Dynamic Excavation and Demolition Pty Ltd v Wei & Ming Group Pty Ltd

Supreme Court of NSW|2020-06-11|Before: Wright J

Solicitors: Michael Jokovic & Associates (Plaintiff) File Number(s): 2019/340948 Decision under appeal Court or tribunal: Local Court of NSW Jurisdiction: Civil Date of Decision: 4 October 2019 Before: Denes LCM File Number(s): 2018/246601

Judgment

By a summons filed on 30 October 2019, the plaintiff, Dynamic Excavation and Demolition Pty Ltd, appeals from the decision of her Honour Magistrate Denes sitting in the General Division of the Local Court at Parramatta on 4 October 2019 dismissing the plaintiff's statement of claim against the defendant, Wei & Ming Group Pty Ltd, with each party to pay its own costs.
When the matter was called on for hearing on 11 June 2020, there was no appearance for the defendant. Given the defendant's previous appearance in this matter, the steps taken by the Court and by the solicitors for the plaintiff to bring this appeal and the hearing to the attention of the defendant's current director and shareholder, as disclosed in the Australian Securities and Investments Commission's records, and the indication from solicitors acting pro bono for the current director and shareholder that he did not intend to take steps to have the defendant appear at this hearing, I was satisfied that it was appropriate to proceed with the hearing in the absence of the defendant.

Grounds of appeal and leave

The grounds of appeal relied upon by the plaintiff were as follows: "1. Her Honour erred in law in not finding that the agreement between Mr. Chidiac on behalf of the Plaintiff and Mr. Hu on behalf of the Defendant constituted a contract. 2. Her Honour failed to provide adequate reasons for determining that the Plaintiff had not established, on the balance of probabilities, that a contract existed between the Plaintiff and the Defendant. 3. Her Honour erred at law in finding that because there was no documentary evidence to support the agreement between the Plaintiff and the Defendant, that none existed. 4. Her Honour erred at law in declining to find that a contract existed between the Plaintiff and the Defendant for the provision of services. 5. Her Honour erred at law in finding that there was insufficient evidence of the existence of a contract. 6. Her Honour erred at law in finding for the Defendant in respect to the Plaintiff's claim."
To the extent that each of these grounds of appeal raises a question of law, the plaintiff is entitled to appeal as of right, under s 39 of the Local Court Act 2007 (NSW). If, however, any of the grounds involves a question of mixed law and fact, the plaintiff will require leave to appeal, under s 40 of the Local Court Act, in respect of that ground.
Perhaps as a precaution, the summons in this matter sought leave to appeal as well as seeking to have the appeal allowed and the judgment of the Local Court set aside. I shall only deal with the question of leave, and whether the plaintiff should be relieved from compliance with the requirements of r 50.12(4)(b) of the Uniform Civil Procedure Rules 2005 (NSW), should that become necessary.
Ground 2 raises the question whether the Magistrate has given adequate reasons for her decision. It is well established that a court's failure to give adequate reasons constitutes an error of law: see for example Stoker v Adecco Gemvale Constructions Pty Ltd [2004] NSWCA 449 at [41]. And, a failure to give adequate reasons for a decision may be a basis for setting aside the decision, as occurred in Beale v Government Insurance Office (NSW) (1997) 48 NSWLR 430.
Whether the reasons given in the present matter were sufficient to satisfy the "minimum acceptable standard" required by law (adopting the words of Basten JA in Resource Pacific Pty Ltd v Wilkinson [2013] NSWCA 33 at [48]) is a question of law. Thus, the plaintiff is entitled to appeal as of right in respect of ground 2.
In addition, if the findings made by, and the process of reasoning of, the court below are not sufficiently disclosed, it may not be possible on appeal to consider properly other grounds of appeal that raise substantive errors of law affecting the decision. Consequently, it is convenient and proper to deal with ground 2 first and the other grounds, to the exent necessary, subsequently.

Ground 2 - Adequacy of reasons

Ground 2 was to the effect that the Magistrate in the Local Court failed to give adequate reasons for her decision dismissing the plaintiff's claim.

The nature of the claim and the hearing

The plaintiff's claim in the Local Court was for payment of money alleged to be due under an oral contract between the plaintiff and the defendant whereby the plaintiff agreed to excavate and remove from the defendant's development site waste, including asbestos, and to dispose of it.
The proceedings at first instance were heard on 4 October 2019 and, at the conclusion of final oral submissions, the Magistrate delivered an ex tempore judgment.

The ex tempore reasons

The reasons of the court below were as follows: "The plaintiff in this case, Dynamic Excavation and Demolition Pty Ltd, brings a civil case against the defendant, Wei & Ming Group Pty Ltd. There is no issue in this case that Mr Chidiac is a director of Dynamic, Excavation. I will probably just refer to him during the course of my reasons as "Mr Chidiac" or "the plaintiff", even though we are talking about a plaintiff company. It is just for the ease of reference. The plaintiff - he is the director, and that Mr Hu is the director of the defendant company. He also, during the course of my reasons, will be called just "the defendant" or "Mr Hu". Mr Hu is also the defendant(as said) of another company that is named in the facts and in the evidence, because ultimately what this is all about is back 2012 - and yes, I will come back to that issue in a moment - it would appear that two of Mr Hu's companies wanted to develop a parcel of land in I think it is in Granville. Mr Chidiac is involved in, obviously from the nature of his company, excavations and demolition - no magic there - and he found himself doing some demolition and excavation there, including a lot of asbestos removal that involved it having to go to a particular tip because it is asbestos and it needs to be dumped in a secure way. Mr Chidiac, the plaintiff, seeks the amount of the claim plus a whole lot of things, effectively … [after clarification was provided to the Magistrate the amount of the claim was accepted as being $41,961]. … Ultimately, I do not think it is going to matter. Seeks an amount of money for services that he says he performed that had not been paid for. Clearly, the plaintiff bears the burden of proof and the burden of proof is on the balance of probabilities. … But in this case, unlike a criminal matter obviously, I do need to look at the defence case and assess the credit and reliability of the defence case, and I can prefer one or the other, and in this case I make it very clear I do prefer the plaintiff's evidence, and I will come to explain why. But ultimately, the statement of claim must fail, and I will explain the reasoning behind that. As I said, this is a claim in contract so the starting point is, "Can the plaintiff prove a contract?" I have got a lot of evidence before me about how it is that Mr Chidiac met Mr Hu. Mr Hu says, "I never met Mr Chidiac" except he cannot explain why Mr Chidiac one, has his business card, or two, has called him on the telephone a few times, or three, there is some receipts made out to Sam, who is Mr Chidiac. But again that is focusing a little too much on the defendant's evidence (which was unfavourable and not good, in simple terms). But I will come back to that in a moment, because again this is about whether or not the plaintiff can make out its case, and that is why this case fails. One, what is the contract? It seems even on the plaintiff's case - and I am going to take the plaintiff's case at its highest - Mr Chidiac has met with Mr Hu at the introduction or referral of some person, Michael(?) (Who is now deceased), so again for Mr Hu that is convenient because he can dump a whole lot of stuff on Michael and Michael cannot be here to answer it. But back to Mr Chidiac. They have had this conversation about some work being done. If I look at exhibit 1 which is Mr Chidiac's evidence, and para 19 is the high point of it, "I agreed with John Hu that I would undertake the works requested. We also discussed the rate of remuneration at the rate of" and it goes on, and the actual cost could not be determined. I am going to say this once. If parties to a contract in this sort of type of business do not want to provide quotes or some sort of confirmation in emails or some document in writing setting out what the works are proposed, it is going to be nigh on impossible seven years later to come to court and say, "These are the terms of the contract" because what has been relied on is an oral contract. One, in this case, Mr Hu does not even acknowledge that he even met with Mr Chidiac, so there is a problem there, and all I have got is word on word. Who is telling the truth about did that they have the meeting? Even if I am satisfied that there was a meeting, and I do think there was some meeting, it would appear to have been in everyone's interest back in 2012 to do this let's say in a very laissez-faire manner, and I say that because there appears also to have been lots of exchanges of cash. Obviously, that suits people for particular purposes in the business world. It is not one that is particularly looked upon very well, generally speaking, and how is it that you can then come back to court and say, "I'm claiming on a contract" when people cannot actually tell the court what the terms of that contract are? No one is going to be able to remember seven years later the exact conversation that you had. So if you want to do business in a fashion that might be designed to avoid certain, I don't know, implications for tax or other regulations, then quite frankly you should not be able to come to court seven years later and somehow rely on some nebulous concept of some job that was going to be done. Also, I say that is worse for Mr Chidiac because the invoices - and I accept that there was some cost that he bore, but it would appear that the defendant company did pay lots of money here and there. It would appear that both companies have pretty lax accounting principles, so much so that Mr Chidiac waited until 2014 to finally issue some invoices. So on the plaintiff's case, it must fail. The plaintiff must satisfy the Court on the balance of probabilities that there is a contract, what the terms of the contract actually are, and how much is actually in dispute. The fact that even today that figure had varied from the amended statement of claim is an indication to me, quite frankly, that this has been a very lax business approach, if I can put it benignly. If and had Mr Chidiac been able to produce some sort of email document, for example that sort of email that says, "Referring to our conversation on site, this is what I'm proposing", that would have sealed the deal quite frankly. It would have been plaintiff wins, no doubt. I say that because I found Mr Hu to be a terrible witness, untruthful. …[The learned Magistrate then explained in some detail why she found Mr Hu to be untruthful and rejected his evidence]. … I actually accept that proposition that was put to him by Mr Heazlewood, that he [Mr Hu] actually has no idea how much he owed and who he owed it to in relation to this clearing of asbestos at these premises. But again it all fails, quite frankly, unfortunately I think, for Mr Chidiac. But then again, you can buy quotation books at the newsagent and a quotation is a contract. There can be any number of reasons why Mr Chidiac would rather not have it all done by quote a well. But all I'm saying is, I have got to be satisfied on the balance of probabilities about the contract, the terms of it, who did what, and whether or not money is owed, and other than para 19, that is it. I have great difficulty in accepting their evidence, either here or there. Even in relation to Mr Chidiac, his first statement makes no mention of Michael at all and it is not until he sees the evidence of the defendant that he goes, "Oh actually, yes, there is Michael. Oh actually, yes, I was referred to Mr Hu by Michael". That is a big thing to miss out on, quite frankly, in your evidence. There is something not quite right, and if it does not smell right, the courts are not going to interfere in loose business arrangements. FOR THOSE REASONS, THE STATEMENT OF CLAIM IS DISMISSED… ."

The plaintiff's submissions

Mr Heazlewood of counsel, who appeared for the plaintiff, submitted in effect that the reasons given on 4 October 2019 failed to meet the minimum standard required by law. In particular, he drew attention to her Honour's findings that: 1. she preferred the evidence of Mr Chidiac; 2. Mr Hu's evidence was "not good" and untruthful; 3. there was a meeting between Mr Chidiac and Mr Hu; and 4. Mr Hu had no idea about how much he owed and who he owed it to in relation to the clearing of asbestos from the premises of his company or companies.
He also noted that there was no cross examination of Mr Chidiac about the formation or creation of the contact or its terms and that there was unchallenged evidence that Mr Chidiac did not read or write English. It was submitted that, notwithstanding all these circumstances, her Honour did not explain in her reasons why she did not accept Mr Chidiac's evidence as to the contract. Nor did she explain what evidence or inferences she relied upon which made his evidence as to the formation of the contract unbelievable or unacceptable. It was submitted that, if any of those factors existed, the Magistrate had a duty to set those factors out in order to make clear to the parties why she was unable to accept the evidence.

Consideration

A public explanation of reasons for final and important interlocutory decisions has long been recognised as central to the judicial function: Wainohu v New South Wales (2011) 243 CLR 181; [2011] HCA 24 at [54].
In considering the adequacy of reasons for judicial decisions, it is important to bear in mind that the Court should not pick over an ex tempore judgement with an eye for error, and due allowance should be made, in a case such as the present, for the pressure under which Magistrates in the Local Court are placed by the volume of cases coming before them and the resources they have to deal with them: Pollard v RRR Corporation Pty Ltd [2009] NSWCA 110 (Pollard) at [56].
The extent and content of reasons will depend upon the particular case under consideration and the matters in issue. While a judicial officer is not obliged to spell out every detail of the process of reasoning to a finding, it is essential to expose the reasons for resolving a point critical to the contest between the parties: Pollard at [58]. Put another way, the judicial officer must engage with, or grapple or wrestle with, the cases presented by each party: Mitchell v Cullingral Pty Ltd [2012] NSWCA 389 at [116].
Importantly, however, it is not necessarily the case that reasons should be lengthy or elaborate in order to be adequate: Thorne v Kennedy (2017) 263 CLR 85; [2017] HCA 49 at [61]. Nonetheless, an appellate court considering an appeal from an inferior court should not be left to speculate from collateral observations as to the basis for a particular finding: Soulemezis v Dudley (Holdings) Pty Limited (1987) 10 NSWLR 247 at 280.
While no mechanical formula can be given as to what reasons are required, three fundament elements should generally be included: 1. the relevant evidence should be referred to; 2. material findings of fact and conclusions of fact should be set out; and 3. reasons should be given explaining why the relevant findings of fact were made and conclusions reached and how the law was applied to those facts, see Beale v Government Insurance Office (NSW) (1997) 48 NSWLR 430 at 443-4.
In addition, in Whalan v Kogarah Municipal Council [2007] NSWCA 5, the Court of Appeal observed at [41]: "To disbelieve a party (or any witness for that matter) who swears his or her oath is a serious finding and not to be undertaken lightly without good and sufficient reasons. Those reasons were conspicuously absent in the present case."
In the present case, Mr Chidiac gave evidence (in pars 17 to 29 of his statement of evidence of 30 April 2019 and par 45 of the supplement statement of 5 August 2019) concerning: 1. Mr Chidiac's meeting Mr Hu, which was accepted by the Magistrate; 2. the nature of the work to be done by the plaintiff for the defendant being excavation and waste removal including removal of asbestos, which was discussed at the meeting; 3. the rates to be charged for truck and trailer work engaged in the removal of waste and for excavator works and the requirement for the defendant to pay for the cost of dumping material removed from the site, which was discussed at the meeting; 4. the fact that the actual or total cost could not be determined until the work was completed; 5. work being carried out by the plaintiff and its sub-contractors at Mr Hu's direction on 2 and 3 August 2012; 6. discussions between Mr Chidiac and Mr Hu in which Mr Hu requested that further removal work be carried out and the carrying out of that work between 24 and 29 October 2012, involving a great deal of asbestos removal; 7. an invoice issued by the plaintiff to the defendant on 29 October 2012 for the cost of dumping material from the site based on invoices paid by the plaintiff to Blacktown Waste Services in relation to dumping asbestos during the period from 24 to 29 October 2012; 8. two invoices issued by the plaintiff to the defendant on 4 March 2014 in relation to the truck and trailer work and the excavator work done on 2 and 3 August 2012 and similar work done in the period from 24 to 29 October 2012; 9. the invoices referred to in the preceding subparagraphs totalled $136,625.61; 10. payments received by the plaintiff from the defendant in relation to those invoices being $30,000.00 on 11 December 2012, $30,000.00 on 31 January 2013 and $30,000.00 on 1 March 2013; and 11. double counting in respect of one invoice for $4,664.00 dated 13 August 2012 which was also the subject of the invoice for the same amount dated 4 March 2014.
As a result, it was clear beyond dispute that in the case before her Honour there were substantial and well supported factual issues with which she was required to engage, or grapple, as to: the existence and terms of the oral contract; the work done in accordance with the contract; the invoicing of work done under the contract; and, payments made in relation to those invoices. Even allowing for the pressures of work under which her Honour was operating, it does not appear to me that she did engage or grapple with these evidentiary and factual issues, which were an important part of what she was required to address.
Her Honour found, at the beginning of her reasons, that Mr Hu wanted to develop a parcel of land in Granville and Mr Chidiac "did some demolition and excavation there, including a lot of asbestos removal and that involved it having to go to a particular tip because it is asbestos and it needs to be dumped in a secure way." She also stated, with some emphasis, that "in this case I make it very clear that I do prefer the plaintiff's evidence". This suggested that she accepted the evidence of Mr Chidiac outlined above. She also expressly found that Mr Hu, who denied meeting Mr Chidiac and entering into a contract with him, was untruthful. It was also expressly accepted: that a meeting had taken place between Mr Chidiac and Mr Hu; that Mr Chidiac had borne "some costs"; and, that "the defendant company did pay lots of money here and there". All of those findings were, in their context, supportive of the conclusion that the plaintiff's claim had been made out. Her Honour, however, dismissed the plaintiff's claim without explaining how that result was consistent with those findings.
In particular, the reasons do not explain whether, if her Honour preferred Mr Chidiac's evidence as she said, she accepted those parts of his evidence outlined above. Moreover, if the Magistrate rejected those parts of Mr Chidiac's evidence, despite her preferring his evidence generally, she gave no good and sufficient reasons for doing so. Thus, the reasons were inadequate in that essential regard.
Instead of grappling with the factual issues raised on the evidence in the matter and exposing the reasons for resolving the critical points in contest between the parties, it appears that the Magistrate reached the conclusion that the plaintiff had failed to discharge its onus of proof because: 1. the plaintiff had "lax accounting principles … So on the plaintiff's case it must fail"; and 2. "[i]f and had Mr Chidiac been able to produce some sort of email document … that would have sealed the deal quite frankly. It would have been plaintiff wins, no doubt."
It is far from clear that there was an adequate basis, whether legal or factual, for that reasoning and those conclusions. Nonetheless, it is not necessary to consider that matter further since the reasons given were, in any event, inadequate. They failed to identify the evidence on which the parties relied; they failed to resolve any conflicts in the evidence; they did not record the necessary findings of material fact in relation to the issues in dispute; they did not include reasons for reaching material conclusions of fact or explain how the law was applied to the facts as found.
On all of these bases, I am satisfied that ground 2 has been made out. In these circumstances, it is unnecessary to consider the other grounds of appeal.

Conclusion and orders

For these reasons, the appeal should be allowed and, in accordance with s 41(1) of the Local Court Act, the orders of the Local Court made on 4 October 2019 should be set aside and the matter should be remitted to the Local Court for rehearing.
In addition to these orders, the plaintiff sought an order that this Court give verdict and judgment for the plaintiff in sum of $58,374.51. Making such an order would require this Court to make findings of facts concerning the contract, its performance and the payments due to the plaintiff and the payments already made, since the Local Court made no such findings. In an appeal under s 39 of the Local Court Act, when an error of law has been established, the Supreme Court does not have the power to make such findings of primary fact: Rose v Tunstall [2018] NSWCA 241 at [31] and [32]. As a result, this Court cannot give verdict and judgment for the plaintiff as sought or at all.
The plaintiff also sought an order for the costs of the appeal. The plaintiff has been successful and there do not appear to me to be any circumstances which would indicate that costs should not follow the event in this case.
Accordingly, the orders of the Court are: 1. The appeal is allowed. 2. The orders made by the Local Court on 4 October 2019 in this matter are set aside. 3. The matter is remitted to the Local Court for rehearing. 4. The defendant is to be the plaintiff's costs of this appeal.

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: 17 June 2020

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