Boral Resources (NSW) Pty Limited v Douglas John Challinor t/as Bedgebury Products & Services

Grounds of appeal

1. Boral Resources appeals from the whole of the decision of the Magistrate dated 8 May 2017, on the following grounds. The Magistrate erred firstly, in holding that the master hire agreement, on its proper interpretation, obliged Boral to hire the grader and the excavator for a particular period and at a fixed price; secondly, by determining quantum by finding that Mr Challinor's claim was in debt (rather than in damages) and did so by reference to whether the pleadings were certified or not and in circumstances where the issue as to the form of the pleadings was not argued before him and as such Boral Resources was denied natural justice; thirdly, the Magistrate erred by finding that the damage suffered by Mr Challinor was $74,758.20 plus costs without making an appropriate allowance or discount for the fact that Mr Challinor mitigated his loss; the Magistrate erred by finding that Mr Challinor proved the loss and damage he suffered; and finally, the Magistrate erred in that he failed to provide adequate reasons.

The Local Court proceedings

1. On 25 July 2016, Mr Challinor filed a statement of claim seeking the sum of $85,646, plus costs for invoices not paid by Boral Resources.
2. Mr Challinor pleaded that on 5 December 2012, he and Boral Resources entered into a contract for the provision of equipment and services by Mr Challinor to Boral Resources. ("the contract"). By document dated 10 November 2015, an extension of the contract was offered for a further 12 months.
3. On 3 March 2016, Boral Resources terminated the contract on 30 days notice. On 14 April 2016, Mr Challinor served on Boral Resources invoices totalling $85,646. On 22 December 2016, Boral Resources paid Mr Challinor the sum of $10,887.80, being the outstanding balance of Mr Challinor's October 2015 and November 2015 grader wet hire invoices. (Aff, David Simpson 27 March 2017, [2]). A "Wet hire" refers to a hiring arrangement in which an operator is provided along with the equipment (as is the case here), compared to a "dry hire" which is the hire of the equipment only.
4. The main issues to be determined by the Magistrate were firstly, whether the contents of clause 3.1 was an enforceable term of the contract as a result of its construction, or, alternatively was it implied to form part of the special conditions as contained in Part D of the contract; and secondly, whether Boral Resources was indebted to Mr Challinor in the sum of $85,646.

Ground 1 - proper construction of the master hire agreement

1. Boral Resources submitted that the Magistrate erred in deciding that the master hire agreement, on its proper interpretation, obliged Boral Resources to hire the grader and the excavator for a particular period and at a fixed price.
2. It is now necessary to briefly set out the relevant terms of the master hire agreement here.
3. The master hire agreement was dated 5 December 2012. The agreement was between Boral Resources and Mr Challinor t/as Bedgebury Products & Services. It was a term of the agreement that Boral Resources agreed to hire the services from the supplier and the supplier has agreed to provide the services to the Boral Group, on the terms of the agreement.
4. Under the heading Part B (Plant Operator Services) of the agreement, it stated: "1. Goods Equipment that may be requested from the Supplier by Boral from time to time during Term. 2. Services Boral may, from time to time, request from the Supplier to provide Plant Hire services."
5. The pricing clause is as follows: "3. Pricing 3.1 Specified pricing Supply Grader Semi Wet Cat140G Motor Grade Operator - (Being current operator) Supply based on 24hrs p/w minimum - (3 x 8hrs Mon Wed Fri) Boral to utilize operator for minimum 40 hrs per week Fuel, oils and work shop facility's provided by Boral Actual servicing, filters and labour provided by the Supplier AlI operations and servicing/repair work to comply with Boral EOH&S Policies The Supplier to provide relevant documentation e.g. Risk Assessments/Work Method Statements for all activities The Supplier offers the above at an hourly rate of $89.00 p/h (Eighty Nine Dollars per hour) Indicative Costing Other Equipment 330CL Cat Long Reach excavator (Wet; BPS Provide Fuel & Operator) -$157. 50 p/h D8 Cat Dozer (Semi Wet; BPS Operator, Boral Fuel) - $195 00 p/h 25t Articulated Dump Truck (Dry; Boral Fuel & Operator) - $84 00 p/h Labour - $48 50 p/h Note *330CLLR Excavator to be left on site with Boral the priority customer with minimum hire of 40hrs per month (Machine can only be taken from site with Boral approval)"
6. Part C is headed "General Terms and Conditions. The relevant clauses read: "1. Hire during the term 1.1 The Supplier must hire the Plant and provide the Operator Services to Boral in accordance with, and as specified in, this agreement during the Term. 1.2 Boral may place orders for hire by providing the Supplier with Hire Orders for Plant and/or Operator Services during the Term. The Supplier will hire such Plant and provide such Operator Services as specified in such Hire Orders. 1.3 Each Hire Order may specify specific details of such order including: … (d) Hire Period. … 13. No minimum purchase or exclusivity 13.1 Unless expressly stated in the Special Conditions: (a) nothing in this agreement obliges Boral to request or hire any minimum level of Plant and/or Operator Services from the Supplier, and (b) this agreement does not evidence, nor does it create an exclusive relationship between Boral and the Supplier in respect of the hire of Plant and/or Operator Services (or any aspect of that hire). … 16. Termination of Hire Order … (c) if notice is given less than 24 hours before the relevant Delivery Date, pay to the Supplier 40% of Hire Charge calculated pro rata for one day…"

Magistrate's reasons

1. The Magistrate in his extempore judgment dated 8 May 2017 stated that clause 13.1(a) contained within Part C (General Terms and Conditions) conflicted with clause 3.1 contained within Part B and, in the circumstances, clause 13.1 should be read down.
2. The Magistrate referred to Franklins v Metcash [2009] NSWCA 407 ("Metcash"). In summary, it establishes the following five principles: 1. The task of construction is to determine what a reasonable person in the position of the contracting party would have understood the words of the contract to mean. 2. That involves consideration of surrounding circumstances as an aid to construction, given that words take meaning from their context. 3. It is not necessary to find ambiguity before reviewing the surrounding circumstances. 4. Negotiations may be admissible if they elucidate the surrounding circumstances but they are not receivable in so far as they are reflective of actual intentions and expectations. 5. Subsequent conduct would not generally be admissible, an exception may be if there was an admission as to the fact of some relevant past surrounding circumstance. Another one may be, in the case of an admission, if the contract was partly oral and the admission relation to the ascertainment of an oral term.
3. The Magistrate also referred to the Court of Appeal's decision Taylor v Dexta Corporation Limited and Others [2006] NSWCA 310 ("Dexta"), where Ipp JA stated at [89]: "According to Chitty on Contracts, Vol 1, 29th ed, para 12-078: "Where the different parts of an instrument are inconsistent, effect must be given to that part which is calculated to carry into effect the real intention of the parties as gathered from the instrument as a whole, and that part which would defeat it must be rejected." This passage is an unexceptional statement of the law of contract. It was approved in AMP Financial Planning Pty Limited v CGU Insurance Limited (2004) 13 ANZ Insurance Cases 61-624."
4. The Magistrate continued (J3.31-50; J4.1-22): "Here, I find the contract was in writing, it was entered in writing and extended in writing. Surrounding circumstances tended to show the content of negotiations cannot assist me in the interpretation task, that would be contrary to point 4 above [that negotiations may be admissible if they elucidate surrounding circumstances nut they are not receivable insofar as they are reflective of the actual intentions and expectations]. There were no other surrounding circumstances evidence suggested except perhaps the fact that the quarry was nearing the end of its life, which I find neutral on interpretation, and secondly, as to the identity of the current operator referred to in the contract, I found surrounding circumstances evidence of, in general, neutral in determining the objective intentions of the parties, although I come back to the topic of the current operator later in the context of one of the arguments for the defendant about the plaintiff being in breach or not performing. Returning to the analysis. The manner in which payments occurred post contractually is equally inadmissible in the construction process as it does not constitute either an admission as to a surrounding circumstance or as to an oral term of the contract within Point 5 summarised in Metcash above [Subsequent conduct would not generally be admissible, an exception may be if there was an admission as to the fact of some relevant past surrounding circumstances or if the contract was partly oral and the admission related to the ascertainment of an oral term]. I will separately consider whether payments made can be admitted as an admission useful to resolving the parties' rights outside the construction process. That analysis leaves me to construe the contract by reviewing the words without reference to negotiations or later conduct. I have to give it a businesslike interpretation, ie, seeking to give it a commercially sensible and businesslike meaning, within the meaning of Metcash at 360. … Clearly there is an intractable conflict between cl 3.1 and cl 13, one provides for minimum rates and hours and one says the reverse. The former, on its face, is a specific clause, the latter are intended as standard terms or conditions. Subject to the arguments to which I will come, I have no hesitation in deciding that the objective intention of the parties is best implemented by reading out the words in the general clause that would have the effect of reversing the clear intention of the specific."
5. The Magistrate continued at J4.24-50; J5.1-13: "Mr Weinberger, who appeared for the defendant and put the submissions able to be put by him clearly and forthrightly submitted one could harmonise the operation the clauses by reading the specific clause so that the minimum charge would only operate if the defendant elected to use the services in any given month. That is not the way I would read the agreement, the words clearly require a monthly commitment for the terms of the contract, that is the commercial interpretation. The evidence is that the contract operated for its duration and was extended. Boral expressed itself to be happy with the arrangements. … The defendant's other arguments. Mr Weinberger submitted that Alex Challinor's departure means nothing is owed at least for the grader. He said that is a proper construction of the words "operator", "current operator" in cl 3.1. I do not see that term objectively as so fundamental that it meant the plaintiff was not performing he contract. The contract, as I read it, called for the supply of a grader based on 24 hour per week minimum, an operator to operate it based on 40 hours per week, the supply of an excavator for a minimum of 40 hours per month, all at agreed rates, plus two other pieces of equipment if required at agreed rates and an agreed labour rate. There is nothing to suggest Alex Challinor's services was a fundamental part of the contract. It is not even clear to me on the evidence that he was the current operator referred to in the contract. If recourse is had to the background, which is possibly an admissible surrounding circumstance on the construction of the words "current operator" that does not assist the defendant. Mr Challinor said …, that he, Douglas Challinor was the person providing services to the predecessor company contracted to Boral. He sent his CV to Boral. There is a reference in his evidence to Alex receiving a minimum 40 hours per week on the basis, "as I will probably be using him to work the grader". None of this suggests that Alex Challinor was somehow a critical element of the contract."

Boral Resources' submissions

1. Boral Resources submitted that the central question is whether the master hire agreement obliged Boral Resources to hire certain equipment (namely a grader, together with an operator and an excavator) for a minimum period and at an agreed rate. Or, alternatively, whether the obligation to minimum hire and rates was only enlivened if and when Boral Resources requested the provision of this equipment and services.
2. Boral Resources submitted that the Magistrate erred in law by treating clause 13.1 as redundant and his Honour failed to consider other clauses in Part C of the contract which supported Boral Resources' construction. These were: 1. Clause 1.2 provides that Boral Resources may place orders for hire; 2. Clause 1.3 provides that each hire order may specify the hire period; 3. Clause 13.1 entitled "No minimum purchase or exclusivity" - provides that Boral Resources is not obliged to hire plant for minimum period, unless expressly stated in the special conditions. The special conditions are found at page 72 of the contract. 4. Clause 16.1 provides that if Boral Resources terminates hire order, it must pay Mr Challinor a certain proportion of charges and in any event no more than the applicable rate for one day.
3. With regards to clause 13.1, Boral Resources submitted that there is nothing contained in the special conditions which limits or removes the effect of clause 13.1. If that was the parties' intention, that is where such a condition would have been found.
4. Boral Resources submitted that a court should not lightly treat the words used by parties as redundant when in conflict and should seek to give all clauses effect.
5. Boral Resources further submitted that their construction was supported by Part B of the contract ("Goods"). Clause 1 provides that equipment may be requested from the supplier from time to time. This suggests that the starting point is that the agreement concerns equipment that may be required. Clause 3.1 of Part B, which provides indicative costing other equipment, indicates that there was plainly no agreement as to an agreed price and, as such, there cannot have been any obligation to minimum hire. This is supported by the matters under this clause. For example, there was no obligation for Boral Resources to hire the dozer or the dump truck. It follows that it cannot be said that if Boral Resources hired either of these, the price was fixed and not open to negotiation.
6. Finally, Boral Resources submitted that the notation in Part B of the contract that provides Boral Resources was a priority customer with minimum hire of 40 hours per week did not assist Mr Challinor. It simply meant that if Boral wished to hire the excavator, it must do so for a minimum of 40 hours per month. The machine could be taken from the site with Boral Resources' approval and could be used elsewhere for an entire month. If this was to hypothetically occur, it could not be said that Boral Resources must pay the 40 hours of hire for that month as that would permit Mr Challinor to double dip. At its highest, Boral Resources agreed to hire the excavator for a minimum period (ie 40 hours a month), if it choose to hire it at all (which is consistent with Clause 13.1 in Part C). Such a conclusion gives the contract a harmonious operation.

Mr Challinor's submissions

1. Counsel for Mr Challinor submitted that the Magistrate relied upon clear legal authority in his reasoning, being Metcash and Dexta. Boral Resources made no such reference to authority either to support their interpretation of the contract or to demonstrate the Magistrate had erred.
2. In respect of Boral Resources' submission that the minimum hire was only enlivened when Boral Resources requested services, this was not supported by any evidence placed before the Court in first instance. In particular, Boral Resources advanced no evidence that it had ever utilised equipment on a request basis. To the contrary, the Magistrate had considered and rejected this. (J4.34-41).
3. Mr Challinor further submitted that Boral Resources provided no authority for their assertion that the Magistrate erred in law through his interpretation of Clause 13.1. His Honour relied upon the Court of Appeal decision of Metcash and adopted the same approach in reading out a term where there is an intractable contradiction between clauses. This was done to give effect to the contract in a commercially sensible and businesslike meaning. Boral Resources did not provide authority as to why the Magistrate should have ensured both clauses 3.1 and 13.1(a) had work to do in circumstances where taking such an approach would not give effect to the true commercial intentions of the parties.
4. Mr Challinor also submitted that Boral Resources was attempting to rerun the same argument as it did in the Local Court and that it did not provide any legal authority reflecting the Magistrate's error. Boral Resources provided a narrow interpretation of the contract and adopted an approach that is arguably contrary to legal authority, including Dexta at [30]. There was only one possible conclusion to be reached in the circumstances, being that the parties intended for there to be minimum hire amounts included in the contract. Nor does the Court of Appeal's decision in Dexta support the narrow approach adopted by Boral Resources. The Court is to look at and give the contract an interpretation that is commercially sensible and in accordance with commercial reality. As the Magistrate took such an approach, there was no error of law.
5. In respect of Boral Resources' reference to hiring a dozer or dump truck, the mere fact that there was no obligation to hire this equipment does not mean that there was no obligation to hire the grader, excavator and operator. This is especially so given the contract explicitly stated minimum hours in respect to each of those items but made no such declaration in relation to the dozer or dump truck. These are therefore irrelevant to determining the matters in dispute.
6. Finally, Mr Challinor submitted that the "double dip" argument raised by Boral Resources was incorrect because the contract stated that Boral Resources was a priority customer and that the excavator could only be removed from site with their approval. Pursuant to the terms of the contract, the excavator was under the control of Boral Resources and therefore the only way Mr Challinor could double dip would be if Boral Resources allowed him to do so. In any event, this concern is irrelevant as Boral Resources did not provide evidence that they gave permission for the excavator to be removed from the site or that any concerns of double dipping ever arose during the contract. It follows that such concerns of double dipping are irrelevant to the construction of the contract. Nor does this interpretation of the wording make any commercial sense. Looking at the words of the contract objectively, it clearly states that the excavator must remain on site and can only leave with Boral Resources' approval. It would make no sense if the contract was to be interpreted as Boral Resources suggests because Boral Resources had the discretion to require the excavator to remain on site for the entire three years of the contract, plus the extended term of a further 12 months and at no time require it to be used. Nor did any clause impose a requirement for Boral Resources to agree to any request by Mr Challinor for the excavator to be removed, and as such, Boral Resources would be entitled to refuse such permission at any time. It follows that if Boral Resources' interpretation of the agreement as existing on a request basis was accepted, the requirement that the excavator remain on site and not be removed without Boral Resources' consent makes no commercial sense.

Consideration

1. Where a conflict exists between the terms of a written contract, the correct approach is that set out by the Court of Appeal in Metcash at [30]: "A necessary corollary of that requirement for a commercial contract to be given a business-like interpretation is the frequent emphasis upon the need to arrive at an interpretation which is commercially sensible, and in accord with commercial reality. As was observed by Isaacs J in Cohen & Co v Ockerby & Co Ltd [1917] HCA 58; (1917) 24 CLR 288 at 300 nearly a century ago, expressions, particularly elliptical expressions, in a mercantile contract are not to be read in a narrow spirit of construction but as honest people may be presumed to have understood them."
2. His Honour correctly identified that Clause 3.1 of Part B and Clause 13.1(a) are in conflict and not readily reconciled. Clause 3.1 provides the specified pricing of certain equipment and notes that Boral Resources is a priority customer with minimum hire of 40 hours per month and the excavator can only be taken from site with Boral Resources' approval. Clause 13.1(a) is a general clause that provides there is no minimum purchase or exclusivity, with nothing obliging Boral Resources' to request or hire any minimum level of plant and/or operator services from Mr Challinor.
3. It is my view that the tension between the clauses should be resolved in favour of clause 3.1. This is because clause 3.1 is a specific clause, whereas clause 13.1(a) is a general clause under the General Terms and Conditions. To my mind, this suggests the parties considered the minimum hire period and price to take priority over the general terms and conditions. This also gives a businesslike interpretation to the contract as it recognises that Mr Challinor, in supplying equipment and services, would likely have desired a specific price to ensure the hire agreement was financially viable. It follows that Boral Resources' interpretation of the hire being on a request basis is incorrect.
4. Boral Resources drew this Court's attention to three additional clauses in Part C of the contract: clause 1.2 which provides that Boral may place orders for hire in accordance with the contract; clause 1.3 which provides that each hire order may specify the hire period; and clause 16.1 which provides that if Boral Resources terminated the hire order, it must pay Mr Challinor a certain proportion of charges and, in any event, no more than the applicable rate for one day. However, nothing in these clauses assists the Court in resolving the tension between clauses 3.1 and 13.1(a). Clauses 1.2 and 1.3 merely provide that the hire orders may be placed and may specify a hire period. Similarly, Clause 16.1 relates to the process and effect of termination and does not impact the existence or non-existence of a minimum hire period. While the Court should not readily interpret the words used by parties as being redundant, it does not follow that every clause is relevant to every conflict that arises between terms.
5. Nor do I consider Boral Resources' issue of double dipping in the Magistrate's interpretation to be particularly persuasive. Under the agreement, Boral Resources (as a priority customer) had full discretion over whether or not the excavator was to be removed from the site. Therefore, Boral Resources' hypothetical suggestion that Mr Challinor could remove the machine from site with Boral Resources' approval and thereby double dip is untenable and in no way informs whether or not the Magistrate gave the requisite businesslike interpretation to the contract. Nor does Boral Resources' reference to the hire of a dozer and a dump truck assist it. The contract makes specific reference to minimum hire hours for the excavator in the contract, but does not do so for the dozer or the dump truck. Therefore, to treat them as being subject to the same minimum hire conditions is incorrect.
6. In reaching his decision, the Magistrate relied upon the Court of Appeal decisions of Metcash and Franklins. In my view, the Magistrate adopted the correct approach in finding a commercially sensible and businesslike interpretation of the contract. The Magistrate did not err in deciding that the master hire agreement, on its proper interpretation, obliged Boral Resources to hire the grader and the excavator for a particular period and at a fixed price.
7. For these reasons, this ground of appeal fails.

Ground 2 - debt or damages and denial of natural justice

1. This ground of appeal is that the Magistrate denied Boral Resources natural justice as his Honour determined quantum by finding that Mr Challinor's claim was in debt (rather than in damages) by reference to whether the pleadings were certified despite the form of pleadings not being argued before him.
2. It is necessary that I briefly set out the pleading framework here.
3. By statement of claim filed 25 July 2016, Mr Challinor pleaded: "10 at the expiry of the period for payment the Plaintiff made demand for payment pursuant to the Contract. … 11 The Defendant has refused or neglected to pay the inbvoices as required by the Contract leaving an amount owing to the Plaintiff of $85,646.00. … 12 In the circumstances the Plaintiff claims:- (a) The sum of $85,646,00; (b) Interest pursuant to Section 100 of the Civil Procedure Act 2005. …".
4. Mr Challinor's solicitor also certified that the statement of claim did not require a certificate under cl 4 of sch 2 to the Legal Profession Uniform Law Application Act 2014 (NSW).
5. By amended defence filed 11 November 2016, Boral Resources denied that it was a term of the contract that Mr Challinor would be provided with payments for minimum hours for both the equipment provided and his own services. While Boral Resources admitted that a demand for payment was made, it denied Mr Challinor's entitlement to the payment of $85,646 or any other relief. (AD, [2], [7] and [8]). In answer to the claim as a whole, Boral Resources pleaded that to the extent that Mr Challinor is entitled to any amount under the contract, he is only entitled to the profit he would have earned; and that he failed to mitigate his loss by seeking and entering other contracts. (AD, [9]).

Magistrate's reasons

1. The Magistrate discussed the principles concerning the distinction between debt and damages at J5.23-50; J6.1-8): "The defendant's next argument is that the profit was not proved by way of damages because there is no quantification of the cost saved, for example, by Alex Challinor leaving in November. The plaintiff's answer is that this is a claim for a debt, not damages. Professor Carter, in Contract Law in Australia, ch 37, under the heading, "Recovery of Sums fixed by Contracts", explains the difference between debt and damages. The action to recover a debt due for payment has a longer history than the action to recover damages for breach of contract. … By contrast, if a plaintiff wishes to recover more than a nominal sum by way of damages the plaintiff must often produce detailed evidence. He goes on to say that secondly, the High Court explained in Young v Queensland Trustees, that the common law does not and never did conceive of indebtedness in a sum certain for an executed consideration as a mere breach of contract, it is rather the detention of a sum of money, and that was so whether the creditor enforced his demand by an action of debt or by indebitatus assumpsit. This means, for example, that the rules dealing with mitiation are not relevant where the plaintiff is seeking to recover a debt due under the contract whereas they are frequently relevant to an action for damages. Professor Carter says the liquidated sum has two essential characteristics, it is fixed by contract and it is due for payment by the defendant. Finally, he says at para 37-03 that historically the action to recover a liquidated sum under the contract was framed at common law in debt. The disappearance of the forms of action and the fusion of the law and equity makes it a little anachronistic to speak today of an action in debt, nevertheless it remains true that an action to recover a contract debt due is not a claim for breach of contract nor does it involve specific performance."
2. His Honour concluded (at J6.10-35): "The plaintiff correctly says here this is a claim for debt for a liquidated sum because it is fixed by a contract and it is due for payment by the defendant. The Local Court's jurisdiction was explained in Albanas v Eleftheriou (2014) NSWSC 416 by Beech-Jones J. In particular he pointed out that the jurisdictional limit of the Court is set out in s 29 of the Local Court Act. In s 29A there is conferral of jurisdiction together with s 30 for a money claim which is a claim for recovery of any debt, demand or damages whether liquidated or unliquidated. I note that that maintains the distinction between claims for debts and claims for damages. It also confers on the Court in its general jurisdiction proceedings on any money claim. In that case of Albanas v Eleftheriou the Court held that account for money not received was a common law count and hence within the definition of the debt or liquidated demand jurisdiction. Here, the claim meets all the requirements for a debt not damages. I note that the statement of claim was a claim for a money amount, it does not appear to be a claim for damages. I also note that the solicitor for the plaintiff certified that the statement of claim did not require a certificate under cl 4 of sch 2 to the Legal Profession Uniform Law Application Act 2014. That Act provides that a law practice cannot file court documentation on a claim or a defence of a claim for damages unless they certify there are reasonable grounds for believing there are prospects of success. The fact they certified there was no need for a certificate suggests the claim was not a claim in damages but a claim in debt. The amended defence took the same approach in that they certified that the defence did not require a certificate under the clause. Reading the pleading in that light It is open to the plaintiff to maintain the claim as one for debt as opposed to damages."

Boral Resources' submissions

1. Boral Resources say that Mr Challinor's claim is "for a debt, not for damages". Boral Resources submitted that the Magistrate erred in law for the following reasons. Firstly, the statement of claim was directed as one of breach of contract (on its proper interpretation) with no allegation of a debt; secondly, even if the statement of claim did allege a debt, this would not be determinative; thirdly, the Magistrate referred to the decision of Young v Queensland Trustees (1956) 99 CLR 560 ("Young") which concerned a claim for money payable for money lent and therefore does not support the finding that "the rules dealing with mitigation are not relevant"; fourthly, his Honour referred to the decision of Albanis v Eleftheriou [2014] NSWSC 416 ("Albanis"), which concerned a claim for money had and received and is therefore not supportive of the finding of the Magistrate; fifthly, the Magistrate erred in his finding that the statement of claim "was a claim for a money amount and as such it is not one for damages" because a claim for a "money amount" or a liquidated amount can nonetheless be a claim in damages; sixthly, the fact that the solicitor for the plaintiff provided a particular certification under the Legal Profession Uniform Law Application Act 2014 cannot be in any way determinative of whether Boral Resources' claim is one for damages or in debt; and seventhly, the Mr Challinor's submissions dated 5 April 2017 states "the plaintiff's claim is based in contract" with no assertion of a debt.

Mr Challinor's submissions

1. Mr Challinor submitted that Boral Resources incorrectly attempted to reframe Ground 2 as being a question of debt or damages rather than the ground raised in the amended summons. This ground concerned whether the Magistrate had denied Boral Resources natural justice by determining quantum through finding Mr Challinor's claim was a debt (rather than damages), particularly where the Magistrate took into account the certification of the pleadings despite this issue not being argued before him. Mr Challinor submitted even if the Court did allow Boral Resources to reframe Ground 2 in this way, it would have no effect on the outcome of the appeal as Boral Resources has not demonstrated that the Magistrate erred by finding the claim was a debt. To the contrary, the Magistrate relied upon sufficient legal authority. It was also submitted that the Magistrate's reference to the certification of the pleadings was one of many reasons for his Honour concluding the claim was in debt. Hence, even if it could be shown that the Magistrate made an error by referring to the certification of the proceedings, his Honour would not have erred in law because he had other reasons for reaching this decision.
2. In relation to Boral Resources' submission that the statement of claim was pleaded in contract and not debt, Mr Challinor submitted that paragraphs 10 and 11 of the statement of claim (reproduced earlier in this judgment) refer to there being a debt owing. In addition, an allegation of a breach of contract can also be an allegation of debt. This is because any claim for a debt would also rely upon there being a breach of contract. Boral Resources recognised this in its Local Court submissions. Hence, to distinguish between an allegation of breach of contract and an allegation of debt creates a false dichotomy.
3. In regards to Boral Resources' submission that it would not be determinative even if the statement of claim alleged a debt, Mr Challinor submitted that this does not provide any error of the Magistrate.
4. Mr Challinor also submitted that there is no legal authority which prevents the principles set out in Young from applying to the current proceedings. It is not uncommon for legal principles to be carried over between cases which do not have the same factual matrix. If the principle is correct, it is correct and there is no reason why it has been incorrectly applied.
5. In regards to Boral Resources' submission that the Magistrate's erred in finding that "the rules dealing with mitigation are not relevant", Mr Challinor submitted this is an incorrect reference as the words formed part of a quote from Contract Law in Australia by Professor Carter rather than a finding.
6. Mr Challinor further submitted that the reference to Albanis was solely for the purpose of establishing the Local Court had jurisdiction to determine the debt matter. It was not relied upon as a basis for finding the proceedings were a debt. His Honour's conclusion that the Local Court had jurisdiction to deal with the matter in debt is therefore not an error.
7. It was also submitted by Mr Challinor that the Magistrate did not err in finding that the statement of claim "was a claim for a money". Simply stating that a claim for a money amount can also be a claim for liquidated damages does not in of itself highlight an error and Boral Resources' submission is a mere assertion which provides no basis for why the Magistrate was in error.
8. In relation to the Magistrate's reference to the Legal Profession Uniform Law Application Act in finding it was a claim for debt, Mr Challinor submitted that this is a mere assertion and not supported by any legal authority.
9. It was further submitted by Mr Challinor that the mere fact his written submissions in the Local Court dated 5 April 2017 raised no assertion of debt does not prevent the claim being one of debt. The reference to a claim being based in contract does not exclude that it is a claim for a debt. These are not mutually exclusive propositions but are intrinsically linked. It is also erroneous to refer the lack of reference to debt in written submissions as creating an indication that it is not an issue for the whole of Mr Challinor's case. This is particularly so where he dealt with the issue in oral submissions and the whole of the case is based upon an accrued right under the contract.
10. Finally, in respect of Boral Resources' submission that the Magistrate had erred by finding the claim was a debt and failing to consider both mitigation and proof of loss, Mr Challinor submitted that this was an assertion not supported by authority. The whole attempt by the Boral Resources to attack the case as one of damages is a nonsense. Mr Challinor would not need to prove damages as he has accrued rights under the contract. The Magistrate found that minimum hours are required to be paid under the contract and these had to be paid while the contract was on foot. Only upon termination did the obligation of Boral Resources to pay minimum hours cease. This is not a matter where the contract has been terminated and there is an argument of improper termination or that there should be post contractual damages paid. Rather, it is simply a case where the defendant was entitled to minimum hours under the contract with payments accruing until termination. Boral Resources had an absolute discretion over whether termination occurred under clause 15.2 and choose not to terminate until the notice of 3 March 2016.

Consideration

1. Boral Resources' ground of appeal raises the issue that this was a claim for damages not debt. I do not accept Mr Challinor's first submission that the plaintiff has attempted to reconstrue this ground of appeal. I shall briefly refer to legal authority on "debt" and then "damages" as Boral Resources submitted that these were separate bases of claim.

Debt

1. A "debt" is defined in the Encyclopaedic Australian Legal Dictionary (2014, LexisNexis Australia) as follows: "Banking and Finance 1. An obligation to pay. 2. A sum of money owed: Director of Public Prosecutions v Turner [1973] 3 All ER 124 . A debt is a sum of money which is now payable or will become payable in the future by reason of a present obligation: debitum in praesenti, solvendum in futuro. It is a right which a creditor has to enforce by taking action in a court of law against the person who owes the money (the debtor). …"
2. In Pavey & Matthews Pty Ltd v Paul (1987) 69 ALR 577 ("Pavey"), Brennan J states at 585-586: "When one party completes work which he has contracted with another party to perform and the other party fails to pay what was agreed, the party who has done the work is entitled prima facie to sue for what is owing either on the contract or on the debt which arises on performance of the contract. The origin of the alternative remedies is to be found in the history of that fruitful action, indebitatus assumpsit. The action depended on the fiction that there is a separate and subsequent promise to pay a debt - indebitatus assumpsit - though the debt arises out of a contract: see Ibbetson "Sixteenth Century Contract Law: Slade's Case in Context" (1984) 4 Oxford Journal of Legal Studies 295 at 315-7. An action lay for damages for breach of the fictional subsequent promise to pay the debt - damages which in theory might not be in precisely the same amount as the debt: see Baker "New Light on Slade's Case" [1971] Cambridge Law Journal 51 at 55,56; Ibbetson, p 309. … The debt, though arising from the contract, was itself a cause of action. As Dixon CJ, McTiernan and Taylor JJ observed in their judgment in Young v Queensland Trustees Ltd (1956) 99 CLR 560 at 567 : "The common law does not and never did conceive of indebtedness in a sum certain for an executed consideration as a mere breach of contract: it is rather the detention of a sum of money and that was so whether the creditor enforced his demand by an action of debt or by indebitatus assumpsit.""

Damages

1. Damages is defined in Encyclopaedic Australian Legal Dictionary (2014, LexisNexis Australia) as follows: "Compensation for damage suffered; a court-awarded sum of money which aims to place the plaintiff in the position he or she would have been in had the legal wrong not occurred: for example, Haines v Bendall (1991) 172 CLR 60 ; 99 ALR 385. … Contract The obligation to make compensation implied by law or stipulated in the contract where there is a failure to discharge a contractual obligation. The party not in breach is prima facie entitled to recover damages for the other party's breach of contract: Bowen v Blair [1933] VLR 398 . The objective in contract law is to place the plaintiff in the position which he or she would have occupied had the defendant performed the obligation breached: Robinson v Harman (1848) 1 Ex 850; Gates v City Mutual Life Assurance Society Ltd (1986) 160 CLR 1 ; 63 ALR 600. …"
2. In Haines v Bendall (1991) 99 ALR 385, Mason CJ, Dawson, Toohey, and Gaudron JJ stated at 386: "The settled principle governing the assessment of compensatory damages, whether in actions of tort or contract, is that the injured party should receive compensation in a sum which, so far as money can do, will put that party in the same position as he or she would have been in if the contract had been performed or the tort had not been committed…Compensation is the cardinal concept. It is the "one principle that is absolutely firm, and which must control all else": Skelton v Collins (1966) 115 CLR 94 , per Windeyer J at 128. Cognate with this concept is the rule, described by Lord Reid in Parry v Cleaver [1970] AC 1 at 13, as universal, that a plaintiff cannot recover more than he or she has lost. [Citations Omitted]."
3. In Gates v City Mutual Life Assurance Society Ltd (1986) 63 ALR 600, Mason, Wilson and Dawson JJ stated at 607: "In contract, damages are awarded with the object of placing the plaintiff in the position in which he would have been had the contract been performed - he is entitled to damages for loss of bargain (expectation loss) and damage suffered, including expenditure incurred, in reliance on the contract (reliance loss)."
4. Boral Resources' first, second and fifth submissions all concern whether debt falls within the statement of claim in the Local Court and therefore I will deal with them together.
5. It is my view that paragraphs 10 and 11 of the statement of claim in the Local Court proceedings refer to the claim as being one for debt. Paragraph 10 pleads that "at the expiry of the period for payment the plaintiff [the defendant in these proceedings] made demand for payment pursuant to the Contract". Paragraph 11 provides that "the Defendant has refused or neglected to pay the invoices as required by the Contract leaving an amount owing to the plaintiff [the defendant in these proceedings] of $85,646. Both paragraphs raise an allegation of debt: see Pavey. Hence, it is incorrect to conclude the statement of claim as solely being one of breach of contract. A claim for debt will also generally require the court to find a breach of contract or agreement and it is therefore inappropriate to characterise breach of contract and debt claims as being mutually exclusive.
6. While I agree with Boral Resources' submission that even if the statement of claim alleged a debt that is not determinative, this does not have a bearing on whether the claim is one of debt in the present circumstances. Similarly, Boral Resources' submission that a claim for a money amount (or liquidated amount) can also be a claim in damages and the Magistrate therefore erred in finding the statement of claim "was a claim for a money amount and not damages" is also incorrect. The mere fact that a claim for a money amount can take the form of either a claim for a debt or a claim for a breach of contract is not a sufficient ground for finding the Magistrate fell into error. The Magistrate stated that the claim meets all the requirements of a debt not damages and it was open for his Honour to do so. Hence, there is no error of law.
7. So far as Boral Resources' submission that the Magistrate incorrectly found that the rules of mitigation are not relevant by reference to Young, a case concerning a claim for money payable is concerned, it is my view that such an argument is incorrect. The principles in Young are general principles. It is authority for the proposition that the common law does not and never has conceived of indebtedness in a sum certain for an executed consideration as a mere breach of contract but a detention of a sum, irrespective of whether the creditor enforced his or her demand by an action of debt or indebitatus assumpsit. Boral Resources also referred to the Magistrate's decision that "rules dealing with mitigation are not relevant", but read in context this appears to be a further quotation from Professor Carter's Contract Law in Australia.
8. Boral Resources also contended that the Magistrate incorrectly applied the authority of Albanis, which concerned a claim for money had and received, as the decision was not supportive of his Honour's finding. However, Boral Resources did not address in either oral or written submissions why the decision was inappropriate. The Magistrate referred to Albanis as authority in establishing the Local Court's jurisdiction to hear claims of debt for a liquidated sum. (J6.10-21). This is supported by the Magistrate's reference to the jurisdictional limits set out in ss 29, 29A and 30 of the Local Court Act.
9. Boral Resources submitted the fact that Mr Challinor's solicitor certified that the statement of claim did not require a certificate under cl 4 of sch 2 of the Legal Profession Uniform Law Application Act cannot in any way be determinative of whether Boral Resources' claim is one for damages or debt. The Magistrate noted the provision and stated that "the fact they certified there was no need for a certificate suggests the claim was not a claim in damages but a claim in debt". It is my view that the making of a certification (or otherwise) is certainly not determinative of a claim for debt or damages. However, it is clear from its context that the Magistrate noted it, but did not rely upon it as a substantive reason for his finding. The Magistrate had already concluded that the claim met all the requirements for a debt and not damages.
10. In relation to natural justice, Professor Stanley A de Smith, Judicial Review of Administrative Action (5th ed 2013, Thomson Reuters), in his wellknown passage, stated at 432: "Procedural fairness generally requires that persons liable to be directly affected by proposed administrative acts, decisions or proceedings be given adequate notice of what is proposed, so that they may be in a position: (a) to make representations on their own behalf …; or (b) to appear at a hearing or inquiry (if one is to be held); and (c) effectively to prepare their own case and to answer the case (if any) they have to meet."
11. In Kioa v West (1985) 159 CLR 550, the High Court of Australia held that the duty to accord natural justice is a duty to act fairly. In the normal course, a party to judicial proceedings (as are those in a tribunal) could expect to be apprised of the nature of the case sought to be made against it, and of the date and time fixed for hearing such as to give it a reasonable opportunity to meet that case and to advance its own. Brennan J (as he then was) stated at 628: "A person whose interests are likely to be affected by an exercise of power must be given an opportunity to deal with relevant matters adverse to his interest which the repository of the power proposes to take into account in deciding upon its exercise."
12. In relation to procedural fairness, Mason J stated that the law had now developed to a point where it may be accepted that there is a common law duty to act fairly, in the sense of according procedural fairness, in the making of administrative decisions which affect rights, interests and legitimate expectations, subject only to the clear manifestation of a contrary statutory intention. Procedural fairness as a notion is a flexible obligation to adopt fair procedures which are appropriate and adapted to the circumstances of the particular case (at 584-585).
13. Boral Resources has not explained why it was not afforded procedural fairness or natural justice to support a finding that the Magistrate fell into error. Boral Resources ran their case for damages and was given the opportunity to be heard. Therefore, it is my view that Boral Resources has been afforded procedural fairness.
14. Finally, in regards to the Boral Resources' seventh submission that Mr Challinor's submissions dated 5 April 2017 were based in contract and does not assert a debt, this proposition is incorrect. The mere reference to a claim being based in contract does not mean the claim cannot be one in debt. As I have previously stated, it is inappropriate to define claims for debt and claims for contract as being mutually exclusive. Thus, the Magistrate was entitled to conclude that Boral Resources owed Mr Challinor the sum of $78,881.70.
15. For these reasons and on the basis of Pavey and Turner (which I have set out above), the Magistrate was justified in reaching his finding that the claim is one of debt. The sum is for a liquidated amount under the master hire agreement which Mr Challinor has performed by making the equipment exclusively available to Boral Resources, irrespective of whether Boral Resources made use of it. Accordingly, this ground of appeal fails.

Grounds 3 and 4 - mitigation in proof of loss

1. Grounds 3 and 4 are dependent upon whether the claim is correctly classified as a debt and not damages.
2. Ground 3 is that the Magistrate erred by finding that the damage suffered by Mr Challinor was $78,881.70 without making an appropriate allowance or discount for the fact that Mr Challinor mitigated his loss. Ground 4 is that the Magistrate erred by finding that Mr Challinor proved the loss and damage he suffered.

Magistrate's reasons

1. The Magistrate, in finding that the claim was for a debt, was not required to consider mitigation or proof of loss as the claim rests upon the accrued rights in a contract.
2. His Honour stated at J5.23-26: "The [defendant's] next argument is that the profit was not proved by way of damages because there is no quantification of the cost saved, for example, by Mr Challinor leaving in November. The [plaintiff's] answer is that this is a claim for a debt, not damages."

Submissions

1. Boral Resources submitted that the Magistrate, in quantifying the alleged loss and damage by reference to the loss of turnover, fell into error by ignoring the costs Mr Challinor would have incurred in generating that revenue and the savings Mr Challinor enjoyed.
2. According to Boral Resources, Mr Challinor was required to provide fuel and the operator. Mr Challinor also enjoyed savings as a result of not having to pay for an operator as a result of Boral Resources not hiring the equipment. These savings should have been brought to account and they were not because the Magistrate incorrectly concluded the amount was a debt. It follows that Mr Challinor failed to prove his loss
3. Mr Challinor submitted that after the Magistrate had found that there were minimum hours payable under the contract, he was not required to make any reference to the costs Mr Challinor would have incurred in generating the revenue or savings from any nonuse of equipment. If minimum hours are payable under the contract, then regardless of whether the equipment was used, the agreed rates based upon the minimum hours are payable. Where the contract provides no obligation on the part of Mr Challinor to set off any amounts in the event that the equipment is not used for minimum hours, the accrued rights under the contract are the totality of the minimum hours payable.

Consideration

1. For the reasons I have previously stated, the claim is to be characterised as one of debt not damages. It is my view that once the Magistrate had found there were minimum hours payable under the master hire agreement, there was no reason for his Honour to reference mitigation or proof of loss which are relevant in a claim for damages. It follows that the Magistrate was justified in his finding that mitigation and proof of loss did not need to be considered as the debt concerns an accrued right in the contract.
2. Accordingly, this ground of appeal fails.

Ground 5 - failure to provide reasons

1. This ground of appeal is that the Magistrate erred in that he failed to provide adequate reasons.
2. Boral Resources submitted that inadequate reasons were provided for the finding that the claim was one of debt. Mr Challinor submitted that Boral Resources has made no real attempt to substantiate this ground and, in any event, any reasonable review of the Magistrate's decision would find that sufficient reasons were provided.

Consideration

1. In Wang v Yamamoto [2015] NSWSC 942, I referred to some authorities on what constitutes adequate reasons. At [35] to [38], I stated: "[35] It is not in dispute that a Magistrate is obliged to provide adequate reasons and not to do so constitutes an error of law: see Stoker v Adecco GemvaleConstructions Pty Ltd [2004] NSWCA 449 at [41] per Santow JA. [36] In Beale v Government Insurance Office of NSW (1997) 48 NSWLR 340 Meagher JA at 422 stated: A failure to provide sufficient reasons can and often does lead to a real sense of grievance that a party does not know or understand why the decision was made: Re Poyser and Mills Arbitration [1964] 2 QB 467 at 478. This court has previously accepted the proposition that a judge is bound to expose his reasoning in sufficient detail to enable a losing party to understand why it lost. [37] In Stoker, Santow JA at [41] said that "It is sufficient if the reasons adequately reveal the basis of the decision, expressing the specific findings that are critical to the determination of the proceedings." However, "the extent and the content of reasons will depend upon the particular case under consideration and the matters in issue. While a judge is not obliged to spell out every detail of the process of reasoning to a finding, it is essential to expose the reasons for resolving a point critical to the contest between the parties": see Pollard v RRR Corporation Pty Limited [2009] NSWCA 110, McColl JA at [58] (with whom Ipp JA and Bryson AJA agreed). [38] In Soulemezis v Dudley (Holdings) Pty Ltd (1987) NSWLR 247, McHugh J at 281 stated: In a case where a right of appeal is given only in respect of a question of law, different considerations apply from the case where there is a full appeal. An ultimate finding of fact, which is not subject to appeal and which is in no way dependent upon the application of a legal standard, can be treated less elaborately than an issue involving a question of mixed fact and law. If no right of appeal is given against findings of fact, a failure to state the basis of even a crucial finding of fact, if it involves no legal standard, will only constitute an error of law if the failure can be characterised as a breach of the principle that justice must be seen to be done. If, for example, the only issue before a court is whether the plaintiff sustained injury by falling over, a simple finding that he fell or sustained injury would be enough if the decision simply turned on the plaintiffs credibility. But, if, in addition to the issue of credibility, other matters were relied on as going to the probability or improbability of the plaintiff's case, such a simple finding would not be enough."
2. Further, in Jung v Son [1998] NSWCA 120, Stein JA stated at [16]: "16 While a judge does not have to state reasons for every aspect of the case, his reasons must be sufficient to satisfy the requirements of Pettit v Dunkley [1971] 1 NSWLR 376. The reasons must be sufficient to enable an appellate tribunal to gain a proper understanding of the basis of the verdict. Not to do so is an error of law (Asprey JA at 382 and Moffitt JA at 388). Failure to give reasons also makes it impossible for an appellate tribunal to give effect to a plaintiffs right of appeal. Issues critical to the case, as these were, must be dealt with by reasons (Samuels JA in Mifsud v Campbell (1991) 21 NSWLR 725 at 728).
3. In short, the judicial officer should make it clear what he or she is deciding and why.
4. It is my view that the Magistrate has shown a clear basis upon for his decision. His Honour has provided adequate reasons and this ground of appeal fails.
5. The result is that the appeal is dismissed. The decision of his Honour Magistrate Brender dated 8 May 2017 is affirmed. The summons dated 23 February 2018 is dismissed.
6. Costs are discretionary. Costs usually follow the event. Boral Resources is to pay Mr Challinor's costs.

The Court orders that: 1. The appeal is dismissed. 2. The decision of his Honour Magistrate Brender dated 8 May 2017 is affirmed. 3. The summons dated 23 February 2018 is dismissed. 4. The plaintiff is to pay the defendant's costs. 5. Liberty to apply in relation to indemnity costs on 3 days notice. 6. If liberty is not exercised within 28 days, the file will be marked as closed.

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: 16 March 2018