Auro Pty Ltd v Drage
[2020] WADC 24 (S)
•21 FEBRUARY 2020
JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CIVIL
LOCATION: PERTH
CITATION: AURO PTY LTD -v- DRAGE [2020] WADC 24
CORAM: STAUDE DCJ
HEARD: 17 OCTOBER 2019
DELIVERED : 21 FEBRUARY 2020
FILE NO/S: APP 121 of 2018
BETWEEN: AURO PTY LTD
Appellant
AND
JULIE DRAGE
Respondent
ON APPEAL FROM:
Jurisdiction : MAGISTRATES COURT OF WESTERN AUSTRALIA
Coram: MAGISTRATE L WARD
File Number : GCLM/17372/2014
Catchwords:
Appeal - Magistrates Court - Claim and counterclaim - Conversion - Contract - Debt - Whether magistrate erred in findings of fact - Whether credibility based findings inconsistent with objective facts - Whether adequate reasons given for findings - Turns on own facts
Legislation:
District Court Rules 2005 (WA)
Magistrates Court Act 2004 (WA)
Result:
Appeal allowed in part
Representation:
Counsel:
| Appellant | : | Mr J N Cianfrini |
| Respondent | : | No appearance |
Solicitors:
| Appellant | : | JNC Legal |
| Respondent | : | Not applicable |
Case(s) referred to in decision(s):
Agbaba v Witter (1977) 51 ALJR 503
Allesch v Maunz [2000] HCA 40 [23]; (2000) 203 CLR 172
Butler v Bennett [2007] WADC 107
Butler v Egg and Egg Pulp Marketing Board (1966) 114 CLR 185
Deng v Millsite Resources Pty Ltd [2010] WADC 21
Fox v Percy [2003] HCA 22; (2003) 214 CLR 118
Han v Mania [2014] WADC 72
Howe v Teefy (1927) 27 SR NSW 301
Lee v Lee [2019] HCA 28
Manonai v Burns [2011] WASCA 165
Mount Lawley Pty Ltd v Western Australian Planning Commission [2004] WASCA 149; (2004) 29 WAR 273
Palgo Holdings Pty Ltd v Gowans [2005] HCA 28; (2005) 221 CLR 249
Penfolds Wines v Elliott (1946) 74 CLR 204
Sellars v Adelaide Petroleum NL (1994) 179 CLR 332
State Rail Authority of New South Wales v Earthline Constructions Pty Ltd (in Liq) [1999] HCA 3; (1999) 73 ALJR 306
Van der Velde v Halloran [2011] WASCA 252
Velez Pty Ltd v Tudor [2011] WASCA 218
STAUDE DCJ:
Introduction
This appeal is from the decision of a magistrate giving judgment for Ms Drage (defendant) against Auro Pty Ltd (Auro) (claimant) in terms that:
1.The claimant is to pay the defendant $75,542;
2.The defendant is pay the claimant's costs to be assessed, if not agreed.
The form of the judgment obscures the fact that the proceedings below involved both claim and counterclaim. Auro's claim was for truck hire fees and damages for conversion of a prime mover. The counterclaim by Ms Drage was for damages for breach of a contract of employment, breach of a loan agreement, conversion of the same prime mover and three other vehicles, and for payment of truck hire fees.
Ms Drage indicated by notice that she did not wish to be heard in the appeal. Hence, there was no contradictor of the grounds. Ms Drage's election not to be heard in the appeal is unusual and rather bemusing. Ms Drage is still engaged in litigation in the Magistrates Court in respect of other business dealings with Auro and is represented in those proceedings, as appears from Auro's counsel's affidavit in support of Auro's (unsuccessful) application to adduce further evidence in the appeal.
The appeal notice pleads 18 grounds of appeal. Auro filed an 80 page written submissions on 20 August 2019 and a 31 page outline of supplementary submissions on 16 October 2019.
Background
Auro operated a heavy vehicle hire business. Ms Drage was the sole proprietor of a transport business called Starcap Logistics.
The parties' business relationship commenced in late 2010 when Ms Drage hired two prime movers and trailers from the appellant. The vehicles were hired from November 2010 to March 2011. In February 2012 Ms Drage hired another prime mover from Auro for a period of 15 days. These two vehicle hire transactions gave rise to Auro's claim for truck hire fees.
In June 2012 the parties made an agreement in relation to four vehicles owned by Ms Drage, namely, a Ford Louisville prime mover (Ford Louisville), a Bobcat skid steer loader (Bobcat), a Jeep Cherokee vehicle and a plant trailer (the June agreement).
It was Auro's position at trial that the agreement was for the sale of these vehicles by Ms Drage to Auro, with Ms Drage having an option to purchase the vehicles back within 12 months. Ms Drage's position was that the agreement was in the nature of a secured loan agreement whereby Auro agreed to advance a sum of money to her secured by the four vehicles. From this transaction, which was in issue at the trial, competing claims for damages for conversion arose.
It was also in issue at the trial that Auro employed Ms Drage to do administrative work for two periods, namely, 24 June 2012 - 14 October 2012 and 15 May 2013 - 14 January 2014, as Ms Drage alleged.
Furthermore, it was in issue at the trial that Ms Drage hired vehicles to Auro on a number of occasions between June 2012 and March 2013, as Ms Drage alleged.
It was an unusual feature of the trial that Mr Kim Morrison, the sole director of Auro and the person with whom Ms Drage dealt in relation to all of the matters in issue, did not give evidence. The only witness for Auro was Ms Simone McDonald who provided management, administration and accounting services to Auro through her company, Manage Pty Ltd. As a result there was no witness capable of contradicting Ms Drage on most matters of issue with respect to both the claim and the counterclaim. The evidence of Auro's claims was to a significant extent documentary in nature. There was a trial bundle of 449 pages. Most of the documents therein were tendered as exhibits.
The witnesses for the defendant were Ms Drage herself, her partner Mr John Knudson, Ms Kirby Wicksey and Mr Gavin Klanjscek.
The learned magistrate delivered oral reasons for decision on 23 November 2018 about one month after a four day trial at which both parties were legally represented. The transcript of the trial comprises 296 pages. The reasons for decisions occupy a further 23 pages.
The reasons
After identifying the causes of action pleaded in the claim and counterclaim, the learned magistrate commented on the evidence generally. The learned magistrate commented rather unfavourably on the evidence of Ms McDonald. Ms McDonald's evidence involved mainly identifying the documents that formed Auro's case and, in relation to the counterclaim for wages and superannuation, evidence of the extent of her own work as a business manager and her observations of Ms Drage at Auro's business premises.
The main criticism of Ms McDonald's evidence was that she 'appeared to be somewhat circumspect with respect to any matters which could be seen as not assisting Auro'. The only example given was that Ms McDonald 'refused to confirm' that a Ford Louisville depicted in an aerial photograph was the vehicle the subject of the conflicting conversion claims. Ms McDonald had said that she had seen that vehicle being worked on by a mechanic, Mr Baxter, but could not tell from the photograph if it was the same one without seeing its registration number. (Ms Drage had the same difficulty (ts 66) when she was asked in evidence‑in‑chief if she could recognise a prime mover in a photograph. She said she did not recognise it and had to look at 'the rego'.) Although it is not clear to what extent the magistrate rejected the evidence given by Ms McDonald, one solitary example of being 'circumspect' is a fragile basis for a generalised and, in my view, unnecessary, reflection on her credibility.
The learned magistrate also observed that Ms McDonald gave evidence of matters of which she had no knowledge and that this was a reason to prefer Ms Drage's evidence. That is not apparent from the transcript. Obviously, Ms McDonald was limited in her testimony to evidence of matters within her knowledge. Her witness statement was admitted without objection. In it she made statements referring to 'the claimant'. The claimant, Auro, is a corporation to which her company, Manage Pty Ltd, was contracted to provide services in accounting, management and administration. As there was no objection to her evidence and she was not relevantly cross‑examined, Ms Drage's counsel's suggestion that she 'overreached' (ts 275) lacked foundation. In examination‑in‑chief she gave no evidence of matters beyond her knowledge. The only objections made in her evidence‑in‑chief were to documents that she identified. It was, therefore, not a valid criticism of her that she could not give evidence of other matters.
The fact that she could not contradict Ms Drage's evidence of matters to which she was not a witness in itself is not a reason for 'preferring' Ms Drage's evidence, though the fact that her evidence of matters of which Mr Morrison may have given evidence (but did not) may have made it easier for the magistrate to accept her evidence on those matters. There were few points on which Ms McDonald's evidence directly conflicted with that of Ms Drage, and none that was identified in the reasons.
The learned magistrate's observations regarding Ms Drage's credibility are set out at ts 4 - ts 5:
Turning now to Mrs Drage and her witnesses, Mrs Drage gave evidence and was subject to extensive cross-examination by Auro's counsel. Mrs Drage presented as a straightforward [sic] and open in all of her dealings. Mrs Drage tried, in my view, to be as accurate as possible with her answers, notwithstanding some of the events occurred eight years ago.
Mrs Drage appeared to me to be an honest and reliable witness and made concessions where appropriate. For example, with respect to paragraph 45 of her statement, she retracted her statement that the $5,500 loan money was a pre-payment of interest. In evidence under cross‑examination, Julie Drage conceded willingly that it was not interest and that there was never any mention of interest between her and Kim Morrison.
Julie Drage also proffered that she wouldn't say 'pre-payment' and that she did not pick up on that error in her statement before. Mrs Drage gave her evidence in a patient, calm, measured and considered way. Mrs Drage did not, in my view, overstate matters or, in my view, make self serving statements. Overall, I found Julie Drage to be a very impressive witness.
Although some mention was made of concessions made in cross‑examination, her Honour's comments did not acknowledge or resolve Auro's counsel's challenges made to Ms Drage's credibility by reference to the inconsistencies between her 2016 witness statement and her evidence, or the contradictory documentary evidence that was put to her.
The learned magistrate made no credibility findings in relation to Mr Knudson or Mr Klanjscek.
Her Honour indicated that she accepted the evidence of Ms Wicksey, an employee of another company associated with Mr Morrison (Towerlink Pty Ltd), that she observed Ms Drage working at Towerlink Pty Ltd's Medina office.
At ts 6, her Honour said:
I have considered, very carefully, the manner in which the five witnesses gave their evidence in order to make findings of credibility and to have assessed the probable accuracy of the evidence and, based on that assessment, draw conclusions about the significance of the documents which are in evidence. I draw no adverse inferences with respect to those potential witnesses who did not give evidence. Rather, this case is decided purely on the evidence which is made available to the court by the parties.
The learned magistrate observed that the parties had had an ongoing business relationship from November 2010 that had involved 'loans and ATO debts' that were not in issue in the litigation.
On the question of Auro's claim for truck hire fees, Ms Drage conceded that money was owed, but disputed the amount claimed. Her Honour found that Ms Drage owed Auro $7,931.50 plus GST ($8,724.65) for the 2010 hire and $3,300 (inclusive of GST) for the February 2012 hire. There is no issue taken in this appeal with those findings.
Her Honour then dealt with Auro's claim for damages for conversion. The claim was premised on the June agreement by which Auro contended that it had purchased the Ford Louisville and the other three vehicles for a total of $21,000 plus GST ($23,100). Auro relied principally on a letter from Ms Drage by email on 29 June 2012 (exhibit 1) that stated, relevantly:
Auro Pty Ltd is to purchase from Julie Lynette Drage of Starcap Logistics the following vehicles for the amounts dated below, to be re purchased by Julie Drage of Starcap Logistics within 6 to 12 months from 28 June 2012.
Reliance was also placed on invoices dated 29 June 2012 from Ms Drage's business Starcap Logistics to Auro for the sale of the Ford Louisville for $5,500 (exhibit 12 and exhibit 52), the Bobcat for $7,700 (exhibit 51 and exhibit 52), the Jeep Cherokee for $7,700 (exhibit 51 and exhibit 52), the plant trailer for $2,200, and bank documents evidencing payments by Auro to Ms Drage (Starcap).
Her Honour accepted Ms Drage's evidence that the 29 June email was provided at the request of Mr Morrison and found that it was not an agreement in writing for the sale of the vehicles. Her Honour accepted Ms Drage's evidence that the parties made an oral agreement whereby Auro, through Mr Morrison, agreed to lend Ms Drage $26,100 secured by four vehicles owned by her, and one owned by Mr Knudson. Her Honour found that Auro advanced Ms Drage $17,600 pursuant to that agreement. Her Honour made no findings in relation to the sales invoices. Her Honour did not characterise in legal terms the nature or effect of the security provided by Ms Drage.
Having found that Ms Drage did not agree to sell the vehicles to the appellant, the learned magistrate stated that Ms Drage did not need to have recourse to 'estoppel, unconscionability and equity, and the Australian Consumer Law' (as Ms Drage had pleaded). Having found that the Ford Louisville belonged to Ms Drage the learned magistrate dismissed Auro's claim for damages for conversion.
Her Honour also found that the parties agreed that Ms Drage would repay the loan by working for Auro and that she did so. Her Honour found that Ms Drage was an employee of Auro during the two periods in question and that she was entitled to wages and superannuation in accordance with the Clerks' Private Sector Award 2010.
Ms Drage's claim for damages for conversion of the four vehicles subject of the agreement was allowed.
The learned magistrate also allowed Ms Drage's claim for truck hire fees in respect of a Kenworth truck, a MAN prime mover and a flat top tri‑axle trailer that her Honour found had been hired to Auro between 20 June 2012 and 4 March 2013.
On Auro's claim, the magistrate found that Auro was entitled to $29,625.65, made up of two amounts of $8,725.65 and $3,300 for vehicle hire, and an amount of $17,600 advanced as a loan by Auro to Ms Drage (ts 24). (The loan amount had not been claimed by the appellant, but ‑ as I understand the magistrate's reasoning - was found to have been advanced to Ms Drage and to be set‑off against the counterclaim for unpaid wages and superannuation.) As mentioned above, Auro's claim for damages for conversion was dismissed.
On the counterclaim, the magistrate held, firstly, that Ms Drage was entitled to $2,400 being an amount paid to Auro as a loan repayment, $33,361.92 for unpaid wages, $3,336.19 for superannuation and truck hire fees of $9,317, totalling $48,415.11 (ts 24). Setting‑off this amount against the money due to the appellant, the learned magistrate held that Auro owed Ms Drage $18,789.46. Pre-judgment interest of $5,423.72 was calculated on the balance from 1 February 2014 (rather than on each relevant amount from the date of loss).
The learned magistrate then allowed Ms Drage damages for conversion. For the Bobcat Ms Drage was awarded $10,000, for the Jeep Cherokee, $9,000, and for the plant trailer, $3000. Interest of $6,350.47 was allowed on these amounts. Her Honour did not state what award she made for the claim for conversion of the Ford Louisville, yet she allowed the claim (ts 21) and interest of $2,978.83. The amounts expressly allowed in the reasons come to $55,542.28. As her Honour gave judgment for $75,542.28, it can be inferred that the court accepted Ms Drage's submission that the Ford Louisville was worth $20,000 and that that sum was allowed, no order being made for the return of the vehicle.
Duty to give reasons
As some of the grounds of appeal challenge the adequacy of the learned magistrate's reasons for decision it is useful at the outset to make reference to the relevant law.
Section 31 of the Magistrates Court Act 2004 (MCA) provides:
31.Judgments, content of
(1) The Court's reasons for a judgment in a case -
(a)need only identify the facts that the Court has accepted in coming to its decision and give the reasons for doing so; and
(b)need only identify the law that the Court has applied in coming to its decision and give the reasons for doing so; and
(c)need not canvass all the evidence given in the case; and
(d)need not canvass all the factual and legal arguments or issues arising in the case.
(2)The fact that a judgment is given orally or in accordance with subsection (1) is not of itself a ground for reversing or modifying it on an appeal.
In Manonai v Burns [2011] WASCA 165 [53] the court stated:
Although provisions like s 31 of the Magistrates Court Act are comparatively new, it has long been accepted that judicial officers have a duty to deliver reasons that expose the process by which a decision has been reached. This enables the parties to understand the basis of the decision. More importantly, perhaps, it enables a losing party to determine whether or not they have any grounds on which to appeal the decision. Should there be an appeal, adequate reasons enable the appellate court to determine whether any errors of fact or law have occurred …
…
The realities of pressure of work and limited time in the Magistrate's Court must be acknowledged. Section 31 of the Magistrate's Court Act obviates any need for a magistrate to canvass all of the evidence given in the case or to canvass all of the factual and legal arguments or issues arising in the case. These dispensations appear to recognise the summary nature of the proceedings in the Magistrate's Court. Reasons can be adequate and comply with s 31 of the Magistrates Court Act without having to be unduly long. It is the substantive content of the reasons rather than their length, which is important.
In Velez Pty Ltd v Tudor [2011] WASCA 218, Murphy JA observed:
Whether the content of reasons is adequate will depend on the circumstances of the case, including the nature of the jurisdiction being exercised … the court will look at the reasons as a whole and, if necessary in the context of the evidence, to determine whether they give a sense of what was intended in a way that achieves their acquired function and purpose …
See also Mount Lawley Pty Ltd v Western Australian Planning Commission [2004] WASCA 149; (2004) 29 WAR 273 [26] and in relation to appeals from the Magistrates Court, Butler v Bennett [2007] WADC 107 [45] - [47] (Bowden DCJ), Deng v Millsite Resources Pty Ltd [2010] WADC 21 [28] (Schoombee DCJ) and Han v Mania [2014] WADC 72 [48] (McCann DCJ).
In Van der Velde v Halloran [2011] WASCA 252 [102] the Court of Appeal observed:
It does not automatically follow that because reasons for decision are inadequate, that an appealable error has occurred. Sometimes, having regard to the reasons as a whole, an inadequacy in reasoning may not give rise to any miscarriage of justice. Further, an appeal court may, in certain circumstances, even where inadequate reasons are given, decide the matter for itself, for example, where the only conclusion open on the evidence is that reached by the trial judge: Beale v Government Insurance Office of New South Wales (444).
Nature of appeal
Rule 50(1) of the District Court Rules 2005 provides:
An appeal to the court must be by way of a reconsideration of the evidence that was before the primary court unless the parties agree otherwise.
This means that it is an appeal by way of re-hearing. It is thus necessary for Auro to demonstrate error in the decision appealed from: Allesch v Maunz [2000] HCA 40 [23]; (2000) 203 CLR 172.
Recently, in Lee v Lee [2019] HCA 28 [55], the plurality (Bell, Gageler, Nettle and Edelman JJ) summarised the role of an appellate court as follows:
A court of appeal is bound to conduct a 'real review' of the evidence given at first instance and of the judge's reasons for judgment to determine whether the trial judge has erred in fact or law. Appellate restraint with respect to interference with a trial judge's findings unless they are 'glaringly improbable' or 'contrary to compelling inferences' is as to factual findings which are likely to have been affected by impressions about the credibility and reliability of the witnesses formed by the trial judge as a result of seeing and hearing them give their evidence. It includes findings of secondary facts which are based on a combination of these impressions and other inferences from primary facts. Thereafter, 'in general, an appellate court is in as good a position as the trial judge to decide on the proper inference to be drawn from facts which are undisputed or which, having been disputed, are established by the findings of the trial judge'.
(citations omitted)
Grounds of appeal
As noted earlier, the notice of appeal pleads 18 grounds. Ground 8 has been abandoned. When the matter first came before me for hearing I made a number of observations about the grounds to the effect that they were a hotchpotch and suggested that they might be refined and organised. Unfortunately, this suggestion was not taken up. The court must do the best it can in the circumstances.
The grounds of appeal can be grouped into four principal categories, ordered for convenience as follows:
1.Auro's claim for damages for conversion;
2.Ms Drage's counterclaim for damages for conversion;
3.Ms Drage's counterclaim for damages for breach of contract of employment; and
4.Ms Drage's counterclaim for truck hire fees.
I propose to deal with the grounds in the order (and groups) in which they were addressed in Auro's outline of submissions.
Some of the grounds are couched in general terms as criticisms of the learned magistrate's treatment of certain evidence. It would have been preferable if they had been pleaded as particulars of an alleged error, rather than in isolation. As they do form a significant part of the appeal they are best dealt with as preliminary points.
Grounds 7 and 9
Ground 7 reads:
The trial magistrate erred in finding that the respondent did not make any self-serving statements when the majority of the respondent's evidence was self-serving. Such finding being unreasonable in the Wednesbury sense [sic].
Commonly understood, a self-serving statement is a statement made by a party that has no evidentiary value and serves no purpose other than to further or reinforce the party's position. Evidence of such statements is generally inadmissible. Usually, the expression refers to an out‑of‑court statement that is merely consistent with the witness' testimony. In evidence‑in‑chief, questions seeking to elicit self-serving answers (e.g. 'Are you a truthful person?') are likewise objectionable. Auro has not demonstrated that the learned magistrate admitted any inadmissible evidence of this kind. Such evidence is not to be confused with relevant evidence by a party of facts that support their case.
Auro's position on matters where Ms Drage's evidence was disputed was that she was untruthful or simply incorrect. The learned magistrate's comment that Ms Drage did not make any self-serving statements was otiose. It was one of a number of comments made by the magistrate concerning the credibility of Ms Drage as a witness. On my reading of the transcript it served no purpose as a justification for the learned magistrate's acceptance of Ms Drage as a credible witness.
Ground 9 reads:
The trial magistrate erred in law by relying on the evidence contained in the statements of the respondent in circumstances where:
(a)large portions of the statements were the subject of objection; and
(b)the respondent swore that the statements were true and correct and further confirmed that the statements prepared solely by her but later recanted stating that the statements contained errors and used words that she would never use.
Ground 9 specifically challenges the learned magistrate's acceptance of Ms Drage's witness statements. Observations made as to the truthfulness of the witness are not findings of material fact. It is for Auro to plead the factual error for which it contends. If the contention is that an error was made on the basis of an incorrect assessment of the credibility of the witness then Auro bears the burden of demonstrating by reference to objectively established facts, or other evidence, why the evidence of the witness should not have been accepted.
The first particular of ground 9 asserts that Ms Drage's evidence should not have been relied upon because objections were made to portions of Ms Drage's witness statements. These objections (to the extent that they were allowed or conceded) are reflected in the redactions made to exhibit 20 and exhibit 21. That parts of Ms Drage's evidence were ruled or conceded to be inadmissible does not in itself impugn her credibility. In any event, Ms Drage gave oral evidence and was cross‑examined.
The second particular of ground 9 asserts that the fact that Ms Drage, having deposed to the truth of her statements, admitted that parts of them were wrong, should have resulted in a rejection of her evidence. Auro at trial submitted that Ms Drage's evidence lacked credibility for various reasons, including that she had admitted to errors in her written statements, including the use of words that she said she would never use, notwithstanding that she said that she had prepared the statements herself.
Ms Drage's credibility, and indeed that of her fiancé Mr Knudson, was obviously critical in circumstances where her evidence, if accepted, would displace a body of documentary evidence tending to show that Auro had acquired the vehicles in question by purchase, where there was no documentary evidence of a secured loan agreement, where there was no documentary evidence to show that Ms Drage had ever been employed by the appellant, and where there was no documentary evidence that Auro was ever invoiced for hiring vehicles from Ms Drage.
Ms Drage and Mr Knudson were cross-examined on their witness statements, with which their oral evidence was inconsistent in a number of respects, and on a number of documentary exhibits that were shown to be, at least arguably, inconsistent with their evidence. It was, of course, for the learned magistrate to assess Ms Drage's evidence. While making a number of favourable comments about Ms Drage as a witness the learned magistrate did not address the submissions of Auro as to why her evidence and that of Mr Knudson should not be accepted.
The principles of appellate review require this court to respect the advantage enjoyed by the court below where matters of witness credibility are concerned. The only way that findings based upon an acceptance of a witness' testimony can be displaced in a case like this is by Auro showing on the basis of facts that were objectively proved that Ms Drage's evidence could not be true.
Her Honour acknowledged that there was 'a disconnect' between what Ms Drage said she agreed with Mr Morrison in June 2012 and her emails sent to Auro on 28 June 2012 and 29 June 2012 (ts 10). Her Honour gave 12 reasons for accepting Ms Drage's evidence that she made an oral secured loan agreement with Mr Morrison rather than a sale agreement in respect of the vehicles listed in the emails.
While those reasons are to be considered in the context of another ground of appeal, I note that in concluding that the agreement was in the terms of Ms Drage's evidence, rather than her emails and invoices, the learned magistrate found as follows at ts 14:
Julie Drage's evidence with respect to the transaction was not shaken, notwithstanding extensive cross-examination, and I attach great weight to Julie Drage's testimony in this regard. Auro relied on the email to support its claim of ownership, and thus conversion of the Ford Louisville by Julie Drage. Considering the above, I am not persuaded that there was any agreement by Julie Drage to sell her four vehicles to Auro, as outlined in the email.
As to the oral contract of employment Ms Drage contended she had with the appellant, her Honour gave reasons for decision at ts 16 - ts 20. It is not apparent from her Honour's reasons that she overlooked or otherwise failed to consider Auro's contentions with respect to Ms Drage's credibility even though no reference was made to them. The only way those findings favourable to Ms Drage can be displaced is by objective evidence for which there is no explanation that does not require a rejection of Ms Drage's evidence or that shows it to be too fragile a base for the challenged findings: State Rail Authority of New South Wales v Earthline Constructions Pty Ltd (in Liq) [1999] HCA 3; (1999) 73 ALJR 306.
In dealing with the claim for truck hire charges her Honour gave reasons at ts 23 ‑ ts 24 for concluding that all the truck hire agreements (exhibit 31) were entered into by Auro irrespective of the name of the hirer that was completed by Mr Knudson. Her Honour concluded that the hires were to Auro notwithstanding the absence of any invoices. She said:
The failure of Mrs Drage to seek payment from Auro at the time of the hire is consistent with her evidence that the hires from Auro and her loan and the payments from her work will be worked out by Auro at some point in time.
It is clear from the reasons that the learned magistrate effectively decided this claim on the basis of her acceptance of the evidence of Mr Drage and her partner Mr Knudson. The correctness of those factual findings falls for consideration elsewhere, again, by reference to the objective evidence of what occurred.
Although not pleaded as such, Auro's contention is, essentially, that the learned magistrate erred by not giving sufficient consideration to the substantial body of documentary evidence adduced in Auro's case that tended to contradict the evidence of Ms Drage, and that upon a proper consideration of that evidence the findings based upon the acceptance of Ms Drage's evidence cannot stand. That contention arises for consideration elsewhere.
Auro's claim for conversion
Grounds 10 and 11
Ground 10 reads:
The trial Magistrate erred in finding that the emails and letters dated 28 and 29 June 2012 was [sic] not a binding contract for sale where the trial Magistrate also:
a.Erred in making inconsistent findings of the evidence of the level of reliance of the Appellant placed on the emails and letters dated 28 and 29 June 2012.
b. Erred in law by failing to:
i.identify the necessary elements of contract for the oral loan agreement;
iiprovide reasons on how these elements had been met by the respondent,
before finding that there was an oral loan agreement.
c.Erred in law by simply stating competing factual propositions as valid reasons.
d.Erred in relying on the absence of notification of change in ownership papers where:
i.The said papers are only required where a vehicle maintains a valid registration with the Department of Transport;
ii.Registration with the Department of Transport is not necessary unless the vehicle is roadworthy;
iii.At the time the Ford Louisville was not roadworthy and could not be validly registered; and
iv.There was no evidence presented at trial regarding the existence or non existence of notification of change in ownership papers.
e.erred in law by failing to give proper consideration to the available evidence or factual circumstances such as:
i.There being no apparent interest being charged in the loan;
ii.There being GST charged to and paid by the appellant to the respondent; and
iii.There being no stipulations as to the repayment of the loan.
This ground can be distilled into a simple contention that the learned magistrate erred in fact and law by failing to find:
(a)that Auro purchased the Ford Louisville from Ms Drage on or about 29 June 2012; and
(b)that Ms Drage converted that vehicle by taking possession of it in February 2014.
The basis for Auro's claim for damages for conversion of the Ford Louisville was that it was purchased from Ms Drage on 29 June 2012 for $5,500. It was one of four vehicles purchased for a total of $23,100, Ms Drage retaining an option to buy the vehicles back after 6 ‑ 12 months. This agreement was confirmed in letters sent by Ms Drage to Auro by email on 28 June and 29 June 2012 and, as I have previously noted, Ms Drage's invoices dated 29 June 2012 for each of the vehicles. Those invoices included GST. There appears to have been no issue that they were tax invoices for taxable supplies, although their treatment for accounting purposes was not explored.
The invoice for the Ford Louisville is stamped as having been paid on 29 June 2012. Also in evidence were two deposit slip stubs (exhibit 13) that indicate that on 3 July 2012 $2,782.20 was paid to Esanda (a finance provider) to the credit of J Drage and on the same date $2,717.80 was deposited in the account of Starcap Logistics, Ms Drage's business. These two payments correspond to the tax invoice for the Ford Louisville. Ms McDonald gave evidence of these payments (ts 23). Her evidence was not challenged in cross-examination.
There is a letter from Esanda to Mr Morrison dated 10 July 2012 (exhibit 15) which confirms that a loan secured against the Ford Louisville was paid out on 3 July 2012. That letter is consistent with Ms McDonald's evidence.
Ms McDonald gave evidence (ts 25) that she allocated an identification number to the Ford Louisville for accounting purposes. She also gave evidence and produced tax invoices in respect of mechanical work done on that vehicle by Bardev Pty Ltd that Auro paid for (exhibit 48).
Ms McDonald also gave evidence that the four vehicles purchased by Auro were included in its commercial motor vehicle insurance policy (exhibit 18). Ms McDonald's evidence included her witness statement (exhibit 3) in which she stated that in late 2013 or early 2014, after repairs to the Ford Louisville were completed, it was arranged that Mr Knudson would take the vehicle 'over the pits' at the Department of Transport inspection centre for licensing, and that he subsequently refused to return the vehicle. She had knowledge of this, having arranged the necessary paperwork.
There was no evidence that the vehicle was licensed or, if it were, that a Department of Transport vehicle transfer notice had been completed. Ms Drage's evidence was that the Ford Louisville had a 'yellow sticker'.
The evidence to which I have referred, supported a conclusion that Auro acquired the Ford Louisville on 29 June 2012. On what factual basis then did the learned magistrate find to the contrary? It is necessary to review the evidence of Ms Drage and Mr Knudson before considering her Honour's reasons.
In her witness statement (exhibit 20) Ms Drage said that she began working for Auro in mid to late June 2012 on a full‑time basis doing 'general bookkeeping, issuing invoices, paying expenses, organising employees and doing other general office tasks', seemingly the same work as Ms McDonald's company was contracted to do. She said that she worked directly for Mr Morrison who was the accounts administrator (par 23 and par 24). At par 25 she said:
After I had been working for Auro Pty Ltd for a number of weeks I asked Kim Morrison about the wages for the work I was doing. He informed me that it was paying back the money I owed him. I asked how much was it worth and he told me not to worry about it as he would take care of it.
That reference to money owed to Mr Morrison from its context can be seen to relate to the admitted vehicle hire debt. She said at par 22:
We did not talk about how much we would be paid for the work that we were going to do. I recall that Kim Morrison made some statement that he would work out a suitable amount to pay us, and that it could be used to offset the amounts I owed to him. At the time I owed him a number of debts so I thought that would be a good way to get rid of my debt.
It is apparent then that at June 2012, on Ms Drage's evidence, she had begun working for Mr Morrison as a way of paying off existing debts.
At par 34 Ms Drage said:
Kim Morrison suggested that he should loan me $5,500 for my prime mover, the Ford Louisville truck. He said he would give me the loan and it would see John and I through until he paid us. My response was to laugh at him because the value of the prime mover was approximately $25,000. Kim Morrison became very angry and aggressive, and replied it was only a loan, and that he wasn't buying the bloody thing.
This evidence attracted no comment by the learned magistrate despite its obvious dissonance with Ms Drage's contention that the loan 'offered' by Mr Morrison was unsolicited by her. If she believed Mr Morrison was merely offering her a secured loan then the value ascribed to the Ford Louisville was irrelevant. On the other hand, if she was in fact responding to an offer to buy the vehicle, then it would make perfect sense that she would insist on a better price.
Ms Drage said that Mr Morrison offered her a loan of $26,100 secured against her four vehicles and a truck owned by Mr Knudson. She said she verbally agreed to the loan. In her first statement she said at par 35:
In or around June 2020, Kim Morrison said to me that he was offering me a loan for $26,100 secured by my business assets as follows:
i)Prime mover - $5,500;
ii)Jeep - $7,700;
iii)Bobcat - $7,700;
iv)Planter trailer - $2,700;
v)F Truck - $3,000
The F Truck was owned by John Knudson. Kim Morrison said he would talk to John Knudson. I verbally agreed to the loan.
In or about June 2012, Kim Morrison called me and said that he was taking all the risk on this loan. He said to me that he wanted a letter from me so that he would be safe guarded if I did not pay the money back.
When she suggested that she write a letter saying that she had borrowed the money from him using her vehicles as collateral, Mr Morrison became angry with her and 'demanded' that she write up a letter that he would dictate to her. She said that he dictated the letter stating the words 'Auro Pty Ltd is to purchase from Julie Lynette Drage the following vehicles'. According to Ms Drage, Mr Morrison said he was not purchasing her vehicles and that this was how it was done in business. She said she was confused, afraid, stressed and emotional and wrote what he told her to write. She then sent the letter to him by email. The same day Mr Morrison called and told her to change the repayment time from 24 months to 12 months. She told him that period was too short. She said he again became angry and aggressive and told her to do as she was told. She made the change because she was upset and afraid of him. She then said that Mr Morrison instructed her to do invoices and receipts for each vehicle, telling her that invoices had to be issued for loans as well as sales and that no money could change hands until the invoices were done. She prepared the invoices believing that they reflected the loan agreement.
Significantly, at par 44 she said:
I never received the agreed loan amount from Morrison. He paid the following amounts only:
(a)$2,717.80 to my bank account on 3 July 2012;
(b)$7,700 on 3 July 2012;
(c)$2,782.20 to Esanda Finance, to pay off my remaining debt on the prime mover;
(d)$4,400 on 11 July 2012; and
(e)$13,200 on 4 July 2012, although this payment was reversed on 5 July 2012.
Ms Drage produced her bank account statements evidencing these payments. The total of the payments set out in par 44 is $30,800. Ms Drage's bank statements show that a deposit on 4 July 2012 of cheques totalling $13,200 were reversed the following day the following day by two debits of $7,700 and $5,500.
The monies paid to Ms Drage's account exceeded $23,100 (being the total of the amounts ascribed to her four vehicles) by $7,700. This would explain the debit of $7,700. As to the other amount of $5,500, Ms Drage explained this at par 45 by saying that Mr Morrison told her that he had paid himself $5,500 of the loan amount as a prepayment of interest. Ms Drage said nothing in her statement about any agreement for interest. In cross‑examination she recanted her evidence that Mr Morrison said the $5,500 was a prepayment of interest. It is clear from her bank statements that she had been advanced $17,600. It was this sum that the magistrate found had been in fact loaned to Ms Drage by the appellant.
As to Auro insuring the vehicles, Ms Drage said at par 46 that Mr Morrison told her in July 2012 that he would insure all vehicles and bear the costs as a way of helping her.
At par 47 she said that a few weeks later she again raised with Mr Morrison the fact that he had not advanced the loan amount that had been agreed. At par 48 she said that sometime after July 2012 Mr Morrison asked her to transfer the Jeep Cherokee into his name so that he could 'take it over the pits'. Ms Drage said that she signed the transfer, Mr Morrison having said that once the vehicle had been inspected he would transfer it back to her.
At par 51 Ms Drage said that on 8 October 2013 she transferred $2,400 to Auro as a repayment of the loans secured against the plant trailer. She said this sum was repaid to her by Mr Morrison. She transferred the same sum again on 14 October 2013. These payments are shown in exhibit 30.
At par 56 she said that Mr Morrison had taken the Ford Louisville to his place. She said that she had not given him permission to repair the vehicle and at time, according to par 55, Mr Morrison had asserted that he was the owner of the vehicle. At par 57 she said:
Kim Morrison contacted me and asked me to get John Knudson to take it over the pits. I asked John Knudson to take it over the pits and bring it back to me, as it was my truck. Since then I had the truck until around May 2016 when Kim Morrison turned up at my property and took the truck. He did not ask permission to enter my property.
In her evidence-in-chief Ms Drage verified her two statements. She identified, for the purpose of tender, the documents referred to therein.
In cross‑examination, she said that Mr Morrison employed her to enable her to pay for vehicle hire charges that she owed and what she described as an existing loan (ts 85). Mr Morrison did not charge her interest on outstanding vehicle hire charges but said that he would employ her in order to clear the debt (ts 90). She was clear in her evidence that she was working to pay off existing debts.
Ms Drage said that when she started working for Auro in late June 2012, she thought she was going to get some wages, 'and the other half was going to go towards my loan that I had with him'. She said that Mr Morrison kept saying that he did not know what he was going to pay her. He said the loan was to see her through until he had worked out her wages. She said that Mr Morrison had loaned her $13,500 and $3,000 (ts 130). She said that she was battling to pay that off when Morrison said that he would employ her as an accounts administrator and that her wages could go towards paying the loan. She said that the original loan was $17,000 or $17,500 and there was interest on the loan. She said that she had paid Morrison $33,000 (ts 130).
In relation to the loan she said was made in June 2012, her evidence was that she told Morrison that she needed another $5,500. He said that he had paid $5,500 as a repayment of the loan (not as a pre-payment of interest as she said in her first statement). When Ms Drage's tax invoices for the four vehicles were put to her she said that they were invoices that Mr Morrison had made her create 'after threatening to take my home'. She accepted that the tax invoices were marked as paid. Her explanation was that it meant the loan had been paid (ts 170).
Ms Drage was cross-examined on her evidence that she did not receive $5,500 of an agreed loan amount of $23,100. She said that Mr Morrison told her it was the first repayment of the loan. She was then cross‑examined in relation to her first statement where at par 45 she said:
In around July 2012, I asked Morrison where the money from the loan was. He said to me that he had paid himself $5,500 of the loan money as a prepayment of interest that would be owed on the loan.
She said that she did not remember making that statement. She said that she was baffled by it. She said that there was nothing mentioned about interest. She said that she prepared her statement herself at her computer, but then she said that she could not recall whether her lawyer typed it (ts 184). She said that she checked her statement, but did not pick up on the words 'prepayment of interest'. She accepted that her statement was incorrect.
She was then asked if she had repaid the loan. She said that she had done so by working for Mr Morrison. She was then taken to her statement at par 51 where she said that she repaid him $2,400 for the plant trailer. She said that she paid that money to see what his reaction would be. She said that she was told to repay the other loan first. She said at ts 186: 'Then I came away more confused because why would I have to pay back the other debt first when my wages was already paying it?'.
She said that she was an emotional wreck at the time. She accepted that she owed other debts to Mr Morrison, as well as vehicle hire charges. Ms Drage admitted writing the letter that evidenced the sale agreement.
The learned magistrate gave 12 reasons for finding no sale agreement was made in relation to the four vehicles (ts 12 ‑ ts 14). These may be summarised as follows:
1.The email of 29 June 2012 was not expressed as an agreement.
2.On the evidence of Ms Drage and Mr Knudson, the email was written for the purpose of Auro's records at its request in the understanding that it was a record of a loan.
3.There was an oral agreement for a loan to be secured by the four vehicles (not reflected in the email).
4.There was no oral agreement to sell the vehicles.
5.The consideration for the sale was inadequate as the market value of the four vehicles in June 2012 was worth more than the amount listed in the email (based on the insured values of the vehicles).
6.There was no notification of change of ownership showing the transfer of any of the four vehicles to Auro except in relation to the Jeep Cherokee, which was transferred in October 2013.
7.The four vehicles remained in Ms Drage's possession.
8.Ms Drage agreed to be employed by Auro in order to repay the loan, not to buy the four vehicles back.
9.Kim Morrison asked Ms Drage to borrow the Jeep Cherokee in mid-2013 (which was inconsistent with Auro owning it).
10.Auro insured the four vehicles, but such insurance was not necessarily an indication of ownership.
11.Auro requested payment by Ms Drage for repairs made to the Ford Louisville for which she denied liability on the basis that she did not authorise them.
12.In February 2014, Mr Morrison called Ms Drage and asked if Mr Knudson could take the Ford Louisville 'over the pits', this being an unnecessary request if Auro owned the Ford Louisville and inconsistent with the manner in which the Jeep Cherokee was dealt with.
Her Honour said she attached great weight to Ms Drage's testimony. Her Honour however, did not address the points on which Ms Drage had been cross‑examined.
Her Honour found that Auro did not own the Ford Louisville and had no right to possess it. Her Honour went on to find that if she were wrong in holding that the Ford Louisville was not converted by Ms Drage, then Auro had not proven any loss or damage, Auro's claim, having been made on the basis of a loss of vehicle hire fees.
As a matter of principle, primary findings based on the credibility of witnesses may be displaced in a case 'where in a complex pattern of events incontrovertible evidence can only be fitted into the pattern if a different view of the credibility of a witness is taken by the court on appeal': Agbaba v Witter (1977) 51 ALJR 503, 508 (Jacobs J), cited in State Rail Authority of New South Wales v Earthline Constructions Pty Ltd (in Liq) [4]. If a conclusion based on credit is shown by uncontroversial facts or uncontested testimony to be erroneous, the appellant court is required to intervene: Fox v Percy [2003] HCA 22; (2003) 214 CLR 118. The fact that the trial magistrate was impressed by Ms Drage as a witness does not preclude this court from concluding, in the light of other evidence, that her denial that she agreed to sell her vehicles should not be accepted.
Having carefully reviewed the evidence and paying due regard to the advantage of the trial magistrate, I am of the view that the only inference that can be drawn from the objective facts of the transaction made with respect to Ms Drage's vehicles is that she sold the four vehicles listed in her email of 29 June 2012 to Auro for the prices stated. The sale was given effect by the raising of tax invoices that included GST. Payments were made on those invoices by Auro. While those invoice payments amounted to $5,500 less than the total agreed sum of $23,100, it is clear that in respect of the Ford Louisville, there were two payments totalling $5,500, one being to Esanda to discharge a security and the other to Ms Drage. It is also clear that Auro insured the vehicles as its own. It is clear on the evidence that possession of the Ford Louisville was given to Auro. The evidence shows that Auro spent $26,574 on repairs before arranging to have the vehicle inspected for registration purposes in February 2014.
The agreement for the sale of the vehicles included a term that Ms Drage could buy back the vehicles within a fixed period. The evidence of Ms Drage as to her intentions at the time of the transaction cannot, in my view, displace the legal effect of the email and the invoices. The option to repurchase the vehicles is consistent with an intention on the part of Auro to assist Ms Drage financially in a way that may be seen as a secured loan, but it was given effect by a sale agreement with a buy back option.
The learned magistrate erred in fact in finding against the evidence that no sale of the Ford Louisville took place. The email was unequivocal and clearly intended to document an agreement for sale. It was prepared and communicated for that purpose. It did not evidence a loan agreement. There was no evidence as to the value of the Ford Louisville or the other vehicles that permitted a finding that the consideration for a sale of the vehicles was inadequate. The insured values prescribed to the vehicles did not constitute such evidence.
Whether the sale agreement was unconscionable is, of course, another question. The statement of defence dated 20 April 2015 alleges that Ms Drage was under a special disadvantage or disability at the time of the transaction in question. The statement of defence specifically pleaded that Auro's conduct was unconscionable. That issue has not been determined.
The absence of transfer documents (a vehicle transfer notice was completed for the Jeep Cherokee, but not the other vehicles) does not have significance in circumstances where the parties intended that Ms Drage would buy back the vehicles within a year, and where the Ford Louisville, at least, was unroadworthy and needed to be repaired and to pass a vehicle inspection in order to be re-registered. Ms Drage retaining possession of the Bobcat and plant trailer and the Jeep Cherokee (for some time) is consistent with an intention to buy back the vehicles. The purpose of Ms Drage working for Auro, on her evidence, was to pay off pre-existing debts and loans.
Accordingly, for the purpose of dealing with Auro's claim for conversion of the Ford Louisville, the finding that Auro did not purchase that vehicle on 29 June 2012 must be set aside. As a consequence the dismissal of Auro's claim for conversion must also be set aside. As the defence pleaded that the agreement was vitiated by unconscionability, that issue will have to be determined upon a retrial.
This conclusion has significance in relation to Ms Drage's counterclaim for damages for conversion. Unless the sale agreement is vitiated by unconscionability on a retrial, it follows that the counterclaim in respect of the four vehicles must also be dismissed. There are, however, other features of that part of the counterclaim that require determination.
As a postscript to my conclusions with respect to the sale of the vehicles I should for the sake of completeness make reference to the learned magistrate's provisional finding that if Ms Drage did sell the vehicles to Auro, then by February 2014 she had bought them back (ts 20). There is no evidence that Ms Drage ever bought the vehicles back from Auro. It cannot be inferred from a finding that she was owed money for unpaid wages that she did so. The alleged conversion by her of the Ford Louisville occurred in early 2014. Ms Drage gave a detailed account of what transpired in her relationship with Mr Morrison around that time at par 28 ‑ par 32 and par 55 ‑ par 57 of her first statement. According to Ms Drage, her recovery of the vehicle occurred in the context of a dispute with Mr Morrison over unpaid wages and, it appears, in the face of a demand by him to repay her loan.
Ground 12
This ground challenges an incidental finding that is non-critical in my view. Yet it warrants consideration in the context of the learned magistrate's treatment of Ms Drage's evidence as a whole.
Ground 12 reads:
The trial Magistrate erred by finding that $5,500 was not for the benefit of the Respondent [Ms Drage], where the previous evidence from the Respondent [Ms Drage] in her statement stating that it was not for her benefit was recanted and acknowledged that the monies were used to pay the Respondent's [Ms Drage's] debts. Such finding being unreasonable in the Wednesbury sense. [sic]
As I have observed already, Ms Drage gave inconsistent evidence in relation to the treatment of the $5,500 sum that she said was withheld by Auro. In her first witness statement she said that Mr Morrison told her that it was interest, but in her evidence she said that she was told it was a repayment. The latter explanation is consistent with Auro's position that the $5,500 reduced a previous debt that Ms Drage admitted she owed and was working to pay off.
Auro's contention is that $23,100 was in fact paid for the vehicles, with $17,600 going to Ms Drage (and Esanda) and $5,500 being applied to her existing debt. As I have found that there was a sale of the four vehicles to Auro for $23,100 (and no loan of $17,600), the issue of the treatment of the $5,500 by Auro has no bearing on the outcome of this appeal.
Ground 5
It is necessary to deal with this ground (which relates to damages) because a retrial is indicated. Ground 5 reads:
The trial Magistrate erred by finding that any damages for conversion to the Appellant would be at best, nominal, due to a lack of evidence, where:
a.there were findings by the trial magistrate that the Appellant operated a truck hire business;
b.the two successful claims by the appellant were for outstanding truck hire fees; and
c.all the trucks hired out were at the same rate of $200 per day.
The learned magistrate found provisionally that if Ms Drage did convert the Ford Louisville, then Auro would not be entitled to more than nominal damages as it had not proved that it suffered any financial loss. Auro's claim for damages was based on it being deprived of the use of the Ford Louisville for a period of time from February 2013. It was premised upon the hypothesis that if the vehicle was available it would have been hired out. As Auro could not prove that anyone would have hired the vehicle in that time, its claim was in truth a claim for damages for the loss of the chance of hiring the vehicle for reward. The claim as pleaded was $50,820.
Auro relied on evidence that showed that it was in the business of hiring such vehicles (and had in fact hired them to Ms Drage, giving rise to its successful claim for vehicle hire fees) and that by reference to the parties' cross-claims for vehicle hire fees, such a vehicle would have been charged out at $200 per day.
On the evidence an inference could readily be drawn that, once repaired, the Ford Louisville would be turned to advantage in Auro's vehicle hire business. It is well established that in tortious claims, damages can be awarded for the loss of a chance: see Sellars v Adelaide Petroleum NL (1994) 179 CLR 332 and Howe v Teefy (1927) 27 SR NSW 301 (involving conversion of a racehorse).
As this issue was not addressed in the judgment, I find that this ground is made out. For the purposes of the retrial, I quash the provisional finding.
Ms Drage's counterclaim for damages for conversion
From my conclusion that Auro purchased the four vehicles, it follows that the finding that Auro converted them must be set aside. It is necessary, nonetheless, to deal with the appeal with respect to the findings on Ms Drage's conversion claim.
Grounds 1 and 3
Ground 1 reads:
The trial Magistrate erred in law by failing to provide reasons on how all the necessary elements of conversion were satisfied by the Respondent before concluding that the Appellant had converted the vehicles.
Ground 3 reads:
The trial Magistrate erred in law by relying on the insurance amounts as the value of the four vehicles where insurance amounts are not necessarily representative of the value of the vehicle at the relevant time and the document relied upon by the trial Magistrate containing these values was not presented as evidence as to the value of the vehicles, but instead only presented at trial as evidence that:
a.the appellant had a second Ford Louisville vehicle; and
b.the appellant took out insurance over all the vehicles.
In relation to ground 1, Auro submitted that the learned magistrate failed to provide sufficient reasons for her conclusions that the elements of conversion were satisfied in respect of each of the four vehicles. This ground requires the court to scrutinise the magistrate's reasoning.
As to the applicable law, the learned magistrate cited the dicta of Dixon J in Penfolds Wines v Elliott (1946) 74 CLR 204, 229:
The essence of conversion is a dealing with a chattel in a manner repugnant to the immediate right of possession of the person who has the property or special property in the chattel. It may take the form of a disposal of the goods by way of sale, or pledge or other intended transfer of an interest followed by delivery, or the destruction or change in the nature of the thing, as for example, pouring water into wine or cutting the seals from a deed, or of an appropriation evidenced by refusal to deliver, or other denial of title. But damage to the chattel is not conversion, nor is use, nor is a transfer of possession otherwise than for the purpose of affecting the immediate right to possession, nor is it always a conversion to lose the goods beyond the hope of recovery. An intent to do that which would deprive 'the true owner' of his immediate right to possession or impair it, may be said to form the essential ground of the tort.
Auro does not question the correctness of that statement of principle, but submits that it is not complete. Yet Auro's submissions do not point to any other principles that might be said to have been overlooked.
JULIE DRAGE
Respondent
ON APPEAL FROM:
Jurisdiction : MAGISTRATES COURT OF WESTERN AUSTRALIA
Coram: MAGISTRATE L WARD
File Number : GCLM/17372/2014
Catchwords:
Costs - Appeal from Magistrates Court - Respondent's Notice of Intention - Respondent elects not to participate and to accept any order except as to costs - Whether election to submit to orders gives immunity from costs
Legislation:
District Court of Western Australia Act 1969 (WA), s 64(1)
District Court Rules 2005 (WA), r 59(1)
Rules of the Supreme Court (WA), O 66 r 1
Supreme Court Act 1935 (WA), s 37
Result:
No order for costs of appeal
Representation:
Counsel:
| Appellant | : | Mr J N Cianfrini |
| Respondent | : | Mr G J Douglas |
Solicitors:
| Appellant | : | JNC Legal |
| Respondent | : | Douglas Cheveralls Lawyers |
Case(s) referred to in decision(s):
Autistic Association of New South Wales v Dodson [1999] FCA 715
Develtor Property Group Pty Ltd v Newcastle City Council [2001] NSWLEC 47
Gray v Sirtex Medical Ltd formerly known as Paragon Medical Ltd [2009] WASC 126
Highland v Labraga (No 3) [2006] NSWSC 871
Hughes v St Barbara Ltd [2011] WASCA 234
Mokdad v FMA Engineering Australia Pty Ltd [2011] WADC 180
STAUDE DCJ:
Introduction
On 21 February 2020 I delivered my decision in this matter, allowing the appeal in part. The judgment hearing was adjourned to enable the appellant's solicitor to bring in a minute of orders disposing of the appeal.
In my reasons for decision, which were communicated by the appellant's solicitors to the respondent's solicitors, I said at [201]:
Auro has been substantially successful in this appeal, but has not succeeded on the grounds relating to the breach of employment contract which was a discrete cause of action. Taking this into account, I order that Ms Drage pay 75% of Auro's costs of the appeal to be assessed.
Upon learning of the decision, Ms Drage's solicitors, who did not represent her in this appeal, wrote to the court requesting an opportunity to be heard as to costs. The letter referred to the Notice of Respondent's Intention dated 14 January 2019 which stated:
The respondent does not intend to take part in this appeal and will accept any order made by the court in the appeal other than as to costs.
In dealing with the issue of costs in my reasons for decision I overlooked the reservation as to costs in the respondent's notice.
At a further hearing on 25 February 2020, I granted leave to Mr Douglas to make submissions as to costs on behalf of Ms Drage. As no orders had been made pursuant to the publication of my reasons for decision, I indicated that I would withdraw the pronouncement on costs in [201] of my reasons for decision (which ought not to have been made without notice to Ms Drage) and adjudicate the issue afresh.
Submissions
Mr Douglas submitted that Ms Drage had elected not to take part in the appeal advisedly with a view to avoiding an adverse costs order in the event that the appeal was upheld. He submitted that by taking this course Ms Drage intended that she would be immune from a costs order should error on the part of the primary court be established.
The principal authority relied upon by Ms Drage is Highland v Labraga (No 3) [2006] NSWSC 871 (Young CJ in Eq). That case involved proceedings to remove an executor. One of the defendants entered a submitting appearance and later argued that he should not be liable for costs for that reason. However, it was held that that party had taken an active part in the proceedings and remained liable for costs. Young CJ observed ([19] - [23]):
The vital question is whether there is some overriding principle that a person who files a submitting appearance is immune from costs.
Mr Ashhurst relies on the decision of Bignold J in the Develtor Property Group case to which I have already made reference. He held in [42] that:
'The effect of the respondent's submitting appearance in the present case, where that appearance has not been challenged or impugned, is that the submitting party is genuinely to be regarded as immune to any liability for costs incurred in the proceedings after the filing of the submitting appearance'.
A word that must not be overlooked in that quotation is the word 'generally'.
Ritchie's Uniform Civil Procedure in note 6.11.5 quotes the Develtor Property Group case as authority for the proposition that 'a submitting party will not ordinarily be liable in respect of costs incurred after filing the submitting appearance'. Again, semantic significance must be given to the word 'ordinarily'.
In a case where a defendant has been named as a proper party, but genuinely takes no part in the proceedings and files a submitting appearance, then almost certainly no order for costs will be made against it.
In Develtor Property Group Pty Ltd v Newcastle City Council [2001] NSWLEC 47, Bignold J cited Autistic Association of New South Wales v Dodson [1999] FCA 715, a decision of the Full Court of the Federal Court in which no order for costs was made in favour of the successful party where the respondent did not participate in the appeal and had filed a submitting appearance 'except as to costs' with the intent that she would incur no liability for costs.
There appears to be no judicial authority on point in this jurisdiction, but the court was referred to Mokdad v FMA Engineering Australia Pty Ltd [2011] WADC 180, where no order for costs was made on a successful appeal from an interlocutory decision in the Magistrates Court. In that case, the respondent elected not to take part on the basis that it would accept any order save as to costs. No reasons were given for the costs order.
Auro has not pointed to any circumstances, such as those that obtained in Highland v Labraga (No 3), that would justify a departure from the general rule identified therein, and has cited no authority against the existence of such a rule. Counsel for Auro argued that costs should follow the event.
Power to award costs
Rule 59(1) of the District Court Rules 2005 provides that the awarding of the costs of and incidental to an appeal is in the discretion of the court.
Section 64(1) of the District Court of Western Australia Act 1969 provides that the costs of any action or proceeding shall be paid by or apportioned between the parties in such manner as the District Court judge directs and in default of such a direction shall abide the event. Section 64(3) provides that, subject to the act, the judge has the same power in relation to the payment of costs by any party as a judge of the Supreme Court has.
Section 37 of the Supreme Court Act 1935 provides, essentially, that costs shall be in the discretion of the court. Order 66 r 1 of the Rules of the Supreme Court echoes s 37, but goes on to provide that 'without limiting the general discretion conferred on the court by the act, and subject to this order, the court will generally order that the successful party to any action or matter recovers his costs'.
The court's discretion as to costs is unfettered: Hughes v St Barbara Ltd [2011] WASCA 234. Yet the discretion must be exercised judicially. The rationale behind the general rule that costs follow the event is that ordinarily it is just that the party who is found by the court to have unjustifiably brought another party before the court, or given another party cause to have recourse to the court to enforce its rights, should be required to pay the other party's costs: Gray v Sirtex Medical Ltd formerly known as Paragon Medical Ltd [2009] WASC 126, [62]; Dal Pont, Law of Costs (Lexus Nexus 4th edition 2018, [7.2]).
Analysis
The prescribed form of the Notice of Respondent's Intention (Form 8) requires a respondent to an appeal to elect whether to take part or not. A respondent who elects not to take part in the appeal and to accept the outcome effectively waives a right of further appeal.
A party's reasons for electing not to take part in an appeal may include a desire to avoid incurring its own costs of opposing the appeal, as well as an adverse costs order in the event the appeal is successful. This reason carries weight in circumstances where, as in this case, the appeal is complex, and where the costs of opposing the appeal may be disproportionate to the value of the subject matter (although I would observe that in this case Ms Drage's judgment was for $75,000).
Highland v Labraga (No 3) is persuasive authority for the principle that a party who files a submitting appearance is generally regarded to be immune from costs. That principle bears on the court's discretion to award costs in this case. I am satisfied that Ms Drage elected not to take part in the appeal in order to protect herself from a possible adverse costs order. That election involved an express undertaking to accept the court's judgment on the appeal. The conduct of the defence and counterclaim did not lead the primary court to make the errors identified in my substantive decision.
Taking these matters into consideration, I consider that a departure from the general rule is warranted. I would therefore exercise my discretion to order that there be no order as to the costs of the appeal.
Disposition
I have heard the parties as to the form of the final orders. The orders will be as follows:
On the appellant's appeal from the decision of Magistrate L Ward given on 23 November 2018, the court orders that:
1.The dismissal of the appellant's claim for conversion be set aside and the claim remitted for re-trial before a different magistrate.
2.On the counterclaim for damages for conversion:
(a)the award of damages for conversion of the Bobcat be set aside and that part of the counterclaim dismissed;
(b)the award of damages for conversion of the Ford Louisville be set aside and that part of the counterclaim remitted for re-trial before a different magistrate; and
(c)the award of damages for the conversion of the Jeep Cherokee be set aside and that part of the counterclaim remitted for re-trial before a different magistrate.
3.Judgment on the counterclaim for truck hire fees be set aside and that part of the counterclaim dismissed.
4.The appeal against the award of damages on the counterclaim for breach of contract of employment be dismissed.
5.The order that the claimant pay the defendant's costs be set aside and the issue of costs of the claim and counterclaim be reserved to the magistrate who hears the retrial.
6.There be no order as to the costs of the appeal.
I certify that the preceding paragraph(s) comprise the reasons for decision of the District Court of Western Australia.
RR
Associate to Judge Staude
27 FEBRUARY 2020
0
23
2