Court of Appeal Supreme Court New South Wales Medium Neutral Citation: G & H Minard Investments (Aust) Pty Ltd v Investment & Property Choices Pty Ltd; Gooroovadoo v Investment & Property Choices Pty Ltd [2014] NSWCA 418 Hearing dates: 2 December 2014 Decision date: 02 December 2014 Before: Basten JA at [1]; Gleeson JA at [27] Decision: Orders made on 2 December 2014 in each matter: (1) Refuse the applicant(s) leave to appeal. (2) Order that the applicant(s) pay the respondent's costs. (3) Reasons reserved. [Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.] Catchwords: PRACTICE AND PROCEDURE - appeal - leave - error on part of trial judge - limited prospects of success - small amount in issue - no issue of principle CONTRACT - written document with no operative provisions - attempt to infer condition for repayment of money from recital - terms unclear Legislation Cited: District Court Act 1973 (NSW), s 127 Cases Cited: Be Financial Pty Ltd v Das [2012] NSWCA 164 Category: Principal judgment Parties: In matter No 2014/243192: G & H Minard Investments (Aust) Pty Ltd (Applicant) Investment & Property Choices Pty Ltd (First Respondent) Barry William Ward (Second Respondent) Nicole Lee Ward (Third Respondent) In matter No 2014/243222: Jean Marc Rudolph Gooroovadoo (First Applicant) Reita Urmilla Gooroovadoo (Second Applicant) Beelall Bhurtun (Third applicant) Investment & Property Choices Pty Ltd (First Respondent) Barry William Ward (Second Respondent) Nicole Lee Ward (Third Respondent) Representation: Counsel in both matters: Mr D Murr SC/Ms M Fraser (Applicants) Mr DR Sulan/Ms ND Oreb (Respondents) Solicitors in both matters: Castagnet Lawyers (Applicant) Clayton Utz (Respondents) File Number(s): CA 2014/243192; CA 2014/243222 Decision under appeal Jurisdiction: 9101 Date of Decision: 2014-07-25 00:00:00 Before: Sorby DCJ File Number(s): DC 2013/195985 Judgment 1BASTEN JA: In August 2011 receivers and managers appointed by the mortgagee to the business of a developer responsible for constructing a residential block of 14 units in Forster on the New South Wales north coast sought to sell the units through a single selling agent, in one line. The agent was identified variously as Mr Barry Ward, Mr Ward and his wife, Ms Nicole Ward, and the company of which they were directors, Investment & Property Choices Pty Ltd. Each of the applicants agreed to purchase a unit for a standard price of $314,286, plus a "buyer's agreement fee" payable to one or more of the respondents in an amount of $35,000. The total purchase price was $349,286. 2Agreements to that effect were reached on 7 October 2011. On 11 October 2011 the applicants each paid a deposit of $31,428 and the $35,000 fee. The fee was paid by cheque to Investment & Property Choices. 3Shortly after entering into that arrangement, it was realised by the vendors that the various units contained different unit entitlements under the strata plan and had different values. The original figure was an average for the 14 units, calculated by reference to an overall price negotiated by Mr Ward (or his company) with the vendors, namely $4.4 million. As a result of this realisation, the prices were varied so that contracts for the sale of land entered into by the applicants and dated 14 October 2011 each had a price of $335,593. 4Although separate contracts of sale were entered into between the vendors and the individual purchasers, there was an underlying "deed of put option" between the vendors and Investment & Property Choices, pursuant to which the vendor could require Mr Ward's company to purchase each unit if the contract for sale were validly rescinded or terminated. In addition, there was a guarantee and indemnity under which Mr Ward guaranteed payment of the purchase price for each unit. 5Each applicant entered into a "Deed of Buyer Agreement Fee [sic]" dated 7 October 2011 (the date being typed) but which, it seemed likely, was executed (so far as it was executed) at a later point in time. The document is referred to below as "the deed". 6Before turning to the terms of the deed, it is convenient to note the remainder of the brief chronology. Contracts having been exchanged on 14 October 2011, settlement occurred on or about 22 December 2011. The balance payable on settlement was based upon the purchase price of $335,593, less the deposit of $31,428, leaving a "balance of purchase money" of $304,164. In identifying that amount, no allowance was made for any part of the $35,000 fee payable to Mr Ward (or his company). In the result, each of the applicants paid for their respective units a total (including the fee), not of $349,000 as agreed, but $370,000. 7For a reason which will be explained by reference to the deed, the applicants asserted that the increase in the purchase price of approximately $21,000 was meant to come from a reduction in the buyer's fee payable to Mr Ward (or his company). That did not happen. Each of the applicants then made a claim against Mr Ward, Ms Ward and their company for payment of that sum. 8The basis upon which payment was alleged to be due was the deed. The deed did not provide a promising basis for the identification of any legal obligation. The first difficulty arose in identifying the parties: the first party in each case was the respective applicant, identified as "the Purchaser", and the third party, identified as "the Vendor". The second party in each case was Investment & Property Choices with Barry Ward and Nicole Ward also named, in some places as directors and in some places (including the execution clauses) as individuals. 9That was only the beginning of the confusion: the deed itself comprised five recitals, A-E, and something called the "Operative Part", which contained four pro forma clauses together with clause 2 which said "Insert the operative provisions - If applicable." 10So far as can be gleaned from the pleadings, the applicants' cases at trial turned upon Recital C which read in part: "C. The Purchaser and the Guarantor have agreed that the purchaser is purchasing a property at the price of $349,286.00 including the Buyer Agreement Fee of $35,000.00. The purchaser agreed that whatever the purchase price is to be determined by the Vendor under the unit entitlement on the Strata Plan SP80194, and then the balance will be the Buyer Agreement Fee - 'BAF'. The purchaser agreed to pay the BAF to the Guarantor after exchanged [sic] of the contract but before settlement." 11Proceedings were commenced in the District Court on behalf of each applicant against three defendants, namely Investment & Property Choices, Mr Ward and Ms Ward. The individuals were described as directors of the corporate defendant. The pleading alleged that on or about 11 October 2011 the plaintiff paid to the defendants the sum of $35,000, being for the use of the plaintiff. The deed was pleaded as an agreement whereby the defendants guaranteed to the vendor of the property the performance by the plaintiff of a contract for sale. It was said to be "a term and condition" of the deed that "the defendants were entitled to a payment by the plaintiff of the difference between $349,286 and [$335,593] ... which sum was payable after exchange and before settlement". The claim then alleged that, again pursuant to the deed, "the defendants thereupon became entitled to the sum of $13,693 payable after exchange and before settlement". Finally, it was alleged that the defendants became liable to "repay" the sum of $21,307 being the difference between the fee paid ($35,000) and the sum payable ($13,693) pursuant to the deed. 12The matters were heard together by the District Court on 12 June 2014. On 25 July 2014 judgment was delivered by Sorby DCJ in both matters, giving judgment for each defendant and requiring each plaintiff to pay the defendants' costs. The plaintiffs (the present applicants) sought leave to appeal. There is no doubt that each requires leave in order to bring an appeal, the amount in question being but a small fraction of the threshold for an appeal as of right ($100,000) pursuant to s 127 of the District Court Act 1973 (NSW). 13There was a factual error in the reasoning of the trial judge. After setting out the background to the arrangements, the trial judge stated at par 27: "By agreement between the Plaintiffs and Mr Ward (as set out in Recital 'C' of the Deed), Mr Ward would adjust the [fee] should the liquidator adjust the prices for each unit up or down." 14After noting the increase in price of approximately $21,000, and Mr Ward's agreement to reduce his fee, the trial judge stated at par 30: "As a result no Plaintiff had to pay no [sic] more for each unit than $314,286.00. All Plaintiffs had the benefit of the $21,307.00 they now each claim. It was used to 'top-up' the contract price per unit from $314,301.00 to $335,000.00 as required by the liquidators." 15The trial judge then said that it was Mr Ward and his company who suffered a loss by way of reduction of the fee from each plaintiff. 16It is common ground that in coming to this conclusion, and accordingly dismissing the claims, the trial judge erred. As noted above, the applicants each paid the full amount of $335,000 on settlement, having already paid the full $35,000 to Mr Ward (or his company). This error meant that a number of other issues were not addressed. 17The fact of this error does not mean, however, that the applicants are entitled to leave to appeal. The question of a grant of leave in the circumstances is discretionary and must be determined according to well-established principles: Be Financial Pty Ltd v Das [2012] NSWCA 164, at [32]-[39]. They may be summarised, relevantly for present purposes as follows: (1)whether the case involves an issue of principle or of general public importance; (2)whether the costs likely to be incurred in the hearing of an appeal are disproportionate to the amount in issue; (3)the degree of hardship for the applicant if leave were refused, and (4)whether, given error, there is a public interest in correcting an erroneous judgment. 18With respect to the first issue, there is no issue of principle or general public importance relied upon. The case involves the construction of a document which hardly qualifies as a contract and, it can readily be predicted, will not have any precedential value. 19It can readily be anticipated that the costs of an appeal (beyond those already incurred) will be of a similar order to the amount in dispute. As the trial judge noted on more than one occasion in the course of argument, the matters should properly have been dealt with in a Local Court. 20For reasons which will be outlined below, although the factual error is conceded, it is by no means clear that correction of the error would lead to a different outcome. That is because the applicants have no clear basis for success if the other issues were to be addressed, as a retrial would require. 21Finally, whatever hardship may have arisen for the applicants individually, the amount in issue was less than 7% of the purchase price of the units and, in a significant respect, they were the authors of their own misfortune. 22With respect to the question of error, the applicants put their case before the trial judge on two bases. The first cause of action asserted that Recital C gave rise to a contractual entitlement to repayment of the balance after the necessary adjustment had been made. This claim faced three problems. First, it was by no means clear which person was responsible for the repayment. On one view, the cheques having been paid to the company, it was the company which was the contracting party: there was no suggestion in the deed that the directors guaranteed any payment to the purchasers resulting from any liability of the company. Secondly, the circumstances in which a payment was due were unclear. It would have been entirely consistent with the terms of the recital if, as the trial judge thought had occurred, the contractual obligation was that part of the purchase price was to be paid from the $35,000 received by the company. Thirdly, there was a lack of clarity as to when any payment was due. Recital E to the deed referred to the guarantor having agreed to guarantee to the vendor the performance by the purchaser and to indemnify the vendor in respect of the consequences of any non-performance by the purchaser. Given this obligation to the vendor, it would be a startling result if the contract obliged the guarantor (Mr Ward or his company) to repay the purchaser in circumstances where the time for completion had not arrived and non-performance was still a possibility. It followed that any repayment might be expected to occur at the time of settlement. There was, however, no clear statement to this effect in any document. This difficulty was compounded by the fact that the pleading alleged that the moneys were wrongfully retained "from 11 October 2011". Such a claim was implausible. 23An alternative cause of action was pleaded for money had and received. In the course of the application in this Court, there was reference to the claim being made on the basis of a total failure of consideration, or possibly a mistake on the part of the applicants. However, the basis on which such a cause of action by the purchaser was pleaded in the reply in response to a defence that any contractual agreement in the deed was unenforceable. If the obligation for repayment were unenforceable it was implied (though not clearly articulated) that the payment itself must have been made on some false basis. While the applicants said that this claim was not dealt with by the trial judge, nor was it adequately particularised. 24A claim based on a total failure of consideration was untenable. As between the purchasers and the guarantor, the guarantor supplied precisely what the purchasers wanted, namely a particular unit at a particular price. It was the fee paid to the guarantor which was arguably inflated. That circumstance does not invoke the relevant legal principle. 25The final point, which need not be articulated in detail, is that the applicants were, in a real sense, the authors of their own misfortune. On their own cases, each purchased a property for an agreed sum of a little under $350,000, but paid at settlement a balance giving rise to a total payment of $370,000 (again in round terms). There was some evidence that they expected that Mr Ward would refund them the excess, but they had no written agreement explicitly requiring him to take that step, nor that his company should take that step. The evidence suggested (although it is not necessary to make any precise finding in this regard) that the reason that an additional amount was paid on settlement was a representation by the applicants' own agent (who was dealing with Mr Ward) that such a payment would be forthcoming. 26In these circumstances, a grant of leave to appeal would not be warranted. Accordingly, the Court made orders at the hearing of the application refusing leave and directing the applicants to pay the respondents' costs of the application. 27GLEESON JA: My reasons for joining in the orders of the Court made on 2 December 2014 accord with the reasons of Basten JA. ********** 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. Decision last updated: 05 December 2014