New South Wales Supreme Court CITATION : VS & R Pty Ltd v Kennedy [2008] NSWSC 478 HEARING DATE(S) : 16 May 2008 JUDGMENT DATE : 20 May 2008 JUDGMENT OF : Malpass AsJ (i) Appeal allowed; (ii) orders of Holmes LCM of 23 November 2007 set aside; DECISION : (iii) defendant to pay the costs of these proceedings. (iv) If so entitled the defendant is to have a certificate under the Suitors Fund Act. (v) The matter is remitted back to the Local Court for determination according to law. CATCHWORDS : COMMON LAW - Local Court appeal - inadequate disclosure of reasoning process LEGISLATION CITED : Suitors Fund Act 1951 CATEGORY : Principal judgment PARTIES : V S & R Pty Limited (Plaintiff) John Francis Kennedy (Defendant) FILE NUMBER(S) : SC 16402/07 COUNSEL : C Hickey (Plaintiff) T Anderson (Defendant) SOLICITORS : Moin & Associates Lawyers (Plaintiff) Wicklow Lawyers (Defendant) LOWER COURT JURISDICTION : Local Court LOWER COURT FILE NUMBER(S) : 68 /2006 LOWER COURT JUDICIAL OFFICER : Holmes LCM LOWER COURT DATE OF DECISION : 23 November 2007 IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION Associate Justice Malpass Tuesday 20 May 2008 16402/07 VS & R Pty Ltd v John Francis Kennedy JUDGMENT 1 HIS HONOUR: In this matter the defendant was the owner of sheep. He placed an advertisement in "The Land" on 2 March 2006. It read as follows: "400 merino ewes CFA, Feb shorn, drenched and backlined. Joined Dorsets for May lambing. Sell decks. $33. (02) …." 2 Mr McRae (of the plaintiff) responded to the advertisement by telephone. He spoke to the defendant. The evidence concerning this conversation was non-contentious. 3 Further conversation took place on 13 March 2006. Mr McRae made an inspection of the sheep. The plaintiff contended that a representation was made during that conversation (to the effect that the lambing percentage was expected to be approximately 80%) which led to the plaintiff agreeing to purchase the sheep. The defendant has denied that any such representation was made. 4 Subsequently, the defendant arranged for, and took, delivery of the sheep. 5 Thereafter, the plaintiff claims that it discovered discrepancies between what it says was represented for sale and what in fact was delivered. 6 It appears that delivery was taken of in the order of 360 sheep. The defendant says that six of them were not CFA merino ewes. It is said that of the others 30 to 40 of the ewes indicated that they had given birth to recently weaned lambs and that there was a deterioration in their condition since the time of inspection. It was also said that only 10 of the ewes were pregnant and these ewes were not going to lamb in May. 7 The defendant further said that attempts were made to make contact with the defendant. The attempts were unsuccessful. Thereafter, the plaintiff sold the sheep at auction and then gave a cheque for the balance of the proceeds of sale (less expenses) to the defendant. It was not banked by the defendant. 8 The defendant persisted with a claim for the sale price. Proceedings were brought in the Local Court. The proceedings were defended and the plaintiff brought a cross-claim for economic loss. 9 The proceedings were heard by a Magistrate (Holmes LCM). An ex-tempore judgment was delivered on 23 November 2007. The Magistrate found for the defendant, both on the claim for the price for the sheep and on the cross-claim. 10 On 21 December 2007, the plaintiff brought proceedings in this Court, the proceedings being an appeal against the decision of the Magistrate. There are a number of grounds of appeal. Largely, they may be described as raising issues of failure to decide relevant questions and failure to give reasons or adequate reasons for what was decided. 11 The appeal of was heard on 16 May 2008. Both parties were represented by counsel. The parties came to join issue on one matter (whether or not the disclosure of the reasoning process was adequate). As a consequence, any matter of leave became irrelevant. 12 There was an agreed statement of facts. There were agreed issues. The agreed issues were as follows: "i. Whether at the time of the sale the plaintiff represented that the ewes were pregnant and 'in lamb' for a 2006 drop and if so whether such representation became a term of the contract for the sale of the ewes in the form of an express and/ or implied condition that at least 80% of the ewes would be in lamb. ii. Whether the defendant is liable for payment to the plaintiff for the ewes and if so for how much. iii. Whether the plaintiff is liable to the defendant for any economic loss from the absence of lambs alleged to have been expected of the ewes and if so for how much. " 13 There was affidavit evidence and cross-examination in respect of the defendant and Mr McRae. The evidence threw up conflicting material. The resolution of the conflict was crucial to the determination of the case. One area of conflict concerned the conversation that took place between Mr McRae and the defendant on 13 March 2006. 14 The Magistrate found that 360 sheep were collected and that the plaintiff did not pay any monies to the defendant. 15 He addressed an issue as to whether or not there was a representation that the ewes were pregnant and in lamb for a May 2006 drop and whether such representation became a term of the contract in the form of an express and implied condition. He then identified other issues: whether the plaintiff was liable for replacement; or liable for the ewes; and whether the defendant was liable for any economic loss suffered by the plaintiff. The judgment then identifies a number of issues noted by the Court. These notations concerned, inter alia, questions of credibility of witnesses. For example, the judgment contains the following: "In determining the issues, the court needs to consider which witnesses it will accept and which witnesses it does not accept. The court needs to take into account whether the witness is truthful and secondly reliable. The court further needs to determine whether the witness is honest or is he or she trying to tell the truth as best as he or she can recall and that is a question of honesty or truthfulness. The second aspect is whether a witness is reliable because a witness may be perfectly honest and trying to tell the truth as best as he or she can but the witness may not be reliable because it was a long time ago and his or her memory may not be so good. He or she may have subconsciously reconstructed matters in his or her own mind and in the meantime there may be situations where the witness' opportunity to observe what has happened has not been good and there may be other reasons why a witness' evidence may be inaccurate or confused." 16 The judgment records a finding that there was no express condition or warranty. After the recording of that finding, the Magistrate proceeded to observe as follows: "The court notes the word 'joined' clearly is defined and the court finds that the word 'joined' means opportunity for sexual relations between the sheep and opportunity for coupling or linkage or copulating but does not necessarily mean that the sheep were pregnant." 17 The judgment then proceeded with the following: "The court also notes, in coming to this conclusion, there was no ultrasounding of the sheep. A prudent purchaser would ultrasound the sheep as a matter of course and there had been no request by the purchaser to the defendant to provide such ultrasounding, nor was there any request by the purchaser, that is the defendant in these proceedings, as to whether there had been any ultrasounding taking place. In the production of sheep an ultrasound is a usual course to determine whether sheep are pregnant. There is no other way of determining pregnancy at an early stage. The court cannot imply any warranty that eighty per cent of the ewes were in lamb and again the [court] comes to the view is how can the plaintiff make such a warranty when he has no real idea as to the state of pregnancy within the sheep being sold. The court does not accept that the plaintiff made such a warranty and the court also notes the evidence of the plaintiff where the plaintiff clearly denies making any such warranty." 18 The judgment then proceeded with the following: "The court notes that the defendant had ample and reasonable opportunity to inspect the ewes and to undertake scanning if the opportunity was presented. There was no request for scanning and the court notes that on the balance of probabilities that there was ample and reasonable opportunity for such an inspection to be carried out. Again the court finds on the balance of probabilities that the plaintiff did not act unconsciously in any way or do anything so as to persuade the defendant that eighty per cent of the ewes were in lamb. The court also notes that on the balance of probabilities that clearly the defendant had taken a risk as a buyer and the general term to be described in that regard is buyer beware and the defendant took on the risk in relation to the issue of pregnancy without undergoing any appropriate scanning procedures." 19 The judgment concluded its addressing of both the original claim and the cross-claim with the following notation : "The court finds that on the balance of probabilities the court is satisfied that the plaintiff has made out its cause of cation and the court accordingly finds in favour of the plaintiff. In relation to the cross-claim made by the defendant and after considering all of the material tendered in relation to the defendant cross-claimant's matters and the evidence given, the court is not satisfied that any cross-claim is made out and accordingly the verdict is entered for the plaintiff." 20 It has been necessary to repeat a substantial part of the judgment. It best discloses how the Magistrate went about his task. 21 What brought about his findings is far from clear. I shall briefly elaborate on the obscurity. 22 His finding as to the meaning of "joined" seems to have been seen as relevant to his earlier finding that there was no express condition or warranty. The failure to have the sheep ultrasounded also seems to be of relevance. 23 The Magistrate then proceeded to deal with the question of implied warranty. The lack of knowledge of the defendant seems to have been of relevance to that finding as does his evidence of denying making any representation, the opportunity had by the plaintiff to inspect and scan the sheep and to the Magistrate's view that the plaintiff had taken the risk of not undergoing what the Magistrate regarded as appropriate procedures. 24 The meaning to be ascribed to "joined" as it appeared in the advertisement was a preliminary matter which was the subject of contentious evidence. The parties presented competing versions of the meaning to be attributed to the word. Indeed, there was also an issue concerning a distinction that was drawn by the plaintiff between "joined" and "join". 25 The Magistrate left unexplained how he came to his finding as to meaning. In respect of this matter, I consider that there was a clear failure to adequately disclose reasoning process. 26 The question of the representation arose subsequently to the advertisement. Whether or not it was made depended on addressing the competing evidence given as to the conversation had on 13 March 2006. 27 Despite the notation as to the task had by the court in evaluating evidence, this crucial conversation was not addressed. Whilst it may be possible to infer that he preferred the evidence of the defendant, there is no disclosure of the reasoning process for the reaching of any such decision. Rather than address such a vital matter, he seems to have become sidetracked by other irrelevant considerations. Therefore, I am of the opinion that there has also been a clear failure to adequately disclose his reasoning process in relation to the findings made as to the representation. 28 Accordingly, I am of the view that the appeal should be allowed. The judgments and orders made by the Magistrate are set aside. The defendant is to pay the costs of these proceedings. If so entitled, the defendant is to have a certificate under the Suitors Fund Act 1951. The matter is remitted back to the Local Court for determination according to law. ********** 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.