FEDERAL COURT OF AUSTRALIA Naroth v Innovative Hair Loss Solutions Pty Ltd [2014] FCA 276 Citation: Naroth v Innovative Hair Loss Solutions Pty Ltd [2014] FCA 276 Appeal from: Naroth v Innovative Hair Loss Solutions Pty Ltd & Ors (No.3) [2013] FMCA 209 (28 March 2013) Parties: NANDITA RAGINI NAROTH v INNOVATIVE HAIR LOSS SOLUTIONS PTY LTD, DEREK BEST, DEBRA BEST and ALEXANDRA MCCLUNIE File number: WAD 107 of 2013 Judge: BARKER J Date of judgment: 27 March 2014 Catchwords: CONSUMER LAW – whether respondents engaged in misleading or deceptive conduct in relation to appellant's entry into service contract under s 52 Trade Practices Act 1974 (Cth) – whether respondents engaged in unconscionable conduct in contravention of s 51AC Trade Practices Act 1974 (Cth) CONTRACTS – whether service contract expressly or impliedly incorporated statutory obligations created by Occupational Safety and Health Act 1984 (WA) – whether company repudiated contract, entitling appellant to accept repudiation and terminate contract EVIDENCE – whether credibility findings against appellant should have been made Legislation: Trade Practices Act 1974 (Cth) s 51AC, s 52 Occupational Safety and Health Act 1984 (WA) Date of hearing: 28 November 2013 Place: Perth Division: GENERAL DIVISION Category: Catchwords Number of paragraphs: 66 Counsel for the Appellant: The appellant appeared in person Counsel for the Respondents: Mr A Metaxas Solicitor for the Respondents: Metaxas & Hager IN THE FEDERAL COURT OF AUSTRALIA WESTERN AUSTRALIA DISTRICT REGISTRY GENERAL DIVISION WAD 107 of 2013 ON APPEAL FROM THE FEDERAL CIRCUIT COURT OF AUSTRALIA BETWEEN: NANDITA RAGINI NAROTH Appellant AND: INNOVATIVE HAIR LOSS SOLUTIONS PTY LTD First Respondent DEREK BEST Second Respondent DEBRA BEST Third Respondent ALEXANDRA MCCLUNIE Fourth Respondent JUDGE: BARKER J DATE OF ORDER: 27 MARCH 2014 WHERE MADE: PERTH THE COURT ORDERS THAT: 1. The appeal be dismissed. 2. The appellant pay the costs of the respondents to be taxed if not agreed. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. IN THE FEDERAL COURT OF AUSTRALIA WESTERN AUSTRALIA DISTRICT REGISTRY GENERAL DIVISION WAD 107 of 2013 ON APPEAL FROM THE FEDERAL CIRCUIT COURT OF AUSTRALIA BETWEEN: NANDITA RAGINI NAROTH Appellant AND: INNOVATIVE HAIR LOSS SOLUTIONS PTY LTD First Respondent DEREK BEST Second Respondent DEBRA BEST Third Respondent ALEXANDRA MCCLUNIE Fourth Respondent JUDGE: BARKER J DATE: 27 MARCH 2014 PLACE: PERTH REASONS FOR JUDGMENT 1 In March 2009, Ms Naroth began providing accounting and bookkeeping services to Innovative Hair Loss Solutions (the company) under a service contract that provided for her to do so for a period of three years. 2 On 9 April 2010, however, Ms Naroth's solicitors wrote to Mr Best, in his capacity as director of the company, alleging repudiation of the contract and purporting to accept that repudiation and terminating the contract. 3 Ms Naroth's solicitors required the company to pay two months' fees of around $15,000 plus goods and services tax (GST) under cl 5 of the contract upon termination, her fees for the period to 8 April 2010 (an invoice for which was enclosed dated 9 April 2010) and "damages for breach of contract". 4 The company rejected Ms Naroth's entitlement to terminate the contract and alleged, in essence, that Ms Naroth had herself breached the contract as a result of which it was entitled to damages. 5 Ms Naroth then commenced proceedings in the Federal Magistrates Court of Australia (now the Federal Circuit Court of Australia) in which she claimed relief for: Breach of contract; Repudiation of the contract; Contravention of s 51AC and s 52 of the Trade Practices 1974 (Cth) (TPA) with respect to unconscionable and misleading and deceptive conduct in relation to the contract. 6 The Federal Magistrate (as the primary judge then was) found that Ms Naroth was entitled to judgment in the sum of $2,253.63 (plus interest) on her claim under the invoice rendered on 9 April 2010, but otherwise that her claims should be dismissed; and gave judgment to the company on its counter-claim in the sum of $14,437.50 (plus interest) by reason of Ms Naroth's breach of contract. 7 In the course of so finding, the primary judge: (1) made what were described in the judgment as credibility findings against Ms Naroth; (2) dismissed Ms Naroth's claim of breach of contract against the company based on express or implied terms of the Occupational Safety and Health Act 1984 (WA) (OSH Act); (3) rejected Ms Naroth's allegations that she had been harassed, bullied, abused and was the subject of malicious and false allegations, particularly by an email of 1 April 2010; and also found that other emails did not constitute evidence of bullying or sabotage or duress; (4) found that there was no basis to justify Ms Naroth's assertion that the company had repudiated the service contract; (5) found that Ms Naroth had not made out the claim of misleading and deceptive conduct under s 52 TPA; (6) found that none of the conduct of any of the respondents rose to the level of unconscionability and, even if it did, there was no evidence of damage to Ms Naroth and so the claim of unconscionable conduct under s 51AC TPA had not been made out. 8 Ms Naroth now appeals against the orders and findings made by the primary judge. 9 The matters in issue on this appeal primarily concern whether the primary judge erred in fact or law: (1) in finding the company did not owe Ms Naroth a duty under the OSH Act to provide her with a safe workplace which duty was contravened; (2) in finding Ms Naroth was not entitled to terminate the service contract; (3) in finding none of the respondents were guilty of any misleading or deceptive conduct or unconscionable conduct directed towards Ms Naroth; (4) in making credibility findings against Ms Naroth. Did the primary judge err in finding that the service contract did not expressly or impliedly incorporate statutory working environment duties? 10 The OSH Act imposes duties on employers in relation to workplaces. 11 It also deals with contract work arrangements. 12 Ms Naroth's claim before the primary judge was that the statutory obligations created by the OSH Act became express or implied terms of the service contract she had with the company so that, by the contract, the company owed her obligations in terms which were the same as or similar to those imposed on employers or otherwise under the OSH Act. 13 The primary judge found there was no express term in the service contract as alleged. 14 He also rejected an argument that such terms should be implied into the service contract. He noted that the OSH Act does not provide for those of its terms imposing duties to be imported or implied into contracts. He also found it was not necessary to do so to give the service contract business efficacy and further that it was unnecessary to imply the provisions imposing a duty on employers and contractors to provide a safe working environment. 15 His Honour found that the service contract was efficacious and without any need to import implied terms. He said it was unnecessary to imply the terms of the OSH Act into a service contract of a purely commercial nature as to the provision of bookkeeping and accounting services and that the service contract and the OSH Act could stand and apply independently of each other. 16 I see no error in the primary judge's finding so far as legal principle or fact finding is concerned in this regard and indeed consider that his Honour's findings are precisely correct. 17 While the company may be said to have owed Ms Naroth a general law duty of care while she performed services in the company's premises, there is no evidence to suggest such a duty was breached. 18 Accordingly, those grounds of the notice of appeal that relate to the issue of safe work environment must fail. Did the primary judge err in finding ms naroth was not entitled to terminate the contract? 19 The answer to this question depends on whether the company relevantly repudiated the contract, thus permitting Ms Naroth to accept the repudiation and terminate the contract. 20 Ms Naroth relied in pressing her claim on this point on a course of conduct between March 2010 and when she ultimately purported to terminate the contract by her solicitor's letter of 9 April 2010. 21 The primary judge laid out in his judgment, and there is no need to repeat the details of the communications here, the course of relevant communications and conduct including the 9 March 2010 emails, the 26 and 27 March 2010 emails, the 1 April 2010 payroll emails, the payroll standby arrangement evidence, the request for the key to Ms Naroth's Subiaco office evidence, the redirection of mail evidence, the handing over of operational issues evidence, the contracts issue evidence, the end of day complaint evidence, and the events of 7 and 8 April 2010 which culminated in Ms Naroth's solicitors' letter of 9 April 2010 purporting to terminate the service contract. 22 The primary judge, having closely regarded all of this evidence, considered that the effect of it did not justify Ms Naroth's assertion that the company had repudiated the service contract. 23 I have had close regard to the evidence and consider that the account given of it by his Honour in his reasons between [31] and [88] is a reasonable account of the factual matters in issue. 24 The evidence supports the view, expressed by Ms Naroth, that she felt highly aggrieved when, having had a three year relationship with Mr and Mrs Best, who owned and operated the company, in March 2010 she received an email addressed to "Arthur" from Mr Best. 25 I accept, however, that the email was never intended for her and was sent to her inadvertently. I read nothing conspirational into the sending of the email to Ms Naroth. 26 On the hearing of the appeal, Ms Naroth was at pains to explain that it was not until the sixth day of the trial before the primary judge that counsel for the company produced the earlier related email that Ms McClunie had sent to Mr Best, commenting on the terms of her (Ms Naroth's) contract. This conduct in Ms Naroth's view confirmed that there had been something afoot and questionable at all material times. My own view of the evidence, however, is different from that of Ms Naroth. 27 I have little doubt that at a certain point in time Ms Naroth did take on extra duties apparently going beyond accounting and bookkeeping services as provided for in the service contract. The company says she did this "voluntarily". There does not appear to be any evidence of the parties having consulted or negotiated about this extra work, in the sense that Ms Naroth was to charge for it or charge for it on some basis different from the provision for remuneration under the service contract. 28 It is also clear on all the materials and not in dispute that after a while Ms Naroth could not manage all of the extra work. It may well have been affecting her and it would appear from her evidence that it did. She was keen to be relieved of the extra work and said so to representatives of the company. She sent an email in late March to the external accountant of the company, whose reply to her shows some sympathy with her position. Indeed, he said he would take up the issue with Mr and Mrs Best. It was not long after those events, however, that a new operations manager, Ms McClunie, was engaged by the company and it is obvious that the Bests were keen to work things out under the control of the new operations manager. 29 Up until that point Mrs Best had been the operations manager but she was to pull back from the position. Indeed, before long there is a note in one of the emails from Ms McClunie advising Ms Naroth that she should not be copying her correspondence to Mrs Best, as had been her earlier custom, but to include just Mr Best and herself. 30 The evidence suggests that soon enough after the engagement of Ms McClunie and certainly about the time that Mr Best asked Ms Naroth to provide him with a copy of her contract, which he then forwarded to Ms McClunie for her comments, around late March, Mr Best was contemplating Ms Naroth's future with the company. 31 It might be said that the correspondence from Mrs Best by email to Ms Naroth expressing some support for her position, were screens in order to accommodate what was obviously an increasingly difficult management issue. Ms Naroth had been with the Bests for some time and was plainly unhappy with what was happening around her. Soothing words, perhaps, were required and Mrs Best provided them. Nonetheless even the soothing email from Mrs Best required the relevant parties to meet to discuss cutting costs and the way forward. Ultimately, at trial, Mrs Best told Ms Naroth, when questioned by her about it, that she actually thought at the material time that Ms Naroth was underperforming. 32 Ms Naroth considers that that evidence was a "lie" in light of what Mrs Best had said in the soothing correspondence, and in an earlier card that had been put to Mrs Best during her evidence. But in my view there is no inconsistency in Mrs Best's position and it is explicable that Mrs Best would not have wanted unnecessarily to offend Ms Naroth, having been working together for some time. 33 The real question is whether, by the end of March 2010, the Bests or Mr Best, effectively with Ms McClunie, had decided to terminate Ms Naroth's contract. 34 In that regard if Ms McClunie had been wanting to keep Ms Naroth on contract for as long as she could while she learned the ropes of the new business, then it is surprising that she should have been using such strong language, as she plainly did in emails to Ms Naroth. 35 Ms McClunie said of her emails, which are set out in appropriate detail in his Honour's judgment, that they were in such strong language as she was responding to unwarranted barbs from Ms Naroth. 36 In that regard, while one needs to read the emails from Ms Naroth with a close eye, on the face of it they were all reasonably unemotive. However, the key issue, which involved Ms Naroth being reluctant to hand over her Subiaco key to Ms McClunie, obviously caused tensions to rise and offence was taken relatively easily on all sides at that point. Ms McClunie's emails were written in this context; although I must say they were, in my view, unnecessarily inflammatory. 37 The question remains, however, whether it can be said that Mr and Mrs Best and Ms McClunie were in league to bring about the downfall, that is to say the resignation of Ms Naroth, and that the course of conduct, including the emails, constituted repudiation of the service contract, or whether Ms McClunie, pretty much of her own accord, simply lashed out at the company's contractor, Ms Naroth who, when all conduct is considered, did not have grounds to terminate the contract. 38 It is relevant I think to note in this context that the emails between Ms Naroth and Ms McClunie were copied to Mr Best, at least. Mr Best was thus fully privy to what was being communicated between Ms Naroth and Ms McClunie. It is clear that he stayed apart from the action, if it may be put that way, as he did not take calls from Ms Naroth when she was trying to discuss the key issue with him. Plainly he knew what was going on and did what he could to stay out of the resolution of the issue, leaving it to Ms McClunie as operations manager. 39 There can be no doubt in my view that the Bests and Ms McClunie appreciated that Ms Naroth was under considerable pressure and not responding terribly well to what was happening around her. 40 But even so, so far as the service contract was concerned, either party had the liberty to terminate on two months' notice. 41 Ms Naroth never did have tenure for any longer period. She may well have feared, rightly, that it was not at all clear that she would be kept on beyond her contract having regard to the introduction of Ms McClunie as operations manager. From the company's point of view, it could, when ready, give Ms Naroth notice or let the contract expire. 42 In all the circumstances it appears to me that this is one of those cases where there is little evidence of the company being concerned about saving a few months' payments to Ms Naroth by, in effect, forcing her to resign. 43 On the other hand, on the evidence, and her own admissions Ms Naroth has clearly had difficulties with depression over the years. The psychiatric evidence of her doctor and other doctors called at the trial illustrates this in detail. She readily admitted this situation herself. The evidence suggests that she was unusually susceptible to pressure or stress at material times in the March period. On the face of it, she interpreted things badly when she received emails. She saw every confrontation as having an ulterior purpose. Thus, the "Arthur" email from Mr Best that was sent to her by mistake was read by her as something deliberately done. 44 The reality, however, is that when she wrote to the external accountant for the company some weeks before that, she was already concerned about the lay of the land. 45 In my view, the evidence does not support the view that the company, as of the date that Ms Naroth instructed her solicitors to terminate the contract on 9 April 2010, had relevantly repudiated the contract. Ms Naroth's purported termination of the contract on the basis of the alleged repudiation of the service contract by the company thus was not made out and the primary judge was correct to so find. 46 It follows that the grounds of appeal that relate to the repudiation and termination of the contract must fail. 47 It also follows, in my view, that the primary judge's finding of Ms Naroth's breach of the contract, and his assessment of damages under the contract were correct. Did the primary judge err in finding that there was no misleading or deceptive conduct or unconscionable conduct? 48 At trial, Ms Naroth claimed that there was misleading and deceptive conduct in that she was induced to enter into the service contract in reliance on a promise that she would be relieved of non-bookkeeping services because the company intended to employ a suitable person to undertake those tasks and remove them from her, but this did not happen. She says that from April 2009 she provided her services in a managerial and non-bookkeeping capacity at no additional cost to the company. She says she would not have entered into the service contract if she had not been misled by the promise of an appointment of a senior person to relieve her of the non-bookkeeping tasks. 49 The primary judge, however, having regard to the evidence set out at [114] of his judgment, considered the evidence was entirely consistent with a consensual variation of the service contract to include the provision of non-bookkeeping services throughout the period from early 2009 until the time of the alleged repudiation. 50 The primary judge also considered that if there was a representation of the kind alleged, it was not a representation which was misleading or deceptive and there was sufficient evidence to establish that the company endeavoured to find solutions to the problem and appoint a person or persons to a variety of senior positions which might have alleviated the load with respect to the non-bookkeeping tasks performed by Ms Naroth. 51 Those efforts culminated in the appointment of Ms McClunie as operations manager in early March 2010. 52 Finally, the primary judge found that even if there had been a misleading or deceptive representation there was no evidence that any loss or damage was suffered by Ms Naroth. 53 I do not consider that any error is disclosed in the reasons of his Honour in making these various findings. The primary issue is whether the relevant representation was made. If there was a representation made, it seems to have been as to a future act, not a present fact. The representation, according to the way Ms Naroth put it at trial, was that the company would attempt to do things to relieve her of the burdens she was experiencing. There is nothing to show that when that representation was made, the company (or the Bests) had no basis for making it. Indeed, as his Honour effectively indicates, the later evidence all goes to support the view that at the time that representation was made the company and the Bests had reasonable grounds for making the representation. 54 In those circumstances, his Honour did not err in dismissing the misleading and deceptive claim, pursuant to s 52 of the TPA. 55 Accordingly, those grounds of appeal which relate to those findings must fail. 56 Ms Naroth also claimed at trial that the respondents acted unconscionably at material times because, in breach of the service contract, they unilaterally changed their accounts address from Subiaco to Wangara and further that they coerced her into providing training and non-bookkeeping services and threatened to take away her core bookkeeping services. 57 This claim in many respects overlaps with the contract claim and the misleading and deceptive claim. 58 Ultimately, the primary judge found, at [125] of his judgment, that there was no evidence that Ms Naroth was coerced into providing training and non-bookkeeping services. Additionally, that the issue with respect to the possible outsourcing of the payroll was a reaction to particular events. His Honour found that even if it was inappropriate it did not constitute unconscionable conduct under s 51AC TPA. 59 Having closely considered the matters that his Honour considered, which I consider fairly represents the state of the evidence relied upon by Ms Naroth, there was no evidence before the primary judge to support a finding of unconscionable conduct by the company or any of the respondents. Unconscionability, in this context, is not simply to be equated with what is unreasonable or unfair so far as business management decisions are concerned. 60 It follows that claims of unconscionability cannot be maintained and accordingly those grounds of appeal which relate to this finding must fail. Did the primary judge err in making credibility findings against Ms Naroth? 61 In my view, it was unfortunate that the primary judge made what look like credibility or credit findings against Ms Naroth under a separate heading to this effect. The points made by his Honour as to why he did not accept a number of aspects of Ms Naroth's evidence did not have so much to do with her "credibility" – in terms of whether or not she was a witness of "credit" – but more to do with why Ms Naroth's interpretation of events should not be accepted, having regard to all of the evidence. There were issues going to the repudiation and TPA claims in particular. I observe there are no findings that Ms Naroth "lied". There are suggestions that she exaggerated, for example in relation to the scope of the additional duties she took on in relation to personnel and management matters. These findings help to explain why Ms Naroth's evidence was not preferred or relied upon in assessing the facts by his Honour. 62 I would also observe that when one appreciates that, at the time of the trial, Ms Naroth apparently suffered depression, then observations about her demeanour made by the primary judge, her slowness in answering some questions and her insistence as to what the meaning of some of her emails were, are perhaps explicable. Ms Naroth plainly saw the sequence of the emails as calculated to put her under undue pressure. 63 In the event, the primary judge did not consider Ms Naroth's interpretation of the consequences of that conduct to be correct. With that conclusion this Court agrees on appeal. But that is not to say that Ms Naroth is not entitled to her own sense of grievance as to what happened, culminating in her solicitor's letter of 9 April 2010. 64 In the result, while the credibility observations made by his Honour are not irrelevant on the appeal, they are not determinative of its resolution. summary and conclusion 65 To summarise the position, the misleading and deceptive case and the unconscionability case run by Ms Naroth against the respondents were without any evidentiary foundation. Nor were duty of care issues concerning a safe system of work arising under statute (or common law). At the heart of the claim made by Ms Naroth against the respondents was the alleged unlawful termination of her contract claim. For the reasons given above, Ms Naroth did not have grounds at law to terminate the service contract on the ground of the company's repudiation. The primary judge did not err in so finding. 66 In these circumstances, the appeal should be dismissed with costs. I certify that the preceding sixty-six (66) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Barker. Associate: Dated: 27 March 2014