New South Wales Supreme Court CITATION : Workforce International Pty Limited v Coefficiency Pty Limited [2004] NSWSC 1142 HEARING DATE(S) : 26 November 2004 JUDGMENT DATE : 3 December 2004 JURISDICTION: Common Law Division JUDGMENT OF : Master Malpass at 1 DECISION : The judgment in the sum of $30,448.84 and the costs order made by the magistrate are set aside; the defendant's action is remitted to the Local Court for determination in accordance with law; the defendant is to pay the costs of the summons; if so entitled, it is to have a certificate under the Suitors' Fund Act 1951; the exhibits may be returned. CATCHWORDS : Appeal - termination of contract - quantification of damages arising from breach - dismissal of cross-claims. LEGISLATION CITED : Trade Practices Act 1974 PARTIES : Workforce International Pty Limited (Plaintiff) Coefficiency Pty Limited (Defendant) FILE NUMBER(S) : SC 11750 of 2004 COUNSEL : Mr P Walsh (Plaintiff) Mr M Lawson (Defendant) SOLICITORS : Church & Grace (Plaintiff) Gadens (Defendant) LOWER COURT Local Court JURISDICTION : LOWER COURT 4227 of 2002 FILE NUMBER(S) : LOWER COURT Baptie LCM JUDICIAL OFFICER : - 6 - IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION Master Malpass 3 December 2004 11750 of 2004 Workforce International Pty Limited v Coefficiency Pty Limited JUDGMENT 1 Master: The defendant and the plaintiff entered into a contract on 30 September 2000. The defendant agreed to provide premises for use as a disaster recovery centre. 2 There was breach of the contract (non-payment of moneys) and thereafter the contract came to an end. 3 The defendant brought proceedings in the Local Court. The case that was ultimately presented was that pleaded in the further amended statement of liquidated claim. Despite the presentation of the case in a statement of liquidated claim, the claim was in fact for damages founded on breach of contract. The breach was said to have taken place on or about 20 February 2002. 4 The proceedings were defended. The plaintiff also brought a cross-claim for the sum of $40,000. It was founded on breach of contract and/or provisions of the Trade Practices Act 1974 (the Act). 5 The proceedings were heard by Baptie LCM. Judgment was delivered on 17 May 2004. The magistrate found in favour of the defendant. It was found to be entitled to the sum of $30,448.84. The cross-claim was dismissed. 6 On 10 June 2004, the plaintiff filed a summons in this court. It brings an appeal against both decisions made by the Local Court. 7 The plaintiff contends that there has been error in point of law. It bears the onus of satisfying this court that there is error in point of law that justifies the disturbing of either of the decisions. 8 It was alleged by the defendant that the contract had been terminated. It was said that this had taken place by one or more of three happenings. By letter dated 6 March 2002, orally on 25 March 2002 or by service of the statement of claim (which took place on or about 11 April 2002). 9 The magistrate found that the contract had been terminated prior to 20 March 2002 (this was a day on which a payment of moneys had been made by the plaintiff). It was this finding that appears to have led her to the awarding of the judgment sum. 10 She dealt with the cross-claim as follows:- In relation to the cross-claim, it is my view on the material before me that when the contract was entered into on 30 September 2002 that the defendant's software was Work Desk. There is nothing before me which would indicate that the plaintiff's company had contracted to provide real time replication of any system but in particular there is not evidence before me to indicate that specifically there was an agreement for the plaintiff's company to provide real time replication in relation to the Track Fast system. I have made reference to some of the emails between the plaintiff's and the defendant's company and Mr Quirk from Fast Track and it would seem to me that the defendant's company had entered into an agreement some time after 17 January 2001 to agree to sign a contract with Fast Track for the provision of the Fast Track services. IN RELATION TO THE CROSS-CLAIM I THEREFORE FIND FOR THE CROSS-DEFENDANT. 11 Before proceeding further, it is necessary to have an understanding of the nature of the contract and of the events that occurred prior to it coming to an end. 12 The contract was a licence agreement. The facility was made available to the plaintiff for what has been described as a back-up office. Under the contract, a licence fee was payable monthly. A further fee was payable in respect of use made of the facility. 13 The contract had a term of 36 months. It made provision for the issue of invoices on a monthly basis in advance. Payment was to be due within 30 days from the date of invoice. Clause 18 conferred a contractual right of termination consequent upon a breach of a provision of the contract where the breach is not remedied within 14 days after receipt of written notice of the breach. 14 Some payments were made under the contract. Thereafter, the plaintiff stopped making payments. It informed the defendant that it wanted to get out of the contract. 15 On 6 February 2002, the defendant gave notice of breach pursuant to clause 18. It was given in respect to non-payment of an invoice issued on 11 December 2001 in the sum of $1,650.00. No payment was made within the 14 day period. 16 By 26 February 2001, the defendant had decided to refer the matter to its legal advisers. It seems that the defendant received advice from the solicitors that the contract had been terminated by the actions of the plaintiff. 17 The solicitors sent a letter dated 6 March 2002 to the plaintiff. It contained the following:- On or about 14 February 2002 Workforce International Pty Ltd terminated the contract by non-payment of fees and vacating the premises. Our client has suffered loss and damages as a consequence of your breach of the contract. 18 There was evidence that what was said in this letter was not written on instructions. It was described as a letter written by the solicitors. 19 The moneys which were the subject of the default notice were paid on or about 20 March 2002. A telephone conversation took place on 25 March 2002 between Mr Jones (of the defendant) and Mr Dobbie (of the plaintiff). In that conversation, Mr Jones had conveyed the impression that it was the view of the defendant that the agreement had been terminated by the plaintiff. 20 The plaintiff wrote a letter dated 25 March 2002. It referred to the conversation and took issue with the contention that the contract had been terminated. It alleged breach on the part of the defendant and gave notice of intention to terminate. 21 There was evidence of a conversation between Messrs Jones and Dobbie in which it was said that the contract had been terminated. This was placed as having occurred sometime between 25 and 27 March 2002. 22 By letter dated 24 April 202, the solicitors for the plaintiff advised that there had been a repudiation of the contract by the defendant which was thereby accepted and terminated the contract. 23 In my view, the finding made by the magistrate on the question of termination was erroneous. How she came to that finding is somewhat unclear. Be that as it may, there was no evidence of an election to terminate, inter alia, prior to the payment made by the plaintiff. 24 The case that was run before the magistrate was that there had been termination pursuant to clause 18. In my view, the defendant failed to make out such a case before the magistrate. Before this court, a different argument was put. It was one that had not been litigated at all in the proceedings before the magistrate. For this reason alone, it seems to me that the argument should not be entertained in this court. If it had been raised in the Local Court, it may have seen the case of the plaintiff being conducted differently before the magistrate. 25 Leaving that matter aside, it seems to me that the argument is devoid of substance for a variety of reasons. 26 It is said that the letter evidences a notice of election to terminate by reason of what was done by the plaintiff on 14 February 2002 (by non-payment of fees and vacating the premises). 27 The argument is dependent on there having been a repudiation by about 14 February 2002. 28 The magistrate made no finding on the question. Counsel for the plaintiff has directed the court to evidence which suggests that it would have been unlikely for the defendant to succeed on an argument that the contract had been repudiated by the plaintiff at that time. 29 The argument also depended on the defendant being able to establish that it had not earlier waived its entitlement to bring the contract to an end. 30 Apart from questions of the lapse of time, the defendant had elected to follow the clause 18 procedure. In so doing, it seems to me that it had then elected not to terminate because of any repudiation that had taken place on or about 14 February 2002. 31 It appears that in the Local Court, the parties and the magistrate may have focussed on the wrong issue. Whilst the question of termination has relevance to the quantum of damages that may be awarded, it is a breach of contract that gives rise to the claim for damages. 32 I do not need to make any observations concerning quantification of damages. However, it may be said that when a contract has been brought to an end, other questions relevant to the quantification of damages may arise (inter alia, questions of mitigation). 33 In my view, for a number of reasons the decision made by the magistrate on the defendant's claim has to be set aside. 34 I now turn to the question of the decision on the plaintiff's cross-claim. It did not occupy a great deal of hearing time during the appeal. 35 On one view, the potential for damages may be only in the order of $300.00. If that be the case, no real purpose will be served by setting aside the decision. 36 As to the claim that was founded on contract, it seems to me that such a claim was hopeless. The magistrate did not deal with that aspect of the cross-claim which was founded on the Act. Despite this oversight, it seems to me that it was also hopeless. 37 Accordingly, I am of the view that no purpose would be served by disturbing the magistrate's decision on the cross-claim. 38 The judgment in the sum of $30,448.84 and the costs order made by the magistrate are set aside. The defendant's action is remitted to the Local Court for determination in accordance with law. The defendant is to pay the costs of the summons. If so entitled, it is to have a certificate under the Suitors' Fund Act 1951. The exhibits may be returned. ********** Last Modified: 12/06/2004 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. 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