Cheng v Motor Yacht Sales Australia Pty Ltd t/as The Boutique Boat Company

Judgment

1. BELL CJ: By Summons dated 8 December 2021, Jian Ling Cheng (the Applicant) seeks leave to appeal from a decision of Payne JA (the primary judge), sitting in the Common Law Division of the Supreme Court: Motor Yacht Sales Australia Pty Ltd t/as The Boutique Boat Company v Cheng [2021] NSWSC 1141 (the primary judgment or PJ).
2. By that judgment, his Honour ordered the Applicant to pay the Respondent, Motor Yacht Sales Australia Pty Ltd t/as The Boutique Boat Company (MYSA) damages in the sum of $62,720, MYSA's costs and pre-judgment interest on the principal sum of damages for the period from 10 January 2017 to 10 December 2021. His Honour also dismissed, with costs, a cross-claim which had been brought by the Applicant against MYSA.
3. The underlying proceedings related to MYSA's disputed sale of a 48 foot "Princess Open Sports Yacht V48 601" (V48 or the Vessel) to the Applicant in 2016.
4. The Applicant, who had made an offer to purchase the Vessel for the sum of $1,180,000 on 1 October 2016, purported to withdraw the offer on 5 October 2016. MYSA contended that the offer had been accepted by that time, either on the evening of 1 October 2016 or the following day. In either case, it was contended that a binding contract for the sale of the Vessel had come into effect and the purported withdrawal of the offer on 5 October 2016 was too late and of no effect.
5. The primary judge accepted the argument of MYSA.
6. The Applicant, who had paid a deposit of $20,000 on 1 October 2016, refused to complete the contract after MYSA insisted that her offer had been accepted prior to its purported withdrawal.
7. The course taken by MYSA in these circumstances was to seek to mitigate its loss by selling the Vessel, which it ultimately did on 10 January 2017 for a price of $1,200,000. This price comprised $600,000 in cash and $600,000 as the agreed value, at that time, of a trade-in-vessel (V39).
8. The price of $1,200,000 exceeded, by $20,000, the sale price under the Applicant's contract. Notwithstanding this fact, MYSA claimed that it had suffered a loss as a result of the Applicant's failure to pay the sale price under her contract and sought damages on the following basis (noting that the V39 was not sold until 1 August 2018; see PJ [18]): "(1) loss arising from the difference in purchase price under the Contract, and monetary amounts ultimately received by MYSA through the eventual sale of the V48 Vessel and through the V39 Sale; (2) loss arising from expenses in relation to berthing, advertising, maintaining, repairing, cleaning, paying skipper, fuel and transport costs, and obtaining insurance for the V48 Vessel until it was sold; (3) loss arising from expenses in relation to berthing, advertising, maintenance, repairing and obtaining insurance for the V39 Vessel until the V39 Sale; and (4) brokerage paid on the V48 Vessel upon its sale and on the V39 Vessel in the V39 Sale, which otherwise did not need to be paid under the Contract."
9. The primary judge did not allow for the recovery of all of the expenses claimed in relation to MYSA's sale of the V39 but did award damages for the following expenses incurred in relation to the Vessel prior to its resale (PJ 194-(3)]): "(a) berthing costs of $19,550; (b) advertising costs of $85; (c) maintenance and repair costs of $3,819; (d) detailing costs of $12,000; (e) skipper, fuel and transport costs of $778; (f) payment of insurance premium to the value of $2,888; and (3) brokerage paid on the V48 Vessel upon its sale and in the sum of $63,600 (being 5.3% of the purchase price)."
10. His Honour concluded that MYSA was entitled to damages in the total sum of $62,720, comprising $102,720 (the sum of the amounts at [9] above) less profit on the resale ($20,000) and the deposit retained ($20,000). His Honour stated that this amount reflected "the loss of the bargain that MYSA suffered by reason of [the Applicant's] repudiation of the [c]ontract, and the costs reasonably incurred by MYSA in mitigation of its loss until it crystallised that loss on sale of [the V48] in January 2017": PJ [195].
11. Another issue which loomed large at trial (but which was not sought to be pursued on appeal) related to the terms of the contract (if one had come into existence) and, in particular, whether it was a term of the contract that the vessel was required to "fit" within a mooring at the Applicant's property in Woolwich. The Applicant, whose evidence was rejected by the primary judge (PJ [30]), also failed on this aspect of the case, which occupied much of the four days over which the proceedings ran at first instance.
12. Although the draft Notice of Appeal was a somewhat discursive document, it essentially sought to raise two issues. These were identified by the Applicant in her outline of submissions as being: (i) whether a contract was formed prior to the purported withdrawal of offer by the Applicant on 5 October 2016 (the Authority Issue); and (ii) assuming that a contract had been formed, whether, in circumstances where the V48 was resold for more than the contract price, brokerage fees on the resale were recoverable as damages (the Damages Issue).
13. The Applicant sought the setting aside of the orders at first instance (see [2] above), the dismissal of MYSA's claim and the refund of the $20,000 deposit together with interest on that amount from 1 October 2016.

The requirement for leave to appeal

1. The amount at issue in these proceedings being less than $100,000, leave to appeal is required by s 101(2)(r) of the Supreme Court Act 1970 (NSW).
2. As has regularly been pointed out in decisions of this Court, a grant of leave to appeal generally requires the identification of an issue of principle, a question of public importance or a reasonably clear injustice going beyond something that is merely arguable: see, for example, Jaycar Pty Limited v Lombardo [2011] NSWCA 284 at [46]; Be Financial Pty Ltd as trustee for Be Financial Operations Trust v Das [2012] NSWCA 164 at [32]-[38] (Be Financial); The Age Company Ltd v Liu (2013) 82 NSWLR 268; [2013] NSWCA 26 at [13]; Secretary, Department of Family and Community Services v Smith (2017) 95 NSWLR 597; [2017] NSWCA 206 at [28]; PPK Willoughby Pty Ltd v Baird [2019] NSWCA 48 at [6].
3. In Carolan v AMF Bowling Pty Ltd t/as Bennetts Green Bowl [1995] NSWCA 69 (Carolan), Cole JA noted the desirability that, where small claims are involved, there be "early finality and determination of litigation otherwise the costs which will be involved are likely to swamp the money sum involved in the dispute". In Gurr v Robinson (Court of Appeal (NSW), 10 February 1986, unrep) (Gurr), Kirby P (as he then was) articulated the following justifications for the requirement of leave to appeal where small sums are involved: "One justification is that, where the amount in issue in a case is small, the parties have a special interest in finality. Protracted litigation necessarily involves costs and inconvenience. If the stake is small, the costs may soon become disproportionate to the amount in issue. Secondly, the provision reflects a number of public interests which must be protected by the Court. They include the discouragement of litigation, the principal purpose of which is to recover an order for costs, and the efficient and cost-effective use of court time, which necessarily involves large public costs."
4. The importance of proportionality between the monetary amount at issue in a matter and the costs of proceedings was emphasised in Berry v Nicholls [2016] NSWCA 272 at [7]; see, also, Gaynor v Attorney General for New South Wales (2020) 102 NSWLR 123; [2020] NSWCA 48 at [20].
5. Consistent with the observations of Kirby P in Gurr, there are "good reasons … for the legislature imposing a requirement for leave where less than a certain amount is in issue": Daily Examiner Pty Ltd v Mundine; Brown v Mundine [2011] NSWCA 126 at [4]. These reasons had the result, in Macfarlan JA's view (with which Basten JA agreed) that "the Court does not ordinarily grant leave where less than $100,000 is in issue unless it considers that the decision at first instance was plainly wrong, that an obvious injustice has otherwise occurred or that a significant issue of principle is involved in the proposed appeal that it is in the public interest for the Court to determine" (at [5]); see, also, M & L Watson Pty Ltd t/as BBR Designs v Rilsung Pty Ltd [2003] NSWCA 36 at [9] where it was observed that "[t]he purpose of the threshold for leave to appeal being imposed is that the Legislature contemplated that relatively small amounts should not come before this Court, save with this Court's leave and in cases warranting appellate intervention".
6. In Ritson v Commissioner of Police, New South Wales Police Force [2019] NSWCA 106 at [39], Gleeson JA, with whom Emmett AJA agreed, observed that: "It is well recognised that there is a need for restraint in granting leave to appeal in matters such as the present where the amount in issue is below the threshold of $100,000: Daily Examiner Pty Ltd v Mundine Brown v Mundine [2011] NSWCA 126 at [4]-[5]; Carolan … at 2-3; and Be Financial at [37]-[39]. Injustice involves a balancing exercise and the entitlement of parties to justice is not unconditional and must have regard to a number of factors, including the proportionality of the costs involved to the amount in dispute. In this case, the costs of an appeal would be disproportionate to the relatively modest amount in issue of approximately $43,000."
7. The need for and desirability of there being proportionality between the value of the matter or amount in issue, and the costs of litigating that matter or issue is also reflected in s 60 of the Civil Procedure Act 2005 (NSW), which provides that "[i]n any proceedings, the practice and procedure of the court should be implemented with the object of resolving the issues between the parties in such a way that the cost to the parties is proportionate to the importance and complexity of the subject-matter in dispute." It was in the context of s 60 of the Civil Procedure Act that Basten JA, in Be Financial at [37], observed that: "the entitlement of the parties to justice is not unconditional, but is dependent upon the resources of the court made available by the government and the appropriate allocation of resources by the parties, which may depend upon their individual assessments of the importance of the issues in dispute." See, also, Condensing Vaporisers Aust Pty Ltd t/as RJ Tinker & Son v FDC Construction & Fitout Pty Ltd (No 2) (2014) 86 NSWLR 360; [2014] NSWCA 89 at [24]; and Burrows v Macpherson & Kelley Lawyers (Sydney) Pty Ltd [2021] NSWCA 148 at [44], where it was observed that "litigation where the costs exceed the amount in issue is not unfamiliar." Leeming JA was correct to observe in that case that "[s]uch litigation is a poor candidate for a grant of leave". As noted above, the proceedings before the primary judge ran for some four days, and it is plain that the costs of both parties would have approached, if not exceeded, the total amount in issue.
8. Section 101(2) of the Supreme Court Act is an important mechanism which equips the Court of Appeal with a measure of control over the range of cases that compete for its attention. Section 101(2)(r) identifies $100,000 as the threshold value of the matter(s) at issue that must be satisfied before a right of appeal to the Court of Appeal may be enjoyed. Where the value of the matter(s) at issue falls below that amount, an applicant for leave must meet the criteria which have been identified in the cases referred to above. In this context, s 101(2) is also concerned with notions of proportionality; the importance of the issue or the gravity of the error of principle relied upon to justify leave will influence the likelihood of leave being granted. This is the reason for the insistence in the authorities that the points sought to be raised on appeal, if leave is granted, must be more than "reasonably arguable".

Disposition

1. In my opinion, leave to appeal should be refused with costs.
2. In respect of the Authority Issue, the primary judge held at PJ [148]-[149] that the contract was entered into on 1 October 2016 or, in the alternative, on 2 October 2016, with both Mr Hugh Simson (MYSA's General Manager for Sales) and Mr Jim Thompson (the Company Secretary of MYSA) respectively having implied authority to enter into the contract on behalf of MYSA. His Honour said: "148 Returning to the facts of this case, Ms Cheng signed the Contract on 1 October 2016. Both parties accepted that this constituted an offer by Ms Cheng to MYSA to purchase the V48 Vessel on the terms of the Contract. Whilst there was not the same consensus between the parties as to the circumstances in which her offer was accepted by MYSA so as to create a binding Contract, I find that MYSA orally accepted the offer on 1 October 2016, when Mr Simson telephoned Mr Johnson and informed him that MYSA had accepted Ms Cheng's offer. MYSA's oral acceptance was communicated to the offeree on the same evening when, on the basis of Mr Simson's acceptance and at Mr Simson's direction, Mr Johnson telephoned Mr Cheng Shu and informed him of that acceptance. I find that Mr Simson, the general manager for sales at MYSA, had implied authority from MYSA to enter into the Contract on behalf of MYSA. Accordingly, I find that the Contract was formed and became binding on the parties on the evening of 1 October. 149 Further, even if this oral acceptance did not constitute valid acceptance by MYSA, the Contract was formed at the latest on 2 October when the written Contract was executed by Mr Thompson. That is, as set out above, I find that Mr Thompson also had implied authority to accept Ms Cheng's offer to purchase the V48 Vessel as agent of MYSA."
3. The principal thrust of the Applicant's attack on the primary judgment was that these alternative bases of agreement were inconsistent with the way in which the contract was pleaded in the Amended Statement of Claim: see Applicant's Summary of Argument [16]-[17]. The fact that the ultimate findings may have been outside the pleaded case will not be problematic where the parties have acquiesced in fighting the case outside of the pleadings: Banque Commerciale SA (en liq) v Akhil Holdings Ltd (1990) 169 CLR 279; [1990] HCA 11.
4. There was no complaint on appeal that the primary judge's findings took the Applicant by surprise or that any form of procedural or other prejudice was suffered as a result of the way in which the contract was ultimately found to have been formed. In this context, counsel for MYSA at first instance made a submission as to the formation of the contract, in the way ultimately upheld by the primary judge, which departed from the pleadings. No complaint was made at the trial (or on appeal) in this regard.
5. There was ample evidence, referred to in detail in MYSA's written submissions in this Court, to justify the primary judge's findings as to contractual formation: see [23] above.
6. The Applicant's submission that "it was not open to the Court to make findings as to acquiescence and consent" as an aspect of implied authority discloses that the Applicant's complaint was not in truth one of principle but one developed by reference to the underlying evidence. The Applicant pointed to the absence of direct evidence from directors of MYSA to establish the existence of the implied authority but that submission overlooked a series of cases relied upon by MYSA which established that a course of dealing may evidence the existence of the requisite authority. There was no issue of principle raised, and there was an amplitude of evidence supporting the implied authority relied upon by MYSA to enter the sale contract. That fact, together with the small monetary amount in issue in this case, especially referable to the costs already incurred by the parties, forms a powerful basis for the refusal of leave on the Authority Issue.
7. In relation to the Damages Issue, concerning the recovery of brokerage fees on the resale of the V48 in January 2017, the Applicant's argument was, in essence, that to allow MYSA to recover those brokerage fees was to deliver a windfall gain as MYSA would have incurred similar brokerage fees on the sale of the Vessel to the Applicant.
8. Were brokerage fees payable on the original sale, that argument may have had some force. As Ms Rich, who appeared on appeal for MYSA, pointed out with great clarity, however, there was unchallenged evidence of Mr Thompson to the effect that brokerage fees would not have been payable on the sale of the Vessel to the Applicant because of the discount in the sale price that had been agreed between the parties.
9. Once this matter was understood, there was no basis for the Applicant's "windfall gain" argument. Rather, the calculation of damages, which included the brokerage on the resale of the Vessel, was consistent with the principle that a party acting in mitigation of its losses is entitled to recover expenses incurred in mitigating its losses: Fox v Wood (1981) 148 CLR 438 at 446-447; [1981] HCA 41.
10. It follows that the primary judge did not err in any relevant regard, and no issue of principle was raised by the Damages Issue sought to be agitated by the Applicant.

Conclusion and orders

1. Not only were the general criteria for leave to appeal not met in the present case but the size of the claim was wholly disproportionate to the costs of the proceedings. Litigants and the profession should be aware of the particular considerations bearing upon an application for leave to appeal, which have been discussed in this judgment and which are reflected in the authorities referred to at [15]-[20] above.
2. The application for leave to appeal should be dismissed with costs.
3. WARD P: I agree with the Chief Justice.
4. BASTEN AJA: I agree with the Chief Justice.

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