Commonwealth Securities Ltd v South Pacific Securities Pty Ltd

Court of Appeal (NSW)|2003-07-16|Before: Hodgson JA, Ipp JA, Tobias JA

CITATION : Commonwealth Securities Ltd v South Pacific Securities Pty Ltd [2003] NSWCA 199 HEARING DATE(S) : 16 July 2003 JUDGMENT DATE : 28 July 2003

JUDGMENT OF : Hodgson JA at 1; Ipp JA at 7; Tobias JA at 8 DECISION : (a) Appeal allowed.; (b) Set aside the judgment of Graham DCJ of 30 August 2002 and in lieu thereof enter judgment for the defendant with costs.; (c) The respondent to pay the costs of the appeal but to have, in respect thereof, if otherwise qualified, a certificate under the Suitor's Fund Act 1951.; (d) Dismiss the respondent's Notice of Motion filed 11 June 2003 with costs.

CATCHWORDS : Procedural fairness - case pleaded specific contract - case conducted on that basis - judge finds no contract as pleaded but finds for plaintiff on basis (either contractual or quasi-contractual) which was not pleaded and differed from way case conducted - whether denial of procedural fairness - ND LEGISLATION CITED : Suitor's Fund Act 1951 Pavey & Matthews Pty Limited v Paul (1987) 162 CLR 221 Banque Commerciale SA., en liquidation v Akhil Holdings Ltd (1990) 169 CLR 279 Suttor v Gundowda Pty Limited (1950) 81 CLR 418 CASES CITED : University of Wollongong v Metwally (No.2) (1985) 59 ALJR 481 Coulton v Holcombe (1986) 162 CLR 1 Water Board v Moustakas (1987) 180 CLR 491 RT & Y E Investments Pty Ltd v New South Wales (2001) NSWSC 1027 PARTIES : Commonwealth Securities Limited South Pacific Securities Pty Limited FILE NUMBER(S) : CA 40851/02 COUNSEL : A - R G Forster SC / G Colman R - J Donohoe SOLICITORS : A - L E Taylor R - Addisons

LOWER COURT District Court JURISDICTION : LOWER COURT 9382/00 FILE NUMBER(S) : LOWER COURT Graham DCJ JUDICIAL OFFICER :

1 - IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40851 of 2002

HODGSON JA IPP JA TOBIAS JA

Monday 28 July 2003 COMMONWEALTH SECURITIES LIMITED v SOUTH PACIFIC SECURITIES PTY LIMITED Judgment 1 HODGSON JA: I agree with the orders proposed by Tobias JA and substantially with his reasons. 2 I am inclined to the view that the decision of the primary judge was based on contract rather than quasi-contract or restitution; but the only contract available on the primary judge's findings was one which was not pleaded. 3 Mr Donohoe for the respondent conceded that the evidence did not support a finding that the appellant had requested the respondent to do the work which it did; but submitted that the appellant chose to accept the work, knowing that the respondent expected to be paid for it. 4 I accept that, where one party accepts a benefit proffered by another party, knowing that the profferor expects to be paid for it, this may give rise to an implied contract obliging the acceptor to pay. However, this depends on the circumstances. For example, if the benefit proffered were a chattel, which the acceptor can simply take or leave, a contract would readily be implied; but if the benefit proffered is work done on the acceptor's car, then a contract would not readily be implied from acceptance. 5 In the present case, the question of whether a contract obliging payment should be implied from the appellant's acceptance of the subscriptions procured by the respondent depends upon circumstances surrounding that acceptance, as referred to by Tobias JA. Those circumstances were not fully explored below, because the allegation that the acceptance gave rise to an implied contract was not pleaded or squarely raised at any time before the primary judge. 6 Accordingly, the respondent cannot retain the judgment in its favour on that basis. 7 IPP JA: I agree with Tobias JA. 8 TOBIAS JA: The respondent is a licensed security dealer. Prior to 13 March 2000 it was retained by the Pan Group of Companies to arrange the float of the Group as a public company under the name Pan Pharmaceuticals Limited (Pan). Pursuant to that retainer the respondent invited the appellant to offer to raise from the public the sum of $60 million as part of the float. 9 Discussions between representative of the appellant and the respondent took place between March and August 2000. On or about 18 July 2000 the appellant signed an agreement with Pan whereby it agreed to procure subscriptions for 55 million shares at $1.00 each in the capital of Pan. By that agreement the appellant was to be paid a fee of 2% of the issue price for subscriptions procured by it and a further fee of 1.5% of the issue price for agreeing to underwrite the issue. 10 On or about 10 August 2000 the respondent caused to be lodged with Computershare Registry Services applications for 8,695,500 shares of $1.00 each in the capital of Pan. It claimed that the appellant was contractually obliged to pay to it a commission of 1.5% of the issue price of those shares which amounted to $130,425.00 together with GST. Liability for payment of any such commission was denied by the appellant. Accordingly, on 21 November 2000 the respondent commenced proceedings against the appellant by statement of liquidated claim filed in the District Court claiming a total of $143,467.50. 11 The matter proceeded to trial before Judge Graham of the District Court on an Amended Statement of Liquidated Claim (the Amended Claim) filed on 11 September 2001. 12 It is necessary to set out [4] to [18] of the Amended Claim: "4. On or about 13 March 2000, a meeting was held between the Plaintiff and the Defendant. Particulars a. The meeting was held at the Plaintiff's office at Level 12, The Gateway, 1 Macquarie Place, Sydney. b. Present at the meeting representing the Plaintiff were Mr G J Harrison and Mr P Curry and Ms A McDonald representing the Defendant. 5. At the meeting referred to in the preceding paragraph, it was agreed by and between the Plaintiff and the Defendant that, in the event of the Defendant agreeing to raise the whole of the capital required by Pan ($60m), the Plaintiff would raise $15m of the amount so agreed to be raised by the Defendant and would, if so required by the Defendant, for the same consideration, sub-underwrite the issue of $15m of the capital. In these circumstances, it was an implied term of the agreement that the Plaintiff would be remunerated by the Defendant for raising the said sum of $15m. Particulars The implied term arose from the following facts and circumstances: a. The Plaintiff is a licensed securities dealer. b. The Plaintiff was agreeing to perform part of the obligation that the Defendant would be called upon to perform under its subsequent agreement with Pan and for which it would be paid by Pan. c. The work involved in procuring such subscriptions is work frequently undertaken for reward by licensed securities dealers. d. In the underwriting industry, persons who give undertakings such as that proffered by the Plaintiff expect to be paid and are customarily paid for procuring subscriptions for shares. 6. On or about 22 March 2000, a further meeting was held between the Plaintiff and the Defendant. Particulars a. The meeting was held at the Plaintiff's office at Level 12, The Gateway, 1 Macquarie Place, Sydney. b. Present at the meeting representing the Plaintiff were Mr G J Hartigan and Ms A McDonald and Mr M Locke representing the Defendant. 7. At the meeting referred to in the preceding paragraph, it was agreed by and between the Plaintiff and the Defendant that the Defendant would accept primary responsibility for raising the whole of the capital of $60m required by Pan and that the Plaintiff would procure subscriptions for $15m of that amount and that the Defendant would pay to the Plaintiff a commission at the rate of 1.5% of the subscriptions for shares in Pan procured by the Plaintiff. 8. Alternatively to paragraph 7 hereof, at the meeting referred to in paragraph 6 hereof, it was agreed by and between the Plaintiff and the Defendant that the Defendant would accept primary responsibility for raising the whole of the capital of $60m required by Pan and that the Plaintiff would procure subscriptions for $15m of that amount and that the Defendant would pay to the Plaintiff commission to the Plaintiff at a reasonable rate on subscriptions for shares in Pan procured by the Plaintiff. 9. Shortly prior to 12 July 2000, it was agreed between, Pan, the Defendant and the Plaintiff, that the capital to be raised by the issue by Pan should be reduced to $55m. 10. On or about 12 July 2000, a further meeting was held between the Plaintiff and the Defendant. Particulars a. The meeting was held at the Plaintiff's office at Level 12, The Gateway, 1 Macquarie Place, Sydney. b. Present at the meeting representing the Plaintiff were Mr G J Hartigan and Ms A McDonald and Mr M Levins representing the Defendant. 11. At the meeting referred to in the preceding paragraph it was agreed that the capital for Pan to be raised by the Plaintiff would be reduced to $10m. It was further agreed that the Defendant would not require the Plaintiff to sub-underwrite the issue of the 10m shares. The agreement arising out of the meetings pleaded in paragraphs 4, 6 and 10 hereof is hereinafter referred to as the Agreement. 12. The Plaintiff disclosed to Pan the terms of its Agreement with the Defendant. 13. On or about 18 July 2000, the Defendant signed the agreement with Pan whereby it agreed to procure subscriptions for 55m shares of $1 in the capital of Pan. By the said agreement, the Defendant was to be paid a fee of 2% of the issue price for subscriptions procured by it and a further fee of 1.5% of the issue price for agreeing to underwrite the issue. 14. On or about 9 August 2000, the Defendant agreed to accept subscriptions procured by the Plaintiff for approximately 8.7m shares in the capital for Pan in satisfaction of the obligation of the Plaintiff to procure subscriptions for 10m shares as pleaded in paragraph 11 hereof. Particulars a. The conversation took place on the telephone between Mr G J Hartigan on behalf of the Plaintiff and Mr Glen Morgan on behalf of the Defendant. b. During the conversation referred to in the preceding paragraph, it was agreed that the capital to be raised by Pan would be reduced to approximately $8.7m. 15. The issue was oversubscribed. 16. On or about 10 August 2000, the Plaintiff, in satisfaction of its obligations under the Agreement, caused to be lodged with Computershare Registry Services applications for 8,695,500 shares of $1 in the capital of Pan together with cheques totalling $7,889,500 ("The Applications"). The balance of the subscription funds ($806,000) were transferred either before or shortly after that date direct to the share offer account opened by Pan for the purpose of receiving application monies for the float. 17. Thereafter, Pan issued 8,695,500 shares in the response to the Applicants and paid to the Defendant the sum of $304,342.50 in respect thereof. 18. The Plaintiff says that a commission of 1.5% was a reasonable price for procuring subscriptions for shares in Pan and is less than the 2% paid by Pan to the Defendant for procuring such subscriptions." 13 It is apparent from the Amended Claim that the respondent was alleging a series of agreements or, perhaps more accurately, one agreement with two subsequent variations. In essence it alleged firstly that on or about 13 March 2000 an agreement was entered into between the appellant and the respondent to the affect that the respondent would raise $15 million of the amount agreed to be raised by the appellant and would, if so required by the appellant, sub-underwrite the issue to the extent of $15 million of capital, it being an implied term of the agreement that the respondent would be remunerated for raising the said sum. This oral agreement it seems to me was, therefore, partly express and partly implied. 14 Secondly, on or about 22 March 2000 it was alleged that either the first agreement was varied or a new agreement was entered into whereby the appellant would accept the primary responsibility for raising the whole of the capital of $60 million required by Pan and that the respondent would procure subscriptions for $15 million of that amount in consideration of the appellant paying to the respondent a commission at the rate of 1.5% of the subscriptions for the procured shares. Alternatively, it was alleged that the appellant would pay to the respondent commission at a reasonable rate on the procured subscription. On either alternative the alleged oral agreement was wholly express. 15 Thirdly, on or about 12 July 2000 it was alleged that the agreement entered into on 22 March 2000 was varied in two respects. The first was that the capital to be raised by the respondent would be reduced from $15 million to $10 million and the second was that the appellant would not require the respondent to sub-underwrite the issue of those 10 million shares. This variation was also wholly express. 16 The last sentence of [11] of the Amended Claim asserts, on one view of it, that there was only one agreement constituted by what was said at the meetings on 13 March 2000, 22 March 2000 and 12 July 2000. In any event it would appear that the respondent procured subscriptions for 8,695,500 shares and that, as alleged in [14] of the Amended Claim, on 9 August 2000 the appellant agreed to accept those subscriptions in satisfaction of the contractual obligation of the respondent to procure subscriptions for 10 million shares as agreed on 12 July 2000. 17 At the commencement of the hearing and after counsel for the respondent, Mr Donohoe, had opened to his Honour, the following exchange took place between the primary judge, Mr Donohoe and Mr Colman for the appellant: "Colman: Before Mr Hartigan does get in the box, I think I was almost invited to hotly contest something. I have not understood up to this moment the true nature of what my learned friend has described as being "implied agreement" and what relief was being sought in relation to that implied agreement. But that analogy that was just put suggests to me that it is relief in the nature of equitable relief. If that is the case my submission would be that the Court has no jurisdiction to give that sort of relief. If it is some other quasi-contractual relief my submission is that it hasn't been pleaded. The case that I expect that I ought to be required to meet is one in contract - express contract, implied contract - as it is pleaded and nothing more. Colman: In paragraph 5, your Honour, there's a reference to the implied agreement. There's a reference to an express agreement and there's a reference to an implied agreement. And that's thereafter referred to as "the agreement", your Honour, whether the agreement is express or implied. His Honour: It has to be a contractual arrangement, doesn't it, because otherwise if you are seeking some sort of equitable restitution you'd need to go elsewhere? Donohoe: That's quite so, your Honour, what we're saying is that in the circumstances it may be that my friend is right that the - I don't dispute what he's saying about the equitable relief. What we're saying, your Honour is there's an express or implied contract posed which we refer to as "the agreement". His Honour: I think that clears the air, Mr Colman." 18 The hearing then proceeded in accordance with what appears to be a common understanding between the parties and the primary judge that the respondent's case was that there was an express or implied contract as pleaded. In particular, it seems to me that the matter was then conducted upon the basis that there was a contract which was either wholly express or partly express and partly implied, the latter relating to the implied term referred to in [5] of the Amended Claim. It was not contended by Mr Donohoe, who also appeared for the respondent before this Court, that in the exchange before the primary judge to which I have referred, he was intending to widen the nature of the contract relied on beyond that which had been pleaded in the Amended Claim. 19 As appears from the judgment of the primary judge, there were significant disputes between the witnesses for each side who were present at the meetings of 13 March 2000, 22 March 200 and 12 July 2000 as to precisely what was said and, in particular, as to whether at any or all of those meetings there was a consensus between the parties which could amount to a binding contract. Nevertheless, there appears that there was no dispute that the respondent procured applications for 8,695,500 shares and that at all times it contended to the knowledge of the appellant that if it procured subscriptions in the capital raising then it expected to be paid by the appellant therefor. 20 The primary judge delivered judgment on 30 August 2002 in which he set out in summary form the paragraphs of the Amended Claim which I have extracted above. He further recorded the Amended Grounds of Defence in which the appellant denied any agreement or discussion as to remuneration and otherwise joined issue with the respondent on the disputed matters raised by its claim. It thus denied any entitlement of the respondent to commission. Its case, as the primary judge noted, was that the respondent had "not been able to prove a contract such as that alleged". 21 The primary judge also noted that the respondent's case was that: "an agreement was struck between the plaintiff and the defendant even before early April 2000, an agreement which was immediately binding but always subject to a condition, probably a condition subsequent, that it was contingent upon the defendant entering a formal underwriting agreement with Pan." 22 The primary judge referred to passages from the judgment of Palmer J in RT & YE Falls Investments Pty Limited v New South Wales (2001) NSWSC1027 where his Honour made reference to the requirements which must be satisfied in respect of an alleged informal contract arising from discussions and negotiations between parties over a period of time. His Honour noted that the necessary requirements were that the parties must have arrived at a consensus as to the terms of the agreement, the terms must be sufficiently certain to be capable of forming a binding contract and the parties by their words and conduct must have evinced a common intention that the consensus at which they had arrived should constitute an immediately binding contract. 23 Against the background of the remarks of Palmer J to which the primary judge had referred, his Honour then observed that a measure of fluidity in the working out of the arrangements proposed in respect of the proposed public float of Pan was inherent in the nature of the activities involved. He continued in these terms: "In those circumstances it is not surprising to find an agreement might be struck by evidence which pieces together conversations and extracts from ' a concatenation of correspondence '. The question in this case is whether such a contract can be pieced together in that fashion."

The primary judge then noted that the conversations relied upon by the respondent as evidence of the contract as alleged were ' significantly in dispute '. Having reviewed the evidence he held, with respect to the meeting of 13 March 2000, that at that stage there was no intention, nor any expectation on the part of the respondent, that the appellant would commit to anything of substance in relation to the proposed underwriting. 24 Although the primary judge expressed a preference for the evidence of the respondent's witnesses, Mr Hartigan and Mr Currie, as to the fact that the question of some involvement of the respondent and the allocation of shares or obtaining of subscriptions and the possibility of it acting as a sub-underwriter were topics raised in the discussions in March 2000, he declined to hold that those discussions took place in precisely the terms identified by the respondent's witnesses and, more specifically, that those discussions resulted in some form of concluded agreement. He said this: "….I am not satisfied that those discussions reached any conclusion in terms of agreement that there would be such a role and that the plaintiff would be remunerated in the way described in the pleadings or that there was any firm discussion as to what the level of remuneration would be." 25 Having found that nothing occurred in March 2000 to constitute an immediately binding contract between the parties, the primary judge concluded this part of his judgment by finding that, at most, there was a joint or common contemplation of the parties that some such role could be performed by the respondent in due course. He accepted the submission of the appellant that there were no contemporaneous documents which corroborated the contention of the respondent that there was recognition by the appellant of the role which the respondent claims to have been given for procuring subscriptions for a fee, whether it was 1.5% or any other fee. 26 The primary judge then proceeded to consider whether any contractual arrangement was made at a subsequent time. He made the following findings: "Again, the evidence in my view is inconclusive as to the establishment of any such agreement. The onus is upon the plaintiff to prove that there was a concluded contractual arrangement. The history of the contacts between the plaintiff and the defendant from June through to August, when activity on this float was as it highest, are equivocal, at least, as to the existence of any such agreement. …..it seems to me that, in the end, the plaintiff has not been able to establish, on the balance of probabilities, that there was any binding contractual agreement between the plaintiff and the defendant to procure subscriptions for shares in this initial public offering." 27 However, the primary judge did proceed to make the following further findings: "There is however, clear evidence that the plaintiff was requested to take part in the procuring of subscriptions in the allocation of shares. When I say ' requested ' I do not intend to suggest that the manner in which the request was made was necessarily express or in writing; rather, the request is to be gleaned from the conduct of the parties as well as their words. It is clear that the plaintiff certainly acted in the placement of shares in the manner described in the Statement of Claim. It is clear also that the defendant obtained payment of its commission for distribution based upon the money which had been got in by the plaintiff. The conclusion is inescapable that that work was done in circumstances where there had been no agreement as to how much was to be paid for that work, but in circumstances where the defendant requested that work to be done, took the benefit of the work and, in turn, was paid for it by Pan." 28 The primary judge then considered the evidence of events which occurred between 24 July 2000 and 9 August 2000. He concluded that Ms McDonald, an officer of the appellant, had not ruled out the possibility of some arrangement or agreement being made with the respondent with respect to the distribution of what was referred to as the chairman's list. He noted that there were things which had to be done, including confirming the list and allocations and confirming the way in which the shares were to be allocated (presumably to the applicants on that list). 29 The primary judge then found that by 7 August 2000 Ms McDonald was accepting that aspects of the allocation of shares would be in the hands of the respondent. Having found that the respondent went on to work on that allocation he remarked as follows: "In those circumstances, there is, in my view, an inescapable conclusion that the work for which the plaintiff seeks payment was done at the request of the defendant. Whilst there was no express agreement as to the amount to be paid for that work to be done, the conclusion is equally inescapable that the work was to be work which was to be paid for by the defendant." 30 A little later on he continued in the following terms: "Given that the topic, I am satisfied, had been raised on a number of occasions as to there being some expectation of payment for such work on the part of the plaintiff, then the implication of an obligation to pay is, in my view, a clear one. …

On the defendant's own version of events, the best that could be said is that no agreement was reached as to the amount of any payment but the plaintiff was led to believe that agreement could be reached upon resolution of issues as to the administration of the allocation of shares and the procuring of subscriptions. Any reticence on the part of the defendant was removed by the resolution of those administrative issues with the concomitant arising of an obligation to pay the plaintiff a reasonable amount for the work which the defendant was requesting the plaintiff to perform." 31 The primary judge concluded his findings in the following critical passage: "Accordingly, although I am not satisfied that a contractual agreement was reached , the plaintiff is entitled to succeed on a claim for work done at the request of the plaintiff which was subject to an implied obligation on the part of the defendant to pay for that work." (emphasis added) 32 The appellant submits that, having found that no contractual agreement had been reached between the appellant and the respondent of the nature of that pleaded in the Amended Claim or, so it was submitted, at all, the primary judge erred in finding for the respondent on a basis which was neither pleaded nor averred at the beginning of the hearing in the exchange which took place to clarify the basis of the respondent's case. It was submitted that the basis upon which the primary judge found for the respondent was not contractual but akin to a claim on a quantum meruit or for restitution, or one based on unjust enrichment. 33 In Pavey & Matthews Pty Limited v Paul (1987) 162 CLR 221 at 227 Mason and Wilson JJ, when dealing with the question of whether a quantum merit amounts to a direct or an indirect enforcement of an oral contract, said this: "Deane J., in his reasons for judgment which we have had the advantage of reading, has concluded that an action on a quantum meruit, such as that brought by the appellant, rests, not on implied contract but on a claim to restitution or one based on unjust enrichment, arising from the respondent's acceptance of the benefits accruing to the respondent from the appellant's performance of the unenforceable oral contract."

In the same case (at 256) Deane J observed: "The quasi-contractual obligation to pay fair and just compensation for a benefit which has been accepted will only arise in a case where there is no applicable genuine agreement or where such an agreement is frustrated, avoided or unenforceable. In such a case, it is the very fact that there is no genuine agreement or that the genuine agreement is frustrated, avoided or unenforceable that provides the occasion for (and part of the circumstances giving rise to), the imposition by the law of the obligation to make restitution." 34 It may well be the case that not every claim based on a quantum meruit is non-contractual in nature. Thus in the present case, the respondent submitted that the basis upon which the primary judge found in its favour was that, in effect, he had held that an implied contract came into existence between the parties as a consequence of the request by the appellant of the respondent that it procure the relevant subscriptions in consideration of an implied promise to pay a commission with respect thereto. 35 I have grave doubts as to whether, in truth, the basis of the primary judge's decision in favour of the respondent was that in contract as distinct from restitution or unjust enrichment. I say this because of his Honour's conclusion that he was 'not satisfied that a contractual agreement was reached' but nevertheless considered that the respondent was entitled to succeed on a claim for work done at the request of the appellant. However, for reasons which appear hereunder, it is not necessary to finally resolve this issue. 36 The respondent conceded before us that there was no proper basis upon which the primary judge could have found that the procuring of subscriptions by the respondent was at the request of the appellant. It is clear that at all material times it was the appellant who was pursuing a role for it in the procuring of subscriptions: it was not seeking to do any favours to the appellant and the only issue was whether the appellant was prepared to permit the respondent such a role. However, the respondent submitted that the primary judge was entitled to imply a promise on the part of the appellant to pay a commission to the respondent with respect to the work that it had performed in circumstances where the appellant had knowledge of, and thereby permitted, the respondent to perform the work it did and where the appellant was aware that the respondent expected to be paid for that work, the benefit of which the appellant accepted. It was submitted that this was a case where there was an unequivocal acceptance by the appellant of the work done by the respondent which gave rise to an implied promise on the part of the appellant to pay for that work. 37 The appellant submitted that if this was the basis upon which the primary judge found for the respondent, such a basis of liability was neither pleaded nor formed part of the manner in which the case was conducted in the court below. Furthermore, such a basis for recovery was, so it was submitted, expressly eschewed by counsel for the respondent after he had opened his case. It was further submitted that had the respondent flagged to the primary judge that this alternate basis of liability would be pursued, the appellant would have focussed on a number of issues and would have conducted its case differently to that which it in fact adopted. In particular:

(a) given the importance of the nature of any acceptance of the relevant work to the imposition of an obligation to pay for that work, the appellant would have sought to cross-examine the respondent's witnesses and/or called further evidence relating to the circumstances under which the appellant agreed to accept the subscriptions procured by the respondent of approximately 8,750,000 shares and, in particular, with respect to the reasons why it did accept those subscriptions given, firstly, that it was clearly entitled to refuse to do so and, secondly, that the issue was over-subscribed;

(b) it would have further pursued the issue of whether any true benefit accrued to the appellant from the respondent's involvement in the float or whether the value of the benefit derived was less than the commission claimed in respect thereof especially in light of the fact that the issue was over-subscribed;

(c) it would have adduced evidence to establish the nature and extent of the work performed by the respondent and, in particular, would have sought to establish that that work constituted only ' administrative work' which was different from the ' procuring of subscriptions ' and thus would not have justified a commission of 1.5%;

(d) it would have put more directly in issue the reasonableness of a commission of 1.5% whereas that was only a peripheral issue given the manner in which the respondent alleged in its Amended Claim that a right to a commission at that rate arose. 38 The respondent submitted in reply that it had, in fact, pleaded the acceptance by it of subscriptions procured by it for approximately 8,750,000 shares and referred to [14] of the Amended Claim. However, in my opinion that paragraph merely pleaded the fact that the respondent had satisfied its contractual obligation under the agreement pleaded in [11] of the Amended Claim; it was not an allegation of an implied contract (if such it be) of the nature of that ultimately found by the primary judge. It is therefore not surprising that no attention was given by the parties and, in particular, the appellant to the circumstances under which the appellant allegedly accepted the subscriptions referred to. It was simply not a relevant issue given the manner in which the respondent's case had been formulated and conducted. The same comment can be made with respect to [16] of the Amended Claim. 39 The central role of pleadings was authoritatively expressed by the High Court in Banque Commerciale SA., en liquidation v Akhil Holdings Ltd (1990) 169 CLR 279. At 286-7 Mason CJ and Gaudron J said this (omitting citations): "The function of pleadings is to state with sufficient clarity the case that must be met. In this way, pleadings serve to ensure the basic requirement of procedural fairness that a party should have the opportunity of meeting the case against him or her and, incidentally, to define the issues for decision. The rule that, in general, relief is confined to that available on the pleadings secures a party's right to this basic requirement of procedural fairness. Accordingly, the circumstances in which a case may be decided on a basis different from that disclosed by the pleadings are limited to those in which the parties have deliberately chosen some different basis for the determination of their respective rights and liabilities." 40 Brennan J at 288 expressed the principle in the following terms (omitting some citations): "When the pleadings bring the parties to the issue, the court's function is to determine that issue and to grant relief founded on the pleadings unless the parties are allowed to alter the issues at the trial without amendment of the pleadings (as to which, see the observations in London Passenger Transport Board v Moscrop (29). The rule is clearly laid down in the judgment of this Court in Dare v Pulham (30): 'Apart from cases where the parties choose to disregard the pleadings and to fight the case on issues chosen at the trial, the relief which may be granted to a party must be founded on the pleadings.'" 41 In my opinion, the appellant's submissions should be accepted. It is plain that the case now sought to be made by the respondent to justify the primary judge's finding in its favour was neither directly nor indirectly pleaded and was not a basis of liability which was pursued in the course of the conduct of the case: such a basis was, in my opinion, expressly eschewed at the commencement of the hearing by the respondent's counsel. This being so, no proper basis existed for the primary judge to find in favour of the respondent in respect of a cause of action which was neither pleaded nor the subject of the way the case was conducted before him. Having found that he was not satisfied that a contractual agreement had been reached between the parties, he was bound to enter judgment for the appellant. To do otherwise was to deny the appellant procedural fairness. 42 The respondent seeks to overcome the foregoing by seeking this Court's leave to further amend the Amended Claim by adding a new [18A] in the following terms:

18A. Alternatively, the Plaintiff claims money payable by the Defendant to the Plaintiff for work done by the Plaintiff for the Defendant at its request. Particulars a. The work done by the Plaintiff was the procuring of subscriptions by the Plaintiff for 8,695,500 shares in the capital of Pan Pharmaceuticals Limited. b. The work was done in or about July and August 2000. c. The Defendant's request for the Plaintiff to do the work was implied from the conduct of the parties as pleaded in paragraphs 4, 6, 10, 14, 16 and 17 hereof. d. The Plaintiff's entitlement to the sum claimed herein is calculated at the rate of 1.5%, a reasonable rate, as pleaded in paragraph 18 hereof. 43 The appellant opposes the application upon the basis of the matters set out in the affidavits of Antony David Solomon sworn 8 July 2003 and 11 July 2003, portions of which I have summarised in [32] above. It is submitted that in the light of that evidence and the well established principles governing such amendments, (see Suttor v Gundowda Pty Limited (1950) 81 CLR 418 at 438; University of Wollongong v Metwally (No. 2) (1985) 59 ALJR 481 at 483; Coulton v Holcombe (1986) 162 CLR 1 at 7-8 and Water Board v Moustakas (1987) 180 CLR 491 at 497-8), the clear prejudice to the appellant of permitting such an amendment was such that leave should be refused. In my opinion, this submission should be accepted. Given the circumstances as to the basis upon which the respondent now seeks to support the primary judge's findings in its favour and the clear prejudice which the appellant would suffer if leave were granted so as to bring the primary judge's findings into line with the pleading, it must follow that leave to further amend the Amended Claim should be refused. 44 For the foregoing reasons, therefore, I am of the opinion that the primary judge erred in finding in favour of the respondent in respect of a cause of action which was neither pleaded nor the subject of proper evidence and argument before him. In these circumstances I would propose the following orders:

(a) Appeal allowed. (b) Set aside the judgment of Graham DCJ of 30 August 2002 and in lieu thereof enter judgment for the defendant with costs. (c) The respondent to pay the costs of the appeal but to have, in respect thereof, if otherwise qualified, a certificate under the Suitor's Fund Act 1951. (d) Dismiss the respondent's Notice of Motion filed 11 June 2003 with costs. **********

Last Modified: 07/31/2003 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.

At a glance

Court

Decision date

Before

Source

Judgment (17 paragraphs)

Parties

Cases Cited (6)