Gardner v Smith - [2000] WASCA 93

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

TITLE OF COURT : THE FULL COURT (WA)

CITATION: GARDNER & ANOR -v- SMITH [2000] WASCA 93

CORAM: KENNEDY J
IPP J
WALLWORK J

HEARD: 20 MARCH 2000

DELIVERED : 12 APRIL 2000

FILE NO/S: FUL 151 of 1999

BETWEEN: ROBERT CHARLES GARDNER
ROBERT MITCHELL
Appellants
AND
PETER VICTOR SMITH
Respondent

Catchwords:

Mining - Appeal from Warden's Court - Agreement to provide consultancy services - Decision of Warden that agreement repudiated overturned on appeal - Matter remitted to Warden for determination of entitlement of consultant to remuneration under agreement - Warden revisiting issue of repudiation - No jurisdiction to do so - Turns on own facts

Legislation:

Nil

Result:

Appeal allowed

Representation:

Counsel:

Appellants: Mr M J McCusker QC & Mr M C Hotchkin
Respondent: Mr N P Hasluck QC & Mr G H Lawton

Solicitors:

Appellants: Hotchkin Hanly
Respondent: Lawton Gillon

Case(s) referred to in judgment(s):

Nil

Case(s) also cited:

Carr v J A Berriman Pty Ltd (1953) 89 CLR 327
Chan v Zacharia (1984) 154 CLR 178
Crocker Consolidated Pty Ltd v Wille [1988] WAR 187
Giumelli v Giumelli (1996) 17 WAR 159
Giumelli v Giumelli (1999) 196 CLR 101
Hazlett v Rasmussen [1973] WAR 141
re Heaney; Tunza Holdings Pty Ltd v Haoma Mining NL (1997) 18 WAR 420
Hot Holdings Pty Ltd v Creasy (1995) 185 CLR 149
Hunter Resources Ltd v Melville (1988) 164 CLR 234
Luna Park NSW (Ltd) v Tramways Advertising Pty Ltd (1938) 61 CLR 286
Rigg v Lee Loy Seng [1987] WAR 333
Shevill v Builders Licensing Board (1982) 149 CLR 620
Sorna Pty Ltd v Flint [2000] WASCA 22
Summers v The Commonwealth (1918) 25 CLR 144
Swan Resources Ltd v Southern Pacific Hotel [1983] WAR 39
Terrex Resources NL v Magnet Petroleum Pty Ltd (1988) 1 WAR 144
United Dominions Corporation Ltd v Brian Pty Ltd (1985) 157 CLR 1
White v Australian & New Zealand Theatres Ltd (1943) 67 CLR 266

JUDGMENT OF THE COURT: On 22 April 1992, the appellants, who were partners engaged in prospecting for gold, found a large gold nugget on a tenement held by them at Ora Banda. The respondent, a mining consultant, advised them how to exploit the find. He recommended that they purchase further tenements surrounding the find and they proceeded to do this. The respondent continued to advise the appellants and assisted them in implementing his exploitation proposals.
At first, the parties' relationship was governed by an oral agreement whereby the appellants agreed that the respondent would receive 5 per cent of the proceeds of the sale of the tenements for his services. Later, on 10 May 1993, the parties signed a written agreement which the respondent had drafted. The agreement contained the following clauses:
" … the parties have agreed that Gardner will have the authority to decide upon the sale of the tenements provided the sale price exceeds $1 m. Should the tenements not sell for $1 m or more then the parties agree to register the tenements as two thirds interest in Gardners name and one third in Mitchells name thereby reflecting the respective input by the parties."
And:
"Gardner and Mitchell have agreed to engage the services of mining consultant Peter Victor Smith to handle the affairs of the partnership in exchange for a 5% interest in the tenements at Ora Banda the subject of the find. Such 5% interest is to be realised upon the sale of the tenements and payable in cash. Smith must use his expertise to effect the sale of the tenements. Smith is not liable for any debts of the partnership. Should the tenements not be sold then Gardner and Mitchell agree to compensate Smith for his time spent on this project."
An important part of the respondent's advice to the appellants was his proposal for a public relations exercise to be carried out in regard to the nugget. While Mr Gardner was overseas, the respondent arranged for the nugget to be "unveiled" on 26 May 1993 to members of the mining industry. On 25 May 1993, however, Mr Gardner's wife telephoned the respondent and, as it was put by Heenan J:
"She told him that everything was cancelled and nothing would happen until Mr Gardner returned. In responding to that information Mr Smith told Mrs Gardner that 'when Robert comes back from Brazil he may as well find a new adviser'."
The respondent thereupon telephoned Mr Mitchell "and told him the same".
The respondent then commenced proceedings against the appellants in the Warden's Court, claiming $100,000 from them. He relied on the clauses of the agreement to which we have referred above and asserted that, as he had performed the bulk of the work he was required by the agreement to do, he was entitled to 5 per cent of the value of the tenements concerned. He contended that that value was $2 million. Hence, he alleged, he was entitled to $100,000. Curiously, although the agreement provided that the respondent was only entitled to 5 per cent of the value of the tenements "upon the sale of the tenements", the respondent alleged in his particulars of claim that "in or about June 1993, the [appellants] decided not to sell the tenements". The respondent made no allegation that the tenements had been sold.
As an alternative claim the respondent alleged that on 25 May 1993 the appellants had "wrongly terminated" his "services as consultant" and asserted that the appellants had thereby repudiated the agreement. The respondent pleaded that this repudiation was accepted by him and he claimed damages for that repudiation amounting to $100,000.
In written reasons given on 12 July 1996 the learned Warden observed that the appellants had acknowledged that the value of the tenements was $2 million and that value was not disputed. His Worship said that he was satisfied that the respondent "carried out the bulk of his work and is entitled to payment". The learned Warden went on to say:
"I am satisfied that the [respondent] was in a position where, there being no acceptance of his advice, [sic - he] correctly resigned his position as adviser and consultant. I am of the view that the [appellants] repudiated the agreement."
His Worship appears to have assumed that the respondent accepted that repudiation by resigning (and thereby the agreement was brought to an end). The learned Warden concluded:
"I am satisfied that [the respondent] is entitled to 5 per cent of the tenements according to the agreement beforementioned and I have calculated his damages to be 5 per cent of $2,000,000, being the sum of $100,000 … "
This observation calls for comment. It contains a fallacy that has permeated and underlain the respondent's approach through the long series of legal proceedings that have taken place between the parties.
Although the agreement referred to the respondent obtaining a "5 per cent interest in the tenements", no true interest in the tenements was thereby created. Senior counsel for the respondent rightly accepted that, should the tenements not be sold, the respondent would have no interest in the tenements whatever and would only be entitled to compensation "for his time spent on this project". It is accordingly apparent that the reference to a "5 per cent interest" was merely to a mechanism that fixed the remuneration to which the respondent was entitled. In other words, upon the sale of the tenements the respondent was entitled to 5 per cent of the selling price. If the tenements were not sold (presumably, by decision of the appellants or within a reasonable time) the respondent would only receive compensation for his time spent in working on the project. Accordingly, there was no basis for the finding that under the agreement the respondent was entitled to "5 per cent of the value of the tenements". The respondent was only entitled to 5 per cent of the price realised by a sale of the tenements. Where no sale took place, the respondent was entitled only to compensation for his time.
As it was common cause that the tenements were not sold, and the appellants had decided not to sell the tenements, and as it was not suggested that that decision was taken otherwise than in good faith, the respondent's entitlement under the agreement, at most, was only for compensation for his time spent on the project. Accordingly, the view expressed by the learned Warden that the respondent "is entitled to 5 per cent of the tenements according to the agreement" was erroneous. Also, the respondent's submission, repeated in various courts including this one, that under the agreement he was entitled to 5 per cent of the value of the tenements, is wrong. We repeat, the respondent was entitled to 5 per cent of the selling price upon the sale of the tenements and, should there be no sale, to compensation for his time.
The appellants appealed against the Warden's judgment and their appeal was heard by Anderson J. His Honour observed:
"On the whole of the evidence, as I understand it, the situation was reached that the respondent and the appellants could not agree on how best to go about marketing the tenements and under those circumstances the respondent, as the warden found, 'resigned his position as adviser and consultant'. There is simply nothing in that state of affairs which justifies a finding of repudiatory conduct on the part of the appellants."
His Honour further observed that:
"[The learned Warden] seems to have squarely placed his award on a finding that the consultancy contract was repudiated and, as I have said, there are no findings upon which that finding i.e. repudiation, can be properly based."
And concluded:
"For these reasons I think the matter must go back to the Wardens Court at Kalgoorlie for re‑hearing of the respondent's claim."
Anderson J invited the parties to appear before him and to make further submissions as to the orders which should be made. On 26 November 1996, after hearing counsel, the learned Judge ordered that the appeal be allowed, the decision of the Warden's Court be set aside and "the matter be remitted back to the Warden's Court in Kalgoorlie for rehearing". According to the transcript of the proceedings before Anderson J on that day his Honour said:
"There will be an order in addition to the orders already made that the matter be remitted to the Warden's Court in Kalgoorlie for rehearing and that is the only order I propose to make as regards rehearing. It seems to me that it should be left to the warden to decide to what extent he goes into the matter and he can do that after hearing argument from counsel.
I specifically do not intend that the warden be in any way limited as to the ambit of the rehearing or as to what liberty he gives to amend pleadings or the like. It seems to me that the trial got off to a very bad start and the trial was conducted by counsel who did not fully understand or come to grips with the true issues involved in the case. I don't see how, under those circumstances, the warden can be limited to evidence already given. I think it would be quite wrong for this court to direct him to so limit himself. Therefore, the remittal order will be simply in terms that the matter be remitted to the Warden's Court in Kalgoorlie for rehearing. No doubt the rehearing will occur with the benefit of the reasons given by me as to why the appeal was allowed."
Although Anderson J said that he was not limiting the Warden to the ambit of the rehearing and was leaving it to the Warden to decide "to what extent he goes into the matter", his Honour made it plain that any decision by the Warden was to take account of the reasons the learned Judge had given "as to why the appeal was allowed". In other words, the learned Warden was required to have regard to the fact that the learned Judge had found that there was nothing "which justifies a finding of repudiatory conduct on the part of the appellants".
The respondent then appealed to this Court against the order of Anderson J. By the notice of appeal the respondent (being the appellant in the appeal from the judgment of Anderson J to the Full Court) contended that the learned Judge should have dismissed the appeal from the Warden or ordered that the matter be remitted to the Warden's Court to be determined in accordance with his reasons without the taking of further evidence.
The appeal came before the Full Court on 8 October 1997 and the court delivered its reasons on 13 November 1997. Kennedy J (with whom Steytler and Parker JJ agreed) observed that the conclusion which Anderson J had reached "was inescapable", and proceeded:
"I therefore agree with the learned Judge below that the Warden squarely based his award on a finding that the consultancy agreement had been repudiated by the [appellants]. The matter must therefore be remitted to him for the determination of the [respondent's] claim for remuneration under the agreement."
The court considered that the appropriate order would be to remit the matter to the learned Warden for determination in accordance with the reasons of Anderson J without the calling of any further evidence. Accordingly, the appeal was allowed to that extent.
On 16 April 1998 the matter came before the Warden again and more than a year later he delivered his second reasons for judgment. He observed:
"In hindsight and having read Anderson J's reasons in respect of repudiation and I accept that there may not have been sufficient reasoning in my original judgment I state quite clearly that my views remain the same …
The repudiation which I referred to was in fact brought about when the [appellants] wrote to the various mining companies which [the respondent] had previously been dealing with. It became abundantly clear to [the respondent] that he could no longer sell the tenements in the way that he had been advocating."
The learned Warden stated further:
"I find as a fact that the [appellants] did repudiate the contract by their conduct in writing letters to the other companies which the [respondent] had been dealing with. It seems quite clear to me on the facts that the [appellants] did not intend to perform their contract at all and not just in a manner which was substantially inconsistent with the contractual terms."
The learned Warden observed finally:
"The obligation upon the [appellants] was to provide the [respondent] with the five per cent interest in the tenements or alternatively with the cash value established by the [appellants] and fixed at two million dollars. It was not just a mere failure of the appellants to accept the respondent's advice which amounted to repudiation. It was their entire conduct."
His Worship again made an order that the appellants pay the respondent $100,000 as damages.
The appellants appealed to a single judge of this Court and the appeal was heard by Heenan J. His Honour was of the opinion that Anderson J and the Full Court had only found that there had been no repudiation by the appellants on 25 May 1993, and it was open to the learned Warden to decide whether the conduct of the appellants thereafter constituted a repudiation of the agreement. In our opinion, however, the learned Warden erred in several respects.
We consider that the reasons delivered by Anderson J finally disposed of the factual issue as to whether the appellants had repudiated the agreement as alleged by the respondent in his statement of claim. The observation, to which we have referred, that there was "simply nothing … which justifies a finding of repudiatory conduct on the part of the appellants", was unequivocal. In our view, the remarks made by his Honour on 26 November 1996 did not detract from the clarity of his written reasons.
Senior counsel for the respondent submitted that all the evidence was not before Anderson J when he delivered his judgment. That submission is disputed by the appellants, but in our view it is an irrelevant matter. The issue decided by Anderson J appears plainly from his Honour's reasons.
In any event, there can be no doubt as to how the Full Court viewed the question of repudiation. Kennedy J noted that Anderson J had "overturned the Warden's decision that the [appellants] had repudiated the contract" and, in effect, upheld Anderson J's conclusion that there had been no repudiatory conduct on the part of the appellants. The direction as to the further conduct of the matter was given by Kennedy J in the clearest possible terms. As we have pointed out, his Honour stated that "the matter must therefore be remitted to [the learned Warden] for the determination of the [respondent's] claim for remuneration under the agreement". Even if Anderson J's reasons could arguably be said to be ambiguous (and in our view they were not) the reasons delivered by Kennedy J, and concurred in by the other members of the Full Court, admitted of no doubt. The only issue that remained for determination was made crystal clear by the express direction given by Kennedy J that "[t]he matter must therefore be remitted to [the Warden] for the determination of the [respondent's] claim for remuneration under the agreement." The regrettable revisiting of the repudiation issue by the learned Warden was directly contrary to the direction given by the Full Court and has caused considerable delay and expense.
In the circumstances, in our view, both Anderson J and the Full Court dealt finally with the question whether the appellants had repudiated the agreement. It was not open to the learned Warden to adjudicate upon this issue again, this being precluded by the principle of issue estoppel (irrespective of whether the appellants' conduct said to give rise to the repudiation occurred after 25 May 1996 or at any other time).
It is to be noted, as well, that the learned Warden sought to decide the repudiation by reference to conduct that had not been pleaded as repudiatory and the appellants had been given no opportunity to deal with this new basis by leading evidence in connection therewith. Indeed, as the Full Court had considered that the issue of repudiation had been resolved once and for all, it had ordered that the learned Warden was to resolve the remaining issue on the evidence that had already been led. It was fundamentally inappropriate for the learned Warden to have proceeded as he did.
Moreover, the learned Warden erred in finding, again, that under the agreement the appellants were obliged to provide the respondent "with the five per cent interest in the tenements or alternatively with the cash value established by the [appellants] and fixed at two million dollars". We have pointed out that, according to the agreement, upon the sale of the tenements, the respondent was entitled to 5 per cent of the selling price and, should there be no sale, to compensation for his time. As it was common cause that the appellants had decided not to sell the tenements (and the tenements were not sold), the respondent's sole entitlement thereunder was compensation for his time. Accordingly, it was not open to make an order grounded on the respondent's so‑called entitlement to 5 per cent of the value of the tenements. There was simply no basis under the agreement for such an approach.
In the result, it matters little whether there was a repudiation or not. If there was no repudiation, the respondent's claim would be limited to compensation for his time spent on the project. If there was a repudiation, and the agreement was in consequence terminated, the respondent's damages would be determined by reference to the provision entitling him to compensation for his time.
For the reasons we have set out above, we would uphold the appeal, set aside the order made by Heenan J dismissing the appeal to him, and set aside the orders made by the learned Warden granting judgment in favour of the respondent in the sum of $100,000 and costs. Notwithstanding the unfortunate history of this matter we would again remit the matter to the learned Warden, to resolve the determination of the respondent's claim for remuneration under the agreement. As the Full Court previously ordered in the appeal which came before it on 8 October 1997, this issue is to be determined by the Warden without the calling of any further evidence. For the sake of clarity, we reiterate that the only issue to be determined by the Warden is the extent of the remuneration to which the respondent is entitled by way of compensation for his time spent on the project. We trust that expressing the issue in these terms will prevent any other issue from being argued or determined.