O’Hare v Bradfield Bentley Pty Ltd (in liq) [2019] NSWCA 122

Court of Appeal Supreme Court New South Wales Medium Neutral Citation: O'Hare v Bradfield Bentley Pty Ltd (in liq) [2019] NSWCA 122 Hearing dates: 13 May 2019 Decision date: 27 May 2019 Before: Gleeson JA Decision: Applicant's notice of motion filed 17 April 2019 is dismissed with costs. Catchwords: APPEAL – extension of time – two-year delay unexplained – where appeal more than merely fairly arguable – both parties entitled to determination that is just and timely – entitlement to justice not unconditional – need to balance interests of the parties – where prejudice to the respondent caused by the delay Legislation Cited: Civil Procedure Act 2005 (NSW), ss 56-60 Corporations Act 2001 (Cth), ss 495(1), 500(2) Supreme Court Act 1970 (NSW), ss 75A(5), 75A(6) Uniform Civil Procedure Rules 2005 (NSW), rr 51.2, 51.9, 51.16(1)(b), 51.53 Cases Cited: Automatic Fire Sprinklers Pty Ltd v Watson (1946) 72 CLR 435; [1946] HCA 25 Aaldars v Putney Finance Australia Pty Ltd (formerly Anzax Finance Australia Pty Ltd) [2011] NSWSC 756 Blackmore v Browne; Kara Kar Holdings Pty Ltd v Blackmore [2011] NSWCA 114 Burton v Palmer [1980] 2 NSWLR 878 at 895 Hillam v Iacullo (2015) 90 NSWLR 422; [2015] NSWCA 196 Nanschild v Pratt [2011] NSWCA 85 Richards v Cornford (No 3) [2010] NSWCA 134 Tito v Waddell (No 2) [1977] Ch 106 Tomko v Palasty (No 2) (2007) 71 NSWLR 61; [2007] NSWCA 369 Category: Procedural and other rulings Parties: David O'Hare (Applicant) Bradfield Bentley Pty Ltd (in liq) (Respondent) Representation: Counsel: Mr G Carolan (Applicant) Mr J Polese (Respondent)

Solicitors: Finch Lawyers (Applicant) Rose Litigation (Respondent) File Number(s): 2017/4074 Decision under appeal Court or tribunal: District Court of New South Wales Jurisdiction: Civil Date of Decision: 8 December 2016 Before: Gibb DCJ File Number(s): 2015/221938

[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.]

Judgment 1. GLEESON JA: Application is made by Mr David O'Hare (Mr O'Hare) for an order extending time for the filing of the appeal and, if that extension is granted, for an order pursuant to s 500(2) of the Corporations Act 2001 (Cth) for leave to proceed with the appeal against the respondent, Bradfield Bentley Pty Ltd (in liq) (Bradfield). Mr O'Hare did not pursue the order sought in par 2 of the notice of motion filed on 17 April 2019, which sought the joinder of Mr Timothy Cook, the liquidator of Bradfield, as a party to these proceedings. He was correct not to do so; the liquidator is not a necessary or proper party to the appeal. 2. The liquidator of Bradfield opposed the relief sought.

Background 1. The appeal concerns a judgment of Gibb DCJ, delivered ex tempore on 8 December 2016. The proceedings below involved a claim by Bradfield against Mr O'Hare and two other defendants for $103,000 plus interest and costs based on the failure to pay an invoice issued by Bradfield dated 29 April 2015 "for services rendered as per the mandate dated 26 March 2014". This amount was calculated as $132,000 including GST, less "received payments" of $29,000. The "mandate" was a reference to an agreement for the provision of debt negotiation services by Bradfield to various persons and related corporate entities, referred to as the "Clients", in a letter from Bradfield to Mr Kerry O'Hare dated 26 March 2014. Mr O'Hare was one of the Clients. The claim against the other two defendants did not proceed, since they were each a bankrupt at the time of the hearing below. 2. In the letter, cl 2 headed "Instructions", provided that Bradfield "cannot act for you without your specific instructions on certain issues" and then identified six dot points listing matters upon which specific instructions were required. The clause continued: "It is immediately understood that you request the following of [Bradfield]", and then set out fifteen dot points, including: initial consultation; preparation of strategy plan; advice on the restructuring of any entity outlined in Schedule 1; liaising with legal advisers and financial advisers, mediating with various third parties; representation at relevant meetings and ongoing consultations for business-related matters; and forensic reconstruction of the accounts for entities. 3. Clause 3, headed "Proposed Timelines", provided "12 (twelve) months". 4. Clause 5, headed "Estimate of fees and disbursements", provided (emphasis added): Our fees and disbursements that will be incurred by us in acting on your behalf in this matter will be $10,000 per month plus GST for a minimum period of 12 months: (a) Monthly Fee (starting 9 April 2014): $ 10,000 (b) Plus GST: $ 1,000 (c) Total Monthly Fee: $ 11,000 (d) Total for the period (ending 9 April 2015): $132,000

1. Clause 8, headed "Termination of Agreement", provided for the rights of termination by Bradfield, in the event of failure by the Clients to pay fees and disbursements, or any misrepresentation by the Clients of any information that should have been disclosed at the time of initial engagement. The clause also provided that the Clients may terminate the agreement at any time. The clause continued: In the event of termination by either party, you will be required to pay to [Bradfield] any amounts which have fallen due for payment pursuant to this Agreement and which, at the date of termination, remain unpaid. 1. Clause 13 provided for an entire agreement clause. 2. The pleadings and evidence before the District Court were not tendered on the present application. The issues in dispute at trial are to be gleaned from the transcript of the hearing on 8 December 2016 and her Honour's reasons for judgment. 3. The transcript records that the issue raised on the pleadings was whether Bradfield had performed the services referred to in its invoice dated 29 April 2015. Mr O'Hare asserted in his defence that no services had been provided by Bradfield and accordingly it was not entitled to payment of the amount claimed. It was common ground that $29,000 had been paid to Bradfield. Counsel for Mr O'Hare asserted on this application that no services had been provided prior to this payment, which was described by counsel as an upfront deposit for work to be performed. 4. Affidavit evidence was adduced by both parties directed to the issue of whether Bradfield had provided services to the Clients. There was no cross-examination of any of the deponents. During closing submissions, her Honour identified the dispute with respect to the provision of services as: You say [not done]. He says [done]. 1. Later in closing submissions her Honour raised with counsel for Mr O'Hare the absence of any pleading of breach of contract or repudiation by Bradfield. Counsel for Mr O'Hare made an application to amend the defence. That application was refused by her Honour on the basis that the parties had closed their respective cases and it was too late to seek leave to amend the defence.

Primary judge's reasons 1. The reasons of the primary judge noted that the existence of the contract was not disputed, and the defence pleaded was a failure to provide services, but there was no defence or pleading of failure of contract, breach of contract, rescission, termination or repudiation, save for the repeated assertion of failure to provide services. 2. As to whether Bradfield provided any services, the primary judge made the following remarks: There is no evidence of relevant instructions in accordance with clause 2. The evidence as to services rendered is best described as light on. … There is no acceptable evidence in real terms that any specific services have been rendered. … There is equally firm evidence from each of the three defendants, including the two who are no longer parties, that they have received and seen nothing that constitutes any services on the part of the plaintiff. On balance, it is highly likely that whatever was done, if anything was done by the plaintiff, nothing came to the attention, sight, vision or knowledge of the defendants. That appears to be the overwhelming evidence of the defendants. 1. The primary judge concluded: … notwithstanding that one is required also to take into account commercial purpose and commercial sense, the plain wording of this contract is work will not be done save insofar as instructions be given. But nonetheless, the promise to pay is accepted by the contractual parties for a total sum of $132,000 over a period of 12 months regardless of the scope of any such instructions. There is, unfortunately, nothing in this contract which permits me to find that services need to be required or delivered to enliven the obligation to pay. 1. Her Honour entered judgment including interest against Mr O'Hare in the sum of $103,366.85.

The events after judgment 1. On 5 January 2017, Mr Daniel Tresise, the solicitor for Mr O'Hare filed a notice of intention to appeal which stated that Mr O'Hare intended to commence appeal proceedings within three months after the material date, that is, on or before 8 March 2017: Uniform Civil Procedure Rules 2005 (NSW) (UCPR), r 51.9. He did not do so. 2. Prior to the expiry of the three-month period for filing an appeal, Mr Cook was appointed liquidator of Bradfield on 1 February 2017 pursuant to a resolution of members: s 495(1), Corporations Act. The liquidation is a creditor's voluntary winding-up. 3. On 14 June 2017, a little over three months after the expiry of the time prescribed by the rules for filing the appeal, the solicitor for Mr O'Hare had a telephone conversation with Mr Benjamin Horne, the then solicitor for the liquidator. Mr Horne sent an email to Mr Tresise on that date recording that Mr O'Hare owned properties in Victoria, asserting that the liquidator was entitled to register a caveat on those properties, and stating that the liquidator was also aware that Mr O'Hare was presently restructuring. The email recorded that the liquidator was mindful of the further costs to be incurred throughout the enforcement/appeal process by both parties, and that the liquidator was prepared to entertain a commercial resolution of the matter and invited an offer by no later than 15 June 2017. 4. No offer was made by Mr O'Hare in response to the liquidator's invitation. There is no evidence that the liquidator of Bradfield lodged caveats against Mr O'Hare's properties in Victoria; counsel for Bradfield said that caveats were not lodged. 5. On 29 March 2018, new solicitors acting for the liquidator sent a letter to Mr O'Hare demanding payment of the judgment sum plus costs post-judgment of $2,000 by 12 April 2018. Mr O'Hare did not respond to that demand. 6. On 22 May 2018, Bradfield issued a bankruptcy notice which was served on Mr O'Hare on 7 June 2018. 7. On 18 June 2018, the solicitors for Mr O'Hare sent a letter to Bradfield's solicitors giving five reasons why there is not in truth or reality a debt behind the judgment. One reason advanced was that Mr O'Hare had filed a defence and cross-claim, but the cross-claim was not heard before judgment was entered. The letter asserted that, following the appointment of the liquidator, Mr O'Hare was prohibited from prosecuting the appeal or cross-claim without leave pursuant to s 500(2) of the Corporations Act and "such leave would not have been forthcoming". The letter invited Bradfield to withdraw the bankruptcy notice. 8. Bradfield's solicitors responded to Mr O'Hare's solicitors by letter dated 21 June 2018 noting that the cross-claim was not filed until after judgment had been entered. Bradfield refused to withdraw the bankruptcy notice. 9. On 28 June 2018, Mr O'Hare filed an application in the Federal Court of Australia in Melbourne seeking to set aside the bankruptcy notice. The bankruptcy proceedings remain on foot and are currently adjourned, pending the outcome of Mr O'Hare's application in this Court. No step was taken by Mr O'Hare to appeal against the judgment for a further nine months. 10. The notice of appeal filed by Mr O'Hare on 7 March 2019 contains two grounds. Ground 1 asserts that the primary judge erred in refusing leave to permit an amendment of Mr O'Hare's defence. Ground 2 asserts that the primary judge erred in her construction of the agreement that the obligation of the Clients, including Mr O'Hare, to pay the fees under the contract was independent of the obligation of Bradfield to provide the services the subject of the contract. 11. No evidence was given by Mr O'Hare on this application seeking to explain the omission to file an appeal within the time prescribed by the rules, or to otherwise explain the delay in filing the appeal. Mr Tresise, the solicitor for Mr O'Hare, deposed that an appeal could not be filed because of the statutory bar in s 500(2) of the Corporations Act, and leave to proceed could not be obtained until the bankruptcy notice was issued to Mr O'Hare. That evidence was admitted as a submission only.

Extension of time – principles 1. UCPR, r 51.9(1) provides that an applicant who has filed and served a notice of appeal must file and serve the relevant originating process on each necessary party (a) within three months after the material date, or (b) within such other period as the Court may order. Rule 51.9(2) provides that an application may be included in the originating process. The "material date" in the case of a District Court judgment is the date on which the judgment is pronounced or given: UCPR, r 51.2 material date (e). In the present case, the material date is 8 December 2016. 2. UCRP, r 51.16(1)(b) complements r 51.9. It provides that a notice of appeal must be filed and served on each necessary party where a notice of intention to appeal has been filed and served and leave to appeal is not required, as allowed by r 51.9. 3. There is no dispute as to the applicable principles with respect to an extension of time. In Nanschild v Pratt [2011] NSWCA 85, McColl JA (Campbell JA agreeing) said at [38]–[39]: [38] The discretion to extend time is given for the sole purpose of enabling the court to do justice between the parties. This means that the discretion can only be exercised upon proof that strict compliance with the rules will work an injustice upon the applicant. In order to determine whether the rules will work an injustice, it is necessary to have regard to the history of the proceedings, the conduct of the parties, the nature of the litigation, and the consequences for the parties of the grant or refusal of the application for extension of time: Gallo v Dawson [1990] HCA 30; (1990) 64 ALJR 458 (at 459) per McHugh J. [39] The underlying premise to these propositions in Gallo (as is made apparent in Jackamarra v Krakouer [1998] HCA 27; (1998) 195 CLR 516 (at [7]) per Brennan CJ and McHugh J) is that the Court's approach to an application to extend the time for filing an appeal from a judgment determining substantive rights (or here to seek leave to appeal) 'at any time' recognises that 'the respondent to the application has a vested right to retain the judgment' proposed to be the subject of appeal: Jackamarra v Krakouer (at [4]); Tomko v Palasty (No 2) [2007] NSWCA 369 (at [55]) per Basten JA (Hodgson and Ipp JJA agreeing). 1. In Tomko v Palasty (No 2) (2007) 71 NSWLR 61; [2007] NSWCA 369 at [55], Basten JA identified four factors of general relevance to an application to extend time within which to appeal: (1) the length of the delay, (2) the reason for the delay, (3) whether the applicant has a fairly arguable case, and (4) the extent of any prejudice suffered by the respondent to the application. Basten JA added at [58] that an application such as this should not be treated as a dress rehearsal for the full appeal. These factors reflect the nature of the inquiry required on an interlocutory motion of this kind. 2. However, it is also relevant that in Tomko v Palasty (No 2) at [14], Hodgson JA (with whom Ipp JA agreed) said: ... there may be circumstances where it is appropriate to go further into the merits of the case of a person seeking an indulgence such as this, than to ask whether or not the case is fairly arguable. If such a person has a reasonable explanation of delay and the opponent does not have a strong case of prejudice, then a fairly arguable case is sufficient. However, if the explanation for the delay is less than satisfactory, or if the opponent has a substantial case of prejudice, then it may be relevant that the person seeking the indulgence shows that his or her case has more substantial merit than merely being fairly arguable. 1. As Campbell JA observed in Blackmore v Browne; Kara Kar Holdings Pty Ltd v Blackmore [2011] NSWCA 114 at [19], the statement of Basten JA at [55] of Tomko should be read with the additional remarks of Hodgson JA (Ipp JA agreeing) in mind. 2. It is also necessary to bear in mind the Court's overriding purpose to ensure that litigation is resolved in a timely fashion. Applications to extend time should be considered in the framework constituted by ss 56-60 of the Civil Procedure Act 2005 (NSW), and against the background of a modern approach to despatch of litigation and the need for reasonable expedition: Richards v Cornford (No 3) [2010] NSWCA 134 at [98], [110] (Allsop P, McColl JA agreeing). Thus it is necessary to take into account the degree of injustice that would be suffered by the respective parties as a consequence of any order or direction: Civil Procedure Act, s 58(2)(b)(vi).

Decision 1. In the present case, the length of the delay – exceeding two years beyond the date prescribed by the rules – is gross, a matter properly conceded by counsel for Mr O'Hare. Counsel acknowledged that the view taken by the solicitors for Mr O'Hare about the possibility of obtaining leave to proceed under s 500(2) of the Corporations Act was erroneous and there is no satisfactory explanation why leave to proceed was not sought. Plainly, if Mr O'Hare was aggrieved by the judgment in favour of Bradfield, and had sought leave under s 500(2) to proceed with an appeal, demonstration of a serious dispute relating to the judgment would not depend upon Bradfield having taken enforcement action such as issuing a bankruptcy notice. 2. Next, counsel for Mr O'Hare submitted that the solicitors for Mr O'Hare took the view that the matter could be resolved by negotiation rather than incurring the costs of an appeal. However, that does not explain the delay after June 2017. Nor is Mr O'Hare blameless in the delay that occurred from this time. After not responding to the liquidator's invitation in June 2017 to make an offer, Mr O'Hare thereafter failed to take steps to pursue an appeal, notwithstanding receipt of the letter of demand in March 2018, and service of the bankruptcy notice in June 2018. While Mr O'Hare's solicitor disputed the "truth" of the judgment in a letter to the liquidator's solicitor on 18 June 2018, still no step was taken by Mr O'Hare for another nine months to seek an extension of time for an appeal, together with leave to proceed under s 500(2) of the Corporations Act. 3. The position is that there is simply no evidence at all explaining the delay by Mr O'Hare in bringing this application. 4. The inference is that Mr O'Hare was content not to challenge the judgment by way of an appeal, so long as Bradfield did not take steps to pursue enforcement proceedings. There is a further inference that even when Bradfield sought to enforce the judgment by issuing a bankruptcy notice in June 2018, Mr O'Hare made a forensic decision to only challenge the bankruptcy notice and not to incur costs in relation to an appeal, which he delayed filing for a further nine months. The course taken by Mr O'Hare is fundamentally inconsistent with the modern approach to despatch of litigation and the need for reasonable expedition: Richards v Cornford (No 3) at [98], [110]. 5. Bradfield submitted that it had suffered prejudice because of the delay. As to the effect of delay on the finalisation of the liquidation, there is no evidence of the state of the administration of Bradfield, including the size of the deficiency, and the number and quantum of creditors. Nevertheless, accepting that Bradfield has been actively attempting to recover the judgment since at least March 2018, an extension of time for an appeal would lengthen the duration of the controversy by a further six to nine months for an appeal. In addition, as the explanation below sets out, there would be further delay if a retrial was necessary. 6. As to the effect of delay on the utility of the enforcement proceedings by Bradfield, Bradfield submitted that it would suffer prejudice in the form of a significant waste of time and costs if an extension of time is granted. That may be accepted at a general level, even without direct evidence of the actual costs incurred. It may be inferred that the likely costs since March 2018 of seeking to recover the judgment, including the costs of the contested bankruptcy proceedings in the Federal Court, are not insignificant compared to the amount of the judgment itself. While counsel for Mr O'Hare submitted that any prejudice to Bradfield could be cured by an order for costs, no undertaking was offered on behalf of Mr O'Hare to submit to an order for costs either in the bankruptcy proceedings or on the appeal, insofar as the past costs incurred by Bradfield in enforcing the judgment would be wasted if an extension of time for an appeal was granted. 7. Neither party addressed the merits of ground 1 of the notice of appeal, being Mr O'Hare's assertion that the primary judge erred in refusing leave to permit an amendment of his defence. This ground may be put aside, as counsel for Bradfield properly conceded, that the construction argument raised by ground 2 raised a contestable issue (AT 13 (40-42)). The issue is whether the promised monthly instalment payments by Mr O'Hare were for the performance of the promised services, or was for the promise by Bradfield to provide such services: see generally, Automatic Fire Sprinklers Pty Ltd v Watson (1946) 72 CLR 435 at 463-464 (Dixon J); [1946] HCA 25; Aaldars v Putney Finance Australia Pty Ltd (formerly Anzax Finance Australia Pty Ltd) [2011] NSWSC 756 at [57]-[61] (Ward J, as her Honour then was). 8. The question of whether obligations are dependent or independent depends upon the intention of the parties. The question is one of construction: Burton v Palmer [1980] 2 NSWLR 878 at 895; Tito v Waddell (No 2) [1977] Ch 106 at 297 (Megarry VC); Hillam v Iacullo (2015) 90 NSWLR 422; [2015] NSWCA 196 at [93]-[102], where the leading authorities and views of commentators were reviewed by Leeming JA. 9. I am prepared to approach the application on the basis that the appeal has more substantial merit than being merely fairly arguable: Tomko v Palasty (No 2) at [14] (Hodgson JA). While cls 2 and 5 of the agreement are not expressly linked, they are arguably connected because the monthly payment obligation in cl 5 is expressed to be for Bradfield's "fees and disbursements that will be incurred by us in acting on your behalf in this matter" (emphasis added), that is, for the performance of the promised services. There is also an obvious commercial link between the payment obligation and the provision of services. In addition, the modern approach favours a construction whereby most obligations are construed to be dependent: Hillam v Iacullo at [107] (Leeming JA). Counsel for Bradfield did not point to any clear words from which a relation of independency could be discerned. 10. Justice involves a balancing exercise and the entitlement of parties to justice is not unconditional. Regard must be had to the need for reasonable expedition mandated by ss 56-60 of the Civil Procedure Act. As Allsop P said in Richards v Cornford (No 3) at [120], the duty on parties to assist to further the overriding purpose and the general statements of principle in ss 56-60 as to the conduct of modern litigation are not empty and pious rhetoric. 11. Both Bradfield and Mr O'Hare are entitled to a determination that is just and timely: Richards v Cornford (No 3) at [120]. Bradfield's entitlement to that would be undermined by granting Mr O'Hare an extension of time that would lengthen the duration of the controversy by another six to nine months with respect to an appeal. But that is not necessarily the end of the matter. If appeal ground 1 was successful, at best, that would result in a retrial assuming Mr O'Hare could demonstrate that a substantial wrong or miscarriage has been occasioned: UCPR, r 51.53(1). 12. If appeal ground 2 was successful, again it is likely that the matter would need to be remitted for a retrial, notwithstanding the Court's powers on a rehearing under s 75A(5) of the Supreme Court Act 1970 (NSW) to make any findings of fact that the District Court could have made: s 75A(6). The primary judge's remarks on the issue of whether any services were provided by Bradfield to the Clients did not amount to a concluded finding of fact. Although no credit issue was raised at trial, it would be difficult for this Court to make the necessary findings of fact, which would be required to decide the matter, given the need to resolve competing and conflicting affidavit lay evidence in the absence of any cross-examination at trial. 13. In all of the above circumstances, I am of the view that Mr O'Hare should not be given an extension of time to file his notice of appeal. It follows that the question of leave to proceed under s 500(2) of the Corporations Act does not arise. Mr O'Hare should pay Bradfield's costs of the motion.

Order 1. The order of the Court is: 1. Applicant's notice of motion filed 17 April 2019 is dismissed with costs.

**********

Amendments 30 May 2019 - Typographical errors 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: 30 May 2019