John v Toll North Pty Ltd [2014] NSWSC 152

Supreme Court New South Wales

Medium Neutral Citation: John v Toll North Pty Ltd [2014] NSWSC 152 Hearing dates: 7 June 2013 Decision date: 28 February 2014 Jurisdiction: Common Law Before: Button J Decision: (1)Appeal dismissed. (2)The plaintiff Alan Hamer John is to pay the costs of defendant Toll North Pty Ltd of the proceedings in this Court. Catchwords: APPEAL - appeal from decision of Local Court Magistrate pursuant to s 39 or s 40 of the Local Court Act 2007 (NSW) - whether her Honour erred in making a finding of "no evidence" on a key issue in dispute - whether her Honour gave adequate reasons for this finding Legislation Cited: Local Court Act 2007 (NSW), ss 39, 40 Uniform Civil Procedure Rules 2005, r 29.9 Cases Cited: Australian Broadcasting Tribunal v Bond [1990] HCA 33; 170 CLR 321 R L & D Investments Pty Ltd v Bisby [2002] NSWSC 1082 Category: Principal judgment Parties: Alan Hamer John (Plaintiff) Toll North Pty Ltd t/as Toll Chemical Logistics (Defendant) Representation: Counsel: G Antipas (Plaintiff) N Kirby (Defendant) Solicitors: McArdle Legal (Plaintiff) Norton White (Defendant) File Number(s): 2012/396964 Decision under appeal Jurisdiction: 9109 Date of Decision: 2012-12-20 00:00:00 Before: Barkell LCM File Number(s): 2011/304013

Judgment 1This is an appeal pursuant to s 39, and in the alternative s 40, of the Local Court Act 2007 (NSW) from judgment in a civil matter heard in the Local Court before her Honour Magistrate Barkell, in which a claim for damages in the sum of $53,350 was dismissed. 2It is accepted between the parties that the plaintiff in this Court (who is the appellant, and who was the second plaintiff at first instance) has an appeal as of right with regard to an error of law, and requires leave with regard to an error of fact or an error of mixed law and fact. Counsel for the defendant (which is the respondent to the appeal, and was the defendant in the Local Court) did not oppose leave being granted if I were to characterise any ground of appeal as establishing an error of fact or a mixed error. 3In truth, the appeal is of very limited compass, and focuses on a small portion of the judgment of her Honour. As a result, I do not need to review the facts extensively. I will need, however, to quote the oral evidence with regard to the nub of the controversy to some degree. 4The first plaintiff in the Local Court was a company that is in liquidation. It assigned its relevant rights to the second plaintiff, who was a director of that company. The second plaintiff was also a witness in the proceedings. For convenience, I shall refer to the first plaintiff in the Local Court as "CEM Engineering", and the second plaintiff, Mr John, by name. I shall refer to the defendant as "Toll". Background 5CEM Engineering is an engineering company that manufactured and sold portable tanks suitable for the conveyance of large quantities of chemicals. 6Toll is a large company in the business of transportation. 7From April to June 2010, there were negotiations between CEM Engineering and Toll through their employees with regard to the sale by CEM Engineering to Toll of a tank suitable for conveying a corrosive chemical. Emails that passed between the parties evidence that process. Mr Karunairatnam, who was the Business Development Manager of Toll, stipulated in an email of 23 April 2010 that the tank must comply with standard AS2809 ("the standard"). 8On 3 June 2010, an invoice was sent to Toll by Mr John Powell, who was the Quality Manager of CEM Engineering, with regard to a tank that complied with the standard. In fact, at the time at which the invoice was sent, the tank had not been supplied to Toll. The invoice stipulated that the tank "will comply" with the standard. 9The case for CEM Engineering at first instance was that Mr Karunairatnam had orally agreed with Mr Powell that there would be prepayment by Toll in the sum of $10,000, that being the amount it would cost to bring the tank up to the standard. 10The case for Toll was that there had been no such conversation. 11Toll did not prepay that sum to CEM Engineering. The tank was never made compliant with the standard. As a result, Toll refused to take delivery of, and pay for, the tank. Subsequently, CEM Engineering was unsuccessful in seeking to sell the tank to others. Eventually, CEM Engineering sued Toll in the Local Court for damages arising from breach of contract. 12To repeat, the nub of the controversy in the Local Court was whether Mr Karunairatnam had orally agreed to prepayment in order to bring the tank up to the necessary standard (see the address of counsel for the plaintiffs in the Local Court at TT 78.44-79.17, and the opening lines of page 2 of the written submissions of counsel for the plaintiff in this Court). The hearing in the Local Court 13At the beginning of the hearing in the Local Court, the case for CEM Engineering underwent a last-minute change. As originally pleaded, the case for CEM was that the tank had indeed been made consistent with the standard. Amended pleadings accepted that the tank was not made consistent with the standard, and asserted that that was because Toll had not made the agreed prepayment that would have permitted that to occur. 14Counsel for CEM Engineering read two affidavits of Mr Powell. Those affidavits annexed a number of documents, including emails and the invoice to which I have referred. None of the emails, whether sent by employees of CEM Engineering or by employees of Toll, explicitly spoke of prepayment. 15Counsel for CEM Engineering relied upon the use of the future tense in the invoice to which I have referred, and in a related email from a Mr Heinrich, Operations Development Manager of Toll, as being circumstantial evidence of an oral agreement to prepay in order to bring the tank up to the standard. 16Just as the contents of the emails did not refer to prepayment, nor did the affidavits of Mr Powell (as read after the determination of objections) speak of oral agreement to prepay on the part of Mr Karunairatnam. 17Mr Powell was called in the case of CEM Engineering. There was no application to supplement the material in his affidavits by way of oral evidence-in-chief. 18In cross-examination, counsel for Toll proceeded to take Mr Powell to conversations he had had with Mr Karunairatnam. In order to understand my determination of the grounds of appeal, it is necessary to extract portions of the oral evidence of Mr Powell at length (seeming errors in the transcript have not been corrected): "Q. Now can you tell me about this conversation you had with Mr Karu? A. Just after that email of the 23rd and I spoke to Jon Karu to say before we progress any further work we need payment up front. Q. How much payment? A. The 48-grand. Q. What about the extra ten? A. No. I did not converse with him about that. Q. When did that come up? A. I, I believe through Alan. Q. Right? A. Through my conversation. I brought that up. Q. And what did Mr Karu say to you? A. He said to speak to Trevor Heinrich, which I made a phone call between that period and before the, he sent the email out stipulating that we need payment up front before we carry on any further work. Q. So you said that to Karu? A. Yep. Q. And Karu said 'Talk to Trevor'? A. Yes. Q. And did you talk to Trevor? A. I, I believe I did. I can't exactly recall what I said but I did speak to him. That's when he came back with the email and said 'Send me the invoice'. Q. So you believe that you did, although you can't be sure, that you spoke to Trevor? A. I can't recall exactly what I said but Jon Karu put me onto Trevor, and obviously that's how I've ended up with his email et cetera as well. Q. Sorry, I don't understand. So how did you - what email do you say that that's how you ended up with? A. The actual request for the invoice, where he said 'Send me down the invoice for it'. (TT 42.26-43.15) ... Q. So you would agree with me that there was no agreement for prepayment that you reached with Jon Karu? A. Well Karu agreed with me that it would happen but he could not facilitate that, that I'd have to go through Trevor Heinrich to get the payment. Q. Sorry, well that's not what your evidence was before. Your evidence before was that when you said you've got to pay us-- A. Yep. Q. He said well you've got to talk to Trevor. Isn't that your recollection? A. Well it's either, well I believe it was part of that but I believe that I've told him that we need a prepayment before it and to help facilitate that payment to speak to Trevor, but he agreed with it, that there would be prepayment before we supplied it. Q. What did he say to agree to it? A. I can't remember specific words but it was basically what he told me. That it'd be paid for before delivery or that we need a payment before delivery and he agreed with that and said 'But I can't facilitate that. You need to go through Trevor'. Q. Are you sure about this? A. Absolutely. Q. Why wasn't it in you affidavits? A. But I, I-- Q. This important conversation? A. But I spoke somewhere about that. That I'm sure it's in there somewhere. I spoke to Trevor. Q. Well you show me where it is in the affidavit? A. Section 4. Q. In what affidavit? A. 14 November. Q. Sorry, which affidavit are you talking about Mr Powell? A. The 14 November. Q. 14 November. Yes. Well but you said in that affidavit that Mr Karu said 'I'll look into it'? A. Correct. Q. Isn't that your recollection? A. It is but it was-- Q. Well-- A. -also conversation about, regarding that he could help out with the prepayment, I'll look into it, ring Trevor. Q. Right, so it is your evidence that Mr Karu did not agree to your suggestion that prepayment was a condition of this sale? A. He said he'd help facilitate it in, in other words. But he couldn't-- Q. The other words being 'I'll look into it'? A. That he couldn't help with the payment but Trevor would. (TT 45.28 - 46.34) ... Q. Now you mentioned before that you didn't have anything to do with the extra $10,000? A. No. Q. Did you ever hear about that, that there was going to be an extra payment? A. I, I can't recall that." (TT 49.3 - 49.8) [Emphasis added] 19Two affidavits of Mr John were read in the case for CEM Engineering. Again, after the determination of objections, they said nothing about conversations with any employee of Toll with regard to prepayment. They did emphasise the use of the future tense in the correspondence and invoice to which I have already referred. 20Mr John gave no oral evidence-in-chief relevant to the determination of this appeal. 21In cross-examination, counsel for Toll announced that he would "cross-examine back in" a portion of an affidavit of Mr John to which he had successfully objected. In the result, the evidence of Mr John was that the prepayments for the alterations were in truth not a requirement for CEM Engineering effecting them (TT 36.47 -38.16). 22At the close of the case of CEM Engineering, counsel for Toll applied for summary dismissal, pursuant to r 29.9 of the Uniform Civil Procedure Rules 2005. That submission was founded on the proposition that "there is no evidence of this critical term that [CEM Engineering] has alleged in its new case" (TT 49.39). Her Honour replied "Well there is some evidence of it, isn't there? I mean Mr Powell has given evidence that he had a conversation". Shortly thereafter, counsel for Toll abandoned the application, seemingly for tactical reasons. 23In the defence case, two affidavits of Mr Karunairatnam were read. In supplementary oral examination-in-chief, Mr Karunairatnam bluntly stated that he never said to Mr Powell that he agreed to prepayment. He also gave evidence (over objection) that it was the normal practice of Toll to pay for purchased items 30 days after their receipt. 24In cross-examination, it was put to Mr Karunairatnam reasonably squarely that he had indeed said words to Mr Powell that had indicated his agreement to prepayment. 25In short, at the end of the hearing, the state of the evidence was: * Despite the number of documents that passed back and forth between the parties, no document spoke of prepayment; * the evidence of Mr John, a director of CEM Engineering, did not support the proposition that prepayment was a term of the contract; * Mr Karunairatnam firmly denied any oral statements on his part to the effect that Toll would make a prepayment to CEM Engineering in order to permit the tank to be brought up to the standard; and * the evidence of Mr Powell was the case for CEM Engineering with regard to the nub of the controversy at its absolute highest. 26In address, counsel for CEM Engineering submitted that Mr Powell had "in his own words" given evidence of saying to Mr Karunairatnam that "before we proceed with the work, we will need payment" (TT 78.48). He also emphasised the aspect of the tense of the language used in the invoice to which I have referred as supporting the case of his client. 27In response, counsel for Toll made various legal submissions to the effect that the contract was completely encapsulated in the emails, and any subsequent oral statements formed no part of it. He concluded his oral submissions about the state of the evidence by saying "There is simply no evidence at all - I know I've said it before and this is the last time I'll say it - there is no evidence of any agreement that prepayment of this tank was a condition of its purchase or the conversion works required to get it up to code." (TT 82.32) 28As I have indicated, her Honour found for Toll. In a short judgment, her Honour reviewed the documents that passed back and forth between the parties. Her Honour also found that one could not safely infer from the use of the future tense in the invoice an agreement that prepayment would occur. The foundation of the appeal to this Court is the following part of the judgment of her Honour: "Even if there were, as [CEM Engineering] asserts, conversations about the costs of bringing the tank to standard, [Toll] submits there is no evidence that in these conversations [Toll] agreed to pre-payment and this submission is clearly right, there is no such evidence." Grounds of appeal 29Three grounds were notified in the first amended summons of CEM Engineering. They were very slightly amended at the hearing, to become as follows: (1)"Her Honour erred in law in finding that there was no evidence in conversations between the parties that the defendant agreed to pre-payment prior to delivery of the Tanker under a contract of sale, such term being the key issue in contention in the case. (2)Her Honour erred in failing to take into account oral evidence of Mr John and Mr Powell in reaching her decision, evidence which was material to the plaintiff's case and which was capable of supporting the inference that prepayment was a term and which the defendant had breached. (3)Her Honour erred in law in failing to give reasons why the oral and affidavit evidence of Mr John and Mr Powell did not support Her Honour's finding of fact that pre-payment before delivery of the Tanker was a term of the contract between the parties, such term being the key issue in contention in the case." 30It was agreed by counsel at the hearing that grounds one and two could conveniently be dealt with together, but that ground three should be dealt with on its own. Grounds one and two 31Counsel for Mr John submitted, in short, that her Honour had committed an error of law. Her Honour had said that that there was no evidence of an oral agreement, but in truth there was some evidence arising from the cross-examination of Mr Powell of an oral agreement that there would be prepayment. Counsel for Mr John submitted that it is well established that an erroneous determination that there is no evidence with regard to a relevant matter is an error of law, not an error of fact: R L & D Investments Pty Ltd v Bisby [2002] NSWSC 1082 at [14]; Australian Broadcasting Tribunal v Bond [1990] HCA 33; 170 CLR 321 at 355. 32In response, counsel for Toll submitted that the determination of her Honour was perfectly correct: on analysis, there was no evidence from Mr Powell that Mr Karunairatnam said anything that could give rise to an obligation on the part of Toll to prepay. He submitted that, looking at the evidence of Mr Powell as a whole about the topic, Mr Powell was not saying that Mr Karunairatnam had said any such thing; rather, Mr Powell was saying that he inferred from the request for the invoice that that was the approach that was to be adopted by Toll, in accordance with his request. 33In the alternative, counsel for Toll submitted that, if there was a skerrick of such evidence, the learned Magistrate was merely implicitly referring to the absence of probative or persuasive evidence. He further submitted that such a finding was very soundly based. 34I respectfully accept the submission of counsel for Toll. It has been necessary for me to extract a large quantity of the oral evidence of Mr Powell, in order to demonstrate its meaning as a whole. 35Read in context, fairly, and as a whole, I consider that the oral evidence of Mr Powell with regard to any conversation with Mr Karunairatnam shows that Mr Powell was giving evidence of what he assumed or otherwise mentally constructed was to occur, not what Mr Karunairatnam actually said. I particularly refer to the lines of the extracted portions of his evidence that I have emphasised. 36It follows from my characterisation of the evidence of Mr Powell that I discern no error in her Honour saying that there was no evidence that Toll agreed to prepayment by way of anything said by Mr Karunairatnam. To be clear, I do not consider that that statement of her Honour was an error, whether of fact, or of law, or of mixed fact and law. To the contrary, I respectfully consider that that approach to the evidence was correct. 37As a result, I respectfully reject grounds one and two. Ground three 38It can be seen that this ground is founded on the proposition that the learned Magistrate failed to give adequate reasons as to why the evidence in the case for the plaintiff did not support the contention that prepayment was a term of the contract. 39This ground can be dealt with shortly. To my mind, it was not a matter of her Honour explaining why, as a matter of determining credit, or inferential reasoning, or balancing competing hypotheses, or any other assessment of the merits of competing cases, her Honour preferred the evidence of Mr Karunairatnam to that of Mr Powell, or why the evidence of Mr Powell was rejected. Rather, it was a matter of analysing the meaning of what Mr Powell was recounting, and construing what Mr Powell was actually saying in his evidence, and as a result accepting the closing submission of counsel for the defendant. 40I have already determined that her Honour was correct in her Honour's characterisation of the evidence of Mr Powell. In short, I consider that Mr Powell was speaking in the witness box of what he assumed or understood, and not of what Mr Karunairatnam said to him. If that be the case, there was no need for her Honour to give reasons why the evidence of Mr Powell was rejected, or why the evidence of Mr Karunairatnam was preferred, for the simple reason that neither of those findings was made by her Honour. I consider that the characterisation by her Honour of the state of the evidence was correct, and did not require ornate elaboration. 41It follows that I do not consider that, in the particular circumstances of this case, I need to analyse the law with regard to the sufficiency of reasons given by a Magistrate in a simple civil matter that focuses upon a very circumscribed area of dispute. 42I respectfully reject ground three. Costs 43Neither party submitted that the usual course of costs following the event should not be adopted with regard to the disposition of this appeal. Orders 44Accordingly, I make the following orders: (1)Appeal dismissed. (2)The plaintiff Alan Hamer John is to pay the costs of defendant Toll North Pty Ltd of the proceedings in this Court.