Unilan Holdings Pty Ltd v Kerin

UNILAN HOLDINGS PTY LIMITED; UNILAN (AUSTRALIA) PTY LIMITED and HAMILTON WOOL
PROCESSING PTY LIMITED v. THE HONOURABLE JOHN CHARLES KERIN
No. NG91 of 1993
FED No. 605
Number of pages - 12
Negligence
(1993) 44 FCR 481

COURT

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
NEAVES(1), RYAN(1) AND GUMMOW(1) JJ

CATCHWORDS

Negligence - alleged negligent misrepresentation by Minister of State as to operation of reserve price scheme for wool - whether case as to reliance made out - whether reliance reasonable - whether the Commonwealth vicariously liable for tort of a Minister of State.

Wool Marketing Act 1987

Wool Marketing (Temporary Provisions) Amendment Act 1991

Parliamentary Privileges Act 1987

San Sebastian Pty Ltd v Minister Administering the Environmental Planning and Assessment Act 1979 (1986) 162 CLR 340

New South Wales Farmers' Federation v Minister for Primary Industries and Energy (1990) 21 FCR 332

HEARING

SYDNEY, 27 May 1993

#DATE 1:9:1993

Solicitors and counsel for the appellants: Mr S.L. Walmsley instructed

by Blessington Judd Freeman Lazarus

Solicitors and counsel for the respondent: Mr D.M.J. Bennett QC and

Mr S.W. Gibb instructed by the Australian Government Solicitor.

ORDER

THE COURT ORDERS THAT:

The appeal be dismissed with costs, including costs of the application for leave to appeal which was dismissed on 27 May 1993.

Note: Settlement and entry of orders is dealt with by Order 36 of the Federal Court Rules.

JUDGE1

NEAVES, RYAN AND GUMMOW JJ This is an appeal from the judgment of a Judge of this Court (Lockhart J.) dismissing an application in which the present appellants sought damages for negligent misstatement.

Earlier, another Judge of the Court had struck out those portions of the statement of claim which propounded a cause of action seeking damages under s. 82 of the Trade Practices Act 1974 ("the T.P. Act") in respect of alleged contravention of s. 52 of that statute. The judgment is reported, (1992) 35 FCR 272. An application for leave to appeal was heard and refused by us on 27 May 1993, immediately before we proceeded with the hearing of the appeal from the decision of Lockhart J.
Accordingly, these reasons are confined to the disposition of that appeal.
The jurisdiction of the Court initially was attracted by that element of the matter comprising the claim of contravention of the T.P. Act. That claim could not be described as colourable. The striking out of the relevant portions of the appellant's pleading did not thereby deprive the Court of the jurisdiction in respect of the balance of the matter: Burgundy Royale Investments Pty Ltd v Westpac Banking Corporation (1987) 18 FCR 212. It is unnecessary, therefore, to determine whether there was any other basis of jurisdiction.
At the trial, whilst issues of liability were hotly contested, the parties agreed, at the conclusion of addresses, on the quantum of damages. It was accepted that, if the present appellants or any of them were successful, judgment should be entered in favour of the appellants in the sum of $5m; in this respect the parties did not distinguish as between the appellants themselves.
The respondent was Minister for Primary Industry from 1983 to 1987 and Minister for Primary Industries and Energy from 1987 to 1991. At the time of the trial, in December 1992, he was Minister for Trade and Overseas Development. At the time of the events complained of, the respondent was the Minister responsible for the administration of the Wool Marketing Act 1987 ("the 1987 Act"). This had replaced the Wool Industry Act 1972. Part IV of the 1987 Act provided for the administration of what was known as the Reserve Price Scheme ("the Scheme"). The nature of the Scheme and the roles in relation thereto of the respondent and the Australian Wool Corporation ("the A.W.C.") are described in detail by the Full Court in New South Wales Farmers' Federation v Minister for Primary Industries and Energy (1990) 21 FCR 332 at 334-339.
Put broadly, the Scheme was a buffer stock scheme whereby the A.W.C. bought and sold wool to offset the fluctuations in price resulting from changes in supply and demand. At times of low prices the A.W.C. purchased wool which failed to reach what was known as the "floor price" and, conversely, when prices moved significantly above the floor price, the A.W.C. became a net seller of wool. The Scheme was funded by a proportion of a tax paid by growers on the value of shorn wool. Early in 1991 the tax was 25%. In addition, the A.W.C. was permitted to borrow up to 50% of the value of its net assets without approval of the Minister.
In the above decision, the Full Court held that s. 120 of the 1987 Act empowered the Minister from time to time to give a direction to the A.W.C. as to the price to be determined by the A.W.C., pursuant to s. 66, as the floor price.
The 1987 Act was amended, with effect from 22 February 1991, by the Wool Marketing (Temporary Provisions) Amendment Act 1991 ("the 1991 Act"). The effect of s. 143, added to the 1987 Act by s. 4 of the 1991 Act, was to suspend the operation of the Scheme, during the period commencing 22 February 1991. This vital step in relation to the Scheme thus was legislative. The second reading speech of the Minister on the Bill for the 1991 Act was made in the House of Representatives on 19 February 1991. The 1991 Act commenced on the day of the Royal Assent, which was three days later, 22 February 1991.
The respondent, against whom the appellants now seek an order for the entry of judgment, is no longer a Minister of State. As we have indicated, the claim against him in which the jurisdiction of the Court was attracted by alleged contravention of s. 52 of the T.P. Act, was struck out before trial.
Whether the source of the Commonwealth liability in tort is found in s. 56 of the Judiciary Act 1903 ("the Judiciary Act") either alone or in combination with s. 64 thereof and with ss. 75 (iii) and 78 of the Constitution remains a vexed question: Breavington v Godleman (1988) 169 CLR 41 at 68-69, 101-102, 117-118, 139-140, 151-152, 169. Section 75 (iii) of the Constitution is concerned with the amenability to federal jurisdiction of, inter alios, persons against whom causes of action lie in their official capacity and as emanations of the Commonwealth: State Bank of New South Wales v Commonwealth Savings Bank of Australia (1986) 161 CLR 639 at 648-9. Section 78 provides that the Parliament may make laws conferring rights to proceed against the Commonwealth in respect of matters within the limits of the judicial power.
Counsel for the respondent agreed that there is no doubt that the acts by his client of which complaint is made by the appellants were done by him as a Minister of State appointed under s. 64 of the Constitution to administer a department of State. However, on the pleadings it is not asserted against the respondent that he has been sued "on behalf of the Commonwealth", within the meaning of s. 75 (iii).
The personal liability of servants of the Crown for torts committed by them was treated by Dicey as an important characteristic of "the rule of law": "Introduction to the Study of the Law of the Constitution", 10 Ed., 1965, pp 193-4. But Dicey was writing in England in 1885 when the Crown was not vicariously liable for the torts of its servants: M v Home Office (1993) 3 All ER 537 at 553. Likewise, in the United States, suit against the federal government required the consent of Congress expressed in a general or special enactment, and the harshness of this rule was modified by the doctrine that a servant or agent of the federal government was personally liable and could not defend simply on a plea of authorization or direction by the executive government; this in turn gave rise to a readiness to admit proceedings against individuals in respect of claims in which they had little personal interest and in which the United States itself was the party really affected: Cowen and Zines, "Federal Jurisdiction in Australia", 2nd Ed., 1978, pp 38-39.
Where immunity has been removed by statute or a combination of constitutional provision and statute, a question arises whether the citizen should thereby acquire the election between suit against the public servant and against the state itself: Hogg, "Liability of the Crown", 2nd Ed., 1989, pp 140-146.
Further, whilst Ministers of State are undoubtedly "officers of the Commonwealth" and amenable to injunction, prohibition and mandamus under s. 75 (v) of the Constitution, it by no means follows that they are correctly classified as servants for whose torts the Commonwealth is liable in the same way as an employer is vicariously liable for the torts of an employee.
Ministers of State must be members of the Federal Executive Council; they are appointed to administer departments of State and shall not hold office for a longer period than 3 months unless elected to the Senate or the House of Representatives. Sections 62 and 64 of the Constitution so provide. The system of responsible government is thereby adopted by the Constitution: New South Wales v The Commonwealth (1975) 135 CLR 337 at 364-5. In administering his portfolio, a Minister of State is not merely a member of the Federal Executive Council upon whose advice the Governor-General relies; he is the person through whom in matters within that portfolio the executive Government of the Commonwealth acts: Radio Corporation Proprietary Limited v The Commonwealth (1938) 59 CLR 170 at 192.
Accordingly, it is not self evident that in respect of acts and omissions of a Minister in the conduct of his portfolio the tortious liability is that of the Minister as a servant for which the Commonwealth is vicariously liable.
At the trial and on appeal, counsel eschewed any such subtleties, of fundamental importance though they may be. Counsel for the respondent did submit, on a notice of contention, that the primary Judge should have gone on to hold that, in any event, there is a public policy against the existence of the cause of action for alleged negligent misstatement by the respondent, and that "a Minister of the Crown owes no duty of care in predicting future Government action". In that regard, reference was made to various authorities, notably to the majority decision of the New Zealand Court of Appeal in Meates v Attorney-General (1983) NZLR 308. There, the plaintiffs recovered damages for negligent misstatements by certain Ministers, including the Prime Minister. The action was framed as one against the New Zealand Government; see (1983) NZLR at 310.
In the present case, the primary Judge expressed the view that a duty of care may exist, in Australia, "in circumstances where a Minister of the Crown makes a statement about the future policy of the Government".
It will be apparent from what we have said above that the issues raised by the notice of contention relate to, and indeed overlap, the issues which arise as to the nature and source of the liability of the Commonwealth in tort, and the existence, if any, of a distinction between the liability of the Commonwealth and that of a Minister of State in respect of negligent misstatements in the course of the discharge of his office. These matters were inadequately explored in submissions. It would not be permissible, insofar as the interpretation of the Constitution is involved, to overlook the need for compliance with s. 78B of the Judiciary Act.
It will be necessary to refer further to these questions after dealing with those issues which otherwise arise on the appeal and which are not entangled with them.
On 31 May 1990, the respondent, acting under his powers given by the 1987 Act, issued a direction to the A.W.C. This instructed the A.W.C. to reduce the minimum reserve price to a level which would mean that the weighted average reserve price for the 1990-1991 season would not be more than 700 cents per kg clean. Before issuing this direction, the respondent had received advice that the maintenance of the then current minimum reserve price of 870 cents combined with a wool tax of 25% and a borrowing limit of $2.5b. would make the Scheme unsustainable and would impact adversely in the longer term on the income of wool growers. The respondent had then formed the view that the maintenance of the minimum reserve price of 870 cents per kg would have serious consequences for the industry as well as for townships and workers dependent on the industry.
On the day after the issue of the direction of 31 May 1990, the respondent made a statement to the House of Representatives. This referred to the direction which had been given to the A.W.C. and included the following passage:

"Furthermore, the decision will restore the reserve price to its original purpose as a floor: to underwrite the market in order to protect growers against large sudden falls in wool prices.

In taking the decision to lower the floor, the Government will not contemplate, under any circumstances, further downward movement from this level.

The decision of 700 cents as a floor is immutable. The wool trade can now act with confidence that the price will not be reduced further. The Government has given tangible expression in offering to guarantee all borrowings of the

(A.W.C.) for the next two years. Against this background, the Government has decided that a review of pricing policy in the wool industry should be conducted. The basic aim of such a review would be to analyse changes which have taken place since the current arrangements were introduced in 1974 and to recommend measures to make the arrangements more effective. I will be announcing details of the review at a later date.

Let me make this perfectly clear. The Government's commitment to the 700c per kg floor is rock solid.

Any recommendations will not be allowed to induce another dizzy round of speculation."

The statements complained of by the appellants did not include what had been said by the respondent to the House; see, in any event, Parliamentary Privileges Act 1987, sub-s. 16 (3) and Amann Aviation Pty Ltd v Commonwealth of Australia (1988) 19 FCR 223 at 228-233. The complaint was as to remarks made by the respondent shortly thereafter, in early June 1990, at the Annual Conference of the International Wool Textile Organisation ("the I.W.T.O.") at its annual conference at Dubrovnik, in what is now Croatia. The allegedly wrongful acts complained of by the appellants occurred outside Australia. It was for the respondent to plead that the conduct was justifiable or not unlawful by the lex loci delicti, thereby invoking the rule in Phillips v Eyre; see the authorities collected in David Syme and Co. Ltd (Receiver and Manager Appointed) v Grey (1992) 38 FCR 303 at 324. He did not do so. Accordingly, no question of foreign law arose.
The I.W.T.O. is an international body concerned with the operation of the international wool trade. The conference was attended by growers, exporters, spinners, weavers, topmakers, brokers, buyers' agents, and officers of the A.W.C. Australia accounts for one-third of world wool production; its dominance is most marked in fine apparel wools. The respondent already had official business in Europe in June 1990 and he received information from the Australian Embassy in Rome that there was a golden opportunity presented by the conference of the I.W.T.O. An invitation was therefore arranged for him to attend and to address the conference.
In the course of his address, the respondent referred to the historical and economic background to the decision to set the next season's reserve price at no more than 700 cents per kg clean. He continued:

"In announcing the Government's decision to reduce the reserve price, I also indicated that we would hold an open public inquiry into price policy for the wool industry. Since the current scheme was introduced in the early 1970's there have been enormous changes in the world textile industry and in financial markets. We need to satisfy ourselves that our wool pricing and marketing system is appropriate to the new world of the 1990's - a world of fluctuating exchange rates and an increasing globalisation of international markets. Having said that, let me make it quite clear that the inquiry will not affect the reserve price. If we are going to make changes, they will be much further down the track. They will be made at a time in the future when we would be considering increasing the reserve price. They will not result in its reduction. I have given a cast-iron guarantee, which I repeat here, that the Australian Government will not contemplate, under any circumstances, any further downward movement in the floor price. We want to see stability and growth in the wool market. The one-off decision made realigns the price of our product to make it competitive. Any speculation on a further price drop is doomed to disappointment and would only be counter productive. The floor price, the M.R.P., has been restored to its proper level and purpose . . ."

After the invasion of Kuwait in August 1990, market confidence deteriorated and purchase rates at auction by the A.W.C. increased sharply from about 40% to about 70%. The Government then agreed that the ceiling on the borrowings by the A.W.C. should be removed to "head off" further continuing speculation about the viability of the Scheme. On 4 October 1990, the operative wool tax rate was increased from 18% to 25%. Thereafter, in November 1990, the respondent led an industry mission to talk to overseas buying countries as part of the effort of the Government to leave no grounds for speculation as to its support for the 700 cents per kg minimum reserve price. Trade purchases at auction improved, but fell away again after early January 1991. On 1 February 1991, the A.W.C. had a total debt approaching $3b. and was faced with the continuation of borrowings to meet its statutory obligation to buy wool not taken up at auction. The A.W.C. then suspended auction sales. After a consideration of various options, the Government, upon the recommendation of the respondent, decided that there was no choice but to allow the market to set the price of wool and that there was a better prospect of bringing the A.W.C.'s debt and wool stockpiles under control if the minimum Scheme was suspended and the A.W.C. did not buy in the market. The 1991 legislation was the result.
As we have indicated, the Scheme was suspended early in 1991, by force of the 1991 Act. The respondent said that the main cause of the decision made by the Government to introduce this legislation had been a telephone call to the respondent by the Chairman of the A.W.C. who told him that the A.W.C. had run out of money and could no longer trade. This was not something the respondent could have predicted in June 1990; his evidence was that he did not know of the likelihood of this coming to pass even a week before the conversation in question.
The primary Judge held:

"(I)f the respondent owed a duty to take reasonable care in the making of any statements of fact or any promises or representations, as to present or future conduct of himself as Minister or of the Government, in my opinion there was no breach of any such duty by the respondent."

His Honour also held that the statements made by the respondent to the I.W.T.O. conference were believed by him to be true in all material respects and that when he made them he intended them to be acted upon. The primary Judge also pointed out that, in speaking to the conference, the respondent represented the Government of one of the most important nations in the international wool market, and that he was in a sense an advocate for a cause. The cause was the upholding of the Scheme by seeking to ensure that the reserve price of 700 cents was maintained with support from buyers. Once the market price fell below the reserve price there would be considerable cost to the Australian Government. Hence it was in the interests of the Government to seek to maintain confidence in the market. In this sense, the Government was not standing outside the market but was, as in substance his Honour held, an active participant in it.

We turn now to consider the position of the appellants.
The appellants are members of what was identified in evidence as "the Unilan Group". Mr James Shasha is the President of the Unilan Group, and resides in Buenos Aires. He founded the group in 1954 when he arrived in Argentina from the United States. Mr Shasha, who gave evidence, is Vice President of the Argentine Wool Federation and has been the head of the delegation of that country to the I.W.T.O. conferences for the past 20 years.
The Unilan Group commenced operations in Australia in 1987. The first appellant is a finance and investment company whose main function is to borrow and provide finance for other members of the Unilan Group. It does not otherwise trade. The first appellant owns 50% of the issued shares of the third appellant. The second appellant buys and sells wool and owns 50% of the issued shares of the third appellant. The third appellant is a processor of scoured wools and a trader in greasy wool. It operates a wool scour business in Hamilton, Victoria, and sells its products on the local and international markets. Mr D.R. Peterson, who also gave evidence, is the Managing Director of all three appellants.
In order for the appellants to make out their case against the respondent for damages for negligent misstatement, it was necessary, inter alia, for them to prove both that they relied on the statements in question and that they acted or refrained from acting to their detriment by reason thereof: San Sebastian Pty Ltd v Minister Administering the Environmental Planning and Assessment Act 1979 (1986) 162 CLR 340 at 355, 357, 366, Parramatta City Council v Lutz (1988) 12 NSWLR 293 at 324.
Although it was not strictly necessary for his Honour to do so, the primary Judge, having made the findings which we have mentioned earlier, went on to consider this aspect of the case and decided it adversely to the appellants. Counsel for the appellants sought to diminish the significance of this finding by saying it was made "obiter". We do not accept that description. It was a considered conclusion which provided an additional and discrete ground for the failure of the appellants' case.
Mr Shasha was present at the I.W.T.O. conference in Dubrovnik. The conference lasted for about a week. He was in attendance when the delegates were addressed by the respondent. He said in his affidavit:

"I particularly remember the words of (the respondent's) address in which he said or words to this effect (sic):

'Processors, spinners, manufacturers and all people in trade should go and do their job based on the price being firm. Don't wait for reduction because there will be none. If any change is going to take place it is going to be a higher floor price.'

And

'I have given a cast iron guarantee which I repeat here that we will not contemplate under any circumstances any further downward movement in the floor price.' I can recall vividly those words as they had a great impact on me and after listening to the respondent I firmly believed that as a trader and processor of wool I could depend on the assurances given by him without any shadow of a doubt, and I made a decision to hold wool stock rather than sell it."

It is necessary now to refer to the situation in which the Unilan Group found itself at this time, and what it did thereafter.
In about February or March 1990, Mr Shasha had become aware that a large quantity of wool had been sold by the second appellant to Jean Paul Eschmann A.G. ("J.P.E.") and that it was stored, pending payment, at warehousing in Flushing in the Netherlands (not in Belgium as stated in some of the evidence). The contracts of sale to J.P.E. were such that there was in effect an unpaid vendor's lien which empowered the second appellant to cause the wool to be sold, there having been default in payment by J.P.E. The wool had been sold to J.P.E. at prices based on the 870 cents price; the exact price varied between grades of wool. J.P.E. was engaged in the business of buying greasy wool, sub-contracting the wool topmaking process, and selling wool tops to spinners. J.P.E. had in turn contracted to sell the wool tops to various businesses in Europe at prices also based on the 870 cents price, with the addition of a profit to J.P.E.; these contracts called for completion at some time in the future. The money owing to the second appellant by J.P.E. was in excess of $13m. As a result of the reduction of the floor price to 700 cents per kg on 31 May 1990, the second appellant's wool stored at Flushing suffered an estimated devaluation of more than $2m.
In April 1990, the principal of J.P.E., Mr Eschmann, with his financial adviser, had met Mr Peterson in Sydney, to discuss the debt of J.P.E. to the Unilan Group. Correspondence followed, and in the result Mr Peterson was faced with the task of re-evaluating the programme he had been discussing with J.P.E. for reduction of the J.P.E. debt.
The essence of the case for the appellants was that, in reliance upon the statements made by the respondent at Dubrovnik, they decided not to sell the stock at that time, but to hold it and to incur expense in processing and storing the wool.
Mr Peterson organised the release of the wool in storage to mills in Italy and Israel, which sub-contracted J.P.E.'s work. He also authorised the release of wool to mills in France. Mr Peterson decided to retain the balance of the wool in Flushing, whilst giving J.P.E. time to obtain finance. From between July and October 1990, much time was spent by Mr Peterson in organising the release of certain of the wool from storage, reconciling the debt by J.P.E. to the Unilan Group, and attempting to agree on a repayment schedule with J.P.E. Numerous discussions and telexes passed between the Unilan Group and J.P.E. on this subject.
In November/December 1990, Mr Peterson visited J.P.E. in Switzerland and evaluated J.P.E.'s financial and stock positions and the contracts which it had with its customers. He came to the conclusion that there were three options which the second appellant could then adopt.
The first was to sell the wool still stored in Flushing on the open market in a greasy state. The second was to continue conversion and to convert the balance of the wool into tops through the services of topmakers and to supply it to the open market. The third was to continue converting the wool into tops by using the services of topmakers and to supply the wool to J.P.E.'s customers, being those who had originally agreed to buy from J.P.E.
Mr Peterson, after discussions with Mr Shasha, followed the third option. Accordingly, he authorised the release of the balance of the wool from storage in Flushing to various topmakers.
Following the abolition of the Scheme early in 1991, the price of wool throughout the world dropped substantially. The Unilan Group was then still owed a considerable sum by J.P.E. but J.P.E. ceased to pay the second appellant under its revised contractual arrangements. On 19 June 1991, bankruptcy proceedings against J.P.E. were commenced in Switzerland.
The appellants' case was that if it had decided in June 1990 to sell immediately the wool warehoused in Flushing, and it had succeeded in doing so, the Group would probably have lost either nothing or somewhere between nothing and $1.7m. Rather, it had preferred to keep the wool and continue dealings with J.P.E. in the manner described.
In June 1990 the Unilan Group was unpaid vendor (at prices based on the 870 cents price) of wool to J.P.E., but it was within its power to cause the wool to be sold (at prices which would now reflect the 700 cents level) and to recover the difference from J.P.E. On the other hand, J.P.E. had on foot sub-sales at the 870 cents level, with a margin for its profit. If those contracts were completed, J.P.E. thereby would be assisted to recoup the Unilan Group. In the meantime, the Unilan Group retained its security over the wool and, in any event, J.P.E. was a well-regarded customer whose solvency was not in question. The risk to the Unilan Group in not moving forthwith was that the price of wool would further diminish, J.P.E. would be unable to enforce the sub-sales at 870 cents, and J.P.E. would be unable to meet the shortfall owed to the Unilan Group.
The primary Judge rejected the appellants' case based on actual reliance. He held:

"I do not accept the evidence of witnesses on behalf of the (appellants) that there was actual reliance placed by (the appellants) upon the statement of the respondent at Dubrovnik which altered the commercial decision that they otherwise would have made in any event."

His Honour found that both Mr Peterson and Mr Shasha had been reluctant to concede in evidence that Mr Peterson had conveyed to Mr Shasha the information, particularly in the second half of 1990, that there was growing speculation in the media about the possible abolition of the Scheme. Mr Shasha gave evidence that he had heard that the respondent had made the speech in the Parliament following the direction of 31 May 1990. He had been hesitant to believe that statement. In his affidavit, Mr Shasha had said that he was "distrustful" of politicians. But, as the primary Judge pointed out, the witness later modified this in his oral evidence in chief to "hesitant to believe".
When the Scheme was suspended early in 1991, Mr Shasha said that it came as a complete surprise and shock to him, and that he "felt that all of my work of the past forty years was now at stake". However, as the primary Judge also pointed out, this was later modified somewhat under cross-examination.
In the course of that portion of his cross-examination dealing with the conference at Dubrovnik, Mr Shasha said of the statements made by the respondent:

"At that point it seemed to me - you know, I can compare it to an insurance policy. If somebody tells me that the price can never go down, it can only go up, to me that was an insurance against a decline in prices and if I can have that insurance I can hope maybe for a rise in prices if I am guaranteed no decline in price. That is a good situation to be in."

In his cross-examination, Mr Shasha also accepted that in June 1990, quite apart from what was said at Dubrovnik, there was a number of reasons why the Australian Government would be very reluctant further to lower the floor price. To do so would have resulted in a loss of confidence in wool pricing, a loss of credibility to the Government, political pressure from wool growers and the like.
The following passage also occurred in the cross-examination of Mr Shasha:

"Now, you knew in June 1990 that Mr Eschmann had taken steps to sell almost all or all of the wool which he had purchased from Unilan Australia? - According to him he had it - Yes, he had it sold pretty much, yes. You believed that? - Yes, there was no reason to doubt it.

You knew also that it was sold at prices based on a floor price of 870? - Yes, or better. Yes or better. You believed in June that it would be possible for Mr Eschmann or for his company to enforce those contracts with his purchasers? - Yes, we certainly believed so. As long as he could enforce his contracts with those purchasers there would be no difficulty in his paying you the 870? - That is right. Also, I suggest to you, if he was not able to enforce those contracts then whether or not he could pay you 870 would depend upon the company's own assets, the Eschmann company's own assets? - But we always had control of the wool, the asset was the wool itself. Oh yes, but if John Paul Eschmann S.A. had a hundred million dollars in the bank? - Yes. You would have been able to enforce an 870 sale notwithstanding that his purchasers defaulted? - Conceivably, yes.

You did not know in June 1990 that Eschmann was going to go bankrupt in the following year? - No, we did not know.

The probability was in your mind in June 1990 that given time Eschmann would be able to pay you the 870 he was contracted to pay? - Correct. You continued to believe that throughout the latter half of 1990? - Yes."

Later, there was the following exchange:

"If Mr Eschmann had not been cooperative and you had wanted to sell and you had forced the sale despite his objections? - Yes. You would not have expected to be able to have Mr Eschmann as a willing client in the future? - I don't think that was an issue at all. Mr Eschmann was cooperating. In fact he came out to Australia a couple of times for the purpose of cooperating further.

Yes and you did cooperate with him throughout the year as best you could? - Well, as best we could, yes.

Because he was your best chance of getting the 870 cents that you hoped to get - Yes. . . .

See, what I suggest to you is this, Mr Shasha, that quite independently of Mr Kerin's speech in Dubrovnik, the course you took from June 1990 was the sensible and correct business course to take. Do you agree with that? - We all make errors. I wish whatever we do is sensible. I don't know. You want me to say that everything I did from June 1970 until - I mean - yes, 1990 until October or November of that year was all correct? I don't know."

In the course of Mr Peterson's cross-examination, there was the following passage:

"Up to the end of 1990 you knew nothing to Eschmann's discredit? - I first met Eschmann in April 1990, he was a very impressive person. There was nothing to indicate we had a problem, a major problem with him, we had some operational problems in the way we'd ship certain wools to him.

Indeed you went to a number of creditors' meetings during 1991 which you have annexed to your affidavit" - Yes.

In general terms, I can put to you the particular passages if you wish, you said to those meetings that Eschmann's bankruptcy followed from misfortune rather than dishonesty? - That was my opinion at the time. Now, did you speak to Mr Shasha on a regular basis during the second half of 1990? - Yes. And how often did you speak to him? - From - it would have been about the end of August on, it would have been at least twice a week and from November it was daily.

I suppose the main topic of conversation was: What is happening to wool? - The main topic of conversation was us trying to evaluate the effect of Eschmann, it was a very complex problem.

And part of that evaluation was a discussion of what was likely - what you were likely to be able to do with the wool at Flushing? - Yes. And it is fair to say that during most of that six months you were hopeful that you would be able ultimately to get the 870 cents from Eschmann (for) all the wool? - It was one of the things we looked at and we believed it was possible.

Because you knew he had sold it or either all or almost all of it at prices based on 870? - Yes. And if he could enforce those contracts he would have the money to pay you? - Yes. Even if he could not, you would get whatever he could sell it for plus whatever he could raise to make up the difference? - Yes. You did not believe that Eschmann was insolvent at that time? - No. The first time insolvency came up would - as a serious option was in early 1991."

With this, and the other evidence to which we have referred, before him it plainly was open to the primary Judge to find, and we accept that he properly did find, that the Unilan Group acted as it did after June 1990 in implementation of a commercial decision which would have been made in any event, and that the case as to actual reliance was not made out.
In these circumstances, it is unnecessary to consider the further submission for the respondent that, had the appellants made out their case of reliance, they still would have failed because the primary Judge was correct in his further holding that such reliance would not have been reasonable. (As to the requirement of reasonable reliance, see Trindade and Cane "The Law of Torts in Australia", 2nd Ed., 1993, pp 367-8.) We should, however, indicate our agreement with the following passage in the Reasons for Judgment:

"In short, although people attending the Dubrovnik conference were entitled to assume that what the respondent said was said genuinely by him and represented the view of himself and the Australian Government, it could not rationally be assumed that it was other than a statement of belief at the time. Many considerations including those of a political nature in Australia could have led to a change in attitude by the Australian Government and any person attending the conference should, in my view, have known or assumed that. Certainly persons were not entitled to trade on the basis that any profits made thereafter would be theirs and any losses would be borne by the Australian Government. The statements were not of this character at all."

The result is that the appeal fails and should be dismissed with costs, including costs of the application for leave to appeal which was dismissed on 27 May 1993.
In view of the circumstances referred to earlier in these reasons, it is preferable to dispose of the appeal in this way without entering upon what in a sense are the anterior questions including those as to the existence of a duty of care and the capacity in which any such duty was owed by the respondent to the applicants. We prefer to leave for another day, and for fuller argument, the legal complexities that are involved.

[1993] FCA 605

01 SEPTEMBER 1993