New South Wales Supreme Court CITATION : JML Constructions v Boyds Investments [2001] NSWSC 544 CURRENT JURISDICTION: Common Law Division FILE NUMBER(S) : SC 11088 of 2001 HEARING DATE(S) : 20 June 2001 JUDGMENT DATE : 29 June 2001 JML Constructions Pty Limited (Plaintiff) PARTIES : v Boyds Investments Pty Limited (Defendant) JUDGMENT OF : Master Malpass LOWER COURT Local Court JURISDICTION : LOWER COURT 829/98 FILE NUMBER(S) : LOWER COURT Mr C Elliott LCM JUDICIAL OFFICER : COUNSEL : Mr M R Aldridge SC/Mr P Cummings (Plaintiff) Mr I Duane (Defendant) SOLICITORS : Patey & Murphy (Plaintiff) Hewitts Commercial Lawyers (Defendant) CATCHWORDS : Appeal - error of law - fragile base for findings as to credit - error of law demonstrated. LEGISLATION CITED : Justices Act 1902, s 104 (5). Local Courts (Civil Claims) Act 1970, s 69. Abalos v Australian Postal Commission 171 CLR CASES CITED : 167. Devries v Australian National Railways Commission 177 CLR 472. State Rail Authority of New South Wales v Earthline Constructions Pty Ltd (in liq) & Ors (1999) 160 ALR 588. DECISION : See Paragraph 23. THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION MASTER MALPASS FRIDAY 29 JUNE 2001 11088 OF 2001 JML CONSTRUCTIONS PTY LIMITED v BOYDS INVESTMENTS PTY LIMITED JUDGMENT 1 The plaintiff (who was the defendant in the Local Court) brings an appeal pursuant to s 104 (5) of the Justices Act 1902 and s 69 of the Local Courts (Civil Claims) Act 1970. 2 The defendant (who was the plaintiff in the Local Court) brought a monetary claim seeking to recover bonus entitlements pursuant to an agreement made with the plaintiff. The defendant had provided consultancy services for the plaintiff pursuant to that agreement. It supervised building projects (this role involved inter alia the controlling of costs). The dispute related to one of those projects (the Sanip Project). 3 The defendant ultimately proceeded on a Second Further Amended Statement of Liquidated Claim (its fourth pleading of the claim). The plaintiff had a Cross-Claim. The issue between the parties concerned the date of the agreement made as to the payment of bonus entitlements and the terms for the calculation of the entitlements (which were to be made in respect of the profit margin on a project). 4 It was heard by Mr Elliott LCM over a number of days. Judgment on the claim was delivered on 26 April 2001. 5 The disputed agreement had been made orally between Mr Lavis on behalf of the plaintiff and Mr Boyd on behalf of the defendant. Mr Lavis said that it had been made in November 1995. Mr Boyd alleged that it had been made in June 1995. 6 It needs to be added that in the first two of the four pleadings it had been alleged by the defendant that the agreement (which was referred to as a revised agreement) had been made in November 1995. Even the third and fourth pleadings alleged discussions had in November 1995 concerning the bonuses. It was these two pleadings that changed the defendant's case to one which propounded a June agreement and increased the sum claimed to $40,000. 7 Both Messrs Lavis and Boyd gave evidence. The only other witness was a Mr Harkin (an accountant employed by the defendant). In addition to the oral testimony, there was a tender of many documents. 8 The defendant was successful on the question of liability. The monetary claim was calculated in the total sum of $86,011.51. A $30,000 part of that entitlement had been earlier paid. On this calculation, a balance of $56,011.51 was outstanding. As this was in excess of the jurisdiction, the sum of $16,011.51 was abandoned. Judgment was then entered in the sum of $40,000 together with interest. There was an order that professional costs be calculated on an indemnity basis. 9 Contrary to the objection of the plaintiff (who wanted the assessment of costs to be referred to a costs assessor) and the provisions of a practice note of the court, the learned Magistrate then proceeded to assess the indemnity costs. He dealt with this matter by requiring the defendant to prepare a bill of costs and the plaintiff to make objections. On 27 May 2001, a further judgment was delivered. The costs were determined in the sum of $60,229.94. 10 I now turn to the first of the two judgments. At an early stage in the expression of reasoning process, there is error and misconception in and about findings inter alia to the effect of a lack of cooperation on the part of the defendant ("it could hardly be said that the Defendant has been a paragon of co-operation"). The learned Magistrate proceeded on the basis that it was this lack of cooperation that brought about the many amendments to the Statement of Claim. He referred to a Chronology of Events and Appearances "to obtain production of documents and information" as evidence of it. The findings made as to lack of cooperation and "reluctance to produce documents" were not open on the evidence. This was also the position with his misconceived findings as to the many amendments. The Chronology of Events whilst it may have been made available as an aide-memoire had not been tendered as evidence. The findings were made following the expression of a view that there was necessarily an implied term giving reasonable access to the records of the plaintiff. 11 The learned Magistrate found Mr Boyd to be an impressive witness in cross-examination ("I have a high regard for the spontaneity of his answers and his seeming conviction as to their veracity, albeit not always directly responsive to the question"). He made allowance for the fact that the conversations occurred many years ago. He then provided an illustration from the transcript. He referred to a concession as to erroneous evidence (as to the payment of a bonus prior to November 1995). Even though no explanation in fact had been given, he concluded that he accepted the explanation made for that error. Apart from that, he "found his evidence to be logical and credible". 12 A meeting was had between Messrs Lavis and Boyd on 16 November 1996 for the purpose of attempting to resolve the quantification of the outstanding bonus entitlements (by this time, the business relationship had come to an end). Mr Lavis had certain documents at the meeting. One was Exhibit 5. There was also Exhibit 12 (Exhibit 12 being a photocopy of Exhibit 5). It was taken away from the meeting by Mr Boyd. Mr Lavis made certain entries on Exhibit 5. The learned Magistrate had regard to documents that had been placed in evidence and expressed views in relation to them (it is said that he misdirected himself in relation to the documents but I need not dwell on this matter for present purposes). He then found that the entries had not been made at the meeting (as had been said by Mr Lavis). On this matter Mr Boyd had merely said "Not to my knowledge" or that he could not recall it. This inter alia led the learned Magistrate to form an opinion which was adverse to the credibility of Mr Lavis. He added "I should add that it confirmed my suspicions". There was then inter alia a reference to "a certain illogicality" and "the different calculations that he reluctantly provided". He later observed himself to be satisfied that Mr Lavis had "lied in court about the meeting of 15 November 1996" (sic). He further said that this lie and the reluctance of Mr Lavis to produce documents had caused the proceedings to be as protracted as they had become. He accepted Mr Boyd's version as a true account of the meeting. He said that he was even satisfied to a higher degree than the mere balance of probabilities. He then found that the agreement was as alleged by the defendant. The order for indemnity costs was made "Having regard for my conclusions about Mr Lavis". 13 For completeness, I should mention that the method of calculation advanced by the plaintiff had been used in other projects and that there was evidence that as supervisor the defendant had access to relevant documentation and that Mr Boyd provided estimates of expected profit margin to the plaintiff from time to time. Indeed, he made a pre-estimate of bonus entitlements and issued invoices on the basis of that pre-estimate. The pre-estimate was proximate to a result produced by application of the plaintiff's version of the terms for the calculation. 14 Counsel for the parties have prepared detailed submissions in writing. This material was supplemented by oral submissions. I have carefully read all submissions. However, it is unnecessary to expressly deal with all of the matters raised therein. 15 The plaintiff relies on what was said in State Rail Authority of New South Wales v Earthline Constructions Pty Ltd (in liq) & Ors (1999) 160 ALR 588. This is authority for the principle that a finding of credit, even one based on demeanour, can be set aside where, in the light of other evidence, the primary judge had too fragile a base to support a conclusion that a witness was unreliable. It was also emphasised that this was not even a case in which any finding had been made as to the demeanour of Mr Lavis. 16 It is well established that a finding of fact based on the credibility of a witness is not to be lightly disregarded. It must stand unless it can be shown that there has been a failure to use or a palpable misuse of the judicial officer's advantage or there has been an acting on evidence which was inconsistent with facts incontrovertibly established by the evidence or which was glaringly improbable ( Abalos v Australian Postal Commission 171 CLR 167 and Devries v Australian National Railways Commission 177 CLR 472). 17 The plaintiff says that what was said in Earthline applies in this case. I agree. I am satisfied that the plaintiff has demonstrated that the learned Magistrate had too fragile a base to support his findings as to credit. 18 In my view, inter alia, these findings were based on error and misconception, matters which were not the subject of evidence and a failure to give attention to all of the evidence in the case. 19 There was a significant body of material relevant to his findings which is not referred to in the judgment and appears not to have been taken into account. Certain of this material is referred to in paragraph 10 of the submissions made on behalf of the plaintiff and does not need to be reproduced in this judgment. It seems to me, that it has been demonstrated that there has not been a determination based upon a consideration of the real strength of the body of evidence placed before the court. 20 A primary argument advanced on behalf of the defendant is that there has been a failure to demonstrate error of law (this being the only avenue of appeal available to the plaintiff). I do not accept that submission. It seems to me that error of law has been amply demonstrated. 21 What has been said suffices to entitle the plaintiff to relief in these proceedings. It is unnecessary to pursue the various arguments that were put concerning the matters of the quantification of the bonus entitlements and indemnity costs. 22 Despite what has been claimed in the Amended Summons, the plaintiff seeks to have the proceedings referred back to the Local Court for re-hearing. In the event that the appeal was successful, this approach was not in dispute. In my view, that is the appropriate course to be taken. 23 Judgment and orders made on 29 March 2001 are set aside. Also, I set aside the determination made on 27 May 2001. Proceedings No. 829 of 1998 are remitted back to the Local Court for hearing and determination according to law. The defendant is to pay the costs of the Summons. ********** Last Modified: 07/02/2001 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. 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