NRMA Ltd & Ors v Heydon

[2001] HCATrans 335

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Sydney  No S26 of 2001

B e t w e e n -

NRMA LIMITED, NRMA INSURANCE LIMITED, NRMA HOLDINGS LIMITED

Applicants

and

JOHN DYSON HEYDON

Respondent

Office of the Registry
  Sydney  No S27 of 2001

B e t w e e n -

NRMA LIMITED, NRMA INSURANCE LIMITED, NRMA HOLDINGS LIMITED

Applicants

and

GREGORY ANTHONY THOMAS BATEMAN and the persons named in Schedule 1 trading as Abbott Tout

Respondents

Office of the Registry
  Sydney  No S28 of 2001

B e t w e e n -

NRMA LIMITED, NRMA INSURANCE LIMITED, NRMA HOLDINGS LIMITED

Applicants

and

JOHN KERIN MORGAN and the persons named in Schedule 1 trading as Allen Allen & Hemsley

Respondents

Applications for special leave to appeal

HAYNE J
CALLINAN J

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON FRIDAY, 14 SEPTEMBER 2001 AT 9.32 AM

Copyright in the High Court of Australia

MR R.C. McDOUGALL, QC:   May it please the Court, in each of those matters I appear with my learned friend, MR N.J. O’BRYAN, SC, for the applicants for leave.  (instructed by Norton White)

MR T.F. BATHURST, QC:   If the Court pleases, I appear with my learned friends, MR A.J. MEAGHER, SC and MR J.T. GLEESON, SC, for Mr Heydon.  (instructed by Corrs Chambers Westgarth)

MR R.J. ELLICOTT, QC:   If the Court pleases, I appear with MR G.K. BURTON for Mr Bateman and others.  (instructed by Ebsworth & Ebsworth)

MR B.C. OSLINGTON, QC:   May it please the Court, I appear with MR M.R. SPEAKMAN for Mr Morgan and others.  (instructed by Blake Dawson Waldron)

HAYNE J:   Subject to anything that counsel may say, we would propose that the three applications be heard together; that the applicant should have 45 minutes, or should I more accurately say up to 45 minutes, in which to present its submissions; each respondent should have up to 15 minutes in which to present its submissions and there would be up to 10 minutes for reply.  Do counsel wish to be heard against those arrangements?

MR McDOUGALL:   No, your Honour.

HAYNE J:   Yes, Mr McDougall.

MR McDOUGALL:   If your Honours please, the applicants in each matter seek special leave to appeal from the orders of the Supreme Court of New South Wales Court of Appeal made on 9 March 2001 pursuant to reasons for judgment delivered on 21 December 2000.  In the Court of Appeal the two central issues in the case became known by the catchwords “Gambotto” and “free shares”.  The proposal is that I will deal with the application for special leave on the Gambotto issue and Mr O’Bryan will deal with the application for special leave on the “free shares” issue.  Your Honours, the litigation at first instance arose out of the NRMA companies first attempt at what was called demutualisation back in ‑ ‑ ‑

HAYNE J:   We are generally familiar with what gives rise to the matter, Mr McDougall.

MR McDOUGALL:   I take that, your Honour.

HAYNE J:   We have attempted to read the papers.

MR McDOUGALL:   And your Honours will know that the key issue relating to the demutualisation was whether it should proceed by way of special resolution passed in general meeting of the members or by way of scheme of arrangement.  In December 1993 the respondent Mr Heydon was briefed to advise on that question and the brief referred repeatedly to the decision of the Supreme Court of New South Wales in Gambotto, which of course was a decision that dealt with oppression in the context of appropriation by special resolution.

The matter was discussed at a conference on 14 December and the trial judge’s finding was that at that conference the parties became aware, if they were not already, that Gambotto was on appeal.  The report in the New South Wales Law Reports had indicated that an application for special leave to appeal to this Court had been filed and, in fact, special leave had been granted I think on 10 December 1993.

Now, the trial judge found that Gambotto being perceived by all relevant parties among the lawyers to be directly relevant to the issue of general meeting or scheme of arrangement and being known to be on appeal, there was a duty to follow up and contemplate and give a warning as to the prospect that the decision of this Court, were leave granted, might, putting it crudely, throw a spanner in the works of the general meeting route.

The Court of Appeal reversed his Honour’s finding in favour of the applicants on that case and we say in this Court that the decision of the Court of Appeal gives rise to three special leave issues.  The first of those relates to the duty of care, the standard of a duty, and the content of the duty of specialist lawyers to warn of risk.

HAYNE J:   Do you seek to challenge the formulation of the duty in the Court of Appeal?

MR McDOUGALL:   We say that the Court of Appeal has effectively not applied the formulation that this Court erected for medical practitioners in cases such as Rogers v Whitaker, although it referred to that as providing the relevant content.  We say that by going to the question of a minimum non‑negligent advice the court has done two things.  Firstly, it has sidestepped the whole concept of warning and, secondly, it created a society in which the duty of lawyers and the content of those duties in respect of warnings as to risk.

HAYNE J:   One of the ways in which the Court of Appeal dealt with the matter was, was it not, to resolve against the interests for whom you appear a question, perhaps the question of fact, whether a risk of material change or restatement of the law affecting what was proposed would have been sufficiently apparent to the reasonable practitioner skilled in the area; is that right?

MR McDOUGALL:   They did that, your Honour.

HAYNE J:   Is that a finding of fact?

MR McDOUGALL:   We would say, with respect, no.  It is at most an ultimate conclusion and, in so far as it is inconsistent with the findings of fact of the trial judge, then it should not stand in any event.  We say the question of risk as analysed by this Court in Rosenberg v Percival is not one that can be dealt with simply by, as it were, trying to whittle down the question of risk, unless it can be said as a matter of law that there was no risk at all and we say in circumstances, particularly having regard to the conflict of approach and reasoning between the judge at first instance in Gambotto, Justice McLelland, and the Court of Appeal and having regard to the fact of grant of special leave in this Court, the risk could not be said to be capable of being so whittled away.

HAYNE J:   That presents the point at a level of considerable abstraction, does it not?  To say that there is a risk of change in the law is a truism.  There is always a risk of change in the law.  Until you bring the matter to a much sharper point, we are debating at a level of abstraction which is not especially useful.

MR McDOUGALL:   It is a level of abstraction at which we need to start, we would respectfully submit, and a level of abstraction from which we would rapidly wish to move on.  May I seek to bring it from the level of abstraction to the level of fact by reminding the Court of the findings made by the trial judge as to what was involved in the abstract question.  May I ask the Court to go to volume 3 of the joint application book, paragraph 1220 at page 575, where his Honour set out in some nine subparagraphs his findings as to what the evidence of the respondent, Mr Heydon, contained in relation to the significance of the grant of leave.  We emphasise in the first subparagraph:

renewal of existing principle or some change –

The second subparagraph:

elimination or extinguishment of the rights of shareholders;

The third subparagraph, “whether expropriation” is “per se unlawful’”.  The fourth subparagraph really only there was the decision:

the resolution of the difference between the trial judge and the Court of Appeal”;

The sixth subparagraph:

the legitimacy of one of the methods of acquiring minority held shares; namely, the method of alteration of the articles –

which, of course, was what in substance was proposed here, albeit not in a share context.  The NRMA’s proposal:

involved the extinction or termination of membership –

rights.  Would it be hard to miss the point that Gambotto “bore upon the questions at issue”, even if Mr Heydon had no recollection one way or the other.  The last question, why cannot a member of the association say:

I just want to stay a member . . . was “the very case that Mr Gambotto was making” –

Now, that is the level of concrete principle at which we say it should have been perceived had attention been turned to it and had warning been given.

HAYNE J:   And say what?  And say what to the client?

MR McDOUGALL:   That on the law as it stood under the Court of Appeal’s decision in Gambotto expropriation at fair value, if value was the appropriate consideration in a company limited by guarantee.

HAYNE J:   And if expropriation be the appropriate characterisation of what was proposed?

MR McDOUGALL:   Yes, that, with respect, seems to be recognised in the paragraphs I have just referred to – would be appropriate but that the fact of grant of special leave indicated at least a possibility of a change in the law which might have an adverse and, indeed, disastrous impact on the proposed method of procedure.  The percentage chance, if I can put it that way, of the risk could not be assessed, but that is not the point.  It is the fact of the existence of risk which gives rise, in our submission, to the duty to warn.

CALLINAN J:   Mr McDougall, in a recent case in this Court, Ghantous, if Mrs Ghantous had offered the defendant the opportunity of accepting 50 per cent of her likely damages, before the matter was actually heard by the High Court, what would the obligation of counsel have been with respect to advice to the defendant?

MR McDOUGALL:   The obligation would be as we say it was here:  to warn that there was a prospect that the amount under offer might prove to be inappropriate and that prospect needed to be taken into account as part of the matrix of facts against which the offer should be considered and evaluated.

CALLINAN J:   The next question might have been, “Well, what do you think, Mr McDougall, is the likelihood of the High Court’s abolishing the distinction between misfeasance and nonfeasance?”.

MR McDOUGALL:   It might indeed, your Honour.

CALLINAN J:   How would you measure it?

MR McDOUGALL:   And if I had been asked to advise on that question and had considered it and had given advice, then the fact that the advice later turned out to be wrong would not of itself indicate that I had been negligent.  That again is not the point, with respect, in a case of failure to warn.

HAYNE J:   But the proposition you advance seems at the moment, at least to me, to be a proposition that counsel needed to utter the words, “There is a risk”, and stop there and that that was satisfaction of the standard of care.  Where does your argument go beyond that?  May I say to you that if that is what counsel is expected to say, that is to utter a truism, “Yes, there is a risk the law will change in the future”.

CALLINAN J:   An ultimate truism because every piece of litigation is risky.  There is no certainty ever in any litigation.

MR McDOUGALL:   There is no certainty.

CALLINAN J:   And parties to litigation, or parties who are aware of litigation that might affect them, know that.

HAYNE J:   So what more is counsel to say, “There is a risk” ‑ ‑ ‑

MR McDOUGALL:   More than the risk of truism, because what counsel would be required to do, in our submission, is to point out what I adverted to before, namely that Gambotto was a case directly in point, that the decision of the trial judge would, putting it mildly, spell trouble for the NRMA’s proposal, the decision of the Court of Appeal did not, and that it was hard to see what else the High Court was going to do other than resolve that difference.

CALLINAN J:   Mr McDougall, in Rogers v Whitaker the risk could be measured.  What was it, one in 14,000, or something – I have forgotten the number.  But it was a measurable risk.  There were statistics.  Although medicine has been described as an art, there was a science with respect to it.  I do not see those factors at present in litigation of this kind.

MR McDOUGALL:   In this case there was evidence that to the knowledge of Mr Heydon and Mr Bennett, QC, who gave evidence, the fact of grant of special leave indicated on a purely numerical or statistical basis at least a 50 per cent prospect of the appeal being allowed.

HAYNE J:   And 50 per cent more dentists use this product than other.  It is not a particularly useful statistic I would have thought, Mr McDougall.

MR McDOUGALL:   It is not useful as a statistic, but what it does is point out that the risk of the appeal being allowed and the consequent risk of an adverse principle being fashioned could not be described as a risk at the level of truism of which no warning was needed.

HAYNE J:   Do you contend that counsel should have trawled through the special leave transcript to divine some likely outcome?

MR McDOUGALL:   That would be something which counsel would be required to do if, having given the warning, advice of the kind your Honour referred to was sought, “What is the likelihood of the risk?”.

HAYNE J:   Let us just test that, because the recognised judicial technique to which it might be thought you are presently being subjected is a level of testing questioning.  It does not represent any concluded view in the mind of the judge at all.  It is simply trying to debate the point, often at a level of apparent hostility, to draw the point out.  Now, what are counsel to make of trawling through the entrails of a special leave transcript?

MR McDOUGALL:   It may be in the result that counsel make nothing.  It may be that, as it were, the volume and direction of the debate is such as to indicate a very real level of apprehension or concern in a particular direction.  But we do not need to go that far because what we say is that the failure to give any warning at all deprived the NRMA of the right autonomously to make a decision whether to proceed.  Now, had the warning been given, there were a number of steps open.  It could have asked for further or more detailed advice.  It could have canned the proposal.

CALLINAN J:   Well, that is the question I asked you, “What would the advice have been?”, because the question would have been, “What are the chances?”.  Now, what advice would have been given there?

MR McDOUGALL:   We do not know and, with respect, we do not need to know because the question is not, “What advice would have been given upon request following a warning that there was at least a prospect of change?”, but, “What is the basis for denying to the client the right to ask that further question?”.

CALLINAN J:   Because the client knows there is a risk and the client knows there is a risk because there is knowledge that there is going to be an appeal.

MR McDOUGALL:   But the client did not have that knowledge, with respect.  The lawyers did; the client did not.  That is the very case:  the client was not given, even at the level of truism, the relevant warning.

CALLINAN J:   There was a risk in what the client was doing obviously otherwise the client would not have asked for advice.

MR McDOUGALL:   But that, with respect, is risk directed to a different question.  There were commercial risks; there were practical risks; there were all sorts of risks.  What there was added to this, by virtue of the grant of special leave, was a very real prospect of legal risk.

HAYNE J:   I think I understand the point that you advance in this respect.  Your time is limited.

MR McDOUGALL:   Time’s winged chariot is certainly drawing near.  May I invite your Honours to go very briefly to the decision of this Court in Rosenberg, which is at tab 18 of our bundle of authorities – may I apologise for providing your Honours with an unreported version; fortunately, in these days of paragraphing, it is of less significance – simply to ask your Honours to look in the judgment of the Chief Justice at paragraphs 4 and 5 of his Honour’s summary of the facts in Rogers v Whitaker:

a remote risk, of which she was not told, that the operation –

could have an effect.

The principal issue was whether the doctor should have informed the patient of the risk.  The surgery was elective.  The outcome was catastrophic.

And so we go on.  Those issues we say can be transposed exactly to the present case and the reasoning, both in Rogers v Whitaker, leads inevitably to the conclusion that just as a duty to warn arose in those cases, so it arose here.

HAYNE J:   What do we do, do you say, about the finding below that the risks were not sufficiently apparent to a reasonable practitioner skilled in the area as to require that practitioner to warn it about it?

MR McDOUGALL:   We say that that is committing what, with respect, is the heresy of returning to the profession that which this Court took away from it in Rosenberg, in Rogers and in Chappel, namely the right to dictate when a warning needs to be given, and if this Court sanctions that, then it is sanctioning a distinction in the duty of care between lawyers and other professionals.  That is why we say the Court of Appeal’s decision leads directly to the special leave point.

HAYNE J:   Do you say therefore that in the medical area the obligation is an obligation regardless of what the reasonably skilled practitioner in the area would or would not do?

MR McDOUGALL:   We do not go that far because this Court has recognised that evidence as to what skilled practitioners do is of assistance, but what it cannot do, as this Court has emphasised, is determine the issue. 

Now, your Honours, the next leave point on which we rely is the related issue of the duty of a specialist lawyer to warn of the risk of a change in the law when he or she knows that a relevant case is on appeal.  That is the Stake v Harlin point, the decision of an appeal court in Florida.  That, of course, is clearly and directly related to the first point and the same considerations underlie it.  The appeals court in the Florida decision made it clear that where the requisite knowledge existed, then there was not just a liberty or a right, but a duty to warn.  We contrast with that the approach of the Court of Appeal in this case, for example, in the decision of Justice McPherson, who referred to the practitioner being, as it was put, at liberty to go further.

The third special leave point on the Gambotto issue that we rely upon is the continued applicability of the decision of the Court of Appeal in Waimond v Byrne.  The Court of Appeal in this case held that that decision could not stand following this Court’s decision in Astley v Austrust.  We say that is simply not so and that it is not so has been confirmed by the two subsequent decisions of the Court of Appeal to which we refer in our supplementary submissions.  I will not take up time by reading them.

Your Honours, just going back to Gambotto for a moment.  Underlying the error of which we complain is what we say is a fundamental failure on the part of the Court of Appeal to approach the Gambotto Case as we put it.  The Court of Appeal explicitly in some cases, for example, the judgment of Justice Orminston from paragraphs 445 on, put the matter in

terms of a duty on the part of the lawyers to predict not just the outcome, but also the reasoning of this Court in Gambotto.  His Honour’s reasons are found in volume 5, commencing at page 1154 on this point.

HAYNE J:   Yes, but which paragraph?

MR McDOUGALL:   Paragraph 445, where he talks about the failure to warn that they may have been wrong – that was not our case – and then proceeding through to 462, and from there through to 464, where the matter is put as high as being prediction of the outcome and the reasoning.  That approach is summarised, if I can put it that way, in paragraph 479, in the passage appearing on page 1182 from line 10.  Although that is the clearest exposition of the approach taken by the Court of Appeal, there are consistent passages in the other judgments.  Contrast that, if I may put it this way, with what Justice Giles said – and this appears in volume 3 at paragraph 1185, which is on page 560.  What Justice Giles said at paragraph 1185 was the way we put the case on this issue, not the way it was put or, perhaps more accurately, paraphrased by the Court of Appeal.

Your Honours, I am conscious of the time.  That deals in about half the time your Honours have allotted with the leave points that we would wish to raise on the Gambotto issue.  Might I now pass the baton to Mr O’Bryan to deal with the “free shares” issue.

HAYNE J:   Yes, thank you.  Yes, Mr O’Bryan.

MR O’BRYAN:   Your Honours, I hope my learned friend is right about half the time, but I suspect he may not be in any event.  Your Honours, there are, in our submission, several parallels ‑ ‑ ‑

HAYNE J:   We have means of informing you of that fact, Mr O’Bryan.  Yes, do go on.

MR O’BRYAN:   Thank you, your Honour.  There are several parallels between the errors of principle which are submitted to have occurred below in both the Gambotto and “free shares” negligence cases in these applications.  The following are the key errors of principle which underlie the applications.  First, in both instances it is submitted the Court of Appeal failed properly to apply the law laid down by this Court in cases such as Rogers v Whitaker and Rosenberg v Percival in connection with a professional’s duty to warn about material risks of a proposed course of action upon which the professional was retained to advise.

Second, in both instances the Court of Appeal reasoned that the fact that it considered the decisions in the Gambotto Case and in the Fraser v NRMA Cases to be controversial and in the Fraser Case, at least, to be wrong, the respondents could not have been in breach of a duty in not foreseeing them as material risks to the NRMA’s proposal.

HAYNE J:   Am I right in understanding that you no longer pursue the “free shares” issue against the first respondent?

MR O’BRYAN:   That is so, your Honour.

HAYNE J:   So far as the solicitor respondents are concerned, what do you say about the proposition taken up, on one view, by a majority of the Court of Appeal that the “free shares” issue having been drawn to the attention of NRMA by Mr Heydon’s advice about the so‑called onsert, NRMA went ahead, in effect, well knowing that there may be a problem?  What do you say about that issue?

MR O’BRYAN:   We say in relation to that, your Honour, that the conclusions of fact drawn by the Court of Appeal are inconsistent in material ways with the conclusions which were reached on that point by Justice Giles and ‑ ‑ ‑

HAYNE J:   But were they impermissibly so?

MR O’BRYAN:   Yes, in our submission, they were.

HAYNE J:   Why?

MR O’BRYAN:   Because, your Honour, Justice Giles made clear the extent and nature of the communications that took place between the NRMA and the solicitors in connection with the two critical Heydon advices of 2 and 3 August and it is clear, in our submission, that they could not in any circumstances have risen higher than a claim, for example, for contributory negligence.  They could not discharge the duty which Rogers and Rosenberg imposed on the solicitors in connection with those advices.

They warned of a litigation risk which was not passed on with sufficient amplification to the client to make it clear that that risk ought to have been apparent and could have been easily avoided.  In other words, what Justice Gummow described recently in the Rosenberg Case as the appropriate steps to be taken in connection with a risk which is real and foreseeable were not take in this case sufficiently.

CALLINAN J:   Can you refer me to that passage in Justice Gummow’s reasons, please?

MR O’BRYAN:   Yes, indeed.  Rosenberg is tab 18 of the authorities, your Honour, and paragraph 64, I think it is, his Honour paraphrases, after considerable discussion of the earlier cases considering the obligation to warn arising out of the so‑called “doctor cases” – your Honours will see in the preceding paragraph that Justice Gummow goes in great detail through the reasoning in Rogers and then, having quoted from the decision of Justice Gaudron about what is a real and foreseeable risk at the end of paragraph 63, his Honour neatly summarises the point in paragraph 64:

A risk is real and foreseeable if it is not far‑fetched or fanciful, even if it is extremely unlikely to occur.  The precise and particular character of the injury or the precise sequence of events leading to the injury need not be foreseeable.  It is sufficient if the kind or type of injury was foreseeable, even if the extent of the injury was greater than expected.

That, in our submission, is at the nub of the point in relation to the warning that was required to be given in this case because, in effect, the decision of the Court of Appeal stands for the proposition that unless the lawyers were able to identify and foresee what Justice Gummow describes as the “precise and particular character of the injury”, that is to say the actual reasons for the decisions in Gambotto and in Fraser v NRMA respectively, then there was no foreseeable risk.  In our submission, it is flatly contrary to the correct enunciation of the principle in Rosenberg.

HAYNE J:   Another point of view may be that the Court of Appeal, at least on the “free shares” issue, stands for the proposition that as a matter of fact, having had the issue drawn to their attention, NRMA went on.  I have in mind notably paragraph 423 of Justice McPherson at page 1120.

MR O’BRYAN:   Yes.  I understand the point, your Honour, but could I ‑ ‑ ‑

HAYNE J:   Why was it not open to the Court of Appeal to reach that conclusion?  We never get to the legal issues if that factual conclusion is right.

MR O’BRYAN:   No.  I accept that, your Honour.  Your Honour, in our reply, which is in the red book – in fact it is the very last page of the red book – if I could ask your Honours to open it in reverse order and look at page 1516, commencing just prior to that, at the very bottom of 1515.  Those are the facts as found by Justice Giles in connection with the very point which your Honour is addressing my attention to.

HAYNE J:   So the chairman of NRMA knew – is it the chairman ‑ ‑ ‑

MR O’BRYAN:   Yes, Mr Mackay was the chairman.

HAYNE J:   ‑ ‑ ‑ and chairman of the due diligence committee knew there had been legal concern expressed about the use of the word “free”?

MR O’BRYAN:   Yes, but was told it had been resolved, your Honour, and was told it was no longer a cause for concern.  That is the specific finding in paragraph 938 of the judgment and the reference ‑ ‑ ‑

HAYNE J:   Told by whom?

MR O’BRYAN:   Was told by whom?

HAYNE J:   By whom?

MR O’BRYAN:   I am not sure.

HAYNE J:   If he is told internally, that is one case.  If he is told by the solicitors, “Don’t you worry about that”, that is another case.

MR O’BRYAN:   With respect to your Honour, it must be both in this case because ‑ ‑ ‑

HAYNE J:   Why?

MR O’BRYAN:   Because, your Honour, the solicitors gave sign‑off letters saying that nothing had come to their attention which gave rise to a concern that anything in the prospectus would be misleading or deceptive.  That amounts – it must amount to a statement that whatever concern was articulated by Mr Heydon early in August had been resolved to the extent that the solicitors could give an unqualified sign‑off in those terms.  So that I believe that the reference in 938 is a reference to what he was told by Ms Conway, the in‑house counsel, but the other protection, as it were, or confirmation was certainly given by the solicitors, your Honour.  That is the nub of the misleading or deceptive conduct in these proceedings.

Secondly, in relation to Ms Conway, who is the other person who is identified in the paragraph that your Honour has directed my attention to, that is responded to in paragraph (d) on page 1516 and, again, the relevant paragraphs in the findings of Justice Giles are there quoted and, again, in our submission, that could not amount to a discharge of the duty in the circumstances of this case, bearing in mind that here we have a large company issuing a prospectus to 2.1 million members of the adult population of New South Wales, and some elsewhere, in respect of whom there was legal liability arising under the Corporations Law at least and under the Trade Practices Act, very significant expense and effort – naturally a due diligence committee is established to trigger the defences under the Corporations Law  – it could not in those circumstances be sufficient to discharge the duty, in our submission, that you mention this to the chairman and say, “Don’t worry, it has been resolved”, and in the case of Ms Conway, she was not a member obviously of the boards and not a member of the due diligence committees.

HAYNE J:   Why should we get into essentially a factual dispute which, if resolved one way, may present legal issues, if resolved the other way, would not?  Why should we take it on?

MR O’BRYAN:   For exactly the same reason that the Court took it on in Rosenberg v Percival, your Honour, because there was no explicit basis given for the conclusion which is expressed only in a sentence or two in two, as I recall it, of the judgments in the Court of Appeal, no explicit reason given for contradicting the findings of the trial judge in respect of these matters or for elevating them into a complete defence in the way in which the Court of Appeal does and just as this Court properly said to, in the case of Rosenberg, the Western Australian Court of Appeal that is not proper basis for a Court of Appeal to disagree with clear factual findings made with all the benefits that a trial judge has, so too in these circumstances, where the result could be plainly to create a significant injustice, this Court should not hesitate to intervene and set that to rights.

CALLINAN J:   For my own part in Rosenberg, I thought the trial judge’s findings, subject to some qualifications, were extremely compelling by reason of a number of objective factors.  I do not think that those sorts of objective factors were present here.

MR O’BRYAN:   With respect, your Honour, one could not imagine a more thorough‑going analysis of the evidence at trial than Justice Giles has presented.

CALLINAN J:   It is a very long judgment.

MR O’BRYAN:   With respect, your Honour, to both you and to Justice Giles, it is a compelling analysis with the benefit of a very close look at all of the relevant witnesses for ‑ ‑ ‑

HAYNE J:   But essentially it comes down to a factual issue.  Why should we take on such a large factual inquiry; to what end?

MR O’BRYAN:   To this end, your Honour:  if the Court is unwilling to take on that factual inquiry, in our submission, a very substantial injustice will result.  It is contrary to the Court’s reasoning and rulings in earlier cases, of which I think Rosenberg is the most recently reported, but the principle is of ancient heritage and absolutely right.  If the Court is not willing to entertain this application on that basis, then it will be productive of a very grave injustice.  All of those reasons, in our submission, are reasons for the grant of special leave in connection with this issue if that is perceived to be the problem issue.

It is not, with respect, a large issue.  It is in very small compass, as the references in that paragraph of our reply show.  There are a couple of key factual findings.  The Court of Appeal has ignored them.  It has not explained why.  It has not ‑ ‑ ‑

HAYNE J:   What do you say are those key findings?  You have probably told me once, but tell me again.

MR O’BRYAN:   The key findings are those which are summarised in this paragraph 12 of the reply.  The key ones for present purposes, in answer to your Honour’s question, are the one about Mr Mackay in (a).

CALLINAN J:   Is that at pages 444 to 446 where his Honour’s findings are?

MR O’BRYAN:   That is so, your Honour, yes.  They are, in our submission, accurately summarised here.  The other one is in relation to Ms Conway, which is in (d), and (e) is a summary of (a) and (d).  That is it from the point of view of answering the points which your Honour Justice Hayne has raised.  It is not a large factual inquiry, with respect, and it is of vital importance that it be set to rights.

HAYNE J:   So the position found by the trial judge at 444 paragraph 938 was that the chairman was told “that it was necessary to refer to the fact that members were giving up their rights”.  The chairman was told that an opinion had been received from senior counsel “that the use of the word ‘free’ was ambiguous and needed to be clarified” and in light of that knowledge, the proposal went ahead with the prospectus as it stood.  Is that the position?

MR O’BRYAN:   No, the position is more than that, your Honour.  If your Honour reads on in paragraph 938 on 445:

Mr Mackay agreed that Ms Conway said that the effect of Mr Heydon’s opinion was either that the word “free” was not used or the ambiguity was cured . . . and that for that reason they had taken the word “free” off the front of the onsert and used the asterisk inside the onsert.

The critical point being that Mr Heydon’s opinions of course were addressed only to the front page of the onsert, so by its nature it was inadequate to give proper prominence to the risk that the use of the word “free” throughout the prospectus 130 times itself represented.  That was the nub of the risk and it could not be adequate in the circumstances of this case, given what was at stake, to make merely that mention of it and as it appears only from Ms Conway’s point of view.

In relation to both the Gambotto and “free shares” negligence cases, your Honours, the Court of Appeal is submitted to have fallen into exactly the trap which Justice Gummow described in the Rosenberg decision.  The Court of Appeal exonerated the respondents in both cases because they did not, and indeed could not, to adapt Justice Gummow’s words, foresee the precise or particular character or the precise sequence of events which underlay the reasoning of this Court in Gambotto and the reasoning of the Federal Court in Fraser.

The Court of Appeal is thereby submitted to have made an error of fundamental principle in the application of the law of professional negligence as laid down by this Court.  This error, it is submitted, can be clearly observed in each of the judgments below, in Justice Malcolm’s judgment at paragraph 303 in volume 4 at page 1012; in Justice McPherson’s judgment at paragraph 412 in volume 5 at page 1106; and in Justice Ormiston’s judgment at paragraph 670.  The reason why it is submitted that question is of public importance in the present context is because it subverts the so‑called autonomy principle as that principle has been articulated by this Court and applied in the doctor cases, principally Rogers, and in Rosenberg.  In summary, it subverts the client’s right to be fully and properly informed about material risks before making a decision about a course of action in which the risk is inherent.

Your Honours, the misleading and deceptive conduct case arises side by side with and out of exactly the same facts as the negligence case.  It is submitted that leave should be given to pursue that case so far as it relates to the breach of the Fair Trading Act in the circumstances in which the sign‑offs were given in this case and in the circumstances in which the solicitors were silent following the receipt of Mr Heydon’s opinions of 2 and 3 August.

HAYNE J:   Where do we find the Court of Appeal dealing with the Fair Trading Act case?

MR O’BRYAN:   It is dealt with in two ways, your Honours.  The first way it is dealt with is by an assertion that because the original pleadings below limited the particulars of the misleading or deceptive conduct case to the negligence case, it should be disposed of on that basis.  I can give your Honours the reference to that:  Justice Malcolm at paragraph 328 in volume 4 at page 1026.

HAYNE J:   Perhaps if you just list the paragraphs, it would help.

MR O’BRYAN:   Yes, I will, your Honour:  Justice McPherson at paragraph 430 in volume 5 at page 1127.  Justice Ormiston of course, as your Honours will recall, simply agreed with Justice McPherson in connection with this issue and his agreement is at paragraph 692.

HAYNE J:   My impression of the Court of Appeal is that the Fair Trading Act case was treated as entirely subsidiary to or subsumed by the negligence case.  Do I misunderstand the way in which the Court of Appeal dealt with it?

MR O’BRYAN:   No, that is exactly the way the Court of Appeal dealt with it, your Honour, and it is, in our submission ‑ ‑ ‑

HAYNE J:   Does that reflect the way in which the case was argued in the Court of Appeal?

MR O’BRYAN:   No, it does not, nor does it reflect the way it was put at trial, your Honour, which is very clearly stated by Justice Giles in paragraph 1426 of the judgment which your Honours will find in volume 3 at page 672.  I will not read the whole of that paragraph; it is quite a long one.  It is absolutely clear from paragraph 1426 that that is not the basis upon which the matter was put at trial and it is not the basis upon which it was put on the appeal.  In those circumstances, your Honours, an error or fundamental principle occurred and the decision of this Court in Water Board v Moustakas should apply, namely that a litigant is entitled, despite the fact that there were or may have been some inadequacy in the original points of claim, or, more accurately, the particulars, to have the case disposed of on the basis upon which it was fought at trial, and that has not happened in this case.

HAYNE J:   Could you point to where in the application for leave there is reference to the Fair Trading Act issues?

MR O’BRYAN:   Yes, your Honour.  To take one example, on page 1449 of volume 6 in paragraph 6(a).

HAYNE J:   Is it otherwise developed in the written arguments?

MR O’BRYAN:   It is only developed to the extent that we answer the point made against us by the Court of Appeal, as it were, for example, on page 1459 of that set of the papers in paragraph 8 and paragraphs 54 and 55 on 1464.  Your Honours, it is submitted that the approach to the misleading or deceptive conduct claim in the present case was wrong in principle on the facts of that case.  Whilst there may be cases – and Boland v Yates is a case which is an example in which no more can be put in relation to misleading or deceptive conduct than can be put in relation to negligence – this is not such a case.

It is not such a case for the reasons which were articulated in that paragraph of the decision of Justice Giles to which I took the Court a moment ago, because here the specific obligations which lay upon the solicitors in connection with the due diligence to give the report, to report to the boards, to give sign‑offs meant that it was not possible for them, in our submission, after 2 and 3 August when Mr Heydon had clearly and succinctly referred to a risk of litigation arising out of what he called the ambiguity or worse, which everyone understood to mean misleading or deceptive character of the expression “free shares”, they could not in those circumstances have given unqualified sign‑offs in connection with litigation risks arising out of this transaction.  They could not, properly discharging the duties which lay upon them under section 42 of the Fair Trading Act, remain silent about the existence of those opinions and their ramifications for the prospectus, bearing in mind of course that Mr Heydon was not advising in those particular advices on the prospectus but only on the front page of the onsert.  That of course was the problem below in connection with the case against Mr Heydon arising out of those advices.

HAYNE J:   Yes, thank you, Mr O’Bryan.

CALLINAN J:   Mr O’Bryan, just one matter.  To what extent does what Justice McPherson said in paragraph 433 at page 1130 provide any answer to what you have just submitted and what appears in Justice Giles’ judgment in paragraph 1426?

MR O’BRYAN:   In our submission, that is putting the misleading or deceptive conduct equals negligence – indeed, is coterminous with negligence – in just another way.  If your Honours look at the bottom of that page, his Honour there says:

The defendants were justified in arriving at a conclusion that the use of that description in the prospectus was not misleading, and they did so without negligence.  Having honestly and carefully arrived at that conclusion they were not obliged to inform the Due Diligence Committee or the plaintiffs’ boards that Mr Heydon had given advice that was not directed to liability under –

the Trade Practices Act.  Then there is a repetition of this point about Ms Conway and Mr Mackay.  We have dealt with the point about Ms Conway and Mr Mackay.

Mr Heydon’s advice was directed to liability under section 52 of the Trade Practices Act.  That was his evidence and it was absolutely clear to everyone involved in this matter in early August 1994 that what Mr Heydon meant when he said “ambiguous or worse” was misleading or deceptive.  That is why, as your Honours will recall from the judgment of Justice Giles, there was a huge meeting on that very day when Mr Heydon’s first advice was received to try to resolve with trade practices specialists present the section 52 problem which he had identified.

In our submission, your Honours, the error here is exactly the same as the error of treating our misleading or deceptive conduct case as merely a negligence case.  It is an error of principle; it is not coterminous with; it is different from that case.  It is no answer to a misleading or deceptive conduct case that someone has arrived at a conclusion honestly and carefully.  That has never been an answer to a misleading or deceptive conduct case.  One can be as honest and careful as one likes.  If what one has done is misleading or deceptive, one is liable under section 42.

HAYNE J:   Thank you, Mr O’Bryan.  Yes, Mr Bathurst.

MR BATHURST:   If the Court pleases.  Might I respectfully remind the Court of five matters which we submit provide the framework within which the application against my client at least should be considered.  The first is this, that it has never been an issue in these proceedings that Mr Heydon did not advise correctly on the law as it was perceived to be at the time he gave his advice, namely late 1993 or early 1994.

The second is this, that all that was expected of him by those who briefed him was that he would advise on the law as it then stood.  That proposition is hardly surprising but, because the allegation is that it seems to be that more should have been done, it is important, in our respectful submission, to bear that finding in mind.  It appears in volume 4 of the book in the judgment of Justice Malcolm at page 968 paragraph 237.  Your Honours will there see at about line 15:

There was no evidence that Mr Heydon assumed a responsibility for making a prediction how the law might change or develop during the prospective life of the proposal.  There was no evidence that Mr Heydon’s instructing solicitors or the relevant officers of the NRMA relied upon his opinion as involving any prediction.  Such evidence as there was suggested to the contrary.

The third matter that we submit is of importance is that whatever could be said about Gambotto, it was perceived at the time that Mr Heydon gave his advice as falling with what I might call the general rubric of oppression.  That is how Mr Justice McLelland, the Chief Judge in Equity, treated it at first instance.  That is how the Court of Appeal treated it.  That was recognised by the High Court in the opening paragraphs of the joint judgment.  The joint judgment appears in tab 2 of the applicants’ bundle of authorities.  Can I just simply remind your Honours what was said at page 439 under the heading “Expropriation of minority shareholdings”:

The fundamental issue in this case is whether, and if so in what circumstances, the taking of a power by majority shareholders by amendment to the articles to acquire compulsorily the shares of the minority shareholders will be held invalid on the basis that it is oppressive.

That was the issue.

The significance of that is, firstly, that that was how it was recognised in the brief which was delivered to Mr Heydon.  Contrary to what seems to be suggested by the applicants, Gambotto was referred to in the brief in the context of oppression.  That appears in the judgment of the learned trial judge in volume 1 of the book, page 187 paragraph 335.  I will not take the Court to it, but his Honour there makes an express finding to that effect saying:

Fifthly, the reference to Gambotto’s case was not in connection with the “major issue” –

that was scheme as against special resolution –

but in connection with oppressive conduct and whatever may have been asked of Mr Heydon in that respect.

The significance is that Mr Heydon expressly indicated that he would not be in a position to advise on oppression within the time limit requested, namely by 20 December.  Your Honours can find that finding in the judgment of Justice Malcolm at page 849 in volume 4 in paragraph 58 of his Honour’s judgment.  In his opinion, Mr Heydon expressly indicated that he was not advising on the oppression issue.

The fourth matter is this.  Gambotto was concerned with an expropriation of a minority’s interest by a majority, something which inherently involved a conflict between two groups of shareholders.  Your Honours will recall how this Court of course dealt with that.  The NRMA’s proposition as presented to Mr Heydon involved all members being treated equally and, rather than depriving them of interest in the companies of which they were members, enabling them to continue to share by being shareholders in the interposed holding company.  The facts are quite different from Gambotto.  There was no acquisition by any majority and no aggrandisement of a majority.

The final proposition was that Mr Heydon was asked was whether this could be achieved by way of special resolution under sections 167 and 176 of the Corporations Law or whether a scheme was necessary.  He was not asked to advise whether in light of Gambotto, or, for that matter, anything else, it could be achieved at all.  In those circumstances, Mr Heydon, in our submission, is sought to be made liable where his advice correctly reflected the law at the time, where he was not expected to go further, where he expressly declined to advise on the matter for which he is criticised and where the case on the face of it bore no resemblance to the proposal or related at all to the issue with which he was confronted.

There is, in our submission, no principle of law which makes a barrister liable in those circumstances.  That is all the more so when the evidence went no further than saying that Mr Heydon knew that a special leave application had been made and did not know that one had been granted.  Even if what I have said to date is incorrect, it remains the case that the Court of Appeal considered the issue in the light of the position of a barrister, or, for that matter, a solicitor, in late 1993 and early 1994 and concluded that it was not reasonably foreseeable that the prospective decision of the High Court would adversely impact the proposal.  That is something, with the greatest respect, that the applicants in their submissions have simply failed to come to grips with.  It is effectively a factual finding.  A review of it involves no question of principle such as, in our submission, to warrant the grant of special leave.

My learned friend orally referred to paragraph 1220 of the judgment of the learned trial judge where he sets out an extract of certain evidence given by Mr Heydon.  I do not need to take the Court back to that, but could I just remind the Court that that did not suggest that any competent practitioner, or, for that matter, Mr Heydon himself, would have said that the decision on appeal would have affected the outcome.  Mr Heydon expressly declined to give an unconsidered answer to that question.  That appears in paragraph 1222 in volume 3 of the book at page 577.  His Honour the trial judge recalls this:

Mr Heydon said in his evidence that he had not “put myself in my chair in 1994 to see looking forward what the outcome might be” if advising on the likely result of the appeal or the effect of a successful appeal on the proposal, and that he could not do that in a reliable way in the witness box –

That evidence was accepted.  He was not asked to consider his position and do it at any other time.  He certainly did not acknowledge that a warning was necessary.

Secondly, there is no error, in our respectful submission, on the approach of the court as compared to what this Court said was the approach necessary in Rogers v Whitaker or in Rosenberg.  That is for one reason, in our respectful submission.  In both Rogers v Whitaker and in Rosenberg there was known, albeit remote, risks which would have been perceived by a competent practitioner.  The difficulty with my learned friend’s submissions is that the findings of the Court of Appeal preclude them from getting to that threshold.

HAYNE J:   The finding you say precludes them being what?

MR BATHURST:   Being that it was not reasonably foreseeable at the time that Gambotto would impact on the proposal.

HAYNE J:   The answer that is made to that appears to be that it was not open to the Court of Appeal to reach that conclusion.  It was a conclusion differing from the trial judge.  By what right did the Court of Appeal reach the different conclusion that it did?

MR BATHURST:   There are two answers to that.  The first is that, although I have put it as a factual conclusion, it is essentially a matter of legal analysis.  The second answer is that the trial judge, in our respectful submission, did not really grasp with the issue.  What the trial judge said was that he adopted a principle of what he described as oppression per se or necessary oppression, took that from Gambotto on its own without a review of the earlier authorities and simply said there was a real risk, whatever that may mean.  The Court of Appeal, in our respectful submission, was entitled to review that finding as, for example – this is a false analogy but it has some ‑ ‑ ‑

CALLINAN J:   It is the sort of analysis that intermediate courts of appeal do all the time.  Intermediate courts of appeal have to look at the trend of authority and they make an assessment.  It seems to me to be much more like a question of law.  Perhaps it is a factual conclusion in the end, but it does not involve anything except legal matters.

MR BATHURST:   The analogy I was keen to give – and it is a somewhat false analogy – was an appellate court reviewing a first instance court’s decision on an issue of foreign law.

HAYNE J:   I do not think we will pursue the analogy too far, Mr Bathurst.

MR BATHURST:   I am not going to.  I put a caveat on it before I used it.  With respect, we would adopt what was said by Justice Callinan.  These are matters that an intermediate appellate court can review and…..reviewed.  Even if those hurdles could be overcome, there remains the question of causation.  The trial judge seemed to proceed on the assumption that the applicants would have to be told what was described without elaboration as a real risk.  He did that notwithstanding his acceptance that advice given could have included advice that Gambotto would not have impacted upon the proposal.  That appears at page 574 of volume 3 of the book, paragraph 1218:

Mr Heydon may have thought, and said, the appeal would not succeed, or that if it succeeded it would not succeed on grounds relevant to the proposal –

There is reference also to Mr Bennett, who gave evidence during the course of the trial to the same effect.

HAYNE J:   Which was to the effect that you could divine what was going to happen from the special leave transcript.

MR BATHURST:   No, I think from the transcript of argument.

HAYNE J:   From the transcript of argument of the appeal?

MR BATHURST:   Yes.  Can I say this about the transcript of argument.  We would submit, with respect, it is never a very reliable way of indicating what any court is going to do.  It is even less reliable when the court does not have the benefit of counsel on both sides.  There was a litigant in person in this case, which makes it even more ‑ ‑ ‑

CALLINAN J:   You would need the written outline as well, would you not?

MR BATHURST:   Yes.

CALLINAN J:   But, even if you had them, there have been a lot of bad predictions made at the Bars of Australia over the years.

MR BATHURST:   True.

HAYNE J:   Judges do change their minds.

MR BATHURST:   That is right.

HAYNE J:   Judges do try to test what is being put to them.

CALLINAN J:   There is a different tradition in this country.  In England in the Court of Appeal, I think 50 per cent of the decisions in civil cases are given ex tempore.  It certainly does not happen in this country.

MR BATHURST:   That is right, and certainly not in this Court.  What was found by both Justices Malcolm and McPherson – and I will simply give the Court the references:  it is in volume 4 page 977 paragraph 355 in the case of Justice Malcolm, and volume 5 paragraph 450 in the case of Justice McPherson – was that the question that would have been asked, the question that the trial judge posed, namely that there was a real risk, simply was not the correct question which would have been given necessarily by a barrister advising without negligence.

HAYNE J:   A client might well ask counsel saying there is a real risk, “What do you mean?”.  Does the trial judge illuminate that?

MR BATHURST:   No, he does not, and that is the very difficulty.  That is what would inevitably, in our submission, have been asked.  No client would be satisfied with an answer, “I’m not going to tell you”, which seems to be underpinning the applicants’ submissions.

CALLINAN J:   I think ultimately there may be some difficulty with Chappel v Hart, for example.  It was a matter I tried to grapple with in Rosenberg:  can the plaintiff define the risk?  I think that that is an unresolved matter on the three authorities at the moment.

MR BATHURST:   We submit this is not the appropriate case to consider that, for the reasons that we have given.  It is not clear to us that the applicants are saying that the Waimond v Byrne issue arises on the Gambotto appeal.

HAYNE J:   I know we have interrupted you a lot, Mr Bathurst, but perhaps if you would simply state and ‑ ‑ ‑

MR BATHURST:   We say it is incorrect.  Waimond v Byrne does not arise.  It does not arise from what was said by either Justice Malcolm or Justice McPherson, who dealt with it on “free shares”.  The only other proposition we would wish to put is that if special leave was granted against my client on the Gambotto issue, special leave should be granted against all three parties.  There are issues of contribution and they say the same point.  I am sorry to detain your Honours.

HAYNE J:   Thank you, Mr Bathurst.  Yes, Mr Ellicott.

MR ELLICOTT:   Your Honours, we would submit that all the relevant issues in this case are questions of fact when they are analysed.  This is not a case which this Court should entertain.  It is in a sense a massive case and if the Court entertains it, it will take a lot of the Court’s time.  That is not a reason in itself for refusing special leave but, before the Court entertains such a case, then it should see a good reason for doing so.

Nowhere – and I can only summarise our argument – in our submission, was there any departure by any of the three justices below on matters of principle.  Rogers v Whitaker, Chappel v Hart, Astley v Austrust, March v Stramare were all quoted and all followed as far as they enunciated the principle.  On all matters, if questions of law were considered, then they were considered in the context of determining a question of fact, that is to say, whether there had been a breach of the duty of care.  There were some very interesting questions of corporate law entertained.  One of them obviously was the state of company law in 1993 and what counsel would have considered, having regard to cases such as Peters’ American Delicacy which had been bread and butter law since the time it was given.

The decision of Justice Dixon was an apocryphal decision.  Every company lawyer knew it and when you came to the Bar, if you did not know it and you were practising company law, you were out of touch.  That remained basically so, and then for the High Court to pull out a case called Bulfin – in 1961 out of the blue and use that was a great surprise, a very great surprise.  Counsel in December 1993, with a decision in Gambotto by the Court of Appeal that had in effect endorsed that previous approach, is supposed to come to the view that because there is an application for leave, and assuming the leave had been granted, that somehow the High Court is going to overturn it.

Obviously much of those judgments in the Court of Appeal took up time dealing with this corporate matter to see whether there was within the range of opinions opinions that were opinions consistent with that given by the lawyers involved in this case.  That was why they obviously considered those questions of law.  The best evidence that one can have, we would submit, of the view being one well within the duty of care were the decisions of these three independent judges brought to New South Wales from three disparate States in order to determine this matter.  Each of them over a long period considers the matter and comes to the view that the advice was not negligent.  It is the best evidence that could be given.

In relation to Percival’s Case and the question of risk, can I just say this.  There is a distinct difference, we would submit, observable between medical risk and what I will call legal risk.  There are statistical reasons why doctors can form views as to whether a risk is there and whether it is material in most cases – in some cases not.  So far as lawyers are concerned, it is, generally speaking – I will say generally speaking – quite different.  Obviously in that United States case, if the lawyer knew that the clause upon which he was advising was about to be overturned or could be overturned by an appellate court, it was a clear breach of his duty but, if it is not such a case as that – and of course this is not such a case as that – then it is a matter for the lawyer to determine within the duty of care whether or not a risk exists and whether or not it is significant.  The views of the Court of Appeal are simply to that effect.

Your Honours, there is in Percival, in the judgment of Justice Gummow, reference to all these issues.  One has the impression from my friends that they are saying that if you see a risk, you must reveal it.  That is not what that case says.  His Honour goes to some trouble to point to the need to assess the likelihoods, the severity, et cetera, of the risk.  Might I take your Honours quickly to those paragraphs.  Paragraph 56:

It should be emphasised that a determination of whether the failure to warn of a risk was causative depends to a large extent on the definition or identification of the risk in question.  Central to the identification of the risk are considerations of degree and severity.

At the foot of the last part of paragraph 63:

Thus, the Court, in (vi), sets the standard that the law demands of medical practitioners in relation to the provision of information.  This standard does not deal with the foreseeability of the risk in question, save to the extent that the risk must be “inherent” in the procedure.

Paragraph 66:

What is lacking here is an identification of the “risk” . . . there is no reference to the severity of the potential injury or the likelihood –

et cetera.  There is repetition in paragraph 69.

CALLINAN J:   What about what the Chief Justice says in paragraph 16?

MR ELLICOTT:   Yes, your Honour.  I did not mean ‑ ‑ ‑

CALLINAN J:   It seems to be relevant perhaps.

MR ELLICOTT:   It is very relevant, your Honour, because it is very easy to take something out of its context.  He says:

There is an aspect of such a question which may form an important part of the context in which a trial judge considers the issue of causation.  In the way in which litigation proceeds, the conduct of the parties is seen through the prism of hindsight –

et cetera.  It is very easy to take this out of its context in relation to December 1993 when my client, for instance, who has just been brought into the matter, raises an issue, is told that that should go to counsel, counsel is chosen, it is Mr Heydon.  He had a particular point of view, Mr Bateman, that it should be by scheme of arrangement perhaps.  He is told when he persists, “Mr Heydon’s going to determine that”.  It goes to Mr Heydon, Mr Heydon gives his advice.  We say it was clearly non‑negligent.  In any event, we would say that the need for Mr Bateman to say anything after Mr Heydon had given him this opinion did not arise.

HAYNE J:   Before your time runs, Mr Ellicott, I do want to hear what you have to say about the Fair Trading Act way in which the claim is put, so would you bear that in mind?

MR ELLICOTT:   Yes, I am just coming to that.  Can I just say this, your Honours, and it relates to that.  There are three concurrent findings of fact, one in relation to “free shares”, one in relation to the statutory claims and again in relation to causation, three of them on issues of fact.  This Court would have to wrestle with those and overturn those before, in our submission, it could get to the issues of principle that my friends want to raise.  There is a concurrent finding in relation to Ms Conway and Mr Mackay on awareness.  Can I take your Honours to paragraphs 1426 in volume 3 at page 672:

The NRMA submitted that the solicitors had engaged in misleading conduct of three separate but interrelated kinds.  First, it was said that, following the opinions . . . Mr Morgan and Mr Bateman knew that it could not be represented that there was nothing which had  come . . . Secondly, it was said that the sign‑off letters, by their failure to raise or address . . . Thirdly, it was said that in remaining silent –

Now, if your Honours go to 1428:

In the result, the NRMA abandoned a case of express representations, and by the supplementary submissions enlarged and clarified its case of misleading conduct by silence.  The NRMA accepted in submissions that if there could be “nothing more alleged in connection with the conduct than the negligence itself” there would not be misleading conduct, and it seems that the NRMA put its case in the way it did in order better to contend that there was misleading conduct, and that the conduct was in trade and commerce –

et cetera.  Later on at 675 at 1433:

However, for the reasons given when dealing with negligence . . . I do not think the implicit judgment exercised by Mr Morgan and Mr Bateman in that connection was unreasonable.  Whether there was misleading conduct involves not a narrow finding that Mr Morgan and Mr Bateman did not tell the due diligence committee or the boards of Mr Heydon’s opinions or of the free shares problem he had raised.  It involves an assessment of their conduct as a whole, in order to determine whether it should properly be categorised as misleading ‑ ‑ ‑

HAYNE J:   Can I just interrupt you there?  Do I understand these passages to amount to these propositions:  one, misleading conduct alleged is misleading by silence; two, there was no misleading by silence because there was no obligation to speak, and there was no obligation to speak is a conclusion at least bound up with the conclusions about negligence?

MR ELLICOTT:   Yes.

HAYNE J:   Do I capture what you say comes out of these passages?

MR ELLICOTT:   That is absolutely right, your Honour.

HAYNE J:   Yes.

MR ELLICOTT:   And all in the background of Mr Mackay knowing, Ms Conway knowing, et cetera.  At 1434, page 675:

The solicitors provided Mr Heydon’s opinions to the NRMA, to Ms Conway its legal counsel in particular, and so the free shares problem as perceived by Mr Heydon, and the legal issue and risk which might have remained even with the asterisk and explanation, were made known to Ms Conway.

In relation to causation, there was a question which is a question of fact and that is whether in any event in relation to the “free shares” issue the proposal would have been accepted on other grounds and it was accepted by the trial judge and by the Court of Appeal that come a date in January 1995, after the Full Court in Fraser had given its decision, matters had so changed that it was most unlikely on the polling evidence that the proposal would have been adopted by the statutory majority of 75 per cent.

There are similar problems or issues in relation to causation and Gambotto but I do not think I have time to develop that.  We submit this is clearly a case where your Honours should refuse special leave to appeal.  If the Court pleases.

HAYNE J:   Thank you, Mr Ellicott.  Yes, Mr Oslington.

MR OSLINGTON:   May it please the Court.  As an essential but not an only step towards a successful appeal the NRMA must first overturn the unanimous finding by each of the members of the Court of Appeal that a competent legal practitioner could conclude without negligence that there was no foreseeable risk attendant upon either Gambotto or upon the free shares.  That finding is not challenged, at least directly, in the draft notice of appeal.  That finding is not addressed in the NRMA’s submissions to this Court in‑chief.  It is only raised in the written submissions by the NRMA in reply and then really by way of assertion rather than any attempt made by reasoned analysis to demonstrate why the carefully structured reasoned opinions of each of the members of the Court of Appeal were in any way wrong or negligently given.

The particular finding which the NRMA must challenge has no general application whatsoever.  It is confined to the facts of this particular case, dealing with matters of corporation law back in 1993 and is of no continuing importance, except in relation to this case.  Negligence is not established simply by saying that some other opinion might have been given, provided the opinions, the substance of which are expressed by the members of the Court of Appeal, are opinions which could be given without negligence, that is the end of the case.

Even if members of this Court considered the matter in detail in a reasoned way and concluded, “Well, we might have given the NRMA different advice.  We might have” ‑ ‑ ‑

CALLINAN J:   Different members of the Court might have decided the issue differently, too.

MR OSLINGTON:   Exactly, yes, but it does not follow that negligence is established simply because members of this Court might have thought back in 1993 they would have reached a different opinion.  One really needs to look at the reasoning behind the substantive opinions within the Court of Appeal judgments and attempt to identify some faults, some matter not taken into account, some authority not taken into account.

HAYNE J:   But the question whether Gambotto ultimately applied, whether in truth these documents were misleading and deceptive, may obscure, may it not, the case against the respondents which is a case about warning of risk?  It is that to which attention must be directed rather than ultimate conclusion, may it not?

MR OSLINGTON:   Exactly.

HAYNE J:   The Court of Appeal, in some respects, seems to have directed its attention to ultimate conclusion rather than risk.

MR OSLINGTON:   With respect not, your Honour.  The Court of Appeal did two things.  First, the court, in a reasoned way, explained what advice could have been given in 1993 without reference to the actual decision of the High Court in Gambotto.  At least two members of the Court of Appeal then embarked on a separate exercise in order to decide whether or not the High Court in a decision in Gambotto would have in fact prevented the NRMA’s proposal succeeding.  But it is the former question addressed by the Court of Appeal and their answer to the question which the NRMA must overturn in order to get anywhere at all in this appeal.

What I have just said applies both to Gambotto and free shares because the Court of Appeal concluded, unanimously, as did the trial judge, that an opinion could be formed without negligence that free shares did not represent a risk.  That is, in effect, the entry point for any appeal and that entry point does not raise any special issues or any matters of public importance.  I was saying a little earlier that even if members of this Court thought that they may have reached a different conclusion if they had been asked to advise in 1993, that does not establish negligence.

What must be said to establish negligence is that an opinion, the substance of that – of which expressed by each of the members of the Court of Appeal could not have been formed without negligence in1993.

CALLINAN J:   It may be easy enough to state a general principle to apply to all professions but in the actual application of it one has to have regard to the entirely different arenas, as it were, in which different professionals operate and lawyers working in courts are in different situations from doctors operating in operating theatres, perhaps.

HAYNE J:   Plus autonomy about one’s body is rather different from autonomy about one’s purse.

MR OSLINGTON:   But the question ultimately is:  could a reasonably competent legal practitioner in 1993 have formed the view without negligence that Gambotto and free shares did not represent a risk to the proposal?  That is the question addressed by the members of the Court of Appeal and no error, in principle, has been demonstrated in their Honours’ approach to that question.  An attempt is made by the NRMA to say that the Court of Appeal considered only a narrow question and considered whether the actual result ought to have been foreshadowed.

The references given in the NRMA’s submissions to support that part of their submission in themselves demonstrate that it is simply wrong.  Each of the members of the Court of Appeal addressed the question of whether there was a foreseeable risk.  The attempt by the NRMA to create a special leave point by asserting that Rogers v Whitaker was not applied is misconceived.  Rogers v Whitaker was a case in which it was common ground that there was a foreseeable risk and the issue in Rogers v Whitaker was essentially whether the duty to warn of that risk should be dictated by the medical profession or whether it should be dictated by the Court with assistance of evidence from the medical profession.

That sort of question does not arise in the present case because of the finding that there was no foreseeable risk, so no special leave point arises in that regard and no error of principle has been demonstrated to show that the Court of Appeal in any way misapplied themselves in going about the task of deciding whether or not an opinion could have been formed without negligence in 1993 that there was no foreseeable risk.  We respectfully adopt what was said by my learned friend, Mr Ellicott, about misleading and deceptive conduct under the Fair Trading Act.

The case at first instance before Justice Giles, as the judgment demonstrates, was conducted on the footing that it was a case of representation by silence.  The case of positive representation, as illustrated in the judgment, was abandoned and the identical facts were relied upon in support of the claim in negligence as were relied upon in support of the claim under the Fair Trading Act.  I am not sure whether the NRMA says to the contrary, but there is a long line of authority – and I think they are collected in Mr Ellicott’s written submissions – the substance of which is that in respect of opinions or statements about future matters it must be established that there was no reasonable basis for holding the opinion and that the opinion was not held honestly.

The trial judge and the Court of Appeal correctly approached the Fair Trading Act issue by asking whether or not there was a reasonably held basis for the opinion, or in a case by silence for not giving the opinion, and whether it was honestly held.  Honesty was not in issue.  The issue about reasonable basis was essentially the same issue as arose in the case of negligence.  My learned friend has not really explained what the difference is said to be in the present case.  Could I just give your Honours some references to the issues which will arise on causation in relation to free shares.  Acting Chief Justice Malcolm, at paragraph 357, page 1049, and Justice Giles in paragraph 665, paragraph 1411.

Just before I sit down might I just return to Gambotto.  My learned friend, Mr McDougall, said once you warn of a risk, you do not need to know what advice would have been given if counsel was asked what the degree of risk was.  That is essentially the approach which was adopted by the NRMA at first instance and throughout the appeal, but, of course, we made the point, and we made it at the trial and we made it during the appeal, that unless you know the content of the advice which is said should have been given, it becomes impossible to properly judge the issue of reliance, in other words, what the company would have done in the hypothetical circumstances of advice having been given, if in fact it had been given.

Mr Ellicott mentioned the length of the appeal if leave is granted.  One reason for the length will be the necessity to go into the factual issue concerning reliance and the evidence of each of the directors of what they would and would not have done.

HAYNE J:   I would not dream of taking that as a threat, Mr Oslington, not at all.  Simply to inform us better.

MR OSLINGTON:   Simply to inform your Honours.

HAYNE J:   Exactly, Mr Oslington, thank you.  Yes, Mr McDougall.

MR McDOUGALL:   And, your Honours, in particular, would not be frightened by that when the learned trial judge made detailed, careful and considered findings of fact on that very issue.

HAYNE J:   Yes, I must have the Court attendant turn the light on over the jury box, Mr McDougall.  It seems to have gone out.

MR McDOUGALL:   If your Honours please.  I am sorry about that.  Your Honours, may I first indicate that we would propose to split our 10 minutes in the same way as the initial 45 was split, although I will try to avoid the similar disadvantageous ratio.  On Gambotto there appear to be a number of recurrent themes that appear, one of which is, of course, that this is a case where advice could have been given in a non‑negligent way, that the outcome of the appeal in Gambotto, leave having been granted, would not involve any impact upon the proposal.

The difficulty with that submission, which is founded entirely upon the legal exegesis that the Court of Appeal undertook, is that it ignores Mr Heydon’s evidence, accepted by the learned trial judge, in paragraph 1220 of the judgment, to which reference has been made already, and it ignores the fact that Mr Heydon acknowledged that on the basis taken by Justice McLelland, expropriation, per se, was unlawful, that what the High Court was likely to do was resolve the difference between Justice McLelland and the Court of Appeal and that Gambotto was directly in point, having regard to the question of expropriation or extermination – elimination or extinguishment, as he put it, of minority interests.

HAYNE J:   Yes, all of those colourful terms can be trotted out but, in essence, what was happening here was a change of status, was it not?

MR McDOUGALL:   Accompanied by the loss of membership rights, yes.

HAYNE J:   Yes, the status changed, rights changed, consequences happened, but there was a change of status.  I am not sure that the colourful language advances things terribly far, does it?

MR McDOUGALL:   It simply makes the point that there was perceived to be, on reflection, a direct relationship between what was up for grabs in Gambotto, if I can put it that way, and ‑ ‑ ‑

HAYNE J:   The majority was – on a view taken in Gambotto – doing things to such disadvantage of the minority that it should not be permitted.

MR McDOUGALL:   Or, on the other view, where a minority was doing something that was not to the disadvantage but was not proved to fall within the qualifying prerequisites that the majority in this Court said were necessary, but that, again, is to look at the question of outcome and, with great respect, to overlook the warning given by Justice Gummow in paragraph 64 in Rosenberg v Percival ‑ ‑ ‑

HAYNE J:   Risk is the relevant ‑ ‑ ‑

MR McDOUGALL:   ‑ ‑ ‑ “not far‑fetched or fanciful”.

HAYNE J:   And the question is:  would a reasonably skilled practitioner, skilled in this area, have given any and what warning?

MR McDOUGALL:   The first question, with respect, is – yes, but that is not a question for practitioners to answer; it is a question for the court to answer and that ‑ ‑ ‑

HAYNE J:   If the court answered it against you, why should we decide that the court answered it wrongly?  What legal principle does that elucidate?

MR McDOUGALL:   Because the answer that the court gave was to absolve the respondents because a reasonable skilled practitioner might not have foreseen:

The precise and particular character of the injury or the precise sequence of events leading to the injury –

to adopt Justice Gummow’s words.

CALLINAN J:   Yes, but Justice Gummow’s – I do not know whether - Justice Gummow, I think, was relying on something that Justice Gaudron had said, is that correct?

MR McDOUGALL:   At this point he was relying on Wyong Council v Shirt.

CALLINAN J:   Yes.  I think he had picked up something that Justice Gaudron had said.

MR McDOUGALL:   In the preceding paragraph he had.  Your Honour is quite correct.

CALLINAN J:   I do know the extent to which all of that, with due respect, was endorsed by the other Judges in Rosenberg, in that sort of situation.  I am not talking about the principle but in that sort of situation.

MR McDOUGALL:   But it is the clear explication, firstly, of what is involved in the real risk and certainly of what is not involved in seeing real risk, in our respectful submission.  Coming back to the question your Honour Justice Hayne put to me, where we say the Full Court erred is because they, in coming to the conclusion that a reasonable practitioner could have come to one view, overlooked entirely the evidence that another reasonable practitioner could, and on paragraph 1220 would, have come to a different view and therefore overlooked the fact that, regardless of the views of some reasonable practitioners, there remained a risk and what they did was say that the practitioners in this case were entitled to deny to the NRMA the opportunity to make the best assessment it could of the quality, the character, the extent, the impact of that risk, and, with respect, a corporation ‑ ‑ ‑

CALLINAN J:   In this material – with all due respect, that sounds a little unrealistic to me.  What the client wants to know is what the risk is.

MR McDOUGALL:   Yes.

CALLINAN J:   In fundamental terms, in legal discourse, what the client wants to know is, “In your judgment how do you think the case will go on the day if it gets to litigation?”.

MR McDOUGALL:   Yes.

CALLINAN J:   That is a lot less refined question than asking what the risk is.

MR McDOUGALL:   It is, but this client was never given the chance to ask that question and that is the heart of our complaint.  Now, your Honours, it is put against us ‑ ‑ ‑

CALLINAN J:   Say that had been the answer, Mr McDougall, to the question.

MR McDOUGALL:   I am sorry?

CALLINAN J:   Say that had been the answer.  Say that had been the question.  Counsel says, “There is a risk”, or the solicitors say, “There is a risk”, the client inevitably says, “How do you think it will go, then?”, and the barrister or the solicitor then gives the opinion ‑ ‑ ‑

HAYNE J:   And the client then says, “What would you do?”.

CALLINAN J:   Exactly.

MR McDOUGALL:   And the barrister says, “It is not my money.  You make your own mind up”.

CALLINAN J:   Yes.

MR McDOUGALL:   But it is, in principle, no different to the doctors’ cases where the doctor says, “You have got one chance in 14,000 of suffering this outcome”.  The barrister says, “In my view the appeal is unlikely to succeed or is unlikely to succeed in a way that impacts on your proposal but I cannot guarantee it”.  It is then a question of the extent to which the client is risk averse and that, again, is a point that never got to be explored in any real way because the warning was not given and the follow‑up question was not asked and the follow‑up advice was not given.

HAYNE J:   But the legal principle, you say, we should take this case on to assert is what?

MR McDOUGALL:   To assert that a lawyer owes the same duty to advise of risk as does a doctor and the duty is not discharged by the lawyer forming but not communicating to the client the individual or hidden private opinion that the risk is unlikely to threaten the proposal, because it is for the client to judge whether that is sufficient to turn it away, just as it is for the

patient to judge whether a one in 14,000 risk of blindness is a sufficient deterrent to undertaking the operative procedure.

HAYNE J:   Yes.

MR McDOUGALL:   Now, for those reasons, your Honour, we say that the question of factual finding against us, which as your Honour Justice Callinan indicated is not really a factual finding, and the question of non‑negligent advice afford no answer to a “failure to warn” case, neither does the point, which seems to be a related point, that the decision of the Court of Appeal either was, or was perceived to be, correct.  Again, we rely upon paragraph 1220 of the findings of the judge at first instance which indicated in Mr Heydon’s mind, when he turned his mind to it, a perception that the significant issue was the resolution of the difference in approach between Justice McLelland and the Court of Appeal.

The final matter that I wish to reply to is the question of the reservation of oppression.  That, with great respect, is not a reason for denying a grant of leave in this case.  As Justice McLelland showed in his judgment in Gambotto, oppression lay at the heart – it was the reason for injuncting the proposed expropriation.

HAYNE J:   But the factual question of the ambit of the retainer would loom large in the claim against the first respondent, would it not?

MR McDOUGALL:   It would, and it is that which gives rise to the Stake v Harlin and Waimond v Byrne point.

HAYNE J:   Yes.

MR McDOUGALL:   Those are the submissions in reply on the Gambotto point, if your Honours please.

HAYNE J:   Yes.  It is, I think, the first time I have heard of a reply being split, Mr O’Bryan, but there we are.  If you need leave, you have leave.

MR O’BRYAN:   I thought I had indicated that at the outset, I am sorry, your Honour.

HAYNE J:   Yes.

MR O’BRYAN:   Thank you, your Honour.  Just two short points.  My learned friend, Mr Ellicott, read from paragraph 1428 of the judgment of Justice Giles.  That is on page 673 in volume 3.  He left out a critical word “if” in the sentence that he read:

The NRMA accepted in submissions that if there could be ‑ ‑ ‑

HAYNE J:   I noticed that but what of the propositions I put to counsel in the course of argument as to what emerges from that passage of the trial judge’s judgment?  Do you say I say I incorrectly characterised what the trial judge said and did?

MR O’BRYAN:   No, I do not, your Honour.  In our submission, the trial judge fell into exactly the same error that the Court of Appeal fell into and that is very clear when one reads paragraphs 1433 and 1434 of the judgment on page 675 and 676.  The trial judged reached, in effect, the same conclusion, because he had found against the NRMA on the negligence claim, he considered that there was nothing more that could be said in connection with the misleading or deceptive conduct claim.  As his Honour said in paragraph 1433:

for the reasons given when dealing with negligence in relation to free shares and disadvantages, I do not think the implicit judgment exercised by Mr Morgan and Mr Bateman in that connection was unreasonable.

That is to say, in connection with not saying anything to the relevant committees.

HAYNE J:   Yes.

MR O’BRYAN:   On the question of silence, I did not bring to Court and we have not referred to Demagogue v Ramensky but could I refer your Honours to the very helpful summary of the law on silence and the fact that of course there is, in truth, not a law of silence as such, it is to be taken into account in connection with everything said and unsaid.  Justice Gummow dealt with that very well, with respect to him, in Fraser, which is in the volume of authorities, at page 18.

Finally, your Honours, in connection with the submission that there is a fatal causation question arising out of the vote, could I just refer your Honours to paragraph 1405 of the judgment of Justice Giles.  It is on page 633.  All that his Honour concluded on that was:

I do not think it has been established that the proposal would have gained the necessary approvals at the adjourned general meetings.

He did not conclude that it would necessarily have failed.  Such a conclusion would, in any event, be irrelevant, your Honours, because the respondents were not engaged – they were not retained to procure a vote;

they were retained only to give non‑negligent advice in relation to the matter.

HAYNE J:   Yes, thank you, Mr O’Bryan.  We will adjourn to consider the course we take in the matter.

AT 11.18 AM SHORT ADJOURNMENT

UPON RESUMING AT 11.21 AM:

HAYNE J:   Whether on the facts of this case a legal practitioner exercising reasonable care in the performance of a retainer should have warned of a risk that there may be a material change in, or restatement of, applicable legal principles was resolved against the applicants in the Court of Appeal on several bases.  One of those was by resolving against the applicants the question whether, in this case, a risk of material change to, or restatement of, the law affecting the applicants’ proposed conduct would have been sufficiently apparent to a reasonable practitioner skilled in the area as to require the practitioner to warn the client about it.

We are not persuaded that an appeal against this finding would enjoy sufficient prospects of success to warrant the grant of leave in any of the applications which seek to raise these issues and that, accordingly, the issues of legal principle which it is sought to agitate would not fall for decision.

The applicants would succeed against the solicitor respondents on what has come to be called the “free shares” issue only if they were to persuade the Court that a majority of the Court of Appeal was wrong to conclude that, the applicants having had their attention drawn to the risk of using the expression “free shares” by the advice given by Mr Heydon about the “onsert”, the applicants nevertheless chose to proceed with the issue of the prospectus in the form in which it had been prepared. 

We are not persuaded that an appeal on those issues would enjoy sufficient prospects of success to warrant a grant of special leave.  Further, in light of the findings of fact at trial as explained further in the Court of Appeal, the alternative case advanced on these questions under the Fair Trading Act would also enjoy insufficient prospects of success to warrant a grant of special leave.  For these reasons, each application for special leave is refused, in each case with costs.

The Court will adjourn to reconstitute.

AT 11.24 AM THE MATTER WAS CONCLUDED