Supreme Court New South Wales Medium Neutral Citation: T & DC Pty Limited v Workforce Clothing Pty Limited [2015] NSWSC 1731 Hearing dates: 23 October 2014 Date of orders: 05 November 2015 Decision date: 05 November 2015 Jurisdiction: Common Law Before: McCallum J Decision: Appeal dismissed with costs. Catchwords: APPEAL – civil – Local Court – conventional estoppel – costs – Local Court Practice Note Civ 1 –– the trouble with the law (there is too much of it) Legislation Cited: Civil Procedure Act 2005 (NSW) Local Court Act 2007 (NSW), ss 39, 40 Uniform Civil Procedure Rules 2005 (NSW) Cases Cited: Ada Evans Chambers Pty Ltd v Santisi [2014] NSWSC 538 Commonwealth v Verwayen ("Voyager case") [1990] HCA 39; 170 CLR 394 Legione v Hateley (1983) 152 CLR 406 Moratic Pty Limited v Laurence James Gordon [2007] NSWSC 5 Ryledar Pty Ltd v Euphoric Pty Ltd (2007) 69 NSWLR 603 Waterman v Gerling Australia Insurance Company Ptd Limited [2005] NSWSC 1066; 65 NSWLR 300 Texts Cited: Coke on Littleton (2nd ed, London, 1629) Handley AO, K R, Estoppel by Conduct and Election (2006, Sweet & Maxwell) Mason, The Hon Sir Anthony, "Contract, Good Faith and Equitable Standards in Fair Dealing" (2000) 116 Law Quarterly Review 66 Young, Peter, Clyde Croft and Megan Smith, On Equity (2009, Thomson Reuters) Category: Principal judgment Parties: T & DC Pty Limited (plaintiff) Workforce Clothing Pty Limited (defendant) Representation: Counsel: C Alexander (plaintiff) D Tynan (defendant) Solicitors: Bull, Son & Schmidt Lawyers (plaintiff) Rockwell Olivier (Perth) Pty Ltd (defendant) File Number(s): 2014/136181 Publication restriction: None Judgment 1. HER HONOUR: This is an appeal from a decision of the Local Court. The plaintiff, T & DC Pty Limited, entered into an agreement with Workforce Clothing Pty Limited for the supply of services as a freight management consultant. The term of the agreement was 24 months from 1 September 2009 to 31 August 2011. The contract had an automatic renewal clause subject to an entitlement to terminate on 90 days written notice. 2. In early 2011, the business of Workforce Clothing Pty Limited was sold. At that point the vendor (the entity with which T & DC had its contract) changed its name to Old Sca Pty Limited and the purchaser (a new entity) took on the name Workforce Clothing Pty Limited with a different ACN. In the balance of this judgment, references to "Workforce" are references to the purchaser. 3. Workforce continued to use the services of T & DC for a period but, in July 2012, communicated its intention "to terminate the current relationship between our organisations" from the end of August 2012. By that date (assuming the contract remained on foot), the time within which notice could be given so as to prevent its automatic renewal had expired (the relevant date was 31 August 2011). 4. On 1 September 2012, T & DC issued an invoice to Workforce in the sum of $16,045.68 for "management and consultancy fees for termination of agreement (contract) 12 months". Workforce refused to pay the invoice. 5. T & DC brought proceedings in the Local Court against both Old Sca Pty Limited and Workforce. The claim against Old Sca was settled on the first day of the hearing. As against Workforce, T & DC's principal claim was that there had been an effective assignment to Workforce of Old Sca's rights and obligations under its agreement with T & DC. In the alternative, T & DC claimed that Workforce had entered into a new agreement with it on the exact terms expressed in its agreement with Old Sca. The magistrate rejected both contractual claims and there is no appeal against that aspect of his Honour's decision. 6. The appeal concerns an alternative claim based on the common law doctrine of conventional estoppel. T & DC contended that both it and Workforce had adopted a mutual assumption as to the terms of their legal relationship; namely, that by or about 8 March 2011, T & DC's contract with Old Sca had been assigned to Workforce. The magistrate held against T & DC in respect of that claim, finding that Workforce had not adopted the alleged mutual assumption. 7. Separately, T & DC alleged that Workforce had engaged in misleading or deceptive conduct. The magistrate also held against T & DC in respect of that aspect of the claim. The summons commencing an appeal to this Court included two grounds of appeal in respect of that claim but those grounds were not pressed (T3.13). 8. It followed from the magistrate's findings that T & DC's claim failed. However, in case of error in that conclusion, the magistrate assessed damages in the sum of $6,215.40. T & DC seeks leave to appeal against that part of the decision. 9. In a separate judgment, the magistrate awarded Workforce its costs on an indemnity basis. T & DC also seeks leave to appeal against that decision. Requirement for leave to bring appeal on some grounds 1. An appeal lies as of right to this Court from a judgment of the Local Court sitting (as here) in its general division but only on a question of law: s 39(1) of the Local Court Act 2007 (NSW). Pursuant to s 40 of the Act, an appeal may be brought on a ground that involves a question of mixed law and fact but only by leave of this Court: s 40(1) of the Act. There is also a requirement for leave to appeal against an order as to costs: s 40(2)(c). 2. Workforce accepted that three of the five grounds of appeal relied upon by T & DC in respect of the conventional estoppel claim raise questions of law (grounds 1(a), (b) and (d); T15-16). Grounds 1(c) and (e) involve questions of mixed law and fact, as does ground 5 in respect of the question of quantum. Workforce opposed the grant of leave to appeal on those grounds. 3. As to the grounds requiring leave, I have concluded that leave should not be granted. My reasons for reaching those conclusions are included within my discussion of each ground below. Conventional estoppel 1. The elements of common law conventional estoppel are well established and were not in dispute in the court below. They are conveniently summarised in the judgment of Brereton J in Moratic Pty Limited v Laurence James Gordon [2007] NSWSC 5 at [30] to [37] in the context of a discussion of the differences (and similarities) between conventional estoppel and the equitable doctrine of promissory estoppel. Of conventional estoppel, his Honour said at [32]: "In common law conventional estoppel, it is necessary for a plaintiff to establish: (1) that it has adopted an assumption as to the terms of its legal relationship with the defendant; (2) that the defendant has adopted the same assumption; (3) that both parties have conducted their relationship on the basis of that mutual assumption; (4) that each party knew or intended that the other act on that basis; and (5) that departure from the assumption will occasion detriment to the plaintiff." Circumstances in which an estoppel was alleged to have arisen 1. The mutuality of the assumption is the critical foundation for an estoppel by convention. As already noted, the mutual assumption specified by T & DC in the present case was "that by or about 8 March 2011 [the contract between T & DC and Old Sca] had been assigned to [Workforce]": further amended statement of claim at paragraph 20(a). The alleged mutual assumption thus went to the issue whether any contractual relationship existed at all rather than being an alleged assumption as to the terms of a contractual relationship as to the existence of which there was no dispute. 2. T & DC provided the following particulars to sustain the alleged assumption: (i) On or about 23 February 2011, Bill Corless met with Steve Camarda in Perth and Steve Camarda said words to the effect: "Look, we have sold the business, let me introduce you to the man taking over the company". Bill Corless then met Steve Johnson and Bill Corless said words to the effect: "What will be happening moving forward?". Steve Johnson replied: "everything will remain the same". Bill Corless then asked: "What about our agreement?" and Steve Johnson replied "We are taking everything over and everything will remain in place for the time being". (ii) Letter entitled "SUPPLIER ANNOUNCEMENT" addressed to the plaintiff, signed by Steve Johnson dated 8 March 2011. (iii) Email dated 10 March 2011 from Bill Corless of the plaintiff to Steve Johnson of the second defendant stating: "we are in receipt of your advice" and "This purchase takes over our agreement as well I assume". (iv) Email in reply dated 10 March 2011 from Steve Johnson of the second defendant to Bill Corless of the plaintiff and copied to Steven Camarda of the first defendant stating: "Thanks for email, I have copied Matthew Winfield in and for now everything stays the same. Matthew will review all agreements in time and no doubt contact you after he settles in. The main focus of course is ensuring a smooth transition with staff, clients and suppliers…". 1. The same particulars were specified in support of the contention that the alleged assumption was adopted by Workforce (at paragraph 16 of the pleading). 2. As to the element that both parties have conducted their relationship on the basis of the mutual assumption, T & DC relied upon the fact that, after those discussions, it provided services to Workforce of the same nature as those described in the contract; that it rendered invoices in respect of those services calculated in accordance with the contract and that Workforce paid those invoices. 3. The pleading also relied upon an email from Workforce to T & DC dated 14 July 2012 which it was alleged represented that "Workforce Clothing will terminate our agreement with T & DC". Since those words are evidently relied upon as an objective indication that Workforce conducted its relationship with T & DC on the basis of its adoption of the mutual assumption (that Old Sca's contract with T & DC had been assigned to Workforce), it is necessary to have regard to the full exchange (at pages 12 to 16 of the affidavit of William Corless, sworn 19 June 2013). Mr Corless had evidently learned that Workforce was proposing to deal with a particular freight company directly rather than through T & DC as intermediary. He sent an email to Mr Winfield of Workforce confronting him with that information and asking for a meeting "to avoid any unpleasantness". Mr Winfield responded by noting that T & DC's agreement was with the former owners of Workforce and asserting that as Workforce had not requested an assignment of the agreement it was not bound by its terms. Mr Winfield said (emphasis added): "We have continued to pay your fees over the past 16 months in a sign of good faith as we settled in following the acquisition however it is now time to bring this aspect of our supply chain in line with group policy. Accordingly we will seek to terminate the current relationship between our organisations on 31 August 2012." 1. Mr Corless responded that he had taken advice as to the agreement. He asserted that it had "a 100% validity" and that payment of T & DC's invoices constituted acceptance. After a further exchange, Mr Winfield ended with the statement (emphasis added): "Per my email below, Workforce Clothing will terminate our agreement with T & DC at the end of August and not accept for payment any invoices from your organisation after this date." 1. As will be seen, Mr Windfield's first email had employed different language, referring to an intention to terminate "the current relationship", not "our agreement". In my view, read in context, the later email relied upon by T & DC is plainly incapable of amounting to a representation or concession by Workforce that it had adopted the mutual assumption that the contract had been assigned to it. The whole thrust of the exchange was to record Workforce's denial of that assumption. 2. As to the element that Workforce knew or intended that T & DC would rely upon the conventional basis upon which the parties conducted themselves, T & DC again relied upon the fact that services were provided and invoices rendered and paid. 3. Perhaps the most difficult aspect of T & DC's claim based on conventional estoppel was the last element set out above; namely, that departure from the assumption will occasion detriment to the plaintiff. The particulars of that contention relied upon by T & DC were as follows: (i) On the assumption that the contract been validly assigned, the second defendant's purported termination on 13 July 2012 amounted to repudiation and breach and sounded in damages. (ii) Such damages being the loss to the plaintiff for the balance of the term of the contract, being up to and including 30 August 2013, and calculated to be $16,045.68 together with interest. (iii) The plaintiff conducted its relationships with the second defendant on the assumption that its rights against the first defendant inured to and were transferred to the second defendant and thereby lost the opportunity to contract with the second defendant on more favourable terms and also the opportunity to sue the first defendant for damages for what would have amounted to a repudiation of its obligations pursuant to the contract. 1. A critical aspect of the evidence was the conversation referred to in the particulars set out at [15] above, to which the magistrate referred as the "everything will remain the same" conversation. 2. The evidence of Mr Corless on that issue (set out at para 8 of his affidavit) was that Steve Camarda introduced Mr Corless to "the man taking over the company, Steve Johnson". Mr Corless said there was a conversation between him and Mr Johnson in the following terms: Steve Johnson: "I own a number of Companies including Abrasiflex. We are looking at all company logistics to see if we can get a group deal." Me: "Ok, no dramas, what will be happening going forward?" Steve Johnson: "Everything will remain the same." Me: "What about our agreement?" Steve Johnson: "We are taking everything over and everything will remain in place for the time being." The magistrate's findings as to conventional estoppel 1. The magistrate evidently accepted that evidence. There is an error in his Honour's judgment where he stated "in cross examination Mr Camarda conceded that Johnson might have said what Mr Corless attributed to him, but that he could not remember the words used". In fact, Mr Camarda did not give evidence in the proceedings, the claim against Old Sca having settled on the day of the hearing. Mr Johnson did give evidence and made a concession to the effect of that attributed to Mr Camarda in the judgment (T35.15). I do not think anything turns on that error since ultimately his Honour accepted the version of the conversation given by Mr Corless. 2. The magistrate also referred to the email from Mr Johnson to Mr Corless dated 10 March 2011, in which Mr Johnson said: "I have copied Matthew Winfield in and for now everything stays the same. Matthew will review all agreements in time and no doubt contact you after he settles in." 1. The magistrate considered those exchanges first in the context of his discussion of T & DC's claims in contract. His Honour said (at page 6): "Use of such expressions as that everything would remain in place "for the time being" are in my view quite critical, especially in the absence of any words indicating explicit adoption of the contract the plaintiff had with Old Sca, and can lead only to the conclusion that the Workforce was not formally taking on responsibility for that contract. I find that the terms of the conversation included a stipulation that while everything would remain in place it was expressly stated that they would remain only for an indefinite or temporary period and the contract with Old Sca was not taken over as a whole. (But because I accept the submission that the contract of sale to Workforce Clothing did not provide for it to assume responsibility for the plaintiff's contract with Old Sca things only 'remained the same' in the sense that ad hoc requests for freight carriage negotiations were made from time to time by Workforce Clothing but not that the contract with the plaintiff had been formally acquired by it.) I find that the contract did not govern their relationship but that they dealt with each other in that ad hoc fashion, and the contract being subject to review, if it had any effect at all, it ceased to have done so once Workforce Clothing informed the plaintiff of it having been terminated." 1. The magistrate's finding on that issue informed his assessment of the claim based on conventional estoppel, addressed at pages 14 to 16 of the judgment. In my respectful opinion, it is clear from the magistrate's reasons that the central reason for rejecting the claim in conventional estoppel was that T & DC failed to prove that Workforce had adopted the assumption. 2. The magistrate first turned to that question in the context of his consideration of a submission put on behalf of Workforce that even if it was established that there was a contract its terms did not confer on T & DC the exclusive right to provide the services in question. His Honour said (at page 16): "I agree, but the real reason is that contrary to the plaintiff's submissions there could not have been any estoppel founding a right to have been the sole freight intermediary. For negotiations of freight still to have been undertaken and completed Workforce Clothing would not have been estopped, because there could have been no convention estoppel in the absence of a mutual assumption. The evidence, as discussed above, made it plain that Workforce Clothing was not obliged to pay for future work, mainly because it had not acquired the Old Sca contract, and there was no underlying mutual assumption that it had or that the plaintiff would be the sole negotiator." 1. The finding made expressly in that passage of the reasons that there was no mutual assumption was determinative and is not directly challenged in this appeal. Grounds of appeal 1. T & DC relies on five alleged errors all falling under the umbrella of the proposition that "the magistrate erred at law in applying the relevant elements of conventional estoppel" (ground 1). Ground 2 (which is entirely consequential on ground 1) contends that the magistrate ought to have found that a conventional estoppel was established, "at least by the date of the automatic renewal of the contract". 2. It is convenient to begin by considering ground 1(b), which is: "The magistrate confused the elements of conventional estoppel and appeared to apply what was termed a "conduct estoppel"." 1. It is appropriate to consider the relevant passage in full. The magistrate said (at page 14): "Mr Tynan [counsel for Workforce] took issue in his submissions with the plaintiff's submission that it was entitled to make use of convention estoppel. He relied on Waterman v Gerling Australia Insurance (2005) NSWLR 300 at 322-32, In the matter of Ledir Enterprises [2013] NSWSC 5 at [48], Moratic Pty Ltd v Gordon [2005] NSWSC 5 at [48], and Con-Stan Industries v Norwich Winterthur Insurance (1986) 64 ALR 481. He lists the conditions for convention estoppel as including the parties' acceptance of a mutual assumption, that each party accepted that the plaintiff was entitled to act on the mutual assumption as each intended, and that the plaintiff suffered a detriment when the mutual assumption was departed from. In addition, to constitute convention estoppel, the assumption must be one that contradicts or at least is outside the terms of the parties' contract. The tests, substantially in those terms, are helpfully set out at page 322 of Waterman. If the true position should be that there was no contract between the plaintiff and Workforce Clothing, there can be no convention estoppel. However, in that case if all other things remain equal the plaintiff would be entitled to rely on what passed between the parties to invoke estoppel by conduct. I would not take the view that the plaintiff was confined to convention estoppel merely because its submissions or its pleadings focussed on that variety. Other things are not equal, not least because Workforce Clothing made it plain that its use of the plaintiff was only on a temporary basis, and therefore what its officer had said regarding things remaining the same as outlined earlier in these reasons could not found any estoppel at all." 1. It will be necessary to return to what his Honour said at the outset of the third of those paragraphs, which is the subject of ground 1(a). 2. The reasons indicate that the magistrate had in mind two kinds of estoppel; one that had been pleaded by T & DC and one that had not (referred to by his Honour as "convention estoppel" and "estoppel by conduct" respectively). 3. T & DC noted that the former category of estoppel is ordinarily termed "conventional estoppel" or "estoppel by convention" rather than "convention estoppel". I do not think anything turns on the magistrate's adoption of a less orthodox term; the kind of estoppel referred to was no less clear for having been described by a composite noun rather than an adjective. 4. The critical question is whether the remarks reveal the application of a wrong principle. I am not persuaded that they do. T & DC submitted that the distinction drawn by the magistrate between what his Honour termed "convention estoppel" and "conduct estoppel" reveals error because "the modern doctrine of conventional estoppel involves the conduct of the parties", citing the decision of the Court of Appeal in Ryledar Pty Ltd v Euphoric Pty Ltd [2007] NSWCA 65; 69 NSWLR 603 per Tobias JA at [193] to [201] (Mason P and Campbell JA agreeing). 5. In my respectful opinion, that submission confuses doctrine and proof. Estoppel by convention is founded upon the common adoption by the parties of an assumption as the conventional basis of their relationship. As revealed by the passage from Ryledar relied upon by T & DC, the existence of such an assumption may be proved by reference to the parties' conduct (such as a course of dealing). It does not follow that a reference to estoppel by conduct as a separate doctrine reveals misconception as to the doctrine of estoppel by convention. 6. Contrary to the suggestion implicit in T & DC's submission, the distinction drawn by the magistrate between conventional estoppel and estoppel by conduct has a long and respectable history. That it has caused confusion in the present case is no more than a reflection of the "historical and piecemeal fashion" in which the principles of judge-made law relating to estoppel have developed: see The Hon Sir Anthony Mason, "Contract, Good Faith and Equitable Standards in Fair Dealing" (2000) 116 Law Quarterly Review 66 at 90; quoted in Peter Young, Clyde Croft and Megan Smith, On Equity (2009, Thomson Reuters) at [12.30]. 7. It may be noted Sir Anthony, when Chief Justice, had used the expression "estoppel by conduct" as referring both to the principle of estoppel at common law and the principle of estoppel by conduct or representation in equity in Commonwealth v Verwayen ("Voyager case") [1990] HCA 39; 170 CLR 394 at 409, [29]-[30]. 8. That is not to suggest that Verwayen is the origin of a distinction between estoppel by convention and estoppel by conduct. Young, Croft and Smith describe three broad classes of estoppel that have been identified: 1. estoppel by record or judgment; 2. estoppel by deed (or estoppel by writing); and 3. estoppel by conduct or estoppel in pais. 1. That classification is attributed to the work of Coke almost 400 years ago: Coke on Littleton (2nd ed, London, 1629). 2. The same three categories are described, with the same citation, in the work of the Honourable Mr K R Handley AO, Estoppel by Conduct and Election (2006, Sweet & Maxwell). The author's preface gives a delightful introduction to the topic which, incidentally, also hints at what Sir Anthony described as the piecemeal development of doctrine in judge-made law: "I began this project with the knowledge accumulated over 40 years from cases that chance had brought my way. Although I was familiar with the expression "estoppel in pais", I discovered what "in pais" actually meant. I also discovered that estoppel by representation originated in decisions of the Court of Chancery dating from 1683 and that the doctrine was incorporated into the common law without acknowledgment in Pickard v Sears (1837) 6 Ad&E 469. Having accepted from Combe v Combe [1951] 2 KB 215 that promissory estoppel was not a cause of action I read the decision of the Court of Appeal in Hughes v Metropolitan Railway Co (1876) 1 CPD 120 and discovered that it was." 1. Mr Handley states that the second category, estoppel by matter in writing, "covered estoppel by deed from which estoppel by convention developed", as explained in chapters 7 and 8 of the text. There is accordingly a principled basis for distinguishing between conventional estoppel (developed from Coke's second category) and estoppel by conduct (Coke's third category). Understood in that historical context, the magistrate's shorthand reference to estoppel by conduct as a category of estoppel distinct from estoppel by convention not only does not reveal error but indeed reflects what appears at some point at least to have been accepted doctrine (cf Moratic at [32] where Brereton J described conventional estoppel as being "included in the rubric of estoppel in pais", citing Legione v Hateley (1983) 152 CLR 406 at 430). 2. Although the language of the magistrate's judgment is terse, on a careful reading of the judgment I think by the term "conduct estoppel" his Honour intended to refer to equitable promissory estoppel or estoppel by representation. As already noted, the differences and similarities between a claim in equitable promissory estoppel and a claim in common law conventional estoppel had been carefully exposed in the decisions of Brereton J in Waterman v Gerling Australia Insurance Company Ptd Limited [2005] NSWSC 1066; 65 NSWLR 300 and Moratic, both cited by the magistrate in his recitation of the elements required to be proved by the plaintiff (set out above). 3. In my respectful opinion, the magistrate's remarks set out above were intended to acknowledge (as Brereton J had, in reverse, in Moratic) that the plaintiff's claim might alternatively have been framed by reference to the doctrine of equitable promissory estoppel. Understood in that way, the references to "conduct estoppel" and "estoppel by conduct" make sense. Having acknowledged the possibility of invoking the equitable doctrine, the magistrate went on to explain (in effect) that it would have been of no avail to T & DC to invoke it since Workforce had "made it plain" that it was using T & DC's services "only on a temporary basis". In other words, there was no representation by Workforce that it would adhere to the terms of its predecessor's contract with T & DC. The intention appears to have been to indicate that a claim in equitable promissory estoppel would also have been rejected, had it been pleaded. 4. For those reasons, I am not persuaded that his Honour was confused as to the elements of common law conventional estoppel as suggested in ground 1(b). 5. Ground 1(a) is: "The magistrate erred in holding that "if the true position should be that there was no contract between the plaintiff and Workforce Clothing, there can be no convention estoppel"". 1. T & DC submitted that those words revealed error. It was submitted that, contrary to what the magistrate said, "conventional estoppel can only be engaged where there is no strict legally enforceable contractual obligation of that nature between the parties but rather, where they have adopted by their conduct an assumed state of affairs". 2. In my view, the plaintiff's submission is based on a misreading of the magistrate's reasons. As I understand the submission, the plaintiff interprets the magistrate's remarks to mean that, for the purpose of establishing a conventional estoppel, the alleged mutual assumption must coincide with a contractual obligation. That would have been wrong and, indeed, would have made no sense – if there is a contractual obligation to do the thing the plaintiff wants done, there is no occasion for reliance upon conventional estoppel. But I do not think it is what the magistrate meant. 3. A more likely interpretation, in my view, is that the magistrate thought the doctrine of conventional estoppel could only be invoked as between parties to an existing contract (as opposed to parties between whom there is no contract at all) so as to stop a party from relying on the strict terms of the contract in circumstances where a mutual assumption inconsistent with those terms has been adopted. His Honour appears to have understood the judgment of Brereton J in Waterman at 322 to state a principle in those terms. 4. I do not think Brereton J expressed such a principle in terms. The magistrate referred to page 322 of the judgment but must also have been referring to the preceding discussion, which begins at page 320, [75]. Certainly, the discussion assumes that a claim in conventional estoppel will ordinarily arise in the context of an existing legal relationship but I do not think it goes so far as to state that the absence of such a relationship is fatal. 5. In any event, it is not necessary to determine that issue because it does not matter in the present context. As already noted, the critical finding was that Workforce did not adopt the alleged mutual assumption. That finding has not been challenged in the present appeal. It was plainly open and, in the circumstances, it was determinative. Accordingly, I would reject ground 1(a). 6. Ground 1(c) is: "The magistrate failed to give sufficient weight to the conduct of Workforce in subsequently accepting services and paying invoices as calculated in the contract into well after the date for the automatic renewal of the contract." 1. As already noted, it is conceded that this ground raises a question of mixed law and fact and so requires leave. The fact in issue was whether Workforce adopted the alleged mutual assumption. In my view, having regard to the magistrate's findings (accepting the plaintiff's case) as to what was said in the "everything will remain the same" conversation, Workforce's subsequent conduct in accepting services and paying invoices was equivocal. Further, as implicitly acknowledged in any ground which complains of a failure to give "sufficient weight" to a consideration, it is plain that the magistrate did take that conduct into account. It was expressly discussed at pages 6 to 7 of his Honour's judgment. I do not think there is any force in this ground. Leave should be refused. 2. Ground 1(d) is: "To the extent that the magistrate held that a conventional estoppel could not bind Workforce by reason of the automatic renewal term, the magistrate erred by likening the automatic renewal clause in the contract to an option." 1. This is a difficult ground. In support of it, T & DC submitted: "It is unclear whether the magistrate accepted that, assuming that the conventional estoppel argument succeeds, it would also carry with it the automatic renewal clause." 1. At page 16.6 of the judgment, the magistrate said: "Mr Tynan submitted, relying on Ryeldar v Euphoric [2007] NSWCA 65 at [232], itself relying on The Indian Grace (No 2) [1998] AC 878 at 913, that convention estoppel does not extend to a renewal of an agreement through the exercise of an option. I accept what he submits in this regard. The renewal was automatic. (The result is that the plaintiff is not entitled to rely on any common assumption that the agreement continued for any future loss even if there could be shown to have been a loss)." 1. To the extent that the reasons for decision are confusing in that respect, they reflect the complexity of the issue brought forward for determination by T & DC. As noted above, the "mutual assumption" alleged to have been adopted by Workforce went not to the terms of an existing agreement but to the question whether there was an agreement at all; the assumption alleged was that T & DC's contract with Old Sca had been assigned to Workforce. 2. Further, as already noted, one of the elements T & DC had to establish in order to make good that claim was that Workforce in fact adopted the mutual assumption; that is, it assumed or adopted the convention that the contract had been assigned to it. The magistrate expressly rejected that proposition. But even if it had been accepted, there was an additional complexity; the copy of the contract held by Workforce did not include page 7, which included the critical clause 4 (the automatic renewal clause). 3. To add to the complexity, at the hearing before me, Workforce made a concession that "if the Court finds that [Workforce] is bound by some form of arrangement as between the parties then I think it follows that we'd be bound by the automatic renewal clause" (T31.36). In my respectful opinion, the correctness of that concession may be doubted. It is difficult to see how Workforce could be found to have adopted as the mutual basis of its dealings with T & DC a clause of which it had no knowledge. T & DC's contentions in that respect appear to confuse notions of contract with those of conventional estoppel. 4. Ultimately, however, the need to resolve this difficult question is obviated by the fact that the magistrate's finding (that Workforce did not adopt the mutual assumption) cannot be impugned. 5. Accordingly, I would reject ground 1(d). 6. Ground 1(e) is: "To the extent that the magistrate accepted that the subsequent conduct of paying invoices might give rise to a conventional estoppel, the magistrate erred by finding that emails inviting for a new tender emanating from Workforce 14 months after the date for renewal of the contract necessarily negatived such a proposition." 1. It may be observed that there is a degree of tension between this ground and ground 1(c), which complains of insufficient weight being given to the subsequent acceptance of services and payment of invoices. In my view, this ground does little more than to wrestle with aspects of the magistrate's findings of fact which, in my respectful opinion, were well open. I am not persuaded that leave should be granted to argue ground 1(e). Quantum 1. The grounds of appeal sought to be relied upon by T & DC on the question of quantum (ground 5) are: 1. "The magistrate found that quantum ought to be assessed on the lower calculation advanced by Workforce." 2. "The magistrate's reasons and acceptance of the evidence of Mr [sic] Corless were consistent with assessing quantum on the higher calculation advanced by T & DC." 3. "The reasons given cannot support the finding made." 1. Some explanation is required. In dealing with the issue of quantum, the magistrate noted that an affidavit of Ms Kym Corless established that invoices paid by Workforce up to September 2012 amounted to a total of $16,045.68. The magistrate noted, however, that the plaintiff's claim was for future loss. On that premise, the magistrate expressly stated that he preferred the evidence of Matthew Winfield on behalf of Workforce which established that, due to a drop-off in work, particularly from one large client, "there would in any event have been less work available to the plaintiff for the period of future loss claimed". The magistrate said: "Since he [plainly a reference to Mr Winfield] is an officer of the second defendant which actually made use of the freight carriers his evidence is of course much more reliable as to what work would have been lost, and he concludes that if the plaintiff had continued to receive the benefit of the contract its entitlement would have been only $6,215.40." 1. The magistrate then considered an alternative argument put on behalf of Workforce that the plaintiff's damages should be nil, since Workforce had in fact made savings by engaging a different freight company from the one used by T & DC as intermediary. The basis on which T & DC's remuneration was calculated in accordance with the contract was by reference to any savings achieved by T & DC. If there were no savings, the amount T & DC would have received would be nil. 2. Having considered that issue, the magistrate concluded that the plaintiff's loss should be assessed in the sum of $6,215.40 (the amount calculated by Mr Winfield on behalf of Workforce). There is an obvious mistake in his Honour's articulation of that conclusion. Having correctly distinguished between the affidavit of Kym Corless (Mr Corless's daughter) on behalf of T & DC and the affidavit of Matthew Winfield on behalf of Workforce in the first part of the discussion, when the magistrate returned to that issue at the conclusion of the discussion he wrongly referred to "Mr Kym Corless" as the author of the calculation in the sum of $6,215.40. It is plain from the logic of the reasoning that his Honour intended in those concluding paragraphs to refer to Matthew Winfield rather than to Kym Corless. The magistrate in fact confirmed exactly that when the apparent error was raised at the costs hearing. 3. In my respectful opinion, the only error revealed in the magistrate's decision on the question of quantum is the incorrect reference to "Mr Kym Corless" where it is clear the magistrate intended to refer to Mr Matthew Winfield. The finding and the reasons for it are tolerably clear. Leave to rely upon ground 5 should be refused. Appeal in relation to the costs decision 1. The magistrate dealt with costs in a separate judgment. The judgment was given ex tempore following argument and is incorporated within the transcript of the hearing rather than being separately transcribed. As noted at the hearing before me, there was a degree of informality in the process and the delineation between argument and the judgment is not exact. 2. Having lost the proceedings, T & DC accepted that it was liable to pay costs. However, it submitted that the proceedings were governed by Practice Note Civ 1 in the Local Court pursuant to which, it was submitted, costs were capped at 25% of the amount claimed (around $4000). 3. Workforce had made three offers of compromise by way of Calderbank letter offering to settle the claim for $500, then $1000 and finally $2000. On the strength of T & DC's failure to accept any of those offers, it sought its whole costs on an indemnity basis. T & DC argued that the practice note should prevail and, separately, that it was not unreasonable to refuse the offers, which (it was submitted) effectively amounted to invitations to capitulate. 4. The magistrate acceded to Workforce's application, ordering the payment of Workforce's costs from the date of the first letter (but carving out an order previously made, by which T & DC had been ordered to pay some costs to be assessed on the ordinary basis). 5. The amount of costs claimed by Workforce pursuant to the magistrate's order is almost $60,000 (affidavit of Mark Whowell sworn 6 August 2014, relied upon on the question of leave). The unfortunate disproportion between that amount and the amount claimed is a strong consideration in favour of granting leave to appeal against the decision. On balance, however, I have determined that leave should be refused. 6. T & DC seeks to rely on three grounds of appeal in relation to the costs decision, as follows. 6. The magistrate erred in refusing to apply the practice note, being practice note Civ 1, in that the magistrate held that the practice note was ultra vires. 7. The magistrate erred in adopting an erroneous construction of paragraph 36 of the practice note. 8. The magistrate erred in holding that the plaintiff's claim was hopeless and thus justified an indemnity costs order by reason of the rejection of a Calderbank letter offering $500. The trouble with the law 1. Ground 6 suggests that the magistrate refused to apply the practice note because he considered it to be invalid. His Honour did express the view (perhaps incautiously) that the practice note is invalid but I do not think, on a fair reading of the reasons as a whole, it is fair to say that is the reason he refused to apply it. On the contrary, his Honour gave an explanation of his views as to costs which, although informally expressed, was compelling. The relevant passage is lengthy – perhaps it is adequately distilled in his Honour's view (with which it is difficult to disagree) that "the trouble with the law is there is too much of it" but it is preferable to set out the relevant reasoning more fully. 2. The plaintiff had noted the deeming effect of cl 36.2 of the practice note and the requirement of cl 36.3 to make any application for a variation of the orders taken to have been made under that rule by notice of motion with a supporting affidavit. Those clauses provide: 36.2 Unless the court otherwise orders, the following orders are taken to have been made when the defence is filed in the proceedings. If the plaintiff is successful and the claim is for an amount between $120,000 and $20,000, then the maximum costs that can be awarded to the plaintiff is 25% of the amount awarded by the court plus any amount that might be allowed in relation to costs incurred up to the filing of the first defence in the proceedings. If the defendant is successful and the claim is for an amount between $10,000 and $20,000, then the maximum costs that can be awarded to the defendant is 25% of the amount claimed by the plaintiff. Where the proceedings were transferred from the Small Claims Division to the General Division, then the maximum costs that can be awarded to the successful party is $2,500. 36.3 A party may file and serve a notice of motion and supporting affidavit seeking to vary the maximum costs order at any time up until two weeks prior to the first review date. 1. The magistrate acknowledged that no motion had been filed. I accept that there was a measure of unfairness in allowing Workforce to make the claim in those circumstances, especially since the requirement to file a motion had previously been emphasised in the presence of Workforce's legal representatives when Old Sca made a similar application at an earlier point in the proceedings. 2. In any event, the magistrate acknowledged the potential unfairness of allowing an application to be made where no motion had been filed and continued: "People from time to time put it that way, lawyers put it that way, and they will often say that a party – which is in this case the plaintiff – might have boxed on, thinking "Well maybe I'm a bit worried about whether I'll win or whether I'll lose, but at least I know I'm safe on costs, I can't lose more than a certain amount on costs." Now that is understandable, it is understandable that they say that, I think 35.6 change things, but I just want to be a bit complete about what I am putting. It is understandable that they say that. It is also extremely unfortunate that it is there at all, because (a) we get unrepresented litigants who nonetheless sometimes have significant costs, and (b) we get some lawyers who are not even aware that the practice note exists, or if they are, if they have got some vague general awareness of it – I do not mean to be disparaging to the profession as a whole, but the fact is they simply are not aware of 36.3. So one can get, and I have had before me cases where there are enormously complicated and difficult questions of fact and law, even though it is only over a small amount of money, and that is what happened in this matter. They were complicated questions, and they were difficult. So it can be very unfair to a party who wants costs higher than the 25% of the plaintiff's claim that is allowed for, if they are successful, because they are then confronted with more for solicitors than barristers, because solicitors have offices to manage as well, and they are extremely busy, and the trouble with the law is there is too much of it. Occasionally people understandably just forget some minute provision such as 36.3, and I think it is an unfair provision because it works unfairness in that way. By the way, the general policy apart from encouraging settlement – one might think there is plenty of provision for settling anyway, but the general is probably mainly to balance the costs where the amount at stage is not huge, and that will be because if you have got a wealthy plaintiff and an impecunious defendant, the plaintiff can grind the defendant into the ground and recover a debt perhaps or an alleged claim, and the poor old – in the absence of this practice note – the poor old defendant simply cannot manage to defend it because it is too expensive. And you get the same thing happening, you get a defendant with very deep pockets who simply refuses to pay a justly owed debt, and the poor old plaintiff – absent this practice note – would be worried about the chance to pursue it, and there is in my view great injustice." 1. After an irrelevant excursion into a personal experience, the magistrate continued: "The chief magistrate – or in the case of a small claims division, the Parliament when it passes the law about costs for those claims – is trying to protect people, but the trouble is it does not work. They mean well, and it will never work. The only way that it is fair is if the particular magistrate – if there has been a full hearing – getting a feel for the matter and a bit of a gut feeling and understanding how the parties were situated vis-à-vis each other, can make in a general discretion a costs order that is appropriate. The worst case is when you get a really complicated matter – as this one was a complicated matter, it is not as bad as many, but it's complicated – and it is just not fair to a party to confine them by reference to this practice note. If the practice note was a mandatory thing that one had to follow, if it was, I think it would probably be invalid, in fact I think it is invalid anyway but we do not need to go into that. It is outside power. There is a discretion to award costs – it would be outside power, should I say this perhaps, but for the fact that it provides for an out, or two outs. One is that it does say in 36.2 "Unless the court otherwise orders", so when would the court otherwise order? The obvious reason – and there are other statutory provision in other areas that have that phrase – the court otherwise orders if it is reasonable and fair to do so, if there is a reason. If the matter is complicated, one might think there's a reason. In this matter, there were solicitors involved early on, counsel were involved, I don't know at what stage exactly but fairly early on." 1. In my view, it may be seen that the view his Honour expressed (that the practice note is "outside power") was not central to, or even an aspect of, his reasons. Power to depart from the practice note 1. Ground 7 asserts a misconstruction of the practice note, effectively contending that the Local court is bound to apply its terms strictly and that failure to do so amounts to error. A similar argument was considered and rejected by Adamson J in Ada Evans Chambers Pty Ltd v Santisi [2014] NSWSC 538 at [19] to [22]. Importantly, her Honour held that the practice note does not have higher status than the Civil Procedure Act 2005 (NSW) or the Uniform Civil Procedure Rules 2005 (NSW). The fact that the issue sought to be raised has already been determined by this Court is a powerful consideration for refusing leave. 2. Ground 8 asserts error in the evaluative judgment whether it was unreasonable of T & DC to reject the Calderbank offers. As observed by the magistrate in his reasons set out above, that is a judgment best made by the Court that heard the matter. 3. For those reasons, I would refuse leave to appeal against the decision as to costs. I have reached that conclusion with some equivocation in light of the obvious disproportion between the costs claimed and the interest at stake. In an ideal world, the practice note would protect litigants against such outcomes. But the position of the defendant must be considered too. If there were no power to award costs as the magistrate did, the sensible commercial decision in the face of a weak but complex claim would be to capitulate to default judgment in the amount claimed rather than to defend the case. That would serve justice no better than disproportionate costs. No system is perfect; the magistrate took a robust approach but one which, in my view, was open to his Honour. 4. For those reasons, the appeal is dismissed with costs. ********** 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. Decision last updated: 23 November 2015