Pitt v Commissioner for Consumer Affairs

Case [2021] SASCA 24

SUPREME COURT OF SOUTH AUSTRALIA

(Court of Appeal: Civil)

PITT v COMMISSIONER FOR CONSUMER AFFAIRS

[2021] SASCA 24

Judgment of the Court of Appeal  

(The Honourable Justice Doyle, the Honourable Justice Livesey and the Honourable Justice Bleby)

30 April 2021

TRADE AND COMMERCE - COMPETITION, FAIR TRADING AND CONSUMER PROTECTION LEGISLATION  - CONSUMER PROTECTION - UNCONSCIONABLE CONDUCT - WHAT CONSTITUTES

The Commissioner brought proceedings against Mr Pitt, a real estate agent, in the Magistrates Court.  The Commissioner alleged that Mr Pitt engaged in unconscionable conduct, and misleading or deceptive conduct, in contravention of the Australian Consumer Law (ACL).  The alleged contraventions related to Mr Pitt’s dealings with Mr Hartwig, a retired pensioner, in 2012, and in particular, the purchase of a property (the Property) from Mr Hartwig.  Mr Pitt denied any contravention of the ACL, and, following a three-day trial, the Magistrate dismissed the Commissioner’s claims.

The Commissioner appealed to a single Judge of the Supreme Court.  The Judge allowed the Commissioner’s appeal in respect of the unconscionable conduct claim, but dismissed the appeal in respect of the claims of misleading conduct. 

Mr Pitt now appeals from the decision of the single Judge.  Mr Pitt contends that his Honour erred in holding that he engaged in unconscionable conduct, relying upon four grounds.  The Commissioner has filed a notice of alternative contention.

Grounds 1 and 2 involve challenges to the single Judge’s conclusion that Mr Pitt engaged in unconscionable conduct under the narrow approach to statutory unconscionability.  Ground 1 challenges the single Judge’s conclusion that Mr Hartwig was under a special disadvantage, while ground 2 challenges the conclusion that Mr Pitt took unconscientious advantage of Mr Hartwig’s position.

Ground 3 contends that the single Judge erred in his conclusion that Mr Pitt engaged in unconscionable conduct in that his Honour erroneously took into account that the Property was subdivided and sold “at great profit to himself and his daughter”, whereas the evidence did not support any such finding.

Ground 4 and the notice of alternative contention concern the single Judge’s conclusion that Mr Pitt acted unconscionably under the broader approach to statutory unconscionability. 

Held, allowing the appeal, dismissing the Commissioner’s notice of alternative contentions, and restoring the Magistrate’s dismissal of the proceedings:

1.      There was not a proper basis for the single Judge to overturn the Magistrate’s finding that the Commissioner did not establish special disadvantage on the part of Mr Hartwig. 

2.      In light of the above finding, there is no utility in considering whether the single Judge further erred in concluding that the Commissioner established that Mr Pitt took advantage of Mr Hartwig in the sense contemplated by the second limb of the narrow approach to unconscionability.

3.      It was relevant to take into account that Mr Pitt was motivated by a desire to make a profit of the approximate magnitude of what was in fact made and enjoyed by his daughter.

4.      Having regard to the totality of the circumstances, it has not been established that Mr Pitt…

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Pitt v Commissioner for Consumer Affairs [2021] SASCA 24
Case
[2021] SASCA 24
Decision Date

CaseChat Overview and Summary

The appeal concerned a claim of unconscionable conduct brought by the Commissioner for Consumer Affairs against Mr Pitt, a real estate agent, and his daughter, Ms Tarnia Pitt. The Commissioner alleged that Mr Pitt had engaged in unconscionable conduct in contravention of the Australian Consumer Law by exploiting a special disadvantage of Mr Hartwig, a property owner. The Magistrate had dismissed the Commissioner's claim, but a single judge of the Supreme Court allowed the Commissioner's appeal, finding that unconscionable conduct had been established. This Court was asked to determine whether the single judge had erred in overturning the Magistrate's decision.

The legal issues before the Court were whether the Magistrate had erred in finding that the Commissioner had not established a special disadvantage on the part of Mr Hartwig, and consequently, whether the Commissioner had established that Mr Pitt took advantage of Mr Hartwig in the sense contemplated by the relevant provisions of the Australian Consumer Law. The Court was required to consider the principles of equitable unconscionability and statutory unconscionability, particularly the requirement for a special disadvantage affecting the weaker party's ability to form a judgment in their own interests, and the stronger party unconscientiously taking advantage of that disadvantage.

The Court reasoned that the single judge had not had a proper basis to overturn the Magistrate's finding that Mr Hartwig did not suffer from a special disadvantage. The Court noted that the Magistrate's findings were informed by having seen and heard the witnesses, and that deference was owed to those findings. Given this conclusion, the Court found no utility in considering whether Mr Pitt had taken advantage of Mr Hartwig. The Court also considered it relevant that Mr Pitt was motivated by a desire to profit from the transaction. Ultimately, the Court concluded that, having regard to the totality of the circumstances, it had not been established that Mr Pitt acted unconscionably.

The Court allowed the appeal, dismissed the Commissioner's notice of alternative contentions, and restored the Magistrate's dismissal of the proceedings.

Orders

Orders of the court

Held, allowing the appeal, dismissing the Commissioner’s notice of alternative contentions, and restoring the Magistrate’s dismissal of the proceedings:

1. There was not a proper basis for the single Judge to overturn the Magistrate’s finding that the Commissioner did not establish special disadvantage on the part of Mr Hartwig.

2. In light of the above finding, there is no utility in considering whether the single Judge further erred in concluding that the Commissioner established that Mr Pitt took advantage of Mr Hartwig in the sense contemplated by the second limb of the narrow approach to unconscionability.

3. It was relevant to take into account that Mr Pitt was motivated by a desire to make a profit of the approximate magnitude of what was in fact made and enjoyed by his daughter.

4. Having regard to the totality of the circumstances, it has not been established that Mr Pitt acted unconscionably in the sense contemplated by the broader approach to unconscionability.

Background

Background to the litigation

It is convenient to commence with a summary of the factual narrative. We will then summarise the matters in issue at trial, the Magistrate’s reasons for dismissing the Commissioner’s claim, and the single Judge’s reasons for allowing the appeal in respect of the allegation of unconscionability. We will then set out in more detail the grounds of appeal relied upon by Mr Pitt, and the terms of the Commissioner’s notice of alternative contention, before undertaking an analysis of the issues arising for determination by this Court.The factual background The following summary of the evidence and facts is taken from the Magistrate’s reasons and the documents in evidence. It consists largely of a summary of the findings made by the Magistrate, together with some commentary from her Honour’s reasons as to the nature and limits of the evidence at trial. We observe that in some respects (replicated in the summary that follows), the Magistrate merely referred to the evidence given by the relevant witness (generally Mr Pitt or Mr Hartwig) without making it express whether that evidence was accepted. It would have been better had her Honour been more explicit in relation to her view of these aspects of the evidence, either through some general observations as to the credibility and reliability of the relevant witnesses, or through more explicit findings on the issues of detail where her Honour confined herself to references to the evidence that was given. However, in most instances it is tolerably clear that her Honour intended to convey her acceptance of the relevant evidence, or at least that her Honour saw no contradictory evidence, or other consideration, that stood in the way of its acceptance. To the extent these instances are significant to the outcome of the appeal, we have addressed them later in the operative sections of these reasons.The parties Mr Pitt is a qualified and experienced real estate agent who operated a real estate agency in Grange for many years. In 2012, the business was trading as Pitt Real Estate. Mr Pitt’s daughter, Ms Tarnia Pitt, worked in the business as a property manager and licensed real estate agent. In early 2012, Mr Pitt attended a seminar and some training courses offered by We Buy Houses Pty Ltd, through a Mr Rick Otton. Mr Otton taught a strategy (referred to as the ‘We Buy Houses’ strategy) which involved locating people who were struggling to sell their property through traditional methods, and then entering into an option agreement with them to purchase their property at a fixed price at some time in the future (by which time it was anticipated that the capital value of the property would have increased). In around March or April 2012, Mr Pitt sought to implement the We Buy Houses strategy. He set up a dedicated mobile phone number, and began to display signs on vehicles with the words “We Buy Houses” and “Can’t sell your house? Don’t want your house?”, and making reference to the mobile phone number and the name “Tarn” (his daughter). Mr Pitt also placed newspaper advertisements stating “We Buy Houses. Any location, any condition, anywhere.”

Evidence

Evidence Before The Court

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Decision

Reasons for decision

We have to this point been describing the appellate task to be undertaken by the single Judge in his independent review of the evidence at trial and reasons of the trial judge. In substance, the same task confronts this Court. Strictly speaking, the task of this Court is to consider whether the single Judge fell into error. But as this involves determining whether the single Judge erred in undertaking the real review that he was required to undertake, it generally calls for a focus upon what transpired at trial. In particular, to the extent that this Court is required to afford deference to findings and conclusions which might have been informed by the advantage of having seen and heard the relevant witnesses, and having had the opportunity to consider the evidence in the context of the evidence as a whole and the trial as it unfolded, that deference is to the advantage enjoyed by the Magistrate as trial judge, and not the single Judge. Thus, while it remains appropriate to consider this appeal through the prism of identification of error in the single Judge’s reasons, the focus must remain on the evidence adduced at trial, and the findings and reasons of the Magistrate in respect of the same.The principles governing a conclusion of unconscionability While this appeal concerns the species of statutory unconscionability found in s 21 of the ACL, it is convenient to commence with a summary of the principles governing a conclusion of unconscionability both in equity and under the various statutory species of that concept.Equitable unconscionability The central concern of the equitable doctrine of unconscionability is to provide relief against the stronger party to a transaction exploiting, or taking advantage of, some special disadvantage which has operated to impair the ability of the weaker party to form a judgment as to his or her interests.[21] [21] Australian Securities and Investments Commission v Kobelt (2019) 267 CLR 1 at [81] (Gageler J), citing Blomley v Ryan (1956) 99 CLR 362 at 392 (McTiernan J), 405 (Fullagar J); Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447 at 462 (Mason J); Bridgewater v Leahy (1998) 194 CLR 457 at [39]-[40] (Gleeson CJ and Callinan J), [74]-[76] (Gaudron, Gummow and Kirby JJ); Thorne v Kennedy (2017) 263 CLR 85 at [38] (Kiefel CJ, Bell, Gageler, Keane and Edelman JJ). The principles governing this doctrine were conveniently summarised in the following terms by Nettle and Gordon JJ in Australian Securities and Investments Commission v Kobelt:[22][22] Australian Securities and Investments Commission v Kobelt (2019) 267 CLR 1 at [145]-[150] (Nettle and Gordon JJ) (citations omitted).The equitable doctrine of unconscionable conduct “looks to the conduct of the stronger party in attempting to enforce, or retain the benefit of, a dealing with a person under a special disability in circumstances where it is not consistent with equity or good conscience that he should do so”. The “abiding rationale” of the doctrine is to “ensure that it is fair, just and reasonable for the stronger party to retain the benefit of the impugned transaction”.Relief under the doctrine of unconscionable conduct requires that the innocent party was subject to a special disadvantage in dealing with the other party when the transaction was entered into, “which seriously affect[ed] the ability of the innocent party to make a judgment as to [their] own best interests”; and that the other party unconscientiously took advantage of that special disadvantage. The existence of those circumstances at the time of the transaction is what “affect[s] the conscience” of the stronger party and renders the enforcement of the transaction, or the taking of the benefit, “unconscientious” or “unconscionable”. It is not possible to identify exhaustively what amounts to a special disadvantage. However, the essence of the relevant weakness is that it ‘seriously affects’ the innocent party's ability to safeguard their own interests. Relevant matters may include, but are not limited to, “poverty or need of any kind, sickness, age, sex, infirmity of body or mind, drunkenness, illiteracy or lack of education, lack of assistance or explanation where assistance or explanation is necessary”; as well as “illness, ignorance, inexperience, impaired faculties, financial need or other circumstances” that affect the innocent or weaker party’s ability to protect their own interests. It is not sufficient that the matters give rise only to an inequality of bargaining power. A party will have unconscientiously taken advantage of an innocent party when the former knew or ought to have known of the existence and effect of the special disadvantage; or, put another way, when the special disadvantage was sufficiently evident at the time of the transaction to make it unconscientious to procure or accept the assent of the innocent party.Unconscionable conduct does not require a finding of dishonesty. However, it is not merely concerned with what is ‘fair’ or ‘just’. Unconscionable conduct can include the passive acceptance of a benefit in unconscionable circumstances. And unconscionable conduct can be found even where the innocent party is a willing participant, the question is how that willingness or intention to participate was produced. As this Court has recognised and restated a number of times, invocation of equitable doctrines, including unconscionable conduct: “calls for a precise examination of the particular facts, a scrutiny of the exact relations established between the parties and a consideration of the mental capacities, processes and idiosyncrasies of the [weaker party]. Such cases do not depend upon legal categories susceptible of clear definition and giving rise to definite issues of fact readily formulated which, when found, automatically determine the validity of the disposition. ... [‘]A court of equity takes a more comprehensive view, and looks to every connected circumstance that ought to influence its determination upon the real justice of the case”.

Ratio Decidendi

Legal Principle Established

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