Divune Pty Limited v Gould Ralph Services Pty Limited

LOWER COURT Local Court JURISDICTION : LOWER COURT 9442/00 FILE NUMBER(S) : LOWER COURT Magistrate J. Garbett JUDICIAL OFFICER :

IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION

10527/2003 - DIVUNE PTY LIMITED (ACN 003 820 031) v GOULD RALPH SERVICES PTY LIMITED (ACN 002 946 358)

1 HIS HONOUR: By a summons filed on 3 March 2002 Divune Pty Limited, ("Divune"), claims as plaintiff against Gould Ralph Services Pty Limited, ("Gould Ralph") as defendant the following relief: "1) An order pursuant to Section 109(c) of the Justices Act 1902 quashing the verdict and judgment entered for the Plaintiff (the third Defendant and Second Cross claimant below) against the Defendant (the Plaintiff below) on the Second Cross-Claim (below) for $1,379.29 plus interest calculated under Section 39A from 17 March 2000. 2) An order pursuant to Section 109(c) of the Justices Act that the Plaintiff be entitled to have verdict and judgment entered in its favour against the Defendant for the sum of $48,250.98 together with interest calculated under s 39A of the Local Court (Civil Claims) Act 1970 from 17 March 2000. 3) Costs." 2 By a Notice of Cross Appeal filed on 28 March 2003 Gould Ralph claims the following relief: "1. An order pursuant to Section 109 (a) and 109 (c) of the Justices Act 1902, quashing the verdict and judgment entered for the First Cross Respondent (the Third Defendant and Second Cross-Claimant below) for $1,379.29 plus interest, calculated under Section 39A of the Local Court (Civil Claims) Act 1970 from 17 March 2000, against the Cross Appellant (the Plaintiff, Cross-Defendant and Third Cross-Claimant below) on the First Cross Respondent's Cross-Claim. 2. An order pursuant to Section 109(a) and 109(c) of the Justices Act 1902, quashing the verdict and judgment for $8,913.38 plus interest calculated under Section 39A of the Local Court (Civil Claims) Act 1970 from 3 September 2000, entered for the Cross Appellant against the Second Cross-Defendant (the First Defendant below). 3. An order pursuant to Section 109(a) and 109(c) of the Justices Act 1902 that the Cross Appellant be entitled to have verdict and judgment in its favour against the Second Cross-Defendant for the sum of $13,359.38 together with interest calculated under Section 39A of the Local Court (Civil Claims) Act 1970 on $11,474.38 from 28 April 2000 and on $2,085.00 from 3 August 2000. 4. An order pursuant to Section 109(a) and 109(c) of the Justices Act 1902 that the First Cross Respondent's Cross Claim in the Court below be dismissed. 5. An order for costs in favour of the Cross Appellant for the proceedings in the Court below and of these proceedings."

The Proceedings in the Local Court: Pleadings 3 By an amended Statement of Liquidated Claim dated 29 August 2000 Gould Ralph claimed an amount of $13,559.58 plus interest and costs. No less than eight defendants were sued. The first defendant was one Bruce Hogan. The second defendant was Veredi Pty Limited as trustee of the B.M.J. Trust. The third defendant was Divune. The fourth defendant was Hogan Company Pty Limited. The fifth defendant was Janette Anne Hogan. The sixth defendant was Jan Hogan Pty Limited. The seventh defendant was Melanie Jane Hogan. The eighth defendant was Veredi Pty Limited. 4 The amended Statement of Liquidated Claim runs to 23 paragraphs. The claim is made by Gould Ralph for the recovery of fees allegedly due and owing to Gould Ralph, as a chartered accountant, for professional services rendered to Mr. Hogan; or alternatively, rendered to all eight defendants or some combination of them. 5 The claim is made in respect of such professional services allegedly rendered between 1 January 1999 or thereabouts and 31 March 2000 or thereabouts; and between 1 April 2000 or thereabouts and 30 June 2000 or thereabouts. $11,474.38 is claimed as the amount properly payable on account of fees for professional services rendered during the former period; and $2,085.00 is claimed, similarly, in respect of the latter period. By a Notice of Grounds of Defence dated 21 September 2001 all eight defendants pleaded as follows to the Amended Statement of Liquidated Claim: "2. None of the Defendants have ever been issued with an account for professional services rendered by the Plaintiff seeking from them the amount said to be due and owing by each of them individually to the Plaintiff. Further they have not received a statement providing any or any sufficient detail of the work said to have been undertaken for them by the Plaintiff and the cost of that work. 3. The Defendants say that the Plaintiff's claim constitutes an abuse of process and that the Plaintiff has commenced proceedings against each of the Defendants without issuing to each of the Defendants an account specifying the amount said to be due by each of the Defendants setting out what items of work were undertaken by the Plaintiff for each of the Defendants and the costs charged by the Plaintiff to the Defendants for those amounts of work. 4. Further, and in addition, these proceedings have been constituted and instituted by the Plaintiff without formal demands made by the Plaintiff to the Defendants seeking the amounts said to be due and owing by them." 6 In addition, the third and fourth defendants, that is: Divune, and Hogan Company Pty Limited, launched a cross-claim against Gould Ralph. The cross-claim was pleaded thus: "5. The Cross Defendant prepared the annual taxation returns for the Cross Claimants for the financial years ending 30 June 1996, 30 June 1997 and 30 June 1998. 6. For the financial years ending 30 June 1996, 1997 and 1998 the Cross Defendant negligently prepared and incorrectly claimed income tax rebates on unfranked dividends causing an incorrect calculation of the Cross Claimants' taxation liability. 7. As a result of the error of the Cross Defendant the Cross Claimants' tax for the said periods above was underpaid by an amount of $471,062.52 8. Tax underpaid by Divune Pty Ltd ("Divune") amounted to $468,321.00 and tax underpaid by Hogan and Company Pty Ltd. ("Hogan") amounted to $2,741.00. 9. On or about 6 December 1999 the Cross Defendant advised the Cross Claimants of the error that had been made in respect of the Cross Claimants' taxation returns. The Cross Claimants then promptly informed the Deputy Commissioner of Taxation of the error and then were required to and did remit to the Deputy Commissioner of Taxation the tax that had not been paid in the sum of $471,062.52 together with interest claimable by the Deputy Commissioner of Taxation pursuant to the Terms of the Income Tax Assessment Act (1935) (as amended) in the sum of $48,491.20. 10. The interest charged to Divune was $48,250.98 and the interest charged to Hogan was $240.22 10A The Cross Claimants were liable to pay the interest charges referred to in paragraph 10 above under section 170AA or 207A of the Income Tax Assessment Act 1936. 10B The First Cross Claimant claims the sum of $240.22 pursuant to section 251M of the Income Tax Assessment Act 1936 together with costs and interest in accordance with the revisions of section 39A of the Local Court (Civil Claims) Act 1970. 10C The Second Cross Claimant claims the sum of $48,250.98 pursuant to section 251M of the Income Tax Assessment Act together with costs and interest in accordance with the revisions of section 39A of the Local Court (Civil Claims) Act 1970. 10D In the alternative to 10B, as a result of the negligence of the Cross Defendant the First Cross Claimant has suffered loss and damage in the sum of $240.22 and claims that sum together with costs and interest in accordance with the revisions of section 39A of the Local Court (Civil Claims) Act 1970. 10E In the alternative to 10C, as a result of the negligence of the Cross Defendant the Second Cross Claimant has suffered loss and damage in the sum of $48,250.98 and claims that sum together with costs and interest in accordance with the revisions of section 39A of the Local Court (Civil Claims) Act 1970," 7 By a notice dated 29 July 2002 Gould Ralph, as Cross Defendant, pleaded to the Cross Claim. The relevant responses as thus pleaded were: "5. The Cross Defendant denies paragraph 6 of the second further amended notice of cross claim. In further answer to paragraph 6 of the second further amended notice of cross claim the Cross Defendant says that for the above financial years income tax rebates on unfranked dividends were incorrectly claimed causing an incorrect calculation of the Claimant's taxation liability. 6. The Cross Defendant denies paragraph 7 of the second further amended notice of cross claim. In further answer to paragraph 7 the Cross Defendant says that the Cross Claimants' tax for the said periods above were underpaid by an amount of $471,062.52. 7. The Cross Defendant does not admit paragraph 8 of the second further amended notice of cross claim. 8. The Cross Defendant denies paragraph 9 of the second further amended notice of cross claim. In further answer to paragraph 9 the Cross Defendant says that on or about early December 1999 the Cross Defendant advised the First Plaintiff of the error that had been made in respect of the Cross Claimants' taxation returns. The Cross Defendant says that it informed the Deputy Commissioner of Taxation of the error and that the Deputy Commissioner of Taxation required the remittance of the tax that had not been paid in the sum of $471,062.52 together with interest in the sum of $48,491.20. The Cross Defendant further says that penalties totalling $23,416.04 were remitted by the Deputy Commissioner of Taxation after representations by the Cross Defendant and therefore did not have to be paid. 12. In further answer to the second further amended notice of cross claim the Cross Defendant says that any loss which may be proved by the Cross Claimants was caused or materially contributed to by the Cross Claimants' and/or First Defendant's own fault." 8 As if the foregoing pleadings were not sufficiently convoluted, Gould Ralph cross-claimed on 29 July 2002 against Bruce Hogan, the first defendant named in Gould Ralph's original statement of liquidated claim. This further cross-claim sought, put very simply, "contribution and indemnity" from Mr. Hogan in respect of any liability of Gould Ralph to pay moneys to Divune and/or Hogan Company Pty Limited.

The Proceedings in the Local Court: Hearing and Judgment 9 The hearing in the Local Court was prolonged and vigorous. It occupied all, or substantially all, of three hearing days: 13 August 2002, 4 November 2002 and 16 December 2002. It will be necessary to refer later herein to various parts of the evidence given at the hearing. 10 Judgment was reserved; and was delivered on 3 February 2003. The learned Magistrate made the following orders: "1. Verdict and Judgment for the Plaintiff against the First Defendant on the Claim for $8,913.38 plus interest calculated under S 39a from 3 September 2000. 2. Verdict and Judgment for the Third Defendant against the Plaintiff on the Cross-Claim for $1,379.29 plus interest calculated under S 39a from 17 March 2000. 3. The Fourth Defendant's Cross-Claim against the Plaintiff is dismissed. 4. No order as to costs." 11 Divune contends that these orders are unsustainable in law. Divune particularises as follows that contention. "1. The Magistrate erred in law in holding that the Plaintiff's director Mr. Bruce Hogan had, prior to December 1999, become aware that tax returns prepared by the Defendant for and on behalf of the Plaintiff were incorrect and erroneous. i. The finding that Mr. Bruce Hogan became aware of the said error in December 1999, and therefore before the Defendant, notified the Plaintiff of the error, is a finding which is and was not open on the evidence. ii There was no evidence given at the trial indicating that Mr. Bruce Hogan became aware of the error after the time at which he signed tax returns and prior to his being informed of the error by the Defendant in December 1999. iii The proposition that Mr. Bruce Hogan became aware of the error in the forms after he had signed them and prior to the Defendant discovering the error in December 1999 was a proposition which was never put to Mr. Bruce Hogan in cross examination and was contrary to the oral and written submissions of both the Plaintiff and the Defendant and all of the other parties to the dispute. 2. The Magistrate erred in law in finding, as he apparently did, that a claim for "interest" can only succeed under s 251M of the Income Tax Assessment Act 1936 if all of the total interest payable by the tax payer as calculated and charged by the Commissioner of Taxation was attributable to the negligence of the Defendant in its capacity as a registered tax agent. 3. Although the Magistrate found that the Defendant had acted negligently and breached its duty as a registered tax agent he did not make an apportionment for liability in favour of the Plaintiff in respect of its claim under s 251M of the Income Tax Assessment Act 1936. The Magistrate held that some part of the loss arose from the negligence of the Plaintiff through its servant or agent Mr. Bruce Hogan who had become aware of the error in the returns prior to December 1999. 4. The Plaintiff says that the finding as to knowledge on the part of its servant or agent Mr. Bruce Hogan was not open on the evidence and, secondly, that even if it was open that a portion of the damages attributable in negligence should have been payable by the Defendant to the Plaintiff in accordance with the provisions of Section 251M of the said Act." 12 Gould Ralph, too, contends that the orders made in the Local Court are erroneous in law. Gould Ralph particularises as follows that contention: "1. That each of the following of His Worship's findings: 1.1 that the Cross Appellant had made a mistake in the preparation of the First Cross Appellant's income tax returns; 1.2 that the sum of $3,186.00 represented an additional appropriate deduction from the debt His Worship found was due and payable by the Second Cross Respondent to the Cross Appellant; 1.3 that computer entries that His Worship referred to as being under "Tax 1999" for "Mr. Glen Harris" related to the said mistake; 1.4 that the sum of $960.00 was referable to the said deduction; 1.5 that the Second Cross Defendant requested no work to be performed by the Cross Appellant after 12 May 2000, and 1.6 that the sum of $500.00 was referable to work done by the Cross Appellant after 12 May 2000. were findings which are properly regarded as errors of law in that there was no evidence before His Worship that was capable of supporting the said findings. 2. His Worship's findings that there was no evidence that Brenda Cheng made inquiry or further inquiry as to how the dividends should be treated for tax purposes was against the evidence and constitutes an error of law. 3. There was no evidence before His Worship as would allow a finding that the Cross Appellant negligently completed the income tax returns or had failed in a duty it owed to the First Cross Respondent and the findings constitute an error of law. 4. His Worship's finding that the Second Cross Respondent was not aware of an error in the income tax return before the lodgement of the return was against the evidence and constitutes an error of law. 5. His Worship's finding that in the common law negligence claim there should be no set-off for income earned by the Second Defendant below on funds loaned to it by the First Cross Respondent constitutes an error of law. 6. His Worship's order that there be an order for costs constitutes an error of law in that such order was not a proper exercise of a discretion, and the general rule that costs follow the event should not be departed from except in exceptional circumstances. The verdict and judgment entered for the Cross Appellant in the sum of $8,913.38 of the $13,359.38 claimed was a successful outcome for the Cross Appellant in that it recovered a substantial and major proportion of the debt it claimed was due. 7. In the circumstance of an almost complete rejection of the First Cross Respondent's Cross Claim by His Worship, the dismissal of the Fourth Defendant's below Cross Claim against the Cross Appellant and in circumstances that the sum recovered on the First Cross Respondent's Cross Claim would not have exceeded the jurisdiction of the Small Claims Division of the Local Court, the appropriate order was that the Cross Appellant be awarded costs. 8. Such other grounds as become apparent once the transcript of evidence becomes available."

The Present Appeal: Preliminary Considerations 13 The appeal is governed by section 69(2) of the Local Courts (Civil Claims) Act 1970. As it stood at the times relevant for present purposes, section 69(2) provided: "(2) A party to proceedings under this Act who is dissatisfied with the judgment or order of the Court as being erroneous in point of law may appeal to the Supreme Court therefrom." 14 In Carr v Neill (l999) NSWSC 1263, I examined some of the practical consequences of the statutory limitation for which section 69(2) thus provided. I have no reason to depart from what I there explained. I need not now repeat the detail of that explanation.

The Present Appeal: the Reasoning of the Learned Magistrate 15 By the time the evidence in the Local Court had reached its conclusion, the following findings of fact were, in my opinion, plainly open to the learned Magistrate:

That Mr. Hogan was in every practical sense the guiding force in all of the commercial affairs of Divune. Mr. Hogan's own evidence accepted that he stood, in relation to the affairs of Divune, in the position of "interface" ; "operative" ; "initiator" ; and the person who normally "would recommend" what commercial decisions should be taken by Divune. It is true that Mr. Hogan was at pains to suggest that his freedom to manage the affairs of Divune was subject to some sort of veto by his then wife; but the learned Magistrate clearly regarded Mr. Hogan as having been, in every practical sense, the person who ran Divune. His Worship, in reaching that conclusion, had the benefit of his observations of Mr. Hogan. This finding of fact was clearly open and is beyond present challenge.

That Mr. Hogan was, in a more general sense, a seasoned man of affairs in the worlds of corporate management and of entrepreneurial investment.

That, in so far as Gould Ralph might be entitled to recover a sum of money on account of unpaid professional fees, it was proper to order that the payment be made by Mr. Hogan himself. The learned Magistrate expressed his satisfaction that "(Mr. Hogan) personally requested the services. It was only at a later date that the issue of allocation of particular charges to particular companies and individuals arose" . Mr. Gould, of Gould Ralph, gave evidence as to relevant accounting practice: see in particular T, 13-8-02 at 9. The learned Magistrate was entitled to accept this evidence. The evidence, once accepted, strengthened the finding of fact previously quoted from his Worship's judgment.

That Gould Ralph prepared for Divune taxation returns which under-estimated by an amount of $471,062.52 the amount properly payable to the Commissioner of Taxation.

That the source of that error was an incorrect claim for income tax rebates on unfranked dividends.

That Mr. Hogan had provided to Gould Ralph in connection with the preparation of the relevant taxation returns a mass of accounting and financial material, including material bearing upon the correct identification of relevant franked, and relevant unfranked, dividends.

That Mr. Hogan had provided, also, to Gould Ralph his own estimate of the relevant taxation liability, that estimate being in the order of $900,000.00

That by December 1999 the error had been discovered by Gould Ralph; had been notified by them to Mr. Hogan; and had been taken up by Gould Ralph with the Commissioner of Taxation.

That Divune was required to pay interest to the Commissioner of Taxation; but was excused by the Commissioner from any liability to pay penalty tax. 16 There remained for his Worship's decision a number of issues both of fact and of law. The decisions actually made by his Worship upon those issues give rise to the alleged errors of law that are relied upon by both of the parties before this Court. 17 The first such remaining issue concerns the entitlement of Divune to some proper reduction of the fees otherwise properly payable to Gould Ralph. The entitlement is said to be justified by a need to recognise in some fair way the error of Gould Ralph in having prepared the relevant erroneous returns. 18 The evidence before the learned Magistrate proved the rendering of two invoices for professional fees:

1. An invoice for $11,474.38. It was dated 28 April 2000. It was referable to the period 1 January 1999 - 31 March 2000.

2. An invoice for $2,085.00. It was dated 3 Augusut 2000. It was referable to the period 1 April 2000 - 30 June 2000. 19 It was clear enough that invoice 1 had allowed a discount of $2,814.00 in respect of work occasioned by the correcting of the errors in the relevant taxation returns. The question for decision by the learned Magistrate was whether Gould Ralph had established on the probabilities that no additional discounting of its claim was warranted. 20 The learned Magistrate decided this issue adversely to Gould Ralph. His Worship did so:

1. By increasing from $2,814.00 to $6,000.00 the amount to be discounted from invoice 1;

2. By deducting from invoice 1 a further $960.00 which appeared to his Worship to be referable to Gould Ralph's mistake;

3. By reducing the invoice 2 by an amount of $500.00 because of his worship's view that the evidence did not establish affirmatively on the probabilities that Mr. Hogan had instructed Gould Ralph to do any work at any time after 12 May 2000. 21 Before considering, as it is necessary now to do, whether these decisions of the learned Magistrate are sustainable in law, it is pertinent to re-state some basic principles concerning the duty of a judicial decision-maker to give proper reasons for any ultimate decision. 22 A convenient starting point is the following extract from the judgment of Stein JA, (Handley and Maher JJA concurring), in Jung v Son, unreported, NSWCA 18 December 1998: "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 plaintiff's 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). 23 The decision of the Court of Appeal in Pettit v Dunkley, to which Stein JA refers, is the conventional point of reference for any discussion of a judicial duty to give proper reasons for any particular decision. It suffices to quote from the judgment of Asprey JA at 382 C-E: "In my respectful opinion the authorities to which I have referred and the other decisions which are therein mentioned establish that where in a trial without a jury there are real and relevant issues of fact which are necessarily posed for judicial decision, or where there are substantial principles of law relevant to the determination of the case dependent for their application upon findings of fact in contention between the parties, and the mere recording of a verdict for one side or the other leaves an appellate tribunal in doubt as to how those various factual issues or principles have been resolved, then, in the absence of some strong compelling reason, the case is such that the judge's findings of fact and his reasons are essential for the purpose of enabling a proper understanding of the basis upon which the verdict entered has been reached, and the judge has a duty, as part of the exercise of his judicial office, to state the findings and the reasons for his decision adequately for that purpose. If he decides in such a case not to do so, he has made an error in that he has not properly fulfilled the function which the law calls upon him as a judicial person to exercise and such a decision on his part constitutes an error of law." 24 In a case of the present kind there are applicable additional, and complementary, principles of law. 25 The first such principle can be taken conveniently from the judgment of Dixon CJ in Hampton Court Limited v Crooks (1957) 97 CLR 367 at 371, 372: "But a plaintiff is not relieved of the necessity of offering some evidence of negligence by the fact that the material circumstances are peculiarly within the knowledge of the defendant; all that it means is that slight evidence may be enough unless explained away by the defendant and that the evidence should be weighed according to the power of the party to produce it, in accordance with the often repeated observation of Lord Mansfield in Blatch v Archer (1) : cf Parker v Paton (2); Ex parte Ferguson; Re Alexander (3)." [emphasis added] 26 The second such principle can be taken conveniently from the judgment of Mahoney JA in Linsell v Robinson (1976) 1 NSWLR 249 at 259 C-E: "The defendant's argument illustrates the attempt, frequently made in cases of this kind, to make a finding of fact where no finding can be made, or to make a finding in more precise terms than the evidence or the nature of the case will permit. If that which is attempted is the prediction, from the evidence at the trial, of what will, as a matter of probability, happen in the future, it may be that from what now exists and from the experience of mankind (as to human habits, economic conditions, or the like) the inference can be drawn that something is more probable than not. It may be that the only inference that can be drawn is that there are several possibilities, and that it is more probable than not that one or other of those possibilities will occur. Or it may be that the uncertainties are such that all that can be said is that there are certain possibilities, and that whether they or any of them will occur cannot be said to be more probable than not: it may be that all that can be said is that as to the future nothing can be predicted except in general terms. I am conscious that, in the assessment of damages, there is necessarily involved something approaching guesswork, rather than estimation as to future events: See Jones v Schiffman (13). But, in my opinion, to determine a particular sum as the average weekly loss in such a case as the present would go beyond this. In my opinion, what can be done in such a case is merely to determine that the plaintiff's future will be uncertain in this regard and, in so far as it can be estimated, the degree of uncertainty; and to take this into account as a factor in assessing an overall sum by way of compensation." 27 The importance for present purposes of this statement of principle lies in the fact that Mahoney JA was speaking of the permissible process of reasoning in an action at law for unliquidated damages. The common law has always allowed, in such cases, an element of what Mahoney JA calls "something approaching guess work". It seems to me, however, that in a liquidated claim in contract there is no such scope. So much seems to me to follow from principles stated in two authorities of long standing which are referred to in the Supreme Court Practice at [7.4.2]. Those principles are stated thus: "The essential concept is also illustrated by Palles CB in Stephenson v Weir (1879) LR Ir 369, in a passage that was followed in Whelan v Kelly (1884) 14 LR Ir 387 at 373 as follows: 'When it was said that an action of debt would lie only for a sum certain, it was sufficient that the sum should be capable of being ascertained by a jury by positive data and not merely measured by opinion or conjecture. In the present case, for instance, when the value of the work was ascertained, the sum to be recovered became definite, and the case would not be like one of assault in which there were not any certain date to fix the amount of damages."

And see also Paterson v Wellington Free Kindergarten Association Incorporated [1966] NZLR 468 per Barrowclough CJ at 471(18)-(56); and on appeal at 981(30)-982(25). · The third, and final, such principle derives from various attempts by appellate Courts to refine the broad obligation, as established by Pettit v Dunkley, to give reasons for a judicial decision. The judgments of Kirby P, of Mahoney JA and of McHugh JA in Soulemezis v Dudley (Holdings) Pty Ltd are, with respect, illustrative of the conceptual difficulties to which such attempted refining can give rise. The majority judgments of Mahoney and McHugh JJA seem to me to support the proposition that in a case at first instance, when there is no appeal save on a question of law, an erroneous or perverse finding of fact cannot amount to an error of law merely because it is erroneous or perverse; but it might be vulnerable on appeal if the ground for the finding is not articulated clearly. And further, articulating the ground does not require the articulation of a precise syllogistic process of reasoning that leads to the stated finding. 28 All of the foregoing principles having been set in place, it is possible to proceed to a consideration, in the light of those principles, of the three decisions summarised in paragraph [20] ante. · As to the decision to increase the fees discount allowed by Gould Ralph from $2,814.00 to $6,000.00. 29 The learned Magistrate expresses his findings as follows: "The Plaintiff submits that its computer records support Mr. Gould's evidence that the Defendants were not charged for "repair" work carried out by the Plaintiff to correct the relevant tax returns and make relevant submissions to the Australian Taxation Office. The records and invoice confirm that the time-cost charge of $14,070.00 was reduced by $2,814 to $11,256.00. This makes the above-quoted recital somewhat confusing. The Plaintiff's time-cost records support the invoice for $2,085.00. Unfortunately the computer records are significantly undetailed, as are the client's invoices. I find it more than probable, on all the available evidence, that several of the entries under the heading "General" in Exhibit One (Annexure "A") relate to the mistake made in the tax returns prepared by the Plaintiff. With the state of the evidence as it is, it is simply not possible to make calculations that are totally accurate, but the onus is on the Plaintiff to prove its case. I am not satisfied that the discount of $2,814.00 fairly and accurately reflects work relating to the error concerning the franking credits. Under the heading "General" in Exhibit One (Annexure "A"), the description of the entries and their dates suggest charges of at least $6,000.00 relate to the mistake. This is reinforced by the recitals in the 28 April 2000 invoice quoted above. These charges should not be the Defendants' liability because they arose from the Plaintiff's mistake. A further credit of $3,186.00 should be allowed in favour of the Defendants." 30 The evidence before the learned Magistrate on the issue of a proper discount came, essentially, from a written statement made by Mr. Gould. The relevant parts of that statement are: "Following the production of annexure "A" the billing memorandum was completed. Annexed hereto and marked "B" is a copy of the billing memorandum. The document was completed by Ms Brenda Cheng and approved by me. In the billing memorandum the time cost balance was $14,288.38. This was reduced to $11,474.38 including disbursements. I decided to reduce the billing memorandum to $11,474.38. The reduction was for the work done by the plaintiff to liaise with the Australian Taxation Office in connection with underpaid income tax because of the error concerning the franking credits and the costs associated with us drawing the Australian Taxation Office's attention to the mistake in the returns as well as achieving the remission of penalties in connection with the third and fourth defendants." 31 Annexure A to Mr. Gould's statement comprises three pages. Each page contains a deal of closely typed items of costed professional service. Each page contains, as well, a deal of hand-written material: a very great deal in the cases of pages 1 and 3 of the Annexure. It seems clear enough from the oral evidence given in the Local Court that these hand-written additions were made by various principals or employees of Gould Ralph. Two of them, Mr. Barnett and Miss Chang, gave evidence at the Local Court hearing. 32 There are listed under the heading "General" thirty-seven separate items. The earliest date given for an item is 2 June 1999; and the latest such date is 31 March 2000. Twenty of the items are allocated to Mr. Barnett; six are allocated to Miss Cheng (to whom the Local Court transcript of evidence refers as "Chang") and the remaining eleven are allocated variously among six-named persons. 33 Most of the thirty-seven items are accompanied by brief individual descriptions. Some of these are reasonably clear; some are ambiguous; and some are practically incomprehensible. 34 The thirty-seven items total $7,107.00. Having read and re-read the relevant parts of the cross-examination of Mr. Gould, of Mr. Barnett and of Miss Cheng, I am wholly unable to see any evidence that answers coherently, or indeed at all, these questions:

[1] How did Mr. Gould calculate the fee discount of $2,814.00 that he undoubtedly approved?

[2] What additional item(s) in Annexure A did Mr. Hogan contend should have been either deducted or discounted because of the need to correct the errors in the relevant taxation returns?

[3] What additional item(s) in Annexure A did Mr. Hogan contend should have been either deducted or discounted because the itemised service, as claimed, had not been rendered either in whole or in part? 35 There was some cross-examination of Mr. Gould upon the items under the heading "General": see T 23-26 for 13 August 2002. The results were anything but clear. It was consistent with that evidence that many of the items were, at least on the probabilities, related to the correction of the taxation return errors. There was, however, no attempt to identify the items precisely; or to put to Mr. Gould, (or, for that matter, to Mr. Barnett or Miss Cheng), that some further discounting should have been allowed. The pleadings were, of course, of no help at all on the issue. 36 It seems to me, therefore, that upon any or all of the following grounds the learned Magistrate's decision cannot be supported.

[1] The finding that a discount greater than that allowed in the account as rendered should be made, was wholly unsupported by evidence;

[2] Insofar as there was evidence to the contrary, it was general and speculative, and to translate such evidence into a figure of $6,000.00 did not involve any process of reasoning, but involved, rather, the arbitrary plucking of a figure out of the air;

[3] The learned Magistrate was obliged to expose, at the very least, a process of reasoning sufficient to disclose the evidentiary basis for his choice of $6,000.00, even if his Worship did not disclose in any more precise or extended way the detail of that process; and the stated reasons do not satisfy that legal requirement. 37 I have concluded, therefore, that his Worship fell into error in his decision to reduce the amount of Gould Ralph's verdict by $3,186.00. · As to the decision to deduct a further $960.00 38 The learned Magistrate's decision is expressed thus: "Similarly, the computer entries under "Tax 1999" for "Mr. Glen Harris" appear to relate to the same mistake. They were not satisfactorily explained and a further reduction of $960.00 should be made." 39 The items there referred to appear on page 2 of Annexure A under the heading: "Tax 1999". The detail shown is:

18/01/2000 Mr. Glen HARRIS 15.00 600.00 TAX REVIEW 20/01/2000 Mr. Glen HARRIS 4.00 160.00 TAX QUERIES RE 1999 21/01/2000 Mr. Glen HARRIS 4.00 160.00 TAX QUERY & LETTER 21/01/2000 Mr. Glen HARRIS 1.00 40.00 DISCUSS AMENDMENTS

40 Somebody, unidentified so far as I can see from the evidence, has bracketed the items; has written beside each item an amount equal to one-half of the printed amount; and has written: "Bruce/BJM Trust 50 = 50". 41 The learned Magistrate's proposition that the claimed items "were not satisfactorily explained" is, in my opinion, a conclusion that was open to his Worship given that the only relevant evidence of substance was given in cross-examination by Mr. Gould. That evidence was: "Q. Then the majority of the next page, we've got at the top there are some things that appear to be administrative, then a bracket "Tax 1999". A. Mm'hm Q. If we go to the bottom of that we've got a number of entries. If we start with the fifth entry from the bottom there's "Tax review" and then "Tax queries re 1999", then, "Tax query and letter", "Discuss amendments". Those relate to the tax problem that was the subject of discussions at that time wasn't it? A. Probably not. Q. Why was that? A. Because I would have thought Glen Harris would have had no involvement with that. This would relate to the ongoing general work of Mr. Hogan. Q. What would he have had to do with tax queries? A. I don't know but the tax office often raised queries. There are a lot of returns here. Q. Mr. Gould, the only tax review at that point in time was in relation to this claim for dividends wasn't it? A. No, the tax review is a term we use in terms of just checking the returns are satisfactory prior to lodgement. Q. Is Mr. Harris a senior accountant at your firm? A. He is. Q. His rates are the same as Ms Chang's rates? In fact, a little lower than Ms Chang's rates are they? If you look at the document Ms Chang's charged out at $42 an hour. A. Yes. Q. Mr. Harris is charged out at $40 an hour. A. Yes. Q. Yet, he has spent 15 hours in fact reviewing Ms Chang's work. Is that your evidence today? A. I don't know without asking Mr. Harris exactly what he's done but I'm certain he has done nothing to do with the proposition you are putting forward. Q. Would it normally be the case that somebody charging at a lower rate checks the work of somebody charging out at a higher rate? A. It would be unusual but in this particular case possible. Q. Your evidence is that you don't know what work that relates to. A. I'm not certain what work it relates to, correct. Q. We don't get an opportunity to see Mr. Harris in these proceedings do we? A. No." 42 In my opinion, it has not been shown that the learned Magistrate erred in holding that Gould Ralph, challenged to justify these figures, had failed to establish on the probabilities that their claim was a proper one. · As to the decision to deduct $500 from Invoice 2 43 The findings of the learned Magistrate are expressed very briefly: "The First Defendant denies that he instructed the Plaintiff to do any work after 12 May 2000. The evidence is not conclusive and the Plaintiff must prove its case. I make a reduction of $500 to the Plaintiff's account dated 3 August 2000." 44 The written evidence from Mr. Gould was: "Between on or about 1 April 2000 and 30 June 2000 various other specialised financial advice unrelated to the issue of the franking credits was provided to the first defendant and entities associated with him by me with Brenda Cheng and others providing ongoing accounting and secretarial services at the first defendant's request. When it came time to prepare the memorandum of fees the WIP was generated. Annexed hereto and marked "D" is a copy of the WIP. The billing memorandum was completed. Annexed hereto and marked "E" is a copy of the billing memorandum. The billing memorandum was prepared by Ms Christine Shean and approved by me. On or about 3 August 2000 a memorandum of fees was prepared and sent to the first defendant. Annexed hereto and marked "F" is a copy of the memorandum of fees." 45 The written responses from Mr. Hogan were: "In about late 1995 or early 1996 I requested that the plaintiff prepare financial documents and the taxation returns for the financial year ended 30 June 1995 for the second, third and fourth defendants. On individual occasions in about late 1996, 1997 and 1998 I requested the plaintiff, on behalf of the second, third and fourth defendants, to prepare financial documents and tax returns for those companies using the financial records I provided to the plaintiff. In late 1999 I requested the plaintiff, on behalf of the second, third and fourth defendants, to prepare tax returns for those companies using the financial records I provided to the plaintiff. All of those tax returns were in fact prepared by the plaintiff for those companies. I recall that in about late 1995 and in 1996 I met with Dorothy Lewis in regard to Hogan & Company and on the other occasions I met with Ms Brenda Cheng. Both Ms Lewis and Ms Cheng were, as far as I was aware, chartered accountants employed by the plaintiff. In 1996 I asked Brenda Cheng if she would not mind lodging Melanie Hogan and Jan Hogan's tax returns electronically on the basis of figures I provided. I asked in the context of doing me a favour as the returns were quite simple and well below her skill base. She did this for 1995/96 to 1998/99, I am not familiar with any work Brenda Cheng did for Jan Hogan Pty Limited but believe she lodged the company's 1998 and 1999 returns. In about early 2000 I requested that Mr. Gould give me some advice and draft some documents in relation to my removal as appointor of the BJM Trust. I requested this work be carried out for me personally, that is, not for any company. I requested the work be performed by Mr. Gould personally and as far as I am aware this is what occurred. On about 12 May 2000 I received a letter from Mr. Gould enclosing a draft Deed of Amendment in relation to my replacement as appointor of the BJM Trust. A copy of that letter is at BH.15. At about the same time I requested from Brenda Cheng the copies of tax assessments referred to in paragraph 10. I am not aware of any work carried out by the plaintiff for me personally after that time and I deny any work was carried out for me personally after that time. I also recall that in about late 1999 Mr. Barnett, an accountant employed by the plaintiff, contacted me in relation to proposed changes in legislation in relation to intercompany loans. He suggested I make an appointment to see him. That appointment was made and I met with Mr. Barnett but I do not recall any specific work being requested to be undertaken by Gould Ralph as a result of the meeting. Indeed no further inter-entity loans were undertaken. I did not to the best of my knowledge, at any time, either on my own behalf or on behalf of any of the other defendants in these proceedings, request that the plaintiff carry out any other work or perform any other services for me or for any of the other defendants in these proceedings, other than the work referred to in the preceding 5 paragraphs in the statement. In relation to Annexure A, I am unaware of much of this work ever having been done. I have never seen this document before and dispute whether the work was carried out as set out in the document." In relation to Annexure D, I am unaware of much of this work ever having been done. I have never seen this document before and dispute whether the work was carried out as set out in the document. 46 Mr. Gould was not cross-examined in any way suggestive of his not having had any retainer, whether for Mr. Hogan personally, or from Mr. Hogan for some one or other of the various entities that Mr. Hogan effectively controlled. 47 The learned Magistrate made a clear and distinct finding that, insofar as Gould Ralph were entitled to recover on account of their professional fees for professional services rendered, they were entitled so to recover against Mr. Hogan personally "because I am satisfied he personally requested the services". This finding was, in my opinion and as I have previously said at paragraph [ 15 ], clearly open to his Worship. 48 It must follow, therefore, that as to work charged out as having been done after 12 May 2000, his Worship had to decide:

[1] whether Gould Ralph had established on the probabilities that the work had in fact been done; and, if so

[2] whether Gould Ralph had established on the probabilities that the work had been done pursuant to instructions from Mr. Hogan; and, if so

[3] whether the amount charged out was challenged as either being more than a precisely agreed charge; or as unreasonable upon some other basis. 49 There was not, so far as I can see, a scintilla of evidence capable, if accepted, of establishing on the probabilities that the work had not been done. Neither was there any challenge of the kind noted at point [3] above. 50 In those circumstances, it seems to me that there were only two practical possibilities. One was that Gould Ralph had done the work, as it were on a frolic of their own. The other was that they had done the work pursuant to a continuing retainer from Mr. Hogan personally. The probabilities seem to me to have been all one way. If his Worship was of the contrary view, then it was incumbent upon him to explain where he saw such evidentiary inconclusiveness as would support a finding that Gould Ralph had not discharged the onus of proof. 51 Even if that approach be incorrect in principle, there is, so far as I can see, no item(s) in the relevant work-in-progress sheet; and no evidence or analysis otherwise, to support the figure of $500. 52 In my opinion the learned Magistrate erred in law in making the $500 deduction from invoice 2. · As to the ultimate resolution of the first issue for this Court 53 In my opinion Gould Ralph should have recovered: · On Invoice 1: $11,474.38 less $960.00, i.e. $10,514.38 · On Invoice 2: $2,085.00 · On both Invoices: $12,599.38 54 The second such remaining issue concerns the entitlement of Divune to recover from Gould Ralph the amount of interest paid by Divune to the Commissioner of Taxation. The amount so paid was $48,491.20 but the claim actually pressed in the Local Court was for $40,000.00, the limit of that Court's jurisdiction. 55 Divune's claim was pleaded, as previously herein noted at paragraph [6], upon two alternative bases. The first basis was a statutory entitlement predicated upon section 251M of the Income Tax Assessment Act 1936 (C'th), (the Tax Act). The second basis was a common law entitlement predicated upon common law negligence. 56 Section 251M of the Tax Act, as in force at the material times, provided: " 251M(1) If, through the negligence of a registered tax agent, or of a person exempted under section 251L, a taxpayer becomes liable to pay a fine or other penalty, any additional tax or any interest under section 170AA or 207A, the registered tax agent, or the person, as the case may be, shall be liable to pay to the taxpayer the amount of that fine or other penalty, additional tax or interest, and that amount may be sued for and recovered by the taxpayer in any court of competent jurisdiction." 57 There is authority in this Court for the propositions:

1. That section 251M creates a statutory cause of action which is independent of any concurrently available cause of action based upon common law negligence;

2. That the amount properly recoverable in a section 251M action cannot be reduced because of the particular plaintiff's contributory negligence;

3. That a plaintiff who establishes concurrent entitlements to section 251M damages, and to common law damages for negligence, will be awarded the greater of the two entitlements.

See per Dunford J in Pech v Tilgals (1994) 94 ATC 4206. 58 I respectfully agree with Dunford J. 59 The learned Magistrate found, on the probabilities, that Gould Ralph had been negligent in the preparation of the 1996, 1997 and 1998 returns. I do not see why this finding of fact was not open to his Worship. 60 His Worship then proceeded to the following findings of fact: "In cross-examination the First Defendant variously described his role and function in relation to the operation of the Third Defendant: "I was the interface", "I was the operative", "… I was the initiator", "I would recommend" . His directorships, his close involvement with the Third and Fourth Defendants, the large amount of tax involved in the 1998 error, his wide commercial and financial experience and close knowledge of the various relevant commercial entities indicated by his evidence generally and in his preparation of accurate draft trading accounts, convinces me on the balance of probabilities that, while he was not aware of the error at the time of the tax returns' lodgement in or about 1 December 1998, he did become aware of the 1998 error sometime before the Plaintiff. His failure to then take any remedial action with the Plaintiff or at all meant that the matter remained unresolved until it was uncovered by the Plaintiff in December 1999. Had remedial action been taken earlier than December 1999, a lower interest charge would have applied. It cannot then be said that the $48,491.20 interest liability arose through the negligence of the Plaintiff . Causation has not been proved." 61 In my opinion the learned Magistrate's findings of fact concerning Mr. Hogan's knowledge, pre-December 1999, that an error had been made at least in the 1998 return, were findings of fact open to his Worship on the evidence. It seems to me to be obvious that these findings of fact depend in large part upon his Worship's assessment of Mr. Hogan, whom his Worship saw and heard at length. It is, in my opinion, trite that this Court should not lightly set aside such findings; and I am unpersuaded that this Court should in fact now interfere with the findings. 62 As to the learned Magistrate's ultimate conclusion that "(c)ausation has not been proved", the relevant principles are summarised in the following extract from: Higgins: Elements of Torts in Australia, at p 241: " It follows that once it has been determined that the defendant's breach of duty is relevant the question whether or not it was an effective cause of the damage suffered by the plaintiff depends upon what inference the court is prepared to draw from the evidence. In the case of a trial by jury the question is purely one of fact and even where the action is tried before a judge alone it remains a question of fact. Therefore, the criterion of causation cannot be regarded as a matter of legal principle so that the finding of a trial court, whether it consisted of a judge and jury or a judge alone, that the defendant's breach of duty was or was not an effective cause of the damage suffered by the plaintiff will not as a rule be reversed by an appellate court, unless, as in Lindeman Ltd. V Colvin , there was no evidence at all to support its conclusion." 63 Divune carried the burden of proof on the probabilities that Gould Ralph's negligence had in fact caused the entirety of the claimed loss. This burden it failed to discharge. In my opinion the learned Magistrate has not been shown to have erred in law in his Worship's ultimate conclusion on the section 241M claim. 64 In connection with the common law claim, the learned Magistrate's essential reasoning is stated thus:` "I have already found that the Plaintiff was negligent in the preparation of the relevant tax returns. I have also found that the First Defendant became aware of the error some time after the 1998 returns were lodged and before the Plaintiff discovered it in December 1999. I am unable to find on the balance of probabilities that the Plaintiff's negligence caused the interest liability for the 1998 returns because it is not possible to say exactly when the First Defendant made the discovery and whether any interest liability would have arisen if the discovery was made in late 1998 or early 1999, at least in relation to the 1998 returns. In relation to the interest for the 1996 and 1997 returns, I am satisfied that the Plaintiff's negligence caused the interest liability up to the 30 November 1998. The Third Defendant should recover the interest paid by until (sic) that date, but only the loss actually incurred after taking into account that the interest is tax-deductible. Total tax underpaid for 1996 and 1997 is $22,264.20. I calculate interest paid to the Commissioner of Taxation on this amount at 9.75% p.a. is $4,322.46. I accept Mr. Barnett's evidence that the after-tax interest rate is 6.25%. I calculate total interest calculated at 6.25% p.a. on the outstanding 1996 and 1997 tax at $2,770.80. For the reasons set out above, I deduct from the latter amount interest at 6.25% p.a. for the 12 months from 1/12/98 to 30/11/99, namely $1,391.51, leaving a balance of $1,379.29." 65 Given the learned Magistrate's antecedent findings about Gould Ralph's negligence; and about the relevant knowledge, and therefore any relevant contributory negligence, on the part of Mr. Hogan; I am unpersuaded that this reasoning is wrong in law. 66 I have concluded, therefore, that the learned Magistrate's award of $1,379.29 should not be disturbed.

Conclusions and Orders 67 The relevant powers of this Court in connection with the final determination of the present proceedings are contained in section 109 of the Justices Act 1902 (NSW). In practical terms, this Court can either vary the orders made in the Local Court; or remit the proceedings to the Local Court to be there re-heard and re-determined in accordance with the opinions expressed by this Court. 68 The amounts at stake in the present proceedings do not seem to me to be such as to justify a remitter to the Local Court, with all that would be thereby entailed as to further time and costs. 69 Subject to the resolution of the questions thereby arising as to costs, I propose to vary the orders of the Local Court so as to give effect to the views expressed in the present judgment. 70 In the Local Court no order was made as to costs. The reasons of the learned Magistrate were stated thus: "In normal circumstances costs will follow the event. An order for costs is discretionary. The court was formally notified of an offer of settlement made by the Defendants. That involved the withdrawal of all proceedings, the Plaintiff to pay the Defendants' costs. I take that into account. It was the Plaintiff's mistake that founded the whole proceedings. Its claim has been substantially reduced. The Third Defendant has succeeded on its Cross-Claim but its claim has also been substantially reduced. The Fourth Defendant's Cross-Claim which is dismissed was minimal. It is not appropriate to make a costs order for or against any party." 71 I see no error of law in this approach. I observe that the so-called offer of settlement made by Mr. Hogan and his co-defendants in the Local Court was in truth no offer of compromise at all, but an unvarnished call for an unconditional surrender. The learned Magistrate adverted, correctly, to the discretionary nature of a costs order. It is trite that this Court ought not lightly to interfere with the exercise of that discretion; and I am unpersuaded that cause has been shown for any interference with either of the orders numbered 3 and 4 made in the Local Court. 72 The conclusions which I have outlined in this judgment entail that Divune's appeal has failed; and that Gould Ralph's cross-appeal has succeeded to the extent of increasing from $8,913.38 to $12,599.38 the amount of the judgment given in its favour by the Local Court. 73 The result is in substance an overall success for Gould Ralph, That being so, I can see no just cause for depriving Gould Ralph of its costs in this Court. 74 I make therefore the following orders:

(1) The appeal of Divune Pty Limited against order 2 of the orders of the Local Court is dismissed with costs.

(2) The cross-appeal by Gould Ralph Services Pty Limited is allowed to the extent only of varying order 1 of the orders of the Local Court by substituting the amount of $12,599.38 for the amount of $8,913.38.

(3) The cross-respondent is to pay the cross-appellant's costs of the cross-appeal.

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