Hungerfords (Registered Firm) & Ors v Walker

[1988] HCATrans 17

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IN THE HIGH COURT OF AUSTRALIA

Office of the Registry

Adelaide No A47 of 1987

B e t w e e n -

HUNGERFORDS (Re~istered Firm),

HUNGERFORD SPOO ER AND KIRKHOPE

(Re~istered Firm) and HUNGERFORD

HANOCK AND OFFNER (Registered Firm)

Applicants

and

PETER VICTOR WALKER, BARRY JOh"N

WALKER, MICHAEL TIMOTHY WALKER,

LEOLA CLAIRE WALKER, DOROTHY

ROSE WALKER and DIANE MARY WALKER

(Trading as "RADIO ELECTRIX")

Respondents

Application for special leave to

appeal

Hungerfords

WILSON J

DAWSON J

GAUDRON J

TRANSCRIPT OF PROCEEDINGS

AT ADELAIDE ON FRIDAY, 19 FEBRUARY 1988, AT 12.01 PM

Copyright in the High Court of Australia

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MR J.W. PERRY, QC:  May it please the Court, I appear with

my learned junior, MR B. BAXTER, for the applicants

in this matter. (instructed by Johnsons)

MR T. GRAY, QC:  May it please the Court, I appear with

my learned friend, MRS. LIPViAN, for the

respondents. (insturcted by Thomson Simmons & Co)

WILSON J: Yes, Mr Gray. Yes, Mr Perry?

MR PERRY:  If the Court pleases, it is the contention of

the applicants in this matter that the case raises
several questions of law of public importance.

The first question is as to the circumstances in

which the Court has power to award interest for

loss of use of money as a component in the

element of an award of damages for breach of

contract or tort apart from statute. This Court
will have seen that the Full Court varied the

trial judge's award by allowing compound interest at a high rate in order, so it was said, properly

to compensate the plaintiffs for loss of use

of the money which the plaintiffs lost by way of

over paid tax.

The circumstances, as the Court will have

seen, were unusual in that the partners in the
respondents' firm paid their personal liability

for tax from moneys which they drew from the firm.

The law in Australia as to the allowance of

interest in those circumstances, in the submission

of the applicants, is unsettled and remains so

despite this decision. Some of the authorities,

which in our submission justify that comment,

appear in the supporting affidavit to the application

at page 98 of the application book.

DAWSON J:  Is there provision for interest on judgments in

South Australia, Mr Perry?

MR PERRY:  Yes, section 30c of the SUPREME COURT ACT - - -

DAWSON J: Its runs from?

MR PERRY:  It runs from the date of issue of the proceedings

except that there is a discretion in the Court

to allow an earlier date. It is the analogue of

LORD TENTERDEN'S hCT in South Australia and is in rather substantially similar provisions to

the legislation in other States of Australia which
allow interest as part of the judgment. At
all events, the long line of authority on this

question, although it extends back beyond the

LONDON CHATHAM & DOVER RAILWAY case which we refer

to at page 98, is commonly picked up at the

point of that case, and that case has long been

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held to deny the recoverability of interest. In

the words of Chief Justice King, which we then quote:

upon an overdue debt or upon the

damages which are ultimately awarded

for breach of contract or tort.

And Chief Justice King refers to that at the bottom

of page 70 of the application book, across to

page 71. At the bottom of page 70:

It is well established law that,

apart from the special provisions -

and so on -

interest is not recoverable upon an

overdue debt or upon the damages which

are ultimately awarded for breach of

contract or for tort. Damages are not

recoverable as a general rule for

late payment of a sum of money -

and His Honour there refers to the LONDON CHATHAM

AND DOVER RAILWAY and MARINE BOARD OF LAUNCESTON

and SIMONIUS VISCHER. Now, His Honour goes on to

say at about line 14 that:

The application of the rule to damages

has been greatly modified, however, by

more recent cases in England.

Before dealing with those cases, His Honour, in a

general way looks at the purpose underlying an

award of damages in tort and in contract, which

His Honour does through the rest of page 71 to

page 72. And after identifying those general rules,

he attempts at the top of page 72 to address the issue of how the rule against the recoverability of interest as part of damages for breach of

contract or on an overdue debt can be reconciled

with what he perceived to be the underlying principle

in awards of damages in tort and in contract and

specifically the principle of restitution.

His Honour then has recourse to the concept of

remoteness of damage in order to find a means to

reconcile the two, picking up as he does what fell

from Lord Justice Denning in the TRANS TRUST case

which he refers to below the middle of page 72.

It is in that process .. that, in our submission,

His Honour the Chief Justice and the Full Court fell

into error. We refer to the decision of

Sir John Latham in the MARINE BOARD OF LAUNCESTON

case at page 99 of the application book, and if

I could take the Court to that, it illustrates the

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manner in which the rule was then expressed and

for long since then, and we say until now, has so

been regarded in Australia. His Honour Sir John Latham

at about line 11:

When an action is brought for damages for

breach of contract or for tort, the amount

of damages is never increased (apart

from some statutory provision, eg

LORD TENTERDEN'S ACT) because there has been

delay caused by negotiation and litigation

or by other circumstances. The loss of the use of the money ultimately awarded

as damages is not part of the loss occasioned

by the tort or breach of contract itself.

It is a loss due entirely to delay in the payment of money ultimately held to be

due, and is not recoverable as part of

the damages.

DAWSON J:  Now I do not follow those two sentences, if I may

say so with respect to His Honour.	They do not
seem to follow in logical sequence.	Why is not

loss occasioned by the tort or breach of contract

in fact a delay in getting the money as

occasioned by them?

MR PERRY: His Honour draws that distinction which has

constantly been applied and perceived since.

DAWSON J:  I can understand it as a rule of policy which

does not require any logical justification, but

I do not see that that is a logical justification?

MR PERRY:  It is all a question of where you draw the line,

of course.

DAWSON J:	Then it becomes a question of policy, yes.
MR PERRY:	And here the line is drawn in that way. We say

consistently so and it is not up to the - - -

DAWSON J: Well you say it is a matter of policy not a

matter of logic? Then I am going to ask you, why

the policy?

MR PERRY:  I have to concede it is probably a matter of

policy rather than logic. It was so regarded by

Lord Brandon in his speech in LA PINTADA where

the origins of the common law rule were traced

back beyond the LONDON CHATHAM & DOVER RAILWAY case.

He said in effect, the law has been clearly stated in that case for so long that there is

no process of judicial change or legislation can

be allowed to whittle the rule away, particularly

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because Parliament has spoken and the legislation

that has come down has defined certain areas in

which interest will be allowed, it would be wrong

for the judges to intervene and extend them. So

in saying that he must be saying, I suppose, that

the basis of it is philosophic, rather than as

a matter of logic.

DAWSON J:  But the provision for interest on judgments

really is designed to overcome the effects of the delays of

litigation, is not it?

MR PERRY:  With respect, it comes down to the same thing

because if here, for example, one would imagine

that the error committed by the accountants had

been discovered immediately the damages would have
been assessed and paid, representing the amount

of tax which had been overpaid but no other

consequential losses. Now, from then on, of

course, delay explains the increase in damages.
From then on whether it is the delayin bringing
the litigation and finding out the error. or whatever,

there is a period of delay which goes on and the

question which arises is whether beyond the award

of damages represented by the repayment of the overpaid tax and beyond the interest allowable under section 30c of the SUPREME COURT ACT the

common law recognizes a right to recover damages

for loss of use of the money. And that, in my

submission, is where the authorities are clear.

Whether they are based on a matter of policy or

logic, it has been applied for a long time before

the decision of Sir John Latham in the MARINE BOARD

OF LAUNCESTON case and it has been applied for a

long time since. For example, in the Court of

Appeal in New South Wales, in the case of
SIMONIUS VISCHER, which is the next case which

we refer to on this page of the application book,

if I could take the Court very briefly - I do not

want to read a long passage, but I can quickly

identify a passage in the judgment of Mr Justice Samuels

in the SIMONIUS VISCHER case. If the Court does

not have it before it, we do have copies of cases.

WILSON J:	No, we have not.
MR PERRY:	If the Court pleases, it is about the fourth tab

down in these books. Now, if I could take the

Court to page 366 at the bottom of the page, and it

is interesting to note that this was a case

involving damages against an auditor for failing properly to discharge his duty as an auditor and there were then said to be consequential losses to

the client. And if you go to page 366, just under

letter E, towards the end of the line:

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What the plaintiffs say is that it was

in the contemplation of the parties that

a breach by the defendants would cause

the plaintiffs financial loss; and that

the plaintiffs would be out of their

money to the extent of that loss until

it was converted into an award of damages

and paid. And the claim is for the value

which the money representing the loss,

assessed as damages, would have had in the

plaintiff's hands had they never been

deprived of it.

That statement is exactly of application for ~he case

at bar:

This formulation involves neither a

contract to pay money nor any "special

loss" in Lord Justice Derming's terms.

That is in the TRANS TRUST case which is referred to

on the earlier page:

It merely describes what must, I

venture to think, commonly be the

situation in any action to recover

general damages for breach of contract.

Naturally enough, the parties must

contemplate that breach will cause loss,

and that the plaintiff will be out of its

money until the damages are assessed and

paid. This was the very reasoning
which led to the statutory amelioration

of the old common law rule. The learned

trial judge made no finding of any

special loss which the parties had had in

contemplation; and there was no evidence

upon which any such finding could have

been based. Shortly, all that the

plaintiffs are seeking here is compensation

for the delay in getting their damages;

and that claim is inadmissible for the

reasons stated by Sir John Latham in

MARINE BOARD ..... It was a dissenting

judgment, but noting turns upon that.

And then there is the passage, which I have already read from that judgment.

WILSON J:  In this case, Mr Perry, how far is the award

in this case within the exclusion noted by

Mr Justice Samuels:

The learned trial judge made no finding

of any special loss which the parties

had had in contemplation.

In this case is not that the peg on which the

Full Court decision hangs?

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MR PERRY:  Of courser and I must come to that because the

real question that arises is whether that process

which was spawned initially by Lord Justice Denning

in the TRANS TRUST case of attempting to ameliorate

the old rule by·recogriizing-an exception where the

second rule in HADLEY V BAXENDALE applies, namely,

a contemplation of the parties in a particular

case that a certain loss might follow a breach,

the whole question is whether the process

of attempting to qualify the rule in that way is

legitimate. It is my submission that that raises

a question of law of importance because Courts have

not been unanimous in being prepared to accept

that qualification.

WILSON J:  The conflict of opinion is clearly a matter that

supports your argument in favour of the grant of

special leave, whatever may be the success of

your client on the appeal, but obviously if there

is a conflict of decision within Australia - - -

MR PERRY:	There is.
- - - then that may well be a matter that should

be addressed.

MR PERRY: Yes, I will certainly come to that. Indeed - - -

WILSON J:  Would you care to state the other matters that

you have in mind as succinctly as you may because

I think the Court would be interested to hear

what Mr Gray has to say as soon as it is convenient?

MR PERRY:  Yes, well I will not take time up unnecessarily.

C~uld I just mention with respect to that first

point that the decision in THE LIPS which is

referred to in His Honour the Chief Justice's

reasons for decision in the case at bar, which at

that stage was believed only to have been argued

in the Court of Appeal has now been overturned

in the House of Lords and that was not realized

at the time these papers were prepared.	But I will
not, in view of what Your Honour says - - -

WILSON J:  Where does he refer to it, Mr Perry, have you

got a page reference?

MR PERRY:  Yes, page 74 to 75.
Yes.

MR PERRY: Whereas what was said by the Court of Appeal

in THE LlPS seemed to give unqualified support for

the amelioration of the rule in the way that we

have mentioned, the House of Lords and Lord Brandon

himself, if I can use the expression, "there seemed

now to be a retreat", has indicated that the

so-called amelioration of the rule is not of application

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where the claim is for damages rather than payment

of a debat and Lord Brandon in the House of Lords
in THE LIPS, and we give the reference to it in the

list of authorities, says that the law will not

recognize a claim for damages for non-payment of

damages. Those are the - - -

DAWSON J: 1'he reasoning being - do not bother; I am just interested.

MR PERRY:  Again, that goes into very deep questions, but

I am sorry to have been slow in taking up
Your Honour Justice Wilson's invitation to go to

the next point, but I thought it proper to point that out because it does carry the matter a long

way down the track because in the House of Lords

in THE LIPS that is exactly the case at bar.

Here we are being asked to pay or were found to be

liable to pay damages for failure to pay damages.

And it falls fairly and squarely with what

Lord Brandon has now said is not allowable and

indeed the House of Lords has said is not allowable

on its reversal of the Court of Appeal decision

in THE LIPS .. Now I am sorry, Your Honour, to

have paused on that - - -

WILSON J: That is quite all right, but what else would be

involved?

MR PERRY:  The other points that we say are involved in this

case are, in the first place, the question of piercing the corporate veil, as the colourful phrase has it. It is our submission that the Full Court and the learned trial judge were wrong

in regarding the circumstances in which it is

legitimate to say that a loss ostensibly borne

by a corporate entity may be regarded as the loss
of an individual plaintiff as being of application
to this case. In this case, about the middle of
the relevant period over which the damages are

said to have accrued,the individual plaintiffs

formed a limited company. That limited company

was trustee of a family trust.	The beneficiaries
of the trust were the children and family members

of the individual plaintiffs. The plaintiffs

never brought into court the memo and articles
of association, the deeds of trust, an indication
of the shareholders, or even any books of account

or balance sheet or profit and loss accounts of

the trust company. They simply asserted blandly,

throughout the trial, that the loss was still

the loss of the plaintiffs.

You will see from the reasoning of His Honour

the Chief Justice in the case at bar, that

His Honour was prepared to accept the argument that

it was good enough if the beneficiaries of the

family trust were substantially the same as the plaintiffs.

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But they were not the same. They were the

plaintiffs and their children, or members of

their family. And, indeed, it was never demonstrated

at the trial how the loss in fact was distributed

because the way in which the family trust had

been administered and what distributions had been

made, the plaintiffs never went into at the trial.

We say that the relevant principle or matter

of law involved is that the loss ostensibly
suffered by a corporate entity may properly be
regarded as the loss suffered by individuals if

they have the total beneficial interest in the

company and if the profit of the company is theirs

and theirs alone.

But if that situation is not established, and

here surely the onus would be on the plaintiffs
to have established that and they did not try to,
they could not, and on the other hand it is clear

from the facts that the formation of the company

spread the loss, in our submission, there is an

error of principle and the Full Court and the

learned trial judge have, with great respect, blurred

over the most fundamental question of principle

there, which is of general application because

attempts to pierce the corporate veil are not

infrequent. Surprisingly, there does not appear

to be a decision of this Court as to the legitimacy

of the process of piercing the corporate veil

in damages actions or a decision which defines the

principles upon which that exercise should be

embarked upon. The very phrase "piercing the

corporate veil" is an emotive phrase which tends to

obscure questions of principle.

DAWSON J: There are a few decisions in the area of family

law, Mr Perry?

MR PERRY:  I see, yes, well I am sorry I am not aware of those,

but that does not surprise me. I do not take

the Court to the passage in His Honour the Chief Justice's

judgment as to that but you will see it at page 86

of the application book.

WILSON J:	So they are the two points, are the~ or is there -
MR PERRY:	I am sorry to say there are two other points, but

I can make them very briefly. Foreseeability

and directness of loss, the Full Court said

foreseeability is alh if the loss is foreseeable,

it is compensable. We say the Full Court misdirected

itself, it should have asked first whether the

relevant losses were direct losses and then the
concept of foreseeability is introduced in order
to limit the scope of the direct losses and if

necessary cut them back.

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WILSON J: Is that an appropriate matter for the Court,

assuming it were to grant special leave on the

points that you have already outlined, it would

require quite detailed investigation of the

evidence and the facts, would it not?

MR PERRY:  With respect, I had thought perhaps not, because

you see the facts of this case are essentially

very simple: failure to deduct the appropriate

amount fordepreciation each year with an enlargement

of the tax that was paid. We say the element in

this point of law of the facts that one would
have regard to is that the partners chose to pay

their personal liability for tax out of the

profits of the firm. And this meant that the loss

they then suffered, which the Court eventually assessed,what would the money have made in the

firm if that extra money had been there, that

those facts show that it is not a direct loss to

start with and you do not reach the question of

foreseeability, that the action of the plaintiffs

intervened and put the particular loss which

they came to court to prove out of the area of being

a direct loss. So I do not think there is a

complex question of fact there.

WILSON J: Which paragraph of the draft notice of appeal

deals with that?

MR PERRY: (f) and (g)at page 108 of the application book and

(s).

WILSON J:	(e), (f) and (g), yes.
MR PERRY:	Yes, if the Court pleases. The final point is

as to contributory negligence. We say that there was

an error of. law in this case, in the reasons for

decision of the Chief Justice at page 69 in that in the

circumstances of the case the Chief Justice said

that the client is able in engaging an accountant

for work of this kind, to rely absolutely on

the accountant checking it and there is no duty

upon the client to take care in ensuring the

accuracy of the figures handed over to the

accountant. You will see that at page 69. We say

that it is expressed in too sweeping a form.

We say that His Honour does not seem to contemplate

any circumstances in which the client must assume

responsibility for the accuracy of figures. But

on the contrary, he says at line 20 of page 69:

He -

the client -

is entitled to rely upon the tax expert whom

he has engaged to check any calculations

submitted to him.

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WILSON J:  But that is an entirely discrete issue that you are

seeking to bring into the case.

MR PERRY:  Yes. It is a discrete issue, but we say an important

question because it is a matter of importance

generally for accountants to know to what extent they

are entitled, as a matter of law, to rely upon

information handed over by clients. It is a not

uncommon thing for clients to hand a certain amount

of information over to an accountant and for him to

work out or prepare accounts from point on. If this

decision stands, it will throw an onus on accountants

to check back far further than has commonly been

regarded, and it raises a very difficult - - -

DAWSON J:  It would differ from case to case. It only throws

an onus on them to take reasonable case, does

it not?

MR PERRY:  Yes, but, of course, it does differ from case to case. Whatwe complain about here is that the

learned Chief Justice, with great respect, does not seem

to have perceived that it would differ from case to

case. He puts it torward as an absolute responsibility;

if you are going to a tax expert you can assume that

he will check the accuracy of everything that is

handed over. An accountant cannot check back

ultimately; there must be a point at which the
figures handed over by the client have to be accepted, but

it seems, with great respect to His Honour the

Chief Justice, that he denies that fact that there

must be a point at which the figures can be picked up.

It is our submission that if the decision in that

respect is allowed to stand, it would thrown an

extraordinary duty upon accountants in this area.

WILSON J:  That is the ground you have set out in paragraph (u)

on page 111?

MR PERRY:  Yes.

DAWSON J:  You are really talking there about the duty of the accountant, I suppose, th.an with the

person who provides the figures, are you not?

MR PERRY:	The two things &o together, with respect.
DAWSON J:	No, not necessarily.
MR PERRY:	Because it is the duty of the accountant on one

hand, to check back; the'duty of the client to take

some care in what he hands over. Somewhere between

those two duties, one draws a line. His Honour the

Chief Justice refused to draw a line. That is O1,.lr complaint.

DAWSON J :  · You say he put the duty of care on the accountant too high.

MR PERRY:  Yes. He formulated the duty of care in too onerous

a fashion. That is an error of law,in our submission.

AlTll/1/VH

Hunger fords	11	19/2/88
WILSON J:	Perhaps we will call on Mr Gray.	The first

and second questions, Mr Gray, seem to raise

questions of importance.	Do you oppose the grant
of special leave?

MR GRAY:  Yes, we do, if the Court pleases. We do not say

that there are not questions of importance within

there, but they do not arise in this case. This

matter took a particular course in the case below

when, in fact, certain legal propositions were

contended for by my learned friend, upon which the

Full Court appears to have acted. To demonstrate

that point immediately, if I could pass to the Court the precis of argument, or the summary of the respondents'· submissions were put to the

Full Court, the Court will see why we say that this

particular matter might not be an appropriate vehicle

for the full analysis of these points.

Could I pass up three copies of the summary

Mr Perry handed to the Full Court? I take the

Court immediately to the propositions l(a)(i) to (iii).
The legal propositions contended for below to the

Full Court were as follows, first that:

Interest is not allowable by way of general

damages simply for non-payment of either

liquidated or unliquidated debt -

citing LONDON CHATHAM in its narrowest sense; secondly -

damages for loss of use of money -

which is what my client claims -

may be allowable if not too remote, and

within the second limb of the rule in

HADLEY V BAXENDALE -

and (iii) -

damages for loss of use under (ii) may be

assessed by reference to interest paid or

foregone, if that is what the parties

might reasonably have contemplated at the

time of entering into the contract -

citing WADSWORTH and, over the page, citing PRESIDENT OF

INDIA V LA PINTADA. So the case was presented to

the court below without there being an issue as to

whether the developments of the law in the

United Kingdom through LA PINTADA correctly reflected

the state of law in this country. Rather, the court

was invited by my learned friend to enter into the

issue: has the second limb of the rule in

HADLEY V BAXENDALE been satisfied? Can it be said

that the claimed damages for loss of use of moneys are too remote and, what was within the reasonable contemplation of the parties at the time of entering

into the contract? The Court will then see, over

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the page, the factual matters that were agitated

at great length below, summarized. My learned

friend's client's case below was that we had not

made out a proper case of special knowledge or of

and then goes to that passage of the Full Court's judgment at pages 71 to 76 of the application book,

foreseeability, or of lack of remoteness. If the

the Court will find that Chief Justice King, and the

other members of the court agreed, simply apply those

principles.

The reasoning of Chief Justice King is as follows.

He cites the old LONDON CHATHAM proposition. If the Court pleases, that commences at the top of page 71. Having dealt with that proposition and, in the context

of late payment of debt - and we contrast damages for through the general principles enunciated by the
loss of use of money as a separate matter -

High Court. Then, through to page 72, he discusses

the reconciliation of an apparent conflict in the

rules. At line 3, he says:

How then is the rule referred to above as

to interest as a component of damages

reconciled with the principle of

restitution? The answer must be found,

I think, in the law as to remoteness of

damage.

Then he goes on to go to the words of Lord Justice Denning

in the TRANS TRUST case. Having advanced the reasoning

in that way, he then takes up the rule in

HADLEY V BAXENDALE. He discusses first the general

limb and traces through those developments and, if

the Court pleases, then comes to deal with that

second limb - that is, the special knowledge

requirement when dealing with contractual damages -

and, at 74, he comes to pose the question, is that

rule available to the plaintiffs in the case at bar?

What of LONDON CHATHAM case? His Honour then picks	up the WADSWORTH decision, the decision of
Lord Justice Brightman. He deals with the treatment
from LA PINTADA of that decision and the strict limitation of the LONDON CHATHAM decision.

At that point, with respect, the Chief Justice

had come to an acceptanceof my learned friend's legal

proposition 1 (a) (ii). Here we are concerned with damages for

loss of use of money; is it within the second limb

of HADLEY V BAXENDALE if it is, it is recoverable.

DAWSON J:  But he did not proceed on the basis that there was

a concession. He fully dealt with the law and came to

a conclusion, did he not?

MR GRAY:  Yes.

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DAWSON J; If what you say is right, it may sound in costs

at some stage later, but you cannot, as it were,

concede the law really in this way. Nor does it

appear that His Honour thought that the law had been

conceded.

MR GRAY:  Yes, If the Court pleases, we have not brought

forward that series of cases that talks about when

a point if law not taken below might be raised on

a further appeal, having not been raised below.

But, if the Court pleases, there is, with respect - - -

DAWSON~:  The point was raised; you say the argument differs,

there - that is the - - -

. MR GRAY:  Yes.

If the Court pleases, from my client's point of view, we have now argued this matter through

several forums, and now, for the first time we have

a change, and it is said against us that what was

conceded before is no longer conceded.

GAUDRON J:  I must say, I do not read l(a)(ii) as a concession

necessarily going to all the matters in issue in

this case. It depends - when you say it is a

concession it presupposes a certain construction

of the second limb of the rule in HADLEY V BAXENDALE,

does it not?

MR GRAY:  With respect, the second limb of the rule is that

if there is special knowledge in the parties, for

example, of a particular head of damage in the

event of loss of use of the money, in this case,

commercial interest being raised, then those are

recoverable damages. But if we leave aside contract

and just test it in tort, we say that,' quite apart

from the contractual issue - and that is the point

that LA PINTADA and WADSWORTH go to - that does not

touch the tortious question. On the question in tort,

it is a simple question of forseeability and

remoteness and, on that particular score, the court

below found that because of the particular knowledge

relationship and through the years when this	in the defendants from,a, the start of their
negligence continued to operate - because ~t operated for
many years - that there was foreseeability, both in
the general and specific sense, sufficient that at the end of the day my clients could recover damages for loss of use of money as a matter of tort.

If that point is right and, with respect, we would

say there the principles are all well established, it is simply a question of fact that at the end of the day, after a full appeal, the court will be left

with the judgment being right because the tortious

assessment has been correctly made. There is no

challenge, with respect, to the general principles

in tort that the court applied and gave effect to.

AlTll/ 4 /VH 14 19/2/88

Hungerfords

DAWSON J: But there is some difficulty, is not there - or

I have always had difficulty with accepting the

notion that one can concede the law.	The law is
always in issue.	You can concede liability, but
not the law.

MR PERRY:  Could I interrupt my friend there, simply to say

that I specifically reserved the right before the

Full Court to argue that the principle which found

expression in WADSWORTH V LYALL was not sound.

If the Court really was to be moved by my friend's

suggestion that there is in some way a concession,

I would ask this Court to look at the notes taken

by the Chief Justice presding in the Full Court.

MR GRAY:  If the Court pleases, despite that interruption,

I am instructed to maintain our stand, relying on

the precis of argument that we put forward as

being the demonstrable way in which the issue was

raised and dealt with below. Might I just, if

the Court pleases, be allowed just to side-step
the contractual issue for the moment and just focus

on the tortious issue? The plaintiffs' claim here

was brought in contract and tort. We said that

the duty of care was either an implied term of the
contract or arose because of the relationship of

the parties in the tortious sense.

When it comes to do with tort, we are concerned

with,	was the type of loss which my clients claimed
forseeable?	Was it foreseeable that damages would

flow for loss of use of money? That is, with respect,

a factual issue on which my client found favour, both

at trial and on the appeal. The difference between

the trial judge and the appellate court related to

the way in which one dealt with the evidence that

flowed. Having established the proposition that

damages for loss of use of m::mey was available at law,

and should be awarded in the case at bar, the question

then becomes, how does one assess that?

At that point, the question of interest arose,

because prevailing interest rates being interest

paid or interest foregone on capital not available,

was some evidence the court had before it, against

which it came to assess the damages. If the Court

follows through the reasoning of the Full Court,

the Court will see that the damages are not interest

per se. The damages are for loss of use of the money

measured in part by - or against a background of -

interest. Because, if the Court pleases, my

clients did not recover their full claim, or their

losses, as being the full interest component. That

was scaled down by some 20 per cent for other factors.

So we have in this case, in our respectful

submission, the proposition put in this way: there

was at law available a head of damage• damages for loss of

use of money. The court found that, in the particular

Aln:ts/VH	15	19/2/88
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circumstances of the case at bar, factually it was

an appropriate head of damage to allow. The

question then became, how much money is to be
allowed for loss of use? In answering that question,

the court had regard to evidence dealing with

interest and interest rates. It weighed that

evidence; it discounted its full effect and allowed

that is the way in which the judgments

a lesser sum of damages for loss of use of money. below and

have come to be handed down.

What is being posed is a different question.

The question being posed is: can interest be a head

of damage? With the greatest respect to my learned

friend's argument, that is not the issue that was

decided below. The issue decided below was: what

is a proper measure of damages for loss of use of

money? Now, if the Court pleases, I take up two

specific matters. The first is that reference is

made to section 30c of the SUPREME COURT OF

SOUTH AUSTRALIA ACT, which deals with the statutory

interest. Such a claim was made in this case, but,

as an alternative.

My clients, having recovered what they said was

their full loss under the head of damage, loss of

use of money, did not then pursue supreme Court interest

because, when analysed, there was no extra amount to
be made up. So that is why, if the Court pleases,

the Court will find no reference to section 30c of
the SUPREME COURT ACT in these judgments, because

the court dealt with the matter in an entirely

different way which led to application for

statutory interest. The second point that we wish

to make is that my learned friend referred to the

LIPS MARITIME decision in the House of Lords, that

being a decision brought down after the Full Court

had delivered its judgment.

We understand that that authority is in the book of

cases that my learned friend has supplied to the
Court, as being the third case in order -PRESIDENT OF

INDIA V LIPS MARITIME CORPORATION (1987) - - -

WILSON J: That is the Court of Appeal decision?

MR GRAY:	Yes.
MR PERRY:	The House of Lords immediately follows.
WILSON J:	Does it? I see.

MR GRAY:  3 All ER 110. In our respectful submission, the end

result of that case is continued application of the

full effect of· the LA PINTADA decision and, in fact,

a reiteration of the need to narrow down the LONDON CHATHAM

decison as much as possible. If the Court moves to

page 116 of the speech of Lord Brandon, the Court

A1Tl1/6/VH	16	19/2/88
Hungerfords

will find the passage dealt with at paragraphs f to h

and the Court will see that the end result of the

reasoning is that the currency exchange losses being

claimed were to be judged against the normal

contractual rules of HADLEY V BAXENDALE and not
delimited by the LONDON CHATHAM case. In effect,

the LA PINTADA case was rigorously applied and

reasserted. If I might read the passage to the Court;

it is but 10 lines or so:

The LONDON CHATHAM AND DOVER RLY case was

concerned, and concerned only, with the

recovery of interest as damages for late

payment of a debt. It was in no way

concerned with the recovery of currency

exchange losses as damages for such late

payment. It follows necessarily that the

scope of the LA PINTADA case, in so far as
as it differentiated between claims for the

recovery of interest as other general

damages on the one hand and as special
damages on the other, was similarly limited.

The House had no reason in the LA PINTADA

case to consider claims to recover currency

exchange losses and did not do so. Such

claims different significantly from claims

to recover interest in two ways. Firstly,

there is no previously established law,

comparable to that laid down in the

LONDON CHATHAM case, precluding the recovery

of currency exchange losses as damages for

late payment of a debt. Secondly, there are

no statutor~ provisions relating to the

recovery of such losses which could conflict

with any right of recovery at connnon law.

In these circumstances it appears to me that

claims to recover currency exchange losses

as damages for breach of contract, whether

the breach relied on is late payment of a debt

or any other breach, are subject to the same

same rules as apply for damages for breach

of contract generally.

That is, the two limbs of the rule in HADLEY V BAXENDALE.
Then His Honour goes on to consider the particular

facts of the matter and, in accordance with normal

contractual principles, there was not a recovery in

that case. But the Court will see from that passage

that the House of Lords reasserted with full rigour
the LA PINTADA decision. It specifically said
foreign exchange losses are to be viewed against the

general contractual principles and then proceeded to

apply those principles and, ultimately, in the particular

facts,find no recovery. So we say that about the

reference to the LIPS MARITIME case in some way being

a reason for the granting of special leave. We

submit to the contrary. It is a clear statement in

favour of the judgment brought down by the Full Court

of the Supreme Court of South Australia. If the Court

AlTll/7 /VH	17	19/2/88
Hungerfords

pleases, that is the way we advance the argument.

We concede that, hidden in that labyrinth, there are

some important points of law, but we say in the

way in which this case has developed, it is not an

appropriate vehicle in view of the submissions put

below. If the Court was,with respect, to find that particular submission unattractive, we would say it

would be a proper case for protection as to costs

on that issue, as far as my clients are concerned.

Can I turn to the second issue on which the

Court has invited submissions?

WILSON J: 

Before you leave that, have you anything to say

about the alleged conflicting decisionsof Australian
courts on that question?

MR GRAY: 

Yes, if the Court pleases, the LAUNCESTON case

that my learned friend referred to was a compulsory

acquisition case. The issue there being dealt with

was a payment under a statute and interest in

respect thereto. In our respectful submission, the

dicta of Sir John Latham in that case does not raise

a conflict. As to the suggestion of other conflict,

on an analysis of the SIMONIUS case, we say that that

too does not produce a conflict, and we simply adopt

the treatment of that case by Chief Justice King

at page 71. If the Court pleases, we are happy to

go to that case in more detail to demonstrate that,
but it will take a little time, but that is our

submission: that we join issue on the suggestion that there is this sharp conflict that my learned friend, Mr Perry, would have as the effect of his

submission.

The other conflict, as we understand it, is

reference to a single justice's decision from

Queensland.

WILSON J:  There are two Federal Court decisions, too.

MR GRAY:	Yes, if the Court pleases, in respect of that particular case, again we say it is not as clear cut
upon an analysis of that authority. If the Court
wished assistance,  we would need to go to that
authority in a little more detail, Might I turn to
the Federal Court cases? In the Federal Court, the
problem has arisen, under section 52 of the
TRADE PRACTICES ACT, the claim for damages for misleading and deceptive conduct by a corporation. I think all of them arise in that context, or one of the sectionswithin that part of the TRADE PRACTICES ACT.

Within those decisions there has been a difference of

opinion. The vast majority of Federal Court judges have

favoured the view that interest can be used within

the assessment process, though there are some judgments to the contrary, Mr Ju~tice Jenkinson in particular.

Again, what is being dealt with is a question of a

AlTll/8/VH	18	19/2/88
Hungerfords

right to money under a statute and not damages at

common law. We say that it is, with respect,

inappropriate to suggest there is conflict in Australia

because the Federal Court, when dealing with

statutory damages, in respect of which it has been

held the common law is but a guide, to say there

is a conflict beetween that line of authority and

the common law cases. With respect, the Full Court

decisions in the Federal Court have all favoured

the view for which we contend for in any event.

What we have is a conflict at the single justice level.

I do not know that, without perhaps going to the

authorities in detail - which we are happy to do -

we can advance that point. We join issue for those

reasons, but it does involve a careful analysis in
particular of the facts in each case, because one is
asking the question, was there any evidence of the

relevant special knowledge in the particular case

concerned, because it is only when that arises that

one has the second limb of the rule in

HADLEY V BAXENDALE satisfied.

Can I turn to the second point that I understood the Court invited submission on, being in respect of the piercing of the corporate veil? If the Court

pleases, the plaintiff's case in that respect, was

put on a very clear basis. These losses arising from

the loss of use of money was said to be their loss

for two reasons. One is there were contractual and

guarantee a_rrangements that they were oersonally

bound to; that alone made them their losses.

As an alternative, it was said that the· corporate

structure that was put in place to continue to run

the previous partnership business - and it did not

change - was but the alter ego of the plaintiffs.

There was no dispute that certain family members

of the plaintiffs were involved in the corporate

structure, but the control all lay with the previous

partners, and in that sense it was said that the

it was the alter ego.

So, for those two reasons it was said that that

aspect of the loss could be recovered: either because

there was a personal indebtedness through agreement
and guarantee or alternatively, because the corporate

structure was but the alter ego of the plaintiffs in

every real sense. The plaitiffs succeeded on both

counts. My learned friend's ground of appeal only

goes to one of the bases. We would say that if that

point was decided in his favour, it would make no

difference because the plaintiffs' personal liability

by agreement and guarantee remained. The factual

matrix to that, if the Court pleases, if I might but

summarize it, was when the plaintiffs thought about

incorporation - and they did so because of the

massive tax losses that were causing them to think

about a restructre - sorry, the massive over-payments

of tax were leading to finaacial prcblems, so they

AlTll/9/VH	19	19/2/88
Hungerfords

thought about restructure - their financiers said,

"Yes, we will allow you to restru:ture; we will continue

the financing arrangements, but only on your
acknowledging by agreement your indebtedness to date
and your continuing, through personal guarantee, to

be responsible for the consequences of that.

GAUDRON J: But does that necessarily bring about a liability

which would need to be indemnified in the context

of this case?

MR GRAY:	In our respectful submission, Your Honour, yes.
GAUDRON J:	I mean, I could understand if it were a guarantee to the company that said the company has received
all that it was agreed.that the company would receive
but if it turns out that it has not, we will make
good the difference, but I think the guarantees to
creditors might be in a different position.
MR GRAY:	Yes, to develop the point and to answer Your Honour's

question, I must delve a little into the facts to

explain the background.

GAUDRON J:  Yes.

MR GRAY: If the Court pleases, this business, being a rental

business had, were it to succeed, an insatiable

appetite for money, because its growth was dependent

upon the owners of the business providing the capital and

returning that through - in the return through interest

payments over a period of time. They had a successful

business with an ever-increasing demand for money

which was obtained through financing arrangements.

At the time when they came to change from a

partnership to a corporate structure, they had in place a very, very substantial debt, credit loan. In respect of that, and within that, were contained

- we say were reflected - the overpaid tax. That was

in there somewhere within those moneys.

That debt continued to grow after corporation.

It was never redeemed, because the businesses

continued to grow and with it success, so the need

for finance. So, if one looks at ac~0ss a time frame,

the losses suffered through overpayment of tax were

then and there within the debt at the time of

incorporation, and remained. The guarantee that the

- or, I said, the agreement first - that the

plaintiffs reached, and it is evidenced by written

documents, was that we remain responsible to the

financier for that debt. So that plaintiffs' loss

continued and remains ta:iay.

AlTll/ 10 /VH	20	19/2/88
Hungerfords

MR GRAY·(continuing):  He still has a guarantee and the

·	debt is still there. Then, on top of that, he
guaranteed any future indebtedness or any top-up -
or any draw-down on that line of credit was guaranteed. So, whichever way you look at it the plaintiffs'
loss remained.

That matter is reflected, with respect,

in the Chief Justice's reasons at page 86 when

he specifically deals with both grounds. We

point out to the Court there is no challenge

at all - to the second ground that I have just

been dealing with - that is not the subject of

challenge at all. He says, at page 86·1ine 20:

It is clear that this loss fell on

the appellants throughout. The intervention

of the company after 1st January 1982 made

no practical difference. It would be unjust

to deprive the appellants of the damages

justly due to them by reason of the

technicality that, whereas prior to

1st January 1982 the loss fell directly

upon the appellants and through them on

their families, the loss after 1st January 1982

fell initially on the trustee company and

only derivatively upon the appellants and

their families. The loss continued to

fall in reality upon the same people. Moreover

the appellants not only remained liable

for the debts incurred by the partnership

prior to the formation of the company, but

personally guaranteed payment of future.

debts by the company.

So that second ground that is used has not been

challenged. It is not the subject of any appeal.

So my friend's first point, and questions of

piercing the corporate veil - perhaps all those

nice points - is successful;_ it leads nowhere because

it is another basis on which the finding was

made that is not challenged.

If the Court pleases, can we say this as

well: there is no principle of law involved; the law, with respect, that is uncontested is

that the court has power per se in an appropriate

case to lift the corporate veil. What is being addressed here is whether, in the circumstances

and facts of the case at bar, was a sufficient

factual basis made for the exercise of that power?

There is no challenge to the power. We are only

concerned with, in the particular facts, whether

that power should have been exercised.

AIT12/l/SDL	21	19/2/88
Hunger fords

To trace this through, if the Court pleases,

in this corporate structure - it is not as though,

with respect, there are no documents about it,

in the exhibits - there are documents and in

regard to the agreements and guarantees there

is quite a lot of information to be put forward.

That is a factual inquiry and does not lend itself

to a definition of principle. So that is the submission we put in regard to that suggested

ground for special leave and if the Court was

minded to be against our submission and grant

special leave on the first ground we say that
it should not run to allow that issue to be raised.

If the Court pleases, I understood the Court not to invite submissions in respect to the other

matters my learned friend raised.

WILSON J:  Paragraphs (e), (f) and (g), Mr Gray, have

you anything to say - - -

MR GRAY:  This is at pages 107 and 108?

WILSON J:  107 and 108. I am referring to the draft notice

of appeal.

MR GRAY: If the Court pleases, the two fundamental matters

that a court addresses in regard to damages are

foreseeability and remoteness. Directness is

but the corollary of remoteness. If the Court goes
to the passage from page 71 to page 76 in the
reasons of the Chief Justice, the Court will

see the question of remoteness is directly dealt

with by the court. What ground (e) seeks to

do is to say, with respect, "We will not call

it 'remoteness', we will call it 'directness'

and say that that has not been intended to."

Our answer is that the court did deal directly

with those matters in law that it had to deal

with and the idea of there being some preliminary

legal principle that one must consider an issue

of directness as a matter of principle is just

unknown to the principles of the laws of damages.

WILSON J:	Yes.
MR GRAY:	Point (f) is, again, simply an attack on a factual
matter. The Court, with respect, specifically deals at length with the factual question as to the depletion of funds employed and loss.
What the Court has said, with respect, is that
one of two things has happened: either there has been a depletion of funds available - so
there has been a loss of the use of the moneys in the active sense through the business and therefore there has been a loss of the advantage
that use would bring or, alternatively, the borrowings

AIT12/2/SDL	22	19/2/88
Hunger fords

have not been reduced or have had to be otherwise

increased so there has been an incurring of interest

in respect of an increased debt. So we are either

dealing with interest paid or interest foregone.

One or other has happened and the Full Court

said that because it is a successful business

and a growing business it is a reasonable inference

to draw that any interest foregone through loss
of capital would be greater than interest paid
otherwise the business would fail rather than
succeed. With respect, we would put it that

the logic of that conclusion is inescapable and,

that being so, it must have been a direct consequence

in the facts of this case that the effect of

the loss of funds flowed through to the partnership

business.

In paragraph (g), with respect, again we

are not dealing with a proposition of law. As

the Court has seen in the passages read already
the court was at pains to deal with the question

of foreseeability, address it in general principle,
deal with the facts that they said gave rise
not only to general foreseeability but particular
foreseeability and then proceed to decide the

case accordingly.

The evidence in regard to direct foreseeability

was very very strong indeed and the Court will

find it in two passages, at pa~es 81 and 82 when

it is set out - the cross-examination of the

two principal officers of the defendant,

Mr Raphael and a Mr Norton. If the Court reads

the passages of evidence there dealt with the

Court will see that there was the clearest

acknowledgement by Mr Raphael on the one hand

and Mr Norton the other that they had, as advisors,

direct knowledge of the consequences of a lack

of money. All the features of this business that

led to this loss were known to them. These were

the advisors who· set up the business and who

conducted the overview of its accounts for a

period of a decade or thereabouts.

The unusual feature of this case, if we

might suggest it, is that there was the clearest

spec ia 1 knowledge . · ..• ·. the second of HADLEY

V BAXENDALE and why it has made it such a strong

case to argue for the full complement of loss

of interest as a head of damage.

Does that cover the points the Court invited

submission - - -?

WILSON J:  I think so, Mr Gray. Thank you.

MR GRAY:  May it please the Court.

AIT12/3/SDL	23	19/2/88
Hungerfords

MR PERRY:  I would wish to reply briefly to one or two matters

which my friend made reference to?

WILSON J:	Even if the Court is disposed to grant the application?
MR PERRY:	No, I would not take another moment up of the

Court's time.

WILSON J:  The Court believes that there are questions

of general importance raised in this case which

would warrant the grant of special leave but

we would exclude ground (u), dealing with

contributory negligence, from the grant of leave.

We see no reason to take that question on board.

The question of costs that Mr Gray has

raised is a question which it is difficult for

the Court to resolve at this point. It would

be easier to resolve it at the hearing of the

appeal and, of course. in leaving it open

it is open to Mr Gray to advance that at the

appeal.	So, special leave will be granted on
that term.

AT 1.06 PM THE MATTER ADJOURNED SINE DIE

AIT12/4/SDL	19/2/88
Hunger fords	24