CONTRACTS – where directors of company, including the appellant, agreed to receive reduced remuneration as employees – whether company gave consideration – whether agreements to vary the original contract were void for uncertainty – held: appeal against orders on breach of contract dismissed
COSTS – where primary judge did not separate costs on issues and ordered the appellant pay the respondents’ costs on an indemnity basis from date of first Calderbank offer – held: appeal against costs orders allowed in part
[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.
[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.
[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.
Consideration
[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.
[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.
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AGLC
Hill v Forteng Pty Ltd [2019] FCAFC 105
Case
[2019] FCAFC 105
Decision Date
CaseChat Overview and Summary
The appeal in Hill v Forteng Pty Ltd involved the appellant, Mr Hill, and the respondents, Forteng Pty Ltd, with the dispute primarily concerning the validity of agreements to vary Mr Hill’s remuneration as an employee of the company and the associated costs orders. The case was heard in the Federal Court of Australia, where the primary judge ruled on the breach of contract and costs issues, and Mr Hill subsequently appealed the decision.
The central legal issues in this case were whether the company provided sufficient consideration for the agreements to reduce Mr Hill’s remuneration and whether these agreements were void due to uncertainty. Additionally, the case examined the appropriateness of the costs orders, particularly whether the primary judge correctly exercised his discretion in awarding indemnity costs following a Calderbank offer. Mr Hill argued that the issues were severable and that the share valuation dispute warranted significant attention, contrary to the primary judge’s findings.
The court found that the agreements to vary Mr Hill’s remuneration were valid as they were supported by consideration, aligning with the principles established in Musumeci v Wincorp Real Properties Pty Ltd. The court upheld the primary judge’s determination that the agreements were not void for uncertainty. Regarding costs, the court held that while the primary judge’s decision to award indemnity costs was appropriate, the lack of separation of costs on distinct issues was erroneous. Consequently, the appeal against the breach of contract order was dismissed, but the appeal against the costs orders was partially upheld.
The final orders of the court were that the appeal against the order dismissing Mr Hill’s claim for damages for breach of his employment contract was dismissed. The costs orders were set aside, and in their place, it was ordered that Mr Hill pay the respondents’ costs of the proceedings below on a party and party basis, to be taxed in default of agreement. Additionally, Mr Hill was ordered to pay 90% of the respondents’ costs of the appeal.
Orders
Orders of the court
1. The appeal against the order made on 5 October 2018 dismissing the appellant’s claim for damages for breach of his contract of employment be dismissed.
2. The appeal against the costs orders made on 6 February 2019 be upheld, those orders be set aside, and in lieu thereof it be ordered that the appellant pay the respondents’ costs of the proceedings below on a party and party basis, to be taxed in default of agreement.
3. The appellant pay 90% of the respondents’ costs of the appeal.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
Background
Background to the litigation
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Evidence
Evidence Before The Court
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Decision
Reasons for decision
Finally, the primary judge determined that the respondents should have their costs on an indemnity basis from the date of the first Calderbank letter, 18 July 2018. His Honour referred to authorities of this Court that have considered the principles applicable to the exercise of a discretion to make a special costs order when a Calderbank offer has been made: Black v Lipovac [1998] FCA 699; 217 ALR 386 at [213]-[218]; Kiefel v State of Victoria [2014] FCA 411 at [37]-[40]. His Honour concluded as follows:In my view, the plaintiff acted unreasonably and imprudently in not accepting the first Calderbank offer (and if it matters, the second one). By failing to accept the offer and pressing on, he ran the risk that he would be unsuccessful and then face the need to accept responsibility not only for his own solicitor’s costs but also for the costs incurred by the defendants – and he chose to accept the risk that the Calderbank principles might, after the trial, operate to his detriment: cf, IFTC Broking Services Ltd v Commissioner of Taxation (2010) 268 ALR 1 at 6. Accordingly, the plaintiff should pay costs on an indemnity basis, from 18 July 2018, and on a party party basis before that date.The parties’ submissions in relation to the primary judge’s costs decision Mr Hill advanced the following grounds of appeal in relation to the costs orders (grounds 8A to 8D):The learned trial judge erred at [14] of the Costs Decision in finding that “given the disparity between the two amounts referred to above, the time spent at trial on matters going to the two respective issues is of little consequence in this case”.The learned trial judge erred at [15] of the Costs Decision in failing to find that the issue upon which [Mr Hill] was successful was of “sufficient significance in proportion to the whole case to warrant a special order to deprive that party of the costs of that issue”.The learned trial judge erred at [21] of the Costs Decision in finding that [Mr Hill] “acted unreasonably and imprudently in not accepting the first Calderbank offer (and if it matters, the second one)”.The learned trial judge erred at [24] of the Costs Decision in awarding the plaintiff/respondent costs of the proceeding from 18 July 2018 on an indemnity basis. By his amended notice of appeal, Mr Hill seeks an order that, if successful on appeal, the respondents pay his costs of the proceeding at first instance, as well as his costs of the appeal. Mr Hill submits that the issues before the Court at first instance were severable, and pointed to the structure of the primary judge’s reasons, which separated consideration of the issues under headings: (1)“the first dispute” (at [18]-[26], [34]-[61]), which concerned Mr Hill’s claim for unpaid remuneration; and (2)“the second dispute” (at [27]-[32], [62]-[88]), which concerned a claim arising out of a share valuation dispute. Mr Hill submits that the share valuation dispute involved two separate and relatively complex identifiable errors by an expert valuer, expert reports, examination and cross-examination of two experts, references to a valuation textbook, case law and legislation, making claims under s 232 of the Corporations Act for an oppression remedy, and breach of a shareholders’ deed. He submits that the time researching, preparing, and conducting the hearing on that issue was significant when compared to the first dispute. On that basis, Mr Hill submits that the share valuation dispute was not merely a “subsidiary issue that paled in comparison to the employment dispute” or a “minor facet of his own pleaded case” as reasoned by the primary judge at [15] of the costs decision, particularly given that his Honour at [82] of the original decision had found that “the company’s expert did commit a manifest error in not having appropriate regard to the future prospects of the company”, and his Honour accepted the submission at [81] that “any substituted valuation is entirely in the realm of the unknown”.
Ratio Decidendi
Legal Principle Established
It follows that the appeal as to the employment contract variations must be confined to the conclusions of the primary judge as to consideration and uncertainty. Mr Hill also challenges the primary judge’s decision to award costs to the respondents, necessarily including the indemnity basis.Grounds 1-7: asserted error in finding consideration It is convenient to commence by considering the authorities referred to by the primary judge on the topic of consideration, together with certain other relevant authorities. The key legal issue advanced by Mr Hill is whether “practical benefits” as consideration for a contract variation, as applied in Musumeci, is good law in Australia. If it is good law, then the debate moves to the question of whether his Honour’s finding of consideration in this case was nevertheless in some way erroneous. As noted above, Musumeci was cited with evident approval in the High Court criminal assets forfeiture case of DPP v Le. One of the issues in DPP v Le was whether a statutory test of “sufficient consideration” for the acquisition of an interest in a matrimonial home by a wife from her offender husband had been met, so as to exclude from automatic forfeiture her interest in otherwise tainted property. That in turn involved determination of whether, and if so how, the ordinary concept of consideration contributed to the meaning to be given to that statutory test. Part of that deliberation was by Gummow and Hayne JJ at [43], who were in dissent as to the result. The High Court in DPP v Le, by majority (Gleeson CJ agreeing with Kirby and Crennan JJ), upheld the Court of Appeal in dismissing an appeal from the primary judge. That explicitly included approval of the Court of Appeal upholding the primary judge’s finding that “natural love and affection” could constitute “sufficient consideration”, albeit with the reservation that it might not be sufficient for a commercial contract. The Court of Appeal had found that “sufficient consideration” in the statutory test included the common law concepts of “good consideration” and “valuable consideration”: see Kirby and Crennan JJ at [71], referring to Director of Public Prosecutions (Vic) v Le [2007] VSCA 18; 15 VR 352 at [45]. The plurality decision of Kirby and Crennan JJ in DPP v Le noted (at [107]) that prior decisions of the High Court had recognised that consideration may have different meanings in different contexts, that it has a wider operation in conveyancing than in simple contracts, and that in conveyancing effective consideration is not required to be sufficient to support other types of contracts. After analysing the differences further, their Honours concluded (at [122]) that given that natural love and affection was sufficient consideration for conveyancing purposes, and given the mutual obligation of support owed between spouses, the criminal assets forfeiture legislation would have had to be specific in preventing exclusion from forfeiture a joint interest of an innocent spouse, which it did not do.