New South Wales Supreme Court CITATION : Jobst v Becke [2001] NSWSC 277 CURRENT JURISDICTION: Common Law Division FILE NUMBER(S) : SC 12779/99 HEARING DATE(S) : 8/03/2000 JUDGMENT DATE : 19 April 2001 PARTIES : John Jobst and Cecily Anne Barker (appellants) James Frank Becke and Anne Shirley Becke (respondents) JUDGMENT OF : Hidden J at 1 LOWER COURT Local Court JURISDICTION : LOWER COURT 103/95 FILE NUMBER(S) : LOWER COURT L Gould LCM JUDICIAL OFFICER : COUNSEL : R A Parsons (appellants) A Diethelm (respondents) SOLICITORS : Russell C Byrnes (appellants) Philip Boyce & Associates (respondents) CATCHWORDS : LOCAL COURT - Civil Claim - Appeal by way of stated case - term implied in contract - whether any evidentiary basis for it LEGISLATION CITED : Justices Act 1902 Local Courts (Civil Claims) Act 1970 BP Refinery (Westernport) Pty Ltd v Hastings Shire Council (1978) 52 ALJR 20 Australis Media Holdings Pty Ltd v Telstra Corporation Ltd (1998) 43 NSWLR 104 Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty (1979) 144 CLR 596 CASES CITED : Codelfa Construction Pty Ltd v State Rail Authority (NSW) (1981-2) 149 CLR 337 Butt v M'Donald (1896) 7QLJ 68 Allen v Kerr (Court of Appeal unreported 7 August 1995) Azzopardi v Tasman UEB Industries Ltd (1985) 4 NSWLR 139 DECISION : Appeal allowed THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION HIDDEN J Thursday 19 April 2001 No 12779 of 1999 John Jobst & Anor v James Frank Becke & Anor Reasons for judgment 1 HIS HONOUR: This is an appeal by way of stated case from a decision of a magistrate in a civil claim brought by the respondents, James Frank Becke and Anne Shirley Becke, against the appellants, John Jobst and Cecily Anne Barker. It is convenient to refer to the parties as the "appellants" and the "respondents", regardless of their status in the Local Court or in certain proceedings in the Equity Division of this Court, to which I shall refer in a moment. 2 The appellants and the respondents were the owners of adjoining blocks of land near Bowral. There was a spring on the appellants' land which flowed onto the respondents' property. The respondents' enjoyment of the flow of water from that spring was the subject of proceedings between the parties in Equity, which were settled on 13 September 1994. Among other things, it was agreed that the appellants would install a holding tank on their land. By clause 2 of the terms of settlement, the respondents were entitled to connect a pipe to that tank so as to draw off water at a level of six inches from the top. By clause 8, the respondents were required to pay the appellants $12,000 by instalments of $500 per month, the first instalment to be paid on the day of settlement, the second on 1 November 1994 and thereafter on the first day of each month. 3 The respondents paid only the first two instalments. On 30 March 1995 they issued the statement of claim in the Local Court, claiming damages for breach of the terms of settlement. They alleged that the appellants had taken certain steps which had the effect of impeding the flow of water to their land. The appellants filed grounds of defence and a cross-claim for the money outstanding under clause 8 of the terms of settlement. The respondents filed a defence to the cross-claim, alleging that the appellants had repudiated those terms. The learned magistrate gave judgment for the appellants on the respondents' claim, finding that the respondents had failed to prove that the damage alleged was attributable to any breach by the appellants. However, he gave judgment for the respondents on the cross-claim, and it is from that decision that this appeal is brought. 4 The stated case records the following findings by his Worship: (a) A holding tank was installed on the appellants' land, water from the spring was directed into it, and a pipe was attached about six inches from the top of the tank allowing water to flow onto the respondents' land. (b) Water did not always flow onto the respondents' land through that pipe, the rate of flow varying from time to time. (c) The appellants installed a wind pump by which they drew water from the tank from time to time to supply their homestead property. (d) At the time of entering into the terms of settlement, the respondents were aware that the appellants proposed to draw water from the holding tank for domestic and cattle watering requirements, and that they would obtain only so much water as the appellants did not use (referred to in evidence as "the overs"). (e) There should be implied into the terms of settlement a condition that the appellants would do all things reasonably necessary to give effect to the express terms, so as to provide the respondents with an uninterrupted flow of water, and that they would not carry out activities on their land so as to impede the flow of water onto the respondents' land. (f) The process whereby the appellants drew water from the holding tank was in breach of that implied condition. (g) That breach discharged the respondents of their obligation to pay the balance of the amount due under clause 8 of the terms of settlement. 5 Before proceeding to the merits of the appeal, I shall deal with a submission by counsel for the respondents that it should be dismissed because each of the procedural steps in bringing the matter before this Court was out of time. 6 As is commonly the case, the hearing in the Local Court did not proceed on consecutive days. It took place on several days during the period from May to November 1996. His Worship gave judgment on 15 November 1996. Accordingly, the appeal is governed by Part 5 of the Justices Act as it existed before its replacement in 1998: see the transitional provisions in cl 40 of Sch 2 to the Act. Section 101 provided for stated cases. Subsection (1) of that section permitted an application for a stated case to be made within 35 days of the determination appealed from or such longer period as a Justice might allow under s102A(1). The time limits for procedural steps thereafter were set by Pt 32, Div 3 of the Supreme Court Rules. 7 The progress of the present matter was a chapter of accidents. On the day judgment was given in the Local Court the appellants attended unrepresented, as their solicitor was unaware that judgment was to be handed down that day. Lacking legal training, the appellants were unable to explain his Worship's reasons to the solicitor and he ordered a transcript. The proceedings had been sound recorded. The 35 day time limit set by s101 expired on 20 December 1996 and on that day, the transcript of the judgment still not having arrived, the solicitor sought and obtained an extension of 28 days in which to apply for a stated case. That period expired on 17 January 1997. On the afternoon of that day the solicitor received a cassette tape of the judgment but it needed to be transcribed. An application, also on that day, for a further extension of time was refused and an application for a stated case was faxed to the Local Court late that afternoon. In the following week the solicitor was informed that the court registry had not received the application until the next working day but I consider it to have been made when it was faxed. Accordingly, the application was made within the time provided for by the Act, albeit by a hair's breadth. 8 On or about 20 January 1997 the tape of the judgment was transcribed, only to find that it was incomplete. It appears that part of the master tape at the court had been erased. In correspondence with the registrar, the appellants' solicitor sought access to any notes the presiding magistrate might have made of his reasons for judgment, but the registrar replied on 1 April 1997 that his Worship had not retained any notes. However, the letter added that the magistrate's decision on the cross-claim "was based upon the grounds that he found that he could imply a condition to the contract", and it is reasonable to infer that it was only then that the appellants' solicitor became aware of the basis for this appeal. A draft case was forwarded to the court on 7 April 1997. This was well outside the time set by Pt 32, r13(1) of the Rules, which is 28 days after the expiration of the time limited for the application for the stated case. However, in the unusual circumstances to which I have referred, I do not consider the delay to be unreasonable. 9 The process of settlement of the draft case was protracted, for reasons which I need not recount in detail. It is sufficient to say that a number of arrangements for the parties' legal representatives to meet with the magistrate were frustrated, partly because of the unavailability of counsel for the respondents. On 8 September 1998, in the absence of counsel for the respondents, his Worship settled the case on the basis that it would be forwarded to the respondents' solicitors and signed if they raised no objection to it. The appellants' solicitor sent the provisionally settled case to the respondents' solicitors on 14 September 1998, and they referred it to counsel for advice. By the end of July 1999 that advice had not been received. In the meantime, the appellants' solicitor wrote to his opponents on several occasions inquiring about the progress of the matter. (I should point out that the respondents were represented by other counsel at the hearing of the appeal.) 10 By letter of 26 July 1999 the appellants' solicitor requested the magistrate to sign the stated case. His Worship did so, and it was available for collection at the Local Court on 20 August 1999. It was picked up that same day by a member of the appellants' solicitor's staff, who attended this Court to file it. That person was informed, erroneously, that the appeal should be initiated by summons in accordance with the procedure following the amendments to the Justices Act of 1998: see Pt 51B of the Rules. Such a summons was filed on 16 November 1999. 11 Part 32, r17 of the Rules provides that a stated case should be obtained and served upon the clerk of the court where the determination was made within 14 days after notification that it has been settled. Counsel for the respondents sought to rely upon non-compliance with that rule on the basis that the case had been settled (albeit provisionally) on 8 September 1998 but, in the circumstances which I have outlined, that argument cannot be sustained. The same must be said of an argument in reliance upon r18, providing that the stated case must be transmitted to this Court within 7 days of notification of its being settled, on the basis that it was not filed until 16 November 1999. Given the unusual turn of events, it does not appear to me that the appellants have been guilty of unreasonable delay in mounting this appeal. Nor is there any basis to conclude that the respondents would suffer unfair prejudice by allowing the matter to proceed. In the exercise of my power under Pt 2 r3, I would grant the necessary extension of any time limited by Pt 32 for that purpose. 12 I turn, then, to the merit of the appeal. The appellants' contentions recorded in the stated case are that there was no basis for implying in the terms of settlement the condition which his Worship found and, in any event, that the actions of the appellants did not constitute a breach of any of the terms of the settlement such as to discharge the respondents from their obligation to make payments in accordance with cl 8. It is clear from the stated case that the magistrate's decision on the cross-claim was based upon a finding that the appellants were in breach of the implied condition set out in par 4(e) of these reasons, rather than any express term of the settlement. That being so, the appellants must succeed if they can establish that his Worship's finding that such a condition should be implied amounted to an error of law. 13 Counsel for the appellants relied upon the judgment of Mason J in Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1981-2) 149 CLR 337 at 347, where his Honour adopted the principles governing the implication of a term in a contract enunciated by the majority of the Privy Council in BP Refinery (Westernport) Pty Ltd v Hastings Shire Council (1978) 52 ALJR 20 at 26: (1) It must be reasonable and equitable; (2) it must be necessary to give business efficacy to the contract, so that no term will be implied if the contract is effective without it; (3) it must be so obvious that 'it goes without saying'; (4) it must be capable of clear expression; (5) it must not contradict any express term of the contract. It was submitted for the appellants that, on the evidence, there was no basis upon which the first three of those conditions could be satisfied. 14 On the other hand, counsel for the respondents relied upon a passage from another judgment of Mason J in Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd (1979) 144 CLR 596 at 607, dealing with the implied obligation on each party to a contract to do all that is reasonably necessary to secure its performance. His Honour referred to the following statement of Griffiths CJ in Butt v M'Donald (1896) 7 QLJ 68 at 70-1: It is a general rule applicable to every contract that each party agrees, by implication, to do all such things as are necessary on his part to enable the other party to have the benefit of the contract. 15 Reliance was also placed upon the judgment of the Court of Appeal in Australis Media Holdings Pty Ltd v Telstra Corporation Ltd (1998) 43 NSWLR 104 at 123-5 and, in particular, to the following passage at 124: Many terms now said to be implied by law in various categories of contract reflect the concern of the courts that, unless such a term be implied, the enjoyment of the rights conferred by the contract would or could be rendered nugatory, worthless, or, perhaps, be seriously undermined. 16 Counsel for the respondents argued that, consistently with those principles, it was open to his Worship to find the implied condition which he did. This, it was said, was a finding of fact which could not be challenged in this appeal, which is limited to a question of law: s69(2) of the Local Courts (Civil Claims) Act 1970. 17 This is not the occasion to examine the distinction between questions of law and fact, such as was undertaken in Azzopardi v Tasman UEB Industries Ltd (1985) 4 NSWLR 139, per Kirby P at 143-151 and Glass JA at 155-7. His Worship's finding of an implied condition in the present case might best be described as a question of mixed law and fact, but this matter was not fully argued and need not be determined. In so far as it was a decision of fact, it would amount to an error of law if there were no evidence to support it: Allen v Kerr (Court of Appeal unreported 7 August 1995) per Clarke JA at p2 and Powell JA at pp13-14. 18 Nothing in the passages from Secured Income Real Estate and Australis Media Holdings to which I was taken by counsel for the respondents modifies the principles adopted in Codelfa Construction, set out above, governing the implication of a term in a contract. In Secured Income Real Estate Mason J went on to say (at 607-8) that, putting aside "fundamental obligations" under a contract, the interpretation of a contract turns "not so much on the application of the general rule of construction as on the intention of the parties as manifested by the contract itself". In Australis Media Holdings (at 124) the court warned of the danger of eliding the purpose of implying certain terms in a contract with the terms themselves, noting that to do so "would replace necessity with desirability". Their Honours continued (at 125): A contract may "contemplate" many benefits for the respective parties, but each can only call on the other to provide, or co-operate in the providing of, benefits promised by that party. 19 Decisive in the present case is his Worship's finding, set out at par 4(d) of these reasons, that the respondents entered into the terms of settlement knowing that the appellants proposed to draw water from the holding tank for their own purposes and that they themselves would have the benefit only of "the overs". This cannot stand with the implication of a term effectively requiring the appellants to ensure an uninterrupted flow of water to the respondents' land, regardless of their own requirements and seasonal and climatic factors. No doubt, a constant flow of water was a desirable outcome for the respondents but it is not what the appellants undertook to supply. I am persuaded by the argument of counsel for the appellants, relying upon Codelfa Construction, that the implication of such a term was not reasonable and equitable, was not necessary to afford efficacy to the contract, and was not so obvious as to "go without saying". There was no evidentiary basis for such a finding and, accordingly, his Worship fell into error warranting the intervention of this Court. 20 The appellants are entitled to judgment on the cross-claim and this would appear to be within the powers conferred upon me by s106 of the Justices Act prior to the 1998 amendments. I shall consult the parties about the appropriate formal order and, if necessary, hear argument on costs. ********** Last Modified: 04/20/2001 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.