LFOT & Ors v Hanave Pty Ltd

[1999] HCATrans 462

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Sydney  No S61 of 1999

B e t w e e n -

LFOT (formerly JAGAR PROJECTS PTY LIMITED

First Applicant

PAUL EWEN MITCHELL TRESIDDER

Second Applicant

JOSEPH RAYMOND GLEW

Third Applicant

and

HANAVE PTY LIMITED

Respondent

Application for special leave to appeal

GAUDRON J
KIRBY J
HAYNE J

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON FRIDAY, 10 DECEMBER 1999, AT 10.51 AM

Copyright in the High Court of Australia

MR C.C. HODGEKISS:   If the Court pleases, in that matter I appear with my learned junior, MR M. RICHMOND, for the applicants.  (instructed by Hunt & Hunt)

MR G.J. McVAY:   If the Court pleases I appear for the respondent.  (instructed by Gilbert Mane)

MR HODGEKISS:   Your Honours, the two essential and important issues here are critical questions of causation and reliance in the context of the Trade Practices Act which of course has direct ‑ ‑ ‑

HAYNE J:   Is that right?  Or is this really a case about appellate review and whether the Full Court was warranted in upsetting the finding below?

MR HODGEKISS:   It might be that.  But the better way, with respect, we characterise it is to say that the majority of the Full Federal Court were in error on principle with respect to causation, and in error with respect to principle ‑ ‑ ‑

HAYNE J:   How do you get to that until the Full Court is warranted in overturning the trial judge’s finding, at least at first blush apparently based in an assessment of the credit of the witness that, subjectively, this witness representative of the applicant did not rely?

MR HODGEKISS:   The reason is your Honour, that the majority did not do it on a subjective basis.  They did it on an improper ‑ ‑ ‑

HAYNE J:   Just so.  But you cannot get to these questions of principle without first determining whether the Full Court was warranted in upsetting the finding made by the trial judge.

MR HODGEKISS:   With respect, they would have been if they had applied the correct legal principle, but the principle they applied is inconsistent with Gould v Vaggelas, inconsistent with the Full Federal Court in Munchies Management, inconsistent with Justice Gummow as he then was in Elders v Reeves, all of these inconsistencies ‑ ‑ ‑

HAYNE J:   All of this is to convert, as the Full Court converted, perhaps wrongly, a question of fact determined by a trial judge into some question of law, which itself may be the ground of leave, that leave should go because the Full Court wrongly interfered with a finding about the subjective state of mind of the representative of the applicant.

MR HODGEKISS:   Perhaps we are not disagreeing, with respect, your Honour.

KIRBY J:   You do not raise that point in your application for special leave.

MR HODGEKISS:   The way we put it in our application is that – this is on pages 104 and 105 – the Full Federal Court was in error in relation - this is in the general way - on issues of reliance and causation ‑ ‑ ‑

KIRBY J:   Mr Hodgekiss, you will know that for years there have been decisions of this Court one after an other, Jones v Hyde, Abalos and before them many cases, more recently the State Rail Case, which have laid down principles relating to the disturbance by appellate courts of the findings of primary judges.

MR HODGEKISS:   Yes.

KIRBY J:   Now, do you or do you not raise that issue in this Court?

MR HODGEKISS:   In this sense, your Honour, yes, to the extent that the Full Court ‑ ‑ ‑

KIRBY J:   Like extracting a tooth?

MR HODGEKISS:   No, your Honour.  The very argument that Justice Hayne and yourself have put to me were put to the Full Federal Court.

GAUDRON J:   Are we not talking about two sides of the same coin, in one sense?  There was a finding that as a fact this did not operate upon the mind of the respondent, for present purposes?

MR HODGEKISS:   Yes.

GAUDRON J:   Opposed to that, the Court of Appeal comes in and says, “Well, in normal circumstances it was likely to have a particular impact”, and we will say, “It did have that impact”.

MR HODGEKISS:   Yes, that is what happened.

GAUDRON J:   Well, are they not two sides of the same coin, in a sense?

MR HODGEKISS:   There are two parts, but it is the second one which we say, with respect, is incorrect as a matter of principle.  If one turns ‑ ‑ ‑

GAUDRON J:   All right.  Let us say that that is incorrect as a matter of principle.  Where does that take you?

MR HODGEKISS:   It is incorrect as a matter of principle on two vital questions, this is if one looks at either of reliance or causation, that impinge upon, in a sense, decisions made every day under the Fair Trading Acts of every State and Territory and by the Federal Court, and let alone other courts that are applying this national legislation.

GAUDRON J:   You have not answered my question.  For the purposes of this case, where does it take you to have it held that the Full Court’s approach to causation was wrong?

MR HODGEKISS:   That would mean that the applicant for special leave, if ultimately able to persuade the High Court, would be successful and the ‑ ‑ ‑

GAUDRON J:   No, it would not, would it?

MR HODGEKISS:   Yes, it would, your Honour, because that would mean that the trial judge who said no reliance, no causation, the dissenting judge, Justice Emmett in the Full Federal Court who said the same thing, in fact those two judges would be upheld and the other two judges who comprised ‑ ‑ ‑

GAUDRON J:   They would only be upheld on the basis that there was no warrant for overturning factual findings at first instance.

MR HODGEKISS:   Or ‑ ‑ ‑

GAUDRON J:   No, not “or”.  That is the only basis on which that would be upheld.

MR HODGEKISS:   No, with respect, your Honour, there are two bases.  One is to say the factual finding should never have been overturned because there were adverse factual findings made in respect of the respondent and they did not fall within State Rail Authority v Earthline.  They should never have been touched.  That is one.

The second one is to say, even if – and this is just accepting for the purpose of argument – that those matters could have been looked at, they could only be looked at by correctly applying, with respect, proper legal principle which was Gould v Vaggelas, which was ‑ ‑ ‑

KIRBY J:   Mr Hodgekiss, you want to get into the Trade Practices Act, and ultimately this case has to, but the Court, I think, has been expressing to you a concern which this Court has and which is in favour of your application, and which is that it was not appropriate in this case for the Full Court to disturb the findings of fact of the primary judge; and that that is itself, as it were, at the gateway an issue which attracts special leave.

MR HODGEKISS:   I understand.

KIRBY J:   Now my recollection is that Justice Emmett does not base his dissent on the basis that his colleagues ought not to have disturbed the finding.

MR HODGEKISS:   No, that is right.  He just said all of the findings were open to the trial judge and endorsed them.  That is what Justice Emmett did.

KIRBY J:   And your argument in support of your application for special leave, your application, does not raise the Jones v Hyde and other points.

MR HODGEKISS:   No, it does not.  And that is why I was truthfully answering Justice Hayne’s question when asked of me.  It does not say that.

KIRBY J:   Do you, on a correct analysis of the case, say that Justice Moore’s decision at first instance was, even if indirectly, affected by his assessment of witnesses?

MR HODGEKISS:   Yes.  We, in fact, said that in the Full Federal Court.

KIRBY J:   Well, is that not an important point that you should have raised in your application for special leave, because it stands at the gateway of whether the Full Court was authorised to interfere?

MR HODGEKISS:   Having heard the questions that have been put to me by your Honour and Justice Hayne, the answer to that is “yes”.  But that is only to create an additional ground for special leave, because even if that ground, that the Full Federal Court should not have intervened, that would be one ground which is not directly contained in the papers, and I was being frank to Justice Hayne in answering his Honour’s question.  That is one ground.

A second ground is the one that is referred to, that is, that the Full Federal Court, doing whatever it was doing, and this is assuming that it was acting permissibly, was applying wrong legal principle ‑ ‑ ‑

KIRBY J:   Can I ask you the question that worries me.  The fact that you did not raise this question in your ground for special leave, and your application otherwise being a very thoughtful and well constructed one, leads me to suspect, and I may be wrong, that credibility as such – looking at witnesses and judging them truthful or not truthful – was not, at the bottom line, the crucial issue in this trial and that assessing the objective facts was open to the Full Court now, and Earthline rather suggested that that, if it is an objective fact case, a Full Court can, and under its mandate should do it, and review the facts fully.  But was this, at essence, a case involving credibility and non‑credibility of witnesses that puts the bar up to the Full Court or not?

MR HODGEKISS:   At the trial it was.  At the Full Federal Court it was argued that there were findings of credit which should not be disturbed.  That, might I say, led, it seems, if one can read slightly between the lines, the majority to find a way around State Rail Authority v Earthline to take it away from subjective factors and to push reliance and other factors into objective factors, therefore colliding with many cases, including Gould v Vaggelas.  It was a credit case at the trial.  It was said that there should not be appellate review but the Full Federal Court said, “We can objectively work it out”, but they have misapplied, with respect, in doing that, the relevant legal principles in such a way to put a statement of the law which is inconsistent with appellate authorities of the Full Federal Court, the New South Wales Court of Appeal where Chief Justice Gleeson then, with whom Justice Samuels and Justice Meagher agreed in Lam v Ausintel, a case that we delivered up yesterday, applying Gould v Vaggelas said that if reliance is to be proved, there might be an inference of reliance but if there is, in fact, evidence that there was not reliance, which is exactly what the trial judge found and what Justice Emmett found, and of course that links into credit, then that is the end of the matter.

KIRBY J:   Where does Justice Emmett say that he rests his opinion on the findings of the primary judge on credit?

MR HODGEKISS:   He does that in the application book.  He does that first at page 97.  He said:

The Trial Judge concluded –

this is a very important passage at lines 10 through to about 24:

concluded that Mr Burke –

who was, in a sense, the alter ego of the applicant Hanave and also the solicitor Hanave:

proceeded with the sale unaware of the true position in relation to the circumstances of Barbara’s Storehouse because of a combination of complacency and careless disregard for matters of details and his reliance on his own knowledge and perfunctory enquiries.

He said that:

In rejecting the invitation to draw inferences –

that is what was asked of the trial judge:

his Honour considered that this was a case where the direct evidence given by Mr Burke made the drawing of any such inference inappropriate.  Accordingly, his Honour concluded there was no causal link –

and that was a conclusion that was open to his Honour on the evidence before him.  And that, might I say, what the trial judge said ‑ ‑ ‑

KIRBY J:   It might have just been politeness, the native politeness of Justice Emmett not to add the sentence “and it is not open to this court to substitute its conclusions for those reached by the primary judge in a matter which depended, in part at least, upon the impression which Mr Burke made upon him in the witness box.”  Is that what you ask us to draw as an inference between the lines?

MR HODGEKISS:   Given that the trial judge had said, if one looks at page 51 of the application book, he evaluates his impression of Mr Burke as a witness at the foot of the page.  He finds, amongst other things, that he tailored much of his evidence and then goes through, at page 54, in the middle of the page, looking at some evidence:

This evidence is disingenuous…..I approach with the same scepticism the evidence in his affidavits…..about why he did certain things.

KIRBY J:   That sounds like credibility.

MR HODGEKISS:    It was and, in fact, what is interesting, the majority, which is Justice Kiefel and Justice Wilcox agreeing, in fact point out some of those adverse comments that were made about Mr Burke.  Can I give you an example?  So they in fact endorsed that credit finding but could, in a sense, with respect, sidestep it by looking at this what I would call an impermissible objective analysis in the circumstances of this case, impermissible for the reasons that I have set out.  But Justice Kiefel – if I could find this - page 85, I am reminded by my learned junior.  This is important, right at the foot of the page.  This is Justice Kiefel with whom Justice Wilcox agreed:

His Honour however concluded that Mr Burke did not rely on the property report.

Referring to other matters:

At this point, it may be observed, as the primary Judge accepted, that the motivation for the purchase was the level of rental…..he did not rely upon what was contained in the property report…..He verified the information contained in it by reference to the contract document and the leases.  He did not make further inquiries –

KIRBY J:   Justice Kiefel and Justice Wilcox obviously felt competent to look at just the objective facts.

MR HODGEKISS:   Well, they thought they could.

KIRBY J:   And you do not raise an objection in your original application to their doing so?

MR HODGEKISS:    Yes, there was ‑ ‑ ‑

KIRBY J:   You want to argue the objective facts but you do not raise an objection in your grounds of appeal that you want to argue before this Court to the fact that they have done what they have done

MR HODGEKISS:   We do, your Honour, in our summary of argument.  It is made quite plain, with respect, that what has happened in relation to reliance is – this is starting from page 111 - that what has happened is that the majority have looked to questions of so‑called objective facts and inferences when, in fact, this was a case where there was direct evidence found by the trial judge, upheld in fact by all of the members of the Full Federal Court about what were the subjective factors in a situation where Justice Wilson in Gould v Vaggelas said the inference about reliance would be rebutted.  What Chief Justice Gleeson, with whom Justice Samuels and Justice Meagher agreed in Lam v Ausintel said in about 1990, “That is a situation where the inference about reliance has gone”.

KIRBY J:   Yes, but I am looking at pages 108 and 109 of your draft notice of appeal.  There is no ground of appeal there that says the majority of the Full Court was in error in disturbing the conclusion of the primary judge which was based, in part, upon credibility.

MR HODGEKISS:   No, the previous question, your Honour, asked me something different and I answered that correctly.  The matter that you just raised and Justice Hayne raised right at the start, if the notice of appeal does not seek to say this was an impermissible attempt by the majority of the Full Federal Court to deal with the matters of fact where there were credit findings and it does not fall within State Rail v Earthline, that was argued before them and then what they did with that was to come at it by an objective analysis that is set out in their judgment.  But, again, the way that we approach that, with respect, is to say that is impermissible as a matter of legal principle.  Now that is in relation to reliance. 

Can I say that there is another ground of appeal in relation to causation, that is the majority say that so long as there was some misleading and deceptive conduct, then that is enough – and this is actually in the judgment of Justice Kiefel at page 89 at line 45 with whom Justice Wilcox agreed at page 71 line 35, where it was said that so long as the misleading and deceptive conduct was a cause of the loss or damage then it did not matter that the person to whom the statement was made did not take sufficient steps to protect their own interest.  If that were adopted, that would mean that the doctrine of novus actus interveniens would be thrown out of the Trade Practices Act, thrown out of the Fair Trading Act ‑ ‑ ‑

GAUDRON J:   It may not even be in there, though.

MR HODGEKISS:   With respect it is, according to the Full Federal Court in Munchies Management, Justice Gummow in Elders.

GAUDRON J:   You are looking for a question of causation?

MR HODGEKISS:   Or reliance.

GAUDRON J:   The expression is “by”.

MR HODGEKISS:   Yes, it might be telescoped to be the same thing.  But on either ‑ ‑ ‑

GAUDRON J:   And you are really just looking – I suppose novus actus interveniens is just another test of - whether or not it was a negative test of causation in a sense.

KIRBY J:   It is not “by”.

MR HODGEKISS:   Yes, but what the majority in that passage said that effectively, even if someone had been careless, then it did not matter.

GAUDRON J:   But they are talking about an effective cause or effective causes.

MR HODGEKISS:   But with respect, even if there was a cause one still, in accordance with the Full Federal Court in Munchies Management and later cases, Argy v Blunts, Justice Hill, Justice Gummow in Elders Trustee, which are in the photocopied volume, in each of those they put it this way, this is the Full Federal Court: it may still be in such a case that the misleading and deceptive conduct complained of may be identified as a sine qua non of the loss claimed.  There may come a point, however, when the applicant’s own conduct is so dominant in the causal chain as to constitute a novus actus interveniens, and that, with respect, there are the findings of the trial judge and, in fact, all of the findings of the dissenting judge, Justice Emmett, and what the majority picked up such that would allow a finding to be made that this was such a case. 

In relation to that, it is submitted that the Full Federal Court in this important area of causation and Trade Practices Act or Fair Trading Act were in error as a matter of principle. It either can be approached under the first limb of section 35A of the Judiciary Act or, secondly, as this Court did in the Effem Foods Case which was really a reliance case in December of 1997 when it granted special leave on a factual reliance question, and then ultimately held that there was no reliance.  But on either of the bases, either there is a question of reliance or causation of significant public importance or, alternatively, the error that the Full Federal Court made on either of these significant matters is so fundamental that there should, with respect, be the grant of special leave.

Might I say that the problem that is created by this judgment at the moment is that it leaves this judgment inconsistent with the approach of Gould v Vaggelas which was picked up in the trade practices context in the Full Federal Court in Dominelli v Karmot.  Secondly, it is inconsistent with the Full Federal Court in Munchies Management.  It is inconsistent with the New South Wales Court of Appeal in Lam v Ausintel and it is inconsistent with statements of persons such as Justice Gummow when on the Federal Court in the Elders v Reeves Case.  All of those have gone one way, that is, which will allow matters to be dealt with in a way that had been established for some time, but here is a way where it seems that one may be able to deal with adverse credit findings by what, we say, is impermissibly to refer to objective factors where the inferences are negatived.

Might I just say this.  There is one further point and that is that if one looks at the judgment of Justice Wilcox who effectively agreed with Justice Kiefel and formed a majority, he really made the assumption that the facts were adverse to Mr Burke but nevertheless said that the applicant, that is Hanave, was entitled to the relief which gets us to what we have put as the grounds of appeal, reliance and causation, and in respect of which we say that both Justice Wilcox and Justice Kiefel fell into error.

GAUDRON J:   Thank you, Mr Hodgekiss.  I think we need not trouble you, Mr McVay.

The applicant in this matter seeks to agitate a number of issues of principle which would arise only if the Full Court should not have substituted its finding of fact for that made by the primary judge.  The importance of appellate courts giving due weight to factual findings made at trial has been emphasised by this Court on many occasions, most recently in State Rail Authority of New South Wales v Earthline Constructions Pty Ltd (In Liquidation) (1999) 73 ALJR 306. The applicant did not by its application seek to challenge the Full Court’s substitution of its finding in the circumstances of this case. That being so, this is not a suitable vehicle to consider the questions of principle which the applicant seeks to agitate. Accordingly, special leave is refused. Submissions having been put in writing, the appropriate order is that it be refused with costs.

The Court will now adjourn to reconstitute.

AT 11.15 AM THE MATTER WAS CONCLUDED