Auro Pty Ltd v Drage
[2020] WADC 24
•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.
The author of Fleming on Torts 10th edition Thomson Reuters 2011 at 4.60 explains the tort of conversion as follows:
Conversion may be defined as an intentional exercise of control over a chattel which so seriously interferes with the right of another to control it that the intermeddler may justly be required to pay its full value. Characteristic of this tort is that the ordinary measure of damages is the full value of the chattel. In truth, the action is in many cases proprietary in substance, and tortious only in form. As has been perceptively observed, the action in effect forces an involuntary purchase on the converter: it permits the plaintiff to say to him: 'you have bought yourself something'. This in turn provides the clue for determining whether a tortious intermeddling is serious enough to justify the drastic sanction of compelling the wrongdoer to by the plaintiff out.
The author's analysis at 4.90 ‑ 4.99 cites authority for, among others, the following propositions:
1.Anyone who, without lawful justification, takes a chattel out of another's possession without consent and with intent to exercise dominion over it, commits conversion.
2.Merely being in possession of another's goods without authority is not a tort: for possession or withholding to be conversion, it must be in some way in defiance of the claimant's rights.
3.The claimant in an action for conversion must have been either in actual possession or entitled to immediate possession of the goods when they were converted. Conversely, an owner who has neither possession nor a right to immediate possession, cannot establish conversion.
The learned magistrate observed (ts 9) that Ms Drage 'must satisfy the court that she owned or had the right to possess the four vehicles at the time she alleges the vehicles were converted'. The magistrate's findings (ts 20 ‑ ts 23) were premised on her earlier conclusion that the four vehicles in question were not sold by Ms Drage, but secured a loan of $17,600 that Ms Drage had repaid by her work for the appellant. Implicit in that finding is that Ms Drage became entitled to possession as the owner of the vehicles when the debt was paid.
It is significant, given the issues as they emerged at trial, that the learned magistrate was not addressed upon and does not appear to have considered the distinction between a pledge (or pawn) and a chattel mortgage. A pledge involves the bailment of personal property as security for a debt. Possession passes to the lender. On the other hand in a chattel mortgage the whole legal title is passed conditionally to the lender: Palgo Holdings Pty Ltd v Gowans [2005] HCA 28; (2005) 221 CLR 249. On the evidence of Ms Drage the 'security' afforded by the vehicles involved neither the delivery of possession nor the transfer of title.
With respect to the Bobcat, the learned magistrate's findings were that it was purchased by Ms Drage's husband in July 2002, that it was part of the June 2012 agreement, that it was insured under Auro's insurance policy and that Ms Drage had possession of the vehicle until it went missing from her yard in October 2013 (ts 16). The magistrate also found that Auro had made an insurance claim for the loss of the Bobcat.
Auro submits that the reasons do not show that Auro did anything that was repugnant to Ms Drage's immediate right of possession of the Bobcat and was without lawful justification and did not find at what point in time a conversion of the Bobcat occurred. The magistrate did not find that Auro took the Bobcat from Ms Drage's premises. On the evidence there was no basis for such a finding.
In Ms Drage's written statement dated 29 June 2016 (exhibit 20, par 46) she said in relation to insurance:
Also in around July 2012 Kim Morrison informed me that he would insure all of my vehicles. I thought this was strange, and I told him I would continue to insure the vehicles as they were my responsibility and I couldn't afford to have them uninsured. Kim Morrison said that he insisted on personally taking care of the insurance, as he intended to help us out and wear the cost. I believed that he was interested in helping me, so I let him take care of the insurance.
She said at par 54:
I was aware from my previous discussions with Kim Morrison about insurance that he had insured the plant trailer and Bobcat for $10,000 each. I never received the insurance money, nor was it credited against the loan I had with Kim Morrison.
There was also in evidence an email from McKay Investigation Services dated 26 March 2014 to Ms Drage in relation to the alleged theft of the Bobcat and plant trailer in which the author confirmed that he had been told by Ms Drage that the Bobcat and plant trailer were collateral for a loan from Mr Morrison and requested copies of documents relating to that loan or any other loans where vehicles or plant and equipment had been used for collateral (exhibit 19).
It may be observed that Auro insuring the vehicles is consistent with the vehicles being acquired by purchase. The learned magistrate found that it was also consistent with the vehicles being provided as security, but there was no finding as to what interest Auro acquired, if not legal title by purchase. The plant trailer that was removed with the Bobcat was also covered by Auro's insurance policy.
Auro's motor vehicle insurance renewal dated 29 July 2013 (exhibit 18) shows that the Bobcat was insured for $10,000, the plant trailer for $3,000, the Jeep Cherokee for $9,000 and the Ford Louisville for $20,000.
The reasons for decision do not contain findings that support the conclusion that Auro converted the Bobcat and the plant trailer, or any findings that would ground any other legal basis for awarding damages to Ms Drage in the amounts of the insured valued of those vehicles. Specifically, Auro's liability in relation to those items was determined on the basis of conversion, not on any restitutionary basis.
In relation to the Ford Louisville, the learned magistrate held at ts 21:
Turning now to the Ford Louisville. For the reasons already given, I am persuaded that Julie Drage owns the Ford Louisville, and has owned it throughout the relevant period. According to Julie Drage, the Ford Louisville was recovered from her control sometime around May 2016 by Gavin Klanjscek, on instructions from Kim Morrison.
Her Honour referred to Mr Klanjscek's evidence at ts 5:
Mr Klanjscek said that he stored several trucks for John Knudson and Julie Drage at his 38 acre property at Byford. The Ford Louisville was brought to his property by John Knudson and later Gavin Klanjscek arranged for the Ford Louisville to be loaded because … Gavin Klanjscek did not have the keys to the Ford Louisville and it was moved to the property in Gingin and all of this was done on the instructions of Mr Kim Morrison.
It was Ms Drage's evidence, and implicit from the learned magistrate's reasons that the vehicle was unlicensed when it came into Auro's possession in June 2012. The Ford Louisville was, on the evidence of Ms McDonald, repaired by Auro prior to Mr Knudson taking possession of it for the purposes of arranging the vehicle inspection. Ms McDonald said that she arranged the paperwork for that and spoke to Mr Knudson. Mr Knudson said that it failed to pass inspection in February 2014 and that he did extensive mechanical work on the vehicle before it subsequently passed inspection in April 2014. He said that the vehicle was used for about a month before it had a major mechanical failure and became unusable.
Mr Knudson stated that he stored the vehicle in a yard leased by Ms Drage in Kelmscott for about six months before moving it to Mr Klanjscek's property in Byford. He said about six weeks later he noticed that it was missing. At that time Mr Klanjscek denied knowing what happened to it. In February 2018 he went to a property in Gingin that he believed was owned by Mr Morrison. He used a drone to take aerial photographs (exhibit 58) that showed the same Ford Louisville on the property: affidavit sworn 6 June 2018 (exhibit 57). The learned magistrate did not say what she made of Mr Knudson's evidence.
Mr Klanjscek's evidence (ts 156) was that the Ford Louisville was brought to his property at Byford in early 2015 and was later taken by him and his son on a trailer to Gingin that he understood was owned by Mr Morrison at Mr Morrison's request. He identified the vehicle by reference to photographs of the vehicle (exhibit 58). He also identified it from the photographs of the property at which the vehicle was left. The learned magistrate did not say what she made of Mr Klanjscek's evidence.
Auro submits that the learned magistrate did not refer to evidence that supported a finding that the Ford Louisville was not removed from Ms Drage's possession in May 2016. There was certainly inconsistent evidence as to when the vehicle was said to have been taken to Gingin.
There was photographic evidence tending to show that a Ford Louisville was parked on the Gingin property associated with Mr Morrison in early 2018 when Mr Knudson used a drone to take aerial pictures of the property.
At par 57 of Ms Drage's 2016 statement (exhibit 20) she stated that in May 2016 Mr Morrison turned up at her property and took the vehicle. Ms Drage was cross-examined on that statement. She said it was true (ts 201). At ts 201 - ts 202, having been shown invoices for parking fees, she admitted that she rented a parking bay for the Ford Louisville at 7 Tinga Place, Kelmscott from 15 January 2015 to 14 April 2016.
This evidence is inconsistent with the evidence of Mr Knudson that he took the Ford Louisville to Mr Klanjscek's property in November 2014 and that it disappeared from there six weeks later, and inconsistent with Mr Klanjscek's evidence that the Ford Louisville arrived at his property in early 2015 and was removed in August or September 2015 and that a Caterpillar excavator was used to move the vehicle, the excavator being later used in a project in Port Hedland in November 2015 (ts 156 and ts 161).
Mr Klanjscek stated in an email to Ms Drage's solicitor on 9 November 2018 (exhibit 59) that Mr Knudson 'had three prime movers at my place for about two years, maybe not quite that long'. He said that one of those vehicles was taken to Mr Morrison's place.
The allegation that Auro converted the Ford Louisville was denied by the appellant, yet the inconsistencies in the accounts of Ms Drage, Mr Knudson and Mr Klanjscek as to when, by whom, and from where the vehicle was moved to Mr Morrison's property were not commented upon by the learned magistrate. They were not resolved. Ms Drage's statement that Mr Morrison took the vehicle from her property in May 2016 was inconsistent with the evidence of Mr Knudson that the Ford Louisville was last seen by him at Mr Klanjscek's property where he left it in November 2014 and with Mr Klanjscek's evidence that it was stored by him for a period in 2015 before he took it at Mr Morrison's request to Gingin.
No express factual finding was made in relation to the alleged conversion of the Ford Louisville. Her Honour simply stated (ts 21):
According to Julie Drage, the Ford Louisville was removed from her control sometime around May 2016 by Gavin Klanjscek on instructions from Mr Morrison.
That was not her evidence. Ms Drage's evidence, confirmed in cross‑examination, was that Mr Morrison himself took the vehicle from her property.
Her Honour did not mention the inconsistencies that have been referred to, or give reasons for finding, implicitly, that the vehicle was removed in May 2016. Her Honour did not comment on the credibility of those witnesses. In short, she gave no reasons for her finding.
While the particular date on which the act constituting the conversion occurred was not material and did not need to be proved as an element of the tort, the circumstances in which and the means by which the vehicle was said to have been converted were facts to be found by the court.
While it may well have been open to the learned magistrate to conclude, on the evidence as a whole, uncontradicted by any evidence that Mr Morrison might have given, that the Ford Louisville was one of the vehicles depicted in the photographs taken by Mr Knudson's drone in 2018, Auro was entitled, as a matter of principle, to reasons for any inference of fact underlying the court's conclusion that Auro had converted it, including the evidential basis. The inconsistencies between the evidence of Ms Drage and her witnesses were conspicuous, yet were not addressed. The paucity of factual findings (and reasons for them) means that the learned magistrate's decision did not disclose the process by which the conclusion that Auro converted the vehicle was drawn.
Turning then to the Jeep Cherokee, the learned magistrate found that the conversion occurred when Auro sold the vehicle, that act being inconsistent with and repugnant to Ms Drage's right of possession as the owner. The real issue with respect to that vehicle is whether it was sold to Auro in June 2012, or merely pledged as security.
The learned magistrate's findings in relation to the Jeep Cherokee were that it had originally been purchased by Ms Drage's late husband in July 2007. It was one of the vehicles the subject of the June 2012 agreement. Although Ms Drage invoiced Auro $7,700 for the vehicle it was found, in fact, to be part of the security given for Ms Drage's loan from the appellant. The Jeep Cherokee was insured under Auro's insurance policy for $9,000. The vehicle registration was transferred to the appellant. Mr Morrison was found to have borrowed the vehicle in mid-2013 for his nephew's use. It was the evidence of Ms Drage and Mr Knudson, accepted by the learned magistrate (ts 22), that they were subsequently informed by Mr Morrison that he had sold the vehicle.
Her Honour found that the vehicle was owned by Ms Drage and that she was entitled to possession of it and that Mr Morrison had purported to borrow the vehicle before informing Ms Drage that he had sold it. The vehicle had been insured by the appellant. On the evidence it was open to the learned magistrate to conclude that by Mr Morrison's admitted act of selling the vehicle, Auro had converted it by transfer.
I am not satisfied that the magistrate's reasons were inadequate for that conclusion, or that the conclusion was in error (assuming the issue of ownership was correctly decided).
The second basis of challenge to the learned magistrate's findings on Ms Drage's conversion claim is that her Honour erred in assessing damages in the amounts for which the vehicles were insured.
In relation to the Bobcat and plant trailer, as I have found, there was no evidence capable of supporting a finding that Auro converted those vehicles. Whether Auro received any insurance payout in respect of those vehicles, whether Auro was entitled to such a payout if it were made, and whether Auro was liable to account to Ms Drage for such a payout were not issues that were raised for determination at the trial.
The learned magistrate also allowed damages for the conversion of the Ford Louisville and the Jeep Cherokee vehicle at their respective insured values according to exhibit 18, a commercial vehicle insurance policy renewal issued by Integra Insurance Brokers that was tendered in Auro's case to show that Auro had an insurable interest in those vehicles. The renewal covered the period 31 July 2013 - 31 July 2014. The schedule of insurance provided that the insured, being Auro and Towerlink Pty Ltd, were liable to be indemnified for loss or damage to any vehicle at 'market value or sum insured whichever is the lesser'.
There was no evidence of the basis upon which any of the sums insured were nominated and there was no evidence of the market value of the vehicles at the time of the acts of conversion found by the learned magistrate. Indeed, in Ms Drage's case, there was no evidence of the value of any of the four vehicles at the times at which they were said to have been converted by the appellant.
The learned magistrate's reasons disclose no course of reasoning that would, in my view, permit a finding that the conversion of each of vehicles was compensable in damages according to an insured value.
The onus was on Ms Drage to prove her loss. The principle according to which damages for conversion are assessed is that the plaintiff should:
receive compensation in the sum which, so far as money can do so, will put him in a same position as he would have been in if … the tort had not been committed.
Butler v Egg and Egg Pulp Marketing Board (1966) 114 CLR 185, 191 (Taylor & Owen JJ) and 192 (Menzies J). The value of the property converted will usually represent the loss caused by the defendant's wrongful act, but it is not a 'hard and fast' rule (192) (Menzies J).
It was for Ms Drage in this case to prove the value of the vehicles said to have been converted. For compensation purposes that value would be the market value of the particular vehicle at the time of the act constituting the conversion.
I accept Auro's submission that the 'sum insured' values set out in the insurance policy renewal simply operated as a limit on the amount payable by the insurer. There was no evidence that the insured values nominated in the insurance renewal reflected, or indeed bore any relationship to the market value of the vehicles at a particular time. Moreover, as evidence of the value of the vehicles the insured values were objectionable as hearsay.
In the case of the Ford Louisville (and the other vehicles), Ms Drage had sought an order for possession (Counterclaim, 15 September 2015, par 12), as the learned magistrate acknowledged (ts 16). The jurisdiction to order possession of personal property is found in s 6(1)(d) of the MCA. Damages were claimed in the alternative. It is not apparent from the reasons why damages were awarded at all for the conversion of that vehicle. Notably, Ms Drage's counsel submitted in his opening address that the vehicles 'ought to be restored to the defendant' (ts 63), before suggesting that the vehicles were valued at $41,000.
It follows from these reasons that the appeal must be allowed in relation to Ms Drage's claim for damages for conversion of the Bobcat and plant trailer and that that claim must be dismissed. There was no legal or factual basis for the learned magistrate's conclusion that Auro converted these items.
It also follows that the appeal in relation to the claim for conversion of the Ford Louisville must also be allowed on the basis that the magistrate did not give any or any sufficient reasons for factual finding (ts 21). The issue of Auro's liability for conversion of that vehicle should be remitted for rehearing by a different magistrate.
The appeal should be allowed with respect to Ms Drage's claim for damages for conversion of the Jeep Cherokee on the basis that the learned magistrate erred in assessing damages by reference to the insured value of the vehicle. The issue of the assessment of damages for conversion of that vehicle should be remitted for rehearing by different magistrate.
By reason of these conclusions it is unnecessary to address ground 2, ground 4 and ground 6.
Mrs Drage's counterclaim for damages for breach of contract of employment
Grounds 13, 14, 15 and 16
These grounds are as follows:
13.The trial magistrate erred in law by failing to identify the necessary elements and characteristics of an employment contract and further, failing to provide why these elements had been met (all characteristics existed) before determining that there was an oral contract of employment between the parties.
14.The trial magistrate erred in finding that the Appellant was the only party involved in the claims and counterclaims and in particular that:
a.The Appellant was the correct party who employed the Respondent;
b.The Appellant was the correct party who hired vehicles from the respondent; and
c.The Appellant was the only entity involved in truck and hire transport.
as:
d.The trial Magistrate erred by refusing to determine who was the employer of Mr John Knudson such determination being indicative of the proper entity interacting with the Respondent.
e.The trail Magistrate further erred by refusing to determine who was the employer of Ms Kirby Wicksy such determination being indicative of the proper entity interacting with the Respondent.
f.There was clear evidence that Mr John Knudson and Ms Kirby Wicksey were both employees of Towerlink Pty Ltd (also known as Mineline Pty Ltd)
g.The trial Magistrate further erred in finding that the deposits by Mineline Pty Ltd or Towerlink Pty Ltd into the bank accounts of the Respondent were for another company's employees where Ms Kirby Wicksey and Mr John Knudson were both recipients of these payments.
h.The trial Magistrate further erred in finding that the only evidence with respect to other companies interacting with the Respondent was in relation to deposits of money where:
i. The evidence in the Respondent's statements:
1.frequently refers to Mr Kimberley Taylor Morrison without any context as to what capacity Mr Morrison is acting; and
2.makes specific mention of Mineline Pty Ltd (Towerlink Pty Ltd) being an entity for which the Respondent performed work.
ii.Invoices referred to by the Respondent in her statements and said to demonstrate her work as an employee only refers to Towerlink Pty Ltd trading as Mineline without any reference to Auro Pty Ltd.
iii.The evidence in the Respondent's statements was that she was issued an email as part of her role, which was identified by the Respondent as [email protected].
iv.The evidence of Ms Kirby Wicksey was that Mineline or Towerlink was operating out of both the Respondent's home and the Medina office where the Ms Wicksey interacted with the Respondent.
v.The truck hire documents from July 2012 to March 2013 specified Towerlink/Mineline.
and thereby also erred in law by failing to properly consider the evidence before her.
i.The trial Magistrate further erred by failing to identify that the insured in the insurance document was both the appellant and Towerlink Pty Ltd and not just the Appellant.
15.The trial Magistrate erred by finding that the amount for wages was the amount calculated by the Respondent, which was on the basis of full time work from 24 June 2012 to 14 October 2012 and 15 May 2013 to 14 January 2014 where:
a.The Trial magistrate also found that the Respondent was working part time when the vehicles were hired by the Appellant being from 7 July 2012 to 4 March 2013.
b.The trial Magistrate accepted that it was unknown what hours the Respondent worked.
c.The trial Magistrate relied on estimates in closing submissions from the Respondent's counsel in the place of evidence.
d.The trial Magistrate found that at times the Respondent did leave work early.
e.There being no evidence at trial supporting the precise dates of 24 June 20212, 14 October 2012, 15 May 2013, and 14 January 2014.
Such finding being unreasonable in the Wednesbury sense.
16.The trial Magistrate erred in law by failing to provide reasons for finding that the Respondent did not receive any monies and further erred in making such finding where:
a.There was clearly numerous and substantial payments being made to the Respondent by both the Appellant and Mineline Pty Ltd (also known as Towerlink Pty Ltd) into two of the Respondent's bank accounts during the relevant time period.
b.The trial magistrate found that the Respondent paid the Appellant the sum of $2,400 in repayment of the loan where such payment could only have originated from monies paid to the Respondent by the Appellant or Towerlink Pty Ltd.
c.The Respondent failed to disclose a third bank account. These circumstances meaning such finding is unreasonable in the Wednesbury sense.
Ms Drage's counterclaim pleaded the following:
2.In or around early June 2012 the claimant, by its director Kim Morrison, entered into an oral agreement with the defendant to employ the defendant as an administrator in its company office on a full time basis.
3.An express term of the defendant's employment was for the claimant to pay the defendant's wages to the claimant and Kim Morrison by way of the repayment of the amounts owing to the claimant and Kim Morrison until the defendant's debt was fully repaid and thereafter to the defendant.
4.Between 24 June 2012 and 14 October 2012 (16 weeks) and then again between 15 May 2013 and 14 January 2014 (35 weeks) the defendant worked for the claimant on a full time basis as an administrator in the claimant's business.
5.The defendant's responsibilities included general bookkeeping, issuing invoices, paying expenses, co-ordinating employees and other administrative responsibilities.
6.Pursuant to clause 4 of the Clerks - Private Sector Award 2010 the defendant's employment was subject to the terms and conditions set out in that Award. Pursuant to clause 16 of the Award the defendant was entitled to be paid the minimum wage set out in that clause.
7.The minimum wage applicable to the defendant was $644.80 until 1 July 2013 and $661.60 thereafter.
8.In breach of the agreement the claimant did not pay the defendant the minimum wage set out above or any wage at all.
The claim for unpaid wages was $33,361.92. In her first witness statement, Ms Drage said that in May 2012 both she and Mr Knudson met with Mr Morrison to discuss the possibility of them both working for him. She said that Mr Morrison said he wanted to employ Mr Knudson to manage his trucks and to employ her as an accounts administrator, and to help Mr Knudson in his job as a transport co‑ordinator. She said that during this discussion Mr Morrison kept referring to Auro. She said she understood that she would be working for Mr Morrison through Auro. Ms Drage said at par 22:
We did not talk much about how 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.
She went on to say that in mid to late 2012 she began working for Auro on a full-time basis often doing extra work after hours. Her responsibilities were 'general bookkeeping, issuing invoices, paying expenses, organising employees and doing other general office tasks'. She said that she worked directly for Mr Morrison who would tell her what to do. He told her to write up invoices and to receipt payments for a number of business including Auro and Mineline Pty Ltd (Mineline). She said that after she had been working for a number of weeks she asked Mr Morrison about wages. He told her that she was paying back the money that she owed him. When she asked how much it was worth he told her not to worry about it. She said that in mid October 2012 after about 16 weeks she decided that she did not want to work for Mr Morrison anymore.
Ms Drage said that in May 2013 her business was still struggling so she agreed with Mr Morrison to again work for him and returned to Auro's office doing the same sort of work and supervising other people in the office. She worked in this capacity for about 35 weeks until mid January 2014. She said that Mr Morrison was abusive and intimidating but she had no choice but to work because it was the only way she could repay her loans.
At par 28 she stated:
Late in 2013 John Knudson and myself met with Kim Morrison at a café in Claremont. Kim Morrison said that he hadn't realised that he hadn't paid John Knudson or myself yet, but to leave it with him for him to sort out. Kim Morrison consistently informed us that we would be receiving payment for our work. Whatever he said varied, however he informed us that it would either be paid as wages or deduced from the money that I owed him. I have not received any payment whatsoever, nor has any money been deducted from what I owe Kim Morrison.
Ms Drage's evidence that she was employed by Auro was supported by the evidence of Mr Knudson. In his first witness statement he said that he met with Ms Drage and Mr Morrison in May 2012 regarding the possibility of working for him. Mr Morrison asked him to work as a transport co-ordinator. He said that he would also be the general manager of the business and that his wages would reflect that position. He said that he would be paid commission if he sold any vehicles or parts. According to Mr Knudson, Mr Morrison told him that he would consider selling the business to him in two years. He too, said he was never paid by Mr Morrison. At par 5 and par 6 he stated:
During the meeting Kim Morrison suggested that Julie Drage could also work for Auro Pty Ltd as an accounts administrator. Kim said that if she worked for him he could help teach her how to run a business and keep proper records. Julie Drage was also to help me in my duties.
Kim Morrison also said to me at the meeting that it would be good for Julie to work for him as that would take care of the loans she owed him.
Mr Knudson said that during the time he worked for Mr Morrison he saw Ms Drage regularly in Mr Morrison's office doing administrative type work. He said he would often get calls from her regarding Mr Morrison's business. He said that in late 2012 he asked Mr Morrison about Ms Drage's wages and was told that her wages were coming off the money that she owed him. Mr Knudson also stated that in October or November 2012, Ms Drage told him that she was no longer working for Mr Morrison and that in around May 2013 she told him that she had begun working for Mr Morrison again. He said he began seeing her in Mr Morrison's office. Each of them ceased work for Mr Morrison in February 2014 because they had not been paid. In cross‑examination, Mr Knudson said that the office where he saw Ms Drage working was at Claremont.
Ms Kirby Wicksey gave evidence that she met Ms Drage through Ms Drage's daughter and occasionally did work for her. Through Ms Drage she met Mr Morrison. She said Ms Drage was working for him at that time. She was offered a full-time job working for Mr Morrison who was employed under a written contract of employment. She was paid award wages and superannuation. Initially she worked at Ms Drage's home office. After three months they moved to an office in Medina rented by Mr Morrison.
She said that when she worked at Ms Drage's house she helped her with her Starcap Logistics business but was working full-time for Mineline on instructions from Mr Morrison and Ms McDonald. She said she did administration work, including reconciling credit card payments of expenses using spreadsheets. She worked for a year from July 2012 to July 2013. She said that Ms Drage also worked in the Medina office but they did different work. In her witness statement she said:
Julie continued to work full-time at the office until early 2013, about February, and then after that she was only part-time at the office. She would come in two or three times a week, but would not stay the whole day, and towards the end, I would see her twice a week. Rocket [Mr Knudson] was in the office every day. He would stay later than Julie. The whole period I was there, Rocket was mostly in the office.
In examination-in-chief, Ms Wicksey confirmed that she was employed by Towerlink Pty Ltd. She said Ms Drage's appearances at the office dwindled in the first half of 2013. By the time she ceased employment in July 2013 she was seeing Ms Drage 'maybe once a week, if that'. She saw her as the office supervisor.
Notably, Mr Knudson gave no evidence of working with Ms Drage at the Medina office. He said he only ever saw her at the Claremont office.
Ms McDonald gave evidence that her company Manage Pty Ltd provided administration services to Auro. As far as she was concerned Auro never hired Ms Drage as an employee. The only time she saw Ms Drage in Auro's office was in June 2012 when she asked to help in maintaining accounting records. In cross‑examination, she said that Auro had no staff but used contractors.
Auro complains that the learned magistrate gave inadequate reasons for her finding that Ms Drage was employed under a contract of employment by Auro and did not canvass all the relevant evidence. Auro's position was that it never employed Ms Drage and that if she were employed it was by Towerlink Pty Ltd one of Mr Morrison's other companies. Towerlink Pty Ltd traded as Mineline. The defence pointed to the fact that Ms Drage was assigned an email address [email protected]. Auro sought to explain Ms Wicksey's evidence by suggesting that when she observed Ms Drage at the Medina office between October 2012 and May 2013 (when Ms Drage was not working for Auro), she was doing work in relation to her own business. Auro sought to demonstrate that Ms Drage's business was operating at that time by reference to bank statement activity. It also sought to show that she could not have been working full-time due to the times at which various bank transactions were made. There were shopping transactions shown on her bank statements that were made during working hours.
Auro also pointed to a number of sums of money that were paid by Towerlink into her account that totalled $175,771.17 over a period of less than 12 months. Ms Drage's evidence was that she was paid money by Towerlink in order to pay wages to Towerlink's employees. It was also suggested that a number of payments described as 'bookkeeping' were made to her for work done for Towerlink. A further suggestion by Auro was that Ms Drage was the recipient of wages payments that were entered under the initials 'JD'. Ms Drage rejected all these propositions.
It was Auro's submission that Ms Drage's testimony was inconsistent and unworthy of belief. For example, it was pointed out that she described returning to work for Mr Morrison when she was struggling financially, yet by her own evidence, she only worked in order to repay debts owed to Mr Morrison, so it made no sense that she would resume work because of financial difficulty. Furthermore, by her own admission she lacked bookkeeping skills, such that she needed to engage a bookkeeper herself.
The learned magistrate dealt with all of these matters in her reasons for decision. In my view it cannot be said that the reasons were inadequate or that the learned magistrate failed to have regard to the evidence. Her Honour gave reasons for finding that Ms Drage was employed by Auro in order to repay her loan and other debts. Her Honour found it telling that Auro retained Ms McDonald's company to do administration work. Her Honour did not consider the fact that Ms Wicksey and Mr Knudson were employed by Towerlink Pty Ltd was relevant to the determination of Ms Drage's employer. Nor did she think that the email address was determinative of the issue.
In my view Auro has not shown that the finding that Ms Drage was employed by Auro, as opposed to Towerlink Pty Ltd, was controverted by objective evidence to such a degree that it cannot stand. Similarly, in my view, it has not been shown that the learned magistrate's findings as to the extent to which Ms Drage worked for Auro lacked a proper evidential basis.
However, the question raised by this ground is whether the learned magistrate made the necessary findings that would justify an award of damages for breach of contract.
There was evidence that Mr Morrison offered to employ Ms Drage in June 2012. The purpose of doing so was to enable to reduce her debt to him. There was no evidence of any agreement as to the terms of the employment. That is, there was no evidence as to the hours to be worked or the value to be given to the work done. There was no evidence as to whether Ms Drage would be an employee or a contractor. However, Ms Drage's evidence was that it was agreed that she would either be paid wages or that her debt would be reduced by the amount of her wages. She gave evidence that she was not paid any wages and that her debt was not reduced.
The learned magistrate's approach was to find, upon an acceptance of the evidence of Ms Drage that she worked full‑time for Auro as an employee for the periods she stated pursuant to an oral agreement (ts 20). Implicit in this conclusion must be a finding that it was a term of the agreement that Ms Drage would be paid a reasonable wage, or at least that a reasonable wage would be the measure of her work for the purpose of reducing her debt.
Having found that an oral agreement was made in those terms, the learned magistrate found further, albeit implicitly, that the agreement was breached by Auro's failure either to pay any wages or to apply any wages in reduction of her debt to Mr Morrison.
There was no issue taken at trial with the Clerks' Private Sector Award 2010 being used as the measure of loss as the learned magistrate pointed out at ts 19 or with statutory superannuation entitlements forming part of the loss.
The evidence of Ms Drage relating to the employment contract may have been vague and inconsistent, but it was supported by other evidence and uncontroverted by objective evidence. I am not satisfied that the learned magistrate's findings as to the existence of an agreement, the breach of the agreement or the assessment of damages were inadequate to support the conclusions she reached. (I should add that Auro's citation of Li v Kc Dental Pty Ltd & Ors [2019] FCCA 104 [178] - [203] was inapposite as it dealt with a Fair Work Act (Cth) prosecution where a contract of employment had to be proved as an element of an offence.)
Ms Drage's claim for truck hire fees
Ms Drage's claim for truck hire fees was $6,313. Her position was that between June 2012 and March 2013, Auro hired trucks from her for which it did not pay. Ms Drage alleged a series of 19 partly written and party oral contracts. In her first witness statement, Ms Drage stated:
61.When Kim Morrison required my trucks, one of his employees would call me and ask me if I had a truck available and if so, I would prepare a truck hire form and get someone from Kim Morrison's office to sign it when they collected the truck. Using this method, Auro Pty Ltd hired the following trucks and incurred the following rental costs: …
62.I never received payment from Kim Morrison for these truck hires. At the time, I was not very good with organising my paperwork and I thought that it had been credited towards the amounts that I owed Kim Morrison.
63.Kim Morrison did not credit my loan accounts for any of the above amounts, or any other amounts.
In evidence Ms Drage said that Mr Morrison was the hirer. She said she had 'no idea whether there was an Auro or a Towerlink or a Mineline' (ts 192). In each case Mr Knudson signed on behalf of Mr Morrison.
Mr Knudson in his witness statement, stated that between June 2012 and May 2013, Mr Morrison instructed him to pick up trucks from Ms Drage for use in Auro's business. Mr Knudson said that he did as he was told and picked up a number of trucks for which he signed paperwork on behalf of Auro, but at par 29 he stated:
During the time that I worked for Kim Morrison, I never understood when or why he would use a different company for things and it never bothered me because I didn't have to worry about that sort of thing. Kim Morrison and his office handled all of the paperwork, so I just did as I was told and worked to organise all the transport jobs and trucks of the business.
Mr Knudson's statement that he signed truck hire agreements on behalf of Auro was inconsistent with his evidence at trial and with the agreements themselves (exhibit 31). Relevantly, he said (ts 231):
Well, when I was employed by Mr Morrison, he had these drawn up in the event of hiring prime movers out to the general public, which we did, but he also wanted any work carried out by his trucks, the Starcap, for his work, to do a rental agreement out. So if we had - if I had a job that required seven trucks and Mineline only owned - or Towerlink only had five, I needed two trucks from Starcap, so we would do a rental agreement out to hire two trucks, two trailers of Starcap.
Exhibit 31 is a bundle of standard form truck rental agreements. In 14 of the agreements the hirer's name is 'Mineline'. In the rest, the hirer's name appears as ' "T" link/Auro/Mineline'. Clearly, Mr Knudson did not hire the vehicles on behalf of Auro exclusively on any occasions. Where the hirer was described as ' "T" link/Auro/Mineline' there is such uncertainty about the identity of the hirer that it could not be found that Auro was liable for the hire fees.
This claim was not one that could be resolved upon the say-so of Ms Drage. Neither her evidence nor that of Mr Knudson was capable of displacing the legal effect of the truck hire agreements that named Mineline as the hirer, or resolving the uncertainty of those agreements that named three hirers. The appeal in relation to this part of the counterclaim should be allowed, the award set aside and the claim dismissed.
Conclusions
It follows from my findings in relation to Auro's conversion claim that, although no order dismissing that claim was made, the dismissal of the claim expressed in the oral reasons for decision must be set aside and the claim remitted for retrial before a different magistrate in accordance with my findings and reasons.
It follows from my findings in relation to Ms Drage's conversion claim (by counterclaim) that:
(a)the award of damages for conversion of the Bobcat ($10,000 and interest thereon) must be set aside and that part of the counterclaim dismissed;
(b)the award of damages for conversion of the Ford Louisville ($20,000 and interest thereon) must be set aside and that part of the counterclaim remitted for retrial before a different magistrate in accordance with my findings and reasons; and
(c)the award of damages for the conversion of the Jeep Cherokee ($9,000 and interest thereon) must be set aside and that part of the counterclaim remitted for retrial before a different magistrate in accordance with findings and reasons.
It follows from my findings in relation to Ms Drage's counterclaim for damages for breach of contract of employment that part of the appeal must be dismissed.
It follows from my findings in relation to Mr Drage's counterclaim for truck hire fees that the appeal in that respect should be allowed, that the award of $9,317 and interest be set aside, and that part of the counterclaim dismissed.
The order for costs is set aside. The issue of the costs of the trial below is reserved for the magistrate who hears the retrial, to be determined in accordance with these reasons and the outcome of the trial. It would be an arbitrary exercise for this court to apportion the costs of the first trial.
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.
I will hear from Auro's counsel on the form of the orders.
I certify that the preceding paragraph(s) comprise the reasons for decision of the District Court of Western Australia.
RR
Associate to Judge Staude21 FEBRUARY 2020
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