Ethnic Earth Pty Ltd v Quoin Technology Pty Ltd (Receivers and Managers Appointed) (in Liquidation) (No 2) - [2005] SASC 112

SUPREME COURT OF SOUTH AUSTRALIA
(Civil)
ETHNIC EARTH PTY LTD v QUOIN TECHNOLOGY PTY LTD (RECEIVERS AND MANAGERS APPOINTED) (IN LIQUIDATION) & ORS (No 2)
Judgment of The Honourable Justice Bleby
30 March 2005
PROCEDURE - SUPREME COURT PROCEDURE - SOUTH AUSTRALIA - JURISDICTION AND GENERALLY
APPLICATION TO RE-OPEN
Application by defendants to re-open to amend defence and counterclaim, to withdraw certain admissions and to have reasons for judgment recalled - Reasons for judgment delivered but orders not yet made - Findings adverse to defendants - Concessions made at trial to limit issues in dispute - Whether prejudice to plaintiff - Finality of litigation - Whether parties bound by conduct at trial - Likelihood of re-hearing and further evidence if application granted - Whether interests of justice require re-opening - Application dismissed.
Land and Business (Sale and Conveyancing) Act 1994 (SA) s 6, referred to.
Wentworth v Woollahra Municipal Council (1982) 149 CLR 672; State Rail Authority (NSW) v Codelfa Construction Pty Ltd (1982) 150 CLR 29; University of Woolongong v Metwally (No.2) (1985) 59 ALJR 481; Copping v ANZ and McCoughan Ltd (1996) 67 SASR 525; Commonwealth v Verwayen (1990) 170 CLR 394, applied.

ETHNIC EARTH PTY LTD v QUOIN TECHNOLOGY PTY LTD (RECEIVERS AND MANAGERS APPOINTED) (IN LIQUIDATION) & ORS (No 2)
[2005] SASC 112

BLEBY J: The subject matter of this action concerned a contract for the sale of a business in which the plaintiff was purchaser and the first defendant was vendor. The plaintiff claimed declarations to the effect that the contract of sale was rendered void by s 6, Land and Business (Sale and Conveyancing) Act 1994. The plaintiff also claimed orders for return of the money paid by it and interest, or alternatively an order for account and equitable damages against the first defendant and its receivers and managers.
The defendant, by counterclaim, sought declarations that the contract was at all material times binding and enforceable and that it was lawfully terminated by the first defendant on 26 June 2002. It claimed the balance of the purchase price and damages for the alleged default of the plaintiff. In the alternative, it claimed the balance of the purchase price by way of restitution, and in the further alternative, restoration of the assets of the business and damages for conversion and in detinue.
There was a second action brought by the first defendant against a number of individuals as guarantors under a deed of guarantee for the performance by the plaintiff of the contract. In that action the vendor claimed the balance of the purchase price and interest.
On 26 August 2004 I published reasons for holding that the contract was rendered void on 13 May 2002. I made no orders at that time because there were outstanding issues to be addressed as a consequence of that finding, being issues on which no submissions had been made. These included questions of the first defendant’s alternative claim for return of property allegedly transferred under the contract, whether there had been a conversion of the property by the plaintiff and whether any claim for damages or restitution could be set off against the claim by the plaintiff for the return of monies paid under the contract.
It is necessary to refer briefly to the basis on which the action proceeded. The commencement of the trial was delayed by three days to enable conferences to occur and the preparation of a tender book of agreed documents. As a result of discussions between counsel it was agreed that an affidavit of the plaintiff’s principal witness would be tendered, subject to resolution of a number of relatively minor objections, and that the plaintiff’s oral evidence would be limited to that of the deponent to the affidavit. It was agreed that the defendant would tender as evidence the written statement of a witness without him being required for further evidence or cross-examination. The defendants, by their counsel, also made certain other concessions and admissions and withdrew certain denials contained in the defence. The objections to the affidavit were ruled on. The parties then opened and closed their respective cases on the claim and counterclaim on the evidence presented, and the hearing proceeded upon the basis of the concessions and admissions made by the defendants.
Because the question of the validity of the contract was fundamental to the nature of the relief to be afforded to one party or the other, I heard submissions only on that question, on the understanding that the actual form of relief and the orders to be made could be addressed in the light of the finding that I subsequently made.
The findings that I made were adverse to the defendants.
Some time after the delivery of my reasons and after a change of solicitors by the defendants, the defendants announced that they wanted to pursue an application to re-open their case and to lead further evidence and make further submissions. A notice for specific directions was subsequently filed seeking the following orders:
1.That the defendants be granted leave to amend the amended defence of the defendants and counterclaim of the first defendant. Particulars of those amendments were given;
2.That the defendants be granted leave to re-open their case on the claim, and the first defendant be granted leave to re-open its case on the counterclaim, for the purpose of making additional submissions only;
3.That the defendants be granted leave to withdraw the admission that the alleged variations to the sale contract (which variations I had found were the cause of the contract being avoided) were effective and binding on the parties as variations to the contract of sale;
4.That the reasons for judgment I delivered on 26 August 2004 be recalled; and
5.For other consequential orders.
It was explained that, if the application were granted, the defendants no longer wished to lead further evidence, but wished to argue questions of law. The effect of the application, if successful, is to re-open not only the arguments put before me but to challenge the factual basis on which they proceeded, and to have me reverse what is, for the defendants, an unfavourable decision.
Although no orders have been made, a fundamental principle of litigation requires that there be an end to litigation, and that the power to re-open to enable a re-hearing must be exercised with great caution: Wentworth v Woollahra Municipal Council (1982) 149 CLR 672 at 684; State Rail Authority (NSW) v Codelfa Construction Pty Ltd (1982) 150 CLR 29.
It is apparent that the defendants now wish to resile from forensic decisions made by their advisers during the course of the hearing. In University of Woolongong v Metwally (No.2) (1985) 59 ALJR 481 the Full Court of the High Court said, at 483:
“It is elementary that a party is bound by the conduct of his case. Except in the most exceptional circumstances, it would be contrary to all principle to allow a party, after a case had been decided against him, to raise a new argument which, whether deliberately or by inadvertence, he failed to put during the hearing when he had and (sic) opportunity to do so.”
See also Copping v ANZ and McCoughan Ltd (1996) 67 SASR 525, Lander J at 569.
In The Commonwealth v Verwayen (1990) 170 CLR 394, Gaudron J said, at 482:
“If, in the course of litigation, a person fails to plead a matter, take an available objection or pursue a particular point of law, the matter proceeds on the basis that the point which might have been taken is not in issue. Were it otherwise the conduct of litigation would be unmanageable. Of course, leave may be granted for the point to be raised notwithstanding the failure to take the point at the appropriate time. Generally, leave is granted if the point can be raised without injustice to the other party. That question may depend upon whether disadvantage to the other party can be avoided by adjournment or an appropriate costs order. But other issues may be taken into account. In Ketteman v Hansel Properties Ltd [1987] AC 189, at p.220 Lord Griffiths said ‘justice cannot always be measured in terms of money’. His Lordship then observed that there was to be weighed in the balance ‘the strain the litigation imposes on litigants …, the anxieties occasioned by facing new issues, the raising of false hopes’. Additionally, his Lordship noted the necessity to take into account ‘the pressure on the courts’ and the public interest in ‘legal business [being] conducted efficiently’.
When a party to litigation deliberately chooses not to take a point or fails to take a point when it comes to notice, the courts may adopt a more stringent attitude, treating the point as having been irrevocable abandoned. Usually the party who has thus failed to take the point is said to have ‘waived’ it.”
With those considerations in mind I turn to consider the defendants’ application.
The admission sought to be withdrawn was one clearly made by counsel for the defendants during the course of the hearing that the defendants no longer relied on a number of paragraphs in the defence in which they alleged that the variations to the contract were ineffective as not complying with the requirements of the original contract. The defendants seek to withdraw their admission for the purpose of now arguing that the variations were ineffective in law as not meeting the requirements of clause 54 of the original contract.
By means of the first set of proposed amendments to the defence they wish to argue –
(a)That the contract as varied provided for only three payments by way of deposit and was therefore not an instalment contract;
(b)That if the contract was rendered void by the second variation to the contract, the sale contract as varied by the first variation was not abrogated and continued to have effect; or
(c)In the alternative, the second variation was itself an instalment contract which was void under the Act and the contract of sale as varied by the first variation therefore remained valid and enforceable.
The second of the proposed amendments seeks to allege that the plaintiff, through its director and solicitor, knew or knew of the possibility that the second variation itself or the contract as so varied would become an instalment contract and therefore void, and that the plaintiff therefore has no entitlement to recover the deposit paid. As originally proposed, the amendment also pleaded certain representations on that topic to the defendants and the consequences thereof, but those parts of the amendment are now abandoned.
The third amendment sought to be made to the defence alleges that if the contract was rendered void as I have found, it was not void at the times of payment of the first two instalments, and that s 6(2) of the Land and Business (Sale and Conveyancing) Act only permits recovery of money paid under a void contract.
In my opinion, the second amendment, in the form now proposed (clause 19B.1 and clause 19B.5 deleting any reference to clauses 19B.2 to 19B.4) is not necessary. I have not yet dealt with consequential orders, such as return of the moneys paid. If there is an argument open on the evidence that the plaintiff is not entitled to a return of moneys paid, that remains open to the defendants, but they cannot rely on matters originally proposed to be pleaded in this amendment. This also means that, in the reasons which follow, reference to the defendants’ proposed amendments, is confined to first and third proposed amendments.
I have not heard full argument on the merits of any of the arguments proposed by the defendants, and I express no views as to the likelihood of their success. It is sufficient to note that none of them were put or foreshadowed during the course of the hearing.
The plaintiff argues that it will be severely prejudiced if the relevant concession is allowed to be withdrawn or if the pleadings are amended in the manner suggested. It was acknowledged by counsel before me at the trial that a number of discussions had taken place which had reduced the issues to be dealt with on the trial. Among them was the concession by the defendants that the variations to the contract were validly made. It was also pointed out that as a result of those discussions a number of other issues were not pursued. The defendants were not required to prove the charge under which the second and third defendants as receivers and managers purported to exercise the powers of sale in entering into the contract and the subsequent variations. The plaintiff had foregone an argument of implied rescission of the contract on the subsequent appointment of a liquidator, an event not even mentioned in the course of the trial. The plaintiff had also foregone any argument as to the capacity of the receivers and managers, after liquidation, to bring the counterclaim. Neither of the receivers were called to give oral evidence and the plaintiff had foregone any adverse comment as to the failure to call them. The plaintiff had agreed to the statement of one of the defendant’s witnesses being tendered by consent and without cross-examination. No evidence was led or submission made as to any want of authority on the part of the receivers and managers to continue to act as agents to bind the first defendant as at the date of the second variation. No contest had been raised by the plaintiff as to the title of the receivers and managers to maintain the counterclaim or the action against the guarantors. In short, the parties had negotiated a means of conduct of the trial in which the legal contest was confined to issues under s 6(1) of the Land and Business (Sale and Conveyancing) Act 1994. If the defendants were now to be allowed to agitate other issues, the basis of concessions made by the plaintiff at trial would disappear and the plaintiff would be seriously prejudiced.
The plaintiff also argued that the issues could not necessarily be confined, as the defendants proposed, to further arguments on the law. The plaintiff would almost undoubtedly seek the leave to amend their statement of claim or reply and thus be forced to raise additional factual issues which could only be resolved by further evidence. The plaintiff would necessarily wish to agitate issues of the capacity of the second and third defendants to bind the first defendant on the appointment of the liquidator of the first defendant and would wish to argue in the alternative an implied rescission of the contract at that time. It would also wish to agitate alleged breaches of warranty of authority of the second and third defendants as receivers and managers and their solicitor to enter into the second variation on behalf of the first defendant, as well as their entitlement to sue by way of counterclaim on behalf of the company. In relation to the withdrawal of the admission they would want to argue the effect of waiver and the effect of the doctrine of part performance on the validity of the variations to the contract.
These issues, so the plaintiff argues, were matters consciously foregone in the interest of confining the issues at trial to what was considered to be the major issue, namely that arising under s 6(1) of the Land and Business (Sale and Conveyancing) Act.
I accept the plaintiff’s submissions. This is not a case of some accidental omission or slip resulting in some injustice that the court is in a position conveniently to rectify. The parties deliberately chose a particular course in what was then perceived, with the aid of legal advice, to produce a satisfactory method of determining their dispute. To allow the defendants now to re-open the matter would produce substantial prejudice to the plaintiff which could not merely be rectified by an order for costs and which could well involve a substantial re-hearing of the trial and the calling of further evidence.
It may be that some of the issues now foreshadowed by the plaintiff are not reflected in the plaintiff’s pleadings, but then neither were some of the issues now sought to be agitated by the defendants raised on their pleadings. If I were to make that concession to the defendants I would, in fairness, have to allow similar rights to the plaintiff.
Ultimately, resolution of the application must depend on how best the interests of justice may be served. While the defendants may now feel aggrieved that the case was not conducted in a way which they consider may have produced a different answer, it is far from certain that the answer would have been different, and the interests of justice are wider than the interests of the defendants. The principles of finality in litigation, holding parties to their agreement in the way they choose to conduct the trial through their counsel and the prevention of undue prejudice to the opposing party require, in the circumstances of this case, that the defendants’ application by the notice for specific directions be dismissed. There will be an order accordingly. I will hear the parties further as to the final orders that should now be made in both actions.