Fury trading as Fury Custom Boats v Nasso

[2022] HCATrans 85

[2022] HCATrans 085

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Perth   No P43 of 2021

B e t w e e n -

SCOTT FURY TRADING AS FURY CUSTOM BOATS

Applicant

and

STEPHEN NASSO

Respondent

Application for special leave to appeal

KEANE J
GORDON J
STEWARD J

TRANSCRIPT OF PROCEEDINGS

AT CANBERRA BY VIDEO CONNECTION

ON THURSDAY, 5 MAY 2022, AT 2.30 PM

Copyright in the High Court of Australia

KEANE J:   In accordance with the Court’s protocol when sitting remotely, I will announce the appearances for the parties. 

MR J.A.G. McCOMISH appears for the applicant.  (instructed by Clyde & Co)

MR M. CHRISTIE, SC appears with MR D.J. MORRIS for the respondent.  (instructed by HHG Legal Group)

KEANE J:   Yes, Mr McComish. 

MR McCOMISH:   Your Honours, there are four reasons this application warrants a grant of special leave.  First, the application raises important questions of principle in an important area of law, namely, the law of contract in its interrelationship with the law of unjust enrichment.  There are three such issues.  First, the applicant undertook, and was paid for, the work required to reach the first stage specified under a boat‑building contract.  No language in the contract made the accrual of the right to payment for that stage conditional on complete performance. 

Each of Mann v Paterson Constructions, Baltic Shipping v Dillon, Hyundai Heavy Industries Co Ltd v Papadopoulos and Stocznia Gdanska v Latvian Shipping would indicate that the reached and paid for stage would thus give rise to an accrued contractual right.  But that is not what the Court of Appeal found here.  By what means, though, was the applicant divested of what ought otherwise have been an accrued right.  Second ‑ ‑ ‑ 

GORDON J:   Is not your problem, Mr McComish, that we are dealing with nothing more than the construction of a particular contract?  I mean, your identification reference to the earlier authorities, in effect, illustrates your difficulty, does it not?

MR McCOMISH:   In my submission not, your Honour, because what happened here was an error of principle and not merely the misconstruction of a particular instrument.  Now, that can be seen most clearly perhaps, your Honour, in the judgment – the very end of the Court of Appeal’s judgment at paragraph 85. 

The problem was this - and this is at page 220 of the court book.  The answer to the hypothetical - or the rhetorical question placed there, the alleged “you need only to state the proposition to see its falsity”, was the very thing to which Lord Goff in Stocznia Gdanska provided the answer, and to which Mr Hopwood in the court below took the Court of Appeal, namely, that in a construction contract, and here that is what the parties pleaded and that is what the judge found, that the question of whether there is a total failure takes its colour, as a matter of principle, from the nature of the construction contract. 

GORDON J:   When one looks at the nature of this contract, why would one not see it as an ability of, in effect, financing or providing funding for the business rather than anything by reference to instalments for work done?

MR McCOMISH:   First, your Honour, there is the finding of each lower court that the very purpose of the instalments was to provide the funds for the very work that was done, and that therefore this falls squarely within exactly the principle of Stocznia Gdanska and Hyundai v Papadopoulos, and by contrast, is not a Fibrosa Case. 

The significance of that is this.  It engages the very point that was made by this Court in Baltic Shipping v Dillon to which the Court of Appeal did not refer, namely, that if the contract requires you, as this one did, to go to expense, to render performance, to incur obligations, to do work, then there will be no total failure of consideration even if the performance of that work is not complete.

KEANE J:   But does that not simply invite attention to the question as to whether this bespoke contract was a contract for the doing of work or a contract for the sale of a boat?  The resolution of that question turns on the particular terms of this bespoke contract.

MR McCOMISH:   Every case of contractual construction and every case of restitution in the case of alleged total failure of consideration will depend on the wording of the contract in question, and that was true in Mann v Paterson, it was true in Baltic Shipping v Dillon, it was true in Stocznia Gdanska, but the analytical problems that arose in the lower courts in this case were not caused by any unique feature of this contract as compared with any other staged construction contract and given the importance of that class of contract to commercial life ‑ ‑ ‑ 

KEANE J:   Mr McComish, under this contract, the parties were taken – as a matter of construction of this contract – to have contracted on the footing that your client would be entitled to payment, your client would earn the right to payment in return for the transfer of the boat.  While it was being built, Mr Christie’s client got nothing.  At the end of the day, in this case, your client was left with the boat.  It would be unique in commercial law for the party that ends up with the boat also to be entitled for the cost of making it.

MR McCOMISH:   Not in my submission, your Honour.  That was, for example, the very circumstance that happened in Stocznia Gdanska.  The point of principle here, though, is the interrelationship between the law of contract and the law of unjust enrichment.  Now, it might very well be that in many cases, damages for breach of contract is what provides the answer to the conundrum of retaining the boat and yet having been paid for some of the work in relation to it.

Now, it was open, of course, to Mr Nasso to have vetted and run such a case, but that was not the basis on which he ran his damages case, which was rejected by the trial judge for lack of proof.  One then comes back to the point of principle.  If the answer was to be found in the law of contract – and perhaps as I suggest – in the law of damages for breach of contract, this Court was very clear in Mann that the answer was not to be found by overlaying a restitutionary remedy, inconsistent with the terms of the contract.  Now, so far as ‑ ‑ ‑

STEWARD J:   Mr McComish, I am sorry to interrupt you.  If you are unable to persuade the Court that the Court of Appeal’s construction of the contract was erroneous, so that their construction is upheld, in particular its characterisation as being one for the sale of a boat, do you have any other legs to stand on?

MR McCOMISH:   Yes, I do.  There are two of them, your Honour.  The first is this.  Even if the court’s construction of this – the construal of the contract is being one for sale only, nonetheless the answer is still to be found in Mann.  What I would to do persuade your Honours is to show your Honours the staging of the payment of the consideration across identified stages of whether or not it otherwise be construed as a construction contract and say, consistently with your Honours’ decision in Mann, that the provision of staged payment of the consideration is enough to generate the very same result as in Mann, namely, there is an accrued contractual right, whatever be the substance of the contract.

The second answer is this.  It is the one which, for example, the learned authors of the present edition of Goff and Jones on Unjust Enrichment point to that even if this were a Fibrosa‑type case – namely a contract construed as being one of sale, not of construction – if the interim payments were, as here, put towards the cost of construction with the knowledge and agreement of the parties – and that was an explicit finding of the lower courts that that was so – even if this were a Fibrosa case, I would, in my submission, nonetheless be able to persuade your Honours that there was an accrued right to those payments or there was a good defence to the restitutionary cause of action. 

So, in other words, even if your Honours were not with me on the ultimate question of the substance of this contract, even if it were simply a contract of sale, in my submission, nonetheless, first there is a question of principle which ought interest your Honours’ Court, but secondly, there is a good answer contrary to that of the Court of Appeal, even if that ultimate choice on the substance of the contract were reached.

STEWARD J:   Can I ask you this as well?  If the construction of the contract is upheld as the Court of Appeal has expressed it, does that mean that the first sentence of paragraph 85, which you took us to, must necessarily be correct?

MR McCOMISH:   Not in my submission, your Honour, simply because of the different consideration of the meaning of – the different understanding of the meaning of consideration in the restitutionary context than in the contractual one.  Now, here, of course, their Honours in the lower court said that Mr Nasso’s client – pardon me, Mr Nasso’s remedy was a restitutionary one, not a contractual one. 

But so far as that question of construction is concerned, the important point is this – it is twofold:  first, the Court of Appeal’s construction was antithetical to the case run at trial to the pleadings and to the findings of the trial judge; but, secondly, if the Court of Appeal had adverted to the very authorities to which Mr Hopwood drew their attention, namely, in particular, Stocznia Gdanska in which the parties were identified as buyer and seller and yet, nonetheless, it was a contract of construction; or, indeed, Hyundai Industries v Papadopoulos where the parties again were identified as buyer and builder, the falsity of the point of construction would have been revealed.

Now, argument was put in the courts below and the answer of the Court of Appeal was inconsistent both with the trial judge’s finding of the way that the case was put at first instance, but also with very distinguished appellate authority to which the Court of Appeal made no reference in its judgment…..in our submission is an important point of principle.  As I was identifying to your Honours, there are the three questions of principle arising in my submission and I do not need to address your Honours further on that.

The second point, as I have alluded to, is the simple fact the judge misinterpreted, and the Court of Appeal simply ignored this Court’s decision in Mann goes to the point of principle before your Honours now.  That absence led to an inconsistency in the Court of Appeal with this Court’s judgment, first, as to the identification and proper interpretation of staged contracts for construction; secondly, the effect of termination on accrued contractual rights under such contracts; and, third, the role of total failure of consideration in respect of such accrued rights. That erroneous approach, in my submission, calls for the intervention of this Court.

This case is not simply a rerun of Mann, because here, the identity of the party in breach and the party seeking to assert the restitutionary claim are the opposite. Mann was correctly decided but it was not correctly applied by the lower courts here and that, in my submission, calls for the intervention of this Court.

The third reason, to which I have already alluded, is that the lower courts reached a conclusion that is at odds with the leading appellate authority elsewhere in the common law world.  The conclusion of the lower courts was at odds with House of Lords’ decision squarely concerning failure of consideration and accrued rights under staged shipbuilding contracts – and I am referring of course to Hyundai and to Stocznia Gdanska.  Those cases in particular show why the lower courts were wrong in principle to have construed the contract here as being a contract of sale alone and not as a contract for designing construction.

On that point, it is critically important that each of the lower courts recognised that there were terms of the contract which could only have been referable to its being a contract of construction – including for example, the right of the parties to vary it as construction progressed – the identification of the counterparty as being a builder.  In that context, the suggestion that the judgment of Lord Goff on unjust enrichment was either wrong or was inapplicable is, in my submission, itself a matter warranting the interest of this Court.

Fourth, and finally, staged contracts for construction – whether of the building or of the vessel or of an engineering or an IT project – are a frequently occurring feature of commercial life.  Every contract is of course distinctive, but as I have said the analytical problems that occurred here were not caused by any unique feature of this contract as compared with any other staged construction contract. 

In my submission, given the importance of that class of contract to commercial life and given the interest and the importance of the questions arising, the applicant invites the Court to grant special leave.  In my submission, the judgment of the Court of Appeal below was wrong.  It gives rise to questions of law of public importance, including in respect of the question of construction and the interests of the administration of justice, both generally and in the particular case invites this Court’s consideration.  May it please the Court.

KEANE J:   The Court will adjourn briefly to consider the course it will take in this matter.  Adjourn the Court, please.

AT 2.47 PM SHORT ADJOURNMENT

UPON RESUMING AT 2.50 PM:

KEANE J:   The Court does not need to trouble you, Mr Christie.

There is no reason to doubt the correctness of the decision of the Court of Appeal, nor is it in the interests of justice that special leave to appeal should be granted in this case.  The application for special leave to appeal is dismissed with costs.

The Court will now adjourn until 10.00 am on Tuesday 10 May.  Adjourn the Court, please.

AT 2.51 PM THE MATTER WAS CONCLUDED