Coefficiency Pty Limited v Workforce International Pty Limited [2005] NSWCA 300

New South Wales Court of Appeal

Coefficiency Pty Limited v Workforce International Pty Limited [2005] NSWCA 300 CITATION: This decision has been amended. Please see the end of the judgment for a list of the amendments.

HEARING DATE(S): 31/08/2005

JUDGMENT DATE: 31 August 2005

JUDGMENT OF: Beazley JA at 34; Ipp JA at 34; Bryson JA at 1

DECISION: Leave granted, appeal dismissed, order varied on Cross-appeal, see [35].

CATCHWORDS: CONTRACT - termination - whether termination procedure was followed - decision on terms of non-standard contract - no question of principle.

LEGISLATION CITED: Local Court Civil Claims Act 1970

Progressive Mailing House v Tabali Pty Limited (1985) 157 CLR 17 at 33. CASES CITED: Shevill v Builders Licensing Board (1982) 149 CLR 620 at 625, 627. Laurinda Pty Limited v Capalaba Park Shopping Centre (1989) 166 CLR 623 at 6333-634.

Coefficiency Pty Limited Appellant PARTIES: Workforce International Pty Limited Respondent

FILE NUMBER(S): CA 40185/05

Mr M. Lawson Claimant COUNSEL: Mr P. Walsh Opponent

Gadens Lawyers Claimant SOLICITORS: Church & Grace Opponent

LOWER COURT JURISDICTION: Supreme Court

LOWER COURT FILE NUMBER(S): SC 11750/04

LOWER COURT JUDICIAL OFFICER: Malpass AsJ

IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL

CA 40185/05

BEAZLEY JA IPP JA BRYSON JA

Wednesday 31 August 2005 COEFFICIENCY PTY LTD v WORKFORCE INTERNATIONAL PTY LTD Judgment 1 BRYSON JA: The claimant, Coefficiency, was the plaintiff in the Local Court where it sued the opponent, Workforce International, in a statement of liquidated claim dated 11 April 2002 for $30,449 damages. The cause of action was stated in the further amended statement of liquidated claim filed on 20 May 2003 (White book 34-35) to this effect. 2 The parties entered into a contract for the provision and use of a disaster recovery centre on or about 30 September 2000. The term of the contract was thirty six months. Workforce breached the contract about 20 February 2002. Notice of breach and termination were sent to the defendant by way of letter on 6 February 2002. It was also and apparently separately alleged that Workforce unlawfully terminated the contract on or about 14 February 2002. 3 The further amended statement of liquidated claim does not allege that Workforce was in breach of contract by repudiatory conduct which was followed by acceptance by Coefficiency of that repudiation. The Magistrate's decision was not based on any such contentions. Workforce brought a cross claim which the Magistrate dismissed and there was no appeal to the Court of Appeal about the cross claim. 4 In relation to what appears to have been in issue on the claim and cross claim, the proceedings before the Local Court were remarkably complicated and extensive. 5 The contract of 30 September 2000 (white book 261) by cl 4 gave Workforce a guarantee "...for the availability and use of the Coefficiency disaster recovery centre subject to invoking the declared disaster procedure." 6 In the contemplated working of the agreement, cl 11, the Co-Efficiency disaster recovery centre facility was to be set up and maintained to provide Workforce with a temporary workplace when Workforce invoked disaster notification procedure. 7 By cl 12, Coefficiency was obliged to supply and put in place equipment for use by Workforce during a declared disaster. The equipment was listed, and it was office equipment, and basic equipment to service Workforce's computer equipment. It was contemplated by cl 6 that Workforce was to house equipment owned by Workforce at the disaster recovery centre and would be responsible for its maintenance, although Coefficiency might also provide and charge for maintenance service. 8 The obligations of Workforce under the contract were few. Workforce was to pay subscription fees of $1,500 per month with an annual CPI review, cl 8. Workforce was to see to its software being properly licensed, cl 10. 9 Under cl 13 there was to be a notification fee for each disaster, a minimum of $1,500, and a usage fee of $1,200 per day, rising after thirty days, while ever Workforce occupied the disaster recovery centre. 10 Workforce had responsibilities under cl 15 and 16 relating to its own equipment. There never was a disaster notification. The contract did not create any obligation on Workforce to put any of its own equipment in place in the disaster recovery centre or to keep it there. It was not a breach of an obligation under the contract for Workforce to have no equipment there or to remove equipment. 11 Although there was some reference to repudiation in the course of the hearing on appeal and as we were told in the proceedings before the Magistrate and before Master Malpass, the principles and application of the law of repudiation appear to me to have been outside the issues raised by the terms of the statement of liquidated claim as amended, and also outside the issues determined by the learned Magistrate. I see no occasion on this hearing to examine closely the principles on what constitutes repudiation followed by acceptance or the remedies which follow. These subjects are dealt with in Progressive Mailing House Pty Ltd v Tabali Pty Ltd (1985) 157 CLR 17 at 33 by Mason J, in. Shevill v Builders Licensing Board (1982) 149 CLR 620 at 625, 627, and Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd (1989) 166 CLR 623 at 633-634. 12 The focus of the decision of the Magistrate was termination, as alleged, not at all clearly, in the first paragraphs of the statement of liquidated claim. The decision was not focused on the altogether obscure allegation that Workforce unlawfully terminated the contract on or about 14 February 2002. I have not seen or heard in the course of argument any basis for consideration of that allegation. 13 The contract provides in cl 18 (White book 264) for termination in these words. Either party may immediately terminate this contract in whole or in part by written notice to the other party if the other party breaches a provision of this contract and such breach is not remedied within fourteen days after receipt of written notice of the breach. In this procedure there is to be a written notice of the breach. 14 The next step follows if the breach is not remedied within fourteen days after receipt of that written notice. Findings of the Magistrate establish that the written notice of breach was dated 6 February 2002 and was received by Workforce on 11 February 2002. In the workings of cl 18, the contract may then be terminated by written notice. It is important to know what the written notice of termination says because the contract might be terminated in whole or it might be terminated in part. 15 At the hearing before the Magistrate there was some consideration of whether the right of termination would still continue to exist if the breach were remedied later than the fourteen days specified. This difficult question is not important for the outcome. 16 Clause 18 does not confer any right to damages arising out of a termination. If as cl 18 provides, the contract were terminated, no further obligations or claims to damages could arise. On the other hand, breaches committed up to the date of termination could still lead to damages claims. As it is clear and findings establish that any money outstanding when the notice dated 6 February was delivered was paid on or about 20 March, it is difficult to see how damages of $30,448, which the Magistrate awarded, could have been assessed. On the face of things the only obligation which Coefficiency could enforce would be any further instalment which fell due by the date of termination (if there was a termination, and it is the underlying theory of Coefficiency's case that there was). 17 The appeal to the Supreme Court heard by Master Malpass was an appeal under s 69(2) of the Local Court Civil Claims Act 1970. As that subsection provides, appeal lay only on the ground that the decision was erroneous in point of law. This confines closely the consideration which it was appropriate to give to the issues on appeal before Master Malpass and again before the Court of Appeal. 18 What is asserted to have been a notice of breach under cl 18 is a letter on the letterhead of Coefficiency bearing date 6 February 2002, (White book 317), which refers to the disaster recovery contract and says, I am writing to advise that you are in breach of the terms and conditions of your contract with Coefficiency for the provision of a Disaster Recovery Facility. In accordance with the terms of this contract you are required to pay Coefficiency within 30 days from the date of each monthly invoice. Invoice SJ-100465 for $1,650.00 was issued on 11 December 2001 and should have been paid on or before 10 January 2002. You are advised that should payment not be received within 14 days Coefficiency is entitled to terminate the contract without further notice. 19 Solicitors who at that time acted for Coefficiency sent Workforce a letter of 6 March 2002 (White book 328) as follows. We act for Coefficiency Pty Ltd. Workforce International Pty Ltd entered into a contract with our client on or about 30 September 2000 with respect to the provision by our client of a disaster recovery centre at Newtown. On or about 14 February 2002 Workforce International Pty Ltd terminated the contract by non-payment of fees and vacating the premises. Our client has suffered loss and damages as a consequence of your breach of the contract. (A paragraph set out an asserted array of damages totalling $254,785.94). Unless a bank cheque payable to Coefficiency Pty Ltd for the sum of $254,785.94 is received by at our office by close of business, Wednesday 20 March 2002, we are instructed to commence recovery proceedings, including interest, damages and legal costs arising from your breach of the above contract. 20 The findings of the Magistrate (White 141 line 40) which might bear on termination under cl 18 are to these effects. On 25 March Workforce sent a letter to Coefficiency which said, wrongly as the Magistrate found, that Workforce did not receive Coefficiency's letter of 6 February 2002 and also claimed that Workforce had been locked out of the premises and that service had not been provided under the contract. The letter said, (White 332), We refer to your telephone discussion with Robert Dobbie of our office on 25 March 2002 and the agreement between Workforce International Pty Ltd ("Workforce") and your company relating to the supply of a Disaster Recovery Centre to Workforce by your company. You have advised that you consider that the agreement has been terminated as Workforce International Pty Limited did not remedy a breach of a provision of the agreement within 14 days of receipt of a written notice of the breach as required by Clause 18 of the agreement.