Zappia v Grant Baines Transport Pty Ltd

[2008] NSWSC 608

CITATION:	Zappia v Grant Baines Transport Pty Ltd [2008] NSWSC 608
HEARING DATE(S):	8 May 2008
JUDGMENT DATE :	18 June 2008
JURISDICTION:	Common Law Division
JUDGMENT OF:	Hislop J
DECISION:	(1) The judgment in favour of the defendant, Grant Baines Transport Pty Ltd, be set aside and the matter be remitted to the Newcastle Local Court to be redetermined. (2) Leave to appeal against the costs order made on 1 June 2007 is refused. (3) Each party is to bear his or its costs of this appeal.
LEGISLATION CITED:	Corporations Act, 2001 (Cth) Local Courts Act, 1982
CASES CITED:	Oshlack v Richmond River Council (1998) 193 CLR 72
PARTIES:	John Zappia (Plaintiff) Grant Baines Transport Pty Ltd (Defendant)
FILE NUMBER(S):	SC 13242/07
COUNSEL:	J.T. Johnson (Plaintiff) M. Holmes (Defendant)
SOLICITORS:	Hall Partners (Plaintiff) Perry Legal (Defendant)
LOWER COURT JURISDICTION:	Local Court
LOWER COURT FILE NUMBER(S):	240/2006
LOWER COURT JUDICIAL OFFICER :	Magistrate M. Morahan
LOWER COURT DATE OF DECISION:	11 September 2007

IN THE SUPREME COURT
OF NEW SOUTH WALES
COMMON LAW DIVISION

HISLOP J

Wednesday 18 June 2008

13242/07 JOHN ZAPPIA v GRANT BAINES TRANSPORT PTY LTD

JUDGMENT

Introduction

1 In February 2004 Grant Baines Transport Pty Ltd (“Transport”) reached an agreement with Zaps Logistics Pty Ltd (“Zaps”) for the provision of transport services. Between 30 December 2004 and 14 March 2005 Transport rendered a number of invoices for such services to Zaps, totalling $53,504.58 which remained unpaid. On 13 July 2005 an administrator was appointed to Zaps and on 7 September 2006 a liquidator was appointed. Zaps later changed its name to Quez Removals Pty Ltd.

2 Transport brought proceedings in the Local Court at Newcastle pursuant to s 588M of the Corporations Act, 2001 (Cth) to recover the outstanding $53,504.58 from John Zappia, a director of Zaps at the time the invoices fell due. In a reserved judgment dated 11 September 2007 the learned magistrate gave judgment for Transport in the sum claimed plus interest.

3 Mr Zappia, by his further amended summons filed on 24 October 2007, has appealed to this court from that judgment and also from an earlier decision of 1 June 2007 in which he was ordered to pay the costs of an adjournment on an indemnity basis.

4 The Local Courts Act, 1982 provides for appeal as of right to this court where a party alleges a judgment is erroneous in point of law (s 73(1)). However, a party may only appeal to this court by leave of the court from an order as to costs (s 74(2)).

The appeal from the judgment

Mr Zappia’s submissions

5 Although there were numerous grounds of appeal in the further amended summons, many of those were expressly abandoned. The argument presented on appeal was limited. The steps in it were as follows:

(a) His Honour entered a judgment for Transport;

(b) That judgment could only be sustained if there was a finding that Zaps was insolvent at the time Transport’s invoices fell due and payable;

(c) Transport’s invoices fell due and payable when the relevant debts were incurred on the date the invoices were rendered to Zaps, ie between 30 December 2004 and 14 March 2005;

(d) His Honour made no express finding that Zaps was insolvent between 30 December 2004 and 14 March 2005 or at any particular date;

(e) In his judgment his Honour relied upon evidence of Mr Zappia to conclude Zaps was insolvent. The relevant references to Mr Zappia’s evidence in the judgment are as follows:

(i) “It is the defence case that [Mr Zappia] was always available to make a further cash injection to the company had he desired to do so and therefore the question of insolvency does not arise. In saying this, Mr Maxwell is relying on Lewis v Doran in that a company is not insolvent if it can rely on a monetary injection from outside sources”;
(ii) “In his statement [Mr Zappia] refers to a payment of $2,657,877.57 he made to Zaps following the obtaining of a loan from the Bendigo Bank. Documentation subpoenaed from Bendigo Bank indicates that at the time, the bank was not concerned with insolvency on the part of Zaps or Mr Zappia for the loan/overdraft was approved on or about 30 June 2004. Mr Zappia says ‘In or about July 2005 as a result of the decline in sales profits and the loss of customers as referred to in this my affidavit, I decided to appoint an administrator for the company.’
He goes on to say: ‘At this time, I decided that I was no longer prepared to financially support the company and contribute money to it. As is indicated, I had already contributed over $2,600,000 cash injection by Bendigo Bank and through money obtained from RAMS Home Loans. As I was not prepared to support the company any further, that it was thereby insolvent.’ For my part, this amounts to an admission by the defendant as to the insolvency of the company…”;
(iii) “The defendant provided all the funding for the operation of Zaps… The defendant was unwilling to inject further cash into Zaps and appointed a liquidator. Clearly he knew the company was insolvent…”;
(iv) “On his own admission, the defendant was aware Zaps was insolvent. He refused to inject further cash into the company so Lewis v Doran does not apply. Instead he appointed a liquidator.”


(f) These references indicate that his Honour found Zaps became insolvent when Mr Zappia became unwilling to inject further funds into Zaps and appointed an administrator. This occurred in or about July 2005.

(g) These findings could not support the judgment as they establish insolvency as at July 2005 and not during the relevant period 30 December 2004 to 14 March 2005. Accordingly, an error in point of law was disclosed as his Honour has failed to give reasons for the judgment and has failed to determine the relevant question, namely the solvency of Zaps as between 30 December 2004 and 14 March 2005.

(h) If it should be inferred from the judgment that his Honour must have determined that Zaps was insolvent between 30 December 2004 and 14 March 2005, then there was a failure to state that finding and to state the reasons which supported the finding. That too would be an error in point of law;

(i) The judgment should be set aside and as no notice of contention had been filed, a judgment for Mr Zappia should be entered.

Transport’s submissions

6 Transport submitted that the relevant debts were incurred within 14 days of the invoices being rendered to Zaps. Thus, the relevant period was 13 January 2004 to 28 March 2005. However, it was conceded the difference between this submission and that of Transport made no difference to the issue on appeal.

7 Transport submitted the evidence that Zaps was insolvent between 30 December 2004 and 28 March 2005 was overwhelming. The magistrate had correctly set out the plaintiff’s case in his judgment and must have been aware of the true issue as to the relevant date for insolvency. It was submitted that when one read the judgment as a whole, it was clear that his Honour was satisfied that “[Transport] had made out its case, it should be entitled to a verdict in its favour accordingly.” Thus the judgment should stand and the appeal should be dismissed.

Decision

8 In my opinion, the express finding was that Zaps became insolvent when Mr Zappia became unwilling to inject further funds into Zaps and appointed a liquidator (sic administrator). This occurred in or about July 2005. Such a finding does not support the judgment which was entered. I accept that there has been error in point of law for the reasons submitted on behalf of Mr Zappia.

9 Other evidence on the question of insolvency was referred to by his Honour in his judgment. It is apparent from those references that the evidence as to insolvency prior to July 2005 was not all one way. His Honour said:

(a) “Many boxes of documents were produced to the court…to support [Mr Zappia’s] contention that documentation was in fact kept. [Transport] had submitted that crucial documents were not produced although it was clear that some important documents could not be located.”;

(b) “[Transport] then called as its expert witness, Mr Tolcher, an accountant. He produced a voluminous report which purported to direct the court to hold that a finding of insolvency was inevitable in these proceedings…I accept him as an expert witness…[but the report] contains so many generalities, estimations and projections as to be of little assistance.” He conceded that very few of the indicators he had relied upon to assess whether Zaps was insolvent had been made out.;

(c) “The defendant relied on Messrs Martino and Marabillio together with other staff to run the company. Due to strained relations between these men and the defendant, they are reluctant to give evidence and there is inadequate documentation as to what occurred in the company during their tenure. The whereabouts of the firm’s accountant is apparently unknown.”

10 Although it would have been appropriate for Transport to have filed a notice of contention contending the judgment could be supported on other grounds, that did not occur. Mr Zappia submits he was prejudiced by such failure and that in its absence a verdict must be substituted in his favour. However, having regard to the nature of the errors, this would produce an unjust result if the appeal was upheld and a verdict simply entered for Mr Zappia without further hearing.

11 In my opinion, it is appropriate to set aside the judgment in favour of Transport and remit the matter to the Local Court for redetermination of the issue of the date of the insolvency of Zaps and such other matters as remain in issue, once that question is determined.

The costs appeal

12 On Friday 1 June 2007 Mr Zappia sought and obtained an adjournment of the substantive proceedings, the hearing of which was then listed to commence on Monday 4 June 2007. The magistrate made the following order for costs:

“The defendants will have to pay the plaintiff’s costs lost and thrown away by the vacating of the hearing today and to also pay the costs of this motion and the costs to be on an indemnity basis.”

13 Mr Zappia seeks leave to appeal against the costs order pursuant to s 74(2) of the Local Courts Act 1982. It has been submitted on his behalf that the costs should not have been ordered as the adjournment was required as Mr Zappia’s solicitor was not aware of the fixing of the hearing date and that, if a costs order was appropriate, it should not be on an indemnity basis as there was not shown to be any relevant delinquency serious enough to justify indemnity costs.

14 The application for leave to appeal was opposed by Transport. It submitted the adjournment application was argued at length in the Local Court. The evidence disclosed there had been a consistent history of non-compliance by Mr Zappia with court directions and a timetable. The application for adjournment was made on the last working day before the hearing. The late service by Mr Zappia of his evidence necessitated the vacation of the hearing date so that the evidence could be considered and responded to by Transport.

15 The magistrate who heard the application on 1 June 2007 concluded that the date of the hearing of 4 June 2007 had been fixed at a registrar’s callover on 11 January 2007 where Mr Zappia was represented. Orders were then made for the filing and serving of documentation. The late filing of Mr Zappia’s evidence offered no reasonable explanation for the non-compliance with the registrar’s instructions and timetable. The non-compliance caused prejudice to Transport. The culpability was on the part of Mr Zappia not Transport.

16 The awarding of costs is a matter in the discretion of the court. The exercise of the discretion will not normally be overturned in the absence of some manifest error or consideration of irrelevant matter. Leave will not generally be granted when the decision involves application of well settled principles applicable to the exercise of the costs discretion.

17 In Oshlack v Richmond River Council (1998) 193 CLR 72 at [44] it was held:

“It may be true in a general sense that costs orders are not made to punish an unsuccessful party. However, in the particular circumstance of a case involving some relevant delinquency on the part of the unsuccessful party, an order is made not for party and party costs but for costs on a ‘solicitor and client’ basis or on an indemnity basis. The result is more fully or adequately to compensate the successful party to the disadvantage of what otherwise would have been the position of the unsuccessful party in the absence of such delinquency on its part.”

18 In this case those representing Mr Zappia sought an adjournment at a very late stage as a result of their failure to comply with various court orders and timetables. These failures resulted in a significant prejudice to Transport.

19 In my opinion, the orders made by the magistrate on this issue were well within the bounds of his discretion. No error is demonstrated. Accordingly, the application for leave to appeal against the costs order is refused.

20 As each party has succeeded on one head of appeal and not on the other, I consider the appropriate costs order is that each party should bear his or its own costs of the appeal.

Orders

21 1. The judgment in favour of the defendant, Grant Baines Transport Pty Ltd, be set aside and the matter be remitted to the Newcastle Local Court to be redetermined.

2. Leave to appeal against the costs order made on 1 June 2007 is refused.

3. Each party is to bear his or its costs of this appeal.

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