Ramsay & Anor v BigTinCan Ltd

[2015] HCATrans 59

[2015] HCATrans 059

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Sydney  No S268 of 2014

B e t w e e n -

DAVID RAMSAY

First Applicant

ROEL POLLERS

Second Applicant

and

BIGTINCAN LTD

Respondent

Application for special leave to appeal

FRENCH CJ
NETTLE J

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON FRIDAY, 13 MARCH 2015, AT 11.46 AM

Copyright in the High Court of Australia

MR G. O’L. REYNOLDS SC:   If the Court pleases, I appear for the applicant with my learned friend, MR S.M. NIXON.  (instructed by Barraket Stanton Lawyers)

MR A.P. CHESHIRE:   Your Honour, I appear for the respondent.  (instructed by McLachlan Thorpe Partners)

MR REYNOLDS:   Thank you, your Honour.  If the Court pleases, I submit that special leave is warranted in this case for a number of reasons.  Firstly, there is the issue of the principles of causation, so far as they apply to equitable compensation which, we submit, raises a point of principle and an important principle.

The general issue, as your Honours appreciate, is what are the applicable tests for causation in relation to the remedy of equitable compensation?  More specifically, the issue will arise, if leave is granted, as to whether this Court should adopt what is generally called the Brickenden test, that is, that if breach is proved then the plaintiff does not need to prove causation or, perhaps more accurately, the legal onus passes to the defendant.
Or, alternatively, some other test of causation which is more favourable to plaintiffs than the usual general law principles. 

Now, the various alternatives are set out most clearly in a passage of Justice Kirby’s in Maguire v Makaronis, and I need to hand to your Honours, if I may, a small bundle which includes Maguire v Makaronis at the top, or at least the relevant pages, and the pages I would like to take your Honours to are in Maguire at pages 490 to 491.  There, after referring to Brickenden in the middle of page 490, Justice Kirby sets out very conveniently a sort of prospective menu of alternative tests.

The first in paragraph (a), at the bottom of page 490, is what he calls an evidentiary principle derived from some Canadian decisions where if a breach of duty is proved, then a court of equity will presume causation.  Another test your Honours will be familiar with ‑ I will not mention paragraph (b) ‑ is in paragraph (c), which is generally known as the Re Dawson test, and towards the bottom of the page, about five lines up, there the inquiry:

would appear to be whether the loss would have happened if there had been no breach –

commonly called the “but for” test.  One other possibility, as mentioned over the page, at the top of page 492, where Sir Anthony Mason is quoted, writing extracurially, as suggesting:

that a fiduciary will not be liable for losses that do not flow from the breach.

So the possibilities, we submit, are laid out there rather neatly and that is the issue of principle that we submit will arise here.  Can I indicate why that is?  In this case at paragraphs 99 to 100 of his judgment, the primary judge dealt with this issue; this is page 38 of the application book, at about line 40.  He said:

There are two possible ways of reaching that conclusion –

favourable to the plaintiff on causation.  One way, he says, is to follow the Brickenden principle, namely, that causation “is not necessary”, as he puts it at line 42, and then at paragraph 100, he says:

But even if the approach in Brickenden is no longer good law, in my opinion, this is a case where –

and I paraphrase, one can infer loss from the breach, that is, from Mr Ramsay’s conduct; that is page 39, line 1.  Now, at lines approximately 2, 10, 28 and 33, his Honour repeatedly uses the expression “inference” and refers there to various cases which talk about presumptions.  So we submit that it is clear, particularly when one looks at the last words of that paragraph, that what his Honour is here doing is adopting the approach of a presumption or evidential onus ‑ ‑ ‑

FRENCH CJ:    Why should one ‑ I am sorry, I do not quite understand that ‑ why should one take from a statement of inference that he is applying a presumption?

MR REYNOLDS:   Well, these cases here are about presumptions.  If we go back to what Justice Kirby says, he talks about it being an evidentiary principle.  For example, Commonwealth v Amann at line 22 on page 39, if you go to the text of it, it says it is a case about presumptions.  Gould v Vaggelas at line 12, former Justice Heydon refers to that case in his book on evidence as a case about presumptions.  That is what we are talking about here, where we talk about inferences being drawn.  That is, an evidential onus passes to the defendant to disprove causation once breach is proved.  Now, of course, this is at a lower level than Brickenden.  Brickenden is more favourable to a plaintiff because ‑ ‑ ‑

FRENCH CJ:   But the inference must be logically open, must it not?

MR REYNOLDS:   Yes, but it is only said here in this paragraph to follow from one fact, namely, from the fact of breach.  That is clear from the first line, and then the second and third last lines of that paragraph, and he says at line 11:

the court will infer in the absence of other evidence –

or at line 32 ‑

for the reasons I have given in the absence of any other evidence it is appropriate to infer –

that means, in the absence of any other evidence other than, going to line 1, “Mr Ramsay’s conduct”, that is the breach that we are talking about here.  So that, I submit, is very clearly an adoption of, you can call it a presumption principle, you can call it an evidentiary principle, or an inference principle, that once breach is proved, one way or another, an evidential onus passes to the defendant to negative the case on causation.

Now, the Court of Appeal at paragraph 63, or rather Justice Macfarlan, with whom the others agree, adopts ‑ this is line 2 in that paragraph, paragraphs relevantly 99 to 100.  But I have to say, as a matter of fairness, that his focus at the end of that paragraph is merely on paragraph 100, rather than on paragraph 99.  If your Honours see the last six lines of paragraph 63, this is on page 77, it is clear there that his Honour is adopting the statement of principle by the primary judge at paragraph 100.

Now, that is one possibility.  No doubt, my learned friends will argue on a notice of contention that Brickenden is correct, in which case that makes it easier because then my client would bear a legal onus.  Alternatively, they will support the Court of Appeal and Justice Ball and say that we have an evidential onus but as your Honours see from the menu I laid out at the beginning, we will probably want to rely on what Sir Anthony Mason said or, as a fall‑back, the Re Dawson test.

But this is an issue, I submit, that is of self‑evident importance.  It has been around for a fair while.  It has not been resolved by this Court.  I think Justice Kirby has plumped in favour of the Brickenden test, in this case of Maguire, and Justice McHugh in the case of Bennett referred to at page 491 in a footnote.  He was in favour of Brickenden.  As you will have noticed from our submissions, this is an issue which has split intermediate courts of appeal.  Some are in favour of the principle, others are against it, but however that may be, it is an issue which needs must arise in most cases or many cases on equitable compensation, namely, breach of fiduciary duty, breach of trust et cetera.  It is a topic that has given rise to much judicial discussion and also much academic discussion and we submit ‑ ‑ ‑

FRENCH CJ:   Well, the point of contention here is, I suppose, having regard to what is said in the respondent’s submissions, whether the primary judge’s reasoning, in effect, applied ordinary principles of causation without reliance upon Brickenden.

MR REYNOLDS:   Well, we submit ‑ ‑ ‑

FRENCH CJ:   I mean, that is the point they are making against you.

MR REYNOLDS:   I am grateful for that, your Honour.

FRENCH CJ:   Yes.

MR REYNOLDS:   Can I respond to it directly, and I really covered it to some extent already ‑ ‑ ‑

FRENCH CJ:   You say he is really applying a presumption.

MR REYNOLDS:   Exactly.

FRENCH CJ:   He is not actually making an inference on the basis of evidence, a relationship between what he did and the loss they suffered.

MR REYNOLDS:   No.  This is just saying there was a breach and we will then infer, I interpolate, or presume causation, the consequence of which is that the evidential onus will pass to us, and as I said before, these cases are cases about presumption because when one reads them closely, they are not here ‑ just picking up on what your Honour the Chief Justice just said to me ‑ about some sort of circumstantial evidence principle.  We just go, there is the breach and then an inference may be drawn as a result of that breach of loss.  That is why I am bold enough to submit that this case raises this issue that I am putting to your Honours in a very pure form, a very pure form. 

That is the main point that I wanted to raise, but we do have another, I submit, most substantial point.  It does not raise a point of principle, but it raises a matter, we submit, that goes to a grant of leave in the interests of justice and it is this.  It is the point that we have called the Suttor v Gundowda point in our submissions, and without putting too fine a point on it, we have submitted, and submit again now, that the damages case found by the Court of Appeal not only was not run at first instance but was expressly disclaimed in clear terms by the respondent and yet that is the case which has been found against us by the Court of Appeal.

I will proceed to attempt to demonstrate that briefly in a moment but we submit that there is very clear prejudice as a result to my client.  He could ‑ and this is the test in the cases – he could possibly have led evidence or further evidence to deal with that issue.  He could himself – he is treated by Justice Macfarlan at paragraph 83 of the judgment as being an expert or quasi‑expert ‑ he could himself have given some evidence about this, and they did not put any of this case on damages that the Court of Appeal found to him in cross‑examination.

Now, in that situation, I submit that it is impossible for the respondent to this application to have run that case in the Court of Appeal.  Now, to be fair, my learned friend repeatedly told the Court of Appeal that no such case was open to him.  As your Honours probably appreciate, it was only after the hearing that this possibility of this case was thought of, that is, by their Honours, and they wrote a memorandum asking for submissions.  But my learned friend, as your Honours will see, has another document there which we have headed “Transcripts”, et cetera, and if you go to the numbers at the top right‑hand corner I will use those numbers.  This is in the Court of Appeal, page 1 at about line 30 where my learned friend says:

there was some discussion between myself and Ball J where I think I implicitly or explicitly recognised that it would not be possible for me to show that this company using those funds would have made a profit or that there was some identifiable chance that you could somehow quantify.

Then again over the page at page 2 at about line 35 he says:

I acknowledged in my submission below that I couldn’t establish a real loss of profit that would be anything beyond speculation because of the position of the company as a start‑up company.

At page 3 on the following page at about line 32:

I conceded that I couldn’t show that the losses would be anything of profit other than speculation in a start‑up company such as this, it’s understandable then why his Honour did not go down that route of analysing whether there could have been a profit or not –

Again, at page 5 around lines 35 to 45 – I will not read that out as well.  Well, that is true, his Honour never did deal with this case found by the Court of Appeal because – and this is at page 7 of our transcript references at about line 52 following.  The case that was put was twofold:  one, wasted expenditure, which we can disregard; and secondly, the case found by the primary judge and rejected by the Court of Appeal, namely, a loss of an opportunity of getting pre‑IPO funding.

In addition to that, as I have just said, my learned friend expressly disclaimed this case.  It was never pleaded, there was never any direct evidence of it, it was not put to Mr Ramsay in cross‑examination, it was not the subject of any final submissions and, obviously, as I have said, it did not make its way into the primary judge’s judgment.  In that situation, it was not open to the Court of Appeal to raise this.  It was, to be fair to my friend, not even raised by him in the Court of Appeal initially on a notice of contention or in the initial oral and written submissions.

Justice Macfarlan says at paragraph 72 that the primary judge erred in not upholding that case.  I submit, with respect, it would have been a grievous error for his Honour to have even considered that case.  So far as the statement of claim argument is concerned, as your Honours appreciate, a Suttor v Gundowda point can be put independently of the pleading, that is, even if the case was pleaded.

But we submit that the reasoning in the Court of Appeal, namely, if your Honours go to the third document, the statement of claim – and I promise I will be very brief with this.  If you use the numbers at the top of the page at page 20, the conclusion of the Court of Appeal is that this damages case that they upheld came within paragraph 62, which is a general pleading of damage which refers back to specific matters pleaded in paragraphs 24 to 51.

We submit that in the context of this pleading, it is not open to say that the case found by the Court of Appeal was pleaded.  Why?  Because if one looks briefly at paragraph 63, first line, which refers to the breach at paragraph 24; 64, first line, the breach at 27 to 33; 65, first line, the breach at 35 to 39; 66, the breach at 41; 67, the first line, the breach in 46 to 50 – we need not read the detail there, but there is a very specific enunciation of what the damages case was, referrable back to each of the relevant breaches covered in paragraphs 24 to 51, and sometimes talking about things like losses of opportunity, although I hasten to add there is no suggestion that this case found by the Court of Appeal comes within any of these paragraphs.  So that is the additional ‑ ‑ ‑

FRENCH CJ:   This is all focused on ground – I am just looking at your draft notice of appeal, Mr Reynolds, 110 and 111, ground 11 of the draft notice?

MR REYNOLDS:   Yes.  May I add that I think the grounds have changed?  When my learned friend, Mr Nixon, and I came into the matter we provided a new draft notice of appeal which is appended to the submissions.  I have a copy but ‑ ‑ ‑

FRENCH CJ:   Just a minute, let me just ‑ ‑ ‑

MR REYNOLDS:   It should be at the back of our submissions.

FRENCH CJ:   Are they the amended submissions that were sent to the Court?

MR REYNOLDS:   Yes, the supplementary ones.  I have got a copy.  I can hand up one copy that is spare to your Honours.  I will hand up one copy.  I am sorry about this but, as your Honours appreciate, I have come into the matter very recently.

FRENCH CJ:   Thank you.

MR REYNOLDS:   We should make it clear that in paragraph 7b the words “for equitable compensation” should not appear but, subject to that, I am content to ‑ ‑ ‑

FRENCH CJ:   That has been crossed out on ‑ ‑ ‑

MR REYNOLDS:   That has been crossed out.

FRENCH CJ:   Yes, all right, thank you.

MR REYNOLDS:   There is, of course, another issue about the quantification of damages but in the circumstances I do not propose to address on this application on that, but the point being that this was a speculative loss and that an issue of principle arises following from Sellars about what the test is in determining whether loss has been proved, where you are dealing with a loss of opportunity based on multiple contingencies.  If the Court pleases, those are my submissions.

FRENCH CJ:   Thank you, Mr Reynolds.  Yes, Mr Cheshire.

MR CHESHIRE:   Thank you, your Honours.  May I just check as a preliminary that your Honours have my summary of argument in response to the amended submissions which were filed 10 March?

FRENCH CJ:   I do not seem to have that.

MR CHESHIRE:   Your Honours, I think the Registrar had given directions when Mr Reynolds came into the matter in relation to filing of, as it were ‑ ‑ ‑

FRENCH CJ:   Yes, I saw a supplementary set from Mr Reynolds, I think.

MR CHESHIRE:   Well, your Honour now has my response to it.

FRENCH CJ:   Yes, all right.

MR CHESHIRE:   Your Honours, if start I with the issue of what my learned friend called the Brickenden point – and, your Honour, it is important to recognise it as being described repeatedly both in this Court and below as an argument about Brickenden because, your Honours, whatever may be the uncertainty about the scope of Brickenden in causation for breach of fiduciary duty, not only is this not an inappropriate vehicle, but it simply does not arise and, in my submission, it is an attempt, as it were, to attract the attention of this Court, as it was indeed in the Court of Appeal, by giving it a label of Brickenden.

But, your Honours, it is important to recognise that the trial judge, first of all having approached the matter on the basis of causation under Brickenden, then approached the matter of causation by reference to the evidence and by reference to, in my submission, ordinary general law principles.  Indeed, Justice Macfarlan when describing the approach of the Court of Appeal described it in exactly that way.

His Honour Justice Macfarlan was the only person who referred to Brickenden in the Court of Appeal and the only mention that it gets is in the context of observing that the trial judge applied causation under Brickenden but also applied, in the alternative, general law principles.  So, in my submission, having approached it in that way, and then his Honour continued to uphold the approach of the trial judge on the general law principles, there is simply no scope for Brickenden to arise.

FRENCH CJ:   What do you say to Mr Reynolds’ contentions in relation to paragraph 100, that the approach involves – the use of the word “appropriate” might give some strength to that ‑ ‑ ‑

MR CHESHIRE:   Your Honour, to deal with it in this way, I accept that it appears to put, the submission against me, on the basis that there is some form of inference or reversing of the onus of proof.

FRENCH CJ:   Well, the inference is all right; it is the question of what you base it on, whether it is a presumption of some kind or ‑ ‑ ‑

MR CHESHIRE:   Yes, and if your Honours go to the application book at page 38, your Honours will see that Mr Reynolds cited to your Honours from paragraphs 99 and 100 and your Honours will see at 100 his Honour started that paragraph:

But even if the approach in Brickenden is no longer good law, in my opinion, this is a case where it is appropriate to infer that BTC lost the opportunity –

et cetera, and then three lines on the following page ‑

in the absence of evidence to the contrary.

But that still leaves open the question of whether it was an inference from facts or an inference in the absence of facts.  Now, if your Honours look at how the judgment of the learned trial judge proceeds, your Honours will see that it is not the case that paragraph 100 commences by saying, having found breach, I can now approach causation on the basis of, well, I reversed the onus and there is nothing to prove to the contrary.  Indeed, when one looks at what precedes paragraph 100, one sees an analysis, and a significant analysis, of the factual background to causation.  Indeed, Mr Reynolds took your Honours to paragraph 99, but if one looks at line 38 there is:

The likelihood is that BTC’s prospects of raising capital would have been better if Mr Ramsay had not put himself in the position he did.

That is a finding of fact preceding the conclusion of an inference.  If one goes back to the end of paragraph 98 at line 21:

Viewed in that way, there is a clear causal connection between Mr Ramsay’s conduct and the opportunity that BTC is said to have lost.

Again, a finding of fact, not simply an analysis of breach followed by, “I can now reverse the onus.  The defendants have produced no evidence to the contrary”.  Furthermore, particularly in the Court of Appeal, there was considerable debate about whether other events were in fact causative of the loss of opportunity for which the respondent contended.  In the judgment of Justice Macfarlan, if your Honours go to page 77 ‑ I do deal with this in my written submissions, but your Honours will see on page 77, paragraph 63:

His Honour concluded that the evidence before him established the required causal link . . . Bearing in mind that he was required to approach the issue on the bases I have just mentioned, this conclusion appears to me to reflect commonsense.

Then his Honour continues at line 28:

The primary judge was right to regard Mr Ramsay’s capacity as a wrongdoer as justifying inferences being readily drawn –

But then his Honour continues at paragraph 64:

Furthermore, Mr Ramsay’s evidence that BTC did not obtain funding because potential investors wanted a new company did not support his argument –

et cetera.  So his Honour Justice Macfarlan continued not only by looking at the evidence, as it were, that pointed towards causation in respect of which he described it as reflecting commonsense, but also his Honour then continued by examining what were posited as alternative reasons as to why funding had not been obtained.  Therefore, he is considering the factual evidence both in support of the positive and in support of the negative and, indeed, his Honour explicitly described ‑ on page 68 at line 12 his Honour Justice Macfarlan describes the learned trial judge as having found causation first of all on the basis of Brickenden:

but that even if the Brickenden test was inapplicable, BTC had nevertheless, applying general law concepts of causation, established causation of its loss.

So his Honour Justice Macfarlan recognised that the trial judge – or considered that the trial judge was applying general law concepts; not any consideration there of he reversed the onus of proof.  So, even if there were some uncertainty as to what Justice Ball was doing – and in my submission there is not – but Justice Macfarlan, in the context of an appeal de novo to the Court of Appeal, made findings of fact which he held reflected commonsense and he expressly shows that he was applying general law concepts of causation.  So, in my submission, it is simply factually incorrect to suggest that there has been some inference of causation in the absence of facts or some reversal of the burden of proof.

There is a further problem, however, with the applicant’s argument in this regard and that is that, even if there was some error in reasoning, whether of the trial judge or in the Court of Appeal in respect of causation, the respondent would contend that there was ample evidence, ample facts, to satisfy causation on any test, bearing in mind that the nature of this case was that there was a plan to set up a rival company into which to divert commercial opportunities and that plan was put into operation.

As Justice Macfarlan held, it would not be surprising if in fact commonsense led to the factual conclusion that there was a loss of factual causation.  So, even if successful on that point, the matter may well have to go back to the Court of Appeal or possibly to the trial judge for further consideration of that issue.

Furthermore, there were alternative claims under the Corporations Act which his Honour at first instance did not need to determine and so they did not arise in the Court of Appeal.  But questions of causation in the context of the Corporations Act may well be different.  Bearing in mind the normative considerations and requirements of that Act as recognised by this Court, for instance, in Marks v GIO, means that even if successful in relation to causation of breach of fiduciary duty the matter would have to go back to consider whether there was a sufficient and direct link between the breach and the matters of causation.

Furthermore, there was also an alternative claim based upon damages for wasted expenditure.  Although the trial judge rejected that, only Justice Gleeson dealt with that.  The other two justices in the Court of Appeal did not need to deal with that.  So again, if an appeal on that issue of causation were upheld, it would need to go back to the Court of Appeal to consider that issue.  Your Honours, that is all I wanted to say about causation.

Dealing with the Suttor v Gundowda point, it is important to recognise that the two authorities my learned friend relies upon, particularly Moustakas and Whisprun, are entirely different beasts.  In Moustakas there was a different allegation of negligence, so separate and distinct cases, and it was clear that different evidence would have been given.  In Whisprun the contents of the medical reports were taken as evidence in the Court of Appeal, but they had not been evidence at first instance; again, separate and distinct cases and, indeed, inconsistent cases, and clearly in those cases the evidence would have been different.

Furthermore, in Moustakas there was objection.  All of these are distinctions with the case currently before your Honours.  In Moustakas there was objection and in Whisprun it appears the Court of Appeal raised this at their own motion without the matter having been referred to the parties, but one can assume that there would have been objection.

But here at the very least there is overlap between a loss of opportunity to raise capital and a loss of opportunity, first, to raise capital and, secondly, to use that capital for profit.  So the cases are not separate or distinct, let alone being inconsistent.  They are overlapping cases and, indeed, the loss of opportunity to raise capital is an essential part of the case that the Court of Appeal had to consider as to the raising and using of that capital.

So the case put by the respondent in both courts was a loss of commercial opportunity.  The difference is the assessment of the various contingencies.  What the Court of Appeal recognised is that there was an additional contingency above and beyond the raising of capital, and that was the using of capital.  So, in my submission, it was a case that was open upon appeal ‑ ‑ ‑

NETTLE J:   Why can it not be said that if the defendant had been alerted at trial to the possibility of quantum being so assessed, he could not have adduced evidence either to negative the possibility of being able to use the funding or at least to increase the risk or chance that it might not have profitably been exploited?

MR CHESHIRE:   Your Honour, there are two answers to that.  First, there was no reason to stop the applicants from doing so.  Secondly, they do not suggest, even now, what that evidence might have been.  Your Honours, the starting point is the pleading which, as Justice Macfarlan held, was broad enough to be a general pleading of loss and damage and, therefore, that encompassed both the claim based upon loss of opportunity to raise the capital and also to use that capital.  That is important for the first step, which is the preparation of trial, except that is not the endpoint, but it is the important starting point.

So, when your Honour asks me about the evidence that was going to be adduced at trial, the evidence was prepared on the basis of a broad and extensive case.  Therefore, in my submission, it would not be open for the applicants to turn around now and say, we would have adduced different evidence.  The way that Mr Reynolds puts it is that in opening in the court below the general point, as it were, was abandoned and it was confined to a narrow case based purely upon loss of opportunity of raising capital.

NETTLE J:   Do you dispute that?

MR CHESHIRE:   Yes, I do, and I am going to show your Honours the transcript of the opening.  But, before one gets to that, even if there was an abandonment, the applicants could not say, we would have led different evidence, because the evidence was in the usual way served in advance by the parties for the trial.  If I may hand up to your Honours two documents, the first of which is the – in the first document, in fact, the final three pages appear in my learned friend’s bundle that he handed up to your Honours.  The first two pages are taken from the plaintiff’s submissions at trial.  If your Honours look at paragraph 22 on page 312 in the bottom right‑hand corner – this is taken from the black book in the Court of Appeal:

Given the advanced stage of the negotiations as reported by Ramsay, it does appear that there was a significant chance of BTC generating further capital:

a.       generally;

b.       so as to recoup the monies it had already spent;

c.so as to be able successfully to exploit its commercial opportunities.

BTC can then establish a loss of a chance or opportunity on the balance of probabilities and the Court must then do its best –

et cetera.  So there is no express confining of the case in those opening submissions.  Then, over two pages, your Honours should come to page 8 of the transcript at first instance, and your Honours will see that goes over to page 9, and I accept that at line 36 that I did say:

it is very difficult and indeed in my submission probably impossible ever to put evidence before your Honour let alone evidence that would satisfy your Honour as to what might be a realistic loss of future profit.

But that is different from valuing a loss of commercial opportunity; that is recognising with a start‑up company one cannot put a precise figure on this.  Ultimately, where this case ended up was the court has to do its best on the evidence before it because, as Justice Macfarlan held, there is no more evidence one could expect the plaintiff below to have adduced.  Then your Honours will see:

the basis of a loss of a chance . . . 

the loss of an opportunity to be able to, as I say in paragraph 22, first of all to raise further capital –

Your Honours will see at the top of page 9 I repeat what is in the written submissions, raising capital ‑

you are trying to bring things up to parity to recoup some of the money already spent and then go beyond that in order to exploit its commercial activities –

I then accept again that ‑

For the third limb, it may be difficult to put any accurate estimation –

But I do not abandon, in my submission, any of those grounds.  Indeed, even if one could say, well, I have acknowledged the difficulties with the third limb, the second limb was recouping the moneys already spent, and the moneys already spent, as your Honours can see down at line 32 – or rather the loss that had already been incurred – was $400,000.  So, even taking it at its very highest that maybe I had acknowledged I could not show, as it were, a profit beyond profit – and I do not accept that concession ‑ in my submission, there was clearly a maintaining of the case of a loss of profit, at least so as to be able to recoup the profits already – rather, the loss already incurred which was $400,000.

Then, your Honours, it is important to recognise this matter has been raised by this legal team only at this point.  Mr Reynolds’ submissions I think were about a week ago.  Now, this point has never been raised before, and that is important for this reason.  First of all, the applicants had up until then never argued that the point had not been argued below, that the point was not available or that they would have led further evidence below or, bearing in mind how this matter arose in the Court of Appeal, it was not part of the appeal; it was not part of the grounds of appeal; it was not part of the written submissions.

Justice Macfarlan raised it in argument, hang on, you cannot have damages on this basis.  The applicants adopted that because it was in the course of oral argument, oral argument was not particularly elaborate and well‑developed and therefore the Court of Appeal invited written submissions which followed.  But in those written submissions – and I have given those written submissions to your Honours – what they contain is an invitation, and it is on the penultimate page, page 6, paragraph 13:

For the reasons set out above the result reached by the primary judge manifested error in that it was not pleaded and was contrary to principle and authority ‑

That is the loss of the raising capital –

Nor, in the absence of adequate evidence of loss that was clearly available to BTC, can the result be defended on the basis that it was otherwise correct ‑

That was rejected by the Court of Appeal –

It follows that this Court should re‑assess compensation.

So the applicant’s case below was not, hang on, this takes us by surprise.  We would have put on some further evidence or would have asked some other questions, but the case was compensation should be reassessed.  In that context, that was the opportunity at that time in the Court of Appeal, which is a hearing de novo, for the applicants to say, hang on a minute, we have been taken by surprise.  We want to put on further evidence.  That probably would have constituted special reasons.  They could have put on whatever evidence it was that they say today that they have not had the

opportunity of doing so.  Yet never was it suggested by the applicant’s legal team – and they were the same team that put on the special leave application and the submissions – and even now Mr Reynolds does not identify what particular evidence it is said would have been put on if they had been alive to the issue.

In my submission, the case is simply not made out of any prejudice, let alone that there was an abandonment of the point.  But even if the appeal were to succeed on this point, the matter would still have to go back to the Court of Appeal at the very least to consider the trial judge’s rejection of the wasted expenditure claim which, as I say, was only dealt with by Justice Gleeson’s judgment.

FRENCH CJ:   Thank you, Mr Cheshire, your time is up.

MR CHESHIRE:   Thank you, your Honours.

FRENCH CJ:   Yes, Mr Reynolds.

MR REYNOLDS:   If I can deal with the Suttor v Gundowda point first.  My learned friend takes the point that our predecessors did not raise this after the argument in the Court of Appeal when this matter was first raised.  He did, as your Honours have just been shown, raise the point whether it was pleaded, which is one aspect.  I am sure my learned friend would concede that the memorandum that he was given to answer raised the question of whether it was pleaded but did not raise whether there was any other difficulty with putting the case.

This is just a situation, as sorry as I am to say it, of a rather inexperienced counsel not knowing about the principles of Suttor v Gundowda.  It is not fair to use that matter against my client in any other way.  There is not any prejudice to my learned friend in us raising the point now.  It is in this Court just a point of law which could have been taken in the court below.  So there is no reason why this Court could not consider the matter, no reason at all, and not the slightest prejudice, given that my learned friend seems to me to be playing Suttor v Gundowda on my Suttor v Gundowda.

My learned friend took your Honours to various references but these references, when one looks at them, are basically again only reinforcing the proposition that there were only two cases.  My learned friend focuses on wasted expenditure, but I put that case to your Honours as being one of the two cases which he articulated and which was rejected by Justice Gleeson and by the primary judge.  It was interesting that, although my learned friend took your Honours to the Court of Appeal, he did not take you to a single reference before the primary judge to indicate where he took this case.  That is for the very simple reason that it never was put and, as I said to your Honours before, it was expressly disclaimed in the clearest of terms.

My learned friend then says, not having, as I understand it, raised it previously, that I do not indicate to your Honours what sort of evidence would have been put.  Well, I am happy to deal with that impromptu on the run now.  But Mr Ramsay, as I said before, was treated by the Court of Appeal as being a form of expert because he had a projection of what moneys would have been made from this business.

Now, if this case had been put to him ‑ that is, the integers in terms of what the profit would have been – he obviously could have responded to aspects of that.  That is the first thing.  Secondly, if he had been told what the case was, about loss of profits and the loss of opportunity to make profits, he could himself have given evidence‑in‑chief about that.  What sort of evidence would it have been?

Well, it would have been difficulties, for example, about getting pre‑IPO funding and the difficulties that he had experienced; difficulties in getting IPO funding; evidence about what the overheads and costs were likely to be and of the risks, as your Honour Justice Nettle said, in running this kind of business; of the cost of setting up the business; of what the markets were for the product; of what the likely sales were as to whether there were any competitors; as to whether there were any comparable businesses; as to whether there were any difficulties in making profits and any other thing that would affect the risk.  Not possible to put on any evidence – we would submit, with respect, that is not an open submission.

Can I deal with the other issue, which is the issue of causation?  My learned friend has, in my submission, sort of danced around the proposition of saying, well, this is all very nice about Brickenden and this presumption point, and I will not go back there, but really when you look to the end of paragraph 98, the judge found that causation was clearly established.  But how?  Your Honours sitting there now are not able – and I am not quizzing you – to indicate how that causation case was established.  That is because this is thin air.  That is why my learned friend did not take you to any passage in this judgment which says anything more than, there was a breach and as a result of that breach we will infer that there is a loss.  There is an entire vacuum there about how it is that that breach could in any way have caused any loss.

Your Honours would have seen our reference in the submissions to Justice Finn in a footnote and to some cases which make this simple point; that if all that somebody does is assume a position of divided loyalty, that is, put themselves in a position of potential conflict, that does not of itself cause any loss.  A solicitor who takes a phone call from a purchaser and a

vendor and says he will act on the conveyance for both, he is in a position of potential conflict, but at that point no loss has been caused.  That is all that happened here.

FRENCH CJ:   The level at which you are putting the argument at the moment seems to be a complaint about inadequacy of reasoning in relation to causation.  I mean, your primary position was there was a wrong principle.

MR REYNOLDS:   It is, and that there is not any indication in the reasons as to how any real case on causation is made out, and my learned friend did not take your Honours to some points to indicate how causation was made out.  There is no suggestion, for example, that my client did not continue to try and get funding or that he diverted funding or anything like that.  We are still waiting to hear what is that integer on causation which took this beyond a situation of mere breach with damage being presumed?  I see the red light.  Those are my submissions.

FRENCH CJ:   Thank you, Mr Reynolds.

Having regard to the approach to causation taken by the Court of Appeal in its analysis of the primary judge’s reasoning and its own reasoning, this case, in our opinion, is not a suitable vehicle to agitate the question of principle upon which the applicant seeks special leave to appeal.  The second point, in our opinion, does not warrant the grant of special leave.  Special leave will be refused with costs.

AT 12.32 PM THE MATTER WAS CONCLUDED