Proof of damage
59 In their pleadings and final submissions in chief at trial, the appellants propounded an extreme interpretation of condition (n). They asserted an entitlement to be paid a sum representing one-third of the royalties received by the Crown regardless of any damage to their interest under the Lease. Consistent with this approach, they tendered no evidence designed to establish that damage had occurred, let alone quantify its extent.
60 The respondent did not plead its alternative interpretation of condition (n) (cf Supreme Court Rules, Pt 15 rr9, 13(2)). It admitted receipt of royalties and that no moneys had been paid to the appellants pursuant to condition (n). And it denied compendiously that its conduct had caused the appellants any loss or damage.
61 In final addresses at trial, counsel for the respondent submitted that the terms of condition (n) did not give the appellants an automatic entitlement to one third of royalty paid to the Crown. He emphasised the reference to "compensation … to cover any damage" in the clause and he submitted that the condition merely provides an entitlement to recompense for actual loss (Nelungaloo at 571) up to a particular capped amount if and only if there is any damage done to the lessee's interests. He submitted that the appellants had not shown any such damage and that therefore their claim must fail. It was accepted before us that the final addresses were the first occasion that the respondent advanced this interpretation of condition (n). However, the respondent disputed that it bore any responsibility to proffer an alternative construction of condition (n) merely because the appellants propounded an extreme and untenable construction of that condition.
62 In address in reply at trial, the appellants submitted that there was no necessity to prove damage for the declaratory relief then being sought and that quantification could be dealt with at a later time. From the present vantage-point, the latter submission is unclear in its detail and purpose. It may well have struck Bergin J in the same way.
63 The suggestion that quantification of damage should have been deferred may have been a bold and belated attempt to accommodate the real possibility that condition (n) required proof of damage, coupled with an attempt to finesse the dilemma of lack of proof of damage in light of the court's power to sever issues and/or the practice of the Equity Division to order an inquiry as to damages. Alternatively, counsel may have been building the submission upon the limited form of declaratory relief being sought at trial and the recognition that any award of damages would depend in part upon the result of the account of royalties received which the appellants were seeking.
64 Bergin J recorded the respective submissions in her judgment and continued as follows:
81. If I am wrong in the interpretation of the legislative implication of abrogation of the plaintiff's contractual entitlement I am however of the view that any declaration as to entitlement to compensation should not be made until damage has been proved. There has been no damage proved in this case.
65 One may infer from this that her Honour accepted the Commission's proffered interpretation of condition (n). I have already indicated that her Honour was correct to interpret the condition in this way.
66 On appeal, the appellants may not have abandoned their absolute interpretation of condition (n), but they did (for the first time in the proceedings) seek to formulate appropriate remedies stemming from the alternative construction of condition (n) propounded by the respondent and accepted by Bergin J. The prayers for relief were formulated and reformulated in oral argument. We gave leave to the appellants to submit in writing the precise amended form of relief now being sought, without deciding whether it was appropriate to give leave to amend the prayers for relief in the statement of claim and the notice of appeal at this late stage in the proceedings. We heard argument from the respondent on the issue of whether such leave should be granted.
67 The appellants submitted a Second Further Amended Statement of Claim, an Amended Notice of Appeal and Short Minutes of Order. The declaratory relief now sought abandons the absolute view of condition (n), propounds the interpretation advanced by the respondent and accepted by Bergin J, and seeks orders for an inquiry as to damage and an order for payment of appropriate, capped compensation.
68 The issue would be quite academic if Bergin J were correct in her primary determination that condition (n) was entirely abrogated by the amendments to the Forestry Act effected in the 1980s. Since however I disagree with her Honour in this matter, it becomes necessary to deal with the question of remedy.
69 The respondent submitted that, even if condition (n) was not abrogated by statutory implication, nevertheless the appeal should be dismissed because no damage was proved at trial. It was submitted that the orders under appeal can be sustained on the alternative basis of a proper exercise of the discretion to withhold declaratory relief that is futile: this is what Bergin J is said to have done in par [81] of her judgment set out above. The respondents also submitted that it would be contrary to principle to allow the appellants to propound for the first time a new case on appeal having regard to (a) the absence of evidence of damage and (b) the manner in which the trial was conducted. Chilcotin Pty Ltd v Cenelage Pty Ltd [1999] NSWCA 11 was cited.
70 Senior counsel for the respondent accepted that there would be utility in determining by declaratory relief the substantive issue of the durability of condition (n), but he opposed any recasting of the prayers for relief, especially if that would allow the appellants the opportunity to recover compensation with respect to damage occurring between 1986 and the date of filing of the summons in the Equity Division in 1996.
71 In my view this is a case where the interests of justice do not preclude the granting of the remedy belatedly sought in the Court of Appeal. If this Court concludes that Bergin J's decision on the substantive issue is in error, then the question of remedy presents itself squarely for the first time in the proceedings. It is true that the appellants did not tender any evidence of damage because of their blinkered approach at trial to the interpretation of condition (n). However, counsel for the appellants did argue in his address in reply at trial that declaratory relief could issue without proof of damage and that this was a case where quantification of damage could and should be dealt with at a later time (see Judgment par [80]). I think that this was an appropriate stance that could and should have been accommodated by reformulated relief in the event that the substantive point went the appellants' way.
72 Given that these proceedings were heard in the Equity Division and that the relief sought by the appellants included an order that an account be taken of moneys received by the respondent in respect of royalties paid to it, it strikes me as inevitable that, if the alternative and less ambitious claim now propounded had been formulated and properly explored at trial, the issue of quantification of loss and damages would have been deferred pending such account - if only because of the capping provision in condition (n) itself. It was always intended that quantification of the royalties received by the Forestry Commission was to be determined in an inquiry following the determination of the main proceedings (see RB 7Q-W). The ascertainment of such information was a prelude to the making of any order for payment of compensation because of the capping provision in condition (n) itself. A detailed and costly fight over quantification was pointless if condition (n) had been effectively written out of the contract.
73 It is commonplace for computation of complex issues of damages to be deferred, particularly in the Equity Division, albeit that it is strictly necessary for some damage to be conceded or proved before an inquiry as to damages will be ordered. The failure of the appellants to have filed a short affidavit establishing a scintilla of damage was a regrettable oversight, possibly prompted by the belief that a body representing the Crown would not take the hard point. But I am not prepared to infer that they took this course because they accepted that no damage at all was suffered. An alternative way to achieve a similar result, without even proof of damage, would be to order trial of a separate issue under Part 31. The remedy has its difficulties, but may be suitable in a trial where neither party wishes to face up to the detailed issues of damages and where there is utility in determining issues of entitlement. This was such a case, all the more so since condition (n) is not spent and where the parties have not even explored quantification issues.
74 In a proper case, declaratory relief may be granted even if consequential relief is not sought or granted (Supreme Court Act, s75). If the appellants are correct on their substantive point about the durability of condition (n), then there is conceded utility in declaratory relief, albeit that it needs to be reformulated slightly from that sought in the trial pleadings. In the event that a declaration is made in favour of the appellants, then the interests of justice do not compel the withholding of consequential relief that would give the appellants the opportunity to prove the extent of damage actually suffered by them. No limitation point is pressed. The claim is in contract, where damage is not of the gist. The inquiry would be at the appellants' risk as to costs. For reasons stated above, such inquiry depends in part upon the order for an account as to royalties received, which would be granted in the appellants' favour in the appeal if they succeed on the substantive point. The respondent concedes that there is no impediment to the appellants pressing a claim for damages in respect of the period after 1996 if they succeed on the substantive issue. In that event, it seems churlish to deprive the appellants of the right to seek such damages for the period commencing 1986 in light of and notwithstanding the way the matter was fought at trial. I cannot see that the respondent would have conducted its case at trial any differently if the alternative declaration now propounded were advanced at trial: that is because it was never part of the respondent's case to prove the non-existence of actual damage.
75 I propose the following orders:
1. Grant leave to the appellants to amend the Further Amended Statement of Claim in the form of the Second Further amended Statement of Claim dated 1 February 2001.
2. Grant leave to the appellants to amend the Notice of Appeal in the form of the Amended Notice of Appeal dated 1 February 2001.
3. Appeal allowed.
4. Order 6 made by Bergin J on 2 September 1999 set aside.
5. Declare that upon the proper construction of Special Condition (n) of the Crown Lease 1919/1 ("the Lease") the appellants are and were entitled to be paid by the respondent compensation for any damage done to their interests in the Lease holding by licensed timber operations to the amount of one-third of any royalty paid to the respondent on timber removed from the forest areas of the Lease.
6. Order that the issue whether the appellants have suffered any damage to their interests in the Lease holding by reason of the activities of licensed timber operations and, if so, the amount of any such damage be remitted to the Equity Division for hearing.
7. Respondent to pay the appellants' costs of the appeal.
76 HEYDON JA: I agree with the President.
77 So far as Orders 1, 2 and 6 proposed by the President are concerned, ordinarily a plaintiff whose case depends on proof of damage but who has failed either to prove any damage or to have that question reserved for later consideration whether under Part 31 rule 2 of the Supreme Court Rules or otherwise should receive very little encouragement or sympathy on appeal. Trials are occasions on which plaintiffs should bring forward the whole of their cases, not merely the first stage of them. However, the present procedural difficulty was not entirely occasioned by the plaintiffs/appellants. They propounded a construction in paragraph 3 of the Further Amended Statement of Claim which was in terms correct. However, when paragraph 3 is read with paragraph 4, and when account is taken of the failure to plead that any damage was done to their interests in the holding by licensed timber operations, it is apparent that in truth they were contending for a different construction of condition (n) obviating the need to prove that any damage had occurred. Bergin J held, and the plaintiffs/appellants now accept, that that construction is wrong and that the construction propounded below by the defendant/respondent is correct. But that latter construction was not articulated in the Defence.
78 Part 15 rule 13(2)(b) provides that in a defence a defendant is obliged to plead specifically any matter which, if not pleaded specifically, may take the plaintiff by surprise. The construction propounded at trial by the plaintiffs/appellants has been correctly described by the President as "ambitious", and as the result of a "blinkered approach", but it is not so self-evidently irrational, and the construction propounded against it is not so self-evidently correct, that the latter construction could not be said to be one which might have taken the plaintiffs/appellants by surprise. Had it been pleaded, the plaintiffs/appellants would have had an opportunity to review their position and either prove damage at the trial before Bergin J, or reserve their rights to do so at a later time by conventional means.
79 Late though the amendments which the plaintiffs/appellants seek are, and unusual though it is to make an order in effect dividing the trial at the end of an appeal, the interests of justice in these very unusual circumstances justify the proposed Orders 1, 2 and 6.
80 IPP AJA: I agree with the President.
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