Kowalski v Lochlee Pty Ltd No. Scciv-02-1782

KOWALSKI v LOCHLEE PTY LTD
[2003] SASC 95
Magistrates Appeal

BESANKO J: This is an appeal from the decision of a Magistrate pursuant to s 40 of the Magistrates Court Act 1991.
In an action in the Magistrates Court the plaintiff sued the defendant for breach of a Deed of Settlement dated 29 June 2001 (“the Deed”) claiming the sum of $23,000 and interest and costs. A hearing took place on 18 November 2002 and the Magistrate delivered his reasons for judgment on that day. He ordered that there be judgment for the plaintiff in the sum of $23,000 and interest and costs.
The defendant appeals against the judgment.
Background
Lochlee Pty Ltd (“Lochlee”) trades as D McKay Auto Brokers. Mr David McKay is the sole director of Lochlee.
Between October 1988 and January 2000 there was a contractual relationship between the plaintiff and the defendant. Another party associated with Mr Kowalski, Killa Pty Ltd, was also said to be involved. That relationship came to an end. Lochlee Pty Ltd trading as D McKay Auto Brokers instituted legal proceedings against Mr Kowalski and Killa Pty Ltd claiming the sum of $25,623.27 as monies owing under agreements described by the plaintiff as the “Profit and Loss Share Agreement” and the “Advance on Future Commissions Agreement”. Those legal proceedings in the Magistrates Court (action number 11133 of 2000) were settled when Lochlee and Mr Kowalski entered into the Deed.
The Recitals to the Deed provide:
“(a)In Action No 11133 of 2000 in the Magistrates Court of South Australia (the ‘Action’) Lochlee, trading as D McKay Auto Brokers (the ‘Business’), has claimed from Kowalski moneys alleged to be owing under a profit share agreement and an advance on future commission agreement (the ‘Claim’).
(b)Kowalski denies any liability in relation to the Claim.
(c)The parties wish to resolve the matters the subject of the Action, and they agree as follows.”
There are ten clauses in the Deed. The Deed is executed by Lochlee and Mr Steven Kowalski (said to be in his individual capacity and in his capacity as sole director and secretary of Killa Pty Ltd). I will not set out all ten clauses. For the purposes of this case the relevant provisions are as follows:
“1. The parties acknowledge the accuracy of the Recitals set out above.
2.David McKay, a director of Lochlee, agrees to open trading with Kowalski for the mutual supply and trading in vehicles, on terms to be agreed between the parties from time to time.
3.In full and final settlement of the Claim, Kowalski shall pay Lochlee the sum of $25,000 inclusive of costs and interest (the ‘Settlement Sum’), payable in instalments of $500 per week (the ‘Instalment Payments’) until the Settlement Sum is paid in full, irrespective of the level of profit (if any) generated via the trading referred to in Clause 2 above.”
The other clauses in the Deed provide for the time and method of payment, the fact that if any of the instalment payments are not paid within 14 days of their due date the balance of the settlement sum remaining unpaid as at that time will become immediately due and payable, and various other matters which it is not necessary to detail.
The plaintiff alleged that on 2 September 2001 Mr Kowalski paid to it the sum of $2,000, but that thereafter no further payments have been made and, as a result, Mr Kowalski has acted in breach of the Deed. The plaintiff alleged that on 17 October 2001 the defendant served a notice of demand on Mr Kowalski demanding payment of the sum then due and owing which Mr Kowalski has failed or refused to pay.
Mr Kowalski filed a defence which in essence admitted these allegations. However, he alleged that the plaintiff had acted in breach of clause 2 of the Deed and that (although not expressly stated) this had the effect of preventing the plaintiff from pursuing its action for a breach of clause 3. In the alternative, he alleged that clause 2 was illusory, and that the Deed as a whole was null and void.
A Summary of the Issues
It is convenient at this point to identify the issues and how they relate to each other. The first issue is whether clause 2 is void for uncertainty or incompleteness. If the answer to that question is yes, then the question arises as to whether severance of the clause is possible. If yes, then the plaintiff’s claim (in view of the admissions by the defendant) must succeed. If no, then the Deed falls and the plaintiff’s claim must be dismissed.
If clause 2 is not void for uncertainty, then an issue arises as to whether the obligations in clause 2 and 3 are dependent or independent obligations. If they are independent obligations then the plaintiff’s claim (in view of the admissions by the defendant) must succeed. If they are dependent obligations, then the plaintiff’s claim will succeed if there has been no breach by it of clause 2, and fail if it has acted in breach of clause 2.
The Magistrate’s Reasons
The Magistrate said that clause 3 was clear and unambiguous and that the obligation therein was separate and distinct from the obligation in clause 2. I take him to mean by that that the obligations are not dependent obligations.
In other words, Kowalski’s obligation to pay in clause 3 is not dependent on Lochlee’s performance of the obligation in clause 2, or at least it is not conditional upon Lochlee at the same time performing the obligation in clause 2 (Contract Law in Australia, Carter and Harland, 4^th ed. para [1807]).
The Magistrate seemed to proceed on the basis that his finding that the obligations were not dependent was a complete answer to the matters Mr Kowalski raised in his defence. That approach is incorrect. Even if the Magistrate was right to find that the obligations are independent that does not dispose of the issue. If clause 2 is void for uncertainty or incompleteness the question of severance then arises which is different from the question of whether the obligations are dependent or independent. In other words, they may be independent obligations but severance might not be possible. In any event, the Magistrate went on to consider issues which he said arose in the event that he was wrong. The Magistrate reached the conclusion that, on its face, clause 2 was at least incomplete, and he held that oral evidence was “permissible” to explain the meaning of clause 2.
Mr McKay is employed as a manager by Auto Group Pty Ltd or (said the Magistrate) a company of similar identity and name in Victoria. Mr McKay is involved in vehicle auctions conducted by Auto Group Pty Ltd. Mr Kowalski trades in motor vehicles. The Magistrate found that by clause 2, Mr McKay agreed that when requested he would provide details of vehicles that were to be auctioned to Mr Kowalski. He agreed that when requested he would give an honest and conscientious assessment of the condition and value of any vehicle to Mr Kowalski. He agreed when there was a reserve price on a vehicle he would give information about that reserve price. Mr McKay agreed that he would arrange for Mr Kowalski to be accepted as an account customer for Auto Group Pty Ltd. The Magistrate rejected oral evidence from Mr Kowalski to the effect that it was understood between Mr Kowalski and Mr McKay that Mr McKay would tell Mr Kowalski the reserve price on vehicles, that Mr Kowalski would purchase the vehicles when the price was good and that he and Mr McKay would share the profit made on the resale of the vehicles. The Magistrate accepted Mr McKay’s evidence that he refused to share any profit and said that Mr McKay’s refusal was based in part on the fact that it would have been an illegal transaction under the “Secret Commissions Act” (or equivalent legislation in Victoria).
The Magistrate found that in negotiating with a view to the settlement of the former proceedings it suited Mr McKay to assist Mr Kowalski in making a profit so that Mr Kowalski had money that he could apply to the agreed obligation to pay $25,000 at the agreed rate of $500 per week.
I think by implication that after making these findings, the Magistrate held that clause 2 was not vague and uncertain. The Magistrate said:
“These are the terms that I import into clause 2 to explain it.”
The Magistrate then went on to consider whether Lochlee or Mr McKay had complied with the obligations in clause 2. He found that Mr McKay did arrange for a form to be sent to Mr Kowalski so that he could be admitted as an account customer of Auto Group Pty Ltd. Mr Kowalski completed the form and he was accepted as a customer.
Auto Group Ltd conducts several auctions per week. Mr McKay arranged for catalogues containing details of the motor vehicles which were to be auctioned to be sent to Mr Kowalski. In relation to one particular vehicle (a Holden Commodore), Mr McKay provided a conscientious valuation and supplied the information in his possession. Mr Kowalski purchased the vehicle. Mr Kowalski’s terms of trading with Auto Group Pty Ltd were seven days which were the terms of what the Magistrate described as “long term and accepted customers of Auto Group Pty Ltd”. The Magistrate found that Mr Kowalski did not comply with those terms. The Magistrate accepted Mr McKay’s evidence that further catalogues were sent to Mr Kowalski. He said that that must have been so because it was the evidence of both parties that there were discussions about other vehicles listed in later catalogues. In fact, Mr Kowalski did not purchase any other vehicles under the arrangement contemplated by clause 2 of the Deed.
The Magistrate noted that Mr Kowalski’s evidence was that catalogues detailing vehicles of lower value (eg repossessed vehicles) were not sent at some stage. Mr Kowalski telephoned Mr McKay and said he was not receiving the right sort of catalogues. There was a dispute between the parties as to what was then said. Mr Kowalski said that Mr McKay agreed that he would look into it and fix it and that he never did so. Mr McKay said that he told Mr Kowalski that he was sending the right catalogues, and that he (Mr Kowalski) ought to look properly. In other words, details of the cheaper vehicles were in the catalogues he was sending to Mr Kowalski and he told him this. Mr McKay said that Mr Kowalski then said “don’t bother sending any more catalogues”, and thereafter Mr McKay sent no further catalogues.
The Magistrate accepted Mr McKay’s version of the conversation saying that such a finding is more likely given the fact that at that point the parties did not “really like each other”.
The Magistrate said that even if Mr Kowalski had established a breach of clause 2 that would not constitute a defence to the plaintiff’s claim for the payment of monies because the obligation to pay monies imposed by clause 3 was a “plain and independent obligation”. This is going back to the first point the Magistrate made. In reaching his conclusion the Magistrate relied heavily on the fact that clause 3 provides for payments, “irrespective of the level of profit (if any) generated via the trading referred to in clause 2 above”.
The Arguments on Appeal
The appellant submitted that clause 2 of the Deed was vague and uncertain. He pointed to the words in clause 2 “on terms to be agreed between the parties from time to time” and submitted that that made the promise illusory. The appellant further submitted that clause 2 and clause 3 are “linked” and are dependent obligations. The appellant pointed to the fact that although clause 3 operates irrespective of the level of profit generated by the trading referred to in clause 2, it does not say irrespective of whether there is any trading referred to in clause 2. If the clause had read irrespective of whether there was any trading referred to in clause 2 then there would be force (said the appellant) in the argument that the clauses were independent.
The appellant submitted that the Magistrate erred in preferring the evidence of Mr McKay over that of the appellant. The appellant submitted that the Magistrate did not decide the question of whose evidence to accept on the ground of demeanour, but rather on the ground that Mr McKay’s version was more consistent with the fact that there was hostility between the two men at the time. The appellant submitted that Mr McKay’s evidence about the number of catalogues was inconsistent. The appellant’s evidence ought to have been accepted. The appellant submitted that the obligations were dependent obligations and that as Lochlee/Mr McKay had acted in breach of clause 2, it could not obtain relief in relation to clause 3.
The respondent filed a Notice of Alternative Contention on the hearing of the appeal. It contains the following contention:
“If (which is denied) clause 2 of the Deed referred to in the claim is illusory, not binding or otherwise void or inoperative, that clause should be severed.”
The respondent submitted that the obligations in clauses 2 and 3 respectively were not dependent obligations. It submitted that clause 2 was not expressed to be a condition precedent. It submitted that as a matter of general principle, obligations are treated as being independent rather than conditions precedent. It submitted that the obligations were independent obligations in this case because they were in separate paragraphs, they involved different parties and the consideration for the promise contained in clause 3 was expressly said to be the settlement of the claim. The respondent also pointed to the fact that it is expressly stated in clause 3 that it operated irrespective of the trading referred to in clause 2. The respondent submitted that in any event clause 2 was severable. The respondent submitted that clause 2 was not vague and uncertain, and that such an assertion was inconsistent with Mr Kowalski’s case at trial. The respondent submitted that Mr Kowalski’s complaint that his evidence should have been accepted in preference to the evidence of Mr McKay must fail because the Magistrate had the advantage of hearing and observing the relevant witnesses. The respondent submitted that the Magistrate made clear findings supporting his conclusion that there had been no breach of clause 2 and that no error could be shown.
Is Clause 2 Vague and Uncertain?
On the face of it there are a number of problems with clause 2.
First, it appears to place the obligation on Mr McKay rather than Lochlee. Mr McKay is not named as a party to the Deed. He signed the Deed in the sense of witnessing the affixing of the common seal of Lochlee as the sole director and the secretary of the company. As the sole director of the company he was the sole manager of the company. It seems that at the time the Deed was executed he was an employee of Auto Group Pty Ltd. On one view the plaintiff was not in any way involved in the obligation in clause 2. On the other hand, Lochlee is effectively Mr McKay’s company. I assume the parties did not overlook such a fundamental point as failing to make Mr McKay a party to the contract if it was intended that only he undertake the obligation in clause 2. I do not think that that was intended and in my opinion, clause 2 places an obligation on Lochlee to cause Mr McKay to perform such acts as are necessary to ensure the obligation is carried out.
Secondly, clause 2 does not specify the duration of the obligation contained therein. I could infer that the obligation may be brought to an end on the giving of reasonable notice. However, I think there is sufficient evidence in this case to imply a term to the effect that the obligation was to continue for so long as the obligation to pay by instalments continued (ie 50 weeks). I think the Magistrate correctly found that:
“it suit[ed] the parties in trying to negotiate an end to the existing proceedings for Mr McKay to assist Mr Kowalski in making a profit so that Mr Kowalski had money that he could apply to the agreed obligation to pay $25,000 at the rate of $500 per week.”
In my opinion, the tests for the implication for such a term are made out (Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337 per Mason J (as he then was) at 347).
Thirdly, it may be said that there is uncertainty as to the meaning of “open trading with Kowalski for the mutual supply and trading in vehicles”. I will need to come back to this point. It was not the focus of the appellant’s attack on clause 2 and I note that the Magistrate was able to make findings which gave content to the obligation.
Fourthly, (and this was the thrust of the appellant’s attack on clause 2) it may be said that clause 2 is invalid because of the reference to “on terms to be agreed between the parties from time to time”. On this argument the agreement is ineffective because it is incomplete rather than because of uncertainty in meaning.
The courts strive to uphold agreements which the parties intend to be effective (Hillas and Co Ltd v Arcos Ltd (1932) 147 LT 503 per Lord Tomlin at 512) and there is a difference to be acknowledged between uncertainty of meaning and absence of meaning (Upper Hunter County District Council v Australian Chilling & Freezing Co Ltd (1968) 118 CLR 429 per Barwick CJ at 436 – 437).
On the face of it the facts in this case bear similarities to the facts in Whitlock v Brew (1968) 118 CLR 445. A contract for the sale of land required the purchaser to grant a lease of part of the land “upon such reasonable terms as commonly govern such a lease”. By a majority the High Court held that this clause was void for uncertainty. A clause requiring arbitration in the event of a dispute between the parties did not save the clause. Taylor, Menzies and Owen JJ said (at 460 – 461):
“We are firmly of opinion that the expression ‘upon such reasonable terms as govern such a lease’ is not, in the context in which it appears, apt to refer to either the period for which the contemplated lease is to subsist or to the rent to be payable thereunder. Nor do we think that the further expression ‘as to the interpretation or operation’ of this clause covers a dispute as to either of those matters. We, therefore, are of opinion that the clause is uncertain in that it neither specifies nor provides a means for the determination as between the parties of the period for which the contemplated lease shall be granted or the rent which shall be payable thereunder.”
Kitto J said (at 456):
“It does say that the lease is to be granted ‘upon such reasonable terms as commonly govern such a lease’, and that would have been enough if evidence had established that for such a lease an ascertainable set of reasonable terms are in common use. But this has not been established, and the result is that the document does not record a consensus ad idem as to the duration of the term, the rent, or anything else except the commencing date and the premises intended to be let.”
(See also British Homophone v Kunz and Crystallate Gramophone Record Co (1935) 152 LT 589.)
To my mind the key to the resolution of this argument lies in a correct appreciation of the precise obligation undertaken by Lochlee under clause 2. The obligation undertaken by Lochlee according to the Magistrate’s findings was to cause Mr McKay to do certain things, namely, to arrange for Mr Kowalski to be accepted as an account customer of Auto Group Pty Ltd, to provide details of vehicles to be auctioned by Auto Group Pty Ltd when asked and to provide an honest and conscientious assessment of the condition and value of any vehicle. Although the Magistrate did not make a specific finding to this effect, I think an additional obligation on Lochlee was to cause Mr McKay to arrange for the purchase of a motor vehicle on Mr Kowalski’s behalf if he was requested to do this by Mr Kowalski. Mr McKay would not actually be purchasing the vehicle in his own right, but rather arranging for the purchase on behalf of Mr Kowalski.
If the obligations identified by the Magistrate and outlined above are the extent of obligations under clause 2 then I do not think the clause is void because it is incomplete. The obligations are clear enough and sufficiently certain to be enforced. I do not think the fact that the clause goes on to say on terms to be agreed between the parties from time to time means the clause is incomplete. At the time the Deed was executed the terms upon which vehicles were to be purchased by Mr Kowalski could not be agreed. That could only be done as each vehicle was put up for sale. That was what was envisaged by the parties. The thrust of the benefit conferred on Mr Kowalski by the obligation in clause 2 was the opportunity to trade in vehicles. The obligations on Lochlee under clause 2 gave him that opportunity and were sufficiently certain.

The correctness of this analysis depends on whether the Magistrate was correct in finding that the obligations I have identified were the obligations encompassed by the words, “open trading with Kowalski for the mutual supply and trading of vehicles”. To reach his conclusion the Magistrate relied on oral evidence given in the case. He referred to the decision in Codelfa Construction Pty Ltd v State Rail Authority of New South Wales per Mason J at 352. The Magistrate said that “oral evidence is permissible to explain the meaning of clause 2”. That proposition is too wide and not a correct statement of the relevant principle. The correct principle is stated by Mason J in Codelfa as follows (at 352):
“The true rule is that evidence of surrounding circumstances is admissible to assist in the interpretation of the contract if the language is ambiguous or susceptible of more than one meaning. But it is not admissible to contradict the language of the contract when it has a plain meaning. Generally speaking facts existing when the contract was made will not be receivable as part of the surrounding circumstances as an aid to construction, unless they were known to both parties, although, as we have seen, if the facts are notorious knowledge of them will be presumed.
It is here that a difficulty arises with respect to the evidence of prior negotiations. Obviously the prior negotiations will tend to establish objective background facts which were known to both parties and the subject matter of the contract. To the extent to which they have this tendency they are admissible. But in so far as they consist of statements and actions of the parties which are reflective of their actual intentions and expectations they are not receivable. The point is that such statements and actions reveal the terms of the contract which the parties intended or hoped to make. They are superseded by, and merged in, the contract itself. The object of the parol evidence rule is to exclude them, the prior oral agreement of the parties being inadmissible in aid of construction, though admissible in an action for rectification.
Consequently when the issue is which of two or more possible meanings is to be given to a contractual provision we look, not to the actual intentions, aspirations or expectations of the parties before or at the time of the contract, except in so far as they are expressed in the contract, but to the objective framework of facts within which the contract came into existence, and to the parties’ presumed intention in this setting. We do not take into account the actual intentions of the parties and for the very good reason that an investigation of those matters would not only be time consuming but it would also be unrewarding as it would tend to give too much weight to these factors at the expense of the actual language of the written contract.”
I have read the evidence carefully. The way the evidence was led means that at times it is unclear what was evidence of surrounding circumstances within the above principle and what was evidence of the actual intentions, aspirations or expectations of the parties before or at the time of the Deed. The latter of course cannot be relied on. Nevertheless, I think it can be said that the evidence from both parties (ie, Mr Kowalski and Mr McKay) of the common understanding between the parties was in accordance with the Magistrate’s findings save for one matter. Mr Kowalski said it was his understanding that Lochlee would directly share in the profit Mr Kowalski subsequently made on the resale of vehicles he purchased under the arrangement envisaged by clause 2. The Magistrate said that this would have made the arrangement illegal and it was denied by Mr McKay. The Magistrate rejected the suggestion that such a term was part of the arrangement. Although the evidence on this point is not as clear as it might have been, I do not think I should interfere with the Magistrate’s finding on this point. The Magistrate had the advantage of hearing and observing the witnesses and a finding of illegality contrary to the Magistrate’s finding could only be made if the evidence was very clear. It is not. I think the Magistrate’s findings as to the content of “open trading with Kowalski for the mutual supply and trading in vehicles” are correct. In reaching this conclusion I have borne in mind the principle that Courts strive to uphold bargains, not destroy them.
There is one further point that I note although in view of my conclusions I do not need to decide the difficult legal issue it raises.
The Magistrate made certain findings as to how the obligations in clause 2 were carried out. He said:
‘What happened was that Mr McKay did arrange for a form to be sent for Mr Kowalski to be admitted as an account customer. Mr Kowalski completed it, returned it and was accepted as a customer of Auto Group Limited. Auto Group Limited conducts auctions on several occasions per week. The exact occasions have varied from then to now but that detail is unimportant. It is clear that Mr McKay did arrange for catalogues to be sent at least the catalogue Exhibit D3 was sent. Mr McKay when requested assessed the Commodore mentioned in Exhibit D3, gave a conscientious valuation, supplied the information he had and it was indeed purchased by Mr Kowalski. Mr Kowalski was on a 7 day trading terms which was the term of long term and accepted customers of Auto Group Limited. He did not comply with that seven days trading term though of course I have heard some excuse for that. Again I don’t dwell on that. I accept Mr McKay’s evidence that further catalogues were sent and indeed that must have been so, because it is the evidence of both parties that there were discussions about other vehicles in later catalogues as potential to be bought. In fact no other vehicles were bought through those auctions at Auto Group.”
Those findings as to the subsequent conduct of the parties support the findings he made as to the content of the obligation in clause 2. The weight of authority in this country is that the way in which the parties perform their obligations cannot be used to interpret the content of the obligations at the time agreement is reached (Maynard v Goode (1926) 37 CLR 529 per Isaacs J at 538; Australian Mutual Provident Society v Chaplin (1978) 18 ALR 385; Codelfa per Mason J at 348; FAI Traders Insurance Co Ltd v Savoy Plaza Pty Ltd [1993] 2 VR 343). However, there is some authority to the contrary particularly in circumstances where the clause or contract will otherwise fail for uncertainty (Farmer v Honan and Dunne (1919) 26 CLR 183 per Isaacs J and Rich J at 197; Spunwill Pty Ltd v B A B Pty Ltd (1994) 36 NSWLR 290). It is unnecessary for me to decide the point and it would be unwise for me to do so in circumstances where there has not been argument on the point.
For these reasons I think clause 2 is not void for uncertainty.
Is the Performance of Clause 3 by Mr Kowalski Dependent on the Performance of Clause 2 by Lochlee?
This issue is determined by reference to the intention of the parties as ascertained from the Deed and the surrounding circumstances.
In my opinion, the performance of clause 3 by Mr Kowalski is dependent on the performance of clause 2 by Lochlee. I recognise the force of Lochlee’s argument that the obligations are independent because clause 3 provides that the promise in that clause is in full and final settlement of the claim and because clause 3 provides that the obligation contained therein is to be performed irrespective of the level of profit (if any) generated by the trading referred to in clause 2. This latter point only goes so far because the obligation is expressed to operate irrespective of the level of profit, not irrespective of whether there is any trading. Despite these arguments the obligation in clause 2 is clearly part of the consideration provided by Lochlee and it is not for me to try to assess how important that aspect of the consideration was to the parties. In any event, I do not think I could make that assessment because it is likely the parties will have different views as to how important that aspect of the consideration was to the settlement. Furthermore, the obligation in clause 2 runs concurrently and for the same period as the obligation in clause 3. Finally, the Magistrate found (correctly in my view) that it suited the parties to try “to negotiate an end to the existing proceedings for Mr McKay to assist Mr Kowalski in making a profit so that Mr Kowalski had money that he could apply to the agreed obligation to pay $25,000 at the rate of $500 per week”. In view of these matters I conclude that the obligations are dependent obligations.
Has Lochlee Acted in Breach of Clause 2?
The parties joined issue on this point by reference to two matters, namely, whether the correct catalogues were sent to Mr Kowalski by Lochlee and whether it was Mr Kowalski who brought the obligations in clause 2 to an end.
The evidence about what catalogues were sent to Kowalski was given in quite general terms and it is not easy to follow. In the end, the Magistrate appears to have accepted Mr McKay’s evidence that all relevant catalogues were sent to Mr Kowalski. I think he was entitled to do that. I would not interfere with his finding.
The second issue, namely, how the performance of the obligation to send catalogues was brought to an end involved a conflict between the evidence of Mr Kowalski and Mr McKay. The Magistrate preferred the evidence of Mr McKay. It is true that he did say that Mr McKay’s version was more likely given the relationship between the parties at that time. In my opinion, he was entitled to proceed in that way. More importantly perhaps, is that the fact that he said this does not mean that he did not have regard to the demeanour of the witnesses. I think that it is likely the Magistrate did have regard to the demeanour of the witnesses; in fact he preferred Mr McKay’s evidence on another point, namely, what was initially agreed. He heard and observed the witnesses and there is no reason to think he misused that advantage in any way. In those circumstances an appeal court will not interfere with a finding of fact (Devries v Australian National Railways Commission (1993) 177 CLR 472).
I do not think the Magistrate erred in finding that Lochlee had not acted in breach of clause 2.
Conclusions
In my opinion, clause 2 is valid. The performance of clause 3 by Mr Kowalski is dependent on performance of the obligation in clause 2 by Lochlee. Lochlee has not acted in breach of clause 2. These conclusions mean that the appeal must be dismissed and I would so order.

[2003] SASC 95

28 March 2003