Knight v Johnstone

[2007] HCATrans 346

[2007] HCATrans 346

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Brisbane  No B32 of 2006

B e t w e e n -

MARK PHILIP KNIGHT

Applicant

and

PETER KEITH JOHNSTONE

Respondent

Application for special leave to appeal

Publication of reasons and pronouncement of orders

KIRBY J
CALLINAN J

TRANSCRIPT OF PROCEEDINGS

AT CANBERRA ON WEDNESDAY, 1 AUGUST 2007, AT 9.00 AM

Copyright in the High Court of Australia

KIRBY J:   In 2001 the applicant gave the respondent, a friend, $30,000.  He claimed that it was a loan and that a document written by the respondent and signed by both of them on 4 March 2001 described it as such.  The applicant sought repayment of the loan, but the respondent alleged that the sum was a contribution to a joint venture which did not come to fruition.  Nothing was therefore repayable to the applicant.

The matter was heard in the Magistrates Court of Queensland and judgment was given in favour of the applicant.  The District Court of Queensland to which the respondent appealed held that the Magistrates Court had taken too narrow a view in considering the evidence and upheld the appeal.

It appears that the applicant and respondent decided to engage in futures trading.  The applicant gave evidence that he agreed to lend $30,000 to the respondent on certain conditions.  Some of those conditions were said to be embodied in the written agreement but that there was verbal agreement with respect to several other matters: that the respondent would pay 50 per cent of any profits generated to the applicant; that a "stop loss" order would be used in every case to minimise the impact of losses; that the respondent's trading and accounting had to be open to inspection by the applicant; that the applicant had the power to veto any particular trade; that there could be a partial repayment of the $30,000; and that the respondent's trading would always be conducted according to trading principles upon which the two men had agreed.

The respondent had thereafter engaged in futures trading using his own money as well as the applicant's.  It was common ground that the written document played a significant part in the arrangement between the parties.  Each fully understood however the risks of futures trading.  Profits and losses could both be made.  Further, the respondent told the applicant that he had insufficient funds himself and that he had no equity for a loan anywhere else because he had borrowed all the money for the purchase of his house two or three years before.  Critical words in the agreement were that the applicant was " … to be repaid whatever balance is owing, according to our agreement, whenever [the applicant] desires … " on five business days notice.

The District Court (Brabazon DCJ) found that the reference to a balance which was owing was more likely to be a reference to a balance which fluctuated because of trading, rather than a balance which was left after partial repayment of $1,000.  Accordingly, the respondent was under no obligation to repay that amount to the applicant.

The applicant sought leave to appeal to the Court of Appeal of the Supreme Court of Queensland.  The Court (Jerrard JA; de Jersey CJ and McMurdo P agreeing) pointed out that the respondent's evidence was that the word "loan" was used in the agreement because the respondent knew that he could not act as an unlicensed securities adviser, and so the parties agreed to describe the investment as a loan, when it was not one in fact.  The Court also noted that, in a conversation between the applicant and respondent secretly taped by the former, the applicant never claimed a categorical right to immediate repayment of $30,000.

The Court held that the conduct of the parties, and the terms of the document would objectively lead a reasonable person in the position of the applicant to understand that the applicant was investing capital, intending to share profits and to guard against losses, as he would be responsible for a portion of those as well.  It therefore held that the District Court was correct in the construction of the written agreement and had not been shown to have failed to take relevant matters into account, or to have reached a conclusion against the weight of the evidence.  Accordingly, the application for leave to appeal was dismissed.

The applicant's draft notice of appeal to this Court makes a general allegation of breach of natural justice but fails to provide proper particulars of it.  He appears to be contending that as various aspects of the agreement between the parties were not observed, he is entitled to relief.

The applicant has not advanced sufficient reason to doubt the correctness of the decisions of the District Court and the Court of Appeal.  The interpretation of the agreement preferred by those courts was well open.  Any appeal to this Court would have few or no prospects of success.

Special leave to appeal must therefore be refused.

Because the applicant is unrepresented, this application for special leave falls to be dealt with in accordance with rule 41.10 of the High Court Rules 2004. Pursuant to rule 41.10.5 we direct the Registrar to draw up, sign and seal an order dismissing this application and I publish the disposition signed by Justice Callinan and myself.

AT 9.04 AM THE MATTER WAS CONCLUDED