New South Wales Supreme Court CITATION : Constantinidis & Anor v Capitol Painters [2005] NSWSC 109 HEARING DATE(S) : 2 February 2005 JUDGMENT DATE : 25 February 2005 JURISDICTION : Common Law Division JUDGMENT OF : Master Harrison DECISION : (1) Part of the appeal is allowed; (2) The judgment of Magistrate Peter Gould that the Constantinidis' pay Capitol the sum of $27,336.00 be set aside. In lieu judgment be enetered that the Constantinidis' pay Capitol the sum of $11,571.08; (3) Interest is to run up to 1 Februarty 2005; (4) Each party is to pay their own costs of the appeal; (5) The costs orders in the Local Court is affirmed. CATCHWORDS : Appeal decision of Local Court Magistrate - Home Building Act Home Building Act 1989 (NSW) ss 3, 7 & 10 LEGISLATION CITED : Limitation Act 1969 (NSW) - s 14, s 54(4) Local Court (Civil Claims) Act 1970 (NSW) - s 69(3) Brunskill v Sovereign Marine & General Insurance Co Ltd (1985) 62 ALR 53 CASES CITED : Devries v Australian National Railways Commission (1993) 177 CLR 472 Maria Constantinidis (First Plaintiff) Achilles Constantinidis PARTIES : (Second Defendant) Capitol Painters & Decorators Pty Ltd (Defendant) FILE NUMBER(S) : SC 10621/2004 Mr W C Terracini SC with Mr G Newton (First & Second Plaintiffs) COUNSEL : Mr P Newton (Defendant) Williams Boxsell Georgas (First & Second Plaintiffs) SOLICITORS : Peter Bouzanis & Associates (Defendant) LOWER COURT JURISDICTION : Local Court LOWER COURT FILE NUMBER(S) : 193/2003 LOWER COURT JUDICIAL OFFICER : Magistrate Gould IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION MASTER HARRISON FRIDAY, 25 FEBRUARY 2005 10621/2004 - MARIA CONSTANTINIDIS & ANOR v CAPITOL PAINTERS & DECORATORS PTY LTD JUDGMENT (Appeal decision of Local Court Magistrate – Home Building Act) 1 MASTER: By summons filed 10 August 2004 the plaintiff seeks an order granting leave to appeal from the whole of the decision of Local Court Magistrate Gould at the Burwood Local Court on 6 February 2004 pursuant to s 69(3) of the Local Court (Civil Claims) Act 1970 (NSW). The first plaintiff is Maria Constantinidis. The second plaintiff is Achilles Constantinidis. The defendant is Capitol Painters & Decorators Pty Ltd (Capitol). The director of Capitol is Mr Gorgas. Local Court proceedings 2 In the amended statement of liquidated claim, Capitol claimed firstly, the sum of $8,368.00 in respect of painting works and materials supplied by Capitol to Mr and Mrs Constantinidis in respect of their former home at Burwood (the Burwood property); and secondly, the sum of $20,548.00 in respect of painting works and material supplied by Capitol to Mr and Mrs Constantinidis in respect of their home at Strathfield (the Strathfield property). The defence pleaded that these actions were statute barred. The Constantinidis' cross claimed against Capitol alleging that they had paid for these works by performing accounting work for Capitol. The Magistrate held that Mr Constantinidis did not perform any consultancy work for Gorgas. The cross claim was dismissed. Grounds of appeal and notice of contention 3 The grounds of appeal are firstly, that the Magistrate erred in law in holding that the defendant was entitled to claim for the 1993 work regardless of the provisions of s 14 of the Limitation Act 1969 (NSW) and finding the plaintiffs liable for a contract for the painting services completed by Capitol by 27 May 1993; secondly, that the Magistrate erred in law in holding that the defendant was entitled to claim for the 1995 work regardless of the provisions of s 14; thirdly, that the Magistrate erred in law in failing to give adequate or any reasons for failing to apply the provisions of s 14; fourthly, that the Magistrate erred in law in failing to give sufficient reasons on issues going to the credibility of Mr Gorgas; fifthly, that the Magistrate erred in law in failing to give sufficient reasons on issues going to the credibility of the plaintiff; and sixthly, that the Magistrate erred in fact in that the reasoning process by which conclusions of fact were reached in relation to Mr Gorgas' credibility was demonstrably unsound, illogical and perverse. 4 It is convenient that I start with the last ground of appeal which relates to the Magistrate's findings on credit. The credibility of the director of Capitol Painting Mr Gorgas and the Constantinidis'. It was this that was "at the heart of the matter". There were three periods of work carried out by Capitol, the first in 1993 at the Burwood property, the second from 18 October 1993 to 28 February 1995 also at the Burwood property and the third in 1997/1998 at the Strathfield property. The Burwood property 5 In his statement dated 11 June 2003 [Ex 1], Mr Gorgas stated that: "I recall in late April/early May 1993, AC telephones me and we had a telephone discussion. During that telephone discussion, AC said to me words to the effect: "Bill, I want you to paint my house as soon as possible and as quickly as possible as I want to sell it. Can you come to the house and see me?" I replied: "I will be there in the next day or so." 6 Mr Gorgas stated that he met Mr Constantinidis' at the Burwood property the following day and agreed to paint the house. At that meeting, Mr Gorgas stated that the following conversation took place [Ex 2]: AC: "That is good. What do you propose to charge for the painting?" WG: "Al we are good friends, I am prepared to do the job for you and all you have to do is pay the painter's day labour and the costs of the paint and the materials required to paint your house. Al, it costs me about $280.00 per day per painter, if you take into consideration their wages, worker's compensation insurance, superannuation, office and other expenses. I will charge you $280.00 per day per painter plus the cost of paint and materials." 7 Mr Constantinidis [para 7, stated 30/9/1993] acknowledged that in or about May 1993 he made arrangements with Mr Gorgas to carry out "specialised painting works" at the Burwood property. Mr Constantinidis gave the following evidence in relation to his request for Capital to carry out painting works at the Burwood property: AC: "…I want you to do some painting work on the parapet at the house." WG: "Okay, I will go straightaway and make the arrangements." AC: "Please give me an idea of the cost involved so that I can note it." WG: "Good, I will come back to you." 8 The painting work was completed on the Burwood property in 1993. 9 Mr Gorgas stated [para 19 – Ex 1] (and his Honour found) that in January 1995, Mrs Constantinidis said to Mr Gorgas: "I will pay you the same rate as the Woodside Avenue (the Burwood property) and I'll pay you for both jobs at the end of this job." 10 Mr Gorgas on behalf of Capital accepted this proposal. The Strathfield property 11 Mr Gorgas stated that he went to the Strathfield property with Ms Voulanakis in or about January 1995 where he met Mrs Constantinidis. Mrs Constantinidis selected paint from a colour chart. Mr Gorgas stated [para 19, statement] that the following discussion took place: MC "Bill tomorrow I want painters here. I want at least ten painters to do the job as soon as possible as I need to move into the house within a week or so. I want you to start upstairs and do the bedroom first, then the lounge room, hallway stairs, etc." WG: "I will try and have as many painters here tomorrow as I can't get my hands on for you Maria." MC: "I will pay you the same rate as the Woodside Avenue job and I will pay you for both jobs at the end of this job." WG: "Its alright Maria, don't worry about it, we are good friends, I trust you." 12 From about 18 January 1995 to about 29 February 1995 Capitol painted the interior of the Strathfield property. From about 19 December 1997 to about 12 February 1998 Capitol painted the exterior of the Strathfield Property. The total cost of the works and materials provided at the Strathfield property was in the amount of $20,548.00. This was made up as paint $4,278.00, labour $15,120.00 (54 days at $280.00 per day) and materials $700.00. 13 The plaintiffs submitted that throughout the proceedings Mr Gorgas maintained his stance that the discrepancy between the work diaries and the invoices was "an honest mistake". The Magistrate (t1 9/2/04) held that Mr Gorgas' explanation as to the discrepancy between the invoices and the plaintiff's work diary is not convincing and bears upon his credibility. 14 It is this following passage that the plaintiffs submitted was clearly wrong and inconsistent with the established facts or glaringly improbable – see Brunskill v Sovereign Marine & General Insurance Co Ltd (1985) 62 ALR 53 (per Gibbs CJ, Wilson, Brennan, Deane and Dawson JJ). 15 The Magistrate concluded at page 4: "Gorgas' explanation as to the discrepancy between the invoices and his work diary is implausible and I reject it. Gorgas presents in the witness box as extremely naïve. He was not truthful on the matter of the invoice and his demeanour showed that. It was equally apparent that he was not a dissembler. On the balance of his evidence he presented as frank and truthful. I am very conscious of the fact that as a rule, demeanour is a very reliable indicator of veracity. On the balance of probabilities I am satisfied that Gorgas is telling the truth apart from his "innocent mistake", and that his evidence is accurate." 16 The plaintiffs submitted that the reasoning in the above passage is contradictory and unsustainable because having effectively found that Mr Gorgas dishonestly rendered fraudulent invoices which virtually doubled the amount of the defendant's claims, the Magistrate stated in the same passage that the witness was "naïve" and "not a dissembler". The plaintiffs further submitted that having rejected the evidence of Mr Gorgas as to the invoices it was not reasonably open to the Magistrate to accept that he accurately or honestly told Ms Voulanakis the correct details which she said she inserted in the work diaries. 17 While the invoices amounted to $52,570, the Magistrate only allowed the sum of $27,336.00. He accepted the evidence of Ms Voulanakis. It is my view that it cannot be said that the Magistrate failed to use or appropriately misused his forensic advantage of viewing the demeanour of Mr and Mrs Constantinidis – see Devries v Australian National Railways Commission (1993) 177 CLR 472 at 479. The Magistrate was confronted with having to decide the case when no party gave entirely truthful evidence. The Magistrate was more critical of the whole of Constantinidis' evidence. 18 In this regard the Magistrate stated: "Not only on this matter but throughout his evidence, Mr Constantinidis presents in his answers and his demeanour as being cute and less than frank. He was evasive and untruthful. Mrs Constantinidis couldn't give a straight answer or understand simple questions where it was not apparent, it appears, to her where the cross-examination was leaving. She was evasive." 19 As previously stated, it was common ground that painting work was carried out. In these circumstances, where no party is accepted as being entirely truthful in the giving of their evidence, it was open to the Magistrate to accept the evidence of Ms Voulanakis, who was Mr Gorgas' secretary, on the issue of the costing of the work performed. There is no error of law. 20 The plaintiffs also complain that they were denied natural justice. The plaintiffs were represented throughout the trial and had the opportunity to place their evidence before the court. Their complaint, in essence, is that they were not believed. In the light of the evidence they gave and referred to above, this is not surprising. There has been no denial of natural justice. Operation of ss 3, 7 & 10 Home Building Act & Limitation Act It was common ground that the agreements were not in writing. It was also common ground that ss 3, 7 and 10 of the Home Building Act 1989 (NSW) were not raised before the Magistrate. If they had been, the contracts would not have been enforceable but Capitol would have been entitled to recover money on the basis of quantum meruit. The plaintiffs go further and say that proof of compliance with the Home Building Act (HBA) was a condition precedent to any claim made by Capitol in contract and therefore it was incumbent on Capitol to prove those matters as part of its case which it failed to do and that there is no prejudice to Capitol by raising this issue now. The plaintiffs conceded that a claim for quantum meruit of the work performed between February 1995 and 28 February 1995 and the work performed in 1998 are not statute barred [see paras 13 & 16 plaintiffs' submissions] but the quantum meruit claims for work performed in 1993 and from 18 January 1995 to 1 February 1995 are statute barred. The statement of claim was filed in the Local Court on 1 February 2001. 21 Capitol contends that the decision should be affirmed on two grounds: namely, that the Magistrate may alternatively have held that by reasons of the representation made by Mrs Constantinidis in or about January 1995, the plaintiffs are estopped from denying liability to pay for the costs of all the painting works and materials supplied by the defendant; or alternatively, that the Magistrate should have held that in or about January 1995 the contract for the provision of painting materials and works for the Burwood property was varied so that payment in respect of the materials and works did not become due until completion of the painting works at the Strathfield property and as the painting of the Strathfield property was not completed until 12 February 1998, any breach or cause of action did not occur until after 12 February 1998, which was well within the limitation period. But this submission is at odds with the Magistrate's finding, namely that the work done in 1998 was part of the 1995 contract. This submission fails. 22 Alternatively, Capitol submitted that the Magistrate accepted that in or about January 1995 Mrs Constantinidis said to Mr Gorgas "I will pay you the same rate as the Woodside Avenue job (the Burwood property) and I'll pay you for both jobs at the end of this job." and it follows that payment in respect of both jobs did not fall due until completion of the painting works at the Strathfield property and accordingly, any breach of contract and cause of action did not accrue until after 12 February 1998. The Magistrate did not make a finding to this effect. 23 Finally, Capitol submitted that the Magistrate could also have found that by making the representation that the Constantinidis' would pay the same rate as the Burwood property and would pay Gorgas for both jobs at the end, the Constantinidis' are estopped from denying liability to pay for the cost of all the painting works and materials supplied at the Burwood property. Capitol further submitted that Gorgas made no attempt to recover the amounts due for the works and materials supplied at the Burwood property and painted the Strathfield property. That is, that Gorgas in reliance of this statement acted to his detriment and thus it would now be unfair and unconscientious for the Constantinidis' to depart from this statement and deny their liability to Capitol. 24 However there were not words or conduct by the plaintiffs to the effect that they would not rely on the limitation period. Section 54(4) of the Limitation Act 1969 requires that an acknowledgment of a cause of action must be in writing before the calculation of the limitation period is effected. There was no such acknowledgement. Capitol's estoppel argument fails. 25 The result is that only part of the judgment can stand. That is the amount awarded for work carried out by Capitol between 1 February 1995 to 1998. It is agreed between the parties that the work carried out and materials supplied before 1 February 1995 amounted to $15,764.92 and the judgment amount should be reduced by that sum. That leaves a verdict amount of $11,571.08 and I shall enter judgment for this sum. Costs and interest 26 The plaintiffs submitted that as far as the costs of the proceedings in the Local Court they submitted that Capitol was not "substantially successful" in the proceedings. The plaintiffs further submitted that the Court should exercise its discretion not to award any costs of the Local Court to the defendant given the conduct of the proceedings by the defendant. 27 Capitol seeks its costs both in the Local Court and on this appeal. It was only the day before the hearing of his appeal that Capitol's legal representative became aware that the plaintiffs were raising ss 3, 7 and 10 of the Home Building Act. The plaintiffs submitted that because the court has substantially upheld the plaintiffs' appeal the plaintiffs are entitled to the full amount of their costs of the appeal. Alternatively, the plaintiffs submitted that if they are not entitled to all of their costs, then the appropriate order would be that the defendant pays 58% of the plaintiffs' costs of the appeal as agreed or assessed. 28 It is my view that the plaintiffs raised a hopeless cross claim in the Local Court, which took up court time. They also did not specifically refer to ss 3, 7 and 10 of the HBA, which has led this appeal to be successful. Further, the Magistrate did not regard them as witnesses of truth. For these reasons, the orders in the Local Court in relation costs should stand. The order for interest should also stand. Interest should continue to accrue up to the day of hearing of this appeal, that being the day after the HBA ground of appeal was specifically raised with Capitol for the first time. It was only after that time Capitol was in a position to make any concessions. 29 In relation to the costs of the appeal, each side was successful in part. Costs are discretionary. In these circumstances it is my view that the appropriate order for costs is that each party pay their own costs. The costs order made in the Local Court is affirmed. 30 The orders are: (1) Part of the appeal is allowed. (2) The judgment of Magistrate Peter Gould that the Constantinidis' pay Capitol the sum of $27,336.00 be set aside. In lieu judgment be entered that the Constantinidis' pay Capitol the sum of $11,571.08. (3) Interest is to run up to 1 February 2005. (4) Each party is to pay their own costs of the appeal. (5) The costs order made in the Local Court is affirmed. ********** 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.