Slipper v Berry Buddle Wilkins Lawyers

[2015] NSWSC 810

Supreme Court

New South Wales

Medium Neutral Citation:

Slipper v Berry Buddle Wilkins Lawyers [2015] NSWSC 810

Hearing dates:

20 May 2015

Date of orders:

24 June 2015

Decision date:

24 June 2015

Jurisdiction:

Common Law

Before:

Harrison AsJ

Decision:

The Court orders that:

(1) Leave to appeal is granted.

(2) The appeal is dismissed.

(3) The decision of his Honour Magistrate Pierce made on 4 November 2014 is affirmed.

(4) The summons filed 2 December 2014 is dismissed.

(5) The plaintiff is to pay the defendant’s costs on an ordinary basis as agreed or assessed.

Catchwords:

APPEAL FROM LOCAL COURT – Local Court Act 2007 (NSW) – whether the construction of a contract is question of law – whether variation of agreement entered into by solicitor and client for deferral of payment – whether Magistrate erred in finding that any variation of the agreement was void for want of consideration – general rule that to perform an existing duty is not fresh consideration

Legislation Cited:

Local Court Act 2007 (NSW)

Cases Cited:

Australian Broadcasting Commission v Australian Performing Right Association Ltd (1973) 129 CLR 99; (1973) 47 ALJR 526
Australian Woollen Mills v Commonwealth (1944) 69 CLR 476; [1945] ALR 16
Disability Services Australia Limited v Gollop & SafeAs Australian Pty Ltd [2015] NSWSC 147
SAS Realty Developments Pty Ltd v Kerr [2013] NSWCA 56
Swain v Waverley Municipal Council [2005] HCA 4; (2005) 220 CLR 517
Vanbergen v St Edmunds Properties Limited [1933] 2 KB 223
Wigan v Edwards (1973) 1 ALR 497; (1973) 47 ALJR 586
Williams v Roffey Bros & Nicholls (Contractors) Ltd [1990] 1 All ER 512; [1990] 2 WLR 1153

Texts Cited:

J W Carter, Contract Law in Australia, (6th ed 2013, LexisNexis)

Category:

Principal judgment

Parties:

Peter Slipper (Plaintiff)
Berry Buddle Wilkins Lawyers Pty Limited (Defendant)

Representation:

Counsel:
T Hall (Plaintiff)
V Bedrossian (Defendant)

Solicitors:
Hall Partners (Plaintiff)
BBW Lawyers (Defendant)

File Number(s):

2014/355263

Publication restriction:

Nil

 Decision under appeal 

Court or tribunal:

Local Court, Downing Centre

Jurisdiction:

General Division

Date of Decision:

04 November 2014

Before:

Pierce LCM

File Number(s):

2014/355263

Judgment

1. HER HONOUR: By summons filed 2 December 2014, the plaintiff seeks firstly, an order, to the extent required, that leave to appeal be granted; secondly, that the order of his Honour Magistrate Pierce made on 4 November 2014, in which judgment was entered for the plaintiff, be set aside; and thirdly, that this appeal be allowed and that the verdict and judgment entered below be set aside.

2. The plaintiff in this Court is Peter Slipper (“Mr Slipper”) who was the defendant in the Local Court proceedings. The defendant in this Court is Berry Buddle Wilkins Lawyers (“Berry Buddle Wilkins”) who was the plaintiff in the Local Court proceedings. For convenience, I shall refer to the parties by name.

3. The parties handed up a court book containing the Local Court file (Ex A). Berry Buddle Wilkins relied on the affidavit of Luke Buddle dated 12 February 2015, which annexed their Local Court submissions, which by oversight had been omitted from the Court Book.

The appeal

4. Section 39 of the Local Court Act 2007 (NSW) provides that a party who is dissatisfied with a judgment or order of the Local Court may appeal to the Supreme Court, but only on a question of law.

5. Section 40(1) of the Local Court Act provides that a party who is dissatisfied with a judgment or order of the Local Court may appeal to the Supreme Court on a ground that involves a question of mixed law and fact, but only by leave of the Supreme Court.

6. Section 41(1) of the Local Court Act provides that this Court may determine an appeal either (a) by varying the terms of the judgment or order, (b) by setting aside the judgment or order, (c) by setting aside the judgment or order and remitting the matter to the Local Court for determination in accordance with the Supreme Court’s directions, or (d) by dismissing the appeal.

7. In Swain v Waverley Municipal Council [2005] HCA 4; (2005) 220 CLR 517, Gleeson CJ at [2] reiterated that in the common law system of civil justice, the trial process determines the issues between the parties. The system does not regard the trial as merely the first round in a contest destined to work its way through the judicial hierarchy until the litigants have exhausted either their resources or their possibilities of further appeal.

Whether leave to appeal should be granted

8. In written submissions, counsel for Berry Buddle Wilkins argued that none of Mr Slipper’s grounds of appeal justify that leave be granted, because “something more than a contention that the judge at first instance was arguably in error is required”: see Disability Services Australia Limited v Gollop & SafeAs Australian Pty Ltd [2015] NSWSC 147, Wilson J at [41]). Usually leave is limited to those cases concerning matters that involve issues of principle, questions of general importance or injustices which are reasonably clear. Counsel further submitted that the relatively small amount of money involved in the proceedings compels, absent some significant issue of principle, that leave to appeal should be refused. However, I have taken a different view to that of Berry Buddle Wilkins.

9. At the hearing before this Court, Berry Buddle Wilkins accepted that the grounds of appeal identified in 1 and 5 involve questions of law and therefore do not require leave.

10. Berry Buddle Wilkins submitted that grounds 2, 3 and 4 involve mixed questions of law and fact and require leave to appeal. It submitted that:

(a)   Ground 2 involves a contention by Mr Slipper that conversations occurred comprising an agreement to vary the terms of the original arrangement between the parties and this involves, in part, a factual question.

(b)   Ground 3 involves a contention that there was consideration provided for the alleged contractual variation and that this involves a factual question as to the existence of any such consideration.

(b)   Ground 4 involves a contention that Berry Buddle Wilkins had agreed to continue carrying on work on the basis that it would be paid on a deferred basis. It says that this involves a factual question as to whether or not it had agreed to do so.

11. However, the construction of a contract is a question of law and so the appeal is as of right: Australian Broadcasting Commission v Australian Performing Right Association Ltd (1973) 129 CLR 99; (1973) 47 ALJR 526. In order to construe whether or not there was a variation to the contract for legal services, it is necessary to consider the surrounding factual circumstances. If the appeal involves mixed questions of fact and law, in construing the contract it is my view that leave ought to be granted and I do so.

The Local Court proceedings

12. On 11 December 2013, Berry Buddle Wilkins filed its statement of claim in the Local Court proceedings seeking payment of $31,613.83 including interest and costs as at 11 December 2013, for legal services provided to and for the benefit of Mr Slipper. The legal services were provided to Mr Slipper between 12 December 2012 and 3 May 2013 (S/C [1]).

13. On 26 February 2014, Mr Slipper filed a defence. He did not deny receiving the benefit of the legal services provided by Berry Buddle Wilkins or the quantum of the claim, but contended that there was a binding agreement whereby any payment for those services would be a deferred obligation. Berry Buddle Wilkins denied that there was any such arrangement.

14. In the Local Court proceedings, it was not in dispute that Berry Buddle Wilkins was at all relevant times an incorporated firm providing and entitled to provide legal services in New South Wales. Mr Slipper was a former parliamentarian in the Parliament of the Commonwealth of Australia and had been involved in proceedings brought against him in the Federal Court of Australia by a former member of his staff, Mr James Ashby. During part of those Federal Court proceedings, Berry Buddle Wilkins acted as solicitors for Mr Slipper.

15. In the Local Court, Berry Buddle Wilkins relied upon the affidavit of Mr Daniel Wilkins sworn 3 October 2014. Mr Wilkins was cross examined. Mr Simon Berry is the solicitor from Berry Buddle Wilkins who acted for Mr Slipper. He is no longer is employed by Berry Buddle Wilkins. Mr Berry relied on his affidavits sworn 14 March 2014 and 17 March 2014. Mr Berry was cross examined. Mr Slipper provided an affidavit sworn 22 October 2014, but did not attend Court so was not cross examined.

16. On 10 July 2013, a deed was entered into by the Commonwealth of Australia (“the Act of Grace Payment Deed”). The Commonwealth agreed irrevocably to provide Mr Slipper with reimbursement for certain legal expenses incurred by him in various Federal Court proceedings, including the proceedings where Berry Buddle Wilkins provided legal services to Mr Slipper. It appears that the Commonwealth will reimburse Mr Slipper when the litigation involving him is finalised.

17. The matters in dispute appeared to be limited to whether or not there was a binding arrangement entered into between the parties whereby Berry Buddle Wilkins would defer any claim for payment of its outstanding legal fees and expenses until such time as either the Federal Court proceedings were concluded and/or the Commonwealth of Australia honoured its obligations under the Act of Grace Payment Deed.

The costs agreement

18. Both parties referred to part of the costs agreement dated 20 December 2012 between Berry Buddle Wilkins and Mr Slipper where it states:

“E.   TERMINATION OF AGREEMENT

a.   We will not continue to do the Work: if you fail to pay my bills; if you fail to provide me with adequate instructions within a reasonable time; if you give instructions that are deliberately false or intentionally misleading; if you fail to accept an offer of settlement which I think is reasonable; if you fail to accept advice I (or counsel) give you; if you engage another law practice to advise you on this matter without our consent; if I, on reasonable grounds, believe that I may have a conflict of interest, or if you indicate to me that we have lost your confidence, or for other just cause.

We will give you at least fourteen (14) days’ notice of my intention to terminate our agreement, and of the grounds on which the notice is based.”

19. No notice of intention to terminate the agreement was given.

Witness statements and cross examination

20. Mr Slipper’s version of events contained in his affidavit dated 22 October 2014. It is as follows:

“17   The terms of the act of grace payment are set out in a deed that I understand my solicitors in this action (Hall Partners) have a copy of and that the Plaintiff solicitors also have on their files. It is annexed to an affidavit sworn on behalf of the Plaintiff in this action and is so described.

18.   The act of grace arrangement was put into place by the Commonwealth. I did immediately inform Mr Berry, telling him: ‘Simon, thank God I can finally do something for you. I have got a Deed of Act of Grace executed by the Commonwealth to pay my expenses finally.’ Mr Berry, who was already aware of the history concerning the Deed of Act of Grace payment, said to me words to the effect: ‘That is a massive load off our shoulders, we can continue acting for you until this entire saga is over. Obviously I will tell the partners and they can get off my back. We will keep acting for you to see this through and at least we know we have the act of grace payment.’

19.   I confirm that to date I have made no further arrangements (because I have not been able to) to secure the Plaintiff’s fees or to pay them as they go along and because I am now aware of the fact of the act of grace payment that will follow with the conclusion of the proceedings. I accepted Mr Berry’s words to the effect that his Firm would keep acting for me and they would see the matter through until the act of grace payment is paid to mean that we had an agreement that any requirement for me to pay the Plaintiff’s fees was deferred until such time as the Commonwealth made the act of grace payment and not otherwise.

20.   The ‘consideration’ that I had provided for this agreement was the fact that I had made repeated representations to the Commonwealth seeking the act of grace payment, and the consideration provided by Mr Berry was that knowing that they would get the act of grace payment, they (the Plaintiff) or Mr Berry, was prepared to continue to act for me.”

21. Mr Berry’s version is at [11] to [18] of his affidavit dated 14 March 2014. It reads:

“11   In or about late April 2013 a discussion was held between the directors of the plaintiff about whether the plaintiff would continue to act for the defendant in the proceedings due to the amount of outstanding fees and the defendant’s impecunious position.

12.   It was agreed during those discussions that, as it would not be appropriate for us to cease to act for the defendant just prior to the Full Court appeal, we would therefore provide limited assistance to Senior Counsel in preparation for and during the hearing.

13   During this time I had a discussion with the defendant in words to the follow effect:

Me:   ‘Peter, we have an issue with your fees. You owe us a lot of money and my partners are concerned about me continuing to act for you.’

Slipper:   ‘I appreciate that and your generosity. I am still speaking to Mark Dreyfus, the Attorney, and he is trying to see whether he can approve an Act of Grace payment. We should have been told already but haven’t heard. I will chase him again.’

Me:   ‘OK that is good but for the purpose of the hearing, Ian Neil has agreed to continue to act on the basis he will secure payment if you are successful and I will continue to act to assist him in the preparations for the appeal. I will have someone there at Court but it won’t necessarily be me. Is that OK?’

Slipper:   ‘Yes.’

14   I recall that shortly after the conclusion of the hearing before the Full Court of the Federal Court on 2-3 May 2013 the defendant forwarded to me a copy of an instrument approving an Act of Grace payment from the Commonwealth Government in respect of the defendant’s legal expenses. …

15   According my understanding of the document, the Government had agreed to meet payment of components of the defendant’s legal costs.

16   Throughout late 2012 and early 2013 at directors meetings at the plaintiff the issue of the outstanding costs of the defendant was raised. I reported, on different occasions, in words to the following effect ‘We have the Act of Grace payment, we will be paid at the end of the case. There is not much more I can do in the meantime’ and ‘We cannot get blood from a stone, we have to wait until the end of the case when the Government will pay us but we will get paid.’ In response to those statements the other directors would nod in agreement or say ‘yes’ or ‘Oh well, OK’. Sometimes there were discussions about the timing of the appeal, the prospects of success on the appeal, and when the judgment would be handed down so we could then determine when the payment would be received. On a number of occasions, Dan Wilkins, a director of the plaintiff, would respond with ‘Keep us informed as to what is happening.’

17.   Following receipt of a copy of the Act of Grace instrument, I had a discussion with the defendant in words to the following effect:

Me:   ‘Peter, I am still getting a lot of pressure about the outstanding fees. It is OK though. I understand that you are impecunious and we will just have to wait until the Act of Grace payment kicks in. Are you OK with that?’

Slipper:   ‘That would be great. Thank you.’

18.   Having regard to the Act of Grace payment and the fact the defendant was impecunious, I understood that there had been a variation to the terms of any costs agreement with the plaintiff in that the defendant would only expect to make a payment when the Act of Grace payment was activated, which I understand to be at the conclusion of the proceedings.”

22. In cross examination Mr Berry gave the following evidence (T33.38-47; T34.28-38):

“Q.   So the conversation that you purport to record here in paragraph 16 saying ‘we have the act of grace payment’ in those terms could not possibly have occurred prior to 10/7/13 correct?

A.   In those terms correct yes.

Q.   So in paragraph 16 where you – I say this respectfully – confidently say throughout late 2012 and early 2013 there were these conversations, your recollection about that is in the terms in this affidavit incorrect, you agree?

A.   In terms of late 2012 and early 2013 that is, in those terms that is correct. There were discussions about act of grace payments.

…

Q.   Mr Berry the fact is that at no time did the plaintiff Berry Buddle Wilkins Lawyers agree with Mr Slipper to, as a blanket proposition, put off his liability for fees. That’s correct isn’t it?

A.   No it’s not correct.

Q.   The truth is as I suggest to you respectfully happens many times in the legal profession, lawyers without reaching any formal agreement simply say to the client ‘Look put off this issue for now, you’re still liable for the fees, we’re still chasing you for the outstanding fees but we’ll see if something can be sorted out in the meantime’. That’s really the position.

A.   No.”

23. Mr Wilkins in his affidavit dated 3 October 2014 gave his version of events. He stated that he had no knowledge of any variation of the costs agreement. However, he also stated that he had knowledge of Mr Slipper’s financial difficulties before he was accepted as a client. At [42] he said:

“…The partners and I were aware of news reports that the Defendant had failed to attend to payment of fees owing to his former solicitors, Maurice Blackburn Solicitors, who had apparently taken legal action against the Defendant to recover those fees. In the circumstances the issue of fees payable to the Plaintiff was a major concern for me and I did not agree to allow the Defendant to pay his legal fees at the end of his case”

24. In cross examination Mr Wilkins gave the following evidence (from T41 to T46):

Q.   “… you would agree with me that your firm regularly reviews its debtors’ ledger is that correct?

A.   Absolutely.

Q.   In relation to clients where it’s got a legal right to recover fees, it would seek to exercise that right is that correct.

…

A.   It depends on the client. We have institutional clients that we would not do such – take such steps. We have individual clients that perhaps we would take steps yes.

…

… My practice is primarily for large institutional clients like Woolworths and it’s not in the best endeavours of the client relationship to start sending letters of demand if they’re beyond 30 days so that would not be my normal practice in that client’s perspective.

Q.   Mr Slipper had gone well beyond 30 days hadn’t he.

A.   He was not my client.

Q.   That’s not my question he was a client of your firm wasn’t he.

A.   Absolutely.

Q.   And he’d gone well beyond 30 days hadn’t he.

A.   He had.

Q.   And he’d gone well beyond 30 days before Mr Berry ceased to have an involvement with your firm is that correct?

A.   Certain invoices definitely.

…

Q.   In fact the simple fact of the matter is that when Mr Slipper came to you as a client he came to you on the basis that he didn’t have any money at that time didn’t he.

A.   Well I wasn’t privy to that, I knew he owed some money but I could not say categorically he had no assets or financial backing no.

…

Q.   …every invoice does have a due date and it’s approximately 30 days from the date of issue, is that correct?

A.   It’s our standard procedure yes.

…

Q.   You would agree with me and you’d tell his Honour that your expectation would be if we pull up that invoice it would say that it was due for payment on about 20 January is that correct?

A.   It says there the 19th yes.

...

Q.   You would also agree with me that after 19 January Mr Slipper’s first invoice was due and payable wasn’t it?

A.   Yes.

Q.   There was work that your firm had done by that time and continued to do work that hadn’t been paid for, is that correct?

A.   Yes.

…

Q.   You would agree with me that for each one of those invoices that were 30 day payment terms, in fact for every invoice that was issued after 20th or 19/1/13 that your firm was continuing to do work for Mr Slipper for which it had not been paid is that correct?

A.   Yes.

…

Q.   … you agree with me that the claims you bring in these proceedings are brought under your written cost agreement and you don’t bring them under any other agreement do you?

…

A.   Well yes invoices are submitted pursuant to costs agreement, they’re unpaid and that’s why we are here today.

Q.   You don’t contend for any variation of the agreement.

A.   To my knowledge there was no variation of that costs agreement.

…

Q.   The point of fact is that it was a term of your agreement that you wouldn’t provide any services if Mr Slipper didn’t pay his bills wasn’t it?

A.   I think that’s a standard term in most costs agreements.

…

Q.   The reality is that he never did pay your bills did he?

A.   No he still has not.

Q.   I want to put it to you that the reason for that is because there was a variation to the agreement in the manner in which Mr Slipper and Mr Berry both contend for.

A.   I don’t agree with that.

…

Q.   And you would agree with me that the first date at which your firm made a written demand for the repayment of what it says is outstanding fees was 22/11/13 is that correct.

A.   If you refer to paragraph 15 I think that’s the letter of demand, yes 22 November.” (My emphasis added).

The Magistrate’s decision

25. In submissions, it appears that the main issue in dispute was whether any consideration was given (T48.5-10).

26. The Magistrate’s decision is as follows (T51.27-48):

“… The plaintiff must succeed. The conversion referred to in para 16 of Mr Berry’s affidavit is simply a gratuitous offer to wait. There is no consideration. With respect, you cannot spell out a consideration merely from the fact that the parties continued to deal with the litigation involving Mr Ashby. Nothing else, waiver, representations, anything of any sort, was pleaded. There is a reference to a variation in para 18 of Mr Berry’s affidavit but it is merely expressed to be his understanding which does not take us anywhere.

There is also I might say, although it is perhaps of less importance, in the defence which is para 1(ii) that is the relevant portion having referred earlier to the act of grace guarantee by the Commonwealth and the arrangements between the parties that there would be a deferral, it says ‘It was never intended that the plaintiff would require payment’ and that is not a defence to say it was never intended. If it was asserted that the arrangements between the plaintiff and the defendant originally involved such a notion, namely that there be a deferral, well it didn’t did it. It happened, on the defence case, later and indeed the language of subpara (ii) when it says ‘It was never intended that the plaintiff would require payment but would be required when the matters the subject of the litigation were finalised’. Well that is not right either. It wasn’t the case that it was never intended. It was something that supposedly happened later. The plaintiff must succeed.”

27. The main reason the Magistrate decided Berry Buddle Wilkins should succeed was that the agreement was a gratuitous offer to wait. He was of the view that there could not be a binding variation to the contract as there was no consideration.

Grounds of appeal

28. Mr Slipper appeals the decision of the Magistrate on the following five grounds.

(1)   The Magistrate erred in misconstruing (as a question of law) the agreement under which Berry Buddle Wilkins had agreed to carry on work for him.

(2)   The Magistrate erred in failing to find, as a question of law, that there had been a variation to the written terms of the original agreement between Mr Slipper and Berry Buddle Wilkins, the terms of which were to provide for a variation to the agreement under which the work and services were performed.

(3)   The Magistrate erred in finding (as a question of law) that any variation of the agreement was void for want of consideration.

(4)   The Magistrate erred in failing to find that the basis upon which Berry Buddle Wilkins had carried on work for Mr Slipper was that Berry Buddle Wilkins would continue to (and did continue to) carry on work for Mr Slipper under an agreement in which Berry Buddle Wilkins would be paid for its works and services upon the making of the Act of Grace Payment, (by the Commonwealth of Australia).

(5)   The Magistrate erred in rejecting as irrelevant the evidence of the solicitor Mr Berry that Mr Slipper had reached an agreement with Berry Buddle Wilkins and that it was to be paid upon the making of the Act of Grace Payment.

29. Since the Magistrate decided that any variation of the agreement was void for want of consideration (ground 3), I shall deal with it first followed by grounds 1, 2, 4 and 5 (“the construction of the variation”).

(3)   Did the Magistrate err in finding that any variation of the agreement was void for want of consideration?

30. It was common ground that when Berry Buddle Wilkins entered into a costs agreement with Mr Slipper, it was aware that Mr Slipper owed money to his former solicitor and the issue of Mr Slipper’s payment of legal fees to Berry Buddle Wilkins was of major concern.

31. There is a conversation about deferral of payment of fees between Mr Berry on behalf of Berry Buddle Wilkins and Mr Slipper, which could amount to offer and acceptance of a variation. This conversation occurred after Mr Barry received a copy of the Act of Grace Payment Deed (in about early May 2013). Mr Berry said, “I am still getting a lot of pressure about the outstanding fees. It is OK though. I understand that you are impecunious and we will just have to wait until the Act of Grace payment kicks in. Are you OK with that?” Mr Slipper replied, “That would be great. Thank you.” ([17] and [18] Berry’s Aff, 14 March 2014). However, if no fresh consideration was given that agreement will merely constitute a gratuitous offer to wait.

32. Mr Slipper submitted that the Magistrate erred in finding that there was no consideration. The solicitor for Mr Slipper argued that in paragraph 20 of Mr Slipper’s affidavit dated 22 October 2014, it explicitly states that the consideration given concerning any variation of the costs agreement was the Act of Grace Payment Deed guaranteeing payment proffered by the Commonwealth. Mr Slipper said that the obtaining of a deed poll concerning the Act of Grace Payment was naturally enough consideration in the way of some other means of profit or benefit. He also submitted that the rendering of further instructions and the opportunity to do work for which one will be paid fees by the Commonwealth on an ongoing basis is additional and further consideration.

33. In support of his proposition that the Act of Grace Payment Deed was consideration, Mr Slipper relied upon Williams v Roffey Bros & Nicholls (Contractors) Ltd [1990] 1 All ER 512; [1990] 2 WLR 1153 at 1165:

“Accordingly, following the view of the majority in Ward v Byham [1956] 1 WLR 496 and of the whole court in Williams v Williams [1957] 1 WLR 148 and that of the Privy Council in Pao On [1980] AC 614 the present state of the law on this subject can be expressed in the following proposition: (i) if A has entered into a contract with B to do work for, or to supply goods or services to, B in return for payment by B; and (ii) at some stage before A has completely performed his obligations under the contract B has reason to doubt whether A will, or will be able to, complete his side of the bargain, and (iii) B therefore promises A an additional payment in return for A’s promise to perform his contractual obligations on time; and (iv) as a result of giving his promise, B obtains in practice a benefit, or obviates a disbenefit; and (v) B’s promise is not given as a result of economic duress or fraud on the part of A; then (vi) the benefit to B is capable of being consideration for B’s promise, that that the promise will be legally binding.”

34. Mr Slipper also referred to Australian Woollen Mills v Commonwealth (1944) 69 CLR 476; [1945] ALR 16 as authority for the proposition that consideration may exist in the accruing of some right or interest or profit or other benefit.

35. According to Mr Slipper, Mr Berry’s statement in answer to the question of an ongoing retainer that: “we can continue acting for you” ([18] Berry’s Aff, 27 October 2014) constituted acceptance of the consideration.

36. Mr Slipper submitted that the finding that no fresh consideration had been provided was legally erroneous, because it assumes that the Act of Grace Payment Deed was not consideration and that Mr Berry’s above statement was not an acceptance of that consideration.

37. Berry Buddle Wilkins submitted that in circumstances such as these, there is no consideration because a promise to perform an existing legal duty (to pay the legal fees) is not fresh consideration. Counsel for Berry Buddle Wilkins referred to the relevant section in J W Carter, Contract Law in Australia, (6th ed 2013, LexisNexis) at [6-41] where the learned author states:

“[6-41]   Promise to perform existing legal duty not consideration.

Since contract law recognises as valid only those promises which are supported by consideration, that requirement applies to promises by parties to existing contracts in the same way as it applies to promises by persons who are not already contractually bound. A variation to a contract will of necessity involve one party making a fresh promise or changing the content of an existing promise. Either way there is a new promise (‘variation promise’) which is binding only if supported by consideration.

As a matter of strict logic, it is difficult to see how an agreement to do what the promisee is already bound to do can constitute consideration for a variation promise. This is, in fact, one aspect of a particular (and troublesome) manifestation of the sufficiency rule. Thus, the traditional view is that the promise to perform (or the performance of) a pre-existing duty is not sufficient consideration for a variation promise. For example, if S has agreed to sell goods to B for $1000, but S and B agree that the price will be increased to $2000, there is no consideration moving from the promisee (S), if S has done no more than repeat the promise to deliver.

The general principle was stated by Mason J in Wigan v Edwards in these terms:

‘The general rule is that a promise to perform an existing duty is no consideration, at least when the promise is made by a party to a pre-existing contract, when it is made to the promisee under that contract, and it is to do no more than the promisor is bound to do under that contract. The rule expresses the concept that the new promise, indistinguishable from the old, is an illusory consideration. And it gives no comfort to a party who by merely threatening a breach of contract seeks to secure an additional contractual benefit from the other party on the footing that the first party’s new promise of performance will provide sufficient consideration for that benefit.’

The statement implicitly recognises two exceptions to the rule: it does not apply when the promise is made to a third party: and consideration is present where the plaintiff’s existing legal duty is exceeded. …”

38. Further, Berry Buddle Wilkins submitted that there would be no consideration when a variation is exclusively for the benefit of one party, and that this is the case here because the law firm is not accruing any extra benefit by allowing Mr Slipper to defer payment until his Act of Grace Payment comes through. In support of this proposition, counsel for Berry Buddle Wilkins again referred to Contract Law in Australia at [7.26] which the learned author continues:

“…consideration will not be present where a variation is exclusively for the benefit of one party. Where the nature of a variation may be equivocal, extrinsic evidence may show that it was made for the benefit of one party only. Thus, the suggested consideration for a seller’s granting of an extension of time for payment and the seller’s promise not to serve a bankruptcy notice, might be a change in the place where payment is to be made, but once it is shown that this change was also made for the buyer’s convenience alone, it is disqualified as a consideration.”

39. Counsel for Berry Buddle Wilkins submitted that the contention of Mr Slipper that the Act of Grace Payment Deed was itself the consideration “makes no sense”. He said that the very conversations upon which Mr Slipper places reliance occurred after the Act of Grace Payment Deed and the benefits flowing from that instrument had already been received by Mr Slipper. Further, counsel for Berry Buddle Wilkins said that Mr Slipper was pursuing the Act of Grace Payment for other interests anyway (his own and to pay outstanding legal fees to Maurice Blackburn).

40. Counsel for Berry Buddle Wilkins submitted that the second matter identified by Mr Slipper as consideration, the provision of further instructions to the solicitors, also failed to meet the test for consideration. He argued that the provision of instructions as consideration for a lawyer is an artificial submission. In addition, counsel for Berry Buddle Wilkins argued that an act of grace payment is not automatic and still requires the Commonwealth to assess and decide whether or not to pay. He submitted that even if there was going to be a payment, it would not be a “blank cheque”, a guaranteed payment of everything.

41. Further, counsel for Berry Buddle Wilkins submitted that Mr Slipper’s reliance on Williams v Roffey is erroneous. He said in that case, and other similar cases, a variation may not require consideration where the contract is incomplete, and because of a doubt about the ability to complete (for example because of impecuniosity) there is a variation of an agreement, if it yields a practical benefit. Counsel for Berry Buddle Wilkins argued that these circumstances are distinguished from that case since the work had been completed and had been invoiced. He submitted that where work has been performed by one party, it is necessary to provide some form of further consideration for their benefit in order to make a binding variation, referring to Vanbergen v St Edmunds Properties Limited [1933] 2 KB 223.

42. In SAS Realty Developments Pty Ltd v Kerr [2013] NSWCA 56 at [70] Ward JA said that: “Agricultural & Rural Finance Pty Ltd v Gardiner [2008] HCA 57; (2008) 238 CLR 570 at [96] makes clear that fresh consideration is required to make valid an agreement varying another contractual agreement.”

43. In my view, there does not appear to be any fresh consideration at all in these circumstances, there is a source of funds that will become available from which Mr Slipper can pay his legal fees. This is the duty Mr Slipper is already bound to perform.

44. The general rule is that to perform an existing duty is not fresh consideration: Wigan v Edwards (1973) 1 ALR 497; (1973) 47 ALJR 586. When the promisee is already contractually bound to the promisor, the general rule is that performance of an existing contractual obligation will not be good consideration unless some additional benefit is conferred. I do not accept that the provision of further instructions with “the opportunity to do work for which you will be paid fees by the Commonwealth on an ongoing basis” is an additional benefit amounting to consideration.

45. Nor do I consider Mr Slipper’s pursuing of the Act of Grace Payment to be an additional benefit. A benefit may exist if performance of the existing duty avoids problems that are associated with non-performance, as in Williams v Roffey. But here, the legal work has been performed and invoiced. Such a variation is for Mr Slipper’s convenience alone, and so in these circumstances, there is no consideration.

46. In my view, the Magistrate was correct in deciding that the agreement was simply a “gratuitous offer to wait” that was not binding on the parties as there was no fresh consideration.

Construction of the variation agreement

47. Since I have found there was no fresh consideration, and hence no variation, it is unnecessary to deal with grounds 1, 2, 4 and 5 of appeal, which concern the construction of the variation. Even if there was an agreement between Mr Berry of Berry Buddle Wilkins and Mr Slipper to defer payment, the Magistrate was correct in finding that there was no fresh consideration involved and consequently no valid variation.

48. The result is that the appeal is dismissed. The decision of his Honour Magistrate Pierce made on 4 November 2014 is affirmed. The summons filed 2 December 2014 is dismissed.

49. Costs are discretionary. Costs follow the event. The plaintiff is to pay the defendant’s costs on an ordinary basis as agreed or assessed.

The Court orders that:

(1)   Leave to appeal is granted.

(2)   The appeal is dismissed.

(3)   The decision of his Honour Magistrate Pierce made on 4 November 2014 is affirmed.

(4)   The summons filed 2 December 2014 is dismissed.

(5)   The plaintiff is to pay the defendant’s costs on an ordinary basis as agreed or assessed.

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Decision last updated: 24 June 2015