New South Wales Supreme Court CITATION : Maait v Chiu Nominees P/L & 2 Ors [2005] NSWSC 451 HEARING DATE(S) : 15 March 2005 JUDGMENT DATE : 11 May 2005 JURISDICTION : Common Law Division JUDGMENT OF : Master Harrison DECISION : (1) The appeal is dismissed; (2) The decision of Magistrate P MacMahon dated 8 October 2004 is affirmed; (3) The summons filed 5 November 2004 is dismissed; (4) The plai ntiff is to pay the defendants' costs as agreed or assessed. CATCHWORDS : Appeal decision of Local Court Magistrate - TPA - reliance Business Names Act 1962 (NSW) LEGISLATION CITED : Local Courts (Civil Claims) Act 1970 (NSW) - s 69(2) Trades Practices Act 1974 (Cth) - ss 52 & 53 Azzopardi v Tasman UEB Industries Ltd (1985) 4 NSWLR 139 Carr v Neill [1999] NSWSC 1263 Devries v Australian National Railways Commission (1993) 177 CLR 472 R L & D Investments Pty Ltd v Bisby [2002] NSWSC 1082 CASES CITED : State Rail Authority of New South Wales v Earthline Constructions Pty Ltd (in Liq) (1999) 160 ALR 588 Swain v Waverley Municipal Council [2005] HCA 4 Taco Company of Australian Inc v Taco Bell Pty Ltd (1982) 42 ALR 177 Tec & Thomas (Aust) Pty Ltd v Matsumiya Computer Company Pty Ltd (1984) 1 FCR 28 John H Maait t/as John H Maait & Co (Plaintiff) Chiu Nominees Pty Ltd ACN 009 606 286 (First Defendant) PARTIES : Henery Property Corporation Pty Ltd ACN 007 381 277 (Second Defendant) Khoury Corporation Pty Ltd t.as Khoury & Partners ACN 003 737 308 (Third Defendant) FILE NUMBER(S) : SC 13654/2004 Mr R J Carruthers (Plaintiff) COUNSEL : Mr E T Finnane (Defendants) Mr S Chen, Cumberland Frank Commercial Lawyers (Plaintiff) SOLICITORS : Ms C Ray, Matthews Folbigg Pty Ltd (Defendants) LOWER COURT JURISDICTION : Local Court LOWER COURT FILE NUMBER(S) : 2849/2002 LOWER COURT JUDICIAL OFFICER : MacMahon LCM IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION MASTER HARRISON WEDNESDAY, 11 MAY 2005 13654/2004 - JOHN H MAAIT t/as JOHN H MAAIT & CO v CHIU NOMINEES PTY LTD ACN 009 606 286 & 2 ORS JUDGMENT (Appeal decision of Local Court Magistrate - TPA - reliance) 1 MASTER: By summons filed 5 November 2004 the plaintiff seeks an order setting aside the judgment of Local Court Magistrate P MacMahon dated 8 October 2004 and remitting the matter to the Local Court for determination. The plaintiff is John H Maait t/as John H Maait & Co. The first defendant is Chiu Nominees Pty Ltd ACN 009 606 286. The second defendant is Henery Property Development Pty Ltd ACN 007 381 277. The third defendant is Khoury Corporation Pty Ltd t/as Khoury & Partners ACN 003 737 308. For convenience I shall refer to the parties by name in this judgment. 2 At the outset, it may be helpful to make some brief comments concerning the remedy pursued by the plaintiff. Section 69(2) of the Local Courts (Civil Claims) Act 1970 (NSW) (the Act) permits a party who is dissatisfied with a judgment as being erroneous in point of law to appeal to this Court. The onus lies on the plaintiff to demonstrate that there has been an error of law. What is a question of law (as opposed to a question of fact) was considered, inter alia, in Allen v Kerr & Anor (1995) Aust Torts Reports 81-354 and Azzopardi v Tasman UEB Industries Ltd (1985) 4 NSWLR 139 at 155-156 and two more recent cases, namely Carr v Neill [1999] NSWSC 1263 and R L & D Investments Pty Ltd v Bisby [2002] NSWSC 1082. It cannot be said that the Magistrate acted on evidence inconsistent with facts incontrovertibly established by the evidence - see Devries v Australian National Railways Commission (1993) 177 CLR 472 per Brennan, Gaudron and McHugh JJ at 479 and State Rail Authority of New South Wales v Earthline Constructions Pty Ltd (in Liq) (1999) 160 ALR 588. Recently in Swain v Waverley Municipal Council [2005] HCA 4 the Chief Justice at [2] reiterated that in the common law system of civil justice, the issues between the parties are determined by the trial process. The system does not regard the trial as merely the first round in a contest destined to work its way through the judicial hierarchy until the litigants have exhausted either their resources or their possibilities of further appeal. 3 Section 69(4) of the Act provides that the court may determine an appeal by either (a) setting the judgment or order aside or (b) by varying the terms of the judgment or order or (c) by setting the judgment or order aside and remitting the matter for determination in accordance with the court's directions or (d) by dismissing the appeal. Grounds of appeal 4 The plaintiff appeals from the whole of the judgment of Magistrate MacMahon dated 8 October 2004 on the grounds that the Magistrate made the following errors of law. Firstly, the Magistrate erred in construing ss 52 and 53 of the Trade Practices Act 1974 (Cth) (TPA) in that he confined the question whether those sections were contravened to the circumstances existing at the point at which the plaintiff entered into the lease and took possession of the premises; and failed to address a question raised by those sections, namely, whether the plaintiff was induced into suffering damage by the representations made by or on behalf of the defendants at a time anterior to the plaintiff's entry into the lease and into possession of the premises; secondly, the Magistrate erred in failing to address the question raised by paragraph 5 of the statement of claim, namely, whether the representations made by or on behalf of the defendants were incorporated as terms of the lease; thirdly, the Magistrate erred in failing to address the question raised by paragraphs 6 and 7 of the statement of claim, namely, whether the representations made by or on behalf of the defendants were also promises or warranties actionable at common law; and fourthly, the Magistrate erred in that he misdirected himself concerning, or defined otherwise than in accordance with law, the question whether the plaintiff relied on misleading or deceptive conduct of the defendants, in that the Magistrate determined that question by reference only to the plaintiff's knowledge (as found by the learned Magistrate) of the physical condition of the premises, and failed to assess the evidence of the plaintiff's reliance on the respondent's misrepresentation as to the lettable area of the premises covered by the lease. Local Court proceedings 5 Maait, a solicitor, claimed damages against Chiu and Henery the owners of a property known as Level 1, 262 Church Street, Parramatta (the property) and Khoury, a property letting and managing agent acting on behalf of Chiu and Henery a principal of which was Mr Anthony Khoury. Maait claimed that Chiu, Henery and Khoury breached ss 52 and 53 of the TPA. I shall refer to the pleadings shortly. 6 For there to be breaches of s 52 TPA Maait needs to establish firstly, conduct on the part of a corporation or person; secondly, conduct that is misleading or deceptive; thirdly, conduct effected in trade or commerce; fourthly, that there was reliance on the conduct and fifthly, loss or damage caused by the conduct. Essentially, the Magistrate found that there was no reliance by Maait upon any representations made. In effect, Maait failed to establish a key element so the action failed. 7 Maait's submissions centred around the case actually pleaded. The framework is set out in paragraphs 6 and 7 of the statement of claim (S/C) and reads: "6. At all material time the Defendants engaged in misleading or deceptive conduct or conduct likely to mislead or deceive by representing to the Plaintiff that the premises would have certain characteristics and would be of a particular quality and standard and thereby induced and obtained the Plaintiff's agreement to and entry into the Lease and into possession of the premises as tenant, such representations being made either orally or in written correspondence passing between the Plaintiff and the Third Defendant from time to time before and subsequent to the entry by the Plaintiff into the Lease and into possession of the premises. All the said correspondence evidencing the said representations promises and warranties will be referred to for its full particulars as if the same were set out herein. 7. The Defendants' representations included, amongst other things, promises and warranties that they would carry out and complete certain works to and at the premises (referred to as "the Lessor's works") and to do so in a proper and tradesmanlike and timely manner to the highest standard prior to commencement of the tenancy aforesaid." Paragraph 7 then goes on to give particulars. 8 Paragraph 9 pleaded that the defendants' conduct was in breach of ss 52 and 53 of the TPA. The Magistrate's decision 9 The Magistrate in his reasons for decision summarised the dispute as follows: "2. … The alleged misleading or deceptive conduct consists of representations made to the Plaintiff which he says induced him to enter into a lease agreement and take possession of the property as a commercial tenant. 3. The alleged representations were said by the plaintiff to relate to the performance and completion of building works by the owners and are set out in paragraph 7 of the Plaintiffs Statement of Claim. 4. The Defendants defend the claim and assert that firstly there was no misleading and deceptive conduct, secondly that even if there was causation, as required by Section 82 of the Act, has not been established and thirdly, even if causation were established, the Plaintiff has not established any loss or damage." The Magistrate's findings 10 The Magistrate's critical findings are: "26. It is trite to say that for him to be successful in these proceedings the plaintiff must establish to the requisite standard that he was induced to enter the lease and take possession of the property by the alleged representations. It is necessary for him to establish that there was "actual reliance" by him on the conduct alleged to be in breach of Section 52. (Henjo Investments Pty Ltd v Collins Marrickville Pty Ltd (No 1 (1988) 39 FCR 546 at 558). It is only after he has established this that it becomes necessary to determine what if any representations were made and whether or not they were false or misleading. On the evidence I find that at the point at which the Plaintiff entered into the lease and then shortly thereafter took possession of the property he did so knowing the state of the property (he having inspected it) and not because of any representations made by or on behalf of the Owners or any conduct thereof but because he had no other alternative available to him he having been forced to vacate his existing premises or otherwise be locked out. 27. I therefore give judgment in favour of the Defendants and order that the Plaintiff pay the Defendants costs as agreed or assessed." 11 Thus the Magistrate made a finding that at the point at which Maait entered into the lease and then shortly thereafter when he took possession, he did so knowing the state of the property (as he had inspected it) and not because of the representations made by or on behalf of Chiu and Henery. 12 The first ground of appeal is that the Magistrate erred in construing ss 52 and 53 of the TPA in that firstly, the Magistrate confined the question whether those sections were contravened to the circumstances existing at the point at which Maait entered into the lease and took possession of the premises rather than whether Maait was induced into suffering damage by the representations made by or on behalf of Chiu, Henery and Khoury at a time anterior to Maait's entry into the lease and into possession of the premises. According to Maait the misleading conduct led him to become locked into a position where he had no choice but to enter into the lease. Chiu submitted that it was Maait not the Magistrate who confined the applicability of ss 52 and 53 to the point at which Maait entered into the lease and took possession of the premises. 13 In support of this submission Maait referred to Taco Company of Australia Inc v Taco Bell Pty Ltd (1982) 42 ALR 177 and Tec & Tomas (Aust) Pty Ltd v Matsumiya Computer Company Pty Ltd (1984) 1 FCR 28. In Tec the applicant was the distributor in Australia of computers and computer equipment manufactured in Japan by the Hattori Seiko group and marketed under the trade name "SEIKO". The four corporate respondents were related corporations. Between late 1982 and mid-1983 the first and fifth respondents had briefly entered into an agreement with the applicant for the distribution of its "SEIKO" equipment, particularly its "8600" "SEIKO" model. Without the knowledge of the applicant the second respondent requested the names "Seikosha" and "Seiko Computers" under the Business Names Act 1962 (NSW). In August 1983, following the termination of the distribution arrangement between the applicant and the first respondent, the second respondent warned the applicant against using these registered names. The fifth respondent also informed the press that the new Seiko systems, the "8640" and the "8680" were to be launched. Neither of these systems were manufactured by the Hattori Seiko group. 14 The applicant in Tec sought injunctive relief under s 80 of the TPA alleging contraventions by the respondents of ss 52 and 53 of that Act. Beaumont J at 176 stated: "It may be accepted that, generally speaking, a consumer of this type of product would make specific inquiries as to the source of the product before completing a transaction, but the anterior conduct may still contravene s 52 (see Taco Co of Australia v Taco Bell Pty Ltd (1982) 42 ALR 177 at 197-9)." 15 In Taco Bell Dean and Fitzgerald stated at 199: "It is, in the circumstances, unnecessary that we form or express any concluded view on the question whether it is a principle of the law of passing-off that deception must continue, or be likely to continue, to the "point of sale". As a matter of principle and of logic, it is difficult to see why it should be. For the purposes of the present appeal, it suffices to say that, even if such a limitation should be recognized in the law of passing-off, we see no ground for importing it into the provisions of s 52 of the Act. In our view, it is sufficient to enliven s 52 that the conduct, in the circumstances, answers the statutory description, that is to say, that it is misleading or deceptive or is likely to mislead or deceive. It is unnecessary to go further and establish that any actual or potential consumer has taken or is likely to take any positive step in consequence of the misleading or deception. That is not to say that evidence of actual misleading or deception at the point of sale and of steps taken in consequence thereof is not likely to be both relevant and important on the question whether the relevant conduct in fact answers the statutory description and as to the relief, if any, which should be granted." 16 It is to be noted that these cases were decided on the issue of passing off not s 52 TPA. 17 Thus in my view it has not been accepted that anterior conduct applies to s 52 cases. 18 The misleading conduct pleaded in the Local Court was Chiu's conduct which induced Maait to enter into the lease and obtain possession of the premises. The Magistrate made a finding that Maait did not rely on this conduct. On appeal, Maait's case cannot be expanded to one that was not pleaded in order that there may be a different result. This submission in relation to anterior conduct fails. 19 The second and third grounds of appeal are that the Magistrate erred in failing to address the question raised by paragraph 5 of the S/C (as particularised by Maait), namely, whether the representations made by or on behalf of Chiu, Henery and Khoury were incorporated as terms of the lease; and that the Magistrate erred in failing to address the question raised by ss 6 and 7 of the S/C, namely whether the representations made by or on behalf of the defendants were also promises or warranties actionable at common law. Maait claims that these claims were not dealt with at common law. There was no pleading contained in the S/C which referred to common law. The claim was pleaded solely pursuant to the TPA. Nor did paragraph 5 of the S/C plead that certain representations made were to be incorporated in the lease. 20 Lastly Maait submitted that the Magistrate determined the issue of misleading and deceptive conduct by reference to Maait's knowledge of the physical condition of the premises and failed to assess the evidence of Maait's reliance on the Chiu misrepresentation as to the lettable area of the premises covered by the lease. There was no claim in the S/C based upon a misrepresentation of the lettable area of the premises. This appeal essentially seeks to argue a case that was not argued in the Local Court. It cannot succeed. This submission fails. There is no error of law. The appeal is not one of mixed fact and law. The appeal is dismissed. The decision of Magistrate P MacMahon dated 8 October 2004 is affirmed. The summons filed 5 November 2004 is dismissed. 21 Costs are discretionary. Costs usually follow the event. The plaintiff is to pay the defendants' costs as agreed or assessed. The court orders: (1) The appeal is dismissed. (2) The decision of Magistrate P MacMahon dated 8 October 2004 is affirmed. (3) The summons filed 5 November 2004 is dismissed. (4) The plaintiff is to pay the defendants' costs as agreed or assessed. ********** 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.