Simos v Yates S121/1998 [1999] HCATrans 29 (12 February 1999)

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry

Sydney No S121 of 1998

B e t w e e n -

THEODORE SIMOS

Applicant

and

IAN FRANCIS YATES

Respondent

Application for special leave to appeal

GAUDRON J

CALLINAN J

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON FRIDAY, 12 FEBRUARY 1999, AT 11.37 AM

Copyright in the High Court of Australia

MR J.L.B. ALLSOP, SC: May it please the Court, I appear in this matter with my learned friend, MR P.R. WHITFORD, for the applicant. (instructed by Corrs Chambers Westgarth)

MR D.M. QUICK, QC: May it please the Court, I appear with my learned friends, MR C.D. CURTIS and MR D.K.L. RAPHAEL, for the respondent. (instructed by Bruce & Stewart)

GAUDRON J: Yes, Mr Allsop.

MR ALLSOP: Your Honour, there are several fundamental matters I wish to address before going to the special leave points. This was a piece of professional negligence litigation which lasted seven weeks before her Honour in early 1997.

GAUDRON J: Could you speak up a bit.

MR ALLSOP: I am sorry, your Honour, which lasted before her Honour Justice Branson for seven weeks in 1997. In that judgment of her Honour, the conduct of the second respondent was dealt with and vindicated. The applicant to that matter appealed. During the course of the appeal process all appeals against the judgments in favour of the second respondent were dismissed.

GAUDRON J: But not on the merits?

MR ALLSOP: Not on the merits, no; in relation to security for costs. There had been as part of the costs order, costs hearing, an order for costs against Mr Yates personally.

GAUDRON J: Only to take effect if - - -

MR ALLSOP: If the company did not pay within - joint and several, but conditional, as it were. Which order for costs mirrored the extant order for costs against the company, the appeal in respect of which had been dismissed.

The only appeal before the Full Court which concerned the second respondent was that appeal by Mr Yates personally concerning the exercise of her Honour's discretion to make him personally liable for costs should the company not pay those costs. Taking into account the principles set out obiter, but the principles set out by their Honours Chief Justice Mason and Justice Deane in Knight v FP Assets. That judgment of her Honour is found - and in particular the judgment of her Honour concerning Knight's Case - in the application book at page 122. The judgment commences at page 112. The section on the claim for an order against Mr Yates commences at 122.

It was not disputed that the Court had jurisdiction to order costs against a non-party -

and so there was no fundamental question of law about the relevant principle. Her Honour set out the relevant passage at 123. Her Honour then turned to consider the financial circumstances of the applicant company, YPC, and dealt with that on that page 123, finding that for relevant purposes she was prepared to proceed on the basis that the company was "a man of straw".

GAUDRON J: And that proved to be the case, did it not?

MR ALLSOP: Yes, well, because of the flow of events costs have not as yet been finalised in the taxation of the matter.

GAUDRON J: But you do have an order for costs against the company as a result of the appeal being dismissed?

MR ALLSOP: Yes, against the company. Then, at 124, the second element of the principle in Knight's Case was dealt with and that is the involvement of Mr Yates as, in effect, the mind of the company both as shareholder and directing mind. Her Honour said at line 19:

Subject to consideration of a matter to which I turn below, the above factors suggest that it would be contrary to the interests of justice for Mr Yates to be able to be shielded by the applicant from any liability for the respondents' costs -

That matter her Honour then dealt with was the explanation given on behalf of those appearing for the second respondent at the time as to why no security for costs order had been made. Her Honour then, having found the relevant elements of Knight's Case, exercised the discretion in favour of the second respondent.

An appeal was lodged in relation to that matter. That notice of appeal in matter 717 commences at page 128 of the application book, and if I may just stop for one moment and remind your Honours that until the appeals of the company were dismissed there were two other appeals that involved the second respondent, one on the question of substantial liability and the other an appeal by the company as to the orders for costs. As time transpired and events took their course, those appeals were dismissed.

One looks at the notice of appeal which has 22 paragraphs, and if I may briefly refer to those submissions, they commence in ground 2 with an appeal about a "man of straw" and Knight's Case, and from grounds 2 through to 21 are the grounds of appeal dealing with the application of Knight's Case. We would say, and we said below, many of them were simply seeking review of a discretionary order on the merits but, nevertheless, all the matters there contained deal with whether Knight's Case should apply. Then in the alternative, in paragraph 22 of the grounds, was well, in the alternative, not indemnity but party/party, in effect, costs.

That is what we then went down to argue. The matter was listed for five days. This appeal received a marking.

GAUDRON J: This particular appeal was for five days?

MR ALLSOP: No, I am sorry. The whole matter was for five days. This appeal received a marking for Friday and it was called on on Friday afternoon. We were not parties to the other appeals and did not attend and that is why we got the marking. Their Honours' reasons for judgment in all the matters start at page 135 and the initial paragraph indicates the substance of the matters to be dealt with, they being the principal matters between the first respondent, the solicitors for the third respondent and the appellants' company.

Those matters then concerned their Honours up to and including page 175 of their Honours' reasons for judgment and I do not propose to take your Honours through all that because it is, in effect, their Honours directing their attention to the first and third respondents, the position of the first and third respondents, the evidence of the first and third respondents and the claims for indemnity of the first and third respondents. The appeal in part was not allowed in respect of the first and third respondents, but in respect of a matter that is subject of separate applications today by others was - - -

GAUDRON J: The only reasons that appear for the decision are the last sentence on page 175.

MR ALLSOP: Either the last sentence or the last paragraph on 175. The orders that were made initially are at page 177.

GAUDRON J: There is material in reply in which you say you requested the court to provide further reasons.

MR ALLSOP: We did not; the respondent to the application. What happened, your Honour, was a slip rule application was made about these orders on 177 because if one reads order 2, read widely it actually removed the second respondent's judgment and reading order 3, 14 August 1997, those orders were all the costs order. Reading that order it removed the second respondent's judgment as to costs against the company which should remain because there was no appeal on foot by the company. So the slip rule application was made.

If your Honours could compare orders 2 and 3 on 177 to 2 and 3 on page 186, the court amended the orders under Order 35 rule 7 so as to make clear that the orders of her Honour which were being set aside were orders which concerned others than the second respondent. Except, of course, the appeal that did proceed was Mr Yates' appeal which was left to the existing orders which allowed the appeal in that respect. Their Honours at pages 182 and 183 indicated that relevantly at 183 in relation to the costs order, indicated that the order made taking away the second respondent's entitlement to costs against the company had been made overlooking the fact that the appeal by the company was not before them.

Would your Honours go to the bundle of documents - - -

GAUDRON J: What is the significance of that, though?

MR ALLSOP: We say only as background, your Honour.

GAUDRON J: What is your special leave point?

MR ALLSOP: The special leave point is this: we did not get reasons, either at all or, if there is to be seen within the whole of the judgment a view that the second respondent should not have the order for costs against Mr Yates because somehow he might have won against the company, that was not the subject of any clear reasons and it was not the subject of argument. The special leave point is this, your Honour: first, that this Court should state the terms of the judicial obligation to give reasons.

We have handed up to your Honours articles by Sir Frank Kitto and Justice Kirby, both writing extrajudicially. We say that the process of reasoning by which a case is decided is an essential part of the judicial function. To the extent it is said against us in submissions that we should have gone back and asked for more reasons, we say no, that is not part of our function. One, we say the court was asked by the respondent, and I can take your Honours to that.

GAUDRON J: Yes, what happened then?

MR ALLSOP: In the course of the slip rule application we put on a notion of motion to change the orders. The respondent to this application, if your Honours would go to the applicant's bundle of documents with tabs A, B, C, D and E, at page 2 of those submissions - - -

KIRBY J: Submissions?

MR ALLSOP: Yes, your Honour. I am sorry, if your Honour would go to tab D. If your Honours would go to page 2 of those submissions and one sees in paragraph 4:

Again with respect, it would appear to be a necessary consequence that, if the Full Court intended the orders as made, then it is a necessary consequence that the Court should give its reasons and the first and second appellants respectfully invite the Court to publish, by way of supplementary reasons, its reasons for the order made including those relating to the appeal by the second appellant in matter No. 717 of 1997 in which he was successful.

Now, your Honours, at tab E is the transcript before their Honours. At page 2 of the transcript and page 21 of the bundle his Honour the presiding judge said to me:

DRUMMOND J: I've received written submissions from Mr Allsop and written submissions from Mr Raphael but no other written submissions. I take it I've got all the material?

MR ALLSOP: As I would understand it your Honours have.

DRUMMOND J: All right, thank you. Yes, Mr Allsop, you can assume that the members of the court have read all the material that has been in turn read this afternoon, including the written submissions.

Now, your Honours, we did not make any oral application, nor did the respondent, but the matter was before the court. We say part of the special leave application, part of the special leave point is that it is a fundamental judicial incident of the judicial function to give the reasons.

GAUDRON J: Do you limit that submission to appeals?

MR ALLSOP: Yes, your Honour, in relation to appeals, specially in circumstances where there is no right of appeal.

GAUDRON J: What do you mean, there is no right of appeal?

MR ALLSOP: There is a special leave application. Where there is no automatic right of appeal, where - there is some discussion in Justice Kirby's article and in the cases to the effect that it is not just when there is a right of appeal strictly speaking, even when there is no automatic right of appeal it can be said it is even more important to state to the parties and to the public - - -

GAUDRON J: I hope you are not extending that to special leave applications, Mr Allsop.

MR ALLSOP: No, your Honour, there are exceptions such as ordinary leave applications and some evidence rulings.

CALLINAN J: Mr Allsop, do I read the submissions or do I read the transcript correctly that the parties invited the court to have regard to the written submissions and nobody sought to elaborate?

MR ALLSOP: Yes.

CALLINAN J: The Federal Court heavily encourages people to put matters in writing, does it not?

MR ALLSOP: Yes, your Honour.

CALLINAN J: And sometimes, like all courts, discourages any repetition orally of what is put in writing.

MR ALLSOP: The other side made the request in writing. We did not - frankly we did not see it as part of the slip rule application, but nevertheless it was made. It is now said against us we should not get special leave because it is either said there are reasons, which we say there plainly are not, or we somehow - the party has disentitled himself of complaining of what we say is a fundamental entitlement to the incident of judicial process.

GAUDRON J: The submissions on the appeal were oral, however, were they?

MR ALLSOP: Written and oral. There were written submissions before their Honours on the Friday and they were supplemented with about two hours worth of oral - - -

GAUDRON J: And may we take it that the submissions did not travel beyond the grounds of appeal to which you have taken us?

MR ALLSOP: Yes, your Honour. There was no submission to the effect that the second respondent, applicant to this submission, was guilty of fault in the substantive sense and we have the submissions here and the transcript here if your Honours would want to see that. We did not burden your Honours with that.

GAUDRON J: So if that is the reason, you say there is a denial of procedural fairness?

MR ALLSOP: We were not heard on that.

GAUDRON J: Yes. The red light is on. It would be convenient to hear from Mr Quick.

MR ALLSOP: My time is up, your Honour. They are our submissions, your Honour.

GAUDRON J: Yes, Mr Quick.

MR QUICK: May it please the Court, the special leave ground identified, and the submissions in support of it, rely solely on what is said to be the failure to state reasons. In our submission, there are three reasons why special leave should be refused. The first of these is that on analysis of the reasons of the Full Court it did give reasons for doing what it did. And that was not to make a final adjudication on the entitlement as to costs against Mr Yates but to overturn an order against him in order to allow for the matter to be remitted and for it to be considered on the merits. In a moment I will take the Court to the reasons.

GAUDRON J: For what to be reconsidered on the merits?

MR QUICK: The matter of whether or not - first of all YPC, Yates Property Corporation, ought to have had costs awarded against it, that being the basis upon which costs were then awarded against Mr Yates.

GAUDRON J: But that was in respect of an action in which there was an appeal that was allowed.

MR QUICK: That is so, your Honour, but the appeal as against Mr Simos was not allowed.

GAUDRON J: That is right.

MR QUICK: Not on the merits.

CALLINAN J: It did not proceed, did it?

MR QUICK: It did not proceed because of the failure to provide security for costs.

GAUDRON J: If the allowing of the appeal on the merits in the other matter was in any way relevant to - - -

MR QUICK: It was, and I will explain why.

GAUDRON J: Yes. Then was there not a denial of natural justice?

MR QUICK: No, your Honour. Your Honour, in our submission, what happened here was - - -

CALLINAN J: Before you get to that, why should not Mr Simos have been heard on the question of is entitlement to costs of the trial before any order in that respect was made?

MR QUICK: We would submit that he was heard in relation to the matter of costs of Mr Yates and in relation to that there were two steps to be taken. The first was, was the company liable for costs? The answer to that was, it has not been determined on the merits in relation to Mr Simos, on appeal, that the company was liable for those costs. The next step was: if there is doubt about whether or not the company was liable for costs, and there are reasons to deprive Mr Simos of the costs, then that is a matter which should be considered. And the court then made the order, not refusing costs indefinitely, but rather - - -

GAUDRON J: Taking away an order that had already been made in his favour.

MR QUICK: That is so, your Honour, but not finally determining the matter.

CALLINAN J: But was Mr Simos heard in relation to that order to disallow the costs that he had been awarded down below? Was he or was he not heard on that matter on appeal?

MR QUICK: Your Honour, I understand that he was not specifically heard on that matter. But I also understand it to be the case that is not the special leave point that is raised. The special leave point that is raised is a failure to state reasons. That is what the applicant puts forward as being the matter which is a matter of public interest or a matter of the administration of justice. That is what is being put forward as being the subject of the proposed appeal.

Now, our submission is - we say there are three things in response. We say, first of all, that when one looks at the totality of the reasons in the Full Court there are reasons why the Full Court decided that there was a question about whether or not Mr Simos should receive costs and why the Full Court decided that that question needed to be determined.

CALLINAN J: Was Mr Simos heard on those matters?

MR QUICK: Your Honour, I cannot say that he was.

CALLINAN J: He was not, was he?

MR QUICK: I understand he was not heard specifically in relation to that matter.

CALLINAN J: No.

GAUDRON J: Is that not the difficulty, although it is put in relation to the failure to give reasons, one sort of comes up against this brick wall, as it were, that if reasons had been given, there is a strong inference that they would have revealed a denial of procedural fairness.

MR QUICK: May I take the Court to what the reasons were that were given in order to answer that question. Why the company lost at first instance included that certain evidence was not led and it was not led partly because Mr Simos decided that it ought not to be led. His view was that Spencer's Case precluded the leading of this evidence. Now, the Full Court decided that Spender's Case did not preclude the leading of that evidence.

GAUDRON J: So what? Because by this stage Mr Simos had his judgment and his order for costs. So what? And there was no appeal on foot.

MR QUICK: With respect your Honour, there was an appeal by Mr Yates, which brought into question - - -

GAUDRON J: There was an appeal by Mr Yates with respect to the personal order for costs, an appeal which was mounted by reference to the principles in Knight v FP Assets, not by reference to the merits of the case against Mr Simos.

MR QUICK: I agree that is a difficulty for me.

GAUDRON J: It is a pretty big difficulty, is it not?

MR QUICK: Save, your Honour, for the fact that the point was still open, bearing in mind that in order to find Mr Yates liable it was necessary for the court to determine, on the merits in his case, that the company was also properly found to be liable. And the court found that that had not happened.

GAUDRON J: Why? I do not see why that is so. The order for costs against the company stood and was not honoured.

MR QUICK: But it was a necessary precondition to the order against Mr Yates and that is why we say it brought into play the correctness or otherwise of the finding against Mr Yates.

CALLINAN J: And in any event, for my own part, I am not too convinced that Ritter v Godfrey represents the law in Australia on this point anyway, and that is a case that was relied upon by the Full Federal Court. To the extent that you can get anything at all out of their reasons on this matter, they seem to depend exclusively upon a reading that they made of Ritter v Godfrey.

MR QUICK: There are many authorities in this country to the effect that a successful respondent can be denied costs if it loses certain issues.

CALLINAN J: As a matter of discretion by the trial judge.

MR QUICK: That is so, and we would submit that the discretion by the trial judge in this case involved an error, as found by the Full Court, in that her Honour found that Spencer's Case - the view taken by Mr Simos of Spencer's Case was an incorrect view. That is what the Full Court decided and that being the case, they thought there might be a reason why Mr Simos' conduct was the type of conduct which led to this action being commenced against him. That then brings into play Ritter v Godfrey where the doctor involved had done something which led to the action being brought against him. That is why the matter was developed.

Could I take the Court to another - to a totally different - - -

GAUDRON J: But that seems to highlight that it was a matter which really was not a live issue, or not a matter on which the second respondent, as he then was, was heard.

MR QUICK: It is true he was not there in the first four and a half days during which that issue was debated.

CALLINAN J: So that does not matter. He was not there for four and a half days. At the end of it an order is made which seriously prejudices him and that does not matter that he was not there.

MR QUICK: He could have been there if he had elected to be, but he did not.

CALLINAN J: On the off-chance that an order might be made against him at the end of it all, that is why he should have been there.

GAUDRON J: On grounds that were not agitated in the notice of appeal.

MR QUICK: I agree, they are not agitated in the notice of appeal. There is an entirely independent reason why this Court should not grant special leave, totally unassociated with those matters, and that is the opportunity which the present applicant had to have this matter remedied in the Full Court of the Federal Court. The respondent did actually invite that both parties should go to the Full Court and ask for supplementary reasons. That offer was made in writing and it is in the documents that the present applicant has put before the Court. The applicant declined that offer. The applicant then, in its notice of motion, did not request supplementary reasons. The applicant - - -

GAUDRON J: You had.

MR QUICK: We had. But if one looks at the transcript - - -

GAUDRON J: What did the court say? What was the court's response to your submission?

MR QUICK: The court said nothing. One has to look at the circumstances. The transcript begins at 6.25 pm and concludes at 6.47 pm. It was very late in the afternoon. It was a matter that had been outstanding for some time. It is quite possible - - -

CALLINAN J: What has that got to do with it, it is late in the afternoon? What on earth has that got to do with it?

MR QUICK: Your Honour, it is late in the afternoon and there is a very brief hearing. It may well be that this was overlooked, particularly because it is one sentence in a substantial written submission. It is not mentioned in the notice of motion and the applicant, whose duty it was if it was complaining about the lack of reasons, it was their duty to seek further reasons if they wanted them. They had the opportunity, they had the co-operation of the respondent, and they simply failed to do anything about it.

There is one further matter why special leave should not be granted and it is this. The Full Court has not finally determined whether or not Mr Simos has his costs. The order of the court is really interlocutory in nature. This matter goes back on remitter - - -

GAUDRON J: It has taken away an order in his favour seemingly on grounds unconnected with anything that was asserted in the grounds of appeal.

MR QUICK: I agree, your Honour. But there is still the opportunity for the matter fully to be argued and to be resolved by a judge on remitter with a right of appeal to the Full Court if found adversely to Mr Simos. On that basis, there being another opportunity, there having already been one opportunity, there now being another opportunity - - -

GAUDRON J: Does this all happen under the rubric of case management, does it?

MR QUICK: I do not think so, your Honour. It is a very unusual situation. But there has been one opportunity - - -

CALLINAN J: It certainly is.

MR QUICK: The applicant here has had one opportunity to ask for further reasons and has declined that and has done nothing to put it forward. The applicant has yet another opportunity, if the matter goes back.

CALLINAN J: But that is unrealistic. The Full Federal Court has expressed a view on the matter. All that happens is that Mr Simos goes back again, argues the matter - well, what do you think his prospects would be?

MR QUICK: Your Honour, the Full Federal Court's reasons make it very clear that they are not expressing a final view.

GAUDRON J: For my part, I do not understand how it is competent to a court to allow an appeal without expressing a final view.

CALLINAN J: Nor do I.

GAUDRON J: It is really as simple as that.

MR QUICK: May I take the Court to what the Full Court actually said, at page 175 of the application book at line 30:

The order as to costs made on 14 August 1997 should be set aside. If, after taking into account the damages for special value Yates has already received, Yates recovers further damages then it should have its costs of the trial. In that event - - -

GAUDRON J: Well that, as I said, I do not understand how you can make provisional orders on appeal. It might have been appropriate to stand this appeal over. That might have been one course. But what has happened is that an order has been set aside. The appeal has been allowed and the order set aside. That is entirely different from standing the matter over to await the outcome of something else.

MR QUICK: Your Honour, the matter could not be stood over because there stood in the way of reconsideration of the matter the order for costs that had been made. There was a necessity for that order to be set aside in order that it could be reconsidered. That was why they did what they did and that is why they reserved to the judge on remitter consideration of the matter. I cannot take the matter any further. I would be repeating myself. But in our submission, the applicant has had opportunities, still has opportunity to get reasons, and that is basically what the applicant complains about. It was necessary to set aside the judgment in order to allow the matter to be reconsidered on the merits when the applicant will have every opportunity to argue, that he may well have been denied now, and may well take it into account.

There is one alternative, and that is to adjourn the special leave application pending consideration of the remitter in relation to the other matters - that is the other two respondents.

GAUDRON J: The remitter?

MR QUICK: There is a remitting order made in relation to the appeals against the other two respondents to the claim. That has to go back for reconsideration. If the Court considers it appropriate, it may be appropriate to adjourn consideration of this application pending the outcome of that matter. May it please the Court, those are the submissions of the respondent.

GAUDRON J: Thank you. Mr Allsop, have you given consideration to alternative grounds of appeal?

MR ALLSOP: Yes, your Honour. Given the argument today, first of all the absence of reasons is what masks the question of procedural fairness.

GAUDRON J: I said alternative grounds.

MR ALLSOP: Yes, your Honour.

CALLINAN J: We are really suggesting to you that you might want to give consideration to including grounds that raise the question of procedural fairness.

MR ALLSOP: Yes, your Honour.

GAUDRON J: And perhaps also the power of the court to make an order remitting - - -

MR ALLSOP: If that is what has been done.

GAUDRON J: If that is what has been done.

MR ALLSOP: Yes, your Honour. If your Honour pleases.

GAUDRON J: Do you undertake to extend your grounds of appeal?

MR ALLSOP: I do, your Honour.

GAUDRON J: Mr Quick, that really is to deal with what you have raised in - - -

MR QUICK: It does rather effectively.

GAUDRON J: Yes. I do not think you are prejudiced by that, are you?

MR QUICK: No, your Honour.

GAUDRON J: On your undertaking that the grounds of appeal will be suitably amended, there will be a grant of special leave in this matter, Mr Allsop.

MR ALLSOP: I would ask for costs of the application.

GAUDRON J: No. As in the ordinary course, they will await the outcome of the appeal. Thank you.

AT 12.15 PM THE MATTER WAS CONCLUDED