Pocius & Assoc P/L v Rech - [2007] SADC 92

DISTRICT COURT OF SOUTH AUSTRALIA
(Civil: Minor Civil Review)
POCIUS & ASSOC P/L v RECH
[2007] SADC 92
Judgment of His Honour Judge David Smith
30 August 2007
MAGISTRATES
Review of minor civil decision pursuant to s38 of the Magistrates Court Act – discussion of whether statutory criteria permit the reviewing court to receive fresh evidence – claim for monies due under a contract for the provision of professional engineering services – new evidence established a variation of contract and established also that the applicant had not compromised its claim by unconditionally appropriating proceed of respondent’s cheque for lesser sum – discussion of recoverability of collection agents fees – held whilst Magistrate’s decision unassailable on evidence before him fresh evidence resulted in rescission of minor civil decision and judgment in favour of applicant.
Magistrates Court Act 1991 s38, referred to.
Ventura v Sustek (1976) 14 SASR 395, considered.

POCIUS & ASSOC P/L v RECH
[2007] SADC 92
Introduction

This is an application pursuant to s38 of the Magistrates Court Act1991, to review a minor civil decision made on the 27^th February 2007 by Mr RH Kleinig SM, whereby he dismissed the applicant’s claim against the respondent for outstanding engineering fees and costs. He did so on the basis that the applicant had compromised its claim, by unconditionally appropriating the proceeds of a cheque for a lesser sum proffered by the respondent in settlement of the claim.
Hearing in the Magistrates Court
Two witnesses gave evidence before the Magistrate.
Mr Eugene Pocius, a consulting engineer and director of the applicant company, told the Court that pursuant to an agreement the applicant had carried out certain engineering works for the respondent. He said that there was a quotation in writing for the work to be done but after the substance of that work was completed the respondent altered his instructions. The applicant company then agreed to carry out new work. The applicant’s claim for monies alleged to be owing under the agreement as varied was as follows:
Site inspection   $250.00
Structural calculations and details for design   $3,122.00
Gst      $337.20
  Total   $3709.20
Mr Pocius said that the respondent disputed the claim and proffered the sum of $2,255, which was the upper limit of the amount agreed for the original work, contending that the extent of the work to be done had not been varied. Mr Pocius said that the applicant company refused the offered sum and then put the matter in the hands of a debt collection agency named AMA Collection Services Pty Ltd (“AMA”). In August 2006 his company acting on the advice of the AMA accepted the respondent’s cheque for the sum of $2,255 and pressed on with a claim for the balance.
The respondent, Mr Rech, in evidence insisted that the contract was not varied. He said that all times he was prepared to pay in accordance with the initial agreed quotation and so he had proffered the sum of $2,255 to the applicant company but that it was refused. He said that when the AMA came into the picture he again proffered his cheque in the sum of $2,255. The accompanying letter of the 11^th August 2006 made it clear that he offered the sum in full settlement. The cheque was banked and the proceeds appropriated.
There was no suggestion in Mr Rech’s evidence and nor were there any documents tendered from either side which suggested that the parties agreed that the banking of the cheque was without prejudice to the applicant’s rights to pursue any alleged balance.
Mr Pocius’ evidence as to this topic was equivocal. The following exchange took place between him and the Magistrate:
Mr POCIUS:I’ll certainly take it up with them because that was the reason why the cheque was refused two or three times –
HIS HONOUR:     Exactly.
MR POCIUS:      -and it was only in the end they said ‘We can accept their cheque however you are still entitled to claim the additional amount for the additional work’.
HIS HONOUR:     That’s what they were telling you but they didn’t advise him.
Mr POCIUS:As far as I knew they had but I’ve got no documentation.
So that was as how the matter stood at the end of evidence.
The Magistrate then dismissed the applicant’s claim on the basis that it was compromised when the proceeds of the cheque were appropriated without any reservation.
On the evidence before him the Magistrate’s decision is unassailable.
It was clear from the transcript of evidence that Mr Pocius for the applicant company was not fully prepared for a hearing focussed upon whether the acceptance of the cheque compromised the claim. Rather, the transcript suggests that the applicant and perhaps even the respondent had in mind a contest about whether or not the contract was varied.
The applicant company now applies to review the Magistrate’s decision. The applicant company also seeks to adduce fresh evidence, from the AMA as to the basis upon which the AMA accepted the respondent’s cheque, and from the engineer from the applicant company who carried out the work and who negotiated the contract.
Nature of this application for review
My powers on applications for review are found in s38 of the Magistrates Court Act 1991. In particular, I may inform myself as I think fit and I am not bound by the rules of evidence (see s38(7)(b)). Further, I am empowered to rehear evidence taken before the Magistrates Court (see s38(7)(c)). Though it is not spelled out, it is clear also that the above robust powers include receiving fresh evidence.
The Review in this Court
First of all I decided to receive fresh evidence from Mr Shane Willmott, who was the accounts officer from the AMA and from Mr Samuel Case who was an engineer from the applicant company who actually negotiated with the respondent and did the engineering work the subject of the claim.
The proposed fresh evidence from Mr Wilmott, as contained in his affidavit sworn on the 29^th June 2007, showed that there was further, and if accepted, crucial evidence on the topic of whether there was an unconditional acceptance of the proceeds of the respondent’s cheque. Putting aside the robust powers I have under s38, such fresh evidence would have been permitted in an ordinary appeal under common law principles (see Ventura v Sustek[1]).
[1] (1976) 14 SASR 395 per Bray CJ at 399
I allowed the fresh evidence from Mr Case because the hearing before the Magistrate resolved speedily on the basis that the AMA, as agent of the applicant company, had compromised the claim, so that evidence as to whether additional work was agreed therefore became somewhat academic. Having perused the foreshadowed fresh evidence of Mr Willmott at the beginning of this application, I was not so certain that evidence as to additional work would remain academic.
So I now turn to the evidence and my findings.
So I heard evidence from:
·Mr Eugene Pocius;
·Mr Samuel Case;
·Mr Shane Willmott;
·Mr Giuliano Rech.
The following are my findings. I will identify areas of conflict and spell out my conclusion as I traverse the narrative of events.
As at early 2006 the respondent or his interests owned an office and warehouse property at 250-260 South Road, Hilton. He proposed altering it to accommodate his business.
The alterations required council approval.
The respondent engaged Daniel Dal Zotto of Dal Zotto building designs to prepare a design of the proposed alterations. A preliminary design had been completed by Dal Zotto by January 2006 (see Exhibit P7). In March 2006 the respondent approached the appellant company to prepare the structural design calculations and documentation necessary for securing council approval. Armed with the Dal Zotto design the applicant company provided a written quotation dated the 7^th March 2006 for the work. The material portions of the quotation were as follows:
Date: 7 March 2006
As requested we are pleased to provide our fee proposal for the following work based on the plan provided by Daniel Dal Zotto of Dal Zotto Building Designers. We have allowed for the following work.
1.0Site inspection to view existing construction and assess construction procedure for new facades and verandah.
Note: A ladder will be required on site to view roof space.
The value for the service for item 1.0 is $250.00 + GST.
2.0 Structural Design and Documentation for:
Design of structural frame for new façade
Design of tie backs to existing building
Design of new verandah framing.
Design of tie-downs for new framing.
The value for the service for item 2.0 is in the range of $1,200.00 - $1,800.00 + GST
Attached to the above offer was a document headed “Terms of Engagement”. One of the terms was:
Collection Expenses: Should it be considered necessary by the Company to incur legal and/or other expenses, including any such expenses to any debt collection agency, in obtaining or attempting to obtain payment of any amount due by the Client, the Client shall be liable for such expenses. The Client further acknowledges that those expenses will be calculated on a commission basis at a percentage rate of up to 22% of the amount owing and expressly agrees to pay those expenses irrespective of the amount of work actually performed by the agency. Amounts received by the Company may be applied first against interest, charges and expenses.
This offer was accepted by the respondent (see Exhibit P10).
The first step was a site inspection on the 14^th March 2006. Mr Case attended with the respondent. The detail of the proposed work was discussed. Mr Case then proceeded with the work.
I now come to an area of controversy.
Mr Case’s evidence was that in the course of the ensuing month culminating in a meeting in the respondent’s office on the 6^th April 2006 the method of construction was changed by the respondent. In particular, he said that the revised method was vastly different to the original method which had been discussed on site. He said that by the time of these second instructions the structural design based on the first instructions had been “95% complete” and calculations had been forwarded not only to Dal Zotto but to the respondent (35). Mr Case said that as a result of the changes he told the respondent that the original quotation would not cover this additional work.
His evidence as to what was said at the meeting about the quotation was as follows:
... on 6 April 2006 he had viewed that what we’d done, decided he wanted to do it a different way, construct it a different way, which I was happy to re-look at, and this included using more struts through the roof. I made it clear to him that we’d done 95% of the design already and we’d used basically 95% of our time. I asked him if he wanted a requote for that time which he said due to the time frame he didn’t have time, he wanted to proceed. I made it clear to him, and I remember distinctly both where we sat and said that the amount of the rework or the cost of the rework would be in the order of what we gave the initial quote, on top of the work that we’d already done.
.....................
Q.So he was effectively – you gave him to believe that the cost of this would be pretty much twice the quote.
A.Pretty much twice the quote, and I specifically remember saying that to him because I’ve known before – learned before that unless you say something to people they very conveniently forget and I made a point of asking him if he wanted a quote, but he needed to get this work completed and didn’t have time to do it, and I remember his words being ‘As long as it seems reasonable’ and that’s at the point when I let him know it would be in the order of what we’d already spent plus in the realms again.
(35, 36; see also Exhibit P9)
So, according to Mr Case, he did not give the respondent a revised estimate of charges but went ahead with the redesign work. This additional work said Mr Case, was completed and approved by the respondent. In particular, he said that on the 13^th April 2006 the respondent in a telephone call, expressed his satisfaction (37). Mr Case added that there were no queries during the construction stage and having seen the building he knows that it proceeded in accordance with his plans and calculations. Indeed the respondent agreed that they had done “done their job well ...” (85).
Mr Case, in the course of his evidence, produced to the Court two sets of engineering drawings and calculations prepared by him (38-43). The first he said were prepared in March 2006 and were useless by reason of Mr Rech’s changes (see Exhibit P5). The second were prepared in April 2006 and were those upon which council approval was given (see Exhibit P6).
The cross-examination of Mr Case by Mr Rech did nothing to dispel Mr Case’s clear evidence as to there being a new or varied contract. It seemed merely that Mr Rech did not agree that the changes he wanted were so fundamental as to warrant any significant further work (60). Mr Rech’s own evidence as to what was said at the meeting about the quotation was particularly unconvincing (66-70). Finally, when asked to address Mr Case’s evidence as to what was said at the meeting of the 6^th April 2006 about the contract between them, Mr Rech said:
I can accept – I can understand that but I can’t accept that he actually told me it would cost more than the quote. Otherwise I wouldn’t have walked out the door thinking it’s going to be the maximum quote, but I accept that he must have said something about it
(83, 84)
I unhesitatingly prefer the evidence of Mr Case, on this topic of the additional work, to that of Mr Rech.
I find that after most of the work was done the respondent changed his instructions such that the applicant company effectively did the job again. Secondly, I find that confronted with the fundamental changes to his instructions, Mr Case made it clear to Mr Rech that he had already carried out a great deal of the work and therefore the cost of implementing these additional instructions would be in the region as twice as expensive as the quotation of the 7^th March.
In a sense the new agreement as to cost was either, that the initial quotation covered the work which had been carried out by the time of the meeting on the 6^th April 2006 and the new work was to be charged on a time basis, or all the work would cost the respondent about twice the quotation. It is not crucial in this case to decide whether there was a new fixed price contract of on the basis of approximately double the quote or whether the additional work was to be carried out on a time basis which means that the charges had to be reasonable. If it is a fixed price contract of about twice the quotation then it is recoverable without any enquiry as to reasonableness because that is what was agreed and that is what has been claimed. If the additional work is to be charged on a time basis, then I am satisfied on all the evidence that the charge for the additional work was reasonable.
I resume the narrative of events.
On the 5^th May 2006 the applicant company invoiced the respondent as follows:
14/3/06
Site inspection to view existing construction  $250.00
19/4/06
Structural Calculation & Details for Design & Detailing as per quote and
discussions on site regarding construction. Within quoted range.  $1,417.00
Re-design and Documentation based on meeting in our office on 6/4/06.
Please note work was 95% completed. Due to changes re-design
necessitated starting from the beginning  $1,705.00
  $3,372.00
  GST  $337.20
  Total Inc. GST  $3,709.20
Balance Due  $3,709.20
(See Exhibit P10).
The respondent took the view that the applicant company was bound by the initial quote and faced with demands he twice proffered his cheque in the sum of $2,255. On each occasion, namely in late July 2006 and early August 2006 the cheque was returned by the applicant company.
In early August 2006 the applicant company engaged the services of AMA to collect the amount of the invoice. The AMA by letter dated the 8^th August 2006 demanded that the respondent pay the amount of $3,709.20 together with an additional $632 for their collection fees.
On the 11^th August 2006 the respondent forwarded to AMA the same cheque in the sum of $2,255. The letter accompanying the cheque provided, inter alia:
In reference to your letter dated the 8^th August 2006 with the abovementioned reference number I enclose payment (for the third time) for the full amount quoted by Pocius & Associates Pty Ltd.
On the 24^th August 2006 the AMA banked the respondent’s cheque and the proceeds were duly appropriated to the account of the applicant company.
This now brings me to the remaining matter of controversy, namely whether the appropriation of the cheque amounted to a compromise of the applicant company’s claim.
The evidence of Mr Willmott was that in two conversations, the first with the respondent on the 23^rd August 2006 and the second with “Leanne” from the respondent’s office on the 24^th August 2006, it was accepted by the respondent that the respondent’s cheque could be considered as part-payment only and could be banked without prejudice to the applicant’s right to proceed for the balance. According to Mr Willmott AMA then banked the cheque on the 24^th August, and on the same day wrote to the respondent in the following terms:
24 August 2006
We confirm that the cheque is at our office & will be banked as a result of our conversation with yourself & Leanne.
Our client has instructed us to proceed to recover the balance, as they are adamant that you were aware that the changes you requested, would incur additional charges.
As per our discussions, we will bank the cheque & proceed to commence action to recover the balance.
(11-49, Exhibits P1, P2 and P3)
The respondent’s initial answer to Mr Willmott’s evidence was rather rambling and inconclusive (85, 86, 87). Finally, he said that there was no conversation between him and Willmott in which he agreed that the cheque could be accepted as “partial payment” (88), and nor was there, he said, any conversation with Willmott where any “reservation” was expressed as to the banking of the cheque (89). Further, he denied receiving the letter confirming the reservation of rights from the AMA dated the 24^th August 2006 (2, 3, 89, 102; see also Exhibits P1, P2 and P3).
Again, I prefer the evidence of Mr Willmott. His evidence is supported by the running sheet of the AMA (see Exhibit P2), and the letter (Exhibit P3). It also fits in broadly with the history of the rejection of the cheque before and the delay by the AMA in banking it. I consider that Mr Rech’s evidence about precisely what was said about the appropriation of the proceeds of the cheque is unreliable. He freely accepted that he had no appreciation of the legal significance of any unconditional banking of his cheque (85) and further he said, as to this topic, that he recalled “... the outcomes of the conversations not the words used in the conversations ...” (87).
Accordingly, I find that the cheque was banked with an agreed reservation of rights and that there was therefore no compromise of the applicant’s claim by the acceptance of the lesser sum.
That leaves the final issue, namely whether the charges of the AMA of $632 should form part of the claim in the inevitable judgment. In my view the charges are recoverable because the liability to meet them in the event of non-payment was part of the contract between the parties. In other words, it was agreed between the parties that such charges would be recoverable in the event that the applicant company engaged the services of such an organisation to recover any amount owing under the contract. There was no call for me to investigate whether the charges were a “penalty” and so not recoverable.
Conclusion

Accordingly, the essential findings are:
·that the applicant company was entitled to its fees for both the original work and the additional work done by it under the agreement;
·that the applicant had not compromised its claim by appropriating the proceeds of the respondent’s cheque for a lesser sum; and
·that the applicant company was entitled to recover in its claim, the collection fees it incurred to the AMA in pursuing a justified recovery of monies owing.
It follows that the application for review must be allowed.
Pursuant to s38(7)(d)(ii) of the Magistrates Court Act I rescind the judgment of Mr Kleinig SM entered on the 27^th February 2007 and substitute in its place judgment for the applicant company against the respondent in the sum of $2,086.20. The above judgment is calculated as follows:
Invoiced sum including GST  $3,709.20
Less paid by respondent  $2,255.00
  Balance  $1,455.20
Plus AMA fees      $632.00
  Total  $2,086.20
The costs of the applicant, namely the fees due to the AMA are necessarily part of the judgment because they are part of the contract sum owing.
I will hear the parties as to interest and other costs.