Connolly & Ors v Craig

[1997] HCATrans 218

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Perth  No P20 of 1997

B e t w e e n -

ANTHONY ROBERT CONNOLLY, PETER JOHN MESSER, ROBERT JOHN GRAY, RODNEY JOHN LEWIS, GEOFFREY JAMES STOKES, PETER LAWSON MUNACHEN, DOMENIC VINCENT MARTINO, ANGUS CLAYMORE PILMER and ALAN ROBERT CRAWFORD

Applicants

and

WARREN ASHLEY CRAIG and DELYS JOAN CRAIG

First Respondents

TRIGG ALEXANDER CRAIG, ELSJA ELIZABETH CRAIG and MANSON BASIL CRAIG

Second Respondents

DIAMOND “C” PTY LTD

Third Respondent

MAXWELL LEONARD TROY

Fourth Respondent

and

ALDO BONAVITA

Fifth Respondent

Application for special leave to appeal

GAUDRON
McHUGH J
GUMMOW J

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON FRIDAY, 15 AUGUST 1997, AT 9.32 AM

Copyright in the High Court of Australia

____________________________

MR D.M.J. BENNETT, QC:  May it please the Court, I appear for the applicants with my learned friend, MR G.I. MACNISH.  (instructed by Cocks Macnish)

MR R.A. CONTI, QC:  May it please the Court, I appear with MR A. METAXAS for the respondent.  (instructed by Arthur Metaxas).

GAUDRON J:   The Deputy Registrar certifies that he has been informed that the fourth and fifth respondents in this matter do not wish to be represented and submit to any order of the Court save as to costs.  Yes, Mr Bennett.

MR BENNETT:   If the Court pleases.Your Honours, I have prepared a slightly refined version of our outline in the light of my learned friend’s submissions, and I hand that to the Court.

Your Honours, we submit, this case involves a fundamental question about causation which is quite a common question.  Although the respondents seek to portray it as a very complex factual case, the facts relevant to the issue on which we say the Full Court erred, are really very simple.  There was one key finding by the trial judge and that appears at page 20 of the application book, and we have set it out in full in paragraph 3.  The trial judge found that:

Whether the development could actually proceed remains to be decided and I am satisfied they always intended to consult Mr Troy before making any final decision.

That is due in the second period.  So, the whole of the continuing - - -

GAUDRON J:   Do you not have to relate what you say to the duty of care that was alleged and found against you?

MR BENNETT:  I concede a duty of care.  I concede a breach.

GAUDRON J:   A duty of care, what?  What is the failure?  What was the breach?

MR BENNETT:   We accept what the Full Court said.

GAUDRON J:   It was a failure to advise over a long period.

MR BENNETT:   Yes, your Honour, we accept that.

GAUDRON J:   Once you accept that that is the breach involved, that there was a duty over a long period, do you not have to move beyond factual issues if you want to raise causation?  When I say, do you not have to go beyond factual issues, do you not have to assert that there was a duty only at a subsequent time?

MR BENNETT:   No, your Honour.  There was another duty.  There was a further duty at the subsequent time, to give the final advice, and that is really the second finding which we have quoted in paragraph 5, where the trial judge finds:

the decision actually to proceed.....was taken on 23 August 1989 -

in the third period:

and was truly caused by the failure of Mr Troy at that time to properly advise the Craigs -

et cetera.  So we have a finding that the final decision to proceed was made in the third period and that throughout the earlier periods it was known that there was going to be a final advice and that it would not proceed until that final advice took place.  That is what distinguishes it from what your Honour Justice Gaudron said in Bennett’s Case, which was cited below.  Your Honour recalls that was the case where the negligent failure to advise by the department was followed by negligent advice by a solicitor when the wardship ended.  But had, in that case, the facts been that it had always be known that there would be a further legal advice and a decision after the wardship ended, before the limitation period expired, it would have gone the other way.

When one looks at what the Full Court did in this case, the whole of the error is in three pages, and your Honours can see that.  It is pages 235 to 237 of volume 2.

McHUGH J:   On 236, their Honours refer to the question of common sense causation.  This case is only a question of application of a settled principle to a set of facts and you may agree or disagree with what they did.  But is there any more to the case than that?

MR BENNETT:   Your Honour, they do not, with respect.  What they say on page 236 at line 20 where the word “common sense” appears:

Had Mr Troy, on behalf of Nelson Wheeler, performed his duty, common sense compels the conclusion that the Craigs would not have entered into the third engagement.

We accept that finding fully.  That is “but for” causation.  But whatever causation it is, we accept that point but he would not have entered into the third engagement had the duty been performed the second occasion.  That damage we accept.  We accept the damage of the cost of the third engagement.  The issue is, was the causation of the ultimate loss, when in the third engagement negligent advice to proceed was given?  That sentence does not address that at all.

McHUGH J:   It is only a question of fact.  Their Honours were aware of the appropriate incidents.

MR BENNETT:   No, your Honour, with respect, they apply the wrong test.  May I just show your Honour where they applied the wrong test.

GAUDRON J:   Are you sure they applied the wrong test rather than took a different view of the effect of that meeting on 23 August?

MR BENNETT:   No, your Honour.  They took the same view of that meeting.  What they said was, and we fully accepted this, that - and this is why I say there is no dispute about the facts - “During the second period, we accept fully that if we had fulfilled our duty and given advice not to proceed, nothing further would have happened and the huge losses would not have been suffered.”  I accept that.

GAUDRON J:   So the meeting of 23 August, you say, in effect, was a new cause?  There was a new cause of action, there was a novus actus interveniens in the old terms?

MR BENNETT:   Yes, your Honour.  But more than that, your Honour, unlike - - -

GAUDRON J:   But you have to say at least that, do you not?

MR BENNETT:   I say that, your Honour, and I say something more.

GAUDRON J:   But is that not a factual consideration?

MR BENNETT:   There is no dispute about that, really.  That is what the trial judge found and the Full Court does not reverse that.

McHUGH J:   But there is nothing special about this case.  It is just a run of the mill, factual issue.

MR BENNETT:   No, your Honour.  With respect, what special - - -

McHUGH J:   Or how you characterise the facts upon which you have applied the relevant principle.

MR BENNETT:   It is not even characterisation, your Honour.  Can I just tell your Honour what we accept, because everything that is put as a complex fact is something which is, (a) simple; and (b) accepted.  We accept a duty.  We accept a continuing duty.  We accept breach of that duty.  We accept that but for the breach of duty during the second period, the losses would not have been suffered.

What we say is, in the light of the trial judge’s finding, which I have referred to in paragraph 5 which is not altered on appeal, and in the light of the finding that it was always intended that they would not proceed without that final advice, the “common sense” consequence of the continuing breaches up to 23 August was nothing more than the incurring of the costs which were incurred up to that date.  The context in which the advice was given was, “We are going to have a final feasibility; make a final decision, at some stage in the future.”  In that context - and there cannot be dispute about that because that is what is found - to say that, “Oh but for your earlier negligence it would not have got to that stage”, is simply applying a wrong test.  It is a refusal to apply the Stramare test.

McHUGH J:   But even if it is, what is special about it?  The case has got no precedent value whatever.

MR BENNETT:   What is so special about it is this, your Honour.  It would occur wherever you have two lots of advice - usually given by solicitors, but it could be any profession, in this case it was an accountant - on the same subject matter and both advices say “do not proceed” when they should say “proceed”, or say” proceed” when they should say “do not proceed”.

GAUDRON J:   But is that not your problem, you see?  You are assuming there were two lots of advice.  You are treating the failure to advise as precisely the same as advice.  Now, had there been actual positive advice at the meeting of 23 August, you might have some basis.  But in the absence of any advice whatsoever, one has to treat things as continuing, surely?

MR BENNETT:   But, your Honour, the fact that it is continuing does not change the application of principle.  There were two separate, or three separate entities, advising, although it was the same person throughout.

GAUDRON J:   And the breach in each case was a failure.

MR BENNETT:   Yes, your Honour, yes.

GAUDRON J:   Not the giving of negligent advice.

MR BENNETT:   Correct, your Honour, with respect.  But the breach in the earlier case was in the context that there was going to be further advice before a final decision, and in that context - - -

GAUDRON J:   But there never was any further advice as such.  There was no positive advice.

MR BENNETT:   Your Honour, the finding - I do not know that I would accept that completely, your Honour.  If one goes to page 77 - - -

GAUDRON J:   Justice Franklyn stopped short at page 337 on the finding of positive advice, did he not?

MR BENNETT:   There was certainly a positive decision.

GAUDRON J:   The best you have, I should have thought, is what comes from Mr Justice Franklyn at page 337:

By inference, the absence of such advice confirmed to the Craigs Mr Troy’s earlier advice, that the project was feasible.

MR BENNETT:   Yes.  But there was always going to be that final opportunity for decision, and the finding at page 77 that the decision was made on that date, it was truly caused by failure at that time to properly advise, makes that a true novus actus.  But it is a novus actus or novus omission, I am not sure what the Latin word is.

GAUDRON J:   Inactus, perhaps.

MR BENNETT:   Perhaps, inactus.  But it is - - -

GAUDRON J:   It is almost a contradiction in terms, is it not?

MR BENNETT:   But the point we make is, and what makes this case special, makes it important but typical of a whole line of cases which could occur, is that the second decision or act or whatever it is, is always anticipated and always known.  If the officious bystander had said to Nelson Wheeler during the second period, “What would be the consequence if you are wrong?”  The answer would be, “Well, we would spend further money up to the point of final decision where we will realise the truth.”  Now, that would have been the answer.

GAUDRON J:   I do not see why:  “Well, we will spend further money until such time as it is apparent that the advice should have been otherwise.”

MR BENNETT:   No, your Honour, because at a point in time there will be a decision to proceed.  That is going to be in the future.  In my respectful submission, the advice given, or not given at that time, is the final crucial thing.  The person before, who fails to divert one from that course as if one applied a test of common sense causation has not caused it.  Let me just say this, your Honour, the Court would not need to go into the question of whether there was common sense causation.  The Court could send that issue back.  If the Court finds, as I submit, that there was a wrong test applied by the Full Court, then it can simply send it back for the right test to be applied.

GUMMOW J:   Now, this test, it is your point 11, is it, on page 2 of your revised summary?  It would be very hard to propound that as a principle of law, it seems to me.

MR BENNETT:   Point 11 is the context in which it will applies, rather than the principle.  But, your Honour, may I just show your Honours where the wrong test is applied because it is consistent throughout the three crucial pages of the judgment.  It is at page 235 of volume 2.

GAUDRON J:   Again, you are looking at it in terms of causation generally, in a sense.  But, really, do you not have to come to this, as I indicated before, that there was a novus actus?

MR BENNETT:   Yes, your Honour.

GAUDRON J:   You could only succeed by showing that, surely.

MR BENNETT:   Novus actus is a way of putting it, yes, your Honour.

GUMMOW J:   It is this phrase here, “that subsequent opportunity miscarries”?  Is it wrapped up in that phrase, is it?

MR BENNETT:   Yes.  May I just show your Honours the way their Honours put it.  Their Honours never asked those questions.  What the majority does, and this is of course true of the four judges who have decided this case with the other two taking the opposite view, at page 235:

One could only assume that his Honour took the view that, upon the termination of the second engagement, any breach of contract.....including a failure to advise about abandonment, ceased to be a “cause”.....With respect, in my opinion, such a conclusion is inconsistent with the finding made by the learned Judge that, but for the initial breach in relation to the first feasibility study.....and the failure to advise at any time or from time to time.....should abandon it.....they would not have continued to incur liabilities.

Just stopping there, his Honour says, “You cannot succeed.  I do not have to ask myself these questions about common sense causation, because the conclusion is inconsistent with pure ‘but for’ causation”, which we accept.  We accept “but for”.  We accept if we had given proper advice, it would all have stopped in the second period.  No major losses.  But the Court never asks itself the question on which the trial judge decided it.  Then, over on the next page at line 15:

Had Mr Troy, on behalf of Nelson Wheeler, performed his duty, common sense compels the conclusion that the Craigs would not have entered into the third engagement.

Again, it is a simple “but for”.  Although the word “common sense” is used, it is not common sense causation, it is common sense implies that there is a “but for” which we accept.

The negligence of Mr Troy while a partner of Nelson Wheeler was not disarmed of its harmful potentiality and superseded by his subsequent negligence....But for - - -

GAUDRON J:   But is that not exactly the issue, and that is a finding against you?

MR BENNETT:   It is the conclusion from the previous sentence, your Honour.

GAUDRON J:   It was not superseded by subsequent negligence.

MR BENNETT:   But, your Honour, the reason given for that is, simply the “but for” reason, and they go on to make that clear:

But for Mr Troy’s failure to warn during the third engagement the Craigs would not have continued to expend money.....It is no answer to say that if Mr Troy had not continued to fail to advise the Craigs would not have suffered loss, or that because of his continued failure they would have suffered the loss in any event. Both the failure to warn in the period.....and a failure in the other period were each necessary elements.

And then they say this:

of the “set of antecedent actual conditions that was sufficient for the occurrence of the consequence”.

That is simply wrong.  Each cannot have been sufficient.  The first, if either had occurred without the other, in other words if there had been the proper advice in one or other occasion, the loss would not have occurred.  So to say each was sufficient for the occurrence, is simply wrong.

In such a case the causality of the one is not negated by the existence of the other.

And that is their conclusion.  But on the next page the same thing is said a third time.

Your Honours, in my submission, what they have done has said, we are not going to do what the trial judge did.  The trial judge said, look as  matter of common sense, you are advising on the basis that - or not advising, you have a duty on the basis that there is going to be a final moment, the crunch moment when we decide whether or not to proceed.  The advice, or absence of advice, at that moment will be crucial.  In that situation, common sense says, “The consequence of my negligence will be the costs up to that moment”.  The Court says, “No, that cannot be right because, but for that, you would have not suffered the final loss”.

Your Honours, in my respectful submission, it is simply a refusal to apply the Stramare Case where it needs to be applied.

GAUDRON J:   And if both are causative?  If, on a common sense approach, both are not causative, then the result must be as presently stands, must it not?

MR BENNETT:   No, your Honour, because one looks at causation, not only on a “but for” test, but also on a basis of what is the normal and natural consequence of the omission.  Here, one has to say, the normal and natural consequences, it would go as far as the next step.  Now, your Honour, all we ask is that it go back to the Full Court to apply the proper test.  The Court could deal with it, probably in an hour.

GAUDRON J:   What is the proper test?

MR BENNETT:   The March v Stramare test.

GAUDRON J:   They say that has been applied.  The majority assert that they are applying that test.  They assert that they have been commonsensical about it.

MR BENNETT:   With respect, they do not, your Honour.  The phrase “common sense” is used only in the context of the causation that we admit, the causation of the further costs, not the causation of the ultimate loss.  The sentence at line 20 on page 236 says that:

Had....performed our duty, common sense compels the conclusion that.....would not have entered into the third engagement.....or continued to expend money -

and so on.  In any event, it is not that it causes it, but that it would not have entered into it.  So it is a “but for” causation in any event.

Your Honours, as I say, it could take an hour or so.  It could easily be heard in the Perth sittings which are conveniently timed for the appeal.  There would be no need to reprint the transcript.  It is only the judgments the Court would need to look at.

McHUGH J:   And it would be contrary to all our principles on special leave, and speaking for myself, I think you would be lucky to get leave in this case, let alone special leave, Mr Bennett.

MR BENNETT:   Your Honours, I have put the arguments.  May it please the Court.

GAUDRON J:   We need not trouble you, Mr Conti.

           The outcome of this case turns upon a meeting on 23 August 1988 to which different significance was assigned by the majority and the minority of the Full Court.  The case is concerned solely with the application of settled principle to facts which are susceptible of different analysis.  Accordingly this is not a suitable vehicle for the grant of special leave.  Special leave is refused.

MR CONTI:   I do not have to ask for costs any more, do I?

GAUDRON J:   I think so.

MR CONTI:   I do ask for costs.

GAUDRON J:   With costs, but limited to the first, second and third respondents.

MR BENNETT:   The parties seem to have reached agreement on that issue in their submissions. There should be one set of costs.

GAUDRON J:   Thank you.

AT 9.53 AM THE MATTER WAS CONCLUDED