Young v King & Ors

[2007] HCATrans 54

[2007] HCATrans 054

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Melbourne  No M120 of 2006

B e t w e e n -

ROBERT YOUNG

Applicant

and

JOHN MILLER CAMPBELL KING, DAVID JOHN HARLIN, BRIAN ALEXANDER GIVEN, SUZANNE MARGARET RUSSELL, JANNETTE CHRISTINE COPSON, GARY JAMES ERNST, ANNE TEMPLEMAN‑JONES, DAVID COLIN SHOMBURGK, SUE ALEXANDER MACLELLEN, BYRON ROBERTS (AS TRUSTEES OF THE TRAVEL COMPENSATION FUND)

First Respondents

LANE MOLLER PARTNERS PTY LTD T/AS LANE MOLLER PARTNERS

Second Respondent

WAYNE JAMES YURISICH

Third Respondent

CHERYL ANNE YURISICH

Fourth Respondent

Office of the Registry
  Melbourne  No M123 of 2006

B e t w e e n -

LANE MOLLER PARTNERS PTY LIMITED T/AS LANE MOLLER PARTNERS

Applicant

and

JOHN MILLER CAMPBELL KING, DAVID JOHN HARLAND, BRIAN ALEXANDER GIVEN, SUZANNE MARGARET RUSSELL, JANNETTE CHRISTINE COPSON, GARY JAMES ERNST, ANNE TEMPLEMAN‑JONES, DAVID COLIN SHOMBURGK, SUE ALEXANDER MACLELLEN, BYRON ROBERTS

First Respondents

ROBERT YOUNG

Second Respondent

WAYNE JAMES YURISICH

Third Respondent

CHERYL ANNE YURISICH

Fourth Respondent

Applications for special leave to appeal

KIRBY J
HEYDON J

TRANSCRIPT OF PROCEEDINGS

FROM MELBOURNE BY VIDEO LINK TO CANBERRA

ON FRIDAY, 9 FEBRUARY 2007, AT 11.21 AM

Copyright in the High Court of Australia

__________________

MR C.L. PANNAM, QC:   If the Court pleases, I appear with my learned friend, MR P.J. COSGRAVE, SC, on behalf of the applicants.  (instructed by Moray & Agnew)

MR R.E. DUBLER, SC:   If the Court pleases, I act on behalf of the first respondents.  (instructed McCabe Terrill)

KIRBY J:   Yes, Dr Pannam.

MR PANNAM:   Your Honours, the point that is sought to be made the subject of an appeal in the High Court is, it is submitted, one of general public importance.  It relates to the nationally operating Travel Compensation Fund and the right of that fund to recover the balance it has been required to pay pursuant to the provisions under which it operates to typically accountants and auditors who provide it with incorrect information.

The point can be, perhaps, illustrated by reference to an example.  The Court has considered this scheme before, as your Honours are well aware, in Tambree’s Case.  Now, in Tambree, the question was a question of causation and the reasoning that the Court focused upon whether there was a break in the chain of causation caused by the fact that the travel agency in question there had ceased trading but had continued unlawfully to carry on business and it incurred substantial losses during that period of time.  The Court held that that was not a break in the chain of causation and the fund was entitled to recover the whole of its loss which was, in substantial part, indeed almost in whole the amount of the loss that was incurred during the period between the time when it ceased participation in the fund and the time when it finally collapsed.

Now, if one just takes, to highlight the point that we say would arise on this appeal if leave was granted, can we give an example?  Assume on the facts of Tambree’s Case, during the course of that unlawful trading the situation had not got worse but it improved so that had the travel agency had its membership of the fund stopped back earlier, let us take a figure, it would have then faced claims of about $200,000 to which the fund would be responsible and then the question would be, “What could the fund recover from the, by hypothesis, negligent auditor and accountant who had provided the accounts upon which it had permitted the continuation?”

But assume, during the course of the unlawful trading, instead of things getting worse they got better.  By the end of the period of time let us say the only claims that were made against the fund when it finally collapsed were, say, $50,000.  The consequence of the Full Court’s decision would be that the fund could recover that $50,000.  Now, in our respectful submission, that would not be consistent with principle and would not be in conformity with the provisions of section 82 of the Act because the fund, in fact, would be, in that example, some $150,000 better off.

So the submission that we put to the Court is this, that what Tambree was concerned with was that part of section 82 that deals with causation.  But, of course, wrapped up in section 82 are other concepts, remoteness, for example, and certainly measure of damage.  In our respectful submission, what the Full Federal Court did in the present case was not to pay any attention at all to the proper principles applying to measure of damage, but rather reasoned in the following way, basing its reasoning on Wardley.

In Wardley the Court held that the loss did not accrue until it materialised.  The mere fact that there was a risk of loss was not loss.  The loss was only suffered when it materialised.  So reasoned the Full Federal Court.  In the present case it was only when Jaja, the travel agency involved in the present case, finally ceased to be a member of the fund that the cause of action accrued.  In our respectful submission, the reasoning should not have stopped there.  That is only the starting point, in our respectful submission.  The question then is, that was the point where the cause of action accrued but the question then was, what was the measure of the loss that had accrued and was caused by, by hypothesis, negligent accounting and auditing reports.

KIRBY J:   It does seem to require a very close examination of the facts and it may be your misfortune, but we had a case in the last two days which involved the most intensive examination by Mr Myers and Mr O’Bryan of facts, and in the end one gets to a point where one thinks that really is not a very productive use of the time of this Court.

MR PANNAM:   The facts in this case can be briefly stated in a matter of 30 seconds or so.  As at August of 1999, Jaja, so found by the trial judge, was so hopelessly insolvent that it would have had to have gone into immediate liquidation and he found there was no alternative open to the fund but to cease participation.  He then found that – finally, when it went into liquidation and ceased to be a member of the fund was late February.  He also found as a fact that as at late August, although the parties did not assist him with evidence, but doing the best he could on the basis of the evidence, that the losses that the travel agency, Jaja, would have suffered back then in August 1999 was about $198,000 as distinct from the $200,000 that it suffered at the end of February.

KIRBY J:   Your point, essentially, is the extra point.  You say that the issue is not what the agency lost, it is what it lost as a consequence of the negligence of the auditors and accountants and the issue is what extra loss was suffered by reason of their negligence, if any, and that the mistake that has been made is to just burden you with everything and not to be discriminating.

Now, we understand that, but to decide that is very much a fact search.  It does not seem to raise any point of principle and could anybody have any doubt about the point of principle?  It would be grossly unjust if you were burdened with all of the consequences and all of the losses of the travel agency if they were not the extra result of your intervention and carelessness.

MR PANNAM:   If one goes back, in response to your Honour’s question, to the provisions of section 82 itself, you look at the loss and damage that was caused by the conduct in question.

KIRBY J:   It all hangs on the word “by,” does it not?

MR PANNAM:   Yes, it does.

KIRBY J:   In the statute.

MR PANNAM:   Yes, so that you look to see, putting contract measure on one side, tort measure on one side and looking simply at the words of the statute, what was the loss and damage that was caused by the inaccurate reporting of the accountant and the auditor?  In our respectful submission, the answer to that question is not simply to say what the end result was and say, “Well, we allowed the travel agency to continue in business but when it finally folded there were all of these damages and the fund could recover them, if it is required to pay them, from the negligent auditor and accountant”.  That is what the Full Federal Court decision does.  It does not follow from Wardley.  It does not follow from Tambree.  It is a different question.

In relation to this scheme, it is submitted that the Court ought to look at Tambree, part 2, as it were, namely, Tambree looked at the causal question that is wrapped up in section 82.  This case looks at a different question and that is, what is the proper measure of the loss?  That is the short point in ‑ ‑ ‑

KIRBY J:   It is a short point because it is a fact point and it is a fact point because it is dealt with in courts applying the trade practices legislation and equivalent laws every day of the week.  It does not seem to raise any – I do appreciate you say an injustice has been done to your client and you put that very attractively in your oral and written submissions, but it does not seem to tender a point of important principle for this Court.  We dealt with such points of principle as exist in this legislation and area in Tambree.  You normally only have one bite of the cherry for at least 10 years.

MR PANNAM:   With respect, your Honour, Tambree really does not bear upon the present case ‑ ‑ ‑

KIRBY J:   I know that, but it is the same context.

MR PANNAM:   But as long as Tambree in the Full Federal Court decision stands, lower courts in this country, intermediate courts of appeal, are going to apply the reasoning of the Full Federal Court and that ‑ ‑ ‑

KIRBY J:   Yes, but surely that is a fact question in every case.

MR PANNAM:   It was stated not as a fact question by the Full Federal Court but as a principle, namely, you only look to what happens at the collapse point and that is the amount of damage.  That is the point of the Full Federal Court’s decision.  So that what we say is is the Full Federal Court simply did not deal with the real question which was the other question wrapped up in section 82, namely, the question of what is the proper measure of damage.

Your Honours, I could go on and put the point in various ways but that is the point upon which we would submit there arises a question of general public importance operating in relation to this national scheme and in respect of which the Court ought to make it clear that the Full Federal Court was wrong in that it applied the wrong principle, Tambree did not mandate it and Wardley certainly did not mandate it.

KIRBY J:   This would be called “son of Tambree”.

MR PANNAM:   Yes, “son of Tambree”.  If your Honour pleases, they are the submissions that we would want to put.

KIRBY J:   Yes, Mr Dubler.

MR DUBLER: Your Honours, the question of the proper assessment of damages under section 82 of the Trade Practices Act has been addressed on a number of occasions by the High Court, only just more recently in Tambree, and we say that there is no issue of principle that arises here, that essentially the Full Court was correct in identifying that there was only ever one loss, the $200,000 suffered in February 2000.

The issue argued before the Full Court was essentially this that whilst it was accepted there was causation, whilst it was accepted the contravening conduct caused the one and only loss in February 2000 of $200,000, what the applicant had to do in its case – what the Travel Compensation Fund had to do in its case, was to go further and establish what were the hypothetical or possible contingent losses on a hypothetical collapse in August 1999, that it is wrong to say, with respect to my friend, that the trial judge found that a hypothetical collapse would have led to – must have led to loss of an order of $180,000 or so.

Could I make that good by going directly to the trial judge’s judgment which I think is the passage relied upon by my friend.  In the application book at page 105 your Honour will see at paragraph 501 the statement of the trial judge was:

Let it be assumed, wrongly in my opinion, that was the Fund’s liability as at 30August 1999.  It may or it may not have been.

Just interpolating there for a moment, what the trial judge was doing was saying there is some information of a snapshot of the likely creditors at 30 June 1999.  The trial judge said, and it was accepted all round, there was no evidence and no basis for knowing – impossible, in fact, to know, what would be the nature of the liabilities on a hypothetical collapse in August 1999.  The Full Court commented that goes and changes day‑by‑day.  One claimant of the order of 150,000, if insured, could not ever give rise to a claim.  So the trial judge went on correctly to say:

It may or it may not have been.

What the trial judge did was to use as a hypothetical, perhaps, scenario, the June figures.  The trial judge then, ultimately, at 509, over the page:

However, for the reasons which I have given, in my opinion, the proceedings should be dismissed –

that is, entirely.  So he uses a hypothetical 30 June wrong date, comes to a hypothetical, perhaps 180,000, but no one knows, and then, on his Honour’s analysis, rejects that entirely because there was not a proof of the loss.  The only principle that does arise is this, your Honours, whether any applicant, such as in Tambree, if the Travel Compensation Fund relies on misleading conduct and there is a collapse at a certain date and loss is ascertained, does the travel compensation bear the onus, to come forward and establish in its case as a necessary incident of the measure of damage what would have happened earlier.  The trial judge said you get zero dollars unless you do establish that.

KIRBY J:   I tell you what is worrying me, and it has been raised by Dr Pannam’s submission, that in the nature of the collapse of travel companies they are going to have at an earlier phase losses, cause losses to passengers and then intervenes an accountant or auditor who gives a clear bill of health, but the question is, how do you distinguish between the loss that is the responsibility of the travel company and the loss that is the responsibility of the auditor?  It would be quite unfair to burden the auditor with the earlier losses and you can only really burden them with the extra losses that occur after and on the faith of or as a consequence of or by the certificate of clean health.  Do you accept that principle?  It is only the extra that you get which is attributable to the certificate from the auditor that gives you the clean bill of health.

MR DUBLER:   The answer to your Honour’s question is yes and why it does not ‑ ‑ ‑

KIRBY J:   Yes, it seems self‑evident.

MR DUBLER:   Yes, self‑evident and it does not arise, we would say ‑ ‑ ‑

KIRBY J:   Why in this case can you attribute to the applicants the entirety of the claim for which they have been held liable?

MR DUBLER:   Because the reason why it does not arise on the application for special leave is the reason the respondent, that is the Travel Compensation Fund got all of its losses, was it was held by the trial judge that the Travel Compensation Fund had not proven in its case a nature of what would have happened, the starting point.  So the answer to your Honour’s inquiry, it is of course obvious.  But if the evidence establishes and the trial judge can find with confidence on the evidence that there would have been a loss at an earlier time, the measure of loss must truly only be the difference because that is commonsensical.  But what is wrong with the principles sought to be raised by the applicant is it puts too strict a burden on the applicant to go into and prove what essentially was agreed as being impossible to ascertain. 

The evidence below, your Honour, was that it was too hard because of the lack of proper records to know a hypothetical collapse in August.  So the policy principle is this, and bearing in mind the comments, for example, of the Chief Justice in Tambree, what is the correct application of the preposition “by” that accords with the remedial purpose of the Act?  Should the Travel Compensation Fund in such cases receive no damages because it cannot prove what the compensating earlier losses might have been, or should it be, and this is what we say is the correct principle – and I will give your Honours a reference in a moment – that if the applicant, the fund, proves loss as a result of an inducement and so therefore, prime facie, the “by” preposition requirement is made out, it is then for the respondent, or the evidence as a whole before the trial judge, to weigh against that.  If it can be found that an earlier collapse would have led to losses in any event, then that would mean that that part of the loss negatives the causal link.

Now, a different context but essentially the similar principle was stated by Justice Gummow in Henville v Walker.  Could I take your Honours just to that.  Your Honours might be reminded in Henville v Walker the question was, but if you have more than one causal factor in a loss, if you cannot separate the loss between the causes, is it for the applicant to do so or is it, if it is impossible to ascertain the different losses connected with the different causes, should the applicant, prima facie, succeed in the absence of anything further known?  If I could take your Honours to the judgment of Justice Gummow in Henville v Walker at 482 ‑ ‑ ‑

KIRBY J:   Yes, we have that.

MR DUBLER:   At paragraph 68 his Honour points out, and this is the second half of the second line:

it should not be confined by imposing an unduly strict burden of proof on the claimant. As already indicated, s 82 provides for the recovery of loss or damage that a person suffers by contravening conduct. To require a claimant to prove which component of his or her loss or damage is referable to the contravening conduct would be to impose limitations on relief which the terms of that subsection do not require.

Then at paragraph 70:

it is for the person whose contravening conduct materially contributed to the loss or damage to establish what component of that loss or damage is referrable to some act or event other than his or her contravening conduct and not for the person who suffers loss or damage to establish the precise component or components referable to that conduct.

His Honour essentially concluded that if material contribution can be shown or a link can be shown so that the conduct can be said to materially contribute to the loss, the applicant has succeeded at that stage.  If the trial judge or the respondent is able to say that something would have reduced that loss in any event, then that would be an appropriate measure.  The case here though, your Honours, was that the trial judge said “We don’t know, but you should have”, the applicant, and that would, we say, be contrary to the purpose of a remedial statute in such a case.

HEYDON J:   Your point is really this, that if you just look at it as a matter of simple justice in this case, the trustees of the fund really knew nothing about the travel agent’s affairs, whereas the auditor and the accountant, though not actually part of the business, would have known or be likely to have known a lot more about it and so it is not unjust that the trustees bear a primary burden, as it were, of proving some loss and then some other burden lies on those who were responsible for the misleading conduct to reduce that figure if they can.

MR DUBLER:   Because otherwise the burden just becomes too high for the Travel Compensation Fund generally.  For example, in the Fry Case or Tambree Case in the High Court at paragraph [33] of the Chief Justice’s judgment the Chief Justice refers to the fact - and it is in the application book at 140 it is quoted – but if I could just read the sentence from the Chief Justice:

The risk that an insolvent agent (as Ms Fry appears to have been) would keep trading until forced by the authorities to close down, and that claims would be made under cl 15.2, was part of the risk against which the appellant was seeking to protect itself –

Essentially the Chief Justice went on to say that it would be consistent with the purpose of the Act if the Travel Compensation Fund establishes reliance on misleading conduct and then the collapse happens, that that is the loss suffered by the conduct, that it would be contrary to the remedial purpose of the Act to require the applicant to go further and investigate someone else’s insolvencies about which the level of information must necessarily be imperfect, about which there must be speculation and hypotheses one way or another, the nature of the collapse, the size of the collapse, the nature of the insurance policies, bearing in mind, your Honours, as I have indicated, the trial judge made no findings.  The loss was on the onus.

KIRBY J:   I do not think we need to hear any more from you, Mr Dubler.  Yes, Dr Pannam, anything in reply to what has been said?

MR PANNAM:   Only one point, your Honours, and that is can we refer to page 51 of the application book in paragraph 232 of the learned trial judge’s reasons?

KIRBY J:   Yes.

MR PANNAM:   The learned judge there first introduced the subject by observing that:

No attempt has been made by anyone and, in particular, the experts, to do any assessment of the company’s financial position as at 31 August 1999.

He goes on to expand on that in the following paragraphs to 236.  Then can I take the Court to 273 at page 61 of the application book?

KIRBY J:   Yes.

MR PANNAM:   His Honour said there:

That is a most significant matter because, on the applicants’ own case, their damages are nothing like they claim them to be.  I will return to this later but the applicants’ case is simply that they paid out the sum to Jaja’s existing clients as at the time that Jaja went into liquidation.  The applicants’ case does not recognise that if the fourth and fifth respondents had done what the applicants say they ought to have done, the applicants would have paid at least $163,000 to the existing Jaja clients. 

Finally, far from opining at pages 105 to 106, simply speculating as to what the position would have been, unassisted as his Honour was, irrespective of where the burden of proof laid, his Honour actually made a finding and at 508, which is immediately before the paragraphs my learned friend referred to:

Therefore, if I am wrong –

so that if his approach was wrong –

and there is sufficient evidence upon which the Fund’s damages could be assessed, they would be assessed in the order of $2,000.

So the question of the onus of proof, in our respectful submission, is not significant.  There was a finding below that there was only a $2,000 difference between the position in late August of 1999 and late February of 2000.  So that the point about where the onus lay really does not respond to the submission that we make because the trial judge actually made a finding on the alternative basis and found that it was only a $2,000 difference, irrespective of the difficulties to be confronted.  If the Court pleases.

KIRBY J:   Dr Pannam, I should have asked you at the beginning, I take it it was by the consent of the parties that these two matters were heard together, the two applications?

MR PANNAM:   Yes.

KIRBY J:   I have a note that there is no appearance for the third respondent or the fourth respondent in the proceedings.

MR PANNAM:   I should have announced more specifically our appearance.  We appear on behalf of both of them.  I said “the applicants” and I should have identified more specifically for whom we acted.

KIRBY J:   Very well.  Justice Heydon will pronounce the orders of the Court and give its reasons.

HEYDON J:   The applicants were ordered by the Full Court of the Federal Court of Australia (Sundberg, Weinberg and Rares JJ) to pay $200,135 as damages under the Trade Practices Act 1974 (Cth). The judgment creditors are trustees of the Travel Compensation Fund operating under uniform State legislation.

The structure of the legislation was recently considered by this Court in Travel Compensation Fund v Tambree t/as R Tambree and Associates (2005) 80 ALJR 183. Here the fund compensated the customers of the travel agent after it had accepted payments from them, ceased business and failed to provide the travel services paid for. The applicants were found to have engaged in misleading and deceptive conduct by painting an unduly optimistic picture of the travel agent’s financial health. This conduct, which took place in August 1999, caused the travel agent’s registration in the fund’s compensation scheme to be effected on 16 September 1999. The travel agent ceased business in February 2000.

The trial judge, Lander J, held that the true measure of the fund’s loss was the difference between the travel agent’s “existing liabilities” in August 1999, and those which it had by February 2000.  Since the fund did not establish what the liabilities were in August 1999, Lander J held that it had failed to prove the quantum of its damages. 

The Full Court concentrated on clause 15 of a trust deed which imposed on the fund a duty to pay compensation to the customers.  Clause 15 created a contingent liability.  That liability only became actual when the travel agent failed.  As the applicants conceded in the Full Court, paragraph 56, in August 1999 there were no relevant “existing liabilities”.  It only acquired “existing liabilities” when the travel agent failed in February 2000 and the damages corresponded with these liabilities less insurance recoveries.

The applicants seek to demonstrate error in the Full Court’s approach by recourse to various examples.  These examples are not analogous or, at least, not closely analogous to the present case.  The legislation permits a range of approaches to calculating damages.  The applicants have not demonstrated that the Full Court was wrong in the approach it selected in the present circumstances, nor is the outcome unjust in the particular circumstances.

There are insufficient prospects of success to justify the grant of special leave.  Special leave is refused with costs.

KIRBY J:   The Court will adjourn now briefly in order for the video link to be established to Perth.

AT 11.51 AM THE MATTER WAS CONCLUDED