Shelcon Pty Ltd v Duhovic

[2007] VSC 430

IN THE SUPREME COURT OF VICTORIA Not Restricted

AT MELBOURNE

PRACTICE COURT

No. 7436 of 2007

SHELCON PTY LTD	Plaintiff
v
DUHOVIC AND ANOTHER	Defendants

---

JUDGE:	OSBORN J
WHERE HELD:	MELBOURNE
DATE OF HEARING:	18 OCTOBER 2007
DATE OF JUDGMENT:	18 OCTOBER 2007
CASE MAY BE CITED AS:	SHELCON PTY LTD v DUHOVIC & ANOR
MEDIUM NEUTRAL CITATION:	[2007] VSC 430

---

APPLICATION for leave to appeal – Section 148 of the Victorian Civil and Administrative Tribunal Act 1998 – Domestic Building List – Preliminary determination as to parties to the building contract – no arguable error of law in reasons – material findings of fact as to background circumstances and as to probabilities – open to the Tribunal to treat circumstantial evidence as it did – justiciability of interim order not decided – potential further claim in tort not decisive – leave refused.

---

APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr Mackinnon	Michael Mackinnon
For the Defendants	Mr J.J. Isles	Stephen Peter Byrne

HIS HONOUR: 

1. In this matter the plaintiff seeks leave to appeal pursuant to s.148 of the Victorian Civil and Administrative Tribunal Act 1998 (“VCAT Act”).  The principles to be applied are most conveniently summarised by the Court of Appeal in The Secretary of the Department Of Premier and Cabinet v Hulls.[1]

   [1](1999) 3 V.R. 331.

1. In the present case three principal issues have been agitated before me.  Firstly, whether the decision of the Tribunal that is in issue constitutes an order for the purposes of the section.  Secondly, whether the reasons disclosed an arguable vitiating error of law.  And thirdly, whether if the first two questions are answered in the affirmative nevertheless leave should be refused because the plaintiff still has on foot a claim for alternative relief.

1. It is necessary to say something about the background to the matter. The Tribunal had before it a claim with respect to allegedly defective concreting works carried out at 310 Camp Road, Broadmeadows. The plaintiff alleged that the works were neither completed nor executed properly, nor rectified insofar as they were defective. He sued the defendants to this proceeding firstly, in contract and secondly, in negligence. Having considered the points of claim and defence, Senior Member Cremean took the view that it was sensible to determine as a preliminary question who were the contracting parties to the arrangement pursuant to which the concreting work was done. In so doing he no doubt had regard in part to his obligation under s.98(1)(d) of the VCAT Act to conduct each proceeding with as  little formality and technicality and determine each proceeding with as much speed, as the requirements of the Act and a proper consideration of the matters before him permitted. 

1. In the event after hearing evidence and submissions on 7 June 2007 he ultimately ordered on 28 June 2007: 

(1)I determine that the contract with the applicant was made with SMK Developers Pty Ltd and not with the respondents or with either of them;

(2)       Reserve costs.

1. It is this order which is the subject of the application for leave to appeal. 

1. The greater part of argument before me was addressed to the question which engages directly with the underlying justice of the situation, namely whether the senior member's reasons disclose an arguable error of law.  It was suggested first that the reasons were inadequate, secondly that they did not comprise adequate findings of material fact, and thirdly that they contain findings of fact unsupported by evidence.  I shall deal with each of these matters in turn.

1. First, turning to the question of reasons, I accept the submissions of counsel that the essential requirement was stated by Ashley JA in Franklin v Ubaldi Foods Pty Ltd[2], in a statement in which the Chief Justice and Nettle AJ concurred: 

Reasons must be such as to reveal, although in a particular case it may be by necessary inference, the path of reasoning which leads to the ultimate conclusion.  If reasons fail in that respect they will not enable the losing party to know why the case was lost.  They will tend to frustrate a right of appeal, and their inadequacy will in such circumstances constitute an error of law.

[2](2005) VSCA 317.

1. In the present case the Tribunal was obliged by s.117(1) and (5) of the VCAT Act both to give reasons for the Order it made (assuming without deciding that the decision did comprise an order other than an interim order) and if it gave reasons it was required to include in those reasons findings on material questions of fact.

1. Independently of the obligation to give reasons, once reasons are given (whether pursuant to obligation or not), if they betray an error of law then that error may provide the proper basis for judicial review and in appropriate circumstances leave to appeal pursuant to s.148.

1. As I read the Tribunal's reasons, the Tribunal sought squarely to address the cases that were advanced by the parties.  At paragraphs 43 and 44 the Tribunal summarised the cases put on behalf of the parties. For the applicant it was submitted that this matter turned on the essentials of a contract; was there agreement or not, and if so, between whom?  It was submitted the Tribunal should find in favour of the applicant that the contract was with the first respondent who allegedly engaged the second respondent.  It was submitted Mr Virduzzo was an impressive witness for the Applicant who gave clear evidence and was not evasive.  On the other hand it was submitted the evidence given by the respondents was unimpressive and less than honest.

1. The Tribunal then turned to the submission made on behalf of the respondents which was in essence that the applicant was manipulating the evidence as to the facts, having discovered the first respondent's apparent property interests.  In part counsel for the respondents submitted the Tribunal should find that the second respondent was contracting on behalf of SMK Developers Pty Ltd. 

1. It was further submitted the Tribunal should find that Mr Virduzzo knew that the first respondent was only ever introducing him to the second respondent and that the latter was only ever acting on behalf of the company.  This was the more probable version of events. 

1. As I read it’s reasons the Tribunal ultimately accepted the last submission.  It concluded on the whole of the evidence that the more probable version of events was that the plaintiff's principal, Mr Virduzzo, knew that the first respondent only ever acted to introduce him to the second respondent, and that the second respondent only ever acted on behalf of the company, SMK Developers Pty Ltd.  In my opinion this view was open to it and the Tribunal gave adequate reasons for it.

1. The Tribunal after summarising the contentions of the parties embarked on an analysis of the evidence and having assessed the probabilities in a number of respects concluded at paragraph 53:

The likely scenario, on the evidence, which I have compressed, is that in this instance, if not in others also, the first respondent procures work for the second respondent who is his stepfather.  But the second respondent carries out work on behalf of SMK Developers Pty Ltd because he is or has been forbidden to do so in his own right.

1. There is no arguable basis on which it can be suggested that these conclusions were not open to the Tribunal.  They were clearly founded in the probabilities as to the circumstances of both the first and second respondents.  The finding in turn forms the context in which the Tribunal went on to deal with other evidentiary matters upon which Mr Mackinnon has focused.

1. Mr Mackinnon emphasised that Tribunal rejected, in some significant aspects, the evidence of the respondents.  Nevertheless at paragraph 55 the Tribunal stated:

Again, from the fact that I should find the second respondent is lying to me about the activities on site of the first respondent it does not follow that he is lying to me in everything he says.  His credibility is, in my view, low but I accept his evidence that he made it clear to Mr Virduzzo that SMK Developers Pty Ltd was the company he was working for.  This, it seems to me, should have put Mr Virduzzo well and truly on notice.

1. Once again, it seems to me that there is no arguable basis on which it can be suggested it was not open to the Tribunal having heard the oral evidence of the witnesses to accept that of the second respondent to the effect that he made it clear to Mr Virduzzo that SMK Developers Pty Ltd was the company he was working for.  Put another way the Tribunal may have been wrong as a matter of fact in this conclusion, but it was open for it to reach this conclusion, particularly within the framework of the conclusion it had previously reached with respect to the probabilities as to the contractual system within which it is likely the first and second respondent ordinarily carried out work.

1. The Tribunal then turns to what it described as the only two items “of any real evidence” it could rely on in the case, "considering all the conflicting testimonies otherwise".  Those matters were matters of circumstantial evidence and, as is sometimes said, the conceptual difficulty with circumstantial evidence is that depending on one's perspective it can be regarded as both the best or the worst evidence in the case.

1. What I must decide is whether the Tribunal erred in law in the way it had regard to the evidence.  The Tribunal had regard to the fact that at or about the time of the making of the contract or, alternatively, immediately after the making of the contract, Mr Virduzzo paid a cheque to SMK Developers Pty Ltd as a down payment, or deposit, for the work.  The Tribunal concluded paying over a cheque to that company was objective evidence that supported the view that Mr Virduzzo regarded that entity as the other contracting party.

1. Once again it seems to me that this conclusion was open to the Tribunal.  It was not saying that payment of the cheque was conclusive evidence.  It was saying that payment of the cheque was objective evidence that supported the view that Mr Virduzzo regarded the corporate entity as the other contracting party.  The Tribunal went on to find that Mr Virduzzo impressed it as a man who is skilled and intelligent and not easily fooled.  The Tribunal rejected Mr Virduzzo's evidence that he paid over the money to the first respondent simply accepting his explanation that it was for “tax purposes”.

1. As I would understand the ordinary meaning of that phrase, what the Tribunal rejected was evidence that the cheque was paid to facilitate some sort of sham for tax purposes.  If the proposition is expressed in this way it can be seen that it does carry with it some inherent difficulty of proof and credibility, particularly if it is advanced by someone who claims to be honest and to have acted honestly.

1. Be that as it may, once the Tribunal had concluded, firstly, that the cheque could be regarded as objective evidence that tended to support the conclusion that the contract was with the company, and secondly that Mr Virduzzo did not, as he stated, pay the cheque over in response to a request to do something for tax purposes, it can be seen that the Tribunal had found material facts upon which it could conclude that there was a substantial circumstantial base supporting the view that the contract was with the company.

1. I should add that the Tribunal’s assessment of Mr Virduzzo is clearly founded in part on the assessment that the Tribunal member made of Mr Virduzzo as a witness giving oral evidence before him, and it is very difficult for a court, whose role is limited to identifying errors of law and in appropriate circumstances granting relief with respect to them, to act in a way which involves a rejection of conclusions based on evidence in this way.

1. The Tribunal went on to refer to the sending of letters of demand to the company.  Once again it took the view that the sending of such letters supported the view that the contract was with the company.  Mr Mackinnon submitted that little weight could be given to the letters because they were post-contractual documents.  The difficulty with this submission, I think, is that the only documents which were in existence constituted the cheque which was made out at or about the time of the contact, and the letters of demand sent during the course of performance of the works pursuant to the contract, and both of them may be regarded, at least in part, as supporting the proposition that the contract was with the company.

1. It is difficult to see that the plaintiff can complain of the Tribunal's consideration of these documents when it chose to conduct its property development venture in a vacuum of documentary evidence.  The Tribunal's conclusions are summarised in paragraphs 58 and 59 of its decision:

58.I have come to the conclusion, by reason of the foregoing, that I should find that the contract in this case was made, in law, between the Applicant and SMK Developers Pty Ltd. I have done do despite rejecting most of the evidence of the First Respondent as untruthful and despite forming the same view about most of the evidence of the Second Respondent. I do so, therefore, rather regretfully but not without anxious consideration. This is unusual in that having such misgivings about their evidence would normally suffice for me to be able to reject their evidence altogether. But if I was to do that, the payment of the money to SMK Developers, and the letters of demand addressed to that entity, could not be explained rationally if also I reject the notion that Mr Virduzzo accepted the explanation he says he was given by the First Respondent to pay the moneys to the company for tax purposes. Yet, in my view, if I do reject that notion their only rational explanation is that Mr Virduzzo thought and knew he was contracting with the company.

59.In other words, this is, an instance of actions speaking louder than works- the payment of the money and the sending of the letters of demand. But I consider this is what I must utilise if I am to follow out the well-established rule that consensus is an objective phenomenon and not less than that.

1. In my view its reasons disclose a clear path of reasoning.  That path of reasoning was responsive to the cases put to it. Further that path of reasoning disclosed a sensible basis for the conclusion reached, albeit that another Tribunal of fact may not necessarily have agreed with that conclusion.

1. The second principal criticism made of the reasons is that they do not provide satisfactory findings of fact.  Assuming that s.117(5) does apply, in my view, the reasons clearly do provide satisfactory findings of material fact.  They resolve the issues between the parties.  If any criticism is to be made of them it is that they do not embark on any extensive analysis of the objective theory of contract law.[3]  But that is hardly surprising given the basis on which the parties joined issue.  The parties did not join issue with the respect to the making of a contract or, as I understand it, as to its essential subject matter. They joined issue as to the identity of the parties and it was that issue which was set down as a preliminary or separate question. In respect of that issue the Tribunal made sufficient findings of fact to ground a conclusion in law.

   [3]Cf e.g. Codelfa Constructions Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337.

1. Next, it is said that the findings of fact made are unsupported by evidence.  In my view, this is plainly not so with respect to the findings I have highlighted in paragraphs 53, 55 and 56.  Insofar as the finding in 57 with respect to letters addressed to the company is concerned, as I understand it, Mr Mackinnon draws a distinction between the fact that there is evidence that an envelope or envelopes were addressed to the company but the letters that they contained were addressed to the persons with whom Mr Virduzzo had some dealings, namely, respectively the first respondent and the second respondent and his wife.  I do not think it is seriously arguable that the distinction between addressing an envelope to the company and addressing the first words of the letter within to persons associated with the company can be regarded as material from the point of view of the Tribunal's reasons.

1. Likewise it is submitted to me that there was only evidence that one envelope was addressed to the company.  This submission is unable to be satisfactorily substantiated on the material before me today but even if it were able to be made out, it seems to me that the fact of the sending of a letter to the company is sufficiently corroborative to meet the purposes which the Tribunal ascribed to the sending of the letters in paragraph 57.

1. It follows that for the above reasons I do not accept that there is an arguable error of law in the decision. It is unnecessary for me to decide whether the senior member’s decision resulted in an order within the meaning of s.148, but if I had been persuaded there was an arguable error of law, I would have been disposed to leave that question to the hearing of an appeal. It seems to me that the point is arguable.

1. It was also submitted that the plaintiff's claim in negligence against the defendants remained alive and that this meant there would be no real injustice if leave to appeal were refused.  Once again, if I had been of the view that there was an arguable error of law in the Tribunal's reasons, I would not have accepted this submission.  It seems to me that the reasons foreshadow implicitly, a real possibility that the plaintiff will fail to demonstrate that the first defendant was materially involved in concreting works.

1. It may often be proper to refuse leave to appeal from the Tribunal when the order appealed is not dispositive of the proceeding, because the further resolution of the proceeding may render the appeal superfluous. In the present case however the Tribunal’s order has entirely disposed of the claim in contract and I would have granted leave if its reasons disclosed an arguable error. 

1. Nevertheless, for the reasons I have first explained I would refuse to grant leave to appeal pursuant to s.148.

---