Hadden v Inline Partners Pty Ltd

Court of Appeal (NSW)|2024-02-19|Before: Gleeson JA, White JA, Stern JA

Background

Mr Hadden is the director, secretary, and shareholder of companies referred to by the parties at trial as the Hadden Group, which term embraced the main trading company, Nickaz Constructions Pty Ltd (Nickaz Constructions), other corporate entities associated with Mr Hadden, together with Mr Hadden and his wife, Ms Nicole Hadden. Nickaz Constructions was placed into voluntary administration on 7 April 2021 and went into liquidation on 3 June 2021.
Inline is an accountancy firm, the principals of which are Mr Mah Chut and Ms Christy Lim. They provided accountancy and bookkeeping services to the entities of which Mr Hadden was a director from about 2002 until September 2020, and also Mr Hadden and Ms Hadden. They did so through several accounting firms, including from about 2010 to 2019 through CDMC Chartered Accountants, and from 2019 through Inline.
Inline's pleaded claim for $71,544.00 relied on the short form money claim in respect of monies said to be owing for work done or materials provided by the plaintiff for the defendant at the defendant's request: Uniform Civil Procedure Rules 2005 (NSW) (UCPR), r 14.12(1)(c).
At trial, counsel for Mr Hadden sought to confine Inline to a claim in contract, contending that only a contract claim was pleaded not a quantum meruit claim. The pleading objection was rejected. As the primary judge observed at [6]-[7], (a) the pleading of the common money count does not distinguish between contract claims and restitutionary claims, referring to Target v McLean Austquip Pty Ltd [2014] NSWSC 1310 at [19], and (b) Mr Hadden did not seek particulars or require Inline to plead the facts on which it relied in full: UCPR, r 14.12(2).

The primary judge's findings and reasons

His Honour made factual findings that: 1. there was no express retainer between any of the accounting firms operated by Mr Chut and Ms Lim, including Inline, and any person or entity on behalf of Mr Hadden, or any member of the Hadden Group: at [26]; 2. accountancy and bookkeeping services were provided by Inline and its predecessor practices on instructions from Mr Hadden from time to time by telephone or by email, and that Inline (or its predecessors) rendered an invoice during or on conclusion of the provision of those services: at [27]; 3. Nickaz Constructions was not the holding company for any of the other group members; the shares are beneficially held by Mr Hadden, personally, or Mr Hadden and Ms Hadden personally: at [25]; 4. over the course of Mr Chut's dealing with the Hadden Group since 2002, many invoices had been issued to different members of the Hadden Group (which term included Mr and Mrs Hadden and companies of which Mr Hadden was a director: at [21]). For the period 2018 to September 2020, other than the disputed invoices, the only invoices that had been issued and paid had been issued to Nickaz Constructions and a superannuation fund associated with Mr Hadden. Mr Chut conceded that Mr Hadden had never personally paid Inline for services provided by it, and he could not recall whether any earlier iteration of the accountancy practice invoiced Mr Hadden personally for annual or ongoing services: at [28]-[29]; 5. Mr Hadden was, either directly or indirectly, the beneficiary of the services provided by Mr Chut: at [25]; and 6. the work the subject of the six disputed invoices was performed in each case: at [37].
After noting at [44] that it was common ground that the relationship between Inline and a member or members of the Hadden Group for the provision of accountancy and bookkeeping services was governed by a contract, the primary judge found at [45] that there was an agreement for the provision of professional accounting and bookkeeping services between Inline and one or more persons or entities from the "Hadden interests' camp".
In finding at [56] that "at least" Mr Hadden and Nickaz Constructions were parties to the contract with Inline and its predecessors, the reasoning of the primary judge included: 1. in the period before 2018, various entities were issued with invoices, which were paid: at [51]; 2. it was common ground that there was no conversation from 2018 by which any existing billing practice would be modified and there was no evidence of any express agreement prior to that time as to which member (or members) of the Hadden Group would be liable to pay invoices raised by any of the accountancy practices operated by Mr Chut and Ms Lim: at [51]; 3. this practice and the evidence of Mr Chut that he determined which entity to invoice strongly indicated that Mr Hadden and the Hadden entities for which work was performed were each parties to the contract with Inline or its predecessor accounting practices for the provision of accounting services to them: at [53]; 4. there was no reason why Mr Hadden could not have personally been party such that he may be liable to pay for services provided to him or to members of the group in which he had an interest: at [52]; and 5. the invoice dated 19 August 2019 issued by CDCM Chartered Accountants did not establish the objective circumstances from which an inference could be drawn that Nickaz Constructions would be liable for all invoices for accountancy work done for members of the Hadden Group: at [53].
The dispositive reasons given by his Honour were at [55]-[59]: [55] In my view, Mr Hadden was personally a party to the contract such that he could be issued with the six invoices in dispute. The objective circumstances that support this conclusion include Mr Mah Chut's evidence that various entities within the Group had been invoiced in the past. Moreover, only Mr Hadden appears to have had an interest in every company or trust that comprised the Hadden Group. The issued share capital of each entity was beneficially owned by Mr Hadden, either alone or together with Ms Hadden. On the other hand, Nickaz Constructions was neither a holding company nor subsidiary of any other corporate member of the group. Objectively, there would be no reason for Nickaz Constructions to be the sole party liable to pay for accountancy services provided to other companies in which it had no equity interest, still less services provided to Mr Hadden personally, as was the case with invoices I001007 and I001428. [56] Mr Mah Chut correctly described Mr Hadden as the ultimate beneficiary of all accountancy services as the businesses were his in a practical sense, both in terms of management and in terms of beneficial ownership. In circumstances where neither the creation of the contractual relationship nor the conduct of the relationship indicated that Nickaz Constructions was the sole contracting party on behalf of the Hadden Group, I am satisfied that at least Mr Hadden and Nickaz Constructions were parties to the contract with Inline and its predecessors. [57] It might also be noted that, as a matter of convenience, Inline could direct invoices to a single entity in respect of work done for that entity and others. The convenient course appears to have been adopted. It does not follow, however, that the single recipient of an invoice could not be Mr Hadden. [58] The routine work the subject of invoices I001009 and I001004, such as financial statements, solvency statements, preparation of company minutes and tax returns, was for various members of the Hadden Group, including but not limited to Nickaz Constructions. Similarly, the Division 7A work the subject of Invoice I001010 was for various members of the group, including Mr Hadden as the borrower. The family law work, the subject of invoices I001007 and I001428, was for Mr Hadden, personally in a direct sense, and not for the benefit of any corporate entity, including Nickaz Constructions. Invoice I001006 was for Nickaz Constructions. [59] As a practical matter, Inline directed all of these invoices to Mr Hadden in March and September 2020. I find that it was entitled to do so under the contract.
After finding at [60] that the inferred or implied terms of the contract included "the accountant to charge a reasonable fee", his Honour found that (a) the rates charged by Inline, while not the subject of express agreement, were reasonable for professional accountancy services: at [63], [65], and (b) the failure of Mr Hadden to pay the disputed invoices was in breach of contract and Mr Hadden was indebted to Inline in the sum claimed: at [66].
Given the conclusion on the contract claim, his Honour did not go on to determine Inline's alternative claim against Mr Hadden based on quantum meruit. His Honour correctly noted that such a claim cannot arise given the finding that the parties' relationship was governed by a valid and binding contract: at [67].

Disposition of the application

It is well-established that ordinarily it is appropriate to grant leave only concerning matters involving an issue of principle, questions of general public importance, or where an injustice is reasonably clear, in the sense of going beyond being merely arguable: Cheng v Motor Yacht Sales Australia Pty Ltd t/as The Boutique Boat Company (2022) 108 NSWLR 342; [2022] NSWCA 118 at [15].
None of the proposed grounds raise an issue of principle or a question of general public importance. Whether there is an injustice in the relevant sense directs attention to the merits of the proposed grounds of appeal.

Challenge to ultimate finding

Proposed ground 1 contends that the primary judge erred in concluding that Mr Hadden was contractually liable to Inline. The challenge in this ground to his Honour's ultimate finding does not identify any error. Nor does Mr Hadden challenge any of the primary judge's factual findings. This ground depends on what inferences should be properly drawn from the limited evidence presented by the parties.
Contrary to Mr Hadden's submission, it was well open to his Honour to draw an inference from the parties' conduct that Mr Hadden was a party to the contract with Inline. The objective circumstances from which such an inference could be drawn were as follows.
First, Mr Hadden gave the instructions to Inline and its predecessors to perform the work and there was no evidence that such instructions were given with any limitation of liability by Mr Hadden.
Second, Mr Hadden directly was the beneficiary of the services provided in relation to (i) his family law matter, as his Honour found at [58], and (ii) the Div 7A loans, as he personally was a borrower, as his Honour found at [58]. Mr Hadden was an indirect beneficiary of the accounting services provided to the other members of the Hadden Group.
Third, the uncontradicted evidence of Mr Chut was that invoices in the past were issued to various Hadden Group entities.
Fourth, given that Nickaz Constructions was neither a holding company nor subsidiary of any other corporate member of the Hadden Group, there was no reason for it to be considered the sole contracting party and be liable for services provided to other companies in which it had no interest, or to Mr Hadden personally relating to his family law matter, the subject of invoices 1007 and 1428 (in part), and as borrower in relation to the Div 7A loans, the subject of invoices 1010 and 1428 (in part).
Fifth, although not relied upon by his Honour, the conduct of Mr Hadden post-contract, relevantly, his failure to respond to a demand for payment by Inline, may amount to an admission against interest, as explained in Roude v Helwani [2020] NSWCA 310 at [33] (White JA, Brereton and McCallum JJA agreeing): … A failure to respond to a demand for payment may amount to an admission if there are circumstances which render it more reasonably probable that a person who denied liability for the claim would answer the claim than that he would not (L Shaddock & Associates Pty Ltd v Parramatta City Council (No. 1) (1981) 150 CLR 225 per Gibbs CJ at 230; [1981] HCA 59; Thomas v Hollier (1984) 156 CLR 152 per Gibbs CJ at 157; [1984] HCA 35; J D Heydon, Cross on Evidence at 33,435).
Here, Mr Chut gave unchallenged affidavit evidence (par 11) that he caused the six invoices to be issued to Mr Hadden, and Mr Hadden did not dispute that he received the six invoices. The circumstances which render it more reasonably probable that Mr Hadden would answer the claim in the six invoices than that he would not, are (i) Mr Hadden is the person who gave the instructions to Inline to perform the work, (ii) Mr Hadden was a director of each of the companies in the Hadden Group, including Nickaz Constructions, and (iii) it can be expected that if Mr Hadden did have an explanation why he did not respond to the invoices, he would have said so in his affidavit evidence. The characterisation by counsel for Mr Hadden of the absence of such evidence from Mr Hadden as "neutral" cannot be accepted.
Mr Hadden's failure to respond to the demand for payment by Inline amounts to an admission against interest. That is a strong objective circumstance which supports his Honour's factual finding.
Finally, contrary to Mr Hadden's submissions relying upon the remarks of Kourakis CJ in Davies v Apted [2013] SASCFC 92 at [4]-[5], this is not a case in which a corporate vehicle alone, relevantly, Nickaz Constructions, "may be identified as the contracting party by implication from the matrix of facts and circumstances in which the contractual promises were made".

Piercing the corporate veil

Proposed ground 2 contends that the primary judge was in error by finding that because Mr Hadden had an interest in the Hadden Group, he was thereby personally responsible for fees of various corporate entities comprising the Hadden Group. This ground is directed to his Honour's finding at [55], which is set out at [15] above. In writing, Mr Hadden said that his Honour's finding raises an issue of principle because this finding "pierced the corporate veil and the finding is a good policy reason to permit the appeal".
The major difficulties with this ground are that it misstates the finding at [55] and also ignores that his Honour found that "at least" Mr Hadden and Nickaz Constructions were parties to the contract with Inline: at [56].
In oral argument, senior counsel for Mr Hadden reformulated the argument. It is said that his Honour's approach "sets a very low bar for ignoring the corporate veil … or otherwise departing from ordinary agency principles". The reference to the corporate veil begs the question, as this assumes that there is a contract to which a company is a party, whereas the present issue is who the contracting party is. That Mr Hadden had an interest in every company or trust that comprised the Hadden Group and therefore was, either directly or indirectly, the beneficiary of the services provided was an objective circumstance relevant to who was the contracting party.
Nor does the reference to agency principles assist this ground. As indicated, the objective circumstances included that there was no evidence that the instructions given by Mr Hadden were given with any limitation of liability.

Onus of proof

Proposed ground 3 contends that the primary judge erred by reversing the onus upon Mr Hadden to prove a course of conduct prior to 2019. This complaint is directed to his Honour's finding at [28], accepting Mr Chut's evidence, that over the course of his dealings with the Hadden Group since 2002 many invoices had been issued to different members of the Hadden Group (noting, as set out above, that this term included Mr Hadden himself). His Honour observed that no such invoices were in evidence, noting that period fell outside the date range of documents called for in a notice to produce issued to Inline on 18 January 2023.
Contrary to Mr Hadden's submission, the observation by his Honour that Mr Chut's evidence was not contradicted did not involve any reversal of the onus of proof. Mr Hadden did not seek to challenge Mr Chut's evidence during cross-examination or by adducing competing or conflicting evidence of the invoicing practice prior to 2019. The weight and importance to be given to Mr Chut's oral evidence of the invoicing practice since 2002 was a matter for his Honour to evaluate as part of the surrounding circumstances.
In his written argument, Mr Hadden made a related complaint that he was denied procedural fairness because (i) he did not have fair notice that Inline's contract claim was based on a course of conduct, (ii) allowing the parties to proceed to trial without a proper articulation of their case puts the other party at some disadvantage, and (iii) public policy warrants an aggrieved party such as Mr Hadden an opportunity to be heard on appeal in the circumstances of this case.
This complaint, which was not mentioned in oral argument, is lacking in substance. First, there is no challenge to his Honour's finding that Inline had adequately pleaded causes of action in contract and quantum meruit: at [8].
Second, Mr Hadden had fair notice that Inline's contract claim was based on a contract implied from the conduct of the parties having dealt with each other for a number of years. This was apparent from the evidence served by Inline in advance of the hearing, relevantly, Mr Chut's 16 June 2022 affidavit (pars 5-9) which referred to the dealings between Mr Chut and Mr Hadden since 2002. It was also apparent from the debate between counsel at the commencement of the trial concerning Mr Hadden's pleading objection during which counsel for Inline referred to Brambles Holdings Ltd v Bathurst City Council (2001) 52 NSWLR 153; [2001] NSWCA 61, and said of the contract claim, "[i]t's a course of dealing case. The two main protagonists have been dealing with each other for a number of years".
Third, that Mr Hadden understood that Inline relied upon a contract implied from conduct which involved a course of dealing over the years is also apparent from Mr Hadden's cross-examination of Mr Chut, which was directed to the parties' dealings since 2002, including to whom invoices were issued. That was the context in which Mr Chut gave evidence, which his Honour accepted, that invoices were issued to Mr Hadden prior to 2018. Having cross-examined Mr Chut on the parties' prior dealings since 2002, Mr Hadden cannot complain that he did not have fair notice of the case which he had to meet.

Applicant's new point

In oral argument, counsel for Mr Hadden raised a new point which was not the subject of the proposed grounds of appeal nor addressed in the written argument. Reference was made to the legal principles stated by the primary judge at [49]-[50] as follows: The identity of contracting parties is to be determined objectively, by examining and construing any relevant documents in the factual matrix when they were created and ascertaining between whom the parties objectively intended to contract: Air Tahiti Nui Pty Ltd v McKenzie (2009) 77 NSWLR 299 at [28]. Where documents are silent or ambiguous (or, it may be added, non-existent), but there is undoubtedly a contract, the identity of the parties must be determined objectively from the surrounding circumstances: Air Tahiti Nui at [28], Barroora Pty Ltd v Provincial Insurance Ltd (1992) 26 NSWLR 170 at 174. See also the comments of Kourakis CJ in Davies v Apted [2013] SASCFC 92 at [4] and [5]. Post-contract conduct can be considered to ascertain the identities of the parties, as the issue is one of contractual formation, rather than construction: Dennis Pethybridge v Stedikas Holdings Pty Ltd [2007] NSWCA 154 at [59], Lederberger v Mediterranean Olives Financial Pty Ltd (2012) 38 VR 509; [2012] VSCA 262 at [31]. The legal onus is on the party asserting that a particular party is, in fact and law, a party to the contract: Dennis Pethybridge at [59].
It is said that his Honour adopted a "bootstraps" approach of incorrectly assuming that there was undoubtedly a contract, where no written document exists in this case. The premise of this submission is that the principles in Air Tahiti Nui Pty Ltd v McKenzie (2009) 77 NSWLR 299; [2009] NSWCA 429 at [28] only concern the approach to identifying the parties to a contract where there are written documents and have no application to an implied contract. That cannot be accepted.
Whilst Air Tahiti involved written documents, the principles stated by Allsop P at [28] concerning the objective determination of the identity of contracting parties are not limited to written documents. Mr Hadden's submission ignores Allsop P's qualification "any" when referring at [28] to "examining and construing any relevant documents in the factual matrix" (emphasis added). Where no written documents exist, the Court examines and evaluates the other surrounding circumstances. That was the approach which his Honour correctly adopted in this case.
In any event, his Honour's reasoning did not proceed on an assumption; he made an express finding at [45], which is not sought to be challenged, that there was an agreement for the provision of professional accounting and bookkeeping services between Inline and one or more persons or entities from the Hadden interests' camp. As noted, this finding accorded with the common position of the parties at trial that the parties' relationship was governed by a contract, as recorded by his Honour at [44]: see [13] above. That Mr Hadden sought to depart from the way in which he ran his case at trial is a further reason to refuse leave to raise a new point on the proposed appeal.

Conclusion

Applying the usual approach to the grant of leave to appeal, Mr Hadden has not shown that this is an appropriate case for a grant of leave. Nor should leave be given when the value of the services provided to Mr Hadden personally are disregarded, as the contention that he is not liable for such services is entirely unpersuasive, leaving a relatively modest claim.
Given the above conclusion, it is unnecessary to address Inline's notice of contention relating to its alternative claim that it is entitled to reasonable remuneration for the work on a quantum meruit basis.

Orders

I propose the following orders: 1. Summons seeking leave to appeal be dismissed. 2. Applicant to pay the respondent's costs in this Court.
WHITE JA: I agree with Gleeson JA.
STERN JA: I agree with Gleeson JA.

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. Decision last updated: 29 February 2024

Solicitors: HWL Ebsworth Lawyers (Appellant) McCabes Lawyers (Respondent) File Number(s): 2023/257859 Decision under appeal Court or tribunal: District Court of New South Wales Jurisdiction: Civil Citation: [2023] NSWDC 273 Date of Decision: 21 July 2023 Before: Andronos SC DCJ File Number(s): 2021/304994

(2022) 108 NSWLR 342

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