Marks and ORS v GIO Australia Holdings Ltd and ORS S209/1996 [1997] HCATrans 125 (10 April 1997)

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry

Sydney No S209 of 1996

B e t w e e n -

MICHAEL MARKS in a representative capacity on behalf of the Borrowers under the Asset Accumulator Account (AAA) of GIO HOLDINGS LTD described or otherwise identified in the schedule annexed hereto ("the Borrowers")

First Applicant

JEREMY KINROSS

Second Applicant

PAUL McCULLAGH

Third Applicant

ALEXANDRA WILLIAMSON

Fourth Applicant

and

GIO AUSTRALIA HOLDINGS LIMITED

First Respondent

GIO GENERAL LIMITED

Second Respondent

GIO FINANCE LIMITED

Third Respondent

GIO BUILDING SOCIETY LIMITED

Fourth Respondent

Application for special leave to appeal

TOOHEY J

GAUDRON J

McHUGH J

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON THURSDAY, 10 APRIL 1997, AT 11.13 AM

Copyright in the High Court of Australia

___________________

MR S. FINCH: If the Court pleases, I appear for the applicants. (instructed by Cashman & Partners)

MR D.M.J. BENNETT, QC: If the Court pleases, I appear with my learned friend, MR S.D. KALFAS, for the respondents. (instructed by Phillips Fox)

MR J.S. HILTON, SC: If the Court pleases, I appear with my learned friend, MR I.D. FAULKNER, on behalf of the Australian Competition and Consumer Commission and would seek leave to put submissions to the Court as amicus curiae in

support of the application for special leave. (instructed by the Australian Government Solicitor)

TOOHEY J: As amicus.

MR HILTON: As amicus.

TOOHEY J: The material that is before the Court raises, it would seem, adequately the issues relevant to either a grant or refusal of special leave, Mr Hilton.

MR HILTON: That is so.

TOOHEY J: That would be the footing upon which leave to appear as amicus would be granted, in other words, the absence of issues or argument that might be relevant.

MR HILTON: I entirely accept, of course, the Court's view. We have put before the Court written submissions upon the issues which we would very respectfully submit perhaps develops certain of the issues for the Court's consideration from a view perhaps slightly different from the perspective of the applicant, namely from the perspective of the effect of a contravention of Part V and the need for the appropriate remedy on the proper functioning of the markets.

TOOHEY J: Those are issues that might form the basis for an application for leave to appear as amicus or to intervene if special leave were granted. I am not sure they would really assist us at this stage of the proceedings.

MR HILTON: I understand what has fallen from your Honour. Your Honour doubtless will also be taken to a very recent decision of the Court of Appeal of New South Wales which bears upon the issues and the public importance. It was thought, from the Commission's point of view, that the Court should be informed of the Commission's approach, as the party charged by the Parliament with the general enforcement of the Act.

TOOHEY J: Thank you, Mr Hilton. Mr Hilton, for the reasons that I think I have already canvassed, we do not think it is appropriate to grant leave to the Commission to appear as amicus at this point or in relation to this application. The future will take care of itself, no doubt.

MR HILTON: If the Court pleases. With the Court's permission, may I remain at the Bar table, pending the dealing - - -

TOOHEY J: Oh yes.

MR HILTON: Thank you.

TOOHEY J: Mr Bennett, we think we might be advantaged if we heard from you as to why there should not be a grant of special leave in this matter.

MR BENNETT: Your Honour, we concede the public importance, but we would submit there is simply insufficient doubt. May I just put a number of matters to the Court in support of that. The first is this: if one sues in tort, there is no discretion about what damages one gets. One gets the tort measure. If one sues in contract, there is no discretion. One gets the contract measure. If one sues in both contract and tort and succeeds in both, at some point one elects as to which one one seeks damages under. That is the plaintiff's election. In none of those situations is there any discretion. It is clearly sensible and rational that under section 52 there be a rule one way or the other. It would be unthinkable, we would submit, that there should be, as is suggested in some of the materials, a discretion so that in every case where one has a breach of section 52, the Court looks at the case with a chancellor's.....and says, "Well, this is a very deserving plaintiff and a not very deserving - - -

GAUDRON J: I am not too sure that one can dispose of the matter on that basis. There does seem to have been a development whereby money contracts, if you like, have become what is known as a financial service. Money has become a commodity. This is a matter that does not seem to have been taken into account in cases heretofore. So that when you come to misleading conduct in relation to what is a contract for financial services you are now talking about something quite different from what the cases have hitherto discussed.

MR BENNETT: But that, in our respectful submission, does not affect either the policy or the primary words of the section.

GAUDRON J: But the primary words of the section do not direct you to a measure in tort. The primary words of the section are wide words and ought not be cut down unless clearly so required by definition or by context.

MR BENNETT: The primary words of the section are "compensate.....for loss or damage". Now, those words, in my respectful submission, point to the tort measure. The damage one suffers - - -

GAUDRON J: You would adduce the same words, would you not, for a contract case?

MR BENNETT: There has been no loss or damage. If one fails to get one's expectation damage and one is not suing in contract for that expectation, that is simply not loss or damage which one has to be compensated for. One is not compensation for the loss or damage by being given an expectation measure.

TOOHEY J: But you speak as if the plaintiff, in a proceeding under section 52, somehow has to elect between the measure of damages in contract or the measure of damages in tort. Why is not the proper approach to see what is adequate compensation to the applicant in the particular case?

MR BENNETT: Because, your Honour, that will always be the tort measure, as a matter of English.

McHUGH J: But, you see, have you read Hill v Van Erp, a recent decision of this Court, on solicitor's negligence? Now, I was the sole dissenter in that case and I dissented on the ground that it was an action for tort and that the only damage was the loss of an expectation. The majority of the Court did not see that as denying an action for negligence. The plaintiff was awarded damages in tort for loss of an expectation. Why cannot you carry that reasoning across to this type of case?

MR BENNETT: Because, your Honour, one is using the word "expectation" in two different senses. There is the expectation one has if one owns an item of property or a right which gives one a chance like a contestant in a beauty contest, to take the classic case, or any of the other cases, and that expectation is taken away from one. Then that is not expectation damages, that is reliance damages. What one has lost is something one had. But expectation damages in contract, in the sort of case we are talking about here, are damages where one is giving a person something to which that person was never entitled.

McHUGH J: Yes, I know, but this is not an action for breach of contract. It is an action under section 52 with damages to be assessed under section 82. There is no reason why damages under 82 have got to be put into the dichotomy of tort or contract. Ordinarily this Court has said that approach in tort is the proper approach. But there may be cases that straddle the two.

MR BENNETT: It is not so much - I mean, in fact the measures coincide with tort and contract, but it is a little misleading to describe it that way, as some of the cases do. The real issue is the words are "compensate.....for loss or damage". That means, we would submit, as a matter of English and logic, simply putting the person in the position the person would have been in if the conduct had not occurred. That is what compensates for the loss or damage. The loss or damage is doing something in reliance on what has happened. To compensate for that one puts one back in the position as if that would not happen.

Where you have a case where someone is promised something which can never be achieved and never obtained in the misleading or deceptive way, and the person cannot obtain it but does not suffer any other damage, one is not compensating for the loss or damage the person has suffered by reason of the contravention by giving the person expectation damages. As a matter of English, one is just not doing it. What one is doing is saying, "We will make the person who engaged in this misleading or deceptive conduct make good the representation so that you are in a position that you believed you might have been in had it been true." That is simply not within those words as a matter of English.

McHUGH J: Let us assume that in Hill v Van Erp the solicitor had said, "I am preparing a will for you, Mrs Beneficiary, which will enable you to get a legacy." and the solicitor had been sued under section 52. Why would not the measure of damages be the same under 82 in that case as this Court held it was in tort?

MR BENNETT: The measure of damages would be the loss of the chance of obtaining the legacy. That is reliance loss - - -

McHUGH J: It was not the loss of the chance, the Court held it was the loss of the legacy.

MR BENNETT: Yes. Well that is not really - yes, the reliance there was reliance, of course, by a different person, so when one talks of reliance damages, one has to apply that to a case where someone other than the applicant or plaintiff is the person to whom the representation was made. But if the conduct had not occurred, the beneficiary would have received the legacy or would have had a certain chance of receiving the legacy. That is the damages. That is not the contractual measure, that is the tort measure, and that is the appropriate measure in tort. But the contract measure here is not giving the person a legacy - - -

McHUGH J: I do not think it is. I think you will find that Hill v Van Erp was probably the first case in the British Commonwealth, at all events, that awards damages in tort for loss of an expectation, as opposed to the invasion of an interest or a legal right.

MR BENNETT: One gets that in personal injury cases, whenever a person with an expectation of earnings for the next 15 - - -

McHUGH J: But that is consequential on invasion of property or person.

MR BENNETT: Yes. But that differential does not affect the distinction here because it is not awarding the contract measure in tort, it is still awarding the tort measure. What is suggested here is that the words "compensate.....for the loss or damage" you have suffered by reason of the contravention can be twisted to mean "get what you would have got if it had been true", which they just do not meant.

GAUDRON J: As a matter of ordinary English there is no difficulty about that.

MR BENNETT: There is, your Honour, because the loss or damage suffered by reason of the representation is the difference between the position you would have been in if it had not been said and the position one is in and that is the tort measure. That is the first point.

The second reason why we submit there is insufficient doubt is that this Act has been amended on, I think we counted 22 occasions, but this section has been amended at least twice since Gates and it has not been changed.

McHUGH J: Mr Bennett, this case could be decided in favour of the applicant without saying that Gates is wrong or without saying Kizbeau is wrong. Both those cases said "as a general rule".

TOOHEY J: There is a wealth of authority that suggests that Gates is not exhaustive in relation to claims under section 52 and the damages that are awarded under section 82.

MR BENNETT: There certainly may be exceptional cases where one uses the expectation measure to fix the reliance measure. I suppose one example would be if one is making an investment, one is told there will be a return of 10 per cent, there is no return, and the problem is if one had not had the representation one might have invested in something making 0 or 20 per cent, one does not know, and the court says, well, the best guide we can find is the representation. In that sort of case one might do it. But even there, one is only using the expectation measure in order to ascertain what the reliance damages are. At the end of the day, we would submit that Gates lays down, correctly, that the reliance measure is the appropriate measure.

If one could avoid that under section 87 by simply saying, "We will make an order", in order to achieve the result of compensation which has the effect of giving you something you could never have obtained, the contract measure, then we submit section 87 is being used in a way contrary to its language and its policy. All the uncertainty that would arise if section 52 were construed in the way - if there was a discretion - would occur. In my respectful submission, when one adds the policy considerations in favour of having a fixed rule, the words of the section which I have taken your Honours to a number of times, the fact that the section has been amended on a number of occasions without anything being done to change this - and indeed it is stronger than that - - -

TOOHEY J: I am not sure what significance we are asked to attach to the absence of amendment.

MR BENNETT: The original phrase in section 87 in 1974 was "redress injury". In 1977 that became "compensate.....for the loss or damage" and that phrase has continued through all the amendments to date. The words in section 82 which were construed in Gates were the same words:

A person who suffers loss or damage.....may recover the amount of the loss or damage -

Those are the words which have been in section 87 since 1977 - - -

TOOHEY J: In section?

MR BENNETT: Section 87, since 1977, as well as they have been in 82, of course, the whole time, and the legislature has not amended them. It could easily have said, if it so chose, it could either have amended section 82 to say that one could have whichever was the appropriate measure or it could have amended section 87 to say that in making an order under section 87 the court shall not be only concerned to compensate the person for the loss or damage but may compensate the person for an expectation wrongly induced.

TOOHEY J: Except there has been a sort of working out, to some extent, of the relevant principles in a number of authorities, perhaps in a negative way in some cases, by simply pointing to Gates and saying it does not really answer the question in every case.

MR BENNETT: But, your Honour, Gates is still, and is applied every day in the Federal Court and other courts - - -

GAUDRON J: But it is applied as though it were an absolute rule, is it not, whereas the statement in Gates itself was qualified.

MR BENNETT: It was, your Honour, but we submit it was qualified for more abundant caution and possibly to accommodate the type of case I have referred to. But at the end of the day, as a matter of neither policy nor drafting, would one wish to have a situation where one can simply select between the various measures in every case. It would double the length of cases in the court every day, it would create huge uncertainties, it would lead to the development of a vast jurisprudence as to what sort of case what type of measure is better in, what sort of case the other type of measure is better. The issue arises in every section 52 case.

TOOHEY J: There would be many cases in which the appropriate measure would be clear. It would hardly be a matter for argument.

MR BENNETT: Your Honour, we submit it is clear from the drafting of the sections. When one is compensated for loss or damage caused by an event, that means putting one in the position, as best one can, as if the event had not occurred. That is what the words mean. They do not mean giving you what you might have got if it had been true, which would have been nice.

TOOHEY J: You say that. That is really the argument.

MR BENNETT: That is the crux of it, your Honour; it is as simple as that.

McHUGH J: It is an important point.

MR BENNETT: Oh yes. So we submit one gets there from policy, one gets there from legislative drafting and one gets there from the fact that the legislature has not changed it and, indeed, what is interesting is that the articles and the submissions refer to views expressed by various bodies about what should happen, that is a classic illustration of the fact that this is a matter for the legislature. This Court has spoken against, and indicated what the general measure is. The courts are applying that. There may be exceptional cases that are exceptions, maybe there are not. But in that situation it is a matter for the legislature to intervene.

TOOHEY J: Put all those articles to one side, there are still signals in cases like Wardley and other cases that Gates may not provide the answer in all situations.

MR BENNETT: None of those signals go so far as to suggest that where there is a representation made and the representation turns out not to be correct or is not correct at the time, that one can then say this is a case for the contract measure, either a section 52 claim under section 82, or that one can use section 87 to achieve that result by the back door. That is the issue in this case. In my respectful submission, that is it.

The other aspect is this. We would submit very briefly the case is an inconvenient vehicle because the sort of calculation of damages that would be involved here on the contract measure would be exceptionally difficult. One does not know how long the applicant would have lived, one does not know what draw-downs he would have utilised, one does not know how long he would have borrowed for on each occasion, and one does not know if the interest rates are going to be higher or lower. There are a range of imponderables and we would submit that makes it an inconvenient vehicle, quite apart from the - - -

TOOHEY J: It would not really make it an inconvenient vehicle before this Court because we are unlikely, if special leave were granted, to become involved in the calculations. There might be difficulties of calculation at the end of the line.

MR BENNETT: There may be difficulties of principle as to how one takes those matters into account as well. But, your Honour, the primary submission is the one I have made, that it is not accompanied by sufficient doubt. They are our submissions.

TOOHEY J: Thank you, Mr Bennett. We need not trouble you, Mr Finch. There will be a grant of special leave in this matter.

AT 11.34 AM THE MATTER WAS CONCLUDED