Australian Beverage Distributors v Kellert

Allen v Kerr & Anor [1995] Aust Torts Reports 81-354 Azzopardi v Tasman UEB Industries Ltd (1985) 4 NSWLR 139 Carr v Neill [1999] NSWSC 1263 Commonwealth v Verwayen (1990) 170 CLR 394 CASES CITED : Con-Stan Industries of Australia Pty v Norwich Winterthur Insurance (Australia) Limited (1985) 160 CLR 226 Devries v Australian National Railways Commission (1993) 177 CLR 472 R L & D Investments Pty Ltd v Bisby [2002] NSWSC 1082 State Rail Authority of NewSouth Wales v Earthline Constructions Pty Ltd (in Liq) (1990) 160 ALR 588 Swain v Waverley Municipal Council (2005) 220 CLR 517 Waltons Stores (Interstate Limited v Maher & Anor (1987) 164 CLR 384

PARTIES : Australian Beverage Distributors Pty Ltd (Plaintiff) Susan Kellert (Defendant)

COUNSEL : D Allen (Plaintiff) M Vincent (Defendant)

SOLICITORS : Catalyst Legal (Plaintiff) Kenneth Harrison (Defendant)

IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION ADMINISTRATIVE LAW LIST

30027/2008 - AUSTRALIAN BEVERAGE DISTRIBUTORS PTY LTD v SUSAN KELLERT

JUDGMENT (Appeal decision of Local Court Magistrate - estoppel) 1 HER HONOUR: The amount in dispute is $5987.60. The plaintiff's costs of bringing this appeal are probably in excess of this amount. Nevertheless, it has decided to proceed with the appeal. The plaintiff seeks to have this matter remitted to the Local Court for rehearing. If the matter were remitted for rehearing even more costs would be incurred. In my view an appeal should only be brought where there is some proportionality between the amount in dispute and the amount of costs incurred in litigating the dispute. 2 By amended summons filed 24 September 2008, the plaintiff seeks firstly an order that the judgment of his Honour Bradd LCM made on 15 February 2008 in Local Court proceedings 2357/2007 in the Downing Centre be set aside; secondly, in lieu thereof judgment for the defendant in these proceeding in the sum of $4,887.48 plus interest; thirdly, in the alternative, that the matter be remitted to the Local Court for rehearing. 3 The plaintiff in these proceedings, Australian Beverage Distributors Pty Ltd (Australian Beverage), was the defendant in the Local Court proceedings. The defendant in these proceedings, Susan Kellert, was the plaintiff in the Local Court proceedings. For convenience, I shall refer to the parties by name. Australian Beverage relied on the affidavit of David George Brooks sworn 30 June 2008. Mrs Kellert relied on her affidavit sworn 8 September 2008. 4 At the outset, it may be helpful to make some brief comments concerning the remedy pursued by the plaintiff. Section 73 of the Local Courts Act 1982 permits a party who is dissatisfied with a judgment as being erroneous on a point of law to appeal to this Court. The onus lies on the plaintiff to demonstrate that there has been an error of law. What is a question of law (as opposed to a question of fact) was considered in Allen v Kerr & Anor [1995] Aust Torts Reports 81-354; Azzopardi v Tasman UEB Industries Ltd (1985) 4 NSWLR 139 at 155-156; Carr v Neill [1999] NSWSC 1263 and R L & D Investments Pty Ltd v Bisby [2002] NSWSC 1082; (2002) 37 MVR 479. The judicial officer cannot act on evidence inconsistent with facts incontrovertibly established by the evidence - see Devries v Australian National Railways Commission (1993) 177 CLR 472 per Brennan, Gaudron and McHugh JJ at 479 and State Rail Authority of New South Wales v Earthline Constructions Pty Ltd (in Liq) (1999) 160 ALR 588. 5 In Swain v Waverley Municipal Council (2005) 220 CLR 517, the Chief Justice at [2] reiterated that in the common law system of civil justice, the issues between the parties are determined by the trial process. The system does not regard the trial as merely the first round in a contest destined to work its way through the judicial hierarchy until the litigants have exhausted either their resources or their possibilities of further appeal. 6 Section 75 of the Local Courts Act provides that this Court may determine an appeal either (a) by varying the terms of the judgment or order, or (b) by setting aside the judgment or order, or (c) by setting aside the judgment or order and remitting the matter to the Court for determination in accordance with the Supreme Court's directions, or (d) by dismissing the appeal.

Grounds of Appeal 7 Australian Beverage seeks to appeal from part of the judgment of his Honour Magistrate Bradd made on 15 February 2008 on the grounds firstly, that the Magistrate erred in that he found for the defendant (plaintiff below) by applying equitable promissory estoppel, when there was no jurisdiction to apply equitable promissory estoppel; secondly, the Magistrate erred in that there was no evidence to establish the elements of estoppel that the Magistrate considered it necessary to prove; and thirdly, the Magistrate erred in that there was no evidence to establish any expenses claimed by the defendant (plaintiff below) were work related expenses. 8 Leave was given to Australian Beverage to file the amended summons at the hearing on the basis that it pay Mrs Kellert's costs thrown away by the amendment.

Extension of time to file the appeal 9 On 15 February 2008, the Magistrate gave judgment. On 17 March 2008, the summons was filed. In oral submissions, Australian Beverage's counsel sought an extension of time to file the appeal. Australian Beverage's solicitor Mr Foate is located at Newcastle. Mr Foate deposed that on 11 March 2008 he sent a covering letter and summons to this Court by express post. Mrs Kellert's counsel submitted that a factor to be considered when considering whether an extension of time should be granted is the small sum in dispute. While the sum is a modest one, I accept that it was reasonable for Australian Beverage's solicitor to expect that the summons would have been received by this Court within the prescribed time to appeal. Australian Beverages should not be penalised because the "express" post was slow. In these circumstances I grant an extension of time to lodge this appeal.

Proceedings in the Local Court 10 On 15 February 2008, the Magistrate entered judgment in favour of the plaintiff with respect to the claims for: termination payments of $2,192.06, late payment of superannuation in the sum of $151.05, unpaid superannuation on car allowance in the sum of $3,489.23, and work expenses in the sum of $5,987.60 being a total of $11,819.94. 11 From 2002 Mrs Kellert was employed by Australian Beverage. In November 2006, Mrs Kellert resigned, effective on 31 January 2007. On 6 December 2006, Australian Beverage terminated her employment. By statement of claim Mrs Kellert claimed that Australian Beverage breached the contract of employment and claimed firstly, loss of salary and car allowance; secondly, work expenses not reimbursed of $2,864.05; thirdly, amount withheld by the defendant of $3,123.55; fourthly, loss of leave loading on annual leave entitlements, calculated as 17.5% of $5,668.81, being $992.04; fifthly, shortfall in contributions to the superannuation account; and sixthly, loss in earning of the superannuation account. 12 It is only the work expenses that are the subject of this appeal. In relation to work expenses, Mrs Kellert deposed (Aff 31/08/07 at [13]-[18]) that there were never any discussions between her or any officer or employee of the Australian Beverage as to exactly what was covered by the car allowance, that she was paid. She determined that the car allowance did not cover tolls or parking. Hence, when she submitted expense claims, she claimed tolls and parking, but not the things she believed were covered by the car allowance. Mrs Kellert thought these would be entitlements similar to being provided a company maintained vehicle for the time that she worked and that she would not be obliged to pay these expenses from her own funds. 13 The process for submitting expense claim forms was that Mrs Kellert would fill in a company form entitled expenditure sheet. She would attach receipts for everything claimed. Where there was no receipt, the item would not be paid. Prior to July 2006 expense claims were approved by David Crawley and thereafter by Paul Irving, group manager. The money for reimbursed expenses was paid directly into Mrs Kellert's bank account. 14 In early 2003, Mrs Kellert had a conversation with David Crawley, in words to the effect, she said "There's no way in the world I can run my phone on $120 a month" David Crawley replied, "That's fine Suze, as long as it's within reason". Mrs Kellert deposed, that prior to July 2006 no one from Australian Beverage at any time queried her expense claims, nor did anyone from or on behalf of Australian Beverage disallow any of her claims. On some occasions she sought prior approval of expenses from David Crawley or Paul Irving and when she did this, they said to her words to the effect "Claim them back on your expenses." The claims were checked by David Crawley and submitted for payment to Leisha Owen who works in Australian Beverage's payroll section.

The Magistrate's decision 15 In his written reasons dated 15 February 2008, his Honour relevantly stated (at [13] and [14]): "13. Counsel for Mrs Kellert asserts that Australian Beverage Distributions are precluded from denying the expense claims by virtue of the representation made by Mr Crawley in approving the claims for payment. The question of whether the departure by Australian Beverage Distributors from the assumption that it would pay the expense claims is unjust depends on whether Mrs Kellert will have placed herself in a position of material disadvantage if departure is permitted. The circumstances of the case are that the then General Manager of Australian Beverage Distributors agreed to pay for the work related parking, tolls and telephone expenses of Mrs Kellert. She submitted claims to him, he approved payment and Australian Beverage Distributors paid the approved claims. Mrs Kellert conducted her work in the expectation of being reimbursed for those expenses once Mr Crawley agreed to payment of certain work related expenses. She travelled on toll roads rather than non-toll roads, and used her mobile phone in the expectation that all phone expenses would be reimbursed. Expenses were remitted to her to defray those expenses. If departure is permitted from the agreement made with Mr Crawley, Mrs Kellert will be materially disadvantaged, having made certain work related expenses assuming they would be reimbursed. 14. The next question to be considered is whether it would be unconscionable to depart from the assumption relied upon by Mrs Kellert. When Mr Crawley agreed to pay certain work related expenses, Mrs Kellert relied on the promise in the course of conducting her work. She incurred expenses in reliance upon the promise. If Australian Beverage Distributors were permitted to depart from the promise made by Mr Crawley, Mrs Kellert will be in a position of having a sum of money that she has been given deducted from her salary allowances, and will be not reimbursed for expenses that she has incurred in reliance upon the promise. As a consequence of the reliance Mrs Kellert placed on the promise of Mr Crawley and the assumptions she made about being reimbursed for certain work related expenses when she conducted work for Australian Beverage Distributors, together with the consequential detriment that will be suffered by her in terms of money expended by her that will not be paid if Australian Beverage Distributors is permitted to depart from the promise of Mr Crawley, I find that it would be unconscionable to permit Australian Beverage Distributors to depart from the promise of Mr Crawley."

Estoppel 16 The parties referred to Thompson v Palmer (1933) 49 CLR 507 at 547; Con-Stan Industries of Australia Pty v Norwich Winterthur Insurance (Australia) Limited (1985) 160 CLR 226; Waltons Stores (Interstate) Limited v Maher & Anor (1987) 164 CLR 387; and Commonwealth v Verwayen (1990) 170 CLR 394. 17 The starting point is to note observe estoppel in pais and equitable estoppel address different problems, though there are elements common to both (Waltons Stores at 413.7) 18 In Thompson, Dixon CJ at 547 stated: "…The object of estoppel in pais is to prevent an unjust departure by one person from an assumption adopted by another as the basis of some act or omission which, unless the assumption be adhered to, would operate to that other's detriment. Whether a departure by a party from the assumption should be considered unjust and inadmissible depends on the part taken by him in occasioning its adoption by the other party. He may be required to abide by the assumption because it formed the conventional basis upon which the parties entered into contractual or other mutual relations, such as bailment; or because he has exercised against the other party rights which would exist only if the assumption were correct … But, in each case, he is not bound to adhere to the assumption unless, as a result of adopting it as the basis of action or inaction, the other party will have placed himself in a position of material disadvantage if departure from the assumption be permitted." 19 Mr Allen Counsel for Australian Beverages referred to a passage in Con-Stan Industries where the High Court in a joint judgment stated at 244 - 245: "The final question is whether the parties are bound by an estoppel by convention … But in our opinion the doctrine has no application to the present case for two reasons. First, there is no estoppel unless it can be shown that the alleged assumption has in fact been adopted by the parties as the conventional basis of their relationship: Dabbs v Seaman [1925] HCA 26; (1925) 36 CLR 538, at p 549. In the absence of proof of custom, there is no evidence that the parties adopted the alleged assumption. Secondly, just as estoppel by representation requires a representation of fact, so too estoppel by convention requires the assumed state of affairs to be an assumed state of fact: Greer v Kettle (1938) AC 156, at p 170; Spencer Bower and Turner, Estoppel by Representation (1977) 3rd ed., at pp 167-168." 20 In Waltons Stores, Brennan J stated at 413 - 415 : "The nature of an estoppel in pais is well established in this country. A party who induces another to make an assumption that a state of affairs exists, knowing or intending the other to act on that assumption, is estopped from asserting the existence of a different state of affairs as the foundation of their respective rights and liabilities if the other has acted in reliance on the assumption and would suffer detriment if the assumption were not adhered to: Craine v Colonial Mutual Fire Insurance Co Ltd [1920] HCA 64; (1920) 28 CLR 305, at pp 327-328 (affirmed on other grounds by the Privy Council - [1922] HCA 32; 31 CLR 27, at p 38); Thompson v. Palmer [1933] HCA 61; (1933) 49 CLR 507, at p 547; Newbon v City Mutual Life Assurance Society Ltd [1935] HCA 33; (1935) 52 CLR 723, at p 734; Grundt v Great Boulder Pty. Gold Mines Ltd [1937] HCA 58; (1937) 59 CLR 641, at pp 657, 674, 676. In Thompson v Palmer Dixon J. said, at p 547: " The object of estoppel in pais is to prevent an unjust departure by one person from an assumption adopted by another as the basis of some act or omission which, unless the assumption be adhered to, would operate to that other's detriment. Whether a departure by a party from the assumption should be considered unjust and inadmissible depends on the part taken by him in occasioning its adoption by the other party."

The effect of an estoppel in pais is not to create a right in one party against the other; it is to establish the state of affairs by reference to which the legal relationship between them is ascertained.

It has been said that estoppel in pais is merely a rule of evidence and not a cause of action ( Seton v Lafone (1887) 19 QBD 68; Low v Bouverie (1891) 3 Ch 82; In re Ottos Kopje Diamond Mines Limited (1893) 1 Ch 618) but that proposition needs some explanation. If the estoppel relates to the existence of a contract between the parties, the legal relationship between the parties is ascertained by reference to the terms of the contract, which has been assumed to exist. If, in the assumed state of affairs, the contract confers a cause of action on the party raising the estoppel, the cause of action may be enforced. The source of legal obligation in that event is the assumed contract; the estoppel is not a source of legal obligation except in the sense that the estoppel compels the party bound to adhere to the assumption that the contract exists. Thus in Laws Holdings Pty Ltd v Short (1972) 46 ALJR 563, a company which had led a supplier of goods to assume that it was the purchaser of goods in fact received by an associated company of similar name was held bound by a contract between itself and the supplier which its conduct had led the supplier to assume to exist. And in Spiro v Lintern (1973) 1 WLR 1002; (1973) 3 All ER 319, a husband whose wife had made a contract in her own name for the sale of the husband's property without his authority was estopped from denying that she had made the contract with his authority. Specific performance was decreed against him. The assumed state of affairs to which a party may be bound to adhere may be more than a state of mere facts; it may include the legal complexion of a fact as well as the fact itself, that is, a matter of mixed fact and law. "

… 21 His Honour Brennan J continued at 428 - 429:

"In my opinion, to establish an equitable estoppel, it is necessary for a plaintiff to prove that (1) the plaintiff assumed that a particular legal relationship then existed between the plaintiff and the defendant or expected that a particular legal relationship would exist between them and, in the latter case, that the defendant would not be free to withdraw from the expected legal relationship; (2) the defendant has induced the plaintiff to adopt that assumption or expectation; (3) the plaintiff acts or abstains from acting in reliance on the assumption or expectation; (4) the defendant knew or intended him to do so; (5) the plaintiff's action or inaction will occasion detriment if the assumption or expectation is not fulfilled; and (6) the defendant has failed to act to avoid that detriment whether by fulfilling the assumption or expectation or otherwise." 22 Counsel for Australian Beverages referred to the passage (referring to equitable estoppel) in Verwayen where Brennan J (as he then was) stated, "The Commonwealth made no misrepresentation of fact" and asserted that there had to be a representation of fact. Next, Mr Allen submitted that common law estoppel is only a rule of evidence. Neither of these propositions is correct. 23 Australian Beverage also submitted that the Magistrate in examining the element of unconscionability had relied upon the principles of equitable promissory estoppel rather than common law estoppel. Common law estoppel, Australian Beverage submitted, could not have been successfully relied upon as the representation relied upon was a promise and not a representation of fact. Estoppel at common law, it submitted, is evidential in that it does not permit departure from an assumed fact. It does not make good promises. 24 On the other hand Mrs Kellert submitted that the Magistrate's finding as to estoppel was a finding based upon common law estoppel, which is a finding within the jurisdiction of the Local Court. Referring to Waltons Stores, Mrs Kellert submitted that Australian Beverage's words and conduct induced her to assume that her expenses would be paid by the company, with Australian Beverage knowing that she would rely on the assumption to her detriment- running up toll and telephone expenses- in the course of her work as a travelling sales representative for Australian Beverage. 25 Mrs Kellert submitted that the Magistrate findings were a factual state of affairs, namely agreed reimbursement of work expenses, upon which the parties conducted their dealings. The Magistrate's reference furthermore, to both Thompson and Waltons Stores Mrs Kellert submitted, were evidence that the Magistrate was alive to the distinction between common law and equitable estoppel. 26 The Magistrate may have used the expression unconscionable that is more akin to equitable estoppel but did he apply the wrong test? There were words uttered by the General Manager to the effect that Mrs Kellert could exceed the $120 per month telephone allowance and would be reimbursed if it were within reason. There was also prior conduct where Mrs Kellert submitted invoices and her expenditure was approved and payment was made into her bank account. There was also prior conduct where each month Mrs Kellert completed an Australian Beverages expenditure sheet wherein she provided the date and details of expenses. There were separate columns for parking, tolls and GST. 27 In my view the Magistrate correctly considered firstly, whether there had been a departure by Australian Beverage from an assumption adopted by Mrs Kellert in relation to work related expenses; and secondly, that the Magistrate's departure from that assumption operated as a detriment to Mrs Kellert. There is no error of law.

Evidence of expenses 28 Australian Beverage submitted that there was no evidence supporting the element of detriment. It submitted that although the Magistrate held that Mrs Kellert had "travelled on toll roads rather than non-toll roads and used her mobile phone in the expectation that all phone expenses would be reimbursed", there was no evidence of any of the expenses of Mrs Kellert being work related. 29 Australian Beverage submitted that all Mrs Kellert had tendered was a claim form with the front pages of her e-tag and phone accounts. Mrs Kellert did not tender, it submitted, the entire accounts or establish that the expenses were work related even when requested to do so in a letter from Australian Beverage dated 6 December 2006. 30 Mrs Kellert submitted that there was evidence before the Magistrate that supported the finding that the expenses incurred by her were work related expenses. 31 In her statement dated 31 August 2007, Mrs Kellert stated: "After the restructure of the defendant company… the geographical area for sales and service which I was required to cover increased to include the Southern Highlands and also all of South Western Sydney. This new area stretched from the Southern Highlands in the South to Parramatta Road to the North, and from Fairford Road (Bankstown Area) in the East to Penrith in the West. As a consequence in the increase in area that I had to cover, my vehicle running costs (fuel), road tolls and telephone expenses increased." (at 25-26) 32 Mrs Kellert's expenditure sheet for the period immediately following this restructuring in July 2006. Under the item mobile phone expenses it is clear that there was an increase in Mrs Kellert's mobile bill. Expenses for the months of July, August and October in 2006 totalling $96.06; $288.93; and $383.07 respectively. 33 Mrs Kellert submitted as there was this evidence before the court capable of supporting the Magistrate's finding as to estoppel, this ground of appeal fails, as any consideration of the Magistrate's finding is simply a question of fact: RL & D Investments P/L v Bisby [2002] NSWSC 1082 at [12] - [13]. 34 Mrs Kellert further submitted that if a question of law did remain, it would be one of mixed fact and law, in which case then leave of the Court would be required by section 75 of the Local Courts Act. 35 I am satisfied that there was evidence before the Magistrate to find that the expenses claimed by Mrs Kellert were work related. This is a finding of fact and is not open to challenge on appeal. Even if it was a question of fact and law, leave would not be granted because of the modest amount in issue. Unfortunately, the costs incurred by both parties most likely exceeds the amount in issue.

Conclusion 36 The Magistrate found that Mrs Kellert conducted her work with the expectation of being reimbursed for certain work related expenses. Further, Mr Crawley and Mr Irving's conduct in approving Mrs Kellert's expenses prior to July 2006 estopped them from denying there was an agreement between Australian Beverage and Mrs Kellert that it would pay certain work related expenses of Mrs Kellert's. 37 In my view, it was open for the Magistrate to construe the words and conduct of Mr Crawley and Mr Irving prior to July 2006 as a representation of fact upon which Mrs Kellert relied on to her detriment. There is no error of law. The appeal is dismissed. The decision of his Honour Magistrate Bradd made on 15 February 2008 is affirmed. The amended summons filed 24 September 2008 is dismissed. 38 Costs are discretionary. Costs normally follow the event. The plaintiff is to pay the defendant's costs as agreed or assessed.

(2) The decision of his Honour Magistrate Bradd made on 15 February 2008 is affirmed.

(3) The amended summons filed 24 September 2008 is dismissed.

(4) The plaintiff is to pay the defendant's costs as agreed or assessed. **********

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