Big Country Developments Pty Limited v Wall & Anor S294/2000 [2001] HCATrans 584 (20 November 2001)

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry

Sydney No S294 of 2000

B e t w e e n -

BIG COUNTRY DEVELOPMENTS PTY LIMITED

Applicant

and

JOHN WILLIAM WALL and CECILIA ELAINE WALL

Respondents

Application for special leave to appeal

GUMMOW J

HAYNE J

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON TUESDAY, 20 NOVEMBER 2001, AT 11.40 AM

Copyright in the High Court of Australia

MR B.A.J. COLES, QC: If your Honours please, I appear with MR P.P. STRASSER for the applicant. (instructed by Denes Ebner)

MR J.C. KELLY, SC: If it please your Honours, I appear for the respondents. (instructed by David Hand)

GUMMOW J: Yes, Mr Coles.

MR COLES: Your Honours have called on the Wall matter first and may I remind your Honours that the applicant's summary of argument is at 379 of volume 2. Your Honours will have divined the essential nature of the problem - - -

GUMMOW J: I am sorry, just give me that reference again, Mr Coles.

MR COLES: At 379.

GUMMOW J: Yes, thank you.

MR COLES: And the applicant, Big Country, owned premises in New South Wales which it leased to the Wall Investment Co. Judgment on the covenants in the lease have been obtained and entered against the Wall Investment Co. However, the guarantors of the obligations of the company have been relieved of their obligations under the lease and the applicant submits that the interference by the Court of Appeal, the conclusion of the trial judge as to the liability of those guarantors was in some certain respects erroneous.

GUMMOW J: Whereabouts do I find the relevant notice of appeal?

MR COLES: That appears at 376.

GUMMOW J: Yes.

MR COLES: If your Honours have volume 1 handy, your Honours will see that the trial judge's consideration - - -

GUMMOW J: It is really very confusing the way this has been done.

MR COLES: It is, we regret to say, your Honour.

GUMMOW J: Yes.

MR COLES: The trial judge's consideration of the contentions between Big Country and Wall Investment Co and its guarantors really commences at page 34 of volume 1 and it is apparent from that and what follows for many pages is that the issue litigated before the trial judge was an issue as to the affect of filling in a blank in the draft lease. Your Honours will recollect that the solicitors for Big Country sent to the solicitors for the intending lessee, that is to say Wall Investment Co and its guarantors, the draft lease for their execution, that draft lease containing certain spaces in the form which made provision for the insertion of any prior encumbrances if the lease was not, in fact, one to which the existing mortgagee had consented, it being, I think, common ground, or at least there are findings to this effect, that the Walls through their solicitors had knowledge that at all material times Big Country's property was subject to those mortgages.

HAYNE J: Can I just understand a perhaps most elementary of questions. Assume the mortgagee did not consent. Could the lease still be registered?

MR COLES: Yes, and was.

HAYNE J: And what was the consequence of registration without the mortgagee's consent?

MR COLES: The lessee obtained, upon registration, an indefeasible title as such. It was, at least in theory, a title which was precarious in the sense that should the mortgagor/lessor default and should the mortgagee therefore re-enter, then that could, if the mortgagee chose to interfere with it, displace the lessee's occupation. But the reality of the position in point of law is that the lessee obtained upon registration no better and no worse legal estate as lessee, albeit there was a contingency but not one derogated to the estate as such, but a contingency which never occurred to the effect that a mortgagee could, at least in theory, intervene. But there was absolutely no derogation whatsoever from the estate or interest of the registered lessee by reason of there being a mortgage.

Now, we really make two points in this aspect of the matter. One is that the Court of Appeal really took the case unto its own, really disregarding how the matter had been conducted before the trial. You can see how the matter was conducted before the trial judge in volume 1 and the plea before the trial judge by both lessee and guarantor was that by adding relevantly for present purposes the note about the prior encumbrance - - -

GUMMOW J: It was a point about Pigot's Case, was it not?

MR COLES: It was all about Pigot's Case and that was the issue which the lessee and - - -

GUMMOW J: There was a later Privy Council case in New Zealand on - - -

MR COLES: Chilcott v Goss.

GUMMOW J: Yes.

MR COLES: That is right. The issue which the lessee - - -

GUMMOW J: Will that be in play if special leave were granted in this Court?

MR COLES: Sadly, I think not, your Honour. Sorry, yes, it will in this sense: if special leave is granted to Big Country at all, it will be open, and no doubt we would expect it will be the case, that Mr Kelly would continue to press before this Court those contentions which he had wished to press and, indeed, had come prepared to press before the Court of Appeal and which counsel appearing - - -

GUMMOW J: Yes. You had better find out if there are any more that might be in - - -

MR COLES: So in that sense, Pigot's Case does not directly fall for your Honours' consideration, but if you grant special leave, of course - - -

GUMMOW J: It may come up.

MR COLES: - - - it will come up because they will no doubt retreat to the position that they were in when they conducted the case before his Honour, which was that position. Now, the whole proceeded before Justice Bainton on the basis that Pigot's Case and outgrowths or derivations from it effected, by reason of being material alteration to an instrument, an avoidance of the instrument.

GUMMOW J: The instrument does not have to be a deed, does it?

MR COLES: It does not have to be a deed. Well, it used to have to be but things moved.

GUMMOW J: Yes.

MR COLES: When the case came to the Court of Appeal, the Court of Appeal - - -

HAYNE J: An avoidance of the instrument though registered?

MR COLES: Though registered.

HAYNE J: With what consequence for the register?

MR COLES: With absolutely none because the Court of Appeal held, in this respect correctly, that registration endowed the lease with, in effect, the immunities which registration confers and, therefore, the Pigot's Case infirmities did not create a response. With that, of course, no exception can be taken.

HAYNE J: Yes.

MR COLES: However, in the Court of Appeal it was the contention of the Walls that what they had really entered into was an agreement with the lessor to the effect that they were to take a lease that, in fact, had as a term the obtaining, presumably by the lessor, of the mortgagee's consent. Now, we have given the references in the outline but it was acknowledged by the Court of Appeal itself that the scraps of evidence which supported that contention was scanty. It was undoubtedly not the way the trial was conducted below, which, of course, focused on no question at all of any agreement between lessor and lessee as to whether there should be a lease granted with or without the mortgagee's consent. The conclusion that the Court of Appeal came to on that issue was at least based on ambiguous and incompletely - - -

GUMMOW J: What is their finding on this about mortgagee's consent, the necessity for it?

MR COLES: The finding is that the lease which the Walls guaranteed was a lease to which the mortgagee's consent was intended to have been obtained. The argument - and this is our second ground of complaint - was that what the Walls guaranteed, which was, of course, the obligations of the lessee under that lease, was somehow a different obligation or a different lease because, so it was said, the lease which the Walls guaranteed was a lease to which the mortgagee's consent had been given, not a lease to which the mortgagee's consent had not been given.

Our criticism of that is simply this, that what the Walls guaranteed was, of course, the obligations of the lessee and those obligations did not change one bit, whether the mortgagees consented or not. What the Walls guaranteed was - - -

GUMMOW J: It was a performance of covenants between the two parties.

MR COLES: That must be plain. The Court of Appeal seems to have thought that what was guaranteed was a lease in the sense of an instrument or a document, but that cannot possibly right, in our respectful submission.

GUMMOW J: It is a bundle of rights and obligations.

MR COLES: It is a congeries of contractual obligations spelt out contractually. They did not alter one iota by reason of the presence or absence of the mortgagee's consent.

GUMMOW J: The absence of the mortgagee's consent might, on one view of it, have rendered the substance of what was to be achieved between the parties infirm, I suppose.

MR COLES: It might have, but the Court of Appeal did not deal with that, although pressed with an argument that they might. I suppose I should mention that now because it may be material to your Honours' consideration. It was suggested, of course, in conformity with cases like Ankar v National Westminster Finance, that any variation of the deal with the lessor and the lessee could, unless insubstantial or the like, affect the rights of the guarantors.

Now, this was not the subject of any conclusion necessarily by the trial judge, because he was not asked, and not by the Court of Appeal, because they did not get to it in the view they took. If that was so, of course, all you would say is that if the theoretical infirmity to which the lease might be subject as a sort of precarious instrument happened, that is to say the mortgagee stepped in, then of course that would foreshorten the lease and necessarily foreshorten the guarantors' obligations. It is little bit hard to see how a guarantor is prejudiced by having a 10-year obligation reduced to some shorter obligation. But that, as I say, is not the matter which the Court of Appeal felt compelled to address.

GUMMOW J: No, but that point might emerge too, I suppose.

MR COLES: It could. But, really, there was a misapplication of the reasoning of this Court in Chan v Cresdon.

GUMMOW J: Yes. Why?

MR COLES: Because Chan v Cresdon held - and, your Honours, it is extracted in the bundle at the request of various of the parties. If your Honours have Chan v Cresdon, it will be recollected that - - -

GUMMOW J: What was guaranteed there was a lease, not - - -

MR COLES: What was there guaranteed was a legal lease.

GUMMOW J: Yes.

MR COLES: What was guaranteed here was a legal lease too because everybody agreed, as they did in Chan v Cresdon, that the lease had to be registered and become a legal lease, and, of course, here it was, and in Chan v Cresdon, it was not. This Court held in Chan v Cresdon that failure to register the lease meant that there was no guarantee of a lease, because the lessee's obligations were contractual only and not deriving from a lease; a lease being an instrument at law and, in respect of Real Property Act land, an instrument registered in accordance with the requirements of that legislation.

GUMMOW J: Even though there might be a specifically enforceable obligation - - -

MR COLES: Even though the contract was specifically performable, contractual obligations were contractual only, in effect, and this Court was careful to point out that when one - - -

GUMMOW J: An equitable lease was not good enough.

MR COLES: An equitable lease was simply not what the guarantor was guaranteed.

GUMMOW J: Because of the terms of the guarantee.

MR COLES: That is right, exactly. That turns on the construction of the guarantee. On the construction of the guarantee in Chan v Cresdon, the guarantors did not guarantee the performance under an agreement for an equitable lease. They guaranteed only the obligations under a legal lease. But that reasoning, which needs to be challenged - of course, it sheds no enlightenment in the present case, where it is common ground that the lease was intended to be registered, and where it was registered, and where the obligations of the guarantors were perfectly capable of taking effect according to their terms, with or without the background circumstances relating to what the mortgagee may have thought about it. So, in short, they are our two points, really. It was just very wrong of the Court of Appeal to displace the whole basis upon which the parties pleaded and conducted the case.

GUMMOW J: I think we will hear from Mr Kelly now.

MR KELLY: Your Honours, it is not correct to say that the whole basis upon which the parties pleaded and conducted the case was as if there were no threshold question about what was the bargain of the parties. For, indeed, rather obviously, one cannot even begin to consider the question of alteration unless one has first established what it is that the bargain of the parties was, against which one can then determine as a fact whether the instrument has been altered or not altered. It is pleaded sufficiently, in my respectful submission, in the amended defence, an extract of which is set out in the final paragraph of our outline of submissions - - -

GUMMOW J: Volume 2?

MR KELLY: - - - which your Honours will find at page 392, yes, indeed. One cannot even begin to proceed along the logical path of determining, first, whether there was an alteration; second, whether it was done pursuant to any authority, express or implied; or thirdly, the effect of any alteration not done with any authority, express or implied.

GUMMOW J: Well, paragraph 12 is directed towards what is said to be the fourth special leave question.

MR KELLY: Yes, your Honour.

GUMMOW J: Where is that?

MR KELLY: The fourth special leave question is my learned friend's proposition appearing at the top of page 380, where my learned friend says, against the number 4:

Whether it is proper for a Court hearing an appeal in an action heard as a commercial cause to decide that appeal by reference to matters not raised as issues for determination at the trial.

My simple point is that this subject matter - - -

GUMMOW J: I am sorry, Mr Kelly. Page 380?

MR KELLY: Page 380, top of the page.

GUMMOW J: I see.

MR KELLY: Paragraph numbered 4, that is my friend's fourth special leave question. He says it is sufficient for special leave simply for this Court to opine on the propriety of that matter. My simple proposition is that the appeal was not determined by reference to matters not raised - - -

GUMMOW J: What do you say about his grounds 1, 2 and 3?

MR KELLY: Well, they are all hopeless, your Honour, because they do not address the threshold finding of fact. Your Honours see, in paragraph 75 at page 215, where Justice Giles, commencing logically with the first question to be addressed - - -

GUMMOW J: Just a minute. Page 215?

MR KELLY: Page 215, paragraph 75. Your Honour sees the question posed in terms of offer and acceptance. The question is:

As between Big Country and Wall Investment the lease was to be either with the consent of the mortgagees or without their consent. Which was it?

Now, his Honour found as a matter of fact that the bargain between the parties, and productive of the subject matter of the guarantee, was that this was to be a lease which was to be with the consent of the mortgagees.

GUMMOW J: Where do we find that?

MR KELLY: Your Honours find that in paragraph 78, line 27, page 216. Your Honour sees that third sentence in the paragraph - - -

GUMMOW J: "Not the subject of direct evidence".

MR KELLY: "In my view" - - -

GUMMOW J: Not much of a finding.

MR KELLY: Not direct evidence in the sense of evidence viva voce, but it was certainly the subject of documentary evidence.

HAYNE J: And this is the finding his Honour divines from the course of the documents, is it not?

MR KELLY: Yes, your Honour. Yes, indeed, and the - - -

GUMMOW J: That is the complaint against you, in a way.

MR KELLY: And the experts' opinion on conveyancing practice. But your Honours will see in - - -

GUMMOW J: Who were the experts?

MR KELLY: Mr Moses, and that appears in paragraph 81, page 218. And Mr Ebner, the solicitor for Big Country, gave evidence to the same effect. That is in paragraph 82. Of course, a very important piece of evidence was the fact that, recited in paragraph 79 on page 216:

When Big Country's solicitors sent the lease to Wall Investment's solicitors -

It was accompanied by their memorandum of costs and disbursements, and that included an amount - $120, as it happened - for, "Mortgagee solicitors fees". Your Honours see that his Honour goes on to reason that that indicates objectively that it was the intention of the parties that consent be obtained; that the getting of consent was bought and paid for by the Wall parties. As your Honours appreciate, the solicitor for Big Country only did half the job. He proceeded to get a form of consent for one of the two mortgages - - -

GUMMOW J: Yes, though there is some question about the relationship between these two companies, is there not? These two finance houses, is there not? Is that explained?

MR KELLY: I do not think it is posed as a question as such, your Honour, but one is Esanda and the other one is Finance Corporation of Australia.

GUMMOW J: That is right.

MR KELLY: The consent which is attached is Esanda.

GUMMOW J: Not FCA.

MR KELLY: There was no consent from FCA. After about 18 months of failing, in effect, to do the job for which he was paid, and confronted with the next transaction in the stream of transactions, this solicitor merely added the number of the other mortgage into the lease instrument as though it were a prior encumbrance. Having done half the job in that way, what he did was to subject the interest of Wall Investment to a position in which, in the event that there was a default under the FCA mortgage, Wall Investment would be liable to be dispossessed. Now, that is the significant difference between registration with consent or registration upon terms with a prior encumbrance entered.

GUMMOW J: Well, that is conceded, I think.

MR KELLY: Now, my learned friend makes light of this, as though the only matter of interest is a matter of right, overlooking completely duty, including the duty to yield up possession of these premises. This was a 10-year lease of a squash court, and the evidence at large is that it was a squash court, the businesses in which were in continual financial difficulty, because it was not much good as a squash court. In effect, Wall Investment was always under risk of being dispossessed and deprived of its estate or interest in the 10-year lease. His Honour drew the inference from the evidence that it would be unlikely that it be the intention of the parties to expose a tenant, under a 10-year lease of commercial premises, to the risk of being dispossessed, especially in circumstances where the getting of consents was bought and paid for, and the solicitor did but half the job. A totally inconsistent position.

HAYNE J: What is the consequence for the guarantors in that event? Dispossession.

MR KELLY: The consequence for the guarantors is that they are therefore exposed to a greater risk of a claim upon the guarantee, for the premises are commercial premises, income-earning premises, and if, instead of it being a 10-year lease, it is a lease from which their company is liable to be dispossessed in the event of a failure to pay one or other of the mortgagees, then what they have is a high risk, in the Carumo sense. But, in this instance, the approach taken by the Court of Appeal, quite correctly, in - - -

GUMMOW J: What you are telling us is the relationship between the lessor and the lessee and mortgagee. Where do we find findings as to the nature of the subject matter of the guarantee itself, which is what the action is brought on?

MR KELLY: I think the specific finding is at page 225, paragraph 99. Your Honours will see in the third sentence, commencing - - -

GUMMOW J: So the guarantee was included in the same instrument?

MR KELLY: Yes, your Honour. Your Honour sees:

At the time the lease was executed by the Wall parties -

that includes the guarantors -

and returned to Big Country's solicitors, thereby accepting Big Country's offer of a lease on the terms of the lease document, the lease was not to be with a mortgage noted as prior encumbrance, but with the consent of the mortgagees. That was the lease the Walls guaranteed.

GUMMOW J: That was the lease - that is a layman's expression. But what does it mean in terms of legal analysis?

MR KELLY: That is the bundle of rights and duties which created the subject matter of their surety. One cannot analyse it, as my learned friend seeks to do, only by looking at one side of the equation. The liability to be dispossessed, that is to say, a guarantee given of a 10-year lease, from which - - -

GUMMOW J: But one way or another, their hazard - the hazard of the guarantors - is action by the lessor, is it not, against them?

MR KELLY: Yes, but one has this additional risk, created by a breach on the part of Big Country, by the failure to obtain the second mortgagee's consent - - -

GUMMOW J: Thereby rendering?

MR KELLY: Thereby rendering the lease - - -

GUMMOW J: No. Thereby rendering the lessee subject to something; subject to the risk of dispossession.

MR KELLY: Yes, correct, and liability to pay rent under a lease in relation to which there is no entitlement to enjoy the property. That, in these circumstances, was of particular materiality. But, of course, the Court of Appeal decided the case upon the basis that one has been entitled to identify and, indeed, obliged to identify the subject matter of the guarantee. For, indeed, that is what happened in Chan v Cresdon. In the particular case, of course, the distinction - - -

GUMMOW J: I think some of the language in Chan v Cresdon is a bit elliptical, actually. I realise it bound everybody, but it seems to me it is.

MR KELLY: But it still gets the basic message across, your Honour, that if the subject matter changes materially, then, pursuant to the ordinary governing principle of strict construction of an instrument of surety and guarantee, one is not retaining, as it were, the same subject matter. My learned friend does not challenge the threshold finding of facts, namely, that the bargain between the parties was that the contract was to be one in which a lease, which was not to be at risk - - -

GUMMOW J: When you say, "the bargain between the parties"; which bargain between the parties? There are several bargains between several parties.

MR KELLY: The original bargain, summarised in paragraph 75, created on the occasion when an offer to lease was made by correspondence, enclosing an instrument, and the acceptance of that.

GUMMOW J: Sorry, page - - -?

MR KELLY: Page 215.

GUMMOW J: Thank you.

MR KELLY: Paragraph 75. Your Honours have not heard my learned friend suggest for a moment, nor could he, that as between Big Country and Wall Investment, the lease was to be - - -

GUMMOW J: But there is no evidence other than what appears in the documents as to the involvement of the guarantors, is there?

MR KELLY: Correct.

GUMMOW J: Their signatures appear, and that is all the evidence is.

MR KELLY: Yes, but the documents provide a powerful basis for indicating what the subject matter of the guarantee was, what the agreement was. There is no explanation, and no rational basis, for why it is that a solicitor acting for Big Country should by any process of authority, express or implied, be entitled to do half the job, and, as I say, attach a consent on the one hand and subject the lease to another mortgage on the other. That is a perfectly inconsistent position, which indicates the departure from the bargain and the creation of a different subject matter outside the scope of the intended guarantee. All of my learned friend's arguments about implied authority to fill in blanks fall to the ground once one appreciates that this was not a blank, that this was a void, meaning nil, which one sees quite clearly from the collateral documents under which, as their Honours - - -

GUMMOW J: If Mr Coles persuaded us to grant special leave, what would then be coming from you by way of cross-attack, as it were? I guess, in the form of a notice of contention.

MR KELLY: Yes, your Honour. Well, one would, of course, include an Ankar point, for there is a variation which gave rise to prejudice in the manner described. In addition, there would be a - - -

GUMMOW J: Variation of what?

MR KELLY: A variation of the contract of guarantee, by altering its subject matter. Proposition No 1 is: no subject matter. Proposition No 2 in the alternative is that the subject matter was altered by the addition of the entry and, under Ankar, that was a material alteration, for it changed the exposure and risk of the guarantors - for they now had not a secure property for 10 years, but one at which the investment was at the mercy of the mortgagor and the mortgagee, pursuant to any default. And, of course, to complete logically the equation, Pigot's Case would enter the scene. There is not a Chilcott point in this case because, at the end of the day, there was no unjust enrichment. They are the issues which would flow.

HAYNE J: Am I wrong in understanding the various ways of putting the argument you have just described as depending upon - I was going to say attaching different temporal significance to events? That is, that you fix an agreement at one point rather than at another, according to the way those arguments fall out. It seems to me your time target is changing in each of the arguments, but am I wrong?

MR KELLY: I think your Honour may be, for we contend fundamentally that there was only one bargain, and that was the bargain struck upon the terms summarised in paragraph 75, and that - - -

HAYNE J: But his Honour's pregnant question at the end of it: "Which was it?"

MR KELLY: And which his Honour, of course, answered. Any act subsequently performed - and, of course, it was the obligation of the mortgagee to get the consent. I should have emphasised that. Your Honours will see that in paragraph 78:

In my view, however, the proper conclusion is that the lease was to be with the consent of the mortgagees, and that the consent was to be obtained by Big Country.

Big Country did not obtain each of those consents. It did but one, and gripped with indolence - not to put too fine a point on it - almost 18 months later, rather than trouble to get the other, the solicitor entered - - -

GUMMOW J: Yes, but this agreement that is being talked about - talking about bargains. You are talking about an agreement which is executory and then was executed, are you not?

MR KELLY: Yes, your Honour.

GUMMOW J: When did it cease to be executory? They agreed to do certain things, then there was a lease, and there was entry into possession. Why does one not look at the situation at the time of the entry into possession?

MR KELLY: One could do, whereupon no material event occurred in the meantime. What was registered - - -

GUMMOW J: But the obligation, if there was one, was to obtain consent before - - -

MR KELLY: Certainly before registration.

GUMMOW J: Well, that is the question, is it not?

MR KELLY: And upon registration, what was registered had exactly the opposite effect.

GUMMOW J: Not before entry into possession?

MR KELLY: Not before entry into possession.

GUMMOW J: So, there was to be entry into possession with a hazardous title.

MR KELLY: But that is the position that was forced upon us.

GUMMOW J: That is not a bargain, is it?

MR KELLY: No, your Honour. That was the position that was forced upon us. Their Honours do not go into, as it were, the next phrase that one would ordinarily see at the end of paragraph 78:

and that the consent was to be obtained by Big Country.

One would ordinarily see, at the end of that - - -

GUMMOW J: Consent to be obtained before when? Before what happened?

MR KELLY: Before the estate - - -

GUMMOW J: As a matter of conveyancing progression.

MR KELLY: Before the estate or interest was conferred. Otherwise, what one gets is vastly different from what it is that one is paying for.

HAYNE J: Am I wrong in my understanding of the sequence of events, that the lease is not registered until 13 July, and - - -

MR KELLY: Several years later.

HAYNE J: Yes.

MR KELLY: Purely at the fault of the solicitor for Big Country, for it was returned, as your Honour sees - - -

GUMMOW J: But the lessee's solicitors have been happy to be sitting there with this imperfect title for months. Is there any conveyancing expert evidence as to that practice? The regularity with which that happens?

MR KELLY: Regularity?

GUMMOW J: Yes.

MR KELLY: No, your Honour, there is no evidence about regularity. The evidence gives - - -

GUMMOW J: Was there evidence that, in New South Wales, entry into possession often precedes by months, and payment and acceptance of rent, the actual registration of a lease requiring registration under section 53 of the Real Property Act?

MR KELLY: There was no evidence to that effect, your Honour. The evidence was, of Mr Moses - - -

GUMMOW J: He was carefully limited, was he, in the questions that were put to him?

MR KELLY: I was not in the hearing at first instance, your Honour, but your Honours do see that the evidence is set out. It was to the effect of a practice, for without it - - -

GUMMOW J: I think we have reached the end of your time, Mr Kelly. Yes, Mr Coles. Do you challenge Mr Moses' conclusion?

MR COLES: No.

GUMMOW J: No. It would be fairly heroic if you did. But why is it irrelevant - - -

MR COLES: In any court, your Honour.

GUMMOW J: Why is it irrelevant?

MR COLES: Well, it is not the deciding factor of the case. The question: which is or which was it to be in point of consent or not was, of course, posed by the Court of Appeal. It was never answered by the trial judge because it was never posed to him. He was asked to decide the issue whether the alteration was with or without consent, not whether there was some antecedent compact, a term of which was the - - -

GUMMOW J: It seems to have been tried on documents in the trial, and then tried I am not sure on what other basis in the Court of Appeal.

MR COLES: A basis which the Court of Appeal by concession itself regarded, at page 217 of volume 2, at line 14, as scanty:

Albeit scanty, this sufficiently found an inference that Big Country and the Wall parties had agreed -

Now, what, of course, was missing before the trial judge - and, of course, therefore unavailable to the Court of Appeal - was the very evidence that might have illumined the question whether it was a term of the bargain, extrinsic to the contents of the instrument, that there should be obtained by someone and, if so, which, the mortgagee's consent.

The reason why Justice Bainton did not, and could not, make any finding about that, as I say, is because the issue was never debated. Had it been a lively issue before Justice Bainton, one could at least expect the following to have occurred before him, and there to be some findings of fact on it. For example, the lessor's solicitor gave evidence at the trial, but he was cross-examined on none of that. The lessee's solicitor, who would have illumined that very question, "Which is it?", was not called at all, and one supposes he might have been called if it had been a material matter at the time.

The lease itself - the lease instrument or the draft document - was at least ambivalent, in the sense that it could just as well have been seen as a lease to which the mortgagee had not consented as much as one to which the mortgagee had or might. Now, for that matter, the consent could well have been obtained later if there was a serious risk of the problems occurring. The mortgage was a prior encumbrance; whatever anybody else wanted to make of the fact, it was there, for all to see. Ultimately, we founded our contention in the proposition that there really was not an altered lease at all. We do dissent wholly from our learned friend's observation that there would have been some disadvantage to his client - - -

GUMMOW J: Was there any expert evidence as to practice of filling in blanks?

MR COLES: Yes, there was. That is recorded in the trial judge's - - -

GUMMOW J: There is no need to take me to it now. But it is there?

MR COLES: It is there. Indeed, I think it may have been called by my learned friend's side, and said, "Well, solicitors sometimes fill in blanks." The issue before Justice Bainton was whether the solicitor had the authority by implication to fill in blanks. His Honour found in all circumstances he did. That was not an issue which raised for consideration or even touched upon directly the question of whether there was some antecedent agreement justifying the Court of Appeal saying, "De novo, which is it?" It was just not in point. Thereby, because of the absence of evidentiary materials in the court below, great injustice was done, in our submission.

GUMMOW J: Yes, thank you, Mr Coles.

There will be a grant of special leave in this matter on each of the three grounds that are set out at pages 373 and 374 of the application book.

AT 12.21 PM THE MATTER WAS CONCLUDED