Australian Stratacore Holdings v Sanwa Australia Securities

[1994] HCATrans 139

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
              Sydney        No S87 of 1994

B e t w e e n -

AUSTRALIAN STRATACORE HOLDINGS
  LIMITED (In Liquidation)

Applicant

and

SANWA AUSTRALIA SECURITIES LIMITED

Respondent

Second Respondent
  Application for special leave to
  appeal

MASON CJ
GAUDRON J

McHUGH J

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON FRIDAY, 9 DECEMBER 1994, AT 10.34 AM

Copyright in the High Court of Australia

MR D.M.J. BENNETT, QC:   If the Court pleases, I appear for the applicant.  (instructed by Webeck Farland Pender)

MR F.M. DOUGLAS, QC:   My it please the Court, I appear with my learned friend, MR M.A. PEMBROKE, for the respondent.  (instructed by Allen Allen & Hemsley)

MASON CJ:   Yes, Mr Bennett.

MR BENNETT:   If Your Honours please.  Your Honours have the summary of argument.  This is an unusual application in that it is not put on the basis of a matter of general principle.  It is simply put on the basis of the general power in section 35A and the interests of the administration of justice.

What we put is two things, basically, that this was such an extreme case for a finding of repudiation that the Court should interfere with a contrary finding and, secondly, that the case does have this general effect that the nature of the findings in a comparatively common situation is such as dramatically to shift the balance between underwriters and companies being underwritten.

Your Honours, the significance of the matters set out in the brief statement of facts can be summarised this way:  we know that the respondent wished to escape from the contract.  Certainly there was no finding that it was anxious to do so regardless of right.  It did three things:  first, it proposed a form of issue which was simply not open.  His Honour, at page 12, described the stance being taken in relation to that as being one which was an impossible reading, one that would contradict the express terms of the document and that it was unmistakably clear that the underwriting agreement did not enable it to take that stance.  That was a stance that it was entitled to require a different form of issue. 

It took the stance in two ways:  it asserted it and said, “Unless we took the necessary steps within 14 days it would have the right to rescind”, and it declined to perform an obligation which it had to perform within a reasonable time which we had demanded that it perform.  Secondly, and even more extremely, it apparently took the view that although it was an underwriter whose function one might think was to underwrite, it did not propose to do that at all.  What it said to the sponsoring broker and then, when he departed, to the fresh sponsoring broker, was that it required the sponsoring broker to be prepared to place the whole issue and assure the underwriter that the whole issue would be placed and that the underwriter would not agree to the appointment unless that was done.

It is true, as my learned friend says, that there was no finding that the new broker was dissuaded by that particular request so, in that sense, I cannot point to an effect of it.  But, in my respectful submission, to make that statement in the context where one has a party endeavouring to get out of a contract, when we are trying to find a new sponsoring broker and it says to this broker, “Of course, we’re going to require an undertaking that you place the whole of the issue before we consent to your appointment”, in my respectful submission, whether or not there has been a formal request and whether or not that persuades it, that is repudiatory conduct.

Now, my learned friend, in his submission, suggested that that was not put to the Court of Appeal.  Your Honours, I have my submissions before the Court of Appeal which I hand to Your Honours.  I do not invite Your Honours to read them all, they are lengthy, but I do just direct Your Honours’ attention to one of the first paragraphs which shows that this was put.

Your Honours see, we started at paragraph 1 by saying the test was whether the respondent evinced an intention to no longer be bound by the contract and, 2, that was clearly evinced, and then paragraph (b) on page 2, by the statements made to May Mellor that the respondent intended to perform the agreement in a way inconsistent with its obligations and only in that way. 

GAUDRON J:   But your difficulty is the finding:  there is no finding only in that way in your favour.  In fact, the findings are that had there been a correct understanding it probably would not have happened.

MR BENNETT:   Yes, that is so, Your Honour.  But what we submit is that the conduct, in the context of an underwriting agreement, of A saying, “Well, really, we

are not going to underwrite unless you promise us we won’t have to” and, B saying that they,Rrquired the issue in a different way, and taking both those stances in a serious way and pressing them, we say is so extreme that one does not need the intention.  The objective conduct is sufficient to constitute repudiation.

GAUDRON J:   You have to say that the findings of fact are perverse, in effect, to get to the position you require, do you not?

MR BENNETT:   Your Honour, I do not need to use the word “perverse”.  That is an adjective which some might apply to the facts and some might not.  What we say is that the findings are so wrong that they cannot stand.  It is like Voulis v Kozary where that was certainly under the old regime.  Your Honours will recall it is the lottery ticket case where the Court said an appellate court has a duty where it finds findings of fact - in that case, findings of credit that were clearly wrong, to intervene.  In our respectful submission, when one has here a very standard situation involving underwriters and companies being underwritten, it is my submission that the effect of the decision of the Court of Appeal is likely to have a significant effect on the balance between the two.

Your Honours, in our respectful submission, those matters are such that the Court should grant special leave.  It would be a short appeal.  The facts are not in a wide compass.  There are a couple of conversations which there have been findings of and there are three letters.  In my respectful submission it is an appropriate case, notwithstanding the absence of a general principle, for the grant of special leave.  May it please the Court.

MASON CJ:   The Court need not trouble you, Mr Douglas.

In order to succeed in the proposed appeal, the applicant must overturn adverse findings of fact.  In the view of the Court, the making of those findings was open to the primary judge.  The case is therefore not an appropriate vehicle for the grant of special leave.  The application is therefore refused.

MR DOUGLAS:   We ask for costs.

MASON CJ:   You do not oppose that, Mr Bennett?

MR BENNETT:   No, Your Honour.

MASON CJ:   The application is refused with costs.

AT 10.45 AM THE MATTER WAS ADJOURNED SINE DIE