GA Stevens Pty Ltd v Deloitte Growth Solutions Pty Ltd
[2009] SASC 364
•25 November 2009
SUPREME COURT OF SOUTH AUSTRALIA
(Magistrates Appeals: Civil)
GA STEVENS PTY LTD v DELOITTE GROWTH SOLUTIONS PTY LTD
[2009] SASC 364
Judgment of The Honourable Justice Bleby
25 November 2009
APPEAL AND NEW TRIAL - APPEAL - GENERAL PRINCIPLES - RIGHT OF APPEAL - WHEN APPEAL LIES - ERROR OF LAW - PARTICULAR CASES INVOLVING ERROR OF LAW - DENIAL OF NATURAL JUSTICE
Appeal from decision of Magistrate finding that appellant was liable to pay respondent fees for professional services - appellant engaged respondent to prepare a valuation of shares - engagement letter included an estimate that fees would be in the region of $5,000 to $6,000 - respondent prepared valuation report and also participated in conference of experts - respondent sent appellant invoice for $11,804.66 - respondent commenced action in debt in Magistrates Court - appellant pleaded that it was an express term of retainer that fees would not exceed $6,000 - before respondent had closed its case, Magistrate expressed a view that that defence could not succeed - appellant did not call any witnesses.
Whether appellant denied procedural fairness - whether any denial of procedural fairness affected the outcome of the trial - whether appellant could have led any evidence relevant to matters in issue - whether respondent bound by terms of retainer to charge no more than $6,000.
Appeal dismissed - Magistrate's conclusion that the figure of $6,000 was an estimate only was correct - appellant unable to indicate how case would have been run if Magistrate had not expressed a view - any denial of procedural fairness did not affect result.
Trade Practices Act 1974 (Cth); Fair Trading Act 1987 (SA); Magistrates Court (Civil) Rules 1992 (SA) r 69A, referred to.
Stead v State Government Insurance Commission (1986) 161 CLR 141, discussed.
Jones v National Coal Board [1957] 2 QB 55; Haw Tua Tau v Public Prosecutor [1982] AC 136; Kyren Pty Ltd v Built Projects Pty Ltd [2006] SASC 204, considered.
GA STEVENS PTY LTD v DELOITTE GROWTH SOLUTIONS PTY LTD
[2009] SASC 364Magistrates Appeal: Civil
BLEBY J. This is an appeal from a decision of a Magistrate who gave judgment for the respondent in the sum of $7,562.50 plus GST, interest and costs. The dispute concerns the liability of the appellant, GA Stevens Pty Ltd (“GA Stevens”), to the respondent, Deloitte Growth Solutions Pty Ltd (“Deloitte”), under a letter of engagement whereby Deloitte agreed to undertake a valuation of shares owned by GA Stevens.
Background
In August 2006, GA Stevens’ solicitor wrote to Mr Whitbread of Deloitte instructing Mr Whitbread to prepare a valuation of the company Sensible Funerals Pty Ltd and its business “for the purpose of calculating a fair market value and the price per share to be paid by the majority for purchase of the minority’s shareholding”. The valuation report was to be used in proceedings in the Supreme Court. On 7 September 2006 Deloitte sent a letter of engagement to GA Stevens. This letter was never executed on behalf of GA Stevens. However, a later letter of engagement dated 16 November 2006 was signed by Mr Stevens, a director of GA Stevens, on 17 November. The 16 November letter was, insofar as is relevant for the purposes of this appeal, identical to the 7 September letter. There is no doubt that the terms of the contract between GA Stevens and Deloitte included the relevant parts of the letter.
The 16 November letter of engagement contains the following passage under the heading “Estimated Fees and Expenses”:
Our fees, which will be payable by G.A. Stevens Pty. Ltd., are based on hourly rates which take account of the level of staff assigned to the engagement.
Assuming no undue complications (and provided we do not subsequently agree to carry out work additional to that agreed in this letter) we estimate that our fees will be in the region of $5,000 to $6,000 (inclusive of disbursements and exclusive of GST). This fee estimate assumes that information requested in Appendix 2 will be up to date and freely available to us upon commencement of the engagement and that we will be provided reasonable access to Sensible Funeral’s management team. We will renegotiate our estimated fee in the event that the scope of our engagement is increased, for example as a result of:
· delays in the timetable which are beyond our control
· changes to the anticipated structure of the transaction
· delays in the provision of the information requested in Appendix 2
· responses to queries from ASIC, the Australian Taxation Office or other third parties which you require us to attend to
· updates to our report subsequent to its completion if requested by you
· other unforeseen matters.[1]
[1] The reference to Appendix 2 is a reference to a document annexed to the letter of engagement, listing the information Deloitte required in order to undertake the valuation.
The letter included hourly charge-out rates for various levels of staff. Appendix 1 contained the standard terms and conditions of engagement. Those conditions included:
6.1Unless otherwise specifically agreed, Deloitte’s fees will be only estimates based on hourly rates which take account of the level of staff assigned to the engagement. Deloitte will advise the Client if it considers the estimate is likely to be exceeded.
Between 29 August and 17 November 2006, Deloitte prepared the valuation report for Sensible Funerals as instructed. On 31 October Deloitte sent GA Stevens an invoice for $5,601 for professional services. This account has been paid. The final valuation report was delivered to GA Stevens on 17 November. It would have been obvious to GA Stevens that further work was being undertaken by Deloitte after 31 October. On 20 November 2006, Mr Whitbread attended at a conference of valuers convened in connection with the Supreme Court proceedings. Following that conference, a compromise was reached in the Supreme Court proceedings and the action was discontinued.
On 21 December Deloitte sent GA Stevens an invoice for $11,804.66 for “fees for professional services”. The amount owing comprised $10,000 in fees, $731.51 in disbursements and $1073.15 in GST. It is GA Stevens’ failure to pay that account that is the subject of these proceedings.
Proceedings in the Magistrates Court
On 28 February 2008 Deloitte filed a claim in the Magistrates Court seeking the sum of $11,804.66 being monies owing by GA Stevens for professional services. In its defence GA Stevens pleaded that it was an express term of the letter of engagement that the costs would not exceed $6,000 unless the fee was renegotiated due to the scope of the engagement being increased. GA Stevens pleaded, further, that the fee was not renegotiated.
The trial took place on 9 April 2009. GA Stevens was represented by its director Mr Stevens, who is a legal practitioner.
Deloitte tendered a number of documents including the letter from GA Stevens’ lawyers instructing Deloitte to prepare the report, a copy of Deloitte’s terms and conditions of engagement, some correspondence and the report of a Court Expert together with several annexures including a copy of the letter of engagement. GA Stevens tendered two letters from Deloitte setting out, in detail, the items of work for which Deloitte sought payment.
Deloitte called one witness, Mr Whitbread. He was asked about the work he had carried out for GA Stevens and the basis on which the fees were calculated. He admitted that he had never “directly” discussed with Mr Stevens the possibility that the fees might exceed the $5,000-$6,000 estimate. He was cross-examined on the work done and the instructions received from GA Stevens. Mr Stevens put it to Mr Whitbread that he had never discussed any variation or increase of the fees during the period of the engagement, and that he must consequently have been prepared to be bound by the estimate. The Magistrate then said:
You can’t hold him to this contract in the way you’re trying to. I can tell you, Mr Stevens, unless you can bring some other evidence than you have put already the terms of their engagement are not going to hold them to $6,000.
After Mr Whitbread had been released from the witness box the Magistrate said:
Mr Stevens, I have expressed a view, I can’t see how you can possibly argue that you can expect them to be held to the maximum estimate of $6,000.
Shortly afterwards the Magistrate said:
I am just going to give a few brief reasons. Do you want to say anything else about the extent that you can hold them to the $6,000?
Mr Stevens then made submissions to the effect that the terms of the retainer bound Deloitte not to charge more than $6,000. Immediately after Mr Stevens’ submissions had concluded the Magistrate gave reasons for ruling that Deloitte was not to be held to its estimate of $5,000-$6,000. These reasons included the following:
…What is clear is the basis of charging is that [Deloitte are] charging on an hourly rate, they have given an estimate of up to $6,000 and they should have, before exceeding the $6,000, have raised the fact that they passed the $6,000 amount with the client.
The client here is himself a professional. I have heard the evidence of Mr Whitbread and it is clear that the scope of works did to some extent change, that there were delays in providing information and that they did an amount of work well in excess of $6,000 and indeed, although I don’t have it as an exhibit, there was an invoice rendered at the end of October for $5,600 and work still continued.
There is a worrying aspect of a scope of works document or the Deloitte letter setting out their terms and conditions which is dated November and it has still got the $6,000 figure in it. It is clear to me that that is a worry without substance. That is simply a repeat of the original terms of engagement right back in the end of August/September which has been prepared and put a current date on it for some other purpose, other than a contractual purpose.
Any view of this is going to be that the plaintiff is entitled to charge on a quantum meruit basis, that is a reasonable fee: a quantum meruit as to time done. The rates are set out in the terms of engagement. I bind myself to that ruling.
The Magistrate then proceeded to hear submissions on the quantum of GA Stevens’ liability to Deloitte. The court-appointed expert attended and was asked questions by Mr Stevens and by counsel for Deloitte. Following this Deloitte closed its case. The following exchange then occurred between Mr Stevens and the Magistrate:
His Honour: All right, well, the plaintiff closes its case. And, what’s your case?
Mr Stevens: Your Honour ruled on the defence.
His Honour: Sorry?
Mr Stevens: Your Honour has already ruled on the main issue arising in the defence.
His Honour: I have.
Mr Stevens: I’d be quite happy to call Fiona Stevens but that would be in part revisiting the issue of her evidence concerning the discussions that she had with Mr Whitbread.
His Honour: I have already ruled on that, all that’s left is how much.
Mr Stevens: Could I indicate because I think it’s important that what she would have – prior to your ruling – informed that the defendant even had an opportunity of presenting a case about that very issue. She would have said that she was the person who engaged Mr Whitbread and would have told your Honour about the discussion she had with him about the fees over an extended period of time and that she wouldn’t have engaged Deloittes in preference to the other parties who had been consulted who had given maximum fees of $5,000 rather than a 300% variation on the estimated fee for doing the same or similar work by a similarly qualified professional. And that in her experience in briefing experts, which she does frequently, no other expert has exceeded an estimate without first obtaining permission to proceed. Your Honour has ruled on the very issues arising in the defence as to what – that there was a contract and on what basis.
His Honour: I asked you if there was anything you wanted to add before I ruled on it too.
Mr Stevens: I would have like to have run my case.
His Honour: You didn’t indicate any of that evidence was available.
Mr Stevens: Well, I wasn’t required to, it was still in the plaintiff’s case. So in these circumstances, I won’t present any further evidence based on your ruling.
His Honour: So you are not calling evidence?
Mr Stevens: Or even presenting a case.
His Honour: No, okay thank you.
Mr Stevens: Because you have ruled.
His Honour: Is there anything else you want to add?
Mr Stevens: In terms of – effectively your Honour has also pre-empted the prospect of presenting a no case to answer or as they haven’t on their own admission complied with their own terms and conditions. In any event, we are at this current situation.
His Honour: Is there anything else you want to add, or evidence you want to call?
Mr Stevens: Well, the ruling has pre-empted any possibility of presenting evidence I think with respect to the defence.
His Honour: Is that a no?
Mr Stevens: Well, can I also point out there is no claim for a quantum meruit.
His Honour: Is there anything you want to say in closing?
Mr Stevens: No.
Judgment was then entered for Deloitte in the sum of $7,562.50 plus GST, plus $1,500 interest, plus costs.
The appeal
GA Stevens’ grounds of appeal against the decision of the Magistrate are:
1The Magistrate erred in law in that prior to the close of Deloitte’s case the Magistrate made a ruling as to the liability arising under the letter of engagement.
2The Magistrate denied GA Stevens procedural fairness in that the ruling had the effect of dismissing GA Stevens’ defence prior to presentation of the defence case.
3After the ruling by the Magistrate the hearing continued on the basis that liability had been determined and the remaining trial issue was quantum.
4The Magistrate’s ruling and assessment of quantum was contrary to the terms and conditions of the Letter of Engagement.
Counsel for GA Stevens identified a series of decisions to the effect that a judge should not reach a decision on any point until each party has had the opportunity to lead evidence and make submissions.[2] It was conceded, however, that this principle was subject to the qualification that an appellate court will not order a new trial if it would inevitably culminate in the same result as the earlier trial.
[2] Jones v National Coal Board [1957] 2 QB 55; Haw Tua Tau v Public Prosecutor [1982] AC 136; Stead v State Government Insurance Commission (1986) 161 CLR 141; Escobar v Spindaleri (1986) 7 NSWLR 51; Burwood Municipal Council v Harvey (1995) 86 LGERA 389; Antoun v The Queen (2006) 224 ALR 51.
In Stead v State Government Insurance Commission[3] the High Court[4] said:[5]
The general principle applicable in the present circumstances was well expressed by the English Court of Appeal (Denning, Romer and Parker L.JJ.) in Jones v. National Coal Board, in these terms:[6]
"There is one thing to which everyone in this country is entitled, and that is a fair trial at which he can put his case properly before the judge. ... No cause is lost until the judge has found it so; and he cannot find it without a fair trial, nor can we affirm it."
That general principle is, however, subject to an important qualification … That qualification is that an appellate court will not order a new trial if it would inevitably result in the making of the same order as that made by the primary judge at the first trial. An order for a new trial in such a case would be a futility.
For this reason not every departure from the rules of natural justice at a trial will entitle the aggrieved party to a new trial. By way of illustration, if all that happened at a trial was that a party was denied the opportunity of making submissions on a question of law, when, in the opinion of the appellate court, the question of law must clearly be answered unfavourably to the aggrieved party, it would be futile to order a new trial.
Where, however, the denial of natural justice affects the entitlement of a party to make submissions on an issue of fact, especially when the issue is whether the evidence of a particular witness should be accepted, it is more difficult for a court of appeal to conclude that compliance with the requirements of natural justice could have made no difference. True it is that an appeal to the Full Court from a judgment or order of a judge is by way of rehearing and that on hearing such an appeal the Full Court has all the powers and duties of the primary judge, including the power to draw inferences of fact. …. However, when the Full Court is invited by a respondent to exercise these powers in order to arrive at a conclusion that a new trial, sought to remedy a denial of natural justice relevant to a finding of fact, could make no difference to the result already reached, it should proceed with caution. It is no easy task for a court of appeal to satisfy itself that what appears on its face to have been a denial of natural justice could have had no bearing on the outcome of the trial of an issue of fact.
[3] (1986) 161 CLR 141.
[4] Mason, Wilson, Brennan, Deane and Dawson JJ.
[5] (1986) 161 CLR 141, 145-146.
[6] [1957] 2 QB 55, 67.
The issue on which the Magistrate ruled in this case was a matter of law – namely, the construction to be placed on the terms of the retainer in general and on the “estimate” in particular. Mr Stevens was given the opportunity to make submissions on this point, albeit not before the Magistrate had expressed a strong view on the issue. Mr Stevens did in fact make submissions on the issue. Later Mr Stevens was expressly asked whether he wished to call any evidence or make further submissions. He declined to do so. In these circumstances it is arguable that there was no denial of procedural fairness.
In any event, I am satisfied that, if there was a denial of procedural fairness, it had no impact on the outcome of the trial. In my view, GA Stevens’ argument that Deloitte ought to be held to the estimate of $5,000-$6,000 was bound to fail for two reasons.
First, I agree with the Magistrate that the figure of $5,000-$6,000 is an estimate and not a fixed quote. The section of the letter in which those figures appear is headed “Estimated Fees and Expenses”. The figure of $5,000-$6,000 is referred to, three times, as an “estimate”. It is expressly qualified by a number of assumptions, including that the requested information will be up to date and freely available, and that Deloitte does not subsequently agree to do additional work. There is no reason to consider that the word “estimate” as used in the letter of engagement does not bear its well understood ordinary meaning.[7]
[7] See Kyren Pty Ltd v Built Projects Pty Ltd [2006] SASC 204, [17]-[27].
Secondly, it is conceded by GA Stevens that some of the work done by Deloitte, particularly in relation to the conference of valuers in connection with the Supreme Court proceedings, was in addition to and outside the scope of the work contemplated in the original retainer and therefore not included in the estimate. The opening paragraphs of the engagement letter set out the scope of the engagement:
Introduction
You have requested Deloitte Touche Tohmatsu (Deloitte) to prepare a report expressing our opinion as to the fair market value of a 23.50% ownership interest in Sensible Funerals Pty Ltd (Sensible Funerals) as at 31 August 2006.
Purpose of Valuation
We understand that this valuation report is required for the purposes of Supreme Court action no 514 of 2006, and more specifically, the purchase of a 23.50% ownership interest held by G.A. Stevens Pty. Ltd. by the remaining shareholders of Sensible Funerals.
Deloitte maintains (and GA Stevens concedes) that the conference of valuers on 20 November 2006 was clearly outside the scope of the original engagement. That fact alone is enough reason to hold that Deloitte should not be held strictly to the original estimate.
There is a final consideration which supports my conclusion that the denial of procedural fairness (if any) did not affect the outcome of the trial. GA Stevens complains of the denial of an opportunity to “run [its] case”. Very little indication was given what that case might comprise. No affidavit was put before me identifying the evidence that GA Stevens would have called had it been given the opportunity to run its case. Counsel for GA Stevens was unable, in the argument on this appeal, to point to any specific matter that could have assisted his client’s case at trial. The only suggestion of what the content of GA Stevens’ case might have been are the remarks made by Mr Stevens before the Magistrate about calling Fiona Stevens to give evidence of a discussion she had with Mr Whitbread about fees. There is no indication, other than what was said by Mr Stevens to the Magistrate, of the content of that discussion. At most, it appears that the matters to which Ms Stevens could have testified might have been relevant to a claim by GA Stevens that Deloittes had breached the contract by not advising GA Stevens that their estimated fee was likely to be exceeded, or had engaged in misleading conduct. There is no counterclaim in these proceedings for damages for breach of contract or for misrepresentation or for breach of the Trade Practices Act 1974 (Cth) or Fair Trading Act 1987 (SA). Nor are these matters pleaded in GA Stevens’ defence. These are simply not matters that arise in these proceedings.
In short, it appears that the view reached by the Magistrate on the effect of the terms of the contract was correct. GA Stevens has been unable to identify any evidence which it could have called which would have been relevant to that issue. It is not necessary to decide whether there was in fact a denial of procedural fairness. On the material before me, I am satisfied that if there was such a denial it made no difference whatsoever to the outcome.
The Magistrate was entitled to proceed, as he did, on an assessment based on quantum meruit.
Basis on which the Magistrate determined quantum
One ground of appeal was that the Magistrate’s ruling and assessment of quantum was contrary to the terms and conditions of the letter of engagement. The argument that quantum was not properly assessed was not seriously pressed in the appeal, other than as part of the general submission that Deloitte ought to be held to its estimate. It can be dealt with briefly for the sake of completeness.
In assessing quantum, the Magistrate relied on the report of an expert appointed pursuant to r 69A of the Magistrates Court (Civil) Rules 1992 (SA), and on some material tendered by Deloitte in the form of an invoice, time sheets and charge-out rates. The expert attended at the trial and was questioned by Mr Stevens and by counsel for Deloitte. GA Stevens did not attempt to lead any expert evidence on the value of the work done by Deloitte. In some respects there were discrepancies between the information on which the expert relied and the information provided to GA Stevens by Deloitte. In those respects the Magistrate adopted the figure that was more favourable to GA Stevens. The Magistrate was entitled to rely on the materials he did in the way that he did. This ground of appeal cannot succeed.
Conclusion
Subject to one matter as to the form of the Magistrate’s order, as to which I will hear counsel, the appeal is dismissed. As this is a civil appeal the respondent is entitled to an order for costs of the appeal to be adjudicated.
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