New South Wales Supreme Court CITATION : Lewis v Nortex Pty Ltd (In Liq); Lamru Pty Ltd v Kation Pty Ltd [2005] NSWSC 1062 HEARING DATE(S) : 10 - 13 October 2005 JUDGMENT DATE : 13 October 2005 Equity JURISDICTION : JUDGMENT OF : Hamilton J DECISION : Lewis and Kation precluded by lateness from pursuing contention that orders relating to Mark Lewis' bonus payments in 1996 and 1997 should be limited by reference to real value of Mark Lewis' services; par [175] of November 2004 judgment withdrawn. CATCHWORDS : PROCEDURE [76] - Supreme Court procedure - Jurisdiction and generally - Jurisdiction - Overriding purpose - Matter sought to be relied on late in proceedings - Whether reliance ought be allowed. Civil Procedure Act 2005 s 56 LEGISLATION CITED : Supreme Court Rules 1970 Part 1 r 3 Amalgamated Television Services Pty Ltd v Marsden (No 2) (2003) 57 NSWLR 338 Bomanite Pty Ltd v Slatex Corp Aust Pty Ltd (1991) 32 FCR 379 Harvey v John Fairfax Publications Pty Ltd [2005] NSWCA 255 CASES CITED : Jones v Sutton (No 2) [2005] NSWCA 203 Lewis v Nortex Pty Ltd (In Liq); Lamru Pty Ltd v Kation Pty Ltd [2004] NSWSC 1143 Lewis v Nortex Pty Ltd (In Liq); Lamru Pty Ltd v Kation Pty Ltd [2005] NSWSC 482 The State of Queensland v J L Holdings Pty Ltd (1997) 189 CLR 146. 3081/97 Peter Lawrence Lewis (P) Lamru Pty Ltd (Applicant) Kation Pty Ltd (Respondent) Brian Raymond Silvia (Liquidator) PARTIES : 1750/02 Lamru Pty Limited (P) Kation Pty Limited (D1) Peter Lawrence Lewis (D2) Mark Lewis (D3) Nortex Pty Ltd (In Liq) (D4) FILE NUMBER(S) : SC 3081/97; 1750/02 N A Cotman SC and J T Johnson (P L Lewis & Kation P/L) COUNSEL : S J Motbey (Lamru P/L & R W Lamb) V R W Gray (Liquidator & Nortex P/L) Kemp Strang (P L Lewis & Kation P/L) Lyons & Lyons (Lamru P/L & R W Lamb) SOLICITORS : Abbott Tout (Liquidator & Nortex P/L) LOWER COURT JURISDICTION : IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION HAMILTON J THURSDAY, 13 OCTOBER 2005 3081/97 PETER LAWRENCE LEWIS v NORTEX PTY LIMITED (In Liq) 1750/02 LAMRU PTY LIMITED v KATION PTY LIMITED & ORS JUDGMENT 1 HIS HONOUR: I have delivered two substantive judgments in this matter. The first was Lewis v Nortex Pty Ltd (In Liq); Lamru Pty Ltd v Kation Pty Ltd [2004] NSWSC 1143 delivered on 29 November 2004 ("the November 2004 judgment") and the second was Lewis v Nortex Pty Ltd (In Liq); Lamru Pty Ltd v Kation Pty Ltd [2005] NSWSC 482 delivered on 19 May 2005 ("the May 2005 judgment"). 2 This judgment will deal with two matters. The first has been referred to during argument as the Mark Lewis bonus payments issue. This matter relates to the form that the orders relating to the breaches of trust which have been found in respect of those payments should take and, in particular, whether the orders relating to the payment of the sums of $101,626 in the 1996 year and $138,773 in the 1997 year should be qualified by limiting the orders to so much of those amounts as represented a loss to Nortex or to the Nortex Unit Trust ("the unit trust"), and that an enquiry should be held as to the amount of the detriment. The other matter has been referred to as the paragraph [175] matter. It relates to an outstanding question as to whether I should withdraw the whole or part of [175] of the November judgment. 3 I shall turn first to the question relating to the Mark Lewis bonus payments. The form of order now sought by Mr Cotman SC on behalf of the Lewis interests is opposed by both Mr Motbey on behalf of Lamru and by Mr Ventry Gray on behalf of the liquidator. What they oppose is any qualification of the order for payment to the trust of the particular sums mentioned by reference to any diminution of them to reflect what is claimed to be the real loss to Nortex or the trust. They also oppose the holding of an inquiry, presumably before an Associate Judge, to determine this lower amount, either before the order for payment is finalised or, at least, before the amount payable under it can become payable. 4 Their opposition is on two grounds. The first is that orders in that form have been sought too late to allow this course to be agitated now. The second is that, in any event, reduction of the amounts to be paid in the way sought is not justified on the evidence. 5 In order for me to deal with the first of these grounds, I must set out some history. It is true, as has been submitted by Mr Cotman, that some evidence was admitted during the course of the trial on the basis that it might "be relevant to various questions of relief. They may limit or be alleged to limit damages sought for breach of trust in so far as they are claimed on behalf of Lamru". Those words are my words at p 2967 of the transcript. 6 However, in relation to the question of the Mark Lewis payments and the order that ought be made, in the course of the trial evidence was not received as to the value of Mark Lewis' services to the company, which is said to exceed the remuneration that he was actually paid (other than the disputed bonuses). 7 There was a deal of cross examination of the liquidator, Brian Silvia, during the course of the trial and more has been recently in the course of evidence given on costs, that he did obtain a report, which has been called the Mercer report, on the value of Mark Lewis' services to the company, particularly in the 1996 and 1997 years. That report was originally included in the bundle of documents tendered on behalf of the liquidator, but was subsequently withdrawn from and is not in evidence. As I recall it, that course was not disputed at the time on behalf of the Lewis interests. In any event, it is quite clear that they did not seek themselves to tender the Mercer report, although it was available to be tendered by them. 8 It is true that the course of this issue was somewhat complicated by the fact that issues in the proceedings relating to Mark Lewis had been divided out for separate hearing. I took that course reluctantly, being aware of the danger of the same issues perhaps arising in two separate hearings. Despite this danger, I made the order for separate hearing of the Mark Lewis issues and do not regret having done so. Not to have done so would have compelled Mark Lewis, who is only peripherally involved, to be present, either all the time or at least sporadically, during the course of the trial that took place before me. I have already pointed out that by repeated misestimates of the time that the matter would take and the extreme combativeness of both Lamru and the Lewis interests, the hearing has proceeded now for a total of 90 days over a period of months or years. The broken nature of the hearing has been caused by the misestimates as to its duration. The length of the hearing that has ultimately taken place only illustrates the utter unfairness that would have been created by the imposition of a crushing burden of costs on Mark Lewis, who is only a small player in the issues among these parties. 9 As it turned out, although there are some matters in the evidence that may be relevant to an issue of what the value of Mark Lewis' services to Nortex and the trust was, which is alleged to be the basis of diminution of the orders for payment arising from the 1996 and 1997 bonus payments, they are exiguous and do not include any actual evidence as to the value of his services. 10 Nothing about this subject matter was put to me in final submissions before the November 2004 judgment. That of itself is possibly not significant, because I made it plain that that judgment would deal with questions of substance and would not deal with questions of relief. However, once that judgment had been delivered, the case moved to the second stage of argument. That argument resulted in the May 2005 judgment. What the ambit of that argument was was made plain in [1] and [2] of the May 2005 judgment. After the delivery of the November 2004 judgment, when the matter was to come back for debate as to the form of orders consequent on my decision, I invited the parties to inform me if they submitted that there were any matters that I should have decided in my judgment but omitted to decide, as well as putting submissions as to the form of relief. I summarised the matters to be dealt with as being: "1 Whether there are matters that were not dealt with in my judgment which should now be dealt with. 2 What relief should be granted as a result of my decision." Furthermore, the matters that were debated during that argument were listed in [2] of that judgment. They included an item (4), as to the consequences of the payments to Mark Lewis. 11 On 7 March 2005, on the direction of the Court, the Lewis interests filed a notice of motion setting out quite formally the orders that they said ought be made in respect of the Mark Lewis payments. There was no element in the order which they sought in that notice of motion of any diminution of the sums of $108,626 and $138,773 by reference to some estimation of the real value of Mark Lewis' services. 12 Lamru and the liquidator submit that that was the appropriate time to bring up the questions now sought to be agitated as to the form of these orders (the question as to what orders should be made then being entirely at large). This was particularly so, since this made a substantive difference to the orders. The other parties say that this question was not raised then and was raised for the first time after the delivery of the May 2005 judgment. 13 It is put by Mr Cotman on behalf of the Lewis interests that this question really was raised before the May 2005 judgment. The first thing that he points to are draft minutes that were brought forward on behalf of the Lewis interests in December 2004 and he particularly points to par 18 in those short minutes. However, that order refers to the hearing of the separate issue concerning Lamru's claims against Mark Lewis and cannot in my view be said to flag this issue. In his written submissions of February 2005, Mr Cotman points to a par 24, which appears in a section headed Mark Lewis Bonus Payment. Paragraph 24 is as follows: "In addition, the evidence of the trial disclosed that the Liquidator has by his own determination apparently determined what amount Nortex owes Mark Lewis in relation to his claims, independent of the merits of the bonus decisions of Mr Lewis Snr. In those circumstances there is simply no symmetry between the claims as made by Lamru and the position of Nortex or the Liquidator. A separate set of issues arises which have not been litigated." If that paragraph can be taken as referring to the matter, it does so in an indirect and discursive manner. I should certainly say that the terms of par 24 did not raise in my mind as an open issue the issue now raised and I take it that it did not have that effect in the minds of the other parties to the proceedings, since it did not lead to submissions to the contrary. No other portion of those submissions is pointed to as relevant, nor is it suggested that the matter was agitated before me in oral submissions. 14 As a result, in the May 2005 judgment, I dealt with the form of orders appropriate in relation to the Mark Lewis payments in a section commencing at [25]. As to the 1995 year, I concluded in [38] and [40] that an adjustment in the accounts would suffice to set the situation vis a vis Lamru straight. However, in [42] I concluded that the situation in respect of the 1996 and 1997 payments could not be regulated by an adjustment to the accounts. I found that, as the unit trust is subsisting, the remedy should be by way of order for payment of those sums into the trust fund to re-constitute it, rather than that 40 per cent of those sums should be ordered to be paid to Lamru, as had been argued by Lamru. 15 I reserved the question of argument as to interest on those amounts until the actual formalising of the orders. So far as I am concerned, apart from any specifically reserved matter such as interest and, of course, costs - which remain at large - the process at this stage is simply one of finding words to clothe the orders that arise from my decision in the November 2004 judgment as amplified in relation to the form of relief in the May 2005 judgment. 16 It was only after the May 2005 judgment that the issue that the quantum of those orders should be diminished to reflect what is said to be the value of the loss to Nortex and the unit trust by reference to the value to them of Mark Lewis' services in the 1996 and 1997 years was raised. It was raised, at least inferentially, in short minutes dated 7 June 2005 brought forward on behalf of the Lewis interests, in the proposed order 4(e). This refers to payment of the amount by which the unit trust has suffered detriment in respect of the payments of $101,626 and $138,773, rather than the payment of those sums in specie. The short minutes refer in order 17 to later argument concerning the extent of the detriment. 17 It is put more amply in written submissions of 7 July 2005 on behalf of the Lewis interests, in par 26 and particularly in par 35, where for the first time an inquiry as to the value of the services performed by Mark Lewis is in terms asked for. 18 The first question to be determined is whether this issue should be allowed to be raised at the heel of the hunt in light of the history of the matter generally and particularly the course of events to which I have adverted above. 19 Although one may be led to doubt it by the tortuous course of this litigation, all litigation must have finality, even this litigation. I have already commented on the protraction of the hearing and the part played in that by the absolute determination of these parties to argue every point that occurs to them from time to time and by repeated misestimates of the length of the hearing. 20 A question of the late raising of new issues was recently dealt with by the Court of Appeal in Harvey v John Fairfax Publications Pty Ltd [2005] NSWCA 255. There, the Court called in aid of determining an application before it for leave to raise new matter reference to Part 1 r 3 of the Supreme Court Rules 1970 ("the SCR") and s 56 of the Civil Procedure Act 2005 ("the CPA"). As in that case, in this case I do not think that it matters which provision applies because of their substantial similarity and I do not propose to and I shall not pause to determine that question. But what is made plain in the judgment of Hunt AJA at [72] is that the effect of those provisions is not confined to ensuring that there has been a compliance with the Rules of Court; the rule is also concerned with the manner in which proceedings are conducted. Reference in that regard may also be made to Jones v Sutton (No 2) [2005] NSWCA 203 at [48] – [49] and Amalgamated Television Services Pty Ltd v Marsden (No 2) (2003) 57 NSWLR 338 at [62]. 21 The circumstances in which the Court of Appeal applied those principles in Harvey were as follows. There had been a s 7A trial in defamation proceedings upon certain defamatory imputations brought forward by the plaintiff as arising from published material. The imputations relied on by the plaintiff were rejected not by one, but by two juries. After the first trial the plaintiff had sought to add fresh imputations arising from the same published material and to have the second trial proceed upon the basis as well of those imputations. The trial Judge, however, refused that application. The Court of Appeal held that he was right to do so. 22 In that case, it was important that a deliberate tactical decision had been taken by the plaintiff as to the imputations upon which to proceed to trial and that the plaintiff ought not at a later stage of the proceedings be allowed to depart from that decision, so as to add additional imputations at a later trial. 23 This is not a case along quite those lines. However, the circumstances of this case are perhaps analogous to the circumstances considered by the Full Court of the Federal Court in Bomanite Pty Ltd v Slatex Corp Aust Pty Ltd (1991) 32 FCR 379. There a directions Judge (Wilcox J) had been asked by the plaintiff to set the matter down for trial. The plaintiff was prosecuting a claim in copyright. It would seem that Wilcox J perceived that the evidence filed by the plaintiff was insufficient to establish the existence of copyright. He asked, I think not once, but three times, whether the plaintiff did not want to file additional evidence, indicating, however, that if the plaintiff wished to file further evidence he would not give a trial date. The plaintiff insisted on a trial date, rather than time to file further evidence. Before finally giving the trial date, Wilcox J warned the plaintiff that there would be no recanting. When the matter came on for trial, it was obvious that the plaintiff could not succeed without the additional evidence. An application was made for an adjournment to permit this to be brought. In the light of what had occurred before Wilcox J, that application was refused by the trial Judge, Lockhart J. The refusal of the application led to the dismissal of the plaintiff's proceedings. The refusal by Lockhart J to grant the indulgence was appealed to the Full Court of the Federal Court, which upheld Lockhart J's decision with Pincus J dissenting. 24 The decision in Bomanite, supra, has perhaps been rather under a cloud since the decision of the High Court in The State of Queensland v J L Holdings Pty Ltd (1997) 189 CLR 146. However, it seems to me in light of the stance taken by the Court of Appeal in Harvey supra, that the situation is now different, apparently in light of the provisions of the overriding purpose provision, now s 56 of the CPA. 25 As I have repeated, these proceedings are protracted. To accede to the Lewis interests' submission that they ought be allowed to proceed in the way they now seek to would protract them further. Although raised now, these matters were not raised when opportunity was solemnly given to raise all matters relating to relief. In the circumstances I do not propose to allow the matters to be raised now. There must be an end to opportunities to raise fresh matter. 26 Whilst I put the decision of the first ground in the forefront of my mind concerning this matter, my views concerning the second point, which I do not need formally to decide, are also relevant. In my view, as between Peter Lewis and Nortex, there is not an entitlement to have the amounts that should be paid to reconstitute the trust reduced by the value of Mark Lewis' services over and above what he received as basic payments (apart from the bonuses). 27 It is said on behalf of the Lewis interests that there was no loss to Nortex or the trust, because they got the value from Mark Lewis of services worth more than the basic payments. But this is in a context where it has been formally found that the alleged agreement that he should have additional payments in the form of bonuses, because his services were worth more than the basic payments, did not exist. In other words, whatever, on somebody's estimation, Mark Lewis' services were worth, as some sort of hypothetical exercise, on the agreement that existed between Mark Lewis and Nortex at the time he supplied the services to Nortex, the only agreement was for the payment of the basic salary, which he was in fact paid. In other words, Nortex was entitled to have those services for the payment which was in fact made, omitting the question of any bonus. If Mark Lewis was induced to provide more valuable services for the basic payments by promises from Peter Lewis (to which Nortex was not a party) that he would have additional remuneration, that, as I say, was not binding upon Nortex. Those promises, if they can be relied on, can be relied by on by Mark Lewis only as between himself and his father. 28 In those circumstances, it seems to me that the loss to the trust was in fact the loss reflected by the sums that were paid away in breach of the trust. That is an additional reason why these orders freshly sought in June and July 2005 after the delivery of the May 2005 judgment should not now be made. 29 The second matter remains open because it was prayed for in a notice of motion of 7 March 2005 filed on behalf of Lamru which has not yet been determined. That was that I should withdraw [175] of the November 2004 judgment. Paragraph [175] is as follows: "As a result of my decisions embodied in this judgment, the claim relating to the Mark Lewis payments is the only claim in respect of which this issue remains to be determined. There was some suggestion that it should be given some play in relation to my decisions relating to issues 2 and 3 as to the add backs convention and the differential interest convention. It was said to arise in that context from the fact that the final determination of the liquidator in relation to those conventions was erroneous and that the Lewis interests were responsible for that erroneous decision by reason of the fact that their solicitor, Mr Baird, applied persuasion to the liquidator to alter, after and by reason of the 2001 judgment, the previous regime that he had adopted. The evidence shows that Mr Baird did advocate that course to the liquidator at that time. I do not doubt that he did so vigorously. However, what he applied to the liquidator was vigorous intellectual argument. It does not appear on the evidence that any other form of persuasion was applied by the Lewis interests, through Mr Baird or otherwise. The liquidator is an officer of the Court who, as the evidence in these proceedings shows, held views of his own quite firmly in respect of many of the matters involved in the winding up of the company. I do not find that the Lewis interests were responsible in any improper way for the liquidator taking the decision he did. It was the liquidator's decision, albeit I have found it erroneous. There can be no liability of Lewis or Kation in respect of that decision." 30 The reason that Mr Motbey says that this paragraph should be withdrawn is because it is wrong to proceed on the erroneous basis that the issues with which it deals were open in the proceedings. Mr Motbey says that those issues did not exist. In so far as [175] suggests that Lamru was claiming to sheet home to Kation and Peter Lewis personal liability for the actions of their solicitor, Mr Baird, in persuading the liquidator to alter his previous regime as to the application of the conventions, Lamru did not plead or bring or agitate at the trial such a case, among the many that it did. 31 The material that Mr Motbey has taken me to shows that this is correct, nor have the Lewis interests or the liquidator been able to argue in any realistic way that what he says is wrong. In those circumstances, the paragraph cannot stand, insofar as it is a determination of this purported issue, which was not an issue. 32 Both the Lewis interests and the liquidator have, however, urged me to retain, either here or somewhere else in the November 2004 judgment, the finding that I made that the liquidator had firm views; that in effect the decision to revise the application of the conventions was the liquidator's decision, albeit erroneous; and that the Lewis interests were not responsible in any improper way for the liquidator taking the decision that he did. 33 It was said that those findings should be retained in the November 2004 judgment because, although there was no claim that Peter Lewis and Kation should be made personally liable by reason of any persuasion by Mr Baird, there were issues raised in pars 76 to 88 of the points of claim, which were open and to which such findings were relevant. 34 Mr Motbey's response to this is that, true it is that a claim was made in terms of pars 76 to 88 of the points of claim, but that claim, although originally made, was withdrawn. He points out that a perusal of the points of claim shows that that claim was made only in the statutory appeal (proceedings 3081/97) and was not relied on at all in proceedings 1750/02. I set out the relevant part of that section of the points of claim: "85 By affidavit sworn 4 September 2001 (after the rulings on the preliminary points) the liquidator, in conformity with submissions urged upon him by Kation and Lewis Senior), advanced a new set of accounting conventions abandoning the accounting conventions referred to in 10 and 11. 86 The conduct of the liquidator referred to in 85 constituted a breach by Nortex of the agreement referred to in 10. 87 The said conduct was also unconscionable Lamru having acted on the faith of the liquidator's previous representations as to what it was he disputed in connection with Lamru's proof of debt (and what was not disputed); there never having been any dispute about the conventions until after the Court ruled that the advice previously acted upon was incorrect. 88 The liquidator is estopped from departing from the agreement referred to in 10." 35 At one stage during argument I wondered whether there was one claim or whether there were two claims made against the liquidator in these paragraphs, being matter arising from that much abused term "unconscionability" as a head of claim, as well as a claim clearly based upon estoppel. Although that portion of the points of claim is not entirely happily worded, I am now content that, upon a proper reading of it, the only claim was a claim of estoppel, to the effect that the liquidator was estopped from departing from the conventions, and that unconscionability was alleged only as part of the claim of estoppel. 36 I have been taken to both Mr Motbey's written submissions and oral submissions before the November 2004 judgment. The written submissions date back to 2003 and state that Mr Motbey had come to the conclusion that the estoppel argument was totally unsound. If the 2001 judgment of Young CJ in Eq did not have the effect of precluding the argument that the conventions were still in force, then he had no need of an estoppel, because his argument would prevail by reason of that finding. If, however, the effect of the 2001 judgment were to the effect that the conventions were brought to an end, then he could hardly say that the liquidator ought not have acted in accordance with them, because he would have been obliged to act in accordance with them by the force of his Honour's decision. The matter was further dealt with on 16 February 2004 in oral submissions at p 6035 of the transcript. Mr Motbey indicated that his "estoppel case is hopeless". I then said, without demur from anyone, "the estoppel case is withdrawn". Discussion ensued. 37 In my view, a perusal of the written submissions on this subject matter, in their context in the written submissions, and of those statements in open Court, viewed in the light of the discussion, only operates to confirm that, despite particular reference to pars 87 and 88 in that oral discussion, the whole section of the points of claim from par 76 to par 88 was withdrawn. 38 In those circumstances, there was no occasion for any finding by me about the effect of anything that Mr Baird did upon the decision of the liquidator in relation to the implementation of the conventions. It should be noted that what was said in [175] of the November judgment was strictly limited to that subject matter, namely, the decision that the liquidator took as to the implementation of the conventions, and did not refer to any other conduct of the liquidator in his dealings as between the parties, which may be the subject of argument on costs. All those matters that are relevant on the costs decision I must determine on the basis of the whole of the evidence as it appears when I come to make that decision. I shall say only that, unless the evidence as to this particular subject matter changes substantially in some way, I am likely to make the same finding concerning that particular subject matter. However, what happens about that can abide the end of the costs argument. 39 As a result, [175] will be withdrawn and replaced with a paragraph indicating that there was no occasion to decide that subject matter. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.