Aztech Science v Atlanta Aerospace - [2005] NSWCA 319 - NSWCA 2005 case summary — Zoe

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Aztech Science v Atlanta Aerospace

[2005] NSWCA 319

Court of Appeal (NSW)|2005-08-09|Before: Handley JA, Bryson JA, Basten JA, Barrett J

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Source facts

Court

Court of Appeal (NSW)

Decision date

2005-08-09

Before

Handley JA, Bryson JA, Basten JA, Barrett J

Source

Original judgment source is linked above.

Judgment (45 paragraphs)

[1]

Background 46 Atlanta Aerospace was jointly owned by Dr Daevys and a colleague, Mr Michael Burke. Their respective roles in the business of the company are not apparent from the evidence, but it appears that, pursuant to their efforts, the company had acquired or developed a monitoring device known as a sub-aquatic monitor, or colloquially "SAM", which could be used for monitoring water quality. That, and other devices, were the subject of discussion during an unidentified period in 2002 between Dr Daevys and Mr Antonio Azzi, with the intention of Mr Azzi forming a company through which capital could be provided to develop and market the identified devices. A further element in the proposal was that Atlanta Aerospace would contract with the new company to provide the services of Dr Daevys to assist with various aspects of the venture. 47 By 11 November 2002 Mr Azzi, identified as "the promoter", entered into a contract with Atlanta Aerospace and Dr Daevys in terms which foreshadowed the registration of Aztech. Thus recital A in the agreement provided: "A. The Promoter intends to apply to incorporate an Australian proprietary company under the provisions of the Corporations Act 2001 to be named 'Aztech Sciences Pty Ltd' or such similar or other name as may be approved by the Australian Securities and Investment Commission ('the Principal')."

[2]

Clauses 1-4 of the agreement read: "1. The Promoter intends to enter into this Agreement on behalf of the Principal before it is registered. 2. If the Principal is not registered or fails to ratify this Agreement within sixty (60) days from the date hereof, this Agreement shall be at an end, and notwithstanding Section 131 of the Corporations Act , neither party shall have any further rights against the other to require performance of this Agreement or to claim damages or costs. 3. If this Agreement ends because of the operation of the preceding provision, the Contractor and the Nominee agree that they do hereby release the Promoter from any liability that he would otherwise be under by law in the absence of this provision. 4. The termination of this Agreement pursuant to Clause 2 shall not affect any rights or remedies of either party against the other for any act event or default occurring prior to the date of termination." 48 Although the agreement was executed by Mr Azzi "for and on behalf of Aztech Sciences Pty Ltd", and by Dr Daevys, in his own right, on 11 November 2002, it was not executed on behalf of Atlanta Aerospace until 19 December 2002. The primary judge held that each of Mr Azzi, Dr Daevys and Atlanta Aerospace were parties to the agreement and that, accordingly, the agreement was not entered into until Atlanta Aerospace executed the agreement on 19 December. His Honour further found, in accordance with the submissions of Aztech, that "the date hereof" in clause 2 of the agreement was not the date on which the contract stated that it was made, namely 11 November 2002, but the date on which the last party executed the agreement, namely 19 December 2002. 49 On the basis that clause 2 of the contract required registration and ratification within 60 days of 19 December 2002, that period expired on 17 February 2003. Aztech, however, was not registered until 20 February 2003. Accordingly, neither registration nor ratification occurred within that agreed period. 50 The fact of registration not being in doubt, the first condition could be satisfied if the Court were satisfied that the 60 day period was waived or extended by three days. The question of ratification, however, involved greater difficulty. Aztech provided no unequivocal evidence that it had ratified the contract nor, if it had, when the ratification occurred. For reasons noted below, the primary judge was satisfied that ratification may have occurred on or shortly prior to 1 April 2003, but was satisfied that that did not constitute timely ratification within the terms of the contract. 51 On 17 March 2003 a meeting was held between officers of the two companies, including the solicitor acting for Aztech. It was clear that, by that date, serious differences of opinion had arisen and that Dr Daevys was asserting that he and Atlanta Aerospace were not bound by the agreement. The representatives of Aztech apparently complained at the meeting that Atlanta Aerospace had been unwilling to disclose details of its intellectual property rights. The reason for such reluctance was expressed to be a concern that there was no binding agreement and hence such disclosure would jeopardise its intellectual property. According to the Aztech letter of the same date, those concerns had been raised "for the first time today". The Aztech letter, written by a representative of the company, Mr Robert Somosi, also asserted: "My principal has always regarded that we have had a binding contract even though some of its terms were waived mutually on your side and on his [sic], these included amounts to be paid and other matters."

[8]

Corporations Act , s 131 57 The problems with pre-registration contracts entered into by promoters, on behalf of companies which did not at the time exist, were not easily resolved under the general law. The promoter could not act as agent for the company which did not exist and, as noted by Ford, Austin and Ramsey, Ford's Principles of Corporations Law at [15.250] the general law did not develop a theory of trusteeship to assist in resolution of the problem. The approach adopted by the general law in this country, prior to statutory reform, was identified in Black v Smallwood (1966) 117 CLR 52; see note by Lücke H, "Contracts made by Promoters on behalf of companies yet to be incorporated" (1967-70) 3 Adel L Rev 102. J.P. Hambrook, commenting on the position established in Kelner v Baxter (1866) LR 2 CP 174 in "Pre-incorporation Contracts and the National Companies Code: What does section 81 really mean?" (1982-83) 8 Adel L Rev 119 at 120 stated: "Not only is it impossible for an unregistered company to be a party to a contract, but the company cannot ratify such a contract upon incorporation. The rules relating to ratification were, in the main, established before commercial corporations became prevalent. One of the fundamental rules is that a principal cannot ratify a contract unless, at the time the contract was entered into, the principal was in a position to enter into the contract on its own behalf. In the case of a corporation, this means that ratification is impossible unless the corporation was in existence at the date of the contract sought to be ratified." 58 Section 81 of the National Companies Code, which commenced on 1 July 1982, provided that a company could ratify pre-incorporation contracts, provided the company was formed within a reasonable time of the contract being made and provided that ratification occurred within a reasonable time of the company's formation. As Hambrook noted, that provision failed to identify the legal position of the parties between the date of the contract and the date of ratification, a problem which might have been resolved had the promoter been deemed to be a principal until and unless ratification occurred. The same broad approach has been adopted in the Corporations Act, although some of the difficulties identified with s 81 have been resolved. 59 Section 131 constitutes Part 2B.3 of the Corporations Act, entitled "Contracts before registration". The provision relevantly reads: "131(1) If a person enters into, or purports to enter into, a contract on behalf of, or for the benefit of, a company before it is registered, the company becomes bound by the contract and entitled to its benefit if the company, or a company that is reasonably identifiable with it, is registered and ratifies the contract: (a) within the time agreed to by the parties to the contract; or

[12]

The background to the comments by Mr Somosi was explained by Mr Azzi in his affidavit, noting that he had been diagnosed with a condition requiring the removal of his gall bladder, an operation undertaken on 21 February, causing him to be in great pain and distress on 14 February. 62 The primary judge did not address the meaning and effect of this conversation because he found that the evidence did not demonstrate "that Mr Somosi acted with the actual or implied authority of Mr Azzi": at [38]. As a result, he concluded that "Mr Somosi's actions cannot be regarded as amounting to contractual conduct on the part of Mr Azzi". This finding was critical, because the relevant time which might be agreed "by the parties to the contract", for the purposes of s 131(1)(a) required the agreement of Mr Azzi. The finding made by the primary judge in relation to absence of agency was challenged on appeal. 63 One of the factors which led the primary judge to that conclusion was that Mr Azzi, in the same paragraph of his affidavit, had identified Mr Somosi as "an employee of my company". The unidentified company could not have been Aztech, his Honour reasoned, because it had not been registered at that time. Whichever company was referred to, it was a separate entity from Mr Azzi. Therefore, Mr Azzi was not affirming that Mr Somosi was acting on his behalf at the meeting. 64 As counsel pointed out, however, the statement was ambiguous, because it did not identify the date at which it was speaking. At the date of the affidavit, Mr Somosi was employed by Aztech, which could reasonably be identified as "my company" by Mr Azzi. That statement was accurate if understood as a description given as at the date of the affidavit. But in that case, it did not purport to identify Mr Somosi's capacity or status at the date of the meeting. However, in an earlier paragraph of the same affidavit, when identifying the handwriting on documents provided by Dr Daevys in October 2002, Mr Azzi identified Mr Somosi as "an employee of the plaintiff's director", a phrase which could be understood to refer to Mr Azzi personally. Accordingly, so it was submitted, the inference should have been drawn that Mr Somosi was indeed involved in the business discussions as an employee of Mr Azzi, prior to the registration of Aztech, including on 14 February 2003. 65 Two relevant passages in the defence are relevant to the meeting of 14 February. First, at par 7, Dr Daevys stated: "Mr Somosi and Mr Azzi failed to incorporate within the 60 day period and the contract was deemed to be null and void."

[13]

The Appellant relies upon that passage as indicating that Dr Daevys accepted that Mr Somosi was indeed working for Mr Azzi in relation to the contract. 66 The second passage, relating to the conversation itself was in the following terms: "Regarding alleged 'oral agreement' on or about the 14th February 2003 at Gosford between Somosi, Azzi on behalf of the plaintiff and the second defendant on behalf of the first defendant it is denied that any variation was agreed to, or even discussed at this meeting." 67 Mr Azzi affirmed that he was present at the meeting and heard the conversation between Mr Somosi and Dr Daevys. His Honour was entitled to find, as he did, that the events took place as Mr Azzi had said. But, he thought it significant that Mr Azzi did not intervene "to confirm what Mr Somosi had said": at [37]. However, in my view, the proper inference to be drawn from the totality of the material set out above, including the statement that in October 2002, Mr Somosi was Mr Azzi's employee, is that Mr Somosi was acting on behalf of Mr Azzi in relation to the agreement before Aztech was incorporated, and that Dr Daevys accepted that to be the case. Accordingly, it is necessary to determine the legal effect of the conversation on 14 February between Mr Somosi and Dr Daevys. 68 The first question is whether his Honour was correct in seeking to identify "contractual conduct" in the conversation. Although his reasoning in this respect was obiter, his Honour held that "agreed" in par (a) of s 131(1) referred to the making of a contract or legally enforceable agreement. His Honour also accepted, without deciding, that a period could be fixed for the purposes of that provision by an agreement subsequent to the contract entered into on behalf of the proposed company, at least where the subsequent agreement was said to vary the original contract: at [39]. 69 While the term "agreed" must involve mutual understanding between the parties to the contract, the section does not require that such an agreement be included in the contract nor, in terms, does it require that the agreement be contractually binding. The agreed date (if there be one) is a fact on which the Corporations Act conditions certain consequences. As noted by Hambrook, supra, s 81 of the National Companies Code did not include reference to a time agreed between the parties, but he suggested that any such agreement might be a factor which would affect the calculation of what was a "reasonable" time in a particular case: 8 Adel L Rev at 131. Under the general law, ratification could be within a period specified by the parties, such an arrangement being characterised as a promise to keep open an offer for the specified period. 70 This matter was not argued before us by reference to authority and it would not appear that the point has been expressly dealt with. The case law rather deals with peripheral issues such as:

[20]

(c) an intention to abandon "the time agreed" so that ratification need only take place "within a reasonable time", such time being assessed by reference no doubt to the original 60 day period and the proposed "extra few days". 73 Although there was undoubtedly a lack of formality involved in the attempt to vary a formal written contract, I am satisfied, on balance, that the first option should be rejected If, as his Honour accepted on the evidence, the conversation took place as attested by Mr Azzi, there appears, objectively, to have been a clear intention to vary the existing arrangement. That conclusion follows, not merely from the words used, but the assumptions which should be made as to the understanding of the parties as to the expiration of the agreed time. 74 These assumptions need to be spelled out. In his defence, Dr Daevys sought to rely on the date written on the top of the contract, on which at least two parties executed the document, namely 11 November 2002, as the commencement of the agreed period. On that view, the 60 days would have expired by 10 January 2003. If Dr Daevys had been of that view on 14 February 2003, his response to the request for a few extra days would only be understandable if, by earlier agreement, the 60 day period had already been waived or extended. On the other hand, there is some evidence from which it might be inferred that the delay in executing on behalf of Atlanta Aerospace was deliberate and Mr Daevys would, in February 2003, have expected the 60 day period to run until 20 February. In any case, his agreement should be treated either as acceptance that the agreed time period no longer applied, or that an agreed period continued to apply, but it did not end until "a few days" after 17 February. 75 As noted above, on 17 and 18 March, there was a flurry of letters between the parties following the meeting early in the afternoon of that day. In two letters from Aztech signed by Mr Somosi and in a letter sent the following day, signed by Mr Azzi, there was reference to the agreement entered into on "19 December 2002". A letter from Atlanta Aerospace, which appears to be a response to one of the letters of Aztech of 17 March, refers to the agreement without taking issue with the date of 19 December. Accordingly, it may be inferred that Mr Azzi accepted that the contract had been executed on 19 December 2002 and that the 60 day period ran from that date. It would follow that, as at 14 February 2003, he would not have thought that the 60 day period had already expired. Given the failure of Dr Daevys, writing on behalf of Atlanta Aerospace, to challenge that statement, the Court can be satisfied that he also held that view in March, and therefore in February 2003. 76 If the proper understanding of the conversation of 14 February is that the agreed period had been waived and par (b) of sub-s 131(1) was applicable, it would be appropriate to calculate what constituted a reasonable time by reference to the agreed period of 60 days and the agreement that there should be an extension of a few extra days. The same result will be achieved by treating the conversation of 14 February as giving rise to a new "agreed time" involving a few extra days beyond 20 February. 77 The calculation of the additional period is not without its difficulties. Taken in the abstract, 'a few extra days' might mean anything between three days and a week. However, one of the circumstances in which the conversation occurred was the ill-health of Mr Azzi, although the cause of his distress and the fact that he was intending to undergo surgery a week later were apparently not revealed to Dr Daevys at that time. Nevertheless, there must have been some uncertainty as to the further period required. That consideration suggests that a longer period, though of no more than two weeks, might have been contemplated. I would draw that inference. 78 Aztech was registered on 20 February 2003 which was, in my view, comfortably within the contemplated extension, being only three days after the expiration of the 60 day period. However, when ratification occurred is more obscure and requires consideration of whether a formal act of ratification is required or whether conduct is sufficient and, in either case, whether the result must be communicated to the other parties to the contract.

[23]

Thus, although this case is relied upon in Ford's Principles of Corporation Law , in relation to what constitutes ratification, it tells one little more than that payments made by a company in the circumstances of the case did not, as a matter of fact, constitute ratification of an hypothetical proposal to contract on behalf of an unformed company. 81 The primary judge set out the basic principles in the following passage: "[49] It is generally said that ratification may be express or implied. Express ratification occurs when the alleged [principal] has, by unequivocal language or conduct, acknowledged that the contract is his. Implied ratification may arise in various ways. It often occurs when the alleged principal, although not expressly acknowledging the contract as his own, acts in a way which can only be explained on the basis that he accepts the contract as his own. The essence is, in either case, a manifestation of the principal's intention to be bound. [50] Determining whether there has been ratification, in the sense relevant to the law of agency, therefore depends on an assessment of the conduct of the alleged principal. The conduct may consist of acts of the alleged principal himself or acts of someone else who clearly acts with the authority of the alleged principal. The reference here to 'acts' extends also to omissions to the extent that, in a particular context, omissions are capable of being of probative value. And it goes without saying that, in a case such as the present, conduct can be relevant only if occurring after the time at which the alleged principal came into existence." 82 Generally speaking, these propositions may be accepted, subject to two qualifications. The first qualification is one of form, rather than substance. The distinction between language and conduct is a matter of emphasis, in many cases. It is likely that conduct will more usually involve implied ratification, rather than express ratification, to the extent that such a distinction is usefully drawn. The second qualification is of more substance: implicit in some of his Honour's language is an assumption that the act of ratification must necessarily be communicated to the other party. Where ratification is implied from conduct, it may well be conduct directed to the other party (or a third person), in circumstances where the relevant implication may reasonably be drawn by the other party. However, an express act of ratification may be an internal action of a company, such as the signing of a board minute stating that the company ratifies the contract. Given the need to act within a specified time, it may in some cases be important to determine whether the signing of a minute, or other internal act of a company is effective immediately, or only if and when communicated to the other parties to the contract. 83 In the present case, there was no evidence of any formal act of the company ratifying the contract: since Mr Azzi gave evidence, but not to that effect, and since he was a director of Aztech, as well as its secretary and sole shareholder, one may infer that no formal act of ratification occurred at any relevant time. On the other hand, what may be sufficient conduct constituting acceptance by the company of the contract, executed expressly for its benefit, should be considered in the particular circumstances of the case. Thus, conduct which might be equivocal in other circumstances may give rise to a sufficient inference in this case. 84 Two factors are significant. First, not only did cl 1 of the contract expressly state that Mr Azzi entered into the agreement on behalf of Aztech before it was registered, but cl 2 indicated that the agreement would come to an end (assuming it ever commenced) if registration and ratification did not occur within the agreed period. Clause 2 expressly recognised that "neither party" (presumably referring to Mr Azzi on the one hand and Atlanta Aerospace and Dr Daevys on the other) would have any rights against the other to require performance of the agreement or to claim damages or costs, in the event that the condition were not fulfilled. Further, cl 3 expressly released Mr Azzi from any liability he might otherwise have by law, such entitlement to contract out of the effects prescribed by s 131 being provided by s 132(1) of the Corporations Act. The relevance of these provisions is that, once the company was registered, any act of Mr Azzi referable to the execution of the contract, occurring within the period agreed, could readily be accepted as referable to a ratification by Aztech, absent which no contractual entitlements would arise. 85 Further, although cl 4 may have permitted either party to recover money paid "prior to the date of termination", there was no right or remedy provided in relation to moneys paid or services rendered thereafter. 86 The second factor of importance, is that Mr Azzi was not only the promoter under the contract, but was also the directing mind of Aztech, once registered. That fact might render his conduct equivocal in other circumstances; however, in the circumstances of the contractual provisions noted above, an inference that, after registration, he was acting on behalf of the company may be drawn with reasonable confidence, that the company had in fact accepted the contract. The relevant conduct therefore needs to be considered. 87 In his Honour's view, the first unequivocal act of the company demonstrating acceptance of the contract was the letter sent by the solicitors for the company threatening legal proceedings on 1 April 2003. Because the discussion of ratification in his Honour's judgment was entirely obiter, the case having been determined on the basis that there had been no extension of the period which ended on 17 February, he made no finding as to when an extended period would have ended, based on the conversation of 14 February 2003. Nevertheless, on the approach adopted above, 1 April being six weeks beyond the originally agreed date of 17 February, was well outside any reasonable construction of the extension agreed on 14 February. 88 Nevertheless, the letter should not be ignored: the "clear manifestations" in the letter of 1 April cannot themselves constitute ratification of the contract because the solicitors would not have the relevant authority. Those manifestations should be understood as reflecting prior ratification, which took place at an unidentified time. 89 The earliest suggested evidence of ratification is the following statement in Mr Azzi's affidavit: "15. Subsequent to 20 February 2003, I caused to be sought from the defendants information necessary for the commercialisation and sale of the four devices set out in Schedule B of the Agreement, but received no satisfactory response."

[25]

The reference to "14 December" is probably a typographical error and should read "19 December". A similar earlier statement (referring to periods after 19 December) referred to payments made on 19 December and on 24 January 2003, being payments made before the company was registered. The primary judge saw the third payment as equivocal in relation to ratification, because the paragraphs in the affidavit relating to the two payments before 20 February and the payment after 20 February were expressed in identical terms. Further, there was a suggestion in the course of the appeal that the payments, including that made on 26 February 2003 was more properly referable to a letter proposing a partnership between Atlanta Aerospace and Aztech dated 3 December 2002 from Dr Daevys, although that letter anticipated a payment of $90,000 over three months, in three equal payments. That letter may properly be understood as an administrative proposal as to the manner of payments to which Atlanta Aerospace would be entitled under the schedule to the contract, which arrangement was again varied to the benefit of Atlanta Aerospace prior to 19 December 2002. 90 Whilst I accept that the language of Mr Azzi's affidavit is equivocal and that the evidence with respect to the payment made on 26 February is scant in the extreme, it must nevertheless be considered in the context of an agreement which envisaged work being done by Dr Daevys prior to the formation of Aztech. In my view the better inference (and one I would draw after some hesitation) is that, Mr Azzi, who became the governing mind of Aztech once it was formed, maintained his commitment to the agreement, and acted on that commitment. The payment on 26 February by Mr Azzi may be seen as a demonstration of his continuing commitment to carrying out the agreement and thus provides evidence of ratification by Aztech, on or before that date. 91 If it were necessary for Aztech to communicate its ratification to the other parties to the contract, I would find that it impliedly did so by making the payment to Atlanta Aerospace for the work done by Dr Daevys, such payment being made on the date on which the invoice was received, namely 26 February 2003. That date, being nine days after the original 60 day period terminated would, in my view, fall within the period of extension agreed on 14 February 2003.

[31]

This material confirms an on-going relationship between the two companies, as at 5 March 2003. That relationship is referable to the subject-matter of the contract, which I infer had been on-going since the formation of the company. It is only consistent with Atlanta Aerospace then being of the view that the formation of Aztech had been followed by ratification so as to satisfy cl 2 of the agreement. 96 The question remains, however, whether it should be admitted. It is not fresh evidence in that it was not only available, but was in a form ready to be used, at the hearing before the primary judge. There was no affidavit tendered in support of the application to admit the further evidence, but counsel stated from the bar table that it had not been relied upon below because the matter was undefended and he was of the view that the matters now in issue were sufficiently established by admissions made by Dr Daevys on behalf of himself and Atlanta Aerospace. He took the view that it was neither necessary, nor appropriate, to burden the Court unduly with confirmatory material supporting unchallenged assertions. That the primary judge would take a different view as to the admissions was not, he asserted, anticipated at the hearing, but only became apparent when judgment was delivered. 97 That ratification was an issue which the primary judge needed to consider further was made clear at the hearing and resulted in counsel filing a further written submission dated 11 October 2004. Those submissions were not directly concerned with the extension of time within which ratification had to occur, being the point on which Aztech lost below, but did go to the present issues. There was no attempt, however, at that stage to tender Mr Somosi's affidavit, or any part thereof. 98 The test to be applied in considering the tender of evidence in appeals generally in this Court is found in s 75A of the Supreme Court Act. Section 75A(5) provides: "(5) Where the decision or other matter under appeal has been given after a hearing, the appeal shall be way of rehearing."

[33]

Further, the section does not apply in a number of circumstances, including so much of an appeal as relates to a claim for a new trial arising out of a trial with a jury. In those cases, it would appear that general law principles, to which reference will be made below, still apply. The express exception of those cases suggests that the effect of sub-ss (7) and (8) was not intended merely to reflect those general law principles. The present case being one where the appeal has been brought from a judgment "after a trial or hearing on the merits", the Appellant must establish "special grounds" pursuant to s 75A(8). 99 In Akins v National Australia Bank (1994) 34 NSWLR 155, an appeal brought from a judgment following a trial without a jury in the Court, Clarke JA (Sheller JA and Powell JA agreeing) stated (at 160) that three conditions need to be met before "fresh evidence" can be admitted. His Honour continued: "These are: (1) It must shown that the evidence could not have been obtained with reasonable diligence for use at the trial; (2) The evidence must be such that there must be high degree of probability that there would be a different verdict; (3) The evidence must be credible." 100 It is important to note, however, that those principles were preceded by the statement that "it is not possible to formulate a test which should be applied in every case to determine whether or not special grounds exist". The justification for the first condition was not addressed and the proposed further evidence was rejected on the second ground alone. 101 In Nowlan v Marson Transport Pty Ltd (2001) 53 NSWLR 116 at [14] Heydon JA (with whom Mason P and Young CJ in Eq agreed) noted that the comments of the High Court in CDJ v VAJ (1998) 197 CLR 172 at [104]-[115] may require a reconsideration of the approach adopted in Akins. His Honour nevertheless concluded that Akins bound the Court and should be followed, until overruled. (See also the references in CDJ v VAJ by Gaudron J at [50]-[56] and Kirby J at [186] sub-pars 8 and 9. The approach adopted in relation to the Family Court in CDJ v VAJ was followed in relation to the Federal Court in Minister for Immigration and Multicultural Affairs v Jia Legeng (2001) 205 CLR 507.) However, in Nowlan, Heydon JA continued at [15]: "Even if the three tests stated in the Akins case are applicable and are not satisfied, a question remains: is it just to admit the further evidence in this case?" 102 Nowlan involved an application for leave to commence proceedings for personal injury out of time. The respondent to the application was successful in the District Court on a basis which could have been met by evidence, but was not raised by the respondent until final submissions. As explained by Heydon JA: "17 The respondent contended before this Court that the further evidence should not be received because the appellant ought to have been aware that an issue would arise in relation to the capacity of doctors to diagnose the nature of the plaintiff's injuries and to offer a view as to whether the injuries were attributable to the car accident, or to playing rugby, or to farm work. 18 However, the issue was not so obvious that it went without saying that the respondent would rely upon it. … Some respondents might have chosen not to take the point that diagnosis was impossible or very difficult. 19 Where the respondent to an application fails to signal a prima facie case of prejudice, either by evidence to be tendered by the respondent, or by an indication that some part of the applicant's evidence will be relied on to raise a prima facie case of prejudice, it will not be possible for the applicant to deal with the point satisfactorily. Here the respondent was able to point to material in the applicant's evidence raising the possibility of prejudice … . But that possibility was capable of being rebutted by evidence. The fact that that possibility was not availed of by the applicant in view of the respondent's failure to give prior notice of the point successfully taken creates an injustice justifying reception of the evidence in this Court."

[34]

His Honour's approach is no doubt a reflection of the fact that the provision refers to "further evidence", thus not obliging the Court to adhere to the fresh evidence test articulated in the first condition in Akins and an acceptance of the need for flexibility. 103 The principles stated by Clarke JA in Akins may be sourced to the judgment of Dixon CJ in Wollongong Corporation v Cowan (1955) 93 CLR 435 at 444, setting out the approach to be adopted under the general law on an application for a new trial on the ground of discovery of fresh evidence. Such cases were treated as exceptional, it being "essential to give effect to the rule that the verdict, regularly obtained, must not be disturbed without some insistent demand of justice". That case involved a challenge to a jury verdict following a trial for damages in negligence. As his Honour made clear, after discussing the cogency required of such evidence (at 447): "I speak upon the hypothesis that a verdict has been regularly obtained without any miscarriage at the trial and the application for the new trial is based wholly on the grounds that the subsequent discovery of fresh evidence demands a second trial." 104 As noted by this Court in Tamas v Streimer (unrep, 10 July 1981) (Moffitt P, Reynolds JA and Glass JA agreeing), even before the introduction of s 75A, "it always had been the law that although the grounds on which a new trial would be granted have been settled by practice, they had never become 'completely stereotyped'." His Honour referred in particular to a case decided four months prior to Wollongong Corporation by the same Justices, namely McCann v Parsons (1954) 93 CLR 418, in which it was held that a retrial should be ordered. In a joint judgment the Court said (at 403-431): "The grounds upon which the court proceeds in granting the remedy [to relieve against a verdict when it would be unjust to allow it to stand as a determination of liability] have been settled by practice but they have never become completely stereotyped; they have always possessed some flexibility and have been governed by the overriding purpose of reconciling the demands of justice with the policy in the public interest of bringing suits to a final end."

[37]

The different considerations involved in "appellate review of primary decision-making, according to whether the decision-maker is a judge or a jury" were noted by the Court in Swain v Waverley Municipal Council [2005] HCA 4 at [1] (Gleeson CJ), but see generally. Those differences find their reflection in the Supreme Court Act , as noted by McHugh J in Puntoriero , but were not created in 1970. Because s 75A provides a different regime with respect to appeals from a judge sitting without a jury, care must be taken in importing authorities concerned with appeals from jury verdicts into an area where different considerations apply. 107 There are a number of factors which militate in favour of receiving the evidence in the present case. First, the evidence is documentary and comprises less than 10 pages. The paragraphs of the affidavit which are read in support, do little more than explain the provenance of the documents and how they arose. Secondly, because the proceedings are undefended, there will be no cross-examination of the deponent, nor evidence sought to be tendered in reply. The evidence thus stands on its own and falls within a short compass. Thirdly, the point to which the evidence goes is a narrow one and is but part of the case to be established by the Appellant. It concerns the date on which Aztech should be treated as having ratified the contract. Fourthly, the case having proceeded below in the absence of the defendants, the evidence which was available at the time, was not read or tendered, simply because it was perceived to be unnecessary. That judgment proved to be in error, but there is a public interest in counsel not burdening a busy trial court with unnecessary material, or extending the length of hearings unnecessarily. An inflexible approach to evidence in these particular circumstances would place an undesirable pressure on counsel to 'play safe'. In this respect the case bears similarities to Nowlan. Fifthly, it is important that this is neither an appeal from a jury nor an appeal in which the relief sought includes a new trial, even before a judge. As will appear below, if the appeal is upheld, it will be necessary to refer the matter back to the Equity Division to determine the appropriate relief, but that is not the point to which this evidence goes. Sixthly, the tender arises in circumstances where the judgment below has been found to be in error for other reasons. The issue to which the evidence is relevant is one which the primary judge did not need to determine, because an earlier point in the chain of events had been found against the Appellant. Finally, there is no prejudice caused to the Respondents, who did not seek to be heard in their own defence, either in this Court or in the Court below. The affidavit had been provided well before the hearing and was acknowledged by Dr Daevys as a document he had read: see 'defence' par 2. 108 There are factors which militate against the reception of the evidence, but they are not, in my view, persuasive. Despite what is said above, it should no doubt be borne firmly in mind that too great a readiness to admit further evidence would encourage parties and their lawyers to treat the hearing of a matter at trial as but a preliminary round. The fact that an appeal is by way of rehearing under the statute, does not justify the view that it is the second round of a trial, rather than that which it is, namely an appeal. It may also be argued that questions of prejudice to other parties are not the only countervailing interests: there are the broader interests of the administration of justice and the delays which may arise from inappropriate calls on the Court's time and resources. It should not be forgotten that there may be cases when the better course may be to seek to reopen the matter before the primary judge, rather than lodge an appeal. However, that course may not be appropriate where there are other arguments that the primary judge has erred, which would not be dependent upon further evidence. It is significant that, in Wollongong Corporation, the High Court expressly left open the possibility that a different approach might be adopted, even under the general law where the relief sought was a retrial, if the verdict below was otherwise attended by error. Finally, it may be said that the evidence supports a contrary determination to that reached by the trial judge, but is not necessary for that result. I would have reached a different conclusion on the material tendered below, but only with some hesitation. The confirmation provided by the proffered further evidence is of assistance in that respect. 109 The material contained in Exhibit B demonstrates that all parties treated the contract as having been ratified, in the sense of being accepted, by Aztech, in the period from the formation of Aztech on 20 February through to the first week of March, being the end of the period within which ratification was possible. It may be that such an inference could have been drawn without the material, but it would have been a far more doubtful exercise. I would admit the material for this purpose. The invoice which forms Exhibit A should also, in my view, be admitted, because it provides additional information in relation to the payment made on 26 February 2003.

Parties

Applicant/Plaintiff:

Aztech Science

Respondent/Defendant:

Atlanta Aerospace

Legislation Cited (2)

Bankruptcy Act 1966(Cth)

Supreme Court Act 1970(NSW)

Cases Cited (14)

Aztech Science v Atlanta Aerospace (Woy Woy) [2005] NSWCA 319 CITATION: This decision has been amended. Please see the end of the judgment for a list of the amendments.

Chapple v Electrical Trades Union [1961] 1 WLR 1290 Lam v Ausintel Investments Aust Pty Ltd (1989) 97 FLR 458 Black v Smallwood (1966) 117 CLR 52 Kelner v Baxter (1866) LR 2 CP 174 Lifesavers (Australasia) Ltd v Fridge Mobile Pty Ltd [1983] 1 NSWLR 431 Trident General Insurance Co Ltd v McNiece Bros Pty Ltd (1987) 8 NSWLR 270 Bolton Partners v Lambert (1889) 41 Ch D 295 Watson v Davies (1931) 1 Ch 455 Dibbins v Dibbins [1896] 2 Ch 348 CASES CITED: Scuderi v Morris (2001) 39 ACSR 592; [2001] VSCA 190 at [83] Akins v National Australia Bank (1994) 34 NSWLR 155 Nowlan v Marson Transport Pty Ltd (2001) 53 NSWLR 116 CDJ v VAJ (1998) 197 CLR 172 Minister for Immigration and Multicultural Affairs v Jia Legeng (2001) 205 CLR 507 Wollongong Corporation v Cowan (1955) 93 CLR 435 Tamas v Streimer (unrep, 10 July 1981) McCann v Parsons (1954) 93 CLR 418 Puntoriero v Water Administration Ministerial Corporation (1999) 199 CLR 575 Swain v Waverley Municipal Council [2005] HCA 4 at [1]

15 September 2005 AZTECH SCIENCE PTY LTD v ATLANTA AEROSPACE (WOY WOY) PTY LTD & ANOR Judgment 1 HANDLEY JA: I agree with Basten JA. 2 BRYSON JA: The appellant Aztech Science Pty Limited (hereinafter Aztech Science) unsuccessfully claimed remedies in the Equity Division under a Contract for Services made between Mr Antonio Azzi referred to as "the Promoter", the first respondent Atlanta Aerospace referred to as "the Contractor" and the second respondent Mr Daevys referred to as "the Nominee". The Contract bears the date 11 November 2002 in two places but it came into effect on 19 December 2002, when Mr Daevys executed the document as director on behalf of Atlanta Aerospace. Recitals show that the Contract was intended to be a pre-incorporation contract and that Mr Azzi intended to apply to incorporate a company named "Aztech Sciences Pty Limited" or a similar name, and intended to enter into the Contract on behalf of that company before the company was registered. There is no difficulty in recognising Aztech Science, which was incorporated on 20 February 2003, as "the Principal" referred to in the Contract. 3 The respondents did not appear at the hearing in the Equity Division and the hearing proceeded ex parte. Mr Daevys the second respondent is a bankrupt. The relief claimed by Aztech Science in the Statement of Claim dated 15 October 2003 included declaratory orders establishing entitlements of Aztech Science to property in work and confidential information relating to a number of inventions and projects referred to in the Statement of Claim. The principal invention referred to being a Sub-Aquatic Monitor, described as a mechanical device comprising a floating buoy and other distinguishable parts which enables samples to be taken of ambient environmental conditions in the aquatic environment, with such samples able to be taken above and below the water level. Several other potentially significant inventions and devices were referred to. The declaratory orders extended widely to entitlement to confidential information to intellectual property, copyright and other forms of property. There were other claims for relief which would bring the property within Aztech Science's control and establish its ownership; and other ancillary matters. Orders are claimed against both respondents. In the Equity Division Barrett J on 19 October 2004 dismissed the claims: [2004] NSWSC 967. Aztech Science now appeals: the respondents did not appear and the appeal was heard ex parte.

(1989) 97 FLR 458

(1966) 117 CLR 52

(1987) 8 NSWLR 270

(1994) 34 NSWLR 155

(2001) 53 NSWLR 116

(1998) 197 CLR 172

(2001) 205 CLR 507

(1955) 93 CLR 435

(1954) 93 CLR 418

(1999) 199 CLR 575

[2005] HCA 4