Baker v Arkman Pty Ltd [2014] QDC 165

DISTRICT COURT OF QUEENSLAND CITATION: Baker v Arkman Pty Ltd [2014] QDC 165 PARTIES: IAN WILLIAM BAKER (appellant) v ARKMAN PTY LTD ACN 064361057 AS TRUSTEE UNDER INSTRUMENT 706741864 (respondent) FILE NO/S: D 214/13 DIVISION: Appellate PROCEEDING: Appeal ORIGINATING COURT: Magistrates Court at Maroochydore DELIVERED ON: Thursday 7th August DELIVERED AT: Maroochydore HEARING DATE: 6th June; written submissions received up to 27 June JUDGE: Robertson DCJ ORDER: Appeal dismissed CATCHWORDS: APPEAL : where respondent successfully sued appellant pursuant to a guarantee as part of its lease with a company now deregistered for unpaid GST; whether on a proper construction of relevant terms of the lease the respondent was entitled to issue and claim GST on rent and outgoings retrospectively and well after the term had expired; whether respondent had proved a liability to pay GST LEAVE TO APPEAL : where judgment obtained was less than the minor civil dispute limit and where appellant had not applied for leave to appeal; where point not taken by respondent in its initial opposition to the appeal; whether leave to appeal should be granted ; whether any “important principle of law or justice is involved” COUNSEL: Mr Baker appeared for himself Mr van de Beld of Counsel for the respondent SOLICITORS: Ferguson Cannon Lawyers for respondent -- 1 of 13 -- 2 [1] On 22 November 2013 in the Maroochydore Magistrates Court, his Honour Magistrate Hodgins gave judgment for the respondent (Arkman) in the sum of $14,662.70 plus interest of $2,992.65, and ordered the appellant (Baker) to pay Arkman’s costs. On 19 December 2013 Baker, who represented himself, filed a notice of appeal which relied on only one ground: (that) “important facts relevant to the defendant’s case were omitted, not answered or presented”. This rather meaningless ground is articulated to some extent in Baker’s outline filed 3 February 2014. I will return to his outline later. The appeal [2] The appeal is pursuant to s 45 of the Magistrates Court Act 1921. Section 45 is relevantly in the following terms: “45 Appeal (1) Subject to this Act, any party who is dissatisfied with the judgment or order of a Magistrates Court— (a) in an action in which the amount involved is more than the minor civil dispute limit; … may appeal to the District Court as prescribed by the rules. (2) Provided that— (a) where in any of the cases above referred to in subsection (1) the amount is not more than the minor civil dispute limit, an appeal shall lie by leave of the District Court or a District Court judge, who shall not grant such leave to appeal unless the court or judge is satisfied that some important principle of law or justice is involved; …” [3] Section 45(5) defines minor civil dispute limit as meaning the amount that is for the time being the prescribed amount under the Queensland Civil and Administrative Tribunal Act 2009. It is common ground that, as at the time of these proceedings and -- 2 of 13 -- 3 now, that amount is $25,000. It follows that Baker was required to seek leave pursuant to s 45(2)(a) of the Magistrates Court Act 1921 and did not. [4] The legal representatives for Arkman did not take the point. The outlines addressed the merits of the appeal only. As the record will reveal, I raised this difficulty with the parties, and in order to save costs, I gave leave to both parties to make further submissions about the leave issue, and I proceeded to deal with the merits of the appeal. Baker has still not formally sought leave to appeal pursuant to s 45(2) of the Magistrates Court Act 1921. His additional submission filed on 20 June 2014 commences with the words, “The appellant seeks leave to appeal pursuant to s 45(2) of the Magistrates Court Act 1921.” The procedure to be followed for seeking leave is governed by Part 3 Chapter 18 of the Uniform Civil Procedure Rules. Baker remains unrepresented but it is clear from his most recent submission in particular, that he has received legal assistance in preparing his response. [5] Mr van de Beld, in his further outline of submissions filed on 27 June 2014, argues that until leave is granted the court has no jurisdiction to deal with an application for leave. This is a reference to Johns v Johns [1988] 1 Qd R 138 at 142/143. The issue there before the court was by reference to very similar words in the then s 92 of the District Courts Act 1967 where, similar to here, leave had not been sought. Given the way in which the matter has proceeded, I intend to deal with the jurisdictional argument and the leave point at the end of my reasons and to set out my view on the merits of the appeal as a first step. I do this because Mr Baker in particular relies on various aspects of the merits of the case to submit that it does indeed involve “some important principle of law or justice”. -- 3 of 13 -- 4 The background [6] It is common ground that a company named as the first defendant (now deregistered) leased premises at Mooloolaba on 25 July 2007 and that Baker, pursuant to clause 18 of the lease agreement, indemnified Arkman against all claims for breach or default of the lease by the lessee pursuant to the terms of the lease. [7] The claim lodged in the Maroochydore Magistrates Court on 7 November 2011 was for unpaid GST on rent charged by Arkman to the lessee. [8] In a defence filed by both defendants on 6 December 2011, they alleged that as the respondent had not complied with clause 2.5(4) of the lease agreement by not issuing tax invoices in accordance with the terms of that clause, no monies were outstanding. [9] In a reply filed 22 December 2011, Arkman put in issue that it had not issued tax invoices to the lessee as alleged, and pleaded that the terms of the lease did not require it to issue tax invoices to Baker. [10] Thereafter there followed significant activity for a claim so small, including an application for summary judgment; an application to change the name of the plaintiff which order was made and costs reserved; an application by Arkman to dispense with Baker and the lessee’s signature on a request for trial date; all of which (with the exception of the name change application) were resolved by a consent order made by the Deputy Registrar on 6 June 2013, whereby the lessee and Baker withdrew their summary judgment application; the parties were given leave to file amended -- 4 of 13 -- 5 pleadings, and the lessee and Baker were ordered to sign the request for trial date by 13 August 2013. [11] An amended defence was filed on behalf of both the lessee and Baker on 5 July 2013 by different lawyers, and raised additional issues, in particular that Arkman, for reasons pleaded, could not lawfully issue a tax invoice under the GST Act, although both defendants admitted that “accounts” were issued to the lessee, it was alleged that these accounts were not “tax invoices” pursuant to the GST Act. All these factual allegations were put in issue by the respondent in its amended reply filed 17 July 2013. The proceedings below [12] By the time of the trial on 22 November 2013, the lessee company had been deregistered and Baker represented himself. Arkman’s case was based on an affidavit by Mr Turner a director of Arkman which he swore was the trustee of the S and L Turner Super Fund and the S Turner No. 1 Trust. The exhibit to Mr Turner’s affidavit is a copy of the lease agreement. It commenced on 25 July 2007 for a period of three years expiring on 24 July 2010. It is common ground that the lease was not renewed, however the lessee stayed in occupation for some time after the lease expired. [13] Mr Turner swore in paragraph 3 of his affidavit (i.e. after the lease had expired): “3. In or around June 2011, I met with Craig McCulloch who was a practising accountant in relation to the financials of Arkman Pty Ltd and the trust that Arkman Pty Ltd acts as trustee for. I was advised that Arkman Pty Ltd in its capacity as trustee had been maintaining accounts on an accrual basis and in 2008 Arkman Pty Ltd as trustee had income in excess of the GST threshold. As a result I was advised that GST needed to be paid on rent received under the lease.” -- 5 of 13 -- 6 [14] He swore that on 17 June 2011, Arkman issued to the former lessee two tax invoices for GST payable on rent charged for the 2008, 2009, 2010 and part of the 2011 financial year at total of $14,662.70, which invoices were exhibited to his affidavit. [15] He also exhibited a series of emails between himself and Baker commencing 25 July 2011, which included a claim for the GST. At no time in those exchanges did Baker deny liability for the GST, rather he queried why the GST claim had not been made previously, and that he needed more time to pay; and finally when legal action was threatened, he said he would get legal advice. Mr Turner gave his interpretation of the email exchange in paragraph 5 of this affidavit as amounting to Baker outlining “an intention to pay the amount outlined in the tax invoices”. [16] Mr Baker cross-examined Mr Turner. Clearly he faced the normal difficulties faced by an unrepresented untrained litigant. He did not challenge this contention, rather he referred to what was really a matter of law and that is the proper construction of various sub-sections of clause 2.5 of a lease. [17] Relevantly, and for the purpose of understanding the scope of the issue in dispute on this point before his Honour, clause 2.5 of the lease is in the following terms: “2.5 GST (1) In this clause:- i. GST means a goods and services tax, consumption tax, value added tax or a tax of a similar nature. … iii. Primary Payment means any payment by the Tenant to the Landlord of any rental outgoings or other amount payable by the Tenant to the Landlord under this lease.) -- 6 of 13 -- 7 iv. Tax Invoice means an invoice in the format required by the law and which also shows the amount of GST payable by the landlord in respect of the relevant primary payment. (2) If the landlord is liable by law for any GST on any primary payment, the tenant must pay to the landlord the amount of the GST. ... (4) As a precondition of any payment of an amount in respect of GST by the tenant in respect of Rent and Outgoings, the landlord must issue to the tenant in the calendar month before the month in which the relevant Primary Payment is due, a Tax Invoice in respect of the payment required. In respect of any other Primary Payment, the Landlord must issue to the Tenant a Tax Invoice within seven days (7) of the Primary Payment being made. …” [18] Mr Baker then gave evidence. He tendered an invoice for the period 1 August -31 August 2008 which was for rent and which did not include GST. He gave evidence that the lessee continued to occupy the premises after the three year term had expired. He told his Honour that the first he knew of GST being payable was via an email from an employee of the respondent which is Exhibit 2 in the proceedings. As Baker said, the reason nominated was that as “Sandcastles” (the building in which the lessee leased a shop) is “now” owned by the super fund, it should be charging GST. He tendered exhibit 3 which he said was the first invoice received from the lessor which was marked “tax invoice” and claimed GST on the past rent. [19] It can be inferred from the first invoice exhibited to Mr Turner’s trail affidavit that the date of purchase of Sandcastles by the super fund was 30 August 2010. [20] Mr van de Beld of Counsel cross-examined Mr Baker. Mr Baker did not accept that the exchange of emails with Mr Turner amounted to him “freely admitting that he needed to pay the GST”. -- 7 of 13 -- 8 [21] The parties then addressed his Honour and Mr van de Beld provided him with a written outline. His Honour then adjourned to consider the matter. He then returned to Court and reopened the proceedings. His concern was that on a proper reading of the exhibits tendered by Mr Baker, Exhibits 2 and 3, it could be inferred that it was not until the super fund purchased the building that the respondent became liable to pay GST. [22] It can be inferred that Mr McCullough was the accountant then advising the Arkmans. The exchange between Counsel and his Honour is from pages 1-27 to 1-32. [23] Counsel conceded that those emails did not refer to any “back GST” that needed to be charged. In effect, he told his Honour that a new accountant came into the picture, which resulted in the two invoices being issued which were exhibited to Mr Turner’s affidavit. His Honour’s reasons [24] His Honour gave short ex tempore reasons shortly after reopening the proceedings. Fundamentally, his Honour found that a mere assertion made by Mr Turner (in paragraph 3 of his trial affidavit) based on the advice of Craig McCullough, was enough to establish that the respondent was indeed liable to pay GST from 2008. Clearly there was no evidence from Mr McCullough of an expert opinion nature, and a fair reading of his Exhibits 2 and 3 suggest that at least inferentially (contrary to the assertion made in paragraph 3), it was the purchase of the building by the Super Fund that enlivened Arkman’s liability as trustee, to pay GST. Mr Turner at not stage -- 8 of 13 -- 9 swears that Arkman has paid GST on the rent paid since 2008 under the lease, although he certainly asserts that it is payable. [25] His Honour expressed this finding (which was clearly a matter concerning him, when he reopened the proceedings) thus in his reasons: “Now, it’s perhaps unfortunate from Mr Baker’s perspective – and I can well understand his angst in that regard – that it wasn’t until June 2011 that he became aware he needed to pay – well, the first defendant needed to pay GST in relation to the rent payable to the plaintiff under the lease. It’s because the – Arkman got advice from its accountant that GST was payable. Now, I’ve canvassed that by reopening the issue of the liability of the plaintiff for the GST. And I’ve raised the query whether or not the GST was – they were liable to pay the GST back from 2008 to 2011. The plaintiff asserts that it is liable for the GST, and Mr Baker’s defence did not raise that. And – but I felt because of fairness I should raise it. I think it’s really – if point – that point – all the – all the – my view in evidentiary (sic) is the plaintiff has to assert that it’s liable for the GST, which it has done so. And I’ve got no evidence to the contrary that it is not liable. I have tried to pursue – test it out, but I’m reasonably satisfied that the – there was accounting advice obtained, and as a result of that accounting advice they then made the claim for the GST. So I have nothing in evidence to undermine that and – or not accept that the plaintiff was liable for the GST. Now, when the plaintiff became aware of that, they issued invoices. And this is what has been challenged by Mr Baker, in relation to the invoices of the 17th of June. The first invoice, which is the claim for GST in the amount of $11,789, goes back for rent charged in 2008, 2009, 2010 and 2011. And the second invoice relates to the period of the 1st of September 2010 to the 31st of May 2011.” [26] His Honour did not refer to Exhibits 2 and 3, which on their face conflict with the assertion made by Mr Turner in paragraph 3 of his affidavit, and was evidence capable of undermining the conclusion that Arkman did indeed have a liability to pay GST on rent received prior to the super fund purchasing the building. [27] His Honour construed the emails between Mr Baker and Mr Turner as meaning that Baker had “made it clear he was going to pay the invoices and he ultimately did not”. However, his Honour made it clear that this finding did not play any part in his conclusion. I do not construe the emails as having the effect of constituting some -- 9 of 13 -- 10 agreement to pay. In my view, they are more equivocal than that. In any event, Arkman’s case was based on Baker’s liability under the guarantee signed in 2007, and not pursuant to some subsequent agreement made after the expiration of the lease. [28] His Honour then went on to construe the relevant parts of clause 2.5 of the lease which are set out above. Discussion [29] In my view his Honour erred in concluding that the respondent had established on the balance of probabilities that it was “liable by law for any GST” on rent payable, at the very least, up to the time of the acquisition of building by the super fund of which Arkman was trustee. The words quoted are a direct quote from clause 2.5(2) of the lease. Mr van de Belt’s response is that his client’s liability to pay GST was not an issue raised in the pleadings at a time when Baker was legally represented. That may be so, but the activation of the requirements to issue invoices etc contemplated by the lease, did depend on the lessor having a liability to pay GST. I do not reach any final conclusion on this for reasons that are obvious. [30] I disagree with his Honour’s construction of the relevant portion of clause 2.5 when that clause is read as a whole. I disagree with his conclusion that clause 2.5(4) should be read as “procedural”. [31] The natural and ordinary meaning of the words in 2.5(4) is that it was “a precondition of any payment of an amount in respect of GST by the tenant” that “the landlord issue -- 10 of 13 -- 11 to the tenant in the calendar month before the month in which the (rent) is due in respect of the payment required”. This was a specific precondition relating to GST payable by the tenant. It provides certainty to the tenant as to what it owes under clause 2.5. [32] It is common ground that clause 2.5(4) was not complied with at any time during the currency of the three year lease. If indeed the landlord was liable, and did not know, my construction of clause 2.5(4) does not permit it to remedy the situation by issuing tax invoices at a later date. It is for these reasons and primarily the construction point that led me to the conclusion that the appeal had merit. The leave issue [33] In permitting the parties to make further written submissions in relation to this issue, I also referred them to the decision of Judge McGill SC DCJ in Ramzy v Body Corporate for GC3 CTS38396 & Anor [2012] QDC 397 at [41] in which his Honour, after a thorough analysis of the authorities on this issue, summarised the test that leave to appeal should not be granted unless the case, is one of gravity; or involves some important question of law; or affects property of considerable value; or is otherwise of public importance; or is of a very substantial character. [34] At [42] of Ramzy, his Honour also confirmed a principle oft stated (for example, in American Express International Inc v Hewitt [1993] 2 Qd R 352) that “in relation to whether there is an important question of justice, it has been held that there be a -- 11 of 13 -- 12 question that goes beyond the consequences of a decision upon the immediate parties to the action or matter.” [35] Essentially in his submission (which has had obvious legal input), Mr Baker says that the case does involve a question of law of general importance “as the plaintiff seeks to recover tax liability arising under legislation after initially not seeking to recover such liability during the term of the lease”. There is no evidence that such claims are quite common and/or significant in amount as he asserts. I do not agree with him that the issue of whether a party can claim recovery of GST after a lease has expired is a question that plainly goes beyond the consequences of the decision upon the immediate parties to the action. [36] I also do not agree that the construction point involves an important question of law. It does not involve reconciling general principles of contract law with procedural requirements under GST revenue law. Although I agree with Mr Baker’s argument in relation to his Honour’s construction of clause 2.5(4), I do not think the construction point goes beyond the consequence of the decision to the immediate parties and/or involves some important question of law. Mr Baker also raises a question of estoppel “that may arise so far as it relates to the conduct of the landlord that does not comply with GST procedural requirements under a lease”. This cannot be accepted as this was not pleaded and was not an issue articulated in the appeal. [37] As indicated previously, Mr Baker relies on the issue of merit as involving an important principle of law or justice. In this regard he relies on the decision of MacPherson J (as his Honour then was) in National Mutual Life Association of -- 12 of 13 -- 13 Australasia Ltd v Oasis Developments Pty Ltd [1983] 2 Qd R 441 at 449. As can be seen, that case involved a completely different issue and did not address the terminology in s 45(2) of the Magistrates Court Act 1921. In my view the case does not involve “some important principle of law or justice” and leave to appeal should not be granted. It follows that the appeal lodged is incompetent and should be dismissed. -- 13 of 13 --