Supreme Court New South Wales Medium Neutral Citation: Chaouk t/as The Hungry Baker v Australian Shadola Pty Ltd [2017] NSWSC 1108 Hearing dates: 17 August 2017 Date of orders: 22 August 2017 Decision date: 22 August 2017 Jurisdiction: Common Law Before: Adamson J Decision: (1) Refuse leave to appeal in respect of grounds 5 and 6. (2) Dismiss the appeal with respect to the balance of the grounds. (3) Subject to (4) below, order the plaintiffs to pay the defendant's costs of the proceedings. (4) Direct that, if a party wishes to make an application for a costs order other than as set out above, he or it is to make a written application to my Associate within seven days of the date of this order, supported by such evidence and submissions as are to be relied upon. (5) In the event that an application contemplated by (4) is made: (a) the respondent to the application is to serve and email to my Associate any submissions and evidence in response within a further seven days; (b) the applicant is to serve and email to my Associate any submissions and evidence in response within a further seven days; and (c) the application will be dealt with on the papers, unless either party seeks an oral hearing. Catchwords: LOCAL COURT ACT 2007 (NSW) – appeal – question of law – whether magistrate failed to give reasons – where magistrate found no right to claim breach of contract on the cross claim where no contract in existence – where magistrate identified legal person behind business and communications as constituting terms of the contract –HELD – magistrate provided sufficient reasons for findings made – no error of law – grounds of appeal not made out LOCAL COURT ACT 2007 (NSW) – appeal – question of mixed law and fact – where magistrate found an intention to create legal relations and existence of contract between the parties ­– where basis of quantum and reasons for judgment sum by magistrate can be explained by reference to pleadings – no error of fact or law – grounds of appeal not made out Legislation Cited: Local Court Act 2007 (NSW), ss 39, 40 Cases Cited: Azzopardi v Tasman UEB Industries Ltd (1985) 4 NSWLR 139 Housing Commission of New South Wales v Tatmar Pastoral Co Pty (1984) 58 ALJR 553; 54 ALR 155 Housing Commission of New South Wales v Tatmar Pastoral Co Pty Ltd [1983] 3 NSWLR 378 Mifsud v Campbell (1991) 21 NSWLR 725 Pettitt v Dunkley [1971] 1 NSWLR 376 Soulemezis v Dudley (Holdings) Pty Ltd (1987) 10 NSWLR 247 Wingfoot Australia Partners Pty Ltd v Kocak (2013) 252 CLR 480; [2013] HCA 43 Category: Principal judgment Parties: Torek Chaouk trading as The Hungry Baker (First Plaintiff) C & Y Holdings Pty Ltd (ACN 144 899 981) (Second Plaintiff) Australian Shadola Pty Ltd (ACN 062 463 610) (Defendant) Representation: Counsel: J Jobson (Plaintiffs) P T Russell (Defendant) Solicitors: Andresakis & Associates (Plaintiffs) Lewarne & Goldsmith (Defendant) File Number(s): 2016/381962 Decision under appeal Court or tribunal: Local Court of New South Wales Jurisdiction: Civil Date of Decision: 9 December 2016 Before: Still LCM File Number(s): 2015/52338 Judgment Introduction 1. By further amended summons filed on 9 May 2017 the plaintiffs, Torek Chaouk trading as The Hungry Baker (Mr Chaouk) and C & Y Holdings Pty Ltd (C & Y Holdings), appeal pursuant to s 39 of the Local Court Act 2007 (NSW) and, to the extent necessary, seek leave to appeal pursuant to s 40 of the Local Court Act from the decision of Still LCM on 9 December 2016 in so far as it relates to the judgment entered against them in favour of the defendant, Australian Shadola Pty Ltd (Australian Shadola). The defendant opposes the relief sought. As the plaintiffs were the defendants in the Court below and the defendant was the plaintiff in the Court below, I propose to refer to Mr Chaouk and C & Y Holdings collectively as the Lessees. 2. The substantive relief sought by the Lessees is that the appeal be allowed; the judgment of the Local Court be set aside; that there be judgment for the Lessees on the statement of claim and the cross claim; and that Australian Shadola be ordered to pay their costs. In the alternative to the orders for judgment, the Lessees seek an order that the matter be remitted to the Local Court for re-hearing. The proceedings in the Court below The claim 1. In the Court below Australian Shadola claimed a liquidated sum of $47,418.25 from the Lessees which comprised the sum of several invoices rendered; and $59,208.30 for damages for breach of contract. C & Y Holdings filed a cross claim which was dismissed on the basis that there was no evidence that C & Y Holdings was party to a contract. It was common ground that neither Mr Chaouk nor C & Y Holdings had paid any money in relation to the allegations the subject of the cross claim. The cross claim is also the subject of the application for leave to appeal. The result 1. In the Court below Australian Shadola succeeded in its claim against Mr Chaouk. Following the hearing on 23 September 2016 his Honour reserved his decision. On 9 December 2016 reasons were given and judgment entered against Mr Chaouk in favour of Australian Shadola in the sum of $70,258.54, which comprised $59,208.30; together with disbursements and interest under the Court Rules. Mr Chaouk was ordered to pay Australian Shadola's costs on an ordinary basis up to 12 September 2016 and thereafter on an indemnity basis. The magistrate's reasons on liability 1. The magistrate found the facts as follows. 2. Australian Shadola, which fabricated steel products, supplied materials and performed internal and external building works at café premises leased by the Lessees from Optus at Macquarie Park in the period April 2014 to November 2014. There were separate agreements for the internal and external works. Some payments were made by Mr Chaouk to Australian Shadola. No payments were made by C & Y Holdings to Australian Shadola. There was an amount outstanding for the work. 3. The magistrate found that there was no evidence of any contract with C & Y Holdings and, accordingly, entered judgment for that company on the statement of claim and dismissed the cross claim. His Honour identified as the principal issue in the proceedings whether there was a contract between Australian Shadola and Mr Chaouk. His Honour noted that, in his evidence, Mr Chaouk denied that there was any contract between him and Australian Shadola and said that any agreement for the performance of works was with Optus or Prime Constructions. 4. The magistrate assessed the evidence of Peter Heniuk, a director of Australian Shadola, and that of Mr Chaouk. He accepted Mr Heniuk's version of various conversations between the two men, which were said to comprise the contract, which were denied by Mr Chaouk. His Honour described Mr Heniuk's evidence as "superior", "given in a straightforward manner", "largely uncontested" and said that "it survived cross-examination". His Honour also said: "The evidence given by Mr Terry Chaouk was unsatisfactory. He filed a one page affidavit and gave oral evidence. Basically his evidence is that it was all up to Optus. He denies any of the conversations with the plaintiff as to invoicing, pricing, progress or supervision. He said that it was hard to remember things so long ago, when such things did not concern him. His explanation for the email between himself and the plaintiff, including annexure M to Heniuk's affidavit, exhibit 2, strains credibility. His evidence was short, evasive and directed to removing himself from any association or role with the plaintiff and saying it was all up to Optus. His comments on written documents was unconvincing. His response to questions was, at times, almost flippant and disengaged as if the claim against him could not be serious. He had not even re-read Hen[iu]k's statement of October 2015 (Ex 2), made well before the hearing I conducted. It seemed to me his evidence was 'Who cares? It had nothing to do with me. So what about emails and conversations? I was not involved. I didn't pay for anything.' He could not and did not say anything about his brother Mo's involvement, as deposed by Mr Heniuk." 1. His Honour noted that there was no dispute that the invoices were sent by Australian Shadola to Mr Chaouk. His Honour considered Mr Heniuk's oral evidence to be supported by the evidence of negotiation about price and the email from Mr Heniuk to Mr Chaouk, sent at 3.03pm on 1 September 2014, which said: "Hi Terry Have been to site today, took levels and most measurements. Mo [Mr Chaouk's brother] advises me now that we are not water proofing upper slab. All we need to do is attach angle to the top of the slab, then everything below, done to drawings. The revised price now is $109.250 plus GST. I have tried to shave off some other costs but it will leave me at a loss with installation costs." 1. The response came by email from Mr Chaouk at 4.42pm the same day: "Ok Pete [Heniuk] send thru invoice for deposit". 1. When Australian Shadola raised with Optus the default by Mr Chaouk in payment, it received the following response by email on 17 November 2014 at 3.05pm: "Hi Peter [Heniuk], I was advised by the Hungry Baker owners today Shadola will no longer be completing the awning works. Unfortunately as the agreement was between Hungry Baker and yourself, Optus has no control managing the sub-contractor or agreement between the 2 parties. Regards Andrew". 1. The magistrate made the following findings as to Australian Shadola's entitlement to judgment. 1. An offer was made by Australian Shadola to Mr Chaouk that it would perform work on the premises at a specified price. 2. The offer and quotation was accepted by Mr Chaouk on his own behalf and not on behalf of C & Y Holdings. 3. Australian Shadola performed the works the subject of the contract and was paid for some of that work. 4. The price and scope of the works was varied from time to time by agreement between Australian Shadola and Mr Chaouk. 5. Mr Chaouk's brother, Mo, played an active role in bargaining and delivery and also played a part in making sure that materials were delivered by promising payment by a particular time. 6. Mr Chaouk withheld monies which were payable for internal works performed, which was predicated on awnings being installed as part of the external works. 7. Mr Chaouk terminated the contract and is liable to Australian Shadola in damages for breach of contract. The magistrate's reasons on costs 1. Australian Shadola tendered a Calderbank offer which had been made by letter dated 12 September 2016, 11 days before the hearing of the proceedings on 23 September 2016. The letter proposed a payment of an amount of money plus costs of $30,000. On this basis his Honour ordered Mr Chaouk to pay Australian Shadola's costs on the ordinary basis to that date and on an indemnity basis thereafter. The appeal 1. The Lessees filed a further amended summons on 9 May 2017 (in which the parties were referred to as they were in the Local Court) and relied on the following grounds: "1. The Magistrate erred in failing to give reasons why the Defendants and Cross Claimants were not entitled to claim faulty workmanship and not completion and repair costs against the Plaintiff and Cross Defendant. 2. The Magistrate failed to give reasons as to why the verdict was given to the Cross Defendant in the Cross Claim. 3. The Magistrate failed to state reasons for finding that the Hungry Baker was the First Defendant and that any reference to Hungry Baker was referrable to a contract between the Plaintiff and First Defendant. 4. The Magistrate erred in finding invoices sent by the Plaintiff to Hungry Baker constituted one of the elements of the contract between the Plaintiff and First Defendant. 5. Erred in finding as a matter in law there was an intention to create legal relations. 6. Erred in law in finding a contract between a plaintiff and First Defendant and failed to give adequate reasons for the finding. 7. Failed to provide any basis in law for the quantum awarded. 8. Failed to give any or adequate reasoning in determining the judgment sum." Whether specified grounds raise a question of law 1. The right of appeal conferred by s 39 of the Local Court Act is limited to a question of law. Otherwise, for questions of mixed law and fact, leave is required under s 40. Accordingly, in respect of each ground I propose to address the identification of the question raised as one of law, or of mixed law and fact. As there is some overlap in the grounds I propose to address them together where convenient. 2. Grounds 1, 2, 3 and 8 raise questions regarding the adequacy of the reasons given by his Honour. An alleged failure to give reasons raises a question of law: Pettitt v Dunkley [1971] 1 NSWLR 376 at 382 (Asprey JA); Soulemezis v Dudley (Holdings) Pty Ltd (1987) 10 NSWLR 247 at 259 (Kirby P); Mifsud v Campbell (1991) 21 NSWLR 725. The sufficiency of reasons required depends, in part, on the issues raised and the circumstances of the hearing: Housing Commission of New South Wales v Tatmar Pastoral Co PtyLtd [1983] 3 NSWLR 378 at 385-386 (Mahoney JA); affirmed sub nom Tatmar Pastoral Co Pty Ltd v Housing Commission of New South Wales (1984) 58 ALJR 553; 54 ALR 155; Soulemezis v Dudley (Holdings) Pty Ltd at 260-261 (Kirby P); Wingfoot Australia Partners Pty Ltd v Kocak (2013) 252 CLR 480; [2013] HCA 43. I note that his Honour delivered his reasons some weeks after the hearing. The degree of latitude afforded in the scrutiny of judgments delivered ex tempore is not available in the present circumstances. Grounds 1 and 2 (failure to give reasons for dismissal of cross claim) 1. Mr Jobson, who appeared on behalf of the Lessees in the Court below and in this Court, submitted, in support of this ground: "The Magistrate failed to give reasoning [sic] as to why, in the absence of any payment by the plaintiff, that there was a contract and yet at J9, lines 25-30 he makes a finding against the cross-claim and bases that evidence on the failure by the first defendant to make any payments." 1. The passage from the reasons referred to is as follows: "THE CROSS-CLAIM BY THE SECOND DEFENDANT, C & Y HOLDINGS, THERE IS A VERDICT FOR THE CROSS-DEFENDANT, IE THE PLAINTIFF, IN THE SUBSTANTIVE PROCEEDINGS ON THAT CROSS-CLAIM BECAUSE NEITHER FAULTY WORKMANSHIP NOR PAYMENT BY THE CROSS-DEFENDANT WERE ESTABLISHED." 1. In the cross claim, C & Y Holdings claimed damages for alleged breach of contract between C & Y Holdings and Australian Shadola by reason of faulty workmanship. C & Y Holdings claimed damages for loss of profits; and also sums allegedly paid to third parties for rectification work to be done. The magistrate had already found that C & Y Holdings (which was the cross claimant) was not party to the contract between Australian Shadola and Mr Chaouk and that, accordingly, it had no right to make a claim for breach of the contract between Australian Shadola and Mr Chaouk. In these reasons, the magistrate was saying, in effect, that C & Y Holdings had not, in any event, discharged the onus of proving faulty workmanship. 2. The magistrate's reference to there being no payment "by" the cross-defendant is puzzling. The parties ultimately agreed that this was an error, either in the nature of a slip or a typographical error, and that the reasons should read "payment by the cross claimant" (which would be relevant to the finding that there was no contract between the cross claimant and cross defendant). This is consistent with the concession made on behalf of Mr Chaouk and C & Y Holdings at the hearing in the Court below that neither had made any payment to anyone in respect of the allegations the subject of the cross claim. 3. I regard the magistrate's reasons as sufficient to explain why the cross claim had not been made out. The first and second grounds have not been made out. Grounds 3 and 4 (relating to finding regarding The Hungry Baker) 1. Mr Jobson submitted, in support of these grounds, that his Honour was in error in finding that Mr Chaouk was the proprietor of The Hungry Baker when there was no evidence to support the finding and no allegation to that effect had been made in the pleadings. He also submitted that his Honour had failed to address contradictions in the evidence as to the payment of particular invoices. The allegation that there was no evidence to support a particular finding raises a question of law: Azzopardi v Tasman UEB Industries Ltd (1985) 4 NSWLR 139 at 149 per Kirby P. 2. As Mr Russell, who appeared for Australian Shadola, submitted, the magistrate did not make a finding to the effect alleged by Mr Jobson in his submissions. His Honour did find that Mr Chaouk was the proprietor of The Hungry Baker. However, this was a matter that does not appear to have been in dispute at the hearing, although it was in issue on the pleadings. Australian Shadola alleged, in paragraph 2 of the further amended statement of claim: "The First Defendant [Mr Chaouk] is an individual that [sic] trades under the business name The Hungry Baker "the business" and is liable to be sued in his own name." 1. Mr Chaouk's response in the amended defence, was: "The First Defendant denies that it trades under the business name Hungry Baker and denies that the First Defendant is a trader at all." 1. However, Mr Heniuk gave evidence, which his Honour accepted, that Mr Chaouk said to Mr Heniuk at their first meeting, upon introduction: "Hi Peter, I'm Terry Chaouk, the owner of the business." 1. The other evidence given by Mr Heniuk as to his conversations and communications with Mr Chaouk concerning the contract and its performance supported the proposition that Mr Chaouk was acting in his personal capacity and not on behalf of C & Y Holdings or any other principal. In addition, in the email of 16 November 2014, Mr Chaouk stated that he was the owner and operator of The Hungry Baker, North Ryde. His Honour was entitled to accept this statement as an admission against Mr Chaouk. Mr Heniuk also gave evidence, which his Honour accepted, that Mr Chaouk asked for invoices from Australian Shadola to be addressed to his business and emailed to either Raymond Younan or himself for payment. The magistrate found that there was no dispute between the parties that, for the most part, the invoices from Australian Shadola were sent to Terry Chaouk at The Hungry Baker. The invoices, which were tendered, were addressed to "The Hungry Baker, North Ryde, NSW" and were sent by email to Mr Chaouk and accompanied by words such as: "Hi Terry [Chaouk]" and "Please find your invoice attached". That they were also forwarded to Mr Younan was consistent with Mr Henuik's evidence about the arrangement for payment which Mr Chaouk had suggested. 2. In these circumstances, I consider that his Honour's reasons were ample to explain the finding that Mr Chaouk was, in effect, the legal person behind the business of The Hungry Baker. The third ground has, accordingly, not been made out. 3. The fourth ground concerns the inference that the contract was between Mr Chaouk and Australian Shadola, which arose from the circumstance that the invoices were sent by Australian Shadola to The Hungry Baker, or, in effect, Mr Chaouk. His Honour had already based his finding as to the parties to the contract and its terms on the communications between Mr Chaouk (and, on occasions, his brother) and Mr Heniuk, on behalf of Australian Shadola. The terms of the invoices supported this inference. Ground 4 has not been made out. Grounds 5 (the finding that there was an intention to create legal relations) and 6 (the finding that there was a contract between Australian Shadola and Mr Chaouk) 1. A finding that there was an intention to create legal relations does not give rise to a question of law. At best it gives rise to a question of mixed law and fact. Accordingly the Lessees require leave pursuant to s 40 of the Local Court Act. 2. The Court below set out the relevant legal principles which govern whether an enforceable contract has been made, including the requirement that the parties to the contract intend to create legal relations. The intention to create legal relations is rarely expressed in terms and is readily assumed in a commercial context where, as in the present case, one party at arms-length from the other performs services and supplies goods to the other. The Lessees have not identified any basis for impugning the inference drawn by the magistrate that the parties intended to create legal relations such as to give Australian Shadola an enforceable right to be paid for the materials supplied and the work performed for Mr Chaouk. The Lessees have not identified any basis for their contention that his Honour was in error in finding that there was a contract between Australian Shadola and Mr Chaouk or that his Honour's reasons for the finding were other than sufficient. I am not persuaded that it is appropriate to grant leave to appeal in respect of either ground 5 or ground 6. Grounds 7 (basis for quantum awarded) and 8 (reasons for the judgment sum) 1. In his submissions in support of these grounds, Mr Jobson submitted: "At J9, lines 18-20 the Magistrate gave a verdict in a set amount. There is want of reasoning as to how this amount was calculated and whether it was done so as damages or Quantum Meruit or some other way. In failing to set out the basis for the calculation the plaintiff [Mr Chaouk] is left to guess." 1. The passage from the reasons referred to is as follows: "IN RESPECT OF THE PLEADINGS, A VERDICT AND JUDGMENT IS ENTERED FOR THE PLAINTIFF AS AGAINST THE FIRST DEFENDANT IN THE SUM OF $59,208.30 ON THE STATEMENT OF CLAIM." 1. Read in isolation, the reasons referred to might give the impression that the magistrate simply accepted the amount alleged in the statement of claim. However, these prefatory words immediately prior to the ordering of judgment on the statement of claim were a summary only of what had earlier been expressed in detail in the magistrate's reasons. The evidence of loss was contained in the affidavit of Peter Heniuk of 5 May 2016 (Exhibit 3 in the Court below) which was admitted without objection. No evidence was adduced on behalf of Mr Chaouk and C & Y Holdings in the Court below on any of the matters relating to damages. The magistrate said in the reasons: "As to ex 3, the affidavit of Mr Heniuk, is largely unchallenged, as I have already said. The quotation in respect of the external works of $109,250 was direct to Terry at Hungry Baker's. That is detailed in annexure M and there is no contest in respect of the plaintiff's [Australian Shadola's] calculations on labour and materials to complete the internal and external works, nor the total loss suffered as covered in ex 3 by the plaintiff [Australian Shadola] of $60,564.71." 1. The finding referred to in the passage extracted above is not the subject of challenge. In so far as there is a discrepancy between the amount entered as the judgment sum and the amount referred to in the affidavit of Mr Heniuk, it can be explained by reference to the pleadings. Paragraph 14D of the further amended statement of claim alleged: "14D. As a result of the First and/or Second Defendant's breaches and repudiation of the agreement or agreements for the internal works and external works, the Plaintiff has suffered loss and damage in the sum of $59,208.30 (GST incl.). Particulars The Plaintiff's loss and damage is calculated as follows: i) Internal Work. a. Contract Price $35,673.00 b. Less Payments made $26,754.75 c. Less Cost of Materials and Labour Saved $660.00 Total: $8,258.25 ii) External Work, a. Contract Price $120,175.00 b. Less Payments made $36,052.50 c. Less Cost of Materials and Labour Saved $33,172.45 Total: $50,950.05" 1. It appears from his Honour's reasons that his Honour has entered judgment in accordance with the pleadings (paragraph 14D), as expressed in the reasons, although a higher amount appears to have been warranted by the evidence (but was not the subject of amendment to the pleading). No error, whether of fact or law has been identified. I consider his Honour's reasons, when read with the acceptance of Mr Heniuk's evidence and the pleaded claim, are sufficient to explain the judgment sum. Accordingly, neither ground 7 nor ground 8 has been made out. Conclusion 1. None of the grounds has been made out. Grounds 5 and 6 require leave but I am not satisfied that it is appropriate to grant leave. Orders 1. For the reasons set out above, I make the following orders: 1. Refuse leave to appeal in respect of grounds 5 and 6. 2. Dismiss the appeal with respect to the balance of the grounds. 3. Subject to (4) below, order the plaintiffs to pay the defendant's costs of the proceedings. 4. Direct that, if a party wishes to make an application for a costs order other than as set out above, he or it is to make a written application to my Associate within seven days of the date of this order, supported by such evidence and submissions as are to be relied upon. 5. In the event that an application contemplated by (4) is made: 1. the respondent to the application is to serve and email to my Associate any submissions and evidence in response within a further seven days; 2. the applicant is to serve and email to my Associate any submissions and evidence in response within a further seven days; and 3. the application will be dealt with on the papers, unless either party seeks an oral hearing. ********** 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: 22 August 2017