Schrank v Ward

[2013] NSWSC 1819

Supreme Court

New South Wales

Medium Neutral Citation:

Schrank v Ward [2013] NSWSC 1819

Hearing dates:

10/10/2013

Decision date:

19 December 2013

Jurisdiction:

Common Law

Before:

RS Hulme AJ

Decision:

(1) Appeal allowed

(2) The orders made by Magistrate Lucas on 24 May 2013 be set aside

(3) The Local Court proceedings 2012/00202279 be dismissed

(4) The Plaintiff in those proceedings pay to the Defendant in those proceedings the Defendant's costs in the Local Court and in this Court.

Catchwords:

APPEAL - appeal from Local Court - error of law - error of law and fact - whether Magistrate erred at law

Legislation Cited:

Local Court Act 2007
Uniform Civil Procedure Rules 2005

Category:

Principal judgment

Parties:

John Edward Schrank (Plaintiff)
Peter Ward trading as Eagle Park Stud (Defendant)

Representation:

Counsel:
V Bedrossian (Plaintiff)
LE Edwards (Defendant)
Solicitors:
Campbell, Paton & Taylor (Plaintiff)
Longman Hill Solicitors (Defendant)

File Number(s):

2013/179272

 Decision under appeal 

Citation:

Nil

Date of Decision:

2013-05-24 00:00:00

Before:

Lucas LCM

File Number(s):

2012/00202279

Judgment

1. By statement of claim filed in the Local Court on 28 June 2012, Peter Ward, trading as Eagle Park Stud, sued John Schrank. After identifying the amount claimed as $12,121.33 plus interest and fees, the pleading was cryptic in the extreme:

The plaintiff relies on the following facts and assertions: Agistment of horses from January 2009 to August 2011 (as per statement enclosed).

1. The statement was not incorporated in the documents originally filed in this Court but the omission was corrected later. The statement was a statement of account dated 31 May 2012 that listed some twenty-two invoices apparently dated between 1 September 2010 and 31 August 2011, all described as "Sale; Schrank, Mr John" and varying in amount between $3.63 and $1,875.50. Three invoices were in amounts of $511.50 and two were in amounts of $11 but otherwise all differed in amount. The total of the invoices was $12,121.33 to which was added a finance charge of $3,647.29. The invoices themselves were never tendered.

1. The defence was in the following terms:

(1) The defendant does not admit there was an agreement between the Plaintiff and the Defendant that the Plaintiff would provide for Agistment for horses belonging to the defendant for the period January 2009 to August 2010 [sic].

(2) The defendant admits receiving the invoices set out in the statement of claim but denies responsibility for payment in relation to invoices as he does not own the horses to which those invoices refer and has no agreement with the plaintiff to agist any horses as claimed.

(3) The defendant denies that the plaintiff is entitled to any relief as claimed.

1. On 24 May 2013, the proceedings were heard by Magistrate Lucas in the Orange Local Court and a verdict entered in Mr Ward's favour.

1. By summons filed in this Court on 12 June 2013, Mr Schrank seeks to have the decision of Magistrate Lucas set aside and a verdict in his favour entered. Errors, said to be errors of law, attributed to the Magistrate were:

(a) Failing to have any or any adequate regard to the evidence adduced at the hearing; and/or

(b) Failing to make necessary and appropriate findings of fact in relation to the matter; and/or

(c) Failing to give any adequate reasons for his decision; and/or

(d) Reaching a verdict inconsistent with the Law and the evidence adduced at the hearing.

1. By reason of s 39 and s 40 of the Local Court Act 2007, except in circumstances not relevant here, an appeal from a magistrate lies to this Court only on a question of law or, with leave of this Court, on a ground that involves a question of mixed fact and law. Some of the grounds just quoted are not obviously compatible with these limits. However, the significance of this can be put aside for the moment.

1. Included in the evidence before the magistrate was information from Mr Ward to the effect that prior to October 2008 Mr Shank had arranged to have a number of horses looked after at Eagle Park Stud and that in that period Mr Schrank had "set up the first account in the name of Platinum Lodge Pty Ltd, in relation to horses unrelated to these proceedings". Mr Ward went on to say that "In October 2008, John bought a mare "Gala Ball" off me". John said, "Open an account in my name for Gala Ball".

1. On or about 10 October 2008, Eagle Park Stud sent an invoice numbered 772.2 addressed to Mr Schrank for the purchase of Gala Ball. The invoice appears to have been paid by Platinum Lodge Pty Ltd on 14 October 2008. Mr Schrank sent a copy of the Electronic Payment Receipt to Mr Ward on which, in handwriting, was endorsed the words:-

"Can I possibly get your Tax invoice 772.2 changed from John Schrank to Platinum Lodge Pty Ltd. All my mares and Byblos are owned by this company."

("Byblos" was a stallion owned, it would appear, by Platinum Lodge Pty Ltd).

1. According to Mr Schrank he also spoke to an employee of Mr Ward and advised that Gala Ball was a Platinum Lodge Pty Ltd horse for billing purposes.

1. There was no evidence of any direct response to Mr Schrank's request. Mr Schrank never received an amended invoice for Gala Ball's purchase. However, a Tax Invoice issued by Eagle Park Stud dated 31 October 2008 and, according to Mr Schrank noted by him at the time, covered services, including agistment fees, provided to some 28 horses, included agistment and other service fees provided to Gala Ball. The invoice was addressed to:-

"Platinum Lodge Pty Ltd

MR John Schrank

158 Patrick st Hurstville" (Sic)

1. In November 2008 at Mr Schrank's instigation another account was opened by Mr Ward in the name of Goldburry Pty Ltd and further mares were purchased in the name of this entity. Mr Schrank also said that prior to 30 June 2009 the ownership of Gala Ball was transferred from Platinum Lodge Pty Ltd to the Schrank Property Trust of which Goldburry Pty Ltd was the trustee.

1. An account from Eagle Park Stud dated 30 June 2009 addressed to:-

"Goldburry Pty Ltd

Mr John Schrank"

for agistment and other fees relates to some dozen horses. These include Gala Ball and 3 other of the horses included in the 31 October 2008 invoice to Platinum Lodge Pty Ltd.

1. On 5 February 2010, the Stud invoiced Goldburry Pty Ltd for a foaling fee relating to Gala Ball. An account dated 30 April 2010 addressed to Goldburry Pty Ltd includes this invoice. However the foal was registered in Mr Schrank's own name and it would appear that at some time Mr Schrank had provided his personal breeder's number to Mr Ward or his manager. Apart from Gala Ball and its foal, there were no other horses owned by Mr Schrank and agisted at Eagle Park Stud.

1. Taken to these documents showing that charges relating to Gala Ball were rendered to companies rather than Mr Schrank personally, Mr Ward denied any knowledge of them, saying that he always believed "we" were invoicing John Schrank and the changes apparent on the documents could have been due to a manager he had. The substance of Mr Ward's evidence in this regard was that there was an agreement between him and Mr Schrank that Mr Schrank personally bought Gala Ball even if, as Mr Ward said, Mr Schrank l later "muddies it around".

1. There was also evidence from Mr Foley-Gallagher who was Stud Manager at Eagle Park Stud from May 2008 to April 2011. Although acknowledging a number of charges for Gala Ball contained in the documents to which I referred - events he attributed to the fact that "errors do happen" - he maintained that the invoices the subject of the proceedings were made out personally to Mr Schrank.

1. As I have indicated, the invoices encompassed within the Statement of Claim were not made available in this Court. No appreciable body of invoices or statements that might have shown general invoicing or accounts to Mr Schank were in evidence although there were, addressed to Mr Schrank personally, the invoice for the purchase of Gala Ball in October 2008, a statement dated 29 February 2012 listing three paid invoices totalling about $24,000 between August 2008 and February 2009, and statements dated 29 February, 31 May and 31 August 2012 listing many invoices between September 2010 and August 2011. Of course, by 2012, dispute between the parties had become apparent.

1. Mr Foley-Gallagher said that after the purchase of Gala Ball, "the mare went to the Platinum Lodge Pty Ltd account then, after buying more mares in his Goldburry account, Mr Schrank had me move her to there". Mr Foley-Gallagher went on to say that on 1 December 2008, he had a conversation with Mr Schrank who, after "Gala Ball" was found to be in foal, "had me open up a new account in his name for this mare and any of her resulting progeny, Mr Schrank saying, 'She's my most valuable mare. I want to keep her separate from the other entities and have her in my own name.'"

1. Mr Foley-Gallagher said that the mare and foal remained on this account in Mr Schrank's name until he finished his employment at Eagle Park Stud (in April 2011) and that "at no time was the bill questioned by Mr Schrank". Mr Schrank acknowledged that the foal was registered by Mr Ward in Mr Schrank's name although Mr Schrank added that Mr Ward had also entered the colt in some sales in Mr Ward's name.

1. Both Mr Ward and Mr Foley-Gallagher also gave evidence to the effect that there were plans in 2010 for the sale of some horses and that in that connection Mr Schrank sent names and numbers for three bank accounts: one in the name of Goldburry Pty Ltd, a second in the name of Platinum Lodge Pty Ltd and a third in his own name. So far as the evidence went, there seemed to be no other horses owned by Mr Schrank and his solicitors denied that he had owned any..

1. For his part, Mr Schrank denied requesting that an account in his name be opened for Gala Ball, adding that he negotiated the purchase of the mare on behalf of Platinum Lodge Pty Ltd. He went on to say that he had spoken to Mr Foley-Gallagher "and confirmed to him that I had faxed written instructions that Gala Ball was a Platinum Lodge Pty Ltd horse for billing purposes". However, no such written instructions, unless Mr Schrank was referring to the hand-written endorsement referred to above, were in evidence.

1. Mr Schrank went on to say that the ownership of Gala Ball was transferred from Platinum Lodge Pty Ltd to Goldburry Pty Ltd. He said he was never aware of receiving any accounts in his name until a solicitor's letter of demand of March 2012. He explained sending his own bank details against the possibility that there was some doubt as to which company owned the horses to be sold.

1. Because an issue arises as to the quantum of the verdict entered in favour of Mr Ward, it is proper to record that the invoices of 31 October 2008 and 30 June 2009, to which reference has been made, show a daily rate for Gala Ball of $15 and sundry other charges for things such as farrier services and drench administration. There was also evidence that invoices directed to Mr Schrank or his companies were paid promptly for over eighteen months.

1. Also in evidence was a letter from solicitors acting on behalf of Mr Ward in which it was asserted:-

"Between approximately 20 August 2008 and 31 August 2011 our client provided you with agistment and related services. Statements of account for that period are enclosed with this letter. You will be aware that invoices from 20 August 2008 to 24 February 2009 have been paid in full to the amount of $24,871. Those invoices were calculated on the same basis as the unpaid invoices."

1. Two Statements of Account appear to have been enclosed. One referred to three invoices during the period August 2008 to February 2009 totalling $24,871 and recorded as paid. The second listed a number of invoices apparently bearing dates between 1 September 2010 and 31 August 2011 and totalling $12,121.33. The Statement also referred to an amount of $2,903.83 (apparently a finance charge) and the amount of $12,121.33 as "60+ days". A response written on Mr Schrank's behalf asserted that he had never owned any of the horses referred to and that all horses agisted at Eagle Park Stud were owned either by Goldburry Pty Ltd or Platinum Lodge Pty Ltd. Otherwise, there was no denial of the matters contained in the passage quoted.

1. Elsewhere Mr Schrank had asserted that until he received a letter from lawyers acting on behalf of the Plaintiff on 15 March 2012 he had never been aware that he had received an account in his name.

1. The case advanced in final address by the solicitor appearing for Mr Ward was that the Grounds of Defence had narrowed the issue to one of who owned Gala Ball, that Mr Schrank's provision of his breeder's number for the foal registration and of his personal bank account details indicated that Mr Schrank was the owner, and that the magistrate should accept the evidence of Mr Ward and Mr Foley-Gallagher.

1. In the opening paragraph of his closing remarks, Mr Boncardo, the solicitor appearing for Mr Schrank observed:-

"My friend said this case is about ownership; it's not about ownership, it's about who the contract was between; whether the contract was between my client, as the person agisting horse, or the corporate entity."

1. Later Mr Boncardo submitted that the evidence of Messrs Ward and Foley-Gallagher to the effect that Mr Schrank had asked for accounts for Gala Ball to be in his name should be rejected in light of the fact that invoices including invoices relating to Gala Ball were in company names and that the Plaintiff had been given leave to file evidence in reply but had not sought to adduce contradictory invoices or accounts. A third point taken by Mr Boncardo was that the invoices relied on by Mr Ward were not in evidence and there was thus no evidence of damage.

1. The magistrate's reasons included the following:-

"If I am satisfied that Mr Ward has established, on the balance of probabilities, that Mr Schrank has incurred and owes one cent, and I make judgment to the plaintiff, then the sum that is claimed really does not make the slightest bit of difference; it is what the court assesses has been the correct amount if, and I stress this, the plaintiff is successful in his application before the court.

Now in regards to the last matter first: I am of the view that the invoices do not, in a civil matter, have to be proven on the balance of probabilities, in these proceedings, bearing in mind the defence filed by Mr Schrank.

...

Having already made the ruling that in my view, proof of invoices per se, is not a matter that this court must take into account. I discard Mr Boncardo's argument on the basis that my reading of the papers before the court, Mr Schrank has admitted that he received the invoice, be it the one that indicates the amount that Mr Boncardo has drawn his address upon, or the very separate ones that are before the court at this time, which are marked annexure A, or annexure H, that there is damages has been accepted.

The Court must, for the purposes of the pleadings, accept what is said by the parties; to do otherwise is to allow you to file one particular case in your answer or pleadings defence to the civil proceedings and then to, at court, to totally change your mind; that simply is not acceptable and it is not allowed for within the law.

I am of the view that the question is, as I believe both parties have indicated, who owned Gala Ball. It is not uncommon for people, as an operating procedure or whatever, to put a particular matter into a company name on the basis that the company is there to make a profit, it is there also to provide tax matters or whatever, but someone always owns the company. On the evidence that has been presented before this court, who has owned that company that Mr Schrank has indicated for the purpose of his possession, or purchase, of Gala Ball.

He makes no dispute with the fact that he and Mr Ward entered into a sale for Gala Ball. He does object to the nature of the proceedings insofar as he asserts that he was not the owner, but the company was. But that, on the evidence before me, on the balance of probabilities - I stress that, because beyond a reasonable doubt I certainly wouldn't be satisfied - but on the balance of probabilities, I AM OF THE VIEW THAT MR SCHRANK WAS THE OWNER OF GALA BALL. (Emphasis in original transcript.)

And as such, if the court is so satisfied as to that matter, bearing in mind the bank details, of the registration, the corporate numbers and all the rest of the matters that have been placed before the court in these proceedings, if the court is satisfied that Mr Schrank is the owner of the horse, Gala Ball, which I am, and Mr Schrank has incurred, in his own pleadings, an amount, be whatever amount, in these proceedings, to Mr Ward, the plaintiff, well quite clearly Mr Ward as the plaintiff, has proven his case on the balance of probabilities."

1. These reasons contain or demonstrate a number of errors. Firstly, it is clear that the Plaintiff's claim was based on a contract, express or implied, for the provision of agistment and other services. The primary issue was as to the identity of the other person to that contract. To that issue the ownership of Gala Ball was relevant but not determinative. In that the reasons I have quoted ignore the primary issue and treat the second I have identified as determinative, those reasons are erroneous. They err also in attributing to Mr Boncardo agreement to the proposition that the question for determination was who owned Gala Ball.

1. A third error lies in his Honour's view that Mr Schrank had in his pleading admitted the quantum of liability. He did no such thing and his acknowledgment of receipt of invoices is not such an admission. These errors by the magistrate were errors of law.

1. It follows that the proceedings before Magistrate Lucas miscarried. On Mr Schrank's behalf it was submitted that the proceedings brought by Mr Ward should be determined in this Court and dismissed, there being no utility in the proceedings being remitted because: -

(a) there is insufficient (and in some critical respects, no) evidence for the Defendant (i.e. Mr Ward) to be able to discharge the burden of proof in respect of his claims;

(b) in the course of the proceedings in the court below, the Defendant and his witnesses made concessions, which were (or ought to have been) fatal to the Defendant's claim; and

(c) there is, in fact, strong evidence to support the Plaintiff's own factual and legal contentions, even though he did not bear that burden in the court below.

1. Subject to one matter which I address below, I disagree. The evidence that Mr Schrank said, "open an account in my name for Gala Ball" provided a firm basis for concluding that there was an initial agreement involving liability of Mr Schrank personally. That evidence derived support from other evidence that Mr Schrank had a personal interest in Gala Ball including the registration of Gala Ball's foal in his name. Certainly, any such agreement was capable of being changed and while some of the invoices to which reference has been made argue for there having been a change and Eagle Park Stud agreeing that one of Mr Schrank's companies instead of Mr Schrank should be responsible for Gala Ball's agistment and other fees, there was also other evidence tending in the opposite direction. Thus Mr Foley-Gallagher's evidence to the effect that there was a mistake in those invoices and that the invoices, the subject of the proceedings were made out personally to Mr Schrank, argues for there having been no change to the original agreement or alternatively, as Mr Foley-Gallager suggested, a change back to Mr Schrank personally. The magistrate did not reject this evidence of Mr Foley-Gallagher and, neither inherently nor combined with other evidence in the case, is it incapable of being believed. In short, there was evidence capable of discharging the burden of proof on Mr Ward of showing a contract with Mr Schrank personally.

1. There were undoubtedly a number of concessions made by Mr Ward and Mr Foley-Gallagher as to identity of the entity liable for Gala Ball's agistment etc. In large part they were inspired by the cross-examiner showing selected invoices or statements to the witnesses. However, it is apparent from what I have said above that in totality the documents display an inconsistent story and Mr Ward remained of the view that Mr Schrank personally owed. These various concessions undoubtedly helped Mr Schrank's case and were capable of being given sufficient weight as to overcome the evidence arguing for Mr Schrank being personally liable. However, the concessions were not so powerful as to compel that conclusion.

1. Turning to sub-paragraph (c), while I accept that there was evidence supporting the contentions of Mr Schrank in this Court - largely consisting of invoices referring to Gala Ball in company names and concessions in cross-examination based on those invoices - Mr Ward and Mr Foley-Gallagher adhered to their view that liability remained in Mr Schrank and the evidence supporting the contentions of Mr Schrank was not compelling.

1. I turn to the subject of the reservation expressed some paragraphs ago. For Mr Ward to succeed, it was not enough for him to show that the contract for Gala Ball's agistment was with Mr Schrank. His claim involved showing also that agistment of horses, specifically Gala Ball and possibly its foal, had occurred and the value, agreed or otherwise, of that agistment. On those topics Mr Hill, the solicitor appearing for Mr Ward, in his closing submissions said:-

Now the reason the invoices, you know an inch thick of them, weren't included in the evidence was because, 2; grounds of defence, the defendant admits receiving the invoices set out in the statement of claim but denies responsibility for them. So the defence narrowed the scope of this court case down to who owned the horse and that's why proof of firstly rendering the services and proof of each individual invoice weren't attended to in the evidence because it's conceded in the defence, in the pleadings. It wasn't a mere oversight or anything as my friend might concede, or sloppiness on the plaintiff's behalf; it's in the pleadings, it's conceded.

1. This assessment of the effect of the Defence was erroneous. The Statement of Claim was hardly a prime example of the draughtsman's art but it was sufficient to involve allegations:-

(i) that the Plaintiff had provided agistment of horses for the period claimed,

(ii) that the agistment was provided to Mr Schrank or pursuant to some agreement with him, and

(ii) that the value of that agistment was $12,121.33 ("as per statement enclosed").

1. (I may add that although the point seems not to have been taken, it is not immediately obvious that the term "agistment" is appropriate to encompass all of the sundry other charges that appear to have been included in the statement of account which summarised the Plaintiff's claim.)

1. Assuming the above analysis be correct, the Defence denied the matters in paragraph (ii), but said nothing about the allegations in paragraphs (i) or (iii). Under the rules of pleading - see Uniform Civil Procedure Rules 2005 rule 14.26 - the allegation in paragraph (i) is taken to have been admitted but that in paragraph (iii) taken to be traversed. For Mr Ward to succeed for more than nominal damages, the value of the agistment had to be established by evidence. It is clear that Mr Hill never attempted to do this. Neither Mr Ward nor Mr Foley-Gallagher was asked anything on that topic.

1. I have wondered whether, despite this omission, there was other evidence that could be said to establish Mr Ward's claim. Certainly, there was evidence of admissions made by Mr Schrank. Thus there were allegations in correspondence that were not denied and an email from Mr Schrank dated 22 December 2010 acknowledged that he owed Mr Ward a considerable sum of money. However, from the terms of the email I would not be prepared to infer that this was an acknowledgment of a personal, rather than a company, debt and when the totality of the material is considered, it is not possible to find sufficient admissions to justify a verdict in favour of Mr Ward or, indeed, to remit the matter for further hearing. The simple fact is that, due to an erroneous view of the effect of the pleadings, or of the relevant principles or Rules in that regard, Mr Ward's representative omitted to prove an essential element of his client's case.

1. Accordingly, the appropriate orders are: -

(1)   Appeal allowed.

(2)   The orders made by Magistrate Lucas on 24 May 2013 be set aside.

(3)   The Local Court proceedings 2012/00202279 be dismissed.

(4)   The Plaintiff in those proceedings pay to the Defendant in those proceedings the Defendant's costs in the Local Court and in this Court.

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Decision last updated: 19 December 2013