Spotlight Pty Ltd v NCON Australia Ltd [2012] VSCA 232

Court of Appeal (Vic)|2012-09-27|Before: Mandie JA, Bongiorno JA, Harper JA, Tate JA

PRACTICE AND PROCEDURE - Appeal from decision to allow a plaintiff to re-open its case on the issue of damages after judgment reserved and before final judgment delivered - Provision to the parties of a memorandum from the trial judge about deficiencies in the plaintiff's case - Role of the memorandum on the resumption of the case - Inspector-General in Bankruptcy v Bradshaw [2006] FCA 22 and ; considered - Appeal allowed and matter remitted to trial judge for final judgment.

1 This is an unusual appeal, although the proceeding itself is unremarkable enough. The litigation was initiated on 10 August 2009, after a dispute had arisen over a contract which the plaintiff (respondent) claimed had been breached by the defendant (appellant), causing the respondent pecuniary damage. There was a trial. It concluded with both liability and damage very much in issue. Relevantly for present purposes, so were both the fact and the extent of the respondent's alleged loss. Judgment on each of these issues was reserved. It has yet to be delivered. This appeal, therefore, raises other issues altogether.

2 It was for the respondent to prove both liability and quantum. Stated in those bald terms, no proposition could be more elementary. But the proper assessment of damages can be very difficult. Certainly, the respondent found that to be so in this case. Its attempts to prove its damages were challenged at many points during the course of an 11 day trial. It is fair to say that it was a battle during which concessions were rare. It is also fair to say that, by its lack of a coherent approach, and by presenting a less than watertight case, the respondent exposed itself to the appellant's trenchant criticism.

3 The struggle continued as the parties prepared for this appeal. No agreement could be reached on the summary of facts and issues,[1] despite the intervention of the Judicial Registrar. As finally produced, the document contained little of the generally very useful chronologically-arranged information about the relevant steps taken between the issue of the writ and the hearing of the appeal; and, although the areas of disagreement were partially identified, such attempts as were made to present a document which was coherent, easily read, and easily comprehended, were unsuccessful. Before the hearing of the appeal began, the Court expressed its disappointment that what should have been a very helpful document failed to fulfil its purpose. Moreover, its defects appeared to be the product of an unwillingness by the parties to put the longer-term interests of the litigation ahead of the short-term interests of the litigators. The provisions of Practice Statement, Court of Appeal No 2 of 1995, which are designed to assist the efficient disposition of appeals, were not followed as they should have been. But a deeper problem, to which we shall return, was probably also at play.

4 In the meantime, an application for leave to appeal was heard by Mandie and Bongiorno JJA on 2 September.[2] In his judgment granting leave, Mandie JA (with whom Bongiorno JA agreed) usefully summarised the position which obtained at, and immediately after the conclusion of, the trial. His Honour said:

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.'

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.

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.[3]

5 The judge was diligent in the preparation of his reasons. But the process of preparation seems to have been accompanied by what most judges probably experience several times during a career on the Bench. It is something which can pose problems of acute difficulty. In the quietude of chambers, with all the materials produced by the processes of litigation within relatively easy access, and perhaps with the luxury of a little time for reflection, one gains a clearer appreciation - clearer than was possible during the hearing - of the particular litigation's unresolved (and perhaps heretofore unexplored) complexities of evidence and law.

6 What happened next, as the judge worked on his judgment, is a matter of unhelpful conjecture; but it is consistent with the possibility that his Honour saw real difficulties, unnoticed or underestimated earlier, with which he would be required to grapple before he could make findings about damages. This, of course, is something which would not arise if the appellant succeeded on liability; and success or failure on that issue had yet to be decided. In short (as best we can glean from a study of the documentation included in the Appeal Book) it seemed to his Honour that he had not been provided with the information required to enable him properly and accurately to calculate the quantum of such loss as, assuming success on liability, the respondent might have in fact suffered.

7 The judge fixed on a means of remedying the deficiencies he perceived in the materials available to him. As was said by Mandie JA in granting the appellant leave to appeal:

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.[4]

8 Mandie JA noted that the memorandum concluded with a statement that it was for the respondent to formulate, plead and prove its damages claim. Consistently with this, the memorandum did not purport to be an exhaustive exposition either of the deficiencies in the respondent's damages case or of the means by which the loss and damage should be calculated. Nevertheless, we agree with the assessment made by Mandie JA. Despite the disclaimers of the trial judge, the memorandum does present, when viewed against the background of its structure, and often of its language, as 'very much in the form of an embryo judgment', or part of one.

9 The disclaimers make it clear that this is not what his Honour intended. His purpose, as he said and as one may confidently conclude, was to ensure that justice was done to the parties by a proper exploration of those contentious issues which fell under the broad rubric of damages. That exploration had not been completed during the trial. His Honour's intention was to finish the task by reconvening the Court in circumstances in which the deficiencies in the presentation of the respondent's case for damages could be analysed, in which the appellant could respond to them, and - depending on where the balance of justice lay - in which those deficiencies could perhaps be rectified.

10 It was as the first step in the pursuit of these aims that the judge issued the memorandum to which Mandie JA referred in the passage set out at [7] above. But the opening words of the memorandum ('I propose to reconvene the hearing of this proceeding to hear submissions on whether or not NCON wishes to apply to reopen its case on damages') inadvertently throw light upon the problem which underlies his Honour's approach. The proposal to reconvene became, in effect, an invitation which the respondent would have been foolish to refuse.

11 The memorandum also had, unfortunately, another consequence which his Honour could not have intended. It moved the judge uncomfortably close to the line, not to be crossed, which divides the Bench from the Bar table. An invitation, entirely unsolicited,[5] issued to one party alone (in this instance, only the respondent could make submissions about whether or not it wished to reopen the question of its damages) and after each party has closed its case, inevitably appears to place the judge in the same general territory as one of the parties, while the other party is forced to occupy different ground. Since the other party could not respond to the question asked of the sole invitee, it would be forced to argue that, no matter what the invitee might want, the invitation should be withdrawn. Such an argument would not be as between party and party, but as between party and judge.

12 No inhibitions of this kind troubled the respondent in this case. The opportunity thus opened was one of which it was, unsurprisingly, willing if not anxious to take advantage. By summons dated 14 April 2011, the respondent applied to reopen its case, file and serve a further amended set of particulars of loss and damage, and rely upon a number of affidavits filed and sworn that day.

13 The summons came on for hearing on 9 May 2011. The appellant opposed the grant of leave to reopen. Judgment on the respondent's application was delivered on the following 23 June. The application was granted, and leave was also given to the respondent to file and serve further particulars and to lead evidence 'of the kind referred to' in three specified affidavits previously filed on the respondent's behalf. It was also ordered to file and serve three witness statements to be made by, respectively, each of those three deponents. A date was fixed for the 'further hearing of the trial'.[6]

14 It is this judgment which is the subject of this appeal. In our opinion, the appeal should be allowed.

15 Senior counsel for the respondent (who did not appear on the trial) submitted that his Honour was doing no more than giving substance to the requirement, imposed by the Civil Procedure Act 2010, that the real issues between the parties be identified and resolved. But in truth much more than that was involved. All the issues surrounding the question of the assessment of damages had been debated during the 11 days occupied by the trial. The respondent's position had changed as the debate ebbed and flowed, but after those 11 days both sides had made their final addresses and closed their respective cases. The next step was the publication of reasons for judgment based upon the application of the law to the evidence presented by the two parties. The respondent, as plaintiff, stood to win or to lose depending, initially, upon whether it could establish on the balance of probabilities that a contract had been created and, having been created, had been breached by the appellant. If the respondent wished to claim more than nominal damages, it stood to win or lose on that issue depending upon whether it had established on the balance of probabilities that more than nominal damages had been suffered and, to the extent required by the law, quantified.

16 It is a truism that a wronged party will not be deprived of damages simply because a precise calculation of their quantum is impossible. On the other hand, where a calculation can be made, it must be made - and evidence to substantiate the calculation must be called - to such degree of accuracy as is reasonably possible. If, at the close of the trial, the party claiming damages has failed in whole or in part to do this to the standard required in civil cases (that is, on the balance of probabilities) it will, to that extent, fail.

17 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.[7] 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.

18 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.

19 This case serves as an example. His Honour restricted the evidence which the respondent would be permitted to lead on the rehearing to 'evidence of the kind referred to' in the specified affidavits. Yet already there are complaints, which may or may not be justified, that the respondent has sought to introduce, within the interstices of the materials which it has been given leave to file and serve, evidence which does not meet his Honour's description. The appellant contends that a whole new field of discovery, not properly confined, has been invaded by the respondent. In particular, it complains that the respondent seeks to take opportunistic advantage of the grant of leave to introduce evidence which supports what the appellant characterises as an hitherto entirely unexplored aspect of the respondent's claim.

20 The appellant's position warrants further, albeit brief, reference. The respondent intended to obtain finance for the manufacture of the fittings (referred to as 'Yes boxes') which, it alleges, the appellant contracted to have installed in the appellant's retail premises - some 106 stores throughout Australia. The financier from whom the respondent initially sought the requisite financial accommodation declined (for reasons with which this Court is not concerned) to provide it. The appellant contends that, if it were otherwise bound to proceed with the installation of the fittings, it was released from that obligation by the respondent's failure to obtain the funds without which the respondent could not fulfil its side of any bargain.

21 The respondent now seeks to call evidence that it had another source of finance available to it. Such a claim was never made during the trial, and does not fall within the scope of the leave granted to the respondent by his Honour - or, at least, such is the appellant's contention. As the inevitable extension of this argument, the appellant asserts that it would be quite wrong to allow the respondent to enlarge its case in this way.

22 It was differences such as this about the width and breadth of any reopening which, we suspect, was one of the reasons why agreement could not be obtained about the formulation of the summary of facts and issues.

23 There is another, fundamental, reason why this appeal must succeed. Were the trial to be reopened, two documents - the judge's memorandum of 23 March 2011, and his judgment of 23 June that year - would assume pivotal importance, no matter how hard the judge and the parties might seek to keep them entirely off-stage. In the circumstances which would then obtain, they could not but influence the way the parties - and especially the respondent - tailored their reopened cases. They could not, in those circumstances, be described otherwise than as the vehicles by which the respondent's case on damages had been reopened; and not merely reopened, but reopened with the benefit of the judge's observations about the very same deficiencies which were the reason for the reopening in the first place.

24 We should refer to two authorities upon which reliance was placed during argument on the appeal. The earliest in time is Inspector-General in Bankruptcy v Bradshaw.[8] The applicants had 'from the commencement of the proceeding ... determined to carry their case without seeking to quantify their loss.'[9] They then sought leave to reopen their case for the purpose of pursuing the very quantification which they had originally spurned.

25 Kenny J refused the application. There were, in her Honour's opinion four recognised classes of case in which a court may grant leave to reopen; and the appellants could not bring themselves within any of them. The four classes (with which we respectfully agree) are: (i) where fresh evidence, unavailable or not reasonably discoverable before, becomes known and available; (ii) where there has been inadvertent error; (iii) where there has been a mistaken apprehension of the facts; and (iv) where there has been a mistaken apprehension of the law.[10]

26 These classes are not closed; but the present case shares with Bradshaw the distinction that it falls into none of them, and no applicable new category is suggested. 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.[11] We are satisfied that, in the present case, it does not.

27 The second case to which reference should be made is Brown v Dream Homes SA Pty Ltd.[12] The appellant, Ms Brown, bought a home after the respondent, which she had engaged for the purpose, carried out an inspection and pronounced the house structurally sound. So (as a subsequent further inspection established) it was; but the respondent's report failed to mention the existence of a crack, noticed by the inspector, which indicated the possibility that it was not. In the meantime, Ms Brown determined to sell, and claimed damages for the costs thrown away in her original purchase and subsequent sale.

28 The Full Court of the Supreme Court of South Australia upheld the magistrate's finding that the appellant would have opted out of the purchase during the prescribed 'cooling off' period had the crack then been brought to her attention. A more difficult question was whether the appellant should be allowed to reopen her case to claim the correct measure of her damages - which, as the Full Court unanimously held, differed from that which she had claimed in the Magistrates Court and which the magistrate had allowed.

29 The Full Court decided by a majority (Doyle CJ and Kourakis J) that her application to reopen should be remitted to the judge of the trial division who heard the appeal from the magistrate. The basis upon which Doyle CJ came to that decision, with which we respectfully agree, is apparent from the following passages from his Honour's judgment:

The remaining issue is whether the case should be remitted to the single judge to permit Ms Brown to renew her application to call further evidence. As I understand it, she wants to lead evidence to prove that between the time of the purchase of the house, and the time of its resale, the value or market price of the house, and of houses of the same kind (I pass by the question of how the kind of house is to be identified) rose by an amount that can be established. Building on this she wishes to argue that the Court should find that because of the commitment involved in acquiring the house in question, she was not in a position to acquire a replacement home until she had sold the house in question. By then, she argues, she was at a disadvantage because the price and value of an equivalent home had risen with the general rise in market prices for housing. On this basis she argues that the amount credited against her claim, on account of the proceeds of sale of the house, should be reduced by the amount by which the market price of equivalent houses had risen over the relevant period.

In effect, Ms Brown wishes to prove the facts necessary to establish a claim that includes, as one element, the gain that she would have made by entering into another transaction (the purchase of a similar house). She argues that the defendant's breach of contract deprived her of the opportunity to do so, because her money was tied up in the house in question.

...

I agree with Layton J that to support this aspect of Ms Brown's claim, it may be necessary for Ms Brown to give further evidence. It might be necessary for her to give evidence that she acted reasonably in not selling the house until she did sell it, and that she could not have sold the house sooner than she did. The fact that she has not acquired a replacement house might also be relevant, and might be a matter on which she will need to give evidence to support the claim. One cannot say at this stage whether or not the valuation evidence will prove contentious, and whether or not the defendant will wish to call answering evidence.

The claim that Ms Brown now wishes to advance is one that should have been identified and advanced from the outset. It was not identified, or at least not adequately identified, before the magistrate, and was promoted for the first time before the single judge. The explanation for the failure to promote this aspect of the claim before the magistrate is likely to be that given by Kourakis J. That is, that the difficulties inherent in the correct approach to the assessment of loss, reflected by the differing views expressed in differing judgments in this case, meant that Ms Brown's representatives failed to identify this claim and failed to advance this aspect of her case when it should have been advanced. It is also true, as Kourakis J says, that the defendant can be compensated in costs for costs thrown away as a result of the damages claim being reopened. But against that, a judge ruling on the application to be made by Ms Brown would have to bear in mind the need for finality, and the need for litigants to have reasonable confidence that once their case has been heard and decided, the case will not be reopened to enable one party to litigate issues that could have been raised earlier but were not raised.

This review of the relevant considerations persuades me that Ms Brown's application to reopen her case should be remitted to the single judge. To some extent, I have had to speculate about what is involved in the reopening of the claim for damages. The application for permission to do so can be decided satisfactorily only with a full understanding of the case now to be put, and with an appreciation of what that involves by way of evidence on either side. On what I know, the matter appears to be finely balanced. I express no view on the question of whether the application should be granted.[13]

30 It is clear from those passages that Doyle CJ was (as, with respect, it seems to us) alive to the problems to which the reopening of a case can give rise. It is, in our opinion, also clear that Brown v Dream Homes SA Pty Ltd can be distinguished from the present case.

31 The appellant seeks an order that the appeal be allowed, that the orders made on 23 June be set aside, and that the proceeding be remitted to the trial judge 'for delivery of the judgment reserved after trial in due course.' Orders for costs in the appellant's favour are also sought. The respondent seeks orders that the appeal be dismissed or, in the alternative, that orders be made for a new trial.

32 The last of the orders favoured by the respondent would place it in much the same position as it would be in were the appeal simply dismissed. Either would provide an avenue for it to re-present its case after what had, in these circumstances, become in effect a practice run at the first trial, resulting (on the occasion of the second) in an opportunity to correct the flaws exposed in the first.

33 For the reasons given in this judgment, the appeal should be allowed. The orders made on 23 June 2011 should be set aside, and the matter should be remitted to the trial judge so that his Honour can complete the task of writing the judgment reserved after the conclusion of final addresses on 2 March 2011.

[1] Practice Statement, Court of Appeal No 2 of 1995 [1996] VicRp 16; [1996] 1 VR 251 (and see Court of Appeal Practice Statement No 1 of 2006, which at 8.2 states that the parties are expected to agree upon the contents of the summary).

[5] 'Unbidden by either party', as the appellant says at [3] of its written outline of submissions.

[6] Orders made on 23 June 2011 and authenticated by the judge on that day.

[7] This precept was well known to antiquity: Interest reipublicae ut sit finis litium (It is in the interests of the state that there be an end to litigation). See also Bailey v Marinoff [1971] HCA 49; (1971) 125 CLR 529, 539 (Gibbs J), where his Honour spoke of 'the obvious principle that it is desirable that there be an end to litigation'.

At a glance

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Judgment (46 paragraphs)

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Cases Cited (2)