Neale v Ancher Mortlock and Woolley Pty Ltd; Ancher Mortlock and Woolley Pty Ltd v Neale
[2013] NSWCA 209
•09 July 2013
Court of Appeal
New South Wales
Case Title: Neale v Ancher Mortlock and Woolley Pty Ltd; Ancher Mortlock and Woolley Pty Ltd v Neale Medium Neutral Citation: [2013] NSWCA 209 Hearing Date(s): 1 July 2013 Decision Date: 09 July 2013 Before: McColl JA Decision: 1. Subject to 2 below, grant the appellant leave to amend the notice of appeal in the form of the document at page 50 of the Red Book.
2. Grant the appellant leave to amend the orders sought in the notice of appeal, such amendment to be made within fourteen days.
3. Dismiss the respondent's notice of motion.
4. Each party to bear his and its own costs of the motions.
5. Direct that the application for leave to appeal and the appeal proceed as a concurrent hearing.
6. Stand the matter into the Registrar's list on Wednesday, 24 July 2013 for directions for the further progress of the concurrent hearing.[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: APPEAL - application to amend notice of appeal - whether appeal arguable
COSTS - security for costs - UCPR 51.50(1) - special circumstances requirement - admitted impecuniosity - whether order should be made where appeal arguableLegislation Cited: Civil Procedure Act 2005
Supreme Court Act 1970
Uniform Civil Procedure RulesCases Cited: McDonald v Dennys Lascelles Ltd [1933] HCA 25; (1933) 48 CLR 457
Preston v Harbour Pacific Underwriting Management Pty Ltd [2007] NSWCA 247
Schwartz v Hadid [2013] NSWCA 89
Westralian Farmers Ltd v Commonwealth Agricultural Service Engineers Ltd (in liq) [1936] HCA 6; (1936) 54 CLR 361Texts Cited: J W Carter, Breach of Contract, 2nd ed (1991) The Law Book Company Limited
J W Carter and J C Phillips "The Liability of Debtors and Guarantors Under Contracts Discharged for Breach" (1992) 22 University of Western Australia Law Review 338Category: Interlocutory applications Parties: James Woodward Neale - Appellant
Archer Mortlock and Woolley Pty Ltd - RespondentRepresentation - Counsel: Counsel:
Appellant in person
R Carey - Respondent- Solicitors: Solicitors:
Appellant in person
Lander and Rogers - RespondentFile Number(s): CA 2013/16530 Decision Under Appeal - Before: Curtis DCJ - Citation: Ancher Mortlock and Woolley Pty Ltd v James Woodward Neale (District Court of New South Wales, Curtis DCJ, 6 December 2012, unreported) Ancher Mortlock and Woolley Pty Ltd v James Woodward Neale (District Court of New South Wales, Curtis DCJ, 29 January 2013, unreported) - Court File Number(s): DC 2011/157885 Publication Restriction: No
JUDGMENT
McColl JA: There are two notices of motion before the Court: an application by James Woodward Neale, the appellant, for leave to amend his notice of appeal and an application by Ancher Mortlock and Woolley Pty Ltd, the respondent, for security for costs. It is convenient to refer to the parties by their status in the appeal proceedings, rather than in their respective notices of motion.
The proceedings from which the appeal is brought involved a claim by the respondent to recover $80,000 being fees said to be due following the termination of an Agreement pursuant to which the respondent provided architectural services to the appellant. The appellant pursued a cross-claim seeking damages for breach of contract and/or negligence said to have flown from the respondent's allegedly tardy performance and failures in respect of the Agreement's performance, the consequence of which was alleged to have been that development approval was not received. Curtis DCJ found in the respondent's favour on the statement of claim and dismissed the cross-claim: Ancher Mortlock and Woolley Pty Ltd v James Woodward Neale (District Court of New South Wales, Curtis DCJ, 6 December 2012, unreported). He ordered the appellant to pay the respondent's costs: Ancher Mortlock and Woolley Pty Ltd v James Woodward Neale (District Court of New South Wales, Curtis DCJ, 29 January 2013, unreported). In his costs judgment the primary judge observed (at page 2) that the appellant asserted that the quantum of his damages claim was "in the terms of millions but which he reduced for the purposes of the jurisdiction of the Court to $750,000".
The judgment including interest entered against the appellant was for $96,163.93. The appellant has not paid the judgment sum. As the proposed amended notice of appeal records, the quantum of the judgment is such that a grant of leave to appeal is required: s 101(2)(r), Supreme Court Act 1970. I will return to this.
The notice of appeal was filed on 6 March 2013, a week out of time: Uniform Civil Procedure Rules ("UCPR") 51.16(1)(c). The respondent did not move to dismiss the appeal as incompetent within the time limited by UCPR 51.41(1) and does not now seek such relief in relation to its lateness. The appellant could have amended the notice of appeal without leave within 28 days after it was filed (UCPR 19.1(1), 51.23) but failed to do so. His application to amend was filed on 28 May 2013.
There were thirty four grounds of appeal in the notice of appeal when first filed - each of which seems to have been a negative averment of a positive finding actually made or inferred from the primary judgment. The proposed amended notice of appeal contains seven grounds, two, complaining generally of error in that judgment below was given for the respondent and that costs were ordered in the respondent's favour.
Of the other proposed new grounds of appeal, three complain of error in the primary judge's construction of the Agreement and the fourth complains the primary judge erred in dismissing the cross-claim because his Honour failed to deal with and/or properly consider the effect of correspondence from the Department of Planning.
The respondent's essential argument both in relation to security for costs and in respect of the amendment application is that the appeal is misconceived first, because the primary judge's construction of the Agreement was a straightforward application of McDonald v Dennys Lascelles Ltd [1933] HCA 25; (1933) 48 CLR 457 and Westralian Farmers Ltd v Commonwealth Agricultural Service Engineers Ltd (in liq) [1936] HCA 6; (1936) 54 CLR 361 ("Westralian Farmers") and, secondly, because, insofar as the dismissal of the cross-claim was concerned, the appellant failed to adduce evidence that the respondent's conduct fell below that expected of a reasonably prudent architect and, in any event it, too, was misconceived from the outset.
Accordingly the respondent submits there is no arguable appeal and that it would be futile to permit the notice of appeal to be amended, and accordingly, having regard to the appellant's admission that he would be unable to meet any order for security for costs, the latter order is warranted. The respondent also contends that the proposed new grounds of appeal lack the required degree of specificity and do little more than repeat the appellant's case at trial.
The Court may grant leave to a party to amend any document at any stage of the proceedings and, in considering whether to do so, is required to follow the dictates of justice: s 58(1), s 64(1), Civil Procedure Act 2005. Subject to the dictates of justice, all necessary amendments should be made which will enable the determination of the real questions raised by the proceedings: s 64(2), Civil Procedure Act. An amendment should not be permitted if it would be susceptible to a strike-out application.
An order for security for costs may be made in this Court if special circumstances are established: UCPR 51.50(1). Mere impecuniosity does not constitute special circumstances. One of the matters to be taken into account in considering whether special circumstances exist is the merit or otherwise of the appeal: Preston v Harbour Pacific Underwriting Management Pty Ltd [2007] NSWCA 247 (at [18]) per Basten JA (Ipp JA and Hoeben J agreeing).
As the arguability of the appeal is central to the issues raised by both notices of motion it is convenient to deal with it at the outset.
Pursuant to the Agreement the respondent was to be paid $200,000 for preparing a Part 3A Detailed Concept Plan (Masterplan) Application/Environmental Assessment ("EA") for approximately 200 apartments to be constructed on land in Pymble owned by the appellant. The fee was payable in two tranches, first for phase 1 and secondly, for phases 2 and 3. Within each tranche, sixty per cent of the fee was payable on completion of the work and the balance (the "second phase payment") "within eight weeks of EA approval". The respondent completed all phases of the work, but EA approval was never received. As the primary judge said "the development is in limbo": Ancher Mortlock and Woolley Pty Ltd v James Woodward Neale (District Court of New South Wales, Curtis DCJ, 6 December 2012, unreported at [3]).
The Agreement provided that either party might terminate it by giving the other party not less than ten working days notice in writing and, relevantly that within ten working days of the notice of termination the "client must pay the architect all accrued fees (including all costs and disbursements) in full, provided that the termination is not on the grounds of architects' incapacity or failure to perform" (my emphasis).
The respondent terminated the Agreement apparently because the balance was not paid after demand.
The appellant resisted the proceedings in part upon the basis that as EA approval was never received, the second phase payment was not an accrued fee within the meaning of the termination clause. He also filed a cross-claim seeking damages for the respondent's alleged breach of contract and/or negligence in performing the Agreement.
The primary judge found in the respondent's favour. He rejected the appellant's defence on the basis that the case was "squarely covered" by the judgment of Dixon and Evatt JJ in Westralian Farmers.
In my view, with respect, the issue was not so clear-cut.
In Westralian Farmers Dixon and Evatt JJ said (at 379 - 380):
"When the parties themselves have provided for the determination of the contract on a given contingency, the consequences flow altogether from their contractual stipulation and are governed by their intention, either actual or imputed ... If the title to rights consists of vestitive facts which would result from the further execution of the contract but which have not been brought about before the agreement terminates, the rights cannot arise. But if all the facts have occurred which entitle one party to such a right as a debt ... the fact that the right to payment is future or is contingent upon some event, not involving further performance of the contract, does not prevent it maturing into an immediately enforceable obligation."
It is unnecessary to recount the facts of Westralian Farmers. It is sufficient to observe that Dixon and Evatt JJ held (at 380) that in that case, the right to payment, while contingent at the time of the termination of the agreement, was a debt otherwise completely vested in the plaintiff as creditor and the termination of the agreement did not prevent it becoming absolute on the occurrence of the contingency, albeit that that occurred after termination.
Whether accrued rights to receive performance survive termination turns on the terms of the contract, the performance rendered by the party claiming the accrued right and the relations between the obligations sought to be enforced and the obligations discharged by termination: J W Carter, Breach of Contract, 2nd ed (1991) The Law Book Company Limited (at [1235]); see also J W Carter and J C Phillips "The Liability of Debtors and Guarantors Under Contracts Discharged for Breach" (1992) 22 University of Western Australia Law Review 338 (at 343).
The primary judge did not have regard to the matters to which Professor Carter refers. In particular, his Honour did not consider the Agreement as a whole or consider whether his construction of the termination clause made commercial sense and gave effect to the aims and purposes of the parties, to the extent that they could be identified from the text and context: Schwartz v Hadid [2013] NSWCA 89 (at [86]) per Meagher JA. Had he done so he would have had to confront the argument that on his construction of the Agreement, the respondent's rights to the second phase payment following termination were greater than those it enjoyed while the Agreement remained on foot. No doubt parties could contract on that basis although it might be thought to lack commercial sense. However, whether or not the parties so agreed arguably required, in my view, a more thorough engagement with the issues than that undertaken by the primary judge.
In my view, looking at the Agreement as a whole, it is arguable that the respondent's right to the second phase payment did not arise unless the contingency upon which the payment was expressed to depend (EA approval) eventuated. In other words there is a live issue as to whether the respondent acquired an "accrued right" within the meaning of the termination clause when EA approval had not been given or, even if it acquired an accrued right whether, as in Westralian Farmers, it could not enforce that right unless EA approval was given. That argument emerges clearly from the appellant's proposed amended grounds of appeal.
The primary judge dismissed the cross-claim because he held (at [46]) that the appellant had failed to establish that the respondent failed to act prudently or professionally or in breach of duty. The appellant's complaint is that his Honour failed to have regard to material correspondence from the Department of Planning which clearly identified the respondent's breach of contract and/or negligence. Needless to say, the parties are at odds as to the significance of that correspondence. It is not necessary to seek to resolve that debate. It is sufficient to say that it does not appear to me to be unarguably irrelevant. The respondent's evidentiary point can be the subject of a notice of contention if it is so minded.
I referred earlier to the appellant's admission that he would be unable to meet any order for security for costs. This is the case, apparently despite the searches conducted by the respondent which reveal that he is the registered proprietor of extensive real property interests, albeit subject to mortgage. This, I assume, is why he is unable to provide security even by way of bank guarantee. The appellant accepted the description of him being "asset rich, but cash poor".
However, despite his impecuniosity, in my view, the appellant has demonstrated that he has a bona fide and reasonably arguable appeal which would be stifled by an order for security. In such circumstances a security for costs order should not be made: Preston v Harbour Pacific Underwriting Management Pty Ltd (at [17] - [18]) .
The amendments contemplated by the proposed amended notice of appeal reduce a previously excessively long document to, essentially, five succinct grounds of appeal, four of which deal with the construction issue and one with the cross-claim. Their brevity is to be applauded. In my view they do not suffer from the vices for which the respondent contends. I would grant leave to amend.
One other matter should be noted. The orders the appellant currently seeks in the proposed amended notice of appeal contemplate that in the event of success the proceedings be remitted to the District Court for determination. That may be a necessary course in relation to the cross-claim insofar as there will clearly be, at the very least, matters of damages to be resolved. However, if the appellant succeeds in the appeal on the fee recovery claim, there seems to me to be no reason why he would not be entitled to a verdict. I would give him leave further to amend the proposed orders.
As I said earlier, a grant of leave to appeal is required. Having regard to the fact that the quantum in dispute on the appeal is so close to the jurisdictional limit of $100,000, it is, in my view, appropriate to order a concurrent hearing of the application for leave to appeal and the appeal.
Insofar as costs are concerned, the respondent has been unsuccessful in its motion, whereas the appellant has been successful. However at the time the respondent's notice of motion was filed, the extant notice of appeal was in a form the respondent was entitled to conclude lacked sufficient, if any, specificity so as to raise an arguable appeal. Further its searches of the appellant's property interests, as well as his failure to pay the judgment sum entitled it to form the view that an application for security for costs was warranted. In such circumstances, in my view, each party should bear his and its own costs of the motions.
I make the following orders:
1. Subject to 2 below, grant the appellant leave to amend the notice of appeal in the form of the document at page 50 of the Red Book.
2. Grant the appellant leave to amend the orders sought in the notice of appeal, such amendment to be made within fourteen days.
3. Dismiss the respondent's notice of motion.
4. Each party to bear his and its own costs of the motions.
5. Direct that the application for leave to appeal and the appeal proceed as a concurrent hearing.
6. Stand the matter into the Registrar's list on Wednesday, 24 July 2013 for directions for the further progress of the concurrent hearing.
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