Agricultural and Rural Finance Pty Ltd v Wardel & Ors; Agricultural & Rural Finance Pty Ltd v Giannuzzi & Ors

[2012] HCATrans 256

[2012] HCATrans 256

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Sydney  No S133 of 2012

B e t w e e n -

AGRICULTURAL AND RURAL FINANCE PTY LIMITED
(ACN 078 025 564)

Applicant

and

DAVID JAMES WARDEL

First Respondent

GAVIN WINSTON LONG

Second Respondent

OCEANIA AGRICULTURE PTY LIMITED

Third Respondent

Office of the Registry
  Sydney  No S134 of 2012

B e t w e e n -

AGRICULTURAL AND RURAL FINANCE PTY LIMITED

Applicant

and

FRANCO GIANNUZZI

First Respondent

GEOFFREY NEVELL FREDERICKSEN

Second Respondent

NICHOLAS CHARELS ROWE

Third Respondent

MARIA FRANCESCO RUSSO

Fourth Respondent

JENNIFER DIANNE WALLACE

Fifth Respondent

Application for special leave to appeal

HAYNE J
HEYDON J

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON FRIDAY, 5 OCTOBER 2012, AT 11.38 AM

Copyright in the High Court of Australia

____________________

MR C.J. BEVAN:   May it please the Court, I appear with my learned friend, MR S.A. ADAIR, for the applicant in each matter.  (instructed by Evangelos Patakas & Associates)

MR S.D. EPSTEIN, SC:   May it please the Court, I appear with my learned friend, MS A. TSEKOURAS, for the respondents, which is to say the first and second respondents in proceeding 133 and the first to sixth and tenth and eleventh respondents in the second matter.  (instructed by Abadee Dresdner Freeman Pty Ltd)

HAYNE J:   I have a certificate from the Registrar in both matters that the solicitors for the third respondent in the first and the twelfth respondent in the second matter have advised that they will be appearing as they support the applicant’s submissions.  There are submitting appearances for the seventh to ninth in the second of the matters, I think.  Yes, Mr Bevan.

MR BEVAN:   Your Honours, ARF’s principal complaint is about the Court of Appeal’s approach to the interpretation of separate trial orders and undertakings which were given pursuant to those orders by 179 of the defendant’s to my client’s summons:

“to be bound by the findings of the Gardiner Test Case” –

The separate trial orders and the undertakings which operated as a condition precedent to their operation first and foremost court process.  Justice Einstein’s approach to their interpretation is reproduced in the decision of Justice Campbell at paragraph 105 which your Honours will find in volume 1, page 377, Justice Campbell summarising the judgment relevantly of Justice Einstein noted that his Honour the primary judge found that:

“I further accept that it clearly was not in the contemplation of the parties that if issues were decided adversely to Mr Gardiner in the test case the remaining defendants who gave undertakings might avoid the consequences of such a judgment by relying upon defences in different terms to those in the test case.

The first point we make is that the effect of the undertaking and the orders pursuant to which it was made was an undertaking to be bound by the result of Mr Gardiner’s test case as much as it was an undertaking, “to be bound by the findings” of fact and law leading to the ultimate conclusions.

HAYNE J:   But where do we most conveniently find the undertaking – the text?

MR BEVAN:   If your Honours go to page 347 your Honours will see the heading, “The Separate Trial Order and the Undertakings” and there Justice Campbell sets out the first iteration of the separate – perhaps not so much a separate trial order but an attempt to bring into being a separate trial order.  The actual first iteration of the separate trial order is at paragraph 24 on page 349, where Justice Bergin made orders on 19 March 2004, and right from the very start what the Supreme Court ordered be separately determined were all issues arising from:

The claim by Agricultural and Rural Finance Pty Limited against Bruce Gardiner –

and Mr Gardiner’s “cross‑claim”.  Then the terms of the undertaking are set out at paragraph 25:

“I undertake to be bound by the findings of the Gardiner Test Case”.

That undertaking was given by 179 defendants.  The Court of Appeal found that the undertaking was actually addressed to Clayton Utz but said that it should be read as having been given to the Supreme Court because it was given in pursuance of the order made on 19 March 2004.  The final iteration of the separate termination order appears in Justice Campbell’s judgment at paragraph 27, over the page on page 350 of the application book.  This was actually made at approximately 4 pm on the last day of the trial in the test case by Justice Young who was the trial judge in the test case.

This, for all intents and purposes, gave meaning to undertakings that had long since been given the previous year because the undertakings were actually given pursuant to the 19 March 2004 order at paragraph 24 of Justice Campbell’s judgment.

HAYNE J:   And paragraph (ii), is it insofar as note, is it not, “Notes . . . that insofar as”, et cetera?

MR BEVAN:   Yes.

HAYNE J:   What, in paragraph (iii) is some things are “not precluded”?

MR BEVAN:   That is right.  The way that the court with the consensus the parties approached it was that there was a separate determination of my client’s claim against Mr Gardiner.  Importantly, as Justice Einstein noted, it was not a determination of Mr Gardiner’s defence, it was a determination of the entire claim by the lender against a borrower who was a nominee of the 179 defendants, including the respondents in this matter.

HAYNE J:   Could I put on the table very early, Mr Bevan, the difficulty I have, which is that my impression of the case is that it is one which turns on the particular way in which the issue was set up for separate trial of one proceeding and says nothing about whether you can have a test case that binds others.  Then it comes to the further question, well, why should this Court at this stage of the litigation get into the intestacies of pleadings and their comparison with what happened in the particular setup of the particular test case, so‑called test case?

MR BEVAN:   Can I answer that question in several ways?  The first, your Honour, is that if we are correct on the interpretation point, such that the 179 defendants were bound by the result, that means that the amended defences that were omitted for rehearing.  We really do not get into the merits of them because they should not have been allowed to amend on the eve of a trial to bring them in breach of the undertakings. 

Secondly, the parties undertook in the broadest terms that one could imagine in the undertaking that 179 of them gave in that undertaking I have read to your Honours at paragraph 25 of Justice Campbell’s judgment, and when they gave that undertaking we say they are taken to have undertaken to be bound by findings, as that terms has been historically understood in the law, which is a conclusion by a court after a trial of fact.

The third point we would make, your Honours, is that one must interpret the separate trial order and undertaking as if it were court process rather than if it were an antecedent contract between litigants calling for interpretation by the court and that the interpretation of the separate trial, order and undertaking must – part of that interpretation context must incorporate the actual approach the court took not only to setting up the order and not only setting up the requirement to give the undertaking if the defendants’ request for a test case were to be acceded to because it was they who asked for it, of course.  It was they who nominated the test case defendant, they who nominated someone with both a punctual and an unpunctual loan so that they could determine all of the issues, they who funded it, they who agreed to be bound by the enormous costs of the test case.

We say that if they were not agreeing to be bound by the result, one would just take two steps back and say why would people incur over $6 million in costs conducting a test case and incurring the costs of the other parties to it for the sake of resolving a claim by my client against one of them involving $165,000.  We say the rational inference to be drawn is that those people were spending that $6 million to run a case for the benefit of all of them, and indeed 168 of them treated it that way.  Sixty six of them obtained summary judgment on the basis that ARF was bound by failure in the test case on the punctual loans and approximately 100 of them gave up after the test case and only 12 of the defendants went to trial.

The 12 defendants who went to trial went to trial on essentially three issues.  One was proving punctuality because that always remained an issue for those who gave a test case undertaking after Mr Gardiner’s case.  They failed on that on the merits, and the only other two defences they had were the estoppel defence, which was struck out, and the Contracts Review Act defence, the heart of which was essentially struck out or leave to amend it on the eve of the trial not granted.

Now, this application for special leave in each of these two matters – we do not seek to get bogged down in questions of estoppel pleading and Contracts Review Act pleading.  This is squarely a case about whether 180 people, including Mr Gardiner, can invite a superior court to determine one case on the basis that it is going to resolve the case for all 180 of them and then stand by and have 12 of them effectively start again. 

Now, if they are not permitted to start again we do not get into pleading issues about estoppel and Contracts Review Act.  The first two special leave questions are really the business end of this application which is was it an abuse of process to amend, was it an abuse of process to effectively force ARF to a second trial after the test case and require ARF to do anything more than test the allegations of punctual performance which it successfully did at trial.

Now, ARF says that what it should have been required to do and the sum total of its obligation at trial two years ago before Justice Einstein was to do exactly what it did in respect of the punctual payment issue which was to establish that the allegations of punctual payment were flawed and that these 12 respondents had not paid in time and that in accordance with the test case they were not entitled to indemnity from the scheme promoter OAL.

ARF should not have been put in a position where it was, as it is now on a remitter, required to go to trial and, in effect, establish yet again, six years after it established it before Justice Young in the trial, that Mr Lloyd had not authority to give to make the representations he is alleged to have made on behalf of ARF.  Nor should we have to go through the factual issues that we went through again six years ago before Justice Young in establishing that the way the project was promoted in the prospectuses was not misleading and deceptive conduct, but in this case, for different forensic ends, to use the Court of Appeal’s language and, in effect, to show that it does not constitute unjustness in the statutory sense within the meaning of section 7 of the Contracts Review Act having regard to the criteria in section 9.

We should not have been required to do that, and we would say that if that were to be done these 12 respondents in these two applications should have done that six years ago before Justice Young.  They funded the test case, they chose the test case nominee, they had a hand in instructing Clayton Utes and two very senior members of the Bar and how that test case was run.  They became responsible for our costs in all three courts in the test case.  It was up to them to make that decision to run their more extensive case, assuming they have one, to quote the Court of Appeal, a de facto agency case in the case of Mr Lloyd, that should have been done then if they wanted to overcome the findings made by Chief Justice Spigelman and Justice Handley on lack of authority, and they should have been required to run the Contracts Review Act case then.

HAYNE J:   But, all of these are matters which sound as though they are matters relevant to whether order for indemnity costs might not run at the end of these proceedings.  It is not a question we are going to embark on, but they are matters that might, possibly, be thought to bear on those issues.  But, what is the point that we would seize?

MR BEVAN:   The point that your Honours would seize is the point of principle, and the point of principle is, in this case there is a remitter, but it could easily have been the end of the case.  If this had not been, for example, your Honours, if this had not been the strikeout, but rather if these defences had been determined on the merits over objection, then we have an intermediate Appellate Court decision that says, you can give an undertaking to be bound by the findings of a test case in the most general terms that one could possibly conceive, you can invite a superior court to hear a test case on the basis that it is going to resolve 180 cases, and then you can step out of it when you get an unsatisfactory result.

That, we say, is an abuse of process because it is not the basis on which the Supreme Court was invited to hear the matter six years ago and it is not, we say, an appropriate use of either the resources of my client or indeed public resources of the Supreme Court or the Court of Appeal or this Court in gearing up and hearing a test case which ultimately is of no avail.  According to the Court of Appeal, the test case served the purposes of the defendants who were punctual.  They are off Scott free, they got summary judgment because, according to them, our failure in the test case on the punctual onus was a res judicata, which is effectively some sort of issue estoppel analysis, but when it came to the unpunctual loans they are allowed to start again.

Now, we say if this decision is allowed to stand, your Honours, no plaintiff, whether it is a large corporate plaintiff or a government instrumentality, in its right mind is going to invite a court to hear a test case

because there is a way out.  Now, your Honours, if we go to the actual interpretation process of Justice Campbell writing the principle decision of the Supreme Court, it is quite succinctly dealt with in paragraph 114, which your Honours will find on page 382 and 383 of the volume of the application book.  At the top of the page his Honour says:

there is no specific evidence that the “clear assumption was that in most cases the issues raised by the defences and cross‑claims would be the same.”

Can we just pause there and say, we see it on standard form loan agreements, they cross‑claim for indemnity on standard form indemnity agreements.  Apart from the reliance on representations to support estoppel defences, there is no conceivable uncommon question that could have arisen.  When one goes a little bit further down, his Honour then places reliance on the differences that could have arisen.  When one goes to his Honour’s analysis starting at line 12:

However, the notional reasonable bystander would also infer –

His Honour then points out:

it was likely that some issues in Mr Gardiner’s case would differ from issues in the case of another defendant . . . [For example,] whether Mr Gardiner had relied upon the various representations that he pleaded in his estoppel case –

That was part of the carve‑out.  That was specifically taken out of the binding effect in paragraphs 2 to 4, which your Honour the presiding judge pointed out when I first started to address:

Further, some of the representations upon which Mr Gardiner based his estoppel case –

Again, within the carve‑out.  Down at line 29 –

there would be the opportunity for investors other than Mr Gardiner to have conversations in different terms –

Again, part of the carve‑out.  The reason the parties put a carve‑out in paragraphs 2 to 4 was it was to be all comprehensive and clearly the parties recognise that where you relied on a representation to either enter the loan agreements or to perform them unpunctually, you should be given an out, but other than paragraphs 2 to 4 there were no possible uncommon questions that could have arisen.  If your Honours please.

HAYNE J:   Thank you, Mr Bevan.  We will not trouble you, Mr Epstein.

The questions which the applicant seeks to agitate in this Court arise out of interlocutory proceedings in two actions that have not yet been tried.  Resolution of the questions depends upon the particular course followed in associated proceedings intended to be a test case in respect of some, but not all, possible issues raised in these matters.  No question suitable for a grant of special leave arises.  Special leave to appeal is refused with costs in each matter.

AT 11.59 AM THE MATTERS WERE CONCLUDED