New South Wales Court of Appeal CITATION : Cosmos E-C Commerce Pty. Ltd. v. Sue Bidwell & Associates Pty. Ltd. [2004] NSWCA 261 revised - 30/07/2004 HEARING DATE(S) : 28 July 2004 JUDGMENT DATE : 28 July 2004 JUDGMENT OF : Hodgson JA at 1 DECISION : 1. Leave granted to the claimant to apply out of time for leave to appeal from the orders made by Judge Rolfe on 11 June 2004. 2. Stayed until the hearing of the applications for leave to appeal the orders made by Acting Judge Cooper on 14 May 2004 and Judge Rolfe on 11 June 2004. 3. Ordered that the claimant to pay the opponent's costs of this application, and also to pay all costs thrown away by reason of the vacation of the hearing on 30 July 2004. 4. Ordered that the claimant provide security for those costs orders in the sum of $10,000. It is to be paid by the payment of $10,000 into an account in the names of the solicitors for the two parties. 5. At this stage leave is not granted for these costs orders to be enforced prior to the conclusion of the proceedings. An application for that leave can be made to the Court of Appeal when the application for leave is heard. The security ordered will stand as security for those particular costs if they are permitted to be enforced prior to the conclusion of the proceedings, or for any balance of costs that may exist at the end of the proceedings in favour of the plaintiff. 6. The stays that have been ordered are conditional on that amount of $10,000 being paid into such an account at or before 12 noon tomorrow. 7. Directed that the claimant proceed with expedition in bringing about the hearing of the leave applications. CATCHWORDS : PROCEDURE - Summary disposal - Striking out defences - Whether denial of contract and performance is impermissible "pleading the general issue" - Whether finding contrary to defendant's affidavit should be made without cross-examination on summary judgment application - Whether and to what extent determination of terms of contract can be addressed at hearing as to damages after judgment for plaintiff given - Whether cross-defendants bound by determination of damages in hearing between plaintiff and defendant - Whether stay of damages hearing should be granted. PARTIES : Cosmos E-C Commerce Pty. Ltd. - claimant Sue Bidwell & Associates Pty. Ltd. - opponent FILE NUMBER(S) : CA 40379/04 COUNSEL : Mr. N. Cotman SC with Mr. M. Cohen for claimant Miss J. Pentelow for opponent SOLICITORS : Watson Mangioni, Sydney for claimant Muggletons, Stanmore for opponent LOWER COURT District Court JURISDICTION : LOWER COURT DC 2590/03 FILE NUMBER(S) : LOWER COURT Cooper ADCJ and Rolfe DCJ JUDICIAL OFFICER : IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40379/04 HODGSON JA Wednesday 28 July 2004 COSMOS E-C COMMERCE PTY. LTD V. SUE BIDWELL & ASSOCIATES PTY. LIMITED Judgment 1 HODGSON JA: On 14 May this year Acting Judge Cooper made orders in proceedings brought in the District Court, as follows: he struck out grounds of defence put on by the defendant; he refused leave to file further grounds of defence; he gave judgment for the plaintiff on the action and ordered that there be a trial for the assessment of damages. A short stay of those orders was granted. A holding summons for leave to appeal was filed, but at that stage no application was made to continue the stay. 2 In those circumstances, on 11 June 2004 Judge Rolfe set the matter down for hearing on the question of damages on 30 July 2004. 3 I have before me a notice of motion seeking a stay of the orders of Acting Judge Cooper and also a stay of the orders of Judge Rolfe. At present there is no application for leave to appeal from the orders of Judge Rolfe; but if the orders of Acting Judge Cooper are stayed, then it seems clear that that would make it impossible that there be a trial on the question of damages on 30 July. 4 The proceedings were commenced by statement of claim in which the plaintiff alleged a consultancy agreement made between August and December 1999 whereby the defendant would pay the plaintiff $1000 "for each and every day that the plaintiff provided consultancy services to the defendant", and a similar provision in relation to other companies in the group of companies that included the defendant. The agreement was said to be made between Barry Bidwell on behalf of the plaintiff, and Adam Gilchrist on behalf of the defendant. 5 The statement of claim also alleged a written agreement to similar effect made on or about 18 May 2000. 6 The statement of claim alleged that, pursuant to the agreement or agreements, the plaintiff provided 300 days of consultancy services, giving rise to an entitlement of $300,000, of which the defendant had paid the sum of $85,000. 7 It appears that ownership of the defendant company changed in about the middle of June 2001, and that thereafter Adam Gilchrist ceased to be associated with the defendant. The original defence put on by the defendant denied the making of the contract and denied the performance of services. As I understand it, District Court defences do not have to be verified, but the defence did contain a certificate from the defendant's solicitors that the defence had reasonable prospects of success. That was the defence struck out by Acting Judge Cooper. 8 The defendant sought to put on an amended defence which, in addition to the previous defences, alleged that if there was a liability to the plaintiff, then there was an extinguishment of that liability by reason of an agreement by the plaintiff to accept shares in the defendant company. 9 At the hearing before Judge Cooper there was an affidavit put on by the defendant sworn by a solicitor, Peter Noble, who apparently has been a director of the defendant throughout its existence, that is both before and after the change of ownership in June 2001. He said that at no time prior to the change of ownership had he been aware of the written agreement alleged in the statement of claim. 10 He annexed a copy of an explanatory note for a board meeting apparently intended to be conducted in about September 2000, proposing the capitalisation of debts, which included identification of a debt to the plaintiff of $211,000. The affidavit went on to assert: As a result of that meeting the debts claimed by the plaintiff in the proceedings herein were forgiven in consideration of the issue of 282,000 fully paid ordinary shares in the capital of the defendant which were issued by the direction of the plaintiff to its nominee, Bidwell Nominees Pty Limited. 11 In his reasons for judgment Acting Judge Cooper held that the documents that were before him made it clear that there was no such forgiveness of debt. He held that the denials of the making of the contract and the denials of the performance of the contract were not legitimate defences because they were, as he put it, pleading the general issue; and for those reasons he struck out the defence. 12 He also had before him a proposed cross-claim by the defendant against interests associated with the previous owners of the company seeking an indemnity for any liability that the company might have to the plaintiff. He permitted that cross-claim to go ahead, but determined that it should be heard separately from the proceedings on the statement of claim. 13 In my opinion, there are serious arguable errors by the primary judge in the course that he took, and to permit the hearing to proceed on Friday would, in all probability, involve wasted expenditure and the creation of further procedural difficulties. 14 I think it is strongly arguable that the primary judge was in error not to permit a defence which, in substance, put the plaintiff to proof of the plaintiff's case as to the existence of a contract and the performance of it, in circumstances where ownership of the defendant had changed. It has been put that Mr Noble's affidavit, in substance, admitted the existence of the debt by the words that I have indicated. However, in my view, when one has regard to all the circumstances, that amounts to no more than an informal admission that could be the subject of explanation. 15 The material relied on by the primary judge to disallow the defence of forgiveness was very powerful, but there is a real question whether a judge should make such a finding contrary to sworn evidence in this kind of application, particularly where there was no cross-examination of the deponent. 16 I think there is also a further problem with the orders made by the primary judge, in that the identification of what was required to entitle the plaintiff to any payment was not at any greater level of particularity than what I identified earlier, namely, $1000 for each and every day that the plaintiff provided consultancy services. In order to determine whether what the plaintiff did on particular days entitled the plaintiff to $1000 would require a determination of what the contract required to give rise to such entitlement, and a determination of whether what the plaintiff did on each day satisfied those requirements. The former is really part of the determination of what the contract was, yet the orders made by the primary judge seem to foreclose any addressing of the question of what work the contract required. 17 Another difficulty with the matter proceeding as proposed is the role of the cross-defendants. It is they who, in all probability, have the best knowledge of what contract was made and as to what was done in the performance of it and it does seem, prima facie, unsatisfactory that those issues should be addressed at a hearing in which they do not participate. There is also, to my mind, a real question as to the extent to which they would be bound by determinations made at such a hearing. On one view they are parties to the proceedings and so would be bound; but on the other hand it seems that they may not have been given a fair opportunity to participate in this part of the proceedings. 18 For all those reasons, it seems to me that there are arguable grounds of appeal, and that for the case to proceed as proposed could very likely create further wasted costs and give rise to further procedural difficulties. 19 One discretionary factor that weighs very heavily against the grant of relief is the delay that has occurred. This application is made two days before the proposed damages hearing. In my opinion, it should have been made very much earlier. It is said that the reasons for judgment did not become available until 19 July, but in my opinion that does not excuse the lateness of this application. 20 Notwithstanding the lateness of the application, I do think the reasons I have given do justify the orders that I have proposed, but only subject to certain conditions which will, to some extent, protect the plaintiff in the proceedings against costs thrown away by reason of the delay. 21 I think the claimant should be ordered to pay the costs of this application since it was brought so late, and I think it should be ordered to pay all costs thrown away by reason of the vacation of the hearing on Friday. They should also be ordered to provide security for those costs in the amount of $10,000, and the stay that I will grant will be conditional on that security being provided by 12 noon tomorrow. 22 I think to ensure there are no procedural problems, I should grant leave to the claimant to appeal out of time from the orders made by Judge Rolfe, and I should grant a stay of those orders also to ensure that there are no further procedural complications that might otherwise arise. As I understand it, the effect of staying those orders will mean that the hearing set down for 30 July would not proceed. 23 For those reasons, I make the following orders. 1. I give leave to the claimant to apply out of time for leave to appeal from the orders made by Judge Rolfe on 11 June 2004. 2. I stay until the hearing of the applications for leave to appeal the orders made by Acting Judge Cooper on 14 May 2004 and Judge Rolfe on 11 June 2004. 3. I order the claimant to pay the opponent's costs of this application, and also to pay all costs thrown away by reason of the vacation of the hearing on 30 July 2004. 4. I order that the claimant provide security for those costs orders in the sum of $10,000. It is to be paid by the payment of $10,000 into an account in the names of the solicitors for the two parties. 5. At this stage I do not give leave for these costs orders to be enforced prior to the conclusion of the proceedings. An application for that leave can be made to the Court of Appeal when the application for leave is heard. The security I have ordered will stand as security for those particular costs if they are permitted to be enforced prior to the conclusion of the proceedings, or for any balance of costs that may exist at the end of the proceedings in favour of the plaintiff. 6. The stays that I have ordered are conditional on that amount of $10,000 being paid into such an account at or before 12 noon tomorrow. 7. I also direct that the claimant proceed with expedition in bringing about the hearing of the leave applications. ********** Last Modified: 08/03/2004 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.