Knevitt v The Commonwealth of Australia - [2009] NSWSC 1341

No judgment structure available for this case.

CITATION: Knevitt v The Commonwealth of Australia [2009] NSWSC 1341

HEARING DATE(S): 26/06/2009, 30/10/2009

JUDGMENT DATE :
4 December 2009

JUDGMENT OF: Buddin J

DECISION: The appeal is dismissed with costs.

CATCHWORDS: Civil - appeal from Local Court - whether breach of contract in relation to length of term of engagement - whether misrepresentations made - whether claim within scope of Trade Practices Act - meaning of phrase "carrying on a business"

LEGISLATION CITED: Local Court Act 2007
Trade Practices Act 1974 (C’th)

CATEGORY: Principal judgment

CASES CITED: Aon Risk Services Australia Ltd v Australian National University [2009] 83 ALJR 951
Azzopardi v Tasman UEB Industries Ltd (1985) NSWLR 139
Australian Gaslight Co v Valuer-General (1940) 40 SR (NSW)
Baring v Russell Edwards Design Services Pty Ltd [2008] NSWCA 58
Coulton & others v Holcombe & others (1986) 162 CLR 1
Equuscorp Pty Ltd and Anor v HGT Investments Pty Ltd (2004) 218 CLR 471
Esanda Ltd v Burgess and Anor [1984] 2 NSWLR 139
Hope v The Council of the City of Bathurst (1980) 144 CLR 1
Klesteel Pty Ltd v Mantzouranis [2008] NSWSC 194
Masterton Homes Pty Ltd v Palm Assets Pty Ltd [2009] NSWCA 234
McMurtrie v Commonwealth of Australia & Ors [2002] NSWSC, 1147
R v PL [2009] NSWCCA 256
Sirway Asia Pacific Pty Ltd v Commonwealth of Australia (2002 ATPR (Digest) 46-226

PARTIES: Ian Knevitt (Appellant)
The Commonwealth of Australia (Respondent)

FILE NUMBER(S): SC 16031/2008

COUNSEL: R de Meyrick (Appellant)
A Tonking SC (Respondent)

SOLICITORS: Law Partners (Appellant)
Sparke Helmore Lawyers (Respondent)

LOWER COURT JURISDICTION: Local Court

LOWER COURT FILE NUMBER(S): 996/07

LOWER COURT JUDICIAL OFFICER : G Bradd

LOWER COURT DATE OF DECISION: 23/10/2008

IN THE SUPREME COURT
OF NEW SOUTH WALES
COMMON LAW DIVISION

BUDDIN J

FRIDAY 4 DECEMBER 2009

2008/016031 – IAN KNEVITT v THE COMMONWEALTH OF AUSTRALIA
JUDGMENT

The appellant sued the respondent in the Local Court alleging that it had breached the terms of his contract of employment with the Department of Defence (DoD). At the relevant time the appellant was employed within DoD in a civilian capacity as a Human Resources Manager in the Electronic Weapon Systems Division (EWSD) of the Defence Material Organisation (DMO). The appellant pleaded his case on two bases. First, it was contended that it was a term of the contract that the appellant was to be employed for a 12 month period which the respondent breached by terminating the contract after 5 months (the contract claim). In the alternative, it was contended that the appellant was misled and deceived by misrepresentations made by the respondent’s servants or agents as to the duration of the period of employment such as to attract the provisions of the Trade Practices Act 1974 (C’th) . In that respect it was contended that the appellant contracted with the respondent in reliance upon representation(s) that the contract was for a period of 12 months (the Trade Practices claim). The appellant claimed the sum of $51,185 in lost income and superannuation being the sum which represented the balance of what he would have received had the contract run for 12 months. The Magistrate rejected both claims and entered a verdict for the respondent and it is that decision which the appellant challenges in this Court.

2 The appellant relies upon the following grounds of appeal:

1. His Honour erred in finding that the Defendant was not conducting a business within the meaning of s.2A(1) of the Trade Practices Act 1974 (C’lth) in its capacity as the Electronic Weapons Systems Division of the Defence Materiel Organisation.

2. His Honour erred in holding that Section 53B of the Trade Practices Act did not apply to the defendant in all the circumstances.

3. His Honour should have held that the Plaintiff was misled and deceived within the meaning of Section 53B.

4. Further, or in the alternative his Honour erred in holding that there was no breach of contract.

5. His Honour should have held that the Defendant breached an express contract to provide a 12 month fixed term of employment.

6. His Honour erred in failing to find that the Defendant was bound by the actions and promises made by Mr Karavas of HR Partners, as its agent with actual and ostensible authority to bind the defendant.

7. His Honour erred in finding that the pleaded contract was contradicted by the letter signed by the plaintiff on 22/12/2005, and in this regard his Honour misapplied the legal authority of Equuscorp v HGT Investments (2004) 218 CLR 471.

3 Section 39 of the Local Court Act2007 relevantly provides that a party who is dissatisfied with a judgment of the Local Court “may appeal to the Supreme Court but only on a question of law”. Section 40 provides that such a party can also appeal on “a question of mixed law and fact but only by leave of the Supreme Court” whilst s 41 deals with the powers of the Court.

4 For the purposes of determining the appeal, I was furnished with the transcript of proceedings at first instance together with the exhibits which were tendered as well as the Magistrate’s reasons for judgment. Four witnesses gave evidence before the Magistrate, each having sworn affidavits which became part of the evidence in the proceedings. The appellant gave evidence in his own case whilst Ms Michelle Priestland, Ms Victoria Doyle and Commodore Michael Uzzell gave evidence on behalf of the respondent.

The evidence at first instance

The contract claim

5 Given the way in which the proceedings unfolded, it will be necessary to refer to the evidence which was led before the Magistrate commencing with the material which pertained to the contract claim. Mr Uzzell’s evidence related principally to the Trade Practices claim and I shall refer to it in due course.

6 The appellant swore an affidavit dated 6 May 2008. He said that he had had a 30 year career in Human Resources and that as of late November 2005 he was just about to complete a 12 month contract as a HR manager with RailCorp. It was in those circumstances that the appellant placed his name with a number of employment agencies in order that they might seek suitable employment for him. Mr Perry Karavas, who worked with one such agency, HR Partners, arranged an interview for the appellant in relation to a position with the DoD. The interview was attended by Mr Karavas and by Ms Priestland who explained what the position would entail. The appellant said that Ms Priestland told him that the contract would be for 12 months. According to the appellant, she also said that “the paper work and time involved in getting approval for a 12 month contract is such that we will initially put the paper work through for a 6 month contract so we can speed the process up and get you started as soon as possible. But it will be for twelve months in total.” She also told him that there were other candidates to be interviewed. The appellant said that a day or two later Mr Karavas phoned and told him that “Michelle…would like to offer you the job”. The appellant said that he agreed to accept the position. According to the appellant, Mr Karavas also said that he would be sent a letter “confirming the twelve months employment but to get you started the Department of Defence will put in for six months and then followed by another six months in July.”

7 On 22 December 2005 the appellant received a letter from Mr Karavas which contained the following paragraph:

As discussed, this role is a fixed term contract for a period of 12 months, effective from 23 January 2006. During this period you will be an employee of Department of Defence and they will issue a formal letter of offer outlining the conditions of your contract.

8 Shortly thereafter the appellant received a letter from the respondent which was in the following terms:

It has been brought to my attention that you have recently been offered a non-ongoing position within the Department of Defence.

As a result please find enclosed a number of forms that are required to be completed as part of the process of being employed within the Department of Defence.

Please complete each form and forward them back to myself on the below address …

Please notify your nominated referee that Defence will be in contact with them in the near future to complete a written character check. This involves a series of mandatory questions relating to security and work performance.

Once I receive this paperwork I will begin the process of conducting mandatory ‘fit and proper’ checks. This involves a Police Records and Character Check.

9 On 23 January 2006 the appellant commenced work with the respondent. He was provided with a document entitled “Engagement as a non-ongoing employee under Section 22 of the Public Service Act 1999” the relevant parts of which are set out below:

I am pleased to advise that you have been selected, under s22(2)(b) of the Public Service Act 1999 (the Act), for employment as a non-ongoing APS employee with the Department of Defence. Your employment will be for a term specified in the attached Notice of Engagement .

Details of your employment and the duties on which you will be initially engaged are set out in the Notice of Engagement.

Your employment will commence on 23 January 2006 and continue for the period specified in the Notice of Engagement. …

As you are aware, your employment is subject to a period of probation as noted in the Notice of Engagement. …

The terms of your employment, as specified in the Notice of Engagement, will be those which apply generally to APS employees in the Department of Defence. In particular, the Public Service Act 1999 applies to your employment and you should familiarise yourself with the APS Code of Conduct, a copy of which is attached. Your employment is also governed by the Defence Employees Certified Agreement 2004-2006. Basic information on a number of these terms of employment is also attached.

Your employment may only be extended in accordance with the provisions of the Public Service Act 1999 . Your engagement in no way implies that you will be offered any subsequent APS employment in the Department of Defence .

If you wish to be engaged…please complete the following details.

(The details requested were the appellant’s name and date of birth) (emphasis added)

10 The document to which I have referred was signed by Craig Smith as the delegate of the Secretary to the DoD.

11 The appellant signed the Notice of Engagement which contained the following conditions:

Commencement Date 23 January 2006

Specified Term 23 June 2006

…

12 The appellant swore in his affidavit that he “did not notice at the time that the Notice of Engagement was for a period of 5 months ending on 23 June 2006. I had assumed that it was six months as per the previous discussion.”

13 On about 20 June 2006 the appellant said that Ms Priestland told him that she was not happy with his progress and that she wanted him to finish on 23 June (the last day of his contract). He also swore that she said that she would not be extending his contract for a further 6 months. He said that he subsequently received formal notification from the respondent that his contract would not be extended.

14 The appellant said that it was only then that he looked at the Notice of Engagement and saw that it was for 5 months and not 6 months. He said that he then contacted executive employment agencies but found it difficult to “find suitable employment” and that it was not until about August 2007 that he was able to obtain full-time employment. He said that he was also registered with Centrelink but said that he found it hard to get work as his confidence was down.

15 In cross-examination he gave the following evidence:

…

Q. That makes it perfectly plain doesn’t it that they – that is the Department of Defence will issue a formal letter of offer outlining the conditions of your contract?

A. Yeah, conditions of the contract yes which is now the detail, that’s standard I think – standard practise in the HR field or an employment agency to do the initial letter of offer or letter of employment and then obviously you’d get more detailed information from the company you’re working for.

^rd

…

16 Ms Priestland swore an affidavit dated 13 June 2008. At the relevant time she was working as the HR Manager for EWSD in the DMO. She gave evidence of the interview which she had conducted on 9 December 2005 with Mr Karavas and the appellant. She said that she told the appellant that:

17 She said that when the appellant asked her if the job was going to be for a year she had replied:

At this stage the work we expect to be done and if no dramatic changes are identified, we expect the project to be completed in one year. But we are not 100% sure which is why we cannot recruit for this role permanently. I cannot make any promises. Perry and I are simply meeting with all the interested candidates today. I have other candidates to meet with today and I am sure when a decision is made Perry will contact the successful candidate and we will go to the next step of the process then.

18 She also said that:

I did not make any guarantees that the defined position would be ‘contracted’ for 12 months. I was not in a position on the day of the meeting to negotiate actual contract details, and dependant on the successful candidate a contract may not have been the engagement tool. I discussed the package with all applicants in terms of position, level of difficulty expected, packet of expected work and role needs describing it as a ‘non-ongoing position’ and not a ‘non-ongoing contract’. A non-ongoing position is one which has a finite term generally for a short period. I did not make undertakings regarding a ‘contract’ as stated by Mr Knevitt.

19 She said that on 11 December 2005 she phoned Mr Karavas and asked him to ascertain if the appellant was still interested in the position. She was subsequently informed by Mr Karavas that he was. She also explained that her task was to identify suitable candidates and that it was for others to make a decision about their employment.

20 In cross-examination she denied that she had told the appellant that she was unhappy with his progress. She said that she had had nothing to do with the decision not to extend his contract and that her role was simply to communicate the decision which had been made by her superiors. She also said that she was not aware of any process of putting some-one up for a period of 6 months to “speed up the paperwork process”.

21 Ms Doyle swore an affidavit on 17 June 2008. She said that she had received instructions from Ms Priestland to complete a non-ongoing employee form so that the Recruitment Services section of DoD could prepare a contract of employment for the appellant. For that purpose she said that she had spoken to Craig Smith who was the manager for Recruitment Services for the ACT. She said that they had a conversation to the following effect:

Me: I need assistance bringing on a person in a temporary role for a 12 month period.

Craig Smith: I have had issues with the recruitment process and who was responsible for the action of the employment. The problem for recruitment was that the work was in Orchard Hills and came under the NSW office of Recruitment Services but the process was driven by the ACT office. However, I agree that we need to progress the matter. But the Department can’t offer Mr Knevitt a 12 month contract. We can progress the paperwork for a 6 month contract.

22 She said that she had subsequently spoken to Mr Karavas and that they had had a conversation to the following effect:

Mr Doyle: We are unable to offer Mr Knevitt a 12 month contract. Can you please find out whether Mr Knevitt is prepared to accept a 6 month contract?

Karavas: What happens at the end of 6 months?

Mr Doyle: We can ask for an extension of the contract for up to a further 6 months. To offer Mr Knevitt 12 months employment the department would need to use 2 non-ongoing contracts over this period.

23 However, she denied having at any stage said to Mr Karavas or to the appellant that he would be guaranteed employment for two 6 month periods. She described the assertion by Mr Karavas, in his letter of 22 December 2005, that the appellant would be retained on “a fixed term contract for a period of 12 months” as “an incorrect statement”.

24 The Magistrate expressed his findings about this aspect of the evidence in the following terms:

Mr Knevitt signed the letter made (sic) by Mr Smith on 23/01/2006, the day he arrived to commence employment. By completing the details under the heading ‘PROSPECTIVE EMPLOYEE TO COMPLETE’ he acknowledged that he wished to be engaged as a non-ongoing APS employee for a term specified in the Notice of Engagement commencing on 23/01/2006, and acknowledged that he was informed that his engagement did not imply that he would be offered subsequent employment.

The Notice of Engagement is set out in part as follows:

As a delegate of the Secretary to the Department of Defence under the Public Service Act 1999, I (a) engage the person…

The term ‘I engage” makes it plain that the engagement occurred when Mr Knevitt signed the letter.

There is no evidence that on 23/01/2006, before signing the letter, Mr Knevitt raised any concerns that the Notice of Engagement did not reflect his understanding of what he perceived was an oral agreement. Further, there is no evidence that he made a request that it be rectified. Mr Knevitt has not pleaded non est factum. Nor has he pleaded that the agreement was partly oral and partly in writing, and in any case the oral agreement pleaded by Mr Knevitt contradicts the letter signed by Mr Knevitt. Having signed the letter of 22/12/2005, Mr Knevitt is bound by it. (It is apparent from what I have said earlier that the letter which his Honour intended to refer to was the one dated 23 January 2006.)

25 In reaching his conclusion, his Honour indicated that he was relying upon the decision of the High Court in Equuscorp Pty Ltd and Anor v HGT Investments Pty Ltd (2004) 218 CLR 471 in which the Court (Gleeson CJ, McHugh, Kirby, Hayne and Callinan JJ) observed that:

The misrepresentation alleged was as to what had been said in the conversations, not what the document was or provided

may

must

There are reasons why the law adopts this position. First, it accords with the ‘general test of objectivity [that] is of pervasive influence in the law of contract’. The legal rights and obligations of the parties turn upon what their words and conduct would be reasonably understood to convey, not upon actual beliefs or intentions.

Secondly, in the nature of things, oral agreements will sometimes be disputable. Resolving such disputation is commonly difficult, time consuming, expensive and problematic. Where parties enter into a written agreement, the Court will generally hold them to the obligations which they have assumed by that agreement. At least, it will do so unless relief is afforded by the operation of statute or some other legal or equitable principle applicable to the case. Different questions may arise where the execution of the written agreement is contested; but that is not the case here. In a time of growing international trade with parties in legal systems having the same or even stronger deference to the obligations of written agreements (and frequently communicating in different languages and from the standpoint of different cultures) this is not a time to ignore the rules of the common law upholding obligations undertaken in written agreements. It is a time to maintain those rules. They are not unbending. They allow for exceptions. But the exceptions must be proved according to established categories. The obligations of written agreements between parties cannot simply be ignored or brushed aside. (at paras 32-35) (emphasis added)

26 It is apparent that Grounds 4 – 7 of the appeal pertain to the contract claim. It is nonetheless convenient to deal first with that aspect of Ground 7 in which it is asserted that the Magistrate erred insofar as he “misapplied” Equuscorp. In developing this argument, the appellant relied upon the following passage from that decision:

The conclusion that the respondents are bound by the written loan agreements may leave open the possibility that an earlier consensus reached by the parties was in each case a collateral agreement (made in consideration of the parties later executing the written agreement), but that has never been the respondents' case. In another case it may leave open the possibility that the contract is partly oral and partly in writing. (at para 36) (footnotes omitted)

27 The appellant submitted that his case fell within one of the two exceptions identified in Equuscorp. It was thus contended that either the contract between the parties was partly oral and partly written or that there was a “stand alone contract which was collateral to the employment contract”. The appellant also referred to the analysis of the principles which are applicable in deciding whether an agreement is one that is wholly written or partly written and partly oral which was undertaken by Campbell JA in Masterton Homes Pty Ltd v Palm Assets Pty Ltd [2009] NSWCA 234 [at para 90].

28 At this stage it is convenient to set out the remainder of the paragraph from Equuscorp upon which the appellant relied. It is in the following terms:

But that cannot be so here. The oral limited recourse terms alleged by the respondents contradict the terms of the written loan agreement. If there was an earlier, oral, consensus, it was discharged and the parties' agreement recorded in the writing they executed. It is the written loan agreement which governed the relationship between Rural Finance and each respondent. (para 36)

29 In my view, what appears in that extract together with the earlier passages from Equuscorp to which I have already referred, provides a complete answer to the appellant’s argument in respect of the contract claim. Nonetheless in deference to the other submissions which were advanced on the appellant’s behalf, I will now consider them as well.

30 The appellant pleaded in the Amended Statement of Claim that “in or about January 2006 he entered into an oral agreement with the defendant” and that it “was a term of the oral agreement that the plaintiff would be employed by the defendant for a period of 12 months in two periods of 6 months”. It was contended that the existence of that term was established as a consequence of what the appellant said he had been told by Ms Priestland in his interview with her and then by what he said he had been told by Mr Karavas when he was informed that he was the successful candidate for the position.

31 His Honour made the following further findings:

She did not have the authority to employ persons on behalf of the Commonwealth

In December 2005 Ms Priestland interviewed the candidates identified by HR Partners [including] Mr Knevitt.

a delegate with the authority to engage Mr Knevitt as an employee in the Australian Public Service for employment in DoD

In any event since Mr Knevitt knew that Ms Priestland was conducting interviews he knew that whatever she said did not amount to an offer.

Mr Knevitt appears to be wrong in his assertion that Ms Priestland said “we will initially put the paper work through for a six month contract”, since later in time, Ms Doyle having been directed to commence the recruitment process by Ms Priestland, asked Mr Smith for a twelve month contract. It was only when Mr Smith declined to offer a twelve month contract that Ms Doyle asked Mr Karavas whether Mr Knevitt was prepared to accept a six month contract.

however Mr Smith, the delegate would only allow a contract for a period of six months

I presume that Mr Knevitt asserts that Ms Priestland offered him a contract for a period of twelve months because of the conversation with Mr Karavas. There is no evidence from Mr Karavas. The alleged conversation is at odds with the sequence of events, and the roles of the participants. It was Ms Doyle who spoke to Ms Karavas about the need to obtain two contracts not Michelle Priestland. The role of Ms Doyle was to process the employment of Mr Knevitt. The role of Ms Priestland was to process the selection of the candidate. It is highly unlikely that Ms Doyle would have said to Mr Karavas “Michelle would like to offer Mr Knevitt the job”. Mr Knevitt is mistaken in saying Ms Priestland said: “we will initially put the paper work through for a six month contract”. For the reasons set in this paragraph, I find that Mr Knevitt is mistaken in saying that Mr Karavas said: “Michelle…would like to offer you the job”

32 As is apparent, the Magistrate did not accept the appellant’s evidence concerning his conversation with Ms Priestland. Counsel for the appellant realistically conceded that there was simply no basis upon which that part of his Honour’s decision could be impugned. This meant that the evidentiary basis for the existence of the so-called “oral contract”, or indeed the existence of a collateral contract, lay solely in the evidence given by the appellant about the conversation that he said that he had had with Mr Karavas. However, the fundamental problem confronting the appellant is that, as the court in Equuscorp observed, even if there had been “an earlier, oral, consensus, it was discharged and the parties’ agreement [was] recorded in the writing they executed”.

33 The appellant also sought to draw some comfort from the letter of 22 December 2005 from Mr Karavas, which referred to his appointment to “a fixed term contract for a period of 12 months”, as giving effect to the oral agreement. His Honour dealt with that argument in the following fashion:

When Mr Knevitt received the letter dated 22/12/2005 from HR Partners, he knew that he would be offered a six month contract even though the letter states that “this role is a fixed term contract for a period of 12 months.”…From the letter he also knew that he would receive a “formal letter of offer outlining the conditions of the contract.”

34 Moreover, the letter alludes to earlier discussions. That could only be a reference to the conversation in which the appellant contends that he was offered a 12 month contract consisting of two consecutive 6 month terms. That being the case, it is somewhat surprising that the letter contains no reference to that latter detail.

35 The formal letter of offer outlining the conditions of the appellant’s contract are contained in the Notice of Engagement which he accepted and signed on 23 January 2006. It could not have been in clearer terms and the appellant, a man with 30 years experience in HR issues, acknowledged by signing the agreement his willingness to accept the conditions contained in it. Nor, as his Honour concluded, did the appellant raise an issue about any of those conditions.

36 The appellant also contended that the Notice of Engagement should be read in conjunction with the pleaded oral agreement. As is apparent his Honour rejected that argument upon the basis that the alleged oral agreement was inconsistent with the conditions specified in the written agreement. In my view, his Honour was correct to do so. First, the written agreement provided for a term of only 5 months rather than 6 months. It seems that that was because of a mistake made by Ms Doyle when the contract was being prepared. Although the appellant makes no complaint in that respect (by, for example, pleading mistake) the fact remains that the term specified in the written contract is inconsistent with the term said to have been nominated in the alleged oral contract. More importantly, the written agreement made it patently clear that “the fact that the appellant was engaged in no way implies that [he would] be offered any subsequent APS employment in the Department of Defence”. That stipulation is also plainly at odds with the appellant’s assertion that he had been guaranteed an additional 6 month term at the expiration of the first term. Nor is the reference in the notice of engagement to a probation period consistent with the case put on the appellant’s behalf.

37 Neither, for similar reasons, can the appellant’s contention that the pleaded contract amounted to a collateral agreement be accepted. It was not, to employ the language in Equuscorp, an agreement which was “made in consideration of the parties later executing the written agreement”.

38 The respondent also drew my attention to the following passage in Esanda Ltd v Burgess and Anor [1984] 2 NSWLR 139 in which Samuels JA observed that:

Maybury v Atlantic Union Oil Co Ltd

89 CLR 507

“… A collateral agreement made in consideration of a main agreement cannot effectively subsist unless it is consistent with the main agreement. Once an agreement is made in writing it is treated, unless the parties are shown otherwise to intend, as the full expression of their obligations. If it is established that the writing was intended to contain only part of a fuller agreement it may be otherwise. That, however, is not the present case. But it may be established that an entirely separate agreement was made by the parties. One of them may give a collateral promise in consideration of the other entering into the principal agreement. But if such a collateral agreement is to have effect as a contract it must be consistent with the provisions of the main agreement, the making of which by the other party provides the consideration. If the promise sought to modify, control or restrict the principal agreement it would detract from the very consideration which is alleged to support he promise.”

Hoyt's

Proprietary Ltd v Spencer

27 CLR 133

J J Savage & Sons Pty Ltd v Blakney

Ross v Allis-Chalmers Australia Pty Ltd

39 See also the helpful summary of the relevant case law in McMurtrie v Commonwealth of Australia & Ors [2002] NSWSC, 1147 [at paras 49-56].

40 I accept the respondent’s submissions that the considerations referred to in those authorities apply equally to the present case.

41 The appellant asserts in Ground 6 that the Magistrate erred in not finding that the respondent was bound by the representations made by Mr Karavas. His Honour made the following observations about that conversation:

It is possible that Mr Karavas made the statement attributed to him by Mr Knevitt, being:

Great, I’ll send you out a letter confirming the twelve months employment but to get you started the Department of Defence will put in for six months and then followed by another six months in July.

The statement attributed to Mr Karavas could be his interpretation of the conversation with Ms Doyle, or a presumption by Mr Karavas that Mr Knevitt would be engaged for a subsequent six months, or a gloss put on the real situation.

42 Given his Honour’s findings which I have referred to at some length in disposing of Ground 7, it was strictly unnecessary for his Honour to have given any further consideration to the conversation which the appellant maintained that he had had with Mr Karavas.

43 Nevertheless the nub of the appellant’s complaint is that his Honour erred in not accepting in unequivocal terms the conversation which the appellant said that he had had with Mr Karavas. I do not discern error in his Honour’s approach to this issue. As I understand the situation, his Honour was merely indicating that even if Mr Karavas had uttered the words which the appellant attributed to him, his remarks did not accurately represent what his Honour described as the “real situation”. Furthermore, there was nothing in his Honour’s reasoning which suggested that he regarded Mr Karavas as the agent of the respondent or that what he said or did was intended to bind it contractually. Indeed, in the extract to which I referred earlier, his Honour made a finding that such authority was exercised by Mr Smith. Nor on my reading of it, did the evidence establish that Mr Karavas had any such authority to bind the respondent in respect of the terms and conditions of his contract of engagement. His role was to assist in the recruitment process for which the respondent was to pay him a fee. At best, the evidence upon this issue could be described as equivocal. Moreover, it is of considerable significance that the appellant chose not to call Mr Karavas to give evidence especially as the conversation between them was pivotal to his case and was a matter in respect of which he bore the onus. For all those reasons, I was of the view that Ground 6 should be rejected. It follows that the various grounds which purport to challenge his Honour’s conclusion in respect of the contract claim must also fail.

44 I have already referred to the fact that the appellant can appeal as of right “but only on a question of law”: see generally Australian Gaslight Co v Valuer-General (1940) 40 SR (NSW) at 138; Azzopardi v Tasman UEB Industries Ltd (1985) NSWLR 139 at 155; R v PL [2009] NSWCCA 256. I have proceeded to determine the merits of the contract claim upon the assumption that Grounds 4-7 properly identify a matter which raises “only a question of law”. Although I am not immediately persuaded that any of the grounds do, I accept that some of them may nevertheless raise a question of “mixed fact and law”. A matter that is properly so characterised requires, as I have said, the appellant to obtain the leave of the Court. The appellant was given the opportunity to amend his summons to seek leave but elected not to do so. Were it necessary to determine the question of whether leave should be granted, one consideration which would militate against granting it is that the appellant did not plead in his Amended Statement of Claim that the contract was either partly oral and partly written or that there was a collateral contract. As I understand the situation, that latter contention first arose in submissions in the Local Court after counsel for the respondent had referred to the decision in Equuscorp (supra). There is clear authority for the proposition that a party should be bound by its conduct of the proceedings at trial: Coulton & others v Holcombe & others (1986) 162 CLR 1. Nor of course did the appellant seek to amend the pleadings: see generally Aon Risk Services Australia Ltd v Australian National University [2009] 83 ALJR 951.

45 Were it otherwise necessary to have decided the issue of whether to grant leave, there are other factors which may well also have warranted its refusal including the fact that the appeal does not involve any issue of principle and nor does it affect third parties: see Baring v Russell Edwards Design Services Pty Ltd [2008] NSWCA 58 [at para 24].

The trade practices claim

46 As I have already indicated, the appellant claimed in the alternative that he was misled and deceived by representations made to him by the respondent’s servants or agents as to the duration of his employment such as to bring him within the scope of s 53B of the Trade Practices Act. That provision is in the following terms:

corporation

persons

47 The representations relied upon are those alleged to have been made to the appellant by Mr Karavas that I have already discussed. Section 2A relevantly provides:

(1) Subject to this section and sections 44AC, 44E and 95D, this Act binds the Crown in right of the Commonwealth in so far as the Crown in right of the Commonwealth carries on a business, either directly or by an authority of the Commonwealth.

48 Section 2C identifies various activities that do not amount to carrying on a business whilst s 4 provides that a business includes a business that is not carried on for profit.

49 The appellant contends that the respondent through the DMO relevantly carried on business. Accordingly, in order to make good this claim the appellant had first to establish that the DMO was carrying on a business. The evidence which was led upon this issue was in a very narrow compass. Indeed the only oral evidence which was adduced was led by the respondent on whose behalf Commodore Uzzell gave evidence. In an affidavit sworn on 14 June 2008 he deposed to the following matters:

On 29 January 2007, I commenced employment in the position of Director General Guided Weapons and Explosive Ordnance, which was retitled Director General Munitions on 2 June 2008.

My day to day responsibilities include:

(a) assuring the availability of munitions for the Australian Defence Force in the specified quantities at specified levels of reliability and performance;

(b) spending public monies in accordance with Finance Management and Accountability Act; and

(c) employing personnel in accordance with the Public Service Act and the Defence Employees Collective Agreement.

Functions of Defence Materiel Organisation

The Defence Materiel Organisation (DMO) is a government agency responsible for equipping and sustaining the Australian Defence Force (

ADF

) It is not a separate legal entity

DMO’s headquarters are in Canberra at the Russell Offices of the Department of Defence

GWEO

EWSD

Until 2 June 2008, the GWEO was responsible for the acquisition, procurement, maintenance and disposal of Explosive Ordnance such as bombs, artillery, mortars, rockets, small arms ammunition, grenades, flares, demolition charges, cartridge actuated devices and similar, related items or components that are explosive in nature. It was also responsible for the maintenance and disposal of guided missiles, sea mines, and torpedoes.

Acquisitions

Major Capital Equipment acquisitions by the DMO are progressed under the authority of a ‘Materiel Acquisition Agreement’ (MAA) with the Department of Defence. The MAA defines the acquisition requirements of the Australian Defence Force. Any given Major Capital Equipment acquisition will occur pursuant to agreements. The purchaser under these agreements is the Commonwealth of Australia, on behalf of the Department of Defence. Inventory is owned by the Department of Defence on behalf of the Chiefs of the three Services (Navy, Army and Air Force)

Acquisitions considered as being ‘minor’ in nature are progressed under a Minor Projects agreement system.

At any given time there are hundreds of agreements in existence under which acquisitions are progressed by the DMO for the Australian Defence Force.

The funds used to make the acquisitions are transferred to DMO, pursuant to an allocated budget set out in the MAA, by the Department of Defence

The Explosive Ordnance acquired by the DMO is delivered directly to the Joint Logistics Command and then delivers it to one of the three armed forces for whose administration and support the Department of Defence is responsible

Receipt of the supplies by the Australian Defence Force is recorded in a statutory register

Delegations of authority to expend public money on acquisitions are formally promulgated via instruments of delegation

Procurement

Procurement of goods and services by the DMO for the ongoing support of the Australian Defence Force is conducted under the auspices a “Material Sustainment Agreement” (

MSA

) with the Chief of Service (Navy, Army, or Air force) to whom the goods or services are to be delivered

The system for delegating authority to expend public monies to procure goods and services is the same as that used for acquisitions.

Maintenance

GWEO was responsible for the maintenance of certain Explosive Ordnance such as guided weapons.

If a guided weapon required repair or servicing, GWEO requested the delivery of the weapon to its servicing site, undertook the repair or servicing, and made the weapon available for delivery back to the Australian Defence Force upon completion.

The costs of delivery, maintenance, and repair are borne by Defence.

Disposal

DMO has the responsibility for the disposal of Explosive Ordnance that no longer meets minimum reliability or performance criteria. Disposal of excess stock, ordinarily the result of the Australian Defence Force no longer requiring the Explosive Ordnance, is also the responsibility of the DMO.

There are three generic methods for disposing of Explosive Ordnance. The first is to break the Explosive Ordnance down into non-hazardous components (deconstruction), the second is to destroy it, and the third is to sell it (however this third option does not apply to Explosive Ordnance that no longer meets minimum reliability or performance criteria).

Any proceeds from the sale of excess stocks of Explosive Ordnance is channelled into consolidated revenue for the Commonwealth of Australia. DMO does not receive any proceeds from the sale

Until very recently, the sale of Explosive Ordnance (when it occurs) has always been to another government. Prior to 2008, DMO had not sold Explosive Ordnance to non-Government entities. The sale of items originally sourced from another government or foreign supplier to a third party government is regulated by international traffic in arms regulations.

DMO can sell excess Explosive Ordnance back to its original manufacturer. However, there are controls on who an Australian manufacturer can then on-sell the Explosive Ordnance to. Those controls are policed by the Department of Defence and the controls ensure that the Government to whom the EO will be eventually delivered is ‘aligned’ with the Commonwealth’s strategic interests. Similar to a government-to-government sale of excess Explosive Ordnance, the funds go back to consolidated revenue and are not collected by the Department of Defence or the DMO. (emphasis added)

50 During the course of cross-examinating Commodore Uzzell the plaintiff tendered a printout from the DMO’s website. It contained the following information:

ABOUT DMO

Who are we

its mission is to acquire and sustain equipment for the Australian Defence Force

The DMO is part of the

Department of Defence

l

argest and most demanding projects in Australia

The Australian Defence Force relies on us to provide its equipment on time, on budget and to the required levels of quality and safety – the ADF’s operational success depends on us

Defence Capability Plan 2006-16

Purpose

Goal

Defence and industry in partnership

DMO works in partnership with defence industry to deliver the 2006-16 Defence Capability Plan (DCP 2006-16). The key commitments outlined in the DCP 2006-16 include the continuation of the 3% Defence White Paper 2000 growth in funding for the DCP beyond 2010/11 and an investment in future acquisitions growing to around $5 billion annually.

Both DMO and industry need to lift performance, particularly on schedule, to deliver on the Defence Capability Plan. Only working together, as partners, can we deliver to the Australian warfighter and the Australian people.

Vigorous, productive and profitable industry is important to equip and sustain the Australian Defence Force and its warfighters. Equally important is the ability of Defence to get the best value for money on behalf of the Australian taxpayer. (emphasis added)

51 Commodore Uzzell also agreed with the proposition that “the core nature of …the DMO is a separate business unit within the Department to Defence service as clients the army, navy and airforce”.

52 After briefly referring to the evidence, his Honour rejected the contention that the DMO was carrying on a business. His Honour said:

The Trade Practices Act (the Act) binds the Crown in the right of the Commonwealth in so far as the Crown in the right of the Commonwealth carries on a business, either directly or by an authority of the Commonwealth.

The DMO is not an authority of the Commonwealth as defined in the Act. The ambit of the business activities of the particular Commonwealth enterprise are relevant to determine whether those activities is engaged in as a part of the carrying on of a business.

…

The Commonwealth acquires explosive ordnance for the purpose of carrying out its responsibility for the defence of the Commonwealth. The activity is not synonymous with a business. The Commonwealth disposes of unwanted explosive ordnance by sale as part of its management of explosive ordnance acquired for the purpose of carrying out its responsibility for the defence of the Commonwealth. The activity is not synonymous with a business.

The acquisition, procurement and disposal of explosive ordnance by sale are functions of the Commonwealth directly relating to its responsibility for the defence of the Commonwealth, and the Commonwealth does not carry on of a business when it carries out those functions. Section 53B of the Trade Practices Act does not apply to the employment of Mr Knevitt.

53 In arriving at that conclusion, his Honour indicated that he had relied upon the decision of Sundberg J in Sirway Asia Pacific Pty Ltd v Commonwealth of Australia (2002 ATPR (Digest) 46-226 to which he had been referred by the parties. It also received some attention in these proceedings. In that case the DoD was responsible for procuring chinaware which would be issued to the armed services (army, navy and airforce) on an as required basis. The DoD sought tenders for the supply of the chinaware. Sirway was the successful tenderer and entered into an agreement with the DoD to supply the chinaware in accordance with the relevant Australian Standard. Sirway arranged for the chinaware to be manufactured on its behalf. A dispute arose as to whether the items complied with the required standard. Having considered the factual background, Sundberg J continued:

J S McMillan Pty Ltd v Commonwealth

Smith v Capewell

“the expression 'carry on a business', in its ordinary meaning, signifies a course of conduct involving the performance of a succession of acts and not simply the effecting of one solitary transaction."

Emmett J, however, was of the view that repetition and the related indicia of system and regularity are not sufficient of themselves to establish that a business is being carried on. Likewise, their absence alone does not indicate that an organisation is not a business.

McMillan

Mid Density Development Pty Ltd v Rockdale Municipal Council

Saitta Pty Ltd v Commonwealth

Thus the ambit of the business activities of the particular Commonwealth enterprise must be examined to see whether the impugned conduct was engaged in as part of the carrying on of a business

McMillan

The applicant pleads that in calling for tenders, accepting tenders and entering into the SOA for the supply of chinaware, the Department of Defence was carrying on the business of trading in chinaware. Its submissions are more confined. The conduct in question is identified as entering into the SOA, and the business is defined as the business of acquiring chinaware in industrial quantities. Although the applicant focuses on its interaction with the respondent as the business operator, that is the applicant's participation in the tender process and the conclusion of the SOA, it must first establish that the respondent was carrying on a business when it engaged in such activities. It is not sufficient that it establish the commercial nature of the respondent's behaviour and the transaction; such behaviour must relate to the respondent's carrying on of the alleged business. See McMillan and the discussion in para64 below. I will therefore consider whether the respondent was carrying on the business of trading in chinaware or acquiring chinaware in industrial quantities, and if so whether it invited and dealt with tenders and concluded the SOA in the course of carrying on that business. The respondent admits that it is liable for the acts or omissions of the Department.

The Department's core function is the defence of Australia and its national interests

The business it is alleged to carry on is supportive of, if not integral to, that core function.

That is, it is essential to the defence of Australia that army and air force barracks and naval vessels are furnished with chinaware so that the service personnel charged with the actual task of defending Australia can be fed in a civilised manner. In determining whether by acquiring chinaware for this purpose the Department is carrying on a business, it is relevant to bear in mind that the Department's primary activity does not amount to the carrying on of a business

Because the Department's trade in or acquisition of chinaware so obviously relates to the execution of a government function which is in the interests of the community, it does not have the characteristic of carrying on a business. See McMillan, Mid Density Development and Saitta . As I have said in para58, the Department's acquisition of chinaware was done for the purpose of sustaining men and women of the Services so that the primary task of defending Australia and its national interests can be pursued. This activity does not constitute the carrying on of a business because it does not have the flavour of a commercial enterprise. Rather is inextricably linked with a function of government. Because I am considering an activity that is of a subsidiary priority when compared to the Department's main function, my conclusion regarding the true purpose for which the activity is performed is informed by the principal government duty that is discharged by the Department . …

54 When distilled to its essence, the appellant essentially made two complaints about his Honour’s reasons. First, he submitted that his Honour in referring to the various activities of DMO as being “functions of the Commonwealth” propounded a test that was too narrow and thus fell into error. It was submitted that “logically almost everything that a Commonwealth body or instrumentality is going to do is going to be a function of the Commonwealth at some level of analysis”. Accordingly, it was submitted that “the mere fact that an activity is a function of the Commonwealth, does not mean that it cannot amount to carrying on a business”. The appellant observed, in support of this proposition, that the Australian Government Printing Service, the Australian Telecommunications Commission, the Australian Postal Commission, and the Australia Broadcasting Commission have all been held to have been carrying on a business. Secondly, it was submitted that the fact that the DMO was a “separate business unit” set the present case apart from other decisions including Sirway (supra) and should have led his Honour to conclude that s 2A of the Act was engaged.

55 So far as the first submission is concerned, I do not accept that his Honour unduly confined the scope of the issue which he was required to determine. True it is that his Honour described the DMO’s activities as being “functions of the Commonwealth”. However his Honour then immediately went on to say that they were functions “directly relating to its responsibility for the defence of the Commonwealth”. That conclusion was not only consistent with what was decided in Sirway (supra) but was entirely in conformity with what the evidence before his Honour revealed. Indeed, as I understand the evidence, the rationale for the very existence of the DMO was to service the Department of Defence’s need to acquire, maintain and dispose of explosive ordnance. Those were its core activities. Those activities, in turn, were integral to the functions the DoD performed in its “defence of Australia and its national interests” (Sirway (supra) at para 58). If anything, the present case provides a clearer example of an activity which meets that description than did the circumstances which prevailed in Sirway. In Sirway, although acquiring chinaware in industrial quantities was not integral to the DoD’s principal function, it was nonetheless essential to its operations which were in turn a government function carried out in the interests of the community.

56 So far as the second submission is concerned, it is true that whilst his Honour referred, whilst recounting the evidence, to the fact that DMO was a ‘separate business unit’, he did not refer to that aspect of the matter in his reasons. Nevertheless, neither that factor nor the description on the DMO website that the organisation aimed to conduct itself in a “business like” fashion nor indeed the size of the organisation’s operations themselves, is determinative of the issue of whether DMO relevantly “carries on business” within the meaning of s 2A. In today’s world it would not be acceptable for any public instrumentality to conduct its activities in a fashion that was other than “business-like” regardless of whether or not it was a “separate business unit”. It is not the description or characterisation of the particular entity which delivers the service or activity in question that is decisive. What is critical is the nature and scope of the functions for which the organisation is responsible and the manner in which, and the purpose for which, they are performed. The activities of DMO can only be understood, upon the limited evidence which was before the Magistrate, as directly serving the needs of the DoD in carrying out a function which is essential to the national interest. It was in that context that his Honour concluded correctly, in my view, that the activities in question were “not synonymous with a business”. That was because they did not “have the flavour of a commercial enterprise [but] rather [were] inextricably linked with a function of government” (Sirway) (supra) at para 62.

57 That conclusion renders it unnecessary for me to consider the respondent’s subsidiary submission that even if there was a business, the impugned conduct (that is the representations allegedly made to the appellant) could not be said to have occurred in the course of “carrying on a business”.

58 Before departing from this aspect of the case, I should indicate that I am not entirely persuaded that the issue upon which Grounds 1 and 2 are founded, namely whether the respondent was relevantly “carrying on a business”, raises “only a question of law”. Indeed it is more likely that the issue raises a question of “mixed fact and law”. See Hope v The Council of the City of Bathurst (1980) 144 CLR 1. As I have previously indicated, leave was not sought. I have, in any event, already expressed my preliminary views about the question of a grant of leave were it otherwise necessary to consider that issue.

59 That leaves Ground 3. It is strictly unnecessary to deal with it since it is common ground that this ground only falls to be determined in the event that the appellant succeeds in relation to Grounds 1 and 2. Furthermore, in oral submissions the appellant realistically conceded that even if he was to enjoy success in relation to Grounds 1 and 2, the matter would need to be remitted to the Local Court for the issue which is raised by Ground 3 to be determined since the Magistrate made no finding in relation to it. The concession was made because the appellant recognised that this Court is not permitted to make its own findings of fact although that is precisely what Ground 3 seeks to have the Court do. See generally Klesteel Pty Ltd v Mantzouranis [2008] NSWSC 194 [at para 36].

60 It is also unnecessary to express a concluded view about the appropriateness of ordering a remitter had it been otherwise necessary to consider the issue. Nonetheless one matter that would tell against doing so is the fact that the appellant would need to make good its contention that the respondent through its agent made the relevant representations. Those representations, as I have said, were alleged to have been made by Mr Karavas to the appellant. I have already dealt at some length with the problems which confront the appellant in that respect. Moreover, there are still further matters which the appellant would need to establish in order to prove its case. They include the requirement to establish that the appellant was misled or deceived by the representations, that the appellant relied upon them, and that he suffered loss as a result. The evidence which was before his Honour, the most important aspects of which I earlier set out at some length, fell well short of establishing any of those matters. That circumstances would provide a further reason why, had it been necessary to consider the issue, it would not have been appropriate to make an order remitting the matter to the Local Court.

Order

61 The appeal is dismissed with costs.

**********

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Citations

Knevitt v The Commonwealth of Australia [2009] NSWSC 1341

Cases Citing This Decision

0

Cases Cited

12

Statutory Material Cited

2

Equuscorp Pty Ltd v Glengallan Investments Pty Ltd [2004] HCA 55

Masterton Homes Pty Ltd v Palm Assets Pty Ltd [2009] NSWCA 234

CITATION:	Knevitt v The Commonwealth of Australia [2009] NSWSC 1341
HEARING DATE(S):	26/06/2009, 30/10/2009
JUDGMENT DATE :	4 December 2009
JUDGMENT OF:	Buddin J
DECISION:	The appeal is dismissed with costs.
CATCHWORDS:	Civil - appeal from Local Court - whether breach of contract in relation to length of term of engagement - whether misrepresentations made - whether claim within scope of Trade Practices Act - meaning of phrase "carrying on a business"
LEGISLATION CITED:	Local Court Act 2007 Trade Practices Act 1974 (C’th)
CATEGORY:	Principal judgment
CASES CITED:	Aon Risk Services Australia Ltd v Australian National University [2009] 83 ALJR 951 Azzopardi v Tasman UEB Industries Ltd (1985) NSWLR 139 Australian Gaslight Co v Valuer-General (1940) 40 SR (NSW) Baring v Russell Edwards Design Services Pty Ltd [2008] NSWCA 58 Coulton & others v Holcombe & others (1986) 162 CLR 1 Equuscorp Pty Ltd and Anor v HGT Investments Pty Ltd (2004) 218 CLR 471 Esanda Ltd v Burgess and Anor [1984] 2 NSWLR 139 Hope v The Council of the City of Bathurst (1980) 144 CLR 1 Klesteel Pty Ltd v Mantzouranis [2008] NSWSC 194 Masterton Homes Pty Ltd v Palm Assets Pty Ltd [2009] NSWCA 234 McMurtrie v Commonwealth of Australia & Ors [2002] NSWSC, 1147 R v PL [2009] NSWCCA 256 Sirway Asia Pacific Pty Ltd v Commonwealth of Australia (2002 ATPR (Digest) 46-226
PARTIES:	Ian Knevitt (Appellant) The Commonwealth of Australia (Respondent)
FILE NUMBER(S):	SC 16031/2008
COUNSEL:	R de Meyrick (Appellant) A Tonking SC (Respondent)
SOLICITORS:	Law Partners (Appellant) Sparke Helmore Lawyers (Respondent)
LOWER COURT JURISDICTION:	Local Court
LOWER COURT FILE NUMBER(S):	996/07
LOWER COURT JUDICIAL OFFICER :	G Bradd
LOWER COURT DATE OF DECISION:	23/10/2008