Cordelia Holdings Pty Ltd & Ors v Newkey Investments Pty Ltd

[2005] HCATrans 17

[2005] HCATrans 017

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Perth  No P26 of 2004

B e t w e e n -

CORDELIA HOLDINGS PTY LTD

First Applicant

VENDOMATIC PTY LTD

Second Applicant

GETUM PTY LTD

Third Applicant

ABRAHAM GILBERT SAFFRON

Fourth Applicant

ABRAHAM GILBERT SAFFRON AS THE EXECUTOR OF THE ESTATE OF DOREEN SAFFRON

Fifth Applicant

and

NEWKEY INVESTMENTS PTY LTD

Respondent

Application for special leave to appeal

KIRBY J
HAYNE J

TRANSCRIPT OF PROCEEDINGS

FROM PERTH BY VIDEO LINK TO CANBERRA

ON FRIDAY, 4 FEBRUARY 2005, AT 3.14 PM

Copyright in the High Court of Australia

__________________

MR S.D. RARES, SC:   May it please the Court in that matter, I appear with my learned friend, MR P.D.C. ROBINSON, for the applicants.  (instructed by Williams & Hughes)

MR D.M.B. DERHAM, QC:   If the Court pleases, I appear with my learned friend, MR A.J. KELLY, for the respondent.  (instructed by Phillips Fox)

KIRBY J:   Yes, Mr Rares.

MR RARES:   Your Honour, we have three points, two of which are interlinked.  They are what we have described in the submissions as the pleaded case point and the silence point and they constitute grounds 7 and 9, which are at pages 144 to 145 of the book. 
KIRBY J:   They do not look on the face of things, the pleading point and the credit point, to be High Court special leave matters, Mr Rares.

MR RARES:   The pleading point has application to every Trade Practices case.

KIRBY J:   Yes, but every pleading point is going to be different according to the pleading of the particular case and how the matter arises, and you know better than anyone, except perhaps Justice Hayne and me, that pleading and the way cases are presented just has to be left to the trial judges because they have so much more knowledge than appellate judges of the full detail of the case.

MR RARES:   But, your Honour, what happened in this case was that the trial judge said you had to plead causation under section 82 of the Trade Practices Act when this Court has said the word “by” in section 82(1), “damage caused by”, is the criterion for liability. We pleaded that, we did not have to plead – and, in our submission, it is quite arcane to suggest that in the context we had here where my client entered into a contract in November 1998 to buy a completed hotel for $11.5 million, in July 1999 there was this negligent and wrong valuation saying it was $13 million. The judge found, and the Full Court said that he was in error in his reasoning, that it was only worth $10 million. Our valuer said 7, and it sold in 2002 for $6 million.

Now, the trial judge said we had to plead the causation point; we had to say somehow that, even though we pleaded that it was a negligent and misleading valuation and we suffered loss or damage by that, we had to somehow plead out how that happened.  The judge said ‑ ‑ ‑

HAYNE J:   You describe this, Mr Rares, as some point about pleading.  The trial judge saw it as a point about procedural fairness, did he not - see paragraph 229, page 121.

MR RARES:   Absolutely.

HAYNE J:   That turns critically, does it not, on the course that the trial followed?  Why should we get into a detailed examination and an attempt to recreate the way a trial of this length happened?

MR RARES:   Because the procedural fairness was all denied to my client, who gave oral evidence saying, “If I had been told the valuation was $7 million or less than what I was contracting to pay, I would not have gone ahead”.  The judge said he did not give that evidence, so the judge did not read that and did not listen to the oral evidence when it was given in the witness box by Mr Saffron, and then he said, “If he had given it, I’d have disbelieved him on it”.  We opened on it in writing, as the Full Court point out. 

Those matters appear, your Honours, at page 197 in the Full Court judgment at paragraph 138, where Mr Saffron’s evidence about this appeared, and in particular, at paragraph 81:

Had I known, at the time of the meeting, that the true value –

this is in November 1999 when he agreed to get two extra securities given by parties that have not provided security, who are now appellants, Getum and Vendomatic, and himself to give a personal guarantee or a confirmation of his personal guarantee –

was less than $11.5 million, I would have, in accordance with . . . advice, sought to terminate -

At page 199 their Honours note at paragraph 144 the opening outline of written submissions.  Let me say that that paragraph 81 was the subject of oral amendment when he gave evidence‑in‑chief in the witness box.  So it was not a question of it passing people by.  This was the usual evidence you give in a misrepresentation case and he gave it.  And the judge says he did not give it, so the judge was not focused on the evidence in the case at all.  He was completely misled in his own mind by what was given in evidence in the passage that your Honour referred to about procedural fairness.  My client was denied the procedural fairness on that point.

Then at paragraph 144 on page 199, the written outline of opening by my clients’ counsel in the emphasised passage:

It is equally self‑evident that had Mr Saffron been informed of the (substantially smaller) true value of the [property], the settlement would not have occurred.  Mr Saffron will give evidence to that effect.”

And he did, and he was not cross‑examined on it.

KIRBY J:   The respondent accepts that at least there is an argument that is conceptually open on the pleadings to support what you are putting, but it says that the way the case was conducted had led to the judge having to make the decision when, as it is said, you propounded an alternative claim in the closing address.  The High Court of Australia is not going to get into questions of that kind.  As Justice Hayne said, we just do not have the time, and it really is not our proper function.

MR RARES:   Let me just try to dissuade your Honour from taking that line, because it really is important.  What is the relevance in this case at the trial of my client suing on a negligent or misleading valuation unless it was in the context of causing him to continue to his detriment with the transaction?  The only way it could be relevant to the case - otherwise it was a sterile academic exercise, yet both parties were fighting the case on this basis.  They were saying the valuation was a proper valuation within the range, and it was honestly believed by Mr Ross, and the trial judge made a finding that Mr Saffron wanted this only for finance purposes.  He said he would certainly have taken notice if told, as the judge found, $10 million, and the Full Court said it would have rung bells for Mr Saffron it was less than or equal to $10 million.  So he would have taken notice of it.  Now, what is the point?  Why were we fighting about the valuation unless that was the point?  It was negligent.

KIRBY J:   Valuating the point is the function that trial judges are there to do.

MR RARES:   Yes, but, your Honour, the judge has missed the point completely, because what he says is that this is a causation point.  The way the Full Court said no, it really was not a causation point.  You pleaded the material facts”, they said.  This is at paragraph 150, at 201 of the book.  At C they say:

Paragraph 26 appears in the statement of claim at the end of a number of paragraphs asserting that the Royal evaluation was misleading and deceptive and negligently prepared.  The factual base for those two sets of allegations, as particularised, was substantially the same even though they gave rise to different causes of action at law. 

We were entitled to have the material facts as pleaded be the subject of determination by the court.  We were not required to plead causes of action.  This Court said that.  This is a Full Court of the Federal Court saying, “You pleaded the material facts but you didn’t plead a cause of action, and you lose”. 

They differ from the trial judge on this, because he said it was causation.  They say this is a wolf in sheep’s clothing or something, and you then say to yourself, “What did the valuation have to do with the case?”  Why were we fighting about the valuation being too high?  What was negligent or misleading about it if it did not go to the fact that if Saffron had been told the valuation is less than you are paying for the property and you want this for finance or whatever?  It was negligent or misleading.  I mean, that was the point of the case. 

To say this is an irrelevance, or to say that this is to do with the judge’s understanding of the trial, only demonstrates that both the judge and the Full Court got this completely wrong, because otherwise we had no cause of action arising out of a negligent or misleading evaluation at $13 million when it was only worth less than what we were paying for it.  It had nothing to do with the case in that context.  That is why there was, if nothing else, a substantial miscarriage of justice, but the way the Full Court has put it here in this paragraph, is to say, “No, you’ve pleaded the material facts”, which is all we had to do, and not only did we plead the material facts, we gave the evidence, and we opened in writing on it.  Our case, as we sought to put it, was not only not accepted by the trial judge, he said it was not even put and, what is more, he then said, “And if it were put, I wouldn’t have believed it”. 

What sort of justice, in our submission, is that to my client?  And how are other litigants when this judgment comes up to deal with what the rules of the Federal Court, and this Court said in Hyde v Agar, for example, just recently, you plead the material facts under the Federal Court Rules, as in the Supreme Court of New South Wales, and the Supreme Court of Victoria.  You do not plead causes of action.

KIRBY J:   That is what brings you up against your problem, you see, that you ask what will happen in future cases.  Well, future cases will be dealt with in their own peculiar and particular facts.

MR RARES:   But your Honour ‑ ‑ ‑

KIRBY J:   That is why decisions on the course of trial or pleadings or where the parties have strayed from pleadings or particulars or the judge has gone too far or been too rigid, they are not matters that the High Court of Australia gets involved in unless there is some issue of principle.

MR RARES:   The question is:  what in the ordinary everyday case of a section 52 or negligent valuation do you have to plead?  In this case the full Court has a matter of precedent reserved detailed judgment, has said, “You have to plead causes of action, and the fact that you have pleaded the material facts doesn’t get you there”.  In our submission, that is just ripe for correction.

KIRBY J:   Well, it is suggested to be not just that.  It is suggested to be the way you ran the case and the way you, as it were, sought to introduce something in the final address.

MR RARES:   What was sought to be introduced in the final address was the objection to this.  The way we ran the case was clear.  Saffron gave the evidence.  He gave ‑ ‑ ‑

KIRBY J:   Mr Saffron, please.

MR RARES:   Mr Saffron gave the evidence, and gave it in the witness box, as well as in his written statement.  The judge did not take it in.  Mr Derham did not cross‑examine him on it, but that is not my clients running the case.  My client pleaded the material facts.  It called the relevant evidence for that purpose, which is the usual evidence everybody calls in these cases, and it was ignored or overlooked, but that is not my clients’ fault, and it is not the way we ran the ‑ ‑ ‑

KIRBY J:   Yes, you have made this point.  There are two other points you have to deal with.

MR RARES:   The way that that comes up as being of some criticality and why I said it was interrelated is if your Honours go to page 207 of the book, their Honours say if we were right about the pleading point - and they rejected it - we must win and get a new trial.  But their Honours say at paragraph 175 that you need to look at this in a different way.  They did not look at it the same way the trial judge did, but they came to the same conclusion.  At 177C:

Although his Honour did not refer to paragraph 81 of Mr Saffron’s evidence, his findings necessarily involved a rejection of that entirely self‑serving passage in a written statement made by a witness whose credibility the judge found to be questionable.

But that is judging him on evidence he gave but the judge speculated he did not give but would not have accepted.  Then at the bottom their Honours said in 179:

Let it be assumed that, contrary to his Honour’s finding, $7 million represents the lowers valuation that might be reached by the application of accepted valuation principles.  Could the tender of a valuation at that level, or even at a higher level of $8 million, have made a difference to Mr Saffron’s decision?  The answer necessarily lies in the realm of conjecture.  Notwithstanding the trial judge’s findings about Mr Saffron’s purposes in obtaining the valuation -

that is, for finance -

his awareness of the risks associated with the settlement, his preparedness to accept those risks and his state of mind attributable of his wife’s death, it cannot be assumed that the presentation of such a low valuation would not have rung warning bells in this mind.  It cannot be assumed that such a valuation would not have put him on his guard and caused him to act differently.

And then their Honours say in 181 that the ground could only succeed on the basis that:

Contrary to his Honour’s decision and our own conclusion –

on ground 7 –

it was open to the appellants to argue a non‑disclosure case.

HAYNE J:   I thought you told us that the Full Court said that if your point was good, there had to be a new trial.

MR RARES:   Yes.

HAYNE J:   Is that so?  Where do I find that?

MR RARES:   Well, your Honour, in that paragraph it goes on to say at C:

It suffices for present purposes to say that if we were wrong in relation to Ground 7, then the appellant would be entitled to succeed on a combination of that and Ground 9.  That success would occur on the limited basis that his Honour’s conclusions were ultimately linked to his erroneous valuation and might have been different if a significantly lower valuation was appropriate.  The possibility cannot be excluded.  Given that, however, the condition upon which appeal Ground 9 is based (ie the success of appeal Ground 7) is not fulfilled, the appeal must also fail on this ground.

Their Honours then go on to say something which, in our submission is wrong because there was evidence that the two companies, Getum and Vendomatic, provided real property security to the vendors which had not been provided before, so there was clearly damage, and Mr Saffron gave a further guarantee, so that they speculated that he would not have acted differently, but the fact is that there was new conduct.  That is effectively the cognate first point. 

The other point is that the trial judge positively not only disbelieved Mr Saffron but found he effectively committed perjury with the purpose of deceiving the court about one matter in five that he listed as significant on his credibility, where the objective evidence - and the Full Court found – Mr Saffron was telling the truth.  I think your Honour Justice Kirby referred to this recently in the case of NAFF [2004] HCA 62. There is a passage in Chief Justice Gleeson’s judgment in Aala 204 CLR, where his Honour said small or minor differences in decisions as to credibility are often based on matters of impression and unfavourable view taken on an otherwise minor issue might be decisive. 

Here, the Full Court dealt with this in their judgment at pages 174 to 175, and what they said is that in effect, while it was in error, it was not of great consequence, and at 175 E to F they said:

The one instance in which his Honour does appear to have been in error concerned a relatively minor matter.  Moreover, the matter in question was taken by his Honour as no more than additional support for a conclusion as to credibility that his Honour had reached on other grounds.

Now, in our submission, that was an erroneous approach, but what it failed to do was to grapple with the very thing that you would expect a judge to look at.  He would say to himself if he realised, “I have formed this totally wrong view of Mr Saffron, formed a view that he was out to not just - I don’t accept the evidence.  He was perjuring himself with a view to perverting the cause of justice by deceiving me”, which is what the judge put in his judgement in other similar terms.  If he said, “Well, hang on, if I formed that view and I was completely wrong about it, maybe I should revisit the other things which depended more on impression, and maybe I should ‑ ‑ ‑

KIRBY J:   Where is the error of the Full Court in dealing with this?

MR RARES:   Well, because when the error as to credibility has been pointed out, they say it is a minor matter, whereas the judge described it as one of the five that he took as being of great significance.  The way the judge dealt with it, at page 77 he starts off dealing with credibility, and it was a case where he did not believe both the principals who gave evidence, and page 78, his Honour at about E says:

I formed the impression, and I so find, that Mr Saffron was not telling the truth about this alleged reliance . . . caused me to have serious doubt about accepting other aspects of Mr Saffron’s evidence, and, in particular in the present context, whether all of the representations, said to constitute the First Royal Representations had in fact been made.  There were other difficulties in accepting Mr Saffron’s evidence on this (and other issues on which the veracity of his evidence depends).  I now turn to some of those.

And then he says, in 58:

Mr Saffron was prepared to swear, and did swear, to the truth of some material parts of his witness statement which were false.  I shall give some examples of this.

His Honour deals with the one we are looking at ‑ ‑ ‑

KIRBY J:   Well he is not confining it to one, he is giving a number of things that he apparently formed an adverse view on.

MR RARES:   I agree.  Paragraph 67 is the one that he deals with on page 81 here, and at line B he says:

I am satisfied that Mr Saffron would have been aware of these circumstances when he signed and subsequently swore to the truth of his witness statement.  He was prepared to swear that a commission of $124,000 was paid to the respondent, when in truth that was not the case and $110,000 had been paid.

The fact is that $124,000 was paid, and there was not an issue about that.  The issue was whether Mr Saffron was being a bit cheeky in asking for the commission to be reduced to the $110,000, but he did not succeed.  Then his Honour says at paragraph 69:

There are other examples of what I consider to be lesser inconsistencies referred to in the respondent’s outline of closing submissions.  However, I shall refer to one more example which I consider involves a further significant inconsistency.

And then at paragraph 73 he says:

After taking into account the matters to which I have referred above, I decided that it would not be safe, generally, to rely on Mr Saffron’s evidence.

Now, that is the point.

KIRBY J:   I know this would be very important to Mr Saffron, I understand that, but the fact is that in order to resolve this, this Court would become, in effect, just an intermediate appellate court.  We would be trying to go through all the evidence and trying to work out where the truth lay and what the weight was to be given to this error.  Now, that was the function of the Full Court, and they have done that, and it was not just one item of disbelief, it was several.  It just does not sound a special leave matter, Mr Rares.

MR RARES:   The error is the approach.

KIRBY J:   I realise it is important and injustice is a factor we have to take in mind, but it is an arduous and intermediate job.

MR RARES:   It is, except that you have a case here where the judge makes a glaring error about that matter.

KIRBY J:   But the Full Court acknowledged that, and then they who have more time and more responsibility to go through all the materials said it is not something which is determinative.

MR RARES:   But, your Honour, in our submission, even on the Fox v Percy test, that really was not something open.  Once you have an error about credibility in that term, it is really a new trial point, and to say it was a minor matter when his Honour does not say it is a minor matter, it is one of the significant matters, that is not, in our submission, dealing with how the judge came to the overall demeanour matter.  Once you have the judge making a completely wrong turn on demeanour on this and a completely wrong turn on the other matter which I pointed to about him not giving the evidence of reliance and what we would have done had he known, you have two fairly serious mischaracterisations of Mr Saffron’s state of mind and behaviour for which he loses in a case where, in our submission, he is entitled to a new trial, which is what we said to the Full Court. 

That is what we seek in the special leave application if your Honours were minded to grant it.  Unless there is anything other than that, those are our submissions, your Honours.

KIRBY J:   Thank you, Mr Rares.  The Court does not need your assistance, Mr Derham.

The applicant seeks special leave to appeal from a judgment of the Full Court of the Federal Court of Australia.  That court unanimously dismissed an appeal against a judgment entered by Justice Carr at first instance in that court.  The application raises three essential points.  None of them, in our view, is sufficient to attract a grant of special leave.

The first point complains about the approach of the primary judge to the interpretation and application of the pleadings and to the conduct of the trial.  Conventionally, this is a matter in which appellate courts afford trial judges a large discretion given the advantages they enjoy from the conduct of the trial and their detailed knowledge and understanding of the evidence.  We are not convinced that the Full Court erred in its treatment of the issue in a way occasioning an injustice or otherwise warranting the intervention of this Court. 

The second point concerns what is said to have been an erroneous finding on credit by the trial judge.  The issues of principle raised in that connection have been examined in very many recent cases by this Court, most notably in Fox v Percy (2003) 214 CLR 118. The Full Court did not cite that decision which had been delivered between the time the case was reserved for judgment and the delivery of the judgment and reasons. However, we see no occasion to revisit the issues of principle, and we are not convinced that the Full Court erred in its ultimate approach. It did find errors in the primary judge’s approach, but it did not consider that those errors warranted disturbance of the ultimate conclusion expressed by the primary judge.

The third point concerning the significance of silence for an alleged contravention of the Trade Practices Act 1974 (Cth) is potentially a special leave point. However, the circumstances of this case do not present a suitable vehicle for the consideration of the issue. There is no sufficient reason to doubt the correctness of the decision of the court below.

Special leave is therefore refused.  The applicant must pay the respondent’s costs.

AT 3.39 PM THE MATTER WAS CONCLUDED