The solicitor representing Mr Kaltoum as an advocate at the hearing was present throughout these exchanges. The exchange provided a further clear indication of the possibility of an illegality argument being available, arising from the licensing status of the business under the operation of the plaintiffs.
34 Pursuant to the orders which I made on 2 December 2002 for the filing of submissions for this Notice of Motion, counsel for T&CPMS filed submissions on 2 June 2003. Those submissions included a basis for opposing re-opening, that, "The applicant has not sought leave to amend any pleadings relied upon by him at the trial." Other portions of the submissions said:
"3.1 The applicant has not put forward any evidence or explanation for his failure to raise the allegations or their purported effect on the outcome of the case nor have they ever sought to amend their pleadings." …
"4.1 If at the trial, evidence had been sought to be given or tendered as to the allegations, that evidence would have been disallowed, in the absence of leave being granted to Mr Kaltoum to amend his defence.
4.2 Even if leave to amend was now sought, such leave should and would be refused in circumstance where the applicant has deliberately framed his case in a particular way or the Respondent may have conducted its case differently had the issue been raised: Burnham v City of Mordialloc (1956) VLR 239."
35 Notwithstanding this repeated reference to the pleadings, counsel for Mr Kaltoum did not seek leave in any pre-hearing written submission, or at the outset of the oral argument, to amend the pleadings to raise any issue of illegality. At the close of the argument on the Notice of Motion, he said that he would seek leave to amend the pleadings, and submit a draft pleading. On 9 September 2003, at a time when these reasons for judgment were at the stage of final proofreading before delivery, a draft Amended Defence arrived at my chambers, under cover of a letter dated 2 September 2003. I will not delay delivery of these reasons for judgment by re-listing the matter for argument about whether the amendment should be permitted.
36 The matters I have referred to in paragraphs 28 to 35 are all ones which tend against exercising the discretion to permit the earlier hearing to be re-opened. I will not, however, decide the application to re-open on the basis of those matters. Rather, I have come to the view that, even if re-opening were to be permitted, it would not produce the result for which Mr Kaltoum contends, namely that the damages are bound to be nil or nominal. That is a sufficient reason not to permit it to be re-opened. I turn now to explain how I have come to that view.
Merits of the Illegality Argument
37 Even though there has been no amendment to the pleading, the substance of the argument which Mr Kaltoum wishes to put is fairly clear, both from affidavits which have been filed for the purpose of the Notice of Motion, and from submissions, and (now) from the draft Amended Defence.
38 The contract which T&CPMS sues on is the restrictive covenant which I have set out at paragraph 2 of these reasons.
39 In Yango Pastoral Co Pty Ltd v First Chicago Australia Ltd (1978) 139 CLR 410 at 413 Gibbs ACJ said:
"There are four main ways in which the enforceability of a contract may be affected by a statutory provision which renders particular conduct unlawful: (1) The contract may be to do something which the statute forbids; (2) The contract may be one which the statute expressly or impliedly prohibits; (3) The contract, although lawful on its face, may be made in order to effect a purpose which the statute renders unlawful; or (4) The contract, although lawful according to its own terms, may be performed in a manner which the statute prohibits."
40 None of those "four main ways" apply to this covenant which Mr Kaltoum has given. The covenant is nothing more than a promise on the part of Mr Kaltoum that he will not do certain types of activities, for a particular period of time. The covenant was given by Mr Kaltoum to T&CPMS long before Mr Lee had anything to do with T&CPMS.
41 The law concerning illegality has a potential impact upon this covenant in a different way to those identified by Gibbs ACJ in Yango. It arises from the way in which T&CPMS would need to go about proving that it has suffered damage as a consequence of Mr Kaltoum's breach of the covenant.
42 Damages for breach of contract are assessed on the basis of the difference between the situation which the plaintiff is in when the contract has been breached, and the situation the plaintiff would have been in if the contract had not been breached.
43 When there is a statutory provision like section 20(3) Property, Stock and Business Agents Act 1941, prohibiting a corporation from carrying on a particular type of business unless it has taken out a particular type of licence, it may be the case - I do not need to decide for the purpose of the present application whether it is actually the case - that damages cannot be recovered which have the effect of a plaintiff recovering a sum to make good profits which the plaintiff could have made only by operating a business illegally. Authorities which tend in favour of that proposition include Smith's Newspapers Limited v Becker (1932) 47 CLR 279 at 288 (Rich J), 291-292 per Starke J, 296-299 per Dixon J, 304-313 per Evatt J, 315 per McTiernan J; Brownbill v Kenworth Truck Sales (NSW) Pty Ltd (1982) 59 FLR 56, especially at 69, per Sheppard J; Lee v McClellan (1995) 127 FLR 383 at 387-388. An argument against such damages being irrecoverable in the present case is that the legislation does not expressly prohibit an unregistered real estate agent from recovering fees, and that, in accordance with the principles in Yango, and in Fitzgerald v FJ Leonhardt Pty Ltd (1997) 189 CLR 215 any contract between the unlicensed real estate agent and its customers were not impliedly prohibited. It could also be argued that even when there were deficiencies in the licensing status of the employees of the business, the legislation does not impliedly prohibit T&CPMS from suing to recover profits it could have earned by using employees who did not hold the required licences.
44 I do not seek to decide whether damages for loss of profits would be recoverable by T&CPMS, because T&CPMS argues that one way in which it wants to put its case concerning damages for the contracts which it lost to Mr Kaltoum is on a basis which depends not on the profits which T&CPMS would have earned from those contracts, but rather which depends upon the capital value of the management contracts. T&CPMS does not disclaim reliance on the "lost profits" approach to calculation of damages (which might or might not be foreclosed to it, if there were to be pleading amendment to raise the illegality arguments, and those arguments were to succeed). Rather, T&CPMS says that even if the "lost profits" approach was foreclosed to it, it could still recover damages on the "lost capital value" approach to calculation of the damages. No argument was put forward by Mr Kaltoum that if an unlicensed real estate agent was deprived of a capital asset, which that unlicensed real estate agent could have, in commercial terms if not in legal terms, sold or made available to someone who could legally turn it to account, recovery of damages for that capital loss was either expressly or impliedly prohibited by the legislation. It may be that the sale or capital value of the management contracts in the hands of T&CPMS is depreciated below what the value might be in the hands of a real estate agent who could legally have turned them to account by itself performing those contracts, or perhaps even completely destroyed - but it is a question of fact whether that is so.
45 As well, I note that the question of whether there has been a breach of section 20(3) in the present case is complicated by the fact that T&CPMS held a license until 8 June 1999. It is true that, throughout the period from 12 December 1998 to 8 June 1999 T&CPMS was an entity which, if it had applied for a license during that period, would not have been granted one, because of section 23(9B) Property, Stock and Business Agents Act 1941. But that does not make it a corporation which was not licensed, in the period up to 8 June 1999.
46 I have not overlooked the fact that Mr Kaltoum also relies upon there being a breach of section 20(3) arising from T&CPMS not having employed as the person in charge of its sole or principal place of business a person who held a real estate agents licence, and upon various real estate sales persons not being licensed. I say nothing about the merits of those arguments, except that Mr Fern was a licensee-in-charge for the period 8 December 1998 to 17 February 1999, so the argument about having no licensee-in-charge cannot apply during that brief period. All that matters, for present purposes, is that, when there is one way in which T&CPMS can put its case on damages which is not bound to fail completely by reason of any illegality argument, that suffices to show that there is sufficient prospect of damages being recovered to warrant a reference to a Master to inquire into the quantum of damages recoverable.
Orders