Tralee Technology Holdings Pty Limited v Yun Chen

1. [1]

   Tralee Technology Holdings Pty Limited (“the plaintiff”) seeks to appeal from a decision of Magistrate Hunstman delivered on 25 November 2013 in proceedings brought against Yun Chen (“the defendant”) in the Local Court. The defendant has filed a notice contending that the decision of the Magistrate (in respect of ground 1) should be affirmed on grounds in addition to those upon which the Magistrate relied. The notice of contention specifies that the defendant does not seek a discharge or variation of any part of the Magistrate’s decision.

2. [2]

   A joint Court Book was prepared containing the following affidavits:

The agreement to lease premises at 41 Churchill Street, Killara

1. [3]

   The plaintiff is a software research and development company. In or about November 2010 its principal, Mr Mark Bradley, commenced looking for premises that would be suitable both as an office for the plaintiff, and a residence for himself and his family. In his affidavit filed in the proceedings before the Magistrate Mr Bradley explained that he was looking for a “substantial home” which could meet both his business and personal needs.

2. [4]

   Mr Bradley was in contact with Donna Cooney of McGrath Real Estate about the availability of such a property and on 4 December 2010 he inspected a house at 41 Churchill Street in Killara (“the premises”). Mr Bradley formed the view that the premises would suit his personal and business needs. Ms Cooney explained that the defendant was resident in China. Mr Bradley emphasised to her that the premises needed to be well maintained. He also emphasised the need for any maintenance issues to be resolved quickly. Ms Cooney confirmed that she had full authority to effect any repairs to the property in the defendant’s absence.

3. [5]

   On 14 December 2010 a Residential Tenancy Agreement (“the agreement”) was executed between the plaintiff and the defendant, item 3 of which was in the following terms:

4. [6]

   The agreement was expressed to commence on 18 December 2010 for a period of 2 years, expiring on 17 December 2012.

5. [7]

   There was no issue between the parties that the provisions of the Residential Tenancies Act 2010 (“the Act”) applied to the agreement, section 13 of which is in the following terms:

The proceedings in the Consumer Trade and Tenancy Tribunal

1. [8]

   In 2011, proceedings were commenced by the defendant in the Consumer Trade and Tenancy Tribunal (“CTTT”) seeking recovery of arrears of rent from the plaintiff. The plaintiff subsequently brought proceedings in that jurisdiction claiming damages for breaches of the agreement. Those breaches included an alleged failure on the part of the defendant to repair and/or properly maintain the premises. Ultimately, it was determined that the plaintiff’s claim for damages exceeded the jurisdictional limit of the CTTT and the proceedings were transferred to the Local Court for determination.

The plaintiff’s claim for damages in the Court below

1. [9]

   In the amended statement of claim filed in the Local Court, the plaintiff pleaded a breach of clause 12 of the agreement which was in the following terms:

2. [10]

   Paragraph (8) of the amended statement of claim then pleaded the following:

3. [11]

   The amended statement of claim sought damages for both non-economic loss and economic loss totalling $57,100.00. The particulars of the claim for damages for non-economic loss were pleaded in paragraph (14) of the amended statement of claim as follows:

4. [12]

   The particulars of the claim for economic loss were pleaded in the same paragraph as follows:

THE MAGISTRATE’S CONCLUSIONS

1. [13]

   The Magistrate concluded that the plaintiff was entitled to damages in the sum of $2,807.17, plus interest calculated in accordance with s. 100 of the Civil Procedure Act 2005 NSW (“the CPA”). Such damages were expressed to be referable to breaches of the agreement arising from the presence of mould and vermin, the damage to the cornice, the ingress of water and the damage to the shower door (see Magistrate’s reasons at [83]). I have considered in more detail below those particular aspects of the Magistrate’s reasons which go directly to the four grounds of appeal upon which the plaintiff now relies.

The Magistrate’s reasons

1. [14]

   Commencing at [30] of her reasons the Magistrate said the following:

2. [15]

   The summons which has been filed cites paragraph [32] of the Magistrate’s reasons as being reflective of the error relied upon in respect of ground 1. That paragraph is as follows:

Submissions of the plaintiff

1. [16]

   Counsel for the plaintiff submitted that paragraph [32] of the Magistrate’s reasons reflected that the Magistrate had erred in law, either in:

2. [17]

   It was submitted that the evidence established that Mr Bradley had made it clear to the defendant’s agent that the plaintiff proposed to use the premises for business purposes. Counsel for the plaintiff submitted that in light of that evidence, it was not open to the Magistrate to construe the agreement in a way which operated to exclude the plaintiff from seeking damages arising from its asserted inability to use the premises for business purposes. It was submitted that the Magistrate had erred by concluding that because the agreement was governed by the Act, and/or because it did not expressly include a reference to the premises being used for business purposes, damages could not be awarded in connection with such use.

Submissions of the defendant

1. [18]

   Counsel for the defendant specifically drew attention to s. 39 of the Local Court Act 2007 (“the LCA”) which is in the following terms:

2. [19]

   It was submitted that properly construed, ground 1 raised the question of whether the Magistrate had failed to give proper consideration to evidence before her, and/or whether the evidence was capable of supporting the particular construction of the lease for which the plaintiff contended. It was submitted that neither of these matters gave rise to any question of law.

3. [20]

   It was further submitted on behalf of the defendant that the fact that the intended use of premises was communicated by the plaintiff to the defendant did not render the intended purpose a term of the agreement, and did not constitute a warranty. It was submitted that no such term was included in the agreement and that all of the relevant terms pointed to the intended use of the premises for residential purposes.

4. [21]

   Finally, it was submitted that in any event, the evidence that it was the defendant’s conduct which caused the premises to be unsuitable for the conduct of the plaintiff’s business was tenuous, if not non-existent. It was submitted that the high point of the evidence in this regard was a broad assertion made by Mr Bradley (at paragraph [109] of his affidavit) to the effect that the plaintiff could not use the premises for its business due to the alleged defects. It was submitted that such a broad assertion was largely unsupported by the evidence and was made in circumstances where, notwithstanding the alleged defects, the plaintiff continued to occupy the premises for the duration of the agreement.

Consideration and conclusion

1. [22]

   Section 39 of the LCA confers a right of appeal from a decision of a Magistrate on a question of law. In Zogiannis v Stevens [2012] VSC 264 Davies J observed (at [4]):

2. [23]

   It is important to emphasise that ground 1 does not assert that the Magistrate reached a finding in respect of which there was no evidence, nor does the ground assert that the Magistrate misdirected herself in law. Rather, the ground asserts that the Magistrate erred in her construction of the agreement. In doing so, the ground specifically refers to what the Magistrate said at [32] of her reasons. In my view, what the Magistrate said in that part of her reasons does not involve any question, or error, of law. Properly understood, what the Magistrate determined at [32] was that the plaintiff did not agree to lease the premises from the defendant for the purposes of the conduct of a business. That, in my view, was a conclusion of fact.

3. [24]

   Counsel for the plaintiff referred me to two authorities which, he submitted, supported the proposition that the question of construction of a contract is a question of law. The first was Jackson Nominees Pty Limited v Hanson Building Products Pty Limited [2006] QCA 159 where, in dealing with the issue of costs following the determination of the principal proceedings between the parties, Jerrard JA said (at [4]):

4. [25]

   The “pure question of law” to which his Honour referred was whether or not a particular term was implied into the agreement by law: Jackson Nominees Pty Limited v Hanson Building Products Pty Limited [2006] QCA 126 esp. at [17]-[19]. It was no part of the plaintiff’s case in the present proceedings that any term was implied by law into the agreement, and neither ground 1 itself, nor the submissions made in support of it, asserted that the Magistrate was in error in failing to find that this was so. In my view, the decision in Jackson is clearly distinguishable from the present case and provides no support for the plaintiff’s position.

5. [26]

   The second authority to which I was referred was the decision of Harrison AsJ in Video Ezy International Pty Limited v Sedema Pty Limited [2014] NSWSC 143 where her Honour observed (at [18]):

6. [27]

   Her Honour’s reference to the proper construction of a contract being a question of law must be viewed in the context of the issues between the parties in those proceedings. That context emerges from the various grounds of appeal set out at [16] of her Honour’s judgment. Grounds (3) and (4) asserted that the Magistrate had erred in law by concluding that a particular condition was implied by law into the relevant agreement. As I have already observed, that was not part of the plaintiff’s case in the present proceedings. Ground 1 does not assert that the Magistrate erred in failing to find that any condition(s) were implied by law. It follows that in my view the decision in Video Ezy is also distinguishable from the circumstances of the present case.

7. [28]

   No question of law arises in respect of ground 1 and it is not made out. In these circumstances it is not necessary for me to consider the defendant’s notice of contention.

The Magistrate’s reasons

1. [29]

   Having outlined the nature of the plaintiff’s claim for damages the Magistrate said (at [85] of her reasons):

Submissions of the plaintiff

1. [30]

   Counsel for the plaintiff submitted that the Magistrate erred in law in finding (at [85]) that because the individual occupants of the premises (i.e. Mr Bradley and his family) were not parties to the agreement, damages for non-economic loss were not recoverable. Such error, it was submitted, was evident in light of what was said to be “authoritative case law” which established that damages for non-economic loss in connection with losses suffered by persons who are not parties to a contract, but for whose benefit the contract was entered into, are recoverable. In this regard counsel referred me, in particular, to the decisions in Jackson v Horizon Holidays [1975] 3 All ER 92 and Cranston v CBFC Limited (NSWSC, unreported 11 June 1993, Bryson J). Counsel also emphasised the provisions of item 3 of the agreement (set out at [5] above).

Submissions of the defendant

1. [31]

   Counsel for the defendant submitted that ground 2A involved no question of law. In the alternative, it was submitted that the facts of the present case were distinguishable from those cases upon which counsel for the plaintiff relied. Counsel for the defendant submitted that all of the matters which went to the alleged failure on the part of the defendant to keep the premises in good order and repair arose after the commencement of the agreement. It was submitted that in these circumstances, they could not have been contemplated at the time at which the agreement was entered into, just as any alleged distress and discomfort could similarly not have been contemplated. The primary point of distinction which counsel for the defendant sought to draw arose from the fact that the authorities upon which the plaintiff relied all dealt with circumstances in which there had been a failure on the part of a contracting party to deliver that which was agreed would be delivered by the contract.

Consideration and conclusion

1. [32]

   Ground 2A raises the question of whether the Magistrate erred in finding that damages for non-economic loss were not recoverable. In my view, that involves a question of law. That requires me to consider a number of authorities to which I was referred.

2. [33]

   In Jarvis v Swans Tours Limited [1973] QB 233 the plaintiff booked a 15 day holiday with the defendant but returned disappointed in the fact that some of the advertised amenities had not been provided. The Court of Appeal concluded that he was entitled to damages for (inter alia) his loss of enjoyment. Denning MR concluded (at 239) that the plaintiff’s damages were not limited to the mere cost of the ticket but extended to general damages for the disappointment he had suffered and the loss of the amenities which he should have had. A similar view was reached by Edmund Davies LJ who concluded (at 239) that if a travel agent failed to provide a holiday of the contracted quality, the damages for which it was liable were not restricted to the amount paid by the client for the holiday or for matters of physical inconvenience and discomfort, but extended to damages for disappointment. Stephenson LJ (at 240) agreed.

3. [34]

   The decision in Jarvis is authority for the proposition that in particular circumstances, damages payable for breach of contract may extend to damages for loss of enjoyment. However Jarvis was a case where the plaintiff was suing for damages solely in his own right.

4. [35]

   In Jackson (supra) the plaintiff had contracted with the defendant, a travel agent, in respect of arrangements for a holiday. The plaintiff was the sole contracting party but his family were to accompany him. He had told the defendant, generally speaking, that he wanted all aspects of the proposed holiday to be of the highest standard. Specific requests were made in respect of (inter alia) accommodation. As events transpired, the plaintiff and his family were greatly disappointed with the standard of accommodation, along with the fact that advertised amenities were not available. The plaintiff brought an action against the defendants for breach of contract.

5. [36]

   Lord Denning MR (with whom Orr and James LJJ agreed) concluded (at 95) that where a party enters into a contract for the benefit not only of himself but for the benefit of others who were not parties to such contract, that person is able to sue for damages for the loss suffered not only by himself but also by those others for whose benefit the contract was entered into, even though he did not act as a trustee for those others. In so concluding, his Lordship referred to the decision in Lloyd’s v Harper (1880) 16 Ch D 290 at 321 where Lush LJ had said:

6. [37]

   The decision in Jackson was referred to by Bryson J in Cranston (supra) where his Honour observed:

7. [38]

   Subsequently in Holloway v Witham (1990) 21 NSWLR 70 Lee CJ at CL, citing the decision in Jackson, observed (at [87]):

8. [39]

   Finally in Dockside Fitness Pty Limited & ors v Woods [1996] TASSC 142 Slicer J applied the decision in Jackson and concluded that a contracting party can recover damages not only in respect of his or her own losses, but in respect of the losses suffered by others as a consequence of the relevant breach of contract.

9. [40]

   The Magistrate’s ultimate conclusion in the present case, as expressed in the final sentence of paragraph [85] of her reasons, was that damages for non-economic loss were not payable to the plaintiff because the other occupants of the premises were not parties to the agreement. Her Honour appeared to draw some distinction between circumstances in which a plaintiff was a corporation and those where the plaintiff was an individual. Although her Honour did not say so expressly, she appears to have held the view that in the former circumstances, damages were not recoverable.

10. [41]

    In my view, the authorities which I have referred support the proposition that it is open to a party, in an action for breach of contract, to claim damages not only on that party’s own behalf but on behalf of any other person or persons who were intended to receive some benefit from the agreement which had been reached. In the present case, the agreement was a residential tenancy agreement to which the Act applied and it was clearly contemplated that Mr Bradley and his family would reside at the premises. In my view, the fact that the contracting party was a corporation does not affect the operation of the principle, established by the authorities to which I have referred, that a contracting party can recover damages in respect of losses suffered by others as a consequence of the relevant breach of contract.

11. [42]

    I am unable to accept the submission made on behalf of the defendant that some distinction is to be drawn between the various “holiday” cases and the circumstances of the present case. Nothing turns on the fact that in the present case, the circumstances giving rise to the claim for damages arose after the agreement had been entered into. The same could be said in the case of each of the authorities to which I have referred.

12. [43]

    It follows that ground 2A is made out. However, that of itself does not entitle the plaintiff to relief. The Magistrate concluded that even if the plaintiff could recover damages in respect of the losses suffered by others, the provisions of the Civil Liability Act 2002 (NSW) (“the CLA”) applied to the present proceedings, and that no damages were recoverable. That conclusion is the subject of ground 2, to which I now turn.

Ground 2 – The Magistrate erred in holding that non-economic loss could not be awarded due to the provisions of the Civil Liability Act 2002

1. [44]

   I have previously set out (at [11]) the terms in which the plaintiff’s claim for damages for non-economic loss was pleaded. Consistent with that pleading, in the course of opening the case to the Magistrate counsel for the plaintiff outlined what he expected to be the various issues and said (commencing at T5 L15):

2. [45]

   The Magistrate (at [84] of her reasons) expressed the view that the plaintiff’s claim for damages for non-economic loss included “a claim for distress, inconvenience, discomfort and disappointment arising from the landlord’s breaches of the agreement”. Her Honour concluded (at [86]) that even if the plaintiff could recover damages for the losses suffered by others, she was not satisfied that this was so in the present case. Commencing at [87], her Honour considered a number of authorities to which she had been referred by the parties. She also considered the relevant provisions of the CLA. Having done so, her Honour concluded (at [94]):

Submissions of the plaintiff

1. [46]

   The fundamental submission advanced by counsel for the plaintiff was that in advancing its claim for damages for non-economic loss, the plaintiff was not claiming damages for “personal injury”, but was rather claiming damages for discomfort and loss of enjoyment of the property. It was submitted that in these circumstances, the provisions of the CLA and the relevant authorities supported the conclusion that the plaintiff’s claim was one for damages which did not attract the provisions of the CLA.

Submissions of the defendant

1. [47]

   Counsel for the defendant submitted that the plaintiff’s claim for damages for non-economic loss was properly viewed as a claim for damages for mental distress and anxiety, which were “injuries” within the meaning of the CLA. It was submitted that in these circumstances, where the severity of any losses fell below the threshold imposed by s. 16 of the CLA, the Magistrate’s conclusions were correct. It was further submitted that the Magistrate’s reasons reflected a careful consideration of the authorities to which she was referred.

Consideration and conclusion

1. [48]

   A consideration of the competing positions of the parties firstly requires reference to various provisions of the CLA. Section 3 contains the following relevant definitions:

2. [49]

   Section 11 contains the following further definitions:

3. [50]

   Section 11A of the Act is in the following terms:

4. [51]

   Section 16 of the Act makes provision for the determination of damages for non-economic loss as defined in s. 3:

5. [52]

   In the State of NSW v Ibbett [2005] NSWCA 445; (2005) 65 NSWLR 168 Spigelman CJ inclined to the view (at [21]-[22]) that an emotional reaction to, or “injured feelings” in respect of, the apprehension of physical violence, and an accompanying sense of outrage or indignation, did not amount to “impairment of a mental condition” within the definition of “injury” set out in s. 11 of the CLA. Ipp JA said at [122]-[125]:

6. [53]

   In the same case Basten JA said (at [211]-[212]):

7. [54]

   Spigelman CJ re-visited the issue in Insight Vacations Pty Limited v Young [2010] NSWCA 137 (at [78]-[79]) and concluded that grief, anxiety, distress and disappointment were elements of pain and suffering within the definition of “non-economic loss” contained in s. 3 of the CLA. In the same case, Basten JA (with whose reasoning Spigelman CJ agreed) said (at [125]):

8. [55]

   In State of NSW v Williamson [2011] NSWCA 183 Campbell JA (at [67]) considered that the extension of the ordinary meaning of “injury” to impairment of a person’s mental condition effected by s. 11 of the CLA “could arguably” have the effect that damages for anxiety and distress could be personal injury damages within the meaning of s. 11. However, his Honour made it clear that it was unnecessary to decide the question whether this was in fact so. Clearly, his Honour’s comments were obiter.

9. [56]

   Counsel for the plaintiff in the present case placed significant reliance upon the decision of Harrison AsJ in Fawzi El-Saiedy v NSW Land and Housing Corporation [2011] NSWSC 820. In that case, the plaintiff was a party to a Residential Tenancy Agreement with the defendant and alleged that his enjoyment of the premises, and that of his family, had been curtailed due (inter alia) to the fact that the premises had been found to contain asbestos. Her Honour concluded (at [95]):

10. [57]

    In Flight Centre Limited v Louw [2011] NSWSC 132; (2011) 78 NSWLR 656 the plaintiff, in the conduct of its business as a travel agent, arranged bookings of holiday accommodation and travel. The first and second defendants booked a holiday at a resort recommended by the plaintiff. It transpired (inter alia) that the defendants’ stay at the resort was interrupted by construction work which was being carried out at the time. The defendants also complained that they had not been notified of other matters by the plaintiff, including the fact that such construction work restricted their access to an adjoining beach. The defendants sued the plaintiff for breach of contract. The particulars of damage were pleaded in terms of the defendants having suffered “loss, inconvenience, distress and disappointment” arising from the matters referred to above. At first instance, an assessor in the Local Court awarded the defendants damages together with interest and costs. The plaintiff brought an appeal to this Court and argued that the damages sought by the defendants were personal injury damages to which s. 16 of the CLA applied.

11. [58]

    Barr AJ, having reviewed the authorities, found in favour of the plaintiff, concluding (at [31]):

12. [59]

    In considering the application of these various authorities to the present case, it is important to bear in mind the basis upon which the plaintiff brought its claim for damages for non-economic loss. Mr Bradley asserted (at paragraph [31] of his affidavit) that he was “embarrassed” to use the outside of the house for entertaining guests and business visitors”. He expanded upon this in his evidence (at commencing at T26 L10):

13. [60]

    When asked whether other defects affected his aspiration to host people at the property, Mr Bradley replied (commencing at T26 L27):

14. [61]

    The weight of authority supports the view that a claim for damages for distress, anxiety, or disappointment is a claim for damages to which the CLA will apply. However in my view that was not the claim brought by the plaintiff in the present case. Although Mr Bradley made reference to the property being an “embarrassment” that was not, in my view, an expression of distress, anxiety, disappointment or any similar emotion. It is apparent from those extracts of his evidence above that the claim for damages for non-economic loss arose from a loss of enjoyment of the property. That was not a claim for personal injury damages.

15. [62]

    In my view, the Magistrate erred in reaching a contrary conclusion. Her Honour found that there was a “conflict” between the decisions in El-Saiedy and Louw. In my view, the differing conclusions reached in those cases is explained by the fact that the respective claims for damages were brought on different bases. The claim brought in El-Saiedy was one for discomfort and loss of enjoyment of the property. That brought in Louw was one for inconvenience, distress and disappointment. The differing bases upon which the respective claims were brought explain why different conclusions were reached. They also explain why Harrison AsJ in El-Saiedy did not consider (and was apparently not taken to) the various decisions of the Court of Appeal which support the proposition that claims for damages based upon anxiety and distress are claims which attract the provisions of the CLA.

16. [63]

    It follows that Ground 2 is made out.

Ground 3 – Due to the error exposed in ground 2, the Magistrate’s quantification of damages failed to account for the total loss suffered by the plaintiff.

1. [64]

   In light of my conclusions in respect of Grounds 2 and 2A, Ground 3 is made out.

The Magistrate’s findings

1. [65]

   At [70] of her reasons the Magistrate said the following:

Submissions of the plaintiff

1. [66]

   In written submissions, counsel for the plaintiff submitted that leave was required in respect of this ground as it raised “purely a matter of fact”. On reflection, and in light of the provisions of ss. 39 and 40 of the LCA, counsel accepted that the plaintiff:

2. [67]

   In these circumstances, counsel submitted that there had been a failure on the part of the Magistrate to consider specific evidence, and/or a failure to give proper reasons for her decision. In either case, it was submitted that a question of law arose.

Submissions of the defendant

1. [68]

   Counsel for the defendant submitted that no error of law was established on either basis. It was submitted that the Magistrate’s reasons set out the basis upon which she reached her conclusions, from which it was clear that she preferred some parts of the evidence over others.

Consideration and conclusion

1. [69]

   There is no merit in this ground. The Magistrate’s reasons (commencing at [66]) set out a careful consideration of the evidence. The path which led to her conclusion is clearly exposed.

2. [70]

   This ground is not made out.

ORDERS

1. [71]

   For the reasons expressed, Grounds 2 and 2A have been made out. Section 39 of the LCA does not operate to confer power upon this Court to review the merits of a case, or to otherwise expand the scope of the appeal, so as to make new findings of fact. The parties agreed that in these circumstances, if error was found, the appropriate order was to remit the matter to the Magistrate to be further dealt with according to law.

2. [72]

   I therefore make the following orders:

   1. (1)

      The appeal is allowed.

   2. (2)

      The judgment and orders of the Magistrate are set aside.

   3. (3)

      The proceedings are remitted to the Magistrate in the Local Court of NSW to be dealt with according to law.

   4. (4)

      Each party is to provide to my Associate, by 4.00 pm on Friday 18 September 2015, written submissions, not exceeding two pages in length, as to the appropriate orders in respect of the costs of this appeal, and the costs of the proceedings in the court below.