Anaconda Nickel Ltd (Now Minara Resources Ltd) v Edensor Nominees Pty Ltd & Anor

[2005] HCATrans 151

[2005] HCATrans 151

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Melbourne  No M184 of 2004

B e t w e e n -

ANACONDA NICKEL LTD (NOW MINARA RESOURCES LTD)

Applicant

and

EDENSOR NOMINEES PTY LTD

First Respondent

JOSEPH ISAAC GUTNICK

Second Respondent

Application for special leave to appeal

McHUGH J
KIRBY J
HAYNE J

TRANSCRIPT OF PROCEEDINGS

AT MELBOURNE ON FRIDAY, 11 MARCH 2005, AT 9.30 AM

Copyright in the High Court of Australia

__________________

MR A.C. ARCHIBALD, QC:   May it please the Court, I appear with my learned friend, MR I.B. STEWART, for the applicant.  (instructed by Holding Redlich)

MR J.H. KARKAR, QC:   If the Court pleases, I appear with my learned friend, MR M.S. OSBORNE, for the respondent.  (instructed by Schetzer, Brott & Appel)

McHUGH J:   Yes.  Mr Archibald.

MR ARCHIBALD:   In our submission, the Court of Appeal correctly concluded, as it did at paragraph 20, page 106 of the application book, that the written variation agreement was entirely at odds with the alleged assurance.  That is to say the court recognised that the alleged assurance was inconsistent with or contradicted by the formal written variation agreement.  An argument was advanced by the respondent ‑ ‑ ‑

HAYNE J:   That is always the case in any promissory estoppel case, is it not?  There is some disconformity between the legal obligation and what is said to be the promissory obligation undertaken.

MR ARCHIBALD:   No, in our submission, not inconsistency or contradiction.  Waltons v Maher type estoppel, for example, does not reflect inconsistency.  The assurance affords legal efficacy to that which might, without the assurance, lack such efficacy.  The concepts, generally speaking, within the field of promissory estoppel, but not exclusively, feed from existing relationships, which are modified or altered or adjusted in consequence of the assurance.  That is the converse of and the antithesis of the circumstances which exist here.  The collateral contract claim failed because of inconsistency between the subject matter of the alleged collateral contract and the formal written variation agreement.

McHUGH J:   I thought Justice Warren found it inappropriate to determine the collateral contract case, or is my recollection wrong?

MR ARCHIBALD:   Her Honour said at paragraph 192, page 77 of the application book, line 15:

as a matter of application of strict legal principle the collateral agreement was inconsistent with the terms of the variation agreement.

In paragraph 193 she referred to decisions in this Court in the area and then she said – we accept your Honour, the presiding judge at line 26:

it is unnecessary, indeed inappropriate in the circumstances of the case to find breach of collateral contract against Anaconda. 

But then her Honour said: 

Even if it was appropriate the plaintiffs face the same problem as under the breach of the share sale deed and variation agreement claims with respect to proof of loss and damage.

It was in that context that her Honour then said:

I would not, therefore, make orders . . . in any event.

So her Honour recognised the inconsistency, the foundation of failure, but resolved that point in that way.  But, of course, the subject matter of the alleged collateral agreement was constituted by the very same assurance, by the very same facts as were relied upon for the purposes of promoting the promissory estoppel case.

McHUGH J:   Is the point that you make that hitherto all the cases have been cases where somebody has assured the other party that they would not enforce their strict legal rights in substance, but this is a case where there was a promise to do something in contradiction of the written agreement?

MR ARCHIBALD:   Yes.  There is an antecedent promise to do something.

KIRBY J:   Do you mean a subsequent written agreement?  That is the point I emphasise, exactly.

MR ARCHIBALD:   Yes, a later negotiated contract and, in a sense, raising – the question, we say, arises in this area of the case to a higher level, the question is really one of primacy.  Which has primacy, the law of contract or the law of estoppel?  We submit that it is the law of contract that should prevail. We submit that this Court’s reasoning in Equuscorp portrays and exposes those concepts, and the decision of the Court of Appeal and, indeed, the primary judge in this case are to the contrary effect.

McHUGH J:   Justice Buchanan at page 106 suggested an explanation for the addition of clause 4.1(a) in the variation agreement but, for understandable reasons, neither party wanted to explore that issue.

MR ARCHIBALD:   Yes.  That was really the only way out, because faced with the inconsistency one had to find some means of resolution and Justice Buchanan found the resolution in the subject matter identified at paragraphs 22 and 23, namely, that there was no inconsistency in truth because the apparent manifestations of inconsistency were no more than elements of the deception of the bond holders.

McHUGH J:   Of the bond holders.

MR ARCHIBALD:   Yes, of the bond holders.  Now, our submission is that his Honour was not able to employ that reasoning and misconceived the circumstances which existed.

HAYNE J:   Why do you say “not able to employ that reasoning”?

MR ARCHIBALD:   Because, your Honour, what his Honour was doing was departing from and indeed contradicting the conclusions of the primary judge on this matter, for the primary judge had concluded substantive legal efficacy in the variation agreement, in other words, finding non‑sham, non‑deception.  His Honour, in advancing this reason, was advancing a view which was not a view that was consonant with the findings adopted by the trial judge.

The moment one embarked upon a conclusion of sham, one necessarily had to reject evidence given by Mr Gutnick.  We set out the elements of that evidence at paragraph 18 of our written submissions, page 156 of the application book.  Once one rejects that evidence of Mr Gutnick, one immediately impugns the central foundation of the primary judge’s basis for preferring the evidence of Mr Gutnick to the evidence of Mr Forrest, namely, her finding that Mr Gutnick was a witness of truth in all respects.

KIRBY J:   If it had been a sham, that would have created a problem for relief on the promissory estoppel principles.

MR ARCHIBALD:   Yes, it would and we argue that it did, but the moment the Court of Appeal embarked upon that finding, one, they were departing from the primary judge and, two, they were impugning her central reasoning for preferring the vital evidence on the critical conversation of 4 September.

HAYNE J:   The draft notice of appeal propounds as many as 28 grounds over heaven knows how many pages.  Where is the essence of the point that you opened reflected in the grounds?

KIRBY J:   You were rather proud of all your grounds in your written submissions.  There are too many of them.

MR ARCHIBALD:   We defended them because their plurality was commented upon.

KIRBY J:   I must say, subject to hearing Mr Karkar, I think you have made out some good and important points, but the idea of the High Court of Australia sitting here for days, combing through all these facts, is horrifying.

MR ARCHIBALD:   If leave were granted, we would certainly submit a notice of appeal that pruned back ‑ ‑ ‑

HAYNE J:   Well, let us into the secret.  Where is the point that you propound as the core?

McHUGH J:   I cannot recollect the point you made in opening being raised in your notice of appeal.

KIRBY J:   It is in the written arguments.

MR ARCHIBALD:   Yes, I have to say the detail of the grounds does tend to submerge the point of principle.

HAYNE J:   So what is the point?

MR ARCHIBALD:   The point is as formulated in our special leave “Question 1” which is set out on the first page of our outline of submission at ‑ ‑ ‑

HAYNE J:   Is that a point that can go forward shorn of this great factual controversy that you would seek to agitate in the other grounds?

MR ARCHIBALD:   Yes, in our submission, for the essential foundation of it is crystallised ‑ ‑ ‑

KIRBY J:   You would have to have the second special leave question, would you not, to get to orders?

MR ARCHIBALD:   Yes.  I did not mean, in responding to your Honour Justice Hayne, that we could move forward with one and one only question so formulated.

HAYNE J:   That is what I want to know.  What are you seeking leave to agitate?  Do you say that the first and principal point is the one you opened?

MR ARCHIBALD:   Yes.

HAYNE J:   But what then would come up if leave were to be granted?  The lot?

KIRBY J:   You see, that would establish error on the part of the Court of Appeal, but we cannot just leave it on that basis.  We would have to reach our own orders.

MR ARCHIBALD:   Yes.  But the finding in paragraph 20 of Justice Buchanan’s reasons really contains the entire essence of the means of resolution of the questions, for if that inconsistency is insusceptible of being displaced, there is one and one only conclusion that is to be reached in the matter, namely, that the written contract, including special condition 4.1(a), governs the relationship between the parties.  That would be determinative of the outcome of the issues between the parties.

HAYNE J:   So does it follow that if this first point you make is good, the prior promise cannot stand in face of the subsequent contract? 

MR ARCHIBALD:   Exactly so. 

HAYNE J:   Your contention is:  appeal allowed and orders which give effect to the written contract are pronounced?

MR ARCHIBALD:   Yes.  Our friends submit that there is the separate ground of misleading conduct available to them, but the misleading conduct ground must march in step with the promissory estoppel ground, for, again, the identical material is relied upon for the misrepresentation said to constitute the misleading conduct.  Just as that statement, when characterised as an assurance for the purposes of promissory estoppel, cannot survive the later inconsistent contract nor, in our submission, is it conceivable that the same words, characterised as a representation, could survive as operative words after the entry into the later inconsistent contract.  So that route of salvage that is advanced by our learned friends is one that is not available, in our submission.

The second salvage route identified by them is the finding by the primary judge that there was not the conduct of due diligence by Anaconda and there was not a bona fide reliance upon the right to elect not to complete.  Again, we have sought to impugn that reasoning of the primary judge.  The Court of Appeal did not deal with that issue at all.  Were that issue to be agitated that we were to fail, the only relief that could flow from that claim is a claim for damages for breach of contract.

The primary judge found that there was no proof of loss or damage and hence success on that ground could yield only an award of nominal damages, at best.  Hence the relief in fact awarded to and enjoyed by the respondents could not be sustained by that route.  We do submit that this point is decisive of the outcome of the case, the substantive relief effectively denying to us the recovery of the loan which was the express foundation of the agreement between the parties, the variation agreement.

McHUGH J:   On the contradiction point, what do you say about the dictum of Justice Brennan in Waltons where he said that:

the plaintiff [must have] assumed that a particular legal relationship then existed between the plaintiff and the defendant or expected that a particular legal relationship would exist –

in the future.  Why does that not cover the case of contradiction?

MR ARCHIBALD:   Because the expectation, even if existing at the moment in time at which the assurance was given, is necessarily and entirely displaced by the later negotiation which, by the process of consensual negotiation, eliminates that expectation.  There cannot thereafter be a persisting expectation.  It has been negotiated away.  The misconception in the case advanced by the respondents and the misconception, in our submission, in the reasons of the primary judge and, ultimately, the Court of Appeal is that notwithstanding the voluntary consensus later arrived at that is inconsistent with the earlier expectation, somehow or other that expectation survives and prevails.  We submit it cannot be so.  For those reasons, in our submission, special leave should be granted in this case.

McHUGH J:   In relation to what?  What ground of appeal?  I mean, the closest you get to is ground 12, I think, is it not?

MR ARCHIBALD:   The central ones, essentially, are ground 3, ground 6 and ground 11.  Your Honour, Justice Hayne, if we do articulate our special leave ground satisfactorily in our draft notice, ground 11 is probably the one that does it. 

McHUGH J:   So ground 3, 6 and 11 ‑ ‑ ‑

MR ARCHIBALD:   Are the essence of that point, yes.

KIRBY J:   We are just concerned that you might win on that and that just leaves us with error, but not with the solution to the case.

MR ARCHIBALD:   Yes, your Honour.

KIRBY J:   You might think of that while Mr Karkar is addressing us and come back with an answer to it.

McHUGH J:   My brother Kirby assumes that we are going to call on you, Mr Karkar, but I think we will.

KIRBY J:   It seemed to be flowing that way, Mr Karkar.

HAYNE J:   There might be a sea change coming, Mr Karkar.  You never know.

MR KARKAR:   Yes, your Honour.  As to the first proposition, your Honours, it is our respectful submission that there is abundant authority, both in this Court and in intermediate courts of appeal, for the proposition that an antecedent promise can stand in the face of or supplant a subsequent agreement.

McHUGH J:   There could be no dispute about that, but Mr Archibald’s point is that the expectation cannot continue when the expected legal relationship that does occur is inconsistent with the expectation.  Is there any case that you are aware of which would hold ‑ ‑ ‑

MR KARKAR:   Yes, your Honour.  In fact I would refer to your Honour’s judgment in the Court of Appeal of New South Wales, State Rail Authority v Heath.

McHUGH J:   State Rail Authority.

MR KARKAR:   Yes.

McHUGH J:   But I dissented in that, did I not?

MR KARKAR:   Excuse me, your Honour.  Your Honour dissented, but not on that point.

KIRBY J:   I think I sat in that, too, Mr Karkar.

MR KARKAR:   Your Honour was vindicated in the High Court in Maher’s Case.

McHUGH J:   Yes.

KIRBY J:   But, Mr Karkar, it is a long time since we have had an interesting case like this.  There is a lot of money hanging on this case.  Equity lawyers are calling out for more elucidation of this area of law.  The Court has not looked at it since the 1990s.

MR KARKAR:   I am not sure, your Honour, that that is the general way that the Court really takes cases, just because they are interesting.

KIRBY J:   I do not know.  It is interesting and different.

MR KARKAR:   I mean, the case has to be an appropriate vehicle for the ‑ ‑ ‑

KIRBY J:   But it is an important point that Mr Archibald raises because, essentially, you are saying that promises trump written agreements.  Earlier promises trump later written agreements.

MR KARKAR:   Yes.

KIRBY J:   And that would not be the law in 90 per cent of the world.  We live, now, in a global economy and therefore we have to think about whether that is the right statement of the law.

MR KARKAR:   With great respect, your Honour, that is the law in Australia.

KIRBY J:   Well, that is the question.

MR KARKAR:   It is the law as propounded, in our respectful submission, in Waltons v Maher.

KIRBY J:   That is the question.  In the circumstances of this case, where the parties go to the trouble of putting their agreement in writing, whether that can be trumped by an earlier oral promise.  It is an odd result.  In Europe they would regard that as fantastic.

MR KARKAR:   I am not sure that I can really respond.

McHUGH J:   Anyway, you are acting under our system.

MR KARKAR:   Yes. 

KIRBY J:   But it does make us look at our system, at whether we have it right.

MR KARKAR:   There are a couple of other things that your Honours need to consider as to whether your Honours will take this case.  First of all, there are evidentiary hurdles to be surmounted in order to get to the point.  There have been concurrent findings of fact as to the representation.  Secondly, there is a case under the Trade Practices Act which, under section 87, we will be entitled to the same relief.  So, your Honours, even if the point is decided against us, it is not going to be determinative of the result of the case.

KIRBY J:   Did not Chief Justice Warren express her doubt about the application of section 87?

MR KARKAR:   No, your Honours.  She found that section 87 would provide the same remedies.  She said that no quantifiable loss was proved, but that is not a condition precedent to the application of section 87.

KIRBY J:   Yes, but, as the applicant points out, the discretion under section 87 is enlivened only where the court finds that the person has suffered or is likely to suffer loss or damage.

MR KARKAR:   Yes.

KIRBY J:   It contemplates orders that are compensatory in character.  Justice Warren found that there was no loss or damage.

MR KARKAR:   No, she did not find that, your Honour.  She found that there was no proof of a quantifiable loss.  She found that there was plenty of evidence that there was a loss.  There was no question that she found that detriment was suffered by the respondent as a result of the resiling from the promise.  Thus, at page 79 of the application book at line 15, her Honour said:

As for relief under the section [section 87] I would be satisfied, if necessary, to order the declaratory relief recited with respect to the promissory estoppel claim for the purposes of relief under s 87 of the Trade Practices Act.

Next, your Honours, there is another reason why we would win in any event. Even if the subsequent agreement reposed the rights and obligations of the parties ‑ ‑ ‑

KIRBY J:   That might be so and that might require that that matter be determined by the Court of Appeal, but you would not win on the basis on which you have won.  Error would have been established.

MR KARKAR:   But your Honours need to consider whether this is an appropriate vehicle.  Notwithstanding that the applicants might succeed on their primary point, if your Honours were of the view that they would fail in any event because of the Trade Practices Act or because of the other issue, namely, that the finding which was made by the trial judge that there was a breach of the subsequent agreement by Anaconda because it did not carry out the due diligence and did not form an honest belief with respect to that clause, therefore it was not entitled to give the relevant notice, then your Honours, in our respectful submission, will think that this is indeed an appropriate vehicle.

HAYNE J:   The question of vehicle, I think, comes at its most acute in this way, Mr Karkar.  The contention under consideration is that the promise I will complete must always fail in face of a subsequent written agreement permitting non‑completion.  “Must always”.  It is the absoluteness of that proposition which presents the difficulty of vehicle because, the concept being an equitable concept, it is not beyond argument that account must be taken of all the circumstances, and are the parties to go forward on an appeal to this Court with all of the findings of fact made below otherwise intact or not?

MR KARKAR:   We concur with what your Honour says.

KIRBY J:   It is a crisp point, is it not?

HAYNE J:   Well, the very point I am putting to you, Mr Karkar, is that the point is not crisp, that the point cannot be made crisp because ‑ ‑ ‑

KIRBY J:   I am putting to you that it is crisp.

MR KARKAR:   Your Honour Justice Kirby might just take that into account, if I may.  I tell your Honours that although I did not appear at the trial it was quite apparent from her Honour’s judgment and from the Court of Appeal’s judgment that this case was fought principally on the facts, and on the facts her Honour’s judgment vindicated Mr Gutnick’s version of the events.  There were concurrent findings of fact by the Court of Appeal.  The sub‑stratum, therefore, of the argument that is sought to be put does not exist.  Here we would either win on the first point or we would win under the Trade Practices Act or we would win because there was a breach of the agreement as found by the trial judge and confirmed by the Court of Appeal.  So, for all those reasons, your Honours might consider that this is not the appropriate vehicle for determination of the issue.

We would submit that the issue that would face your Honours would be this.  It is not whether in every case an antecedent promise must give way to a later inconsistent agreement, but whether, in the circumstances of the particular case, it should do so.  This is an evidentiary matter and it has been decided decidedly in our favour.  If your Honour pleases, that is all.

McHUGH J:   Yes.  Yes, Mr Archibald.  What do you say about the trial judge’s findings at paragraph 195 of her judgment and the relief that she would have given, set out in paragraph 198 of the judgment, on the Trade Practices claim?

MR ARCHIBALD:   Our submission is that her Honour concluded that no damage was proven.  Her Honour had before her a claim that there was damage, the damage said to reside largely in what was said to be a difference between the value of the shares.

McHUGH J:   I understand that, but her Honour also said that she would order the declaratory relief recited with respect to the promissory estoppel claim for the purposes of relief under section 87 of the Trade Practices Act.

MR ARCHIBALD:   And her Honour must necessarily have been in substantial error in that respect, for, even if there were some loss of some kind, it was indeterminate and in no way quantified.  There was no possibility, therefore, that there could be any calibration of orders under section 87.

McHUGH J:   But there could be injury.

MR ARCHIBALD:   There could be, in concept, but one could not calibrate it or ensure that orders of the kind made in respect of the promissory estoppel case would be a true reflex of, and compensate, prevent or reduce, that loss.

McHUGH J:   But you yourself agreed in‑chief that nominal damages could be awarded.  If nominal damages can be awarded, why cannot declaratory relief be awarded?

MR ARCHIBALD:   It is the subject matter of the declaration that makes the vital difference, because here the declarations precluded Anaconda from recovering more than $10 million.  It was, in substance, a quantification of loss.

KIRBY J:   Mr Archibald, I have sat in an intermediate court for more than a decade and if you come to that position in the Court of Appeal that an error has been made in the principle of law that has been applied, but you consider that there is, within the facts, a possible alternative basis on which the plaintiff should succeed, but the primary judge has not determined that because of the error, would one not then order that it go back for the primary judge to consider the quantification and then to consider the application of the Trade Practices Act to the case?

MR ARCHIBALD:   In our submission, no.  We have made our point about the misleading conduct case having to fail as a matter of liability, but the argument before this Court is not about whether nominal damages should be awarded whether under the general law or under section 87.  The argument is, is the substantive relief that essentially denies to Anaconda the entitlement to recover the loan as a result ‑ ‑ ‑

KIRBY J:   What do you say on the point of crispness, that you are putting forward in a sense a very common law approach, but that equity looks at everything, and therefore you are putting forward too absolute a rule that just does not work against the background of our principles?

MR ARCHIBALD:   In our submission, the way it has been crystallised in the Court of Appeal makes it very close to absolute.  We cannot, of course, suggest that one would ignore the other facts, but if the concept adumbrated by Justice Hayne for the purposes of argument were to be sound, this Court would never, ever entertain such a case because any principle of this kind with which the law of equity is concerned will involve looking at all the circumstances.  The circumstances here are not unmanageable for this Court.  They were not unmanageable for the Court of Appeal.

HAYNE J:   And are they going to be in dispute?

MR ARCHIBALD:   They cannot be in dispute. They may need to be canvassed, but written submissions will address those matters.  The hearing in the Court of Appeal just went into the third day.  In this Court it would not take more than two days.  The central focus, inevitably, the dominating focus, will be the fact of inconsistency reposing in a two or three page letter.

KIRBY J:   How much is ultimately at stake in this application?

MR ARCHIBALD:   The total loan money is exceeding ‑ ‑ ‑

McHUGH J:   $10,645,000 is it?

MR ARCHIBALD:   Yes, exceeded $10 million.  Now, with interest and so on I have not done those calculations, but it is not an insubstantial sum.  For those reasons, in our submission, this case is a sufficiently suitable vehicle for this Court to entertain the matter.  If the Court pleases.

McHUGH J:   The Court will adjourn briefly to consider this matter.

AT 10.03 AM SHORT ADJOURNMENT

UPON RESUMING AT 10.10 AM:

McHUGH J:   By majority the Court is of the view that if leave were granted in this case any decision on the issue of promissory estoppel would turn on the facts and no point of principle would emerge.  Moreover, there are issues under the Trade Practices Act that would have to be resolved.  In those circumstances, the majority of the Court is of the view that the case is not a suitable vehicle for determining the issue raised by the applicant. 

Accordingly, the application is dismissed with costs.

KIRBY J:   I would grant special leave.

McHUGH J:   Yes.   The Court will now adjourn to reconstitute.

AT 10.11 AM THE MATTER WAS CONCLUDED