Travel Compensation Fund v Tambree

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HIGH COURT OF AUSTRALIA

GLEESON CJ,

GUMMOW, KIRBY, HAYNE AND CALLINAN JJ

TRAVEL COMPENSATION FUND  APPELLANT

AND

ROBERT TAMBREE T/AS R TAMBREE
AND ASSOCIATES & ORS  RESPONDENTS

Travel Compensation Fund v Robert Tambree t/as

R Tambree and Associates [2005] HCA 69

16 November 2005
S54/2005

ORDER

1.Appeal allowed with costs.

2.Set aside the orders of the Court of Appeal of the Supreme Court of New South Wales made on 26 February 2004 and in their place order that the appeal to that Court be dismissed with costs.

On appeal from the Supreme Court of New South Wales

Representation:

J E Marshall SC with N F Francey and M J O'Meara for the appellant (instructed by McCabe Terrill)

P B Walsh for the first respondent (instructed by Burston Cole & Co)

R E Dubler SC with H Sonmez for the second respondent (instructed by Phillips Fox)

No appearance for the third to fifth respondents

Notice:  This copy of the Court's Reasons for Judgment is subject to formal revision prior to publication in the Commonwealth Law Reports.

  1. GLEESON CJ. This appeal concerns an issue of causation that arose in assessing damages against an accountant and an auditor who were held to have been negligent, and to have engaged in misleading or deceptive conduct in contravention of s 42 of the Fair Trading Act 1987 (NSW) ("the Fair Trading Act"). The appellant took proceedings in the Supreme Court of New South Wales and succeeded in its claim for damages, both at first instance before Austin J[1], and in the Court of Appeal[2].  However, the Court of Appeal substantially reduced the damages awarded.

    [2]Tambree v Travel Compensation Fund (2004) Aust Contract Reports ¶90-195.

  2. In order to explain how the issue as to damages arises it is necessary to state, in broad terms, the statutory and factual basis of the first and second respondents' liability to the appellant.

    The travel compensation scheme

  3. Uniform State legislation has established a national scheme for the regulation of travel agents.  The relevant New South Wales legislation is the Travel Agents Act 1986 (NSW) ("the Travel Agents Act"). One aspect of the regulatory scheme involves a compensation fund designed to safeguard people who suffer loss by reason of an act or omission of a travel agent. One form of such loss involves paying in advance for travel services and, through default on the part of the agent, not receiving the services. The scheme was examined by Lehane J in Travel Compensation Fund v Travel Guide Pty Ltd (in liq)[3].

  4. The Travel Compensation Fund ("the Fund") is administered by a group of trustees, originally the responsible Ministers in a number of States, who were appointed pursuant to a Deed of Trust ("the Deed") dated 12 December 1986. By virtue of s 52 of the Travel Agents Act the trustees may sue and be sued in the name of the Fund.…

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Details
Case
[2005] HCA 69
Decision Date

CaseChat Overview and Summary

The High Court of Australia heard an appeal concerning a claim brought by the Travel Compensation Fund (the appellant) against an accountant and an auditor (the respondents). The Fund sought to recover losses it had incurred in compensating members of the public who had suffered financial detriment due to the unlawful trading activities of a travel agent, Travel Shop International (TSI). The Fund alleged that the respondents, by preparing and auditing TSI's financial statements, had engaged in misleading or deceptive conduct and had been negligent, knowing that the Fund would rely on this information to permit TSI's continued participation in the compensation scheme.

The central legal issues before the Court were whether the respondents' conduct in preparing and auditing TSI's financial statements constituted misleading or deceptive conduct in contravention of the *Fair Trading Act 1987* (NSW), and whether this conduct, along with the respondents' alleged negligence, caused the loss suffered by the Travel Compensation Fund. The Court was required to determine the appropriate approach to causation in the context of statutory claims for misleading or deceptive conduct and common law negligence, and whether policy considerations and value judgments were relevant to this determination.

The High Court, allowing the appeal, held that the extent of the respondents' liability was to be ascertained by applying the *Fair Trading Act*. While acknowledging the statutory context, the Court affirmed that in charting the limits of legal liability, both under statute and at common law, considerations of common sense, practicality, and reasonableness, which involve value judgments, are relevant. The Court found that the errors identified in the Court of Appeal's reasoning justified the restoration of the primary judge's judgment.

The High Court ordered that the appeal be allowed with costs, and that the orders of the Court of Appeal of the Supreme Court of New South Wales be set aside and replaced with an order dismissing the appeal to that Court with costs.

Orders

Orders of the court

1. Appeal allowed with costs.

2. Set aside the orders of the Court of Appeal of the Supreme Court of New South Wales made on 26 February 2004 and in their place order that the appeal to that Court be dismissed with costs.

Background

Background to the litigation

I agree in the orders proposed by the other members of this Court. However, I do not agree with the ways in which error on the part of the Court of Appeal of New South Wales is there expressed so as to justify the restoration of the judgment of the primary judge in the Supreme Court of New South Wales (Austin J)[27]. There was error; but in my view it was different from that identified in the other reasons.[27]Travel Compensation Fund v Fry [2002] NSWSC 1044.The facts, legislation and common ground The facts are stated by Gleeson CJ[28]. His Honour explains the manner in which the Travel Compensation Fund ("the Fund") was constituted, the recovery of payments out of which is in issue in this appeal[29]. Also explained there is the relevant legislation, being the Travel Agents Act 1986 (NSW)[30] ("Travel Agents Act") and the Fair Trading Act 1987 (NSW)[31] ("Fair Trading Act"). It is by reference to the former Act that the object and design of the travel compensation scheme, providing for payments from the Fund (the appellant in this appeal), is to be understood. It is by reference to the latter Act[32] that the claim by the Fund for recovery against the accountant and an auditor of the defaulting travel agent (the first and second respondents in this appeal), is chiefly to be judged. The Fund also brought its claim relying on negligence by the respondents at common law.[28]Reasons of Gleeson CJ at [9]-[19].[29]Reasons of Gleeson CJ at [3]-[6], with reference to Travel Compensation Fund v Travel Guide Pty Ltd (In liq) (1997) 72 FCR 371.[30]Reasons of Gleeson CJ at [3].[31]Reasons of Gleeson CJ at [1]; [30]-[31].[32]Notably, s 42. As other reasons explain, the Fair Trading Act limits the recovery by a person found to have engaged in misleading or deceptive conduct by reference to a concept of a causal connection between the impugned conduct and the loss or damage suffered. This result is achieved in consequence of the use in the Fair Trading Act of the preposition "by" in s 68(1). In the same way as s 82 of the Trade Practices Act 1974 (Cth) ("Trade Practices Act") has been interpreted, s 68 of the Fair Trading Act, in its reference in sub-s (1) to contraventions of s 42 of that Act, presents the question whether a causal connection has been established between a breach of that Act and the amount of the loss or damage claimed[33]:"The measure of damages hangs on the words 'by conduct'; the preposition 'by' has been interpreted to mean 'by reason of' or 'as a result of'."[33]Munchies Management Pty Ltd v Belperio (1988) 58 FCR 274 at 286 applied in I& L Securities Pty Ltd v HTW Valuers (Brisbane) Pty Ltd (2002) 210 CLR 109 at 153 [142]. In the context of a claim, such as this, arising out of statutory provisions, it is self-evident that the starting point for charting the boundaries of contested issues of causation is a thorough examination of the facts and of the statute. In such matters, the duty of a court is not, as such, to give effect to common law notions but faithfully to carry into force the objects of the legislation, as understood from the language and structure of the statutory text[34]. [34]Trust Co of Australia Ltd v Commissioner of State Revenue (2003) 77 ALJR 1019 at 1033 [92]; 197 ALR 297 at 316; Roy Morgan Research Centre Pty Ltd v Commissioner of State Revenue (Vict) (2001) 207 CLR 72 at 89 [46]; Victorian Workcover Authority v Esso Australia Ltd (2001) 207 CLR 520 at 544-545 [62]-[64]; The Commonwealth v Yarmirr (2001) 208 CLR 1 at 111-112 [249]; Allan v Transurban City Link Ltd (2001) 208 CLR 167 at 184-185 [54]; The Queenv Lavender (2005) 79 ALJR 1337 at 1357 [107]; 218 ALR 483 at 548.

Evidence

Evidence Before The Court

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Decision

Reasons for decision

GLEESON CJ GUMMOW AND HAYNE JJ KIRBY J (dissent) CALLINAN J
It follows that the reasons of Gummow and Hayne JJ are correct in pointing out that the extent of the liability of the respondents to the Fund was to be ascertained by the application of the Fair Trading Act[38]. Yet, as will often be the case, in charting the limits of such legal liability, both at common law and under such legislation[39], the outer bounds will be defined by similar notions of commonsense, practicality and reasonableness[40], as these concepts appeal to judges expressing the common law, and to Parliament enacting legislation such as the Fair Trading Act.[38]Reasons of Gummow and Hayne JJ at [49].[39]Referring to Fleming, The Law of Torts, 7th ed (1987) at 172-173; Hart and Honoré, Causation in the Law, 2nd ed (1985) at 110.[40]Fitzgerald v Penn (1954) 91 CLR 268 at 277-278.Values and policy judgments in issues of causation Approach to issues of causation:The point of departure of my reasoning from that of my colleagues concerns any attempt to restate or qualify the approach to issues of causation explained by Mason CJ in March, by excluding from that approach the "second question" that his Honour identified as integral to such decisions. His Honour described this "second question" ("whether a defendant is in law responsible for damage which his or her negligence has played some part in producing"[41]) as one to be answered in determining whether recovery was available in the particular case. It cannot be doubted that this is a policy question where value judgments have to be resolved. The contrary proposition is inconsistent with both earlier and later authority of this Court. Nothing in the Fair Trading Act suggests the need for a different approach in that statutory context.[41](1991) 171 CLR 506 at 515. The authority of this Court:There are many other remarks by judges of this Court that acknowledge explicitly that identifying the outer limits of legal recovery for loss or damage, in cases of this kind, cannot be explained solely by reference to the "but for" test of temporal relationships; nor to considerations of "commonsense" or other such verbal formulae. Thus in Wardley Australia Ltd v Western Australia[42], the joint reasons of four members of this Court analysed the limits of recovery under s 82 of the Trade Practices Act. They did so by reference to various considerations culminating in what is declared, in the circumstances, to be a matter of "justice" and "reasonableness", "practical" and "fair" and "sensible"[43]. Clearly, these are words connoting a value judgment of the kind identified in March. To say the least, they do not conjure up the image of a refined rule or precise principle of law. [42](1992) 175 CLR 514 at 533.[43]Wardley (1992) 175 CLR 514 at 533. See also Chappel v Hart (1998) 195 CLR 232 at 270 [93.3]; Rosenberg v Percival (2001) 205 CLR 434 at 449 [45], 463-464 [91], 487 [160]-[161], 504-505 [221]-[223]; I & L Securities (2002) 210 CLR 109 at 154 [144]; Stapleton, "Perspectives on Causation" in Horder (ed), Oxford Essays in Jurisprudence, 4th series (2000) 61 at 77.

Ratio Decidendi

Legal Principle Established

Established by: GLEESON CJ, GUMMOW AND HAYNE JJ, CALLINAN J

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