Opeka Pty Ltd v Mackie Group Pty Ltd [2003] VSC 183

Supreme Court of Victoria|2003-05-23|Before: NETTLE J

Practice - appeal from final order of Magistrates' Court - error of law - whether Magistrate's reasons for judgment adequately expressed - procedural fairness - whether Magistrate erred in refusing adjournment.

This is an appeal from a final order of the Magistrates' Court of Melbourne made on 15 August 2002 whereby it was ordered that the appellant pay to the respondent the sum of $40,000 together with interest of $19,528.75 and costs in the amount of $9,015.

By order dated 2 August 2002, the Master determined that the questions of law shown by the appellant to be raised by the appeal were:

"(a) did the Magistrate err in law in refusing an adjournment of the trial due to the illness of Lesley Booth despite production of a medical certificate? (exhibit RS-1 to affidavit of Raymond Stuart page 16); (b) did the Magistrate err in law in refusing to adjourn the proceeding by consent on 15 August 2002 to permit the Appellant an opportunity to make submissions in response to the written submissions delivered on behalf of the Respondent late on 14 August 2002? (exhibit RS-1 p 98); (c) did the Magistrate, having determined that there was a loan agreement between the parties (see exhibit RS-1 p 89) and having raised the question whether it was void for illegality (exhibit RS-1 p 90), deny the Appellant procedural fairness by not permitting it to make submissions on the question? (exhibit RS-1 p 112); (g) did the Magistrate err in law in not determining that the loan agreement found by him to exist was void for illegality being contrary to Part IV Division 4B Bankruptcy Act 1916."

Upon the appeal coming on for hearing before me this morning, the appellant applied ore tenus and unopposed for a direction pursuant to Rule 58.13 of the Rules of Court setting down the questions for determination on the hearing of the appeal as follows:

(a) Did the Magistrate err in law by failing or failing adequately to express his reasons for decision?

(b) Did the Magistrate err in law in refusing to adjourn the proceeding by consent on 15 August 2002 to permit the appellant an opportunity to make submissions in response to the written submissions delivered on behalf of the respondent late on14 August 2002?

(c) Did the Magistrate deny the appellant procedural fairness by not permitting the defendant to make submissions on the question of illegality of the loan agreement?

I made such a direction and thus they are the questions now to be decided upon the appeal.

By its statement of claim the plaintiff alleged that on or about 30 April 1998 the plaintiff as lender and the defendant as borrower entered into an agreement in writing ("the loan agreement") for the plaintiff to lend to the defendant the sum of $40,000. The particulars of the loan agreement given were as follows:

"The loan agreement is contained in a letter dated 27 April 1998 on the letterhead of the plaintiff signed by Graham Duckitt on its behalf addressed to Mr Ray Stuart of Freelane Australia and countersigned by Stuart on 30 April 1998."

It further alleged that on or about 1 May 1998 it caused $40,000 to be transferred to the defendant by way of loan pursuant to the loan agreement; that the period of the loan had since expired; and thus that the defendant was indebted to the plaintiff in the amount of $40,000.

By its defence the defendant denied that it had entered into a loan agreement with the plaintiff and averred that at a meeting on 27 April 1998 the plaintiff agreed to advance a loan or pre-payment of $40,000 to Mr Les Booth in circumstances in which the defendant acted as agent for a disclosed principal, namely, Mr Booth. It gave as particulars of that allegation the following:

"The plaintiff was represented at the meeting by Mr Graham Duckitt and the defendant was represented by Mr Ray Stuart. Also present at the meeting was an accountant, Mr Kevin Hollingsworth. The agreement was evidenced in writing by a letter from the plaintiff to Mr Les Booth dated 28 April 1998 and further evidenced in writing by a letter from the plaintiff to Mr Les Booth dated 21 July 2000."

At the hearing before the Magistrate the plaintiff contended, consistently with its statement of claim, that it had entered into a loan agreement with Opeka Post Pty Ltd; that the agreement was in writing constituted solely by the letter dated 27 April 1998 (to which I have already referred); and that it did not enter into any loan agreement with Mr Les Booth.

The defendant contended that it had not entered into a loan agreement with the plaintiff; that it was Mr Booth that had entered into the loan agreement with the plaintiff; that that agreement between the plaintiff was oral and made at a meeting on 27 April 1998 which was attended Messrs Duckitt, Stuart and Hollingsworth; that the letter of 27 April 1998 was simply confirmatory of the oral discussions; and that while it had accepted the loan moneys, it had done so on behalf of Mr Booth because it was asked to do so.

In the result, the issues which fell for determination by the Magistrate were, simply -

(a) What was discussed at the meeting held on 27 April 1998?

(b) Did the letter of 27 April 1998 constitute a written agreement between the plaintiff and the defendant?

(c) Did the defendant contract as an agent for a disclosed principal?

The hearing before the Magistrate proceeded in stages. It began on Friday 2 August 2002 with opening submissions and continued with the oral evidence of Mr Duckitt and Mr Stuart until the end of that day. It resumed on the morning of Monday, 5 August and continued with further evidence of Mr Stuart, evidence of Mr Mackie and evidence of Mr Hollingsworth. At the conclusion of Mr Hollingsworth's evidence, counsel for the defendant announced that there was to be no more evidence for the defendant[1] and that it was not counsel's intention to make any submissions on the law. There then followed a number of submissions on the effect of the evidence, until the Magistrate said[2] -

"... Look, I'm going to go and think about it. I'm not assisted by this because I have already thought of all these things and you have already addressed them in evidence. The point is the fundamental principle, and it probably shouldn't be any surprise to a layperson, although oddly enough it could be to a lawyer, but the fundamental contractual principle is that people can make agreements as they please as long as they are within the law. I might be assisted by something further in the future. I think I had better go away and look something up, first, because - and then I will give you the opportunity then, but I would like - I think - I can see all your points. I know what they are, and I will be back in due course - probably in about half an hour".

A short adjournment followed after which the Magistrate returned to the Bench and said[3] -

"What I want you to do is give you the benefit of preliminary findings, but a bit of difficulty with this case that I am obliged to raise myself and I want to hear more from you about it, both of you. I am sure you want to say a lot about it. But I will just hand you some preliminary points because I think it will make it easier for you. And I suppose the first point is that all things being equal, I would be at the moment making a finding in favour of the plaintiff. But I am not doing that. I will get to the reasons why I might have done that if there hadn't been a problem. Basically the plaintiff serves on a written agreement, and as I have said, the fundamental principle is that the parties can do what they like, and I suppose if there was not this problem that I will mention later, I suppose the bywords meant would be, be careful what you sign and above all else, be careful of taking money and giving it away, which is apparently what has happened. But the very fundamental first question is, is there any justification for looking outside the parties' written agreement - outside the four corners of their agreement. And I say written agreement because whatever the way the case is put they purport to have reduced it to writing on 27 April by way of a loan agreement. I noticed, however, there has been plenty of evidence led without objection about the intentions of the parties so I suppose I will have to deal with that, but I think probably I could say at the outset, that what we are dealing with in the extrinsic evidence that was led that there was no need for extrinsic evidence. On an analysis of the document of 27 April 1998 contained in exhibit D, as I said, they were reduced to writing and on analysis, it is nothing but an agreement for an interest free loan for 120 days, which is probably enough. However, to remove doubts, it is expressed to be against - and I guess this wasn't absolutely necessary, but someone has put it in, it is against consultancy fee agreements to Less documented under separate cover so as an exhibit to the loan agreement, or annexure, I suppose, more properly, and so to the extent that it needs to be explained, there is ample evidence from Mr Duckett it was to keep Mr Booth honest, given that he was an undischarged bankrupt. Now I am not so sure if that proposition was agreed to by the defendant wholeheartedly, but I am proceeding on the assumption that it was known or assumed that he was an undischarged bankrupt. Anyway, I am prepared to give evidence about this later. Now, that mightn't have been a problem but I hesitate to call it clever, but it is definitely a device. It may not have been a problem but for the fact that Mr Booth was available to take the money and that a stakeholder wasn't resorted to and that Mr Stuart's company was resorted to. But in any event, I will confine myself to an analysis of the position if I had decided in favour of the plaintiff. It wouldn't have been difficult to deal with the extrinsic evidence that was led which purports to explain this agreement as an agency agreement. In my view, the extrinsic evidence fails entirely to characterise or justify it as an agency agreement. The evidence is entirely to the contrary. As I have said, Booth could have been paid direct. I am confining myself to the defence intention that it was simply an agency agreement and not an attempt to do anything more, but Booth could have been paid direct. As I said, he is apparently bankrupt, and that is known which is more important. Mr Steward says that he - in correspondence that he looks forward to long term relationships and he arranges key meetings, he chairs a meeting, he is termed -he is called a project liaison person, there are titles attached. Mr Hollingsworth confirms that he was there to make sure Mr Stuart did nothing silly, and Mr Duckett mentioned a separate agreement with Booth at the meeting. That is confirmed in the agreement. So, all those things suggest that there was more to it from Mr Stuart's point of view than a simple loan agreement. Finally, Mr Stuart, however, says he was only doing as he was told, which is entirely unconvincing. So from the point of view of the plaintiff, any extrinsic evidence that is led to characterise this is an agency agreement is entirely unconvincing, and there seems to be no reason to step outside the four corners of the agreement, because for this very important reason, the four corners rule was never - has never been invoked to destroy the very agreement that appears on paper. So, really all that evidence was inadmissible, but ever if it is admitted, it goes too far and purports to re-characterise the agreement entirely or change its very fundamental nature and on that basis, I suppose the law simply says that if you entered into an agreement which you say is an entirely different agreement, you are bound by the first agreement. You may introduce extrinsic evidence to explain the agreement that still stands, but that is re-jigging the whole thing. It is a lost cause. So that the extrinsic evidence does nothing more than confirm. It does the worst thing it could ever do which is to confirm the other party's case. However, on the face of it, the difficulty with this is that from the plaintiff's point of view now, the whole thing that we have done to avoid - purportedly to avoid Mr Booth dissipating the money, although I don't think that is even correct. I don't think it is done to avoid Mr Booth dissipating money because Mr Duckett says that he doesn't care what happens to the money once he paid it to Mr Stuart's company, so that can't be the reason. The reason, in the absence of a stakeholder for paying the money to a company as opposed to an individual, such as Mr Stuart, he could have equally received it as an individual or as a company. The reason for doing that is to give some legitimacy, I think, to the payment of the money and the only conclusion that I am left with is that the whole agreement was set up to avoid the appearance of Mr Booth receiving any money at all because he was a bankrupt and would otherwise have to account to his trustee for the funds, or to his creditors, actually. So, the only reason for having this agreement, in my view, is to avoid Mr Booth's creditors. Now, the difficulty with that is that it doesn't simply just stop with the defence, and it doesn't on the face of it affect the plaintiff until you have a look at the basic text on legal contracts and realise that if this contract, or loan, is entered into for the purpose of avoiding the creditors then it is against public policy. The difficulty with that is that subject to what you two can come up with, well, from the point of view of Mr Gray's client, subject to what you refrain from coming up with, given the position can't get any better, Mr Blewett, the difficulty I suppose is that the authorities, particularly the High Court decision of David Securities Pty Ltd and the Commonwealth Bank [1992] HCA 48; (1992) 175 CLR 353 concerning a loan by a bank, of course, and a mistaken assumption that a - or allegedly mistaken assumption that a certain clause was legal, whereas it wasn't. The High Court decided that if you - that a voluntary payment is not recoverable and voluntary means you make payment by choice, meaning that the payor is prepared to assume the validity of the obligation ought to make the payment irrespective of the validity or invalidity of the obligation. Now, the inference I draw from Mr Mackie is that from - Mr - what is your client's --"

After some further discussion between the Magistrate and counsel as to the issue of illegality identified by the Magistrate, the Magistrate allowed an adjournment of the hearing until 15 August 2002 for both parties to consider their positions.

On the evening of 14 August 2002 senior counsel who had by then been retained by the plaintiff, but who had not appeared before the Magistrate, delivered to counsel for the defendant substantial written submissions concerning the point of illegality which had been identified by the Magistrate. In view of the bulk of those submissions, counsel agreed that the Magistrate should be asked the next morning further to adjourn the hearing to allow time for the defendant's counsel to consider the submissions.

When the hearing resumed on 15 August 2002 counsel asked the Magistrate for the further adjournment, but his Worship responded: "I have thought about it. As I understand it, having analysed it, an undischarged bankrupt doesn't have to account for anyone (sic) for the money. That is my understanding which makes the agreement quite legitimate". Counsel for the plaintiff answered: "Well, that is the way, the track that we would be taking". The Magistrate then expressed the view that it would not be necessary to hear from senior counsel in order to be satisfied of that proposition.

Counsel for the defendant (incorrectly described in the transcript as "Mr Blewett", who was counsel for the plaintiff) then said: "Well, sir, I do want to make submissions". The Magistrate asked whether it was intended to say that the agreement was illegal and the response from counsel suggests that it was. He said "Well, there doesn't need - well, firstly, there need not be an expressed or even implied breach of statute or common law rule...". Further discussion followed, leading to a submission by counsel for the defendant that "...an intention to enter into a scheme which is contrary to good public policy is sufficient for a court to set aside a transaction". That precipitated yet more discussion leading to an observation by the Magistrate that: "But at this stage is he - are we talking about getting a percentage of this money, now, at this stage of his bankruptcy?", to which the answer was given "As of today he is discharged, sir, but ...".

Then occurred the following exchange[4]:

"His Worship: At the time, I mean, as an undischarged bankrupt, was he - was it ever the case that anyone was going to get any of that? Mr Blewett: If it were calculated as capital on that, yes. His Worship: Yes. But not if it was income. Mr Blewett: That is right. That is an interesting question in itself, because this flows back to the question about the characterisation, putting aside these issues, the characterisation of whether it were a loan or whether it were a contract of service."

The Magistrate rejected that argument. The answer which he gave was[5]:

"His Worship: Well there is no chain, though, the money goes to you. And I know there was a lot of talk about whether the money went to Mr Booth but once it is paid over it is your money and it can go to Booth via you without being that money, unless it is meant to be just a conduit. But as I say, there is that uneasy tension between the conduit theory and the wise businessman theory, protecting his interests. Now, I have accepted that - what I have accepted, what I said in the first place was that - I think it is important to recognise this, if I didn't make it clear at the time, I will make it clear now; that my findings were that it was a loan to you with a view to getting it back if the contracts weren't signed and it was a, certainly a device but a protective device on the basis that I found that - also remember that to your client, that there was something in it for your client and I think I used the expression `a piece of the action'." And there was still some doubt about whether your client shared in the amount or not. And it would only be a signature of contracts that the money would be released for whatever purposes - your client and Mr Booth, saw fit. But the time it was handed over it still wasn't necessarily, according to findings, all Mr Booth's money. Because I found a credibility problem with your client saying that he was only doing what he was told and suggesting that there was nothing in it for him. Remember, I made findings concerning his chairing of meetings and adoption of titles and all that sort of thing that, in those circumstances, my view was that he had to be a prospective beneficiary himself of this whole arrangement. So that I wasn't necessarily finding that it all would necessarily go to Mr Booth. But I think it has go to be said ---"

Thereafter, as I read the transcript, the bulk of the argument was confined to the issue of whether the loan agreement had been made between the plaintiff and the defendant or between the plaintiff and Mr Booth. But from time to time some further reference was made to the Bankruptcy Act, suggesting that the question of illegality had not been abandoned completely, and in the end prompting the Magistrate to ask:

"You are not seeking to plead illegality, are you?"[6]

"Mr Gray: Well, since you have raised it, sir --- His Worship: No, that is different. You have got to - it would be very important to know whether you are interested in raising illegality, yourself? Mr Gray: Well it would. I mean, that has consequences for me in terms of ethical obligations to my client. His Worship: Yes. Mr Gray: And - but I don't have instructions, sir, because - well, you hadn't made a ruling about that and I would like to make submissions on that, sir, because in my brief - sorry - as far as I can tell at this stage --- His Worship: Well it has got to be on its face illegal or - yes, well, that is it, it has got to be on its face, illegal in three ways, one of three ways, by the written word, mode of proof or the - or accident during the hearing. Say the, I suppose, one of those ways would be by the defendant blurting it out but that certainly didn't happen. So I don't know how you could raise it. Anyway, look, I will just read on. ... Mr Gray: It has. But, sir, there is earlier authority and more recent authority, that I can't produce to you right now, to the contrary. His Worship: But it is not an inquiry, it has got to be done - I would have to strike it down according to the proven facts in my view. I don't want to open the matter up any further. And it seems to me that it is not a case where - my - I will be candid, my view initially was mistaken and that was that it seemed to me that he was absolutely duty bound to account to his - that Mr Booth was absolutely duty bound to account to his trustee for any amount of money that he received and that somehow this agreement would allow him to avoid that. But when you really analyse it, if he gets the money from Mr Stuart and he is bound to account then it is still only an agreement that protects the plaintiff. Because if Booth gets the money from Stuart he is still bound to account just as he would be if he got the money from Mackie Group."

Counsel responded that it was not as simple as His Worship appeared to think it was[8]:

"Yes, but the point is that the Mackie Group - and the uncontested evidence from my client's mouth (scil. Mr Stuart) was that Mackie insisted on this, insisted on Stuart receiving the money ... and the reason for that, you inferred, was that it was made so that Booth would not - so that it would be much easier for Booth not to have to account to his trustee ... that was the inference that you drew, sir. Now, if you seek to undo that, well, well and good. But I am not ... "

"His Worship: That is what I seek to do. Because what I have done is, I have said my findings were that the plaintiff would, all other things being equal, be successful because the very simple question - very simple agreement, a loan of money, on the face of it - and I might add, too, and I have said before, a simple written agreement - the extrinsic evidence was merely led to strike it down, which I have already observed is an odd situation, him leading extrinsic evidence to explain his intentions, but not to extricate yourself from what appears to be a simple written agreement, that is an interest free loan for 120 days. And the extrinsic evidence was really led to explain that Booth was involved. But it doesn't make any difference, if Stuart passes money on to Booth. I think the mistake is regarding it as that 40,000. It is just 40,000 that goes on from Stuart to Booth with the - certainly with the knowledge of the Mackie Group. But I am now unable to extrapolate from that any problem as far as the creditors are concerned because Booth is entitled to an income and I don't think it is a capital item."

Nothing daunted counsel for the defendant continued to press upon the Magistrate the view that the agreement was one which had been made between the plaintiff and Booth through the agency of the defendant. But the Magistrate was not to be persuaded. In the Magistrate's opinion[10]:

"His Worship: Yes, and I said, apart from this question of illegality, it is a loan between Mackie and Opeka Post and it can't in any way be characterised as a loan to Booth. I have already decided that. All I was interested in was this illegality problem. So let us not get side tracked. If there is nothing further, I don't' - there is another aspect to this, too. Your client hasn't sought in any way to raise illegality. In fact, it has completely and utterly shied away from it and --- Mr Gray: Would --- His Worship: --- said in his defence that he was simply following instructions which I haven't found favour with, with that assertion that he was simply following instructions. In fact I have criticised that and said - ... TAPE MALFUNCTION His Worship: - and that is when I observed that he was definitely going to get a piece of the action or that there was a prospect of that down the track. So, the simple question is, let's not muddy the waters, the simple question is whether on the face of it there is any apparent illegality and whether I should buy into it. I don't think I should. Mr Gray: Well, sir, if you are making that as a definite ruling then I ought to have - I mean, given that is an important threshold issue and given the history of how this has proceeded in the last, and the last time we were here before you, I think --- His Worship: Well, look, I went to the trouble of making my --- Mr Gray: --- on that basis I ought to --- His Worship: --- initial findings because I wanted to - you will notice I didn't bother, I didn't reserve judgment on the major question because I wanted to get that out of the way in case this didn't come to anything. And I have done that. And I don't think this comes to anything, so I am about to abandon the ship on this point."

Apparently sensing that he was unlikely to succeed in his submissions as to the characterisation of the contract, counsel for the defendant again returned to the subject of illegality and submitted that there would be a great lack of procedural fairness if he were not allowed further time in which to take instructions upon the subject of illegality and that: "He (meaning the defendant) might plead the matter, nevertheless the matter could be raised ...".

The Magistrate was to have none of it. He responded[11]:

"His Worship: --- I have raised it and I am now no longer interested in it and it would have to be raised during the hearing, not after, not after because the Court raises it. So I am no longer interested in the point. I corrected myself. I take the view that there was no apparent - the agreement, itself, is certainly not illegal. There is absolutely no doubt about that. You can lend money to anyone you like, interest free. And having resolved my doubts about this very simple question which was whether or not in some way it might be cheating the creditors, I can't see any way that ... TAPE MALFUNCTION ... lead to that result and my view is that it is simply protective of the plaintiff. Mr Gray: Sir, the --- His Worship: And I think it is probably appropriate to make this observation that a - once I decide that it is no longer open to the defendant to argue illegality without a firm commitment to that such as some sort of admission in evidence or assertion in evidence. But you are not coming from that direction. Your client simply wishes to seize the opportunity to defeat the claimant. That is fine but if your client's position has always been not only that he was just following orders but that this was perfectly all right to the extent that there was an accountant there to make sure it was, it is not only --- Mr Gray: Well, to protect his own interests I think. His Worship: Yes, yes --- Mr Gray: Sir --- His Worship: And so, given those circumstances, it is not only inappropriate that I should allow the question to blow out but I think it is really a bit cheeky of your client to want to rely on it, to be honest."

Counsel for the defendant again submitted that to refuse the defendant an adjournment would be to limit the defendant's right to instruct counsel to make a submission, I infer on the subject of illegality, and that it was very concerning that the Magistrate had not given to counsel a fair chance to put his submissions on the subject. The Magistrate again observed, however, that he had been the one first to raise the question of illegality and that he was satisfied that there was no substance in it, to which counsel responded with the question of whether the Magistrate was saying that he did not wish to hear from counsel any more. The Magistrate replied that it was very difficult because it was he who had raised the point but, on the other hand, it was not difficult because it was not a point which was taken in the defendant's defence. His Worship concluded[12]:

"His Worship: Could I just add this. During the whole hearing there was never the slightest suggestion from your client's side, that there was anything wrong with this, quite to the contrary, that everything was above board and fine. So that once I have resolved my doubts, I don't think it is open to you to pursue the matter any further because it is contrary to your whole case. So, once I am satisfied that I was wrong, I doubt very much that I should be open to urgings that there is in fact statement wrong with this agreement, after all. Because, as I say, your evidence contradicts that stance entirely, so. Mr Gray: Yes. His Worship: No. I am not - no longer interested. My original findings stand. I make no further comment."

I turn to the first question for determination on the hearing of this appeal. Did the Magistrate err in law by failing to express his reasons for decision adequately? In my opinion he did not. It is not in issue that as a general rule a judge or a magistrate should state his or her reasons[13]. Nor is it in issue that the failure of a judge or magistrate to state his or her reasons may constitute an error of law[14]. But that is not always the case. Sometimes the simplicity or the context of a case or the state of the evidence may be such that a mere statement of the judge's conclusion will be sufficient to indicate the basis of decision. Some examples were given by Cussen ACJ in Brittingham v Williams[15]. Other times it may be that only a brief statement of reasons is required. The test to be applied in determining whether a judge or magistrate has erred in law by failing to state his or her reasons or by failing to state them adequately was thus recently restated by the Court of Appeal in Agresta v Agresta[16] in these terms:

"Want of reasons may amount to an error of law where the absence of reasons would frustrate a right of appeal. That would occur if the appellate court is unable to ascertain the reasoning upon which the decision is based. Whether reasons are inadequate in this sense will depend upon the nature of the decision and the circumstances of the case".

It may also be accepted for present purposes, as was submitted on behalf of the appellant, that in determining whether reasons pass the test formulated by the Court of Appeal the adequacy of reasons may be assessed by reference to the factual issues before the court and perhaps also by reference to the sums at stake (independently of the correctness of the conclusion which has been reached). If a matter turns on evidence the reasons should identify the evidence and explain the basis on which conclusions have been drawn. But it is not always necessary for the judge or magistrate to refer to all the evidence or necessarily to assign a reason for preferring some evidence over other. And it may not be necessary to make findings on every argument or destroy every submission, particularly where the arguments advanced are numerous and of varying significance[17].

In this case the principal issue for determination before the Magistrate was whether the loan agreement was wholly in writing, as the plaintiff contended, or partly in writing and partly constituted by conversations between Mr Duckitt and Mr Stuart, as the defendant contended. Accordingly, the evidence given by Mr Duckitt and Mr Stuart and those other persons who were present at the meeting was important or critical to the proper determination of the matter and hence it followed that it was incumbent upon the Magistrate to deal with that evidence in his reasons for judgment. But it seems to me that he did. The Magistrate referred to the evidence at some length in his preliminary findings on 5 August 2002 as follows[18]:

"It wouldn't have been difficult to deal with the extrinsic evidence that was led which purports to explain this agreement as an agency agreement. In my view, the extrinsic evidence fails entirely to characterise or justify it as an agency agreement: the evidence is entirely to the contrary. As I have said, Booth could have been paid direct. I am confining myself to the defence intention (presumably 'contention') that it was simply an agency agreement and was not an attempt to do anything more but Booth could have been paid direct. As I said, he is apparently bankrupt and that is known which is more important. Mr Stuart says that he - in correspondence - that he looks forward to long-term relationships and he arranges key meetings. He chairs a meeting. He is termed - he is called project liaison person. There are titles attached. Mr Hollingsworth confirms that he was there to make sure Mr Stuart did nothing silly and Mr Duckitt mentioned a separate agreement with Booth at the meeting that is confirmed in the agreement. So all those things suggest that there was more to it from Mr Stuart's point of view than a simple loan agreement. Finally, Mr Stuart, however, says he was only doing as he was told which is entirely unconvincing. So from the point of view of the plaintiff, any extrinsic evidence that is led to characterise this as an agency agreement is entirely unconvincing and there seems to be no reason to step outside the four corners of the agreement because for this very important reason: the four corners rule has never been invoked to destroy the very agreement that appears on paper. So, really, all that evidence was inadmissible but even if it is admitted it goes too far and purports to re-characterise the agreement entirely or change its very fundamental nature and on that basis I suppose the law simply says that if you entered into an agreement which you say is an entirely different agreement you are bound by the first agreement. You may introduce extrinsic evidence to explain the agreement that still stands but that is re-jigging the whole thing. It is a lost cause so that the extrinsic evidence does nothing more than confirm". (Emphasis added.)

Then when the matter came on for further hearing on 15 August 2002 his Worship in effect adopted his preliminary reasoning as his final reasoning, by referring to the fact that he had already said that the agreement was a loan agreement between the plaintiff and the defendant; by explaining that his findings were that it was a loan agreement to the company (defendant) with a view to getting it back (scil., repaid) if the contracts were not signed; and by explaining that he had reached those findings after taking into account the chairing of meetings and adoption of titles and "all that sort of thing".

The appellant submits that the Magistrate's preliminary findings and his Worship's reference to them on 15 August 2002 are nevertheless inadequate as reasons in a number of respects:

* First, it is submitted that what was said on 5 August 2002 was of such an inherently preliminary nature as constitutionally to be incapable of later adoption or ratification as a final finding.

* Secondly, it is submitted that because of the way in which the findings emerged in the course of argument over time, punctuated by exchanges between the Bench and counsel, there is doubt as to exactly what was determined.

* Thirdly, it is submitted that because of the sequence whereby the preliminary findings were announced at the end of the day on 5 August 2002 and then, as it were, adopted immediately at the outset of the resumed hearing on 15 August, there was no opportunity for the defendant's counsel to put to the Magistrate such submissions as might with further development have clarified the position. Rather, it is said, the defendant was left faced with something which was no more than preliminary and so roughly articulated as to remain forever uncertain in meaning.

* Fourthly, in exposition of the third submission, counsel for the appellant refers to the enigmatic use of the expression "extrinsic evidence" which permeates the first part of the findings on 5 August; what he submits is a re-characterisation of, or addition to, the findings of 5 August 2002 in the passage on 15 August 2002 of the Magistrate's response to defendant's counsel's request for an opportunity to put further submissions concerning the issue of illegality; and, I suppose more generally, to the disjointed and somewhat difficult fashion in which the findings are expressed.

I do not accept the argument that it was impermissible or inappropriate to articulate preliminary findings as a precursor to the question of law that had occurred to the Magistrate on 5 August 2002. Nor do I accept that it was impermissible or even inappropriate to adopt the preliminary findings as final findings on 15 August 2002. I do agree, however, that given that the findings of 5 August 2002 were stated as "preliminary findings" and that there was a considerable period of time between the conclusion of the hearing on 5 August and the resumption of the hearing on 15 August, it would have been desirable for the Magistrate on 15 August 2002 to restate concisely and clearly his preliminary findings as final findings in terms that made them readily comprehensible to the parties and any appellate court. The fact that he chose not to do so has created the possibility to argue about the adequacy of what was done and resulted in an appeal which could otherwise have been avoided.

But be that as it may, I consider that upon a reading of the transcript as a whole and bearing in mind the relatively simple issue which fell for consideration, his Worship's reasons do pass the test which was articulated in Fletcher. There is reference to the critical evidence of Mr Stuart; there is reason assigned for rejecting it, namely, that his Worship found Mr Stuart's evidence to be "wholly unconvincing"; and there are further reasons given after that conclusion as to why his Worship found Mr Stuart's evidence to be unconvincing in light of the documents and other objective evidence.

In my opinion, the Magistrate has made sufficiently plain for the purposes of the test that his reasons for allowing the plaintiff's claim were because his Worship found upon the facts that the agreement was in writing constituted of the letter of 27 April 1998 and that what was said by Mr Stuart in oral evidence about an oral agreement was so unconvincing as not to affect that conclusion.

I turn to the second question of a lack of procedural fairness. The principles by reference to which the court is to decide whether a magistrate's refusal of an adjournment constitutes an error of law were considered by Kaye J in McColl v Lehmann[19]. His Honour said:

"The decision whether to accede to or refuse the application for adjournment of the hearing was within the magistrate's discretion. An appellate court will rarely interfere with a trial judge's exercise of discretion upon such an application... However, the result of refusal to grant an adjournment might be to prevent the parties seeking it from presenting his case or defence, if some circumstances such result would constitute an injustice. This is so because it is essential to the fair trial of an action, whether civil or criminal, that all parties are able to present their case as fully as necessary and within the limits of the law. To overcome an injustice so brought about or threatened an appellate court will interfere with the trial judge's discretion. (This principle was expressed by Atkin LJ in Maxwell v Kuen)".

To similar effect, in Sali v SPC Limited and Blake Dawson Waldron[20], Brennan, Dean and McHugh JJ observed that:

"In Maxwell v Keun the English Court of Appeal held that although an appellate court will be slow to interfere with the discretion of a trial judge to refuse an adjournment, it will do so if the refusal will result in a denial of justice to the applicant and the adjournment will not result in any injustice to any other party. A proposition has since become firmly established and has been applied by appellate courts on many occasions. Moreover, the judgment of Atkin LJ in Maxwell has also been taken to establish a further proposition: an adjournment which, if refused, would result in a serious injustice to the applicant should only be refused if that is the only way that justice can be done to another party in the action. However, both propositions were formulated when court lists were not as congested as they are today and the concept of case management had not developed into the sophisticated art that it has now become."

Reference should also be made, however, to Howarth v Adey[21] and to Queensland v J.L. Holdings Pty Ltd[22], particularly in the joint judgment of Dawson, Gaudron and McHugh JJ[23], as to whether Sali can any longer be regarded as wholly authoritative.

In short the point of these authorities seems to me to be that if the refusal of an adjournment has shut a party out or is likely to have shut a party out of an opportunity to advance a sustainable proposition which may have affected the outcome of the proceeding, the result of the refusal will be seen to constitute a miscarriage of justice and will be set aside. But it is incumbent upon an appellant from a refusal of an adjournment to establish that the effect of the refusal was to deprive him of the opportunity of putting a sustainable proposition that may have affected the outcome of the proceeding.

In this case, the basis on which counsel for the defendant sought an adjournment from the Magistrate was in order to consider further whether the defendant would argue that the contract was affected by illegality and, presumably, to consider further whether application would be made for leave to amend the defence in order to enable such an argument to be advanced. Yet it appears that even as the application for adjournment was made the defendant had not given any significant consideration to the question, despite the fact that there had been an adjournment of ten days after the hearing on 5 August 2002 expressly to enable it to do so.

Of course, the fact that the defendant may have been tardy in considering its position is not necessarily fatal to the contention that the refusal of adjournment constituted a miscarriage of justice. But that so little thought had been given to the issue would tend to suggest something about its prospects of success. And as matters have since developed, that impression has been confirmed.

Although one of the questions at first formulated by the Master was whether the Magistrate erred in law in not determining that the loan agreement was void by reason of illegality, the point has since been abandoned. In the result it is no longer contended that the refusal of the adjournment deprived the defendant of the opportunity to put a point that may have succeeded. All that is said is that because of the refusal the defendant was deprived of the opportunity further to consider the question of illegality and that the loss of that opportunity in itself amounts to a miscarriage of justice.

That contention is hopeless. There is no point in allowing a party an adjournment unless the adjournment will or may lead to an effect upon the outcome of the proceeding. Here, inasmuch as the only point which was sought to be considered was the illegality point, it must be taken that the adjournment would not have led to the promotion of a point which could have affected the outcome of the proceeding.

In my opinion, the Magistrate is not shown to have committed an error of law in refusing the adjournment which was sought.

For similar reasons, the third question of whether the Magistrate denied the appellant procedural fairness by not permitting the appellant to make further submissions on the question of illegality, ought be decided in favour of the respondent. Ex hypothesi, there was no point in the Magistrate permitting further submissions on the point because, as the appellant now concedes, the point could not have led to a difference in outcome.

Subject therefore to anything further that counsel may say as to the orders to be made, I consider that the appeal should be dismissed.

I certify that this and the 22 preceding pages are a true copy of the reasons for judgment of Nettle J of the Supreme Court of Victoria delivered on 23 May 2003.

__________________________

MR SOLOMON: Your Honour was asked at the beginning of the day to make a direction which Your Honour made. Your Honour might recall that direction.

HIS HONOUR: The direction will be recorded in the formal orders of the court.

MR CAMPBELL: I would seek costs of the appeal, together with costs reserved.

HIS HONOUR: Thank you. Do you resist that, Mr Solomon?

1. I direct pursuant to Rule 58.13 of the Rules of Court that the questions for determination on the hearing of the appeal are -

(a) Did the Magistrate err in law by failing or failing adequately to express his reasons for decision?

(b) Did the Magistrate err in law in refusing to adjourn the proceeding by consent on 15 August 2002 to permit the appellant an opportunity to make submissions in response to the written submissions delivered on behalf of the respondent late on 14 August 2002?

(c) Did the Magistrate deny the appellant procedural fairness by not permitting it to make submissions on the question of illegality of the loan agreement?

2. For the reasons given, those questions are answered -

3. The appeal will otherwise be dismissed with costs including reserved costs.

[1] See transcript of 5 August 2002 page 20 at line 1

[2] See transcript of 5 August 2002 at page 24 lines 17-22

[3] See transcript of 5 August 2002 at page 25 line 20 to page 28 line 19

[4] See transcript of 15 August 2003 at page 4 line 27 to page 5 line 6

[5] See transcript of 15 August 2003 at page 5 line 14 to line 38

[6] See transcript of 15 August 2002 at page 11 line 20

[7] See transcript of 15 August 2002 at page 11 line 24 to page 12 line 30

[8] See transcript of 15 August 2002 at page 12 line 31 to page 13 line 7

[9] See transcript of 15 August 2002 page 13 at line 8 to line 23

[10] See transcript of 15 August 2002 at page 16 line 13 to page 17 line 9

[11] See transcript of 15 August 2002 page 17 at line 23 to page 18 line 18

[12] See transcript of 15 August 2002 at page 20 line 8 to line 19

[13] See Sun Alliance Insurance v Massoud [1989] VicRp 2; [1989] VR 8 and Pasha v Edmonds [1998] VSC 169 at [12]

[14] As was observed by Gray J, with whom Fullagar and Tadgell JJ agreed in Sun Alliance Insurance v Massoud above, at p.19; see too Fletcher Construction Australia Ltd v Lines MacFarlane & Marshall Pty Ltd [2002] VSCA 189 at [99]- [103]

[17] Beale v GIO (NSW) (1997) 48 NSWLR 430 at 443-4

[18] See transcript of 5 August 2002 page 26 at line 31 to page 27 at line 23

[20] [1993] HCA 47; (1993) 67 ALJR 841; (1993) BC 930, 360-2

[21] [1996] VICSC 4; [1996] 2 VR 535 at pp. 545-547 per Winneke P

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