ECS Services Pty Ltd v DGA Holdings Pty Ltd - [2012] NSWSC 1058 - NSWSC 2012 case summary — Zoe

NSWNSWSC

ECS Services Pty Ltd v DGA Holdings Pty Ltd

[2012] NSWSC 1058

Supreme Court of NSW|2012-09-10|Before: Gleeson CJ

View original source

At a glance

Source facts

Court

Supreme Court of NSW

Decision date

2012-09-10

Before

Gleeson CJ

Source

Original judgment source is linked above.

Judgment (18 paragraphs)

[1]

Judgment 1HER HONOUR: The plaintiff seeks orders firstly, that leave to appeal from the whole of the decision of his Honour Magistrate Coombs dated 9 December 2011 be granted; secondly, that the appeal be allowed; thirdly, that the Local Court judgment in proceedings 2011/149130 be set aside; fourthly, that judgment and costs be entered for the plaintiff in Local Court proceedings 2011/49130; and fifthly, an order that the time for appeal against the orders of his Honour Magistrate Coombs be extended. 2The plaintiff in this Court is ECS Services Pty Limited (ECS) who was the defendant in the Local Court proceedings. The defendant in this Court is DGA Holdings Pty Limited (DGA) who was the plaintiff in the Local Court proceedings. For convenience, I shall refer to the parties by name. 3Leave has been granted for an extension for ECS to file the appeal out of time. Likewise, leave has been granted for DGA to file its notice of contention out of time.

[2]

The appeal 4Section 39 of the Local Court Act 2007 provides that a party who is dissatisfied with a judgment or order of the Local Court may appeal to the Supreme Court, but only on a question of law. The onus is on the plaintiff to demonstrate that there is an error on a question of law. 5Section 41 of the Local Court Act provides that the Supreme Court may determine an appeal either (a) by varying the terms of the judgment or order, or (b) by setting aside the judgment or order, or (c) by setting aside the judgment or order and remitting the matter to the Local Court for determination in accordance with the Supreme Court's directions, or (d) by dismissing the appeal. 6In Swain v Waverley Municipal Council [2005] HCA 4; (2005) 220 CLR 517, Gleeson CJ at [2] reiterated that in the common law system of civil justice, the trial process determines the issues between the parties. The system does not regard the trial as merely the first round in a contest destined to work its way through the judicial hierarchy until the litigants have exhausted either their resources or their possibilities of further appeal.

[5]

The pleading framework 9It is necessary to briefly examine the pleading framework. 10By amended statement of claim (Tab 11) DGA as plaintiff claimed as against ECS as first defendant and Cornish as second defendant the sum of $78,649.64 for damages for breach of contract, or alternatively, the sum of $78,649.64 on a quantum meruit claim. 11DGA Holdings pleaded: "4 On or about December 2009, the plaintiff and ECS (either on its behalf, or as agent for Cornish as an undisclosed principal) entered into an express oral contract for the plaintiff to provide certain tiling services in respect of a number of schools (the Contract). PARTICULARS (b) The Contract was constituted by conversations between George Azzi on behalf of the plaintiff and Anthony Luck of ECS, firstly over the telephone and then at a warehouse located on Bryans Avenue, Westmead sometime in the week commencing 21 December 2009. 5. There were express terms of the Contract, namely that (a) The plaintiff would provide labour services and materials (but not including the tiles) for floor and wall tiling in the toilet blocks at schools located at Gundagai, Junee, Nangus and Condobolin (the Services); (b) The defendants would pay the plaintiff for the provision of the labour services, identified in paragraph 5(a) above, at a rate of $55 00 per hour plus a 15% mark up; (c) The defendants would pay the plaintiff for any materials used at cost plus a 15% mark up; (d) The defendants would provide the plaintiff's employees accommodation; (e) The defendants would pay for the plaintiff's employees travel and pay a food allowance. Breach of Contract 6 Between 5 January 2010 and 3 February 2010 in performance of its obligations under the Contract, the plaintiff provided to the defendants the Services. 7a. On or about 14 January 2010, the plaintiff issued an invoice to ECS for the sum of $6,600. b. Mr Azzi on behalf of DGA was however informed by Mr Luck on behalf of ECS to re-do the invoice and issue it to Cornish. 8. On or about 2 April 2010, the plaintiff rendered the following invoice to ECS (the invoices). [This date was amended to 2 May 2010 at the hearing in the Local Court] PARTICULARS Invoice Number Description Amount 00785 Labour and material for the Floor and wall tiling of schools located at Gundagai and Nangus for the period 5 January 2010 to 24 January 2010 $63,172.64 00786 Labour and material for the floor and wall tiling of a school located at Condobolin for the period 31 January 2010 to 3 February 2010 $15,477 Total $78,649.64

[9]

Duty to give sufficient reasons 17The judicial obligation to provide reasons was considered in Young v Cesta-Incani [2007] NSWCA 229 where Tobias JA (with whom Hoeben and Ipp JJA agreed) stated at [54]: "The relevant principles are not in issue. They were relevantly summarised by Ipp JA, with whom Bryson JA and Stein AJA agreed, in Wiki v Atlantis Relocations (NSW) Pty Ltd (2004) 60 NSWLR 127 at 135-136; [2004] NSWCA 174: "56 A miscarriage of justice can arise where what is and is not disclosed in a judge's reasons is a breach of the principle that justice must not only be done but must be seen to be done: Beale v Government Insurance Office of NSW (1997) 48 NSWLR 430 at 431, per Mason P 57 As McHugh JA explained in Soulemezis v Dudley (Holdings) Pty Ltd (1987) 10 NSWLR 247 at 279, one of the purposes served by a judicial decision is that: '[I]t enables the parties to see the extent to which their arguments have been understood and accepted as well as the basis of the judge's decision.' Accordingly, as McHugh JA said (at 278-279): '...[A] judicial decision must be a reasoned decision arrived at by finding the relevant facts and then applying the relevant rules or principles. A decision which is made arbitrarily can not be a judicial decision; for the hallmark of a judicial decision is the quality of rationality...'. 58 In Flannery v Halifax Estate Agencies Ltd [2000] 1 WLR 377; [2000] 1AIIER 373, which was followed in Moylan v Nutrasweet Co [2000] NSWCA 337, Henry LJ said (at 381-382; 377-378) in regard to the general duty of a judge to give reasons for his or her decision (particularly in relation to expert evidence): '(1) The duty is a function of due process, and therefore of justice. Its rationale has two principal aspects. The first is that fairness surely requires that the parties especially the losing party should be left in no doubt why they have won or lost. This is especially so since without reasons the losing party will not know ... whether the court has misdirected itself, and thus whether he may have an available appeal on the substance of the case. The second is that a requirement to give reasons concentrates the mind; if it is fulfilled, the resulting decision is much more likely to be soundly based on the evidence than if it is not.' 59 It is, of course, well settled that a judge does not need to refer to all the evidence in the proceedings or to indicate which of the evidence is accepted or rejected. The extent of the duty to give reasons depends upon the circumstances of the individual case: Mifsud v Campbell (1991) 21 NSWLR 725 at 728 (per Samuels JA, with whom Clarke JA and Hope AJA agreed). But it is not for nothing that in some bilingual countries the judgment of the court is given in the language of the unsuccessful party. The proper administration of justice requires reasons to be given in a form, firstly, that will enable the losing party to understand properly the grounds upon which the case was lost, and, secondly, that will not, effectively, frustrate the losing party's right of appeal: Public Service Board of New South Wales v Osmond (1986) 159 CLR 656 at 666-667." 18In Jung v Son [1998] NSWCA 120, Stein JA concluded: "...While a judge does not have to state reasons for every aspect of the case, his reasons must be sufficient to satisfy the requirements of Pettit v Dunkley [1971] 1 NSWLR 376. The reasons must be sufficient to enable an appellate tribunal to gain a proper understanding of the basis of the verdict. Not to do so is an error of law (Asprey JA at 382 and Moffitt JA at 388). Failure to give reasons also makes it impossible for an appellate tribunal to give effect to a plaintiff's right of appeal. Issues critical to the case, as these were, must be dealt with by reasons (Samuels JA in Mifsud v Campbell (1991) 21 NSWLR 725 at 728)." 19In short, the judicial officer should make it clear what he or she is deciding and why.

[12]

Mr Luck's (ECS's) version of events 28Anthony Luck is the project manager of ECS. On 29 November 2009, John Morrison of Cornish asked him to inspect the bathrooms at the schools that Cornish had secured the contract to upgrade. On 8 December 2009, Mr Luck visited the sites again to undertake measurements in order to prepare a quote. 29Also on about 8 December 2009, Mr Luck says that he had a conversation with Mr Azzi who wanted to know who to charge for the work. Mr Luck informed him that he had not worked out the contract terms with the head contractor Cornish but when they had been agreed he would get back to Mr Azzi. 30On 15 December 2009, before Mr Luck had completed the quotes for each school, he had a conversation with Allan Raad from Cornish. Mr Raad asked if they could get the jobs started straight away. Mr Luck agreed to do so. Mr Luck says that no agreement was reached concerning Cornish's payment to DGA. 31On 17 December 2009, Mr Luck spoke to Allan Raad in words to the following effect: "... We need you to pay the deposit on the bathroom partitions, as Raj does not agree to funding them with the current debt." Mr Raad said he would speak to Raj. 32On 20 December 2009, Mr Raad telephoned Mr Luck and said, "We will pay you $15,000 immediately. Go ahead and order the partitions." Mr Luck ordered the partitions but received no moneys and the manufacturer would not commence the work until a deposit was paid. 33On 27 December 2009, they again spoke by telephone. Mr Raad said that they needed to have the tilers onsite over the Christmas/New Year break. Mr Luck told him that the tilers were "ready to go we just need to give them some money." Mr Raad said he would get the money sorted and it was safe. 34Mr Luck says that he telephoned George Azzi and said words to the effect: "Luck: Cornish wants tilers to commence in the first week in the New Year. We still have not sorted the money and it is probably quicker and easier if you deal with Cornish direct. Cornish will supply the tiles and accommodation has been booked by Cornish at Condobolin and Gundagai. Cornish will take care of all your site induction and OH&S compliance. George: Okay I will send a team out but they will not start until I get a deposit. Luck: That is understandable." 35On about 4 January 2009, payment still had not been made by Cornish to DGA. Mr Luck understood that Cornish had not paid a deposit to the tilers to commence work but understood that discussions had taken place between Allan Raad and George Azzi concerning payment of the tilers by Cornish as Allan Raad said to him that, "We will pay the tilers and all you need to do is to manage and supply labour." 36Mr Luck believes that DGA's first progress claim, described as quote 769 and dated 14 January 2010, was prepared by DGA and addressed to Cornish after Cornish had paid DGA $6,600.

[13]

Mr Azzi's (DGA's) version of events 37Sometime in December 2009 Mr Luck offered Mr Azzi a job. A few days later Mr Azzi met with Anthony Luck at a factory on Briens Road Westmead. When he arrived at the premises he had a conversation with Anthony Luck in words to the following effect: "Anthony Luck: The schools are going to be in Gundagai, Junee, Nangus and Condobolin. The job I want you to do is the tiling of the toilet blocks [Mr Azzi]: How do you want to do this? Should I send the boys and do day charges. Anthony Luck: Yeh, it has to be by the day. There's loose tiles coming off, so we can't do contract. We have accommodation there that your boys can stay in." 38Mr Azzi took this to mean that a lump sum figure would not be paid for the work, but that DGA would be paid on a "do and charge" basis. Mr Azzi said, "Okay, I'll charge our usual rate" to which Mr Luck responded that that was fine. Mr Azzi asked, "When do you want us to start?" to which Mr Luck responded "You can start during the school holidays." 39The standard rate charged by DGA at the time was $55 per person per hour plus GST, plus a 15% margin plus materials. 40Then Mr Azzi spoke with Sung Sub Kim of Double S Tiling in relation to the job. DGA subcontracted some work to Sung Sub Kim trading as Double S Tiling. He told Sung Sub Kim that Mr Kim would need about five workers plus Mr Kim. On 5 January 2010 Sung Sub Kim and his employees commenced work at Gundagai South Public School. 41On or about 6 January 2010 Mr Azzi called Mr Luck on his mobile phone and had a conversation with him in words to the effect of: "Mr Azzi: Anthony I need to pay my boys, we need payment. Mr Luck: Send me the invoice" 42He then emailed Anthony Luck a tax invoice for $6,600.00. 43A short time later he received a telephone call from Mr Luck. He said: "Can you change the invoice from ECS Services to Cornish Property Services. If you can you won't have to wait, you can get paid straight away." 44On about 14 January 2010 Mr Azzi amended the details on the tax invoice, that was stored on his computer, from ECS Services to Cornish Property Services. He sent the amended tax invoice to Anthony Luck at ECS. 45On about 14 January 2010 Mr Azzi received a telephone call from Alan Raad of Cornish. Mr Raad said "What are your bank account details so I can transfer you the money?" He informed Alan Raad of his bank account details. This he says is the only conversation he had with Alan Raad during the course of the works being completed. On 15 January 2010 he received $6,600 from Cornish Property via internet transfer into his company bank account. 46While Mr Morrison's evidence is that he had a conversation with Mr Azzi, Mr Azzi denies this and says that he has never met nor spoken to Mr Morrison. Mr Azzi also denies having any other conversations with Mr Raad, as outlined in Mr Morrison's evidence. 47However Mr Azzi also swore an affidavit relevantly seeking default judgment against Cornish where he deposed: "1. I am a director of DGA Holdings and am authorised to verify this notice of motion on its behalf. 2. The source of my knowledge of the matters contained in this affidavit concerning the debt is tax invoice dated 2 April 2010 in the sum of $15,477.00 and tax invoice dated 2 April 2010 in sum of $63,172.64. ... 4. The amount owing to me at the time of commencement of the proceedings in respect to the cause of action for which the proceedings were commenced was $78.649.60." 48The Magistrate referred to this affidavit during the hearing (at T41.14-17). His Honour did not think this evidence suggesting that Mr Azzi is asserting that Cornish owed DGA this money was of any significance. The Magistrate stated: "... the situation seems to have been that once Mr Azzi got a lawyer the lawyer could see this alternative line of attack and added in a second defendant is what seems to happen, isn't it."

[16]

Conclusion 56It is my view that the Magistrate failed to give adequate reasons and that this failure amounted to an error of law. In particular there was a failure to consider the oral evidence of the witnesses as to who DGA contracted with. If the Magistrate was unable to reconcile this evidence he should have explained why. His Honour bases his decision upon the exchange of invoices and emails. The two significant invoices are contradictory. The Magistrate did not explain why he came to the conclusion he did in the light of this inconsistent evidence. The result is that the appeal is upheld. 57Counsel for DGA submitted that this Court should not intervene, because even if the Magistrate's reasons were inadequate, there was only one conclusion available. I do not think so. There was inconsistent oral evidence and the only evidence upon which the Magistrate stated he based his decision was also inconsistent. 58The notice of contention seeks that the decision be affirmed on the basis that DGA would have been entitled to payment of the judgment sum on a quantum meruit basis. That is, DGA contends that as it performed the work and ECS would not have been entitled to be paid by Cornish until the job was complete, it is entitled to payment on a quantum meruit basis. This Court is not in a position to assess the merits of this claim. While it appears that the work was carried out by DGA, whether ECS would only be entitled to payment on completion is not clear. If this was the situation, it may be argued that ECS received a benefit and thus DGA should receive payment on a quantum meruit basis. As this matter is being remitted, the Magistrate may be required to determine this issue. 59The appeal is upheld. The decision of his Honour Magistrate Coombs dated 9 December 2011 is set aside. The matter is remitted to the Local Court, Fairfield to be determined according to law. 60Costs are discretionary. Costs usually follow the events. The defendant is to pay the plaintiff's costs as agreed or assessed.