Montague Mining Pty Limited v Peter L. Gore & Ors trading as Clayton Utz S239/2000 [2001] HCATrans 352 (10 August 2001)

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry

Sydney No S239 of 2000

B e t w e e n -

MONTAGUE MINING PTY LIMITED

Applicant

and

PETER L. GORE & ORS TRADING AS CLAYTON UTZ

Respondent

Application for special leave to appeal

GLEESON CJ

McHUGH J

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON FRIDAY, 10 AUGUST 2001, AT 11.34 AM

Copyright in the High Court of Australia

MR N.J. MULLANY: May it please, your Honours, I appear for the applicant. (instructed by McLaughlin & Riordan)

MR D.J.S. JACKSON, QC: May it please the Court, I appear for the respondents with my learned friend, MR D.R. PRITCHARD. (instructed by Brian Bartley & Associates)

GLEESON CJ: Yes, Mr Mullany.

MR MULLANY: Your Honours, this matter raises issues of significant importance for negligence law. It turns squarely on the methodology of proof of causation and on the issue of shifting burdens of proof.

GLEESON CJ: Well, the usual methodology of provable causation is to call the evidence of the witness who is likely to know most about the facts.

MR MULLANY: That is true, your Honour.

GLEESON CJ: Why was that not done in the present case?

MR MULLANY: One can only speculate about that, your Honour, and that is true. That is a hurdle that needs to be overcome but matters have moved, predominantly in the field of medical negligence, and I would like to attempt to persuade your Honours that that test, which now finds favour in the medical negligence arena, the "creation of risk" theory, the "shifting of burden" theory should have a more broad and general application.

GLEESON CJ: Let me just understand how the case was argued in the courts below. Was the point that you wish to ventilate in this Court argued at first instance or on appeal?

MR MULLANY: No, your Honour, it was not. The approach that his Honour Justice Wilcox took, however, in our submission, accords with the approach we seek to contend for here.

GLEESON CJ: But the point that you want to argue for the first time in this Court is a point that only arises because of a failure to call the principal of your client as a witness, is it not?

MR MULLANY: We put it slightly differently, your Honour. We would say that there was no need to do so in this particular set of circumstances and the reasons for that are contained in the kinds of criticisms that have been made in this Court recently by your Honour Justice McHugh, for one, and by Justice Callinan in Rosenberg v Percival as to the effective uselessness of hypothetical evidence in "failure to advise" cases, the use to which that evidence may be put and the utility that it serves.

The theory that has found favour in the medical negligence arena, and which we say should be applied more broadly, or certainly in relation to "failure to advise" cases, carries with it an appreciation of that fact and we say that the two decisions reached below here illustrate the diversity of approach which is now being taken and highlights the uncertainty and confusion which now prevails. The question, in a nutshell, which arises, your Honours, is in what circumstances will the common law now presume the existence of a causal nexus on proof of a tortious breach of duty followed by damage.

McHUGH J: I know, but one of the problems is that, because this point has not been argued at any previous stage, this Court has been deprived of the benefit of the judgments of the court below and that has always been regarded, in the practice of granting special leave, as a matter of some weight and we are being asked to look at it afresh, without any assistance from the judgments of the judges in the courts below, who may bring different perspectives to it.

MR MULLANY: That is true, your Honour, but it is well known and clear, as your Honour pointed out recently in the special leave application in Clay v Clay, if the matter is one of law and it is expedient and in the interest of justice to ventilate it, then subject to costs and prejudice, then, of course, any question can be raised in a court of last resort. Now, we say that nothing - - -

McHUGH J: That is ordinarily when a party is seeking to rely on an argument in support, although I appreciate an appellant is entitled to do it as well. Anyway, I hear what you are say.

MR MULLANY: Your Honour, that is a difficulty I have to face and I accept that that was not raised below, but what occurred at first instance, the process, the quick jump from breach to damage across the presumed bridge of causation, we say is consistent with the theory that we press for and, contrary to what their Honours below found, we say that Justice Wilcox did not move impermissibly on the current state of the authorities.

The Chief Justice of Canada has voiced the view that this Court is now poised to adopt different approaches to causation and that the door has opened for this Court to take that alternative route and she predicts that the rules governing proof of causation will change is advancing public views about the attribution of legal responsibility change and force the courts towards a more fundamental reappraisal of orthodox principle and we say the time to do that has arrived.

Your Honours, the uncertainty that has arisen as a consequence of what was said in Chappel v Hart and, to a lesser degree, in Naxakis, is illustrated by the comments of Justice Santow in the case of Johnson v Biggs, which is on our recent list and I refer your Honours to paragraph [99] of that judgment where his Honour talks of the differences of approach between your Honour Justice McHugh and your Honours Justices Kirby, Gummow and Gaudron and acknowledges that there are unresolved questions concerning shifting of proof and evidential onus.

Can I refer your Honours also to the critical finding recorded at paragraph [41] by Justice Giles as to the trial judge's conclusion that it was not for the plaintiff patient to demonstrate that she would not have undergone the operation concerned but that the onus shifted in that case to the doctor. There is now discernible a difference of approach being taken in different jurisdictions across the country and to the authorities referred to in paragraph 26 of our summary can be added the authorities that we refer to in our recent list.

The most important of those is a recent decision of the Full Court of South Australia in Zaltron v Raptis. Your Honours find the relevant discussions from paragraph [77] through [106] and the approach taken in that case by the Full Court contrasts sharply with the approach taken by the Full Court in this case below. The approach that their Honours in South Australia took is the approach which we contend ought have a broad application. That was a medical negligence case. There was an allegation of a failure to warn of treatment.

What is significant about that case, for present purposes, your Honours, is this. The plaintiff did not give evidence in that case. She did not give evidence as to the procedure she would have adopted if the required advice had been given and your Honours find discussion of that at paragraphs [72] and [74].

Now, based predominantly on what was said in Chappel v Hart, the Full Court, adopting the interpretation of those judgments which we press for, held that the lack of evidence from the plaintiff, notwithstanding, a prima facie case of causal connection was made out on proof of breaching and proof of damage and that an evidential burden then did shift.

GLEESON CJ: Just let me seek to understand the way your argument runs. The solicitor fails to say to the client, "You ought to negotiate for a provision in this agreement that will entitle you to let other people farm in without the consent of the other party to the agreement". The solicitor's failure to give that advice is said to constitute a failure to exercise due care and nobody knows what would have happened if that advice had been given to the client. One possibility is that the client would have said to the other party, "I would like a clause in the agreement allowing people to farm in without your consent" and the other party might have said, "Go and jump in the lake". Now, how does the law deal with that situation at the level of causation?

MR MULLANY: That is the conundrum that this case raises, your Honour. That is true. I would put it slightly differently. Four Justices have now held that there was an obligation upon the respondent to advise that that clause should have been inserted and to structure the agreement accordingly. That did not happen and, as a consequence of that, certain things were lost. There were three valuable rights lost and at least two commercial opportunities lost.

GLEESON CJ: You say as a consequence of that?

MR MULLANY: Yes, your Honour. The damage takes a number of different forms, which I will deal with in due course, if I may. The sole question for your Honours' consideration is whether that is enough. The coincidence of the latter following the former to at least, for the time being, lower the drawbridge of causation and turn to my learned friend to instruct his client to seek to raise it again. That is what is happening in the medical and negligence arena now. The question arises whether it should apply across the board or, if not across the board, to all kinds of "failure to advise" cases.

I said there were two things that were significant about Zaltron. The second is this. The conclusions of that case followed the decision of this Court in Rosenberg v Percival, said by my learned friend to be inconsistent with the proposition that we press for. That is not so, with respect, and the answer to that is found at paragraph [88] of the Full Court's decision.

Rosenberg v Percival was a difficult case in that there was an adverse credit finding in relation to the plaintiff generally and particularly in relation to the question of causation. That evidence was forthcoming after a belated decision to reopen and adduce that hypothetical, we would say virtually useless, evidence from the plaintiff and none of your Honours, with the possible exception of Justice Gummow, had occasion to consider the "creation of risk" theory, which your Honour Justice McHugh was attracted to particularly in Chappel v Hart.

The only passages in Rosenberg v Percival which do, on one view, present a difficulty for us are those in your Honour the Chief Justice's decision at paragraph [14] which, on one reading, although your Honour did not consider it in detail, suggests that no movement should be made from the traditional position.

The difficulty that plaintiffs are now facing, your Honours, is that Justices of this Court and others continue to reach opposite conclusions about causation by reference to the same principles and the same sets of facts. The latest example of that is found in a comparison of your Honour the Chief Justice's conclusions and Justice Callinan's conclusions in Modbury Triangle, respectively with that of Justice Kirby.

There is one thing that should not be lost sight of here. The respondent was paid a premium to provide a protective service and he failed to do so. Four judges have held that that is the case and in breaching that duty he placed the applicant in the very position that he was paid to take all reasonable steps to avoid. Why should a man in that position, when he is able to show that his experienced solicitor should have taken certain precautions because, without them, there is a risk or an added risk of loss and who, in fact, sustains exactly that loss, be in a position where he has to prove anything more.

That, your Honours, is why a different approach has now been taken in relation to the medical negligence sphere. We say that the applicant did not dig his own grave by failing to call what can only be retrospective hypothetical evidence after the event, knowing that the loss has been sustained and the very limited utility of that has been commented on by Justice Callinan, particularly, in Rosenberg v Percival at paragraph [221].

The theory we press for carries with it an implicit assumption that that hypothetical evidence is a waste, effectively, of time. A comparison of what the applicant had prior to the provision of the advice with what it had afterwards, that is after 9 January 1997 when it was forced to withdraw from the Manilan negotiations is instructive. It lost its rights under the memorandum of agreement. It lost its rights under the Spinifex agreement and it lost its rights in relation to an option, which the respondent had sought to obtain a further percentage interest of Montague's shares and it lost at least two commercial opportunities. It lost an opportunity to sell to Spinifex an existing project interest and it lost an opportunity to develop further ventures in that region.

Here we have an expert who never raised a subject he knew was of a regular and significant feature of these contracts. There was evidence that the expert knew that the appellant had no financial resources and that an assignment of equity was a frequent and standard method of overcoming this. There is a dispute between the parties about that and I ask your Honours to take a note of the relevant findings and references to that evidence.

It was put directly to Mr Gore that Montague Mining had no financial interests and that he knew it. Mr Gore said that, "That's correct". Your Honours, can I refer you particularly to application book page 10, page 29 at lines 40 to 50 where his Honour Justice Wilcox said it was "blindingly obvious" that that assignment clause was required in all the circumstances to raise finance; 14, 23, 27 at 15 to 20 and 50 to 55.

They presented a document to this gentleman, prepared as an expert, which purported to properly protect this man and the company from adverse outcome and the omission to do that exposed them to the very risks which transpired. There was not even an opportunity afforded to the applicant to structure the clause appropriately in circumstances where the respondent knew that that was required and appreciated that it was so. Particularly you see that from clause 5 of the memorandum of agreement as committing the appellants to raise finance. You find that at application book pages 12 to 13.

Your Honours, can I deal briefly with loss of chance? There is, of course, an alternative way of looking at this. Following some divergent opinion in Chappel v Hart and Naxakis a number of things are arguable. It is arguable that there was a chance of some value, not insignificant, that the respondent, had he discharged his professional duty, certain events would have transpired and led to the obtaining of the properly drafted agreement.

It is arguable that the applicant should have been awarded damages to be equated with and reduced to the value of that lost chance and it is arguable that if the real chance can be equated to 51 per cent or more, then the applicant should be awarded damages in full. That is derived predominantly from the reasoning of Justice Callinan in Naxakis where his Honour talked of assessment of loss in terms of possibilities rather than first proving a link by way of a balance of probabilities.

Your Honour Justice McHugh does not think much of that argument. He said as much in Chappel v Hart. Justice Kirby indicated that he was attracted to it but declined to reach a concluded view and Justice Gaudron dismissed it in relation to a particular context but did not rule it out generally. Your Honour the Chief Justice has yet to express a concluded view on the issue.

It is a question of great conjecture. It is a controversial thesis. It is one that needs to be settled by this Court and, in our respectful submission, it is time to do so. My learned friend will tell you that that was not the way the matter was conducted below and that is correct. The only time it arose, briefly, was towards the end of the submissions in the Full Court where my learned friend alerted the Court to the fact that the matter had proceeded differently and had detected a change in approach to the submissions advanced on behalf of the appellant as that appeal progressed.

Thirdly, your Honours, we say that this is an occasion to consider the very important thesis advanced recently by Jane Stapleton as to the attribution of legal responsibility, perhaps in circumstances where no causal link can be established by reference to traditional orthodoxy. This case, in truth, turns on competing perspectives of fact and competing visions of individual responsibility. She has advocated that - - -

McHUGH J: We are very familiar, or at least I am very familiar with her articles.

MR MULLANY: This is a perfect vehicle, your Honour, to examine it because if your Honours were not persuaded that the causal test could be satisfied either by reference to traditional principle or by reference to the theory for which I press, then the matter arises squarely.

This is a case which is appropriate in all of the circumstances for the attribution of responsibility and compensation to be paid by the respondent to the plaintiff in this particular case. You cannot get, we think, a more appropriate vehicle to examine that and there are signs that the courts are beginning to approach these matters from a different perspective and to acknowledge the kinds of things which Professor Stapleton relies on.

Your Honours find an example of that recently by Justice Sperling in the Morrison Case at paragraph [119] where his Honour says that:

causation in law also involves a normative judgment as to whether it is fair and reasonable to attribute the harm to the breach in the context of a claim for compensatory damages.

The late Professor Fleming, "resolution of causal uncertainty is apt to be influenced by the strength of disapproval of the defendant's fault", and so it is.

GLEESON CJ: But deciding what is fair and reasonable in the present case is being done in the context of silence on behalf of your client.

MR MULLANY: Indeed, your Honour, and that, in itself, raises perfectly, we say, an opportunity to examine the force behind what Professor Stapleton says. If you accept the last two propositions I have put to you, it is not a gigantic step to refocus these inquiries in the way that she advocates.

Your Honours, it is true that some of these things I have put to you may, on one interpretation, be considered to be radical but many things have been in the past. The common law is not set in sacred stone. Things which are considered to be inviolate on one day may be questionable on another and unsustainable on a third.

McHUGH J: Well, it is a question of raising judicial consciousness after a while, ie is this rejected unhesitatingly, become accepted?

MR MULLANY: Precisely, your Honour. The fact is that there have been legitimate inquiries of the highest importance emerging on these issues in recent times. It is my submission that now is the appropriate occasion for the Court to entertain the debate and settle those questions.

GLEESON CJ: Thank you, Mr Mullany. We do not need to hear you, Mr Jackson.

The Court is of the view that having regard to the way this case was conducted at first instance and argued on appeal, it is not a suitable vehicle in which to consider the issues which the applicant seeks to agitate and the application will be dismissed with costs.

We will adjourn for a short time to reconstitute.

AT11.55 AM THE MATTER WAS CONCLUDED