Precision Coating Services Pty Limited v Building Equipment Services Pty Ltd

[2012] NSWSC 550

Supreme Court

New South Wales

Medium Neutral Citation:

Precision Coating Services Pty Limited and Another v Building Equipment Services Pty Ltd [2012] NSWSC 550

Hearing dates:

15 May 2012

Decision date:

15 May 2012

Jurisdiction:

Common Law

Before:

Barr AJ

Decision:

1. The appeal is allowed and the judgment and orders of the court below are set aside.

2. The Court remits the claim and the cross-claim to the Local Court to be dealt with according to law by a magistrate other than the magistrate whose decision is appealed against.

3. The Court orders the defendant to pay the plaintiffs' costs in this Court. The defendant should have a certificate under the Suitors Fund Act 1951.

Catchwords:

Appeal to Supreme Court from Local Court on a question of law - finding of fact made without evidence - error of law

Legislation Cited:

Trade Practices Act 1974 - s 52
Local Court Act 2007 - Div 4 Part 3
Suitors Fund Act

Cases Cited:

Australian Broadcasting Tribunal v Bond [1990] HCA 33; (1990) 170 CLR 321
Sinclair v Maryborough Mining Warden (1975) 132 CLR 473

Category:

Principal judgment

Parties:

Precision Coating Services Pty Limited (Plaintiff)
Blake Hymen (Second Plaintiff)
Building Equipment Services Pty Limited (Defendant)

Representation:

S Gardiner (Plaintiffs)
T Bland (Defendant)
Archer Legal (Plaintiffs)
Lou Baker and Associates (Defendant)

File Number(s):

2011/00334522

Judgment

1. HIS HONOUR: By their Summons commencing an Appeal, filed on 20 October 2011, the plaintiffs, Precision Coating Services Pty Limited and Blake Haymen, its Managing Director, seek the following orders:-

1. Appeal allowed.

2. Judgment of the Court below be set aside.

3. Judgment in favour of the Plaintiffs in the sum of $8,316 plus interest plus costs.

4. An order in the alternative that the matter be remitted to another magistrate of the court for determination according to lay by way of rehearing.

1. This is an appeal from a judgment and orders made in the Local Court. The defendant is Building Equipment Services Pty Limited. The plaintiffs were the plaintiffs in the Local Court. The defendant was the defendant and cross-claimant in the Local Court.

1. The defendant had metal conduit to supply to a contractor installing electrical equipment at the Sydney Opera House. The conduit had a galvanised metal surface but it had to be coloured orange to denote the nature of the cabling to be installed within it. The first plaintiff was in the business of treating such metal surfaces to colour them. It did so by the use of powders supplied to it by manufacturers.

1. The plaintiffs and the defendant came into a commercial relationship by which the defendant would supply to the plaintiffs a quantity of lengths of conduit and the plaintiffs would treat it in the required way and return it to the defendant for the purposes I have mentioned. The first order, for 20 lengths, was made in writing on 17 October 2008. The defendant's description of what it desired was as follows:-

20 x 220mm Conduit Powder Coated Orange x 15 MJT

1. The reference in the order to "Orange X15" was to the colour that had to be imparted to the coating of the conduit. MJT was a reference to the source of the coating. MJT powder was made by a particular manufacturer. The treated conduit was delivered and no problems arose over its use by the ultimate user or between these parties on the contract.

1. On 2 March 2009 the defendant again ordered the treatment of conduit which it supplied to the first plaintiff. In its order it described the service it required as follows:-

Powder Coat 1400 lens (sic) galvanised conduit to x15 Electric Orange.

1. In the meantime the plaintiffs had become aware that changes had taken place in the composition of the powder it had previously used to treat the conduit. In the opinion of the plaintiffs those changes made the MJT powder unsatisfactory, so they used a powder supplied by another manufacturer. They supplied 1400 lengths of conduit powder-coated to the required colour and the defendant paid for them.

1. The reason for the plaintiffs' dissatisfaction with the MJT powder is not relevant and did not bear on the magistrate's findings.

1. The contractor to whom the defendant supplied the treated conduit bent it in the course of installing cable. It so happened that the MJT powder used initially produced a coating that would withstand such bending. Unfortunately, the powder used on the second occasion did not. When the contractor bent the conduit the coating came off. The contractor rejected 840 lengths of conduit and the defendant had to purchase 840 more lengths and have them coated, this time with MJT powder, in order to fulfil its obligation to the contractor. It asked the first plaintiff to do the work. The first plaintiff did so and re-delivered the 840 lengths. The defendant did not pay for the work.

1. The plaintiffs had never been told that the conduit would be bent. There was evidence before the Magistrate that nobody on the plaintiffs' side or on the defendant's side knew that it would be bent.

1. The plaintiffs sued in the Local Court for the price of powder coating the 840 additional lengths with MJT powder. In its defence the defendant pleaded that it believed that the plaintiffs had used MJT powder to treat the 1,400 lengths, that it was not aware that another powder had been substituted, that it did not consent to the substitution, that the plaintiffs had by their silence represented to it that they had used MJT powder and that the substitution of another powder was a breach of their contract. Costs of rectification were set up and particularised. In a cross-claim the defendant claimed damages for breach of contract. It also pleaded that by accepting payment for the 1,400 lengths the first plaintiff represented that it had supplied powder coating equal in performance to that supplied with the initial 20 lengths. That representation, it pleaded, amounted to misleading and deceptive conduct pursuant to s 52 Trade Practices Act 1974. Relief was sought under that Act.

1. Appeals from the Local Court in civil matters are dealt with in Division 4 of Part 3 of the Local Court Act 2007. Relevantly to this appeal, the Act is as follows:-

38 Judgments and orders final

Subject to this Division, all judgments and orders of the Court exercising jurisdiction under this Part are final and conclusive.

39 Appeals as of right

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

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

40 Appeals requiring leave

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

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

(a) an interlocutory judgment or order,

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

(c) an order as to costs.

1. The plaintiffs' principal submission is that the magistrate made a finding of fact without evidence. On that finding the magistrate based a conclusion that the first plaintiff's not informing the defendant that it had substituted another powder was a representation by silence that amounted to misleading and deceptive conduct for the purposes of the Trade Practices Act. On that conclusion the magistrate dismissed the plaintiffs' claim, upheld the cross-claim and awarded the defendant damages.

1. Whether there is evidence of a fact is a question of law. Whether a particular inference can be drawn from facts found is a question of law. The making of findings and the drawing of inferences in the absence of evidence is an error of law: Australian Broadcasting Tribunal v Bond [1990) HCA 33; (1990) 170 CLR 321 per Mason CJ at 355; Sinclair v Maryborough Mining Warden (1975) 132 CLR 473.

1. His Honour rejected the defendant's claim that there had been a breach of a term that MJT powder would be used. His Honour found that there was no such term. His Honour continued -

Undoubtedly, there would be an implied term that a suitable product (indeed, one that would withstand post-forming) would be used ...

"Post-forming" means bending.

1. His Honour continued:-

As discussed further below, what is of more use to the cross-claimant is the pleading of the Trade Practices Act misrepresentation, which begins as paragraph 46. The pleading in that paragraph is that the cross-defendant "represented ... that it (the plaintiff) supplied powder-coating that is equal in performance to the powder-coating for the first 20 lengths", and that that was misleading and deceptive. In my view, that is the more significant misrepresentation. It was indeed not some representation that the same product (MJT) would be used, but that a product equal in performance would be used that really mattered. As appears below, an inferior product was used.

1. His Honour continued:-

There was much evidence relating to testing of the various products. Again, I find that not to be especially helpful. A report from Oxytech stated that the powder on the conduits the subject of the March 2009 order had not been properly cured. Dulux which provided the newer substitute powder asserted that it had. I cannot find that incorrect curing was the problem. The experts disagree with each other, but the fact is that work done using MJT powder in 2008, and later work in 2009 and possibly 2010 when MJT was again used, did not reproduce the problem. The problem (being the delamination of the powder coating) occurred only when the substitute Dulux product was used. The fault then, lies in not ensuring that a powder which would withstand bending was employed.

1. The reference to "Dulux" was to the substituted powder.

1. His Honour went on to consider whether misrepresentations could arise in law from silence or conduct and concluded that they could. He continued:-

I think it is open in law to the cross-claimant to establish a misrepresentation from the silence of the plaintiff as to the type of powder used, against the background that a natural inference in industry is that any metal part might be bent in the course of construction work.

1. His Honour analysed the matter thus:-

Therefore, in my view, in the circumstances of this matter, the misrepresentation will be made out if the cross-claimant has shown that -

(a) in connection with the supply of goods or services (which is self-evident here),

(b) in trade or commerce (also self-evident),

(c) the cross-defendant has made a representation that is false or misleading, and

(d) that in relation to the second cross-defendant its powder-coating services were of a particular standard, quality or grade (ie: ones which would withstand post-forming),

(e) in the alternative to (d), that the coated conduit or the services constituted by the act of coating it had performance characteristics, uses or benefits it or they did not have, which was false or misleading (in that it did not have an ability to withstand post-forming).

1. His Honour reached his conclusion in these words:-

I think the misrepresentation is made out. So far as section 52 is concerned, the representation made was false or misleading in that the coated conduit could not withstand such ordinary usage as post-forming, and so the defendant was misled as to its performance characteristics.

People in industry generally must know that metal parts are likely to be bent at times, or "post-formed" to use the language the parties prefer. It will not always be the case that parts will be bent. A manufacturer of engine valves to a car make might very well not know at all that the valves would be bent or deformed by the carmaker. It would be more likely to assume they would be kept pristine. But conduit is of its own nature likely to be bent at times. Not all conduits will run in perfectly straight lines without ever needing to turn a corner. I believe that is a proposition of common sense and common knowledge.

1. As I have said, there was no evidence that anyone representing the plaintiffs or the defendant ever knew that it was necessary for conduit to withstand bending during the course of electrical installation. There was evidence before his Honour that Mr Haymen did not and that Mr Graham Kuschert, a director of the defendant who at all times represented it, did not. The passages I have extracted show that in coming to his conclusion about the necessary qualities of conduit his Honour was relying not on evidence but on a natural inference, common sense or common knowledge.

1. It was faintly argued in this Court that there was evidence that the ability to withstand bending was a necessary quality. Mr Craig Brennan wrote a report of 12 June 2011. He was accepted as an expert witness, having worked in and around powder coating plants in the window industry and in related quality assurance systems for 22 years. Part of his report is as follows:-

The Dulux report than goes on to state the problem is caused by post forming the conduit. I am not sure what powder was specified however, I am aware that some powders are manufactured to have different attributes designed for different applications. I can only assume that this powder is not designed to be elastic enough to cope with post forming.

1. It seems to me that while capable of showing that conduit may be bent, this evidence fell short of establishing that the ability to withstand bending was a necessary attribute of conduit supplied in the industry with which the parties were concerned. I note that his Honour did not expressly rely on it for the conclusion he reached.

1. I conclude that his Honour's finding that it was an implied term of the agreement that the colour coating should be able to withstand bending was made without evidence. I do not consider that such a conclusion could be arrived at as a matter of common sense or common knowledge. I do not consider that it was a matter about which his Honour was entitled to take judicial notice. I think his Honour erred in law. The plaintiffs are entitled to have the matter dealt with according to law.

1. The orders I make are as follows:-

1. The appeal is allowed and the judgment and orders of the court below are set aside.

2. I remit the claim and the cross-claim to the local court to be dealt with according to law by a magistrate other than his Honour.

3. I order the defendant to pay the plaintiffs' costs in this Court. It should have a certificate under the Suitors Fund Act 1951.

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Decision last updated: 23 May 2012