DNFS Pty Ltd v De Neefe Signs Pty Ltd
[2010] VSCA 125
•18 May 2010
SUPREME COURT OF VICTORIA
COURT OF APPEAL
No S APCI 2008 3874
| DNFS PTY LTD (ACN 005 587 593) & ORS | |
| Applicants (Respondents to Cross-Appeal) | |
| v | |
| DE NEEFE SIGNS PTY LTD (ACN 115 924 939) & ORS | Respondents |
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JUDGES: | NETTLE and MANDIE JJA and EMERTON AJA | |
WHERE HELD: | MELBOURNE | |
DATE OF HEARING: | 18 May 2010 | |
DATE OF JUDGMENT: | 18 May 2010 | |
MEDIUM NEUTRAL CITATION: | [2010] VSCA 125 | |
JUDGMENT APPEALED FROM: | [2008] VSC 424 (Pagone J) | |
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APPEAL – Application for leave to appeal from interlocutory orders – Preliminary questions determined pursuant to Rule 47.04 of Supreme Court (General Civil Procedure) Rules 2005 – Contract – Sale of business agreement – Terms – Time in which to make claims for adjustments – Evidence – Whether judge wrong to hold one claim made within time but no evidence that other claims made within time – Whether judge wrong to hold applicants not estopped from contending claims not within time – Construction – Trade practices – Misleading and deceptive conduct – Whether judge erred in holding that contract precluded claims for damages for misleading and deceptive conduct – Trade Practices Act 1984, ss 52 and 82.
PRACTICE AND PROCEDURE – Pleading – Particulars of claim not included in statement of claim – Whether inclusion of details in reply sufficient to put claims in issue.
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| APPEARANCES: | Counsel | Solicitors |
| For the Applicants | Mr M L Sifris SC with Mr M D Dean | Rennick & Gaynor |
| For the First and Second Respondents | Mr M W Wise | Middletons |
NETTLE JA:
We have before us an application by DNFS Pty Ltd and others, which I shall call 'the applicants,' for leave to appeal against orders made by Pagone J on 16 October 2008 in respect of Preliminary Questions 1 and 3, and a further application by De Neefe Signs Pty Ltd and others, which I shall call ‘the respondents’, for leave to appeal against orders made by his Honour on 16 October 2008 in respect of Preliminary Questions 1, 4 and 5.
His Honour’s orders were by way of answer to six Preliminary Questions set down for hearing pursuant to Rule 47.04 of the Rules of Court. The questions arise out of a dispute between the applicants and the respondents over a sale of business agreement made 3 October 2005 between the applicants as vendor and the respondents as purchaser.
It may be observed that some of his Honour’s answers are final, in the sense that they finally dispose of some of the issues between the applicants and the respondents. Nevertheless, the orders are interlocutory orders for the purposes of s 17A of the Supreme Court Act1986, because they do not finally determine, in a legal sense, all the rights of the parties that are in issue in the proceeding.[1]
[1]Computer Edge Pty Ltd v Apple Computer Inc (1984) 54 ALR 677, 678; Fisher & Paykel Healthcare Pty Ltd v Avion Engineering Pty Ltd (1991) 103 ALR 239, 242; Australian Builders’ Labourers’ Federated Union of Workers-Western Australian Branch v J-Corp Pty Ltd (1993) 42 FCR 452, 454; Caboche v Ramsay (1993) 119 ALR 215, 225–6; NZI Securities Australia v Poignand (1994) 51 FCR 584, 594; Thai v Deputy Commissioner of Taxation (1994) 53 FCR 252, 259–260.
The test for leave to appeal against an interlocutory order is clear. An applicant must satisfy the Court both that the order is sufficiently attended by doubt to warrant the grant of leave and that, if leave were not granted, the order would be productive of substantial injustice.[2] I turn, therefore, to the questions and the judge's answers.
[2]Niemen v Electronic Industries Ltd [1978] VR 431, 438–439.
Question 1
Question 1 was as follows:
Has the First Defendant and Plaintiff by counterclaim (‘De Neefe’) made a claim for an adjustment to purchase price (‘purchase price adjustment claim’) which satisfies the requirements of cll 4.1, 17.3 and 28 of the Sale of Business Agreement (‘Agreement’) referred to in para 6 of the statement of claim?
The judge answered the question, thus:
No, except in relation to the notice given by email dated 31 May 2006 which was resent on 6 June 2006.
His Honour reasoned that:
The burden of proving the validity of a claim falls upon the party seeking to rely upon it, namely, the defendants. The only evidence concerning compliance with the 30 day from awareness requirement for notification in cl 17.3 is the limited evidence of Mr Harris concerning the first claim and that evidence is ambiguous. On the other hand, I have no reason to assume that the claims which he said ‘had been identified’ by May 2006 had not been brought to the attention of his principals promptly during May 2006. I am also prepared to assume that the direction given to him to advise Mr Donegan of the claim was done promptly after Mr Harris had identified them, and, therefore, that it was done at a point of time near to the time when the claims were identified. Accordingly, I am prepared to assume that the defendants’ awareness of the claims to which Mr Harris referred, and of which notice was given on 6 June 2006, was within the period of time required by cl 17.3.
The applicants contend that the judge was in error so to hold. Counsel for the applicants submitted that it was not open to his Honour to assume or, in effect, to infer that the respondents’ awareness of the claims, to which Mr Harris referred and of which notice was given on 6 June 2006, was within the time period required by cl 17.3 of the agreement.
I do not accept that submission. It appears to me to be tolerably clear that it was open to his Honour to draw the inference, based inter alia on the evidence which his Honour essayed in paragraphs 3 to 12 of his reasons for judgment.
Counsel for the applicants submitted further that, if it were open to draw such an inference on the basis of the identified evidence, the fact was that the first claim had not been sufficiently identified in the pleadings to allow evidence to be tendered in support of the claim, and that the evidence to which the judge referred was admitted as relevant only to a claim of estoppel, which was the subject of Question 4.
I do not accept that submission either. I allow that the first claim was not sufficiently identified in the respondents’ statement of claim - and it should have been – but it was plainly exposed in paragraph 3 of the respondent's Amended Reply to Amended Defence to Further Amended Counterclaim in direct answer to the allegation in paragraph 19(c) of the applicant's Amended Defence to Counterclaim that the first claim did not sufficiently comply with the requirements of cl 17.3 of the agreement.
On the other side, the respondents contend that the judge erred in answering Question 1 by holding that the only claim made in accordance with cl 17.3 of the agreement was the first claim. Counsel for the respondents submitted that the judge came wrongly to the view, expressed at paragraph 11 of his Honour’s reasons, that there was no evidence before him that would enable a conclusion to be reached that any claim, apart from the first claim, satisfied the 30 day time requirement in cl 17.3. Counsel argued that it was open to infer, and that the judge should have inferred from evidence given by Mr Scrinis and Mr Harris as to when the second and third claims were compiled, that there was compliance with the 30 day time requirement.
I reject that argument too. I shall assume without deciding that it was open to draw the inference for which the respondents contend. But I am far from satisfied that the judge was bound to draw the inference; especially given that the one person in the respondent's organisation who appeared to have discovered the facts on which the claim was based was not called to give evidence for the respondents.
Question 3:
Question 3 was as follows:
If the answer to Questions 1 and 2 is ‘No’, does the Agreement upon its proper construction, preclude De Neefe from making a purchase price adjustment claim or warranty claim in accordance with the Agreement?
His Honour answered that question, thus:
The Agreement precludes the purchaser from making a purchase price adjustment claim or a warranty claim in accordance with the Agreement to the extent that I have answered questions 1 and 2 in the negative. The entitlement to make a purchase adjustment claim under cl 17 arises where the facts identified in cl 17.3 exist. To the extent that a claim has not been made in conformity with the clause there is, in my view, no entitlement to do so. A warranty claim if not made within the 12 months following the Provisional Completion Date (as defined) is expressly terminated by cl 18.3. Either way the Agreement provides a mechanism bringing an end to entitlements to claim.
The respondents did not advance any argument in support of their attack on his Honour’s answer to Question 3, other than what was put in support of their attack on the answer to Question 1. Accordingly, I need say no more about it.
Question 4
Question 4 was as follows:
If the answer to Question 3 is ‘Yes’, does an estoppel arise against the Plaintiffs as pleaded in paragraph 2 to 10 of De Neefe's amended reply to defence to amended counterclaim filed 12 February 2008?
In answering that question, the judge said he had no doubt that the parties had taken steps emblematic of the commencement of a process to determine whether there was to be an adjustment to the purchase price under cl 17. But, as his Honour observed, the more difficult question was the extent to which the applicants should be taken thereby to have waived non-compliance with cl 17. It was clear, however, that the applicants always maintained that they were entitled to more information in support of the claims. Thus, as his Honour reasoned, the respondents could not logically have been induced to believe that they need not comply with the time requirement of cl 17.3. Additionally, his Honour found, the evidence did not establish any detrimental change in position by the respondents in reliance on the applicants’ conduct.
The respondents contend that the judge was in error so to hold. Counsel for the respondents submitted that the evidence given by Mr Scrinis at paragraph 25 of his witness statement was sufficient to establish the reliance alleged. It was as follows:
In the absence of having received any such objection, [I interpolate, objection to the failure to comply with the time requirement of Clause 17.3] I assumed that there was no issue being taken by the De Neefe Group in relation to the form in which notice was given. Had the De Neefe Group expressed any such objections, then I would have ensured that all such notifications be provided again, and in the future, strictly in accordance with the terms of the Sale Agreement.
I agree with the judge that that evidence does not establish that the respondents were induced to change their position to their detriment. The problem with Mr Scrinis’ testimony is that it did not condescend to the detail of when it was that he, or more importantly his organisation, first acquired knowledge of the details on which the second and third claims were based; that being the point from which time began to run for the purposes of the purposes of cl 17.3 of the agreement. Absent evidence of that date, it was not open to conclude that the respondents could have complied with the time requirement in relation to subsequent claims, even if they had been put on notice at the time of the first claim that the applicants would insist on compliance with the time requirement in relation to subsequent claims.
Question 5
Question 5 was as follows:
Does the Agreement, upon its proper construction, preclude De Neefe from making the claims pleaded in paragraphs 42 to 52 of its further amended defence and counterclaim filed 21 December 2007?
As the judge observed, paragraphs 42 to 47 of the respondents’ further amended defence and counterclaim plead a case against the applicants of misleading and deceptive conduct contrary to the Trade Practices Act 1974 (‘the Trade Practices Act claims’) and paragraphs 48 to 52 plead a case of negligent misstatement against the applicants at common law (‘the negligent misstatement claim’). The applicants contended below that neither claim could be brought because the agreement, upon its proper construction, excluded all claims other than those contemplated by the agreement itself.
The judge held that that the agreement did preclude both claims, and so answered the question as follows:
Accordingly, my answer to question 5 is ‘yes’ as to the claims pleaded in paragraphs 48 to 52 and ‘yes’ as to the claims pleaded in paragraphs 42 to 47 on the evidence at the trial of the preliminary point.
The respondents contend that the judge was in error concerning the Trade Practices Act claims and the answer to Question 5 should therefore have been ‘no’ as to the claims pleaded in paragraphs 42 to 47.
In coming to the conclusion that the agreement precluded the Trade Practices Act claims, the judge reasoned that:
It is unlikely that the parties intended to exclude (as a matter of construction of the Agreement) such liability as s 52 may have cast upon the plaintiffs in view of the state of the authorities and in the absence of an express attempt to address the liability which s 52 created. In saying that, however, I should not be understood as expressing any view about the defendants’ prospects of success on that pleading or upon its sufficiency.
It is not suggested, and it could not be, that there is any error in that part of his Honour's analysis. But the judge then continued:
On the evidence available to me, I would conclude that any loss to the defendants was occasioned by their failure to comply with clause 17 rather than any inducement which was misleading or deceptive. Similarly, on the evidence before me, I would conclude that the presence of provisions for adjustment to the purchase price would relevantly deprive the plaintiffs conduct as misleading or deceptive, or sufficiently connected to the defendants’ loss. In other words, on the evidence on the trial of preliminary questions, I would conclude that the defendants had failed on their Trade Practices Act claims.
Accordingly, my answer to question 5 is ‘yes’ as to the claims pleaded … in paras 42 to 47 on the evidence at the trial of the preliminary point.
The respondents contend, and the applicants do not demur that, in expressing that view, the judge went beyond his remit in relation to Question 5, and to that extent was in error.
With respect, I agree. Liability, if any, for damages under s 82 of the Trade Practices Act1974 is not to be determined until all the evidence has been considered. The judge's view, although presumably intended to be helpful, was based only on the limited evidence which was before him for the purposes of deciding the preliminary questions. It cannot be regarded as binding or persuasive on the judge who hears the trial; and to the extent that the answer to Question 5 suggests otherwise, it needs to be corrected.
Conclusion and orders
It follows from what I have said that I am not persuaded that any of the judge's answers to Questions 1, 3 or 4 is attended by sufficient doubt to warrant the grant of leave to appeal. Nor am I satisfied that, if there were error in any of those answers, it would be productive of sufficient injustice to warrant the grant of leave.
The refusal of leave to appeal in relation to the answers to Questions 1, 3 and 4 will doubtless preclude the respondents adducing evidence in support of the second and third claims at trial (although it may be that much of that of evidence will be admitted and considered in connection with the respondents’ Trade Practices Act claims). Equally, the refusal of leave to appeal from so much of the answer to Question 1 as is opposed to the applicants, may lead to consideration at trial of evidence about the first claim which it would not be necessary to consider if the judge were shown to be in error about the timeliness of that claim. But after final judgment, it will be open to either side to appeal inter alia on the basis that Question 1, 3 or 4 was wrongly decided and, although it is not a perfect solution, any expense thrown away as a consequence of an appeal then being upheld on that basis, or the need for a further trial to consider evidence not admitted on the first trial, could to some extent be corrected by an award of costs.
As matters stand, I would simply refuse the applicants’ application for leave to appeal against the answer to Question 1 and the respondents’ application for leave to appeal against the answers to Questions 1, 3 and 4.
[Discussion followed]
As to Question 5, I consider that, because the agreement upon its proper construction does not preclude the respondents from pursuing the Trade Practices Act claims, the question should have been answered: as to the claims pleaded in paragraphs 42 to 47, ‘No’.
I would, therefore, grant leave to appeal in respect of the answer to Question 5, treat the appeal as instituted and heard instanter and allowed, set aside his Honour's answer to that question in relation to the Trade Practices Act claims, and in lieu thereof substitute the answer: as to the claims pleaded in paragraph 42 to 47, ‘No’.
MANDIE JA:
I agree.
EMERTON AJA:
I agree.
COUNSEL:
As your Honours please.
NETTLE JA:
What about costs, Mr Sifris?
[Discussion as to costs followed]
NETTLE JA:
These are difficult questions which raise issues as to costs of some complexity. The capacity to resolve them, however, is unlikely to improve with further time or consideration. Essentially, one must adopt a fairly broad brush approach in order to do what is fair. All things considered, given the relative successes and failures on each side, the Court is of the view that each party should bear its own costs of each application.
Accordingly, the orders of the Court will be as follows:
1. On the application made by summons by De Neefe Signs Pty Ltd and others dated 29 October 2008, for leave to appeal from paragraphs 1(1), 1(4) and 1(5) of the orders of the Honourable Justice Pagone made 16 October 2008:
a) The application for leave to appeal against paragraph 1(5) of the order is allowed.
b) The appeal is treated as instituted and heard instanter and is allowed.
c) Paragraph 1(5) of the order is set aside and, in lieu thereof, it is ordered as follows:
(5) Q: Does the Agreement, upon its proper construction, preclude De Neefe from making the claims pleaded in paras 42 to 52 of its further amended defence and counterclaim filed 21 December 2007?
A:Yes, as to the claims pleaded in paragraphs 48 to 52, but no as to the claims pleaded in paragraphs 42 to 47.
d) Otherwise the application is dismissed.
e) Each party shall bear its own costs of the application.
2. On the application made by DNFS Pty Ltd and others by summons dated 29 October 2008 for leave to appeal against the orders made 16 October 2008 by the Honourable Justice Pagone in respect of Preliminary Questions 1 and 3:
a) The application is dismissed.
b) Each party shall bear its own costs of the application.
[Discussion followed]
NETTLE JA:
On each application it will be further ordered that:
The matter be remitted to the Commercial Division for trial before a judge other than the Honourable Justice Pagone.
COUNSEL:
As the Court pleases.
NETTLE JA:
We are grateful to counsel for their assistance, thank you.
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