Etna & Ors v Arif & Ors [1999] VSCA 99

105. Before us the appellant contended that his Honour had no power to allow the amendment as well as, in the alternative, that he had erred in the exercise of his discretion. Now, para.(1) of R.36.01, on which his Honour expressly relied and which indeed seems the only relevant rule, provides:

"36.01(1) For the purpose of determining the real question in controversy between the parties to any proceeding, or of correcting any defect or error in any proceeding, or of avoiding multiplicity of proceedings, the Court may at any stage order that any document in the proceeding be amended or that any party have leave to amend any document in the proceeding."

By para.(2) "document" includes a pleading. To my mind, so far as material, para.(1) confers on the Court a discretionary power to grant leave to amend a pleading provided that this is for one of the three purposes stated at the commencement of the paragraph. The only purpose suggested to be relevant is that of determining the real question in controversy between the parties.

110. In reliance on the decision of the Full Court in Dwyer v. O'Mullen [1887] VicLawRp 162; (1887) 13 V.L.R. 933, it was submitted for the appellant that that purpose was not here satisfied, with the result that the judge had no power to grant leave, because whether the term pleaded in para.5(f) of the amended statement of claim was implied in each contract was not "the real question in controversy" between the parties or, I suppose, one such question. In the case mentioned the sole defence to an action for the recovery of land was that the defendant had not executed a deed conveying the land to the person from whom the plaintiff derived title. At the close of the evidence the defendant had applied for leave to amend her defence to allege that the deed had been obtained by fraud or was not understood by her. The trial judge, a'Beckett, J., refused leave. The Full Court, having held that these defences were not covered by the plea of possession, held that they were not "real questions in controversy between the parties" within O.XXVIII r.1 of the then Rules of the Supreme Court, overruling the defendant's submission that the real question in controversy was whether the plaintiff was entitled to the land. The rule there in question provided:

"1. The Court or a judge may, at any stage of the proceedings, allow either party to alter or amend his endorsement or pleadings in such manner and on such terms as may be just, and all such amendments shall be made as may be necessary for the purpose of determining the real questions in controversy between the parties."

"The last clause of that rule makes an amendment mandatory. The judge is under the obligation of making an amendment, but only for a certain purpose and in certain cases - for the purpose of determining the real question in controversy between the parties - that being expressed in many cases to be the question which the parties had agitated between themselves, and had come to trial upon. It is necessary before determining whether it is an amendment the judge is required to make, that he should exercise his discretion in view of the evidence as to whether it was or was not the real question in controversy between the parties. ... [T]his particular question had not been previously in controversy or debated between the parties, and the defendant never came to the Court to have that case tried."

His Honour went on to refer at 940 to some discretionary considerations bearing upon whether it was fair to the plaintiff to allow the amendment. The Court therefore upheld the decision of a'Beckett, J. on both points of "this peculiar and remarkable case". Williams and Kerferd, JJ. agreed. In the course of some concurring reasons Williams, J. said at 940:

"[The words in the rule] mean that the amendment is to be allowed to determine some question which the parties have been agitating between themselves before the day of trial. I do not say that that question must necessarily appear upon the pleadings in some form, but that it should be one that has been in dispute or agitated between the parties before the trial, and which they intended to raise, but by some slip did not. The learned judge to whom the application is made has to decide upon the materials before him whether the matter as to which amendment is sought be such question or not."

(Williams, J. had during argument at 937 said that the question of discretion arose when the judge was determining what was the matter in controversy. That determination was the exercise of his discretion. Although Higinbotham, C.J. said much the same in the passage I have quoted from his judgment, I should, with great respect, have thought that the question would today be considered, not one of discretion, but one of assessment or value judgment.) It is true that in Dwyer v. O'Mullen, as here, it was the trial judge who first raised the point, but that was not the basis of the decision that the point was not in controversy.

119. There are, strangely, so far as I have been able to find, not many cases in which the meaning of the expression "the real question in controversy" or the several expressions like it have been expounded. For the moment I mention only Wilkin v. Reed [1854] EngR 576; (1854) 15 C.B. 192; 23 L.J.C.P. 193, which was cited in argument in Dwyer v. O'Mullen at 937. The Court of Common Pleas there held the expression to mean the question in agitation between the parties. Maule, J. at (L.J.) 197, echoing remarks he had made in argument at (L.J.) 195, expressed the view that what was the real question in controversy was a matter of fact to be decided by the judge upon the pleadings, opening of counsel and evidence. (The passage of his Lordship's judgment as reported in 15 C.B. at 204 is somewhat different.) Wilkin v. Reed was followed in Lucas v. Tarleton [1858] EngR 409; (1858) 3 H. & N. 116; 157 E.R. 409 by the Court of Exchequer.

122. There may be a question whether, if the former O.XXVIII r.1 and its progenitor, s.222 of the English Common Law Procedure Act 1852, are correctly considered as consisting of two limbs, one discretionary and the other mandatory, it is right to apply decisions on the meaning of the expression "the real questions in controversy" in them to the meaning of the similar phrase in R.36.01(1), where, since the expression occurs in a discretionary context, there is no need to confine it. (The older provisions are capable of being read as single statements with the concluding portion being simply explanatory of the principal consequence of the first portion, but still part and parcel of the opening discretion, so that, for instance, notwithstanding the word "shall", amendment would not be allowed even if it were necessary for the purpose of determining the real questions in controversy if it would be unjust to the other party to allow it by reason, for instance, of the death of a witness. The remarks of Jenkins, L.J. in G.L. Becker Ltd. v. Medway Building & Supplies Ltd. [1958] 1 W.L.R. 1216 at 1231 and Chitty's Archbold's Queen's Bench Practice, 14th edn, 317, support that reading. But I consider it unnecessary, even if open in the face of Dwyer v. O'Mullen, for this Court to decide whether that reading is correct. In the English rules in force until very recently the two parts of s.222 appear in separate rules (O.20 rr.5 and 8(1)), but both are clearly discretionary.) On the basis, however, that it is proper to apply those decisions to R.36.01(1), there must be some modification to the test, in that paragraph (1), even if not the latter portion of the earlier provisions, is applicable "at any stage" of the proceeding, including well before the parties come to trial. It may, perhaps, be said that to procure an amendment at such an early stage the question must have been agitated between the parties as that upon which they were proceeding towards trial. Nevertheless, I find it hard to conceive that, in the absence of unusual circumstances, a plaintiff who has commenced a proceeding alleging, for instance, breach of a duty of care will at an early stage be refused leave to amend the statement of claim to allege misleading and deceptive conduct on the ground that up to that stage that had not been suggested or "agitated" between the parties. Further, if one turns to defences, the fact that Dawson, J.'s explicit reference in The Commonwealth v. Verwayen (1990) 170 C.L.R. 394 at 456 to the provision in rules of court for the giving of leave to amend pleadings for the purpose of determining the real question in controversy was made in the context of the grant of leave to amend a defence to enable a period of limitation to be pleaded by a defendant who had failed to plead it shows at the least, I consider, that the question does not have to have been explicitly agitated. (In that case the defendant had over some period stated that it would not contend that the action was statute-barred, so that that defence can scarcely be said to have been agitated between the parties as a question on which they were proceeding towards trial.) In addition, the terms of para.(3) of R.36.01 suggest that a somewhat wider interpretation of "the real question in controversy" may be required: para.(3) permits amendment under para.(1) having the effect of adding or substituting a cause of action arising after the commencement of the proceeding, and one would think that, at any rate in most cases, such a cause of action is unlikely to have been agitated as the question on which the parties were proceeding towards trial. The word "real", indeed, suggests a contrast between what is ostensible (on the pleadings) and the underlying dispute.

125. There are moreover cases in which a wider reading has been adopted. In National Australia Bank Ltd. v. Nobile [1988] FCA 72; (1988) 100 A.L.R. 227 at 235-236 Davies, J., in the Full Court of the Federal Court, took a wide view of the admittedly somewhat different words "the real questions raised by or otherwise depending on the proceeding" in the corresponding rule of that Court, and in Re Great Eastern Cleaning Services Pty. Ltd. v. The Companies Act [1978] 2 N.S.W.L.R. 278 at 281 Needham, J. treated the expression "matters in dispute" in the rule relating to joinder of parties as covering "what could be considered to be the issues in the proceedings" (emphasis added). Importantly, in Qantas Airways Ltd. v. A.F. Little Pty. Ltd. [1981] 2 N.S.W.L.R. 34 at 38 Glass, J.A. (with whom Samuels, J.A. agreed) said, in a case where the plaintiff had applied to add a defendant, that the phrase "all matters in dispute in the proceedings" should not be construed as limited to matters arising in the pleadings. It might also properly include those disputed issues of fact "which are subjacent to the pleadings." (I have already used the linguistic equivalent, "underlying.") Mahoney, J.A. at 54 stated that the words should not be given a limited meaning such as the basis of claim which the plaintiff had postulated. In Blake v. Done [1861] EngR 981; (1861) 7 H&N 465; 158 E.R. 555 the Court of Exchequer took a non-technical and liberal view of s.222 abovementioned. Importantly again, so too did Isaacs, J. in O'Keefe v. Williams at 205. As to the width of the power conferred by R.36.01 reference may be made to Williams, Civil Proceedings - Victoria, Vol.1, para.[36.01.15]. Compare also s.29(2) of the Supreme Court Act 1986 and R.1.14(1).

128. It is, however, unnecessary to decide whether the considerations and cases to which I have adverted in the two immediately preceding paragraphs require the expression in R.36.01(1) to be read more widely than the expression in question in Dwyer v. O'Mullen was there read, and as, in substance, comprehending questions potentially within the ambit of the controversy or lis between the parties. For, if the exposition in Dwyer v. O'Mullen is accepted, the short answer (after a long excursus) to the appellant's contention on power is that the leave to amend was granted for the purpose of determining the real question in controversy between the parties. That question can be stated as being whether after the Plan Registration Date the appellant was under any, and if so what, obligation with respect to procuring the certification and registration of the plan of subdivision. In my view, it is altogether too artificial to say that the existence of the precise pleaded term was alone in controversy here, as it would in the case of an oral contract be too artificial to say that only the precise pleaded term was in issue and not also some slightly differently worded term which, as the evidence ultimately fell out, was found to be the term in fact agreed upon. If the appellant's contention is correct, there must have been very many orders for leave to amend made, both on interlocutory applications and at trial, since the coming into force of R.36.01(1) that were beyond power. In any event, to apply what was said by Maule, J. in Wilkin v. Reed and (without necessarily subscribing to the view that a discretion is involved) by Higinbotham, C.J. and Williams, J. in Dwyer v. O'Mullen, the trial judge here was clearly of the view on the material before him that the existence of the implied term was comprehended within the real question in controversy between the parties. I am quite unpersuaded that his Honour's conclusion was wrong.

131. With regard to his Honour's exercise of discretion, it was submitted for the appellant that the appellant was of very limited means and understandably anxious as to the outcome of the case; that the case had by the time of the application for leave to amend already well exceeded the total estimate of its duration of three days given to the judge who fixed it for hearing; that the appellant was entitled to expect that the respondents' case, in what was essentially a conveyancing dispute, was in final form at the conclusion of the opening at lunchtime on the second day; and (by implication) that his Honour had failed to have regard to those considerations. It was further put that under the modern approach to amendments courts have long discarded as a shibboleth the proposition that an order for costs is an adequate panacea, and reliance was placed upon the statement by Lord Griffiths in Ketteman v. Hansel Properties Ltd. [1987] A.C. 189 at 220, which it was said was adopted in The Commonwealth v. Verwayen at 456-457, 461-462, 464-465, 482 and 498 and not disavowed in Queensland v. JL Holdings Pty. Ltd. [1997] HCA 1; (1997) 189 C.L.R. 146 at 155. This was particularly so, it was submitted, in litigation between natural persons and where to allow the amendment at a late stage of a trial might completely change the outcome of the trial. Here, it was said, a new claim had been allowed, changing the basis of the case, in contrast to Howarth v. Adey [1996] VICSC 4; [1996] 2 V.R. 535. It was accepted that whether to allow an amendment is a discretionary matter for a trial judge, but it was submitted that an appellate court will intervene where the discretion has miscarried, particularly to ensure that trials in modern times are conducted efficiently and fairly. Here the appearance of the impartial administration of justice had been eroded by the allowance of amendments, made at the invitation of the Bench itself, well after the conclusion of evidence and the filing of final submissions.

134. In my judgment, his Honour's discretion did not miscarry. This is so whether or not the allegation of the implied term should ultimately prove correct, because the allegation cannot be said to be obviously bad in law: The Commonwealth v. Verwayen at 456 and 464. The fundamental principle which should guide a trial judge upon an application for amendment of pleadings so as to plead a new or alternative claim or defence is that such an application should ordinarily be allowed provided that any injustice arising to the other party from doing so can be compensated by the imposition of terms: Howarth v. Adey at 542-543 and Wilson v. Grimwade [1995] VicRp 80; [1995] 2 V.R. 628 at 632 and 634. It is true that the application for leave to amend was made on the last day of hearing, after the close of evidence and the filing of written submissions. But the question raised by the amendment was simply a legal question of implication in or construction of a written contract. In that regard the observations of Isaacs, J. in O'Keefe v. Williams [1910] HCA 40; (1910) 11 C.L.R. 171 at 203-206 are particularly apposite. Indeed, the facts concerning amendment in that case are very close to those here. For the appellants there had throughout the action rested their case on an express contract in a wide sense and not on implication, and then in the end sought leave to add a count based on implication, which Isaacs, J. at 204 described as consisting simply of a better and fuller legal statement of uncontroverted facts, with the same results dependent upon the same circumstances and upon almost the same formal allegations of fact. This, he held, led to a just determination of the matters "really in issue". Although not concerned with amendment of pleadings, the well-known statement in Connecticut Fire Insurance Company v. Kavanagh [1892] A.C. 473 at 480, referred to by Isaacs, J., that when a question of law is raised for the first time in a court of last resort, upon the construction of a document, it is not only competent but expedient, in the interests of justice, to entertain the plea, points to the same conclusion as regards exercise of discretion at first instance. The amendment went to the very heart of the dispute between the parties as to whether the appellant as vendor could rescind in May 1998 when he had had a cheque for $26,000 since November 1997.

137. As regards prejudice to the appellant, the contentions as to his impecuniosity and anxiety as a natural person seem to me to be designed to bring the case within the statement of Lord Griffiths in Ketteman at 220. But the nature of the amendment there, and some of the circumstances, are quite different. In any event, although the length of the hearing was raised, these matters were not put to the judge, and where the amendment was (as proved to be the case) unlikely to prolong the case beyond the day or greatly add to the costs, the impecuniosity and anxiety did not constitute relevant prejudice and were of minimal weight, not requiring to be expressly mentioned by the judge. His Honour several times raised with counsel for the appellant the question whether the amendment would cause him prejudice in the presentation of his case which could not be compensated by an award of costs or the grant of extra time for submissions. None was suggested either to his Honour or in this Court. Although it appears in a dissenting judgment, the statement cannot be doubted that it "is not a relevant type of prejudice that allowance of the amendment will or may deprive [a party] of a success which he would achieve if the amendment were not to be allowed" (per Lord Keith of Kinkel in Ketteman at 203).

140. The final factor for consideration is that the possibility of there being the implied term and the possible need to amend were raised by the trial judge himself in his memorandum and orally with both counsel. I do not accept the submission for the appellant that thereby the appearance of the impartial administration of justice was eroded or that it was unfair or unjust to invite or allow the amendment. The judge had clearly been giving consideration to the proper construction of the contracts and was, as he said, troubled and concerned on that score. In my view, it was perfectly proper for his Honour to raise with the parties a possible construction which did not depend upon any additional facts, because he would have been in a difficult position if, not having done so, he felt obliged to come to the view that there was no other construction open than that one. He was assuredly not the first judge to take such a step. That having been done, it was desirable to ensure, both for the correctness of the Court's records and in case there was an appeal, that the pleadings reflected that possible view of the contract. All too frequently one finds in appeals or when a judgment falls for consideration in another proceeding that the record in the first trial is incomplete or out of date. In the corresponding rule in force in England until earlier this year (O.20, r.8) the power to order amendment could be exercised by the court of its own motion or on the application of any party. Rule 36.01(1) does not itself authorise the Court to act of its own motion. But there is a general provision in R.1.14(2) authorising the Court to exercise any power under the Rules of its own motion. In The Supreme Court Practice 1997, para.20/5-8/3 it is stated that the (English High) Court has to date very rarely exercised the power to order amendment of its own motion, but later in the paragraph it is said, "The rule enables the Court, by persuasion, if possible, and, by order, if necessary to raise the real point at issue between the parties". In my view, it was in order for his Honour to suggest to senior counsel for the respondents that he consider whether an amendment was necessary. In short, his Honour's two suggestions did not, either alone or in combination, erode or give the appearance of eroding the impartial administration of justice: compare Montedeen Pty. Ltd. v. Bamco Villa Pty. Ltd. [1999] VSCA 59 at [43-45].

143. The ultimate question for his Honour was whether it was just to allow the amendment: Queensland v. JL Holdings Pty. Ltd. at 155; O'Keefe v. Williams at 206; and Connecticut Fire Insurance at 480. In my opinion, for the reasons given in the preceding paragraphs, the interests of justice required the grant of leave to amend and his Honour by his decision correctly determined where the interests of justice lay.

146. In reaching my decision as to his Honour's exercise of discretion, I have not found it necessary to rely upon the principle that an appellate court should be slow to interfere with a discretionary ruling of a trial judge particularly where such ruling relates to a matter of practice and procedure.

149. In addition I have not taken into account, either here or earlier when considering what was the real question in controversy, that in the opening of the respondents' case at trial there was reference to the implication of a term as a "fall-back" from their reliance on Special Condition 2.2.

153. It was common ground at trial and on appeal both that the parties to the contracts were entitled to extend the Plan Registration Date by consent and that the appellant had not failed to use his best endeavours to procure the certification and registration of the plan of subdivision by the substitute Plan Registration Date. (I shall usually for convenience speak of the Plan Registration Date as though it had not been extended.) What was in dispute was whether, after the passing of that date, he was under any and, if so, what obligation with respect to certification and registration in the event that neither party to a contract rescinded it pursuant to Special Condition 2.5.1 before registration of the plan. That issue I have found difficult of resolution.

156. The respondents contended, first, that the obligation under Special Condition 2.2 was two-fold, namely, to use best endeavours to bring about certification and registration (an obligation which did not end upon the passing of the Plan Registration Date) and to use best endeavours to bring that about by the Plan Registration Date. Alternatively, they contended that it is an implied term of the contract that, in the event that the Plan Registration Date passed without the occurrence of certification and registration and that the contract remained on foot, the appellant should use reasonable endeavours to procure certification and registration and should complete the contract within a reasonable time thereafter. (The specification of time for completion in the Particulars of Sale would still be appropriate, but it would now be necessary to obtain a certificate of occupancy within a reasonable time. Reasonable endeavours to procure certification and registration of the plan would entail procuring its certification and registration within a reasonable time from the Plan Registration Date. It is implicit in the term that a reasonable time does not expire with the passing of the Plan Registration Date. Special Condition 2.5.1 confirms that.) For the respondents the submission was stressed that each contract was, fundamentally, a contract for the sale of land, as its front page made clear. Everything was to be understood in that light.

159. The appellant, on the other hand, contended that, on the proper construction of each contract, his primary obligation was to use his best endeavours to procure the certification and registration by the Plan Registration Date; that the primary obligation was not an obligation to sell or transfer and that that was only a secondary obligation, contingent upon certification and registration. Any sale was a conditional one and was of contingent future property. (I am not sure whether that description is entirely correct, but I need not consider that question.) Since, notwithstanding the appellant's best endeavours, the plan was not registered by that date he had committed no breach of his primary obligation and, accordingly, none of his contingent obligation. There was no basis, the appellant contended, for inferring or implying that the parties actually intended that he would be under any continuing obligation after the Plan Registration Date if the plan had not been registered despite his best endeavours. The appellant had the right to rescind on 1 September 1997. How, it was asked rhetorically, could he lose that by mere effluxion of time? It was contended that a time, which was generous, had been unequivocally stipulated in relation to the obligation to use best endeavours and that the consequences of non-satisfaction of Special Condition 2.1 had not been left in a state of uncertainty, to be resolved by the implication of terms, but had been specifically and completely dealt with in Special Condition 2.5.1. It would contradict the express terms of each contract if it were to be construed as imposing an obligation upon him to use best endeavours or reasonable endeavours after the expiry of the Plan Registration Date.

162. The foregoing and other arguments marshalled in support of the parties' respective contentions, which appear to have been substantially the same on appeal as at trial, may be found set out in detail in his Honour's reasons.

165. Several further matters were common ground. Each written contract is the sole repository of the agreement between the vendor and the relevant purchaser. Special Condition 2.1 is a contingent condition, not a promissory condition: compare McTier v. Haupt [1992] VicRp 46; [1992] 1 V.R. 653 at 657. The condition there expressed is not a condition precedent to the coming into being of a contract, but a condition precedent to the parties' obligation to complete and thus a condition subsequent to or resolutive of the contract as a whole: Sandra Investments Pty. Ltd. v. Booth [1983] HCA 46; (1983) 153 C.L.R. 153 at 157; Perri v. Coolangatta Investments Pty. Ltd. [1982] HCA 29; (1992) 149 C.L.R. 537; Suttor v. Gundowda Pty. Ltd. [1950] HCA 35; (1950) 81 C.L.R. 418 at 443; and Maynard v. Goode [1926] HCA 4; (1926) 37 C.L.R. 529 at 540. Except where the condition is altogether independent of the conduct of either party to a contract, and subject to any express provision to the contrary, the ordinary consequence of non-satisfaction of such a condition is, not that the contract is automatically void, but that it is voidable by one or other or both of the parties: Suttor v. Gundowda Pty. Ltd. at 441-442_; New Zealand Shipping Co. v. Société des Ateliers et Chantiers de France_ [1919] A.C. 1 esp. at 9; cf. Rudi's Enterprises Pty. Ltd. v. Jay (1987) 10 N.S.W.L.R. 568 at 576-580. Here, Special Condition 2.5.1 makes express provision on that subject. The appellant contended that the contracts should be construed as at the respective dates when they were made. I did not understand the respondents to disagree with that contention, and I consider it correct. But any question of what was a reasonable time would be determined, not at that date, but at the date it arose, since it would be dependent upon the circumstances then existing: Rudi's Enterprises at 575-576.

168. I have now reached the point where the submissions of the parties diverged. A number of arguments may first be disposed of summarily. Special Condition 17, referred to for the respondents, which I have not set out, but which relates to waiver of any provision of the contract "expressed or implied", is a standard, generally expressed, clause and does no more relevantly than acknowledge the possibility of there being implied terms. On the other hand, Special Conditions 14.1.1 and 14.1.2, relied on by the appellant, do not stand in the way of the implication of a term which is otherwise to be implied. In Hart v. MacDonald [1910] HCA 13; (1910) 10 C.L.R. 417 it was held that the implication of a term to give business efficacy to a contract was not affected by the inclusion in the contract of a provision that there was no agreement or understanding not embodied in the tender and acceptance constituting the contract, for the term arose "by necessary implication upon a construction of the express words" (per Griffith, C.J. at 421), and "[e]very implication which the law makes is embodied in the contract just as effectively as if it were written therein in express language" (per O'Connor, J. at 427). Likewise Isaacs, J. said at 430 that an implication is as much a part of a contract as any term couched in express words. In relation to statutes, Rose v. Hvric [1963] HCA 13; (1963) 108 C.L.R. 353 at 358 is comparable. Hope v. RCA Photophone of Australia Pty. Ltd. [1937] HCA 90; (1937) 59 C.L.R. 348 at 363 per Dixon, J. might be thought to be to the contrary of Hart v. MacDonald, which is not cited in it. I think, however, that the explanation of Hope is that it was concerned with the possibility of the existence of circumstances extraneous to the contract from which an implication might be drawn. Special Condition 14.1.1, therefore, cannot assist the appellant. Nor can Special Condition 14.1.2, because it is concerned to exclude terms, conditions, representations and warranties other than those included in this contract. For reasons already given, an implied term or condition is included in the contract. Nor do I accept the appellant's argument that the putative implied obligation (however expressed) is directly inconsistent with the express provisions of Special Conditions 2.2 and 2.5.1. In my view, they can sit together: the implied term operates after the Plan Registration Date and admits of the appellant's rescinding pursuant to Special Condition 2.5.1 provided that up to rescission he has used the requisite endeavours to procure certification and registration. I accept that it may be another question whether Special Condition 2.2 constitutes a code, that is, is exhaustive, on the subject of the appellant's obligations with respect to certification and registration of the plan. I defer consideration of that question for the moment.

171. Like the trial judge, I cannot accept the respondents' contention that Special Condition 2.2 has two express component parts, of which one is an absolute obligation, unlimited in point of time, to use best endeavours to procure certification and registration while the contract subsists. The short answer to this contention is that it is not supported by the natural reading of the words of Special Condition 2.2. That provision is not in two parts, and turns very much upon the Plan Registration Date, as do Special Conditions 2.1 and 2.5.1. Special Condition 2.2 cannot be read, as in substance the respondents would read it, as if there were inserted in it before the concluding words "by the Plan Registration Date" an expression such as ", if possible" or ", preferably". The elaboration of the rationale put forward by the respondents in support of their construction of Special Condition 2.2 can be found in his Honour's reasons. But I conclude, for the reasons I have given, that there is no express provision imposing an obligation on the appellant with respect to certification and registration after the Plan Registration Date in the event of the contract's remaining on foot.

174. After close consideration of the submissions at trial and on appeal and the authorities referred to in those submissions, I can now state my conclusions. Each contract whose interpretation is in question here is a formal written agreement prepared by solicitors. Accordingly, what is in question here is, not the inferring of a term as a matter of actual intention of the parties, but the implication of a term as a matter of presumed or imputed intention: Hawkins v. Clayton (1988) 164 C.L.R. 539 at 569-573; Codelfa Construction Pty. Ltd. v. State Rail Authority (N.S.W.) [1982] HCA 24; (1982) 149 C.L.R. 337 at 346; and Byrne v. Australian Airlines Ltd. [1995] HCA 24; (1995) 185 C.L.R. 410 at 448-453. Because of the presence of Special Conditions 2.2 and 2.5.1, I agree with the appellant that, if there is an implied term here, it is not one annexed by law from the nature of the contract, as in Liverpool City Council v. Irwin [1976] UKHL 1; [1977] A.C. 239 at 254-255. In other words, because those clauses already cover part at least of the field which would be covered by a term implied from the nature of the contract as one, at least ultimately, for the sale of land, containing the contingent condition in Special Condition 2.1, it seems to me that the question here is whether the implication of a term is necessary to give business efficacy to the particular contract: Codelfa Construction at 345-346 and Byrne v. Australian Airlines Ltd. [1995] HCA 24; (1995) 185 C.L.R. 410 at 448 per McHugh and Gummow, JJ.; and Australis Media Holdings Pty. Ltd. v. Telstra Corporation Ltd. (1998) 43 N.S.W.L.R. 104 at 122-123.

49 I approach the interpretation of each contract, and in particular the question of the implication of a term, with two principles in mind. First, a contract should, so far as possible, be given its natural meaning. Secondly, a court must not make for the parties a contract that is different from or (in its view) fairer than a contract they themselves have made. Now, subject to two contrary indications, the natural meaning of Special Condition 2 is that the vendor's obligation was no more than to use his best endeavours to procure the certification and registration of the plan by the Plan Registration Date (or substitute date). There would seem little room for any implied term. The first of the two contrary indications is that Special Condition 2 appears in what is described as, and, in my view, is fundamentally, a contract of sale of real estate. This is shown by the statement, on the first page, of the primary and comprehensive obligation of each party. It is true that Special Condition 2 makes the contract conditional, but I consider it plain beyond argument that the real object of the contract was to effect for consideration the disposition and acquisition respectively of a defined piece of land and a defined accessory piece of land on which, being air-space at the date of contract, there should by settlement date exist agreed structures. Special Condition 2 does not mean that there is no contract, but rather constitutes a mechanism whereby the contract may be brought to an end without completion. The starting point, then, in deciding whether there is an implied term is to remember that there is a subsisting contract for the sale of land, albeit subject to conditions.

178. The fundamental nature of the contract bears on the appellant's argument that the language of Special Condition 2 is clear and unambiguous and that the provision deals in its express terms completely with the consequences of non-satisfaction of the contingent condition; that the legal relationship subsisting between the parties after 31 August 1997 was one at will; and that, until the plan was certified and registered or one party rescinded, there was no obligation on either party to take any step. The argument was, or means, in short that there was simply a vacuum. Now, whilst there are relationships such as tenancies at will known to the law, the contractual position contended for by the appellant is, I should have thought, highly unusual where, for the reasons I have given, the relationship of the parties is at bottom that of vendor and purchaser of land. It is true that the purchaser, no less than the vendor, had the option of rescinding; but the purchaser, unlike the vendor, if desirous of completing the contract had neither the power to do something to ensure completion nor (if the appellant be correct) the comfort of a provision obliging the vendor to do so. Whilst each had the power of veto, as it were, the purchaser was otherwise at the mercy of the vendor: cf. Zieme v. Gregory [1963] VicRp 34; [1963] V.R. 214 at 223. It is true that the appellant's construction would cause no problems in the event that the plan had been certified and then lodged in registrable form immediately before the Plan Registration Date, so that registration a few days afterwards without any further act of the vendor might be expected. But in other sets of circumstances the parties would, on the appellant's construction, simply drift along with nothing necessarily being done. I do not accept that there was, as asserted, a period devoid of operative obligations, or "contractual vacuum", as his Honour called it. A term must be implied to give business efficacy to the contract. (I am not suggesting that the contract would otherwise be illusory: for a start, the purchaser had the benefit of the appellant vendor's obligation under Special Condition 2.2.)

51 The second - and, in my view, decisive - contrary indication is afforded by the words "but before the Plan is registered" in Special Condition 2.5.1. Those words would not have been included if the scheme of the contract had been that the parties were uninterested in what happened after the Plan Registration Date, as might be the case, for example, with a contract that had to be performed by the end of a particular financial year or before the conclusion of the Sydney Olympic Games. If performance were wholly contingent upon certification and registration within 24 months (or other extended time), it would have been illogical to deny the right of rescission if the plan happened to be registered thereafter. To put the matter another way, the words quoted from Special Condition 2.5.1 show that the parties were willing to be bound after the passing of the Plan Registration Date.

182. The contract, then, is expressed to be conditional upon (that is, defeasible upon failure of) certification and registration by the Plan Registration Date. The vendor is to use his best endeavours to procure certification and registration by that date. It does not follow that the vendor may then stop using best endeavours. On the contrary, it goes without saying that the vendor is to continue to use best endeavours after the Plan Registration Date. It is simply that, after that date, either party may rescind, though not if the vendor's continued best endeavours have, before rescission, resulted in certification and registration. The expression "but before the Plan is registered" in Special Condition 2.5.1 is the reason why it goes without saying that the vendor continues to be under an obligation to use best endeavours after the Plan Registration Date.

185. Consideration of the term that I hold is implied prompts the following observations in support. The obligation implied is one of best endeavours, not reasonable endeavours. There is thus no departure from the concept used by the parties. Likewise, it is irrelevant, and need not be decided, whether in some cases, and (if so) which, there may be a difference in meaning between the two expressions: compare Transfield Pty. Ltd. v. Arlo International Ltd. [1980] HCA 15; (1980) 144 C.L.R. 83 at 100-101 and 107 and Hospital Products Ltd. v. United States Surgical Corporation [1984] HCA 64; (1984) 156 C.L.R. 41 at 64, 65, 91 and 92. Further, unlike an implied term couched in the language of reasonableness, the term implied here does not involve the difficulty of treating the express obligation in Special Condition 2.2 as superimposed, as it were, upon some otherwise underlying obligation implied at common law to give business efficacy and expressed in terms of reasonableness and as excluding it only up to the Plan Registration Date. Finally, no question of "reasonable time" is involved. Some of the difficulties to which an implied term referring to a reasonable time would give rise in the context of this contract appear from the second parenthesis in [42] above. Essentially, the problem is that the concept of a reasonable time must be capable of being given a concrete meaning and it is difficult to see what that meaning would be in the context of this contract. It does not, of course, simply mean a period of time that is neither very short nor very long.

188. In my opinion, the term which I hold to be implied satisfies the five cumulative and admittedly fairly stringent criteria enunciated by the majority of the Privy Council in the well-known and oft-applied passage in BP Refinery (Westernport) Pty. Ltd. v. Shire of Hastings (1977) 180 C.L.R. 266 at 283. For the reasons I have earlier given when discussing the "vacuum" that would exist during the relationship at will contended for by the appellant, the term is reasonable and equitable and is also necessary to give business efficacy to the contract as a contract for the sale of real estate containing the critical words in Special Condition 2.5.1, which would not, I think, be effective without it. My earlier exposition of the term shows that I consider that it "goes without saying". It is obviously capable of clear expression. Finally, for the reasons already given, I do not consider that it contradicts any express term of the contract. I can now state my opinion on the question which I earlier deferred, whether Special Condition 2.2 constituted a code with respect to the appellant's obligations to procure certification and registration. That Special Condition 2.2 is not a code on the subject is implicit both in the view I have expressed that without the term there would be a "vacuum", and indeed in the words of Special Condition 2.5.1 itself.

191. For the reasons I have given, the appellant as vendor was bound to continue to use best endeavours until either party rescinded or the best endeavours resulted in the plan's being certified and registered. That simple term, based on the contractual language, is virtually dictated by the parties' willingness to be bound if the plan should be registered after the Plan Registration Date. The implication of that term does not mean that, if the other members of the Court agree, the Court is making a different contract for the parties. Rather, it is effectuating the contract which they made.

56 Like the trial judge, I have treated the terms of Special Condition 2.5.1 as the principal factor requiring the implication of a term. I have, however, concluded that the term implied is somewhat different from that which his Honour held to be implied. The question arises whether it is open in this Court, having regard to the pleadings and the course of the trial and the appeal, to hold a term to be implied that is different from that which his Honour held was implied. In my view, there is no difficulty about this. Although the term which I hold to be implied was not expressly pleaded as part of the contract in the statement of claim or the amended statement of claim, paragraphs 13, 14 and 15 of the statement of claim, both before and after amendment, made it clear that the respondents were contending as one alternative that the appellant continued after 31 August 1997 to be under a contractual duty to use best endeavours to procure certification and registration and that he failed to do so and was thereby in breach of his obligation, albeit that the obligation was said to be under Special Condition 2.2. Moreover, in the conduct of the trial and of the appeal, the parties argued for and against the implication of a term referring to "best endeavours" as well as the term which his Honour held to be implied. That there may be a slight variation in formulation of the implied term is immaterial. In short, I see no consideration of justice or fairness that would preclude the Court from holding (if the other members agree) that the term I have earlier set out was implied.

196. No real argument was put for the appellant that, if he was after 31 August 1997 under an obligation with respect to procuring certification and registration, he had not, by refraining from paying the sum of $26,000 to the Port Phillip City Council, lost the right to rescind each contract. That the right to rescind was thereby lost is, I consider, clear.

Issue (e): Loss of right to rescind by election to affirm

200. This issue occupied little of the argument. Having regard to my conclusion on the last two issues which I have considered, it is strictly unnecessary for me to consider this issue. Having done so, however, I see no reason to differ in any way from the trial judge's reasons and conclusion. I therefore content myself with a few remarks only. First, the appellant's execution of the second deed of variation with Esanda on 23 October 1997, whilst it might show or constitute an election to affirm the project, cannot show or constitute an election to affirm the contracts in question, for it was transacted with a stranger to those contracts. Secondly, under Special Condition 2.5.1 the appellant had a right of rescission "at any time" before registration of the plan. As the joint judgment in Immer (No.145) Pty. Ltd. v. United Church in Australia Property Trust (N.S.W.) [1993] HCA 27; (1993) 182 C.L.R. 26 at 42 states, where (as is thus the case here) the right to rescind is a continuing one, it is not so readily concluded that the party entitled to rescind has abandoned that right completely as opposed to taking no action to exercise the right at the time in question. Compare Tropical Traders Ltd. v. Goonan [1964] HCA 20; (1964) 111 C.L.R. 41 at 55. Thirdly, as regards documents, the only one whose effect is arguable is the letter of 10 November 1997 from the appellant's conveyancing solicitors to the solicitor for the second respondent. The works with which it deals seem to be extras. Even if it can be said to relate to the contract, I think that it does no more than state an intention to hold the second respondent to the contract in the event that he should in the future decline to continue with the balcony. In other words, it does not communicate a present election, but merely foreshadows a possible election in the future. It is to be noted that, even if I were wrong about that, the other two contracts would not be affected. Fourthly, in the written submissions in reply on behalf of the appellant on this question reference was made to cross-examination of the second and third respondents and their solicitors which, it was submitted, showed that at all times each appreciated that the appellant retained a right to rescind which each at all relevant times wanted to restrict by procuring a further extension of the Plan Registration Date. This cross-examination is not referred to in his Honour's reasons concerning election. Since I would in any event decide issue (e) in favour of the appellant, I do not find it necessary to consider whether the submission is borne out and, if so, its effect.

204. This issue raises two difficult questions. The first is whether the principle embodied in the statements by Barwick, C.J. and Stephen, J. in Godfrey Constructions Pty. Ltd. v. Kanangra Park Pty. Ltd. [1972] HCA 36; (1972) 128 C.L.R. 529 at 538 and 551-552 is applicable to unconscionable termination of a contract for non-fulfilment of a contingent condition. That question is discussed in, for example, Cheshire & Fifoot's Law of Contract, 7th Austn. edn., para.[20.13]. The second is whether the conduct by or on behalf of the appellant in or about the termination was unconscionable. I prefer not to burden this already lengthy judgment with necessarily obiter views on these questions.

208. It is convenient to take this costs issue before the other. The appellant contends that his Honour failed to consider or give any weight to the appellant's submission that there should be no order as to the costs of the proceeding and that his Honour failed to express any reasons about that submission. It had been submitted for the applicant in essence that, since the outcome of the proceeding had turned on an interpretation of the contract which had not been pleaded or argued by the respondents but raised by the judge and since the respondents had failed on several aspects of the case and had wasted time in opening and by raising matters ultimately abandoned, there should be no order as to costs. The appellant submits that this Court should now substitute such an order for the order in fact made against him.

211. There is a preliminary question whether leave to appeal in respect of the order for costs made against the appellant is necessary and a further question whether, if it is, leave should be given. Because of the possibility that, the question of leave having been raised, this Court might hold that it was necessary, the appellant applied orally for an extension of time for seeking leave to appeal and for the grant of such leave. The respondents were content to proceed without the filing of a summons for the extension and leave, and did not, I think, suggest that an extension should not be granted if the Court were minded otherwise to grant leave. They did, however, contend that leave was necessary and should not be granted.

214. Section 17A(1)(b) of the Supreme Court Act 1986 provides that an order made by the Trial Division constituted by a Judge "as to costs which are in the discretion of the Trial Division" is not subject to appeal to the Court of Appeal except by leave of the Court of Appeal or by leave of the judge who made the order. The costs in question here were clearly in the discretion of the primary judge: Supreme Court Act 1986, s.24(1); cf R.63.02. Section 17A(1)(b) is expressed in terms of orders, not appeals, as to costs. Unlike earlier corresponding Acts, it does not refer to orders "as to costs only" (emphasis added). The natural meaning of "an order ... as to costs", in my view, is a curial command that relates to costs. In other words, the expression is apt to refer to the contents of a single paragraph of the document known as a judgment or an order provided that the paragraph relates to costs. Even if the expression refers only to such a document as a whole, the "General Form of Order" made on 12 November 1998 is such an order because its substantive provisions are confined to costs. But I would be of the same view even if it had been incorporated in the General Form of Order made on 5 November 1998, for that combined document would be "as to" costs amongst other things. It is in that context that the omission of the word "only" would be significant.

217. In my view, the balance of authority in this Court supports, indeed requires, that interpretation. In Spencer v. Dowling [1996] VSC 51; [1997] 2 V.R. 127 at 132-133 Winneke, P. recorded that on the hearing of the appeal counsel for the cross-appellant (who was challenging the substantive decision as well) "recognised" (not merely that he "conceded") that leave was required to challenge the costs order and accordingly applied for it. The Court refused leave. Thus, the Court acted on the view that leave was required. The next case in point of time is Leibler v. Air New Zealand Ltd. [1998] 2 V.R. 525 at 528-9. There the appeal had been instituted against the whole of the judgment below, challenging the principal relief and many findings upon which that relief depended, and challenging also the order for costs. The substantive dispute, but not the question of costs, had then been settled, although it remained live (as it was held) for the purpose of determining the appeal against the order for costs. Phillips, J.A. (with whom Winneke, P. and Kenny, J.A. agreed) considered that, the appeal, when instituted, having been brought as of right, subsequent events could not turn it into an appeal for which leave should have been obtained. His Honour said at 528:

"When instituted, the appeal plainly lay as of right and I did not understand the plaintiffs to be contending that, had the situation continued unaffected by subsequent events, leave would have been required under s.17A(1)."

It appears, however, that the case is distinguishable, for, having stated his view as abovementioned, his Honour said at 528-529:

"That statement should not be taken out of context. This is not an appeal in which the defendants are seeking to challenge the orders for costs on any separate or independent ground, irrespective, that is, of the merits on the principal issue ... Defendants' counsel accepts that the orders for costs were made in pursuance of the general principle that costs should follow the event, and neither the principle nor its application below is challenged ... What is challenged is that principal determination, and that remains under challenge, albeit that the consequences may now be limited ..."

223. In other words, the substitute order as to costs which the appellant sought would be made only as the consequence of a successful challenge to the principal relief. Nevertheless, his Honour did at 528 refer to whether the appeal was as to costs "only", and, unless the last-mentioned matter is an operative distinction, his reasoning is, with respect, inconsistent with Spencer v. Dowling. His Honour referred at 529 to Thorne v. Doug Wade Constructions Pty. Ltd. [1985] VicRp 48; [1985] V.R. 433 esp. at 497-498. That case was decided under s.39 of the Supreme Court Act 1958, which spoke of "no order ... as to costs only". The decision in that case that**,** the appeal on substantive grounds having failed, leave was required to argue that, on the basis of the correctness of the primary decision, the discretion as to costs had been mis-exercised is, therefore, all the stronger and, with the greatest of respect, supports the view of s.17A(1)(b) which I have expressed.

226. The third case is Hanlon v. Brookes (1997) 15 A.C.L.C. 1626, decided six days later. The reasoning there at 1632 in the last paragraph of the judgment of Callaway, J.A. (with whom on this point the other members of the Court agreed) is consistent with Spencer v. Dowling. A cross-appeal had been instituted raising a number of grounds but at the hearing the cross-appellants sought to argue only one ground, that relating to costs. The court considered that leave to cross-appeal as to costs was necessary and refused leave. So the contrast with Leibler v. Air New Zealand is all the more marked. Finally, in Montedeen Pty. Ltd. v. Bamco Villa Pty. Ltd. [1999] VSCA 59 at [167] the Court recorded that the cross-appellant had sought leave to appeal from the decision of the trial judge not to order that the costs payable to it be paid on a solicitor-client basis, although no summons had been issued seeking leave to appeal from the judge's costs order, and that the cross-appellant had offered to file such a summons. The cross-appeal related to the merits as well as that costs order. Whilst Montedeen is not, perhaps, an authority on the point, the judgment seems to accept or assume that leave was required.

229. In my view, the current of authority is to the effect that leave is required to appeal against an order as to costs even though the appeal relates also to the merits, at any rate where, as here, the challenge to the order as to costs goes beyond the mere consequence of success of an appeal on the merits. This does not, of course, derogate from the rule, applied almost daily, that leave is not necessary in order for the costs order below to be set aside when an appeal on the merits succeeds.

232. With regard to the discretion to grant leave, Callaway, J.A. in Hanlon v. Brookes at 1632 observed:

"It is almost invariably the case that the judge at first instance is better placed to deal with the costs after a long trial and counsel seeking leave ordinarily has a difficult task. The test is not whether we should have exercised the discretion in the same way as his Honour but whether there was or were a ground or grounds on which he could reasonably do so."

In Wentworth v. Rogers (No.3) (1986) 6 N.S.W.L.R. 642, which concerned an application for leave to appeal against an order for costs, Kirby, P. (with whom Glass, J.A. agreed) stated at 644 that the principles requiring leave to appeal from interlocutory decisions applied with special force where the decision in question was one of practice and procedure, referring to the well-known statement of Jordan, C.J. in Re The Will of F.B. Gilbert (Deceased) (1946) 46 S.R.(N.S.W.) 318 at 323 and to subsequent developments. His Honour further stated that the New South Wales provision corresponding in substance to s.17A(1)(b) amounted to a legislative recognition of those considerations. He continued:

"Accordingly, it is normally necessary for a claimant for such leave to show something more than that the appeal court would, if exercising its discretion afresh, have come to a conclusion different to that reached by the trial judge. Some error of principle in the exercise of the discretion, a consideration of irrelevant matters or some other manifest mistake is needed to take the case out of the ordinary situation in which, wherever a discretion is to be exercised, minds may differ on the result."

"One of the purposes of this provision is to ensure that costs questions, important though they frequently are to litigants not only cannot be further litigated by a party as of right on appeal, but also may only be allowed to be further litigated by appeal if the Court of Appeal thinks there is some good reason, over and above the Court's own opinion of what would have been the best costs order in the particular circumstances, for doing so. In a great many cases, including the present, costs are in the discretion of the Court; they also seem to me to fall within the category of matters of practice and procedure."

Other cases are collected in Williams, Civil Practice - Victoria, Vol.2, para.[263.5] (third para.).

241. Here, in my view, the appellant has not succeeded in the difficult task of showing that leave should be granted. No question of principle appears to me to be raised in this paradigm matter of practice and procedure and I discern no good reason, over and above whatever opinion this Court might have as to the best costs order in the circumstances, for granting leave. Only one aspect of the costs order presently under consideration, I think, requires comment. It is true that on 12 November 1995 his Honour gave no reasons for rejecting the appellant's submissions as to costs and, instead, ordering that the respondents' costs of the proceeding, including reserved costs, be paid by the appellant. However, his Honour acted consistently with the remark which he made to senior counsel for the respondents at the commencement of his reply on costs, which was to the effect that counsel's argument was that the points that his opponent had made might be true, but his (counsel's) clients had won. To that counsel assented. His Honour said that that was what he had to weigh up, he supposed. For those reasons, I am of opinion that leave to appeal, being necessary, should be refused.

245. In the case of the solicitors the respondents adopted the same attitude on the questions of a summons, extension and leave itself as they did in the case of the appellant. It is established that an order that a solicitor personally pay costs is not an order "as to costs only" which are in the discretion of the court, but rather is an order in the disciplinary jurisdiction of the court (even though the main object of the order may be compensatory): In Re Bradford, Thursby and Farish (1883) 15 Q.B.D. 635; Thompson v. Fraser [1985] 3 All E.R. 511 at 512; [1986] 1 W.L.R. 17; and Michael v. Freehill Hollingdale & Page (1990) 3 W.A.R. 223 at 228 and 231-233; cf. In Re Hardwick (1883) 12 Q.B.D. 148; In Re Land and Property Trust Co. Plc [1991] 1 W.L.R. 601 at 604-605; and Wilkinson v. Kenny [1993] 1 W.L.R. 963 at 971 and 974. (The compensatory object of the order is emphasised in Myers v. Elman [1940] A.C. 282 at 289 and 319, contra at 303; Michael at 233; Ridehalgh v. Horsefield [1994] Ch. 205 at 227; and White Industries (Qld) Pty. Ltd. v. Flower & Hart [1998] FCA 806; (1998) 156 A.L.R. 169 at 229-230 (affd. sub nom. Flower & Hart v. White Industries (Qld) Pty. Ltd. [1999] F.C.A. 773) and cases there cited.) In the first-mentioned case (scil., In Re Bradford, Thursby & Farish) it was held that a judge had no discretion to make an order for costs against a solicitor personally unless there had been misconduct or negligence and that on that question there ought to be an appeal without leave. Later cases have taken a wider view and in Thompson v. Fraser at (All E.R.) 512 Sir John Donaldson, M.R. said that the Court was unanimously of the view that an appeal in such circumstances did not relate only to costs "or, indeed, primarily to costs: it relates to the conduct of the solicitor." Although the word "only" does not appear in the Victorian s.17A(1)(b), that difference does not, in my view, make the long-established line of authority distinguishable and, whilst it is not binding upon this Court, I consider that we should follow it. If, however, leave is required I would grant leave, for the appeal raises a question of some general importance as to the interpretation of Rule 63.23 and a prima facie case of error in the interpretation and application of that rule is shown.

248. Paragraph (1) of Rule 63.23 of the Rules reads:

"63.23 Costs liability of lawyer (1) Where a solicitor for a party, whether personally or through a servant or agent, has caused costs to be incurred improperly or without reasonable cause or to be wasted by undue delay or negligence or by any other misconduct or default, the Court may make an order that - (a) all or any of the costs between the solicitor and the client be disallowed or that the solicitor repay to the client the whole or part of any money paid on account of costs; (b) the solicitor pay to his client all or any of the costs which the client has been ordered to pay to any party; (c) the solicitor pay all or any of the costs payable by any party other than the client."

Ultimately, in their application to the trial judge for an order (under sub-paragraph (c)) that the solicitors pay part of their costs, the respondents relied, and relied only, upon the following case provided for in the introductory portion of paragraph (1), namely, that the solicitors had "caused costs ... to be wasted by ... negligence or by [some] other misconduct or default".

253. The basis of the respondents' application was that they had unnecessarily incurred costs on the issue of whether, because of the extent of the appellant's indebtedness to his new financier, a secured creditor, specific performance of the contract was impossible. The costs had, it was claimed, been unnecessarily incurred by reason of the appellant's solicitors' having prepared the affidavit sworn by the appellant on 1 July 1998 (and in particular paras.5 and 54-58 of that affidavit) and the affidavits of David Gall sworn 4 September 1998, Vitina Bernadette Costa sworn that day, John Antoni Costa sworn 9 September 1998 and Mario Costa sworn that day when the solicitors knew or ought to have known that the conditions for re-financing imposed by St. George were not such as to preclude specific performance of the contract. The respondents' attack was two-fold. First, it was said that the solicitors knew or should have known to be false statements in the affidavits which they prepared and had had sworn to the effect that St. George would not permit the contracts of sale in question to be settled at the contract prices but would inevitably require settlement at current market values. In his affidavit of 1 July 1998 the appellant had referred to deposing in an affidavit of 20 May 1998 that raising of sufficient funds to pay out encumbrances on the title could not be effected on the basis of the sale prices of (amongst others) the units in question. He swore that sufficient funds to re-finance the project could only be procured on the basis that re-financiers could lend against the units on the basis of current market valuations (which were considerably higher than the contract prices). In his affidavit of 4 September 1998 Mr. Gall, executive manager of St. George for Victoria, swore that, if Catani requested that a discharge of mortgage be provided by St. George as mortgagee in respect of a sale for the price for one of the three units in question set out in the relevant contract instead of substantially the market value of the unit, he would not authorise St. George to provide such discharge without the consent of each of the guarantors (the four deponents other than himself mentioned earlier in this paragraph, together, it would seem, with a company of which the appellant was a director), as in his opinion to do so might expose St. George to claims from the guarantors. It was pointed out, however, for the respondents that on the very day that the appellant swore his affidavit of 1 July the re-financing of the project was settled with St. George and documents were executed including a deed of cross-collateralisation which included clauses giving the guarantors' consent to St. George's settling the three contracts in question for the sale prices respectively contained in them.

256. Secondly, it was said that, notwithstanding the terms of the deed of cross-collateralisation, the solicitors had prepared and had had sworn in September 1998 affidavits by the three Costa guarantors in which they stated that, if St. George sought his or her consent as guarantor to its providing a discharge of its mortgage over any of the three units in question for the price for the particular unit in the relevant contract instead of substantially the market value of the unit, the deponent would not provide the consent, since the deponent believed that the effect of St. George's doing so would be to increase the deponent's risk of liability under the guarantee. Attention was then drawn for the respondents to the fact that each of those deponents had already in the deed of cross-collateralisation consented to that very thing.

259. In his reasons of 12 November 1998 his Honour accepted the foregoing facts, remarking that it was, on the face of it, remarkable that the affidavits had been sworn with the statements in them in view of what was contained in the documents executed by the deponents and in view of the fact that the solicitors drafted all the affidavits.

262. An affidavit was sworn on 5 November 1998 by the partner in the firm of solicitors who had the care and conduct of the proceeding. The deponent said that neither he nor the two solicitors assisting him had been aware of the relevant provisions of the deed of cross-collateralisation until they were raised during the trial. He swore that the deed was part of a large bundle of security documents prepared by the solicitors for St. George. Settlement of finance provided by St. George was to be effected on 1 July 1998 and was proceeding with some haste given the position of the former financier, Esanda. Neither he nor his relevant assistant was "privy to all of the documents prepared", although he was generally aware of the nature of the securities to be provided. The deponent swore that "in the late evening of 30 June 1998" his firm had received the security documents, some 27 in number, from the solicitors for St. George. They were to be executed the next morning, with settlement scheduled for the afternoon. The independent solicitor acting for the guarantors had the documents executed by them in his presence on the morning of 1 July**,** and returned the documents to St. George's solicitors. A copy of the deed of cross-collateralisation was not retained by the appellant's solicitors. The deponent stated that he had prepared a draft affidavit for Mr. Gall to swear; that Mr. Gall, St. George's solicitor, the deponent and his assistant solicitor attended a meeting on 2 September 1998 with senior and junior counsel for the appellant at which the draft affidavit was considered. The critical words in Mr. Gall's affidavit, which I have earlier summarised, were substituted in the draft by Mr. Gall and the solicitor for St. George, and the affidavit, with some other alterations, was re-engrossed and sworn. Neither of them mentioned the deed of cross-collateralisation during the meeting. His Honour pointed out that the affidavit did not state whether the deponent or either of his assistants read the documents prior to their execution. He inferred that neither the deponent nor the solicitor assisting him in the litigation perused the document. No party before us sought to challenge that inference.

265. His Honour then turned to Rule 63.23(1). He noted that in Myers v. Elman it was suggested that the jurisdiction should only be exercised where there had been a "serious dereliction of duty" (per Viscount Maugham at 292) or a failure to conduct litigation "with due propriety" (per Lord Atkin at 302), and that it had been said (by Drummond, J.) in Re Bendeich (No.2) [1994] FCA 1504; (1994) 53 F.C.R. 422 at 427 (with reference to Commonwealth legislation applicable in that case) that so long as lawyers are

"not guilty of professional misconduct or gross, as opposed to mere, negligence in the way they conduct their client's case, they will not be exposed to any personal liability to pay either the costs of their own client or those of the opposing litigant."

His Honour then stated that Rule 63.23 did not in terms refer to or require the establishment of gross negligence. Addressing himself to the particular words upon which the respondents relied, he said that it was sufficient to establish negligence, as opposed to gross negligence, in order to be able to invite the Court to exercise the discretion to make the orders sought. In exercising the discretion it would be appropriate to consider, amongst other things, the degree of negligence and the consequences of the negligence. It seemed to him that the discretion was not to be lightly exercised and one needed to guard against the effect of hindsight.

270. Turning to the question whether the solicitors had been negligent, his Honour said:

"Looking at the facts before me, I do find it remarkable that the solicitors for the defendant did not peruse the security documents very closely when they came into their possession. I would have expected a solicitor acting with due care to do so. The client was in the middle of an important fight with several purchasers, having purported to rescind their contracts, and was attempting to defeat claims for specific performance of those contracts A major issue he was relying upon was impossibility of performance based on the requirements of financiers as at 1 July 1998. An affidavit had been drawn which purported to set out in some detail the arrangements with St George. I would have expected a solicitor acting with due care to study closely the documents with a view to exhibiting them to the affidavit to demonstrate the reality of the factual allegations made - in particular, the fact that St George was demanding the right to sell the properties at market value should the need arise. If such terms had existed in the documents they would have made the case of the plaintiffs extremely difficult to win. Further, a solicitor acting with reasonable care would want to ensure that whatever his client deposed to about the financial arrangements accorded with the documents; for, if not, his client's credibility could be severely damaged in cross-examination. I find it remarkable, therefore, that the solicitors for the defendant in the litigation apparently did not examine the documents. However busy they were, I would have expected them to examine them closely."

He then said that, had the solicitor read the documents and absorbed their contents, it would have become apparent to him both that the position his client sought to maintain could not be maintained in the terms advanced in the affidavit of the appellant and that there was no point in pursuing the issue of the consent of the guarantors. Attempting to make due allowance for the impact of hindsight, he concluded that the solicitors had been negligent in the way they conducted themselves for the appellant. They should have closely perused the documents for the two reasons given in the passage quoted above. Their failure to do so meant, he said, that the case proceeded on a basis without any foundation and led to the unnecessary incurring of costs, costs that were wasted. The pre-conditions for the exercise of the discretion whether to make an order against the solicitors were therefore made out.

275. In exercising the discretion, his Honour considered an argument for the solicitors that the respondents' lawyers had twice had the opportunity to examine the documents and that, if they had done so, the true facts would have emerged at the commencement of the trial at the latest. Whilst he accepted that that was true, his Honour was of the view that the negligence of the appellant's solicitors was the precipitating cause of the problem and that any failure by the opposing lawyers to inspect should not protect the solicitors from an order. His Honour seems also to have considered that the negligence was of sufficient gravity to warrant the making of an order. As to the consequences, his Honour was satisfied that significant delay was caused. Accepting the assertion of counsel for the appellant that the issue of impossibility would still have been fought and an attempt made to raise doubts at least about the effect of the involvement of St. George on the chances of having the contracts specifically performed, so that some time would in any event have been spent on the issue, his Honour was of the view that a reasonable estimate was that two days of the hearing had been wasted. It was appropriate to make an order against the solicitors in favour of the respondents for their costs of two days of the hearing.

278. In this Court a comprehensive argument was presented on behalf of the solicitors challenging (1) his Honour's construction of Rule 63.23(1); (2) his finding that failure to read the deed constituted negligence; (3) his finding that the failure was causative of loss (or waste); and (4) his finding as to the extent or quantum of the loss (or waste). I find it necessary, however, to deal only with the first and second challenges.

281. In my opinion, the solicitors made good their challenge to his Honour's construction of Rule 63.23(1). I consider that "negligence" in para.(1) connotes more than "mere" or "tortious" negligence: some kind of professional impropriety or "gross" negligence is required. This follows from the language of the paragraph itself, the apparent history or source of the particular words, and such authorities as there are. As regards the language of para.(1), the word "negligence" appears as one of the alternatives in the second limb (namely, that commencing "to be wasted") of the introductory "where" clause. It appears there in a context of words denoting blameworthy conduct: it is juxtaposed to the preceding "undue delay" and the succeeding "other misconduct or default" (emphasis added). That context suggests that its meaning is to be ascertained from that of its companion words or phrases. More importantly, the word "other" suggests that "undue delay" and "negligence" are to be construed as being of the same kind as "misconduct or default". That "negligence" connotes negligent misconduct or other negligent impropriety is shown, for a start, by decisions on forerunners or cognates of the present Rule 63.71(1). That provision uses, in relation to costs, the very words appearing in Rule 63.23(1) from "incurred" down to "default". It then goes on, "or where from any other cause the amount of costs is excessive". It was that clause which fell for consideration in Re Commonwealth Oil Corporation Ltd. [1917] 1 Ch. 404, but the preceding words of the English Rule in question (O. LXV r.27(38A)), like those in the equivalent and same-numbered Victorian rule in force until 1 January 1987, spoke of costs' having been "increased by unnecessary delay or by improper, vexatious, prolix or unnecessary proceedings, or by other misconduct or negligence" (emphasis added). At 412 Sargant, J. rejected a suggestion that the words "from any other cause" in the sub-rule were limited to matters of the same kind as the matters mentioned in the preceding words, that is to say, that they applied only where there had been "something like misconduct on the part of the solicitor." It is clear that his Lordship accepted that the preceding words, which included the word "negligence", albeit in a slightly different context and in a different order, did connote "something like misconduct on the part of the solicitor". In an earlier case, In re Johnston; Mills v. Johnston [1904] 1 Ch. 132 Farwell, J. at 136, having read the preceding words, said:

"[N]ow down to that point it is quite clear that all the matters mentioned are matters of the most vital import to a solicitor, imputing to him misconduct which no honourable man would put up with if he could avoid it."

His Lordship recurred to that view later in his reasons. In Mitchell v. Mitchell (1971) 19 F.L.R. 100 at 110-111 Neasey, J., considering an almost identical Tasmanian rule, followed Sargant, J. and Farwell, J. Neasey, J. clearly treated the first part of the rule as related only to misconduct of some kind.

286. Unlike his Honour, this Court was treated to a review of the history of the rule in Victoria and England, as revealed in the cases and particularly Ridehalgh v. Horsefield. Rule 63.23 is based upon r.57.07 of the Rules of Civil Procedure of Ontario and the New South Wales Supreme Court Rules Pt.52 r.66. There is now also Pt.52A r.43 in New South Wales. But the word "negligence" does not appear in the New South Wales rules. It does appear in the Ontario rule, though the word "misconduct" does not there appear. Counsel were unable to find any decision on the meaning of "negligence" in the Ontario rule. But, having had the benefit, denied to his Honour, of the review of the English rules in Ridehalgh v. Horsefield, I consider it difficult to resist the conclusion that the collocation "negligence or ... any other misconduct or default" in Rule 63.23(1) had its genesis in words used by Viscount Maugham in the course of his review in Myers v. Elman of the jurisdiction to make costs orders against solicitors, when at 289 he said:

"In my opinion the jurisdiction as to costs is quite different. Misconduct or default or negligence in the course of the proceedings is in some cases sufficient to justify an order." (Emphasis added.)

His Lordship had earlier with respect to the jurisdiction to strike off the rolls, said at 289 that mere negligence, even of a serious character, would not suffice; and then in relation to the jurisdiction to make costs orders he pointed out that some of the authorities depended on the negligence or mistake of the solicitor "and in that sense only on his misconduct in the proceedings." However, at 292 he said that the jurisdiction in question ought to be exercised "only when there has been established a serious dereliction of duty as a solicitor either by himself or by his clerks." It might be said that, in the light of his Lordship's earlier remarks, the inclusion of "negligence" in Rule 63.23(1) shows or suggests that "mere" negligence or tortious breach of duty was intended to be covered. But his Lordship's later remark seems to indicate that that is not so. In any event the natural meaning, in their context in Rule 63.23(1), of the collocation of words actually adopted is, for the reasons given earlier, quite opposed to such an interpretation.

291. Immediately before the introduction, with effect from 1 January 1987, of the Rules containing Rule 63.23 and for very many years before that, Chapter I of the Rules had contained in Order 65 rr.5 and 11 provisions authorising orders making solicitors personally liable for costs, in the first case to any party and in the second case to the solicitor's client (by way of disallowance of costs or of reimbursement of costs which the client had been ordered to pay another person). But r.5 dealt only with the case where the trial could not conveniently proceed through neglect on the part of the solicitor (which is now found elaborated in para.(2) of Rule 63.23), and r.11, although of a general nature like Rule 63.23(1), did not include the word "negligence", referring relevantly only to "any undue delay ... or ... any misconduct or default of the solicitor". The equivalent English rules are discussed in Ridehalgh v. Horsefield at 227. A new rule introduced in England in 1960 in place of Order 65 r.11 spoke of costs wasted "by undue delay or any other misconduct or default", again with no reference to "negligence". In Orchard v. South Eastern Electricity Board [1987] Q.B. 565 Sir John Donaldson M.R. said at 572 that the jurisdiction under the rule introduced in 1960 was to be exercised "only in clear cases." He made it plain that he considered that that category included cases where the proceedings instituted by a solicitor constituted an abuse of process or were unjustifiably oppressive. In 1986 the English rules were amended so as to omit reference to "misconduct" and to introduce reference to "reasonable competence". It is to be observed that in Ridehalgh v. Horsefield at 229 the English Court of Appeal was of opinion that the changes, first, removed "the implication that any conduct must amount to misconduct if it is to found a wasted costs order" and, secondly, suggested "the ordinary standard of negligence and not a higher standard requiring proof of gross neglect or serious dereliction of duty". At 230 the Court of Appeal did not question that the new rule was intended "to cut down limitations hitherto thought to restrict the court's jurisdiction to make wasted costs orders". In 1990 the English Supreme Court Act 1981 was amended to authorise the making of orders against legal or other representatives in respect of "wasted costs". These were defined as costs incurred, amongst other things, as a result of "any improper, unreasonable or negligent act or omission". In Ridehalgh v. Horsefield, at 232-233 the Court of Appeal dealt with the meaning of "negligent" in that definition. It rejected an argument that the word invoked technical concepts of the law of negligence, namely, an actionable breach of the legal representative's duty to his own client, to whom alone a duty is owed. It held that the word was to be understood in an untechnical way to denote failure to act with the competence reasonably to be expected of ordinary members of the profession.

294. I stress, however, that the exposition of the word "negligence" in that case comes as a result of successive changes made in England to the Rules and the governing Act that were clearly intended to widen the circumstances in which costs orders could be made against legal representatives. It is implied in the judgment of the English Court of Appeal that, but for changes from 1986 onwards, misconduct or the like would have remained requisite and the ordinary standard of negligence would have continued to be inapplicable, the word "negligence" admittedly not being in the rule. The judges of this Court have not seen fit to adopt or adapt the changes made in England and in particular to remove the concept of "misconduct". Whilst an order under Rule 63.23(1) is clearly intended to compensate, the Victorian rule remains supplementary to the summary jurisdiction of the Court over solicitors (preserved in relation to legal practitioners by s.172 of the Legal Practice Act 1996) which, though it differs from the jurisdiction to strike off, has a disciplinary character. In such a context it is natural that the word "negligence" should have a more stringent meaning than it does in the law of tort. So far as duty is concerned, it is the solicitor's duty to the Court that is relevant. Thus, it seems to me, that the summary of Myers v. Elman by the Court of Appeal in Ridehalgh v. Horsefield at 227 is, in essence, applicable to the Victorian rule. In particular, "[w]hile mere mistake or error of judgment would not justify an order, misconduct, default or even negligence is enough if the negligence is serious or gross."

297. Paragraph (2) of Rule 63.23 provides that, without limiting paragraph (1), a solicitor is in default for the purpose of that paragraph where, in substance, an application or trial cannot proceed by reason of the failure of the solicitor to attend, to file or lodge a requisite document, to be prepared with evidence or otherwise to proceed. For the avoidance of doubt, I make it clear that nothing that I have said about the interpretation of para.(1) is intended to derogate from the express provisions of para.(2). That paragraph, it may be noted, fastens upon the word "default" in para.(1), rather than the word "negligence".

300. On the basis that "negligence" in Rule 63.23(1) is limited to professional impropriety or the like and serious or gross, as opposed to mere, negligence, I turn to the second challenge to his Honour's decision to make a costs order against the solicitors. In view of the interpretation I have arrived at, it is unnecessary to decide the precise point raised by this challenge, namely, whether the preparing and filing of the affidavits without having read the deed of cross-collateralisation and picked up in it the provisions which were relevant, though apparently somewhat unusual in such a document, constituted negligence. That conduct, in my opinion, plainly did not constitute professional impropriety, dereliction of duty to the Court, or other misconduct or default, or serious or gross negligence. It is to be remembered that the deed of cross-collateralisation was accompanied by 26 other documents and had to be, along with them, executed as a matter of urgency. The solicitors were not acting for the guarantors other than the appellant, though they were acting for him and the borrower, Catani. The main concern as regards the deed was to ensure that it was satisfactory to the guarantors after they had received independent legal advice. There was no over-reaching of the Court, no dereliction of duty to it nor any other impropriety in the omission and in the preparing and swearing of the affidavits, even of those sworn in September. The solicitors' omission was careless and mistaken, for each document should have been perused before a client was allowed to execute it, but, in the circumstances, the omission did not amount to serious or gross negligence. Independently of the foregoing considerations, there is much to be said for the view that there could not have been "negligence" or other misconduct or default within Rule 63.23(1) unless the solicitors should have read the deed for the purpose of the litigation, and that, although the deed related to the re-financing and the re-financing was relevant to an assertion in the affidavit of 20 May (though the defence had not yet been served), any perusal of the deed on 30 June or 1 July 1998 that was requisite, was requisite not for the purpose of the litigation, but for the finalisation of the security documents on which the re-financing of the project depended.

303. For the foregoing reasons, I consider that the pre-requisites for the making of the order against the solicitors in the Court's discretion were not satisfied. Their appeal should therefore be allowed.

307. In my opinion, the appellant's application for leave to appeal against the order against him as to costs should be refused and his appeal should be dismissed, whilst the like application of the second appellant should be granted so far as necessary and its appeal allowed. Paragraph 2 of the order made on 12 November 1998 should be set aside and in lieu thereof it should be ordered that the plaintiffs' application for an order that the solicitors for the defendant pay part of the plaintiffs' costs of the proceeding be dismissed with costs. With the passage of time since his Honour's order of 5 November 1998 was made, dates stated in ancillary orders have been overtaken and will require to be varied. I would hear counsel on that aspect of the order below and on any similar aspects.