Civil and Administrative Tribunal New South Wales Medium Neutral Citation: Forbes v Liu [2020] NSWCATAP 196 Hearing dates: 17 September 2020 Date of orders: 23 September 2020 Decision date: 23 September 2020 Jurisdiction: Appeal Panel Before: The Hon F Marks, Principal Member D Robertson, Senior Member Decision: (1) The appeal is allowed (2) Order 1 made by Senior Member Meadows on 1 May 2020 is varied so as to read "Jeffrey Feng is liable to pay the amount of $15,804.61 to Jajing Liu". Catchwords: APPEALS – error of law – incorrect test for determining unconscionable conduct under the Australian Consumer Law (NSW) Legislation Cited: Australian Consumer Law (NSW) Fair Trading Act 1987 (NSW) ss 27,28, 79 Competition and Consumer Act 2010 Sch 2 Cases Cited: Forbes v Wan [2020] NSWCATAP 129 Australian Securities and Investments Commission v Kobelt [2019] HCA 18; 368 ALR 1 Texts Cited: None cited Category: Principal judgment Parties: Callum Forbes (Appellant) Yajing Liu (Respondent) Jeffrey Feng (Second Respondent) Representation: Solicitors: Appellant (Self Represented) C Wan (Agent) (Respondent) Second Respondent (No Appearance) File Number(s): AP 20/28752 Publication restriction: Nil Decision under appeal Court or tribunal: NSW Civil and Administrative Tribunal Jurisdiction: Consumer and Commercial Division Citation: N/A Date of Decision: 1 May, 2020 Before: Senior Member G Meadows File Number(s): GEN 19/23998 Reasons for decision Background 1. Yajing Liu, the respondent to these appeal proceedings brought an Application in the Consumer and Commercial Division of this Tribunal on 23 May 2019 seeking monetary relief from And Chill Property Management Pty Limited (ACPM), the appellant Callum Forbes and the additional respondent Jeffrey Feng. The Application related to a Property Management agreement that Ms Liu had entered into with ACPM to manage a residential unit in Queensland which she had purchased as an investment. ACPM guaranteed a net rental return being 6% of the purchase price, which it had not paid, and there were certain other management matters it was alleged that ACPM had failed to attend to. Although the Application does not state any basis for making any claim personally against the appellant and the additional respondent, it transpired during the course of the hearing of the Application that these claims were made under section 79N of the Fair Trading Act 1987 (NSW). For present purposes it is sufficient to note that by the time the proceedings came on for hearing ACPM was in liquidation. The appellant was a director and the Chief Executive Officer of another company, also in liquidation, which was the holding company of ACPM. The additional respondent was a director of ACPM and was its licensee under relevant real estate agency legislation. 2. The respondent has limited command of English, and conducted her negotiations with ACPM and others through her daughter, Chenyang Wan who had also purchased a residential unit in the same apartment block and entered into the same form of Property Management agreement with ACPM. 3. Ms Wan had already commenced proceedings in this Tribunal against ACPM as well as the appellant and the additional respondent, based on the same alleged breaches by ACPM of its obligations. The appellant and the additional respondent were named in those proceedings on the same basis as in these proceedings. The application brought by Ms Wan came on for hearing before a Senior Member who granted the application and made orders on 25 February 2020 that the appellant and the additional respondent pay her certain monies (The Wan Decision). 4. The same Senior Member who dealt with Ms Wan's claim also heard the Application brought by the respondent. There is a great deal of similarity between the factual background and issues in the Application made by the respondent, which has given rise to these appeal proceedings with which we are dealing, and the application made by Ms Wan. In the Wan Decision the Senior Member found that both the appellant and the additional respondent had engaged in conduct in the supply of services pursuant to the Property Management agreement that constituted unconscionable conduct in breach of the Australian Consumer Law, and on that basis made monetary orders against them. 5. In the Decision under appeal in these proceedings the Senior Member made the same findings against the appellant and the additional respondent and, on 1 May 2020, made monetary orders against them. 6. The appellant in these proceedings also brought an appeal against the Wan Decision. By orders made on 30 June 2020 an Appeal Panel allowed the appeal in part and set aside the order made against the appellant that he pay monies to Ms Wan. Those appeal proceedings are Forbes v Wan [2020] NSWCATAP 129. We shall refer to the reasoning of the Appeal Panel in Forbes v Wan in greater detail later in these reasons for decision. 7. As is obvious, the Senior Member did not have available to him the decision and reasons of the Appeal Panel in Forbes v Wan when he determined the Application brought by the respondent in these proceedings. As will be seen, the reasoning of the Senior Member in support of his decision on the Application brought by Ms Liu reflected his reasoning in the Wan Decision, which was overturned by the Appeal Panel in Forbes v Wan. The relevant legislative provisions applying to the Application 1. By the combined provisions of sections 27 and 28 of the Fair Trading Act 1987 the Australian Consumer Law text consisting of inter alia Schedule 2 to the Competition and Consumer Act 2010 of the Commonwealth applies as a law of New South Wales. We set out below ss 20-22 of the Australian Consumer Law upon which the Senior Member founded his decision that the appellant was liable to the respondent: 20 Unconscionable conduct within the meaning of the unwritten law (1) A person must not, in trade or commerce, engage in conduct that is unconscionable, within the meaning of the unwritten law from time to time. Note: A pecuniary penalty may be imposed for a contravention of this subsection. (2) This section does not apply to conduct that is prohibited by section 21 21 Unconscionable conduct in connection with goods or services (1) A person must not, in trade or commerce, in connection with: (a) the supply or possible supply of goods or services to a person; or (b) the acquisition or possible acquisition of goods or services from a person; engage in conduct that is, in all the circumstances, unconscionable. (2) This section does not apply to conduct that is engaged in only because the person engaging in the conduct: (a) institutes legal proceedings in relation to the supply or possible supply, or in relation to the acquisition or possible acquisition; or (b) refers to arbitration a dispute or claim in relation to the supply or possible supply, or in relation to the acquisition or possible acquisition. (3) For the purpose of determining whether a person has contravened subsection (1): (a) the court must not have regard to any circumstances that were not reasonably foreseeable at the time of the alleged contravention; and (b) the court may have regard to conduct engaged in, or circumstances existing, before the commencement of this section. (4) It is the intention of the Parliament that: (a) this section is not limited by the unwritten law relating to unconscionable conduct; and (b) this section is capable of applying to a system of conduct or pattern of behaviour, whether or not a particular individual is identified as having been disadvantaged by the conduct or behaviour; and (c) in considering whether conduct to which a contract relates is unconscionable, a court's consideration of the contract may include consideration of: (i) the terms of the contract; and (ii) the manner in which and the extent to which the contract is carried out; and is not limited to consideration of the circumstances relating to formation of the contract. 22 Matters the court may have regard to for the purposes of section 21 (1) Without limiting the matters to which the court may have regard for the purpose of determining whether a person (the supplier) has contravened section 21 in connection with the supply or possible supply of goods or services to a person (the customer), the court may have regard to: (a) the relative strengths of the bargaining positions of the supplier and the customer; and (b) whether, as a result of conduct engaged in by the supplier, the customer was required to comply with conditions that were not reasonably necessary for the protection of the legitimate interests of the supplier; and (c) whether the customer was able to understand any documents relating to the supply or possible supply of the goods or services; and (d) whether any undue influence or pressure was exerted on, or any unfair tactics were used against, the customer or a person acting on behalf of the customer by the supplier or a person acting on behalf of the supplier in relation to the supply or possible supply of the goods or services; and (e) the amount for which, and the circumstances under which, the customer could have acquired identical or equivalent goods or services from a person other than the supplier; and (f) the extent to which the supplier's conduct towards the customer was consistent with the supplier's conduct in similar transactions between the supplier and other like customers; and (g) the requirements of any applicable industry code; and (h) the requirements of any other industry code, if the customer acted on the reasonable belief that the supplier would comply with that code; and (i) the extent to which the supplier unreasonably failed to disclose to the customer: (i) any intended conduct of the supplier that might affect the interests of the customer; and (ii) any risks to the customer arising from the supplier's intended conduct (being risks that the supplier should have foreseen would not be apparent to the customer); and (j) if there is a contract between the supplier and the customer for the supply of the goods or services: (i) the extent to which the supplier was willing to negotiate the terms and conditions of the contract with the customer; and (ii) the terms and conditions of the contract; and (iii) the conduct of the supplier and the customer in complying with the terms and conditions of the contract; and (iv) any conduct that the supplier or the customer engaged in, in connection with their commercial relationship, after they entered into the contract; and (k) without limiting paragraph (j), whether the supplier has a contractual right to vary unilaterally a term or condition of a contract between the supplier and the customer for the supply of the goods or services; and (l) the extent to which the supplier and the customer acted in good faith. (2) Without limiting the matters to which the court may have regard for the purpose of determining whether a person (the acquirer ) has contravened section 21 in connection with the acquisition or possible acquisition of goods or services from a person (the supplier ), the court may have regard to: (a) the relative strengths of the bargaining positions of the acquirer and the supplier; and (b) whether, as a result of conduct engaged in by the acquirer, the supplier was required to comply with conditions that were not reasonably necessary for the protection of the legitimate interests of the acquirer; and (c) whether the supplier was able to understand any documents relating to the acquisition or possible acquisition of the goods or services; and (d) whether any undue influence or pressure was exerted on, or any unfair tactics were used against, the supplier or a person acting on behalf of the supplier by the acquirer or a person acting on behalf of the acquirer in relation to the acquisition or possible acquisition of the goods or services; and (e) the amount for which, and the circumstances in which, the supplier could have supplied identical or equivalent goods or services to a person other than the acquirer; and (f) the extent to which the acquirer's conduct towards the supplier was consistent with the acquirer's conduct in similar transactions between the acquirer and other like suppliers; and (g) the requirements of any applicable industry code; and (h) the requirements of any other industry code, if the supplier acted on the reasonable belief that the acquirer would comply with that code; and (i) the extent to which the acquirer unreasonably failed to disclose to the supplier: (i) any intended conduct of the acquirer that might affect the interests of the supplier; and (ii) any risks to the supplier arising from the acquirer's intended conduct (being risks that the acquirer should have foreseen would not be apparent to the supplier); and (j) if there is a contract between the acquirer and the supplier for the acquisition of the goods or services: (i) the extent to which the acquirer was willing to negotiate the terms and conditions of the contract with the supplier; and (ii) the terms and conditions of the contract; and (iii) the conduct of the acquirer and the supplier in complying with the terms and conditions of the contract; and (iv) any conduct that the acquirer or the supplier engaged in, in connection with their commercial relationship, after they entered into the contract; and (k) without limiting paragraph (j), whether the acquirer has a contractual right to vary unilaterally a term or condition of a contract between the acquirer and the supplier for the acquisition of the goods or services; and (l) the extent to which the acquirer and the supplier acted in good faith. The decision under appeal 1. In his decision the Senior Member determined that the Tribunal has jurisdiction to deal with the Application. The Senior Member also held that neither the appellant nor the additional respondent had engaged in misleading or deceptive conduct as that expression is defined in the Australian Consumer Law. There is no appeal from these findings. 2. However, the Senior Member found that both the appellant and the additional respondent had engaged in unconscionable conduct in breach of section 21 (1) (a) of the Australian Consumer Law. The basis for so finding was that they had failed "to properly manage" the property pursuant to the Property Management agreement in breach of section 22 (1) (j) (iii) and that their conduct in doing so "was outside societal norms of acceptable commercial behaviour, resulting in severe mismanagement of the applicant's property." It is this finding which the appellant submits involved an error of law on the part of the Senior Member, and which should be corrected in this appeal. 3. There was no evidence before the Senior Member that the respondent had any direct, or even indirect, contact with either the appellant or the additional respondent. She dealt with others, principally through her daughter Ms Wan. The Senior Member relied on reports of the Administrators of ACPM and its holding company to conclude that the appellant "was responsible for the day-to-day management and operations" of ACPM and the holding company. Who is the appellant? 1. The Notice of Appeal named both the appellant and the additional respondent as appellants. However, it was signed only by the appellant. We note from the decision of the Senior Member that the additional respondent did not participate in the proceedings before him. 2. The appellant informed us that he had included the name of the additional respondent as an appellant for abundant caution. However, he had no authority to represent the additional respondent in the proceedings and was not acting as his agent. 3. In the circumstances we concluded that the additional respondent was not, in fact, an appellant in the proceedings and indeed was not participating in the proceedings. For these reasons, with the consent of the appellant and the respondent we amended the appeal proceedings by removing the name of the additional respondent as an appellant and constituting him as an additional respondent. The basis of the appeal 1. The appellant submitted that the decision of the Senior Member that he was guilty of unconscionable conduct constituted an error of law, and that his appeal should succeed accordingly. 2. There is a detailed consideration of what constitutes unconscionable conduct for the purposes of the Australian Consumer Law contained in the decision of the Appeal Panel in Forbes v Wan. We gratefully adopt the discussion contained in that decision at [51] to [62]. In essence, the Appeal Panel held that conduct which is confined to a failure to comply with the terms of a contract does not of itself constitute unconscionable conduct. In order for conduct to be characterised as unconscionable conduct there must be some evidence to substantiate a finding that not only is there an innocent party at a special disadvantage but that the guilty party has inappropriately taken advantage of the innocent person by conduct in the nature of "victimisation, unconscientious conduct or exploitation." (Per Keifel CJ and Bell J in the High Court of Australia in Australian Securities and Investments Commission v Kobelt [2019] HCA 18; 368 ALR 1 at [15]). We agree with these observations. 3. The Senior Member made no such findings against the appellant. His findings were limited to the conclusion that the appellant had had some degree of involvement with a company which was in breach of its contract with the respondent, in circumstances where the appellant had had no contact with the respondent. Without more, as the Appeal Panel held in Forbes v Wan, such findings cannot sustain any conclusion that the appellant engaged in unconscionable conduct. Conclusion and orders 1. As the finding of the Senior Member that the appellant engaged in unconscionable conduct cannot be sustained, that finding must be set aside. 2. It follows that the order made by the Senior Member that the appellant is liable to pay monies to the respondent must be quashed. In lieu the order should be varied to provide that the additional respondent alone is liable to pay those monies to the respondent, there having been no appeal instituted on his behalf. 3. We make the following orders 1. The appeal is allowed 2. Order 1 made by Senior Member Meadows on 1 May 2020 is varied so as to read "Jeffrey Feng is liable to pay the amount of $15,804.61 to Jajing Liu". ********** I hereby certify that this is a true and accurate record of the reasons for decision of the Civil and Administrative Tribunal of New South Wales. Registrar DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 23 September 2020