Cornerstone Hardware Brokers (Australia) Pty Ltd v Methven Australia Pty Ltd

SUPREME COURT OF VICTORIA

COURT OF APPEAL

S APCI 2014 0143

CORNERSTONE HARDWARE BROKERS (AUSTRALIA) PTY LTD	Appellant
v
METHVEN AUSTRALIA PTY LTD	Respondent

---

JUDGES:	WARREN CJ, FERGUSON AND KAYE JJA
WHERE HELD:	MELBOURNE
DATE OF HEARING:	14 April 2015
DATE OF JUDGMENT:	2 June 2015
MEDIUM NEUTRAL CITATION:	[2015] VSCA 128
JUDGMENT APPEALED FROM:	Cornerstone Hardware Brokers (Australia) Pty Ltd v Methven Australia Pty Ltd [2014] VCC 945 (Macnamara J)

---

CONTRACT – Variation – Written agency agreement providing commission rates on sales of bathroom products - Whether commission rates varied – Whether variation conditional upon execution of formal written agreement - Sagacious Procurement Pty Ltd v Symbion Health Ltd [2008] NSWCA 149.

CONTRACT - Damages – Proof of quantum of loss – Spreadsheets purporting to be summary of loss tendered at trial without objection – Documents created for purpose of proceeding and not a business record – Author of spreadsheets did not give evidence – Witness evidence on spreadsheets confusing and vague – Whether spreadsheets contained sufficient probative evidence of alleged loss.

PRACTICE AND PROCEDURE – Appeal from decision refusing to allow plaintiff to re-open its case on the issue of damages after reasons delivered but before final orders made – No basis to interfere with discretion of judge to refuse application to re-open.

---

APPEARANCES:	Counsel	Solicitors
For the Appellant	Mr S R Horgan QC with Mr L E P Magowan	Hicks Oakley Chessell Williams
For the Respondent	Mr P Wallis	Herbert Smith Freehills

WARREN CJ
FERGUSON JA

Introduction

The respondent (‘Methven’) sells showerheads, tapware and valve products. The appellant (‘Cornerstone’) was the sole and exclusive agent for the sale of Methven’s products into particular retail hardware stores, including Bunnings. The written agency agreement (which was assigned or novated to Cornerstone in 2003) provided a commission rate of 10 per cent of the value of sales up to $2 million in a calendar year and after that by negotiation. If Bunnings required a product display to be re-established, moved or otherwise reconstructed, Cornerstone would charge for this work, described as ‘relays’ in addition to the commission it charged on sales. Cornerstone also made a separate charge for refits (essentially cleaning and tidying) and refilling retail stores with Methven’s product. The contract could be terminated by either party giving six months’ written notice.

In September 2009, the agency agreement was varied so that Cornerstone was paid a commission of 10 per cent on showerhead products, five per cent on sales of tap products and two per cent on sales of valve products. The variation was not recorded in an executed written form of agreement.

In June 2011, Methven put the agency contract out to tender and found that there were others willing to do the work for less than was being charged by Cornerstone. On 13 July 2011, representatives of Methven and Cornerstone met to discuss their ongoing relationship, in particular, the commission to be charged and whether separate charges were to be levied for relays and refits. No further written agreement was entered into, but from 1 September 2011, Cornerstone reduced the commission it charged on sales to a flat rate of six per cent and was paid at that rate by Methven until late March 2012.

On 28 March 2012, Cornerstone’s Mr Michael Dobbin sent an email to Mr Mark Bejatovic of Methven stating that Cornerstone had agreed to the reduced commission rate conditional on a new written agreement being entered into. Mr Dobbin said that if a written agreement was not signed by the end of the month, Cornerstone would have to assume that the earlier contract was the one that the parties were using and that he would send an invoice for the difference between the commission that had been paid and the commission at the old rates. No contract was signed.

On 12 April 2012, Cornerstone gave Methven six months’ notice of termination and rendered invoices for the difference between the commission that it had charged since 1 September 2011 and the amount that it would have been entitled to if the old commission rates applied. It also invoiced Methven for relay and refit charges that had not been paid from 1 September 2011. When the invoices were not paid, it served statutory demands for the amounts it claimed to be owed. It later withdrew those demands.

On 16 July 2012 Cornerstone began proceedings claiming the amount of $440,759.71 as a debt due for unpaid commission and relay and refit costs, alternatively damages.

On 27 July 2012, Freehills (on behalf of Methven) wrote to Cornerstone’s lawyers, Hicks Oakley Chessell Williams (‘Hicks Oakley’), stating that Cornerstone had engaged in conduct which constituted a clear repudiation of the agreement and that Methven elected to terminate the agreement with immediate effect. Hicks Oakley responded stating that Methven had no right to terminate the agreement, and that this amounted to a wrongful repudiation such that Cornerstone could and did elect to terminate the agreement and would sue for damages arising from the repudiation. The claim in the County Court was amended to add a claim for damages for wrongful repudiation.

The trial judge concluded that in the period July to August 2011 the parties made an agreement that Cornerstone would charge a flat commission on sales of six per cent and then five per cent with effect from 1 September 2011 and 1 April 2012 respectively.[1] He found that there was no condition (either precedent or subsequent) requiring the varied agreement to be committed to writing.[2] He held that Methven repudiated the contract and was liable for damages.[3] At trial, Cornerstone had tendered spreadsheets which it contended proved its loss. The judge found that the spreadsheets proved nothing and he proposed to give Cornerstone an opportunity to put on proper evidence to prove what the damages were.[4] No orders were made at the time the judge delivered his reasons. Rather, he gave the parties an opportunity to bring in short minutes to give effect to his reasons.[5] Methven opposed the course that had been proposed by the judge of giving Cornerstone a further opportunity to prove its loss. After hearing submissions, the judge ruled that Cornerstone should not be permitted to re-open its case.[6] He ordered that there be judgment for Cornerstone in the amount of $1 for Methven’s repudiation of the agency agreement; that the claim otherwise be dismissed and that Cornerstone pay Methven’s costs of the proceeding partly on a party/party basis and partly on an indemnity basis.[7]
[1]Cornerstone Hardware Brokers (Aust) Pty Ltd v Methven Australia Pty Ltd [2014] VCC 945 (‘Reasons’) [95], [105].
[2]Ibid [113].
[3]Ibid [134].
[4]Ibid [135].
[5]Ibid [147].
[6]Cornerstone Hardware Brokers (Australia) Pty Ltd v Methven Australia Pty Ltd (Unreported, County Court of Victoria, Macnamara J, 21 August 2014) (‘Re-opening Ruling’).
[7]Cornerstone Hardware Brokers (Australia) Pty Ltd v Methven Australia Pty Ltd (Unreported, County Court of Victoria, Macnamara J, 27 October 2014).

Cornerstone has appealed and seeks judgment for $440,759.71 and for orders that Methven pay its costs. It challenges the Re-opening Ruling in relation to the judge’s refusal to permit it to re-open its case. It also sought leave to amend its notice of appeal to challenge the judge’s finding that the spreadsheets proved nothing and it seeks orders for the payment of the amounts included in one of the spreadsheets.

For the reasons which follow, we would dismiss the appeal.

The facts

Cornerstone contends that the judge erred in finding that there was a varied contract in 2011. It submits that the evidence at trial was overwhelming that any variation was subject to the entry by the parties into a written agreement. Consequently, it is necessary to set out the evidence and factual findings of the judge in a little more detail before dealing with Cornerstone’s contentions.

The original agency agreement is dated 21 September 2000. The parties to that agreement were Cornerstone and Flexispray Pty Ltd. The contract provided that it was initially for one year and then ongoing until determined by either party giving to the other six months’ written notice in advance of its wish to terminate. Cornerstone could also terminate the contract if moneys payable to it were not paid within 21 days after they fell due for payment. The contract also provided for payment of commission to Cornerstone at the rate of 10 per cent up to $2 million in a calendar year and after that by negotiation. The contract was executed by Cornerstone in the presence of its director, Sandra Walz (now Dobbin) and by Flexispray in the presence of its director, Mathew Crichton. Michael Dobbin signed as a witness.

The method of charging commission followed a pattern of Methven raising ‘Recipient Created Tax Invoices’ based on its sales and then Cornerstone would issue a mirror invoice to Methven. In a sense, it operated as an honesty system. Only Methven knew the quantity of its sales and it was on that criteria that Cornerstone was entitled to charge commission.

Although there is no formal written novation, it is common ground that the agreement was subsequently novated with Methven replacing Flexispray Pty Ltd as a party. The Crichton family were shareholders of the Methven group of companies. It is also common ground that the 10 per cent flat rate commission was varied in 2009 with commission on shower installations remaining at 10 per cent, five per cent for tapware and two per cent for valve products. That variation was not recorded in a formal written agreement.

On 8 July 2011, Mr Crichton sent an email to the Dobbins telling them that Methven was required to run a tender process for the agency contract and that two alternative service suppliers were offering much cheaper rates with one of them offering full service (including relays and charge outs) of four per cent. Mr Crichton said that ‘the numbers are too big to ignore’ and that as Cornerstone was their longstanding supplier and the incumbent he would like to discuss this with them.

A meeting between the Dobbins, Mr Crichton and Mr Bejatovic (Methven’s national sales manager) took place on 13 July 2011. Each of them gave evidence about what happened at the meeting.

Mr Dobbin testified that Mr Bejatovic asked them to agree to a four per cent commission which they could not agree to because of the cost of running the business. There was then discussion about five and six per cent. The contract was still profitable for Cornerstone at those commission rates and Mr Dobbin wanted to keep the Methven business.

Mr Dobbin also gave evidence that Mr Bejatovic wanted them to agree to do the refits and relays as part of the new commission and the Dobbins asked him to write to them about it and they would then do some calculations to see what their costs were and whether they could afford it. So far as he was concerned, there was no resolution between them on the topic of refits and relays.

According to Mr Dobbin, he told Mr Crichton and Mr Bejatovic that if they were going to accept a new commission structure they also needed a new contract and they would have to be happy with the new contract or they would just revert back to the old commission rate and terminate the contract. Mr Dobbin was looking to see if he could secure a contract confirming their ongoing relationship on the terms in the previous contract with just a variation to the commission. When asked what was to happen to the commission structure while negotiations were continuing, Mr Dobbin responded:

They stayed as they were until 1 September and I said look - which I might add my wife didn’t agree with but that was only later - as a sign of good faith, because the relationship had been going for so long I assumed they would get the contract together fairly quickly and so we would start on the - once we got agreement on the commission rates we would start on those commission rates on 1 September but it was again subject to getting the contracts sorted out, that was the key issue.

When asked what he had actually said he replied:

I said to Crichton of course, mate, if we can’t get this contract together you do realise we’re going to have to terminate at six months at the 10 per cent as per the contract, he said yes, absolutely.

When asked how the meeting was left, Mr Dobbin said:

The meeting was left that they would confirm their final offer on commissions and that subject to us being happy with that and the new contract being signed we would progress but as a sign of good faith while in contract discussions were going on and once we had agreement between ourselves formally from them on what they had talked about, then the process would go underway.

Mr Dobbin testified that during the course of the meeting, Mr Bejatovic said that if they did not agree to reduce the commission that they were charging, then Methven would have to look at terminating the contract. According to Mr Crichton, it was him who said something along those lines in response to Ms Dobbin saying that Methven had them over a barrel and that there was nothing Cornerstone could do about it. Ms Dobbin’s evidence was that this type of statement was made by both Mr Crichton and Mr Bejatovic at different times in the discussion and that she had also said it at the end of the meeting. Ms Dobbin said that they did come to an agreement that the commission would reduce to six per cent and then five per cent but she wanted to do some calculations. She asked Mr Crichton and Mr Bejatovic to formalise exactly what it was that they were agreeing to so that she and her husband could do some modelling and work out how they were going to structure the Cornerstone business going forward. Ms Dobbin wanted to see the real impact of it even though she knew that they had no choice but to look at some sort of commission reduction. Ms Dobbin testified that when she left the meeting they had not accepted Methven’s proposals as she was still ‘crunching numbers.’

The best outcome for the financial year for Methven was to have the commission reduced rather than having to give six months’ notice because the commission during that six month period would be payable at the higher existing rate of commission. Mr Crichton initially gave evidence that at the end of the meeting there was an agreement on the reduction of commission with Mr Bejatovic to formalise it in a written contract immediately. In cross examination, however, he accepted that by the conclusion of the meeting there were still matters of substance to be agreed. He testified that there was no discussion about what would happen if Cornerstone started charging the lower commission but no written contract was entered into. However, Mr Crichton was of the view that the old rates would continue and that Methven would be charged at those rates until there was an agreement or it was terminated.

Mr Bejatovic gave evidence as well about the meeting. He said that there was no discussion that in the event no written contract was signed, Cornerstone could revert back to the old commission rates.

Ms Dobbin made a brief note during the meeting which reads in part:

I said
* You have us over a barrel
forming
a new Contract
at the
lower
commission

2 choices
In Return for

Giving us the NZ Business
OR we Terminate
With 6 months
notice

Pulling all of the various threads of this evidence together, it seems probable that at the meeting there was a discussion about the rates of commission moving towards a final position of six per cent to be payable for the first six months of the new arrangement and five per cent from then on. Methven was to provide its final proposal to Cornerstone after the meeting. No agreement had been concluded by the end of the meeting.

On 15 July 2011, Ms Dobbin sent an email to Mr Crichton and Mr Bejatovic asking for Methven’s figures as she had been expecting to receive a spreadsheet of figures from them following the meeting on 13 July so that she could do her modelling. Mr Bejatovic responded later on 15 July:

Hi Sandra.
I had a chat to Mike [Dobbin] earlier today – he may not have spoken with you as yet.
I haven’t prepared a spreadsheet but……
In summary what we are proposing as a compromise position is made up of two parts:
Part one – re-negotiated commission structure:
Phase one – Moving to a flat 6% commission structure – effective August 1^st 2011
Phase two – Moving to a flat 5% commission structure in six months from now – effective Feb 1st 2012.

Part two - tiered sales based commission structure whereby all commissions on sales in excess of $15m are paid at a commission rate of 4%. The base rate commission remains at 5% for the first $15m in sales assuming that it will take more than six months for us to reach this level in the next year.
In addition broad terms we wish to work together and include are:
1.A new store visitation matrix whereby 1/3 of stores are visited weekly, 1/3 fortnightly and the remainder monthly.
2.Free relays, refits and new store layouts as well as on going rectification works to existing displays and layouts (Zero charge-outs).
3.A guaranteed one hour to Methven dedicated from each of your reps on every store visit.
4.Agreement to terms within a KPI and Service level agreement framework (created together with Cornerstone) which covers goals and measures the achievement of set targets offering complete transparency across both leading and lagging indicators.

The proposed new contract will be for a two year period.
Feel free to call me at your convenience if you have any questions,

Mr Dobbin testified that after this email was sent, he had a discussion with either Mr Crichton or Mr Bejatovic (he could not recall which) and the dates were changed from August to September and from February to April but otherwise the commission matters were agreed. Mr Dobbin wanted the other matters set out in 1–4 dealt with separately because he did not believe that those types of matters should be in a contract. Mr Crichton agreed that the dates were changed to September and April and that in the days following the email, all the other commission matters were resolved although he could not recall whether it was him or Mr Bejatovic who had spoken to Mr Dobbin about this. Mr Bejatovic gave evidence that Mr Crichton told him that he had reached agreement with Mr Dobbin about reduced rates.

On 18 August 2011, Mr Dobbin sent Cornerstone’s standard contract to Mr Bejatovic asking him to check that he was happy with the content and apologising for the delay in sending the document. Mr Bejatovic responded the same day to say that he had given it to Methven’s lawyers to look over and he would be in touch.

The document that Mr Dobbin sent provided for a term of one year initially and then ongoing until determined by six months’ notice by either party. The schedule setting out the products, territory and commission covered by the agreement was left blank. Mr Dobbin sent the contract expecting that it would be signed and that would be the end of the matter. The draft contract did not deal with any of points 1–4 set out in the 15 July email.

On 1 September 2011, Mr Bejatovic sent a revised draft contract prepared by Methven’s lawyers to the Dobbins. From then on, Cornerstone charged, and Methven paid, commission at the rate of six per cent. When asked during the trial why Cornerstone had reduced the commission it charged from September 2011, Mr Crichton said that this was a ‘good faith move’ by Mr Dobbin even though the documentation had not been formalised. When pressed in re-examination about this, he said that Mr Bejatovic had told him that this had been agreed with Mr Dobbin.

On 6 September 2011, Mr Dobbin forwarded to Mr Bejatovic the email that Cornerstone had received from its lawyers with comments on Methven’s form of draft contract. Those comments principally focussed on the additional matters that had been included which were not in Cornerstone’s standard agreement including key performance indicators (‘KPIs’) for Cornerstone to meet. Mr Dobbin suggested that he and Mr Bejatovic get together to ‘finalise this once and for all.’ They met on 8 December 2011 and Mr Dobbin asked for a number of changes focussing on the KPIs and the way that relays, refits and store set ups would be charged. He left the meeting thinking that they had an agreement.

Towards the end of 2011, Mr Crichton resigned from Methven.

On 10 February 2012, Mr Dobbin contacted Mr Bejatovic by email asking for a draft with the proposed wording changes following what had been discussed at their meeting on 8 December 2011 so that he could have it checked before they were to meet again on 23 February. Mr Bejatovic responded on 12 February to say that he would try to work on the contract the following week.

On 22 February 2012, Mr Bejatovic sent a revised form of contract to Mr Dobbin. This draft included a provision that among other things enabled Methven to terminate if Cornerstone employed Mr Crichton.

On 28 March 2012, Mr Dobbin sent an email to Mr Bejatovic in the following terms:

Mark, just confirming our phone conversation earlier today regarding the contract between our two companies and subsequent conversation to set a 2.00pm appointment tomorrow.
As you are aware there is still an existing contract ‘on foot’ between Cornerstone Hardware Brokers (Australia) and Methven and has been since 2000. At your company’s insistence we were forced to renegotiate with you last year, both on the commission arrangements, and store servicing charges, (under pressure of competitive quotes from other providers in the market).
As a gesture of goodwill, based on Methven confirming that we were the continuing as their rep force, and that only minor details had to be finalised, and ultimately conditional on Methven signing the new contract, I agreed to go to the new commission arrangements from the 1st of September, 2011.
After protracted discussion, we reached a final agreement on a proposed new contract in late November 2011. In February of 2012 we met again as the contract was still not signed. You then introduced several new clauses to the contract which have no relevance to our company, and were not points that our company Cornerstone Hardware Brokers (Australia) would ever agree to.
It is now late March, and unless you sign the agreed November contract before the end of the month, I will have to assume (given our numerous conversations and attempts to resolve the new negotiations), that the existing contract is the one we are using and I will be sending Methven an invoice for $170,974.53 plus GST for the makeup commission between what was the rate, and what we are currently being paid conditional on Methven signing the contract. Plus we will also need to invoice any relay and refit charges that have taken place since September.
Mark, I value my long relationship with Methven, but feel that this has dragged on more than long enough. Because of the number of staff we employ, and the liabilities we are incurring on your behalf, I must have our contracts of employment settled Mark, the other issue which you and Mathew raised in your discussions in September, was that as part of this negotiation as a ‘Trade Off’ for the income loss we could do the merchandising in New Zealand. We then incurred cost to go over and meet with Rick & Gary at Methven NZ and look at the market. To date this has amounted to nothing, which you both had portrayed as something certain to happen and had included the potential commission in your discussions at the time. As we have already started in NZ this income is critical to us, and you indicated you were going to give me some feedback when you spoke to Rick in January regarding our start date?
Mark, let’s get this resolved tomorrow as I need to raise March invoices.

At around the time of this email, Mr Dobbin found out that Methven were in the marketplace looking for another agent to replace Cornerstone.

Mr Bejatovic and Mr Dobbin met again on the afternoon of 29 March 2012. Later that day Mr Bejatovic sent an email to Mr Dobbin referring to their discussion and stating that all of the changes that Mr Dobbin had requested had been made. A copy of the revised document was attached to the email.

On 1 April 2012, Mr Dobbin sent an email to Mr Bejatovic about one of the proposed KPIs. Mr Dobbin had told Mr Bejatovic that he would contact Bunnings for wording that could be used in the contract with Methven to avoid difficulties that might arise in respect of that KPI. The email concluded with a postscript saying that as soon as Mr Dobbin had the proposed wording, he would return the contract to Mr Bejatovic ‘for consideration.’

On 11 April 2012, Mr Bejatovic sent a follow up email saying that he needed the ‘altered and signed contract’ that week. He asked for confirmation that that would be done. On 12 April 2012, Mr Dobbin responded by email. Part of the email read as follows:

We obviously are not going to be able to get agreement on this contract, and to that end I am reverting to the original contract, of the year 2000, and giving Methven 6 months’ notice under the terms of this contract, finishing our relationship at the 30th September 2012. I am also enclosing an invoice for the difference in Commission between what you have currently paid to date, and what the commission rate is in the contract that has been still on foot for the last 7 months. This account is due and payable immediately. As you are very much aware, the drop in Commission last September was on the condition we could agree on a new contract between our two companies as well as picking up the vendor servicing business for Methven with “Bunning’s”, New Zealand. You and your previous management made a big selling point at our many discussions last year that New Zealand was to be part of the whole deal in accepting any kind of commission cut in the new agreement. I noted that in our discussions at our last meeting that you were trying to distance yourself from any commitment about New Zealand and that was another factor in my decision here. On top of this attached invoice I will also be sending Methven a charge for all of the relay and refit work we have done over this period where a charge has not been applied to date as per the terms of the original contract.
Mark it has been a great thrill being involved with Methven for all of these years, and it is disappointing that it has to end this way, but as we have been 7 months trying to get agreement on the proposed contract revision, (to the financial disadvantage of Cornerstone), your company has things in the proposed new contract which are just untenable. You and your team keep entertaining Quotes from other merchandising companies instead of showing loyalty to our team and as of late as last week we got more industry information that you are still reviewing for other Merchandising companies to replace us? Cornerstones fine work in Bunnings is what got Methven to where it is today, and it is very disappointing to us that we just cannot trust what we are being told now by you in pushing to revise our current contract. That is why we believe it best to end the relationship.
You can be assured Cornerstone will do it best for Methven, as it always has, till we finish at the end of September.

An invoice for $212,004.96 for ‘unpaid’ commission was attached to the email. Further charge-out invoices for refits and relays were also raised.

On 4 May 2012, Freehills (acting for Methven) sent a holding letter to Mr Dobbin stating that they were taking instructions about this. A week later, Hicks Oakley, who then acted for Cornerstone, sent to Freehills statutory demands addressed to Methven. Freehills responded by letter dated 18 May 2012 pointing out that the alleged debts were disputed. They also said that the 2000 agreement was no longer on foot having been replaced by a 2009 and later 2011 agreement which both included new and lower commission rates compared to the rates under the 2000 agreement. They pointed to the invoices for the respective periods to which each agreement related and observed that those invoices reflected the reduced rates of commission. Freehills also attacked the validity of the statutory demand which related to the charge-outs for relays and refits. Freehills sought the withdrawal of the statutory demands. The demands were withdrawn.

On 1 June 2012, Freehills wrote again to Hicks Oakley stating that Cornerstone’s conduct in asserting that the 2011 agreement was not on foot, invoicing for back payment of commission, relays and refits and asserting that the amounts in the invoices were due and threatening to commence proceedings constituted a clear repudiation of the agreement. Freehills asked whether Cornerstone still sought payment of the invoices and continued to threaten to begin court proceedings and stated that if that was the position, Methven would regard it as confirmation that Cornerstone repudiated the agreement.

On 16 July 2012, Cornerstone commenced a proceeding against Methven in the County Court.

On 27 July 2012, Freehills sent a further letter to Hicks Oakley. This time Freehills said that Cornerstone had engaged in repudiatory conduct by asserting the agreement was not on foot, serving the invoices for back payment and asserting that they were due for payment, serving the statutory demands and commencing proceedings against Methven in respect of the invoices. Freehills said that in light of Cornerstone’s repudiation, Methven elected to terminate the agreement with immediate effect.

On 31 July 2012, Hicks Oakley responded saying that Cornerstone remained ready, willing and able to perform the contract and disputing Methven’s right to terminate. They went on to say that the purported termination by Methven, its request for the return of stock and product information and its statement that any monies due would only be paid after those things had been returned constituted a wrongful repudiation of the agreement by Methven which Cornerstone accepted. Hicks Oakley stated that Cornerstone elected to terminate the agreement and would sue for damages arising from the repudiation.

At trial, the pleaded claim by Cornerstone was that the agency agreement was varied to provide for a commission rate of six per cent from 1 September 2011 to 1 April 2012 and after that a flat rate of five per cent with the parties to commence negotiating towards the entry by them into a new agency agreement in writing and with the varied commission rates and no charges for relays and refits subject to and conditional upon the parties executing a new written agreement. Cornerstone alleged that if no written agreement was entered into within a reasonable time, the commission rates would revert to the earlier rates and it would be entitled to charge for relays and refits. Cornerstone pleaded that the requirement for a written agreement was not met so that the commission rates and relay and refit charges reverted to the previous arrangement. In the alternative, Cornerstone pleaded that there was no agreement in 2011 to vary the agency agreement with the 2009 agreement remaining in force such that it was entitled to charge commission at the 2009 rates.

Cornerstone alleged that Methven had failed to pay both the higher rate of commission due from 1 September 2011 and the relay and refit charges. It claimed a debt, alternatively damages of $440,759.71. Moreover and in the alternative, Cornerstone sought damages for Methven’s alleged wrongful repudiation. It claimed loss of profits for the period from 27 July to 12 October 2012 in the sum of $122,278 and direct additional costs of $7,537. Annexed to the pleading was a spreadsheet (‘Annexure A’) which was said to contain a breakdown of these figures. That document was tendered into evidence at the trial, as was an alternative spreadsheet (‘Annexure B’) which had a figure of $184,276 for lost profitability and the same figure for additional costs. Taking Annexure B as an example, it lists figures for each month from July 2011 to July 2012 for commissions and costs for each month of that period broken down into ‘merchandisers’, ‘super,’ ‘oncosts’ and ‘kilometres.’ The costs are deducted from the commissions to give what is described as net profit figures which are averaged to give a monthly figure of lost profits of $76,000. That figure is then used to calculate claimed lost profitability of $184,000 for a period of 74 days running from 31 July to 12 October 2012. Added to that are what are described as additional costs (which are itemised) totalling $7,537 giving a total claimed loss of $191,813. Annexure A follows the same format. At the trial, counsel informed the judge that loss of profits in Annexure A were calculated on the basis of the reduced commission rates whilst the Annexure B figure was calculated at the rates applying from the 2009 variation.

Mr Dobbin gave evidence that Annexure A would have been prepared by Cornerstone’s financial controller. He could not explain the calculations to the judge. The judge asked whether there could be other witnesses better informed about the information in the spreadsheet and was told by counsel that there would be. Annexure A was then tendered. No objection was taken by counsel for Methven to the tender of the document.

Ms Dobbin subsequently gave evidence that Annexure B would have been prepared by an accountant that Cornerstone had engaged for budgets and costing work. She said that she was familiar with the underlying accounts for both annexures and believed them to be true and correct. Annexure B was then tendered into evidence without objection.

The evidence that Ms Dobbin gave about the Annexures was confusing. She could not in any meaningful way explain how the calculation had been undertaken or what it represented. For example, in examination in chief she was asked about the section of Annexure B under the heading lost profitability for July to October 2012 which gave a figure of $184,276. The following exchange occurred:

COUNSEL: You will see on the left-hand side there is lost profitability?---Yes.
That is calculated by reference to days, isn’t it? --Yes.
And it’s that which gives rise to the number which appears, the $184,276?---That’s correct.
And so what we have is for July we have a day, for August we have 31, for September we 30 and for October we have 12?---That is correct.
Is it the case what when you have done is extrapolated on what occurred in the previous year?---That I don’t - I don't know the answer to.
So going back up to the top, what occurs at the top line is the commission?---Yes.
…
COUNSEL: Underneath is the cost to service? --- For the merchandisers only, yes.
And that covers the period July 2011 to July 2012?---Yes.
And then we have an average section?---Yes.
And what does that average figure, the $76,166, what does that represent relative to the lost profitability? --- The average of the year’s net profit.
HIS HONOUR: What it looks like to me, and tell me if I’m right, is this is the average monthly profit obtained by Cornerstone in this part of its business in the period July 2011 to July 2012, that’s what I read it as, have I read it right? --- Yes, I believe you have, Your Honour.
Thank you.

Ms Dobbin was cross examined about Annexure A and said that the profit listed in that document was not exaggerated but was conservative. She gave evidence that one of the difficulties was that Methven had not provided its actual sales figures for some of the relevant period. Indeed those figures had not been provided for the period from July 2012. Ms Dobbin testified that in calculating its alleged loss, not all of Cornerstone’s costs had been deducted from the expected revenue to arrive at a net profit figure. From her evidence, it seems that none of Cornerstone’s fixed costs (such as its head office and accounting costs) had been included. There were no underlying documents in evidence that supported the calculation of Cornerstone’s costs.

We will say more about Annexures A and B later in these reasons.

Finally, Cornerstone claimed damages in the sum of just under $150,000 under s 18 of the Australian Consumer Law for what it alleged was Methven’s misleading and deceptive conduct. The judge dismissed that claim and there is no challenge on appeal regarding that matter.

The judge’s reasons

The trial judge observed that no matter how one interprets what happened between July to August 2011, both parties intended that a formal written agreement would be signed yet that did not happen.[8] The judge reviewed the evidence and held that there was ‘a concluded agreement to modify Cornerstone’s commission entitlement progressively down to a flat six per cent and then five per cent with effect from 1 September 2011 and 1 April 2011.’[9] The judge reviewed the evidence and observed that:

·Methven was convinced that it was ‘paying over the odds’;
·Methven was keen to lock in savings in the current financial year ending 31 March 2012 and it was in its interests to obtain a reduced commission immediately; and
·Methven was in a strong bargaining position although Cornerstone did have some bargaining power because it could lock Methven into the higher rates for six months (that being the notice period to terminate the contract).[10]

[8]Reasons [91].

[9]Reasons [95].

[10]Ibid [97]–[99].

The judge concluded that all of these matters supported a finding that the parties would reach an immediate agreement on commission.[11] He observed that the ‘parties had approached the documentation of their relationship in an informal manner for a number of years.’[12] He pointed first, to the lack of documentation between the parties when the agreement was novated and Flexispray was replaced as a contracting party by Methven and secondly, to the lack of documentation when the commission rates were altered in 2009.[13] Nevertheless, the judge stated that the evidence as to the making of the agreement was relatively vague.[14] He summarised the evidence and noted that Mr Bejatovic had given evidence that a few days after the 13 July 2011 meeting the position on commission had been agreed by Mr Crichton on behalf of Methven.[15] The judge concluded:

All this leaves the matter substantially uncertain. However, when I consider the history of the pleadings, namely, that the plaintiff’s sole contractual case until the commencement of the trial was that there was a contract, albeit a conditional one, to cut commission, I am satisfied that there was an agreement as to commission made between the parties by word of mouth in the period July to August 2011 involving Mr Dobbin, Mr Bejatovic and Mr Crichton, with subsequent telephone conversations between Mr Dobbin and Mr Crichton, or perhaps Mr Bejatovic.[16]

[11]Ibid [99].

[12]Ibid [101].

[13]Ibid [101].

[14]Ibid [102].

[15]Ibid [104].

[16]Ibid [105].

His Honour also found that the 2011 varied agreement removed Cornerstone’s ability to charge separately for relays and refits.[17]
[17]Ibid [106].

The judge then turned to consider whether the variation was conditional. He considered Perri v Coolangatta Investments Pty Ltd[18] and the observations of Mason J (as he then was) as to the difference between a stipulation that is a condition precedent to performance and one which is a condition precedent to the formation or existence of a contract.[19] Having quoted from that case, the trial judge then said:

In conformity with the presumption referred to by Sir Anthony Mason and Professor Carter that a condition is more likely to be regarded as affecting the performance of obligations under a contract, rather than the very existence of the contract itself, I find that the condition was a condition precedent to performance and not to the existence of the variation contract. The application of this presumption is consistent with the finding that I have already made, that there was an effective variation contract entered into by the parties. Whilst it might ultimately be a matter of semantics, the case advanced by Cornerstone seems to me best characterised as being one entailing the inclusion of a condition subsequent in the relevant variation contract. This is in accordance with the fact that the parties commenced performing in accordance with the variation contract from 1 September.[20]

[18](1982) 149 CLR 537.

[19]Ibid 552.

[20]Reasons [109].

The judge then began the next paragraph of his reasons with the question, ‘Did the variation contract include the alleged condition?’ His Honour reviewed the evidence of Mr Crichton, including the evidence that he gave that there was no discussion at the 13 July 2011 meeting about the retrospective charging of invoices if there was no written agreement entered into after September 2011. His Honour also reviewed the evidence of the Dobbins about termination of the agreement if there was no agreement and reversion to the higher rates of commission in that event.[21] He found the account of the Dobbins about what was to happen if there was no formal written agreement to be intrinsically improbable. In this regard, the judge referred to the lack of documentation regarding the novation from Flexispray to Cornerstone and the alteration to commission rates in 2009. Although the reduction in rates for tap and valve products was not as important as the rate to be paid for shower installations,[22] his Honour found the failure to document ‘indicative of an attitude of mind on the part of the Dobbins and their company which renders it against all probability that they would make a point or a particular stipulation as to the need for a written agreement which was fully up to date.’[23]
[21]See [19]–[22] above.
[22]Reasons [101], [116].
[23]Ibid [116].

The judge found Mr Crichton to be the most reliable witness with a more accurate recall of events than Mr Bejatovic. He noted that Mr Crichton had represented Methven in the discussions but had since become a consultant and employee of a company controlled by the Dobbins. In the judge’s view, Mr Crichton could not be dismissed as a mere partisan witness for Methven; he did not have the obvious self-interest of the Dobbins. In the case of Mr Bejatovic, it was put to him that the outcome of the case might affect his bonus or standing in Methven. The judge noted that these considerations did not operate in respect of Mr Crichton.

His Honour noted that although post-contractual conduct could not be considered for the purpose of construing a contract, it could be taken into account in determining whether a contract had been entered into or not.[24] The judge concluded:

In my view, the conduct of Methven Australia in rendering its recipient generated tax invoices on the basis of the new commission regime, and Cornerstone by billing in accordance with the new regime and not pressing claims for charges for refits and relays, is supportive of the view that there was no condition precedent or subsequent involved in the agreement which was made between the parties to vary their Agency Agreement in July/August 2011. These considerations fortify me in the views which I have already expressed.[25]

[24]Ibid [113].

[25]Ibid.

The judge took account of the fact that not all of the evidence pointed in the one direction. For example, Mr Bejatovic’s response to the issue of the invoices for catch up commission was to arrange a meeting with Mr Dobbin rather than to refute outright the entitlement of Cornerstone to levy the charges. Similarly, Freehills had not immediately refuted the right of Cornerstone to charge for past commission. The judge explained that it was unsurprising that there had been no definitive immediate response from Mr Bejatovic and Freehills given the relatively complex and uncertain nature of the matters in contest.[26] He rejected Cornerstone’s contention that ‘the reduction in commissions and the removal of the entitlement to make separate charges for refits and relays was the subject of a condition as to contract, as to performance, precedent or subsequent.’[27]
[26]Ibid [115].
[27]Ibid [116].

The judge also rejected submissions that a subject to written contract condition should be implied into the agreement[28] and that the New South Wales Court of Appeal decision in Sagacious Procurement Pty Ltd v Symbion Health Ltd[29] was particularly instructive in the present case.[30]
[28]Ibid [118]–[119].
[29][2008] NSWCA 149 (‘Sagacious’).
[30]Ibid [120]-[121].

It is convenient to set out a summary of that case now. The central issue was whether a letter constituted a binding contract for the provision of eProcurement services for the catering activities in Mayne’s hospitals. The trial judge in that case held that it did not and found that it fell within the third Masters v Cameron[31] category, that is that ‘the intention of the parties is not to make a concluded bargain at all, unless and until they execute a formal contract.’[32] Sagacious and Mayne had entered into a Strategic Alliance Agreement in July 2000. That agreement had been preceded by Heads of Agreement. Under the Strategic Alliance Agreement, there was to be an implementation phase to be completed by 24 September 2000. The implementation phase was not completed. The alliance agreement was varied by a letter of 18 January 2002 but otherwise continued. It was to come to an end on 31 July 2002. Negotiations for renewal began at the end of March 2002. The negotiations culminated in a letter of 16 April 2002 (that had been through a number of drafts). The letter was lengthy. It described the proposal of Sagacious to Mayne under the headings pre-conditions, billing structure, retail product purchasing, systems upgrade, ancillary procurement services and miscellaneous. Under this last heading, the letter recorded that Sagacious and Mayne ‘acknowledge and confirm that they are bound by these terms and conditions and will act in good faith to expedite the finalisation of the Service Level Agreement which will be provided to Sagacious by Mayne.’[33] The letter was signed on behalf of Mayne below a statement that acknowledged and accepted the terms and conditions outlined in the letter. After that there were drafts of a letter of intent and an agreement with both documents being discussed by the parties and then changed. One of the changes saw the insertion in the letter of intent to include reference to the agreement being based on Sagacious’ proposal on 16 April 2002. From the time of the April letter until termination of the relationship at the end of July 2002, the parties acted in conformity with the April letter. Having considered the authorities, Giles JA reviewed the terms of the April letter and noted that it left indeterminate a number of matters and observed that in a multi-million dollar contract which was replacing an earlier detailed and lengthy contract, one would expect the parties to state the terms definitively before being contractually bound.[34] His Honour also considered the circumstances in which the letter was sent and the past conduct of the parties in putting what had been agreed in original heads of agreement into the Strategic Alliance Agreement.[35] He also took account of subsequent communications between the parties.[36] Giles JA concluded:

As is not uncommon, there are indicators for and against a binding contract constituted by the April letter. I do not think the answer to the question is found from the April letter alone. In my opinion the circumstances in which the letter was sent and signed, the terms of the letter and the nature of the putative contract are on the whole contrary to the requisite contractual intention. The billing and payment consistent with the April letter is material, but businessmen not uncommonly act upon an anticipated contractual relationship prior to the contract. The subsequent communications otherwise tend quite strongly against a binding contract. I consider that the better view is that there was not to be a binding contract until the conclusion of ongoing negotiations, including taking into account the trial period results, and execution of a formal contract.[37]

[31](1954) 91 CLR 353.

[32]Sagacious [2008] NSWCA 149 [3].

[33]Ibid [46].

[34]Ibid [91].

[35]Ibid [93]–[98].

[36]Ibid [99]–[114].

[37]Ibid [117].

In the present case, the judge took the view that Sagacious was distinguishable on its facts and noted that applying the same principles as had been enunciated in that decision, he had reached the opposite conclusions with respect to the transaction between Cornerstone and Methven.[38]
[38]Reasons [121].

The judge formed the view that the Dobbins were driven to terminate the agreement by giving six months’ notice because Mr Dobbin had heard rumours in the market that Methven had a new tender process under way.[39]
[39]Reasons [123].

The judge then considered the quantum of damages and said:

[Counsel for Cornerstone] relied on a document, described as Annexure A, as a calculation of the damages which Cornerstone sought for the repudiation. [Counsel for Methven] correctly submitted that this document, in itself, proved nothing. It was in effect a set of particulars of damage. It was prepared by a former employee of Cornerstone, or one of the other Dobbin companies, Mr Simpson. It was prepared for the purposes of this proceeding and therefore cannot be regarded as a business record for the purposes of the Evidence Act 2008 (see section 69(3)). Mr Simpson did not give evidence. Mrs Dobbin did, but since this was not her document she could not in any genuine sense verify. [Counsel for Methven] submitted that if repudiation were found, the claim for damages for repudiation should simply fail because the damages have not been properly proven. Accepting that the damages have not been properly proven, in my view the appropriate course is, following the publication of these reasons, to give Cornerstone an opportunity to put on proper evidence to prove what the damages are, or perhaps simply to verify the particulars which have been given in the form of Annexure A.[40]

[40]Ibid [135].

As we noted at the outset, Methven opposed the application by Cornerstone to re-open its case to lead further evidence to prove its loss.

The judge weighed up the following factors in determining to reject the application to re-open. He observed that this was not a case of inadvertence on the part of Cornerstone and that some sort of decision was made to present its case on quantification of damages in the manner in which it was presented. Next the judge looked at the consequences of re-opening and found that proof of damages would be a complicated exercise that would require further discovery and possibly amendment of Methven’s case to plead mitigation. Methven would be entitled to put on further evidence. The judge thought it proper to weigh the complexity and cost that would be entailed in a re-opening of Cornerstone’s case against the maximum damages of $129,000 which could be made to look relatively meagre. Finally, his Honour took into account that to refuse the application would leave a contract breaker in the position of getting off scot free on damages. He concluded:

That last point is a very weighty one indeed but the two other considerations which I have already mentioned, that is the lack of inadvertence, the apparent deliberate decision that was made to present the case in the way that it was presented and the potential for a runaway of costs and complexity if the application is allowed to re-open by, I think, a relatively fine margin outweigh the argument as to the injustice of allowing a contract breaker to get away with contract breaking and not paying any damages.
In those circumstances and in light of the matters that I have mentioned I think the proper exercise of discretion would require me not to accede to the application on the part of the plaintiff to re-open on the question of damages despite what I said in the judgment.

The judge ordered that Methven pay $1 in damages to Cornerstone.

On the basis that the claim was one about money, the judge treated Methven as the successful party in the litigation and therefore entitled to its costs.[41] Methven already had the benefit of some extant costs orders in its favour that had been made earlier in the proceeding.
[41]Cornerstone Hardware Brokers (Australia) Pty Ltd v Methven Australia Pty Ltd (Unreported, County Court of Victoria, Macnamara J, 27 October 2014) (‘Costs Ruling’).

Methven sought its costs of the proceeding on an indemnity basis. It did so on the basis of three Calderbank offers which Cornerstone did not accept. The judge found that it was only the third of those offers that gave a basis for a higher award of costs. The offer was made in an email sent by a solicitor on behalf of Methven on Sunday 15 June 2014 after four days of the trial. The substance of the email was as follows:

We refer to the evidence given in Court this past week, in particular the evidence of Matthew Crichton. We respectfully note that we consider the evidence of Mr Crichton to be fatal to Cornerstone’s case.
We refer also to the telephone discussions between Counsel for our respective clients earlier today. We confirm our client’s offer to settle the proceeding on the basis that the proceeding be discontinued with no order as to costs.
This offer will remain open until 5pm tomorrow, ie 5pm on Monday 16 June. If not accepted, then upon judgment being delivered in our client’s favour we will seek orders that your client pay our client’s costs of the proceeding on an indemnity basis.
If the offer in this email is not accepted by your client, then we respectfully note that the costs amount that will ultimately be payable by Cornerstone to our client, even if not assessed on an indemnity basis, would amount to hundreds of thousands of dollars.

The judge observed that the offer did not deal with the question of what was to happen with the extant costs orders that had already been made in Methven’s favour. His Honour said:

There had, however, been four days of a trial and the prospect of more days of trial and the significance, therefore, of the pre-existing costs orders was rather swamped by the extra money that had been spent by both sides and so, therefore, in considering the reasonableness or otherwise of the conduct of Cornerstone with respect to that third offer, I put the issue of the extant costs orders to one side. Further, I note that the trial was well underway and the difficulties which were inherent in Cornerstone’s major case, namely, the alleged conditionality of the reduction in commission rates, were well evident, particularly in light of the evidence which Mr Crichton had and had not given. The offer made over the weekend was a lifeline and, in my view, it was unreasonable at that point for Cornerstone not to accept it. It was open for a short time, certainly, but given that the trial was so advanced, the very short notice period relative to that offer was justified. In my view, Cornerstone was unreasonable in not accepting that offer and so, therefore, from that point onwards, it is proper, in my view, to make the costs order in favour of Methven thereafter on a full indemnity basis.[42]
[42]Ibid T907.19-908.10.

Grounds of appeal

There were a number of grounds of appeal that ultimately reduced to two main issues. The first was whether the judge erred in finding that a varied contract came into existence in 2011. The second was whether Cornerstone had proved the quantum of its loss or should have been permitted to re-open its case to do so. Related to the latter were grounds of appeal concerning the costs order that was made by the judge and whether any adverse inference should have been drawn due to Methven not discovering certain documents.

Was the contract varied in 2011? (Grounds 1–4)

Cornerstone pleaded and argued that there was no meeting of the minds in 2011 as to a variation of the contract so that the terms and conditions agreed in 2009 remained in force. In the alternative it contended that any variation to the commission rate was conditional upon a formal contract being executed by the parties.

Cornerstone was critical of the judge’s conclusion that there was an agreement as to commission made between the parties in July to August 2011.[43] It submitted that the judge’s reasoning was circular, that is, that because the alternative submission was inconsistent with the other submission the alternative submission should be rejected. Cornerstone contended that the Court ought to consider the evidence at trial rather than the impression gleaned from earlier versions of the pleadings. In our opinion, these submissions do not take into account the broader approach taken by the judge. As we have set out above, his Honour did consider the evidence quite carefully. It was only having done this that his Honour also took into account the history of the pleadings in which for some time Cornerstone had relied on the existence of a conditional contract and only during the course of the trial sought to say that there was no agreement. We can see no error in the judge’s approach.
[43]See [56] above.

In light of that conclusion, it is unnecessary to deal with Methven’s Notice of Contention that if there was no agreement reached at or shortly after the 13 July 2011 meeting, the conduct of Cornerstone would give rise to an estoppel.

Cornerstone also submitted that the judge had erred in not finding that there was a condition precedent (or subsequent) to the formation of the varied contract that the parties enter into a written agreement. Most of Cornerstone’s submissions in respect of this part of its appeal sought to disturb the factual findings made by the judge. In doing so, counsel pointed to parts of the evidence that possibly conflicted with the judge’s findings. It submitted that it was illogical for the judge to find an enforceable agreement to lower commissions which stood separate from the unchallenged continuing negotiations. It contended that it is glaringly improbable that such an agreement as the judge found was reached. It submitted that all of the documents showed continuing negotiation on all issues, including commission. So it submitted, on the overwhelming evidence the judge was compelled to make a finding that such agreement as there was as to the new rates of commission was subject to a condition.

Cornerstone submitted that critical to his Honour’s finding was Mr Bejatovic’s evidence about an agreement being concluded. The judge said:

Mr Bejatovic said that he was rung by Mr Crichton a few days after the [13 July] meeting and told that the position on commissions had been agreed and that he had not [concluded] that negotiation, but rather Mr Crichton had.[44]

[44]Reasons [104].

Counsel for Cornerstone observed that the evidence of Mr Bejatovic that we have just set out was not put to Mr Crichton, so it should have been given very little weight because of the rule in Browne v Dunn.[45] Counsel submitted, however, that the judge had given this evidence crucial weight and it was a fundamental point in his Honour’s determination that the negotiations on commission were severed from the negotiations on the other matters that were set out in the 15 July 2011 email. Cornerstone argued that there was no place in the contractual analysis to sever the terms as to the rate of commission from the terms about performance.
[45](1894) 6 R 67.

In this context, it is worth considering some of the oral evidence in a little more detail. In re-examination Mr Crichton was asked about the charging of reduced rates by Cornerstone as a good faith gesture and his evidence that he understood that that had been agreed. He said:

MR CRICHTON: Mr Bejatovic advised me that Mike and he had had discussions and they hadn’t yet formalised the contract but were in agreement and therefore Mike went forward with the drop in the commission rate.
COUNSEL: Do you know when those conversations occurred or when you were informed they occurred?---I can’t recall exactly but it would have been before the end of September when the September invoice would have been calculated and due, perhaps I can give you the end date on that.

Mr Betojovic was asked about a discussion he had with Mr Crichton in the days following the July meeting. He testified as follows:

I remember that discussion, I remember Matthew signalling to me he had reached agreement with Michael Dobbin for Methven to - with reduced commission rates continue its service with Cornerstone and that would be effective.

Subsequently Mr Betajovic was again asked about the discussion with Mr Crichton. He testified:

I recall Matthew Crichton said during the telephone conversation that the deal is done, he said I have negotiated a 6 per cent commission starting 1 August which reduces to 5 per cent in six months’ time, I remember him saying that the inclusion of refit and charge out services was part of that deal.
COUNSEL: Anything else?---I remember there was discussions about – we talked about KPI and he said that the next steps were to include those elements and the performance elements in an email and formalise that by writing through to Mike Dobbin.

During cross examination, Mr Bejatovic said that he had been asked by Mr Crichton to formalise the agreement. The passage from his cross examination reads as follows:

COUNSEL: Your evidence is that the conversation you had with Mr Crichton is in the evening?---Yes.
And your evidence of Tuesday was it was in the evening, referring to Mr Crichton?---Yes, I believe so.
And then he asked you to put what he tells you into an email?---He asks me to formalise the agreement through writing to Mike Dobbin.

Cornerstone submitted that the conclusion that the judge came to that Mr Betajovic had said that Mr Crichton had reached the agreement with Mr Dobbin[46] is inconsistent with this passage of his evidence in cross examination that Mr Crichton sent him to make the agreement with Mr Dobbin. We do not understand the evidence that way. All that Mr Bejatovic is saying in cross examination is that the agreement had been made and he was asked to confirm it in writing. The two pieces of his testimony are not inconsistent.
[46]See [79] above.

Cornerstone also sought to impeach Mr Bejatovic’s evidence by pointing to evidence given by him that placed the discussion between him and Mr Crichton before his email of 15 July to the Dobbins:

COUNSEL: So on your version of events the deal’s already done?---Yes.
And this is copied to Mike Dobbin and Matthew Crichton?---Yes.
What you say at line 3 is, ‘in summary, what we are proposing as a compromise position is made up of two parts’, do you see that?---Yes.
You don’t say as discussed between Matthew Crichton and Mike Dobbin earlier today I’m setting out what is agreed, do you?---That is correct.
What’s then put, part 1, renegotiation commission structure, do you see that, phase 1 and phase 2?---Yes.
We know the dates for that change of commission structure are in fact wrong in terms of what was ultimately put in practice, don’t we?---Yes.

Whilst Mr Bejatovic’s recollection of the timing of his discussion with Mr Crichton seems to be improbable, his evidence as to the substance of the discussion is not when account is taken of the other evidence.

In our view, the evidence of Mr Crichton and Mr Bejatovic was broadly consistent that there had been an agreement between one or other of them with Mr Dobbin during which rates of commission had been agreed. It is not crucial which one of them had the discussion with Mr Dobbin.

In any event, Mr Dobbin’s evidence supports the conclusion that there was such a discussion. In this regard, Mr Dobbin was asked in cross examination about the 15 July email. That email appeared over two pages (138 and 139) in the court book with the sections about commission rates set out on the first of those pages. The other matters itemised from one to four were set out on the second page.[47] The cross examination proceeded as follows:
[47]See [27] above for the full text of the email.

COUNSEL FOR METHVEN: At the meeting on 13 July it was left, wasn’t it, that Methven was going to come back with a position in writing?---Yes.
And this is that position, isn’t it?---Yes.
And do you recall receiving that document?---Yes.
And when you looked through it did you feel that it reflected the position that was to be the position moving forward?---Page 138, yes, page 139, it outlined we had to work on those points.
Let’s focus on 138, you say you have just agreed that reflected the position you would move forward with, it actually says August there, doesn’t it, in phase 1?---Yes.
But you had discussions with someone, didn’t you, that changed that date to September?---Yes.
Do you remember who you spoke to?---No, I don’t, sorry.
But you would accept - - -?---It would probably be Mr Bejatovic.
Or Mr Crichton perhaps, and similarly in the second line it says February, and it was changed to April, do you remember that implementation?---Didn’t it go from February, it went six months from February – from September 1, so that would have been March.
In any event we’re not sure but it would change from February and shortly after this email you had a discussion with someone where that change was made?---Yes.

As to the separation of commission from the other matters left for negotiation, it does not seem to us that the judge erred. Mr Bejatovic’s evidence is just one part of the evidence that supports this finding and it is far from clear to us that his Honour placed much weight on Mr Bejatovic’s evidence on this point in any event. The most probative evidence is perhaps the contemporaneous email of 15 July which talks of commission in one section of the email with the second section dealing with additional matters which were described as matters to be worked on. It is implicit in that email that the commission rate was a separate matter for the parties.

Cornerstone was critical of the way that Methven had examined and cross examined witnesses. In the case of its own witnesses, Cornerstone submitted that during cross examination questions were put in such a way that they did not reflect the discussions that the witnesses gave evidence about. Other complaints concerned evidence given in response to leading questions. Most of the complaints were connected with Mr Bejatovic’s evidence. For example, in Cornerstone’s view, counsel asked him a leading question on a matter of some importance; that is whether there had been discussion at the 13 July meeting about reverting to the old commission rates if the parties did not enter into a written agreement. No objection was taken at trial to that evidence but Cornerstone submitted that this was the only evidence that formed the basis for putting to Mr Dobbin in cross examination that there had been no such discussion. Cornerstone says that it was never its case that there was a discussion about retrospective charging of invoices for commission, yet it is the evidence about this that his Honour relied upon as being determinative to overcome its case. Other matters that were examples of Cornerstone’s criticisms of Methven’s approach in cross examination concerned questions put to Mr Dobbin based on what evidence Mr Bejatovic would give (but did not). In particular, it was put to Mr Dobbin that a Ms Grasso was present at the 13 July meeting; that Mr Crichton led the discussion on commission rates and said that if the rates were not lowered, Methven would have to look at terminating the arrangement; that Mr Dobbin pushed back for less of a reduction in rates; that Mr Crichton said that Methven would come back with a compromise position in writing and that Mr Bejatovic said that he wanted to document some agreed service levels. In our opinion, Cornerstone has sought to inflate the importance that the judge gave to Mr Bejatovic’s evidence and has focussed on matters in the evidence that were not critical to his Honour’s findings. Moreover, many of the complaints that it had were matters that should have been raised during the trial but were not.

Whilst Cornerstone was critical of the judge for putting to one side the evidence of Mr Crichton that if there was no written contract entered into, the old rates would continue, it seems to us that he was entitled to do that. This was mere supposition on the part of Mr Crichton and does not go to whether an agreement was reached or not.

Cornerstone nevertheless submitted that Mr Crichton’s evidence on this point amounted to an admission. Precisely what the admitted fact was said to be was not addressed by Cornerstone. Nevertheless, it relied on Sagacious where Giles JA said:

The basis of subsequent communications as admissions is very different. It does not depend on communication between the parties, and that basis gives scope for evidence of, for example, a party’s internal memoranda saying or less directly conveying that there is or is not a concluded contract. Admissions bearing upon contractual intention present difficulties. As Gleeson CJ said in Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd at 550, ‘it will often be necessary to identify with some care the fact which is said to have been admitted’. What is said to be admitted may be a relatively straightforward fact, for example that A discussed with B the price for goods. But if a matter of mixed law and fact is involved, or the application of a legal standard, admissibility may be more contentious ... An admission by conduct in a case such as the present may bring its own difficulties. And a statement that there is or is not a concluded contract, for example, may if admissible, carry significant weight or little weight depending on the circumstances, and the weight of any admission will depend on the source of knowledge of the person making the admission.[48]

[48]Sagacious [2008] NSWCA 149 [106]. Cornerstone also referred to Factory 5 Pty Ltd v State of Victoria (2010) 276 ALR 523 [95]–[96].

It seems to us that what is said by Giles JA has no application to the evidence given by Mr Crichton as to his supposition as to what would have occurred in particular circumstances. It does not amount to an admission. It was evidence as to his subjective understanding. It is of no assistance when determining on an objective basis whether there was a binding contract. In a related submission, Cornerstone argued that the judge had given no reasons for rejecting Mr Dobbin’s evidence that he had said at the 13 July meeting that they would revert to the old commission rates and that this was consistent with Mr Crichton’s understanding. However, that submission fails to have regard to the evidence given by Mr Crichton that the matter of return to the old rates was not discussed and to the judge’s rejection of the evidence of Mr Dobbin as improbable. The judge had good reason to reject Mr Dobbin’s evidence.[49]
[49]See [59] above.

Cornerstone contended that in general terms, the evidence of the Dobbins and Mr Crichton was all in one direction; that is that there were negotiations, there was to be confirmation of the terms and then a written contract. However, it seems to us that this is not so. Mr Crichton’s evidence was not all to that effect. In particular, as we have noted above, Mr Crichton testified that the commission rates in the 15 July email were resolved.

In any event, the judge made it clear that the evidence was not all one way. It would be surprising if it were. The relevant events took place some three years before the trial. In this regard, it is not unusual for people at the same meeting or in the same discussion to vary in their recollections of what was said and by whom and to have different views as to the emphasis on and importance of the various matters canvassed between them. It is also not unusual for some witnesses to be mistaken as to the exact timing of meetings and discussions which took place as part of a negotiation.

Cornerstone sought to attack the judge’s reliance on the charging of commission from 1 September 2011 as a piece of evidence that supported the conclusion that there was an agreement as to rates. It contended that the charging of lower commission from that date was explained as a gesture of good faith. However, it was open to the judge to reject that evidence. Mr Dobbin’s evidence of what was said at the 13 July meeting did not include a statement by him that it was a good faith gesture. Rather, he testified that he told Mr Crichton that if they could not get a contract together, they would terminate on six months’ notice at the 10 per cent rate of commission.[50] The only evidence of a discussion about charges at a good faith rate is from Mr Crichton. He said that Mr Bejatovic had agreed it with Mr Dobbin. All that appears from the documentary evidence is that some time after the meeting in July and subsequent discussions, Mr Dobbin characterised the acceptance of the reduced commission as a good will gesture. This was in his email of 28 March 2012 sent shortly after he had discovered that Methven had gone out to tender again.
[50]See [20] above.

Whilst Cornerstone implored the Court to have regard to the case of Sagacious submitting that it was analogous, in our respectful opinion, the judge was correct to categorise that as a case which, like the present case, turns on its own facts. The judge applied the principles recited in Sagacious and came to a different conclusion on the facts here to that reached by the court on the facts before it in that case. Indeed, the statement by Giles JA about businessmen not uncommonly acting upon an anticipated contractual relationship before contract must be understood in the context in which it was said. In Sagacious, the conduct of the parties which was consistent with the existence of a contract was significantly outweighed by other matters in that case that tended to support quite strongly the conclusion that there was no binding agreement. Unlike the situation here, the parties in Sagacious had a history of detailed written contracts between them and they fully documented their contractual relationship. In that case, the Strategic Alliance Agreement had been preceded by heads of agreement. In the present case, there was a history of the parties not encapsulating all of their agreements in writing. The novation agreement replacing Flexispray with Methven had not been committed to a formal written agreement, nor had the variation of commission rates in 2009.

Cornerstone submitted that the judge had failed to account for the fact that when a written agreement could not be negotiated, Cornerstone terminated the contract by giving six months’ notice. However, this submission fails to take into account the judge’s finding that the reason Cornerstone had taken this step was because of the rumours that Methven had put the agency contract out to tender.

Cornerstone also submitted that the judge had given no reasons for rejecting the implication of a condition that the agreement be reduced to writing. That is not so. Having referred to the well-known requirements for the implication of terms as referred to in BP Refinery (Westernport) Pty Ltd v Shire of Hastings,[51] the judge observed that the alleged condition was ‘in no way necessary for the reasonable or effective operation of the 2011 variation.’[52] We agree. Cornerstone did not suggest any reason why such a term was necessary.
[51](1977) 180 CLR 266, 283.
[52]Reasons [119].

Cornerstone focussed much of its criticism on the evidence about the 13 July meeting and that there was a significant amount of evidence that did not support a finding that an agreement about commission was arrived at by the time the meeting finished. However, the judge did not find that the agreement was concluded during or at the conclusion of the meeting. Rather, his Honour was satisfied that the agreement was reached in the period July to August 2011. Having reviewed the evidence for ourselves, in our view that conclusion was open to his Honour. What comes out of the evidence when it is weighed up is that Methven wanted to reduce the rates of commission it was paying to Cornerstone and to obtain the benefit of the reduction in the then current financial year which was due to end on 31 March 2012. The meeting of 13 July was held to start the ball rolling towards an agreement on new rates of commission. At the end of the meeting, Methven was to go away and come back with a final proposal. It did that by Mr Bejatovic’s email of 15 July. That proposal was in two sections; the first dealt with commission rates and the second concerned other matters. There was then a discussion between Mr Dobbin and either Mr Crichton or Mr Bejatovic (it matters not which of them). During that discussion, the parties came to a final agreement about rates of commission and the dates from which the reductions would apply. Other matters were left for negotiation. A written agreement would have eventuated if those other matters could be agreed, but they were not. That does not destroy the rates agreement. This conduct was consistent with how the parties had done things when the rates were varied in 2009. In 2011, the agreement was to be recorded in writing. But entry into a written agreement was not a condition that would see the contract fail if it was not fulfilled. If there had been such a condition, one would have expected that Methven would have been anxious to secure the written agreement as soon as possible to ensure that it obtained the benefit of the reduced rate in the current financial year and was not going to be lumbered with a catch up payment if no agreement in writing was executed. However, neither party acted quickly. More than a month after the July meeting, Mr Dobbin sent a form of contract based on the earlier contract just expecting that it would be signed and that would be the end of the matter. That form of contract did not include any of the additional matters set out in items one to four of the 15 July email. Sending that form of contract is consistent with the parties having made an agreement on commission rates leaving other matters open for negotiation and conclusion at a later time. Cornerstone also started charging the lower rates in September 2011 and this is also consistent with an agreement having been reached. At no time from July 2011 to late March 2012 is the supposed condition referred to in any documentation. One would have expected that this would have been mentioned in either emails or on the invoices sent from September 2011. But it is not.

It follows that we would reject Cornerstone’s grounds 1–4.

Should the judge have drawn an adverse inference due to any failure of Methven to make discovery? (Grounds 5 and 6)

Cornerstone submitted that the judge erred by failing to find that an adverse inference ought to be drawn against Methven in accordance with Part III Division 9 of the Evidence (Miscellaneous Provisions) Act 1958 based on a failure by Methven to make discovery. It contended that discoverable documents were provided during the course of the trial and that relevant documents (such as Methven’s Recipient Created Tax Invoices for July to September 2012 which were relevant to Cornerstone in proving its loss) had not been discovered. At no stage has Cornerstone identified the adverse inference that it says should be drawn. In any event, the judge dealt with Cornerstone’s submission as follows:

While I accept the documents would have been discoverable by Methven Australia under the traditional principles for the scope of discovery enunciated by Brett LJ (as he then was) in Compagnie Financiere de Pacifique v Peruvian Guano Co (1882) 11 QBD 55, it is not plain that they were discoverable under the now narrower scope of discovery reflected in the orders which were made in this proceeding. The additional documents were produced, I was told, in response to successive notices to produce [given] by Cornerstone. In any event, the case has turned on the assessment of competing accounts of a meeting and the ensuing documentary communication between the parties. It does not depend crucially upon the drawing of inferences. These considerations therefore do not [affect] the findings I have made.[53]

[53]Ibid [146].

In our opinion, his Honour was correct in his analysis. It follows that we would reject grounds 5 and 6.

Should the judge have found that Cornerstone had proved its loss? (Proposed grounds 6A and 6B)

Cornerstone sought leave to amend its notice of appeal to include a ground that the judge erred by failing to admit Annexures A and B to prove its loss and damage when no objection was taken during the course of the trial. It also sought to amend to include a ground that the judge ought to have found that Methven waived the objection to admissibility pursuant to s 190 of the Evidence Act 2008 and should have accepted the evidence as proof of loss and damage.

Cornerstone submitted that the judge had not determined the issue as a matter of weight but rather on the basis that the documents were not business records and that it was a question of admissibility so far as the judge was concerned. Cornerstone relied upon the following passage from the Re-opening Ruling:

The material which was relied upon by Cornerstone in this secondary part of its claim to prove quantum was, according to a submission put by [counsel for Methven], and accepted in my judgment to be characterised not as a piece of evidence but rather as a particular from a pleading. That is, despite contention to the contrary it did not meet the requirements to be regarded as a business record under the Evidence Act (2008).[54]

[54]Re-Opening Ruling T 839.14-22.

Cornerstone submitted that this was the wrong approach. However, what his Honour said in this oral ruling was a shorthand reference to the conclusions that he had reached and recorded in his Reasons. For convenience, we will set out the relevant passage from the Reasons again:

[Counsel for Cornerstone] relied on a document, described as Annexure A, as a calculation of the damages which Cornerstone sought for the repudiation. [Counsel for Methven] correctly submitted that this document, in itself, proved nothing. It was in effect a set of particulars of damage. It was prepared by a former employee of Cornerstone, or one of the other Dobbin companies, Mr Simpson. It was prepared for the purposes of this proceeding and therefore cannot be regarded as a business record for the purposes of the Evidence Act 2008 (see section 69(3)). Mr Simpson did not give evidence. Mrs Dobbin did, but since this was not her document she could not in any genuine sense verify. [Counsel for Methven] submitted that if repudiation were found, the claim for damages for repudiation should simply fail because the damages have not been properly proven. Accepting that the damages have not been properly proven, in my view the appropriate course is, following the publication of these reasons, to give Cornerstone an opportunity to put on proper evidence to prove what the damages are, or perhaps simply to verify the particulars which have been given in the form of Annexure A.[55]

[55]Reasons [135].

The judge was addressing whether Cornerstone had established its loss on the balance of probabilities. His conclusion was that damages ‘have not been properly proven.’ The difficulty for Cornerstone is therefore that Annexures A and B were admitted into evidence. Consequently, the authorities and texts upon which Cornerstone relied as to the consequences of failing to object to the admission of evidence were not of assistance to it.

The judge was clearly troubled by the vagueness of the evidence that Ms Dobbin gave about the Annexures. Counsel for Cornerstone did accept that Ms Dobbin’s evidence was extremely confusing but submitted that her evidence was only vague in respect of the lost commission for the period from July to October 2012 and that this was due to the failure of Methven to provide sales figures for that period so that the lost commission calculation could be made. By contrast, it submitted that Ms Dobbin’s evidence was that she was fully conversant with Cornerstone’s books and accounts, that she prepared the company’s financial reconciliations and statements, that although someone else had prepared Annexures A and B, she was in fact the one that was in charge of Cornerstone’s accounts. Ms Dobbin was cross examined about the documents and Cornerstone submitted that the revenue figures in them were supported by invoices that were also in evidence. So, counsel for Cornerstone submitted, using Annexures A and B was a normal mode of proof of loss being a summary of losses based upon revenue and costs.

Ultimately, the judge found that Annexures A and B carried little if any weight. There is no error in the approach that he took and it was open to him to find as he did. Of course, the Court must do the best that it can with the evidence before it to make an assessment of damages.[56] But in this case, there was insufficient probative evidence of the loss sustained by Cornerstone upon which to base an award of more than $1.
[56]Commonwealth of Australia v Amann Aviation Pty Ltd (1991) 174 CLR 64, 83 (Mason CJ and Dawson J). See also at 125 (Deane J), 153 (Gaudron J).

The evidence of Ms Dobbin about the Annexures was not reliable. When giving evidence about the meeting of 13 July, she said that the margins that Cornerstone operated on were very slim. Yet the margins that were included in Annexures A and B were large. In cross examination, counsel put to Ms Dobbin that the figures claimed were inflated and she denied it. One may accept that Cornerstone faced some difficulty in calculating revenue for the period July to October 2012 because it did not have access to information from Methven such that the calculation of revenue was based on an average of the preceding 12 months (supported to some extent by the invoices that were in evidence). However, the real difficulty for Cornerstone was with proof of its costs so that a net profitability figure could be calculated. Proof of its costs was a matter solely within its own control.

Whilst some credence may have been given to the revenue figures, the costs simply could not be given credence. For a start, Cornerstone’s fixed costs had been omitted from the calculation. That leaves aside the question of whether the margins on which Cornerstone operated were large, small or somewhere in between. As will be seen from the next section, Cornerstone accepted that it should have done better on the question of proof of loss.

We would refuse leave to amend the notice of appeal to add these new grounds. Had leave been granted, we would reject the grounds for the same reasons that we have given.

Should the judge have permitted Cornerstone to re-open its case? (Grounds 7–9)

Cornerstone submitted that the judge should have permitted it to re-open its case to prove its loss. The grant of leave to re-open is a matter of discretion and error of the House v The King[57] type must be identified for Cornerstone to succeed.
[57](1936) 55 CLR 499, 504–5 (Dixon, Evatt and McTiernan JJ) (‘House’).

In refusing its application to re-open, Cornerstone says that the judge failed to have regard to the following considerations:

(a) Methven’s failure to discover documents concerning its sales revenue (from which Cornerstone could have established the commission that would have been payable to it but for the wrongful repudiation of the contract);

(b) Methven’s lack of objection to the tender of Annexure A and Annexure B with objection being taken only in Methven’s closing submissions in reply; and

(c) that forensic accounting evidence would have been very expensive.

In relation to the first of these matters, the documents would have been limited to possibly assisting Cornerstone in accurately quantifying lost revenue. It would not have aided Cornerstone in quantification of costs and, as we have said above, the primary difficulty for Cornerstone with its claim for loss was proof of costs to arrive at a net lost profit figure.

In respect of the second matter, counsel for Cornerstone sought to attack the manner in which Methven had raised the issue of the admissibility and weight of Annexures A and B in closing submissions (both written and oral). The written submissions were handed up to the judge when counsel started his oral closing address. Cornerstone submitted that it was then not given an opportunity to respond. Cornerstone submitted that this was a matter that the judge ought to have taken into account when determining not to permit it to re-open its case. However, that was not a matter that Cornerstone raised on the re-opening application. Indeed, on that occasion, counsel for Cornerstone accepted that the evidence to prove quantum of loss was insufficient, that it would have been better to have forensic evidence before the court and that Cornerstone should have done better.

In any event, it is clear from the cross examination of Ms Dobbin that Methven was attacking the reliability of the evidence that she gave about the Annexures. There was no unfairness in the way that Methven conducted its case. Cornerstone was on notice that the evidential worth of Annexures A and B was in issue and should it have determined to address that attack it could have sought to shore up its claim for loss by calling further evidence before closing its case.

As to the last matter, the attack is on the following passage from his Honour’s Re-opening Ruling:

In short this is not a case of inadvertence at all. Why the decision to present the case in the way that it was presented was made one can only speculate. I was inclined to think that it was done in the interests of economy, to avoid the further costs which might have been entailed in calling a now departed financial controller or perhaps more plausibly a forensic accountant. Neither counsel, however, invited me to make that finding. In light of that unanimity I refrain from doing so.[58]

[58]Re-opening Ruling T 846.25–847.2.

Cornerstone relied on the following passage of transcript between the judge and its counsel at trial:

HIS HONOUR: You heard what I put to [counsel for Methven] which was that in the absence of anyone offering any explanations, the interpretation that seemed to me to be the most likely was litigation is an expensive thing for private individuals, whether they are corporations or private companies, a burdensome thing. You can lose out in the fight just because your opponent outlasts you in terms of resources and to put on a full case with perhaps a forensic accountant would have been very expensive and the plaintiff and its team thought, ‘Well, look, maybe we can sort of slip by without that expenditure.’ If no one offers me any further explanations; that is the inference I draw. So what do you say about that?
COUNSEL: I cannot quibble with that.
HIS HONOUR: Yes.
COUNSEL: I think it would have been better to have forensic evidence before the court.
HIS HONOUR: But that is costly.
COUNSEL: As the court was aware, there is a significant disparity between the, albeit incorporated plaintiff, but a mum and dad operation, a husband and wife operation.
HIS HONOUR: Yes.

However, it is clear from the exchange that followed this passage that what counsel was saying was that a deliberate decision had been made not to call forensic evidence:

COUNSEL: And the significant resources that - - -
HIS HONOUR: And the comment that I made a few moments ago is cognizant of that.
COUNSEL: Yes. I do not think I can add anything more to that. We should have done better.
HIS HONOUR: So I guess [counsel for Methven] will probably say in response, ‘Well, there you are. That proves that whatever it was, it wasn’t inadvertence so we can scratch any thought that there should be relief given for inadvertence because whatever it was it wasn't that. It was a calculated decision to save money.’ I am sure he is going to say that.
COUNSEL: I am not sure if in agreeing what you have said that I necessarily go that far.
HIS HONOUR: Yes.
COUNSEL: What was sought to be proved without expert evidence was the loss and damage. We failed but it was not a calculated matter to try and abandon that. The effort would not have been made to try and seek to prove that without it.

In light of that, it is not surprising that the judge found that it was not a case of inadvertence and expressed his reasons in the manner in which he did.[59]
[59]See [119] above.

It follows that in our view, Cornerstone has failed to establish grounds 7–9.

Did the judge err in treating Methven as the successful party and finding that Cornerstone acted unreasonably in not accepting Methven’s Calderbank offer? (Grounds 10–13)

Cornerstone contended that it should have been treated as the successful party, alternatively that Methven was disentitled to a costs order in its favour because of a failure to provide discovery. It also contended that it was not unreasonable for it to refuse to accept Methven’s Calderbank offer because:

·it had obtained an award of nominal damages and was the successful party;
·the offer did not specify why it would fail;
·the email should not have been admitted as it referred to discussions between counsel;
·Methven had failed to make full discovery;
·acceptance of the offer would have amounted to a capitulation;
·the email did not deal with extant costs orders and was uncertain; and
·the offer was open for acceptance for an unreasonably short period of time.

The award of costs is a discretionary matter. To succeed on this part of the appeal, Cornerstone has again to establish error of the kind identified in House.[60]It has failed to do so.
[60](1936) 55 CLR 499, 504–5 (Dixon, Evatt and McTiernan JJ).

In particular:

·the judge correctly identified that the case was one about money and Cornerstone having only obtained a nominal award of damages, it could not have been regarded as the successful party;
·Freehills did say why Cornerstone would lose – it was because of the evidence of Mr Crichton which the judge identified as making evident the inherent difficulties in Cornerstone’s primary case based on conditionality of the agreement;
·the trial was well underway and these difficulties were known to Cornerstone such that although it might in other circumstances be described as a capitulation, the judge correctly characterised the offer as a lifeline to Cornerstone;
·as the judge observed the extant costs orders were insignificant compared to the costs that each side had otherwise incurred by the time of the offer and were therefore a matter that could be put to one side;
·the time to accept was short, but the judge took this into account noting that the offer was made after the trial had been running for a few days so that the short time for acceptance in those circumstances was justified;
·the reference to discussions between counsel was just that; there was no detail as to the content of those discussions; and
·the matter of discovery had been dealt with by the judge in his Reasons where he concluded that it was not plain that the missing documents that Cornerstone complained about were discoverable. [61]

[61]Reasons [146].

Whilst different judges may have arrived at a different decision as to the award of costs, the judge took into account all relevant matters and gave them the weight that he thought appropriate. He did not take into account an irrelevant matter. In those circumstances, there is no basis upon which this Court may disturb his costs order, albeit that had there been an error, the Court may well have exercised the discretion in a different way.

It follows that we would reject grounds 10–13.

Conclusion

For the reasons set out above, we would dismiss the appeal.

KAYE JA:

For the reasons given by the Chief Justice and Ferguson JA, I agree that the appeal should be dismissed.

---

[2015] VSCA 128

2 June 2015