PRD Realty Pty Ltd & Anor v Expectation Pty Ltd

[2005] HCATrans 164

[2005] HCATrans 164

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Brisbane  No B47 of 2004

B e t w e e n -

PRD REALTY PTY LTD

First Applicant

GORDON DOUGLAS

Second Applicant

and

EXPECTATION PTY LTD

Respondent

Application for special leave to appeal

KIRBY J
HAYNE J

TRANSCRIPT OF PROCEEDINGS

AT BRISBANE ON MONDAY, 21 MARCH 2005, AT 10.59 AM

Copyright in the High Court of Australia

MR P.D.T. APPLEGARTH, SC:   May it please the Court, I appear with my learned friend, MR A.M. POMERENKE, for the applicants.  (instructed by Thynne & Macartney)

MR W. SOFRONOFF, QC:   May it please the Court, I appear with my learned friend, MR M.J. BURNS, for the respondent.  (instructed by Clewett, Corser & Drummond)

KIRBY J:   Yes, thank you. 

MR APPLEGARTH:   Your Honours, the principle at stake in this case is that damages are assessed for a loss actually suffered, and that this requires account to be taken of the financial benefits gained from the acquisition of property that is acquired as a contravention of the Act.

HAYNE J:   The principle at stake here is, what is the factual base on which these principles are to be applied, is it not, Mr Applegarth?

MR APPLEGARTH:   It is, your Honour.  If I can turn then immediately to that point ‑ ‑ ‑

HAYNE J:   How do we know what that factual base is when the Full Court said there has to be a retrial?

MR APPLEGARTH:   Well, the Full Court said that, but, with respect to the Full Court, the Full Court did not, in our submission, pay regard to the fact that the respondent at trial, when faced with arguments based upon Flemington Properties and Manwelland, chanced its forensic arm by not contesting the submissions and seeking findings of fact.  So we say to the argument advanced by the respondent that this matter is ripe for determination, that there were ‑ ‑ ‑

KIRBY J:   Yes, but, as Justice Hayne has said, until you get the fact‑finding accurately and properly made, the application of the legal principles is impossible.  That was what the Full Court said.  By reason of the gross delay in the giving of the reasons and the unsatisfactory character of the reasons one is given, that just had not been properly done.

MR APPLEGARTH:   Your Honour, we are not here to defend those aspects, but what we are here to defend is the argument that there were no findings of fact, when a party did not seek findings of fact.  So we submit that, far from the resolution of these important questions of law being diverted by an inquiry by the court into the facts, the essential facts are these.  The trial judge found, based upon exhibits and submissions and calculations that the respondents point to in their submissions, that there was a net income, after payment of borrowing costs and expenses, of $4 million.

KIRBY J:   But he found that after a year and a half’s delay, which the Full Court said flawed the decisions that he reached on the facts.

MR APPLEGARTH:   Your Honour, there was no suggestion, on the appeal to the Full Court or now, that that matter, the $4 million, was controversial.  His Honour was not impressed with an argument that it was a different figure.  The only evidence was that after account was taken of expenses incurred, borrowing costs, the respondent had a net income during the period of its ownership of $3,789,872, to be precise.  The respondent, with respect, ought gain no advantage from the fact that rather than contend that the application of the principles which were fairly and squarely raised before the trial judge ‑ ‑ ‑

KIRBY J:   No one doubts that the principles were fairly and squarely raised.  The question is whether they were fairly and squarely resolved.

MR APPLEGARTH:   Your Honour, we start with this proposition, that there were findings of a net income of about $4 million.

KIRBY J:   That is true, but the Full Court has said those findings are flawed.  How could this Court – we would then have the matter coming up to us and we would effectively become a trial court, because the trial has not been properly performed.

MR APPLEGARTH:   No, with respect, the Full Court did not say that those findings were flawed, because those findings were never in contest on the appeal.  There was no contest about what the evidence was at trial.  Submissions were put forward based upon the exhibits ‑ ‑ ‑

HAYNE J:   But this is a submission that the retrial is irrelevant.  Now, is the retrial irrelevant?  Are the facts which the Full Court undid irrelevant?

MR APPLEGARTH:   No, because the Full Court accepted that if the applicants were successful on their “no loss” submission on either ground, there would be no retrial.  So we have eschewed attempting to re‑argue findings of fact on questions of liability, about which ‑ ‑ ‑

HAYNE J:   Could I put it to you as bluntly as I can, so that you can answer it.  The Full Court says, “The fact finding went awry.  There has to be a retrial”.  Without those facts being re‑found, how can we usefully get into any discussion of principle or get to any answer?

MR APPLEGARTH:   Because, your Honour, one starts with what facts was the trial judge asked to find?  And the trial judge was not asked to find that upon the application of the principles which we have identified, Flemington Properties and Manwelland, the respondent suffered a loss.

KIRBY J:   It is a little bit like, though, is it not, what was raised in the first special leave application today, in Justice McHugh’s elaboration.  In effect, what the Full Court said was that there was never a trial, a proper trial, according to law, and that is what the respondent says before us.

MR APPLEGARTH:   On the issues that were before the trial judge, and we are not here arguing that, your Honour.  But one has to go back to what issues were argued before the trial judge?  What issues was the trial judge asked to find?

KIRBY J:   Well, it was an awful long trial if there was nothing in issue.

MR APPLEGARTH:   Your Honour, we are facing the harsh burden of a retrial which, if we are right on the point of law, and if we can quite simply say that the point of principle is ripe for consideration, because it is not distracted by findings of fact which the respondent never sought to find, the matter proceeds on the basis that there are uncontested findings of a net benefit of $4 million during the ownership and exiting with $1 million of proceeds.  The court proceeds on the fact that no further findings were sought.  The court proceeds and can deal with the point of principle rather simply on the basis that it has never been contended by the respondent that the application of those principles leads to a finding of loss.

Your Honour, we accept that in ordinary circumstances the court might prefer a different vehicle where there were findings of fact on all matters, but, with respect, in the interest of the administration of justice, the applicant should not be denied their opportunity to avoid the oppression of a retrial because the respondent took the forensic choice of not seeking findings of fact on these matters and took the forensic choice, or the punt which paid off, that his Honour would simply adopt the Potts v Miller approach.

So, in our submission, it is not simply the fact that these important points of principle require resolution.  It is that in the case of the applicants we face the harsh burden on going back to a retrial, where the law is in a such a state of disarray.  The case, or the grant of special leave, on the grounds of administration of justice can be simply put.  Will the judge at any new trial be constrained by and bound by the Full Court’s view that Manwelland and Flemington Properties are wrong and that the approach to compensation contended for by the applicants is contrary to High Court authority?

So we face the burden of a lengthy retrial.  If the trial judge considers himself bound by the view taken by the Full Court, we face that long retrial.  A judge finding himself bound by the statements by the Full Federal Court ‑ ‑ ‑

KIRBY J:   Well, I can understand fully and absolutely the complaint of your client and the endeavour that you are now engaged in, but, in my experience, normally this Court would not engage in a consideration of important questions of law on such an infirm foundation, because we have a case where the fact‑finding has simply gone awry.

MR APPLEGARTH:   But, your Honour, the infirm foundation is, with respect, not an infirm foundation.  The foundation is a simple one, that points of law were raised by the applicant at trial.  The respondent did not seek to meet those.  The factual basis which underpinned those submissions was put forward and not contested ‑ ‑ ‑

KIRBY J:   Yes, but, as Justice Hayne pointed out to you at the very beginning, just assume the matter was brought up and the Court then determined the legal point you want to resolve.  The Court could not carry that forward into judgment, because of the unsatisfactory way in which the matter has been tried and determined.

MR APPLEGARTH:   With respect, your Honour, the Court could and should, because litigants should be bound by the manner in which they conduct cases.  Whatever may be said about the trial judge, his delay and the like, the respondent chanced its forensic arm on not seeking findings of fact from the trial judge concerning these matters.  It would be contrary to the administration of justice for us now to be shut out.  Instead, the matter went forward on a simple basis,.

Your Honour, we see this as a suitable vehicle because the facts are, in short compass, the findings that his Honour made, that we have identified, and the fact that there was no attempt on appeal to challenge those findings.  In our submission, the point is an extremely important one, particularly in the light of the obiter in Astonland where the Court said that having regard to the benefits left in the plaintiff’s hands had some merits, so that the plaintiff was not under‑compensated for its actual loss.  We submit that, likewise, that approach commends itself and regard ought be had to the benefits found to have been left in the respondent’s hands in order to determine whether it suffered an actual loss.

The Full Court’s decision is that regard can only be had to benefits left in the plaintiff’s hands when the plaintiff asks for this to be done, and that appears in the application book at page 168 at paragraph 258, line 50, and also at line 15, where their Honours – going to the first passage, at about line 14, said in relation to Manwelland:

There is a substantial question as to whether that is correct in principle where the purchaser does not elect to claim consequential loss –

they use the language of election, and, on line 50, looking forward to the retrial, our ability to raise this was said to be dependent upon whether Expectation “put an alternative case for damages”.

With respect, the principle ought not depend upon whether the plaintiff asks for it.  The overarching principle of compensation and regard to benefits actually received requires consideration, whether or not the plaintiff asks for it.  In fact, in a case like this where the plaintiff clearly does not ask for it, there is every reason why the principle ought be engaged. 

In our submission, these are important questions, and they are questions which are more uncertain in the light of the obiter in Astonland.  Although the Court might, in different circumstances, have preferred a vehicle which had much fact‑finding, this is the vehicle we find ourselves in, and it is the vehicle we find ourselves in ‑ ‑ ‑

KIRBY J:   It is not “much” fact‑finding.  It is satisfactory fact‑finding.

MR APPLEGARTH:   Your Honour, I do not mean to be repeating myself, but there was no criticism of the trial judge’s finding in relation to this ‑ ‑ ‑

KIRBY J:   Well, that is not how I read the Full Court.  They said that the vice inherent in a one and a half year delay in giving reasons is that you do not accurately and in a timely manner address the contests, and questions of impressions of witnesses and resolution of trial contests – and this was a long trial – cannot be properly made.

MR APPLEGARTH:   We accept that, your Honour, but the Full Court, with respect, made an exception and did it at the start of its substantive reasons, by saying that if we were right on the “no loss” submission then that would be a complete answer.  Our “no loss” submission on the Manwelland and Flemington Properties point did not depend upon assessments of the demeanour of witnesses.  It depended upon the fact that at trial we put forward comprehensive submissions on law and on the facts based on evidence.  Our learned friends, in their submissions, point out what the exhibits were.  We put forward these.  We seek findings – there are essential findings – of a $4 million net benefit.  The onus fell fairly and squarely on the respondent to say, “Well, one can offset against that net benefit other factors”.  It did not choose to do so. 

KIRBY J:   But the truth of the matter is, in the end, you would be asking the High Court of Australia to make the fact findings.

MR APPLEGARTH:   No, your Honour.  The only facts – we would not, indeed.  The only ‑ ‑ ‑

KIRBY J:   Well, you say it is an easy job, because of the way the respondent conducted the case, but essentially that is what you would be asking us to do.  We would be making the fact finding.

MR APPLEGARTH:   Your Honour, the only facts that the Court would need to refer to is the fact that his Honour made the findings that we point to about the net benefit of $4 million of income and that these other matters, that might have been sought to lead to the result on the respondent’s part that the application of Manwelland and Flemington Properties led to a loss, were not sought.  So it would be, with respect, unnecessary and indeed wrong for the Court to go back into matters in respect of which the respondent never sought to ventilate arguments in response to the Manwelland and Flemington Properties argument.

There was also a finding of fact, in terms of opportunity cost, that the respondent did not succeed in its alternative case of saying that there was an alternative investment which would have yielded it a greater benefit than the benefits it obtained from the acquisition of this centre.  So that is another finding of fact, which was not contested on appeal.  Just about everything else was contested on appeal, as your Honours see from the appeal to the Full Federal Court, but that finding was not contested.  So there are essential facts, but the biggest fact is the fact that the trial judge was not asked to make findings of fact.  Your Honours, we see the point of principle as an important one, and that the Full Court ‑ ‑ ‑

KIRBY J:   Yes, well, you have said that three times now ‑ ‑ ‑

MR APPLEGARTH:   Well, your Honour, may we move then briefly to the second aspect of the appeal, that is, the adequacy of the trial judge’s reasons on the valuation issue.  His Honour applied the Potts v Miller rule.  There were two critical elements, the net income of the centre and the capitalisation rate.  The first aspect there was no contest about.  As to the second element, one expert valuer adopted 11 per cent, the respondent’s expert said 13 per cent.  The judge preferred the first expert’s figure because, as he said, it reflected the features of the centre and was supported by contemporary valuations.  The judge’s reasons were exposed.  They were adequate.

In our submission, the authorities are to the effect that the trial judge does not need to apply the same degree of expertise as that displayed by an expert witness.  He should simply provide an explanation as to why he has accepted the evidence of one over the other.  We have given your Honours St Helens Farm, where Justice Mason said that:

valuation of property by a court has many of the characteristics of a discretionary judgment –

and we have given your Honours Tatmar Pastoral, where Justice Hutley said: 

The choice between conflicting experts may have to be a matter of judgment, not of detailed reasoning. 

And in the same case Justice Mahoney said: 

Nor is it necessary for a judge who is exercising a discretionary judgment to detail each factor which he has found to be relevant or irrelevant –

and the reasons need not be elaborate.  We have given your Honours other passages, which are to the effect that it is sufficient if the reasons exposed are the essential reasons for decision.

Here, the trial judge’s reasons, with all of the criticisms which can be properly made of them, exposed his reasons on a matter which, with respect, was not rocket science.  It was the appropriate capitalisation rate for a centre having these features.  His Honour had the advantage of having the experts cross‑examined and the reasons were adequate.  In our submission, the capitalisation rate adopted by them was correctly identified by the judge as having reflected the features of the centre, referred to in paragraph 81, and capitalisation rates for similar centres.

So, in our submission, the administration of justice in this case should not require the applicants and their witnesses to be burdened by a new trial through no fault of their own, when the application of the principles in Manwelland and Flemington Properties leads to a conclusion of no loss, and that the application of the rule in Potts v Miller led to a conclusion of no loss on the basis of reasons which were adequate.  On either basis, the respondent suffered no loss, and it would be contrary to the administration of justice for the applicants to be burdened by a new trial, particularly because these issues are ripe for consideration, for the reasons we have given. 

It is very important, in terms of principle, that this Court, as the final appellate court, resolve differences of opinion between different courts and within the Federal Court as to the state of this much‑litigated field.  We regret that, unless that is done, we face the real hazard of a new trial at which the new trial miscarries, because we are shut out of arguing a case of no loss based upon the post ‑ ‑ ‑

KIRBY J:   Well, you can reserve the point in a satisfactory trial.  I realise your complaint about that, but you are not shut out eventually.  You would be coming back here in two years’ time to argue the matter in a satisfactory vehicle.

MR APPLEGARTH:   Well, your Honour, we may well be shut out, because the trial judge may say, “This principle has been determined by a Full Federal Court, which says that Potts v Miller ‑ ‑ ‑

KIRBY J:   We understand that, but, so long as you reserve the point, you can take the matter along the line and bring it back here on a satisfactory case. 

MR APPLEGARTH:   But we may not even be permitted to put in the factual material which underpins our arguments, if the trial judge takes a particular view that these matters are not to go into evidence. 

KIRBY J:   Yes, thank you.

MR APPLEGARTH:   Your Honour, that would be an extremely harsh result, and we may find ourselves here, as your Honour says, in a few years’ time with another case, where we are met with the argument that there were not findings by the trial judge.  In our submission, the matter ought to be resolved for the benefit of the applicants and for the benefit of those who advise and trial judges throughout the country in this much‑litigated area.

KIRBY J:   Yes, you have said all this.  Thank you.  Well, Mr Sofronoff, this is a pretty sorry sort of a situation.  Can it be rescued in the way that Mr Applegarth suggests?  Is it simply a matter of the application of the law to the questions that you did not argue, and therefore that this Court could rescue the matter?

MR SOFRONOFF:   It was argued below, your Honour, at the trial.  But could I show your Honours the only passage in which the trial judge deals with the contention, and what appears to be the passage relied upon as containing the findings of the trial judge.  It is at page 26 of the application book, paragraph 86.

KIRBY J:   Yes.

MR SOFRONOFF:   The second sentence beginning with the words, “I do not accept” – if your Honours read that you will see that what he is doing is setting out the contention being made on behalf of the then respondent, not making any findings.

KIRBY J:   Yes.

MR SOFRONOFF:   And then the Full Court, at page 165 paragraph 251, declined to embark upon the task that the applicant today invites this Court to embark upon, to make findings of fact on those issues.  The course of this issue is summarised in our outline of submissions at page 217.

KIRBY J:   Well, they say:

It is quite unsatisfactory to pick through pieces of voluminous evidence and reconstruct a complex picture.

MR SOFRONOFF:   Yes, and ‑ ‑ ‑

KIRBY J:   Which is what I was putting to Mr Applegarth.

MR SOFRONOFF:   Perhaps one of the reasons the issue has developed in this way ‑ ‑ ‑

KIRBY J:   Let me get this clear.  Do you say that, as a result of that, there is no binding decision of the Full Court that would put Mr Applegarth’s client out of court at trial to raise the point that he has been pressing upon us for resolution by this Court?

MR SOFRONOFF:   Your Honour, I hesitate to say something that might bind ‑ ‑ ‑

KIRBY J:   Well, I know you would hesitate, but you may ‑ ‑ ‑

HAYNE J:   That is why you are asked.

MR SOFRONOFF:   Well, your Honour, it is obiter, as their Honours declined to ‑ ‑ ‑

KIRBY J:   It does not look as though their Honours have finally determined the point.

MR SOFRONOFF:   No.  Their Honours ‑ ‑ ‑

KIRBY J:   And, therefore, Mr Applegarth’s client would not be put out of court in raising the point in the retrial.  Do you accept that?

MR SOFRONOFF:   I accept that.

KIRBY J:   Yes, very well.  All right, thank you.  Yes, Mr Applegarth.

MR APPLEGARTH:   Your Honour, our learned friend points to the passage from the Full Court’s judgment about picking through evidence, but, with respect, the Full Court’s view that it had to pick through evidence betrays a misconception on its part, because this is a case, like Astonland, where there is no supervening event.  The only evidence they have to pick through is the income which the respondent intended the property should generate, and there are sufficient findings of fact, in our submission.  We are not particularly heartened by our learned friend’s proposition about what we may or may not be able to do, because the trial judge may take the firm view that the Full Court has ruled on the question of law and said that our arguments are contrary to principle ‑ ‑ ‑

HAYNE J:   You seem to be arguing yourself into the contrary position adopted by Mr Sofronoff, Mr Applegarth.  If you want to argue yourself into that position, that is a matter for you ‑ ‑ ‑

MR APPLEGARTH:   No, your Honour ‑ ‑ ‑

HAYNE J:     ‑ ‑ ‑ but at the moment Mr Sofronoff says the point is obiter.

MR APPLEGARTH:   Well, your Honour, we hope that the trial judge will take the same view.  All we can say is that we are at a hazard that his Honour will not.

KIRBY J:   The Full Court of the Federal Court of Australia allowed an appeal by the respondent against a judgment entered by a single judge of the court.  It did so on the basis that the primary judge’s reasoning in respect of a claim against the respondent pursuant to the Trade Practices Act 1974 (Cth) section 82 and its State counterpart was inadequate. The Full Court found that the delay in the delivery of reasons by the primary judge was grossly inordinate. That delay was one and a half years between final submissions and judgment. The only way to repair the unsatisfactory outcome, in the view of the Full Court, was to order retrial of the action which is what the Full Court did.

Understandably, the applicants feel aggrieved at having to face the delay, inconvenience and costs of a retrial.  They have sought to persuade us that special leave to appeal should be granted to permit them to endeavour to persuade this Court that, notwithstanding the imperfections of the first trial, the law compelled the primary judge to find that the respondent had suffered no loss.

We are unconvinced that the Full Court erred in its order and reasons.  It was accepted by counsel for the respondent that the applicant could, at the retrial, raise the point of law which the applicant has pressed on us.  

Special leave is refused.  It must be refused with costs.

AT 11.26 AM THE MATTER WAS CONCLUDED