Servcorp v Tikuta

Servcorp v Tikuta - [2008] NSWSC 1005 - NSWSC 2008 case summary — Zoe

[13]

JUDGMENT (Appeal decision of Local Court Magistrate - money due under rental agreement - misrepresentation) 1 HER HONOUR: By summons filed 2 May 2008, the plaintiff seeks to appeal from the whole of the decisions of his Honour Magistrate Pierce dated 11 December 2007 and 7 April 2008. 2 In proceedings 41372/2006, Servcorp seek firstly orders, that the judgment entered in the Local Court in favour of the defendant/cross claimant in the sum of $36,401.31 be set aside; secondly, that the order that the plaintiff pay the defendant's costs and those costs be on an indemnity basis from April 2007 be set aside; thirdly, that the defendant pay the plaintiff's costs of the Arbitration, Local Court hearing and these proceedings; fourthly, that the foregoing orders not to be construed as affecting the judgment entered in favour of the plaintiff by the Magistrate; fifthly, in the alternative, an order that the proceedings be remitted to the Local Court to a Magistrate other than the Magistrate who originally determined the matter for determination in accordance with the directions of this Court. 3 In proceedings 40833/2005, Servcorp seek firstly an order setting aside the costs order made in favour of the defendant against the plaintiff; and secondly, an order that there be no order as to the costs of those proceedings to the intent that each party pay and bear their own costs. 4 By cross appeal filed 30 May 2008, Tikuta seeks firstly, leave to appeal from the part of the decision made by the Magistrate in relation to the order/s in favour of Servcorp; secondly, an order that the cross appeal be allowed; thirdly, that the appeal be dismissed; and fourthly, that there be judgment for the Tikuta. 5 The plaintiff is Servcorp Chifley 29 Pty Ltd (Servcorp). The defendant/cross appellant is Tikuta Pty Ltd (Tikuta). Servcorp relied on two affidavits of Malcolm Murray sworn 27 June 2008 and 21 August 2008. Servcorp is the service company of the legal practice of Davids Legal. Suzy David is the principal of Davids Legal and Fred David was the salaried partner.

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The evidence of the Ms Thomas for Servcorp and the evidence of the Davids are in direct conflict. 16 Suzy David and Fred David say that they attended a meeting on 26 or 27 June 2003 with Ms Thomas of Servcorp. The Davids' evidence is the following exchange took place: "Ms Thomas then showed us two rooms opposite each other. We thought that they would also be suitable. We then continued with our conversation in words to the following effect: Ms Thomas: How long do you intend to Stay? Fred: About one year. Ms Thomas: That is considered to be long term by us. On that basis if you commit to only one year we can do a better deal for you. Fred: What happens after one year? Ms Thomas: Then you become a month to month tenant. At that time we can talk again and see what suits you. It may be that you outgrow the office, if may be that the office is too big. This is what you need to test out over the next year. …" 17 Ms Thomas's version is that at this meeting she said that during negotiations, she recalled making the following statement: "This is the one page of terms and conditions that apply to the rental agreement. It is your responsibility to read through the terms and query anything. It is required that you give two months prior written notice to terminate on the official end of the lease. Which in your case, is 1 July 2004. If you don't provide notice, we can hold you for another 12 month lease. When you terminate, there will be a 'make good' fee to pay for the office to be returned in its original state. That fee is generally around $1,000.00 per office. At the time of the termination, you will be signed up to our gold virtual office membership, we will continue to answer your phones in your company name and on-send your mail and you will have access to Servcorp meeting rooms and boardrooms." 18 Ms Thomas denied that the conversation as outlined by the David's occurred. 19 At the hearing in the Local Court the parties tendered a statement of agreed facts and issues dated 29 November 2007. It is helpful to read these agreed facts and issues so that the Magistrate's decision is put in context. They are: " A. AGREED FACTS 1. On or about 25 June 2003, the defendant's Fred David met with the plaintiff's Kristie Thomas at Level 29, Chifley Tower, 2 Chifley Square, Sydney to inspect premises available for lease. 2. On or about 25-27 June 2003, Fred David and Susie David met with Kristie Thomas at Level 29, Chifley Tower, 2 Chifley Square, Sydney to inspect premises available for lease. 3. On 30 June 2003, Susie David executed the first page of the plaintiff's document 'Welcome to Servcorp Rental Agreement' on behalf of the defendant. 4. On 1 July 2003, the defendant took possession of the premises. 5. On 1 July 2003 at 3.29pm, Kristie Thomas emailed to Susie David, a draft lease. 6. On 1 July 2003 at 4.33pm, Kristie Thomas emailed to Susie David, an amended lease. 7. The parties exchanged correspondence between March 2004 and February 2005 concerning their relationship. 8. On 11 June 2004, the defendant sent to the plaintiff, a notice of termination. 9. The defendant vacated the premises on 7 April 2005. 10. The plaintiff has rendered rental invoices to the defendant for the period February 2005 to September 2005 totalling $36,401.30. B ISSUES 1. Did the plaintiff make the following misrepresentations to the defendant? (a) The plaintiff was a flexible body that provided flexible arrangements to its tenants who thus benefited from entry and exit of occupation at will. (b) The plaintiff would agree to one year arrangement and that arrangement would automatically expire at the end of the year. (c) Thereafter the defendant would hold over on a month to month basis. 2. Was the initial agreement/s between the parties the entire agreement? 3. What terms, if any, governed the relationship? 4. Did the defendant validly terminate the lease, and if so, when? 5. If not, did the lease continue as a periodic lease equal to the term of the rental agreement? 6. Was the conduct of the plaintiff unconscionable? 7. What rent was the defendant liable to pay? 8. Construction of the agreement/s."

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The Magistrate's decision 20 His Honour Magistrate Pierce, in his extempore reasons for decision dated 7 April 2008, stated: "The defendants the David's in my view are believable and perhaps I should just get out of the way before I forget, that I agree with Mr McHugh's submission that it is perfectly understandable that Miss David signed the extra copy that needed to be witnessed in the way that Mr McHugh put it and I attach no significance to that. I simply think the David's were telling the truth… I think that this matter, which did have more points in it than a porcupine, can nonetheless be resolved very simply. I believe the David's, I think the representation was made, that's just a matter of observation of their manner and demeanour and the representation in my view that it's relied upon by the David's is a representation which has an effect in two ways. In the first place it does become a part of a contract, such that the written lease is not the whole of the contract and consequently attracts a right to damages which surface in the cross-claim and might, well it wasn't clear the set off it's all different now these days but it could have been framed as a set off, I think. an equitable set off - it doesn't appear to have been but anyway it's a cross-claim so that doesn't matter… I think it's more a matter of intuition than anything else to determine whether the parties intended that something would be some term "would be a part of the contract or not". In this particular case, I think it was. If the correct test is objective and I think an objective bystander would reach the view that it was but I think it's probably the subject of - even if I were wrong about that, section 52 is also relied upon and it simply gives a right to damages for misrepresentation, all other things being… (not transcribable)… as we discussed before ie there are trading corporations involved so the jurisdiction of the Trade Practices Act was attracted and there are damages under section 82, I think it is or 84, we don't need to rely on section 87. The same representation also in respect of that course of action attracts damages under the Trade Practices Act and in the circumstances obviously the damages should be, in my view of it, so much of the rent has remained unpaid and the consequence, therefore, ought to be that strictly speaking, I think the correct way to deal with it. Given the way the authorities collected in all that old edition of Cheshire and… (not transcribable)…. express - it is that probably there ought to be technically a judgment for the plaintiff with a judgment for a similar amount on a cross-claim cancelling that out. Now that to me doesn't make much sense I concede but if the terms of the contract is a representation that is found to be a term of the contract, one might well have thought that a better way to look at it would be that the Plaintiff would simply pay but that doesn't seem to be the way in respect of which the courts have treated it, it simply attracts a right to damages for breach of that term with no new representation but a term and it is also a section 52 breach and the damages equal the amount of the claim to which, as I say ought to be the unpaid rent from March, whenever it was to June whenever it was. So if nobody wants to put in anything specific about the particular from of the orders, that's what I'll do and is it possible for you fellows to work out the dollars and cents just so we can wrap this up?"

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Duty to give sufficient reasons 21 Both parties referred to Beale v GIO (1997) 48 NSWLR 430 and in particular the statements of Meagher JA. In Beale, at trial, the judicial assessment of the appellant's credibility was critical to the resolution of the case. The appellant's case and her credibility were corroborated at critical points by three witnesses (Mr Lewis, Mrs Larner and Dr Millar). The first two of those witnesses were called by the appellant, were not attacked in cross-examination as to creditworthiness, and gave inherently credible evidence supporting the appellant's claim that she suffered severe and prolonged headaches and debilitating pain to her neck and back. The trial judge made no reference to their evidence, and offered nothing by way of reasons as to why their corroborating evidence should be ignored. The third witness (Dr Millar) was expressly accepted by the trial judge as having recorded a correct history for the appellant. The Court of Appeal, per Mason P (at 432), stated that: "Given this, and the absence of any challenge to his reported conclusions, it is not possible to understand the trial judge's conclusion that the "whole edifice" of the appellant's case collapses in the light of his and other named doctors' evidence." 22 However the court also said that had the appellant stood alone in her evidence there would probably have been no basis of complaint against the rejection of the case that she was advancing (at 437). A new trial was ordered. 23 In Beale, Meagher JA, after acknowledging that reasons need not necessarily be lengthy or elaborate and the contents of the obligation is not the same for every judicial decision, stated that there are three fundamental elements of an adequate statement of reasons. They are, firstly, that the judicial officer should refer to the relevant evidence; secondly, set out any material findings of fact and any conclusions or ultimate findings of facts reach; and finally, provide reasons for making the relevant finding of fact (and conclusions) and reasons in applying the law to the facts found. 24 In relation to the second element, Meagher JA elaborated by stating: "…a judge should set out any material findings of fact and any conclusions or ultimate findings of fact reached. The obvious extension of the principle in North Sydney Council v Ligon 302 Pty Ltd (1995) 87 LGERA 435 is that, where findings of fact are not referred to, an appellate court may infer that the trial judge considered that finding to be immaterial. Where one set of evidence is accepted over a conflicting set of significant evidence, the trial judge should set out his findings as to how he comes to accept the one over the other. But that is not to say that a judge must make explicit findings on each disputed piece of evidence, especially if the inference as to what is found is appropriately clear: Selvanayagam v University of West Indies [1983] 1 WLR 585; [1983] 1 All ER 825." 25 Counsel for Tikuta also referred to two passages from Soulemezis v Dudley (Holdings) Pty Ltd (1987) 10 NSWLR 247 at 280 and 281, where his Honour McHugh JA stated: "Where the resolution of the case depends entirely on credibility, it is probably enough that the judge has said that he believed one witness in preference to another; it is not necessary 'for him to go further and say, for example, that the reason was based on demeanour' Connell v Auckland City Council [1977] 1 NZLR 630 at 632-633 per Chilwell J. The position will usually be different if other evidence and probabilities are involved."

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and at 281: "In a case where a right of appeal is given only in respect of a question of law, different considerations apply from the case where there is a full appeal. An ultimate finding of fact, which is not subject to appeal and which is in no way dependent upon the application of a legal standard, can be treated less elaborately than an issue involving a question of law or mixed fact and law. If no right of appeal is given against findings of fact the failure to state the basis of even a crucial finding of fact, if it involves no legal standard, will only constitute an error of law if the failure can be characterised as a breach of the principle that justice must be seen to be done." 26 This passage was quoted with approval in Beale at 443-444. 27 Counsel for Servcorp submitted that the Magistrate failed to address any of the three fundamental elements. According to Servcorp, as the Magistrate had conflicting evidence before him as to the circumstance in which the lease was executed and he was obliged to resolve the factual dispute between the evidence of Ms Thomas on the one hand and the Davids on the other, and at the very least this involves a reference to the evidence of each, a finding of what happened and some reasoning process as to why he had come to that conclusion. 28 Counsel for Tikuta submitted that the case turned on whether or not the Magistrate accepted the evidence of the defendant or the plaintiff on the issue of whether representations were made and this was an "ultimate finding of fact", and on this issue the Magistrate accepted the defendants' evidence. Tikuta submitted that the Magistrate's reasons for doing so are not simply at pp 104 and 105 of the transcript even though the reasons given there are adequate. 29 Counsel for Tikuta, in his written submissions, referred to various exchanges in the transcript just prior to the Magistrate giving his extempore reasons for judgment as being relevant, and he submitted that from those exchanges, the parties were on notice of the Magistrate's views about the evidence and what flowed from it. Counsel for Tikuta, in referring to Soulemezis, stated that it was enough for the Magistrate to say that he believed one witness in preference to another, but in any event, the Magistrate went further and referred to demeanour. 30 The content and obligation is not the same for every judicial decision. The alleged representation had already been set out in the issues so the Magistrate did not need to set it out in his judgment. The critical issue here was whether the alleged representations were made by Ms Thomas to the Davids. The evidence of Ms Thomas was completely at odds with that of the Davids. I accept that the Magistrate stated that the Davids were believable and they were telling the truth and it was a matter of their manner and demeanour. The Magistrate accepted the explanation for Mr David signing the extra copy of (a document) but attached no significance to it. It seems that the reason the Magistrate accepted the Davids' evidence was based on demeanour. The Magistrate did not elaborate on this topic. In one sense, Ms Thomas either said those words that constituted the representation at that one meeting or she did not, but the Magistrate did not analyse any of the evidence such as the undated letter of Mr David faxed on 11 June 2004. If this had been the only appeal point, it would have been a borderline case as to whether the reasons were adequate.

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(iii) Damages 33 Having made a finding that the misrepresentations were made, the Magistrate had to decide the loss or damage that was caused by the conduct of Servcorp. 34 Servcorp submitted that the Magistrate approached the matter on the basis that the damages that the Davids had suffered as a result of the alleged misleading and deceptive conduct were the same amount as the Davids were obliged to pay Servcorp for rent and that this was plainly wrong. Servcorp says that the loss, which the Davids suffered as a result of the alleged conduct, was the rent that it was obliged to pay for the extended term. The Davids had given a written notice on 11 June 2004 purporting to terminate the lease with effect from 11 July 2004. Servcorp submitted that notwithstanding this the Davids remained in possession of the premises until 7 April 2005, and at the very least they were obliged to pay rent for the months of February, March and April in the sum of $28,627.21. In these circumstances, Servcorp submitted there should have been judgment for Servcorp for the sum of $28,627.21 plus costs even if the misrepresentations were made. 35 Tikuta also asserts that the Magistrate's decision in relation to damages is wrong. Counsel for Tikuta referred to the Magistrate's comments at t 99.15 and 100.20 where the Magistrate suggested that notwithstanding the defendant giving notice, it had the benefit of occupation and the Magistrate supposed, "those two things cancel themselves out". Tikuta submitted that this was where the Magistrate began to fall into error when he returned to damages in the judgment. The Magistrate concluded (t 106.32) that "the substance of the matter is that the plaintiff fails" and found that neither side owed the other any moneys. Tikuta then submitted that the judgment on damages did not appear to reflect the actual findings and this was an error; and on the factual findings that it made, they are entitled to judgment for the moneys that it paid under protest. 36 The Magistrate made a finding that the damages should be so much as the rent that had remained unpaid. It seems that this finding relates to the plaintiff's claim that there had been a breach of terms of the rental agreement. The Magistrate then made a finding that the damages under s 52 were equal to the amount of claim which was the unpaid rent from March to June. So there was judgment in favour of the plaintiff in relation to the statement claim and the judgment in favour of the cross claimant on the cross claim. The effect of which was that they cancelled each other out. With respect, there are no reasons provided as to why the loss arising from the misrepresentation is equal to the amount of unpaid rent between March and June. In my view, the scant reasons for preferring the Davids evidence that the representation was made, the wrong approach to the contract claim and the confusing approach to damages leads me to conclude that there were inadequate reasons given, which in itself is an error of law, or there was alternatively an error of law in the approach to damages. The result is that the appeal should be upheld and the whole judgment be set aside.

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Should the matter be remitted to the Local Court 39 Counsel for Tikuta submitted that where there has been a finding of fact, as there has been here, this Court should enter its own verdict. He relied on Klesteel Pty Ltd v Mantzouranis [2008] NSWSC 194 and Thaina Town (On Goulburn) Pty Ltd v City of Sydney Council [2007] NSWCA 300. In Klesteel at [43], McCallum J stated: "43. Having regard to the language of the section as a whole and the remarks of Basten JA in Loudan-Shand at [52], I am of the view that s 75(b) confers power to correct an error of law by entering a verdict in favour of a successful appellant in circumstances where, on the facts as found by the Magistrate, that is the only result reasonably open." 40 I respectfully agree with this statement. In earlier decisions on appeal from the Local Court, I have adopted this approach. 41 In Thaina Town Spigelman CJ at [103] stated: "103. This Court must be concerned that the course of administration of justice in this State does not impose unnecessary cost burdens on parties by adopting a narrow interpretation of statutory powers conferred upon the Court to ensure the just and efficient administration of justice. Where no new findings of primary fact are required to be made, this Court should exercise a power conferred upon it in wide terms so as to ensure that the costs of legal disputation is minimised and thereby apply the guiding principle in s 56 of the Civil Procedure Act 2005 to the exercise of powers conferred by an Act other than that Act or by Rules of Court, so as to facilitate the just, quick and cheap resolution of the issues in dispute in civil proceedings." 42 I also respectfully agree with this statement. However, in this appeal it is not appropriate for this Court to substitute its own verdict, there needs to be further reasons given as to why the Davids' evidence as to the representations was preferred over Ms Thomas and in relation to quantum of the cross claim. This Court is not in a position to undertake that role. These matters are best determined by the Local Court. In my view, there is an error of law and the judgment cannot stand. The appeal is allowed. The decision of Magistrate Pierce in Local Court proceedings numbered 41372/2006 dated 7 April 2008 is set aside. The matter is remitted to the Local Court to be determined according to law. The orders made in Local Court proceedings 40833/2005 are affirmed. 43 Costs are discretionary. Costs normally follow the event. The defendant is to pay the plaintiff's costs in this appeal as agreed or assessed. The defendant is to have a certificate under the Suitor's Fund Act, if appropriate.

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