Masters & Ors v David Lombe in his capacity as Liquidator of Babcock & Brown Limited (in Liquidation); Broome & Ors v Lombe; Wilhelm & Ors v Lombe

[2022] HCATrans 57

[2022] HCATrans 057

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Sydney  No S157 of 2021

B e t w e e n -

MICHAEL MASTERS AND 24 OTHERS LISTED IN THE SCHEDULE

Applicants

and

DAVID LOMBE IN HIS CAPACITY AS LIQUIDATOR OF BABCOCK & BROWN LIMITED (ACN 108 614 955) (IN LIQUIDATION)

Respondent

Office of the Registry
  Sydney  No S158 of 2021

B e t w e e n -

BRUCE BROOME AND 142 OTHERS LISTED IN THE SCHEDULE

Applicants

and

DAVID LOMBE IN HIS CAPACITY AS LIQUIDATOR OF BABCOCK & BROWN LIMITED (ACN 108 614 955) (IN LIQUIDATION)

Respondent

Office of the Registry
  Sydney  No S159 of 2021

B e t w e e n -

SARAH WILHELM AND 179 OTHERS LISTED IN THE SCHEDULE

Applicants

and

DAVID LOMBE IN HIS CAPACITY AS LIQUIDATOR OF BABCOCK & BROWN LIMITED (ACN 108 614 955) (IN LIQUIDATION)

Respondent

Applications for special leave to appeal

GAGELER J
STEWARD J

TRANSCRIPT OF PROCEEDINGS

AT CANBERRA AND BY VIDEO CONNECTION

ON FRIDAY, 8 APRIL 2022, AT 12.30 PM

Copyright in the High Court of Australia

GAGELER J:   In accordance with the protocol for remote hearings, I will announce the appearances of the parties.

MR O.R. JONES appears with MR M. JOUKHADOR for the applicants.  (instructed by Thomas Booler Lawyers)

MR I.M. JACKMAN, SC appears with MR J.J. HUTTON for the respondent.  (instructed by Johnson Winter & Slattery)

GAGELER J:   Yes, Mr Jones.

MR JONES:   May it please the Court.  The delay in the primary judge in giving judgment in this case was over three years from the conclusion of the evidence to the date of the reasons.  That delay is rightly described as excessive and inordinate. 

Your Honour, delays of this nature are unfortunately the subject of a number of recent decisions of appellate courts.  Such delay is pernicious in its effect.  It means it is unlikely that the trial judge could recall his or her impressions of witnesses giving oral evidence.  It means the trial judge squanders the unique ability to see all of the evidence as submissions unfold in contact throughout the trial.  It means that an inevitable suspicion arises that the pressure created by the delay has influenced the judgment with the result that the decision that is easiest to make has the greatest psychological attraction. 

The questions we submit are worthy of a grant of special leave in this case are those set out at page 324 of the application book.  They concern ‑ ‑ ‑

GAGELER J:   Mr Jones, I am a little puzzled about what you want.  You want the questions of causation and loss to be remitted to a judge of the Federal Court for determination – on further evidence?

MR JONES:   Your Honour, the terms of the further determination would be a matter, we say, for the judge hearing the re‑hearing.  But further evidence is a possibility, yes, your Honour.

GAGELER J:   On what basis would further evidence be a possibility?  

MR JONES:   Your Honour, one of the critical flaws we say arises from the primary judge’s judgment, which is not addressed, with respect, by the Full Court’s judgment, is that the primary judge did not take advantage of his ability to see the expert witnesses giving their oral evidence and, indeed, based his conclusions, in part, on impressions that his Honour formed in seeing those witnesses give their evidence.

If that is identified as a valid complaint and a valid cause for saying that the judgments of the primary judges are safe then, logically, that means that when the matter is remitted, the trial judge hearing that remittal should have the ability to see those witnesses give their oral evidence.

GAGELER J:   Plural here – but there was really just one relevant witness, was there not - Dr Coulton?

MR JONES:   Dr Coulton for the applicant and Mr Potter for the liquidator.  Yes, your Honour.  

GAGELER J:   What role does this – the impression of demeanour – have in the assessment of the evidence of, relevantly, Dr Coulton? 

MR JONES:   If your Honour goes to paragraph 262 of the judgment, which is at page 97 of the application book, this forms part of the primary judge’s analysis of the expert evidence, and it is this analysis of the expert evidence that is then picked up later in his Honour’s judgment, when he enters into the question of whether the applicants have proved, on the balance of probability, that some causation or loss has been found.  Your Honours will see from paragraph 262, that his Honour says:

After hearing and seeing the expert protagonists providing their oral evidence in relation to Dr Coulton’s methodology, I have come to the view that that methodology was flawed -

Now, your Honour, those expert witnesses gave evidence for one and a half days, and if your Honour turns back to paragraph 229 of the primary judge’s judgment on page 89 of the application book, one sees there that his Honour says that:

The many and extensive differences of opinion between Dr Coulton and Mr Potter were subjected to scrutiny in the concurrent evidence process. 

So that is where his Honour identifies that those matters will be subject to scrutiny.  It lasts for a day and a half, and his Honour concludes on the basis of – at least in part – his impressions formed during that concurrent evidence process, that he will prefer the expert evidence of Mr Potter over that of Dr Coulton ‑ ‑ ‑ 

STEWARD J:   Mr Jones, when his Honour says:

After hearing and seeing the expert protagonists -

that is no more than just simply saying, after hearing their evidence, which evidence was in transcript form as well as in expert report, and which could be digested by a Full Court just as easily – surely.  It has nothing to do with credit or whether they performed well on the box, it is about the persuasiveness of the methodology that the relevant expert has used as a matter of logic. 

MR JONES:   Your Honour, in my submission, the advantages that a trial judge has goes beyond a mere assessment of credit in seeing witnesses give live and oral evidence.  That is particularly so in the context of a concurrent evidence process, and it is particularly in the context of detailed and complex expert evidence.  Now, your Honour is right to say that, ultimately, the trial judge and the appellate court needed to make an assessment of the veracity and legitimacy of the methodologies used by the two experts. 

But it eviscerates the advantages of the first instance judge in my submission, to say that merely because the credibility of the expert witnesses are not challenged, the trial judge does not have an advantage in seeing them give their oral evidence live, does not have an advantage in seeing – being able to ask them questions – and that that is an advantage that, as the Full Court said in Expectation v PRD, the appellate court simply does not have. 

Now, obviously there are situations, your Honour, where the appellate court can enter into the factual analysis where it identifies errors below, and whether it can and should do so may depend on the nature of the question in issue. 

STEWARD J:   Can I ask you this then?  The Full Court dealt with Dr Coulton’s evidence from paragraph 281 to paragraph, I think, 313.  Is there anything in that analysis which you say is wrong because of this disadvantage that you advert to – an error that would not have taken place if they had seen Dr Coulton go into the witness box?

MR JONES:   Your Honour, we do say there are numerous errors in the analysis, in the sense that we do not accept the conclusions that their Honours drew in relation to the expert evidence that was before them.  So, therefore, we do say that, had the appellate court had the advantage that a trial judge has of considering all of those issues in context and being able to ask questions of the witness, then it may have been that the arguments we put forward to the Full Court that were rejected, would have prevailed.

Your Honour, if I could make this remark about that analysis in the Full Court’s judgment, it is commendable, in one sense, that the Full Court grasped the nettle and dealt in detail with these expert issues.  Of course, in the Federal Court context, those sitting on the Full Court have extensive trial experience.  But merely because they could do so does not mean that they should have done so. 

What one sees in the Full Court’s judgment is an extensive analysis of the expert evidence in circumstances where inevitably on appeal, the applicants did not have the opportunity to make full submissions on it.  The appellate court did not have the opportunity to see it all unfold in context.  It was limited, as it necessarily was, to a very short prism – a very narrow prism – in the context of the appeal. 

Now, that is not to say that the analysis is necessarily wrong.  But what it does show is that the applicants have been denied a right to which they were entitled.  That is a right to have all of these arguments considered in the trial context at trial and not to have them determined in a truncated way before the appellate court.

GAGELER J:   Mr Jones, it seems to me that, procedurally, there are two possibilities on your case – either you go back and have one judge do what three judges have already done, that is, look again at the evidence as it now is in documentary form and form an assessment of it, or you lead further evidence and, effectively, have a new trial.  I am not sure that you are entitled to either of those.

MR JONES:   Your Honour, I take issue, with respect, with the suggestion that the Full Court has already done what we suggest it should do.  In my submission, the authorities are clear that one of the advantages that the trial judge has is the ability to see all of the evidence over the course of the trial unfold and have the opportunity to reflect upon it in context.  That has the correlative right on the applicants to be able to make submissions on all of that evidence in that staged way at trial. 

That was simply an opportunity that they were not afforded before the Full Court.  The Full Court had a raft of issues to address – not only the issues of liability on which we accepted that they needed to determine, but also the question of remittal and then, also, the question of all of the expert issues and causation and loss.

So, as I say, the Full Court has grasped the nettle.  It has reached a determination on the documents but that is not a determination that accords with the right the applicants had had the success, at first instance, been conducted fairly.

STEWARD J:   But, Mr Jones, the Full Court found at paragraph 280 that there was little doubt that his Honour considered the evidence in detail.

MR JONES:   Yes, that is the Full Court’s assessment, your Honour.  But one vice we see throughout ‑ ‑ ‑

STEWARD J:   Do you say it is wrong?  If so, on what basis?

MR JONES:   We say it is not wrong, your Honour, to say that his Honour at first instance went through the evidence in detail in that one sees a paraphrasing in commentary and extraction of the evidence in the judgment.  So, we do not deny that.  What we do say is that his Honour failed to set out in a comprehensive way the reasons and analysis for accepting one set of expert views over another. 

In my submission, the reasons in the judgment are rightly described as perfunctory.  Indeed, the Full Court recognised that they were, at least, somewhat sparse and that our decisions in that regard were not without some force.  The thing that the Full Court did not do, with respect, is make any determination about whether the delay was appropriate, whether it was explained, whether it had caused errors in the fact‑finding process.  Rather, the Full Court appears to have approached the issue on the basis that it was just dealing with what I might call a “plain vanilla” complaint about an absence of adequate reasons.  But one really has to take into account the delay and the impact that that has one the fairness of the process to the applicants. 

So, your Honour, we do say that there were inadequate reasons for accepting the views of one expert over another.  But, critically, the Full Court simply did not engage with the delay and did not engage with the impact that may have on the primary judge’s judgment.

STEWARD J:   But why is it not reasonable to say that the way the Full Court engaged with the delay is for itself to give a comprehensive analysis of the evidence – including the expert evidence – and give you a judgment which is 319 paragraphs long?  Why was that not the just and efficient thing to do in all the circumstances, given that there were not issues of credit, for example, which arose in this matter?

MR JONES:   Your Honour, as a threshold point, I would say what the Full Court should not have done is made an assessment of what it should do without considering the impact of the delay upon the judgment and that is because delay and operative delay in this context gives rise to, in my submission, an unsafe judgment, a miscarriage of justice and the result that the applicant is entitled to a retrial or at least a hearing before a trial judge. 

Now, your Honour, as to why what the Full Court did was inappropriate – it is inappropriate because we are dealing with an appeal that lasted for, I think, a day and a half based correctly on 10‑page submissions from either side, in circumstances where the Full Court heard submissions on a raft of other issues with which we are now not concerned. 

The appellants did not have the opportunity – they have been denied the opportunity as a result of the delay – of putting their case in the usual way at trial, including allowing the trial judge to see oral evidence, to have the advantage of the concurrent process and to be able to ask the experts questions.  They are rightly, in my submission, aggrieved by that. 

The Full Court grasped the nettle, but that is not giving the applicants what they are entitled to if there had not been this delay.  What is more, your Honours, there is a real issue, in my submission, in the Full Court’s approach of not making any commentary on the delay at all.  It is well-recognised that delays of this type have the ability to bring the administration of justice into disrepute, and the Full Court should have identified that delay and set out some analysis of how it had an impact on the reasoning process in the judgment because that then informs – and this goes back to your Honour’s question – what is the fair result? 

This is not a case where the applicant was asking the Full Court to determine these factual issues for reasons of efficiency, and as the Full Family Court said in Manifold v Alderton, when justice and efficiency collide, then justice should prevail – as it did in that case.  We say that is what should happen here. 

GAGELER J:   Does that complete your submissions, Mr Jones?

MR JONES:   Your Honour, I would simply say this by way of further submission, that we say that this issue does raise an issue of public importance in this case, because while numerous judgments identify that an appealable error will arise where a delay has given rise to an unsafe judgment, what they do not grapple with is, first, what unsafe means, and we say it means the sort of procedural fairness that arises in NAIS, but, critically, and this goes to the questions that your Honours have put to me, what should be the result if it is found that the judgment is unsafe? 

Of course, one can accept that where there are significant credibility issues that there should be a remittal - that seems to be accepted, but, of course, that is an example and not a test.  We say that should also apply where impressions of witnesses also form part of the judge’s analysis.  The same approach should apply.  It is not merely necessary to establish untruthfulness.

Now, the Full Court also said, well, apparently there should not be a remittal where the Full Court or the appellate court is capable of assessing the issue for itself, and that goes to your Honour Justice Steward’s question

of, well, why should not the Federal Court do it if it is capable of doing it for itself?  But the question should not be capacity, but whether this is appropriate and fair to the applicant.  We say it will not be appropriate and fair where there are issues of credibility – that seems to be accepted – but it also will not be appropriate and fair where there are detailed and complex issues of factual and expert evidence, because the Full Court is simply not in the same position as the primary judge.

Now, that does not have the consequence merely that the Full Court does not need to defer to the primary judge.  It also has the correlative consequence that the applicants have not got what they are entitled to at trial.  They have been treated in a procedurally unfair way, and it is for that reason that we say that issue does give rise to an issue of public importance because, as matters stand, the Full Court’s judgment is authority for the proposition that where the appellate court considers itself capable of dealing with the factual and expert evidence, then it should grasp the nettle and do that and not remit the question, and we say that is the wrong approach. 

We say that it is inconsistent with other intermediate authority, including Hoblos v Alexakis in the New South Wales Court of Appeal and Manifold v Alderton in the Full Family Court, and, as a result of that conflict of intermediate authority and the injustice that arises we say from the delay and the fact that it has not been dealt with, that justifies the grant of special leave. 

GAGELER J:   Yes, thank you, Mr Jones.  The Court will adjourn for a short time to consider the course it will take.

AT 12.47 PM SHORT ADJOURNMENT

UPON RESUMING AT 12.51 PM:

GAGELER J:   Mr Jackman, we do not need to hear from you.  Thank you.

The delay between the hearing and the judgment at first instance cannot be taken to have gone unnoticed by the Full Court.  We are of the opinion that the analysis undertaken by the Full Court at paragraphs 275 to 313 of its reasons for judgment was not unfair, and that nothing in the analysis was in any way inappropriate.

Each application is refused, with costs.

The Court will now adjourn.

AT 12.52 PM THE MATTERS WERE CONCLUDED