McDavitt v Sedgley DC Christchurch CIV-2011-009-442 [2012] NZDC 1894 (14 November 2012)

Last Updated: 27 September 2016

IN THE DISTRICT COURT AT CHRISTCHURCH

_{CIV-2011-009-000442}

IN THE MATTER OF DISPUTES TRIBUNAL APPEAL

BETWEEN TIM MCDAVITT Appellant

AND RON SEDGLEY Respondent

Hearing: 7 November 2012

Appearances: Mr McDavitt Appears in Person

Mr Sedgley Appears in Person

Judgment: 14 November 2012

_{RESERVED DECISION OF JUDGE C P SOMERVILLE}

The Dispute

[1] This is a Disputes Tribunal appeal brought by Mr McDavitt after the Disputes Tribunal ruled that he was liable to pay Mr Sedgley $3,590.62 for plumbing work undertaken in 2009 by the latter on a property owned by Mr McDavitt.

[2] Mr McDavitt originally received an account for $6676.42 for the plumbing work. Mr McDavitt considered the account was excessive but paid $2,000 and brought the dispute to the Tribunal under s 10(1)(b). In other words, he sought a declaration that he was not liable to pay Mr Sedgley the full balance claimed, although he was not disputing that there might still be a balance owing.

[3] Mr Sedgley was not required to file any documents in reply, because s 11(2)(b) provides that the Disputes Tribunal has the power to order Mr McDavitt to

_{pay him whatever it found to be owing.}

MCDAVITT V SEDGLEY DC CHCH CIV-2011-009-000442 [14 November 2012]

[4] Mr McDavitt complained about the hourly rate charged by Mr Sedgley because, in his view, Mr Sedgley had overstated the hours he had worked and inflated his hourly rate beyond what was reasonable.

[5] Mr McDavitt also complained about the price of the materials supplied by Mr Sedgley, claiming that they had agreed that these materials would be supplied at “trade” prices. In his view, the prices claimed by Mr Sedgley appeared to be excessive and well above what one would have expected for “trade” prices.

[6] Mr McDavitt lives in Australia and attended the hearing by telephone. He found this to be very frustrating, and has since attended in person, both for his unsuccessful rehearing application, and for the present appeal.

The Findings

[7] At the conclusion of the hearing, the Tribunal:

(a) Deducted 2.5 hours from the 44 hours claimed by Mr Sedgley, finding that this was time spent by him inspecting the job before the contact was entered into, and should not have been charged.

(b) Reduced the hourly rate charged by Mr Sedgley from $70 to $50 after finding that, although there had been no agreement concerning the labour charge out rate, the claimed rate of $70 per hour was excessive. In arriving at this conclusion, the Tribunal specifically rejected Mr Sedgley’s claim that he was entitled to charge this rate “because he could see that a dispute was likely and that he would have to spend time in the Disputes Tribunal.”

(c) Confirmed that Mr McDavitt was liable for the invoiced cost of materials as there was no evidence of an agreement between the parties that the materials would be supplied at “trade” prices.

[8] In relation to the costs of materials, the Disputes Tribunal said:

“I have had regard to Mr and Mrs McDavitt’s statement that Mr Sedgley agreed to supply materials at trade rates. Mr Sedgley, however, denied that to be the case. Unfortunately, Mr and Mrs McDavitt did not ensure that any

such agreement was clearly recorded in writing. That being the case, and in the absence of any evidence that the prices quoted by Mr Sedgley are excessive in some way, Mr and Mrs McDavitt are obliged to pay at the quoted retail price.”

The Appeal

[9] Under s 50 Disputes Tribunal Act 1988, the only ground upon which a party can appeal is that the proceedings were conducted by the Referee in a manner that was unfair for the appellant, and prejudicially affected the result of the proceedings.

[10] The reasoning behind Parliament’s limiting rights of appeal to procedural

unfairness, is well summarised by Fogherty J in Shepherd v Disputes Tribunal:1

“The goal of [the Disputes Tribunal Act] is to provide for low cost, speedy and final resolution of small disputes. To achieve that end, Parliament was not interested in providing appeals on the merits of decisions. That may result in what may be described as rough justice from time-to-time. That has to be balanced against the overall goal of the Act to enable persons who could not possibly afford the very expensive litigation costs in the District and High Courts, the opportunity of taking claims before Referees and getting justice.”

[11] For similar reasons of expediency:

(a) Evidence tendered to the Tribunal need not be given on oath (although the Tribunal may require it).2

(b) The Tribunal may use its own initiative to seek out and receive any other evidence, and to make any other investigation that it see fit (although there is an obligation to disclose to the parties any information that may be discovered in so doing).3

(c) The Tribunal may take into account any relevant evidence or

information, whether or not that information would be admissible in a

_{Court of Law.} 4

1 _{High Court Christchurch, CIV-2003-409-001991, 27 February 2004}

2 _{s 40(1)}

3 _{s 40(2)}

4 s 40(4)

(d) There is no right for one party to seek discovery or inspection from the other party of any documents that party might have in their possession that are relevant to the proceedings.

[12] Mr McDavitt’s appeal was accompanied by a six page typed document

outlining the grounds of appeal, and a bundle of documents to be read in support.

Labour Charges

[13] Although Mr McDavitt has complained about the way the Disputes Tribunal Referee dealt with the alleged overcharging of labour, his arguments in this context are essentially about the outcome rather than the process. The findings made by the Referee were in favour of Mr Sedgley, and I can see nothing alleged by Mr McDavitt in his supporting statement, or in his submissions before me, that persuade me that the Referee was unfair and that he was prejudiced as a result. Specifically, the Referee was under no duty to press Mr Sedgley to reveal his normal hourly charge out rate. And she was correct in attempting to identify what was an appropriate market rate on the rather scant material made available to her.

[14] This part of the appeal is dismissed.

Material Charges

[15] The main focus of Mr McDavitt’s appeal, however, was in relation to the

prices charged by Mr Sedgley for the materials he supplied.

[16] In the statement he filed supporting his appeal, Mr McDavitt said:

“Mr Sedgley has repeatedly refused to provide copies of the actual invoices showing how much the goods actually cost. He has given all manner of reasons for not providing this information. Mr Sedgley convinced us to return goods we had already purchased, and buy the replacement goods and all subsequent plumbing materials through his supplier, Plumbing World, on the basis that he would pass on the cost of these goods to us ‘at trade’ prices. Mr Sedgley has reneged on this arrangement, but worse than that, rather than pass on the trade prices to us, he has actually added a significant margin to these materials (for his own pocket) and passed these inflated costs to us. This contention by us can clearly be proven, or dis-proven by Mr Sedgley by

simply providing copies of the actual invoices for the materials bought on our behalf. We acknowledge that as a share-holder, Mr Sedgley is entitled to some benefits, and have allowed him the opportunity to ‘white out’ any personal, private or confidential information on the invoices. He has refused point blank to provide the original invoices. He also refused to provide copies of the invoices to Mrs Todd to see only (in confidence).

[The Referee] accepted his refusal to provide copies of the invoices, even though the provision of these invoices would categorically settle this particular point. [The Referee] did not even ask Mr Sedgley to provide copies of the invoices to her (in confidence) so she could make a fair ruling on this point. [The Referee] simply made a ruling that materials are to be paid for as invoiced by Mr Sedgley, on the basis that we had “not provided any evidence that the prices quoted by Mr Sedgley are excessive in some way”. Mr Sedgley has that evidence, and that is the reason we raised the original application. If [the Referee] is not going to instruct Mr Sedgley to provide the evidence (the original invoices), then she should have given us the opportunity to provide our own evidence that the prices quoted by Mr Sedgley are excessive.”

[17] The Referee responded directly as follows:

“Mr McDavitt states that he was denied the opportunity to present evidence about excessive charges on the materials. This relates to the allegation that Mr McDavitt agreed to charge the materials at trade rates. However, I found that there was no evidence to substantiate that claim and Mr McDavitt had no evidence at the time of the hearing as to any overcharging on either trade or retail rates. He did state that his wife had previously bought some materials at cheaper cost, but there was nothing to confirm that or to show what the difference in pricing may have been.”

[18] After the Tribunal’s decision was released, Mr McDavitt went to Plumbing World and obtained prices for all of the equipment supplied by that store to Mr Sedgley. On the basis of those prices, Mr McDavitt says that he can prove that the prices charged to him by Mr Sedgley carry a 57% margin on the retail price. In other words, he claims that Mr Sedgley, as a shareholder in Plumbing World, had obtained the materials at trade prices from that company and then supplied them at prices that exceed by 57% what Mr McDavitt could have brought them for himself.

[19] Mr McDavitt was not permitted to present this new evidence in support of his rehearing application, possibly because the interests of finality in litigation prevented him from being able to bolster his case by submitting evidence that was, or would have been, available to him at the time of the hearing.

[20] Of course, similar considerations apply on this appeal. All litigants know that they only get one chance to present their evidence, and that is at the hearing of their dispute. If they don’t like the outcome, they cannot ask to re-litigate the dispute with fresh evidence they could have brought to the hearing had they known of its relevance.

[21] It must be remembered, however, that proceedings in the Disputes Tribunal are not as purely adversarial as they are in the civil jurisdiction of the District and High Courts where those rules relating to the finality of litigation were developed. Instead, in the process of providing for the low cost, speedy, and final resolution of small disputes, Parliament created an inquisitorial process in the Disputes Tribunal in order to balance the removal of the right to counsel. For example, the litigant, who in the District or High Court jurisdictions would have been entitled to discovery, can ask the Disputes Tribunal to investigate the documents for itself. Indeed, we know that Mr McDavitt did just that in the present proceedings.

[22] An important issue on this appeal is whether the Referee’s decision to refuse that request was unfair.

[23] Mr McDavitt approached the hearing firm in his belief that an examination of the invoices would reveal that he had been charged more than trade prices for the materials. He was alleging that Mr Sedgley had breached that agreement by adding a margin.

[24] Mr McDavitt had two possible avenues for proving that Mr Sedgley had breached the contract:

(a) He could produce evidence of Plumbing World’s retail prices for the materials supplied and ask the Tribunal to deduce that the trade prices were lower, but he would not be able to establish the actual trade price, and he ran the risk that the prices actually charged by Mr Sedgley, despite his adding a margin, were less than the retail prices, in which case he would be unable to establish a breach of contract.

Moreover, this was not a particularly practical option when Plumbing

World traded in New Zealand and he resided in Australia.

(b) Alternatively, he could ask Mr Sedgley to produce his invoices or disclose them to the Referee. This would immediately establish whether or not there had been a breach of contract, while at the same time providing the proper price Mr McDavitt should have paid for the materials.

[25] It is clear from this analysis, that Mr McDavitt’s request for disclosure of the invoices to the Referee, if not to him, was appropriate.

[26] Of course, Mr McDavitt had completely overlooked that he must first establish that Mr Sedgley had agreed to supply the materials at trade prices, and the Referee was entitled to find, as she did, that there had been no such agreement. As she said in her decision, once she had made this finding, inspecting the invoices would have served no useful purpose. Her decision to refuse Mr McDavitt’s request to inspect these invoices was therefore reasonable, and his appeal fails on this ground.

[27] However, a new issue arises as to whether or not the Referee should have gone on to examine the reasonableness or otherwise of the margin actually charged by Mr Sedgley.

[28] Certainly, as the Referee said in her decision, Mr McDavitt had produced no evidence that the prices charged were unreasonable but, as I have already noted, he had been focused on proving that the prices charged exceeded the trade price and had paid no attention to the secondary issue of the reasonableness of the actual prices charged. There is no evidence that he sought an adjournment to obtain that evidence, but he was unlikely to have been aware of the need to do so until he read the Referee’s decision. So should the Referee either have enquired into the matter herself or given Mr McDavitt the opportunity of examining the issue himself?

[29] Dr Spiller in The Disputes Tribunal of New Zealand (2nd Edition), notes that the Tribunal has an investigatory or inquisitional role, and then comments:5

It is quite appropriate that Referees should take a more interventionist role than Judges commonly take in New Zealand. Referees are often confronted with people who are unskilled in marshalling and presenting evidence and to sometimes lack the foresight or the financial means to present all the evidence in their favour. Without the aid of legal representatives, and with the overriding duty on the Referee to ensure that justice is done, the Referee repeatedly has a duty to use his or her own initiative to “seek and receive” relevant evidence. Thus, for example, in a dispute where the only evidence about the appropriateness of legal fees claimed was that presented by the parties, the District Court held that the Referee should have embarked on a wider enquiry and sought an opinion from the local District Law Society for comment by the parties.

[30] In the present case, the Referee had already come to the conclusion that Mr Sedgley had inflated his hourly rate inappropriately. There was, therefore, a reasonable possibility that he might have acted similarly in relation to the cost of the materials.

[31] I therefore find that the Referee acted unfairly in failing to explore the new issue raised when she determined that there had been no agreement for the materials to be charged out at trade prices.

[32] I also find that Mr McDavitt has been prejudiced by the Referee’s failure to do so. He claims that the prices he has since obtained from Plumbing World demonstrate that Mr Sedgley charged him prices for the major items that exceeded retail values by an average of 57%. If he is able to prove that, then this would certainly be excessive and would warrant a finding that the prices charged by Mr

_{Sedgley were unreasonable.}

5 Rickett vSievewright Quinn & Porter [28/6/95] DC Lower Hutt DT477/94 Page 73

The decision of appeal

[33] As I have found that the proceedings were conducted by the Referee in a manner that was unfair to Mr McDavitt and prejudicially affected the result of the proceedings, the appeal will be allowed in part in as much that the matter will be returned to the Disputes Tribunal for a rehearing on the question of whether or not the prices charged to Mr McDavitt by Mr Sedgley for materials was unreasonable and, if so, what was a reasonable price for them. It can then decide how much is due by Mr McDavitt to Mr Sedgley under the contract.

C P Somerville

District Court Judge