New South Wales Supreme Court CITATION : Robinson v Gleeson [2003] NSWSC 674 HEARING DATE(S) : 20 June 2003 JUDGMENT DATE : 28 July 2003 JURISDICTION: Common Law JUDGMENT OF : Master Harrison DECISION : (1) The judgment of Miszalski LCM dated 14 August 2002 is confirmed; (2) The appeal is dimissed; (3) The plaintiff is to pay the defendant's costs as agreed or assessed. CATCHWORDS : Appeal decision of LCM - purchase of second hand boat "Flight" that sank LEGISLATION CITED : Local Court (Civil Claims) Act 1970 (NSW) - s 69 Sale of Goods Act - s 19 Allen v Kerr & Anor (1995) Aust Torts Reports 81-354 Azzopardi v Tasman UEB Industries Ltd (1985) 4 NSWLR 139 Barr v Gibson (1838) 150 ER 1200 BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266 Broussard v Minister for Immigration and Ethnic Affairs (1989) 21 FCR 472 Byrne v Australian Airlines Ltd (1995) 185 CLR 410 Devries v Australian National Railways Commission (1993) 177 CLR 472 Hawkins v Clayton (1988) 164 CLR 539 CASES CITED : Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41 Kioa v West (1985) 159 CLR 550 McDevitt v Kattengall (1879) 5 CLR 89 Magill v National Bank Ltd [2001] NSWCA 221 Pilbarra Aboriginal Land Council Aboriginal Corporation Inc v Minister for Aboriginal and Torres Strait Islander Affairs (2000) 103 FCR 539 Shirlaw v Southern Foundries (1926) Ltd [1939] 2 KB 206 State Rail Authority of New South Wales v Earthline Constructions Pty Ltd (in Liq) (1999) 160 ALR 588 VAAC v MIMIA [2003] FCAFC 74 VAAC OF 2001 v Minister for Immigration and Multicultural and Indigenous Affairs [2003] FCAFC 74 Leigh Robinson (Plaintiff) PARTIES : Michael Francis Gleeson (Defendant) FILE NUMBER(S) : SC 12497/2002 Mr D Godwin (Plaintiff) COUNSEL : Mr V A Bizannes (Defendant) Orchiston Ranzetta Finney (Plaintiff) SOLICITORS : Conditsis & Associates (Defendant) LOWER COURT Local Court JURISDICTION : LOWER COURT 176/2002 FILE NUMBER(S) : LOWER COURT Miszalski LCM JUDICIAL OFFICER : - 2 - IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION MASTER HARRISON MONDAY, 28 JULY 2003 12497/2002 - LEIGH ROBINSON v MICHAEL FRANCIS GLEESON JUDGMENT (Appeal decision of LCM – purchase of second hand boat "Flight" that sank) 1 MASTER: By amended summons filed 22 November 2002, the plaintiff seeks an order that the decision of Miszalski LCM dated 14 August 2002 be set aside and judgment be entered in favour of the defendant. The plaintiff relied on the affidavit of John Hamish Giles Finney sworn 14 November 2002. This matter was referred by the list Judge to a Master for hearing. 2 At the outset, it may be helpful to make some brief comments concerning the remedy pursued by the plaintiff. Section 69(2) of the Local Courts (Civil Claims) Act 1970 (NSW) permits a party who is dissatisfied with a judgment as being erroneous in point of law to appeal to this Court. The onus lies on the plaintiff to demonstrate that there has been an error of law. What is a question of law (as opposed to a question of fact) was considered, inter alia, in Allen v Kerr & Anor (1995) Aust Torts Reports 81-354 and Azzopardi v Tasman UEB Industries Ltd (1985) 4 NSWLR 139 at 155-156. It cannot be said that the magistrate acted on evidence inconsistent with facts incontrovertibly established by the evidence - see Devries v Australian National Railways Commission (1993) 177 CLR 472 per Brennan, Gaudron and McHugh JJ at 479 and State Rail Authority of New South Wales v Earthline Constructions Pty Ltd (in Liq) (1999) 160 ALR 588. Background 3 On 12 October 2000, the defendant purchased from the plaintiff a 40 year old 25 foot timber Chriscraft Cruiser named "Flight" for the sum of $12,000. On 16 October 2000, the boat partially submerged at its mooring. In the Local Court, by statement of claim the plaintiff Michael Gleeson, the purchaser of the boat, sought to recover the moneys he paid for the boat from the defendant, Leigh Robinson. Mr Robinson is the plaintiff in these proceedings. Likewise, Mr Gleeson is the defendant in these proceedings. In this judgment, I shall refer to Mr Robinson as the plaintiff. Grounds of appeal 4 The plaintiff submitted that the Magistrate erred in law in finding firstly, that there was a breach of an essential term of the contract when the boat ceased to float 3 days after it was sold because it ceased to be a boat. The plaintiff claims that the Magistrate erred in law firstly, in finding that there was an implied warranty that the boat would last two or three weeks; secondly, that in using the conduct of the parties subsequent to their entering into the contract to determine the terms of the contract; and thirdly, in not finding that the contract for the sale of the boat was wholly in writing. 5 It is common ground between the parties that the contract is not subject to s 19 of the Sales of Goods Act as the defendant was not in the business of supplying the goods. There is no warranty of fitness implied by the common law. The position at common law is that stated by Barron Parkes J in Barr v Gibson (1838) 150 ER 1200 namely that "In the bargain and sale of an existing chattel, by which the property passes, the law does not (in the absence of fraud) imply any warranty of the good quality or condition of the chattel so sold." Reasons for judgment 6 The judgment is eight pages in length. The facts are interwoven throughout the judgment but rather than reproduce the whole of the judgment I will refer to a number of the relevant portions of the judgment. 7 The plaintiff submitted that the Magistrate adopted the incorrect approach in finding that the receipt did not constitute the contract between the parties. According to the plaintiff the terms of the contract were expressly set out in the receipt and thus there was no need to imply any terms into the contract. The plaintiff further submitted that the grounds on which a term is to be implied in a contract have been variously stated, none of which support the implication of such a term. The plaintiff's counsel postulated that if asked in October 2000 whether the term in question formed part of their contract, it could not be said that both parties would have said "Of course" or "It goes without saying" or "Obviously" – see Shirlaw v Southern Foundries (1926) Ltd [1939] 2 KB 206 at 227 per Mackinnon LJ; Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41 at 121; Byrne v Australian Airlines Ltd (1995) 185 CLR 410 at 442. According to the plaintiff, the defendant expressly stated that were goods sold "as is", so it was not necessary to give business efficacy to the contract to imply the term in question. The principle of caveat emptor is applicable and the contract operates reasonably and effectively without it – see BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266 (PC) at 282-3 and Hawkins v Clayton (1988) 164 CLR 539 at 573. 8 However, the defendant submitted that the written document constituted merely a receipt. The defendant further submitted that the Magistrate was entitled to make findings of fact that the terms of the contract were such as espoused by Mr Gleeson rather than Mr Robinson and having made that finding of fact it is not an error of law to find that there was a breach of an essential term. 9 The plaintiff referred to passage from McDevitt v Kattengall (1879) 5 CLR 89 at 92 where it was argued that a receipt cannot be a contract. It reads: "The document contains all the necessary elements of a contract – the fact of the sale, the names of the parties, a description of the horse, and the price; its containing in addition a receipt for money, does not make it a receipt only, or prevent if from being, as we are of the opinion it is, the best evidence of the contract." 10 It is trite to say, but each case depends on its facts. At the hearing, the issue of whether the receipt constituted the contract was argued (t 13.40). Mr Gleeson gave evidence that he received a receipt for $12,000. Mr Gleeson then continued on with some confusing evidence but settled upon being given a receipt which he had not asked for (t 18.27). Mr Robinson gave a different version of these events. The Magistrate recounted that the defendant's case was that there was a contract for sale of the vessel "Flight" and the plaintiff's case was that the document was really a receipt (t 161.5). 11 The Magistrate decided: "I think at the end of the day when one looks at it, it is a receipt. it encapsulates a transfer of property from the defendant to the plaintiff and it has those magic words at law which says that the vessel was sold as is, and that's the defence as far as the defendant is concerned, that there was in fact no attachments to the vessel. When I say attachments, that is that there was no suggestion as far as the defendant was concerned that there would be any form of warranty. The vessel was sold as it was, as is." 12 Thus the Magistrate made a finding that the written document constituted a receipt. This finding was open to the Magistrate. It does not constitute an error of law. 13 Thus the contract was an oral one and in order to construe the contract the Magistrate has to have regard to the parties evidence as to what the terms of the contract were. The plaintiff claimed that there was a warranty that the boat was seaworthy but the defendant maintained that there was never, never any representation by him that the boat itself was safe (J:2 48-55). 14 On Mr Robinson's credibility the Magistrate stated: "The question of the fraudulent claim on the insurance company is relevant to this extent. Mr Godwin makes reference to it in his submissions to me and he looks at it this way. He says that the insurance claim at paragraph 22, the defendant contends that the claim by the defendant on his insurance policy is relevant to the proceedings. In a way it is, but the making of the claim and pursuing the claim effects his credit to the extent in my view that where he persists with the claim, particularly with the evidence of Mr Sutherland, where his evidence is at odds with the plaintiff's evidence, then the plaintiff's evidence should be preferred, that's my view. Because in those circumstances where deceit is used, and that is what courts look at, is the veracity of witnesses where one witness, a party to the proceedings, relies upon – his behaviour is such that it involves stealth, deceit, some sort of fraud, then in those circumstances his veracity, his reliability is undermined." 15 Earlier in the judgment the Magistrate recorded that Mr Gleeson gave evidence that Mr Robinson said 'Promise me you will have it slipped as soon as possible and all the leaks fixed before any substantial use of the boat." 16 In relation to the plaintiff's knowledge of the boat's condition the Magistrate recorded: "There were some things pointed out to him [Mr Gleeson], that there was in fact leaks. There were things that concerned him about water being in the hull. But the defendant assured him that that was part and parcel of the way the boat was, and things would resolve themselves in the long run." 17 To imply a term into a contract in Shirlaw MacKinnon LJ stated at 227: "Prima facie that which in any contract is left to be implied and need not be expressed is something so obvious that it goes without saying; so that, if, while the parties were making their bargain, any officious bystander were to suggest some express provision for it in their agreement, they would testily suppress him with a common 'Oh, of course!'" 18 In relation to the implied warranty, at J 6.1-5, the Magistrate stated: "And even if at law, and I think that this may well be right, there was not in fact an actual warranty as such, there was in fact in my view an implied warranty. The implied warranty from my perspective, I am looking at the whole of the evidence, would be that the boat would in fact last at two or three weeks. At least two or three weeks. The reason I mention the $12,000, it is not like someone is paying $120 for a bargain or $1200 for a bargain, this boat was not sold as a handyman's dream, this boat was in fact something that could be used. Subject of court to the imprimatur by the defendant that it be slipped within two or three weeks. … The situation is the boat did not float. It certainly does not come within the scope, in my view, of what a boat is. It was expected to last some time. Certainly if this was the situation where three months later the boat sank, well I would be of the view as set out in one of the submissions by Mr Stroud, and if that was the reliance because that is the defendant's case, that he sold it as is, his stance ought have been one, well that's just tough. But the defendant took the boat, one the guise he was going to actually rectify the situation. So in those circumstances it is my view as I say the plaintiff's entitled to a verdict. SO I ENTER VERDICT FOR THE PLAINTIFF." (J 8.55; 9.1-10) 19 The reference to reliance does not add anything to the finding that there was an implied warranty. I digress to reflect upon the Magistrate's statement that a boat that does not float does not come within the scope of what a boat is. As the plaintiff pointed out a boat can still be a boat though at the time incapable of being, from the want of local conveniences and facilities, beneficially employed as such see - Barr v Gibson (1838) 150 ER 1200. Flight may well have still been a boat but this finding is not critical to the finding that there was an implied warranty. 20 Thus, the Magistrate found on the facts that the boat was something that could be used and that it would be slipped within two to three weeks. The Magistrate then decided there was an implied warranty that the boat would last at least two or three weeks. This view was on the evidence open to the Magistrate. There has been no error of law. Subsequent conduct 21 The plaintiff also submitted that the Magistrate erred in his approach by construing the contract by using subsequent acts and things that the parties said or did after it was made. Both parties referred to Magill v National Bank Ltd [2201] NSWCA 221 at paras 50, 51 where the Court of Appeal per Ipp JA (with whom Handley and Meagher JJA agreed) stated: "The admissibility of subsequent conduct as an aid to the construction of a contract remains to be authoritatively resolved. It is sufficient to point to the differing views flowing from Hide & Skin Trading Pty Limited v Oceanic Meat Traders Limited (1990) 20 NSWLR 310 expressed by Santow J in Spunwill Pty Limited v Bab Pty Limited (1994) 36 NSWLR 290 (where subsequent conduct was held to be potentially admissible) and by Bryson J in Sportsvision Australia Pty Limited v Tallglen Pty Limited (1998) 44 NSWLR 103 (where the contrary was held). In my respectful opinion the views expressed in Sportsvision Australia Pty Limited v Tallglen Pty Limited are to be preferred. Like Bryson J, I consider the reasoning of Lord Reid in James Miller & Partners Limited v Whitworth Street Estates (Manchester) Limited [1970] AC 583 at 603 to be unanswerable. His Lordship there said: "I must say that I had thought that it is now well settled that it is not legitimate to use as an aid in the construction of the contract anything which the parties said or did after it was made. Otherwise one might have the result that a contract meant one thing the day it was signed, but by reason of subsequent events meant something different a month or year later". 22 In Magill, the contract was written. It was the identity of the lender that was in dispute. In this appeal the identity of the parties was known and the contract was a oral one. It is accepted that the court cannot look at subsequent conduct as an aid to the construction of a contract. However, in the case of an oral agreement, later statements and the conduct of a party could well be admissible as admissions or constructive admissions of the meaning of terms on which the parties had agreed, and there is no rule of exclusion of evidence extrinsic to oral statements constituting agreement. 23 As previously stated, the Magistrate accepted Mr Gleeson's evidence that Mr Robinson said "Promise me you will have it slipped as soon as possible and have the leaks fixed before you make any substantial use of the boat and that the boat was expected to last some time". These statements form part of the contract and were made when the contract was being entered into. That sometime was two to three weeks. The Magistrate did not rely upon subsequent conduct to imply the term of the contract. This ground of appeal fails. (ii) Denial of natural justice 24 The plaintiff submitted that no implied term was pleaded by the defendant in his statement of claim. No express term in the words implied by the Magistrate was pleaded by the defendant in his statement of claim and at no stage did the Magistrate alter the plaintiff to the possibility that such a term might be implied and that this was the critical issue upon which the case turned – see Kioa v West (1985) 159 CLR 550 at 587; Broussard v Minister for Immigration and Ethnic Affairs (1989) 21 FCR 472 at 481; VAAC v MIMIA [2003] FCAFC 74 and Pilbara Aboriginal Land Council Aboriginal Corporation Inc v Minister for Aboriginal and Torres Strait Islander Affairs (2000) 103 FCR 539 at 557 (and the cases there cited). The plaintiff was denied procedural fairness and this is a legal error. 25 The statement of claim pleaded that it was a term of the contract for the purchase of the motor cruiser that the motor cruiser was seaworthy, free of any defects that could cause it to sink and that the hull was sound. In breach of the condition the motor cruiser was not seaworthy, free of any defects that could cause it to sink or that the hull was sound. By virtue of the breach, the plaintiff has repudiated the contract and accordingly the defendant is excused from performance of his obligations under the contract. The defendant has paid to the plaintiff the contract price and is entitled to the recovery from the plaintiff. 26 The plaintiff referred to the following passage from the full Court of the Federal Court decision of VAAC OF 2001 v Minister for immigration and Multicultural and Indigenous Affairs [2003] FCAFC 74 where the Court (per North, Merkel and Weinberg JJ) stated: "Determining the appellant's prospects of success on the appeal requires consideration of the merits of the new ground. It is well established that the rules of natural justice require that a decision-maker bring to an applicant's attention the critical factor on which the decision is likely to turn so that he or she may have an opportunity of dealing with it: see Kioa v West (1985) at 587; Broussard v Minister for Immigration and Ethnic Affairs (1989) 21 FCR 472 at 481; and Pilbara Aboriginal Land Council Aboriginal Corporation Inc v Minister for Aboriginal and Torres Strait Islander Affairs (2000) 103 FCR 539 at 557 and the cases there cited." 27 At the hearing, the parties gave their oral evidence as to what were the express and implied terms of the contract. Submissions were put as to the effect of that evidence and its reliability. The Magistrate was not obliged to give the parties prior notice of what findings he was going to make on the facts so as to enable the parties to address on those findings. The purpose of submissions is to canvass the various alternative findings that may be made on the facts. It is my view that there has been no denial of natural justice. The judgment of Miszalski LCM dated 14 August 2002 is confirmed. The appeal is dismissed. 28 Costs are discretionary. Costs normally follow the event. The plaintiff is to pay the defendant's costs as agreed or assessed. 29 The orders I make are: (1) The judgment of Miszalski LCM dated 14 August 2002 is confirmed. (2) The appeal is dismissed. (3) The plaintiff is to pay the defendant's costs as agreed or assessed. ********** Last Modified: 07/31/2003 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. 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