Court of Appeal Supreme Court New South Wales

• Medium Neutral Citation: Guest v Karl Romandi & Helen De Luis Pty Ltd [2012] NSWCA 84
• Hearing dates: 13 March 2012
• Decision date: 13 April 2012
• Before: Young JA; Meagher JA

Decision

(1) The summons seeking leave to appeal and cross-summons seeking leave to cross-appeal be dismissed.

(2) The applicants pay the respondent's costs of the summons seeking leave to appeal.

(3) The respondent pay the applicants' costs of the cross-summons seeking leave to cross-appeal.

[Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.]

• Catchwords: APPEAL - leave to appeal - no question of principle and no issue of general public importance - small amounts involved - leave refused
• Legislation Cited: Local Court Act 2007
• Cases Cited: Carolan v AMF Bowling Pty Ltd [1995] NSWCA 69; Jaycar Pty Ltd v Lombardo [2011] NSWCA 284; McGuirk v University of New South Wales [2009] NSWCA 321; (2009) 75 NSWLR 224; Walker Corporation Pty Ltd v Sydney Harbour Foreshore Authority [2009] NSWCA 178; (2009) 168 LGERA 1
• Category: Principal judgment
• Parties: Phillip Guest (First applicant); Melissa Guest (Second applicant); Karl Romandi & Helen de Luis Pty Ltd (Respondent)
• Representation: Counsel: M Tyson (Applicants); D Moujalli (Respondent); Solicitors: W Lawyers (Applicants); McCulloch & Buggy (Respondent)
• File Number(s): CA 2011/12350

Decision under appeal

• Citation: Karl Romandi & Helen de Luis Pty Ltd v Guest [2011] NSWSC 1124
• Date of Decision: 2011-09-21 00:00:00
• Before: Fullerton J
• File Number(s): 2011/12350

Judgment

1 THE COURT: This is an application for leave to appeal from a decision of Fullerton J (the primary judge) which allowed an appeal by the respondent from a decision of the Local Court: [2011] NSWSC 1124

2 The respondent, an architect, sued the applicants in the Local Court for $58,567.50 for architectural services provided in relation to proposed renovations to their residential property in Woolwich. That amount was the balance of the invoice value of services said to have been provided by the respondent less payments already made by the applicants. The claim was made in contract and alternatively on the basis of a quantum meruit. By way of cross-claim, the applicants sought to recover the $56,485 already paid on the basis that there had been a total failure of consideration.

3 The claim was heard in the General Division of the Local Court over a period of three days. In a judgment delivered on 20 December 2010, Grahame LCM (the magistrate) dismissed the respondent's claim and allowed the applicants' cross-claim in an amount of $6,960.

4 The magistrate held that there was a contract between the parties evidenced by a written fee agreement dated 1 November 2007. She rejected the applicants' argument that it was an oral term of that contract that the cost of the renovations should not exceed $1 M. The renovation project was abandoned in February 2009. By that time the probable cost of the project was estimated at $2.2 M. That estimate was first advised to the applicants in early November 2008. The magistrate held that, in those circumstances, the respondent was entitled under the contract to an amount calculated by reference to "actual work done" and disbursements incurred. She assessed that amount to be $49,525. In doing so she discounted the amounts of some of the claims of the respondent on the basis that they were excessive or unreasonable. In addition, she rejected claims for work done after 17 November 2008 on the basis that by that time, the contract was "under review" and the respondent "had no clear brief to undertake" work because the applicants had indicated that they were considering whether to proceed any further with the project. As the applicants had paid $56,485, the magistrate dismissed the respondent's claim and ordered the respondent to repay the difference between $49,525 and the amount paid.

5 The appeal to this Court was limited to questions of law and leave was not sought to extend it to any questions of mixed law and fact: Local Court Act 2007, ss 39 and 40(1). The respondent argued that the magistrate erred in construing the contract as permitting that various deductions be made from the amounts claimed for work done. The applicants, by way of a notice of contention, pressed their argument as to the oral term of the contract, maintaining that the magistrate did not address the question of contract formation and identification of contractual terms in accordance with the objective theory of contract.

6 The primary judge, whilst not accepting all of the respondent's arguments, allowed the appeal. On 21 September 2011, she made orders setting aside the judgment and orders of Grahame LCM and remitting the proceeding to the Local Court "to be determined according to law". No more specific directions were made as to how the matter should be dealt with on remitter: see Local Court Act, s 42.

7 The applicants seek leave to appeal from the primary judge's decision. The respondent also seeks leave to cross-appeal from that part of the primary judge's decision which ordered that the proceedings be remitted to the Local Court. It says that the primary judge should have determined the amount due on its claim and dismissed the cross-claim.

8 We are not satisfied that leave to appeal and cross-appeal should be granted. The relevant principles which apply in the present case were summarised by Campbell JA in Jaycar Pty Ltd v Lombardo [2011] NSWCA 284:

"[46] ... In Carolan v AMF Bowling Pty Ltd [1995] NSWCA 69 (followed in Zelden v Sewell [2011] NSWCA 56 at [22]), Sheller JA said that an applicant for leave must demonstrate something more than that the trial judge was arguably wrong in the conclusion arrived at. Cole J relied on a principle that where small claims are involved, it is important that there be early finality in determination of litigation, otherwise the costs that will be involved are likely to swamp the money sum involved in the dispute. Kirby P recognised that ordinarily it was appropriate to grant leave to appeal only concerning matters that involve issues of principle, questions of general public importance or an injustice which is reasonably clear, in the sense of going beyond what [is] merely arguable."

9 The draft notice of appeal contains 25 grounds which address the arguments the applicants seek to make on appeal.

10 The applicants' first argument is that the primary judge was wrong to conclude that the magistrate did not err in law when addressing the question as to the terms of the contract and their proper construction. We are not satisfied that the primary judge was arguably wrong in so concluding. The parties signed a document which purported to record their agreement. It contained terms which did not fix any limit on the "probable building cost" and, assuming the works were completed, provided for fees to be paid by reference to the "final commercial building cost". The findings of fact made by the magistrate did not support a conclusion that the parties intended, by their discussions concerning the applicants' budget "of around $1 M", to fix an upper limit for the building cost as a term of their contract.

11 The consequence for the applicants of the rejection of this argument could be that they cannot press their cross-claim for repayment of $56,485 on the basis of a total failure of consideration. Whether that is so depends on the way in which that claim is put. As pleaded and particularised in the amended cross-claim, it was not limited to an argument that the consideration failed because the services were provided in respect of a project with a probable cost of $2.2 M rather than one which it was agreed would not cost more than $1 M.

12 The applicants' second argument is that the primary judge was wrong to conclude that the magistrate erred in the way she assessed the amount of $49,525 as due to the respondent. That argument raised questions as to the construction of the contract in the circumstances as found by the magistrate. One question was whether there was evidence to support the magistrate's findings which led to her conclusion that the respondent was only entitled to charge for work done by an architectural assistant (Ms Harrison) at a rate of $75 per hour. The primary judge was not persuaded that the magistrate's findings involved any error of law. That conclusion is not challenged in the draft cross-appeal. In money terms it means that the amount claimed by the respondent is reduced to $38,973.

13 There are four respects in which the applicants argue that the primary judge erred when assessing the amounts claimed by the respondent. First, it is said that the primary judge should have allowed a deduction for amounts claimed which answer the description of "usual minor design alterations". The difficulty with this argument is that the magistrate found that no deduction should be made for any such alterations and it was not argued before the primary judge that this involved any error. For that reason the primary judge did not deal with this argument and cannot be said to have erred in not doing so.

14 Secondly, it is said that the primary judge wrongly held that the magistrate erred in rejecting the respondent's claim for work done between 17 November 2008 and 3 February 2009. The amount claimed by the respondent in respect of this period is conceded to be less than $20,000. The magistrate rejected this part of the respondent's claim on the basis that from November 2008 the contract was, by its express terms, "subject to review" and the respondent had "no clear brief to undertake this work". The primary judge held that the second basis for this conclusion involved an error of law because there was no evidence to support that finding. In doing so it is not suggested that the primary judge did not identify the correct principles (at [28]). It is arguable that this conclusion was wrong because the specific finding or findings of fact for which it was said that there was no evidentiary support were not identified. Had that been done, it may have revealed that the "no evidence ground" was in substance an attack on findings of fact on the basis that they were contrary to the weight of the evidence. Such an attack would have involved a question of fact which the primary judge did not have jurisdiction to address. The primary judge did not expressly consider the other basis given for the magistrate's decision which turned on an arguably wrong construction of the provision that the agreement was "subject to review in November 2008". That provision permitted the parties at that time to seek to negotiate the fee and other terms of their agreement. It did not, however, have the consequence that their existing arrangements ceased to apply unless and until something further was negotiated and agreed.

15 Thirdly, it is said that the primary judge should have allowed a deduction for claims in respect of an incomplete "heritage report". That argument was dealt with by the primary judge as part of the question as to whether the magistrate erred in law when disallowing claims for work done after 17 November 2008. It was indicated in argument that the amount claimed for that report was approximately $2,600. The observations we have made above apply equally to this argument.

16 Finally, it is said that the primary judge erred in failing to uphold the magistrate's discount to the claim for preparation of the "measured study" because the respondent had not provided the applicants with electronic versions of those drawings. It is said that the failure to provide those electronic versions meant that the actual work in relation to the preparation of those drawings was "not in fact complete". This argument does not reveal any obvious error by the primary judge. The magistrate's conclusion that a discount should be allowed was founded on the evidence of the applicants' expert, Mr Bullen. That evidence and the finding of the magistrate was not that the relevant work was not completed without provision of the electronic versions but that the value of the measured drawings to the applicants was diminished in circumstances where the project had been abandoned.

17 With one exception, the various arguments which the applicants seek to press on an appeal have insufficient prospects of success. The one matter in relation to which the primary judge was arguably wrong involves a sum of less than $20,000. It does not involve a question of principle or issue of general public importance and it is not clear that the primary judge's ultimate conclusion (at [49]) is wrong. In circumstances where these issues have been debated before a magistrate for three days and a judge of this court for a further day, the factors identified in Carolan v AMF Bowling Pty Ltd [1995] NSWCA 69 lead to the conclusion that the application for leave to appeal should be refused.

18 The respondent's application for leave to cross-appeal is made on the basis that the primary judge erred in remitting the matter to the Local Court and in failing to enter judgment in favour of the respondent for $38,973, being the amount claimed less what is said to be the adjustment for the architectural assistant's hourly rate (from $100 per hour to $75 per hour). We do not consider that the primary judge erred in not entering judgment for the respondent and dismissing the applicants' cross-claim. In addressing the respects in which the magistrate had wrongly discounted the respondent's claim, the primary judge indicated that it would be necessary to undertake some calculations concerning aspects of the deductions made by the magistrate which she was not in a position to undertake: [25]. It is appropriate that those calculations be undertaken by the Local Court.

19 The primary judge was not prepared to dismiss the applicants' cross-claim for return of moneys paid because that claim had not been considered by the magistrate in light of the primary judge's conclusions as to the basis on which the respondent was entitled to have its claim assessed. The applicants plead that the services provided were of "no value or benefit" to them and the final disposition of that claim, if maintained on that basis, may raise questions of fact which have not been addressed by the magistrate. It is appropriate that those questions also be dealt with by the Local Court. For these reasons, the respondent's application for leave to cross-appeal should also be dismissed.

20 The result is that the primary judge's order remitting this matter to the Local Court to be determined "according to law" is not disturbed. The effect of that order is to at least require a determination in accordance with the law as identified by the primary judge: Walker Corporation Pty Ltd v Sydney Harbour Foreshore Authority [2009] NSWCA 178 at [33]; (2009) 168 LGERA 1; McGuirk v University of New South Wales [2009] NSWCA 321; (2009) 75 NSWLR 224 at [18]. Whether the Local Court on the rehearing permits evidence to be led on any particular issue in relation to the claim or cross-claim is for the discretion of that court to be exercised having regard to the factual issues remaining in the proceeding in the light of the conclusions of the primary judge: Walker Corporation Pty Ltd v Sydney Harbour Foreshore Authority at [36]-[39], [115], [118]. Those conclusions include that the magistrate was in error in discounting the claim for services rendered after 17 November 2008 ([49]), that the magistrate erred in relation to specific discounts or deductions ([24], [25]), that the magistrate erred in not allowing the respondent's claim for disbursements of $2,346 ([50]), that the magistrate did not err in allowing a rate of $75 per hour for all work done by the architectural assistant ([53], [57]) and the magistrate did not err in concluding that it was not a term of the agreement that the value of the works should not exceed $1 M ([12], [18]).

21 Both applications for leave have been refused. The application of the respondent was a free-standing application pressed irrespective of the outcome of the applicants' application. In the circumstances, the appropriate order is that the applicants pay the respondent's costs of the application for leave to appeal and the respondent pay the applicants' costs of the application for leave to cross-appeal.

22 Accordingly, the orders of the court are as follows:

(1) The summons seeking leave to appeal and cross-summons seeking leave to cross-appeal be dismissed.

(2) The applicants pay the respondent's costs of the summons seeking leave to appeal.

(3) The respondent pay the applicants' costs of the cross-summons seeking leave to cross-appeal.

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Decision last updated: 16 April 2012