A-One Metal Services Pty Limited v A.A.R.A. Pty Ltd

1. [1]

   HER HONOUR: These proceedings involve an appeal from a Local Court Magistrate concerning a dispute between a contractor and subcontractor over whether the welding services provided by the subcontractor were defective.

2. [2]

   By summons filed 21 August 2017, the plaintiff seeks firstly, that leave be granted to appeal from the whole of the decision of his Honour Magistrate Pierce; secondly, that the appeal be allowed; thirdly, that the orders of the Local Court dated 24 July 2017 be set aside; and fourthly, that judgment be entered for the defendant in the Local Court proceedings.

3. [3]

   The plaintiff in these proceedings is A-One Metal Services Pty Limited (“A-One Metal Services”) who was the defendant in the Local Court proceedings. The defendant in these proceedings is A.A.R.A. Pty Ltd (“AARA”), who was the plaintiff in the Local Court proceedings. For convenience, I shall refer to the parties by name.

4. [4]

   A-One Metal Services relied upon the affidavit of Hannah Martin dated 25 August 2017 and its accompanying annexure of the Local Court file, as well as two colour photographs handed up in the Local Court (marked Ex A in this Court).

5. [5]

   In the Local Court proceedings, the Magistrate found in favour of AARA and entered judgment that A-One Metal Services pay AARA the sum of $17,487.16.

The appeal

1. [6]

   Section 39(1) of the Local Court Act 2007 (NSW) provides that a party to proceedings before the Local Court sitting in its General Division who is dissatisfied with a judgment or order of the Court may appeal to the Supreme Court, but only on a question of law.

2. [7]

   Section 40(1) of the Local Court Act provides that a party to proceedings before the Local 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. [8]

   Section 41 of the Local Court Act provides that this Court may determine an appeal made under ss 39(1) or 40(1) by either (a) varying the terms of the judgment or order, or (b) setting aside the judgment or order, or (c) 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) dismissing the appeal.

Grounds of appeal

1. [9]

   At the hearing of this appeal, grounds of appeal 1, 2, 3, 5 and 8 were not pressed. There are two main areas of appeal. They are firstly that the Magistrate erred in firstly, taking judicial notice (Ground 4); and secondly, in making findings where there was no evidence (Grounds 6, 7, and 9). I shall refer to them in more detail later in this judgment.

Whether leave to appeal should be granted

1. [10]

   The first issue to be determined is whether leave to appeal should be granted. A-One Metal Services seeks leave to appeal on a question of mixed fact and law pursuant to s 40(1) of the Local Court Act in relation to the issue of judicial notice under s 144 of the Evidence Act 1995 (NSW).

2. [11]

   At the hearing of the appeal, counsel for AARA conceded that while the “no evidence” ground of appeal raises a question of law, the judicial notice ground of appeal does not. AARA contended that it either raises a question of fact only or alternatively, raises a question of mixed fact and law and that leave should therefore be refused. Hence AARA opposes leave being granted on this issue.

3. [12]

   In Be Financial Pty Ltd as Trustee for Be Financial Operations Trust 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:

4. [13]

   Counsel for A-One Metal Services submitted that the principles governing leave were stated by the Court of Appeal in Lee v New South Wales Crime Commission [2012] NSWCA 262, (2012) 224 A Crim R 94 (Bathurst CJ, Macfarlan and Barrett JJA agreeing) at [12]:

5. [14]

   So far as leave is required for any of the appeal grounds, AARA contends in its written submissions that it ought not be granted because (a) the amount in dispute is relatively small, (b) there is no clear injustice to A-One Metal Services, and (c) there is no issue of principle or general public importance.

6. [15]

   As to the size of the claim, that is only one discretionary matter to be taken into account by the Court and even when relatively small amounts are involved, leave ought not be denied where there has been a clear injustice: He v Yeung [2015] NSWCA 392 at [49] (Bergin CJ). A-One Metal Services also referred to the decision of Button J in B&B Enterprise (Aust) Pty Ltd v Sur Holdings Pty Ltd [2016] NSWSC 490.

7. [16]

   These authorities establish that the amount of the claim is a discretionary factor to be considered by the Court in determining whether to grant leave.

8. [17]

   AARA submitted that the Court’s determination of whether a matter falls within the scope of ordinary English words is a question of fact and on that basis the appeal is incompetent. As to this:

9. [18]

   A-One Metal Services submitted that this ground of appeal is squarely directed at whether, having regard to the Australian Standards and other matters referred to above, the requirements in s 144 that the matter in question be “not reasonably open to question” and “common knowledge” were met. Counsel for A-One Metal Services referred to Dreamtech International, where the Full Court of the Federal Court of Australia stated at [18]:

10. [19]

    A-One Metal Services submitted that the terms “not reasonably open to question” and “common knowledge” carry their ordinary meanings in s 144 of the Evidence Act, and, in light of the information concerning Australian Standards placed before the Court, whether the terms were satisfied in the circumstances of this case is a question of law.

11. [20]

    It is my view that the terms “not reasonably open to question” and “common knowledge” in s 144(1)(a) of the Evidence Act are to be given their ordinary meaning as these are not words that carry a special legislative meaning. Accordingly, the determination of the meaning of these ordinary expressions in s 144(1)(a) is a question of fact and whether the present facts fall within such expressions is a question of law. It is therefore arguable that ground 4, involving judicial notice of standards of welding workmanship, is a question of law and A-One Metal Services is entitled to appeal as of right under s 39(1) of the Local Court Act.

12. [21]

    However, if I am wrong in finding that the ground is a question of law and it is rather a mixed question of fact and law, I will consider the exercise of this Court’s discretion to grant leave under s 40(1) of the Local Court Act.

13. [22]

    There are several factors which, to my mind, favour leave to appeal being granted. The grounds of appeal raise the evidentiary issues of judicial notice and no evidence and therefore involve a question of potential injustice which is more than merely arguable. This is in accordance with the decision of Campbell JA in Zelden v Sewell; Henamast Pty Ltd, which I have referred to earlier in this judgment. While the present proceedings do not appear to concern matters of general public importance and the size of the sum involved is relatively small, these considerations are discretionary and not determinative.

14. [23]

    For these reasons, in the exercise of my discretion, I grant leave to appeal on the issue of judicial notice.

The Local Court proceedings

1. [24]

   By statement of claim filed 11 May 2016, AARA commenced proceedings in the Local Court against A-One Metal Services. The Magistrate commented that the statement of claim did not identify a cause of action. The hearing proceeded on the basis that there had been a breach of contract and that there were common law implied terms that A-One Metal Services would perform the work in a proper and workmanlike manner and such work would be completed within a fixed time or alternatively, within a reasonable time.

2. [25]

   By defence, A-One Metal Services denied defective workmanship and pleaded estoppel, or alternatively, Anshun estoppel, based on finding in the court of adjudication proceedings under the Building and Construction Industry Security of Payment Act 1999 (NSW). That defence was abandoned leaving only the delays and quality of work issues in dispute. The issue of delay forms no part of this appeal.

The hearing in the Local Court

1. [26]

   On 24 November 2016 and 20 January 2017, the matter was heard by his Honour Magistrate Pierce at the Local Court, Downing Centre, Sydney. Mr Adelstein, AARA’s solicitor, appeared for AARA. Mr Byrne of Counsel appeared for A-One Metal Services.

2. [27]

   AARA relied upon the affidavit of Elie Minassian sworn on 17 October 2016, the statement of Elie Minassian signed 11 November 2016, the statement of Stuart Watson signed 18 November 2016 and the statement of Gavin Owens signed 22 November 2016. A-One Metal Services relied upon the affidavit of Zinan “Sam” Ou filed 15 November 2016 and an accompanying exhibit (referred to as “Exhibit SO2”). At the hearing on 24 November 2016, Elie Minassian gave evidence. At the hearing on 20 January 2017, Stuart Watson and Zinan “Sam” Ou gave evidence.

Judicial notice – Ground 4

1. [28]

   This ground of appeal is whether the Magistrate erred in taking judicial notice of standards of welding workmanship where such standards were reasonably open to question and not common knowledge in New South Wales or generally.

2. [29]

   Section 144(1)(a) of the Evidence Act provides:

Submissions

1. [30]

   Counsel for A-One Metal Services submitted that it was not open to the Magistrate to rely upon judicial notice of standards of welding workmanship in regards to the aesthetics of commercial balustrade railings and posts. Such standards are not general or notorious facts and do not fall within a category of knowledge similar to those raised by McHugh J in Woods v Multi-Sport Holdings Pty Ltd (2002) 209 CLR 460; [2002] HCA 9 at [64]. Rather, such a category requires specific knowledge of workmanship standards in commercial construction which must be proved by expert evidence. This conclusion is supported by the documentary evidence of correspondence between AARA and the head contractor in which AARA defended the aesthetics of the welding, as well as the submissions by AARA at the commencement of the Local Court hearing that expert evidence was essential for resolution of the workmanship claim. This is inconsistent with a finding that such standards are common knowledge over which every reasonable person may be presumably presumed to be aware.

2. [31]

   It was also submitted by A-One Metal Services that the Magistrate’s finding that the welding was not aesthetically pleasing is quite different from a finding that the welding fell short of any implied standard of workmanship. The former is an opinion drawn from looking at the photographs, which the Magistrate said was not permissible. The Magistrate’s hesitation in finding judicial notice “with difficulty” supports the view that aesthetics of welding is not a category over which the Magistrate could say there was no reasonable doubt or is indisputable.

3. [32]

   Counsel for AARA submitted that there was a reasonable basis for the Magistrate to take judicial notice of those standards. Judicial notice was taken over a narrow category of knowledge, being the aesthetics of the welds and external appearance, and not the actual process of welding which would require specialist skill and knowledge. The documentary evidence of correspondence between AARA and the head contractor defending the aesthetics of the welding does not prevent the finding that welding standards is common knowledge as this evidence was only adduced by AARA to avoid contractual responsibility for rectification. Nor does AARA’s submission that expert evidence was “essential” preclude the Magistrate’s judicial notice finding because it amounted to a strategic preference towards expert evidence which bears no weight on whether the conditions of judicial notice have been satisfied.

4. [33]

   In relation to the distinction raised by A-One Metal Services between a finding that welding that is not aesthetically pleasing and a finding that the welding fell short of an implied standard of workmanship, AARA submitted that the Magistrate made it clear that judicial notice was confined to the aesthetic standards of welding. It flowed from this that the findings in relation to the aesthetic standards of the welds were founded on the standards of which the Magistrate took judicial notice.

5. [34]

   The Magistrate’s reasons in relation to judicial notice at 5 are as follows:

6. [35]

   His Honour continued at 9-10:

7. [36]

   Stuart Watson, the sales manager of AARA, in his statement at [28] stated:

8. [37]

   It is my view that observations of the aesthetic standards of balustrades are a matter of common knowledge and experience. Commercial balustrades are common and ordinary people are likely to interact with them in a variety of settings in their daily lives. Leaving aside the issue of defects in the welding process, whether a finished welding on a balustrade has an attractive physical appearance or whether it is up to the ordinary standards of finish is an issue that is capable of determination by the day-to-day experiences and observations of everyday people. It is fair to say that an ordinary person without any particular expertise in the field would be capable of observing whether a balustrade possesses a rough, bubbly or generally unappealing physical appearance. It is my view that the Magistrate was correct in his finding that the aesthetic, welding standards of balustrades concern an area of common knowledge that is not reasonably open to question either within NSW or generally. I am not satisfied that the documentary evidence of correspondence between AARA and the head contractor or AARA’s submissions in the Local Court regarding the importance of expert evidence has any direct bearing on whether the requirements for judicial notice in s 144(1) of the Evidence Act have been made out.

9. [38]

   For these reasons, the statutory requirements of s 144(1)(a) have been satisfied and this ground of appeal fails.

No evidence – Grounds 6, 7 and 9

1. [39]

   The grounds of appeal are in finding that work undertaken by A-One Metal Services was defective, and that AARA had suffered damages, where there was no evidence that the work was defective or that any damages were suffered (Ground 6); in finding that Mr Ou had made an admission that work undertaken by A-One Metal Services was defective where there was no evidence of any such admission (Ground 7); and in finding that A-One Metal welding work had been defective, his Honour erred in referring to and relying upon parts of affidavits excluded from evidence and not before the Court (Ground 9). I shall deal with each ground of appeal in turn.

2. [40]

   Counsel for A-One Metal Services referred to Haider v JP Morgan Holdings Aust Ltd (2007) DDCR 634, where Basten JA stated at [33]:

No evidence of defective work – ground 6

1. [41]

   This ground of appeal is that the Magistrate had erred in finding that the work undertaken by A-One Metal Services was defective, and that AARA had suffered damages, on the basis that no evidence that the work was defective or that any damages were suffered.

2. [42]

   So far as no evidence that the work was defective, counsel for A-One Metal Services submitted that the Magistrate’s conclusion that the work was defective with an “unsightly wielding” was based upon the affidavit of Mr Watson (sales manager at AARA) and two photographs. However, neither the affidavit nor the photographs provided evidence that the welding was performed in an improper and unworkmanlike manner. The affidavit only referenced a conversation (Watson, aff, [27]) and provided limited evidence about further contracting work organised by Mr Watson. (Watson, aff, [28]). However, the first two sentences of para [27] were subject to an order by the Magistrate under s 136 of the Evidence Act order which prevented its use to prove the facts asserted, and the remainder was ruled inadmissible. Similarly, para [28] could not be relied upon because the evidence of further contracting work to rectify the welding is not logically connected to the work of A-One Metal Services, especially as no time period was identified for when such work took place.

3. [43]

   It was further submitted by A-One Metal Services that the Magistrate could not rely upon the two photographs as evidence that the welding work as a whole was defective. While the Magistrate suggested such an inference was possible on the basis of invoices, few of these made any reference to rectification work, the invoices did not specify what balustrades were being rectified and when such work occurred, some of the invoices were issued by AARA entities, and the invoices did not provide evidence that rectification work was actually required.

4. [44]

   Counsel for AARA submitted that there were four sources of evidence relied upon by the Magistrate in support of his finding that the welds were defective and done in an unworkmanlike manner. These were the photographs (Ex A), the affidavit of Mr Watson and para [28] in particular, the oral evidence of Mr Minassian, and the admissions by Mr Ou. The photographs could be relied upon as manifestly probative evidence for a finding concerning a breach of the relevant contractual standard, being the aesthetics of the welds. The Magistrate could rely upon the lay opinion evidence of Mr Watson as it provides support for the photographs, any observation of the welding’s defective appearance and as implicit evidence of the pervasive nature of the defects across the welding work. The Magistrate could also rely upon Mr Minassian’s oral evidence that there was defective work not visible in the photographs. Finally, it was argued that Mr Ou himself acknowledged the work was less than perfect (I will deal with this later in this judgment).

5. [45]

   Leaving aside Mr Ou’s evidence, there are three other sources of evidence that support the Magistrate’s conclusion that the welding work was defective:

6. [46]

   I have already referred to Mr Watson’s evidence in which he says that he had arranged for a further contractor to complete the metal grinding work and finish off the poorly welded handrails, a licensed lift operator and additional glaziers to lift the glass and position the glass, and additional sanding and finishing work of steel stanchions around three levels of stairs. The Magistrate stated in his reasons that Mr Watson’s evidence “is not expert evidence” and “raises no higher than lay opinion. However, the opinions help to understand the photos in evidence and to provide support for the observations which I make of the apparent defects in appearance.”

7. [47]

   Mr Minassian gave evidence at the hearing where the following exchange took place:

8. [48]

   It is my view that Mr Watson’s evidence, in particular para [28], provides support for the Magistrate’s findings. Mr Watson observed that the features identified by the Magistrate in the photographs as defective were present across the entire works undertaken by A-One Metal Services. While Mr Watson’s affidavit could not be relied upon in isolation to prove the truth of the facts asserted due to the Magistrate’s order under s 136, it could be used in conjunction with both the photographs and Mr Minassian’s evidence for the Magistrate to reach the conclusion that the welding work was defective. On this basis, the Magistrate had sufficient evidence to find that the welding work performed by A-One Metal Services was defective.

9. [49]

   In relation to damages, the Magistrate found that the evidence provided by AARA was “very light on” (Decision, 14). However, his Honour relied upon invoices of subsequent contractor work performed to rectify the defective welding of A-One Metal Services. (Decision, 16-17).

10. [50]

    It is my view that the evidence of invoices, while not evidence of bad workmanship or defective performance, could reasonably be relied upon by the Magistrate as evidence of damages. The Magistrate did rely upon these invoices to deduct half of the amount due to delay, but this was not challenged.

11. [51]

    This ground of appeal fails.

No evidence of Mr Ou’s admission of defective work – ground 7

1. [52]

   This ground of appeal is that the Magistrate erred in finding that Mr Ou had made an admission that the work undertaken by A-One Metal Services was defective where there was no evidence of any such admission.

Submissions

1. [53]

   Counsel for A-One Metal Services submitted that, notwithstanding the Magistrate’s finding that “there is a reasonably large amount of evidence supporting the view that Mr Ou himself acknowledged that the work was less than perfect”, this did not bear out in either the evidence or the Magistrate’s analysis. Nor did any of the examples provided by the Magistrate in his reasons amount to an admission of poor workmanship. To the contrary, the evidence established that polishing was often not immediately undertaken in the welding process; and that Mr Ou that he had been put on notice that the head contractor had raised issues concerning welding. The Magistrate was also not permitted to rely upon the telephone conversation between Mr Ou and Mr Minassian referred to in Mr Minassian’s evidence where issues of welding quality and delay were raised because this was a conversation that took place at least a month before the welding was finished (Minassian, aff, [9]). As previously mentioned, that paragraph was also subject to a ruling under s 136 of the Evidence Act which prevented its use as proof of the facts asserted.

2. [54]

   It was further submitted by A-One Metal Services’ counsel that the Magistrate could not rely on Mr Ou’s silence, being his failure to “cavil at all with the suggestion that the work was defective”, as an admission that the work was defective. However, no admission can properly be found in circumstances where Mr Ou, by his silence, failed to cavil with an allegation of poor workmanship in a conversation that is inadmissible on that issue. In addition, while facts may be the subject of an admission, a conclusion which depends upon the application of a legal standard is not admissible.

3. [55]

   Counsel for AARA submitted that his Honour methodically addressed the evidence which supported the finding of admissions and expressed cautious conclusions about the limited probative value attributable to those matters. On this basis, there was no error in his analysis as his Honour placed limited weight on the admissions in support of his overall conclusions.

4. [56]

   The Magistrate’s reasons at 8 are as follows:

5. [57]

   The Magistrate placed little weight on Mr Ou’s admissions. The Magistrate relied more heavily upon the three other sources of evidence, the photographs, Mr Watson’s affidavit and Mr Minassian’s oral testimony, in reaching his conclusion that the work was defective. As I have previously stated, there was a sufficient evidentiary basis for his Honour to have reasonably formed such a conclusion. In light of the conflicting evidence, the Magistrate was entitled to come to this conclusion.

6. [58]

   For the reasons above, ground 8 fails.

Reliance on excluded parts of affidavits – ground 9

1. [59]

   This ground of appeal is that the Magistrate erred in finding that A-One Metal Services’ welding work had been defective as his Honour referred to and relied upon parts of affidavits excluded from evidence and not before the Court.

2. [60]

   In relation to the Magistrate’s reliance upon excluded parts of affidavits in reaching his conclusion that the work was defective, neither party provided submissions specific to this ground. However, the s 136 order made by the Magistrate in relation to the affidavits only prevented the reliance on certain paragraphs as proof of the facts asserted. The Magistrate did not rely upon these in such a manner. Rather, his Honour relied upon them in conjunction with the other sources of evidence to reach the conclusion that the work was defective and that these defects were pervasive. While the Magistrate referred to para [9] of Elie Minassian’s affidavit in finding an admission, his Honour also relied upon the oral evidence of Elie Minassian at the hearing. Nor was his Honour’s reliance upon para [28] of Stuart Watson’s affidavit impermissible as this paragraph was in evidence and provided a reasonable basis for his Honour to draw the conclusion that “the work was defective and needed to be rectified”.

3. [61]

   It is for these reasons that ground 9 of the appeal fails.

Conclusion

1. [62]

   The result is that the appeal is dismissed.

2. [63]

   Costs are discretionary. Costs usually follow the event. The plaintiff is to pay the defendant’s costs on an ordinary basis.

   1. (1)

      The appeal is dismissed.

   2. (2)

      The decision of his Honour Magistrate Pierce dated 24 July 2017 is affirmed.

   3. (3)

      The summons dated 21 August 2017 is dismissed.

   4. (4)

      The plaintiff is to pay the defendant’s costs on an ordinary basis.