Cape v Redarb Pty Limited

[1993] HCATrans 149

~

~ -.,~·or

IN THE HIGH COURT OF AUSTRALIA

Registry No Cl of 1993

B e t w e e n -

WILLIAM TIMOTHY CAPE

Applicant

and

REDARB PTY LIMITED (Receiver

and Manager Appointed)

First Respondent

ROBERT JOHN YEOMANS

Second Respondent

Application for special leave
to appeal

DAWSON J TOOHEY J GAUDRON J

Cape 1 11/6/93

TRANSCRIPT OF PROCEEDINGS

AT CANBERRA ON FRIDAY, 11 JUNE 1993, AT 2.19 PM

Copyright in the High Court of Australia

MR M.J. NEIL, QC:  May it please the Court, I appear with my

learned friend, MR T.M. JOHNSTONE, for the

applicant. (instructed by Crossin Barker Gosling)

MR P.M. BISCOE, QC: If the Court pleases, I appear with my

learned friend, MS J.T. GLEESON, for the

respondents. (instructed by Gallens Crowley

Chamberlain)

DAWSON J: Yes, Mr Neil?

MR NEIL:  Your Honours, my learned friend has indicated to

me a preliminary matter he wishes to raise about

some objections to our affidavit. We received a

letter yesterday and we have replied. It is our

view that there is no substance in my learned

friend's concerns and they are not really relevant

to this application, and no point was raised at the
settling of the application book. But my learned

friend does wish to have his position at least

noted and it would seem to us this matter should be

ventilated before I go ahead so that there is some,

if need be, ruling on the matter.

DAWSON J:  We have all read the offending material, if it be

offending material. Yes, Mr Biscoe?

MR BISCOE:  Your Honours, our objections are noted in a

letter written to the other side and we have

received their response. I am very reluctant to

take up any significant amount of this Court's

time.

DAWSON J:  What are the matters that you say should not be

included in application?

MR BISCOE: It is perhaps most quickly communicated to

Your Honours by handing up the correspondence, if

that is a convenient course.	The Gallens letter
notes the objections and the Crossin letter

responds to them.

TOOHEY J: Is a suggestion that some of the material in the

affidavit is by way of evidence additional to that

that was led at the trial?

MR BISCOE: Yes, with respect, we suggest that these matters

misstate the effect of His Honour's findings or go

outside the evidence that were before His Honour.

TOOHEY J: Well if they misstate the findings then I suppose

they are argumentative and they can be responded

to. If they go outside the evidence, that is

another matter.

MR BISCOE: Yes.

Cape 2 11/6/93

DAWSON J:	What do you ask us to do with them at the moment?
MR BISCOE:	I was trying to think of the most convenient

course, because it does not seem appropriate that

Your Honours should be spending significant amounts

of time on it.

DAWSON J: Well, perhaps we note them at the moment and if

they become crucial in any way then we can look at

them then.

MR BISCOE:	I will be content with that, Your Honour.
DAWSON J:	Mr Neil?

MR NEIL: Yes, Your Honour, because you will see from our

letter that we do not concede the claims made and

probably these matters would fall by the way.

DAWSON J: It is unlikely on a special leave application

they will become crucial.

MR NEIL: That is so, Your Honour, yes. Your Honours, could

I hand to the Court a short outline of submissions

I would wish to make today.

DAWSON J: Yes, Mr Neil.

MR NEIL:  Your Honours, it is hoped to shorten the points by

this means. As to the first point, it is

superficially attractive to say, "Well, if there's

a finding of fact that there would not have been a

higher price received, then that should be the end
of the matter", but our complaint is very much

about the methodology and the principles and

whether courts in Australia ought to follow a

procedure of asking the right question, and not

arriving at the answer by asking the wrong

question. The trial judge did not even ask the

right question and, although the Full Court in a

way purported to ask the right question, they

resolved it by going back to what the trial judge

Now, it is not inconsistent to say you could

did.

have a finding on a balance of probabilities that a
higher price would not be obtained, but also to
have a finding that there could have been a chance

of a higher price. And in this unusual area of

assessment of damages, which we stress must be

called equitable compensation here, although the

principles dovetail in some considerable measure

but not entirely, that the evaluation of

opportunities lost and chances must fundamentally be approached by asking firstly that question and

assessing that evidence or all the evidence

Cape 3 11/6/93

relevant to that matter.	An instructive decision
is - - -

TOOHEY J: Could I just interrupt you before you go to that

decision, Mr Neil. We have not got a copy of the

pleadings but how was the claim formulated by

reference to the relief sought?

MR NEIL:  It was formulated by reference to a claim for many

matters, Your Honour:

equitable compensation -

I have here the statement of claim as amended to

16 December 1991 and -

a declaration of breach of duties, an order

that account be taken of the property the

subject of the trusts, an order the plaintiff recover from the defendants or either of them

such money, property, loss or damage as the

plaintiff is entitled as a beneficiary of the

Redarb Unit Trust, as against the second defendant -

which was the present respondent, the Receiver -

general damages and or aggravated and or

exemplary damages and damages equivalent to

the costs of the interlocutory proceeding;

alternatively an order that the second

defendant make restitution to Redarb or the

Redarb Unit Trust of the difference between

true values of the various properties;

alternatively an order the second defendant

make restitution to Redarb or the Trust of the

amounts of loans written off -

not relevant to this point, the loans one -

an order the second defendant make restitution

to Redarb or the Trust for the amount of his

legal costs drawn from the Trust to defend the

proceedings; such further other accounts,

inquiries, or directions as such be just;

interest only sum recovered; order that the
second defendant forfeit his remuneration or
so much thereof as the court thinks just; and

costs.

DAWSON J: But essentially what you are asking for is the

difference between the price that was received and

the price which you say ought to have been

received, apart from questions of aggravated or

exemplary damages.

Cape 11/6/93

MR NEIL: Well, not as it was eventually argued,

Your Honour. It was argued on the basis of

equitable compensation.

DAWSON J: But that would be the measure of the

compensation, would it not?

MR NEIL:  No, Your Honour. It was argued the measure would

be - if the valuation evidence succeeded you would

work out the difference between valuations; if not,

there was a need to assess a reasonable amount for

loss of opportunity. You did not take two

different scales and subtract.

DAWSON J: Perhaps I can put it this way. Apart from

questions of aggravated or exemplary damages, the

amount that you would seek to recover would be

based upon the true value of the concern?

MR NEIL:  It would, Your Honour, or the loss of opportunity

of realizing true value.

DAWSON J: Yes, which in the end would amount to the same

thing in terms of figures?

MR NEIL:  No, it may not, Your Honour, because the Court

might assess, for example, a high or low chance of

the true value being obtained, and could then

decide to, on an assessment basis, allot a figure depending on what they thought was the likelihood of the chance, providing the chance is not

insignificant or remote or fanciful.

DAWSON J:  But the basis of it all is the true value of the business?

MR NEIL: Ultimately, yes, Your Honour.

TOOHEY J:  I rather thought the argument was that to

Maidment the business had a value of a particular

sort.

MR NEIL: Yes, indeed, Your Honour, that was very much

intertwined in true value.

TOOHEY J:  Is that what you mean by true value, the value

that it had to a particular purchaser, in this case

Mr Maidment.

MR NEIL: Yes, the true and/or special value to Maidment.

TOOHEY J: But is it only the particular value, or special

value, it had to Mr Maidment? When you speak of

loss of opportunity and loss of chance and

equitable compensation and so on, are you saying

anything more than that the Court should have had

regard to what Mr Maidment might have paid in the

Cape 11/6/93

end by reason of the particular value of the

business to him?

MR NEIL:  In the long run, what Mr Maidment might have paid

by reason of particular value to him, or other

factors appertaining to him, and the general

situation. Not entirely the special value to

Maidment, but there were other factors very much

intertwined with that. Maidment was, by the end of

the proceedings, once Cape had been cut out, the

only real source of a further opportunity.

GAUDRON J:  The difficulty with that, it seems to me, is

that you are assuming, or it assumes, that the
receiver's duty is simply to your client. There is

implicit in what you say that the receiver should

have required Mr Maidment, or should have let

things operate so that Mr Maidment might have paid

what was more than its true value.

MR NEIL:  If it could be obtained, yes, because the duty,

Your Honour is to both the trust and each of the

beneficiaries.

GAUDRON J: Yes.

MR NEIL:  If you can get out of Maidment more than what

someone might think is the true value - - -

GAUDRON J:  Even though Maidment is entitled to the same

duty towards him as was owed to your client?

MR NEIL: Yes, Your Honour, because ultimately it is divided

up between the two of them anyway.	The principal
duty is to the trust.	If you can end up getting

more for the trust by putting these two men who

hate each other at one·stage into some competition,

then ultimately there is more for Cape on the one

hand and Serendipity, which was Maidment's family

trust, he and his family and children. So that

ultimately you look at it from the point of view of

the trust, if you can achieve that, and we say it

was achievable - - -

GAUDRON J: Is the trust the litigant here?

MR NEIL:	The fund, no, the way the procedures were -
GAUDRON J:	You see, the difficulty does come to the

parties. If the plaintiff were the trust, not you:

client, I could see some merit in what you say.

MR NEIL: Well, Your Honour, the way in which the matter

proceeded was that the trust company was the first

respondent and the reality was that it was always

considered that the duty of Mr Yeomans lay to the

trust or the trust fund and then to the

Cape 6 11/6/93

beneficiaries. He had the two duties. The way the

Full Court approached it was the way that the case

had in fact been run. At appeal book 86, 45:

On that basis the critical issue in this

appeal is whether the company, or the

appellant as a shareholder of the company, suffered damage as a result of the breach.

Which was assumed. It was assumed to be a breach

at line 40 on page AB 86 of:

fiduciary duty towards the company of which

he was receiver -

Now, the fact is that any breach of duty to the company ultimately results in half each of the consequence of the breach being suffered by the

beneficiaries or half each of any gain that is to

be obtained from a judgment of the Court being

ultimately divided back down.

So that, if in the circumstances, either one

of these men were prepared to put in to the fund

more than - - -

GAUDRON J: Well, how is there a duty then - if the duty is

to the company, what I simply do not understand at

all is how there is a duty to your client to allow

him to make a bid - which I presume is what it is -

to make a bid that was not intended to be accepted,

it was hoped would not be accepted, I presume, but

was intended to force the other person out.

MR NEIL: Firstly, Your Honours, such bid was not a sham, as

the trial judge found. Cape would have taken the

property if it had fallen to him.

GAUDRON J:  No, I am just wondering where the duty to your

client is.

MR NEIL:  The duty is that the client is a beneficiary of

the trust of which the receiver was the fiduciary

and he had fiduciary duties to both the trust

company and to the beneficiaries. As one part of

our case also on the facts, we refer to the way in

which he had dealt with these beneficiaries, we

refer to the moulding of fiduciary duties according to the circumstances and we mount a case that there was therefore a fiduciary duty both to the company

and the beneficiary. That issue has not been

determined.

The respondent here says that there has not been a breach of fiduciary duty. One would expect

something along the lines of the type of argument

perhaps I have not put it quite as clearly as

Cape 11/6/93

Your Honour Justice Gaudron - along those lines,

but the Full Court has assumed the duties - - -

DAWSON J: Because it has said, "Even if there was a breach

of duty, the best price in all the circumstances

was obtained" .

MR NEIL: That is so, Your Honour. All I could say in

answer to Justice Gaudron's question is that we

were able to, in our submission, produce a mass of

evidence and material which is to the effect that

the circumstances must be looked at and the
fiduciary duties are moulded, established, in our
submission, that there were fiduciary duties owed

both to the company and to the beneficiary.

TOOHEY J: But that does not help you, Mr Neil, does it,

unless the evidence takes you from principal to

some additional amount than was awarded by the

trial judge? I mean, the findings of fact are so

strongly against you, are they not?

MR NEIL:  The findings of fact are not against us on the

question of fiduciary duty or breach, we say they

are with us.

TOOHEY J:  No, no, I am not speaking of that. I am speaking

of what you might have gained by reason of the - or

what you were entitled to by way of compensation

consequent upon a breach.

MR NEIL:  Yes, well the trial judge said we were entitled to

nothing, not even, Your Honour, to have the

receiver repay remuneration he had taken for what

we said was a breach of duty.

TOOHEY J: Yes, but that is not before us, is it, that

aspect of it?

MR NEIL:  That is part of the overall question of damage,

Your Honour. It has just been assumed, in effect,

that because - Mr Justice Higgins took the view

that if you have not established that there would

have been a further bid, you do not establish there

is a loss of opportunity. He said nothing further,

really, and did not go on to deal with the question

of exemplary damages which, in our submission,

should have been dealt with. He did not, even on

his own finding that a bid of $360,000 could have

been possibly expected, award what we would have

thought should have been at least $10,000, plus

exemplaries, nor did he deal at all with this

question of the remuneration.	The Full Court did
it almost exactly the same.	They simply said,

"Look, there is a finding of fact and we are not

going to ask ourselves these other questions and we

are not going to go into the other areas".

Cape 11/6/93

TOOHEY J: That is not quite right, is it? I mean, if you

look at page 90, for instance, the Full Court looks

firstly at the position of Mr Maidment, says maybe

he could have been forced to offer more than

$350,000, but there is no evidence to that effect,

therefore the amount which he offered and which was

accepted must be taken to be the amount that he was

prepared to pay. Then they look at Mr Cape and

they say he made no claim initially, that he had

been deprived of the opportunity of bidding more.

Neither his affidavit nor his oral evidence contained any claim that he had been interested in

bidding more than $350,000. So, is the loss of

chance related to one or other of those two
gentlemen, or does it go right outside and just, as

it were, look to anybody else who might have been

interested?

MR NEIL:  No, Your Honour, and when we come to one of our

next points, it goes right outside in this sense,

that the law makes a presumption that we say should

have come to our aid and it looks at - equity

traditionally, we submit, looks at the position not

through the eyes of an argument between the

receiver, Mr Cape, but what the receiver should

have done in the circumstances.

We say, for example - and we put the argument,

it was rejected - that if he has got a floor price

of $350,000, in effect, or an undertaking, we say

it is inconceivable that if he had not gone to

Mr Maidment and said, "Look, I am cutting Cape out,

I am tired of all this trouble, but I am not going

to let you have it for $350,000 because I am

floored at that", floor price, "tell me what you

are prepared to pay, I'll tend it with you, I will

deal with you. Show me your internal valuation so are not getting it for $350,000, I have got other

valuations, I have got other things". He should

have negotiated with him if he had cut out Cape as

he did.

DAWSON J: 

He could have done that but, ultimately, the

question is whether - or his duty was to obtain the
best price possible, was it not?

MR NEIL: Yes, Your Honour. Now, you cannot, in our

submission, obtain the best price possible if you
cut out one of the competing bidders and do not
then do something yourself to see if you can get

the best price possible out of the remaining

person.

TOOHEY J:  Mr Neil, I just find it rather disturbing _that

after what I take to have been a lengthy and

bitterly fought hearing and an appeal to the Full

Cape 9 11/6/93

Court of the Federal Court, we are now being asked

to take this case on board, presumably with a view
to sending it back to the Full Court, with a

possibility that best case scenario from your point

of view that you might get somewhere around

$10,000.

MR NEIL:  No, Your Honour; we have got stronger arguments

than that. We say we could get a substantial sum

further depending on how the chance is rated, plus

exemplary damages, let alone this question about

remuneration, if the court below, either if it goes

to the Full Court or back to the trial judge,

determines it.

GAUDRON J: But all of this is on the assumption that in due

course there will be a finding of duty to Mr Cape -

not to the company, to Mr Cape - and of breach of

that duty, because that has not yet occurred.

MR NEIL: That has not occurred. That is one of the

problems, Your Honour.

GAUDRON J:  But it is also a problem in the way of your

application, is it not? It gives the application a

very abstract artificial air.

MR NEIL: Except for this, Your Honour: we would submit that

the case is absolutely compelling in view of what

occurred that there has been the breach and to my

client but, secondly, the Full Court would not, in

our submission, even working on an assumption

basis, have made such an assumption. If the

position of my client on that point were untenable,

it would have been irresponsible. Indeed, we say

the matter is not artificial; it is just

compelling.

DAWSON J: But breaches of duty which result in no damage

are of no consequence, are they? Really, some

breaches of duty on the part of trustees result in
benefit to the beneficiaries.	No one worries about
those, do they?

MR NEIL:  No, Your Honour, but we -

DAWSON J: And here you have got no finding that this, if

there was a breach of duty, resulted in any damage.

It is a matter of no consequence on the findings.

You certainly could not in that situation really

float a case for exemplary damages, could you?

MR NEIL: Yes, Your Honour.

DAWSON J:  If there was a breach of duty it resulted in no

loss to your client, and you would say nevertheless

you should have exemplary damages?

Cape 10 11/6/93

MR NEIL: Yes, Your Honour, because, for example, in the

common law analogy you can have exemplary damages

that if there is a breach of a fiduciary duty,

if, say, you have only suffered nominal damages.

exemplary damages are available, but it is then a

matter to assess on the facts whether they should

be awarded. That is the position that has been

reached. We know of no case in Australia on the

particular point.

DAWSON J: There is a New Zealand case, but really it would

be most extraordinary where no one has suffered any

damage to award exemplary damages in a situation

such as this, would it not? What would be the

basis for doing so?

MR NEIL:  Your Honour, the basis would be that the court has

to have some way of ensuring that its officers are
subject to some sanction. According to the
articles in this field, equity once had a power for

all sorts of things, even Draconian powers - the

pillories and so on. The nature of equitable

relief and equitable compensation in particular

fell into a little bit of a grey area for a while

while common law principles were being developed.

The equitable principles in relation to relief

are being revived in New Zealand, in Canada and in

a case that we, I regret to say, located only

yesterday - it is referred to in today's ALJ that

we have brought copies of - where there is a
requirement to consider how and in what way the
control of the conscience by equity and the
application of sanctions to persons, particularly,

we say, court officers, should be applied,

otherwise there is no.way in which one could hold

to account.

Every time a court officer, say, breached an

undertaking but managed to get away with it, there

would be no sanction.

money, go to the races, come back at the end of the If he were to take some

weekend, put the money back in with a couple of

days interest, other than perhaps the professional

arrangements, nothing could be done.

Now, in our submission, that is not right.

The New Zealand cases, there are a number of areas

where, in New Zealand, the exemplary damages have
been attached to breach of a number of different
types of fiduciary duty. In Canada it has recently
been attached with a significant amount of both

compensatory, I should say, and exemplary damages.

DAWSON J: That would be where one is taking a risk which is

unjustifiable, even though it might result in

Cape 11 11/6/93

winnings in the end. But where a trustee does

something which involves no risk, indeed, is to the

benefit of the beneficiaries, you would not award

exemplary damages, surely.

MR NEIL: Well, Your Honour, setting aside the case - - -

DAWSON J:  I can recall being trustee of the Barristers

Superannuation Fund, and a very much more senior

barrister and trustee than myself explained that

sometimes trustees were there to commit breaches of

trust for the benefit of the beneficiaries.

Perhaps that may not be a supportable view but it

certainly seems to be one which suggests exemplary

damages would not be awardable merely because there

was a technical breach of trust resulting in no

damage.

MR NEIL:  Your Honour, there might be a different question

where you ended up with some kind of benefit to the

trust. There was no benefit here, because the

$350,000 was guaranteed. There was certainly no

benefit to Cape in cutting him out and, in our

submission, there was no additional benefit at all

to the trust. There is either one of two

situations: some possible further benefit has not

been gained or it is line ball. And in this

circumstance, if the conduct of the trustee is

assessed ultimately by the fact finding court as

contumelious, in our submission, it would be

appropriate and necessary to address the question

of whether or not - and in our submission it would

be right - to award exemplary damages for what had

occurred.

GAUDRON J: But there is nothing in any of the judgments

below, is there, to suggest that this conduct was

contumelious. On that contrary.

DAWSON J: Well, it was a breach of an undertaking.

MR NEIL:  The problem is that neither the judge below nor

the Full Court had passed upon the point. In our

submission, once you find - and I know my friend

says that it has not been found but once you find a

breach of a fiduciary duty, and we -

DAWSON J:	Can we identify what the breach of the fiduciary duty is that you point to.
MR NEIL:	It was a breach of a duty to allow the trust to

have the benefit of the competitive arrangement

that the receiver had set up between the two

persons concerned, to have the benefit of that

competition without it being cut off, and a breach

of a duty to disclose to one or other at least that

Cape 12 11/6/93

there was an offer from the other and not to cut

one out completely.

TOOHEY J: It really has nothing to do with the undertaking

given by one solicitor to another, does it?

MR NEIL: It has a great deal to do with it, with respect,

Your Honour.

TOOHEY J: But Mr Maidment is not a party?

MR NEIL:	No, that is true, Mr Maidment is not a party.
TOOHEY J:	He may have some evidentiary significance, I do

not know, but there is no action on foot for a

breach of that undertaking to hold back until 5 pm

on Monday, 15 January or whatever the date was, is

there?

MR NEIL:  No, there is no action. The complaint has

been -

TOOHEY J:  Then there is no claim in respect of the breach

of that undertaking, if there were such a breach?

MR NEIL:  No, Your Honour. The claim has been made in the

proceedings that that breach is part of this

problem.

DAWSON J: But, in fact, it was as a result of the breach of

the undertaking that the processes, which you

suggested should have been gone through, were not

gone through.

MR NEIL: That is what we say is clear, Your Honour.

DAWSON J:  I thought your case was that the receiver was in

error in not alerting Mr Cape to the existence of

Mr Maidment's offer, but not expressly by reference

to the undertaking given in relation to between the

two solicitors.

MR NEIL: Well, Your Honour, the receiver's position is that

he was able to go ahead despite the undertaking.

That is the argument that is mounted.

DAWSON J: But he did not give the undertaking.

MR NEIL:  No, but there is no doubt, Your Honour, that on

the evidence that Mr Davis, Mr Ezra, the other

partner, and Mr Chamberlain were all intimately

involved in the events of what was occurring on the

relevant days, and they were all part of the

process. They discussed between themselves the

effect of this undertaking and whether or not they

should abide by it, in effect.

Cape 13 11/6/93

Now, if the undertaking had been kept to, then

this cutting out would not have occurred and the

opportunity would have been given to Mr Cape to

make an appropriate response. Now, what we do have
is the trial judge finding that Mr Crossin had been

misled, that it was not reasonable to do that, and

that an opportunity to obtain -

DAWSON J:	What has been put to you was, I think, that what you are complaining about was that the proper
processes were not gone through. It so happens it
was in breach of an undertaking, but what you are
complaining about is what was not done.
MR NEIL: Yes, Your Honour.	- ....., :'.'.'.\ ~
..., - _;.....
TOOHEY J:	I mean your=:complaint is that Maidment's offer

was not referred to Cape, is it not? . .:. . ~

,_ .A,

MR NEIL: Yes, Your Honour.

TOOHEY J:  And the fact that there had been some telephone

conversations between solicitors was relevant to

the circumstances in which all this came about, but

there is no action for a breach of an undertaking

given by one solicitor to another.

MR NEIL: There is no action as such, Your Honour, but

we - - -

TOOHEY J: Could I just shift ground slightly, Mr Neil, to

ask you this? Before the trial judge, what was

said by way of the amount that should be awarded

for exemplary damages?

MR NEIL:  Nothing was said of the trial judge by way of an

amount as such, it was left - - -

TOOHEY J: But why not? What was the trial judge being

asked to do if he found exemplary damages were

appropriate?

MR NEIL: Well, he was being asked to award a large amount

on the valuation evidence, but that was rejected. opportunity and it was put that, on his view of the

evidence, it was for him to decide whether or not

an amount of exemplary damages should be awarded.

We said it was sufficiently serious to permit of

that and it should be awarded.	We did not suggest
an amount.

Now, to some extent, maybe one could say,

"Well, on the authorities, you look at the amount

of the compensatory damages to some extent and

decide whether that is enough anyway." But where

Cape 14 11/6/93

there is no compensatory damages, that question

does not really concern us.

DAWSON J: Well, except at the end of the day, the matter

might go back to the trial judge with exactly the

same result that obtains now, even allowing for the

possibility of exemplary damages. I mean, he might

just say they are not appropriate in the

circumstances.

MR NEIL:  Our complaint, Your Honours, is that we have been,

at the legal level, twice shut out of having a

proper consideration of the question of loss of

opportunity and the other consequential damages

questions. If we can those matters settled and the

principles determined, because both courts below as

good as seemed to think that exemplary damages does

not apply, rejected our argument under the Guerin

case that there is a presumption that aids us in

that field, that inequity gets us over all the

hurdles, if we can have these matters settled by

this Court, so be it if we go back, we fight and

take our chances. We say we have a good case, it

may be we might not get any more, Your Honour, but

at least we can get a decision on the right basis.

Your Honours, the Guerin principle, for

example, is not even referred to by the Full Court,

but we gave the court the Guerin judgment, and one

would have thought they would address it. One

would have thought they would address the question

of whether the law in Australia is that if there is

a breach of fiduciary duty, exemplary damages are

available thereafter depending on what the decision

is made. Guerin says, and this is the law in

Canada, that you cannot, in effect by your own wrongdoing, come along and say later, "Well, I want

the benefit of that", by saying that nothing

otherwise would have happened. Guerin says you

take the highest assumption available in favour of

the wronged person and hold it against the

wrongdoer. In other words, in that case, although

the Indian band did not prove they were going to

develop the land, and although they had agreed to a

lease but got one that was not as good, the measure

of damages for them was not looking at the two

leases and working out the difference, what the

Supreme Court said, it had to go all that way, was

that equity will assist by making an assumption

that the most favourable thing they would have done

with their land would have come to pass, there

being some evidence that you could have done that.

But they made a decision to do other things.

TOOHEY J: But you can see how it operates there, where

somebody has been wrongly deprived of their

property, the Court will make assumptions most

Cape 15 11/6/93

favourable to the person who has suffered as a

result of some unlawful conduct on the part of
another. But, you are dealing here with
businesses, that both parties want it sold.

Really, the only question was, what was the best

price that could be obtained.

MR NEIL: That is so, Your Honour. Now, what the Full Court

has said is there is no evidence that Mr Cape would

have bid further. We say the Guerin principle

applies and allows a presumption to be made that

must be made that he would have bid further -

DAWSON J:  No, but that - once there is a loss of some sort

then you can make the presumption, but here it is

said there is no loss.

MR NEIL:  Your Honour, if he had bid further - - -

DAWSON J: That is true, but they said he would not.

MR NEIL:  The presumption is that he would under the Guerin

principle.

DAWSON J:  No, that is a different sort of presumption you

are seeking to rely on.

MR NEIL:  Your Honour, with respect, it is in my submission

not different, it is really very much to the point.

If Your Honours will just allow me to get the

judgment.

TOOHEY J: Say you have got a business that is not worth, on

anyone's view, more than $100,000, and there is

horse trading on both sides and eventually the

person charged with the duty of disposing of it

sells it for $100,000, ·without reference to one of

the parties. I just have the greatest difficulty

in seeing how the Guerin principle can even begin

to get off the ground here, because you are talking

wish sold and the proceeds distributed between about something that has a value, which the parties	them. If the value is no more than $100,000, that
is it.

MR NEIL:  The value in this case, Your Honour, was the

highest figure that either side would have gone to

in light of the fact that they were in a

competitive situation and we say the option, in

effect, a reverse option, was not over.

TOOHEY J: Well, the findings are that neither side - at

least there is no evidence to support a conclusion

that Mr Cape would have offered more than $350,000.

MR NEIL:  The answer to that, Your Honour, is that Mr Cape

had previously taken action to stymie sales at

Cape 16 11/6/93

lower values; he had over a period forced

Mr Maidment to go up and up. Now, that finding,

that particular finding, when made in the absence

of the Guerin type of principle, might be one

thing, but it is not a finding that, in our

submission, should be made in law in circumstances

where a person had the right to make further bids,
where the trustee or the receiver had set up this
system and had put it into operation and where if,

on the Guerin principle you assume there would have

been a further bid, there was every likelihood that

that further bid would have to be more than

$350,000. Once you are over that hurdle, all that

has to happen is for the court to make an

assessment of what might have been the likely range

thereafter.

TOOHEY J:  Did your client ever say that he would have been

prepared to pay more than $350,000?

MR NEIL:  No, Your Honour. We accept that he did not say

that, and that is what the Full Court has, in

effect, anchored the entire approach around.

TOOHEY J: 

You say the court should have approached the

matter on the basis that he would have offered more
than $350,000.

MR NEIL: Under Guerin, yes. But equally, we have said, and

we are quite happy to - not in these proceedings,

obviously, but we have an argument that we mount

and want to continue to mount, that you then look

at the matter through the eyes of Maidment. Even
if my client did not go further, the trustee had

absolutely no reason to take $350,000 because he

effectively had that figure available to him by the

undertaking. So to do the best for the trust,

which was his duty, even if Cape had died on the

weekend, he should have gone further. That is

perhaps a little excessive an example to take and I

do not want to say things like that about my

client. But he had the duty, Your Honour, to press

the matter further, but he certainly had the duty
to give Cape the opportunity.

Now, just because Cape did not come along to court and tailor his evidence and say, "I would

have come in and done this"; what he said was he thought he had been cut out and in fact that was

the end of the situation. It is not as if, these types of cases you have to put together and

come to court and give evidence of.

TOOHEY J:	No, but you have got to offer the trial judge something by which he can make the sort of
assessment you are asking him to make.

Cape 17 11/6/93

MR NEIL:  We did offer him, Your Honour, a track record of

forcing Maidment up; we offered him a lot of
material on special value, we offered him the

position of the receiver at the time and we offered

him material that indicated that, we would submit,

at the very least, if the receiver had have

attempted to get somewhere further with Mr Maidment

he might have produced something. And then we have

the finding of the trial judge, that has never been

the subject of any contest, it is not the subject

of any cross-appeal or anything like that, that an

offer could have been expected up to $360,000

which, in our submission, is not something -
because there are very big cost implications about
this as well, Your Honour; you cannot just ignore

that, as the trial judge did not do anything about

it and the Full Court has done nothing about it.

So that, even if we are not looking at a large

area, there are cases here, Your Honour, on our

list where, for example, a solicitor was sued by

his client for not bringing an action, the court

held that he must have lost against his employer;

he could not win. But, none the less, there should

have been an evaluation of the chance that the

insurance company would have settled rather than go

to court.

There are other cases where it has been held,

even if the chance is not great - - -

GAUDRON J: But where we are talking about a chance as the

loss, that is one thing, and you keep sliding into

the chance here, being Mr Cape's chance, but

ultimately the duty you assert is the duty to get

the best price possible; it is not a question of

valuing the chance, it is a question of saying, was

there are breach of the duty to get the best

possible price?

MR NEIL: Well, Your Honour, yes, and if you cut out the two

competing people -

GAUDRON J: And ultimately, there was a finding against you

that he did get the best price possible, and that is

all there was to it, is it not?

DAWSON J:  Or at least that he did not fail to get the best

price.

MR NEIL:  Your Honours, the finding goes no more than to say

that Mr Cape, on that finding, would not have

offered more. In our submission, the duty of the

trustee was not to adopt this, what I might call

the almost adversarial approach to the matter.

DAWSON J: Well, where did the onus lie in proving this?

Cape	18	11/6/93
MR NEIL:	The onus lay in the trustee.	If he was going to

cut out Cape, there is even more reason, in our

submission -

DAWSON J: But it was you who was alleging that he failed to

get the best price available, was it not?

MR NEIL:	Yes, Your Honour.
DAWSON J:	You did not establish that.
MR NEIL:	Your Honours, we established that there was a

process that was on foot that was operating with a

track record of continual increases in price.

DAWSON J:	On all of that evidence, the trial judge and the appellate court held that it was not possible to
say that the trustee failed to get the best price available.

MR NEIL: Well, Your Honours, the reality of the findings is

a little different, in my respectful submission.

DAWSON J: But I am looking at page 90.

MR NEIL:  Yes. The realities of the findings is that, if

one goes to page 91:

even if Cape had not been lulled into

quiescence, no better price would have been

obtained than the receiver obtained.

Without addressing the question of whether or not

the receiver could have obtained a higher price, if

he, the receiver, had have taken any negotiating

position with Maidment - - -

GAUDRON J: But that is a finding, elliptical though it may

be, that there simply would not have been a better
price; full stop, would not have been. It is a

finding of fact and it is one that is made in the

and led, the arguments made, it is an absolute light of all the evidence that has been canvassed finding.

TOOHEY J: Bearing in mind, too, that negotiations had been

going on for a year or more, had they not? I mean,

it is not as if the receiver just received one

offer and snapped it up without reference to one

party; my understanding of the evidence is that

there had been negotiations going on for at least

12 months.

MR NEIL:  The receiver was appointed in about August,

Your Honour, the previous year. There were some

attempts to obtain market interest and there were

some offers that floated up, but at the relevant

Cape 19 11/6/93

time and for some weeks before the relevant time,

it was down to three people, Cape, Ramsay - who the

judge held was a front for Cape in trying to force

Maidment up - and Maidment. Now, the question has

not been addressed, in our submission, by the trial

judge or the Full Court, of whether or not they

should proceed to that finding, if there is a
presumption of law that aids my client - that is

the Guerin point - or secondly, there has been no

assessment at all of the loss of a chance to obtain

a further price by negotiation with Maidment; and

thirdly, there has been no assessment at all, or

consideration given at all, to the question of any

exemplary damages. And there has been nothing done

or said about the $360,000 or about the costs of carrying out these actions, if they should be in

breach, and whether those fees that have been paid

or taken are recoverable.

Each of those, Your Honours, in my submission,

does not founder on this finding. We would submit

it could be argued against us. We do not concede

that we might founder on the first point, but not

on the others, and the others are points of

considerable public importance.

TOOHEY J: Yes, but the Court looks generally for questions

of general importance involving principles of law

and so on in considering whether it will grant

special leave, but it also has an eye to what is

going to happen at the end of the day. It is not

customary to grant special leave merely because

there is some question lurking in the sidelines if

it is not apparent that it is going to achieve
something ultimately, and particularly here when it

is fairly apparent that it is not going to achieve

anything.

MR NEIL: With respect, it could not be said that it is

fairly apparent that it will not achieve anything,

Your Honours, with respect. If as we stand now

there is an assumption - only right now - an

assumption of a breach of a fiduciary duty, is it

to be said that the moneys taken in pursuit of

those actions - is he to keep the fees he took for

breach of duty? That is one thing.

This $360,000 question which is somewhat up in

. the air but is a finding we can point to; is it to

be said that we failed to cross that threshold?

The Guerin point is a vital point. The whole

question of equity, the presumptions and the

exemplary damages question - the latest Canadian

case is one where a physician was held to be a fiduciary to a lady. He had provided her with

prescriptions for drugs, more than she needed, in

exchange for sexual favours. She was convicted of

Cape 20 11/6/93

obtaining double prescriptions, but she has then

sued the doctor and was able to recover damages and

exemplary damages for his fiduciary breaches.

It is the question of vulnerability of

different types of person, not just businessmen who

it might be thought can in some way help

themselves, but it is a question of what are the

principles to be applied in cases of fiduciary

obligations owed to people who are vulnerable to

the fiduciary. Where he has total control - he is

a court-appointed officer in this case, and without

any control over him other than by the court, he can do what he likes really. Whether there is a

presumption available to assist persons in that

position is important. At present the effect of

the Full Court's decision is that this presumption

does not apply and you simply say there was no

evidence; therefore the finding below stands.

DAWSON J:  But it is very difficult to see how it could

apply, Mr Neil.	Here he got a price which, on	the
evidence, was as	good a price as he could have	got.
What presumption	can you build on that?

MR NEIL:  You make the presumption, Your Honour - and the

other case in our list of Brickenden - that a

trustee -

DAWSON J: But you see, what happened in Guerin's case was

that the band did not get the sort of lease that it

was entitled to, but here he got the sort of price

that he was entitled to, or the receiver obtained
the price that the beneficiaries were entitled at

best to.

MR NEIL:  Not if you assume, Your Honour, that if Cape had

not been cut out, he would have made a further bid.

That is what the presumption does.

GAUDRON J:  The finding makes such an assumption impossible.

There is a straight finding of fact that even if he

had not been lulled into quiescence, no better

price would have been obtained. That is to say, no

matter what would have happened, that was the best

price that was going to be got. That is the

finding against you and that eliminates any basis

or, indeed, any room for a further assumption.

MR NEIL: Well, Your Honours, that is the error, with

respect. It was held there in contract it would

have been necessary for the band to prove it would

have develop the land. Now, the Full Court has

said it is necessary for Cape to have proved he

would have bidded more. He did not prove that,

therefore, they have said, the best price was

obtained. But further, going on in Guerin, Guerin

Cape 21 11/6/93

then says, "In equity a presumption is made to that

effect". We say you should set aside the finding

that the best price was obtained based upon lack of

evidence by my client and presume in equity that my

client would have, not developed the land, but

would have made a bid. With that presumption this

finding falls away, and that is why it is a finding

not available at law, if the presumption is to be

part of our law.

TOOHEY J: But you are using presumption in a - or the

presumption you rely upon on Guerin is not

available here. The presumption in Guerin is a

presumption that is used once loss has been

established, but the extent of that loss is not

readily quantifiable by reference to ordinary

principles of breach of contract and the like.

But, you have to get off the ground somehow, and

here the finding of fact stops you getting off the

ground. There has been no breach according to the

finding of fact.

MR NEIL:  Your Honours, that is one of the problems, the

trial judge -

TOOHEY J: Well, it is a problem and it is a pretty

insuperable one.

MR NEIL: But the trial judge, in effect Your Honour, seems

on one view of it to have said, "Well, if there is

no loss there is no breach".	We say that it must
be the other way around.	If there is a breach you

then look at what the loss is including maybe

exemplary - - -

DAWSON J: Now, that is a logical glide. Because there is a

breach there is not necessarily any loss.

MR NEIL:  No. I said, Your Honour, if there is a breach you

then look at the question of loss.

DAWSON J:  You then look at what the loss is assuming there

is a loss, but that is an assumption you cannot

make here, you see, on the findings of fact.

MR NEIL:  What the trial judge seems to have done is to say

because there is no loss there is no breach.

DAWSON J:  He said because there is no loss we do not go any

further. Whether or not there is a breach becomes

academic really.

MR NEIL:  Your Honours, it still does not deal, and I accept

the problem of what might happen in the future, but

it still does not deal with the issues upon which

we have never had the benefit of any decision at

all. But, just before I depart immediately from

Cape 22 11/6/93

that, there is Brickenden, Your Honour, where it

was held that speculation as to what course of

action would be taken if material facts have been
disclosed was not relevant.

Now, speculation as to what would have happened if my client had not been cut out in my

submission is not relevant. But it is that

speculation, elevated to a finding that he would not have made another bid, which is the problem.

That was a decision from Canada but of the Privy

Council and it is on our list.

We are saying, Your Honour, we did get over

the threshold and there was loss, and that the

finding that has been referred to is based on a

totally false legal premise and position. It has

fallen into the error that Brickenden foreshadowed

could happen and should not happen. In other

words, it is back to the principle that I submitted

earlier that if something is done wrongly the

wrongdoer cannot be heard to say, "Well, I have, in

effect, been able to get away with it".

TOOHEY J: But there is no wrong here merely by failing to

refer Maidment's offer to Cape, is there? There

can only be a wrong done to your client if, by

reason of that failure, some better offer might

have been made. In that respect, as

Justice Gaudron has just pointed out to you, the

finding of fact is dead against you.

MR NEIL: Well, Your Honour, that finding of fact, as I have

said a number of times, and I do not wish to keep
repeating myself, that is a finding of fact that
arose from a number of wrong premises of law and is

not available as a finding of fact. It just

discounted and took no account of the presumption
and, in my submission, when properly analysed,

simply looked at it through the eyes of Mr Cape's

position, did not ask the question "What should the

receiver have done, having chosen to deprive

himself of one arm of a possible better price?".

That is one thing, we say simply the finding of facts is so wrong that because even if, even if,

you could in some way support it the judge should
have gone further and asked for the chance of what would have occurred, but he has not even addressed

that question. But he certainly has not addressed
the question of what should happen in the case of

special value to Maidment if the receiver had done

something else. There is no consideration given to

it. It might address the question of, well, Cape

would not have bid more, but it does not address

the question of whether any action of the receiver

would have produced some further result. The

Cape 23 11/6/93

findings of fact by the trial judge, for example,

at page 47, line 5:

It was reasonable to believe that the figure

of $350,000 was not likely to be improved

upon. However, in so doing, an opportunity to

get a higher offer from Cape or Ramsay was

foregone. Whether that is likely to have made

a difference and whether it is open to Cape to

complain of it are separate questions.

We say it is not inconsistent with our case

that the judge made the finding that you would not

get a higher price. He has based that on saying,

it is not that $350,000. He has

acknowledge ~tan opportunity to get a higher

offer was fc ~e. He has, however, foreclosed

off the ques	of assessing that opportunity and
making some e	ration of it, simply because he

said there wo,< be no higher price. He has posed

two questions ,~.tat are really inconsistent. If he

had have gone into answering the second question,

for all we know a proper judicial approach to the
matter would have led him not to make that finding

in there. Or, alternatively, we say he could make that finding and still consistent with it go ahead

and make a finding of what is the value of the

opportunity that was foregone that he identified.

And as I say, Your Honours, none of the other features that I mentioned earlier about other types

of damages, or about the $10,000 or any of the

other matters, have even been addressed. At

page 42 of the transcript, line 55:

it is clear that Cape had no reasonable

opportunity to consider whether he, or Ramsay,

would increase or revise the offer Ramsay had

put.

And, at the top of page 43:	In my opinion, it was not reasonable in the
circumstances then prevailing to deceive Cape,
even if by default.  He need not have been
told of Maidrnent's offer but he could and
should have been told that unless he or Ramsay
came up with a final offer a sale might well
proceed to the highest offer then reasonably
available. At least he would not have been
lulled into a false position.
Now, in light of those findings and that he

identified a lost opportunity - I suppose in one

sense we are really saying there is no evidence to

support the proposition that you could not evaluate

an opportunity, even if you could, on one view of

Cape 11/6/93

it, say you are not likely to get, on a balance of

probabilities, a higher price. That is why I was

going to briefly refer to the case of Davies v

Taylor. I do not want to slip into this chance

area unwarrantably again, Your Honours, but it is

in (1974) AC 207 and the question there was what

should be done about a case of a lady who had

separated from her husband, but after his death

made a contrarelative claim and the question arose

whether there was any real prospect of her going

back to the husband before he died and the court

held that there was none, no real prospect of her

problems. For example, in the centre of page 212, line F, if you had two cases, one widow:

going. back. However, at pages 212 and 213,

estimated that the chance that she would have
returned to him is a 60 per cent probability
(more likely than not) but in the other the

estimate of that chance is a 40 per cent

probability (quite likely but less than an

even chance). In each case the tribunal would

determine what its award would have been if

the spouses had been living together when the

husband was killed, and then discount it or

scale it down to take account of the

probability of her not returning to him.

In this case, we say the tribunal should have

considered what would have happened if Cape had not

been cut out, in all the circumstances, viewed

through the eyes of the receiver. Going a little

further, to the bottom of page 212:

When the question is whether a certain

thing is or is not true - whether a certain

event did or did not happen - then the court

must decide one way or the other. There is no

question of chance or probability. Either it

did or it did not happen.	But the standard of
civil proof is a balance of probabilities. If
the evidence shows a balance in favour of it having happened then it is proved that it did
in fact happen.

But here we are not and could not be

seeking a decision either that the wife would

or that she would not have returned to her

husband. You can prove that a past event

happened, but you cannot prove that a future

event will happen and I do not think that the

law is so foolish as to suppose that you can.

All that you can do is to evaluate the chance.

Sometimes it is virtually 100 per cent: sometimes virtually nil. But often it is

somewhere in between. And if it is somewhere

Cape 25 11/6/93

in between I do not see much difference

between a probability of 51 per cent and a

probability of 49 per cent.

And further down the page, His Honour resolves the

problem of the 60 per cent and the 40 per cent.	It
is not that one gets all and one gets nothing, it
is that you make an appropriate evaluation.

Now, on the judge's findings that an

opportunity has been foregone, the failure to

address how to assess that opportunity, in

accordance with this type of approach, is one of

our complaints, and it is not sufficient for him to

have just gone ahead and made the one finding of

the one answer to the question as to whether or not

he thought the best price had been obtained.	It
was the wrong question.	He should have asked the

loss of the opportunity to obtain the true overall, including special value, and to deal with the other

headings that I have outlined in respect of which

there has never been any determination,

Your Honours, or any ruling.

DAWSON J:  The Court will take a short adjournment to

determine what course it will take.

AT 3.22 PM SHORT ADJOURNMENT

UPON RESUMING AT 3.28 PM:

DAWSON J: The Court need not trouble you, Mr Biscoe. In

this matter, the trial judge made a finding of fact

in these terms:

I am persuaded that, even if Cape had not been

lulled into quiescence, no better price would

have been obtained than the receiver obtained.

The evidence does not lead to any conclusion that, even if the sale had been postponed

until conditions improved, a net higher price

in real terms, after costs of receivership,

would have been obtained.

That finding was accepted by the Full Court. In

the light of that finding, we do not think that any

question of principle arises as suggested by

Mr Neil in support of the application.	The
application is therefore refused.

MR BISCOE:  I ask for costs, if the Court pleases.

Cape 26 11/6/93

DAWSON J:	Mr Neil?
MR NEIL:	I cannot say anything on that.

DAWSON J: Refused, with costs.

AT 3.29 PM THE MATTER WAS ADJOURNED SINE DIE

Cape 27 11/6/93