Arnold & Anor v State Bank of South Australia

[1993] HCATrans 67

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IN THE HIGH COURT OF AUSTRALIA

Office of the Registry

Adelaide No A27 of 1992

B e t w e e n -

OWEN ROY ARNOLD and JENNIFER

DIANNE ARNOLD

Applicants

and

STATE BANK OF SOUTH AUSTRALIA

First Respondent

DAVID WARHURST

Second Respondent

WAYNE MADQAFORD

Third Respondent

RONALD GEORGE FRANCE

Fourth Respondent

Arnold 1 12/3/93

GRAHAM M. CONNOR

Fifth Respondent

Application for special leave

to appeal

MASON CJ
BRENNAN J
GAUDRON J

TRANSCRIPT OF PROCEEDINGS

AT MELBOURNE ON FRIDAY, 12 MARCH 1993, AT 2.46 PM

Copyright in the High Court of Australia

MR L.F. HOINS:  Your Honours, I am seeking leave to speak

for the Arnolds this afternoon, and for special

leave to appeal for the Arnolds.

MASON CJ:  You realize that except in exceptional

circumstances, an application for special leave to

appeal must be presented by a barrister or

solicitor, or barrister and solicitor?

MR HOINS:  Yes, I am aware of it, Your Honour, and I have

prepared some notes, if I may address Your Honour,

my application to you for me to speak for the

Arnolds, if you will permit me so to do.

MASON CJ: Yes.

MR HOINS:  Thank you, Your Honour. Do it for the first one,

Your Honour.

MASON CJ:	Mr Wells, you appear for the respondent.
MR W.J.N. WELLS, QC:	With my learned friend,

MR J.M. CUDMORE. (instructed by Ward & Partners)

MR HOINS:  I will endeavour to be brief, Your Honour. I

have made copies of these notes if Your Honours

would care to see them, and I will be brief.

I am the public officer of the

Financial Victims Association Incorporated.	I am
not a lawyer, as you know, and I seek leave to represent Mr and Mrs Arnold, who are before
Your Honours, and at their appeal, if it is
allowed.	We are well aware it is most unusual for

this Court to allow a non-lawyer to represent an

applicant, or an appellant, but in this case there
are some very special reasons which justify the

granting of this once only appeal, or privilege, I

should say.

Arnold 2 12/3/93

I know Order 69A rule 11 states that while

special leave to appeal by a non-lawyer may be

granted by the Court it has to be in exceptional

circumstances.	We do claim exceptional
circumstances.

Firstly, the guiding principle that similar

cases must be treated similarly has resulted in a
large number of cases in the lower courts being

dependant on the outcome of the Arnolds' case

before this Court.

Secondly, many if not all of those cases,

across the width and breadth of Australia, involve
members of our association.

Thirdly, the outcome of the Arnolds' case will

have a direct effect on the members of our

Association.

Fourthly, the outcome will be used as a

precedent throughout Australia in all the courts in

the land meaning that the outcome is of national

importance, and not merely of sectional or

individual interest and/or importance.

On Tuesday, 9 March 1993, His Honour

Justice O'Loughlin, in the Federal Court of

Australia in Adelaide, in Pavloman v National

Australia Bank Limited (SG2 of 1992), in which

Mr Cudmore also appears, said on page 192 of the

transcript at lines 5 to 10 of the transcript:

In the latter case, neither your nor

Mr Christie -

Mr Christie appearing for the bank -

nor I would have any idea when the High Court

would announce its decision. It might be

within a week or a month or two month's time.

So we are really just adjourning off to see

what happens next Friday.

Being here. On the same page, line 45,

O'Loughlin J said:

And the decision of the High Court in the

Arnold's case will play a most important part

in determining how the matter is to proceed.

On page 196, O'Loughlin J said:

Then I am adjourning this directions hearing to Monday 5 April 1993 at 9.45 with the

intimation that if I am informed by

Mr Christie or his office that the matter of

Arnold 3 12/3/93

Arnold has not been the subject of a judgment

by the High court, I will then adjourn the

directions hearing without the attendance of

any parties and I will. fix a date which my

associate will inform you of by letter.

We, and I refer to the Arnolds and myself, we

have been unable to find even one lawyer who

understands the matter of cost-free credit creation

by the banks, and who is prepared to argue the

matter before this Court, or any other court.

Indeed, most lawyers say, "You cannot beat the

banks",. and that appears to be perfectly correct.

Therefore, the Arnolds, our association and the

people are bereft of competent legal counsel to argue these matters cogently before this Court.

Order 16 rule 12 allows for one person to act

for a number of persons. Order 44 rule (1) and (2)

allows for a person to represent a class which is

interested in the proceedings.

As the public officer of the Financial

Victims' Association Incorporated, I am permitted,

as I understand it, to perform certain legal work

in behalf of the Association according to

section 117(4)(a) of the New South Wales Legal

Profession Act 1987 No 109 and section 117(5), (6)

and (7) exempts a public officer from the penalties imposed for performing legal work in (2) and (3) of

that section.

The New South Wales Associations Incorporation

Act 1984 No. 143 states in section 17(1):

Subject to this Act an incorporated

association has the right, the powers and the

privileges of a natural person and without

limiting the generality of the foregoing, has

power to do any act that is authorized by any

other law.

While (3) states:

An incorporated association has the capacity

to exercise its powers in a place outside the

State.

The objects and rules of this association defines

our role as existing to assist members with their

problems with the banks.

Mr and Mrs Arnold are members of this

association, but are also on the management board
of the association representing South Australia.

we three stand here today representing several

Arnold 4 12/3/93

thousand people around Australia and not merely the

Arnolds themselves.

MASON CJ:  We are only concerned with the Arnold's

application to this Court.

MR HOINS:  Thank you, Your Honour. I will not mention any

more then.

We are all well aware of the oft quoted dictum

by Lord Acton that, "Power corrupts and absolute

power.corrupts absolutely", but not a great many -

MASON CJ: But that has got nothing to do with this case

really.

MR HOINS:  Thank you, Your Honour. I am merely, with

respect, merely saying - I am asking you to

consid~r my right to represent the people in the

dictum that Lord Acton quoted. The matter that has

come down the centuries, it will have to be fought

sooner or later, is the banks versus the people.

MASON CJ: Let me say this to you. This Court is only

concerned to hear arguments that are based on legal

principle. Unless you are going to advance

arguments based on legal principle, it would be

inappropriate for us to grant you leave to appear

for the Arnolds.

MR HOINS:  Thank you, Your Honour, and that is exactly what

I am going to do, and I will not waste any more of

your time.

Both applications, that is, mine to speak for

the Arnolds, and the Arnolds' application for
special leave to appeal, go hand in hand and

involves matters of general public importance, maintained in contradistinction to proceedings

Collins (Hass) v R, (1975) 8 ALR 150, at 151 per	the Court's leave, and with respect, I refer to inter partes brought on as a right or pursuant to
Barwick CJ, Stephen, Mason and Jacobs JJ.

Section 35A of the Judiciary Act 1903 declares

that:

In considering whether to grant an

application for special leave to appeal

MASON CJ:  We are familiar with that, you do not need to

take us through these provisions.

MR HOINS:  I am sorry, Your Honour, I will not offend you by

reading it. Thank you, Your Honour.

Arnold 12/3/93

Then, in this matter, we are stating and will

argue cogently and prove that the definition of
banking enunciated by Isaac Isaccs J, in a famous

1914 case with State Savings Bank of Victoria v

Permewan, was wrong then and is wrong today. This

is a matter of the utmost national importance which

is having ramifications throughout the land, going

as it does, to the very heart of the banking system

in Australia.

Now the fact that Isaacs J was a Justice of

the H_igh Court for nearly 24 years, before becoming the Chief Justice of the High Court on 2 April 1930

and then Governor-General from 1931 to 1936 as the

Right Honourable Sir Isaac Alfred Isaacs, PC KCMG,

GCMG and GCB does not mean that his definition way

back in 1914, apart from being set in stone by the

lower courts, was or remains correct.

'rhe definition of banking by Isaacs J was

demonstrably wrong and remains wrong to this day

with calamitous results for the people that are

involved and the people.

This is not the time or place to argue the

matter.	I understand the lateness of the day, and
that the list has run over.	Nor do we understand

has time been allowed for the argument. Suffice to

say, with respect, that any number of judges in

Australia have clung limpet-like to that wrongful

definition of banking by Isaacs J, back in 1914.	I
could quote the cases at Your Honour, but I would
probably offend you.	The famous bank cases 1948

and 1949. There have been other cases, as per ou:

10 page list of authorities.

Now, more recently but not destructively, and

we understand that Mr Cudmore is going to address

Your Honours on this in a few minutes, we have seen

French Jin the Federal Court of Australia in Perth

in WAG 81 of 1992 - - -

MASON CJ:	You mean Mr Justice French.
MR HOINS:	I beg your pardon.  I stand corrected,

Your Honour - that Mr Justice French, in

Fishers v Westpac Banking Corporation, arbitrarily

struck out the applicants, without argument being

permitted or even listened to on this basic, indeed

elemental matter of the banks creating credit at no
cost to the banks and that that credit so created

out of thin air, does indeed constitute the essence

of banking in direct and irrefutable contradiction

to that which His Honour Justice Isaacs, and

His Honour Chief Justice Latham, have laid down in

the years past.

Arnold 6 12/3/93

The summary judgment by His Honour

Justice French in WAG 81 of 1992 on 18 August 1992,

has been used across the width and breadth of

Australia in all jurisdictions as res judicata and

as a direct consequence used to wrongfully strike

out any number of applicants. We have even seen

His Honour Justice Einfeld in G369 of 1993 Abrams v

Bank of New Zealand in the Federal Court in Sydney,

laugh and joke about these matters, before again

relying on the summary judgment of His Honour

Justice French in WAG 81 of 1992.

On Tuesday 9 March 1993 - - -

BRENNAN J:	Mr Hoins, we are concerned at this stage, of course, with whether you should be given leave.	So
far, what you have told us is that the view that
you formed is contrary to the great mass of Australian law, and that there is no lawyer that
you can find who can even understand your

proposition. But you are asking this Court to

grant-you, who can find no resonance in any of the

authorities or any of the present practitioners,

leave to argue a case of some complexity.

MR HOINS:  Your Honour, the several dozen lawyers that I

have negotiated with, or approached in the last 14, 15 months, only one was prepared, in Sydney, and he

is an American barrister, and he would only do it

on limited grounds, and he would not argue the

matter of credit creation with the banks. It may

be true that the whole of the law in Australia, and

all the lawyers are not prepared to entertain

argument on it, but we we are appealing to the

highest court in the land, and it is other eminent lawyers, such as the barrister, McLeod, in London,

who wrote a 1400 page tome about this, and he is a

barrister, and I would think a well-regarded

lawyer. Furthermore, he was selected by a

Royal Commission in London to write a digest on law

for learned people like yourself.

So, I do not stand alone at all, by any means.

I may stand very thin on the ground in Australia,

and that is perfectly true, but I do not stand

alone when it comes_ to arguing the fact about the

subject-matter, Your Honour, and standing alone

does not make me wrong, with the greatest respect.

May I go on, Your Honour?

MASON CJ:	The real question is, whether or not, the view you are seeking to advance, has any prospects at
all, of acceptance by this Court, having regard to well-established principles in this country.
MR HOINS:	Your Honour, with respect, the whole system of

banking is certainly 400 years old. I am well

Arnold 7 12/3/93

aware, and I mean no disrespect to Your Honour, or

your brother Judges, but the fact that for 400

years it has been going in a particular way does

not mean it cannot be changed. With the greatest

respect to His Honour Justice Isaacs, if he was

wrong in fact, in fact in 1914, and that error in

fact becomes law through the succeeding decades,

does not make it right.

Now, I know, and I have been told before, that

about something that may be - - - judges are ultra conservative, and we are talking

MASON CJ:  We are not concerned with whether judges are

ultra conservative or not. We are merely concerned

with whether or not the points that are sought to

be raised on behalf of the applicants, in this

case, have sufficient prospects of success, for

this Court to grant special leave to appeal.

Now, it is against that background, at the current moment, we are listening to your

application for leave to appear on their behalf,

and it seems to me that from what you have already

said, that there is no basis on which we should

grant you leave, when all you are concerned to do

is to raise arguments which, in my view, have no

prospects of success, having regard to existing

authority and settled principle.

MR HOINS:  Thank you, Your Honour, and with respect, I am

only dealing with one part of the application for

leave to appeal. The other part are more

functional matters, if one may call them that,

which I am about to come to.

But, with respect to you what you said then,

Your Honour, the fact of the matter is, that if we

are in front of three honest people, and I do not suggest for a moment Your Honours, or whoever the

Honours might be sitting on the matter, if we are

the opportunity to lay the evidence out, then there	in front of three honest people, and we are given	is no reason why you would not overturn the
long-standing principle. There is no reason.

GAUDRON J: But assuming even that, what would it avail the

Arnolds? They have received, if not money, moneys

worth, they have signed a promise to pay money.

MR HOINS:  Yes, thank you, Your Honour. It is an important

point. Thank you for raising it, because there is
plenty of legal textbook available, ample

available, that money and credit are not the same

thing, and that the law of credit and the law of

money is not the same thing.

Arnold 12/3/93

Now, in answer to Your Honour, there is no

question that the Arnolds received consideration.

No one has denied it, including the Arnolds. The

argument would be, which I presume we are not

making it today, but the argument would be that the

consideration that the Arnolds have paid in return
for that credit, which the bank denies it created

out of nothing anyway, the consideration is way out

of bounds for what they received. Now you say

received consideration and the use of the credit.

The bank is endeavouring to deny that it sold to

these people a product that did not cost the bank

anything.

Now, the banks throughout Australia, following

His Honour Justice Isaacs definition, way back in

1914, insist that they are loaning to people like

the Arnolds, money they have raised from people

like you, and the people sitting behind us. It

simply is not true. It is just simply not true.

Now, I take what Your Honour said, that it may be

an uphill battle, and you might recoil in horror,

and say, "We cannot afford to have that said", but

what I just said is simply the truth. All we are

asking - - -

GAUDRON J: But it does not matter whether it is true or

not. Let it be assumed it is true. The Arnolds

promised to pay a sum of money to the banks for

consideration.

MR HOINS: Certainly, and if the bank - - -

GAUDRON J: And leaving aside any notion of any principles

of banking law, one gets back down to ordinary,
basic contract principle, if you receive

consideration in return for which you make a

promise, you are bound by your promise.

MR HOINS: Absolutely, and may I, with respect, say to Your

Honour, that if you loan me a particular thing that

did not cost you anything at all, and pretended

that it was another thing, that the contract you

have entered into with me, is not correct anyway.

Now I say that with the greatest respect to you.

If the bank is saying, "I am loaning you A", and in

fact it is loaning you B, then you are talking

about two different circumstances. We really are.

Now, the application for special leave to appeal, is not merely based on what may be seen by

Your Honours as an esoteric argument, but it surely

is not. You have asked me what would it avail me

if we won the point. If you three Honours were

hearing the matter today, and you were convinced

factually that the fact of the matter that we are

talking about, whether credit creation by the banks

Arnold 9 12/3/93

is a fact, if you allow the argument, and then you

said, "Yes, that is correct", it would, in fact,

enable the Arnolds to argue that successfully at a

subsequent action with the bank.

At the moment, the lower judges, the lower

court judges simply will not permit it.	They will
not permit.	The question is, "Why won't it be
permitted?"

MASON CJ:  Mr Hains, we have listened patiently to the

arguments that you say that you will want to

present on behalf of the applicants. We have, I think, extended every tolerance that we could to you, but the fact of the matter is that what you

seek to argue is legal nonsense, and it would be

quite inappropriate for this Court to grant leave

to the applicants for you to represent them, to

present arguments of that kind to us. Now, in

those circumstances, the application for leave to

appear and present argument on behalf of the

applicants is refused.

MR HOINS:	Thank you, Your Honours, for your time.
MASON CJ:	Now, I should ask Mr and Mrs Arnold whether they

wish to present any argument to the Court in

support of their application. Yes, Mrs Arnold?

MRS J.D. ARNOLD:  Your Honour, at page 123 of our

application book index preference - - -

MASON CJ: 

Now, we have read the notice of appeal, we are

familiar with what is stated in the grounds of
appeal.

MRS ARNOLD: 

Your Honour, the State Bank of South Australia

has no stock mortgage, which we believe we fully

signed on the day of signing any mortgages. We

both have got a copy of a memorandum of lien, which

we do not believe we signed, we do not recall

signing it. In fact, it was quite a surprise when

we actually received copies of all documents from

the State Bank. Now, when these documents were

originally signed, we were never given a copy. In

fact, we were told that they would be safer in the

bank vaults.

It was not until we received them back that we

realized there was no stock mortgage under which -

and yet they were - while we were still dealing

with the bank manager at the time, that there was a

stock mortgage. Now there is no stock mortgage.

Now, that memorandum of lien, they, themselves

have said in court, in front of His Honour

Justice Von Doussa in South Australia, in the

Arnold 10 12/3/93

Federal Court, that they admit that they do not

have a lien over anything.

In the judgment handed down by Justices

Burchett, Hill and Drummond, they said that we, the appellants, were referring to what a trial judge

said to Robert Pavloman in regard to: "I'm not

interested about bank credits and how the banks

carry on their business." We stated that at the

time, that we were referring to that.

Even if Their Honours were correct, which they

are not as to what the appellant was saying,

the fact is that if it is true that the first

respondent is creating credit "out of thin

air" as is now patently clear it is, and if

the bank is doing that as part of the

Australian banking system then that fact

should be argued at trial.

In any case the subject matter is certainly

not frivolous and to call it vexatious and/or

an abuse of the process of the court is a

parody of common justice.

(e) His Honour Justice Maurice O'Loughlin

was, and remains, compromised in these

proceedings because,

(i) His Honour suffers from a conflict of

interest in that he is or was a member of the

Merger Advisory Group which was directly

involved in the management affairs of the

first respondent, was a Liberal Party

appointee to the old State Bank and was so

named in the South Australian House of

Assembly on 17 November 1992.

BRENNAN J: What has that to do with anything?

MRS ARNOLD:  Your Honour, he said he was impartial, he did not take sides. Now, if he was on the management

of the State Bank board, then that has everything
to do with our case.	We are in conflict with the

State Bank of South Australia.

MASON CJ:  Mr Arnold, do you wish to address any argument to the Court, or not?

MR O.R. ARNOLD: Well, at the moment, Your Honour, I can see

nothing but - to me it is a waste of time.

Arnold	11	12/3/93
MASON CJ:	Very well.	The Court need not trouble you,

Mr Wells. The Court is of opinion that the

judgment of the Full Court of the Federal Court is

plainly correct. The application for special leave

to appeal is therefore refused.

AT 3.10 PM THE MATTER WAS ADJOURNED SINE DIE

Arnold 12 12/3/93