Borcherdt v Scott

Court of Appeal (NSW)|2014-07-07|Before: Basten JA, Gleeson JA, Adamson J

Judgment 1BASTEN JA: The several appeals before the Court should be dismissed for the reasons given by Tobias AJA. The appellant must pay the respondent's costs in this Court. 2GLEESON JA: I agree with Tobias AJA. 3TOBIAS AJA: The respondent, Mr Coswald Scott, was at all relevant times the owner of a property on Coal Mine Road, Nymboida, in northern New South Wales. The property was timbered. Mr Scott had two sons, Timothy Scott and Glen Scott, who conducted a sawmilling business on their father's property from mid-2004 until about 2008. 4The appellant lived at Black Mountain Road, Nymboida. In proceedings in the Grafton Local Court, when asked to state his occupation, he said that he owned a farm, did some timber milling and was "semi-retired". It was the timber milling activity undertaken in partnership with Timothy and Glen Scott (the membership of the partnership being an issue in dispute) which gave rise to the current proceedings. The timber milling operation was undertaken on the property owned by the respondent. Beyond that fact, there was a disagreement as to the role (if any) played by the respondent in the timber milling business. 5The appellant had accounting qualifications and managed the financial side of the partnership, which included not merely keeping books of account, but arranging finance for the business. Following the collapse of the partnership by 2008, the appellant brought proceedings against the respondent seeking to recover from the respondent amounts said to be owing to the appellant; he also sought to recover property or the value of property which had been left on the respondent's land when the timber milling operation ceased. 6More particularly, on or about 22 June 2011 the appellant instituted three separate actions in the General Division of the Grafton Local Court. The first proceedings (2011/203244) (the Dozer Proceedings) concerned a claim by the appellant for an order that the respondent repay all moneys advanced by him to the respondent in relation to the latter's alleged purchase of, and repairs to, a Caterpillar D9 Dozer (the D9) together with interest. The net balance claimed was $77,764.82. The second proceedings (2011/203267) (the Goods Proceedings) concerned a claim in detinue for the return in good order and condition of all goods allegedly belonging to the appellant which were left upon land owned by the respondent at Nymboida (the Nymboida property) and in respect of the goods not returned, an order for the payment of their value. The third proceedings (2011/203279) (the Westpac Proceedings) related to a claim by the appellant for an order that the respondent repay to him all moneys advanced by him to the respondent to enable the repayment of a loan from Westpac for which the Nymboida property was being held as security. The amount claimed was $51,608.33. The Westpac proceedings also included a claim for the repayment of all moneys advanced by the appellant to the respondent in relation to the repayment of what was referred to as the Autocar truck loan, the amount claimed being $28,202.67. 7The respondent's defences to each of the three claims may be summarised as follows. With respect to the Dozer Proceedings the respondent denied that the appellant lent money to him in respect of the purchase of the D9 and alleged that: (a) From 2004 to on or about 30 June 2008 the appellant and the respondent's sons, Glen Patrick Scott and Timothy James Scott, conducted a sawmilling business in partnership under the business name or style of "Nymboida Native Timbers" (the partnership); (b) The sawmilling operations of the partnership were conducted on the Nymboida property under licence from the respondent for that purpose; (c) In or about August 2004 the respondent made it known to the partners that the D9 was available for purchase for the sum of $35,000; (d) The partners agreed to purchase the D9 under an agreement with the respondent whereby it would become his property and ownership of, and title to, it would be transferred to him on his permitting the partnership to harvest logs from the Nymboida property to the value of the D9; (e) The partners purchased the D9 and used it in connection with the business of the partnership including the harvesting of 30 loads of logs from the Nymboida property which were thereby supplied to the partnership by the respondent for the purpose of its business. 8With respect to the Goods Proceedings, the respondent denied that he had possession or control of the relevant goods and pleaded that the goods identified in the statement of claim belonged to the partnership and that there was a dispute between the partners concerning the goods; in particular, as it turned out, the partnership was indebted to the Australian Taxation Office (ATO) with respect to certain taxation payments and the goods were required to remain in the possession of the partnership in order to meet that indebtedness. 9With respect to the Westpac Proceedings, the respondent denied that there was any loan arrangement between himself and the appellant relating to the repayment of the Westpac loan or in relation to the Autocar truck loan and further alleged that: (a) the loan from Westpac was a loan to Glen Scott and a Tom Scott (no relation) and the payments allegedly made by the appellant were drawings made in respect of Glen's share in the profits of the partnership; (b) the Autocar truck was an asset of the partnership and used in connection with its business and therefore the payments made in relation to it were expenses of the partnership. 10With respect to both the Dozer Proceedings and the Westpac Proceedings the respondent also pleaded that the claims were statute barred pursuant to the Limitation Act 1969 (NSW). The issue raised by that defence was not determined by the Magistrate who heard the proceedings (Magistrate Heilpern) as it was unnecessary because he otherwise concluded that each of the appellant's claims should be rejected on their merits. 11Affidavit evidence was filed on behalf of both parties in the Local Court. The proceedings were set down for hearing in Grafton on 3 and 4 April 2012 and an order was made that the three proceedings be heard together and that the evidence in one be evidence in the others. 12Magistrate Heilpern heard evidence on 3 April and submissions on 4 April at the conclusion of which he delivered an ex tempore judgment in all three matters dismissing each of the appellant's claims. The question of costs was adjourned to 7 May 2012 as on the same day as the respondent had filed his defences (12 July 2011), he had made an offer of compromise pursuant to r 20.26 of the Uniform Civil Procedure Rules 2005 (the UCPR) whereby he offered to accept a verdict and judgment in each of the proceedings in his favour with no order as to costs. That offer was not accepted by the appellant. Accordingly, the respondent made an application for indemnity costs which the Magistrate granted on 7 May 2012. He therefore ordered the appellant to pay the respondent's costs on the ordinary basis prior to 13 July 2011 and on an indemnity basis thereafter. 13Pursuant to ss 39 and 40 of the Local Court Act 2007 (NSW) (the Act), the appellant appealed to the Supreme Court against the decision of the Magistrate dismissing the three proceedings. That appeal was heard by Adamson J on 25-26 March 2013 and on 3 April 2013 her Honour delivered judgment dismissing the appeal: Borcherdt v Scott [2013] NSWSC 285. Her Honour noted that insofar as appellant's appeal was confined to questions of law, his right of appeal was conferred by s 39 of the Act. However, he had also sought leave to raise questions of mixed law and fact pursuant to s 40 of the Act. A question arose on appeal as to whether the primary judge had granted such leave. Her Honour acknowledged that an application for such leave was made during the hearing but neither in the transcript of the hearing before the primary judge nor in her judgment is there any recording by her of any such grant. For present purposes, I am prepared to assume that such leave was granted although it is difficult to discern from the appellant's submissions before the primary judge or this Court the identity of the mixed questions of law and fact which were said to have arisen out of the decision of the Magistrate. 14On 2 July 2013 the appellant filed a notice of appeal against the orders of the primary judge. An amended notice of appeal was filed on 17 December 2013. In the meantime on 30 August 2013 the respondent filed a notice of motion seeking an order that the appeal be dismissed as incompetent. On 24 September 2013 the appellant filed a summons seeking leave to appeal. Both the summons and the notice of motion came before Emmett JA and Sackville AJA on 22 November 2013: Borcherdt v Scott [2013] NSWCA 417. The relevant issue was whether leave to appeal was required, and if so if it should be granted. In this respect as noted by Emmett JA at [5] of his reasons of 22 November 2013, although the three proceedings were heard together in the Local Court because there were factual matters that were common to all three, the proceedings before the primary judge were treated as a single proceeding notwithstanding that the appellant sought to appeal from orders made in three separate proceedings in the Local Court. His Honour observed that despite the proceedings being so treated by the primary judge, there were in truth three appeals to her Honour which she should have dealt with separately. However in my view nothing turns on that given the manner in which the appeals were conducted. 15The issue before the Court on 22 November 2013 was whether in respect of any of the three appeals s 101(2)(r) of the Supreme Court Act 1970 (NSW) was satisfied in that each involved a matter at issue amounting to, or of the value of, $100,000 or more. The only appeal that so qualified was the Goods Proceedings in which the appellant claimed that the goods alleged to belong to him and in respect of which he sought their return, had a value of $114,500. Neither the Dozer Proceedings nor the Westpac Proceedings involved a matter at issue amounting to $100,000 or more. Accordingly, leave to appeal was required in respect of those two proceedings. The Court took the view, understandably, that as the appellant had an appeal as of right with respect to the Goods Proceedings, and as before the Local Court the three proceedings were heard together, it would be appropriate to grant leave to appeal in respect of the Dozer Proceedings and the Westpac Proceedings due to the evidentiary inter-relationship between the three sets of proceedings. It was on that basis only that leave to appeal was granted in respect of the Dozer Proceedings and the Westpac Proceedings.

The Amended Grounds of Appeal 16Not all of the grounds of appeal argued before the primary judge were reagitated on the appeals. The appellant expressed his appeal grounds in terms of the issues that he wished to argue, which were as follows:

The partnership issue;
The burden of proof issue;
The repayment of dozer loan issue;
The repayment of Westpac/Autocar issue;
The credibility issue;
The veracity of business records issue;
The indemnity costs issue; and
The detained goods issue. 17A further issue identified was referred to as the dismissal of claims issue but it overlaps with the other issues to which reference has been made. It merely asserted that the primary judge erred in finding that the appellant had failed to identify any error in the reasons of the Magistrate. Under the heading "Other Issues", a number of points were raised which were not the subject of submissions on the appeals or if they were, they overlapped with the issues which I have already identified. However, in paragraph 29 of the amended notice of appeal the appellant asserted that the primary judge erred "by not making findings of fact based on the record, the trial evidence and the fresh evidence admitted on appeal, and drawing the natural and compelling inferences therefrom because she had not seen or heard the witnesses." Of course, the primary judge had no jurisdiction to make findings of fact. She was confined to determining whether the Magistrate had committed any legal errors or errors of mixed fact and law. So is this Court on hearing the appeals. 18In paragraph 30 of the amended notice of appeal the appellant alleged that the primary judge erred by not finding error in the findings of the Magistrate which he then listed in respect of each of the proceedings and which were all findings of fact. In paragraph 31 he alleged that the primary judge erred in failing to make the findings which he then listed with respect to each of the three proceedings and which, again, all involved findings of fact. 19The primary difficulty faced by the appellant in the appeals generally was that the Magistrate made various adverse findings of fact which the appellant sought to have reversed both by the primary judge and this Court but which he failed to appreciate could only be entertained, given the limitations in ss 39 and 40 of the Act, in the event that he could establish that any of the challenged findings by the Magistrate were made in the absence of any supporting evidence: in other words, that there was no evidence to support the factual findings sought to be challenged: Kostas v HIA Insurance Services Pty Ltd [2010] HCA 32; (2010) 241 CLR 390. 20The appellant faced two further difficulties. The first was that the Magistrate found that the appellant was not a credible witness, and that the respondent and his two sons were credible witnesses. The second was that in respect of all the appellant's complaints, there was conflicting evidence rather than no evidence. It was therefore a matter for the Magistrate as to whose evidence he accepted. He accepted that of the respondent and his witnesses. Accordingly, none of the appellant's challenges established any errors of law on the part of the Magistrate let alone the primary judge. I shall seek to illustrate this conclusion in the reasons which follow.

The Findings of the Magistrate 21At [14] of her reasons the primary judge summarised the Magistrate's findings which appear to have been taken from paragraph 30 of the amended notice of appeal in which the appellant himself summarised those findings. For present purposes they can therefore be taken as accurate. They were as follows: "The Dozer proceedings (1) The plaintiff had not discharged his onus of proving that the document which the plaintiff contended amounted to a partnership agreement with the defendant had ever been signed by the defendant or that it had been prepared on or around the date which it bore, 29 August 2004. (2) The defendant was not party to a partnership with the plaintiff. (3) The plaintiff had not proved any agreement of loan between him and the defendant. (4) In any event, even if there was such a loan, the plaintiff had not discharged the onus of proving that the debt has not been paid. (5) 30 loads of timber had been removed from the defendant's property which entitled him to the dozer. (6) Many of the loan payments were statute-barred, although it was unnecessary to quantify these since the claim failed in any event. The Westpac proceedings (1) The defendant had a debt to Westpac at the time the partnership was entered into between the Partners. (2) The defendant's debt had been adopted by Glen and Tim Scott and then taken over by Glen Scott and Tom Scott (no relative) such that it was no longer the defendant's debt; this is evident from the names of the account holders on the bank statements in evidence: Tom Scott and Glen Scott. (3) The plaintiff had not proved the quantum of the payments that had been made to reduce the Westpac debt. (4) In any event, the arrangements in relation to this claim were so loose and unclear that the plaintiff's claim failed. (5) The partnership was the entity responsible for the payment of the Autocar debt. (6) There was no evidence linking the Autocar debt or its payments to the defendant. The Goods proceedings (1) The goods on the defendant's property comprise partnership property. (2) The plaintiff has not discharged the onus of establishing that he paid for all the goods on the property. (3) The defendant is not the proper defendant to an action for return of the goods since his only connection with them is that he owns the property on which the goods are located. (4) Glen Scott's resistance to the return of the goods is understandable, having regard to the partnership debt which will arise if the Australian Taxation Office's (ATO) contingent liability is not successfully challenged and an assessment is issued against the Partners. Any such debt will need to be paid from a realisation of the partnership property or by the partners from their own funds." 22As I have indicated, the Magistrate accepted the evidence of the respondent and his witnesses, Glen Scott and Tim Scott, over that of the appellant. His detailed finding in that regard was as follows: "In terms of assessing evidence the Courts have long ago discarded the concept that they have some pathway to heaven whereby they can immediately tell if people are lying or not lying. The fact is that this Court has taken into account in determining the credit worthiness of each of the witnesses as follows, demeanour, internal and external inconsistencies, credit and corroboration. On each of these and in each of the claims the plaintiff's evidence was found significantly wanting. In terms of demeanour the plaintiff in the witness box under cross-examination was unconvincing and appeared, in my view, unreliable. Most damning was exhibit K of his affidavit. He was adamant at first, of course, that the name of the firm was not decided until the weeks before it was initiated - I use 'the firm' in terms of partnership. When it was put to him that letter K contained NNT, Nymboida Native Timbers, he was obviously taken aback by that and started moving the goalposts. Similarly, when it was put to him that some $246,000 was transferred he adamantly denied that that could be the case until given lunchtime to do his own figures based upon amounts that Mr James provided him, and he backtracked rapidly saying that, 'Well, it could have been but equal amounts or more was taken out'. His demeanour in both those instances was utterly unconvincing, his answers became more adamant, more convoluted and more incredible in response. In contrast, the defendant and his sons, Tim and Glen, were cogent and clear in their evidence, they impressed as uneducated, uncomplicated men who were honest country folk who knew right from wrong." Exhibit K referred to above purported to be a letter from the appellant to the respondent setting out the terms of their agreement. I return to the significance of exhibit K at [25] below. 23In his reasons the Magistrate recognised that there were few legal issues in the matter which was largely a factual dispute. Apart from the Limitation Act defence, the other primary legal matter which he was required to address was the effect of the Partnership Act 1892 (NSW) and, in particular, ss 1 and 2 thereof, since a question had been raised as to whether the respondent was a member of the partnership. It was common ground that the partnership comprised the appellant, Glen Scott and Tim Scott but the appellant asserted that the respondent was also a member of the partnership which the respondent denied and which denial was accepted by the Magistrate. However, the Magistrate identified as a key issue whether the appellant and the respondent were ever in a partnership together. To that and the other issues identified at [16] above I now turn.

The Partnership Issue 24The Magistrate noted that the onus was on the appellant to satisfy the Court on the balance of probabilities as to each of his claims. He also observed that the appellant had both undergraduate and postgraduate qualifications in commerce and had had significant business experience as well as being an accountant. He thus found it: "amazing, yet incredible, that [the appellant] would enter into a series of what can only be described as complex partnership, agency, leasehold contra deals without any written agreement between the parties". 25As appears from [22] above and which the Magistrate found to be "most damning" to his credibility, the appellant relied heavily on exhibit K to his affidavit sworn 4 October 2011 which purported to be a letter from the appellant to the respondent dated 29 August 2004 which was in the following terms: "Re: Advances for D9, Westpac loan and Autocar loan Just to confirm our discussions over the last weeks about further advances to you, I confirm that we have agreed that I will cover the purchase of the D9 and any expenses to fix it up. I will ensure that the loan with Westpac and the loan for the Autocar are paid. We have agreed that I will get logs from your property to repay these advances along with other advances I make/made to you, Tim and Glen. As we discussed, no one else is to take logs; especially the Brushbox which you said was all mine. I appreciate your offer to pay interest at bank rates but as we discussed I could not get this for my money and think the agreed rate of 5% pa is fair. I don't want this interest on previous amounts advanced to you, Tim or Glen as these have already been paid and any future advances should be funded from the operation of NNT. When the Westpac loan is fully repaid we will fix up all the paperwork for these advances and my entitlement to logs from your property. As I said Cossie, if anything goes wrong on your side, you know with the boys, the logs or whatever, I will want all this money and interest back immediately and you will have to make other arrangements." 26The respondent denied receiving this letter. He certainly denied signing it although it was the appellant's case that he did. That denial was effectively accepted, since the Magistrate did not accept the plaintiff's account. Nevertheless in paragraph 20 of his affidavit the appellant asserted that he entered into an agreement with the respondent to fund the purchase of the D9 "on or about 29 August". He then stated that the partnership did not come into existence until 1 October 2004. In paragraph 24 of his affidavit he deposed as follows: "During October 2004, I agreed with the Scotts to enter into a partnership known as Nymboida Native Timbers .... At all times the partnership was a partnership between the Plaintiff and the Scotts. Cossie Scott could not have his name on the registration because of difficulties this may cause with his pension and Tim Scott could not have his name on the registration because he owed a considerable sum for child support in arrears and the relevant agency was chasing him. It was agreed that the partnership be registered as RJ Borcherdt & GP Scott; Glen holding the interests of the Scotts ie Cossie, Tim and Glen." 27There was an inconsistency between the assertion in the alleged letter of 29 August 2004 which refers to the name of the partnership as NNT or Nymboida Native Timbers and the sworn statement in paragraph 24 of the appellant's affidavit that it was not until October 2004 that the appellant agreed to enter into a partnership under that name. In these circumstances it was open to the Magistrate to rely on this discrepancy as militating against the respondent's credit although there were other aspects of his evidence upon which he relied including, but not confined to, the appellant's demeanour in the witness box. Thus, when finding that the respondent was a "most impressive witness who was telling it like it was", the Magistrate referred to the respondent's reaction when he was shown a copy of exhibit K and he indicated that he had neither signed anything like it nor had he ever seen such a letter. That needed to be contrasted, the Magistrate found, with the appellant's failure to provide the original of that letter, indicating that it had become lost or wet or was otherwise at the hearing before the Administrative Appeals Tribunal (the AAT). 28Much was made by the appellant before the Magistrate, the primary judge and this Court, of Glen Scott's evidence at the AAT, it being suggested by the appellant that in the AAT proceedings (which involved a taxation issue with respect to the partnership) Glen Scott had agreed that he had no interest in the partnership but had then asserted in his evidence before the Magistrate that he did have such an interest in the assets of the partnership given that the ATO was asserting that the partnership was indebted to it for a substantial sum. 29More importantly, the appellant asserted that the letter, exhibit K, constituted a written agreement between the appellant and the respondent and, further, that that document constituted a partnership agreement to which the respondent was a party. However, his questioning of Glen Scott (who the appellant called in his own case against the advice of the Magistrate) seemed to proceed, at least after the Magistrate queried the basis upon which the appellant could suggest to the witness that exhibit K constituted a written agreement, on the basis that there was no written partnership agreement (only an oral agreement) but that exhibit K was confirmatory of a prior oral agreement with regard to the partnership. Yet the appellant conceded in oral argument before this Court that his case at trial was that the respondent had signed exhibit K, evidence which was not accepted by the Magistrate given the respondent's denial that that was so. 30Similarly, the following exchange occurred: "Q. You've just told the Court and me that the business name Nymboida Native Timbers, or it's abbreviation NNT, was not used in connection with any of the operations of the Scotts' businesses until after it was devised to be used, and that was in October 2004? A. That's not what I said, Mr James. What I said was that I really can't recall the formulation of the name, when it took place, and if I'm proven to be wrong about when it was formulated, well - there's no - there's no intent to mislead or to misrepresent the facts." It is apparent that the Magistrate having heard that evidence took the view that the appellant was changing position; it was open to him to make that finding on that evidence. It was directly relevant to the appellant's credibility. Furthermore, the appellant's submission (referred to below) that the Magistrate's finding that impugned his credibility was purely based upon demeanour was contrary to the fact. 31When it was put to the appellant that there was no evidence of a partnership of which the respondent was a member apart from exhibit K, he responded that the respondent was a partner because his son, Glen represented the family interests which included those of the respondent. The Magistrate considered that that was simply an argument of convenience, manufacturing a partnership agreement with the respondent which on the evidence he was not satisfied ever existed. 32In his written submissions on the appeals the appellant relied heavily on the evidence of Glen Scott at the hearing in the AAT in November 2011 where Glen accepted that it was agreed between the appellant, the respondent and his two sons that the partnership would have access to logs on the Nymboida property. The evidence of Glen Scott upon which the appellant placed particular reliance was in the following exchange: "Who actually did the negotiations, do you recall, in this arrangement that you're talking about? Who did - - -?---The partnership. Yes, for the partnership, who did the talking?---Robert [the appellant]. Robert. But who did he talk to with the other partners, did he talk to you, did he talk to your dad?---He spoke to all three of us." 33The appellant relied upon this exchange as some form of admission at least on the part of Glen Scott that the respondent had agreed to become a partner. I would not regard that evidence as justifying such a finding and nor did the Magistrate. In any event, in his evidence in the Local Court it was never suggested to Glen Scott by the appellant in his extensive cross-examination of him that the respondent was a member of the partnership. Nor was it suggested to him that he, Glen, had said at the AAT hearing that his father was a partner. The respondent denied that he was ever a member of the partnership and his evidence was accepted by the Magistrate. The latter thus made a finding of fact in respect of which no legal error has been demonstrated. Given that in the appellant's written submissions on the appeals he asserted that whether the respondent was a partner was a key issue to the determination of each of his claims, it follows that the refusal of the Magistrate to find the respondent was a partner undermined, to a very large degree, the whole of the appellant's case. 34Underlying the appellant's submissions, both written and oral, on the major issues was his reliance on his own evidence to establish his claims. However, notwithstanding that he accepted there was evidence to the contrary of his, thus resulting in a conflict of evidence, his case on the appeals was that his evidence ought to have been accepted. He was, with respect, unable to appreciate that once there was such a conflict on an issue upon which he bore the onus of proof, it was entirely up to the Magistrate to resolve that conflict and how he resolved it was not appealable. Once the Magistrate accepted evidence (as he did) which indicated that the fact the appellant was seeking to establish was not correct, that was the end of the matter. A refusal to accept his evidence, on a matter on which he bore the burden of proof did not and could not demonstrate error of law on the part of the Magistrate: Azzopardi v Tasman UEB Industries Ltd (1985) 4 NSWLR 139 at 156 (Glass JA).

The Repayment of the D9, Westpac loan and Autocar issues 35Both before the primary judge and this Court the appellant submitted first, that he ran his case in the Local Court on the basis that the agreements in relation to the D9 repayment and the Westpac and Autocar loans were agreements made directly between him and the respondent; secondly, and alternatively, that as the respondent's defence was that in relation to the D9 the agreement was between the appellant and the partnership, then the respondent was a member of that partnership; thirdly, as the two Scott brothers were no longer partners, so that the only extant partner was the appellant, it followed that he was entitled to recover the Westpac and Autocar loans from the respondent as the only surviving partner other than himself. 36In his oral submissions to this Court the appellant agreed that for him to succeed on the Westpac and the D9 claims he had to establish a partnership to which the respondent was a party. Notwithstanding that agreement he then conceded that as he had pleaded the Westpac and D9 issues as involving a loan agreement as between himself and the respondent (and not the partnership), it followed that the partnership had no role to play in the D9 and Westpac loan proceedings but was relevant only to the issue of credit. It can be inferred that the same concession would apply to the Autocar loan issue. The contrary was not suggested. The appellant submitted that if there was a partnership that included the respondent then that would seriously damage the respondent's credit so that where the evidence of the respondent and/or his sons was in conflict with the appellant's own evidence, it negated their evidence with the result that there was a "no evidence situation". It was apparent that the appellant misunderstood the relevant principles; the fact that there is conflicting evidence, which there was on these issues, denies the existence of a no evidence point. 37When this was pointed out to the appellant he contended that notwithstanding that there was a conflict in the evidence as to whether the respondent was or was not part of the partnership, his evidence that he was not was "glaringly improbable" or "contrary to compelling inferences", citing Fox v Percy [2003] HCA 22; (2003) 214 CLR 118 at [29]. 38The appellant's reliance upon Fox v Percy in the respect mentioned has no relevance to a case such as the present where the issue is not whether the Magistrate should have found facts other than those that he did find, but whether, in making the findings he did, he erred in law. Accordingly, the appellant's reliance on Fox v Percy was misplaced. The partnership issue was determined by the Magistrate based upon conflicting evidence which he resolved by accepting that of the respondent and rejecting that of the appellant. There being a conflict of evidence which the Magistrate addressed and determined, it follows that in relation not only to the partnership issue but also the D9 issue and the Westpac and Autocar issues, the Magistrate's findings of fact were not unsupported by any evidence. It follows that no error of law has been demonstrated. 39With respect to the loans issues, both before the primary judge and this Court the appellant relied upon the decision of the High Court in Young v Queensland Trustees Ltd [1956] HCA 51; (1956) 99 CLR 560 that where a loan is admitted, the defendant bears the onus of establishing payment. The appellant sought to assert the further proposition, allegedly following from what was held in Young, that the respondent bore the onus of establishing every allegation of fact in his defence, including payment, even where the loan was disputed. At [22] of her reasons the primary judge rejected that proposition. 40The difficulty faced by the appellant was that in fact the loans were disputed in the defences. The respondent denied that there was any loan agreement between him and the appellant in respect to either the D9, the Westpac loan or the Autocar loan, his evidence with respect to the latter being that he did not know about it. 41The Magistrate did not accept that there was an agreement between the appellant and the respondent in respect of any of these loans and whatever the arrangement was, it was one between the appellant and the partnership. It was in that context that the appellant sought a finding that the respondent was a member of the partnership. In that he failed. It followed that the decision in Young had no application to the facts as found. 42The evidence of the respondent with respect to the Westpac loan was that the agreement was between the appellant and the partnership in that the latter would repay that loan by taking logs from the Nymboida property, selling them, and applying the proceeds to pay off the Westpac debt. This was the arrangement that the Magistrate accepted. There was evidence that entitled the Magistrate to make a finding that the appellant took a certain number of logs from the Nymboida property in satisfaction of the relevant debts. On that basis the burden of proof issue upon which the appellant relied falls away. This is particularly so as there was evidence as to the value of the logs which the Magistrate accepted, finding that the 30 loads of logs, together with the value of work done on a road by the partnership for North Power (now known as Country Energy) utilising the D9, was more than sufficient to repay the price of the D9 paid by the appellant. Whether the Magistrate was right or wrong in the findings he made is irrelevant. They were findings of fact and disclosed no error of law. Accordingly, the repayment of the D9 issue as well as the repayment of the Westpac/Autocar issues must be determined in favour of the respondent.

The Credibility Issue 43I have already said a deal about this issue so that I can shortly summarise the position. The Magistrate rejected the evidence of the appellant with respect to exhibit K. Further, he rejected the appellant's credibility for reasons other than mere demeanour although he relied on what he referred to as "temper tantrums" thrown by the appellant throughout the defence evidence. In any event, as already noted, Fox v Percy upon which the appellant placed much reliance, has no application to a case where the appeal is limited to an error of law. The Magistrate's extensive reasons for rejecting the evidence of the appellant and accepting that of the respondent and his sons cannot and does not give rise to legal error. Although during the course of argument on the appeals the appellant attempted to explain his position with respect to exhibit K, the submissions were irrelevant given the Magistrate's findings which were clearly open to him on the evidence. It follows that the appellant's submissions on the credibility issue must be rejected.

The Veracity of the Business Records Issue 44This issue was relevant only to the issue of the appellant's credibility. He accepted that that was so in the course of argument on the appeals. It was used by the Magistrate in part for that purpose. The evidence of the appellant and the Magistrate's finding was that the appellant had used his own and the partnership bank accounts indiscriminately so that they were not reliable as a record of the partnership's accounts alone. What is to be made of the figures was clearly a matter for the Magistrate. He made no finding of dishonesty but merely that the records were unreliable. They were therefore not available to support the appellant's case with respect to the repayment of the loans. Again this was a finding of fact based on conflicting evidence and thus excludes any error of law. As I have indicated, the appellant accepted that the business records issue was relevant only to his credit. He submitted that he relied on them to support the credibility of his evidence generally. The Magistrate did not accept this submission. It was open to him to do so. No error of law is disclosed. 45Again during the course of oral argument, the appellant sought to argue the facts in an attempt to persuade the Court of a particular factual outcome. He was once again reminded that his task was to persuade the Court that there was an error of law made by the Magistrate which should have been identified by the primary judge. Again he relied upon a no evidence submission. However, it is clear from the Magistrate's findings, particularly his finding that the appellant had changed his position on a number of occasions, that there was ample material to support the Magistrate's finding that the appellant's credibility was suspect. 46To give one example referred to in oral argument: when dealing with the ATO the appellant was required to register the partnership. He said in evidence that he registered it only in the name of himself and Glen Scott notwithstanding that he asserted before the Magistrate that there were four partners including Tim Scott and the respondent. When it was put to him in cross-examination that there was no indication given to the ATO that the respondent was a partner in the business, he replied that that was because Glen Scott was representing the Scott family interests. The Magistrate repeated this explanation when dealing with the partnership issue, finding that it was an argument of convenience. This was just one of a number of examples relied on by the Magistrate as impugning the appellant's credit.

The Indemnity Costs Issue 47As referred to above, on 12 July 2011 the respondent made an offer of compromise pursuant to UCPR r 20.26 offering a verdict for the defendant with each party to bear their own costs. This offer was made upon the filing by the respondent of his defences and before any evidence was filed. The appellant rejected the offer. He submitted to the Magistrate, the primary judge and to this Court that the offer was not a genuine offer of compromise as it required the appellant to, in effect, capitulate and, in any event, it was not unreasonable for him to reject the offer given that no evidence had at that point been filed and the parameters of the dispute were said to have been uncertain at the time the offer was made. 48The appellant did not contend that the offer did not comply with r 20.26 in the form in which it existed as at July 2011. Relevantly, it provided as follows: "(1) In any proceedings, any party may, by notice in writing, make an offer to any other party to compromise any claim in the proceedings, either in whole or in part, on specified terms. (2) An offer must be exclusive of costs, except where it states that it is a verdict for the defendant and that the parties are to bear their own costs." 49The offer in the present case complied with r 20.26(2). As the appellant did not accept the offer, r 42.15A applied. Relevantly it provided as follows: "(1) This rule applies if the offer concerned is made by the defendant, but not accepted by the plaintiff, and the defendant obtains an order or judgment on the claim concerned as favourable to the defendant, or more favourable to the defendant, than the terms of the offer. (2) Unless the court orders otherwise: (a) the defendant is entitled to an order against the plaintiff for the defendant's costs in respect of the claim, to be assessed on the ordinary basis, up to the time from which the defendant becomes entitled to costs under paragraph (b), and (b) the defendant is entitled to an order against the plaintiff for the defendant's costs in respect of the claim, assessed on an indemnity basis: (i)if the offer was made before the first day of the trial, as from the beginning of the day following the day on which the offer was made ..." 50There was no suggestion by the appellant that he sought to take advantage of so much of r 42.15A(2) by applying to the Court to "order otherwise". It accordingly followed that sub-rule 2(a) and (b)(i) applied in terms. It is apparent that the appellant failed to understand the difference between an offer of compromise that complied with the rules and a Calderbank offer in which it may be a live question as to whether it was unreasonable for a party to reject the offer of another party. Under a statutory offer it prima facie matters not whether the rejection of the offer is reasonable. Clearly the rules contemplate an offer by a defendant that there be a verdict in his favour with each party to bear their own costs as occurred in the present case. Issues of reasonableness may arise if there is an application for the Court to "order otherwise" but no such application was made to the Magistrate in the present case. The primary judge rejected the appellant's submissions on this issue and so should this Court.

The Detained Goods Issue 51The Magistrate's findings with respect to this issue may be summarised as follows:

The appellant's claim to the goods or assets of the partnership on the Nymboida property was too uncertain to enable the goods claimed to be properly identified for the purposes of the appellant's claim for their return or value.
Although the goods claimed were partnership property, and were being held on the Nymboida property as they belonged to the members of the partnership (which did not include the respondent), any claim for detinue needed to be against the other partners and not the respondent who simply owned the property upon which the partnership was conducted.
Although Glen Scott at one stage had indicated that he wished to walk away from the partnership, he changed his mind and resisted the removal of the partnership goods from the Nymboida property given that the partners were indebted to the ATO for $160,000 and he wished to retain the partnership assets in order to pay that debt.
Whether the appellant, although a member of the partnership, had any greater right to the possession of the partnership goods than Glen Scott or any of the other partners who wished to retain the goods for the purpose of meeting the partnership's debts was completely unclear.
Although the appellant submitted that all the partnership goods were paid for by him, the Magistrate did not accept that claim given the evidence of Tim and Glen Scott to the contrary (they having given evidence that the relevant items, to the extent to which they could be identified, were purchased with partnership money or belonged to the respondent). Further, the Magistrate recorded Glen Scott's evidence that there were various items of equipment already at the mill when the partnership commenced operating upon the respondent's land and which were claimed by him as his own personal property.
Accordingly no order would be made with respect to the goods claimed by the appellant because who owned the items was contentious and "mired in uncertainty", this being a reference to a claim on those goods by Glen Scott that needed to be sorted out in civil proceedings between Glen Scott and the appellant rather than between the appellant and the respondent. 52It is apparent from a reading of the Magistrate's decision on this issue that he denied the appellant relief as he could not be satisfied as to what goods were properly the subject of the claim. That was sufficient to dispose of it. Furthermore, having found that the respondent was not a partner and that the appellant needed to look to the other partners rather than the person who owned the land upon which the goods were located, it could not be said that that finding disclosed any error of law. 53Glen Scott's evidence accepted by the Magistrate was that although the sawmill belonged to the appellant, the partnership had an interest in the items which made up the sawmill business; that he had a claim on the partnership with respect to the payment of the ATO's debt which was the reason why he wished the goods claimed to remain on the Nymboida property. In other words, the respondent's case was that Glen Scott, as a member of the partnership, rather than the respondent himself, was withholding the goods from the appellant as they were partnership assets required to meet the debt to the ATO. 54Ultimately, the appellant accepted that this was another situation where there was conflicting evidence. When it was then suggested to him that that was the end of the issue, he in effect acknowledged that that was so. Accordingly the appellant's submissions with respect to this issue do not disclose any error of law on the part of the Magistrate.

Conclusion 55In my view each of the issues identified as arising from the appellant's submissions should be resolved in favour of the respondent. Essentially, those submissions did no more than challenge the Magistrate's findings of fact. In respect of each of them there was conflicting evidence as a consequence whereof no error of law could or did arise. In these circumstances I propose that the appeals be dismissed with costs.

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: 03 October 2014

Local Court Act 2007(NSW)ss 39, 40

Supreme Court Act 1970(NSW)s 101(2)(r)

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