New South Wales Supreme Court CITATION : Rosier v DTH Pty Limited [2003] NSWSC 736 HEARING DATE(S) : 5 August 2003 JUDGMENT DATE : 12 August 2003 JURISDICTION: Common Law Division JUDGMENT OF : Master Malpass DECISION : The judgment entered against the plaintiff is set aside. The first defendant is to pay the costs of these proceedings. If so entitled, the first defendant is to have a certificate under the Suitors' Fund Act 1951. The first defendant is to pay the costs of the claim made against the plaintiff in the Local Court. The Exhibits may be returned. CATCHWORDS : Appeal - lack of consideration - who were the parties to an alleged contract - errors of law. LEGISLATION CITED : Suitors' Fund Act 1951. CASES CITED : N/A Peter William Rosier (Plaintiff) PARTIES : v DTH Pty Limited (First Defendant) Sharpe Partners Legal Pty Limited (Second Defendant) FILE NUMBER(S) : SC 13420 of 2002 Mr M S White (Plaintiff) COUNSEL : Mr R Lovas (First Defendant) N/A (Second Defendant) Rosier Partners (Plaintiff) SOLICITORS : Watson, McNamara & Watt (First Defendant) N/A (Second Defendant) LOWER COURT Local Court JURISDICTION : LOWER COURT 223 of 2001 Local Court Armidale FILE NUMBER(S) : LOWER COURT Roger Prowse LCM JUDICIAL OFFICER : IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION Master Malpass Tuesday 12 August 2003 13420 of 2002 Peter William Rosier v DTH Pty Limited & Anor JUDGMENT 1 MASTER: The first defendant brought proceedings against both the plaintiff and the second defendant in the Local Court. A monetary claim was propounded. It was founded on an alleged agreement said to be made on 2 May 2000. The agreement was said to arise orally from a conversation had between Messrs Ter Hedde and Grahame Sharpe. The express terms of the agreement were said to include a purchase of the first defendant's accountancy practice for a price of $90,000 (payable by instalments). 2 The claim was defended. The alleged contract was put in issue. The learned Magistrate (Mr Prowse LCM) found in favour of the first defendant and a monetary judgment was entered in its favour. 3 By Summons filed on 24 December 2002 the plaintiff brings an appeal to this Court. It is common ground that the avenue of appeal is restricted to error in point of law. The onus rests with the plaintiff to demonstrate error justifying a disturbing of the decision of the Local Court. 4 The grounds of appeal are set forth in an Amened Statement filed on 25 July 2003. For present purposes, it is not necessary to address all of those grounds. 5 At the relevant time, the plaintiff had been the chairman of Sharpe Partners National Pty Limited (National). National provided accountancy services. There were a number of associated companies (including Sharpe Partners New England Pty Limited (New England), Sharpe Partners Facilities Pty Limited (Facilities) and Sharpe Partners Legal Pty Limited (Legal) ). Legal were chartered accountants. Sharpe Partners Legal was a partnership carried on between the plaintiff and Legal. 6 The plaintiff is a lawyer. He had no first hand knowledge of the arrangements made by the first defendant. He had not met or spoken to Mr Ter Hedde (who was a director of the first defendant). The latter describes himself as an accountant and financial advisor. 7 The first defendant had carried on an accountancy practice. In May 1998, it entered into a transaction with Harris Smith. The court has been told that this transaction in effect saw a sale of the practice with the files and staff being transferred to Harris Smith (with the first defendant giving a covenant in restraint of trade). Whilst there was agreement for payment of moneys in the future, no payment was in fact made by Harris Smith to the first defendant. Subsequently, what has been described as a takeover took place and New England acquired the practice. It appears that Mr Ter Hedde became aware of what happened at some time during 1999. He then proceeded on the basis that there had been default by Harris Smith and sought to recover payment in respect of the practice. 8 In early 2000, Mr Ter Hedde made contact with Mr Sharpe. He wrote letters to "Sharpe Partners National". One was directed to "The Chairman of the Board" and for the attention of the plaintiff (Exhibit H). Others, were directed to Mr Sharpe (including Exhibit G). 9 Exhibit H contained the following:- "In my most recent discussion with Grahame, he suggested that I formally put the matter to the notice of Sharpe Partners National, whom I understand has effectively purchased Harris Smith's practice." 10 Exhibit G contained the following:- "It would be appreciated if you could get this information to me well before 14 February 2000 , being the date of the next meeting of the board of Sharpe Partners National, so that I can liaise with you before the meeting." 11 A written response by letter dated 30 March 2000 was sent to Mr Ter Hedde from Sharpe Partners Legal. It was signed by the plaintiff. It referred to the contact had between Messrs Ter Hedde and Sharpe (who was referred to as "one of our Board members" ) and advised that at a Board meeting Mr Sharpe had been authorised to approach to finalise arrangements. 12 Following that letter, a number of discussions took place between Messrs Ter Hedde and Sharpe. The meeting had on 2 May 2000 was arranged. 13 What is said to be a statement by Mr Ter Hedde was tendered in the proceedings before the Local Court. It sets out inter alia a narrative of past events and his version of the meeting that took place on 2 May 2000. The statement records Mr Sharpe (he said of whom, "I understand was the Managing Director of the Defendant Company") as saying "I have been given authority by my Board to proceed to solve a deal with you. That's what we are here to do." A consensus was reached for the payment of a sum of $90,000 by instalments. It also records Mr Sharpe as saying "I am your saviour too. If it wasn't for us, you would be getting nothing". It also records Mr Sharpe as saying words to the effect of "We will want the Restrictive Covenant for five (5) years from today". Subject to certain reservations, a consensus was reached on that matter. The statement further records that it was contemplated by the parties that documents would be prepared and that no such documents were ever executed. 14 There seems to have been a further conversation had between them on 9 May 2000 during which it is suggested that the name "Sharpe Partners National" was mentioned by Mr Sharpe. 15 Subsequently, eight instalments were paid by Facilities. They were paid by electronic transfer into a bank account. The judgment was obtained in respect of five unpaid instalments. 16 A statement by Renata Joy Kong was also tendered in the Local Court proceedings. She was the Office Manager of the first defendant. An extract from a diary kept by her was an annexure to the statement. It contains inter alia the following:- " 2 May 2000 David met with Grahame. They organised that Sharpe Partners National would pay $90,000 over 27 months ($3,333.33 per month), beginning 31 May. These payments will be made by direct credit into our bank account. Grahame is going to have papers drawn up to this effect." 17 Mr Ter Hedde was cross-examined on this entry (Transcript pp 15 – 16). One of the questions produced a somewhat equivocal or ambiguous answer. 18 Mr Ter Hedde also gave the following further evidence in respect of the conversation had on 2 May 2000:- "………………. Q. Isn't it true that Mr Sharpe said to you 'The board of Sharpe Partners National has given me the job of attempting to reach an agreement with you. In regards to an amount of money Sharpes would be prepared to pay on behalf of Harris Smith and over what period of time Sharpes would be able to pay any such amount'? A. Sorry was that a, where was that from. Q. I'm suggesting to you that Mr Sharpe, in the course of that conversation, said to you those words or something like them. Would you like me to repeat the paragraph? A. Yes thanks. Q. 'The board of Sharpe Partners National has given me the job of attempting to reach an agreement with you. In regards to an amount of money Sharpes would be prepared to pay on behalf of Harris Smith and over what period of time Sharpes would be able to pay any such amount'? A. Words to that effect yeah. Q. So he did say words to that effect? A. Yeah. …………………" 19 He also gave the following further evidence in respect of exhibit G:- "………………. Q. You wrote that because you understood again that the relevant board was the board of Sharpe Partners National? A. And I didn't know what Sharpe Partners National was, if it was a reference to a particular company, he just told me to write to Sharpe Partners National. ……………………" 20 The plaintiff argued before the learned Magistrate that there was no consideration to support the alleged agreement and that any right to sue for the purchase price was against Harris Smith. His case was that the practice had not been purchased from the first defendant in 1998 and it had been acquired by New England well before the alleged agreement. These latter matters were not in dispute. 21 It seems to have been overlooked that there was a considerable divergence between the case as pleaded and the evidence led in support of it. The case as pleaded could not have been maintained on that evidence and was doomed to failure. 22 The learned Magistrate found that consideration had been proven. Indeed, he found that it had been proven in two ways. Firstly, he found that a covenant had been offered on behalf of the first defendant. Secondly, he found that words "I am your saviour…." said by Mr Sharpe to Mr Ter Hedde gave rise to a forbearance. 23 Whilst strong doubts may be entertained as to whether such words could give rise to what was found, it is not necessary to consider whether or not the finding of the forbearance was erroneous. It suffices to say that it was not a matter argued by the parties. The plaintiff did not have the opportunity of either leading evidence or making submissions on the point. The finding gave rise to a clear denial of procedural fairness. 24 There was no dispute that a contract not under seal is enforceable only if consideration is given by the promisee to either the promisor or to some other person at the request of the promisor. 25 In my view, the findings as to consideration were erroneous. No consideration was given by the alleged promisee to either the alleged promisors or to some other party at their request. In any event, the determinative question was whether agreement had been made with the plaintiff and the second defendant. 26 The statement of Ms Kong was tendered by the first defendant and admitted without objection. The plaintiff made a submission relying on the entry which appears in that diary for 2 May 2000. This submission is referred to in the judgment ("the contemporaneous note"). The plaintiff submits that although the submission was referred to in the judgment it was not in fact addressed by the learned Magistrate. 27 I should preface my further observations with the comment that the disclosure of the reasoning process that led the learned Magistrate to the decision that the contract had been made with the plaintiff and the second defendant has its deficiencies. At times, it may be regarded as confusing. In my view, in a number of respects the disclosure of the reasoning process is insufficient. 28 The submission concerning the "contemporaneous note" does not appear to have been expressly dealt with and it is unclear whether it was dealt with by implication. Similarly, it is unclear whether he had regard to the diary entry in reaching his decision. He referred to a submission based on the cross-examination of Mr Ter Hedde. This may have been dealt with, at least in part, later in the judgment (when he rejected submissions made in relation to the communication of 9 May 2000). He rejected the contention that any agreement was made with Facilities. He appears to have put aside the correspondence preceding 2 May 2000 (other than the letter dated 30 March 2000), even though he said that it was evidence that he accepted. Whilst, once again the basis for so doing is unclear, it may be because he had found that the alleged agreement came into existence on 2 May 2000. 29 The judgment concluded with the following :- "…….In the absence of any evidence that I am prepared to accept and for reasons I have already announced briefly from Mr Sharpe to say that on 2 May 2000 it was a term of the contract that the contract was to exist between Sharpe Partners National Proprietary Limited and Mr Ter-Hedde that Mr Ter-Hedde was entitled to uplift from the letter of 30 March 2000 which was sent to him by Sharpe Partners Legal, not solicited or in any way begged by Mr Ter-Hedde but voluntarily sent to him by Sharpe Partners Legal Proprietary Limited in partnership with Mr Rosier, he is entitled to rely upon that letter as being the entity with whom he is negotiating and in fact negotiated a contract to finality on 2 May 2000. As I say if there was a conversation on 9 May 2000 and it seems that there was between Mr Ter-Hedde and Mr Sharpe, I am not satisfied that there was any variance to the contract that I have found existed as at 2 May 2000 with the offer acceptance and consideration. For those very brief and truncated reasons, with all the limitations that I have previously announced, I AM SATISFIED THAT THE PLAINTIFF HAS DISCHARGED THE ONUS THAT IS CASE UPON HIM AND THERE WILL BE JUDGMENT FOR THE PLAINTIFF IN THE TERMS SOUGHT." 30 Whilst I appreciate that the learned Magistrate had time constraints, this is a passage which causes me difficulty. What was intended by the expression "In the absence of any evidence that I am prepared to accept" is unclear. Perhaps, it was intended to have reference to evidence and submissions made in relation to cross-examination and the communication had on 9 May 2000. It may be that it was being said that there was no evidence to support a finding that the agreement had been made with National. I shall assume that it was not intended to suggest that there was an onus borne by the plaintiff and the second defendant to prove such a matter. The passage (and what was earlier said) makes it clear that he placed great significance on the letter of 30 March 2000. It led him to the view that Mr Ter Hedde was entitled to rely on it "as being the entity with whom he is negotiating and in fact negotiated a contract to finality on 2 May 2000" and "organise his affairs in relation to it." This seems to be the evidence that led him to his ultimate finding. 31 Whatever may have been the reasoning process, it seems to me that the learned Magistrate misdirected himself as to the contents of the letter dated 30 March 2000 and addressed the wrong questions. If any reliance was placed on the contents of that letter, the contents presented Mr Sharpe as being a board member who received his authorisation to finalise arrangements at a Board Meeting held on 14 February 2000 (which Exhibit G shows Mr Ter Hedde knew to be a board meeting of Sharpe Partners National). I should digress to add that if reliance was a relevant question there is no evidence capable of supporting a reliance. For completeness, I should also add that whatever view be taken of the letter it does not present Mr Sharpe as being authorised to finalise arrangements on behalf of the plaintiff personally. The statement of Mr Ter Hedde presents a similar picture ("been given authority by my Board to proceed to solve a deal"). The diary records that "Sharpe Partners National" was to pay $90,000 by direct credit into the bank account. This material is to be seen in the context of Mr Ter Hedde's correspondence preceding the letter of 30 March 2000 and his oral evidence. The material provided a powerful body of evidence to support a finding that the plaintiff was not a party to the alleged agreement. Indeed, I consider that only such a view was reasonably open on the evidence. It would be erroneous to find that there was an absence of evidence to that effect. 32 In my view, there is no evidence capable of supporting the finding that the plaintiff was personally liable under any arrangement made with the first defendant. If the question was addressed, I consider that there was no evidence capable of supporting a finding that he authorised Mr Sharpe to enter into any agreement on his behalf. 33 Accordingly, I am satisfied that the plaintiff has discharged the relevant onus. The judgment entered against the plaintiff is set aside. The first defendant is to pay the costs of these proceedings. If so entitled, the first defendant is to have a certificate under the Suitors' Fund Act 1951. The first defendant is to pay the costs of the claim made against the plaintiff in the Local Court. The Exhibits may be returned. ********** Last Modified: 08/18/2003 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.