Romeo v De Chiara Constructions Pty Limited

Judgment 1MACFARLAN JA: I agree with Meagher JA. 2MEAGHER JA: The applicant (Mr Romeo) seeks an order under UCPR r 51.9(1)(b) extending the time to file and serve a notice of appeal from the decision and orders of Olsson DCJ given and made on 5 December 2011. 3The respondent (De Chiara) sued Mr Romeo and his wife for moneys due under a contract for building works on a property at Church Point. That claim was commenced in March 2010. In their verified defence filed in June 2010, Mr and Mrs Romeo admitted that they were parties to that contract. By a verified cross-claim filed in July 2010 they claimed damages from De Chiara for breach of that contract and for negligence with respect to the performance of the contract works. 4The claim and cross-claim were listed for hearing before Olsson DCJ on 5 December 2011. On 1 December 2011 Mrs Romeo became bankrupt after presenting a debtor's petition. 5At the hearing on 5 December 2011, counsel appearing for Mr Romeo applied to have the proceedings adjourned. Two matters were relied on. The first was that the proceedings on the cross-claim were stayed by s 60(2) of the Bankruptcy Act 1966 (Cth). The claim was by Mr and Mrs Romeo jointly and it could not be prosecuted by Mr Romeo alone. The second was that Mr Romeo was unwell and unable to give instructions for the defence of the claim and prosecution of the cross-claim. The matters relied upon in the cross-claim were also pleaded in defence to the claim. 6After hearing argument, Olsson DCJ refused the application for an adjournment of the proceedings in so far as they involved Mr Romeo. De Chiara then presented its case on the claim. No evidence was led in support of the cross-claim. 7In answer to the claim, counsel for Mr Romeo sought to argue that his client was not a party to the building contract because the agreement was described as being between the Owner and De Chiara as Builder and the only party named as Owner in the schedule to the contract was Mrs Romeo. The documents evidencing the contract also contained indications that Mr Romeo was also intended to be a party to the contract. Those indications included that he had signed the contract as Owner and that the special conditions described the contract as being between "G & AM Romeo" and De Chiara. It was also relevant that Mr and Mrs Romeo were said to be the owners of the property on which the works were taking place. 8Olsson DCJ rejected Mr Romeo's argument for two reasons. First, the verified defence and cross-claim admitted that Mr and Mrs Romeo were the parties to the contract. Secondly, construed in the context of the negotiations which led to the undertaking of the works, the contract documents were to be understood as providing that Mr and Mrs Romeo were parties as Owner. 9At the conclusion of argument, Olsson DCJ delivered reasons and judgment was entered against Mr Romeo on the claim for $96,290 plus interest and the cross-claim was dismissed. 10Notwithstanding that a notice of intention to appeal was filed and served in December 2011, no notice of appeal was filed before 5 March 2012. Instead, on that day Mr Romeo filed a summons seeking leave to appeal from the decision and orders made upon the basis only that Olsson DCJ had erred in not granting Mr Romeo an adjournment of the proceedings on 5 December 2011. In the draft notice which accompanied that application, nine grounds of appeal were relied on. None raised as an issue that the primary judge had erred in rejecting the argument that Mr Romeo was not a party to the contract and, for that reason, not liable on the claim. 11In May 2012 the summons seeking leave to appeal was fixed for hearing today. On 18 June Mr Romeo served a revised draft notice of appeal which included additional grounds that Olsson DCJ erred in not granting leave to withdraw the admission and in not holding that Mr Romeo was not a party to the contract. 12At the commencement of the hearing before this Court, Mr Romeo's counsel amended the application from one seeking leave to appeal to one seeking an extension of the time to file that revised draft notice of appeal. It was said, and accepted by De Chiara, that leave to appeal was not required because, taking account or pre-judgment interest, the amount in issue exceeds $100,000. De Chiara also correctly conceded that Mr Romeo was able, in exercise of that right of appeal, to challenge any interlocutory order leading to the judgment appealed from. 13De Chiara opposed the application to extend time for the filing of the revised draft notice of appeal. It submitted that Mr Romeo had not demonstrated a fairly arguable case on the question whether Olsson DCJ erred in finding that Mr Romeo was a party to the contract, both on the basis of his verified admission and by reference to the construction of the contract. In relation to the decision not to adjourn the proceedings on the claim and cross-claim, De Chiara submitted that in circumstances where Mrs Romeo's trustee in bankruptcy did not propose to prosecute the cross-claim or seek to set aside the judgment on the claim, any prejudice which Mr Romeo had suffered was due to his not being ready to proceed on 5 December 2011 with the defence of the claim and prosecution of the cross-claim. 14The matters to be addressed on an application to extend the time for appeal are discussed in Tomko v Palasty (No 2) [2007] NSWCA 369; 71 NSWLR 61. They include that the applicant has a fairly arguable case and also require that consideration be given to any prejudice suffered by the respondent to the application. It is necessary to consider that question in relation to both of the arguments sought to be made on appeal. 15Where proceedings have been commenced by plaintiffs or cross-claimants jointly and one of the parties subsequently becomes bankrupt, the authorities suggest that subject to limited exceptions, the entire action should be stayed until the trustee makes an election in writing to prosecute or discontinue the claim: see Campbell v Metway Leasing Ltd [2001] FCA 1311; 188 ALR 100 at [18] and the cases cited in McDonald, Henry & Meek, Australian Bankruptcy Law & Practice, 6th ed (loose-leaf) Thomson Reuters at [60.2.05]. Those exceptions appear to include that the litigation has progressed beyond the stage where the trustee's decision remains material: John v Neiman Holdings Pty Ltd (1986) 84 FLR 84 at 86. De Chiara argues that that exception applies in this case where the bankruptcy occurred within days of the final hearing. In Beneficial Insurance Co v Hamilton (1985) 73 FLR 347 the bankruptcy occurred after the hearing but before orders were pronounced. In those circumstances, s 60(2) did not prevent the pronouncing of formal orders. That is not the present case. The cross-claim had not been heard and there was an opportunity for the trustee to assess the position and decide whether to proceed with it. In my view, it cannot be said that Mr Romeo's argument that proceedings should have been stayed was not fairly arguable. 16De Chiara has been on notice of the fact that Mr Romeo intended to appeal on the basis of that argument since 5 March 2012. It does not claim to have suffered any prejudice by reason of any delay in filing a notice of appeal which includes that argument. 17The position is different in relation to the question whether Mr Romeo was a party to the contract. As well as dealing with the argument on its merits, the primary judge's decision implicitly rejected Mr Romeo's attempt to withdraw his verified admissions. To the extent that her Honour's decision involved the exercise of a discretion to refuse to permit the withdrawal of the admission, no error is demonstrated. The proceedings had been conducted on the basis that there was no issue as to the parties to the contract. De Chiara would have been prejudiced had leave been given to raise the matter for the first time at the hearing. It would have involved further evidence as to the circumstances in which the contract was made as well as the possibility of a reply based on an estoppel by conduct or convention. The evidence before this Court suggests that the parties conducted themselves from the outset in relation to the performance of the contract on the basis that Mr and Mrs Romeo were the contracting parties. For these reasons, I do not consider that there is a fairly arguable case that the primary judge erred in dealing with this issue on the pleadings particularly when it was strongly arguable that the admission was correctly made. 18In the result, Mr Romeo should not have an extension of time for an appeal in relation to the contract issues raised by grounds 1 to 5 inclusive of the revised draft notice of appeal. 19Accordingly, the orders I propose are as follows: (1)The applicant is granted an extension of time to file and serve a notice of appeal which excludes grounds 1 to 5 inclusive and order 2(1) as sought but is otherwise in the form of annexure A to the affidavit of Damian Phair sworn 21 June 2012. (2)The applicant to pay the first respondent's costs thrown away by the filing and prosecution of the summons seeking leave to appeal. (3)The costs of the application for an extension of time to file and serve a notice of appeal be costs in the appeal. (4)The reference to "proceedings" in the grounds of appeal in order (1) is to proceedings on the claim and cross-claim before Olsson DCJ.