AMC Commercial Cleaning (NSW) Pty Ltd v Coade

Smith v New South Wales Bar Association (1992) 176 CLR 256 CASES CITED : Smith v South Wales Switchgear Ltd [1978] 1 All ER 18 Woolworths Limited v Olson [2004] NSWSC 871

AMC Commercial Cleaning (NSW) Pty Ltd (plaintiff) PARTIES : Stephen Keith Coade (first defendant) Australian Maintenance and Cleaning Pty Ltd (second defendant)

COUNSEL : T A Alexis SC (plaintiff) M A Ashhurst SC, M Seelig (defendants)

SOLICITORS : Rockcliffs Solicitors (plaintiff) Linacre Lawyers (defendants)

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

Date of Hearing: 1 September 2010 Date of Judgment: 3 September 2010

2009/289426 AMC Commercial Cleaning (NSW) Pty Ltd v Stephen Keith Coade and anor (No. 2)

JUDGMENT (EX TEMPORE) 1 REIN J: In this matter, I delivered reasons for judgment on 21 July 2010 and indicated that the parties should bring in proposed Short Minutes of Order (see [87]), and that, it was agreed, was to occur on 11 August. On that date, the parties were not able to agree on the form of orders for various reasons, including the defendants' application to re-open the case, which is the Notice of Motion with which I now must deal.

2 The leave which is sought is to tender a manual said to be a 2002 manual and an addendum operative as at 5 March 2003, which is the date that the Master Franchise Agreement ("MFA") was entered into by the plaintiff with the second defendant. In the balance of these reasons, I shall use the names and references set out in the principal reasons for judgment. I shall refer to what is put forward as the 2002 manual and the 2003 addendum as "the 2002 manual".

3 The issue to which the 2002 manual relates is the entry by AMC NSW into an agreement with Mr Ajaj whereby Mr Ajaj was to become the sub-master franchisee for the Australian Capital Territory. Approval for the agreement was sought from AMC National, which approval was not forthcoming. The issue was ventilated by AMC NSW only after submissions had been exchanged following the principal hearing in March this year, and leave to re-open was opposed by the defendants.

4 Leave was granted to AMC NSW to re-open its case following the provision of assurances that its case on the ACT sub-master franchise issue was limited to construction of the MFA and that no case of estoppel or misleading conduct would be advanced. The hearing on the ACT sub-master franchise issue was held on 25 May. At that hearing, AMC NSW relied on and tendered the 2009 manual, which became Exhibit L. It was tendered without objection, but with liberty to the defendants to check that the version tendered was an up-to-date version of the manual as at the date on which AMC NSW entered into the agreement with Mr Ajaj and sought AMC National's consent: see T495.15-19.

5 The exhibit was removed with leave, copied and returned to my Associate a few days later, and implicitly it was accepted by the defendants that no other manual should be tendered in place of the one which had been tendered by the plaintiff. The exhibit was considered by me in delivering my reasons on 21 July. The judgment deals with the ACT sub-master franchise issue at [72]-[86].

6 The judgment expressed a view that the 2009 manual was a significant reason for concluding, contrary to the argument advanced by the defendants, that the MFA, which incorporated the manual, did contemplate sub-master franchises.

7 The defendants had contended that the MFA did not confer a right on AMC NSW to create sub-master franchises, even though in the past such sub-master franchises had been permitted, both by AMC NSW and by other state master franchisees.

8 In support of their motion, the defendants relied on the affidavit sworn 9 August 2010 of the defendant's solicitor, Mr Linacre, in particular in particular paragraphs 4 and 5, which state: "4. At the time that the document was tendered, I considered that the operations manual was a fluid document to which the Master Franchise Agreement always referred. I did not turn my mind to the relevance of any other form of the operations manual. 5. It was not until after Judgement had been handed down in this proceeding on 21 July 2010 that I recognised that a relevant version of the manual was the one current at the commencement of the Master Franchise Agreement."

9 The plaintiff accepts that this is the explanation for the failure to tender the earlier version of the manual. 10 The defendants also relied on the affidavit sworn 17 August 2010 of Ms White, a business development manager employed by AMC National, in which she deposes to being involved in the creation of the 2002 manual.

11 In support of their application, the defendants also relied on Exhibit A, which is the exchange of correspondence between the solicitors acting for the defendants in 2002 and the solicitors then acting for the plaintiff. The first letter, in particular, contains a notation in paragraph 33 in the following form: "We confirm that there are two separate manuals: (i) the operations manual and (ii) the master operations manual. We confirm that your client has had access to both these manuals on two separate occasions which would have allowed an assessment of the content of the manuals. We are informed that Mr Kijurina has read both manuals."

12 The submissions of the defendants in support of their application rely on Smith v New South Wales Bar Association (1992) 176 CLR 256 at 265-267, and a summary of the principles derived from that case as follows: "1. the power is discretionary, and exercised having regard to the public interest in maintaining the finality of litigation; 2. whether there is a relevant avenue of appeal. 3. the importance of the matter calling for review. 4. if the application involves an application to adduce further evidence the reasons the evidence was not previously tendered (ie was it a deliberate decision) 5. embarrassment or prejudice to the other party." 13 It was also submitted that if the cause of failure to adduce the evidence was an error and that if the issue is of a type that invites further evidence, then prima facie the evidence should be allowed: see Smith at 267.

14 The defendants also relied on the following statement found in Einstein J's judgment in Woolworths Limited v Olson [2004] NSWSC 871 at [18]: "There is obviously a need in every case to look at the particular significance of the case of a particular issue, and there is a need to permit the true issues and the real merits, factual and legal, to be litigated."

15 Mr Alexis did not take issue with the principles relied on, but he put his case against leave being granted solely, at least initially, on the basis of a lack of utility in granting leave.

16 To understand the asserted lack of utility, I need to set out the defendants' argument, which has these limbs: (1) The 2002 manual was the manual in effect as at the date that the MFA was executed. (2) The 2002 manual makes no references to sub-master franchises. (3) The 2009 manual, whilst making reference to sub-master franchises, cannot constitute an amendment of the MFA, particularly by reason of cll 7 and 20.4 of the MFA, because whilst cl 17.3 permits AMC National to amend the manual unilaterally, the amendment permitting master franchisees to enter into a sub-master franchise is not a power which falls within those enumerated in cl 17.3 (a)-(d) of the MFA, and the defendant says that none of those provisions are relevant. (4) There is a further argument, which is that the defendants assert that the reference in the 2009 manual (that is, Exhibit L) to sub-master franchises does not purport to amend the MFA, but merely specifies what the rates to be paid are if AMC National does agree to permit a sub-master franchise to be entered into.

17 AMC NSW's response to these arguments is, first, that the introduction of sub-master franchises through the manual is within the power of amendment found in cl 17.3(c) and (d), and secondly, that the defendants have not established that the 2002 manual was linked to the MFA. There is nothing to establish that the 2002 manual is in fact the manual created as at 2003, and even if there is, it is not shown to be a manual "issued", as required in the definition in the MFA.

18 Mr Alexis also made the point that for AMC National to argue now that its own manual, that is the 2009 manual, contains amendments which are beyond power is unmeritorious and outrageous. Mr Alexis, whilst not pointing to any specific prejudice in permitting the defendants to tender the 2002 manual and to advance the argument that it now seeks to advance, says that the late raising of this means that the resolution of the matter from his client's point of view will be further deferred, which is a form of prejudice. He also made reference to the need for further evidence to be obtained.

19 Mr Ashhurst objected to reliance on the need for further evidence, given the failure of the plaintiff to adduce any evidence as to what further evidence would or might be required in relation to this further issue.

20 I agree with Mr Ashhurst's submission that such material, if it was to be relied on as a reason to oppose leave, should have been the subject of evidence. The plaintiff sought and was given a clear opportunity to put on any evidence that it wished to. I do not accept that the plaintiff was not in a position to outline what would be needed if leave were granted.

21 I have a real doubt as to whether it is appropriate to permit this endless war between two very determined individuals, albeit through their corporate extensions, to take up any more of the Court's time, given that the original hearing did not finish in the allotted time and there was then an application to re-open by the plaintiff to which I have referred, particularly having regard to the needs and interests of other litigants and the importance of finality in litigation, and further because it would appear that the principal basis which is now sought to be advanced is really one that involves an argument that could have been put at the hearing, had it been considered.

22 However, I am of the view that the application should be granted for the following reasons: (1) The principal basis upon which the application was opposed was the lack of utility. So far as the first basis of lack of utility is concerned, I do not think that the defendant's argument that neither cl 17.3(c) nor cl 17.3(d) covers the amendment permitting the granting of a sub-master franchise is one that can be characterised as hopeless or doomed to failure. On the contrary, it appears to be at the least reasonably arguable. (2) This is a somewhat complicated point: in relation to the definition of "manual", my view is that it is necessary for the manual to be "issued" to the master franchisee. Placement in a cupboard at AMC National, for example, is not an issuing of the manual, nor in my view is showing a copy of the manual to a prospective master franchisee many months before entry by that person into the contract an issuing of the manual, particularly when the prospective master franchisee did not proceed with the transaction at that point in time.

23 I am doubtful that Exhibit A establishes that the manual was shown to Mr Kijurina, but even assuming that it was, I do not think that is sufficient. The manual is not like the terms in cases such as Smith v South Wales Switchgear Ltd [1978] 1 All ER 18.

24 Notwithstanding the previous point, however, the evidence establishes on the balance of probabilities that there was in existence in 2003 a master franchise manual. Nothing has been produced by the plaintiff to establish that at any time prior to 2009, in particular in 2003, a manual existed which contained a sub-master franchise provision or reference.

25 Ms White was asked about existence of manuals, and the only manuals other than the 2002 manual were not master franchisee manuals.

26 It follows that if a manual were in existence in 2003 at the time of execution of the MFA, it was in the form of Exhibit 4 (Exhibit KAW 1 to Ms White's affidavit) or Exhibit 5 (Exhibit KAW 2 to Ms White's affidavit). Either those documents were issued or they were not. If they were not issued, and as I have said there is inadequate proof that they were, then no manual was issued as at the date of the MFA. If there were no manual in existence or issued as at the date the MFA was executed, then the point which AMC National wishes to make remains available, namely that the 2009 manual involved a unilateral change after the MFA was entered into.

27 There is evidence that there was in existence a sub-master franchise for Victoria in 2002 (see Exhibit 1), but it does not establish that sub-master franchises were contemplated for New South Wales, and even if it were relevant, it does not establish that the defendants' argument must fail.

28 I think there is some force in Mr Ashurst's submission that the 2009 manual was only brought forward as part of the plaintiff's case on construction at a late stage. The submissions of the plaintiff provided to the Court on 24 May appear to make no reference to the manual. This is in the context of a case where the plaintiff was permitted to re-open upon the limited basis to which I have earlier referred.

29 For these reasons, I am of the view that leave should be granted to the defendants to re-open the case in relation to this single, very specific point, and I will need to hear now from the parties on what time needs to be provided.

30 Leave is granted to the defendants to re-open the case by tendering what has been described as KAW 1 and KAW 2, annexed to the affidavit of Katrina Adele White sworn 17 August 2010.

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