WYKES v SAMILK PTY LTD [NO 2] SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL SHELLER, BEAZLEY and STEIN JJA 3 August 1998, 18 August 1998 [1998] NSWCA 268 COURT'S discretion to re-open judgment - leave to appeal out of time — fault criterion — whether earlier judgment proceeded on misapprehension as to facts or law The plaintiffs brought proceedings in the District Court to recover damages, firstly, from the first defendants for breach of an alleged agreement for lease and secondly, from the second defendants, the partners in a law firm, for negligence in respect of the preparation and execution of the lease. The trial Judge found that the second defendants had acted negligently but held that because the damages were caused by the first defendant, it was unnecessary to deal with the claim against the second defendants. The trial Judge assessed the damages that would be payable by the second defendants if it were necessary to award them and ordered that the second defendants pay the plaintiffs' costs of the proceedings against the second defendants. This cost order was stayed until further submissions were made in relation to costs. After these submissions were made the trial Judge on 16 November 1995 did not vary the costs order and made an additional order, 10.1A "that there will be a verdict for the second defendants against the plaintiffs". The first defendants appealed and the plaintiffs failed to cross appeal against O10.1A. On 19 May 1998 the Court allowed the appeal and cross-appeal by the second defendants, set aside the trial Judge's orders other than a verdict for the second defendants against the plaintiffs and dismissed the proceedings against the first defendants. As a result, the plaintiffs failed to recover damages from the first defendants and the second defendants despite the trial Judge's finding of negligence on the second defendants' part. The plaintiff, by summons, claimed for leave to appeal against O10.1A. Held: 1. The solicitor conducting the proceedings on behalf of the plaintiffs was unaware of the nature and consequence of O10.1A until this Court gave its decision in the appeal. Therefore, the failure to file a notice of cross-appeal in relation to the order was the fault of the plaintiffs solicitor and not for any other reason. 2. The plaintiffs did not meet the absence of fault criterion for the Court to exercise its discretion to order a re-hearing set out in Wentworth v Woollahra Municipal Council (1982) 149 CLR 672. 3. The exercise of the Court's jurisdiction to re-open a judgment is not limited to the fault criterion in Wentworth v Woollahra Municipal Council: Autodesk Inc v Dyason (1993) 176 CLR 300 at 301-2 applied. 4. The Court will exercise its jurisdiction where it has good reason to believe that in its earlier judgment it has proceeded on a misapprehension as to the facts or the law. The plaintiff failed to satisfy this criterion: Autodesk v Dyason at 302 applied. Authorities: Autodesk Inc v Dyason (1993) 176 CLR 300 Wentworth v Woollahra Municipal Council (1982) 149 CLR 672. Sheller JA INTRODUCTION On 19 May 1998 the Court as presently constituted gave judgment in this appeal, which was from a decision of Sidis DCJ in proceedings the first respondents (the plaintiffs) brought in the District Court against the appellants 2 UNREPORTED JUDGMENTS (the first defendants) and the second respondents (the second defendants). The Court allowed the appeal and a cross-appeal by the second defendants, set aside her Honour's orders other than a verdict for the second defendants against the plaintiffs, and dismissed the proceedings against the first defendants. The plaintiffs' brought the proceedings in the District Court to recover damages for the breach of an alleged agreement for lease for a term of three years of factory premises between the plaintiffs as lessors and the first defendants as lessees. Judge Sidis awarded the plaintiffs damages in the sum of $31,213.69, which this Court set aside. The plaintiffs also claimed damages from the second defendants, the partners in a firm of solicitors, retained and employed by the plaintiffs, for acting negligently in the conduct of their retainer to perform work for the plaintiffs in respect of the preparation and execution of the lease and in advising and acting for them in respect thereto. In her reasons for judgment of 25 October 1995, her Honour found that the partner who had acted for the plaintiffs had acted negligently. However, having regard to the findings she had made that the first defendants were responsible for the damages suffered by the plaintiffs, she said "it is not necessary to deal with the claim against the second defendants". Her Honour said: "Tf it were necessary to award damages against the second defendants, I would assess them at $31,213.69 and reduce them by 10 percent to take account of the contributory negligence of the plaintiffs in failing to make enquiries in relation to completion of the lease documents." However, her Honour ordered the second defendants to pay the plaintiffs' costs of the proceedings against the second defendants but stayed this order to allow for further submissions to be made in relation to costs on 14 November 1995S. After such further submissions, her Honour delivered further reasons for judgment on 16 November 1995 saying that she did not propose to vary this costs order. Her Honour said: "Firstly, the plaintiffs did successfully pursue their claims against them. The reason that there is a verdict for the second defendants is that the plaintiffs also successfully pursued their case against the first defendant. Secondly, I found that the second defendants were negligent. The fact is that were it not for that negligence, the plaintiffs would not have had to bring the proceedings against either of the defendants. And thirdly, it was reasonable for proceedings to have involved each of the defendants so that the court could canvass the respective obligations of those defendants." However, her Honour went on to add a further order, 10.1A "that there will be a verdict for the second defendants against the plaintiffs." Her Honour may have intended to recognise that the plaintiffs, having succeeded in their claim for breach of contract, suffered no damage as the result of any negligence by their solicitor. The plaintiffs took no steps to appeal or cross-appeal against this verdict. The second defendants' cross-appeal was directed to the order for costs against it. In my reasons for judgment on this cross-appeal I observed: "The [plaintiffs] did not appeal against the verdict in favour of the [second defendants] and the [second defendants] did not challenge her Honour's findings of negligence." It was in this context that I came to the conclusion that the cross-appeal should be upheld. In short, the result of the appeal was that the plaintiffs' proceedings failed against both defendants. URJ WYKES v SAMILK PTY LTD [NO 2] (Sheller JA) 3 APPLICATION FOR LEAVE TO APPEAL The plaintiffs filed on 3 June 1998 a notice of motion seeking an extension of time to institute an appeal and on 22 June 1998 a summons for leave to appeal, or, more accurately, cross-appeal, from that part of Judge Sidis' decision that there be a verdict for the second defendants against the plaintiffs. The reason for this application is obvious enough. The plaintiffs, as a result of the decision in the appeal, failed to recover damages from the first defendants because the first defendants had entered into occupation of the demised premises, not on the terms of a lease for a three year term which they had never executed, but under a lease at will terminable by a month's notice expiring at any time, which allowed them to vacate the demised premises about 18 months after going into possession. However, the plaintiffs also had a finding of negligence against the second defendants, the solicitors acting for them, but a verdict against them in favour of the second defendants. The only reason expressed by the trial Judge for this result was that it was not necessary to deal with the claim against the second defendants. As I have said, the plaintiffs did not challenge this verdict and this Court gave its decision on that basis. The orders of this Court have not been entered. FAULT The plaintiffs, as claimants in the summons, relied upon an affidavit by their solicitor, David James Nagle, of 3 June 1998. Mr Nagle personally conducted the argument on behalf of the plaintiffs at the further hearing on 14 November 1995. However, he arranged for an agent to be present when her Honour gave judgment on 16 November 1995. He said that although he received on that date a facsimile which set out O10.1A, though this was partly obliterated, and a clear copy through the document exchange the next day, he did not appreciate that on 16 November 1995 Sidis DCJ had made O10.1A that there be a verdict for the second defendants against the plaintiffs. Mr Nagle was cross-examined about this but I accept what he said. Unfortunately, his failure to appreciate that this order had been made continued until some time after 19 May 1998 when this Court gave its decision; see his letter to counsel of 20 May 1998 in which he stated that the trial Judge "did not enter a verdict and judgment for the second respondent". Mr Gray, who appeared for the second defendants and opponents on this application, cross-examined Mr Nagle about this and in particular about letters written to counsel in December 1995 requiring advice as to whether a notice of cross-appeal should be filed by the plaintiffs. It should be noted that as far as the material goes, none suggested that counsel at this time was provided with her Honour's judgment of 16 November 1995. That was of course included in the appeal book. Mr Nagle cannot say when the appeal book came into existence or when he first saw it. However, he said, and again I accept what he said, that he was unaware of the terms of the reasons for judgment until after this Court had given its decision. On instructions from Mr Nagle, Mr Wilmot of counsel prepared the plaintiffs' outline of submissions which, under the heading "The Case Against the Second Respondents", stated: 1. In the event the appeal brought by the appellants is successful, the first respondents' loss will be satisfied by the finding that the second respondents were negligent....... 2. No cross-appeal has been filed by or on behalf of the second respondents challenging this finding. 4 UNREPORTED JUDGMENTS 3. The first respondent does not seek to challenge the finding that they are liable in contributory negligence to the extent of 10 percent....... 4. In the premises, the first respondents are entitled to judgment against the second respondents in accordance with her Honour's findings." This document was dated 25 March 1998. This was the closest that the plaintiffs came, either formally or informally, to pressing their claim against the second defendants. However, it overlooks the absence of any appeal or cross-appeal by the plaintiffs and fails to recognise the existence of the verdict against the plaintiffs of which their legal representatives were apparently unaware. In oral argument, the verdict against the plaintiffs in favour of the second defendants was not challenged. THE SECOND DEFENDANTS' POSITION The second defendants relied upon an affidavit to which is annexed an outline of submissions on costs on behalf of the second defendants presented to the Court on 14 November 1995. It was submitted in these submissions that "the second defendants, being entitled to a verdict in their favour against the plaintiff, are entitled to an order for costs." Also annexed is a copy of the second defendants' outline of submissions dated 24 March 1998 to this Court which refers to the terms of O10.1A. The second defendants' argument as cross-appellants was that costs should follow the event. Part of the material annexed was correspondence between the solicitors for the second defendants and for the plaintiffs in which the former sought to persuade the latter that their claim against the second defendants would fail. The solicitors for the plaintiffs stated that if the plaintiffs failed against the first defendants because of the second defendants' negligence, then the plaintiffs would look to the second defendants for their loss and that if they succeeded against the first defendants they would seek a Bullock type order that the first defendants pay not only the plaintiffs' but also the second defendants' costs. Neither party found the other's argument persuasive. In their submissions, the opponents emphasised that the claimants' predicament was the result of their fault or the fault of their solicitor which Mr Nagle acknowledged in his evidence. I am not persuaded that the decision not to file a notice of cross-appeal was for any reason other than a failure to appreciate the nature and consequence of O10.1A. I do not believe that the decision was taken deliberately in the sense that the plaintiffs or their advisers decided that if they failed against the first defendants they would accept failure against the second defendants. However, the plaintiffs or their advisers were at fault and have by their inaction, if this leave should be granted, increased the costs of the proceedings on appeal. Furthermore, after the hearing of the appeal, they have now put the second defendants in jeopardy of losing the verdict in their favour, after they might well have proceeded on the basis that that matter was no longer a live issue. Mr Jackson QC, who appeared for the claimants, has acknowledged that if his clients are given leave to cross-appeal, the second defendants should have leave to amend their cross-appeal. In answer to a request from the Court, Mr Gray handed up a document outlining matters about which the second defendants would wish to appeal, namely: "1. The finding that the solicitors were negligent in failing to protect the [plaintiffs] from the consequences of the failure to comply with s54A of the Conveyancing Act 1919. URJ WYKES v SAMILK PTY LTD [NO 2] (Sheller JA) 5 2. The finding that, if the solicitors were negligent, the damages caused by such negligence were proved by the [plaintiffs] to be $31,213.69. 3. The finding that the contributory negligence of the [plaintiffs] should reduce the damages payable by the solicitors by only 10 percent." Various grounds are set out. These embrace an application to lead further evidence at the hearing of the cross-appeal. None of these grounds strikes me as particularly persuasive but it seems to me that if the plaintiffs are given leave to cross-appeal, the second defendants should, as the price of that leave, be allowed to amend their cross-appeal to raise such matters as they would have been entitled to raise in it if the plaintiffs' proposed cross-appeal had been filed within time, that is to say, in 1995. Mr Gray further makes the point that the amount involved is relatively small. CONCLUSION In Wentworth v Woollahra Municipal Council (1982) 149 CLR 672 at 684 the High Court in a joint judgment said: "The public interest in maintaining the finality of litigation necessarily means that the power to reopen to enable a re-hearing must be exercised with great caution. Generally speaking, it will not be exercised unless the applicant can show that by accident without fault on his part he has not been heard." The claimants do not meet the absence of fault criterion. However, in Autodesk Inc v Dyason (1993) 176 CLR 300 at 301-2 Mason CJ said: "The exercise of the jurisdiction to reopen a judgment and to grant a re-hearing is not confined to circumstances in which the applicant can show that, by accident and without fault on the applicant's part, he or she has not been heard." After referring to the decision in Wentworth v Woollahra Municipal Council the Chief Justice continued: "But these statements do not exclude the exercise of jurisdiction to reopen a judgment which has apparently miscarried for other reasons, at least when the orders pronounced have not been perfected by the taking out of formal orders. So much was acknowledged by Brennan, Dawson, Toohey and Gaudron JJ in Smith v NSW Bar Association (1992) 176 CLR 256 at 264-6 when their Honours said: 'if reasons for judgment have been given, the power is only exercised if there is some matter calling for review'." The Chief Justice referred to a number of examples and said at 302 that they indicated that the public interest in the finality of litigation will not preclude the exceptional step of reviewing or re-hearing an issue when a court has good reason to consider that, in its earlier judgment, it has proceeded on a misapprehension as to the facts or the law. Again the claimants have not met this criterion. This Court proceeded on the basis that the plaintiffs had not cross-appealed against the verdict in favour of the second defendants. The plaintiffs were not denied the opportunity to cross-appeal or to put such submissions as they wished. They had the opportunity to challenge the verdict by cross-appeal and failed to do so. None of the indicia referred to by the High Court as appropriate to be taken into account in determining whether an application such as the present should be granted is present. In my opinion, the application should be refused. It seems to me it is an application to allow a party, which failed to pursue a claim during the hearing of an appeal, to reopen, after the appeal has been decided, for no better reason than that the claim was overlooked. 6 UNREPORTED JUDGMENTS ORDERS I would dismiss the notice of motion and summons with costs. Beazley JA I agree with Sheller JA. 5 Stein JA I agree with Sheller JA. The Notice of Motion for an extension of time to appeal and the Summons for leave to appeal should be dismissed with costs. Dismiss the notice of motion and summons for leave to appeal with costs. Counsel for the claimant/first respondent: D F Jackson QC/A W Tonking Solicitors for the claimant/first respondent: Nagle & McGuire 15 Counsel for the opponent/second respondent: V R Gray Solicitors for the opponent/second respondent: Colin Biggers & Paisley253545