George Ferizis & Co Pty Ltd v Tzavaras Papasinos Pty Ltd

1. [1]

   This judgment involves an appeal from part of the decision of the Local Court.

2. [2]

   The plaintiff is George Ferizis & Co Pty Ltd (Ferizis & Co) and is represented by G Carolan of counsel. The first defendant is Tzavaras Papasinos Pty Ltd (Papasinos). The second defendant is Northmead Auto Centre Pty Ltd (Northmead Auto). The third defendant is Tzavaras & Sons Pty Ltd (TAS). The fourth defendant is William (who is also known as Bill) Tzavaras (Bill). The fifth defendant is Kylie Louise Tzavaras (Kylie). The sixth defendant is Peter Tzavaras (Peter). The seventh defendant is Northmead Auto Pty Ltd (NA). All defendants are represented by A Gauja of counsel.

3. [3]

   The parties relied on a court book consisting of 2 volumes marked as exhibit A1 and A2 respectively. For convenience of understanding and without intending any disrespect, I shall refer to the parties by name.

Background

1. [4]

   Ferizis & Co appeals from part of the decision of Magistrate Reiss (the Magistrate) in the Local Court in relation to its claim seeking recovery of its unpaid fees for accounting services rendered to the defendants, who are members of the Tzavaras family and their related companies. Specifically, the unpaid fees included:

   1. (1)

      the balance of Ferizis & Co’s invoice dated 22 December 2016 and the invoices dated 30 June 2017 and 18 December 2017 (the Outstanding Invoices); and

   2. (2)

      an administration fee or interest on the Outstanding Invoices.

2. [5]

   Mr George Ferizis (Mr Ferizis) has been the sole director of Ferizis & Co since 28 April 2004. Mr Ferizis has provided accounting and taxation services to the defendants through his company, Ferizis & Co, the plaintiff, from 1979 to 2019.

3. [6]

   The principal defendants were the fourth defendant, Bill, and the fifth defendant, Kylie, who is also Bill’s wife. Both of them were directors of the first defendant, Papasinos. The second defendant, Northmead Auto, was the trustee of the Northmead Auto Centre Trust and Bill was the director of that company. The third defendant, TAS, was the trustee of the Nicholas Tzavaras Family Trust and the Tzavaras Family Trust. Bill and the sixth defendant, Peter, were directors of TAS. Bill and Brooke Warwick Thomas were the directors of the seventh defendant, NA.

4. [7]

   On 4 and 14 December 2023, these proceedings were heard in the Local Court. On 22 August 2024, the Magistrate delivered the judgment (the Judgment).

5. [8]

   Ferizis & Co relied upon the affidavit of Mr Ferizis dated 13 February 2023. Mr Ferizis gave evidence and was cross-examined.

6. [9]

   Bill and Kylie relied on behalf of all defendants in their affidavits dated 21 June 2023 respectively. They each gave evidence and were cross-examined.

7. [10]

   On 22 August 2024, the Magistrate entered a verdict for Ferizis & Co against all individual defendants, except Kylie, for specific small amounts which had been claimed from them. However, his Honour rejected the claim for payment of the invoices issued to "Messrs B, J & P Tzavaras & Mesdames G & K Tzavaras", being (CB 1467-1472):

8. [11]

   The claim for payment of the three invoices was rejected because his Honour said that Ferizis & Co had not apportioned the value of the work performed in relation to each invoice between the various defendants for whom work was performed.

9. [12]

   His Honour also held that Ferizis & Co was not entitled to rely upon the terms of the Client Engagement Letter which was posted to the defendants on 12 December 2016 addressed to the post office box nominated by the defendants to receive their correspondence.

10. [13]

    In relation to the alternative claim of quantum meruit, his Honour found that there was no dispute that the "work in question was requested and/or freely accepted" (at [45] of the Judgment). His Honour found that the unpaid invoices "reflect fair and reasonable rates for the work done” (at [52] of the Judgment).

Summons

1. [14]

   By way of the Summons filed on 21 November 2024, Ferizis & Co seeks the following orders:

   1. (1)

      An order nunc pro tunc pursuant to Uniform Civil Procedure Rules 2005 (NSW) (UCPR) rr 50.3(1)(c) and 50.12(1)(c) extending time for the commencement of the appeal to the date of filing of the Summons;

   2. (2)

      Leave to appeal from the part of the decision below in relation to the Magistrate's finding at [41] of the Judgment in relation to service of the plaintiff's Client Engagement Letter;

   3. (3)

      Appeal allowed;

   4. (4)

      Order (i) made in the Local Court be set aside;

   5. (5)

      Judgment for the plaintiff against the fourth, fifth and sixth defendants for the sum of $56,192; and

   6. (6)

      An order that the fourth, fifth and sixth defendants pay the plaintiff's administration fee or, alternatively, interest on amounts outstanding.

2. [15]

   Ferizis & Co appeals on three grounds. They are:

   1. (1)

      The Magistrate erred as a matter of law in not finding the fourth, fifth and sixth defendants liable for the Outstanding Invoices (Appeal Ground 1), given:

   2. (2)

      The Magistrate erred as a matter of law in finding that the plaintiff was required to apportion the amounts charged in the outstanding invoices (Appeal Ground 2).

   3. (3)

      The Magistrate erred as a matter of mixed fact and law in finding that the Client Engagement Letter sent by the plaintiff to the fourth, fifth and sixth defendants on 12 December 2016 was not received by them, being a finding which was against the weight of evidence and contrary to the findings made by the Magistrate in relation to the evidence of the fourth and fifth defendants (Appeal Ground 3).

The pleading framework:

1. [16]

   The starting point is the pleading framework. I shall briefly set it out here.

2. [17]

   On 28 March 2023, Ferizis & Co filed its amended statement of claim (ASC) seeking damages for breach of contract or in the alternative, quatum meruit, for the defendants’ failure to pay the Outstanding Invoices. The Outstanding Invoices totalled $66,473.77 for accounting and taxation services provided by the plaintiff to the defendants between 22 December 2016 and 18 February 2019.

3. [18]

   Ferizis & Co also pleaded that on or about 12 December 2016, it entered into a contract with the defendants to provide accounting and taxation services through the Client Engagement Letter that was posted to the defendants.

4. [19]

   Ferizis & Co further pleaded that from 12 December 2016, Bill and Kylie provided instructions to it to provide accounting and taxation services in respect of all the defendants.

5. [20]

   The defendants each filed their amended defences on 6 June 2023, admitting that the Outstanding Invoices had not been paid but denying that they were required to pay the outstanding amount.

6. [21]

   The defendants denied that they entered into a contract with Ferizis & Co through the Client Engagement Letter.

7. [22]

   The defendants admitted that Bill and Kylie provided instructions to Ferizis & Co to provide services in respect of the defendants.

8. [23]

   The defendants denied that Ferizis & Co was entitled to damages for breach of contract, or in the alternative, that the outstanding amount was payable as quantum meruit.

9. [24]

   The defendants further claimed that Ferizis & Co did not disclose any costs prior to undertaking any work, did not provide an itemised breakdown of the outstanding amount, and that the quantum claimed by the plaintiff was unreasonable for the accounting and taxation services provided by it.

The law

1. [25]

   Sections 39, 40 and 41 of the Local Court Act 2007 (NSW) (LCA) relevantly read:

Leave to appeal

1. [26]

   The first issue that needs to be determined is whether Ferizis & Co should be granted leave to appeal on the basis that Appeal Ground 3 refers to a question of mixed law and fact.

2. [27]

   In BHP Billiton Ltd v Dunning [2013] NSWCA 421 at [19]-[20] the Court of Appeal set out the following principles with respect to the granting of leave to appeal:

3. [28]

   The failure by his Honour to give effect to the oral and/or written contracts between the parties is a clear example of error which, if left uncorrected, would give rise to a substantial detriment to Ferizis & Co and consequently, a miscarriage of justice.

4. [29]

   However, the defendants submitted that there is no clear error, or no error at all that would give rise to any substantial injustice to Ferizis & Co which would favour the grant of leave to appeal.

5. [30]

   In oral submissions, counsel for the defendants stated that beyond Ferizis & Co’s submission that his Honour’s failure to give effect to the oral and/or written contracts between the parties, there were no other factors that the plaintiff could point to that established an error that gave rise to either a substantial detriment to the plaintiff or a miscarriage of justice (T6 [5]-[15]). Counsel further submitted that any injustice must be reasonably clear and more than reasonably arguable (T6 [25]-[35]).

Resolution

1. [31]

   Appeal Ground 3 raises a mixed question of fact and law. In my view, Appeal Ground 3 raises an important issue of an important principle of practice and procedure as to the law in relation to service of documents by post. In these circumstances, I grant leave to appeal.

The decision of the Local Court

1. [32]

   In his written judgment dated 22 August 2024 (the Judgment), the Magistrate provided his written reasons.

2. [33]

   The Magistrate made the following findings in relation to the Client Engagement Letter at [40]-[41]:

3. [34]

   The alternative claim of quantum meruit was set out at [44]-[52] of the Judgment:

4. [35]

   His Honour then dealt with the issue of apportionment at [53]-[58] of the Judgment, saying relevantly:

5. [36]

   The Magistrate found that Ferizis & Co had established its claim for quantum meruit on the smaller invoices:

6. [37]

   The Magistrate stated that “[g]iven the finding in respect to the Client Engagement Letter, I also find there is no contractual basis for claiming the administration fee” (at [59] of the Judgment).

7. [38]

   The final orders are as follows:

8. [39]

   I will start with Appeal Ground 3, followed by Appeal Grounds 1 and 2 which will be dealt with together as they overlap, if necessary.

Appeal Ground 3

1. [40]

   Appeal Ground 3 is as follows:

2. [41]

   S160 Evidence Act reads:

3. [42]

   The Client Engagement Letter acknowledges receipt of instructions to manage accounting and taxation matters for the client’s family, corporate and trustee entities. It outlines the terms and scope of engagement, replacing any previous agreements, explains the new regulations applicable under the Tax Agent Services Act 2009 (NSW) and invites the client to reach out with any questions. It also asks the client to sign and return the Client Engagement Letter to accept the terms but notes that the client will be bound by the terms even without signing, if they provide instructions after the Client Engagement Letter’s date.

4. [43]

   The rest of the Client Engagement Letter is structured as follows with the key information reproduced here:

5. [44]

   There is no clause in the agreement concerning service of documents.

6. [45]

   His Honour found that Ferizis & Co sent the Client Engagement Letter dated 12 December 2016 to the defendants at their usual post office box and that the letter was not returned undelivered (at [40] of the Judgment).

7. [46]

   His Honour rejected the evidence of Bill on any factual matters in dispute at [35]:

8. [47]

   In relation to Kylie's evidence, his Honour observed at [38]:

9. [48]

   Notwithstanding these observations, his Honour said at [41] that he was "not persuaded on the balance of probabilities that [the Client Engagement Letter] was in fact relevantly received by Kylie or Bill or the other defendants".

10. [49]

    Having accepted it was sent, his Honour did not provide any reasoning as to why it was not reasonable to expect that the Client Engagement Letter was delivered to the post office box in the ordinary course of post.

11. [50]

    Counsel for Ferizis & Co elaborated in oral submissions that although there could be some explanation as to why correspondence was not delivered in the ordinary course, there was no evidence of that. As per s 160(1) of the Evidence Act, the presumption is that the letter having been sent, would be received in the ordinary course unless that presumption was somehow rebutted.

12. [51]

    His Honour’s finding that the letter was never received has no basis and gives rise to either an error of law or an error of mixed fact and law because his Honour failed to deal with the evidence about service of the Client Engagement Letter.

13. [52]

    This proposition is supported by the decision of the High Court in Kostas v HIA Insurance Services Pty Ltd (2010) 241 CLR 390, 418 at [91] (Kostas) where it was said that the question of whether there was no evidence to support a factual finding is a question of law, not a question of fact. Where a tribunal decides a question of fact when there is no evidence to support that finding, it makes an error of law and the question as to what material could support a factual finding is a question for judicial decision (Kostas at [91]).

14. [53]

    Counsel also submitted, by reference to Ming v Director of Public Prosecutions (NSW) [2022] NSWCA 209 at [12]-[18], that there was constructive failure to exercise jurisdiction by the Magistrate because of his failure to address the essential matters. His Honour did not address the issue of service properly, and having purported to address it, his Honour did not deal with the evidence that existed before him and in fact ignored his own findings about the existence of that evidence. In so doing, his Honour could not have completed the task because he did not address these essential matters.

15. [54]

    In oral submissions, counsel also addressed the Magistrate’s observations about the fact that Mr Ferizis did not follow up on whether the defendants had received the Client Engagement Letter, stating that it was irrelevant to determining whether the letter was in fact served. The Client Engagement Letter had been sent to an existing, longstanding client and it was not unusual to not refer to such a letter in unless the terms were to be updated.

16. [55]

    In counsel’s submissions in reply, attention was drawn to s 160(2)(c) of the Evidence Act which provides that the presumption does not apply if it is inconsistent with a term of the relevant contract. In this case, there is no term in the Client Engagement Letter that relates to service such that, there is no inconsistency.

17. [56]

    Further, the characterisation at [41] of the Judgment as containing evidence that the Client Engagement Letter was not received, is inaccurate. Rather, his Honour merely makes observations about what may have been but were not available in evidence. Counsel also said that the Magistrate’s findings at [40] and [41] of the Judgment are completely inconsistent. His Honour’s acceptance that the Client Engagement Letter was posted does not sit well with the finding that on the balance of probabilities it was not served.

18. [57]

    The defendants submitted that Appeal Ground 3 would fail on the basis that it is purely a question of fact and not a question of mixed law and fact. No appeal lies to the Supreme Court on a question of fact that is not a question of mixed law and fact: El-Hadi v Australian Timbers (NSW) Pty Ltd [2021] NSWSC 501 at [16].

19. [58]

    As an error of law, a finding of fact can only be disturbed if (a) there is no evidence to support its inferences; (b) the facts inferred by it and supported by evidence are incapable of justifying the finding of fact based upon those inferences; or (c) it has misdirected itself in law (Australian Gaslight Co v Valuer-General (1940) 40 SR (NSW) 126 at 138 (Australian Gaslight)).

20. [59]

    Similarly, as set out by Davies J in Fortune Food Manufacturers Pty Ltd v K Young Trading Pty Ltd [2010] NSWSC 407 at [25]-[26], quoting Kirby P in Azzopardi v Tasman UEB Industries Ltd (1985) 4 NSWLR 139 at 150:

21. [60]

    Ferizis & Co relied on two causes of action being a contractual entitlement based on a Client Engagement Letter or alternatively, a claim of quantum meruit. The issue that his Honour had to decide, was a factual dispute as to whether or not, in effect, there was an offer and acceptance, and his Honour ultimately found that the Client Engagement Letter was not received.

22. [61]

    In oral submissions, counsel for the defendants noted that s 160 of the Evidence Act contains a carve-out in subsection (2), stating that the presumption does not apply to proceedings relating to a contract where all parties to the proceeding are parties to the contract and subsection (1) is inconsistent with a term of the contract (T22 [45] – [50]; T23 [1] – [6]).

23. [62]

    Given that this is a proceeding that relates to a contract and all the parties to the proceeding are also parties to the contract, and there is no clause in the Client Engagement Letter, being the contract, that relates to service, s 160(1) of the Evidence Act does not apply. Counsel for the defendants submitted that there may have been a misdirection if s 160 of the Evidence Act applied, but as it does not apply his Honour did not misdirect himself.

24. [63]

    The Court then returned to the factual question of whether or not the letter was received. Whilst his Honour found that there were issues in relation to Bill and Kylie’s evidence, there was no positive evidence that the Client Engagement Letter had been served. His Honour weighed all the evidence to make a finding of fact that it was never received and accepted. It cannot be an error of law because there was evidence upon which the Magistrate could make that ultimate finding.

25. [64]

    It is asserted by Ferizis & Co that there is a "mixed question of fact and law" on the basis that the finding is against the weight of the totality of the evidence.

26. [65]

    None of the above factors identified in Australian Gaslight apply in this case, and similarly, the finding is not against the weight of the totality of the evidence, as asserted. As set out at [41] of the Judgment, the Magistrate took into account the following evidence:

    1. (1)

       Mr Ferizis did not send the Client Engagement Letter by registered mail;

    2. (2)

       There was no receipt of delivery;

    3. (3)

       A signed copy was never returned to Mr Ferizis;

    4. (4)

       There was no follow-up by Mr Ferizis in relation to delivery; and

    5. (5)

       The Client Engagement Letter was never referred to in any subsequent correspondence or the invoices themselves.

27. [66]

    It is submitted that it was open to the Magistrate to make the findings that he did on the basis of the above evidence.

Resolution

1. [67]

   The onus is on the defendants to rebut the presumption raised in s160 Evidence Act that the Client Engagement Letter was served validly by post. On the rebuttal issue, Bill made a positive assertion that the Client Engagement Letter was not received despite having no role to play in collecting and filing the mail. Unsurprisingly, on that basis, the Magistrate rejected his evidence. That leaves the evidence Kylie as to satisfy the court that the Client Engagement Letter had not been served on the defendants by post. She offered no proof to support her assertion that she never received the Client Engagement Letter. She neither looked for it nor checked if it was in her file. She unreasonably made no room for the possibility that she received it and had forgotten about it. So far as the rebuttal evidence is concerned, His Honour rejected Bill's evidence in its entirety and questioned Kylie's categorical denial of receiving the letter (at [38]-[39] of the Judgment).

2. [68]

   This evidence is insufficient to establish the rebuttal that the Client Engagement Letter was not received by the defendants. In these circumstances, the Client Engagement Letter was validly served by post.

3. [69]

   Counsel for the defendants submitted that the Magistrate’s findings, firstly, raised a question of fact only and, secondly, there was a carve out in s 160(2)(C) Evidence Act that s 160(1) does not apply if it is inconsistent with a term of the Client Engagement Letter. However, there is no term as to service contained in the Client Engagement Letter. Hence, there is no inconsistency with s 160(1) Evidence Act.

4. [70]

   In relation to the issue as to whether s 160(1) Evidence Act was correctly applied by the Magistrate, it was not. The onus was not on Ferizis & Co to prove service of the Client Engagement Letter but rather for the defendants to provide sufficient evidence to raise doubt about the presumption. There was no such evidence. The Magistrate applied the wrong test. This is an error of law and the decision should be set aside.

5. [71]

   If the postal rule is applied correctly, there may be a different result. It is now unnecessary to deal with Appeal Ground 1 and 2. In the exercise of my discretion, the matter should be remitted to the Local Court to be dealt with according to law.

The Result

1. [72]

   Appeal Ground 3 is upheld. The decision of Magistrate Reiss dated 22 August 2024 is set aside. The matter is to be remitted to the Local Court to be determined according to law.

Costs

1. [73]

   Costs are discretionary. The usual rule is that costs follow the event. The defendants are to pay the plaintiff’s costs.

   1. (1)

      The appeal is upheld;

   2. (2)

      The decision of Magistrate Reiss dated 22 August 2024 is set aside;

   3. (3)

      The matter is remitted to the Local Court to be dealt with according to law.

   4. (4)

      The defendants are to pay the plaintiff’s costs.