Wood v Intrafocus Pty Ltd

[2011] QDC 102

[2011] QDC 102

DISTRICT COURT

CIVIL JURISDICTION

JUDGE ROBIN QC

No 1527 of 2010

JOHN LAING WOOD	Appellant
and
INTRAFOCUS PTY LTD	Respondent

BRISBANE

..DATE 20/05/2011

ORDER

CATCHWORDS

Plaintiff appeal against Magistrate's rejection of his claim to commission for affecting 3 "sales" of houses to be constructed - arguments raised for first time on appeal - appeal points were that the parties agreement restricted the defendant's rights to terminate engagement to common law rights, that the failure to meet variable sales targets was not a proper basis for termination for breach of a term of the agreement, that the forfeiture of commissions on sales to clients already introduced was a penalty - none of these points raised at the trial - defendant persuades court that the appeal should be dismissed on that basis - however, the court made some examination of the merits - if appeal allowed new trail would be necessary - appeal dismissed, notwithstanding that the "penalty" argument might have some validity

HIS HONOUR:  It's no disrespect to the able and thorough arguments of counsel both sides that I've giving judgment now because I've formed a clear view of what the outcome ought to be.

The appeal is by a plaintiff, Mr Wood, against a Magistrate's dismissal of his claim to commission, which he contended he had earned as a consultant manning display homes with a view to finding clients for whom the defendant company could build houses.

As it happens, the appellant makes no complaint about the Magistrate's findings or reasoning.  He raises legal arguments which were not run before the Magistrate and contends that those are a clear basis for a decision in the appeal which would see him recovering judgment for $22,565.  That sum is, as it happens, taken from records of the defendant company which were made available on disclosure in which the amount was described as the sum owing to the salesman.  Some $7,000, or a little more, had been made available to Mr Wood as an advance on commissions.

The respondent/defendant argued that the appeal should be dismissed without a hearing on the merits, indeed without any examination of the merits, as a threshold issue.

A powerful group of authorities was relied on, starting with Suttor v Gundowda Pty Ltd [1950] 81 CLR 418, especially at page 438, where the judgment quotes dicta from members of the House of Lords tending in different directions preparatory to the High Court following the approach favoured. Next is Metwally v University of Wollongong [1985] 60 ALR 68 where an application to ventilate in a High Court appeal a particular ground, namely, that the Racial Discrimination Act 1975 was invalid, previously expressly abandoned, was refused by the High Court. At page 70 their Honours referred to their task of "weighing what might otherwise be irremediable injustice against the public interest in maintaining the finality of litigation," with a reference to State Rail Authority of New South Wales v. Codelfa Construction Pty Ltd [1982] 42 ALR 289, 150 CLR 29 at 38. At page 71 is the following passage: "It is elementary that a party is bound by the conduct of his case except in the most exceptional circumstances. It would be contrary to all principle to allow a party, after a case had been decided against him, to raise a new argument which, whether deliberately or by inadvertence, he failed to put during the hearing when he had an opportunity to do so." Those two decisions were considered and applied in Coulton v Halcombe [1986] 65 ALR 656, Deane J dissenting, an indication that in contexts like this judicial minds may differ.

The particular passage relied on by Mr Healy for the respondent is at the foot of page 562:  "The first respondents must be bound by the conduct of their case at the trial.  It would not be fair to the appellants to subject them at this stage of the proceedings to what is virtually a new trial on an entirely different issue to that which has been litigated.  In pursuit of such a course, the interests of expedition, finality and justice are denied."

In Water Board v Moustakas [1988] 180 CLR 491 the dissenting Judge was Gaudron J, who agreed with the Court of Appeal in New South Wales. The majority in the High Court were of the view that the case against the employer which the Court of Appeal had discerned was not a case which the employer had been required to meet at the trial and because the possibility of calling evidence to meet it was denied to the employer at that stage the plaintiff shouldn't be allowed to raise it on appeal. The headnote says: "In very exceptional cases a plaintiff's omission to put at trial a case formulated on appeal may not be conclusive against him but the opportunity to assert the new case at another trial should be granted only where the interests of justice require it and such a course could be taken without prejudice to the defendant."

Mr Healy acknowledged, but rather passed over Fingleton v R [2005] 227 CLR 166 where a new point was raised on appeal in the High Court for the first time and, indeed, by McHugh J in the special leave application and ultimately was embraced by the appellant and applied by the Court. That's a striking example of an appellant being allowed to argue points not taken below. It may be that special conditions in the criminal jurisdiction make this a special case.

Lastly, in the High Court is Lumbers v W Cook Builders Pty Ltd (in liquidation) [2008] 232 CLR 635, especially at 644 to 645 where the Water Board case was referred to. The Chief Justice said: "The respondent sought by notice of contention in this Court to dispute for the first the existence of the contract it alleged in its statement of claim. This should not be permitted."

Mr Travis representing the appellant fairly conceded that the three points he raised had not been run before the Magistrate, although plainly it was open to his Honour to appreciate them and apply them himself in the circumstances; perhaps, had they been obvious enough points, it was his Honour's duty to do so, as Mr Wood was self-represented at the trial.

I was not prepared to accede to Mr Healy's invitation to dismiss the appeal out of hand notwithstanding that his authorities establish the entitlement of an appellate Court to do that in respect of new points in the appeal that could, as the present points could, have been ventilated at trial but were not.

I do not regard those authorities as establishing any requirement that an appeal court proceed in such a severe manner.  My own approach was to require some assurance or comfort that dismissing the appeal on this basis was not allowing some unacceptable miscarriage of justice to occur.  The possibility that such might be occurring, in my view, clearly arises here.

It appears to be common ground that Mr Wood's efforts brought about three contracts for construction of homes which got to a stage where commission was payable to him.  The defendant/respondent's case was that at the time of termination of Mr Wood's engagement as consultant the conditions for the commissions becoming payable had not been satisfied.  Summarising it, there hadn't arisen sufficient certainty that contracts under which the clients would be obliged to go ahead would come about.  The learned Magistrate considered the issues in relation to the three contracts which Mr Wood relied on, having abandoned a claim in respect of a fourth, at pages 12 to 15 of the written reasons which impress me as careful.

I propose to set out in full in these reasons when they're transcribed the agreement under which Mr Wood provided services.  I do not include Annexure A which provided details of the manner of calculation of commission.  The correctness of the $22,565 amount seems to have been accepted.

A copy of the agreement in annexed.  The second sentence in clause 19 of the agreement of the parties was, on the evidence, added at the request of Mr Wood who was assessed by his Honour as a mature man experienced in matters of business.  The addition that he got made tended to confirm that.  It's intended effect I take to be that the deferring of commissions becoming payable ought not to apply regardless of the circumstances but only if he should leave in breach of the agreement.

The reason for setting out the full terms of that agreement relates to the first of Mr Travis's legal arguments and clause 16 which refers to the company retaining the right to terminate the agreement in the case of breach of any part of it by Mr Wood.  The argument was that "retained" has the meaning of "keeping" a right to terminate which exists already or independently.  There are indeed dictionary definitions of "retained" which support that meaning but there are other meanings of the word well understood in the community in reference to retaining lawyers or retaining something such as the contents of a dam.

The Merriam Webster Dictionary On-Line gives as a meaning of retain, "to hold, secure or intact," and as a synonym "hold."  The parties' agreement, which I take it was the respondent's standard form, would win no prizes for its drafting.  I agree with Mr Healy's observation that the interpretation put on clause 16 which would have the parties contemplating the whole panoply of common law rights with attendant restrictions regarding termination of such agreements and drafting a clause whose effect was to be to do nothing other than confirm the defendant's common law rights is so strained as to be totally unacceptable.  In my opinion, looking at the contract as a whole, "retain" is to be construed as meaning "have."

The next point raised by Mr Travis was that, accepting his first point, there could be under the general law no right in the circumstances for the defendant to terminate Mr Wood's engagement, as it did on the 11th of September 2005, slightly less than six months after the making and commencement of the agreement in the previous March.  At common law it was said, (and speaking generally, correctly) that such an agreement is not to be terminated for slight or trivial departures from its requirements, but only where essential or important terms are breached.

The defendant relied on alleged breaches of clause 5 of the agreement and also of clause 11, the appellant having not reached the acceptable level of two net sales per month averaged over a three-month period, as referred to in clause 11.  It appears to be the case that the appellant's only sales were the three for which he claims commission, and perhaps the fourth.  If those sales are averaged over a three-month period he falls short of the "acceptable level."  His Honour determined the clause 5 issue against the defendant and, although he said nothing specific about it, it appears to follow that he was accepting that clause 11 had been breached.  Indeed, it seems to me incontrovertible that it was.  Mr Travis's argument was that that provides no basis for termination and, in particular, because the two-net-sales-per-month benchmark is indicated as no more than the current benchmark, susceptible to change by the respondent.  It seems there never was any change.  Mr Travis's point is that the capricious possibilities open to the defendant render this a totally unsuitable basis on which to terminate citing breach.

As the matter was litigated in the Magistrates Court, all that need be shown against Mr Wood was "breach of any part of the agreement" which in the circumstances was shown.  Those circumstances include the exclusion of the common law.  I ought to observe that the circumstances, on the face of things, look very harsh from Mr Wood's point of view.  The analysis of the relevant events in respect of which commission is claimed indicates that Mr Wood was terminated, and it rather seems without warnings in advance, very soon after bringing in the clients.

In the event, apart from the advances on commissions which he received, which Mr Healy, who was not at the trial, indicated and perhaps inaccurately were the subject of a counter-claim, Mr Wood received nothing whatever for his services which we know proved of some value to the defendant in the three contracts procured.  That's the circumstance which gave me pause so far as acceding to Mr Healy's threshold point is concerned.

It's not possible to identify any injustice either way in that situation.  On the face of things, Mr Wood's rate of success seems amazingly slight.  One can infer, and there's no evidence about this although Mr Healy foreshadowed such evidence was in preparation, that there were significant costs for the defendant in keeping available the display homes where Mr Wood was to work.  I think one can infer that, to the extent that he was there not effecting sales, hypothetical alternative consultants may have been able to do that.

One of the issues raised before the Magistrate which he determined against Mr Wood centred on the contention that the defendant failed to keep the display houses in a sound and attractive condition appropriate to attract clients.  The issues as identified by Mr Healy at the trial concerned, in addition to the clause 5 issue, the maintenance of the display home issue, and whether or not the three relevant contracts had become unconditional, had added a so-called preliminary issue referred to in the Magistrates reasons at pages 3 and 4.  It's worth mentioning that as an introduction to the subject of the unfortunate history of the litigation which was much more confused and protracted than ideally it should've been.

The preliminary issue raised at the commencement of the trial on the 25th of July 2008 by Mr Wood was whether he had brought his claim in the right jurisdiction, the possibility being raised by Mr Wood himself that this was really an industrial dispute in which he was the employee contrary to what the agreement sets out. That issue required consideration by his Honour which occasioned delay and cost. The reasons for judgment record Mr Wood being ordered to pay costs of $1,325 on the 2nd of November 2006 in connection with an application to amend his statement of claim, leave for which was given. There was a summary judgment application brought by Mr Wood which was dismissed or withdrawn. There certainly was an application by Mr Wood for summary judgment filed on the 31st of October 2006 which plainly wasn't successful. The reasons for judgment record when the matter came before the Court for trial on the 16th of August 2007 Mr Wood raised assertions that the agreement was a breach of the Trade Practices Act and also, as the Magistrate put it, the Taxation Act. This may be a way of describing the assertion that in accordance with the Commissioner of Taxation's guidelines Mr Wood was an employee. Those were new assertions on the day and attracted the ire of the defendant's counsel, Mr Blond. The Magistrate recorded that Mr Wood wanted to get legal advice himself on that date.

A substantial order for costs in the amount of $8,880 had been made on the 16th of August 2007 when the Taxation Act and Trade Practices Act issues were raised. That amount was subsequently corrected by reduction by the amount of $1,325 which had apparently been included twice.

Exhibit 1 tendered in the appeal is a document setting out the respondent's version of costs that have been incurred and ordered in this matter to be paid by Mr Wood to the defendant.  Those include the costs of the trial which occurred finally on two days, the 31st of October 2008 and the 5th of December 2008.

The Magistrate through transfers and other difficulties didn't deliver his reasons until the 29th of April 2010.

Those features of the tortured progress of the proceeding which relates to a modest claim of $30,000 or so at the most are relevant, in my assessment, where the Court has to make a judgment about further proceedings.  I think those matters are relevant for the Court in determining whether it ought to accede to Mr Healy's threshold point, although they don't necessarily dictate what the outcome ought to be.

I need to mention the third of the appeal points which is that clause 18(a) of the agreement amounts to a penalty.  It's an unusual penalty in the sense that the subject matter of it is not some identified monetary sum which has to be paid by a breaching party but rather the forfeiture of amounts that might otherwise become payable to him.  In this case it appears clear that they would've become actually payable to him had the termination of engagement as consultant been deferred for long enough.  It's an unusual provision which Mr Healy sought to defend as a genuine attempt to pre-estimate losses in the event of breach in that one could not know in advance what quantum of commissions might be lost.

For the purposes of today, it may be accepted that whether a contractual provision is a penalty is assessed, not at the time when the penalty is suffered so that the parameters of it are known and can be measured against the circumstances, but rather at the time when the contract is made (see, for example, PC Developments Pty Ltd v Revell [1991] 22 NSWLR 615 especially at 645 which Mr Travis cited). On that basis, it doesn't assist the defendant that forfeiture of what was still only a potential $22,565 might seem appropriate or within the limits of what could be seen as fair or defensible.

I have real concerns regarding this penalty aspect; it's perhaps broadly covered in contentions that his Honour was faced with that the agreement was unfair or worked unfairly in the circumstances about which things were said to his Honour.  The reasons at page 14 state a conclusion:  "In relation to the argument by the plaintiff that as he was a consultant at the time of signing the contract but not at the time it became unconditional he was entitled to a commission or was, in fairness, entitled to a commission (as discussed in more detail above and rejected by me).  It may be that the plaintiff regarded that outcome to be unfair and harsh to him and he did not receive the full benefit of his work in having the contract signed.  However, as I've earlier found, Mr Wood freely signed the agreement which clearly set out those terms, conditions and consequences."

I regard the penalty issue as one which is truly open.  It's obviously one which could've been raised at the trial.  In relation to it and, indeed, other issues, Mr Healy submits that it would be unjust to allow the points to go ahead now because, in principle, evidence about them which would've been available had the issues been known to be in play could've been presented before his Honour.  I think that Mr Healy is right about that.  I confirm the view I expressed during the argument regarding Mr Travis's approach that the appeal should be granted on the basis of what he submitted were pure legal issues or enough of them being decided in favour of his client, whereupon the Court could simply award judgment for the accepted amount to his client.  It seems to me unacceptably inconsistent for Mr Travis to seize on any concession of that kind (as to quantum) which was made at the trial when the issues in the action were defined as they were and insist that, although Mr Wood can raise new issues on the appeal, the respondent couldn't raise new issues or new considerations in such a way as to withdraw any concession that it might've made.

If the appeal had succeeded, in my view it would've been unavoidable to send it back for retrial because the defendant in justice ought to have the opportunity of assembling and presenting relevant evidence. Mr Travis barely contested the propositions about acceptability of "evidence of the factual matrix" as dealt with, for example, in Carter and Others, Contract Law in Australia, 5th Edition, at 12-13 and following.

The proceeding went to a third further amended defence of the defendant.

...

And went as far as a second amended statement of claim.  The extent of costs generated is already out of proportion compared with the amount in issue.  The Court in the particular circumstances ought not to exacerbate the burden on the parties by directing a retrial.

The delay in years has now reached levels which effectively involve prejudice to the defendant of themselves.  Conscious that the effect is to deprive a plaintiff of any compensation for useful work which he did, I'm in the end of the firm view that he ought to be held bound by his conduct of his claim to the extent of not being allowed to raise any of his appeal points even if the one regarding penalty may seem to hold promise.

I think it follows from there being no other appeal point that the appeal has got to be dismissed.  That's the Court's order.

...

HIS HONOUR:  Appeal dismissed with costs to be assessed on the standard basis, if not agreed.

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