New South Wales Supreme Court CITATION : Powercell v Cuzeno [2003] NSWSC 600 HEARING DATE(S) : 2/6/03 - 6/6/03 JUDGMENT DATE : 22 July 2003 JURISDICTION: Equity JUDGMENT OF : Campbell J DECISION : Issue estoppel arises from previous decision as to terms of contract, and matters going to validity of contract - no issue estoppel, in circumstances of unusual basis for earlier decision, concerning whether section 54A Conveyancing Act prevents recovery of damages for breach of contract - contract unenforceable because not complying with section 54A Conveyancing Act CATCHWORDS : ESTOPPEL - former adjudication and matters of record or quasi record - when issue estoppel arises - respective roles of trial judge and appellate court's findings in creating issue estoppels - relevance of remarks of High Court Justices on application for special leave to issue estoppel - role of error in earlier judgment to whether issue estoppel arises - whether "special circumstances" exception to issue estoppel - CONTRACTS - GENERAL CONTRACTUAL PRINCIPLES - Statute of Frauds, section 4 - what is a "contract for the sale or other disposition of land or any interest in land" - possibility of an estoppel against application of the Statute - whether part-performance can entitle plaintiff to recover damages if contract breaches Statute - DAMAGES - measure and remoteness of damages in actions for breach of contract - circumstances in which costs of appealing are recoverable damages - CONTRACTS - GENERAL CONTRACTUAL PRINCIPLES - illegal and void contracts - application of section 23C(1)(a) Conveyancing Act to contract for disposal of interest in land Conveyancing Act 1919 Conveyancing (Amendment) Act 1930 LEGISLATION CITED : District Court Act 1973 Law of Property Act 1925 (Eng) Supreme Court Act 1970 Action Strength Limited v International Glass Engineering IN. GL. EN. SpA [2003] UKHL 17 Alexander v Cambridge Credit Corporation Ltd (Receivers Appointed) (1985) 2 NSWLR 685 Angell v Duke (1875) LR 10 QB 174 Arnold v National Westminster Bank Plc [1989] 1 Ch 63 Arnold v National Westminster Bank Plc [1991] 2 AC 93 Baloglow v Konstantinidis [2001] NSWCA 451 Birmingham v Renfrew (1937) 57 CLR 666 Blair v Curran (1939) 62 CLR 464 Boston v Boston [1904] 1 KB 124 Brown v Robertson (1890) 16 VLR 786 Cachia v Isaacs (1985) 3 NSWLR 366 Carter v Northmore Hale Davy & Leake (1995) 183 CLR 121 Cocking v Ward (1845) 1 CB 858 Commissioner of Australian Federal Police v Propend Finance Pty Limited (1997) 188 CLR 501 Cooke v Rickman [1911] 2 KB 1125 Cromwell v County of Sac (1876) 94 US 351 Cuzeno Pty Ltd v Powercell Pty Ltd [1999] NSWCA 344 Dalgety & Co Ltd v Gray (1919) 26 CLR 249 Daulia Ltd v Four Millbank Nominees Ltd [1978] Ch 231 Frost v Knight (1872) LR 7 Ex 111 Giumelli v Giumelli (1999) 196 CLR 101 Hadley v Baxendale (1854) 9 Ex 341; 156 ER 145 Henderson v Henderson (1843) 3 Hare 100; 67 ER 313 Hoffman v Cali (1985) 1 QdR 253 Horsey v Graham (1862) LR 5 CP 9 Horton v Jones (1935) 53 CLR 475 Howlett v Tarte (1861) 10 CBNS 813; 142 ER 673 Hoysted v Federal Commissioner of Taxation (1921) 29 CLR 537 Hoysted v Federal Commissioner of Taxation [1926] AC 155 CASES CITED : Humphries v Humphries [1910] 2 KB 531 Johnson v Perez (1988) 166 CLR 351 Jones v Baker [2002] NSWSC 89; (2002) 10 BPR 19,115 Kelly v Webster (1852) 12 CB 283 Lees v Fleming [1980] QdR 162 Linsley v Petrie [1998] 1 VLR 427 Mainline Investments Pty Ltd v Davlon Pty Ltd [1969] 2 NSWR 392 Malec v J C Hutton Pty Ltd (1990) 169 CLR 638 Mraz v The Queen (No.2) (1956) 96 CLR 62 O'Rourke v Hoeven [1974] 1 NSWLR 622 O'Toole v Charles David Pty Ltd (1991) 171 CLR 232 Pollnow v Armstrong [2000] NSWCA 245 Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589 Queensland v The Commonwealth (1977) 139 CLR 585 R v Inhabitants of the Township of Hartington Middle Quarter (1855) 4 El & Bl 780; 119 ER 288 R v Storey (1978) 140 CLR 364 Radford v de Froberville [1977] 1 WLR 1262 Redken Laboratories (Aust) Pty Ltd v Docker (No.2) [2000] NSWCA 235 Riches v Hogben [1986] 1 QdR 315 Rogers v R (1994) 181 CLR 251 Selkirk v Romar Investments Limited [1963] 1 WLR 1415 Somodaj v Australian Iron and Steel Ltd (1963) 109 CLR 285 Thoday v Thoday [1964] P 181 Tiufino v Warland [2000] NSWCA 110; (2000) 50 NSWLR 104 Vogan & Co v Oulton (1898) 79 LT 384 Waddington v Silver Chain Nursing Association (1998) 20 WAR 269 Waterford v The Commonwealth (1987) 163 CLR 54 Wright v Madden [1992] 1 QdR 343 Wroth v Tyler [1974] Ch 30 Yates Property Corporation Pty Ltd v Boland [2000] FCA 1106; (2000) 179 ALR 664 PARTIES : Powercell Pty Limited - Plaintiff Cuzeno Pty Limited - Defendant FILE NUMBER(S) : SC 3592/97 COUNSEL : J M Ireland QC; C Dimitriadis - Plaintiff T G R Parker; R E Steele - Defendant SOLICITORS : Willis & Bowring - Plaintiff Michie Shehadie & Co - Defendant POWERCELL PTY LIMITED v CUZENO PTY LIMITED 3592/97 INDEX Paragraph No . The Initial Joint Venture Arrangements................................................................................................1 Powercell Pre-Sells Nine Home Units....................................................................................................5 Source of the Present Dispute...............................................................................................................11 The Purchasers' Litigation.....................................................................................................................13 The Proceedings Now Before the Court..............................................................................................15 The Issues in 3592 of 1997.....................................................................................................................18 The Grasso Litigation – Trial Judge's Decision..................................................................................21 Part Performance of Oral Contract as a Basis for Awarding Damages............................................29 The Grasso Litigation on Appeal..........................................................................................................32 Issue Estoppel – The Principles............................................................................................................40 From Which Decision Might Estoppels Emerge – Trial Judge, Court of Appeal, or High Court.........................................................................................................43 The Legal Foundation of a Decision....................................................................................................46 Issue Estoppel and Errors in Judgments.............................................................................................59 Alleged Estoppel 1 – Terms of Agreement.........................................................................................62 Alleged Estoppel 2 – Absence of Necessary Parties to Contract...................................................64 Alleged Estoppel 3 – Voidness for Uncertainty.................................................................................66 Alleged Estoppel 4 – Take Over all Nine Contracts, or Only Four..................................................70 Alleged Estoppel 5 – Condition Precedent Not Complied With......................................................71 Alleged Estopels 6 & 7 – Causation of Damages and Mitigation of Loss.....................................72 Alleged Estoppel 8 – Lack of Writing..................................................................................................73 "Special Circumstances" Exception to Issue Estoppel......................................................................77 Section 23C(1)(a) Conveyancing Act 1919..........................................................................................83 Findings on Facts – Terms of Contract Between Cuzeno and Powercell.......................................91 Application of Section 54A..................................................................................................................108 Powercell's Estoppel Claim..................................................................................................................130 Findings on Facts – Events Relevant to Breach and Causation of Damage................................139 Proceedings by Purchasers Other than Grasso................................................................................155 Agreed Facts Concerning Quantum..................................................................................................156 Conclusion Concerning Breach and Causation...............................................................................157 Contract to Indemnify?........................................................................................................................160 The Appeals Concerning Scattergood and Cannazarro.................................................................164 Principles Concerning Remoteness of Damage and Costs of Appealing....................................165 The Scattergood Appeal.....................................................................................................................172 The Cannazarro Appeal......................................................................................................................182 Orders....................................................................................................................................................189 IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION EQUITY LIST CAMPBELL J 22 JULY 2003 3592/97 POWERCELL PTY LTD v CUZENO PTY LTD JUDGMENT HIS HONOUR: The Initial Joint Venture Arrangements 1 Powercell Pty Ltd ("Powercell") is a company of which Mr Stephen Ward was, at all relevant times, Managing Director. Cuzeno Pty Ltd ("Cuzeno") is a company which at all relevant times was controlled by Mr George Jabbour. At the beginning of 1996 Cuzeno owned two houses located at 2 and 4 Cairo Street, Rockdale. Cuzeno had a plan to redevelop the site of those two houses as a block of home units containing 18 units. 2 Mr Chris Savelle was a real estate agent whose business included the identification of sites which were capable of redevelopment and the sale of those sites to developers. He told Mr Ward that Mr Jabbour had a development site at Rockdale. In February 1996 Mr Jabbour put to Mr Ward a proposal that they enter a joint venture, on the basis that Mr Ward would organise the finance and carry out the construction, Mr Jabbour would make the land available as collateral, and the units would be divided between them equally, so that each of them received nine. Mr Ward set about obtaining an offer of finance from his bank. 3 On 29 March 1996 Mr Jabbour and Mr Ward caused two documents to be executed. The first was a contract for the sale of land, whereby Cuzeno agreed to sell to Powercell an undivided half share in 2 and 4 Cairo Street, Rockdale. There was no deposit payable, and the price was stated as being $300,000. 4 The second document was a building contract between S J Ward Pty Ltd (another company controlled by Mr Ward, and one which held a builders licence) and Cuzeno, whereby S J Ward Pty Ltd agreed to construct the 18 home units. That contract had two pages of special conditions, which were executed under seal by Powercell. Those special conditions made provision for the following matters. · Cuzeno warranted that it had obtained development approval and building approval · completion of the contract for sale of land was not to take place until the building contract had been completed · Cuzeno would allow the land to be mortgaged for the purpose of raising finance for construction of the works, and Powercell would be responsible for making arrangements for financing of the works · on completion of the land contract the 18 units would be partitioned between Cuzeno and Powercell, so that each obtained nine units, and so that the nine units retained by Cuzeno would be as near as possible of equal value to the nine units retained by Powercell · Powercell was to ensure that, when that partitioning took place, the nine units which were transferred to Cuzeno were free of any charge, encumbrance or mortgage or any other debt · any mortgage which Cuzeno entered would be one which did not contain any personal covenants, and where Cuzeno's liability was limited to what was obtained by realising the nine units which Powercell would receive upon partition · Cuzeno would accept the nine units transferred to it under the deed of partition in complete settlement of Powercell's obligations under both the building contract, and the contract for the sale of land. Powercell Pre-Sells Nine Home Units 5 Mr Norm Sarrif is a real estate agent who worked, in some way not gone into in the evidence, with Mr Savelle. Mr Sarrif told Mr Ward that he had nine buyers for the units which Mr Ward's company would obtain from the joint venture, if Mr Ward wanted to pre-sell those units. Mr Savelle, purporting to act on behalf of Cuzeno, reached agreement with Mr Ward about which nine units to be constructed would be retained by Cuzeno, and which nine would pass to Powercell. Mr Jabbour must have come to know what Mr Savelle did in this respect, and never denied Mr Savelle's authority to do so. 6 Over the period 18 April 1996 to 15 May 1996 Powercell exchanged contracts with nine different purchasers, to sell the nine units which it would acquire on completion of the building, and division of the units between Powercell and Cuzeno. The contracts were as follows: Purchaser Date of contract Price Deposit paid Grasso 18 April 1996 170,000 8,500 Scattergood & Morgan 1 May 1996 170,000 5,000 Cannazarro, Giacca, Grasso and Grasso 18 April 1996 170,000 8,500 Ayoub 1 May 1996 165,000 5,000 Yassmin 2 May 1996 165,000 5,000 C & C Huon Holdings Pty Ltd 1 May 1996 170,000 8,500 Markovski 29 April 1996 165,000 5,000 Karavelas 1 May 1996 170,000 8,500 Azar 15 May 1996 160,000 5,000 7 Each of the contracts was in the form published by the Law Society of New South Wales and the Real Estate Institute of New South Wales. Each made provision for the deposit which was paid to be released to the vendor. Each contained a limited guarantee, in the following form: "The Guarantors Steve Ward and Julianne Ward of 15 Phillips Road Kogarah, in consideration of the purchasers entering into this agreement, hereby jointly and severely guarantee the due and punctual performance by the vendor of its obligations to refund the deposit paid by the purchaser to the vendor in any circumstances where the purchaser is entitled to have the deposit refunded to it." 8 Each of the contracts except those entered with Markovski and Azar contained a special condition number 1 which said: "The building in which the said Unit is situated is in course of construction … and this contract and completion hereof is subject to and conditional upon the due approval by the Council of the Shire of Rockdale and of the registration by the Registrar General of the Strata Plan provided that if the Strata Plan is not registered on or before the expiration of twelve (12) months from the date hereof, then either party may by notice in writing to the other rescind this Contract whereupon all monies paid by the Purchaser hereunder shall be refunded to the Purchaser and thereafter neither party shall have any action claim or demand against the other arising out of this Contract or its rescission. In any event the Vendor shall not be otherwise liable for any delay in such lodgement or registration. 9 In the Markovski contract, this special condition was modified so that it was only the purchaser who had a right of rescission if the strata plan was not registered within 12 months from the date of contract. In the Azar contract, the clause was modified so that it was only the purchaser who had a right of rescission, and that right of rescission would arise if the strata plan was not registered on or before the expiration of six months from the date of the contract. 10 The total sale price for the nine units was $1,505,000. Mr Ward had made arrangements to borrow $1.3 million dollars from his bank, which included $80,000 for interest which would accrue while the project was constructed. Mr Ward calculated that these contracts would enable him to perform his obligation to pass title of nine units to Cuzeno, once the building was completed, free of any mortgage or other encumbrance. Source of the Present Dispute 11 Various difficulties arose concerning the project – it turned out that development approval had not been obtained, and there was some delay in obtaining a rezoning of the site which was a necessary precondition for the development approval. Also, some difficulties arose from Mr Ward's bank submitting security documentation which called on Cuzeno to undertake more extensive obligations concerning the financing of the project than Cuzeno and Powercell had agreed, and than Powercell and its bank had agreed would be the terms of the loan. On 3 July 1996 Mr Jabbour told Mr Ward that he did not want to go ahead with the joint venture. 12 It is common ground between Powercell and Cuzeno that over the period 17 to 19 July 1996 an agreement was arrived at between them which terminated the previous joint venture, and provided for the block of units on the Cairo Street site to be constructed by Mr Ward's company S J Ward Pty Ltd on the basis that it would be paid a sum of money for carrying out the construction work, rather than that it would cause Powercell to receive home units in specie. The dispute between Powercell and Cuzeno concerns the terms of what was agreed, the legal effect of what was agreed, and what it is now open for Cuzeno to allege, either by way of factual submission or legal argument, concerning that agreement. The Purchasers' Litigation 13 One outcome of the agreement entered in July 1996 is that Powercell was unable to carry out any of the contracts it had entered to sell units in the building. In due course, Powercell was sued by six of those purchasers for breach of its contract to sell a unit. Five of those purchasers have recovered a judgment and order for costs against Powercell. The claim of the sixth purchaser is not yet determined. In each of the six actions brought by the purchasers, Powercell filed a cross-claim, seeking indemnity from Cuzeno in relation to any liability which Powercell was found to have to the purchaser. In the action brought by Grasso, that cross-claim went to trial in the District Court, and resulted in Powercell being entitled to be indemnified by Cuzeno for Powercell's liability to Grasso. Cuzeno appealed against that decision to the Court of Appeal, unsuccessfully. Cuzeno then sought special leave to appeal to the High Court of Australia against that decision of the Court of Appeal, and again was unsuccessful. 14 In the other four actions by purchasers which have gone to trial, the claim by the purchaser against Powercell for breach of contract was separately determined to the cross-claim brought by Powercell against Cuzeno. The Proceedings Now Before the Court 15 There are now listed before me six separate proceedings. The first of them, number 3592 of 1997, is one brought by Powercell against Cuzeno. In it, Powercell alleges an agreement in the following terms: "On or about 19 July 1996, the Plaintiff and the Defendant agreed that, in consideration of the joint venture agreement being terminated, and of the Plaintiff entering into a contract with the Defendant to construct the home unit development ("the building contract"), the Defendant would take over the Plaintiffs' obligations under the contracts between the Plaintiff and the purchasers, and would indemnify the Plaintiff in respect of any liability which the Plaintiff might have to the purchasers under the Plaintiff's contracts ("the July agreement")." 16 The plaintiff alleges that in breach of that agreement Cuzeno has failed to take over Powercell's obligations under the contracts between the plaintiff and its purchasers, and has refused to indemnify Powercell in respect of its liability to purchasers under those contracts. Powercell seeks damages in relation to: (a) the damages which have been awarded to each of the purchasers who has so far recovered a judgment against Powercell, (b) the costs which have been awarded to each of the purchasers who have so far recovered a judgment against Powercell, (c) Powercell's own legal costs of running the claim brought by each of those purchasers against Powercell, (d) certain costs incurred by Powercell in connection with appeals brought against some of those judgments. Powercell also seeks an order that it is entitled to an indemnity against any liability which it might have to purchasers who have not yet recovered a judgment against it. 17 The other five proceedings which are listed are each proceedings which have been removed into the Supreme Court from either the District Court or the Local Court. In each case, they are the cross-claim which Powercell brought against Cuzeno in an action brought by a purchaser against Powercell, alleging breach of contract. Powercell accepts that the outcome of each of those cross-claims will be determined by the outcome in 3592 of 1997. The Issues in 3592 of 1997 18 Not all of the issues which arose on the pleadings in 3592 of 1997, were ultimately pressed. However, it is convenient to state the issues as they arise on the pleadings. (1) Cuzeno denies that the agreement made on 19 July 1996 was in the terms which I have set out in paragraph 15 above, (2) Cuzeno says that the purchasers were necessary parties to any contract such as that which was alleged, and hence any such contract was of no legal effect, (3) The contract is void for uncertainty, (4) The agreement made was one to take over Powercell's obligations under four only of the contracts Powercell had made with the purchasers, not all nine contracts, (5) Cuzeno agreed to take over Powercell's obligations under the contracts only on condition that there were and would be no circumstances which would cause difficulty in obtaining specific performance of those contracts, yet there were circumstances which would have caused difficulty in obtaining specific performance, (6) Causation of damage is denied, (7) Powercell has failed to mitigate its loss, (8) The contract on which Powercell sues was not in writing, and consequently is unenforceable under section 54A Conveyancing Act 1919 . Section 54A, re-enacting part of the Statute of Frauds, provides: "(1) No action or proceedings may be brought upon any contract for the sale or other disposition of land or any interest in land, unless the agreement upon which such action or proceedings is brought, or some memorandum or note thereof, is in writing, and signed by the party to be charged or by some other person thereunto lawfully authorised by the party to be charged" (9) The dispositions of interests in the property purportedly effected by that contract were not in writing and signed by Powercell or Powercell's agent duly authorised in writing, and accordingly under section 23C(1)(a) Conveyancing Act 1919 those purported dispositions were invalid, and consequently the alleged contract is unenforceable. Section 23C provides: "(1) subject to the provisions of this Act with respect to the creation of interests in land by parol - (a) no interest in land can be created or disposed of except by writing signed by the person creating or conveying the same, or by the person's agent thereunto lawfully authorised in writing, or by will, or by operation of law" (10) Insofar as Powercell seeks damages in connection with the claim of Grasso, Powercell cannot recover more than has already been awarded to it by the District Court in connection with that claim, 19 In reply, Powercell says that the judgment in proceedings 2325 of 1997 in the District Court of New South Wales (ie, the judgment in the cross-claim which was brought in the Grasso proceedings) has resulted in there being an issue estoppel. The reply has some unclarity of expression about just what it is that this issue estoppel exists in relation to, but the way the case was fought treated the reply as alleging that all the arguments listed in paragraph 18 above, down to and including the point based upon section 54A Conveyancing Act 1919, were precluded by the issue estoppel. The reply also contended that the point based upon section 23C(1)(a) was one not open to Cuzeno, because it had not been pleaded in the District Court proceedings and, under the principle in Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589 it could not be raised now. 20 Cuzeno filed a rejoinder. It alleged that there was insufficient identity of issues between the Grasso proceedings, and 3592 of 1997, for an issue estoppel to arise. Alternatively, it alleged that it would be unjust in the circumstances of the case to hold the defendant to an issue estoppel. The rejoinder also denies the applicability of the Anshun principle to the facts of this case, and says that (alternatively) there are special circumstances which would prevent it from applying. The Grasso Litigation – Trial Judge's Decision 21 Mr Grasso took proceedings number 2325 of 1997 in the District Court of New South Wales at Sydney against Powercell, and Mr and Mrs Ward. Powercell filed a cross-claim against Cuzeno and Mr Jabbour in those proceedings. That cross-claim was, by consent, heard separately. On 20 February 1998 his Honour Judge Puckeridge entered judgment in favour of Mr Grasso in the sum of $33,600 plus costs. Mr Grasso's costs of that action were compromised at $18,000. 22 His Honour Judge Williams decided the cross-claim on 27 July 1998, awarding Powercell $73,059. That sum was made up of the $33,600 damages which Powercell had been held liable to pay Mr Grasso, Mr Grasso's costs of $18,000, and Powercell's own costs of that matter of $21,459. 23 The Amended Cross-Claim in the Grasso litigation pleaded the agreement on which Powercell, the cross-claimant, sued as follows: "On or about 19 July 1996, the Cross-Claimant and the First Cross-Defendant agreed that, in consideration of the Joint Venture Agreement being terminated, and of the Cross-Claimant entering into a contract with the First Cross-Defendant to construct the home unit development (called "the Building Contract"), the First Cross-Defendant would take over the Cross-Claimant obligations under the Contract between the Cross-Claimant and the Plaintiff and would indemnify the Cross-Claimant in respect of any liability which the Cross-Claimant might have to the Plaintiff under that Building Contract ("the July Agreement")." 24 After particularising that agreement as being an oral one, the Amended Cross-Claim alleged that "the First Cross-Defendant partly performed the Joint Venture July Agreement with the Cross-Claimant" and that "the Cross-Claimant partly performed the July Agreement." The breach alleged was failure by Cuzeno to take over Powercell's obligations under the contract which Powercell had entered with Mr Grasso. 25 The Notice of Grounds of Defence to that Amended Cross Claim included a denial of the agreement alleged, and an alternative allegation that any such agreement was not in writing and signed by Cuzeno, or some person thereunto lawfully authorised and consequently, by section 54A of the Conveyancing Act 1919, was not enforceable against Cuzeno. 26 His Honour Judge Williams records, (at page 4 of his judgment) the way that Powercell had put its case to him: "That agreement is alleged to be composed of three parts. Firstly, an agreement to rescind the Joint Venture. Secondly, an agreement to enter into a contract to build the units between Cuzeno and Powercell, with Powercell being simply the builder. Thirdly Cuzeno agreeing to take over as vendor the nine contracts that Powercell had exchanged in regard to the units that were going to be its property under the rescinded agreement. Powercell alleges that between the 18th & 19th July 1996 this new agreement was entered into." 27 After considering the evidence, his Honour concluded, at page 9: "I am also satisfied on the balance of probabilities that there was an agreement between Mr Jabbour and Mr Ward for Mr Jabbour to take over the nine contracts that Powercell had entered into and which by the 19th July 1996 it could no longer complete." In this passage, the reference to "for Mr Jabbour to take over the nine contracts" is clearly intended as meaning "for Mr Jabbour's company Cuzeno to take over the nine contracts" . His Honour continued, at pages 10-11: "I find on the balance of probabilities that when it became apparent in July 1996 that, for one reason or another the parties were unable to agree on the financial situation, that in consideration for revoking the contract for the sale of the Cairo Street property on 29th March 1996, and the loan documentation from the bank of both 28th March 1996 and 18th July 1996 and in effect terminating the joint venture, Powercell would build the building for an agreed price which was the price set out in the agreement signed on 19 July 1996, and that Cuzeno would take over as vendor on any contract entered into by Powercell in regard to the nine units it had purported to sell where the purchaser insisted on the contract being performed." 28 His Honour Judge Williams expressed "considerable doubt that the agreement that I have found existed is an agreement for the sale or other disposition of land and or any interest in land" and hence took the view that Cuzeno's defence based on section 54A Conveyancing Act 1919 failed. His Honour held that, even if he were wrong in taking that view, there had been part performance of the agreement. He went on, on that basis, to make an award of damages for breach of contract. Part Performance of Oral Contract as a Basis for Awarding Damages 29 In one respect the trial before his Honour Judge Williams was conducted, by counsel on both sides, on a fundamentally mistaken basis. Part performance is a doctrine invented by the Chancery Court, and provides a basis upon which a court of Equity will provide equitable relief concerning a contract, when that contract is unenforceable by reason of non-compliance with the Statute of Frauds. The equitable relief most commonly provided when acts of part performance of a contract are established is specific performance of that contract. It may be that part performance can also provide a basis for other equitable remedies, such as an injunction to enforce a provision of the contract (Meagher, Gummow & Lehane, Equity Doctrines and Remedies, 4th edition, paragraph 20-220), or some other equitable remedy (Jones v Baker [2002] NSWSC 89; (2002) 10 BPR 19,115). However, an action for damages for breach of contract is a common law action, to which part performance is irrelevant. 30 These principles are authoritatively adopted in New South Wales. In O'Rourke v Hoeven [1974] 1 NSWLR 622 at 626 Glass JA (with whom Reynolds and Hutley JJA agreed) said: "The doctrine of part performance was developed in the Equity courts and has never been available in an action at law for damages to excuse absence of the writing which the Statute of Frauds demanded. As Dixon J, as he then was, said in J C Williamson Ltd v Lukey and Mulholland (1931) 45 CLR 282, at p 297. "An action of damages could not but fail, because, when a common law remedy is sought, part performance never did and does not now afford an answer to the Statute of Frauds ... if the doctrine is not confined to cases in which a decree might be made for the specific performance of the contract, it is at least true that the doctrine arose in the administration of that relief and has not been resorted to except for that purpose." (and see per Starke J and Evatt J (1931) 45 CLR 282, at pp 294, 306.) The position is in no way altered by the concurrent administration of law and equity directed by Pt IV of the Supreme Court Act . This is not a fusion of two systems of principle but of the courts which administer the two systems: Britain v Rossiter (1879) 11 QBD 123, at p 129. The rules continue to be influenced by the system to which they belong, so as to disentitle a party claiming damages at law from praying in aid an exemption from writing on equitable grounds." 31 Before 1858 the Court of Chancery might have had a limited jurisdiction to award damages in lieu of, or in addition to, specific performance (Meagher, Gummow and Lehane, Equity Doctrines and Remedies, 4th edition, paragraph 23-025). In 1858 Lord Cairns' Act conferred on the Court of Chancery jurisdiction to award damages either in addition to, or in substitution for, the grant of an injunction for specific performance; that provision now has its equivalent in New South Wales in section 68 Supreme Court Act 1970 (NSW). However there was no equivalent of that section in the District Court Act in 1998 (or now). The Supreme Court's powers under section 68 Supreme Court Act are conferred on the District Court through section 137 District Court Act, but are exercisable only in relation to actions for an injunction or specific performance where jurisdiction is conferred on the District Court by some other section of the District Court Act. No provision of the District Court Act enabled it to grant specific performance of a contract like that which Williams DCJ held existed between Powercell and Cuzeno. Thus, the award of damages for breach of contract because there were sufficient acts of part performance was an error. The Grasso Litigation on Appeal 32 Cuzeno appealed against his Honour Judge Williams' decision to the Court of Appeal. The appeal failed: Cuzeno Pty Ltd v Powercell Pty Ltd [1999] NSWCA 344. 33 Cuzeno's first argument in the Court of Appeal attacked the trial judge's factual findings, including his findings about the terms of the contract between Powercell and Cuzeno. That argument was rejected. 34 The remaining submissions on the appeal assumed that the trial judge's factual findings were correct, but made arguments about their legal consequences. One such argument was that the agreement between Cuzeno and Powercell was one which sought to effect a novation of the underlying contracts, and hence was ineffective without the participation of the purchaser. That argument was rejected. Priestley JA (with whom Stein JA and Davies AJA agreed) said, at [23]-[24]: "I do not think this argument is correct. I do not think there is any rule of contract law which prevented Cuzeno from agreeing with Powercell to take over Powercell's contract with Mr Grasso. Such an agreement would bind Cuzeno to take over, that is become the vendor in, the contract with Mr Grasso, and to take all necessary steps to bring that about. If Cuzeno should prove to be unable to achieve the result it had agreed with Powercell, that would mean it would be in breach of its contract with Powercell. In other words, by such an agreement, Cuzeno was assuming the risk that Mr Grasso might not agree to contract with it on the same terms as those in the contract with Powercell and leaving itself open to the consequences if he did not. There is a further reason in the facts of the present case which makes the submission even less arguable. The facts show that Mr Grasso's solicitors were pressing Cuzeno to enter into the contract with Mr Grasso on the same terms as those in the Powercell contract. Cuzeno chose not to enter into such a contract. It could have done so. Thus, in fact, it was possible for the arrangement made between Powercell and Cuzeno to be carried out in full. Powercell and Cuzeno had agreed to do something which it was lawful for them to agree upon and which could have been done had Cuzeno not chosen itself not to carry out its contracted arrangement." 35 Another argument on the appeal was that the trial judge had erred in holding that section 54A of the Conveyancing Act 1919 did not apply, and in holding that, even if section 54A applied, there were sufficient acts of part performance to enable Powercell's claim to succeed. Priestley JA dealt with this argument at [26]-[29]: "It seems to me likely that s54A was applicable to the arrangement found by the trial judge and I will assume in Cuzeno's favour, without deciding, that that was so. That brings me to the submission that the judge was wrong in holding there had been part performance. The first point taken on Cuzeno's behalf on this aspect of the case was that Powercell's claim was for damages at law but the doctrine of part performance was only available in equity and could not support an action for damages at law. O'Rourke v Hoeven [1974] 1 NSWLR 622 was relied on. This point was not taken at the trial and in the appeal Powercell argued that Cuzeno should not be allowed to rely on it. It seems clear that had the point been taken at the trial Powercell's conduct of its claim would have been very different. In accordance with what was said in O'Rourke v Hoeven by Glass JA, with whom Reynolds and Hutley JJA agreed (at 625 and 626) the only proper way for Powercell to have relied on the doctrine of part performance would have been to claim specific performance of its agreement with Cuzeno and damages in lieu of specific performance. To do this, Powercell may have needed to seek to have its claim transferred to the Supreme Court, because s134 of the District Court Act as it stood at relevant times may not have conferred sufficient jurisdiction in equity upon the District Court to deal with such a claim. Pleadings would have had to be amended; it would have been prudent also for Powercell to consider whether it could claim that Cuzeno was estopped by its conduct from relying on s54A, and whether such an estoppel should be classified as a common law or equitable estoppel, or whether it should rely on equitable fraud as preventing Cuzeno from relying on s54A, and if it were to seek to rely on either of the latter two doctrines whether only the Supreme Court would be a proper venue. The questions for Powercell to consider would have been serious and difficult. Cuzeno, by not raising the point, left the trial judge to resolve what would still have been an ultimate issue, even had the technical difficulties explained in O'Rourke v Hoeven been raised. That is, Cuzeno left it to the judge to decide the substantive question whether the facts before him justified the conclusion that there had been part performance, within the meaning of the doctrine of part performance, without the complications that would have followed from raising the O'Rourke v Hoeven point. In these circumstances it seems to me that the rule stated in a long line of authoritative cases, prominent among which are Suttor v Gundowda Pty Ltd (1950) 81 CLR 418 and Coulton v Holcombe (1986) 162 CLR 1, should be applied and this court should not allow Cuzeno to raise the point in this court. 36 Priestley JA went on to hold that, when the question of whether there had been acts of part performance had been left to the trial judge in these circumstances, he had correctly come to the conclusion that the facts showed that there were sufficient acts of part performance. 37 Another argument advanced on the appeal concerned whether Cuzeno's breach of contract had caused the damage which the trial judge had quantified against Cuzeno. Priestley JA rejected an argument that Cuzeno was not responsible for the damage suffered by Powercell at the suit of Mr Grasso, and rejected an argument that Powercell had failed to mitigate its damage. Priestley JA said, at [36]: "It was said that it was likely, as at August 1996, that in due course a clause in the contract between Powercell and Mr Grasso which entitled either party to rescind if the building development was not complete by April 1997, should have been availed of by Powercell. This submission overlooks the fact that the action taken by Powercell in writing to purchasers in terms of the letter of 1 August 1996 was a way suggested by Mr Jabbour to Mr Ward of carrying out their new agreement. In such circumstances, the duty to mitigate suggested on behalf of Cuzeno simply did not arise." 38 The final submission in the appeal, concerning the enforceability of the contract, arose from the guarantee, in the contract between Powercell and Mr Grasso, in the form I have set out in paragraph 7 above. Concerning that clause, Priestley JA said at [37]-[38]: "It was submitted that the agreement by Cuzeno to take over Powercell's contract with Mr Grasso made no provision for what should happen about this clause. The result was said to be that the new agreement between Powercell and Cuzeno was incomplete and unenforceable. I do not think this conclusion follows from the fact that the parties did not refer to special condition 20 in making their new agreement. No attention appears to have been given to this point in the evidence before the trial judge. On the evidence as it was left, it seems to me that the parties envisaged that their agreement would be carried out by the substitution of Cuzeno as the vendor for Powercell in Powercell's contract with Mr Grasso and that, in the absence of any agreement about an alteration to special condition 20 the guarantee of Mr and Mrs Ward would have remained in the new agreement which Cuzeno was undertaking to make with Mr Grasso. I do not think this point avails Cuzeno in the appeal." 39 An application to the High Court of Australia for special leave to appeal against that decision of the Court of Appeal was argued on 13 October 2000, resulting in special leave being refused. The following exchange occurred in the course of that application. MR PARKER: May I say one further thing on the overall significance of this to the parties and that is this. There are five other actions between these parties and the outcome of this litigation and the outcome of these points may be determinative therefore, not just --- KIRBY J: You say "may". I notice that submission. I am not at all certain that that is a --- McHUGH J: No, neither am I. MR PARKER: I can only point to the fact that my friends have put a point by way of res judicata on that. KIRBY J: That will take its course in the other proceedings. MR PARKER: Yes KIRBY J: We cannot solve everything. We cannot even solve all the applications for special leave. We certainly cannot solve your future litigation. MR PARKER: Your Honours, I think that --- KIRBY J: I did understand the basis on which you put that up. You put it up as a reason why this case was elevated out of its own particular economic facts. MR PARKER: It is not just a single case. Yes, your Honour. KIRBY J: I am not at all convinced that it is." Issue Estoppel – The Principles 40 In R v Storey (1978) 140 CLR 364 at 378-379 Gibbs J said: "Although it appears that the phrase "issue estoppel" was first used by Higgins J in Hoysted v Federal Commissioner of Taxation (1921) 29 CLR 537, at p 561 the doctrine which the phrase describes is very much older, as Lord Reid pointed out in Carl Zeiss Stiftung v Rayner & Keeler Ltd [No 2 ] [1967] 1 AC 853, at pp 913-914. The principle was succinctly stated by Dixon J in Blair v Curran (1939) 62 CLR 464, at p 531: "A judicial determination directly involving an issue of fact or of law disposes once for all of the issue, so that it cannot afterwards be raised between the same parties or their privies." Similarly Lord Denning MR said in Fidelitas Shipping Co Ltd v V/O Exportchleb [1966] 1 QB 630, at p 640 in a passage cited by Lord Wilberforce in Carl Zeiss Stiftung v Rayner & Keeler Ltd [No 2] [1967] 1 AC, at p 964: " ... once an issue has been raised and distinctly determined between the parties, then, as a general rule, neither party can be allowed to fight that issue all over again ... " The issue determined by the prior decision, and as to which an estoppel is raised, must have been essential to the conclusion, in the sense that to deny the correctness of the determination of that issue would necessarily be to deny the correctness of the decision itself: Queensland Trustees Ltd v Commissioner of Stamp Duties (Q) (1956) 96 CLR 131, at p 152. The estoppel only extends to what is "legally indispensable to the conclusion", that is to matters which are "in point of law the essential foundation or groundwork of the judgment, decree or order", and not to findings which concern only evidentiary facts, however important to the decision: see Blair v Curran (1939) 62 CLR, at pp 532-533. In order to ascertain what issues were necessary to be decided, and were in fact decided, in arriving at a judgment, it is permissible to look not only at the judgment and the reasons given for it, but at the pleadings and the evidence and indeed at any material which is relevant: see Jackson v Goldsmith (1950) 81 CLR 446, at p 467 and Carl Zeiss Stiftung v Rayner & Keeler Ltd [No 2] [1967] 1 AC, at p 965." 41 The classic statement of the nature and content of the doctrine of issue estoppel is that of Dixon J in Blair v Curran (1939) 62 CLR 464, at pp 531-533, as follows: "A judicial determination directly involving an issue of fact or of law disposes once for all of the issue, so that it cannot afterwards be raised between the same parties or their privies. The estoppel covers only those matters which the prior judgment, decree or order necessarily established as the legal foundation or justification of its conclusion, whether that conclusion is that a money sum be recovered or that the doing of an act be commanded or be restrained or that rights be declared. The distinction between res judicata and issue estoppel is that in the first the very right or cause of action claimed or put in suit has in the former proceedings passed into judgment, so that it is merged and has no longer an independent existence, while in the second, for the purpose of some other claim or cause of action, a state of fact or law is alleged or denied the existence of which is a matter necessarily decided by the prior judgment, decree or order. Nothing but what is legally indispensable to the conclusion is thus finally closed or precluded. In matters of fact the issue estoppel is confined to those ultimate facts which form the ingredients in the cause of action, that is, the title to the right established. Where the conclusion is against the existence of a right or claim which in point of law depends upon a number of ingredients or ultimate facts the absence of any one of which would be enough to defeat the claim, the estoppel covers only the actual ground upon which the existence of the right was negatived. But in neither case is the estoppel confined to the final legal conclusion expressed in the judgment, decree or order. In the phraseology of Coleridge J in R v Inhabitants of the Township of Hartington Middle Quarter (1855) 4 El & Bl 780, at p 794 [119 ER 288, at p 293], the judicial determination concludes, not merely as to the point actually decided, but as to a matter which it was necessary to decide and which was actually decided as the groundwork of the decision itself, though not then directly the point at issue. Matters cardinal to the latter claim or contention cannot be raised if to raise them is necessarily to assert that the former decision was erroneous. In the phraseology of Lord Shaw, 'a fact fundamental to the decision arrived at' in the former proceedings and `the legal quality of the fact' must be taken as finally and conclusively established ( Hoysted v Commissioner of Taxation [1926] AC 155, at p 165). But matters of law or fact which are subsidiary or collateral are not covered by the estoppel. Findings, however deliberate and formal, which concern only evidentiary facts and not ultimate facts forming the very title to rights give rise to no preclusion. Decisions upon matters of law which amount to no more than steps in a process of reasoning tending to establish or support the proposition upon which the rights depend do not estop the parties if the same matters of law arise in subsequent litigation." 42 Some understanding of the meaning of the word "cardinal" in the second paragraph just quoted from Dixon J might be derived from the judgment of Starke J in the same case: "A judgment is conclusive evidence not merely of the facts directly decided but of those facts which are necessary steps to the decision – so cardinal to it that without them it cannot stand." ( Blair v Curran (1939) 62 CLR 464, at 510) From Which Decision Might Estoppels Emerge – Trial Judge, Court of Appeal, or High Court 43 Spencer Bower, Turner and Handley, Res Judicata, 3rd edition, paragraph [60] says: "Where a tribunal with original jurisdiction has granted, or refused, the relief claimed and an appellate tribunal reverses the judgment or order at first instance, the former decision, until then conclusive, is voided ab initio ( Railways Commissioner (NSW) v Cavanough (1935) 53 CLR 220; and D M Gordon "Effect of Reversal of Judgment " (1958) 74 LQR 517 at 518-21) and replaced by the appellate decision, which becomes the res judicata between the parties. Even if the appeal fails the operative decision becomes that of the appellate court which replaces the earlier decision as the source of any estoppels ( Wishart v Fraser (1941) 64 CLR 470; R v Marks (1981) 147 CLR 471 at 476.)" 44 Even though the appellate decision is the source of any estoppels, this does not necessarily mean that the content of any estoppels is derived solely from the appellate judgment. In the present case, where the Court of Appeal's decision concerning the fact finding of the trial judge was to effect that no reason had been shown to doubt it, it is to the judgment of the trial judge that one must look for the content of the findings on factual issues litigated between the parties, which might give rise to an estoppel. If it were to happen that, in the course of an appellate court giving its own account of the facts of a case, there was any difference between that account and the findings of the trial judge, it would be the account of the appellate court which should be looked to, on any matter where there is any such difference, for the content of any estoppels concerning factual issues. In carrying through the exercise of identifying the content of any issue estoppels, whether on factual matters, legal matters, or mixed questions of fact and law, one question to be asked is, "what are the findings which the course of the litigation, considered as a whole, has resulted in". There is then a further question of whether each of those findings is of a type which gives rise to an issue estoppel. 45 Cuzeno submits that the exchange between Mr Parker and McHugh and Kirby JJ on the application for special leave to appeal shows that their Honours were of the view that the outcome of the Grasso litigation would not be determinative of whether Cuzeno was liable to indemnify Powercell for its losses concerning other purchasers, and that that view is a matter which I should take into account in determining what issue estoppels arise from the Grasso litigation. I leave to one side whether the exchange between Mr Parker and McHugh and Kirby JJ should be read in the way for which Cuzeno contends. As a matter of principle, that exchange in the High Court does not enter into any consideration of what, if any, issue estoppels arise from the course of the Grasso litigation. The only issue which the High Court was deciding, on that occasion, was whether a case for granting special leave to appeal had been made out. Their Honours made no decision on the facts or law of the issues litigated in the Grasso litigation. The Legal Foundation of a Decision 46 Some assistance can be provided from the case law in understanding the statement of Dixon J in Blair v Curran that a judicial determination concludes "those matters which the prior judgment, decree or order necessarily established as the legal foundation or justification of its conclusion". All cases of issue estoppel are ones where two decisions of courts are involved – I will adopt the convention of referring to the decision from which the estoppel is said to arise as "the earlier decision", and the decision in which it is contended that estoppel should operate as "the later decision". 47 R v Inhabitants of the Township of Hartington Middle Quarter (1855) 4 El & Bl 780; 119 ER 288 was a case where, in the earlier decision, Justices had ordered the removal of two children to Hartington Middle Quarter, on the basis that they were the "lawful children" of two named people, and that the father of the children was settled in that township. In the later decision, the question at issue was whether that township was the place of settlement of the mother of the children (who by this time had become a lunatic). Coleridge J held that the earlier decision necessarily decided the place of settlement of the father, and the marriage of the father with the mother. There was, therefore, an estoppel concerning those two facts. There being no evidence of any subsequently acquired settlement on the part of the mother, the earlier decision necessitated the conclusion that the place of settlement of the mother was in that township. 48 Hoysted v Federal Commissioner of Taxation [1926] AC 155 concerned the application of federal land tax to land in a deceased estate. The relevant legislation allowed a deduction to each of several "joint owners" of land. In the earlier decision, a question had been stated to the Full Court of the High Court of Australia which assumed that certain beneficiaries of a deceased estate were joint owners; when the answer to that stated case was known, a single judge of the High Court, without further argument, entered judgment, allowing six such deductions. In the next tax year, the Commissioner of Taxation sought to argue that the beneficiaries of the estate were not joint owners, and hence were not entitled to multiple deductions. Higgins J in the High Court (Hoysted v Federal Commissioner of Taxation (1921) 29 CLR 537), and the Privy Council on appeal from the High Court, held that the Commissioner was bound by an estoppel as to whether the beneficiaries were joint owners, because the actual result in the earlier decision could not have been arrived at if the beneficiaries were not joint owners. 49 In Mraz v The Queen (No.2) (1956) 96 CLR 62 involved facts described as follows in the headnote (at 62): "M was indicted on a charge of murder of a woman, the Crown case being that the death of the woman had been caused during or immediately after the commission of an act of rape upon her by M. At the trial it was not disputed that there had been sexual intercourse between M and the woman and that at the time, or shortly afterwards, the woman had died, but the real issue contested was whether or not such intercourse had taken place against the woman's will. The jury found M not guilty of murder but guilty of manslaughter. The conviction for manslaughter was quashed on appeal by the High Court. M was subsequently indicted for rape on the same facts, and to such indictment, in addition to pleading not guilty, he entered a special plea of issue estoppel in reliance on the verdict in the earlier proceedings." 50 The High Court (Dixon CJ, Williams, Webb, Fullagar and Taylor JJ) upheld that plea of issue estoppel. Their reasoning was, in effect, that the crime of murder with which he had been charged had three elements – (1) that he committed rape, (2) that during or immediately after the commission of the crime (3) an act of his caused the death of the young woman. A finding of not guilty of murder could result if any one of these three elements was missing. However, when the jury's verdict of not guilty of murder was coupled with a finding of guilty of manslaughter, that involved a finding that the third element was proved. Thus, the finding of not guilty of murder must have been based upon the absence of one or other of the first two elements. An examination of the course of the trial showed that it was not disputed that an act of intercourse took place and that at the time or shortly afterwards the woman died. It followed that the verdict at the first trial could only have been based upon a finding that the accused had not committed rape. While the application of issue estoppel in criminal law, since Mraz, became, first, debatable (R v Storey (1978) 140 CLR 364) then impermissible (Rogers v R (1994) 181 CLR 251) Mraz remains a useful illustration of Sir Owen Dixon's views about the reasoning process involved in applying the law of issue estoppel. 51 In Cachia v Isaacs (1985) 3 NSWLR 366 a solicitor (Glass) had been ordered by a Consumer Claims tribunal, in the earlier decision, to pay a dissatisfied client (Cachia) $1,500, made up of $1,425 as refund of costs which the client had been ordered to pay to the opposite party in some unsuccessful litigation, and a return of $75 which the client had paid to the solicitor on account of fees. Hope JA (with whom Kirby P agreed) said, at 380: "The order by the Tribunal that this amount be repaid to Cachia necessarily involves a conclusion that Glass was not entitled to any costs. One finding essential to reach this conclusion was that Glass had been negligent in respect of the services. However, this finding alone would not have justified the Tribunal reaching the conclusion that Glass was not entitled to any costs, and hence had to refund the $75, it would have had to conclude also that Cachia had received no benefit. Had he received a benefit, it would have been necessary for the Tribunal to identify what part of the costs included in Glass' bill produced some benefit to Cachia, and to decide accordingly what part of the bill should be regarded as recoverable costs. If this sum amounted to $75 or more, then Cachia would not have been entitled to a refund of any part of this amount. If the sum amounted to something less than $75, Cachia could recover the difference between that sum and $75. It is only if he obtained no benefit at all from the services provided by Glass that he would be entitled to recover the whole of the $75. In other words, whether or not it was explicitly raised as an issue before the Tribunal, a necessary basis of the order of the Tribunal that Glass return the whole of the $75 was, in the circumstances, that by reason of Glass' negligence, Cachia had received no benefit of any kind from the services the subject of Glass' bill of costs." 52 Thus, it was established that there was an issue estoppel that Cachia had received no benefit from Glass' work, which meant that Glass' claim against Cachia for unpaid fees, in the later action, failed. At 381 Hope JA said: "It should be noted that the present case is not one where the defendant failed to raise some special defence; it is a case where a fact essential to the plaintiff's case was assumed." 53 In Humphries v Humphries [1910] 2 KB 531 the earlier decision had been one in a case where the plaintiff had contended there was a concluded agreement for lease of a property for 14 years; the defendant denied there was a lease, and refrained from entering into possession of the property. The plaintiff sued the defendant for rent said to have accrued during a particular period. The court in the earlier decision held that there was the agreement the plaintiff contended, and gave judgment for the rent then accrued. The plaintiff then brought the later action, suing for the second instalment of rent. In answer to that action, the defendant pleaded lack of writing of the lease to satisfy the Statute of Frauds. That issue had not been raised for adjudication at the trial of the first action. The English Court of Appeal held that there was an estoppel arising from the earlier decision, which prevented that issue being raised. The Court, at 534-535, accepted as correct the following statement by Williams J in Howlett v Tarte (1861) 10 CBNS 813 at 826; 142 ER 673. "If the defendant (to a second action) attempted to put on record a plea which was inconsistent with any traversable allegation in the former declaration (ie in the first action) there would be an estoppel." 54 Farwell LJ, at 535 referred to the fact that the first action was for the first instalment of rent, while the second action was for the second instalment of rent, relating to the same premises, under the same lease. He continued: "Each action, therefore, raised two issues of fact, (1) the existence of the specified agreement for a lease, and (2) the amount due for rent thereunder on the specified dates. The allegation of the existence of the agreement raises the issue which the plaintiff has to prove, namely, the existence of that specific agreement as an agreement binding and valid at law, ie, complying amongst other things with the requirements of the Statute of Frauds. This is the issue that was raised by the plaintiff and was traversable by the defendant, and such an issue is not the less traversable because the defendant fails to traverse, either wholly or in part, whether such failure arises from neglect to comply with the rules of Court requiring notice of reliance on the statute to be given or from omission properly to argue a point – eg that the documents tendered in evidence omitted a material provision required by the statute. It is clear that this was the fact to be alleged by the plaintiff under the old law. A bill for specific performance of a contract for the sale of land was demurrable if it omitted to state that the contract was in writing; and at common law, as it stood in 1842, a plea of the statute was demurrable on the ground that it was a mere argumentative denial of the contract ( Leaf v Tuton (1842) 10 M & W 393), the general issue being "itself a denial that the requisites of the Statute of Frauds had been complied with"; the abolition of demurrers is a mere matter of pleading which does not affect the principle. The rule laid down in Howlett v Tarte (10 CB (NS) 813) is confined to allegations which the defendant could have traversed, and does not extend to pleas which confessed and avoided, or to matters which were not raiseable by traverse but by special plea, necessitating proof on the part of the defendant, such as fraud, gaming, release or infancy, allegations which do not amount to denial, but to confession and avoidance of the contract" 55 In Cooke v Rickman [1911] 2 KB 1125 a divisional court considered another situation where the earlier decision gave judgment to a landlord for one instalment of rent, and in the second action the tenant was sued for a second instalment of rent for the same premises under the same agreement. The tenant sought to raise a point not previously raised. The point on that occasion was that there was no consideration for the agreement sued on. The court held that the earlier decision created an issue estoppel which prevented that point from being raised. Bray J said, at 1128-1129: "The onus was on the plaintiff to prove that there was consideration for the agreement, and the effect of the decision in Humphries v Humphries [1910] 2 KB 531 is that it is only in the special circumstances mentioned in the judgment that the exception to the rule of estoppel prevails. It is true that Howlett v Tarte (10 CB (NS) 813) was decided before the passing of the Judicature Act, when pleading was a matter of great strictness, and no doubt the rules under the Judicature Act do involve some looseness in pleading; but it is not necessary for us to say whether a plaintiff suing on an agreement must now expressly allege consideration, though I am inclined to think that he need not do so; nor is it necessary for us to decide whether a defendant must plead in terms the want of consideration. Humphries v Humphries shews that to avoid the estoppel the matter must be such as requires a special plea or a plea necessitating proof by the defendant. The defendant in this case could have raised the question of no consideration in the first action, and if she had done so, that would have been a matter necessitating proof, not by the defendant, but by the plaintiff. The defendant did not raise that question in the first action, and therefore according to the principle laid down in Humphries v Humphries the defendant is estopped from raising it in the second action." 56 Bankes J came to the same conclusion, saying, at 1130: "… under the present system of pleading, if an agreement were set up in a statement of claim, without saying what was the consideration, the defendant would be entitled to apply to strike it out or to apply for particulars of the consideration. But if the defendant does not adopt either of those courses and proceeds to trial, it is not, in my opinion, open to him, in a second action in respect of the same subject matter, to say that there was not a traversable allegation in the first action, because, applying the test laid down in Humphries v Humphries, the consideration for the agreement sued upon is an issue which the plaintiff has to prove, and if he fails to prove consideration he fails to prove, in the words of Farwell J, "the existence of that specific agreement as an agreement binding and valid at law" " 57 It will be seen from these cases that an issue estoppel can arise even in relation to a point which was not actually decided in the earlier decision. When Dixon J, in Blair v Curran (1939) 62 CLR at 532 said: "… the judicial determination concludes, not merely as to the point actually decided, but as to a matter which it was necessary to decide and which was actually decided as the groundwork on the decision itself, though not then directly the point in issue. Matters cardinal to the latter claim or contention cannot be raised if to raise them is necessarily to assert that the former decision was erroneous", the second sentence just quoted was intended to supplement and expand the first sentence quoted – there can be an issue estoppel concerning matters which "necessarily … assert that the former decision was erroneous," even if those matters were not actually decided in the first decision. 58 It will also be seen from these cases that a proper way of ascertaining what is "the legal foundation or justification" for a court's decision upholding the claim of a plaintiff in the earlier proceeding, is to identify those elements which must be proved, as a matter of law, before a claim of that type succeeds. If a court has decided that the claim succeeds, then it can be inferred that it decided that each of those elements is present. Issue Estoppel and Errors in Judgments 59 The law concerning issue estoppel makes the judgment that, as between the one set of parties (or their privies) a matter which is fundamental to a lawsuit ought be litigated to finality only once, and that both private benefit and public benefit flows from a rule which prevents those parties (or their privies) from contending that the court in later proceedings should come to any different conclusion concerning such a matter: Thoday v Thoday [1964] P 181 at 198; Rogers v R (1994) 181 CLR 251 at 274; Arnold v National Westminster Bank plc [1991] 2 AC 93 at 104; Queensland v The Commonwealth (1977) 139 CLR 585 at 614-615. It is an inevitable part of human imperfection that sometimes the litigation of such a question will come to a conclusion which is mistaken. Sometimes, that mistake can be cured on appeal. However, if it is not cured, or cannot be cured, the policy of the law is that, even so, an issue estoppel arises to prevent the question being litigated again. Somewhat analogously, the law of legal professional privilege makes a judgment that it is in the public interest that unrestrained confidential communication take place between lawyers and clients, even though the price is that litigation is sometimes decided on the basis of less than complete evidence (and hence perhaps decided wrongly): Waterford v The Commonwealth (1987) 163 CLR 54 at 64-65; Carter v Northmore Hale Davy & Leake (1995) 183 CLR 121 at 128, 133-135; Commissioner of Australian Federal Police v Propend Finance Pty Limited (1997) 188 CLR 501 at 511, 563. 60 Hoysted is a case where the later decision perpetuated a mistake which had been made in the entry of judgment in the earlier decision. The issue estoppel in Mraz was held to arise even though the verdict of the jury is the first action, of not guilty of murder but guilty of manslaughter, arose from a misdirection of the trial judge. These are not isolated examples. It should be realised that every single case in which there is an argument about issue estoppel is one where the party opposing the existence of the estoppel is of the view that, given another chance, it might achieve a different result on an issue, in later litigation, to that which it achieved in an earlier decision. Every time a plea of issue estoppel is upheld, that decision automatically brings with it a consequence that the party who loses that argument will be bound by a decision which it wishes to contend is wrong. That a decision which is mistaken might continue to govern the rights of the parties is an inevitable part of the working out of the doctrine of issue estoppel. Pointing out that an earlier decision is in some way wrong – as the first instance decision on the Grasso cross-claim was wrong in assuming that part-performance provided a justification for giving damages for a breach of a contract that contravened section 54A – is in itself no reason for denying that issue estoppels arise from that decision. 61 However, the reasoning I have earlier examined about what is the legal foundation of a decision, proceeds on an assumption that the earlier decision was made by a court correctly identifying and applying the elements of the cause of action being asserted, or defence propounded. Once that assumption is shown to be wrong, closer examination of what the court making the earlier decision has actually decided is called for. Alleged Estoppel 1 – Terms of Agreement 62 I shall now deal with the application of the principles of issue estoppel to the various contentions which Cuzeno raises. In so doing, I will adopt the numbering of those contentions set out in paragraph 18 of this judgment. 63 In the Grasso case, the issue which the litigation decided, concerning the existence and terms of the contract, was not the issue thrown up by the pleadings in the cross-claim in the Grasso litigation. The agreement alleged in the cross-claim (set out at paragraph 23 above) is one whereby Cuzeno agreed to take over Powercell's obligations under the particular contract which Powercell had entered with Grasso, and to indemnify Powercell in respect of any liability which Powercell might have to Grasso under (surprisingly) the contract whereby Powercell agreed to construct the home unit development. That is simply not the case which was litigated. The case which was litigated is that which his Honour Judge Williams recorded in his reasons for judgment, which concerned there being an agreement for Cuzeno to take over as vendor the nine contracts that Powercell had exchanged. That contract was found to exist by the trial judge, and the Court of Appeal. While it is true that the Grasso litigation involved an allegation of only one breach of that contract, the existence of that contract was still a matter which was fundamental to the decision which resulted in Cuzeno being liable to indemnify Powercell in relation to the Grasso contract. In my view, there is an issue estoppel as to a contract having been entered in those terms. Alleged Estoppel 2 – Absence of Necessary Parties to Contract 64 Cuzeno's argument that the purchasers were necessary parties to any contract such as that which was alleged, and hence that any such contract was of no legal effect is an attack on the validity of the contract. The validity of the contract which was sued on in Grasso is, it seems to me, a matter which is fundamental to the decision which was arrived at on the Grasso cross-claim. There is an issue estoppel preventing this attack upon the validity of the contract. 65 In the Court of Appeal, Priestley JA dealt explicitly with the argument that the contract was defective because Mr Grasso was not a party to it (see paragraph 34 above). That aspect of the decision of the Court of Appeal is not an express decision that the contract is valid even though the other purchasers, beside Grasso, were not parties to it. Even if I were wrong in concluding that there is an issue estoppel concerning this argument of Cuzeno's, I would regard that portion of the decision of Priestley JA as a precedent which I could not distinguish, and would apply it to reach the conclusion that the absence of each of the purchasers from the contract Powercell sues on did not result in its invalidity. Alleged Estoppel 3 – Voidness for Uncertainty 66 Cuzeno points to two separate bases upon which it submits the contract between Powercell and Cuzeno is void for uncertainty. The first is that it was unclear what was to become of the terms in the contracts whereby Mr and Mrs Ward gave a guarantee (see paragraph 7 above). The second is that it was unclear what date should be inserted in the special condition of the contracts which enabled termination if the strata plan was not registered by a particular date (see paragraphs 8 and 9 above). 67 I regard each of these arguments as being unavailable to Cuzeno by reason of issue estoppel. These arguments also are an attack on the validity of the contract which was found to exist in the previous litigation on the Grasso cross-claim. 68 Even if that view were not correct, Priestley JA has dealt expressly with why it is that the absence of any express consideration, by Mr Ward and Mr Jabbour of what was to happen concerning the guarantee in the Grasso contract did not result in the contract which Powercell sues on being unenforceable (see paragraph 38 above). If I were wrong in thinking that there were an issue estoppel which now prevents Cuzeno from alleging that the contract on which Powercell sues is void for uncertainty, I would apply that reasoning in relation to each of the other purchasers, to reach the conclusion that the absence of agreement about what was to happen concerning the guarantees in the contracts of those other purchasers did not result in the contract which Powercell sues on being unenforceable. 69 If I were wrong about there being an issue estoppel concerning whether invalidity arose by reason of alleged uncertainty concerning what was to happen about the special condition permitting the vendor to terminate if the strata plan was not registered, I would conclude that the agreement which has been found to exist (and which, independently of estoppel, I later find to exist – see paragraph 105 below) is one whereby Cuzeno would take over the existing contracts. That means take them over as they stand, including with a contractual right of recision if the strata plan was not registered within 12 months (or six months in the case of Azar) from the date on which Powercell originally entered into the contract with each respective purchaser. In reaching that conclusion I would be fortified by the words of Priestley JA set out at paragraph 34 above, that: "By such an agreement, Cuzeno was assuming the risk that Mr Grasso might not agree to contract with it on the same terms as those in the contract with Powercell and leaving itself open to the consequences if he did not." Alleged Estoppel 4 – Take Over all Nine Contracts, or Only Four 70 The terms of the contracts sued on, at least insofar as it was found that any one of them was breached, is a matter fundamental to the decision in the Grasso litigation. Thus, there is, it seems to me, an issue estoppel that Cuzeno agreed to take over all nine contracts which Powercell had entered. While there is an issue estoppel concerning that matter, it is consistent with the existence of such an estoppel that, after the contract was entered, it was varied so as to provide that Cuzeno was obliged to take over only four of the contracts. The allegation which Cuzeno wishes to make is that the Grasso contract was one of the four contracts which it agreed to take over. There is no issue estoppel which prevents Cuzeno from alleging that there has been such a variation. Alleged Estoppel 5 – Condition Precedent Not Complied With 71 The allegation which Cuzeno wishes to make, that the contract was conditional on there being no circumstances which would cause difficulty in obtaining specific performance on those contracts, yet there were circumstances which would have caused difficulty in obtaining specific performance, does not involve an attack on the validity of the contract. However, if the contention were true, then a condition precedent to the enforceability of the contract which was sued on in the Grasso cross-claim, would not have applied. That is a consideration which might give rise to an estoppel under the principle in Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589. Whether it also gives rise to an issue estoppel will depend upon whether the onus of proving satisfaction of any conditions precedent to the operation of a contract lies upon a plaintiff who sues on that contract. Rather than deal with those legal questions (which were, in any event, not specifically argued before me) I have decided (paragraph 97 and 98 below) that in fact the contract was not subject to the condition which Cuzeno alleges. Alleged Estoppels 6 & 7 – Causation of Damages and Mitigation of Loss 72 Insofar as the Grasso litigation made findings concerning causation of damage, and whether Powercell had mitigated its loss, those findings were related only to the damage which arose from the particular breach of contract whereby Cuzeno failed to take over the Grasso contract. No issue estoppel arises from those findings. Alleged Estoppel 8 – Lack of Writing 73 To decide whether any issue estoppel arises concerning the applicability of section 54A Conveyancing Act 1919, it is necessary to look to what was actually decided concerning that issue. As there was some difference in approach between the trial judge and the Court of Appeal on that issue, it is to the decision of the Court of Appeal that one must look. That decision was one which expressly declined to decide whether the contract found by the trial judge was one to which section 54A applied. It decided that there were sufficient acts of part performance, and, in circumstances where the parties left it to the trial judge to decide whether there were sufficient acts of part performance to enable damages to be recovered, no error could be found in his conclusion that there were sufficient acts of part performance. An issue estoppel arises to the effect that there are sufficient acts of part performance – but that is of no practical use to Powercell in litigation like the present which claims damages for breach of contract. 74 It should not be concluded that an issue estoppel arises to the effect that damages can be recovered for a breach of the contract which Williams DCJ found to exist. 75 I accept that the question of whether the lack of writing in the contract sued on precluded recoverability of damages is one of the questions which was litigated, and on that question Cuzeno lost. Cuzeno's Notice of Grounds of Defence to the Amended Cross-Claim in the Grasso litigation, expressly the effect of non-compliance with section 54A - it included the allegation: "if (which is denied) the first cross-defendant agreed to take over the obligations of the cross-claimant to the plaintiff, then such agreement was not in writing and was not signed by the first cross-defendant or some person thereunto lawfully authorised and consequently, by s 54A of the Conveyancing Act the alleged agreement is not enforceable against the first cross-defendant." That the pleading took that form, restricted to an agreement to take over the obligations of Powercell to Mr Grasso, arose from the way in which the cross-claim had pleaded the agreement (set out in paragraph 15 above). However, the issue which was actually litigated was the broader question, of whether the contract to take over all nine contracts was one was not enforceable by reason of section 54A. 76 As Humphries shows, it was for Powercell to show that section 54A posed no obstacle to enforceability of the contract it sued on in the Grasso cross-claim. If Powercell had pleaded, in the Grasso litigation, a contract in the terms it propounded in submissions in that case, and obtained by default a judgment on a cross-claim so pleaded, it would be open to a court, in later litigation, to take that decision as establishing every element which Powercell had to prove in suing on the contract, including that section 54A posed no obstacle to a verdict. But a fundamental part of issue estoppel is that the estoppel arises in relation to what has actually been decided in the earlier proceedings (Somodaj v Australian Iron and Steel Ltd (1963) 109 CLR 285 at 299), and what has actually been decided is nothing at all so far as the application of section 54A to the contract is concerned, and that there are sufficient acts of part-performance to attract the equitable doctrine of part-performance. The judgment of the Court of Appeal recognised that the decision at first instance incorrectly identified the elements of the cause of action for damages for breach of contract. There is no finding in the Court of Appeal that the existence of the acts of part-performance entitles Powercell as a matter of law to receive damages for breach of the contract, other than on an appeal from a decision where it was mistakenly assumed there was such an entitlement. Hence there is no issue estoppel that Powercell is entitled to receive damages in the present proceedings, despite the contract sued on not being in writing. "Special Circumstances" Exception to Issue Estoppel? 77 In Arnold v National Westminster Bank Plc [1991] 2 AC 93 the House of Lords held that sometimes special circumstances could prevent an issue estoppel arising. The case concerned a long lease, which contained a rent review clause. That rent review clause was construed by an arbitrator when a dispute arose between landlord and tenant at the first rent review date. An appeal to a judge construed the clause in a different way. That judge refused to grant a certificate permitting an appeal against his decision. Several later decisions of the Court concerning similar rent review clauses construed them differently to the way the judge had construed them. The tenants brought another set of proceedings, which raised the question of the correct construction of the rent review clause. The landlord sought to have those later proceedings struck out on the ground that an issue estoppel already bound the lessee concerning construction of the clause. The landlord failed at first instance, in the Court of Appeal, and in the House of Lords. In the House of Lords, Lord Keith of Kinkell said, at [1991] 2 AC 109: "In my opinion your Lordships should affirm it to be the law that there may be an exception to issue estoppel in the special circumstance that there has become available to a party further material relevant to the correct determination of a point involved in the earlier proceedings, whether or not that point was specifically raised and decided, being material which could not by reasonable diligence have been adduced in those proceedings." 78 He held that a change in the law, as well as newly discovered or newly emerging facts, could constitute such further material. He mentioned – it is not clear with what precise role in the argument – that the decision of the judge on the construction of the rent review clause was "plainly wrong" and that the decision of the judge to refuse to grant a certificate permitting an appeal from his decision was also wrong. 79 In O'Toole v Charles David Pty Ltd (1991) 171 CLR 232 at 258 Brennan J said that the decision in Arnold at first instance (Arnold v National Westminster Bank Plc [1989] 1 Ch 63), a decision which was affirmed in both the English Court of Appeal and the House of Lords, was one which "rests on an uncertain foundation". In Linsley v Petrie [1998] 1 VLR 427 Hayne JA, at 441, declined to express a concluded view on whether Arnold should be accepted as good law in Australia. In Linsley, at 449, Callaway JA said he shared Brennan J's scepticism in O'Toole concerning Arnold. In Yates Property Corporation Pty Ltd v Boland [2000] FCA 1106; (2000) 179 ALR 664 at [118] Goldberg J held that it was not necessary for him to reach any concluded view as to whether the "special circumstances" exception referred to in Arnold represented the law in Australia. In Tiufino v Warland [2000] NSWCA 110; (2000) 50 NSWLR 104 at [30] Handley JA (with whom Mason P and Powell JA agreed) also found that the circumstances of that case provided no occasion for deciding whether the Arnold exception applied in Australian law. In Pollnow v Armstrong [2000] NSWCA 245 Meagher JA (with whom Priestley and Sheller JJA agreed) described (at [9]) the Arnold exception as "a quaint doctrine" but did not apply it on the ground that the case then before the Court involved a true res judicata, not an issue estoppel. 80 The Full Court of the Supreme Court of Western Australia has been less tentative. In Waddington v Silver Chain Nursing Association (1998) 20 WAR 269 at 280, Malcolm CJ, Kennedy and Owen JJ said: "In contrast to the Australian High Court's rejection of the development of any principle that there exists any exception to res judicata , the relevant passage in the judgment of Wigram V-C in Henderson has been interpreted by English courts not only as authority for the principle that there is a discretionary exception to the principle of res judicata but has also been used to develop a similar exception to issue estoppel: see Arnold v National Westminster Bank Plc [1991] 2 AC 93; Fildelitas Shipping Co Ltd v V/O Exportchleb [1966] 1 QB 630 at 642 per Diplock LJ. Needless to say this position has not been mirrored in Australian law. Although "the doctrine of issue estoppel operates in a more restricted way in family law disputes and in criminal cases" because of special policy considerations in those particular areas of the law (Cross on Evidence (5th Aust Ed 1996) para 5115 at 163 referring to para 5125 and para 5130), Australian law, strictly speaking, does not recognise any exception, discretionary or otherwise, to the principles of res judicata or issue estoppel." 81 Even if the exception recognised in Arnold were part of the Australian law, it would not apply on the facts of the present case. There is no new material which could not by reasonable diligence have been adduced in the Grasso cross-claim. 82 Cuzeno submits that the Court should find that there are special circumstances in the present case, which should be recognised as an exception to issue estoppel. Those circumstances are: (a) Cuzeno is a defendant, not advancing any cause of action of its own; (b) the nature of Powercell's claim necessarily requires the Court to investigate all of the relevant facts again, and accordingly there is no public interest to be served by preventing Cuzeno from re-arguing its case; (c) (so far as the O'Rourke v Hoeven point is concerned) Cuzeno sought to agitate this matter in the High Court but was refused, apparently on the basis that it would not be shut out from re-agitating the point in subsequent proceedings. Neither principle nor authority is put forward in support of the contention that these matters amount to special circumstances which prevent issue estoppel from arising. Nor, independently of the submission made, do I see either principle or authority which leads to the conclusion that these matters would prevent an issue estoppel from arising. Section 23C(1)(a) Conveyancing Act 1919 83 The terms of section 23C(1)(a) are set out in paragraph 18 above. The agreement between Powercell and Cuzeno, whereby Cuzeno agreed to enter into contracts with the nine purchasers, was not one which created any interest in land, neither did it dispose of any interest in land. It is true that if it were to be performed, so that Cuzeno entered into a new contract with a purchaser, and performed that new contract by conveying a home unit to that purchaser, an interest in land would then be disposed of. That fact is not enough to attract the operation of section 23C(1)(a): Baloglow v Konstantinidis [2001] NSWCA 451 at [3], [112], [158]-[193] and especially [158]-[162], [183], [190]-[191]. At [191] Giles JA (with whom Mason P agreed) said: "… s 23C does not apply at all – whether as to creation or as to disposal of an interest – if there is no more than an agreement to assure property in the future." 84 Even if, contrary to this view, the argument that section 23C made the contract between Powercell and Cuzeno unenforceable was a valid one, Cuzeno would be precluded, in accordance with the decision in Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589 from raising it in these proceedings. The supposed defence based on section 23C is a true defence, not a matter of set-off or cross-claim. The appropriate principle to apply in deciding whether omission to plead a defence in an earlier action prevents that defence being raised in a later action, was stated in Anshun, at 602-603, as follows: "… there will be no estoppel unless it appears that the matter relied upon as a defence in the second action was so relevant to the subject matter of the first action that it would have been unreasonable not to rely on it. Generally speaking, it would be unreasonable not to plead a defence if, having regard to the nature of the plaintiff's claim, and its subject matter it would be expected that the defendant would raise the defence and thereby enable the relevant issues to be determined in the one proceeding. In this respect, we need to recall that there are a variety of circumstances, some referred to in the earlier cases, why a party may justifiably refrain from litigating an issue in one proceeding yet wish to litigate the issue in other proceedings eg expense, importance of the particular issue, motives extraneous to the actual litigation, to mention but a few. See the illustrations given in Cromwell v County of Sac (1876) 94 US [24 Law ed at page 199]." 85 The passage referred to in Cromwell v County of Sac (1876) 94 US 351 is: "Various considerations, other than the actual merits, may govern a party in bringing forward grounds of recovery or defence in one action, which may not exist in another action upon a different demand, such as the smallness of the amount or the value of the property in controversy, the difficulty of obtaining the necessary evidence, the expense of the litigation, and his own situation at the time. A party acting upon considerations like these ought not be precluded from contesting in a subsequent action other demands arising out of the same transaction." 86 There are no such considerations in the present case. At the time the Grasso cross-claim was heard, it was known that it was the first of several cross-claims likely to be brought by Powercell against Cuzeno. There was no reason to believe the potential quantum of damages on the Grasso claim would be significantly less than on any of the other cross-claims. There was every reason for Cuzeno to put forward all the arguments it could, so that the Grasso cross-claim could act as, in effect, a test case for the other cross-claims. It was completely predictable that its operation as a test case might occur not only through providing a precedent (a persuasive precedent if the decision of the Grasso litigation remained at the level of District Court judge, and needed to be applied by other District Court judges or by Local Court judges, or a binding precedent if there were to be an appeal to the Court of Appeal) but also by creating issue estoppels, and Anshun estoppels. The hearing of the Grasso cross-claim in fact extended over four days, and involved the taking of more oral evidence than was heard in the case before me. It would have been known, before the Grasso cross-claim was heard, that its hearing was likely to be of this order of length, and that several witnesses would be called and cross-examined, concerning the circumstances of (inter alia) the entry into of the contract between Powercell and Cuzeno, and the non-performance of that contract. It was hardly to be expected that evidence on that scale would need to be taken, and decided upon by a judicial officer, again and again concerning each cross-claim. There was every reason for Cuzeno to present its whole case concerning enforceability of the contract between Powercell and Cuzeno in the course of the hearing of the Grasso cross-claim. The argument based on section 23C is a pure argument of law, and so involved little difficulty or expense to present. 87 At least before the unfavourable result in the Court of Appeal, Cuzeno understood and accepted the role of the Grasso cross-claim as deciding other cross-claims. Cuzeno needed to obtain leave from the New South Wales Court of Appeal to bring its appeal against the decision of his Honour Judge Williams. Cuzeno's written submissions in support of the granting of leave to appeal, dated 20 August 1998, included the following paragraphs: "47 There are parallel proceedings pending in the Supreme Court, in which Powercell is seeking declarations that Cuzeno is liable for any damage it may suffer from claims by any of seven nominated purchasers (Grasso and six others). The legal issues raised by the proposed grounds of appeal apply equally to all the other purchasers. Thus, if leave is granted the appeal will constitute a precedent determinative of the legal issues in the Supreme Court proceedings. 48 Since judgment was delivered in these proceedings, Powercell has made a further cross-claim against Cuzeno in District Court proceedings brought against Powercell by another purchaser. This cross-claim is pleaded in terms identical to the terms of the cross-claim against Cuzeno in the Grasso proceedings. The cross-claim seeks a further judgment for $121,352.57. If leave is granted the result is likely to resolve this further cross-claim as well." 88 When his Honour Judge Phegan gave judgment, on 23 June 1999, in the claim brought by one of those purchasers against Powercell he said: "There is also in the pleadings, although not a matter which arose before me, a cross-claim by the defendant against Cuzeno Pty Ltd, as cross-defendant. The cross-claim was severed from the principal claim for the purpose of these proceedings, but has been the subject, in effect, of an earlier judgment in the case of Grasso v Powercell Pty Ltd , number 2325 of 1997, a decision of Williams J in this court of 27 July 1998. I understand that the decision is at the moment the subject of an appeal, but it is accepted by the parties that the outcome of that particular aspect of Grasso will determine, for the purpose of this case, and indeed of any other similar cases, the issues which have arisen between the defendant and the cross-defendant in these proceedings. 89 In the circumstances as they were known to Cuzeno at the time of the Grasso litigation, it would be unreasonable for Cuzeno not to plead the supposed defence under section 23C in the Grasso litigation. Consequently an Anshun estoppel arises concerning it, subject to any "special circumstances" exception. 90 I record that Cuzeno submitted that the three matters which I listed in paragraph 82 above amounted to "special circumstances" which prevented the arising of an Anshun estoppel. The approval by Gibbs CJ, Mason and Aickin JJ, in Anshun at 598, of a passage from the judgment of Sir James Wigram V-C in Henderson v Henderson (1843) 3 Hare 100 at 115; 67 ER 313 at 319 puts the existence of such a "special circumstances" exception in Australian law beyond doubt. The result in this case will not be altered by my considering that "special circumstances" exception. No additional factual findings, beyond those which I have made in this judgment, are needed to enable the Court of Appeal to apply that exception, if it disagrees with any conclusions I have come to in this judgment. There was no argument before me about what types of matters could, as a matter of law, amount to such "special circumstances". Hence I shall consider that exception no further. Findings on Facts – Terms of Contract Between Cuzeno and Powercell 91 Both for the purpose of dealing with those matters concerning which I have held no issue estoppel arises, and for the purpose of making factual findings against the possibility that the Court of Appeal might take a different view to me of the application of issue estoppel, I turn to the evidence adduced in the present case. 92 The only witness before me who gave evidence about the terms of the agreement reached was Mr Ward. Mr Jabbour elected not to give evidence. Mr Sarrif was brought to court on a subpoena issued by Powercell. He was not prepared to talk to Powercell's lawyers before being called. Ultimately Powercell decided not to call him. 93 Mr Ward swore an affidavit on 30 August 2002 which expressly sought to draw together evidence which he had given in two previous affidavits in 1997, in an affidavit in March 2002, and in oral testimony in the District Court on 21 and 22 July 1998. In addition, at the end of the first day's hearing he located his 1996 diary. There are some differences between his affidavit evidence, and what is recorded in his diary. He strikes me as a witness who is honest, was doing his best, had genuine recollection of the general nature of what had occurred, but had some understandable difficulties in recollecting precisely the detail of events of as long ago as 1996. In these circumstances, I place more weight upon what is recorded in his diary than upon his oral testimony, if ever the two are in conflict. 94 Mr Ward's affidavit evidence about the events of 17 July, 18 July and the early part of 19 July are as follows: "On 17 July 1996 I had a meeting with Jabbour at his office. I said to Jabbour words to the effect:- "Powercell has sold its 9 units off the plan and, if we now go into a building contract and Cuzeno keeps the land, Powercell will not be able to complete on those 9 units. Would you agree to take over the nine sales?" He said words to the effect:- "Yes, as long as I will have no problems getting specific performance of the contracts from the purchasers." I said words to the effect:- "Powercell has also paid commissions to the agent on those sales." Jabbour said words to the effect:- "I will reimburse you for those commissions since the units will now be sold by Cuzeno." I then went to see the solicitor who was acting for the plaintiff on the sale of the units – Ron Tosolini of Willis & Bowring. He gave me nine back pages of the usual contract for the sale of real estate, which were blank. Tosolini said to me words to the effect:- "Have George sign and seal these back pages and then bring them back to me and I'll do all the paperwork to organise the altering of the vendor on the contracts from Powercell to Cuzeno." I took the nine back pages to Jabbour on the afternoon on Thursday, 18 July. I recall that it was this date because Jabbour had said to me words to the effect:- "I'm going to the snow for a week with my family on the weekend." I left the contract back pages with him. At 9.30am the next morning I went back to his office to pick them up. I also took two new MBA BC3 building contracts. Jabbour said to me words to the effect:- "The amount that I pay you for doing the building work should be the amount that you would have received from the sale of the 9 units, less the interest you would have paid during the project, the demolition and excavation costs and other fees which you have already paid, and the agent's commissions on the sales which you would not have to pay. We did some calculations and agreed that, using the formula suggested by him, the amount to be included in the new building contract was $1.42m and I then filled out the details of the new building contract and we both signed it. A copy of the new building contract is exhibited to me at the time of swearing this affidavit and marked Exhibit W22. He also signed, and to the best of my recollection put the defendant's seal on, each of the nine contract back pages. He then gave me the building contract and the nine back pages and said to me words to the effect:- "Take these back pages to your solicitor and get him to arrange for the contracts to be changed so that Cuzeno is the vendor. I will telephone the agent and tell him what we have agreed." 95 Mr Ward's diary for 17 July 1996 contains the following entries: "* Saw George he agreed to price of 1.505 less commissions/interest/ and QS inspections = 40,000 + 38,000 + 1600 = Contract Price of 1,420,000 but must rescind contracts and reissue in Cuzeno * Spoke to Tosolini he said no problem. * George said he will not sign Building Contract until he knows that sales contracts will have no problem with Specific Performance. He does not mind if anybody pulls out." 96 In the light of Mr Ward's diary, it seems to me that he was mistaken in attributing the conversation in which the price payable in the new building contract was calculated at 1.42 million to the morning of 19 July, and rather that that conversation took place on 17 July. 97 I also have concluded that Mr Ward did not state accurately in his affidavit the response which Mr Jabbour gave to Mr Ward's request on 17 July to take over the nine existing contracts. As contained in the affidavit, Mr Jabbour's response accepts that he will take over the nine contracts, subject to a condition. That condition expresses a concern about his own ability to enforce specific performance of the contracts which Powercell had entered. The flavour of Mr Ward's diary note is quite the opposite – Mr Jabbour does not mind if any of Powercell's purchasers pull out. In my view, while Mr Jabbour's agreement to take over the nine contracts was subject to a condition connected with the possibility of a problem with specific performance, it is a problem which Mr Jabbour expected to be able to resolve in the comparatively short term – that is, in the period before he signed the building contract. 98 In my view it is more likely that the concern which Mr Jabbour expressed about specific performance was a concern about the possibility that purchasers from Powercell might be able to enforce specific performance against Cuzeno. When the contracts had been entered in April and May 1996, and by mid-July 1996 the only progress which had been made with the building job was to demolish the two existing houses and carry out some excavation, this was an understandable concern on Mr Jabbour's part. Further, Mr Jabbour actually signed the building contract on 19 July 1996. By that time he had satisfied himself that there was no problem concerning specific performance, or else he dispensed with the condition concerning specific performance to which his agreement to take over the nine contracts was subject. 99 Mr Ward's diary entry for 18 July 1996 is as follows: "* Picked up building contracts & new back page for sales contracts, dropped 9 back pages to George, he will sign them tonight. * … * George and Pierre go to snow for 1 week on Sunday. Must sign contracts tomorrow. * Tosolini says no problem, bring 9 new pages and he will fix it all up." 100 In light of that entry, it seems to me that Mr Ward was mistaken in attributing his picking up of the nine back pages of the contract for sale of real estate from Mr Tosolini to 17 July rather than 18 July, but this is a matter of inconsequential detail. Subject to its being corrected in the three respects I have just identified, I accept the affidavit evidence of Mr Ward set out in paragraph 94 above. 101 Mr Ward's affidavit evidence about the rest of the events on 19 July is as follows: "He also signed, and to the best of my recollection put the defendant's seal on, each of the nine contract back pages. He then gave me the building contract and the nine back pages and said to me words to the effect:- "Take these back pages to your solicitor and get him to arrange for the contracts to be changed so that Cuzeno is the vendor. I will telephone the agent and tell him what we have agreed." I left his office but I then remembered that I needed to obtain the engineering plans for the project, which were being prepared by Jabbour's son-in-law and I went back to the office to ask when the engineering plans would be ready. When I walked back into the office, Jabbour was on the telephone. I sat down to wait until he finished his conversations but I recall him saying …words to the effect:- "So the contracts could be rescinded and we could re-sell for more money?" When he had finished the telephone conversation he said to me words to the effect:- "That was Chris Savelle, apparently we will have to rescind the Powercell contracts before Cuzeno can enter into new contracts with the purchasers, and those new contracts can be exchanged at any time. There is no hurry, would you give me back the nine back pages." I gave the nine pages to him and we then spoke about the engineering plans. I then left the office. After leaving the office I became concerned about the plaintiff's liability to the purchasers and I immediately went to see Tosolini to obtain advice. As a result of what he told me, I returned to Jabbour's office at about 11.30am but he was not there. I went back to the office a few times through the day but it was not until 4.30pm or 5.00pm that he was there when I arrived. Savelle was also there. I said words to the effect:- "I've been trying to see you all afternoon." Jabbour said:- "We've been out for lunch." I said:- "I've come to see you to get back those nine back pages." He said:- "I'm not going to give them to you. Now that we have the new building contracts in place, our original agreement is rescinded." I said:- "But George it was part of our new agreement that you would take over those nine contracts and I need the nine back pages so that the new contracts can be prepared and Powercell wont be liable to the purchasers." Savelle, who was sitting beside me, said words to the effect:- "George, you don't operate like that." There was further discussion between Jabbour and me but he refused to hand back the nine pages to me. Savelle said:- "I'll ring Norm and find our how many of the nine buyers would be a problem." Savelle then had one or two telephone conversations with Norm Sarrif and finally he said words to the effect:- "Norm says that only four of the purchasers will be a problem." And he named those four purchasers. I cannot now remember which of the nine purchasers he named. There was then some further conversation between Jabbour and Savelle and Jabbour went over to his filing cabinet and took four of the nine signed back pages out of it and gave them to Savelle saying words to the effect:- "Exchange these with the four problem buyers." I said words to the effect:- "But the other five have all paid legal costs and surely they'll be upset at losing that money." Savelle said words to the effect:- "No, Vosnakis is the solicitor for most of them and he is also my best mate and I give him so much work that he won't charge them and if he does I'll pay it." 102 Mr Ward's diary notes relating to Friday, 19 July 1996 are as follows: "* Went to see George 8.30, he signed 9 back pages of contract, and Building Agreement. But then took back the 9 pages, saying we can exchange whenever we want. *Tosolini says that this is now not simple these people could all sue. * Went back to see George, Chris was there. I wanted 9 back pages for contract as agreed, but Chris & Norm talked on phone and worked out that there would only be 4 problems, MARKOVSKI, HUON, GRASSO & GRASSO. So Chris talked George into giving him 4 back pages (signed) I said as long as you can assure me there will be no problems, I am happy with 4, Chris said No Problems, stop worrying. I said what about legal costs for the other 5 people, he said VOSNAKIS is the solicitor for most of them and I give him so much work; he will not charge them. He said if he does, I will pay it." 103 These diary notes name the four purchasers who were potential problems, whose names Mr Ward could not remember at the time he swore his affidavit. Mr Ward explained in oral evidence that his notes included two references to Grasso because one of those references was to the contract where Mr Grasso alone was the purchaser, and the other was a reference to the contract where Mr Grasso was a purchaser along with others including Mr Cannazarro. I accept the evidence of Mr Ward which I have set out in paragraph 101 above, subject to adding to it the names of the four purchasers, and that towards the end of the conversation Mr Ward said words to the effect of "As long as you can assure me there will be no problems I am happy with four", and Mr Savelle said "No problems, stop worrying". 104 The 1992 edition of the Law Society/Real Estate Institute contract had on its back page a schedule containing various boxes to be ticked if a document, described alongside that box, was attached to the contract, and various other boxes designed to be ticked to identify which of several alternative situations that the contract provided for applied in the instant case. It contained some advice of a consumer protection nature to vendors and purchasers, and provision for the parties to the contract to sign. The point of Cuzeno executing nine blank back pages of a contract is that, armed with those blank pages, Mr Ward would have been in a position where he had authority to attach them to a contract identical in terms (apart from the back page) to a contract which Powercell had entered with its nine purchasers (changing only the name of the vendor on the front page of that contract and, possibly, the name of the vendor's solicitor) and exchange the composite document so resulting with the purchaser. When Mr Savelle was, at the conclusion of the meeting on 19 July 1996 given the four signed back pages, Mr Savelle had authority to exchange those contracts with the four buyers who had been identified as being potentially a problem. 105 I conclude that an agreement was reached on the morning of 19 July, whereby the original joint venture agreement and land sale agreement was rescinded, the new building contract was entered into, Cuzeno agreed that it would reimburse the real estate agents' commission Powercell had paid, and would enter into a contract on the same terms as the contracts which Powercell had already entered into with the nine purchasers, but if any purchaser or purchasers proved willing to not proceed with its contract, Cuzeno would not be required to enter a contract with that purchaser or those purchasers. It seems to me that, while the elements of the agreement had been discussed and a consensus was arrived at on 17 July, it was only on 19 July that any conditionality of Cuzeno's obligation to take over the nine contracts, dependent on availability of specific performance, was dispensed with, and probably only on execution of the new building contract that uncertainty about the terms of that building contract was removed. 106 The meeting which took place from 4.30 pm or 5.00 pm on 19 July 1996 did not alter the substance of that agreement. At no time in that later meeting did Mr Ward assent to accepting the situation that Cuzeno would take over only the four contracts which were then perceived, by Mr Sarrif, to be a potential problem. Mr Ward said, as his diary records, that, subject to being assured there would be no problems, he was "happy with four" – but the context of that discussion shows that the "four" things he was happy with were four signed back pages. The handing over of those pages was a conveyancing expedient to implement the agreement that had been arrived at. If four back pages were handed over and exchanged, and the other purchasers did not insist on their contracts, the practical problem of the nine outstanding contracts would be solved. But in agreeing to four signed back pages being handed over, Mr Ward was not varying or foregoing any of the rights Powercell had under the agreement I have found was made. Neither was he varying any of the rights under the contract concerning which there is an issue estoppel about its existence, terms and validity. 107 Mr Ward was cross-examined about some evidence that he had given in the District Court concerning the second meeting on 19 July, where he was asked whether, at the conclusion of that meeting, "… did you think there was any, at that stage concluded deal under which Mr Jabbour was going to take over your obligations under the contract in favour of your purchasers? A. In favour of four of them, yes." While that was Mr Ward's belief, I do not accept that it was his belief that there was a concluded deal that Mr Jabbour's company was going to take over responsibility in relation to the nominated four purchasers, and no others . Application of Section 54A 108 I have set out the terms of section 54A in paragraph 18 above. It is the re-enactment, in somewhat altered words, of section 4 of the statute commonly known as the Statute of Frauds (A Statute for the Prevention of Frauds and Perjuries, 29 Car. II, Cap. 3). So far as relevant section 4 provided: "No action shall be brought … (4), or upon any contract or sale of lands, tenements, or hereditaments, or any interest in them … (6), unless the agreement or some memorandum or note thereof shall be in writing and signed by the party to be charged, or by some person thereunto by him lawfully authorised." 109 It is to be observed that section 4(4) of the Statute of Frauds has an awkward grammatical structure, arising from the words "contract or sale". In Brown v Robertson (1890) 16 VLR 786 at 788 Webb J said, arguendo, "… it has been generally thought that the word "or" in that section ought to be read "for"." The section was treated as being read in that way by Maule J in Kelly v Webster (1852) 12 CB 283 at 290. 110 Section 54A was introduced into the Conveyancing Act by the Conveyancing (Amendment) Act 1930. The Bill for that Act was first introduced to the Parliament in the Legislative Council by the Attorney General, the Honourable F S Boyce on 11 April 1930. In the course of his Second Reading speech he said (Hansard page 4765): "If Hon Members will look at the schedule of repeals at the end of the Bill, he will see that it proposes to repeal Acts 13 eliz. C. 5 and 27 eliz. C. 4, and in certain respects, the Statute of Frauds, which dates back to the reign of Charles II. But all of this is now being re-enacted in modern and less archaic form." 111 In these circumstances I conclude that no substantial difference was intended between the wording of section 4(4) of the Statute of Frauds, and that of section 54A Conveyancing Act. 112 Section 7 Conveyancing Act 1919 contains a definition that "sale" "means only a sale properly so called". That definition could influence the meaning to be given to "contract for sale" in section 54A. However, that definition was added by the same 1930 legislation which added section 54A. Given the express statement of intention about the purposes of enactment of section 54A, the presence of that definition does not provide any occasion to narrow the meaning of section 54A to any lesser scope than the Statute of Frauds had. 113 These conclusions are consistent with the remark of Rich and Dixon JJ in Horton v Jones (1935) 53 CLR 475 at 487, that section 54A "has, we think, substantially the same effect as the Statute of Frauds so far as it related to interests in land." 114 The question which arises in the present case is whether the contract which is established by issue estoppel (or, alternatively, the contract which I have found to exist) is one which is "a contract for the sale or other disposition of land or an interest in land". It arises in a situation where Cuzeno was already the owner of the real estate upon which it was proposed the home unit building would be constructed. The contract was one whereby Powercell stood to acquire no interest in land. However, it was a contract which could result in Cuzeno entering into one or more contracts to sell home units to people not party to the contract between Powercell and Cuzeno. The question involves considering what sort of relationship, between the contract in question, and the sale or other disposition of land or an interest in land, is required by the preposition "for", in "contract for the sale or other disposition of land or an interest in land." 115 Authority establishes that the following types of contract fall within the Statute of Frauds, and hence need to be in writing to be enforceable. · The plaintiff is lessee of property, which the defendant wishes to occupy. They agree orally that the plaintiff will give up possession, and the defendant will become the tenant of the landlord, and pay a sum of money to the plaintiff. – Cocking v Ward (1845) 1 CB 858; Kelly v Webster (1852) 12 CB 283 · The plaintiff wishes to obtain an assignment of a lease of a particular public house. He agrees with the defendant (a hotel broker, who has no legal rights in that public house) that the defendant would obtain the lease of the public house, for a nominated price. The agreement is in substance that the defendant will procure and convey the lease for that price to the plaintiff: Horsey v Graham (1862) LR 5 CP 9 · A landowner and a broker agree that the broker will find someone who will grant a mortgage over specified land, on specified terms, to the landowner, and the landowner agrees that he will execute such a mortgage: Dalgety & Co Ltd v Gray (1919) 26 CLR 249 at 254-255. · A defendant who holds an option to purchase certain land subject to approval of a development consent (that consent not being granted at the date of litigation so that the option is not specifically performable) agrees to transfer that option to the plaintiff: Mainline Investments Pty Ltd v Davlon Pty Ltd [1969] 2 NSWR 392 · Mortgagees of property with an accrued power of sale agree that they will enter a written contract to sell that property to the plaintiff if the plaintiff performs certain actions, which the plaintiff then fully performs: Daulia Ltd v Four Millbank Nominees Ltd [1978] 1 Ch 231 · An agreement by the highest bidder at an auction that he will sign a contract to purchase the property: Wright v Madden [1992] 1 QdR 343 116 The following contracts are ones not caught by the Statute: · A landlord promises to someone thinking of becoming a tenant that if he entered into a lease, the landlord will effect certain repairs and install certain additional furniture. The promise to provide these benefits is not within the Statute because it is a collateral agreement to the agreement to lease: Angell v Duke (1875) LR 10 QB 174 · The plaintiffs and the defendant agree that the plaintiff will purchase a particular mine, if he can, with finance being provided in part by the defendants, float the mine into a new company, and thereupon issue a certain proportion of the capital of the company to the plaintiffs, and a certain proportion to the defendants. (The defendants then bought the mine for themselves, and the plaintiff sued for damages.) This was not a case within the Statute of Frauds, but rather a contract whereby the parties agreed to purchase the mine if they could: Brown v Robertson (1890) 16 VLR 786. · A husband and wife orally agree that if the husband will purchase a particular house the wife will, when money comes to her from her father's will, pay him the amount of the purchase price. The Statute does not apply because the husband has not promised that he would buy the house: Boston v Boston [1904] 1 KB 124. 117 In deciding whether a contract is one which falls within section 54A, "one needs to consider the subject matter of the contract at the time of the making of the contract." (per Helsham J, Mainline Investments Pty Ltd v Davlon Pty Ltd [1969] 2 NSWR 392, at 398). This same conclusion follows from the remarks of Rich and Dixon JJ in Horton v Jones (1935) 53 CLR 475 at 487. "The contract is to leave property by will whatever form it may be in. At the time of contracting, it involved an interest in land. It is therefore a contract to leave that interest or the proceeds thereon if thereafter called in and invested in some other form of security or distributed. It appears to us that this is a contract which relates to an identifiable asset or assets which have the character of an interest in land, although consistently with the contract and before its performance is complete, they may have lost that character." See also Birmingham v Renfrew (1937) 57 CLR 666 at 678-680 per Latham CJ, 690-691 per Dixon J. 118 Various explanations have been given of the type of contract to which the Statute applies. In Kelly v Webster (1852) 12 CB 283 (the facts of which are at paragraph 115 above) the way in which the defendant became the new tenant of the premises was by entering a new lease with the landlord, not by taking an assignment of the plaintiff's lease. At 289 counsel for the defendant referred, obviously with the intention of distinguishing it from the case then before the court, to authority which decided that an agreement by a tenant to assign the residue of his term was within the Statute. The following exchange then occurred: MAULE J: "If it relates to a sale of an interest in lands, etc, the agreement is within the Statute. Here, the plaintiff, by virtue of his agreement with his landlord, was entitled to an equitable interest in the land for the seven years. A sale of that interest clearly is within the Statute. Is not this in substance an agreement for that? The plaintiff contracts to part with his equitable title to the seven years lease." COUNSEL: "The plaintiff does not affect to transfer that supposed equitable interest to the defendant; nor does the defendant take any such interest from him." MAULE J: "The plaintiff has an interest in land, and he parts with it for a pecuniary consideration." COUNSEL: "Not to the defendant." MAULE J: "The Statute of Frauds does not contemplate this or that mode of conveyance, it looks to the substance of the thing." In his judgment at 290, Maule J said: "Where any thing is done which substantially amounts to a sale or parting with an interest in land, the contract is "for or relating to a sale of an interest in or concerning lands, tenements or hereditaments" within the fourth section of the Statute of Frauds." 119 In Boston v Boston [1904] 1 KB 124 Collins MR said, at 127: "Looking at the contract, its terms do not embrace as part of the contract the acquisition of any interest in land. Undoubtedly the wife promised that if the husband bought [the house] she would in that case repay him the amount of the purchase money; but it is no part of the contract that he is to buy the house; and that being so, the contract does not embrace an interest in land. There is no case, so far as I am aware, to be found in the books in which the Statute has been held to apply unless by the terms of the contract the sale of land, or some interest in or concerning land, was dealt with as part of the contract." (emphasis added) 120 Mathew LJ said, at 127: "It seems to me that s 4 of the Statute of Frauds means that any contract for any interest in or concerning land must, to be enforceable, be expressed in writing, and that the contracts dealt with in the section must be contracts operating on an interest in land. In this case the contract created no obligation to acquire an interest in land, it did not affect the owner of the land mentioned, nor did it create or deal with the interest of anyone in it." (emphasis added) 121 In Brown v Robertson (1890) 16 VLR 786 Webb J said, at 790: "Now I take the distinction between cases which are within the Statute, and cases which are not, to be this – to bring a case within the Statute there must be a contract by virtue of which one party to it is to acquire an interest in land. But where the agreement is between independent parties, none of whom have any interest in land, and under which no party to the agreement acquires any interest in the land, that is not a contract which is under the Statute of Frauds, and does not require to be in writing." 122 Hodges J said, at 792: "I think it aims at a contract for the sale of lands, a contract by which a person is to acquire or to part with some interest in lands." 123 In my view, Webb J in Brown v Robertson unduly narrowed the Statute by saying that there must be a contract by virtue of which one party is to acquire an interest in land. The decision of the Privy Council in Gray v Dalgety & Co is inconsistent with that proposition – there, the only dealing with land which would occur under the contract was that the landowner would part with an interest in land, by mortgaging it. The formulation of Hodges J in Brown v Robertson, which does not have that difficulty, is to be preferred. 124 In Horton v Jones (1935) 53 CLR 475 at 489 Starke J said: "The Statute of Frauds is directed to agreements concerning, covering or extending to lands or interests therein, whether the contracting party has title to them or not." 125 In Daulia Ltd v Four Millbank Nominees Ltd [1978] 1 Ch 231 (the facts of which are set out at paragraph 115 above) Goff LJ said, at 240: "It is clear to me that ex hypothesi it is not a contract for the sale of land or any interest in land because it is a separate and independent contract to enter into such a contract. In my judgment, however, it is equally clearly a contract for some other disposition of an interest in land." The section there being considered was section 40 Law of Property Act 1925 (Eng), a section for all practical purposes identical with section 54A Conveyancing Act 1919 . 126 Daulia illustrates how the fact that a further agreement would need to be entered into before any interest in land actually passed is no obstacle to the Statute applying. That was also the situation in Gray v Dalgety & Co Ltd, where the landowner would need to enter into a mortgage with the mortgagee who the broker found before he parted with any interest in land. Similarly, in Horsey v Graham, a further agreement would be needed, between the plaintiff and the present lessee of the public house, before any interest in land would actually be acquired. 127 The contract between Powercell and Cuzeno was one under which Cuzeno obliged itself to part with an interest in land, in certain circumstances (viz, that the purchasers were not prepared to forego their right to have a home unit conveyed to them). While the carrying out of the contract between Powercell and Cuzeno would require a further contract or contracts to be entered, between Cuzeno and any purchaser who was not willing to forego his or her rights, that does not prevent section 54A applying. For these reasons, I am of the view that the contract between Powercell and Cuzeno is one which is required, by section 54A, to be in writing, or to have a note or memorandum in writing. Because there is no such writing, Powercell's claim fails. 128 It is of some comfort to the conclusion I have reached about the application of section 54A to the present contract that it appears that a similar result would be arrived at in the United States' law, where the Statute of Frauds has also been adopted. Williston, A Treatise on the Law of Contract", 3rd edition (1960) volume 3 page 513 paragraph 488 says: "Nor is it material that the conveyance is not to be made directly from one party to the contract to the other. A contract to convey to or to purchase from a third person is within the Statute." 129 In Lees v Fleming [1980] QdR 162 Connolly J said, at 168, that the Queensland equivalent of section 54A "… does not extend to a contract to purchase from a third party as distinct from a contract to purchase from the other party …". That view was based in part upon a perceived difference between the terms of the Queensland version of the Statute of Frauds, and its original English version. As I am not persuaded that there is any such difference between section 4(4) of the Statute of Frauds and section 54A Conveyancing Act 1919, it is not appropriate to apply this statement from Lees v Fleming in New South Wales. Powercell's Estoppel Claim 130 In addition to the issues which I mentioned in paragraph 19 above, as arising under the reply, Powercell pleaded in the following terms: "In any event, the defendant took the benefit of the July agreement and it would now be inequitable or unconscionable for the defendant to rely on section 54A(1) or section 23C(1)(a) of the Conveyancing Act . Particulars (i) The plaintiff terminated the joint venture agreement, and the defendant ceased to be bound by its terms, including the term requiring the defendant to transfer the title to nine of the home units to the plaintiff. (ii) The defendant sold the nine home units for significantly more than the defendant would have received if it had completed the sales to the plaintiff's purchasers." 131 This was treated by both counsel, in argument, as though it raised an allegation of estoppel. 132 On the first day of the trial, the plaintiff sought and was granted leave to delete paragraphs from the Amended Statement of Claim, in the following terms: "10. Additionally or alternatively, on or about 19 July 1996 the Defendant represented to the Plaintiff that, if the Plaintiff agreed to:- (i) terminate the joint venture agreement with the Defendant; and (ii) enter into a contract with the Defendant to construct the home unit development; then the Defendant would take over the Plaintiff's obligations under the contracts between the Plaintiff and its purchasers, and would indemnify the Plaintiff in respect of any liability which the Plaintiff might have to the purchasers under those contracts. Particulars The representations were oral and were made by George Jabbour (on behalf of the Defendant) to Steven Ward (on behalf of the Plaintiff) at George Jabbour's office. 11. Acting in reliance upon the representations, the Plaintiff:- (i) terminated the joint venture agreement with the Defendant; (ii) entered into a contract with the Defendant to construct the home unit development; and (iii) terminated the contracts with its purchasers. 12. The Defendant did not take over the Plaintiff's obligations under the contracts between the Plaintiff and its purchasers and did not indemnify the Plaintiff in respect of the liability which the Plaintiff had to those purchasers but instead the Defendant entered into contracts in 1997 for the sale of the Plaintiff's units to other parties at prices which exceeded the amounts payable under the contract in the Schedule and, on completion of those contracts later in 1997, the Defendant obtained the benefit of:- (i) the profit which the Plaintiff would have obtained on completion of the contracts in the Schedule; and (ii) a further profit in excess of $380,000, 13. As a result of having acted in reliance on the Defendant's representations, the Plaintiff suffered loss. Particulars (i) The Plaintiff repeats the particulars of paragraph 9 above. (ii) The Plaintiff is liable to be sued under the contracts it entered into with Markovski, Karavelas and Azar. 14. In consequence of the matters referred to in paragraphs 10-13 above, the Defendant is estopped from denying the existence of the contract referred to in paragraph 5 above." The plaintiff also, at that time, deleted from the prayers for relief in the Amended Statement of Claim a claim for: "A declaration that the Defendant is estopped from denying that it is liable to compensate the Plaintiff for the losses referred to in paragraph 9 and to indemnify the Plaintiff in respect of any liability it has under its contracts to C & C Huon Pty Limited, Markovski, Karavelas and Azar;" 133 Voumard, The Sale of Land, 5th edition, paragraph [3050] says: "Where there is no written memorandum of an agreement or where the only memorandum is defective in some particular, a party to the agreement may, by acts, words or other conduct be estopped from denying that there is a sufficient memorandum within the Statute ( Ford v Young (1882) 8 VLR(E) 93; Grummit v Natalisio [1968] VR 156; Humphries v Humphries [1910] 2 KB 531; Deveney v Crampsey (1967) 62 DLR (2d) 244. Compare Phillips v Ellinson Bros Pty Ltd (1941) 65 CLR 221 at 244 …). This principle depends on the ordinary rules of estoppel." 134 The possibility of there being an estoppel against the operation of section 54A was expressly recognised by Priestley JA in Cuzeno Pty Ltd v Powercell Pty Ltd [1999] NSWCA 344 at [28], which I have quoted at paragraph 35 above. 135 Riches v Hogben [1986] 1 QdR 315 provides a further example of an equitable estoppel being used as the basis for equitable relief, notwithstanding that a contract was unenforceable by reason of the Statute of Frauds. 136 The substance of the submissions Powercell made on this "estoppel" point were: (1) a written submission that the estoppel " flows from detrimental reliance by Powercell upon Mr Jabbour's oral assurance to 'take over' the existing purchase contracts. Powercell agreed to rescission of the original land and building contracts which placed it out of its power to complete with any of the purchasers." (2) a written submission that "the development of the modern law of estoppel as traced by the Hon. L J Priestley QC in his 1993 article and culminating in the High Court's decision in Giumelli makes the application of the general estoppel doctrine unremarkable in this case. The actions of Mr Jabbour in denying the oral agreement were unconscientious in that the first instance he supplied nine blank pages which Mr Ward (wrongly) thought would secure his position of having secured the result of recision of the original land and building contracts and the execution of a new building contract, Mr Jabbour then recovered those pieces of paper to improve his position in asserting the statute." (3) an oral submission that "the essence of it is if the writing point is an answer to the contract, then it is unconscientious to assert, having the benefits on one side and profits made and that the equitable remedy ought to be granted, if we are not in the area of damages at law and we have covered that account, is an equitable award for loss suffered? We are merely seeking an indemnity for walking away from the misrepresentation. That is in essence the way we put the case." 137 Counsel for Powercell made a reference to Giumelli v Giumelli (1999) 196 CLR 101 as a case where an equitable estoppel led to the payment of money as appropriate relief, to the "quartet of cases" culminating in Foran v Wight (1989) 168 CLR 385, and handed me a copy of Justice Priestley's article "Estoppel: Liability and Remedy" in Equity, Fiduciaries and Trusts 1993 page 273. After judgment was reserved he sent me a reference to Action Strength Limited v International Glass Engineering IN. GL. EN. SpA [2003] UKHL 17. 138 I regret to say that, having re-read the written submissions, and having re-read the transcript of the oral argument, I do not begin to understand which particular principles of estoppel are here relied upon, or how it is submitted the facts of the present case relate to any such principles. In that circumstances I cannot uphold the pleading said to give rise to the "estoppel" claim. Findings on Facts – Events Relevant to Breach and Causation of Damage 139 In light of the conclusion which I have come to, that the contract on which Powercell sues cannot be enforced by reason of section 54A Conveyancing Act 1919, Powercell is not entitled to receive any damages. However, in case the Court of Appeal disagrees with my conclusion on liability, I now proceed to set out findings relevant to damages. 140 In the weeks following 19 July Mr Ward contacted Mr Savelle at least twice a week to enquire whether he had arranged for the exchange of the four new contracts. On each occasion Mr Savelle told him to stop worrying, and that he would look after it. This continued for several months. 141 A week or so after the meeting on 19 July 1996, Mr Ward went to see Mr Tosolini. Mr Ward was uneasy about what Mr Jabbour might do concerning the nine purchasers. As well, though, he was aware that it would now be impossible for Powercell to perform those contracts, and that Powercell had received deposits under those contracts. Part of the procedure which Mr Jabbour had outlined on 17 July for changing the basis of the development from a joint venture to a conventional builder-and-principal agreement, included rescinding the contracts and re-issuing them in Cuzeno's name, and that had been reiterated on 19 July. 142 Mr Ward, and his solicitor, Mr Tosolini, set about implementing a strategy of trying to persuade the purchasers to accept a rescission of the contract, without offering those purchasers the opportunity of a replacement contract with Cuzeno. On 1 August 1996 Mr Tosolini sent to each purchaser a letter in the following form: "We refer to contracts for sale dated [insert appropriate date]. Prior to entering into the Contracts with your client our client had contracted with the registered proprietor of the land to purchase a one half share of the land. After construction and registration of the plan our client would be registered pursuant to a deed of partition as proprietor of the lot he is selling to your client. We are now instructed that the sale to our client of the one half share in the land will not proceed. Accordingly, our client will not acquire the half share in the land or ultimately the lot, the subject matter of the sale and consequently will not be able to transfer title to the lot to your client. Accordingly, our client therefore wishes to rescind the Agreement as it will not be able to perform its obligations. Please confirm." 143 Mr Tosolini explained in oral evidence the strategy behind his letter of 1 August 1996: "Basically it says that "We wish to rescind the contracts. Please confirm." Obviously that would elicit some sort of reaction from the nine purchasers. If any of those purchasers were to again cause a problem, so to speak, the idea was that we would then, or Steve Ward, the client would then approach Mr Jabbour and Chris Savelle and ask them to resolve this problem in accordance with the arrangement." 144 Part of the reason for Mr Tosolini adopting the strategy he did, of seeking to get purchasers to agree to rescind the contract, without offering them an alternative contract with Cuzeno, was that he was aware that the arrangement between Mr Ward and Mr Jabbour was an oral one, and proceedings would be necessary to enforce it, if Mr Jabbour refused to co-operate. 145 Each of the contracts with the purchasers had made provision for the deposit paid to be released to the vendor. That was a provision which had been inserted at the suggestion of Mr Savelle, to enable his firm to obtain commissions at an earlier date. The total commissions payable to Mr Savelle's firm in connection with the nine sales was $40,000. Powercell had paid one half of that commission, and the other half was to be paid on completion of the sales. In accordance with the agreement made on 19 July, on 14 August 1996 Mr Jabbour gave Mr Ward a cheque for $20,000, to refund the commission which had been paid. 146 At first, Mr Tosolini's strategy seemed as though it was going to work in relation to some purchasers. On 16 August 1996 the solicitors for Yassmin wrote to Mr Tosolini saying that their client had no objection to her contract being rescinded. On 19 August 1996 cheques in favour of "C Huon" and "W Karavelas", each in the sum of $8,500 were drawn on Powercell's account. On 19 August 1996 a letter from C & C Huon to Powercell said, "We accept the rescission on the condition that our deposit of $8,500 is refunded in full". The evidence does not disclose whether the cheques in favour of "C Huon" and Mr Karavelas were ever presented. Nor does it disclose the exact circumstances in which the letter from C & C Huon dated 19 August 1996 was written – though it is at least a possibility, on the evidence, that it is a letter solicited by Mr Sarrif. 147 On 30 August 1996 solicitors acting for C & C Huon wrote to Mr Tosolini, referring to his letter of 1 August 1996, and confirming that their clients were agreeable to the contract being rescinded. The letter requested "a letter confirming mutual rescission of the contract". The evidence does not disclose whether any such letter of confirmation was sent. 148 In relation to at least some purchasers, including both Mr Markovski and Mr Scattergood, Mr Tosolini wrote a letter on 19 September 1996 enclosing a cheque for the amount of the deposit which that purchaser had paid, and saying: "We confirm that the acceptance of this cheque by your client will be deemed to be an acceptance of the rescission of the contract by your client and that neither party shall have any further rights either at law or in equity against the other." 149 In relation to at least some of the purchasers (including both Mr Markovski and Mr Scattergood) the cheque was returned, with an intimation that the client considered the contract still on foot. 150 On 9 October 1996 the solicitors for Cuzeno wrote to Mr Tosolini saying: "We refer to various correspondence we have received in these matters and confirm that as we understand it, the contract between Cuzeno Pty Ltd and Powercell Pty Ltd will be rescinded and the various contracts entered into by Powercell with certain prospective buyers of units will also be rescinded and our client will make a decision as to whether or not he wishes to enter into contracts with those purchasers. Could you please confirm whether that is the case." My attention was not drawn to any response to that letter. 151 Mr Ward's affidavit evidence is that, after a few months of Mr Savelle telling him that he would arrange for the exchange of new contracts with the four purchasers for whom he had been given executed back pages, Mr Savelle said to him, "George will not exchange those contracts and he has told me to butt out of it." Thereupon, Mr Ward rang Mr Jabbour, who told him, "I'm not exchanging on any of those units." 152 Mr Ward's diary for 5 November 1996 contains the entries: "George said he will not exchange on 4 units as agreed. RENEGED ON DEAL Rang Tosolini told him that George will not exchange on 4 as agreed and to write to buyers." 153 I infer that it was on 5 November 1996 that the conversation just mentioned in Mr Ward's affidavit occurred. 154 I record that counsel for Cuzeno relied on this diary entry to support a submission that any contract entered on 19 July 1996 related to four contracts only. In my view, this diary entry relates only to the conveyancing expedient which had been agreed on, of handing over executed back pages of contracts, and not to the full contract which had been arrived at on the morning of 19 July. Proceedings by Purchasers Other Than Grasso 155 The purchasers other than Grasso who commenced proceedings against Powercell, and obtained verdicts for breach of contract, plus costs, are as follows: Purchaser Court File No Judgment date Verdict Scattergood & Morgan District 3829 of 1998 23 June 1999 $45,000 Cannazarro, Giacca, Grasso and Grasso Local 3640 of 1998 13 Sept 1999 $40,000 Ayoub Local 8595 of 1998 14 April 2000 $40,000 Yassmin Local 6981 of 1998 17 Aug 2000 $40,000 C & C Huon Holdings Pty Ltd has commenced proceedings number 2273 of 2000 in the Local Court at Sydney. Those proceedings are not yet decided. Agreed Facts Concerning Quantum 156 While there is vigorous disagreement about whether Powercell is entitled to recover any, and if so which, of the amounts it has paid in consequence of the litigation brought against it by the various purchasers, the lawyers acting in this case have acted as responsible litigation lawyers should, and reached agreement on the amounts which Powercell has paid, or is liable to pay, in connection with the various claims brought against it by the purchasers. That agreement appears as a schedule to this judgment. Insofar as there is an item, relating to any purchaser, for "Powercell's costs incurred" those costs are ones which relate to the claim brought by the purchaser against Powercell, not to the cross-claim which Powercell has brought against Cuzeno in the same proceedings. Insofar as Powercell has incurred costs in those proceedings, for cross-claiming against Cuzeno, those costs are omitted from the Schedule because those cross-claims are part of the present litigation. Who pays them will depend upon the order for costs which I make at the conclusion of these proceedings. Conclusion Concerning Breach and Causation 157 The only communication between Mr Ward and Mr Jabbour which indicated unpreparedness on Cuzeno's part to go ahead with the agreement is the conversation which occurred on 5 November 1996, referred to in paragraphs 151 and 152 above. At no time did Mr Ward ask Mr Jabbour to carry out the contract concerning any purchaser other than the four which had been discussed on 19 July 1996. Even so, following the conversation of 5 November 1996 it was quite clear that Cuzeno was not going to perform the agreement in any way whatsoever. Cuzeno has breached its contract by not entering into agreements with all nine purchasers. 158 Cuzeno submitted that the initial preparedness of C & C Huon to accept a recision of the contract (see paragraphs 146 and 147 above) shows that the damages paid to it were not a consequence of Cuzeno's breach of contract. The evidence simply did not explore why it was that C & C Huon came to change its mind about being willing to accept recision of its contract. On the evidence as a whole it is more likely than not that any damages, paid legal costs, and own legal costs connected with C & C Huon are caused by Cuzeno's breach of contract. 159 It was only concerning C & C Huon that there was any serious submission put that damages were not caused by the breach. I conclude that the damages which Powercell has paid to all of the purchasers who have recovered a judgment against Powercell, the costs which Powercell has paid to those purchasers, and the legal costs which Powercell has incurred in defending the actions brought by those purchasers are a consequence of that breach. So far as the Grasso litigation goes, all of Powercell's rights against Cuzeno have now merged, in a true res judicata, in the judgment which the Court of Appeal gave on that cross-claim. No additional damages are recoverable in these proceedings concerning the Grasso contract. Contract to Indemnify? 160 Powercell asserts that the contract between Powercell and Cuzeno included a provision that Cuzeno would indemnify Powercell in respect of any liability which Powercell might have to purchasers. Such a term was not found by Williams DCJ. The correct legal analysis is that there is an issue estoppel against Powercell, arising from Williams DCJ's finding of the terms of the contract, and that his Honour's finding does not contain any term obliging Cuzeno to indemnify Powercell. Even if that view were wrong, I do not find, on the evidence before me, that there was any such term in the contract. The consequence is that, independently of the s 54A point, Powercell is not entitled to a declaration that it is entitled to be indemnified against any liability which it might suffer at the hands of C & C Huon, or at the hands of those purchasers who have not yet sued. 161 The plaintiff's claim for damages is one in relation to all nine contracts. Thus, in relation to those purchasers who have not yet obtained a judgment, damages need to be assessed by evaluating the likelihood that damages will be suffered in the future (cf Malec v J C Hutton Pty Ltd (1990) 169 CLR 638). 162 Concerning the three purchasers who have not yet commenced proceedings, Powercell had breached its contracts to convey well prior to the end of June in 1997. Thus, each of those purchasers is now out of time for bringing an action for breach of contract. I would assess the prospects of those purchasers recovering damages at zero. 163 The claim by C & C Huon has not yet been heard. Powercell bears the onus of proving the likely quantum of damages which might be recoverable. The best guide to the damages, other side's costs, and own costs likely to be involved is the damages, other side's costs and own costs sustained in the actions by other purchasers. If C & C Huon were to be successful in establishing liability, I would, at this stage, assess the likely verdict as being $40,000, the likely amount of prejudgment interest at $18,000, the amount of plaintiff's costs at $20,000, and the amount of Powercell's costs incurred at $30,000. I would reduce each of the amounts for judgment, prejudgment interest, and plaintiff's costs awarded by 50%, to allow for the contingency that Powercell might escape liability altogether by reason of the matters discussed in paragraphs 146 and 147 of this judgment. That results in an amount of damages, attributable to C & C Huon, totalling $69,000. The Appeals Concerning Scattergood and Cannazarro 164 The only matters concerning mitigation of damage which Cuzeno pressed related to the costs which Powercell incurred, both for its own costs and for the costs of the opposite party, when Powercell unsuccessfully appealed against judgments which had been given in favour of the purchasers Scattergood and Cannazarro. I now turn to consider those appeals. Principles Concerning Remoteness of Damage and Costs of Appealing 165 Cuzeno relies on principles set out in McGregor on Damages, 15th edition. At paragraphs 709-711 the learned author deals with three situations where a plaintiff can recover, as damages, costs incurred in prior litigation. Those three situations are: · where the now plaintiff has unsuccessfully but reasonably defended an action against him, he generally recovers the taxed costs he has had to pay to the successful party and his own costs of defending the action taxed as between solicitor and client · where the now plaintiff has unsuccessfully but reasonably brought a claim, he is entitled to the taxed costs paid by him to the other party and his own costs taxed as between solicitor and client · where the now plaintiff has unsuccessfully defended a prosecution, he is sometimes entitled to his costs of defence. The learned author continues, at [712]: "In the above three types of cases, any of the costs involved in an unsuccessful appeal in the prior proceedings by the now plaintiff after his failure at first instance will generally not be recoverable because they will not be held to have been reasonably incurred, and thus the now defendant should not be liable for them. Thus costs of the first hearing only and no appeal costs were allowed in Vogan v Oulton (1898) 79 LT 384; affirmed (1899) 81 LT 435 (CA) but only on the question of whether the costs of the action at first instance were recoverable, and also in G W Ry v Fisher [1905] 1 Ch 316. In Vogan v Oulton (1898) 79 LT 384, 385 Wright J said he knew of no such case allowing appeal costs, and "it would be going a long way when a man has had a decision against him on a matter which is largely a question of fact, if not altogether a question of fact, to allow those to be recovered." However, in one exceptional case, Sutton v Baillie (1892) 65 LT 528 it was held reasonable to appeal, since there had been a difference of opinion among the judges below, [The matter had been adjudicated upon by two judges of first instance in two separate actions] and the costs of the unsuccessful appeal against the third party were allowed as damages against the now defendant." 166 Vogan & Co v Oulton (1898) 79 LT 384 was a case brought by a firm which had taken goods on hire from the defendant. The goods were defective, resulting in a person being injured. That person sued the firm which had been using the goods, and recovered damages. An appeal from the decision granting those damages was unsuccessful. The full text of Wright J's judgment on this topic (at 385) is: "Then there are the costs of the appeal from the County Court. I feel a difficulty about that. I do not know of any case in which the costs of the appeal have been allowed to be recovered, and it seems to me that it would be going a long way when a man has had a decision against him on a matter which is largely a question of fact, if not altogether a question of fact, to allow those to be recovered. I do not think that the appeal can be considered the natural consequence of what had taken place. I rather think that they went out of their way in appealing, and I don't think that they ought to recover the costs of the appeal." 167 This fuller statement of the remarks on judgment shows, by its reliance on what was a "natural consequence", and on the plaintiffs having 'gone out of their way in appealing' that Wright J was not purporting to do anything other than apply the ordinary rule for remoteness of damages in contract. In Hadley v Baxendale (1854) 9 Ex 341; 156 ER 145 Alderson B stated the rule (at 355; 151): "Where two parties have made a contract which one of them has broken, the damages which the other party ought to receive in respect of such breach of contract should be such as may fairly and reasonably be considered either arising naturally, that is according to the usual course of things, from such breach of contract itself, or such as may reasonably be supposed as to have been in the contemplation of both parties, at the time they made the contract, as the probable result of the breach of it." 168 What counts as "the usual course of things" can change with time. In Alexander v Cambridge Credit Corporation Ltd (Receivers Appointed) (1985) 2 NSWLR 685, at 693, Kirby, Hope and McHugh JJA considered the test requiring "special" or "exceptional" circumstances before a stay would be granted pending appeal. They said: "… the principle and the like expression of it in Barker v Lavery (1885) 14 QBD 769 and in Monk v Bantram [[1891] 1 QB 346] first appear in decisions of the courts when the facility of appeal (which was not generally available at common law) was still relatively novel. In these circumstances the courts might more readily look upon appeals as an exceptional process. Today this is not the case. Far from being exceptional, appeals are common." 169 In my view today, it could not be said that if A, through breach of contract, puts B in a situation where B might be sued, it is out of the usual course of things that B might appeal if he or she were to lose in that litigation. 170 Thus, it is not possible to say that the costs of an appeal are necessarily too remote to be claimable as damages. However, in some circumstances the taking of an appeal might involve B in failing to act reasonably to mitigate his or her damage. That is to say, it is by reference to the circumstances of the individual case, not by reference to a rule about costs of appeals always being unrecoverable, that the recoverability of damages consisting in the costs of an appeal is to be judged. In Redken Laboratories (Aust) Pty Ltd v Docker (No.2) [2000] NSWCA 235 Sheller JA quoted the passage from McGregor which I have set out earlier, and said, at [13]: "In my opinion, Redken's appeal against the verdict in favour of the plaintiff had no real prospect of success and, accordingly, cannot be regarded as reasonable. For that reason, I do not think that Redken is entitled to any order against Achievement, requiring Achievement to indemnify it for the costs of the appeal Redken was required to pay the plaintiff, or for its own costs of the appeal." 171 This decision of his Honour's, looking as it does to the reasonableness of the taking of the particular appeal in question, is in accordance with the principle I have just outlined. The Scattergood Appeal 172 After judgment had been given against Powercell in the claim brought by Scattergood, Scattergood sought leave to appeal against that judgment from the Court of Appeal. The judgment in the District Court had been given by his Honour Judge Phegan. His Honour held that the letter of 1 August 1996 (set out in 142 above) was a clear repudiation. A letter from Powercell's solicitors dated 19 September 1996 had enclosed a cheque for the deposit, but Scattergood's solicitor had returned that cheque, and said that they regarded the contract as still on foot. 173 On 6 November 1996 Powercell's solicitors wrote again to Scattergood's solicitors, saying that Powercell was unable to complete the contract because it would never have title to the land. A cheque refunding the deposit was once again enclosed. On 8 November, Scattergood's solicitor replied, purporting to return the deposit, and reiterating that the contract was valid and binding. 174 On 27 November 1996 a further letter from Powercell's solicitor to Scattergood's solicitor mentioned that the deposit cheque had not been actually returned, but continued "in any event, with respect, we consider this to be a futile exercise on your part. Please understand that our client will not and cannot transfer title of the units to your client as he will never acquire title". There was no immediate response to that letter, but on 15 April 1997 Scattergood's solicitor wrote to Powercell's solicitor purporting to terminate the contract. 175 Powercell's solicitors replied on 17 April, saying, "Our client advises that your client is entitled to terminate the contract." On 2 May 1997 Powercell's solicitors wrote again to Scattergood's solicitors saying: "We refer to our letter of 17 April 1997 and advise that the letter contains an error, and should have read 'is not entitled to terminate the contract.' Previous correspondence in relation to this matter plainly sets out our client's position. Our client hereby rescinds the contract pursuant to special condition 1 of the contract." Special condition 1 was the condition, set out in paragraph 8 above, which entitled either party to rescind if the strata plan had not been registered within 12 months from the date of the contract. 176 Scattergood argued before Phegan DCJ that the letter of Powercell's solicitor of 6 and 27 November were each fresh acts of repudiation, which gave rise to a fresh right in Scattergood to elect whether or not to accept the repudiation. Phegan DCJ held that whether this submission was correct or not depended upon whether the undoubted repudiation which had occurred on 1 August 1996 was a "once and for all breach". His Honour held that it was, because it made clear that Powercell had lost for all time the capacity to make a good title. Thus, the letters of 8 and 27 November were not properly to be understood as fresh acts of repudiation. 177 His Honour also held that neither, however, was the rescission of Powercell pursuant to the special condition in the contract a valid one. He set out portion of the judgment of the Privy Council in Selkirk v Romar Investments Limited [1963] 1 WLR 1415 at 1422-1423, concerning the circumstances in which a contractual right of recession can be availed of, and in particular that it cannot be availed of when a vendor has been guilty of recklessness in entering into his contract. His Honour held that recklessness of Mr Ward, subsequent to entering the contract (in particular handing back the nine executed back pages) was recklessness. Further, at least some of the delays which resulted in the strata plan not being registered within the 12 months were attributable to the actions of Powercell in insisting on conditions of finance of the joint venture which were unacceptable to Mr Jabbour. His Honour found that "These are circumstances which do fall within the spirit of the principles enunciated in Selkirk, even though they may not fall strictly within the letter". (At judgment page 18). The purported rescission by Powercell pursuant to the special condition was, his Honour held, a repudiation, which Scattergood accepted by commencing proceedings. 178 When Powercell appealed against that judgment, it was on grounds which included that Scattergood had not pleaded that the purported exercise of a contractual right of rescission was another repudiation, and that his Honour had applied the wrong legal test in holding that Powercell was not entitled to exercise a contractual right of rescission of the contract. 179 The application for leave to appeal was dismissed on 22 May 2000 by Mason P and Heydon JA. The totality of their Honours reasons was: "1. The claimants letter of 27 November 1996 was a clear repudiation which the opponents were entitled to treat as a basis for termination. This they did on 15 April 1997. 2. Although this argument did not appeal to the trial judge, it is flagged as a contention point by the opponents. Because that argument is correct, there is no utility in granting leave to appeal to ventilate the other issues. 3. The summons is dismissed with costs." 180 The decision to appeal in this matter was made by Powercell on the basis of oral advice from counsel who had conducted the hearing in the District Court. That advice was to the effect that Powercell had reasonable prospects in obtaining leave to appeal and in succeeding in an appeal if leave were granted. 181 When Powercell had advice from counsel, and when the basis upon which leave was not granted was that a point not relied on by the trial judge was correct, it seems to me that the taking of the appeal proceedings did not involve any failure to act reasonably to mitigate damage. I would allow the costs involved in the Scattergood appeal. The Cannazarro Appeal 182 Magistrate Lulham decided the case brought by Cannazarro against Powercell on 13 September 1999. He held that the letter of 1 August 1996 was a "rescission of the contract by the vendor in terms which allowed the purchasers to proceed for any damages suffered by them due to the breach by the vendor." He said that the purchasers accepted that the contract was terminated by applying for a refund of stamp duty which had been previously paid by them. 183 The submission which Powercell put to the Magistrate, was that the contract was terminated on 12 August 1996, and that that was the appropriate date for quantification of any damages. Valuation evidence in the case showed that the value of the unit had not moved between the date of the contract and 1 August 1996. Thus, Powercell submitted that no loss had been established. 184 The Magistrate refused to accept that submission. He referred to some evidence which had been given that Cuzeno would agree to sell the same unit to the same purchasers as Powercell had contracted with and for the same price, that some attempts were made by the purchasers to obtain such a contract from Cuzeno, and that those negotiations continued to November 1996. Thereafter, they set about finding an alternative property. The purchasers had started to study advertisements, trying to find a substitute unit, before Christmas 1996. They started actually inspecting possible substitute units about the end of January or early February 1997. They entered a contract to purchase an alternative investment property in May 1997. The unit which Powercell had contracted to sell to Cannazarro was sold by Cuzeno to another purchaser on 14 March 1997 for $215,000. The learned Magistrate referred to the High Court's decision in Johnson v Perez (1988) 166 CLR 351, and to a principle whereby "damages will be assessed at the date necessary to adequately compensate the plaintiff for the loss suffered." He quantified the damages by reference to the price at which Powercell had agreed to sell the unit to Cannazarro, and the price at which that same unit was sold by Cuzeno in March 1997. The difference was $45,000. He entered judgment for the amount which was the upper limit of the jurisdiction of the Local Court, namely $40,000, plus costs. 185 Powercell filed a Summons for Leave to Appeal from that judgment. Again, that course was taken on the basis of oral advice of counsel who had appeared at the trial, to the effect that Powercell had reasonable prospects in obtaining leave to appeal and in succeeding in an appeal if leave were granted. The grounds for appeal related to whether the Magistrate had adopted the correct date as at which to assess damages, and whether the Magistrate had failed to give proper effect to the purchaser's obligations to mitigate their damage. 186 The Summons for Leave to Appeal was heard by Smart AJ on 2 December 1999. His Honour delivered judgment on 7 December 1999. 187 Smart AJ considered in more detail than the Magistrate had done, the decision of the High Court in Johnson v Perez (1988) 166 CLR 351. He noted that in that case all Justices in the High Court agreed that the general rule was that damages for tort or for breach of contract were assessed at the date of breach, but in each case the courts had to work out a solution best adapted to give the wronged party that amount in damages which would most fairly compensate that party for the wrong suffered. He noted that Johnson v Perez was an action in which solicitors were sued both for professional negligence, and for breach of contract, and that Mason CJ pointed out, at 356 that the general rule had been applied more uniformly in contract than in tort, but even in contract cases courts depart from the general rule whenever it is necessary to do so in the interests of justice. Smart AJ noted that Dawson J, in Johnson v Perez, at 387, said that one category where damages for breach of contract could be given at a different date to breach is where damages are awarded in lieu of specific performance and the value of the property which is the subject matter of the contract is assessed at the date of judgment, or where a plaintiff does not move immediately to carry out repairs or to mitigate his loss but it is not unreasonable for him to delay doing so. Smart J noted that in Radford v de Froberville [1977] 1 WLR 1262 Oliver J, at 1286 had noted that, if the function of an award of damages is to put the plaintiff in as good a position as if the contract had been performed, there was no reason in principle why damages should not be assessed as at the date of judgment in the case of a breach of contract which cannot be specifically performed. Smart J noted that Radford and Wroth v Tyler [1974] Ch 30 (both cases where damages for breach of contract were awarded assessed at the date of the trial) both involved contracts for the sale of land, where if the defendant had not been in breach the plaintiff would have received land which had increased in value. His Honour considered Hoffman v Cali (1985) 1 QdR 253, where the Queensland Full Court considered the correct measure of damages where there has been an anticipatory repudiation by the vendor of an executory contract of a sale of land. They case, following the general rule laid down on Frost v Knight (1872) LR 7 Ex 111, 113, held that a plaintiff who accepts such a repudiation is entitled to such damages as would have arisen from non performance of the contract at the appointed time. Smart AJ said that, applying that principle, April 1997 was the contractual date for completion; if some allowance was made for a failure to mitigate, which took the form of delay in finding an alternative unit, March 1997 might be the appropriate date for assessment of damages. Thus, whether by following the Johnson v Perez principles, or by following those outlined in Hoffman v Cali, Smart AJ held that the Magistrate had dealt with the reasonableness of the plaintiff's conduct and the plaintiff's delay in finding an alternative unit in a permissible way. Smart AJ concluded that the Magistrate's process of reasoning not only revealed no error, but also that it was correct. 188 In my view, the decision of the Magistrate involved, and should have been seen to involve, the correct application of the correct principle. The costs of the Cannazarro appeal are not recoverable. Orders 189 Powercell's claim in matter number 3592 of 1997 should be dismissed. Each of the other cross-claims which have been brought into the Supreme Court should also be dismissed. I direct the parties to bring in short Minutes of Order to effect that dismissal, and make any consequential orders which might be appropriate. At the same time I shall hear any arguments concerning costs. ********** Last Modified: 02/26/2004 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. 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