McClellan v Horswill

WHITE JA: This is an application for leave to appeal from orders of the Equity Division (Darke J) for specific performance of a contract for sale of land (Horswill v McClellan [2019] NSWSC 557).

The applicant and his former wife (Ms Warren) were the registered proprietors of land in West Portland Road, Sackville. On 19 May 2015 orders were made by consent by the Federal Circuit Court of Australia in proceedings under the Family Law Act 1975 (Cth) between Ms Warren and Mr McClellan. The consent orders were as follows:

Proceedings were commenced in the Equity Division by Mr and Mrs Horswill who were neighbours of Mr McClellan and Ms Warren. They sought specific performance of an agreement said to have been made on or about 18 October 2015 with Mr McClellan and Ms Warren, whereby the defendants agreed that they would transfer to the Horswills a portion of their land in consideration of payment of $50,000; with the Horswills bearing the costs and expenses associated with the purchase and sale of that portion. It was alleged that the agreement was made orally in a telephone conversation between Mr Horswill and Ms Warren. The Horswills also alleged that on or about 16 March 2016 the parties agreed to vary the agreement by increasing the frontage of the defendants’ land to West Portland Road from 5.5 metres to 6.5 metres, but with other terms remaining the same. The variation was also alleged to have been made orally and in a conversation between Mr and Mrs Horswill and Ms Warren. The Horswills alleged acts of part performance of the agreement.

There was no dispute that an agreement to the effect alleged was made between Mr and Mrs Horswill and Ms Warren. Ms Warren did not oppose the orders sought by the plaintiffs. Mr McClellan did. He alleged that Ms Warren did not have his authority to make the agreements sued on (amended defence, para 5). He relied upon s 54A of the Conveyancing Act 1919 (NSW) and denied that the acts relied upon by the plaintiffs constituted part performance of the agreement alleged. He also said that the alleged agreement was unjust in the circumstances relating to the contract at the time it was made such that pursuant to s 7 of the Contracts Review Act 1980 (NSW) the court should decide not to enforce it. The most significant of the allegations made in support of this contention was that the $50,000 purchase price was considerably below market value, that he did not have legal advice in relation to the agreement, and that he was never informed in writing of the terms of the proposed agreement (emphasis added).

On 8 February 2019 the proceeding was set down for hearing before the primary judge on 13 May 2019. Mr McClellan was present when the matter was set down for hearing. The matter was apparently listed for hearing for two days. Evidently, orders were made for the service of evidence. At least Mr Horswill, Ms Warren and Mr McClellan made affidavits. We have been referred to no evidence served by Mr McClellan to support his defence under the Contracts Review Act that the sale was undervalued.

On 9 May 2019 Mr McClellan sent a letter to the plaintiffs’ solicitor in the following terms:

When the matter was called on for hearing on 13 May 2019 Mr McClellan did not appear and there was no appearance by any solicitor or counsel for him. In ex tempore reasons given on that day the primary judge said that it was then brought to his attention that an email had been sent by or on behalf of Mr McClellan to the court shortly prior to 10.00am that morning. The primary judge recorded:

The primary judge treated this correspondence as if it were a formal application by Mr McClellan for an adjournment of the proceeding. He refused to adjourn the proceeding essentially for the following reasons:

The primary judge concluded that in all of the circumstances it seemed that the interests of justice were best served by rejecting the application for the adjournment and allowing the hearing to proceed, albeit in the absence of Mr McClellan.

The primary judge’s refusal of an adjournment was a discretionary decision to which the principles in House v The King (1936) 55 CLR 499; [1936] HCA 40 apply.

None of the primary judge’s reasons for refusing the adjournment was challenged as irrelevant. The judge was entitled to weigh the statement made in the report of Dr Malek that Mr McClellan was unfit to attend court due to his mental health against Mr McClellan’s own statement that if an adjournment were not granted he required three witnesses for cross-examination. He could also take into account that Dr Malek’s report gave no reasons for the opinion expressed and the lateness of the application.

Mr McClellan invoked the reasons of Rich J in Cameron v Cole (1944) 68 CLR 571 at 589; [1944] HCA 5 that:

There, the bankrupt had no notice of the hearing. The irregularity was, or was treated as, fundamental, in the same way as an order obtained (other than on an ex parte basis) against a defendant who is not served and has no notice of the proceeding is a fundamental irregularity that entitles the defendant to have the order set aside ex debito justitiae (Craig v Kanssen [1943] 1 KB 256).

In the present case the primary judge had to weigh the competing considerations, including the unsatisfactory “evidence” that Mr McClellan was not fit to appear, which was inadmissible to prove the fact stated, but raised a real concern that he might not be fit to appear.

Mr McClellan did not seek to set the orders aside under UCPR r 36.16(2)(b), where he could have been cross-examined on his evidence as to the reason for his non-appearance. Had he done so, because there was no fundamental irregularity, he would have been required to show a prima facie defence on the merits (Vacuum Oil Co Pty Ltd v Stockdale (1942) 42 SR (NSW) 239 at 243; Double Bay Newspapers v The Fitness Lounge Pty Ltd [2006] NSWSC 226; 57 ACSR 131).

On appeal Mr McClellan would be required to show error in the primary judge’s refusal of the adjournment. I accept that it is arguable that the primary judge erred, but I do not think it is more than arguable. Mr McLellan would also have to show that he was deprived of the possibility of successfully defending the proceeding (Nobarani v Mariconte [2018] HCA 36; (2018) 359 ALR 31).

The principal issue as to the merits of the case that would arise on an appeal, if leave to appeal were given and it were found that the primary judge erred in refusing the adjournment, would be whether it was possible that Mr McClellan could establish that Ms Warren did not have actual or ostensible authority to enter into the agreement made with Mr and Mrs Horswill on behalf of Mr McClellan. If she had that authority, there is no reason to doubt the correctness of the primary judge’s finding that the oral agreement was enforceable by reason of acts of part performance. On the application for leave to appeal Mr McClellan must show an error going beyond what is merely arguable that occasions an injustice.

The agreement could be binding on Mr McClellan in any one of four ways:

The primary judge found:

The primary judge was in error in his statement at [35] that Mr McClellan did not plead that any agreement made by Ms McClellan on his behalf was invalid due to a lack of authority. But it is clear from his Honour’s reasons that he did not rely upon that wrong assumption as the basis for his finding that Ms McClellan (Ms Warren) had actual and ostensible authority to act for him.

Contrary to the respondents’ submissions, the orders of the Federal Circuit Court did not authorise Ms Warren to sell a portion only of the Sackville property. Her authority must be found elsewhere.

It would be arguable at a contested hearing that Mr McClellan gave his own authority for the sale. Mr McClellan signed the plan of subdivision (Judgment [21]). Mr McClellan deposed that he only did so after he was made drunk by Mr Horswill (Affidavit 22 January 2019) para [11]) and the document he signed did not have the plan of subdivision attached to it (para [12]).

However, Mr McClellan accepts that he told Mr Horswill that he wanted the boundary adjustment moved back a metre (Affidavit [21]), which it was.

The evidence adduced on this application for leave included Mr McClellan’s affidavit that had been filed in the Equity Division and some parts of which were tendered below. Mr McClellan deposed that he told Mr Horswill that:

Mr McClellan allowed Ms Warren to conduct negotiations with the Horswills.

Mr McClellan relied on evidence that on or about 14 August 2016 he told Ms Warren that he would agree to proceed on certain conditions. Those conditions were not met. But the agreement sued on was alleged to have been made on 18 October 2015 in a telephone conversation between Ms Warren and Mr Horswill and raised in a later conversation between Ms Warren and Mr and Mrs Horswill on 16 March 2016. Mr McClellan’s refusal to proceed was an alleged breach of the agreement. That refusal could not revoke Ms Warren’s actual or ostensible authority to have contracted on Mr McClellan’s behalf.

The argument that Ms Warren may not have had actual or ostensible authority to contract on behalf of Mr McCLellan does not rise above that which is “merely arguable” (Be Financial Services Pty Ltd atf Be Financial Operations Trust v Das [2012] NSWCA 164 at [33]; The Age Company Ltd v Liu (2013) 82 NSWLR 268; [2013] NSWCA 26 at [13]).

We were referred to no evidence that might suggest there was any substance to the defence based on the Contracts Review Act, nor was the arguability of any such defence advanced in Mr McClellan’s submissions.

Section 101(2)(r) of the Supreme Court Act 1970 (NSW) provides that:

Although the applicant filed a summons for leave to appeal he submitted that leave was not necessary for two reasons. He submitted that s 101(2)(r) was inapplicable. This was so for two reasons. First, the matter at issue was the denial of the applicant’s opportunity to be heard, and no value could be put on that as it involved a fundamental principle of justice which did not involve money. Secondly, under sub-para (ii), the appeal concerned the whole of the land and the primary judge’s order contradicted the order of the Federal Circuit Court by permitting his former wife to sell part of it.

Neither submission is correct. Subject to later provisions in s 101 (none of which is relevant) the effect of s 101(2)(r) is that an appeal from a final judgment or order of the Court in a Division requires leave unless one of sub-paras 101(2)(r)(i) or (ii) is satisfied. If the issue has no monetary value leave is required (Clyne v New South Wales Bar Association (1960) 104 CLR 186 at 205; Re DG and the Adoption Act 2000 [2007] NSWCA 241; (2007) 244 ALR 195 at [17]-[21]).

As to the second submission, the order for specific performance of a contract that bound Mr McClellan because he had either authorised Ms Warren to contract on his behalf or clothed her with ostensible authority did not contradict the order of the Federal Circuit Court. As counsel for Mr McClellan correctly acknowledged, the parties could consensually vary the terms of the order.

There is no evidence that the portion of land contracted to be sold is worth more than the sale price of $50,000. The fact that the entirety of the Sackville property is worth more than $100,000 is irrelevant (Horseshoe Pastoral Co Pty Ltd v Rixon [2018] NSWCA 121 at [3]). The application raises no issue of principle or question of public importance. It does not appear that the judgment contains an error going beyond what is merely arguable that occasions an injustice. Leave to appeal should be refused. I propose that the summons be dismissed with costs.

SIMPSON AJA: The relevant facts and circumstances are set out in the judgment of White JA which I have had the advantage of reading in draft. For the following reasons, which differ in some respects from those of his Honour, I also would refuse leave to appeal. The following assumes familiarity with the facts as stated in the judgment of White JA.

Pursuant to directions earlier made, affidavit evidence of the parties was filed prior to the date fixed for hearing. The respondents appear to have relied on either, or perhaps both, of two propositions: (i) that the applicant had himself agreed to the sale of the land and (ii) that he had vested Ms Warren (his wife or former wife) with authority to do so on his behalf.

The applicant filed affidavit evidence that disputed both propositions. He expressly disputed some evidence of the respondents concerning the discussions that preceded the submission of the application to the Land Titles Office.

It is apparent (Judgment [15] and [19]) that some oral evidence was given in the hearing that took place in the applicant’s absence.

The primary judge found both that the applicant agreed to the proposed sale, and that he held out Ms Warren as his agent in that regard (Judgment [35]).

The applicant seeks leave to appeal on a variety of grounds. The first proposed ground attacks the primary judge’s refusal of his application for adjournment of the proceedings which, he contends, denied him procedural fairness and an opportunity to be heard, resulting in injustice. The remaining grounds, in essence, attack the primary judge’s conclusions on the substance of the respondents’ claim, that is, that an oral agreement in terms asserted by them (principally by the first respondent, Mr Horswill) had been made, either by the applicant himself or by Ms Warren on his behalf. They do not attack the finding that the steps taken by the parties amounted to sufficient part performance for the purpose s 54A of the Conveyancing Act 1919 (NSW).

There are, therefore, two distinct aspects to the proposed appeal.

The evidence before the primary judge on the adjournment application was, on its face, that of a consultant psychiatrist in a brief report dated 10 May 2019 (the Friday before the day fixed for hearing, on Monday). That evidence was that the applicant had been an in-patient in the St John of God psychiatric hospital for one month, that he would need continued hospitalisation for at least a further two weeks, and that he would be unfit to attend court until 15 July 2019.

Notwithstanding that the adjournment application was made, and the evidence presented, in an unorthodox and even “unsatisfactory” (as the primary judge found) manner, the application was treated as properly made, and the evidence was accepted. In refusing the adjournment application, the primary judge appears to have attached considerable weight to evidence of two previous occasions on which the applicant had submitted evidence of his psychiatric condition. One was in August 2018, when the applicant sought (by similar methods to those employed in the present case) adjournment of a scheduled hearing in the Federal Circuit Court. It is not clear whether that application was or was not successful. On the other occasion (February 2015, also in the Federal Circuit Court) as recorded in the primary judgment, the applicant had also submitted evidence from the same psychiatric hospital (St John of God) providing psychiatric diagnoses of depression with anxious distress, dysthymia and cannabis use disorder in remission. The purpose for which that evidence was submitted is not disclosed, nor is its result.

What may be inferred is that that evidence was relied on for the purpose of affecting, adversely, the assessment of the applicant’s credibility and the genuineness of the basis on which he sought adjournment. The primary judge also expressed doubts, as to the prospect that the applicant would ever (or at least in the near future) be in a position to defend the case against him.

Some weight was also attributed to the last sentence of the applicant’s letter to the respondents’ solicitor on 9 May 2019, in which, having asked for agreement to an adjournment, he advised that, if the adjournment were refused, he would require both respondents and Ms Warren to attend for cross-examination.

Of this letter the primary judge said:

That conclusion is a direct contradiction of the medical evidence.

What does not appear to have been taken into account, or given any weight, is that the applicant was unrepresented, and that if the adjournment application were refused the case would proceed in his absence, and in the absence of such evidence as he had filed; and that the inevitable consequence would be that the applicant’s defence would fail. The proceedings would terminate in favour of the respondents.

In Sali v SPC Ltd (1993) 57 ALJR 841 at 845 Brennan, Deane and McHugh JJ said:

The primary judge stated that “some parts” of the affidavit filed by the applicant were tendered by the respondents as admissions, but the material before this Court does not identify the content of that evidence.

It would be, in my opinion, strongly arguable on an appeal that, in the face of the psychiatric evidence, refusal of the adjournment application represented an error of discretion of the last kind enumerated in House v The King (1936) 54 CLR 49 at 505; [1936] HCA 40, that is that the result is one which is unreasonable or plainly unjust. It may also be arguable on an appeal that, in concluding that the applicant’s conditions were not such as to prevent him from appearing at the hearing, based on the applicant’s letter of 9 May, the primary judge failed to take into account a material consideration, namely, the contrary psychiatric opinion expressed on 10 May.

That being the case, were the proposed appeal limited to the refusal of the adjournment application, I would consider that a strong case was has been made for a grant of leave to appeal. However, the application for leave is not, and cannot be, so limited. The applicant must also make out a case for a grant of leave to appeal against the substantive orders made. That is a more difficult task.

Section 101(1)(a) of the Supreme Court Act 1970 (NSW), which provides for appeals and empowers the court to make any order which the nature of the case requires is, as the High Court observed in Nobarani v Mariconte [2018] HCA 36, subject to UCPR Rule 51.53(1) which provides that the court must not order a new trial on any of a number of specified grounds, or “any other ground” unless it appears to the court that some substantial wrong or miscarriage has been thereby occasioned. Any error identified:

There was no real issue about whether what had been done amounted to part performance of the oral contract. The issues were whether the sale had been agreed to by the applicant, or by Ms Warren on his behalf and with his authority, and whether the acts done in pursuance of the agreement were done by him or by Ms Warren, again, on his behalf and with his authority. This is where the factual dispute, on the evidence as filed, lay. That evidence is sufficiently detailed in the judgment of White JA.

In The Age Company Ltd v Liu (2013) 82 NSWLR 268; [2013] NSWCA 28 at [13] Bathurst CJ, with whom Beazley and McColl JJA agreed, pithily summarised the principles on which applications for leave to appeal are determined as follows:

No issue of principle or question of public importance has here been identified.

The question is thus whether, as a consequence of the refusal of the adjournment application: “it is reasonably clear that an injustice has occurred … going beyond what is merely arguable”. In considering this question it is appropriate to bear in mind that the applicant’s evidence was not read or taken into account and its credibility was not assessed. However, it is necessary to take into account what evidence the applicant would have given at a hearing in which he participated.

Assessment of that evidence, limited as the assessment must be in the present circumstances, does not afford much comfort to the applicant. Indisputably, he signed the proposal for sub-division. His evidence of the circumstances in which that came about (that he and Mr Horswill consumed several cans or bottles of beer before he signed) could not, even if accepted, reach the level of establishing that his signature should not be taken to represent a considered decision on his part. His evidence that the document that he signed did not have the plan attached similarly would be insufficient, even if accepted, to invalidate his signature.

The proposition which the applicant would advance on appeal, that the finding that he himself agreed to the sale of the land was erroneous, has not been shown to be more than merely arguable.

On the question of authority of Ms Warren to agree to a sale on behalf of the applicant, the applicant’s own evidence was that, when Mr Horswill first approached him with a proposal to purchase part of his land he said:

He added that, at Mr Horswill’s request, he gave Ms Warren’s phone number to him. In the light of this evidence it would be difficult for the applicant to challenge the finding that Ms Warren made the arrangements with his authority, or at least that he represented to Mr Horswill that she could do so.

The applicant has not established any reasonably arguable case of injustice, let alone one which goes beyond the “merely arguable”.

Notwithstanding my view that the applicant presents a significant case with respect to the refusal of his adjournment application, I have come to the view that his application for leave to appeal does not satisfy the tests summarised in Liu.

I therefore agree with the orders proposed by White JA.