RYAN - v - CLEMENTS & McCARTHY PTY. LTD. [2002] NSWSC 1078

New South Wales Supreme Court

CITATION : RYAN - v - CLEMENTS & McCARTHY PTY. LTD. [2002] NSWSC 1078 CURRENT JURISDICTION: Supreme Court FILE NUMBER(S) : SC 013153/01 HEARING DATE(S) : 28 October 2002 JUDGMENT DATE : 15 November 2002

PARTIES : Paul Francis Ryan (Plaintiff) Clements & McCarthy Pty. Limited (Defendants) JUDGMENT OF : Cooper AJ

LOWER COURT Local Court JURISDICTION : LOWER COURT 253/97 and 75/2000 FILE NUMBER(S) : LOWER COURT G. Madgwick SM JUDICIAL OFFICER :

COUNSEL : Mr. K. Andronos (Plaintiff) Mr. D. Day (Defendant) McLaughlin & Riordan (Plaintiff) SOLICITORS : Kenny Spring (Defendant) Turner Whelan (City Agent for Kenny Spring Solicitors) CATCHWORDS : judgement-reasons to be given LEGISLATION CITED : 69 (3) of the Local Courts (Civil Claims) Act Section 109 of the Justices Act Azzopardi v Tasman UEB Industries Ltd (1985) 4 NSWLR 139 CASES CITED : Mifsud v Campbell (1990) 21 NSWLR 725 Soulemezis v Dudley (Holdings) Pty Ltd (1987 10 NSWLR 247 DECISION : 1.The appeal is allowed and the orders made by the Magistrate in Local Court actions 253 of 1997 and 75 of 2000 are set aside.; 2.The matters are remitted to the Local Court to hear and determine the matters.; 3.The defendant is ordered to pay the plaintiff's costs of the appeal

- 14 - IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION

COOPER AJ 15 November 2002 013153/01 Paul Francis RYAN (Plaintiff) -v- Clements & McCarthy Pty Limited (Defendants)

JUDGMENT Introduction 1 The plaintiff appeals by way of Summons to this Court against orders made by Magistrate G Madgwick on 14 September 2001 in proceedings 253 of 1997 and 75 of 2000 in the Local Court at Bathurst. 2 The appeal is brought pursuant to Section 69 of the Local Courts (Civil Claims) Act and is therefore limited to determining whether the judgment or order of the learned Magistrate was erroneous in point of Law. No appeal lies to this Court on matters of fact. 3 In action 253 of 1997 Clements and McCarthy Pty. Ltd. sued Mark Anthony Ryan (the present plaintiff's brother) as well as the plaintiff. It is not necessary to consider the claim against Mark Ryan which was dismissed. 4 As against Paul Ryan the Statement of Claim alleged that on 19 December 1996 he assumed liability for certain outstanding trading accounts including those of the first defendant in the sum of $7,922.19 and that, for consideration, the plaintiff agreed to pay that sum yet he has failed to do so. 5 Alternatively it alleges that Paul Ryan and Mark Ryan were partners, that they purchased stock on behalf of each other and that in his capacity as a partner of Mark Ryan, Paul Ryan is liable to pay the sum of $7,922.19. 6 By his grounds of defence Paul Ryan denied the agreement referred to above and said he was not indebted as alleged. 7 In action 253 of 1997 Paul Ryan brought a Cross Claim against Clements and McCarthy Pty. Ltd. alleging an agreement under which Clements and McCarthy Pty. Ltd. would pay the telephone bills, vehicle expenses including repair costs, insurances and registration incurred by him whilst he was a director of Clements and McCarthy Pty. Ltd. Pursuant to this agreement he claims a total of $1,679.15. 11. In addition he alleges that he entered into a conjunction agreement with Clements and McCarthy Pty. Ltd. to act as conjoint agents on the sale of some lambs. In respect of his share of commission on this conjunction sale he claims $2,559.34 plus interest.

8 In action 75 of 2000 Clements and McCarthy Pty. Ltd. alleged an agreement under which it would advance to Paul Ryan an amount equal to his weekly salary and allowances following upon his sustaining injuries in a motor accident on 8 August 1996 on terms that Paul Ryan would repay those advances on his receiving a judgment in his favour or a settlement payment for any claim he may have for his injuries caused by the motor accident. Between 8 August and 19 December 1996 the plaintiff advanced $14,219.22.

9 By his grounds of defence Paul Ryan denied the agreement and generally denied indebtedness. 10 The hearing of the case occupied three days. Page 1 of the transcript of the second day of hearing records that it had been agreed, "that the matters should be heard in an amalgamated fashion".

The Relationship Between the Parties 11 Since its incorporation in about July 1994, Clements and McCarthy Pty. Ltd. has carried on the business of a stock station agent in respect of which it holds the appropriate licences. Since incorporation the three directors have been Mr Mullen, Mr Birch and Paul Ryan. Each of their respective family trusts have held one third of the units in the Clemcar Unit Trust which is the operating trust that runs Clements and McCarthy Pty. Ltd. For the present purposes it is not necessary to consider the details of the Trusts. 12 Each of the three directors also holds the appropriate stock and station agent's licences in his own right.

Background to the Claim for $7922.19 13 In about July 1996 Paul Ryan purchased heifers and some steers on account of his brother Mark Ryan without telling him. When his brother saw the heifers he said he did not want them and accordingly Paul Ryan agreed that he would take them personally. However he had debited the purchase price of the cattle in the name of his brother in the accounting records of Clements and McCarthy Pty. Ltd. 14 The evidence of Paul Ryan at the hearing was that he was quite prepared to pay for the cost of the cattle but disputed the interest charges which Clements and McCarthy Pty. Ltd. had added to the principal cost. He said that no such interest was payable. On the other hand evidence was given by Mr Birch and Mr Mullen that interest was payable. The liability of Mr Ryan to pay the interest was clearly an issue of fact for the Magistrate to decide. 15 Thus, subject the events of 19 December 1996 Paul Ryan was on his own admission liable to pay the principal cost and it was an issue of fact for the Magistrate to determine whether he was liable to pay interest on that principal as well.

Background to the Claim for $14,219.22 16 On 8 August 1996 Paul Ryan was involved in a motor vehicle accident which left him unable to perform his duties with Clements and McCarthy Pty. Ltd. 17 He did some part time work in September and October but was unable to work full time. Messrs Mullen and Birch came to the conclusion that they could not carry the plaintiff under the circumstances and informed him at a meeting on 25 November 1996 that they were acquiring the units held by his Trust Company (Edenvale Holdings Pty Ltd) in Clemcar Unit Trust which was the operating trust of Clements and McCarthy Pty. Ltd. 18 In the meantime, Paul Ryan had commenced an action in the District Court claiming damages in respect of the injuries sustained by him in the motor accident. An arrangement was made between Paul Ryan, Clements and McCarthy Pty. Ltd. and the solicitor acting for Mr Ryan in the motor accident case that a claim would be made in the District Court action for loss of earnings and allowances from 8 August 1996 and that Clements and McCarthy Pty. Ltd. would in the meantime pay to the plaintiff such allowances and wages by way of advance to be repaid to it out of any judgment or settlement which he may subsequently receive. 19 Paul Ryan's District Court action was settled and, in late 1999 or early 2000 he received within his damages an amount equivalent to the wages and allowances paid to him by Clements and McCarthy Pty. Ltd. Subsequent to this, Clements and McCarthy Pty. Ltd. commenced Local Court action 75 of 2000 claiming repayment of these alleged advances. 20 Thus, subject to the events of 19 December 1996, Paul Ryan conceded that he was liable to pay to Clements and McCarthy Pty. Ltd. only the principal cost of the cattle and there was an issue as to the interest and, in addition, he was liable to refund out of any judgment or settlement he may obtain the amount of the advance of wages and allowances made to him by Clements and McCarthy Pty. Ltd. It is emphasised that these concessions were subject to what occurred on 19 December 1996.

The Events of 19 December 1996 21 Between 25 November and 19 December 1996, the accountants for Clements and McCarthy Pty. Ltd. were engaged in calculating the value of the holdings of Paul Ryan with much negotiating with Mr Ryan. The upshot was a meeting on 19 December 1996 at which a Memorandum of Agreement in the following terms was signed by Messrs Paul Ryan, Mullen and Birch:- "We the undersigned representing the unit holders of Clemcar Unit Trust agree to the following: 1. As at 4.00 p.m. on this day for the consideration of $43,000 Edenvale Holdings Pty Limited will relinquish to the Trustee ownership of 50,000 A class units and 1 B class unit in Clemcar Unit Trust as full and final settlement. 2. The trustee will pay to Edenvale Holdings the balance of its loan account as at 30 November 1996 less any payments made on its behalf since that date. 3. Release the Ford Maverick to Paul Ryan and that he accepts responsibility for its payout of $14,042.81 to the National Australia Bank. Furthermore, Paul Ryan is to bear the cost of transfer of the vehicle. 4. Paul Ryan is to be released of any guarantees on any bank liabilities or from any debts owing by the Unit trust as at date. 5. Paul Ryan is to cease his right to remain as a signatory of the business bank account. 6. Paul Ryan to cease in any way as trading on behalf of Clements & McCarthy. 7. Paul Ryan is to transfer his share in Clements & McCarthy Pty Limited to Ray Mullen. 8. Paul Ryan to resign as Director and Secretary of the Company effective as of 20 December 1996. 9. Paul Ryan to return to Clements & McCarthy all items belonging to them including keys to the building, mobile phones and phone numbers. 10. For the Trading Accounts outstanding to the business of $7,922.19 to be settled in return for letter transferring insurance claim transferred to P. F. Ryan on Monday 23.10.96. Signed in agreements on the 19th December 1996 by Paul Ryan, Raymond Mullen and Peter Birch" 22 The underlined words in paragraph 10 were written by hand by Paul Ryan at the meeting. It is common ground that the Trading Account of $7,922.19 refers to the cost of the cattle together with interest. 23 On its face it appears that Clause 10 is an agreement under which, in return for Paul Ryan's promise to pay $7,922.19, Clements and McCarthy Pty. Ltd. waived its right to recovery of the monies advanced to Paul Ryan by way of wages and allowances between August 1996 and December 1996 from any damages which he may subsequently recover. 24 In relation to this clause the learned Magistrate said in her Judgement:- "The business requested the outstanding account of $7,922.19 to be paid and Paul Ryan agreed to do so on the basis that the Company transfer to him their claim for the money owed to the business as a result of payments made as a result of his motor vehicle injury. There is clear acknowledgement of the debts or should I say, both debts. There was no payment of the $7,922.19 and that amount is still outstanding. As it has not been paid then the money owing on the insurance claim remains outstanding." 25 There is, on the face of it, an internal inconsistency in this reasoning. Her Worship found that the basis of (or consideration for) the promise by Paul Ryan to pay the partially disputed $7,922.19 to the Company was that the Company would transfer to him its claim for the money owed to the business as a result of payments made as a result of the motor vehicle injury. Clements and McCarthy Pty. Ltd never disputed that it had not so transferred this claim to Mr Ryan. Consequently the logical conclusion from this finding is that the consideration for the liability to pay the trading account of $7,922.19 had failed and, therefore there was liability only to repay the advances of wages and allowances. It is inconsistent to go on and say "There is clear acknowledgment of the debts or should I say, both debts". 26 Alternatively, her primary finding would have been consistent with an agreement between the parties under which liability for the partially disputed $7,922.19 was accepted by Paul Ryan in return for the abandonment of the claim for refund of wages and advances and that the reference to the date of 23 December was not one in respect of which time was "of the essence". Under these circumstances Paul Ryan would be liable only for $7,922.19. 27 It needs to be noted that Paul Ryan did not allege in his Grounds of Defence that there was an agreement under which in return for his paying $7,922.19, the Company waived all claims to the monies which had been advanced to him during the period following his motor accident. 28 At the commencement of the case for the defendant Mr Cameron, Counsel for Paul Ryan is recorded at page 4 of 10 May 2000 saying the following:- "But the substance of the defences and the cross claim is simply this, that in respect of the repayment of the compensation monies, that's the 12,065 odd dollars our case is that it was deducted from the purchase price of the units and that's reflected in that document and secondly so far as the cattle account, if you can call it that, is concerned two things. In that agreement on 19 December Mr Paul Ryan agreed to pay that. So that Mr Mark Ryan's not liable. And secondly so far as interest is concerned that the custom between Clements and McCarthy and its partners and its Trading Accounts with the Ryans was that no interest was charged at all and that was always the case until this one isolated incident." 29 So the issue before the learned Magistrate was not one as to whether on the true legal construction of the document of 19 December 1996 there was an accord and satisfaction in respect of the liability to repay the wages and allowances advanced. Rather it was a question of fact as to whether that sum had already been taken into account in calculating the amount of $43,000.00, which was paid to the plaintiff in return for his Trust Company's Share Holding. The Magistrate made no reference to this issue in her judgment and made no finding upon it. Furthermore, she gave no indication as to why she gave no attention to this issue in her reasons for judgment. 30 On the question of the liability for the cost for the cattle, as stated earlier Paul Ryan disputed only the amount of interest. The entitlement of Clements and McCarthy Pty Ltd to recover the interest was a matter of fact to be determined on the evidence. Once again the learned Magistrate made no express reference to the issue of liability for interest. Her reasons for judgment seem to indicate that as paragraph 10 of the Agreement, set out above, acknowledged indebtedness for the $7,922.19 it was not necessary to consider this issue. If this was the basis of her reasoning then it failed to take into account the conditional nature of that acknowledgment. 31 The inconsistency and the failure to give due consideration to essential issues raised between the parties do not necessarily result in the appeal being successful. In Azzopardi v Tasman UEB Industries Ltd (1985) 4 NSWLR 139 the majority pointed out that an error of fact finding would not be elevated to an error of law, if based on evidence open to the trial judge, even if an appeal court were of the view that the decision on the facts was illogical, perverse or completely unreasonable. It is, therefore, necessary to examine the evidence relating to the events of 19 December 1996 in some detail. 32 On day 1 at page 10 Mr Mullen's was giving evidence of the circumstances of Paul Ryan writing in the addition to paragraph 10 of the Agreement:- "Q. Did he say something before he wrote that in? A: Not to my knowledge. When it was written in the accountants then gave us all a copy of it after we had signed it and explained to us what it was about, it's self explanatory, and at that particular time we were prepared to forego any of the, as it's described there, any of our claim for the insurance claim that we had on Paul Ryan. For payment of that account we were quite happy to call it quits and that's why we signed that document, and it was on the basis that that would be paid to our office on Monday 23rd, and that has not eventuated. Q: So you're saying that if he paid the insurance claim you'd call it quits? A: No, no if he paid this amount of money here that related to, to cattle purchases that we would relinquish our related to, to cattle purchases that we would relinquish our claim on him, the insurance claim that was put out, that in lieu of paying, him paying that amount of money there were would forgo to him if he paid that account on Monday 23rd, as he's got written there, and as I say at this stage we have not been paid that amount of money." 33 On day 2 (page 23) Mr Birch's evidence was:- A: "Yes. He - for us to go the insurance claim he would be at our office on the Monday 23 December to pay outstanding cattle debt. Q: And when those words were expressed to you, what did you say? A: We weren't real happy at the time. Q: Well what did you say sir? A Then we said "Yes" we would forego the debt provided he came in on the Monday and paid out the cattle debt. Q: And what did Mr Ryan say after that? A I'll call Monday I'll deliver the mobile phones back to your office and I'll pay the outstanding cattle debt." 34 And at page 24:- Q: "Did Mr. Paul Ryan attend at your offices? A: No he didn't. Q: Has Mr Paul Ryan subsequently attended at your offices with a cheque in the sum of $7,922.19? A: No he hasn't. Q: Has he subsequently attended with mobile telephones? A: Yes he didn't. Not on that Monday, some time after. 35 The issue was put squarely to Mr Birch in cross examination (day 3 page 27 commencing at line3):- Q: That you wanted to be repaid those monies, is that correct? A: We are seeking reimbursement for wages and expenses we'd advanced to Paul whilst off work. Q: And you were expecting that you'd get repaid by the Compensation insurer when the case was eventually heard and determined? A: We were expecting a refund from the insurance company yes. Q: But you decided that you'd accelerate that by asking Paul Ryan to repay you the money out of the settlement monies for his share of the partnership? A: Definitely not. 36 And at lines 35 and following:- Q: And that letter that you're looking at there does exactly that. It assigns your rights, that's Clements & McCarthy's rights to recoup those monies from the insurer to Paul Ryan? A: But you've left out the important thing here. That would , that was to happen on Monday 23 December if Paul Ryan was to pay $7,922.19 for the purchase of cattle on behalf of his brother. That was inserted in at the meeting that clause, handwritten clause. 37 The evidence of Paul Ryan on this issue was (day 3 page 31):- Q: And would you agree with me that at the meeting on the afternoon of 19 December 1996 with Mr Birch, Mr Mullens, Mr Mizzi and yourself it was agreed that you would repay the salary and allowances you'd received from Clements & McCarthy when your motor vehicle case was either settled or you won it in Court? A: That's not right, they wouldn't take the risk. Q: They wouldn't take the risk? A: In case I didn't get any money in Court they wouldn't take the risk, they wanted it deducted from my capital, it was their idea. They didn't want to risk it, they'd paid the dough, they didn't want to take the risk. So they deducted it off my capital. Q: Didn't you say something like this to them, "Look if I can pay you for the cattle can I keep my salary and allowances that I've been paid?' A: No I, I paid them back, it was there before that time, before we got up to item number 10. In my calculations it was already paid back. Why would I say it again? I can't see the sense in that so no." 38 He went on to say that the obligation was on Clements and McCarthy Pty. Ltd. to give him a letter "transferring insurance claim transferred to P. F. Ryan on Monday 23.10.96" (to quote paragraph 10 of the Agreement) before he became liable to pay the $7,922.19. It was common ground that he never received such a letter. Hence he was not liable to pay that sum. Furthermore, he was not liable to repay the advances totalling $14,219.22 because this sum had already been deducted from the price which Edenvale Holdings Pty Ltd was paid for its units in Clemcar Unit Trust. 39 The evidence outlined above raised the issues of fact which it was necessary for her Worship to determine in the actions before her. Yet nowhere in her reasons for judgment does she refer to them, let alone express any decision upon them. Nor does she explain why she considered it not necessary to so consider them. 40 The question remains as to whether the failure of the learned Magistrate to refer to and determine the issues raised before her amounts to an error of law which is appealable under section 69 of the Local Courts (Civil Claims) Act. 41 In Mifsud v Campbell (1990) 21 NSWLR 725 at 728 Samuels JA said:- "However, for a judge to ignore evidence critical to an issue in a case and contrary to an assertion of fact made by one party and accepted by the judge . . .may produce a sense of grievance in the adversary and create a litigant who is not only 'disappointed' but 'disturbed' – to use the words which appear in the New Zealand case of Connell v Auckland City Council [1977] 1 NZLR 630 at 634. It tends to deny both the fact and the appearance of justice having been done. If it does . . then it will have worked a miscarriage of justice and have produced a mistrial and resulted in what I would take to be an error of law which is reviewable on appeal." 42 It is trite law that a judicial officer is bound to consider the issues raised before him/her for determination and to give reasons for judgment. A record needs to be made of the facts upon which that officer's conclusion is based and of the process of reasoning by which the conclusion is reached. This is an essential part of his/her duty as a judicial officer. See Soulemezis v Dudley (Holdings) Pty Ltd (1987 10 NSWLR 247 per McHugh JA at pp 278 et seq:- "When parties submit their dispute to a tribunal for adjudication, they do so on the assumption that the dispute will be decided in accordance with rules. They assume that the adjudicator will decide the dispute according to the rules or principles which governed their conduct and that he will ascertain, so far as he reasonably can, what are the facts of the dispute. To give effect to these assumptions a judicial decision must be a reasoned decision arrived at by finding the relevant facts and then applying the relevant rules or principles. A decision which is made arbitrarily can not be a judicial decision, for the hallmark of judicial decision is the quality of rationality." 43 It is appreciated that, in some cases it may be unnecessary for a judicial officer to deal with all issues raised in a case. But this would arise where there is evidence on other issues capable of supporting the officer's findings. 44 Regrettably, in this case, the learned Magistrate failed to consider all of the essential issues raised for her determination and, insofar as she gave reasons, they are inconsistent. These defaults in my view make her orders erroneous in point of law. 45 Unfortunately, the learned Magistrate fell into similar error in her determination of Paul Ryan's Cross Claim in action 253 of 1997. He adduced evidence in support of that claim. There was evidence adduced on behalf of Clements and McCarthy Pty. Ltd. in reply. Yet all her Worship said about the issues raised on the Cross Claim was "Cross-claim dismissed". No record was made of the facts upon which her conclusion was based and of the process of reasoning by which the conclusion was reached. Consequently this order is likewise erroneous in point of law. 46 Section 69(3) of the Local Courts (Civil Claims) Act applies the provisions of sections 101 to 115 (inclusive) of the Justices Act to the present proceedings. Section 109 of the Justices Act states:- The Supreme Court may, after hearing an appeal, determine the appeal by dismissing the appeal or by doing any one or more of the following:- (a) confirming, quashing, setting aside or varying the . . order appealed against or any part of it, (b) [not relevan]t (c) making such other order as it thinks just (d) remitting the matter to the Magistrate who made the . . .order . . to hear and determine the matter of the appeal. 47 I have considered whether in lieu of remitting the matter to the Magistrate I should myself determine the matter. If the result of this case depending only upon a question of law I would be prepared to do so. However, this case turns upon disputed issues of fact and I do not consider that this court is in a position to decide upon such issues. 48 Accordingly, the following order are made:- The appeal is allowed and the orders made by the Magistrate in Local Court actions 253 of 1997 and 75 of 2000 are set aside The matters are remitted to the Local Court to hear and determine the matters. The defendant is ordered to pay the plaintiff's costs of the appeal.

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