Cuzeno Pty Ltd v Powercell Pty Ltd

[2000] HCATrans 441

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Sydney  No S184 of 1999

B e t w e e n -

CUZENO PTY LIMITED

Applicant

and

POWERCELL PTY LIMITED

Respondent

Application for special leave to appeal

McHUGH J
KIRBY J

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON FRIDAY, 13 OCTOBER 2000, AT 2.58 PM

Copyright in the High Court of Australia

MR T.G.R. PARKER:   May it please the Court, I appear for the applicant.  (instructed by Michie Shehadie & Co)

MR J.McC. IRELAND, QC:   I appear with MR C.M. HARRIS on behalf of the respondent.  (instructed by Willis & Bowring)

McHUGH J:   Yes, Mr Parker.

MR PARKER:   Your Honours will have seen that the points put forward are put forward under three headings.  Can I deal with the first of them, which is addressed in the written submissions, which is the Statute of Frauds point.  Your Honours will appreciate that my client has sued on an oral agreement to “take over” an existing contract which the defendant had with a third party, Mr Grasso.

The trial judge held that the statute did not apply but we submit that that decision was clearly wrong.  Although the Court of Appeal did not deal with the matter finally, it expressed the tentative view that we were right in that contention and we seek to support what we say there by reference to the decision of Wright v Madden which is a Queensland Full Court case of an auction type and which collects a lot of the other cases which also have arisen in the auction area. 

We say it is clear that the statute did not apply and we note the point is taken against us again for the purpose of this special leave application.  We simply say that it is certainly not the sort of point which would, if the Court were otherwise persuaded of the merits of this point, cause the Court to refuse special leave.

McHUGH J:   But if, contrary to your submission, you lost on that point, these other points do not arise, do they?

MR PARKER:   They do, your Honour.

McHUGH J:   They do?

MR PARKER:   Yes.

McHUGH J:   Well, one of them might.

MR PARKER:   When I say the other points, in my submission, both other points do arise because it is only if we get to having the Statute of Frauds applicable, of course, that we get to part‑performance, so I have to persuade the Court that the Statute of Frauds is applicable.  The other point, the point of construction, would arise, your Honour.

McHUGH J:   But at the trial you did not take the point.

MR PARKER:   This is the O’Rourke v Hoeven point.

McHUGH J:   Yes.

MR PARKER:   That is right.  The case was not cited to his Honour and I need to deal with that.

McHUGH J:   It is not really that the case was not cited but the point itself, the principle, was not cited.

MR PARKER:   That is correct, your Honour, but I do need – if I may seek to deal with that.  I think the easiest way to deal with that is to look at the way the Court of Appeal dealt with it.  That was at pages 119 and following of the application book.

McHUGH J:   Yes.

MR PARKER:   What was put against us by the Court of Appeal was essentially this:  first, that we would have needed to plead the point.  We submit that that is not so.  One can test the matter in this way by putting this hypothetical, in my submission.  Suppose that one was sued on an ordinary cause of action and defended it on the merits.  Would it be necessary to plead as a defence that the facts pleaded did not give rise to that cause of action?  We say no.  That is a pure point of law which is open to take and which does not need to be pleaded.  If one were to take the example a bit further, suppose ‑ ‑ ‑

McHUGH J:   But do not the District Court pleadings require a party to plead any point which might take the other party by surprise?

MR PARKER:   It is a question of how far that extends.

McHUGH J:   It extends pretty far these days, or at least it ought to.  I mean, if you are going to open up a whole area about part‑performance to suggest that your opponent would not be surprised by you raising it, that is a far‑reaching proposition, is it not?

MR PARKER:   Your Honour, the example that I have sought to give by way of analogy is one where, I submit, it would not be necessary to plead that matter specifically.

McHUGH J:   Take a negligence claim.  Surely a party would have to plead contributory negligence?

MR PARKER:   Yes, your Honour, because that involves putting forward an affirmative case.  It involves demonstrating facts which do not arise, necessarily, out of the case put against you.

McHUGH J:   Yes, but what you are saying is this action for damages does not lie because the doctrine of part performance does not operate.  That is a fairly fundamental point.

MR PARKER:   Your Honour, what we are saying is that the action for damages does not lie because, as a matter of law, the doctrine of part‑performance is not available.  Now, what I am simply submitting is that that is a pure matter of law and as such it does not require to be pleaded.  There must be some limitation on the principle that one has to plead anything that the other side may later say they were surprised by.

KIRBY J:   Yes, but we have gone beyond the age of ambush.  I mean, it is absurd to suggest that a barrister should go along to court not knowing that he has the issue to deal with and to contest.  Just because you assert something as a legal proposition does not mean you do not have to give notice of it.  People have to prepare.  That is the whole point of modern litigation.

MR PARKER:   I accept that, of course, your Honour.

KIRBY J:   They have to look up the law.  They have to look up the cases.  They have to get the principles clearly in their mind.

McHUGH J:   These rules are designed to overcome what was the position when I was a barrister about the same seniority as you were.  It was trial by ambush.  You did not plead anything in those days.  They hardly pleaded anything, not guilty.

KIRBY J:   His Honour took advantage of it all the time.  He was famous for it.

MR PARKER:   I am not suggesting we should go back to either the good old days or the bad old days, depending on what they were.  I do have a lot of points to cover, your Honours, and I cannot deal with all of these things.  I would ask your Honours in considering the matter to look at the pleadings because, when one looks at the pleadings, one will see that it is a counsel of perfection, what is being suggested.

The way the matter was pleaded was that the contract was pleaded first.  Then it was pleaded in the statement of claim part‑performance as well and it was pleaded – this is page 7 of the application book ‑ not only that my friend’s client had part‑performed the contract, but it was pleaded that we had part‑performed it as well, which is completely irrelevant.  Then we pleaded in response the statute.

Now, in theory, the pleadings should then have gone a reply which put up in answer to the statute part‑performance and then, I suppose, in theory, if one accepts what is put against me, we should have put on a rejoinder which said, “No, you can’t have part‑performance.”  None of that happened but the matter was fully fought out at trial and I would just simply submit ‑ ‑ ‑

McHUGH J:   Or you could have put the matter down for hearing by an objection on a point of law to their defence, their claim that it was partly performed.

MR PARKER:   We could have but, of course ‑ and I have made this point in the submissions ‑ I mean, it is not a court of strict pleading and we are talking about the District Court here.  It is not as if we are talking about a court which is, as your Honours would no doubt be aware, in a position to deal with those nice points of law and availability of doctrines in that particular way.

Your Honours, all I just wish to add before I pass from that point is this, that even if your Honours were against me and were of the view that in accordance with the rules the matter should have been pleaded, the question still arises whether there has been prejudice.  I have dealt with that matter in my written submissions.

What was put against us was specific performance ‑ we say that just could never have been applicable ‑ and equitable fraud, and we say there is no independent doctrine of equitable fraud because the doctrine of part‑performance is, itself, grounded in equitable fraud and it is a mistake, we respectfully submit, for the Court of Appeal to have assumed that there may be an additional area of equitable fraud extending beyond the doctrine of part‑performance which my friend’s client could have availed itself of.

We say that when one looks at the matters that were put against us by the Court of Appeal, it is just not the case that any prejudice was demonstrated and one should come back to the principle that unless prejudice is demonstrated, we say, the point should have been allowed.  Prejudice was not demonstrated and I have sought in my submissions to indicate why procedurally and substantively that was not so.

Can I pass to the next point which assumes the part‑performance, that I am unsuccessful there and I need to deal with part‑performance.  The point here is simply this.  Your Honours will have seen in the papers that there were prior contracts between the parties.  There had been a contract in March and that had required money to be provided in a certain way.  Finance had to be provided.  That finance could not be provided and the parties had reached the point where my client had said, “We’re going to terminate the contract”.  It was at that point that the oral agreement took place and we simply say that the Court of Appeal’s decision does not give any weight to the word “unequivocally”, and that is essentially the point.

McHUGH J:   Yes, I know.  That is hardly a special leave point, Mr Parker.

MR PARKER:   As your Honour please.  May I deal with the third point that I have raised in the submissions.  There are really two aspects to the third point which is the structure of the contract point, if I can put it that way.  This was a deceptively simple arrangement on the face of it whereby A is to take over B’s obligations under a contract with C.

We submit that the Court of Appeal has not adopted the correct characterisation of what is involved in such a contract.  The curiosity in this case is that the third party, C, the first that Mr Grasso knew about this was he received a letter repudiating his arrangement.  Now, your Honours, if we are correct in saying that this was really a tripartite arrangement, then Mr Grasso was never involved by way of offering an acceptance in making the contract.

The Court of Appeal dealt with that matter by saying that, in effect, my client had said that it would make a contract with Mr Grasso and that if it failed to do so, for whatever reason, that it would be liable in damages.  Now, we simply submit that there was no basis for that analysis and it is not a proper analysis in a tripartite situation of this sort.  The significance of it, we say, is that it is appropriate for this Court to elucidate just what is the correct analysis of that commonly occurring situation where, for instance, in a sale of business there are existing contractual relationships which are to be assumed in some way by an incoming person.

KIRBY J:   You say it is commonly occurring, but I do not remember in my 13 years on the Court of Appeal anything quite like this.  I suppose it does happen but it is not commonly occurring.  When it occurs the parties commonly provide for it in express terms and, if they do not, they have had conversations and it is just a matter of working out what they agreed and applying to it the principles of law.  It does not seem a special leave matter.  We can get through 60, 80 cases a year and we just have to conserve time to matters of general importance.  That is the whole point of the special leave process.

MR PARKER:   All I can say in response to that, your Honour, is that in virtually any sale of business, and that is a very common commercial contract ‑ ‑ ‑

KIRBY J:   It is very common then for the parties, if they are advised, to put down there what they are going to do in writing and to provide for it expressly and, if they do not, they have conversations which then yield litigation when they do not agree.  In 99 per cent of cases there is no litigation.  They go ahead and they agree and they do and they have agreed.

MR PARKER:   Your Honour, I put the submission that it is an important analytical question and I do not think I can take the matter any further than what I have said.

KIRBY J:   No.  Your written submissions were very good and they present the issue as well as it could be presented for your client.

MR PARKER:   As your Honour please.  The final thing that I must mention is the mitigation point and there the argument is that the Court of Appeal has simply dealt with the matter factually incorrectly and I have explained why in the submission and I think really the same point is reinforced by the point put against me.  What happened, in my submission, is that the Court of Appeal confused rescission, which is an agreed procedure, with repudiation, which is a unilateral tearing up of the contract, and when it seized on a statement which it was found my client had made, namely, “We can rescind any time”, the Court of Appeal assumed that that permitted a repudiation, which is, in fact, what happened.

May I say one further thing on the overall significance of this to the parties and that is this.  There are five other actions between these parties and the outcome of this litigation and the outcome of these points may be determinative therefore, not just ‑ ‑ ‑

KIRBY J:   You say “may”. I notice that submission.  I am not at all certain that that is a ‑ ‑ ‑

McHUGH J:   No, neither am I.

MR PARKER:   I can only point to the fact that my friends have put a point by way of res judicata on that.

KIRBY J:   That will take its course in the other proceedings.

MR PARKER:   Yes.

KIRBY J:   We cannot solve everything.  We cannot even solve all the applications for special leave.  We certainly cannot solve your future litigation.

MR PARKER:   Your Honours, I think that ‑ ‑ ‑

KIRBY J:   I did understand the basis on which you put that up.  You put it up as a reason why this case was elevated out of its own particular economic facts.

MR PARKER:   It is not just a single case.  Yes, your Honour.

KIRBY J:   I am not at all convinced that it is.

MR PARKER:   As your Honours please.  Your Honours, those are the submissions that I put.

McHUGH J:   Thank you.  Yes, we need not hear you, Mr Ireland.

The issues sought to be ventilated in this application do not warrant the grant of special leave, particularly having regard to the pleadings and the conduct of the case at first instance.  Accordingly, the application is dismissed with costs.

AT 3.14 PM THE MATTER WAS CONCLUDED