Patdith Services Pty Ltd v Mitronics Corporation Pty Ltd
[2016] FCCA 1611
•30 June 2016
FEDERAL CIRCUIT COURT OF AUSTRALIA
| PATDITH SERVICES PTY LTD & ANOR v MITRONICS CORPORATION PTY LTD & ANOR | [2016] FCCA 1611 |
| Catchwords: PRACTICE AND PROCEDURE – Application for order under r.13.10 of the Federal Circuit Court Rules 2001 (Cth) that proceeding be dismissed – whether applicants have no reasonable prospects of establishing they suffered loss or damage “by” the misleading or deceptive conduct of the first respondent within the meaning of s.82(1) and s.87(1) of the Trade Practices Act 1974 (Cth) – whether applicants have no reasonable prospects of establishing they suffered loss or damage because of the respondents’ alleged breaches of terms as to fitness for purpose, merchantable quality, and the provision of services with due care and skill – whether notwithstanding the applicants not having reasonable prospects of proving loss and damage they nevertheless have a cause of action based on the breach of implied terms for nominal damages. |
| Legislation: Federal Circuit Court of Australia Act 1999 (Cth), s.17A, 17A(2)(b) Federal Circuit Court Rules 2001 (Cth), r.13.10, 13.10(a) Trade Practices Act 1974 (Cth), s.52, 52(1), 71, 73, 73(1), 73(14), 74, 74D(1), 82, 82(1), 87, 87(1) |
| Cases cited: Battley v Faulkner (1820) 3 B & Ald 288; 106 ER 668 Henry v Leighton Admin Services Pty Ltd & Anor [2015] FCCA 1923 Luna Park (NSW) Ltd v Tramways Advertising Pty Ltd [1938] HCA 66; 61 CLR 286 |
| First Applicant: | PATDITH SERVICES PTY LTD |
| Second Applicant: | VICTOR BERGER |
| First Respondent: | MITRONICS CORPORATION PTY LTD |
| Second Respondent: | CAPITAL FINANCE AUSTRALIA LTD |
| File Number: | SYG 548 of 2015 |
| Judgment of: | Judge Manousaridis |
| Hearing date: | 25 May 2016 |
| Delivered at: | Sydney |
| Delivered on: | 30 June 2016 |
REPRESENTATION
| Counsel for the Applicants: | Mr R Brender |
| Counsel for the First Respondent: | Ms E Peden |
| Solicitors for the First Respondent: | McLean & Associates Solicitors | |
| Counsel for the Second Respondent: | Mr L T Livingston | |
| Solicitors for the Second Respondent: | Kemp Strang Lawyers |
ORDERS
Pursuant to r.13.10 of the Federal Circuit Court Rules 2001 (Cth) the proceeding, so far as it is brought against the first respondent, is dismissed.
Pursuant to r.13.10 of the Federal Circuit Court Rules 2001 (Cth) the proceeding, so far as it is brought against the second respondent, is dismissed, except to the extent the applicants claim nominal damages for breaches of the conditions they allege are implied by s.71 of the Trade Practices Act 1974 (Cth) into the agreement referred to in paragraph (b) of the particulars to paragraph 7 of the statement of claim.
Subject to order 4:
(a)the applicants pay the first respondent’s costs of the proceeding; and
(b)the applicants pay the second respondent’s costs of the application for summary dismissal.
The parties have liberty to apply within twenty days for an order to discharge or vary order 3.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT SYDNEY |
SYG 548 of 2015
| PATDITH SERVICES PTY LTD |
First Applicant
| VICTOR BERGER |
Second Applicant
And
| MITRONICS CORPORATION PTY LTD |
First Respondent
| CAPITAL FINANCE AUSTRALIA LTD |
Second Respondent
REASONS FOR JUDGMENT
Introduction
The respondents apply under r.13.10 of the Federal Circuit Court Rules 2001 (Cth) (FCC Rules) for an order that the Court dismiss the proceeding brought by the applicants. The respondents submit the applicants have no reasonable prospect of successfully prosecuting the proceeding.
The claims the applicants make in the proceeding have their genesis in two agreements. The first is the agreement (CFAL Agreement) made in May 2009 between the first applicant (PSPL) and the second respondent (CFAL) under which CFAL agreed to make available for PSPL’s use certain photocopiers and a printer (Machines) for 60 months in return for PSPL paying to CFAL the amounts specified in the agreement. The second applicant, Mr Berger, guaranteed PSPL’s obligations under the agreement. The second agreement is between PSPL and the first respondent (MCPL) under which MCPL agreed to provide ongoing services to PSPL in relation to the Machines that were made available under the CFAL Agreement (MCPL Service Agreement).
PSPL and Mr Berger allege they were induced to enter into the CFAL Agreement and the MCPL Service Agreement by MCPL’s misleading or deceptive conduct; that CFAL breached conditions of fitness for purpose and merchantable quality that were implied by s.71 of the Trade Practices Act 1974 (Cth) (TPA) into the CFAL Agreement; that MCPL breached a warranty implied by s.74 of the TPA into the MCPL Service Agreement that MCPL would provide the services under the agreement with due care and skill and supply materials in connection with those services that were reasonably fit for purpose; and that, under s.73(1) of the TPA, CFAL, as a “linked credit provider”, is jointly and severally liable with MCPL for the loss PSPL and Mr Berger have suffered as a result of MCPL’s misleading or deceptive conduct and for having breached the implied warranty under the MCPL Service Agreement.
The principal ground on which CFAL and MCPL rely for contending PSPL and Mr Berger have no reasonable prospect of successfully prosecuting the proceeding is that, as a matter of incontrovertible fact, PSPL and Mr Berger did not suffer the alleged loss or damage or, if they did, they did not suffer that loss or damage as a result of MCPL’s alleged contravention of s.52(1) of the TPA, or as a result of the Machines not being reasonably fit for purpose or not being of merchantable quality. The alleged incontrovertible fact is that, by the time the CFAL Agreement was terminated, another supplier of photocopying equipment had paid to PSPL an amount for the purpose of enabling PSPL to discharge its obligations under the CFAL Agreement.
To be in a position to consider these contentions, it will be necessary to set out the alleged facts on which PSPL and Mr Berger rely for their claims together with the facts about which there is no dispute, the loss or losses PSPL and Mr Berger allege they suffered, and the matters on which the respondents rely for contending that PSPL and Mr Berger did not suffer any loss or, if they did, the loss was not caused by MCPL’s contravention of s.52 of the TPA or by MCPL’s or CFAL’s breaches of any implied condition or warranty of the CFAL or MCPL Service Agreements.
I have considered on another occasion the principles that govern the exercise of the power conferred by s.17A of the Federal Circuit Court of Australia Act 1999 (Cth) (FCC Act).[1] I also propose to apply these principles to the applications before me even though MCPL and CFAL apply for an order dismissing the claims against it under r.13.10 of the FCC Rules. That is so because under r.13.10(a) of the FCC Rules – being the paragraph on which MCPL and CFAL rely – the Court may order, among other things, that a proceeding be dismissed generally or in relation to any claim for relief in a proceeding if the Court is satisfied that “the party prosecuting the proceeding for a claim for relief has no reasonable prospect of successfully prosecuting the proceeding or claim”. This, in substance, is the language used in s.17A(2)(b) of the FCC Act.
[1] Henry v Leighton Admin Services Pty Ltd & Anor [2015] FCCA 1923 at [3]-[17]
Alleged and uncontested facts
PSPL is a service company that, during 2009-2011, provided services to a solicitors’ practice known as Milne Berry and Berger (MBB).[2] Mr Berger was a partner of MBB.[3]
[2] Berger affidavit, 27.08.13, [1] attached to Berger affidavit, 25.09.2015. At some stage, Milne Berry and Berger became Milne Berry Berger & Freedman
[3] Berger affidavit, 27.08.13, [1] attached to Berger affidavit, 25.09.2015
On 5 May 2009 Ms Green, the practice manager for MBB, met with a representative of MCPL.[4] During that meeting, the representative of MCPL submitted a proposal for the supply of photocopiers to MBB’s city and Gladesville offices, one of which was a HP CM8050 Full Colour Copier (Photocopier). MCPL confirmed its proposal in a letter dated 6 May 2009.[5]
[4] Berger affidavit, 20.05.13, [3], Annexure “A”, attached to Berger affidavit, 24.09.2015
[5] Berger affidavit, 20.05.13, [3], Annexure “A” , attached to Berger affidavit, 24.09.2015
In their statement of claim, the applicants allege that, at around this time, MCPL made a number of representations. These included representations to the effect that the Photocopier would meet the needs and requirements of MBB; that the Photocopier would operate without problems caused by inherent defects throughout the life of the service agreement MBB would enter into with MCPL and the agreement MBB would enter into with CFAL; that MCPL would provide complete service and support; that the average response time would be four hours or two hours in the central business district; that there would be preventative maintenance to ensure optimum performance; and that there would be greater reliability. The statement of claim further alleges that the representations were false, and they induced PSPL to enter into the CFAL Agreement and the MCPL Service Agreement, and Mr Berger to guarantee the CFAL Agreement. [6]
[6] Exhibit KM-1, pages 3-5
The CFAL Agreement was for a term of 60 months, but the agreement could be terminated earlier. Under cl.14(1) CFAL could terminate the agreement by notice in writing if, among other things, PSPL were to breach any of the essential terms specified in cl.13(2) of the CFAL Agreement, or if PSPL were to breach any other term of the CFAL Agreement and fail to remedy that breach within ten business days of being required to do so. Subclause 14(2) provides as follows:
If we terminate this Plan, you must:
(a) immediately on receiving notice of termination, deliver up the Equipment in good working order and condition (fair wear and tear excepted) to us at a place directed by us;
(b) pay to us on demand, by way of indemnity for our loss arising from the early termination:
(i) all amounts then due but unpaid under this Plan; and
(ii) the Print Charges that would have been payable through to the end of the Term, brought to a present value by applying the Discount Rate (and calculated on the assumption that the number of prints for each future Billing Period would have equalled the Agreed Volume Per Billing Period);
(c) pay to us on demand all our costs and expenses incurred by us in effecting , or attempting, repossession of the Equipment, satisfying any third party claim, and (as applicable) in storing, repairing to good working order and condition, insuring, valuing and disposing of, the Equipment after repossession.
The expressions in cl.14(2) beginning with capital letters are defined elsewhere in the CFAL Agreement, but it is unnecessary to refer to those definitions.
Also relevant is cl.19(1) of the CFAL Agreement, which is as follows:
In consideration of us agreeing to enter into this Plan at the request of the Guarantor, the Guarantor irrevocably and unconditionally guarantees to us:
(a) the due and punctual payment of all amounts at any time owing by you to us under or in connection with this Plan; and
(b) the due and punctual performance by you of all of your obligations under this Plan.
“Guarantor” is defined in cl.1 of the CFAL Agreement as the person or persons identified as such in the schedule to the agreement. Mr Berger is the person identified as the guarantor in the schedule.
Under the MCPL Service Agreement, MCPL agreed “to render and supply regular and ongoing service to the Customer”, that is, to PSPL, “for the Equipment listed in paragraph 1 of the Schedule” on the terms and conditions set out in the agreement.[7]
[7] Exhibit KM-1, page 9
Mr Berger alleges the Photocopier started breaking down a month or two after it was installed at the premises of MBB, and that it broke down regularly.[8] It appears that some time before 1 February 2011 MBB’s then practice manager, Mr Baldwin, met with representatives of MCPL. That led to MCPL sending a letter to MBB dated 1 February 2011 in which MCPL offered to replace the Photocopier.[9]
[8] Berger affidavit, 27.08.13, [3]
[9] Exhibit KM-1, page 10
MBB did not accept the offer. Instead, MBB approached a business known as “Ricoh Finance” for it to supply replacement photocopiers. That resulted in an agreement (Ricoh Agreement) between Ricoh Australia Pty Limited (Ricoh) and “Victor Berger and Harry Freedman ATF the MAHD and The MAHD TRUST and The Berger Trust t/as Milne Berry Berger and Freedman”.[10] Mr Baldwin signed that agreement on 8 March 2011 on behalf of Victor Berger and Harry Freedman.
[10] Exhibit KM-1, page 41
The front page of the Ricoh Agreement describes the equipment covered by the agreement, and other information such as the costs of printing, and the agreed volume of printing.[11] Next to the words “Goods Location Address” there is typed the words “See Schedule A”. That directs attention to a document that is titled “Schedule ‘A’ – Ricoh Print Management Plan No. For Milne Berry Berger & Freedman”.[12] Under that heading there is a table with seventeen columns describing, among other things, the photocopiers covered by the agreement and the order date (24 February 2011). Under the table, the following printed words appear:
Plus Ricoh will provide a cheque back for the payout the remainder of the existing finance contract with Mitronics (up to the value of $84,000).
[11] Exhibit KM-1, page 41
[12] Exhibit KM-1, page 42
Under the printed words, the following hand written words appear:
Cheque to be to the favour of MBBF so as to allow negotiation with Mitronics.
Before Mr Baldwin signed the Ricoh Agreement, it appears he asked MCPL to provide details of the amount that MBB would be required to pay out the CFAL Agreement. That is apparent from the email Mr Siljic of MCPL sent to Mr Baldwin on 1 March 2011 in which he stated:[13]
Thanks for your time today & explaining your situation.
As per our conversation the payout for your contract would be:-
· $83,346.50 + gst
· $1,500 pick-up + gst
· Total $93,331.15 including GST
[13] Exhibit KM-1, page 11
Sorry for the inconvenience.
The offer is there to change the machines over & we would like to keep you as a customer.
In a letter dated 25 March 2011 to MCPL, MBB set out “some of the many areas of dissatisfaction we have encountered with your organisation and to conclude our dealings with you”.[14] The letter stated:
Your company warranted a 4 hour response to any issues, however our experience and records clearly indicate that your servicemen would often only be able to attend our offices after 24 hours or more. In light of the business that you are involved in, you would no doubt be fully aware of the importance of photocopiers and printers to a busy legal practice. The loss of business that we have suffered as a consequence of the poor quality of the machines as well as the slow response rate of your technicians, has caused significant loss of production in our firm.
[14] Exhibit KM-1, page 12
The letter then stated:[15]
[W]e do not feel that it is appropriate that we continue our business relationship and we now request that you arrange for the various printers and photocopiers to be removed from our premises on Friday 6 May 2011”.
[15] Exhibit KM-1, page 13
Mr Siljic of MCPL responded by letter dated 28 April 2011 in which he said, among other things, that he received MBB’s letter dated 25 March 2011 on 28 April 2011, and that MCPL would collect the photocopiers and the printer after the CFAL Agreement is paid out.[16] Further correspondence followed, but MBB maintained its position that it would not pay out the CFAL Agreement.
[16] Exhibit KM-1, page 14
In the meantime, in early May 2011 MBB took possession of the photocopying and other equipment covered by the Ricoh Agreement. On 16 May 2011 Ricoh transferred $84,000 into a bank account held at Macquarie Bank in the name of “Milne Berry Berger & Freedman ITF Ricoh Controlled Money Account” (MBB account).[17] Ricoh transferred that amount into the MBB account in response to a form titled “Payment Request for Cheque Back” dated 3 May 2011, and approved on 4 May 2011, which contained the following details:[18]
[17] Exhibit KM-1, page 74
[18] Exhibit KM-1, page 245
Cheque Back Amount: $76363.63 ex gst.
Attach this request to the Purchase and Service Agreement that requires payment to the Customer to make a sale. . . .
. . . .
Payment to: Milne Berry Berger Freedman Return EFT to:
. . . .
Details: Mitronics machines
Ricoh’s accounting system generated a document titled “Adjustment Note: 1973073”.[19] Near the top of the document there are the words: “Invoice To: Milne, Berry, Berger & Freedman”. In the column headed “Description”, the following information is recorded:
[19] Exhibit KM-1, page 243
PAYOUT FOR MITRONICS MACHINES, INV #00000001
EFT: BSB … A/C …
MACHINE PAYOUT
Although Ricoh paid the $84,000 into the MBB account, and Ricoh’s accounting records describe that amount as the amount MBB was required to pay out the agreement MBB had in place in relation to equipment supplied by MCPL, PSPL did not use the money to pay out the amount Mr Siljic had earlier represented had to be paid to end the CFAL Agreement. Instead, PSPL refused to make payments under that agreement. That resulted in the CFAL Agreement being terminated, and CFAL commencing proceedings in the Local Court against PSPL and Mr Berger.
By an amended statement of claim it filed in the Local Court, CFAL claimed PSPL committed an event of default under the CFAL Agreement, that, because of the event of default, CFAL terminated the CFAL Agreement, and as a consequence of that termination, both PSPL and Mr Berger became liable to pay to CFAL $74,879.64. The defence PSPL and Mr Berger filed is not in evidence. There is in evidence, however, a cross claim PSPL and Mr Berger filed against MCPL seeking “damages and indemnity in relation to any judgement [sic] in favour of” CFAL against PSPL and Mr Berger.[20]
[20] Exhibit KM-1, pages 25-30
The Local Court proceedings were resolved by the making of consent orders on 20 September 2013, being the day the hearing was due to commence. It is common ground the proceedings were resolved on that basis because PSPL and Mr Berger were not in a position to proceed with the hearing, and the presiding Magistrate refused to grant PSPL and Mr Berger an adjournment. Judgment in the sum of $74,879.64 was entered in favour of CFAL. The consent judgment was subject to the following matters noted by the Court:
1. On the undertaking of the Defendants to prosecute Federal Court Proceedings Number 1878/2013 with due expedition the Plaintiff has agreed not to enforce the above orders until the conclusion of the Federal Court Proceedings.
2. That the Judgment is without prejudice to the right of the Defendants to claim in the Federal Court proceedings that it is entitled to damages or orders against either Respondent having the effect of offsetting the judgement in full.
It is not apparent from the evidence what were the claims made in “Federal Court Proceedings Number 1878/2013”. Nothing appears to turn on the identification of those claims.
I pause here to address one matter that is unclear on the evidence. Counsel for MCPL submitted that PSPL purported to terminate the CFAL Agreement and MCPL Service Agreement. Further, Mr Freedman, a former partner of MBB, has deposed in an affidavit to which I refer below that MBB decided to terminate the CFAL and MCPL Service agreements. Counsel’s submission, and Mr Freedman’s evidence, is inconsistent with the allegation contained in CFAL’s amended statement of claim filed in the Local Court that it was CFAL that terminated the CFAL Agreement. Whether or not it was CFAL or PSPL who terminated the CFAL Agreement is relevant to a submission MCPL makes that PSPL’s election to terminate the CFAL Agreement severed the causal link between the alleged misleading or deceptive conduct and the loss PSPL and Mr Berger claim they suffered.
In my opinion, given the allegation made in the statement of claim filed in the Local Court, and PSPL’s and Mr Berger’s consenting to judgment on the claims made in the statement of claim, subject to their rights to seek relief to offset the loss reflected by that judgment, the better view is that it was CFAL who terminated the CFAL Agreement. In any event, apart from MCPL’s contention that PSPL’s purported termination of the CFAL Agreement severed any causal link between MCPL’s misleading or deceptive conduct and the loss PSPL and Mr Berger claim they suffered, nothing turns on whether the CFAL Agreement was terminated by PSPL or by CFAL.
PSPL’s and Mr Berger’s claims
The statement of claim pleads two causes of action against each of MCPL and CFAL. The first is based on a contravention of s.52(1) of the TPA, which prohibited a corporation, in trade or commerce, from engaging in conduct that is misleading or deceptive, or which is likely to mislead or deceive. PSPL and Mr Berger allege that MCPL made representations to the effect I have set out in paragraph 9 of these reasons; that the representations were misleading or deceptive; that PSPL was induced to enter into the CFAL Agreement and Mr Berger was induced to guarantee PSPL’s obligations under the CFAL Agreement; and that PSPL was induced to enter into the MCPL Service Agreement. In addition, PSPL and Mr Berger allege as follows:[21]
[21] Statement of claim, [8]
By reason of the said conduct the Applicants have, unless orders are made under s87 varying or not enforcing the [CFAL Agreement] or the [MCPL Service Agreement], suffered loss and damage.
Particulars
Exposure to claim in Local Court proceedings 2011/289436 by [CFAL] for breach of contract and guarantee.
The second cause of action against MCPL relates to the MCPL Service Agreement. PSPL alleges the MCPL Service Agreement was subject to the warranty implied by s.74 of the TPA, namely, that the services MCPL agreed to provide under the MCPL Service Agreement would be rendered with due care and skill, and that any materials supplied would be reasonably fit for the purpose for which they are supplied. PSPL alleges MCPL did not provide services with due care and skill, and that materials it supplied were not reasonably fit for their purpose. That allegation is particularised as follows:[22]
a) Service was not satisfactory in that there was no preventative maintenance.
b) Service calls were ineffective.
c) Mitronics failed to replace a defective part until it failed by which time it had caused other damage as well as ongoing avoidable breakdowns as identified in affidavits served between the parties.
[22] Statement of claim, [23]
The first cause of action pleaded against CFAL relies on s.71 of the TPA. PSPL and Mr Berger allege the CFAL Agreement was subject to the conditions implied by s.71 of the TPA that the Machines would be reasonably fit for the purpose for which PSPL acquired them, and that they would also be of merchantable quality. The statement of claim further alleges that each of the Machines was neither reasonably fit for such purpose, nor of merchantable quality, because each of the Machines “broke down with regularity, as identified in affidavits served between the parties”.[23] In addition, the statement of claim alleges as follows:[24]
[23] Statement of claim, [16]
[24] Statement of claim, [8]
By reason of the said conduct the Applicants have suffered loss and damage.
Particulars
Entry into the agreements particularised in paragraph 7 [that is, the CFAL Agreement and the MCPL Service Agreement] and exposure to the claims made by [CFAL] in the Local Court proceedings 2011/289436
The second cause of action against CFAL is based on s.73 of the TPA. It is alleged that CFAL and MCPL had a contract, arrangement, or understanding under which MCPL referred to CFAL persons for the purpose of CFAL providing credit in relation to the supply of goods and, for that reason, CFAL was a “linked credit provider” within the meaning of s.73(14) of the TPA. The statement of claim further alleges that, because of s.73(1) of the TPA, CFAL is jointly and severally liable with MCPL for the loss and damage PSPL and Mr Berger suffered because of MCPL’s misleading or deceptive conduct and MCPL’s breaches of the warranty implied by s.74 of the TPA.
Respondents’ submissions
Counsel for MCPL and counsel for CFAL both submit that PSPL and Mr Berger cannot establish a necessary component of their claims, namely, their having suffered any loss or damage. The basis of that submission is the $84,000 Ricoh paid into the MBB account. MCPL and CFAL submit the money was paid for the purpose of PSPL discharging its obligations under the CFAL agreement. MCPL and CFAL submit that PSPL’s and Mr Berger’s inability to prove loss or damage is fatal because the only conceivable grounds on which PSPL and Mr Berger seek any remedy for the causes of action they plead in the statement of claim is s.82 and s.87 of the TPA; and to establish a cause of action under s.82 and s.87 of the TPA an applicant must prove loss or damage that has been caused by a contravention of a relevant provision of the TPA.
Counsel for PSPL and Mr Berger, on the other hand, submits that Ricoh’s payment to the MBB account cannot be taken into account to show that PSPL and Mr Berger suffered no loss or damage. Counsel submitted that Ricoh paid the $84,000 without attaching any condition to the payment.
In addition to submitting that PSPL and Mr Berger have no reasonable prospects of succeeding in the proceedings because they will be unable to prove lose or damage, MCPL submits that the evidence PSPL and Mr Berger have filed is incapable of proving other essential elements of their claims.
Preliminary matters
There are three observations that may be made at the outset in relation to the parties’ submissions. First, CFAL and MCPL assume the only remedy PSPL and Mr Berger seek, or can seek, on the causes of action they plead are orders under s.82 and s.87 of the TPA. That assumption is correct for the causes of action based on MCPL’s alleged contravention of s.52(1) of the TPA; it is incorrect, however, for the causes of action based on MCPL’s and CFAL’s breaches of the conditions implied by s.71 and s.74 of the TPA, and the cause of action based on s.73 of the TPA.
Subsection 52(1) of the TPA provided that a corporation “shall not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive”. That subsection, however: [25]
. . . does not purport to create liability, nor does it vest in any party any cause of action in the ordinary sense of that term; rather, s 52 establishes a norm of conduct, and failure, by the corporations and individuals to whom it is addressed in its various operations, to observe that norm has consequences provided for elsewhere in the Act. The consequences are provided for in a range of remedies found principally . . . in Pt VI of the [TP] Act. The remedies include . . . recovery of the amount of loss or damage and prevention or reduction of loss or damage (ss 82, 87); and prohibition of payment or transfer of moneys or other property (s 87A).
[25] Tobacco Institute of Australia Ltd v Australian Federation of Consumer Organisations Inc [1988] FCA 373; (1988) 19 FCR 469 at 473-474.
As is noted in this passage, one of the remedies provided for by Part VI of the TPA is s.82(1) of the TPA which, at the time of MCPL’s alleged contravening conduct, provided:
Subject to subsection (1AAA), a person who suffers loss or damage by conduct of another person that was done in contravention of a provision of Part IV, IVA, IVB or V or section 51AC may recover the amount of the loss or damage by action against that other person or against any person involved in the contravention.
Also relevant was s.87(1) of the TPA which provided:
Subject to subsection (1AA) but without limiting the generality of section 80, where, in a proceeding instituted under this Part, or for an offence against Part VC, the Court finds that a person who is a party to the proceeding has suffered, or is likely to suffer, loss or damage by conduct of another person that was engaged in (whether before or after the commencement of this subsection) in contravention of a provision of Part IV, IVA, IVB, V or VC, the Court may, whether or not it grants an injunction under section 80 or makes an order under section 82, 86C or 86D, make such order or orders as it thinks appropriate against the person who engaged in the conduct or a person who was involved in the contravention (including all or any of the orders mentioned in subsection (2) of this section) if the Court considers that the order or orders concerned will compensate the first mentioned person in whole or in part for the loss or damage or will prevent or reduce the loss or damage.
It will be seen that s.82(1) of the TPA constitutes a statutory cause of action that “arises when the plaintiff suffers loss and damage “by” contravening conduct of another person”.[26] To succeed on such cause of action an applicant must establish:
a)the respondent engaged in conduct that contravened a provision of Part IV, IVA, IVB, V or VC of the TPA;
b)the applicant suffered loss or damage; and
c)the applicant suffered the loss or damage “by” such conduct.
[26] Wardley Australia Limited v State of Western Australia (1992) 175 CLR 514 at 525
In Re Franki Arturi v Zupps Motors Pty Ltd and Auswide Pty Limited,[27] Brennan J, when sitting as a judge of the Federal Court, held that conduct in breach of a condition implied by s.71 of the TPA did not constitute conduct done in contravention of Part V of the TPA, being the Part of the TPA that contained s.71. The conduct constituted a breach of the condition that, by the operation of s.71 of the TPA, had become a term of the contract. His Honour said:[28]
There are two reasons why a breach of a condition which is implied by s.71 does not involve conduct in contravention of a provision of Part V. First, the breach does not consist in the conduct of supplying goods, but in the want of correspondence between the state of the goods supplied and the quality referred to in s.71. Secondly, s.71 takes effect by imposing an obligation upon one of the contracting parties as though the parties had embodied the obligation in their contract. No doubt it is right to say that the obligation is statutorily created, for the condition can derive no force from an actual or implied consent of the parties whose freedom to exclude its imposition is removed by s.68. But by describing the obligation as an implied condition, s.71 defines the nature of the obligation. It is an obligation which takes effect by a legal fiction, namely, that the parties had made a contract which included the obligation. For the purposes of s.82, therefore, a breach of the obligation is not to be treated as a breach of an obligation imposed upon the obligor by the Act dehors the contract, but as an obligation imposed by the contract itself.
It follows that a proceeding for damages for breach of a s.71 condition is not a proceeding falling within s.82.
[27] Re Franki Arturi v Zupps Motors Pty Ltd and Auswide Pty Limited [1980] FCA 164; (1980) 49 FLR 283
[28] [1980] FCA 164; (1980) 49 FLR 283 at 285-286
Although his Honour did not consider s.87(1) of the TPA, s.87 is an additional statutory cause of action, and the reasoning Brennan J applied to s.82(1) applies to prevent a claim based on a breach of a condition implied by s.71 of the TPA from falling within s.87(1) of the TPA.
Thus, an action for damages based on the breach of a condition implied by s.71 or a warranty implied by s.74 of the TPA is an action for breach of contract, not an action for an order for compensation under s.82(1) of the TPA, or for an order under s.87 of the TPA. The significance of this conclusion is that a cause of action based on breach of contract does not depend on the party alleging the breach proving actual damage; a cause of action for breach of contract is complete when the breach occurs, whether or not the innocent party suffers any actual loss.
The remedy that is available to enforce the liability created by s.73 of the TPA in relation to linked credit providers is also one that does not fall within s.82(1) or s.87(1) of the TPA. Section 73, in the circumstances it identifies, provides for the creation of a liability on a “linked credit provider” for the amount of loss or damage a consumer has suffered as a result of a supplier’s conduct, and further provides that “the consumer may recover that amount by action in accordance with this section in a court of competent jurisdiction”. The liability for which s.73 of the TPA provides does not arise from any contravention of a provision of the TPA.
This conclusion is supported by Brennan J’s observations in Re Franki Arturi in relation to s.74D(1) of the TPA. That subsection created a liability in the manufacturer corporation to compensate the consumer for the amount of loss and damage the consumer suffered, and, like s.73(1), provided that the consumer “may recover the amount of the compensation by action against the corporation in a court of competent jurisdiction”. Brennan J observed that that provision did not “create any standard of curial competency”. That necessarily meant that any claim to enforce the liability created by s.74D(1) of the TPA did not fall within s.82(1) or s.87(1) of the TPA.
The second observation that may be made about MCPL’s and CFAL’s submissions is they appear to assume that the only loss and damage PSPL and Mr Berger allege they suffered is their liability as measured by the judgment that was entered against them in the Local Court. That certainly appears to be the loss and damage PSPL and Mr Berger claim in relation to the causes of action based on MCPL’s alleged contravention of s.52(1) of the TPA and CFAL’s breaches of the conditions implied into the CFAL Agreement by s.71 of the TPA. That, however, is not the loss and damage PSPL alleges it suffered in relation to its cause of action based on MCPL’s breaches of the warranty implied by s.74 of the TPA into the MCPL Service Agreement. As I have already noted, PSPL and Mr Berger allege that MCPL “failed to replace a defective part until it failed by which time it had caused other damage as well as ongoing avoidable breakdowns as identified in affidavits between the parties”.
My third observation relates to the defence. Neither MCPL nor CFAL have raised in their defences the $84,000 payment by Ricoh into the MBB account. Counsel for PSPL and Mr Berger has made no point about this. I do not suggest that counsel should have made a point of it. I only mention the omission to record that the parties have elected to litigate the question whether the making of the Ricoh payment has the consequence that neither PSPL nor Mr Berger have suffered any loss or damage, even though that issue has not formally been raised on the pleadings.
Issues
From this statement of the parties’ submissions, and my observations on those submissions, the following issues arise:
a)Does Ricoh’s payment to the MBB account necessarily mean that PSPL and Mr Berger have no reasonable prospect of establishing that their liability on the judgment that was entered against them in the Local Court represents loss or damage for the purpose of s.82 or s.87 of the TPA, or, if that liability does constitute loss or damage, it was caused by MCPL’s contravention of s.52 of the TPA?
b)Do PSPL and Mr Berger have no reasonable prospect of showing they have suffered no loss or damage as a consequence of MCPL’s breach of the warranty implied by s.74 of the TPA implied into the MCPL Service Agreement?
c)Assuming PSPL and Mr Berger have no reasonable prospects of succeeding on all or part of their claims that they have suffered any loss or damage, does that necessarily mean that an order must be made under r.13.10(a) of the FCC Rules?
d)Assuming I do not accept PSPL and Mr Berger do not have reasonable prospects of proving loss or damage, do PSPL and Mr Berger have no reasonable prospects of establishing other essential elements of their claims?
The Ricoh payment
Before I consider whether Ricoh’s payment into the MBB account has the consequence MCPL and CFAL contend it has, it will be necessary to identify the relevant principles concerning s.82(1) of the TPA, as it applies to contraventions of s.52(1) of the TPA.
Subsection 82(1) and s.87(1) of the TPA
As I have already noted, s.82(1) of the TPA is a statutory cause of action, an essential element of which is that the applicant has suffered “loss or damage by” the contravening conduct of another person. Subsection 87(1) of the TPA also is a statutory cause of action, an essential element of which is that the applicant has suffered loss or damage “by” the contravening conduct of another person. The word “by” “clearly expresses the notion of causation without referring or elucidating it”.[29] The relevant notion of causation that must be established is the “common law practical or common-sense concept of causation”.[30]
[29] Wardley Australia Limited v State of Western Australia (1992) 175 CLR 514 at 525
[30] Wardley Australia Limited v State of Western Australia (1992) 175 CLR 514 at 525. The common law notion of causation is that identified in March v Stramere (E. & M.H.) Pty Limited (1991) 171 CLR 506
The usual way in which a causal connection is established between misleading or deceptive conduct that is constituted by a misrepresentation, and loss or damage suffered by the representee, is by the representee proving he or she relied on such conduct. In that “situation, as at common law, acts done by the representee in reliance upon the misrepresentation constitute a sufficient connection to satisfy the concept of causation.” [31] Reliance implies the applicant was misled by the misrepresentation. That, in turn, implies “the representee accepted the decision and believed it to be true”, and that “the representee made a decision or undertook a course of action on the basis of that belief”.[32]
[31] Wardley Australia Limited v State of Western Australia (1992) 175 CLR 514 at 525
[32] Eggers, P.M., Deceit The Lie of the Law Informa, London, 2009 at 168 relying on McCormack, N., “What is Wrong with Deceit?” (1983) 10 Syd L Rev 5, at 9-10
Reliance by itself, however, does not exhaust causal questions in every case. The loss or damage a representee claims he or she suffered are often due to, or contributed by, events that occur or do not occur after the representee has relied on the representation; and they are events or non-events for which the person who has engaged in the misleading or deceptive conduct is not responsible. Such events or non-events may be, and often are, held to form part of the causal chain that links the misrepresentation with the loss or damage the representee suffers simply because it was the misrepresentation which in the first place induced the representee to be in the position in which he or she came to be exposed to the risk of loss or damage from those events or non-events.
It is not, however, every event or non-event that contributes to the loss or damage a representee suffers after relying on a misrepresentation that is causally relevant to a representee’s loss or damage; and it is sometimes the case that events or non-events that occur after the representee relied on a misrepresentation are held to sever the causal link between the representee’s reliance on the misrepresentation, and the loss or damage it is claimed resulted from that reliance. As Gummow J said in Elders Trustee & Executor Co Ltd v E G Reeves Pty Ltd & Ors, “a party is [not] to be fixed with liability under s 82 for loss or damage suffered by his conduct where the chain of causation has been broken or dislocated, or where the real, essential, substantial, direct, appreciable or effective cause lies elsewhere”.[33] One example where this may occur is where the cause or causes of the alleged loss or damage arises “from the acts or omissions of the applicant himself”.[34]
[33] (1987) 78 ALR 193 at 243
[34] (1987) 78 ALR 193 at 243
The question whether a representee’s acts or omissions have broken an asserted causal link between the misrepresentation and the alleged loss or damage has often been determined by applying by analogy the common law principles that govern the duty to mitigate loss. [35] Those principles “find an echo in the way in which the causes of loss are identified in s 82 cases”.[36] In this context, “mitigation” embraces two ideas:[37]
First, a plaintiff cannot recover damages for a loss which he or she ought to have avoided, and secondly, a plaintiff cannot recover damages for loss which he or she did avoid.
[35] See Lockhart, The Law of Misleading or Deceptive Conduct 3rd ed, LexisNexis, (2011) at [10.25] – [10.28]
[36] State of Western Australia v Bond Corporation Holdings Ltd (1991) 28 FCR 28 at 82 (French J)
[37] Clark v Macourt (2013) 253 CLR 1 at 9 (Hayne J) (emphasis in original)
Both these ideas of mitigation are relevant to the assessment of the legal implication of the Ricoh payment to PSPL’s and Mr Berger’s claims under s.82 and s.87 of the TPA, and their claims against CFAL based on CFAL’s alleged breach of the conditions implied by s.71 of the TPA. Before I consider how that is so, it is necessary to characterise the nature of the Ricoh payment, and the purpose for which Ricoh paid $84,000 into the MBB account.
Character of Ricoh payment
As I noted earlier in these reasons, counsel for PSPL and Mr Berger submits there were no conditions attached to the $84,000 payment Ricoh made to MBB, and therefore, PSPL or MBB were entitled to do as they pleased with the amount once they received it. Whether that submission is correct requires an analysis of the circumstances in which Ricoh made the payment. That is so because there are a number of circumstances in which the law recognises that a person who receives payment from another may come under an obligation to deal with that money in a particular way.
The most obvious set of circumstances in which a payee may come under an obligation to deal with money in a particular way is a trust. Whether or not an express trust arises in the circumstances of a particular case “will always have to be answered by reference to intention”; that “ordinarily the relevant intention is that of the alleged settlor”; but that, “where the subject matter of the trust is contractual rights against the settlor, conferred by the settlor upon the alleged trustee, the objective (or “purpose”) of the transaction being to benefit third parties it may be appropriate to look to the mutual intention of the settlor and trustee”.[38] The “relevant intention is to be inferred from the language employed by the parties and to that end the court may look also in the nature of the transaction and the relevant circumstances attending the relationship between them”.[39]
[38] Re Australian Elizabethan Theatre Trust (1991) 30 FCR 491 at 502 (Gummow J)
[39] Re Australian Elizabethan Theatre Trust 1991) 30 FCR 491 at 503
As was noted by Gummow J Re Australian Elizabethan Theatre Trust,[40] however, “dealings between two parties may give rise to equitable rights in a third party, falling short of those of a beneficiary against a trustee”;[41] and that these “included equitable charges and liens and equitable personal obligations”.[42] Some examples were identified by Dixon J (as his Honour then was) in The Countess of Bective v The Federal Commissioner of Taxation:[43]
When a provision is made by way of gift, testamentary or inter vivos, directing a payment to one person and expressing a purpose beneficial to another or others, it may receive one or other of at least four different interpretations.
(1) The expression of the purpose may be taken as but a statement of the donor's motive or of his expectation. If so, the first person takes the gift absolutely and incurs no legal or equitable obligation to fulfil the purpose. . . .
(2) The purpose may be so stated as to amount to a condition upon and subject to which the first person takes the gift beneficially. By accepting it the donee incurs an equitable duty to perform the condition which is annexed to the gift. If the condition requires a money payment, it must be made whether the property given is or is not adequate for the purpose. . . .
(3) The first person may take the gift beneficially, but the statement of the purpose, particularly if it involves the payment of money, may operate as an equitable charge thereon in favour of the other or others. Bequests and devises to parents for the maintenance and benefit of their children are from their very nature peculiarly susceptible of this interpretation. . . .
(4) The direction to pay the first person may be regarded as conferring no beneficial interest upon him, and, whether he receives it strictly in the character of a trustee or in some other character such as guardian, the expression of the purpose may amount to a statement of objects to which he is bound to apply the fund.
[40] (1991) 30 FCR 491
[41] (1991) 30 FCR 491 at 503
[42] (1991) 30 FCR 491 at 503
[43] (1932) 47 CLR 417
There is no reasonable prospect that PSPL and Mr Berger will succeed in establishing at the final hearing that the payment Ricoh made into the MBB account was unconditional. The Ricoh Agreement, in the form in which it was given to Mr Berger, stated Ricoh will give a cheque “for the payout the remainder of the existing finance contract with Mitronics (up to the value of $84,000)”.[44] That is, the draft agreement provided that the money would be paid for a specific purpose, namely, to pay out the remainder of the agreement that was to be replaced by the Ricoh Agreement. That agreement was the CFAL Agreement. It is true that, before Mr Baldwin signed the Ricoh Agreement, Mr Berger or some other person qualified this purpose to the extent he or she requested Ricoh draw a cheque in “favour of MBBF so as to allow negotiation with Mitronics”. That qualification, however, did not alter the substance of the purpose for which Ricoh paid the money. The purpose remained to pay out the CFAL Agreement, subject to Mr Berger first holding negotiations with MCPL. PSPL and Mr Berger, therefore, have no reasonable prospect of persuading the Court at a final hearing not to find that Ricoh paid the $84,000 into the MBB account for the purpose that it be applied to pay out the CFAL Agreement.
[44] Exhibit KM-1, page 42
Counsel for PSPL and Mr Berger submitted that Ricoh only wanted to obtain market share, and did not care who received the money, or what the money was used for. I do not accept that submission. The intention or purpose behind Ricoh’s payment is to be determined by reference to the contemporaneous documents to which I have referred. There is no reasonably arguable basis on the evidence that is before me for contending that Ricoh had an intention that was different from that which it recorded in its own business records.
It may be that, given the purpose for which Ricoh made the payment, the holder of the MBB account came under an obligation, enforceable at the suit of Ricoh or PSPL or Mr Berger, to use the money to pay CFAL on account of any liability PSPL and Mr Berger had or which CFAL claimed PSPL and Mr Berger had under the CFAL Agreement and, to the extent such money was not used, or was not required to be used, for that purpose, the holder of the MBB account would have come under an obligation, enforceable at the suit of Ricoh, to return such part of the money to Ricoh. It is unnecessary, however, to reach a final conclusion on these matters.
Ought PSPL and Mr Berger reasonably to have used the money paid by Ricoh to pay out CFAL Agreement?
I now turn to the first idea of mitigation, namely, that a plaintiff cannot recover damages for a loss which he or she ought to have avoided. Translated into the circumstances of the case before me, the question becomes: did PSPL and Mr Berger act unreasonably in not using the money Ricoh paid into the MBB account to pay out the CFAL agreement? In my opinion, PSPL and Mr Berger have no reasonable prospect of resisting the claim that they ought reasonably to have used the $84,000 Ricoh paid into the MBB account to pay out the CFAL Agreement. That is so whether or not PSPL or Mr Berger or anyone else came under a legal or equitable obligation to use the money Ricoh paid into the MBB account to pay out the CFAL Agreement. As I have already concluded, Ricoh paid the $84,000 into the MBB account for the purpose that it be used to pay out the CFAL Agreement. PSPL and Mr Berger have no reasonable prospect of persuading the Court that the money Ricoh paid was money that PSPL or Mr Berger could use for whatever purpose they pleased.
In these circumstances, PSPL and Mr Berger also have no reasonable prospect of resisting the Court’s making the following findings at the hearing:
a)had the money Ricoh paid into the MBB account been used to pay out the CFAL Agreement, PSPL and Mr Berger would not have been exposed to the claim CFAL made in the Local Court;
b)PSPL’s and Mr Berger’s deciding not to use the money Ricoh paid into the MBB account, therefore, severed the causal link between MCPL’s alleged misleading or deceptive conduct, and the loss PSPL and Mr Berger alleged they suffered “by” MCPL’s alleged misleading or deceptive conduct, namely exposure to the claim CFAL made in the Local Court; and
c)PSPL’s and Mr Berger’s exposure to the claim CFAL made in the Local Court is not loss or damage they suffered “by” MCPL’s alleged misleading or deceptive conduct and, therefore, PSPL and Mr Berger have no reasonable prospect of succeeding on their claims under s.82(1) or s.87(1) of the TPA based on MCPL’s having engaged in misleading or deceptive conduct.
Did PSPL in any event avoid loss or damage by accepting Ricoh’s payment?
The second idea of mitigation - a plaintiff cannot recover damages for loss which he or she did avoid - is also relevant to the payment Ricoh made; for it has been recognised that in certain circumstances an applicant’s receipt of money should be taken into account when determining the loss or damage the applicant has suffered “by” a person’s contravention of s.52(1) of the TPA. The question when such payments should be taken into account was considered by the Full Federal Court in Monroe Schneider Associates (Inc) v No 1 Raberem Pty Ltd,[45] and in Masters Dairy Ltd v Nagy.[46] The principles the Full Federal Court held were relevant to that question were those identified particularly in the judgments of Dixon CJ and Windeyer J in The National Insurance Company of New Zealand Limited v Espagne.[47] A recent statement of those principles is to be found in Zheng v Cai,[48] where the High Court held that whether a payment made to a person who has a claim for damages should be taken into account to reduce the amount of his or her damages is to be determined by answering “the ultimate question, framed by Mason and Dawson JJ in Redding v Lee”,[49] namely:
Was the benefit conferred on [the plaintiff] independently of any right or redress against others and so that he might enjoy the benefit even if he enforced the right?
[45] (1991) 104 ALR 397
[46] (1998) 156 ALR 262
[47] (1961) 105 CLR 569
[48] (2010) 239 CLR 446
[49] (1983) 151 CLR 117 at 137
Thus, whether or not the payment Ricoh made to the MBB account should be taken into account in determining whether PSPL and Mr Berger suffered loss or damage depends on Ricoh’s intention when making the payment. In particular, it depends on whether Ricoh paid the $84,000 into the MBB account independently of any right of redress PSPL and Mr Berger had against CFAL or MCPL, so that PSPL or Mr Berger or anyone else might enjoy the benefit of the payment even if PSPL exercised its rights against CFAL or MCPL.
In my opinion, given my conclusions about the purpose for which Ricoh paid the $84,000 into the MBB account, PSPL and Mr Berger have no reasonable prospect of resisting the Court’s finding at the final hearing that Ricoh paid the $84,000 into the MBB account to indemnify PSPL and Mr Berger, at least to the extent of the $84,000, against claims CFAL had against PSPL and Mr Berger under the CFAL Agreement; and that the payment did indemnify PSPL and Mr Berger, at least up to $84,000, against any liability PSPL and Mr Berger had to CFAL under the CFAL Agreement. Given that the judgment that was entered in favour of CFAL against PSPL and Mr Berger is less than $84,000, PSPL has no reasonable prospect of resisting the Court’s finding at the final hearing that Ricoh’s payment into the MBB account fully indemnified them against the loss which they claim is the loss or damage they suffered “by” MCPL’s alleged misleading or deceptive conduct.
It follows from this conclusion that PSPL and Mr Berger also do not have reasonable prospects of succeeding in their claim against CFAL based on s.73 of the TPA to the extent they seek to render CFAL jointly and severally liable with MCPL for the loss or damage they claim they suffered “by” MCPL’s misleading or deceptive conduct. That is so because s.73 of the TPA confers a right of action on a consumer to recover the amount of the loss or damage the consumer suffered as a result of the supplier’s misrepresentation or breach of any term implied under the TPA.
Conclusion
PSPL and Mr Berger do not have reasonable prospects of succeeding on their causes of action for a remedy under s.82 and s.87 of the TPA based on MCPL’s allegedly engaging in misleading or deceptive conduct. That is so because loss or damage is the gist of a cause of action for a remedy under s.82 and s.87 of the TPA, and PSPL and Mr Berger have no reasonable prospects of resisting the Court’s finding that the loss or damage PSPL and Mr Berger allege they suffered “by” MCPL’s misleading or deceptive conduct, namely their being exposed to CFAL’s claim in the Local Court, is not loss or damage suffered “by” MCPL’s alleged conduct; and they have no such reasonable prospect because they have no reasonable prospect of resisting the Court’s finding that the $84,000 Ricoh paid into the MBB account was paid for the purpose of the CFAL Agreement being paid out.
Other damage
The next question to consider is whether PSPL and Mr Berger have no reasonable prospects of proving they suffered any other damage they have alleged in the statement of claim. As I noted earlier in these reasons, their exposure to the claim CFAL made against them in the Local Court is not the only loss or damage PSPL and Mr Berger allege they suffered. They also allege they suffered loss or damage as a consequence of MCPL’s breaches of the warranty implied into the MCPL Service Agreement by s.74 of the TPA.
I have examined the affidavits on which I understand PSPL and Mr Berger intend to rely at the hearing, and statements of evidence PSPL and Mr Berger expect witnesses will be available to give at the hearing, for the purpose of determining whether PSPL and Mr Berger have reasonable prospects of establishing they have suffered loss or damage other than exposure to CFAL’s claim in the Local Court. In particular, I reviewed the following:
a)Unsigned statement of Ms Kylie Green. Ms Green refers to problems with the printing trays. The statement says: “This never got repaired properly”. The statement also says: “There were issues in relation to difficulties requiring serviceman [sic] to attend”.
b)Affidavit of Ms Benazir Amin, a former receptionist and then legal secretary at MBB, in which Ms Amin deposes to MCPL being requested to make service calls in relation to the Photocopier. She deposes that during the first few months after the Photocopier was installed, a technician attended the premises approximately 2-3 times per week, and that each visit lasted 30 minutes. Ms Amin also deposes that technicians usually came the day after the making of a service call. Ms Amin annexes what she describes as a spreadsheet that appears to include details of a log Ms Amin began to maintain in late October or early November 2010 which she says is incomplete.
c)Affidavit of Mr Freedman, a former partner of MBB. He deposes in general terms to the Photocopier breaking down and the disruption it caused. He says there were times when “the printer” was not working for several days, and staff were taking documents to be printed by local copying shops. Mr Freedman also says:
By 2010 we had a new Practice Manager named Adam Baldwin and I spoke with him on a regular basis at management meetings about what was happening with the printers.
The frequency of the complaints and the total lack of improvement on service led to discussions at the partners meetings to consider taking the step of finding another supplier.
Adam advised the partners that in early 2011 he had had an offer from Mitronics to replace the troublesome machine. I or one of the other partners asked him what did he think about that proposal and he stated that he was so unhappy with the service of Mitronics and the machines given to us that he had no confidence they would be able to improve their performance.
I decided that based on 2 years of unsatisfactory performance, Mitronics had not and were not capable of complying with their contractual obligations to provide machines that worked satisfactorily and to maintain and service them regularly and that they had repudiated their obligations. The partners decided to terminate the contract.
The main copier machine is still in the office. It has never been collected.
d)Affidavit of Ms Donovan, a secretary employed by MBB. She deposes in general terms to the Photocopier jamming three quarters of the times she used it; that, although she sometimes was able to fix the machine, technicians were quite often called; and that, sometimes the technician could fix it, but on other occasions the machine was not operating for days or up to a week at a time. Ms Donovan further deposes that she estimates that at least 5 to 6 times she outsourced copying, and that the printers also broke down.
e)Affidavit of Ms Checchia, a solicitor employed by MBB. She deposes in general terms to recalling the Photocopier breaking down. Ms Checchia also deposes to having outsourced copying on one occasion.
f)Affidavit of Ms Knez, a secretary employed by MBB. She deposes in general terms to the Photocopier jamming and breaking down at a great frequency, its causing disruption to the MBB office, and her observing technicians attending the premises to repair the Photocopier. Ms Knez annexes documents which refer to invoices rendered to MBB for copying outsourced. Most of these are referred to in what appear to be MBB business records titled “Anticipated Payments”. These show invoiced amounts of $5,151.11 for the period 25 August 2009 to 17 August 2012, and $3,665.90 for the period 14 May 2009 and 28 June 2011.
g)Affidavit of Ms Doueihy, a paralegal employed by MBB. She deposes to the Photocopier experiencing problems, the most regular of which was jamming. She also deposes to its not being unusual for her to have observed a technician working on the Photocopier.
In my opinion, although these affidavits are capable of proving the Machines experienced breakdowns and, perhaps, an abnormally high level of breakdowns, they are not reasonably capable of proving that any of the breakdowns were due to work MCPL undertook or failed to undertake in relation to the Machines, or due to materials MCPL provided in connection with the services it provided. In particular, the evidence does not identify the matters particularised in paragraph 23 of the statement of claim, namely:
a)the maintenance service or services it is alleged MCPL failed to provide, or how such failure led to the Photocopier breaking down;
b)the service calls MCPL made were ineffective; or
c)the defective part or parts it is alleged MCPL failed to replace, or the damage such failure caused.
Further, the affidavits on which PSPL and Mr Berger intend to rely are not reasonably capable of identifying, let alone proving, the “avoidable breakdowns as identified in affidavits between the parties” referred to in particular (c) to paragraph 23 of the statement of claim.
PSPL and Mr Berger also rely for the purposes of the present application, on the affidavit of Mr Blair, the solicitor for MCPL. In that affidavit, Mr Blair annexes service reports generated by information systems maintained by MCPL that record service calls attended to by MCPL in relation to the Machines. The service reports record that from May 2009 until April 2011, there were 39 reported faults in relation to the Photocopier, and 23, 19, and 1 in relation to three other Machines respectively. On its face, this may reflect a high number of reported faults with the Machines; but the information by itself is not reasonably capable of supporting findings that the breakdowns occurred because of any work MCPL performed or failed to perform, or because of any material MCPL supplied in connection with the services it supplied under the MCPL Service Agreement.
Should the proceeding be dismissed?
Given my conclusion that PSPL and Mr Berger do not have reasonable prospects of succeeding on their allegation that they suffered the loss and damage they alleged in their statement of claim, it follows that the proceeding should be dismissed to the extent it relies on causes of action in which loss or damage is an essential element. These are the causes of action based on MCPL’s having engaged in misleading or deceptive conduct and the cause of action based on s.73 of the TPA to the extent it is alleged CFAL is jointly and severally liable for the loss or damage PSPL and Mr Berger allege they have suffered as a consequence of MCPL’s misleading or deceptive conduct.
What of the causes of action that rely on breaches of the conditions and warranty PSPL and Mr Berger alleged were implied in the CFAL Agreement and the MCPL service agreement by s.71 and s.74 of the TPA respectively? As I noted earlier in these reasons, the causes of action based on breaches of such implied conditions or warranty can only be an action for breach of contract, and a cause of action in contract accrues at the time the breach occurs.[50] Further, it is “trite law that a plaintiff who sues for breach of contract and proves the breach, but cannot or does not establish that he or she has suffered loss as a result of the breach, is entitled to nominal damages, but no more”.[51] Thus, in relation to the causes of action based on breach of the conditions and warranty implied by s.71 and s.74 of the TPA respectively, proof of damage is not an essential element. It would not be open to me, therefore, to dismiss the proceeding in so far as it relates to causes of action based on the breach of the implied terms unless I am satisfied there is some other reason for finding PSPL and Mr Berger do not have reasonable prospects of succeeding on them.
[50] Battley v Faulkner (1820) 3 B & Ald 288; 106 ER 668
[51] State of New South Wales v Stevens [2012] NSWCA 415 at [67] (Sackville AJA) referring to Chappel v Hart [1998] HCA 55; 195 CLR 232, at [149], per Hayne J; Luna Park (NSW) Ltd v Tramways Advertising Pty Ltd [1938] HCA 66; 61 CLR 286, at 305, per Latham CJ; at 312, per McTiernan J; Motium v Arrow Electronics, at [11], per curiam; Chitty on Contracts, General Principles (31st ed, 2012), at [26-009]
There is another reason why, in my opinion, PSPL and Mr Berger do not have reasonable prospects of succeeding on their cause of action against MCPL based on breach of the warranty implied into the MCPL Service Agreement by s.74 of the TPA. The evidence I have identified in paragraphs 72 and 75 of these reasons is not reasonably capable of sustaining a finding that MCPL provided any service under the MCPL Service Agreement without due care and skill, or that any materials MCPL supplied in connection with those services were not reasonably fit for their purpose. At most, the evidence supports a finding that the Machines failed regularly. It cannot reasonably be inferred from that fact that the Machines failed regularly because or partly because MCPL did not provide service without due care or skill, or provided materials in connection with the services it provided that were not reasonably fit for their purpose. Even if such inference could be drawn, however, there would be no basis for rationally inferring which of the services MCPL provided were not provided with due care and skill, and which of the materials it supplied were not reasonably fit for purpose.
The cause of action against CFAL based on breaches of the conditions implied into the CFAL Agreement by s.71 of the TPA is different. I am not satisfied that, on the basis of the evidence I have identified in paragraphs 72 and 75 of these reasons, PSPL and Mr Berger have no reasonable prospect of establishing that the Machines were not reasonably fit for purpose or of merchantable quality.
Other matters
There are a number of other matters that it is appropriate I address. First, MCPL relied on another matter for submitting PSPL and Mr Berger have no reasonable prospect of proving it suffered loss or damage; and that is PSPL’s refusal to accept MCPL’s offer to supply a replacement Photocopier. I am not satisfied PSPL and Mr Berger have no reasonable prospect of resisting the Court’s finding that PSPL failed to mitigate its loss by not accepting MCPL’s offer of a replacement photocopier. The offer was conditional on MCPL continuing to provide services under the MCPL Service Agreement, and I am not satisfied PSPL and Mr Berger have no prospect of persuading the Court that, given PSPL’s complaints about MCPL, it would have been unreasonable for PSPL to continue to keep the MCPL Service Agreement on foot.
The second matter I should address is MCPL’s submission that the cause of the loss PSPL and Mr Berger claim they suffered was the act of PSPL in purporting to terminate the CFAL Agreement. I do not accept this submission. First, there is no evidence PSPL terminated the CFAL Agreement. As I have already noted, in the statement of claim it filed in the Local Court, CFAL alleged it terminated the CFAL Agreement.[52] Second, that a party has terminated a contract in the exercise of an express term to terminate does not necessarily disentitle that party from claiming loss of bargain damages if the termination occurred in circumstances where the other party repudiated the contract.[53]
[52] Exhibit KM-1, page 20, [4]
[53] Progressive Mailing House Pty Ltd v Tabali Pty Ltd [1985] HCA 14; (1985) 157 CLR 17: “Termination in the exercise of a contractual power is not an affirmation of the contract which debars the innocent party from suing for damages for breach on the ground of repudiation or fundamental breach.” (Mason J at 31)
The third matter I should address is a submission, or perhaps, the suggestion of a submission counsel for PSPL and Mr Berger made to the effect that the Ricoh Agreement was less favourable than the CFAL Agreement.[54] There are at least two difficulties with that submission. First, no such loss is alleged in the statement of claim. The submission, therefore, is irrelevant. Second, PSPL does not appear to be a party to the Ricoh Agreement; as I noted earlier in these reasons, the parties to the Ricoh Agreement are Ricoh and “Victor Berger and Harry Freedman ATF the MAHD and The MAHD TRUST and the Berger Trust t/as Milne Berry Berger and Freedman”.
[54] T44.5, T45.25
Conclusion
Given my conclusions, it follows that the proceeding should be dismissed to the extent it consists of claims against MCPL. The proceeding should also be dismissed against CFAL to the extent it claims CFAL is jointly and severally liable with MCPL in relation to the loss or damage PSPL and Mr Berger claim they suffered as a consequence of MCPL’s engaging in misleading or deceptive conduct in contravention of s.52(1) of the TPA. This, then, leaves alive only a claim for nominal damages against CFAL based on CFAL’s breach of the conditions implied into the CFAL Agreement by s.71 of the TPA.
I propose, therefore, to order that:
a)the proceeding be dismissed against MCPL; and
b)the proceeding be dismissed against CFAL except to the extent PSPL and Mr Berger claim nominal damages for breaches of the conditions they allege are implied by s.71 of the TPA into the CFAL Agreement.
I also propose to order that PSPL and Mr Berger pay MCPL’s costs of the proceeding, and CFAL’s costs of the application for summary dismissal. That order, however, will be conditional on my reserving to the parties liberty to apply for a different costs order.
I certify that the preceding eighty-five (85) paragraphs are a true copy of the reasons for judgment of Judge Manousaridis
Date: 30 June 2016
5
19
4