Brdar v Kolo No. Scciv-01-491
[2001] SASC 155
•24 May 2001
BRDAR V KOLO
[2001] SASC 155
LANDER J. This is an appeal from a decision of a Magistrate sitting in the civil jurisdiction of the Magistrates Court.
The appellant, who was the defendant in the Court below, was originally sued by the respondent, (the plaintiff) for the sum of $10,000. The respondent is presently the trustee of the Rod Martin Family Trust. He was appointed trustee on 31 March 1999 in lieu of the former trustee Mr Rodney Martin.
MIG Engineering Pty Ltd was incorporated on 5 December 1996 and immediately became the trustee of MIG Engineering Unit Trust (the Unit Trust). The trustee carried on the business of “The Eave Bracket”.
The Respondent’s Original Claim
The respondent’s case, as originally framed in his Particulars of Claim, was that on 9 April 1998 the appellant had received the transfer of ten shares in MIG Engineering Pty Ltd, and ten units in MIG Engineering Unit Trust in consideration of the appellant paying $10,000. The respondent claimed that the Rod Martin Family Trust of which he was the present trustee agreed to advance the appellant $10,000 so that the appellant could pay the consideration for those shares and units. It was an express term of the agreement that the appellant would repay the Trust that sum. It was claimed that the respondent had sought repayment of the sum of $10,000 on 23 December 1999 but the appellant had refused to repay that sum.
The case as originally framed was not the case presented at trial.
Prior to trial the respondent was given leave to amend his Particulars of Claim.
The Respondent’s Amended Claim
After amendment it was the respondent’s case that in or about February 1998 the appellant agreed with Mr Rodney Martin, who was then the trustee of the Trust, to contribute $25,000 in capital to MIG Engineering Pty Ltd. The terms were that the appellant would be issued with 25 per cent of the shares of that company and 25 per cent of the units in MIG Engineering Unit Trust.
It was claimed that sometime after 16 February 1998 and before 20 February 1998 the respondent agreed with Mr Martin that the latter would, on behalf of the Rod Martin Family Trust, would contribute to the business such funds as were due to be contributed by the appellant from time to time, and that the appellant would repay to Mr Martin, as trustee of that Trust, any such funds contributed. In security for any payments made by Mr Martin, on behalf of the appellant, Mr Martin would hold 15 per cent of the shares in MIG Engineering Pty Ltd and the units in the Unit Trust which would otherwise be issued to the appellant.
It was claimed that on or about 3 March 1998 Mr Martin in his capacity as trustee of the Rod Martin Family Trust contributed $15,000 to the business for and on behalf of the appellant.
It was the respondent’s case that on 9 April 1998 ten shares in MIG Engineering Pty Ltd and ten units in the Unit Trust were transferred to the appellant, and on the same day a further 15 shares in MIG Engineering Pty Ltd and 15 units of the Unit Trust were transferred to Mr Martin to be held by Mr Martin as security for repayment of the $15,000 advanced by the Trust.
The respondent’s case as framed in the amendment was substantially different to the case in the original particulars of claim. The change in direction of the respondent’s case is not insignificant.
The Appellant’s Answer
The appellant denied that he had agreed to borrow either $10,000 or $15,000 from the Rod Martin Family Trust or that he had agreed to purchase units in the Unit Trust.
The Witnesses And Other Evidence
The respondent’s case relied mainly upon the evidence of Mr Martin who, as I have said, was the trustee of the Rod Martin Family Trust at the relevant time. The appellant’s case relied upon the appellant and Mr Ivanovic. There were contemporaneous documents but they were not unequivocal. The documents could not establish by themselves whether the appellant’s case or the respondent’s case was more likely to be correct.
The Magistrate’s Findings
The learned Magistrate proceeded to find that there had been an advance of $15,000 to the appellant pursuant to an agreement made between the appellant and Mr Martin for the purpose of the appellant obtaining eventually a 25 per cent shareholding in the Unit Trust. He further found that the advance of $15,000 was repayable after six months. He found that no rate of interest was ever discussed or agreed between the parties and that therefore no interest was properly payable by the appellant “except as part of the pre-judgment commercial rate of interest arising out of these legal proceedings”. He found that the respondent, as trustee of Rod Martin Family Trust, held 15 per cent of the units in the Unit Trust as security for the repayment of the sum of $15,000.
The Grounds Of Appeal
The appellant has complained in the notice of appeal of the following matters:
“The Grounds for the appeal are:
1.The learned Special Magistrate erred in finding that the defendant was lying in that he did not take into account sufficiently or at all
(a)the defendant’s evidence that he did not understand questions put to him in cross-examination;
(b)the fact that the plaintiff did not call one Luka Kolo to give evidence,
(c)the fact that it is implicit from his reasons for judgment that he accepted some of the defendant’s evidence;
(d)the fact that interest on money which the plaintiff claimed to have borrowed was paid for the first six months after the alleged loan was made not by the plaintiff but by a company in which the plaintiff’s predecessor in title was a shareholder; and
(e)the fact that he made findings about the defendant’s familiarity with the roles of a company secretary and a company director and that he had sought the advice of solicitors in or about the conduct of his business when there was no evidence about such matters.
2.The learned special Magistrate erred in exercising his discretion in relation to deciding that the defendant pay interest to the plaintiff at a commercial rate rather than the rate fixed by the Magistrate Court Rules and from the 9th day of October 1998 in that he
(a)made such decision without argument being presented about the same;
and
(b)gave no reasons for making such decision.
3.The learned Special Magistrate erred in ordering that the defendant pay interest to the plaintiff at a commercial rate and from the 9th day of October 1998.
4.The learned Special Magistrate erred in exercising his discretion in relation to deciding that the reserved costs should be costs in the cause in that he
(a)made such decision without argument being presented about the same;
(b)made such decision without providing an opportunity for argument about the same;
(c)made such decision after saying words to the effect that he did not know why the trial had been adjourned (the reserved costs being the costs of such adjournment); and
(d)gave no reasons for making such decision.
5.The learned Special Magistrate erred in not ordering that the plaintiff pay the reserved costs.
6.The learned Special Magistrate erred when assessing costs in that he took into account an offer to consent to judgment made by the plaintiff on the 28th of August 2000 which offer did not comply with the provisions of the Magistrate Court Rules.
The Appellant seeks the following orders on the appeal:
1.That the appeal be allowed.
2.That the judgment and orders of 27th February 2001 be set aside.
3.That the action be remitted to the Magistrate Court for retrial.”
The Respondent’s (Plaintiff’s) Case
The respondent’s case rested upon documentary evidence to which I will refer and the oral evidence of Mr Rodney Martin. The respondent himself was not called. That is not surprising because he had no first hand knowledge of the facts. However, the respondent’s father (Luka Kolo) did. It was Mr Martin’s evidence that it was the respondent’s father who introduced the appellant to this transaction and it was Mr Kolo Snr who had the initial dealings with the appellant.
The appellant, in my opinion, rightly complains about the respondent’s father’s failure to give evidence. His evidence would have been relevant and material. The Magistrate did not comment upon the respondent’s father’s failure to give evidence. In my opinion, the respondent’s father’s absence from the witness box should have led the Magistrate to conclude that his evidence would not have supported Mr Martin’s evidence and, in particular, in respect of the early conversations with the appellant: Jones v Dunkel (1959) 101 CLR 298 per Windeyer J at 321.
In 1996 Mr Rodney Martin, Mr Ivanovic and Mr Komazec agreed with each other to promote and commercialise a product Mr Ivanovic had invented called ‘Easy Eave’. They caused MIG Engineering Pty Ltd to be incorporated and they each became shareholders. Mr Martin and Mr Komazec each took ten shares and Mr Ivanovic, 80. On 5 December 1996 the unit trust was settled.
On that day 80 units were allotted to Mr Ivanovic as trustee for the Ivanovic Family Trust and ten shares each to Mr Komazec as trustee for the Komazec Family Trust and Mr Martin as trustee for the Rod Martin Family Trust.
It was intended to capitalise the unit trust and then to seek financial support from AusIndustry.
AusIndustry was prepared to lend financial support provided that it could be satisfied that the shareholders had contributed $150,000 of their own money.
It was proposed that Mr Komazec and Mr Martin would each raise $25,000 and would secure an overdraft for a further $100,000.
In June 1997, Mr Komazec provided $10,000 in two advances of $3,000 and $7,000. In June and October of 1997 Mr Martin provided a total of $25,000 in two advances of $10,000 and $15,000.
At or about the time of the payment by Mr Martin of the second sum Mr Komazec informed Mr Ivanovic and Mr Martin that he did not wish to continue as an investor with the enterprise.
At about the same time Mr Martin’s father in law told Mr Martin that he thought the appellant might be interested in becoming an investor. The appellant at that stage ran a business Marine and General Engineering Pty Ltd at Moorhouse Road, Gillman.
To this point there is no dispute between the parties.
Mr Martin said that he visited the appellant in October 1997 at his premises and left a copy of the application for finance to AusIndustry and a sample of ‘Easy Eave’.
Mr Martin told him that it would be necessary for Mr Brdar to contribute $25,000. Mr Martin said that the appellant told him that he would look at it and that he would show the product to some people.
At or about the same time Mr Martin advised AusIndustry that Mr Komazec had ceased to be interested in the project, but that they were hoping to obtain another investor.
In January 1998 Mr Martin had a further conversation with Mr Brdar again at the appellant’s premises at which Mr Ivanovic was present.
During the discussion Mr Brdar said that he would be interested in becoming an investor. It was proposed by either Mr Martin or Mr Ivanovic that the parties would hold shares in the ratio 60 to Mr Ivanovic, 20 to Mr Brdar and 20 to Mr Martin.
Mr Martin said that Mr Brdar agreed to contribute $25,000 for his 20 per cent share.
At that same conversation the AusIndustry requirement of the shareholders raising $150,000 was discussed.
On 29 January 1998 Mr Martin sent a fax to the company’s solicitor, Mr Wight of Michell and Co in which he asked Mr Wight to arrange for the transfer of ten shares from Mr Komazec to Mr Martin and 20 shares from Mr Ivanovic to Mr Brdar in MIG Engineering Pty Ltd.
He also asked for the transfer of ten units from the Komazec Family Trust to be transferred to the Rod Martin Family Trust and a further transfer of 20 units from the Ivanovic Family Trust to Nikola Brdar in the unit trust.
He sought an end result whereby the parties shared in accordance with the agreement as to shares made during that conversation to which I have referred.
Mr Martin said that about a week to ten days later, but before 10 February, he was contacted by Mr Brdar who advised him that he was not satisfied with the share split. He did not want Mr Ivanovic to have control of the company. He suggested the shares be split 50 per cent to Mr Ivanovic and 25 per cent to Mr Martin and himself.
Mr Ivanovic was also not called by the respondent. His evidence, of course, was relevant and undoubtedly material. He could have corroborated Mr Martin’s evidence. However he was called by the appellant. I will refer to his evidence in due course.
Mr Martin gave evidence of a third conversation with the appellant. He was not sure whether it was by telephone or otherwise. He said in that conversation the appellant indicated that the appellant was unable to contribute his $25,000 because he had other business commitments which would impact on his cash flow.
Mr Martin said he was quite upset about that. It necessitated him sending a further instruction to the company’s solicitors on 16 February 1998 in which he asked the solicitor to cease work on all transfers because there had been another change. The instruction continued that he would advise the solicitor when the new structure was finalised.
Mr Martin said there was then a fourth conversation sometime between 16 February and 20 February 1998. He believed the conversation took place at the appellant’s business premises. He said in that conversation he proposed to the appellant that provided the appellant still agreed to contribute that he, Mr Martin, would put the money in for him on the proviso that he would hold 15 shares as security against the money advanced, and further provided that the money was repaid within six months.
He said the appellant agreed to that proposal. Consequently he provided yet a further instruction to Mr Wight on this occasion asking for a transfer from Mr Komazec to himself of ten shares and a transfer from Mr Ivanovic to himself of 20 shares. He sought a transfer of the equivalent number of units from the same persons to his wife. Lastly, he sought a transfer of ten shares from Mr Ivanovic to the appellant and a like number of units.
Mr Martin’s evidence was that on that transfer taking place Mr Ivanovic would hold 50 per cent of the shares and units, Mr Martin 40 per cent and the appellant 10 per cent. 15 per cent of the 40 per cent held by the respondent were held as security against the $15,000 which the respondent agreed to advance on behalf of the appellant.
It was Mr Martin’s evidence that in fact he did not have the $15,000 at that time so he borrowed it from friends of his father-in-law in Melbourne. He borrowed $15,000 and agreed to pay interest on a monthly basis at the overdraft rate of the day. On 3 March 1998 that sum was paid by the respondent to the company.
On 9 April 1998 the transfers which the respondent had requested on 20 February 1998 were executed, and the shareholding and unit holding took effect as the solicitor had been instructed.
On the same day the appellant executed a consent to act as a director and secretary of MIG Engineering Pty Ltd. He also accepted the transfer of both ten shares and ten units, as Mr Martin said had been agreed, in the fourth conversation shortly prior to 20 February 1998.
On the same day the company signed an application for finance to the Industry, Research and Development Board. That application was executed under the common seal of the company and signed by Mr Martin as director and the appellant as secretary.
Moreover, each of Mr Martin, Mr Ivanovic and the appellant executed the application as covenantors in support of the application.
There seems to me to be no doubt that by executing the transfers of the shares and units the appellant consented to the transfer of both the shares and units to himself. He also consented to become a director and secretary and, by executing the application for finance, held himself out as holding those offices. He also joined in on the application for finance as a covenantor.
Mr Martin said the loan was not repaid and a demand was made by his solicitors sometime either late October or early November 1998.
Mr Martin said that the monies continued to remain unpaid. He had paid the interest on the outstanding loan to the date of trial. He claimed that he had paid an amount of $4,768.50 in interest since October 1998. The trust could not pay the interest. It did not have the funds. He did not say that he paid the interest on behalf of the trust.
On 23 December 1999 further demand was made by the respondent’s solicitors on the appellant. I set out the terms of the letter of demand:
“Dear Sir
SHAREHOLDING & UNIT HOLDING:
MIG ENGINEERING
We are instructed that you currently hold a 10% shareholding in MIG Engineering Pty Ltd and a 10% unit holding in the MIG Engineering Unit Trust.
In October of 1997 it was agreed that you were in fact to contribute $25,000.00 to the new company structure in accordance with the requirements from Ausindustry. Because you were not in a position to contribute your $25,000.00 to acquire a 25% shareholding and unit holding, you and our client agreed that our client would contribute $10,000.00 representing your acquisition of a 10% shareholding and unit holding, and that upon you being in a position to pay your full $25,000.00 commitment, you would then be issued with further shares and unit holdings to reflect a 25% unit holding/shareholding position.
Our client contributed the $10,000.00 on your behalf and you have not at any stage made any endeavours to repay our client, nor have you at any stage transferred the shareholding back into our client’s possession.
We demand that either of these alternatives be addressed immediately.
We require you to either:
1.at your cost transfer the 10% shareholding and unit holding back into our client’s name; or
2.pay to our client the sum of $10,000.00 representing your 10% shareholding and unit holding.
We are instructed that either of these issues must be attended to as a matter of urgency. If they are not attended to, our client has instructed us to commence proceedings.
Yours faithfully
FLOREANI COATES AND CO
SEAN RYAN”
A number of points were made in cross examination of the respondent.
Mr Martin agreed that the claim presented in Court was quite different to that which was contained in the original particulars of claim. He agreed that the letter of demand to which I have referred was inconsistent with his account.
He was unsure of his father-in-law’s approaches to the appellant and what his father-in-law told the appellant. He agreed that between March 1998 and September 1998 the company, MIG Engineering Pty Ltd, paid the interest on the amount of $15,000 which had been borrowed from his father-in-law’s friends. He agreed that after September 1998 he paid the interest personally. It was not paid by the Family Trust. The Family Trust did not have the money.
He could not remember if he had ever told the appellant that he had paid the $15,000 on the appellant’s account.
He, however, maintained that he had had the conversations to which he had referred in his evidence in chief.
There is a difficulty about the respondent’s case which the respondent has never faced up to. The respondent has not explained how it was that the appellant became entitled to 10 per cent of the company without making any payment at all. The 10 per cent that the appellant received was transferred to him by Mr Ivanovic. It was not the respondent’s case that the appellant owed $10,000 to Mr Komazec for his shares because those shares and units were transferred to Mr Martin. It followed on the respondent’s case that if the appellant paid the $15,000 which the respondent claimed had been paid on his behalf the appellant would have become entitled to 25 per cent of the company.
The respondent did not explain why it was that Mr Komazec transferred his interest to Mr Martin as trustee of the Rod Martin Family Trust without apparently being paid.
The end result was that on the respondent’s case the respondent would have had to pay $25,000 for his interest, but the appellant only $15,000 for the same interest.
The respondent did not satisfactorily explain why the letter of demand and the original proceedings were inconsistent and materially inconsistent with the claim which was presented in Court.
The respondent’s case had to be assessed in the light of the adverse inferences which could have been raised by reasons of the absence of the respondent’s father.
The Appellant’s Case
The appellant said that he knew both Mr Kolo, the respondent’s father and Mr Martin’s father-in-law and Mr Ivanovic, both of whom had come to Australia from Yugoslavia. He said, in about Christmas of 1997, he was approached by the respondent’s father relating to the Easy Eave project. That conversation took place at the appellant’s business. He was told that a third partner had withdrawn from the project and that Mr Kolo’s family was prepared to admit the appellant as a third party, and that if he joined he would become a millionaire.
The appellant said that he told Mr Kolo that he was interested. About a week later the respondent’s father came to his factory again and told him that his family would be happy if the appellant joined the venture.
He said that he was told Mr Rod Martin would explain the venture to him and it was suggested that he go and see Mr Martin.
He said that Mr Kolo said that they needed the appellant’s name and signature and matters of money would come later.
The appellant said that he went to Mr Rod Martin’s work premises and had a meeting with Mr Kolo Snr and Mr Martin although Mr Kolo left the meeting early.
He was shown the Easy Eave and was allowed to take one away. In due course he showed that Easy Eave bracket to builders whom he knew. Some of them told him the venture would be successful. Others said it would not.
The appellant said that he next spoke to Mr Kolo senior and told him that if Mr Martin and the appellant did not have at least 50 per cent of the shares the appellant would not go into the project. He said that Mr Kolo said that 10 per cent was enough but that he would speak to his son-in-law.
He said that Mr Kolo reported back to him that he had spoken to Mr Martin and that Mr Martin had agreed that it was a good idea that they have 50 per cent of the shares.
Another meeting occurred with Mr Martin. It is not clear, from the appellant’s evidence, exactly when that occurred. At that stage Mr Martin sought details of the appellant’s assets. The appellant took away a form to his accountant and the form was sometime later returned to Mr Martin.
The appellant’s evidence was that Mr Martin never asked him for any money in relation to the Easy Eave project but he was asked to sign some papers. He said that he did not really read the papers before he signed them.
He said that Mr Kolo telephoned him at one stage when the appellant was in his car and asked when the appellant was going to give some money. He said that he told Mr Kolo that he would give some money when he was ready, and when he could see something for his money. He said that he had told Mr Martin and his father that he would put money in when he was ready, and when he saw something of the project going on.
He said that he was allotted the 10 per cent shareholding in exchange for putting up his assets.
He said that Mr Kolo spoke to him again about two weeks later asking when he was going to give some money. He said he gave the same reply which was that when he was ready he would give money.
Eventually he said that Mr Kolo stopped asking. He never spoke to anyone else about putting in money apart from Mr Kolo.
Specifically he said that Mr Martin never spoke to him about lending him money or paying money on his behalf.
The first he knew of that was when he received the letter of demand to which I have referred above in which there was a claim for $10,000.
The thrust of the appellant’s evidence in chief was that he agreed to participate in the project, but was only prepared to commit himself to the extent that he offered his assets in support of the application for finance, in exchange for 10 per cent of the company and the units. His evidence was that he reserved to himself the right to contribute capital which he advised Mr Kolo he would only contribute when he was satisfied that the project was going somewhere.
In his cross examination he maintained his story. He maintained that he never spoke to Mr Martin about money. He did speak to Mr Kolo. He continued to assert that he reserved to himself the right to contribute money when he was convinced that the project was going somewhere. He continued to maintain that he had received the 10 per cent shareholding because he had allowed his name to go forward and for his assets to be available to the venture.
It has to be remembered that the plan was to raise $50,000 so as to enable an overdraft to be obtained of $100,000 and then to obtain a matching amount of $150,000 from the Industry Research and Development Board.
The appellant was shown the application for finance. He acknowledged his signature and agreed that he had signed the document as secretary of the company.
He said that he was not aware that the document represented that the company would contribute $151,301 as the document stated as its contribution to obtain funding.
He admitted that he had previously been shown a business plan which had been prepared by the company’s accountants, Perks & Associates, and that he had been told that there was to be an application for a government grant. He said he was, however, aware that the company intended to seek an overdraft of $100,000 on top of the $50,000 of capital which would be contributed.
He denied that Mr Martin spoke to him about a proposed share split of 60/20/20.
He said he was not aware that Mr Ivanovic was only contributing the intellectual property and was not putting up any money.
It is fair to say, from a reading of the transcript, that the appellant’s English deteriorated as the cross examination proceeded. His answers became lengthier and a little less easy to understand. However, he did not change any of the evidence which he gave and evidence in chief.
It was put to the appellant in cross examination that there was no reason on his story why Mr Martin would need the appellant in the project. It was put that all he was lending to the project was his name. It was suggested to him that Mr Luka Kolo could have done the same. The appellant gave a rather discursive answer to that question which, I think it would be fair to say, was non responsive. [TX 108]
However, in my opinion, the question does not necessarily admit of the answer which the cross examiner sought.
The appellant, on his account, was offering his name and allowing his assets to be put forward and allowing himself to be put forward as a covenantor.
The cross examiner specifically put his case to the appellant but the appellant denied that there was ever a discussion of the kind in which Mr Martin said that he would put forward the $15,000 for the appellant but the appellant would have to repay him that amount in due course.
The appellant called Mr Ivanovic. His evidence is remarkable for what he did not say rather than what he did say. Neither counsel asked him to give evidence in relation to the meeting at which Mr Martin said Mr Ivanovic was and the appellant was present.
His evidence is rather benign except for his understanding that Mr Martin was going to have to guarantee his business and Mr Brdar would have to guarantee his house if the business plan was to go forward.
He said that when he heard of that he offered each of “Rod” and “Nick” a further 10 per cent which would have allowed for a holding of 60/20/20.
Specifically he was not asked in cross examination whether he was present at the meeting at which the respondent claimed he was present.
I think it can be inferred from a failure to cross examine him on that matter that the respondent did not believe that Mr Ivanovic would support his evidence.
The Magistrate’s Reasons
I have read the evidence of the witnesses. I have had regard to the documents tendered by the parties.
The learned Magistrate said from the outside that the matter could and would only be resolved on the base of credit.
I agree with the Magistrate that this matter depended upon an acceptance upon one version to the exclusion of the other. That required a consideration of the credibility and reliability of the evidence adduced by the appellant and the respondent.
The Magistrate formed a very clear view that the appellant was a liar and the respondent was truthful.
The learned Magistrate said of Mr Martin:
“... I got the impression that Martin told his story in a simple, coherent, cogent and ultimately compelling manner. Any infelicities in his testimony I think were the result of nervousness rather than the prevarication.”
He said of the appellant:
“The same cannot be said for Brdar. When the cross-examination got close to the bone, and I thought very close to the truth, Brdar became argumentative, disputative and downright evasive in the witness box.
Mr Magarey urged me to take a view that I was dealing with somebody of Yugoslavian cultural bent who had something of a language problem. I make every concession I can on that account. It does not stop the fact that I can tell a liar, whoever it may be. And this man is lying. In the face of documents that squarely inculpated him in accordance with Martin’s story, Brdar became defensively aggressive. He was even willing, in my view, to argue that black was white.”
He described the appellant’s evidence as “a mush of ‘blather’”.
I cannot see, on a reading of the evidence, how he could have formed a view that the appellant was a liar or that his evidence was “a mush of ‘blather’ ”.
In Smith v NSW Bar Association (1992) 176 CLR 256 at 271 Deane J said:
“There are many circumstances in which a trial judge - and the Court of Appeal in the present case was effectively sitting as a court of first instance - is required to consider whether a party or a witness has been deliberately untruthful in the course of giving evidence before it. An obvious example of such a case is where there is direct conflict of evidence and it is apparent that there is no real possibility of honest mistake unless it be truly necessary for the purpose of disposing of the particular case, however, a specific finding that a party or witness has deliberately given false evidence should ordinarily not be made.”
This was a case where there was a direct conflict between the evidence of the appellant and that of Mr Martin. The Magistrate found the appellant was a liar. He made that finding without identifying any evidence where it had been established that the appellant had lied. He did not even identify any example where the appellant’s evidence was incontrovertibly wrong.
It is trite to say that simply because a witness’s evidence is wrong or unbelievable that does not make the witness a liar. It merely makes the witness’s evidence unreliable.
To call a witness a liar a Court must be confident that the witness’s evidence is false and that the witness knew the evidence to be false when the evidence was given. Both matters must be addressed by the Court before a finding that the witness lied on his or her oath can be made.
A court should not brand a person a liar without first identifying the particular evidence which it is satisfied is untrue. It should also be able to particularise how it is that it can say that the witness is a liar.
“A finding that a person deliberately lied when giving evidence is, in effect, a finding of perjury, and, thus, it ought not to be made on “the single oath of another man, without any confirmatory evidence”: per Brennan, Dawson, Toohey and Gaudron JJ at 268 in Smith v NSW Bar Association (supra).
A court should be reluctant to make such a finding unless the witness has received some sort of warning, not necessarily from the Court, but perhaps by the cross examiner that there is a real risk that the person will be described as a liar. Without such a warning the witness may not have any idea that he or she may be publicly described as a liar and thereby miss the opportunity of explaining his or her evidence.
Deane J said at 271 in Smith v NSW Bar Association (supra):
“Ordinarily, a party or other witness will not be concerned or entitled to set out to establish that, if his or her oral evidence is ultimately found to be mistaken, the mistake was an honest one. As a consequence, material which serves only to establish that a party or other witness subjectively believes that his or her evidence is correct is likely to be inadmissible in the proceedings in which the evidence is given. And there is good reason for that. The length, costs and hazards of litigation would be intolerably increased if each party or other witness was required not only to deal with the issues before the particular court but also to anticipate the ultimate rejection of his or her evidence and seek to establish that, notwithstanding that it was mistaken, it was honestly given.”
English is not the appellant’s native tongue. The appellant was born in Croatia and whilst he came to Australia in 1970 when he was in his late 20s, the appellant does not speak English well. Indeed his re-examination showed his limitations in the English language. In those circumstances there was room in this case for a finding that the appellant misunderstood the nature of the transaction into which he had entered but was still liable in respect of it.
Having regard to the appellant’s limited understanding of the English language the finding that the appellant was a liar should not have been made. It may have been open to the learned Magistrate to reject the appellant’s evidence. It was not open to him, in my opinion, to find him a liar. The distinction between the two findings is fundamental: Smith v New South Wales Bar Association (supra) per Brennan, Dawson, Toohey and Gaudron JJ at 268.
Later the learned Magistrate said after discussing the appellant’s evidence in detail:
“I am going to make an omnibus credibility finding in this matter that satisfies me that justice can and will be done. Wherever the evidence of Brdar conflicts with that of Martin, I unreservedly and unqualifiedly prefer the evidence of the latter to that of the former. It therefore follows that any factual finding that I could or should make in these proceedings is or would be made in accordance with that primary ominous finding.”
In view of the learned Magistrate’s conclusion that he believed the appellant to be a liar, it is not surprising that he preferred Mr Martin’s evidence. The learned Magistrate did not expressly say that he had regard to the appellant’s demeanour in assessing his evidence but his reference to the appellant being “argumentative, disputative and downright evasive” and later “defensively aggressive” suggests that he had some regard to demeanour.
The learned Magistrate enjoyed an advantage not enjoyed by a judge on appeal in seeing and hearing the witnesses.
In Devries v Australian National Railways Commission (1992-1993) 177 CLR 472 at 479 Brennan, Gaudron and McHugh JJ said:
“More than once in recent years, this Court has pointed out that a finding of fact by a trial judge, based on the credibility of a witness, is not to be set aside because an appellate court thinks that the probabilities of the case are against - even strongly against - that finding of fact. If the trial judge’s finding depends to any substantial degree on the credibility of the witness, the finding must stand unless it can be shown that the trial judge ‘has failed to use or has palpably misused his advantage’ or has acted on evidence which was ‘inconsistent with facts incontrovertibly established by the evidence’ or which was ‘glaringly improbable.’ ”
In Agbaba v Witter (1977) 51 ALJR 503 at 508 Jacobs J provided an example where it would be permissible for a Court of Appeal to set aside primary findings based on credibility of witnesses. Such a case was:
“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 of Appeal.”
In State Rail Authority of New South Wales v Earthline Constructions Pty Ltd (In Liq) (1999) 73 ALJR 306 at 328 Kirby J referred to:
“... a growing understanding … of the fallibility of judicial evaluation of credibility from the appearance and demeanour of witnesses in the somewhat artificial and sometimes stressful circumstances of the courtroom.”
He pointed to the remark of Atkin LJ in Societe D’Avances Commerciales (Societe Anonyme Egyptienne) v Merchants’ Marine Insurance Co (‘The Palitana’) (1924) 20 L1 L Rep 140 at 152:
“... an ounce of intrinsic merit or demerit in the evidence, that is to say, the value of the comparison of evidence with known facts, is worth pounds of demeanour.”
In particular Kirby J pointed to the lessening confidence of judges in being able to tell truth from falsehood by reference to the appearance of the witness.
His Honour then undertook in examination of circumstances where credibility findings do not stand in the way of an appeal court overturning the judgment (331). In particular he said at 332:
“There is also the case, as was accepted in the early Privy Council decisions, where, although a credibility finding has been made which represents an apparent obstacle to appellate review, it is so contrary to the ‘extreme and overwhelming pressure’ resulting from the rest of the evidence, or is so ‘glaringly improbable’ or ‘contrary to the compelling inferences of the case’, that it justifies and authorises appellate interference in the conclusion reached by the trial judge.”
This case was decided on credibility.
It is not for this Court to set aside the Magistrate’s decision because it does not believe that the findings of fact should have been made.
This Court should only interfere in this case if it believes if the Magistrate has failed to use or palpably misused his advantage or has acted on evidence which was inconsistent with facts incontrovertibly established by the evidence.
In my opinion, the Magistrate has failed to use the advantage available to him. Moreover he has acted on evidence, namely the evidence of the respondent, which was inconsistent with facts incontrovertibly established by the evidence.
I believe that he has misused his advantage particularly in the assessment of the appellant.
The Magistrate has arrived at a decision on credibility by branding the appellant a liar without being able to identify the material upon which such a strong finding can be made. As I have said he has not identified the matters upon which the appellant’s evidence was incontrovertibly wrong. Nor has he shown how the appellant knew his evidence was wrong when he gave it.
I am not satisfied that the Magistrate has approached the assessment of the credibility of the respective witnesses appropriately. He should have, in my opinion, considered the oral evidence of each of the witnesses against the matters to which I have referred, and the contemporaneous documents.
It may be in due course, having had the opportunity of hearing the various witnesses, another Magistrate would arrive at the same result as the Magistrate because that Magistrate prefers the evidence of the respondent.
However, the assessment of the credibility of the witnesses must proceed upon the basis to which I have referred.
I intend, reluctantly, to remit this matter to the Magistrates Court for re-hearing by another Magistrate.
Other grounds of appeal were raised by the appellant. Specifically there was a complaint about the interest ordered by the learned Magistrate. I will not say much about that matter because it will have to be considered again. However the Magistrate does not seem to have taken into account that it was not the trustee of the trust who paid the interest on behalf of the trust. Initially the interest was paid by MIG Engineering Pty Ltd. Why that company paid the interest is not explained. Later, on Mr Martin’s evidence, as I presently understand it, he paid the interest because the trust could not afford to. There was no suggestion that he paid the interest on behalf of the trust or that the trust became indebted to him in respect of payments made by him.
The appellant also complained about an order for costs made by the Magistrate. When this matter was first listed for hearing in the Magistrates Court the respondent sought to amend the particulars of claim in the manner to which I have referred earlier in these reasons. It can be seen that the respondent almost recast the whole of the respondent’s case.
Leave was given to amend the particulars of claim and the matter was adjourned. The costs of the amendment and the adjournment were reserved. When he delivered judgment the Magistrate allowed the respondent the costs of action on a party and party basis. If this respondent was entitled to succeed there could be no quarrel about that order.
However, without reference to the parties he made the following order:
“All costs reserved throughout the file are to be considered costs in the cause and therefore made out in favour of the plaintiff.”
The appellant should have been heard on the question of the reserved costs before that order was made.
In my opinion that order indicates the exercise of the Magistrate’s discretion on costs entirely miscarried.
Ordinarily one would have expected that the appellant would be entitled to his costs of the amendment and the adjournment. It may be possible to argue that the appellant should not have had his costs for reasons which are not presently apparent to me. It is impossible, in my respectful opinion, to conclude that the respondent should have had costs in circumstances where the respondent needed to fundamentally amend his claim and thereby created the need for the adjournment.
The Magistrate effectively awarded the respondent those costs by making them costs in the cause. As the respondent has been successful in the cause it meant that the respondent obtained those costs.
I will set aside that order for costs and remit that matter also to the Magistrate who is to hear the further trial in this matter.
As I have said, it is with a degree of reluctance that I remit this matter to the Magistrates Court. However, I could not have decided this matter on an assessment of the evidence without hearing the witnesses.
The orders of the Court will be:
1. Appeal allowed.
2.The orders of the Magistrate made on 27 February 2001 entering judgment for the respondent set aside.
3.The orders for costs set aside.
4.The action remitted to the Magistrates Court for rehearing before a Magistrate other than the Magistrate who heard the first trial.
5.The question of any costs awarded by the Magistrate who heard the first trial including the costs occasioned by the adjournment and the costs of the trial be remitted to the Magistrate hearing the rehearing.
I will hear the parties as to the costs of this appeal.
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