Klement v Pencoal Ltd
[2001] HCATrans 128
IN THE HIGH COURT OF AUSTRALIA
Office of the Registry
Brisbane No B44 of 2000
B e t w e e n -
KOLOMAN KLEMENT
Applicant
and
PENCOAL LIMITED
First Respondent
SOUTH BLACKWATER COAL LIMITED
Second Respondent
IAN RUSSELL GOULD
Third Respondent
JOHN CHARLES CRIDLAND
Fourth Respondent
Application for special leave to appeal
KIRBY J
HAYNE J
TRANSCRIPT OF PROCEEDINGS
FROM BRISBANE BY VIDEO LINK TO CANBERRA
ON FRIDAY, 4 MAY 2001, AT 11.45 AM
Copyright in the High Court of Australia
__________________
MR F.L. HARRISON, QC: May it please the Court, I appear with my learned friend, MR C.L. FRANCIS, for the applicant. (instructed by G.T. Down)
MR J.C. BELL, QC: May it please the Court, I appear with my learned friend, MR J.D. McKENNA, for the first second respondent (instructed by McCullough Robertson) and the second respondent. (instructed by Blake Dawson Waldron)
MR HARRISON: I am instructed there is no appearance for the other respondents.
KIRBY J: Yes, I have a note from the Deputy Registrar of this Court certifying that he has been informed by the solicitors for the third and fourth respondents that they do not wish to take part in these proceedings and that they will abide by the order of the Court.
MR HARRISON: Thank you, your Honour.
KIRBY J: May I compliment both sides, speaking for myself, on the written submissions in this case, which are very clear and which have saved a lot of the trouble that might otherwise have been experienced in understanding all the issues, but I think we understand what the issues are. So you go ahead, Mr Harrison.
MR HARRISON: Thank you, your Honour. In the applicant’s summary of arguments at pages 114 to 115 of the application book are reasons why it is submitted that special leave should be granted. Subject to your Honours, we propose to deal orally primarily with the third, which we would characterise, in effect, as that the interests of the administration of justice, both in the particular case and generally for Queensland require consideration by this Court of the judgment of the Court of Appeal. It is our submission that ‑ ‑ ‑
HAYNE J: Before you come to that, Mr Harrison, may I understand better one aspect of the facts. As I understand the way in which the case stands at the moment, there is no dispute by your client that an option was validly given to one or other of the respondents for that respondent to acquire your client’s interest in the relevant mining interests, is that right?
MR HARRISON: Not quite but not significantly different. The option was originally granted to a company called Pennant Holdings which assigned it to the first respondent which settled and then sold the interests to the second respondent.
KIRBY J: So, save for that intervening fact, his Honour’s question is answered yes.
MR HARRISON: Yes, that is so, your Honour.
KIRBY J: Yes.
HAYNE J: Further, there is no dispute that the relevant option holder exercised the option in accordance with its terms?
MR HARRISON: That is so, your Honour.
HAYNE J: That being so, does it not follow inexorably that your client would be liable to specifically perform the obligation to transfer his interest in the relevant mining interests to the option holder?
MR HARRISON: No, your Honour, that is a case that my learned friends could have brought by way of counterclaim and did not, and it is a case that does not raise precisely the same issues as are raised here because if they had raised that case, one would have focused not on the conduct of the applicant, but on the conduct of the first respondent to determine whether or not it was entitled to specific performance. So one would have been looking closely at the aspects of the conduct of the first respondent in the course of settlement.
Secondly, my client, on the other hand, would not oppose a decree of specific performance if it provided for the payment of my client’s share of the purchase price to my client, but ‑ ‑ ‑
HAYNE J: That is to say, your client does not resist transfer of the mining tenement or mining interests to or for the benefit of the relevant respondents. His concern is a concern with the destination of the proceeds of exercise which he regards as having been misappropriated by the other person interested in the mining interest, is that right?
MR HARRISON: No, your Honour, it is a fraction antecedent to that. My client says that the proceeds were not, in fact, paid to a person who was capable of giving a valid receipt. It is not that they were paid to somebody who gave a valid receipt or could give a valid receipt who then misappropriated them. So that there has not been settlement in accordance with the contract by the first respondents.
KIRBY J: Yes, press on.
MR HARRISON: Your Honours, the basis for the submission that the interests of justice require the Court to consider this is that in this particular case both the judge at first instance and the Court of Appeal reached conclusions on vital issues of fact without revealing the process by which those conclusions could be drawn from the evidence and as well reached conclusions which are not supportable by the evidence. In other words, both Courts failed to give the necessary particular attention to the evidence and reasoning to do justice to the plaintiff. In this regard, we rely on the recent statement by the English Court of Appeal which I may mention has been applied in the New South Wales Court of Appeal in Moylan v Nutrasweet [2000] NSWCA 337 at paragraph 63, the English Court of Appeal decision being Flannery v Halifax Estate Agencies Limited [2000] 1 WLR 377, and in particular to parts of the passage in the judgment of the court, starting at 381 at about the letter G:
We make the following general comments on the duty to give reasons.
(1) The duty of a function of due process, and therefore of justice. Its rationale has two principal aspects. The first is that fairness surely requires that the parties especially the losing party should be left in no doubt why they had won or lost. This is especially so since without reasons the losing party will not know whether the court has misdirected itself, and thus whether he may have an available appeal on the substance of the case. The second is that a requirement to give reasons concentrates the mind; if it is fulfilled, the resulting decision is much more likely to be soundly based on the evidence than if it is not.
We submit, with respect ‑ ‑ ‑
KIRBY J: Why do you read an English case. There is a ton of Australian authority to the same effect.
MR HARRISON: That seemed to me to put it very succinctly and I noticed that the Court of Appeal in New South Wales had adopted it.
KIRBY J: I see, the Australian authority was rather long-winded. I think you had better move to your next point.
MR HARRISON: Your Honour, what I am proposing to do is develop that point and I need to lay as quickly as I can the background to it. This is not the case of the judge at first instance saying simply that he believed Lindner, the fifth defendant, rather than my client, Mr Klement. His Honour said at 52, paragraph 24, line 15 that the evidence of both was unreliable, in Klement’s case because his memory was unreliable and that he rationalised considerably and was not always truthful and that Lindner was plainly dishonest.
KIRBY J: It went beyond that, did it not, Mr Harrison, because in the Court of Appeal’s summary - and I did check and it does not seem to be wrong - their Honours say, and this is at 84:
The judge observed that the relationship between the appellant and Lindner was marked by “fluid informality”, that aspects were “strange”. even “bizarre”. As to why the appellant was apparently not inclined properly to protect his own position, the judge inferred that “while he may not have authorised Lindner’s forgery of his signature to the transfer, the (appellant) was content to condone it as part of Lindner’s efficient conduct of the transaction with such splendid results and in the expectation that his friend would ultimately account to him fully”.
Now, that is very unpromising factual material to present these deep issues that you are suggesting arise in this case because the facts are found, really, against your client and, in any case, it is a very peculiar factual matrix, very peculiar.
MR HARRISON: Yes, but, with respect, although it may be overall a peculiar factual matrix, there are particular issues which are important which neither court, in fact, examined. Could I take, really, as the prime case how the courts, both at first instance and on appeal, dealt with the two meetings at the Cavan Hotel on 25 November and on an unspecified date in December which are the source of their Honours’ conclusion and which their Honours in the Court of Appeal nor his Honour at first instance did not, with respect, advert to vital aspects of. In particular, in both cases, notwithstanding what I have read to your Honour about his Honour’s findings as to credibility, in both cases, both courts ignored the evidence of the one independent witness. In each case they were different people who cast an entirely different light on what happened on those occasions than Mr Justice Derrington submitted and the Court of Appeal accepted without itself again examining the light which the independent witness threw on the events.
HAYNE J: Just before you embark on this exercise, does it follow that if leave were granted, you would be inviting this Court to engage in a close and detailed analysis of the course of events at trial.
MR HARRISON: No, your Honour, we would be asking your Honour to make proper conclusions on, I think, about five pages of transcript because, in our submission, the events at these two meetings have been so badly misunderstood that that is all that will be required for your Honours to conclude that, really, in the absence of any criticism of the independent witnesses, the only reasonable course was to adopt their accounts of what happened on those two occasions which differ from the conclusions of the ‑ ‑ ‑
KIRBY J: Yes, but that is really to put at naught the judge’s impression of your client.
MR HARRISON: No, what his Honour said is that, a little after the passage that I read, that one could - although both were unreliable, that is not to say that they were not telling the truth on some occasions, but then his Honour did not go on to say on what occasions and why and, in particular, why he rejected the evidence of the independent person. He was not challenged in cross‑examination, even, your Honour, in either case.
KIRBY J: That may be so, but we have got to recall what the court said only a couple of weeks ago in Rosenberg v Percival that appellate courts have to be still very careful about disturbing in any way the findings of primary judges which rest on their impression of crucial evidence and crucial witnesses.
MR HARRISON: Yes, we are going further, your Honour, and saying that the court has made mistakes. It is not a matter of saying the judge, in the course of his reasoning, disbelieved that particular part of the evidence where he should have believed it. It is that the judge simply, without analysing the evidence at all, expressed the conclusion which self-evidently failed to take account of the evidence that was there. It was as though his Honour had formed an impression at some stage during the course of the trial and just simply had not taken account of one of the later witnesses and had failed when reserving his judgment likewise to consider that other evidence. He was, as it were, blind to any evidence against his preliminary view, and that is what we say is revealed by the course of events here and that the Court of Appeal did not deal with that in the submissions. Even to reject them, your Honour ‑ ‑ ‑
KIRBY J: But unless you can disturb that conclusion of the judge which, in a sense, is based on an overall impression and intuition - I have not forgotten your criticism of the way he reasoned it, but that, really, is fatal to your client. If that is the interpretation of these bizarre events which their Honours refer to, including the primary judge, then that is fatal to you.
MR HARRISON: Well, the bizarreness, your Honour, with respect, is the overall relationship of not requiring constant accounts in relation to dealings in respect of machinery carried out by one or the other. But these are simple conversations ‑ ‑ ‑
KIRBY J: Not necessary constant accounts, but just a trust in Mr Lindner and a belief that he had already got a marvellous result and that he was willing to rest upon his action and that he condoned the forgery.
MR HARRISON: Yes, and it is ‑ ‑ ‑
KIRBY J: It does happen, condoning the forgery. I mean, it should not but it does.
MR HARRISON: Yes, but one needs evidence that that happened, your Honour, and if his Honour has misunderstood the evidence on the two occasions that he says amounted to condemnation and ignored the evidence of the independent witness, then the condemnation falls away.
KIRBY J: But you agree that to get to your important legal questions, you have to go through this rather unpromising forest of factual determinations full of pitfalls and landmines and all the other impediments?
MR HARRISON: Not at all, your Honour, it is just a few – I can point your Honour in perhaps five minutes or less than that to the particular mistakes.
KIRBY J: It will have to be less.
HAYNE J: Just before you embark on that, where in your notice of appeal to the Court of Appeal do we find the ground that squarely raised this wrong treatment of the independent witness because I do not see it?
MR HARRISON: Your Honour, in the notice of appeal we put it briefly, I think, by saying that the court should not have found the estoppel or the ratification and then the argument was developed in the outlines of argument, your Honour.
HAYNE J: Yes, I see. Do not delay on that, your time is limited. You wish to make two points about this independent witness?
MR HARRISON: Yes, your Honour. Your Honour, there were two meetings, one in November, one in December. The first meeting his Honour said that what occurred then should have put Mr Klement on his guard. That was the meeting at which Mr Lindner had mentioned his ability to forge Mr Klement’s signature. The Court of Appeal at pages 88 to 89, paragraph [20], elevated that and conflated what happened at the two meetings to a proposition that:
The appellant learned of the settlement of the transfers, and of Lindner’s boast to be able to sign for the appellant without authority.
But if one reads Mr Morgan’s evidence, the independent witness, the subject sale was not the subject of that meeting at all. There was a discussion about - the meeting was limited to the complaints about the general machinery dealing and there was no reference to the sale at that meeting.
Then at the second meeting, that is the December meeting, his Honour concluded and the Court of Appeal adopted that Klement challenged Lindner to the effect that he had received nothing from the sale transaction, when the evidence of Mr Messenger was, if I can read two passages:
was there discussion as to whether or not anyone had received those moneys?
This is at 39, meaning the moneys from the contract of sale, to which Mr Messenger said “No.” Later on – I am sorry I have the wrong reference – the question was:
you couldn’t tell whether Mr Lindner had received anything from the contract yet, could you?-- No, I couldn’t.
It is completely inconsistent with that to conclude that Mr Klement had complained at that meeting about the absence of payment under the contract of sale. Now, how‑ ‑ ‑
KIRBY J: But the judge did not have to accept any of the evidence. It was for him to decide who he would accept.
MR HARRISON: But it leaves one with the impression which, in my submission, is ‑ ‑ ‑
KIRBY J: You say it leaves a sense of unease that he did not refer to the independent witness and somehow indicate why he did not accept him.
MR HARRISON: A sense of injustice, your Honour, not just unease, and that makes all the following conclusions unsatisfactory and leaves my client in the position where he has not had his proper case tried. His Honour has decided the legal issues on events that did not happen.
Could I refer then to just one other of these particular aspects where the court, through lack of particularity, both courts have erred, and that is in relation to the detriment said to have been suffered as a result of Mr Klement’s not advising the purchaser of Lindner’s forgery. The Court of Appeal said at page 94, paragraph [40]:
the appellant came to know of the forgery at a relatively early stage, and at a time when Pencoal could have rectified the problem if alerted to it –
yet if one looks at the chronology at page 110, Lindner paid away $690,000 of the proceeds of sale in October, that is, before there is any allegation of any knowledge on the part of Klement that there had been a forgery. Then he says that he paid away the balance. He refers to a time span which places one at about the time of the second meeting, which is perhaps the occasion when there may stronger evidence that Mr Klement knew of the sale. So that if there is any onus on the respondents to establish damage as a result, that has not been satisfied. In other words, they would be in no worse position if Mr Klement had disclosed in December that the forgery had occurred. Without that, with respect, there cannot be an estoppel.
KIRBY J: Yes, thank you, your time is up, Mr Harrison. Mr Bell, the Court does not need your assistance, perhaps because of your written submissions.
The facts of this case were distinct and most unusual. Both the primary judge and the Court of Appeal commented on the peculiarities of the course of dealings between the applicant and Mr Lindner which led to the present litigation. The applicant, a Mr Lindner, executed an option. It was valid on its face. It was validly exercised in accordance with its terms. In these circumstances, it is doubtful that the special leave questions propounded, or all of them, arise in the circumstances.
But even if they do, the dealings between the parties was so unique, even bizarre, that this would not be a suitable vehicle to present the suggested questions for decision by this Court. Special leave must, therefore, be refused with costs.
AT 12.08 PM THE MATTER WAS CONCLUDED
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