Wealthcare Custodians Limited v Mathews
[2015] VSC 523
•25 September 2015 (republished on 30 September 2015)
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
S CI 2015 00137
| WEALTHCARE CUSTODIANS LIMITED | Plaintiff |
| v | |
| WENDY MARGARET MATHEWS | Defendant |
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JUDGE: | MUKHTAR AsJ |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 23 September 2015 |
DATE OF JUDGMENT: | 25 September 2015 (republished on 30 September 2015) |
CASE MAY BE CITED AS: | Wealthcare Custodians Limited v Mathews |
MEDIUM NEUTRAL CITATION: | [2015] VSC 523 |
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NATURAL JUSTICE – Procedural fairness in Victorian Civil and Administrative Tribunal – Consumer type dispute – Claim by investor for overcharging of fees and expenses by responsible entity of a managed investment scheme – Gradual enlargement of amount of claim – Essential specificity at trial – Reasonable prior notice as a content of natural justice – No conspicuous unfairness – Claimed ‘subtle’ unfairness – No objection below in the course of participation by respondent – Leave to appeal refused
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr T Alexander with Mr H Kirimof of counsel | SMR LEGAL |
| For the Defendant | Mr M D Tehan of counsel | Pearce Webster Dugdales |
HIS HONOUR:
On 8 December 2014, the Victorian Civil and Administrative Tribunal sitting at Shepparton made an order in favour of an applicant Wendy Margaret Mathews requiring Wealthcare Custodians Ltd to pay her $12,033.48 plus interest of $4,179.93 and to also reimburse her $132.30 being the fee paid by her to commence the VCAT proceeding.[1] The Tribunal also dismissed a counterclaim which did not make any countervailing claim as such, for it was a cross-application for a summary dismissal under s 75 of the VCAT Act. I think the so called counter claim can be put to one side. Ordinarily, and by its nature, an application for summary dismissal is determined before any final hearing and determination of a claim. In this case it had to fall collaterally with the final order in favour of Ms Matthews.
[1]The reimbursement order was made under s 115B of the VCAT Act.
Ms Mathews’ claim was made by her as a member or investor in a management investment scheme known as Wealthcare Investment Service of which Wealthcare Custodians Ltd (the respondent below, and the applicant here) was the responsible entity. It is unnecessary to rehearse the structure and statutory provisions concerning a management investment scheme. It is sufficient to state the commonly known fact that the responsible entity operates or manages and administers the investment scheme according to compliance plans and a constitution. It holds the investments on behalf of investors. The investors contribute money in a pooling arrangement. They do not have any day to day control of the investment scheme. That is the function of the responsible entity. Such schemes are governed by statutory provisions, a registration scheme, and regulatory measures. Investors act on a product disclosure statement. As is well known, investors become liable to pay fees and expenses under the scheme. For present purposes, the description can be left at that level of generality.
In essence, Ms Mathews’ claim was that Wealthcare Custodians Ltd had improperly charged her investment account with fees and expenses (including management fees and commissions beyond what was allowed or stipulated in the product disclosure statement.
The Tribunal’s orders were made after a hearing on 21 October 2014. Ms Mathews conducted her own case in the Tribunal and from what I have seen, she was well prepared. She, and maybe her mother (nothing turns on that) are trustees and beneficiaries of a self- managed superannuation fund. The case for the responsible authority Wealthcare Custodians Ltd was conducted by a Mr Gregory Flexmore Roberts in the Tribunal. He is one of five of its directors, and is also a 50% shareholder.
According to the transcript, witnesses were sworn in; documents were adduced; questions were asked; and both Ms Mathews and Mr Roberts were, it appears to me, truly involved ― as was the Member looking to ensure an understanding of the claim which is not a routine consumer-trader dispute.
The Tribunal delivered its decision on the same day, although the transcript does not show it. It matters not. I am told that solicitors who came to act for Wealthcare Custodians Ltd, the applicant in this Court, subsequently sought written reasons which were published on 8 December 2014.
Wealthcare Custodians Ltd now seeks leave to appeal the whole of the Tribunal’s orders. As is well known, an application for leave to appeal under s 148 of the VCAT Act can only be on a question of law. As leave applications are not at all uncommon in this Court, it is unnecessary to rehearse the principles or prerequisites that have been affirmed de rigeur in numerous cases in this court since Hulls.[2] Apart from having to show a question of law, the applicant for leave must show a real or significant argument to be put that an error of law exists. In appellate parlance, the decision must be shown to be ‘attended with sufficient doubt.’ If shown, it is usually regarded as just to grant leave; or at least unjust to leave the decision unexamined and possibly corrected by this Court. But in the leave exercise the Court has the power under its rules to refuse leave if satisfied that the applicant does not have a prima facie case on appeal.[3]
[2]Secretary to the Dept of Premier and Cabinet v Hulls [1999] 3 VR 331.
[3]See Chapter II of the Rules of Court, r 4.09.
The question of law, or the error of law, for which the applicant seeks leave became confined to a contention that it was denied procedural fairness. The exiguous notice of appeal elaborates on that by saying no more than ‘…the member erred by determining a claim that was not properly before him.’ This was perplexing as there seemed to be no question that the Tribunal had original (not review) jurisdiction. There came to be no issue about this as it appears to be a consumer dispute under the Australian Consumer Law and Fair Trading Act 2012 for which VCAT has original jurisdiction. Rather, the contention was based upon the denial of procedural fairness because the applicant was said to have been not given proper notice of the ambit or basis of the Ms Matthew’s claim until the day of the hearing, which had been become enlarged from the claim of $3,783 in the initiating VCAT application to a claim she believed was still under $10,000. (At the end of this judgment it will be seen that although the Tribunal’s order was, exclusive of interest, for $12,033 there was an error in the computation. The correct figure should be $8,245.) The proposed notice of appeal also seeks leave on the ground that certain findings were not supported by, or open on the evidence, and that the onus of proof had been wrongly reversed. Those contentions were not pressed in argument. The only question was one of procedural fairness.
The scope of the duty of procedural fairness is capable of much amplitude depending on the context, and ascertaining the content of the duty has its difficulties unless the court is made to properly understand precisely how and in what way someone is said to have been deprived procedural fairness. That is especially so in Tribunal proceedings which by statutory charter take place with informality, frequently without lawyers, without pleadings (at least not in a case of this small scale) and where the Tribunal is allowed to make decisions based upon the substantial merits of the case, all subject to a statutory obligation to observe the rules of natural justice. The complaint here is that Mr Roberts, a director of the applicant, was put in a predicament where he says now (but did not complain at the Tribunal) he had to face a hearing in the Tribunal on a claim of greater ambit that for which he had been given reasonable prior notice under the originating application filed in the Tribunal, and did not therefore obtain a fair hearing. The question on this leave application was whether as a matter of objective demonstration, that was arguably so.
As frequently happens in leave applications there is strong resistance to leave being granted and a respondent’s energies are applied to demonstrate that there is no question of law or even if there is, it is bound to fail or there is no prima facie case. Of course, a denial of procedural fairness is capable of being a question of law. But it is not enough in my view for a Court on this application to recognise no more than that and therefore give leave to appeal. In this instance, the Court was in effect taken through all the materials and the transcript as if it was the hearing of the appeal. This is hard to avoid especially where respondents, wishing to maintain that there is no error and no injustice in leaving an order undisturbed naturally do not want to go through the delay and further expense of Supreme Court proceedings especially in a small consumer dispute where the amount at stake has I venture to say already been surpassed by the legal costs in this Court.
I mention this as I wish to say that I have been given an extensive exposé of the procedural events and documentation showing the issues before the Tribunal to equip me with an understanding of the elements of the claim, the procedural facts, the position in which the Tribunal member was put in, how the hearing was conducted and above all, what notice was given to Mr Roberts about the ambit of the claim and how he participated in the proceeding.
It permits me to come to the conclusion that leave to appeal ought to be refused in this case. I do not think it can be said that there truly is sufficient doubt on the question of whether he was afforded procedural fairness. I do not think the applicant has a prima facie case on appeal or that it would be unjust to let the decision stand. I can see that the member went about at the hearing looking to elucidate the issues in the case, assimilate the materials, and ascertain the precise amounts of the claim. It is plain to me that although beforehand Ms Mathews’ case had been a moving feast as she was putting together the documentary basis for proving her claim, there is no doubt she went about adamantly to present the Tribunal with an extensive documentary presentation to make her case that she was wrongly made to pay fees and charges. In my assessment, it cannot be said that at the hearing Mr Roberts, a director of the responsible entity, was seeing or gaining for the first time an understanding that an investor was aggrieved by improper charges. He did not assert to the Tribunal that he had been ambushed or had been presented with a case of which he had been previously made aware and for which he required further time to properly consider. To the contrary, he participated in the Tribunal hearing. He gave evidence. He was allowed to ask questions.
By its counsel, the appellant concedes properly there was no conspicuous unfairness. Rather, it was submitted the unfairness was something more subtle. As I understood the point being made, it was to say that Mr Roberts was disarmed or was being assailed on the day with an array of material prepared by Ms Mathews to sustain a claim on a number of heads and that he was at a disadvantage. If that was so, the transcript shows he certainly said nothing to reveal that. The essential document was the Product Disclosure Statement and documents from the responsible entity showing what she was charged. He participated in the hearing without complaint that he was labouring at a disadvantage in not having sufficient notice of the claim or its magnitude.
Moreover, I do not see in the transcript a state of affairs where, as can happen in judicial or administrative proceedings, a judge or Tribunal member can discern that a party is at a disadvantage in having to deal with a lot of documentation for which they are not prepared or have not really thought about. In such situations, in the interests of ensuring proper engagement on the issues and assistance to the court or Tribunal to reach a just result, it is not uncommon to offer an adjournment. Much will depend on the nature of the case, the vulnerability of the disputant, or the question of whether it can truly be said that someone was taken by surprise.
But none of those factors were present here. I see nothing in the materials to lead me to think that all things considered the Tribunal member should have been moved to see that Mr Roberts was labouring under some disadvantage that made the hearing unfair. Questions about management fees and commissions, and fee recoveries are all matters very much within the knowledge and responsibility of a director of a responsible entity in a managed investment scheme. I think it is correct to say that the applicant is now ex post facto looking to assert procedural fairness on the basis, as was put by his counsel before me, that Mr Roberts did not realise he was experiencing procedural unfairness. In other words, so the proposition went, Mr Roberts was in no position to complain to the Tribunal about the absence of notice because he did not realise it was procedurally unfair to be given such short notice.
For one thing I do not accept on the objective material that he was taken by surprise. Secondly, there was nothing in the circumstances done by the Tribunal or the applicant below to lead him to think that he had no ability to complain at the hearing that he was taken by surprise, which he now says he was.
I do not think the application calls for a disquisition into the principles of procedural fairness or reference to legal authority. I think there is enough to make the following statements of cardinal principle.[4] The hearing rule is a flexible rule and is determined by what is fair in all the circumstances in a particular case. So much depends on the rules under which the Tribunal is acting, the subject matter, the situation of those presenting the case, and what amounts to a reasonable opportunity to present a case. A useful question to ask is whether a decision was made affecting a person’s rights or liabilities in a hearing which was compromised through no fault of the losing party. Another useful view looks to asking if there was a prevention of proper participation by the affected party: Was there efficacy of participation? That in turn helps understand the notice rule. It asks whether the affected party was given reasonable notice of the claim to be considered so as to enable effective participation in the process to ensure a proper outcome. The flexibility of the doctrine has an unavoidable instinctive element for courts on appeal; more readily aroused where there has been conspicuous unfairness. There is no calculus to convert these factors to any precise measure of what is required to show a denial of procedural fairness.
[4]See Aronson and Groves, Judicial Review of Administrative Action (Fifth ed), Ch 8 esp [8.140].
I think in the present case the question really is: was Mr Roberts deprived of any proper notice about the claim made by Ms Mathews? And, even accepting as at the hearing the claim was still being elucidated, has he in a sense waived any procedural unfairness by nevertheless being willing to proceed and engage in the case? The question of waiver can be problematic. It arises for example in bias cases. A strong instinctive view is to say that waiver as a concept of the law must be informed and voluntary especially so where there is no lawyer acting.
I cannot see anything in the transcript to demonstrate that Mr Roberts truly was taken by surprise. He did not say he was. He now says he was. But on appeal, this court cannot proceed on such a basis. The Tribunal cannot be even arguably said to have even denied him procedural fairness when he did not complain at the time that he was taken by surprise. The most that could be conceived of as an argument is to say that regardless of Mr Roberts’ willingness to participate in the proceeding without complaint, the Tribunal for itself should have self-activated a responsibility to offer him an adjournment or to otherwise ensure he truly was able to properly participate. As I say, such an apprehension can be aroused where a disputant is manifestly labouring under some disadvantage, personal or situational. But there was not such factor present here.
I think properly assessed, I can see for myself from the transcript that the Tribunal member was himself looking to understand the array of documents that Ms Mathews had presented and eliciting from her clarification or a precise understanding of the claim she was making and the amount. Mr Roberts was part of that process. In the end, as the reasons show, the question of the fees and charges came to turn, expectably, on looking at the product disclosure statement and its references to permissible fees and charges and comparing that to what Ms Mathews was actually charged. Where there was a charge that exceeded that which was permitted under the product disclosure statement, prima facie the charge was illegitimate unless the responsible entity could justify it.
The Tribunal had before it, I detect, a highly meticulous and comprehensive presentation of documents to enable such a comparison which then called for an explanation from Mr Roberts. Although the Tribunal’s reasons are not elaborate (and there was no ground of attack on the basis that the reasons were inadequate) they disclose the basis of the decision as being that Mr Roberts gave no challenge to the documents on which the case was based.
It seems from what has emerged from this application, he wanted to contend, and to some extent did, that certain impositions were made pro rata on a discovery by the responsible entity that the previous responsible entity had allowed the scheme to improperly have a loan account for $50,000. He wanted to say that a reporting of that matter to the regulator lead, he says, to the approved steps being taken of imposing on the investors a pro rata share of the burden of having to discharge that loan account. He also wanted to say that the other fees and commissions, even if they did go beyond that which the product disclosure statement described, were nonetheless legitimate because the percentage figures in the product disclosure statement were indicative only and that there are regulations that permit the responsible entity to go beyond the product disclosure statement. I do not know if that is so; but the point is there is nothing at all to demonstrate that he was somehow deprived of an opportunity to put up such arguments.
Thus, as Mr Tehan submitted the applicant is, in truth, now looking to set aside the decision not for any conspicuous fairness at all; not even for subtle unfairness. Rather, there is regret in not taking the opportunity to conduct the case in a certain way in the Tribunal and to now seek to invoke the principle of procedural fairness in an attempt to set aside the decision and re-conduct his case on remittal.
The Court is not concerned with whether the decision is right or wrong. The only is one of notice and procedural fairness in reaching the decision. It is just as well I expose the essential procedural facts.
The VCAT application was made in the Civil Claims List apparently on 9 January 2014. It stipulates the value of the claim at $3,783.36. It seeks payment of that amount. It ticked a box to also say that it sought ‘damages or other orders for misleading and deceptive conduct, false representation or unconscionable conduct.’ It added the words ‘Product Disclosure Statement dated 1.11.2009 represents contract. Relevant pages herewith. Full particulars will be provided at hearing (see Attachment 2)… see detailed attached explanation… the fee application is beyond the limits detailed in the PDS.’ The attachment states that the application ‘relates to an Expense Recovery Fee of $3,783.36 charged to the portfolio on 30.6.2011 for the single month of June 2011 (Attachment 1 page 4). It goes on to say ‘the basis of my application is that this charge contradicts the terms of the Product Disclosure Statement of Wealthcare Investment Service.’ The attachment made clear that what she was seeking was a refund of $3,783.36 and a refund of the VCAT application fee of $132.30.
On 8 July 2014 Ms Mathews sent a letter to VCAT stating that she wished to vary her original application to include all overcharges from 22 April 2009. She gave details in a table with cross-references to attachments. The total claim became $9,520.69 plus ‘loss of enjoyment in pursuing these matters over two years’ (which I take to mean claim for distress and inconvenience). It does not appear this letter was served on the responsible entity. It came to light at a directions hearing on 25 July 2014 before Member Warren. There was no appearance that day on behalf of the respondent because he had not been served or did not know of the hearing. On that day, the applicant below was directed to serve a copy of the 8 July 2014 letter with all attachments. The order recorded that the respondent’s current address was care of J K Wong and Associates at an address in Chatswood in New South Wales.
The next event was on about 22 August 2014. By letter of that date, Mr Roberts lodged some ‘attached paperwork as a counterclaim’. There were 26 attachments. Much reference was made to a ruling by the Financial Ombudsman Service which, the letter says, found in favour of the responsible entity on a complaint made by Ms Mathews.
Affidavit evidence has been adduced on this application that on 1 September 2014 Ms Mathews sent a three kilogram express post bag to the respondent at the Chatswood address. She copiously produces evidence to show the postal dispatch. One of the documents in that package was a nine page document dealing with the issues in the case and explaining the case before the Financial Ombudsman Service and how findings by the Service led to her making the application to VCAT. That document claims $8,046.08 for overcharges and a refund of the VCAT application fee. Within it, she seeks by reference to attachments to show how her claim is calculated or made up.
I have countervailing evidence from Mr Roberts that he did not get the package. Of course I am not here to determine on appeal contested questions of service. No point was made of this in the Tribunal proceeding which is what this court is concerned with. Nevertheless, it is significant when it comes to evaluating the justice of this case to see e-mails showing that come 11 September 2014, Ms Mathews was corresponding with Mr Roberts making reference to the documents sent to him in Chatswood. Nothing in those emails from Mr Roberts is consistent with him now complaining he did not get the documents.
The hearing was due to occur at Shepparton on 16 September 2014. Both Ms Mathews and Mr Roberts attended. But the Tribunal’s file had not yet been transmitted to Shepparton and the hearing was therefore adjourned to 21 October 2014. That brings me to the relevant hearing.
An affidavit from Mr Roberts before me states that upon sitting at the Bar table he saw a bundle of documents. On top of the bundle was a document entitled ‘Summary of Issues’. He said he had not seen that before. It was a three page document exposing the three issues which Ms Mathews was seeking to have resolved by the Tribunal. She sought to recover not only the expense recovery fee of $3,783.36 but also excessive fees and charges, that is, charges over and above those allowed under the Product Disclosure Statement. That amounted to $8,046.08. Mr Roberts says:
I looked briefly at the Document but because people were talking I focused on what was being said and put the Document to the side. I simply thought it was part of the numerous documents that the respondent had produced since the commencement of the application.
He then adds this:
I proceeded to defend and argue the matter on the understanding that what was in dispute was the allegation contained in the application relating to the $3,783.36 expense recovery fee, interest on that fee and the ‘loss of enjoyment’ claim.
I think this truly exposes the question on this application. He chose to ignore a document tabled that day by which the applicant had identified the issues and the claim she was making. I have read the transcript and it does not support in any way his assertion that the Tribunal conducted the case to ‘confirm’ his ‘understanding’ that all that was in dispute was the $3,783.36 expense recovery fee. The transcript shows no such thing. It is to the contrary. Whatever the disorder may have been in the case beforehand it is plain that the Tribunal member was seeking by reference to the documents prepared by Ms Mathews to gain a clarification or an understanding from her of the claim and its basis. Mr Roberts was part of that process. Within that process there was not assertion by him that he was taken by surprise. I do not see anything in the transcript which independently of that may have aroused in the mind of a solicitous Tribunal member an apprehension that the case was now taking on an ambit that was somehow a departure from the claim that was instituted so as to arouse a sense that it would be unfair to proceed. The case simply went on without any apparent difficulties at least none expressed in comprehending the case to be determined. Mr Roberts was allowed to ask questions, was himself questioned, and was allowed to make submissions. The Member went on to decide the case, ultimately with written reasons based upon, or aligned with, the very issues as exposed by Ms Mathews in her paper which was before the Tribunal at the hearing. On the face of his reasons the Member has adhered to the assessment of the issues as presented to him. The reasons are conspicuous in not really showing an analysis of opposing submissions or making findings of fact; but, that appears to be because there was no issue taken by Mr Roberts at the hearing on the applicant’s evidence which was all documentary.
Thus, I am afraid to say, all objective evidence concerning the conduct of this case by the Tribunal shows it is not possible to contend he was denied procedural fairness. The problem is that there was instability in the case in that it started making a single claim for $3,786.36; then there were problems with files being lost; interstate service of documents; a substantial amount of documents coming into existence; and assumptions being made about the ambit of the dispute.
One thing is clear: this court cannot allow a re-run of a Tribunal hearing or set aside an order to give an opportunity to better run a case a second time. The question for me is whether there was some basis for saying the Tribunal denied Mr Roberts procedural fairness. That has not been shown. What has been shown, I think, is that he was exposed on the day of hearing, if not beforehand, to the enlarged claim and was willing to participate in a determination of the case as it was being propounded by Ms Mathews on the day. With the Tribunal’s assistance, the basis of the claim and supporting documentation was put before the Tribunal at the hearing in the presence of Mr Roberts on a matter concerning the imposition of fees and charges about which Mr Roberts as a director of the responsible entity would be aware. That is, by subject matter it was a matter within his knowledge. At all events he did not seek time or opportunity to better conduct his case. In that sense I think it analytically not correct to speak about a waiver of an entitlement to natural justice. That presupposes that he was visited with natural injustice but was willing to disregard it. It is more accurate, I think, or faithful to the facts to say that the only possible question is whether he was given proper notice of the case to be put against him. The evidence is there was never a complaint that he had not received a three kilogram bundle of documents in September; he participated in the determination of the case according to the issues as identified by Ms Mathews; and the case has been decided according to the issues as identified by her. Accordingly, I see no injustice in reaching the conclusion that the decision is unassailable on the grounds of procedural fairness.
Accordingly, I propose to order as follows:
1. The application for leave to appeal is refused;
2. The proceeding be dismissed;
3. The plaintiff shall pay the defendant’s cost of the proceeding.
Finally, I now ask the parties to turn their minds to the measures that must now be taken to rectify what is described as the error in the Tribunal’s calculation of moneys payable under the Order. An affidavit of Ms Mathews sworn on 14 August 2015 draws the court’s attention to a miscalculation in that Order in her favour. The outcome is that instead of the first Order requiring the payment of $12,033.48 plus interest of $4,179.13 to get a total of $16,213.41 it should be: $8,245.12 plus interest of $2,865.24 to get a total of $11,110.36. It is a matter for the parties, but such an error ought not to be allowed to stand. I doubt if it is a matter of applying the Tribunal’s slip rule. The parties will need to consider whether it is possible to have the Tribunal by some other means to revisit the Order and correct it. If not, thought needs to be given as to whether this Court, possibly under the aegis of this proceeding, ought make an order by consent vary the Tribunal’s decision. I shall abstain from authenticating any order and propose re-listing the matter for mention on a date convenient to the parties.
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