Screenmasters Australia Pty Ltd v Key Recruitment Pty Ltd

[2013] NSWSC 1569

Supreme Court

New South Wales

Medium Neutral Citation:

Screenmasters Australia Pty Ltd v Key Recruitment Pty Ltd [2013] NSWSC 1569

Hearing dates:

24/10/2013

Decision date:

31 October 2013

Jurisdiction:

Common Law

Before:

Harrison AsJ

Decision:

The Court orders that:

(1) The appeal is upheld.

(2) The decision of his Honour Magistrate Curran dated 18 December 2012 is set aside.

(3) The defendant is to pay the plaintiff the sum of $21,102.40 plus interest to be calculated.

(4) The defendant is to pay the plaintiff's costs as agreed or assessed.

Catchwords:

APPEAL - appeal from Local Court -CONTRACT - interpretation of contract - terms of contract - whether there was a breach of contract - whether guarantee in the contract has been discharged

Legislation Cited:

Local Court Act 2007
Uniform Civil Procedure Rules 2005

Cases Cited:

Egan v Static Control Components (Europe) Ltd [2004] 2 Lloyd's Rep 429
McCann v Switzerland Insurance Australia Ltd (2000) 203 CLR 579
Swain v Waverley Municipal Council [2005] HCA 4; (2005) 220 CLR 517

Category:

Principal judgment

Parties:

Screenmasters Australia Pty Ltd (Plaintiff)
Key Recruitment Pty Ltd (Defendant)

Representation:

Counsel:
M Hutchings (Plaintiff)
Solicitors:
McIntosh McPhillamy & Co (Plaintiff)

File Number(s):

2013/16729

Publication restriction:

Nil

 Decision under appeal 

Citation:

Nil

Date of Decision:

2012-12-18 00:00:00

Before:

Curran LCM

File Number(s):

2011/92060

Judgment

1. HER HONOUR: This is an appeal from a decision of his Honour Magistrate Curran dated 18 December 2012 in proceedings 2011/92060 Screenmasters Australia Pty Ltd v Key Recruitment Pty Ltd. The trial concerned a contract for the provision of recruitment services. Screenmasters Australia Pty Ltd ("Screenmasters") terminated for breach of the contract and sued Key Recruitment Pty Ltd ("Key Recruitment") for damages in the sum of $21,102.40 for damages plus costs and interest. The Magistrate declined to find breach of contract and entered a verdict in favour of Key Recruitment. This appeal concerns the Magistrate's construction of the contract.

1. By summons filed 18 January 2013, Screenmasters seeks orders first, that the appeal be allowed, secondly, that the orders of his Honour Magistrate Curran made 18 December 2012 in the Bathurst Local Court be set aside; and thirdly, that there be verdict and judgment for Screenmasters.

1. The plaintiff is the Local Court and this Court is Screenmasters. The defendant in the Local Court and in this Court is Key Recruitment. For convenience I shall refer to the parties by name. Screenmasters relied two affidavits of Christopher John Nichols sworn 12 March 2013 and 23 October 2013.

1. The defendant did not appear at the hearing of this appeal. When it was called three times outside court at 10.05 am and there was no appearance.

1. On 5 April 2013, Key Recruitment's solicitor filed a notice of ceasing to act and provided an address for the defendant.

1. On 6 June 2013, the registry forwarded Screenmaster's written submissions to Key Recruitments at the address provided on the notice of ceasing to act. On 8 June 2013, the envelope and its contents were returned to the registry with "return to sender" endorsed on the envelope (Ex 1). On 23 October 2013 (the day before the hearing), an ASIC search showed that Key Recruitment is still registered and that there has been no change to its registered office or principal place of business.

1. Screenmaster's solicitor Mr Nichols deposes that throughout the proceedings he has had difficulty contacting the Key Recruitment. All of the solicitor's correspondence has been returned and its envelope marked "return to sender". In addition to the registered office, the trading address in Milton, Queensland, Screenmasters' solicitor forwarded notification of hearing to the director of Key Recruitment Mr Deon Haar at the address shown in the ASIC search. All of these letters were returned to sender. In these circumstances, I am satisfied that Key Recruitment has elected to play no active role in this appeal. That means that there is no contradictor before this Court to put submissions adverse to Screenmasters.

The appeal

1. Section 39 of the Local Court Act 2007 provides that a party who is dissatisfied with a judgment or order of the Local Court may appeal to the Supreme Court, but only on a question of law. The proper construction of a contract is a question of law.

1. Section 41 of the Local Court Act provides that this Court may determine an appeal either (a) by varying the terms of the judgment or order, or (b) by setting aside the judgment or order, or (c) by setting aside the judgment or order and remitting the matter to the Local Court for determination in accordance with the Supreme Court's directions, or (d) by dismissing the appeal.

1. In Swain v Waverley Municipal Council [2005] HCA 4; (2005) 220 CLR 517, Gleeson CJ at [2] reiterated that in the common law system of civil justice, the trial process determines the issues between the parties. The system does not regard the trial as merely the first round in a contest destined to work its way through the judicial hierarchy until the litigants have exhausted either their resources or their possibilities of further appeal.

Grounds of appeal

1. Screenmasters appeals from the whole of the decision of Magistrate Curran on three grounds. The first is that his Honour erred in construing the contract; the second is that his honour erred in construing cl 6 of the contract; and finally, in the alternative, his Honour erred in finding that Key Recruitment had discharged it's obligations under the contract.

Proceedings in the Local Court

1. At the hearing in the Local Court, the following facts were not in dispute, most having been admitted in the defence.

1. In about March 2010, Screenmasters entered into a contract with Key Recruitment whereby Key Recruitment was to provide to Screenmasters recruitment services. I shall refer to the contractual provisions later in this judgment.

1. On 10 May 2010, Screenmasters employed a candidate, Mr Mike Bayens, introduced by Key Recruitment. Key Recruitment issued an invoice in the sum of $21,102.40 to Screenmasters following the employment of Mr Bayens. The invoice was paid within seven days. Mr Bayens proved to be incompetent in the role for which he was recruited. On 14 June 2010, he resigned.

1. In accordance with cl 6.4 of the contract, Screenmasters notified Key Recruitment of the resignation of Mr Bayens and of its dissatisfaction with his performance and the six month guarantee was engaged.

The contract

1. The contract is between Screenmasters Australia Pty Ltd and Key Recruitment Pty Ltd dated 19 May 2010. It is headed "Terms & Conditions of Engagement - Permanent Placements". The relevant clauses read:

"1. Application of These Terms & Conditions

1.1 In this agreement "Key Recruitment" means Key Recruitment Pty Ltd ABN XXX XXX XXX"; "Client" means the employer seeking staff to whom Key Recruitment provides recruitment services for and whose authorised representative has signed this agreement and "Candidate(s)" means a person(s) introduced to the Client by Key Recruitment. "Fee(s)" means the $ amount calculated in accordance with this agreement between Key Recruitment and the Client. "Placement(s)" means any Candidate who obtains a position with the Client through Key Recruitment. (my emphasis added)

6 Guarantee - Permanent Placements

6.1 All Placements made by Key Recruitment carry its guarantee for six (6) months from the date of commencement, providing that all Fees have been paid within 7 (seven) days of the Candidate's start date.

...

6.4 If the Client is not satisfied with the placed Candidate's performance and Key Recruitment is notified within the guarantee period, Key Recruitment will undertake the assignment for one replacement Candidate for that same position without charging additional professional Fees."

Events subsequent

1. At the hearing before the Magistrate, Key Recruitment conceded that it had undertaken "to go through the role again of getting one replacement for the candidate in the same position" (T13.35-38, 24/10/12).

1. On 11 November 2010, the second interview took place. Screenmasters found the candidate was partly suitable. Screenmasters' manager, Mr Alexander wrote to Mr Duff stating that the candidate had some of the electrical skills that were required for the position.

1. Key Recruitment was unable to locate a potentially suitable replace candidate until late October 2010, more than four months later.

1. In late October 2010, Mr Brian Duff of Key Recruitment found a potentially suitable candidate, Mr George Smalley, via an employment website, seek.com.au. Mr Duff highly recommended Mr Smalley.

1. Screenmasters conducted two interviews with Mr Smalley. On 11 November 2010, the second interview took place.

1. On 2 December 2010, Mr Grant Alexander of Screenmasters advised Mr Duff that Screenmasters was interested in employing Mr Smalley but that employment would not start until January 2011 due to the seasonable downturn in work.

1. On 3 December 2010, Mr Duff wrote to Mr Alexander stating, "... the onus is on us (Screenmasters) to be happy that he is the right man before putting him on."

1. On 21 December 2010, Screenmasters emailed Mr Smalley offering him employment. The candidate did not respond. (T5.45; 5.48, 18/12/12).

1. At trial it was put to Mr Alexander that, "You did not really want to employ Mr Smalley at all did you, you simply wanted the defendant to refund the amount of money that they'd paid to you, isn't that the truth? Mr Alexander replied, "No". (T40.32-35, 24/10/12).

1. On 28 January 2011, Mr Alexander, following repeated unsuccessful attempts to communicate with Mr Smalley, contacted Mr Deon Haar of Key Recruitment advised him that the candidate was uncontactable.

1. There is no evidence that Mr Haar, nor any other person from Key Recruitment, ever replied to Mr Alexander's communication. However, there is no dispute that the communication was received.

1. On 1 March 2011, Screenmaster's solicitor gave notice of the termination of the contract to Key Recruitment.

The Magistrate's reasons

1. On 18 December 2012, the Magistrate gave ex tempore reasons for his decision. The Magistrate made a finding that the contract contained no ambiguity or lack of clarity. At (T8.50-T9.1-10) the Magistrate stated:

"Primacy of place lies with the written text of a contract. I do not find it to be ambiguous or confusing as it applies to the facts of this particular case before me in the circumstances established on evidence.

I do emphasise the facts of this particular case. Where the facts different, for instance of no candidate had been found to fill the position and this had gone on for some time... this may well create a situation where a term or terms may have to be implied into the contract."

1. The Magistrate held (T8.1-13, 18/12/12) that:

"It seems to me that the guarantee, once triggered, does not mean that a further candidate must not only be introduced to the plaintiff but also must, in fact, be hired by the client before the guarantee is discharged. The obligation is to find "one replacement candidate for the position." The interpretation that would require the hiring of the replacement candidate as being a basis for satisfaction of the guarantee would possibly lead to what I would regard to be "commercial nonsense".

It would mean that the [respondent] could well be in a position where endless candidates are introduced, objectively suitable for the position and for many reasons, such as delay on the part of the client, or just capricious dislike of the candidate, are not hired."

1. Thus, the Magistrate held that once the guarantee is triggered, the obligation under cl 6.4 of the contract is for Key Recruitment to find one replacement candidate for the position

1. Counsel for Screenmasters submitted that the reference to the "the facts... in the circumstances established on evidence" and "were the facts different..." illustrates that the Magistrate approached the question of construction incorrectly by analysing post-contractual events and then examining the text of the contract.

1. Screenmasters submitted that the guarantee would have been discharged by Key Recruitment had the appellant employed a candidate introduced by Key Recruitment and that the Magistrate's approach to the construction of the contract ignores the plain meaning of the words used in the contract. Clause 6.4 refers to "placed candidate" and "replacement candidate".

1. Screenmasters submitted that the Magistrate was required to give effect to that text, those plain and unambiguous words, and to construe the contract congruently (rather than incongruently). Screenmasters say that the Magistrate repeatedly stressed that the contract was not ambiguous, his Honour's construction of the contract requires the implication of a contractual term, namely, a qualification upon the terms of the guarantee, and that his Honour failed to have proper regard to the text of the contract.

1. Counsel for Screenmasters referred to McCann v Switzerland Insurance Australia Ltd (2000) 203 CLR 579 (at 589, [22]), where Gleeson CJ after observing that, as a commercial contract, a policy of insurance should be given a businesslike interpretation stated:

"Interpreting a commercial document requires attention to the language used by the parties, the commercial circumstances which the document addresses, and the objects which it is intended to secure."

1. The trial judge was required to examine the text of the contract and the surrounding circumstances (as known to the parties at the time of contract), and the purpose and object of the transaction (as known to the parties at the time of contract).

1. In Egan v Static Control Components (Europe) Ltd [2004] 2 Lloyd's Rep 429 (at [27]) 29, Arden LJ held:

"...there are not two possible constructions in any given situation, namely a purely linguistic one and one in the light of the factual background, but only one, the true interpretation. This is because the object of interpretation is to discover the meaning of the provision in question in its context."

1. I agree with the Magistrate that there is no ambiguity in the wording of the relevant clauses of the contract. The definition of "placement(s)" means any candidate who obtains a position with the client through Key Recruitment. The definition of "placement(s)" also applies to "replacement(s)". For a placement to occur, one candidate has to obtain a position with Screenmasters. Those words are clear. The meaning of placement and replacement is not merely to find a candidate for the position. On the facts, Screenmasters offered Mr Smalley employment. Mr Smalley did not reply to the offer. Had Mr Smalley accepted the offer he would have obtained a position. Key Recruitment would have satisfied cl 6.4. That did not occur. Mr Smalley did not obtain the position with Screenmasters through Key Recruitment. Clause 6.4 of the contract was not satisfied. Screenmasters terminated the contract and sought to be repaid the sum of $21,102.40 as damages.

1. In my view the Magistrate erred in his construction of the contract. This is an error of law. The decision of his Honour Magistrate Curran dated 18 December 2012 is set aside.

1. The next issue is whether or not I should remit this matter to the Local Court to be determined according to law. The facts were not in dispute. In my view it would be of no utility to take this approach and remit the matter to the Local Court, particular where it seems likely that Key Recruitment will not appear. As Key Recruitment did not fulfil cl 6.4 of the contract, it has breached the contract. Screenmasters claims damages that comprises of the fee it paid for the recruitment plus interest and costs. I enter judgment in favour of Screenmasters in the sum of $21,102.40 with interest to be calculated.

1. Costs are discretionary. Costs normally follow the event. The defendant is to pay the plaintiff's costs as agreed or assessed.

The Court orders that:

(1) The appeal is upheld.

(2) The decision of his Honour Magistrate Curran dated 18 December 2012 is set aside.

(3) The defendant is to pay the plaintiff the sum of $21,102.40 plus interest to be calculated.

(4) The defendant is to pay the plaintiff's costs as agreed or assessed.

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Decision last updated: 31 October 2013