Kapiris Bros (Vic) Pty Ltd v Zausa & Anor [2006] VSCA 15

"... he was told quite categorically that the entity had changed, however that he should have no concern because Werribee Salad Fresh was a company incorporated with the two directors, which is myself and Bruno [Zausa], and that we would honour any and all ... invoices that had been previously done under the Werribee Fresh banner."[4]

7 The difference between these two accounts gave rise to the only issue to be resolved at the trial. Its determination would answer the question whether Mr Giummarra was, at law, himself liable for the price for goods sold and delivered to the business between 28 December and 12 March the following year. If Mr Kapiris' version were accepted, Mr Giummarra would be so liable because he had put himself forward as a contracting party; and in these circumstances the appellant would succeed. If, on the other hand, Mr Giummarra were believed, he would escape liability because he had proclaimed his non-party status; and the action would fail. It was not disputed that the unpaid balance of the purchase price for deliveries between December and March equals the amount claimed, that is, $65,369.00.

8 One qualification should, in order to avoid any risk of confusion, be made to the above. It is possible to read the reference to "any and all ... invoices" in Mr Giummarra's evidence as an acceptance by him of some personal responsibility to make good at least certain of the debts of the business. In the context, however, the witness must have been referring to those debts which remained outstanding as at the time of the December meeting. That indebtedness was subsequently eliminated, and was not an issue - either at the trial, or thereafter.

9 After some hesitation, the learned trial judge in the County Court at Melbourne held that Mr Giummarra was not a party to any contract with the appellant, and thus could not be held contractually responsible for the price of goods sold to the business. But the judgment made no reference to the critical conversations. It is in this context that the appellant brings this appeal. Claims in negligence, for breach of the Fair Trading Act 1999, and for an account stated, though pleaded in the County Court proceeding, were not pursued.

10 The three grounds of appeal argued before this Court may be stated as follows:

(i) That the trial judge erred in finding that there was not in existence a contract between the appellant and the second respondent which would enable the appellant to recover moneys outstanding to it from the second respondent.

(ii) That on the evidence, the trial judge should have found that the appellant was entitled to recover the debt outstanding to it pursuant to the contract between it and the second respondent.

(iii) That the trial judge failed to consider and make findings on the following critical issues:

(a) the substance of the oral communications that took place between the appellant and the second respondent in, first, August 2001 and, secondly, December 2001;

(b) whether, in communications with the appellant before 14 November 2001, the second respondent disclosed that he was acting on behalf of a partnership of three corporations trading under the business name "Werribee Fresh";

(c) whether, in communications with the appellant on or after 14 November 2001, the second respondent disclosed that he was acting on behalf of the company Werribee Salad Fresh Pty Ltd; and

(d) whether the second respondent represented that he was in partnership with the first respondent under the name "Werribee Fresh".

11 The first ground is the converse of the second; the second, likewise, the converse of the first. A partial response to them is that, on the necessarily limited evidence available to him on the point, his Honour was clearly entitled to hold that the respondent (Mr Giummarra) did not enter, and was not a party to, any contract by which he was personally responsible for payment of the price of the goods, or any of them, sold and delivered by the appellant to the business. But, equally clearly, the judge was not, on that same evidence, bound so to conclude. Much depended on his assessment of the credibility of the two principal witnesses, Messrs Kapiris and Giummarra.

12 There were no witnesses to the conversation or conversations in August 2001 by which the trading relationship was established. Messrs Kapiris and Giummarra were the sole representatives of the several parties, and no-one else was present. It is therefore one man's version against the other. The same is true of the negotiations which took place the following December.

13 It must be acknowledged that there were some circumstantial factors that his Honour might have taken, or did take, into account. One was that Mr Kapiris came to the relevant conversations secure (as he thought) in the common knowledge of those in the trade: that is, that Messrs Zausa and Giummarra were business partners. It is therefore possible that he subconsciously allowed that assumption to govern his recollection of that which he was told by Mr Giummarra. Such a conclusion would be easier to reach when it is appreciated that Mr Kapiris never gave evidence to the effect that Mr Giummarra offered a guarantee, or otherwise explicitly accepted responsibility for payment of the goods purchased by the business from the appellant. Indeed, Mr Kapiris did not go beyond the proposition that "Jean Luc [Giummarra] said to me he was in partnership with Bruno and they ran Werribee Fresh"[5]; but, of course, partnership carries with it the joint and several liability of the partners to meet the debts of the business.

14 The fact was, however, that the two individuals were not partners, but business associates, joined by the circumstance that they held separate directorships in two of the three companies that then operated the business. Given that the two were not partners, but merely associates in the business, there is no reason why Mr Giummarra should say otherwise; and this is so even if he did mean to accept personal responsibility for payment. Had he thought that the relationship might not be established without his personal acceptance of that responsibility, he would most likely have told Mr Kapiris the truth - that the business, which operated under the name "Werribee Fresh", was in fact a partnership between the three corporate owners of that business name; but that he was nevertheless prepared to guarantee payment of the debts of the business.

15 The judge, however, did not analyse the evidence in this way. Rather, after noting that Messrs Zausa and Giummarra had denied "that the contract by which the debts are said to have arisen were ever contracts with them as individual persons"[6], his Honour said of Mr Kapiris that he "seemed to me to be giving his evidence in a straightforward fashion"[7] although, because his evidence was transmitted by video link, an assessment was more difficult than it would otherwise have been. Nevertheless, Mr Kapiris appeared to his Honour to be "a person who was, as I say, being forthright and telling me as best he could in the circumstances what had taken place."[8]

16 By contrast, the judgment says almost nothing about the credibility of Mr Giummarra. According to the judge he was, in December 2001, "anxious to secure the fixed price contract if he could and it seems to me that in those circumstances promises to pay would most likely be sought".[9]

17 If these assessments were to remain unqualified save for the limitations which the judge had already put upon them, the result would seem inevitable: judgment for the appellant. It is a mark of the unsatisfactory nature of his Honour's statement of reasons that the additional qualifications, which led him to find against the appellant, are very difficult to discern. It is true that, immediately after observing that "promises to pay would most likely be sought", the judgment continued: "but Mr Giummarra minded his P's and Q's, which I am quite sure he is capable of doing, and that could have been an arrangement entered into without making a personal commitment, in an area which he knew and had good reason to believe was fraught with financial danger."[10] But his Honour was then speaking of December, not August, although it was in August that the crucial negotiations took place; and he failed altogether to refer to the circumstance that Mr Kapiris gave no evidence of any relevant conversation taking place in December, whereas (again, without there being any reference in the judgment to this) Mr Giummarra swore that it "was [in December] made very clear that Werribee Salad Fresh Pty Ltd was a new company set up with two directors"[11] and that Werribee Fresh no longer "existed".[12]

18 More inexplicable is his Honour's failure not only to record what each side relevantly said about the fundamentally important negotiations in August, but to reveal which version he accepted; for he had to accept one, but could not accept both. The judge thus ignored, in effect, the evidence upon which the fate of the litigation ought to have turned, and instead fleshed out his judgment with observations that are either irrelevant or, which is worse, cannot be reconciled with the evidence.

19 Several examples will suffice to make the point. His Honour accepted the "undoubted fact ... that Mr Zausa and Mr Giummarra and another formed companies which entered into partnership and operated under the business name of Werribee Fresh".[13] He did not, however, state whether Mr Kapiris was or was not told about this, although the latter had sworn that he was not, while Mr Giummarra had sworn that he was.

20 The judgment then contains a passage which cannot be reconciled with the evidence of either party: "As long as he [Mr Kapiris] was satisfied that the two men [Messrs Zausa and Giummarra] would honour the debts of the company, the rest was immaterial."[14] Yet Mr Kapiris' evidence was that he was throughout unaware that Messrs Zausa and Giummarra traded through a corporate structure, while Mr Giummarra swore that, in August, he told Mr Kapiris that not one company was, but three companies were, involved, and that nothing was then said to indicate that any individual would honour any debts at all.

21 His Honour then refers, as if it were significant, to the fact that Mr Kapiris himself conducted his business through a corporate entity - in his case, the appellant. The judgment continues:

"So it becomes very difficult indeed to accept that Mr Kapiris would continue along the path of his trading ventures [using a corporate vehicle] without being aware that people with whom he was dealing ... in business would resort to the same trading arrangements as he himself had entered into."[15]

22 This again is to ignore Mr Kapiris' evidence that he had been told that Messrs Zausa and Giummarra operated the business in partnership: something that surely is not uncommon in the relevant trade. It is also to put aside Mr Giummarra's evidence that he made it clear to Mr Kapiris in August that the business was operated as a partnership between three companies (which evidence leaves no room for the conclusion, based upon an assumed awareness by Mr Kapiris of the way trade is conducted, that he knew that his own business arrangements had been adopted by those behind Werribee Fresh).

23 The judgment contains a statement which encapsulates the difficulties to which it gives rise. According to his Honour, "When one analyses what Mr Giummarra says, there is not really that much difference between what they [Mr Kapiris on the one hand and Mr Giummarra on the other] are saying."[16] This is simply wrong. It may be conceded that the judge was there referring to the December 2001 negotiations, not those that took place in August that year. But even the separate accounts of what was said in December are irreconcilable; and it requires very little analysis of the evidence concerning the earlier (August) discussions to appreciate that those two stories are diametrically opposed. There is simply no basis upon which to sustain the proposition that there is not much difference between them.

24 Justice must not only be done, but be seen to be done. This does not mean that an obligation to provide reasons is a universal (although it is a normal) incident of the judicial process.[17] It does mean that judges must endeavour not to deliver judgments which, because they ignore significant evidence, cannot satisfy the reader that the result is just. It also follows that it is an incident of judicial duty for the judge to consider all the evidence in the case_[18]_; and that the failure of a judgment to refer to relevant evidence may result in an appeal court properly drawing the inference that it was overlooked or ignored.[19]

25 It is important nevertheless to recognise that the duty to deal with facts or evidence is not absolute. While justice must be seen to be done, that necessary goal must be achieved without the unnecessary expenditure of the limited time judges have available, and with an appreciation of the interests of those who have occasion to read reasons for judicial decisions.[20] Those interests, which in summation include the community interest in the due and efficient administration of justice, will never be served by judgments of unnecessary length. The judge has the often difficult task of finding the correct balance, which of course will vary according to the circumstances, including the place which the court occupies in the judicial hierarchy.

26 It was submitted by the respondent, in reliance upon (among other authorities) Devries v Australian National Railway Commission,[21] that a finding of fact by a trial judge, when based upon the credibility of a witness, is not to be set aside because an appellate court thinks that the probabilities of the case are against - even strongly against - that finding. Although the credibility of Mr Kapiris as against that of Mr Giummarra was (or, rather, should have been) crucial to the outcome of the trial that, nevertheless, is not the point on this appeal. It turns upon the sufficiency of the trial judge's reasons for his decision. This Court must here discharge the obligation of an appellate court, so far as it properly can, to perform its statutory function of appellate review "in a real and substantive way as the enacted law mandates."[22] In Victoria, that involves giving content to the right, conferred on litigants by s. 74 of the County Court Act 1958 and s.10 of the Supreme Court Act 1986, to appeal to the Court of Appeal if they are "dissatisfied with any judgment or order" of the County Court.

27 In our opinion, the review process has in this case revealed a judgment which failed properly to examine the crucial evidence. One (somewhat paradoxical) result of such failure is that this Court is not in a position to say whether or not the trial judge erred as described in the first ground of appeal. Nor are we able to say that his Honour should have found (in the terms set out in Ground 2) that the appellant was entitled to recover, from Mr Giummarra, the debts conceded to be outstanding. Grounds 1 and 2 of the grounds of appeal are therefore not made out; indeed it may ultimately be shown that, despite the problems with the analysis undertaken by his Honour in his judgment, the correct end result was achieved. On the other hand, his Honour's judgment does in our opinion suffer from flaws which make it impossible to be confident that justice has been done. For this reason, the third ground of appeal is made out. The judgment below must be set aside, and a new trial ordered.

[1] Transcript, p.4.

[2] Ibid., p. 79.

[3] Ibid., p. 80.

[4] Ibid., p 85.

[5] Transcript, p.6. It should be noted that the transcript available to us begins at some point after the cross-examination of Mr Kapiris began. For the balance of the evidence, we have had to rely on the notes of the practitioners, and on a summary of facts filed with the Court by the appellant on 15 July 2005.

[6] Reasons for judgment, p.142.

[7] Ibid.

[8] Ibid., p.143.

[9] Ibid., p.149.

[10] Reasons for judgment, p.149.

[11] Transcript, pp. 96-97.

[12] Ibid., p. 98.

[13] Reasons for judgment, p.144.

[14] Reasons for judgment, p.146.

[15] Ibid.

[16] Ibid., p.149.

[17] Fletcher Construction Australia Ltd v Lines Macfarlane & Marshall Pty Ltd [2002] VSCA 189; (2002) 6 VR 1 at [99].

[18] Mifsud v Campbell (1991) 21 NSWLR 725 at 728 per Samuel JA.

[19] Fletcher Construction Australia Ltd v Lines Macfarlane & Marshall Pty Ltd [2002] VSCA 189; (2002) 6 VR 1 at [103].

[20] See Campbell, Enid: Reasons for judgment: some consumer perspectives (2003) ALJ 62.

[21] (1993) 177 CLR 472 at 479 per Brennan, Gaudron and McHugh JJ.

[22] CSR Ltd and Midalco Pty Ltd v Maddalena [2006] HCA 1 at [19] per Kirby J.