Child v Commonwealth Development Bank

[2001] HCATrans 101

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Sydney  No S255 of 2000

B e t w e e n -

JAMES DAVID CHILD

Applicant

and

COMMONWEALTH DEVELOPMENT BANK OF AUSTRALIA LIMITED

Respondent

Application for special leave to appeal

GAUDRON J
GUMMOW J

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON TUESDAY, 10 APRIL 2001, AT 2.32 PM

Copyright in the High Court of Australia

MR C.W.J. LEGGAT:   May it please the Court, I appear for the applicant.  (instructed by Webster O’Halloran & Associates)

MR M. WALTON, SC:   May it please the Court, I appear with my learned friend, MS E.A. COLLINS, for the respondent.  (instructed by Abbott Tout)

GAUDRON J:   Yes, Mr Leggat.

MR LEGGAT:   Thank you, your Honour.  As your Honours would be aware, Mr Child sought to buy a parcel of land up the road.  That was a parcel of land called “Ewandon”.  At the time he owned two parcels of land by the name of “Sneaths” and “Bennetts”.  It was clear from the application that Mr Child made to the Bank that he was not prepared to risk “Sneaths”, he was not prepared to mortgage “Sneaths” to acquire “Ewandon”.  However, what the Bank put before him for signature by way of security documents was a mortgage for the “Sneaths” property.

GAUDRON J:   Now that leaves out some steps in the procedure, does it not?

GUMMOW J:   It leaves out his solicitor, for one thing.

MR LEGGAT:   Yes, it certainly does.

GAUDRON J:   It leaves out the letter which the trial judge held constituted a counter‑offer and ‑ ‑ ‑

MR LEGGAT:   Yes.  All right.  Well, let me deal with it this way.  Mr Child established to the satisfaction of Justice Adams that Mr Child’s belief was that the “Sneaths” mortgage was radically different from the “Ewandon” mortgage.

GAUDRON J:   No.  What was accepted by Justice Adams was that he believed he was signing a mortgage of “Ewandon” and “Bennetts”.  Justice Adams at that point of his judgment was dealing with facts, not legal conclusions.

MR LEGGAT:   Yes, but with respect, your Honour, we are both saying the same thing.

GAUDRON J:   No, we are not.

GUMMOW J:   No, we are not.

MR LEGGAT:   All right.  What flows from that finding of fact is that Mr Child was not prepared to sign the “Sneaths” mortgage.  The reason why he was not prepared to sign the “Sneaths” mortgage was that to him the “Sneaths” mortgage was radically different ‑ ‑ ‑

GAUDRON J:   Well, again, that over‑simplifies.  A question might have been whether, if he had been offered the choice between finance as proposed by the Bank and no finance at all, what would his decision have been.  That was not, however, a matter that had to be determined, was it?

MR LEGGAT:   No, that is right, but what was determined favourably to Mr Child was that had he known ‑ ‑ ‑

GAUDRON J:   No, what was determined was that he believed that he was mortgaging two properties and not “Sneaths”.

MR LEGGAT:   Yes, it went slightly further than that and if I could take your Honour to the finding.  It is in this form, that had Mr Child - this is at 69 of the white book, 3.4(e):

Mr Child has said that he would not have proceeded with the transaction in that form had he been aware that Sneaths had been substituted for Ewandon.  I accept that this is so, although not without some reservations.

Now, an acceptance that Mr Child would not have proceeded with the transaction in that form supports very strongly the proposition that to Mr Child there was a fundamental difference between a mortgage of “Ewandon” and a mortgage of “Sneaths” because the transaction just would not have proceeded and, with respect, that is a paradigm example of when something is fundamentally different.  Now, if that is right, once that is accepted, then Mr Child should have succeeded.

GAUDRON J:   No, because do you not have to deal with the question of the trial judge’s finding that the Bank made no false or misleading representations and that Mr Child was careless of his own interests?

MR LEGGAT:   Yes, that is quite so.  What the ‑ ‑ ‑

GAUDRON J:   And you would only get to your rather interesting point about radically different, would you not, if you can set aside the trial judge’s findings in that regard?

MR LEGGAT:   With respect, no.  The way this Court approached the matter in Petelin’s Case was to look initially as to whether or not there was a belief that Mr Petelin had that the receipt was fundamentally or radically different from that which he signed and then their Honours moved ‑ ‑ ‑

GAUDRON J:   Well, it was radically different.  He signed an option when he thought he was signing a receipt.  There is no question about ‑ ‑ ‑

GUMMOW J:   There could not be much debate about that.

GAUDRON J:   Yes.

MR LEGGAT:   Well, just pausing there - and this is an important point - whilst it is very easy to say there is not much dispute about that - and that is what Justice Handley did - that overlooks, with respect, the fact that the Court of Appeal in New South Wales, 30, found the opposite way, that is, that the document was not fundamentally different.  So, with respect, what seems to be happening here is that judges are prepared to respond instinctively or intuitively to a situation without making their reasoning transparent as to why it was so obvious.

GAUDRON J:   You lost at first instance and on appeal on the grounds of the Bank being innocent, using that in a shorthand way, and your client having been careless of his own interests.  In addition, in the Full Court, the Full Court said not radically different.

MR LEGGAT:   In Petelin v Cullen before the High Court the issue of carelessness was considered to be not relevant.

GAUDRON J:   That is right, because there had been a misrepresentation or a fraud perpetrated.

MR LEGGAT:   Well, it was not put as high as that, with respect.  The language of the High Court concerning the carelessness issue was that ‑ ‑ ‑

GAUDRON J:   The agent had not been innocent.  The agent ‑ ‑ ‑

MR LEGGAT:   No, your Honour, it is not as clear as that.  The language was ‑ ‑ ‑

GUMMOW J:   Just a minute.  I am looking at the bottom of page 360 of 132 CLR.  It seems pretty clear to me, the paragraph beginning, “On this analysis”.

MR LEGGAT:   Yes, and it is the second sentence that I was endeavouring to focus on the language:

the appellant’s belief that the document was a receipt was inspired by the agent’s representation that the document acknowledged the payment -

et cetera.  What we have here, Mr Child’s belief was inspired by the Bank’s actions.

GAUDRON J:   Well, that is just what you have not a finding in your favour on because the finding was that there was no misrepresentation.

MR LEGGAT:   Your Honour, one does not need misrepresentation in the context of a non est factum case.

GAUDRON J:   What do you need?

MR LEGGAT:   Petelin v Cullen does not say that.

GAUDRON J:   What do you need?  You have findings that the Bank took reasonable steps to bring it to the attention of your client, that the Bank communicated with his solicitor.

MR LEGGAT:   But none of that worked.  If your Honour accepts that, then what your Honour would be doing is imputing a defence to a non est factum case contrary to the facts.  If one accepts, as the trial judge has, that Mr Child did not intend to enter into the transaction, then non est factum should not permit, with respect, an imputed belief to override an actual belief, that there is nothing in Petelin v Cullen which suggests that that is an appropriate limitation and, quite to the contrary.  At the top of page ‑ ‑ ‑

GAUDRON J:   I think what you will find, will you not, if you look at it, that this notion of carelessness as it is expressed in Petelin v Cullen is that a person who signs a document without taking proper care for his own interests, in a case where there has been nothing amounting to a misrepresentation should be estopped from asserting that it is not his document.

MR LEGGAT:   Your Honour, it is not in that language.

GAUDRON J:   I know it is not in that language, but I think you may find that that is ‑ ‑ ‑

MR LEGGAT:   And it does not involve those concepts.

GAUDRON J:   ‑ ‑ ‑ what underlies ‑ ‑ ‑

MR LEGGAT:   Well, that is not what their Honours have said prior to you, your Honour.

GAUDRON J:   No, I know it is not what they have said but there has to be some principle rationale for what is there said.

MR LEGGAT:   Your Honour, we have the clear words at page 360, at the top of page 360, the first full sentence:

To make out the defence a defendant must show that he signed the document in the belief that it was radically different from what it was in fact -

Now, we get that far.  We then go on ‑ ‑ ‑

GAUDRON J:   Well, not quite, but ‑ ‑ ‑

MR LEGGAT:   Well, even my learned friend acknowledges in the written summary - this is page 75, first full sentence:

The evidence and the findings establish only that the mortgage was different to what the applicant thought it to be.

But perhaps that can be - if one accepts that Mr Child does get to first base - and by that I mean the first part of the first full sentence on 360 - then he is faced with this observation, an element, as their Honours describe it:

at least as against innocent persons, his failure to read and understand it was not due to carelessness on his part.

Now, that is the entirety of the proposition.

GUMMOW J:   In that case the other party was not innocent because of the matters that her Honour was putting to you.

MR LEGGAT:   Indeed.  Yes, and the Bank in this case is not innocent because of the findings that Justice Adams made.  There are two particular findings and they are set out at page 70 of the outline at 3.6 and 3.7 and the language of the trial judge - there was a failure to send copies of the proposed mortgage and that failure caused a lack of opportunity to examine the details.  Does your Honour see that 3.6?  And at 3.7 ‑ ‑ ‑

GUMMOW J:   These are your submissions.

MR LEGGAT:   Yes, but that is the extract from the trial judge’s finding, your Honour.  That there was a duty upon the Bank to bring to his attention specifically and that there was a failure to deal with that duty.  Now, that supports strongly ‑ ‑ ‑

GUMMOW J:   Look, the Bank knew, did it not, that your client had a solicitor acting for him, Mr Burridge?

MR LEGGAT:   Yes, but, your Honour, there was a solicitor acting for Mr Petelin as well, but that was not the end of the matter.  The mere involvement by a solicitor is not of itself sufficient to either, addressing the first element in Petelin v Cullen, to show that the document is other than radically differently or, secondly, to somehow make it careless - carelessness on the part of the pleader simply because his solicitor failed to become aware of something that he could have become of.  That is not, with respect, how the principle operates.  Carelessness does not have an element of, “You are careless because your solicitor may have done something”.

GAUDRON J:   I am reading paragraph 27, which is footnoted to your ‑ ‑ ‑

MR LEGGAT:   That is Justice Handley’s judgment, your Honour, is it?

GAUDRON J:   No, of the trial ‑ ‑ ‑

GUMMOW J:   Page 17 of the application book.

GAUDRON J:   Page 17.

MR LEGGAT:   I am sorry, your Honour has lost me.

GUMMOW J:   Page 17 of the application book.

MR LEGGAT:   Page 17 of the application book.  Yes.

GAUDRON J:   The last sentence suggests that what his Honour was dealing with there was not the duty of the CDB but the duty of the ANZ.

MR LEGGAT:   No, with respect.  The CDB delegated the task of obtaining execution of the document to the ANZ and your Honour will see in the quote at 3.7 on page 70 that the duty that is being spoken of is in the context of the CDB’s duty.

GAUDRON J:   But his Honour concludes:

No doubt ANZ did not do so -

but perhaps you are right, yes.

MR LEGGAT:   Your Honour, the factual position there is that CDB was the lender but CDB chose to use the local branch of the ANZ Bank as the vehicle by which the document would be executed.  So what his Honour is saying there is that there is really no doubt that the change did not get brought home to Mr Child because no one at the CDB told the ANZ Bank what was going on.  So that is an explanation as to why it was that the duty upon the CDB was not filled.

GAUDRON J:   That, of course, is said - is that said in the context of relief under the Contracts Review Act rather than the factual findings with respect to non est factum?

MR LEGGAT:   Your Honour, with respect, that is right, but it is a finding of fact as to ‑ ‑ ‑

GAUDRON J:   Yes, but it is in a context.  Duty takes its meaning in a context.

MR LEGGAT:   But there is no reference in the Contracts Review Act to duty and there is no reason why your Honours would read that finding of fact in such a limited manner and, of course, there is no definition of “innocence” for the purpose of the non est factum plea and what we have are findings of fact which suggest that the Bank ‑ ‑ ‑

GUMMOW J:   What do you say about the findings of fact by the primary judge at page 16, paragraphs 24 and 25, before he got on to the Contracts Review Act matter which is dealt with on page 17?

MR LEGGAT:   Well, that is part of - that is not so much a finding of fact but it is a conclusion that his Honour reached, which conclusion, as a matter of law, was wrong and sits very uncomfortably with his Honour’s finding as to how the Bank conducted itself.  Of course, your Honours will recall that ultimately Justice Adams found that this was an unjust contract for that very reason, that what the Bank had brought into existence was an unjust contract.  That is the context in which one needs to view the conduct of the Bank.  There is a fall‑back position, that if your Honour did form the view that ‑ ‑ ‑

GUMMOW J:   What fall‑back position?

MR LEGGAT:   If your Honours formed the view that the Bank was innocent, notwithstanding these observations about what it should have done and what it did not do, then Mr Child can still win if he establishes that he was other than careless, and there is no evidence that he was careless.  He is a man who, upon the evidence, could not have understood the difference between the “Ewandon” mortgage and the “Sneaths”

mortgage on its face.  The only carelessness is perhaps in choosing a solicitor who maybe was not as careful as some others, but that cannot be what “carelessness” means in the concept of - for the plea of non est factum.

So Mr Child deserves to win if he establishes the radical difference and if he is unable to satisfy that the Bank was other than innocent, he can still win by establishing that he was not careless.  There really is no evidence that he was careless and if your Honours imputed his solicitor’s knowledge to him, that would be a gloss that does not presently exist in Petelin v Cullen and it would seem to be an unwarranted restriction on the operation of the plea.

Would your Honours be assisted if I spoke about the benefit to the legal community in solving these problems?  Perhaps I can do more than just point to Justice Handley’s lament, where he, in effect, said - well, not in effect, he expressly said there is limited guidance in the speeches in Gallie v Lee and there is little assistance in Petelin v Cullen on this important question of when will a document be radically different.  May it please your Honours.

GAUDRON J:   Yes, thank you, Mr Leggat.  Yes, we need not trouble you, Mr Walton.

Having regard to the findings of fact by the trial judge, the proposed appeal does not enjoy sufficient prospects of success to justify the grant of special leave.  Accordingly, special leave is refused with costs.

The Court will adjourn briefly to reconstitute.

AT 2.51 PM THE MATTER WAS CONCLUDED