Eaton v AJM Services Pty Limited

[2002] NSWSC 223

CITATION:	Eaton & Anor v AJM Services Pty Limited [2002] NSWSC 223
CURRENT JURISDICTION:	Common Law Division
FILE NUMBER(S):	SC 13115/01; 13118/01
HEARING DATE(S):	Monday 18 March 2002
JUDGMENT DATE:	27 March 2002
PARTIES :	Joined Pty Limited and Douglas Eaton v AJM Services Pty Limited ACN 076 512 064 Douglas Eaton and Joanne Eaton v AJM Services Pty Limited ACN 076 512 064
JUDGMENT OF:	Michael Grove J at 1

LOWER COURT JURISDICTION :	Local Court
LOWER COURT FILE NUMBER(S) :	166/2000; 327/2000
LOWER COURT JUDICIAL OFFICER :	C.A. Elliott, LCM

COUNSEL :	A.J. Allen (Appellant) M.R. Pesman (Respondent)
SOLICITORS:	Douglas Eaton (Appellant) Ross Fiddes (Respondent)
CATCHWORDS:	LOCAL COURT (CIVIL CLAIMS) - ASSERTED ERROR BY MAGISTRATE - FACT FINDING - SALE OF BUSINESS - NO SPECIAL POINT OF PRINCIPLE
LEGISLATION CITED:	Local Courts (Civil Claims) Act Trade Practices Act
DECISION:	EACH SUMMONS DISMISSED WITH COSTS

IN THE SUPREME COURT
OF NEW SOUTH WALES
COMMON LAW DIVISION

MICHAEL GROVE J

13115/01 - JOINED PTY LIMITED and DOUGLAS EATON v AJM SERVICES PTY LIMITED ACN 076 512 064

13118/01 - DOUGLAS EATON and JOANNE EATON v AJM SERVICES PTY LIMITED ACN 076 512 064

JUDGMENT

1 HIS HONOUR: There are two summonses before the Court, each challenging a decision delivered in Toronto Local Court on 5 September 2001. Summons 13115/01 nominates the parties as Joined Pty Limited (Joined) and Douglas Eaton as appellants and AJM Services Pty Limited (AJM) as respondent. Summons 13118/01 nominates Douglas Eaton and Joanne Eaton as appellants and AJM Services Pty Limited as respondent.

2 Two proceedings instituted by statement of claim were heard together by consent in the Local Court, as were the summonses in this Court. In Local Court Action 166/2000 AJM sued Joined and D. Eaton for $7,900.24, a liquidated sum described as rent on nominated premises, fees for ISDN (which I gather to be acronymic jargon for some gateway control to Internet access) payable between 10 and 31 December 1999 and the payment of some wages on the first mentioned date.

3 The pleading is otherwise uninformative and the defence likewise, denying liability for the amount claimed, the existence of agreement and a somewhat cryptic statement that “the defendants do not admit the plaintiff was the owner, occupier or holder of the services claimed”.

4 In Local Court Action 327/2000 AJM sued D. & J. Eaton for $15,000 for goods sold and delivered. The claim was elucidated in an amended pleading and was said to be the balance unpaid in respect of the sale of certain equipment used in AJM’s business. An express agreement to pay a balance of debt within two days of proof being provided that an outstanding telephone account of Joined had been paid was also pleaded. The defence denied any agreement between AJM and J. Eaton, whereas D. Eaton “did not admit” any such agreement. Further D. Eaton pleaded that the goods were “incomplete and not to specification” and that “the telephone account had not been paid”. He denied that the plaintiff was the owner of the goods supplied and alleged that he was induced to purchase the goods by an unspecified fraudulent misrepresentation, breach of s52 of the Trade Practices Act and made a claim for an unparticularized set-off.

5 There is reference in the judgment of the magistrate to cross claims. I was informed by counsel for the respective parties, and as is consistent with the terms of the summonses, that no issue was raised in respect of them in the appeal. The ambit of the appeal is restricted by s69 of the Local Courts (Civil Claims) Act.

6 Disputes arose out of the sale of an Internet service business, at least In part conducted by Joined and in respect of which AJM apparently owned the equipment. D. Eaton, who is by profession a solicitor, negotiated the purchase of the business with A. Micallef, who appears to have been the principal human being in the business which was conducted through a web of corporations, partnerships and business names. There was insufficient evidence to enable either the magistrate or me to chart this or the post-purchase web. There was evidence that D. Eaton had said (to an employee of the business other than A. Micallef) that he and J. Eaton were buying the business together, D. Eaton looking after the accounting side and J. Eaton the technical side.

7 There was a document setting out terms of agreement which was a letter dated 1 December 1999 on the letterhead of D. Eaton as a solicitor and conveyancer, which was signed by D. Eaton and A. Micallef. Inter alia, this document evidenced that “Micallef will transfer to Eaton” shares in Joined and another corporation called Summagrove Pty Limited. I note that some copy correspondence tendered in the Local Court included another letter dated 10 December 1999 and an agreement dated 21 February 2001 titled as being between Fordance Pty Limited, AJM Services Trust and D. Eaton. It was referred to as a release and I shall mention it again later.

8 The claim numbered 166/2000 resulted in a verdict for the plaintiff (AJM ) for “the amount claimed with interest to be filed and calculated in the Registry”.

9 The quantum as such is not challenged in the grounds of the summons but it sets out the following:

“1. The Magistrate erred in law in failing to determine which of the Defendants or as to whether both Defendants were liable to the Plaintiff.
2. The Magistrate erred in law in finding the absence of evidence that there was an agreement between the Plaintiff and the First Defendant (Joined Pty Ltd).
3. The Magistrate erred in law in finding that the Second Defendant was in the position of a fiduciary and that there was therefore by implication an agreement for adjustments.”

10 The letter of 1 December 1999 evidences that the sale was to be achieved, at least in part, by the transfer of shares in Joined to D. Eaton. There was evidence that “the day of transfer” of the business was 10 December 1999 and that D. Eaton requested that staff work on that day to maintain continuity of business. As will be mentioned in connection with the other action heard concurrently, there was a dispute between Telstra and the business. In various documents a variety of corporations are mentioned in connection with what is variously described as a telephone or similar account. The dispute needed resolution and in the meantime up to 31 December AJM claimed that it paid the rent on the premises and the fees for ISDN links. The fact of payment was established. Those elements made up the amount of claim, that is wages, premises rental and ISDN link fees.

11 Grounds 1 and 2 relate to the status of Joined. I do not understand there to have been any suggestion of agreement between AJM and Joined. The latter was one of the vehicles through which the business was conducted and the sale was being effected, inter alia, by the transfer of its shares. The letter produced on D. Eaton’s stationery and drafted by him leaves much of the mechanics of the “deal” in obscurity, but insofar as the situation could be determined the magistrate found that both Joined and D. Eaton were liable. There were no cross claims between them and the evidence showed that what happened was that D. Eaton became the owner of the shares in Joined (presumably) and disputes between him and the corporation in which he owned the shares was unlikely. It would also be unlikely to lead to litigation if J. Eaton was also an owner of the shares.

12 The nature of the claim was simply a common money count for money paid by a plaintiff for a defendant at his request. So far as the evidence went, Joined and/or D. Eaton enjoyed the benefit of the payments, knew that they were being made and offered no dissent, in one case, expressly asking for payment to be made. Those payments by AJM exonerated both Joined and D. Eaton from any liability in respect of the specified wages, rent and fees.

13 The magistrate expressed his reasons in terms of an implied agreement for adjustment of credits and liabilities but analysis of the correctness of that approach is not required in the light of the clear evidence of the recoverability of the sum by AJM on a simple indebitatus count.

14 I reject ground 3. There was not a finding that D. Eaton was a fiduciary of AJM. The observation that he had an obligation to draw an agreement which did not disadvantage AJM was erroneous. AJM had not retained him professionally and the evidence revealed that AJM (through A. Micallef) was content for D. Eaton to draft any written memorandum. However, as I have mentioned that finding was unnecessary to establish liability for the moneys paid to the benefit of Joined and D. Eaton.

15 For reasons which were not explained, the transcript merely records that counsel for AJM addressed whereas D. Eaton’s submissions seem to have been transcribed. Perhaps it was because he was technically a litigant in person. He is recorded as submitting that there was no agreement with AJM but only between himself and A. Micallef. That submission is somewhat contradicted by a letter in handwriting, signed by D. Eaton, addressed to AJM Services Pty Limited and dated 10 December 1999 in which there is reference to “the transfer of this business from you today”.

16 Be that as it may, the facts were exclusively within the jurisdiction of the magistrate and that includes the identity of parties and the extent to which any writing evidenced the totality, or less than the totality, of the agreement between those parties.

17 The only legal error demonstrated has been the observation about obligation of D. Eaton as a solicitor to act not to the disadvantage of AJM but this was, in terms of the outcome of the litigation, inconsequential.

18 Local Court Claim 327/2000 was for $15,000, in effect a balance of purchase money.

19 Certain of the grounds originally filed were abandoned but those pressed were:

“1. The Magistrate erred in law in failing to find that the document dated 10 December, 1999 addressed to the Plaintiff and signed by the First Defendant evidenced a variation of the agreement between the Plaintiff and the First Defendant which required the Plaintiff to in fact pay in full monies due in respect of outstanding telephone accounts standing in the name of Joined Pty Limited and that compliance therewith required actual payment by the Plaintiff.
2. The Magistrate erred in law in that the evidence did not permit a finding that there were no outstanding debts to Telstra.
5. The Magistrate erred in law in that it was a misconstruction of the evidence in holding that paragraphs 5 and 6 of the letter dated 1 December, 1999 and signed by both the First Defendant and Alexander Micallef was a consideration relevant in establishing the Plaintiff’s claim in that the Plaintiff’s claim was a claim for payment in respect of the sale of certain equipment used in the Plaintiff’s business.
7. The Magistrate erred in law in failing to consider at all the effect of the subsequent agreement entered into between Fordance Pty Ltd AJM Services Trust and the First Defendant on 21 February, 2001 and that the terms of such agreement ought to have been construed as release by the Plaintiff of its claim against the First Defendant.
8. The Magistrate erred in law in dismissing the First Defendant’s objection to jurisdiction in that such proceedings were a re hearing of an action where there had been no hearing before the Arbitrator by reason of the Plaintiff being at that time a de registered Corporation having no standing and that the proceedings ought therefore have been recommenced.”

20 Ground 8 was not developed. It appears that at the time of the scheduled arbitration, AJM had been struck from the register and for that reason the hearing proceeded no further than establishment of that circumstance. It was common ground at the hearing that AJM had been restored to the register and a statement by counsel that that registration was effective in retrospect was not challenged. I am unpersuaded that the circumstance as described obliged recommencement of the action.

21 I have already made mention of the handwritten letter (on the stationery of Wyong Shire Council – Councillor Doug Eaton) dated 10 December 1999 which was the “day of transfer”. Part of the letter states:

“I hereby undertake to pay ………………. (b) $15,000 for sale of equipment payable within two days of proof of settlement of outstanding phone accounts in the name of Joined Pty Limited to be paid up to today’s date.”

22 Once again there is some confusion about corporate vehicles but what the learned magistrate determined was, in short, that $15,000 part of the purchase price was retained to ensure payment of outstanding accounts of Joined. There was evidence that there were no outstanding debts once the dispute with Telstra had been resolved. There was adequate evidence of resolution and therefore no longer any basis for retention of the amount stated. It was open to the magistrate to reject the proposition that precise payment by Joined was a pre-requisite to release of the retained portion of the purchase money.

23 The magistrate also found as a fact that the agreement was between AJM and both defendants, that is both D. and J. Eaton. No doubt in so finding he had regard to what had been said about the intended division of the operation. I reiterate that fact finding is not open to challenge.

24 Ground 7 refers to yet another pair of entities AJM Services Trust and Fordance Pty Limited trading as Newcastle Regional Users. I note reference to the acronym NRU from time to time. D. Eaton is also a party to this document which is dated 21 February 2001. It contains a clause stating that A. Micallef as a director of AJM will procure a release of Eaton from all court action taken by AJM against him. Exactly where this document fits into the mosaic of transactions, the magistrate did not determine. Neither am I able to do so. I note that A. Micallef is not a party to this agreement although he has signed it and an endorsement upon it.

25 The conclusion which I reach within the confines of my jurisdiction is that there was material which entitled the magistrate to determine that D. and J. Eaton were indebted to AJM in the sum claimed.

26 The parties expressed concern that this matter be dealt with in an urgent fashion because a relevant winding up petition was in fact listed on the same day as these appeals but a short adjournment of that petition was procured. The appeals were listed for hearing on 18 March 2002. Counsel for the appellants conveyed his instructions that a relevant affidavit had been despatched for filing in the Registry. In its absence, the parties agreed to the tender in lieu of a collection of copy statements and exhibits. Bearing a filing stamp of 20 March 2002 an affidavit of D. Eaton was later forwarded to me via the Registry. Two copy pages appearing between pages 1 and 2 of the statement of Louise Greer dated 16 July 2001 appear to be notes of argument and I have assumed that they were accidentally included. The affidavit appears to be sworn by D. Eaton on 13 March. Possibly part of the delay arose from the absence of endorsement on the affidavit of the Supreme Court reference number which appears to have been added by notation, I would infer, after the Registry identified the file. As I have said, there is much confusion particularly about the corporate vehicles and the transactions are by no means described with precision either by the magistrate or by me, but there has not been provided any comprehensive (or comprehensible) description of the exact dealings.

27 The learned magistrate found that the amounts claimed in each instance were owing and owing by the parties who had been sued. Those central findings of facts were exclusively for his jurisdiction and in the absence of demonstration of error, they should be allowed to stand.

28 Each summons is dismissed with costs.

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Last Modified: 03/28/2002