Devon v Capital Finance Australia Ltd
[2014] VSCA 73
•15 April 2014
SUPREME COURT OF VICTORIA
COURT OF APPEAL
S APCI 2013 0172
| KATHLEEN LINDA DEVON |
| v |
| CAPITAL FINANCE AUSTRALIA LTD |
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| JUDGES | WHELAN and SANTAMARIA JJA |
| WHERE HELD | MELBOURNE |
| DATE OF HEARING | 27 February 2014 |
| DATE OF JUDGMENT | 15 April 2014 |
| MEDIUM NEUTRAL CITATION | [2014] VSCA 73 |
| JUDGMENT APPEALED FROM | [2013] VCC 1252 (Judge Cosgrave) |
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PRACTICE AND PROCEDURE – Whether defence was raised on the pleadings or at trial – Whether new defence may be raised on appeal – Principles relating to when a new point can be raised on appeal – When a new trial will be ordered on an issue of fact not litigated at trial
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| Appearances: | Counsel | Solicitors |
| For the Appellant | Mr A P Rodbard-Bean with Ms S J Varney | In person |
| For the Respondent | Mr A T Schlicht | Koroneous Lawyers |
WHELAN JA:
The respondent (‘Capital Finance’) and a company named Melbourne South Pty Ltd (‘Melbourne South’) entered into a terms purchase agreement in March 2011 which the appellant, Kathleen Devon, guaranteed. The subject matter of the agreement was computer equipment supplied, or to be supplied, by a company named Akyman Investments Pty Ltd (‘Akyman’). All the relevant dealings on behalf of Melbourne South with both Capital Finance and Akyman were undertaken by Mrs Devon’s husband, Mr Hugh Devon.
Melbourne South never collected the relevant equipment and it never made payments under the terms purchase agreement, save for the first payment which Capital Finance received by direct debit. Capital Finance eventually took possession of the equipment and arranged for it to be sold at auction. It then sued Melbourne South and Mrs Devon for the sum of $109,710.36, being what was alleged to be due under the terms purchase agreement and the guarantee.
Melbourne South went into liquidation. Capital Finance did not seek leave to proceed against it. It did proceed against Mrs Devon and a trial was held in September 2013. On 18 October 2013 Judge Cosgrave in the County Court delivered judgment.[1] He found in favour of Capital Finance and gave judgment against Mrs Devon.
[1][2013] VCC 1252.
Extension of time
Mrs Devon did not appeal in time. By a summons issued on 15 November 2013 she sought an extension of time. She issued that summons herself. She had been represented by counsel before Judge Cosgrave. She has since obtained representation through the Victorian Bar’s Pro Bono Scheme. Mrs Devon has sworn in an affidavit that the barrister who appeared for her in the County Court incorrectly advised her that she had 28 days in which to appeal, and she exhibited a letter from him confirming that advice. Her new counsel drafted an amended proposed notice of appeal dated 25 February 2014.
On 13 February 2014 Judicial Registrar Pedley ordered, amongst other things, that the application for an extension of time and the appeal, if an extension is granted, be heard on the same day.
After hearing brief argument, on 27 February 2014 the Court granted the extension sought, gave leave to file a notice of appeal in the form of the draft dated 25 February 2014,[2] and proceeded to hear the appeal. The President had determined under s 11(1A) of the Supreme Court Act 1986 that the bench constituted to hear the extension application could hear and determine the appeal.
[2]The Notice of Appeal was filed in court that day.
For the reasons set out below, in my opinion the appeal should be dismissed.
Grounds of appeal – identification of the issue on the appeal
The grounds of appeal are as follows:
1. The learned trial judge:
a.failed to consider the Appellant’s argument that the terms purchase agreement between the Appellant and the Respondent was for the supply of new computer equipment;
b.should have found that the computer equipment supplied was second hand and not fit for the purpose or of merchantable quality; and
c.should have found that the Appellant was entitled to terminate the terms purchase agreement for breach.
2.The learned trial judge:
a.erred in finding at [67] of the Judgment that ‘‘the allegations [alleging misleading and deceptive conduct and seeking declaratory relief under the Australian Securities and Investments Commission Act 2001 (C’th)] in the Third Defence are ineffectual’’; and
b.should have considered the Appellant’s allegations concerning the right to seek declaratory relief under the Australian Securities and Investments Commission Act 2001 (C’th).
3.The learned trial judge:
a.failed to consider the Appellant’s argument that the terms purchase agreement should have been declared void under the Australian Securities and Investments Commission Act 2001 (C’th); and
b.should have declared the terms purchase agreement was void under s12GM of the Australian Securities and Investments Commission Act 2001 (C’th).
As articulated on the hearing, the complaint is that the judge failed to address a defence Mrs Devon had relied upon, namely, that Melbourne South had been entitled to terminate the terms purchase agreement because the equipment was not new, and that she was relieved of her liability as guarantor because the principal debt had been extinguished. The defence was said to be founded on the principle explained in McDonald v Dennys Lascelles Ltd.[3]
[3](1933) 48 CLR 457 (‘Dennys Lascelles’).
If that was part of Mrs Devon’s case, the judge did not consider it. The issue on the appeal is whether that was part of Mrs Devon’s case in the County Court. I begin with Mrs Devon’s pleaded case, and I will then review the conduct of the trial.
The pleaded case
The relevant allegations in Capital Finance’s statement of claim were admitted either in Mrs Devon’s defence or by virtue of her failure to respond to a Notice to Admit.
Mrs Devon filed three defences. The first two were drafted by her husband, Hugh Devon, and the third by solicitors then acting for her. That third document dated 2 May 2013 and described as a further amended defence, contained the following positive allegations:
5.It was a specific term of the Offer that there was no agreement between the Plaintiff [Capital Finance] and the First Defendant [Melbourne South] parties until such time as it was signed by an authorised officer of the Plaintiff.
6. Prior to the time that the Plaintiff executed the offer on 11 March 2011, the First Defendant changed terms of the offer to the Plaintiff by advising that the Plaintiff must not pay the settlement proceeds to Akyman until such time as the First Defendant had approved the inspection and notified the Plaintiff that the equipment was ready for collection.
Particulars
In a telephone conversation on or about 1 March 2011 Mr Hugh Devon for and on behalf of the First Defendant advised Ms Julieanne Morcos of the Plaintiff that the First Defendant required inspection of the equipment in an assembled and working order. As such he advised her not to pay Akyman until such time as the First Defendant had approved the inspection and notified the Plaintiff that the equipment was ready for collection.
By a letter dated 9 March 2011 Mr Devon, for and on behalf of the First Defendant, advised Ms Julieanne Morcos of the Plaintiff not to pay Akyman until such time as the First Defendant had approved the inspection and notified the Plaintiff that the equipment was ready for collection.
Breach of Agreement
7.On or about 11 March 2011 the Plaintiff entered into an agreement with the First Defendant to finance for the purchase of computer equipment from Akyman for the settlement sum (‘the Finance Agreement’).
Particulars
The terms of the Finance Agreement were in [sic] written, oral and implied.
In so far as the terms of the Finance Agreement were in writing they are constituted by:
(a) the Capital Finance Term Purchase Account No 22144440; and
(b) letter dated 9 March 2011 from Mr Devon, of the First Defendant to Ms Julieanne Morcos of the Plaintiff.
In so far as the terms of the Finance Agreement were oral they were constituted by the telephone conversation between Mr Devon and Ms Morcos on 3 March 2011.
In so far as the terms of the Finance Agreement were implied they were by operation of law.
8. It was a term of the Finance Agreement that [sic] Plaintiff would not pay the settlement proceeds to Akyman until such time as the First Defendant had approved the inspection and notified the Plaintiff that the equipment was ready for collection (‘the further term’).
Particulars
The Second Defendant [Mrs Devon] refers to and repeats paragraph 6 herein. In addition the First Defendant refused to supply the Plaintiff with the appropriate authority for payment of the ‘initial instalment’ until after inspecting the equipment and prior to the Plaintiff advancing the [sic] the settlement sum.
9. The equipment to be supplied by Akyman was not fit for its purposes or of merchantable quality.
Particulars
On 15 March 2011 Mr Devon inspected the equipment at the offices of Akyman at Level 3 450 St Kilda Road Melbourne in the State of Victoria and discovered that the computer and other equipment being supplied was not new as agreed but second hand and in poor condition. Upon inspecting the equipment he was informed by an officer of Akyman that new equipment would be available on 17 March 2011.
On 17 March 2011 Mr Devon attended Akyman offices to be informed that new equipment and relevant software would not be supplied.
10. By reason of the allegations in paragraph 9 herein the First Defendant cancelled the Finance Agreement.
Particulars
On 17 March 2011 upon discovering the equipment was not fit for its purpose or of merchantable quality Mr Devon cancelled the purchase agreement with Akyman and the Finance Agreement.
11. In breach of the further term of the Finance Agreement, the Plaintiff released the settlement sum to Akyman without the Plaintiff’s [presumably intended to be a reference to Melbourne South, the first defendant] written advice that the equipment was ready for collection.
Particulars
On or about 15 March 2011, prior to the First Defendant inspecting the equipment the Plaintiff released the settlement sum to Akyman with [presumably intended to be ‘without’] the First Defendant’s written advice that the equipment was ready for collection.
Breach of Duty of Care
12. Further, in the premises, at all relevant times, in providing finance to the First Defendant the Plaintiff owed the Second Defendant a duty to take reasonable care in the provision of such services, including as set forth in section 912A(l)(a) of the Corporations Act 2001 (Cth), to:
(a) do all things necessary to ensure that the financial services provided to the First Defendant as aforesaid were provided efficiently, honestly and fairly (section 912A(l)(a));
(b) discharge its duties competently; and
(c) exercise reasonable care and skill; and
(d) ensure that the equipment was to the First Defendant’s satisfaction fit for its purpose and of merchantable quality before releasing the settlement sum.
13. In breach of the Plaintiff’s duties to the Second Defendant the Plaintiff:
(a) released the settlement sum to Akyman without advising the First Defendant and/or the Second Defendant;
(b) released the settlement sum to Akyman without obtaining written confirmation from the First Defendant that the goods were fit for their purposes or of merchantable quality; and
(c) did not comply with the settlement check list according to the conditions contained in the offer of finance by failing to receive payment of the initial instalment prior to settlement.
Estoppel
14. In the premises, by reason of the facts alleged in paragraphs 8 to 13 herein, the Plaintiff represented to the Second Defendant that the settlement sum would only be released to Akyman upon the Plaintiff’s written advice that the equipment was ready for collection.
15. Induced by and in reliance on the Representation the Second Defendant continued to provide a guarantee and indemnity for and on behalf of the First Defendant.
16. In the premises, by reason of the facts alleged in paragraph 11 herein, the Plaintiff is estopped from claiming the settlement sum from the Second Defendant
No Finance Agreement
17. In the alternative, at all relevant times the offer by the First Defendant included the further term. The Plaintiff’s acceptance of the Finance Agreement on some other basis does not constitute proper acceptance of the First Defendant offer.
18. By reason of the allegations in paragraph 11 herein the Finance Agreement is void.
Plaintiff’s False, Misleading and Deceptive Conduct
19. In the premises, by reason of the facts alleged in paragraphs 8, 9, 10 herein, the Plaintiff represented to the Second Defendant that the settlement sum would only be released to Akyman upon the Plaintiff’s written advice that the equipment was ready for collection. (‘the Representation’)
20. Induced by and in reliance on the Representation the Second Defendant executed the guarantee and indemnity on or about 3 March 2011 for and on behalf of the First Defendant and remained guarantor of the First Defendant.
21. The Representation was false, misleading and deceptive in so far as the Plaintiff released the settlement sum without obtaining the First Defendant’s written advice that the equipment was ready for collection.
22. In so far as the Representation related to future matters, the Plaintiff had no, or no reasonable, grounds for making the Representations.
23. By reason of the allegations in paragraphs 14 to 17 herein the Plaintiff has engaged in conduct that is misleading and deceptive in breach of section 18 of the Competition and Consumer Act 2010; section 1041H of the Corporations Act 2001 (Cth) and section 12DA of the Australian Securities and Investments Commission Act 2001 (Cth)
24. In the premises by reason of the allegation raised herein the Second Defendant is entitled to have the Finance Agreement declared void pursuant to section 87 of the Competition and Consumer Act 2010; and 12GM of the Australian Securities and Investments Commission 2001 Act (Cth).
I will hereafter refer to the further amended defence simply as the defence.
It is readily apparent that the principal complaint in the defence is the payment of the ‘settlement sum’ prior to Mr Devon’s inspection of the goods. That is the sole basis for the estoppel claim (paragraphs 14-16), the claim no agreement was made (paragraphs 17–18), and the misleading and deceptive conduct claim (paragraphs 19–24). The negligence claim (paragraphs 12–13) is based upon that complaint and a complaint about a failure to comply with the settlement checklist. As to the claim for breach of agreement (paragraphs 7–11), the only term pleaded (paragraph 8) and the only breach alleged (paragraph 11) relates to that same complaint of payment before inspection. The trial judge dealt with that issue at length. In substance, the defence failed on that issue because the judge preferred the evidence of Capital Finance’s employee, Ms Julieanne Morcos, to that of Mr Devon. The trial judge also dealt with the alleged failure by Capital Finance to comply with its own procedures (the settlement checklist, amongst others).
What is put on Mrs Devon’s behalf on the appeal is that there was another pleaded defence which the judge did not deal with. Addressing that postulated defence by reference to what should have been pleaded and what was pleaded, the position seems to me to be as follows:
· It should have been pleaded that there was a term of the terms purchase agreement that the goods were, or were required to be, new. This is not the subject of any allegation in the defence, other than the reference to ‘not new as agreed’ in the particulars to paragraph 9.
· It should have been pleaded that the equipment was not new. This is said to be pleaded in paragraph 9. Paragraph 9 does not plead that, unless one reads the allegation and the particulars together and notionally replaces the fit for purpose/merchantable quality complaint with one concerning newness.
· It should have been pleaded that Melbourne South terminated the terms purchase agreement for breach of an essential term, being that the goods were, or were required to be, new. It is pleaded in paragraph 10 that Melbourne South terminated the agreement by reason of the allegation in paragraph 9, but not by reference to any particular term, essential or otherwise.
· It should have been pleaded that Mrs Devon was thereby discharged because the principal liability to which her obligation was accessory was extinguished. It is contended that this is pleaded in paragraph 24. I do not accept that. Paragraph 24 seems to me to be concerned with the misleading and deceptive conduct claim.
I do not read the defence as raising the issue which it is said the judge failed to address. The particular alleged term relied upon is not pleaded, and its alleged breach is not pleaded. Parts of what would have been needed were pleaded but other parts were not.
But in deciding whether or not a point was raised and should have been addressed, an analysis of the pleading is not the end of the enquiry; it is necessary to look to the actual conduct of the trial to see whether the point was or was not taken.[4]
[4]Water Board v Moustakas (1988) 180 CLR 491, 497 (‘Moustakas’)
Before reviewing the trial it is necessary to say something about two of the documents referred to in the defence, and about the Notice to Admit.
The Capital Finance Term Purchase Account No 22144440, referred to in the particulars under paragraph 7 of the defence, is a document which Capital Finance alleged constituted the relevant agreement. It sets out the amount financed and amounts due. It has detailed, and apparently standard, terms and conditions. It bears the signature of Mrs Devon dated 3 March 2011 and of an authorised officer of Capital Finance dated 11 March 2011. One of the terms and conditions (clause 1) is a detailed provision whereby the customer is said to have satisfied itself of the condition and suitability of the goods, and whereby terms as to their condition are said to be excluded to the extent permitted by law. I will refer to this provision simply as ‘clause 1’. The document identifies the goods by reference to an annexure which is an invoice from Akyman. That invoice has an entry which reads ‘NEW HARDWARE EQUIPMENT’.
The letter dated 9 March 2011 from Mr Devon to Ms Morcos, referred to in the particulars under paragraphs 6 and 7 of the defence, contains statements reflecting, or constituting, the alleged ‘further term’ in paragraph 8. The statements are to the effect that Capital Finance should not pay until Melbourne South had inspected the equipment and notified Capital Finance that the equipment was ready for collection.
By a Notice to Admit dated 30 April 2013 Capital Finance sought admissions from Mrs Devon as to certain documents and facts. Mrs Devon did not respond to that notice. Because Mrs Devon did not respond, under r 35.03(2) she was taken to have admitted those documents and facts. Amongst the facts so admitted, were these:
7.The Plaintiff terminated the Agreement by written notice to the First Defendant dated 8 March 2012.
8.As at 8 March 2012 the amount of $101,747.71 was due and owing by the First defendant under the Agreement.
…
11.As at 8 March 2012 the amount of $101,747.71 was due and owing by the Second Defendant under the Agreement.
The ‘Agreement’ was defined as the Capital Finance Term Purchase Account No 22144440 document to which I have referred.
I turn then to a review of the course of the trial, concentrating on an identification of the defences raised.
Review of the trial
Counsel for Capital Finance opened the case, taking the judge through the Notice to Admit, the pleadings, and what he contended to be the significant correspondence. The focus of his attention was on the allegation that an agreement had been made whereby Capital Finance was not to pay Akyman until advised that Melbourne South had inspected and approved the equipment. Counsel described this as the ‘nub of the dispute’. As to the letter of 9 March 2011, counsel described that as a ‘controversial letter’ and as a document which Capital Finance’s relevant employee at the time, Ms Morcos, would say she had never received.
On the appeal it was submitted that there were passages in the opening where counsel for Capital Finance revealed that he was aware that a defence was being raised that Mrs Devon had been discharged because the principal liability had been extinguished when the terms purchase agreement was terminated for breach of the essential term that the goods were, or were to be, new.
First, at one point counsel for Capital Finance said:
Essentially, your Honour, the defendant says that it cancelled, well that the plaintiff wrongly paid the supplier and received goods that – well the goods that were the subject of the invoice were not satisfactory, and it says that therefore it was entitled to cancel the agreement, even though that occurred after settlement.
Then, when reading out the defence, counsel said:
And then, your Honour, there’s a breach of a further term the plaintiff released the settlement sum to Akerman without the plaintiff’s written advice that the equipment was ready for collection. [5]
[5]In the transcript ‘Akyman’ is often written as ‘Akerman’.
Finally, counsel for Capital Finance referred the judge to clause 1 and paraphrased its terms.
The first passage may assist Mrs Devon, the other two do not. It is clear that the reference to a ‘further term’ was a reference to the defined expression in the defence. That term concerned what I might call the inspection issue. The reference to clause 1 also does not assist Mrs Devon. As will be seen, both counsel saw that term as potentially relevant to the inspection issue.
Counsel for Mrs Devon did not respond to the opening.
The only witness called by Capital Finance was Ms Morcos. She gave evidence that she did not recall having ever seen the letter of 9 March 2011 until being shown it in the course of the proceeding. She gave evidence of her dealings with Mr Devon, the relevant substance of which was that Mr Devon had placed her under pressure to settle as quickly as possible, and that she and other staff at Capital Finance had done that, settling the transaction on Friday 11 March 2011. She was asked about her various interactions with Mr Devon, including a conversation she had with him on 15 March. In substance, Ms Morcos said that she was contacted by Mr Devon who indicated that he did not want the transaction to proceed, giving the explanation that the supplier had not been willing to release the goods for a few days and that something had not been written on a whiteboard at the supplier, which had a significance Ms Morcos did not understand.
Ms Morcos was cross-examined. Two topics were most prominent.
The first was the alleged request or stipulation that the money was not be paid to Akyman until Mr Devon had advised Capital Finance that he had inspected and approved the equipment. She denied any such request or stipulation was made to her.
The second topic was what were said to be failures on Capital Finance’s behalf to follow their own ‘internal guidelines and procedures’. The particular failures were said to be: settling on Friday 11 March 2011 without a requested confirmation of the identity of the signatory on the direct debit form (not received until Tuesday 15 March), settling without having the first instalment paid in advance, and drawing the first instalment under the direct debit authority when the relevant box on that authority marked ‘No’ had been ticked in relation to that instalment.
She was also asked about the collection of the equipment and its eventual sale.
As to the postulated defence of discharge by virtue of extinguishment of the primary obligation, the following potentially relevant matters arose:
· It was put to Ms Morcos that Mr Devon had told her on 15 March that there was a problem with the equipment and that it was not new. She denied that.
· It was put to Ms Morcos that clause 1 required the customer to satisfy itself as to the condition of the goods, and she agreed with that. It was put to her, and she accepted, that that was ‘up to them. It’s not up to you’. In the context, it seems to me that this interchange was directed at fortifying the argument that an arrangement had been made about inspection. That is, as the customer was responsible, it would want to inspect before settlement.
· It was put to Ms Morcos that Capital Finance had required the Akyman invoice to specify that the equipment was new, and she agreed with that.
· Ms Morcos was asked whether she had received a letter from Mr Devon dated 18 March 2011. She was shown a copy of the letter. She said she had never seen it before. She was not cross-examined about the contents of that letter. The letter made complaints about the inspection issue, payment when documents were not ‘in order’, deduction of the first instalment without authority, and ‘gross misrepresentation’ because the goods were not new.
Counsel on behalf of Mrs Devon then opened her case.
The defences he outlined were what was said to be the agreed term ‘that inspection and an approval was required before paying of money’, and what was said to be a representation which concerned ‘the specification of an inspection prior to settlement’. Reference was also made to the alleged failures of Capital Finance in drawing the first instalment under the direct debit, and failing to comply with ‘their own internal processes’. No reference was made in the opening to an essential term that the equipment was new, to termination by Melbourne South as a consequence of breach of that alleged term, or to discharge of the guarantor as a result of extinguishment of the primary obligation.
Given the pleading, it is unsurprising that counsel for Mrs Devon’s opening, when addressing negligence, misleading conduct, and estoppel, was confined to what was said to be a representation that payment would not be made until Capital Finance had been advised that Melbourne South had inspected and approved the equipment. I think it is clear in the pleading that that is the basis of these defences. As to the contractual part of the defence, what was said was the following:
The case concerning Melbourne South and Capital Finance is quite simply a hire purchase agreement. The key term, if I can put that to the Court, that was the subject of numerous protestations by Hugh Devon, the key liaison person at Melbourne South. Hugh was the key liaison at Melbourne South and he repeated a number of times that inspection and an approval was required before paying of money. A large sum of money to a computer company.
Now this repeated gesture and repeated expression is found in multiple sources of writing, corroborated in my submission. They appear in a letter importantly of 9 March. Repeated on the 18 March. They also occur in phone calls with accurate diary notes as independent corroboration. These diary notes provide a piece of evidence that the Court should consider in regards to credibility.
The credibility point concerns conduct. Prima facie the documentation is clear in discrediting the version that has been given by the previous witness. The documents speak for themselves, the documents show that a direct debit was taken, the first instalment was taken without authority. If there was a follow up authority it had to have been in writing, it was never given.
At that point his Honour interrupted and queried the significance of Capital Finance’s drawing under the direct debit for the first instalment. Counsel addressed that matter and then turned to the question of credibility concerning the stipulation that payment should not be made before inspection, and then turning to the alleged negligence and misleading and deceptive conduct.
The defence called Hugh Devon and he gave an account of his dealings with both Akyman and Capital Finance. He described the requirements that he says he made known to Akyman, including what he described as a need for the ‘latest technology’. The most significant topic addressed in his evidence-in-chief was his dealings with Ms Morcos concerning a requirement which he said he made that the money not be paid to Akyman until he had inspected all the equipment.
Mr Devon agreed that he had also required that settlement occur as soon as possible, and when asked whether there was anything else he had said to Ms Morcos, he replied that there was, and said:
Because of my concerns with Akerman, I wanted to make sure that I had the equipment because the equipment was not available at the time of the pro forma invoice. So I was not, Akerman said the equipment was not available to be inspected as they have to order the equipment in. So as a result of it, in combination with the fact that I know that they had some financial problems themselves, I asked Julie that I wanted to inspect the goods prior to any payments.
The inspection issue was not connected by Mr Devon to the issue of the equipment being new.
Mr Devon’s evidence was that he raised this issue of inspection prior to payment with Ms Morcos two or three times, and that she had responded using expressions such ‘that’s fair enough’ and ‘we will proceed down that path’.
Mr Devon was taken through hand-written notes in his diary, which he maintained recorded these conversations, and to the letter of 9 March, which he said he had sent to Capital Finance.
In addition to giving evidence on the inspection issue, Mr Devon also gave evidence that both Ms Morcos and another employee of Capital Finance had confirmed that settlement would not take place until ‘documentation was received in writing from Kathleen’. This was a reference to a confirmation that was required from Mrs Kathleen Devon as to a signature on the direct debit.
In his evidence-in-chief Mr Devon described his inspection of the equipment on 15 March. He said the ‘boxes were all open’, that it ‘appeared’ that the monitors were all old and that there were items missing. When he said he was going to cancel the contract and that Akyman was not going to be paid, he said an employee of Akyman’s had laughed at him and said it was too late because payment had already been made. Mr Devon gave evidence that he discussed this situation with Ms Morcos who confirmed that the money had been paid.
He was asked about the direct debit authority, about having ticked the ‘No’ box, and about the letter of 18 March which he said he had sent.
Mr Devon was cross-examined at considerable length. The cross-examination was very substantially directed to the inspection issue. There was a direct conflict between the evidence of Mr Devon and Ms Morcos on this issue. In his judgment, Judge Cosgrave concluded that he preferred the evidence of Ms Morcos to that of Mr Devon. The judge gave reasons why he was unable to accept Mr Devon as a truthful and reliable witness, whereas he was able to accept Ms Morcos as a witness of truth. Having read Mr Devon’s cross-examination and having considered the relevant documents, in my view that conclusion was fully justified. It was not the subject of any ground of appeal.
For present purposes, the significance of Mr Devon’s cross-examination is that it does indicate that the only defences which counsel for Capital Finance perceived to be in issue were those based upon the inspection issue and those based on compliance by Capital Finance with its own internal procedures.
Counsel on behalf of Mrs Devon commenced his final address immediately after Mr Devon’s evidence. Mrs Devon had not been called to give evidence at that point. In his final address counsel began by referring to a chronology which he had prepared and then said:
I’ll be simple and short and sweet. The key term of the defendant – I’ll cut to the chase. The key term of the defendant is that a representation or a misrepresentation was made for the inspection and an approval of that inspection. This occurred on 1 March, 3 March, and appears in the diary notes for 1 March and 3 March and also in a letter on 9 March and 18 March. The nub of the plaintiff’s case is that she didn’t receive those letters, 9 March, 18 March, and I strongly submit, we strongly – I strongly submit that you should prefer the evidence of Hugh.
Reference was also made in the address to the issues about following internal procedures, which was said to be relevant to credit, as well as to negligence and misleading conduct. Counsel for Mrs Devon said:
Because if they’re disobeying their internal procedures and processes, then the checks and balances are simply not there, and its telling altogether that there is misconduct and negligence. The defendant’s case is framed on negligence, Trade Practices misleading and deceptive conduct and all the factual matrix of what has occurred …
In the course of his final address, his Honour questioned counsel for Mrs Devon in relation to the fact that there was no counter-claim and as to how he would give relief for misleading and deceptive conduct in those circumstances.
Counsel for Mrs Devon did say in his final address that the contract was ‘null and void’, although only in the context of what he described as ‘the 2010 legislation’, which it seems to me was a reference to the pleaded Competition and Consumer Act 2010 and the misleading and deceptive conduct provisions of that Act.
The trial judge asked counsel for Mrs Devon why the matters relied upon invalidated the guarantee. Counsel for the plaintiff replied:
The guarantee is invalidated because we say there is a fact of misleading and deceptive conduct. That fact is that Hugh Devon received the representation from Capital Finance that they wouldn’t pay out the money until an inspection occurred.
A little later counsel for the plaintiff repeated:
The guarantee is invalidated because there was a representation of only paying that money prior to an inspection.
His Honour then asked:
So the real complaint is this pre-condition thing? You say it was represented to the company that the company could inspect – or no settlement would take place before an inspection of the goods.
[COUNSEL] Yes your Honour.
[HIS HONOUR] Alright, so the plaintiff represented that[,][6] the plaintiff didn’t do it, therefore the guarantee is invalidated.
[COUNSEL] Yes.
[6]I insert this comma as I understand His Honour to be saying that the plaintiff represented to Melbourne South that it would refrain from settling before inspection but that it did not do that.
When counsel for Capital Finance commenced his final address he pointed out that there was no evidence that any representation had induced Mrs Devon to sign the guarantee. Counsel for Mrs Devon then sought leave to reopen his case to call Mrs Devon and there was a discussion about whether there had been an agreement between counsel concerning the need for Mrs Devon to give evidence. After hearing the argument the trial judge permitted counsel to re-open the defendant’s case and call Mrs Devon, notwithstanding the stage at which the trial had then reached. Mrs Devon gave evidence that she had been told by her husband that ‘Capital Finance would not … pay out any funds until he had provided … an authority for them to do so’. When cross-examined about when she was told this, she was unable to say other than that it ‘would have been in March some time’.
After Mrs Devon’s evidence, counsel for Mrs Devon made a further submission directed to the misleading and deceptive conduct claim.
Counsel for Capital Finance then resumed his final address. He dealt with the inspection issue almost exclusively. He made no reference to any defence based on termination for breach of an essential term as to the equipment being new. Counsel for Capital Finance did make a reference to clause 1 in his final submission, but that was in the course of a submission as to why Mrs Devon’s case that the requirement for inspection before payment became a term of the terms purchase agreement should be rejected. At the end of his address, he said:
And what simply this case is about, your Honour, is that the first defendant purchased equipment which it was dissatisfied with for whatever reason, and didn’t want to proceed with the purchase but it was all too late and that’s where it ends starts and ends, your Honour.
I think it is clear that counsel for Capital Finance did not perceive that a defence based on the principles in Dennys Lascelles was being advanced. My analysis of the course of the trial is that he was correct in that perception.
Judgment
Judge Cosgrave delivered a careful and detailed written judgment. I will not reproduce that detail here. Instead, I will confine myself to what he said were the defences with which he was dealing.
The Judge observed that, given the effect of the Notice to Admit, Capital Finance had proved its case and was entitled to judgment on that basis alone. He nevertheless reviewed the third defence and dealt with the matters it raised.
He began by setting out the correspondence in some detail. He then observed that the submissions regarding Mrs Devon’s defence were ‘extremely unclear’ but that she had arguably raised the following issues in her third defence:
(a) breach of the agreement;
(b) misleading and deceptive conduct;
(c) negligence;
(d) estoppel; and
(e) an allegation the agreement was void.
His Honour dealt with each of these defences separately.
In relation to the breach of agreement defence he set out the facts relied upon and then observed:
On this basis, Devon contended that it was a term of the agreement that Capital would not pay the settlement proceeds to Akerman until such time as Melbourne South had approved the inspection and notified Capital that the equipment was ready for collection.
The judge referred to the relevant paragraphs of the defence and observed that the ‘further term’ defined in paragraph 8 of the defence was ‘central to her case’. The ‘further term’ concerned what I have called the inspection issue.
The judge did not accept that the further term formed part of the agreement between Melbourne South and Capital Finance. He set out seven reasons why he had reached that conclusion. It was in the course of that analysis that he concluded that he considered Ms Morcos be a witness of truth but that he did not have the same view in relation to Mr Devon.
The judge then dealt with submissions made to the effect that Capital Finance had ‘acted improperly or in breach of contract’ by failing to comply with its own approval conditions. He rejected that defence.
The judge then turned to the misleading and deceptive conduct claim, the negligence claim, the estoppel claim, and the claim that the agreement was void. He found against Mrs Devon on each of those defences because each were based upon the inspection complaint which was the subject of the defined ‘further term’.
The judge gave reasons why he had permitted the defendant to re-open its case to call Mrs Devon. He observed that Mrs Devon had not relied on authorities such as Yerkey v Jones[7] and Garcia v National Australia Bank Ltd[8] before concluding that the plaintiff should have judgment against Mrs Devon.
[7](1939) 63 CLR 649.
[8](1998) 194 CLR 395.
Conclusion as to whether the issue was raised at trial
My conclusion is that the postulated defence based upon Dennys Lascelles to the effect that Mrs Devon’s ancillary obligation was extinguished when Melbourne South validly terminated the agreement with Capital Finance for breach of the essential term that the equipment was, or was to be, new, was a defence not raised at trial.
Submissions as to whether the new defence can be entertained now
Each of the parties filed supplementary submissions addressing what the position would be if it were to be determined that the postulated defence now sought to be relied upon had not been raised at trial.
The respondent relied upon the oft quoted passage in Suttor v Gundowda Pty Ltd.[9] The High Court, constituted by Latham CJ and Williams and Fullagar JJ, said:
Where a point is not taken in the court below and evidence could have been given there which by any possibility could have prevented the point from succeeding, it cannot be taken afterwards.[10]
[9](1950) 81 CLR 418 (‘Suttor’).
[10]Suttor (1950) 81 CLR 418, 438.
The respondent submitted that had the postulated defence been raised, there would ‘certainly’ have been evidence given by Akyman as to the state of the goods supplied and whether or not they were new. The respondent relied upon a number of authorities in the High Court since Suttor, in particular Moustakas[11] and Banque Commerciale Sa, En Liquidation v Akhil Holdings Ltd,[12] and to the analysis of those authorities in this Court in Geelong Building Society (in liquidation) v Encel.[13]
[11](1988) 180 CLR 491.
[12](1990) 169 CLR 279 (‘Banque Commerciale’).
[13][1996] 1 VR 594 (‘Geelong Building Society’).
The appellant placed particular reliance on the observations of Jacobs J in Maloney v Commissioner of Railways.[14] Justice Jacobs observed that there are ‘very exceptional cases’ where the interests of justice may require a new trial on an issue of fact not litigated in the trial below.[15] In that context Jacobs J endorsed observations which had been made in the New South Wales Court of Appeal by Samuels JA to the effect that an omission to put a particular case at trial was not necessarily conclusive against a party and that he might be entitled to a new trial ‘if the interests of justice require it, the evidence already given is capable of sustaining it, and such a course can be taken without prejudice to the defendant’.[16]
[14](1978) 18 ALR 147 (‘Maloney’).
[15](1978) 18 ALR 147, 152.
[16](1978) 18 ALR 147, 152.
The appellant submitted that the evidence below was ‘capable’ of sustaining the allegation that there was a term of the terms purchase agreement that the computer equipment was to be new and that the evidence was ‘capable’ of sustaining an allegation of breach. It was submitted that a new trial could occur without ‘irreparable prejudice’ to the defendant.
Applicable legal principles
There is a fundamental principle that a point not taken in the court below cannot be taken on appeal if it is possible that evidence could have been given in the trial which would have prevented the point from succeeding.[17] Put another way, a party is bound by the conduct of their case at trial.[18]
[17]Suttor (1950) 81 CLR 418, 438; Coulton v Holcombe (‘Coulton’) (1986) 162 CLR 1, 7–8; Moustakas (1988) 180 CLR 491, 497; Banque Commerciale (1990) 169 CLR 279, 284; Whisprun Pty Ltd v Dixon (2003) 200 ALR 447, [51] (‘Whisprun’).
[18]Metwally v University of Wollongong (1985) 60 ALR 68, 71 (‘Metwally’). See also Banque Commerciale (1990) 169 CLR 279, 284 citing the early authority of Rowe v Australian United Steam Navigation Co Ltd (1909) 9 CLR 1, 24.
If a new point is sought to be taken on appeal and it is one which further evidence could not affect, such as an argument as to the construction of a statute or document, or a legal submission based on facts proved beyond controversy or admitted, then the new point may be entertained on appeal.[19] While reliance on a new point may be permitted in those circumstances, the authorities describe all departures from the case advanced at trial as being permissible only in exceptional circumstances;[20] and even where the new point sought to be raised is a point not capable of being affected by further evidence, the court may not permit it to be relied upon.[21] Instead, the Court must determine if it is ‘expedient in the interests of justice’ for the new point be raised and argued.[22]
[19]Suttor (1950) 81 CLR 418, 438, quoting Lord Watson in Connecticut Fire Insurance Company v Cavanagh [1892] AC 473, 480. This has been applied in a series of High Court decisions: Green v Sommerville (1979) 141 CLR 594, 608; O'Brien v Komesaroff (1982) 150 CLR 310, 319; Coulton (1986) 162 CLR 1, 7–8; Moustakas (1988) 180 CLR 491, 497; Banque Commerciale (1990) 169 CLR 279, 284; Whisprun (2003) 200 ALR 447, [51].
[20]Metwally (1985) 60 ALR 68, 71; Geelong Building Society (1996) 1 VR 594, 605.
[21]Multicon Engineering Pty Ltd v Federal Airports Corporation (1997) 47 NSWLR 631, 645–46; Geelong Building Society (1996) 1 VR 594, 605–607.
[22]See the authorities cited above at footnote 19.
There are very exceptional circumstances where a new trial might be ordered on an issue of fact not litigated at trial.[23] The interests of justice must require the determination of the new issue, and there must be no prejudice to the other party.[24]
[23]Maloney (1978) 18 ALR 147, 152; Moustakas (1988) 180 CLR 491, 498 (Mason CJ, Wilson, Brennan and Dawson JJ), 501–502, 507 (Gaudron J).
[24]See the cases cited in the preceding footnote.
Identifying the features of the very exceptional case where a new trial might be ordered on an issue of fact not litigated below is difficult. The very exceptional character of these cases is well demonstrated by the paucity of reported cases where this situation is said to arise.
One express application of this exception was by this Court in Macarthur Cook Real Estate Funds Ltd v APN Funds Management Ltd.[25] But in that case all the evidence which appeared to be relevant had been called, all the submissions on the point had been made and the trial judge had seemingly decided the case on the issue without characterising it as such. The Court held that any improper prejudice to the respondent could be removed in that case by confining the judge’s further consideration of the issue to the evidence previously adduced.[26]
[25][2013] VSCA 240, [38] (‘Macarthur’)
[26]Macarthur [2013] VSCA 240, [39].
Another possibility was suggested by Gaudron J in Moustakas where the plaintiff seeks to make an alternative case based upon facts established by evidence called by the defendant. She said:
[T]he denial of a verdict to a plaintiff where the evidence called by a defendant results in a finding of fact disclosing a breach of duty not expressly relied upon by the plaintiff makes the case a ‘‘very exceptional [case] where the interests of justice … require a new trial’’ as contemplated by Jacobs J in Maloney v Commissioner of Railways (NSW).[27]
[27]Moustakas (1988) 180 CLR 491, 507. Ultimately, she held, in dissent, that the plaintiff’s case on appeal fell within the scope of the particulars and that at trial all relevant facts had been proved beyond controversy. No new point had therefore been raised. The principles regarding the ordering of a new trial were no applied.
On the other hand, the Full Court of the West Australian Supreme Court refused to apply this exception in WA Country Health Service v Wright [No 2] where the party seeking a new trial had at trial deliberately eschewed the issue.[28] In the circumstances the Court held that allowing a new trial would be unfair to the other party.[29]
[28]WA Country Health Service v Wright [No 2] [2010] WASCA 120, [52] (‘Wright’).
[29]Wright [2010] WASCA 120, [52], [83].
One reason why cases of this kind are very exceptional is because there will almost inevitably be prejudice to the other party. Costs are one obvious source of prejudice, but there is also prejudice in the unrecoverable expenses, worry, uncertainty, and inconvenience of a further trial.[30]
[30]Whisprun (2003) 200 ALR 447, [51]; McLennan v McCallum [2010] WASCA 45, [212].
The circumstances of modern litigation mean that strict enforcement of these principles is as important as ever.[31] In Tyson v Brisbane Market Freight Brokers Pty Ltd McHugh J described its importance as follows: [32]
Except in the case where the parties have mutually abandoned the pleadings at the trial, the public interest in the finality of litigation requires that, unless some exceptional circumstance exists, a party must be refused leave to make a case on appeal which is inconsistent with his or her pleadings. As the majority of this court in Coulton v Holcombe pointed out, no court finds any satisfaction in refusing to allow a party to raise a point which might enable it to succeed in the litigation. But, as the court went on to say, the principles which govern the raising of new points “have stood the test of time because they have been found to serve effectively the public interest in the fairness and expedition of the administration of justice”. We live in an era where the cost of litigation is beyond the means of ordinary citizens and where awards of party and party — and even indemnity — costs cannot fully compensate a party for the cost and worry of litigation. Because that is so, it is as important as ever that the established principles concerning the raising of new points be strictly applied and that the parties be kept to the issues which, by their pleadings, they raised for determination at the trial.
[31]Moustakas (1988) 180 CLR 491, 497; Coulton (1986) 162 CLR 1, 11.
[32]Tyson v Brisbane Market Freight Brokers Pty Ltd (1994) 120 ALR 1, 11 (citations omitted).
The authorities recognise that there will be cases where these principles operate harshly or with the effect that a party is potentially prevented from succeeding.[33] The principles must nevertheless be upheld.
[33]Kelso Builders Supplies Pty Ltd v Timbreck Pty Ltd [1989] NSWCA 121; Coulton (1986) 162 CLR 1, 10–11.
Analysis
This is a case where the fundamental principle applies.
The respondent asserts that had the point been raised, at the least, evidence from Akyman would have been called. There is no reason to doubt that. There was evidence in some of the tendered correspondence that Akyman contested Mr Devon’s assertions as to the equipment’s condition. Mr Devon’s cross-examination would certainly have addressed additional matters.
This is not a case where it can be said that submissions on the new point can be made and ruled upon on facts proved beyond controversy.
The only avenue by which the new point could be raised is by ordering a new trial. Is this one of the very exceptional cases where the interests of justice require that step and it can be taken without prejudice to the respondent? It is not.
Mrs Devon had counsel appearing for her. Reliance on any lack of competence in counsel was expressly disavowed in the oral submissions on the application. It is clear that a forensic decision was made to advance the defences based on the inspection issue and issues related to Capital Finance’s compliance with its own procedures. No explanation has been given as to why the point now sought to be advanced was not advanced at trial. One consequence of reliance on the inspection issue was that the issue as to condition was merely part of the narrative. If Mrs Devon had established the term she relied upon as to inspection she would have established breach by Capital Finance, regardless of the condition of the equipment. If a new trial were ordered now, the applicant could effectively run a whole new case, on new contested factual issues, having tried and failed to succeed on the issues she chose to advance at the first trial. I do not think that the interests of justice require that course to be taken.
In any event, a new trial on the issue now sought to be raised would inevitably involve prejudice to the respondent. The case would, in effect, begin
again. There would inevitably be unrecoverable costs.[34] There would inevitably be inconvenience. This is not a case like Macarthur where a defined point can be addressed in a confined contest without improper prejudice to the respondent.
[34]It seems that the judgment has not been met and that the respondent has commenced bankruptcy proceedings against the applicant. The applicant’s outline of submissions read:
It would appear that Capital Finance is seeking to bankrupt Ms Devon and without leave to prosecute the appeal there would be no reasonable prospects of setting aside the Bankruptcy Notice or seeking a stay on execution of the judgment under SCR 64.25.
In the circumstances, this appeal should be dismissed.
SANTAMARIA JA:
I agree.
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