Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Limited

[2010] HCATrans 94

[2010] HCATrans 094

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Melbourne  No M69 of 2009

B e t w e e n -

MILLER & ASSOCIATES INSURANCE BROKING PTY LTD ACN 089 245 465

Applicant

and

BMW AUSTRALIA FINANCE LIMITED ACN 007 101 715

Respondent

FRENCH CJ
HEYDON J
CRENNAN J
KIEFEL J
BELL J

TRANSCRIPT OF PROCEEDINGS

AT CANBERRA ON FRIDAY, 16 APRIL 2010, AT 10.01 AM

Copyright in the High Court of Australia

MR J.J. GLEESON, SC:   May it please the Court, I appear with MS G. CRAFTI on behalf of the applicant.  (instructed by Minter Ellison)

MR A.C. ARCHIBALD, QC:   May it please the Court, I appear with MR M.A. ROBINS for the respondent.  (instructed by Francis V Gallichio Lawyers)

FRENCH CJ:   Before you start, Mr Gleeson, I should indicate that we are of the view that we will hear full argument on both sides including issues as to the availability of appeal ground 1 and whether your argument trespasses beyond its limits and so forth, so proceed on that basis.

MR GLEESON:   Thank you for that indication, your Honour.  Your Honours, the respondent’s case failed at first instance and should not be resurrected by the Court of Appeal or this Court.  Not to stretch the metaphor too far, but at the conclusion of the plaintiff’s case it did not have a heartbeat.  That is doubtless why the learned trial judge took only eight days to deliver judgment.  The judgment of course was based heavily on demeanour and credit issues. 

Now, one important reason for the failure of the respondent’s case is that the learned trial judge rejected the evidence of Reynolds and Jones that they believed the policy was cancellable.  He found that they were not sure.  The majority in the Court of Appeal misunderstood this point and in doing so they committed a serious error from which their analysis never recovered.

We will return to that issue, but it is the clearest of errors.  What we propose to do is to touch upon four issues today, firstly, to address the issue of characterisation of the conduct, including the issue of ambiguity; next to consider causation; then to identify the errors in the judgments of the majority of the Court of Appeal and, finally, to address the notice of contention.  We have said in some detail almost everything of significance that we think we probably need to say in the written outlines and I do not propose to revisit them, but hopefully just to highlight certain points.

The Court might note in due course, when reviewing one of the seminal cases of Butcher v Lachlan Elder Realty, that our written outline adopts the structure of the majority judgment in that case.  It works through the nature of the parties, the character of the transaction, the contents of the document in question and then the circumstances in which it was sent.  I do not want to repeat the relevant aspects of all of those categories, but to reinforce a couple of salient points – the nature of the parties:  it is rare that in a section 52 case you have, as a plaintiff, an entity with a degree of commercial sophistication of this plaintiff, this respondent.

CRENNAN J:   You can, though, from time to time.

MR GLEESON:   I beg your pardon?

CRENNAN J:   From time to time there has been a fact situation where there are commercial adversaries in relation to a section 52 case.

MR GLEESON:   Yes, indeed, your Honour.

FRENCH CJ:   Sellars v Adelaide Petroleum would be a good example.

MR GLEESON:   Yes.  Typically, though, that plaintiff is not pleading the degree of ineptitude or lack of attention to detail of its own affairs, as this plaintiff does.  They conducted business of $300 million in premium funding loans per annum and yet they had a very modest view of what they were required to do to conduct that business.  The individuals in question – Reynolds and Jones – were the heart of the organisation; they were the premium funding department.  So a communication to them does not have the character of the man on the street receiving a communication and that is a matter that we say that the Court of Appeal, the majority, failed to give any weight to at all.  These were serious high‑end players in the industry and the character of the communication is informed heavily by that.

As to the circumstances in which the certificate was forwarded the key fact is that it was sent when the deal was done.  The applicant knew the deal was done.  The respondent knew that the applicant knew.  So this is akin to Mr and Mrs Butcher in Butcher v Lachlan Elder Realty being given the brochure depicting the Pittwater property with the swimming pool, after they had bought the property, and then complaining about the fact that they were misled, or Mr Henville being told by Mr Walker about the selling prices for units in the area after he had already purchased them.  But it is necessary to extend the analogy a little further to really be at one with the type of considerations that are brought to bear in Henville v Walker.  I have mentioned the sophistication of the parties; compare that to Mr Henville.

It is also the case that you would need to imagine that it was not a case of Mr Henville writing to Mr Walker and saying, “What are the selling prices for these units in this area?” but rather just asking him, “Could you send me the sale details on property X?” because what did not happen here is that the respondent never said to the applicant, “We need to know whether this cancellable”.  In fact, on the evidence, the word “cancellable” was never uttered in communications between them.  The respondent attempts to recover from that fundamental difficulty by saying, “Well, the evidence is” - they call it a concession – “The evidence is that a broker such as Miller knows that cancellability is critical.”

CRENNAN J:   That is Mr Mitchell, is it?

MR GLEESON:   Mr Mitchell gives that evidence and in fact at one point he sought to move away from it to some extent and I pressed him to adhere to it because self‑evidently it is a difficulty for the respondent’s case.  If it is known to both parties to be critical to the premium funder as to whether it is cancellable and they both know the deal has been done the only logical inference is that the premium funder has satisfied itself about that.  Mr Mitchell acknowledges that.  On at least two occasions he says, “Yes, well, in those circumstances the broker, the prudent broker assumes that the lenders ‑ ‑ ‑

FRENCH CJ:   It has either satisfied itself about that or does not care.

MR GLEESON:   Yes.  So, at no point does the word “cancellable” come up.  The only reasonable inference is that they have been satisfied.  Associate Justice of Appeal Robson treated that issue fairly briefly and said, “Because the defendant, now applicant, did not lead any evidence on the issue I am not prepared to infer that it held that view”, but that was the evidence, no inference was required.  In fact, in the absence of Mr Mitchell’s evidence it is just a matter of simple logic.

Your Honour Chief Justice French in Campbell v Backoffice spoke about the practical overlap between the logically distinct questions of characterisation and conduct, and we are very much in that arena in this matter where issues that might be thought to principally go to causation actually inform the question of characterisation as well.  Perhaps the best, perhaps even the only, observation the Court need have a good appreciation of to understand the character of the transaction is Reynolds’ concession that when the HIH certificate was sent it was tidying up the paperwork.

So the same communication between the same parties can have a different character depending on the circumstances.  I might say something to you when I know you have entered a transaction.  I might say something that is quite inaccurate when I know you have entered the transaction, and it will not attract the character of misleading and deceptive.  That same communication when I know you are asking me because you are thinking of entering the transaction assumes a different character.  I just want to turn to the issue of ambiguity.  Could I ask the Court to turn up the ‑ ‑ ‑

FRENCH CJ:   I am just not quite sure about that.  The overlap of which you speak and to which I referred in Campbell v Backoffice really arises out of the fact that when you characterise conduct as misleading and deceptive you characterise it as leading into error or having a tendency to lead into error.  So there is a notional causation involved in that or a cause/effect connection and that has to do with the character of the conduct.  I am not sure it changes according to circumstances.

MR GLEESON:   I accept that they are perhaps ‑ ‑ ‑

FRENCH CJ:   External circumstances, I mean.

MR GLEESON:   ‑ ‑ ‑ two different methods of analysing the issue.  Taking the first one, that is the tendency to mislead or deceive, with respect what his Honour Associate Justice of Appeal Robson did was to render that issue entirely conclusive to say Reynolds and Jones were misled.  They believed it was cancelled, they made an error there - but let us pass over that for a minute - therefore, it was misleading or deceptive.  Now that is an error.  There is an overlap, as your Honour, with respect, correctly finds, but they are not at one, the issues.  As to the second issue of whether the character might change according to the circumstances in which the document is given, we do press the argument that that is indeed the case depending on the circumstances in which I tell you something, the same words ‑ ‑ ‑

CRENNAN J:   That is a reliance point, I suppose?

MR GLEESON:   That is where we say there is this overlap, with respect, your Honour.  We say that it goes to reliance, but it also changes the character.  It is not misleading and deceptive to tell you something in circumstances where – take the puffery cases.  If it is obvious to everyone that it is not being said as a grave matter to persuade you to do something then the same words attract a different character to what they might do in a different scenario.

CRENNAN J:   When you talk about “the deal was done” and the certificate comes post the deal being done, that deal gets unravelled at a certain point, does it not?  What is the sequence in terms of the certificate and the unravelling of that first deal, if I can put it that way, the October agreement?

MR GLEESON:   Yes.  The certificate is transmitted on 9 October and received and read on or about that date.  The deal is then unravelled, so to speak, in around about mid‑October and then it is resurrected in early to mid‑December.  So our learned friends will say, well yes the deal was done, but it then was undone and, therefore, the certificate attracts this character of being of the inducing type.  That is quite wrong, with respect, because nothing changes about the status of the knowledge about the first deal.  Reynolds and Jones do not at any stage tell Merton, or my client the welcome letter went out in error.  So nothing changes the character of that understanding.  They needed, for their case to succeed in this regard, to have something shift.

KIEFEL J:   Why do you say the certificate was sent after the deal was done?  The welcome letter followed the certificate.

MR GLEESON:   No, no the welcome letter went out on 2 October and the certificate went on the 9th.

FRENCH CJ:   Your primary position, as I understand it, is the certificate says nothing about cancellability and therefore it does not mislead or deceive in that respect.  The fallback position:  if the certificate is ambiguous on that position it is not thereby misleading or deceptive and further there is no contextual silence which is misleading or deceptive which could be linked to the ambiguity.

MR GLEESON:   That is quite right; that is our case.

KIEFEL J:   Do you accept that there is ambiguity in the certificate?

MR GLEESON:   Our primary position is that there is not.  For it to be ambiguous a party needs to look at it and think – let us remove it from the passive – would have required a different character in the document itself.  It would have required a party to be entitled to look at it and say, “This tells me everything I need to know”.  I think that was the phrase in Butcher v Lachlan:  this is all you need to know.  This was the antithesis of that situation.  This is certainly not all you need to know; that is what you ask for.  It is a certificate.  In those circumstances it is not ambiguous because what is the party looking for?  It is not ambiguous about what it purports to be.  It is the certificate.  If we are wrong about that then there is a patent ambiguity.  With respect, his Honour Associate Justice of Appeal Robson mishandles the evidence on this point.

CRENNAN J:   He is an Acting Judge of Appeal.

MR GLEESON:   I am sorry.  Did I say “Associate”?

CRENNAN J:   Yes; just a slip of the tongue, I think, Mr Gleeson.

MR GLEESON:   Yes; I apologise.

HEYDON J:   These questions of etiquette are very interesting.  Is it not correct simply to call him Justice Robson?

MR GLEESON:   That is a lot easier; thank you, your Honour.

HEYDON J:   And the others are Justice Ashley and so on.

MR GLEESON:   That will shorten my submissions significantly.

FRENCH CJ:   That is to be encouraged.

CRENNAN J:   What was the trial judge’s position on this point?  Did he make a finding that the certificate was ambiguous?

MR GLEESON:   Implicitly. Yes, because he says it does not contain the representation that they say it does.

FRENCH CJ:   Can you take us to the relevant passage from which that implication would be drawn?

MR GLEESON:   It is in the second volume of the appeal book at paragraph 34.

BELL J:   Appeal book 758.

MR GLEESON:   Thank you, your Honour.  Paragraph 34 is where his Honour – it is a critical paragraph.  At about line 50 of page 758:

I find that neither of them subjected the HIH certificate to a careful analysis; they saw the word “properties” and jumped to the erroneous conclusion that the policy concerned property.

For it to be an erroneous conclusion his Honour is therefore saying that that was not a meaning that was open to them on that document.

From this, they passed over the question as to what was the risk insured and made the further leap to the conclusion that the policy was cancellable.  Neither of these conclusions was warranted by the terms of the document ‑

His Honour is saying on one view it was not even ambiguous, they should not have leapt to that conclusion.  But if that is not right, implicitly he is saying the conclusion was not justified because it was ambiguous.

KIEFEL J:   In the realm of erroneous assumptions and what gave rise to that assumption his Honour is saying it is not the document.

MR GLEESON:   It is not the document.

KIEFEL J:   So where is the ambiguity?

MR GLEESON:   As I say, our primary case is that there is none, but the implicit view is, alternatively, it was one of two alternatives that were open on the document and they leapt to it.

HEYDON J:   The final conclusions on this subject are in paragraph 67 on page 768, I think.  One:  the certificate “did not convey the represented fact”; two:  “At best from BMW’s point of view, it created an uncertainty”; three:  the fact that it drew the conclusion was, as it were, its own generated by itself rather than the document.

MR GLEESON:   Yes.  So the proposition that properly understood it did not convey the represented fact leaves alive the possibility that it is ambiguous.  It possibly was clearly not property, or it was ambiguous.  Both of them would permit that first sentence.

KIEFEL J:   His Honour saying there is no representation, is he not?

MR GLEESON:   Yes.

FRENCH CJ:   The next sentence:

At best, from BMW Finance’s point of view, it created an uncertainty as to this -

that is not to be equated necessarily to ambiguity.  It would be just we do not know, therefore uncertainty.

MR GLEESON:   That is a possible reading of it, your Honour.  We do not shy away from ambiguity because patent ambiguity tells the reader this.  You can make no safe assumption, so it does not contain a representation.

KIEFEL J:   Confusion or being left to wonder about a matter does not equate with misleading and deceptive conduct.

MR GLEESON:   That is right.

CRENNAN J:   It puts you on inquiry really.

MR GLEESON:   It puts you on inquiry.

FRENCH CJ:   I suppose if a document is capable of conveying two possible meanings, one of which is misleading or deceptive, and associated with that there is a risk that it will be read according to that meaning by some people, one might see an argument for characterisation of the document, notwithstanding that it is ambiguous as misleading or deceptive because it is capable of conveying a misleading or deceptive meaning to at least a significant proportion of its readers, although in this particular case we are dealing with individuals rather than the public at large, but I suppose logically it is not to be excluded – misleading or deceptive conduct may not be excluded by ambiguity.  Mere confusion or uncertainty, as Justice Kiefel says, of course, takes us out of the territory.

MR GLEESON:   Yes.  The answer is as provided at the conclusion of what your Honour said, with respect, and that is that in a private case as distinct from a public case we do not need to really be too cautious about dealing with ambiguity because the range of readers is not as unknown.  We do not need to be as generous and make allowances for people in a rush.  That is one thing.  They were not in a rush.  They were about to do a very, very substantial deal. 

Let us imagine this was an explicit representation to deal with this ambiguity point.  Let us imagine instead of it being said to arise from the contents of the document it actually said, or the covering fact said, the policy is probably cancellable.  That throws into sharp relief the fact that it is not a representation that can found an action because if you are told it is probably cancellable but you are also told in the same breath is, but it may not be.  My learned junior reminds me that in paragraph 68 there is a further passage from his Honour that goes to the point where his Honour says, at line 12 on 769:

Furthermore, in a case such as the present, where it asks for details of the underlying policy, it cannot be heard to complain where the broker provides a copy of the policy itself, presumably on the basis that the lender will read it and make its own assessment.

You might say the same thing about the certificate.  Not only presumably will it read it and make its own assessment but it is invited to make further inquiries.  Mr Hanning says, in his covering fax, “Let me know if you need anything more”.  There is startling evidence from Jones at appeal book 366 in relation to the certificate.  At 366, I am cross-examining Jones.  At line 27:

This critical document that was the critical document in the critical issue –

This is the certificate I am talking about –

you would have taken the trouble to read all of the one page?

His answer:

I looked at the points that I was interested in.

This is perhaps part of the practical overlap between ambiguity and causation, but I said a moment ago ‑ ‑ ‑

FRENCH CJ:   You mean between characterisation and causation?

MR GLEESON:   Yes, the subset of characterisation being how you characterise an ambiguous document.  I said a moment ago that Justice Robson mishandled the evidence in relation to the cross‑examination of Reynolds about the document.  Reynolds’ evidence was in large part – when he was taken to the parts of the HIH certificate that made it clear that it was not a property policy, or you could not assume it was, his answers were typically, “Well, that didn’t occur to me”. 

But then he was pressed in cross‑examination and conceded in a number of respects that, “With a moment’s thought now, yes, of course, that’s true.”  It is not issued from what a property policy would normally be issued from; it is from the professional indemnity division.  It does not have a fire services levy.  He had never seen a five‑year policy for a property policy – these types of things – and he made concessions that, “Yes, with a moment’s thought, I can see that now”. 

Now, Justice Robson said, “Well, that doesn’t really go to the issue because he said he didn’t think of that”, but it goes to the characterisation issue because we can assume, for present purposes, that he gives some insight into what a premium funder reads when he or she reads that document.  His concessions, “Yes, with a moment’s thought, I can see that, yes, it doesn’t really look like I can assume it’s a property policy” tells us that that is the character of it to a premium funder.  He concedes at appeal book 162, Mr Reynolds, line 23 - I put to him:

Given the fact that this certificate purported to you to refer to a property policy for a five year period for a premium of $3.75 million, I suggest to you that at the time you were aware that this was not a standard policy that you were dealing with?‑‑‑No.

I am relieved to see that I pursued him to see that that was an affirmative answer:

You are agreeing with me, it’s not a standard policy?‑‑‑It’s not a standard policy.

Thank you.  At the time you read it you also read the covering fax?‑‑‑Yes.

His evidence is that at the time he was aware it was not a standard policy and he could scarcely think otherwise.  If we turn up the certificate itself that he was looking at.  That is at appeal book 691.  The fax that the company did is at 690 and there is that telling line at the foot of 690, “If you need anything further please let me know.”  The starting point is to remember this is what he asked for.  It is the certificate.  That is common ground.  Then you see in item 4, “PROFESSION MISCELLANEOUS”.  As we say in our written outline there could scarcely be a more ambiguous, open, non‑informative description of the policy.

HEYDON J:   I see, it is “MISCELLANEOUS”, yes.  “POLICY COVER” is a heading.

MR GLEESON:   I beg your pardon?

HEYDON J:   The words on the next line, “POLICY COVER” are simply a new heading.

MR GLEESON:   Yes.  It appears, of course, to be a template taken from the professional indemnity division, you will see in the bottom right corner above the signature, “HIH (Professional Indemnity)”, and that perhaps explains why it is asking as to the profession there.  The entirety of the plaintiff’s, now respondent’s case rests on the little table of properties, “PROPERTIES INSURED AND LIMITS”.  Reynolds says, “Well, I looked at that and thought this is a property policy.”  He concedes that property policies have a fire services levy and there is none there.  But, the point is, it just does not say what the insurance is.

BELL J:   Apart from the five‑year term was there not some evidence about the calculation of the premium being inconsistent with a view that it was property?

MR GLEESON:   Yes, there was, your Honour.  He accepted that the premium was very high.  His evidence was that he thought that the total limit was $12 million, “Limit of Indemnity – AUD 12,000,000” and when it was put to him that the premium was $3.75 million on “a $12 million limit of indemnity” that that was very high, he accepted, “Yes” it is.

HEYDON J:   That is page 161, line 27.

MR GLEESON:   Yes, your Honour.  So his Honour’s finding that this document did not contain the representation must, of course, be disturbed effectively in order for the respondent to hold on to its position.  But, in our respectful submission, it is the only conclusion that one can draw from this document.  It is not a document that these men were entitled to read only the bits that interested them.  They were not buying a can of soft drink.  There was no explanation as to why they did not pick up the phone and telephone Mr Hanning in response to his invitation and say, “What is it?  What type of policy is it?”  Reynolds conceded that not all property policies are cancellable in any event, a point that Justice Robson just fails to address. 

FRENCH CJ:   There was evidence, was there not, that BMW provided finance - up to 25 per cent of their business covered non‑cancellable policies, in which case they look to other sources of assurance as to the creditworthiness of the borrowers and guarantees and the like?

MR GLEESON:   That is right, your Honour.  They were typically workers’ compensation‑type policies, but they also include some other types of policies.  Contract works, I think, was another category.  But when Reynolds concedes that he knew that not all property policies are cancellable, the conclusion that his Honour makes that the leap from property to cancellable was not open to them is the only conclusion that the learned trial judge could have made, with respect.

People in business are entitled to make assumptions, but if they do so with their eyes open, as this man must have done, they cannot turn around and seek compensation on the basis that no assumption was there at all.  That is effectively their case.  “I did not make an assumption; one equalled the other.”  It does not withstand a review of the evidence.

The characterisation of the conduct requires a consideration of the silence case, but the simple answer to the silence case is it never got any better, from the plaintiff’s perspective, than this document.  I touched on the issue earlier, for the plaintiff to succeed there needed to be a factual shift that converted a non‑misleading document into misleading silence.

Now, the cases on silence, of course, talk about the reasonable expectation that disclosure will be made, or information will be proffered.  It is audacious for the respondent to rely upon its reasonable expectation that Miller & Associates, the broker, would have volunteered information in a period, let us say, between mid‑October and December, after the deal had unravelled, in circumstances where BMW itself did not tell Miller that the welcome letter went out in error.

One cannot call in aid the reasonable expectation of another party to be candid and proactive when you, yourself, are secretive and fail to equip the other party, the representor, the silent party, with the knowledge as to why it should proffer anything.  The only inference is available on Mr Mitchell’s evidence as a matter of logic that for the entirety of this period of silence the broker is in a state of blissful ignorance as to there being any concern about cancellability.  Why would it think, “I had better just make sure that they are worried about cancellability and that they know that this is not cancellable”.  There is no earthly reason why they would turn their mind to that proposition.

Causation:  could we just return, please, to the reasons for judgment, and his Honour finds only that Reynolds and Jones thought ‑ ‑ ‑

FRENCH CJ:   What paragraph are you taking us to?

MR GLEESON:   Paragraph 34, your Honour, at the top of 759 of the appeal book:

In my view, had they been pressed at the time, they would have truthfully answered an inquiry as to the cancellability of the policy that the policy was an unusual one –

and we know why his Honour made that finding –

and that they could not be sure and, further, that it was probably cancellable.

I will not ask you to turn it up, but perhaps to note that at appeal book 82 Reynolds said that as at 19 October – that is 10 days after they receive the certificate – he did not know what the security was; that is in response to a question from his Honour.  Now, that finding by his Honour is not only open but required on the evidence because the next two paragraphs permit of no other conclusion.  Paragraph 36 in particular:

On Thursday 12 October –

this is three days after they got the certificate –

Mr Jones spoke to Gina Meth of NCI, Adelaide, who was considering the BMW Finance application for credit risk cover.  When she asked about the underlying insurance Mr Jones responded, in my view truthfully –

Now, that is three words, four words that Justice Robson dropped out of his summary –

that he was not sure, but that he had a an invoice or a certificate and, further, that the policy “could be for four properties”.

Gina Meth asked him to send something and at the last sentence of 37 you will see that Mr Jones said he would but he did not.  So Jones conceded in cross‑examination that that is a conversation he had.  Three days after he got the certificate he told someone, “I am not sure what the policy is; it could be for four properties”.  Well, I suppose you might look at the certificate and reach the conclusion it could be for four properties.  Not only is “probably” or lack of certainty not sufficient as a matter of logic and as a matter of application of the law for causation purposes but it was not the plaintiff’s case.  The plaintiff pleaded and only led evidence as to a different case.  It pleaded that it believed the policy was cancellable.

So the causation structure it put forward in its case was there was a representation, we believed as a result of the representation the policy was cancellable and that caused us to enter the second loan agreement.  Given that his Honour did not find that they believed it was cancellable, their case fails.  There is no evidence from the plaintiff ‑ ‑ ‑

FRENCH CJ:   Can you just take us to the critical part of the statement of claim.

MR GLEESON:   Yes; paragraph 7, your Honour, which is at appeal book 9.  It is, with no disrespect to the pleader, an unsatisfactory rolled‑up narrative.

FRENCH CJ:   That is a list of representations, is it not?

MR GLEESON:   It is.  The particulars go on for some pages.  Misleading and deceptive conduct cases do not need to be representation cases, as we know, but this one is.

FRENCH CJ:   I appreciate that, but going to the question of how they pleaded a positive belief ‑ ‑ ‑

MR GLEESON:   You can glean it from the fact that they are listed as representations and defined as such at the foot of – appeal book 10.  Then you need go to 15A which is at appeal book 21.

If during the period BMW had known any of:

There are a number of matters but one is:

the representations were false -

It would not have entered into the loan agreement.  That is the way they put their case and their evidence only ever went to the state of their belief being that it was a property policy and that it was cancellable.

KIEFEL J:   Where is the reference in the pleading to it being cancellable?

MR GLEESON:   It is one of the many paragraph 7 representations.

KIEFEL J:   I think it is (g) on page 10.

MR GLEESON:   It appears in the second line of (b).  There is a deal of repetition there but it is also in (g), as your Honour notes.  The causation structure that we are presented with is that the plaintiff says, “We would not have entered the loan unless we believed it was cancellable”.  His Honour finds, “You did not believe it was cancellable, only that you did not know and that it was probably, but you still approved the loan”.  Those two matters, when put together, can only amount to a rejection of their case.

There are two levels to the causation analysis, we say.  Firstly, if, as Justice Robson concludes, and Justice Neave agrees, Reynolds and Jones believe the policy was cancellable, what caused them to hold that belief?  Then, secondly, did any such belief cause the respondent to enter the December loan?  The case fails at both levels.  We have been dealing principally with the first – what caused them to hold any belief that they did hold – but the second level of whatever belief they did hold, did it cause them to enter the loan?

The trial judge’s findings are set out in paragraph 34 in relation to the first level, and we have gone to that, and they are set out in paragraph 56 in relation to the second level.  This is the paragraph dealing with the cost of production policy.  It is the paragraph that contains that word “reassured” that excites the respondent.  The finding of his Honour is, at line 30:

In short, the actual policy was of little interest to them given what had gone before and given their strong motive to make a fresh loan, if at all possible.

This is the very type of case referred to in Sutton where a party is in truth so desirous of entering into a transaction that the alleged representation was not a causative factor.  How do we know that to be the case?  Reynolds conceded that right up until the December loan he held the view that BMW was bound on the first contract.  It is hardly surprising.  The welcome letter says just that. 

His state of belief, of course, puts paid to the proposition that there was some sort of accord and satisfaction.  The first instalment went back, which is scarcely surprising.  But what his Honour refers to with significant understatement as a delicate situation at one point and a strong motive at another point is they had no alternative.  They had begun to weave this tangled web and they had no alternative.  The surrounding known circumstances support only that view because what happened was they tried to get out of it and for a few moments it looked like they had got away with it.  But the moment Merton said, “CTHL, the borrower, is going to sue”, they re‑entered it.  They found out in probably late October that the borrower was going to sue and then ‑ ‑ ‑

FRENCH CJ:   Was it as clear‑cut as that, the borrower was going to sue or the borrower was consulting solicitors?

MR GLEESON:   I think there are a number of different ways it is put on the evidence, but I think in cross‑examination Reynolds conceded that his mindset was they were going to sue.

CRENNAN J:   His Honour’s finding, I think, did not go further than a reference to their knowledge that CTL, whatever its name is, had consulted its lawyers?

MR GLEESON:   Yes.  His Honour is at times a little elliptical in some of his language, but the only fair reading, we say, is that when he speaks about the strong motive and his conclusion that he reaches in 67 in the passage that Justice Heydon, I think, pointed to, the third sentence the reference there to “wishful thinking”, why did they have this wishful thinking?  They are not a party that out of the goodness of its heart just wanted to do the deal.  They had wishful thinking because they thought, “We can make it go away”.

Now, for present purposes, whether they were bothered about the threat of suit or the suggestion of suit because they thought they would lose such a case, or they were troubled by it because their perception would be exposed, is irrelevant.  Either way they were compelled by this problem to enter the deal.

CRENNAN J:   There was also an issue, which complicated matters, was there not, about them exceeding their limits in relation to approval for a loan?  Was not Mr Reynolds’ limit half a million or something?

MR GLEESON:   Yes, it was and as Justice Ashley points out that is a telling deception.  He refers to it as dishonesty.  We are challenged for a failure to put dishonesty, but we were not exploring the prospect of dishonesty with these people.  They admitted it.  Reynolds admitted, “I exceeded my authority many times over”.  So that is probably the embarrassment issue, the wanting to conceal the deception issue, but as long as his Honour was satisfied, as we say he was, that this was the real motivation it does not matter quite why they wanted to cover up. 

Just on this issue, could I ask the Court to turn up page 442 of the appeal book?  At line 26 I put to Mr Jones:

You believed in December 2000 that BMW was on the hook for the first deal –

Now the unravelling had happened throughout October –

and had to find some way to redo the deal, that was your belief?‑‑‑Yes, we still had the underlying policy, that hadn’t changed.

So your answer is yes?---Yes.

An explicit admission that their mindset was we have to do the deal.  Now, our learned friends say, yes, but note that he says, we still had the underlying policy, but his Honour has found that they held no belief about that policy.  It is axiomatic if you think about it, as the trial judge found, if you believe only that it is probably and therefore your mind permits the prospect that it may not be, and you do not check – and we know they did not – it leads to only one conclusion, it did not matter.  If it mattered they would have checked.

So it is not a case, as the respondent would like to put it, that this need only be a cause.  The respondent, with respect, tries to put the soft causation case.  It need only be a cause, it need only be a minor cause, but even with the most generous approach to causation on section 52 cases the plaintiff’s case failed.  To be a cause they had to have held the belief.  If I could turn now to the issue of ‑ ‑ ‑

FRENCH CJ:   Held the belief or relied?

MR GLEESON:   One follows the other, with respect, your Honour.

FRENCH CJ:   Yes.  I mean, if contrary to your primary submission there was misleading or deceptive conduct and implied representation one way or another the policy was cancellable, then your fallback position is no reliance because they were actuated by other factors to the exclusion of any consideration of whether the policy was cancellable or not.

MR GLEESON:   Yes, your Honour, reliance as a subset of causation, and I am using the two somewhat synonymously here, but for our purposes I think I can say that they really are ‑ ‑ ‑

FRENCH CJ:   Reliance is how you get to causation in this case.

MR GLEESON:   Yes.  Even if the Court is against us on the characterisation of the conduct, unless there is belief that it was property policy and cancellable, you do not get to reliance.  There is the break.  The next issue is the error committed by the majority of the Court of Appeal in demeanour‑based findings of fact.  Reliance is pre‑eminently a credit question because it depends on internal mental reasoning.  There has been a good deal of authority from this Court in the last decade or two in relation to the circumstances in which an intermediate appellate court might disturb a trial judge’s finding of fact.

As we have said in our written outline, some of it is quite helpful to our present circumstances, but there are limitations in respect of which you can truly apply all aspects of Fox v Percy to this type of matter, because here we are dealing with the state of mind.  Fox v Percy was about where the kombi van stopped on the road and the skid marks and objective evidence.  As Justice Ashley says, cases such as Rosenberg v Percival are perhaps of more assistance.  That is the failure to warn, medical negligence‑style case, because it explores the question of the plaintiff’s mindset:  what would I have done?

CRENNAN J:   What about the fact that in this case Justice Byrne analyses the certificate in one way and Justice Robson really analyses it in a different way?  In Fox v Percy terms, you have a document here.  How do we deal with that?

MR GLEESON:   The respondent, we think, puts something to that effect.  It says, “Well, if Justice Byrne was wrong on the characterisation of the document then doesn’t that infect his reasoning in relation to causation and why can’t we strip it away and look at it ourselves afresh?”  The answer, in part, is that might be right as to the first layer of causation – that is, what contributed to their belief?  So if Justice Byrne was wrong and it was a misleading document, it might be possible to say, “Well, his reasoning as to reliance at that level is vulnerable”.  But not at the second level, because we have moved on at the second level to, “Yes, but what made them enter into the contract?”  That remains quarantined from the character of the document.  You must carry with it to that level of analysis the proposition that these demeanour‑based findings about why they did what they did ‑ ‑ ‑

FRENCH CJ:   When you call them “demeanour‑based findings”, I am not quite sure what that means.  It seems to me that a lot of what the trial judge found in relation to Reynolds and Jones had to do with objective circumstances, what was driving them in terms of the situation they found themselves in as a result of the welcome letter and so forth.  Does he say anywhere that somebody had a shifty look on their face?

MR GLEESON:   No.

FRENCH CJ:   I do not know too many judges who base their judgments on that sort of thing these days.

MR GLEESON:   No, indeed, your Honour.

HEYDON J:   The point is really this, is it not?  This is not a case where there are collisions between the two sides, because all the evidence was called by the plaintiff, or is it really a case where there were documents littering the path which ineluctably forced the witnesses in a certain direction?  They came out and said certain things, as you said earlier, to say, “I relied on something as an internal mental state”.  But the judge said, as the Chief Justice remarked, “Look at the objective circumstances they were in, the troubles with their superiors and so on.  At the end of the day I just don’t accept what they say about relying on it.  They were driven by other things”.  It is not a crude question of watching the witness sort of go white or start trembling, but it is a question probably on which trial judges do have some positional advantage over judges who examine the cold record of the appeal book.

FRENCH CJ:   That is because the trial judge is immersed in the detail of the case and the nuance in a way that – and I think that has been well recognised – no appeal court can be.

HEYDON J:   The trial judge is exposed slowly.  Justice Kirby pointed this out in possibly State Rail Authority.  The trial judge is slowly introduced to the detail of the case and follows it, as it were, in real time.  Appellate courts are taken to a snippet here and a snippet there.

MR GLEESON:   That is true and, with respect, the first way that your Honour put the proposition that it is not entirely a matter of observing the demeanour of the witness but that the demeanour of the witness informs the question to some extent is sufficient for our purposes because it is not a minor extent.  Stripped bare, what Justice Byrne does is, he says, “I have looked at Reynolds and Jones when they have said to me, ‘I would not have entered this second loan if I had not believed the policy was cancelled’ and I don’t believe them”.  He just says, “I don’t believe them”.

Now, to some extent that relies upon documentary evidence but you cannot escape the fact that that conclusion relies upon observing the witnesses.  There is a passage in Rosenberg v Percival that actually comes to mind. It is not the passage that is cited by Justice Ashley but is at paragraph 27 of the judgment of Justice McHugh which is a passage that Justice Gummow agreed with.

HEYDON J:   What is the volume reference?

MR GLEESON:   I am sorry.  Rosenberg v Percival 205 CLR 434 at page 444. It should be in the appellant’s list of authorities. Rosenberg v Percival was the medical practitioner who submitted to surgery, said she was not warned and she went blind as a result.  Her case failed because the Court rejected the proposition that if warned she would not have undergone the surgery.  Justice McHugh explores this issue of the hypothetical. 

Now, the evidence of Reynolds and Jones is necessarily hypothetical, what they would have done in the different set of circumstances.  This goes to the proposition that that is an inherently internal consideration, of course.  At paragraph 27 his Honour says:

When the tribunal of fact has rejected the patient’s evidence that he or she would not have proceeded with the surgery, however, the ordinary restrictions on appellate review of fact finding apply.

HEYDON J:   It is very interesting, this.  Footnote (64) in Chappel v Hart is where Justice McHugh’s thinking on this began.  He says however impressive the demeanour of a patient, it will not restrain appellate review really because circumstances drive a badly injured person into saying “I would have acted on different advice”.  They have to say it but it does not really carry very much weight.

MR GLEESON:   The blind woman is undoubtedly going to say, “Had I been told I would never have done this”.  But what his Honour says there is there are two different alternatives.  At 26 he refers to:

When the tribunal of fact has accepted the patient’s evidence that he or she would not have undertaken the surgery, an appellate court will often be in a stronger position to reverse that finding -

Paragraph 27 is critical:

When the tribunal of fact has rejected the patient’s evidence ‑

the normal restrictions apply.

If the tribunal of fact is a judge, as in the present case, an appellate court must respect the advantage that the judge has had over the appellate court in seeing and hearing the patient give evidence.  Ordinarily, the appellate court cannot reverse the finding of the judge unless it is satisfied “that any advantage enjoyed by the trial judge by reason of having seen and heard the witnesses, could not be sufficient to explain or justify the trial judge’s conclusion.

A powerful passage that we say supports our position.  At a broader level you have the nice phrase with respect that the majority of the Court in Fox v Percy at 23 where they refer to the feeling of the case.  That is I think touching on the second issue raised by you, Justice Heydon, where the trial judge is immersed in the narrative over a series of days.  This was eight days.  Eight days later he wrote his judgment.  The appellate court cannot know of the evasiveness and the thundering silence that occurred when Jones was compelled to concede that he had told Gina Meth he did not know what the policy was.  Our learned friends will say how can you say that from the Bar table?  That is the very point.  Let us assume I am wrong and that there was no silence.  What was there, then?  Did he say it comfortably, confidently? 

The more antiquated case of Dearman v Dearman that is often referred to by Justice McHugh refers to the transcript being the mere words used by witnesses when they appear in cold type.  We get enough from the cold type here but the relevance for present purposes is was Justice Robson, was Justice Neave entitled to say no?  Reynolds and Jones not only should be but must be accepted.  In an unfortunate lapse of language Justice Robson assumes the language of the trial judge at 171 of the appeal court judgment.

FRENCH CJ:   Paragraph 171 at page 856, I think.

HEYDON J:   We are to compare this with which paragraph of Justice Byrne?

MR GLEESON:   Paragraph 171 of Justice Robson.

HEYDON J:   Yes.  Comparing it to which paragraph of Justice Byrne?

MR GLEESON:   The sentence in question is at about the mid‑point of line 20.  His Honour says:

I am not prepared to reject the sworn evidence of Mr Reynolds and Mr Jones that they would not have entered into the loan agreement or authorised the loan agreement ‑

Our argument is, with respect, that is not your job.

HEYDON J:   It is not up to him to reject it, it is to work out some error in the trial judge’s rejection.

MR GLEESON:   Yes, and it goes to the heart of the problem.  He certainly makes reference early in his judgment to Fox v Percy, but he does not apply it.  He does not identify a glaringly improbable fact.  Now, how do we know that his Honour the trial judge rejected the sworn evidence of Reynolds and Jones that they would not have entered the agreement if they had been aware?  Well, it goes back to the proposition I put earlier and the passages I took you to earlier, including 56, and I think 67.

HEYDON J:   I mean, in a sense the technique adopted by Justice Byrne is perfect from a trial judge’s point of view to have – to look at an ex tempore judgment might have aroused a little bit of criticism because of the complication of the case, but to deliver a judgment eight days after an eight‑day trial indicates on the one hand a close familiarity with the facts, and on the other hand just a pause for reflection before deciding.

MR GLEESON:   Yes, indeed, and I think it might be CSR v Della Maddalena where the opposite was the case, where there was some question as to, well, how much can we as an appellate court assume that the trial judge has made demeanour‑based findings when the judgment was delivered eight months later?  Surely that must have been largely from notes and transcript.  This is why I make constant reference to the eight‑day turnaround.

HEYDON J:   Well, if you get much more delay than that you are exposed to grounds of appeal centring upon the excessive delay.

MR GLEESON:   Yes.

HEYDON J:   Justice Neave just agreed on this causation question, did she?

MR GLEESON:   Yes – she relied principally on Gould v Vaggelas, which was an error in itself.  The Gould v Vaggelas passage that says if a representation is calculated to induce reliance and the person acts to enter the transaction it is a reasonable inference that there was reliance.  Of course, that is, with great respect, not applicable at all to a case such as this, firstly, because on the facts there was no calculation to induce.  The HIH certificate was sent when on the evidence the mindset of the sender has to be you have done the deal, so it is not being sent to induce the party to enter a transaction.  I think the majority judgment in Campbell v Backoffice is critical of the Gould v Vaggelas style inference being used in a case such as this.

HEYDON J:   It may not be the case to say so, but I have the gravest doubts about Justice Wilson’s judgment in any case.  I am not sure it is an evidential burden, it is a purely tactical burden I would have thought, but I do not think this case will decide that point.

MR GLEESON:   It is a deceit case for one, and I think this is what the majority says in Campbell v Backoffice.  It has great currency now, of course, because when there is an evidentiary gap in a plaintiff’s section 52 case it is inevitably relied upon to paper over a difficulty, and ‑ ‑ ‑

HEYDON J:   Your point is that deceit involves an intention on the part of the speaker to induce the hearer to act in a certain way, whereas section 52 cases not involving dishonesty, deceit do not – one thing is said, the question is what did it cause, what was the response for that?

MR GLEESON:   Yes.  One can imagine a situation where reliance really is not that difficult and inference is sufficient.  If somebody says, “I’m thinking of doing X.  I’ll do it if you tell me Y”, and the person tells them that, it is pointless for the witness to give evidence to that effect.  It is a logical inference to draw.  Perhaps his Honour Justice Wilson was doing no more than articulating that.  I cannot locate that passage I was thinking of in relation to Gould v Vaggelas being appropriate, but I think we have made the point.

HEYDON J:   I think at footnote 13 on page 812, paragraph 44, her Honour refers to Sutton and then to Gould v Vaggelas.

FRENCH CJ:   In the context of the movement of the evidentiary onus.

MR GLEESON:   Yes.  Her Honour deals with the matter fairly briskly and, we say, in a manner that was not open to her on the style of case that this was.  In order to disturb Justice Byrne’s findings as to the state of mind of Reynolds and Jones, in our submission, Justices Robson and Neave would have needed to have identified glaringly improbable aspects of the evidence that the trial judge’s views were inconsistent with.  The opposite is the case, with respect.  His conclusions were supported by a host of external evidence – issues such as the fact that Jones applied to NCI, the credit insurer, which, on Reynolds’ evidence, you just never did for cancellable policies and, on Jones’ evidence – well, he ‑ ‑ ‑

BELL J:   The application to NCI was some days before the receipt of the certificate.

MR GLEESON:   But it was alive after they received the certificate.

BELL J:   Yes.

MR GLEESON:   He had made no attempt to inform them, “We’ve got ourselves a cancellable policy; we don’t need it”.  His explanation as to why he did not do that is unsatisfactory, we say.  As to the matters that are not glaringly improbable or do not render the conclusions glaringly improbable, or quite the opposite, there are the guarantees.  They obtained directors’ guarantees with respect to these fellows which, on their inevitable previous practice, they just did not do if they had a cancellable policy.  They only cared about having the premium to recover if they needed it.  His Honour pressed Jones on this and at 324 – it might be just worth turning up – at line 5 his Honour says:

Why would you do that, you’ve got plenty of security with the policy, haven’t you?‑‑‑

Testing their assertion:

Yes, we did.

You’ve got plenty of security with the policy as you understood it, so why do you need guarantees?‑‑‑Just further to shore up our position.

But you never got guarantees in the past, I was told that generally speaking you didn’t worry about guarantees?‑‑‑We didn’t for limited companies, but a proprietary limited company – we did on our car business, we didn’t on premium funding.

You did not?‑‑‑No.

So this is unusual to ask for guarantees?‑‑‑Yes.

Do you know why guarantees were sought on this transaction if it was unusual?‑‑‑Just further to – getting as much as we could, I suppose.

There is a nice little insight into the feel of the case.

HEYDON J:   This must have been a depressing question from the judge in examination in‑chief.

MR GLEESON:   Yes.  Jones is described as not a careful man by his Honour.  Our learned friends say, “Well, how can these findings be made by his Honour when he has not found them to be dishonest?  Seasoned trial judges such as Justice Byrne do not always go for the jugular in their language, with respect.  Describing him as not a careful man, saying the evidence presents more difficulties is polite but it is very pointed.  He says, in substance, in paragraph 34, “I don’t believe you.”  He says, in substance, in 56, “I don’t believe you.”

Our learned friends say he had no basis for rejecting their evidence that when they got to the actual policy they did not link it with a certificate.  That is the part where he says it presents more difficulties.  This is at 55.  Their further evidence that they treated the policy as having nothing to do with the proposed loan presents more difficulties.  The first thing he mentions in connection with that - St George.  This is a point that I just need to quickly demonstrate to the Court.  The policy that came through in the bundle in ‑ ‑ ‑

FRENCH CJ:   November, was it?

CRENNAN J:   November, I think.

MR GLEESON:   Yes, late November, thank you – appears at 639 of the appeal book  You will see there on 639 there are two parties mentioned, St George Bank Limited and Plantation Management.  If you hold that page open and turn to the certificate that I took you to earlier at 691 you will see, of course, there is no mention of St George, but Reynolds made a terrible slip ‑ ‑ ‑

KIEFEL J:   What is the point of that, that there is no reference to St George?

MR GLEESON:   Because Reynolds made a terrible slip in‑chief when he said in response to a question from his own counsel, “Well, I knew St George were ahead of us in the queue”.  I cross‑examined him on that and said, “But, you’ve given evidence that you made no link between the policy and the certificate.  You thought the policy was something entirely different.  How is it that you knew St George was ahead of you in the queue?” and he gave no satisfactory answer.  He could only have held that view if he did make the link and of course he made the link.  That is why his Honour refers, in the very passage in which he is rejecting their evidence that they did not make a link between the two.  That is why his Honour refers to the very issue.

HEYDON J:   Just on the St George question – I may have misunderstood this – but is the reason why perhaps St George Bank Limited is not in the certificate that they were not being insured?  It was only Plantation Management that was being insured.  The cost of reduction insurance policy brings the bank in for other purposes, is that the reason why the structure is like that?

MR GLEESON:   It could well be.  For our purposes we need only go so far as to explore the mindset of Reynolds and Jones.  Reynolds is hopelessly conflicted.  He says, “I did not think that document had anything to do with it, but I believe St George was ahead of us in the queue”.  Jones, interestingly enough, concedes under cross‑examination that the fact that St George is not mentioned on the certificate was not something that could have put distance in his mind between the two – the certificate and the policy – because he knew certificates do not always refer to all insureds.  But that was his sole stated reason, the sole specific stated reason he had given in evidence, for divorcing the two because of the presence of St George.  This is Jones I am talking about now.

There is a passage of cross‑examination when I take Reynolds to his awful blunder that he had made where he made the link between St George and the policy.  His Honour is clearly very troubled by it because he enters that exchange.  At one point Reynolds seems to be saying, “Well, no I just – all I am saying is I knew St George were in the picture”.

FRENCH CJ:   Where are you taking us to, Mr Gleeson?

MR GLEESON:   I wish I had the answer to that, your Honour.

FRENCH CJ:   Well, it is not much good giving it sort of absent reference.

MR GLEESON:   It is easier without referring to the written word.

FRENCH CJ:   You were there, we were not.

MR GLEESON:   Less accurate.  I might return to it, your Honour.

HEYDON J:   There is some re‑examination on it on page 266, but let that just be a starting point.  Maybe it is simpler to return to it.  All the references are in order.

MR GLEESON:   It is latish in the cross‑examination.

HEYDON J:   It seems to be around 253.  That is part of it.

MR GLEESON:   Yes, I found it.  At page 250 of the appeal book, line 11:

That was your state of mind in March 2001?---Yes.

You knew that HIH had collapsed, you knew there would be a queue and you knew St George was probably ahead of you –

Now, remember that March 2001 Reynolds’ evidence is, “I am still oblivious to the fact that this is a non‑cancellable policy”.  He is still relying on a certificate –

How did you know St George was probably ahead of you?---From the details within the policy.

I see.  Would you turn back to the certificate, please.

Now, there are two things that are called a certificate and that is why there is some potential for confusion, but it is clear from the court book numbers I am taking him to that we are comparing the certificate at 691 of our appeal book and 649, which was the one that came with the policy.  At the top of 251:

Because they were the co‑insured on the cost of production policy?‑‑‑Yes.

Mr Reynolds, your evidence has been that your understanding as at October 2000 and as at March 2001 was that this cost of production policy was not the policy?---That’s correct.

Why is it then that in March 2001 you assumed that St George Bank, as the co‑insured, would stand ahead of you in the queue?---St George were involved with HIH that was the only assumption I drew.

His Honour then enters the equation and at line 20:

I think we are at cross‑purposes, you pick it up and sort it out, Mr Gleeson.  I think the answer he gave to me might have been wrong.  When I asked him whether it was because of St George generally as a banker of HIH, and if you are dealing with an organisation and you know that St George is a banker, well, you might well assume that it borrowed money from St George and you would have to wait in the queue.  But you are now saying that on this transaction, the transaction involving this plantation or whatever it was, that St George was involved, you knew that?---Yes.

How do you know that?---From the original documentation that we had that St George was listed on the – within the documents.

So it is clear that he is not talking about a general St George being in the frame.  He made the link.  The only way he could make the link is because when he got the documents he assumed this was the policy.  It is scarcely a surprising factual finding by his Honour that they looked at the bundle, of which this policy comprised a little under a quarter of the documents, and that they thought this was the policy.  His Honour says, unsurprisingly, it really was not of much importance to them.

The notice of contention itself is concerned more with whether Justice Neave was in error in not addressing the issue of the notice of contention and that that was the error.  But as the Court will have seen from our written outline we contend that her Honour did deal with the matter in substance in her Honour’s reasons without mentioning or specifically adverting to the notice of contention.

Could we add to the material we have already provided by way of the written submission a reference to her Honour’s paragraph 45 at page 813, lines 18 to 20.  There her Honour clearly finds that the evidence does not support the inference that Jones and Reynolds would have agreed to the December loan because they believed they were already contractually bound to make the loan.  Justice Neave there is really dealing with the factual basis that would otherwise give life to the notice of contention and therefore her Honour should be taken to have dealt with it in substance if not mentioned it explicitly.

In any event, the point is doomed.  It is a point that would fail on the merits, as Justice Robson said, and it is really self‑evident, in our submission, from what Justice Neave said on the matter that that is the way her Honour was deciding it and if asked explicitly to mention the notice of contention would have referred back to those passages in her Honour’s reasons.  It is simply a case in which the parties, having got to the point that they had in mid‑October, by mutual assent abrogated their contract and left one another at large.

At the end of the day, of course, there were fresh negotiations entered into between the borrower and BMW and they did yield a fresh agreement which became the December loan.  It is not without significance, having regard to the argument on this point, that the December loan was far more advantageous to BMW than the antecedent October loan was or would have been.  There was a shorter repayment period, a much shorter repayment period, much greater effective security and a much higher yield, a much higher effective interest rate – 9.4 for the October loan, shown at page 615, and 15.72, shown at page 704.

If what was happening in December was some compromise of a damages claim one might have thought the loan agreement would be on terms less advantageous to BMW than had been the original terms.  All the objective indicators are that that is not what was happening at the time and, in our submission, the basis of the argument advanced before this Court on this point is one that was rightly rejected by Justice Robson without error of principle and rightly dealt with in substance by Justice Neave without error of principle on her part.  If her Honour erred in failing specifically to address the notice of contention then it is an error without any consequence because the outcome of the notice of contention is clear from the facts in any event.  If the Court please.

FRENCH CJ:   Thank you, Mr Archibald.  Yes, Mr Gleeson.

MR GLEESON:   Your Honours, the respondent’s submissions are built on a false premise.  My learned friend said there is only one Fox v Percy finding, and that is the one in respect of his Honour’s conclusion that they did, in fact, link the cost of production policy with the certificate.  That is not correct.  The finding by the trial judge that Reynolds and Jones believed that the cost of production policy was linked is not the only finding.  There is also the fundamental finding by his Honour that Jones and Reynolds were uncertain as to whether it was a property policy and whether it was a cancellable policy.  That is a state of mind finding.  A state of mind finding is necessarily based, we would say, substantially on demeanour, substantially on observing the witnesses give their evidence, but, on any view, at least partly so.

The error committed by their Honours, Justices Neave and Robson, is in failing at that point to undertake a Fox v Percy analysis.  We need only look at, I think, three paragraphs from their respective judgments.  First of all, paragraph 155 of Justice Robson:

I accept, as the trial judge appears to have, that the evidence established that at the time Mr Reynolds and Mr Jones approved the December loan, they believed that the insurance was property insurance and was cancellable.

The reason that his Honour did not engage in a Fox v Percy analysis is because he gets that wrong, with respect.  He does not even appreciate, with respect, that what he is doing is making a finding contrary to the trial judge.  Of course he does not undertake the analysis ‑ ‑ ‑

CRENNAN J:    This is paragraph 34 of the trial judge ‑ ‑ ‑

MR GLEESON:   Yes.  At paragraph 34, his Honour has said if they had been pressed, they would have said it is “unusual” and we cannot be sure.  The second of three references I wanted to take you to in this regard is paragraph 159 of Justice Robson’s judgment:

The trial judge found at best from BMW’s point of view –

We know where that paragraph comes from.  That passage comes from the trial judgment –

the HIH certificate created uncertainty and the fact that BMW drew the conclusion that it did was a product of its own carelessness or wishful thinking.  If the certificate did create uncertainty, which I do not accept –

This is the difficult part of Justice Robson’s judgment.  One can perhaps understand the error he commits at 155, where he mistakenly asserts that he and the trial judge are at one.  It is more difficult when one gets to 159 because he there identifies in consecutive sentences the difference between the two of them, but fails to undertake the analysis.  On what basis does he not accept the trial judge’s finding?  There is the error of principle.  Justice Neave commits the same error at paragraph 43 of her Honour’s judgment at 812 of the appeal book:

After careful consideration, I agree with Robson AJA that Mr Reynolds and Mr Jones approved the loan because of their belief that the policy was cancellable –

So there we have it, the two judges in the majority departing from the trial judge in a demeanour‑based finding and failing to undertake the analysis.  Now, our learned friends attempted to deflect this as an issue by asserting that if you read the trial judgment in a certain way you can come to the conclusion that Justice Byrne has made a finding that they did believe it was a property policy and cancellable.  With respect, that is straining the language of what his Honour said, and it is clear, with respect, that what his Honour is doing at paragraph 34 where he refers to “erroneous conclusion” – and these are the words that are fastened on by our learned friends – that is part of his narrative journey through to his final conclusion at the end of 34 where he says, this is what I find.  He says:

In my view, had they been pressed –

and so on.  So the earlier parts of paragraph 34 is a recitation of their assertions, but we have the actual finding in the conclusion of 34, and our learned friends are driven in the end to acknowledge this by referring to tolerances as to certainty, which is a tantalising proposition in the context of reliance.  It is accepted by our learned friends, although they minimise the degree of uncertainty, but it is accepted that there is a degree of uncertainty. 

Now, if I choose to act in a certain way and I am conscious of my uncertainty, I am doing so conscious of the risk, especially when it is within my power to easily resolve the uncertainty to pick up the phone, send an email, get the answer, but if I decide nonetheless to press on I am not truly acting in reliance on the conduct.  It would be, with respect, a radical development, we would say regression of the law in relation to causation and section 52, for this Court to find that a representee with admitted uncertainty can act on that uncertainty and then turn around with an actionable claim.

Returning to one of the early points made by my learned friend in his submissions about the notice of admission and notice to admit, the transcript where his Honour expresses incredulity, of course, occurs well before the cross‑examination of Reynolds and Jones in relation to the document.  So his Honour picks it up, reads it and says, “Well I can see the differences”.  The position is that his Honour heard the evidence in relation to what they did with this document and his incredulity, it seems from the content of the judgment, transferred to the way that they conducted themselves.

At appeal book 313, 314 and 315 we have the admissions from Jones during evidence in‑chief and questions from his Honour about how they dealt with this policy.  Jones says at line 12:

we wouldn’t even take great note of that type of detail in a policy. 

Except that if you were lending money on the security of this policy –

This is his Honour –

wouldn’t you want to know what the policy was about or doesn’t it really matter very much as long as there is a policy?‑‑‑As long as there is a policy and the class of insurance was of greater concern to us.

HEYDON J:   What page are you on, I am sorry?

MR GLEESON:   Page 313, your Honour.  So his Honour hears this evidence about the manner in which Jones and Reynolds regarded the policy and there is the answer as to why he said they reassured themselves.  There is a touch of irony in what his Honour says, in fact, there is a touch of irony weaving through a lot of his Honour’s judgment.  There is barely restrained mirth in parts at his expression as to what these gentlemen did, or did not do.  But his Honour says they really did not look at it.

Now, my learned friend tries to turn that vice into a virtue and to say, “Yes, well you have to consider these differences”.  They are differences that his Honour expressly stated.  They did not realise, or a more careful reader would have realised, but they did not because they were not careful readers.

We are fastening on this issue because it is the one that is acknowledged by our learned friends to present difficulties for them in the Fox v Percy analysis and they say it was permissible for Justices Robson and Neave to do what they did in relation to the reassurance point, but if we just return to his Honour’s judgment momentarily, what his Honour says at paragraph 56 in the reassurance sentence, the reassurance has nothing to do with cancellability or anything else. 

It is their brief examination of this page that reassured them.  That is where they were reassured.  This page is page 9; the handwritten certificate.  What is it on page 9 that they were cross‑examined about - the properties.  They admitted that they had seen that the four properties were the same, as on the other certificate; that is what reassured them.  That clearly is a finding that was open to his Honour, it is not glaringly improbable and the case of the respondent accordingly fails. 

Our learned friends suggest that our case has changed, that the particulars refer to Jones being told by Dick, our learned friend passed over the preceding paragraph, the particulars which of course referred to the proposition that they were given the policy.  It has always been the applicant’s case that by provision of the policy they were taken to be on notice.

My learned friend asked the rhetorical question, how were they able to appreciate it was the same policy?  There are a number of reasons, but this one will do.  It is the only policy they were ever given in relation to a 3.95 million loan.  You would think it might raise a question in their mind.  Remaining on this point for a moment as to the Fox v Percy task that was not undertaken, at 434 Jones was cross‑examined in relation to his recollection about what he did when he got the bundle.  At line 4 he was asked:

Yes, you’ve made some assumptions about what you probably did but you can’t be certain that you have any true recollection of precisely what you thought when you got this policy?‑‑‑Yes.

His stated reason for the difference that he thought there was between the policy and the certificate was the existence of St George on the former and not on the later, but he admitted at 434, line 20:

St George’s presence on the cost of production policy could not have been your main reason for forming any conclusion that this is not the policy?‑‑‑No.

You agree with that?‑‑‑Yes.

His evidence was wholly unsatisfactory, rejected by the learned trial judge and that finding was disturbed in a manner that was not permissible.  It was an error by the majority to do so.  My learned friend spent some time on the differences that existed between the policy and the certificate.  There is no good news for the respondent in that exercise because all it yields is the conclusion that there is ambiguity – ambiguity upon ambiguity.  Their case rests on the proposition that all was clear.

I want to correct something I said earlier.  The exchange in relation to the notice to admit came after the evidence.  That changes nothing though, in respect of the argument that his Honour’s conclusions were informed by what they did.  I have already taken the Court to the proposition and the finding by his Honour that they made the link without noting that there were different policy numbers.  That is really fatal to what his Honour Justice Robson does.  Once Justice Byrne finds that they did not look at the policy numbers or any of the other differences, that is the end of the matter.

A minor point:  the uncertainty about whether this cost of production policy had expired.  Clause 2 of the policy itself refers to the 60‑month period.  That is at odds with the certificate that is at the back which refers to a 12‑month period but as I say further ambiguity does not assist the respondent.

A question arose during an exchange with my learned friend as to what the lender would typically get.  At appeal book page 275 – and this goes to the nature of the request of Merton - line 7 during examination in‑chief Jones is asked:

When you say “the nature of what we are funding”, what do you mean by that?‑‑‑Details of the insurance policies, yes; normally it would be in the form of an invoice or a certificate from the insurer and that would give us an idea of the nature of the policy.

So that is his evidence as to the degree of specificity that they normally required.  It is not open on the evidence for our learned friends to suggest that what was being requested of Merton was full policy information.  Jones’ evidence is that they typically did not get that at all.

Finally, in relation to the approval document at 716, our learned friends say the approval document is contemporaneous objective documentary evidence supporting the conclusion that they believed positively that this was a cancellable policy because they have ticked “cancellable”.  But this document is itself infected with uncertainty.  The last piece of transcript I would ask the Court to turn to is 205 and 206.  We are cross‑examining Mr Reynolds in relation to this document, beginning at 205, line 18:

You’ve been shown the approval format that was signed by yourself and Mr Cameron Jones in relation to the deal that was put in December 2000.  Could you turn to court book 252.  Do you see there at the top there’s a section that says, “Cancellable component” and it’s got a ticket?---Yes.

You say that’s consistent with the fact that your view was at the time that it was an entirely cancellable policy?---That’s correct.

There’s no money amount written in there and no percentage amount written in there, do you see that?---Yes.

I then took him to 10 other documents, involving himself and Jones, from the same period.  At line 9 over the page:

That was your usual practice to insert in those dollar spaces the amount that was cancellable and the amount that was non‑cancellable?---Yes.

We go down:

the same?---Yes . . . 

the same?---Yes.

And so on.  At line 25:

Every instance in this court book in which a deal is done at about the time of 2000, the application approval form has the dollar figure inserted for the cancellable or non‑cancellable component,
correct?‑‑‑Yes.

Do you have any explanation as to why in this mater if the entire amount was cancellable there’s no entry in the cancellable provision there?‑‑‑No, I don’t, sorry.

Is it possible that it’s because you weren’t sure?

He says no, but he cannot offer an explanation.  The one document that the respondent fastens on as being supportive of the proposition that they were certain on the evidence is quite the opposite.  Our learned friend says this was a finding by Justice Ashley of dishonesty, that this document was a dishonest document and this was not put to them.  In fact, what his Honour Justice Ashley says at appeal book 806 is not so much that this is a dishonest document.  He says at the top of 806:

This document alone shows the extent to which they were prepared to act dishonestly.

That is what his Honour was saying:  the document shows.  Of course, it shows the extent to which they were prepared to act dishonestly because they were well in excess of their authority.

HEYDON J:   But anyway, that finding is no integral part of your case, is it?  If that sentence had never been written, your case would be just as strong as it is, or as weak.

MR GLEESON:   Yes, indeed.  If the Court pleases.

FRENCH CJ:   Thank you, Mr Gleeson.

The Court will reserve its decision.  The Court adjourns until 9:15 am on Tuesday next, 20 April.

AT 3.21 PM THE MATTER WAS ADJOURNED