Torrens Aloha Pty Ltd v Citibank NA

[1997] HCATrans 200

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Sydney  No S28 of 1997

B e t w e e n -

TORRENS ALOHA PTY LIMITED

Applicant

and

CITIBANK NA

Respondent

Application for special leave to appeal

DAWSON J
GAUDRON J
McHUGH J

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON MONDAY, 4 AUGUST 1997, AT 11.43 AM

Copyright in the High Court of Australia

MR B.W. WALKER, SC:   May it please your Honours, I appear with my learned friend, DR A.S. BELL, for the applicant.  (instructed by Verekers)

MR D.H. BLOOM, QC:   May it please the Court, I appear with my learned friend, MR A.W. STREET, SC, for the respondent.  (instructed by Dibbs Crowther & Osborne)

MR WALKER:   Your Honours, if this is a case about the extent of what has been called a fiction, or less kindly, a fairytale, in our submission, it necessarily raises the question for special leave as to whether these facts, these findings, provide an appropriate vehicle to test the extent of the magic worked by that fiction or, as we would put it, departing from metaphor, if an initial premise of a relevant argument is that the law did not change in the sense of according to certain facts the status of a cause of action, so that a cause of action accrued when those facts had occurred, although courts of the time would have said not.  Then the question first raised is whether the way in which these decisions were made in David Securities was a way which provides this Court with a test of the power of that fiction.  In our submission, for the following reasons it does.

DAWSON J:   I do not want to get into a philosophical argument but it is not entirely a fiction.

MR WALKER:   I have used two of the words that have been used in discourse in this area: - fiction and fairytale.

DAWSON J:   Yes, and they become a cliche which is very misleading, in fact.

MR WALKER:   They are.  I would disavow each of them as inappropriate metaphors for the necessary thinking about how the law changes incrementally or otherwise in court, as opposed to how the law may change in Parliament.  In our submission, although both of those cliches have been applied, including by those of the highest authority, what really is at stake here is a question about how one should view the accrual of a cause of action in a system which contemplates, with a degree of equanimity, at least without too much discomfort, the fact that from time to time, relatively rarely, the courts change, rather than merely develop the law.  We apprehend from what has been put in writing against us that one of the arguments said to be a practical matter, by Justice Sackville in the leading judgment in the Full Court below, said to raise invidious distinctions supposedly too difficult for the courts to apply, is whether this case really was a change of law as opposed to a so‑called mere development.

DAWSON J:   It does not seem to me to matter very much.  If it was a change in the law then the change was to recognise a cause of action which did not exist previously.

MR WALKER:   That is right, your Honour.

DAWSON J:   But, the cause of action which was recognised is one which had its origin at a point of time.  If that point of time means that the cause of action is statute bound, so be it.  Why is not that simple approach the proper approach?

MR WALKER:   That is a simple way of disposing of our case, that is, finding against us.  However, in our submission, whether that simple answer is the appropriate one is why this is an appropriate case for special leave because there is an equally simple answer on the other side with, in our submission, a more appealing fitness in relation to the individual justice of the individual case.  It is every bit as simple to say that when the law says by dint of an interlocutory argument that inquires, “Does this pleading disclose a reasonable cause of action?”, when the law says at point A, “The proper answer is ‘no’ on authority”, and then a later court, in another case perhaps, says that the proper answer for materially similar pleading should be “yes”, and does so by the use of judicial technique that identifies what might be called error or a wrong turning in the law and says that something called the old law, or something called the traditional rule, or something called received doctrine should be changed, then, in my submission, those who were advised properly by their lawyers or who suffered properly a decision by a court looking at their pleadings, in former days, point A, are entitled to say, “Why should my case have been looked at on that basis when the court is now saying at point B that I was all the time right?”.

DAWSON J:   Simple, because if there is a change it is a change which is retrospective and because the court does not declare the law prospectively only, but retrospectively as well, then the result must follow.  That is why what you disavow, the term “fairytale”, is a quite misleading expression.

MR WALKER:   We are not here to develop the rightness of “fairytale” as a description, your Honour.

DAWSON J:   No, but that is the reason why it is misleading, and that is the reason why your argument, perhaps, cannot succeed.

MR WALKER:   The force of my present argument, if it has any, is in the appropriateness of your Honour’s use of the word “perhaps” in that last proposition because, in our submission, what your Honour has raised is a very important aspect hitherto undecided ‑ ‑ ‑

DAWSON J:   But if there is no doubt that the court, when it declares the law, declares it retrospectively as well as prospectively, then how can your argument succeed, because although someone looking at the pleadings at a particular time may come to a conclusion, after the court has retrospectively declared the law to be such that another conclusion is required, so be it.

MR WALKER:   The question is whether “so be it” is an appropriate response where what occurs is the people who correctly advise ‑ ‑ ‑

McHUGH J:   They did not.  That is part of the problem.  Maybe they have a cause of action against their lawyers.  They have failed to perceive the - - -

MR WALKER:   If there is a floodgate here, that is an infinite regression whereby everybody who correctly advises on what the High Court says are the authorities, or were the authorities, is wrong for not saying, “But the High Court could well be wrong”.  No doubt advisers do, from time to time, suggest the High Court may change its mind but, in my submission, that amounts to conceding that from time to time it changes the law.

DAWSON J:   But really, do you not have to say that for your purposes the law is only declared as a change to change prospectively?

MR WALKER:   No.  For our purposes, or the argument which we would seek to develop on appeal, we would simply say that the description of the law’s technique which is retrospective is not an apt description to encompass all the consequences of that.  We are focusing on just one consequence of that, which is an important one because it has the effect of time barring, in ignorance or not.  In our submission, to say that the court retrospectively pronounces the law for cases other than the matter before it at the time does not answer the question, “What effect does that have on the question of the accrual of a cause of action?”.  A simple way to put it is that anything retrospective has two times in question - one is the time of the retrospective utterance, and the other is the time about which the utterance is made, that is, earlier in time.  Our submission is quite simple, that it is the first of those, the time of the retrospective utterance, which brings the cause of action into existence which, to that point, did not exist, and nothing which is later said changes that.

DAWSON J:   But is it a cause of action which has an origin in facts.

MR WALKER:   Yes.

DAWSON J:   Therefore it has an origin in point of time.

MR WALKER:   Yes.  The facts all accrue - this case is a good vehicle, in our submission, precisely because it shows the facts all accruing which in Judicature Act thinking make it plain that if the law says so that is when the cause of action accrues so that we were statute barred.  There is no question about that and we accept it.  It provides strength for our special leave application, in our submission.

DAWSON J:   I am not sure that I follow that.  You are really approbating reprobating, are you not?  You are saying, “We accept the cause of action ‑ ‑ ‑

MR WALKER:   No, we accept that all the facts occurred which, once the law changed ‑ ‑ ‑

DAWSON J:   - - -gave you a cause of action.

MR WALKER:   Gave us a cause of action, occurred so that we were statute barred by the time we commenced.  That much is clear.  In our submission, it is also a cliche to say that a cause of action is but a collection of facts because causes of action differ from other collections of facts, disparate or random, because of what the law says about their effect.  It is what the law says which enables us to say that there is another date in question, and that without in any way cavilling with the proposition that the law precedes as a matter of technique, retrospectively, to pronounce itself in court, it is by no means cavilling it back to say that depends upon utterances which can be dated - judgments of this Court which can be dated.  That has an effect, obviously enough, when it comes to, for example, a judge in the negligence or otherwise of legal practitioners who advise on the basis of case law and it also, in our submission, ought to have, as Justice Hill held, an effect when one asks the question, “At what time did the law say of that collection of facts that they were no longer just a collection of facts, but they were a collection of facts which were a cause of action?”.

McHUGH J:   That is not the theory of the common law.  I have not read Chief Justice Barwick’s judgment in MLC v Evatt for years but my clear recollection is he says that when the Court does declare what the law is then that is what it always was.

MR WALKER:   That, your Honour, is a statement which, bordering on the simplistic, does attract the programme of being called a fairytale or a fiction because one cannot say, looking back through the books, that the law has always been the same if one, at any moment, accepts the common law, is made by the judges.

McHUGH J: It is like looking at the Constitution: with 80 or 90 years of experience you see things different. We see meaning in the Constitution today that people may not have seen in 1900. The conciliation and arbitration powers are a classic illustration.

MR WALKER: We would wish, on any appeal, to develop the proposition that judicial technique in relation to a constitution, a text which needs to be interpreted in light of changing conditions or changing perceptions, stands quite apart from the common law. Not that the common law does not take account of changing circumstances and changing perceptions, but in, we say, a significantly different way. So that a view about the Constitution, in our submission, will not answer the question, “When does a cause of action accrue?”. Once one accepts the proposition, first, that judges make the common law; second, that a cause of action is that which the law clothes a collection of facts with; and third, that one can date when the law said, in this case, those collections of fact gave a cause of action.

DAWSON J:   But it says that those collection of facts gave a cause of action retrospectively, in other words, at the time they arose.  That is what the law says.

MR WALKER:   The law said in 1992, then in 1985, 1984, facts which had by then occurred gave, though nobody knew it at the time, a certain character to that collection of facts ‑ ‑ ‑

DAWSON J:   That is right, gave rise to a cause of action in 1985.

MR WALKER:   But that is a statement which was true only from 1992 onwards.

DAWSON J:   That is a characteristic of any retrospective statement.

MR WALKER:   Quite.  In our submission, your Honour, the question neatly before this Court, is whether it is the date of the retrospective utterance.

DAWSON J:   What is the question?  The question is when did the cause of action accrue.  If you asked the Court in 1992, “When did the cause of action accrue?”, they would say 1985.

MR WALKER:   But if one had asked in 1990, the Court would have said there is no cause of action.  Indeed, would have struck it out as disclosing no reason ‑ ‑ ‑

GAUDRON J:   Maybe not.  That is assuming that had a case been conducted in this Court two years earlier than it was it would have produced a different answer, and that seems to me to be an assumption underlying your argument which cannot be sustained even by way of speculation.

MR WALKER:   Your Honour, first of all, I accept that.  Second, if one logically extends what your Honour has said, then one does come by a different means to, perhaps, the myth of the unbelievably busy Court, which in year one, manages to hand down all the decisions replete with internal inconsistencies which have been handed down over the last 150 years on the subject.  In our submission, if one adopts that approach ‑ ‑ ‑

GAUDRON J:   I do not think one has to go back to 1901.  One has only to go back six years.  You can take a more limited time frame.

MR WALKER:   But your Honour is, with respect, quite correct, we do assume the fact and, in our submission, to assume a fact, that is, what history actually shows, is always safe.

DAWSON J:   Yes, but even if you assume that fact, why does that make out your argument.  The fact that a court would have said something different had it been asked earlier does not alter the retrospective effect of what it does say when it is asked.

McHUGH J:   Do you get any assistance from looking at the matter from the opposite point of view?  Take the abolition of the Rylands v Fletcher cause of action.  Does that mean that in 1980 people who settled cases on the basis of Ryland v Fletcher paid money under a mistake of law because there was no cause of action?

MR WALKER:   We would say it does violence to common sense and to language to say that people who advised, and people who accepted advice on the basis that that cause of action then existed, was suffering from a mistake.  They were, to pick up on the point which Justice Gaudron has confronted me with, certainly acting, failing to anticipate what might happen.  In our submission, to call that a mistake is really doing violence to language.  However, if the reasons of Justice Sackville are correct, or if the full retrospectivity with all its logical consequences model is accepted, then it must be the case that those who settled Rylands v Fletcher causes of action or claims before it was abolished, were making a mistake, that is, there was no cause of action pleaded thus.

Perhaps the example is not entirely happy because it may be that in most such cases, amongst the pleading one would have found a negligence action in any event, but not always.  If something was pleaded naturally Rylands v Fletcher one would not have had the relevant plea for negligence.  In our submission, that is the kind of example which raises an entirely unattractive proposition of the Court using language which offends against an ordinary meaning of it.  It offends against an ordinary meaning to say that before the Court has pronounced that a cause of action does not exist, that it already ceases to exist; that retrospectivity casts a pall backwards to bring about, before it has occurred, all the consequences which are yet to occur.

In our submission, that is to mistake a retrospective effect for some of its consequences with a retrospective effect for all of its consequences.  In our submission, the question neatly before the Court is whether, what I will call full retrospectivity, that is, with all logical consequences spun out as if the initial premise is true, namely that the law was ever thus, is correct.  In our submission, just as one rejects the language of fiction or fairytale to describe the notion that the law was ever thus, one should also, in our submission, approach the question in a discriminating way when one comes to the relatively narrow question, “When does a cause of action accrue for the purposes of a limitation action”.

In our submission, when one introduces the question of purpose there is nothing salutary at all in a restitutionary ‑ ‑ ‑

DAWSON J:   For the purpose of what?

MR WALKER:   The purpose of a limitation period .

DAWSON J:   I see.

MR WALKER:   There is nothing salutary at all about introducing the notion of full retrospectivity so that accrual occurs even though everybody, properly advising, and every court properly ruling, would then have said there was no cause of action.  In our submission in a restitutionary area where one has a change of position defence, all the public policy behind limitation period can be safely seen as looked after in the restitutionary area, leaving only the question, “Could one say as at ‑ ‑ ‑?”

DAWSON J:   I do not know about that.  You could have stale restitutionary actions as well as stale other actions.

MR WALKER:   If they were stale in a way that would offend against the sense which informs the legislation in a Limitations Act, your Honour, they are likely to be stale.  Indeed, almost certainly likely to be stale in a change of position sense.  That is, if they are likely to be stale in a way which would bring about a relevant injustice.  In our submission, for those reasons, this is both a suitable vehicle and an important issue for the Court to take on.

DAWSON J:   Thank you, Mr Walker.  Mr Bloom.

MR BLOOM:   Your Honours, it is true that there are difficulties in the path of a plaintiff who, prior to this Court’s decision in David Securities, alleged a mistake of law due to the distinction then perceived between mistakes of fact and mistakes of law.

The applicant was not obliged to accept the correctness of that decision or that distinction any more than did the applicant in David Securities, itself.  It was open to the applicant here to press its claims to be entitled to recover on the footing that as this Court was subsequently to hold, the distinction was artificial and should be rejected.  In accordance with accepted doctrine, the applicant’s cause of action here arose when the payments in issue were made.

GAUDRON J:   And they were the payments to the Bank, I take it, not to the Commissioner?

MR BLOOM:   That is so, although it is still to this day ‑ ‑ ‑

GAUDRON J:   The pleadings have been clarified, or not?

MR BLOOM:   No.  Still at this stage, no.

GAUDRON J:   I see.  So, it is not clear what precise moneys are sued upon?

MR BLOOM:   No, not precisely.  The so‑called realist theory, for which our learned friend contends, is fraught with problems.  In the first place, it becomes necessary to ask when, on that theory, did the applicant’s cause of action in David Securities, itself, arise.  If it arose when the Court pronounced judgment, how could the Court reverse the Full Court of the Federal Court, because that Court had not erred.  Yet, judgment was given, of course, for the appellant.

McHUGH J:   That is because the declaration operates retrospectively, as Justice Dawson pointed out.  What about my example of Rylands v Fletcher, does that mean that there was no Rylands v Fletcher cause of action in years gone by?

MR BLOOM:   No, your Honour, there was cause of action at the time that Rylands v Fletcher was recognised as part of the law.

McHUGH J:   There was a cause of action.   So, when was the cause of action abolished?

MR BLOOM:   At the point of time to which a court came to adjudicate upon a claim, if Rylands v Fletcher was no longer part of the law, then the cause of action could find no remedy.  That is simply a case of the development of the law.

McHUGH J:   You cannot divorce a cause of action from the law that governs it.  It is true you have to have the facts to constitute a cause of action, but it is also facts that fall within a particular conceptual framework which the law delineates.

MR BLOOM:   But the law is constantly fluid and not only in constitutional senses but, of course, in the common law.  One takes one’s chances both in terms of the advice one gets, and obviously the advice of the plaintiff in David Securities got was the right advice, namely to press its point, which is what the plaintiff here should have done, and to come to the Court at a time at which it was still open to the Court to adjudicate on that cause of action.  What is happening here is that the plaintiff comes and says it is not really a prospective overruling because that would not do him any good.  He says it is a conjunction of two things.  A cause of action really only arises where there has been some development in the law where the second of two things occurs, that is the facts arising and the change in the law.  With respect, that cannot be right because his cause of action on any view arose back when the payments, whatever they may be, were made.

Your Honours, there is the other practical difficulty to which Justice Sackville referred below.  It is in the application book at page 78.  It was here that my learned friend, Mr Walker, sought to draw a distinction.  It is at the top of page 78:

The appellant’s submissions also encounter a formidable practical difficulty.  Mr Walker stressed that the principle for which he was contending applied only in limited circumstances -

That, of course, raises itself a question of whether or not this is a proper case for special leave:

that is where a judicial decision “truly changes the law”.  In such a case the cause of action would not accrue until the decision is handed down.  However, if a decision, although novel in some respects, merely “synthesises” the law without changing it, or corrects error, the cause of action would accrue at an earlier time, in accordance with orthodox principles.  It would therefore be necessary to distinguish between incremental changes and those which changed the law by reason of deliberate policy choices.

The discussion in the course of argument about the classification of cases such as Hedley Byrne & Co Ltd v Heller & Partners Ltd, Trident v McNiece and Mabo (No. 2) illustrates the difficulty of applying the suggested distinction.

In any case, Judges of this Court have said that the decision in David Securities fell within the latter category, that is, one of synthesisation or development, not one of a reversal of earlier law.  As the High Court pointed out in David Securities, there was no decision of the High Court to that point in time which constrained them otherwise to come to a decision that mistakes of law were not actionable.  The development of the law, as they pointed out, was such as to lead anybody who was advising at the time, to look hopefully upon the abolition of that distinction.

Your Honours, there is another reason, with respect, why special leave should not be granted in this case and why this case is not an appropriate vehicle and that is, irrespective of the merits of the applicant’s main point, the respondent, your Honours, will have seen, is a non‑resident.  By a notice of motion the applicant sought leave to serve its statement of claim on the respondent outside the jurisdiction.  For this purpose it argued and needed to show that its cause of action arose within Australia.  That was the relevant part of Order 8 of the Federal Court Rules, which is the relevant order that it relied upon.

The respondent filed a conditional appearance and, inter alia, contested that proposition, namely that the cause of action arose in Australia.  That was one of the grounds on which it sought to strike out.  The respondent was successful before the trial judge on that issue and this was not reversed on appeal.  If your Honours would go, please, to page 54 of the appeal book, your Honours will see the reference to the filing of the notice of motion right at the very bottom of the page and a reference at the bottom of page 55 to a concession is said to have been made by my learned friend, Mr Street, namely:

that, if its motion were unsuccessful, there would be no need for the appellant’s motion to proceed, because Citibank NA in that event would accept that its appearance was unconditional.

But, one of the grounds upon which it was sought to strike out the applicant’s motion was that there was no jurisdiction because the cause of action did not arise in Australia.  If your Honours go to page 56:

FCR, 0.8, r.1 provides that originating process may be served outside Australia in certain cases, including where the proceeding is founded on a cause of action arising in the Commonwealth.....In order to grant the applicant leave, or to confirm service -

this is at line 20 ‑ ‑ ‑

GAUDRON J:   This is where the question of the moneys precisely sued upon are in issue.

MR BLOOM:   Yes, and it still, to this point, has not been pleaded.  An amendment was sought at first instance but that was refused.  It was not renewed before the Full Court, and to this point there has been no amendment.

If your Honours then turn please to page 59, at the bottom of the page, about line 40:

The trial Judge also held that the appellant’s case could not be brought within FCR 0.9, r. 1, since the facts giving rise to the cause of action did not occur in Australia.  The ingredients of the cause of action were the payment of the money and the mistake of the payer, being a mistake causative of the payment.  The mistake occurred in Australia, but the payment took place in Switzerland, in accordance with the directions given to the appellant by Citibank NA.  Therefore, the cause of action arose outside Australia.

The trial Judge concluded that the proceedings should be set aside.

For two reasons:  firstly on the main point but also on this jurisdictional point.  That was not reversed in the Full Court and, with respect, that points out even more so why this is not an appropriate case for the grant of special leave.  If your Honours please.

DAWSON J:   Mr Walker.

MR WALKER:   Your Honours, on the question about the pleading, the way in which their Honours in the Full Court dealt with it is recorded on page 62 of the application book.  Your Honour Justice Gaudron’s question focused on the identity of the payments, and you are, with respect, correct to apprehend that the case which was argued in the Full Court, and one gathers also, at first instance, was that the payments in question were properly or truly, or should have been the payments to the Bank.  That is, the Bank was paid more than it should have been by reason of the mistaken view taken about the liability of my client to pay the Commissioner.

GAUDRON J:   But that then, you seen, seems to me to raise another question, and that is that the proper law of the contract is, I think, said to be New York, is it not?

MR WALKER:   Yes, your Honour.

GAUDRON J:   And there then is the question whether that being the case, the relevant provision of the Income Tax Act has anything to say about it; whether there was any mistake at all.  That would seem to me to be another preliminary point operating against you.

MR WALKER:   First of all, I can see that the more one‑off matters of that kind there are, the worse it is for me today.  Second, as to the pleading issue, that was dissolved, in our submission, by the approach taken in the Full Court at page 62, namely that the way in which the parties had conducted themselves in the argument below and in the Full Court, show that the payments which were in question were the payments which were identified by the attempted amendment and by the argument.  Second, so far as the question of New York law was concerned, there was no attempt by the Bank to prove New York law ‑ ‑ ‑

GAUDRON J:   But you would not have to.  It must be clear on its face that the Income Tax Act provisions do not apply to contracts not governed by Australian law.

MR WALKER:   That much is clear, and we must accept that, of course, your Honour.  It is the effect of New York law on the identity or the content

of an Australian statute which, in our submission, was simply not proved and therefore, as ‑ ‑ ‑

GAUDRON J:   But that would not advance your position, though, would it?

MR WALKER:   But therefore, as his Honour pointed out, it ought to be assumed to be the same as a matter of our common law.  In our submission, that means that that preliminary point, as well, disappears.  May it please your Honours.

DAWSON J:   The Court is of the view that this case is not a suitable vehicle in which to test the point which the applicant seeks to raise.  Accordingly, special leave to appeal is refused.

MR BLOOM:   An order for costs, if your Honour pleases?

DAWSON J:   Mr Walker?  Refused with costs.

AT 12.13 PM THE MATTER WAS CONCLUDED