Thomas v Panourakis
[2014] VSC 398
•26 August 2014
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
JUDICIAL REVIEW AND APPEALS LIST
S CI 2013 3670
| GORDON THOMAS, DOUGLAS THOMAS and KATHLEEN THOMAS | Plaintiffs |
| v | |
| EMMANUEL (“MANNY”) PANOURAKIS | Defendant |
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JUDGE: | KYROU JA | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 12 August 2014 | |
DATE OF JUDGMENT: | 26 August 2014 | |
CASE MAY BE CITED AS: | Thomas v Panourakis | |
MEDIUM NEUTRAL CITATION: | [2014] VSC 398 | |
DECISION APPEALED FROM: | Thomas v Panourakis [2013] VCAT 1014 | |
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ADMINISTRATIVE LAW — Appeal from Victorian Civil and Administrative Tribunal — Fair Trading Act 1999 — Tribunal’s jurisdiction under that Act — Whether s 159 is subject to pt 9 — Whether Tribunal erred in finding it lacked jurisdiction — Whether Tribunal erred in finding plaintiffs had not proved their case.
ADMINISTRATIVE LAW — Natural justice — Plaintiffs bound by their pleaded case and the manner in which their counsel conducted it — Tribunal not obliged to find in favour of plaintiffs on the basis of a case they did not conduct — Tribunal’s use of the word ‘Yes’ during counsel’s submissions did not signify that Tribunal accepted the submissions but only that Tribunal heard them — Factual errors did not vitiate Tribunal’s decision — Tribunal’s reasons not inadequate — Victorian Civil and Administrative Tribunal Act 1998 ss 97, 98, 102, 117.
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| APPEARANCES: | Counsel | Solicitors |
| For the Plaintiffs | Mr P Duggan | McNab McNab & Starke |
| For the Defendant | Mr P G Willis | John Morrow |
TABLE OF CONTENTS
Introduction and summary............................................................................................................... 1
Uncontested facts................................................................................................................................ 3
Relevant provisions of the Fair Trading Act................................................................................. 7
Points of claim and defence in the VCAT proceeding................................................................ 9
VCAT hearing................................................................................................................................... 14
VCAT’s Decision.............................................................................................................................. 19
Proposed ground of appeal............................................................................................................ 22
Scope of VCAT’s jurisdiction under the Act............................................................................... 23
Is s 159(2) of the Act subject to pt 9 of the Act?....................................................................... 23
The plaintiffs’ case as conducted before VCAT..................................................................... 24
The plaintiffs’ case as pleaded — wide interpretation of the Act....................................... 25
The plaintiffs’ case as pleaded — narrow interpretation of the Act.................................... 29
Have the plaintiffs made out any part of the ground of appeal?............................................ 32
Proposed order.................................................................................................................................. 36
HIS HONOUR:
Introduction and summary
This is an application for leave to appeal from a decision of the Victorian Civil and Administrative Tribunal (‘VCAT’) made on 19 June 2013 which dismissed the plaintiffs’ claim against the defendant (‘VCAT’s Decision’).[1]
[1]Thomas v Panourakis [2013] VCAT 1014 (19 June 2013) (‘Reasons’). On 23 October 2013, Lansdowne AsJ made an order that the application for leave to appeal, and any resultant appeal, be heard at the same time.
The plaintiffs’ claim was made pursuant to the Fair Trading Act 1999 (‘Act’)[2] and related to a failed investment of $800,000 that was made to acquire an interest in land at Braeside upon which a service station operated (‘Land’). The investment was made following discussions with the defendant and was effected by acquiring units in the Keylock Unit Trust (‘Trust’), the purchaser of the Land.
[2]Although the Act was repealed by the Australian Consumer Law and Fair Trading Act 2012, it was common ground that the Act continued to apply to the plaintiffs’ claim. As appears from [34(j)] below, the plaintiffs also relied on causes of action that were independent of the Act but those causes of action are not relevant to this appeal.
The defendant was a director and shareholder in Keylock Enterprises Pty Ltd (‘Keylock’), which was the trustee of the Trust, and Manvic Developments Nominees Pty Ltd (‘Manvic’), which managed the Land. The defendant was an accountant and he had provided accounting services to the first plaintiff, Gordon Thomas, since 1983 through entities associated with the defendant.
The plaintiffs were represented by counsel at the VCAT hearing whereas the defendant represented himself after a failed application for an adjournment. The plaintiffs’ claim, as pleaded, was based principally on the defendant’s conduct at the time the investment was made in 2003. Their claim, as conducted by their counsel, relied on an indemnity in cl 15.3(b) of a unitholders agreement that was executed by the plaintiffs, Manvic and Keylock in August 2003 (‘Unitholders Agreement’).
During the hearing, the plaintiffs were given leave to inspect documents produced on subpoena by National Australia Bank (‘NAB’). Those documents indicated that the defendant’s wife (‘Mrs Panourakis’) had used the Land as security for her personal loans (‘Security Use’), that NAB demanded repayment of those loans in 2010, and that this demand resulted in the sale of the Land for a price that was insufficient to leave any equity for the unitholders in the Trust.
Despite the fact that the plaintiffs’ counsel cross-examined the defendant about the Security Use by Mrs Panourakis, counsel did not apply for leave to amend the plaintiffs’ points of claim and he did not make any closing submissions. Accordingly, the evidence about the Security Use, which was not authorised by any provision of the Unitholders Agreement, was not made referable to any aspect of the plaintiffs’ claim as pleaded or as conducted before VCAT.
The substance of the plaintiffs’ application for leave to appeal against VCAT’s Decision is that VCAT should have found in their favour on the following basis:
(a) by allowing the Security Use by Mrs Panourakis, Manvic and/or Keylock contravened the Act by engaging in unconscionable conduct or by breaching their duties in relation to the services they provided to the plaintiffs as unitholders; and
(b) as the defendant was the controlling mind of Manvic and Keylock, he was involved in their contraventions of the Act and was thus liable to the plaintiffs.
The plaintiffs pressed their application on this basis notwithstanding that the above grounds of liability were not set out in their points of claim and were not the subject of any submissions to VCAT by their counsel. The plaintiffs have contended that VCAT’s obligations to accord natural justice[3] and to act fairly and according to the substantial merits of the case[4] required VCAT to find in their favour or to give them prior notice that it proposed to find against them. The plaintiffs have also complained about VCAT’s findings of fact and the adequacy of its Reasons.[5]
[3]Victorian Civil and Administrative Tribunal Act 1998 (‘VCAT Act’) s 98(1)(a).
[4]VCAT Act s 97.
[5]VCAT Act s 117.
If the plaintiffs’ counsel had conducted their case by incorporating the evidence of the Security Use by Mrs Panourakis within the framework of the Act and by adducing evidence to establish that the requirements of applicable sections of the Act were satisfied, VCAT would have been able to find in their favour. However, this is not how counsel conducted the case. Based on the case that was conducted before VCAT and the evidence before it, the only order that VCAT could have made was to dismiss the plaintiffs’ claim.
Although VCAT’s Reasons contain some errors, VCAT’s order dismissing the plaintiffs’ claim (‘VCAT’s order’) was legally correct. Accordingly, leave to appeal will be refused.
Uncontested facts
Douglas Thomas, the second plaintiff, is the brother of Gordon Thomas. Kathleen Thomas, the third plaintiff, is the wife of Douglas Thomas.
The defendant conducted his business as an accountant and financial advisor through various business names and corporate entities, including E Panourakis & Company, Manvic Insurances Nominees Pty Ltd, Manvic Accountants, and Manvic Solutions Pty Ltd.
In 2003 the plaintiffs received substantial bequests from the deceased estate of Gordon and Douglas’ father and were seeking to invest that money. Following discussions with the defendant, in August 2003, the plaintiffs signed the Unitholders Agreement and paid $800,000 to Keylock to acquire units in the Trust. Gordon Thomas paid half of the amount of $800,000 to acquire 13 units and Douglas and Kathleen Thomas paid the other half to acquire 13 units. Keylock issued 74 units to Manvic in its capacity as trustee of the E Panourakis Family Trust. Accordingly, the plaintiffs collectively acquired 26 per cent of the units and Manvic acquired 74 per cent of the units.
The key provisions of the Unitholders Agreement were as follows:
(a) The recitals made it clear that the purpose of the Trust was to acquire the Land, which was described as ‘the Property’, and that Keylock was to act as trustee of the Trust.
(b) Clause 1.1 defined ‘Business’ to mean the business of managing the improvements and any business located on the Land.
(c) Clauses 4.1 and 7.1 required that the defendant be the sole director of Keylock.
(d) Clause 5.3 provided that ‘the principal business activities and aims of the Business will be the preservation, maintenance and development of the Property and any improvements situate upon same from time to time.’
(e) Clause 8.1 provided that the board of directors of Keylock ‘is responsible for the overall direction, control and management of the Trustee and the formulation of policies to be applied in the conduct of the Business.’
(f) Clause 9 provided as follows:
9. Individual Unitholder Responsibilities
9.1In addition to any obligations imposed at law, or generally upon the Unitholders (as noted herein), Manvic agrees to undertake the management of the Property and shall accordingly be responsible for carrying out in a diligent fashion the following matters:
(a)act as the liaison and co-ordinator for all matters relating to any lessee or licensee who shall occupy the Property (or any part thereof) from time to time;
(b)collect and promptly bank and account to the Unit Trust for all rental and/or licence fees payable by any lessee or licensee of the Property from time to time;
(c)carry out or cause to be carried out any and all maintenance of the Property as shall be required pursuant to any licence or lease relating to the Property (or any part thereof) and to generally oversee and maintain the Property in a first class condition;
(d)liaise with any necessary third party professionals whose services are required for the upkeep, maintenance and/or improvement of the Property from time to time;
(e)be responsible for liaising with any government bodies having authority or jurisdiction over the Property, ensure that all rates, taxes and other charges payable by the Trustee as registered proprietor of the Property are paid within the terms of any authorised authority.
9.2In consideration of Manvic agreeing to carry out the various undertakings set out in Clause 9.1, it shall be entitled to a management commission of 7½% based on the total of all gross income (whether by way of rental, licence fees or otherwise) as shall be derived by any activity, carried out on any part of the Property of whatever nature (‘the Management Fee’). It is agreed that the Management Fee shall be treated as an operating expense of the Business as an arms length expense incurred on revenue account and shall be paid monthly.
9.3Should at any time Emmanuel Panourakis not be available to carry out the various responsibilities set out in Clause 9.1 on behalf of Manvic either because of death, incapacity or unavailability then the Unitholders shall meet in good faith for the purpose of appointing an estate agent at arms length to carry out those responsibilities set out in Clause 9.1 for such financial reward as shall be agreed upon by the Unitholders.
(g) Clause 15 provided as follows:
15. Security
15.1Each of the [plaintiffs] hereby acknowledges and consents to Manvic using the title of the Property as security for the making of a commercial advance not to exceed the sum of two million, one hundred thousand dollars ($2,100,000) from the Commonwealth Bank to Manvic to be used to fund the obligations of Manvic to make available moneys to the Trustee for the purchase of the Property.
15.2Notwithstanding the provisions of 15.1, the parties agree that they shall each be responsible for providing funds to the Trustee in satisfaction of the Purchase Price of the Property in proportion to their unitholding in the Unit Trust.
15.3In consideration of the contents of Clause 15.1, Manvic agrees to:
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(b)indemnify the [plaintiffs] in respect to any claims, demands, actions, suits or damages incurred by any of the Trustee [or the plaintiffs] as may arise as a result of any default by Manvic in relation to the advance set out and referred to in Clause 15.1.
The Trust purchased the Land on 27 October 2003 for $2.9 million. With stamp duty and other expenses, the total outlay was $3,060,195. Notwithstanding that cl 15.1 of the Unitholders Agreement authorised Manvic to borrow up to $2.1 million from the Commonwealth Bank to enable Manvic to contribute to the funding of the acquisition of the Land, a loan was obtained from St George Bank. St George Bank was the sole mortgagee of the Land and the Land was security only for the loan provided by that bank. St George Bank obtained a valuation of the Land in the amount of $2.65 million. The defendant gave evidence that St George Bank made a loan of $1,722,500 to Manvic and that his family home and business premises were used as additional securities for Manvic’s loan.
In December 2004, the loan to Manvic was refinanced with NAB and NAB became the mortgagee. At that time, Mrs Panourakis entered into an arrangement with NAB which had the effect that the Land became part of the assets securing her personal borrowings of $3.53 million. There is a dispute about whether the plaintiffs knew about, and consented to, the Security Use by Mrs Panourakis. The plaintiffs allege that they discovered this arrangement only during the VCAT hearing whereas the defendant alleges that the plaintiffs consented to the Security Use at the time that it took place.
Between 2004 and 2011 the plaintiffs received distributions totalling $474,032 from the Trust, which were funded principally by income received from the Land.
In 2010 NAB refused to extend Mrs Panourakis’ loans and this necessitated the sale of all securities for those loans, including the Land. The Land was sold in June 2011 for $1.15 million and NAB, as mortgagee, received $1,108,304. As that amount and the other proceeds of sale of NAB’s securities did not cover Mrs Panourakis’ borrowings, there was no equity left for the unitholders of the Trust.
Manvic was deregistered on 8 May 2011.
Keylock was deregistered on 29 March 2013.
Relevant provisions of the Fair Trading Act
Set out below is a high level, and necessarily incomplete, summary of the provisions of the Act that are relevant to this appeal.
Section 8(1) of the Act provides that a person ‘must not, in trade or commerce, in connection with the supply or possible supply of goods or services of a kind ordinarily used for personal, household or domestic purposes to a purchaser, engage in conduct that is, in all the circumstances, unconscionable.’ Section 8(2) sets out matters ‘to which a court or [VCAT] may have regard for the purpose of determining whether a person has contravened subsection (1)’. Those matters include the relative strengths of the bargaining positions of the supplier and the purchaser, whether the purchaser was able to understand any documents relating to the supply of goods or services and whether any undue influence was exerted.
Section 8A of the Act is broadly similar to s 8. The main differences are: first, s 8A is not limited to goods or services of a kind ordinarily used for personal, household or domestic purposes; secondly, s 8A does not apply where the price of the goods and services exceeds $3 million; and, thirdly, s 8A contains a more extensive list of matters that can be considered by a court or VCAT.
Section 9 of the Act provides that a person ‘must not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.’ Section 4 provides that, if a person makes a representation about a future matter and does not have reasonable grounds for doing so, the representation is deemed to be misleading and that person bears the burden of proving that he or she had reasonable grounds.
Section 10 of the Act provides that a person ‘must not, in trade or commerce, engage in conduct that is liable to mislead the public as to the nature, the manufacturing process, the characteristics, the suitability for their purpose or the quantity of any goods.’
Section 11 of the Act provides that a person ‘must not, in trade or commerce, engage in conduct that is liable to mislead the public as to the nature, the characteristics, the suitability for their purpose or the quantity of any services.’
Section 12 of the Act provides that a person ‘must not, in trade or commerce, in connection with the supply or possible supply of goods or services or in connection with the promotion or advertising by any means of the supply or use of goods or services’ make false representations about those goods or services.
Section 20(2) of the Act provides that, where a person, in trade or commerce, invites another person to participate in certain business activities, the first mentioned person must not make false or misleading representations with respect to the profitability or risk of that business activity.
Part 9 of the Act is headed ‘Functions of [VCAT]’ and comprises ss 107 to 113A. Section 107(1) provides that, in pt 9, a ‘consumer and trader dispute is a dispute or claim arising between a purchaser or possible purchaser of goods or services and a supplier or possible supplier of goods or services in relation to a supply or possible supply of goods or services.’ Section 108(1) provides that VCAT ‘may hear and determine a consumer and trader dispute.’
Section 109 of the Act confers additional powers on VCAT in relation to a ‘consumer dispute’ involving an unjust term of a contract. Section 109(4) defines ‘consumer dispute’ as a dispute ‘relating to the supply or possible supply of goods or services of a kind ordinarily used for personal, household or domestic purposes’.
Section 159 of the Act is in pt 11 which is headed ‘Enforcement and Remedies’. The section relevantly provides as follows:
(1)A person who suffers loss, injury or damage because of a contravention of a provision of this Act may recover the amount of the loss or damage or damages in respect of the injury by proceeding against any person who contravened the provision or was involved in the contravention.
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(2)A proceeding under this section may be brought before [VCAT] or in any court of competent jurisdiction.
(3)A proceeding under subsection (1) must not be commenced more than 6 years after the date on which the cause of action accrued.
The phrase ‘involved in the contravention’ in s 159(1) of the Act must be interpreted in the light of the following definition in s 145:
A reference … to a person involved in a contravention of this Act means a reference to a person who—
(a) has aided, abetted, counselled or procured the contravention;
(b)has induced, whether by threats or promises or otherwise, the contravention;
(c)has been in any way, directly or indirectly, knowingly concerned in or party to, the contravention;
(d) has conspired with others to effect the contravention.
Points of claim and defence in the VCAT proceeding
In October 2011, the plaintiffs commenced a proceeding in VCAT against the defendant, Mrs Panourakis and Keylock. As Mrs Panourakis became bankrupt during 2012 and Keylock was deregistered on 29 March 2013, the proceeding continued against the defendant alone.
The plaintiffs’ points of claim alleged breaches by the defendant of ss 8 (or in the alternative 8A), 10, 11, 12 and/or 20 of the Act. In summary, the grounds upon which the plaintiffs relied and the defendant’s response in his points of defence were as follows:
(a) Between 1983 and 2003, the defendant made representations (described as ‘the Panourakis representations’) to the plaintiffs that he was able to give expert advice which, if accepted by his clients, ‘was guaranteed to improve clients’ “business, wealth and quality of life”.’
The defendant denied this allegation.
(b) The Panourakis representations were made with regard to future matters and without reasonable grounds within the meaning of s 4 of the Act.
The defendant denied this allegation.
(c) In early 2003, the defendant gave advice to the plaintiffs (described as ‘the Panourakis advice’) that they should invest $800,000 in the acquisition of a petrol station through a unit trust that he proposed to establish and manage for that purpose. The defendant also advised that such an investment would provide the plaintiffs with a guaranteed rental income, capital appreciation and superior returns to a term deposit with a bank.
The defendant alleged that Gordon and Douglas Thomas made an offer to the defendant to each contribute $400,000 to purchase the Land, such purchase to be acquired through a unit trust which the defendant would put in place.
(d) The defendant did not give advice to the plaintiffs on a number of matters including that they should obtain independent advice about the investment in the unit trust, that the defendant was in a conflict of interest situation, that the defendant would control the unit trust and thus the plaintiffs’ investment, and that there was a real risk that the plaintiffs would lose their investment. Further, after the plaintiffs had made the investment in the unit trust, the defendant never advised them that they should minimise their losses by exiting that investment.
The defendant denied these allegations.
(e) The plaintiffs invested a total of $800,000 to acquire a total of 26 units in the Trust in reliance upon the Panourakis representations and the Panourakis advice. The defendant and Mrs Panourakis, through their ownership and control of Manvic and Keylock, acquired 74 per cent of the units in the Trust, and thus control of the Trust, at negligible cost and risk to themselves and they controlled the operations of the Trust for their own benefit and to the detriment of the plaintiffs.
The defendant denied these allegations, other than the allegation that the plaintiffs paid $800,000 to acquire 26 units in the Trust and that Manvic acquired 74 units.
(f) Between 2003 and 2011, the defendant, Mrs Panourakis and Keylock were each involved in the day to day management and control of the Trust and, in that capacity, they each caused the Trust to purchase the Land and permitted the Land ‘to be used by [them] and/or others associated with [them] to secure certain borrowings of no actual or potential benefit to the [plaintiffs]’.[6] Those borrowings fell into arrears, the relevant financiers entered into possession and sold the Land and the plaintiffs’ capital investment was entirely lost as a consequence.
[6]Paragraph 13(b)(ii) of the points of claim.
Save for certain admissions, the defendant denied these allegations. The admissions included that, as a director of Keylock, the defendant was involved in its management from 12 August 2003, and that NAB placed Keylock under external administration on or about 25 August 2010.
(g) The defendant has wrongfully refused to indemnify the plaintiffs for their loss in accordance with the guarantee that was part of the Panourakis representations.
The defendant denied these allegations.
(h) By reason of the preceding matters, the plaintiffs have suffered loss and damage comprising loss of capital and loss of reasonable return on their capital.
The defendant denied these allegations.
(i) Paragraphs 17, 18 and 19 of the points of claim were in the following terms:
17. The respondents’ conduct was —
(a)in connection with the supply or possible supply of services to the applicants, (namely the accounting and business services referred to in the Panourakis representations); and
(b)unconscionable within the meaning of s 8 and/or 8A of the Fair Trading Act 1999.
Particulars
(i)The applicants invested capital totalling $800,000 in reliance upon the Panourakis representations and/or the Panourakis advice;
(ii)The respondents contributed no capital, alternatively negligible capital, to the same venture;
(iii)The respondents nevertheless caused, suffered or permitted themselves and/or associated entities to acquire a 74% interest in that venture and the applicants only a 26% interest between them;
(iv)The resulting ostensible legal and commercial relationships between the applicants on one part and the respondents on the other part was so one-sided to the applicants’ detriment as to be explicable only by —
(1)the applicants having reposed such faith and confidence in the respondents as to impose upon each of the respondents a fiduciary obligation of which they must in good conscience have been aware;
(2)the applicants being in a position of special disadvantage by reason of their lack of formal education and relevant experience and their trust in the respondents;
(3)the respondents’ failure to advise the applicants candidly and competently as to the disadvantageous transactions the applicants were undertaking with the respondents; and/or
(4)the respondents’ failure to ensure that the applicants sought and received an[d] understood competent independent professional advice.
18.Further and in the alternative the respondents’ conduct constituted breaches of sections 10, 11, 12 and/or 20 of the Fair Trading Act1999.
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19.To the extent that any of the Fair Trading Act contraventions referred to above were contraventions by Manvic (which company is now deregistered) by any or all of the respondents acting as servants and/or agents of Manvic —
(a)the applicants have suffered loss and damage as a result of such contraventions;
(b)the respondents were each persons involved in such contraventions; and
(c)the applicants are entitled to recover the amount of their loss and damage from the respondents by reason of s 159 of the Fair Trading Act 1999.
The defendant denied these allegations. He also alleged that the investment in the Trust was not made for the purpose of trade or commence within the meaning of the Act, that s 8 did not apply because that investment was not in connection with the supply of goods or services of a kind ordinarily used for personal, household or domestic purposes, and that ss 10, 11, 12 and 20 also did not apply because its requirements were not satisfied.
(j) The defendant owed duties of care to the plaintiffs independently of the Act, including certain fiduciary duties. The defendant breached those duties and thereby caused the plaintiffs to lose their entire capital investment. The defendant is liable to account to the plaintiffs all benefits he received directly or indirectly.
The defendant denied these allegations and asserted that VCAT lacked jurisdiction in relation to them.
On 7 June 2013, ten days prior to the VCAT hearing, the defendant sent an open letter to the plaintiffs (with a copy to VCAT) offering $40,000 payable over 12 months to settle the VCAT proceeding. The letter stated that the offer was being made ‘[i]n the interests of a Commercial decision and to avoid further legal cost[s]’. The letter attached details of the defendant’s financial position and stated that he could not afford legal representation. The letter also stated that if VCAT’s decision were ‘detrimental’ to the defendant, he would have no option but to declare himself bankrupt.
VCAT hearing
At the commencement of the VCAT hearing, the defendant was represented by counsel who made an application to adjourn the hearing. In opposing the application, counsel for the plaintiffs made a brief opening address which focused on the indemnity by Manvic in cl 15.3(b) of the Unitholders Agreement. Counsel submitted that Manvic (which was not a party because it had been deregistered) had no defence on the merits to the obligation to indemnify the plaintiffs and that the plaintiffs were entitled to claim against the defendant personally because he is a person who was ‘involved in the contravention’ for the purposes of s 159(1) of the Act. Counsel did not refer to the Security Use by Mrs Panourakis and did not explain the nature of the alleged contravention by reference to any earlier provision of the Act.
After the Deputy President of VCAT refused the application for an adjournment, the hearing proceeded with the defendant representing himself. Counsel for the plaintiffs made a more detailed opening in which he relevantly stated:
(a) The plaintiffs’ claim is for damages against the defendant personally relying on s 159 of the Act.
(b) The plaintiffs rely on s 8 of the Act or if the ‘personal, household or domestic purposes’ requirement is not met, they rely on s 8A. The plaintiffs also rely on ss 9, 11 and 12 of the Act. The defendant misled the plaintiffs personally and through the defendant’s corporate entities in the manner set out in the points of claim.
(c) The plaintiffs can ‘bring this case home against Mr Panourakis personally if he has been operating through Manvic … and or Keylock … or the firm E Panourakis and Company or other vehicles’. Manvic and Keylock never acted except by or in cooperation with Mr Panourakis personally and therefore he was involved in any contravention of the Act by those entities.
(d) Pursuant to cl 15.3(b) of the Unitholders Agreement, the plaintiffs are entitled to an indemnity for any shortfall they have suffered.
Counsel for the plaintiffs submitted that, because the defendant admitted that the plaintiffs contributed $800,000 and that they did not receive any part of the proceeds of sale of the Property when it was sold for $1.15 million, ‘that’s all the evidence [the plaintiffs] need’ in order to prove their case. The Deputy President said ‘Yes’ and the following exchange then took place between the Deputy President and counsel:
Counsel:
So here’s my difficulty in terms of calling evidence, we appear to have no dispute whatsoever on the facts.
Deputy President:
Yes. So you plead [reliance] on clause 15.3 in the points of claim?
Counsel:
No, … we paint our claim on a much wider canvas — —
Deputy President:
Yes.
Counsel:
In the points of claim against the … three defendants who have been available. Now we refer to the [Unitholders Agreement] … but we don’t specifically claim on that indemnity.
Deputy President:
Yes. So that means you don’t have an admission in [the] defence there because it just hasn’t — —
Counsel:
No.
Deputy President:
There isn’t, yes, okay. Look, someone’s served a subpoena on the NAB and they’ve handed over files and documents. …
Counsel did not request that the proceeding be stood down so that he could inspect the subpoenaed documents, preferring to do so later during the luncheon adjournment. In explaining the unconscionable and misleading conduct upon which the plaintiffs relied, counsel referred to some of the conduct set out in the points of claim. Counsel stated that the unequal contribution of funds to acquire equity in the Trust was itself misleading or unconscionable for the purposes of the Act. Counsel then said that he did not ‘understand that there’s any real argument at all today.’
The Deputy President then asked the defendant whether he wanted to respond before any evidence was called by the plaintiffs. The defendant said that he preferred to defer making any statements until after the plaintiffs commenced their evidence.
Kathleen Thomas was then called to give evidence. On the defendant’s application, the Deputy President ordered that Gordon and Douglas leave the hearing room despite their counsel protesting: ‘They are parties, Sir.’
In her evidence in chief, Kathleen Thomas said that she was retired and that prior to the investment in the Trust, she had not had any business experience. She said that she and Douglas Thomas had discussed investing the money they inherited in a term deposit and considered other options. She then gave evidence about being introduced to the defendant and the statements he made about the investment before the Land was purchased. She candidly said that she did ‘[n]ot really’ remember what the defendant said about the investment in 2003 and whether it was him or somebody else who said that it was a safe investment. She gave evidence that she and her husband invested $400,000 and did not receive any amount when the Land was sold. She said that ‘it would appear’ that the defendant’s personal loans were secured against the Property and that she had never agreed to that.
The defendant then cross-examined Kathleen Thomas. Counsel for the plaintiffs interrupted the defendant to make a submission that ‘we appear to have no argument at all against our case on the basis of the unit holders trust’ and that ‘if Mr Panourakis has a defence it’s in that document and he needs to put it to this witness otherwise we really are wasting everybody’s time and money.’ In response, the Deputy President said that the defendant must be given an opportunity to put his defence.
Counsel for the plaintiffs inspected the subpoenaed documents during the luncheon adjournment.
After the luncheon adjournment, counsel for the plaintiffs interrupted the defendant’s cross-examination of Kathleen Thomas again when she was being asked questions about her knowledge of trusts. When the Deputy President stated that the questions were relevant to the plaintiffs’ allegation that they are unsophisticated people, counsel stated that this was not relevant to ‘the indemnity we went to this morning’ and that ‘unless [the defendant] goes to that he is wasting everybody’s time and my clients’ money.’
At the conclusion of Kathleen Thomas’ evidence, the following exchange took place between the plaintiffs’ counsel and the Deputy President:
Counsel:
And again before Mrs Thomas leaves the stand we propose to call no further witnesses because there’s been no attack made at all on [cl 15.3(b)].
Deputy President:
Yes.
Counsel:
It tends to follow that our case is essentially conceded, it’s a matter of law. Now, I’m thinking of [Browne v Dunn] which is obviously not something that … non-lawyers are expected to be familiar with but let me restate the same proposition in terms of fairness to Mr Panourakis.
Deputy President:
Yes, thank you.
Counsel:
Mr Panourakis has taken you to this agreement, he says this agreement is the final accurate form agreed to by all the parties. He told us just now that this was a … standard document — —
Deputy President:
Yes.
Counsel:
There were certain amendments to it particularly [cl 15.3(a)] but he’s not suggested anywhere ever today or on papers before today that the indemnity that appears in [cl 15.3(b)] wasn’t part of the agreement nor has he contended ever that there’s been any payment to the Thomas’s in connection with that indemnity.
Deputy President:
Yes
Counsel:
Accordingly it seems that there’s no further evidence required (indistinct) on his behalf.
Deputy President:
Okay. Well, you know it’s up to you [to] run the case [as] you see fit? Yes. All right, thanks then Mrs Thomas, you can sit down. So there’ll be no more evidence from your side at all?
Counsel:
Yes, none sir.
The defendant then gave evidence. He said that Gordon Thomas had worked in a bank and operated a small business with his wife. The defendant gave evidence that the value of the Land had declined in 2010 because of a general decline in property values and also because the tenant gave notice that it would not renew the lease and a new tenant had not been secured. The defendant also said that he was unable to refinance the loan with any other bank and that an attempt to sell the Land by auction in October 2010 was unsuccessful.
The defendant was cross-examined about the Security Use by Mrs Panourakis. The defendant gave inconsistent evidence about whether the plaintiffs were informed of this arrangement at the time it was made and whether they had consented to it. The upshot of the evidence was that the defendant believed that the plaintiffs had consented to the arrangement by virtue of their agreement to cl 15.1 of the Unitholders Agreement. His reasoning appeared to be that, as that clause permitted Manvic to use the Land as security and Mrs Panourakis was a director of Manvic, she was also permitted to use the Land as security.
At the conclusion of the defendant’s evidence, the Deputy President asked him whether he proposed to call any other witnesses. The defendant stated that he wanted to call a real estate agent, a solicitor and the trustee of Mrs Panourakis’ bankrupt estate and he explained the issues upon which they would give evidence. The following exchange then took place:
Counsel:
It seems to me that Mr Panourakis hasn’t quite appreciated the case against him and it’s misconceived. If these people say everything Mr Panourakis … apparently hopes they will say it doesn’t do our case any harm at all.
Deputy President:
No, it doesn’t seem to me to have much to do [with] anything … If you’re insisting you need to call these witnesses then I suppose we have to listen but I mean?
Mr Panourakis:
Well, if they’re not going to add any more value to the case I’m happy not to call them and not waste any more of your time.
…
Deputy President:
Yes? All right. Okay, well, look Mr Duggan, do you want to just make any final comments or submissions?
Counsel:
Yes, I’ve given you a detailed opening twice.
Deputy President:
Yes.
Counsel:
So I won’t take a third pass at that either.
Deputy President:
Yes.
Counsel then briefly referred to the amount of damages claimed by the plaintiffs and formally tendered some documents, and the Deputy President reserved his decision.
VCAT’s Decision
In its Reasons, VCAT made the following preliminary observations:
(a) The defendant was a shareholder in, and the controlling mind of, Manvic and Keylock.[7]
(b) After noting that the plaintiffs called only Kathleen Thomas, VCAT said: ‘As she hardly rates a mention in the Points of Claim, one would have expected that the other [plaintiffs] would have been called first. In the event they did not give evidence at all.’[8]
(c) The defendant had challenged VCAT’s jurisdiction in respect of some of the causes of action upon which the plaintiffs relied, but most of those challenges were withdrawn prior to the hearing. However, VCAT does not have inherent jurisdiction and cannot give itself jurisdiction even if no party objects to jurisdiction.[9]
[7]Reasons, [13].
[8]Reasons, [15].
[9]Reasons, [17]–[18].
VCAT summarised the points of claim, the points of defence and the opening address of counsel for the plaintiffs. VCAT stated that, at the conclusion of the opening address by counsel for the plaintiffs, the defendant ‘expressly confirmed his formal Defence [and] did not concede any issues.’[10] VCAT also stated that the defendant had put in issue the following matters:
[10]Reasons, [25].
(a) What entity owned the defendant’s accounting practice.
(b) Whether the defendant was retained by Douglas and Kathleen Thomas as an accountant at any time.
(c) Whether the defendant made ‘the Panourakis representations.’
(d) Whether the defendant gave the ‘Panourakis advice’.
(e) Whether the plaintiffs had the opportunity to obtain independent advice before making the investment in the Trust.
(f) Whether the defendant acted in the supply or possible supply of services to the plaintiffs.[11]
[11]Reasons, [20].
VCAT said the following about the plaintiffs’ claim on the indemnity in cl 15.3(b) of the Unitholders Agreement:
22.The Applicants also noted that whilst they invested their $800,000.00 in cash and received 26 Units in the Trust, Manvic Developments Nominees Pty Ltd received the other 74 Units without contributing cash. It was entitled by clause 15.1 of the Unitholders Agreement to use the petrol station as security for a loan of up to $2.1 million, which Manvic Developments Nominees Pty Ltd would make available to the Trustee to purchase the petrol station. In return, clause 15.3 required Manvic Developments Nominees Pty Ltd to indemnify the Applicants in respect of any loss or damage sustained by the Trustee or by the Applicants as a result of any default by Manvic Developments Nominees Pty Ltd in relation to the loan set out in clause 15.1. The absurdity of taking comfort from an indemnity given by a company which by definition would have defaulted under a mortgage is obvious.
23.Assuming that Manvic Developments Nominees Pty Ltd defaulted under its loan, (which was not admitted) Manvic Developments Nominees Pty Ltd would be liable under the indemnity.
After summarising the evidence of Kathleen Thomas, VCAT made the following observations and findings:
34.As the [defendant] had made it clear that [he] put in issue the six issues that I identified in paragraph 20 above,[12] the following is apparent from Kathleen Thomas’s evidence:
[12]See [52] above.
(a)There is no evidence that the [defendant] owned the accountancy practice before 9 August 2003;
(b)Douglas and Kathleen did not engage the [defendant], or any entity associated with the [defendant], as an accountant until 2004, after the investment had been made;
(c)There is no evidence that the [defendant] or any entity associated with the [defendant], made ‘the Panourakis representations’;
(d)There is no evidence that the [defendant] even gave ‘the Panourakis advice’, the most Kathleen Thomas having said being, ‘Not me. I presume you’;
(e)Kathleen Thomas and Douglas Thomas did have the opportunity to obtain independent advice before paying their respective sums of $400,000.00. They received the draft Unitholders Agreement a month before executing the final copy, and had been asked to ‘fax back any questions’. There is no evidence that they did so; and
(f)There is no evidence that the [defendant] acted in the supply or possible supply of services to Kathleen Thomas. The accounting firm was not retained until 2004, and then only to do tax returns. The events in 2003 preceded that retainer.
35.Further, Kathleen Thomas did not even make a sweeping statement to the effect that she verified that the Points of Claim were correct. Such a statement would have been of little value, but in the absence of such a statement, and in the absence of any evidence from Gordon and Douglas, there is simply no basis on which it could be said that the Applicants proved their case.
36.I must reject the Applicants’ submission that if they established any breach of the Fair Trading Act 1999, that they must succeed under section 159 of the Fair Trading Act 1999. With respect, the jurisdiction of the Tribunal under the Fair Trading Act 1999 arises from sections 107 and 108. The latter says:
(1)The Tribunal may hear and determine a consumer and trader dispute
and the former defines that expression to mean
a dispute or claim arising between a purchaser or possible purchaser of goods or services and a supplier or possible supplier of goods or services in relation to a supply or possible supply of goods or services.
37.The dispute must be ‘between’ the purchaser and the supplier. That limitation is why, for example, a case such as Hornsby Building Information Centre Pty Ltd v Sydney Building Information Centre Ltd[13] cannot be litigated in the Tribunal.
38.A dispute between investors, or joint venturers, or shareholders or company directors is not within the Tribunal’s jurisdiction even if it is proven that one of them acted in a misleading and deceptive manner, because such people do not supply services to other such people in trade or commerce.
39.On the evidence presented in this case, the [defendant] has not been proven to have supplied services to the Applicants.
40.If the Applicants contended that it was unconscionable for Manvic Developments Nominees Pty Ltd to be allowed to borrow, using a Trust asset as security, and overcame the point that permission to do so was set out unambiguously in clause 15.1 of the Unitholders Agreement, which Kathleen and Douglas Thomas at least had for about a month before executing it, they would have to take that matter before a Court. Manvic Developments Nominees Pty Ltd is not a Respondent, and on the evidence did not supply services to the Applicants. Even if the [defendant] was ‘involved in’ the conduct of Manvic Developments Nominees Pty Ltd, on the evidence presented, there is no conduct by that company which contravenes the Fair Trading Act 1999 and arises from the supply or possible supply of goods or services.
41. The Applicants’ claim must be dismissed.
[13](1987) 140 CLR 216.
Proposed ground of appeal
The plaintiffs’ proposed ground of appeal is as follows:
(a)[VCAT] erred in law by failing to accord procedural fairness to the plaintiffs;
(b)[VCAT] erred in law by failing to provide coherent reasons which either decided the case on its merits or declined to decide the case on the basis that the dispute was beyond [VCAT’s] jurisdiction;
(c)[VCAT] erred in law by making findings of fact which were not open on the evidence and submissions before it; and
(d)[VCAT] erred in law by failing to act fairly and according to the substantial merits of the case as required by s 97 of the Victorian Civil and Administrative Tribunal Act.
Scope of VCAT’s jurisdiction under the Act
At the outset of the hearing of the appeal, I informed the parties that the issue of whether VCAT had jurisdiction to deal with the plaintiffs’ claim was critical to the disposition of the appeal because, if VCAT lacked jurisdiction, the proceeding could not be remitted to VCAT even if the plaintiffs succeeded in establishing their ground of appeal. Accordingly, I suggested to the parties that they deal with the following issues prior to addressing each of the components of the ground of appeal:
(a) Did VCAT have jurisdiction in relation to the plaintiffs’ claim?
(b) If VCAT had jurisdiction, did the plaintiffs adduce sufficient evidence to enliven VCAT’s jurisdiction to grant them relief?
The parties agreed to adopt the above course.
Is s 159(2) of the Act subject to pt 9 of the Act?
The defendant submitted that VCAT’s jurisdiction under the Act is confined to the matters set out in pt 9 and that s 159(2) does not confer an independent source of jurisdiction. According to the defendant, a contravention of a provision of the Act is incapable of enlivening VCAT’s jurisdiction under s 159(2) to award damages unless that contravention constitutes a ‘consumer trader dispute’ as defined in s 107(1). As such, any unconscionable or misleading conduct which constitutes a contravention of a provision of the Act — such as s 8 or s 9 — must be committed in the course of the supply or possible supply of goods or services and must give rise to a dispute about that supply or possible supply. I will refer to the defendant’s interpretation of VCAT’s jurisdiction as ‘the narrow interpretation’.
The plaintiffs submitted that s 159(2) of the Act constitutes an independent source of jurisdiction which is not subject to s 107(1). Accordingly, if it can be established that particular conduct constitutes a contravention of a provision of the Act — such as s 8 or s 9 — VCAT can award damages under s 159(2) in respect of that conduct even if the existence of a consumer trader dispute cannot be established. I will refer to the plaintiffs’ interpretation of VCAT’s jurisdiction as ‘the wide interpretation’.
A decision of this Court[14] and a number of decisions of VCAT[15] have proceeded on the basis of the wide interpretation.
[14]American International Assurance Company (Australia) Ltd v Skewes (2010) 28 VR 111, 113–14 [4]–[6].
[15]See, eg, Davis v AAMI Ltd [2008] VCAT 572 (13 March 2008) [5]; Skinner v Ford Motor Company of Australia Pty Ltd [2008] VCAT 998 (11 June 2008) [22]; AHV Pty Ltd v Blairgowrie Yacht Squadron Inc [2013] VCAT 1789 (17 October 2013) [31].
Paragraphs 36 to 40 of VCAT’s Decision adopt the narrow interpretation. If the wide interpretation is correct, VCAT erred in law in relation to its jurisdiction. However, it is not necessary for me to decide whether this interpretation or the narrow interpretation is correct. This is because, irrespective of which interpretation is correct, the plaintiffs’ appeal cannot succeed. As will be demonstrated below, any error by VCAT in rejecting the wide interpretation would not vitiate VCAT’s Decision because, even if VCAT had adopted that interpretation, VCAT would have been bound to dismiss the plaintiffs’ claim.
Nothing in this judgment should be taken as casting any doubt on the correctness of the decisions referred to at [60] above. While there is merit in the wide interpretation, this is not an appropriate case for deciding between the competing interpretations.
The plaintiffs’ case as conducted before VCAT
The discussion at [36] to [50] above demonstrates that counsel for the plaintiffs conducted their case before VCAT exclusively in reliance upon the contractual indemnity in cl 15.3(b) of the Unitholders Agreement even though a claim under that clause was not included in the points of claim. The case, as conducted, was based on the following narrow basis: the plaintiffs paid $800,000 to acquire units in the Trust; Manvic borrowed money against the security of the Land; the Land was sold for a price that resulted in the plaintiffs not being repaid any part of their investment; Manvic was obliged under cl 15.3(b) to indemnify the plaintiffs for their loss; Manvic failed to indemnify the plaintiffs and thus breached the Unitholders Agreement; as the director and controlling mind of Manvic, the defendant was involved in Manvic’s breach.
The confined basis upon which counsel for the plaintiffs conducted their case did not involve any contravention of the Act and thus, on the assumption that that case was established, it could not have invoked VCAT’s jurisdiction under the Act either under the wide interpretation or the narrow interpretation. Counsel appears to have erroneously equated a breach of cl 15.3(b) of the Unitholders Agreement with a contravention of the Act. It follows that, insofar as VCAT decided that it lacked jurisdiction to grant relief against the defendant on the basis of Manvic’s failure to indemnify the plaintiffs under cl 15.3(b), it was correct to do so.
On this basis, even if the plaintiffs are able to establish all components of the ground of appeal — as to which see further below — it would be futile to grant them any relief because, by dismissing the plaintiffs’ claim, VCAT made the only order it could lawfully have made on the basis of the plaintiffs’ case as conducted by their counsel.
The plaintiffs’ case as pleaded — wide interpretation of the Act
Even though counsel for the plaintiffs did not conduct their case in accordance with their points of claim, I will consider what the position would have been if he had done so.
If the wide interpretation is correct, in order to be entitled to an award of damages under s 159 of the Act, the plaintiffs needed to establish contraventions of one of the provisions of the Act upon which they relied, namely ss 8, 8A, 9, 10, 11, 12 and 20. I will consider each of these provisions in turn.
Section 8 of the Act could not apply because the services which may be relevant to the plaintiffs’ pleaded case related to the purchase of units in a unit trust which was to acquire an investment property. Those services were commercial in nature and not ‘of a kind ordinarily used for personal, household or domestic purposes’.
The phrase ‘of a kind ordinarily used for personal, household or domestic purposes’ has been considered in a number of cases.[16] The principles discussed in those cases indicate that, ordinarily, professional advice about a commercial investment and ongoing management or trustee services in relation to such an investment would not be of that kind. While it is possible that such services could be of that kind in an individual case, a finding to that effect would be based on features that are particular to that case, including the attributes of the recipient of the services (such as their level of commercial sophistication and subjective intentions), the nature and purpose of the investment, the use to which any assets of the investment are put and the recipient’s involvement with the investment or assets.
[16]See, eg, Begbie v State Bank of New South Wales Ltd (1994) ATPR ¶41–288, 41,898; Bunnings Group Ltd v Laminex Group Ltd (2006) 153 FCR 479, 496 [77]–[92]; Sherwood v Commonwealth Bank of Australia [No 4] (2013) 308 ALR 45, 61–4 [71]–[85]; Violet Home Loans Pty Ltd v Schmidt (2013) 300 ALR 770, 790–3 [71]–[75].
In the present case, evidence was given only by Kathleen Thomas. That evidence was not detailed enough to enable VCAT to conclude that the circumstances of each of the plaintiffs were such that the services supplied to them were ‘of a kind ordinarily used for personal, household or domestic purposes’.
Furthermore, in order for VCAT to make a finding of unconscionable conduct under s 8 of the Act, VCAT was required to have regard to such matters as were relevant to the case including, if applicable, the matters set out in s 8(2). Those matters included the relative strengths of the bargaining positions of the supplier and purchaser, whether the purchaser was able to understand any documents relating to the supply of services and whether any undue influence was exerted. Kathleen Thomas’ evidence did not directly address these matters and the other plaintiffs did not give any evidence at all. Further, insofar as the plaintiffs’ counsel referred to any of these matters in his submissions, he did so in a sweeping and superficial manner.
The documents produced by NAB on subpoena coupled with the evidence given by the defendant in cross-examination about the Security Use by Mrs Panourakis may have enabled VCAT to characterise that use as unconscionable conduct. However, that use had to be ‘in connection with the supply or possible supply of goods or services’. As discussed at [81] below, the use was not in connection with the narrow description of services set out in para 17(a) of the points of claim. Paragraph 17 of the points of claim also provided specific particulars of unconscionability which related exclusively to events in 2003. Further, Kathleen Thomas’ evidence largely focused on that period and did not refer to the Security Use by Mrs Panourakis. This was probably because she did not know about that use.
It was certainly open to VCAT on the evidence to find that the plaintiffs did not know about, and did not consent to the Security Use by Mrs Panourakis at the time that the Land was used as security for her personal loans. However, while the evidence of this use arguably came within para 13(b)(ii) of the points of claim, it was not made a basis of liability under the points of claim or in the manner that counsel for the plaintiffs conducted their case at the VCAT hearing.
At the conclusion of Kathleen Thomas’ evidence, counsel based the plaintiffs’ case on cl 15.3(b) of the Unitholders Agreement without any reference to the Security Use by Mrs Panourakis. Indeed, counsel did not make any submissions to VCAT as to how evidence of this use was relevant to, still less how it was supportive of, the plaintiffs’ claim.
In these circumstances, it was not possible for VCAT to make a finding of unconscionability under s 8 of the Act on the basis of the evidence about the Security Use by Mrs Panourakis. This was so whether that evidence was considered alone or in conjunction with all the other evidence because VCAT was required to apply the evidence within the framework of the plaintiffs’ case as ‘pleaded’ and conducted at the VCAT hearing.
Unlike s 8 of the Act, s 8A does not require that the goods or services be ‘of a kind ordinarily used for personal, household or domestic purposes’. However, s 8A does require that the unconscionable conduct be in trade or commerce in connection with the supply or possible supply of goods or services. Accordingly, the discussion and conclusions at [71] to [75] above in relation to s 8 also apply to s 8A. Indeed, s 8A(3) contains a longer list of matters which may be taken into account in determining whether there has been a contravention of the section, and which were not addressed by the plaintiffs in their evidence or in the submissions made by their counsel.
In order to succeed under s 9 of the Act, the plaintiffs had to establish that the defendant engaged in conduct that was misleading or deceptive or that was likely to mislead or deceive and that they suffered loss ‘because’ of this conduct.[17] On the appeal, the plaintiffs did not allege that VCAT made any error in not finding that the defendant engaged in conduct proscribed by s 9 in relation to the events preceding the Security Use by Mrs Panourakis. Likewise, when the plaintiffs’ counsel was asked to identify any misleading or deceptive conduct in connection with that use, he was not able to do so to my satisfaction. It follows that VCAT did not make any error in relation to s 9 of the Act.
[17]See s 159(1) of the Act.
Sections 10, 11, 12 and 20 of the Act are similar to s 9, albeit that they use variants of the expression ‘misleading or deceptive’. On the appeal, counsel for the plaintiffs was not able to satisfy me that VCAT had erred in relation to those sections, either in relation to conduct preceding the Security Use by Mrs Panourakis or conduct relating to the Security Use. Accordingly, VCAT did not make any error in relation to those sections.
The plaintiffs’ case as pleaded — narrow interpretation of the Act
If the narrow interpretation is correct, the conclusions set out at [68] to [78] above will apply with even more force. That is not to say that, on the narrow interpretation, VCAT would not have had jurisdiction to grant relief to the plaintiffs if their case had been pleaded or conducted differently. On the contrary, VCAT would have had jurisdiction to do so if the plaintiffs had conducted their case based on the following propositions and had adduced sufficient evidence to establish them:
(a) The plaintiffs as unitholders purchased ongoing management services from Manvic and trustee services from Keylock under the Unitholders Agreement. One of the express or implied duties of Manvic and Keylock in performing their services was to safeguard the Land as an asset of the Trust, including preventing any individual from using the Land as security for borrowings that were personal to that individual and did not benefit the Trust.
(b) Mrs Panourakis’ Security Use occurred without the knowledge or consent of the plaintiffs.
(c) Mrs Panourakis’ Security Use could not have occurred without the cooperation of Manvic and Keylock.
(d) The conduct of Manvic and Keylock in cooperating with Mrs Panourakis in relation to the Security Use constituted a breach of their contractual duties in performing their services for the plaintiffs under the Unitholders Agreement.
(e) The abovementioned conduct, considered in the light of all the circumstances of the case, including the factors set out in s 8A of the Act, constituted unconscionable conduct by Manvic and Keylock in connection with the supply of services to the plaintiffs.
(f) The defendant was at all times the controlling mind of both Manvic and Keylock and therefore he was involved in the contraventions of the Act by those companies.
(g) The plaintiffs suffered loss because of the contravening conduct and they were entitled to recover the amount of their loss from Manvic, Keylock and the defendant.[18]
(h) Manvic and Keylock refused to compensate the plaintiffs in respect of the breach of s 8A of the Act and accordingly a dispute arose between Manvic and Keylock as suppliers of services and the plaintiffs as purchasers of those services, and that dispute is in relation to the supply of the services. Accordingly, the definition of ‘consumer trader dispute’ in s 107(1) of the Act is satisfied.
[18]The causation requirement arises under s 159(1) of the Act. The defendant’s evidence about the adverse effect on the value of the Land resulting from general property market conditions and the non-renewal of the lease raised important issues about causation.
To the extent that VCAT’s conclusions in para 40 of its Reasons cannot accommodate the above analysis, VCAT fell into error. However, such an error cannot assist the plaintiffs because they neither pleaded nor conducted their case as set out at [79] above.
As is evident from [34(i)] above, para 17(a) of the points of claim makes it clear that the only services upon which the plaintiffs relied are ‘the accounting and business services referred to in the Panourakis representations’. These services are confined to the period when the investment was initially made in 2003. That narrow definition of services could not support a finding in favour of the plaintiffs based on the analysis set out at [79] above. Moreover, even if the phrase ‘[t]he respondents’ conduct was … unconscionable’ in para 17(b) of the points of claim is treated as being independent of the narrow definition of services in para 17(a), the particulars to para 17(b) indicate that the conduct relied upon is confined to the initial period when the investment was made. There is simply no express reference in the points of claim to the Security Use by Mrs Panourakis.
It is clear from [36] to [50] above that at no time did counsel for the plaintiffs present a case along the lines set out at [79] above. Counsel’s opening addresses briefly touched on some parts of the points of claim. During the course of the hearing, counsel focused on the indemnity in cl 15.3(b) of the Unitholders Agreement. The exchange at [38] above indicates that counsel formed the view that the evidence — including admissions by the defendant — established the plaintiffs’ claim on the narrow basis set out at [63] above. Reliance on cl 15.3(b) of the Unitholders Agreement was clearly misconceived because it imposed a contractual indemnity obligation on a non-party, namely, Manvic, and a breach of that obligation by Manvic could not in itself be the basis for any liability by the defendant under the Act.
Although subsequent to the exchange at [38] above admissions were elicited from the defendant in cross-examination about the Security Use by Mrs Panourakis, counsel did not make any submissions to VCAT about how that evidence was relevant to the plaintiffs’ case as pleaded or as opened or what use VCAT could make of that evidence. Further, counsel did not state that the plaintiffs’ case changed in any way as a result of that evidence.
In these circumstances, it is not surprising that VCAT’s Decision is based on the case of the plaintiffs as pleaded and as argued by their counsel. As the evidence about the Security Use did not feature in that case, VCAT cannot be criticised for not referring to it.
Even if it is assumed that VCAT should have decided the plaintiffs’ case on the basis that it incorporated the analysis at [79] above, counsel for the plaintiffs did not adduce evidence, or make submissions, that would have enabled VCAT to make a decision in favour of the plaintiffs based on that analysis.
It would have been open to VCAT to draw some supportive inferences from the defendant’s admissions and the documents before it. For example, VCAT could have inferred from the defendant’s admissions about the establishment of the investment in the Land and from the terms of the Unitholders Agreement that Manvic and Keylock provided management and trustee services to the plaintiffs and that the defendant was knowingly involved in all of the activities of those companies.
However, in order for VCAT to take into account the matters necessarily arising under the sections of the Act upon which the plaintiffs relied and to make decisions favourable to the plaintiffs under those sections, it was necessary for the plaintiffs to give evidence about those matters. For example, in assessing the relative strengths of the bargaining positions of the plaintiffs on the one hand and Manvic and Keylock on the other hand under ss 8 and 8A, the plaintiffs needed to give evidence about matters such as their education, employment history and experience with commercial investments. Kathleen Thomas’ evidence did not extend beyond saying that she was retired, had no prior business experience and had limited knowledge of trusts, and the other plaintiffs did not give evidence at all. Statements in the points of claim about the plaintiffs’ background were not evidence and could only be relied upon to the extent that the defendant admitted them. The defendant disputed many of those statements.
For the above reasons, the plaintiffs failed to adduce evidence and failed to conduct their case in a manner that was sufficient to invoke VCAT’s jurisdiction to grant them relief under the Act. It follows that VCAT correctly dismissed the plaintiffs’ claim.
Have the plaintiffs made out any part of the ground of appeal?
My conclusions at [64], [68] to [78] and [88] above make it unnecessary for me to decide the specific components of the plaintiffs’ proposed ground of appeal.[19] This is because even if the ground of appeal is established, it would be futile to set aside VCAT’s order because, as a matter of law, that was the only order that VCAT could have made. Nevertheless, as the ground of appeal was argued before me, I will set out brief reasons in relation to each of its components.
[19]See [55] above.
The plaintiffs’ submissions in relation to the proposed ground of appeal may be summarised as follows:
(a) During the hearing VCAT made observations which caused the plaintiffs’ counsel to believe that VCAT was assenting to propositions made by counsel and this resulted in counsel not adducing further evidence or making further submissions in support of the plaintiffs’ case. The observations upon which the plaintiffs relied include the response ‘Yes’ that the Deputy President made from time to time during the submissions by counsel for the plaintiffs. By making those observations, VCAT breached its obligation under s 98(1)(a) of the VCAT Act to comply with the rules of natural justice. Further, in breach of s 102(1) of that Act, VCAT failed to allow the plaintiffs a reasonable opportunity to call evidence and to make submissions and failed to warn them that VCAT might find that their case did not come within VCAT’s jurisdiction under the Act.
(b) Although the plaintiffs’ counsel did not make a closing address and did not at any stage explain to VCAT how the evidence of the Security Use by Mrs Panourakis was relevant to the plaintiffs’ case, it should have been obvious to VCAT how the plaintiffs relied on that evidence. By not referring to that evidence and treating it as part of the plaintiffs’ case, VCAT failed to act fairly and according to the substantial merits of their case as required by s 97 of the VCAT Act.
(c) VCAT’s Reasons are contradictory and do not adequately explain its path of reasoning, contrary to VCAT’s obligation under s 117 of the VCAT Act to provide adequate reasons. For example, VCAT’s Reasons include inconsistent conclusions about its jurisdiction in relation to the plaintiffs’ claim because VCAT purported to find that it lacked jurisdiction while also exercising jurisdiction by purporting to adjudicate upon the claim on its merits.
(d) VCAT made findings of fact that were not open to it.
The allegation that VCAT breached the rules of natural justice is devoid of any substance. A full reading of the transcript makes it clear that counsel for the plaintiffs conducted their case in the manner chosen by him without any inappropriate encouragement or interference by the Deputy President. On the numerous occasions where the Deputy President said ‘Yes’ after a statement by counsel, the Deputy President was doing no more than acknowledging that he had heard the statement. It is fanciful to suggest that such an acknowledgment constitutes agreement with the statement. Further, the Deputy President expressly said ‘it’s up to you [to] run the case [as] you see fit’. The responsibility for the manner in which the plaintiffs’ claim was conducted, and the unsuccessful outcome based on that manner, lies entirely with counsel for the plaintiff.
VCAT erred in ordering Gordon and Douglas Thomas to leave the hearing room while Kathleen Thomas gave evidence.[20] As parties to the proceeding, Gordon and Douglas Thomas had a right to remain in the hearing room. While it is possible that an order requiring a party to leave the hearing room may in particular circumstances deprive that party of a fair hearing, the present case did not have that result. It is clear from the transcript that counsel’s ability to make forensic decisions about the scope of the plaintiffs’ case and the evidence to be adduced on their behalf was not adversely affected by the absence of Gordon and Douglas Thomas from the hearing room. If counsel had considered that he needed instructions from Gordon and Douglas Thomas, he could have requested a brief adjournment to enable him to obtain those instructions.
[20]See [41] above.
In circumstances where the plaintiffs had the onus of persuading VCAT that the defendant either breached or was involved in a breach of the Act in order to invoke VCAT’s jurisdiction under the Act, VCAT did not have an obligation to warn the plaintiffs during the hearing that VCAT might decide that they had failed to engage that jurisdiction. It is not the duty of VCAT to warn a legally represented plaintiff of a possible finding that the plaintiff had failed to establish the necessary jurisdictional facts upon which the plaintiff’s claim depended.
The allegation that VCAT failed to act fairly and according to the substantiated merits of the plaintiffs’ case is misconceived. Contrary to the submission of counsel for the plaintiffs, VCAT decided their case — as pleaded and conducted on their behalf — in accordance with its substantial merits. VCAT did not have a duty to speculate on the subjective intentions of counsel about the various ways in which the plaintiffs’ case could be reformulated to accommodate the evidence about the Security Use by Mrs Panourakis. Rather, it was the duty of counsel to seek leave to re-plead the plaintiffs’ case if he considered that this was necessary, to adduce appropriate evidence and to make closing submissions explaining why, on the evidence, VCAT should find in favour of the plaintiffs on their claim. Counsel failed to adopt this approach. If VCAT had decided the plaintiffs’ claim in their favour on a basis other than that upon which they conducted it, the defendant as a self-represented party could have legitimately complained that he was not afforded procedural fairness. The duty to afford procedural fairness is owed to all the parties and not just to some of them.
The allegation that VCAT’s Reasons are inadequate must fail. VCAT’s Reasons adequately explain the path of reasoning adopted by VCAT in arriving at its decision to dismiss the plaintiffs’ claim as pleaded and conducted. It is not illogical for VCAT to make findings in the alternative where jurisdictional issues are raised. VCAT was not obliged to make any findings or give any explanations on issues that were not relevant to the plaintiffs’ claim as pleaded and conducted.
The allegation that VCAT made factual findings that were not open on the evidence has some substance. VCAT was obliged to decide the plaintiffs’ case on the basis of the evidence before it and on any admissions that were made by the defendant. The evidence before VCAT comprised a small number of documents which were tendered as exhibits and the oral evidence of Kathleen Thomas and the defendant. To state the obvious, allegations in the points of claim which were not admitted by the defendant and statements by counsel from the Bar table were not evidence. Statements by the defendant from the Bar table were also not evidence except insofar as they constituted concessions.
On the evidence before VCAT, it was open to it to find that Manvic provided management services to the plaintiffs in accordance with the Unitholders Agreement and that these services were provided by Manvic through the defendant. Accordingly, VCAT erred in concluding that Manvic did not supply services to the plaintiffs.[21]
[21]Reasons, [40].
The statement in para 25 of VCAT’s Reasons that the defendant ‘expressly confirmed his formal Defence [and] did not concede any issues’ is not entirely accurate. As stated at [40] above, the defendant simply said that he preferred to defer making any statements until after the plaintiffs commenced their evidence.
As I have already explained, the above errors do not vitiate VCAT’s Decision. This is because, even if VCAT had not made the errors, VCAT would still have been obliged as a matter of law to dismiss the plaintiffs’ claim as pleaded and as conducted.
Proposed order
For the reasons set out above, the plaintiffs have failed to establish any basis for doubting the correctness of VCAT’s order dismissing their claim. Accordingly, leave to appeal will be refused. I will hear further submissions from the parties on the precise order to be made by the Court and on the question of costs.
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