Potts & Anor v Westpac Banking Corporation

[1992] HCATrans 189

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry

Brisbane No B21 of 1992

B e t w e e n -

LIONEL JAMES POTTS and DAVINA

LUCY POTTS

Applicants

and

WESTPAC BANKING CORPORATION

Respondent

Application for special leave

to appeal

BRENNAN J
TOOHEY J

GAUDRON J

Potts 1 24/6/92

TRANSCRIPT OF PROCEEDINGS

AT BRISBANE ON WEDNESDAY, 24 JUNE 1992, AT 4.09 PM

Copyright in the High Court of Australia

MR D.F. JACKSON, QC:  May it please the Court, I appear with

my learned friend, MRS D.A. MULLINS, for the

applicants. (instructed by Lynch & Co)

MR R.N. CHESTERMAN, QC:  May it please the Court, I appear

for the respondent with my learned friend,

MR J.C. SHEAHAN. (instructed by Freez Ruthning)

BRENNAN J:	Mr Jackson.
MR JACKSON:	Your Honours, this is a case where, it is

submitted, special leave should be granted because
of the injustice occasioned to the applicants by
the course taken by the majority of the Full Court

in setting aside the judgment of the primary judge,

Mr Justice Mackenzie. Now Your Honours, the

essence of the case in that regard is that the

majority in the Full Court disregarded findings

made by the primary judge in circumstances where
those findings were based, at least in part, on his
view of the witnesses and also disregarded, in

effect as if they had not been made, other findings

made by the primary judge.

Your Honours, it will take me a minute, but I

hope not too many minutes, to indicate the basic matters which give rise to those submissions and
may I proceed to do so as quickly as I can.

Your Honours, the transaction, of course, to

which the proceedings related was a loan of

130 million Japanese yen for a period of two years

from 31 May 1982. At the time of the borrowing it

was worth A$500,000 approximately. At the time of

the _repayment the number of dollars required to

repay the loan was very much higher. In the event

the loan was extended and eventually the total

amount repaid was about A$1.8 million.

Your Honours, it was not a case where proceedings

were brought to avoid liability; the applicants had

satisfied their obligations before suing.

The critical events consisted of what had

taken place at a discussion at the Stones Corner

Brisbane Branch of the Westpac Bank.	The meeting
in question took place in April 1982.

Your Honours, that appears at page 6 lines

10 to 22. I do not need to take Your Honours to

it. Three people were present: the male applicant,

the branch manager, Mr North, and a Mr Imhoff, the

respondent's manager, International Business, for

Queensland. Those persons all gave evidence. The primary judge's view was based ~n his assessment of

them. Generally he preferred the applicant's view

of events, although by no means in every respect,

and Your Honours will see that stated at page 52

Potts 2 24/6/92

lines 39 to 55. He considered at length in his

reasons all the arguments advanced in relation to

credibility and he made a number of findings which

are presently material.

The first, Your Honours, concerns the

respondent's attitude. Your Honours, I am going to

go to four findings which are material for what I

am about to say. The first concerns the attitude

of the respondent. It appears at page 44 and may I

take Your Honours to it. It is in a passage

commencing at about line 10 and going to about

line 26, where he said that he was:

left with the clear view that just before and
at the time of this transaction the bank's
attitude was that these loans presented an

opportunity to expand business outside the

restrictions -

and, Your Honours, I shall not read the rest of it

out, but I would refer Your Honours to the whole of

that paragraph.

The second finding, Your Honours, is at

page 60 in a passage which commences at line 20 and

goes through to the bottom of the page. Now,

Your Honours will see that between lines 20 and 30

His Honour found that the manager of the branch: arranged for Mr Imhoff to attend the meeting

with Mr Potts to explain such loans to him.

Your Honours will see the words:

to explain such loans to him.

His Honour finds also that he was:

satisfied that Mr Imhoff professed to be, and

was represented as, an expert in such loans.

Your Honours will see -

BRENNAN J: What does that mean, Mr Jackson, "an expert in

loans"?

MR JACKSON:  Your Honour, it means that within the -

Your Honour, perhaps I should go back one stage.

The topic of borrowings in foreign currencies, as

His Honour's reasons for judgment earlier indicate,

were something that had not been largely engaged in

in Australia until a few years before the events in

question. Now a number of questions were involved

in relation to foreign loans: how it might be

arranged in broad terms; where the money might come

from; what was the currency; would there be terms

Potts 3 24/6/92

providing for conversion from one currency to

another, and matters of that kind. What where the

interest rates; what were the advantages; what were

the disadvantages. Now, Your Honour, one might

have within a bank or some other financial

institution a person who is an expert in financing

by discounting of bills; a person who is an expert

in financing by reference to mortgages and lent

real property mortgages, or hire purchase or

anything along those lines. That seems to be what

His Honour was talking about and Mr Imhoff was the

person whose responsibility it was to look after

that aspect of the Bank's activities, and

His Honour's findings were to the effect that he was an active promoter of the business, most

successful in Australia, in fact.

Now Your Honour, if I could move on on the

same page, commencing at about line 38, His Honour

goes on to say that he was:

satisfied that Mr Imhoff fell into a category

of person who ought to have realized that he

was being trusted by Mr Potts to give him
information, in respect of which Mr Potts had

reason to believe Mr Imhoff had special

knowledge, which information concerned a

matter of a business nature.

He goes on to find also:

that Mr Imhoff ought to have realized that

Mr Potts intended to act on that information

in relation to his business affairs.

Your Honours, he goes on to find, in the last three lines on that page:

that it would be reasonable for Mr Potts to accept and rely on the information given to

which a duty of care arose. him. Therefore there were circumstances in

The third finding relates to a rather similar topic

and that appears at page 63 in a passage from

line 39 through to a passage on the next page,

about line 45. Now, Your Honours, may I refer

specifically to the second sentence in the last

paragraph on page 63 where His Honour said he was:

satisfied that nothing that occurred during

Mr Potts' meeting with Mr Imhoff and Mr North

would have led the defendant to believe that

Mr Potts had the degree of knowledge of

overseas currency loans that would enable him

to perform the task of effective management of the loan, a task which later became obvious to

Potts 4 24/6/92

the bank to be one that was beyond most

borrowers of this class.

He went on to say:

there are substantial grounds for discounting

Mr North's evidence as to Mr Potts' degree of

understanding of the transaction.

And Your Honours will see that on the next page,

notwithstanding what he says at the top of that

page, Mr Imhoff may well himself have been:

ill-equipped to appreciate the full extent of

the risks -

He says that he is:

satisfied that he was represented by the

defendant to be an expert in the subject and

considered himself to be one at the time he

met Mr Potts. I am also satisfied that the

defendant was being pro-active in relation to

this kind of loan, at least to the extent -

and Your Honours will see what is said in that

sentence. His Honour went on to say that he was:

satisfied that the procedure ought not be

characterised as the ordinary kind of

transaction -

and I would ask Your Honours to read the remainder

of that paragraph.

Your Honours, having said that, may I come

then to the aspects of the case which were

critical, and could I say, Your Honours, that there

were three documents which adopted a considerable

materiality in the deliberations of both the

primary judge and also of the Full Court. They do

not appear in the book, Your Honours; may I hand

copies to Your Honours and I will explain them as I

come to them. Your Honours, the first is a

document which came into being for the purposes of

the case. It is the document which is referred to

as page 33, about line 30, and Your Honours will

see that His Honour says:

It is demonstrated clearly from figure O -

Your Honours, figure O is the one that perhaps I

can hold up but it has 'Figure 0' at the top and

has a graph at the top.

in the report of Dr Hunt, an academic

economist, that from about mid-1974 to late

Potts 24/6/92

1978 the AUD dropped in value from almost

450 JPY/AUD to about 210.

Your Honours, that, of course, is the slump that

one sees in that document from the peak to the

trough beside it. Your Honours will see that there

is a reference in the paragraph at page 33 to which

I referred to a "boxed area" and that area is the area on figure O which is enclosed in a small box.

And Your Honours, that was a period of relative

stability where, if I could use an expression of

one of the judges in the Full Court, there was more

or less a plateau. Your Honours, that area
enclosed in the box covers the period which is

referred to in the second document, which is the

document which is exhibit 7; it has "exhibit 7" in

the top right-hand corner - I am sorry,

Your Honour, perhaps it does not - but it is the

document that is headed "Average Exchange Rates

Against Australian Dollar". Your Honours, could I say that there is now much writing on the document.

At the time when the document - I am sorry. I

should say that the only handwritten notations on

it at the time of the events in question, as

distinct from ones which were made much later, are

those which were highlighted on the copy which

Your Honours have.	Your Honours, that appeared
from the evidence.

That document, exhibit 7, dealt with the

average Australian dollar rates against other

currencies, month by month. One of the currencies

mentioned, as Your Honours will see in the third

column of currencies, was the Japanese Yen. That
document, doing it month by month averages, started in 1979, as Your Honours will see, and went through until the early months of 1982. That document was

the document which was given to the applicant at

the meeting in April 1982, and His Honour referred

specifically to the cross-examination of Mr Imhoff

in relation to that, in an important passage, which

forms part of his findings, at page 33 line 46,

through to page 34 line 56.

Now, Your Honours will see that he there sets

out a part of the cross-examination and I would ask

Your Honours to read that, but I will then direct

Your Honours' attention, if I may, particularly to

some aspects of it. His Honour asked Mr Imhoff,

page 34 about line 34:

HIS HONOUR: Did you do any research at all ith

wa view to determining what the historic trend

of the two currencies was before you started

approving loans to people?

MR IMHOFF: Other than this information here?

Potts 6 24/6/92

Meaning by that, Your Honours, the information

covering that short period 1979 to 1982, and he

said:

MR IMHOFF:  No, this was the information that

I used to explain to customers that these

rates did change, yes.

He was then asked:

MR KIRK:  In fact, if you had gone back over

that period, you would have been able to take

a· worst case two year period, would you not?

MR IMHOFF:  Yes.

MR KIRK: You could have picked a worst case

two year period?

MR IMHOFF:	Yes.
MR KIRK:	It would have demonstrated very

substantial risks associated with offshore

loans?

MR IMHOFF: That is what the graph would show,

yes.

And the graph, Your Honours, is the first document

I gave Your Honours, and what it demonstrated, of

course, was that over a period of time there had

not been the mild fluctuations, as it were, but

there had been a very, very significant decline in

the value of the two currencies.

Your Honours, may I come into the third

document, and that is the document which is

e~hibit 6. It is a document, Your Honours, which

is headed "Percentage Movement of Today's Rates

from Average Rates During" various specified

periods, and in relation to that, what Your Honours' will see is that about half-way down	the document there is the name "Japan" and then if
one draws a line across one can see the percentage
movement going along for the periods, but the two
of particular relevance for present purposes are the last two columns, speaking of the "Rates after
Devaluation 29 Nov 1976" and the "Rates after Smithsonian" determination "18 Dec 1971", and
Your Honours will see two figures written in "2 1/2% pa" and "3% pa" and the evidence concerning that document appears in His Honour's reasons for judgment - this is again evidence which was
accepted - at page 40, line 20 through to page 41,
line 42.

Potts 7 24/6/92

Now, Your Honours will see in the text at

page 40, that Mr Potts set out his knowledge, or

his limited knowledge of the types of transactions,

and then His Honour goes on to record at line 31:

He said that he got the document relating to

currency variations (ex 7) at the meeting and

received ex 6 -

which is the document to which I have just been

referring -

by post after the meeting.

He wrote those two figures of two and half percent and 3 percent, Your Honours. He then recounts the

evidence about it, and Your Honours, this really is

the crux of the case so far as liability was

concerned.	He said, Your Honours, at about
line 46:

Well, Mr Imhoff had told me about this

possible movement in the currency and at the

meeting with Mr North I asked him specifically

did he have any other figures to back up what

he said.	The document he gave me at the
meeting -

which was exhibit 7, which was the 1979 document -

only went back to 1979 only two or three years

beforehand and I asked him specifically did he

have any other document which would give me a

better appreciation of those figures he had

mentioned and he said he would send me another

document. This is the one he sent me which
went back to 1971, and I had a quick look at

it and worked out on the Japanese yen

against -

and then, Your Honours, he says what he did. He

then said he:

was trying to work out and confirm that the

risk that had been pointed out to me -

and, Your Honours, what that is appears in just a

moment -

by Mr Imhoff was not excessive and that was a

simple way of doing it.

Now, Your Honours will see, continuing on page 41:

that there was no discussion apart from what

could be gleaned from the documents about past

fluctuations ..... He said that Mr Imhoff raised

Potts 24/6/92

the subject of a loan ..... no other currencies

were discussed. He said that currency risk

was discussed during the course of the

meeting. He explained how it arose in the

following passage.

And Your Honours will see the answer:

During the course of the conversation with

Mr Imhoff I said to him, 'These loans look a

good deal. Are there any problems associated

with these sort of loans?'	He said, 'Yes,
there is a currency risk.'	I then asked him

what was the magnitude of the risk, and he

replied, 'It could - the Australian dollar

could devalue against the Japanese yen by a
maximum of ten per cent over the two-year

period of the loan.' Now, the two-year period

must have come up at some stage in the

conversation because the ten per cent referred

to two years.

And then he said in the next answer:

No, he did say it would be unusual and

excessive for that to happen and in actual

fact it could go the other way and we could be

better off.

Now, Your Honours, the point where that

evidence was accepted was at page 65 line 25, and

Your Honours will see, in the passage which commences at line 25, that His Honour accepted:

exhibit 6 was probably obtained by Mr Potts

after the meeting with Mr Imhoff and that the

figures that he was written upon it support

his evidence that he merely used it for the

purpose of checking the accuracy of what

Mr Imhoff had told him about depreciation

rates -

His Honour then proceeds to say what he says in the

next sentence: he accepts the proposition that -

and, Your Honours, perhaps I should also say - at page 65 one sees the core of His Honour's reasons

for judgment where he says that:

The proposition that Mr Imhoff had conveyed to

Mr Potts that a devaluation ..... was unlikely

and excessive -

was established.	He goes on to say in the same
paragraph:

that it was a subject upon which experts could

genuinely differ -

Potts 9 24/6/92

and to say that was not -

of itself, be evidence of negligence.

And Your Honours, he goes on then to say, at
page 66, and I would refer Your Honours to the last
paragraph on page 65 and then at the top of

page 66, and then, Your Honours, in the next

paragraph what he says in relation to his findings,

appears at about line 20:

On the basis that I have accepted Mr Potts'

version of events at the meeting in the

passage ..... it follows that the period

was, its purpose, converted into a bench-mark.

analysed in exhibit 7 irrespective of of

Meaning, one would think in the context, a typical

representation of what might happen. And he said:

The sending of material to

Mr Potts ..... ensured that the information was

used to confirm the impression taken away from

the meeting.

Now, Your Honours, that appears to be a finding of

fact. His Honour then goes on to say -

BRENNAN J: But, what does it mean, Mr Jackson? What is its

relevance?

MR JACKSON:  Your Honour, the relevance of it is this, that

the approach taken by His Honour, in our

submission, one that was entirely open to him, was

to say, as he says in the next paragraph, "I accept
that for someone to express the view that the
decline might be a decline of up to 10 per cent in

the next two years", was a view that a person might

reasonably and without negligence hold.	What he
by Mr Imhoff in the conversation we had had, was to	goes on to say, however, is that what had been done
convey the impression that the relevant
relationship was not likely to be subject to any
wild fluctuations. Now, Your Honour, in fact, if
one had taken a period -

BRENNAN J: But that proved to be false. It was subject to

wilder fluctuations than that.

MR JACKSON:  And had been.

BRENNAN J: Yes, well you are not involved in breach of

warranty.

MR JACKSON:  No, no.

Potts 10 24/6/92

BRENNAN J: It is negligence causing loss.

MR JACKSON:	Yes, Your Honour.
BRENNAN J:	And you have to prove, do you not, that but for

a failure to communicate some fact, you would not

have suffered the loss.

MR JACKSON:  Yes, Your Honour.

BRENNAN J: Well now, the loss, I take it, is the change in

the value of the dollar repayments. Where is there

anything to indicate a finding that if the

plaintiff had been told X, he would not have taken

the loan?

MR JACKSON: Well, Your Honour, that is the inference one

draws from the findings made by the primary judge.

BRENNAN J:  An inference on a central fact of the cause of

action?

MR JACKSON: Well, Your Honour, there was not doubt, of

course, in the first - and Your Honour is right to say that, of course, but what of course His Honour

goes on to say is that he entered into the

transaction almost immediately after the meeting

that had taken place and in the belief that it had

been engendered in him by what had been said by

Mr Imhoff. Now, could I take Your Honour to, for

example, page 69, commencing in the fourth line on

that page, and His Honour is there dealing with the

question of reliance, he says he has:

set out earlier the salient parts of the

evidence -

and so on. He refers to:

The striking thing about the sequence of

events is that following the meeting, Mr Potts

immediately decided to apply for a loan.

May I ask Your Honours to read that but I would

refer particular to lines 35 and following:

The sequence of events in my opinion suggests

strongly that his reliance on the

inforrnation ..... was a critical factor in his

decision to have Mr North prepare an

application for him and his wife. In all of

the circumstances I am satisfied that the

element of reliance is established.

BRENNAN J:  You have got the finding that there was a

representation which turned out, in fact, to be

Potts 11 24/6/92

untrue.	The untruth was not necessarily negligence
in itself.

MR JACKSON:  No.

BRENNAN J: And that the representation induced the

plaintiff to take out the loan.

MR JACKSON:  Yes.

BRENNAN J: But you have to show, do you not, as one would

have to show in the case of a failure to provide a

safe system of work, that there was a specific

cause that should have been taken which, if taken,

would have avoided the loss.

MR JACKSON: Well, Your Honour, His Honour is making the

observation to which I just referred, in a context

where His Honour has, just a few pages earlier,

said that what should have been done was to bring

to his attention - I am sorry, I am putting it in
the wrong way. What His Honour had said was that
there had been a failure to bring to his attention

the possibility that the fairly rosy estimate he

had given was one which might be le.ss than rosy.

That whilst one might, at that time, honestly hold the view and perhaps reasonably hold the view that

there would only be a marked decline, what had not

been brought to his attention was the possibility

that there might be a far greater decline as had

occurred dramatically in times not too far behind.

Now, Your Honour, that is what His Honour was

talking about when he says that the sequence of

events suggest strongly that his reliance on the

information, and of course the lack of information,

was the critical factor.	And Your Honour, could I
say ·- - -

TOOHEY J:  I am not clear what the proposition is,

Mr Jackson.	Is it that the Bank manager should
embarked upon the provision of some information, or	have provided more information than he did, having
that, having provided the information that he did,
he should have qualified what he said about the
future prospects of currency moves?

MR JACKSON:  Your Honour, there may be in a sense two ways

of saying the same thing, and I say so with

respect, but the proposition which we are putting

is one that, one sees, for example, at page 68

about line 29, and it is this, that he was - if I

could start perhaps one stage back - presented as a

person who was the Bank's expert in this area and

he was a person upon whom reliance was being placed

for advice. Those were findings that were made.

The advice that he gave was advice which

represented that the risk of a decline in the

Potts 12 24/6/92

currency was no greater than about 10 per cent.

Now, whilst that is a view that he might honestly

have held, having said that what he did not convey

was the fact that there had been much wilder

fluctuations, which had occurred in the not too

distant past. He did not present the information

in a sufficiently qualified manner, there being

other factors which were material to someone

deciding whether to enter into a risk.

TOOHEY J:	And is there a finding to that effect?
MR JACKSON:	Yes, Your Honour, I was about to come to that

actually. At page 66 what His Honour said -

Your Honours it is the second new paragraph on that

page, commencing at about line 36. That is where

he says:

While it would not have been negligent to

express a view that a depreciation of up to

10 per cent ..... was unlikely and

excessive ..... the fact remains that the

combination of the statement and the documents

was such as to lead to a reasonable inference

that there were no features that were likely

to falsify the information -

et cetera. And he goes on to say:

As Mr Imhoff conceded, had he gone back over

the few years before his figures ..... would

have demonstrated the -

risks were, in effect, much more substantial. Now,

Your Honours, that was the core of the case on the

findings made by the primary judge.

GAUDRON J: But Mr Imhoff gave your client what is Figure 0,

did he not?

MR JACKSON:  No, no.

GAUDRON J:	He did not?
MR JACKSON:	No, what he gave us - Figure Owasa document

prepared by an expert at the trial, and adopted.

What he gave us, in effect, was that part of

Figure 0 that is in the box.

GAUDRON J: Yes, and then he gave you the movements, the

long-term trends, in various currencies, which went

back at least to 1971.

MR JACKSON: Yes, Your Honour, but Your Honour, of course

there is nothing in that which enables one to see
the rate year by year, of course, and of course,

then exhibit 7 is the document which covers the

Potts 13 24/6/92

period in the box. Your Honour, even the document

that covers the period from 1971, of course does

not take into account the fact there there had been

a great decline, because there had also been a

peak.

BRENNAN J:  And there was a devaluation by government

action, was there not?

MR JACKSON:  Your Honour, indeed.

BRENNAN J: Mr Jackson, let it be assumed that careful

advice·would have gone back to incorporate at least

the 1976 drop in the currency. The next question

would have been, "And if you had been informed of

that fact, would you have taken out the loan?"

Now, is there any evidence even as to what the

result of that is?

MR JACKSON: Well, Your Honour, may I first come to the

findings. Your Honour will have seen the question

of reliance dealt with at pages 68 and 69.

BRENNAN J: Well, I have seen it, Mr Jackson, in terms of

the fact that he relied upon what was said to him

and in so doing, entered upon the transaction.

MR JACKSON: Well, Your Honour, it is a little more than

that, with respect. What His Honour said at

page 69, line 40, was that:

his reliance on the information contained in

the presentation by Mr Imhoff was a critical

factor in his decision -

in effect, to go ahead. Now, Your Honour, that,

with respect, cannot mean other than that; he would not have gone ahead if that had not been so, in the context in which Your Honour is speaking._

BRENNAN J:  I am unable to read it that way in the light of the facts to which His Honour was there referring,

because, at this stage, as I understand the

findings, the plaintiff was being pressed with

heavy interest rates if he was going to take out an

Australian dollar loan or to martial his loans into

one Australian basket. Now, the question is, where

did the advantage lie? And it seems to me that it

was a critical question to determine whether, if he

had known of an unstated fact, he would have

persisted.

MR JACKSON: Well, Your Honour, I do not know that I can

advance it beyond saying that the way in which the

issue is described in the primary judge's reasons

as being:

Potts 14 24/6/92

a critical factor in the decision to have

Mr North prepare an application -

means, one would think inevitably in the
circumstances, that what the judge is saying is

that he would not have entered into the transaction

were it not for what was said.

GAUDRON J:	Were it not for what was not said.
MR JACKSON:	I am sorry, Your Honour, I have put that badly.

GAUDRON J: But that has sort of got a thirteenth striking

of the cuckoo clock about it when it is also said
that it was not negligent merely to give the

information that was given.

MR JACKSON: Well, Your Honour, I do not know whether

"thirteenth striking"; I know thirteen is too many,

but having said that, could I just say that one had

to look at the type of case it was, and what it was

was, Your Honour, in a sense, a simple case where

it was said that a person giving advice had given

advice which was relevantly unqualified, when, as

the judge found, it should have been qualified.

Now, what the judge is then saying is, if it had

been qualified, there would have been a much

greater appreciation of the risks, if there had

been, and that, he says, was a critical factor in

the decision to go ahead. Now, Your Honour, one

cannot really be surprised to see that His Honour

then says that he is:

satisfied the element of reliance been has

been established.

Now, Your Honour, that is a factor. I mean, the

Court should not assume, with respect, that

His Honour was in error in that, or was adopting a

wrong test.

BRENNAN J:  Mr Jackson, that was one of the findings that

His Honour made with regard to the too rosier

picture being painted of the fluctuations. But

that was not the only so-called particular

negligence on which His Honour dwelt. He also said

that there was not sufficient advice about careful

management, and that perhaps brings out the point

more clearly. What more was to have been said

which, having been said, would more likely than not

have avoided the loss? And the judgment is silent.

MR JACKSON:  Your Honour, what His Honour said about that really appears at pages 67 and 68. What His Honour

does say is that - and I am looking at about line

25 on page 68 - what was said did not in effect

explain:

Potts 15 24/6/92

the complexity and difficulty involved in

monitoring and managing loans of this kind.

He went on to say that the explanation:

fell short of what a reasonable person

embarking upon an explanation of the nature

of, and risks associated with, an offshore

currency loan would have given.

And, Your Honours, whilst it is true to say that

His Honour did not go into the detail of that, he

had said on the previous page, about line 30, that

he was:

satisfied that the explanation -

given -

as to the management of the loan was

restricted to a very elementary level.

And he describes such advice as was given and forms

the view that it was not:

a satisfactory explanation that careful

management of such loans was essential.

Now, Your Honours, that is a view formed by seeing

the witnesses. Inevitably involved in those

findings is a view that what was said by Mr Imhoff

to Mr Potts did not convey to him what might have

been conveyed, and Your Honours will see at page 69

between lines 30 and 35 that he finds specifically:

that at the very most Mr Potts had only a very general knowledge of the way in which offshore currency loans operated.

Now, Your Honours, I wonder if I might move

from that to the judgments in the Full Court.

Could I go, first, to the reasons for judgment of

Mr Justice de Jersey at page 120.

Mr Justice de Jersey and Mr Justice Dowsett were

the majority on this issue.

Now, Mr Justice de Jersey's reasons for

judgment commence relevantly about line 50 on

page 120, and go through to the top of the next

page. And then, Your Honours, the other part is at

page 121 at about lines 45 to 57. Now, what

His Honours says in the second of those passages -

and Your Honours is very difficult indeed, we would

submit, to fit in with what the findings that had

been made by the primary judge were it is "He new

generally how to manage those risks", that is quite

the contrary of what had been said by the judge.

Potts 16 24/6/92

And then at page 123, commencing at about line 33

and going to the bottom of the page, His Honour

said the:

Judge has not found thereby that the bank

officer assumed a responsibility to take care

to prevent loss to the respondents -

and so on. Now, Your Honours, I would refer

Your Honours to the whole of that passage. But,

Your Honours, those findings seem very difficult to

tie in with what had been said by the primary judge

at page 60, lines 22 to 65, and page 63, line 39

through to page 64 line 45 to which I have already

referred.

Your Honours, and in particular the passage at

page 69 lines 30 to 35 where the judge said that

Mr Potts:

at the very most ..... had only a very general

knowledge of the way in which offshore

currency loans operated.

It seems entirely inconsistent with what was said

by Mr Justice de Jersey at page 121 in the passage

at about lines 54 to 56. Your Honours, the two, we

would submit, just could not stand together.

GAUDRON J: Is not one of the difficulties, if they are not

standing together though, that it is not precisely

clear what it is that the Bank should have done on

the findings?

MR JACKSON:  Your Honour, perhaps it might have been

expressed differently but it is clear, in our

submission, and what it is is that it should have

been conveyed to Mr Potts that the figures that had

been given to him were not the figures which

represented a true assessment of the potential

risks of variation in the currency.

GAUDRON J: But how can that stand with a finding that it

was not negligent to make the prediction that was

made?

MR JACKSON:  Your Honour, because a different aspect of the matter is being looked at. Now, Your Honour, if

one thought to be an expert in these things had

said that the prospect of there being a decline in

the relative value of the two currencies was one

that was unlikely to have an effect greater than a

10 per cent effect over the next two years, then

the person saying that might well not be negligent

in expressing that view because it might be a view

(a), honestly, (b), reasonably held. But if one is

looking at it from the point of view of the

Potts 17 24/6/92

recipient of the information and if that is

conveyed not merely as being something which is the

person's own view but as something that is to be

acted on, one is entitled to know the degree of

likelihood of that opinion being proved to be

incorrect. But as Your Honour will recall that

what was said at the time - - -

GAUDRON J: But there really is something circular about

this, Mr Jackson. You say, "Look, it is my honest

and reasonable belief that it will not move by a

margin as much as 10 per cent", you then go and

say, "But the probabilities of that being correct
are 40 per cent, 50 per cent, 60 per cent", the

findings just do not, to my mind, march together.

MR JACKSON:  Your Honour, it goes a little beyond that.

What His Honour was really saying was that a person

might have held that view and that view might have

been one that could have been reasonably held. But

Your Honours will recall that His Honour had

accepted that what had been said was not just that,

it was also said - and this appears at page 41

about line 40 - that "it would be unusual and

excessive for" it to go beyond that. And,

Your Honour, in the context of that being said,

together with the limited information which was

given about the alterations in the currency risks,

and was in a situation where the possibility of

that being incorrect in the light of what had been

said was not sufficient adverted to because the

person to whom the information was given was

entitled to have, we would submit, given to them

information which would affect the correctness of

the proposition that it would be unusual or

excessive for that to change - for that to be

different.

Your Honours, could I go then to

Mr Justice Dowsett's reasons for judgment. They

Your Honours will see that His Honour then proceeds commence relevantly at page 128 about line 40, and	to discuss exhibits 6 and 7. That goes through the
remainder of that page, and then Your Honours will
see at about line 17 on the next page he refers to
the observation of the primary judge that exhibit 7
had been "converted into a benchmark". His Honour
said he understood this:

to mean that the range ..... was accepted by

Mr Potts as a starting point against which

future fluctuations ..... could be measured.

Your Honours, His Honour in the context in which it

appears at first instance seems really to have been

referring to it as typical rather than as a

Potts 18 24/6/92

starting point, but perhaps that does not matter in

the end.

Your Honours, at page 130 when one comes to

the ultimate discussion, in the passage which

appears between lines 24 and 52, Your Honours will

see at about line 30 that he speaks of the very

serious decline which had occurred and says:

This was outside the period dealt with in

ex. 7, but was reflected in ex 6 as part of

the general decline since December.

Now, Your Honours, that is only true in the sense

that the overall rate appears in that document in

covering the period, but it does not take account
of the fact that it does not reflect at all the

volatility of the currency during that period,

indeed, creates rather the opposite impression. The
second thing is that does not record the fact that

there had been a peak as well as the trough.

Now, Your Honours, at lines 45 to 52 on that

page, what His Honour says:

it is clear that he knew that there had been a

substantial, long-term depreciation since

December, 1971 -

but Your Honours that really was not very much to

the point because it was a question of the rate at

which that might occur, and he also could see from

it that there was a decline which appeared to be

consistent with exhibit 7.

Now, Your Honours, His Honour's discussion at

the bottom of that page through to page 152,

about line 12, we would submit, rather misses, with

respect, the point which had been made by the

primary judge, namely, that the - - -

BRENNAN J: Did you say 152?
MR JACKSON:	I am sorry, Your Honour, 132. Your Honour, I

would not do that to Your Honour - through to

page 132 about line 12, we would submit, rather

misses the point which had been made by the primary

judge, namely, that the failure to advert to the

prior volatility was material to the risk. And,

Your Honours, His Honour referred to the fact, at

the top of page 132, that it starkly demonstrated
the risks of dealing in the currency market but,

Your Honours, that seems to give no weight to the acceptance at page 66 of the conversation which was

at page 41.

Potts 19 24/6/92

Now, Your Honours, that seems, we would

submit, to be quite inconsistent with the finding

as to that conversation and as to its effect. And,

Your Honours, the finding which appears also at the

top of page 133, the sentence commencing in the

second line of that page:

In any event, to the extent that there was

extrinsic information likely to cause doubts

about the opinion, it was sufficiently

communicated -

et cetera, sits very oddly, we would submit, with

the findings which appear at page 66 line 20

through to page 67 line 14, and also the finding at

page 68 lines 29 to 33.

BRENNAN J: But, Mr Jackson, to come to any conclusion

different from that expressed by Justice Dowsett

would require this Court to examine the evidence

for the purpose of determining whether it is right

to say that, particularly, exhibit 6 which takes

its figures back to December 1971, did sufficiently

communicate the relevant information. Now, is that

not what this Court would be faced with if we were

to grant special leave?

MR JACKSON:  Not really, Your Honour. All that exhibit 6

shows is a line which shows the rates after

devaluation and what has happened over that period,

it does not go into any detail about it at all.

BRENNAN J:  I do not know, frankly, what it shows. I do not

understand it properly.

MR JACKSON:  I am sorry, Your Honour, but the only parts to

which His Honour was referring, Mr Justice Dowsett,

is really the last two columns and Your Honour will

see there, if Your Honour follows through the line

"Japan" across one sees - - -

BRENNAN J: Yes, "-13.92" and "-31.01"?

MR JACKSON:  Yes. Your Honour all that says is what decline

there has been in that overall period since then

which works out at two-and-a-half per cent per

annum, if one averages it out, and a similar figure

for the next column, three per cent. That is all

the document showed. Now, it is in relation to

that that His Honour is saying - there was no other

information apart from those two documents, 6 and

7, the pieces of paper, but that is the extrinsic

information to which he refers, and he says it was sufficiently communicated in exhibits 6 and 7 and, Your Honours, that really seems to be entirely

contrary to what the primary judge said.

Potts 20 24/6/92

BRENNAN J:  What other evidence was there of what

information was available at this time?

MR JACKSON:  Your Honour, one sees the exhibit O, for

example, is a document made up from information

freely available at that time.

BRENNAN J: But prepared specifically for the case?

MR JACKSON:  Of course, Your Honour, but prepared from

historical information.

BRENNAN J: Would we not, in order to come to a question of

whether Justice Dowsett was justified in what he

said or not, have to go through the whole of the

evidence examining the material that was available

in order to determine yea or nay the proposition

for which you are contending?

MR JACKSON:  Your Honour, could I say two things: first,

our submission would be no. However, assuming that

be incorrect, if one did go to the evidence, there

is really very little evidence one would have to go

to on the point. And, Your Honour, if it be that

there is a case where, in order to resolve the

question, the Court does need to go to some

evidence that really should not be a factor which

is decisive against - - -

BRENNAN J:  No, it is not decisive but what is the special

leave ground?

MR JACKSON:  Your Honour, the special leave ground is that

the way in which the matter was dealt with by the findings made by the primary judge in relation to a

number of important matters. Now, Your Honour, I

have gone to those findings and the point I was

seeking to make about, for example, what is at the

top of page 33 is that it does appear to be quite

contrary to the findings of the judge on the

critical aspect of knowledge and what was conveyed

to Mr Potts.

Your Honour, what I was seeking to say was

that that passage does not seem to be consistent

with - and I gave Your Honours the reference to two

passages I think. And, Your Honour, the second

thing I was going to say was that if one looks at

the passage which appears at page 133, commencing

at about line 20 and going through to page 134

about line 42, the observations made there do not,

we would submit, sit at all well with the findings

made by the primary judge in three passages which

are at page 63 lines 39 to 61, at page 67 lines 30

to 40, and at page 69 lines 30 to 35.

Potts 21 24/6/92

Now, Your Honours, on this aspect of the case

Mr Justice de Jersey agreed with

Mr Justice Dowsett. That appears at page 121.

Your Honours, our submission is that the manner in

which the case was dealt with in the Full Court the

applicants lost the benefit of the judgment in

circumstances where there was no true basis for

there doing so, and the majority did not, although
the dissenting judge did, respect the primary

judge's findings. Your Honours that is the case so

far as liability is concerned.

If the Court were minded to grant special

leave a question arises also in relation to damages

and we would seek to have the issue of damages on

which there was a reduction in damages on a

question of causation in the Full Court also come

to the Court. Your Honours, may I indicate very

briefly the nature of that. It is this, that the

primary judge had allowed damages in respect of a
period beyond the original term of the loan, which

would have come to an end in 1984, and he allowed

them to 12 April 1985. The original loan had been

extended for a period of some three years and the

events leading to that I would need· to take

Your Honours to for just a moment, at page 71

line 25 going through to page 72 line 35, and

Your Honours will see that the loan was extended in

consequence of the conversation with another

officer of the Bank.

Now, Your Honours, it was submitted that the

loss during the extended period had not been caused

by the negligence, and the issue was dealt with by

the primary judge at page 80 line 10, at the top of

the .page going through to page 81 line 25. He

held - and, Your Honour, we would submit, not

terribly surprisingly - that something that was

reasonably foreseeable was that there had to be an

extension of the loan.	Now, it is true to say that
the judge uses the term "foreseeability" but it	seems apparent enough, we would submit, that in
reality he was dealing with foreseeability and
causation.

The Full Court allowed an appeal on that

aspect of the damages. Your Honours, I should say that His Honour did not give damages for the whole

period of the renewed loan, he gave it to April

1985 at a time when he expressed the view events

had occurred which left the option open to bring it

to an end, and that should have been taken.

The Full Court allowed an appeal on this

aspect, at page 113 line 15 through to page -

Your Honours, the discussion really goes through to

page 116. What is said was that it was an element

Potts 22 24/6/92

of free choice but, Your Honours, essentially, the

case was won, we would submit, where the primary

judge was right in taking the view that once one
got into difficulties because of the negligence it

was hardly surprising that advice given by the same Bank that one of the possible ways was to refinance with the Bank - rollover in effect - was a way

which might result in there being no or a lesser

loss.

Your Honours, could I just say that if an

appeal were to be admitted on liability then, we

would submit, the issue of damages should be

considered because the issue is one which is likely

to arise and has arisen in other cases concerning

this type of transaction.	Your Honours, those are
our submissions.

BRENNAN J:  The Court will adjourn briefly to consider what

course it should take.

AT 5.09 PM SHORT ADJOURNMENT

UPON RESUMING AT 5.13 PM:

BRENNAN J:  We need not trouble you, Mr Chesterman.

There are two factors militating against the

grant of special leave in this case. First, the

success of an appeal to this Court would depend

upon this Court's assessment of the facts and it

would be undesirable to grant special leave to

invite a reassessment of facts that have been

variously assessed in the courts below.

Secondly, the findings of the primary judge

relied on by the applicants fall short of

identifying with particularity the advice which

ought to have been given and which, if given, might

reasonably have been expected to induce the
applicants to have refrained from applying for the
foreign currency loan. For these reasons we would

refuse special leave to appeal. Special leave to

appeal is refused accordingly.

MR CHESTERMAN:  Your Honour, I would ask for the costs of

the application?

Potts 23 24/6/92

MR JACKSON: There is nothing I can say about that,

Your Honour.

BRENNAN J: Refused with costs.

AT 5.14 PM THE MATTER WAS ADJOURNED SINE DIE

Potts 24 24/6/92