R & K Services Pty Ltd v Di Stasio Pty Ltd

"it says further that no obligation to make any payment in relation to the second, third or final progress claims has arisen, whether under clause N6.1 of the Contract (as that term is defined in the SOC) (Stage 2 Contract) or otherwise, as no person has prepared tax invoices equal in value to any certificates of the architect issued in relation to those claims and presented those documents to Di Stasio for payment as required by clause N6.1 of the stage 2 Contract;"

The builder had not issued and served a tax invoice equal in value to the amount certified by the architect, as I found the clause in the contract required: [205]-[207] of the principal judgment.

3 On 2 June 2017 the solicitors for the plaintiff filed a summons seeking orders:

(i) the plaintiff have leave to amend its statement of claim,

(ii) the plaintiff have leave to re-open its case and adduce evidence and make submissions,

(iii) such further or other order/s as the court deems fit,

(iv) the costs of this summons be the plaintiff's costs in the proceedings.

4 This summons came on for hearing before me on 16 June. On that occasion the plaintiff, which had previously been represented by Mr Smith of S. Smith & Associates, was represented by Mr Uren QC and Mr Korica. The plaintiff's counsel submitted that due to inadvertence or misapprehension on Mr Smith's part, he had not dealt with the issue of the submission of a tax invoice "equal in value" to the architect's certification. They contended that the authorities gave me a discretion to allow the plaintiff to re-open the case, which I should do.

5 The summons was supported by an affidavit from Mr Hartman, the plaintiff's principal, in which he deposed that, following publication of my judgment, a tax invoice "equal in value" to what I found to be certified as owing on the relevant claim by the architect had been served. The service of this further invoice did not appear to be disputed by Mr Sharkey, who appeared, as he had at trial, for the defendant. Accordingly, it was said that leave should be granted for a further amendment to be made to the plaintiff's claim, and this part of it should be determined to have succeeded. For reasons which I then gave, I determined that the application to re-open should succeed, and the relief sought in the summons should be granted.

6 The defendant's solicitors shortly afterwards issued a further summons dated 23 June 2017 which eventually came on for hearing before me on 11 September, in which the defendant sought orders that the plaintiff's summons "be reinstated or relisted for further hearing" and that the defendant "have leave to amplify its submissions" in certain respects which were summarised, with the result that the orders which I had pronounced on 16 June should be set aside "and in lieu thereof it be ordered that the said summons be dismissed with costs".

7 On 11 September, having heard argument from the parties and having considered an affidavit sworn by Mr Sharkey, the defendant's counsel at both the trial and the first summons, I acceded to the application that the orders which I had pronounced in June (but which had not been authenticated) be set aside, and allowed the first summons to be reargued. This reargument took place on 12 September. I reserved my decision.

8 Upon the second summons and the rehearing of the first, Mr Sharkey was led by Mr Garratt QC for the defendant, and the plaintiff was represented by the same counsel as in June. Mr Uren QC and Mr Korica, for the plaintiff, sought to rely upon an affidavit that had not been before me in June, sworn by Mr Smith, who had represented the plaintiff at trial. I overruled an objection by Mr Garratt QC and Mr Sharkey for the defendant to my receipt of that affidavit upon the rehearing.

9 Mr Uren QC and Mr Korica returned to the submissions which they had made in June. They placed primary reliance on the decision of Ferguson J (as her Honour then was) in CC Containers Pty Ltd v Desmond Ming Lee (No 5) [2013] VSC 619 [8]-[9], where her Honour said:

"8. In InspectorGeneral in Bankruptcy v Bradshaw, Kenny J refused an application to reopen. In the course of her judgment, Kenny J noted that there are four recognised classes of case in which a court may grant leave to reopen as follows:

(a) where fresh evidence, unavailable or not reasonably discoverable before, becomes known and available;

(b) where there has been inadvertent error;

(c) where there has been a mistaken apprehension of the facts; and

(d) where there has been a mistaken apprehension of the law.

These classes are not closed and the overriding principle is that leave to reopen will be granted if, taken as a whole, the justice of the case favours such a course. Her Honour's categorisation of the recognised classes of case in which a court may grant leave to reopen was approved by the Court of Appeal in Spotlight Pty Ltd. v NCON Australia Limited. In that case, after judgment had been reserved, the trial judge caused a memorandum to be sent to the parties in which he said that he proposed to reconvene the hearing of the proceeding to hear submissions about whether the plaintiff wished to apply to reopen its case on damages. The plaintiff duly applied to reopen its damages case and leave to reopen was granted. The defendant successfully appealed the decision granting leave. The Court of Appeal observed:

'There are good reasons why the circumstances must be exceptional before a court may allow a case, having been closed and judgment reserved, to be reopened. The need for finality in litigation is one. It is no answer to this point to say that the further evidence sought to be adduced by the respondent in this case is confined to the quantum of damages. Were applications to reopen to be allowed almost as of course, such applications would be regularly made. That would add enormously to inefficiencies in the administration of justice, even if the reopened hearing was strictly confined. The discipline which ought to attend the conduct of litigation by highly competent litigators would also inevitably decline.

The very strict rule that, subject to any applicable process of appeal or review, the presentation of their cases by parties to litigation must conclude with the end of the trial, has another important justification. It is that, very often, the boundaries of the reopened issues would be hard to define and as difficult to protect. The reopened hearing would then be bedevilled by arguments about whether one party or the other was seeking to take advantage of the reopening to polish parts of its case which were more or less within the scope of the reopened proceeding but not clearly on one side or the other of the prescribed limits.'

1. 9. In Urban Transit Authority of New South Wales v Nweiser, the defendant closed his case. On the same day, he began his closing submissions. The next morning he sought leave to reopen his case. Counsel for Kain Chong relied on the following passage from the reasons of Clarke JA (Mahoney and Meagher JJA agreeing):

'The principle which should guide the court in determining whether to grant an application for leave to re-open is whether the interests of justice are better served by allowing or rejecting the application as the case may be. No doubt it is relevant to take account of a number of matters such as likely prejudice to the party resisting the application and the reasons why the evidence was not led in the first place, but there is not, in my opinion, any hard and fast rule which requires the court to reject an application where the decision not [to] call the witness in the party's case was a deliberate one. Of course that does not mean that that is not a very relevant consideration. It is. Where, for instance, a decision was based on tactical grounds it may be difficult to resist the conclusion that the interests of justice were better served by the rejection of the application. But even in that circumstance there may be cases in which it is felt that the client whose application it is should not have to suffer for his or her counsel's deliberate decision. Where the decision is not made for tactical reasons and is based on a mistaken apprehension of the law or the facts the case is more appropriately to be considered as one in which the application has resulted from an error by counsel.'

Similar views were expressed by Sheppard J in Joyce v GIO (NSW) (Ritchie's Supreme Court Procedure, New South Wales, val 2 [13,028]) and Jeffery J in Henning v Lynch [1974] 2 NSWLR 254. It is the fact, as Sheppard J observed in Joyce, that there are a number of decisions which support the view that the principles relating to the calling of fresh evidence on appeal are relevant when what is under consideration is an application to re-open. That view may be correct where the application to re-open is made after the delivery of judgment but I can see no justification for importing those principles into an application to re-open which is made before the hearing is concluded: see Smith v New South Wales Bar Association [No 2] [1992] HCA 36; (1992) 66 ALJR 605 at 608-609; [1992] HCA 36; 108 ALR 55 at 61-62 of the judgment of Brennan, Dawson, Toohey and Gaudron JJ.

In Henning, the late Jeffrey J said (at 259):

'... The applicable principle is one which in the circumstances obtaining here strongly favours the re-opening of the prosecution case: where the defendant's case has not been gone into and there is ready to be tendered some additional evidence which by accident, mistake or want of foresight has not been tendered before the prosecution case is closed it is - to use the words of Cave J in Hargreaves v Hilliam (1894) 58 JP 655 "a very fit and proper thing to allow the evidence to be given unless there is some very good reason".'

That particular statement was approved by this Court in Brown v Petranker (1991) 22 NSWLR 717 and accurately expresses the principle which should have been applied by his Honour.

I would conclude, therefore, that the evidence which the appellant sought to lead was relevant and important and his Honour erred in failing to allow the appellant to re-open. In these circumstances the appeal should be upheld and a new trial ordered."

10 They submitted in terms of her Honour's formulation, which derived from the judgment of Kenny J in Inspector General in Bankruptcy v Bradshaw [2006] FCA 22, that there had been an inadvertent error on the part of Mr Smith in the presentation of R & K's case. Mr Smith swore, as at 6 September 2017, paragraph 13:

"The paragraph of the defence on which the defendant now relies (paragraph 12(b)) is a jumble of assertions which does not squarely have the effect which is now asserted by the defendant. At the trial, I understood (in my submission correctly) this paragraph as only denying that the documents had been served on the defendant, as asserted at the conclusion of the paragraph."

"I did not make a 'forensic decision' not to have the plaintiff prepare and submit an invoice equal in value to the amount certified by the architect."

11 According to Mr Uren QC and Mr Korica, it was the existence of the inadvertent error which created the jurisdiction to re-open the trial. It was unnecessary to demonstrate that this inadvertent error was created or contributed to by the defendant, or that Mr Smith, in making the error, acted without negligence.

12 They said there was no evidence to suggest that Mr Smith had made a forensic ‒ viz tactical or strategic ‒ decision to leave the point as to the lack of an invoice equal in value to the architect's certificate amounts They submitted the obvious course for Mr Smith to have followed, had he been alive to the reliance being placed on the point, would have been to have his client issue an invoice of equal value and include a plea in the plaintiff's statement of claim based on that further invoice as a "fall-back" should the court not be persuaded that what had already taken place, contemporaneously with the building works and the dispute, had constituted compliance with the procedures for an effective progress claim.

13 Mr Garratt QC and Mr Sharkey, on behalf of Di Stasio, submitted there should be no re-opening of the 19 May judgment. There was, they said, a strong presumption against any re-opening. They referred to Marriner v Australian Super Developments Pty Ltd [2016] VSCA 141 at [185], where the Court of Appeal said:

"Where a case has been closed and judgment reserved, exceptional circumstances will be required for a court to allow the case to be reopened. This rule applies with even greater force where reasons for judgment have already been delivered but final orders have not yet been made. The rule is necessary to ensure finality in litigation and the efficient administration of justice, and to avoid a reopened hearing being 'bedevilled by arguments about ... the scope of the re-opened proceeding'." (per Tate ACJ, Kyrou and Ferguson JJA)

14 They said that, while the Court of Appeal in Spotlight Pty Ltd v NCON Australia Pty Ltd [2012] VSCA 232; (2012) 46 VR 1 had concluded that the classes of case in which a re-opening might occur were not closed:

"The overriding principle is that the court consider whether, taken as a whole, the justice of the case favours the grant of leave to reopen." [2012] VSCA 232; (2012) 46 VR 1, 7[26]

The Court of Appeal in Spotlight v NCON, they said, had approved the formulation adopted by Kenny J in the Federal Court in Bradshaw.

15 According to Mr Garratt and Mr Sharkey, the discretionary considerations in Bradshaw's case, itself favouring a re-opening, were quite strong. The Commonwealth had incurred expenditure in investigating the behaviour of Mr Bradshaw. If allowed to re-open and put on the evidence which it sought to do, the Commonwealth could quantify its loss and recover this up to the amount of a bond which it held. Any additional costs could be covered by a costs order against the Commonwealth. There were no pleadings and, aside from the issue of costs, there would appear to be no prejudice to Bradshaw. Nevertheless, Kenny J determined that no re-opening ought be allowed. A fortiori the same conclusion should be reached in this case.

16 They noted it was incumbent upon a party seeking to amend its pleadings, especially at so late a stage, to provide an explanation as to why the indulgence was being sought. They referred to Aon Risk Services Pty Ltd v Australian National University [2009] HCA 27; (2009) 239 CLR 175 at [103].

17 The present case, they said, did not fit any of the Bradshaw categories as adopted by the Court of Appeal in Spotlight v NCON. This was not a case of fresh evidence. They said:

"The ability and right of the Plaintiff to bring [the new invoice] into existence has always been available. Further, the evidence of that ability and right was directly in issue in this trial, both in the pleadings and in the cross-examination of Mr Hartman. It cannot be said that this invoice was not issued by inadvertent error, again because it has been squarely in issue since the outset of the proceeding."

Nor, they said, could it be contended that the plaintiff laboured under a misapprehension of fact or law.

18 They referred at length to passages in the transcript which, they said, made clear that the question of the lack of an invoice from the plaintiff equal in value to the architect's certificate had been pressed on behalf of the defendant.

19 Insofar as it might be contended by the plaintiff that, in the face of these matters, Mr Smith remained inadvertent, it could not be right, they said, that a party could benefit from its own obtuseness or that of its legal adviser.

21 Mr Smith was cross-examined at great length. He was taken to clause 12(b) of the defendant's Defence and to numerous passages from the trial transcript which, it was said, made quite plain the reliance which the defendant was placing on compliance with each element of the procedure for progress claims laid down in Clause N. The obligation on the builder to prepare a tax invoice to ground liability for a progress claim in accordance with Clause N6 was raised in Mr Sharkey's opening. (Transcript ("T")16, Lines ("L")1617) At T18, also as part of his opening statement, having referred to two inconsistent architect certificates, Mr Sharkey said at L24-28:

"I think the builder's relying on the lower amount but the builder then didn't issue a tax invoice on either of those amounts. So the payment certificate has not been issued ..."

22 During the course of the evidence of Mr Hartman, the plaintiff's principal, Mr Sharkey, said:

"The defendant's position is that the certification process is not yet complete. The certification is not a valid certification for a number of reasons and those reasons will come through. ... The tax invoice, the evidence has been that there has been no tax invoice issued that accords with the board of certification." [Scil the architect's certificate] (T82, L29-T83, L6)

23 During Mr Hartman's cross-examination, he was asked:

1. "So you at no time issued a tax invoice which accords with either of those sums apparently certified by the architect?---
2. Well, the second sum which is $118,915.19.
3. Yes, but that doesn't accord with what the architect certified?---
4. No, but it accords with Progress Claim 1." (T168, L7-12)

24 A few moments later, Mr Sharkey put to Mr Hartman:

1. "So no obligation to pay has arisen pursuant to clause N 7 of the contract, yes or no, has any obligation to pay arisen pursuant to clause N 7 of the contract?---
2. It would seem so." (T169, L24-27)

1. "Just as a matter of curiosity, why did you never issue the tax invoice after the architect certification, leave to one side the issue of its signature, and the inconsistent figures on it, but let's suppose that that is a fully effective certificate, why did you not take the next step and issue the tax invoice?---
2. I can't answer that, Your Honour, I sent the claim for $108 off to Mr Humphrey [the architect] and was advised it was sent to Mr Di Stasio." (T170, L1-9)

26 In his closing submissions at trial, Mr Sharkey took up the issue of Progress Claim No 2. I noted a submission by Mr Sharkey that the second progress claim had never been finalised, properly issued or certified. I said:

"Suppose I'm with you on that point, does that mean that even if satisfied that there was work done, it is work that attracts no remuneration at all?" (T1005, L18-21)

"... there is a contractual process for claiming payment set out in both the contracts but importantly on this one, stage 2 which required the issue of a claim and we have been taken to [that] in evidence." (T1006, L2-6)

"Mr Hartman conceded in cross-examination that the plaintiff failed to comply with the contractual regime." (Ibid, L18-20)

"And it is still within the power, I submit, of the plaintiff to comply with that process." (Ibid, L24-25)

I asked what the legal consequence was and he replied:

"No liability arises under the contract for that payment." (T1007, L7-8)

27 These submissions, together with clause 12(b) of the defendant's Defence, make clear to my mind that the defendant was denying compliance with the procedure laid down for progress claims insofar as Progress Claim No 2 was concerned. It was therefore incumbent upon the plaintiff, in making good its case, to demonstrate compliance with each element of the procedure laid down. Insofar as Mr Smith has suggested that this was not made clear, I reject his contention. Even a generalised denial of liability for the progress claim, much less the more detailed one in clause 12(b) of the defence, would have obliged the builder's counsel to indicate how each of these requirements of the progress payment claim clauses had been met. The builder plaintiff carried the onus of proof. Had I accepted the plaintiff's case as to Claim No 2, it would have been incumbent on me to disclose my "pathway of reasoning" - the phrase adopted by the Court of Appeal as the test for the adequacy of reasons for judgment.

28 The fact that sufficient was said to raise the issue relative to Progress Claim No 2, on which the plaintiff failed at trial, renders it less likely that the person representing the plaintiff would make an inadvertent error as to this matter. It does not, however, render it impossible.

29 I accept Mr Smith's evidence that he did make an inadvertent error on this point. The general trend of the evidence which he gave in the course of a lengthy cross-examination during the second re-opening application was that he believed that the only issue being relied upon by the defendant relative to compliance with the procedure was service of the claim upon the defendant. The evidence showed that it had been handed to the architect and not delivered to the defendant. I was prepared, after some fairly elaborate analysis based upon various matters urged upon me by Mr Smith, to conclude that the requirement of service of the claim had, in the circumstances, been made out. ([191]-[200] of my judgment) I was also prepared to regard as non-fatal an obvious error in the documents. [201][202]

30 It is perhaps unsurprising that Mr Smith allowed himself to concentrate upon these other irregularities and difficulties with the process attending Progress Claim 2 and simply ignore the failure of the plaintiff to issue a tax invoice equal in value to the sum certified by the architect. There is no obvious reason why, other than by reason of inadvertence, he would have allowed this point to "go through to the keeper". Mr Garratt QC and Mr Sharkey submitted that the reason for not dealing with the issue was not inadvertence, but rather a broad strategy in the case formulated by others acting for the plaintiff, who originated its pleadings before Mr Smith's involvement, whereby failures to comply with the terms of the contract by the plaintiff builder could be effectively "outflanked" by reliance on a quantum meruit claim which was included in the plaintiff's pleading. This was supported, they claimed, by paragraph 5 of Mr Smith's closing written submissions at trial ‒ Exhibit SS2 to his affidavit ‒ which said:

"...it is submitted that there has been substantial compliance with the contractual obligations in respect of both certification and service of the claim and invoice upon the Defendant in respect of the Plaintiff's claim for progress claim 2 of the Stage 2 Contract."

31 This quotation from the closing written submissions is perplexing. It seems to proceed from a view that mandatory procedural steps laid down in a contract can be regarded as satisfied where there has been "substantial compliance". I know of no such doctrine. Where, for instance, a mandatory statutory notice is required to be given by a party before taking a particular step ‒ for instance, by way of enforcement of a contract, forfeiture of a lease, et cetera ‒ if a notice is relied on which deals with four of the five matters provided for in the statute, that notice is not 100 per cent correct because it is mostly correct; it is not 80 per cent correct because it deals with four out of five of the requirements. Because it is not correct in all of the mandatory requirements, it is 100 per cent incorrect, and wholly ineffective. This drastic result may, of course, be modified by a statutory provision giving a court authority to act upon substantial compliance or to excuse non-compliance. There seemed to be no provisions along those lines in the contract here in question. According to Mr Garratt QC, this misconception of the law, as entertained by Mr Smith, explained his "studied indifference" to the issue.

32 It may be accepted that a decision made for tactical or strategic reasons in the course of litigation, sometimes described as "forensic decision", is one which a litigant must live with. The litigant cannot expect, after having lost the case, to be somehow relieved of the consequences of the deliberate decision which it made.

33 A typical example of the sort of step that would not be regarded as an inadvertent error for the present purposes is a decision not to call a witness to obtain a perceived advantage in the order of closing addresses in a jury trial, or a decision to dispense with a witness because calling him or her would prove too expensive. Again, a decision to dispense with calling a witness because he or she might give other embarrassing evidence under cross-examination would likewise be a decision with which a litigant and his or counsel would have to live. The reason for this view is obvious. The litigant and his counsel have derived whatever tactical or strategic benefit the decision delivered. To allow the decision after the event to be repented of would allow the litigant to eat his cake and still have it.

34 Mr Smith went to some lengths to deal with the issue of service of Progress Claim No 2 and succeeded in persuading me that this element of the contractual process required for the progress claim had been satisfied. Why, apart from inadvertence, would he have ignored the other element ‒ viz the issue of a tax invoice equal in value? Again, if he had not failed to advert to the significance of this matter, even although I believe he should have, he could have urged matters upon me, such as that an invoice for an amount less than what was certified by the architect could be regarded as equal in value because the greater amount certified by the architect could be regarded as encompassing the lesser amount invoice, or that this clause was a mere mechanism and not a mandatory pre-condition to liability. Mr Smith carries on a sole practice. At trial he was without the assistance of an instructor.

35 In reply, Mr Uren QC was inclined to denigrate some of what Mr Garratt QC had said, referring to some of the threatened consequences of accepting the plaintiff's application as being "in terrorem" or arguments as to the opening of "flood gates". The matters relied on by Mr Garratt QC were embraced by the Court of Appeal in the passages which he quoted and relied upon. The authority of these utterances cannot be diminished. Moreover, I have had personal experience which gives me the gravest concerns in countenancing applications such as the present. I seem to have had a spate of them in the last year or two. A trial which I thought I had concluded the week before the present application is now, itself, the subject of an application by one of the parties to re-open. Nevertheless, the present application does not, I think, merit the strictures which the authorities have delivered with respect to others. It is, as I have explained, a matter of pure inadvertence. The material necessary to make good the deficiency in the plaintiff's case was, in very short compass an invoice and an affidavit from the plaintiff's principal, Mr Hartman. This stands in contrast to the sort of elaborate financial evidence which would have been necessary had the re-opening in Spotlight v NCON been allowed. In Bradshaw's case, the evidence of damage and loss sustained by the Commonwealth would, no doubt, have required relatively elaborate evidence. The present case is one of the satisfaction of a simple formality. In Bradshaw's case, it seems the Commonwealth, for some practical reason of expense, logistics or otherwise had deliberately decided to dispense with the evidence which it later sought to add.

36 It is also a matter of simple justice. No argument other than the bare technicality has been urged against the plaintiff's entitlement to be paid on this progress claim. "For the labourer is worthy of his hire". (Luke 10, verse 7)

37 The orders sought in the plaintiff's summons should be made.