Canon Australia Pty Ltd v Instant Colour Pty Ltd and ORS P17/1997 [1998] HCATrans 321 (11 September 1998)

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry

Perth No P17 of 1997

B e t w e e n -

CANON AUSTRALIA PTY LTD

Applicant

and

INSTANT COLOUR PTY LTD

First Respondent

BRIAN IVEY, MATTHEW FERGUSON, NEVILLE CHARLES QUARTERMAINE, EDWIN BENNETT IVEY and RICHARD THOMAS MINCHERTON

Second Respondents

Application for special leave to appeal

GUMMOW J

HAYNE J

TRANSCRIPT OF PROCEEDINGS

AT MELBOURNE ON FRIDAY, 11 SEPTEMBER 1998, AT 11.47 AM

Copyright in the High Court of Australia

MR R.C. MACAW, QC: If it please the Court, I appear with my learned friend, MR D.J. MARTINO, for the applicant. (instructed by Clayton Utz)

MR E.J.S. SZABO: If the Court pleases, I appear with my learned friend, MR B.H. TAYLOR. (instructed by Mandurah Law Chambers)

GUMMOW J: We would be assisted to hear first from you, Mr Szabo.

MR SZABO: Your Honour, in our submission, special leave should be refused for these three reasons, that in reality there is only one question of law that has been posed by the applicant which is said to be of general importance, yet that does not correctly state the issue that was raised before the intermediate Appeal Court. The second reason, your Honour, is that this is not a suitable vehicle for determination of special leave of the issues, as contended by - - -

GUMMOW J: Well, the real problem seems to be that things just went quite wrong in the Full Court. In respect of a finding of what breach of what obligation was the award, as pleaded, was the award made of damages by the Full Court?

MR SZABO: Your Honour, the relevant passage appears at page 412 of the application book, but, your Honour, that was in the context of what had preceded earlier at page 411 of the application book where theirr Honours said that there was evidence of the practical effect of the problems that were being experienced with the machines.

HAYNE J: Maybe, but what claim pleaded and argued below was there for loss of revenue occasioned by delay in dealing with customers?

MR SZABO: Your Honour, we say it came under the general ambit of the trading loss claim and that is how, when your Honours see - if I could take your Honour to page 412 of the application book, it is the second paragraph.

HAYNE J: Yes, I have read that.

MR SZABO: It is where:

If it was shown that all the business losses stemmed directly from the misrepresentations -

We say, your Honour, you can interpolate business losses to be trading losses.

HAYNE J: The impression I had, reading the pleadings, Mr Szabo, was that the claim as made was that this was a disastrous business venture that led, not to the loss of custom, but to the loss of the whole business. There was no claim made that I could identify, reading the papers, based on the fact that, "Oh, look, if they had worked, we could have earned a couple of hundred thousand dollars more, because we could have fed the customers quicker with their copies".

MR SZABO: But, your Honour, we say two things. The point or the process by which the intermediate Appeal Court awarded damages in this case was explored in the course of the appeal hearing.

GUMMOW J: How long did the appeal hearing last?

MR SZABO: Three days, your Honour. And it was not objected to by our learned friends, and when one looks at paragraph 53 of the amended statement of claim, it is quite clear that under the categories of "Loss" and "Damage", there is reference to the continual breakdowns with the machines, under paragraph 53.2, and that appears at page 46 of the application book. And your Honour will see that at the base of the page:

As a result of the continual breakdowns of the machines and the difficulties experienced by the machines and also the failure of the machines to perform to their represented capabilities, the First, Second and Third Applicants have lost profits.

And then it goes on. Your Honour, in so far as the way in which the trial was conducted - because what our learned friend seeks to say is that there has been a degree of procedural irregularity in the way in which the intermediate Appeal Court awarded damages in this case, one needs to look at how the trial itself - - -

GUMMOW J: Well, you have taken us to 53, on page 46. Now, what your opponents say in their written submissions at 427 rather tends to shoot some holes in what you have just said.

MR SZABO: Yes, your Honour, but the way in which the intermediate Appeal Court awarded damages was that the case advanced to trial claimed the certain sums of $1.9 million in respect of lost profits, and $1.2 million for trading losses. It is clear that the intermediate Appeal Court was facing difficulties in allowing that or the extent of those damages in this particular case. But the intermediate Appeal Court - - -

GUMMOW J: Why were they facing difficulties? For want of evidence?

MR SZABO: Well, your Honour, the way in which it evolved was that it was not so much a question of the want of evidence, but the question is going to the reliability of that evidence. But in any event, the intermediate Appeal Court was properly of the view that the respondents suffered losses, and if I could take your Honour to how it posed at page 410 of the application book. It was in the course of going through the losses in detail that the intermediate Appeal Court asked whether there was material that would suggest an award of compensatory damages, even one that involved an element of overall judgment, rather than a detailed assessment. Now, your Honour, that then led to the formulation on which the award of damages was made. It was not objected to by our learned friends, and our submission - - -

GUMMOW J: Are these damages in contract, or tort, or under section 82, or what?

MR SZABO: Your Honour, these are damages that - - -

GUMMOW J: For breach of what obligation? I know you keep saying it broke down, and I can understand that.

MR SZABO: They are for business losses.

GUMMOW J: I know that.

MR SZABO: But we say - - -

GUMMOW J: It does not answer my question.

MR SZABO: They flow, your Honour, under the breach of the fraudulent misrepresentations.

GUMMOW J: They are in tort, are they?

MR SZABO: They are in tort - - -

GUMMOW J: For fraud?

MR SZABO: And also under section 82 of the Trade Practices Act, for breach of section 52.

GUMMOW J: I see.

MR SZABO: Now, your Honour, it is - - -

GUMMOW J: Was that ever pleaded?

MR SZABO: It was, your Honour, yes, and, in fact, the learned trial judge found that the applicant was guilty of fraud in the making of two key representations, but also breached section 52. Your Honour, we say the principles established in the Enzed Case are well established. They do not need to be revisited. The critical part was that the intermediate Appeal Court properly was of the view - - -

GUMMOW J: Well, I do not think they are licenced to do what was done here. I do not think Enzed is a licence to do anything like what happened here.

MR SZABO: Well, your Honour, if the court takes the view that loss has been suffered, and it is more than a nominal loss, the court is entitled to award damages, even if a degree of speculation and guess work is involved.

GUMMOW J: Oh, yes.

MR SZABO: And the complaints that our learned friends make is that there was speculation involved. Now, we say that does not address the - - -

HAYNE J: That is not how I understand the complaint that is made. As I would understand, the complaint is that a wholly new case was raised by the Bench in the course of the hearing of the appeal.

MR SZABO: No, your Honour, we dispute that. We say that when one puts the intermediate Appeal Court's judgment in its proper context, what the Full Federal Court posed was that, is there material that would support an award of compensatory damages, even if it involved an element of overall judgment - - -

HAYNE J: But is that something that they raised, the court raised, or is something that your side asked for to overturn an erroneous decision below?

MR SZABO: It was posed by the intermediate Appeal Court, but the Enzed Holdings Case was referred to in our closing submissions. Your Honour, what has happened in the - - -

GUMMOW J: Were there written submissions to the Full Court?

MR SZABO: The way in which the closing addresses proceeded was by way of written submissions to the trial judge.

GUMMOW J: No, no, in the Full Court of the Federal Court, were there written submissions?

MR SZABO: No, your Honour. I am reminded by my learned friends that there were, but I cannot recall, your Honour. Now, the second point, your Honour, is that we say that when one looks at this case in its context and the way in which the appeal evolved, this is not a suitable vehicle for this Court to intervene, that counsel - our learned friends made no objection to the way in which the appeal proceeded. In any event, the way in which the trial was conducted was on the basis upon which the intermediate Appeal Court has awarded its damages. It has awarded damages for business losses flowing from the disruptions that were caused to the respondents' business, which was due to lost custom and dissatisfied customers. Whilst there may have been a dispute as to amount of the damage, the Full Federal Court has, as it said, awarded damages at the very minimum level.

HAYNE J: Where, in your pleading, do I find reference to lost customers or dissatisfied customers?

MR SZABO: Well, your Honour - - -

HAYNE J: You have taken me to 53, I do not see it there. Am I wrong? If I am not, is there somewhere else where I would find it in your pleading?

MR SZABO: It is not in the pleading itself, your Honour, but there was a plethora of evidence, and can I take your Honours to page 154 of the application book, and it runs through to page 157. But this is at a section that deals with our reply to the defence that was put to section 53 of the statement of claim, and if I could take your Honour to the category of "(iii) Fiona Cost",

- She was aware that when the machine was broken down or being serviced the First Applicant's business lost customers or trade -

and continues:

- Sometimes up to 30 customers were in queues and if the machine broke down those customers would have to be sent away and if they had been waiting for sometimes 21/2 hours they would be absolutely irate -

The quality of that style of evidence continues through for about two or three pages. Now, what we say, your Honour, is that at no stage was that put in issue by the applicant. There was a plethora of evidence led at trial as to the practical effect of the problems that were being experienced with these machines being down, due to their requiring more frequent servicing than what was represented.

Now, your Honour, we have referred to the passage in the Banque Commerciale v Akhil Case, where the authorities support the proposition that one simply does not confine the debate to analysis of the pleadings. One needs to look at the way in which the trial was conducted, and, your Honour, when one sees at pages 154, 155, 156 and 157 of the application book that deals with the evidence related to lost customers, dissatisfied customers, long queues, people walking away, we say that is the way in which the Full Federal Court properly viewed this matter, as it was entitled to.

Your Honours, there is also a complaint made by our learned friends in so far as the intermediate Appeal Court awarded costs. Again, your Honour, what we say is that in the context of this case - - -

GUMMOW J: You only need to develop that point very succinctly, I think, Mr Szabo.

MR SZABO: Yes, your Honour. It is a short point. The court properly awarded costs of the appeal in our favour. Our learned friends were present, they said nothing, they were there.

GUMMOW J: They were stunned.

MR SZABO: Your Honour, the consequences - - -

GUMMOW J: They say they were stunned.

MR SZABO: But, your Honour, the consequence of that is this is not an appropriate vehicle to attract his Court's intervention.

GUMMOW J: Yes.

MR SZABO: They would conclude our submissions, your Honour.

GUMMOW J: Yes. Yes, Mr Macaw.

MR MACAW: If the Court pleases, the point was not pleaded, and - - -

GUMMOW J: I know, but the authorities - perhaps it is a matter of regret in some ways, but the authorities say that cases wander outside pleading sometimes, and evidence gets in, and it is there and then it can be acted on, and it is said against you that pages 154 and 155 are illustrations of that, here.

MR MACAW: It was not dealt with as an issue to be determined at the trial, separate from those pleaded, and that can be judged by the fact that there was no application to amend the pleadings, so as to make a claim of the kind the Full Court propounded. It was not, therefore, dealt with by the trial - - -

GUMMOW J: You say it is not a claim that is, as it were, a sub-class of a claim that was already there?

MR MACAW: No, absolutely not, your Honour. It was not dealt with by the trial judge, not surprisingly. It was not the subject of the notice of appeal. It was not the subject of any written submissions. It was not the subject of the five principal points which were said, in summary, to be the points contended for. It was relevant, no doubt, in a general sense, to a claim for trading losses of the kind that was made, that is to say, the whole business collapsed; and, no doubt, you do not just put forward an accountant to say that you can reconstruct accounts which show a major collapse. You try to provide some colour and factual foundation which might tend to support that view.

It was sufficient for our purposes, however, to deal with that claim, without having to traverse the point. It was sufficient for our purposes to demonstrate, as we sought to and the judge apparently accepted, that there was no reliance in relevant respects on representations which led to loss making decisions of the kind for which damages were claimed, and further, that the accounts, in any event, were highly unreliable. So that it never became an issue of the kind which, of course, the parties, by their conduct, can erect outside the pleadings for proper determination of their rights.

GUMMOW J: You say that there were written submissions in the Full Court?

MR MACAW: Yes.

GUMMOW J: I would expect that to be so if the appeal was going to go three days.

MR MACAW: Yes.

GUMMOW J: If leave were to be granted, what was said in those submissions might become important.

MR MACAW: Your Honour, yes.

GUMMOW J: That brings us to this, perhaps: how extensive would the materials have to be before this Court, if there was to be a grant of leave?

MR MACAW: Not extensive, your Honour. In fact, in our - - -

GUMMOW J: Much more than is in the application books?

MR MACAW: No, your Honour. Indeed, our submission is that the case is so plain of procedural irregularity that the appropriate course is for this Court immediately to determine the appeal, and remit it to the Federal Court to be dealt with according to law. I have raised this possibility with my learned friend last week, but I have not had any response from him. But if the Court were to take the view that it ought embark further upon the question of procedural irregularity, we would certainly urge that any grant of special leave be limited to that question, which could be dealt with briefly, and that - - -

GUMMOW J: Well, looking at your draft notice of appeal at page 421, ground 2 one can understand, perhaps 3, certainly 3(b). What about 4?

MR MACAW: The way we put 4, and 3 in a sense - - -

GUMMOW J: Are 4 and 3 any more than explanatory of 2?

MR MACAW: No, they are not. They are really concomitants of the undesirable process of the court dealing with the matter in this fashion.

HAYNE J: I understand, then, that you would be content to nail colours to the mast of ground 2?

MR MACAW: Yes.

HAYNE J: Without the addition of grounds 3 and 4? Or would you have them there simply as explicatory of the content of 2?

MR MACAW: Yes, the latter, your Honour.

HAYNE J: The latter?

MR MACAW: Yes.

GUMMOW J: Yes, Mr Szabo.

MR SZABO: No further submissions, your Honour.

GUMMOW J: The Court is minded to grant leave in this matter, gentlemen, on ground 2, as indicated at page 421, and on the footing that paragraphs 3 and 4 on page 422 to be understood as particularising ground 2, and no more; and on the further footing that the appeal book should contain no more than is already there, plus the order made today, and the written submissions, if any, that were before the Full Court of the Federal Court; and that if any further material is to be included, other than that just indicated, it should require the leave of a Justice on reference from the Registrar, The Registrar should note that Justice Hayne and I are familiar with the matter, if such reference has to be made. Thank you, gentlemen.

AT 12.10 PM THE MATTER WAS CONCLUDED