Barrak Corporation Pty Ltd v The Kara Group of Companies Pty Ltd

Court of Appeal (NSW)|2014-10-27|Before: Barrett JA, Adamson J

Judgment 1BARRETT JA: I agree with Adamson J as to the disposition of the present appeal. 2In relation to the solicitor, Mr Barrack, it is a matter for concern that, according to the part of his cross-examination quoted by Adamson J, he saw nothing untoward in his acting as solicitor for a plaintiff in the initiation and conduct of proceedings in which he knew that he was himself to be that plaintiff's principal witness on factual matters at the heart of the parties' controversy. The terms of the rule of professional conduct which applied at the time and to which his attention was directed were clear. The operative words were "must not" - subject to an "exceptional circumstances" qualification. The purpose of the rule was also clear. It sought to underwrite the practitioner's primary duty to the court as one of its officers concerned in the administration of justice; and, to that end, to eliminate a particular form of influence or interest that, of its nature, might compromise the practitioner's ability to discharge that duty 3SACKVILLE A-JA: I agree with the orders proposed by Adamson J and her Honour's reasons. In particular, I agree with her Honour's comments concerning the conduct of Mr Barrak. I also agree with the additional observations of Barrett JA on that matter. 4ADAMSON J: This is an appeal against the judgment in favour of the respondent, the Kara Group of Companies Pty Limited (Nu-Door), ordered by Whitford DCJ on 27 September 2013 following a trial in the District Court. This appeal is confined to a challenge to the primary judge's rejection of the appellant's claim in negligence against Nu Door and, if the appeal on that basis is allowed, his Honour's assessment of damages. The respondent, Nu Door, has filed a notice of contention supporting the judgment on the alternative basis that the appellant's claim for damages in negligence was out of time. 5Because of the matters raised in the appeal it is necessary to set out in summary form the genesis of the proceedings in the Court below and their history.

The history of the proceedings 6On 26 February 2010 the appellant filed an application in the Consumer Trader and Tenancy Tribunal (CTTT) against four parties: Sukru Sarikaya trading as C & S Kitchens; Keles Cengiz, also trading as C & S Kitchens; Mehmet Ali Karamemis and Nu-Door. 7On 3 August 2011 the CTTT, having found that it lacked jurisdiction to determine the dispute, ordered that the application be transferred to the District Court to proceed as if commenced in that Court. On 7 March 2012 the appellant filed a statement of claim in the District Court. As against Mr Sarikaya and Mr Keles (referred to collectively as C & S Kitchens), the first and second defendants, the appellant claimed damages for breach of statutory warranties implied into contract for the installation of kitchens in the appellant's home unit development at 86, 88 and 90 Sorrell Street, North Parramatta (the Development); damages arising from various misrepresentations said to amount to misleading or deceptive conduct in contravention of the Fair Trading Act 1987 (NSW); and damages in negligence. As against Mehmet Karamemis, the third defendant, the appellant claimed damages under the Fair Trading Act and arising from contraventions of s 52 of the Trade Practices Act 1974 (Cth); damages in negligence; and an action on a guarantee. As against Nu-Door, the fourth defendant, the appellant claimed damages under the Trade Practices Act and damages in negligence. 8The proceedings were listed for hearing in the District Court on 24 September 2013. On 6 September 2013 the appellant resolved the proceedings as against Mr Sarikaya by a settlement deed which provided for payment by Mr Sarikaya to the appellant of $125,000 inclusive of costs. Clause 9 of the Settlement Deed provided as follows: Evidence in District Court Proceedings In acknowledgement of the District Court litigation proceeding against other Defendant(s), and issues which are privy as between the First Defendant on the one hand and the Third and Fourth Defendants on the other hand, the Releasee agrees to sign Affidavits and attend to give evidence in accordance with his Affidavits in the District Court litigation as reasonably requested by the Releasor. 9The proceedings between the appellant and Mr Keles were also settled by the payment of $80,000 inclusive of costs, which was paid in two tranches: $15,000 on 13 September 2013 and $65,000 on 18 September 2013. 10Mr Sarikaya swore an affidavit on 16 August 2013 when the proceedings were still on foot against him, in which he deposed to having completed work on the kitchens in the Development in October 2002, although he was only able to give that date from recollection, his own records having been destroyed in a fire. He swore a further affidavit on 11 September 2013 after the proceedings had been settled against C & S Kitchens, to be read in the appellant's case, in which he gave evidence of C & S Kitchens' usual practice as to installation following delivery of panels. He also deposed that Mustafa Karamemis attended site meetings at the Development on behalf of Nu-Door, which was a matter in issue between Barrack Corporation and Nu-Door. 11The proceedings began on Tuesday 24 September 2013 and concluded on Friday 27 September 2013. Whitford DCJ delivered an ex tempore judgment on 27 September 2013 at the conclusion of which judgment was entered for Mehmet Karamemis and Nu Door. There is no appeal against entry of judgment for Mr Karamemis.

The case in negligence against Nu Door at trial 12The appellant's case in negligence was pleaded in general terms and not properly particularised. In substance, the appellant relied on the fact that the lamination that covered the panels that had been manufactured by Nu Door had become detached from the panels themselves. It alleged either that it ought be concluded in the circumstances that the defect in the panels was the result of negligent manufacture or that the principle of res ipsa loquitur applied to establish negligence. 13Nu Door adduced evidence to the effect that there were other possible causes for the defective panels, which did not involve any negligence on its part, including: (1)incorrect storage or mishandling after it had delivered the panels to C & S Kitchens; (2)negligent installation of the panels by C & S; or (3)poor treatment of the panels after they had been installed. 14Nu Door contended that at least causes (1) and (2) had not been excluded on the balance of probabilities and, accordingly, the appellant had failed to prove breach of duty or causation. As can be seen by the summary of the primary judge's reasons set out below, his Honour largely accepted Nu Door's submissions. 15It is not necessary to address in any detail the way in which the other causes of action were propounded and defended. It is sufficient to note that there were various contests of credit between the witnesses that the primary judge resolved in favour of Nu Door's witnesses and against Mr Barrak and Mr Sarikaya.

The primary judge's reasons for rejecting the appellant's claim in negligence against Nu Door 16The primary judge's findings and reasons for judgment are summarised as follows. 17In September 2002, the appellant contracted with C & S Kitchens for the manufacture, supply and installation of kitchens in 15 units in the Development. It was agreed that C & S Kitchens would use thermo-laminated panels manufactured by Nu-Door. The panels were delivered in batches. Two of the delivery dockets were dated 25 September 2002; a third was dated 19 March 2003. C & S Kitchens installed the kitchens, which incorporated the panels, in the period from September 2002 until about 12 July 2003. 18The primary judge addressed the pleadings and noted that the relevant duty alleged against Nu-Door was a duty to exercise reasonable care, skill and diligence in manufacturing and supplying the panels. His Honour considered that the only relevant particular of negligence against the third and fourth defendants was that the thermo-laminated panels were not reasonably fit for the specified purpose for use in a residential kitchen. His Honour said: "The case by reference to this particular seems to have been advanced essentially on a res ipsa loquitur basis, relying on the fact of the delamination which has occurred. . ." 19The primary judge found that the claim in negligence against Mr Karamemis was unfounded because he was not conducting the business. This finding is not the subject of challenge. 20The primary judge had regard to the photographs and the evidence of Mr Dumble and Ms Bonfield, who occupied units in the Development. His Honour found that there was clear evidence that there was a problem with the laminated panels and that the problem was not limited to one or two panels. His Honour excluded as causes of the delamination: promixity of the panels to excessive heat or moisture or use of harsh cleaning products or practices (cause (3) above). 21The primary judge then addressed other possible causes for the delamination in the following terms: "There is evidence, however, that the panels and doors are or at least may be very sensitive to the way they are handled between delivery and installation. After he had settled the proceedings with the plaintiff, the first defendant, in consultation with the plaintiff's solicitor (who I have pointed out is also its sole director and its principal witness in these proceedings) prepared an affidavit which addressed for the first time the handling of the doors and panels by C & S Kitchens after they had been delivered by the fourth defendant and prior to and during installation. His evidence was that the panels were stored in a well-ventilated area, free of moisture, that they were stored flat, and that they were generally handled with appropriate care. In circumstances where there is no evidence as to precisely what has caused the delamination of the panels, I am not persuaded by reference to the first defendant's evidence that it is more likely than not that the problems with the panels have their genesis in faulty or negligent manufacture or handling on the part of the fourth defendant." 22The primary judge noted the absence of expert evidence attributing the delamination to the manufacturing process as opposed to the storage, care, handling or installation of the panels. The circumstance in which Mr Sarikaya's evidence was obtained was only one of a number of factors that led to its rejection. The primary judge referred to other aspects of his evidence that reflected adversely on his credibility. His Honour also relied on the discrepancy between Mr Sarikaya's evidence that the installation of the kitchens was complete by October 2002 on the one hand and Mr Barrak's evidence on the other that it took significantly longer and was not completed until July 2003. Mr Barrak's evidence was corroborated by the delivery dockets referred to above. As the primary judge found: "The sheer length of time between delivery of the product and the completion of installation gives rise to significant opportunity for there to have been mishandling or damage to the doors and panels." 23The primary judge concluded: "In the absence of corroboration of the first defendant's [Mr Sarikaya's] evidence concerning the conditions of handling and storage of the fourth defendant's [Nu Door's] product and in circumstances where there is no independent or other evidence which is capable of supporting a conclusion that the delamination resulted from some defect inherent in the product or in some aspect of its manufacture, I am not satisfied that the plaintiff has discharged its onus of establishing that there has been a breach of duty of care on the part of the fourth defendant."

The primary judge's assessment of damages 24The primary judge proceeded to determine damages in the event that his finding that Nu Door was not liable was overturned. The appellant relied on the evidence of Mr Nisbett that it would be "more feasible and probably more economical to replace the kitchens with new kitchens" than to repair the existing kitchens on site. Mr Nisbett assessed the cost of replacement to be $340,296. The primary judge did not accept this evidence and assessed damages on the basis of the quotation in the sum of $145,365 for replacement of the panels which C & S Kitchens had provided to the appellant in May 2009, before the commencement of the proceedings and outside the context of litigation.

The liability grounds 25The appellant appealed on liability on the following grounds: (1)His Honour erred in applying the civil standard of proof by requiring the Appellant to have adduced evidence of the precise cause of the de-lamination of kitchen panels supplied by the respondent in circumstances where the process of manufacturing the panels was peculiarly within the knowledge of the respondent. (2)Having found that: (a)There was clear evidence of a problem with the panels in that the thermo laminated coloured doors and panels had separated from the MDF board; (b)The de-lamination extended to all panels in 8 kitchens in which the panels were installed; (c)The de-lamination was not caused by proximity to excessive heat or moisture or the use of harsh cleaning products or similar practices due to the treatment of the kitchens by end users, his Honour should have found that the respondent was negligent in supplying panels which were not reasonably fit for purpose. (3)His Honour erred in holding that the length of time between the delivery of the panels and completion of their installation gave rise to a significant opportunity for there to have been mishandling or damage to the panels. (4)There was no evidence upon which his Honour could have properly inferred that the panels had been packed on a pallet, delivered and stored over a period of many months such as to increase the prospect of mishandling and consequent damage resulting in de-lamination in all panels in all kitchens subject of this dispute. (5)His Honour should have held that the respondent had failed to adduce any evidence to explain the cause of the de-lamination. 26The first and fifth grounds can be dealt with together. The appellant called in aid three well established principles relevant to proof of causation in support of these grounds: (1)The doctrine of res ipsa loquitur, which has the effect that, in certain circumstances, negligence can be inferred from the occurrence itself. (2)The inability to call evidence, whether lay or expert, to show exactly how something has happened is not fatal. (3)Slight evidence may be enough to discharge the onus of proof where the facts are peculiarly within the knowledge of that party. 27The doctrine of res ipsa loquitur does not extend to a process as sophisticated as lamination of panels: Schellenberg v Tunnel Holdings Pty Limited [2000] HCA 18; 200 CLR 121 at 138-142. The second and third principles are interrelated: see the summary of the principles and relevant authorities in Bendix Mintex Pty Limited v Barnes (1997) 42 NSWLR 307 at 317 per Mason P. 28Nu-Door established that there were several possible causes of the delamination in the present case, including those which involved no negligence on its part, such as mishandling of the panels after they had been delivered to C & S Kitchens, inappropriate storage, or negligence in the course of installation. The other cause postulated: inappropriate care and use of the panels after their installation, can be put to one side as the primary judge was satisfied that it had been excluded to the relevant standard by the evidence of Mr Dumble and Ms Bonfield. 29Although the manufacturing process was purely within Nu-Door's knowledge and control, the storage, handling and installation of the panels after Nu-Door had delivered them to C & S Kitchens was a matter within the knowledge and control of C & S Kitchens. The appellant bore the onus of excluding other possible causes that could not be attributed to any negligence on the part of Nu-Door. The primary judge's finding that the appellant had not discharged the onus was correct and followed from his Honour's rejection of Mr Sarikaya's evidence as to storage, handling and installation. 30Given the absence of expert evidence, Mr Sarikaya's evidence was the only evidence that was capable of excluding as causes mishandling of the panels post-delivery, inappropriate storage, or negligence in the course of installation. Mr Condon SC, who appeared on behalf of the appellant, contended that there was no relevant challenge to Mr Sarikaya's evidence about C & S Kitchens' handling of panels and that, in those circumstances, it was an error for the primary judge not to accept it. 31I do not accept this submission. A cross-examiner may challenge a witness's evidence in a broad way by challenging the witness's credibility on the grounds of self-interest, lack of recollection, bias, or some other matter. A cross-examiner may also choose to challenge testimony by reference to its level of generality, or its inconsistency with incontrovertible, or objectively established facts. It is not necessary for a cross-examiner to challenge each line of evidence directly for a challenge to be effective: see generally Allied Pastoral Holdings Pty Limited v Commissioner of Taxation [1983] 1 NSWLR 1 per Hunt J. Nu-Door challenged Mr Sarikaya's credibility in several ways, including as to its timing (after the settlement of the proceedings against him) and its generality. Nu-Door also showed that Mr Sarikaya's evidence that the kitchens had been installed by October 2002, was incorrect. I consider that the appellant was sufficiently on notice of the submission, that was eventually made on behalf of Nu-Door, that Mr Sarikaya's evidence as to the handling of the panels ought not be accepted. 32The appellant relied on Kuhl v Zurich Financial Services Australia Limited [2011] HCA 11; 243 CLR 361 at [72]-[75] which sets out the obligations of a trial judge to foreshadow a challenge to a witness whom the judge proposes not to accept, where the opposing party has not done so. I do not consider that there was any such obligation on the primary judge in the present case when the challenge had, for the reasons given above, been sufficiently made by Mr Altan, counsel for Nu-Door. 33In any event, Mr Sarikaya's evidence was confined to his usual practice. His evidence did not contain any detail about what actually occurred in the period between the delivery of the panels and their installation. Indeed, his evidence as to the completion of the units was incorrect by several months and at odds with the description of his usual practice in his affidavit. Apart from the evidence of Mr Sarikaya, which the primary judge was, for the reasons given above, entitled to find was insufficient to discharge the onus the appellant bore, the appellant had not adduced any evidence that was capable of excluding storage, mishandling or negligent installation as a cause of the delamination. Nu-Door bore no onus to exclude manufacture as a cause. In these circumstances, there was no need for Nu-Door to adduce evidence to explain the cause of the delamination. Neither the first nor the fifth grounds has been made out. 34The second ground contains within it two false premises. First, the primary judge did not find that the delamination extended to all panels in all kitchens and accordingly must be taken to have rejected Mr Barrak's evidence to that effect. Although the appellant's expert, Mr Nisbett, said that panels in eight kitchens were delaminated, there were more than eight kitchens that were constructed and therefore Mr Nisbett's evidence, even if taken at its highest, cannot establish universal damage. Secondly, the use of the panels post-installation was, as set out above, only one of a number of postulated causes. Although the primary judge found that post-installation use and care had been excluded as causes on the balance of probabilities, his Honour was not satisfied that the damage to the panels had not been caused by unsuitable storage, negligent handling or negligent installation. 35The length of time between the delivery of the panels and their installation is relevant to the third ground. The evidence established that the first batch of panels was delivered on 25 September 2002 and the last batch was delivered on 19 March 2003. The kitchens were constructed in the period from September 2002 and July 2003. Accordingly, the last panel was installed in a kitchen in the Development ten months after the first delivery and four months after the second. In these circumstances I can discern no error in the finding made by the primary judge that the length of time between delivery of the panels and completion of their installation gave rise to a significant opportunity for there to have been mishandling and consequential damage to the panels, having regard to their susceptibility to damage if not handled properly. 36The fourth ground has not been made out for the same reasons as set out with respect to the third ground. Further, it contains the same false premise that all panels in all kitchens suffered from delamination when this was not accepted by the primary judge. 37The appellant has not made out any of the five grounds pertaining to liability.

Damages 38For completeness I shall address the remaining grounds, which relate to damages. They are: (1)In assessing damages for which the respondent would otherwise have been held liable, his Honour erred in assessing damages in the amount of $145,365 by reference to a quotation from C & S Kitchens dated 20 May 2009, and in preference to evidence given by Craig Nisbett (Sydney Building Reports) in an expert report dated 13 March 2013 assessing damages in the amount of $340,296. (2)In assessing damages in the amount of $145,365 his Honour: (a)Failed to have any regard to evidence explaining and qualifying the amount referred to in the quotation from C & S Kitchens dated 20 May 2009; (b)Incorrectly found that Craig Nisbett did not explain or adequately explain his opinion assessing the replacement cost of the kitchens for the amount of $340,296 in his expert report dated 13 March 2014. (c)Unfairly rejected the evidence of Craig Nisbett assessing damages contrary to the rule in Browne and Dunn. 39Mr Nisbett's evidence was challenged in a short, but efficient, cross-examination in which he accepted that he was neither a cabinet maker, nor kitchen installer; nor had he made any enquiries of such persons. The cross-examination was sufficient to comply with the rule in Browne v Dunn (1893) 6 R 67 UKHL. It was open to the primary judge to reject Mr Nisbett's evidence on that basis. His Honour was left with C & S Kitchens' quotation dated 20 May 2009 in the sum of $145,365 for replacing panels and doors in 15 kitchens as the only evidence of damage. In these circumstances, it was open to the primary judge to base his assessment of damages on the quotation.

The notice of contention 40As the appeal is to be dismissed there is no need to address the notice of contention or to consider further the ambit of the dispute the subject of the application to the CTTT.

Proposed orders 41I propose the following orders: (1)Appeal dismissed. (2)Subject to an application for a different order being made in writing within seven days (7), order the appellant to pay the respondent's costs of the appeal.

The conduct of Mr Barrak 42At the conclusion of the hearing of the appeal the Presiding Judge provided Mr Barrak with an opportunity to put forward any matter to this Court regarding his conduct as revealed in the proceedings in the Court below. Mr Barrak submitted that the appropriate forum for him to put forward such matters was in any disciplinary hearing. Mr Barrak did, however, draw attention this Court's attention to the new form of the rule that replaced rule 19 of the Professional Conduct and Practice Rules 1995, rule 27.2 of the New South Wales Professional Conduct and Practice Rules 2013 (Solicitors' Rules), which does not prohibit a solicitor from acting "unless to do so would prejudice the administration of justice". The new rule became operative on 1 January 2014. Mr Barrak contended further that he had engaged an independent solicitor to arrange for Mr Sarikaya's affidavit to be sworn. He also relied on the fact that no allegation had been made in the proceedings that he had either deliberately misled the Court or that he had been involved in any conscious attempt to engage in any impropriety. 43I accept that is not appropriate to express a view whether Mr Barrak is guilty of either professional misconduct or unsatisfactory professional conduct within the meaning of ss 496 and 497 of the Legal Profession Act 2004 (NSW) since Chapter 4 of the Act makes detailed provision for such matters to be investigated and, if a complaint is made, and proceedings are brought in this Court or in the Civil and Administrative Tribunal, determined. An issue arises as to whether Mr Barrak's conduct should be referred to the Legal Services Commissioner for consideration as to whether a complaint should be made. In any event, it is desirable, in my view, to make some observations about what occurred in the instant case for the guidance of the profession generally. 44Mr Barrak, the appellant's sole director and shareholder, was also the solicitor on the record for the appellant (the plaintiff at trial) and its principal witness for the plaintiff. Mr Barrak was cross-examined about these circumstances in the trial. His attention was drawn to rule 19 of the Professional Conduct and Practice Rules 1995 which relevantly provided: "Unless there are exceptional circumstances justifying the practitioner's continuing retainer by the practitioner's client, the practitioner must not act or continue to act in any case in which it is known or becomes apparent that the practitioner will be required to give evidence material to the determination of the contested issues before the court." 45The following exchanges occurred during Mr Barrak's cross-examination at trial: "Q. Are you familiar with that rule [rule 19]? A. Well, not specifically, but you've read it out to me. Q. This is coming as news to you this -- A. No, no, I consider what you have just read out to be a normal vicissitude of practice in law, and I don't think that what you're saying applies to this particular case, because if it did a solicitor could never, ever act for any matter in which he has an interest, and that's simply - I reject that. Q. You don't accept that that's the position? A. No I don't. Q. Or the effect of the rule? A. No, well I can assure you I've acted in, for my own company every single time it has been involved in any litigation, and I've never encountered any objection of the kind that you're now raising. . . . Q. Mr Barrak, did it not concern you that you might be breaching the professional rules by which you are bound as a solicitor? A. It would always concern me if I thought that I was breaching any professional rule as a solicitor. I do not consider that my conduct breaches any professional rule as a solicitor. Q. Did it not concern you at any point that there was a risk that your personal interest in the outcome of this case might conflict with your duties as an officer of the court? A. No, certainly not. Q. You have prepared the affidavits of the other witnesses in the case? A. Yes I have. Q. Did it not concern you that the objectivity and independence required in performing those tasks might be jeopardised by the fact that you have a personal interest in the outcome of the case? A. No, it did not concern me. The affidavits which I drafted are in accordance with the versions of events as described to me by each particular witness, and I followed those instructions. [Emphasis added.] 46Mr Barrak's answers set out above indicate not only that he was ignorant of Rule 19 but also that it was his invariable practice to be the solicitor on the record in matters in which the appellant was a party. He also appeared to be unperturbed by the general prohibition on witnesses conferring about matters the subject of evidence, which necessarily occurred when he conferred with witnesses to prepare their statements. The significance of that prohibition was greater in the present case, given that Mr Sarikaya swore an affidavit after the proceedings against him were settled on the basis that he agreed to sign affidavits as reasonably requested by the appellant (see [7] above. That affidavit was read in the appellant's case. 47It is necessary to emphasise the risk posed to the administration of justice in New South Wales by solicitors remaining on the record when they are, or may be, witnesses in proceedings. This risk is heightened when they have a personal interest in the outcome of litigation beyond recovery of their fees. Courts rely on legal practitioners to discharge their duties to remain objective and professional in the preparation and presentation of proceedings. Such duties are susceptible to compromise where a practitioner is also a witness and even more so when he or she has a financial interest in the outcome: see, for example the observations made by Brereton J in Mitchell v Burell [2008] NSWSC 772 at [20]. 48As referred to above, rule 19 was modified after the proceedings in the Court below had been determined. The present rule, rule 27.2 of the Solicitors' Rules, provides: "In a case in which it is known, or becomes apparent, that a solicitor will be required to give evidence material to the determination of contested issues before the court the solicitor, an associate of the solicitor or a law practice of which the solicitor is a member may act or continue to act for the client unless doing so would prejudice the administration of justice." 49The effect of the amendment is to change the rule from a prohibition qualified where there are "exceptional circumstances justifying the practitioner's continuing retainer by the ... client" (Rule 19) with a qualified permission that allows a solicitor to continue to act for the client unless doing so would prejudice the administration of justice (Rule 27.2). I do not discern any change in the purpose of the provision, which is to protect the administration of justice by circumscribing the circumstances in which a solicitor who is, or may be, required to give evidence in proceedings is permitted to act. 50A copy of this judgment should be forwarded to the Legal Services Commissioner for consideration of whether a complaint should be made in respect of Mr Barrak's conduct.

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: 19 November 2014

Legal Profession Act 2004(NSW)

Trade Practices Act 1974(Cth)

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