Bamford v Pozenel No. Sccrm-00-1318

BAMFORD v POZENEL
[2001] SASC 132
Magistrates Appeal

WICKS J This is an appeal against a judgment of a Magistrate given on 17 October 2000 in favour of the plaintiff in the sum of $30,000 plus interest of $1,750 making a total amount of $31,750. The defendant was ordered to pay the plaintiff’s costs of the action to be taxed.
Evanston Gardens Child Care Centre
The defendant owned and conducted a child care centre known as the Evanston Gardens Child Care Centre (“the Centre”). The premises were situated at 19 Milne Road, Evanston Gardens. They were licensed as a Child Care Centre under s 25 of the Children’s Services Act 1985 with the defendant named as licensee. The licence was initially for a period of one year from 30 September 1997. However, by an amendment to the Act that came into effect on 16 April 1998, the period of one year was extended to two years. Thereafter, the licence in respect of the Centre would be for the duration of two years rather than one year.
The plaintiff was a qualified child care worker. She came to work for the defendant as a person with qualifications and worked for the defendant as a level four child care worker, a level that requires the holder to have certain qualifications under the Children’s Services Act or regulations thereunder.
There is some dispute over when the plaintiff commenced to work for the defendant but the differences in date are not material for the purposes of this appeal. The position occupied by the plaintiff with the defendant was a part-time position under which the plaintiff worked at the Centre for two days in each week. Prior to working for the defendant, the plaintiff was employed at the Salisbury North Child Care Centre as a level 5 child care worker. A child care worker of this level was also required to have suitable qualifications.
Agreement on taking over the Centre
The plaintiff expressed some interest in managing a child care centre. She thought that it was a good business and that she would like to do something like that herself one day. In response the defendant asked whether the plaintiff would be interested in buying the business of the Evanston Gardens Child Care Centre but the plaintiff explained that she did not have the money. Nothing further was said at that time but shortly afterwards the defendant approached the plaintiff with a suggestion that she might be interested in leasing the building and the business for a period of twelve months or so or whatever period the parties could agree upon. There were discussions about the rent that would have to be paid for the building and the business. A figure of $200 per week was agreed upon.
A bond was also settled on to act as a “security against breaking of the lease, damage to paint work, light shades, equipment, fridge etc”. The figure agreed upon was $5,000. The plaintiff was in no position to pay this at once. There was to be a payment to the defendant of $2,000 at once followed by three instalments of $1,000 per month payable thereafter.
The question of expenses was also discussed and it was agreed that all outgoings of the business except for council rates were to be paid by the plaintiff. Receipts were kept for all purchases including food and other requisites for the children.
The plaintiff had a partner known as Pedro Mujica. It was agreed that they would both be party to the arrangements. Apart from being named in the lease agreement as a party thereto, Mr Mujica does not appear to have been involved in this matter. In particular, he is not a party named in the action and, and, in particular, in the pleadings. I propose to ignore him in these reasons.
A form of leasing agreement was then signed and dated 30 March 1998. A copy of the document is set out in full:
"LEASING AGREEMENT
I Amie Rebecca Bamford along with my partner Pedro Jose Mujica will be leasing the Evanston Gardens Child Care Centre from Marisa Pozenel from April 1^st 1998 until April 1^st 1999.
This will be at the cost of $200 per week paid in advance, with an initial bond of $2000, and $1000 to be paid at the end of each month until a total of $3000 is paid, this will mean that Marisa Pozenel will receive a $5000 bond by the end of June 1998. This bond is a security against breaking of the lease, damage to paint work, light shades, equipment, fridge etc.
This bond will then be returned to the lessee at the end of the leasing period, on condition that the child care premises are returned to the lessor in the same condition in which they were received. This includes both the building and the equipment within the centre. (See inventory attached.)
During the leasing period all responsibilities regarding the running of the centre, payment of insurance $1034, water, electricity, phone, internal and external maintenance will be for Amie Bamford and Pedro Mujica to meet. Marisa Pozenel will not be required to meet any of the responsibilities associated with the centre if she does not choose to do so. However, Council rates will be paid by the lessor.
The lease is confined to the centre fenced off as defined to meet D.E.T.E.’s requirement. It does not include the bulk of the land nor the green garage at the back.
Signed:
[signed] [signed] [signed]
Amie Bamford Pedro Mujica Marisa Pozenel
Dated: 30-3-98"
It is clear that the written lease agreement was not a complete record of the agreement between the parties. The agreement was also partly oral and partly implied. As from the date upon which the plaintiff took over the Centre, all contributions from parents for child care were paid directly to her. Payment of the periodic subsidy received from the Commonwealth was subject to different arrangements. That matter will be discussed later in these reasons.
It was common ground between the parties that the defendant would transfer the licence issued under the Children’s Services Act to the plaintiff as soon as possible. The agreement must be taken to have been subject to an implied condition subsequent that DETE would approve the transfer of the licence to the plaintiff. In turn, the defendant must be taken to have given an implied promise as a term of the agreement to use her best endeavours to ensure that the transfer would be approved within a reasonable time. These terms were either oral or implied. I need not determine which.
In implying terms of the kind referred to, one should have regard in the first place to the general duty of co-operation which is implied in all contracts. The following statement of principle was approved by Mason J in Secured Income Real Estate (Australia) Limited v St Martin’s Investments Pty Ltd (1979) 144 CLR 596 at p 607. The statement was as follows:
"It is a general rule applicable to every contract that each party agrees, by implication, to do all such things as are necessary on his part to enable the other party to have the benefit of the contract: Butt v McDonald (1896) 7 QLJ 68 per Griffiths CJ at p 70-1."
The same statement was approved by Dawson J in Hospital Products v United States Surgical Corporation (1984) 156 CLR 41 at pp 137-138.
In Cheshire and Fifoot’s Law of Contract, 7^th Australian Edition, the following statement appears in par 10.41:
"In the absence of contrary agreement, each party to a contract must comply not merely with the letter of the contract, but act with due regard for the objective to which the contract is directed ..."
In my opinion, these principles are applicable in relation to the terms of the agreement between the parties the subject matter of these reasons.
The Commonwealth subsidy
From a perusal of the evidence, it was common ground between the parties that the Commonwealth subsidy in relation to the Centre received by the defendant would be accounted for by the defendant to the plaintiff in respect of the running of the Centre while in the hands of the plaintiff.
The parties were not in agreement as to when the Commonwealth subsidy was payable by the defendant o the plaintiff. The plaintiff said that it was payable on receipt of the amount in question by the defendant at the beginning of the month in which it was paid by the Commonwealth. On the other hand the defendant maintained that she was not required to account to the plaintiff in respect of the Commonwealth subsidy before the end of the month in which it was paid by the Commonwealth. For the purposes of these proceedings, there is no need to determine which version of the facts is correct. On any view of the matter, the Commonwealth subsidy referred to has long since become due and payable by the defendant to the plaintiff.
The amount of the Commonwealth subsidy was based on the average payment per month in the previous quarter. There was then an adjustment at the end of the quarter and the adjusted figure was used as a basis for the monthly amounts paid in advance in the next quarter. The Commonwealth had an arrangement with the defendant under which payments of Commonwealth subsidy were made directly into a nominated bank account of the defendant as the proprietor of the Centre. It was common ground that the subsidy payments were essential to a viable business. They amounted to almost 75% of the revenue of the Centre. According to the plaintiff, it was also agreed that the Commonwealth subsidy in relation to children using the Centre would become payable to the plaintiff in lieu of the defendant. While this was undoubtedly the position, it could not occur until the licence in respect of the Centre had been transferred.
The amounts received by the defendant on account of the Commonwealth subsidy were $3,257 paid on 1 April 1998, $2,443 paid on or about 1 May 1998 and $1,331 paid on or about 3 August 1998. The total payment of Commonwealth subsidy was $7,031.
The monthly rental in respect of the Centre was paid by the plaintiff and the defendant together signing a written authorisation enabling the defendant to treat the moneys concerned as being no longer part of the Commonwealth subsidy for which the defendant must account to the plaintiff. Such amounts became moneys in the bank account held by the defendant for her own use and free of any claim thereon on the part of the plaintiff. The total payment on account of rent was $1,600. It should have been $1,800, that is, in respect of nine weeks at $200 per week.
The only other payment received by the plaintiff from the defendant on account of the Commonwealth subsidy was an amount of $1,068 received from the defendant on 5 May 1998. This payment was applied to meet an insurance premium in relation to the Centre of $1,034. The plaintiff contends that an additional amount of $1,000, being a payment on account of the bond, was included in the payment in question but this is denied by the defendant. The fact that such payment had been made is not supported by any documentary evidence. At this stage it does not matter whether the amount of $1,000 concerned remains as part of the Commonwealth subsidy or whether it is treated as part of the bond moneys. In either case the amount in question should be treated as belonging to the plaintiff. There was $34 outstanding in respect of the payment of $1,068. How this was to be is not explained in the evidence.
Refusal to approve transfer of licence
On 26 March 1998, an application for the transfer of the defendant’s licence in respect of the Centre was prepared and signed by the defendant. The document was also signed by the plaintiff as the transferee of the licence.
Regulation 16 of the Child Care Centre Regulations 1985 provides that “[T]he Director before granting an application for transfer of a licence shall take into consideration the suitability of the proposed transferee and may grant or refuse the application subject to such conditions as he thinks fit”.
On 23 January 1998, the Executive Director, Children’s Services of the Department of Education Training and Employment (“DETE”) wrote to the defendant in the following terms:
"Dear Ms Pozenel
I write to advise you that the Department of Education, Training and Employment (DETE), Children’s Services has recently received several complaints regarding the operation and facilities of your centre.
The complaints relate to a number of issues including child/staff ratios, lack of supervision, inappropriate management of children, staff hygiene practices, access to unsafe areas within the centre, limited access to equipment to be used by children and lack of appropriate programming.
These matters are currently under investigation. In due course you will be contacted by an Investigator from the Government Investigation Unit who will arrange for an interview to be conducted with yourself. At that interview the allegations will be put to you in full for your comment and/or explanation.
To ensure the safety and well being of the children attending Evanston Gardens Child Care Centre, your service will be closely monitored by officers of DETE Licensing and Standards. The monitory process will include regular unannounced visits by officers from DETE, Children’s Services, Licensing and Standards.
Yours sincerely
[signed]
Dawn Davis
EXECUTIVE DIRECTOR, CHILDREN’S SERVICES
23 January 1998."
From a perusal of the exhibits admitted in evidence in this matter, I have been unable to find any letter in response signed by the defendant before a letter of 2 April 1998. In that letter, the defendant vigorously denied the allegations and puts forward a detailed explanation as to how such allegations may have come to be made.
After the transfer of the licence was signed and before 1 April 1998, the defendant sent it to DETE. From the tone of the letters passing between DETE and the defendant, it would appear that no action to register the transfer of the licence to the plaintiff would be taking place, at least for the time being.
On 3 April 1998, DETE wrote a letter to the defendant in relation to the transfer of the licence in respect of the Centre. The letter in question may well have crossed with the defendant’s letter of 2 April 1998. In DETE’s letter of 3 April 1998 the Executive Director, Children’s Services said, so far as is material:
"This matter has been given careful consideration in view of the fact that serious allegations against you as licensee of the Evanston Gardens Child Care Centre are currently under investigation. I am prepared to accept a licence transfer on the condition that you are not involved in the operations of the centre in any way nor present at the centre during the operating hours of the service. Any meeting concerning the operations of the lease are to occur either off the premises or outside the operating hours of the centre.
These conditions will be conveyed to the new licensee and any breach could result in the licence being cancelled.
...
Following receipt in writing of your agreement to the transfer proceeding on the above conditions, I will progress the application. I enclose a document for you to sign and return should you so agree."
Thus, the defendant became aware of the fact that DETE would only approve a transfer of the licence to the plaintiff on the condition that the defendant was not involved in the operation of the Centre in any way nor present on the premises during the operating hours of the child care service.
The defendant sent a further letter to the Department on 6 April 1998 in the following terms:
"6 April 1998
Dear Ms Davis,
Re: Evanston Gardens Child Care Centre.
I guess your registered letter was received by me at the same time that you would have received my letter.
The Statutory Declaration that you are inviting me to sign is befitting a person with a criminal record; not a professional person with a proven record of integrity.
I would like you to consider what I stated in my letter, as it still stands.
Awaiting to hear from you.
Yours faithfully
[signed]
Marissa Pozenel"
DETE responded by letter to the defendant dated 14 April 1998. The part of the letter which is material to the question of the transfer of the licence read as follows:
"Due to the number and nature of the allegations made against you I have also been considering recommending that your licence be cancelled. I would not usually consider a licence transfer where there is a possibility of that licence being cancelled, however, in your case I have decided to progress the transfer only on the understanding that you have no further involvement with the Centre. Should you wish to proceed with the transfer you will need to sign and return the Statutory Declaration as provided in my correspondence of 3 April 1998.
Yours sincerely
[signed]
for Dawn Davis
EXECUTIVE DIRECTOR, CHILDREN’S SERVICES
14 April 1998"
DETE’s letter of 14 April 1998 made the position perfectly clear. If the required statutory declaration were not provided, the transfer of the Centre to the plaintiff would not be approved.
The plaintiff spoke to the defendant on a number of occasions to ascertain what was happening about the transfer of the licence. This was critical to the plaintiff having direct access to the Commonwealth subsidy as the Commonwealth would only pay the subsidy into a nominated bank account of the licensee for the time being. In or about late April or early May 1998, the plaintiff telephoned DETE and spoke to Ms Helen Leo. In the conversation with Ms Leo, the plaintiff asked her why it was taking so long to receive correspondence in regard to the transfer of the licence. Ms Leo replied that she had had correspondence with the defendant and that DETE would only approve a transfer of the licence to the plaintiff on certain conditions but that she could not tell the plaintiff of those conditions because they were confidential.
As soon as the plaintiff had spoken to Ms Leo, she went to the defendant and questioned her about the matter. The plaintiff said that DETE had received something but they could not inform the plaintiff of what was happening. The defendant replied that she had received a letter from DETE saying that they would approve a transfer of the licence to the plaintiff on condition that the defendant would agree that she would have nothing further to do with the Centre. The defendant made it known to the plaintiff that she would not be prepared to accept any condition on the transfer of the licence to the plaintiff.
Closing of the Child Care Centre
In early May 1998, the parties gave consideration to closing the Centre on 11 June 1998. The plaintiff’s reason for doing so was that without the payments of the Commonwealth subsidy in hand, she was unable to meet the expenses of the Centre promptly. The plaintiff and her partner, Mr Mujica, approached the defendant and explained that if they were not to receive the money from her that she had received from the Commonwealth, the plaintiff would not be able to continue running the business. The defendant replied: “Okay, fine, we will close the child care centre”. In view of the state of the relationship between the defendant and DETE, an impasse had been reached. The defendant really had no choice but to agree to the closure of the Centre.
According to the plaintiff, it was agreed that on return of the keys and closing everything up, the plaintiff would be paid the remaining moneys that the defendant owed her. The parties set about preparing a letter to be signed by them jointly addressed to the parents of the children attending the Centre. This letter did not tell the whole story, but as it was signed by both the plaintiff and the defendant, there would be no good purpose served in closely examining its terms. The important thing to observe is that the letter notified parents that the Centre would be closing on 11 June 1998. The letter was dated 12 May 2001 and would have been sent to parents on or about that date.
Although the letter referred to the closure of the Centre on 11 June 1998, in fact, the Centre was closed on 3 June 1998 for to two reasons. First, the plaintiff had run out of money and was not able to afford to buy groceries or other items for the Centre. Secondly, the defendant had started taking some of her things from the Centre such as the television set and videos so that there was not much left for the children to do on attending the Centre at that time. The defendant also took various toys and equipment that belonged to her. In view of the early closure, the plaintiff contacted the parents to point out to them that she had to close early.

On 4 June 1998, the plaintiff attended the Centre in order to tidy up. She left a note saying that she would be back to do the garden and tidy up the last few things on the weekend and that she would return the keys on the payment of the money that was owed to her. However, when she returned to the premises she discovered a letter on the door saying that all the locks had been changed. Two days later the plaintiff approached the defendant about the moneys due to her. The defendant refused to pay any money and said that she wanted a written apology. It is understood that the apology related to the closing of the Centre earlier than had previously been arranged. The plaintiff then left and later asked the defendant for her things but the defendant declined to hand them over. The plaintiff approached the police later that day and accompanied them to the premises but the defendant was not at home. The plaintiff was eventually able to recover her things with the assistance of the police. No money was paid by the defendant.
Breach of contract
Although a contract may be subject to a contingent condition of performance, a party may nevertheless have agreed to use its best endeavours to bring about the fulfilment of such a condition. If there has been a failure to use best endeavours to bring about the fulfilment of the condition and from such failure the other party is deprived substantially of the benefit of the contract, the other party is entitled to elect to terminate the contract in the sense that it comes to an end prospectively. Fully accrued obligations remain unaffected: McDonald v Dennys Lascelles Ltd (1933) 48 CLR 457 and Cheshire and Fifoot’s Law of Contract 7^th Australian Ed: par 20.7. In McDonald v Dennys Lascelles Ltd, Dixon J said at pp 476-477:
"When a party to a simple contract, upon a breach by the other contracting party of a condition of the contract, elects to treat the contract as no longer binding upon him, the contract is not rescinded as from the beginning. Both parties are discharged from the further performance of the contract, but rights are not divested or discharged which have already been unconditionally acquired. Rights and obligations which arise from the partial execution of the contract and causes of action which have accrued from its breach alike continue unaffected. When a contract is rescinded because of matters which affect its formation, as in the case of fraud, the parties are to be rehabilitated and restored, so far as may be, to the position they occupied before the contract was made. But when a contract, which is not void or voidable at law, or liable to be set aside in equity, is dissolved at the election of one party because the other has not observed an essential condition or has committed a breach going to its root, the contract is determined so far as it is executory only and the party in default is liable for damages for its breach."
The agreement must be taken to have been subject to an implied condition that DETE would approve the transfer of the licence to the plaintiff. In turn, the defendant must be taken to have given an implied promise to use her best endeavours to ensure that the transfer would be approved within a reasonable time.
It is necessary to consider whether the defendant must be taken to have failed to honour the implied promise on her part to use her best endeavours to ensure that the transfer of the licence would be approved within a reasonable time. A promise in those terms cannot be absolute in terms. The defendant can do no more than act reasonably.
Right of termination
For there to be a right of termination of the contract, a breach must be a fundamental breach going to the root of the contract. To put it another way, the breach must deprive the other party substantially of the benefit of the contract. The plaintiff was placed in jeopardy. She was unable to secure the transfer of the licence. In view of the attitude adopted by the defendant it was almost certain that neither DETE nor the defendant would back down. In consequence, the plaintiff was unable to have access to the Commonwealth funds providing nearly three quarters of the revenue of the Centre. Without those funds it is clear that the business of the Centre would not survive long.
In my opinion, there was a breach of the contract on the part of the defendant and that breach had the effect of depriving the plaintiff substantially of the benefit of the contract. Such a breach was fundamental and went to the root of the contract. The breach occurred once the defendant had been given a reasonable time to consider her position and accept DETE’s demand. One week should be sufficient for this purpose. Thereafter, the plaintiff would have had the right to elect to terminate the contract.
Failure to exercise right of termination
The question arises as to whether or not the plaintiff did in fact exercise her right to terminate the contract. The plaintiff’s evidence in chief on the matter was as follows:
"QApart from the $1,068 at the end of May did you receive any other part of the Commonwealth subsidy from Miss Pozenel.
A No, I didn’t.
Q Did you ask her about that.
AI spoke to her on the - I couldn’t tell you the day but the day when I rang Helen Leo and I went and spoke to Mrs Pozenel about the reason why she had received correspondence and hadn’t told me what was going on. It was agreed then that she was trying to sort out whatever the prior problems were and that until it was sorted out she would just give me the money. So at the end of that month she hadn’t and I said ‘I can’t keep doing this we have to either, I have to get up the money or we have to close.’ And that’s when she said ‘Right, fine, we’ll write a letter and we’ll close the centre.’ And it was supposed to be agreed that on the return of the keys and closing everything up then I was supposed to get the remaining money that she owed me."
Evidence in chief on the part of the defendant on the topic was as follows:
"QThe amount of $2,068 has been mentioned. Do you remember that being paid to her.
AYes.
QWhen was that.
AThe very first few days in May.
QShortly after that was there a further discussion with her.
AShortly after that, soon after she got money. She wanted payment for the whole of May.
QWhat did she say.
AI think I just said that. She said she has got no money to pay all these debts and needed more money.
QWhat did she say about the carry on at the child care centre at that time.
AShe wouldn’t be able to carry on unless she had more money.
QWhat did you say when she said that.
AI refused to give her more money. I refused to give her extra money.
QAt that time.
AYes.
QDid you say when she would be paid.
AI said ‘You will get it at the end of the month when you present your form, your claim form, you will get the rest of the payment’.
QThe form was what.
AThe Commonwealth attendance record.
QWhen you told her that what did she say.
AShe said ‘I can’t carry on’.
QWhat did you then say.
AI couldn’t stop her. I had enough stresses on me. I couldn’t stop her doing that. I said ‘Okay, if that is what you want to do’."
Further evidence in chief of the defendant on the topic of closure of the Centre was as follows:
"QApart from talking about the money and the Commonwealth centre, what else did she say to you at that time. You discussed with her this question of the Commonwealth. Was there any further discussion at that time about what was to happen.
A Yes.
Q What was said by you and by her.
AShe wanted to close the centre and I was plenty upset at the Department of Education and Training not listening to what we had to say - I had to say, and we made a note informing parents that we were going to close.
QShe said that, did she.
AWe both agreed on doing that, yes, because it wasn’t fair that family day care workers were allowed to operate with more children than we were. We phoned the parents and also to hit back at the Department of Education and Training for their unfair way of dealing with people."
In my opinion, having regard to this evidence and to the joint letter which was signed by the plaintiff and the defendant, the plaintiff did not elect to terminate the agreement for fundamental breach and as one going to the root of the agreement. Instead, the parties must be taken to have terminated the agreement by mutual consent so far as it related to future performance after the closure of the Centre. In my view, the agreement remained in operation for the purpose of dealing with accrued and accruing rights and obligations up to the date of closure.
Obligation under the contract
From the evidence, it was common ground that the defendant would account to the plaintiff in respect of the Commonwealth subsidy moneys in relation to the period from 1 April 1998 to the date of the closure of the Centre. As I have said earlier in these reasons, there was some difference between them as to the time of payment. The plaintiff maintained that she was entitled to payment as soon as the moneys in question were received by the defendant from the Commonwealth. On the other hand, it was the defendant’s contention that she was entitled to retain the subsidy moneys until the end of the month in which they were received when they would be accounted for to the plaintiff provided that attendance records in respect of the Centre were completed and forwarded to the Commonwealth. Whichever version is correct, it is common ground that the attendance records have been made available to the defendant for submission to the Commonwealth and that the defendant has been paid moneys to which she was entitled as against the Commonwealth in respect of the subsidy.
The Commonwealth subsidy is money payable by the defendant to the plaintiff under the agreement between them referred to in detail in these reasons. That amount is $7,031 in total. From that amount should be deducted $1,600 paid to the defendant on account of rent payable by the plaintiff in respect of the Centre and $1,034 on account of insurance premium in respect of the Centre paid by the defendant out of the Commonwealth subsidy. The net amount is $4,197.
The bond money is also due and payable under the contract between the plaintiff and the defendant. The amount involved is $2,000. There does not appear to have been any claim by the defendant for compensation under the bond.
Counterclaim
The defendant has made a claim for wages at $431.55 per day for a period of nine weeks totalling $3,884. This claim is contested by the plaintiff. A further claim is made for $32.75 for unpaid water rates. This further claim is conceded. There is also a claim for $200 for unpaid rent. Rent which has been treated as paid has been dealt with and brought to account as part of the plaintiff’s claim.
The counterclaim appears to have been ignored by the learned Magistrate both in his reasons for judgment and in the order itself.
When the plaintiff took over the conduct of the Centre as of 1 April 1998, an arrangement was made for the defendant to work one week only. There was no arrangement for any longer period. I treat the week’s work as part of the hand-over arrangements and as being without payment.
There was no discussion about the defendant working in the Centre on a paid basis nor was there any discussion about wages payable to the defendant either when arrangements for the hand-over were being made or at any later time before the closure of the Centre. At the time when these arrangements were being made, the plaintiff had no reason to believe that formalising arrangements would take more than a few days and that it would be reasonable in that case for the previous owner and operator of the Centre to be available without payment during a running-in period. In fact, matters dragged on for several weeks until the plaintiff indicated that she could no longer carry on. One amount was paid to the defendant for wages and this was in respect of a day on or about 13 May 1998 when the plaintiff was absent from work due to illness. Apparently this was in respect of a particularly busy day. The amount payable to the defendant was $69.90. The expenditure book contains a note as follows "Wage because I was sick & M Pozenel worked for one day only." This note is strongly indicative of an arrangement whereby the defendant attended the Centre from time to time in order to keep an eye on things and, as the plaintiff said in her evidence: “to pop over and sit around and chat” and, “yes, while I didn’t ask her to come there, it actually made it quite uncomfortable for me to do what I was doing but, no, she certainly wasn’t employed. It was, yes, her own choice to come and have a look and see what was going on.” I should mention that the defendant’s home was next door to the Centre. In evidence, the plaintiff was asked: “Was there ever an agreement that you would pay Ms Pozenel for anything that she was doing when she was there?” The plaintiff replied: “Only for this day” referring to the day for which the amount of $69.90 was paid.
In relation to the payment of $69.90, the defendant wrote out a note in the following terms:
“ 13-5-1998
I Amie Bamford authorise Marisa Pozenel to withdraw $69.90 as wages for 8-5-98
Worked when Pat Beacon was sick.
(Signed) A Bamford”
The document was in the defendant’s handwriting and the signature at the bottom of it was that of the plaintiff. This was the only occasion in which the parties were in agreement as to the defendant working at the Centre. They went to all the trouble to write out and sign a document relating to the wages for this one day and yet recorded no arrangements to which the plaintiff was a party in respect of other periods of time when the defendant alleged that she was working at the Centre for wages.
Findings of the Magistrate and grounds of appeal
The learned Magistrate appears to have proceeded on the footing that the defendant was guilty of a fundamental breach of the contract going to the root of the contract, and that the plaintiff duly elected to terminate the contract and recover damages from the defendant for breach of the contract. As a fundamental breach was involved, the plaintiff would be entitled to recover damages in respect of future losses and in particular, for loss of profit in respect of the unperformed part of the contract, subject always to any failure to mitigate loss. In my opinion, the learned Magistrate erred in approaching this case in that manner.
The defendant alleged in the grounds of appeal that the learned Magistrate erred in failing to find that the parties had terminated their obligations under the agreement on or about 30 March 1998 by the entering into of another agreement on or about 12 May 1998 and that the plaintiff’s claim was therefore limited to damages. In my view, the facts of the case do not support this ground of appeal.
The defendant alleged in the grounds of appeal that the learned Magistrate erred:
(a)in attempting to resolve all differences between the version of facts put forward by the plaintiff and the version of facts put forward by the defendant merely on the basis of a finding as to credibility; and
(b)in making a general finding of credibility adverse to the defendant and favourable to the plaintiff and, in particular, in failing to properly consider objective evidence that was corroborative of the defendant’s version of events and inconsistent with the plaintiff’s version.
I agree with that contention. In my opinion, it is possible to decide this case without having to resort to adverse findings as to the credibility of particular witnesses. That is what I have endeavoured to do.
In the grounds of appeal it was alleged that the learned Magistrate erred:
(a)in finding that the plaintiff only understood that the defendant would agree to the conditions of transfer imposed by DETE “very late”;
(b)in finding that the defendant knew at the time of entering into the agreement with the plaintiff that the transfer of the licence for the Centre could only be achieved with difficulty;
(c)in finding that the defendant, recognised that she would not be in a position to transfer to the plaintiff the child care licence; and
(d)in finding that the defendant, with knowledge that she could not complete her part of the agreement, determined to withhold moneys from the plaintiff that were due to her.
In my opinion, the plaintiff was not aware of the fact that there was an obstacle to the transfer of the licence until after her telephone conversation with Ms Helen Leo in late April or early May 1998. The agreement with the plaintiff was entered into on 30 March 1998. The defendant did not become aware of the difficulty in obtaining approval to the transfer of the licence until after the defendant had received a letter from DETE dated 3 April 1998 setting out its condition of transfer. There is no evidence that the defendant was prepared to agree to the conditions of transfer in respect of the licence. DETE imposed a condition which the defendant would not agree to. As a result there was an impasse which was never really resolved.
Orders
In the circumstances:
(1) I allow the appeal.
(2) I set aside the judgment of the learned Magistrate.
(3)I give judgment for the plaintiff in the sum of $7,503 (inclusive of a lump sum in lieu of interest of $1,106).
(4)I give judgment for the defendant on the counterclaim in the sum of $272 (inclusive of a lump sum in lieu of interest of $40).
I will hear the parties as to costs.

[2001] SASC 132

27 April 2001