Spotlight Pty Ltd v NCON Australia [2011] VSCA 267

2 The background to the matter is that in November 2007 NCON entered into a services agreement and a rental agreement with Spotlight in respect of energy-saving light devices to be installed by NCON in Spotlight's stores. NCON claimed that Spotlight had committed breaches of the rental agreement and it also claimed, among other things, that Spotlight had repudiated both agreements.

3 On 10 August 2009 NCON filed a writ seeking damages for breach of the rental agreement. I do not purport to set out in detail the various claims made by NCON. The proceeding was fixed for trial which commenced on 14 February 2011 and ran for 12 days. The judge directed that the evidence (apart from expert evidence) be given wholly viva voce and not by witness statement although witness statements had been prepared in accordance with earlier court orders.

4 At the trial there were significant disputes on the evidence in relation to issues of contractual formation, repudiation and termination. There were substantial written outlines of submissions after the close of evidence. Spotlight's written outline comprised 40 pages. In those submissions Spotlight said that NCON had claimed loss of profits by its amended statement of claim but, in its amended particulars of loss and damage, had claimed for 'loss of revenue' and not 'loss of profit'. The submission said that NCON had presented no evidence in chief to sustain a loss of profit claim and that no evidence was given of NCON's costs and, therefore, 'it is pure speculation that there was any net profit in the deal'. In the course of making that submission, Spotlight also pointed out that NCON was 'a company of no means.'

5 A transcript (dated 1 March 2011) of Spotlight's oral argument on damages shows that Spotlight made further contentions in line with its written submissions on the question of the proofs necessary to show a loss of net profits.

6 A further transcript of the same date of NCON's oral argument on damages shows that a number of the issues as to damages raised by Spotlight were also put to counsel for NCON by the judge.

7 The trial concluded and his Honour reserved judgment.

8 On 23 March 2011 the judge caused to be delivered a memorandum to the parties in which his Honour said that he proposed to reconvene the hearing of the proceeding to hear submissions on whether or not NCON wished to apply to reopen its case on damages in view of the possible findings open to be made if he were to find a breach of contract and the pleadings, evidence and submissions of the parties on damages remained as they were. The judge said that the possible findings open to him were set out 'below' but he had not in fact made such findings and that, at that stage, all issues remained to be decided. The memorandum by the judge comprised 31 pages most of which was constituted by these 'possible findings' which were very much in the form of an embryo judgment or part thereof. The 'possible findings' indicate a number of problems about NCON's damages claim and his Honour's memorandum concludes as follows:

This memorandum does not purport to be an exhaustive statement of the deficiencies in NCON's damages case or an exhaustive statement on how the loss and damage should be calculated.

It is a matter for the plaintiff to formulate, plead and prove its damages claim.

9 In response to that memorandum, NCON applied for leave to reopen its case on damages and for leave to file and serve further amended particulars of loss and damages. The judge heard that application on 9 May 2011 and on 23 June 2011 ordered that NCON have leave to file and serve its proposed further amended particulars and have leave to lead evidence of the kind referred to in a number of affidavits sworn on 14 April 2011 in support of NCON's application and the judge ordered that the further hearing of the trial would proceed on 12 July 2011. His Honour's reasons for making those orders[1] are contained in a 39 page judgment to which are appended a number of schedules comprising an additional 11 pages.

10 In his reasons, the judge said that the initial claim by NCON, based on the breach of the rental agreement and repudiation by Spotlight, was for damages for loss of profits calculated by deducting from the revenue to be received by NCON the cost of manufacturing and installing certain electrical devices in Spotlight's stores but that subsequently NCON changed its approach to damages and amended its particulars thereof. It emerged that the amended particulars of loss and damage were calculated on the basis of loss of revenue without making any allowance for costs and expenses that may have been incurred to earn the rental. His Honour said that during final submissions Spotlight contended that NCON's damages claim was bad at law as it was based on the loss of revenue and not the loss of the anticipated profit. The judge said that when he queried aspects of this claim NCON produced a written calculation of damages calculated on a loss of profits basis but NCON did not seek to amend its particulars and the written calculation produced contained several expenses about which there was little or no evidence.

11 His Honour then referred to NCON's explanation for what had occurred in relation to its damages claim and that NCON's solicitor had sworn that the principal but not the sole reason for NCON's decision to pursue damages on the basis of revenue was a pragmatic but mistaken and ill conceived stratagem in response to certain difficulties posed by advancing the original basis of the claim to damages. NCON's solicitor further deposed that, by inadvertence of NCON's legal team, NCON had failed to seek to further amend its particulars of damages and that, also, there had been a number of time and other pressures on NCON and its legal team.

12 His Honour then considered the proposed amendments to the damages claim and the proposed further evidence in great detail.

13 His Honour said that the court had a discretion to allow a party to reopen its case before or after judgment had been given and that the overriding principle was the interests of justice. He said that an application to reopen could be based on accident, mistake or want of foresight and also referred to a Federal Court decision[2] in which Kenny J referred to four principal classes of case in which a court may grant leave to reopen: fresh evidence, inadvertent error, mistaken apprehension of the facts, and mistaken apprehension of the law.

14 The judge noted NCON's submission that its failure to lead evidence to calculate a loss of profit was not a deliberate tactical decision and that various mistakes had been made. NCON further submitted that Spotlight would suffer no prejudice that could not be cured by appropriate cost orders whereas, on the other hand, NCON faced the real prospect, if leave to reopen were not given, that it would not recover any damages even if a breach of contract were established.

15 The judge noted Spotlight's submissions. He said that Spotlight laid emphasis on the finality of litigation principle pointing out the length of the trial and the public interest in the expeditious use of court time. He said that Spotlight submitted that NCON made a deliberate decision as to how the damages claim would be conducted and that Spotlight had expressly pointed to the defects in NCON's claim in tis written and oral submissions.

16 The judge rejected Spotlight's analysis - he said that on the final day NCON had decided to return to its original claim for loss of profits but the oversight (if that was what it was) was in not seeking to lead the necessary evidence or to amend the particulars. His Honour said that NCON had concluded its case on the basis of a claim for loss of profits, and not a claim based on lost revenues, but it had overlooked fully proving it and formally seeking to amend its particulars of loss and damage. The judge said that the anticipated further evidence was extensive but that Spotlight would not suffer any prejudice that could not be met by an appropriate costs order, whereas it was likely (on the then present evidence), that if NCON established liability it would fail in establishing any damages. Accordingly, his Honour granted leave and made the orders in respect of which Spotlight now seeks leave to appeal.

17 In support of its application for leave to appeal, Spotlight submits that the decision permitting NCON to reopen its case was erroneous for a number of reasons:

• The jurisdiction to reopen is an exceptional jurisdiction. The present case did not fall within the four recognized classes of case referred to by Kenny J. The evidence was well known. There was no inadvertence but instead a reiterated decision by NCON to run the case the way it did. It was a considered stratagem. The application was closer to one made after judgment than before judgment because the judge had in substance, though not in form, effectively published a judgment dealing with the quantification of loss.

• If discovery had been properly made and the evidence now sought to be given had been given at trial, the cross examination and submissions would have been different not only in relation to quantum but in relation to the other major issues at trial, all of which raised questions as to credit and the weight of conflicting evidence. What was now contemplated was that NCON witnesses would give evidence which overtook and even conflicted with their evidence at trial and Spotlight would have to cross examine again on issues which it had already canvassed. Spotlight would have to review all the evidence and consider whether to call rebutting expert evidence on loss.

• The judge had given undue weight to a passage in reasons for judgment of Kourakis J in Brown v Dream Homes SA Ltd.[3]

• The judge had erred in publishing indicative findings on quantum and then inviting and allowing the application to reopen. In substance the judge had set out fully and carefully for a party what it must apply to do if its claim for substantial damages was not to fail, after the opposing party had cross examined, called its evidence and laid out its entire argument. Spotlight's searches revealed that the case was unprecedented in Anglo-Australian law but for one reported case that was expressly on point.[4] In that regard, Spotlight submits that it is not in the interests of justice to invite and allow an application to reopen in circumstances which created an apprehension of bias (due to the expression of tentative views represented by the possible findings contained in the judge's memorandum).

• The judge incorrectly proceeded on the basis that any prejudice to Spotlight could be adequately addressed by a costs order whereas the prejudice suffered by Spotlight would be of a wider nature. Spotlight referred to the considerations addressed by the High Court in Aon Risk Services Australia Ltd. v Australian National University[5]. Spotlight refers to the waste, delay and costs associated with the reopening of the trial and a number of other factors.

• The judge did not deal with a submission by Spotlight based on a ground of 'futility'.

• The undisclosed intention of NCON at the time of the application to reopen to adduce expert evidence and evidence from Mr Richards was also to be considered. The subsequent conduct of NCON shows that a proper explanation of the scope of the intended reopening was not given to the trial judge.

18 In response to Spotlight's submissions, NCON emphasises in written submissions that the judge's orders were made in the exercise of a discretion and submits that no error was made in the exercise of that discretion. NCON joins issue with and contests each of the points made by Spotlight and these matters were expanded upon orally this morning.

19 In my opinion, it would often be appropriate, in cases where leave has been given to reopen a case after it has been closed and the judge has reserved his decision, to adjourn an application for leave to appeal therefrom until the hearing of any appeal that might be brought from the final judgment (and of course there might never be such an appeal) because it would be desirable that the case not be interrupted by an interlocutory appeal and that all issues be considered at the one time. Alternatively, for the same reasons, such an application for leave to appeal might be dismissed without prejudice to the applicant's right to raise the relevant grounds of appeal should it decide to appeal from the final judgment (again, if any). However, having regard to the somewhat novel and unusual course taken by the judge in the present case - I refer in particular to the nature of his Honour's memorandum to the parties - and also to the projected length and complexity of the further hearing - I think that the foregoing considerations are of less significance.

20 In my opinion, the grounds foreshadowed by Spotlight are such that the decision and orders of the learned trial judge are attended by sufficient doubt as to justify a grant of leave to appeal. I further consider that the prejudice that would be suffered by Spotlight if leave to appeal were not granted is considerable and not confined to questions of costs and would amount to substantial injustice. I think that the disruption, delay, cost, trouble and anxiety that would be suffered by the respondent would amount to substantial injustice of itself. In addition, it appears that the respondent would probably lose an existing forensic advantage of substance of which it should not be deprived if the exercise of the judge's discretion was wrong.

[1] NCON Australia Ltd. v Spotlight Pty Ltd [No 4] [2011] VSC 271.

[2] Inspector-General in Bankruptcy v Bradshaw [2006] FCA 22.

[3] [2008] SASC 295 [138].

[4] Home Management Maintenance Pty. Ltd. v Doyle (1990) 107 FLR 225, 230.

[5] [2009] HCA 27.