Frugtniet & Anor v State Bank of NSW

[2000] HCATrans 413

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Sydney  No S3 of 2000

B e t w e e n -

BRIAN FRUGTNIET
SUZANNE FRUGTNIET

Applicants

and

STATE BANK OF NEW SOUTH WALES

Respondent

Application for special leave to appeal

McHUGH J
HAYNE J
CALLINAN J

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON TUESDAY, 12 SEPTEMBER 2000, AT 2.28 PM

Copyright in the High Court of Australia

MR A.W. STREET, SC:   May it please the Court, I appear with my learned friend, MR G.D. WENDLER,  for the applicants.  (instructed by David M. Robinson & Associates)

MR D.L. RONZANI:   May it please the Court, I appear for the respondent.  (instructed by Abbott Tout)

McHUGH J:   Yes, Mr Street.

MR STREET:   Your Honours, there was sent up belatedly yesterday an outline of supplementary submission which I seek to rely upon, together with a chronology.  Your Honours, this is a matter where we say that there has been a demonstrable miscarriage of justice.  The first matter I would seek to address is simply the nature of the cross‑claim that was before the court which the applicants did not have the benefit of having heard.  Could I just indicate in relation to that cross‑claim, so your Honours are alive to it, that that was a cross‑claim in respect of which no defence had been filed by the respondent.  It was a cross‑claim in respect of which there had been no discovery.  It was a cross‑claim in respect of which the applicants had not given evidence and it was a cross‑claim in respect of which there was Mr Blair, a bank officer, who is still under cross-examination in the case in relation to that cross‑claim.  The cross‑claim is one in which there was an issue raised in the ‑ ‑ ‑

HAYNE J:   Sorry, you have just lost me.  You say that the cross‑claim had not been the subject of a defence filed?

MR STREET:   No, no defence by the respondent.

HAYNE J:   And yet there is cross-examination going on about the cross‑claim.

MR STREET:   Yes, there was.

HAYNE J:   How was the issue being ‑ ‑ ‑

MR STREET:   There was evidence being ‑ ‑ ‑

HAYNE J:   Mr Street, please.

MR STREET:   Sorry, your Honour.

HAYNE J:   How has issue been joined?

MR STREET:   Your Honour, to the extent that there was a bank officer who was called by the respondent in-chief, cross-examination by Mrs Frugtniet developed into exploring the areas seeking to support her cross‑claim.  Now, she indicated she had not finished that cross‑examination and wished to further explore matters relating to her reliance on what I might describe as the banker’s opinion relating to Inforvision.  That banker’s opinion was critical to that cross‑claim.  Can I just briefly take your Honours to that banker’s opinion so your Honours can understand the basis of the section 42 Fair Trading Act cross‑claim issue.

HAYNE J:   Just before you come to that, am I to understand that whatever interlocutory procedures may or may not have been undertaken, trial of the cross‑claim had begun?

MR STREET:   The trial had begun of the cross‑claim.  It, in fact, commenced – the hearing commenced on 1 August.  The cross‑claim was only filed on 22 August, so the proceedings had in fact occupied three days of hearing.  There had been a defence filed to the summons.  On 21 August, which was the second day of hearing, leave was granted to file a cross‑claim.  That cross‑claim was one which sought to raise a number of matters but, relevantly, and the one I have sought to identify, is the issue under section 42 and it is one on which we respectfully submit the applicants had a real and substantial cross‑claim.  I would seek to make that good if I can very briefly take your Honours to the banker’s opinion which is set out in the final judgment of Justice Hunter, page 30.  At about line 50 one sees the “Bankers Opinion” by the respondent asserting that the company was able to meet:

all commitments as and when they fall due and we do not believe that they would enter into any commitment they could not keep.

That banker’s opinion was the subject of some cross-examination.  If you go to page 31, this is by Mrs Frugtniet, and obviously the question has some difficulty with it, but if you look at the question starting at line 15:

But you would agree that we provided or went into that overseas currency transaction which you also agree caused our demise because we believed that to get such a good recommendation from the State Bank, which was also our bank recommending the company Improvision –

and that should be Inforvision –

made us do certain things as a result.  I mean we went into it 100 per cent because if you come to a business transaction with a high quality of bona fides or – the words evades me at the moment – a reference from the bank indicating that they had transacted six figure amounts – would you agree that was the reason why we went into that transaction with Inforvision Pty Limited?
A.  It was a commercial decision you would have to make.  It would be one of the factors you would have used to make that decision.

In other words, the financing transaction the witness ‑ ‑ ‑

McHUGH J:   Does not anybody object to questions like that when there are litigants in person?

MR STREET:   To the extent Mrs Frugtniet was obviously seeking to pursue her cross‑claim herself, but the answer given was a cause, in other words the representation which was the subject matter of the cross‑claim was a cause of what I might describe as the financing transaction.

HAYNE J:   What is the representation you expel out of this?

MR STREET:   That the company would be able to meet its commitments.  It plainly was not.

HAYNE J:   That is not what it said.

MR STREET:   Your Honour, to the extent that that is an issue of fact, we would have sought to have that litigated.  Now, that was not litigated in a way in which the respondents were able to have that matter determined in a full trial.  The respondents – the applicants were denied the opportunity of giving evidence in support of that representation and relying upon it.  They were denied the opportunity of getting what I might describe as the bank documents to support that cross‑claim and support that representation being misleading. 

What the applicants were seeking ‑ and this is the complaint about ‑ the non-production of documents was identified by Justice Beazley as being one of legitimate concern.  The majority agreed with that comment in respect of it being a legitimate concern in respect of the non‑production of documents by the respondent.  That non-production of documents went to the very heart of this cross‑claim, namely whether there was a position where the Bank did have reasonable grounds to make a representation that the company would be able to meet its financial commitments.  But for that document, that is the banker’s opinion, the applicants would not have entered into the financing transaction.  That is what they were seeking to propound.  They put on a verified defence to that effect, that it was an inducing factor.

McHUGH J:   But, Mr Street, do any of these assertions meet the reasons the learned judge refused the adjournment to your client?

MR STREET:   Your Honour, what I was seeking to do is to identify, first of all, that there was a genuine cross‑claim with real issues that were not determined, no defence put on and the like.  So what I was seeking to say from there, your Honours, was this, that in that position, when one comes to apply a consideration of whether or not an adjournment should be granted, one has to look at the question of whether or not there should be an adjournment of proceedings on the cross‑claim and, in that regard, we would have said the correct test was whether or not justice could be done to the respondent by granting the adjournment.  In that regard, plainly it could be.  The proceedings on the summons could continue.  There was no basis, in our respectful submission, on which the learned trial judge could have come to a conclusion that justice could not be served, so far as concerns the respondent, by granting an adjournment of the proceedings on the cross‑claim.

McHUGH J:   But he had regard to the whole history of the matter and the various failures of the applicants.

MR STREET:   But, your Honour, in that regard, there were grounds identified by the applicants for an adjournments which their Honours in the Court of Appeal found were legitimate, namely the failure to produce documents.  They had a number of grounds they relied upon.  The first ground was the failure to produce documents.  Now, his Honour, according to Justice Beazley, and we adopt it, failed to have proper regard to that fact in determining whether or not an adjournment should be granted.  They were documents that were relevant to the cross‑claim. 

The next ground that was identified was that the applicants had difficulty with the proceedings going on in Victoria.  They were serious proceedings in which the liberty of the applicants was at stake.  Those proceeding in Victoria actually resulted in both applicants losing their freedom in Victoria.  That was in circumstances where they were making legitimate applications, on proper notice, supported by affidavits, to try and obtain adjournments in order to be able to conduct other proceedings.

McHUGH J:   They got adjournments at various stages, did they not?  Then it turned out that at the time that they really were not needed at all.

MR STREET:   No, your Honour, that, with the greatest respect, was not quite right.  That was the picture that the learned trial judge painted when he came to prepare the reasons, in part forgetting – and I think it accords with Justice Beazley’s comments – that at the time the adjournment was granted on 22 August the proceedings had in fact only been fixed for two days and there was an interchange that took place between counsel at that stage where it was conveyed to the court that it was not the position that they would require the whole period between August and November for a trial, in terms of it being on going, but that there were commitments in Victoria, and those commitments were real.  Those commitments resulted in, obviously, proceedings which affected the freedom of the applicants.

Now, those are proceedings where what the applicants were saying to Justice Hunter – and it appears in Justice Beazley’s judgment – they were saying this is oppressive for us to have to meet these grounds, these proceedings – at the bottom of page 63 they were saying having to face these various proceedings was oppressive.  He identified first of all the ground, at the bottom of 63, line about 56, “the Bank had not produced the documents”.  It did not.  My client has never obtained the documents in support of the cross‑claim that they were seeking.  He says that he was facing other proceedings, he was, your Honour, and he attacks again, on page 64, the issue relating to those Bank documents.  So, your Honours, we say it is one where there were what I might describe as substantial merits in relation to the problem the applicants were encountering.  This is not a case where the applicants were seeking to delay proceedings without any proper foundation.

Could I say this to your Honours in relation to the application.  When it came on on 27 November before his Honour and his Honour refused that application, there was no cross-examination whatsoever of the applicant, challenging the three grounds that she had identified.  She identified the grounds of the non-production of documents; she identified the ground of her illness and she identified the ground of the commitment of the Victorian proceedings.  No cross-examination challenging her in relation to those three grounds identified on 27 November.

But his Honour then came, on 28 November, to look at the question of what I might describe as severing the cross‑claim.  A test we say he applied, when one looks at the bottom of page 20, line 55, in determining whether or not to sever the cross‑claim, this is the test his Honour applied:  there is no good purpose to be served.  A “no good purpose” test is not a test as to whether or not justice can be done by the respondent only by refusing the adjournment.  That is, in essence, the test that his Honour should have applied.  What his Honour applied at the bottom of page 20 line 55 was simply a proposition that there was no good purpose to adjourn the proceedings in relation to the cross‑claim.  Now, that is not an application of the correct test.

In our respectful submission, when one comes to looking at what his Honour said in this regard, it is also worth while taking your Honours to page 21.  Your Honours will see there is the observation relating to the banker’s opinion.  There is a view that his Honour has formed on page 21 relating to that banker’s opinion, namely it is said, about line 10, “a copy of which is in the possession of the Defendants” ‑ ‑ ‑

McHUGH J:   What page is this again?

MR STREET:   Page 21.  This is the banker’s opinion.  This is the document in support of the cross‑claim.  His Honour continues:

It is not alleged that the letter was provided by the plaintiff to the defendants or, for that matter, obtained at their request although its contents are said to have been confirmed by the plaintiff.

Your Honours, that is just a misunderstanding of the evidence and if I could very briefly just hand up to the Court an extract of the transcript, which I have provided to my learned friend, which ‑ ‑ ‑

CALLINAN J:   Mr Street, was leave required in order to file the cross‑claim?

MR STREET:   It was, your Honour, and his Honour granted it on the 21st and the verified cross‑claim was filed on 22 August.

CALLINAN J:   Why was leave required?  I am not familiar with the Victorian ‑ ‑ ‑

MR STREET:   Because there had already been, obviously, directions relating to the matter being fixed for hearing and it was one where the applicants had sought to identify clearly, on the affidavit but not in what I might describe as ordinary form, a complaint relating to this banker’s – or at least relating to their case against the respondent.

CALLINAN J:   Had the other side got notice of the proposed cross‑claim and its form?

MR STREET:   They certainly did have, on 21 and 22 August.

CALLINAN J:   Not earlier than that?

MR STREET:   They had the period from 22 August, where they had the verified cross‑claim, until November and they did not put on any defence, gave no discovery, did not produce the documents the subject of it.

CALLINAN J:   No application to strike out or anything of that kind?

MR STREET:   No, your Honour, and this is a case where the applicants, obviously, are unrepresented.  Can I take your Honours to that transcript I just handed up to your Honours because it impacts on the way in which his Honour approached it.  If your Honours look at page – it is the bottom right‑hand side – it is page 138 in the blue book in the court below, but ‑ ‑ ‑

CALLINAN J:   Mr Street, I am sorry to come back to this:  was the application to put on a cross‑claim opposed?

MR STREET:   Your Honour, I do not think it was, actually, on the evidence, when I read the transcript.  His Honour simply granted leave to file the cross‑claim.  They filed the cross‑claim.  They verified it.  They asserted they relied on the banker’s opinion and they asserted they were induced by it in relation to those representations.

McHUGH J:   But what appears at page 125 of the transcript hardly contradicts what the judge said at page 21, does it?

MR STREET:   Your Honour, it does in this way, because what Mrs Frugtniet was saying ‑ his Honour said that he gave a description to the exhibit which your Honours will see he gives at the bottom of - line 50 on page 107, which is the next page.  Your Honours will see that his Honour gave a description to the exhibit as having been “found in the bank file” and he picks that up from a question that was put by Mrs Frugtniet which appears at page 119 about line 10.  Mrs Frugtniet, in a question, legitimately seeks to identify a document by saying it is a copy of a document I have got from your file.  But what she says on page 125, at line 35, is, in answer to the question where his Honour says but you said you obtained that from the bank file, she says:

Yes, but originally from InfoVision” –

which is understandable, that is the company that they financed –

in the project – that is when I saw it and referred it to the bank manager, and he verified that it was real.

That is exactly the question she was putting to the witness that I took your Honours to in the judgment.

HAYNE J:   What on earth is different between that and what his Honour said.  I understood you to be taking us to this to demonstrate some difference.  What is the difference?

MR STREET:   The difference is this, your Honours, that what his Honour appears to have done in relation to the matter at page 21 and when his Honour came to his judgment in relation to the cross‑claim, which obviously the applicants had not been heard on, if your Honours go to, first of all, page 32, his Honour seems to pick this up in relation to this exhibit and says it was a banker’s opinion described in terms as follows, and he picks up his own description of the exhibit in some way to sever what I might describe as the causal link.  He picks up again that issue relating to that banker’s opinion when one goes to the top of page 34:

As to the banker’s opinion, while I have heard no evidence from the defendants as to the precise circumstances in which this banker’s opinion got into their possession, nor heard any evidence as to any reliance that they may have placed upon it, assuming it to have been in their possession prior to the subject transaction with Inforvision, I note that it is an opinion expressed on the basis of a customer relationship –

Now, your Honours, at that stage the evidence is complete.  The applicants have not given their evidence on this.  The bank officer has not completed his cross-examination.  All I am seeking to identify is that the banker’s opinion, as a causal matter in relation to the applicants’ cross‑claim, was a matter on which his Honour appears to have approached it on the basis that there was no link between that and their entering into the transaction.  Clearly there was.

Your Honours, the next matter that we just seek to draw your Honours’ attention to in relation to the matter is that it is one where his Honour expressed strong views in relation to litigants in person which one sees at page 26.  His Honour expressed views in relation to the appearance of litigants in person which would, in our respectful submission, be ones which would at least call for close examination of what occurred in the present case.  When one goes to page 74 in the application book one finds this observation by the judge, which is quite extraordinary, picked up by Justice Beazley in paragraph 82, the second paragraph indented:

I have expressed views which, I think on nay view of it, are particularly critical of both defendants to the point where I think it would be quite ‑ ‑ ‑

McHUGH J:   Sorry, where is this, again?

MR STREET:   Page 74, the second paragraph, second sentence, “I have expressed views” ‑ ‑ ‑

HAYNE J:   Line 43.

MR STREET:   Line 43, I apologise, your Honour.

McHUGH J:   Yes.

MR STREET:  

‑ ‑ ‑ quite inappropriate for me to continue to hear the proceedings if that hypothetical possibility was considered.

At the bottom of the page, going down to about line 57:

I think it is completely unacceptable that the proceedings, having reached the stage they have reached, that the Court should accede to any application which would result in a reopening of the matter by way of further order of some kind or another, which would only have the effect of me disqualifying myself from further hearing the matter and for the matter to then be relisted for hearing de novo before another judge.

Now, your Honours, they are not legitimate grounds upon which one could have come to a view that, applying the correct test for adjournment, an adjournment should be refused of the cross‑claim.  The only test identified was what I might describe as “no good purpose” test.  That is not the correct principle and when one looks at the question of applicants who have a cross‑claim for which there is no defence, they are seeking further documents which have not been produced ‑ ‑ ‑

McHUGH J:   Yes, but you cannot overlook what the judge’s basic motivation was for refusing the adjournment.  It is set out very plainly at page 18:

I think that it is literally testing the gullibility of the court to accept that that history and more recent applications for adjournment are not part of a resolve on the part of the defendants to ensure, by whatever means they can devise that they might perceive to be acceptable to the court, the indefinite deferral of the hearing of these proceedings.

Now, once the judge forms that view, why is he not entitled to refuse an application?  Your client does not turn up.

MR STREET:   Your Honour, this was a case where the applicants had, in a timely basis – and that is what is identified from that chronology – in advance of the hearing indicated they had commitments in Melbourne, commitments they said were causing oppression, and when one goes to page 69 of the application book, your Honours will see that the
 ‑ ‑ ‑

McHUGH J:   But the trial started.

MR STREET:   Your Honour, there is no question in relation to the summons ‑ ‑ ‑

McHUGH J:   On 1 August they sought leave to appeal, did they not, from the decision of Justice Simpson?  She had given a decision the day before, on 31 July.  Leave to appeal was refused the following day.  Then Justice Hunter commenced hearing on that particular day.

MR STREET:   But, your Honour, that is as a result of what I might describe as a serious concern relating to proceedings in Melbourne which were criminal proceedings in which their liberty was at stake.  What one had, in those circumstances, was a position where the applicants certainly could not be heard to say that the respondents should not have a continuation of the proceedings on its summons.  But that is very different from saying that there should be no adjournment of the proceedings on the cross‑claim.  The answer to what your Honour has just raised is those observations justify refusing an adjournment on the summons.  But on what basis could one say justice could only be done to the respondent by refusing to adjourn the cross‑claim in these circumstances?  How would that deny justice to the respondent?  Because the respondent would be able to obtain ‑ ‑ ‑

McHUGH J:   Because both matters were put together.  Did not the judge say that he saw them both based – at page 20 he said, line 11:

The defences and cross‑claim, except for the one matter to which I will refer, essentially seek relief by way of declarations as to the avoidance of the subject security document based upon the provisions of the Fair Trading Act 1987.  Moreover, the cross‑claim contains allegations, by reference to the defence, of a denial of having executed the subject security document alleging it to be a forgery –

and so on.

MR STREET:   Your Honour, undoubtedly the position was he could proceed on the summons and determine the summons and the cross‑claim could be heard later.

McHUGH J:   Then he goes on to say, at line 39:

The matter to which I refer as possibly falling outside issues that are inextricably related to the principal proceedings is the claim

by the defendants of proscribed conduct within the meaning of section 42 –

MR STREET:   But that is recognising it was a separate matter and that is what Justice Beazley accepted as well.  In our respectful submission, what Justice Beazley recognised was that there was a legitimate cross‑claim which the applicants were entitled to pursue in respect of which the respondent, in essence, had failed to produce documents and the failure to take into account those, we respectfully submit, was a matter which meant there was a substantial miscarriage of justice.  If the Court pleases.

McHUGH J:   Thank you, Mr Street.  The Court need not hear you, Mr Ronzani.

The Court is of the view that the matter has insufficient prospects of success.  That being so, the application for special leave to appeal is refused.

AT 2.50 PM THE MATTER WAS CONCLUDED