Wynton Stone Australia Pty Ltd (In Liquidation) v MWH Australia Pty Ltd (Formerly Montgomery Watson Australia Pty Ltd) [2011] HCATrans 61

[2011] HCATrans 61

[2011] HCATrans 061

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Melbourne       No M158 of 2010
  No M159 of 2010

B e t w e e n -

WYNTON STONE AUSTRALIA PTY LTD (IN LIQUIDATION) (ACN 065 625 498)

Applicant

and

MWH AUSTRALIA PTY LTD (FORMERLY MONTGOMERY WATSON AUSTRALIA PTY LTD) (ACN 007 820 322)

Respondent

Applications for special leave to appeal

HEYDON J
CRENNAN J

TRANSCRIPT OF PROCEEDINGS

AT MELBOURNE ON FRIDAY, 11 MARCH 2011, AT 10.03 AM

Copyright in the High Court of Australia

MR D.J. O’CALLAGHAN, SC:   If the Court pleases, I appear with my learned friend, MR C.M. ARCHIBALD, for the applicant in both matters.  (instructed by Norton Rose Australia)

MR D.S. LEVIN, QC:   If the Court pleases, I appear with my learned friend, MR I.H. PERCY, on behalf of the respondent in both matters.  (instructed by Monahan & Rowell Lawyers)

HEYDON J:   Yes.

CRENNAN J:   Mr O’Callaghan, just before you start, I wanted, if I may, just to make sure I understand how the various points of appeal would translate into orders which you might seek, to look, please, at the order made by the primary judge which is to be found at application book 173, together with looking at application book 258 which sets out the three special leave questions.

MR O’CALLAGHAN:   Yes, your Honour.

CRENNAN J:   Now, just checking then if I may, the first special leave point is the abandoned claim point.  So that is the warranty point.  Looking at his Honour’s order, there are damages awarded there for breach of warranty, so that will be set aside if you succeed on that point.  Then your third point is the principles of contractual construction and if you succeed there the Court of Appeal ordered that after the word “warranty”, “breach of contract and negligence” be added to that order of the primary judge.  So success on your third ground would set aside that part of the order “damages in relation to breach of contract and negligence”, as I understand it.

MR O’CALLAGHAN:   That is correct.

CRENNAN J:   Then your third ground is your inferred reliance point in relation to the trade practices claim and you lost in the Court of Appeal in relation to that, although it does not seem to have translated into any specific orders in the Court of Appeal.  But I expect the case is, is it, that you are being pre‑emptive in relation to a possible notice of contention?
Is that how it all works and fits together?

MR O’CALLAGHAN:   Yes, your Honour.  It can fit together that way but it also fits together because a declaration under section 87 of the Trade Practices Act that was sought in respect of the section 52 claim is, in substance, a stepping stone to the making of an order that, in effect, the respondent be permitted to obtain damages for breach of contract or negligence notwithstanding the terms of the release in clause 2 of the deed of novation. 

CRENNAN J:   Yes, and indeed I think the Court of Appeal referred to that in the alternative, did they not?

MR O’CALLAGHAN:   They did.  The Court of Appeal said, I think ‑ ‑ ‑

CRENNAN J:   Paragraph 108 at 237.

MR O’CALLAGHAN:   Yes, your Honour:

In case it matters, however, we should say that –

they would have made an order under section 87 were their interpretation incorrect, that they would have disentitled our client from relying on the clause were it to be broadly interpreted.  Before the Court of Appeal - I do not think this is in the materials - but the respondent set out in a document the relief it sought and it said in a document entitled “Relief sought by the appellant” if clause 2 of the deed of novation is construed as releasing the respondent from tortious and contractual liability, the court declares that we be disentitled from relying on it and (4) the judgment given in favour of the appellant be varied by inserting the words “negligence and breach of contract”.  So they saw section 87 as a stepping stone, as it was.

CRENNAN J:   Yes, thank you.

HEYDON J:   Mr O’Callaghan, your point about the abandoned claim, that is to say Justice Byrne directed that anything he was going to decide would have to be dealt with in final address and a particular claim was not dealt with in final address, is there not a ground of appeal in your draft notice of appeal that captures that point?

MR O’CALLAGHAN:   There are two draft notices of appeal, your Honour.

HEYDON J:   Which one should I be looking at - the one on page 255?  I see, I see, I see.  You deal with some points in the first one and some in the second.  Why two notices of appeal?  Will not one do?

MR O’CALLAGHAN:   I gather that was done at the direction of the Registry.

HEYDON J:   I have one other question.  In paragraph 33 on page 267 of your submissions, you attack the Court of Appeal strongly for denying you procedural fairness in three respects.  Should not that type of attack appear in a draft notice of appeal?

MR O’CALLAGHAN:   It should, your Honour, and as we said in our reply, it will if leave is granted, if special leave is granted.

HEYDON J:   To put it bluntly, you adhere to what you say in paragraph 33?

MR O’CALLAGHAN:   Yes, your Honour. 

HEYDON J:   Yes, carry on, Mr O’Callaghan.

MR O’CALLAGHAN:   Can we turn first, your Honour, to the Trade Practices Act point?  The status of Justice Wilson’s dicta in Gould v Vaggelas about so-called inferred reliance, the implication is generally of what this Court said in Campbell v Backoffice about that dicta we say are important issues that warrant this Court’s consideration.  At appeal book 236, the majority said:

In principle, however, we see nothing in Campbell which runs counter to the reasoning of the Full Federal Court in Ricochet and Hanave.  It appears to us that those cases remain as authoritative statements that Wilson J’s approach in Gould v Vaggelas provides a practical guide to the way in which inferences can and should be drawn in cases of this kind.

In our respectful submission, that statement is clearly wrong.  The Chief Justice sets out at application book 207 the acutely relevant words from Campbell  v Backoffice where their Honours made three important points about why it is inapposite to apply the dictum of Justice Wilson in Gould to a claim under the Trade Practices Act.  This is a passage to which the majority made no reference despite the fact that it was at centre stage of the submissions that we made.

The points that the plurality made in that passage that the Chief Justice sets out are that Gould v Vaggelas is expressed in relation to a case in relation to deceit.  The dictum contains a number of subsidiary questions of fact, such as what is a material representation, was it calculated to induce?  Thirdly, because it is directed to the drawing of inferences, it must be carefully considered in light of the evidence.

Now, none of those points and that is what the Court in Campbell calls them were addressed by the majority in this case.  They ignored, with great respect to them, the evidence in this case.  The two gentlemen were called, through whose hands the deed of novation passed, said that they could not remember it and they passed it on to a director in Sydney who signed it.  That director was never called.  We say, in circumstances where the evidence is along those lines, for reasons that the Chief Justice gave in dissent, the drawing of the inference in Gould is not open at all.  It is hardly surprising that the learned trial judge found the respondent had not proved its case.  At application book 236, paragraph 106, the court or the majority rather says:

At all events, if one looks at the acknowledgement in clause 4 of the Deed in the light of the relevant surrounding facts and circumstances and the course of conduct leading up to the execution of the deed, it appears to be a material representation -

In our respectful submission, that statement is also, with respect, clearly wrong because the court did not identify any facts or circumstances; they did not identify any course of conduct.

HEYDON J:   That is really a sort of “no reasons” point.

MR O’CALLAGHAN:   Yes.  The second point in Campbell is asking those subsidiary questions.  Well, they did not ask any of them.  The first point is made in Backoffice is that the dicta was expressed in relation to a deceit case.  Their Honours refer in passing to the fact that Gould was a deceit case but they do not go anywhere with the observation.  In our respectful submission, the point that is made in Campbell v Backoffice required them to consider, and we say that this Court should now consider, whether that dicta has any role to play at all in section 52 cases, whether it is an evidential onus or a tactical onus or indeed whether the dicta is correct at all.  We say that those are important questions that warrant the grant of special leave.  May I turn to the construction point?

HEYDON J:   Yes.

MR O’CALLAGHAN:   There the court at 223 of the application book, paragraph 75 embarked upon what we submit, with great respect, was the wholesale rewriting of the deed.  There is a reference in passing to Pacific Carriers and IATA but, in substance, we say, the sole basis that the court, in fact, gave for departing for what everyone seems to have agreed was the claimed meaning of clause 2 of the deed of novation was that the meaning was not consistent with the court’s own, we would say, with great respect, untutored version of what business commonsense was.  They did so ‑ ‑ ‑

HEYDON J:   This is a point where the Court of Appeal differed from Justice Byrne, is it not?

MR O’CALLAGHAN:   Yes, it is, your Honour.  They did so by saying on at least four separate occasions between 224 and 226 of the application book that the interpretation that the court adopted was one that was “more likely” than the interpretation contended for by our client.  In our respectful submission, it cannot be that that formulation more likely was an accident and the inevitable conclusion that one must draw is that the court thought that the construction contended for by our client was still likely.  It was just that theirs was more likely. 

In our submission, absent evidence of business commonsense, absent a contention by anyone that that is how you construed the contract, the deed, the court erred as a matter of principle in invoking its own, I use again the expression “untutored”, with respect, interpretation of words that everyone conceded had a plain meaning and which we say are unambiguous and make perfect business sense.

We say, with great respect, and would have said to the Court of Appeal that it makes perfect commonsense that everyone should know that as from the effective date of substitution that Montgomery Watson was to look to TTW and only TTW for relief and that is the construction that we contended for below. 

CRENNAN J:   So you are not saying the court erred in its application of the principles of construction but made itself an error of principle by construing the deed the way it did?

MR O’CALLAGHAN:   Your Honour, in our submission, the court did err as a matter of fundamental principle by approaching the question of construction as if it is capable of being resolved by reference to the court’s unguided sense of what business commonsense is in circumstances where the construction found for was never contended for and when no evidence of business commonsense existed.

HEYDON J:   I am not sure you could call evidence of business commonsense.  What you could point to is surrounding circumstances in a Chartbrook sense, in a Prenn v Simmonds type of sense.

CRENNAN J:   Or custom?

HEYDON J:   You might - perhaps custom, but this analysis does not operate along those lines.

MR O’CALLAGHAN:   It most certainly does not, your Honour.  We say because it does not, because the only reference to established principle is a footnote to Pacific Carriers and to IATA without taking it any further, it is the reasoning that follows that - we would call it rewriting in paragraph 75 that represents the approach the court took to construction and we say it is fundamentally wrong as a matter of principle.

HEYDON J:   Yes.  Are you coming to the other point?

MR O’CALLAGHAN:   Yes, your Honour, I am, briefly. 

HEYDON J:   I, for my part, have difficulty in grappling with it.  You say, nothing, negative, it was a negative.  The other side say, no, no, there are positive things and they refer in footnotes to documents that are not before us, not part of the application.

MR O’CALLAGHAN:   Your Honour, the only evidence that the respondent adduces of what it says was the pressing by it of the breach of warranty claim in final addresses appears at, in our submissions, application book 261 footnote 20.  That is all there is. 

HEYDON J:   You say that has nothing to do with this particular claim. 

MR O’CALLAGHAN:   We say, self-evidently, has nothing to do with the breach of warranty claim.  As the Chief Justice recognised at page 211 of the application book where her Honour the Chief Justice sets out part of that exchange at the top of page 211, they were talking about the Trade Practices Act claim.  The onus is on my learned friend that the transcript runs to thousands of pages, although, with respect, it is only the closings that are relevant, I suppose, which is some hundreds of pages.  But in all those hundreds of pages, the closings from my learned friend, that is all there is and has nothing to do with the breach of warranty claim. 

It follows that it was not mentioned, let alone pressed in final addresses.  That must be established unless anything else can be pointed to which it cannot.  It follows that by the rules of the trial that the judge set and everyone agreed to that when my learned friend sat down for the final time in his closing submissions that claim was necessarily abandoned and it was never open to the learned trial judge to consider it or decide the claim in the respondent’s favour.  Those are our submissions.  If the Court pleases.

HEYDON J:   Yes, Mr Levin.

MR LEVIN:   Could I take up our submissions ‑ ‑ ‑

HEYDON J:   Mr Levin, …..from granting special leave, could you direct your submissions to the question why should this matter not be referred into a Full Court of this Court for argument as if on appeal.  In other words, if it turns out that Mr O’Callaghan’s points dissolve in the hot sun that will beat on them, the plug can be pulled and everyone can go away but if there is something in them, they can be examined.  It is a little difficult for us to deal with them with special leave papers, as it were, in front of us.

MR LEVIN:   I appreciate that, your Honour.  There is really no disadvantage, I suppose, in the matter being pressed again with special leave still not finally granted where all the papers are before the Court.  This was a – I think it was a 40‑day trial.  It was an extensive matter.  There were seven parties involved.  When we talk about the conduct of the case, it is very hard in 30 seconds to say, well, this was or was not the conduct of the case. 

It is obviously important on the abandonment issue.  For example, the judge himself, we say, was quite convinced that the warranty point was a live issue because when he circulated a draft of the initial pages of his judgment where he set out his understanding of the pleadings and what was being pressed he included it, my learned friends never objected, though they were invited to do so.  He dealt with my learned friends up hill and down dale during their closing submissions on the warranty point.

So, in the judge’s mind it was a live issue although as you said, your Honour, a moment ago, when I sat down, one cannot actually point to very much in the way of having been dealt with in our closing submissions.  We say the question of whether it was pressed in closing submissions was a question which only comes into the issue in the reasons for judgment.  The judge actually in the course of the running where he said “Look, this is a complicated case, if you want me to decide an issue you have to make sure it is properly pleaded ‑ ‑ ‑

HEYDON J:   And mentioned in final address.

MR LEVIN:   He did not say “and mentioned in final address” until he gave his reasons, with respect.  So that it was a matter of it being “pressed” I think his words were but the first reference of final address came in his reasons.  But be that as it may, your Honour has asked me, well, why should it not be referred so that it could be properly addressed with the full documentation in order for both the appeal and the special leave issue to be considered.  I cannot really point to a convincing reason why that would be an improper approach. 

If the Court is uncomfortable with the paucity of material which is inevitable at this stage of an application and really finds that it is in a position of not being able to decide, I am in a cleft stick because if I say, well, you must decide today, then the Court is probably bound to grant special leave.  It seems to me that it is more appropriate if the Court is in that position of uncertainty to say, well, let us leave the special leave for a full argument.

HEYDON J:   Yes, very well.  Yes, thank you, Mr Levin.  Mr O’Callaghan, do you have any opposition, and to oppose would be a risky course ‑ ‑ ‑

MR O’CALLAGHAN:   My instincts tell me that, too, your Honour.

HEYDON J:   ‑ ‑ ‑ to simply referring it into the Full Court for argument as on appeal. 

MR O’CALLAGHAN:   We have no opposition to that, your Honour.

HEYDON J:   How long do you think this would take, assuming it ended up being an argument on appeal?

MR O’CALLAGHAN:   We would have thought a day, your Honour.

HEYDON J:   What do you think, Mr Levin?

MR LEVIN:   I do not think it will take more than a day.  I think it could quite reasonably take less.

HEYDON J:   In view of some of the things Mr Levin has said and he is obviously a force in some of them, I am a little troubled about 40 days of transcript and accompanying documents being bundled up for the Court.  We would urge the parties to concentrate on what is really necessary.

MR O’CALLAGHAN:   That shall be done, your Honour.

HEYDON J:   Very well, we will refer these matters to the Full Court for argument as on appeal.

AT 10.26 AM THE MATTERS WERE CONCLUDED