Films and Casting Temple v Malla

[2013] NSWCA 377

Court of Appeal

Supreme Court

New South Wales

Medium Neutral Citation:

Films and Casting Temple v Malla [2013] NSWCA 377

Hearing dates:

14/10/2013

Decision date:

15 November 2013

Before:

Ward JA at [1]
Gleeson JA at [2]
McDougall J at [3]

Decision:

Appeal dismissed with costs.

[Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.]

Catchwords:

PRACTICE & PROCEDURE - PLEADINGS - defective pleadings - where pleadings mischaracterised the effect of a contractual provision - where actual terms of provision proved without objection - claim to be decided on the basis of the term as proved, not as pleaded - where claim for damages neither pleaded nor particularised - where respondent denied sufficient opportunity to adduce evidence relevant to the question of damages - whether appellant should be permitted to raise damages claim on appeal

CONTRACTS - restraint of trade - breach of contract - where respondent was required not to work on Indian film projects in Australia for 2 years without engaging, or procuring the engagement of, the appellant - where respondent subsequently worked on projects without the appellant - whether in fact any loss proved

DAMAGES - calculation of damages - loss of opportunity - where respondent was required not to work on Indian film projects in Australia for 2 years unless he engaged, or procured the engagement of, the appellant - whether primary judge erred in failing to assess the probability that the appellant would have been engaged for the relevant projects - where respondent denied sufficient opportunity to adduce evidence relevant to the question of damages

CONTRACTS - contractual guarantees - where respondent agreed to pay the appellant any 'proven' outstanding amounts that a named third party was 'unable' to pay - whether relevant debts 'proven' under the contract - where third party 'unable' to pay - meaning of 'unable'

WORDS & PHRASES - meaning of 'unable' - definition informed by context

Legislation Cited:

Civil Procedure Act 2005 (NSW)
Local Government Act 1903 (Vic)

Cases Cited:

Banque Commerciale SA, EN Liquidation v Akhil Holdings Limited (1990) 169 CLR 279
Leeder v The Mayor, etc., of the Town of Ballarat East [1908] VLR 214
OV and OW v Members of the Board of the Wesley Mission Council (2010) 79 NSWLR 606
SP Hywood Pty Ltd v Standard Chartered Bank Ltd [1992] SASC 3764

Category:

Principal judgment

Parties:

Films and Casting Temple Pty Limited (Appellant)
Rajesh Malla (also known as Venkata Durga Rajesh Lakshman Malla) trading as Datamine Solutions (Respondent)

Representation:

Counsel:
J Horowitz (Appellant)
D L Cook (Respondent)
Solicitors:
Swabb Attorneys (Appellant)
Macree Law (Respondent)

File Number(s):

2013/5543

 Decision under appeal 

Jurisdiction:

9101

Citation:

Films and Casting Temple v Malla (Unreported, District Court of New South Wales, Olsson DCJ, 14 December 2012)

Date of Decision:

2012-12-14 00:00:00

Before:

Olsson DCJ

File Number(s):

DC 2010/291255

Judgment

1. WARD JA: I agree with McDougall J.

1. GLEESON JA: I agree with McDougall J.

1. McDOUGALL J: The appellant (Temple) provided production management services in Australia for the Indian film industry. The respondent (Mr Malla), who traded under the name "Datamine Solutions", introduced a project to Temple in about May or June 2009. In mid June 2009 (the precise date is, for present purposes, unimportant), Temple and Mr Malla entered into a written "production agreement" known as PA1. By that agreement, Mr Malla, who said that he was representing the interests of an Indian film producer known as "Mr Pullarao", engaged Temple to "consult and advise... in relation to the filming of" a segment of a film with the provisional name "Shivam" (clause 2.1).

1. Clause 9 of PA1 dealt with the topic of "confidentiality". Clause 9.3 reads as follows:

9.3 DS, acknowledges that TEMPLE has a leading advantage and know how about the niche industry - Indian film in Australia. DS, through this contract will learn about confidential information about the workings of TEMPLE with the Indian media. Recognizing this DS provides an undertaking that it will not deal with any Indian film project without TEMPLE providing production management for a period of two years after the signing of this contract.

1. In about February 2010 (again, the precise date is unimportant for present purposes), Temple made another production agreement, known as "PA2", with an Indian company known as Anjana Productions (Anjana). Under the agreement, Temple was to consult, and provide services, for the filming in Australia of portions of a film provisionally titled "Orange". It appears to be the case that Anjana was introduced to Temple by Mr Malla. However, in the case of PA2, Temple was engaged by the producer (Anjana) and not by the intermediary (Mr Malla).

1. Clause 2.3 of PA2 reads as follows:

DATAMINE Solutions, will be the sponsor of the film and responsible for all obligation. Datamine and TEMPLE have a separate contract for this. TEMPLE will use its best endeavours to obtain all permits (including union documents) and other documentation necessary for the Key Personnel to enter, perform in and leave Australia, save that the ANJANA will be responsible for obtaining and paying for passports and visas for the Key Personnel. ANJANA will use all reasonable efforts to assist TEMPLE in obtaining the documents referred to in this clause. TEMPLE will not be responsible for any circumstance which causes any visas, work permit or other permission to be refused, cancelled or otherwise invalidated.

1. Temple and Anjana fell into dispute in relation to payment. Temple said that, by May 2010, Anjana owed it an amount in excess of $200,000.00.

1. On 23 May 2010, Temple, Mr Malla and Anjana entered into a further written agreement (the 23 May agreement) which, in terms, operated as a variation of PA2. (It may be noted that PA2 contained a "entire agreement" clause, which specified, among other things, that it could only be varied in writing - clause 11.1.)

1. The 23 May agreement stated that it was made "further to... and as part of" PA2 and concluded by stating that signature of it would "serve as acceptance of all parties" (that is, Temple, Mr Malla and Anjana) of the specified amendments to PA2.

1. The background to the 23 May agreement includes that some 44 "cans" of film had been shot in Australia for the film "Orange". Temple had possession of those cans. It was refusing to part with them until it was paid the amount it said was owing. Anjana desperately required the cans for various purposes related to completion of the film. The agreement that was reached was intended to provide a mechanism under which some part of the amount claimed would be paid, the cans of film would be released and Mr Malla would provide a guarantee.

1. Against that background, what might be called the operative parts of the 23 May agreement read as follows:

Further to mutual agreement in good faith I summarize our agreed settlement through following points and amendments in our contract. If the following information is correct kindly signed and write accepted on each page.

1. Anjana to pay $200,000 as part payments to TEMPLE for the outstanding amounts due as per contract, usage, and/or approval $200,000 to be clear in TEMPLE bank by Close of Business Australia on Wednesday 26th May 2010.

2. Within 2 working hours of received $200,000 clear in the bank account of TEMPLE, TEMPLE will release ALL remaining cans to Mr. Rajesh Malla of Datamine Solution.

3. All parties agree that $200,000 is NOT THE FINAL settlement and to this effect:

a. Any proven balance outstanding will be paid by Anjana.

c. If Anjana is unable to pay Datamine take responsibility to pay the balance.

c. Any proven overcharge, mistake, over payments to be PAID BACK by TEMPLE.

4. Temple to provide Datamine keys of the car and car (to be driven to chosen Datamine location by Datamine driver/personnel), and any further storage charges (if any) to be borne by Datamine.

5. Further to this document/signing Datamine and TEMPLE to sign release documents at the time of handing over the cans stating that DATAMINE has physically received the cans and is responsible for their delivery to ANJANA Productions.

6. TEMPLE to keep working on possible grants and provide details, amount, and clauses of such a grant (as per approvals by ANJANA with 10% of the value of the grant to be paid to Datamine and TEMPLE).

7. Anjana to provide any material required by TEMPLE in relation to the film information so TEMPLE can successfully obtain the grant.

8. All parties to work in good faith and cooperate with each other in resolving remaining accounts differences.

1. After the 23 May agreement was made, Mr Malla continued to work for Anjana in relation to what was called variously the second tranche, or the second stage, of filming in Australia for "Orange". He also worked for another Indian producer, known as "SVC", in relation to the shooting of parts of yet another Indian feature film in Australia, known as "Production Number 12" (PN 12). Temple was not involved in any way in either the second stage of Orange or in PN 12.

1. Temple sued Mr Malla in the District Court of New South Wales. It sought an order restraining Mr Malla from using what was said to be its confidential information; an account of profits; what were called "damages" representing the amount said to be owing by Anjana to Temple in connection with the first stage of Orange; interest; and other relief.

1. When the case was opened before the primary judge, leading counsel then appearing for Temple said that her client abandoned the claim in relation to alleged confidential information and pressed only two claims. The first was the claim against Mr Malla under what was said to be his guarantee of the obligations of Anjana to Temple. The second was a claim for damages for breach of cl 9.3. The second claim was put on the basis that Mr Malla had been involved in the second stage of Orange, and in PN 12, without Temple's also being involved.

1. The primary judge found for the defendant on each claim and entered judgment accordingly.

1. Temple appeals from that decision. For the reasons that follow, the appeal should be dismissed with costs.

The pleaded case

1. Leaving aside the confidential information case, (which includes a case based on an alleged breach of an alleged equitable duty of confidentiality), Temple pleaded two contractual claims in its Further Amended Statement of Claim (FASC). One claim was said to be made under PA1. The other was said to be made under PA2, in particular as varied by the 23 May agreement.

1. As to the former, Temple pleaded (FASC para 6) that:

... it was a term of the PA1 that by virtue of the grant to the Defendant under the PA1 of access to the Plaintiff's Confidential Information and proprietary business practices that the Defendant undertook not to deal with any Indian film project without engaging the Plaintiff to provide production management services for a period of 2 years from the date of the PA1.

1. By FASC para 7, Temple pleaded breach of that obligation by Mr Malla's entering into a film production agreement with SVC for PN 12, in circumstances where Mr Malla "did not engage the Plaintiff to provide production management services".

1. Paragraph 7A pleaded the like allegation of breach based on Mr Malla's entering into a film production agreement with Temple, for the second stage of Orange, without engaging Anjana.

1. Mr Malla's Further Amended Defence stated, in relation to the pleading of clause 9.3 in FASC para 6:

The Defendant does not admit the allegation set out in Paragraph 6 of the Claim and relies on the agreement between the parties.

1. In relation to the allegations of breach, Mr Malla pleaded, among other things, that:

(1) he admitted entering into the agreements alleged with, respectively, SVC and Anjana;

(2) he did not engage Temple to provide production management services;

(3) he did not have any right to force SVC or Anjana to engage Temple for that purpose;

(4) he denied breach of PA1; and

(5) he denied, also, that he provided management, or production management, services to SVC or Anjana.

1. Since there was no pleading point taken in relation to the claim under the 23 May agreement, I will not go to the detail of its pleading.

The judgment at first instance

1. The primary judge set out the issues arising on the pleadings, and a number of other issues which her Honour disposed of, which have not been agitated on the appeal.

1. Her Honour observed at [148] that the parties had paid little attention to the pleaded case. At [149] and [150], her Honour set out Mr Malla's answers to, respectively, the case based on cl 9.3 of PA1 and the case based on his obligation to guarantee under the 23 May agreement.

1. As to the claim based on cl 9.3, one of the issues raised by Mr Malla (and the only relevant one for present purposes) was that Temple had not proved its loss.

1. As to the claim made under the 23 May agreement, one of the issues raised by Mr Malla (and again, the only relevant one for present purposes) was that there was no evidence that Anjana was unable to pay what if anything was the balance proved to be owing by it, so that "the guarantee did not arise".

1. The primary judge dealt with the claim under PA1 by noting the discrepancy between the language of cl 9.3 and the way that the effect of that clause was pleaded in FASC para 6. Her Honour said at [170] (emphasis in original):

The defendant did not agree that he would not involve himself in another project without engaging Temple, yet that is what was pleaded against him in paragraph 6 and following of the Further Amended Statement of Claim.

1. Her Honour then found that Mr Malla was involved in other projects, namely PN 12 and the second stage of Orange. She said, at [171]:

... not only was he involved in those projects and providing production management services, but... he quite deliberately sought out the opportunities to be so involved. Indeed, the evidence revealed that he was investigating those possibilities while still working with the plaintiff on 'Orange'.

1. Her Honour found at [173] that in so acting, in circumstances where Temple was not involved, Mr Malla was in breach of cl 9.3. However, her crucial findings were at [174], [175] (emphasis in original):

[174] However, the defendant is not in breach of the agreement pleaded against him in the Further Amended Statement of Claim. It was not the agreement that he would not deal with another company without engaging the plaintiff.

[175] I find therefore that the defendant was not in breach of the agreement pleaded in the Further Amended Statement of Claim.

1. Her Honour then moved to consider the question of damages. She said at [177] that "appropriate compensation for the plaintiff would be to put him in in the position that he would have been [sic] had the contract been performed". That meant, her Honour said (again at [177]) that had the defendant performed by involving himself only on the basis that Temple was also involved, "Temple would have been entitled to its production management fees".

1. Her Honour said at [178] that in those circumstances, "Temple's loss is the profit that it would have made on those projects". Her Honour considered the evidence. She quantified the loss of profit in respect of PN 12 at $15,900.00, and in respect of the second stage of Orange at $12,400.00. On that basis, her Honour concluded at [190], she would have allowed the sum of $28,300.00 together with interest.

1. In relation to the claim under the 23 May agreement, her Honour stated the critical issues at [202]:

[202] The ultimate questions for determination fall as follows:-

(a) Was any balance proved to be outstanding?

(b) Was Anjana unable to pay?

(c) Is the defendant liable to pay the balance?

1. She concluded, on the basis of the evidence before her, that the sum of $149,471.83 was due and payable by Anjana to Temple, over and above the payment that had been made back in June 2010. Thus, as between Temple and Mr Malla, her Honour was satisfied that Anjana owed this amount to Temple, under PA2, in respect of services provided by Temple for the first stage of filming in Australia of the film "Orange".

1. As to the second question, her Honour said at [204] that "there was no evidence that Anjana was unable to pay the outstanding amount. The indisputable evidence is that Anjana has not paid" (emphasis in original).

1. Her Honour supplemented this by stating at [205] that "the email correspondence strongly suggested that Anjana was merely unwilling to pay because it did not believe that money was owing".

The issues on appeal

1. Temple's notice of appeal raised the following issues:

(1) Whether Mr Malla breached PA1 "as pleaded in" the FASC (ground 1);

(2) In the alternative, whether Temple was entitled to damages for breach of PA1 "notwithstanding the way in which PA1 was pleaded in" the FASC (ground 2);

(3) Whether Mr Malla's guarantee under the 23 May agreement operated "in the circumstances of this case" (ground 4);

(4) Whether Mr Malla was liable under his guarantee "by reason of Anjana Productions' failure to pay Temple the sum of $149,471.83" (ground 5);

(5) Whether the 23 May agreement "comprised not only the letter of 23 May 2010, but also the email correspondence leading up to the signing of that letter"(ground 6); and

(6) Whether the words "if Anjana is unable to pay" should be construed to mean "if Anjana fails to pay"; this ground sought to call in aid, in support of that construction, the email correspondence referred to in ground 6 (ground 7).

Grounds 1 and 2: the claim under cl 9.3

The parties' submissions

1. Mr Horowitz of Counsel, for Temple (who did not appear for Temple before the primary judge), submitted that the primary judge had erred in her approach to the claim based on cl 9.3. He submitted that:

(1) the "mischaracterisation" of the effect of cl 9.3 was not fatal to Temple's claim; it had pleaded and particularised the elements of a valid cause of action for breach of contract, and the superfluous although erroneous allegation as to the effect of cl 9.3 was not an insuperable obstacle to success.

(2) Since the contract was in evidence, and the facts said to amount to breach of cl 9.3 were likewise in evidence, it had been incumbent on the primary judge to deal with the case on the basis of the evidence that had been admitted.

(3) Perhaps as a variant of the preceding submission, the parties had conducted this aspect of the proceedings on the basis of cl 9.3 as it was drafted, not as it was pleaded, and the primary judge should have dealt with this aspect on the same basis.

1. As to the guarantee claim, Mr Horowitz submitted that:

(1) as a matter of fact, Anjana was "unable" to pay Temple, because its directors would not permit or direct it to do so.

(2) Alternatively, on their proper construction, the relevant provisions of the 23 May agreement required Mr Malla to pay the amount owed by Anjana to Temple if Temple failed to do so.

(3) Alternatively, the word "unable" should be construed to mean "unwilling" in the context of the 23 May guarantee, understood "in light of the relevant extrinsic evidence" (including an exchange of emails between the parties and a conversation between Mr Sharma of Temple and Mr Malla).

(4) Alternatively, since the 23 May agreement in terms was a summary of "our agreed settlement", it was proper to go to the evidence showing what that "agreed settlement" was for the purpose of understanding the nature of the guarantee obligation undertaken by Mr Malla.

1. Mr Cook of Counsel, for Mr Malla (who did not appear for Mr Malla before the primary judge), submitted, as to the claim under cl 9.3, that:

(1) the claim as pleaded had properly failed, and the claim now pressed had not been pleaded.

(2) Had the claim now pressed been pleaded, Mr Malla might well have raised other defences, including that cl 9.3, as drafted and agreed, was an unenforceable restraint of trade.

(3) The pleaded case was based on protection of confidential information and sought an account of profits for alleged breach of what was said to be an equitable obligation of confidence; there was no pleaded case seeking damages for breach of cl 9.3.

(4) The way the claim for damages was now put assumed that there was in effect a joint venture between Temple and Mr Malla; or that (to paraphrase the way that leading counsel for Temple opened the case to the primary judge), Mr Malla's obligation was to "bring Temple in"; and that, by breach of this obligation, Temple would have earned income.

(5) However, Temple had not proved that it would have been "brought in"; Mr Malla could equally have performed his obligations under cl 9.3 by declining to be involved with PN 12 or with the second stage of Orange.

(6) Further, and as a variant of the preceding submission, since Temple's claim for damages under cl 9.3 was in substance a claim for lost opportunity, it had to show that it had been deprived of a lost opportunity to make profit, and the strength of that opportunity.

(7) Further, although the claim was characterised as one for loss of profit, the primary judge's quantification of the claim appeared to reflect revenues rather than profit (Mr Cook acknowledged that this was a point that should have been raised by way of notice of contention).

Decision - the claim under cl 9.3

1. I start with the pleading point.

1. It is clear that FASC para 6 does not correctly characterise cl 9.3 of PA1. Clause 9.3 is in substance a restraint of trade (I express no view as to whether it is or is not enforceable). Its stated purpose is to protect what is asserted to be Temple's "leading advantage and know how about the niche industry - Indian film in Australia". By its terms Mr Malla accepted that, through performance of PA1, he would have access to confidential information of Temple; and he agreed that he would not "deal with any Indian film project" unless Temple provided "production management", for the agreed period of two years from signing.

1. Whatever cl 9.3 is, it is not an agreement by Mr Malla that he would engage, or procure the engagement of, Temple to provide production management services for any Indian film project with which Mr Malla might deal for the described period.

1. In essence, Mr Malla could have performed his obligations under cl 9.3 in one of two ways:

(1) by not dealing with any Indian film project for the period of the restraint; or

(2) by not dealing with any Indian film project for the period of the restraint unless Temple were engaged to provide production management services.

1. If, in relation to any particular Indian film project, Mr Malla took the first course, there would be no question of his using, for his own benefit, any confidential information of Temple. If Mr Malla took the second course, whatever use he might make of any confidential information would be for the joint benefit of himself and Temple. Perhaps as importantly from Temple's perspective, that use would be within the knowledge, or in a broad sense under the oversight, of Temple.

1. The relief claimed, in respect of cl 9.3, was a restraint for the balance of the two year period and an account of profits. No relief was sought by way of damages. The damages claim did not surface until leading counsel for Temple opened the case before the primary judge. That way of presenting, or narrowing, Temple's case may have come as some surprise to counsel then appearing for Mr Malla; but if it did, there does not seem to have been any protest.

1. Mr Horowitz submitted that the relevant procedural obligation imposed on his client was to plead the facts material to its cause of action. He submitted that, if the facts proved showed that Temple was entitled to relief, then the court should give it that relief. It was not necessary that the court should find proved the cause of action pleaded; it was sufficient that the court find that the facts proved demonstrated an entitlement to relief.

1. That may be accepted. It is made good by the judgment of Perry J in SP Hywood Pty Ltd v Standard Chartered Bank Ltd [1992] SASC 3764, in particular at [50] to [52]. In the last of those paragraphs, his Honour said:

.... all causes of action are at large at the end of the trial, in the sense that judgment may be given upon any cause of action open on the evidence as proved, irrespective of the manner in which the plaintiff's case has been presented, or argued.

1. I would qualify that only by saying that before the court proceeds thus, it should ensure that the party affected by the proposed judgment has been given an adequate opportunity (either through the conduct of the trial or otherwise) to deal with the case that has in fact been made good. And I think that it is at least implicit in his Honour's reasons that ordinarily, through the conduct of the trial, the parties will have become aware of the real issues and, expressly or by inference, agreed to those issues being fought out and decided.

1. So qualified, the observations of Perry J seem to me to be consonant with the views expressed by the High Court of Australia in Banque Commerciale SA, EN Liquidation v Akhil Holdings Limited (1990) 169 CLR 279.

1. Mason CJ and Gaudron J dealt at 286-287 with the situation in which a case might be decided on a basis other than that pleaded. Their Honours noted that the function of pleadings was to state the case to be met, and thus "to ensure the basic requirement of procedural fairness" (at 286). It followed, they said, that a case should not be decided on a different basis unless "the parties have deliberately chosen some different basis for the determination of their respective rights and liabilities" (at 287).

1. Then, their Honours said:

Ordinarily, the question whether the parties have chosen some issue different from that disclosed in the pleadings as the basis for the determination of their respective rights and liabilities is to be answered by inference from the way in which the trial was conducted. It may be that, in a clear case, mere acquiescence by one party in a course adopted by the other will be sufficient to ground such an inference. ...

1. Brennan J expressed similar views at 288.

1. Dawson J, who dissented in the result, expressed perhaps a stronger view, at 296 - 297. His Honour stated the function of pleadings as being to define the issues so as to tell parties the case to be met and to enable the trial to proceed in an orderly fashion. His Honour gave, as an example of the latter point, rulings on objections to evidence on the ground of relevance. However, his Honour said (at 296-297):

But modern pleadings have never imposed so rigid a framework that if evidence which raises fresh issues is admitted without objection at trial, the case is to be decided upon a basis which does not embrace the real controversy between the parties. Special procedures apart, cases are determined on the evidence, not the pleadings. It is incumbent upon the trial judge to see that the pleadings or particulars are amended so that the record reflects the proceedings as they have been conducted, but his failure to do so will not result in the invalidity of those proceedings.

1. There was, his Honour said at 297, a limiting case. The relief granted should not exceed the relief claimed. That was of particular relevance to the case before the High Court, because the appellant bank did not participate in the trial. Thus, any application to amend the relief claimed would necessarily be one made in its absence.

1. In this case, the relief that Temple sought at the trial went beyond that claimed in its pleading. Temple sought damages for breach of cl 9.3. As I have pointed out, no such claim for relief was made in FASC. But Mr Malla was represented at the trial. It does not appear that counsel then appearing for him took any objection to the way in which the case for Temple was put to the primary judge. The obvious inference is that Mr Malla was content to meet the new case on its merits.

1. In those circumstances, in my view, it was not appropriate for the primary judge to deal with the claim under cl 9.3 in the way that she did: by rejecting it because the pleaded case was not made good. Her Honour was required to consider whether, having regard to the way in which the trial had been conducted, it was open to Temple to seek a verdict and judgment on the basis of the facts proved. Those proven facts would include, of course, PA1 itself, and the evidence that Mr Malla had been involved in two other Indian film projects during the period of the restraint, in circumstances where Temple had not provided production management services for those projects.

1. If her Honour had come to the conclusion that to decide the case on this basis would not be relevantly unfair to Mr Malla, then she would have been required to deal with it on that basis. Of course, if her Honour had come to the conclusion that (for whatever reason) it would be relevantly unfair, then the approach that she took would have been justified. For the reasons I give at [72] to [84] below, her Honour would have been justified in coming to the latter conclusion.

1. That analysis requires consideration of a number of matters. One is that Mr Malla had put in issue the pleading of the effect of cl 9.3, and had said in substance that he would rely on the proper construction of that clause. Another, obviously enough, is that PA1 was proved. Thus, the proper construction and effect of cl 9.3 was one of the matters in controversy. That required the primary judge to consider whether Temple had made good a claim for damages on the proper construction of cl 9.3 and having regard to the evidence of Mr Malla's involvement in PN 12 and the second stage of Orange.

1. As I have noted, Mr Cook submitted that it would be unfair to permit Temple to argue the case that it now puts, because (had the matter been pleaded properly), his client's attention might have been directed to the restraint of trade argument. I do not think that this submission should be accepted, at least in its absolute form. As I have said, cl 9.3 does operate as a restraint of trade. But that is true both of cl 9.3 as it is drafted and as it was pleaded in FASC para 6.

1. Mr Cook appeared to accept that this was so. However, he submitted, his client may well have made a forensic decision not to take any restraint of trade point, because he thought that he had a complete answer to the claim as pleaded. Mr Cook noted, in particular, that there was no claim for damages for breach of cl 9.3 articulated in Temple's pleading.

1. Whilst I accept the theoretical proposition, experience suggests that were there are a number of alternative answers to a claim, each of which is properly arguable, all are likely to be pleaded and supported. I do not accept, as Mr Cook submitted, that s 56 of the Civil Procedure Act 2005 (NSW) requires a party having multiple viable defences (or, for that matter, multiple causes of action) to select the best and abandon the others.

1. In this context, and as Mr Cook submitted, it is to be noted that Temple's pleaded case based on cl 9.3 focused on protection of its confidential information (by claiming injunctive relief) and on compensation for alleged past misuse of that confidential information (by claiming an account of profits). Each of those claims must have directed attention to the fundamental point: is the restraint of trade valid? That point requires consideration of at least two things. The first is identification of the legitimate interests of Temple which the clause seeks to protect. The second is whether, in all the circumstances, the terms of the restraint are no more than is reasonably required to protect those interests. Put negatively, the restraint is unlawful except to the extent that it protects the legitimate interests of Temple.

1. When the pleaded case is put in context, it is apparent that the real issues are those that I have just identified. The pleader's incorrect characterisation of cl 9.3, in FASC para 6, is peripheral. It should have been apparent, on anything more than a cursory reading of the FASC as a whole, that Temple was seeking both to enforce the restraint of trade contained in cl 9.3 and to obtain relief for alleged breaches. Those claims could rise no higher than the agreed terms of cl 9.3. The pleader's erroneous gloss on the words of that clause necessarily directs the reader back to what it was that the parties had actually agreed. And Mr Malla's defence, making it clear that he would rely not on cl 9.3 as pleaded but on cl 9.3 as drafted and agreed, confirms that his attention had not been diverted by the terms in which FASC para 6 was pleaded.

1. In my view, the argument of prejudice based on denial of the opportunity to plead a restraint of trade defence should not be accepted.

1. It does not follow that Temple must succeed on its claim under cl 9.3. It was required to prove that there was a breach and that it suffered loss. And it was required to prove the amount of that loss.

1. There would appear to be little doubt about the first of those matters. Mr Malla did deal with two Indian film projects during the period of the restraint. Temple did not provide production management services in respect of either of those projects.

1. That leads to the question of damages. And it is here, in my view, that Temple's case falls down. Clause 9.3 does not contain a positive promise by Mr Malla that he would engage, or procure the engagement of, Temple on any Indian film project with which Mr Malla might deal during the period of the restraint. As I have said, the evident purpose of cl 9.3 is to protect what the parties agreed was Temple's confidential information and know how. (As an aside: Mr Cook submitted, again by reference to the pleadings, that much of the alleged confidential information or know how should not properly be so characterised. That submission may be true in part; but it does not follow that there was nothing that, in the eyes of the law, could not be protected by a restraint of the kind under consideration.)

1. In the ordinary way, damages for breach of cl 9.3 would encompass whatever loss Temple had sustained by reason of the misuse of what, properly, could be characterised as its confidential information. Such a case would be very difficult to prove (such cases notoriously are). No doubt, that is why Temple claimed injunctive relief and an account of profits (as is commonly done in such cases).

1. That is not the end of the question of damages. As the primary judge pointed out at [177], the function of damages for breach of contract is, so far as money can do it, to put the successful plaintiff in the position it would have enjoyed had the contract been performed. In the circumstances of this case, her Honour said, where Mr Malla had dealt with Indian film projects during the period of the restraint, the measure of damages was the profit that Temple would have derived had it provided production management services for those projects.

1. Thus, her Honour said at [178], "Temple's loss is the profit that it would have made on those projects". That was the loss that her Honour assessed, against the possibility that her decision on the liability issue were incorrect.

1. On that analysis, Temple's claim for damages for breach of cl 9.3 was a claim for lost opportunity: the loss of the opportunity to provide production management services for the projects in question, and to make profit thereby. Accordingly, it was necessary to do more than assess the revenues that would have been derived had the services been provided. It was necessary, also, to assess the strength of the chance: the likelihood that Temple would have been so engaged.

1. At first blush, this might seem to be a simple matter to resolve. As I have said, Mr Malla had two choices. One was not to be involved at all. The other was to be involved if Temple were involved. Leaving aside for the moment the question, of whether Mr Malla had the power to procure the involvement of Temple, it might seem to be obvious that he would have preferred to take a slice of the action rather than to leave all of it to some third party. But the matter is not so simple.

1. I start with the second stage of Orange. It is clear that, by the time the 23 May agreement was made (which was before work started on the second stage of Orange), the relationship between Temple and Anjana had broken down. Temple took the view that Anjana was exploiting it, by failing to fund in any adequate way the services provided by Temple. Temple claimed that it was owed a substantial sum of money: variously estimated at between $200,000.00 and $250,000.00.

1. Anjana took the view that it had been overcharged very significantly for the services provided by Temple. There were substantial overruns on the production budgets from time to time supplied (or revised and supplied) by Temple. Each party suggested that the other was responsible for those cost overruns.

1. Each party had retained accountants to try and agree on the amount outstanding. They were unable to do so.

1. There is no doubt that Temple's assertion of a lien over the 44 cans of exposed film caused significant inconvenience (at least) to Anjana. Production work (editing and the like) could not be performed until the cans were handed over. And apparently, until that work was done, it was not possible to plan the second stage of shooting.

1. In those circumstances, it seems to me, there is a strong basis for saying that Temple's prospects of being involved in the second stage of Orange were, at best, minimal. It may be accepted, as Mr Horowitz submitted, that Anjana was contractually bound to retain Temple for the whole of the Orange project. But there is a lot of evidence that Anjana was not prepared to do so. And in any event, I think, it was unlikely that Temple would have undertaken any further work unless:

(1) it was paid what it considered was owing in respect of work already undertaken; and

(2) more satisfactory arrangements were made, than those documented in PA1, for further work to be funded.

1. It may be, of course, that all these matters could have been explored in the evidence before the primary judge. But one result of the change in the litigious course charted by Temple, through its abandonment of the claim based on confidential information and its assertion of a claim for damages for breach of cl 9.3, was that Mr Malla was denied the opportunity to consider that claim for damages, and to adduce evidence bearing on assessment of the strength of the lost opportunity.

1. Similar considerations apply in respect of the other project, PN 12. The Indian company, SVC, appears to have contacted Mr Malla. No doubt Mr Malla could have suggested that Temple be retained. No doubt he did not do so in part because, as the primary judge in essence found, he was trying to supplant Temple (or, as Temple's then counsel put it to the primary judge, "white ant" Temple). Nonetheless, there being no pre-existing contractual relationship between SVC and Temple, it cannot be assumed that SVC would have engaged Temple. And again, because of the late change in course, Mr Malla was denied the opportunity to consider the loss of opportunity case, and to adduce evidence bearing on the assessment of the strength of this opportunity also.

1. Mr Horowitz submitted that Mr Malla had said, in effect, that he had it within his gift to nominate Temple to provide production management services. There are passages in Mr Malla's affidavit that could suggest that. For example, at para 281, Mr Malla denied that he was "an employee, contractor or sub-contractor of Temple". He said that he "hired and paid Temple to assist [his] producers and [him] in the Australian Film productions schedule" (and that is how PA1 reads).

1. The primary judge was less than impressed with Mr Malla as a witness, as she noted at [161]. She took the view that Mr Malla said things "in order to bolster what he perceived to be a weak point in his own case". Nonetheless, to the extent that aspects of Mr Malla's evidence could be regarded as against his interest, her Honour may well have accepted it.

1. All that is beside the point. The very late change in this aspect of Temple's case meant that Mr Malla was not given any adequate time to address the loss of opportunity claim. Indeed, it appears that no one turned their minds to this. The underlying assumption appears to have been that if Temple were entitled to damages for breach of cl 9.3, those damages would simply be whatever was the profit that it would have derived from providing production management services on the two projects. No one appears to have paid attention to the need to assess the likelihood, or probability, that it would have been so engaged.

1. There are two consequences. The more fundamental one is that Temple should not now be permitted to raise, on appeal, a loss of opportunity claim in respect of cl 9.3 that is substantially different to its pleaded claim. That entails substantial procedural injustice to Mr Malla, because it has denied him the opportunity of investigating, leading evidence as to, and putting submissions on that claim.

1. What might perhaps be a secondary point is that, on the evidence, Temple in any event failed to prove its new case, because it failed to prove the strength, or likelihood, of the opportunity that was lost.

1. Accordingly, in my view, the challenge to the primary judge's rejection of the claim based on cl 9.3 fails. It is unnecessary to deal in detail with Mr Cook's "contention" point. Were it necessary to go to that point to resolve the appeal as to the cl 9.3 claim, I would conclude that the point has substance. It seems to be clear that the primary judge, whilst purporting to assess loss of profit, in fact assessed lost revenue; and at least part of the revenue assessed as flowing to Temple was, on the evidence, for the benefit of and payable to Mr Sharma personally.

Decision - the guarantee claim

1. To my mind, the challenge to the conclusion of the primary judge on this claim fails, for two related reasons. First, "unable" does not have the extended meaning for which Mr Horowitz contended. Secondly, Temple has not shown that there was a "proven balance outstanding", of which it can be said that Anjana was "unable" (whatever that may mean in context) to pay.

"Unable"

1. Mr Horowitz accepted, I think, that the primary meaning of "unable" was "not able" or "incapable". However, he submitted, it could also connote "unwilling".

1. Mr Horowitz relied on the decision of the Full Court of the Supreme Court of Victoria in Leeder v The Mayor, etc., of the Town of Ballarat East [1908] VLR 214 That case concerned s 708 of the Local Government Act 1903 (Vic). The effect of that section was to impose certain limitations on the entitlement of a person to recover damages against a municipality. One of the limitations was that notice be given within a certain period unless "some sufficient reason" were shown why the claimant "was unable to give such notice".

1. Hodges J noted at 219 - 221 the various ways in which the word "unable" could be used and concluded that, for the purposes of the statute, "unable" should be read as requiring something less than absolute impossibility, or incapacity.

1. Cussen J at 223 pointed out that the word "unable" was one of flexible rather than definite meaning. He said:

Sometimes, where it is used with reference to a person, it connotes an act or series of acts which no human being could do; sometimes an act or series of acts which the particular person referred to could not in any circumstances do; sometimes an act or series of acts which this person could not in existing circumstances do; and sometimes an act or series of acts which in existing circumstances this person could do if he directed his mind to nothing else, but which, having regard to other circumstances, he could not reasonably be expected to do. It therefore sometimes involves a comparison of the various circumstances influencing action or inaction. If the contemplated action and its consequences are of trifling importance, very little may be sufficient to induce a person to say that he is unable to do it.

1. What Cussen J said demonstrates the need to look at the context in which the word "unable" appears. That is necessary because the process of construction of a document does not involve simply taking the ordinary English meaning of each of the words used in it, and aggregating those meanings sequentially for the purpose of producing the correct construction of the document as a whole. See Basten JA and Handley AJA in OV and OW v Members of the Board of the Wesley Mission Council (2010) 79 NSWLR 606 at [29], [30]. Accordingly, I turn to the context in which the expression "unable to pay" is used.

1. The starting point is the use of the words "unable to pay" in the context, not only of cl 3, but of the 23 May agreement as a whole. There was a disagreement as to Temple's entitlement to be paid under PA1. The parties had negotiated an "agreed settlement". That agreed settlement provided for a payment on account, release of the cans of film, and a mechanism for adjustments if the payment on account should be found to be insufficient or excessive. In that context, the requirement was that any "proven balance outstanding" be payed by Anjana, and that Mr Malla should pay that balance if Anjana were unable to pay it.

1. The requirement to determine the "proven balance outstanding" directs attention to clause 8, under which all parties were required "to work in good faith and cooperate with each other in resolving remaining accounts differences". Presumably, the parties intended that cl 8 should be honoured.

1. Focusing in isolation on the words "unable to pay" distracts attention from the real point of inquiry. That point is: what is it that Mr Malla must pay if Anjana is unable to pay it? The answer, clearly, is "any proven balance outstanding". It is necessary to understand this, because it casts light on the question of "inability".

"Proven balance outstanding"

1. That raises the next question: what is meant by "any proven balance outstanding"? Mr Horowitz submitted that his client had proven a balance outstanding, because it had proved, to the satisfaction of the primary judge, that Anjana owed it the amount in dispute. But that is not what cl 3 requires. Clause 3, read in conjunction with cl 8, contemplates a process whereby the three parties to the 23 May agreement - Temple, Anjana and Mr Malla - will work out the exact balance, so that any proven underpayment can be paid or any proven overpayment refunded.

1. I return to the words "unable to pay". It is obvious that Anjana would not pay simply the balance that had been demanded by Temple. Anjana was not prepared to pay more except to the extent that it could be proven that there was underpayment. It is only once underpayment was proven, in the relevant sense, that any question of inability to pay arises.

1. Those considerations suggest that "unable to pay" should not be construed as meaning "unwilling to pay" or "does not in fact pay". Looking at the intentions of the parties as, objectively, they appear from the document, and giving due regard to the competing claims which the document was intended to resolve, the parties must have understood that Anjana would pay nothing more than what, with its concurrence or assent, was "proven" to be "outstanding". Except to that extent, Anjana was undoubtedly unwilling to pay, and in fact would not pay.

1. Further, the parties agreed by cl 8 to undertake a process of cooperative inquiry so as to seek to establish the balance actually due from one to the other. One could infer from this an intention on the part of both Anjana and Temple to pay whatever might be found to be owing by the one to the other through the working out of that process.

1. For those reasons, I think, the word "unable" should be given its ordinary English meaning: "not able" or "incapable".

Is there a "proven balance outstanding"?

1. Does the decision of the primary judge, as to the amount owing, relevantly "prove" the outstanding balance? I think not.

1. On the proper construction of cl 3, Anjana was not required to pay anything that was not "proven" in the sense earlier identified. Anjana is not a party to the proceedings. It is not bound by the primary judge's determination of the balance due. Her Honour has determined that amount, as between Temple and Mr Malla. But her determination of that amount does not satisfy the requirement of cl 3a. Thus, it does not establish a "proven balance outstanding" in respect of which the question can be asked: is Anjana "unable" to pay that balance?

1. Mr Horowitz submitted that it was sufficient for his client to establish the balance in some way and that, once established, its rights were clear. I do not agree. To take an example raised in the course of argument: Temple could have referred its records to an independent accountant, to audit them and to certify the balance due between the parties. That may well have amounted to proof. But unless that process were undertaken with the consent of, or otherwise so as to bind, Anjana, it could not establish a proven balance outstanding for the purposes of cl 3a of the 23 May agreement.

1. Thus, Temple has not shown that there is a proven balance outstanding, for the purposes of cl 3a of the 23 May agreement, that Anjana has not paid. It follows from this that, whatever "unable to pay" connotes (whether unwillingness, or something more), there is no "proven balance outstanding" in respect of which the question of inability arises.

1. To put it another way: Temple has not demonstrated, in a way that binds Anjana, what it says is the "proven balance outstanding". If one thing is clear, it is that Anjana, because it considered (or affected to consider) that it was owed money by Temple, was not prepared - was not willing - to pay anything that was not "proven" to its satisfaction to be "outstanding".

Other issues

1. I turn to the remaining submissions put by Mr Horowitz, as summarised at [39(1),(4)] above.

1. I have no doubt that the directors of Anjana have not permitted or directed it to pay Temple. But on the evidence, the reason for that is that there has not been shown to be a "proven balance outstanding" for the purposes of cl 3 of the 23 May agreement. I refer to what the primary judge said at [204], [205] (see at [35], [36] above).

1. I do not think that it is legitimate to go to the "relevant extrinsic evidence". There is no relevant ambiguity.

1. Nor do I think that it is appropriate to go behind the 23 May agreement. It may be accepted that it was said to be a summary of what had been agreed. But, nonetheless, it was the form in which the parties chose to express what had been agreed.

1. In any event, when one goes to the material, it is questionable whether the parties were completely ad idem until the 23 May agreement was signed. Mr Horowitz referred to a telephone conversation in which, according to Mr Sharma, Mr Malla said: "I will guarantee the rest" and "I will sign it and get [Anjana] to sign it as well". But it is apparent, from the same conversation, that what Mr Malla was proposing was simply that Mr Sharma draft an agreement so that "we can discuss any changes" - by inference, before it was signed.

1. Accepting (as the primary judge found) that the conversation occurred, it does nothing to dissuade me from the view that the parties were not ad idem until, having agreed to the terms embodied in the 23 May agreement, they signed it.

Conclusion and orders

1. For those reasons, I conclude that the challenges to the primary judge's dismissal of Temple's claim fail.

1. I propose that the appeal be dismissed with costs.

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Decision last updated: 15 November 2013