Magic Glass v Singh

LEGISLATION CITED : Local Courts Act 1982 (NSW) - ss 70, 73(2)

Kojima Australia Pty Ltd v Australian Chinese Newspapers Pty Ltd [2000] NSWSC 1153 CASES CITED : Wakim v Mathiew Pty Ltd t/as Dove Migration Services [2002] NSWSC 405 Wende v Finney [2005] NSWSC 927

PARTIES : Magic Glass Pty Limited - Plaintiff Narinder Singh - Defendant

SOLICITORS : Mr G Fernie (as agent) - Plaintiff Mr Carins - Defendant

IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION

11255/2006 - MAGIC GLASS PTY LIMITED v NARINDER SINGH

JUDGMENT (Appeal decision of Local Court Magistrate - Small Claims Division) 1 HER HONOUR: By summons filed 16 March 2006 the plaintiff seeks an order that the decision of Her Honour Magistrate Hannan dated 20 February 2006 in matter number 1295/2005, entering judgment for the defendant and awarding costs in favour of the defendant, be set aside and in lieu thereof an order that the matter be remitted to the Local Court for determination. 2 The plaintiff is Magic Glass Pty Limited (Magic Glass) who was also the plaintiff in the Local Court proceedings. The defendant is Narinder Singh (Mr Singh). Magic Glass relied on the affidavit of Ali Hassan dated 8 June 2006. 3 At the outset, it may be helpful to make some brief comments concerning the remedy pursued by the plaintiff. Section 73(2) of the Local Courts Act 1982 (NSW) allows an appeal to this court on the grounds of lack of jurisdiction or denial of natural justice. 4 Section 75 of the Act provides that the Court may determine an appeal by either (a) varying the terms of the judgment or order or (b) setting the judgment or order aside or (c) setting the judgment or order aside and remitting the matter for determination in accordance with the Court's directions or (d) dismissing the appeal.

Grounds of appeal 5 The grounds of appeal are firstly, that the Magistrate in reaching her determination denied Magic Glass natural justice; secondly, that the Magistrate should not have made a determination that the terms and conditions of the plaintiff's contract with the defendant were unconscionable when such a defence had not been pleaded by the defendant; thirdly, the Magistrate should not have permitted the defendant to rely upon unconscionability of the terms of contract without providing the plaintiff with the right to provide evidence contradicting the assertions that the defendant had not had the opportunity to read the terms and conditions of the contract entered into; and fourthly, the Magistrate should not have reached the conclusion that as a contract was signed early in the morning and the writing on the document was small that the defendant could not be bound by the terms of the contract without providing the plaintiff with the opportunity to provide evidence as to the defendant's opportunity to be aware of the terms of contract. 6 In Kojima Australia Pty Ltd v Australian Chinese Newspapers Pty Ltd [2000] NSWSC 1153 and Wakim v Mathiew Pty Ltd t/as Dove Migration Services [2002] NSWSC 405, O'Keefe J (at [23]-[24] and at [20]-[21] respectively) made essentially identical observations on natural justice. In Kojima he stated: "The requirements of natural justice (or procedural fairness as it is now commonly referred to) apply to the Small Claims Division of the Local Court. This is clear from the nature of the function to be performed by that tribunal and the statutory recognition that is afforded to natural justice by s 69(2A) of the Act. The content of the requirements of natural justice is not fixed. The content is fluctuating. The overarching requirement is that of fairness (National Companies and Securities Commission v News Corp Ltd (1984) 156 CLR 296 at 312 per Gibbs CJ with whom Brennan J agreed). For a court that normally involves a duty to: (i) act judicially; (ii) deal with the matter for decision without bias; (iii) give each party the opportunity of adequately presenting its case; (iv) observe the procedural and other rules provided for in the relevant statute; (v) come to its decision with that sense of responsibility that is the necessary accompaniment of the duty to do justice."

Overview of the Small Claims Division of the Local Court 7 The legislative policy in relation to small claims is that there should be a quick, cheap and informal resolution of these claims. To achieve this, proceedings are conducted with a minimum of formality. According to O'Keefe J in Wakim v Mathiew Pty Ltd t/as Dove Migration Services [2002] NSWSC 405 at [16], the quick, cheap and informal resolution of claims: "…has many advantages. It tends to shorten proceedings. It assists in reducing costs. It does this in a number of ways, one of which is to make it easier for litigants in person to understand the procedures, perhaps to appear for themselves and not be disadvantaged by excessive legality, formality or procedural rules. Another is to give finality to decisions made in respect of small claims. This has been done by so framing the legislation as to ensure to the greatest extent possible that claims before the Small Claims Division of the Local Court should begin and end in that court. The limitation on the right of appeal permitted by the statute betokens this. Such a policy is readily understandable in the light of the fact that the ceiling for claims in the Small Claims Division is $10,000. Taking up the time of superior courts with such small matters is thus properly avoided in the vast majority of cases." 8 In determining whether the plaintiff was denied procedural fairness it is necessary to consider the nature of the jurisdiction exercised in the Small Claims Division. This is because the content of procedural fairness varies depending upon the nature of the tribunal and the jurisdiction it exercises. Section 70 of the Act provides: "Procedure generally in Small Claims Division

(1) The jurisdiction conferred by or under this Act on a Court sitting in its Small Claims Division is to be exercised by a Magistrate or an Assessor.

(2) Proceedings in a Court's Small Claims Division are to be conducted with as little formality and technicality as the proper consideration of the matter permits.

(3) The rules of evidence do not apply to proceedings being heard or other proceedings in a Court's Small Claims Division.

(4) Witnesses may not be cross-examined except in circumstances in which, and to the extent to which, the cross-examination of witnesses is authorised by a practice note.

(5) An Assessor or Magistrate exercising the jurisdiction of a Court sitting in its Small Claims Division may inform himself or herself on any matter relating to proceedings being heard or other proceedings in the Small Claims Division in such manner as he or she thinks fit.

(6) Proceedings in a Court's Small Claims Division (other than any judgment given or order made in respect of the proceedings) are not required to be recorded." 9 Practice Note 2 of 2005 at [10.1] to [10.4] reads: "10.1 There is no right to call witnesses to give evidence, to give evidence on oath/affirmation or to cross-examine a party or witnesses on oath/affirmation or otherwise in the Small Claims Division 10.2 Where a direction had not been given at the Pre-trial review by the Magistrate, Assessor or Registrar for the attendance of any witness at the trial of the proceedings, the proceedings will be heard and determined by each party tendering the written statements of witnesses together with any other relevant documentation or material in support of the party's case. There will be no right to examine or cross-examine any witness. Parties will, however, be entitled to make comments, present arguments and make final submissions on the evidence. 10.3 Where a direction has been given at the Pre-trial review by the Magistrate, Assessor or Registrar, that a witness attend for cross-examination, the proceedings will be heard and determined on the oral evidence and the written statements and other documents and materials which have been tendered. Submissions on the evidence will also be allowed. 10.4 The procedure at the trial of the proceedings in the Small Claims Division will be determined by the Magistrate or Assessor as he or she thinks fit." 10 In Wende v Finney [2005] NSWSC 927 Howie J at [27] and [28] made some pertinent observations about the proceedings in the Small Claims Division which I respectfully reproduce here. They are: "Of course informality and the abandonment of the normal rules of evidence and procedure should not be allowed to give rise to unfairness even where the justice being administered is in relation to relatively trivial claims. Rather in such matters the court might need to be particularly astute to ensure that the lack of formality and the speedy resolution of claims does not become an end in itself at the expense of the appearance of fairness to the parties within the court's jurisdiction. After all the formal rules of procedure that normally attend a hearing are generally aimed at producing fairness to the parties, sometimes at the expense of efficiency in the exercise of the court's jurisdiction. So where those rules are displaced by the need to provide cheap, efficient and expedient justice to the parties, the advantages can sometimes be obtained at too high a price so far as a particular litigant is concerned.

No doubt one of the reasons why the proceedings in the Small Claims Division are conducted with the informality required is that the parties before the court are, in advance of the hearing, aware of the material upon which the determination is to be made. There are procedures laid down and referred to in the Practice Note that require the parties to identify to each other the material they intend to rely upon. The material upon which each side relies, including statements of witnesses and the actual documents at the heart of the dispute, are in a form where they can be reviewed by the court assisted by such submissions that the parties wish to make upon those documents without the need to formally tender and prove the relevant material. …the intention of the scheme of the relevant legislation is that the dispute can generally be resolved on the documents." 11 In Wende a party tendered documents that were produced on subpoena during the hearing. Those documents alleged dishonesty and misconduct. Wende requested the opportunity to call witnesses to rebut that evidence. This request was refused. As it turned out, much of what the Magistrate read into his judgment from these documents was highly prejudicial to Wende. It was held that the failure to give Wende an opportunity to rebut that evidence constituted a denial of procedural fairness.

Local Court proceedings 12 On 31 March 2005 the premises of Libra Logistics at North Sydney sustained damage to glass, aluminium and an air conditioner as a result of a break and enter. Mr Singh was a director of Libra Logistics which is now in liquidation. On 31 March 2005 Magic Glass carried out repairs at Libra Logistics' premises. On 23 April 2005 Magic Glass issued Libra Logistics Pty Limited with an invoice (No 8139) for an amount of $7,833.10 in respect of services rendered. This amount has not been paid. 13 The issue before the Magistrate was whether Mr Singh should be regarded as a guarantor to the contract and held liable to pay the amount of the invoice, namely $7,833.10. 14 The Magistrate made two factual findings. At page 9.17 the Magistrate made a finding that: "In my view the words, "I'm signing only for glass work as a tenant", does not have any legal effect in that it is not clear what that means. However, it is evidence of Mr Singh's intention that he was distancing himself from any full obligation in relation to the debt, or to the warranties." 15 Further, the Magistrate made a finding that the conversation whereby Mr Hassan asserted that Mr Singh said that regardless of what happened he would pay for the repairs, did not occur (t 9.45). 16 At the hearing, the second page of the invoice document (ie the back page) was produced. 17 The following exchange took place: "HER HONOUR: But the buyer isn't a person referred to at all on the front page, it is the customer who is the buyer. This talks about buyers and sellers which isn't - I see buyer means all of those entities specified over leaf and referred to as the customer and/or guarantor. So under 22, gosh this is hard to read. CAIRNS; Perhaps I should be addressing your Honour on unconscionable conduct or something like that. HER HONOUR: Well it wasn't raised. I mean -- FEATHER: The difficulty I have your Honour is I don't have anything on the back of my document, I've only got the front page, so I don't know what they showed Mr Singh. CAIRNS: I understand my friend had a copy of the statement that Mr Hassan filed in the proceedings. HER HONOUR: Where is the evidence that this entire document was shown to Mr Singh as in the not just the covering page, but the other - the only evidence about the actual signing of the document. There is no evidence either way that this entire document with all its pieces was shown to - whether that was printed on the back of it or anything? CAIRNS: Well only that there's of course that warrant on the first page of the document that says we acknowledge and declare that we've read and understood the terms and conditions I believe. HER HONOUR: Yes that's true. CAIRNS: And that's been signed. HER HONOUR: And that is conditions, yes. Yes it does see overleaf which indicates on the other side of the same page. CAIRNS: Yes." (t 5.36-58; t 6.1-19) 18 Clause 22 (typed in very very small font size) reads: "22. In this clause unless the contrary intention appears (1) "Guarantor" means the person specified over leaf or the persons signing this contract as director/secretary of the Buyer; (2) A reference to "guarantor" is a reference to all of the persons named as "guarantor" jointly and each of them severally; and (3) An agreement, representation, warranty or indemnity on the party of the guarantor binds the persons named as "guarantor" jointly and each of them severally. (4) The guarantor gives this guarantee and indemnity in consideration of the Seller agreeing to enter into this contract. The guarantor acknowledges the receipt of valuable consideration from the Seller for the guarantor incurring obligations and giving rights under this guarantee and indemnity. (5) The guarantor unconditionally and irrevocably guarantees to the Seller payment of the all amounts which, whether at law, in equity, under statute or otherwise, are payable, are owned but not currently payable, are contingently owing or which remain unpaid by the Buyer to the Seller at any time or which are reasonably foreseeable as likely, after that time, to fall within those categories for any reason or circumstance in contention with this contract or any transaction contemplated by it. (6) The guarantor unconditionally and irrevocably guarantees to the Seller due and punctual performance by the Buyer of all the Buyer's express or implied obligations to the Seller in connection with this contract or any transaction contemplated by it. (7) If the Purchaser does not pay any amounts when due, and in accordance with this contract, then the guarantor agrees to pay such amounts to the Seller on demand from the Seller whether or not demand has been made on the Purchaser. A demand may be at any time and from time to time. (8) If the Buyer does not duly and punctually perform its obligations in accordance with the terms of the document under which they are to be performed then the guarantor agrees to perform such obligations on demand from the Seller whether or not demand has been made on the Buyer. A demand may be at any time and from time to time. (9) As a separate undertaking, the guarantor indemnifies the Seller against all liability or loss arising from, and any costs, charges or expenses incurred in connection with: (a) the amounts not being recoverable from the guarantor or from the Buyer; and (b) the obligations not being duly and punctually performed because of any circumstance whatsoever. (10) This guarantee and indemnity is a continuing security and extends to all of the amounts and other money payable under this guarantee and indemnity and to all the obligations. The guarantor waives any rights it has of first requiring the Seller to proceed against or enforce any other right, power, remedy or security or claim payment from the Buyer or any other person before claiming from the guarantor under this guarantee and indemnity. (11) The liabilities of the guarantor under this guarantee and indemnity as a guarantor, indemnifier or principal debtor and the rights of the Seller under this guarantee and indemnity are not affected by anything which might otherwise affect them at law or in equity including without limitation, one or more of the following: (a) The Seller or another person granting time or other indulgence to, compounding or comprising with or releasing the Buyer; or (b) Acquiescence, delay, acts, omissions or mistakes on the part of the Seller; or (c) Any variation or novation of a right of the Seller, or alteration of this contract or a document, in respect of the Buyer. (12) The guarantor represents and warrants that its obligations under this guarantee and indemnity are valid and binding and that it does not enter into this guarantee and indemnity in the capacity of a trustee of any trust or settlement."

(see enlargement annexed) 19 The Magistrate at (t 10-11) stated that: "…of the signing are such that it would be unconscionable to enforce the terms of clause 22, as it read, to take into account it could be construed that the defendant was signing as guarantor when that was not his intention and that is made very clear to in effect catch him through the use of that clause in the circumstances in which it appears that the document was signed, would not operate fairly in terms of this defendant." 20 Magic Glass submitted that unconscionable conduct was not pleaded. The Magistrate at (t 5.47) acknowledged that it was not raised, yet proceeded to determine the matter on the basis of unconscionable conduct and this constitutes a denial of natural justice. 21 The Magistrate held that in light of the circumstances of entering into the contract Mr Singh should not be treated as a guarantor and the result was that Magic Glass' claim failed. The effect of Clause 22 only came to light as an issue during the proceedings. Once Magic Glass relied on Clause 22 it became an issue in the proceedings. The pleadings in the Local Court are not before this Court. Any defence to Clause 22 also became relevant. The Magistrate was entitled to reach the decision that she did. It is my view that there has not been a denial of natural justice. The appeal is dismissed. The decision of Her Honour Magistrate Hannan dated 20 February 2006 is affirmed. The summons field 16 March 2006 is dismissed. 22 Costs are discretionary. Costs usually follow the event. The plaintiff is to pay the defendant's costs as agreed or assessed.

(2) The decision of Her Honour Magistrate Hannan dated 20 February 2006 is affirmed.

(4) The plaintiff is to pay the defendant's costs as agreed or assessed. Enlarged Clause 22

"22. In this clause unless the contrary intention appears (1) "Guarantor" means the person specified over leaf or the persons signing this contract as director/secretary of the Buyer; (2) A reference to "guarantor" is a reference to all of the persons named as "guarantor" jointly and each of them severally; and (3) An agreement, representation, warranty or indemnity on the party of the guarantor binds the persons named as "guarantor" jointly and each of them severally. (4) The guarantor gives this guarantee and indemnity in consideration of the Seller agreeing to enter into this contract. The guarantor acknowledges the receipt of valuable consideration from the Seller for the guarantor incurring obligations and giving rights under this guarantee and indemnity. (5) The guarantor unconditionally and irrevocably guarantees to the Seller payment of the all amounts which, whether at law, in equity, under statute or otherwise, are payable, are owned but not currently payable, are contingently owing or which remain unpaid by the Buyer to the Seller at any time or which are reasonably foreseeable as likely, after that time, to fall within those categories for any reason or circumstance in contention with this contract or any transaction contemplated by it. (6) The guarantor unconditionally and irrevocably guarantees to the Seller due and punctual performance by the Buyer of all the Buyer's express or implied obligations to the Seller in connection with this contract or any transaction contemplated by it. (7) If the Purchaser does not pay any amounts when due, and in accordance with this contract, then the guarantor agrees to pay such amounts to the Seller on demand from the Seller whether or not demand has been made on the Purchaser. A demand may be at any time and from time to time. (8) If the Buyer does not duly and punctually perform its obligations in accordance with the terms of the document under which they are to be performed then the guarantor agrees to perform such obligations on demand from the Seller whether or not demand has been made on the Buyer. A demand may be at any time and from time to time. (9) As a separate undertaking, the guarantor indemnifies the Seller against all liability or loss arising from, and any costs, charges or expenses incurred in connection with: (a) the amounts not being recoverable from the guarantor or from the Buyer; and (b) the obligations not being duly and punctually performed because of any circumstance whatsoever. (10) This guarantee and indemnity is a continuing security and extends to all of the amounts and other money payable under this guarantee and indemnity and to all the obligations. The guarantor waives any rights it has of first requiring the Seller to proceed against or enforce any other right, power, remedy or security or claim payment from the Buyer or any other person before claiming from the guarantor under this guarantee and indemnity. (11) The liabilities of the guarantor under this guarantee and indemnity as a guarantor, indemnifier or principal debtor and the rights of the Seller under this guarantee and indemnity are not affected by anything which might otherwise affect them at law or in equity including without limitation, one or more of the following: (a) The Seller or another person granting time or other indulgence to, compounding or comprising with or releasing the Buyer; or (b) Acquiescence, delay, acts, omissions or mistakes on the part of the Seller; or (c) Any variation or novation of a right of the Seller, or alteration of this contract or a document, in respect of the Buyer. (12) The guarantor represents and warrants that its obligations under this guarantee and indemnity are valid and binding and that it does not enter into this guarantee and indemnity in the capacity of a trustee of any trust or settlement." **********

12/09/2006 - Date of judgment added - Paragraph(s) Coversheet

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