Spitzer v Ward & Anor

IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION

JUDGMENT 1 MASTER: The plaintiff is a Chartered Accountant. The first defendant is a Real Estate Agent. The second defendant is his company. 2 In 1991, the first defendant retained the plaintiff to perform accountancy services. Work was done. An account was rendered and paid. Thereafter, until the issue of a final account in February 2000, the plaintiff continued to provide services. During this period, not only were services provided for the first defendant but also for the second defendant and the children of the first defendant. 3 There was no letter of retainer. There was no agreement as to the rate of remuneration. Prior to the final account, the plaintiff had not rendered accounts. Payments were made from time to time. 4 Following the issue of the final account, the retainer was terminated. The final account claimed fees for work done during the preceding years less the amounts paid. It was in the sum of $32,000. 5 Subsequently a further account was issued for the sum of $1,800. It was for work done during 1999 and 2000. The plaintiff adopted the position that the product of that work should not be made available until payment of the final account was first made. The defendants refused to pay the accounts. 6 It seems to be common ground that this is a most unusual case. On behalf of the plaintiff, it is said that his evidence provides the explanation for what took place. It is his contention that this situation arose because of the financial position of the defendants. The financial documents showed that modest profits only were being made. They were having cash flow problems and he was helping them out. Payments would be made when he needed money. There was dispute as to who nominated the amount payable. Payments were made from time to time in rounded sums. There were post dated cheques. There seemed to be no discernible pattern in the payments. The plaintiff said that he did not render accounts because of his tax position (he was required to pay tax on accounts rendered). 7 In 2000, the plaintiff commenced proceedings in the Local Court. The proceedings were defended. The Notice of Grounds of Defence raised various matters. The defences included the following;- 1. That there was no agreement as to the rate at which the plaintiff was to be remunerated;

2. That the rate of charge claimed was unreasonable or excessive;

3. That part of the claim was statute barred by reason of the expiry of the relevant limitation period;

4. That the defendants had paid all fees asked for during the course of the plaintiff's employment (the fourth defence); 5. Estoppel;

6. Misleading and deceptive conduct pursuant to s 42 of the Fair Trading Act; and

7. Non performance and denial of instructions in respect of 1999 work. 8 The dispute went to a hearing. It was heard by Mr Gould LCM. The hearing occupied about 3 days. The parties made extensive written submissions. On 29 November 2002, the learned Magistrate delivered a short judgment. He found in favour of the defendants. 9 There was no dispute that the work had been done and that it had been done properly. The claim of the plaintiff was that he was entitled to reasonable remuneration for the work done on the basis of an implied term to that effect. There was evidence from an expert that the amounts claimed satisfied the requirement of reasonableness. 10 Evidence was given by both the plaintiff and the first defendant. There was conflict between them. The first defendant gave evidence of belief had in respect of the amounts which had been paid from time to time. He said that he had not been told that he would be ultimately sent a final account. There was evidence of financial documentation which had been prepared by the plaintiff for the defendants (including documentation signed by the first defendant). It showed an indebtedness to the plaintiff for accountancy fees and claims for tax deductions in respect of those fees. The amounts involved did not correspond with what had been in fact paid to the plaintiff. It was the plaintiff's contention that these represented estimates made from time to time of what was due for the accountancy fees. 11 In his judgment, after referring to the plaintiff's evidence concerning the financial documentation, the learned Magistrate observed inter alia:- "…………………….. I am not of the view that the plaintiff's evidence should be, on that account, preferred to that of Ward. I accept as accurate Ward's evidence that he was not informed of any rates of charge and that he believed that the amounts which he paid from time to time were in respect of current work. He denies, and I accept his denial that he was ever told that the plaintiff would ultimately render a financial account for the whole period. It is not contended as I understand Ward's evidence, that each instalment represented precisely payment for the work done since the previous payment. I accept that Ward believed that he was paying the amounts requested by the plaintiff for work done or to be done at or about the time the payments were made. The conduct of the parties viewed in the light of the surrounding circumstances shows a tacit understanding or agreement that what Ward was paying and what the plaintiff was accepting over the years was the amount the defendants were to be charged. I find that a reasonable bystander would regard the conduct of the plaintiff including his silence as signalling to the defendants that the payments up to the year 2000 were accepted in full satisfaction of the work done up until then. …………………………… The plaintiff agreed from time to time to do accountancy work for the defendants. There was never any agreement as to rates of charge. It was a term of the agreement that the amounts requested from time to time and accepted by the plaintiff were the amounts the defendants were to be charged for the work done in each period. ……………………………. I AM NOT SATISFIED THAT THE PLAINTIFF HAS PROVEN THAT HE HAS PROVIDED THOSE SERVICES AS ALLEGED. THERE SHALL BE A VERDICT FOR THE DEFENDANT WITH COSTS AS AGREED OR ASSESSED." 12 It appears that the learned Magistrate did not deal with either the defence of estoppel or what was said to be a defence under the Fair Trading Act 1987. He took the view that what he describes as the "quantum meruit" did not arise. 13 He said that he was not satisfied that any fees remained outstanding. He expressed the view that any cause of action in respect of the years 1991 to 1994 would have first accrued outside the six-year period. In making that observation, he appears to have overlooked the arguments put on behalf of the plaintiff which involved the operation of the rule in Clayton's case. The effect of the arguments was intended to render the limitation defence inapplicable. 14 In respect of the work covered by the second account, the learned Magistrate observed as follows:- "………………………………………… …………………….Ward claims not to have received any of the work for that period. The plaintiff does not appear to cavil with this. The defendant denies instructing the plaintiff to prepare accounts for 31 December 1999. I accept that as accurate." 15 Although the grounds of defence do plead lack of instruction, it appears that the real issue litigated at the trial was somewhat different (not giving the benefit of the work, the product of which was being withheld from the defendants until payment of the final account). In rejecting this part of the claim, he appears to have misdirected himself and he has failed to consider the case that was being advanced on behalf of the plaintiff. 16 The plaintiff has now appealed to this Court. The grounds of appeal relied on are those set forth in the Further Amended Summons filed on 26 August 2003. 17 The hearing of the appeal occupied almost a day. Written submissions were supplemented by oral argument. 18 Broadly speaking, the thrust of the appeal raises three matters:- 1. That the learned Magistrate misdirected himself as to a matter of law in dealing with questions of the terms of the contract; 2. That the evidence was not capable of supporting the findings of fact; and 3. That he failed to give reasons for accepting evidence of the first defendant in preference to that given by the plaintiff. 19 The learned Magistrate put aside the question of whether or not the plaintiff was entitled to be paid a reasonable remuneration for the work done. Whilst it does not now seem to be in dispute that such a term should have been imported into the contract, during the hearing before the learned Magistrate the defendants argued that there should have been imported a term that was reasonable in the particular circumstances of the case. It was said that "the remedy is discretionary". This somewhat novel concept was not argued during the appeal. It was also put aside by the learned Magistrate. 20 The decision made by the learned Magistrate was dependent upon findings made as to the credibility of witnesses. Whilst such findings as were made may be lacking in clarity, it appears that he preferred at least part of the evidence given by the first defendant. 21 This finding seems to have led him to the decision which he regarded as being determinative of the case. In making that decision, he appears to have had in mind the fourth defence (even though there seems to have been emphasis placed on the estoppel defence by the defendants). As pleaded, it may be concluded that it does not give rise to a defence in law to the plaintiff's claim. During the hearing of this appeal, counsel for the defendants appeared to embrace the proposition that it pleaded a defence of performance of a term of the contract. There is dispute between the parties as to whether or not such a stance was taken during the hearing before the learned Magistrate. 22 What was decided by the learned Magistrate may be the subject of debate. The relevant observations throw up confusion and appear to involve misdirection. 23 The language used by the learned Magistrate indicates that a finding was made as to terms of the contract (a term that the amounts requested from time to time and accepted by the plaintiff were the amounts the defendants were to be charged for the work done for each period). There is also an indication that he may have had accord and satisfaction in mind. 24 I leave aside the question of whether what was found was in fact the subject of the issues litigated by the parties. The findings were the subject of trenchant criticism from the plaintiff. In my view, that criticism is well directed. I am satisfied that there has been inter alia misdirection and inadequate disclosure of reasoning process. I am unable to see the relevance of the views of "a reasonable bystander". 25 The learned Magistrate appears to have had regard to certain matters (the evidence concerning the financial documentation) and has decided "on that account" the evidence of the plaintiff should not be preferred to that of the first defendant. In reaching that view, it appears that these were the only matters that he took into account. Otherwise, no reasoning process is expressed for the view. Save for what follows (his acceptance of certain evidence given by the first defendant), the conflict between the two instances is left unresolved. 26 What was accepted falls within a limited compass. There was an acceptance that the first defendant was not informed of any rates of charge. This was never in issue. There was an acceptance as accurate certain of the evidence given by the first defendant that he had a belief that amounts paid were in respect of current work. Also, he accepted the first defendant believed that he was paying the amounts requested by the plaintiff for work done or to be done at or about the time the payments were made. The beliefs which were accepted were of no relevance to the issues in the case. Further, he accepted a denial that he was ever told that the plaintiff would ultimately render a financial account for the whole period. Again the reasoning process behind these findings is inadequately expressed. 27 It is well established that a failure to sufficiently disclose the reasoning process is an error of law which may vitiate a decision. 28 In reaching his findings, the learned Magistrate appears to have ignored critical evidence (Daniel Gerard Fitzgibbon v The Waterways Authority & Ors [2003] NSWCA 294).

29 Apart from reference to financial documents prepared by the plaintiff, the learned Magistrate appears to have had regard to little of the evidence of the plaintiff himself. Further, he appears not to have had regard to other evidence given by the first defendant himself.

30 It seems to me, in the light of just these matters, that it is unnecessary to give further consideration to what was argued on the appeal. The plaintiff bears the onus of satisfying the court that there has been error in point of law that justifies the disturbing of the decision of the learned Magistrate. I am satisfied that such onus has been discharged.

31 The plaintiff asks that the matter not be remitted back to the Local Court, but that the court proceed to enter judgment in his favour.

32 Whilst I am sympathetic to the position of the parties, (significant legal costs have already been incurred in a contest over a sum that is not large), it seems to me that the court has no option but to remit the matter back to the Local Court. It is necessary for the Local Court to make further findings and attend to unaddressed issues.

33 The decision made by the learned Magistrate on 29 November 2002 is set aside. The matter is remitted to the Local Court for determination according to law. The defendants are to pay the costs of the Summons. Exhibits may be returned. 34 If so entitled, the defendants are to have a certificate under the Suitors' Fund Act 1951.

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