Clarke v AAA Mercantile Pty Ltd - [2017] SASC 84

SUPREME COURT OF SOUTH AUSTRALIA
(Magistrates Appeals: Civil)
CLARKE v AAA MERCANTILE PTY LTD & ANOR
[2017] SASC 84
Judgment of The Honourable Justice Stanley
15 June 2017
TRADE AND COMMERCE - COMPETITION, FAIR TRADING AND CONSUMER PROTECTION LEGISLATION - CONSUMER PROTECTION - MISLEADING OR DECEPTIVE CONDUCT OR FALSE REPRESENTATIONS
The appellant and the second respondent entered into a contract whereby the appellant purchased a business licence and associated plant, equipment and training for a concrete resurfacing business. The appellant did not make total payment on the debt incurred due to the purchase. The magistrate found against the appellant in that her Honour found that the outstanding debt had been validly assigned by the second respondent to the first respondent, rejecting the appellant’s defence of inducement to enter into contract by misleading or deceptive conduct and by dismissal of the appellant’s counterclaim and third party claim. The appellant appeals this judgment which finally found the appellant liable in debt to the first respondent in the sum of $26,364.76.
Held, per Stanley J:
1. There is nothing to impugn the Magistrate’s finding that the assignment of the debt was absolute (at [41]).
2. I do not consider there has been any error demonstrated in the approach taken by the Learned Magistrate (at [42]).
3. I would dismiss the appeal (at [43]).
Magistrates Court Act 1991 (SA) s 40; The Australian Consumer Law s 18(1); Law of Property Act 1936 (SA) s 15(1), referred to.
Fox v Percy (2003) 214 CLR 118, applied.

CLARKE v AAA MERCANTILE PTY LTD & ANOR
[2017] SASC 84
Magistrates Appeal: Civil
STANLEY J.
Introduction

This is an appeal from a judgment of a magistrate who found the appellant liable in debt to the first respondent in the sum of $26,364.76. The magistrate dismissed the appellant’s counterclaim against the first respondent in the sum of $8,679.96, and dismissed the appellant’s third party claim against the second respondent which claimed an indemnity for any monies owing to the first respondent.
The proceedings arose out of a contract between the appellant, Mr Clarke, and the second respondent, Spray Pave Australia Pty Ltd (Spray Pave), for the purchase by the appellant of a business licence system and associated plant and equipment for concrete decorating and resurfacing. The total purchase price was $48,050.
The contract was made on 12 December 2013. The appellant paid $10,550 for the plant and equipment. He paid a deposit for the business licence system of $9,500. This left a balance of $28,000. He made monthly payments pursuant to an instalment payment plan which formed part of the agreement over a period between 27 February 2014 to 29 January 2015 in the sum of $8,679.96. The second respondent subsequently repurchased the plant and equipment from the appellant for $7,000.
The magistrate found that on 20 March 2015 the outstanding debt owed by the appellant to the second respondent was validly assigned by the second respondent to the first respondent.
The magistrate rejected the appellant’s defence that he had been induced to enter the purchase agreement by the misleading and deceptive conduct of the second respondent through its director, Mr Bylhouwer.
The appellant appeals from judgment in favour of the first respondent in the sum of $26,364.76, the dismissal of the counterclaim against the first respondent for the sum of $8,679.96, the dismissal of the third party claim, and the order that the appellant pay costs and interest.
Grounds of appeal
There are 15 grounds of appeal. In summary, the grounds of appeal contend that the magistrate erred in finding that the second respondent had not engaged in misleading and deceptive conduct and/or breached the contract by representing or agreeing as a term of the contract, first, that it would provide 20 customer leads, second, that it was Australia’s largest network of concrete networking specialists and, third, that the appellant could readily obtain a licence to undertake concreting work in South Australia and use that licence in New South Wales pursuant to the mutual recognition regime. There is an additional ground that the magistrate erred in finding that the debt owed to the second respondent had been validly assigned to the first respondent. There is a further ground that the magistrate erred in accepting the evidence of Mr Bylhouwer.
Approach on appeal
An appeal to this Court pursuant to s 40 of the Magistrates Court Act 1991 (SA) is by way of rehearing. It is not an appeal de novo, and usually proceeds on the documents, albeit with power to receive further evidence.
To the extent that the issues raised on appeal by the appellant involve issues of law or inferences to be drawn from uncontested or established facts, this Court is in as good a position as the magistrate to determine such issues. However, an important aspect of the appeal is the challenge to the magistrate’s findings of primary fact.
The principles applicable to the approach to be taken by a court, on an appeal by way of rehearing, when reviewing findings of fact, such as in the present case, are well established. In Fox v Percy,[1] Gleeson CJ, Gummow and Kirby JJ explained the position as follows:[2]
[1] [2003] HCA 22, (2003) 214 CLR 118.
[2] [2003] HCA 22 at [23], [25]-[29], (2003) 214 CLR 118 at 125 - 128.
The foregoing procedure shapes the requirements, and limitations, of such an appeal. On the one hand, the appellate court is obliged to “give the judgment which in its opinion ought to have been given in the first instance”. On the other, it must, of necessity, observe the “natural limitations” that exist in the case of any appellate court proceeding wholly or substantially on the record. These limitations include the disadvantage that the appellate court has when compared with the trial judge in respect of the evaluation of witnesses' credibility and of the “feeling” of a case which an appellate court, reading the transcript, cannot always fully share. Furthermore, the appellate court does not typically get taken to, or read, all of the evidence taken at the trial. Commonly, the trial judge therefore has advantages that derive from the obligation at trial to receive and consider the entirety of the evidence and the opportunity, normally over a longer interval, to reflect upon that evidence and to draw conclusions from it, viewed as a whole.
...
Within the constraints marked out by the nature of the appellate process, the appellate court is obliged to conduct a real review of the trial and, in cases where the trial was conducted before a judge sitting alone, of that judge's reasons. Appellate courts are not excused from the task of “weighing conflicting evidence and drawing [their] own inferences and conclusions, though [they] should always bear in mind that [they have] neither seen nor heard the witnesses, and should make due allowance in this respect”. In Warren v Coombes, the majority of this Court reiterated the rule that:
“[I]n general an appellate court is in as good a position as the trial judge to decide on the proper inference to be drawn from facts which are undisputed or which, having been disputed, are established by the findings of the trial judge. In deciding what is the proper inference to be drawn, the appellate court will give respect and weight to the conclusion of the trial judge but, once having reached its own conclusion, will not shrink from giving effect to it.”
As this Court there said, that approach was “not only sound in law, but beneficial in . . . operation”.
After Warren v Coombes, a series of cases was decided in which this Court reiterated its earlier statements concerning the need for appellate respect for the advantages of trial judges, and especially where their decisions might be affected by their impression about the credibility of witnesses whom the trial judge sees but the appellate court does not. Three important decisions in this regard were Jones v Hyde, Abalos v Australian Postal Commission and Devries v Australian National Railways Commission. This trilogy of cases did not constitute a departure from established doctrine. The decisions were simply a reminder of the limits under which appellate judges typically operate when compared with trial judges.
The continuing application of the corrective expressed in the trilogy of cases was not questioned in this appeal. The cases mentioned remain the instruction of this Court to appellate decision-making throughout Australia. However, that instruction did not, and could not, derogate from the obligation of courts of appeal, in accordance with legislation such as the Supreme Court Act applicable in this case, to perform the appellate function as established by Parliament. Such courts must conduct the appeal by way of rehearing. If, making proper allowance for the advantages of the trial judge, they conclude that an error has been shown, they are authorised, and obliged, to discharge their appellate duties in accordance with the statute.
Over more than a century, this Court, and courts like it, have given instruction on how to resolve the dichotomy between the foregoing appellate obligations and appellate restraint. From time to time, by reference to considerations particular to each case, different emphasis appears in such reasons. However, the mere fact that a trial judge necessarily reached a conclusion favouring the witnesses of one party over those of another does not, and cannot, prevent the performance by a court of appeal of the functions imposed on it by statute. In particular cases incontrovertible facts or uncontested testimony will demonstrate that the trial judge's conclusions are erroneous, even when they appear to be, or are stated to be, based on credibility findings.
That this is so is demonstrated in several recent decisions of this Court. In some, quite rare, cases, although the facts fall short of being “incontrovertible”, an appellate conclusion may be reached that the decision at trial is “glaringly improbable” or “contrary to compelling inferences” in the case. In such circumstances, the appellate court is not relieved of its statutory functions by the fact that the trial judge has, expressly or implicitly, reached a conclusion influenced by an opinion concerning the credibility of witnesses. In such a case, making all due allowances for the advantages available to the trial judge, the appellate court must “not shrink from giving effect to” its own conclusion. Finality in litigation is highly desirable. Litigation beyond a trial is costly and usually upsetting. But in every appeal by way of rehearing, a judgment of the appellate court is required both on the facts and the law. It is not forbidden (nor in the face of the statutory requirement could it be) by ritual incantation about witness credibility, nor by judicial reference to the desirability of finality in litigation or reminders of the general advantages of the trial over the appellate process.
[Citations omitted.]
In this case, the magistrate heard all of the evidence and delivered judgment approximately four months later. There were only two witnesses. The magistrate heard and observed each of Mr Bylhouwer and Mr Clarke give evidence. The magistrate had distinct and obvious advantages, as compared with this Court, when forming a view about the credit and reliability of their respective accounts. The magistrate delivered judgment at a time when I consider the impressions made by the various witnesses must have been clear in her mind. Review of the evidence as a whole and, in particular, those aspects to which the appellant has drawn attention concerning the magistrate’s reliance on the evidence of Mr Bylhouwer, notwithstanding her expressed reservations in relation to some aspects of his evidence, does not disclose any basis upon which this Court should find any of the magistrate’s findings to be contrary to incontrovertible facts or uncontested testimony, to be glaringly improbable or to be contrary to compelling inferences available from other evidence.
The magistrate’s decision also turned in significant ways upon her view as to who bore the onus of proof and whether that onus had been discharged. For reasons I will explain, I do not consider there has been any error demonstrated in the approach she took.
Misleading and deceptive conduct/breach of contract
The appellant submits the magistrate erred in rejecting the submission that the second respondent contravened s 18(1) of the Australian Consumer Law and/or breached the contract between the parties by its misleading and deceptive conduct in making representations in relation to customer leads, the second respondent being Australia’s largest network of concrete resurfacing specialists, the appellant’s ability to gain a licence for use in New South Wales, potential earnings and training.
It is convenient to address each of these grounds seriatim.
Customer leads
The second respondent provided the appellant with a brochure. The brochure contained the following representation under the heading “5) Customer Leads”:[3]
SPA offers a guaranteed minimum of 20 FREE customer leads, designed as an addition to operators own advertising. (a) Not a guaranteed job. (b) Generally within surrounding district. (c) No time limits. (d) Lead marketing commences and may continue upon written request. (e) May include quotes for new concrete or other concrete services. (f) Marketing ceases upon operator inappropriate conduct or lack of substantial self-commitment. (g) Fees apply if operators own advertising uses SPA toll free number.
[3] Pg 21 of Exhibit P2 (Trial Book).
The magistrate made the following findings in relation to this topic:[4]
Mr Clarke gave evidence that he received 32 customer leads but only two of the leads resulted in customers. Mr Clarke said that he was given completed customer cards. Mr Clarke said that Mr Bylhouwer set up a stand in a shopping centre and had scratchy tickets and advertising material. Mr Clarke said that the scratchy tickets were used as an incentive for people to write down their name and number to have work quoted.
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Of the 32 customer leads, Mr Clarke said approximately 85 per cent of the people were home owners who were able to authorise Mr Clarke to carry out work. Mr Clarke said that three or four of the leads were people who were public housing tenants who could not authorise work being done.
Mr Bylhouwer gave evidence that Spray Pave conducts a marketing campaign and refers any customer leads from the operator’s area to the operator. Mr Bylhouwer recalled conducting marketing in a shopping centre in Gosford for Mr Clarke’s business and said that 32 leads were supplied to Mr Clarke.
Counsel for Mr Clarke submitted that the leads were not qualified leads and did not ‘kickstart’ Mr Clarke’s business.
A marketing campaign was conducted and Mr Clarke received 32 customer leads. After deducting 15 per cent of the leads who were not home owners, there remained 27 leads. I accept that some of the people who provided their details for quotations may have been induced to do so by the offer of a ‘scratchy’ ticket but the written information signed by Mr Clarke made it clear that the leads were not guaranteed jobs.
[4] Judgment of Magistrate Kennewell, 20 December 2016 at [30], [32]-[35].
On appeal, the appellant submits the magistrate erred in not finding that the second respondent engaged in misleading or deceptive conduct, or conduct that was likely to mislead or deceive by representing that a purchaser of its package would be given 20 leads. He submits the 32 “leads” were not genuine, as they were merely people proffering their name and address in return for a scratchy ticket. In addition, some 15 per cent of the “leads” were public housing tenants who were not in a position to authorise work on their property without the approval of the relevant public housing authority.
In my view, there was no error in the approach of the magistrate. The contractual promise or representation was satisfied. What was promised were “customer leads” not guaranteed jobs. The fact a person might have accepted a scratchy ticket as an incentive to provide their details for the purposes of obtaining a quote for concreting work does not render such a “lead” other than genuine. The appellant submits that these were not true incentives, which he describes as some reward for entering into a contract. However, merely stating that proposition identifies the flaw in the argument. That definition of an incentive refers to a benefit received for entering into a contract. The contractual promise or representation made by the second respondent expressly provided it was not a guaranteed job. It could never constitute more than an expression of interest on the part of a potential customer to obtain a quote. This ground is misconceived.
Australia’s largest network of concrete resurfacing specialists
The second respondent’s brochure also included the following:[5]
“As Australia’s largest network of concrete resurfacing specialists, Spray Pave is highly regarded by customers, businesses, councils and government. That means as an operator you’ll benefit from instant recognition and the trust you need to win jobs!”
[5] Pg 2 of Exhibit P2 (Trial Book).
At trial, the magistrate found the appellant had not proven that this representation was misleading or deceptive. The magistrate said:[6]
Mr Clarke gave evidence that when he commenced work, customers had not heard of and were not aware of Spray Pave. When cross-examined, Mr Clarke conceded that he had not asked every customer whether they had heard of Spray Pave. No other evidence was presented in order to demonstrate that the statement above was misleading or deceptive or likely to mislead or deceive.
Mr Bylhouwer gave evidence that the statement was based on the number of people trained by Spray Pave over the years and said that Spray Pave’s competitors could not quote the number of operators as could Spray Pave.
It is for Mr Clarke to establish that Spray Pave engaged in misleading or deceptive conduct. There is insufficient evidence to make a finding that Spray Pave is not Australia’s largest network of concrete resurfacing specialists. Mr Clarke’s evidence that his customers had not heard of Spray Pave is not sufficient to satisfy me that this representation was misleading or deceptive or likely to mislead or receive.
[6] Judgment of Magistrate Kennewell, 20 December 2016 at [38]-[40].
In my view, the approach taken by the magistrate does not disclose any error. The appellant submits the court should have found that the representation of a large network was misleading and deceptive. The evidence disclosed that Mr Bylhouwer is the only permanent employee of the second respondent and that the second respondent exercised no control, regulation or monitoring of the purchasers of its business licensing package.
In my view, that does not demonstrate that the representation was misleading or deceptive, or likely to mislead or deceive. Mr Bylhouwer gave evidence that approximately 300 people or businesses had taken up the licensing packaging since 1998. They traded under the Spray Pave name and logo. In my view, that is sufficient to constitute a “network”. “Network” is a term of imprecise meaning. However, at the very least, it connotes some form of relationship between the parties to the “network”. I am satisfied that if hundreds of people are operating the same kind of business under the name “Spray Pave”, they constitute a “network”. The appellant bore the onus of proving that the second respondent’s claim that Spray Pave was Australia’s largest network of concrete resurfacing specialists was misleading and deceptive. The appellant adduced no evidence that there was any larger network than the second respondent’s. It did not discharge the onus it bore.
Gaining a licence

The appellant complains that the magistrate erred in failing to find that the second respondent engaged in misleading and deceptive conduct, or conduct that was likely to mislead or deceive, by representing to the appellant that he could readily obtain a licence for the purposes of operating the Spray Pave business in New South Wales by obtaining a South Australian licence and using this licence in New South Wales under the mutual recognition regime.
The magistrate found that this representation was made by Mr Bylhouwer on behalf of the second respondent to the appellant knowing that the appellant intended to operate his business in New South Wales and that the existing requirements in New South Wales to obtain such a licence was much more onerous in that state.
The magistrate found that, at some point, the requirements for obtaining a South Australian licence were tightened such that the appellant was unable to obtain a South Australian licence for use in New South Wales, and he could not obtain a licence in New South Wales without completing an apprenticeship. As a consequence, he was restricted to performing small jobs worth less than $1,000.
At trial, an issue arose as to whether Mr Bylhouwer offered to allow the appellant to use his licence. The appellant said he did. Mr Bylhouwer gave evidence that he thought this was “probably unlikely”, but he could not recall. The magistrate found Mr Bylhouwer’s evidence on this matter to be unconvincing. There was also an issue whether Mr Bylhouwer advised the appellant he could risk operating without a licence. The magistrate did not consider it necessary to decide whether the advice was given because, in her opinion, it could not amount to misleading or deceptive conduct. She came to that conclusion on the basis that the statement made clear that it was not lawful to operate without a licence and it would be a problem if the appellant was caught operating without a licence. The magistrate noted that the second respondent’s brochure contained a recommendation that all prospective operators check the licensing requirements in whichever states they intended to operate.
Ultimately, the magistrate found against the appellant on the following basis:[7]
I am satisfied that Spray Pave made representations that a licence could be obtained in South Australia and under mutual recognition laws the licence could be recognised in New South Wales. Mr Clarke gave evidence that he was later informed that those avenues were no longer available. No evidence was before the court as to the detail in the changes to the licensing system or when changes were made to the requirements to be licensed. I find that Mr Clarke was aware prior to entering into the agreement that in order to carry out all aspects of the spray paving business in New South Wales, he needed to be licensed. I find that Mr Clarke understood that he would be able to obtain a licence in South Australia and transfer it to New South Wales.
I am unable to find that Spray Pave engaged in misleading or deceptive conduct in providing advice to Mr Clarke about the South Australian licensing regime and mutual recognition laws. This is because there is insufficient evidence for me to be satisfied that the information given to Mr Clarke was incorrect at the time it was given. There is no evidence before me as to when the system changed, if indeed it did. Therefore, I am unable to determine if the advice given was capable of misleading. It is for Mr Clarke to prove that Spray Pave engaged in misleading or deceptive conduct or conduct that was likely to mislead or deceive in the provision of advice about licensing requirements. I am not satisfied that Spray Pave engaged in such conduct with respect to communications with Mr Clarke about gaining a licence. I also consider that a reasonable purchaser having been advised of licensing requirements in some States would make enquiries as to what was required to be licenced in the State where he or she intended to operate.
[7] Judgment of Magistrate Kennewell, 20 December 2016 at [54]-[55].
In my view, there was no error in the approach taken by the magistrate.
The magistrate found the appellant had not discharged the onus of proving that, at the time the representation was made, it was misleading or deceptive. The evidence before the magistrate did not permit her to make any conclusive finding as to when changes were made to the licensing system in South Australia which precluded the appellant from being able to obtain a South Australian licence which he could use in New South Wales. Accordingly, the magistrate’s conclusion that there was insufficient evidence for her to be satisfied that the representation made to the appellant was incorrect at the time it was given has not been demonstrated to be wrong.
Potential earnings
The appellant complains that the magistrate erred in failing to find that the second respondent engaged in misleading or deceptive conduct in relation to its representation in the brochure that an operator “could earn up to $3,300 a week”.[8] The magistrate addressed this issue in the following terms:[9]
Spray Pave advertised that an operator could earn up to $3,300 a week. In evidence, Mr Clarke agreed that he was not told that he would earn $3,000 a week. It is pleaded at para.28 of the defence and counterclaim that Mr Clarke earned on average $1,500 per week. I am not satisfied that Spray Pave engaged in misleading or deceptive conduct in relation to statements made about potential earnings.
[8] Pg 1 of Exhibit P2 (Trial Book).
[9] Judgment of Magistrate Kennewell, 20 December 2016 at [58].
In my view, there was no error in the approach taken by the magistrate.
The appellant submits that the representation was misleading or deceptive because the misleading nature of the representation as to licensing significantly reduced the scope of work the appellant could legally perform with a consequent reduction in his earning capacity. I do not accept this submission. While it is true that the evidence establishes that the appellant’s earnings were considerably less than $3,300 per week and that this could be attributed, at least in part, to the fact that he was restricted to performing jobs of less than $1,000 in value because he did not have a licence which permitted him to operate as a concreter in New South Wales, that does not establish that the representation was misleading or deceptive, or likely to mislead or deceive. First, the submission proceeds from a premise that the representation in relation to licensing was misleading or deceptive. For the reasons set out above, that was not established. Second, in any event, the representation was confined to potential earnings. It was not a guarantee or warranty as to how much would be earned.
Training
The appellant complains that the magistrate erred in failing to find that the second respondent engaged in misleading or deceptive conduct in relation to representations made by it relating to training.
In its brochure, the second respondent represented that its equipment and techniques were easy to master with just three days of intensive training. If an operator needed it, it would also provide follow-up training.[10] Mr Bylhouwer gave evidence that the second respondent had a training centre in Adelaide where a three‑day training program was undertaken, followed by a further two days training on site at the customer’s location. In the case of the appellant, that was in Sydney and Gosford in New South Wales.
[10] Pg 21 of Exhibit P2 (Trial Book).
The appellant complains that the training was inadequate. He submits that the use of instructors hired on a contract basis to provide the training in a single classroom in some way represented a failure to satisfy the representation in relation to training. The magistrate addressed this issue in the following terms:[11]
Mr Clarke complained that the training given by Spray Pave was insufficient to carry out the work. Mr Clarke conceded in evidence that he had not ever complained to Spray Pave about the training being inadequate. Mr Clarke gave evidence that Mr Bylhouwer came to New South Wales to work with him on a stencil job. Mr Clarke also conceded that Spray Pave did provide ongoing support on a reactive basis.
Mr Clarke gave evidence that he found the work difficult but it was not the reason he decided to stop operating the business. I am not satisfied that Spray Page engaged in misleading or deceptive conduct in relation to representations made about the training provided.
[11] Judgment of Magistrate Kennewell, 20 December 2016 at [59]-[60].
In my view there was no error in the approach taken by the magistrate. There is no inherent reason why the use of contractor instructors in a single classroom cannot adequately provide the training promised. The appellant has failed to demonstrate that the representation was misleading or deceptive, or that there had been a breach of a contractual promise. Given the concessions made by the appellant in this evidence, this ground of appeal could not be made out.
Assignment of the debt
The appellant complains that the magistrate erred in finding there was a valid assignment of the debt owed by the appellant from the second respondent to the first respondent.
The appellant submits that the respondents failed to adequately demonstrate that the assignment was an arm’s length transaction. He submits that the assignment was not valid as the evidence suggests that the assignment was not absolute and that there were further benefits to be received by the second respondent pursuant to the deed of assignment.
The magistrate found that the three requirements for a valid assignment of a debt, stipulated in s 15(1) of the Law of Property Act 1936 (SA), had been satisfied in this case. First, there was an assignment in writing under the hand of the assignor, Spray Pave. Second, the terms of that deed of assignment make clear that the assignment was absolute. Third, express notice of the assignment was given to the appellant in writing in the final notice of claim dated 8 April 2015. In my view the magistrate’s reasons do not disclose error.
At trial, Mr Bylhouwer gave evidence that the debt had been assigned by the second respondent to the first respondent and no amount was payable to Spray Pave. When cross-examined as to whether Spray Pave had received anything in return, he said that the respondents had a “business arrangement”. This evidence was not explored further in cross-examination.
In my view, the appellant has failed to demonstrate any error in the approach taken by the magistrate. There is nothing in the evidence of Mr Bylhouwer which would suggest anything other than that there had been some consideration paid by the first respondent to the second respondent for the assignment of the debt. That is to be expected. There is nothing to impugn the magistrate’s finding that the assignment was absolute.
Conclusion
The appellant has failed to demonstrate any error in the approach taken by the magistrate. There has been no error demonstrated on the appeal against the magistrate’s order that the appellant was liable to the first respondent in debt in the sum of $26,364.76. It follows that there is no error in the magistrate’s consequential orders dismissing the appellant’s counterclaim against the first respondent and the appellant’s third party claim against the second respondent.
I would dismiss the appeal. I would hear the parties as to costs.