Hill v Grand United Friendly Society

[1999] HCATrans 130

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Sydney  No S119 of 1998

B e t w e e n -

DAVID HAMILTON HILL

Applicant

and

GRAND UNITED FRIENDLY SOCIETY

First Respondent

RODNEY KIVELL DOWNING

Second Respondent

Application for special leave to appeal

GLEESON CJ
HAYNE J

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON FRIDAY, 14 MAY 1999, AT 11.33 AM

Copyright in the High Court of Australia

MR D.H. HILL:   May it please your Honours, I appear in person.

MR M.J. NEIL, QC:   May it please the Court, I appear with my learned friend, MR J.B. MASTON, for the first respondent.  (instructed by Graham Molloy & Associates)

MR M.L. WILLIAMS:   If the Court pleases, I appear with my learned friend, MS E.A. CHEESEMAN, for the second respondent.  (instructed by Blake Dawson Waldron)

GLEESON CJ:   Yes, Mr Hill.

MR HILL:   If the Court pleases.  My submissions are, of course, with respect.  Pure subjectivism alone stands between Hill and remedy.

Mutual solicitor, Downing, and lender, whom I call the GUFS, for short, each knew from the outset, but did not tell Hill, the borrower, that the loan equalled a massive escalation of borrower’s risk, utterly beyond the borrower and that, by the terms of the loan, Hill did not have the power to deal singly with the three units, could not achieve his stated purpose of relocating his home from the middle unit to the top unit; that his only financial capacity, that is to market and sell one or both of the middle or bottom units, in order to pay the interest and to reduce the principle and which gave Hill his flexibility to weather any adversity of market would be taken from him by the terms of the loan.  And that is exactly what happened.

This is not a case of the trial judge doing as best he or she can to evaluate the more probable between contradicting and rival accounts.  There is no material, such evidence.  The defendants state no memory sufficient to allow cross-examination one way or the other.

Hill already owned the other two of three units, the bottom and the middle, his home of 28 years, having in 1973/74 renovated to strata title all three units and to market and sell the top unit, to pay the capitalised interest, that is additional to and not deducted from the principal sum borrowed, carrying the outstanding moneys on the pre-existing and thereafter continuing mortgage here called the N mortgage; in effect, an “all moneys” mortgage, and which was available in 1988.

The investigation of, that the loan elements of the prior conduct 1973/74 undertaking were available, from this specific lender and through this specific solicitor was, by express instructions from Hill to Downing, the very task of Downing’s retainer by Hill.  Hill received an unqualified assurance from the solicitor that the lender could, and would, provide funds on Hill’s terms and no indication that the lender would, or could not, do so.  On 19.11.1988 Hill purchased at auction, in the presence of Downing, the third unit, the top unit, and so commenced the undertaking the subject matter of the proceedings.

Hill has proved a case, the trial judge finding the mutual solicitor Downing negligent in not explaining the unusual meaning intended by the lender and mutual solicitor to be given to the term “capitalisation”, namely that the interest be deducted from undrawn principal.  The trial judge wrongly does not examine the ramifications and significance of this failure to explain.

The Court of Appeal just appropriates the trial judge’s words and, with demonstrable error, efforms them anew to support the trial judge’s withholding of relief which the Court of Appeal declines to review; in result, the withholding of remedy remains upon pure subjective conjecture.

There are other anomalies.  A sustainable process of reason is not apparent in either the trial judge or the Court of Appeal, unless it be what is labelled practical reasoning upon passion as a determinant.  If this be so, the courts, without explanation, disregard the two well-known obstacles to this form of reasoning.  One, the human propensity of not acting against one’s own interests, which is at the very heart of the law’s requirement to make disclosure, full and timely, necessary for the making of proper decision, particularly in fiduciary or analogous relations.

Secondly, no necessary relation between the act; the reason for, the reason why, the purpose, not even if it is conscious.  Additionally, wrongly at law, it disregards the legal framework, the interrelationship of rights, obligations and expectations within the relevant legal relations and so it disregards connection at law.

By withholding relief the courts conduce the relationship of mutual solicitor plus lender to borrower, one, to an artifice and, two, to a contrivance to avoid statute by complicit non-disclosure, wilful silence and wilful blindness, at the price of undisclosed massive escalation of borrower risk.

GLEESON CJ:   Mr Hill, on pages 70 and 71 of the application book Justice Fitzgerald sets out what he describes as three basic objections to your fundamental proposition.  What answer do you make to those three objections?

MR HILL:   Pages 70 and 71?  For the first, it is not relevant, because that is not the way the proceeding was.  Hill, first of all, instructed Downing to ascertain whether the funds would be available from this lender only through Downing, the solicitor, which was the way it was in 1973/74.  So it is not the position of just going to the market generally.  Secondly, although the Court of Appeal is wrong in the particular issue, in my submission, which it has raised, Downing nevertheless replies that the Society was the cheapest money that was available and cheaper than any commercial bank.  So, in fact, there is evidence of that.  But it is not the issue here. 

The alleged misstatement did not cause Hill to borrow the additional money.  The answer to that is that each of the courts fudge and neglect the basic proposition that it is not to do with interest – and there is quite a lot to say on that – but in fact was to deal with the treatment of the interest, namely its deduction from its capitalisation, namely whether it was additional to the principal or whether it was deducted from the principal.  If it is deducted form the principal, then it is self-evident and inevitable that the money must run out.  There must come a time when a quarter’s interest is due and there is no money to pay it whereupon the mortgage, which was not to have effect – and there is something to say on that – will automatically be enforced, even though the trial judge has found that it was not to be enforced according to its terms, even though the trial judge has not proved any meeting of mind to form any agreement and therefore the three units would be put up for sale by mortgagee sale.  Thus from the very very beginning it was known to the solicitor and to the lender that Hill must inevitably pay it and must therefore – the loan was utterly inappropriate to Hill relocating his home to the top unit because, inevitably, right there, the seeds are that mortgagee sale of the three is inevitable.

Now if, as it was in the prior conduct, 1973/74, that the funds were additional to the principal, then that situation does not arise and, as in 1973/74, time was allowed, and quite a lot of time, the top unit was sold and the interest capitalised by way of addition was paid from the proceeds and the principal reduced and the balance carried on long term mortgage, which was the N mortgage which was still available.  And that is the agreement that Hill had.

The third point is really taken up in the second one, as far as I can understand it.  Do I meet your Honour’s ‑ ‑ ‑

GLEESON CJ:   Yes, thank you.

MR HILL:   The hearing progressed to reveal that an underlying fiduciary relation of solicitor to client, and lender to borrower, and if held not to be a fiduciary, then in analogous situation, and that breach of fiduciary duty has existed from early 1988.  To go back to what your Honour asked me, the non-disclosure was on, even before the 18.10.88 letter of application by Downing, which Hill had not seen, but even before then, as far back as March 1988, this situation had not been disclosed.  Had it been disclosed, none of the events would have occurred.

So the breach is in fact gross, fundamental, deliberate and sustained over many years, right into cross-examination by Downing, in a situation of no new material, and he reverses his evidence.  Non-disclosure of these matters were necessary for the borrower to make proper decisions as to whether he would even entertain the agreement – entertain the borrowing of money, let alone entertain it in those terms, and let alone entertain it on being told that he must inevitably face ruin.

The case is of a lender looking for a responsible borrower, not a borrower in search of a lender, to go back to your Honour’s point.  This lender had funds, over a $1 million to place, and it was revealed during the hearing that a statutory restriction against its putting these funds out to the general market, so it needed a borrower.  Only on the unqualified assurance that the 1973/74 loan elements, which again comes back to your Honour’s question, were available from this lender and through this solicitor who, over 28 years Hill’s solicitor, does Hill entertain the undertaking at all.  So the application proceeds both on miscarriage of justice and questions of law. 

In passing, Hill submits that the evidence satisfies the consideration of Esanda’s Case and Hill’s Case and obviously the three policy considerations against unlimited liability being imposed.  Hill’s specific person does not gain competitive advantage and does not disturb a coherent body of law and though the defendant be individual, it remains of general and public import.  But maximum liability, though unfixed - because the ultimate cost for wages was not known, just on the basis if you open something up, until you actually open it up you do not know whether it is a weeks work or a months work - although it was unfixed, it was in the defendant’s attention and was estimable by the lender’s own valuer, Mr Child.

For the questions of law, there is a constitutional reach within the case.  The case is of relations between citizens within a democracy, and therefore to do with the reach of the court’s independence, in particular with the evolving complex of the recognisable relations within the notion of proximities, that something added to foreseeable injury, the defining of which is desirably resisted if the essential and epic dynamic aspect of the court’s independence is to be nurtured.  That is a desirable goal but the only durable preservative of public respect of the court.

In this case, the relation is an interconnection of two independent relations - lender to borrower and solicitor to client, who is also the borrower – brought into relationship by the solicitor’s initial investigation of, and assurance, that 1973/74 elements were available from this lender and through this solicitor.  These are both important points.  An investigation made upon the borrower’s express uncontradicted instruction, to Downing, that the loan must be as in the 1973/74 undertaking, and that is an express instruction completely forgotten by the trial judge.

The underlying questions touch the following:  that the court, in a civil case, shall not withhold relief from the client where to do so would, in effect, sanction against the client’s interest, the solicitor’s breach of fiduciary duty.

Two, shall translate to a non-trustee fiduciary, particularly a solicitor, the upholding and vindication of trustee fiduciary obligations as appropriate to that special relationship, such that the fiduciary duties permeate all duties, irrespective of how the pleading is couched.  Once the facts establish that the special relationship underlying the case to be over a defendant in fiduciary or analogous position, and the case sufficiently so proceeded and, where appropriate, that the non-disclosure is material; and , in so doing, apply to the delinquent fiduciary, particularly solicitors, the rigour and reasoning of Brickenden’s Case, including the cases where otherwise as seen as purely contractual or tortuous or statutory.  And that is important because the true nature of the facts were not disclosed until the hearing.  That is over eight years of non-disclosure.

Three, shall not translate the doctrine of novus actus interveniens.

Four, shall regard the legal principles expressed in the two Jacks Cases as correctly representing the applicable legal principles, of rejecting speculation, affirming the proper acceptance of the plaintiff’s evidence that but for the breach, he would not have proceeded, and that this evidence disposes of the defence by way of "loss in any event .. even if full disclosure". 

Precludes judicial presumption favouring the delinquent solicitor; places the onus of proof of any escape squarely upon the fiduciary, particularly if a solicitor; delineates that the relationships of solicitor to multiple clients in the same transaction is the free choice of the solicitor wanting to so act.  And that is an important point.  Twenty-eight years solicitor for the lender, and the lender is looking for a borrower.

That the fundamental duty is to refuse engagement – well, that is well known, and that to escape breach of the high standards, which are steeped in disclosure, are the solicitor’s initiative and onus.  Hill submits that he is able to draw an assumption from that situation.  And affirms common sense as the connective determinant in answer to the trial judge.

The fifth matter:  shall consider, in its reasons and ramifications and significance an interrelationship and connection with the relevant statute – that is the Trustee Act and Friendly Societies Act 1912 – of each relevant material breach established by the evidence and shall not confine itself, particularly if it is to withhold remedy.

Six, shall not fail to accept evidence possible, internally consistent, uncontradicted and unopposed by evidence or by rival account established by evidence.

I see the five minute bell is up, so I must move to miscarriage of justice.

“We live and others dream your life”, Albert Camus, “The First Man” in translation.  Much of what the trial judge and the Court of Appeal reasons is outright fancy.  I could name a few of those, but I think time is running out for me, so I move to four matters which stand head and shoulders above the many, many other matters.

One.  Subjectivism.  The Court of Appeal misquotes the trial judge’s unsustainable subjective conjecture of - Hill would have gone ahead even if the 15.5 per cent interest had been disclosed – that was the trial judge – to vastly transform it into something quite different, namely, to “lender’s terms and conditions of loan”, upon which the Court of Appeal then makes its own subjective conjecture as if it were the trial judge’s conjecture, which it is not.  In the trial judge’s conjecture, the trial judge did not deal with the treatment of the interest, the deduction from principal or additional to principal, to go back to your Honour’s question.

These conjectures each eliminate from these judges’ minds any obligation to disclose the true picture or any element for making proper decision, not even disclose that Hill would not have the power to deal with the units singly, no partial discharge, ipso facto, therefore denies remedy.  Each of the courts below throughout their reasons have fudged this issue, that Hill was not told that the interest would be deducted from the principal, and that he had no power to deal with the units singly and that the loan was ruinous for Hill and this was known by the defendants.  The courts below also ignored that Hill had not agreed to the deduction of interest.  He had no knowledge of the deduction.

Bias.  There are many.  To move to the main.  The trial judge states his bias in favour of Downing – “on matters of importance where his

evidence conflicts with that of Downing, I have no hesitation in accepting the evidence of Downing”, the defendant.  The only trouble is, there is no such evidence and there is no basis for the trial judge’s general statement.

Next, each court makes no comment whatsoever, and completely ignores, Downing’s resiling in cross-examination from the main thrust and from the specific detail of his case.  His case that he but merely couriered back and forth between lender and borrower an orderly progression of their full informed instructions as to their terms and conditions of loan.  Whereas Dowling’s resiling evidences a total non-disclosure to Hill of any matter necessary for making proper decision, including not disclosing that the 1973/74 elements were not available, that there was no power to deal singly, no partial discharge, that therefore the lender’s terms were ruinous.  Downing, however ‑ ‑ ‑

GLEESON CJ:   I think your time is up, Mr Hill, thank you.

Mr Neil, on page 147 of the application book, between lines 36 and 45, you refer to two factual matters.  I would just like to understand a little better the significance of those.  Page 147, line 35, you say:

The Court of Appeal was further correct to hold that -

MR NEIL:   Yes.  The kernel of the point being, your Honour, that the trial judge and the Court of Appeal were of the view that Mr Hill was committed to the proposition, committed to the proposal, and there was no reliance – he was prepared to take such loans as he could ever get, and there were variations.  He needed the money, he wanted the money, he made his own commercial decisions and he proceeded – and he would have proceeded in any event, regardless of anything to do with the capitalisation question.

HAYNE J:   Where do we find that in the trial judge’s reasons?

MR NEIL:   At page 41, at least in terms of the – could I just preface it by going back a moment, your Honour, to the top of page 40 where his Honour makes it clear that he does not accept the proposition that Mr Downing was to be involved in any commercial advice, and his Honour makes those findings at 40, lines E to H.

HAYNE J:   But the case that, as I understand it, it is sought to make is:  I was mislead.  Had I known what was meant, I would not have borrowed.  That is a significant part, at least, of the case that is sought to be made.  Now, your answer, as I understand it, is even if first proposition, I was mislead, was made out, the second proposition, I would not have borrowed, is not made out and is determined against the applicant.  Do I understand your side of the argument sufficiently?

MR NEIL:   Yes.  If I take your Honour to the top of page 41, his Honour the trial judge said:

I should add that even if I were wrong in my finding of knowledge of the interest rate I would not have accepted Hill’s evidence that had he been informed of the true interest rate he would not ‑ ‑ ‑

HAYNE J:   But that is interest rate.  As I understand the case against you, it is, I was mislead about what was meant by capitalised interest.  Now, do we have a finding of the trial judge that says, “Although Mr Hill maintained ‘I would not have borrowed’, that is not so.”?

MR NEIL:   At 45 line I, this is after dealing with capitalisation:

On any basis he would have needed more funds.  I find that he would have gone ahead.  I also find that the money would not have been available from the Society on the basis that he says he expected.

HAYNE J:   Yes.  I wondered whether 44, lines P to S, may also bear on it.

MR NEIL:  

Nor is it really claimed by Hill that it did.  What Hill claims is that had he known interest payments were required and would be obtained as they were by in effect drawing them from undrawn principal then he would have refused to sign the mortgage.  That I do not accept because had that happened he could not have completed the purchase, would have been in breach of the contract and almost certainly lost the deposit of $77,500.00.  However, Hill could have settled ‑ ‑ ‑

HAYNE J:   We can read it, but is that a finding to the contrary of the proposition that is now advanced or is it not?

MR NEIL:   In my submission it is a finding, when combined with the interest one and the one on page 45, that the judge was clearly of the view that Mr Hill would have gone ahead.

HAYNE J:   Yes.

GLEESON CJ:   This is to negate reliance.

MR NEIL:   Yes, your Honour.  We would submit there is no reliance, and even if there had been, there has been specific waiver of any interest differential, so there could not have been any damage, and then we further say, if there had been any damage ‑ ‑ ‑

GLEESON CJ:   Yes, thank you, Mr Neil.  Mr Hill, do you want to say anything in reply?

MR HILL:   Just refused to sign the mortgage on interest, I have already dealt with.  My two other points would be, really, because I ran out of the time to complete, but it might be worthwhile bringing to the Court’s attention, that the purpose to relocate his home to the top unit was completely omitted, not a word of it, except for a quote from Hill’s affidavit on another issue entirely, but not mentioned in the reasoning.  The signing of the Y document, the trial judge makes tremendous reliance upon that, the majority of Hill’s evidence and his reliability, and there is utterly no evidence available to the trial judge to sustain the 16th of the 12th, the signing of the Y mortgage, and in fact the Court of Appeal finds, as Hill’s evidence, the 30th December…..that the minds of the trial judge were in fact mislead when he was assessing what Hill would, or would not, have done.  And there is other matter relating to statute, like who was wrong about committee of management – that is a statutory error by the trial judge.  It is a statutory matter.

GLEESON CJ:   Thank you, Mr Hill.

In this matter the Court has given careful consideration to the reasoning of the trial judge and the members of the Court of Appeal and we have come to the conclusion that there are not sufficient prospects of success to warrant the grant of special leave to appeal.  The application should be dismissed.

Can you resist an order for costs, Mr Hill?

MR HILL:   I do not…..funds, your Honour.  I…..bankrupt.

GLEESON CJ:   Yes.  The applicant must pay the respondent’s costs of the appeal.

AT 12.01 PM THE MATTER WAS CONCLUDED