Najask Pty Ltd v Stow

Supreme Court of NSW|2016-09-13|Before: Wilson J

Judgment

This is a case concerning payment of a disputed bill for holiday accommodation for a group of school children in an amount of a little over forty thousand dollars.
The plaintiff, Najask Pty Ltd, operates the Capital Country Holiday Village; the defendant conducts a travel booking agency which booked a stay for a school group at the plaintiff's holiday accommodation. The school group found the accommodation unsatisfactory and made complaint about it. The complaints were taken up by the defendant with the plaintiff, with the former ultimately refusing to pay the account levied by the plaintiff for the accommodation (although she herself had been paid by the school group).
The dispute over the unpaid account came before the Local Court, with the Court ruling in favour of the defendant, and dismissing the plaintiff's claim for the unpaid monies. The Magistrate concluded that the contract between the plaintiff and defendant should be construed as an entire contract, and failure by the plaintiff to complete the entire contract, including provision of accommodation of a particular standard, disentitled it to claim payment.
In an amended summons filed in the Registry of this Court on 15 April 2016, Najask Pty Ltd appeals and, insofar as is necessary, seeks leave to appeal, against the decision of Stapleton LCM of 26 October 2015.
The matter turns upon the proper construction of the (unwritten) contract between the plaintiff and defendant, and whether the contract for the provision of holiday accommodation was an entire contract.

The Factual Background

The defendant conducts a business which trades as Educational Tours Worldwide. On behalf of a private girls' school from Western Australia she contracted with the plaintiff to provide accommodation and meals for a group of 99 students and 11 staff of the school over 8 nights in June and July 2013.
The school group stayed at the plaintiff's holiday accommodation at Sutton between 26 June 2013 to 4 July 2013.
There were issues with the standard of the accommodation, with complaints about inadequate provision of toilet paper, poor standards of cleaning in cabins, failure to provide clean linen, sub-standard and delayed meals, and overcrowding of a shared dining room facility.
At some stage the school paid the defendant for the tour booked through her company, including the accommodation at Sutton.
On 13 September 2013 the plaintiff issued a tax invoice to the defendant for $42,897.50 for the accommodation provided to the school group. Because of the issues about the standard of the accommodation the defendant declined to pay it in full, offering to pay only 50% of the invoiced amount.
The plaintiff was not prepared to accept payment of less than the total amount invoiced, and filed a Statement of Claim in the Local Court, seeking payment of $40,155.00 plus interest and costs. (The difference between the invoiced amount and the amount sought in the Local Court reflected an amount of money owed by the plaintiff to the defendant arising from another school booking at the Sutton accommodation.)
The matter came on for hearing in the Local Court before Stapleton LCM on 26 October 2015, who dismissed the claim and ordered costs against the plaintiff. The Magistrate's ex tempore judgment is the subject of the current appeal.

Local Court Proceedings

In the Local Court the Magistrate heard oral and affidavit evidence from the director of the plaintiff, Stephen Lindsay, in the plaintiff's case. The defendant gave oral and affidavit evidence in her case.
The determination of the matter ultimately turned on whether the contract for accommodation contained an implied term as to the standard of the accommodation and related services and, if so, whether the contract had been performed.
In her ex tempore judgment, her Honour concluded that there was an implied term in the contract between the plaintiff and defendant as to the standard of the accommodation and services provided by the plaintiff. Performance of the contract depended upon all of its terms being met, as it was an entire and indivisible contract. The Magistrate concluded that the plaintiff failed to establish that it had met its obligations under the contract, and thus failed to establish its case.
The Statement of Claim was dismissed, with costs against the defendant.

Supreme Court Proceedings

The plaintiff brings its appeal under s 39(1) of the Local Court Act 2007 (NSW). That section provides for appeals as of right on a question of law.
The plaintiff advances 11 grounds of appeal, all of which plead an error of law. There is an issue between the parties as to whether the grounds are in fact confined to errors of law, with the defendant contending that at least grounds 6, 7(b), 7(c) and 9 are grounds which involve questions of both fact and law.
The grounds as pleaded are as follows. 1. Her Honour erred in law by holding that the plaintiff's evidence with respect to the defendant receiving payment for the services performed was not relevant. 2. Her Honour erred in law by failing to hold that the plaintiff had performed the contract in accordance with the terms of the reservation made by the defendant by virtue of the defendant admitting paragraph 6 of the statement of claim. 3. Her Honour erred in law by holding that the plaintiff had failed to traverse the allegations of the defendant that the plaintiff had breached the express and implied terms of the contract by the plaintiff's failure to reply to the defendant's defence. 4. Further or in the alternative to the preceding ground, Her Honour erred in law in failing to apply r 14.27(2) of the Uniform Civil Procedure Rules 2005 (NSW) properly or at all to hold that there was an implied joinder of the issues on the defence. 5. Her Honour erred in law by holding that the onus was on the plaintiff to establish that it had not breached the express and implied terms alleged by the defendant. 6. Her Honour erred in law by holding that the plaintiff had breached the express and implied terms alleged by the defendant. 7. Her Honour erred in law by: 1. Holding that the defendant was not required to establish it had suffered damage by virtue of the breach of the express and implied terms alleged by the defendant; 2. Failing to give any or proper weight to the finding that the defendant had been paid for the services performed under the contract; 3. Failing to hold that there was no damage caused by any breach of the express or implied terms alleged by the defendant. 1. Her Honour erred in law by failing to hold that the defendant had the onus of establishing that the contract was an entire contract that required the plaintiff's complete performance before the plaintiff was entitled to payment. 2. Her Honour erred in law by failing to hold that the defendant had not established that any breach of an implied or express term entitled it to withhold all payment of the contracted amount, without reference to any actual loss caused by the alleged breach of the implied or express terms. 3. Her Honour erred in law by holding that a breach of the express and implied terms alleged by the defendant entitled the defendant to be relieved from paying any amount to the plaintiff for the provision of the services performed under the contract. 4. Her Honour erred in law by failing to properly apply the principles set out in Baltic Shipping Co v Dillon (1992) 176 CLR 344.

The Plainitiff's Case on Appeal - in Summary

The plaintiff contends that the Magistrate was in error in construing the contract as an entire contract and, as a consequence of that error, misapplied law and principle as to the onus of proof of relevant factual matters. It is submitted that the Magistrate wrongly allowed the defendant "to pick and choose between two different contractual concepts to make out her case", being allegations of defective performance, and failure to perform and entire contract and therefore fell into error as to what the parties had to prove, and what had in fact been proved. The plaintiff contends that, for the defendant to succeed, she was obliged to prove damage as a consequence of breach of contract; in the absence of evidence of damage, judgment should have been for the plaintiff on proof of performance of the contract.

The Defendant's Case on Appeal - in Summary

The defendant contends that any mistake as to the nature of the case pleaded in the Local Court was the plaintiff's. Before the Local Court, the plaintiff pleaded breach of agreement, but sought to run a case alleging debt. The defendant contends that the Magistrate was correct in finding that the consequences of the conduct of its case by the plaintiff was to oblige it to prove both the existence and terms of the contract, and performance of it, to recover the outstanding monies. The subsequent failure of the plaintiff to call any evidence of performance of the contract, beyond the mere provision of some accommodation, and some services, was fatal, in the context of the defence case for failure to perform the contract.
The defendant submits that the plaintiff's appeal is subject to the same failure to understand the nature of the case, and thus fail to prove performance of the contract.

Consideration

Reduced to its essentials, the case is a relatively straightforward one, and the Magistrate appears to have approached it in that practical way. Much time can be spent arguing about whether a case is one of breach of contract, or debt, or failure of consideration. The real issue is whether the plaintiff was entitled to recover the amount of money claimed, in the context of the defence raised. It is apparent that the Magistrate endeavoured to get to the real issue and to determine it.
To do that, it was necessary to determine the nature of the agreement, or contract, between the plaintiff and defendant, and then to determine whether the plaintiff had proved its performance of the contract, such as to give rise to an entitlement to payment from the defendant.
In her ex tempore judgment the Magistrate considered the nature of the agreement between the plaintiff and defendant, including consideration of the terms of the agreement. In the absence of any evidence of any express written terms, her Honour concluded that it was necessary to have regard to the whole of the circumstances that applied to the agreement between the parties relevant to the provision of holiday accommodation to a large school group. She concluded that the agreement included an implied term as to the standard of the accommodation and service provided: "… [I]t is a matter of necessary for the reasonable or effective operation of the contract to imply to that the standard will be appropriate to a large party of school girls with accompanying teachers." (at T29:28 of 26 October 2015)
Her Honour went on to find that the implied term as to an appropriate standard of accommodation encompassed such matters as cleanliness and the provision of clean linen.
In the ex tempore judgment the Magistrate next turned to consider the evidence that would establish performance of the contract by the plaintiff, that being denied by the defendant.
The plaintiff relied in that regard upon what it purported was an admission by the defendant of performance of the contract by it. The asserted admission was part of the plaintiff's pleadings in the Local Court, admitted by the defendant. It was in these terms: "5. The defendant made a reservation with the plaintiff with respect to the attendance of a group from the Georgiana Molloy Anglican School for the period 26 June 2013 to 4 July 2013, being a total of 8 nights. 6. The group from Georgiana Molloy Anglican School attended the plaintiff's premises in accordance with the terms of the reservation made by the defendant." (Local Court Statement of Claim, AB p.214)
The plaintiff contended that the acceptance by the defendant of the attendance by the school group at the accommodation in accordance with the terms of the reservation was an admission of the performance of the contract. On that basis, no evidence was called to establish performance of the contract, beyond that which went to prove that the school group attended and was accommodated. No evidence was led to deal with the defence, or to answer the allegations as to sub-standard accommodation and poor quality meals.
The Magistrate did not accept that the defendant's admission of the attendance of the school group was anything more than acceptance of attendance by the school group at the accommodation on a particular date. She concluded that it was not an admission as to performance of the contract and noted the failure of the plaintiff to call any evidence of the standard of accommodation provided. Notably, no evidence was called from any staff member of the plaintiff who dealt with the school group, or who could have deposed as to the cleanliness of the cabins provided, the provision of clean linen and other necessaries, or the quality and timeliness of meals. The plaintiff did adduce evidence of the contemporaneous complaints made by the defendant as to those matters.
The Magistrate concluded: "The plaintiff's obligation in the circumstances of the evidence in this case and the pleadings is to prove, on the balance of probabilities, that it performed its side of the bargain. The plaintiff has failed to call any evidence that its accommodation was to the standard agreed. It was admitted by the defendant that the school group stayed but that was not the sole criterion for payment. The quality of that stay was an essential component of the agreement." (T30:41 - T30:46 of 26 October 2015)
Her Honour cited Baltic Shipping Co v Dillon [1992 - 1993] 176 CLR 344, wherein reference was made to Steele v Tardiani (1946) 72 CLR 386 at 401. The relevant section of the judgment is at 350: "An entire contract or, perhaps more accurately, an entire obligation is one in which the consideration for the payment of money or for the rendering of some other counter-performance is entire and indivisible. In Steele v Tardiani (27), Dixon J. cited the general proposition stated in E. V. Williams' Notes to Saunders' Reports (28): "Where the consideration for the payment of money is entire and indivisible, as where the benefit expected by the defendant under the agreement is to result from the enjoyment of every part of the consideration jointly, so that the money payable is neither apportioned by the contract, nor capable of being apportioned by a jury, no action is maintainable, if any part of the consideration has failed; for, being entire, by failing partially, it fails altogether.""
The Magistrate concluded that the contract between the parties was an entire contract, inclusive of terms as to the standard of accommodation provided, and partial failure led to total failure to perform the contract.
Whilst the Court accepted that the plaintiff had provided "a roof over their [the students'] heads" (T31:20 - T31-21 of 26 November 2015), the plaintiff had failed to establish that it had performed the whole of the contract. It was on that basis that the Magistrate concluded that the plaintiff had not established its case.
Having considered all of the (very limited) evidence placed before the Magistrate, and the submissions of the parties before this Court, I am unable to conclude that the plaintiff has demonstrated error by the Magistrate. The plaintiff simply failed to adduce sufficient evidence in the Local Court to establish performance by it of the contract between the parties, such as to give rise to the obligation of the defendant to pay the invoiced amount.
Against that background, the grounds advanced by the plaintiff can be quickly dealt with.

Ground 1

There was in fact some evidence of payment by the school to the defendant of the cost of the travel she arranged for them in 2013, but the specific evidence of payment was rejected by her Honour as irrelevant to the issues to be determined by her. Since I have concluded that the Magistrate's approach to the matter overall was not erroneous, the evidence of payment to the defendant by the school was not relevant, for the reasons given by the Magistrate.

Ground 2

I have referred above to the plaintiff's contention, rejected by the Magistrate, that the defendant had admitted performance of the contract by admitting that the school group attended the accommodation in accordance with the reservation. The Magistrate was correct to conclude that the defendant's admission was not an admission of performance of the contract, as she had construed the contract to be. The admission went no further than an admission of attending the premises on a particular date, in accordance with a reservation. The reservation did not extend to detail of the nature of the accommodation and services. Admission of attendance pursuant to a reservation could not be relied upon by the plaintiff to establish that it had in fact provided the accommodation and services as contracted for by the parties.

Ground 3 and, or in the alternative, Ground 4

These grounds go to the Magistrate's conclusion that the plaintiff had failed to traverse the defence. The defendant (properly) accepts that the Magistrate did erroneously hold that the plaintiff should have filed a reply to the defence expressly disputing the allegation of implied terms. These grounds are made out. However, the Magistrate considered the matter on the basis that issue had been joined, and the error did not affect the outcome of the determination of the claim.

Ground 5

Whilst pleaded as error as to onus, the substance of the ground is misconceived. The simple fact was that the plaintiff was obliged to prove that it had performed the contract to give rise to obligation by the defendant to pay the invoiced amount. The plaintiff failed to call adequate evidence of performance of the contract. In the context of the defence mounted, it was not sufficient to rely upon an acceptance by the defendant that the school group attended the accommodation on a particular date as proof of performance of the contract.

Ground 6

This ground could only be made good if the Magistrate were held to be in error in concluding that the plaintiff was obliged to prove that it had performed the contract. In my view, she was not. Her Honour correctly concluded that, performance of the contract having been put in issue, the plaintiff had to adduce evidence to prove it. It did not.

Ground 7

This ground could only be made good if the plaintiff's argument about the relevance of payment to the defendant by the school of the cost of the accommodation was upheld. I have concluded that it must be rejected.

Ground 8

The ground as pleaded raises issues as to the onus of proof based upon an incorrect understanding of the nature of the matter as it was conducted before the Local Court. I have concluded that the approach of the Magistrate - to identify the real issues and determine those issues - was correct and, accordingly, this ground must fail.
The plaintiff's case before the Local Court failed because it failed to prove performance of the contract, and failed entirely to deal with the case raised by the defence.

Grounds 9 and 10

These grounds are misconceived in that they rely upon an incorrect premise that the defendant was obliged to prove that she had sustained damage to succeed in her defence. The defence was to assert failure of the plaintiff to perform the contract. Whether loss had been sustained as a consequence was not material to that question.

Ground 11

The nature of the asserted failure by the Magistrate is not precisely identified but in the context of the argument must relate to the question of whether the obligation to perform the contract was entire and indivisible or otherwise.
He Honour concluded in that regard that, "the money paid was not capable of being apportioned under the contract as evidenced before me" (at T31:16-18). That comment may say something about the paucity of the evidence the plaintiff chose to adduce, but in my view, the Magistrate was correct. There was no evidence that would have allowed for the particular services to be individually identified and a cost or value attributed to each. The evidence was for a cost per visitor.
The Magistrate was not in error in concluding, on the limited evidence placed before her, that the benefit expected by the defendant under the agreement would be derived from the enjoyment of every part of the consideration jointly.
The Magistrate applied the principles set out in Baltic Shipping to the particular facts of the case as established by the evidence, slight as it was. I can discern no error in that regard.

Conclusion

For these reasons I conclude that the plaintiff has not established error in the determination of the matter by the Magistrate.
Accordingly, the appeal is dismissed.
Costs should follow the event and, unless the parties wish to be heard on the issue of costs, I would order costs in favour of the defendant on an ordinary basis.

orders 1. Appeal Dismissed. 2. Costs in favour of the defendant, stayed for 14 days to allow the parties to make any submission seeking contrary orders. 3. Any submission as to costs by the plaintiff to be filed and served within 7 days from today. 4. Any submission in reply to be filed and served within 7 days thereafter. 5. Any such submissions will be determined on the papers.

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: 20 April 2018

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