Assets China Pty Ltd v Eastern Blue Pty Ltd
[2020] VSC 685
•19 October 2020
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
JUDICIAL REVIEW AND APPEALS LIST
S ECI 2019 03667
| ASSETS CHINA PTY LTD (ACN 093 530 583) & ANOR (according to the attached schedule) | Appellants |
| v | |
| EASTERN BLUE PTY LTD (ACN 620 756 694) & ANOR (according to the attached schedule) | Respondents |
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JUDGE: | Ierodiaconou AsJ |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 11 September 2020 |
DATE OF JUDGMENT: | 19 October 2020 |
CASE MAY BE CITED AS: | Assets China Pty Ltd & Anor v Eastern Blue Pty Ltd & Anor |
MEDIUM NEUTRAL CITATION: | [2020] VSC 685 |
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ADMINISTRATIVE LAW – Judicial review – Appeal from a decision of a Magistrate on a question of law – Whether it was open on the evidence for the Magistrate to find there was a variation to the contract of sale agreement – Whether the Magistrate gave adequate reasons for the finding of joint liability and joint entitlement to relief – Whether it was open on the evidence to make such a finding – Whether the Magistrate decided the proceeding on a basis other than disclosed on the pleadings – No error of law – Stefanovski v Digital Central Australia (Assets) Pty Ltd (2018) 368 ALR 607 – ISPT Pty Ltd v Melbourne City Council [2008] VSCA 180 – Magistrates’ Court Act 1989 s 109 – Appeal dismissed.
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APPEARANCES: | Counsel | Solicitors |
| For the Appellants | Mr A Morrison | ALT Legal Associates |
| For the Respondents | Ms J Anthony-Shaw | Nicholas William Albon |
TABLE OF CONTENTS
Summary.............................................................................................................................................. 1
Background......................................................................................................................................... 1
Notice of appeal.................................................................................................................................. 3
Applicable principles – Magistrates’ Court Act s 109................................................................. 4
Was it open on the evidence for the Magistrate to find there was a variation to the contract of sale agreement?..................................................................................................................................... 4
Appellants’ submissions.............................................................................................................. 5
Respondents’ submissions........................................................................................................... 8
Analysis........................................................................................................................................ 10
Did the Magistrate give adequate reasons for the finding of joint liability and joint entitlement to relief? If so, was it open on the evidence to make such a finding?................................. 16
Appellants’ submissions............................................................................................................ 17
Respondents’ submissions......................................................................................................... 17
Analysis........................................................................................................................................ 18
Did the Magistrate decide the proceeding on a basis other than disclosed on the pleadings? 22
Appellants’ submissions............................................................................................................ 23
Respondents’ submissions......................................................................................................... 25
Analysis........................................................................................................................................ 27
Conclusion......................................................................................................................................... 31
HER HONOUR:
In 2017, there were negotiations for the sale of Studio 466, a brothel. The amount of $75,000 changed hands. It was paid by cheques of $25,000 and $50,000 respectively. The sale did not finalise and the prospective vendor repaid $25,000. This dispute concerns the amount of $50,000. It was paid to Ms Michelle Siu Pik Chan, a director of the prospective vendor, Assets China Pty Ltd. The prospective purchaser, Eastern Blue Pty Ltd, and its director, Ms Mian (‘Dinah’) Zhang demanded the $50,000 be repaid. It was not and they were successful in obtaining orders in the Magistrates’ Court that it be repaid. In this proceeding, Assets China Pty Ltd and Ms Chan appeal from those orders.
Summary
The real issues in dispute follow.
Ground 1: Was it open on the evidence for the Magistrate to find there was a variation to the contract of sale agreement? Yes.
Ground 3: Did the Magistrate give adequate reasons for the finding of joint liability and joint entitlement to relief? Yes. If so, was it open on the evidence to make such a finding? Yes.
Ground 4: Did the Magistrate decide the proceeding on a basis other than disclosed on the pleadings? No.
The appeal fails.
Background
The first appellant, Assets China Pty Ltd, owned and operated a brothel and escort agency known as ‘Studio 466’. The second appellant, Ms Chan, is the director of the first appellant.
The appellants entered into negotiations with the first respondent, Eastern Blue Pty Ltd, for the sale of Studio 466. The second respondent, Ms Zhang, is the director of the first respondent.
A written contract of sale dated 6 June 2017 was executed between the first appellant and the respondents (‘the contract of sale’).[1] It required the first respondent to pay a deposit of $25,000 subject to a condition that the landlord of the business premises consent to a transfer or new lease on similar terms. This amount was paid by bank cheque (no. 646) dated 7 September 2017 payable to the trust account of the appellants’ solicitors.[2]
[1]Exhibit P1 ‘Contract of Sale of Business dated 6 September 2017’ in the proceeding below contained and in exhibit ‘ALT-11’ to the affidavit of Ajai Lyndon Thapliyal sworn 21 August 2019 (‘Thapliyal affidavit’) (‘Exhibit P1’).
[2]Exhibit P3 ‘Copies of bank cheques dated 7 September 2017’ in the proceeding below and contained in exhibit ‘ALT-11’ to the Thapliyal affidavit.
The contract of sale is silent as to the $50,000 in dispute here. However, also on 7 September 2017 another bank cheque was drawn: bank cheque (no. 647) payable to the second appellant in the amount of $50,000.[3] On the same date, the second appellant signed the following note (‘the 7 Sept 17 note’):[4]
I, Michelle Chan, have received $50,000 from Dinah Zhang as an extra payment for the purchase of Studio 466.
This amount, less up to $3000 reimbursement for legal costs for the landlord’s negotiation for the transfer of lease for 466 City Road South Melbourne 3205, will be refunded to Dinah Zhang in the event that the landlord successfully refuses to grant the consent for the transfer of same lease.
[3]Ibid.
[4]Exhibit P2 ‘Further written agreement dated 7 September 2017’ in the proceeding below and contained in exhibit ‘ALT-11’ to the Thapliyal affidavit (‘Exhibit P2’).
On 4 December 2017, the first appellant’s solicitors signed a notice of default and rescission on its behalf.[5] The Notice stated that the first respondent had failed to provide information reasonably required by the landlord to transfer the lease. The first appellant disagreed. A flurry of disputed correspondence between solicitors followed.
[5]Exhibit P4 ‘Notice of default and rescission dated 4 December 2017’ in the proceeding below and contained in exhibit ‘ALT-11’ to the Thapliyal affidavit.
On 13 December 2017, the first appellant’s solicitors sent a letter to the first respondent’s solicitors attaching a cheque in the amount of $25,000 stated to be in reimbursement for the deposit paid.[6]
[6]Exhibit P5 ‘Correspondence between the parties and their solicitors December 2017 & January 2018’ in the proceeding below and contained in exhibit ‘ALT-11’ to the Thapliyal affidavit.
On 12 January 2018, the respondents’ solicitors demanded the $50,000 be repaid in full failing which proceedings would be issued. The monies were not repaid.
On 10 June 2018, the respondents commenced proceedings against the appellants in the Magistrates’ Court. The trial proceeded on 30 April and 1 May 2019.
On 20 May 2019, which was to be the third day of trial, and without any notice, the appellants’ solicitor made a no case submission. He submitted that the evidence did not support the pleaded case. The Magistrate permitted time for written submissions.
On 27 June 2019, the Magistrate ruled on the no case submission and substantive issues, finding that the $50,000 was refundable.
On 17 July 2019, the Magistrate dismissed a counterclaim and made the following order:
1.The defendants to pay the plaintiffs $50,000 on the claim, interest pursuant to statute and costs on scale ‘F’ until 13 May 2019 and after that date on scale ‘G’, except in relation to the no case submission where a costs order has already been made.
Notice of appeal
A notice of appeal was filed in this Court on 14 August 2019. The notice of appeal contains four questions of law. Grounds 1, 3 and 4 are analysed below.
Ground 2 is not analysed. It alleged the Magistrate erred in making an alternative finding of restitution. (Unjust enrichment was pleaded as an alternative in paragraph 22 of the respondents’ Magistrates’ Court complaint.) However, the parties now agree that although the Magistrate made comments on restitution being an alternative basis for findings, ultimately the final orders were not made on that basis. Accordingly the appellants did not pursue this ground of appeal. Having read the transcripts, I agree the ultimate findings were not made on the basis of restitution. Ground 2 is dismissed.
Applicable principles – Magistrates’ Court Act s 109
The appeal is brought pursuant to s 109 of the Magistrates’ Court Act 1989 which permits an appeal in a civil proceeding on a question of law from final orders.
I adopt the following principles outlined by Derham AsJ in Romas v Green:[7]
It is well established that an appeal under s 109 on a question of law must relate to a question that was involved in the making of the order. The question of law must have been raised in the Court below, whether on the pleadings, by evidence or otherwise.
The appeal under s 109 is an appeal strictly so called, and not in any sense a re-hearing. As Kaye J noted in Fiorelli Properties Pty Ltd v Professional Fence Makers Pty Ltd: ‘[i]t is necessary for the appellant to be able to identify a relevant error of law made by the Magistrate before it is entitled to relief from this Court’.
Thus, the Court is not entitled to interfere with the decision of a Magistrate unless it is satisfied that he acted on a wrong principle of law, misapprehended the facts or made a wholly erroneous assessment of the relevant issues. There is a strong presumption in favour of the correctness of the decision appealed from, and the general rule is that the decision should be affirmed unless the Court is satisfied that the decision is clearly wrong.[8]
Was it open on the evidence for the Magistrate to find there was a variation to the contract of sale agreement?
[7][2015] VSC 95.
[8]Ibid [24]–[26] (citations omitted).
This issue arises from the first question of law in the notice of appeal read with the corresponding ground of appeal.
1. Whether her Honour erred in law in finding that Side Agreement was a variation to the Main Agreement.
Ground 1 of the appeal follows.
1.Ground 1: Error of law in finding that Side Agreement was a variation to the Main Agreement
1.1.Her Honour found that the agreement comprising the “further written agreement dated 7 September 2017” [exhibit P2] (Side Agreement) was a variation to the “contract of sale of business for Studio 466” [exhibit P1] (Main Agreement).
1.2.It was not open on the evidence for her Honour to find, and her Honour erred at law in so finding, that the Side Agreement was formed after the Main Agreement in light of the uncontradicted evidence of the second respondent (Zhang) that:
(a)the second appellant (Chan) would not sign the Main Agreement until Zhang paid the sum of $50,000 referred to in the Side Agreement;
(b)she handed over the $25,000 cheque and the $50,000 cheque at the same time that she and Chan signed the Main Agreement;
(c)the $25,000 cheque and the $50,000 cheque were given to Chan on 7 September 2017;
(d)the Main Agreement was signed on 7 September 2017; and
(e)there was no variation to the Main Contract, and the Side Agreement was separate to the Main Agreement.
1.3Further, or in the alternative, it was not open at law for her Honour to find, and her Honour erred in so finding, that the Side Agreement was formed after the Main Agreement as, in that case, any consideration provided in exchange for the Side Agreement was past consideration only.
1.4.As a result, the only conclusion open to her Honour was to find that the Side Agreement was formed prior to, or contemporaneously with, the Main Agreement and, in those circumstances, her Honour erred in finding that the Side Agreement was a variation to the Main Agreement.[9]
[9](emphasis omitted) (citations omitted).
Appellants’ submissions
Ground 1 of the notice of appeal identifies an error of law in the Magistrate’s conclusion that the side agreement ought be characterised as a variation to the contract of sale. Such a conclusion was not open for two reasons.
Firstly, a variation of contract cannot occur in the absence of an earlier agreement. Unless a variation occurs after the formation of an earlier agreement, there can be nothing to vary. A variation could not occur here due to chronological impossibility. The evidence could only establish that the side agreement was formed before the main agreement and the cheques were provided prior to the signing of the contract of sale or contemporaneous to it. The variation cannot have arisen after the contract of sale. The appellants rely on evidence given by the second respondent during cross-examination below.
(a) The second respondent read out a text message that she sent to the second appellant:
Can you read that for the court?---Ah, ‘Hi, Michelle, I think you will help if your solicitor can have the contract price for $250,000, ah, and I will have the 50,000 (indistinct) to you with a non-refundable deposit, thank you, again.’
Can you explain to the court what that means?---Um.
Well, what did you mean by that?---I was very eager to purchase Studio 466. I believe I made a very reasonable offer, um, and for her, at the time, she didn’t – there wasn’t any counteroffer back to me so, I thought maybe to emphasise about the $50,000 I will get the purchase or get the business.
So just so that I understand, is it your evidence that you offered her additional purchase price?---Yeah, yeah
Very well, and had you seen a copy of any contract at that stage?---No, I haven’t.[10]
[10]Transcript of Proceedings, Eastern Blue Pty Ltd v Assets China (Magistrates’ Court of Victoria, J1560616, 1 May 2019) (‘Transcript of 1 May 2019’) T58:16–25.
(b) The 7 Sept 17 note was produced and shown to the second respondent.
X Do you recognise this document?---Yes.
Is that your recollection of the terms?---Yes.
And to the best of your knowledge, who signed that document?---Michelle did.
Who gave you that original copy of the document?---Michelle has.
Did you make any payment at that time?---Yes, I’ve handed over the 50,000 cheque.
Did you hand over another money?---Ah, the – the 25,000 deposit to Michelle.
And who did you make the $25,000 deposit to?---Ah, Michelle’s solicitor.[11]
[11]Ibid T63:14-28.
(c) Later:
Very well, all right, I’m putting to you – all right, so you signed this principle [sic] contract on the 6th, and handed over $25,000?---As well as the 50,000; I handed in at the same time.
Then, you met, again, the next day?---We didn’t meet, again, the next day. We met same day.
You met, again, on the 6th?---We met once.
On the same day – you said you met again, on the same day; being the 6th?---We met once, we signed the contract, as well as I’ve handed over the two cheques for the deposit, correct.[12]
[12]Ibid T82:6-16.
(d) The two cheques were produced and shown to the witness.
So, the two cheques that you have in front of you, they’re both bank cheques?---Correct.
One’s payable to Michelle Chan and one’s payable to ALT Legal Trust Account?---Yes, correct, yes.
They’re both dated 7 September, aren’t they?---Correct.
Very well, so, you would accept then, that they could not have been handed at all to anybody prior to 7 September?---Say that, again.
They must have been handed to the recipients, or to Michelle, on 7 September; those two cheques?---But Michelle didn’t sign the contract unless I handed over the cheque.[13]
[13] Ibid T83:8–18.
(e) In relation to the when the cheques were exchanged.
That you signed it [contract of sale] on the 6th, and you handed over the cheques dated 7 September?---I handed in everything to Michelle, and then she signed the contract, and she did say that she won’t sign the contract unless I’ve given her the 50,000, as well as the 10 per cent deposit (indistinct.)
So, you would accept when Michelle signed this contract, it was after you gave her the 25,000 and the 50?---Sorry (indistinct.)
When Michelle signed this contract, you had given her both cheques?---At the same time – it happened at the same time.[14]
[14]Ibid T84:5–15.
Secondly, if the side agreement was formed after the contract of sale was entered into, then it fails for want of valid consideration. A variation is a new contract pursuant to which the parties agree to maintain the old contract but with altered terms. Consideration applies to a variation in the same way that it does to the original contract. A variation could not occur due to an absence of consideration.
Proper characterisation of the side agreement was at the heart of the parties’ dispute. If the side agreement was a separate or collateral bargain to the contract of sale, rather than a mere variation, there is a greater likelihood that the terms on which the $50,000 cheque was repayable to the respondents would be different from the terms on which the $25,000 cheque was repayable.
Respondents’ submissions
Ground 1 requires the appellants to demonstrate what the Magistrate should have found. It must identify the proper legal characterisation of the ‘side agreement’ and what effect this different characterisation would have on the ultimate outcome. The appellants say “there is a great likelihood that the terms on which the $50,000 cheque was repayable to the respondents would be different from the terms on which the $25,000 cheque was repayable”. They do not go on to say what these terms are. This ground merely suggests that different characterisation could have a bearing on the approach to be taken. The appellants have failed to address the key issue: what are these key differences and why was the outcome and decision of the Magistrate wrong as a result?
Further, there was evidence given at the trial concerning the timing of the sale of contract and the exchange of the cheques. The evidence at trial was not available at the time the complaint was drafted. In the usual course, closing submissions would address the evidence that came out at trial. It was clear from the outset that the claim was for $50,000. The issue of consideration was raised at trial. The finding of variation of the contract of sale was a legal possibility without the issue of consideration being pleaded.
The appellants place emphasis on oral evidence of the second respondent in cross-examination that “the $50,000 was in addition to the purchase price under the contract of sale” and that “there was no variation to the contract”. The latter is a legal conclusion that was sought to be elicited from her. No great legal import should be taken from it. The second respondent was re-examined on 1 May 2019. She gave clear evidence about her understanding of the $50,000 payment:
You were shown P3, which is a picture of the two cheques, is that correct?---Yes.
Can you recall at the moment what accounts those cheques were drawn from, I’ll be specific, are they drawn from your personal accounts or are they drawn from the accounts of your company?---Personal account.
Did you have business accounts for Eastern Blue?---No.
In your understanding, what were you paying $50,000 deposit for?---Extra payment to purchase the business.
And was it your understanding that that 50,000 was towards the purchase of Studio 466?---Yes.
Was it your understanding that that payment had nothing to do with the purchase of Studio 466?---No.
Okay. Was it your understanding that if the defendant, that is to say, Michelle, didn’t go through with the transaction, that you would have that money returned?---Yes.[15]
[15]Ibid T166:4–19.
The following material facts must be relevant:
(a) the appellants admitted that the landlord’s approval of the respondents as incoming tenants was a condition of the contract of sale;
(b) the appellants admitted that they did not provide the landlord of the business premises with the documents required by the landlord to approve or disapprove the respondents’ request for a transfer of the lease;
(c) it was therefore impossible for the landlord to ‘refuse to grant approval’, as the appellants had already terminated the contract; and
(d) the appellants, subsequent to their termination, returned the deposit of $25,000 under the contract.
The Magistrate’s decision was that terms had been agreed by which any money paid under the sale of the business was to be repaid. Those terms manifested by the appellants’ own acts being termination of the transaction. The Magistrate was satisfied that circumstances existed in which the monies advanced by the respondent should be repaid.
Analysis
I adopt the following principles concerning appeals on the ground that a finding is not open on the evidence.[16]
The matters which the applicant seeks to agitate in attacking the Tribunal’s finding on the facts are in our view matters which go to the weight of the evidence founding that finding. They go principally to concessions made in cross-examination… such an attack is not open upon an appeal on questions of law. The relevant principle was reiterated by Kirby P in Azzopardi v Tasman UEB Industries Ltd:[17]
The court is limited, relevantly, to points of law. The finding of what have been called the primary facts of a case does not, in itself, expose the trial judge to review on a point of law, unless it can be shown that there is no evidence of a primary fact and that, this being crucial to his decision, the judge’s fact finding has involved an error of law. If there is evidence, or if there are available inferences which compete for the judge’s acceptance, no error of law occurs simply because the judge prefers one version of the evidence to another or one set of inferences to another. This is his function. The evaluation of competing evidence and inferences is reserved in compensation cases to the judge of the Compensation Court. Even if the evidence is strongly one way, the appeal court may not intervene simply because it reaches a different conclusion and this even if it regards the conclusion of the trial judge as against the weight of the evidence.[18]
[16]ISPT Pty Ltd v Melbourne City Council [2008] VSCA 180 [72].
[17](1985) 4 NSWLR 139, 151.
[18]Applied in Myers v Medical Practitioners’ Board of Victoria [2007] VSCA 163.
As to whether the evidence supports the legal characterisation, namely whether there was a variation of contract, that is a question of law. As Her Honour indicated, that was for her to decide.[19]
[19]Transcript of 1 May 2019 T85:22–6, 29–30.
The respondents pleaded variation of contract.[20] They submitted that there was a variation to cl 3.1 of the contract of sale.[21] Clause 3.1 of the contract provides the following:
[20]Exhibit ‘ALT-1’ to the Thapliyal affidavit ‘Form 5A Complaint including Statement of Claim dated 10 June 2018’ [8]–[9].
[21]Transcript of Proceedings, Eastern Blue Pty Ltd v Assets China (Magistrates’ Court of Victoria, J1560616, 30 April 2019) (‘Transcript of 30 April 2019’) T16:12–23, T17:17–T18:12.
3. PURCHASE PRICE
3.1 Payment of the Purchase Price
Unless the parties agree otherwise, the Purchase Price is to be paid as follows:
(a)The Deposit is to be paid to trust account of the Vendor’s solicitors, upon execution of this Agreement (if not already paid); and
(b)The balance of the Purchase Price to be paid by the Purchaser as directed by the Vendor at Completion.
On the other hand, the appellants pleaded that the $50,000 was paid pursuant to a separate agreement between the second appellant and second respondent.[22] They denied there was a variation.
[22]Exhibit ‘ALT-2’ to the Thapliyal affidavit ‘Defendants Defence to Claim dated 4 July 2018’ [8], [8A], [8B].
The appellants eschewed the opportunity to lead oral evidence and made a no case submission. Her Honour rejected it and made the following findings on 27 June 2019.
In relation to a no case to answer submission, the test, having assessed the evidence is to whether on the balance of probabilities I could find in favour of the respondent to the no case submission… the principles set out in paragraph 6 which follows: ‘in such a case the judge would only find against the respondent party if the evidence so far adduced is so inherently unreliable or equivocal that he would conclude that he could not be reasonably be satisfied of the case made by the respondent party on the evidence thus far adduced’.
The defendants’ no case submission in this matter is made on the basis that they submit that the evidence of the plaintiffs is insufficient to support a finding against either of them on the causes of action which the plaintiffs have pleaded.
I required the defendants to elect to call no evidence before I made a ruling on the no case to answer submission. That election was made in writing on 19 June 2019 at paragraph 25 of the defendants’ submissions in reply. To make a decision on the no case submission, I need to consider the pleadings and the evidence, both oral and documentary of the plaintiffs.
...
…On or about 6 September 2017, the first plaintiff and the first defendant entered into an agreement in the form of a written contract of sale for the business known as Studio 466.
A further document which the plaintiffs allege is evidence of the variation to the terms of the contract relating to payment which was marked as an Exhibit P2 and referred to as either the receipt or further written agreement, payment of Ms Zhang of a deposit of $25,000 and an additional deposit of $50,000, a termination of the agreement, the refund of the $25,000 and a failure to turn $50,000.
The payment of the additional deposit is pleaded as a variation to the contract and the failure to return to the plaintiffs as a breach. Alternatively the plaintiffs plead that the defendants have been unjustly enriched by the retention of the additional deposit.
I will now turn to the parties and the evidence of the plaintiff. Ms Zhang gave evidence that following discussions, text messages and emails between her and Ms Chan, she met with Ms Chan and the contract of sale was executed. At that time, she, Ms Zhang provided two bank cheques, one for the $25,000 deposit made out to the defendants’ solicitors and the other for $50,000 made out to Ms Chan. Those cheques are exhibited at P3.
...
The defendants submit that the evidence of the plaintiffs, that both cheques were handed over on the same day and that the $50,000 was not part of the purchase price under the contract of sale, means that the plaintiffs’ case is untenable. The defendants place heavy reliance on Ms Zhang saying under cross-examination that there was no variation to the contract. Additionally they submit that no claim can be made against Ms Chan in her personal capacity.
Further the defendants say that for there to be a valid variation it would need to be in accordance with the formal process set out at clause 26.2 of the contract of sale. I reject this last submission as it goes against the authorities on this point ... there is sufficient evidence for me to be satisfied that there could be a variation as pleaded. The evidence I have taken into account is Ms Zhang’s oral evidence, the texts, the emails and the wording of the document that is P2. Even though it seems that this was signed on the same day as the contract of sale and I note the defendant made much of this, it appears to me to have been an afterthought. It could constitute a variation, a side agreement or even a separate agreement but nonetheless it relates to the sale of the business.
In any case, there was consideration. An additional sum of money was paid by the second plaintiff in exchange for getting the deal over the line and/or the efforts that Ms Chan had indicated that she would need to make to get the landlord to agree to transfer the lease.
The document evidencing the payment of the additional $50,000 was signed by Ms Chan with no indication on the face of that document that she was signing it on behalf of the first defendant. However, in my view, it is inextricably linked to the agreement between the first plaintiff and the first defendant for the sale of the business. Further, I note that a corporate entity can only act through its officers, employees and agents that in this case we are not dealing with complex corporate structures. Ms Chan and Ms Zhang were the only natural persons who could act on behalf of their respective companies and they both signed the contract of sale on behalf of those corporate entities.
I find that on the evidence of the plaintiffs and the pleadings, I could make a finding in [favour] of the plaintiffs. I therefore reject the defendants’ no case submission and will proceed to determine the substantive matter.[23]
[23]Transcript of Proceedings, Eastern Blue Pty Ltd v Assets China (Magistrates’ Court of Victoria, J1560616, 27 June 2019) (‘Transcript of 27 June 2019’) T220:1–223:30 (emphasis added).
The Magistrate found in favour of the respondents and ruled there was a variation of the contract.
I turn now to the issues [sic] whether there was a variation to the contract of sale and if so, what were the terms of that variation. ... Ms Zhang [second respondent here] sent Ms Chan [second appellant here] an SMS offering to pay $50,0000 as a non-refundable deposit. Ms Chan sent Ms Zhang an email on 28 July 2017 stating, ‘I am willing and happy to return all of your deposits should you not [it should be] be successful in getting the lease transferred to you or your licence approval’ [sic]. Both those documents are exhibited or rather form a part of P6.
The primary evidence of the terms of the agreement in relation to the additional $50,000 is of course the written document itself, that is P2. It clearly states that the $50,000 less up to $3,000 in legal costs will be refunded in the event that the landlord refuses to grant consent to transfer the lease.
The contract came to an end before the landlord had made a decision about the transfer of the lease. It cannot be the case, in my view, that in those circumstances, that is where it was not possible for that decision to be made, that the deposit is not refundable, as there was no consent granted for the transfer of the lease.
…
For all the reasons I have outlined, I find on the balance of probabilities that the further written agreement was a variation to the contract of sale and given the terms of that variation, the amount of the additional deposit being $50,000 is payable to the plaintiff.[24]
[24]Ibid T223:31–224:27, T225:6–11 (emphasis added).
The Magistrate’s finding of variation to contract was open on the evidence. Her Honour referred to a text message of 23 June 2017 and an email of 28 July 2017 contained in Exhibit P6. These follow.
On 23 June 2017, the second respondent sent a text to the second appellant stating “I think it will help if [sic] your solicitor can have the contract price for $250k and I will have the $50k pay by cash to you as a non-refundable deposit…”.[25] To which the second appellant replied “Noted. Thanks.”[26]
[25]Exhibit P6 in the proceeding below and contained in exhibit ‘ALT-11’ to the Thapliyal affidavit: text message sent 13:15 on 23 June 2017 (‘Exhibit P6’).
[26]Ibid: text message sent 13:16 on 23 June 2017.
On 28 July 2017, the second appellant emailed the second respondent (‘28 Jul 17 email’). The email included the following, which the Magistrate relied upon.[27]
I am willing and happy to return all of your deposits should you not [be] successful in getting the lease transferred to you or your license approval…
[27]Ibid: email dated 28 July 2017.
The primary evidence to which the Magistrate made reference is Exhibit P2, namely the 7 Sept 17 note. It was admitted into evidence with the description of ‘further written agreement’ given its characterisation was disputed.[28] As discussed in the background above, the second appellant signed a receipt of payment for the $50,000 on that date referring to it “as an extra payment for the purchase of Studio 466”.[29] It stipulated this amount, less up to $3,000 reimbursement for legal costs for the landlord’s negotiation, would be refunded to the second respondent “in the event the landlord successfully refuses to grant the consent for the transfer of the lease”.[30]
[28]Transcript of 30 April 2019 T11:29–32.
[29]Exhibit P2.
[30]Ibid.
The contract of sale relates to the sale of Studio 466. It is between the corporate parties and the second respondent as guarantor. The contract of sale identifies the deposit as being $25,000. As discussed above, cl 3.1 provides the deposit is to be paid into the trust account of the first appellant’s solicitor upon execution of the agreement. The 7 Sept 17 note states it is an extra payment for the purchase and would be refunded if the landlord refused to transfer the lease for Studio 466. The 7 Sept 17 note relates to the sale as does the 28 Jul 17 email that Her Honour referred to in her findings. Amongst other things, it refers to the return of all deposits, should the lease transfer not be successful. Accordingly, there is evidence to support Her Honour’s finding that cl 3.1 of the contract of sale, which related to payment of a deposit, was varied.
Moreover, Her Honour’s finding of variation gives effect to the intention of the parties in the contract of sale. The intention was for the first respondent to purchase Studio 466 from the first appellant, and for a deposit to be paid, and, pursuant to cl 6.1(d) for the deposit to be returned in the event that the ‘transfer of lease condition’ was not satisfied and the first appellant rescinded the contract.
Turning now to address the appellants’ submission that the Magistrate’s finding that the variation occurred after contract of sale was a chronological impossibility. Her Honour did not make that finding. As evident from the transcript above, the Magistrate held that the 7 Sept 17 note was signed on the same day as the contract of sale. It is not otherwise contended by the appellants. There was no finding as to the exact times the contract of sale and variation were signed. Nor was this the subject of cross-examination. As Ellicott J stated in Commonwealth of Australia v Crothall Hospital Services (Aust) Ltd, “[a] variation to the original contract could only take place by agreement, that is, by offer and acceptance.”[31] The evidence points to the $50,000 cheque being accepted in the same transaction as the contract of sale. The 7 Sept 17 note is consistent with that. It was open to Her Honour to weigh the second respondent’s oral evidence, which the parties refer to above in their submissions, as supporting the contract of sale and variation of it occurring in the same transaction.
[31](1981) 36 ALR 567, 580.
Turning now to the issue of consideration. The appellants made similar submissions to this ground of appeal before Her Honour and she provided reasons for rejecting their no case submission on those grounds. Her Honour referred back to her reasons for the no case submission when giving her findings above, namely that there was consideration and that the $50,000 was paid “in exchange for getting the deal over the line and/or the efforts that Ms Chan had indicated that she would need to make to get the landlord to agree to transfer the lease”.[32] This finding was open to Her Honour on the evidence referred to above. Moreover, it gives effect to the intention of the parties in the contract of sale.
[32]Transcript of 27 June 2019, T223:7–11.
Finally, the appellants contend that if the Magistrate had found there was a collateral or separate contract, then there is a greater likelihood that the terms on which the $50,000 cheque was repayable to the respondents would be different from the terms on which the $25,000 cheque was repayable. The appellants elected not to lead evidence supporting the pleading in their defence that there was a separate agreement. Rather, they chose the path of a no case submission. The primary evidence relied upon by the Magistrate above did not constrain Her Honour to make the finding of a separate contract and accordingly there is no error of law.[33]
[33]Ericsson Pty Ltd v Popovski (2000) 1 VR 260, 265 [14] (Brooking JA) cited in Francis v Farrell [2016] VSC 251 [90].
Ground 1 of the appeal is dismissed.
Did the Magistrate give adequate reasons for the finding of joint liability and joint entitlement to relief? If so, was it open on the evidence to make such a finding?
These issues arise from the third question of law in the notice of appeal read with the corresponding ground of appeal.
3.Whether her Honour erred in law, or alternatively failed to set out sufficient reasons, in finding that:
(a)the appellants were jointly liable; or
(b)the respondents were entitled to relief jointly.
Ground 3 of the appeal follows.
3.Ground 3: Error of law / failure to set out reasons to justify joint liability or joint entitlement to relief
3.1.Paragraph 1 of the Judgment provides for judgment on the claim, interest and costs to be paid by the appellants jointly in favour of the respondents jointly.
3.2.Her Honour’s reasons fail to set out any or any sufficient reasons for paragraph 1 and in so doing her Honour erred at law.
3.3.Further, or in the alternative:
(a)in light of her Honour’s findings that the Side Agreement constituted a variation to the Main Agreement, her Honour ought to have found that any liability was owed by the first appellant to the first respondent only; and
(b)it was not open to her Honour to find, and her Honour erred in so finding, that:
(i)the appellants should bear joint liability; and
(ii)the respondents should be entitled to relief jointly.
Appellants’ submissions
Ground 3 addresses privity of contract. The second appellant and second respondent were joint parties to the judgment when the second appellant was not a party to the contract of sale and the second respondent was a party as a guarantor only.
This ground identifies an error of law in the second appellant and second respondent being named as parties in the judgment despite an absence of contractual privity between them. If the side agreement was merely a variation to the contract of sale, then it does not follow that the second appellant (who was not a party to the contract) should be jointly liable for the debt or that the second respondent (who was a party but as a guarantor only) should be jointly entitled to the benefit of the judgment.
This is a relevant issue because having an adverse judgment has a notorious effect on the credit of an individual.
Respondents’ submissions
There is no error on the part of the Magistrate in relation to this ground. The appellants admitted in their defence that $50,000 was paid from the second respondent to the second appellant and received by the second appellant in person. In an email to the second respondent sent on 25 August 2017, the second appellant states, amongst other things, that she will declare the $50,000 on her personal tax.
I can provide a note for you re the extra payment. Please note that I will declare such payment on my side (only on my personal tax and absolutely not any other agency).[34]
[34]Exhibit P6: email dated 25 August 2017.
The appellants do not state in what capacity these funds were received nor whether they were deposited in a business account or personal account. The second appellant was named as the second defendant from the outset. At no point prior to trial was there any application to have her removed. As a matter of practicality, the second appellant was named because: (a) only a party to the proceeding can be bound by the outcome; and (b) as required by Order 9 of the Magistrates’ Court General Civil Procedure Rules 2010.
The appellants have not identified any legal error nor adverted to any personal prejudice of the second appellant which arises as a result of sharing liability jointly with the first appellant nor any prejudice by the second respondent being named in the orders jointly with the first respondent.
Analysis
The Magistrate heard the parties on the orders consequential to the hearing. Her Honour’s findings and part of the discussion follows.
HER HONOUR: ... I need to make an order that the - effectively the deposit moneys, the additional 50,000 be paid to the plaintiff in the original claim, I haven’t made that order, and that the counterclaim is dismissed. I think they’re probably the only orders other than the costs orders that I need to make, but I’m happy to hear you both on that.
...
MS ANTHONY-SHAW [for the respondents here / plaintiffs in Magistrates’ Court]: Can I assist, Your Honour?
HER HONOUR: Yes, in terms of the return of the deposit, I think in the circumstances I probably need to make the orders against the first and second defendant in terms of them being jointly and severally liable one way or another.
MS ANTHONY-SHAW: I think that’s correct, Your Honour, but I will say that the cheque itself was made out to the second defendant in person.
HER HONOUR: Yes.
MS ANTHONY-SHAW: And we don’t have any evidence to the effect that the first defendant received those funds particularly. I don’t know whether that’s something that Mr Thapliyal really has much to say about, but given that the liability was described initially as joint and several, I think it’s appropriate that the order be made as against both parties.
MR THAPLIYAL [for the appellants here / defendants in the Magistrates’ Court]: In the original judgment and the original reasons there wasn’t any finding against the second defendant based on any cause of action that had been alleged against the second defendant. There was a finding that the moneys had to be paid back on the basis of the variation pleaded, and I’m very clear as - - -
HER HONOUR: But I did make a decision about the status of the parties and I haven’t actually brought that down with me, so I might have to go back up to chambers and collect it, that effectively both parties, the first and second defendant and the first and second plaintiff in the original claims were, in effect, the companies, and that was clear on the - - -
MR THAPLIYAL: That’s right, they were the mind of the – the second - - -
HER HONOUR: Yes.
MR THAPLIYAL: The directors were the mind of the company engaging in these transactions but Your Honour had found that there was a variation. There was a contract, there was a variation. The only parties to that are the first plaintiff and the first defendant. The other persons aren’t parties to that contract. The second plaintiff, as I had earlier submitted, was only a party to reserve guarantor, with no obligations, with no rights under that contract which are enforceable against the defendants, and there was no finding that there were any such rights. The second defendant was brought into the proceeding - I understand Your Honour’s finding, the second defendant was the mind in all the actions but there was nothing pleaded against the second defendant and Your Honour specifically found that there was a variation as pleaded. Now, the second defendant is not a party to that.
HER HONOUR: But if she’s received those funds, Mr Thapliyal, in either - and look, you know, there wasn’t really any evidence to this effect as to in what capacity she received those funds, but my finding was it was intrinsically related to the proposed property transaction and if there’s going to be some sort of issue as to who had control of those funds I’m prepared to make orders that either, you know, both defendants pay that amount back.
MR THAPLIYAL: I am not going to take it any further. All I will say is both on the pleadings, the way the case was argued there was no evidence - there was no case run against the second defendant. ... There was no cause of action pleaded against her…
...
MS ANTHONY-SHAW: We’ve got a cheque made out in person to a person who received those funds. I respectfully disagree with Mr Thapliyal’s submission that nothing was pleaded as against the second defendant because in fact we had a restitutionary claim on foot and the restitutionary claim requires for its effectives the restitution from the person who received the funds and, therefore, the second defendant must be bound by the orders, but the company - the cheque was not made out to the company. It was in relation to a transaction in which the company was concerned, but the point of fact - and I’m sorry I also respectfully disagree that there was no evidence on this point - the cheque is in evidence.
HER HONOUR: Yes.
MS ANTHONY-SHAW: The cheque is clearly made out.
HER HONOUR: And it’s also in evidence that Ms Chan was the only director and the sole shareholder of the company.
MS ANTHONY-SHAW: Yes, and the author of the receipt/second agreement in person. It’s not signed on behalf of the company, so that’s my submission in respect of the parties and who ought to be bound by the orders…
...
HER HONOUR: Okay. Was there anything you wanted to say about that matter, Mr Thapliyal?
MR THAPLIYAL: No, Your Honour, no.
...
MS ANTHONY-SHAW: My submission in relation to the repayment of the deposit is that the order has to be made in respect of both the first and second defendants, not necessarily apportioning any liability as between them but instead for jointly and severally…
...
HER HONOUR: My finding is that because Ms Chan effectively is the director or sole shareholder of the first defendant, that either way wherever the money actually comes from is really neither here nor there. That payment needs to be made.
...
HER HONOUR: … My finding was that the contract was varied and that the repayment of the deposit has to be made one way or another by either or both of the defendants.
…
HER HONOUR: Okay. All right. Well, look having heard from the parties on these matters I can indicate that the orders I’m going to make is that: the defendants pay the plaintiffs $50,000 with a stay of 30 days; that interest be pursuant to statute, and we can get an exact figure and that costs of the proceedings other than the order I’ve already made in relation to the no-case submission, paid on scale F until 13 May and after that date on scale G...[35]
[35]Transcript of Proceedings, Eastern Blue Pty Ltd v Assets China (Magistrates’ Court of Victoria, J1560616, 17 July 2019) T349:15–373:2.
Turning now to the finding of joint liability. Her Honour held that the contract of sale between the respondents and the first appellant was varied. Her Honour referred to the second appellant being the sole director and shareholder of the first appellant. The second appellant was at all times a party to the proceedings. Paragraph 8 of the defence refers to the cheque for $50,000 being payable to the second appellant. Accordingly, it was an agreed fact that the cheque for $50,000 was made payable to the second appellant. Her Honour referred to the cheque in her findings on variation of contract. The second appellant did not elect to give any oral evidence about the circumstances of her receiving the cheque. I am satisfied, given the factors above to which Her Honour made reference, that she provided adequate reasons for the finding of joint liability.
Although the second appellant was not a party to the contract of sale, the finding of joint liability does not contravene principles of privity. It was open on the evidence for Her Honour to find that the second appellant made a promise that she would repay the monies she received personally regarding a contract of sale with the first appellant, of which she was sole director. Indeed, such an interpretation is consistent with the variation finding that Her Honour made.
As to the findings of joint relief, both respondents were always party to the proceeding. The second respondent was a party to the contract of sale in her own capacity (as guarantor). It was common ground that the second respondent was the sole director of the first respondent. She gave evidence that the $50,000 cheque was paid from her personal account (and that there was no business account for the first respondent).[36] This evidence appears uncontroversial. In its no case submission, the appellants relied on the evidence that the $50,000 was paid from the second respondent’s personal account.[37] The finding of joint relief was open on the evidence to Her Honour. I am satisfied that Her Honour’s path of reasoning is sufficient to enable review in this appeal so that I may determine whether or not there is an error of law. Her Honour’s findings of joint relief flow from the findings made in respect of the variation of contract and it was unnecessary for those reasons to be reiterated.
[36]Transcript of 1 May 2019 T166:6–9.
[37]Transcript of Proceedings, Eastern Blue Pty Ltd v Assets China (Magistrates’ Court of Victoria, J1560616, 20 May 2019) (‘Transcript of 20 May 2019’) T187:17–9.
Ground 3 of the appeal is dismissed.
Did the Magistrate decide the proceeding on a basis other than disclosed on the pleadings?
These issues arise from the fourth question of law in the notice of appeal read with the corresponding ground of appeal.
4. Whether her Honour erred in law, or the appellants were denied natural justice or procedural fairness, insofar as the case was decided on a basis other than that disclosed on the pleadings and where the appellants had earlier elected to call no further evidence in the event their no case submission failed.
Ground 4 of the appeal follows.
4.Ground 4: Error of law in permitting departure from pleadings / natural justice / procedural fairness
4.1.The respondents’ pleaded case, and the case they brought to trial, was that the Side Agreement constituted a variation to the Main Agreement. The respondents made no application to amend their case.
4.2.Upon the respondents closing their case, the appellants made a no case submission on the claim as pleaded. Her Honour required the appellants to make an election to call no further evidence in the event the no case submission was unsuccessful. The appellants made that election strictly by reference to the case as pleaded.
4.3.After the appellants made that election, in the course of finding in favour of the respondents, her Honour found that:
(a)there were other legal categories into which the Side Agreement could be put, aside from that of a variation, namely “a variation, a side agreement or even a separate agreement but nonetheless it relates to the sale of the business”;
(b)the consideration given in exchange for the Side Agreement was “getting the deal over the line and/or the efforts that Ms Chan had indicated that she would need to make to get the landlord to agree to transfer the lease”; and
(c)“unjust enrichment is a source of restitutionary obligation where money has been transferred or paid, notwithstanding that no contractual right of recovery can be established”.
4.4.Her Honour’s findings set out in paragraph 4.3 above were matters outside the respondents’ pleaded case and the case they brought to trial.
4.5.As a result, her Honour erred in law, or denied the appellants natural justice and due procedural fairness and thereby erred in law, by:
(a)deciding the case on a basis other than that disclosed in the pleadings;
(b)deciding the case on a basis other than that disclosed in the pleadings after requiring the appellants to elect to call no further any evidence in the event their no case submission failed;
(c)deciding the case on a basis other than that disclosed in the pleadings without providing any, or any proper, notice to the appellants;
(d)improperly holding the appellants to an election not to adduce any evidence which was expressly stated to be an election limited to the case pleaded by the respondents and brought to trial; and
(e)failing to extend to the appellants any opportunity to:
(i)withdraw their election; or
(ii)address the merits of the respondents’ case, or the basis on which her Honour decided that case, in evidence to the extent it departed from the case pleaded by the respondents and brought to trial.[38]
[38](citations omitted) (emphasis omitted).
Appellants’ submissions
Ground 4 is that Her Honour concluded the variation could alternatively be characterised as a ‘side agreement’ or ‘separate agreement’. The respondents made no such allegation in their pleading. The Magistrate’s conclusion was an unprompted amendment to the respondents’ claim. This occasioned an injustice to the appellants where they had already elected to call no evidence and were given no opportunity to address the amended case.
The appellants made a no case submission that the respondents’ evidence could not establish the pleaded case. They elected to call no further evidence if that submission failed. The election was made strictly in respect of the case as pleaded.
The Magistrate rejected the no case submission and then proceeded to decide the substantive case without hearing further from the parties.
The respondents’ pleaded case was that the side agreement constituted a variation to the contract. They made no application to amend their case. It was improper that the reasons disclosed arguments not set out in the respondents’ claim, that:
(a) there were other legal categories into which the side agreement could be put, namely “a variation, a side agreement or even a separate agreement but nonetheless it relates to the sale of the business”;
(b) the consideration given in exchange for the side agreement was “getting the deal over the line and/or the efforts that [the second appellant] had indicated that she would need to make to get the landlord to agree to transfer the lease”; and
(c) “unjust enrichment is a source of restitutionary obligation where money has been transferred or paid, notwithstanding that no contractual right of recovery can be established”.
The Magistrate fell into error by allowing a departure from the pleaded case after the appellants made an election strictly by reference to the pleaded case. It is not enough to say that all the facts were in evidence. Legal characterisation of facts is important. Pleadings are the ‘backbone of litigation’, reliance on them should not be treated as mere pedantry or formalism. Relief is generally confined to that claimed on the pleading. Demands imposed upon the Magistrates’ Court often require a ‘less strict’ application of pleadings rules but the Magistrates’ Court is still a ‘court of pleading’. The argument is that, here, the amendment was made: (1) by the Magistrate entirely unprompted and without any application; (2) after the appellants elected to call no further evidence if their no case submissions failed; (3) without notice to the parties; and (4) without giving the appellants an opportunity to withdraw their election and address the amended case. They were denied a basic right of procedural fairness.
Respondents’ submissions
There is nothing improper about the Magistrate’s findings as they arise squarely from the material facts pleaded. The respondents’ complaint clearly alleges the following material facts:
a)An agreement in the form of a contract of sale document;
b)A further document executed by [the second appellant], which, it is pleaded by the Plaintiffs, forms an additional part of the agreement between the parties by virtue of the fact that it varied the terms contained in the contract of sale relating to payment;
c)Terms relating to the payment of monies by the purchaser [first respondent] under the Contract and terms relating to the circumstances in which moneys may be refunded to the purchaser;
dPayment by [the second respondent] of $25,000 to the First Appellant and [sic] of $50,000 to the Second Appellant pursuant to the agreement;
e)Termination by the Appellants, including the refund by the Appellants of the $25,000 deposit to the Respondents;
f)Breach by the Appellants in failing to return the further $50,000 sum;
g)Alternatively failure of consideration for the $50,000 sum retained by the Appellants, entitling restitution of $50,000.[39]
[39]The respondents’ submissions filed on 2 July 2020 [39(a)–(g)].
It is trite to say that oral evidence emerging in witness examination at trial may often differ from the particular pleaded at the outset. The reality is that pleadings are different in the Magistrates’ Court. This is different from the appellants being caught by surprise in relation to a substantive part of the case against them in the form of material facts. The appellants laboured the point of the chronology of the execution of the contract of sale, side agreement and the dates of the cheques. The issue is: was the respondent entitled to return the $50,000 however characterised? This issue was well-known to the appellants. The appellants devoted a significant part of their defence to this issue. They characterised the $50,000 sum as a ‘risk offset agreement’. The defence ties this to the contract of sale: paragraphs 8B(a)–(c).
The risk offset agreement alleged by the appellants was not put to the second respondent in cross-examination. In their no case submission, the appellants did not address evidence before the Court in the form of correspondence from the second appellant to the second respondent stating that “all deposits will be refunded” if the transaction did not go through (Exhibit P6). That and the following evidence were clearly before the Court at the time that the appellants elected to make their no case submission:
a)the $50,000 paid to [the second appellant], however characterized, formed part of the consideration for the sale-of-business transaction;
b)on or about 4 December 2017 the Defendants’ solicitor instructed the Landlord in writing not to have regard to [the second respondent’s] documents as had been provided by [the second respondent] directly to the landlord;
c)the Appellants did not provide [the second respondent’s] documents in support of obtaining a transfer of lease to the landlord following their directive to the landlord to disregard;
d)the Appellants returned [the second respondent’s] deposit, to the extent of $25,000 which was held in trust, before the Landlord had considered [the second respondent’s] documents or made any decision about the transfer of the lease to [the second respondent]. Such an act, in conjunction with the failure to provide the relevant documents to the landlord, was repudiatory, in that it demonstrated that the Appellants no longer intended to be bound by the contract of sale;
e)the Appellants unequivocally confirmed that the contract was at an end by correspondence from the solicitor for the Appellants to the solicitor for the Respondents; and
f)it was thereafter impossible in the circumstances for any further application to the landlord to be made by [the second respondent], and accordingly for the landlord to refuse such an application as contemplated by the terms of the ‘side agreement’.[40]
[40]The respondents’ submissions filed on 2 July 2020 [45(a)-(f)].
The appellants have offered no explanation for why the $25,000 deposit was returnable but not the $50,000. This is a pivotal omission. The $50,000 was not a gift. Where was the error?
It was open for the appellants to make submissions if they did not understand the case made against them or the issue of the dates of execution of documents and cheques. No such submission was made. All matters were squarely before the Magistrates’ Court at the time the appellants decided to proceed with the no case submission.
The appellants’ submission that they ought have been given an opportunity to be heard following the rejection of the no-case submission, was not set out as a ground of appeal in the notice of appeal and therefore should not be the subject of consideration by this Court.
The decision to pursue a no case submission and the election not to call further evidence was forensic choice made by the appellants’ solicitor. It is not open to the appellants to try to avoid the consequences of the no case submission by way of submissions rather than properly by way of ground of appeal.
The appellants state a denial of natural justice stems from being denied the opportunity to further cross-examine the second respondent. There are two problems with this submissions: a) the appellants’ solicitor was given ample opportunity to cross-examine the respondents’ witness and cross-examined repeatedly and at length on this point; and b) the second respondent was a lay witness and was in no position to give evidence in the nature of legal conclusions concerning the proper legal characterisation of the $50,000 payment.
The appellants have not demonstrated how any additional cross-examination of the second respondent could have materially made any difference to the outcome. The appellants cut short their opportunity to present further material by their own decision to make a no case submission. The appellants had ample opportunity for submissions to the Magistrates’ Court on the facts and law by detailed written submissions and reply submission on their no case submissions.
There is no practical utility in remitting the matter to the Magistrates Court on the question of the legal construction of the variation.
Analysis
The following principles are applicable.[41]
[41]Stefanovski v Digital Central Australia (Assets) Pty Ltd (2018) 368 ALR 607, 623–5 [63]–[65] (‘Stefanovski’).
It is a fundamental characteristic of the adversarial system that trials are conducted on the basis of the issues the parties agitate in the pleadings and, as a general rule, relief is confined to that claimed or available on those pleadings (see Ingot Capital Investments Pty Ltd v Macquarie Equity Capital Markets Ltd (2008) 73 NSWLR 653, [424]–[428]). Ordinarily, an applicant is only entitled to obtain judgment on the case advanced before the Court. That is an emanation of the underlying principles of natural justice accorded to all litigants before the Courts. As was said by the majority of the High Court in Water Board v Moustakas (1988) 180 CLR 491, “a trial is not at large but is of the issues joined by the parties”.
…
[61] More recently, in Banque Commerciale SA v Akhil Holdings Ltd, the High Court reiterated that observance of the rules of pleading is intended to facilitate the fair determination of the real issues in dispute between the parties, and is not an end in itself. Their Honours said:
“The function of pleadings is to state with sufficient clarity the case that must be met: Gould and Birbeck and Bacon v Mount Oxide Mines Ltd (In liq) ((1916) 22 CLR 490, at p 517), per Isaacs and Rich JJ. In this way, pleadings serve to ensure the basic requirement of procedural fairness that a party should have the opportunity of meeting the case against him or her and, incidentally, to define the issues for decision. The rule that, in general, relief is confined to that available on the pleadings secures a party’s right to this basic requirement of procedural fairness. Accordingly, the circumstances in which a case may be decided on a basis different from that disclosed by the pleadings are limited to those in which the parties have deliberately chosen some different basis for the determination of their respective rights and liabilities. See, eg, Browne v Dunn ((1893) 6 R, at p 76); Mount Oxide Mines ((1916) 22 CLR, at pp 517 – 518).
Ordinarily, the question whether the parties have chosen some issue different from that disclosed in the pleadings as the basis for the determination of their respective rights and liabilities is to be answered by inference from the way in which the trial was conducted. It may be that, in a clear case, mere acquiescence by one party in a course adopted by the other will be sufficient to ground such an inference …”
That is not to say that a judgment needs to be precisely within the scope of the “particulars” alleged in a pleading so long as judgment is given on the causes of action pleaded. A fair amount of tolerance can be justified so long as the circumstances are such that all parties to the action have had fair notice of what will be determined. Experience shows that it is not infrequently the case that the evidence adduced at trial diverges from the pleaded particulars to some degree. That is not unexpected given that pleadings are prepared well in advance of all of the relevant information becoming known. In this respect, in Water Board v Moustakas (1988) 180 CLR 491, 497, the majority of the High Court (Mason CJ, Wilson, Brennan and Dawson JJ) indicated that particulars are less confining than material facts. Their Honours said:
In deciding whether or not a point was raised at trial no narrow or technical view should be taken. Ordinarily the pleadings will be of assistance for it is one of their functions to define the issues so that each party knows the case which he is to meet. In cases where the breach of a duty of care is alleged, the particulars should mark out the area of dispute. The particulars may not be decisive if the evidence has been allowed to travel beyond them, although where this happens and fresh issues are raised, the particulars should be amended to reflect the actual conduct of the proceedings. Nevertheless, failure to amend will not necessarily preclude a verdict upon the facts as they have emerged: see Dare v Pulham (1982) 148 CLR 658; 44 ALR 117. In Leotta v Public Transport Commission (NSW) (1976) 50 ALJR 666 at 668; 9 ALR 437 at 446, a case having been submitted to the jury which was factually different from that alleged in the pleadings and particulars, Stephen, Mason and Jacobs JJ observed that the pleadings should have been amended in order to make the facts alleged and the particulars of negligence precisely conform to the evidence. The failure to apply for the amendment in that case was held not to be fatal. But in Maloney v Commissioner for Railways (NSW) (1978) 52 ALJR 292; 18 ALR 147 Jacobs J, with whom the other members of the court agreed, pointed out (ALJR at 294; ALR at 151–2) that the conclusion in Leotta v Public Transport Commission (NSW) (1976) 9 ALR 437 was reached only upon the presupposition that the new issue or new way of particularising the existing issue had emerged at the trial and had been litigated.
Here, the Magistrate did not decide the proceeding on a basis other than disclosed in the pleadings.
The appellants have misunderstood the findings as to their no case submissions and the ultimate findings made by Her Honour. As discussed earlier, immediately after giving the findings rejecting the appellants’ no case submission, Her Honour gave her findings on the respondents’ complaint. Her Honour decided that there was a variation of the contract. Although Her Honour had referred to other possibilities in her findings on the no case submission, the finding was ultimately variation of contract.
The appellants’ submission that the respondents did not plead consideration in respect of the variation of contract and accordingly the case was decided other than on the pleaded basis, must be firmly rejected. As discussed above, the respondents’ complaint pleaded variation of contract and the appellants’ defence responded to that pleading. The appellants knew the case they had to answer was variation of contract and their defence responded to that case. They did not seek to strike out the pleading. Rather, as the respondents say, the appellants made the forensic decision to make a no case submission and not call their own witnesses in respect of the complaint. By that time, the evidence upon which Her Honour made her findings had been tendered and the second respondent had given oral evidence and been cross-examined. She was cross-examined at length about the 7 Sept 19 note.[42] In addition, Her Honour gave the appellants time to supplement their oral no case submissions with written submissions. There was never the amendment to the complaint contended by the appellants.
[42]Cf Stefanovski, relied upon by the appellants, in which allegations akin to dishonesty were not pleaded, and there was no cross-examination.
It is evident from the pleadings and the transcript that the parties were well aware of the real issues in dispute in the complaint – how the $50,000 should be legally characterised and whether it should be paid back. An example from the transcript follows:
HER HONOUR: …Look, I don’t want to interrupt you, but I’m just saying you’re essentially asking me at this stage on the basis of a no case submission to determine that somehow this is a sort of side agreement which has nothing to do with the business transaction and what I’m saying is that’s clearly the main issue in this case is what is the nature of this agreement around the $50,000 and surely that’s the nub of the whole case that is the ultimate issue really for me to determine.
MR THAPLIYAL: Accept that, Your Honour, that the plaintiff has pleaded. The case of the plaintiff is that the $50,000 was paid as a further deposit towards the purchase price under the contract of sale.[43]
[43]Transcript of 20 May 2019 T186:6–18.
The appellants say in grounds 4.5(d) and (e) that they were improperly held to their election and ought to have been given an opportunity to withdraw their election, lead evidence and make further submissions. These submissions are rejected given the finding the case was not decided on a basis other than disclosed is the pleadings. So too the appellants’ other submissions alleging denial of natural justice or procedural fairness.
As for the issue of consideration, I refer to and repeat the analysis in respect of ground 1 above. It was unnecessary for it be separately pleaded given the respondents’ pleading of variation in paragraph 8. It was particularised as being “partly oral, partly in writing, and partly to be implied”. Insofar as it was oral, “it is contained in negotiations and conversations leading to the execution [of the 7 Sept 17 note]”. Insofar as it was in writing, it was contained in the 7 Sept 17 note. Insofar as it was to be implied, “it is implied by the conduct of the parties in accordance with the payment and receipt of the [$50,000] and in order to give business efficacy to the Contract of Sale and the [7 Sept 17 note].” The appellants were well aware that variation, including the issue of consideration, was in dispute between the parties. Indeed, the appellants’ no case submissions included the following: “She [second respondent giving evidence] then emphasised the $50,000 to be paid to [the second appellant] to get the business.”[44] And “[the $50,000] is linked to the business transaction in the sense that there is as [the second respondent] put it, she paid the further $50,000 to [the second appellant] to get the business transaction between [the second appellant] and [the first appellant] over the line.”[45] Her Honour held that the payment was made “for getting the deal over the line” and/or the efforts that the second appellant had indicated that she would need to make to get the landlord to agree to transfer the lease. As discussed above, Her Honour however rejected the appellants’ legal characterisation of the $50,000.
[44]Ibid T184:2–3.
[45]Ibid T188:20–4.
In respect of the submissions as to unjust enrichment, it is common ground now that Her Honour did not make her ultimate findings on that ground.
Ground 4 of the appeal is dismissed.
Conclusion
The appeal fails on the four grounds of appeal. The notice of appeal is dismissed.
SCHEDULE OF PARTIES
| S ECI 2019 03667 | |
| BETWEEN: | |
| ASSETS CHINA PTY LTD (ACN 093 530 583) | First Appellant |
| MICHELLE SIU PIK CHAN | Second Appellant |
| - v - | |
| EASTERN BLUE PTY LTD (ACN 620 756 694) | First Respondent |
| MIAN ZHANG | Second Respondent |
4
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