NARHEX AUSTRALIA PTY LTD v TELEMARKETING AUSTRALIA PTY LTD SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL KirBy ACJ, HANDLEY and SHELLER JJA 12 July 1995, 24 August 1995 [1995] NSWCA 307 CONTRACT — penalty — credit charges 0.6% per day — whether penalty law applies — if so whether penalty — held: Not a penalty — no relief. AMEV Finance Ltd v Artes Studios thoroughbreds Pty Ltd (1989) 15 NSWLR 564 (CA) appld. PRACTICE and PROCEDURE — cross examination — control of by trial judge limits to — changing approach to — held: No error. INTEREST — contract — whether penalty. JUDGE'S REASONS — whether adequate. ARBITRATION — civil arbitration — costs of whether evidence deliberately withheld. CONTRACT — penalty — credit charges — provision for credit charge of 0.06% per day on debt unpaid after 21 days — whether such charge is a penalty and unrecoverable as such — whether the law of penalties applies to such a charge held: (1) In deciding whether a sum provided by a contract amounts to a penalty, the Court must determine whether that sum is provided for a breach of the agreement and if so whether it amounts to a genuine pre-estimate of the damages which flow as a result of the breach. Dunlop Pneumatic Tyre Co Ltd v New Garage and Motor Co [1915] AC 79 (HL) applied, (2) The Court will approach such questions by looking to the substance not the form of the agreement. Acron Pacific Pty Ltd and Ors v Offshore Oil NL and Ors (1985) 157 CLR 514; (3) The sum in question was not, in the circumstances, a penalty because it did not amount to an extravagant burden or impose unconscionable or unreasonable burdens upon a party. IAC (Leasing) Ltd v Humphreys (1972) 126 CLR 131; O'Dea and Ors v ALL States Leasing System (WA) Pty Ltd and Ors (1983) 152 CLR 359; AMEV Finance Ltd v Artes Studios Thoroughbreds Pty Ltd (1989) 15 NSWLR 564 (CA) applied. PRACTICE and PROCEDURE - cross-examination - control of - entitlement of judge to limit - whether limit was imposed - whether any such limit unduly circumscribed the right of the proposing party to test and challenge evidence important to its case - held: (1) The extent to which a judge may limit cross-examination, without statutory authority is circumscribed, is difficult to define but is determined by procedural fairness to the party affected. Wakeley v The Queen (1990) 93 ALR 79 (HC); Mooney v James [1949] VLR 22 (SC) applied. (2) In the modern circumstances of civil trial at least, the judge conducting the trial must be allowed considerable latitude in the control of cross-examination which he deems to be unhelpful to him. Ketteman and Ors v Hansel Properties Pty Ltd [1987] AC 189 (HL); (3) In the present case there was no excessive judicial interference in cross-examination. APPEAL - credibility finding - challenge to - whether incontrovertible evidence permit appellate court to overrule findings as to the acceptability of testimony as to an accounting 2 UNREPORTED JUDGMENTS system and supporting documents - held: The judge was entitled to reach the conclusion which he did and it was not contradicted by incontrovertible fact. Voulis v Kozary (1975) 180 CLR 177; Abalos v Australian Postal Commission (1990) 171 CLR 167, 179 applied. JUDGE'S - reasons - adequacy of- dispute as to invoices for running account - evidence as to system and supporting documents - whether judge bound to deal with all conflicts - whether acceptance of honesty of creditor enough - held: In the circumstances there was no inadequacy in the reasons provided by the judge. Soulemezis v Dudley (Holdings) Pty Ltd [1987] 10 NSWLR 247 (CA); Sun Alliance Insurance Ltd v Massoud [1989] VR 8; Bourke and Anor v Beneficial Finance Co Ltd (1993) 124 ALR 716 (FFC) applied. INTEREST - penalty - contractual term - whether credit charge is a penalty - held: not a penalty - consumer credit charge upheld - interest added to debt. COSTS - arbitration - proper conduct of in civil action - District Court appeal- whether costs recoverable - whether arbitration proceedings no properly conducted - held: No basis was shown that evidence had been deliberately withheld from the arbitration - costs follow event. Quach and Anor v Moustaffa, Court of Appeal (NSW), unreported 15 June 1995 distinguished. PRACTICE and PROCEDURE - conduct of trial - public and private costs - detailed examination of debt - scrutiny of invoices and supporting documents - four day District Court trial - one day arbitration - observations by Kirby ACJ on the duty of legal practitioners to instil a sense of proportion in clients having regard to the public and private costs involved in litigation over comparatively small sums. Arbitration (Civil Actions) Act 1983 Supreme Court Act 1970, s75A District Court Act 1973, s83A ORDERS Appeal dismissed with costs. Kirby ACJ This appeal from the District Court (Patten DCJ) concerns challenges to a verdict and judgment returned in favour of Telemarketing Australia Pty Ltd (the respondent) against Narhex Australia Pty Ltd (the appellant). The judgment challenged is in the sum of $81,238.85 together with interest found pursuant to a contract, in the sum of $113,549.71. The total judgment for the respondent was therefore in the sum of $194,788.56. Patten DCJ knew that there had previously been a reference of the dispute to arbitration. This had taken place pursuant to the Arbitration (Civil) Actions Act 1983. What his Honour did not know was that the arbitrator (Mr WS Reynolds) had rejected certain of the respondent's claims as either unproved or unsustainable under the contract between the parties. He had found the total recoverable indebtedness at $61,735.31. He had declined the claim for interest under the contract, upholding a contention that the interest rate which the respondent charged (viz a fee of 0.6% per day on all moneys outstanding on overdue accounts) was a penalty which "ought to be struck down". The arbitrator dismissed the alternative submission that he should award interest under the District Court Act 1973. This refusal was grounded upon the failure, as the arbitrator found, of the respondent to establish a number of its claims and to recover a sum greater than that which the appellant had earlier brought into court. On 4 May 19839, the appellant paid into court the sum of $66,311.86 in answer to the entirety of the respondent's claim. That amount was, of course, greater than the sum recovered by the respondent in the arbitration. When that sum was not accepted by the respondent it was repaid to the appellant which therefore had the benefit of it. At no stage did the appellant pay the respondent a sum (other than an initial payment of $5,000 in respect of the acknowledged debt by it to the WRARHEX AUSTRALIA PTY LTD v TELEMARKETING AUSTRALIA PTY LTD (Kirby ACUB respondent). As will appear, this refusal was based upon a dispute which broke out between the parties and the contest which the appellant raised as to the proof by the respondent of the amount owing by the appellant to it. Having brought in an award less than the sum which had been paid into court, the arbitrator declined to award the respondent its costs of the arbitration after the date of the payment in. From that time, he ordered the respondent to pay the appellant's costs. The arbitrator also dismissed a claim brought by the respondent against Mr Wojciech Majewski, the managing director of the appellant. That claim had been based upon an alleged contract of guarantee which Mr Majewski had signed accepting personal liability to the respondent for the appellant's debt. Patten DCJ also rejected the claim against Mr Majewski. That claim has not been prosecuted in the appeal. The arbitrator ordered the respondent to pay Mr Majewski's costs of the arbitration. Patten DCJ ordered the respondent to pay such of Mr Majewski's costs as could be shown to be exclusively referable to the proceedings against him. That order has not been contested. Although the amount recovered under the judgment of the District Court entered by Patten DCJ for the debt owed by the appellant to the respondent ($81,238.85) was not greatly more than the amount found by the arbitrator to be owing ($61,735.31), upon the difference rode important results. These related to the costs of the arbitration and of the District Court proceeding and to the interest which was payable by the appellant to the respondent. The appeal to this Court represents the endeavour of the appellant to restore the position in which it found itself after the arbitration. If this could be done, the debt owing by it to the respondent would be reduced, the costs orders reversed and the interest payable, avoided or diminished. Unfortunately, this is another case in which the substantial difference between the parties was originally quite modest (of the order of $15,000). But once litigation is put in train, with the emotional and financial consequences which it typically engenders, the modest difference blew out to a substantial wager in which the outcome became somewhat unclear and the adventure decidedly risky. It is the obligation of legal practitioners always to counsel parties against the improvident venturing of large costs and emotional investment in litigation where these so greatly outweigh (as in this case) the original stake in contest between them. GENESIS OF THE DISPUTE BETWEEN THE PARTIES At the beginning of 1988, the appellant was in the business of developing and marketing a cosmetic product called "Cross-Linked 10/60 Elastin". The respondent was in the business of providing telemarketing services. As the name connotes, this involved making and receiving telephone calls on behalf of clients engaged in advertising campaigns. Mr Majewski contacted Mr Roy Grady, general manager of the respondent. There were discussions between the parties about an arrangement between them. This resulted in the execution of an agreement in writing for the provision by the respondent to the appellant of its telemarketing services. Those services were to be of two general kinds. The first was an "outbound" service. The second was an "inbound" service. Each service followed public advertising of the appellant's product. The "outbound" service involved employees of the respondent contacting by telephone a number of pharmacists, seeking to enlist the interest of those pharmacists in stocking the appellant's product and in agreeing to act as an agent for the purpose of the promotion. The charges to be made by the respondent to the appellant for such "outbound" calls included an establishment charge of $3,000 for the service, 4 UNREPORTED JUDGMENTS various charges for telephone calls made. Such charges varied in accordance with whether the calls were successful or unsuccessful and whether sundry costs such as courier, postage, photocopying, etc were incurred. So far as the "inbound" calls were concerned, these were to be received on an 008 telephone line nominated by the respondent. Telephone calls to that line were transfered to employee receptionists of the respondent. They might at the same time be receiving calls in relation to other promotions. But when they related to the appellant's product, the respondent's system required the operators to record the relevant order so that it could be followed up by the appellant in the provision of the product ordered directly by the customer. For this service there was also an establishment fee ($260). The appellant was bound to pay the cost of the telephone calls, varying in accordance with whether they were local calls (as some were) or were made to the 008 number. A differential administration charge was levied and again miscellaneous charges such as for courier, postage, fax, photocopying, etc were to be paid by the appellant to the respondent. Produced in evidence was the booking form to which was attached the cost schedule. This described the establishment costs as "Development Costs" In the case of outbound calls the $3,000 establishment fee was described as for scan sheet preparation, scripting, response form design, operator instruction, inhouse testing". So far as "call making" was concerned the written agreement provided: "Tf prospect is not contacted Cost per attempt $8-00 Estimated 5 contacts/hour One attempt = one third of contact if prospect not contacted" There is then provision for "Telecom" broken down to: "Local... 30c per call STD - Bris, Melb, Can, $2.30 p/c - Adelaide, Perth $3.30p/c (At Cost)" Provision is then specifically made for: "Additional Costs Courier... At Cost Postage... At Cost Photocopying.... 15c per page. " The foregoing cost schedule was accepted by the appellant. It bears the signature of Mr Majewski dated 10 May 1988. An attached application for a credit account on behalf of the appellant, signed by Mr Majewski addressed to the respondent, contains the following credit terms: "1 Payment of account is to be made within 21 days from Date of Invoice. 2 A fee of.06% per day on all monies outstanding on Overdue Accounts may be applied at the company's discretion without notice. 3 Credit facilities may be withdrawn on Overdue Accounts at the company's discretion without notice. 4 When the application is in the name of a Private Company, the Personal Guarantee of Each Director is required." This document was signed by Mr Majewski on behalf of the appellant. Annexed to it was the form of guarantee upon which the respondent originally relied on its action against Mr Majewski personally. This Court has not been concerned with that issue. WRARHEX AUSTRALIA PTY LTD v TELEMARKETING AUSTRALIA PTY LTD (Kirby ACUB The cost schedule for incoming telephone calls specified the establishment fee of $260. There was a fee for local calls of 1.65 c per call and 008 of 2.75 c per call with a hand written annotation "per single product additional 30c for each additional product per order'. A charge was also provided for "admin/batching/line rental" of $52 per week. Additional costs were also provided: "Courier... At Cost Postage... At Cost Facsimlle... Telecom +.21c per page Telecom: Local.30 per call STD At Cost Photocopying....16c per copy." Although this document was not similarly signed by Mr Majewski on behalf of the appellant, there was no dispute that it was binding on the parties. The respondent had its system for recording both "outbound" and "inbound" telephone calls. It would have been surprising, in an organisation whose business was telemarketing, it there had not been a settled procedure to record the telephone calls which were the basic unit service upon which the respondent's fees and charges were based. It was as much in the interests of the respondent to have an efficient system for this purpose as it was in the interests of the customers (including the appellant) who would be charged for such services. A great deal of the evidence in the arbitration and in the District Court, both oral and written, was directed to elucidating the system adopted by the respondent to ensure the accuracy of the recording of both "inbound" and "bound" calls and then transfering such record to the invoices regularly sent to customers, including the appellant. There seems little doubt that Mr Majewski felt that the appellant had been overcharged by the respondent for its services. The case for the appellant was put variously: (1) That the overcharge was deliberate and involved, as the appellant's counsel repeatedly put to this Court 'doctoring' of the records. I take this to be an assertion, in effect, of a false and deliberately fictitious charges, quite possibly fraudulent and certainly deliberately deceptive. It should be said at once that there is no evidence whatsoever of this claim. It was not pleaded or particularised by the appellant in its defence. It has never been made out. Even the arbitrator did not accept such a claim. The case at no time gave rise to the proof of such assertions. I regard it as regrettable that such assertions were made although not pleaded and particularised. Unhesitatingly, I would reject the suggestion that the respondent "doctored" its records in order to overcharge the appellant. There is no foundation for this assertion in the facts proved; (2) That the respondent deliberately and obdurately refused to provide the one objective basis for disposing of the dispute concerning the number of telephone calls which were made, namely the respondent's Telecom record which would break down both the number and origin or destination of such calls and permit, from an objective external source, the determination of the multiplier by which the principal component of the respondent's charges could be accurately and authoritatively determined. At first, this seemed to me to be a much better argument. The refusal of the respondent to provide its Telecom account upon privacy or other grounds appeared at first to be rather obdurate and needlessly obstructive. However, it later appeared that this apparent solution to the dispute between the parties was unhelpful, given the multiple uses for which the 6 UNREPORTED JUDGMENTS respondent's assigned telephone numbers with Telecom were used and the need to adopt an internal record-keeping system to differentiate the costs which were properly chargeable upon those numbers to the account of the appellant. Contrary to what I took to be the case of the appellant in chief before this Court, it emerged in the respondent's reply that supplementary discovery in the District Court had occasioned the production to the Court (and the appellant) of the Telecom accounts. Those accounts were not tendered for the appellant to contest the charges claimed by the respondent. In the circumstances of this case, it may readily be inferred that had the Telecom accounts of the respondent cast the slightest doubt upon the number, origins and destinations of the telephone calls charged by the respondent to the appellant's account, such records would have been tendered in the appellant's case in the District Court. They were not. Accordingly, this second challenge to the respondent's charges can be dismissed; and (3) To put the respondent to the proof that its charges were in accordance with the agreement between the parties. Ultimately, this was the strategy of the respondent both in the arbitration and in the District Court. It was the third strategy before this Court when the contentions of "doctoring" and seemingly obdurate refusal to provide objective Telecom records were blown away. All that was then left was a requirement that the respondent prove its case. This consumed no fewer than five days of hearing at the trial in the District Court. It took up two days of the appeal to this Court. It obliged both courts to spend very considerable time scrutinising individual invoices submitted by the respondent to the appellant and then to check individual accounts and internal records of the respondent referred to in those invoices in order to make sure not only that the system was efficient, accurate and subject to spot checks from time to time (as I am satisfied it was) but also that no overcharges were made which were not subsequently the subject of adjusting credits. Whilst the courts are obliged to determine disputes as the parties present them, it is necessary to point out that a substantial public cost is involved in the expenditure of judicial time on such endeavours. Far in excess of the differences between the acknowledged debt of the appellant to the respondent and the amount claimed by the respondent are the sums that were devoted to the curial scrutiny which this case involved. A measure of proportion is required in such disputes, if not in the private costs then at least because of the public costs involved. When such disputes come to this Court, it is not unreasonable that the Court, discharging its duty to perform a rehearing as s75A of the Supreme Court Act 1970 requires, should none the less remind the parties that its function is appellate. Error must be shown before this Court will intervene to disturb the judgment entered by the District Court after such a painstaking and detailed conduct of the trial by the primary judge. THE GROUNDS OF APPEAL The appellant's grounds of appeal were variously expressed. However, as argued they may be grouped as follows. They each contend that Patten DCJ erred: (1) In curtailing and limiting the cross-examination by counsel for the appellant of the respondent's managing director, Mr McInerney; (2) In holding that the respondent's record-keeping system was meticulous and reliable; (3) In allowing evidence to be given of reconciliations necessary to make sense of the respondent's invoices and documents offered in support of the invoice and in allowing such evidence to be admitted; WRARHEX AUSTRALIA PTY LTD v TELEMARKETING AUSTRALIA PTY LTD (Kirby ACJUY (4) In holding that a contractual interest rate of 0.06% per day (approximately 21.9% per annum) did not constitute a penalty; (5) In failing to give adequate reasons for the decision; (6) In refusing to allow cross-examination or the admission of evidence as to the respondent's financial position, relevant to the question of the alleged penalty; (7) In the award of interest; and (8) In the exercise of the discretion as to the costs of the arbitration. I shall take each of these challenges in turn. THE PRIMARY JUDGE'S FINDINGS AS TO CREDIT It is necessary to notice the finding by Patten DCJ concerning the credit of the respondent's officer which, at least in the case of Mr James McInerney, was the subject of severe criticism in the District Court, as it was later to be repeated in this Court. Of this, his Honour said: "There was no challenge to the evidence of Mr Grady as to his conversations with Mr Majewski, and there was no challenge to the written documentation. I am satisfied that the services performed by the plaintiff for the defendant thereafter, those services being provided between May and about August 1988, were performed by the plaintiff in accordance with the written documents, as modified by subsequent telephone and other conversations between Mr Grady and Mr Majewski." The modification referred to was a 25% increase in the charges made above those set out in the written agreement. Later, his Honour went on: "Evidence was given in relation to those invoices by Mr Mclnerney, who was the Managing Director of the plaintiff at the time. He provided detailed explanations of the invoices and provided orally, reconciliations of what might be said to be discrepancies. Other witnesses called in the plaintiff's case were Mr Grady, principally as to the making of the contract, and as to subsequent conversations with Mr Majewski, a Miss Brenner, who was involved with the supervision of the two campaigns, that is, supervision of the telemarketers engaged in both campaigns, a Miss Vicki Argyopolous, who was concerned with the keeping of the records, and the compilation of draft invoices, and most significantly on this issue, Mr McInerney, the plaintiff's Managing Director. Ihave no difficulty in accepting the plaintiffs witnesses as witnesses of truth, but I wish to make particular reference to the evidence of Mr Mclnerney, who in my view, was subjected to a quite unwarranted slur upon his veracity. In my opinion Mr Mclnerney was a patently credible witness, who did nothing but assist the court to the best of his ability. He was attacked because he sought yesterday to correct some evidence which he had given the previous day, and which he apparently believed was incorrect. When confronted with the fact that his original evidence was correct, he readily admitted that to be the position, and I certainly draw no inference whatsoever adverse to Mr Mclnerney, from what transpired in relation to that particular piece of evidence. I do not think it necessary in these reasons to go in detail through the formulation of the plaintiff's case. There is a considerable quantity of documentation before me tendered in evidence. I am satisfied from that documentation, and from the evidence of the witnesses, particularly the evidence of Mr McInerney, that the plaintiffs general and particular systems of conducting its business, were such as to produce an accurate statement of the sum actually due by the defendant to the plaintiff under the agreement reached. Indeed it was plain from the evidence of Mr McInerney that he was absolutely meticulous in 8 UNREPORTED JUDGMENTS checking and correcting where necessary the records, so as to ensure that the defendant was only charged the correct amount determined in accordance with the agreement between the parties." In accordance with binding authority, this Court must approach its function with these findings and conclusions firmly in mind. CURTAILMENT OF CROSS-EXAMINATION Given that the eventual case of the appellant at the trial (and in this Court) was one which put the respondent to prove that its charges, and all of them, conformed strictly to the written agreement, as varied, it was complained on behalf of the appellant that Patten DCJ curtailed or limited cross-examination in an impermissible way The grounds of appeal in this regard suggest that his Honour "refused to allow to be explored the attitude and responses of Mr McInerney in the course of the luncheon adjournment of the earlier arbitration hearing of the matter" (ground 3), "refused to allow an issue to be explained in respect of invoice No 2853" (ground 4) and "refused to allow further cross-examination of Mr McInerney on credit subsequent to Mr McInerney's admission that he lied on his oath" (ground 7). The conduct of a trial must, to a very large extent, be reposed in the primary judge. It is subject to appellate review in this Court to guard against the possibility that procedural directions (as in limiting cross-examination) have passed the permissible line and have involved such a mistake as to occasion an injustice calling for appellate intervention. Care must be taken in applying some of the earlier dicta of the courts concerning restraint by the judges in limiting or curtailing cross-examination. The greater pressure upon the courts today, the large backlog of cases awaiting hearing (approximately two years in the general list of this Court), the disinclination of governments to appoint more judicial officers and the growing recognition of the public costs of trials have occasioned greater attention in recent times to the needs for judicial control of litigation than was formerly the case. This is particularly so in civil trials see eg Ketterman v Hansel Properties Ltd [1987] AC 189 (HL); GSA Industries Pty Ltd v NT Gas Ltd (1990) 24 NSWLR 710 (CA). A judge, conducting a civil trial has a responsibility not only to the parties before the court and to the witness under questioning but also to the community and to litigants in waiting. In a famous aphorism Wigmore once said that cross-examination was the greatest engine for truth. Certainly, it is a most important element in our trial system. But where cross-examination is unduly extended, pursues irrelevant or manifestly unhelpful lines of inquiry, or continues at such a length that its likely marginal utility is outweighed by its marginal cost in time and delay, the trial judge has an undoubted right (and ultimately the duty) to intervene. It is difficult, as the High Court has observed, to identify with precision when that point is reached. The judge, who, at least early in the trial, will know much less about the facts than the parties is obliged to repose much trust in the professional judgment of legal practitioners engaged in the case. The judge will be less likely to intervene in a civil trial before a jury. Particular restraints are imposed in criminal trials. The duty of the judge is to avoid procedural unfairness to a party. The judge must be careful that, in controlling cross-examination which appears excessive, that no miscarriage of justice to a party occurs. The purpose of cross-examination and of the trial process must ultimately control the use made of the judge's power to prevent excessive, irrelevant, offensive or otherwise impermissible cross-examination. This is because the judge does "not know what WRARHEX AUSTRALIA PTY LTD v TELEMARKETING AUSTRALIA PTY LTD (Kirby ACUD is in counsel's brief and has not the same facilities as counsel for an effective examination-in-chief or cross-examination". See Youll v Yuill [1945] 1 All ER 183 (CA) applied; Galea v Galea (1990) 19 NSWLR 263 (CA), 280. See also U Gautier, "Judicial Discretion to Intervene in the Course of the Trial" (1980) 23 Crim L Q 99, 97 (usurpation of the functions of counsel). A judge must not be unduly insistent on haste. See R v Ignati (1965) 53 WWR 248 (Man CA), 250. Nor may a judge unduly interfere with counsel's conduct of the trial or become or appear partisan or participate in an improper way in the trial. In my view U Gautier was right in concluding (at 124): "[T]here is no precise, objective way for establishing whether a decision to intervene in a trial will result in unfairness to the [party], nor is there one clear or correct answer. Rather, it is the task of an appellate tribunal to evaluate the consequence of the intervention... and weigh in a judicious manner its single or cumulative effect upon the outcome of the proceedings." Nevertheless, ultimately a point will be reached where the judge may properly intervene. Although that point is difficult to specify with precision, it will be recognised by the courts. See Wakeley v The Queen (1990) 93 ALR 79 (HC) 86; Mooney v James [1949] VLR 22 (SC), 28. So far as the cross-examination of Mr McInerney is concerned, it is worth noting that Patten DCJ rejected only seven questions during an extremely lengthy cross-examination. So far as Mr MclInerney's conduct after the arbitration is concerned, counsel for the appellant at the trial (who was not counsel on the appeal) cross-examined Mr McInerney on matters subsequent to the arbitration without interference. Although one question was rejected, leave was given to raise the matter again. To the extent that the appellant chose not to raise that matter, it cannot be complained about in this Court. So far as the cross-examination of Mr McInerney on his credit is concerned, I acknowledge that the appellant was entitled to test Mr McInerney's evidence given that he was clearly the most important witness from the respondent's camp who could explain both the systems in place and their implementation in the present case. Cf Bickel v John Fairfax and Sons Ltd and Anor [1981] 2 NSWLR 474, 494; Wentworth v Rogers [No 10] (1987) 8 NSWLR 398 (CA), 408. However, I am not convinced that the particular rulings which were made by Pattern DCJ during the cross-examination of Mr McInerney constituted an undue interference in the questioning so as to enliven the concern of this Court. So far as the complaint about invoice 2853 is concerned, it is worth noting that virtually the whole of the preceding three pages of transcript was devoted to the cross-examination of Mr McInerney about that invoice. It can scarcely be said that the primary judge intervened impetuously to limit this questioning. The cross-examiner at the trial appeared to think that he was entitled, in respect of each invoice, to question endlessly and repetitiously. Given that Patten DCJ was sitting alone and was obliged to resolve the differences between the parties for himself, he was perfectly entitled at the point where he felt the issue had been fairly explored with adequate thoroughness, such as would be helpful to him, to direct counsel to proceed to another point. This is all he did. The appellant accepted that the strong finding as to the credit of the respondent's witnesses, particularly Mr McInerney, presented an important obstacle in its path in disturbing the judgment of the District Court by appeal to this Court. In such a case, the authority of the High Court of Australia is clear. The trial judge's finding must stand unless it can be shown to this Court that he 10 UNREPORTED JUDGMENTS or she has failed to use, or has palpably misused, the advantage of conducting the trial or has acted on evidence which is inconsistent with facts incontrovertibly established or reached a conclusion which is glaringly improbable. See Abalos v Australian Postal Commission (1990) 171 CLR 167,178; Devries and Anor v Australian National Railways Commission and Anor (1993) 177 CLR 472, 479 Halvorsen Boats Pty Ltd v Robinson (1993) 31 NSWLR 1 (CA), 5. Faced with this line of authority the appellant sought to establish the falsity, or at least the inaccuracy, of Mr MclInerney's evidence by references to documentation which, it contended, cast doubt both upon the system which the respondent had in place and its support documentation for the actual charges made in the invoices presented by the respondent to the appellant in this instance. None of the material to which this Court was taken came close to disturbing Patten DCJ's credibility finding. It must stand. I have read the entirety of the cross-examination of Mr McInerney. The suggestion that Patten DCJ unduly curtailed or interfered with the cross-examination is insupportable. On the contrary, his Honour showed great patience and restraint as the lengthy duration of this trial over a comparatively small dispute, demonstrates. CHALLENGE TO THE "METICULOUS" AND "RELIABLE" RECORD KEEPING The appellant then contended that Patten DCJ had erred in finding that the respondent's record keeping was meticulous and reliable. In support of this, it pointed out that Mr McInerney chose to alter documents forming part of the system after they had been completed or drafted by employees of the respondent. But Mr MclInerney's evidence in this regard was that, as part of his duties, he checked the work of employees and performed "spot checks" to identify errors. This would be a perfectly regular and proper system for a business organisation such as the respondent to put in place. Calculations, mistakes, attributions of calls to incorrect customers and other like errors could occur from time to time requiring scrutiny and correction by a supervisor. Mr McInerney had university and accounting qualifications. It is important to say that although the cross-examination of Mr McInerney was prolonged and severe, it was not specifically put to him that he had falsely and fraudulently changed records in order deliberately to overcharge the appellant. Although such a case appears to have been signalled at one stage. it was not ultimately advanced. The relevant entry reads: "[Counsel for the defendant] pressed the question on the basis that the defendant alleged that after the arbitration there appeared documents that were never discovered before which improved the evidence of the plaintiff The defendant had subjected some of the documents to an examination by a document examiner who had produced a report and there was an allegation of manufacture of evidence by the plaintiff to better its case. [Counsel for the plaintiff] submitted that the defendant should put forward evidence to support its allegation which was illfounded and which should not be made. Submissions ensued." No report by a document examiner was ever tendered in the case. Given the intense conflict between the parties, it cannot be doubted that, had such document appeared to support the appellant's case in any way, it would have been tendered. It was not. In the course of his evidence, explaining the respondent's system, Mr McInerney described the procedures for spot checks: "Q Did you at any time make it a practice to check the inbound summaries at all? I mean they were prepared on a daily basis? WRARHEX AUSTRALIA PTY LTD v TELEMARKETING AUSTRALIA PTY LTD (Kirby ACJ) A Yes. Q From the response forms you have told us? A Yes. Q And the response form copies were not kept by you? A Correct. Q The originals were sent to the client? A Correct. Q Did you at any time do spot checks to ensure that the summaries... OBJECTION; LEADING; ALLOWED Al did. Q Can you tell us how frequently you did that? A Not really. It was spasmodic. I tried to make sure that the work was done accurately and I did it periodically. Once a week would he the most." Although the appellant's notice of appeal complains that Patten DCJ refused the "tender of material relevant to the reliability of the business records of the respondent", a fair reading of the transcript does not bear out this complaint. So far as the contention that his Honour erred in refusing to allow the tender of documents affecting "the reliability of the credit of Mr McInerney" the reference seems to be to the rejection of the tender of a collection of letters. In my view those letters were correctly rejected. Certainly, they show impatience on the part of Mr McInerney concerning what he perceived as the unjustified and improper refusal of the appellant to meet its just debts. They did not reflect upon his trustworthiness as a witness of truth. A great deal of latitude must be accorded by this Court to trial judges in the control of cross-examination directed solely to credit. There is no substance in these grounds of challenge. EVIDENCE OF RECONCILIATIONS Next, the appellant complained that Patten DCJ erred in permitting the respondent to give evidence of reconciliations designed to make clear the respondent's invoices and to tender secondary documents relied upon in support of those invoices as well as a memorandum which was prepared by Mr McInerney which was admitted into evidence. Given the way in which the appellant ultimately presented its case at trial, putting the respondent to the proof of a great many invoices and of the supporting documents relating to them, it is difficult to see how, consistent with a modicum of efficiency, the case could have proceeded without supporting documentary material. This Court itself called for documentary analysis to provide a reconciliation between the award of the arbitrator and the judgment entered by the District Court. Its purpose was to identify the points of difference. A case such as this is extremely difficult to manage without an efficient handling of documentary material. The aide memoir which was produced by Mr McInerney was used by Patten DCJ during submissions only. There is absolutely no substance to the challenge to this document. Its admission as an exhibit was purely for convenience. Perhaps if more documentary material had been produced both at trial and in this Court, the consumption of expensive sitting time might have been reduced. So far as the complaints of Mr McInerney's checking of the original records of Ms Argyopolous is concerned, in all but one case her mistakes were detected and corrected before the invoices were despatched to the appellant. The one exception (invoice No 2741) was in the sum of $640. The overcharge was later discovered and reversed as a credit. To infer because Mr McInerney picked up 12 UNREPORTED JUDGMENTS occasional mistakes by Ms Argyopolous that the respondent's system was generally unreliable is incorrect. The very fact that there was a spot check procedure and other systems for scrutinising records and that only one persisting mistake was found, demonstrates the general reliability of the system. I repeat, that it was in the interests of the respondent to have an. Its charges to clients such as the appellant depended upon the maintenance of such a system and its transference of totals at regular intervals to invoices despatched to the clients. PENALTY INTEREST There is no doubt that the agreement between the appellant and the respondent, to which Mr Majewski put his hand, contained the provision for the levy of an agreed interest of.06% per day. The arbitrator found that this sum (amounting to approximately 21.9% per annum) was a penalty. Pattern DCJ rejected that argument. The appellant argued that the arbitrator was, in this respect, correct. Patten DCJ upheld the submission for the respondent that a charge of the kind which the respondent levied amongst its "credit terms" was not such as to attract the law in relation to penalties. He pointed out that neither party had been able to draw to his attention to a case where an interest rate stipulated for unpaid accounts in a contract of this kind had been struck down as a penalty. In this Court, the respondent maintained its argument that the law as to penalties was inapplicable to a case such as the present. That law was to be confined to cases in which a contract had provided for breach of the contract and then sought to quantify the consequences of such a breach. In such a case, the Court must decide whether the sum so provided is a genuine pre-estimate of the damages flowing to a party as a result of the breach or whether it amounts to a penalty and so is unenforceable. See Dunlop Pneumatic Tyre Company Pty Ltd v New Garage * Motor Co Ltd [1915] AC 79 (HL). For the respondent it was put that this was quite a different case. The law's aversion to penalty provisions in contract was a far cry from the provision of a rate of interest for the extension of consumer credit, designed to ensure that parties conform to the credit terms which they have agreed. Such rates of interest are not uncommon in the provision of consumer credit in Australia today. They are commonly provided by retail establishments and credit card providers. They doubtless arise from the fact that the spending of credit provided by them is easy and the repayment often less so. Because the regular repayment of credited sums is necessary to the turnover of many businesses, because of variable rates of interest (higher in the 1980's than today) and because many businesses can place liquid fund on the short term money market for higher than bank rates of interest, provisions such as appear in the respondent's credit term are quite common. It is true that they encourage the prompt payment of credit extensions. It is also true, in a general sense, that they impose a penalty upon late payment. The fact that the rate of interest is higher than bank interest is obviously designed to bring home to the consumer that late payment is disadvantageous to it and cannot be offset against bank interest paid on the borrower's own bank overdraft or equivalent source of funds. But the purpose is not to assess a sum payable upon a breach of contract as such. It is to provide separately for late payment on an agreed sum. There is some authority which would cast doubt upon the application of the decisions providing relief from penalties to a case such as the present. See eg IAC (Leasing) Ltd v Humphrey (1972) 126 CLR 131, 140; O'Dea and Ors v All States Leasing System (WA) Pty Ltd and Ors (1983) 152 CLR 359, 397. However, this Court does not have to determine, in the present case, whether the credit charge WRARHEX AUSTRALIA PTY LTD v TELEMARKETING AUSTRALIA PTY LTD (Kirby ACIB levied was capable of constituting a penalty so as to attract the law on relief against penalties. I would not wish to exclude the possibility that such relief would be available, in particular circumstances, where a credit charge was purportedly levied which was so manifestly punitive and harsh as to attract the intervention of a court. In such case, it would not be a sufficient answer simply to say that the parties had agreed to the charge. But this case falls far short of one attracting relief of that character. The duty of a court, where a contractual provision is alleged to be a penalty, is to look at the term as a matter of substance, not of form. See Acron Pacific Pty Ltd and Ors v Offshore Oil NL and Ors (1985) 157 CLR 514, 520. The withdrawal of an incentive or a concession will not be classified as a penalty, at least in a case where the provision impugned is arguably reasonable. If the present clause had provided for payment of interest at an agreed rate as from the contract, with a concession that no interest would be charged if the payment were made within 21 days of invoice, it could not have been attacked as providing a penalty because it levied a rate of.06% per day. Upon the rendering of the invoice, in accordance with the written credit terms agreed to by the appellant, a debt came into existence which was not payable until the expiry of 21 days from that date. The appellant could have paid the minimum sum which it acknowledged was owing by it to the respondent. Instead, it chose to pay into court and, upon rejection of its payment, to recoup the sum and to use it for its own purposes. The test to be applied where a clause, agreed to by parties, is struck down as a penalty is stated by Clarke JA in AMEV Finance Ltd v Artes Studios Thoroughbreds Pty Ltd (1989) 15 NSWLR 564 (CA), S77. It will only be struck down "if the agreed sum be either extravagant in amount or imposes an unconscionable or unreasonable burden upon a party". By neither of these tests does the rate of credit charge levied by the respondent and agreed to by the appellant amount to a penalty or otherwise attract relief. Therefore, assuming that the law as to penalties applies to a credit charge such as was imposed here, I am not convinced that the charge made led to the precondition for relief against penalties. The onus of establishing that the provision was penal in character rested upon the appellant. At the time that the parties contracted they would have been entitled to take into account possible future increases in bank interest rates. It is not without significance that the rates fixed by the Supreme Court reached 21% in the period between 1 September 1989 to the end of August 1990. It is also worth noting that in the present case the respondent stipulated, and the appellant agreed, that a time would be afforded to the appellant in which it might pay the sums due. During that time of grace, no interest would accrue. It was only upon the expiry of the time specified that interest would run. This kind of arrangement, which does not involve any back-dating of the interest to the time when the debt itself was incurred is less likely to be catalogued as a penalty. Cf David Securities Pty Ltd and Ors v Commonwealth Bank of Australia and Ors (1990) 93 ALR 271, 299; C J Belmore Pty Ltd v AGC (General Finance) Ltd [1976] 1 NSWLR 507 (SC), 510. In judging the suggested penalty of the respondent's charge, it is also not unreasonable to take into account the nature of the respondent's business. As a telemarketing organisation, it would be endeavouring to promote the sale of a variety of products, highly dependent upon television and other advertising. The basic costs of Telecom services would fall upon the respondent, whether or not the promotion of the customer's product proved successful. Some customers would be bound to be disappointed in the return because of the lack of consumer 14 UNREPORTED JUDGMENTS demand for their products, having nothing to do with the efficient and faithful discharge by the respondent of its obligations under the contract. Doubtless some businesses might even hope to cover the costs of telemarketing by the sales thereby secured of their products. In such circumstances, a fairly strict regime for the presentation of invoices and the prompt payment thereafter of the debts disclosed, would be necessary. Against this background, the institution of credit charges of the kind levied by the respondent and agreed to by the appellant seems far from unreasonable. For these reasons, somewhat different from those offered by Patten DCJ, I see no error in the decision to uphold the credit charge agreed to between the parties. The judgment in this regard should be affirmed. ADEQUACY OF REASONS The appellant complained about Patten DCJ's failure to go through the documentation tendered in evidence and deal with each and every complaint of suggested disharmony between the support documentation and the invoices put forward to sustain the claims. The principles to be applied were not in doubt. The giving of reasons is an incident of the judicial process. It does not, however, require the judge to express findings on each fact leading to or in some way relevant to the final conclusions of fact. It is sufficient ordinarily for the judge to set out the ground for the decision and to record the relevant findings of fact and determinations of law which support the orders entered. See Soulemezis v Dudley (Holdings) Pty Ltd (1987) 10 NSWLR 247 (CA), 280. See also Sun Alliance Insurance Ltd v Massoud [1989] VR 8, 18. Given that there is an appeal on fact and law against the judgment, the primary judge must state sufficiently the findings of fact which will permit this Court to review the findings against the evidence and determine whether any error has occurred. The appellant's essential complaint was that Patten DCJ failed to identify with appropriate precision which records he took to support the evidence of Mr McInerney. It was suggested that the case was analogous to Bourke and Anor v Beneficial Finance Corporation Ltd (1993) 124 ALR 716 (FFC), 735. Ido not agree. At the trial, the appellant did not call evidence to contradict the respondent's evidence as to the terms of the agreement. It did not challenge, or call evidence, to contradict the fact that the respondent had undertaken the "outbound" campaign as agreed and completed in excess of 900 pharmacy response forms pursuant to that agreement. Nor did it contest or call evidence to contradict the fact that the respondent had undertaken the "inbound" campaign as agreed and completed in excess of 13,000 customer response forms. The appellant did not challenge or call any evidence to contradict the fact that each of the pharmacist response forms had been couriered or faxed to it or that the respondent had posted each of the invoices to it. It would have been open to the appellant to perform (as indeed it might) spot checks upon pharmacists or customers according to these forms in order to confirm that the calls for which the respondent was charging it were made as claimed. If any such spot checks were performed they were not revealed to the Court. Certainly, no evidence was given which gave any support to the suggestion that the respondent had falsely overstated its claims and rendered false and fraudulent forms to support them. Given that the ultimate case of the appellant was to put the respondent to the proof, and that Patten DCJ accepted Mr McInerney as a truthful witness, it is unsurprising that his Honour did not respond to the rather ineffective WRARHEX AUSTRALIA PTY LTD v TELEMARKETING AUSTRALIA PTY LTD (Kirby ACI5 cross-examination of the respondent's witnesses by painstakingly setting out in his reasons each support document which sustained the several invoices submitted. I can dismiss this ground of appeal with the statement that the reasons provided are more than adequate to meet the Soulemezis test. QUESTIONING ON THE RESPONDENT'S FINANCIAL POSITION Ground 13 of the notice of appeal challenged Patten DCJ's refusal to permit cross-examination as to the respondent's financial position. The appellant contends that this was highly-relevant to the question of alleged penalty. It urged that the stipulated interest rate of nearly 22% per annum for credit charges could be demonstrated not to be a genuine pre-estimate if it had been opened to it to show the financial position of the respondent at the time from which the rate of bank interest upon its overdraft could be inferred from Reserve Bank bulletins. I regard this as a completely meritless ground of appeal. I have already dealt with the objection to the agreed interest rate. The inquisition into the respondent's financial position had nothing to do with the debt owed by the appellant to the respondent. I suspect that the inquiry demonstrates rather the personal animus which appears to have engendered the conduct of the case and which occasioned the sense of disproportion which seems to have pervaded it both at trial and in this Court. THE PROVISION FOR INTEREST Grounds 14 and 16 challenge Patten DCJ's determination of the date from which an amount for which interest should be allowed. Given that I am of the view that the respondent was entitled to interest on its agreement, no ne inn s es to calculate interest under the District Court Act 1973, s83A. COSTS OF ARBITRATION The final ground (ground 15) argued for the appellant was that Patten DCJ's exercise of discretion, in allowing the respondent its costs of the arbitration was perverse. In support of this it was put that Mr McInerney admitted under oath that he had used the arbitration merely as a "sighting shot'. The appellant argued that it was contrary to the purpose of arbitration under the Arbitration (Civil Actions) Act 1983, to allow parties to treat that process with distain, reserving their real contest to the court. If this were to become a general rule, it would defeat the purpose of Parliament in providing for such arbitration. There is force in this suggested principle. In Quach and Anor v Mustafa, Court of Appeal (NSW) unreported, 15 June 1995, the Court insisted upon the proper conduct of arbitration proceedings as a prerequisite to the award, to a party successful in the District Court, of the costs of such proceedings. That was a case where the parties, successful in the District Court, had withheld film evidence from the arbitration which profoundly affected the opinion of the District Court Judge. In my reasons (with which Sheller JA and Powell JA agreed) I said at 11: ".. If a party elects [not to exhibit a film before the arbitrator], it cannot later expect to benefit from it. I! is now impossible to know what reaction the arbitrator might have had, had the films been shown before him. It seems likely from his description of the respondent's complaints during the arbitration, and [the] description of the film, that the award entered by the arbitrator would have been for a sum substantially less. As a matter of principle, to secure the operation of arbitration proceedings as the Act appears to contemplate (as a true alternative to a hearing in the District Court and to relieve that Court of the burden of hearings) the failure of the appellants to show the film has a consequence. There 16 UNREPORTED JUDGMENTS has been a considerable waste of public and private time and cost. The process of settlement which it is the object of Ptl9A R9 DCR to promote is frustrated. At least in the circumstances of this case, where the films were obviously most significant, the failure to show them before the arbitrator should have cost consequences. Those consequences are sufficient to sustain an order of this Court providing otherwise than Ptl9A R9(6) DCR would ordinarily require." The reference to the "sighting shot" appears in the cross-examination of Mr McInerney. He was questioned about his attitude to the arbitration. He had been present but had not given evidence before the arbitrator: "Q It's a different case than you ran at the arbitration isn't it? A I didn't run a case at the arbitration. Q You didn't give any evidence at the arbitration did you? OBJECTION; ALLOWED ANo, I didn't. Q But in actual fact you knew that the arbitration ran from something like 8.30 in the morning to something just short of 6 o'clock at night? A That is correct. Q And I suggest to you that subsequent to the arbitrations you have tried to intimidate my client. A (No answer). Q What do you say to that? AI would deny that. Q You haven't tried to intimidate him from defending this case? A Not at all. Q Have you asserted subsequent to the arbitration that you were merely using the arbitration as a sighting shot? A Yes. Q Have you subsequent to the arbitration...? A Without prejudice - all communication was without prejudice. Q You know a bit about the law of evidence, do you? Aldo. Q Do you know the exceptions to it without prejudice? A No. I don't. HIS HONOUR: He agreed that he was only using the arbitration as a sighting shot. WITNESS: I 'd like to expand on that one, your Honour. Q May I ask you further questions about that. Did you say subsequent to the arbitration that you would at this time have good evidence? OBJECTION A I didn't say anything. Anything I communicated in writing was without prejudice." The reference to the correspondence is a reference to a letter in which the appellant used the phrase "sighting shot". This is a military expression which refers to the shots fired at a target designed to ensure that ultimately the target is hit. I see nothing in the answers of Mr McInerney, nor in his letter, which sustains a suggestion that he, or the respondent, entered the arbitration deliberately withholding evidence so that it could be placed before the District Court later. Why he should do so was never explained. Certainly no devious or illicit motive was ever precisely put to him. Unlike the showing of the film in Quach, there is no obvious advantage to the respondent in withholding evidence from the WRARHEX AUSTRALIA PTY LTD v TELEMARKETING AUSTRALIA PTY LTD (Sheller JAY arbitrator. It seems fairly clear that some evidence was missing when the matter proceeded to the arbitration. Whose fault or mistake this was, was not explored. A substantial part of the difference between the amount recovered in the District Court and that recovered at the arbitration is shown by the invoice reconciliation prepared at the request of the Court to relate to the outbound invoices. At the arbitration no documents were tendered for these. Before the District Court the documents tendered sustained the claim for $15,120.10 which passed into the judgment entered by Pattern DCJ. Had that claim been proved and upheld by the arbitrator, it would have resulted in an award substantially in excess of the sum paid into court. It might have seen the end of the litigation. It would certainly have carried the costs of the arbitration. Omission to prove that sum was a serious mistake. But it does not show that it is a deliberate one for purpose designed to frustrate the carrying out of the objects of the Arbitration (Civil Actions) Act 1983. It is important to note that the description of the arbitration as a "sighting shot" is one which was offered after the arbitration was complete. It was an ex-post categorisation of the arbitration from the point of view of a party dissatisfied with its outcome. It was not by any means a description of the way in which the respondent entered the arbitration. Although it only took one day and not the five days of the trial in the District Court, it was a full day in a hotly contested claim. It defies belief that the omission to prove the sums by which District Court judgment exceeded the arbitration was part of an impermissible strategy on the part of the respondent to spin out the litigation to the costs of the appellant. Not only was this not proved. It was never clearly alleged and put to the respondent's witnesses, for fairly obvious reasons. In these circumstances, there is no proper basis for attacking the exercise of discretion on the question of costs. The respondent recovered substantially more at the District Court hearing than it had at the arbitration. In these circumstances there is no reason to disturb a conclusion that the respondent should have its costs both of the District Court hearing and of the arbitration. Such an order was within the bounds of the proper exercise of discretion reserved to the trial judge. The amount ultimately recovered was significantly greater than the sum paid into court. Both on legal grounds (the arguments as to penalty) and on factual grounds (the establishment by proof of the larger entitlement) the respondent considerably improved its position before Patten DCJ. I would not disturb his Honour's order for costs. ORDERS The result is that none of the grounds of appeal has succeeded. The appeal should be dismissed with costs. Handley JA I agree with Kirby ACJ. Sheller JA I agree with Kirby ACJ. Appeal dismissed with costs. COUNSEL: Appellant: CJ Stevens Respondent: MS Willmott SOLICITORS: 18 UNREPORTED JUDGMENTS Appellant: Mallesons Stephen Jacques Respondent: TH Walker and Co