Kinsella & Ors v Cooper

[2011] HCATrans 241

[2011] HCATrans 241

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Sydney  No S135 of 2011

B e t w e e n -

IAN ANTHONY KINSELLA

First Applicant

SIMON STONIER

Second Applicant

SCOTT BENJAMIN WRITE

Third Applicant

and

BENJAMIN ROBERT COOPER

Respondent

Application for special leave to appeal

FRENCH CJ
KIEFEL J

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON FRIDAY, 2 SEPTEMBER 2011, AT 1.29 PM

Copyright in the High Court of Australia

MR N.C. HUTLEY, SC:   If your Honour please, I appear with my learned friend, MR G.B. COLYER, for the applicants.  (instructed by Kemp Strang Lawyers)

MR P.A. BEALE:   If your Honour please, I appear with MR E. CHRYSOSTOMOU for the respondent.  (instructed by Mills Oakley Lawyers)

FRENCH CJ:   Yes, Mr Hutley.

MR HUTLEY:   Thank you, your Honour.  Can I trouble your Honours shortly with a little bit of background.  Mr Cooper, the respondent, invested in a company called Redrock Co Pty Limited in April 2003.  His co‑investors were Mr Kinsella and Mr Write, two of the applicants.  Redrock carried on business as a wholesale seller of alcoholic and non‑alcoholic beverage.  The investment was not a success.  Mr Cooper came to sell his interests to Mr Stonier and that led to a series of agreements, the important one of which was the agreement of loan, which the relevant ‑ ‑ ‑

FRENCH CJ:   Clause 1.3.3 is the ‑ ‑ ‑

MR HUTLEY:   Exactly, which involved Mr Cooper in fact lending back into the company $175,000, and that takes one to clause 1.3.3, which your Honours will find set out in the judgment of Justice Hodgson in the Court of Appeal at application book 42.  Your Honours are obviously seized of the terms of it, but, broadly speaking, over a period of three years it provided for a series of repayments by way of supply of supply of stock in trade, the subject of orders, from time to time in differing amounts on a monthly basis, the first 10 months at 4,000 and so on. 

Clause 1.3.4 provided that compliance with that would lead to a total discharge of the amount owing.  The applicants guaranteed the loan on the terms which, relevantly, are set out at page 45.  Clause 2.1 is all that is of particular relevance.  Thereafter, Redrock supplied stock from time to time to Mr Cooper and the company known as Inner City Blues, which was a company controlled by Mr Cooper and which ran a nightclub in Sydney, and goods were supplied for various figures over a number off months up until October 2004 such that as at that date the amount owing by Inner City Blues was some $29,000. 

That was thereafter dealt with as appears from application book 46 in the way identified in paragraph 16.  In effect, there being no orders received from Mr Cooper, on a monthly basis there was a paydown in respect of that debit balance of 4,000.  That was not called for under the agreement.  That seemed to have been an informal practice adopted by my clients.  If your Honours then go over to page 50 of the application book, your Honours will see what was deposed to by Mr Cooper and particularly at this point if your Honours would note paragraphs 24 and 25 in paragraph 23 at page 50 commencing at line 33.

FRENCH CJ:   So it gradually became harder to get what he wanted.

MR HUTLEY:   Quite.  That is, Redrock was unable to meet the orders on the basis that it did not have products available.  In fact, Redrock was scaling back its liquor operations, and that appears from paragraphs 26 and 27 which are there set out.  That this was, in effect, understood and the basis upon which the case was conducted can be seen from page 405 in the application book.  That is an email from Mr Cooper to, relevantly, my clients, Redrock and Mr Kinsella, and that is an email of 5 May, and if your Honours would see the suggestion:

you have some right of action against me.  my position is and has always been –

Your Honours will see at line 20.  If your Honours then go down to 3:

i sold my share in the company because

a)        i did not feel three directors salaries could be justified

b)       the company was moving towards non‑alcohol sales, a business of which i have little knowledge –

So, in other words, at all relevant times it was known that a situation could arise where this company’s stock in trade did not include alcoholic liquors.  Returning if I can to the judgment, if your Honours go to application book 46, your Honours will see a reference to a meeting, in paragraph 17, of 18 March which came to form a significant part of the reasoning of the members of the Court of Appeal.  That is where Mr Cooper met my clients:

at which [my clients] advised Mr Cooper that they were not in a financial position to make the payments to him required by the Loan Agreement.

In one sense, the language of that conversation bore little relation to the terms of the agreement which, of course, did not call for the payment of money, but rather the supply of stock in trade, if ordered.  It did, however, reflect to an extent the practice which was then maintaining, namely, in default of receipt of an order form for the paying down, as it were, drawing down against the debit balance.  The next event is the event of 26 July, which your Honours will see in paragraph 18, where Mr Cooper sent an order form listing various amounts in various levels of alcoholic beverages.  I just make this point, at no point was any evidence led or was that my clients had, as part of their stock in trade, any of those goods at any relevant time.

The next event of significance is the letter of 29 August, which is referred to in paragraph 19 of the judgment of Justice Hodgson, which is the communication which formed the basis of the disagreement between Justice Hodgson on the one part and Acting Justice Sackville on the other as to whether there had been acceptance of a repudiation, which they found.  There was further evidence before the court, which we have referred to at paragraph 32 of our summary of argument which is at application book 88, which the applicants drew to the Court of Appeal’s attention in relation to the question whether Mr Cooper should be allowed to depart from the course taken at trial and which suggested that there had been a delivery of stock to Inner City Blues on or about 14 April 2005.

Your Honour, the relevant invoice which indicated such an occurrence is at application book 401.  The relevant entry is at line 40 and this is a statement on the part of Redrock which shows the issuing of an invoice on 14 April 2005 in respect of the sum of $2,879.32.  So, in other words, there was some evidence to indicate there had been a delivery of beverages between the 18 March date and the date upon which the 26 July order took place.

FRENCH CJ:   That is the asserted repudiation.

MR HUTLEY:   Quite.

FRENCH CJ:   On 26 July, I mean.

MR HUTLEY:   Justice Hodgson found it was a combination of 18 March communication plus the 26 July order not being responded to which constituted the repudiation, and I will come to the details.  This material, which was drawn to their Honours attention, if properly investigated would have been highly material to the question as whether one could interpret the communication of 18 March as repudiatory with respect to performance of the contract so far as delivering goods in response to an order.

KIEFEL J:   What happened to the contractual term then?

MR HUTLEY:   I am sorry, your Honour.

KIEFEL J:   What happens to the contractual terms, 1.3.3, if it cannot be fulfilled?

MR HUTLEY:   Well, your Honour, we say that was part of the commercial – when your Honour says it cannot be fulfilled, if we have goods in stock ‑ ‑ ‑

KIEFEL J:   Do you say there was a course of conduct, like a convention estoppel or something?

MR HUTLEY:   No, your Honour.  Redrock was running a business.  It had stock in trade.  If the plaintiff, the respondent before your Honours, had chosen to ask for that stock in trade, we would have been obliged to supply it.

KIEFEL J:   But that would mean you are only obliged to supply what you have on hand.

MR HUTLEY:   Yes, and that is the meaning of stock in trade and that is precisely the question of construction which no one has ever addressed.  One of the points we make in respect of this appeal is that my client has been found liable on the basis of a repudiatory breach of Redrock without any determination as to the true construction of the contract.

KIEFEL J:   But the underlying premise for the agreement is gone.  I mean, no one ran a case on frustration though, namely, that stock in trade suggests that the continuance of that side of the business by which alcohol would be maintained.

MR HUTLEY:   That would have required a claim by the respondent that there was an implied term to the like that we would continue to run the business using alcoholic beverages sufficient to meet reasonable orders.  In fact, Justice Hodgson adverted to that possibility of an argument, your Honour, at paragraph 40 in his Honour’s judgment when his Honour found that we were debarred from raising by way of – in the appeal, having regard to the change, that there had been no breach, and your Honours will see from the bottom of paragraph 40 over to the top of the sentence leading over to paragraph 57.  Can I come to directly answering that question in a little while, your Honour?

KIEFEL J:   Yes.

MR HUTLEY:   As we say, that was the further evidence and we say that would have been highly material to the question of repudiation and was a reason why their Honours should not have allowed the departure from the way the case was conducted on appeal for reasons of Suttor v Gundowda.  Can I now turn to the pleadings, your Honour, because that was also a part of what took place in the trial.  Your Honours, the relevant amended statement of claim sued upon by Mr Cooper is at application book 98.  The relevant paragraphs are paragraphs 7 through 11, which your Honours will find on 99 at line 40 through 100 at line 40.  Your Honour, could I just note one thing.  This statement of claim was amended on the morning of the trial, and your Honours will see that from 97, line 10, and that deleted paragraph 9 which alleged:

In the alternative, as Red Rock was unable to provide stock in trade pursuant to the Loan Agreement, the Plaintiff and Defendants agreed that further repayments would be made in cash –

Then at 10 there is an allegation of breach:

Redrock failed to make payments due to the Plaintiff pursuant to the Loan Agreement, such that the principal sum of $139,000 remains outstanding.

KIEFEL J:   Just going back to paragraph 7, though, “or in the form of cash in the equivalent sum” was retained.

MR HUTLEY:   Yes.  Well, that was the allegation of the construction and that was denied.  It was never found ‑ ‑ ‑

KIEFEL J:   I see, the following allegations relate to some form of agreed variation.

MR HUTLEY:   Well, your Honour, it is somewhat obscure.

KIEFEL J:   Yes, it is a bit.

MR HUTLEY:   But the important point is, in paragraph 10 it is alleged that we breached the contract, and at paragraph 11 it is alleged:

Redrock repudiated the Loan Agreement by failing to make payments/deliver stock in trade pursuant to the Loan Agreement.

KIEFEL J:   Did the primary judge establish what the terms of the agreement were?

MR HUTLEY:   Yes.

KIEFEL J:   In the relevant respects in which we are presently concerned.

MR HUTLEY:   Your Honour, he concluded that the agreement was the written agreement and only the written agreement.

KIEFEL J:   But did he construe the terms of 1.3.3?

MR HUTLEY:   To be fair, no one has ever construed the terms ‑ ‑ ‑

KIEFEL J:   It is always a good starting point, is it not, to have a look at the terms of your agreement?

MR HUTLEY:   Well, your Honour, this is our fundamental point about what the Court of Appeal did.  We have been found guilty of repudiating the contract – of there being a repudiation and no one has determined what the meaning of the contract is.

KIEFEL J:   That raises an interesting point though.  If you were granted special leave, what is this Court to do?

MR HUTLEY:   Well, your Honours would construe the contract and we would say that ‑ ‑ ‑

KIEFEL J:   .....time.

MR HUTLEY:   Well, your Honour, the difficultly is this is a Whisprun case.  My client was found liable on appeal on two bases never run.

FRENCH CJ:   But pleaded in relation to repudiation.

MR HUTLEY:   With respect, no, repudiation was pleaded only by reference to the failure to supply; not by reference to the conversation of 18 March, and that was fundamental to Justice Hodgson’s finding that there was repudiation.  This is why we ‑ ‑ ‑

KIEFEL J:   But the conversation of 18 March was contained in the affidavit of Mr Cooper, was it not?

MR HUTLEY:   I accept that, your Honour.

KIEFEL J:   And it was before the parties and he was not cross‑examined on it.

MR HUTLEY:   Your Honour, with respect, one of the odd things in this day and age is it was allowed into evidence, it did not really go anywhere in respect of the pleaded case because it was not relevant, strictly, to the pleaded case of repudiation.  It is not unheard of for efficiency reasons that one does not take every objection to relevance in a commercial case.  Your Honours’ experience at first instance and your Honours would – as if every relevance to every document and every paragraph and every affidavit on a relevance was taken ‑ ‑ ‑

KIEFEL J:   No, but our experience might also suggest that one usually keeps a close eye on extraneous material for the points that it might lead to whether or not it might leave you exposed in relation to a plea that is not taken up.

MR HUTLEY:   But, your Honour, if then one tries to take it up on appeal, and that becomes a central element in the case, then Suttor v Gundowda becomes significant.  Then one has to look at this evidence that after the communication of 18 March there appears to have been a delivery of stock by Redrock to Mr Cooper.  That was drawn to the Court of Appeal’s attention as a reason why the case should not be allowed to be run because if that had been fully investigated, that could have had a significant effect upon the significance of the conversation of 18 March.

KIEFEL J:   It could, but I would not have overcome what Justice Hodgson I think identified as the more important fact, which was the non‑response to the order in July.

MR HUTLEY:   I understand that, your Honour, and I was going to come to that directly, but all I wish to say is, we denied we were in breach of the contract on the pleadings.  Can I then tell your Honours something shortly about how the trial was conducted.  Proceedings were heard before Judge Robison on 3 March, his Honour delivering judgment on 4 March.  If your Honours go to application book 120 and if your Honours would be kind enough and look – this is the opening.  Mr Chrysostomou was counsel for Mr Cooper.  He opened the matter, and if your Honours would please look in the transcript at lines 4 and lines 10 and also then go over to 121 between lines 45 and 50, what we say is clear from that is Mr Chrysostomou appreciated that there was an argument about the construction of clause 3.3 and whether there was any failure to comply with that clause.  That was clearly in issue in the case.  His Honour delivered judgment on 4 March, and your Honours will find that application book 1.

FRENCH CJ:   This was an ex tempore ‑ ‑ ‑

MR HUTLEY:   Yes, your Honour, I think his Honour reserved it overnight.  His Honour was at pains, your Honours will see, to make clear throughout the judgment that all the parties were in court and it was important that he set out and explain to them precisely the points which were run, how they were run and why they succeeded or did not succeed.  This point should be made; nothing was advanced before his Honour either by way of opening or in closing submissions concerning repudiation and he did not deal with that. 

His Honour found, if your Honours go to application book 18, lines 35 to 40, that there was a failure to fulfil the order.  That is at lines 36 to 40.  What he did not find was that there was any breach of contract by that.  The case was decided by his Honour on the basis that Mr Cooper had failed to deliver orders to Redrock after 26 July but not that there had been a breach on 26 July, and your Honours will see that if your Honours go to application book 22 at lines 43 over to 23, lines 13.  His Honour then went on to deal with the failure to make orders thereafter at application book 23, line 40 to 24 line 20.  In effect, what his Honour found is that whatever had occurred, because no further orders were made, there could be no establishment of damage on the part of Mr Cooper.

KIEFEL J:   I am sorry, I do not follow that.  I thought his Honour was referring to – well, at page 22 at least starts to refer, I would have thought, to the issue of breach.

MR HUTLEY:   Yes, but he does not go on to make a finding of breach because he does not need to make a finding of breach, with respect, because he says at about line 43:

The submission made by Mr Colyer for the defendants to the effect that Mr Cooper chose to sit back and not place any more orders does have foundation.  There was a decision which must have been made not to place anymore orders.  So effectively Mr Cooper has seized upon that particular failure to fill that order to trigger this claim –

His Honour is not determining that that constitutes a breach.  It is just a seizure on that failure –

In my view there was no evidentiary basis for Mr Cooper to do that having regard to the issues which have been raised in this particular case.

Then he goes on to deal with it. 

KIEFEL J:   How do you say his Honour determined the contractual point?

MR HUTLEY:   What his Honour said is, the way Mr Cooper’s counsel chose to put it at first instance was, “If you do not deliver the goods to me once, which I order, that is sufficient for me to be entitled to the entirety of the money.”

KIEFEL J:   This is the July request?

MR HUTLEY:   July.  His Honour in effect said, “That does not follow at all ‑ ‑ ‑

KIEFEL J:   Well, it would be if it was a fundamental breach.

MR HUTLEY:   But his Honour did not need to – the way his Honour approached it, his Honour did not determine it was a fundamental breach, like a repudiatory breach or anything like it.  In fact, one of the complaints made upon appeal by Mr Cooper is that his Honour had failed to make any finding of breach.

KIEFEL J:   I have interrupted you.  You were going to explain to me how his Honour did deal with it.

MR HUTLEY:   What his Honour said, in our respectful submission, is this.  “The way it was put is that any failure to deliver goods in response to an order would trigger my entitlement to the entirety of the money.”  That is how it was put.  So his Honour, in effect, did not need to determine the question of construction, or he perhaps may have, but he did not, as to whether you only had to supply that which you had or the contract meant something else, because his Honour said this ‑ ‑ ‑

KIEFEL J:   You mean implicit in what his Honour said was that there was no refusal to deliver?  Do we infer that?

MR HUTLEY:   That appears to be what his Honour said.  His Honour also seems to have said that whatever the character of a failure on one occasion may be, you do not prove damages, loss of $139,000 by just not getting the goods once.  You have to then go on and, in effect, place orders.  That may have been right or wrong as a matter of law, but the important point is that his Honour did not make a finding of breach and that that was clearly what all people understood was the fact that the appeal grounds advanced on behalf of the applicants was to that effect, and that appears from Justice Hodgson’s judgment at page 53 of the application book.  If your Honours look at ground 1 and ground 7, the errors which are pointed to on the appeal is that:

The trial judge erred in failing to find that the agreement was repudiated – and/or there was breach of contract –

That is ground 1.  Ground 7:

The trial judge erred in not finding that The Redrock Co Pty Limited (“Redrock”) had defaulted on the loan agreement –

and then refers to the unchallenged evidence.

FRENCH CJ:   All right, Mr Hutley, I think your time is up.  Thank you.  Yes, Mr Beale.

MR BEALE:   Your Honours, if I can just start with a point that assumes some significance in the way that my learned friend puts the appeal now.  One matter that has not been mentioned in the case for the applicant but was ventilated thoroughly, in our respectful submission, before the Court of Appeal, which formed, as I think their Honours put it in their judgments, a part of the context of the matter at the time that a conclusion must have been reached by the respondent, that his orders would not be fulfilled.

At the risk of labouring the point, the paragraph that the Court has already been referred to, which was actually paragraph 29 in the affidavit of Mr Cooper which appears at page 318 of the application book, is only the first step, and the context of that – whether my learned friend is correct, and we say he is not, about a subsequent delivery in April, I will come back to that in a moment.  Much can be determined about that question by looking at the handwriting on the invoice which indicates it is for an order on 5 March 2005. 

It is clear from the unchallenged evidence of the respondent, contained in paragraph 29, that they were just not in a financial position to honour the contract.  That is, we say by way of concession, but one piece of evidence that goes towards making up the conclusion that repudiation was occurring and ultimately that he was excused from further compliance with his side of the contract.  What has not been ventilated so far is the material in the emails which are referred to in paragraph 30 of that affidavit commencing at about line 45 of the same page, page 318.  They commence at page 403, but they run over page 402 to page 408 and, indeed, 409 which is the letter of 29 August.  Because of the way these things are printed, the material starts at page 403 and then goes over to page 402 and apparently concludes again at the top of page 403.

If I can invite your Honours to look at the email of 23 March 2005 which comes on the heels of the meeting of 18 March.  This, we would submit, is a complete answer to the notion that there was not a repudiation and that it was not ventilated properly before the primary judge.  Whilst criticism can be made about the way, or at least the specificity of addresses before the primary judge, there was a considerable volume of evidence that should have obliged him and entitled the Court of Appeal to conclude that there was a repudiation.  As I say, the document of the 23rd, timed at 4.08, coming on the heels of the meeting of the 18th suggests that he has been told certain things on the 18th and he is trying to work with them to find a way out, that is to say, an alternative to performance of the contract in the way specified in clause 3.1.1. 

The response to that is perhaps more interesting.  May I invite your Honours to go to line 30 on page 402, and then down to line 20 again on page 403.  What is contained there is a detailed reference to the problems, if I may put it that way, associated with Redrock and the reasons why Redrock is unable to perform.  What is adumbrated there is that they need to find an investor in order to recapitalise in order to pay his debt and that requires – the only investor they have who is interested requires a radical restatement of their liabilities following up on the suggestion that his is the only or principal one.  The conclusion that one must reach from that, we would submit, is that they are not going to pay his debt either in kind or in any other fashion, bearing in mind at their option they were entitled to pay it in cash but not at the option of the respondent.  Unless and until a new ‑ ‑ ‑

KIEFEL J:   The more important communications though are ones that amount to either repudiation or non‑repudiation, otherwise we have to construe what is said and done between the parties in light of the agreement.

MR BEALE:   Yes, we do not cavil with that, your Honour, but the point that I am making is merely that what occurred on the 18th was very important, what occurred on 25 July with the order that is ignored, bear in mind there is no response to it, and then ultimately what we contend, with respect, is acceptance of the repudiation in the letter of 29 August, but our submission is that all has to be looked at in the context of the communications between the parties.  The objective observer would, in our respectful submission, nonetheless need to look at these emails to determine what they were saying when they said nothing about the order and when they ignored the letter of the letter of 29 August.

KIEFEL J:   Your point, I take it, is that the non‑response to the July order is in the background of people who have a company that cannot trade or it has not got the finances to contend with?

MR BEALE:   Yes.  What is described in Peter Turnbull v Mundus.

KIEFEL J:   That is just an explanation for ‑ ‑ ‑

MR BEALE:   Yes.  We would say a clear intimation that he should not waste his time placing any more orders because we are not going to supply them unless and until you perhaps take some debt, debts which they say are owned by the Westpac Bank, if we can set that off, we will possibly swap your debt for equity.  They have made it clear, we would submit, that the orders are not going to be filled.  We would have said, with respect, that had he not done anything on 25 July, he could have relied on that as repudiation, but the acts of the 25th bought them another opportunity but one which they allowed to pass.  Clearly on the 25th, taken with all that had previously transpired, he was entitled to assume, and it is the proper objective assessment of the situation based on the complete contextual background, that they were not only not in a position to comply with their end of the contract but that he need not take any further action to do so.

KIEFEL J:   Do you say that the communications which are tantamount to saying, we cannot fulfil the contract, mean that whatever changes they made to their business and the stock in trade that they were carrying from time to time become irrelevant?

MR BEALE:   Irrelevant, yes.  If you cannot supply alcohol, one would have thought – it is not a necessary point in the appeal, of course, but, in our submission, if you cannot supply alcohol and it is your obligation to supply stock in trade and you have been in the habit of supplying alcohol, you might lead some evidence before the primary judge that you in fact did not have any alcohol to supply and that the other contracting party to the agreement knew it.  None of that was done.  There was no attempt at that whatsoever, that is why we say repudiation was made out. 

The other matter that I would like to respond to now is the proposition that the respondent ran a different case at first instance to the one that was put before the intermediate appellate court.  It is our submission that, as indeed has already been conceded by my learned friend, paragraph 11 of the statement of claim, which appears in the appeal book I think at page100, it raises the issue.  It alleges both repudiation and acceptance.  The defence denies that there has been repudiation, admittedly it is a broad denial, but it must be taken to deny both repudiation and acceptance.  The evidence of the respondent, in our respectful submission, contained in paragraphs 29 and 30, to a lesser extent from paragraph 24 of that affidavit through to paragraph 30, contends that there has been a repudiation because paragraph 30 of the affidavit annexes or refers to the annexed email material, including the letter of 29 August. 

Those pieces of evidence went entirely unchallenged by the defendant.  The defendant, now applicant, cannot be heard to say, in our respectful submission, when it gets to the High Court of Australia that we would have run our case entirely differently had this matter been the subject of an address, because that is, in effect, the essence of the submission which is made by my learned friend with respect to him.  What transpired before the primary judge was the evidence was led in a rather hurried form.  There was time in that day for negation as well, I perceive from the transcript.

His Honour then adjourned at the end of the day having heard ex tempore, if I may put it that way, addresses from both counsel rather than giving himself the advantage of written submissions.  His Honour then delivered what was, in effect, an ex tempore judgment the next morning.  But there was clear evidence, that I have already laboured, that there was repudiation and that must have been, indeed was, put on in accordance with the rules of court and orders of the court long before the hearing.

FRENCH CJ:   Incidentally, there was a complaint on the part of the applicant that there was, in effect, an erroneous holding by the Court of Appeal that there had been a finding of breach by his Honour when in fact there was no such finding.  What do you say to that?

MR BEALE:   That contention, with respect to my learned friend, is incorrect.  What his Honour the learned trial judge said was that there was a failure, that is a failure to deliver.

FRENCH CJ:   Well, you would construe failure as breach?

MR BEALE:   Yes.  In our submission, in the context in which his Honour used it, it is not capable of any other construction and his Honour Justice Hodgson actually referred to the fact that it was described as a failure in his judgment.  Can I just get back to the point about which the applicant seems to make a great deal, that this was not a case that was put before the primary judge?  The primary judge did not have the benefit of any evidence from the now applicants.  There was not one word of affidavit suggesting that anything Mr Cooper said in his affidavit was exaggerated, let alone untrue, indeed they led no evidence at all.

Of course, there would have been an opportunity for cross‑examination, he was cross‑examined.  Nothing was put to him in cross‑examination to the effect that what he had said in paragraphs 24 to 30, but principally 29, was erroneous.  Of course, that could not happen in light of the fact that the emails create a perfect trail and also indicate who sent them.  They are irrefutable, in our respectful submission.  That is why the evidence was not led.  That evidence was accepted. 

The failing, of course, is that neither counsel troubled his Honour with an address on the actual question of repudiation, but, with great respect to the primary judge, and I acknowledge the difficulties under which judges in that type of court must work, the workload and the speed with which the matters need to be eliminated, but he himself has an obligation to read the pleadings and apply the facts of the case to the case pleaded.  The fact here is that the respondent pleaded a case of repudiation and acceptance.  It was denied, so that it could be said that the applicants joined issue on the point but then led no evidence of it, doubtless because the emails which support the evidence that is given in ‑ ‑ ‑

KIEFEL J:   I do not think you can really point to the judge and say that the reason it was not taken up is the judge did not read the pleadings.

MR BEALE:   No, I know, that is not what I am saying.  Indeed, I am specifically saying ‑ ‑ ‑

KIEFEL J:   The point was not taken up in submissions.

MR BEALE:   That is right.  What I am saying is specifically it is not his Honour’s problem but the facts were led.  His Honour did not find clearly that there was a breach of a kind that would constitute either a fundamental breach or repudiation.  That is not the way the Court of Appeal decided the matter, but it is not open, and that is the main thrust, as I glean it, of the applicants’ submission that they did not get a fair go because at first instance there was no mention of repudiation, but there clearly was, and it was a piece of evidence that they might have had trouble refuting.

There was an opportunity given in the Court of Appeal when such a point was taken in the course of submissions.  Mr Colyer complained at appeal book 257, point 47 – I beg of your Honours’ pardon, may I go back to line 40.  That needs some light shed on it by what his Honour Justice Hodgson said at that point.  Towards the end of what his Honour says:

could you at that stage have said that can’t now be relied on or if that submission is made I would seek leave to reopen the case.

Mr Colyer’s answer to that was not an answer at all, we would submit, with respect to him:

What I can say is there would have been a meaningful exchange about whether or not that letter ‑ ‑ ‑

Over on the following page his Honour says:

Well you can have that exchange with us.

Mr Colyer repeats:

We can have that exchange now, yes.

His Honour the President passes a remark that might have alerted counsel to the fact that that was the opportunity to suggest what evidence it is they would have led.  Of course, we accept that, of course as we must, that Whisprun is a very strong authority for the proposition that you cannot run a brand new case on appeal, but one of the qualifications in that is that if you – and we do not say we are running a new case, but one of the qualifications is that if indeed there was, even if I am wrong about everything else that I

have said, there was no answer, there was nothing that could have been led by the applicant to refute that case, it is not a proper ground for appeal and one has to look at what Mr Colyer said in the Court of Appeal in context.

Had it been addressed on, their case might have been run differently.  Well, had it been addressed on, it would have come at the close of the evidence.  It would have required an application on the part of the present applicant to reopen his case and lead some evidence and it is at that point in time that perhaps section 56 of the Civil Procedure Act, relied upon by the applicant, might have come into play.  It is unlikely in the extreme, in our submission, that had there been a submission, which clearly enough was overlooked by both counsel, of repudiation, there would still have been no evidence for Mr Colyer to rely on.  It cannot be said now by my learned friends that they would have run their case differently had Mr Chrysostomou mentioned repudiation in the court below during addresses.

Indeed, the case was on the evidence proven, in our submission.  Little more needed to be said about it.  The trial judge, in his judgment, appeal book 3 at point 2, refers to the alternative pleading which alleged Redrock repudiated the loan agreement by failing to make payment.  So his Honour was cognisant of it and his Honour clearly gave some thought to it.  We say his Honour was wrong if he did in fact reach a conclusion about it.  It is not clear from the judgment whether his Honour did do that or not.  But the fact of the matter is, it was referred to by the judge in his judgment, it was pleaded, it was the subject of a defence and there was evidence about it which was unchallenged.

FRENCH CJ:   Thank you Mr Beale.

MR BEALE:   Thank you.

FRENCH CJ:   Yes, Mr Hutley.

MR HUTLEY:   Two points.  Your Honour, as to the invoice of 26 July, it was never established, which was the onus of the applicants, of the plaintiff at trial, to establish, that we had in our possession stock in trade, goods described within that order.  If we were right on the true construction of the agreement, that was their onus because they had to prove breach.  That was never done.  We were precluded from taking that point on appeal by what his Honour Justice Hodgson said at paragraphs 39 and 40.  In our respectful submission, that was wrong.  If there was an allegation of breach of contract, paragraph 11, but there was a denial of it and the particulars of the repudiation were failure to deliver stock.  It lay upon our learned friends, they bore the onus of proving breach and if we were right on the construction, they had to establish it.  They did not.  That is the first point, and we were in a position to take that point on appeal, this having been raised. 

It appears that his Honour has found that a plaintiff who alleges breach of a contract can be taken by surprise by a denial of breach by being forced to prove that there has been a breach.  No one sought to prove and it was the plaintiff’s onus to prove breach by the fact that, one, they sent an order, two, we did not comply with it and, three, it was part of our stock in trade.  The error of the Court of Appeal lay in the fact that they never dealt with the construction issue which lay at the heart of determining whether there could be repudiation.  That was part of the denial of a fair hearing.

KIEFEL J:   It would have been relevant to breach as well, would it not?

MR HUTLEY:   Quite.

KIEFEL J:   So it was not run by your side at trial?

MR HUTLEY:   It was, your Honour.

KIEFEL J:   The construction for which you now contend?

MR HUTLEY:   Your Honour, I took your Honour to Mr Chrysostomou’s opening; that recognised exactly that point.  The correspondence which was also in evidence at trial, which Justice Sackville refers to which your Honours will find at page – the September letter – 412, made perfectly clear that that was the construction for which we obtained and in submissions before the trial judge, which the judge accepted – well, referred to at application book 172, paragraph 22, we denied there had been any breach at all established by the plaintiff.  So in other words, this was clearly in issue.  We say it lay upon the plaintiff to establish it, they did not.

As to whether in the Court of Appeal my learned friend made submissions that Mr Colyer did not raise the issue of Suttor v Gundowda in the Court of Appeal and he only took you to what transpired orally, but there were further written submissions on this very point directed after appeal, and if your Honours go to application book 294 at paragraph 21 your Honours will see that this very point was raised and never dealt with by the Court of Appeal – and 22, not addressed at all by the Court of Appeal on the Suttor v Gundowda point, which could have been fundamental to explaining what transpired on 18 March and whether it was only referring to payments of money in that drawdown way which we described as opposed to the supply of goods, and that it was a clear Suttor v Gundowda point and we were denied the opportunity, and the Court of Appeal did not deal with hit.

The next point advanced by my learned friend is that the repudiation case was pleaded.  True it was that it was pleaded by pure non‑delivery of goods.  It was not pleaded or particularised as involving an anticipatory breach, namely, a conversation of 18 March.  That was wholly new and, in fact, was, as appears from the Court of Appeal transcript, developed by the Court of Appeal, not even our learned friends.  Had that been raised at the end of the trial, had repudiation been purely run on the basis of non‑delivery in response to the 26 July order, that would have been available.  The answer would have been, you have not proved that there was a breach but, alternatively, if you did, it is not a repudiation, but if they had raised 18 March as anticipatory breach, there would have been clearly a basis for saying that was not open on the pleadings.

FRENCH CJ:   Yes, thank you, Mr Hutley.

MR HUTLEY:   Yes, your Honour.

FRENCH CJ:   Court will adjourn briefly.

AT 2.23 PM SHORT ADJOURNMENT

UPON RESUMING AT 2.28 PM:

FRENCH CJ:   The applicants were sued under a guarantee for the performance, by a company, which they were directors, of its obligations under a loan agreement.  The loan made provision for repayment by way of supply of stock to the creditor and/or repayment of the loan.

The applicants, who succeeded at trial but lost in the Court of Appeal complained, inter alia, that the Court of Appeal allowed the respondent’s appeal on the basis of the company’s repudiation of the loan agreement.  They contend that the repudiation case was not run at trial.  Repudiation was pleaded.  In allowing the appeal, inter alia, on the basis of the company’s repudiation of the agreement, the Court of Appeal held that the pleadings and evidence did raise that question.  The applicants complain that the Court of Appeal determined repudiation on a broader basis than was pleaded. 

We consider, however, that the approach taken by the Court of Appeal in the circumstances was reasonably open to it by reference to the evidence at trial.  We do not consider that the correctness of the decision of the Court of Appeal is attended with sufficient doubt to warrant the grant of special leave.  Special leave will be refused with costs.

MR HUTLEY:   If the Court pleases.

MR BEALE:   If the Court pleases.

AT 2.30 PM THE MATTER WAS CONCLUDED