Smith v Nelson[2023] QCATA 51

QUEENSLAND CIVIL AND ADMINISTRATIVE TRIBUNAL

REASONS FOR DECISION

What is this application about?

1. [1]
   On 23 February 2022 a decision was made by consent in the Tribunal’s minor civil dispute (MCD) jurisdiction ordering Ms Nelson to pay Mr Smith the sum of $10,000 by instalments of $50 per week until that sum was paid in full. Upon default of an instalment payment, the full amount would become payable immediately.
2. [2]
   The question for the Appeal Tribunal is whether Mr Smith’s consent to the order was irregularly obtained.
3. [3]
   Mr Smith’s initial claim was for $25,000 and he says it should never have been reduced.  He therefore wants to appeal the original decision, but to do so, leave is first required.^[1]
4. [4]
   In determining whether to grant leave, the Appeal Tribunal must be satisfied that, relevantly: ^[2]

   1. (a)
      there is a reasonably arguable case of error in the primary decision; and
   2. (b)
      leave is needed to correct a substantial injustice caused by that error.

The first instance decision

5. [5]
   Mr Smith and Mr Nelson were in a sexual relationship between September and November 2019 but did not regard themselves as being ‘in a relationship’ and say they were “never boyfriend and girlfriend’.^[3]
6. [6]
   Nonetheless Mr Smith says that during this period, and through until September 2021, he advanced $25,000 to Ms Nelson by way of loan, on the understanding that as a struggling single mother she would pay him back when she could. Advances were haphazard and for various of Ms Nelson’s expenses that included shoes, vehicle registration, pharmacy items, trailer hire, McDonalds, and Kentucky Fried Chicken.
7. [7]
   Ms Nelson did not dispute that Mr Smith advanced money to her, except to say that some advances were gifts rather than loans, and this was, in turn, conceded by Mr Smith. There was no discussion or determination of which advances were considered gifts and which were considered loans, as, after hearing brief, unsworn evidence from both parties on nature of their relationship during the time money was advanced, the Tribunal initiated a discussion as follows:^[4]

TRIBUNAL:   Okay.  Good.  Right.  Okay.  Let me make a suggestion, Ms Nelson and Mr Smith.  I don’t know why you continued to give Ms Nelson money, Mr Smith but I don’t need an answer to that.  Okay.  Ms Nelson, what if I suggested to you that you’ve said some of this was gifts, some of it was because you were in a relationship, some if – I think you have said to me – or – I think you’ve said that you – it was a loan and you were intending to pay it back.  Ms Nelson, what if I suggested to you that you pay to Mr Smith the sum of $10,000 by way of $50 per week for a period of four years.

MS NELSON:   [indistinct]

TRIBUNAL:   That’s a very substantial discount and it’s a very low amount of money to meet every week.

MS NELSON:   Yep.  Okay.

TRIBUNAL:   Thank you.  Mr Smith -    

MS NELSON:   But it’s a hard amount of money when you’re, like, struggling though.

TRIBUNAL:   Well, look, he’s given you this money.  You needed things for your daughter’s appointments. 

MS NELSON:   Yeah.

TRIBUNAL:   He has been an angel for you during this time.

MS NELSON:   Yes.

TRIBUNAL:   That’s all I’m saying.  Okay.  Mr Smith, I want to talk to you now. 

MR SMITH:   Yep.

TRIBUNAL:   Okay.  You’re not the first bloke who’s lost a lot of money with a person that he probably likes a bit too much and has been taken in but you’ve been very silly and there are amounts in there that I would never give you; the amounts that are things like meals, shoes, all that sort of thing.  She’s right.  There was an element of gift in here.  In the early days.      

MR SMITH:   Yep.

TRIBUNAL:   In the early days I – no matter what you say, you were in a relationship and you do things for people when you are in the pink of love.  So because of that, you’ve been silly but I could discount your items down to $10,000 and ask that Ms Nelson pay it off over a period of four years which is a long time and a small amount of money but it acknowledges that there was some loans made.

MR SMITH:   Yep.

TRIBUNAL:   Good.  Are you agreeable with that, Mr Smith?

MR SMITH:   Yeah.  I’m agreeable but, like, as I said, like, I know that she’s struggling.  I know $50 – but $50 for her is a lot of money and that’s why I -     

TRIBUNAL:   Well, I – well, why don’t you just get up.  I’ll just say the – I’ll dismiss the matter and don’t worry about it?  But she says she’s got a job now.

MR SMITH:   No but – yeah but all I want to do is – yeah but even though she’s got a job, she still doesn’t make that much money to make ends meet.  That’s the only thing.

TRIBUNAL:   Well, what [indistinct] do      

MS NELSON:   Fifty dollars      

MR SMITH:   [indistinct]

MS NELSON:   Fifty dollars is fine.

TRIBUNAL:   Okay.  When’s your      

MR SMITH:   If she’s right with $50 then [indistinct]

MS NELSON:   Fifty dollars a week is fine.

TRIBUNAL:   Thank you.  Okay.  Ms Nelson, when is your next payday, please?

MS NELSON:   Tonight.

TRIBUNAL:   Tonight?  Okay.  Then we’ll go      

MS NELSON:   Yes.  So I get paid Wednesday night.

TRIBUNAL:   Okay.  Well, we’ll move on to the 2nd day of March.  Okay.

MS NELSON:   Yep.

8. [8]
   The Tribunal then made orders:^[5]

TRIBUNAL:   All right.  Now, I’m going to just craft this order.  I am going to say, “By consent” – no-one is being forced to do anything here.  By consent, the respondent will pay the applicant the sum of $10,000 by way of weekly instalments of $50 per week, commencing on or before 4 pm on the 2^nd of March 2022 and by bank direct deposit”.  So by next week, Ms Nelson, you need to set up a bank direct deposit so that 50 goes straight out of your account.  Okay. 

The next paragraph says, in default one payment, all monies outstanding are payable immediately.  So if you decide not to pay next week, Ms Nelson, Mr Smith does not have to  – does not have to wait four years.  If you do not pay once, he can collect the $10,000 from you in any way he can immediately.

MS NELSON:   Okay.

TRIBUNAL:   Okay.  Mr Smith, do you understand the order?

MR SMITH:   Yep.  I understand it.

9. [9]
   Mr Smith’s application for leave to appeal and appeal says that:

It was claimed that myself and the respondent were in a relationship thus why the amount claimed was reduced.

10. [10]
    He also says that he wants the Appeal Tribunal to “reconsider the amount owing as this was all borrowed money that the respondent asked for”.
11. [11]
    Ms Nelson made no submissions in response.

Application for leave to rely on fresh evidence

12. [12]
    For reasons that will become obvious it is not necessary to consider Mr Smith’s request that he be allowed to rely on new evidence in this application as it can be decided on the hearing transcript alone.

Should leave to appeal be granted?

A reasonably arguable case of error in the primary decision

13. [13]
    A consent order that has merely been “submitted to” may be set aside in the same circumstances as any order made without the parties’ consent.^[6]
14. [14]
    As observed by the Appeal Tribunal in Critchley v Isabel [2021] QCATA 23 at [1] to [2]:

    1. (a)
       Alternative dispute resolution is one of the Tribunal’s core functions. It facilitates the Tribunal’s mandate to conduct proceedings in an informal way that minimises costs to parties and is as quick as is consistent with achieving justice.^[7]
    2. (b)
       However, the conduct of settlement negotiations in proceedings can be a delicate exercise:

There are some occasions when on the day of the hearing it is appropriate for the presiding Member to offer the parties the opportunity to resolve the dispute before the proceeding commences. However it is not appropriate to carry out those negotiations with the parties on the record and then proceed with the hearing. The parties should leave the hearing room to conduct those discussions.

Alternatively another member (if available) could chair a compulsory conference.

If the member allocated to conduct the hearing conducts a conference they should only do so off the record and after explaining to the parties that in all likelihood they will not be able to continue the hearing if the matter does not resolve.

[An] indication by the learned Member as to the likely outcome before and after the hearing commenced, and the conducting of settlement negotiations during the giving of evidence [can mean] that the parties were in all likelihood confused about the process.^[8]

15. [15]
    In Critchley, the Appeal Tribunal noted at paragraphs [6]-[10] that:

    1. (a)
       The parties were self-represented.
    2. (b)
       The parties were entitled to expect that the Tribunal would proceed to hear their evidence and submissions and then make a decision.
    3. (c)
       Any attempt by the Tribunal to facilitate a settlement should have been done at the start of the proceeding and before the taking of any evidence from the parties.
    4. (d)
       An appropriate attempt by the Tribunal to encourage the parties to settle a proceeding must never create any impression of prejudgement.
    5. (e)
       In all proceedings, the Tribunal must still act fairly and according to the substantial merits of the case^[9] and observe the rules of natural justice.^[10]
    6. (f)
       A failure to give natural justice is an error of law for which leave should be granted to correct a substantial injustice.^[11]
16. [16]
    In similar circumstances in McWilliam v Australian College of Information Technology Ltd [2021] QCATA 38 the Appeal Tribunal found that the Tribunal’s attempts to facilitate a settlement during the hearing amounted to a denial of natural justice where they:

    1. (a)
       indicated during proceedings an appropriate outcome;
    2. (b)
       attempted to facilitate a settlement of the dispute on the record during the course of the hearing with specific proposals; and
    3. (c)
       led the negotiations between the parties on the record.
17. [17]
    In the matter of Mr Smith and Ms Nelson:

    1. (a)
       The Tribunal initiated settlement discussions after brief and unsworn evidence was given and by suggesting the outcome rather than letting the parties lead it. 
    2. (b)
       This took place on the record. 
    3. (c)
       When Mr Smith expressed some hesitance, he was immediately confronted with the Tribunal’s suggestion that the application would instead be dismissed. 
    4. (d)
       It was open to Mr Smith to conclude that the Tribunal had formed a view before testing all the evidence and hearing further submissions and this impacted how Mr Smith then acted in agreeing to the order that was suggested to him. 
    5. (e)
       In those circumstances, Mr Smith was not given a satisfactory opportunity to properly frame and present his case.
    6. (f)
       The application for leave to appeal and appeal claiming that the settlement amount should not have been reduced supports an inference that Mr Smith was confused by the outcome rather than that he experienced a subsequent change of mind: he did not understand why his claim was reduced and the transcript reflects that the settlement figure was substantially discounted and a creation of the Tribunal rather than offered by Mr Smith, proposed by Ms Nelson or calculated by some reference to evidence.
    7. (g)
       These circumstances amounted to a denial of natural justice, which is an error of law.

Substantial injustice on account of the error

18. [18]
    The denial of natural justice to Mr Smith is a substantial injustice that can only be corrected by a rehearing of the claim.
19. [19]
    On that point, in what may be a circumstance of being ‘careful what you wish for’ Mr Smith faces some challenges in obtaining the substantive relief he seeks upon that rehearing.
20. [20]
    Firstly, evidence before the Tribunal that was not addressed included a text message from Ms Nelson to Mr Smith in which she says:

Hi Daniel Smith.

Could I please have your details to add your debt to my bankruptcy register?

I filed for bankruptcy and can include your debt on it, but this means I won’t be able to pay this debt, as I am in no position to, which is why I’ve decided to go bankrupt because you are not the only “debt” I have.

Thank you

Karen

21. [21]
    If it is the case that Ms Nelson is the subject of a personal insolvency agreement, her administrator has responsibility for dealing with claims as stated in her debt agreement s 185LA of the Bankruptcy Act 1966 (Cth). A creditor cannot enforce a remedy against the debtor‘s person or property, or start or take a fresh step in legal proceedings, in respect of a provable debt (s1 85K(1)(c)). Other provisions of the Bankruptcy Act 1966 (Cth) may also operate as an effect bar against Mr Smith’s action. However, Ms Nelson did not mention her bankruptcy in the original hearing and there is no evidence before the Tribunal to establish the point definitely.  It will need to be addressed on any rehearing.
22. [22]
    Secondly, schedule 3 of the Queensland Civil and Administrative Tribunal Act 2009 (Qld) (QCAT Act) describes a minor civil dispute (MCD), amongst other things, as “a claim to recover a debt or liquidated demand of money, of up to the prescribed amount”, which is currently $25,000.00, excluding interest and costs. 
23. [23]
    A debt or liquidated demand has been described as a sum of money that can be calculated by reference to a formula, schedule, or some other yardstick by which the debt or sum payable can be readily calculated.^[12]  A debt can arise between two parties in several ways: relevantly in this case, it might be pursuant to a contract or by way of an equitable claim
24. [24]
    Although only brief evidence was given by the parties regarding the circumstances in which Mr Smith paid money to Ms Nelson, the arrangement occurred in some type of social relationship, be it sexual, friendship or otherwise, rather than in an arm’s length, commercial transaction.
25. [25]
    Despite a promise to repay, a legally enforceable agreement (contract) requires an offer, acceptance of that offer, consideration for the promises made and an intention to create legal relations.^[13] The terms must be certain, and the parties must have capacity to contract. 
26. [26]
    As observed in Guzman v Bird [2021] QCAT 100, ‘lenders’ in social/familial relationships are often unable to establish that they have an enforceable contract because they fail to establish that the ‘borrower’ had an intention to be bound by their promise to repay and because the repayment terms are not certain.
27. [27]
    In determining whether funds loaned to a party should be considered a loan, courts will consider several factors including:^[14]

    1. (a)
       the existence of any written loan agreement;
    2. (b)
       the terms of repayment;
    3. (c)
       whether any loan repayments were in fact made by the parties;
    4. (d)
       evidence of any discussions held between the parties as to the existence and terms of the loan;
    5. (e)
       whether there was any expectation of repayment; and
    6. (f)
       whether there was any security provided in respect of the loan, such as a registered mortgage.
28. [28]
    Thirdly, if the claim is not a “debt”, it appears to now be well established that a liquidated claim in restitution based on unjust enrichment might also fall within the MCD jurisdiction.^[15]
29. [29]
    In 2005 Chief Justice Allsop AO observed^[16]:

The action of restitution as the descendant of the common law action for "money had and received" has matured in Australia, based on the informing principle of the prevention and reversal of unjust enrichment.

30. [30]
    His Honour identified^[17] at least three features governing the Australian law of restitution for unjust enrichment:

    1. (a)
       “unjust enrichment” is not the statement of a premise or principle of recovery, but rather it is an informing principle or unifying or organising concept;^[18]
    2. (b)
       a two-stage approach is to be adopted requiring:
       3. (i)
          identifying an unjust or qualifying or vitiating factor that causes enrichment such as mistake, duress, conditionality of payment, request, failure of consideration; and
       3. (ii)
          establishing that the defendant has no juristic reason entitling retention of the enrichment;^[19] and
    3. (c)
       there is an explicit recognition of the equitable character of the action by the application of equitable principles in ascertaining who should properly bear the loss and why.^[20]
31. [31]
    If he cannot establish a binding agreement to repay, Mr Smith will need to establish that:

    1. (a)
       Ms Nelson was enriched;
    2. (b)
       The enrichment occurred as his expense;
    3. (c)
       The enrichment was unjust; and
    4. (d)
       That any defences or vitiating factors raised by Ms Smith ought not deny him his remedy.
32. [32]
    Establishing his contractual or equitable right to payment is a daunting task for Mr Smith that he was not put to in the first instance hearing and will now need to occur.

Conclusion

33. [33]
    As the Tribunal denied the parties natural justice and therefore fell into an error of law in making the orders it did, leave to appeal should be granted, the appeal allowed, the original decision set aside and the claim reheard in the MCD jurisdiction. 
34. [34]
    As the original decision-maker engaged in alternate dispute resolution within the hearing, it is appropriate that a differently constituted Tribunal rehear the claim. 
35. [35]
    Directions will be made requiring Ms Nelson to establish her bankruptcy if she maintains that she is bankrupt.