Frost v Fuller No. Scgrg-98-1591 Judgment No. S93
[1999] SASC 93
•11 March 1999
FROST (TRADING AS AMBROSE BAKER & PARTNERS) v FULLER
[1999] SASC 93
Magistrates Appeal
Debelle J
This is an appeal from the decision of a magistrate dismissing the appellant’s claim to recover professional fees.
The appellant is a public accountant. He provided professional services to a group of companies called “the Capricorn Group” from 1990 to 1994. The appellant claimed that between September 1992 and May 1994 he had rendered accounts for professional fees totalling $10,456 of which $1,441.06 had been paid. In his action he claimed the balance of $9,014.94. The appellant claims that the fees are payable by the respondent and not by any company in the Capricorn Group.
The appellant had been the accountant for the respondent since about 1977 and for the respondent’s wife since at least 1981. In late 1989 or early 1990 the respondent purchased a group of three companies. Following the acquisition, the respondent changed the name of the group to the Capricorn Group and the three companies were then called Capricorn Credit Pty Ltd, Capricorn Credit Australia Pty Ltd and Capricorn Insurance Pty Ltd. The respondent is a director of each company.
The appellant gave evidence that since 1987 he has implemented a strict policy in respect of work for companies. The policy is that he will not provide accountancy services to companies unless the directors agree to pay his fees. He expressed his policy in these terms:
“It doesn’t matter to me whether the company is successful or not, all the companies I deal with I have a strict policy of charging whatever accounting fees to the individuals that are the directors.”
He said that he explained that policy when engaged by the respondent to provide accountancy services to the Capricorn Group in 1989. He also said that, at an early stage, he sent a letter to the respondent confirming the policy. However, the appellant could not produce a copy of the letter he claimed to have written, he could not be specific as to the date of the letter, and he could not produce a copy of any letter typical of the kind of letters he was writing to corporate clients in 1989 or 1990.
On 2 March 1993 the appellant wrote a letter to the respondent and Mr J Rawnsley concerning payment of the fees then due to him. The letter concerned fees in respect of work both for the Capricorn Group and for the respondent personally. The appellant gave evidence that both the respondent and Mr Rawnsley came to see him in response to that letter. He has no diary note or other record of the date when the alleged conversation occurred. He said that the two directors told him that he could not issue proceedings against them for the fees outstanding by the company since it was “a company debt and not their personal debt”. The appellant’s evidence was that he then explained to them that, if they wished him to continue any work, he would do so on the footing that they were personally liable. He was then asked:
“Question: ‘When you put it to them that you had already explained to them that they were personally liable, what was the response of Mr Fuller?
Answer: ‘They were both unhappy about it but they accepted the position because I would not do any more work for them’.”
The appellant also said that, after the meeting on 2 March 1993, he continued to undertake work for the companies and incurred payment from time to time.
At the trial, the appellant produced a bundle of thirteen accounts for fees in the period between 7 September 1990 and 31 May 1994 which were admitted as Exhibit P2. Those accounts are addressed to the respondent and Rawnsley and are in respect of fees for services to individual companies in the Capricorn Group. The last statement dated 31 May 1994 is for the balance claimed to be due in the sum of $9,901.20. The appellant said that the sum due to him was further reduced by payments in the form of tax refund cheques to Mrs Fuller which, by agreement, were credited to the balance outstanding by the companies.
The appellant was aware that in mid 1992 Rawnsley had been declared bankrupt. He was not clear when he became aware of that fact. The magistrate found, and the finding is not challenged, that the bulk of the work for the companies was done after the appellant had learned of Rawnsley’s bankruptcy.
The respondent denied that he had agreed at any time to pay the fees due for work performed by the appellant on behalf of the companies in the Capricorn Group. He also denied receiving a letter confirming that to be the position. He also denied that he had agreed at a meeting following the letter of 2 March 1993 to pay the costs of the accounting work on behalf of the companies.
In addition to the question of the liability of the respondent, there was also a substantial dispute as to the amount properly due to the appellant. The magistrate was not persuaded that the amount alleged to be due to the appellant was incorrect and there is no cross-appeal against that finding.
There was no evidence other than that of the parties. The case for each party had involved a substantial attack upon the credit of the other. No other witnesses were called. The documentary evidence was not extensive. In the course of their final submissions, counsel for the parties both conceded that much turned on the view taken by the magistrate of the credit of the parties.
The magistrate expressed his reasons for dismissing the plaintiff’s claim in these terms:
“In my view Mr Sallis has made a number of telling points against the plaintiff with respect to his evidence. Mr Sallis was critical of the manner of cross examination of his own client with respect to the trust account. He said this was typical of the ‘malicious’ manner in which the plaintiff had conducted this litigation. He submitted that that cross examination based, as it must have been, upon instructions, was founded in inuendo and speculation by the plaintiff and he suggested his own client’s version of events was inherently more probable. He said I should find that there was no meeting discussing the question of personal liability to pay. After reflection on the unsatisfactory nature of the plaintiff’s evidence and bearing into account where the onus of proof lies, I have reached the conclusion that the plaintiff has failed to establish, on the balance of probabilities, that Mr Fuller ever agreed either at the meeting in late 1989 or early 1990, or indeed at any other time, that he would personally meet the company’s accounts. This case was motivated, in my view, by the knowledge gained by the plaintiff that the Capricorn Group had failed and he could not hope to recover from the companies, or their liquidator.”
In this appeal, the appellant asserted, and the respondent denied, the existence of the agreement said to have been made by the respondent and Rawnsley as the directors of the Capricorn Group to pay the fees incurred by the companies for the work the appellant did for the companies.
There was no evidence of the letter allegedly sent confirming the agreement. The fact that the respondent did the work could not prove the agreement he alleged nor could it prove an estoppel. But the evidence as to the existence of the alleged agreement was not simply the appellant’s assertion of its existence and the respondent’s denial. The documents which were tendered at the trial provided a degree of corroboration for the appellant’s evidence. I have already referred to Exhibit P2, the bundle of 13 memoranda of fees sent by the appellant between 7 February 1991 and 31 May 1994. They were addressed to “Mr M Fuller and Mr K Rawnsley, C/- Capricorn Australia”. The fact that each is addressed to the respondent and Rawnsley suggests on its face that the debtors are the individuals not the particular company. There was no evidence that either the respondent or Rawnsley objected to the account being addressed in that way.
It is against that background that regard should be had to the letter dated 2 March 1993 sent by the appellant to the respondent and Rawnsley. The letter was addressed personally to them. It reads:
“Re: OUTSTANDING ACCOUNTS
I am disappointed to see another month pass by without any reduction to your account, despite many “promises”.
The payment history of your accounts may be of some interest to you, so I have provided a summary:
M. FULLER
11.5.90 $ 350
21. 6.91 250
5. 9.91 5M. FULLER & K. RAWNSLEY
29. 06.90 $ 250
29.11.90 446
8. 03.91 500
12.03.91 500
18. 8.92 1000It would seem that the only alternative available is to refuse any more services until the accounts are cleared in full.
If the accounts are still outstanding after the 16th March, 1993 I will instruct solicitors to issue Summonses immediately.
I regret having to take this action but you have left me no other alternative.”
The fees listed under the heading “M. FULLER” were for work done for the respondent personally. The fees listed under the heading “M. FULLER & K. RAWNSLEY” relate to work done in respect of one or the companies in the Capricorn Group. The respondent replied by letter dated 8 March 1993 written on the letterhead of Capricorn Australia Pty Ltd. It reads:
“We are in receipt of your letter dated March 2nd 1993 and I must admit as a past partner and friend I am amazed. We ask for work to be produced - our business depends on it as no doubt you are aware and yet you ask for money up front. Alan we understand you have bills to pay - you have never supported our business and at times you have been rude about our business. We need the work you have completed ASAP. We are prepared to pay you $200 each and every month - all contact to this office re; this account is to be directed through myself.
I would suggest that verbal approval to this letter would suffice and lets get on with business - should you require any discussion I am happy to meet in your office.”
The respondent was cross-examined as to the terms of the letter. The use of the word “we” is ambiguous. It could mean the companies in the Group, or it could mean the respondent and Rawnsley as directors. Even if it means the respondent and Rawnsley as directors, it does not necessarily mean that they agreed to be liable for the fees due in respect of the work done for the companies. The significance of the letter lies in the fact that the respondent did not deny that he and Rawnsley were liable for the amounts set out under the heading “M. FULLER & K RAWNSLEY” in the appellant’s letter of 2 March 1993.
There is a further factor. The three companies which had been acquired by the respondent were experiencing financial problems, although a liquidator or administrator had not been appointed. In those circumstances, it can be readily understood that the appellant would be looking to a person other than the companies for payment of his fees.
When reaching his conclusion, the magistrate did not weigh with the oral evidence any of the factors I have mentioned. The fact that the memoranda of fees were addressed to the respondent and Rawnsley, the absence of any denial in the letter dated 8 March 1993 of a personal liability, or the fact that the Capricorn companies were not financially sound were factors which provided a measure of corroboration for the appellant’s case. The magistrate’s reasons indicate that he has treated the case as one turning only on the credit of the only two witnesses called and the manner in which the appellant conducted the litigation. He has overlooked the factors I have mentioned which constituted an important part of the evidence.
In reaching this conclusion, I do not overlook the fact that early in his reasons, the magistrate had mentioned the memoranda of fees. But they are noted only in the course of a recital of the evidence. There is no examination of the weight to be attached to them. These were considered reasons. I do not think that it is reasonable to infer that the magistrate had regard to those memoranda when reaching his conclusion.
Mr Sallis, who appeared for the respondent, laid great emphasis upon the fact that Rawnsley had been declared bankrupt in mid 1992 and that the appellant knew that fact at least by 1994. The appellant’s knowledge of Rawnsley’s bankruptcy, he submitted, undermined the appellant’s evidence that he was looking to both the respondent and Rawnsley for payment. But Rawnsley’s bankruptcy was in mid 1992, well after the date on which, according to the appellant, the arrangement had been put in place. Furthermore, it seems that it was not until 1994 that the appellant first learned that Rawnsley was bankrupt. In any event, the liability of the respondent and Rawnsley was, on the appellant’s case, joint and several. Rawnsley’s bankruptcy does not, therefore, have the weight that Mr Sallis sought to attach to it.
This was a case where there were factors other than the credibility of witnesses which bore on the ultimate issue for determination. They were factors which had an important bearing on the weight to be attached to the evidence of the appellant. Findings on credibility do not, standing alone, necessarily preclude an appellate court from interfering with the decision of the trial court: State Rail Authority of New South Wales v Earthline Constructions Pty Ltd (In Liq) [1999] HCA 3. The factors identified above had an important bearing on the weight to be attached to the evidence of the appellant. The failure of the magistrate to weigh those factors with the oral evidence means that the appellants’ case has not been considered on the whole body of the evidence. It is necessary, therefore, to set aside the magistrate’s decision and order a new trial.
I do not lightly reach this conclusion, particularly as the trial occupied no less than seven days. I express the wish that the parties conduct the new trial with a good deal more expedition than the first trial. The issues were in a fairly narrow compass. The trial should not have occupied any more than two days at the most. It is apparent from reading the transcript that time was occupied in dealing with issues which had very little, if any, bearing upon the ultimate result. The length of the trial reflects sadly upon the parties and their counsel.
It is unnecessary to deal with all of the arguments adduced by the parties. As there must be a new trial, I briefly deal with two of them. The appellant complained that the magistrate had had regard to an adverse finding made in other proceedings as to his credibility. It is not uncommon for a witness to be asked whether a court has commented on his testimony in another case. Views differ as to the legality of the practice. In Seaman v Netherclift (1876) 2 CPD 53 both Bramwell and Amphlett JJ held that such a question should not have been put. The editors of Phipson on Evidence (14th ed) note in para 12-23 that Hawkins J criticised the practice in R v Bottomley, The Times 7 February 1893. However, it appears that in South Africa the practice is permitted but said to be of doubtful utility: S v Damalis 1984 (2) SA 105. The doubtful value of the practice lies in the fact that there may have been a number of extraneous reasons why the witness was not believed. Further, the conclusion is only a matter of opinion. Most importantly, the issue is whether the witness is to be believed in the current proceeding. The issues in this action were quite different from those in the other action to which his cross-examiner had referred.
There is also a question whether the appellant was entitled to rely on a letter from the respondent dated 10 January 1997. The letter had been written in an attempt to settle the appellant’s claim. That letter was not admissible by reason of the provisions of s67C of the Evidence Act 1929 which excludes evidence of communications made in connection with an attempt to negotiate settlement of a civil dispute.
For these reasons, the appeal is allowed. The order of the magistrate will be set aside. There will be an order for a new trial.
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