Nicolaou v The Federation of Ethnic Communities’ Councils of Australia

1. [1]

   HER HONOUR: This is an appeal from a decision of a Local Court Magistrate. By summons filed 23 June 2015, the plaintiff seeks firstly, an order that leave be granted to bring this appeal pursuant to s 40 of the Local Court Act 2007 (NSW); secondly, that the appeal be allowed in respect of the contract claim only; and thirdly, that the judgment of her Honour Local Court Magistrate Milledge be set aside in respect of the contract claim only.

2. [2]

   The plaintiff in this Court is Dr Loucas Nicolaou (“Dr Nicolaou”), who was the plaintiff in the Local Court proceedings. The defendant in this Court is the Federation of Ethnic Communities’ Councils of Australia (“FECCA”), who was the defendant in the Local Court proceedings.

3. [3]

   On 27 May 2015, the Magistrate entered judgment in favour of FECCA.

4. [4]

   On 17 July 2015, the Registrar in this Court made an order that the leave to appeal application be dealt with separately. The leave application was listed before me for hearing. At this hearing, with the consent of the parties and in the interest of containing costs, I decided to determine both the application for leave and the appeal itself.

The appeal

1. [5]

   Section 39(1) of the Local Court Act provides that a party who is dissatisfied with a judgment or order of the Local Court may appeal to the Supreme Court, but only on a question of law.

2. [6]

   Section 40(1) of the Local Court Act provides that a party to proceedings before the Court sitting in its General Division who is dissatisfied with a judgment or order of the Court on a ground that involves a question of mixed law and fact may appeal to the Supreme Court but only by leave of the Supreme Court.

3. [7]

   Section 40(2) of the Local Court Act relevantly provides that a party who is dissatisfied with an interlocutory judgment of the Local Court may appeal to the Supreme Court, but only by leave of the Supreme Court.

4. [8]

   Section 41 of the Local Court Act provides that this Court may determine an appeal either (a) by varying the terms of the judgment or order, or (b) by setting aside the judgment or order, or (c) by setting aside the judgment or order and remitting the matter to the Local Court for determination in accordance with the Supreme Court’s directions, or (d) by dismissing the appeal.

Whether leave to appeal should be granted

1. [9]

   The first issue to be determined is whether leave to appeal should be granted. Dr Nicolaou seeks leave to appeal on a question of mixed fact and law pursuant to s 40(1) of the Local Court Act. FECCA opposes such leave being granted.

2. [10]

   In Be Financial Pty Ltd v Das [2012] NSWCA 164, the Court of Appeal set out the principles to be considered in deciding whether leave to appeal should be granted. At [32], [33] and [35] Basten JA stated:

3. [11]

   Counsel for Dr Nicolaou submitted that the Court should have regard to the overriding principles contained in s 56 of the Civil Procedure Act 2005 (NSW) in terms of doing justice between the parties. He argued that by granting leave the Court would correct an injustice that is reasonably clear on the facts and not merely arguable.

4. [12]

   Counsel for FECCA opposed leave on the following grounds, firstly, that the appeal concerns no issue of general importance, public policy or legal principle over and above the detriment suffered by Dr Nicolaou as a result of the judgment; secondly, the prospects of the appeal succeeding are poor with Dr Nicolaou providing no arguably demonstrable error; and thirdly, the costs involved in arguing the appeal are disproportionate (s 60 Civil Procedure Act). The costs involved in the appeal are now being mostly absorbed by the hearing of the application for leave to appeal and the appeal together.

5. [13]

   I agree that the amount in dispute is a relatively modest sum of about $36,000 exclusive of GST. The subject matter in dispute is whether there was a binding agreement between FECCA, as an employer, and Dr Nicolaou, as a (former) employee, that Dr Nicolaou’s services were required for a further 14 weeks following the termination his employment as Chief Executive Officer of FECCA.

6. [14]

   The construction of a contract is a question of law and so the appeal is as of right: Australian Broadcasting Commission v Australian Performing Right Association Ltd (1973) 129 CLR 99; (1973) 47 ALJR 526. The agreement between Dr Nicolaou and FECCA is partly written and partly oral. In order to construe the contract, factual findings were made concerning the oral portions of the alleged agreement. Taking these matters into account and in the exercise of my discretion, this appeal is at least arguable. It is my view that leave ought to be granted and I do so.

Grounds of appeal

1. [15]

   Dr Nicolaou appeals on four main grounds. They are, firstly, that the Magistrate erred in not finding that a binding agreement came into existence between 31 March 2014 and 2 April 2014; secondly, that the Magistrate erred in not finding that the email sent by Mr Joseph Caputo of FECCA (“Mr Caputo”) on 31 March 2014 did not amount to an offer that could be accepted by Dr Nicolaou; thirdly, that the Magistrate erred in not finding that Dr Nicolaou accepted the agreement contained in the email; and finally, the Magistrate erred in finding that the offer contained in the email was subject to further executive consideration or approval.

The pleading framework

1. [16]

   At paragraphs [6] and [7] of the statement of claim, filed on 16 May 2014 in the Local Court, Dr Nicolaou pleaded:

2. [17]

   FECCA denied these allegations (Defence [6] and [7]).

3. [18]

   There were also claims for estoppel and false or misleading conduct. Neither of these claims were pursued on this appeal.

Background

1. [19]

   On 27 February 2012, Dr Nicolaou commenced employment as Chief Executive Officer of FECCA.

2. [20]

   In November 2013, Mr Caputo was appointed the new chairperson of FECCA.

3. [21]

   On 14 January 2014, Mr Caputo met Dr Nicolaou at a restaurant in Bondi Junction. Mr Caputo informed Dr Nicolaou that he was a problem for FECCA and that an operational review would be undertaken.

4. [22]

   On 24 March 2014, Mr Caputo and Dr Nicolaou met again. At this meeting Dr Nicolaou was provided with a letter of redundancy. It was at this meeting that options for “an ongoing role” were discussed.

5. [23]

   On 27 March 2014, Mr Caputo emailed Dr Nicolaou relevantly stating:

6. [24]

   On 28 March 2014, Dr Nicolaou emailed Mr Caputo responding:

7. [25]

   On 31 March 2014, Mr Caputo and Dr Nicolaou met at the FECCA office at Bondi Junction and had a long discussion and conducted negotiations. At 11.30 pm that evening, Mr Caputo emailed Dr Nicolaou. That email relevantly reads:

8. [26]

   In this Court, counsel for Dr Nicolaou referred to portions of the Local Court transcript relating to the above email. He submitted that the above email constituted an offer made by FECCA to Dr Nicolaou.

9. [27]

   Counsel for Dr Nicolaou, after referring to the email above, referred to his cross examination of Mr Caputo as follows:

10. [28]

    Counsel for Dr Nicolaou drew this Court’s attention to Mr Caputo’s answer “Yes. Sorry, yes, but there is, I mean, if you read that-”.

11. [29]

    In re-examination, counsel for FECCA asked Mr Caputo the following questions:

12. [30]

    There was some evidence given by Mr Caputo in relation to whether FECCA could retain consultants without the approval of the FECCA executive. On this topic, Mr Caputo gave the following evidence:

13. [31]

    On 2 April 2014, Dr Nicolaou emailed Mr Caputo attaching a document containing proposed deliverables and submitting that the key element of his agreement to accept his redundancy was that he would work for FECCA as a consultant.

14. [32]

    On 2 April 2014, Mr Caputo replied:

15. [33]

    Later on 2 April 2014, Dr Nicolaou forward a revised list of deliverables removing the paragraph relating to the “key element” as requested. He relevantly stated:

16. [34]

    Dr Nicolaou submitted that this reply constituted an acceptance of the offer and at that time there was a binding agreement between the parties that had been partially performed such that it fell with the first category of Masters v Cameron (1954) 28 ALJR 438; (1954) 91 CLR 353 at 360.

17. [35]

    On 3 April 2014, Dr Nicolaou was informed by Mr Caputo that his appointment as a consultant was not supported by FECCA.

18. [36]

    Before I refer to the Magistrate’s reasons for her decision, it should be noted that the Magistrate had this to say about the parties credibility (J7.46-59; J8.103):

The Magistrate’s decision

1. [37]

   After the Magistrate set out the emails referred to earlier in this judgment, her Honour then stated:

Counsel for Dr Nicolaou’s submissions in the Local Court

1. [38]

   Dr Nicolaou submitted that on the authority of Masters v Cameron, FECCA is bound by the contract by virtue of part performance.

2. [39]

   Counsel for Dr Nicolaou submitted that FECCA, in the course of negotiations with Mr Caputo prior to the making of the agreement, did not inform Mr Caputo that executive approval was required for the agreement (T75.5-75.20). Counsel for Dr Nicolaou submitted that FECCA had retained consultants previously without the need for executive approval, as conceded by Mr Caputo (T90.29-90.32). It was Dr Nicolaou’s evidence that Mr Caputo did not require executive approval to enter into a contract with him, and in fact FECCA did (T30.40-30.50; T31.44-31.46; T32.18-32.24; T33.28-33.41; T36.5-36.14; T41.15-41.24; T42.35-42.43).

3. [40]

   Counsel for Dr Nicolaou also submitted that the Magistrate should accept the admission made by Mr Caputo that he failed in his evidence to address paragraph 70 of Dr Nicolaou’s evidence and that the evidence of Dr Nicolaou should be accepted. Counsel for Dr Nicolaou further submitted that the Magistrate should accept that there was performance of the agreement because Dr Nicolaou provided a list of deliverables as requested by Mr Caputo (T84.6-84.44). The Magistrate was also asked to accept the admission of Mr Caputo that Dr Nicolaou sent an email on 2 April 2014 confirming the agreement and that the email confirmation sent by Dr Nicolaou was consistent with the email that Mr Caputo sent to Dr Nicolaou on 31 March 2014 (T84.16-84.44; T85.5-85.31). Counsel for Dr Nicolaou directed the Magistrate to Dr Nicolaou’s diary entry dated Tuesday, 1 April 2014 (Ex 1D), which contains a contemporaneous file note made by Dr Nicolaou as to the consultancy role and the agreement.

4. [41]

   Counsel for Dr Nicolaou further submitted that Mr Caputo accepted that the email that he sent on the 31 March 2014 was truthful (T87.12-22) and the Magistrate should accept this evidence in making a finding that there was a binding agreement in law.

5. [42]

   The first category of case mentioned in Masters v Cameron is as follows: (at 360):

Counsel for FECCA’s submissions in the Local Court

1. [43]

   Counsel for FECCA submitted that Dr Nicolaou’s case ought to be dismissed with costs for the following reasons, firstly, the contemporaneous and direct evidence proves that there was no agreement as to future employment or engagement by FECCA as Dr Nicolaou asserts; secondly, the factual circumstances make it clear that there was no congruous link between the redundancy of Dr Nicolaou and any agreement as to future employment/ engagement; and thirdly, it was clear that any offer of future employment or engagement was conditional upon the parties reaching agreement as to what tasks Dr Nicolaou was to provide in any future role and approval of any such agreement by the senior executive group of FECCA.

2. [44]

   Counsel for FECCA submitted that the chronology was telling because it proves that no agreement to offer a further consultancy was reached that could possibly have been binding on the parties. It also makes clear that what was really agreed upon on 31 March 2014 was that Mr Caputo would put Dr Nicolaou’s proposal that he be employed or engaged as a consultant to the senior executive of FECCA.

3. [45]

   Dr Nicolaou was cross examined on this timeline. He conceded that there was to be a two step process whereby he was to be “out the door” before other employment options would be explored. Dr Nicolaou then sought to explain that despite the plain words Mr Caputo had used on two occasions (the effect of which being that he required the executive’s approval before any further employment/engagement option could be explored), he knew that Mr Caputo had authority to hire and fire “based on previous experience”. However, this previous experience was based on a consultancy in 2012 before Mr Caputo was the chairperson of FECCA.

4. [46]

   Counsel for FECCA submitted that Dr Nicolaou’s case simply ignores the emails from Mr Caputo on 27 and 28 March 2014 and their content. In cross examination, Dr Nicolaou denied that Mr Caputo did not have the ability to offer him a consultancy based on his previous experience. Overall, FECCA submitted that what Dr Nicolaou was seeking to do was cherry pick which information he chose to rely on and which he chose to ignore.

Conclusion

1. [47]

   The approach to be adopted in construing a contract is a question of law. When construing a contract, or whether one had come into existence, the rights and liabilities of the parties are to be determined objectively. It is not the subjective beliefs or understandings of the parties about their rights and liabilities that govern their contractual relations. What matters is what each party, by words and conduct, would have led a reasonable person in the position of the other party to believe. The meaning of the terms of a contractual document is to be determined by what a reasonable person would have understood them to mean. That, normally, requires consideration not only of the text, but also of the surrounding circumstances known to the parties, and the purpose and object of the transaction – see Codelfa Construction Pty Limited v State Rail Authority (NSW) [1982] HCA 24; (1982) 149 CLR 337 at 350; Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451; [2004] HCA 35 at [40]; Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165 at 179.

2. [48]

   To accept Dr Nicolaou’s approach to establish that an agreement was formed, is one of contortion and not borne out by the objective facts and circumstances.

3. [49]

   The Magistrate analysed the objective intentions of the parties by reference to the disputed oral conversations and the written documents. After undertaking that task, she concluded that she was satisfied that the late night email of 31 March 2014, coupled with the disputed conversation that Dr Nicolaou said he had with Mr Caputo on 1 April 2014, were not sufficient to ground a legal agreement between the parties. It was not the situation in which the parties had reached finality in arranging all the terms of their bargain and intended to be immediately bound to the performance of those terms.

4. [50]

   It is my view that her Honour adopted the correct approach. She analysed the oral and written evidence and came to the correct conclusion. There is no error of law.

5. [51]

   The result is that the appeal is dismissed.