New South Wales Supreme Court CITATION : Groedel Kitchens (NSW) Pty Ltd v Buckingham Road Transport Pty Ltd [2002] NSWSC 1165 FILE NUMBER(S) : SC 12482/2001 HEARING DATE(S) : 08/02/2002 JUDGMENT DATE : 5 December 2002 PARTIES : Groedel Kitchens (NSW) Pty Ltd - Applicant Buckingham Road tRansport Pty Ltd - Respondent JUDGMENT OF : Hidden J at 1 LOWER COURT Local Court JURISDICTION : LOWER COURT 684/1999 FILE NUMBER(S) : LOWER COURT M Price LCM JUDICIAL OFFICER : COUNSEL : Mr J Sleight - Applicant Mr C J Millard - Respondent SOLICITORS : Dickson Fisher Macansh - Applicant Voros & Associates - Respondent CATCHWORDS : Local Courts: civil claim - appeal - issue of unjust enrichment. LEGISLATION CITED : Local Courts (Civil Claims) Act 1970 CASES CITED : David Securities Pty Limited v Commonwealth Bank of Australia (1992) 175 CLR 353 DECISION : Appeal dismissed. IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION HIDDEN J 5 December, 2002 12482/2001 – GROEDEL KITCHENS (NSW) PTY LTD (ACN 074 396 421) v BUCKINGHAM ROAD TRANSPORT PTY LTD (ACN 078 368 073) JUDGMENT 1 HIS HONOUR: This is an appeal from a decision of a Local Court magistrate in a civil claim. Groedel Kitchens (NSW) Pty Ltd ("Groedel") manufactures kitchen and bathroom cabinets. In or about July 1998 it entered into an agreement with Buckingham Road Transport Pty Ltd ("Buckingham") to deliver its cabinets to building sites. There was an oral agreement between directors of the two companies that Buckingham would be paid $7.50 per cabinet. However, shortly afterwards the agreement was renegotiated, again orally, and it is the terms of that new agreement which were at issue in the Local Court proceedings. 2 It was common ground that the rate per cabinet was increased to $8.50 but Buckingham alleged, and Groedel denied, that it was also entitled to charge an hourly rate for smaller jobs. For several months Buckingham presented invoices to Groedel which included an hourly rate, and Groedel paid them. According to Mr Richard Knebel, the director of Groedel, this was a mistake. His evidence was that his company's dispatch foreman, having confirmed that the requisite number of cabinets had been delivered, would send the invoice to the accounts department, where a cheque would be drawn for Mr Knebel to sign. The foreman was not aware of the terms of the agreement with Buckingham, although it seems that the accounts department should have been. Previous transport contractors had been paid an hourly rate. 3 Mr Knebel realised the error when he checked a large invoice from Buckingham in December 1998. He did not pay that invoice and terminated the contract with Buckingham. 4 For present purposes, the course of the proceedings in the Local Court can be sketched briefly. Buckingham issued a statement of liquidated claim against Groedel, claiming the amount of the December invoice. Groedel filed a cross-claim, seeking repayment of the money it had previously paid on the basis of the hourly rate. The parties agreed that the magistrate should decide, as a preliminary question, what were the terms of the agreement. His Worship found that Buckingham was entitled to the cabinet rate only and not to an hourly rate. 5 His Worship gave reasons for this finding on 1 March, 2001, in the course of which he said: … with whatever scrutiny that was appropriate within the defendant's organisation, the claim or claims were paid and paid in full, on one view reflecting the fact that those charged with this responsibility were totally in the dark as to what it was they were approving for payment and equally is open to the view that hourly claims, at whatever rate, were not inconsistent with the pre-existing trading circumstances of an earlier transport company … … the upshot of the renegotiated company (sic) only reflected a concluded agreement to pay a so called unit rate of $8.50 and there was no concluded agreement at any time to pay hourly rates for labour. 6 On 21 May, 2001 his Worship dealt with motions by Groedel that Buckingham should provide security for costs and by Buckingham for leave to file an amended statement of claim. Both motions were dismissed for reasons which need not concern us. However, in the course of giving those reasons, his Worship said: The hearing (on 1 March, 2001) essentially determined what the terms of the contractual arrangements between the parties was. Inferentially or obviously such a determination would place the Plaintiff at a considerable disadvantage in so far as the labour he provided and the services he provided, and that comment is made notwithstanding the evidence that some of his accounts were paid by the Defendant mistakenly in terms of hourly charge out rates. 7 This left to be determined Groedel's cross-claim for repayment of the money it had paid as an hourly rate. This called for the application of the principles relating to unjust enrichment expounded by the High Court in David Securities Pty Limited v Commonwealth Bank of Australia (1992) 175 CLR 353. That case put to rest the distinction between money paid under a mistake of law or fact and, in particular, the rule precluding recovery of money paid under a mistake of law: see the joint judgment at 376. Their Honours expressed the relevant principle in this way (at 379): The fact that the payment has been caused by a mistake is sufficient to give rise to a prima facie obligation on the part of the respondent to make restitution. Before that prima facie liability is displaced, the respondent must point to circumstances which the law recognizes would make an order for restitution unjust. There can be no restitution in such circumstances because the law will not provide for recovery except when the enrichment is unjust . It follows that the recipient of a payment, which is sought to be recovered on the ground of unjust enrichment, is entitled to raise by way of answer any matter or circumstance which shows that his or her receipt (or retention) of the payment is not unjust. (Footnote omitted.) 8 At the hearing of the cross-claim reliance was placed upon the evidence which had been given when his Worship dealt with the preliminary question in March 2001. In addition, further documentary material was tendered and there was further cross-examination of Mr Knebel, directed particularly to the extent to which the Buckingham invoices were checked before they were paid. The effect of his evidence was that they were examined by his accounts staff but not by him personally. In re-examination, he said that no-one in the accounts department was authorised to pay any amount which Groedel was not legally bound to pay. 9 His Worship dismissed the cross-claim in a judgment of 13 July, 2001. It is against this decision that Groedel brings the present appeal. The relevant part of his Worship's reasons was as follows: It is informative to consider the evidence as to the manner in which the Plaintiff company came to be in a position of offering its services to the defendant company. Readily accepting that the negotiations and ultimately contract formed was solely upon the basis of discussions, that is an oral contract, from the outset the Plaintiff has submitted his accounts or invoices on an hourly rate and not solely on a per cabinet rate. More pertinent is that from the start these invoices which in many instances were hand delivered, have obviously been subjected to some form of scrutiny, or administrative checking and even disallowances. It is difficult not to find that the plaintiff has altered his position on the strength or on the basis of being remunerated at what to his mind at least was the basis of trading. If he was engaging labour to assist with the various deliveries and if he was being denied remuneration for that service it goes without saying he would have ceased undertaking these various contracts of carriage. … Having considered the evidence and the competing submissions this court cannot come to the view that the Defendant company was operating under a mistake of Law so far as these payments to the Plaintiff company were concerned … 10 From the last part of that passage, I take it that his Worship found that the relevant payments were not made by mistake. As I have said, it is settled law in this country since David Securities that whether the mistake be one of fact or law is immaterial. Groedel's primary complaint in this appeal is that that finding cannot stand with his Worship's conclusion of March 2001 that the agreement did not include an hourly rate and that, accordingly, those payments were made in error. 11 There is considerable force in this argument. True it is that his Worship's preliminary determination that the agreement entitled Buckingham only to a cabinet rate did not necessarily mean that Groedel's payments of the hourly rate were mistaken. David Securities (at 373-4) recognises that a person might make a payment "voluntarily", in the sense that he or she chooses to make the payment irrespective of whether there is a legal obligation to do so. At no stage was there any evidence to that effect in the present case. As I have said, Mr Knebel gave evidence that no-one was authorised to make any payment which Groedel was not legally obliged to make, and the contrary was not suggested to him in cross-examination. Nor does it appear that such scrutiny as there was of Buckingham's invoices by Groedel's staff extended to a consideration of whether an hourly rate was payable at all. Whether or not his Worship's finding that the payments were not made by mistake is inconsistent with his earlier determination of the terms of the contract, there does not appear to be any evidence to support that finding. 12 That, however, is not the end of the matter. From the passage of his judgment on the cross-claim quoted above, it is apparent that his Worship also found that Buckingham had changed its position as a result of its receipt of payments by way of an hourly rate over a period of some months. In effect, his Worship concluded that Buckingham continued to deliver the cabinets because Groedel was making payments consistent with the agreement as Buckingham understood it, and that it might not have done so if Groedel had declined at the outset to pay an hourly rate. It does not appear that this issue was explored in evidence, no doubt because Buckingham continued to maintain that an hourly rate was provided for. Nevertheless, it is clear from his Worship's reasons that the matter was raised in submissions before him and, in all the circumstances, it was an inference reasonably open to him. That finding would fairly give rise to the conclusion that Buckingham's retention of those payments would not be unjust: David Securities at 379-80, citing Goff J in Barclays Bank Limited v WJ Simms Son & Cooke (Southern) Limited [1980] QB 677 at 695. 13 It follows that there was a basis upon which it was properly open to his Worship to dismiss the cross-claim, even though his ultimate finding that Groedel's payments of the hourly rate were not made by mistake cannot be sustained. An appeal to this Court from the decision of a magistrate in a civil claim is limited to a question of law: s 69(2) of the Local Courts (Civil Claims) Act 1970. There are sound reasons of policy why this is so, and any error of law which is identified must be of such significance that the decision cannot be sustained. This is not such a case. 14 I would dismiss the appeal. I understand that final orders disposing of the matter in the Local Court have yet to be made. I shall consult the parties about the formal orders which I should make and, if necessary, hear argument on costs. ********** Last Modified: 02/05/2003 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.