New South Wales Court of Appeal CITATION: Bull v Lee (No 2) [2009] NSWCA 362 HEARING DATE(S): (On Written Submissions) JUDGMENT DATE: 11 November 2009 JUDGMENT OF: Allsop P; Campbell JA; Young JA DECISION: Orders amended to include interest calculation and effective date of judgment. Leave to make additional submissions refused. Respondent to pay costs concerning the additional submissions. Respondent's counsel given opportunity to make submissions about why he personally should not bear costs. CATCHWORDS: PROCEDURE - appeal - leave to make submissions on a particular topic - how submissions made beyond the scope of the leave granted are to be dealt with - APPEAL - when leave granted to file Notice of Contention - whether leave to be granted after judgment delivered to raise fresh arguments - LEGAL PROFESSION - costs order - written submissions made beyond scope of leave granted - circumstances where costs order against practitioner is appropriate for making written submissions beyond scope of leave granted - PROCEDURE - costs - interest - pre-judgment interest on debt to be calculated at rate of interest provided by debt - DAMAGES - debt - where interest on a monthly balance amounts to charging interest on interest CATEGORY: Consequential orders CASES CITED: Bull v Lee [2009] NSWCA 215 Notaras v Waverley Council [2007] NSWCA 333; (2007) 161 LGERA 230 Brendan Alex Bull (First Appellant) PARTIES: Kathleen Ann Bull (Second Appellant) Heny Xueheng Lee (Respondent) FILE NUMBER(S): CA 40275/08 COUNSEL: D Ash (Appellants) FS Santisi (Respondent) SOLICITORS: Caldwell Martin Cox, Camden (Appellants) JN Legal, Bankstown (Respondent) LOWER COURT JURISDICTION: District Court LOWER COURT FILE NUMBER(S): 18/06 LOWER COURT JUDICIAL OFFICER: Delaney DCJ LOWER COURT DATE OF DECISION: 4 June 2008 IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40275/08 DC 18/06 ALLSOP P CAMPBELL JA YOUNG JA 11 NOVEMBER 2009 BRENDAN ALEX BULL & ANOR v HENY XUEHENG LEE (No 2) Judgment 1 THE COURT: The Court delivered judgment in this matter on 28 July 2009: Bull v Lee [2009] NSWCA 215 ("the Earlier Judgment"). The case related to whether any amount remained unpaid under an Agreement for Sale of a share in a business, and if so, what that amount was. 2 The Court construed the agreement, and provided a draft calculation of the amount that, in accordance with the construction that the Court held was correct, would have been owing as at November 2004. The orders of the Court allowed the appeal, set aside orders made in the court below, and gave the following directions (at [54]): "(3) Direct the solicitors for the parties to confer and, if agreement is possible, provide to the Court within 14 days of the date of delivery of these reasons, Short Minutes of Order providing for a judgment in favour of the Appellants, as at a date approximating the date of submission of those Short Minutes of Order, in a sum calculated as the amount owing, in accordance with the principles set out in this judgment, as at 30 November 2004, together with interest under section 100 Civil Procedure Act 2005 on that amount from 1 December 2004 to the date as at which the calculation is made and (if the parties do not dispute the draft calculation attached to this judgment) costs orders as set out in paras [51]-[53] above. (4) Direct that, in the event that the parties are not able, within 14 days of the date of delivery of these reasons, to agree in the manner contemplated in the preceding order, they each provide written submissions, within 16 days of the date of delivery of these reasons, identifying their contentions about how the calculation of the amount owing as at 30 November 2004 should proceed, the amount of pre-trial interest that would be payable on that amount up to an identified date approximating the date of those submissions, and the costs orders that they submit should be made in the event that their calculations were accepted." 3 The parties were unable to agree in the manner that had been contemplated in the direction numbered (3). In consequence, written submissions were made by both parties. Both parties had lodged their written submissions by 13 August 2009. The Court set about preparing a judgment to give its decision concerning the arguments raised in those written submissions. 4 On 18 August 2009 the Respondent filed a Notice of Motion that sought the following orders: "1. In respect of the submissions filed on behalf of the Respondent on 13 August 2009, that leave be granted to make such further submissions as contained within those submissions, or any other submissions, on the points raised. 2. Further, or in the alternative, the Respondent be granted leave to file a Notice of Contention out of time in respect to the matters raised in the Respondent's Submissions on 13 August 2009. 3. Any other Orders this Honourable Court deems fit. 4. Costs." 5 Counsel for the Respondent provided some written submissions dated 12 August 2009 in response to direction (4). We will refer to those submissions as the Respondent's Initial Submissions. Counsel for the Respondent provided another set of submissions dated 7 September 2009 that repeated the whole of the Respondent's Initial Submissions, but also made some additional submissions. We will refer to those submissions as the Respondent's Consolidated Submissions. Submissions Beyond the Scope of Leave Granted 6 Paras [1]-[28] of the Respondent's Initial Submissions, repeated and expanded in some respects in paras [12]-[41] of the Respondent's Consolidated Submissions, went well beyond the matters of calculation concerning which direction (4) had permitted additional submissions. They sought to raise arguments to the effect that payments that had been made by the Respondent prior to the date that the judge found the Agreement for Sale of Business was executed should be credited towards the sale price. An alternative contention was to the effect that the manner in which the Management Agreement was dealt with in the court below was unfair to such an extent that it led to a mistrial. In a portion of both of the Respondent's written submissions that purports to address the calculation, the Respondent's counsel in fact raises arguments that contest conclusions that the Court has already reached in its judgment concerning the significance of the monthly payments being "inclusive of interest". 7 These are matters on which leave to make further submissions was not given. They are matters that, if they were to be raised at all, should have been raised in the substantive appeal. 8 In Notaras v Waverley Council [2007] NSWCA 333; (2007) 161 LGERA 230 at 267 [147], Tobias JA (with whom Mason P and Hodgson JA agreed) said: "As leave to file the final submissions was neither sought nor granted, authority requires that they should be ignored except for para 66 and the material to which that paragraphs refers: Carr v Finance Corporation of Australia Ltd [No 1] (1981) 147 CLR 246 at 258 per Mason J; In the matter of an application by the Chief Commissioner of Police (Vic) [2005] HCA 18; (2005) 79 ALJR 881 at 890 [53]-[54] per Kirby J; Dwyer v Commonwealth Bank of Australia (1995) 31 ATR 48; Kirwan v Cresvale Far East Ltd (In liq) [2002] NSWCA 395; (2002) 44 ACSR 21 at [340] per Young CJ in Eq; Chapmann v Caska [2005] NSWCA 113 at [19] per Beazley, Giles and Tobias JJA. As Mason J said in Carr and Kirby J in ex parte the Commissioner of Police , the notion that supplementary submissions can be filed without leave is misconceived and this is so even if the other party to the proceedings consents. It should not occur." 9 The effect of making submissions after judgment has been either delivered or reserved, that go beyond the scope of any leave that has been granted is not confined to having those submissions ignored. Counsel should understand that it is a breach of their professional responsibilities to the Court to seek to make submissions that go outside the scope of the leave that has been granted. For counsel to act in that way seeks to undermine the important principle that, save in the most exceptional circumstances, all arguments relating to an appeal should be put at the one time. It has the capacity to cause waste of the Court's time, and both waste of time and expense for counsel's opponent in deciding what to do about the submissions that have been made without leave. 10 As it happened, counsel for the Appellants recognised that principle required the Court to ignore those of the Respondent's Initial Submissions for which leave had not been granted. Apart from a reference to Notaras, counsel for the Appellant correctly declined to deal with the substance of that part of the Respondent's Initial Submissions for which leave had not been granted. 11 It was this stance on the part of counsel for the Appellants that led the Respondent to file the Notice of Motion on 18 August 2009. 12 In a portion of the Respondent's Consolidated Submissions that deals with the orders sought in the Notice of Motion, counsel for the Respondent refers to the Earlier Judgment as the Court's "preliminary reasons and judgment". It is a fundamental error to refer to the Earlier Judgment in that way. Rather, it was the Court's decision concerning disposal of the appeal, subject only to a minor matter concerning the manner of calculation of interest. 13 The submissions that the Respondent puts forward are to the effect that the trial in the court below miscarried. That is the sort of submission that, if made, should have been made by a cross-appeal. It is not appropriate for such a submission to be made by a Notice of Contention. That is because a Notice of Contention is one filed by a "…respondent who wishes to contend that the decision below should be affirmed on grounds other than those relied on by the court below, but does not seek a discharge or variation of any part of the orders of the court below" ( UCPR 15.40) 14 If there had been a mistrial in the court below the effect would be either that a new trial was required or, in the unlikely event that the Court of Appeal was able to remedy adequately the respect in which a mistrial had occurred, the substitution of different orders by the Court of Appeal itself. Neither of those is the type of outcome that flows from success on a Notice of Contention. For that reason, the alternative relief that the Respondent seeks in para 2 of her Notice of Motion is inappropriate. 15 We mention also that no draft of a Notice of Contention was provided. Even if a Notice of Contention had been an appropriate type of document for the Respondent to lodge, the Court has a strong reluctance to grant leave to file a formal process that affects the ambit of appeal proceedings without a draft of the proposed amendment being provided. For these reasons para 2 of the Notice of Motion fails. 16 In the Court's view it is not appropriate to grant the Respondent leave to make further submissions on the appeal. In substance, what the Respondent is seeking to do is to run a cross-appeal that undermines fundamentally the Earlier Judgment. No reason is advanced to explain why it is only at this stage that the argument is put forward, beyond that the reasons in the Earlier Judgment have highlighted to the Respondent's counsel the relevance of the arguments he now seeks to advance. That is nowhere near an adequate reason for re-opening an appeal that has already been decided. 17 Nor do we see that any injustice would result from declining to re-open the appeal. The Respondent submits that the way in which the Management Agreement was introduced into evidence in the court below involved "trial by ambush". We do not agree. Mrs Bull was the first witness called by the Appellants (the plaintiffs in the court below). Early in her evidence-in-chief she gave evidence of a Management Agreement being entered between the Appellants and the Respondent and that that Management Agreement was entered into before the Agreement for Sale of the Business in 1999. 18 Counsel for the Respondent in the court below (who was not the same counsel as appeared for the Respondent on the appeal) cross-examined Mrs Bull about the temporal relationship between the Management Agreement and the Sale Agreement: "Q. I put to you that the agreement that was entered in between yourself and your husband and the defendant in fact took place in February 1998 and I put that to you, that was in fact the case? A. No, we had a management agreement some time around in 1998 but I just don't know when. Q. You had a management agreement? A. Yeah. Yes. Q. And that was an agreement between? A. Between us and Heny. Q. Us and Heny and you say that agreement had finished when? A. In, I think it was 1999 when she paid the deposit." Those answers were not challenged. 19 The Management Agreement was identified by Mrs Bull in re-examination. Counsel for the Respondent had not seen the document previously. There was an adjournment, and a matter interposed, after the Respondent's counsel had been shown the Management Agreement. When Mrs Bull's re-examination resumed, the Management Agreement was tendered without objection. There was no application for adjournment, or for extra time for counsel to take instructions from the Respondent concerning it. 20 When Mr Bull gave evidence-in-chief, he confirmed that the Management Agreement was entered into about a year before the Sale of Business Agreement was entered. 21 In cross-examination the Respondent was shown the Management Agreement: "Q. Now it's accepted that you've signed this document and it's your initials that appear on each of the pages? A. Yes. Q. Do you recall when you signed that document? A. On the same day I signed the contract in February 98. Q. And how do you know that was then? A. Because I never signed anything else after—" 22 The Management Agreement has a typed date of 29 March 1998. The judge made findings at [28]-[29] and [33] that it was on 1 July 1999 that the Sale Agreement was executed. 23 In these circumstances quite apart from the lateness of the submission, we are not persuaded there is any substance in the contention that the introduction of the Management Agreement into evidence amounted to trial by ambush. There was no occasion for the Appellants to plead anything about the Management Agreement, because they were suing on the Agreement for Sale of Business. Evidence concerning the Management Agreement was relevant to the pleaded case, however, because the Management Agreement was part of the history leading to execution of the Sale Agreement. The Calculation of the Amount Owing 24 In paras [29]-[33] of the Respondent's Initial Submissions, and again in paras [42]-[46] of the Respondent's Combined Submissions counsel for the Respondent makes a submission, that was within the scope of the leave granted, to the effect that the manner in which the draft calculation attached to the Earlier Judgment proceeded amounted, in substance, to charging interest on interest. 25 While we would agree that it would in principle be wrong to perform the calculation on a basis that charged interest on interest, we do not accept that the draft calculation attached to the Earlier Judgment charged interest on interest. Rather, the principle upon which it proceeded was that it recognised that there was an opening balance of principal owing each month, that interest would accrue on that opening balance each month, and that a payment would be made at the end of each month. The payment that was made at the end of each month was appropriated, first, to payment of the interest that had accrued during the month, and, second, to reduction of the principal sum. Because the amounts of the monthly payments were always greater than the amount of interest that accrued in a month, any interest that accrued in a month was always paid at the end of that month. Thus, on no occasion was interest charged on interest. 26 The alternative calculation that counsel attaches to his submissions shows no interest being charged at all during the month of July 1999, and the whole of the monthly payment of $1,800 in July 1999 being used to effect a principal reduction. Interest is then charged only from August 1999, on the resulting opening monthly balance of $103,200. Calculating in that way is mistaken. There is no occasion to alter the draft calculation that was attached to the Earlier Judgment. Basis for Costs Below 27 The Appellants submitted that, when they had pleaded an alternative claim for $80,000, which was beyond the jurisdictional limit of the General Division of the Local Court, it was appropriate for the claim to have been brought in the District Court, and costs should not be assessed on the basis that the hearing had been in the Local Court. That submission involves a retreat from the concession recorded at para [50] of the Earlier Judgment. In any event, we do not accept it. The claim that there was an agreement to compromise for $80,000 was rejected by the trial judge on the facts, and not pressed in this Court. So far as viable claims go, the case is one that could, and should, have been brought in the Local Court. Costs should be paid on that basis. Rate of Pre-Judgment Interest 28 Counsel for the Appellants has correctly pointed out that section 100 Civil Procedure Act 2005 states, in section 100(3)(b) that it: "… does not authorise the giving of interest on a debt in respect of any period for which interest is payable as of right, whether by virtue of an agreement or otherwise …" 29 In the present case, interest was, by agreement, payable at 8.5%. That is the appropriate rate at which pre-judgment interest should be calculated. 30 The Respondent submitted that no pre-judgment interest should be allowed, as the Appellants did not give the Respondent details of the amount she owed before commencing proceedings, and indeed it is only as a consequence of the appeal proceedings that the amount actually owing as at November 2004 has been ascertained. 31 We do not accept that argument. Both parties knew the initial amount of the debt, and both were equally capable of doing the comparatively simple mathematics involved in keeping records of payments made and applying the payments to the debt outstanding. Pre-judgment interest is, primarily, compensation for a person who is entitled to be paid money having been out of that money. We see no reason why it should not be payable in the present case. 32 We accept the calculation that counsel for the Appellants has performed, whereby the interest payable at 8.5% per annum on $18,189.04 from 1 December 2004 to 13 August 2009 is $7,272.87. 33 So that there is no room for argument about the effective date of this Court's orders relating to the appeal, and for the convenience of being able to find all the Court's orders disposing of the appeal in the one place, we propose to revoke the first two orders made by the Court on 28 July 2009, but to make them again in identical terms. Costs of the Post-Judgment Applications 34 To the extent to which the parties made submissions pursuant to direction (4) in the Earlier Judgment, the costs of so doing are part of the general costs of the appeal. However, paras [1]-[28] of the Respondent's Initial Submissions, the costs of paras [1]-[41] of the Respondent's Consolidated Submissions, and the costs of the Notice of Motion filed 18 August 2009 are in a different position. Counsel for the Appellant provided written submissions on 14 September 2009 dealing solely with those issues. As the application has failed, it is appropriate that the Appellants have an order for costs concerning the Notice of Motion. We propose to make such an order. 35 There remains a question of who, as between the Respondent and her counsel, should bear those costs. For the reasons given at paras [6]-[9], the making of the submissions in paras [1]-[28] of the Respondent's Initial Submissions was improper. The attempt to regularise the putting of those submissions, by filing the Notice of Motion, has failed, and was always doomed to fail. As we have said, we propose to make an order that the Appellants have the costs of the Notice of Motion. The making of that order will bring to an end the Appellants' involvement in these proceedings. We also propose to give counsel for the Respondent the opportunity to put before the Court written submissions, if he chooses, as to why the Court should not make a supplementary order requiring that he bear personally the costs of paras [1]-[28] of the Respondent's Initial Submissions, and the costs of the Notice of Motion, including the costs of paras[1]-[41] of the Respondent's Consolidated Submissions. Orders 36 The orders of the Court are: (1) That orders 1 and 2 made 28 July 2009 are revoked. (2) That the appeal be allowed. (3) That the orders made in the court below be set aside. (4) That there be judgment in the court below in favour of the Appellants in an amount of $25,461.91 (comprising a sum due at 30 November 2004 of $18,189.04 together with interest of $7,272.87 calculated at 8.5% per annum from 1 December 2004 to 13 August 2009). (5) That the judgment referred to in order (4) above take effect on 13 August 2009. (6) That the Respondent pay the Appellant's costs in the court below, assessed in an amount not to exceed the amount that would have been payable if the proceedings had been brought in a Local Court of New South Wales. (7) That the Respondent have a certificate under section 6(1) Suitors' Fund Act 1951 if otherwise qualified, with no other order as to the parties' costs of the appeal. (8) Notice of Motion filed 18 August 2009 dismissed with costs. (9) Direct counsel for the Respondent to file, within 21 days of the date of this judgment, and provide a copy to each judge who heard the appeal, any submissions he might wish to make as to why he should not bear personally the costs of paras [1]-[28] of the Respondent's written submissions filed 13 August 2009, and of the Notice of Motion filed 18 August 2009, including the costs of paras [1]-[41] of the Respondent's Consolidated Submissions. (10) Reserve further consideration of the matter identified in (9). ********** 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.