Lyon v Adami

Supreme Court of NSW|2014-11-14|Before: Garling J

Supreme Court Proceedings

Before the Court is an appeal pursuant to ss 39 and 40 of the Local Court Act 2007 by Mr and Mrs Lyon, ("the appellants"), from a judgment delivered on 17 March 2014, in proceedings heard in the Local Court. The appellants were the plaintiffs in the Local Court proceedings.
There is also before the Court, by an Amended Cross-Summons commencing an Appeal, a Cross-Appeal by Mr Adrian Adami, ("the defendant"). He was the defendant in those Local Court proceedings.
Stated broadly, the appellants contend that the award of damages by the Trad LCM was inadequate, and that instead of giving judgment in the sum which she did, the Magistrate should have had awarded damages in an amount of about $13,000. The Cross-Appeal claims that the Magistrate fell into error and should have awarded a lesser sum of damages, namely one of $2,400. Neither of these sums includes interest.

Local Court Judgment

On 17 March 2014, her Honour delivered her judgment. She identified the fact that the claim which was being made was for damages for breach of bailment. Her Honour identified the claim in these terms: "Mr and Mrs Lyon contend that Mr Adami breached the bailment by failing to take reasonable care of their lounges. Mr Adami bears the onus of satisfying the Court on the balance of probabilities that he took such care of the lounges as was reasonable in the circumstances." and considered the evidence relevant to those issues. Ultimately, she concluded, by reference to the evidentiary burden borne by the defendant, Mr Adami, that he had not discharged that evidentiary burden. She held that Mr Adami had not proved that he had taken all reasonable care for the property which was under bailment, and, accordingly, announced that she found for the plaintiffs, Mr and Mrs Lyon.
That foundational decision is not challenged in this Court by either the Appeal or the Cross-Appeal.
Trad LCM went on to deal with the question of quantification of loss and damage. She made these findings and remarks. She said: "It is common ground that the lounges were totally destroyed in the fire at Mr Adami's business premises. Further, it was not in dispute that the lounges were ten years old and that Moran leather lounges were considered to be of a particular standard and quality."
Her Honour then identified that what was in dispute between the parties was the value to be assigned to the lounges owned by Mr and Mrs Lyon. She correctly identified that the fundamental principle of damages was to put the party suffering the loss in the position they would have been in, but for the wrong giving rise to the loss.
In addition to the issue of value of the lounges, the plaintiffs also made a claim for loss of use of the lounges. Her Honour dealt with that claim by saying this: "Likewise, I am not convinced by the plaintiff's argument ... that there should be any further award for loss of use of the lounges. I do not dispute that a party may be compensated for the loss of use of a personal item but in my view, to be successful, the Court must be satisfied of something beyond the loss of amenity or physical convenience together with the prohibition in s 16 of the Civil Liability Act 2002. In this case, the evidence has not gone beyond that point. Further, I am not satisfied on the balance of probabilities that the lounges were of any nature or type that the plaintiffs could find nothing of comparable value, quality or functionality in the market place. Evidence of not replacing the lounges does not take the matter further."
Her Honour identified in the judgment that, on the evidence before her, there was an unchallenged valuation provided by Mr Simon Hullington, an accredited valuer, that the two lounges were each worth $1,200 at the time they were delivered to Mr Adami by Mr and Mrs Lyon.
Her Honour also noted, and accepted, that Mr Adami had provided to Mr and Mrs Lyon, a written quotation for the value of restoration work which he had been asked to undertake, which was in the sum of $3,350. She then went on to conclude her assessment of the damages saying this: "Therefore doing the best that the Court can, from the evidence provided during the course of the hearing and considering what best represents the interests of justice by making a finding where the Court can be satisfied of a proper basis for doing so, I ascribe a value of $5750 to the lounges. This being the amount, I am satisfied on the balance of probabilities would have been the value of the lounges had they not been destroyed by the fire. The valuation of Mr Hullington plus $3,350."
The only other evidence before her Honour about the value of the lounges was, at best, peripheral, and was with respect to what the cost would be, if new lounges were purchased to replace those that had been destroyed. Whilst there is no specific finding to this effect in the Local Court judgment, it would appear that, from the quotations for the replacement of the lounges which were put before the Local Court, the replacement value of "new for old" was in the order of $13,000. The precise amount is not directly relevant.

Appellant's Submissions

The appellants submit that the learned Magistrate erred as a matter of law by failing to apply the proper legal test as to the assessment of damages. They submit that that test is to be found in Clark v Macourt [2013] HCA 56.
Clark was a decision about the measure of damage to be awarded in contract. Keane J with whom Hayne, Crennan and Bell JJ agreed, said at [106]: "The principle according to which damages for breach of contract are awarded is that the damages should put the promisee in the same situation with respect to damages, so far as money can do it, as it would have been in, had the broken promise been performed."
That principle is not to be doubted. It is of long standing. As Keane J's judgment notes, an earlier decision of the High Court of Australia in Bellgrove v Eldridge [1954] HCA 36; (1954) 90 CLR 613 held: "That the principle is always applied with a view to assuring to the purchaser the monetary value of faithful performance by the vendor of the bargain."
The appellants submit that the application of this principle should have resulted in damages in the order of the "new for old" value of the lounges, namely, in the order of $13,000. They make this submission on the basis that had the lounges been restored, they would have been in an "as new" condition.

Discernment

I do not accept the appellant's submission that the Magistrate has applied the incorrect test because she did not apply the identified principle relating to contractual damages. Her Honour did not find a breach of contract. She was not asked to find a breach of contract by counsel for the appellants. The case put by counsel for the appellants, was solely on the basis that her Honour would find that there had been a breach of bailment. That is exactly what her Honour found had been established.
The general principle of assessment of damages to which her Honour had regard, namely, that the function of damages is as far as money can do it put the injured party in the position it would have been in but for the wrong, was correctly stated. That principle then needed to be applied to bailment.
McDougall J in Lindores Plant and Equipment Proprietary Limited v Jacap Low Loaders Pty Ltd [2004] NSWSC 867, dealt with a claim for damages for breach of bailment. He said at [47]: "In principle, the function of damages is, so far as money can do it, to put the injured party in the position it would have been in but for the wrong. Where what is lost or damaged is personal property, then the assessment of damages must take account of the estimate of value of the property at the time of the wrong."
Although an appeal was taken from that judgment, there was no appeal on the basis that his Honour's expression of the appropriate principle for the assessment of damages was wrong.
Recently, the Court of Appeal considered a similar question in Cambridge v Anastasopoulos [2012] NSWCA 405. Meagher JA with whom Barrett JA and Sackville AJA agreed, in a judgment which, if I may say with respect, puts the principles with absolute clarity, said at [20]: "The primary judge correctly approached the assessment of damages on the basis that they should, so far as money can do, put Mr Anastasopoulos in the position he would have been in if the motorboat and trailer had not been damaged on 10 February 2009. Ordinarily, and in a case such as this, that requires an assessment of the amount by which the value of the property at the time of loss has been diminished."
In a case such as the present, where personal property or goods are destroyed rather than damaged, such as occurred in Cambridge, then the appropriate measure of loss is the value of the goods at the time the wrong was committed namely, at the time the fire in this case took place, and the goods were destroyed.
There is no finding by the Magistrate as to what state the goods were in at the time they were destroyed. There is no complaint made in the Appeal or Cross-Appeal about this. There is no finding that the goods were in any state different from that which they existed at the time they were delivered by Mr and Mrs Lyon to Mr Adami.
It follows, by application of the correct legal principles, that the Local Court, in fixing the amount of damages, was required to identify the sum of money which represented the value of the lounges at the time they were destroyed. The only evidence available, and upon which the Local Court Magistrate could make a finding of fact, relevant to this question, was evidence that the lounges were valued at $2,400, or being $1,200 each, at the time they were destroyed.
In my view, the Magistrate's finding that the lounges had any value greater than that sum was an error of law. Accordingly, it follows that the appellants have correctly complained that the Magistrate erred in law in making her finding of the value of the damages, but they have not correctly complained that the error is demonstrated by her Honour's failure to award the appellants a sum for what can be termed "contractual expectation" damages, that is, the value of the lounges once fully restored, if the contract had been fulfilled.
It follows that the Cross-Appellant has also correctly identified that there was an error of law in the finding by the Magistrate of the proper sum by way of her assessment of damages. The Cross-Appellant is correct to submit that the proper sum for damages that ought to have been awarded was $2,400.
The second basis of complaint on the appeal was that the learned Magistrate erred by making a finding as to the cost quoted by the defendant to repair and restore the lounges. It is complained that her Honour made a finding that the costs to repair was $3,350 and she should have found that it was $3,350 plus GST.
This is a question of pure fact. The authorities demonstrate that this Court has no role when dealing with an appeal under the Local Court Act to interfere with any finding of fact, however erroneous that finding may be. I reject this ground.
The third ground referred to an error made by the Magistrate, when she held that a "not insubstantial" part of the market value of a new leather lounge comprised a ten years manufacturer's warranty when there is no evidence before the Court as to the value of that warranty or its composition. The warranty was before the Court. There was no evidence as to the value of that warranty. Her Honour was not entitled to conclude, as a fact, that the value of the warranty was a not insubstantial part of the market value of the new leather lounge. However, that error is not, in my view, of any relevance because of the findings to which I have earlier adverted, as to what result would follow from the application of proper test as to the assessment of damages. Accordingly, to the error ought to be put to one side.

Loss of Use

The fourth ground was that the learned Magistrate erred with respect to considering as a component part of an award of damages, a sum for the loss of use of the lounges by the appellants, by finding that she needed to be satisfied that s 16 of the Civil Liability Act 2002, imposed a threshold before any such award could be made.
Clearly, her Honour was in error in holding that s 16 of the Civil Liability Act had any application. It is entirely irrelevant to a claim for loss of use of personal goods.
But it seems to follow from the way in which the appellants have put their submissions to this Court that the Magistrate has erred in failing to make any award at all for their loss of use of the lounges.
I have set out earlier in this judgment the findings which the Magistrate made about the loss of use of the lounges. In short, her Honour held, that whilst she accepted that a party may be compensated for loss of use of a personal item, that she needed to be satisfied in the circumstances of this case that the loss of use was appropriately to be compensated in circumstances where the detriment suffered by reason of loss of use was something capable of being valued, although difficult so to do.
Her Honour says, correctly, that she was not satisfied on the balance of probabilities that the lounges were of any particular or specific nature or type, such that lounges of comparable value, quality and functionality could not have been found in the market place. From that conclusion, she reasoned that there ought no award for loss of use.
In my view, her Honour in failing to award any damages for loss of use of a personal item has fallen into an error of law. The damages are properly claimed and ought to have been the subject of an attempt at assessment. The difficulty which arises is that there was no basis upon which her Honour could have reached an assessment of any identifiable sum, other than a nominal amount for the loss of use of those lounges. A nominal sum in present terms would, in my assessment, certainly have been no more than a hundred dollars.
It follows that I have been satisfied that the Magistrate erred in law in respect of assessing the value of the plaintiff's loss of use and has erred in law in failing to assess an amount for loss of use.

Conclusion

I come then to consider what order should be made for the determination of this Appeal and the Cross-Appeal. Section 41 of the Local Court Act permits the Court to determine an appeal brought under either s 39 or s 40 of that Act, by varying the terms of the judgment or order of the Local Court, or by setting aside the judgment or order, or by setting aside the judgment or order and remitting the matter to the Local Court. Finally, an appeal can be dismissed. The relatively small sums of money involved in these proceedings and the legal costs which have been incurred so far, tell strongly against remitting the matter to the Local Court for further hearing.
Accordingly, in the exercise of my discretion under s 41 of the Local Court Act, I have decided that I will determine this appeal by varying the terms of the judgment or order which was given by the Magistrate. The judgment or order below ought to be varied by altering the sum of $5,750 to $2,500.
Her Honour, the learned Magistrate, ordered interest pursuant to s 100 of the Civil Procedure Act 2005 from 8 November 2009 to the date of judgment. It remains appropriate that such interest be ordered and for it to be calculated on the judgment which I have ordered.
The parties will be required to bring in short minutes of order to reflect that calculation.
Accordingly, in summary, I uphold the appellant's appeal but only insofar as there ought to have been an award for loss of use of the lounges. I would include in a varied judgment, a sum of $100 to reflect that loss of use.
The parties will need to bring in formal orders.
Consequent upon the reasons I have just given, issues arise as to what order for costs, if any, ought to be substituted in the Local Court proceedings and what order for costs ought be made with respect to the Supreme Court proceedings.

Local Court Costs Order

In the Local Court, on 19 August 2013, an Offer of Compromise was served in which the defendant offered to compromise the claim by paying the sum of $5,000 and paying the plaintiff's costs as agreed or assessed.
Clearly, the consequence of the new judgment in the Local Court varied by order of this Court, is that the defendant has obtained a better result, and to a significant degree, than the offer made in the Offer of Compromise of 19 August 2013.
The effect of a party doing better than an offer of compromise when the Court comes to consider what order it ought make, is dealt with in Pt 42 of the Uniform Civil Procedure Rules 2005. Rule 42.15A deals with the circumstances in which an offer of compromise is made by a defendant, and which is not accepted by a plaintiff, and then, the defendant obtains a result on the claim which is no less favourable to the defendant than the terms of the offer. That is the rule applicable here.
Rule 42.15A provides that, unless the Court otherwise orders, the defendant is entitled to an order against the plaintiff for the defendant's costs in respect of the claim to be assessed on the ordinary basis up to the time from which the defendant becomes entitled to costs under subparagraph (b) of that rule, and the defendant is entitled to an order against the plaintiff for the defendant's costs in respect of the claim assessed on an indemnity basis on the date an offer of compromise is made.
Having regard to the nature of the issues before the Local Court, the fact that no offer was made to compensate the plaintiff in any sum at all before proceedings were commenced, it is appropriate to otherwise order, within the terms of r 42.15A(2).
In my view, the plaintiff ought have their costs up to the date upon which the offer was made, namely, 19 August 2013, and on the usual basis, including all filing and other fees incurred in commencing the proceedings. The plaintiff should pay the defendant's costs on an indemnity basis after that date. Accordingly, I will vary the order or costs made in the Local Court and order as follows: 1. ● Order the defendant to pay the plaintiff's costs up to and including 19 August 2013. 2. ● Order the plaintiff to pay the defendant's costs on an indemnity basis from 20 August 2013. Counsel will need to include these orders, when final orders are brought.

Supreme Court Costs

I then have to consider what order this Court should make with respect to the Appeal and the Cross-Appeal. In my view, each party has had a measure of success. Both the Appeal and Cross-Appeal was upheld. Sums of money involved in this case are minimal.
The cost of engaging in an assessment of costs in the Supreme Court is out of all proportion to the sums in dispute and, in my view, in the exercise of my discretion, the interests of justice require that each party be ordered to pay their own costs of the proceedings in this Court.
Accordingly, it will be necessary for counsel to bring in short minutes of order to reflect the orders of the Court.
I direct that the defendant is to submit to my Associate, within seven days, the short minutes of order which he proposes ought be made. Those short minutes are to be served on counsel for the plaintiff at or before that time. Counsel for the plaintiff have seven days to indicate whether the orders are agreed or such other orders as are sought and a copy of counsel's proposal should be provided to the other side and I will make the orders which I think are appropriate in due course.

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: 25 March 2015

At a glance

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Judgment (11 paragraphs)

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Cases Cited (5)