Umt Holdings Pty Ltd v Rankin Saunders Pty Ltd - [2019] SADC 199

District Court of South Australia

(Civil)

UMT HOLDINGS PTY LTD v RANKIN SAUNDERS PTY LTD

[2019] SADC 199

Judgment of His Honour Judge Beazley

20 December 2019

MAGISTRATES

LICENCES - GENERALLY - LICENCE DISTINGUISHED FROM OTHER INTERESTS IN LAND - TERMINATION OF LICENCE - SET OFF - GST - PENALTY INTEREST
The applicant issued proceedings in the Minor Civil jurisdiction of the Magistrates Court claiming the sum of $12,000 for allegedly outstanding 'licence fees', and for unpaid 'sessional fees' pursuant to the terms of a 'service agreement' between the parties and dated 20 January 2017. The respondent asserted that no such agreement was concluded between them, and accordingly denied the applicant's claim - It further counterclaimed the sum of $12,000 against the applicant for damages for the alleged unlawful retention by it of the respondent's plant and equipment and damages for misrepresentation and/or breach of contract, in the event that a valid and binding licence agreement was entered into by the parties - detinue, measure of damages considered - availability of counterclaim for damages as a set off against applicant's liquidated claim - liability for GST.

PROCEDURE - JUDGMENTS AND ORDERS

The Learned Magistrate concluded that judgment be entered for the applicant in the sum of $5,590 after in effect setting off against the applicants proved claim of $10,750 inclusive of interest against the sum of $5,160 assessed by the Learned Magistrate in favour of the respondent on its counterclaim. The Magistrate made no order as to costs having regard to his findings on the respective claim and counterclaim.
Minor Civil Review
Purpose and objectives of s38 of the Magistrates Court Act 1991 considered - the Act evinces a general intention that a Magistrate, sitting as the trial court, should proceed broadly in accordance with an inquisitorial model as opposed to an adversarial model - discussion of the nature of an application for review in the District Court - it is not in the nature of an appeal stricto sensu - it is an enquiry to determine whether a full and fair hearing was conducted by the court below.
Held: Save for one reduction in the assessment of damages on the counterclaim and the consequential need to reduce the counterclaim from $5,160 to $4,680 the decision and orders of the Learned Magistrate were clearly correct and the application by the application for review is otherwise dismissed.
Orders -
1. That the application for review by the applicant is allowed to reduce the respondents counterclaim from $5,160 as assessed by the Learned Magistrate to the sum of $4,680.
2. The applicants is thereby entitled to judgment in the sum of $6,070 in lieu of the sum of $5,590 as assessed by the Learned Magistrate.
3. The decision of the Magistrate is otherwise affirmed. Each party bear its own costs of the application for review.
Magistrates Court Act 1991 (SA) s 38; District Court (Civil) Rules 2006 R6 DCR 279A; Elevate NSW Pty Ltd v Canada Bay Private Hospital [2019] FCA 1248;; Radaich v Smith (1959) 101 CLR 209;; Aitken Agencies v Richardson (1967) NZLR 65;; Lewis v Bell [1985] 1 NSWLR 731;; Henderson v Housing Choices SA Pty Ltd [2019] SASC 121;; Isaac v Hotel de Paris Ltd (1960) 1 WLR 239;; Sazzi (SA) Pty Ltd v Chang [2013] SADC 178;; Vakauta v Kelly (1989) 167 CLR 568;; Edwards v Olsen [2003] SASC 238;; Johnson v Johnson (2000) 201 CLR 488;; Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] 219 CLR 597;; ABC v XIVth Commonwealth Games (1988) 18 NSWLR 540;; Mushroom Composters v IS & DE Robertson Pty Ltd [2015] NSWCA 1;; Olsen v Olsen [2019] NSWCA 278; and; Flowfill Packaging Machines v Fytore Pty Ltd BC 9302155, referred to.
Bunnings Group Ltd v CHEP Australia Ltd [2011] NSWCA 342 at [166]-[186]; Palermo Seafoods Pty Ltd v Lanapas Pty Ltd [2017] NSWSC 1583; Penfolds Wines v Elliott (1946) 74 CLR 204 at [229]; Kuwait Airways Corp v Iraqi Airways Co [2002] UKHL 19; Bunnings Group Ltd v CHEP Australia Ltd (2011) 82 NSWLR 420; Flowfill Packaging Machines v Fytone Pty Ltd (1993) Aust Torts Rep 81-244; Sadcas Pty Ltd v Business & Professional Finance Pty Ltd [2011] NSWCA 267; N Palmer - Palmer on Bailment (3rd ed, 2009); Harradine v District Court of South Australia [2012] SASC 96; ABC v XIVth Commonwealth Games (1998) 18 NSWLR 540; Attorney-General (SA) v Marmanides [2019] SASCFC 3; Hills Industries Ltd v Hiley & Co [2012] SADC 148; Aberdeen Group v Bluestone Property Service [2009] NSWCCA 386; Banks v Ferrari (2000) NSWSC 984 at [60]; Kyriacou v Manakis (2006) NSWSC 804; Duncan v Christensen Commercial Leases in Australia 8th Ed 2017 Ch 3; Aitken Agencies Ltd v Richardson (1967) NZLR 65 at [67]; Inverugie Investments Ltd v Richard Hackett Co (1995) 3 All ER 841; Chambers - Property Law, Cht 7, para 7.50, considered.

UMT HOLDINGS PTY LTD v RANKIN SAUNDERS PTY LTD

[2019] SADC 199

Introduction

This is an application brought by UMT Holdings Pty Ltd (the Applicant) seeking a review of a judgment entered in its favour by a Magistrate in the Minor Civil jurisdiction of the Magistrates Court, pursuant to s 38 of the Magistrates Court Act 1991 (the Act).
The Applicant was the Plaintiff in those proceedings, in which it claimed the sum of $12,000 from Rankine Saunders Pty Ltd (the Respondent). The Applicant asserted that the Respondent had breached the terms of a written agreement dated 20 January 2017, interchangeably referred to as a ‘Service Agreement’, and a ‘Licence Agreement’. It particularised its claim for ‘breach of contract for not paying overdue invoices for the licensing fees amounting to $9,600 plus interest in addition to unpaid sessional fees, and GST’.
The Respondent filed a defence in which it alleged that no valid and enforceable agreement had been entered into by the parties. It also counterclaimed for ‘damages for the unlawful retention of its plant and equipment to the value of $7,000, and in addition, damages for misrepresentation and/or breach of contract in the sum of $8,100’. It limited its counterclaim however to no more than $12,000.
The respective claim and counterclaim were expressly restricted to the sum of $12,000 so that they remained within the Minor Civil jurisdiction of the Court. There was no request sought by either party for the quantum to exceed that sum and still continue as a minor civil action. As things transpired on the Review it became plain that the Applicant was not conscious of this jurisdictional limit, and submitted that it was entitled to a sum in excess of the jurisdiction limit.
On 14 November 2018, the trial commenced in the Minor Civil jurisdiction of the Magistrates Court.
The Learned Magistrate delivered ex tempore reasons for his decision on that day. His Honour determined that the Applicant was entitled to the sum of $10,750 including interest on its claim.
His Honour also found in favour of the Respondent on its counterclaim assessing damages in its favour in the sum of $5,160.
Ultimately, his Honour proceeded to set off the respective sums and entered judgment for the Applicant for the balance in the sum of $5,590.
His Honour made no order as to costs having regard to his findings on the quantum of the respective claim and counterclaim.
On 3 December 2018, following the request of the Applicant, the Learned Magistrate provided written reasons for the judgment which he had entered.
On 5 December 2018, the Applicant filed the subject Application for Review of that decision.
On the Application for Review the Court is obliged to act according to equity, good conscience and the substantial merits of the case without regard to technicalities and legal forms.
A decision of this Court on a Review is final and not subject to appeal, pursuant to s 38(9) of the Act. The clear policy of the Act is to provide an efficient and economical means by which small claims can be finally determined.
The respective claims in the minor civil action, and indeed upon review raise some complex questions of law, including the legal nature of the arrangement between the Applicant and the Respondent, and whether it constituted a contractual licence; whether the parties were ad idem as to its terms; whether the Applicant held onto the Respondent’s chattels as security for outstanding licence fees, and if so whether it became a bailee for reward; whether a counterclaim based upon conversion or detinue by the Respondent can be offset against the Applicant’s claim.
Among the initial issues is whether there was a wrongful detention by the Applicant of the Respondent licensee’s chattels upon the termination of the ‘licence’ and the method of assessment of damages consequent upon such a finding; and the entitlement of the application to recover GST, and interest on outstanding sums from the Respondent.
The relationship of licensor and licensee has been described in the various authorities as ‘vexed’ and ‘obscure’, particularly where the terms of the licence are not clearly defined.
It was unsurprising that the parties had some difficulties in understanding the relevance of those issues.
At the completion of the hearing of the respective submissions on the Review, I indicated my views as to the merits of the Review. I encouraged both parties to resolve their differences. I also informed them that I would provide detailed reasons in due course which would explain the relevant legal principles. I have not heard back from either party as to whether they had proceeded to resolve their disputes. In any event, I now provide the reasons to them. As is plain the respective roles of the Learned Magistrate and of this Court on Review are different, as I will now explain.

The nature of a minor civil action

Section 38 of the Act, details the provisions which are applicable to the trial, of a minor civil action, as follows:
(1)         (a)      The trial will take the form of an inquiry by the Court into the matters in        dispute between the parties rather than an adversarial contest between the         parties;
(b)   the Court will itself elicit by inquiry from the parties and the witnesses, and by examination of evidentiary material produced to the Court, the issues in dispute and the facts necessary to decide those issues;
(c)        the Court may itself call and examine witnesses;
(d)        the parties are not bound by written pleadings;
(e)         the Court is not bound by the rules of evidence;
(f)    the Court must act according to equity, good conscience and the substantial merits of the case without regard to technicalities and legal forms.
(2) At or before the trial of a minor civil action, the Court should explore any possible avenues of achieving a negotiated settlement of the matters in dispute.
(3)         After giving judgment in a minor civil action, the Court—
(a)    should advise the unsuccessful party of his or her right to apply for review of the proceedings by the District Court; and
(b)    should give the successful party any advice or assistance as to the enforcement of the judgment that the Court considers appropriate in the circumstances; and
(c)    if there is a judgment debtor who is present, should proceed immediately to investigate his or her means of satisfying the judgment and to take any further action that appears appropriate in view of the results of that investigation.
(4)        The following provisions govern representation in minor civil actions:
(a)    representation of a party by a legal practitioner will not be permitted unless—
(i) another party to the action is a legal practitioner; or
(ii) all parties to the action agree; or
(iii)     the Court is of the opinion that the party would be unfairly disadvantaged if not represented by a legal practitioner;
(ab) however, the Court may, in its discretion, permit representation of a party by a legal practitioner at the hearing of an interlocutory application;
(b)    if a party to the action is a body corporate, the Court must, if the party seeks to be represented by an officer or employee who is not a legal practitioner, permit such representation;
(c)    if a person is subrogated to the rights of a party, the Court will permit that person to appear in the proceedings on behalf of that party and to be represented in the same way as if that person were a party;
(d)    the Court will permit a party, or a person subrogated to the rights of a party, to be assisted by a person who is not a legal practitioner but only if that person is not acting for fee or reward.
(5) In a minor civil action costs for getting up the case for trial, or by way of counsel fees, will not be awarded unless all parties were represented by counsel, or the Court is of opinion that there are special circumstances justifying the award of such costs.
•        The conduct of the trial
The Learned Magistrate explained the nature of the proceedings to the parties. His Honour directed that the principal witnesses for each party would be sworn and would give evidence together. Each of the relevant directors, namely Dr Yap for the Applicant and Ms Rankin for the Respondent gave evidence in that manner.
Brief evidence was also obtained from the Applicant’s secretary Ms Loo.
In addition, they tendered various emails; a draft agreement dated 2 January 2017; and the executed ‘Service Agreement’ dated 20 January 2017. While the documents themselves are not in dispute the parties differed as to the inferences which may be drawn from them.
The respective directors of each of the parties are highly qualified professional people involved in the provision of medical and health services.
The Applicant’s director, Dr Yap, practises in the areas of ‘women’s health, pregnancy and fertility’. At all relevant times, he conducted that practice from a major hospital but retained premises in Glandore (the Premises). He had previously given consideration to the question of whether physiotherapy services might be provided at the premises to assist pregnant patients.
The directors of the Respondent, Ms Rankin and Ms Turner, are both physiotherapists, and conducted their practice at premises in North Adelaide.
In late 2016, Ms Rankin and Dr Yap discussed the question as to whether the Applicant could provide a room, administration and business support at times and for a fee to be discussed, at its Glandore practice at which the Respondent wished to provide physiotherapy services. Ms Rankin deposed that she was interested in the referral by Dr Yap of his patients as she had an interest in physiotherapy services for pregnant women.
Following that meeting, Dr Yap prepared a draft ‘Agreement’ dated 2 January 2017. It did not correctly identify the Respondent as a party. It referred to a term of 3 months to commence on 1 February 2017, and did not provide for early termination of the Agreement, by either party.
It was, with respect, a vague document described as ‘a Service Agreement’ with many essential terms left unresolved. A further meeting occurred on 10 January 2017 attended by both Ms Rankin and Ms Turner. By email of that date, Dr Yap forwarded a ‘draft Service Agreement’. It correctly identified the parties to the ‘Agreement’; provided for a right to terminate without cause, which was vested exclusively in the Applicant; variations to the ‘sessional fee’; identified a particular consulting room, and other matters which required agreement including the Respondent being notified of in-patient admissions for physiotherapy.
The correspondence which followed included an email from Dr Yap dated 19 January 2017. It detailed various other ‘variations’ which specifically contrasted the proposed arrangement from that of ‘a standard commercial lease without a fit out/outgoings and rental fixed as a licensing fee plus sessional fee’. The text was completed with the following:
The collaboration will bring you access to a fully fitted and well managed premise with access to all common areas (space provided at no extra cost) and twice the projected annual profits compared to what I would gain, while I manage the premise and the responsibility almost entirely. Whatever annual profit I gain would literally be covering the common areas and cost of running the entire premise. I think this is a really good bargain for you.
On 21 January 2017, Ms Rankin, Ms Turner, Dr Yap and the Applicant company’s secretary, Ms Loo, signed a ‘Service Agreement’ dated 20 January 2017. I will refer to that document as ‘the Contract’.

The Contract

The Contract which was prepared by Dr Yap, described the relationship between the Applicant and the Respondent as being one of ‘agent’ and ‘specialist’, respectively.
It relevantly specified:
That the Respondent ‘was to engage the applicant (as agent) to provide reception, administrative/business support and a room to the respondent’s practice’.
That the term of the Agreement was 12 months commencing on 1 February 2017, and detailed time periods for the Respondent’s physiotherapy session at the premises, and the provision of business support by the Applicant.
The service fees, under clause 5, were ‘subject to change at the applicant’s discretion within 14 days’ notice’ (my emphasis). It provided for an annual licensing fee of $600 payable fortnightly in advance.
One of the fees, said to be a ‘sessional fee’ in subclause 5.3 ‘amounted to 20% of the respondent’s consult billings, payable every fortnight’. It also provided that if an amount had not been paid to the Applicant within 7 days of the due date, the Applicant may require the Respondent to pay interest on that amount at the ‘highest rate’ charged by the Applicant’s bank on overdraft facilities of less than $100,000.
A ‘tax invoice’ under clause 5.5 would be provided by the Applicant to the Respondent and must be paid within 7 days GST,’ if applicable’ must be paid in addition to the fee charges’. (my emphasis)
The Applicant reserved to itself the right to terminate the Agreement without cause on 4 week’s notice at which time the Respondent was obliged to remove, inter alia, its ‘chattels’ under clause 17.
The circumstances of the execution of the Contract were the subject of much dispute before the Magistrate. Ms Rankin deposed that Dr Yap had insisted that the document be signed forthwith, on 21 January 2017, because of the need to place the requisite profiles and services on his website; to prepare brochures and business cards; and to undertake work on the front entrance window for signage. She deposed that Dr Yap had told her that the terms of the Agreement could be changed thereafter.
In an email dated only one day later on, 22 January 2017, Ms Rankin, inter alia, detailed a starting date of 13 February 2017, suggested a process where by Dr Yap’s patients could be included in the Respondent’s computer system; and raised a number of other matters.
Further discussions took place. Indeed, by 3 February 2017, Dr Yap had reflected upon the number of requests made by Ms Rankin and whether they could be accommodated. In his email of that date, he explained ‘Changing contract can be disruptive/stressful … while I work on amending the contract to keep you happy you should honour the current contract …. ‘Let’s look on the positives that we have so much to offer and let’s not bogged down by this issue’.
In fact, no changes were ultimately agreed by Dr Yap, save by inference, for the 13 February 2017 starting date. On 10 February 2017, he asserted that the Agreement was binding, and that it was unfair to demand changes. He suggested a meeting to ‘discuss an amicable solution as he ‘preferred to give diplomacy a go’.
Ms Rankin deposed that no formal agreement on essential terms had been reached on 20 January 2017 nor indeed thereafter.

The discussions between Ms Rankin and Dr Yap continued until late February 2017. Ms Rankin had wished to reduce the session times to once per week. It is plain that within a short time the relationship between the parties had broken down irretrievably. The Respondent eventually left the subject premises on 19 July 2017, at which time, Ms Rankin asserted that the Respondent had entered into ‘the Contract’ on the basis that Dr Yap would refer his pregnant patients to the Respondent, for physiotherapy services, and that he had failed to do so. When the Respondent effectively left the premises, it left its plant and equipment there.
Discussions continued by letters, emails and by telephone.
In his letter of 22 September 2017, Dr Yap complained that the Respondent was ‘fabricating the events leading up to the signing of the service agreement’. He asserted that there was no condition or agreement that he must refer patients to them and that any such suggestion would be ‘unprofessional’.
He did expressly state that ‘since 4 February 2017, you repetitively demanded for more amendment of the contract but we did not reach any consensus’.
On 18 January 2018, Ms Turner attempted to recover the Respondent’s plant and equipment from the premises. This included its new professional electric bed and pictures.
On that date, Dr Yap emailed the Respondent’s directors stating, inter alia, ‘stuffs … are currently being withheld because (you) have failed to pay overdue licensing fee and the belongings within the premises will be withheld pending Magistrate ruling on the debt recovery’. He asserted that the failure to pay ‘would be considered a breach of contract’.
Between 25 January 2018 and 13 February 2018 there were various discussions and correspondence between Dr Yap and Ms Rankin with respect to the possible transfer of ownership of the treatment bed then being held by Dr Yap.
Ms Rankin explained her proposal in the email dated 1 February 2018 as ‘leaving the bed at the premises to reduce their costs, that is, the amount asserted to be owed by the respondent’. She deposed that the proposal was rejected. Dr Yap denied that he had rejected the proposal.
Ms Rankin deposed that the bed was a brand new electric bed. She said that because the Applicant had refused to allow them to recover the bed, they were commercially renting a bed at a cost of $145 per week. She deposed that when attempts had been made to recover the bed, Dr Yap refused to let them do so.
Dr Yap, when giving evidence, explained that his refusal to enable them to collect the bed was because he had not received ‘notice’. He denied holding the equipment as security for outstanding licence fees, despite the terms of his email.
He said that he simply wanted Ms Rankin to identify what items the Respondent wished to recover, and proof of ownership. He denied making use of the Respondent’s bed during the period it remained on his premises. He said that he did not want to keep any of those items, and would have given them back to the Respondent, ‘if identified’, because he did not want to use them.
Dr Yap provided a calculation on what he alleged was owed by the Respondent. Further, he alleged that he was entitled to an interest rate of 19 or 20 percent based upon his ‘overdraw commercial rate’ at the Commonwealth Bank of Australia.
The principal contention of the Respondent was that Dr Yap had misrepresented to Ms Rankin that the 20 January 2017 Agreement could be changed.

The Learned Magistrate’s reasons for decision

The Learned Magistrate delivered an ex tempore ruling on 14 November 2018, followed by written reasons for decision on 3 December 2018.
He referred to the Respondent’s evidence that the ‘Contract’ would not have been signed if its directors had not been led to believe that the Agreement could be changed after signing it on 20 January 2017.
The Magistrate had rejected the Respondent’s assertion that Dr Yap had falsely stated that the Agreement could be changed. He found that it was ‘unsustainable’, since Dr Yap ‘could only [have meant] that the Agreement could be changed if both parties agreed’. Ms Rankin’s insistence that the Agreement was not final was ‘misconceived’.
His Honour indicated that while he initially had reservations about Ms Rankin’s evidence, it became clear she genuinely believed that Dr Yap did tell her that the Agreement could be changed.
The Magistrate also referred to the demeanour of Dr Yap as a witness. Initially, Dr Yap was considered a ‘good and reasonably accurate witness’. It was noted that ‘Dr Yap had made sensible observations and provided logical explanations as to why his statements during negotiation were not as extensive as contended for by Ms Rankin’. However, his Honour found that Dr Yap’s evidence later became ‘extravagant’. The Magistrate pointed to inconsistencies in what Dr Yap said about whether the Respondent could collect the goods. His Honour also regarded adversely the claim by Dr Yap that his overdraft interest rate was 20%, without any attempt to establish the fact by a document.
His Honour also noted that ‘the Agreement’ greatly benefited Dr Yap, and repeated that Dr Yap had the ‘right to terminate the agreement without cause upon giving four weeks’ notice’, and by contrast, the Respondent had no right of termination.
The Magistrate described the $600 fortnightly licence fee, paid in advance, and the sessional fee of 20% of the Respondent’s income as ‘high’. Ms Rankin’s evidence was that she immediately sought for it to be reduced to $300 and anticipated further discussing the financial terms, as she did by email on 22 January 2017. She said that she trusted Dr Yap when he told her that the Agreement could be changed.
His Honour then commented that while he ‘very strongly suspect[ed] that [Dr Yap] exploited the trust of two young and inexperienced business women’, there was no basis for finding that he said anything other than the Contract would be varied so long as both parties agreed.
The Magistrate found that while Dr Yap provided Ms Rankin with hypothetical net returns, this could not have been taken as him suggesting that the hypotheticals were going to be achieved by the Respondent ‘in fact’.
His Honour concluded that the Applicant’s claim ‘must succeed’, but that it was subject to the Respondent’s counterclaim.
The Applicant had claimed $9,600 for the unpaid licence fees. In his reasons, the Magistrate referred to an amount of $9,900. Whether the latter figure was a typographical error, or alternatively represented some allowance for the fact the Respondent had not commenced its occupation until 12 days after the contract date, no longer matters because the Respondent did not cross appeal. The Magistrate had entered judgment for the Applicant in the sum of $10,750.
His Honour then turned to the Respondent’s counterclaim for the return of its equipment including ‘its expensive electric bed’. His Honour plainly did not accept the evidence of Dr Yap that he did not keep those items as security for the licence fees. He held that Dr Yap had ‘no right to distrain for rent’, nor did he have ‘a lien over the goods’, resulting in wrongful detention of the goods. Dr Yap’s conduct was described as ‘cavalier, high handed and … a little vindictive’.
He concluded, in the absence of evidence from Dr Yap, that the interest rate should not exceed 8% per annum. His Honour allowed this rate and entered judgment for the Applicant in the sum of $10,750 on its claim.
His Honour contrasted the position of the parties to a licence agreement, with that of the parties to a landlord/tenant agreement. He noted that Dr Yap had become ‘argumentative and pedantic in the extreme’. His Honour said that he found Dr Yap to be ‘too willing to make extravagant claims in his own interest’.
The Magistrate proceeded to assess damages on the counterclaim, on the basis equivalent to the cost of a replacement bed. His Honour did not accept Ms Rankin’s evidence to the effect that the cost of hire of a replacement electric bed was $145 per week. Instead, the Magistrate fixed the cost at $120 and assessed the Respondent’s entitlement for 43 weeks. His Honour accordingly assessed damages in the sum of $5,160, and gave judgment to the Respondent on the counterclaim in that sum.
The Magistrate set off the two sums, thereby entering judgment for the Applicant for the balance in the sum of $5,590.
He ordered the Respondent to pay the sum of $5,590 to the Applicant within 14 days and set out the arrangements to enable the Respondent to collect is chattels by 8 December 2018.

The application for a Review

In its application, the Applicant detailed a large number of asserted grounds of appeal. There were in fact many paragraphs of assertions including that ‘the Applicant strongly felt that there were double standards employed against them’.
The document seemed to have identified some 5 grounds of Review as follows:
1.     That the applicant was denied procedural fairness by the learned Magistrate receiving certain documents from the respondent, not receiving certain documents from the applicant, and not allowing Dr Yap to refer to his notes during the hearing.
2.     That the applicant was entitled to $10,200 in outstanding annual licensing fees, rather than $9,900 as fixed by the Magistrate.
3.     That the learned Magistrate erred in allowing only $300 as the sessional fee in the applicant’s claim.
4.     That the learned Magistrate erred in adopting 8% as the interest rate.
5.     That the learned Magistrate erred in finding that the applicant wrongfully detained the respondent’s goods.

The Review

When the parties attended upon the Review, the grounds of Review had been refined. Dr Yap asserted that for the purpose of the above item 5, he submitted that he was not a bailee of the Respondent’s chattels. He further submitted that the Court ought to have concluded that he did not hold the items as security for outstanding licence fees; and that he simply held them pending the proof of ‘ownership’ by the Respondent. This raised the question of jus tertii.
He then raised for the first time that the quantum of the counterclaim ought to be reduced by the period of time during which the Respondent had offered to leave the bed at the premises to reduce costs.
The Applicant had initially sought the following orders:
a)    An immediate stay of the order by Magistrate Milazzo given on 3 December 2018 pending a review by the District Court.
b)    The Respondents to provide specifications of the property/belongings they are claiming, proof of ownership and evidence to substantiate the claimed belongings were in the Applicant’s premises.
c)    The Respondents are not permitted to enter the premises to search at will before clarifying which items have been agreed by both parties to be of the respondents’ belongings.
d)    No disputed item shall be permitted to leave the premises until confirmed by the court as to the right ownership of the items/property claimed.
e)    The agreed items which the respondents claimed ownership shall be placed in a mutually secured area within the premises so that there is no need for the respondents to search the entire premises thereby breaching the privacy and security of the premises.
f)     The respondents are indebted to the applicant in the sum of $13,435.85 for:
o Outstanding payment of annual licencing fee of $10200 (+GST of $ 1,020)
o Sessional fee of $796 (+GST 79.60) which is the 20% of the billings of $3980
o Overdue payment interest (at 8.71%): $1044
o Court fees of $296.25 (a sum of $143 + $153.25)
g)    The respondents claimed that the appellants wrongfully retained the respondents’ belongings be reviewed in reference to the evidence presented and be dismissed accordingly as a gross misrepresentation.
h)    The order the appellants to compensate the respondents for the loss of use of the bed amounting to $ 120 per week for 43 weeks be reviewed in reference to the evidence presented and be dismissed accordingly as a gross injustice.
Ultimately, the Applicant restricted the proposed orders specifically to those detailed in items (f), (g) and (h) above, because by the time of the Review the Respondent had retrieved its chattels.

The nature of a review

Section 38(7) of the Act relevantly provides that in respect of a minor civil review by this Court:
…
(b)          the Court may inform itself as it thinks fit and, in doing so, is not bound by the rules of evidence;
(c)         the Court may, if it thinks fit, re-hear evidence taken before the Magistrates Court;
(d)        in determining the matter, the Court may—
(i)         affirm the judgment; or
(ii) rescind the judgment and substitute a judgment that the Court considers appropriate; or
(iii) if the review arises from a default judgment or summary judgment, rescind the judgment and—
(A)         substitute a judgment that the Court considers appropriate; or
(B)         remit the matter to the Magistrates Court for hearing or further hearing;
(e) in hearing and determining the review, the Court must act according to equity, good conscience and the substantial merits of the case without regard to technicalities and legal forms.
The nature of a review was considered by Blue J in Harradine v District Court of South Australia, in which his Honour said, at [53]:
1. The review is not in the nature of an appeal stricto sensu.
2. The review is not necessarily a hearing de novo in that the Court is entitled to have regard to the evidence adduced before a magistrate and “may” rehear that evidence.
3. The review is not necessarily an appeal by way of rehearing in that it is a “review” (not an “appeal”), the Court may inform itself as it thinks fit, the Court must act according to the substantial merits of the case and the Court may rehear evidence without being confined by the “fresh evidence” rules which apply to appeals by way of rehearing.
4. The Court can tailor the nature of the hearing to the circumstances. In a case where the review will not turn on findings of fact or credibility of witnesses, the Court might simply have regard to the evidence adduced before a magistrate and a magistrate’s findings of fact. In a case which does turn on disputed issues of fact or credibility, the Court might simply proceed to hear the evidence afresh.
5. If the District Court concludes that a magistrate made an error vitiating the judgment and had not made findings of fact necessary to determine the matter, it will be necessary for the Court itself to hear the evidence relevant to those findings of fact (as it does not have power to remit the matter for rehearing).
6. To the extent that the Court does itself hear evidence, it should proceed in a similar manner to that provided by section 38(1), namely adopting the form of an inquiry by the Court rather than an adversarial contest between the parties. This is because section 38(7) provides that the Court may inform itself as it thinks fit and also because it would be incongruous if the District Court were to adopt a radically different approach to the hearing to that required to be adopted by a magistrate at first instance given that there is no power of remitter.

Discussion

Before turning to the substantive issues ultimately raised by Dr Yap, I should deal briefly with three other issues raised by the parties in their respective submissions.
• Did the parties evince a common intention to be immediately bound by the terms of ‘the Service Agreement’ dated 20 January 2017 as asserted by Dr Yap, and as found by the Learned Magistrate?
The Respondent, through Ms Rankin, asserted that there was no formal agreement reached between the parties. She referred to the various texts between them which referred to ongoing changes to its terms. In particular, she referred to the text from Dr Yap dated 3 February 2017, to which I have already referred, that ‘changing contract can be disruptive/stressful … while I work on amending the contract you should honour the current contract’.
I have no doubt that Ms Rankin genuinely held the belief that the terms had never been agreed. It is entirely consistent with her email of 22 January 2017, sent less than 24 hours after the Agreement was signed.
However, the High Court has repeatedly stressed that in considering the question as to whether the parties have concluded an agreement, it is the principle of objectivity which must be applied, and not the subjective belief of a party.
In Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd, the High Court explained:
This Court, in Pacific Carriers Ltd v BNP Paribas, has recently reaffirmed the principle of objectivity by which the rights and liabilities of the parties to a contract are determined. It is not the subjective beliefs or understandings of the parties about their rights and liabilities that govern their contractual relations. What matters is what each party by words and conduct would have led a reasonable person in the position of the other party to believe. References to the common intention of the parties to a contract are to be understood as referring to what a reasonable person would understand by the language in which the parties have expressed their agreement. The meaning of the terms of a contractual document is to be determined by what a reasonable person would have understood them to mean. That, normally, requires consideration not only of the text, but also of the surrounding circumstances known to the parties, and the purpose and object of the transaction.
In Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd, Gleeson CJ said:
… In a case where a court is required to make a judgment concerning the intention of the parties in relation to what might broadly be described as a Masters v Cameron (1954) 91 CLR 353) dispute, it will normally be of importance that the court have an understanding of the commercial context in which the dispute arises, and a most significant feature of that context will relate to the subject which the parties regard, or would ordinarily be expected to regard, as matters to be covered by their contract. In some cases, such as transactions involving the sale and purchase of land, or leases, courts may properly feel well equipped to form a view on such matters without the need for much evidence. In many cases, however, of which the present is a good example, there is a need for evidence in one form or another as to what subjects would be regarded as requiring agreement between the parties. In this case the best evidence on that subject is to be found in the actual communications between the parties and, in particular, in the issues which they in fact addressed when they set about drafting their detailed contract.
It is to be noted that the question in a case such as the present is expressed in terms of the intention of the parties to make a concluded bargain: see, eg, Masters v Cameron (at 360). That is not the same as, although in a given case it may be closely related to, the question whether the parties have reached agreement upon such terms as are, in the circumstances, legally necessary to constitute a contract. To say that parties to negotiations have agreed upon sufficient matters to produce the consequence that, perhaps by reference to implied terms or by resort to considerations of reasonableness, a court will treat their consensus as sufficiently comprehensive to be legally binding, is not the same thing as to say that a court will decide that they intended to make a concluded bargain. Nevertheless, in the ordinary case, as a matter of fact and common-sense, other things being equal, the more numerous and significant the areas in respect of which the parties have failed to reach agreement, the slower a court will be to conclude that they had the requisite contractual intention.
Reference has earlier been made to “intention”. Cases which typically give rise to problems of the kind presently under consideration are cases in which there is no doubt that the parties had a common intention that at some stage, and by some means, they would enter into contractual relations. They have entered into negotiations for that specific purpose. The problem which arises is that they have exchanged communications which, on the one hand, use the language of agreement but, on the other hand, disclose an expectation that at some future time a document embodying the terms of their contractual arrangement will be brought into existence. Where, as in the present case, the communications which the parties have exchanged are in writing, the question of their "intention" is, prima facie, to be resolved objectively, and as a matter of construction of the relevant documents. Thus, in Sinclair Scott Co Ltd v Naughton (at 317), dealing with precisely such a problem as arises in the present case, the majority in the High Court said:
… We think, as a matter of construction, that the execution of the further contract was a condition or term of the bargain and not a mere expression of the desire of the parties as to the manner in which a transaction already agreed to will in fact go through … The case is not one in which the parties were content to be bound immediately and exclusively by the terms which they had agreed upon whilst expecting to make a further contract in substitution for the first contract, containing, by consent, additional terms.

In my opinion, the decision of the Learned Magistrate that the parties had reached a concluded agreement was, with respect, plainly correct.

Procedural unfairness

In my view, there is no basis in the Applicant’s complaints as to procedural fairness.
In relation to Dr Yap’s use of his notes before the Magistrate, his Honour correctly informed Dr Yap that the proper way of providing evidence to the court is without reference to notes. The Applicant acknowledged this but shortly after referred to his notes again, some of which were generated during ‘the last few months or so’ and some ‘just three or four days’ prior to the hearing on 13 November 2018.
The events beginning from the formation of the Contract and until the Applicant commenced its action in the Magistrates Court took place from January 2017 to March 2018. His Honour noted that these were not notes made contemporaneously nor while the events were fresh in Dr Yap’s mind.
Isherwood v Tasmania (2010) 20 Tas R 375 concerned an appeal of a criminal trial and the Court of Criminal Appeal (Tas) considered s 32 of the Evidence Act 1929. The Court of Criminal Appeal obviously in a much different context held that, at [81]-[82]:
The principal object of s 32 is the giving of leave to a witness to refresh memory from notes made when the events recorded were fresh in the witness’ memory, but that is not its only object and its provisions are sufficiently broad to apply to the situation that arose in this case. Almost invariably, unrepresented litigants are at a disadvantage when giving evidence because they do not have counsel to lead the evidence from them by appropriately worded questions. The risk of an unrepresented litigant forgetting to give evidence of a material fact will be a real one in many cases if he or she does not have recourse to notes. While a trial judge will have an understandable concern to ensure that a witness does not simply read his or her evidence from a prepared document, care should be taken before refusing an unrepresented litigant leave to refer to any notes at all when giving evidence. There could hardly be harm to the interests of justice if the notes contain only subject headings or questions that are not in a leading form, the purpose of which is to refresh the mind of the witness of the matters about which he or she should give evidence.
The learned judge erred by ruling against the use of the notes without exercising the discretion whether to give leave to the appellant to refer to them and without calling for submissions why leave should or should not be given. In support of any application for leave the appellant may have wished to make when informed of his right to make one, the documents could have been produced to the learned judge for inspection. It may have appeared that there was nothing in them that should have prevented leave being given. However, although the PowerPoint presentation is before this Court, the other notes the appellant had in front of him are not and we are unable to determine whether leave to refer to some or all of the notes should have been given.
Although the Magistrate did not inspect Dr Yap’s hardcopy and electronic notes, his Honour properly disallowed Dr Yap referring to these notes. His Honour had ascertained that the dates which Dr Yap elicited from his notes were equally available from source documents, such as emails, showing the relevant dates.
His Honour explained that ‘[if Dr Yap] referred to documents to put these [his notes] together it’s the documents that’s the source material’ and the source documents were what Dr Yap should have provided to the Court.
His Honour explained to Dr Yap that he could not ‘make a secret note then not give [the respondent] a copy of the note, but then say, ‘this is what it is, because the respondents needed a chance to respond’. In any event, in my opinion, this did not adversely impact upon the Applicant’s presentation of his case. Dr Yap had filed an affidavit on the Review. In that affidavit affirmed on 4 December 2018, he provided a number of documents not presented before the Magistrate. These included his calculations as to the total debt.
• Alleged bias
It has become common for parties to a minor civil action to claim that Magistrates had exhibited bias in favour of the other party. The case law on this topic is well settled.
In respect of alleged apprehended bias, the test is ‘whether a fair-minded lay observer, fully informed of all relevant facts might conclude that the judicial officer was unable to bring an impartial and unbiased mind to bear on the questions to be decided’.
I have considered the transcript in detail. There is and was no basis for the assertion made by the Applicant that the Learned Magistrate was biased against it nor is there any reasonable apprehension of bias on a fair reading of the transcript and the ex tempore reasons delivered by his Honour.
Indeed, the judgment reflects a ‘genuine and realistic consideration of the merits of the claim and the counterclaim involving difficult matters of law’. His Honour, as I have noted, found in the Applicant’s favour entirely in respect of its claim. He concluded that it was a binding agreement. He held that Dr Yap did not falsely assert that the Agreement could be changed without both parties’ agreement. I repeat there was no basis for this assertion by the Applicant.

The principal issues

I turn to the specific issues raised by the parties, which mainly relate to the counterclaim.
• Jus tertii
In some rare cases where a party is not in actual or constructive possession of chattels it may be possible for a defence to be raised of jus tertii, that is putting to the Court the fact that a right of possession exists in a third party.
In the subject case, there could have been no doubt that the Respondent was lawfully in possession of its equipment and chattels. It did not matter who ‘owned them’.
It is well established that a person who is in possession of goods, even if the possession was unlawful, has rights at law against anyone except the rightful owner. In the subject case, the Respondent had such rights to the chattels against the Applicant. Even if the Applicant could have shown, that the goods belonged to someone else, and it could not, the Applicant could not plead that defence of jus tertii to the claim by the Respondent. It had no right to retain the goods. It had no right to demand proof of ownership before releasing the items, and in particular the bed.
• Wrongful detention of goods
The Respondent’s counterclaim is based upon the Applicant’s wrongful detention of its electric bed.
An action in detinue arises from the wrongful deprivation or detention of property after a request has been made for its return in circumstances where the party demanding the return has a right to possession.
The focus of the law in a claim for detinue is in possession and not ownership. The Respondent need not prove ownership for such an action. As I have just explained, Dr Yap had erred in asserting that the Respondent had to prove ‘ownership’ of the chattels.
The elements of an action in detinue were described by Dowd J in Banks v Ferrari at [60]:
To establish an action in detinue, the plaintiff must prove that the following three elements exist. Firstly, the plaintiff must specifically make a demand for the return of the goods on the person who has legal possession of them. The plaintiff’s immediate right to possession must simultaneously subsist at the time the demand is made Timewell v Virgoe (1868) 5 WW& A’B L 147 at 151, per Stawell CJ. Secondly, the plaintiff's demand must have been refused by the alleged tortfeasor Nelson and Another v Nelson [1923] St R Qd 37 at 40, per McCawley CJ. And thirdly, where the goods are in the actual possession of the alleged tortfeasor, the refusal to return the goods to the plaintiff must be unreasonable EE McCurdy Ltd (in liq) v Postmaster-General [1959] NZLR 553 at 556-557, per McGregor J (hereinafter ‘McCurdy’). In the event that the goods are not in the actual possession of the tortfeasor, the tortfeasor must have wrongfully parted with possession McCurdy, note 8 at 556-557, per McGregor J. (my emphasis)
The Respondent demanded the return of the items located at the premises, and Ms Turner attended the premises attempting to retrieve the Respondent’s belongings.
The findings of the Learned Magistrate that Dr Yap had deliberately withheld them from the respondent were inevitable. Indeed, it was open to His Honour to find that he had held them as security for the asserted overdue licence fees. Notably, Dr Yap, in an email sent on 18 January 2018, said that the items ‘[were] currently being withheld’ due to the Respondent’s failure to pay. The Applicant continued to refuse to release them. This constitutes a wrongful refusal of the Respondent’s demand for return.
The intent required to be established does not need to include the specific intent to deprive the Respondent of its rights in respect of the chattels.
Indeed, the Court may have dealt with the Respondent’s counterclaim by way of an action in conversion. The overlap between conversion and detinue has been described as ‘subtle’. An unqualified refusal to comply with the demand for delivery up of a chattel made by, as in this case, the Respondent which was entitled to possession may amount to either conversion or detinue. I do not need to further discuss this issue. See Bunnings Group Ltd v Chep Australia Pty Ltd. I do not need to discuss the difficult issue of knowledge by an ‘agent’ as discussed in that case.
For these reasons and contrary to the Applicant’s submission, the Magistrate correctly determined that the Applicant’s refusal to allow the Respondent to collect its goods ‘constituted a wrongful detention of the goods’.
The assessment of damages on the counterclaim
In Bunnings Group v CHEP Australia Ltd at [175] the Court of Appeal (NSW) held that ‘it is entirely logical and in accordance with justice and common sense that a wrongdoer should pay a price ‘for keeping the goods of another as a matter of compensation for the denial of its rights’.
Implicit in the Applicant’s submission of ‘gross injustice’ is that the Respondent had suffered no loss, and accordingly no damages ought to have been awarded to it on the counterclaim.
The Learned Magistrate, correctly with respect, rejected that submission. The normal measure of damages for detinue in similar cases was held in Aitken Agencies Ltd v Richardson^., to be the cost of hiring a replacement until the chattel was returned. This is also the approach adopted by the Court in Flowfill Packaging Machines Pty Ltd v Fytore Pty Ltd. It was held that on some occasions, time should be allowed to enable the holder to check the bona fides of the claimant. However, it relevantly held that does not apply where, as here, there is no doubt as to the Respondent’s right to possession.
There is however one issue which was not brought to the Learned Magistrate’s attention. Indeed, it was only mentioned on the Review by Dr Yap. Between 1 February 2018 and 1 March 2018, the Respondent had offered to sell the bed to Dr Yap. This was a 4-week period when the request for the return of chattel was suspended.
This period was conceded on the Review. I find that the Applicant was not wrongfully detaining the Respondent’s goods during this four-week period to 1 March 2018. Accordingly, I reduce the period of wrongful detention to 39 weeks and assess the damages in the counterclaim as $4,680, in lieu of the sum of $5,160.
The ‘claim’ by the Applicant for the sum of $13,435.85
This is the subject of item ‘f’ in the orders sought by the Applicant. Dr Yap referred to his affidavit affirmed on 4 December 2018. He claimed that the annual licensing fee ought to have been $10,200 plus GST. He purported to claim an additional $600 on the basis that he had overlooked the delay of two weeks in the Respondent commencing occupation. He submitted that there ought to have been a finding that the Contract was implicitly extended for 2 weeks. There is no basis for that submission.
The Applicant had claimed $9,600 for the outstanding licensing fees. The Service Agreement had specified in clause 5.2 ‘An annual licensing fee of $600 per fortnight to be paid in advance’. The wording of that sub-clause was unfortunate; however, the Respondent accepts that it was intended to be a fee of $600 per fortnight and not an annual fee of $600.
Accordingly, he submitted, it was necessary to add the sum of $600 to the initial claim of $9,600 to cover the length of the 12-month agreement.
This issue was not raised before the Learned Magistrate. I do not accept the submission by Dr Yap. The Agreement was not altered. Inevitably at the end of the executed Agreement, the Applicant may well have acted on the basis that the Agreement provided for termination on the date specified in clause 1, namely ‘12 months commencing on 1 February 2017’. There was no ‘error’ by the Learned Magistrate. The Applicant limited its claim to the sum of $9,600. Indeed, the only possible ‘error’ was that His Honour awarded the sum of $9,900 rather than $9,600.
The Applicant also claimed GST on the licensing fee and on the ‘sessional fee’. He had not claimed it before the Magistrate. He also claimed interest at 8.7%, as opposed to 8% as found by the Magistrate. I do not need to discuss the difficulties confronting those claims. They were also unsuccessfully claimed in the case of Clambake, supra.
• Sessional fee
Clause 5.3 of the Contract provided for a sessional fee of ‘20% of the Specialist’s consult billings, payable every fortnight’. The Magistrate calculated the sessional fee as 20% of $1,500, amounting to $300.
The $1,500 was taken from a bank statement which the Respondent had produced at the trial. Dr Yap disagreed with that list being an accurate record of patients. The Magistrate based the calculations on that list because Dr Yap was not able to provide him with contrary figures. Dr Yap explained that Ms Rankin had never provided him with the billings, so at the time of the action, he did not know how much of the sessional fees he was entitled to. Plainly there was no evidence before the Magistrate that the Applicant was entitled to the asserted sessional fees of $796. While on this application the Applicant sought to provide additional documentation to establish the figure of $796, it faces two difficulties.
The first is that the Applicant did not claim them before the Magistrate. The second is that Dr Yap now concedes that the additional claims even if otherwise successful, would exceed the jurisdictional limit of the Minor Civil jurisdiction. In any event, the Applicant was benefitted by the additional $300 awarded to it in the allowance for the licensing fee.
GST
I do not propose to discuss the difficult question of the claim for GST. The issues when discussed in the case of Clambake, supra. I do not accept that GST was payable on the ‘sessional fee’ component. I repeat that GST was not in fact pressed by the Applicant before the Magistrate. The Contract itself provided for GST, ‘if applicable’. Nothing was led before the Magistrate or this Court on that topic.
In Clambake, supra the Court described the claim as ‘curious’, because if found in favour of the applicant it would have no benefit to it. If it was chargeable then the applicant would have to remit the full amount to the Federal Commissioner of Taxation.
Set Off
The question as to whether the Court may set off, in equity, the respective assessments and enter a single judgment has been the subject of recent authority involving similar liquidated claims and counterclaims in detinue. See Clambake Pty Ltd v Tipperary Projects Pty Ltd (No 3) [2009] WASC 52; Elevate NSW Pty Ltd v Canada Bay Private Hospital Pty Ltd [2019] FCA 1248 and Forsyth v Gibbs [2009] 1 Qd 403. While at one time it may have not been open to set off an unliquidated claim for damages for detinue against a liquidated claim, there is no doubt that on the facts of this case the Learned Magistrate was correct in permitting an equitable set off. This counterclaim related to the same parties and arose out of the same transaction.
In Elevate NSW Pty Ltd v Canada Bay Private Hospital, supra, a case in detinue, the Court accepted that such a set off would have been available. However, on the facts it found that the defendant had not established ‘a plausible and coherent basis for the claim’. By contrast in the subject case, the Learned Magistrate correctly concluded that the Respondent had established an entitlement to damages in detinue.
There is no basis to the submission that an equitable set off was not available.

Claim for interest

The Applicant’s claim for interest was based on clause 7 of the Service Agreement which calculated interest at ‘the highest rate charged by its bank on overdraft facilities of less than $100,000. The interest was to accrue from day to day, and the Applicant could capitalise unpaid interest on the last day of each month’.
The Applicant asserted that its effect was to prescribe a rate of interest of up to 19%. In Amev-UDC Finance Ltd v Austin (1986) 162 CLR 170 the High Court explained that a penalty clause prescribes the payment of a sum which is exorbitant or by a formula which is not a genuine pre-estimate of loss. This was plainly a penalty clause.
As it transpired there was no evidence provided to the Magistrate to establish the figures. The Respondent’s counterclaim was to be set off against the Applicant’s claim, and therefore about one half of the Applicant’s claim is extinguished. In any event, the time for determining whether the interest rate constitutes a penalty is the date of the Contract not the date of the breach. The Magistrate could have concluded that the clause was a penalty. It was patently disproportionate. However, no issue was taken on Review. I would therefore allow the rate of 8% per annum as found by His Honour.

Conclusion

Save for the variation in the sum awarded on the counterclaim which reduces it to the sum of $4,680, and increases the Applicant’s judgment to the sum of $6,070, I would otherwise dismiss the Application for Review, and affirm the decision of the Magistrate.

Costs

Rule 279A(10)(g) of the District Court Civil Rules 2006 gives the Court the discretion to make an order for costs of the Review. The philosophy of the Parliament, as demonstrated in s 38(5) of the Act, is that costs should only be awarded in minor civil actions with unrepresented parties where such is justified by circumstances.
In my opinion, the appropriate order is that each party bear its own costs of the Review. There are no circumstances justifying any other order.

Formal orders

The formal orders of the Court are:
1.    That the Application for Review is allowed only in part, in relation to the counterclaim so as to reduce it to the sum of $4,680. Accordingly, after set-off the Applicant is entitled to judgment in the sum of $6,070.
2.    Save for the adjustment in 1 hereof the decision of the Magistrate is affirmed.
3.    The Application for Review is otherwise dismissed.
4.    That each party bear its own costs of the Application for Review.