Anastopoulos v Soulios

[2008] NSWSC 1168

CITATION:	Anastopoulos v Soulios [2008] NSWSC 1168
HEARING DATE(S):	28 October 2008
JUDGMENT DATE :	7 November 2008
JURISDICTION:	Common Law
JUDGMENT OF:	Harrison AsJ
DECISION:	(1) Leave to appeal is refused. (2) The appeal is dismissed. (3) The decision of his Honour Magistrate Bugden dated 2 May 2008 is affirmed. (4) The summons filed 30 May 2008 is dismissed. (5) The plaintiff is to pay the defendant's costs as agreed or assessed.
CATCHWORDS:	APPEAL - Local Court - whether parties intended to enter into legal relations
LEGISLATION CITED:	Local Courts Act 1982
CATEGORY:	Principal judgment
CASES CITED:	Allen v Kerr & Anor [1995] Aust Torts Reports 81-354 Azzopardi v Tasman UEB Industries Ltd (1985) 4 NSWLR 139 Baulkham Hills Private Hospital v G R Securities (1986) 40 NSWLR 622 Carr v Neill [1999] NSWSC 1263 Devries v Australian National Railways Commission (1993) 177 CLR 472 Helmos Enterprises Pty Ltd v Jaylor Pty Ltd (2005) 12 BRP 23,021; (2005) Aust Contract R 90-125; [2005] NSWCA 235 Master v Cameron (1954) 91 CLR 353 R L & D Investments Pty Ltd v Bisby [2002] NSWSC 1082; (2002) 37 MVR 479 State Rail Authority of New South Wales v Earthline Constructions Pty Ltd (in Liq) (1999) 160 ALR 588 Swain v Waverley Municipal Council (2005) 220 CLR 517
PARTIES:	George Anastopoulos trading as Supreme Souvlakia v Peter Soulios trading as Superb Souvlaki Food Services
FILE NUMBER(S):	SC 12587/2008
COUNSEL:	T Hall (Plaintiiff) D Bernie (Defendant)
SOLICITORS:	J T Law (Plaintiff) Bayside Lawyers (Defendant)
LOWER COURT JURISDICTION:	Local Court
LOWER COURT FILE NUMBER(S):	9460/2007
LOWER COURT JUDICIAL OFFICER :	Bugden LCM
LOWER COURT DATE OF DECISION:	2 May 2008

IN THE SUPREME COURT
OF NEW SOUTH WALES
COMMON LAW DIVISION

ASSOCIATE JUSTICE HARRISON

FRIDAY, 7 NOVEMBER 2008

12587/2008 - GEORGE ANASTOPOULOS t/as SUPREME SOUVLAKIA v PETER SOULIOS t/as SUPERB SOUVLAKI FOOD SERVICES

JUDGMENT (Appeal decision of Local Court Magistrate
- whether the parties intended to enter into
legal relations)

1 HER HONOUR: By summons filed 30 May 2008, the plaintiff seeks leave to appeal against the decision of his Honour Magistrate Bugden made on 2 May 2008 in the Local Court with file number 9460/07; that the decision of the Local Court on 2 May 2008 be set aside; that judgment be entered in favour of the cross claimant in the Court below and that the matter be remitted to the Local Court for hearing on the question of damages.

2 The plaintiff is George Anastopoulos trading as Supreme Souvlakia (“George Anastopoulos”) who was the defendant/cross claimant in the Local Court. The defendant is Peter Soulios trading as Superb Souvlaki Food Services (“Peter Soulios”) who was the plaintiff/cross defendant in the Local Court. Mr Anastopoulos relied on the affidavits of his solicitor John Tomaras sworn 30 May 2008 and 28 August 2008.

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 permits a party who is dissatisfied with a judgment as being erroneous on a 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 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; (2002) 37 MVR 479. The judicial officer cannot act 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 The plaintiff also sought leave pursuant s 74 of the Local Courts Act. The onus lies with the plaintiff to demonstrate that there has been an error of law or that leave should be granted on a mixed question of law and fact.

5 Section 75 of the Local Courts Act provides that this Court may determine an appeal either (a) by varying the terms of the judgment or order, or (b) by setting aside the judgment or order, or (c) by setting aside the judgment or order and remitting the matter to the Court for determination in accordance with the Supreme Court’s directions, or (d) by dismissing the appeal.

6 In Swain v Waverley Municipal Council (2005) 220 CLR 517, 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.

Grounds of Appeal

7 The plaintiffs appeal from the whole of the decision of his Honour Magistrate Bugden dated 2 May 2008 on the grounds that the Magistrate erred firstly; in failing to make any finding as to the legal relationship between the plaintiff and the defendant; secondly in making a negative inference from the defendant's failure to call George Anastopoulos as a witness or, in the alternative, failing to make a finding and to take into account at all or adequately, objective evidence put before the Court; thirdly in reaching a decision that the legal relationship the parties fell into the "third category" of the High Court decision in Masters v Cameron (1954) 91 CLR 353; fourthly in failing to take into account at all, or adequately, objective documentary and oral evidence relating to the conduct of defendant indicating that he intended to enter into legal relations with the plaintiff; fifthly in making findings inconsistent with the defendants admissions in evidence and pleading; and sixthly in failing to find that the conduct of the defendant amounted to conduct that would otherwise be inferred that the parties had entered into legal relations pursuant to the contract, the subject of these proceedings.

Notice of contention

8 By notice of contention filed 16 September 2008, Mr Soulios contends that in the event that any contractual relations did come into operation between the parties, the Magistrate should have found that any contractual relationship that came into operation between the parties was abandoned by both parties.

Pleadings in the Local Court

9 The claim was brought by Peter Soulios trading as Superb Souvlaki Food Services against George Anastopoulos trading as Supreme Souvlakia for an amount due in connection with the production of souvlaki.

10 Paragraph [1] of the statement of claim pleads that:

“The plaintiff is the owner and operator of the business known as ‘Superb Souvlaki’. The business was previously known as ‘Supreme Souvlaki Wholesale’. The business sells meat and poultry products.”

11 Soulios claimed the sum of $14,400 plus costs. In short Peter Soulios alleged that he delivered products to Food Service Central and he rendered invoices to Food Service Central in the sum of $14,400. Food Service Central paid the money to George Anastopoulos. Peter Soulios claimed he was entitled to payment of that sum. This sum had not been paid by George Anastopoulos and judgment was entered that George Anastopoulos pay Peter Soulios the sum of $14,400. By defence, George Anastopoulos admitted that he did receive the payments but did not account to Peter Soulios and claimed the right to an equitable set off of the amount of George Anastopoulos’s loss and damage against any moneys authorised to be payable to Peter Soulios by George Anastopoulos.

12 The dispute before the Magistrate was in relation to the cross claim brought by George Anastopoulos against Peter Soulios for money payable on the sale of business to Peter Soulios pursuant to a licence agreement. The issue for determination was whether or not enforceable legal relations were entered into between the parties. On 2 May 2008, the Magistrate decided that no legal relationship was entered into by the parties. On the cross claim, judgment was entered in favour of Peter Soulios the cross defendant as against George Anastopoulos as cross claimant.

Background

13 The background facts were set out in the judgement of his Honour Magistrate Bugden and are as follows.

14 George Anastopoulos was the principal in the family business trading as Supreme Souvlakia. In or around October 2004 a decision was made to sell the business and by about late October 2005 Peter Soulios had contacted Phillip Anastopoulos, George Anastopoulos' son about purchasing the business. Subsequently, a number of meetings took place between George Anastopoulos and Peter Soulios, to discuss the sale and purchase of the business.

15 In order to learn "the business" Peter Soulios worked for the Anastopoulos family in their Belmore premises from about January to May 2006. George Anastopoulos indicated his family wanted a break from the business and Peter Soulios made it clear that he was not interested in a 6 to 12 month arrangement, but that he was looking for long-term involvement in the running of the business.

16 In early March 2006, Phillip Anastopoulos engaged solicitors Karavias & Associates (“Karavias”) to act on his father's behalf in regard to the sale and purchase of the business. On 7 March 2006, Bayside Solicitors (“Bayside”), for Peter Soulios, wrote to Karavias. The letter concerned a “taking over" of the business by Peter Soulios. They noted that Karavias were to prepare a licence in relation to the business.

17 On 10 March 2006 Karavias replied saying they were to see George to discuss the matter but that they had received instructions to prepare a lease for a term of two years, with an option to purchase the business.

18 On the 13 March 2006 Karavias sent Bayside a fax indicating that:

1 The $600 weekly licence fee was agreed to

2 The licensor would waive the licence for one month

3 The Toyota Hi-Ace van was to be transferred for nil consideration but the licensee would be responsible for stamp duty and insurances including comprehensive

4 The licence was to be to the wholesale business and not include the business at 411 Burwood Road, Belmore

5 The licensee could not further licence without the licensor consenting

6 The licence could be terminated on 3 months notice

7 - 10 Concern the transfer of relevant licences

11 Phillip Anastopoulos to provide ongoing support on behalf of George

12 The licensor to take out all insurances

19 Shortly thereafter Karavias Solicitors faxed Bayside Solicitors a draft licence agreement and the covering fax stated:

“We note you are awaiting your clients instructions but as requested fax only a draft Licence Agreement which has not yet been approved by our client.

No legal relations are intended to be created until such time as the licence has been approved and executed by our client” . [my emphasis added]

20 It was common ground that the licence agreement was not executed by Mr Anastopoulos.

21 On 16 March 2006 Karavias sent a handwritten fax to Bayside in the following terms:

“I omitted to provide in the draft licence that the licensor can terminate the lease on 3 months notice. Please advise your comments on the deed ASAP.”

22 Bayside replied on 17 March 2006 requiring some minor amendments to the licence agreement and on 20 March 2006 Karavias faxed a handwritten reply indicating agreement to the suggested amendments and said, "Once you approve licence I'm happy to provide your client with a copy.”

23 On 20 March 2006 Karavias faxed a substitute page 9 to be added to the original licence. On 22 March 2006 Peter Soulios signed the Licence agreement. On the 23 March 2006 Bayside wrote to Karavias and set out:

“We refer to previous correspondence and advise that the licence has now been executed by our client and should now be in your possession.”

24 On 27 March 2006, Bayside again faxed Karavias asking if the licence had been executed.

25 On 4 July 2006, Peter Soulios spoke directly to George Anastopoulos and asked why he hadn't signed the agreement and George told him he was waiting for Phillip to return from overseas before signing the licence.

26 On 10 July 2006, Peter Soulios received a call from George asking why the licence fee had not been paid. He said "I will pay it as soon as you have signed the lease". Shortly thereafter George Anastopoulos' daughter, Georgina Szatow, rang Peter Soulios and asked for the van to be returned. Peter Soulios agreed to do so and the van was returned the next day.

27 On 14 July 2006 Bayside wrote back to Karavias indicating that Peter Soulios did not intend to proceed with the arrangement and requested the return of the executed licence agreement.

28 Phillip Anastopoulos gave written evidence that he spoke to Peter Soulios from Greece and that Peter Soulios indicated he refused to pay the licence fee because the business was not going well, but that he would continue to pay for the goods he was purchasing from the Anastopoulos business.

29 On 2 August 2006 Bayside again wrote to Karavias and noted they had not received a response to the letter of 14 July 2006 and again confirming that Peter Soulios did not wish to proceed with the arrangement.

30 On 3 August 2006 Karavias faxed Bayside stating that George Anastopoulos had the licence and Bayside’s letters had been sent to him.

31 On 15 August 2006 Tzovaras Legal, the new solicitors for George Anastopoulos faxed Bayside stating:

“Although the licence agreement was not executed by our client, the provisions set out by the licence agreement were acted upon and supported by both parties including the payment of the licence fee of $660 per week for the month of June 2006. Accordingly, the licence agreement was entered into and was on foot.”

32 Then under the heading of ‘Repudiation of Licence Agreement’:

“We are instructed that your client has been guilty of repudiatory conduct as follows:

1. repeated failure to make payment of the licence fee in accordance with clause 4 of the licence agreement;

2. the return of the Toyota Hi-Ace van to our client being the motor vehicle referred to in clause 5 of the licence agreement;

3. the registration of:

a) the business name Supreme Souvlakia Food Services (BN 98229789) without our client’s consent or approval, thereby purporting to claim property rights to our client’s name and trade mark, which is contrary to clauses 11 and 18 of the licence agreement; and


b) the Domain Name. (Your client’s email address, [email protected] incorporates our client’s Trade Mark “Supreme Souvlakia”).

4. By letter from your firm dated 14 July 2006, your client has expressed his intention not to proceed with the licence agreement.”

33 The issue before the Magistrate was, which category as set out in Masters v Cameron, applied. In Masters v Cameron, the High Court set out three categories where parties who have been in negotiation reach agreement upon terms of a contractual nature and also agree that the negotiation shall be dealt with by a formal contract. They are:

1. Where the parties have reached final agreement on the terms of their contract and agree to be immediately bound but wish to restate those terms in a fuller or more precise way in a formal document;

2. Where the parties have reached final agreement on all the terms and intend not to depart in any way from them but the performance of some part of the contract is made conditional on the execution of a formal contract;

3. Where the parties intend there not to be a concluded contract unless and until a formal document is executed.

34 In categories (1) and (2) the parties are bound at the time they reach agreement. In category (3) the parties are not bound by the agreement.

35 In so far as category (3) is concerned, the High Court in Masters v Cameron stated at 362 – 363:

“Again, Sir George Jessel MR said in Crossley v Maycock : "if the agreement is made subject to certain conditions then specified or to be specified by the party making it, or by his solicitor, then, until those conditions are accepted, there is no final agreement such as the Court will enforce" (1874) LR 18 Eq at pp 181, 182.

This being the natural meaning of "subject to contract", "subject to the preparation of a formal contract", and expressions of similar import, it has been recognized throughout the cases on the topic that such words prima facie create an overriding condition, so that what has been agreed upon must be regarded as the intended basis for a future contract and not as constituting a contract. Indeed, Lord Greene MR remarked during the argument in Eccles v Bryant and Pollock (1948) Ch 93 at p 94 that when the expression "subject to contract" was used he had never known a case in which it had been suggested, much less held, that this did not import that there was nothing binding till the exchange of parts of the formal contract was made.”

36 Since, Masters v Cameron, there has evolved a fourth class – see Baulkham Hills Private Hospital v G R Securities (1986) 40 NSWLR 622 at 628 and Helmos Enterprises Pty Ltd v Jaylor Pty Ltd (2005) 12 BPR 23,021; (2005) Aust Contract R 90-125; [2005] NSWCA at [55] to [59] but it is not relevant here.

The Magistrate’s decision

37 The Magistrate made a finding that that the licence agreement was never at any stage, signed by George Anastopoulos. In finding for the cross defendant Peter Soulios the Magistrates reasons were as follows:

“Of some importance in determining the relations between the parties is the van supplied. Though the van was physically supplied by George Anastopoulos to Peter Soulios, title was never transferred to Peter Soulios, as provided for in the licence. It appears that George Anastopoulos regarded himself as retaining possessory title to the van and accordingly it was within his rights to have the van returned to him upon his demand. George Anastopoulos demanded the return of the van and it was returned by Peter Soulios.
No evidence was ever given in the hearing by George Anastopoulos despite the fact that he was the Cross Claimant.
In this regard both George Anastopoulos son, Phillip Anastopoulos and his daughter, Georgina Szatow, gave evidence.
Ms Szatow gave evidence that though she was “in the loop” regarding legal activities between the parties, her evidence was not of great assistance to the case for the Cross Claimant. She did give evidence that Peter Soulios expressed a concern to her about her father not signing the Contract but that was a "legal question" and, by inference, not an issue for her. She deferred to her brother in this regard.

Phillip Anastopoulos gave evidence and said that "they" (George Anastopoulos and Peter Soulios) had an agreement, and that they were going to transfer the van. Phillip’s main concern was the intellectual property transgression that he perceived had taken place. He was aware that his father instructed new solicitors during the proceedings but that was his fathers' decision. The inference for the Court is that George Anastopoulos alone was the Principal and that his decisions and not those of any other family member were the decisions of Supreme Souvlaki.

Phillip Anastopoulos gave evidence that he instructed solicitors but was not aware of the crucial letter that there was no agreement until the licence agreement was signed by his father.

The absence of any evidence by Mr Anastopoulos, who I was informed remained working in the family business during the hearing, was an impediment to his cause.

Mr Soulios gave evidence, and it is clear that his position is that because the licence agreement was never executed by Anastopoulos he never regarded their legal relations as being finalized and therefore the parties never arrived at a position where it could be said that there were binding legal relations on both of them.

As a principal of law, when two parties have finalized the details of a contract but the formal document is not completed there is a dilemma as to whether or not the parties are immediately bound by the informal agreement or whether they should be bound only when the formal agreement is executed. The common practice used by legal practitioners is to ensure that no legal obligations are created until the exchange of formal contracts. This is achieved by using the words "subject to contract" in any correspondence leading up to the informal finalization of agreement. Even though the process of offer and acceptance appear to have been completed, there is a presumption that no binding agreement is reached if these words are used. This is typically seen in regard to transactions for the sale of land.
This implication may be displaced by a contrary intention disclosed by the words or conduct of the parties.
[The Magistrate then set out the three classes in Masters v Cameron ]

Whether the parties have reached final agreement, or intend to postpone contractual relations is ultimately a question of intention disclosed by the language the parties have used or to be inferred from their conduct.

In these proceedings it is clear from the oral and written evidence of Peter Soulios, he did not regarded himself as being bound by a formal legal relationship with George Anastopoulos.

George Anastopoulos, never at any stage signed the licence agreement. He had ample opportunity to do so. His solicitors, at a very early stage of the proceedings informed the Legal representatives of Peter Soulios that "no legal relations are intended to be created until such time as the licence has been approved and executed by our client".

George Anastopoulos never gave oral evidence in the proceedings so that the Court could be informed directly, of his views of the finalization of any legal proceeding between the parties.
In all of these circumstances I am satisfied that the status of the legal relationship between the parties fails into the third category of Masters and Cameron; that being that no "Legal Relations" were ever entered into by the parities . ”

38 Starting with the pleading appeal point first, George Anastopoulos submitted that the Magistrate made findings that were inconsistent with Peter Soulios’s admissions in evidence and pleadings. Paragraph [1] of the statement of claim pleads that Peter Soulios is the owner and operator of “Superb” Souvlaki and the business was previously known as “Supreme Souvlaki Wholesale”. George Anastopoulos was trading as Supreme Souvlaki. The trading name used by George Anastopoulos and Peter Soulios are not identical. Nowhere in the statement of claim does Peter Soulios plead that he purchased the business from George Anastopoulos or that he entered into a licence agreement with George Anastopoulos. There is no admission that Peter Soulios purchased the business from George Anastopoulos. In any event, this issue was not raised before the Magistrate. This appeal point fails.

39 The next ground of appeal is that the Magistrate erred in making a negative inference from the defendant’s failure to call George Anastopoulos as a witness. The Magistrate commented that George Anastopoulos never gave oral evidence in the proceedings so that the court could be informed directly of his view of the finalisation of any legal proceedings between the parties and that his non-attendance was an impediment to his cause. George Anastopoulos’s son Phillip was the one who was involved in telephone conversations with Peter Soulios. The Magistrate did not draw any inference against George Anastopoulos, although the licence agreement was between George Anastopoulos and Peter Soulios. However, his Honour considered the intention of the parties that must be objectively obtained from the terms of the documents when read in the light of the surrounding circumstances. Even if George Anastopoulos had given evidence, it remained common ground that he never signed the licence agreement. This ground of appeal fails.

40 The other ground of appeal challenges the Magistrate’s findings that led him to decide that it was a Masters v Cameron class three situation. George Anastopoulos’s counsel submitted that the Magistrate failed to find that the van was delivered up to George Anastopoulos; George Anastopoulos applied the van to a course of trade, pursuant to the terms of the licence agreement; George Anastopoulos received the van and stock and trade subject to the terms and conditions of the licence agreement; and the terms and conditions of the licence agreement recorded in writing the licence agreement. The Magistrate did consider evidence in relation to the van. The ownership of the van was never transferred to Peter Soulios. The Magistrate did take these factors into account. But there were two important factual findings made by the Magistrate. The first is that George Anastopoulos never signed the licence agreement. The second is that in March 2006, George Anastopoulos’s solicitor wrote to Peter Soulios’s solicitors and stated, “No legal relations are intended to be created until such time as the licence has been approved and executed by our client.” While Masters v Cameron in class three, there is a reference to the words “subject to the contract” prima facie creating an overriding condition that what has been agreed upon must be regarded as the intended basis for a future contract, here, the overriding intention is that no legal relations were intended to be created until such time as the licence agreement had been approved by George Anastopoulos.

41 These factual matters were not the subject of dispute between the parties. It was open to the Magistrate to make these factual findings. In these circumstances it was open to the Magistrate to decide that it was a Masters v Cameron class three situation. That is where the parties intend there not to be a concluded contract unless and until a formal document is executed.

42 There is no reason to grant leave on a question of mixed fact and law. Nor has there been an error of law. Hence, it is not necessary to consider the matter raised in the notice of contention.

43 Leave to appeal is refused. The appeal is dismissed. The decision of his Honour Magistrate Bugden dated 2 May 2008 is affirmed. The summons filed 30 May 2008 is dismissed.

44 Costs are discretionary costs normally follow the event. The plaintiff is to pay the defendant’s costs as agreed or assessed.

The Court orders

(1) Leave to appeal is refused.

(2) The appeal is dismissed.

(3) The decision of his Honour Magistrate Bugden dated 2 May 2008 is affirmed.

(4) The summons filed 30 May 2008 is dismissed.

(5) The plaintiff is to pay the defendant’s costs as agreed or assessed.

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