DJ & LJ Norman Pty Ltd v Sheather

Supreme Court of NSW|2022-02-25|Before: Walton J, Woolworths Plus P

rase Ltd [1969] 1 WLR 51 McPhee v S Bennett Ltd (1934) 52 WN (NSW) 8 Namoi Sustainable Energy Pty Ltd v Buhren [2022] NSWSC 175 Orr v Cobar Management Pty Ltd (2020) 103 NSWLR 36; [2020] NSWCCA 220 Peisley v Maddrell Management Pty Ltd [2010] NSWSC 1477 Piddington v Bennett & Wood Pty Ltd (1940) 63 CLR 533; [1940] HCA 2 Pivovarova v Michelsen [2019] 2 Qd R 508; [2019] QCA 256. Precision Flooring Pty Ltd v Armstrong [2021] NSWSC 844 R v Lewis; Ex parte Attorney General [1991] 2 Qd R 294 Re Minister for Immigration and Multicultural Affairs; Ex parte Applicant S20/2002 (2003) 198 ALR 59 RL & D Investments Pty Ltd v Bisby [2002] NSWSC 1082; (2002) 37 MVR 479 Robinson v Woolworths Ltd (t/as Woolworths Plus Petrol Werrington) (2005) 64 NSWLR 612; [2005] NSWCCA 426 Schwartz Family Co Pty Ltd v Capitol Carpets Pty Ltd [2017] NSWCA 223 SFGB v Minister for Immigration & Multicultural & Indigenous Affairs [2003] FCAFC 2321 Sokolowski v Craine [2019] NSWSC 1123 Vetter v Lake Macquarie City Council (2001) 202 CLR 439; [2001] HCA 12 Watson v Foxman (1995) 49 NSWLR 315 Whitehaven Coal Mining Ltd v Pain [2018] NSWCA 229 Williams v The Queen (1986) 161 CLR 278; [1986] HCA 88 Wilson v Chan & Naylor Parramatta Pty Ltd atf Chan & Naylor Parramatta Trust [2020] NSWCA 62 Texts Cited: M J Beazley, "The Distinction Between Questions of Fact and Law: A Question Without Answer?" (2013) 11 The Judicial Review 279 B Wickham, "The Procedural and Substantive Aspects of Applications for Special Leave to Appeal in the High Court of Australia" (2007) 28 Adelaide Law Review 153 Category: Principal judgment Parties: DJ & LJ Norman Pty Ltd (Applicant) Mark William Sheather (First Respondent) Victoria Riddick (Second Respondent) Representation: Mr A D Crossland (Applicant) Mr W R Chan (First Respondent) Mr K Roser (Second Respondent) File Number(s): 2021/208486 Decision under appeal Court or tribunal: Local Court of New South Wales Jurisdiction: Civil Date of Decision: 25 June 2021 Before: J Price LCM File Number(s): 2018/166387

Judgment

HIS HONOUR: By a Summons filed pursuant to Part 50 of the Uniform Civil Procedure Rules 2005 (NSW) (UCPR), DJ & LJ Norman Pty Ltd (the Applicant) appeals or, alternatively, seeks leave to appeal from a decision of J Price LCM (the Magistrate) in the Local Court of New South Wales.
By that decision (the primary judgment), her Honour dismissed the Applicant's claim that, on or around 16 February 2016, it had entered into a contract with the First Respondent, Mr Mark Sheather (Mr Sheather), and the Second Respondent, Ms Victoria Riddick (Ms Riddick), to supply trucks and drivers for the provision of water cartage services for the upgrade of the Pacific Highway between Woolgoolga and Halfway Creek, NSW (the pleaded contract). In the proceedings before the Magistrate, the Applicant claimed that it was owed the total sum of $43,740.05 (plus interest and costs) pursuant to the pleaded contract.
The Applicant now seeks to challenge the Magistrate's finding that neither of Mr Sheather nor Ms Riddick was a party to the pleaded contract, such that they were not liable to pay the total sum said to be owing to the Applicant. In the event that the Applicant is successful, beyond the setting aside of the Magistrate's order, it seeks the remittal of the proceedings for re-determination in the Local Court.
The jurisdictional provisions governing an appeal from the Local Court to this Court are found in ss 39-40 of the Local Court Act 2007 (NSW), which relevantly read as follows: 39 Appeals as of right (1) A party to proceedings before the Court sitting in its General Division who is dissatisfied with a judgment or order of the Court may appeal to the Supreme Court, but only on a question of law. … 40 Appeals requiring leave (1) A party to proceedings before the Court sitting in its General Division who is dissatisfied with a judgment or order of the Court on a ground that involves a question of mixed law and fact may appeal to the Supreme Court but only by leave of the Supreme Court." (emphasis added) It is therefore necessary to characterise, with precision, the grounds of appeal raised by the Applicant for the purpose of considering whether the requirement for leave is enlivened.
On that note, the Applicant's conduct of the present appeal raised two preliminary issues for determination before turning to the substance of the matter. The first of those issues is an application for leave to file an Amended Summons, which was made orally by Mr Crossland (who appeared for the Applicant) during the course of the hearing and was opposed by counsel appearing for both of the respective Respondents (the amendment issue). This application is dealt with at [7] - [27] below.
The second preliminary issue (the leave issue) is whether the Court should grant the Applicant leave to appeal, on particular grounds advanced in the Summons, pursuant to s 40 of the Local Court Act, in light of Mr Crossland's concession at the commencement of the hearing that "this is an appeal which can only proceed by leave … and that's reflected in the Summons".1 This concession reflected an acknowledgement that particular grounds in the Summons on which the Applicant initially moved raised questions, properly characterised, of mixed law and fact. [1] Whether other grounds, properly characterised, require leave to be advanced also falls to be determined as a necessary aspect of the leave issue (see [59] - [131] below).

The Amendment Sssue

The Summons on which the Applicant moved at the hearing of this matter, dated 21 July 2021, is set out from [58] below.
At [10] of its written outline of submissions filed in advance of the hearing, on 21 January 2022, the Applicant sought leave to file an Amended Summons which, relevantly, inserted a new ground 8A and removed the "culminating" ground 11, which contended that "[h]er Honour fell into error in finding that the defendants' company (as opposed to the defendants themselves) was a contracting party under the Contract".
At [1] of its written submissions in reply, filed on 18 February 2022, the Applicant withdrew the application for leave to file the Amended Summons annexed to its earlier written outline of submissions.
However, at the commencement of his oral submissions in reply and well into the hearing of this matter, Mr Crossland sought leave to amend the Summons to add a new ground 9, that "in the alternative, her Honour erred in failing to determine the terms of the oral contract, giving rise to the supply of the services by the [Applicant]". In a draft Amended Summons, filed following the conclusion of the hearing, the new ground was framed as follows: "9 In the alternative, the learned magistrate erred in failing to make a finding about a material fact, namely the terms of the oral contract(s) pursuant to which the plaintiff supplied the relevant trucking services."
This application for leave to amend was framed as arising from "the exchange between bench and bar" at the hearing during which, in relation to the questions of the findings that were specifically made by the Magistrate and their consequences for this Court's appellate jurisdiction, "some matters [were] shaken out, which can be the basis for a different approach to a ground". [2]
Notwithstanding that ss 64 and 65 of the Civil Procedure Act 2005 (NSW) grant the Court with a discretionary power, at any stage of the proceedings, to amend its originating process, I raised the propriety of such an amendment, at a very late stage of the proceedings, with Mr Crossland in the following exchange: [3] "CROSSLAND: … it has to be re-opened … But in circumstances where I think all the parties have accepted that's the case, and your Honour's engaged with counsel on that topic [of whether the Magistrate made a finding as to the terms of the contract entered into by the Applicant] … the exercise of discretion was whether that should occur, and the position of the [Respondents] as to a prejudice, then I'd maintain the application to amend [the Summons]. It falls squarely within the exchange which we'd been having this morning, and it's just an alternative way of looking at the same set of problems. … HIS HONOUR: … the questions I've raised with counsel to satisfy myself as to what her Honour has done or not done in those circumstances can't be a substitute for a properly established ground which provides a basis for the counsel appearing for the respective defendants to answer. CROSSLAND: … I wouldn't say to your Honour I need the ground to succeed, but I'm putting it as an alternative because there's some question about whether that would be an alternative approach to the question of whether her Honour erred. HIS HONOUR: That's a different question. You may well say, 'look, I don't need any of that to succeed with this appeal', and that falls within the four walls of the appeal found in the Summons. [An] entirely different question is whether, if that particular consideration is not found within the grounds of the appeal, whether you should be given leave to reopen the appeal to bring that ground. … CROSSLAND: Yes. I understand why your Honour would be concerned about that. Your Honour has to be concerned about that question. It's not a ground which appears on the outskirts of the debate and has suddenly been brought into the middle. It's a different appreciation of the same evidence which has concerned the parties over the course of their submissions. And it's not a materially different ground in terms of its content". (emphasis added)
Following this exchange, the parties were granted leave to file short written submissions on the amendment issue after the conclusion of the hearing.
It is important at the outset to note the wording of s 64(2) of the Civil Procedure Act which relevantly provides that subject to the "dictates of justice" in s 58 of that Act, "all necessary amendments are to be made for the purpose of determining the real questions raised by or otherwise depending on the proceedings". Relevantly, this statutory formulation displaces the common law assumption that, prima facie, a party should be permitted to amend an originating process to raise an arguable issue subject to the payment of costs occasioned by the amendment: see Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175; [2009] HCA 27 at [96] ("Aon").
Both Respondents opposed the grant of leave to amend the Summons. Mr Chan, who appeared for Mr Sheather, submitted that the lack of merit in proposed ground 9 in turn disclosed that it did not contribute to the determination of "the real questions raised by the proceedings".
This submission relied upon the contention that ground 9 raised a question of fact (cf, a mixed question of law and fact), such that it would not attract the appellate jurisdiction of this Court pursuant to the Local Court Act. Mr Chan submitted that "[h]er Honour was not satisfied that there was a contract [between the Applicant and the Respondents] to begin with and did not need [to] proceed to find the terms to this non-existent contract. It was for the [Applicant] to prove that there was a contract between the parties as alleged". Mr Chan relied upon Jordan CJ's judgment in McPhee v S Bennett Ltd (1934) 52 WN (NSW) 8 at 9 as authority for the proposition that in circumstances where the Magistrate found that the Applicant had not discharged its onus of proof of the pleaded contract, her Honour was not required by law to determine the terms of the contract in fact entered into by the Applicant.
The Applicant submitted that ground 9 was of considerable merit on the basis that the terms of the pleaded contract were "material" facts, in the sense that they formed a necessary and critical part of the chain of reasoning to a conclusion as to the identity of the contracting parties (see, for example, SFGB v Minister for Immigration & Multicultural & Indigenous Affairs [2003] FCAFC 2321 at [19]). In support of this submission, the Applicant cited D v D [2007] FamCA 1020 at [133] and De Domenico v Marshall [1999] FCA 1305 at [64]-[66] as authority for the proposition that "a failure to make material findings of fact is, in appropriate circumstances, an error of law".
I do not accept this submission. Properly characterised, ground 9 raises a question of fact for the determination of the Court and does not invoke the appellate jurisdiction of this Court under the Local Court Act. The terms of the contract entered into by the Applicant were not material facts forming a critical step in the ultimate conclusion of the Magistrate.
Nowhere is this clearer than in the statement of issues filed jointly by each of the parties in the Local Court on 4 November 2019, which was raised in submissions by Mr Roser (who appeared for Ms Riddick) and by which the Magistrate was asked to determine: [4] 1. who are the contracting parties (and do they include or exclude the first and/or second defendants)? And 2. the amount outstanding, if any. Further, during the hearing at first instance, the Applicant declined to submit that the Magistrate was required, in light of the limited evidence before her Honour, to make findings as to the terms of the contract actually entered into by the Applicant.
The evident purpose underpinning an agreed statement of this kind is to narrow the issues in dispute so as to facilitate the just, efficient and quick determination of proceedings: Civil Procedure Act, s 56. The Applicant is not entitled to turn around, during the hearing of the matter, and essentially renege on its earlier agreement as to the material issues required to be determined in the Magistrate's chain of reasoning, particularly in circumstances where the point was not taken before her Honour in oral submissions. To allow the Applicant to so renege would occasion considerable prejudice to the Respondents.
That proposed ground 9 raises a question of fact, and therefore seeks to re-agitate the merits of the proceedings before the Magistrate in direct contravention of ss 39 and 40 of the Local Court Act, is sufficient to refuse leave to amend the Summons. However, in the interests of completeness and fairness to the parties, I will address the remainder of the Applicant's arguments, namely as to the matter of prejudice.
The Applicant raised the following written submission in support of leave to amend on the basis of a lack of prejudice to the Respondents: "The new ground involves no further evidence, only brief submissions (as above). The relevant issue (did her Honour make a finding about the conversations which formed the oral contract?) has, in effect, already been addressed orally by counsel for the first defendant in his exchange with the bench. In short, the ground involves a matter adjacent to the grounds as presently formulated. It involves the matters addressed at the hearing. It is submitted that the granting of leave would not involve prejudice." (emphasis in original)
I do not consider that the Applicant's submission displaces the considerable prejudice in introducing a new ground essentially at the conclusion of the oral hearing of the matter, such that the Respondents were deprived of the opportunity to address the relevant contention in oral argument or to re-frame the presentation of their respective cases accordingly. To that effect, just as Mr Crossland stated that his client "would hate to be shut out of being successful in the appeal because an alternative which was available wasn't put", [5] so too would the Respondents be aggrieved if they were not given adequate opportunities to address the alternative contention in question.
Mr Crossland's formulation of prejudice as applying unilaterally to the Applicant appears to invoke the common law assumption debunked by the plurality in Aon (see [14] above). Instead, the exercise of the discretion to amend is to occur in accordance with s 64 of the Civil Procedure Act, which also factors against the grant of leave to the Applicant. This is evident from the exchange extracted above at [12], where Mr Crossland repeatedly emphasised that proposed ground 9 does not depart significantly from the balance of the grounds, through statements such as "it's just an alternative way of looking at the same set of problems" and "it's a different appreciation of the same evidence which has concerned the parties over the course of their submissions".
Where s 64(2) of the Civil Procedure Act sets out the determination of the real questions raised by the proceedings as the purpose underlying any amendment to the Summons, and where ground 11 of the Summons already directs attention to the Magistrate's alleged overarching finding that Mr Sheather and Ms Riddick were not parties to the pleaded contract, it cannot be accepted that proposed ground 9 clarifies or facilitates the determination of the "real questions" in the appeal.
Instead, ground 9 broadly seeks to re-agitate the merits of the case before the Magistrate at a very late stage of the proceedings and with a distinct lack of notice to the Respondents. This is a less than satisfactory way in which to seek leave to amend a Summons commencing an appeal in this Court.
For these reasons, the Applicant's application for leave to amend is refused.
Before coming to the determination of the leave issue, it is necessary to set out the relevant factual and procedural background to this appeal.

Factual and procedural background

The Applicant owned trucks capable of carrying and transporting water, and employed drivers to operate those trucks. The Respondents operated a business providing water cartage services to the principal contractors overseeing the upgrade of the Pacific Highway between Woolgoolga and Halfway Creek ("the Pacific Highway project"). Relevantly, two of those principal contractors were Ostwald Brothers Pty Ltd ("Ostwald") and Seymour Whyte Pty Ltd.
Unchallenged evidence was adduced before the Magistrate to establish that a company by the name of M & V Sheather Pty Ltd ("the Sheather Company"), of which Mr Sheather was sole director and a 50% shareholder with the remaining 50% of shares held by Ms Riddick, was the party entering into agreements with the principal contractors. Accordingly, those contracts were not entered into by Mr Sheather and Ms Riddick personally or in partnership. This distinction was of critical relevance to the dispute before the Magistrate and remains so on appeal.
At the outset, it should be noted that there was no dispute between the parties that an agreement was formed whereby the Applicant would supply trucks and drivers to the Respondents' business interest for the purposes of its Pacific Highway project sub-contracts. It was also not in dispute that a sum of money was owed to the Applicant pursuant to that agreement which remained outstanding as at the time that proceedings were commenced in the Local Court.
The following statement of agreed facts was provided by the Second Respondent in the Court below and was reproduced by the Magistrate at [18] of the primary judgment: "1 The [Applicant] and Sheather Pty Ltd were both engaged in providing vehicles and drivers as subcontractors to various head contractors constructing the Pacific Highway upgrade. 2 Mr David Norman was the director of the [Applicant] and Mr Sheather was the director of the company M & V Sheather Pty Ltd (hereinafter 'the Sheather company'). 3 In February 2016 Mr Sheather contacted Mr Norman to offer work for the [Applicant's] equipment and drivers as a subcontractor. Mr Norman and Mr Sheather met and discussed the offer and reached agreement (the terms and parties to the agreement are in issue). 4 The [Applicant] began performing the agreement in February 2016 and continued until termination in mid June 2017 when the [Applicant] ceased providing equipment and drivers. 5 The head contractor with whom the Sheather company was contracted went into administration in August 2017 owing significant debts including to the Sheather company. 6 In August, September, November and December 2017 the [Applicant] issued accounts to M & V Sheather claiming $22,166.41. 7 In November 2017 Mr Norman spoke with Mr Sheather and separately, Ms Riddick, the Sheather company bookkeeper, about the money owing (the content of the discussion is not agreed). 8 In December 2017 the [Applicant] caused a debt collector to pursue Mr Sheather and Ms Riddick personally for the sum of $22,166.41. 9 Mr Sheather and Ms Riddick denied that they personally had agreements with the [Applicant] or owed it any money. 10 Ms Riddick, instructed by Mr Sheather, and other affected individuals (acting for their own corporate vehicles) made representations to the state government who confidentially compensated subcontractors in July 2018. 11 The [Applicant] commenced these proceedings against Mr Sheather and Ms Riddick personally in 1 June 2018."
Further, the Applicant's Statement of Claim in the Local Court pleaded the following facts: [6] "2 The [Applicant] carries on business as 'Coffs Coast Grease Trap and Septic Service and Hastings Septicleen'. 3 The [Respondents] are individuals who, at all material times, held themselves out as a couple who were either married or in a de-facto relationship. 4 The Second [Respondent] Victoria Jean Sheather [Riddick] held herself out to the [Applicant] as 'Vicki Sheather'. Unbeknown to the [Applicant] she also holds herself out as 'Vicki Riddick'. 5 In or about February 2016 the First and Second [Respondents] contracted with the [Applicant] for the [Applicant] to supply services as requested by the [Respondent]. 6 The terms of such supply were that payment would be made to the [Applicant] within thirty (30) days of an invoice being issued/ 7 The [Applicant] subsequently carried out work as requested by the [Respondents] and issued a number of invoices which the [Respondents] have refused or neglected to pay … 8 The total amount owing by the [Respondents] as at 31 August 2017 was $43,740.05. 9 Despite demands for payment the [Respondents] have not paid any of the amount owing. 10 The [Applicant] claims the sum of $43,740.05 plus interest … and continuing plus costs." (emphasis in original)
By an amended Defence filed jointly, the Respondents denied liability in their personal capacities or in partnership and asserted that the Applicant had entered into a supply agreement not with Mr Sheather and/or Ms Riddick, but with the Sheather Company. Under cross-examination, Mr Sheather accepted that, on the Respondents' case, the Sheather Company owed the Applicant $22,166.41 which remained outstanding. [7]
The competing contentions of the parties gave rise to the material issues in dispute as jointly agreed by each of the parties and extracted above at [19].
The Applicant bore the onus of proof, at all times, that the Respondents were parties to the pleaded contract, as opposed to the Sheather Company.

The evidence

The proceedings below were heard over three days, in February 2020 and February 2021. It is not necessary, for present purposes, to summarise the evidence before the Magistrate at length. Four witnesses were cross-examined on their Affidavit evidence-in-chief, namely Mr David Norman (the sole director and shareholder of the Applicant) ("Mr Norman"), Mr Sheather, Ms Riddick and Mr David O'Keefe (the Sheather Company's foreman) ("Mr O'Keefe").
The Magistrate found that while Mr Norman was "an individual with a legitimate desire to be paid for the work his company had undertaken", aspects of his evidence were "clearly mistaken" and their accuracy was adversely impacted by certain assumptions Mr Norman had made. [8] Her Honour found that Mr O'Keefe was a truthful and credible witness. [9]
In respect of Mr Sheather, the Magistrate found that he was not a credible witness who "found it difficult to make appropriate concessions" and tailored his testimony to the case he sought to advance. [10] Her Honour's findings as to the credit of Ms Riddick were also less than positive, such that she was "combative" and gave "implausible" evidence as to her knowledge of her 50% shareholding in the Sheather Company, while her evidence as to why money paid by the New South Wales Government's Small Business Commissioner was not forwarded to the Applicant was found to be "unsatisfactory". However, the Magistrate also found that Ms Riddick "gave the impression of someone who had an eye for detail" and of "having a much greater grasp of the business side of the operation than Mr Sheather". [11]
The differing accounts of material conversations offered by Messrs Norman and Sheather and Ms Riddick, and the issues affecting their respective credibility and/or reliability, gave cause for the Magistrate to take notice of the seminal observations of McLelland CJ in Eq in Watson v Foxman (1995) 49 NSWLR 315 at 319, that: [12] … human memory of what was said in a conversation is fallible for a variety of reasons, and ordinarily the degree of fallibility increases with the passage of time, particularly where disputes or litigation intervene, and the processes of memory are overlaid, often subconsciously, by perceptions or self-interest as well as conscious consideration of what should have been said or could have been said. All to often what is actually remembered is little more than an impression from which plausible details are then, again often subconsciously, constructed. All this is a matter of ordinary human experience.
The Magistrate accurately observed that "[t]he [contemporaneous or documentary] evidence as to who the contracting parties were is very limited". [13] However, her Honour found the following chronology of facts from the evidence, none of which are relevantly in dispute on appeal (see, also, [10] above): 1. prior to February 2016, Mr Norman and Mr Sheather had not met each other, although they knew of each other and their respective business interests; [14] 2. on or around 16 February 2016, Mr Sheather contacted Mr Norman requesting to hire trucks and drivers from the Applicant. It was stated by Mr Sheather that "he" or "we" would be hiring the trucks; 3. following that telephone call, Mr Norman attended a shed at Woolgoolga, NSW, from which the Respondents operated their business. Mr Sheather and Mr O'Keefe were present, although Ms Riddick was not. An oral agreement for the supply of trucks and drivers was reached and concluded, although no reference was made to the name of the Sheather Company; 4. pursuant to the oral agreement, the supply of trucks and drivers would occur on terms whereby Mr Sheather or Mr O'Keefe would telephone Mr Norman and "make a request for trucks to be provided at a certain location on a certain day"; 5. on 24 March 2016, Mr Norman sent the following letter to "Sheather Water Carts": Dear Mark, As a current subcontractor to you on the Woolgoolga to Halfway Creek Highway upgrade for OHLYork [one of the principal contractors] we would like to state the following: 1) This is the first subcontracting to a subcontractor we have undertaken on any of the Highway upgrades as we normally deal directly with the construction companies, as such have dealt with Leighton Fulton Hogan, Lend Lease & McConnell Dowell. 2) At present we accept the rates you offer as the bare minimum we are willing to accept due to our overheads of office staff, drivers, insurances, registrations and vehicle maintenance and on the understanding the trucks are currently for sale. 1. sometime after the meeting between Mr Norman and Mr Sheather at Woolgoolga, Ms Riddick, who was responsible for maintaining the Sheather Company's books, commenced communicating with a Ms Johnstone, who was employed by the Applicant, including in respect of the provision of dockets for work completed; 2. at some point in time after 24 March 2016, the Applicant received docket books from the Respondents for the purposes of itemising work performed daily. The dockets contained therein were headed "M & V Sheather ABN 61 104 164 829" (with no reference to "Pty Ltd" or an ACN). As to the timing of the Applicant's receipt of the docket books, which Mr Norman contended occurred during his meeting with Mr Sheather at Woolgoolga, the Magistrate found that: [15] to my mind it suggests at the very least that [Mr Norman] did not have in possession the docket books at that point, as he contends. If he had, it might be thought his letter of 24 March 2016 would have been addressed in that fashion. The later transition to the terminology used in Mr Norman's invoices to 'M&V Sheather' supports a finding he was not aware of that name earlier, and the docket books were not given to him on that date. I am of the view that it is more consistent with Mr Sheather's evidence that he instructed Mr O'Keefe to give the docket books over at a later time. That is also consistent with Mr O'Keefe's evidence that the docket books were given to the drivers. He confirmed that they were given to drivers after they were inducted and had their vehicles inspected. 1. Beyond Mr Norman's letter of 24 March 2016 and his invoices (which also recorded the recipient as "M & V Sheather"), [16] the dockets were the only documents that moved between the contracting parties for the duration of the agreement.

The evidence of Ms Prochilo

In addition to the evidence of the four witnesses referred to at [17] above, the Magistrate admitted into evidence, over the objection of the Applicant, the following Affidavit of Ms Nancy Prochilo ("the Prochilo Affidavit"), who was relevantly employed successively by the two principal contractors referred to at [29] above from June 2016-October 2017: 1 I hold a Diploma in Accounting but for the last 28 years I have been employed in the construction industry, predominately [sic] on large infrastructure projects. 2 Between June 2016 and June 2017 I was employed by Seymour Whyte Pty Limited in the role/capacity of Senior Commercial Manager engaged on the same project. 3 Between June 2017 and October 2017 I was employed by Ostwald Bros Pty Limited in the role/capacity of Senior Commercial Manager engaged on the same project. 4 In summary my duties for both employers were: Procurement - Tender negotiations, review/authorise contract documentation Financial Management of Projects - review forecasting, cashflow, claims etc Financial Management of Subcontractors - cashflow, claims etc Manage Procurement, Commercial, Financial and Administrative teams Monthly Reporting on all Procurement, Commercial and Financial aspects of the project(s) 5 I was personally involved with most agreements entered into by my employers with both subcontractors and suppliers engaged in the construction of the Pacific Highway Upgrade. 6 During the sixteen months I was involved with these projects I was aware that each of my employers had a policy against entering agreements with natural persons or members of a partnership. 7 I became aware of the 'corporate-only' policy from my awareness of and familiarity with my employer company's policy and common knowledge within the industry. 8 I never saw an agreement between a head contractor and a natural person or member of a partnership whilst I was engaged on the Pacific Highway Upgrade Project and it would have been improbable for such a contract to exist without my knowledge. 9 Annexed to this affidavit … is a copy of the current (August 2019) guidelines issued by [Roads and Maritime Services NSW]. I note that my experience and understanding of the 'corporate-only' policy prevailing during the Pacific Highway Upgrade with which I was involved is replicated in the section of the current guidelines (headed Exclusions at 3.7, p. 13)". (emphasis added)
Objection was taken, by counsel for the Applicant at first instance, to the admission of Ms Prochilo's Affidavit on two bases. First, that it was not relevant to a fact in issue for the purposes of s 55 of the Evidence Act 1995 (NSW) and, secondly, that it was precluded by the opinion rule in s 76 of that Act and failed to enliven either of the exceptions set out in ss 78 (lay opinion) and 79 (specialised knowledge) respectively.
The Magistrate admitted Ms Prochilo's Affidavit into evidence over both bases of objection. With respect to the question of relevance, her Honour accepted that "Ms Prochilo's evidence goes only to the nature of the agreements that existed between head contractors and subcontractors … [h]er evidence does not speak to what might have been the arrangements between any subcontractors". [17] The Magistrate proceeded to summarise the effect of s 55(2) of the Act, namely that evidence is not irrelevant only because it relates solely to the credibility of a witness, and stated that "[t]he issue of the credibility of the witnesses will be … of utmost importance in this matter" given the paucity of contemporaneous documentary evidence (see [41] above).
The relevance of Ms Prochilo's Affidavit was said to be bolstered by the fact that although the document expressly lacked reference to the witness' actual knowledge (cf, "awareness"; Prochilo Affidavit at [6]-[7]), the evidence could indirectly affect "the probability of the fact in issue [i.e. the identity of the contracting parties], noting Mr Norman's alleged familiarity with procedures imposed by head contractors, and his previous work as a subcontractor to head contractors".
The Magistrate then referred to the judgment of Leeming JA in BH Australia Constructions Pty Ltd v Kapeller [2019] NSWSC 1086 ("BH Australia"), which affirmed the proposition that post-contractual evidence may be used "to establish contextual facts, including the purpose of the transaction, in existence at the time the contract was executed" (at [101]) as authority for her Honour's determination that the Prochilo Affidavit was relevant because it shed light upon "the knowledge that the parties [to the contract] had of the surrounding circumstances". [18]
As to the second basis of objection, raised pursuant to the opinion rule, the Magistrate accepted that, prima facie, the Prochilo Affidavit expressed an opinion as to the principal contractors' "corporate only policy". Her Honour cited the decision of the High Court in Dasreef Pty Ltd v Hawchar (2011) 243 CLR 588; [2011] HCA 21 at [31] as authority requiring that opinion evidence be relevant (as conceptualised in s 55) for the purposes of the lay opinion exception in s 78 of the Evidence Act.
Having already accepted that the Prochilo Affidavit satisfied the test of relevance, the Magistrate addressed the content of that relevance. Her Honour noted that by the reference to "common knowledge in the industry" as between principal contractors and sub-contractors, Ms Prochilo's evidence was capable of casting light upon Mr Norman's knowledge of the industry and the "broader commercial context", in which the Applicant was "subcontracting to a subcontractor" (see [41(5)] above) and the relevant subcontractor was the Sheather Company (see [30] above). The Magistrate concluded her reasons for admitting the Prochilo Affidavit pursuant to s 78 of the Evidence Act as follows: With regard to whether it is a lay opinion, under s 78, I'm satisfied her opinion is the relationship between head contractors and subcontractors, and the policies, are based upon what she saw, heard, or otherwise perceived about those arrangements, given her experience. I'm furthermore satisfied that evidence of the opinion is necessary to gain an adequate account, or understanding, as to her perception about the matter, or event. That matter being the relationships between head contractors and subcontractors, rather than any conclusion as to what might have occurred between the parties in this matter. In that regard, it is noted that in s 78, the term 'matter or event' is not necessarily related to what is in question in the proceeding, but rather to what the person expressing the opinion saw, heard or otherwise perceived. To my mind, her affidavit does fall within the provisions of s 78, and is admissible. (emphasis added)
In light of the body of evidence summarised from [29]-[48] above, the Magistrate made a narrow set of findings in order to determine the matter in the Respondents' favour.

Disputed factual findings and determination of issues

At the outset of the section of the primary judgment titled "factual findings and determination of issues", the Magistrate made three preliminary findings, the first and third of which were not in dispute, namely that any agreement between the Applicant and the Respondents' business interests was entirely oral and that "in February 2016 Mr Sheather contacted Mr Norman to offer work for the plaintiff's equipment and drivers as a subcontractor. Mr Norman and Mr Sheather met and discussed the offer and reached agreement". [19]
The second preliminary finding was that a single contract was formed between the parties during the meeting between Mr Norman and Mr Sheather at Woolgoolga on or around 16 February 2016. It had been argued by counsel for Mr Sheather at first instance that a new contract was formed with the submission of each work order by the Applicant. That issue is not material to the present appeal.
At [157]-[160] of the primary judgment, the Magistrate set out the principles relevant to the determination of the existence and terms (including the identity of the parties) of an entirely oral agreement as follows: 157 Identification of the parties to a contract must be in accordance with the objective theory of contract - that is the intention that a reasonable person, with the knowledge of the words and actions of the parties communicated to each other, and the knowledge that the parties had of the surrounding circumstances, would conclude that the parties had (see for example Air Tahiti Nui Pty Ltd v McKenzie [2009] NSWCA 429; (2009) 77 NSWLR 299 at [38]; Lederberger v Mediterranean Olives Financial Pty Ltd [2012] VSCA 262; (2012) 38 VR 509 at [19]). The process of construction includes consideration of the surrounding circumstances known to the parties and the purpose and object of the transaction, the background and the context in which the parties are operating. … 159 Consideration of surrounding circumstances and post contractual conduct is permissible when the existence or terms of an oral contract are in issue: County Securities Pty Ltd v Challenger Group Holdings Pty Ltd [2008] NSWCA 193 at [20] (per Spigelman CJ, Beazley and McColl JJA); Colyer Fehr Tallow Pty Ltd v KNZ Australia Pty Ltd [2011] NSWSC 457 at [47]; King v Benecke [2013] NSWSC 568 at [186]. In Pethybridge v Stedikas Holdings Pt[y] Ltd [2007] NSWCA 154 the Court of Appeal considered that the question of who the contract was entered into with was considered, in substance, no different to a question of whether there was a contract entered into at all (at [59]). The legitimacy of the Court's taking into account conduct after the date of the contract to determine the identity of the parties was accepted by Ball J in Filadelfia Projects Pty Ltd v Entirety Business Services Pty Ltd [2011] NSWSC 116 … 160 The Court of Appeal has confirmed that it is permissible to have regard to post-contractual material if it is relevant to determining the terms of a contract that is not wholly in writing: Lawrence v Ciantar [2020] NSWCA 89 at [114] (Bathurst CJ, Meagher and Gleeson JJA agreeing). (emphasis added)
Although it may be inaccurate to refer to the construction of an oral contract, the Magistrate's use of that language at [157] of the primary judgment is of no moment on appeal.
As noted at [20] above, the Magistrate also had recourse to the principles set down in Watson v Foxman when making findings of fact, such that her Honour placed emphasis upon the limited body of contemporaneous documentary evidence. That body of evidence was, in essence, limited to Mr Norman's letter of 24 March 2016 (see [41(5)] above) and the docket books referred to at [41(7)] above.
It was implicit from her Honour's reasons that the highest point of the Applicant's argument, noting that it bore the onus of proof, was the absence of any explicit reference to the Sheather Company (by the presence of "Pty Ltd" or an ACN) on the dockets. At [176] of the primary judgment, the Magistrate posed the question of whether the supply of the docket books was "sufficient to prove that [the Respondents] were entering the contract as individuals or as a partnership".
In addressing this question, her Honour raised the parties' knowledge of the commercial background and surrounding circumstances of the contract at the outset. The Magistrate stated that it was common ground between the parties that they were "aware that the purpose of the agreement was to supply equipment for the construction of the Pacific Highway upgrade", a position said to be bolstered by Mr Norman's letter of 24 March 2016. [20]
This reference to the background to, and surrounding circumstances of, the contract precipitated the Magistrate's consideration of the evidence of Ms Prochilo. In circumstances where the Summons commencing the appeal expressly impugns [256], [258], [260], [261] and [263] of the primary judgment (see [5] below), and where the findings contained therein were of relatively short compass, it is appropriate to reproduce that impugned portion in its entirety, as follows: 256 The evidence of Ms Nancy Prochilo was that her employers, Seymour White Pty Ltd and Ostwald Bros Pty Ltd over the period of June 2016 to October 2017, had a policy against entering agreements with natural persons or members of a partnership. She stated she never saw an agreement between a head contractor and a natural person or member of a partnership while engaged in the Pacific Highway upgrade, and it would have been improbable for such a contract to exist without her knowledge. 257 The evidence was not challenged that it was M & V Sheather Pty Ltd, rather than Mr Sheather and Ms Riddick as a partnership or as individuals, who entered into contracts with the head contractors … 258 It is also not in dispute that, while the plaintiff issued the invoices to M & V Sheather, they were always paid by the company from the account of M & V Sheather Pty Ltd. 260 Furthermore, it is clear that companies operated under trading names in addition to their company titles. Mr Norman's company traded as a Pty Ltd company, DJ & LJ Norman Pty Ltd. The trading name was Coffs Coast Grease Trap and Septic Service (T36 13/2/2020 at lines 25-29). Mr Sheather gave similar evidence in relation to his own company. 261 It is against that background, that the docket book must be considered. The ABN details, as shown in the ASIC extract … show the ABN was linked to M & V Sheather Pty Ltd. The company also had an ACN. The placement of the ABN on the docket book is relevant, but to my mind not decisive. An ACN … and ABN … are identifying numbers that serve very different purposes. While every Australian business needs an ABN, only businesses registered as companies require an ACN. The presence of an ABN does not preclude an entity being a company. It is equally consistent with both. The absence of the words Pty Ltd does not necessarily require an inference to be drawn that the parties were contracting as a partnership or as individuals. That evidence needs to be seen against a backdrop of the use of trade names, together with the background facts known to the parties concerning the commercial environment in which they were operating. 262 Reliance was placed by the plaintiff on the decision of Cincotta v Russo [2019] NSWSC 272 to submit that the court would not find that the placing of an ABN on a contract would be understood by a reasonable person as meaning that the other party had an intention to contract as an agent for the company whose ABN it was (Cincotta at [38]). 263 The present matter can be distinguished from Cincotta. The facts of that matter concerned the issue of agency. Agency was not pleaded in this matter. Similarly, the facts involved a written contract in circumstances where there was deliberate dishonesty attributable to the relevant builder. The present matter can also be distinguished with regard to the background circumstances known to the parties and the context of businesses operating in a commercial context in which they were both familiar. (emphasis added)
In light of the foregoing analysis, and in circumstances where the Applicant bore the onus of proof, the Magistrate entered judgment for the Respondents. Her Honour was not satisfied that the Applicant had established, on the evidence adduced "together with the background facts known to the parties", that "a reasonable observer of the communications [between the parties] would conclude that a contract was entered into by the defendants either as individuals or in partnership, as opposed to the company". [21] It is not immediately clear whether the language adopted by her Honour in expressing this conclusion corresponded to a positive finding or direct inference that the contract was entered into by the Applicant and the Sheather Company.

The Summons commencing the appeal

The Summons on which the Applicant moved at the hearing raised the following grounds of appeal: Admission of evidence 1 The learned LCM made an error of law by admitting into evidence the affidavit of Nancy Prochilo dated 25 November 2019. 2 In the alternative, the Learned LCM made an error of law by admitting the evidence at paragraph 7 of the affidavit of Ms Prochilo dated 25 November 2019. The parties "knowledge of background facts concerning the commercial environment" 3 The learned LCM fell into error in taking into account an irrelevant matter, that is, whether or not there were 'background facts known to the parties concerning the commercial environment in which they were operating' ([261], [263]). 4 In the alternative, the learned LCM fell into error in that there was no evidence for her finding (or, in the alternative, no basis for her to draw an inference) that there were 'background facts known to the parties concerning the commercial environment in which they were operating' that were relevant to the question of the identity of the parties to the contract for the supply of the trucking services at issue in the proceedings (the Contract) ([261], [263]). 5 In the alternative, the learned LCM fell into error in taking into account an irrelevant matter, that is, whether Seymour White Pty Limited and Ostwald Bros Pty Limited had a policy in the period June 2016 to October 2017 'against entering into agreements with natural persons or members of a partnership' ([256], [261] and [263]). 6 In the alternative, the learned LCM fell into error in that there was no evidence for her finding (or, in the alternative, no basis to draw an inference) that at the time the parties entered into the Contract, the head contractors on the Pacific Highway upgrade had a policy 'against entering into agreements with natural persons or members of a partnership' (the wording at [256]). 7 Further or [in] the alternative to Grounds 5 and 6, the learned LCM fell into error in that there was no evidence for her finding (or, in the alternative, no basis to draw an inference) that at the time the parties entered into the Contract they knew that head contractors on the Pacific Hwy upgrade had a policy 'against entering into agreements with natural persons or members of a partnership' (the wording at [256]). 8 Further or in the alternative to Grounds 5-7, by making a finding that at the time the parties entered into the Contract they knew the head contractors on the Pacific Hwy upgrade had a policy 'against entering into agreements with natural persons or members of a partnership' (the wording at [256]), the learned LCM fell into error because that was not a matter put to the plaintiff. Other grounds 9 Her Honour fell into error by taking into account an irrelevant matter, namely that the payments the plaintiff received for its services, were made from a bank account of the defendants' company ([258]). 10 Her Honour fell into error by taking into account an irrelevant matter, namely that the plaintiff and the defendants' company carried on their respective businesses under trading names ([260]). Culminating ground 11 Her Honour fell into error in finding that the defendants' company (as opposed to the defendants themselves) was a contracting party under the Contract.

The Leave Issue

The first of the orders sought in the Summons was for leave, pursuant to s 40(1) of the Local Court Act, to appeal on "the mixed question of law and fact (if that is what it is) identified in Ground 11", that is, the "culminating ground" extracted above. By the way this order was framed, it was implicit in the Summons that the Applicant asserted that it could bring the appeal as of right, pursuant to s 39 of the Local Court Act, in respect of grounds 1-10.
However, in circumstances where Mr Crossland accepted, in general terms, that the Summons raised questions of mixed law and fact (see [6] above), it is necessary to characterise each ground with precision.

Grounds 1 and 2: admission of evidence

As to grounds 1 and 2 of the Summons, the implication that the Applicant sought to bring the appeal as of right was bolstered by the use of the words "error of law".
During the hearing of the appeal, as noted at [6] above, this position was clarified and underwent considerable change, thereby altering the issues for determination. This change of position was captured in the following exchange between bench and bar table, which was preceded by Mr Crossland (for the Applicant) framing grounds 1 and 2 as the "strongest points" of his argument: HIS HONOUR: How do you say that the magistrate's ruling on the admissibility of that evidence over objection constitutes an error of law for the purposes of [ss] 39 and 40? CROSSLAND: Well, your Honour, it is a mixed question of fact and law, and I've conceded that we need leave to bring the appeal for that reason under s 40. It's not a strict question of law, it's a mixed question. And when one gets to the question of what one should do, if one accepts that there was an error of that kind, which I've called the cumulative ground or the ground for setting the whole thing aside, that is also a question of mixed fact and law, and one returns in relation to the question of leave. (emphasis added)
The concession made by Mr Crossland was properly reflective of the state of the law regarding the characterisation of an assertion of error in the admission of evidence. In Williams at 301-302, Mason and Brennan JJ stated, in respect of s 401 of the Criminal Code 1924 (Tas), that: An appeal lies on a 'a question of law alone'. An appeal does not lie in a ground which involves a mixed question of fact and law … An appeal on the ground of the wrongful rejection of evidence by a trial judge in the exercise of a discretion is not an appeal on a question of law alone. The manner in which a discretion is exercised depends on the judge's appreciation of all the facts of the case, so that an error of law which leads the judge wrongly to hold that he has a discretion is not the only factor which contributes to his decision to reject the evidence.
See, also, Bagumya v Kakwano [2010] NSWSC 600 at [21]-[28], cited with approval in Pivovarova v Michelsen [2019] 2 Qd R 508; [2019] QCA 256.
It follows that there was no dispute that the Applicant required leave to bring grounds 1 and 2 of the Summons. I will return to determine the question of leave to pursue these grounds, amongst others, at [101 - 128] below.
Although, at the outset of the hearing of the appeal, Mr Crossland employed general words to make the concession that "this is an appeal which can only proceed by leave … and that's reflected in the Summons", [22] in light of the subsequent exchange extracted above at [62], I will proceed on the more favourable basis that this concession was limited to grounds 1 and 2. The question of whether the pursuit of each of grounds 3-11 requires the leave of the Court, pursuant to s 40 of the Local Court Act, therefore falls for determination.

Grounds 3, 4, 6, 7 and 8: the parties' "knowledge of background facts concerning the commercial environment"

In its written submissions in reply, the Applicant indicated that it did not press grounds 3 and 6 of the Summons. In respect of ground 7, the Applicant accepted Mr Sheather's submission that "there is no finding by her Honour that the parties actually knew of the policy". I presume, by virtue of this concession, that ground 7 is also not pressed.
Curiously, as to ground 8, which purported to impugn the same finding as did ground 7 albeit on a different basis, the Applicant maintained its position and advanced submissions in writing. However, I consider this to be incompatible with the concession made in respect of ground 7, such that ground 8 must also be taken to have been abandoned by the Applicant. This conclusion is fortified by the absence of oral submissions on this point by Mr Crossland. [23]
In Collector of Customs v AGFA-Gevaert Ltd (1996) 186 CLR 389 at 394; [1996] HCA 36, the High Court observed that "[t]he distinction between questions of fact and questions of law is a vital distinction in many fields of law … Notwithstanding attempts by many distinguished judges and jurists to formulate tests for finding the line between the two questions, no satisfactory test of universal application has as yet been formulated".
Although this observation remains as pertinent today as it was when it was made some 26 years ago, in the context of an appeal contended to be brought properly under s 40 of the Local Court Act Johnson J observed, in Peisley v Maddrell Management Pty Ltd [2010] NSWSC 1477 at [30], that "[m]any cases have considered what is a question of law as opposed to a question of fact, particularly in relation to the vexed issue of what is a question of mixed law and fact". A useful summary of those cases was provided by Davies J in Fortune Food Manufacturer Pty Ltd v K Young Trading Pty Ltd [2010] NSWSC 407 at [25]-[31] ("Fortune Food"), as follows: "25 Under s 39 Local Court Act 2007 a party is confined to an error of law in an appeal as of right from the Local Court in its General Division. What amounts to an error of law has been discussed in a number of cases. Because of the way the appeal grounds in the present case are put (viz. the way the Magistrate dealt with evidence) it is important to see what conduct and holdings amount to an error of law. 26 Kirby P discussed the question in Azzopardi v Tasman UEB Industries Ltd (1985) 4 NSWLR 139. He said (at 150): In their article 'Error of Law in Administrative Law' (1984) 100 LQR 612, C T Emery and B Smythe call attention to the three stage process typically followed in the decision of a court or tribunal. The stages of their classification are (1) fact-finding; (2) rule-stating; (3) rule application. The most typical error of law, attracting the appeal court's corrective jurisdiction occurs at the 'rule stating' stage (ibid at 615). However, it may also occur in the finding of facts if the court or tribunal treats as having occurred what in truth is not shown by the evidence to have occurred. Furthermore, it may occur at the third stage in the application of the law to the facts … What follows from this review concerning the test that should be applied in this Court to a challenge to the process of fact-finding by the compensation judge? The court is limited, relevantly, to points of law. The finding of what have been called the primary facts of a case does not, in itself expose the trial judge to review on a point of law, unless it can be shown that there is no evidence of a primary fact and that, this being crucial to his decision, the judge's fact finding has involved an error of law. If there is evidence, or if there are available inferences which compete for the judge's acceptance, no error of law occurs simply because the judge prefers one version of the evidence to another or one set of inferences to another. This is his function. The evaluation of competing evidence and inferences is reserved in compensation cases to the judge of the Compensation Court. Even if the evidence is strongly one way, the appeal court may not intervene simply because it reaches a different conclusion and this even if it regards the conclusion of the trial judge as against the weight of the evidence. Where the evidence points only in one direction, and, as in Poricanin the trial judge nonetheless states that he disbelieves it, the onus being upon that person, the court, on appeal, may not intervene. 27 Glass JA (with whom Samuels JA agreed) said (at 155-156): To say of a finding that it is perverse, that it is contrary to the overwhelming weight of the evidence, that it is against the evidence and the weight of the evidence, that it ignores the probative forces of the evidence which is all one way or that no reasonable person could have made it, is to say the same thing in different ways. Upon proof that the finding of a jury is vitiated in this way, it will be set aside because it is wrong in fact. Since the Act does not allow this Court to correct errors of fact, any argument that the finding of a Workers' Compensation Commission judge is vitiated in the same way discloses no error of law and will not constitute a valid ground of appeal. It is also pointless to submit that the reasoning by which the court arrived at a finding of fact was demonstrably unsound as this would not amount to an error of law: R v District Court of the Metropolitan District Holden at Sydney; Ex parte White (1966) 116 CLR 644 at 654. … It has been suggested that since judges unlike juries are required to give reasons a perversity of result will or may suggest an error at some stage of the reasoning process and the perversity will then rise to the level of an error of law. It is important, I believe, to remember that whether an error is one of fact or law is determined by legal theory and the theory is the same whether the tribunal be divided or undivided. 28 More recently the matter has been considered by Hall J in US Manufacturing Co Pty Ltd v ABB Service Pty Ltd [2008] NSWSC 705 at [45]-[55]. 29 Hall J first considered and accepted a number of propositions distilled by Kirby J in RL & D Investments Pty Ltd v Bisby [2002] NSWSC 1082; (2002) 37 MVR 479 at [12]-[14] as follows: First, there is no error of law in simply making a wrong finding of fact (Australian Broadcasting Tribunal v Bond (1990) 170 CLR 321 per Mason CJ at 341), unless there is no evidence to support that finding. Secondly, it does not amount to an error of law if the finding of fact, or the inference (or the refusal to make a finding of fact or draw an inference) is perverse, in the sense that it is contrary to the overwhelming weight of evidence. (Glass JA in Azzopardi v Tasman UEB Industries Ltd (1985) 4 NSWLR 139 at 155). Thirdly, it is not an error of law, even if the reasoning process by which the Court reaches its conclusion of fact is demonstrably unsound or illogical (Menzies J in Regina v District Court: ex parte White (1966) 116 CLR 644 at 654. Fourthly, there is a limited exception (which has no application in this case) in relation to decisions of fact in the context of a statutory description. In such a case there may be an error of law if the decision on the facts if one which could not be reasonably entertained, or supported, if the tribunal had properly understood the true construction of the relevant enactment (Mahoney v Industrial Registrar of NSW & Anor (1986) 8 NSWLR 1 per Hope JA at 1 and Samuels JA at 5). 30 Hall J then considered a number of other decisions including the observations of Lord Denning MR in Instrumatic Ltd v Supabrase Ltd [1969] 1 WLR 519 at 521 where he said: There are many tribunals from which an appeal lies only on a 'point of law': and we always interpret the provision widely and liberally. In most of the cases, the tribunal finds the primary facts (which cannot be challenged on appeal); and the question at issue is what is the proper inference from those facts. In such cases, if a tribunal draws an inference which cannot reasonably be drawn, it errs in point of law, and its decision can be reviewed by the Courts. That was settled, once and for all, in Edwards (Inspector of Taxes) v Bairstow … In other cases, the question is whether, given the primary facts, the tribunal rightly exercised its discretion. In such cases, if the tribunal exercises its discretion in a way which is plainly wrong, it errs in point of law, and its decision can be reviewed by the Courts. 31 Hall J then said: It is clear that an error in point of law may include: (1) A finding made where there is no evidence to support it or draws an inference from facts that cannot reasonably be drawn. (2) A finding that no person acting judicially and properly instructed as to the relevant law could have made. (3) Where a Court has misdirected itself in law: Australian Gas Light Co v Valuer-General (1940) 40 SR (NSW) 126 at 137-138."
In Fortune Food, the appeal was allowed on the basis that the Magistrate had made a factual finding which was "based on no evidence at all", thereby involving the determination of a question of law: see [43].
It is clear from the summary extracted above that ground 4 of the Summons, which impugned the Magistrate's finding that there were certain "background facts known to the parties concerning the commercial environment in which they were operating" - namely that the principal contractors on the Pacific Highway upgrade entered into agreements with corporate (cf, personal or partnership) subcontractors - on the basis that there was no evidence of (or no reasonable basis to draw an inference for) such a finding, raises a question of law for the purposes of s 39 of the Local Court Act: see, for example, Fortune Food at [31(1)]. Leave to bring ground 4 is therefore not required.
This leaves the questions of whether grounds 5, 9 and 10 of the Summons, which contended that the Magistrate fell into error by taking three separately asserted "irrelevant considerations" into account, raised questions of law for the determination of this Court.

Grounds 5, 9 and 10: taking irrelevant matters into account

The passage from the judgment of Davies J in Fortune Foods, extracted at [69] above, draws attention to the three stages of the process of judicial reasoning set out by Kirby P in Azzopardi v Tasman UEB Industries Ltd (1985) 4 NSWLR 139 at 150 ("Azzopardi"), namely finding the facts; stating the law; and then applying the law to the facts as found (see, also, M J Beazley, "The Distinction Between Questions of Fact and Law: A Question Without Answer?" (2013) 11 The Judicial Review 279).
Grounds 5, 9 and 10 require characterisation at the third stage of that process, as the Applicant contends that the Magistrate erred in applying the law governing the identification of parties to an oral contract (see [52] above) to certain facts that her Honour was said to have found, namely that the principal contractors had a policy "against entering into agreements with natural persons or members of a partnership", that "the payments the [Applicant] received for its services were made from a bank account of the [Sheather Company]" and that "the [Applicant] and the [Sheather Company] carried on their respective businesses under trading names".
The characterisation of a question raised by contended error at this stage of the judicial reasoning process is particularly fraught, as was acknowledged by Bathurst CJ and Bell P (as the current Chief Justice then was), with whom Johnson, Garling and Lonergan JJ each agreed, in Orr v Cobar Management Pty Ltd (2020) 103 NSWLR 36; [2020] NSWCCA 220 at [51] ("Orr"): "The distinction between a question of law and a question of fact, often and perhaps wrongly assumed to be binary, is perhaps at its most subtle, elusive and perplexing when a challenge is made on appeal to the application of the law to the facts 'as found'. The case law (which is far from consistent: see T Endicott, 'Questions of Law' (1998) 114 LQR 292 at 297) reveals that this is an area where fine and difficult distinctions are or may be drawn, or indeed where the distinction may be open to manipulation. This phenomenon was openly recognised by Lord Denning in Griffiths (Inspector of Taxes) v JP Harrison (Watford) Ltd [1963] AC 1 at 21, who said 'My Lords, you have indeed here a question of law, if you please to treat it as such'."
Unfortunately, returning to the present case, the Court did not receive the benefit of detailed submissions from any of the parties on the proper characterisation of the Applicant's grounds of appeal.
Prima facie, grounds 5, 9 and 10 assert that the Magistrate made errors of law in her Honour's reasoning to the "legal description" of the facts as failing to disclose a contract (on the objective theory of contract) between the Applicant and the Respondents either individually or in partnership. The assertion of such an error ordinarily raises a question of law, as was observed by the majority of the High Court (Gleeson CJ, Gummow and Callinan JJ) in Vetter v Lake Macquarie City Council (2001) 202 CLR 439; [2001] HCA 12 at [24]: "whether the facts found by the trial court can support the legal description given to them by the trial court is a question of law. However, not all questions involving mixed questions of law and fact are, or need to be susceptible of one correct answer only." (emphasis added)
However, the second sentence of the above extract casts some doubt upon that ordinary position and is emblematic of the "subtle, elusive and perplexing" distinction between a question of law and a mixed question of law and fact.
This prima facie assertion that contended errors of law in turn raise questions of law needs to be counterbalanced against three further matters. First, that (as the Magistrate correctly stated at [158] of the primary judgment), "[a]scertaining the existence and terms of an oral contract is a question of fact - that is, what did the parties agree", citing the judgment of Spigelman CJ in County Securities Pty Ltd Challenger Group Holdings Pty Ltd [2008] NSWCA 193 at [7] ("County Securities"); see, also, Empirnall Holdings Pty Ltd v Machon Paull Partners Pty Ltd (1988) 14 NSWLR 523 at 535 per McHugh JA. It therefore could not be in contention that any error of law in the Magistrate's reasoning process would necessarily infect the overarching determination of a question of fact.
Secondly, there is a distinction between a question of law and an error of law, such that "[a] question may, in its form, sufficiently identify a possible error of law, but may nevertheless not qualify as a 'question of law' or readily be answered as a question of law": Orr at [52]; see, also, Robinson v Woolworths Ltd (t/as Woolworths Plus Petrol Werrington) (2005) 64 NSWLR 612; [2005] NSWCCA 426 at [51].
Thirdly, and perhaps most critically, the characterisation of a "question of law" for the purposes of s 39 of the Local Court Act turns upon the construction of those words in their statutory context: see Re Minister for Immigration and Multicultural Affairs; Ex parte Applicant S20/2002 (2003) 198 ALR 59 at 73; [2003] HCA 30. This principle was pellucidly expressed by Spigelman CJ in Attorney-General (NSW) v X (2000) 49 NSWLR 653; [2000] NSWCA 199 ("A-G v X") at [28], where his Honour stated that: "The determination of whether a particular alleged error in matters such as fact finding, the exercise of a discretion or a process of evaluation answer the description 'question of law', will depend on the scope, nature and subject matter of the statute, including the nature of the body making the relevant decision".
In considering the statutory context of the words "question of law" in A-G v X at [32], Spigelman CJ also observed that "it is often the case that analysis of whether a particular matter answers the description of 'question of law' proceeds on the basis that those words are used in contra-distinction to 'question of fact' and that the combination of the two formulations exhausts the whole of the relevant sphere of discourse. It is usually, but not always, useful to proceed on this basis". It is on that basis that statements of principle emerged such as that of Lord Denning MR in Instrumatic Ltd v Supabrase Ltd [1969] 1 WLR 519 at 521, where his Lordship suggested that statutory formulations such as "question of law" should be given a wide and liberal construction.
However, ss 39 and 40 of the Local Court Act represent a circumstance in which it is not useful to proceed on the more liberal basis of a binary distinction between questions of law and questions of fact, as s 40 explicitly establishes a contradistinction between an appeal on a question of law and an appeal on "a mixed question of law and fact".
As was noted by Spigelman CJ in A-G v X at [28], the identity of the decision-maker is also relevant. In this case, the decision-maker was a Magistrate of the Local Court exercising judicial power, in circumstances where, by ss 39 and 40 of the Local Court Act, "the legislature has quite deliberately restricted the nature of appeal … from the Local Court. The right of appeal is severely restricted and, while leave to appeal can be granted in a wider class, it is nevertheless a restricted class": Bagumya v Kakwano [2010] NSWSC 600 at [26] (emphasis added). See, also, R v Lewis; Ex parte Attorney General [1991] 2 Qd R 294 at 299-300, where Macrossan CJ stated that a narrow construction of the words "point of law" (which were accepted to be equivalent to "question of law") "will lead only to difficulties, time-wasting effort and, at the worst, some mischievous consequences".
By virtue of the narrower contradistinction between a question of law and a mixed question of law and fact in ss 39 and 40, and the manifest purpose of these provisions in the Local Court Act, that is, to restrict the right of appeal so as to prevent the re-agitation of cases on their merits and the associated burden on limited judicial resources, the words "question of law" in s 39 should be construed as referring to a "question of law alone" (Bagumya v Kakwano [2010] NSWSC 600 at [28]), also known as a "pure question of law" (Wilson v Chan & Naylor Parramatta Pty Ltd atf Chan & Naylor Parramatta Trust [2020] NSWCA 62 at [11]) or, as was implicitly acknowledged by Mr Crossland in making the concession extracted at [62] above, a "strict question of law". The character of such a question must be "recognised on the face of the question, and not depend upon the answer given to the question". It also does not include "a question which ultimately may disclose an error of law depending on an analysis of the facts but where this cannot be known without scrutiny of the facts": Orr at [109].
This conclusion is fortified by the observations of Basten J (sitting in the Common Law Division of this Court) in Souaid v Nahas [2019] NSWSC 1132; (2019) 89 MVR 364 at [3], where his Honour stated that: "Sections 39 and 40 of the Local Court Act reflect the conventional view that legal proceedings involve questions of law, questions of fact and questions of mixed law and fact. Such a tripartite classification is never easy to apply in practice. However, what appears not to be appreciated by the structure of the provisions of the Local Court Act is that there is no right of appeal, with or without leave, from findings of fact. The assumption that the application of law to the facts may be a question of 'mixed law and fact' will rarely assist an appellant. If the legal principle has been incorrectly identified in the Local Court, that may be established on an appeal as of right. If it be a material error, that will usually result in an order setting aside the judgment below and may involve replacement with a different order, or remittal to the Local Court. It is only in the rare case that the legal principle has been correctly stated, but misapplied to the facts as found, that leave will be appropriate". (emphasis added)
The question remains: do grounds 5, 9 and 10 raise "questions of law alone" or "pure questions of law"?
Some light is shed on this question of characterisation by reference to the Applicant's submissions on grounds 5, 9 and 10. For instance, the Applicant did not impugn the Magistrate's summary of the applicable legal principles governing the determination of the parties to an oral contract as a matter of fact (see [52] above). Instead, the following submissions were advanced in writing: "32 The [Applicant] submits that her Honour was in error because: … (c) if in fact her Honour did not rely on Ms Prochilo's evidence of 'common knowledge' about the policies of [the principal contractors], but on the mere fact of the policies themselves, her Honour took into account an irrelevant consideration. That is because only the parties' knowledge of matters is relevant to determining the identity of the parties to the contract, not the mere fact of those matters. … 33 In addition to giving particular emphasis to Ms Prochilo's evidence, her Honour took into account two irrelevant matters, namely: (a) that the payments the [Applicant] received for its services were made from a bank account of M&V Sheather Pty Ltd. That matter is irrelevant in circumstances where there is no evidence that Mr Norman ever received notice from that company or from the defendants about the source of the payments or, in particular, that the payments were being made from the company's account; (b) that the [Applicant] and the [Sheather Company] carried on their respective businesses under trading names - respectfully, that matter cannot rationally bear on whether the trading name was used by a company or by individuals or a partnership." (emphasis added)
From these submissions emerge several points which favour the characterisation of grounds 5, 9 and 10 as raising questions of mixed law and fact.
As was noted above at [78], the Applicant's appeal as a whole seeks to impugn the Magistrate's determination of the question of fact as to whether there was an oral contract between the Applicant and the Respondents personally or in partnership (cf, the Sheather Company). There is an inherent difficulty in severing that overarching characterisation from the specific grounds of the Summons particularly where, as was noted by the Applicant in writing, "[t]his ground [10], as with all other grounds, has both separate force and - together with the other grounds - a cumulative force" in challenging what was essentially a finding of fact by the Magistrate (emphasis added). Framing the grounds in terms of errors of law cannot overcome their inherent mixture, to adopt the language of s 40, with a question of fact. The inappropriateness of such an approach, in order to re-ventilate the merits of the case at first instance, was noted by the Court of Appeal (Meagher, Payne and White JJA) in Schwartz Family Co Pty Ltd v Capitol Carpets Pty Ltd [2017] NSWCA 223 at [13] ("Schwartz"): "Although an appeal to the Supreme Court only lay as of right on a question of law, the respondent did not identify the questions of law that were the subject matter of the appeal, but rather asserted the magistrate erred in law in various ways. This was wrong (TNT Skypak International (Aust) Pty Ltd v Federal Commissioner of Taxation (1988) 82 ALR 175 at 178; [1988] FCA 119; B & L Linings Pty Ltd v Chief Commissioner of State Revenue (2008) 74 NSWLR 481; [2008] NSWCA 187; Colby Corporation Pty Ltd v Federal Commissioner of Taxation (2008) 165 FCR 133; [2008] FCAFC 10 at [13]; Osland v Secretary, Department of Justice (No 2) (2010) 241 CLR 320; [2010] HCA 24 at [21]; Hoe v Manningham City Council [2011] VSC 37 at [3]-[4]; Smalley v Secretary, Department of Health and Ageing [2011] FCA 302 at [10 ff) … As Leeming JA said in Ferella v Chief Commissioner of State Revenue [2014] NSWCA 378 at [6]: 'Obviously, it is not possible, merely by the device of asking whether the Tribunal erred in law in doing something or failing to do something, to circumvent the statutory limitation on the scope of the appeal'."
The Applicant's Summons and submissions in the present case suffer from the same deficiency as did those of the Respondent in Schwartz. In particular, by framing the imputed error of law (cf, question of law) as the taking into account of "irrelevant matters" by the Magistrate, the Applicant has invoked, whether deliberately or inadvertently, the language of, and principles governing, the appellate review of the judicial exercise of a discretion, as set down by the High Court in House v The King (1936) 55 CLR 499 at 505; [1936] HCA 40. This language is most inapposite in the present case, where the determination of the existence of, or parties to, a contract, whether oral or written or both in part, is necessarily an evaluative judgment reached in accordance with the objective theory of contract, which deliberately eschews analysis of parties' actual beliefs or intentions: see Air Great Lakes Pty Ltd v KS Easter (Holdings) Pty Ltd (1985) 2 NSWLR 309 at 315-319 per McHugh JA; Equuscorp Pty Ltd v Glengallan Investments Pty Ltd (2004) 218 CLR 471; [2004] HCA 55 at [34].
Further, the Applicant's limited submissions on grounds 5, 9 and 10 (none of which were addressed orally in any detail) invite the Court to analyse and scrutinise the evidence and/or the facts as found by the Magistrate in order to determine whether an error of law has occurred, which places those grounds beyond the realm of a "question of law alone" or a "pure question of law". For example, in respect of ground 5, before turning to the "legal description" of the impugned consideration, the Court must determine whether the Magistrate did in fact rely on Ms Prochilo's evidence as to "common knowledge", before interrogating the evidence of the parties' knowledge and/or whether it was open to draw an inference of such knowledge. This necessarily discloses a mixture of questions of fact with a question as to whether the Magistrate erred in law.
In any event, this analysis proceeds on the assumption that the Magistrate made a finding or drew an inference that such a policy did nor did not exist, which is unclear from the primary judgment at [257] - [261]. On a fair reading of those paragraphs, the Magistrate simply recited Ms Prochilo's evidence and referred generally to the "background facts" of the contract without specifying any policy of a principal contractor, as such, a fact.
Further, and critically, the Applicant abandoned ground 6 of the Summons prior to the hearing, presumably on the basis that the Magistrate did not make a positive finding or draw a direct inference that "at the time the parties entered into the contract, the head contractors on the Pacific Highway upgrade had a policy 'against entering into agreements with natural persons or members of a partnership'" (see [66] - [67] above). This appears to be at odds with the factual contention advanced by ground 5.
In respect of grounds 9 and 10, when determining the terms of an oral contract (including identifying the parties), non-parol evidence, including post-contractual conduct, may be used to establish contextual facts, retrospectant evidence of a surrounding circumstance that was known to the parties at the time of contracting, and the underlying purpose of a transaction (see BH Australia Constructions Pty Ltd v Kapeller [2019] NSWC 1086 at [101]-[102]; see, also, County Securities at [17], where Spigelman CJ said that "[i]n the case of an oral contract, when the issue is not interpreting words but determining the subject matter of the contract as a fact … the relevant surrounding circumstances extend to both pre-contractual and post-contractual conduct").
Thus, the identity of the party making payments under the contract, and the trading names of the parties, may properly be identified as facts which are capable of being regarded as either "within or without the description" of admissible and relevant non-parol evidence, "according to the relative significance attached to them", such that their consideration and/or application by the Magistrate "cannot be disturbed by a superior Court which can determine only questions of law": Australian Gas Light Co v Valuer-General (1940) 40 SR (NSW) 126 at 138; see, also, Azzopardi at 156-157.
More recently, in Whitehaven Coal Mining Ltd v Pain [2018] NSWCA 229, White JA (with whom Emmett and Simpson AJJA agreed) stated at [29] that "where a finding depends upon the decision-maker's assessment of the relative importance and significance of facts found the ultimate determination is one of fact". This statement is apt in relation to the present matter, as the Applicant advances grounds 5, 9 and 10 in such a way that in order for this Court to impugn the Magistrate's factual determination that Mr Sheather and Ms Riddick were not parties to the contract, recourse must be made to the "relative importance and significance" placed by her Honour upon the factors raised in grounds 5, 9 and 10.
That the factors in grounds 9 and 10 are correctly identified as failing to raise pure questions of law is further supported by the Applicant's written submissions in reply. In respect of ground 9, the Applicant attempts to transpose the corporate identity of the payer from an irrelevant consideration into a fact for which there was no evidence of the Applicant's knowledge before the Magistrate. This attempt at re-formulation occurred in circumstances where an emphasis on subjective knowledge is in clear contradiction of the objective theory of contract (see primary judgment at [157] - [160]; [90] above) and where ground 9 was framed in terms of the relevance of that factor to the objective determination and not in terms of a lack of any evidence.
Turning to ground 10, the Applicant accepted the First Respondent's contention that "[i]t might well be assumed that because of the [Applicant's] own use of a trading name, 'the [Applicant] knew that the corporate entities might not use their corporate name when trading'". It therefore appears that the Applicant accepted that this factor may be relevant (contrary to the terms in which ground 10 was expressed), but argued that, in any event, it did not support a finding that the Sheather Company was a contracting party. This exposes the character of ground 10 as raising a question of mixed law and fact on two bases. First, it invites the Court to consider whether the Magistrate in fact made a positive factual finding as to the identity of the contracting parties (see [18] above). Secondly, whether a finding of fact is contrary to the weight of evidence, even to the extent that it may be described as "perverse", does not raise a question of law: Azzopardi at 155 per Glass JA; RL & D Investments Pty Ltd v Bisby [2002] NSWSC 1082; (2002) 37 MVR 479 at [12]-[14] per Kirby J.
For all of these reasons, grounds 5, 9 and 10 are properly characterised as raising mixed questions of law and fact which require the grant of leave under s 40 of the Local Court Act.

Ground 11: the culminating ground

As noted at [59] above, the first order sought in the Summons was leave, under s 40 of the Local Court Act, to appeal on "the mixed question of law and fact (if that is what it is) identified in Ground 11", which was referred to as "the culminating ground". By the parenthetical qualification contained in that proposed order, the Applicant asks the Court to characterise ground 11 as a question of mixed law and fact.
Plainly, that is not what it is.
On the assumption, favourable to the Applicant for present purposes, that the Magistrate in fact made a positive finding or drew a direct inference that the Sheather Company was a party to the contract (which is not entirely clear from a close reading of the primary judgment), the culminating ground clearly raises a question of fact for the determination of the Court. As is described above at [78], this was expressly noted by the Magistrate at [158] of the primary judgment, where her Honour stated that "[a]scertaining the existence and terms of an oral contract is a question of fact - that is, what did the parties agree" (see County Securities at [7]; BH Australia at [101]-[102]). In Homburg Houtimport BV v Agrosin Private Ltd [2004] 1 AC 715 at [175], Lord Millett stated that: "The identity of the parties to a contract is fundamental. It is not simply a term or condition of the contract. It goes to the very existence of the contract itself. If it is uncertain, there is no contract. Like the nature and amount of the consideration and the intention to create legal relations, it is a question of fact and may be established by evidence". (emphasis added)
In the present circumstances, where ss 39 and 40 of the Local Court Act distinguish between questions of law and of mixed law and fact (see [82]-[83] above), but do not admit of appeals on questions of fact, ground 11 must be dismissed as incompetent for failing to enliven this Court's appellate jurisdiction.

Consideration

The principles governing whether leave to appeal will be granted under s 40 of the Local Court Act are the same as those in respect of leave pursuant to s 101(2) of the Supreme Court Act 1970 (NSW), which has received frequent treatment in the Court of Appeal: see, for example, De Armas v Peters [2015] NSWSC 1050 at [23]-[28], citing Be Financial Pty Ltd v Das [2012] NSWCA 164 at [32]-[36].
Most recently, in Cheng v Motor Yacht Sales Australia Pty Ltd t/as Boutique Boat Co [2022] NSWCA 118 at [15]-[20] (Cheng), Bell CJ (with whom Ward P and Basten AJA agreed) summarised those well-established orthodox principles as follows, with an emphasis upon the necessity for proportionality between costs incurred and the monetary value at issue in litigious matters: "15 As has regularly been pointed out in decisions of this Court, a grant of leave to appeal generally requires the identification of an issue of principle, a question of public importance or a reasonably clear injustice going beyond something that is merely arguable: see, for example, Jaycar Pty Limited v Lombardo [2011] NSWCA 284 at [46]; Be Financial Pty Ltd as trustee for Be Financial Operations Trust v Das [2012] NSWCA 164 at [32]-[38]; The Age Company Ltd v Liu (2013) 82 NSWLR 268; [2013] NSWCA 26 at [13]; Secretary, Department of Family and Community Services v Smith (2017) 95 NSWLR 597; [2015] NSWCA 206 at [28]; PPK Willoughby Pty Ltd v Baird [2019] NSWCA 48 at [6]. 16 In Carolan v AMF Bowling Pty Ltd t/as Bennetts Green Bowl [1995] NSWCA 69, Cole JA noted the desirability that, where small claims are involved, there be 'early finality and determination of litigation otherwise the costs which will be involved are likely to swamp the money sum involved in the dispute'. In Gurr v Robinson (Court of Appeal (NSW), 10 February 1986, unrep), Kirby P (as he then was) articulated the following justifications for the requirement of leave where small sums are involved: 'One justification is that, where the amount in issue in a case is small, the parties have a special interest in finality. Protracted litigation necessarily involves costs and inconvenience. If the stake is small, the costs may soon become disproportionate to the amount in issue. Secondly, the provision reflects a number of public interests which must be protected by the Court. They include the discouragement of litigation, the principal purpose of which is to recover an order for costs, and the efficient and cost-effective use of court time, which necessarily involves large public costs.' 17 The importance of proportionality between the monetary amount at issue in a matter and the costs of proceedings was emphasised in Berry v Nicholls [2016] NSWCA 272 at [7]; see, also, Gaynor v Attorney General for New South Wales (2020) 102 NSWLR 123; [2020] NSWCA 48 at [20]. … 20 The need for and desirability of there being proportionality between the value of the matter or amount in issue, and the costs of litigating that matter or issue is also reflected in s 60 of the Civil Procedure Act 2005 (NSW), which provides that '[i]n any proceedings, the practice and procedure of the court should be implemented with the object of resolving the issues between the parties in such a way that the cost to the parties is proportionate to the importance and complexity of the subject-matter in dispute.' It was in the context of s 60 of the Civil Procedure Act that Basten JA, in Be Financial at [37], observed that: 'the entitlement of the parties to justice is not unconditional, but is dependent upon the resources of the court made available by the government and the appropriate allocation of resources by the parties, which may depend upon their individual assessments of the importance of the issues in dispute.' See, also, Condensing Vaporisers Aust Pty Ltd t/as RJ Tinker & Son v FDC Construction & Fitout Pty Ltd (No 2) (2014) 86 NSWLR 360; [2014] NSWCA 89 at [24]; and Burrows v Macpherson & Kelley Lawyers (Sydney) Pty Ltd [2021] NSWCA 148 at [44], where it was observed that 'litigation where the costs exceed the amount in issue is not unfamiliar.' Leeming JA was correct to observe in that case that '[s]uch litigation is a poor candidate for a grant of leave.' As noted above, the proceedings before the primary judge ran for some four days, and it is plain that the costs of both parties would have approached, if not exceeded, the total amount in issue." (emphasis added) See, also, Namoi Sustainable Energy Pty Ltd v Buhren [2022] NSWSC 175 at [34]-[39] ("Namoi") per Bellew J, applying the orthodox principles governing the grant of leave in the specific context of s 40 of the Local Court Act.
The closing observation of the Chief Justice in Cheng at [20], which is emphasised in the extract above, is also apt in the present circumstances, as the hearing before the Magistrate ran over three days across the span of just over one year.
It is important to recognise that, contrary to a matter brought pursuant to s 101 of the Supreme Court Act, under s 40 of the Local Court Act leave to appeal is confined to a matter raising a "mixed question of law and fact" (cf, a pure question of fact giving rise to a rehearing of the merits of the case). Further, by virtue of the Local Court's jurisdictional limit, considerably smaller sums of money, consequently eroded by higher relative proportions of costs, are in issue where this Court's appellate jurisdiction is invoked under pt 3, div 4 of the Local Court Act.
In light of these distinctions, in Ashi Pty Ltd v Karasco Investments Pty Ltd [2009] NSWSC 780 at [33]-[35] ("Ashi"), Davies J held that a slightly more onerous standard should be applied to the orthodox principles governing leave (as set out above at [102]) where the appeal is brought from the Local Court, in the following terms: "33 In relation to those remarks of Fitzgerald JA [in Chapmans Ltd v Yandell [1999] NSWCA 361] it is to be noted that s 208L Legal Profession Act 1987 gave an appeal as of right in matters of law and that s 208M gave a right to seek leave to appeal in relation to dissatisfaction of a determination … on other grounds. A similar position obtains in the present case where s 39 Local Court Act 2007 gives a right of appeal where it is alleged the judgment is erroneous in point of law but otherwise, and in particular in relation to any order for costs, s 40 requires that leave be granted. 34 The result is, in my opinion, that the party seeking leave to appeal needs to point to some other matter which in justice requires that leave to appeal be granted. 35 Ashi was not able to identify any additional matter over and above the error of principle or law which the Magistrate was said to have made, apart from an assertion that it had suffered a detriment. In my opinion, it could reasonably be expected that any party appealing or seeking leave to appeal had suffered a detriment. That in itself cannot be an additional matter that justice requires leave to be granted." (emphasis added)
The Applicant raised a single matter "over and above the error which the Magistrate was said to have made", namely that by failing to pay the acknowledged debt of $22,166.41 (see [34] above) from the Sheather Company to the Applicant, the Respondents had misappropriated public monies, which in turn gave rise to a "question of public importance".
A brief recital of relevant facts is necessary to illuminate this argument.
As noted above at [29], one of the principal contractors on the Pacific Highway upgrade project was Ostwald, to which the Sheather Company was a small business sub-contractor. Ostwald went into liquidation on 30 November 2017, at which time the Sheather Company was an unsecured non-priority creditor of Ostwald.
In circumstances where, based on the assessments of the liquidator, "unsecured non-priority creditors will not receive any distribution in the liquidation of Ostwald Bros for a lengthy period if at all", and where "[t]he small business sub-contractors have no legal recourse against any other party to the Project to recover unpaid amounts for Subcontract Works", [24] the Sheather Company entered into a Deed with the Small Business Commissioner of New South Wales on 24 July 2018. Pursuant to that Deed, the Sheather Company received an ex gratia payment of $105,029.94.
It was not in contention that a portion of the ex gratia funds was owing to the Applicant for services it had performed as a sub-contractor to, relevantly, the Sheather Company. [25] However, none of that money made its way to the Applicant. Under cross-examination, Mr Sheather provided the following explanation for that state of affairs: "A … M & V Sheather was using a lawyer in Queensland … and those people requested the money to pay Mr Norman … but I don't think that those people offered Mr Norman the original amount of $22,166.41, they offered Mr Norman a lesser amount … I said 'no, go back and offer the man the $22,166.41', right. Then he refused it. He was asking for more money, which my company believes that he wasn't owed more money, that's the amount, the $22,000, yeah. … Q What you're saying to her Honour is that you knew you should pay it to Mr Norman, the $22,000, but somebody made you pay it to someone else; is that what you're saying? A I was under advice from the lawyers in Queensland … and they said that, you should do this, you should do that, so I done what I was told … Q You should do what? A Pay - give them the money to pay so they could pay Mr Norman. I was under the advice that I was using legal representation and those people were representing me, but that turned sour in the finish, right, so at the end of the day, they've still got the money and won't hand it over." (emphasis added)
Under re-examination, Ms Riddick explained that the Applicant did not receive a portion of the ex gratia payment because it "had sued me as an individual, not the company. The company received the ex gratia payment. I didn't receive it as an individual, so I didn't have to pay Mr Norman anything". The Magistrate considered this to be an unsatisfactory response. [26]
According to Mr Crossland, this state of affairs gave rise to an issue of sufficient public importance to justify the grant of leave as: [27] "it's public money. This was money which the state of New South Wales and the taxpayers, indirectly, of New South Wales would have paid to my client. It's been essentially taken and, we say, dishonestly kept from my client in circumstances where it should have been paid … this matter is important because relief in this matter will, one assumes, result in my client, being the company, receiving the moneys which the state of New South Wales earmarked paid to the defendants for us to receive. So it's an important matter from that point of view because this concerns public money of the state. It's not simply a question of a dispute between private parties in relation to their private rights. It's a dispute which indirectly concerns public money."
This point was summarised by Mr Crossland in the following terms: "It is more than simply a garden variety dispute between two people who happen to own trucks, or companies who happen to own trucks. There's public money involved and some very serious and well-established allegations, if not findings, of a misuse of public money and, indeed, the fraudulent taking and keeping of that money … I say that without much hesitation, as strong as those words are". (emphasis added)
Although I agree with the Magistrate that Ms Riddick's explanation for the failure to pay the Applicant was unsatisfactory (see [114] above) and did not legally preclude the Sheather Company from honouring its debt to the Applicant, I do not accept the Applicant's contention that it gives rise to a sufficient question of public importance for a number of reasons. First, the inaccurate characterisation of the ex gratia funds as "public monies", where they had been validly and legally transferred to the Sheather Company by the Deed of 24 July 2018a, does not shift the character of the present matter from "a dispute between private parties in relation to their private rights". Indeed, each of the Applicant, Mr Sheather and Ms Riddick are private legal persons, engaged in a dispute as to the Applicant's asserted private right, pursuant to the pleaded contract, to receive payment in consideration of its water cartage services.
The Applicant appears to have fallen into the trap described by Davies J in Ashi at [34], that is, the conflation of its detriment with an "issue of public importance" by the occurrence of the ex gratia payment of what were previously public monies to the Sheather Company. The Applicant did not direct the Court to any authority for the proposition that the public provenance of particular monies in an inter partes matter, not involving the revenue, raises an "issue of public importance", where that phrase is well understood to refer to legal issues, such as "a gap in jurisprudence that requires filling" or circumstances where "if the [contended] error is left to stand, a state of unsatisfactory incoherence in the law will exist": see B Wickham, "The Procedural and Substantive Aspects of Applications for Special Leave to Appeal in the High Court of Australia" (2007) 28 Adelaide Law Review 153 at 155-156.
In any event, the Applicant's submission is deficient in respect of procedural fairness, as was noted by Ms Riddick in her written submissions. For instance, the contended "question of public importance" was first raised by the Applicant orally at the hearing of this matter on 25 February 2022. It was not foreshadowed in writing during the approximately seven months between the filing of the Summons and the hearing, so as to occasion the Respondents with adequate notice and opportunity to respond.
Nor does the Applicant's allegation of dishonesty and/or fraud against the Sheather Company and/or the Respondents assist its application for leave, where that matter was not raised in the Summons or foreshadowed in writing prior to the hearing. As was stated by Bell P (as the Chief Justice then was) in ET-China.com International Holdings Ltd v Cheung (2021) 388 ALR 128; [2021] NSWCA 24 at [172], "[i]t is a fundamental requirement of procedural fairness that allegations of or akin to fraud are pleaded with particularity: Banque Commerciale SA (En Liqn) v Akhil Holdings Ltd (1990) 169 CLR 270 at 301-302; [1990] HCA 11". Sufficient particularity was clearly lacking in the present case.
That the ex gratia payment was received by the Sheather Company, as opposed to either of the Respondents, also factors against the grant of leave to appeal, given that the Sheather Company is not party to these proceedings nor are the Respondents sued in their respective capacities as directors of that company. This can only be the result of a deliberate forensic decision by Mr Norman and/or his legal advisors to bring proceedings against the Respondents, given that during the cross-examination of Mr Sheather, there was no challenge to his evidence that the sum of $22,166.41 due to the Applicant was owed by the Sheather Company (cf, by the Respondents personally or in partnership).
In essence, in circumstances where the impugned funds were received by the Sheather Company, it is unclear why the alleged misuse of those funds should favour the grant of leave to appeal against Mr Sheather and Ms Riddick in their personal capacities. This is fortified by the fact that, at all material times, it was open to the Applicant to bring proceedings against the Sheather Company.
Finally, it is necessary to examine (albeit without determining) the merits of the arguments advanced in support of the grounds requiring leave (see Namoi at [37], citing Sokolowski v Craine [2019] NSWSC 1123 at [119] per Lonergan J) in order to consider whether the Applicant raises a reasonably clear injustice going beyond that which is merely arguable.
Broadly, grounds 1, 2, 5 and 9 of the Summons impugn the Magistrate's reliance upon "the parties' knowledge of background facts concerning the commercial environment" in which they were operating. Grounds 1, 2 and 5 are predominantly focused on this knowledge as at the time of contracting, and the commercial purpose precipitating the transaction, whilst ground 9 is directed towards knowledge as evinced by post-contractual conduct.
I do not consider that these grounds raise a reasonably clear injustice, above and beyond one which is merely arguable. The Magistrate, at [161] of the primary judgment, referred to the principle in Watson v Foxman and thereby emphasised the importance of contemporaneous documentary evidence to her Honour's process of fact-finding, including as to the parties' knowledge of the relevant surrounding circumstances and the commercial context.
One such piece of evidence was Mr Norman's letter to Mr Sheather dated 24 March 2016 (see [41(5)] above). In my opinion, and in light of the deficiencies in the oral evidence of Messrs Norman and Sheather properly identified by the Magistrate (see [38]-[39] above), the content of this letter provides considerable support for the Magistrate's inferences as to the parties' knowledge of the surrounding circumstances, which would cause a reasonable person, with the knowledge of the parties, to consider that the Respondents were not parties to the pleaded contract.
For instance, Mr Norman expressly acknowledged that the Applicant wa "subcontracting to a subcontractor" on the Pacific Highway upgrade, where it was not in dispute that the Sheather Company had been engaged by the principal contractors, as recorded by the Magistrate at [257]: "Tendered into evidence as Exhibit 18 was a Supply Agreement between OHLCP York Joint Venture and MW & VJ Sheather Pty Ltd. Also admitted into evidence was a plant hire agreement between Seymour Whyte Constructions Pty Ltd and M & V Sheather Pty Ltd. A wet hire agreement between M & V Sheather Pty Ltd and Ostwald Brothers Pty Ltd was also tendered".
The letter also indicated that the Applicant had previously subcontracted with principal contractors on "Highway upgrades", including Leighton Fulton Hogan, Lend Lease & McConnell Dowell. This provided a rational basis for the Magistrate to draw an inference that the Applicant was knowledgeable in the nature of the relevant principal contractor-sub-contractor relationship.
In respect of ground 10, the 24 March 2016 letter did not appear to contain a reference to the Applicant's corporate name. Instead, it was headed "Coffs Coast Grease Trap & Septic Service", which supports the Magistrate's inference that the Applicant was alert to the possibility that the Respondents could also trade under a business name as a corporation. The letter also limits the efficacy of the Applicant's reliance (in submissions) upon the Magistrate's finding that, during the conversation of 16 February 2016 (see [41(2)] above), Mr Sheather stated that "he" or "we" would be hiring trucks and drivers from the Applicant, as Mr Norman frequently adopted the perspective of the fourth grammatical person to state that "[t]his is the first subcontracting to a subcontractor we have undertaken … as we normally deal directly with the construction companies" (emphasis added).
In any event, I accept the argument, advanced on behalf of Mr Sheather, that the Applicant has failed to demonstrate how the Magistrate's finding regarding the identity of the contracting parties was affected, in any material way, by her Honour's reference to the parties' knowledge of trading names: see, for example, Piddington v Bennett & Wood Pty Ltd (1940) 63 CLR 533 at 554; [1940] HCA 2; Balenzuela v De Gail (1959) 101 CLR 226 at 235-236; [1959] HCA 1.
For these reasons, it is my opinion that leave to appeal on grounds 3, 5, 6, 7, 8, 9, 10 and 11 should be refused.

Ground 4: no evidence

Ground 4 raises a question of law as to whether there was no evidence of (or no reasonable basis to draw an inference) for a finding made the Magistrate that there were "background facts known to the parties concerning the commercial environment in which they were operating", namely, the principal contractors on the Pacific Highway upgrade entered into agreements with corporate subcontractors.
In written submissions in reply, the Applicant sought to modify the ground by submitting that there was no evidence for a finding that there was, in February 2016, "a uniform and certain corporate-only policy among head contractors on the Pacific Highway upgrade". It was submitted, therefore, that there was no evidence that these matters were, in the relevant sense, "notorious" among those who conducted a business of the sort the plaintiff conducted. Further, it was submitted that there was no evidence for a finding, by way of imputation, that the plaintiff knew, in February 2016, that there existed a uniform and certain corporate-only policy.
In Precision Flooring Pty Ltd v Armstrong [2021] NSWSC 844 ("Precision Flooring") at [72]-[79] there was a no evidence contention of this kind as follows: 72. Whilst the plaintiff variously referred to the illogicality or irrationality of the decision making below, the ground of judicial review relied upon, in that respect, was squarely based upon there being no evidence to support the impugned findings (see the discussion of relationship between those grounds of judicial review: D'Amore v Independent Commission Against Corruption (2013) 303 ALR 242; [2013] NSWCA 187 ("D'Amore") at [235] (per Basten JA); see also Brennan v New South Wales Land and Housing Corporation (2011) 83 NSWLR 23; [2011] NSWCA 298 at [93] (per Basten JA), citing Amaba Pty Ltd v Booth [2010] NSWCA 344 at [23]). As earlier mentioned, in my view, the attack in that respect was not upon a finding of fact per se but the ground was formulated as a point of law based upon there being no evidence to support the finding: see Workers Compensation Nominal Insurer v Hill [2020] NSWCA 54 at [82] (per Simpson AJA). However, it is ultimately necessary to analyse the impugned finding to determine whether the ground of appeal does, in fact, invoke that principle: Capital Carpets Pty Ltd v Schwartz Family Co Pty Ltd [2016] NSWSC 1753 at [52] (per McCallum J). 73. The absence of material capable of supporting a finding on a material issue constitutes an error of law: Kostas v HIA Insurance Services Pty Ltd t/as Home Owners Warranty (2010) 241 CLR 390; [2010] HCA 32 ("Kostas") at [91]; D'Amore at [224]. Thus, a tribunal which decides a question of fact when there is no probative evidence to support the finding makes an error of law (not a factual error): Kostas at [91] and [92]; Bruce v Cole (1998) 45 NSWLR 163 ("Bruce") at 188-189. 74. What amounts to material that "could" support a factual finding is ultimately a question for judicial decision (Kostas at [91]). Evidence in this respect means material which could rationally affect the decision-maker's assessment of the probability of the facts in issue: D'Amore at [235]. 75. Similarly, the drawing of an inference without evidence to support it is an error of law: Bruce at 188; Whitehaven Coal Mining Ltd v Pain [2018] NSWCA 229 ("Whitehaven") at [29] (per White JA, with whom Emmett and Simpson AJJA agreed). 76. Thus, in Australian Broadcasting Tribunal v Bond (1990) 170 CLR 321; [1990] HCA 33 ("Bond") at [87]-[88] (per Mason CJ, with whom Brennan J agreed) stated: [87] The question whether there is any evidence of a particular fact is a question of law: McPhee v. S. Bennett Ltd. (1934) 52 WN (N.S.W.) 8, at p 9; The Australian Gas Light Co. v. The Valuer-General (1940) 40 SR(NSW) 126, at pp 137-138. Likewise, the question whether a particular inference can be drawn from facts found or agreed is a question of law: Australian Gas Light, at pp 137-138; Hope v. Bathurst City Council (1980) 144 CLR 1, at pp 8-9. This is because, before the inference is drawn, there is the preliminary question whether the evidence reasonably admits of different conclusions: Federal Commissioner of Taxation v. Broken Hill South Ltd. (1941) 65 CLR 150, at pp 155, 157, 160. So, in the context of judicial review, it has been accepted that the making of findings and the drawing of inferences in the absence of evidence is an error of law: Sinclair v. Maryborough Mining Warden (1975) 132 CLR 473, at pp 481, 483. [88] But it is said that "(t)here is no error of law simply in making a wrong finding of fact": Waterford v. The Commonwealth (1987) 163 CLR 54, per Brennan J. at p 77. Similarly, Menzies J. observed in Reg. v. The District Court; Ex parte White (1966) 116 CLR 644, at p 654: "Even if the reasoning whereby the Court reached its conclusion of fact were demonstrably unsound, this would not amount to an error of law on the face of the record. To establish some faulty (e.g. illogical) inference of fact would not disclose an error of law." 77. Further, Mason CH stated in Bond (at [89]): [89] Thus, at common law, according to the Australian authorities, want of logic is not synonymous with error of law. So long as there is some basis for an inference - in other words, the particular inference is reasonably open - even if that inference appears to have been drawn as a result of illogical reasoning, there is no place for judicial review because no error of law has taken place. 78. Spigelman CJ in Bruce (at 188-189) observed that the expression reasonably open in this context went no further than requiring some probative evidence or other factual material. 79. As Mark Aronson, Matthew Groves and Greg Weeks observed in Judicial Review of Administrative Action and Government Liability (2016, 6th ed, Thomson Reuters), at common law, when there is some evidence, no matter how unconvincing, and no matter how overwhelmed it might have been by evidence to the contrary, the traditional approach is to treat the complaint as being factual (although that is not to preclude the possibility of there being a jurisdictional error).
This ground by the Applicant is significantly diminished by virtue of the refusal for the ground of leave for the remaining grounds of appeal. In any event, as noted in the above extract from Precision Flooring, a no evidence ground will succeed if there is even a skerrick of probative evidence.
In this case there are two sources of evidence which warrant the rejection the ground as follows: 1. As was submitted for Mr Sheather, there is evidence of the fact (the corporate-only business practice) being a notorious fact, sufficient for it to be imputed to the plaintiff. The evidence of Ms Prochilo is evidence of the business practice at least for the industry of the Pacific-Highway upgrade. It was open for Her Honour to find the knowledge as being imputed to the Applicant as part of the common background knowledge. 2. As discussed above, there is direct evidence bearing upon the question found in Mr Norman's letter to Mr Sheather dated 24 March 2016. That correspondence supports the inferences drawn by the Magistrate as to the parties knowledge of the surrounding circumstances, which would cause a reasonable person with the knowledge of the parties to consider the Respondents were not parties to the pleaded contract.
It is unnecessary to resolve the further issue raised by Mr Sheather that the finding complained of did not go to an ultimate fact found by Her Honour, namely, that the defendants were not party to the contract with the Applicant. It is at least arguable that, in the area of judicial review, at least, that the no evidence ground extends only to facts a decision maker is specifically required to address.
It follows that Ground 4 should be dismissed.

Costs

In a communication received from the parties on 28 March 2022, the parties indicated their agreement that the question of costs should be dealt with after the delivery of this judgment.
I shall conform with that agreement but note in doing so, that, in the ordinary course, the judgment reached by the Court in this matter would result in costs being awarded to Mr Sheather and Ms Riddick.
If upon the receipt of this judgment the parties reach an agreement as to costs, they have liberty to file Short Minutes of Order reflecting that agreement. Otherwise, the Court directs that a program for the resolution of any disputed costs question be provided to my Associate within 14 days of the publication of this judgment.

Conclusion

For the foregoing reasons, I make the following orders: 1. Refuse the Applicant leave to amend the Summons commencing an appeal as filed on 28 February 2022. 2. Refuse leave to appeal on grounds 3, 5, 6, 7, 8, 9, 10 and 11 of the Summons, pursuant to s 40 of the Local Court Act 2007 (NSW). 3. Otherwise dismiss the Summons. 4. Costs reserved. 5. The Court gives liberty to file Short Minutes of Order as to any agreement as to costs. In the event of a dispute as to costs the parties shall file a program for the resolution of any questions as to costs within 14 days of the publication of this judgment.

Endnotes

T 1.36.
See Williams v The Queen (1986) 161 CLR 278 at 287, 301-302; [1986] HCA 88 (Williams).
T 40.13.
T 40.25-41.27.
Primary judgment at [19].
T 41.28.
See primary judgment at [7].
Primary judgment at [90].
Primary judgment at [137]-[138].
Primary judgment at [139].
Primary judgment at [140]-[145].
Primary judgment at [146]-[152].
Primary judgment at [161].
Primary judgment at [162].
Primary judgment at [168].
Primary judgment at [169].
Primary judgment at [169].
T 12.13 (13 February 2020).
See T 12.27 (13 February 2020).
Primary judgment at [153]-[156].
Primary judgment at [177]-[178].
Primary judgment at [264].
T 1.36.
See, for example, T 29.21.
CB 2/868.
CB 1/336-337; T 5-6 (26 February 2021).
Primary judgment at [152]. 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: 28 September 2022

Local Court Act 2007(NSW)ss 39, 30, Part

Evidence Act 1995(NSW)ss 55, 76, 78, 79

(2020) 102 NSWLR 123

At a glance

Court

Decision date

Before

Catchwords

Source

Catchwords

Judgment (18 paragraphs)

Parties

Legislation Cited (5)

Cases Cited (111)

Cited By (2)