Getex Pty Limited v Reed Business Information Pty Limited

[2013] NSWSC 1161

Supreme Court

New South Wales

• Amendment notes

Medium Neutral Citation:

Getex Pty Limited v Reed Business Information Pty Limited and ors [2013] NSWSC 1161

Hearing dates:

1 May 2013

Decision date:

26 August 2013

Before:

Bellew J

Decision:

(i) the appeal is allowed;

(ii) the cross-appeal is allowed;

(iii) the judgment and orders of the Magistrate, save for the order entering judgment in favour of the cross claimant, Jason North, on the second cross claim, are set aside;

(iv) the amended notice of contention is dismissed;

(v) the proceedings are remitted to the Magistrate in the Local Court of New South Wales to be dealt with according to law;

(vi) the parties are to provide written submissions, not exceeding two pages in length, as to the appropriate orders in respect of the costs of this appeal, and the costs of the proceedings in the court below, including any submissions as to the grant of a certificate under the Suitors Fund Act 1951 in favour of any party who is ordered to pay costs, by 4:00pm on Monday 3 September 2013;

(vii) I stand the matter over until 9:15am on Friday 6 September 2013 for judgment on the question of costs.

Catchwords:

APPEAL FROM LOCAL COURT - reasons for decision - whether reasons of the Magistrate adequate - where reasons did not expose the reasoning process and contained no determination of one of the issues between the parties - where defendant filed notice of contention - where resolution of notice of contention would involve making new findings of fact - limitations placed upon appellate court in dealing with the notice of contention in view of the nature of the appeal

PRACTICE AND PROCEDURE - reasons for decision - whether reasons of Magistrate adequate - need to adequately expose the process of reasoning leading to findings of fact - need for unsuccessful party to be able to ascertain, from the reasons, why he or she was unsuccessful

COSTS - where costs order made in favour of party who was substantially successful - where application for interest on costs refused - where reasons did not identify the basis of refusal

Legislation Cited:

Civil Procedure Act NSW 2005
Local Court Act NSW 2007
Supreme Court Act 1970

Cases Cited:

B and L Linings Pty Limited v Chief
Commissioner of State Revenue (2008) 74 NSWLR 481
Beale v Government Insurance Office of New South Wales (1997) 48 NSLWR 430
CDJ v VAJ (1998) 197 CLR 172
Goodrich Aerospace Pty Limited v Arsic [2006] NSWCA 187; (2006) 66 NSWLR186
Owners Strata Plan 4003 v Mustafa [2012] NSWSC 780
Pollard v RRR Corporation Pty Limited [2009] NSWCA 110
Qushair v Raffoul [2009] NSWCA 329
Robinson v Australian Association of Social Workers Limited [2000] SASC 239
State Rail Authority (NSW) v Earthline Constructions Pty Limited (in liq) (1999) 73 ALJR 306
Stoker v Adecco Gemvale Constructions Pty Limited [2004] NSWCA 449
Thaina Town (on Goulburn) Pty Limited v City of Sydney Council (2007) 71 NSWLR 230
Wood v Inglis [2012] NSWSC 749

Category:

Principal judgment

Parties:

Plaintiff - Getex Pty Limited
1st defendant - Reed Business Information Pty Limited
2nd defendant - Jason North
3rd defendant - Local Court of New South Wales

Representation:

Mr A Blank - Plainitff
Mr B Ilkovski - 2nd Defendant
Horowitz and Bilinsky – Plaintiff
Toomey Pegg – 2nd Defendant

File Number(s):

2012 / 157814

Publication restriction:

Nil

 Decision under appeal 

Jurisdiction:

9109

Date of Decision:

2012-04-20 00:00:00

Before:

Magistrate Gilmour

Judgment

INTRODUCTION

1. By an amended summons filed on 28 May 2012 the plaintiff, Getex Pty Limited ("Getex"), appeals against part of a judgment delivered by Magistrate Gilmour in the Local Court on 20 April 2012.

1. By an amended cross-appeal dated 30 April 2013, the second defendant Jason North ("North"), appeals against that part of the Magistrate's decision dismissing his application, pursuant to s. 101(4) of the Civil Procedure Act 2005 ("CPA") for interest on costs.

1. Further, by an amended notice of contention dated 30 April 2013, North contends that the Magistrate's decision, other than that part of her decision which is the subject of the cross-appeal, should be affirmed on grounds other than those upon which her Honour relied.

1. It should be noted that although three defendants are named in the amended summons commencing the appeal, only North has played an active part in the hearing. This was similarly the case when the proceedings were before the Magistrate.

THE BACKGROUND TO THE PROCEEDINGS

1. On 11 December 2009, Reed Business Information Pty Limited ("Reed") commenced proceedings in the Small Claims Division of the Local Court against Getex. In defending those proceedings, Getex joined North by way of a cross-claim ("the first cross-claim") seeking damages in excess of $78,000.00. North entered a defence to the first cross-claim and filed a further cross-claim ("the second cross-claim") against Getex seeking damages of $6,809.00, an amount Getex ultimately conceded that it owed to North.

1. Reed and Getex settled the proceedings between them. The first and second cross-claims then came before the Magistrate for hearing. That hearing took place over four days. On 20 April 2012, the Magistrate delivered judgment in which she:

(i)   entered a verdict in favour of Getex on the first cross-claim against North in the sum of $5,324.00;

(ii)   entered a verdict in favour of North against Getex on the second cross-claim in the sum of $6,809.00.

1. Following the Magistrate's decision, North made an application for costs. He submitted that such costs should be payable on an indemnity basis and that an order should be made for the payment of interest on those costs. Getex opposed the making of an order that it pay North's costs and further submitted that if such order were made, it should be on the normal basis. The Magistrate rejected North's application for indemnity costs, as well as his application for interest on costs. She ordered that Getex pay North's costs as agreed or assessed.

THE NATURE OF THE CLAIMS BROUGHT BY GETEX

1. North was, at all relevant times, a director and employee of Getex. Against that background, Getex pleaded a number of claims against North. However, the present appeal is limited to an appeal against the Magistrate's determination of three of those claims, namely:

(i)   a claim for the repayment of overpayments ("the overpayments claim");

(ii)   a claim for the reimbursement of funds which were allegedly utilised by North for personal expenses ("the reimbursement claim"); and

(iii)   a claim for the repayment of unauthorised transfers alleged to have been made by North to himself ("the unauthorised transfers claim").

The overpayments claim

1. Getex alleged that during the period of North's employment, he had been overpaid a sum of $19,532.31. North, who did not file an affidavit in the proceedings and who did not give evidence, denied that this was the case.

1. The principal evidence in support of the overpayments claim (as was the case with all of the claims brought by Getex against North) came from Kerrie Ford ("Ford") a director of Getex who swore an affidavit of 20 September 2011 and who gave evidence before the Magistrate. At paragraph (49) and following of her affidavit, Ford deposed to a number of matters in relation to the overpayments claim.

1. Ford stated that from October 2007, pursuant to a resolution of the Board of Getex, North was paid an hourly rate calculated according to timesheets which he was required to provide, setting out the hours he had worked. According to Ford, North fell behind in the preparation and submission of his timesheets, to the point where he developed a practice of asking to be paid in advance of submitting them. Ford deposed as follows:

"[51] In mid-2009 I had a conversation with Jason in words to the following effect:

I said: "You need to sort out your timesheets."

[52] Jason started providing some of the time sheets but this was in a piecemeal way. It took some months from the date of our conversation for him to submit most but not all of his timesheets.

[53] In another conversation with him in early 2010 I said words to the effect:

"You have not put in time for (sic) leave and I am reviewing all your timesheets before I pay you anymore".

Jason then left the company.

[54] I have since caused an exercise to be completed whereby amounts actually paid to Jason have been reconciled with the time sheets he submitted. Exhibited to me as EXH KF3 is a copy of the timesheetc (sic) submitted by Jason.

[55] The calculation has been documented in the spread sheet annexed to the defence to the second cross-claim. For completeness I annex a copy of that spread sheet as Annexure R.

[56] From Annexure R it is apparent that Jason has in fact received an amount totalling $19,531.31 which is not substantiated with timesheets".

1. An agreed tender bundle ("TB") was before me on the hearing of the appeal. At TB 80 and following of the tender bundle there is a copy of a letter dated 22 July 2010 addressed to North under the hand of Ford. It is apparent that this letter was sent to Ford shortly after his resignation. Paragraph 6 of that letter contains the following:

"In relation to part of your pay claims, your hours on MYOB are 5,872.18. Your hours on Access are 5,466.84. That is, you have been overpaid at least 405.34 hours at $45/hr equals $18,240.30 plus interest. Note that the tax office requires that you pay interest. I will calculate, check and let you know later."

1. Ford was cross-examined about various aspects of this part of the claim. In particular, she was cross-examined about the procedure in relation to the preparation of time sheets. She agreed (at T126 L28) that North prepared the timesheets, that she then "signed off" on some of them, and that they were then given to Denesh Ivon ("Ivon"), the Financial Controller of Getex, to be processed. Ford denied any knowledge of occasions on which errors were made by Ivon which necessitated the payments made to North being corrected.

1. Ford gave evidence (commencing at T145 L50) that she had instructed Ivon to conduct a reconciliation of North's timesheets. She said that she herself had commenced that exercise but was having "great difficulty" in doing it, thus necessitating the delegation of the task. She said that she "suspected" that Getex had overpaid North, but agreed that her affidavit contained no specific assertion that North had received money that was not due to him.

1. In subsequent cross-examination (commencing at T147 L31) Ford agreed that having delegated the task of reconciliation to Ivon, she in fact went through the material with him. She explained that in doing so they "got every time sheet out that (North) had submitted and the computer version and went through how much he had been paid and tried to do a reconciliation".

1. Ivon swore an affidavit of 9 September 2011 and also gave evidence. Paragraph (15) of his affidavit was in the following terms:

"From time to time, Jason would approach me and say words to effect, 'I've worked X hours for the fortnight, can you process my pay' which I did. In about April 2011 I prepared a reconciliation of timesheets I received from Jason compared to payments actually made. Annexed hereto marked "C" is a copy of that spread sheet."

1. The spread sheet reflecting the reconciliation to which Ivon referred is reproduced at TB157 and following.

1. In the course of cross-examination (commencing at T189 L44) Ivon agreed that the process of time recording and submitting timesheets had been the same throughout the entirety of North's employment. He explained that it firstly involved a staff member keeping a handwritten timesheet or notes recording the times worked. That information was then entered into what was known as the "Access" database which then produced a hard copy document. That document was then passed on to an "authoriser" who, having authorised payment, forwarded it to Ivon for entry into what was known as the "MYOB" database.

1. Upon being asked questions by the Magistrate, Ivon explained (commencing at T191 L1) that the authoriser did not check or cross reference the handwritten timesheet with the hard copy document produced from the Access database before signing it. When asked by her Honour what the point of such a procedure was, Ivon said:

"Because it's - it - it goes in like - like time - time management, so say if you - you start work at 8am and the first 10 minutes is your doing emails and then from 8:10 to say 8:30am your doing something else, it just - it's a timeline. So they check the timelines as well and - -

1. The cross examination turned to the question of why it was that in carrying out the reconciliation, Ivon undertook an examination of the original timesheets as opposed to the hard copy document produced by the Access database which had been given to him. He explained (commencing at T191 L45):

"Because with some of the directors, they - they sometimes are too busy to do timesheets. So what we do is we pay them on a - they give me advice - like they say to me 'okay I've done 120 hours this fortnight' - or, 'I've done 110 hours' and then we pay them on that amount. With the employees, if they're interstate or they're away, we pay them a - the - a - minimum amount of 80 hours and when they come back from either being interstate of wherever they've been, they have to submit their timesheets."

1. When asked (commencing at T192 L26) whether he had processed payment on the basis of what North had told him, in the absence of any belief that North was asking to be paid for work he had not done, Ivon replied:

"I don't question the directors".

1. When it was suggested to Ivon that he would have raised the matter had he thought North was asking for money to which he was not entitled, he said:

"No, because he's the director".

1. In response to further questions from her Honour (commencing at T192 L48) Ivon agreed that it was possible for North to have been paid in the absence of submitting any document produced from the Access database. Whilst there was said to be a responsibility upon a member of staff to submit such a document, there was no time limit imposed within which this was to be done. Ivon then gave the following evidence in response to a question from her Honour:

"Q: If he never gave you the Access sheet, what did you check it against?

A: Well, his word, because he gave me - he - if I get told its 120 hours, its 120 hours".

The reimbursement claim

1. The reimbursement claim totalled $528.23 and was made up of amounts in respect of dry cleaning and car hire incurred by North. This part of the claim was set out in paragraphs (57) and (58) of Ford's affidavit in the following terms:

"Personal Expenses

[57] Annexed hereto and marked S is an extract of the company's employee expenses report. The relevant entries are:

12/07/2006 - Dry-cleaning $33.40

20/07/2006 - Dry-cleaning $24.40

15/10/2006 - Dry-cleaning $18.95

24/01/2009 - Car hire - $451.48

[58] Expenses of this type were not approved by the Board and are not typically expenses that the company would pay on behalf on an employee or director. The car hire claim was the result of Jason having an accident and needing a car."

1. Ford was cross-examined as to this aspect of the claim (commencing at T126 L48). She agreed that it was the practice for Getex to pay expenses incurred by employees in some circumstances but she denied that this included the cost of dry cleaning. She also agreed (commencing at T129 L23) that she had no personal knowledge of this aspect of the claim and that the records kept by Ivon were the source of the information which was contained in her affidavit. In this regard, Ivon deposed (at paragraph 13 of his affidavit) as follows:

"Annexed hereto marked B is a printout of Employee Expense Reports. The procedure for claiming expenses is that employees fill out an employee expense form and from that I enter the date into the MYOB system."

1. It was never directly put to Ford that Getex was not entitled to the repayment of the amount which was the subject of this claim. However, counsel for North did attempt to cross-examine Ford about the obligation of Getex, pursuant to s. 56(3) of the Civil Procedure Act, to prosecute issues in the proceedings justly, quickly and cheaply. The Magistrate disallowed this line of cross-examination and observed (at T155 L13):

"I take your point as to the nature of the claim and, given the length of time that he was there, the overpayment, but I don't think it is going to help me determine the facts from Mrs Ford's view of that. So I will disallow it at this stage".

1. Counsel then asked (at T155 L20):

"Q: Ms Ford, would you agree with this characterisation of that small claim, that the time and effort taken to initiate it and prosecute it, in terms of, first of all, time and expenditure and legal fees, significantly exceeds the value of the claim? Would you accept that?

A: No...no I wouldn't".

The unauthorised transfers claim

1. Getex alleged that North transferred, without authorisation, amounts of $5,580.54 and $4,000.00 to himself on 18 and 19 July 2006 respectively. Getex accepted that North had demonstrated an entitlement to a sum of $357.61, but had not otherwise provided an explanation for, and had no entitlement to, the transfers.

1. In his defence, North asserted that:

(1)   the sum $5,580.00 represented reimbursement of amounts that he outlaid for Getex, and that the reimbursement of the sum had been approved; and

(2)   the sum of $4,000.00 represented payment of a travel allowance to which Getex had agreed he was entitled, at a rate of $2,000.00 per year.

1. In respect of this aspect of the claim, Ford deposed (at paragraphs (59) to (62) of her affidavit) in the following terms:

"Unsubstantiated transfers

[59] On 18 July 2006 the company, on Jason's request, transferred an amount of $5,580.54 to Jason's personal account.

[60] On 19 July 2006, the company at Jason's request, transferred an amount of $4,000.00 to Jason's personal account.

[61] Save for an amount of approximately $357.61 Jason has not ever provided any documents or provided any explanation for the basis of these payments.

[62] I annex as T a copy of the company's 2009 balance sheet which shows as a company liability an amount of $9,222.93 as a liability."

1. The balance sheet appears at TB 98 and contains the following entry under the heading "Current Liabilities":

"Jason North - AMEX minus $9,222.93."

1. When cross-examined (commencing at T152 L22) Ford agreed that North and others were entitled to travel allowance in a sum of $2,000.00 per annum "in the very early days but not later". She later clarified that "later" meant after the middle of 2007, although when further cross-examined she agreed that it was in fact on or about 29 October 2007 that the system changed and that, prior to that time, North had been entitled to a travel allowance of $2,000.00 per annum.

1. Ivon, in paragraphs (3) to (12) of his affidavit, deposed to the fact that as part of a project in 2006, Getex had sent asbestos samples for testing to a company in the United States, L A Testing. He confirmed that the amount of $5,580.54 was said by North to have been paid by him via credit card in respect of this project. He also confirmed that he had been told by North that he (North) had incurred the amount in relation to the work done by L A Testing. Ivon also agreed that he had no reason to disbelieve the explanation he had been given by North in that regard.

1. When cross-examined in relation to the issue of travel allowance (commencing at T203 L30) Ivon told the court that his recollection was that a study allowance, as opposed to a travel allowance, was payable, although he qualified that evidence by saying that "all (he) did was mainly enter the documentation into MYOB". Ivon agreed that when he had queried, with North, the transfer of the amount of $4,000.00 North had told him that it related to travel allowance. Whilst he appeared to agree with the proposition that he had no reason to disbelieve North in that regard, he reiterated that he "didn't question directors".

THE MAGISTRATE'S REASONS

1. After four hearing days, the evidence and submissions in the proceedings concluded on 18 April 2012.

1. On 20 April 2012 the Magistrate delivered an oral judgment by reference to what she described as a "draft copy" of notes. Leaving aside arguments as to costs, the Magistrate's reasons are set out at T256-261.

1. I have set out the relevant parts of the Magistrate's reasons when dealing with the grounds of appeal.

THE GROUNDS OF APPEAL

1. There are restrictions imposed by the provisions of ss. 39 and 40 of the Local Court Act 2007 ("the LCA") upon appeals to this Court from decisions of a Magistrate in the Local Court. Those provisions are in the following terms:

39 Appeals as of right

(1) A party to proceedings before the Court sitting in its General Division who is dissatisfied with a judgment or order of the Court may appeal to the Supreme Court, but only on a question of law.

(2) A party to proceedings before the Court sitting in its Small Claims Division who is dissatisfied with a judgment or order of the Court may appeal to the District Court, but only on the ground of lack of jurisdiction or denial of procedural fairness.

40 Appeals requiring leave

(1) A party to proceedings before the Court sitting in its General Division who is dissatisfied with a judgment or order of the Court on a ground that involves a question of mixed law and fact may appeal to the Supreme Court but only by leave of the Supreme Court.

(2) A party to proceedings before the Court sitting in its General Division who is dissatisfied with any of the following judgments or orders of the Court may appeal to the Supreme Court, but only by leave of the Supreme Court:

(a) an interlocutory judgment or order,

(b) a judgment or order made with the consent of the

parties,

(c) an order as to costs.

1. The amended summons made a number of references to the Magistrate's determination of factual matters. However, the written and oral submissions of counsel for the plaintiff before me advanced one fundamental complaint, namely that the Magistrate's reasons were inadequate.

1. In respect of the Magistrate's determination of the question of costs, the plaintiff's principal complaint was that the Magistrate's discretion had miscarried.

THE MAGISTRATE'S REASONS

1. The Magistrate commenced by briefly recounting the history of the proceedings before observing (at T257 L25) that the determination of the matter depended upon a party "proving its case on the balance of probabilities". Her Honour then observed that the evidence relied upon "must be assessed in light of the pleadings and identified issues between the parties".

1. At T258 L20 her Honour then stated:

"It is not the function of this court to recite the evidence, it being both the tribunal of fact and law. Any references made to specific evidence to illustrate matters upon which the court relies in determining the proceedings should not be taken to be the only matters taken into consideration. Both parties have provided detailed written submissions to the court and spoken to those submissions. Again, it is not my function to recite them, they are a matter of record."

1. Her Honour (at T258 L35) then commenced to refer to the evidence in a summary form. That summary, as it relates to the three claims which are presently relevant, was limited to the following (commencing at T258 L28):

"The evidence for Getex can be summarised as follows. Ms Ford claims all the money owed is because that is what she has been told by Ivon and others. She has little to no personal knowledge of the details of the actual amounts allegedly owed by North and while she makes many assertions bearing on factual issues, the evidence to establish those assertions, if it exists at all, requires careful scrutiny.

Ivon says that some of the money allegedly owed is due to a comparison of computer data held by Getex or because the company's external accounts have in the past queried some of the figures and those amounts were made outstanding. He likewise has no personal knowledge as to the basis of the claims, repeating numerous times in his evidence "it was not my position to question the directors". The use of the word reconciliation in his evidence does not, in my view, accord with what such a process involves in administrative and/or financial matters.

During the evidence of both Ford and Ivon, it became apparent that minutes of board meetings were not completed, if at all, for months after the meeting and not placed before the Board members at subsequent meetings. Contents of minutes that were available and produced were acknowledged as incorrect and inaccurate. Documents annexed to minutes produced in evidence were not the document before the Board at the meeting.

Original timesheets used to enter date into the system were not checked or retained by the company. Copies of approvals allegedly given and signed by authorised signatories as to expenditure as opposed to text were not retained by the company. Rules of incorporation as to resolutions were not know nor complied with in some instances at Board meetings. Cheques signed by Ms Ford and other signatories accepted on the face of them as indebtedness simply because the accounts section produced a cheque for payment.

In terms of the original hand-written timesheets that were not retained, there was no way of knowing if the activity alleged to have been undertaken and claimed was in fact undertaken. Ms Ford found it difficult to produce financial reports to Board members when requested because the reports always needed adjustments (see the transcript of 30 November 2011 at page 72). Ms Ford herself admitted to committing the company to $70,000.00 in breach of an alleged delegation.

I have not included in that summary actual transcript references because the issues were repeatedly covered throughout the cross-examination of Ms Ford and Mr Ivon and the transcript in its entirety would need to be read. But they, as I say, were summation of the evidence that was given. It is fair to say that the vast majority of evidence in cross-examination was devoted to the issue of the delegation it is alleged that North breached."

1. Her Honour then proceeded to make reference to the submissions made on behalf of Getex before observing (commencing at T259 L40):

"In fact, both Ms Ford and Mr Ivon gave evidence that everyone worked on a trust basis in terms of submission of timesheets and claims for expenses, and all matters relating to the company. Trust is neither definitive in its terms nor capable of being used to imply terms. The generic basis of a contract is an offer, acceptance, consideration and intention to create a legal relationship. The court accepts that a contract maybe inferred from the acts and conduct of the parties, as well as, or in the absence of their words or a document. However, such conduct must be capable of proving all the essential elements of an expressed contract."

1. Her Honour continued (commencing at T259 L50):

"Getex through counsel placed much weight on a conversation deposed to in Ms Ford's affidavit of 20 September 2011 at para 54 and Annexure O of that same affidavit as an admission by North that there was a delegation in place, that he had breached it and acknowledged that he was legally liable for the unauthorised amount. Whilst that is one inference that might be drawn from it, it is by no means the only inference that can be drawn. Particularly in the context in which the conversation was taking place.

It does not form the basis upon which this court could find either, that there was a contract between North and Getex; what the conditions of that contract were, nor that the parties at any time had contemplated that the relationship was with the intention of forming legal consequences. There is certainly no evidence to establish any basis upon which it would be argued that North owed a duty of care to Getex such as to give rise to an action in tort."

1. Her Honour then concluded (commencing at T260 L42):

"On the basis of the evidence produced in these proceedings by Getex, the court can have no confidence that the documents relied upon to establish any of their claims are capable of proving the asserted fact, are accurate or reliable, and as such, the evidence of Ms Ford remains uncorroborated assertions only, and Getex has not proven any of its claims on the balance of probabilities, therefore, in accordance with the previous concessions made by both Getex and North as to indebtedness the court makes the following order..."

1. Her Honour then proceeded to make the orders to which I have previously referred.

1. The parties then addressed her Honour on the question of costs. Her Honour rejected the application by North for indemnity costs before stating the following (commencing at T269 L36):

"On day one of the hearing .... Getex conceded the entirety of the second cross claim by North in the amount of $6,809.00. On that same day ... North conceded $5,324.00 of the total amount of $78,299.48 plus at that stage the return of some inconsequential company property. On 18 April 2012 ... North agreed to return to the company the property sought. I intend to apply the de minimus rule in relation to the property in terms of the total value of the claim.

Therefore, as I see it, (Getex) was successful in its claim to the value of $5,324.00 from a total claimed of $78,299.48. (North) was successful in the total amount claimed of $6,809.00. The general rule, of course, is that costs follow the event and ordinarily in the course of things, the loser pays. In this case, and while I appreciate the submissions made by (counsel for Getex) ....as to the court having the discretion to award a percentage of a party's costs, I do not intend to apply it in this case. In this case there can be no doubt that in the context of these proceedings .... Getex was the clear loser in all but a nominal amount of their claim.

Therefore (Getex) is to pay (North's) costs on the ordinary basis as agreed or assessed and on that ruling I decline to order (Getex) to pay interest on (North's) costs".

THE SUBMISSIONS OF THE PARTIES

The adequacy of the Magistrate's reasons

1. Counsel for Getex made, in essence, three submissions in support of the proposition that the Magistrate's reasons were inadequate.

1. Firstly, counsel submitted that the Magistrate's reasons were inadequate because her Honour failed to expose, sufficiently or at all, the reasoning process which she adopted in reaching her conclusions.

1. Secondly, he submitted that there had been a related failure on the part of her Honour to properly set out the material findings of fact she had reached in coming to her conclusions.

1. Thirdly, he submitted that her Honour's reference to the fact that matters which were not the subject of any express reference in her reasons might nevertheless have been taken into account in determining the matter, had the result of leaving Getex in a position where it could have no confidence that the relevant evidence was properly considered.

1. Counsel submitted that the effect of these three matters was that Getex had been left in a position where it was not really aware of how it was that the Magistrate had determined the matter as she had done.

1. Counsel for North stressed that the relevant consideration was not whether the reasons were elaborate, but rather whether they were adequate. Whilst accepting that they were not elaborate, counsel submitted that on a fair reading of the Magistrate's reasons the basis of her decision was adequately revealed, and that the plaintiff's complaints were without merit.

1. Counsel for North submitted, in particular, that a determination of whether the reasons were adequate should be approached in what he described as a "contextual" manner. In this regard he submitted that the Magistrate was obviously seized of the relevant evidence and had simply come to a conclusion having considered that evidence, that the plaintiff had failed to prove its case.

The Magistrate's order that Getex pay North's costs

1. Counsel for Getex submitted that in ordering that Getex pay North's costs, the Magistrate erred in two fundamental respects.

1. Firstly, he submitted that her apparent application of the de minimus rule in relation to the items of property of which Getex sought return (and which North did return) was an error, in view of the fact that Getex was pursuing the return of those items as part of a much wider issue concerning the protection of its intellectual property.

1. Secondly, he submitted that the Magistrate's apparent application of the de minimus rule was inappropriate and erroneous, in circumstances where there was no evidence as to the value of the property in question.

1. The fundamental submission of counsel for North stemmed from the application of the principle that costs follow the event. Counsel submitted that in the present case, the relevant event was that North was substantially successful in defending the proceedings. Counsel submitted that the Magistrate's order reflected a proper application of that principle, and that there was no evidence at all that the Magistrate's discretion had miscarried.

CONSIDERATION AND CONCLUSION

The adequacy of the Magistrate's reasons

1. I have previously set out the provisions of ss. 39 and 40 of the LCA which govern an appeal of this nature. Pursuant to s. 39, an appellant has an appeal as of right on a question of law. In respect of an appeal involving a question of mixed law and fact, the leave of the court is required pursuant to s. 40.

1. Counsel for Getex submitted that a failure to give adequate reasons was an error of law. I did not understand counsel for North to argue against that proposition, although he made it clear that to the extent that the plaintiff sought to impugn some of the Magistrate's factual findings, his position would be different. As I have pointed out, the focus of the submissions of counsel for the plaintiff was what was said to be the inadequacy of the Magistrate's reasons.

1. In Stoker v Adecco Gemvale Constructions Pty Limited [2004] NSWCA 449 at [41], Santow JA (Mason P and Sheller JA agreeing) observed, by reference to a number of authorities, that the failure to give adequate reasons may be an error of law. One of the authorities to which his Honour referred was the decision in Beale v Government Insurance Office of New South Wales (1997) 48 NSLWR 430 where Meagher JA observed (at 444) that in most cases where the provision of inadequate reasons is asserted as constituting an error, it is assumed that such an error is an error of law.

1. I am satisfied, having regard to these authorities, that a failure to provide adequate reasons is an error of law. Accordingly on that basis, Getex has an appeal as of right pursuant to s. 39 of the LCA.

1. The duty to give reasons is a necessary incident of the judicial process (see Stoker (supra) at [41] per Santow JA). In that case Santow JA also said (at [41]):

"It is sufficient if the reasons adequately reveal the basis of the decision, expressing the specific findings that are critical to the determination of the proceedings."

1. In Beale (supra) Meagher JA said (at 442):

"A failure to provide sufficient reasons can, and often does, lead to a real sense of grievance that a party does not know or understand why the decision was made: Re Poyser and Mills' Arbitration [1964] 2 QB 467 at 478. This court has previously accepted the proposition that a judge is bound to expose his reasoning in sufficient detail to enable a losing party to understand why it lost."

1. His Honour went on to observe (at 442 - 443) that whilst a statement of reasons need not necessarily be lengthy or elaborate, an adequate statement of reasons will:

(i)   refer to all relevant evidence;

(ii)   set out any material findings of fact and any conclusions reached; and

(iii)   provide reasons for making the relevant findings of fact, and reaching the relevant conclusions, as well as provide reasons in applying the law to the facts found.

1. Similar observations were made in Pollard v RRR Corporation Pty Limited [2009] NSWCA 110 at [56] and following. They were subsequently confirmed and summarised by Sackville AJA (Campbell JA and Bergin CJ in Eq agreeing) in Qushair v Raffoul [2009] NSWCA 329 at [52] and following. Amongst the principles summarised by Sackville AJA in Qushair were the following:

(i)   although lengthy and elaborate reasons are not required, a trial judge must, as a minimum, provide reasons which are adequate for the exercise of a facility to appeal, where such facility is available;

(ii)   whilst the extent of the reasons will depend upon the particular case and the issues under consideration, it is essential that the reasoning of the trial judge on a point which is critical to the contest between the parties be exposed;

(iii)   the requirement in (ii) above may require the trial judge to refer to evidence which is critical to the proper determination of the issues in dispute;

(iv)   where credit issues are involved, it is necessary to explain why it is that the evidence of a witness is accepted or rejected.

1. In my view, bearing in mind the various statements of principle to which I have referred, the Magistrate's reasons in the present case fell short of what was required.

1. Firstly, as I have noted, the Magistrate made reference to the fact that it was "not the function of (this) court to recite the evidence". It may not always be necessary to set out the entirety of the evidence in a statement of reasons. However, the Magistrate was required, in accordance with the authorities to which I have referred, to refer to all of the relevant evidence (see Beale (supra) at 442-443). In a case which had extended over a number of hearing days, and where the oral and documentary evidence was lengthy, the Magistrate's summary of the evidence, which I have set out above, was such that the requirement to refer to all of the relevant evidence was not met. Each of the three claims which is the subject of the present appeal depended upon different documentary evidence to support it. The Magistrate's reasons concentrated upon the timesheets. Those documents were obviously relevant to the overpayments claim. There was little or no reference to the documents upon which the two remaining claims were based.

1. Secondly, in my view, the Magistrate's observation that it was not the court's function to recite the evidence had the result of leading to a further error. Having made that observation, her Honour went on to say, in effect, that even though she might make specific reference to some parts of the evidence in her reasons, it was not to be assumed that those parts of the evidence to which she referred were "the only matters taken into consideration". If the Magistrate, in coming to her conclusions, did have regard to evidence to which she did not refer (as she clearly indicated was the case) then that approach was contrary to the requirement expressed by Meagher JA in Beale (supra) that all relevant evidence be referred to. Moreover, as Meagher JA also observed, there must be a sufficient exposition of the reasoning process to enable a losing party to understand why it was unsuccessful in the proceedings. Apparently taking matters into account when making a decision, but not disclosing what those matters are, necessarily leads to the conclusion that any reasoning process has not been sufficiently exposed.

1. Thirdly, and despite the fact that the Magistrate expressly acknowledged that the evidence to establish the various assertions made by Ford required "careful scrutiny", no such scrutiny was ever undertaken. There were broad references to the timesheets and the process followed for their creation. There was little or no reference at all to the documents relevant to the reimbursement claim or the unauthorised transfers claim. There was no attempt to undertake a proper analysis of the documentary evidence to determine whether it provided any corroboration of the oral evidence of Ford and Ivon. In this regard, it would appear that the Magistrate concluded that documents were unreliable and provided no corroboration. However, in a case where the documentary evidence was both voluminous and important, it was necessary for it to be dealt with in some satisfactory manner (see State Rail Authority (NSW) v Earthline Constructions Pty Limited (in liq) (1999) 73 ALJR 306 at [94] per Kirby J). It was not sufficient to make broad references to that evidence, and then make similarly broad conclusionary statements as to its effect (see Pollard (supra) at [64] per Ipp JA, citing Goodrich Aerospace Pty Limited v Arsic [2006] NSWCA 187; (2006) 66 NSWLR186 at [28]).

1. Finally, I note that s. 90(1) of the CPA is in the following terms:

"The court is, at or after trial or otherwise as the nature of the case requires, to give such judgment or make such order as the nature of the case requires".

1. The "nature of the case" for the purposes of s. 90 is to be ascertained by reference to the issues arising between the parties (see Owners Strata Plan 4003 v Mustafa [2012] NSWSC 780 at [23]). As I have already noted, Getex relied upon different documents to substantiate each of its claims. The Magistrate's principal references were to the timesheets, which were directly relevant to only one of those claims. One of the issues between the parties in the present case was the reimbursement claim. Whilst the value of that claim was properly described as miniscule, it remained incumbent upon the Magistrate to make a determination of it. Her reasons do not disclose such determination having been made.

1. A similar observation is open to be made in relation to the unauthorised transfers claim. The Magistrate's reasons are bereft of any specific reference to the evidence in support of that claim, as well as any determination of it.

1. For all of these reasons I accept the submissions of counsel for Getex that the Magistrate's reasons were inadequate, and that an error of law has been made out.

The Magistrate's order that Getex pay North's costs

1. The Magistrate's power to award costs was obviously a discretionary one. However in my view, her reasons do not disclose that the discretion miscarried, so as to give rise to error.

1. A fair reading of the Magistrate's reasons in respect of costs indicates that her application of the de minimus rule had little, if any, bearing upon her determination to order costs against Getex. In my view, the Magistrate's discretion was exercised according to principle. Her Honour made express reference to the general principle that costs follow the event. The expression "follow the event" is a reference to the practical result of a particular claim (see Windsurfing International Inc. v Petit (1987) AIPC 90-441. The practical result in the present case was that North was substantially successful.

1. Counsel for Getex placed particular reliance upon the decision in Robinson v Australian Association of Social Workers Limited [2000] SASC 239 at [12] - [17] to support the proposition that an order that a successful party should pay the costs of an unsuccessful party requires particular justification. Accepting that as a correct statement of principle, it is plain from the Magistrate's reasons that the particular justification upon which she relied to make the order that Getex pay North's costs was the fact that Getex had, but for a nominal amount, been largely unsuccessful in its various claims, and had also expressly conceded those claims made by North. That, in my view, provided ample justification for her Honour's order.

1. It follows that these errors for which Getex contended have not been made out.

1. However, in view of the conclusions I have reached regarding the inadequacy of the Magistrate's reasons and the disposition of the appeal, the Magistrate's determination that Getex pay North's costs, although not specifically reflective of error, must also be set aside.

THE CROSS APPEAL

The ground of appeal

1. As previously noted, North made an application for interest on costs pursuant to s. 101(4) of the CPA. That application was dismissed by the Magistrate.

1. Section 101(4) of the CPA is in the following terms:

Interest after judgment

...

(4) The court may order that interest is to be paid on any amount payable under an order for the payment of costs.

1. The cross-appeal brought by North asserts that in dismissing North's application for interest on costs, the Magistrate acted on a wrong principle, or failed to take into account a relevant consideration.

The Magistrate's reasons

1. At the commencement of her judgment in relation to costs, the Magistrate noted (at T 268 L29-31) that North had made an application for indemnity costs and, in the alternative, had made an application for an order "for interest on costs paid". The Magistrate then proceeded to deal specifically with the application for indemnity costs, which she ultimately rejected (at T269 L9).

1. The Magistrate then turned to consider (at T269 L11) "what costs order should be made and whether Getex .... should pay interest on North's costs". Having dealt with the history of the proceedings, and having noted that Getex was largely unsuccessful in its various claims, the Magistrate made an order for costs against Getex. In doing so she said (at T 270 L10):

"I decline to order (Getex) to pay interest on (North's) costs".

1. In reaching that conclusion, the Magistrate made no reference to the provisions of s. 101(4) of the CPA (in circumstances where a specific claim had been made under that section) nor did she make any reference to any factor(s) which may have been relevant in the exercise of her discretion to make an order under that section.

The submissions of the parties

1. Counsel for North submitted that there were no discretionary factors which tended against the exercise of the Magistrate's discretion to award interest on costs. In circumstances where no such factor(s) had been identified, he submitted that the Magistrate erred. Inherent in this submission was the proposition that in this particular respect, the Magistrate's reasons were not adequate.

1. Counsel for Getex submitted that there was no statutory mandate for the making of the order sought by North. He emphasised that the power to make an order for the payment of interest was discretionary, and that there was nothing to indicate that the Magistrate's discretion not to award interest on costs had miscarried.

Consideration and conclusion

1. In Wood v Inglis [2012] NSWSC 749 Brereton J observed (at [13]) that:

" .... ordinarily a party that obtains a costs order will also obtain (if it seeks one) an order for interest on those costs, in the absence of any countervailing discretionary factor".

1. In the present case, North clearly asked for such an order. The Magistrate refused to make it, but did not say why she did so. In particular, she made no reference to any countervailing discretionary factor which might have caused her, in the exercise of her discretion, to so refuse it. In my view, no aspect of the history of the proceedings (which her Honour summarised immediately prior to dismissing North's application) constituted a countervailing discretionary factor.

1. Two of the questions which the Magistrate was required to consider were firstly, whether Getex should pay North's costs and secondly (if the first was answered affirmatively) whether North was entitled to interest on those costs. It is not possible, particularly in the absence of any reference to s. 101(4) of the CPA, to determine why the Magistrate refused North's application. It follows that in my view, her Honour's reasons are inadequate in this respect.

1. The ground pleaded in the cross-appeal is therefore made out.

THE AMENDED NOTICE OF CONTENTION

1. As previously noted, North filed an amended notice of contention which was the subject of lengthy written and oral submissions by counsel. Shortly put, it was submitted that on a proper analysis of the evidence (and in particular the documentary evidence) which was before the Magistrate, the various claims brought by Getex could not be made out. Counsel for Getex made lengthy submissions to the contrary.

1. In the course of those submissions, the question arose as to whether, in the event that I found error, I had power to determine the various questions of fact which were relevant to a consideration of the submissions of counsel for North in support of the amended notice of contention.

1. Section 41 of the LCA sets out this court's powers in determining an appeal under either s. 39 or s. 40:

Determination of appeals

41(1) The Supreme Court may determine an appeal made under section 39(1) or 40:

(a)   by varying the terms of the judgment or order; or

(b)   by setting aside the judgment or order; or

(c)   by setting aside the judgment or order and remitting the matter to the Local Court determination in accordance with the Supreme Court's directions; or

(d)   by dismissing the appeal.

1. In Thaina Town (On Goulburn) Pty Limited v City of Sydney Council (2007) 71 NSWLR 230, the Court of Appeal considered the question of whether a power conferred on the Supreme Court to "make such other order in relation to the appeal as seems fit" under s. 57(2)(b) of the Land and Environment Court Act 1979 (NSW) included a power to award costs pursuant to s. 69(2) of the same Act. Spigelman CJ (with whom the other members of the court agreed) said (at 252; [103]):

"This court must be concerned that the course of administration of justice in this State does not impose unnecessary cost burdens on parties by adopting a narrow interpretation of statutory powers conferred upon the Court to ensure the just and efficient administration of justice. Where no new findings of primary fact are required to be made, this Court should exercise a power conferred on it in wide terms so as to ensure that the cost of legal disputation is minimised and thereby apply the guiding principle in s. 56 of the Civil Procedure Act 2005 to the exercise of powers conferred by an Act other than that Act or by Rules of Court, so as to facilitate the just, quick and cheap resolution of the issues in dispute in civil proceedings".

1. In a subsequent decision of the Court of Appeal in B and L Linings Pty Limited v Chief Commissioner of State Revenue (2008) 74 NSWLR 481 the Court considered its powers on the hearing of an appeal from an Appeal Panel of the Administrative Decisions Tribunal, in circumstances where the relevant legislation (like s. 39(1) of the LCA) conferred a right of appeal on a question of law. The appellant in that case had argued that once the jurisdiction of the Court was "established" by the identification of a question of law, the appeal proceeded as an appeal as contemplated by s. 75A(5) of the Supreme Court Act 1970.

1. The Court of Appeal concluded that the right of appeal which was conferred in such terms did not authorise it to engage in a review of the merits, and did not provide a gateway to an appeal by way of rehearing once the question of law was identified and argued. By reference to the decision in CDJ v VAJ (1998) 197 CLR 172 Basten JA (at 512; [148]) observed that if a right of appeal is conferred by statute, the terms of the statutory grant determine the nature of the appeal. His Honour went on to say (at 513; [149]) (citations omitted):

"It is clear that such an appeal is to be distinguished from an appeal in the strict sense, where the function of the appellate court is to determine 'whether the decision in question was right or wrong on the evidence and the law as it stood when that decision was given'. ... An appeal on a question of law must also fall within a different and more limited category. It follows that insofar as s. 75A of the Supreme Court Act expressly provides that an appeal shall be by way of rehearing, it is, in categorical terms, inconsistent with a statutory provision conferring a more limited right of appeal. Section 75A must, in accordance with its own terms, have effect subject to the Administrative Decisions Tribunal Act: s. 75A(4). Whether it applies at all might be an open question; it should not, in its terms, operate so as to affect the scope of the appeal conferred by sections to which it is, in its terms, subject. It does not operate to expand the scope of the appeal permitted by s. 119 and 120 of the Administrative Decisions Tribunal Act".

1. His Honour then said (at 513; [150]):

"The function of this Court, exercising jurisdiction in relation to an appeal brought under s. 119 of the Administrative Decisions Tribunal Act, is limited to the identification of an erroneous answer in respect of a question of law. For that purpose it is not required, and indeed is not entitled, to embark upon any review of the decision-making process of the Tribunal beyond that necessary to answer the appropriately identified questions of law. Thaina Town (On Goulburn) is not inconsistent with that conclusion".

1. The provisions of s. 39 of the LCA confer a right of appeal upon a party only on a question of law. The powers of the court, on the hearing of the appeal, are set out in s. 41. In the circumstances of the present case, and consistent with the decision in B and L Linings (supra), those provisions cannot be read as conferring a power upon me to review the merits of the case, or to otherwise expand the scope of the appeal which is conferred by s. 39, so as to allow me to make a series of new findings of fact over and above those made by the Magistrate. Were I to accept the submissions of counsel for North, I would necessarily be engaged, in the circumstances of this case, in such a process.

1. Accordingly, the appropriate order is to remit the matter to the Magistrate to be dealt with according to law.

ORDERS

1. In view of the foregoing I make the following orders:

(i)   the appeal is allowed;

(ii)   the cross-appeal is allowed;

(iii)   the judgment and orders of the Magistrate, save for the order entering judgment in favour of the cross claimant, Jason North, on the second cross claim, are set aside;

(iv)   the amended notice of contention is dismissed;

(v)   the proceedings are remitted to the Magistrate in the Local Court of New South Wales to be dealt with according to law;

(vi)   the parties are to provide written submissions, not exceeding two pages in length, as to the appropriate orders in respect of the costs of this appeal, and the costs of the proceedings in the court below, including any submissions as to the grant of a certificate pursuant to the Suitors Fund Act 1951 in favour of any party who is ordered to pay costs, by 4:00pm on Monday 3 September 2013;

(vii)   I stand the matter over until 9:15am on Friday 6 September 2013 for judgment on the question of costs.

**********

Schedule

By consent I make orders in accordance with paragraph 1 of the Consent Orders signed, dated and sealed by me.

Pursuant to 36.15(2) order that:

(a) order (iii) made by the court on 26 August 2013 is set aside and in lieu thereof order that:

(iii) in the proceedings in the court below:

(a) set aside the verdict for the First Cross-Claimant;

(b) set aside the order of the Magistrate of 20 April 2012 in respect of costs; and

(c) enter judgment for the First Cross-Claimant against the Second Cross-Defendant in the amount of $5,324.00.

(b) Vary order (v) made by the court on 26 August 2013 by deleting the word “proceedings” and inserting instead the following:

“the  claims by the plaintiff, Getex Pty Limited, the subject of paragraphs 4 to 6 of its Defence to Second Cross-Claim filed on 20 May 2011 and incorporated by paragraph 14 of its Further Further Amended Statement of Cross-Claim filed on 3 November 2011”.

Amendments

06 September 2013 - Variation to orders made on 6 September 2013.

Amended paragraphs: Schedule of orders

Decision last updated: 06 September 2013