Australian Technology v Papalia No. Scgrg-97-1126 Judgment No. S6828

AUSTRALIAN TECHNOLOGY PTY LTD
v
JOHN PAPALIA trading as SA LIFTING SERVICES

[1998] SASC 6828

Magistrates Appeal
Nyland J

This appeal is from a decision of a stipendiary magistrate sitting in the civil jurisdiction of the Adelaide Magistrates Court. The issue which arose for decision concerned the terms of an oral contract entered into between the parties in relation to work carried out by the plaintiff with respect to a truck owned by the defendant. On 30 April 1997 the magistrate entered judgment for the respondent/plaintiff against the appellant/defendant for the amount of the plaintiff’s claim in the sum of $5513.68. For convenience I will continue to refer to the parties as plaintiff and defendant.
In order to understand some of the issues which arose on the hearing of this appeal it is necessary to have regard to the prior history of this matter. On 7 September 1995 the plaintiff filed a claim against the defendant for the aforesaid sum of $5513.68. The particulars of claim specified that it was in respect of an overdue account which related to engineering services supplied by the plaintiff at Wayville, South Australia in 1994. On 5 October 1995 the defendant filed a defence and counterclaim. The defendant denied that he was indebted to the plaintiff as claimed or at all.
In the counterclaim the defendant claimed the sum of $30,000 which essentially related to a claim for loss of profits as a result of a delay with respect to the date on which the truck could be registered and used by the defendant for the purpose of earning income. This was as a result of the plaintiff’s refusal to provide further assistance to complete the work for which he had been contracted. At a directions hearing held on 3 November 1995 the plaintiff attended in person and the defendant attended with a solicitor. An order was made for discovery by 1 December 1995 and a conciliation conference was listed for hearing on 18 December 1995. The matter did not resolve and it would appear that the trial of the action was listed for hearing on 16 April 1996. On 12 April 1996 an application was filed by the defendant seeking an order that the action be adjourned from 16 April 1996 for a period of one month. On 15 April 1996 an order was made that the trial be adjourned from 16 April 1996 and to be re-listed. On the same date the magistrate ordered that the defendant at trial be dux litis. The action was subsequently re-listed for hearing on 20 June 1996.
On the 2 May 1996 the defendant’s solicitors filed an application for leave to amend the defence and counterclaim. The defendant’s solicitor Mr Kahl filed an affidavit sworn on 27 May 1996 in support of this application.
On 7 June 1996 an order by consent was made to amend defence and delete the counterclaim.
On 12 June 1996 the amended defence was filed. The defence is in the following terms:
“1.... The defendant denies that he is indebted to the plaintiff in the sum of $5,513.68 or at all.
2..... The plaintiff and the defendant entered into an oral contract in or about the month of February 1994. In entering into this contract the defendant acted as agent for Cleanpeace Pty Ltd (ACN 063 495 947), however the defendant did not inform the plaintiff that he was doing so. All actions of the defendant as set out in this defence were carried out by the defendant in his capacity as a director of and agent for Cleanpeace. The terms of the said contract were, inter alia:
(a)..... that the plaintiff would design a properly functioning steering system (hereinafter called ‘the steering system’) to steer an additional pair of wheels (hereinafter called ‘the extra wheels’) which the defendant wished to add to a truck which he had the opportunity to purchase;
(b)..... that if the defendant elected to purchase the truck and add the extra wheels to his truck the plaintiff would provide whatever documentation was required by the Department of Transport to enable the truck to be registered with the extra wheels fitted and with a Gross Vehicle Mass of 28 tonne;
(c)..... that the plaintiff’s charges for all services described in (a) and (b) above would be $700.00; and
(d)that the design to be provided by the plaintiff as aforesaid would be such that the power steering box already fitted to the truck would provide adequate power to steer the truck after the extra wheels had been fitted.
3..... In or about the month of March 1994 the plaintiff presented the defendant with an account for the sum of $544.00 for portion of the work described in paragraphs 2(a) and (b) above which account the defendant paid.
4..... In reliance on the contract as described in paragraph 2 hereof the defendant purchased the said truck and has invested substantial amounts of time and money in improving the truck.
5..... The defendant admits that the plaintiff has provided the defendant with a design for the steering system and has fabricated some of the components of that design and supplied the same to the defendant. The defendant says that the said design and some of the said components are defective and that the plaintiff has failed to modify the said design and components to overcome the defects. The said design and components are defective in that:
(a)..... the drag link sometimes fouls against the lever fixed to the right wheel with the consequence that the steering jams;
(b)..... the design and/or components cause severe steering wobble when the speed of the truck reaches approximately 80 km/h.
(c)..... the extra wheels oversteer on both right and left turns, and there is greater oversteer on right turns than on left turns.
6..... Further the defendant says that the plaintiff is in breach of the terms of the said contract in that:
(a)..... the power steering box of the truck does not supply adequate power to steer the truck;
(b)..... even if the extra wheels and the steering system functioned properly the maximum Gross Vehicle Mass of the truck fixed by the Department of Transport would be approximately 14.0 tonne, which is not adequate for all of the purposes of the defendant’s business.
7..... The defendant attempted to contact the plaintiff by telephone to discuss the defects in the design of the steering system on several occasions during the period of three months from late May 1994 onwards but it was not until early September 1994 that the plaintiff agreed to meet with the defendant. Up until the happening of that meeting the defendant was expecting the plaintiff to provide further design services to rectify the said defects, but the discussion which took place during that meeting made it clear to the defendant that the plaintiff would not provide any further assistance without receiving payments in excess of that referred to in paragraph 2(c) hereof.”
The matter eventually came on for trial before a magistrate on 20 June 1996. At that time Mr Kahl appeared and sought leave to withdraw as counsel for the defendant. The application was granted. The defendant did not seek a further adjournment to instruct alternative counsel and the matter proceeded to trial. In accordance with the earlier order making the defendant dux litis, the defendant then gave evidence and was cross-examined by the plaintiff’s solicitor. In addition an engineer Mr Peter Gilsmore gave evidence on behalf of the defendant, as did Mr James Caruso, a partner of the defendant in the Cleanpeace business. At the conclusion of Mr Caruso’s evidence the matter was adjourned to 22 August 1996.
In the interim the defendant ordered a copy of the transcript of the evidence and applied for a remission of fees. Another magistrate granted that application but ordered that the matter be removed from the trial list for 22 August 1996 and be adjourned to 4 November 1996. On that date the matter was further adjourned until 31 January 1997 due to the medical incapacity of the defendant. In the interim, the defendant instructed new solicitors. On 7 January 1997 those solicitors filed an application in which the following orders were sought:
1....... That the defendant be given leave to file and serve a counterclaim in this matter.
2.That the defendant be given the opportunity to give and call further evidence in relation to the counterclaim.
3....... That James Caruso and the company Cleanpeace Pty Ltd be joined as defendants to the proceedings.
4.That James Caruso and the company Cleanpeace Pty Ltd be given to file and serve a counterclaim or claim against the plaintiff.
5....... Such further or other orders as is this honourable court deems fit.
That application was eventually listed for argument before the magistrate who had been conducting the trial. Both parties were represented by counsel. The application to amend was vigorously opposed. It appears that the basis of the application to amend was to return to the assertion that the defendant was at all times acting as an agent for Cleanpeace Pty Ltd but to reassert that the plaintiff knew, or should have known, of the agency arrangement.
When giving his reasons with respect to the issues which arose in the trial, the magistrate referred to this application and said that the factors relevant to his refusal of the application to amend were as follows:
“1..... The application to amend was to express a position in complete contradiction to a point earlier taken on the defendant’s application to abandon his original counterclaim. In support of his application on that occasion his lawyer had asserted that his instructions were that the agency arrangement was never revealed to the plaintiff’s representatives.
2.That the matter had already occupied one day of trial and the defendant had called evidence been examined and cross-examined and had effectively closed his case.
3....... That although delays might be compensated for in costs there had already been substantial delays (three adjournments of trial dates on applications by the defendant).
4.The joining of further parties would only complicate the issues and require all previous witnesses to be recalled to be examined and cross-examined in far more detail than within the limited scope of the dispute as it stood at 20 June 1996.
5....... The plaintiffs claim was not a large claim by any means - barely more than a minor civil action yet the costs associated with further adjournments and the need to further examine, cross-examine witnesses and for further expert testimony to be placed before the court on the issues proposed to be ventilated by the counterclaim would far exceed the amount in dispute. In weighing up the question of those likely costs it was not insignificant that the defendant’s first firm of solicitors had ceased to act on the basis the defendant expressed inability to pay a lawyer for the costs of representing him at trial. Further the defendant had sought a remission of fees to purchase the transcript for the one day of evidence that had already been taken.”
Following the refusal to further amend the pleadings, the trial of the action recommenced before the magistrate on 31 January 1997. On that date Mr Kourakis appeared as counsel for the defendant. Mr Kourakis made an application to recall witnesses from the hearing on the 20 June 1996. The magistrate reserved his decision as to that matter until evidence was heard from the plaintiff. Mr Potts was the managing director and principal consulting engineer of the plaintiff company and the determination of the terms of the contract primarily turned on negotiations between Mr Potts, on behalf of the plaintiff, and the defendant, John Papalia. Mr Potts gave evidence and was cross-examined by Mr Kourakis.
At the conclusion of Mr Potts’ evidence, Mr Kourakis renewed his application to recall witnesses. The application was rejected and the matter was adjourned to Friday 7 March 1997. On 7 March 1997 no application was made by Mr Kourakis to recall Mr Potts but an application was made to amend the defence in order to raise the issue as to the contracting parties.
This application was based on evidence given by Mr Potts to the effect that the company name had been disclosed to him. As I have mentioned, the application was opposed and was refused. Mr Kourakis then called Mr Marrone, an engineer, to give further evidence on behalf of the defendant. At the conclusion of his evidence judgment was reserved.
The magistrate delivered judgment on 30 April 1997. He found the defendant liable to pay the plaintiff the sum of $3,446.80 in respect of an invoice number S/01/94404V3 printed on 10 May 1994 and the sum of $2,066.88 which sum related to the manufacture of twin steer components and was contained in an invoice rendered to the defendant on 31 May 1994. He entered judgment for the plaintiff in the total sum of $5513.68.
In this appeal the defendant seeks an order that the decision of the magistrate be set aside on the basis that he made errors of law and fact. The basis upon which it is said that the magistrate erred are that:
“1..... he applied the wrong legal test in determining the terms of the contract between the parties and, in so doing, over-looked or failed to take into account relevant evidence, resulting in further errors affecting his findings as to the terms of the contract;
2.he erred in the exercise of his discretion as to whether he should have allowed cross-examination concerning the company Cleanpeace Pty Ltd and amendment of the defence; and
3....... he erred in allowing the defendant to give evidence first and in not making sufficient allowance for that fact in his reasons for judgment.”
The magistrate in his reasons set out the facts he found as follows:
“The plaintiff company is involved in business as an automotive engineer. Mr William Douglass Ridley Potts (Doug Potts) is its director and principal consulting engineer. Mr Potts has considerable experience in the design and modification of automotive componentry. His company holds a number of certifications including that as a ‘recognised engineering consultant for commercial vehicles’ from the South Australian Department of Transport. The plaintiff company (ie Mr Potts) is recognised as competent to submit engineering reports on all aspects of automotive construction and is thus familiar with the complex design rules which must be complied with before a vehicle will be accepted for registration by the South Australian Department of Transport.
Mr Papalia and his partner Mr Caruso had apparently conceived the idea of developing a medium sized truck to be utilised in the rubbish removal business and a medium truck would permit access to limited spaces which might be prohibited to a larger truck and therefore Mr Papalia believed customers would see an advantage in being able to place their rubbish skips at a point to suit their convenience. A medium truck could obtain access to move in confined areas. Some market research apparently supported the development of such a concept.”
The magistrate then went on to discuss “The Plaintiff’s Evidence of the Contract”. This consisted of an analysis of the evidence given by Mr Potts, as to the various meetings he had with Mr Papalia and the discussions that took place on each of those occasions. He then discussed the evidence of the defendant, which included the evidence of Mr Papalia, which was in substantial conflict with that of Mr Potts. He also referred to the evidence of Mr Caruso and the evidence of Mr Gilsmore. Much of this evidence related to the issue of whether Mr Potts had been contracted to obtain an increase in the gross vehicle mass (GVM) of the defendant’s truck. This was a significant issue as the defendant’s case was that he relied on Mr Potts’ representation that 28 tonnes was achievable with his truck and he would not have proceeded had he been informed of the difficulties which Mr Gilsmore later identified.
The defendant also maintained that at no time did he ever discuss with Mr Potts an hourly rate of charge. He said that in their first telephone discussion Mr Potts mentioned that he had recently done a similar design which had cost in the order of $600 to $700 and that, having made it clear to Mr Potts that the proposed design work was for the purpose of having the axle twin steer system approved by the Department of Transport, Mr Potts had suggested that the work could be done for $600 to $700.
In his reasons under the heading “Resolution of the Issue”, the magistrate went on to say:
“Wherever there is a conflict on the evidence between Mr Potts on the one hand and Mr Papalia and Mr Caruso on the other I indicate that I overwhelmingly prefer the evidence of Mr Potts.”
He accepted that Mr Potts, in the first telephone conversation, may have intimated that he had done a job earlier that had cost in the range of $600 to $700, but he accepted that Mr Potts was then referring to a task which was far less substantial than that he faced when he came to the workshop to see what equipment the defendant already had to fit as a second axle. He further said:
“What is clear is that Mr Potts was obliged to design a system which was not then available.
Contrary to the evidence of Mr Papalia and Mr Caruso I am satisfied that Mr Potts did indeed advise that his company charged at the rate of $68 an hour for engineering design and Mr Pott’s technical expertise and at a lesser rate for manufacture and trades work. I am quite satisfied that the defendant knew this from the time of their first meeting. I am also satisfied that at their first meeting Mr Potts was instructed to proceed with investigation as to available systems and was ultimately instructed upon advising that no suitable system was available to proceed with the design of a system.
Contrary to the evidence for the defendant I am satisfied that Mr Potts did not represent that the fitting of a second axle would itself permit an increase GVM to 28 tonne. I accept Mr Potts explanation that if the issue was raised it was in the context of a potential increase and Mr Papalia made it clear that throughout the course of further discussions on the project that Mr Potts should confine his considerations to the question of the steering mechanism.”
Mr Tokley, who appeared as counsel for the appellant, in careful and detailed submissions, submitted that the magistrate had fallen into error by considering that he could ascertain the terms of the contract by preferring one person’s evidence to another, instead of ascertaining what objectively had been represented by the parties to each other. He also criticised the magistrate for putting to Mr Potts the very question which he had to determine. This criticism related to the following passage of evidence (Tr p92):
“Q..... ...- what was the agreement that was reached between yourself and Mr Papalia at the first meeting, what were you to do.
A.Do a feasibility study of his additional axle. I was to go away and return with a recommendation of how he could fit a steering system.
Q.... Whether he could source the componentry from manufacturers or whether it would have to be manufactured by you or another engineer.
A.Yes, and what I expected to do and in fact did was to identify what angles the second axle would have to - what angles the wheels on the second axle would have to turn through to make the steering viable and that would include determining the length of a steering arm and the position of that steering arm, and there were matters that I addressed in preparation for our meeting on the 10th, and in fact it was through doing that preparation, that it became obvious that the - this larger steering system for a larger truck wasn’t going to be appropriate, so that I had completed my first requirement but it was a negative result.” (emphasis added)
Mr Tokley argued further that not only had the magistrate adopted an erroneous approach to the ascertainment of the terms of the oral contract, he had thereby failed to give any or sufficient weight to the contemporaneous written documents relating to these issues.

Mr Tokley referred to a hand-written note of Mr Wirtitsch (an employee of the plaintiff) at the first meeting with Mr Papalia. This described the job as:
“Steering Components
eg: Pitman Arm
Steering Arm
Design
5T truck with lazy axle
GCM IIT
16” wheel”.
Further down the memo was noted “Could we design comp req’d either make or have them made. Cost”. Mr Tokley also referred to a document completed by Mr Potts which is dated 14 April 1994 and is entitled “Modification and Registration Requirements”. On the top of this document is noted three items, viz
“1.     Fitment of Twin Steer Axle;
2.     Fitment of air over hydraulic brake activator;
3.     Increase in GVM.”
The document thereafter refers to eleven other items. Attached to it is an application form under the heading of “Department of Road Transport” which is described as an “Application to modify a Commercial Motor Vehicle”. The evidence established that this document took about an hour and a half to complete. On the defendant’s case this clearly went against the evidence of Mr Potts that it was not part of his engagement to submit an application form to the Department of Road Transport with respect to GVM. If he had not been so instructed, there was no reason for him to spend so much time with Mr Papalia taking details and making the appropriate calculations.
The third document was a letter dated 23 August 1994, from Mr Potts to Mr Papalia which is described as being “Re: development and certification of your twin steer International truck” which includes the comment:
“I have reviewed your project and I am concerned at the level of work that is required before we could submit an engineering report to the Department of Road Transport.”
It then goes on to include an estimate of the cost of reporting and testing as between $5,000 and $6,000 and raises concerns about the non-payment of the account at that stage.
Mr Tokley argued that if the contract had ceased before that date, the letter would not have been set out in those terms. If Mr Potts was only concerned about the payment of the account in August 1994, there was no need for him to discuss the amount of work that had to be completed before a report was submitted. On the defendant’s case, the letter could be categorised as a concern by Mr Potts about the amount of work that had to be carried out by his company before a submission could be made to the Department of Road Transport. This document included a reference to gross vehicle mass and was therefore consistent with one of the terms of the contract described by the defendant. It showed that the plaintiff was engaged to present a written submission to the Department of Road Transport for an increase in gross vehicle mass.
The last document referred to Mr Tokley was a facsimile transmission from Australian Technology Pty Ltd dated 7 October 1994. That is headed “Re Gross Vehicle Mass” and says:
“Attached is the chart, or at least one of them that we use to justify GVM. In your case, the limits are:-
Twin steer 11 tonnes
8 wheels 16.5
27.5 tonnes
However, the axles, tyres and chassis must also be made compatible with this.”
Mr Tokley made detailed submissions which included a resume of aspects of the evidence of Mr Potts which he suggested were inconsistent and showed him to be unreliable, particularly with respect to the topic of GVM. He also complained that the magistrate failed to take into account the evidence of Mr Marrone who said that he had not been asked by Mr Papalia to establish the vehicles GVM, and all of the evidence pointed to Mr Potts being the expert engaged for that purpose. Accordingly, the magistrate had not used the advantage of seeing the witnesses and his findings, especially his failure to refer to Mr Marrone’s evidence, could be set aside: Abalos v Australian Postal Commission[1].
[1] (1990) 171 CLR 167 at 178
Mr Jamison, who appeared for the plaintiff, however, criticised the manner in which the defendant gave evidence. He submitted that the defendant contradicted himself, was contradicted by documentary evidence, and withheld evidence when giving discovery, had failed to keep or disclose any contemporaneous records of the evidence, showed poor understanding of the legal entities with which he traded, had a poor understanding of the technical issues associated with modifying the heavy vehicle, and presented no documentary evidence in support of his principal claims.
Mr Jamison submitted that the contemporaneous records supplied by Mr Potts were consistent with his evidence which was to the effect that he had a concern that Mr Papalia was not addressing this issue of GVM. His evidence was to the effect that on three occasions he had attempted to explain to Mr Papalia how the GVM for his vehicle would be established but on each occasion, Mr Papalia indicated that he had another engineer dealing with the matter and this was not Mr Potts’ concern.
Mr Potts said that he became frustrated because the design of the steering arm had to comply with the GVM that the defendant, in conjunction with his engineer, was trying to achieve. Mr Potts’ explanation for the completion of the lengthy Department of Transport form was that it was an effort by him to focus Mr Papalia’s mind on what had to be done as he was concerned about his failure to implement necessary matters.
He described the letter dated 23 August 1994 as simply another effort to draw Mr Papalia’s attention to the size of the project. It was an endeavour to clarify what seemed to be misguided information that Mr Papalia was getting from the other engineer. Mr Pott said that he also sent a copy of the Department of Transport limits to clarify the point but still had no involvement at all in either suggesting or prescribing limits to him, he was simply clarifying what the Department of Transport upper limits were.
Having read the evidence, I must say there are aspects of it which I find confusing. It is surprising that Mr Potts spent so much time with Mr Papalia filling out the Road Transport form if it was not a part of his contract to make such an application. Mr Potts’ explanation that he did this as a result of his concern that this was not being addressed by Mr Papalia was, however, accepted by the magistrate and the written documents are not inconsistent with that evidence. Mr Potts gave evidence over a number of days and was cross-examined closely by Mr Kourakis as to these various matters.
The magistrate was clearly impressed by Mr Potts as a witness of truth. He did not believe Mr Papalia. His comment that he preferred Mr Potts to Mr Papalia reflected his assessment of the credibility of the two crucial witnesses in the case. I do not consider that the magistrate abrogated his responsibility of determining the terms of the contract by reason of the question addressed to Mr Potts in the course of his evidence. Read in context, all the magistrate was asking Mr Potts, was to give evidence as to the discussions which took place on that occasion. In my view, the magistrate was in the best position to assess the credibility of the witnesses. He also appears to have undertaken a careful analysis of all of the evidence in the case.
Although the magistrate, in his reasons, did not refer to the evidence of Mr Marrone, I do not think that alters the situation as Mr Marrone had little to add to the matter. All he said was that he had not been asked to calculate the vehicle’s GVM. This was not necessarily inconsistent with the evidence presented by the plaintiff which was accepted by the magistrate.
In my view, the defendant fails with respect to this ground of appeal.
The second error complained of by the defendant relates to the refusal by the magistrate to permit cross-examination of Mr Potts about his knowledge of the company Cleanpeace Pty Ltd and not allowing an amendment of the defence to plead that issue. In my opinion, this ground of appeal cannot be sustained. I have set out the history of the matter as it progressed to trial and the magistrate’s reasons for refusing to amend. As he said, the proposed amendment was such as to express a position in complete contradiction to a point earlier taken on the defence application to abandon his original counterclaim. The defendant’s own lawyer had stated in his affidavit, sworn on 27 May 1996, in support of the application to delete the counterclaim, viz:
“... the defendant did not make it clear to the plaintiff that the plaintiff was entering into a contract with Cleanpeace Pty Ltd”.
I do not consider the fact that Mr Potts knew of the existence of the company or the fact that the appellant had signed on a company cheque when making payment was sufficient evidence to prove that Mr Potts was on notice that the defendant was acting as an agent for Cleanpeace, up until the time of entering into the contract.
The trial was already underway when the application was made to amend and the plaintiff would have prepared its case on the basis of the pleadings as they stood at the commencement of the trial. It would have been unfair and potentially prejudicial to permit the amendment at such a late stage. I consider that the magistrate correctly took into account all relevant matters in refusing the application to amend the proceedings and in refusing to permit cross-examination of Mr Potts about his knowledge of Cleanpeace.
The third ground of appeal complains of the procedure adopted, whereby the defendant was required to present his case first. The order that the defendant proceed as dux litis was, however, made at a time when the defendant was represented and it would seem to have been a suggestion made by his own legal advisers. On the situation that then existed, this would appear to have been a practical approach to the conduct of the litigation. The magistrate was faced with a plaintiff suing for a simple debt. The substantive issues arose on the defendant’s defence. It was for the defendant to say why he should not have to pay the debt. Until that evidence was given the plaintiff would not know what case he had to confront. The defendant may well have suffered some disadvantage as a result of having to give his evidence in the absence of a solicitor, but any such disadvantage was overcome by the approach taken by the learned magistrate throughout the trial.
When the case resumed for the second day of the trial, the defendant was represented by Mr Kourakis of counsel. He asked for leave to re-open the defendant’s case. Leave was granted and the defendant was allowed to tender evidence and call further witnesses after the plaintiff had closed its case. In those circumstances, I do not think that there was any prejudice occasioned to the defendant by this procedure which would warrant this court to interfere on appeal.
In my opinion, the appeal should be dismissed.

[1998] SASC 6828

2 September 1998