McKay & Anor v National Australia Bank Ltd

[2000] HCATrans 30

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Melbourne  No M36 of 1998

B e t w e e n -

RALPH BEDFORD McKAY and MARIE MICHELLE CHRISTINE McKAY

Applicants

and

NATIONAL AUSTRALIA BANK LIMITED

Respondent

Application for special leave to appeal

KIRBY J
CALLINAN J

TRANSCRIPT OF PROCEEDINGS

AT MELBOURNE ON FRIDAY, 11 FEBRUARY 2000, AT 1.28 PM

Copyright in the High Court of Australia

KIRBY J:   You are Mr Ralph McKay?

MR R. McKAY:   That is right.

KIRBY J:   And your wife, Marie McKay, is with you?

MR McKAY:   Yes.

KIRBY J:   Your wife is a party, so she can sit at the Bar table and assist you, and if necessary we will hear her as well, if she wishes to speak.

MR McKAY:   Pardon me, sir, she will be allowed to speak too?

KIRBY J:   Yes, she is a party as well.  If she wishes to be heard, she can be heard as well and she, in some respects, has an additional or separate argument to your position, has she not?

MR McKAY:   Yes, your Honour.

KIRBY J:   Very well.  And we will just take the appearances first, Mr McKay.  Mr Clark.

MR P.H. CLARK:   If the Court pleases, I appear with my learned friend, MR A.T. SCHLICHT, for the respondent.  (instructed by Russell Kennedy).

KIRBY J:   Yes, Mr McKay.

MR McKAY:   Your Honours, on this initial issue of Mrs McKay speaking for herself.

KIRBY J:   Yes.

MR McKAY:   I think she.

KIRBY J:   Just divide the time and leave her a little time to say anything that she wants to say.  Get a glass of water if you want it.

CALLINAN J:   If she wants to, Mr McKay.  You can speak for her if you want.

MR McKAY:   I would like to speak for her, your Honour, because she has never been able to do so in any other court previously.

KIRBY J:   You might be one of those old-fashioned relationships where the husband can speak for the wife.

MR McKAY:   I am not old fashioned, sir.  It is the nature of the situation we are in that makes that situation the way it is.

KIRBY J:   Well, you did very well in your written submissions, if I can say so.  You present the matter very intelligently and I think we understand what the matters are that you wish to raise.  We have read the written submissions of both parties.

MR McKAY:   In that case your Honour, I will dispense from going through the first paragraph of my submission which was to be going through the various issues that I have already raised with you.  In that case, subsequent to the filing of our submission in this Court, two significant decisions have been handed down by this Court.

Your Honours, we submit that if we had been in possession of those two decisions prior to the appeal in the Supreme Court, the result would have been different.  We venture to say that the appeal would yet have been decided in our favour, and I refer in this case to State Rail Authority of NSW v Earthline where the court revisited the principle in considering Devries and expanded the guideline to be applied by the way in which an appellate court when dealing with the matter of facts.  I will return to this authority later.

The next one, more importantly for the second respondent, is a decision of Garcia v National Australia Bank.  Your Honours will be aware that when that decision was handed down, it was after our hearing in the Court of Appeal and we subsequently submitted on behalf of the respondent ‑ ‑ ‑

KIRBY J:   Their Honours did refer to Garcia, did they not?

MR McKAY:   No, sir.  On behalf of the ‑ ‑ ‑

KIRBY J:   You referred to Yerkey v Jones.

MR McKAY:   We referred to Yerkey v Jones right through from the very beginning, but it was always, at the time, a position where Yerkey v Jones had been supposedly subsumed by Amadio.  At that time, Garcia was still in the process of going to this Court and subsequently after this judgment Garcia had reached this Court and the decision in Garcia was delivered after the decision in this Court in our matter.

KIRBY J:   Yes, I know indeed, I know the sequence of events.  I had rather strong things to say in Garcia.

MR McKAY:   You did, sir.  The decision in Garcia becomes so important, especially for the second respondent, because the second respondent, from the very beginning, pleaded unconscionable conduct and undue influence, mistaken belief and repeated these pleadings in her counterclaim.

KIRBY J:   I realise that.  But Garcia does not lay down some absolute rule and in respect of the findings that were made here by the primary judge, one finding which seems to stand against your wife, even on the basis of the law as clarified in Garcia is the finding on page 25 of the application book.  Would you just have a look at that, starting really at the bottom of page 24, where the primary judge says:

I also reject the evidence of each defendant in so far as it supported such representations being made on 20 February 1987.  I find that McKay –

that means Mr McKay -

and later at their home McKay and his wife, were told the document was a guarantee, and the effect of it, and were given an opportunity to obtain legal advice before they signed it.

That is a finding by the trial judge.

MR McKAY:   Yes.  But your Honour, this position, at the time, was when the matter was being decided on the guarantee and the guarantee has since failed.  This matter, here now, is for the counterclaim and the counterclaim only, and the situation as far as this position was concerned has to be seen in the light of the position that existed in Garcia comparable to the position of the second applicant.  If I can I take your Honours to the two positions as it stands, and it is not – in Garcia Mrs Garcia was a director of a company.  She presented as an intelligent lady in a professional occupation and they are from the judgment, and she went to the Bank and signed as a guarantee with the presence of the Bank manager.

In the present case, it is common ground, and that is accepted, that the second applicant, which is Mrs McKay, had never even been to the Bank.  The Bank manager in the evidence acknowledged that they have never met her.  The only time she encountered a bank manager was when the biggest Bank manager came to her home and made her sign a guarantee at the kitchen table in five minutes.  The transaction took no more than five minutes and it is also common ground that the Bank manager was aware at that time that she was distressed due to the condition of her son who was critically ill with leukemia.

I appreciate, your Honours, what his Honour Justice Hansen said in the first judgment in this matter, and you might maybe say that this is a decision that he has observed.  But the critical point is, your Honour, this forum does not allow me to analyse Garcia as you have already done so in very much detail.  But I submit to you, your Honour, that should this case be given, given the fact that Garcia came after this matter, that this is a case where special leave should be given at least to give a chance so that this can be aired in the forum of the High Court in the sense of revisiting the evidence.  The court could revisit its evidence and see whether the trial judge was in error.

Now it must be remembered that in that appeal in the first instance, an appeal that overturned the judge’s previous decision, the Court of Appeal did not make great remarks about these issues of unconscionable conduct and undue influence, even though they did touch on it, but they are attached to the fact that Amadio, at the time, was the first to have subsumed Yerkey v Jones and, as such, the decision was only given on the basis of – because there was no consideration, the guarantee had no effect.  So in that case, it would be very unfair if, due to the fact that this matter has not been aired in its true form, and given that the time of the influence of the position of Yerkey v Jones as it stood at the time, was permeated right through the whole trial, I will say it will be very unjust if a second chance were not given to re-examine these issues because it was not, in effect, examined in this true light of Garcia in the first appeal, nor in front of the primary judge and, for that matter, in the matter of the counterclaim it was not done at all.

KIRBY J:   Well, I think we understand that point, and that is specific to the second applicant so let us get away to the important points that affect the case.

MR McKAY:   Yes, your Honour.  The question of voluntary payments, your Honour:  we take the view that the decision that has been made by the two courts at this point is a departure from the established principle.  Now, it has been said, and the judgment is heavily loaded on the basis that it is a judgment of a finding of facts and, of course, Devries was followed.

Before I get back to Devries, I would like to point to your Honours that there are no precedents in existence to a question of voluntary payment.  The precedents that are in existence at the moment are precedents in Mason and a few others, and your Honours obviously would know a lot more than I do about these matters.  But I put to your Honours that they are pleading -these matters are to do with statutory demands and others and it was, I believe, and I will not mislead the Court, but I think it was accepted by all parties because the question was asked at the previous hearings in the various courts whether there was such a precedent and the answer was, “No, none have been found”.

So all the situations you are looking at, all these cases, are cases where the payment was – in a case of restitution, they are all cases of restitution under the cause of action of had and received.  At that point, each person who was seeking restitution had actually paid over the money, and that is an important point, that must come home.  If they had the control of the funds, they wrote the cheque, they paid cash, but they paid the money, they had the control of it.

KIRBY J:   But all of the Justices in Mason were addressing their attention to whether or not the payment was made voluntarily or involuntarily in the particular case under a suggested compulsion of law.  But the question was whether it was made voluntarily because, otherwise, if it were made voluntarily, it would not be recoverable in account for money had and received.

MR McKAY:   That is correct.

KIRBY J:   So, they were looking at the question of voluntariness or non‑voluntariness.  My reading of all the Justices there is that they did address themselves to the criteria to be applied.

MR McKAY:   Yes.  But they also addressed it in a position of practical affairs when a party had a choice.  Now this is a point which has not been addressed, and this is a point which is of principal importance, of public importance, because if this judgment is not reanalysed on the position when the payment takes place.  And this is what we say is wrong in these judgments, is that in the case of State Bank of NSW v Swiss Bank Corp, which we have also addressed, and the High Court case of David Securities, it is clear – and it is made clear – and it is part of our submission that the critical moment for the payee and the payer is the moment of the making of the payment and the change of position.  At the time when the payment is made, do you have a choice?  Do you have the money in your possession? Do you have control?

KIRBY J:   Well, I understand that and I have some sympathy for the factual proposition that you advance, but the fact is that the trial judge who had the advantage which was conventionally ascribed to the trial judge saw you and heard you give your evidence and came to a conclusion that you were fully aware of what you were doing and you did this for what you then perceived to be your own advantage, and that this is, therefore, categorised by the law as voluntary.

Now it is true that Earthline gives some new guidelines and says that the trial judges are not insurmountable in their opinions in these matters, but it does not expunge completely the advantage which a trial judge has.

MR McKAY:   It does not expunge it, your Honours, but in this particular case, his Honour totally disregarded the two positions at the time when the ‑ ‑ ‑

KIRBY J:   You say that, but his Honour had advantages which we did not have.  I have always thought for myself, and I expressed it in Earthline that the real advantage the trial judge has is not seeing people’s faces and hearing their voices, but he or she has a long time during the whole course of the trial for the matter to percolate and to think of where the logic of the situation leads.  All we get are appeal books.

MR McKAY:   In that case, your Honour - this is the point I am trying to make at the time, the Bank manager, himself - you have seen the evidence of the Bank manager which we put to you – it points to the fact that control was taken away.  We had no control.

KIRBY J:   I realise this.  I think you quite a strong case at trial, and if I had been the trial judge I would have, I think, been inclined to look, just speaking only for myself now, more at the logic and the reality of the pressures that were on you.  But the trial judge had an additional advantage that we do not have.  He saw you.  He saw your wife.  He heard the evidence and he reached a view that you did this voluntarily.  Now if that is so, you have a very big wall to jump over to get this Court to change that.

MR McKAY:   I appreciate that, your Honour.  But, at the same time, the focus in the question of voluntary payment must be addressed and should be given a chance to be aired, purely for the very reason of trying to point out at what point should – the point of involuntariness, your Honour, I have written a small paragraph about it of various matters and it is described in – which I have put to you actually in our submission again, which is part of the Mason Case.  The term “voluntariness”, your Honour, implies the existing of free will at the time when you are making it. 

Now, this case, what has gone against us is that the judges say that because three months previously a threat was made and it is accepted.  We are told we had a choice, “Sell your house, or sell your property”, in the commercial sense.  That was not aired and we did not address our mind to this area of voluntariness because the pleading was not there at the time.  Should the pleading had been there, your Honour, we would have been in a position where it would have been glaring at us and we would have had to address it.  You will note that that area, the pleading of voluntariness was not there, and that can be seen when his Honour addresses this issue when he allows the pleading to be amended.  In his judgment in this matter, for starters, he admits to that and says so. 

If your Honours look at pages of the original pleading position of the Bank at page 1, you have a situation where the defence for the counterclaim was that at settlement the Bank received a balance of the money.  The defended permitted the Bank to retain that amount by reason also of the alleged belief that the guarantee was enforceable and entitled the Bank to retain the money.  That was the judgment that his Honour gave.  But his Honour, the next day, at page 2, points to the fact that there was – this is when he allows them to amend – there was no pleading of voluntariness.  It was not there.  Your Honour, again this point comes to mind.  It is a reason for having this matter - at least, at best we need the special leave to be able to address it for the very reason that how can it be said that, at any point, an issue is to be determined on a question of facts and I submit to you that a pleading must reflect a cause of action prior to the adducement of evidence because to hide a pleading in an interlocutory document and then flag it afterwards when all evidence is given, two and a half years later, then use the same evidence as if it was known to the party has been pleaded, is an injustice to the parties against whom this pleading is being used. 

This is the point, there was no pleading of voluntariness.  After the Court of Appeal reversed the first decision, in effect, at that point the respondent had no defence.  The counterclaim had practically no defence.  The defence then was raised and an amendment was brought in.  His Honour allowed them to amend and brought in a pleading of voluntariness.  Now a pleading of voluntariness is something totally different from whatever was there before.  It might be assumed that “or hidden somewhere in the various interlocutory documents”, there could have been a reference or an inference for it.  But it was not there.  So to make us now pay the price of not responding, or not directing evidence, or not addressing the point when the pleading is not there, and later on you will hang by it, is an injustice.  And that will continue to happen unless this Court  ‑ ‑ ‑

KIRBY J:   Well it depends a bit on the findings of fact of the trial judges.  You may get other trial judges who take a different view of what is voluntary in situations of economic and psychological pressure.

MR McKAY:   This is where this Court should allow for public importance reason, your Honours, to allow at least this : even if, at the end of the day, after analysing the facts this Court would be able to give clear guidelines like has been given now in Garcia, like has been given now in Devries, clear - revisit Mason which is quite not on point at the same time of a certain age, in the view of the modern world of banking and  ‑ ‑ ‑

KIRBY J:   It is on point in that it discusses voluntariness, but you say the factual situation is different.

MR McKAY:   It is different, your Honour.

KIRBY J:   But the factual situation was judged by the trial judge here with the advantages that he is conventionally taken to have.

MR McKAY:   But on facts which were adduced by evidence which was taken prior  ‑ ‑ ‑

KIRBY J:   In part, influenced by his impression of you as a witness.

MR McKAY:   Pardon me?

KIRBY J:   In part, influenced by his impression of you and your motivation.

MR McKAY:   That is what he said.  At the time, your Honour, I was a different person.  I have had to learn a lot since then and that is the way it has been.  It has been 10 years since this matter was filed.  However, at the same time, your Honour should look at the situation again in the view of at the time we could not.  Learned barristers, lawyers, could not have been in a position to do so.  To put a sharper point on it, in the Court of Appeal we tried to tie his Honour back to his own remarks.  The remarks he made are at page 91, and that is repeated in the judgment, and I alert your Honours to this.  That is a reflection of what his Honour said at the first trial.  He said, to a question addressed to him:

when counsel for Mrs McKay was seeking to persuade his Honour that the sale of the house was not “voluntary” in the sense that they did not wish to proceed to a mortgagee’s auction.

That was the whole point.  There was no voluntary payment, no voluntary sale but we did not want the mortgagee auction.

KIRBY J:   Yes, but we have read the reasons of the court.

MR McKAY:   You have read the reasons, your Honour.

KIRBY J:   I notice your red light is on.  Would you just like to ask your wife if there is anything else that she wanted either herself, or through you, to say to the Court?  Is there anything that you have not said that she would like to be said?

MR McKAY:   Your Honour, it has always been the case, and that is about all I can advance for the moment, Mrs McKay has never been able to  ‑ ‑ ‑

KIRBY J:   I know that.  You put your wife’s case very effectively and I am going to ask Mr Clark to respond to a question in relation to that.  Thank you very much Mr McKay, your time is up.  Mr Clark, what about the Garcia point?  It does appear that there is a supervening decision which, if the Court of Appeal and/or the trial judge had, might have affected the separate position of Mrs McKay.

MR CLARK:   We would submit, your Honour, that Garcia does not play any part in this particular case and in the stage that we have reached now.

KIRBY J:   Was the issue of the wife’s separate position raised in the grounds of appeal to the Court of Appeal?

MR CLARK:   No, it was not.

KIRBY J:   I was just looking at those.  I could not see - - -

MR CLARK:   Page 75 is the grounds of appeal.  The appeal, of course, was only on the counterclaim and not on the question of the ability of the guarantee, that having been determined in the prior appeal.  The prior appeal had dealt with both issues as to Mrs McKay’s position viz-a-viz her special disability  ‑ ‑ ‑

KIRBY J:   So you say that was not a matter before the Court of Appeal?

MR CLARK:   No, your Honour.

CALLINAN J:   And it was matter - her voluntariness and her understanding were the subject of findings by the trial judge.

MR CLARK:   That is correct.

CALLINAN J:   Not only at page 25, but also at page 27, there is another ‑ ‑ ‑

MR CLARK:   And we would add that the Court of Appeal reviewed those findings of fact in so far as all the evidence was concerned that was before the trial judge and unanimously found that Mrs McKay had voluntarily agreed to the sale of her home and the proceeds being used to reduce the debt of the family company.

CALLINAN J:   On one view, of course, of Garcia anyway, one might have thought that the wife, Mrs Garcia, was rather lucky to win at first

instance, having regard to her previous business dealings, but in this Court, those findings were not attacked.

MR CLARK:   The point is that, of course, the decision that is now being appealed from is confined to the counterclaim where the issue was whether or not the dissipation of the proceeds of the sale of the home was voluntary, rather than the validity or enforceability of the guarantee and that, in that sense, the issue of Garcia would not be appropriate even now if this matter was to be reopened.

KIRBY J:   Yes.  Well, we have read your written submissions, I do not think we need further assistance.  Do you seek costs in the event that the application is dismissed?

MR CLARK:   We do, your Honour.

KIRBY J:   Mr McKay, there is an application for costs, and normally the costs are ordered, but you have made a special submission relating to the question of costs in the event that the application is dismissed.  Do you want to say something about that?

MR McKAY:   Yes.  I say to you, your Honour, that this matter, to us, it is a matter of public importance.  In such cases, we believe that given the financial position of both parties, and the way things are distributed at the moment, that we should not allowed  ‑ ‑ ‑

KIRBY J:   On that principle, banks would always pay costs.  That cannot be a correct principle.  Banks have shareholders and customers.  They are equal before the law.  Anyway, thank you very much, Mr McKay.

Despite the very competent way in which Mr McKay put his submissions to the Court, the Court is not convinced that this is a matter for special leave.

As to the grounds raised by both applicants, it is not contested that the principles to be applied governing recovery of payments made voluntarily by one party to another are those established by the authority of this Court, see especially Mason v State of New South Wales (1959) 102 CLR 108. Mr McKay says that that case dealt with a situation which was factually different; but so it is in every case. The legal propositions that are there dealt with are the same and were applicable.

Those principles were considered at trial and in the Court of Appeal.  At most, the case is one concerning the application of established principles to the facts of the case.   That represents an unpromising foundation for a grant of special leave by this Court. 

As well, to some extent at least, the conclusion of the primary judge about whether or not the payments in question were made in circumstances that should be classified as voluntary depended on assessments and impressions of the witnesses and especially of the purposes and motivation of the applicants.  The decision in State Rail Authority of New South Wales v Earthline Constructions Pty Ltd (1999) 73 ALJR 306, does not require a different conclusion. See ibid at 326.

In these circumstances, even if this Court were attracted to the notion that it should look again at the issues of principle, this case would not present a suitable vehicle for that purpose.

As to the ground raised for Mrs McKay following the intervening decision of this Court in Garcia v National Australia Bank (1998) 194 CLR 395, the Court is not convinced that the decision provides a ground for intervention. The issue does not appear to have been one raised by the grounds of appeal to the Court of Appeal. In any case, having regard to the way in which the proceedings were conducted at trial, this would not be a suitable matter in which to revisit the issues of principle decided in Garcia. 

The Court also not convinced in the circumstances (which include the fact that Mr and Mrs McKay were the directors and shareholders of the company, Caprid, and the findings of the trial judge at pages 25 and 27 of the application book) that the application of the holding in Garcia would result in a different outcome in Mrs McKay’s case.  Accordingly, special leave is refused.

Although in their written submissions, the applicants suggested that a special order should be made on the basis that their application was brought in the public interest and although Mr McKay has said orally to the Court that the matter is one of public importance, the Court does not consider that these represent its proper classification.  The cause concerned the private interests of the applicants.  They have lost.  They must pay the costs in the ordinary way.  The application is therefore dismissed with costs.

I am sorry, Mr McKay and Mrs McKay that you have lost but you presented your argument very well and your written submissions were much better than those of many lawyers that we get in this Court.

MR McKAY:   Thank you for the compliment, your Honour.

KIRBY J:   The Court will now adjourn until 10.15 on Tuesday, 29 February in Canberra.

AT 2.01 PM THE MATTER WAS CONCLUDED