Malcolm Carr v Trevor Neill [1999] NSWSC 1263 (17 December 1999)

Last Updated: 20 December 1999

NEW SOUTH WALES SUPREME COURT

CITATION: Malcolm CARR v Trevor NEILL [1999] NSWSC 1263

CURRENT JURISDICTION: Common Law Division

FILE NUMBER(S): 10880/99

HEARING DATE{S): 11 November 1999

JUDGMENT DATE: 17/12/1999

PARTIES:

Malcolm Carr

Trevor Neill

JUDGMENT OF: Sully J

LOWER COURT JURISDICTION: Local Court

LOWER COURT FILE NUMBER(S): 80313/96

LOWER COURT JUDICIAL OFFICER: Price LCM

COUNSEL:

M. J. Watts - Appellant

G. Kennedy - Respondent

SOLICITORS:

R. D. Black & Associates - Appellant

North Shore Legal Solicitors - Respondent

CATCHWORDS:

ACTS CITED:

Local Courts (Civil Claims) Act 1970 (NSW)

Justices Act 1902

Justices Legislation Amendment (Appeals) Act 1998

Administrative Decisions (Judicial Review) Act 1977 (C'th)

DECISION:

Appellant's summons dismissed with costs

JUDGMENT:

SUPREME COURT OF

NEW SOUTH WALES

COMMON LAW DIVISION

SULLY J

17 December, 1999

10880/99 - Malcolm CARR v Trevor NEILL

JUDGMENT

1 HIS HONOUR: Mr. Malcolm Carr, to whom I shall hereinafter refer as `the appellant', and Mr. Trevor Neill, to whom I shall hereinafter refer as `the respondent', are both solicitors of this Court. They have become embroiled in litigation stemming from a proposal for the sale by the respondent to the appellant of a legal practice formerly carried on by the respondent.

2 That litigation commenced with the issue on 19 September 1996 of an Amended Statement of Liquidated Claim brought by the respondent as plaintiff against the appellant as defendant. The respondent claimed a sum of $31,250 "being the balance of moneys payable by the ......(appellant) ......to the ... ... (respondent) ... ... pursuant to an agreement between ......(the respondent) ...... and ......(the appellant) ... ... executed by .....(the respondent) ......and ......(the appellant) ..... on or about the 3 May 1994 ......". The claim alleged an agreement for the sale by the respondent to the appellant of the former's legal practice for a sum of $100,000. It was alleged that the appellant had agreed to pay the purchase price, as to the sum of $50,000 on 1 July 1994; and as to the balance of $50,000 by eight equal instalments of $6,250 each upon certain nominated days commencing with 1 October 1994 and ending with 1 July 1996. It was alleged that the appellant had paid the first three of such eight instalments; but had failed to pay the remaining five instalments.

3 The proceedings thus commenced were vigorously defended. They proceeded to a vigorously contested hearing at the Downing Centre Local Court before Mr. M. Price LCM. Evidence and submissions occupied no less than four hearing days, on 8, 11 and 12 November 1998 and 1 March 1999. The learned Magistrate reserved his decision, giving eventually, and on 19 March 1999, judgment for the respondent in the amount claimed.

4 On 14 April 1999 the appellant filed in this Court a summons seeking that the judgment of the Local Court be set aside and replaced by a judgment in his favour; or, alternatively, by an order that there be a new trial; and that there be appropriate ancillary orders as to costs and otherwise.

5 The submissions for the appellant postulated as follows the questions which are said by the appellant to arise for the determination of this Court:

"1. Was the Respondent in a position, either as owner or as legal representative, to sell the legal practice to the Appellant?

2. If the answer to the previous question is yes, did the Appellant and the Respondent, by signing the Heads of Agreement on 3 May, 1994, intend to enter into a legally binding agreement for the sale of the legal practice?

3. If the answer to the previous question is yes, did the parties complete the agreement for the sale of the legal practice so that the Respondent is entitled to the purchase price of $100,000? In particular, (a) did the Appellant complete the pre-completion audit referred to in the Heads of Agreement dated 3 May, 1994; (b) did the Respondent transfer to the Appellant the goodwill as referred to in the proposed Agreement for Sale; and (c) had the respondent discharged all other obligations imposed upon him by the terms of the Heads of Agreement,

so that the Respondent was thereby entitled to the sale price of $100,000?

4. Was His Worship's finding that a pre-completion audit as required by clause 3.2 of the Agreement `for all its imperfections' took place on 21 April, 1994 so against the weight of evidence that it was a perverse finding of fact and amounted to an error of law?"

6 The way in which the foregoing questions have been framed makes it necessary to fix with some precision the actual jurisdiction of this Court in connection with the present appeal.

7 The appellate jurisdiction of this Court as now invoked is conferred by s.69 of the Local Courts (Civil Claims) Act 1970 (NSW). That section provides, relevantly:

"69(1) Subject to sub-section (2), all judgments and orders of a court exercising jurisdiction under this Act shall be final and conclusive.

(2) A party to proceedings under this Act who is dissatisfied with the judgment or order of the court as being erroneous in point of law, may appeal to the Supreme Court therefrom.

(2A)...........(not applicable)

(3) The provisions of section 101 to section 115, both sections inclusive, of the Justices Act 1902, apply, to the extent to which they are applicable, to appeals under sub-section (2) in the same way as they apply to appeals to the Supreme Court under those provisions."

8 Sections 101 to 115 inclusive of the Justices Act make up Part 5 of that Act. Part 5 governs, so far as is now relevant, appeals to this Court in connection with judgments of the kind now in question. Section 102 deals in general terms with the applicability of Part 5. That section provides, relevantly:

"(3) This Part, to the extent to which it is not inconsistent with any other Act, applies to any order of a magistrate made under another Act against which: (a) an appeal is provided for under the other Act to the Supreme Court, ........."

9 Section 104 prescribes the circumstances in which certain nominated categories of judgment or order may be brought on appeal to this Court and pursuant to Part 5. Section 104(1) deals with appeals by defendants. Section 104(2) deals with appeals by informants. Section 104(3) deals with appeals in relation to committal proceedings. Section 104(4) deals with appeals in relation to interlocutory orders. Section 104(5) deals with appeals by parties to civil proceedings. Of these various provisions, only sub-sections (1) and (5) are relevant. They provide as follows:

"(1) A person against whom any conviction or order was made, or sentence was imposed, by a Magistrate in summary proceedings may appeal under this Division to the Supreme Court on any of the following grounds: (a) a ground that involves a question of law alone, (b) a ground that involves a question of mixed law and fact, but only with the leave of the Supreme Court, (c) the ground that the conviction, order or sentence cannot be supported having regard to the evidence.

This sub-section does not apply in respect of an order that is made in relation to committal proceedings or an interlocutory order.........................................

(5) A party to any proceedings under the Local Courts (Civil Claims) Act 1970 may appeal under this Division to the Supreme Court as provided for by section 69 of that Act."

10 It was submitted for the appellant that sub-sections (1) and (5) are to be read together, with the consequence that the jurisdiction conferred by section 69(2) of the Local Courts (Civil Claims) Act has been expanded so as to encompass the jurisdiction that is conferred by the various paragraphs (a), (b) and (c) of sub-section 1.

11 In my opinion, this submission is unsound. It is unsound because, in my opinion, it cuts across the plain provisions of section 102(3). It would be entirely inconsistent with the plain provisions of section 69(2) of the Local Courts (Civil Claims) Act 1970 to treat an appeal brought to this Court under that very limited and particular provision, as having been extensively expanded by the provisions of sub-section 104(1) of the Justices Act.

12 In that connection it is to be borne in mind that Part 5 of the Justices Act as it now stands is a substitution for a previous Part 5. The substitution was effected by the Justices Legislation Amendment (Appeals) Act 1998. The broad legislative purpose of that amending statute was to simplify the machinery for the bringing of appeals from, relevantly, Local Courts exercising civil jurisdiction, to this Court. The true relationship between section 69 of the Local Courts (Civil Claims) Act, and Part 5 of the Justices Act is, in my opinion, that section 69 of the Local Courts (Civil Claims) Act confers the jurisdiction which is relevant to the present case; while Part 5, and in particular section 104, of the Justices Act provides the procedural machinery by means of which a section 69 appeal is to be brought in fact before this Court.

13 I propose, therefore, to deal with the present appeal upon the basis that it lies properly to this Court only in so far as the judgment from which the appeal is now brought is shown to have been "erroneous in point of law".

14 Just as it is important to be clear, in connection with the present appeal, as to the true nature and scope of the available appeal to this Court, so also it is necessary to be clear about what is conveyed by the expression, used in section 69 of the Local Courts (Civil Claims) Act; "erroneous in point of law". The question has been considered in a number of reported decisions. It is useful to take note of some, in particular, of them.

15 In Australian Gaslight Co v Valuer-General [1940] NSWStRp 9; (1940) 40 SR (NSW) 126, a case concerned with a particular question of statutory construction, Jordan CJ considered the nature and the limitations of an appeal which is permitted only as to a question of law. His Honour collected a number of propositions which he had extracted from a large number of authorities. Looking only at those propositions which are relevant to the present appeal, and omitting the detailed references to earlier decisions, Jordan CJ states the following propositions:

"(3) A finding of fact by a tribunal of fact cannot be disturbed if the facts inferred by the tribunal, upon which the finding is based, are capable of supporting its finding, and there is evidence capable of supporting its inferences.

(4) Such a finding can be disturbed only (a) if there is no evidence to support its inferences, or (b) if the facts inferred by it and supported by evidence are incapable of justifying the finding of fact based upon those inferences, or, (c) if it has misdirected itself in law." [40 SR (NSW), 138]

16 In Poricanin v Australian Consolidated Industries Ltd (1979) 2 NSW 419, the Court of Appeal considered an appeal by an unsuccessful applicant for compensation in the Workers' Compensation Commission. Such an appeal was available only as to a question of law. Hope and Glass JJA said:

"There was evidence both ways and his Honour was not persuaded that a causal relationship had been established. It was argued that he was guilty of an error of law, because the reasons he gave for finding against the applicant involved a misconception of the evidence. Where, however, the party bearing the onus fails to persuade the tribunal of fact, an alleged error in the evaluation of the evidence, even if it extends to the point of perversity, is no more than an error of fact." [ (1979) 2 NSWLR, 422F]´

17 And later:

"Going to the facts of the present case, the applicant's evidence of an offer to work and the refusal of that offer, having been accepted, would, we should have thought, have justified an inference that the applicant was ready, willing and able to perform appropriate light work offered to him. However, the Commission was not bound to draw that inference as a matter of law. Likewise, the evidence of the applicant as to the work which he was willing to do was evidence, which if accepted by the Commission, would have justified or supported the relevant finding, but the Commission was not bound, as a matter of law, to accept that evidence. In declining to draw the inference, and in not accepting the applicant's evidence, the Commission may have been wrong in fact, but even if its rejection was so wrong as to be perverse, that rejection would not have constituted an error of law." [1979 2 NSWLR, 426E]

18 In Mahony v Industrial Registrar of New South Wales & anor (1986) 8 NSW R1, the Court of Appeal had occasion to consider an application for prerogative relief directed to the quashing or the setting aside of an order of the Industrial Registrar which order amended certain Trade Union Rules.

19 Hope JA said:

"There are several lines of authority as to what constitutes an error of law. A dominant rule is that a decision of fact which is wrong, or even unreasonable or perverse does not on that account involve an error of law. ..................Another line of authority, which operates as it were as an exception to the dominant rule, applies in relation to decisions of fact in relation to the application of a statutory description. In these cases there may be an error of law if the decision on the facts is one which could not be reasonably entertained or supported if the tribunal had properly understood the true construction of the relevant enactment." [1986 8NSWLR, 2G-3B]

20 Samuels JA said:

"It was, however, submitted by the appellant that no reasonable tribunal properly directed on the law could have come to the conclusion reached by the Registrar and that, in those circumstances, an error of law appears; and reliance is placed upon Edwards v Bairstow [1956] AC14 and R v Medical Appeal Tribunal; Ex parte Gilmore [1957] EWCA Civ 1; [1957] 1 QB 574 at 582. But these cases - and Hope v Bathurst City Council [1980] HCA 16; (1980) 144 CLR 1 at 7-8 - apply only to the rather special situation where an ultimate finding of fact may reveal error of law `if the primary facts found are necessarily within or outside a statutory description and a contrary decision has been made .............', per Glass and Samuels JJA in Azzopardi v Tasman UEB Industries Ltd (1985) 4 NSWLR 139 at 156. The judge was very hard on the Registrar describing some of his findings `as such as to strain credulity' and his reliance upon certain factors as `nonsensical'. But he appears to have appreciated that, apart from the type of case exemplified by Edwards and Rv Medical Appeal Tribunal; Ex parte Gilmore and Hope even perverse or unreasonable findings of fact do not constitute errors of law:....................." [ (1986) 8 NSWLR 1 at 5B-D]

21 The question now being considered received some attention in the High Court of Australia in Australian Broadcasting Tribunal v Bond and ors. [1990] HCA 33; (1990) 170 CLR 321. The Court was considering certain of the provisions of the Administrative Decisions (Judicial Review) Act 1977 (C'th). Mason CJ, (Brennan J agreeing), said, (omitting from the following citation his Honour's references to authority):

"The question whether there is any evidence of a particular fact is a question of law. Likewise, the question whether a particular inference can be drawn from facts found or agreed is a question of law. This is because, before the inference is drawn, there is the preliminary question whether the evidence reasonably admits of different conclusions. So, in the context of judicial review, it has been accepted that the making of findings and the drawing of inferences in the absence of evidence is an error of law.

But it is said that `[t]here is no error of law simply in making a wrong finding of fact'. Similarly, Menzies J observed in Reg v District Court; ex parte White:

`Even if the reasoning whereby the Court reached its conclusion of fact were demonstrably unsound, this would not amount to an error of law on the face of the record. To establish some faulty (e.g. illogical) inference of fact would not disclose an error of law.'

Thus, at common law, according to the Australian authorities, want of logic is not synonymous with error of law. So long as there is some basis for an inference - in other words, the particular inference is reasonably open - even if that inference appears to have been drawn as a result of illogical reasoning, there is no place for judicial review because no error of law has taken place.

On the other hand, there are statements in the English cases which support a `no sufficient evidence' test in the context of judicial review of findings of fact. It remains to be seen whether these statements convey any more than a `no probative evidence' test. So far no occasion has arisen to determine whether this is the case and, if so, whether the statements are to be seen as expressing what is or should be the law of Australia on the topic. There are also statements in the English cases which suggest that findings and inferences are reviewable for error of law on the ground that they could not be reasonably made on the evidence or reasonably drawn from the primary facts. Further, in Mahon v Air New Zealand the Judicial Committee stated that natural justice requires that `the decision to make [a] finding must be based upon some material that tends logically to show the existence of facts consistent with the finding and that the reasoning supportive of the finding, if it be disclosed, is not logically self-contradictory'. ................... The approach adopted in these cases has not so far been accepted by this court." [170 CLR, 355-357]

22 I have thought it useful to explore, in the early stages of this judgment, the foregoing principles of law in order to emphasise the narrowness of the appellate jurisdiction that the appellant now invokes. It will be necessary, of course, to look presently at the relevant detail of the learned Magistrate's reasons for his Worship's judgment. But it is important to be clear from the outset of any such exercise that the present appellant cannot succeed simply by pointing to findings of fact made by the learned Magistrate, and by contending, however persuasively, that, in effect, the findings might well have been made in favour of the appellant rather than in favour of the respondent. Nor will it be sufficient for the appellant to convince this Court that, had the matter been before this Court at first instance, findings of fact would have been made in terms more favourable to the appellant than the findings made by the learned Magistrate. In so far as the judgment of the learned Magistrate rests upon inferences of fact drawn by his Worship from the evidence before him, it will not be sufficient to sustain the present appeal that the appellant can demonstrate that the particular process of reasoning by which the learned Magistrate arrived at the particular inference is apparently illogical, provided only that there is some evidence reasonably capable of giving rise to the inference.

23 All of those propositions having been set in place, it is appropriate to turn, next, to a consideration of the factual issues raised, respectively, by the appellant and by the respondent at the hearing before the learned Magistrate in the Local Court.

24 It was not disputed in the Local Court that the appellant and the respondent had in fact negotiated for the sale by the respondent to the appellant of the legal practice that was then being carried on by the respondent. Nor was it disputed by either party that the course of those negotiations had brought into existence three connected documents; and, separately and later, a fourth document. The issues for trial in the Local Court turned, essentially, upon the construction of those documents.

25 The first of the documents in question is dated 3 May 1994. It is headed: "MEMORANDUM OF HEADS OF AGREEMENT'. The parties to it are, admittedly, the appellant and the respondent. The document is comparatively short. Its operative provisions read as follows:

"1. The parties have agreed that on the 1st day of July, 1994 they will enter into and complete a Deed of Agreement for the Sale of the Solicitor's practice conducted by Trevor Neill.

The form and terms of the Deed to be executed on the 1st July, 1994 are attached hereto and marked "A" and have been signed by the parties for identification.

2. The parties have agreed that Trevor Neill will procure Vaderi Pty Limited to enter into a Consultancy Agreement in the terms of Deed attached hereto and marked "B" and signed by the parties for identification.

3. The parties have agreed that in consideration of their entering into the agreements above referred to and in order to facilitate a smooth finalisation and transition of the practice into the hands of Malcolm Carr, Trevor Neill will as and from the 30th day of May 1994, commence to move such equipment, files, phone numbers and other items connected with the sale of the business premises of Malcolm Carr and Forshaws Solicitors and will transfer the day to day operation of his practice to those premises or vacate his existing premises at 2A Boyle Street, Sutherland.

4. Trevor Neill will maintain and continue to operate the existing Trust Account of Trevor Neill & Company and will have such account audited so as to comply with the requirements of the Trust Account Regulations and will if required by Malcolm Carr arrange for an inspection by a Trust Account Inspector of the Law Society of New South Wales, such inspection to be completed prior to the 1st July, 1994."

26 The document to which reference is made in clause 1 as Annexure "A" is a lengthy document running to some nine typewritten pages. It is, plainly, an agreement for the sale to the appellant by the respondent of the latter's current practice as a solicitor. The agreement nominates a purchase price of $100,000. It provides for completion on 1 July 1994. It provides that on the date of completion the appellant will pay to the respondent the sum of $50,000 on account of the purchase price, and will pay the balance of the purchase price by eight equal quarterly instalments on the first day of each of eight nominated months. It provides that completion of the agreement is conditional upon the respondent's procuring the execution by a service company of which he was, essentially, the proprietor, to execute a Deed of Consultancy agreement, a copy of which is annexed to the sale agreement. Save for one clause, it is not necessary to set out in detail the remaining provisions of the sale agreement. It is sufficient to understand that they are appropriate to the sale of a legal practice; and that they provide for such obvious things as the transfer of files, of accounts, of services and the like.

27 The one clause that needs to be set out in full is clause 3.2. It appears in a portion of the sale agreement headed: "PRIOR TO COMPLETION". The clause reads as follows:

"3.2 Before the date of completion [1st July 1994] the Vendor will allow Mr. Martyn Betts Accountant to inspect books of accounts, invoices, ledger, bank deposit, bank statements, cash books and any files at their then location for a pre-completion audit."

28 It is not necessary to set out in detail the contents of the Deed of Consultancy. It is sufficient to note that there is in that Deed a recital of an "agreement for sale made the 1st day of July, 1994 ..............".

29 The appellant did not dispute at the first instance hearing that he and the respondent had signed on 3 May 1994 the Memorandum of Heads of Agreement; that the document had been dated as of that date; and that the signatures had been witnessed by a third party. Nor did the appellant dispute that on that same occasion he had signed the sale agreement and the deed of consultancy. The appellant contended, and the respondent did not dispute, that when all three of those documents were signed on 3 May 1994, only the Memorandum of Heads of Agreement was dated.

30 The respondent's case at trial was that he had, between 3 May 1994 and 1 July 1994 put into effect the practical arrangements that one would suppose to be appropriate and necessary for the carrying into effect of the sale of his then practice to the appellant. It is not necessary to detail those steps taken by the respondent.

31 The respondent's case was that on 1 July 1994 he had spoken to the appellant, drawing the attention of the appellant to the need to date as of 1 July the sale agreement. According to the respondent, the appellant had replied, simply: "Well you've got your money, you're alright aren't you?". The respondent, he said, replied: "Yes, but we should nonetheless date the agreements as agreed. I am dating mine now.". According to the respondent the defendant did not reply; but the respondent himself then dated both the sale agreement and the deed of consultancy, inserting in each the date of 1 July 1994.

32 The appellant's case was that the Memorandum of Heads of Agreement did not give rise to binding legal obligations. The appellant contended that the document was nothing more than an agreement to make an agreement; and that, as such, it gave rise to no enforceable legal obligations as between him and the respondent. The appellant's case as to the sale agreement and the consultancy deed was that he had signed such documents, not as documents evidencing an agreement that had been concluded between himself and the respondent, but as documents indicating what they would agree in the way of contractual engagements provided that, prior to 1 July 1994, a pre-completion audit, satisfactory to the appellant, was carried out in connection with the then current financial worth of the respondent's practice. The appellant gave extensive evidence at the Local Court hearing. The thrust of the case that he sought to make is made clear in the following extracts from that evidence:

"Q. What obligations, legal obligations, came into effect on 3 May when you signed the documents you signed that day, or when you signed what you signed?

A. Well I only signed one document. I only signed the Memorandum of Heads of Agreement. It incorporated by reference in schedules further pieces of paper which related to certain contingent arrangements. There was only one document signed.

Q. What legal obligations came into effect on 3 May 1994 in your opinion?

A. By legal obligations do you mean contractual obligations?

Q. Actually yes.

A. None [T 1.3.99, 30 (35) - (50)]

Q. Tell me this Mr. Carr, do you contend that you had any contractual obligations arising by any of the documents signed on 3 May 1994?

A. All in fact no, although other arrangements were made and one of those was that Trevor Neill moved his office into my office and we commenced the consultancy agreement on his move in.

Q. So that would you say, sir, that Trevor Neill equally had no obligations arising by reference to the documents executed on 3 May?

A. The answer's yes." [T, 1.3.99, 33(20)-(30)]

A. ..................Ah, the contract is structured, it is not like, I didn't draw this contract up, this contract is structured to assist Trevor Neill. It is not intended that it will be signed before 1 July but he wants it signed and executed then quickly after that. What I have to do on him presenting certain material to me which related me to do with due diligence, is to then satisfy myself. Upon being satisfied the way the contract is structured I then sign the contract to enter in to it. The reason I didn't sign it on 1 July because I hadn't got the material." [T, 1.3.99 36 (55) - 37 (5)

33 In these passages the appellant was attempting to assert the cardinal point of his case, which point was that the entirety of the transaction contemplated by all three of the documents of which I have previously been speaking, was that they would have no operative effect unless and until he, the appellant, had been satisfied by an independent pre-completion audit that the worth to him of the respondent's practice justified the price that he would eventually pay for it. It was a cardinal feature of the appellant's case at first instance that he had never agreed to a fixed purchase price; but had at all times insisted in his dealings with the respondent that the purchase price should be one related to the independently audited fee-generating capacity of the respondent's practice.

34 The appellant gave, during the course of his lengthy cross-examination, a very long answer in which he outlined in great detail the nature of the practice records which he saw himself as needing to have inspected and audited before he could be in a position to negotiate a final purchase price for the practice. The answer is at T.43, 1.3.99, 43(20) - (55). I will not set it out at length; but will observe that it goes, I should have thought, far, far beyond anything contemplated in clause 3.2 of the sale agreement to which I have earlier referred.

35 At the Local Court hearing it was not disputed that the respondent had in fact undertaken work in accordance with the deed of consultancy earlier herein mentioned. Nor was it disputed that, as the relationship between the appellant and the respondent steadily deteriorated throughout the second half of 1994, it became apparent to both parties that the deed of consultancy ought to be terminated.

36 The undisputed evidence was that on 10 January 1995 both the appellant and the respondent executed a Deed terminating the consultancy arrangement previously on foot. Two provisions of the Deed are of present significance.

37 First, the Deed contains a recital in the following terms:

"A. By agreement dated 1-7-94 ..........(the respondent)......... agreed to sell to .........(the appellant) ........his legal practice, and it was a term of such agreement that completion was conditional upon procuring the execution of a consultancy agreement between .....(the respondent's service company).......(the appellant) and .........(the respondent)."

38 Secondly, the document contained a clause in the following terms:

"4. (The appellant)......hereby re-affirms his committment (sic) to pay the balance of purchase moneys due under the sale agreement of the 1-7 94 and .....(the respondent).......re-affirms his committment (sic) to observe all the covenants in the said sale agreement to be observed by him.."

39 It is noteworthy that one of those covenants on the part of the respondent was a stringent covenant in restraint of trade. Not surprisingly it might be thought, the appellant was cross-examined upon this particular document. He gave this evidence:

"Q. Under that agreement you had an obligation to pay $100,000?

A. I had no obligation at that point in time. My re-affirmation was going back to 3 May. .............

Q. ............. . You're re-affirming a commitment to pay 100,000 which arose on 3 May, is that right?

A. That's right. If the circumstances were that I had the stuff that I asked for and that was provided for in the same agreement. I haven't got those." [T,1.3.99, 45 (5) - (20)]

40 The appellant called in the Local Court Mr. Martyn Betts, to whom reference is made in clause 3.2 of the sale agreement. Mr. Betts gave evidence that he had gone to the respondent's office on 20 April 1994. He had been handed previously by the appellant "sheets containing various accounts including the profit and loss accounts of ..........(the respondent's legal practice firm)". His instructions from the appellant were to ascertain, and to comment upon, the following materials:

"i The controls and procedures

ii Types of accounting system

iii How.....(the respondent's) ........practice could be integrated into the Locus accounting software

iv A list of clients

v Details of file openings and closings for 1994"

41 The evidence by Mr. Betts did not suggest that he had been in any way obstructed in the inquiries that he had sought to make at the respondent's premises. Mr. Betts said that he had not been engaged for any great length of time in his inquiries at the respondent's office. He gave evidence which, if accepted, would have justified a finding of fact that his inspection of April 1994 had fallen a good deal short of what might be described as a full-blown audit. The appellant could not, of course, dispute that he had paid $50,000, and three successive quarterly instalments in the precise amounts contemplated by the document which, according to him, had never been intended to generate, and had not in fact generated, any contractual obligations on his part. The appellant's explanation of those payments, taking what he said at the highest point in his favour, was that he had made the payments, so to speak, as an earnest of good faith in connection with the performance of the transaction witnessed by, in particular, the sale agreement, but always provided that he was first satisfied of the fee-generating potential, as earlier herein discussed, of the respondent's practice.

42 Such was, in general terms, the factual contest presented for decision by the learned Magistrate.

43 As to the inspection carried out by Mr. Betts, the learned Magistrate's conclusions appear in the following passage in his Worship's reasons for judgment:

"As a finding of fact it would have to be established that Mr. Betts was engaged on behalf of Mr. Carr at what I shall term the negotiation stage. It matters not how long or how thoroughly Mr. Betts might have channelled his professional skills to the perusal or examination of the manual card system of clients, as opposed to a computer-based accounting system within the Neill practice. The fact of the matter is he was provided with that material, whatever its shortcomings. Similarly Mr. Fink an accountant was engaged on behalf of the defendant Mr. Carr. He simply was not called."

44 All of these findings were, in my opinion, plainly open to the learned Magistrate.

45 The core of the reasoning of the learned Magistrate appears, as it seems to me, in the following concluding passages of his Worship's reasons for judgment:

"In conclusion, what the evidence clearly established was that Mr. Carr was unhappy with the draft Sale of Business Document and indeed the document in final form did not meet with his entire approval for whatever reasons. Nevertheless he affixed his signatures to it. The evidence again is that in the course of those pre purchase negotiations or discussions the defendant Mr. Carr released Mr. Neill from previous representations. It is inescapable that Mr. Carr engaged Mr. Betts to undertake an examination of the records of the practice. However many minutes or days he might have spent in that exercise, whatever ease or difficulty he might have encountered whatever the merits of a manual as opposed to a computer based accounting or record keeping system, the totality of evidence is that following that "appraisal" this Heads of Agreement was signed, signed by both. Without detailing each and every instance or event, at least on the part of Mr. Neill there was a flurry of activity, transferring Trust Funds, re-locating client files in the Carr practice, sharing a common unit of staff, transferring of the telephone and fax numbers, re-naming the practice to incorporate the name Neill, not to mention the physical re-location of Mr. Neill the plaintiff in the defendants business premises his practice. Then, of course there was the $50,000 payment and the three instalments spanning many many months. All this at a time when the Defendant argues there was no Agreement or if there was it was allied in some way to a Consultancy. All the Defendant can basically point to is the confrontation on 1st July, 1994 when he was asked to affix his signature, and he declined. Yet there is the $50,000 and these monotonously regular payments of $6,000 odd each time.

A telling aspect, in the mind of this court, is that the agreements made no provision for Arbitration to resolve the purchase price. The irresistible inference has to be that it was agreed, at $100,000. What need is there to Arbitrate on something that has been concluded or decided.

What comes through loud and clear throughout the whole of the taking of the evidence and the two principal witnesses Mr. Neill and Mr. Carr is that begrudgingly the latter affixed his signature to the May 3rd document. That election was not taken lightly but the court accepts was against the background of Messrs. Betts and Fink being engaged in some consultancy or advisory basis. Thereafter, as was said, a lot of things flowed physical as well as financial. To now submit, what is essentially that the Agreement was a "Claytons Agreement" does not find favour with this court. It may well be, as Mr. Carr exclaimed in one outburst in cross examination that this exercise almost bankrupted him, it may well be that with the passage of time post July 1st, 1994 a consideration of the venture which had virtually unravelled was not within his, Mr. Carrs' original contemplation.

If there was no Agreement why, one rhetorically asks, were these significant sums of money paid, paid by a Solicitor.

It is relatively easy to assert a collateral aspect of the Agreement about figures for the 1994 fiscal year.

The court accepts that Mr. Carr is bitterly disappointed with his business venture vis a vis Mr. Neill. It cannot, however accede to the earlier described litany of complaints levelled at him so far as their dealings were concerned."

46 It should be pointed out, in explanation of something said in the earlier part of the foregoing extracts, that his Worship's reference to a release by the appellant of the respondent from previous representations is, as I understand what was meant, a reference to clause 7.0 of the sale agreement. That clause reads as follows:

"(The appellant) ...........acknowledges that he has, in entering into this Agreement, not relied upon any statements, representation, warranty or condition made or given by .....(the respondent) ..... or anyone on his behalf in respect of the subject matter of this Agreement, other than those that are expressly herein contained"

47 In my opinion the evidence adduced at the hearing in the Local Court justified the following process of reasoning:

1) A fair reading of the Memorandum of Heads of Agreement, of the Sale Agreement, and of the Consultancy Deed, justifies a finding of fact that the documents were intended, both by the appellant and by the respondent, to be read together.

2) The question whether the documents, when so read together, manifested a common intention to be bound contractually by the terms of all three of the documents, was a question to be decided by reference to principles of law which are well established. A useful collection and discussion of the relevant authorities will be found in Lewison: The Interpretation of Contracts: 2nd Edition: pages 8-13 under the heading: "Objectivity and Subjectivity". Of particular relevance for present purposes are the principles embodied in the passages quoted by the author from the decision of Blackburn J in Smith v Hughes (1871) LR 6QB 597; from the decision of Stuart-Smith LJ in R v Lord Chancellor's Department, ex p. Nangle [1992] 1 All ER 897; and the decision of Saville J in Vitol B.V Compagnie Europeene des Petroles.

3) The application of those principles to the facts of the present case was capable of justifying a finding of fact that a sensible objective observer in the position of the respondent would have understood that the appellant, when he signed all three of the documents on 3 May 1994, intended that they should constitute, as an integral set of documents, a binding contractual agreement between him and the respondent.

48 If, as is my view, the foregoing findings of fact were reasonably open; and if, as I think is clear from the published reasons for judgment, that the learned Magistrate effectively followed that path of reasoning; then I do not think that it is now open to this Court to hold that, in the narrow and particular sense now relevant, the learned Magistrate's decision is "erroneous in point of law".

49 I take the learned Magistrate to have rejected the assertions of the appellant that he, the appellant, had never intended that any of the documents which he signed in May 1994 should generate binding contractual obligations. That was entirely a question of fact for the learned Magistrate. I do not see how it is possible to say that it was not reasonably open to his Worship so to reject the contentions of the appellant.

50 I take the learned Magistrate to have found, further, that the conduct of the appellant in paying over on 1 July 1994 a lump sum of $50,000, followed by three quarterly instalments in precise conformity with the terms of the sale agreement was such as to justify an inference, drawn in fact by his Worship, that the appellant did consider himself contractually bound to make those payments to the respondent. I take his Worship to have rejected the evidence of the appellant asserting the contrary. These matters, too, were matters of fact for the Magistrate. I do not see how it can be argued that the findings were not reasonably open to his Worship.

51 As to the pre-completion audit contemplated by clause 3.2 of the sale agreement, I take his Worship to have found as a fact that Mr. Betts was given every access to which he was entitled in terms of that clause. That, too, was entirely a matter of fact for his Worship. I do not see that it was not reasonably open to his Worship to reach such a finding of fact.

52 As to the repeated and vehement assertions of the appellant that he had told the respondent on a number of occasions that he, the appellant, would agree to no purchase price unless and until he had first had an audit of a kind that satisfied him, I take the learned Magistrate to have rejected that evidence of the appellant. This was, in my opinion, quintessentially a question for the learned Magistrate. I do not consider that any cause has been shown for a holding by this Court that it was not reasonably open to his Worship to take that view of the appellant's evidence. It is trite, but in the circumstances of this appeal it is worth reiterating nonetheless, that the learned Magistrate had the advantage, which this Court does not and cannot have, of seeing and hearing the witnesses, and in particular the appellant. In my opinion no cause has been shown for this Court now to interfere with assessments of that kind, made by the learned Magistrate. A fortiori when the basis of the present appeal is the narrow and particular basis for which provision is made in section 69(2) of the Local Courts (Civil Claims) Act.

53 I have referred earlier in this judgment to the four particular questions posed by the written submissions put in on behalf of the appellant. The first of those questions was not pressed at the hearing of the appeal. I would answer as follows the other particular questions.

54 Question 2: The learned Magistrate so found; and was entitled, in my opinion, so to find.

55 Questions 3: As to the general portion of the question, I take the learned Magistrate to have made such a finding of fact; and, in my opinion, it was open to his Worship to make such a finding.

56 As to the particular paragraph (a), the question would be more accurately posed by reference to clause 3.2 of the sale agreement as incorporated by reference into the Memorandum of Heads of Agreement dated 3 May 1994. Approaching the sub-question (a) upon that basis, I take the learned Magistrate to have made a finding of fact to that effect; and in my opinion it was reasonably open to his Worship so to find.

57 It is not necessary, in my opinion, to venture a precise answer to the sub-questions (b) and (c) for the reason that they pose issues not truly litigated at first instance. In reality, as it seems to me, the issues that were truly litigated at first instance were: first, was there a binding contract at all?; and, secondly, if there was, did the respondent do what he was required to do in terms of clause 3.2 of the sale agreement?

58 Question 4: In my opinion, the finding was not a perverse finding of fact as postulated by the question. There was no error of law as suggested in the question.

59 For the whole of the foregoing reasons, I have come to the conclusion that the appellant has not shown cause, conformably with the requirements of section 69(2) of the Local Courts (Civil Claims) Act, for the disturbance by this Court, on appeal, of the judgment given at first instance.

60 The appellant's summons is dismissed with costs.

61 The exhibits are to remain in Court for a period of 28 days from today. If, within that period, an appeal is lodged against this judgment, then the exhibits are to remain in Court pending further order. If within that period no such appeal is lodged, then the exhibits thereafter may be returned to the persons or bodies respectively entitled to them.

**********

LAST UPDATED: 17/12/1999