Zutic v Bubalo

Contracts Review Act 1980 (NSW) - s 9 LEGISLATION CITED : Local Courts Act 1982 (NSW) - ss 73 & 75

Allen v Kerr & Anor (1995) Aust Torts Reports 81-354 Azzopardi v Tasman UEB Industries Ltd (1985) 4 NSWLR 139 Beale v GIO (1997) 38 NSWLR 430 Carr v Neill [1999] NSWSC 1263 Devries v Australian National Railways Commission (1993) 177 CLR 472 Gorczynski v Beilby [2005] NSWSC 884 CASES CITED : Housing Commission (NSW) v Tatmar Pastoral Co Pty Ltd (1983) 3 NSWLR 378 Pettitt v Dunkley (1971) 1 NSWLR 376 R L & D Investments Pty Ltd v Bisby [2002] NSWSC 1082 Soulemezis v Dudley (Holdings) Pty Ltd (1987) 10 NSWLR 247 State Rail Authority of New South Wales v Earthline Constructions Pty Ltd (in Liq) (1999) 160 ALR 588 Swain v Waverley Municipal Council [2005] HCA 4

Bozidar Zutic (Plaintiff) PARTIES : Slobodan Bubalo (Defendant)

Ms B Obradovic (Plaintiff) COUNSEL : Mr T Wolf (Defendant)

McDermott & Associates SOLICITORS : (Defendant)

LOWER COURT JUDICIAL OFFICER : Her Honour Magistrate Schurr

IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION

JUDGMENT (Appeal decision of Local Court Magistrate - s 9 Contracts Review Act, Cross claim, sufficiency of reasons) 1 HER HONOUR: By amended summons filed 22 September 2005 the plaintiff seeks firstly, an order setting aside the judgment and orders of her Honour Magistrate Schurr made on 23 March 2005 at the Downing Centre, Local Court, in file number 10008/2004; and secondly an order remitting the matter to the Local Court to be heard and determined in accordance with law. 2 The plaintiff (defendant in the Local Court proceedings) is Bozidar Zutic. The defendant (plaintiff in the Local Court proceedings) is Slobodan Bubalo. The plaintiff relied on his affidavits sworn 31 August 2005, 13 September 2005 and 13 October 2005. For convenience, I shall refer to the parties by name in this judgment. 3 At the outset, it may be helpful to make some brief comments concerning the remedy pursued by the plaintiff. Section 73 of the Local Courts Act 1982 (NSW) (the Act) permits a party who is dissatisfied with a judgment as being erroneous in point of law to appeal to this Court. The onus lies on the plaintiff to demonstrate that there has been an error of law. What is a question of law (as opposed to a question of fact) was considered, inter alia, in Allen v Kerr & Anor (1995) Aust Torts Reports 81-354; Azzopardi v Tasman UEB Industries Ltd (1985) 4 NSWLR 139 at 155-156; Carr v Neill [1999] NSWSC 1263 and R L & D Investments Pty Ltd v Bisby [2002] NSWSC 1082. It cannot be said that the judicial officer acted on evidence inconsistent with facts incontrovertibly established by the evidence - see Devries v Australian National Railways Commission (1993) 177 CLR 472 per Brennan, Gaudron and McHugh JJ at 479 and State Rail Authority of New South Wales v Earthline Constructions Pty Ltd (in Liq) (1999) 160 ALR 588. 4 Recently, in Swain v Waverley Municipal Council [2005] HCA 4, the Chief Justice at [2] reiterated that in the common law system of civil justice, the issues between the parties are determined by the trial process. The system does not regard the trial as merely the first round in a contest destined to work its way through the judicial hierarchy until the litigants have exhausted either their resources or their possibilities of further appeal. 5 Section 75 of the Act provides that the Court may determine an appeal by either (a) by varying the terms of the judgment or order or (b) setting the judgment or order aside or (c) by setting the judgment or order aside and remitting the matter for determination in accordance with the Court's directions or (d) by dismissing the appeal.

Grounds of appeal 6 The plaintiff appeals from the whole of the decision of her Honour Magistrate Schurr on the grounds firstly, that her Honour erred in law in holding that the contract signed by the plaintiff and the defendant on 12 September 2001 was valid, in not stating sufficient reasons for that finding, in not stating what the terms of the contract signed were, and in holding that the defendant/cross claimant had not made out his case; secondly, that there was no evidence upon which her Honour could find (a) that in all the circumstances that the contract was not unjust and (b) that there was an inference that the defendant/cross claimant had received (any) legal advice in respect of the contract signed by the parties on 12 September 2001; thirdly, that her Honour erred in law by not making any, or making inadequate, findings in respect of the credibility of witnesses, in particular but not limited to the plaintiff and the defendant, when credibility issues were important; fourthly, that her Honour erred in law by not taking into consideration the plaintiff/cross defendant's evidence in respect of his agreement with "Rafo" to collect the debt from the defendant/cross-claimant, and by not making any findings in relation to that agreement or that the plaintiff/cross-defendant below had at material times and from time to time made demands on the defendant/cross-claimant for the payment of money; fifthly, that her Honour erred in directing herself to the applicable law, and was in error in applying the law to the facts as found, in particular, but not limited to the applicability or otherwise of the Contracts Review Act 1980 (NSW) (CRA).

Local Court proceedings 7 By the time that matter came on for hearing in the Local Court the parties had filed a statement of agreed facts and issues. It was agreed that the parties had entered into two written agreements, the first being dated 4 May 2001 and the second being dated 12 September 2001. On 12 September 2001 Zutic repaid the sum of $40,000.00 to Bubalo. The agreement dated 12 September 2001 provided for Zutic to pay the sum of $15,000.00 to Bubalo on or before 11 December 2001. 8 Zutic alleged that as a matter of law, that he was not obliged to pay the sum of $15,000.00 to Bubalo in accordance with the agreement dated 12 September 2001. Zutic also alleged that between December 2002 and February 2003 he paid a total of $27,000.00 Bubalo. Bubalo denied the allegations and claimed that Zutic has paid him no moneys at all since 12 September 2001 (see agreed issues). 9 Zutic relied upon the CRA. Bubalo submitted that the CRA defence had not been pleaded and that the contract was not unjust. In relation to the CRA defence, Bubalo relied amongst other things, upon the fact that Zutic had been advised by his solicitor about the agreement. 10 In the cross claim Zutic sought repayment of the sum of $27,000 which he says he paid to agents of Bubalo on a date between December 2002 and February 2003. In reply Bubalo submitted that there was no evidence of such a transaction.

The duty of a judicial officer to give reasons for his or her decision is uncontroversial (see Pettitt v Dunkley (1971) 1 NSWLR 376; Housing Commission (NSW) v Tatmar Pastoral Co Pty Ltd (1983) 3 NSWLR 378 at 385-6 per Mahoney JA; Soulemezis v Dudley (Holdings) Pty Ltd (1987) 10 NSWLR 247). While a judgment need not be a detailed exposition of the minutiae of every aspect of evidence adduced in a particular case, of necessity, a judicial officer should turn their mind to and articulate the core aspects of a matter. Gorczynski v Beilby [2005] NSWSC 884 Kirby J at [96-97]. The duty does not require the trial judge to spell out in minute detail every step in the reasoning process or refer to every single piece of evidence. It is sufficient if the reasons adequately reveal the basis of the decision, expressing the specific findings that are critical to the determination of the proceedings. Reasons need not necessarily be lengthy or elaborate. 11 Zutic's counsel referred to Beale v GIO (1997) 48 NSWLR 430. In Beale, at trial, the judicial assessment of the appellant's credibility was critical to the resolution of the case. In Beale 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, was 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 Mason P at 431-432). The Court of Appeal 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." 12 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.

The Magistrate's decision 13 The Magistrate stated that both Zutic and Bubalo were workers in the construction and transport industries (respectively). The Magistrate did not make any findings as to credit or demeanour of any of the witnesses nor the plaintiff or defendant. 14 At paragraph [6] the Magistrate made findings that the 12 September 2001 agreement replaced the May agreement and noted that Zutic repaid Bubalo $40,000 on 12 September 2001. Zutic was required to repay the balance of $15,000 by 11 December 2001. According to the Magistrate Bubalo forewent the claim for interest at $1,000 per week as stated in the May agreement, as there was no claim for interest in the September agreement. The agreement of 12 September 2001 was in writing and was witnessed by Zutic's solicitor. 15 In relation to the issue as to whether the contract dated 12 September 2001 should be set aside pursuant to the CRA, s 9(1) requires in determining whether a contract is unjust in the circumstances when the contract is made, the court is to take into account consequences and results whether or not and when independent legal or other expert advice was obtained by the party seeking relief under the Act, the extent to which the provisions of the contract and their legal and practical effect were explained, and whether any undue influence, unfair pressure or unfair tactics were exerted or used against the party by another person appearing or purporting to act for another party to the contract. 16 The evidence of Mr Zutic (t 15) in relation to the agreement dated 12 September 2001 is that Mr Dobrich, his solicitor, saw him sign the document. Mr Dobrich also read the document to Zutic prior to him signing it. Zutic knew what was in the document and he was in the presence of his solicitor and his signed it in his solicitor's presence. Zutic also knew that at the moment of signing that Bubalo was immediately entitled under an earlier agreement to more moneys. Zutic knew that when he signed the document that in effect Bubalo agreed not to recover that money for a period of time. Zutic also knew that Bubalo effectively agreed not to claim interest as per the first agreement. 17 The Magistrate at paragraphs [14] and [15] stated: "The defendant argued that the rate of interest in that the first agreement, being a lump sum interest rate of $15,000 for a loan of $40,000 for three months, was at an unconscionable rate. However, the only contract before the court in this case is the one dated 12 September 2001. I have reviewed the evidence in the case, including the defendant's evidence about his role in negotiating the details of the first loan, that the said that he (sic) often borrows from other people and the role of the defendant's solicitor in drawing up the second agreement. Taking into consideration the factors set out in the Contract Review Act 1980 (NSW) s 9(2)(a)-(l). I am not satisfied that there was inequality in the position of the parties and that in all the circumstances I am not satisfied that the contract was unjust. I hold that the contract was valid." 18 In the circumstances no more reasons were required. These reasons are sufficient. This first ground of appeal fails.

Cross claim 19 In relation to the cross claim the Magistrate at paragraphs [10], [11], [12] & [16] stated: "The defendant said that two men, one of whom has since died, came to collect the outstanding money which they said was $27,000, being the original $15,000 plus $12,000 in interest. The defendant agreed that the September 2001 agreement did not require the payment of interest. The defendant gave evidence that some time prior to December 2002 he obtained access to a loan of $27,000 and that he used that cash to give to people who said they were acting on behalf of the plaintiff. The defendant said that he declined to name the personal from whom he borrowed the money, because the defendant had given the lender his word that the lender's name would not be disclosed. The defendant said that he handed over the $27,000 in cash sometime between December 2002 and February 2003 without witnesses, without a receipt and without consulting his solicitor. … The plaintiff bears the onus of proof in establishing the payment of $27,000 to the plaintiff. There is no evidence of that payment, apart from the evidence of the defendant as set out above. I am not satisfied on the balance of probabilities that the cross-claim is made out, and I dismiss the cross-claim." 20 Zutic's counsel referred to other statements that Zutic made which corroborated a small part of his version of events. This evidence was not specifically referred to in the Magistrate's reasons. 21 Sevko Kaminic at paragraph [4] of his statement recorded: "Mr Harker said "We are here to represent Mr Bubalo. We understand that you owe him $15,000.00." Mr Zutic said "I have lost a lot of money. I do not have the money to pay right now." My brother said "When are you going to be able to pay this money?" Mr Zutic became very aggressive and said "I have already given the money to some men who represent Mr Bubalo. I do not have to pay him again." My brother said "Who are these men?" Mr Zutic said "I do not remember what they looked like." My brother said "What were their names?" Mr Zutic said "I do not know their names." 22 Simo Bogdanovic's version is that he had not spoken to Zutic for the last five years. Bogdanovic denied that he ever spoke to Rafo, who he knew to be a debt collector, about the debt owed to Zutic. Bogdanovic denied receiving any money from Zutic in relation to the debt he owed to Bubalo. Rafo has since died. 23 Zutic deposed as follows: That after a very long time he found someone to borrow money from. When Rafo rang him the next time asking if he had the money, he told him that he did and that he could come to collect it. Rafo said that he would the next day at around noon. The next day Rafo came to Zutic's house with Simo Bogdanovic. Zutic gave Rafo $27,000.00 in cash and Rafo then gave it to Simo to count. Simo started to count it but did not finish because he said he was positive that everything was fine. Simo then put the money in his pocket. Zutic asked Rafo and Simo to give him written confirmation that he given them money, but Rafo flicked him on his head with his finger and said in irony words to the effect "You are a good boy, there is no need for any written confirmation." They then left his house. 24 The evidence of Bubalo as to the payment of $15,000.00 (or $27,000.00 on Zutic's version) was in direct contradiction to Zutic's. Zutic said he handed the money to Rafo who in turn handed it to Bogdanovic. Bogdanovic denied speaking to Zutic and denied receiving the money. Rafo is dead. 25 Her Honour dismissed the cross-claim on the basis that Zutic bore the onus in establishing payment of the $27,000 to Bubalo, being the original $15,000 plus $12,000 interest, and that there was no evidence of that payment apart from the evidence as set out in her Honour's judgment. Her Honour held that on the balance of probabilities the cross-claim was not made out. 26 This case is unlike Beale. On the critical issue namely whether Zutic had repaid $15,000 there was a direct conflict between the evidence of Zutic and that of Bubalo. The witness Simo Bogdanovic supported Bubalo on this issue. 27 In the circumstances, the Magistrate's reasons are sufficient. There is no error of law. The appeal is dismissed. The decision of her Honour Magistrate Schurr dated 23 March 2005 is affirmed. The amended summons filed 22 September 2005 is dismissed. 28 Costs are discretionary. Costs usually follow the event. The plaintiff is to pay the defendant's costs as agreed or assessed.

(2) The decision of her Honour Magistrate Schurr dated 23 March 2005 is affirmed.

(3) The amended summons filed 22 September 2005 is dismissed.

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

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