Effem Foods Pty Ltd v Lake Cumbeline Pty Ltd

[1997] HCATrans 382

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Sydney  No S55 of 1997

B e t w e e n -

EFFEM FOODS PTY LTD trading as UNCLE BENS OF AUSTRALIA

Applicant

and

LAKE CUMBELINE PTY LTD

First Respondent

IDOBOOK PTY LTD

Second Respondent

PETER HORROBIN

Third Respondent

RICHARD SANDS

Fourth Respondent

RAYMOND PRIDMORE

Fifth Respondent

Application for special leave to appeal

TOOHEY J
GAUDRON J
HAYNE J

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON FRIDAY, 12 DECEMBER 1997, AT 10.42 AM

Copyright in the High Court of Australia

______________________________

MR P.G. HELY, QC:   If the Court pleases, I appear with MR R.M. SMITH for the applicant.  (instructed by Deacons Graham & James)

MR J.D. HEYDON, QC:   I appear with MS P.P. WINES for the respondents, if the Court pleases.  (instructed by Blake Dawson Waldron)

TOOHEY J:   Yes, Mr Hely.

MR HELY:   Your Honour, I appreciate that the Court does not often grant special leave in civil cases upon the basis of section 35A(b) but we would submit that the Court should do so here, principally because, in our respectful submission, the errors made by the Full Court were so egregious in character as effectively to result in a miscarriage of the appellate process and we refer to in particular two errors.  First, we submit that the Full Court misunderstood the decision of the trial judge.  It attributed to the trial judge a misdirection from which he never suffered.  It attributed to the trial judge a decision on issues as to whether representations were made and as to whether they were false and by reference to his findings upon credit when it is patent on the face of his judgment that his decision as to credit had no influence upon his decision upon those issues.

The second complaint that we would make is, in our respectful submission, the court made orders which had the effect of implicitly setting aside other factual findings which the trial judge made and which, whilst they stood, were fatal to the success of the plaintiff’s case.  Those findings, particularly findings as to lack of falsity of the representations charged, were not infected by any supposed misdirection and with one possible exception were all credit based and could only be set aside in the circumstances referred to in Abalos, a matter to which the Full Court gave no attention.

It will be apparent from what I have so far put to your Honours that I am seeking to reformulate one of the grounds on which special leave is sought in our application.  On page 460 in paragraph (b) we deal with the

misunderstanding of the trial judge.  In paragraph (c) we deal with this issue of other findings of fact that were not infected by any misdirection, but what we have put there is that because of those matters a new trial would be a futility.  That presupposes, of course, that those findings would continue to survive the order for a new trial, whereas they do not.  So that what I would seek to do is substitute for what is on page 460 a paragraph in terms of the document that I hand to the Court.

Can I endeavour to make good those submissions and this will involve taking your Honours to some of the material in the appeal books.  If one goes to page 2 paragraph 3.  Paragraph 3 sets out the misrepresentations relied upon.

TOOHEY J:   Those are the matters, are they not, that are to be the subject of a retrial?

MR HELY:   Yes.  I am sorry, (b) to (d) are to be the subject of a retrial.  3(a) was abandoned on appeal.  So 3(b) intended representation intention to honour obligations.  3(c), representation of the contract was:

a genuine one intended to be fulfilled by the parties to it -

and 3(d), a representation as to present capacity or future ability to supply the product called for by the contract.  Page 3 clause 4 are the particulars of falsity.  4(b) “no intention of honouring the contract”, 4(c) “never intended by UBA to embody or record a binding agreement” but was intended in effect as a sham and (d):

UBA knew Trawl did not have the capacity.....or, alternatively, did not have reasonable grounds for believing that Trawl had that capacity or ability.

So that with the exception of the second alternative in paragraph (d), each of those findings of falsity depends upon intention of my client or knowledge on the part of my client, factors which are inherently subjective.  If I can take (b) and (c) together and first.  The trial judge’s focus in connection with these representations was on their alleged falsity rather than on the question as to whether they were made and he deals with this in three short passages that I can take your Honours to.  The first on page 198, line 20:

The evidence of Lees, which I accept on this point, was that although he did not consider the Heads of Agreement imposed binding obligations, he regarded the “W” and “A” contracts as binding obligations on UBA.  Accordingly, in my view it is more likely than not that he regarded W17299 as a genuine binding contract.

Again, at line 40:

The above evidence, in my view, supports the conclusion that UBA regarded this contract as genuine and binding.

On 213 he comes back to the same topic, line 20:

Both sides throughout treated the “W” and “A” contract as binding commitments which they sought to perform.

Line 30:

In view of this conduct the contract W17299 was clearly not treated or regarded as false or as “a sham” by UBA and this supports the view that it was not different to what it appeared on its face to be, namely, a contract to take fish intended to be binding on the parties.

The true position is that not only was W17299 a binding enforceable contract which imposed clearly defined rights and obligations on the parties, but it appeared to be such on its face and was treated throughout as such a contract by both parties to it.

Page 214, line 10, he says that in his view there is no substance in the argument that the contract convey “amounted to a representation to the effect alleged”, but I should direct attention to 202, line 32, where his Honour says:

The only representation by UBA in issuing the order made is that the contract exists in the form in which it has been executed and issued with the legal effect it has on its face.

Then if I can come back to 214, line 16:

However, even contrary to my view, if there was such representation it was true in that UBA intended to be bound by it and to honour its commitment, and there was therefore no misrepresentation or misleading or deceptive conduct -

just stopping there, your Honours.  The case which is made in relation to representations (b) and (c) is that this contract was a sham and that my client did not intend to perform.  Mr Lees gave evidence to the effect that he regarded the contract as being genuine and it was his intention to perform.  The trial judge accepted that evidence and ‑ ‑ ‑

GAUDRON J:   This would have to be a whole new trial, would it not?  It would have to go back to somebody other than the trial judge on the Full Federal Court’s order.

MR HELY:   Yes.

TOOHEY J:   There is no particular direction by the court as to it not going back to the trial judge, is there?

MR HELY:   No.  It would, I suppose, be a matter for administrative direction within the Court as to where it goes.

HAYNE J:   But it is a general retrial on 3(b), (c), (d) including a general retrial of the oral element of the misrepresentations alleged, at least as the order stands?

MR HELY:   Yes.  Well, these particular representations are said to be derived largely in writing and by conduct.  I hope they do not have any oral component but - - -

HAYNE J:   Yes, I see.

MR HELY:   What the Full Court seems to have said is that the trial judge bought to bear credit‑based findings in determining whether representations depended upon circumstances that documents were made, but our submission is that it is patent on the face of his judgment that his Honour did no such thing and if one looks at page 197, line 10 to 15, his Honour makes it perfectly clear that he had an acute and correct understanding of what was patent on the face of the pleadings that these were representations said to arise from pieces of paper and from conduct.

So there is just no operative misdirection, in our respectful submission, in relation to these two findings or in relation to their findings in relation to these two representations and there is a clear unequivocal finding which his Honour was entitled to make that even if the representations were made they were not shown to be false.  So far as representation (d) is concerned, which is:

that Trawl presently had and/or would have the ability and capacity to supply that 6250 tonnes of fish -

the judge looked at this matter on pages 201 to 208 and on 201, line 40, he says:

Reduced to essentials, the submission of the applicants is that the issue by UBA of contract W17299, with the knowledge that it would be handed to ascertained investors in circumstances where UBA, through its officers, must have had strong doubts about Trawl’s ability to perform, or even a firm belief that Trawl would not in fact be able to perform, amounts to a misrepresentation -

of the type described and then his Honour gives a large number of reasons for concluding, firstly, that no such representation was made and, secondly, even if it was, its falsity was not established and none of these reasons is in any way dependent upon or connected to or related to any finding upon credibility.  His Honour is just taking the objective circumstances and coming to the conclusion that he is not satisfied that the representation alleged inhered or that the representation alleged was proved.

TOOHEY J:   Presumably these matters were pointed out to the Full Court.

MR HELY:   It is difficult, with respect, from looking at the court’s judgment to work out what was pointed out to it because what it consists of over a very large number of pages is simply a summary of parts of the trial judge’s judgment coupled with extracts from my learned friends’ submissions without reference to any submissions put on behalf of the defendants and then when one gets to the last couple of pages of the judgment one has, in effect, a disconnected decision not dependent upon anything which has gone before.  I am submitting for your Honours’ consideration that the Full Court simply misunderstood what the trial judge did and that, in our respectful submission, requires the intervention of this Court if your Honours are ‑ ‑ ‑

GAUDRON J:   Were there other grounds of appeal that were not considered by the Full Court?

MR HELY:   I believe so, your Honour.

GAUDRON J:   You believe so?

MR HELY:   Yes, there were.

GAUDRON J:   There were other grounds of appeal?

MR HELY:   Yes.

GAUDRON J:   Were you a - no, you were not a cross‑appellant.  It was just an appeal.  There was no cross‑appeal.  Do we have the grounds of appeal that were in the Full Court?

MR HELY:   I do not think so, your Honours.

GAUDRON J:   Yes, a notice of appeal, 316.

MR HELY:   I am reminded that originally there were 24 representations that were alleged in the statement of claim.  All of those were persisted in by the notice of appeal but ultimately it was only five that were relied upon.

GAUDRON J:   So the whole appeal was in essence directed to factual findings?

MR HELY:   In essence, yes.

GAUDRON J:   A funny sort of appeal.

MR HELY:   It is a very sort of case.  It perhaps explains why 18 of them were abandoned.

HAYNE J:   I think the humour paled at about day whatever, did it not, Mr Hely?

MR HELY:   This case took four months to try.

HAYNE J:   Exactly.

MR HELY:   The appeal took five days.  The Federal Court considered its decision for 14 months.

GAUDRON J:   I mean, those grounds were directed, I take it, to the proposition that either that there was some error in the trial judge’s process of reasoning or that there was no evidence on which his Honour could have made those findings.

MR HELY:   Or, as your Honour says, that his Honour was in error in making them.

GAUDRON J:   Well, that must have been directed to some error in the process of his reasoning though, must it not?

TOOHEY J:   Well, the error alleged presumably was that he allowed his findings of credibility to affect - or in the light of his findings as to credibility he should not have made the findings that he did make, your point being that those findings turned largely on conduct and documents and did not turn upon questions of credibility.

MR HELY:   What Mr Justice Beaumont says, if I could take your Honours to it, on 433 - perhaps I have to go back to 430.  At 430, at about line 30, he deals with the misrepresentations and the fact that 15 of them were based solely on conversations and then he deals with the credibility finding and then this appear at line 41:

But, with all respect to the primary Judge, it was another thing to reject a claim which was said to be based, not on any conversation, but upon written material, the existence of which was not disputed.

TOOHEY J:   Your argument presumably is that there should have been simply no interference with the findings made below?

MR HELY:   Yes, your Honour.

GAUDRON J:   So this really is an Abalos [No 2] Case, even though you put it on the administration of justice.

MR HELY:   Yes.  It is different to Abalos in the sense that in Abalos a court consciously does something which it is not entitled to do.  What we submit here is that a court has done by implication something that it could not do consciously inconsistently with the proper application of Abalos and we also say that the court has misunderstood in a critical fashion what it was that caused the trial judge to come to the decision which he came to, his process of reasoning being patent on the face of his decision and not infected by this error that the Full Court appears to attribute to him.

HAYNE J:   And the point you seek to agitate, if leave were granted, is as narrow as that?

MR HELY:   We say two things.  We would submit, first, the finding as to the misdirection was wrong; second, that there were other findings of fact which were not set aside which with one possible exception consistently with Abalos could not have been set aside.  The one possible exception I should direct attention to is on page 3, 4(d), it is pleaded in the alternative:

UBA knew Trawl did not have the capacity.....or alternatively did not have reasonable grounds -

but if one has a look at 204, (g) ,line 16, he says he is not satisfied that in effect of the knowledge component and at 207, line 15, his Honour finds as a fact that “there were reasonable grounds”.  Now, that last one as to whether there were or were not reasonable grounds is not necessarily an Abalos matter and, you know, this was a fraud case conducted as such.

GAUDRON J:   Can I ask you one question?  Is it clear on your argument that the only decision that the Full Court could have properly made was “appeal dismissed”, having regard to the somewhat at large grounds of appeal that were ‑ ‑ ‑

MR HELY:   I cannot put it as squarely as that because it may be that within the grounds of appeal Mr Heydon could have properly - and I put this as a theoretical possibility, no more - but properly persuaded their Honours that the judge fell into error in his decision on representation or, for that matter, in his decision upon breach.

TOOHEY J:   In other words, there could be a notice of contention, if special leave were granted, seeking to uphold the judgment on other grounds?

MR HELY:   Yes, there could be and probably would be.

TOOHEY J:   Which would take the Court very much into a factual inquiry, almost devoid of legal principle.

MR HELY:   It would.  Almost devoid of legal principle except proper administration of the course of justice, which we submit is lacking.

TOOHEY J:   I do not underestimate that.

GAUDRON J:   But does this mean - I mean, it is one thing to advance an application for special leave in the interests of the administration of justice if that is going to result in a final determination of the issues between the parties, but if the choice is between another appeal and another hearing, then the interests of the administration of justice looks sort of fairly evenly balanced, do they not?

MR HELY:   I appreciate the force of what your Honour is putting to me.  My respectful submission is that it is counterbalanced in this way, and I say this without meaning any disrespect to any members of the courts that have been involved, but if your Honours come to the view that the Full Court did not do its job properly, which is essentially the respectful submission that I am putting to this Court, we would submit that that is a counterbalancing consideration that outweighs the other sorts of considerations which are implicit in your Honour’s question to me, and those are my submissions, if the Court pleases.

TOOHEY J:   Thank you, Mr Hely.  Mr Heydon.

MR HEYDON:   The first matter that has to be dealt with, your Honours, is whether there was or was not what has been described as a misdirection.  The Full Court started from the important proposition on 429 and 430 that in determining whether there has been a breach of section 52 in any circumstances you have to examine the notion of conduct in the totality of circumstances and see whether it was likely to mislead or did mislead.  In the next two pages, 431 to 432, dealing with these three representations (b), (c) and (d) that are documentary and by conduct, they explain why objectively it would be natural for would‑be investors like my client in the company Trawl to try and see what Trawl’s main business asset was, namely, the contract it had with Uncle Ben’s.  Not only does the court demonstrate that it was natural to want to see that, but it demonstrates that they actually stipulated for that.

Can I flag at this point that the Full Court really saw two essential errors in the trial judge’s approach.  One was what I will call a methodological difficulty in that he appeared to adopt one method of fact finding and actually use another in certain respects.  The other was a direct contradiction between certain of his findings.  The direct contradiction is thrown up on pages 431 and 432 in this way.  One of the reasons why the trial judge rejected the case below was he said there can have been no reliance on the representations because in the so‑called shareholders agreement it was stipulated that the investors had entered into the agreement on the basis of and in reliance upon the representations set out in that agreement and, in effect, by silence and no others, therefore, he said the fact they did not stipulate in that agreement in relation to any other inducing factor is a sign there was no other inducing factor.

The difficulty is that if that is a good argument for rejecting reliance, it is also a good argument for supporting the proposition that there were objectively representations made to the investors because among the representations or warranties in the shareholders agreement was a reference to the W contract 17299 for the very large number of tonnes of fish that was involved.  In other words, contrary to his Honour’s approach to the W contract as merely a piece of paper which carried with it no representation of either genuineness or capacity of the Trawl company to perform it, the stipulation of that character in the shareholders agreement is a sign that it was important in the mind of the investors that there be that contract.

Now, can I go to the question of the misdirection.  The applicant here has said on paper and orally that there was nothing credit based in the trial judge’s reasoning in rejecting the three representations and he says that that was patent on the face of his Honour’s reasoning.  Can I give an illustration or two in an endeavour to demonstrate invalidity in that proposition?  Mr Hely took the Court through his Honour’s approach.  These representations were dealt with over page 196 to 214.  We start out with a statement which was read to the court at line 20 on 198:

The evidence of Lees, which I accept on this point, was that.....he regarded the “W” and “A” contracts as binding obligations.....he regarded W17299 as a genuine binding contract.

That, we submit, is a credit‑based acceptance of Mr Lees’ evidence.  It turns on credibility in a sense of accepting his oral evidence.  That it is so is supported by the fact that the reasoning in support of this particular finding, though it is not found at this point, it is found in part at page 210 and if your Honours go to 210 in volume 1, at line 25, the point under discussion is this:  Uncle Ben’s had entered into contracts with the Trawl company and many other companies which were way in excess of its requirements for the forthcoming period.  That was said to be one of the reasons why it was not a genuine contract.  Mr Lees explained that by saying, as it says in line 25:

that he could have exported the surplus to sister companies in the UK.

The trial judge accepts that explanation.  That is obviously a credit‑based finding.  Another example is on 211, line 20, where his Honour refers to:

the difficult commercial judgment involved in balancing the need for UBA to ensure that it had at all times sufficient raw material to meet its commitments against the danger of over commitment -

and so on.  Again, it is an acceptance of Mr Lees’ explanation for his behaviour.  So his Honour starts out then with - or does not start out with the question of whether a representation was made or not, but deals with the question of whether this supposed representation as to genuineness was true and answers it by saying it was true.  He then adopts that finding, credit‑based as I have said it is, in relation to the issue of whether it was actually made.  He does that, for example, on page 204.  This is one of the reasons he gives for rejecting the notion of the representation:

It would generally be unreasonable, except possibly in cases of fraud or sham transactions, which do not represent the present situation, that a buyer of goods.....represent to third parties such as potential investors or lenders, that the supplier has the capacity and ability to supply -

in other words, he reasons from the credit‑based finding that the contract was genuine to the conclusion that it is not a fraud or sham transaction and from that he reasons ‑ ‑ ‑

GAUDRON J:   He does not state that as an absolute rule though, does he?

MR HEYDON:   He says “except possibly in cases of fraud or sham transactions”, of which this case is not one, which do not represent the present situation.  We submit his Honour does in effect reason a few pieces together in this way.  One, Mr Lees said he believed the contract was genuine, therefore, two, it was genuine.  Therefore, three, given that it was genuine, it would be unreasonable to treat a person like Uncle Ben as representing that the contract is one which ‑ ‑ ‑

GAUDRON J:   Now, you bore the onus on these matters, did you?

MR HEYDON:   Yes.

GAUDRON J:   And what his Honour said has to be understood in the context of the ‑ ‑ ‑

MR HEYDON:   Well, it is a rejection.

GAUDRON J:   Yes, of your bearing that onus.

MR HEYDON:   Yes.  Now, the short point I am seeking to make is that it is, in fact, patent, if one wants to use that expression, on the face of his Honour’s reasoning that the findings on whether representations were made and whether they were untrue was in part based on the credit of Mr Lees.  In the written submissions the applicant made the point that nothing turns on conversations and that is inherent in the nature of these representations and makes the further point that what might be called the method which his Honour set out for himself, which is quoted at the bottom of page 432 by the Full Court, is one which turns in relation to deciding on who said what in conversations.

We respectfully submit that is not what the trial judge said.  The trial judge said that because of the seven or eight years that elapsed between the events and conversations and the trial and then a few lines further on “In circumstances where the events took place so long ago”, events include things like the formation of a belief or lack of belief by Mr Lees and genuineness or the formation of equivalent states of mind on the part of the so‑called investors, so that the applicant is, as it were, unduly narrowing down the methodological tool used by his Honour ‑ ‑ ‑

GAUDRON J:   Yes.  Can I interrupt you there at this point, Mr Heydon?  Going back to “It would generally be unreasonable” et cetera at page 204 that you relied on, am I right in thinking that there could only really be a misrepresentation of that matter if there was a duty to disclose?

MR HEYDON:   We would submit not.  We would submit ‑ ‑ ‑

GAUDRON J:   Does the law of - is this a misrepresentation under the Trade Practices Act?

MR HEYDON:   Yes, it is a section 52 case.

GAUDRON J:   Yes, and it goes so far as to say there can be a misrepresentation even though there is no duty to disclose?

MR HEYDON:   There is a duty to be truthful and there was positive conduct involved over and above mere silence.  The Uncle Ben’s executive, Mr Lees, handed over to the investors the contract he had made with Trawl.  He handed over a heads of agreement document that he had made with Trawl.  These things were not handed over as mere pieces of paper.  They were handed over, we submit, because they would objectively be taken as genuine contracts to be performed and contracts which Trawl was capable of performing.  There is an element of silence ‑ ‑ ‑

HAYNE J:   As to genuineness, if later it could be demonstrated that there was a legal infirmity in the contract, that of itself is sufficient to constitute the misrepresentation, is it?

MR HEYDON:   I think the pleadings - well, it depends what one means by “genuineness”.  If there was some defect of a type which might make it void or voidable.

HAYNE J:   Thus if the parties treat the contract as binding, intend to perform it and, in fact, do perform it, if later it could be asserted that the contract was legally infirm there is a misrepresentation?

MR HEYDON:   That was not this case and probably it would not be a misrepresentation.  This case was an allegation against Uncle Ben’s that they for their part at least did not intend to perform it.  They intended to take ‑ ‑ ‑

HAYNE J:   And that was found against you on credit bases?

MR HEYDON:   Yes.

HAYNE J:   And why did that not conclude the case against you?

MR HEYDON:   Because his Honour does not seem to have applied consistently the guiding star, as it were, of his methodological reasoning.  The Full Court is essentially saying there seems to be some contradiction or clash of principle within his Honour’s judgment which causes us completely to lack confidence in the outcome of the reasoning.  Is your Honour, in effect, flagging an Abalos criticism of our stand or ‑ ‑ ‑

HAYNE J:   I come to the case without the deep history that you have in it, Mr Heydon, over so many days, but it seemed to be a simple case of misrepresentation where his Honour found as a fact based on credit that no oral misrepresentation was made, no reliance was placed upon it by well‑informed competent investors.  The contract which was tendered in writing was a contract which the parties to it intended to perform.

MR HEYDON:   Your Honour has summarised the findings.  The Full Court’s difficulty was simply this:  however superficially sound the findings were or however difficult conventionally it might be to attack them in an intermediate court, the fact is there was a contradiction in the methodology employed and there was a contradiction between his findings on reliance and his findings on representation which his Honour did not resolve or address.  I think I have dealt with the question of misdirection.  Can I turn to the other point that the applicant makes, which is even if there were this misdirection, there would still be findings on both really reliance and on Mr Lees’ and Uncle Ben’s belief in genuineness that would stand and have, in effect, been implicitly overturned and that could not have been done conformably with Abalos.  What we say about that is this.  Abalos simply does not apply.  If I can just pick up the well‑known words from Devries Case at 479:

a finding of fact by a trial judge, based on the credibility of a witness is not to be set aside because an appellate court thinks that the probabilities of the case are against - even strongly against - that finding of fact.

That is the ban.  This case does not fall within that ban.  The Full Court did not think that the probabilities of the case were strongly against the finding of fact.  It preserved a neutral mind on that subject.

GAUDRON J:   Yes.  Well, that is a worrying aspect too, is it not?  Without making any decision really about them, just saying that reasoning process seems suspect, and for my part let me say I do not quite understand how it is said that that reasoning process is suspect, but having said that, it does necessarily set aside factual findings without being in any of the Abalos marked out areas.

MR HEYDON:   It is not within the Abalos exceptions, but it is not within the main ban of Abalos either, that is to say the ban to which those are exceptions, because the Full Court did not think the probabilities were strongly against.  The Full Court merely said, “We find these errors.  They shake our confidence in the judgment.  The matter will have to be examined afresh at a new trial.”

GAUDRON J:   I do not understand that that is the function of an appellate court.  We have got some doubts about what happened, therefore, you get a new trial.  As I understand the function of an appellate court, it is to decide whether the court appealed from was right or wrong.

MR HEYDON:   That is the ultimate function of an appellate court, your Honour.

GAUDRON J:   I do not understand that it is ultimate.  I understand that is the function.

MR HEYDON:   If the trial judge engages in reasoning which is internally inconsistent, one limb or other of the two limbs must be wrong.  In that sense error was found by the Full Court.

GAUDRON J:   It is the ultimate conclusion that has to be determined to be right or wrong, as I understand it, by an appellate court.

MR HEYDON:   We would submit it can be broader than that.

GAUDRON J:   I mean, this is not quite the same game as arises when you have a jury trial.  I mean, in that situation the mere fact of a misdirection is sufficient, but is not the nature of an appeal from a judge finding facts and determining law to decide whether or not he could not or she could not have come to that conclusion or that the conclusion is wrong?

MR HEYDON:   What your Honour says is, of course, the general approach.  There are exceptions to it; for example, the case where no reasons are given or insufficient reasons are given, but another example is this somewhat unusual case where something seems to have gone wrong, no doubt because of the complexity of the material being examined, in the trial court’s handling of it.  Where that occurs, in our submission, the Full Court was entitled to do what it did here, namely, to remit the matter for a new trial on these issues so that - - -

GAUDRON J:   Something seems to have gone wrong as to factual findings which were open and which may yet be vindicated.  That is as high as you can put it, is it?

MR HEYDON:   They were open and they may yet be vindicated but they may not be.  There is a breakdown in the administration.  Mr Hely appeals to the administration of justice.  We appeal to it too.

GAUDRON J:   This really raises a question about the fact-finding function of a trial judge, and you put forward a fact-finding function of a trial judge that I have not heard asserted before, I must say.

MR HEYDON:   Your Honour, I do not blanch at that because of the unusualness of the case.  But, your Honour, can an outside observer or a party feel content if one moves away from a 300-page judgment and there appears to be a radical inconsistency of approach in it.

GAUDRON J:   That is not the question that arises.  The question that arises is what should the Full Court then do?

MR HEYDON:   Remit it to trial so that the matter can be properly approached.

GAUDRON J:   That seems to me to be a very big question.

HAYNE J:   On that retrial is it your contention that the trial judge is at large and you are at large to canvass the question of the belief of Uncle Ben’s ingenuiness, presumably the believe of Lees’ ingenuiness of the contract and whether the investors relied on that fact?

MR HEYDON:   Yes.

HAYNE J:   Thus, there may be inconsistent findings about, for example, the credit of Lees when he says, as I assume he would on a retrial, “I believe this contract to be genuine”?

MR HEYDON:   There will be inconsistent findings as there often is when there are two trials.

TOOHEY J:   But different findings as to credibility.

MR HEYDON:   Made by a different judge, no doubt.  The number of representations fell from 24 to three but the trial would be at large within those three representations, yes, your Honour.  Would not be at large on anything else.

TOOHEY J:   Thank you, Mr Heydon.  Yes, Mr Hely.

MR HELY:   There are only two matters I would seek to put to your Honours in reply.  The first is that my learned friend’s submissions as to the acceptance and reliance upon Mr Lees’ credit do not go to the issue as to whether the representations were made but to their falsity, and his credit necessarily is involved in that issue because falsity depends, in all but one case, upon intention and knowledge, so that there is no error in taking account of credibility issues on the matter of falsity.

Second, we would submit that it is just not open to an appellate court to maintain an implied neutrality in relation to factual findings if it be the case that it cannot consistently with principle, and were it to address those findings, expressly to set them aside.  They are the submissions I would put in reply.

TOOHEY J:   Yes, thank you, Mr Hely.  The Court will adjourn briefly to consider its course of action in this matter.

AT 11.27 AM SHORT ADJOURNMENT

UPON RESUMING AT 11.31 AM:

TOOHEY J:   There will be a grant of special leave to appeal.

Mr Hely, the Court is actually concerned about the ambit of matters that might be canvassed during the course of an appeal.  It might be appropriate to approach the Chief Justice, perhaps, with a view to a directions hearing seeking to confine the issues as much as possible and, perhaps, reproducing in writing those areas of submissions that go to factual matters, identifying pages and the like.

MR HELY:   Yes, if your Honour pleases.  It is probably not a task that can be taken very far until we get my learned friend’s notice of contention.

TOOHEY J:   That is the next step, that any notice of contention ought to be in very early and perhaps before a directions hearing, Mr Heydon, so that any hearing of that sort would be profitable.

GAUDRON J:   And may I say, in relation to that, Mr Heydon:  the grounds of appeal that were before the Full Court seem to have been wide ranging and the like of which I have never seen.  If there is to be any reliance on those grounds of appeal in the notice of contention, I think they should be particularised.

MR HEYDON:   The notice of contention will be much more specific than the notice of appeal was but not necessarily brief.

TOOHEY J:   Thank you.

AT 11.33 AM THE MATTER WAS CONCLUDED