Albanis v Eleftheriou

Supreme Court of NSW|2014-04-09|Before: Beech-Jones J

ex tempore Judgment 1In April 2013 the plaintiff, John Albanis, commenced proceedings in the Local Court against the defendant, Con Eleftheriou. He sought recovery of an amount he paid to purchase a Citroen motor vehicle from Mr Eleftheriou in December 2012. The proceedings were listed for hearing on 26 November 2013. On that day the presiding magistrate dismissed the proceedings without hearing the matter on the merits. His Honour did so because his Honour concluded that the Local Court had no jurisdiction to hear Mr Albanis' claim. Mr Albanis was ordered to pay Mr Eleftheriou's costs of the proceedings on an indemnity basis. 2Mr Albanis now appeals from his Honour's orders pursuant to s 39(1) of the Local Court Act 2007 (NSW). This confers upon him a right of appeal against those orders on a question of law. 3To the extent necessary, Mr Albanis also seeks leave to appeal under s 40(2) of the Local Court Act from those orders against the contingency that they are found to be interlocutory. I am doubtful that they are interlocutory. However, assuming they are, I would grant leave to appeal, as this matter is of potentially some importance in determining the scope of the jurisdiction of the Local Court and the orders have the effect of bringing Mr Albanis' case to an end without there being a hearing on the merits.

The proceedings below 9When the matter was called on before the presiding magistrate, his Honour enquired of counsel for Mr Albanis whether the Local Court had "jurisdiction in this matter". The transcript records that his Honour suggested that Mr Albanis' claim was not one for "loss or damages" but instead he wanted to: "reverse the situation, that's an equitable, matter for equity and you will have to go to the Supreme Court". 10Counsel for Mr Albanis responded by contending that his client was seeking "restitution" and that was a "common law remedy" and he was not pursuing any equitable remedy. After further discussion, the following exchange ensued, which includes his Honour's judgment: "[Counsel for Mr Albanis]: Your Honour ultimately, if somebody purchases a, if there has been a total failure of consideration or a failure of consideration, then damages would no doubt stem from that failure of consideration. With great respect to your Honour - HIS HONOUR: You need not bother with those flowery terms which actually mean the opposite of what they say. I am not interested in your flowery terms, I just want to know - you can sit down for a minute. [Counsel for Mr Albanis]: Sure. HIS HONOUR: All right well I find that the Court does not have jurisdiction. The statement of claim in each claim firstly in repudiation, states that the plaintiff has tendered the return of the vehicle against repayment by the defendant of the purchase price. In relation to the alternative claim of rescission, the plaintiff seeks restoration to his pre contractual position [passage said to be not transcribable] received by the defendant and hereby is tendered, tenders to the defendant return of the vehicle against payment of the plaintiff's claim for restitution. And alternatively, claim three, the plaintiff tenders to the defendant the return of the vehicle against such restitution and reinstatement. The Local Court only has power to deal with the money claim. It has power as set out in Local Court Act, s 29 and 29A. The s 29A finds the term money claim and is a claim for recovery of any debt demand or damages and this limits the jurisdiction of the Local Court and therefore excludes the claim made by the plaintiff in this case, John Albanis, for return of the money, the purchase price of, the purchase money that he gave to the defendant for a particular motor vehicle. SO THE CASE IS DISMISSED." 11It is not possible on an appeal such as this to ascertain the tone in which the presiding magistrate referred to counsel's submissions as using "flowery terms". His Honour's comments do not read well. Counsel's language did not appear to be "flowery". However, even if it was, he at least had the advantage of being correct. 12Otherwise, the above passage constitutes the only reasons given by the presiding magistrate for dismissing the claim. It is difficult to ascertain what reason there was other than simply a lack of satisfaction that the three claims identified in the pleading answered the description of a "money claim" in s 29A of the Local Court Act. His Honour did not address the submission of counsel for Mr Albanis that his client's claim was in restitution. There was no explanation for why a claim in restitution did not fall within s 29A. 13Otherwise, from the exchanges which preceded the above passage, the only substantive reason for a lack of satisfaction that the claims made fell within s 29A was the reference to the rescission claim necessarily invoking an "equitable" jurisdiction. However, as I have explained, the statement of claim made three claims, of which the claim for rescission was only one. 14After his Honour gave the above judgment, counsel for Mr Albanis then sought leave to amend to include a claim for damages. He stated that he had evidence that the car had a "value of between $2,000 and $3,000". There was further debate about that application. Counsel for Mr Eleftheriou opposed the amendment. He submitted in effect that, as the proceedings had been dismissed, there was nothing to amend. Although it is not clear, his Honour appears to have agreed with that submission. In any event, the amendment application was not granted. 15Counsel for Mr Eleftheriou then made an application for Mr Albanis to pay his client's costs on an indemnity basis, which, as I have stated, was granted.

Submissions on appeal 16Counsel for Mr Albanis, Mr Moutasallem, made three submissions in support of his client's appeal. First, he contended that his Honour erred in law in concluding that the Local Court had no jurisdiction. In particular, he submitted that, properly analysed, his client's claims were restitutionary in nature and thus answered the description of a "money claim" in s 29A of the Local Court Act. Further, he contended that, to the extent that his client claimed restitution consequent on a rescission of the contract, then there is a well recognised distinction between rescission at common law and rescission at equity, and at the very least his client could invoke the principles concerning the former. 17Second, Mr Moutasallem submitted that his Honour failed to give adequate reasons for concluding that the Local Court lacked jurisdiction. This submission was not expanded upon in any detail. 18Third, Mr Moutasallem contended that his Honour otherwise erred in law in refusing his client's application to amend. 19Counsel for Mr Eleftheriou, Mr Heazlewood, firstly submitted that his Honour had correctly found that the Local Court lacked jurisdiction to hear Mr Albanis' claim. He submitted that each of Mr Albanis' claims was in effect based on a rescission of the contract for sale, and that rescission is ultimately either an equitable remedy or at least a remedy that relies on equity before it can be perfected. He submitted that before the Local Court could have granted the relief sought by Mr Albanis in his statement of claim, it would have had to adjust the parties' rights, including ordering the return of the motor vehicle. He submitted it had no power to do so. 20Second, Mr Heazlewood submitted that the basis on which his Honour found the Local Court lacked jurisdiction was stated with sufficient clarity in his Honour's judgment. 21Third, Mr Heazlewood contended that his Honour was correct to refuse the amendment application as the Local Court was functus officio at the time the application was made. Otherwise, Mr Heazlewood submitted that, to the extent his Honour refused the application to amend in the exercise of a discretion, no basis for interfering with the discretion had been established. 22It follows from the passage from the transcript that I have extracted above that his Honour's conclusion that the Local Court did not have jurisdiction did not turn upon any finding of fact. Instead, his Honour's conclusion involved a consideration of Mr Albanis' claim as pleaded and the relevant legislation conferring jurisdiction on the Local Court. It further follows that this Court is in as good a position as his Honour to deal with the question of whether the Local Court had jurisdiction to embark upon a hearing of Mr Albanis' case. I will proceed to consider that question, rather than considering whether his Honour's reasons for dismissing the matter conformed to the relevant legal standard. If his Honour's conclusion concerning the absence of jurisdiction was correct, then the appeal will be dismissed irrespective of the adequacy of the reasons for that conclusion. Similarly, if his Honour's conclusion that the Local Court lacked jurisdiction was in error, then the appeal will be allowed irrespective of whether his Honour's reasons conformed to the appropriate standard.

The Local Court's jurisdiction 23The relevant provisions of the Local Court Act pertinent to this matter were ss 29, 29A and 30(1), which relevantly provided: "29 Jurisdictional limit of Court (1) For the purposes of this Part, the jurisdictional limit of the Court is: (a) $100,000, when sitting in its General Division, and (b) $10,000, when sitting in its Small Claims Division. (2) However, the jurisdictional limit of the Court, when sitting in its General Division, in relation to a claim for damages arising from personal injury or death is $60,000. 29A Money claim - meaning In this Part, money claim means a claim for recovery of any debt, demand or damages (whether liquidated or unliquidated). 30 Conferral of jurisdiction (1) Subject to this Part, the Court sitting in its General Division has jurisdiction to hear and determine: (a) proceedings on any money claim, so long as the amount claimed, whether on a balance of account or after an admitted set-off or otherwise, does not exceed the jurisdictional limit of the Court when sitting in that Division, and (b) proceedings to recover detained goods, or to recover the assessed value of detained goods, so long as the value of the goods, together with the amount of any consequential damages claimed for their detention, does not exceed the jurisdictional limit of the Court when sitting in that Division, and (b1) proceedings involving company title home unit disputes under section 34A, and (c) proceedings that, pursuant to any other Act, are required to be dealt with by the Court sitting in that Division. (2) ..." (emphasis added) 24No question arises in this appeal as to whether the amount claimed exceeded the "jurisdictional limit". Instead, the relevant question is whether Mr Albanis' claim involved the bringing of "proceedings on [a] money claim", being a claim for "recovery of [a] debt, demand or damages whether liquidated or unliquidated". To answer that question, it is necessary to consider the claims made in the statement of claim in more detail.

The first claim: repudiation 25As noted above, the first claim alleged that the delivery of the motor vehicle in a manner that did not conform with the relevant representations was a breach of the contract for sale amounting to a repudiation. Although it was not expressly pleaded, implicit in that allegation is that the content of those representations was a term of the contract. 26In the extract set out above, counsel for Mr Albanis had referred to his client's claim for restitution as arising from a "failure of consideration". In I.M. Jackman's The Varieties of Restitution, (1998, The Federation Press) the author referred (at pp 44 to 45) to "three doctrines of the common law of contract which use 'total failure of consideration' as a yardstick for the discharge or avoidance of a contract and thus for the recovery of money paid pursuant to the contract, namely, frustration, mistake and termination for fundamental breach". In relation to the latter category, in Roxborough v Rothmans of Pall Mall Australia Ltd [2001] HCA 68; 208 CLR 516 at [16], Gleeson CJ, Gaudron and Hayne JJ noted that the concept of "failure of consideration is not limited to non-performance of a contractual obligation", thus clearly conveying that it includes the non-performance of a contractual obligation. 27It follows that counsel for Mr Albanis was correct in submitting to his Honour that his client was able to make a claim in restitution based on the alleged repudiatory behaviour of Mr Eleftheriou. Such a claim for refund is one "which the count for money had and received lies", being a "common law count" (Roxborough at [15] and [16]). Such counts have often been brought in courts that do not exercise any equitable jurisdiction (see Coastal Estates Pty Ltd v Melevende [1965] VR 433 at pp 447 to 448 per Adam J). The "common law count" to which the plurality referred in Roxborough has an ancient lineage which was traced in the various judgments in Pavey & Matthews Pty Ltd v Paul [1987] HCA 5; 162 CLR 221. In Lagos v Grunwaldt [1910] 1 KB 41 at p 48, Farwell LJ observed that "everything that could be sued for under those counts comes within the description of debt or liquidated demand", as that latter phrase was used in the English High Court Rules. This passage from Lagos was referred to with approval by Deane J in Pavey & Matthews at p 251. 28The phrase "debt or liquidated demand" as used in the High Court Rules and discussed in Lagos resonates with the definition of "money claim" in s 29A of the Local Court Act, which refers to "debt, demand or damages (whether liquidated or unliquidated)". In my view, it follows that Mr Albanis' first claim was clearly a "money claim" within the meaning of s 29A of the Local Court Act and that his Honour erred in ruling otherwise. 29In making this finding, I have not overlooked Mr Heazlewood's contention that the Local Court could not order the return of the vehicle and therefore it could not entertain this claim. At least so far as the first claim is concerned, this contention amounts to no more than an argument that there may not have been a total failure of consideration under the contract and thus any refund should not be ordered (see Baltic Shipping Company v Dillon [1993] HCA 4; 176 CLR 344). It is a contention that does not raise a matter of jurisdiction but, as I will explain, only concerns the availability of relief once the facts have been investigated. 30In this case, in all likelihood the contract for the purchase of a motor vehicle in the circumstances pleaded was covered by either the Sale of Goods Act 1923 (NSW) or the equivalent legislation in Victoria, which for present purposes is not relevantly different. Section 16 of the Sale of Goods Act provides: "16 When condition to be treated as warranty (1) Where a contract of sale is subject to any condition to be fulfilled by the seller, the buyer may waive the condition or may elect to treat the breach of such condition as a breach of warranty and not as a ground for treating the contract as repudiated. (2) Whether a stipulation in a contract of sale is a condition the breach of which may give rise to a right to treat the contract as repudiated, or a warranty the breach of which may give rise to a claim for damages but not to a right to reject the goods and treat the contract as repudiated, depends in each case on the construction of the contract. A stipulation may be a condition though called a warranty in the contract. (3) Where a contract of sale is not severable and the buyer has accepted the goods or part thereof, the breach of any condition to be fulfilled by the seller can only be treated as a breach of warranty and not as a ground for rejecting the goods and treating the contract as repudiated, unless there be a term of the contract express or implied to that effect. (4) Nothing in this section shall affect the case of any condition or warranty, fulfilment of which is excused by law by reason of impossibility or otherwise." 31It can be seen that, in the absence of a term to the contrary, s 16(3) removes the right of the buyer to reject goods and treat the contract as repudiated for breach of a condition by the seller if the buyer has "accepted the goods". Acceptance and rejection of the goods is dealt with by ss 38 and 39 of the Sale of Goods Act, which provide: "38 Acceptance (1) The buyer is deemed to have accepted the goods when the buyer intimates to the seller that the buyer has accepted them, or, subject to section 37, when the goods have been delivered to the buyer and the buyer does any act in relation to them which is inconsistent with the ownership of the seller, or when after the lapse of a reasonable time the buyer retains the goods without intimating to the seller that the buyer has rejected them. (2) The buyer's acceptance of the goods as referred to in subsection (1) does not preclude rescission of the contract for an innocent misrepresentation, unless the acts constituting acceptance amount to affirmation of the contract. 39 Buyers not bound to return rejected goods Unless otherwise agreed, where goods are delivered to the buyer and the buyer refuses to accept them, having the right so to do, the buyer is not bound to return them to the seller, but it is sufficient if the buyer intimates to the seller that the buyer refuses to accept them." 32It can be seen from s 39 that the rejection of the goods does not necessarily require the redelivery of the goods, but simply an intimation by the buyer that they are rejected. 33It follows that, in this case, if Mr Albanis establishes that the subject matter of the representations was a condition of the contract, that they were not complied with, that that non-compliance amounted to a repudiation and that he did not "accept" the motor vehicle, then he may succeed in his claim. In those circumstances, the supposed inability of the Local Court to order the delivery-up of the motor vehicle to Mr Eleftheriou would be irrelevant. As the contract for sale would not be an unconditional one then, in those circumstances, property would not have passed to Mr Albanis (cf Sale of Goods Act, s 23 rule 1). Thus, in such a case, the Court would simply enter judgment for Mr Albanis for the purchase price and the other expenses. The Court would not have to order the redelivery of the motor vehicle. It would simply remain the property of Mr Eleftheriou. If he did not choose to collect his motor vehicle, then that would be his problem. However, as I have stated, these are all matters for inquiry at a hearing before the Local Court. For present purposes, it suffices to find that his Honour erred to the extent that his Honour concluded that the Local Court lacked jurisdiction to deal with the first claim.

The second claim: rescission 34As noted, Mr Albanis' second claim was the rescission of the contract on the basis of Mr Eleftheriou's misrepresentation and he sought recovery of the purchase price. During submissions, his Honour described this as a "matter for equity". 35With respect to his Honour, this was incorrect. The right to rescind for a misrepresentation inducing the entry into of a contract is both a common law and equitable doctrine. However, there are two critical respects in which they differ. First, rescission at common law is restricted to cases of fraudulent misrepresentation, whereas equity can intervene in the case of an innocent misrepresentation. Second, the common law requires that the precise restitution of the parties to the status quo can be effected before a rescission is effective, whereas equity can make provision for adjustments even if precise restitution is still no longer possible (see N.C. Sneddon and M.P. Ellinghans Cheshire & Fifoot's Law of Contract (9th Aust Ed, 2008, LexisNexis Butterworths) at p 523). 36In Alati v Kruger (1955) 94 CLR 216 at 223 to 224, the High Court discussed the second aspect of this difference between common law and equity as follows: "If the case had to be decided according to the principles of the common law, it might have been argued that at the date when the respondent issued his writ he was not entitled to rescind the purchase, because he was not then in a position to return to the appellant in specie that which he had received under the contract, in the same plight as that in which he had received it: Clarke v Dickson (1858) EB & E 148 (120 ER 463). But it is necessary here to apply the doctrines of equity, and equity has always regarded as valid the disaffirmance of a contract induced by fraud even though precise restitutio in integrum is not possible, if the situation is such that, by the exercise of its powers, including the power to take accounts of profits and to direct inquiries as to allowances proper to be made for deterioration, it can do what is practically just between the parties, and by so doing restore them substantially to the status quo: Erlanger v New Sombrero Phosphate Co (1878) 3 App Cas 1218, at pp 1278, 1279; Brown v Smitt (1924) 34 CLR 160, at pp 165, 169; Spence v Crawford (1939) 3 All ER 271, at pp 279, 280. It is not that equity asserts a power by its decree to avoid a contract which the defrauded party himself has no right to disaffirm, and to revest property the title to which the party cannot effect. Rescission for misrepresentation is always the act of the party himself: Reese River Silver Mining Co v Smith (1869) LR 4 HL 64, at p 73. The function of a court in which proceedings for rescission are taken is to adjudicate upon the validity of a purported disaffirmance as an act avoiding the transaction ab initio, and, if it is valid, to give effect to it and make appropriate consequential orders: see Abram Steamship Co Ltd v Westville Shipping Co Ltd (1923) AC 773. The difference between the legal and the equitable rules on the subject simply was that equity, having means which the common law lacked to ascertain and provide for the adjustments necessary to be made between the parties in cases where a simple handing back of property or repayment of money would not put them in as good a position as before they entered into their transaction, was able to see the possibility of restitutio in integrum, and therefore to concede the right of a defrauded party to rescind, in a much wider variety of cases than those which the common law could recognize as admitting of rescission. Of course, a rescission which the common law courts would not accept as valid cannot of its own force revest the legal title to property which had passed, but if a court of equity would treat it as effectual the equitable title to such property revests upon the rescission." (emphasis added) 37At least in circumstances where a contract for the sale of land was rescinded at common law for a fraudulent misrepresentation, any moneys paid over prior to rescission are treated as having been paid for a consideration that has wholly failed (see Coastal Estates at 455 per Adam J). Thus, in Coastal Estates, it was held that the County Court of Victoria could order payment of an amount representing the purchase price in relation to such a sale in the exercise of what was described as its "common law jurisdiction" (Coastal Estates at p 434 per Herring J; see also p 439 per Sholl J and pp 447 to 448 and p 455 per Adam J). The common law and equitable rules in respect of rescission also appear to apply to contracts for the sale of goods (see s 4(2) and s 4(2A) of the Sale of Goods Act). 38I have already explained how an action for moneys had and received consequent upon a failure to provide proper consideration answers the description of a "money claim" in s 29A of the Local Court Act. Nevertheless Mr Heazlewood contends that the Local Court could not entertain the second claim because it also requires the court to make orders for the adjustment of the parties' rights and the return of the motor vehicle. 39The passage from Alati set out above makes it clear that rescission is something that is only effective of its own force. The Court's role is to determine whether the rescission was valid. The Court's orders do not give a rescission a force of law it does not otherwise have. If in a particular case it turns out that adjustments are required before a rescission can be found to be valid, then a court exercising a purely common law jurisdiction, such as the Local Court, could not determine that such a rescission was valid. 40Again, however, such an assessment is one that can only be undertaken after a hearing. It did not mean that the Local Court lacked jurisdiction to entertain Mr Albanis' second claim. Otherwise, for the reasons I have already explained, it is not necessarily the case that to uphold Mr Albanis' second claim, the Local Court would have to order the delivery of the motor vehicle by Mr Albanis to Mr Eleftheriou. If the rescission was determined to be effective, then that would necessarily mean that title to the motor vehicle remained with Mr Eleftheriou. 41Accordingly, at least to the extent that Mr Albanis alleged that the representations which induced him to enter into the contract of sale were fraudulent, then the Local Court had jurisdiction to entertain his claim to recover the purchase price by reason of his alleged rescission. Upon the remittal of the matter to the Local Court, it will be necessary for Mr Albanis to clarify his pleading of fraud and provide any necessary particulars.

Other matters 42To this point I have not addressed Mr Albanis' third claim which alleged that there had been a total failure of consideration by the delivery of a motor vehicle that did not conform with the representations. It follows from the above analysis that this claim was no different to the first claim. 43Further, in light of this Court's findings in respect of the first two claims, it is not necessary to consider the further complaint that his Honour erred in refusing Mr Albanis' application to amend. As the matter will be remitted, Mr Albanis can then consider whether he wishes to renew his amendment application and the Local Court, as then constituted, can hear it at that time. 44Otherwise it should be noted that no question of whether there are any statutory remedies available to Mr Albanis, or whether he was required to elect between the various remedies, arose on this appeal.

Relief 45Accordingly the Court orders that: (1)To the extent necessary the plaintiff be granted leave to appeal pursuant to s 40(2) of the Local Court Act 2007 (NSW). (2)The appeal be allowed. (3)The orders made by Magistrate Bradd on 26 November 2013 in proceedings number 2013/117169 dismissing the proceedings and ordering the plaintiff to pay the defendant's costs on an indemnity basis be set aside. (4)The matter be remitted to the Local Court for determination in accordance with this Court's reasons.

Costs [The parties addressed as to costs.] 46Mr Heazlewood has sought to resist an order that his client be ordered to pay the costs of the appeal. He has pointed to two matters. The first is that the question of jurisdiction was a matter that originated from the Local Court on 26 November 2013 and not from his client. Second, he submitted that the events as they unfolded were at least partly caused by difficulties in the pleading and particularisation of the plaintiff's claim. 47In response, Mr Moutasallem pointed to a passage early on in the proceedings on 26 November 2013 when counsel then appearing for Mr Eleftheriou seized the moment and joined in with the presiding magistrate's attack upon the plaintiff's assertion that the Local Court had jurisdiction to hear the proceedings. Otherwise, he pointed to the fact that Mr Eleftheriou has continued to resist the appeal when it was open to him to simply submit to the outcome. 48All litigation involves forensic choices. In this case it is clear that the Local Court started the hare running about jurisdiction, but counsel for Mr Eleftheriou joined in the race. In the end Mr Eleftheriou has to wear the costs consequences of that decision. His camp has staked its ground on supporting the presiding magistrate's view that the Local Court lacked jurisdiction to hear Mr Albanis' claim. I have determined that his Honour erred. In these circumstances there is no basis for declining to award the costs of the appeal to Mr Albanis. 49However, I am satisfied that the idea that the Local Court lacked jurisdiction did not originate with Mr Eleftheriou. I have not researched the question as to whether the Suitors' Fund Act 1951 (NSW) would be available to Mr Eleftheriou in a Local Court appeal but, if it is, I consider that he should be entitled to make such a claim. 50Accordingly, the Court further orders that: (5)The defendant pay the plaintiff's costs of the proceedings in this Court. (6)The defendant have a certificate under the Suitors' Fund Act 1951 (NSW) if he is otherwise qualified and eligible.

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: 14 April 2014

Suitors' Fund Act 1951(NSW)

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