Advanced Communications Pty Ltd v Kooyoo Holdings Pty Ltd T/as the Codemaster Systems

[2001] NSWSC 315

CITATION:	Advanced Communications Pty Ltd v Kooyoo Holdings Pty Ltd T/as The Codemaster Systems [2001] NSWSC 315
CURRENT JURISDICTION:	Common Law
FILE NUMBER(S):	SC 11453/00
HEARING DATE(S):	9 April 2001
JUDGMENT DATE:	27 April 2001
PARTIES :	Advanced Communications Pty Ltd - Plaintiff Kooyoo Holdings Pty Ltd T/as The Codemaster Systems
JUDGMENT OF:	Simpson J

LOWER COURT JURISDICTION :	Local Court
LOWER COURT FILE NUMBER(S) :
LOWER COURT JUDICIAL OFFICER :	Mr Milson

COUNSEL :	Mr G M Mcgrath - Plaintiff Mr D J Brogan - Defendant
SOLICITORS:	Dominic David Stamfords- Plaintiff Noyce Lawyers - Defendant
LEGISLATION CITED:	Local Courts (Civil Claims) Act 1970
CASES CITED:	Pavey and Matthews Proprietary Limited v Paul (1987) 162 CLR 221 at 256
DECISION:	Appeal dismissed with costs.

THE SUPREME COURT
OF NEW SOUTH WALES
COMMON LAW DIVISION

SIMPSON J

27 April 2001

11453/00

ADVANCED COMMUNICATIONS PTY LTD V KOOYOO HOLDINGS PTY LTD T/AS CODEMASTER SYSTEMS

Judgment

HER HONOUR :

1 Pursuant to s 69 of the Local Courts (Civil Claims) Act 1970 the appellant appeals against the decision of a magistrate of the Local Court of 12 May 2000. Such an appeal lies to this court on a question of law only.

2    The Local Court proceedings were commenced by statement of liquidated claim. The then plaintiff (Kooyoo Holdings Pty Ltd, to whom I refer as “Kooyoo”) was a company engaged in the business of creating and supplying accounting software systems. The defendants, Advanced Communications Pty Ltd (to whom I will refer as “Advanced Communications”) was a company engaged in the supply of mobile telephones.

3    Kooyoo’s claim was that, sometime in the first half of 1996, it had agreed to supply a computer and software system to Advanced Communications, and modify it as necessary in order to make it suitable for Advanced Communications’ needs. No specific contract price was then agreed upon.

4    Kooyoo did supply and install software, and its employees consulted from time to time with employees of Advanced Communications to effect modifications to the product. Kooyoo eventually sent a number of invoices amounting to $4,970 to Advanced Communications, who did not pay. Kooyoo accordingly instituted the Local Court proceedings.

5    The claim came on for hearing before Mr Milson, Local Court Magistrate, and proceeded over three non consecutive hearing days. On the first day of hearing, 20 August 1999, Kooyoo filed in court an amended statement of claim. In this document Kooyoo claimed, for the first time, on a quantum meruit. This was pleaded as an alternative to the principal claim which was essentially framed in contract.

6    Advanced Communications had earlier filed a defence, putting in issue all matters that had been alleged in the original statement of claim. Because of the timing of the filing of the amended statement of claim, Advanced Communications had not expressly pleaded to the quantum meruit claim. The magistrate observed that the late filing of the amended statement of claim precluded Advanced Communications having the usual, and statutory, opportunity expressly to plead to that assertion. Counsel for Advanced Communications orally denied the claim made in that form. (This has some significance, which will be mentioned below.)

7    The legal representatives of the parties put before the magistrate an agreed statement of facts. Essentially, the facts stated were to the effect that the parties had agreed to the provisions by Kooyoo to Advanced Communications of a software system, that that system had in fact been supplied and modified and expanded from time to time at the request of Advanced Communications, and that the system had been removed in October or November 1997. The precise date of installation was not disclosed.

8    Two particular paragraphs of the statement of agreed facts should be extracted in full. They are:

3. The Plaintiff and Defendant entered an agreement whereby the Plaintiff would provide an accounting software system that would meet the Defendant’s specific needs.
4. These specific needs were discussed extensively by the Plaintiff and Defendant and an arrangement was reached whereby the Plaintiff would modify their system and loan it along with a computer to the Defendant. If this test system proved satisfactory, then the Defendant would purchase the system and the computer.”

9    Affidavit and quite lengthy oral evidence was given in addition to the facts contained in the statement of agreed facts. I was referred only to limited parts of the oral evidence. This concerned, firstly, a meeting that took place on 12 February 1996. Mr Terrence Jones (described as a director and the owner of Kooyoo) regarded this meeting as having “crystallised” the arrangements. The second piece of evidence to mention was a series of invoices totalling $4970 that had been sent by Kooyoo to Advanced Communications which had not been paid, but which had not been the subject of any protest by or on behalf of Advanced Communications.

10    A week after this meeting (on 19 March 1997), Mr Mike McCullen, on behalf of Kooyoo, wrote to Advanced Communications. The letter was in the following terms:

“Following our recent discussion with yourself, Terry Jones and me, I have established the rental costs of systems and the utilisation of our resources in providing you the computer system.
As you said at the meeting, the system has been put to some commercial use over the last nine months and I have raised an invoice for a value that represents the lower end of the scale.
As you know Terry and Ka have recently spent time examining your use of the system and I know Terry visited last Wednesday but you were in Melbourne.
Perhaps you can give me a call so I can discuss your future needs.”

Advanced Communications did not reply to this letter.

11    As I understand the manner in which the matter proceeded in the Local Court, Advanced Communications did not dispute that Kooyoo had provided equipment. The competing positions advanced by the parties, as they were outlined to me during the course of the present appeal, were these: Kooyoo contended as set out in the statement of agreed facts, that it would mould a package suitable for Advanced Communications’ requirements and would make that available on a loan basis to Advanced Communications, and modify and expand it so as to meet Advanced Communications’ needs; on that being achieved, Advanced Communications would purchase the system and the computer. Advanced Communications, on the other hand, contended that the agreement was no more than that Kooyoo would provide the equipment and software, for an unspecified period, in the hope that Advanced Communications would eventually become dependent upon the system and be persuaded to buy it. On Advanced Communications’ contention, the arrangement involved a bait dangled in its direction by Kooyoo but without any attached obligation on Advanced Communications.

12    The magistrate delivered judgment on 12 May 2000. He set out the agreed facts in full, and a statement of issues on which the parties had also agreed. His Worship then made the following findings:

“For a variety of reasons this equipment did not meet all of [Advanced Communications’] needs. These reasons may have included the fact or did include the fact that the equipment was not adequate to the task, particularly as the task was changing as time went past (sic). However, I am satisfied that the defendant achieved some practical use from the equipment and the programmes which was of commercial value to the company. That this was so is supported by the fact that the defendant was actively seeking an alternative and a more suitable package of equipment and programmes from another company from about March through to July 1997, but did not terminate its working arrangement with [Kooyoo] but rather continued to use his equipment until about July or August 1997 when it was failed (sic) and collected by the plaintiff for repair. It was not until this time that the defendant told the plaintiff that the equipment was no longer required.
I find that in a meeting in February 1997 it was acknowledged by Mr Damian [who identified himself as manager for Advanced Communications] that the plaintiff was entitled to some remuneration, the work being done and the use of the equipment. That this is so is reflected in the letter of Mr McCullen on 19 March 1997. I am satisfied that the defendant company received this letter and ignored it.
In the light of those facts, as agreed, or found by me, I am satisfied that firstly, there was never any agreement between the parties which made clear terms of the working arrangement between them .
The letter of 19 March 1997 was a letter that warranted a response, particularly if its contents were denied.
The meeting of 12 February and the letter of 19 March 1997 and the subsequent failure to respond combined to create an estoppel to the defendant denying the plaintiff’s right to succeed on a claim on the quantum meruit.” (emphasis added)

13    His Worship accordingly found a verdict for Kooyoo in the sum of $4,970.

14    Advanced Communications challenges the conclusions on three grounds. These may be expressed as:

1. it was not open to the magistrate to make the finding that there was never any agreement between the parties;
2. it was not open to the magistrate to find that Advanced Communications was estopped from denying Kooyoo’s claim to a quantum meruit;
3. even if it had been open to the magistrate to find in favour of Kooyoo on the basis of a quantum meruit, the damages awarded on that basis were excessive.

15    I shall consider each of these in turn.

1. The finding as to agreement between the parties
The argument put on behalf of Advanced Communications was that the magistrate’s conclusion was inconsistent with paragraphs 3 and 4 of the statement of agreed facts (set out in paragraph 8 above).

16    There is a fundamental misconception in the position taken on behalf of Advanced Communications. The argument is based upon a misreading of the finding. It assumes that the magistrate found that there was no agreement between the parties. In fact, what the magistrate found was:

“… there was never any agreement between the parties which made clear terms of the working arrangement between them .”

17    The final words are very important. The magistrate did not find that there was no agreement of any kind, but that there was no agreement which clearly set out the terms of the working arrangement. This, regrettably, appears to be incontrovertible, was certainly open on the evidence, and was not inconsistent with the statement of agreed facts the parties had put before the magistrate. The agreement there specified was limited, and omitted reference to the precise items that would be supplied, the duration of the loan agreement, and the compensation Kooyoo would be entitled to receive.

18    If the magistrate’s conclusion were confined as suggested on behalf of Advanced Communications, the inconsistency contended for would have been established. However, when the judgment, and the agreed facts, are properly read, there is no such inconsistency.

19    Counsel for Advanced Communications relied upon a passage from the judgment of Deane J in Pavey and Matthews Proprietary Limited v Paul (1987) 162 CLR 221 at 256. In this passage his Honour said:

“The quasi contractual obligation to pay fair and just compensation for a benefit which has been accepted will only arise in a case where there is no applicable genuine agreement or where such an agreement is frustrated, avoided or unenforceable. In such a case, it is the very fact that there is no genuine agreement or that the genuine agreement is frustrated, avoided, or unenforceable that provides the occasion for (and part of the circumstances giving rise to) the imposition by the law of the obligation to make restitution.”

20    Advanced Communications’ argument was that, since there was in fact a genuine agreement, the occasion for the law to impose an obligation to make restitution did not arise. That was because, on Advanced Communications’ argument, the agreement excluded a right to compensation if it declined ultimately to purchase the system.

21    The argument cannot be accepted. While there was agreement, there was not, as the magistrate found, agreement as to the essential question of recompense for Kooyoo. That was why it was appropriate for the magistrate to proceed on the basis of awarding damages by reference to the principles of quantum meruit.

22    In my view the magistrate’s findings were open to him. Bearing in mind that an appeal lies only on a question of law, to succeed on this ground Advanced Communications would have to establish that the finding was not open. It has failed to do so.

23    2. Estoppel

Advanced Communications made a number of points about the magistrate’s reference to estoppel.

24    Once again, it is necessary properly to construe what the magistrate did. The proper interpretation of his finding is that Advanced Communications was estopped from denying Kooyoo’s right to succeed on a claim on a quantum meruit, by reason of its previous conduct, in the meeting of 12 February, and the letter of 19 March, both of which the magistrate apparently interpreted as acknowledgments on the part of Advanced Communications of its obligation to pay for the goods and services it had undoubtedly received.

25    In this court Advanced Communications’ first argument in this respect was that estoppel had never been raised as an issue in the Local Court proceedings. Counsel for Kooyoo accepted that the word “estoppel” had not been used, but argued that the evidence of the meeting and the letter were plainly tendered to support that position.

26    These arguments can be dealt with in the context of the next point argued on behalf of Advanced Communications. This was that the essential characteristics of an estoppel include a representation, reliance on the representation by the party claiming the benefit of the estoppel, and detriment suffered by that party as a result of its reliance on the representation. Advanced Communications argued that, even if what was said in the meeting, and the absence of any response to the letter, could be construed as a relevant representation, there was no express evidence that Kooyoo had relied upon those representations, and no evidence that it had suffered any detriment as a consequence.

27    There was ample evidence that Kooyoo relied upon its understanding that Advanced Communications had accepted that it was under an obligation eventually to pay for the services it had received. That evidence was the continued efforts on the part of Kooyoo to modify and improve the package for Advanced Communications, and, indeed, the fact that the equipment and software remained with Advanced Communications until July or August 1997. It could hardly be thought that Kooyoo would have taken this course if it had not relied upon a representation that Advanced Communications would pay for what it had received. It follows that detriment could also have been inferred.

28    The magistrate did not expressly deal with these questions, but it is implicit in the conclusions he reached that this was the approach that he took.

29    It may be that it was not strictly necessary for the magistrate to deal with the issue on the basis of an estoppel. It may have been open to him simply to have construed what was said in the meeting, and the absence of any reply to the letter, as an acknowledgment going directly to the issue. Whichever way he treated these pieces of evidence would have led him directly to the same conclusion. I reject this ground of the appeal.

30    3. Damages

Advanced Communications’ argument as to damages was also, in my view, misconceived. It was, in effect, that, even if the magistrate was entitled to find an estoppel against Advanced Communications, then the assessment of damages based upon a quantum meruit could run only from the date of the representations giving rise to the estoppel, or to identified acts of reliance on those representations by Kooyoo, or the date on which Kooyoo began to suffer detriment as a result.

31    This argument misconceives the nature of an estoppel. The estoppel found in this case, as noted above, operated to preclude Advanced Communications from denying its obligation to make an appropriate payment. It had nothing to do with quantification of any payment, or the date from which damages were to be calculated. The estoppel is not the foundation for liability. Accordingly, I also reject this argument.

32    The result is that the appeal is dismissed with costs.

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Last Modified: 05/01/2001