37

ACT CIVIL & ADMINISTRATIVE TRIBUNAL

LE v NGUYEN (Appeal) [2017] ACAT 55

AA 48/2016

Catchwords:APPEAL sale of business compliance with agreement failure by purchaser to complete claim by purchaser for improvements and deposit whether deposit of 50% of purchase price a penalty principles of agent of necessity unjust enrichment claim by vendor for damages for breach of contract expectation loss

Legislation cited:ACT Civil and Administrative Tribunal Act 2008 ss 18, 21

Cases cited:AMEV-UDC Finance Ltd v Austin (1986) 162 CLR 170

Burns Philip & Co Ltd v Gillespie Brothers Pty Ltd (1947) 74 CLR 148

Coates v Sarich [1964] WAR 2

Commonwealth of Australia v Amann Aviation Pty Ltd (1991) 174 CLR 64

Dunlop Pneumatic Tyre Company Limited v New Garage and Motor Company Limited [1915] AC 79

Le v Nguyen [2016] ACAT 74

Smyth v Jessup [1956] VLR 230

State of Tasmania v Leighton Contractors Pty Ltd (No 3) [2004] TASSC 132

State of Tasmania v Leighton Contractors Pty Ltd [2005] TASSC 133

Stern v McArthur (1988) 165 CLR 489

Workers Trust and Merchant Bank Ltd v Dojap Investments Ltd [1993] AC 573

Yardly v Saunders (1982) WAR 231

List of

Texts/Papers cited:JW Carter, Carters Guide to Australian Contract Law (3rd ed, 2016)

JW Carter, Elisabeth Peden and GJ Tolhurst, Contract Law in Australia (5th ed, 2007)

DW Greig and JR Davis, The Law of Contract (1987)

Appeal Tribunal:Acting Presidential Member R Orr QC

Date of Orders:1 August 2017

1

Date of Reasons for Decision:1 August 2017

AUSTRALIAN CAPITAL TERRITORY)AA 48/2016

CIVIL & ADMINISTRATIVE TRIBUNAL)

BETWEEN:

THOA KIM THI LE

Applicant

AND:

TOAN NGUYEN

Respondent

TRIBUNAL:Acting Presidential Member R Orr QC

DATE:1 August 2017

ORDER

The Tribunal orders that:

1.The orders of the tribunal made on 13 July 2016 in this matter are set aside.

2.The provision in clause 12.5(1) of the Agreement dated 11 January 2015 between Mr Nguyen and Ms Le for payment of the deposit to Mr Nguyen as vendor is declared to be a penalty and will not be enforced. Subject to order 4, the deposit should be repaid to Ms Le as purchaser.

3. The appeal by Ms Le is otherwise dismissed.

4.The counter claim by Mr Nguyen for damages for breach of the Agreement by Ms Le is allowed in an amount of $29,120.

5.In implementation of orders 2 and 4, Carden & Co, Law Practice, stakeholder of the deposit, is to release the deposit of $75,000 held under the Agreement as follows:

(a) $29,120 is to be paid to Mr Nguyen;

(b) the balance is to be paid to Ms Le.

6. Order 4 is stayed for 28 days from the date of this order.

..

Acting Presidential Member R Orr QC

REASONS FOR DECISION

A. Introduction

1. On 11 January 2015 the appellant and original applicant, Thoa Kim Thi Le (Ms Le, purchaser or appellant),[footnoteRef:1] entered into an agreement to purchase a manicure business (business) in premises at the Belconnen Mall (premises) from the respondent Toan Nguyen (Mr Nguyen, vendor or respondent) for an amount of $150,000 (Agreement). [1: As discussed below, Ms Les proper name is Kim Thoa Thi Le. The name given to her in the Agreement was Thoa Kim Thi Le]

2. This Agreement, its history and the proceedings which have concerned it raise matters of some complexity. In summary, on about 12 January 2015, pursuant to a licence under the Agreement, Ms Le, the purchaser, occupied the premises and commenced operating the business. On about 30 March 2015 and without completing the Agreement, Ms Le vacated the premises and ceased to operate the business. Mr Nguyen, the vendor, subsequently took back over the premises and business.

3. After vacating the premises and not completing the Agreement, Ms Le brought proceedings in the tribunal that:

(a) Mr Nguyen pay to her compensation for the value of fitout work undertaken at the premises in January 2015 that was paid for by her and not removed when she vacated the premises (in an amount of $6,925);

(b) Mr Nguyen pay to her compensation for the value of a hot water service installed on the premises and paid for by her and not removed when she vacated the premises (in an amount of $1,310); and

(c) the deposit of $75,000 be returned to her, including on the basis that because it was for 50% of the purchase price it amounted to a penalty.

4. Mr Nguyen denied that he was liable to pay the amounts sought by Ms Le and argued that the tribunal should authorise release of the deposit to him.

5. The original proceedings in the tribunal were heard on 3 March and 5 April 2016 (original tribunal proceedings) and in a decision dated 13 July 2016 entitled Le v Nguyen[footnoteRef:2] (original tribunal decision) the original tribunal dismissed the application by Ms Le and ordered that the deposit be released to Mr Nguyen as the vendor. [2: [2016] ACAT 74]

6. Ms Le appealed this original tribunal decision on a number of grounds. During the course of the appeal, Mr Nguyen was given leave to make a counter claim that, if the deposit was ordered to be refunded to the purchaser Ms Le, he was entitled to damages for breach of the Agreement by her. This decision determines the appeal and counter claim.

B. Summary of Appeal Tribunal decision

7. This Tribunal finds against most of the grounds of appeal. However further evidence and argument has lead this Tribunal to the view that the provision of the Agreement for the deposit of 50% of the purchase price to be paid to the vendor, Mr Nguyen, was a penalty and should not therefore be enforced. Ms Le stated that she had received no legal advice and gave no instructions in relation to the Agreement; the person who paid the deposit was in a similar position.

8. However, the Tribunal also upholds in part the counter claim for damages by Mr Nguyen for breach of the Agreement by Ms Le in the sum of $29,120.

9. Therefore in the Tribunals view, the deposit of $75,000 should be paid in the following way: $29,120 to the vendor Mr Nguyen; and the balance to the purchaser Ms Le. The order for payment of the deposit will be stayed for 28days in case there is any further appeal or other proceedings.

C. BackgroundAgreement

10. The terms of the Agreement were set out and discussed in the original tribunal decision at paragraphs [9]-[15]. This appeal decision focuses on the terms relevant to the issues in the appeal, which are briefly summarised here and discussed further below in the consideration of relevant grounds of appeal.

11. The purchaser was described in the Agreement as Thoa Kim Thi Le or her nominee; the date of the Agreement was 11 January 2015; the completion date was the date that the purchaser or its nominee enters into the franchise agreement with the franchisor of the business, Professional Nails, and is granted occupation of the premises; the purchase price was $150,000; the deposit was $75,000; and the stakeholder Carden & Co, Law Practice Trust Account.

12. Under clause 3 of the Agreement, from 12 January 2015, and in consideration for the parties entering into the Agreement, the vendor granted to the purchaser a licence to operate the business. The purchaser operated the business for a period under this licence.

13. Clause 1.1(9) of the Agreement set out the Conditions Precedent to Completion as follows:

(a)the Vendor successfully effecting the transfer of the Franchise Agreement to the Purchaser or its Nominee; and/or

(b)the Franchisor agreeing to the transfer of the Franchise Agreement from the Vendor to the Purchaser or its Nominee, or granting a new franchise agreement to the Purchaser or its Nominee; and/or

(c)the Lessor agreeing to the Purchaser or its Nominee becoming the lessee of the Premises (if applicable); and

(d)any other condition required to transfer the Franchise Agreement to the Purchaser or its Nominee.

The Franchise Agreement was defined to mean the agreement entered into by the vendor and Professional Nails (clause 1.1(15)). Under clause 1.1(16) Lessor meant Westfield or its related entity that entered into the Premises Lease with the Franchisor.

14. In relation to completion, clause 6.1 provided that the Vendor acknowledges that this Agreement is subject to the Conditions Precedent to Completion and clause 6.2 that in the event that the Franchisor does not consent to providing a franchise agreement to the Purchaser, the Deposit must be returned to the Purchaser immediately upon demand and this agreement will be rescinded. Further clause 3.5 stated that if the condition precedents to completion are not satisfied, the vendor agrees to release the deposit to the purchaser.

15. The vendor sold the business and assets for the purchase price and the value of stock (clause 2.1). The assets are set out in schedule 1 (clause 1.1(2) first occurring).

16. Clause 12 dealt with default. In summary, if the vendor defaulted, provided the purchaser had given notice and there was a failure to remedy, the purchaser could terminate the Agreement and would be repaid all monies paid by it under the Agreement (clause 12.4). If the purchaser defaulted, provided the vendor had given notice and there was a failure to remedy, the vendor could terminate the agreement and keep the deposit (clause 12.5). However, the vendor was not required to send a default notice to the purchaser if the purchaser committed an Event of Default.

Events following execution of the Agreement

17. The events following execution of the Agreement were set out and discussed in the original tribunal decision at paragraphs [16]-[35]. These events are briefly summarised here, and discussed further below in relation to the consideration of relevant grounds of appeal.

18. From about 12 January 2015 Ms Le as purchaser occupied the premises and operated the business pursuant to the licence granted in the Agreement.

19. It appears that the purchaser sought to negotiate a reduced rent for the premises from the lessor, Westfield. On 18 March 2015 the purchasers solicitor sent a letter to the vendor advising that the lessor did not agree to the purchasers rent offer. The purchasers solicitors letter then stated:

Sadly this means that our client cannot complete the terms of the Contract with you, and unfortunately, they have to hand the premises and the business back to you.

When hand-back is effected, we will return the deposit held in trust to our client.[footnoteRef:3] [3: Le v Nguyen [2016] ACAT 74 at [18]; Appeal Book (AB) document 41]

20. By letter dated 19 March 2015 the vendors solicitor responded as follows:

1.Under no circumstances, [sic] our client will [sic] accept the hand back of the premises and the business;

2.Our client requests that you should hold the deposit in the sum of $75,000.00 in escrow pending finalisation of this matter.

3.In the event the Purchaser rescinds the contract, our client will claim for damages such as loss of income[sic][footnoteRef:4] [4: Le v Nguyen [2016] ACAT 74 at [21]; AB document 46]

21. By letter dated 21 March 2015 the purchasers solicitor reaffirmed the purchasers position.[footnoteRef:5] [5: Le v Nguyen [2016] ACAT 74 at [22]; AB document 43]

22. On 24 March 2015 the vendors solicitor wrote to the purchasers solicitor noting that:

The Agreement provides that Completion is subject to the Purchaser entering into a franchise agreement with the Franchisor and is granted occupation of the premises.

the Franchise Agreement has been prepared a long time ago. In fact, they [the Franchisor] are ready and willing to enter into the agreement but the Purchaser refused to sign. We have been provided a copy of the Franchise Agreement between the Purchaser and the Franchisor.

It is, therefore, in our view that the Purchaser intentionally and deliberately withholds the agreement in order to withdraw from the contract.[footnoteRef:6] [6: Le v Nguyen [2016] ACAT 74 at [25] [28]; AB document 47]

23. The letter indicated that the vendors solicitors were instructed to issue a notice to complete and the vendors solicitor attached, by way of service, a notice to complete dated 25 March 2015. The date specified for completion was on or before 13 April 2015.

24. In reply, the purchasers solicitor advised that the purchaser had not been provided with an offer to enter into a franchise agreement with the franchisor; denied that the vendors notice to complete was valid and enforceable; stated that the purchaser could not complete the conditions precedent; and asserted that the licence must therefore be terminated, the agreement must be rescinded and the vendor must authorise return of the deposit to the purchaser.[footnoteRef:7] [7: This document is dated 21 March 2015 but was clearly sent on a later date: Le v Nguyen [2016] ACAT 74 at [31]; AB document 44]

25. On 30 March 2015 the purchasers solicitor sent a notice of rescission to the vendor and advised that the purchaser had vacated the premises. The notice of rescission asserted that the licence granted by the vendor to the purchaser was a sub-licence to occupy the premises and operate the business; referred to the franchise agreement between the vendor and the franchisor, which prohibited the vendor from sub-licensing the business without the prior written consent of the franchisor; and asserted that the vendor did not have the franchisors consent, and thus the sub-licence to the purchaser had no legal force or effect. For these reasons the purchaser contended she was entitled to rescind the Agreement and that the vendor must authorise return of the deposit to the purchaser.[footnoteRef:8] [8: Le v Nguyen [2016] ACAT 74 at [32] [33]; AB document 40]

26. The purchase was not completed. Mr Nguyen the vendor took back over the business and the premises.

D. Original tribunal proceedings and decision

Original tribunal proceedings

27. The proceedings in the tribunal have unfortunately given rise to their own complexities. In matter XD 371/2015 (sometimes referred to as XD 15/371) Mimosa Beauty & Nails Salon Pty Ltd (Mimosa), a company which apparently was formed by Ms Le and others, brought proceedings against Mr Nguyen, the vendor, in relation to some vouchers for services he had issued. Given that it was Ms Le who was the purchaser of the business under the Agreement, the tribunal made orders that she was the sole applicant in those proceedings. [footnoteRef:9] On 4November 2015 the tribunal ordered that Mr Nguyen pay to Ms Le an amount of $1,760 in relation to the vouchers.[footnoteRef:10] [9: Order of Senior Member W Corby dated 10 August 2015, AB document 17] [10: Order of Senior Member W Corby dated 4 November 2015, AB in document 19]

28. In those proceedings it appears that a broader dispute in relation to the purchase of the business was raised but not determined. In an appeal from the decision of the tribunal concerning the vouchers,[footnoteRef:11] this broader dispute was raised. The tribunal indicated that this broader dispute was more properly a new claim, and it was dealt with as such in proceedings XD 83/2016 (sometimes referred to as XD 16/83). [11: AA 46/2015 Thoa Kim Thi Le v Toan Nguyen]

29. In this new claim by Ms Le against Mr Nguyen, the original tribunal proceedings the subject of this appeal, she sought:

(a) compensation for the value of fitout work undertaken at the premises in January 2015 that was paid for by her and not removed when she vacated the premises (in an amount of $6,925) (fitout claim);

(b) compensation for the value of a hot water service installed on the premises and paid for by her and not removed when she vacated the premises (in an amount of $1,310) (hot water service claim); and

(c) return to her of the deposit of $75,000 (deposit claim).[footnoteRef:12] [12: Le v Nguyen [2016] ACAT 74 at [6]; Statement of claim dated 19 November 2015, AB document 30; order of General President Crebbin of 25 January 2016, AB document 34]

30. This new proceeding was heard on 3 March and 5 April 2016 with a decision on 13 July 2016, the original tribunal decision, rejecting the claims.[footnoteRef:13] In summary the original tribunal found as follows. [13: Le v Nguyen [2016] ACAT 74]

Summary of original tribunals decision

31. The original tribunal was not persuaded that the Agreement was subject to a condition that the purchaser would only be obliged to complete the Agreement if the lessor agreed to a reduced rent that was acceptable to the purchaser (at [37]).

32. Whilst the lessors consent or approval for the purchaser to occupy the premises may have been required before the Agreement could be completed, under clause 1.1(9)(c), there was no evidence that this consent or approval had not been, or by the completion date would not be, given (at [38]). Similarly, the original tribunal also found in effect that there was no evidence that the franchisor did not, or would not, consent to providing a franchise agreement to the purchaser (at [41]-[43]).

33. The tribunal found that the need for the franchisors consent to the sub-licence and sale had no bearing on the vendors legal right to enter into the Agreement (at [45]-[46]).

34. The tribunal considered that where the purchaser had twice indicated her unwillingness to complete, the vendor was justified in issuing the notice to complete making time of the essence and nominating 13 April 2015 as the completion date (at [52]).

35. The tribunal rejected the purchasers submission that preconditions to completion had not been met. The notice to complete was valid (at [53]).

36. The contract ended on 13April 2015. The vendor then became entitled to the deposit under clause 12.5(1) (at [54]).

Deposit claim

37. Although the deposit was 50% of the purchase price, being a significant proportion, the original tribunal noted that the purchaser was at all times legally represented and her solicitors appeared to have either drafted or finalised the Agreement ([55]). It appears that in effect the original tribunal found that the provision for forfeiture of the whole deposit to the vendor was not a penalty, and should be enforced.

Hot water service claim

38. The original tribunal found that during the licence period the purchaser elected to replace the hot water service. Pursuant to clause 10.1(1) of the Agreement the purchaser was required to obtain the vendors written consent to incur commitments other than in the ordinary course of business during the operation of the licence. The vendor had a discretion to give, but could not unreasonably withhold, consent. Despite clause 10.1, the purchaser did not obtain the vendors written consent to replace the hot water service. The vendor disputed that the hot water service needed to be repaired or replaced and asserted that the purchaser chose to replace the existing hot water service because she wanted a larger system. Clause 10.2 provided that during the period of the licence the purchaser was entitled to the takings and profits and was required to pay or bear all outgoings and liabilities of or related to the Business. In the original tribunals view this included the cost of repair or replacement of the hot water service. The purchasers claim for reimbursement of $1,310 for replacement cost of the hot water service was therefore dismissed (at [56]-[60]).

Fitout claim

39. The original tribunal found that the purchaser, without consent from the vendor, undertook fitout work soon after she commenced operating the business pursuant to the licence in January 2015. The tribunal accepted that the vendor was aware of and did not object to the fitout work, but did not accept that the vendor was therefore liable for the cost of the work. Indeed the purchaser repudiated the Agreement and vacated the premises without removing the work and making good. This claim was also dismissed (at [61]-[63]).

Counter claim

40. The original tribunal noted that in his response to the purchasers claims, the vendor foreshadowed a counter claim of $89,880 for compensation. However the vendor did not pay the application fee in relation to a counter claim, and there was no evidence brought or submissions made by the vendor in support of it (at [64]).

E. Appeal proceedings

41. The purchaser Ms Le sought an extension of time to bring an appeal. This extension of time was granted on 24 October 2016.[footnoteRef:14] [14: Order of Acting Presidential Member R Orr dated 24 October 2016, AB document 5]

42. The purchaser Ms Le relied on eight grounds of appeal which can be summarised as follows.

(a) The original tribunal erred in (i) joining Ms Le as a party to application XD 15/371; and/or (ii) proceeding pursuant to section 21 of the ACAT Act.

(b) The original tribunal erred in finding that Ms Le, rather than the company Mimosa, was at all times legally represented.

(c) The original tribunal erred in finding that the 50% deposit on the purchase price, being $75,000, was paid to Carden & Co, either by or on behalf of Ms Le, rather than the company Mimosa.

(d) The original tribunal erred in failing to consider whether clause 12.5(1) of the Agreement was a penalty.

(e) The original tribunal erred by failing to accord procedural fairness to third parties, namely the company Mimosa and Carden & Co, before ordering Carden & Co to release the deposit.

(f) The original tribunal otherwise erred in ordering Carden & Co to release the deposit.

(g) The original tribunal erred in finding that Mr Nguyen had complied with clause 1.1(9)(a) of the Agreement, the conditions precedent to completion.

(h) The original tribunal erred in failing to consider the principle of agency of necessity and the equitable principle of unjust enrichment in respect of the Ms Les claims.

Each of these grounds of appeal is considered further below.

43. The appeal was heard on 23 January and 27 February 2017. Some of the proceedings were interpreted into Vietnamese via a telephone interpreter. The appellant Ms Le provided an Appeal Book (AB) of documents from the earlier proceedings, and relied on a written submissions on behalf of the applicant dated 20 January 2017. Ms Le and Chinh Nguyen gave oral evidence. MrNguyen provided a bundle of documents (exhibit RA) and a response to submissions by the appellants solicitor Michael Toole dated 3 February 2017 (marked as exhibit RB, since these also contain some evidence).

44. After the first day of the hearing it was clear that a primary issue in the proceedings was whether the deposit of 50% of the purchase price was a penalty. Further at that hearing Mr Nguyen stated again that he had a basis for a counter claim. In light of this situation, the Tribunal wrote to the parties as follows:

In brief summary, in these proceedings Miss Le argues that the provision in the Agreement for the deposit to be 50% of the purchase price is a penalty, that is, is for such a large amount of money that it is an unfair provision. Without making any finding in this matter, the Tribunal notes that if this argument is successful, it is possible that the provisions in relation to the deposit in the Agreement do not operate, and the full deposit may be returned to Miss Le. This may be so even though Miss Le has breached the Agreement.

Again without making any finding in this matter, the Tribunal notes that in such circumstances, it is possible for Mr Nguyen to claim damages for any alleged breach of the Agreement, and that this be set-off from the deposit to be repaid to Miss Le. While the possibility of such a claim has been raised by Mr Nguyen in these proceedings, no such formal claim has been made, and no evidence or submissions provided in support of it.

In the Tribunals view, it may be unfair to consider allowing the full deposit to be repaid to Miss Le, without also considering whether to allow Mr Nguyen to argue that some amount for damages for breach of the Agreement should be set-off from this and paid to Mr Nguyen.

The Tribunal is prepared to consider allowing Mr Nguyen to raise such a claim for damages by way of set-off from the deposit at the further hearing. This would be considered if the terms of the claim for damages by Mr Nguyen, and evidence and submissions in relation to it, are provided to the lawyers for Miss Le and the Tribunal in accordance with the current directions

45. Mr Nguyen did provide details of a counter claim in a document dated 22February 2017 (counter claim dated 22 February 2017) which became exhibit RC (since this also contained some evidence). In the reconvened hearing the lawyer for Ms Le indicated that he did not oppose allowing MrNguyen to make the counter claim, though he did dispute a number of the items claimed.[footnoteRef:15] The Tribunal therefore ordered that in response to the appellants claim that the provision for forfeiture of the deposit was a penalty and the deposit should therefore be repaid to her, the respondent was given leave to make a counter claim, subject to paying the relevant filing fee, which was paid. [15: Transcript of proceedings on 27 February 2017, page 76]

46. The counter claim dated 22 February 2017 by the vendor Mr Nguyen was for breach of the Agreement by Ms Le and made up of the following elements:

(a) stock of $7,303[footnoteRef:16] (items 1-19 of the counter claim dated 22 February 2017); chairs and bench in an amount of $400 (item 20); and nail drills in an amount of $900 (item 21); a total of $8,603; [16: All figures in this decision have been rounded to remove cents]

(b) franchise fee from 12 December 2014 to March 2015, a claim which was not pursued at the hearing (items 22-24);

(c) franchise legal fee of a revised amount of $2,750 (item 25);

(d) telephone expenses from 15 January 2015 to 12 February 2015 of $162 (item 26);

(e) electricity expenses from 16 January 2015 to 12 February 2015 of $412 (item 27);

(f) cash register expenses, not pursued at the hearing (item 28);

(g) refurbishment costs of $4,863 (item 29);

(h) cost of replacing the key to the shop of $296 (item 30);

(i) lost salary for the respondent from 12 January 2014 (which should be 12January 2015) to 31 March 2015 of $11,850 (item 31);

(j) lost salary for the respondents wife from 13 January 2014 (which should be 13 January 2015) to 31 March 2015 of $10,200 (item 32);

(k) lost income from the business from 12 January 2015 to 12 February 2015 of $19,000 (item 33);

(l) lost income from the business from 12 February 2015 to 12 March 2015 of $10,000 (item 34);

(m) lost income from the business from 12 March 2015 to 31 March 2015 of $8,000 (item 35);

(n) lost income from the business from 1 April 2015 to 30 April 2015 of $5,766 (item 36); and

(o) lost income from the business from 1 May 2015 to 31 May 2015 of $4,800 (item 37).

This is a total of $86,702. The counter claim and each of these items are considered below

F. Consideration of grounds of appeal

Should Ms Le have been a party in proceedings XD15/371 (ground of appeal (a))?

47. The purchaser Ms Le raises the joinder of herself as a party in proceedings XD 371/2015. As noted above, in proceedings XD 371/2015 the company Mimosa brought a claim against Mr Nguyen in relation to some vouchers for services he had issued (at para [27] above). Given that it was Ms Le who was the purchaser of the business under the Agreement, the tribunal made orders that she was the sole applicant in those proceedings.[footnoteRef:17] On 4 November 2015 the tribunal ordered that Mr Nguyen pay to Ms Le an amount of $1,760 for the vouchers.[footnoteRef:18] Other issues in relation to the purchase of the business were raised in these proceedings but not determined. An appeal was begun in relation to this decision, but not pursued. [17: Order of Senior Member W Corby dated 10 August 2015, AB document 17] [18: Order of Senior Member W Corby dated 4 November 2015, AB within document 19]

48. This issue wholly concerns other proceedings. If there are concerns about this issue they should have been pursued in those other proceedings. The concerns are not directly relevant to these proceedings.

49. Further, as noted, those other proceedings have been concluded with an order in favour of Ms Le in an amount of $1,760. It appears that the amount has been paid to Ms Le.[footnoteRef:19] It is not possible, or appropriate, or of any utility, to now consider any issues concerning the parties to those proceedings. [19: Transcript of proceedings on 25 January 2016, page 3, AB document 52]

50. In this matter, the original tribunal proceedings were commenced and maintained by Ms Le, and the appeal has been commenced and maintained by Ms Le, not the company. Ms Le could at any time have abandoned these proceedings and arranged for new proceedings to be brought in the name of the company, or sought to add the company as a party. The company could have sought to be joined as a party, noting that Ms Le was a director and shareholder. No such action has been taken. It is not appropriate, or of any utility, to now consider changing the parties to these proceedings.

51. At any rate it is noted that in the Agreement the purchaser was described as Thoa Kim Thi Le or her Nominee. No evidence was provided in the earlier proceedings or these proceedings of any nomination of the company as a party. There was no suggestion any such nomination was made.

52. There was some evidence that it was intended that the company Mimosa would at some time take over the Agreement. There was evidence of some confusion as to who was a party to the Agreement. But this is an insufficient basis on which to amend or ignore the express terms of the Agreement.

53. This ground also alleges that the original tribunal erred in proceeding pursuant to section 21 of the ACAT Act. Section 18 of the ACAT Act provided that a civil dispute application cannot be made to the tribunal for an amount greater than $10,000[footnoteRef:20] unless section 21 applies. Section 21 of the ACAT Act provides that the tribunal has jurisdiction to hear an application despite section 18 if the application could be made but for section 18; the parties agree to the application being decided by the tribunal; and the tribunal is satisfied that the parties understand that the amount of the claim in excess of $10 000 is not being abandoned. [20: This was the amount at the relevant time]

54. In proceedings XD 15/371 concerning the vouchers issued by Mr Nguyen, the tribunal did not hear the broader claim in part because it did not have jurisdiction to do so.[footnoteRef:21] Ms Le then brought these proceedings. These proceedings have always been for about $83,000. The parties agreed to the application being decided by the tribunal.[footnoteRef:22] The proceedings were therefore within the jurisdiction of the tribunal. Ms Le pursued the claim, and this appeal, and at no time sought to revisit her agreement to the tribunal hearing this matter. Mr Nguyen has resisted the claim in the original tribunal hearing, and in this appeal, but never on a jurisdictional basis, and has now asserted his counter claim in an amount of about $86,000. Given the position of the parties it does not appear to have been an error for the tribunal to have heard the claim. [21: Order of Senior Member W Corby dated 4 November 2015, AB within document 19] [22: Statement of claim dated 19 November 2015 (AB document 30); Applicants claim undated (AB document 32); transcript of proceedings on 25 January 2016, pages 3-4 (AB document 52); Le v Nguyen [2016] ACAT 74 at [8]]

Was Ms Le legally represented (ground (b))?

55. In the context of considering whether the deposit was a penalty, the original tribunal found that the purchaser, Ms Le, was at all times legally represented and her solicitors appeared to have either drafted or finalised the Agreement.[footnoteRef:23] The finding that Ms Le was at all times legally represented is challenged in the appeal. [23: Le v Nguyen [2016] ACAT 74 at [55]]

56. To say that the position in relation to the Agreement is confused is an understatement. There is no challenge to the finding that the solicitors, Carden & Co, drafted or finalised the Agreement. There is no direct challenge to the finding that Ms Le was the purchaser under the Agreement. As noted the Agreement refers to the purchaser as Ms Le or her Nominee, but there was no evidence of any such nomination.

57. But Ms Le gave evidence in the appeal[footnoteRef:24] and stated she first met Mr Carden of Carden & Co on the day that they signed the paper for Mrs Lan, Auntie Lan and Uncle Toan. Although the transcript is a little confusing, the Tribunal takes this to be 15 January 2015, the date of the Agreement. She said that she had not met or spoken at all to Mr Carden before that day, nor had there been any communication in writing. [footnoteRef:25] [24: As provided for by rule 21 of the ACT Civil and Administrative Tribunal Procedure Rules 2009 (No.2)] [25: Transcript of proceedings on 23 January 2017, page 17]

58. It appears from the evidence that the Mrs Lan or Auntie Lan referred to was Tan Thi Duy Le, and Uncle Toan was her husband Minh Phan. As to who arranged for the lawyer, Ms Le stated that I did not request Minh Phan and Le [apparently Tan Thi Duy Le] to go find lawyer for me but Minh Phan reckon that he could find a lawyer on the contract. It wasnt my request Minh Phan reckons that I need a lawyer for that contract and he did mention that but it wasnt my request. Ms Le said she was not aware of any communication between Minh Phan and Mr Carden. [footnoteRef:26] [26: Transcript of proceedings on 23 January 2017, pages 18-19]

59. Later Ms Le stated in evidence that she was sure she signed the contract to buy the shop but believed that we bought the shop as a partnership between me and Tan Thi Duy Le and another person. She stated that she was told by Tan Thi Duy Le and Minh Phan that we are going to buy the shop and form as a company well call Mimosa Nail and Beauty Pty. Ms Le stated that when she asked Minh Phan why Tan Thi Duy Le was not a party to the Agreement he said that she, Ms Le, was signing the contract on behalf as a nominee so thats why I was the one who signed the Agreement.[footnoteRef:27] [27: Transcript of proceedings on 23 January 2017, page 21]

60. Ms Le also gave evidence that her proper name is Kim Thoa Thi Le. The name given to her in the Agreement was Thoa Kim Thi Le, which is incorrect and a mistake; it was argued that this supported her contention that her name was given to Mr Carden by Tan Thi Duy Le or Minh Phan, and that she had never met Mr Carden, nor received advice or given instructions, including as to her proper name, before signing.

61. Documents in evidence before the Tribunal show that the company Mimosa was registered on 12 January 2015. The application for registration shows that the directors were proposed to be Thi Kim Thoa Le[footnoteRef:28] and Tan Tan Le. This was lodged by Minh Phan, with Thi Kim Thoa Le as one member, Chinh Minh Nguyen as another, and Le Consultants Pty Ltd as a third. The registered office was said to be care of Tan Le at Florey. Ms Le gave evidence that Tan Tan Le and Tan Le was her friend, Tan Thi Duy Le.[footnoteRef:29] A company extract of 29June 2015 shows Thi Kim Thoa Le and Tan Duy Thi Le[footnoteRef:30] as directors, and Chin Minh Nguyen, Thi Kim Thoa Le, and Le Consultants Pty Ltd as shareholders.[footnoteRef:31] [28: It appears that this is another version of Ms Les name, see transcript of proceedings on 23January 2017, pages 23-24] [29: Transcript of proceedings on 23 January 2017, page 23] [30: It appears this is another version of Tan Thi Duy Le] [31: AB documents 10 and 11 ]

62. On the basis of the evidence of Ms Le, it appears that before signing the Agreement she had received no advice and given no instructions in relation to it. It appears the Agreement may have been drafted on the instructions of Tan Thi Duy Le or Minh Phan, who may have received any legal advice.

63. The Tribunal notes that the subsequent correspondence from Carden & Co suggests that the firm acted for Ms Le; for example a letter dated 30 March 2015 states that we act for Thoa Kim Thi Le who is referred to as our client.[footnoteRef:32] But there is no evidence beyond these documents of Ms Les later involvement with the lawyer. [32: Letter of Carden & Co dated 30 March 2017, AB document 39]

64. The Tribunal notes that it seems unlikely that a person would sign a contract worth $150,000 without legal advice. It also seems unlikely that a lawyer would draft a contract worth $150,000 without ever taking instructions from the party, or advising the party, for whom they were meant to be acting. But unlikely as it is, this seems to be what happened.

65. This ground of appeal is upheld on the basis of the evidence of Ms Le, but this finding is only relevant in the context of considering whether the deposit was a penalty, which is discussed further below. For these purposes it does seem that Ms Le did not give any instructions on the drafting of the Agreement, nor was she advised on the terms of the Agreement before she signed it. While not completely clear, it seems that Tan Thi Duy Le or Minh Phan dealt with the lawyer. Notwithstanding this evidence and conclusion, it remains clear that MsLe was the party to the Agreement.

Who paid the deposit (ground (c))?

66. The purchaser Ms Le argued that the deposit was paid by Chin Minh Nguyen (Mr Chin Nguyen) on behalf of the company. There is no relevant finding in the original tribunal decision with regard to this issue. It is difficult to see how a finding on this issue is a ground of appeal. However it is of some relevance in the context of considering whether the deposit was a penalty, and it is therefore briefly noted.

67. Mr Chinh Nguyen gave evidence in these proceedings. He said that Tan Thi Duy Le and Minh Phan were talking to us about the forming of the company, and he became a shareholder. He said that before the signing of the Agreement he had no dealing or contact or communication with Mr Carden. He said that later he talked to him about a dispute concerning the deposit.[footnoteRef:33] [33: Transcript of proceedings on 23 January 2017, pages 26-27]

68. Mr Chinh Nguyen said that he paid the deposit under the Agreement. He said that he did pay that deposit on behalf of the company, Mimosa and that Minh Pham gave him the deposit details, but told him he wasnt to have any direct contact with Mr Carden. Mr Chinh Nguyen said he was not involved in deciding the deposit; Minh Phan was; Mr Chinh Nguyen was informed after the Agreement was signed of the 50% deposit.[footnoteRef:34] Again, notwithstanding this evidence it remains clear that Ms Le was the party to the Agreement. [34: Transcript of proceedings on 23 January 2017, pages 27 and 31]

69. It therefore seems that Mr Chinh Nguyen paid the deposit. He thought he did so on behalf of the company. But this finding has no direct effect on the decision of the original tribunal. This finding is only relevant in the context of considering whether forfeiture of the deposit was a penalty, which is discussed next.

Was the amount of the deposit a penalty (ground (d))?

70. Except for ground (e), the appellant does not challenge the findings of the original tribunal that the respondent was entitled to terminate the Agreement. Ground (e) raises an issue as to whether the preconditions to completion had been met. Subject to this, Ms Le did not challenge that the notice to complete was valid; and the Agreement ended on 13April 2015. Ms Le did however pursue her claim that the provision for the surrender of the deposit which was 50% of the purchase price to Mr Nguyen was a penalty and therefore invalid and could not be enforced. [footnoteRef:35] [35: There are two related principles of relief against a penalty and relief against forfeiture. There is some confusion as to the difference between them. But in Stern v McArthur (1988) 165 CLR 489, at 524, Deane and Dawson JJ stated that relief against a penalty is relief against the retention by the vendor of both the land and any instalments of purchase price (other than a genuine deposit), irrespective of any damage suffered by him. This is the relevant principle here. Relief against forfeiture in contrast is relief against the loss of the purchaser's equitable interest in the land which is a necessary step to enable an order for specific performance of the contract to be made. This is not the relevant principle here.]

71. The relevant clause of the Agreement is clause 12.5 which states:

If the Purchaser defaults in performing or observing any conditions imposed on the Purchaser under this Agreement, provided that the Vendor has complied with cause 12.1, or if the Purchaser commits an Event of Default, the Vendor will be entitled by notice in writing served on the Purchaser to forfeit the Deposit (if any) and terminate this Agreement, or seek specific performance of this Agreement (failing which the Vendor may then elect to terminate this Agreement) and after any such termination the Vendor will be entitled to:

(1)the Deposit (if any) as its absolute property;

(2)either:

(a)retain the Business and the Assets and institute legal proceedings against the Purchaser for damages for breach of this Agreement; or

(b)resell the Business and the Assets in such manner as it sees fit and recover any deficiency in the Purchase Price on the resale and any costs and resulting expenses by way of liquidated damages; and

(3)in addition to the money forfeited under clause 12.5(1) (if any), retain any other money paid under this Agreement pending determination of damages and may apply that money in satisfaction or part satisfaction of those damages.

(4)In calculating the damages recoverable by the Vendor for the Purchasers default or an Event of Default, credit must be given to the Purchaser for the amount forfeited to the Vendor under clause 12.5(1) (if any).

72. It seems clear from this clause, in particular clause 12.5(1), that where the vendor terminates the Agreement for breach by the purchaser, the vendor is entitled to the whole of the deposit.

73. Generally, the law allows for and will enforce a clause which provides for payment to a party upon termination of an agreement of an amount which is a genuine pre-estimate of loss suffered (referred to as liquidated damages). However a clause will not be allowed or enforced, and is invalid, if its purpose is to penalise the party in breach, rather than to compensate the other party for their loss (referred to as a penalty). Whether a sum stipulated is an appropriate amount of liquidated damages or a penalty is a question of construction to be decided upon the terms and inherent circumstances of each particular contract, judged as at the time of the making of the contract. [footnoteRef:36] [36: JW Carter, Carters Guide to Australian Contract Law (3rd ed, 2016), paragraphs [27.51]-[27.56]; Submissions on behalf of the appellant, dated 20 January 2017, paragraphs 19-23, referring to State of Tasmania v Leighton Contractors Pty Ltd [No 3] [2004] TASSC 132 at [233], quoting Dunlop Pneumatic Tyre Company Limited v New Garage and Motor Company Limited [1915] AC 79 at 86-88]

74. Provisions for payment of a deposit in a sale of land, and a business, are in a somewhat different position. Deposits are generally a sum paid to show the genuineness of the party, and a security for completion. It is generally accepted that forfeiture of a reasonable deposit, usually of 10% of the contract price, to the vendor when the buyer defaults does not fall within the general rule against penalties; this can be enforced and is valid even though the amount of the deposit bears no reference to the anticipated loss flowing from the default.[footnoteRef:37] [37: DW Greig and JR Davis, The Law of Contract (1987), pages 1460-1463]

75. However, any special treatment afforded to deposits is subject to consideration of the particular circumstances of the case. It may be hard to draw the line between a reasonable, permissible deposit and an unreasonable, impermissible one, but as the customary deposit is 10%, it seems appropriate that where a contract provides a larger amount that there must be special circumstances to justify this. [footnoteRef:38] Otherwise it will be a penalty. [38: Workers Trust and Merchant Bank Ltd v Dojap Investments Ltd [1993] AC 573]

76. In this case the amount of the deposit was 50% of the purchase price. It is difficult to see how in the circumstances of the sale of a small business this could be justified. It does seem to meet the requirement to be an amount which is extravagant, exorbitant or unconscionable[footnoteRef:39] and therefore a penalty, rather than a reasonable, permissible deposit. [39: AMEV-UDC Finance Ltd v Austin (1986) 162 CLR 170 at 190, referring to English decisions]

77. The vendor suggested that a 50% deposit was a common practice.[footnoteRef:40] He provided no evidence of this. The relevant case law and legal writings provide little basis for this submission.[footnoteRef:41] For example, in Smyth v Jessep[footnoteRef:42] a deposit of 25% on the sale of land was held to be extravagant and the court allowed the purchaser relief against forfeiture subject to a set-off in respect of the damages suffered by the purchasers breach. It is true that a deposit of 20% on the sale of a taxi business was allowed in Yardley v Saunders;[footnoteRef:43] and 30% in Coates v Sarich;[footnoteRef:44] but these cases involved unusual factors not present here, where at any rate the deposit is a much greater 50%. [40: Response to submissions by the appellants solicitor Michael Toole, dated 3 February 2017, exhibit RB, paragraph 4] [41: DW Greig and JR Davis, The Law of Contract (1987), pp 1460 -1462 and the cases cited there; JW Carter, Carters Guide to Australian Contract Law (3rd edition, 2016), at [30.14]; Workers Trust and Merchant Bank Ltd v Dojap Investments Ltd [1993] AC 573 ] [42: [1956] VLR 230] [43: [1982] WAR 231 at 237] [44: [1964] WAR 2]

78. One factor in considering whether a clause is a penalty is whether the amount specified is out of all proportion with the loss that could conceivably be proved to have followed from the breach.[footnoteRef:45] That is the position here; on termination of the Agreement the respondent obtained the business and the deposit of 50% of the agreed value of the business. [45: JW Carter, Carters Guide to Australian Contract Law (3rd edition, 2016), at [27.54]]

79. This seems to be confirmed by the terms of clause 12.5 of the Agreement set out above. This indicates that there may be no deposit at all indicating that these are standard terms not adjusted for the specific deposit provided for in this Agreement. If there is a deposit and the purchaser breaches, the vendor can keep it and the business and assets and institute legal proceedings against the purchaser for damages for breach of this Agreement (clause 12.5(2)(a)). In calculating the damages recoverable by the vendor for the purchasers default, credit must be given to the purchaser for the amount of the deposit (clause 12.5(4)). These provisions suggest some link between the deposit and the vendors loss; and deal with the situation where the loss is greater than the deposit. No provision is made for a loss less than the deposit. This of itself suggests that even within the terms of the Agreement itself, the amount specified as the deposit is unreasonable and out of proportion with the loss that could conceivably be proved to have followed from the breach.

80. The main point raised by the Mr Nguyen was that the solicitors for Ms Le drafted the Agreement. As discussed above, Ms Le was the purchaser of the business, but on her evidence she received no legal advice in relation to the Agreement. Also the person who paid the deposit, Mr Chinh Nguyen, obtained no legal advice. It was never made clear in the proceedings on whose instructions the Agreement was drafted. As noted above it may have been Tan Thi Duy Le or Minh Phan. But whoever it was it was not the person who was a party to the Agreement or the person who provided the deposit.

81. It was therefore not clear on what basis the solicitor could draft an Agreement providing for a 50% deposit. Mr Nguyen suggested that Ms Le and her associates wanted to impress him by volunteering such a deposit.[footnoteRef:46] Ms Les evidence does not suggest this approach on her part. It may be Tan Thi Duy Le or Minh Phan took this approach; if so, it was a very foolish and inappropriate position, in particular since it gave rise to a very significant potential liability in others. [46: Counter claim dated 22 February 2017, paragraph 2(c)]

82. Another factor sometimes considered in determining whether a clause is a penalty is any relevant imbalance in bargaining power between the parties. Such an imbalance is not necessary.[footnoteRef:47] At any rate this is an unusual situation where the purchaser and deposit provider had no legal advice and did not instruct on the terms of the Agreement; the advice was given to and instructions given by others. [47: State of Tasmania v Leighton Contractors Pty Ltd (No. 3) [2004] TASSC 132 at [234]; overturned on appeal but not on this particular issue in State of Tasmania v Leighton Contractors Pty Ltd [2005] TASSC 133]

83. The fact that damages for breach of a contract are difficult to assess may suggest that a clause is not a penalty. As discussed below, damages for failure to complete an agreement for the sale of a business should generally be possible of calculation, notwithstanding the uncertainties in this case.

84. For these reasons the Tribunal finds that the provision for payment of the deposit of 50% of the purchase price to the vendor was in these circumstances a penalty, and should not be enforced. This ground of appeal is allowed.

85. Although not completely clear, it seems that where a clause is a penalty, it cannot be enforced at all, including to the extent it would be allowed, enforced and valid. That is it does not seem possible in this case to allow for forfeiture of the deposit to the vendor in an amount of 10% of the purchase price, but not the remaining 40%. Rather it seems that the innocent party needs to sue for damages for any breach, and the amount of such damages can be paid from the deposit.[footnoteRef:48] As discussed above this was the course allowed in this case; MrNguyen did make a counter claim for damages; and this is considered below. [48: JW Carter, Elisabeth Peden and GJ Tolhurst, Contract Law in Australia (5th ed, 2007), at [37.11]]

Did the order of the original tribunal in relation to the deposit fail to accord procedural fairness or contain other errors (grounds (e) and (f))?

86. Ms Le argued that the payment of the deposit to Carden & Co by Mr Chin Nguyen was on behalf of the company, Mimosa. It was suggested that the tribunal failed to accord the company and Carden & Co procedural fairness before ordering release of the deposit.

87. As discussed above, Ms Le was the party to the Agreement. She maintained these proceedings on that basis. Whatever Mr Chinh Nguyen thought he was doing, he was in fact providing his own money as a deposit under the Agreement to which Ms Le was the relevant party and to meet her obligations under the Agreement.

88. At any rate, the evidence before the Tribunal is that Ms Le was a director and shareholder of the company. The company, therefore, as a practical matter had notice of the proceedings. It could have sought to be joined as a party. It chose not to do so.

89. Carden & Co simply holds the deposit under the Agreement. This dispute does not affect the interests of the firm.

90. At any rate the company and the firm were given notice of the appeal and chose not to participate. These grounds of appeal are not made out.

Did Mr Nguyen comply with clause 1.1(9)(a) of the Agreement (ground (g))?

91. As discussed above at paragraph [13], the Agreement provided in clause 1.1(9) that the Conditions Precedent to Completion included:

(a)the vendor successfully effecting the transfer of the Franchise Agreement to the purchaser or its Nominee; and/or

(b)the Franchisor agreeing to the transfer of the Franchise Agreement from the Vendor to the Purchaser or its Nominees, or granting a new franchise agreement to the Purchaser or its Nominee; and/or

92. In their terms these can be alternatives. Clause 3.5 provides that if the conditions precedent to completion are not satisfied, the vendor agrees to release the deposit to the purchaser; and clause 6.2 provides that if the franchisor does not consent to providing a franchise agreement to the purchaser, the deposit must be returned to the purchaser upon demand and the Agreement will be rescinded.

93. The original tribunal decision notes that the vendor gave evidence that shortly after signing the Agreement he provided the purchasers solicitor with a draft franchise agreement, and tendered a copy (at [23]). The purchaser gave evidence that she had not before the hearing seen this draft and that because Mimosa, the company, was named as the franchisee the document was not genuine, and should not be accepted as evidence that the franchisor knew about the sale or agreed to provide an agreement to the purchaser (at [24]). At [41] the original tribunal refers to contact between the franchisor and the purchasers solicitor on 16 March 2015. At any rate the original tribunal held that even if it was accepted that the vendor did not provide the purchaser with the unsigned franchise agreement or the document was not genuine, it is not evidence (nor is there any evidence) that the franchisor did not, or would not, agree as required by subclauses 1.1(9)(a) and/or (b), or would not consent under clause 6.2, to providing a franchise agreement to the purchaser.

94. The appellant notes that the evidence about provision of the draft franchise agreement was disputed, but now argues that even if accepted the draft franchise agreement does not facilitate the transfer of the franchise agreement or the grant of a new agreement since the draft provides for the company Mimosa to be the new licensee, and Ms Le as one guarantor. The Tribunal does not accept this argument. The draft franchise agreement is evidence that the franchisor was willing to enter into a new agreement; the draft does provide for the franchisee to be Mimosa; but this is a company in which Ms Le is a director and shareholder; she is also shown as a guarantor in the draft. Contrary to the appellants argument, this suggests that it is likely that the franchisor would have also entered into a new franchise agreement with Ms Le directly. This ground of appeal is not made out.

Do the principles of agent of necessity and unjust enrichment assist Ms Le in relation to the fitout claim and the hot water service claim (ground (h))?

95. This ground concerns the claim for the cost of the new hot water service. The decision of the original tribunal is outlined at paragraph [38] above. The appellant argues that an implied condition in the Agreement was that the business would operate in accordance with law and that by breaching this condition the respondent ought to make restitution for the cost of the new hot water service.

96. However before implying any terms, it is necessary to look at the express terms in the Agreement. As the original decision noted, clause 10.1(1) provides that pursuant to the licence the purchaser must not, without the prior written consent of the Vendor, which the Vendor may give at their discretion, but not unreasonably withhold, enter into or incur in the name or on behalf of the Business, any commitment or Liabilities, other than commitments or liabilities in the ordinary course of business. It seems likely that replacement of the hot water service was not part of the ordinary course of business, but the consent of the vendor was not sought. If this was part of the ordinary business, then clause 10.2 provides that the purchaser shall bear such outgoings and liabilities.

97. It was argued that the ACT health legislation in effect requires beauty therapists to have hot water. If so, clause 10.1(2) requires the purchaser, not the vendor, to comply with these requirements. This seems appropriate since it was the purchaser who was running the business under the licence; the vendor had no role at this time. Clause 10.1 concludes by providing that if without default of the purchaser the Agreement is not completed, the vendor must pay to the purchaser any reasonable amount expended by the purchaser in complying with the requirement. As the original tribunal noted, the Agreement was not completed, but this was due to default by the purchaser. Therefore the obligation on the vendor does not arise. There is no basis for implying a term inconsistent with the express terms of the Agreement.

98. Ms Le also sought to rely on the principle of agent of necessity, under which circumstances of emergency may create an authority to act in relation to the property of another person or to impose a liability upon them which would not exist in ordinary circumstances.[footnoteRef:49] But again this was a situation which was dealt with by the Agreement; and under the Agreement liability fell on the purchaser. The purchasers liability arises from her acts and the operation of the terms of the Agreement. There is no basis for relying on the principle of agent of necessity when the Agreement expressly deals with the matter. For similar reasons there is no basis for relying on the principle of unjust enrichment. This ground of appeal fails in relation to the hot water service claim. [49: Submissions on behalf of the appellant, dated 20 January 2017, at [41], quoting Burns Philp & Co Ltd v Gillespie Brothers Pty Ltd (1947) 74 CLR 148, 175]

99. The original tribunal also rejected the fitout claim for the reasons set out at paragraph [39] above. Again this was a situation which was dealt with under the Agreement; and under the Agreement liability fell on the purchaser. In particular the vendor was not asked to and did not approve those changes. Indeed he makes a claim for further renovations, in part, to undo those made by Ms Le. For similar reasons as set out in relation to the hot water service claim there seems little basis for implying a term inconsistent with the express terms of the Agreement, nor for relying on the principles of agent of necessity or unjust enrichment. This ground of appeal fails in relation to the fitout claim.

Summary of findings on the appeal

100. Therefore, this Tribunal only upholds ground of appeal (d), which is supported by findings in relation to grounds (b) and (c). This means that there is a basis for the deposit claim, that is for the return of the deposit to the purchaser Ms Le, but subject to the counter claim of Mr Nguyen discussed below. The other grounds of appeal are not made out, and the original tribunals findings in relation to the fitout claim and the hot water service claim are confirmed; MrNguyen is not liable for these claims.

G. Consideration of the Counter claim dated 22 February 2017

101. The original tribunal decision found that Ms Le breached the Agreement by rescinding it without cause, and failing to complete it in accordance with the notice to complete. The only relevant challenge to this finding in the appeal is ground (g) which went to whether Mr Nguyen did comply with clause 1.1(9)(a) of the Agreement, the conditions precedent to completion. This ground has been rejected. Therefore Mr Nguyen is entitled to damages for the breach by Ms Le.

102. The purpose of an award of damages for breach of contract is to put the injured party in the position that that party would have been in had the contractual obligation been performed. Generally for the sale of property or a business, damages are assessed on an expectation loss basis, that is the difference between what the party would have received if the contract had been performed, and what they did receive at the time fixed for completion. In this case this is the difference between the $150,000 Mr Nguyen would have received had the Agreement been fulfilled, and the value of the business at the time it returned to him, which is what he was left with.[footnoteRef:50] [50: JW Carter, Carters Guide to Australian Contract Law (3rd edition, 2016), [27.15]; Commonwealth of Australia v Amann Aviation Pty Ltd (1991) 174 CLR 64]

103. However it is also possible to claim damages on a reliance basis, that is on the basis that the impact of the breach is that money spent in reliance on the contract has been wasted. Indemnity or consequential losses flowing from the breach itself can also be claimed. [footnoteRef:51] [51: JW Carter, Carters Guide to Australian Contract Law (3rd edition, 2016), [27.16] [27.18]; Commonwealth of Australia v Amann Aviation Pty Ltd (1991) 174 CLR 64]

104. Mr Nguyen was clearly at a disadvantage in making this claim because he was without legal representation. He chose this course notwithstanding the risk he was running in doing so.[footnoteRef:52] [52: Transcript of proceedings on 23 January 2017, pages 6 and 7]

Expectation loss arising from decline in value of the business

105. Mr Nguyen did not put his claim directly on the appropriate expectation loss basis. However he did claim some amounts for loss of income from the business, including when it was returned to him (items 33-37,[footnoteRef:53] see paragraph [46] above), and this can be seen to be on the basis of loss of value in the business. Further, there is some evidence that the market value of the business when it was returned to Mr Nguyen was less than the Agreement price, and that he is entitled to damages on this basis. [53: Counter claim dated 22 February 2017, exhibit RC, paragraph 3]

106. In evidence was a report dated 12 March 2015 by IQ Tax Accountants & Business Advisors to Minh Phan, Ms Le and Tan Duy Thi Le concerning the business (IQ Report).[footnoteRef:54] This report shows that for the 2014 year, the average gross daily value of sales was $1,120; with average daily expenses of $1,663, including $900 for staff, and $572 for rent; giving an average daily loss of $543. The IQ Report recommended negotiating a reduction in rent. It went on to state that the current economic cycle in Canberra is very depressing, and noted the decline at Westfield Woden and Belconnen. Generally, this report suggests that the price obtained by Mr Nguyen under the Agreement was a good one, since the profitability of the business was questionable and declining. [54: AB, in document 26]

107. The IQ Report shows the turnover of the business for January 2015, when for the most part it was run by Ms Le, was $33,303, compared to the previous January figure of $36,375; and for February 2015, when it was wholly run by Ms Le, was $30,054 compared to the previous February figure of $31,989.

108. In the letter from the solicitors for Ms Le to Mr Nguyen dated 18 March 2015 it is stated that Ms Les negotiations with Westfield in relation to the lease have been unsuccessful.[footnoteRef:55] This is the reason given for not completing the Agreement. It appears from the IQ Report that the rent was about $17,410 per month (about $572 per day). It appears from the 18 March 2015 letter and the attachment to it that Ms Le sought a reduction to about $12,500 per month (about $416 per day). This is a reduction of about 27% in the lease costs; which would have resulted in a reduction of about 9% in the total costs. These figures go to the profitability of the business, not its value. But there is some link, and they provide some basis for a finding that the business was, on return to the vendor, less valuable than the purchase price provided in the Agreement. [55: Letter of Carden & Co dated 18 March 2015, AB document 41]

109. Also Mr Nguyen gave evidence that after the purchaser gave up running the shop, it took a long time for the business to go back to normal.[footnoteRef:56] That is, that this period saw a reduction in its value. This appears a reasonable proposition. As noted, Mr Nguyen did claim for loss of income from the business. Some of this related to loss during the licence. But some related to loss when he took the business back over. Although it is not entirely clear how these claims were calculated, his positon was that in this period, the income from the business was less than the equivalent 2014 months which are shown in the IQ Report. [56: Transcript of proceedings on 27 February 2017, page 120]

110. Also Mr Nguyen has not been able to sell the business and stated: We cannot sell, we couldnt sell the business because Le didnt want to buy and she break the agreement and who can I sell. [footnoteRef:57] [57: Transcript of proceedings on 27 February 2017, page 120]

111. Further, although not directly relevant, as discussed above, if the Agreement had provided for a deposit of 10%, and perhaps more, this would not have been a penalty and would have been forfeited to the vendor.

112. In light of this evidence and factors, this Tribunal thinks it is appropriate to award damages on the basis of a 15% decline in the value of the business from the purchase price, that is $22,500. This is an expectation loss, that is the difference between what Mr Nguyen would have received had the purchaser fulfilled the Agreement ($150,000), and the value of the business he received back after the breach by Ms Le.

113. Further, Mr Nguyen did make a number of specific claims, which are considered below. Items 22, 23, 24 in the counter claim dated 22 February 2017 (concerning payment of the franchise fee) and item 28 (concerning cash register expenses) were not pursued at the hearing.[footnoteRef:58] [58: Transcript of proceedings on 27 February 2017, pages 82 and 106]

Other lossStock used by the purchaser

114. Mr Nguyen claimed for stock used by Ms Le in running the business. This apparently included items of stock which were on the premises when Ms Le took over the business under the licence, but were not there when Mr Nguyen took back the premises and the business. They also included larger items such as a vacuum cleaner, chairs and a bench, and nail drills. These are items 1 to 21 in the counter claim dated 22 February 2017, with a claimed value of $8,603. At least in relation to the stock Mr Nguyen indicated that if the purchaser had bought the shop, he would have given her the stock, but as she did not buy the shop and used the stock, she should pay him for it.[footnoteRef:59] [59: Transcript of proceedings on 27 February 2017, page 100]

115. Clause 2.1 of the Agreement provides that the vendor sells the business and assets to the purchaser in exchange for the purchase price (which was $150,000) and the value of the stock. There was therefore to be a sale of the stock, in addition to the sale of the business and assets. Clauses 7.9-7.14 of the Agreement deal with stock. They provide that the purchaser agrees to purchase the stock (clause 7.9); but that the value of the stock will be no more than $3,000 (clause 7.10); and that the parties will on the day before the date of the Agreement carry out a physical stocktake of stock (clause 7.11). If the value is less than $3,000, this will be paid on completion (clause 7.12(1)). If it is more, clause 7.12(2) states that the Purchaser will pay the balance of the costs of the Stock to the Vendor on Completion for the Stock; notwithstanding the limit in clause 7.10 this suggests that more than $3,000 may be payable. There is a mechanism for resolving a dispute in relation to the value of the stock (clauses 7.13 and 7.14). Apparently there was no relevant stocktake; and there was no use of the dispute resolution mechanism.

116. The definition of stock in clause 1.1(25) of the Agreement includes but is not limited to consumables, and includes small tools not on the asset list. Most of items 1-21 of the counter claim dated 22 February 2017 fall within this definition. The vacuum cleaner (item 18) is on the asset list in schedule 1 and therefore it should not be allowed; the nail drills (item 21) are not on the list and should be; the position of the relevant chairs and bench (item 20) is unclear.[footnoteRef:60] [60: Transcript of proceedings on 27 February 2017, pages 104-105]

117. Notwithstanding the lack of supporting materials in relation to Mr Nguyens claim in this regard, it does seem the Agreement provided for payment of an additional amount for stock on completion, which was denied to him by the breach. Some of the stock would clearly have been used by the purchaser during her time running the business. This was an expectation loss additional to the loss of value of the business. The Agreement suggests that the value of the stock was in the order of $3,000, but that it may have been more or less. Mr Nguyen provided little basis for his alternative, much higher assessment of the cost of the stock.

118. Therefore it seems appropriate to allow for damages on this basis of $3,000 to Mr Nguyen.

Franchisor legal fee

119. Mr Nguyen claimed $1,800 for the franchisors legal fee, but then adjusted this to $2,750.[footnoteRef:61] He provided an invoice from Professional Nails which showed a payment in this amount for assignment fees. It seems appropriate to allow this amount on a reliance basis, that is on the basis that the impact of the breach is that money spent in reliance on the Agreement has been wasted, as no assignment occurred because the Agreement was not completed. [61: Counter claim dated 22 February 2017, exhibit RC, item 25; transcript of proceedings on 27February 2017, page 82]

Expenses paid by vendor during period of licence

120. Mr Nguyen also claimed for telephone expenses, electricity expenses, refurbishment and the cost of replacing the key for the shop.

121. The position with regard to the telephone and electricity expenses is confused. However, Mr Nguyen provided an electricity account from about 15 January 2015 to 12 February 2015 of $412, within the period in which the business was run by Ms Le under the licence, apparently for the premises occupied by the business (item 27).[footnoteRef:62] On the basis of this account it seems appropriate to allow this claim, as an amount paid by Mr Nguyen which should have been paid by the purchaser under the licence agreement (clause 7.3). Ms Le argued that she arranged for the transfer of these services, but the account suggest this was not wholly achieved. [62: Attachment to counter claim dated 22 February 2017, exhibit RC]

122. The fixed line telephone account for $162 (item 26) seems to be in a similar position, and is allowed.[footnoteRef:63] [63: Attachment to counter claim dated 22 February 2017, exhibit RC, account for the period 15/16 January 2015 to 12 February 2015]

123. Mr Nguyen claimed for refurbishment of the shop in an amount of $4,863.00 (item 29) and provided a quotation for this work dated 2 August 2015.[footnoteRef:64] However Mr Nguyen indicated that these were things in the shop he wanted to change, and that the refurbishment had not proceeded;[footnoteRef:65] even if it had it is difficult to see that this is a cost which should be allowed as damages for the breach. [64: Attachment to counter claim dated 22 February 2017, exhibit RC] [65: Transcript of proceedings on 27 February 2017, page 90]

124. Mr Nguyen also claimed an amount of $296 for the cost of replacing the key to the shop when he took it back over (item 25 of counter claim dated 22 February 2015). The purchaser argued that obtaining a new key was a too cautious approach by Mr Nguyen. But it seems reasonable to obtain a new key after the purchaser gave up the business and the premises, and to allow this as a consequential loss flowing from the breach.

Salary payable to vendor and his wife

125. Mr Nguyen also claimed an amount for the lost salary for himself from 12 January 2014 to 31 March 2015 in an amount of $11,850 (item 31) and for his wife, Lan Tran, in an amount of $10,200 (item 32).

126. The fact that Mr Nguyen and his wife did not earn wages in this period arose from the Agreement and the grant of the licence. It did not arise from breach of the Agreement; they would not have earned wages from the business in this period even if the sale had been completed. They could have earned income in this period doing other work; indeed it appears Mr Nguyens wife did work a little for Ms Le and was paid for this.[footnoteRef:66] Therefore, this does not seem an appropriate basis for compensation. [66: Transcript of proceedings on 27 February 2017, page 116]

Loss of income from the business

127. Mr Nguyen also claimed amounts for loss of income from the business for the period 12 January 2015 to 31 May 2015 in an amount of $47,566 (items 33-37). This covers both the period of the licence, and then two more months, April and May 2015.

128. It is very unclear how these figures were arrived at. As discussed above, the IQReport did provide amounts for the gross sales for the business for January to May 2014. That report found average daily sales over the 2014 year of $1,120, but also addressed expenditure, and found that after adjusting for this, principally rent of $572 a day and staff costs of $900 a day, that there was an average daily loss of $543 a day.

129. It seems that Mr Nguyen may have subtracted the gross sales for the months in 2015 from those in 2014 to give the figures claimed (see paragraph [107] above). But if so, the amounts proposed are inconsistent with those in the IQReport, and this approach gives a very misleading picture, since the expenditure incurred in obtaining that gross income is ignored. He may have done calculations based on net profit, but even on this basis the figures he puts forward are not consistent with those in the IQ Report.

130. Further, for the months of January, February and March 2015, the fact that MrNguyen did not earn income from the business arose from the Agreement and the grant of the licence. It did not arise from breach of the Agreement; he would not have earnt income from the business in this period even if the Agreement was completed.

131. The income for the months of April and May is in a slightly different position. But it remains unclear how these figures were arrived at. Further, as discussed above, the Tribunal accepts that there was some decline in the value of the business which Mr Nguyen took back over, and has awarded expectation loss damages on this basis. There is no basis for awarding additional amounts for loss of income.

Summary of findings on the cross claim

132. Therefore the Tribunal allows the counter claim dated 22 February 2017 in the following amounts:

loss of value in the business: $22,500

stock used by the purchaser: $3,000

franchisor legal fee: $2,750

telephone expenses: $162

electricity expenses: $412

replacing the key: $296

Total: $29,120

H. Conclusion

133. As discussed above, the application by Ms Le was for $6,925 under the fitout claim; $1,310 under the hot water service claim; and the return of the deposit of $75,000, in part on the basis that because it was for 50% of the purchase price it amounted to a penalty, under the deposit claim. The original tribunal rejected all these claims.

134. This Tribunal has allowed the appeal on the basis that the provisions of the Agreement for payment of the deposit of 50% of the purchase price to the vendor was a penalty and should not be enforced (appeal ground (d), supported by grounds (b) and (c)). Subject to the counter claim dated 22 February 2017, this deposit should be returned to the purchaser. The other grounds of appeal are not allowed.

135. But this Tribunal has also allowed the counter claim dated 22 February 2017 by Mr Nguyen for breach of the Agreement in the amount of $29,120. This amount should be paid to Mr Nguyen from the deposit, and the balance paid to Ms Le.

..

Acting Presidential Member R Orr

HEARING DETAILS

FILE NUMBER:

AA 48/2016

PARTIES, APPLICANT:

Thoa Kim Thi Le

PARTIES, RESPONDENT:

Toan Nguyen

COUNSEL APPEARING, APPLICANT

N/A

COUNSEL APPEARING, RESPONDENT

N/A

SOLICITORS FOR APPLICANT

Legal Aid ACT

SOLICITORS FOR RESPONDENT

N/A

TRIBUNAL MEMBERS:

Acting Presidential Member R Orr QC

DATES OF HEARING:

23 January and 27 February 2017