Burger King Corporation v Hungry Jack's Pty Ltd S157/2001 [2002] HCATrans 180 (19 April 2002)

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry

Sydney No S157 of 2001

B e t w e e n -

BURGER KING CORPORATION

Applicant

and

HUNGRY JACK'S PTY LIMITED

Respondent

Application for special leave to appeal

GLEESON CJ

CALLINAN J

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON FRIDAY, 19 APRIL 2002, AT 11.55 AM

Copyright in the High Court of Australia

MR S.G. FINCH, SC: If the Court pleases, I appear for the applicant. (instructed by Allens Arthur Robinson)

MR N.C. HUTLEY, SC: If the Court please, I appear with MR T.D. CASTLE for the respondent. (instructed by Mallesons Stephen Jaques)

GLEESON CJ: Yes, Mr Finch.

MR FINCH: Thank you, your Honours. Your Honours may, for all practical purposes, I think, discard most of the red folders. They are there, really, for abundant caution. The judgments below were very lengthy indeed. It is unlikely that your Honours will need to refer to them.

Your Honours, special leave in this matter ought be granted because the Court of Appeal, in dealing with a disputed finding of fact by the primary judge, made a number of errors which, if uncorrected, we say would result in serious injustice to the applicant.

The errors involve, importantly, the reinterpretation of what was, on its face and in its context, we say, an unambiguous finding of fact and the substitution for that unambiguous finding of fact of a different finding which was itself wrong. That process was unaccompanied by an exercise of fact finding by the Court of Appeal.

GLEESON CJ: Where is the original finding and then where is the reinterpretation of it?

CALLINAN J: It is 145, is it not?

MR FINCH: The original finding, your Honour, is in the blue application book at application book 145 in one paragraph, which is paragraph 634.

CALLINAN J: And 244, is it not, the other one?

MR FINCH: The other finding, your Honours, is at application book 236 at paragraph 698 and I will come to precisely how one grew out of the other in a moment, if it is convenient to your Honours.

CALLINAN J: Page 236?

MR FINCH: Yes, your Honours. They are the two pages. In reality, this case boils down to an analysis of those two paragraphs. Your Honours, it is a serious matter. We acknowledge, of course, as I said at the outset, that it is a matter that involves an error of fact but, nevertheless, the error was important both because in terms of the money consequence to the applicant - it is in the order of some $19 million out of $73 million is the order of the correction which would flow if this error was corrected.

It also involves the approach of the Court of Appeal. It was not merely the exercise of a discretion in fact finding but it involved, as I have said, the reinterpretation of a finding of fact without an accompanying fact-finding exercise by the Court of Appeal where that reinterpretation, we say, was not reasonably open or, indeed, open at all.

Can I give your Honours a very brief factual background; not much is needed to appreciate the issue but your Honours may have noticed one of the heads of damage in this case involved the delay in opening restaurants by Hungry Jack's in a period from August 1995 to December 1999.

His Honour found that Hungry Jack's would have opened, in that period of about four years, 17 restaurants a year if not for Burger King's conduct. To derive a figure for the income which was lost from those 17 restaurants per year, Hungry Jack's expert analysed three samples of existing restaurants which had been built up until that point. Burger King's expert analysed only one of those three samples. Neither expert, your Honours, expressed a view about which sample was appropriate to use.

Turning to the three samples, your Honours - and this will only take a moment - because it is important to appreciate the differences, Sample 1 consisted of a selection of 46 of the most profitable restaurants, whether new or old, some being refurbished in recent years. They were all of a particular type: they were suburban restaurants; they had drive-through facilities; they had playgrounds; they had external seating - the sort of thing that your Honours, no doubt, find attractive in a restaurant.

Importantly, your Honours, a feature of Sample 1 was that this sample excluded inner-city restaurants and shopping-centre restaurants and suburban restaurants with drive-throughs, each of which category of restaurants - and there was no dispute on this in the evidence - continued to be built in the four years leading up to the exclusion period.

Sample 2 consisted of all of the restaurants that Hungry Jack had built in the four or so years leading up to the delay period. There were 33 restaurants in that sample. Importantly, 22 of them were also in the Sample 1 list, that is, of the more profitable style of restaurant, but equally importantly, included were also the inner city, shopping-centre style of restaurants.

The important thing that we would ask be noticed about that category is, firstly, that it did take account of the wish of Hungry Jack to establish more profitable style restaurants because two-thirds of the sample were the Sample 1 style, but equally importantly, it incorporated the physical expression of the corporate intent so far as it could be derived from an analysis of what had happened, and that is that so far as one could see from what had happened, Hungry Jack had not decided to cede the battleground in the inner city and in the shopping centres to its competition. It had continued to open restaurants in those areas. Sample 3 was a sample of all of the restaurants averaged out. That was the sample that Burger King's expert analysed.

Can I turn then, straightaway, your Honours, to the judgments and to the findings which compete. Your Honours will find his Honour Justice Rolfe's decision at first instance at application book 145. Paragraph 634 is the relevant paragraph. His Honour in that paragraph recites the three samples and appends to two of them a characteristic about which we want to make comment.

By way of background, if your Honours have time, your Honours will notice in due course that this recital in paragraph 634 is lifted almost word for word from Hungry Jack's written submissions before him, which appear at application book 42. They also, we say, incorporate the errors which were made in those written submissions. What his Honour does is, in respect of Sample 1, which your Honours see commencing at about point 20, his Honour appends this comment about it, and this is at about point 30, 31:

Mr Cowin gave evidence supporting that calculation upon which he was not cross-examined.

That, your Honours, was only partially correct.

GLEESON CJ: What does he mean by that expression, "supporting that calculation"?

MR FINCH: It is difficult to know what he means and this is the source of his error in the last sentence in the paragraph, your Honour. What, on one view it meant, was that Mr Cowin gave evidence that such restaurants had been built but that was not sufficient to support his Honour's conclusion. As your Honours will see, at the start of this paragraph, it is opened with a sentence which includes:

to represent the type of store which would have been opened in the period after August 1995.

Mr Cowin gave no such evidence. He did not give any evidence about what style of store would be opened after August 1995. This is the first of the errors which derives from application book 42 where exactly the same expression was given in paragraph 36.28 of the written submissions.

GLEESON CJ: Just a moment.

MR FINCH: If your Honour would turn back to application book 42.

CALLINAN J: Was Mr Cowin cross-examined in fact at all?

MR FINCH: He was cross-examined, but not about this issue.

CALLINAN J: Not about the calculation.

MR FINCH: Not about the calculation because, as I will come to in a moment, your Honour, we accepted his evidence about the historical building performance of the company. In fact, that supports our case, which is why he was not cross-examined about it. Regrettably, as will no doubt be pointed out, we did not give his Honour Justice Rolfe any assistance by way of submissions as to why Sample 1 was not the right one to adopt, but I will come to that in a moment.

Your Honours see at page 42 of the application book at about point 24 - this is part of the word-for-word extract that his Honour pulled out of these submissions:

Cowin gave evidence setting out the basis for that calculation, and was not cross-examined as to that evidence.

That appears to be what is the source of his Honour's remark:

Mr Cowin gave evidence supporting that calculation - - -

GLEESON CJ: As distinct from justifying the use of that calculation for purposes of computing damages.

MR FINCH: Yes, precisely, your Honour. All Mr Cowin did was say, "We have built from time to time some restaurants which fall into a certain category". He did not mention the samples, but he simply recited the sort of restaurants that had been built. So in that sense it is important to notice that his Honour's recitation of that characteristic of Sample 1 was partially erroneous. It was correct in so far as Mr Cowin said such restaurants had been built. It was incorrect in so far as it was deployed in support of an assertion that he said that that style of restaurants would be opened in the future, or that only that sort of restaurant would be opened in the future.

About Sample 2, your Honours see, commencing at about 35, 36 on page 145 of the application book, his Honour correctly recited:

The second sample, ("Sample 2"), comprised the 33 restaurants -

and as your Honours will immediately notice, he then goes on to recite something which is wrong as a characteristic -

accordingly, a larger sample of restaurants -

and he must be comparing it to Sample 1, being the sample which is preceding it -

on which to predict the performance of those which would have been opened from August 1995, but for BKC's withholding of expansion -

Now, of course, that was wrong. As soon as one looks at Sample 1, one sees that it has 46 restaurants in it. Sample 2 has 33. Again, the source of this error can be found back on page 42 where it can be seen that his Honour has simply adopted uncritically the written submissions which record precisely the same assertion that it was a larger sample.

GLEESON CJ: Whose submissions are they?

MR FINCH: They are Hungry Jack's submissions, your Honour. Now, I should say at once we did not give his Honour the assistance that he deserved by pointing out that error at first instance but the errors were pointed out at Court of Appeal level which, we say, is the important thing.

Importantly, also about Sample 2, his Honour did not recite the fact that Mr Cowin had also given evidence about Sample 2, that is, he had said that these restaurants were built in the four years leading up to the exclusion period. So, if one interprets the comment about Sample 1 in its correct way, which is Mr Cowin gave evidence that these restaurants had been built, the same comment could, and should, have applied to Sample 2. It was not a point of difference. The last sentence on 145 is the finding. His Honour says:

It seems to me that "Sample 1" is the appropriate one to use, as reflecting the type of stores Mr Cowin said would be opened.

GLEESON CJ: Did he say that?

MR FINCH: He did not say that. He did not say anything about the type of stores which would be opened. He said something only about the number of restaurants which would be opened. All he said was what restaurants had been opened in the past. I will take your Honours in a moment to precisely the paragraphs which contain his evidence. They are very short.

Can we say a number of things which are relevant to this special leave application about that finding, because it is relevant to the way the Court of Appeal dealt with it? That sentence is not ambiguous on its face. In terms of simple English it contains a recitation that Mr Cowin gave evidence about the type of stores which would be opened. He did not.

If one looks at the finding in context, that is in the context of the paragraph which is the only paragraph where his Honour deals with this question, what his Honour was doing was resolving a competition between Samples 1 and 2. Sample 3 does not enter into the competition. For the purpose of resolving that competition, his Honour tagged each sample with a characteristic.

The characteristic attached to Sample 1 was that Mr Cowin gave evidence supporting it. That was wrong in the crucial sense because it was not a forward looking piece of evidence about what would be opened. The tag attached to Sample 2 was also wrong, that it was larger than Sample 1. So, your Honours can see immediately that the competition which his Honour resolved to determine in favour of Sample 1 was fundamentally flawed because the stated basis of the contest contained an erroneous attribution of characteristics to each of the samples involved in the contest.

Now, the reason I point that out, your Honours, is, as your Honours will see very shortly, the Court of Appeal has reinterpreted his Honour's finding in a way which attempts to say his Honour was not there finding that Mr Cowin said anything about the type of stores which would be opened.

GLEESON CJ: But the ultimate question for the Court of Appeal on this issue was whether error had been demonstrated in the selection of Sample 1 by Justice Rolfe and, as I understand what they said on page 236, they said, "Some of the steps that he took towards that conclusion are shown to have been erroneous but we're not persuaded that the conclusion was incorrect".

MR FINCH: Yes, and I will come to that directly. We will say that there is an error involved in that because the Court of Appeal did not engage in any analysis that they reveal of the evidence which supported either choice.

GLEESON CJ: Except that they pointed out that Sample 1 was the larger sample.

MR FINCH: Yes, but that is probative of nothing where it is not suggested that any of the samples was too small to be of use. That would only be a reason for selecting one over the other if it was suggested that there was some utility or advantage attached to the number 46 as opposed to the number 33.

GLEESON CJ: But would you not prefer a wider sample if it gave a better mix of restaurants?

MR FINCH: All other things being equal, your Honour, yes, but the one thing one knows about Sample 1 is it did not give a better mix of restaurants. The evidence that was incontrovertible was that Sample 1 was a selection of restaurants confined to the more profitable type, which expressly did not include the inner-city restaurants, the shopping-centre restaurants, which one knows as a matter of fact were being opened right up until the time of exclusion.

That is why I mentioned at the outset because nobody said anything about corporate intent in the years of the exclusion period, the court has to fall back on the contemporaneous record of what did happen as the physical expression of that corporate intent. That is Sample 2. It includes two-thirds of the Sample 1 restaurants, of its number, and it includes the other restaurants in competitive territory which one would assume, in the absence of evidence of a change in corporate policy, was still going to be fought out between Hungry Jack's, McDonald's and whoever else enters the fray.

CALLINAN J: Just remind me, who was Mr Gower?

MR FINCH: Mr Gower was the expert called by Hungry Jack. Your Honours, can I turn straight to the Court of Appeal judgment that I have been invited to - - -

CALLINAN J: So their own expert was putting up three possibilities?

MR FINCH: Yes, but he did not make any recommendation between the three possibilities.

CALLINAN J: No, but I mean, obviously, he thought that there were three and that a choice had to be made.

MR FINCH: Your Honour is quite right.

GLEESON CJ: What was his expertise?

MR FINCH: In accounting.

GLEESON CJ: Right.

CALLINAN J: The very fact that he was putting up three suggests that there had to be some analysis as to why one or other of them should be preferred.

MR FINCH: Yes, your Honour, but he did not perform that analysis. He simply recited his instructions about what the characteristics were of each of the samples.

CALLINAN J: Yes, and you say that Mr Cowin did not provide any analysis either.

MR FINCH: No, he simply described some of the restaurants, but not all of them, that were in the samples and nobody said anything about what would happen in the delay period. That was a matter to be resolved by inference from Mr Cowin's evidence, that being the only evidence from which such inference could be drawn, and his evidence supported our case which was in the four years leading up to the exclusion period, Sample 2 were the restaurants we had been building and there was no evidence that said, and as a matter of corporate policy we were going to stop building in the inner city and stop building in shopping centres and leave that to McDonald's. Such a giant change in corporate intention, one would assume, would have been the subject of some evidence if it had occurred. In the absence of that evidence, we say, the inference was unavoidable. Can I come to what the Court of Appeal said, your Honours?

GLEESON CJ: Yes.

MR FINCH: The Court of Appeal dealt with this matter equally briefly. They commenced the relevant analysis at the top of page 236 of the application book. They say:

HJPL -

that is Hungry Jack's -

accepts that Rolfe J was wrong in saying that Sample 1 reflected the type of restaurants Cowin said would be opened. He apparently expressed no view about the matter.

GLEESON CJ: I think you have left out a sentence, at the bottom of page 235.

MR FINCH: Yes. That was the disposal of Sample 3, which is not in play. That was the "all stores" sample. So, what their Honours are saying there is, "Sample 3 is no good. Let us turn now to the competition between Sample 1 and Sample 2". As your Honours see there it:

would be represented by the average of the best and the worst and the newest and the oldest of existing restaurants.

We take that to be a reference to the "all stores" sample. Then, their Honours go on to say:

He apparently expressed no view about the matter. However, we are not convinced that that is what his Honour meant. Rolfe J expressed the view that Sample 1 was the appropriate one to use.

Their Honours there leave out the stated wrong reason which his Honour gave and they deal with that by saying, two sentences later:

What we think Rolfe J meant was that in his opinion the restaurants that Cowin said would be opened would be of a type reflected by Sample 1.

There are a number of problems with that.

CALLINAN J: Well, there are obvious problems. Nothing could be plainer. They are almost words of one syllable.

MR FINCH: Yes.

CALLINAN J: How could they possibly be ambiguous in meaning?

MR FINCH: Well, that is what their Honours essentially have to find and the problem with that, as your Honour says, with respect, it is not what his Honour said. What his Honour said was plain on its face and it is also plain in its context. He was resolving a competition expressly on that basis that he said he was doing it on.

Equally importantly, if his Honour had come to an independent opinion that their Honours postulate here about what type of restaurants had been opened or would have been opened, one would have expected to see some analysis of it in his judgment other than the simple acceptance of Mr Cowin's evidence, which was an erroneous point of view. There is no such analysis, none at all.

CALLINAN J: The trial judge was lavish in his praise of Mr Cowin as a witness.

MR FINCH: Yes, he was extremely impressed by Mr Cowin and for this purpose we are content to accept that praise because Mr Cowin gave no evidence contrary to what our submissions are.

CALLINAN J: He was not cross-examined at all - cross-examined but on different - - -

MR FINCH: He was cross-examined, your Honour, but mostly about the financial ability to open 17 restaurants per year.

CALLINAN J: I know, I remember that issue. Yes.

MR FINCH: As your Honours have seen, his Honour's paragraph derived almost wholly from paragraph 42 of the written submissions. Now, there is no reason, of course, why a judge cannot replicate written submissions if they are right, but the danger inherent in doing it is that any errors in those written submissions, if they are not checked, are going to infect the judgment and that is what happened here.

If his Honour had come to an independent view, as the Court of Appeal must postulate he did, or if they are going to do it, they have to do, either the judge at first instance or the Court of Appeal has to grapple with the facts that I have mentioned, for instance, the fact that Mr Cowin said that Sample 2 represented the restaurants that were being opened; the fact that nobody said that did not represent the corporate intention on an ongoing basis; the fact that there was no evidence that any corporate intention had changed.

Indeed, if his Honour had really looked at the competition between Sample 1 and Sample 2, why would he not have picked up the error in sample size that he recites in his judgment? It simply points out the fact that the submissions have been uncritically adopted.

Now, the result of that, for today's purposes, your Honours, is that the Court of Appeal has reinterpreted an unambiguous finding of fact where there was no room to do so. It substituted a finding which was itself wrong and if your Honours turn back to 236, they themselves indulge in no other analysis except for the sentence that the Chief Justice already pointed out to me. I see my time has come, your Honour.

GLEESON CJ: Yes, thank you, Mr Finch. Yes, Mr Hutley.

MR HUTLEY: Your Honours, the first point is, at first instance in this case, the only submissions which were made in respect of sample size were made on behalf of the respondent on the appeal. We submitted that Sample 1 should be accepted and for the reasons set out. Alternatively, Sample 2 was put forward. No contest was forthcoming from the applicant on the appeal of that submission.

GLEESON CJ: Now, what was the reason why Sample 1 should be selected?

MR HUTLEY: The reasons why we said Sample 1 should be selected are, your Honour, essentially these. In any prediction with which one was concerned in this case, one was dealing with a prediction as to what could have happened but for the wrong of Burger King. Inherent in that in the choice of any sample would be elements of uncertainty. It was the nature of the beast, because one simply could not know what would occur over the four and a half years which we were interfered with by Burger King.

Therefore, one had to take the samples or create samples which one could seize or not seize as the better available. The natural likelihood of departure from those samples would, of course, be reflected in the discount undertaking because we are dealing with a "loss of a chance" case. We chose two samples. One could have, for example, formulated other samples, namely, for example, a mixture, an addition of 1 and 2 to create a third sample.

The applicant's approach to the case was they would not engage in any exercise of this variety. Their attitude to the case was such that they would not even submit as to which was the appropriate sample, and your Honours will find in the judgment of the trial judge the attitude taken by Mr Oslington in submissions on behalf of the applicant to questions of damages. He addressed three points only. Your Honours will find this at application book volume 1 page 137. He declined to engage. He simply made no submissions in relation to sample size. He fought it at a higher level of generality and lost and none of those challenges are attacked. Therefore, this point was raised - that is Sample 2 as the preferable sample was raised for the first time by the appellant in the Court of Appeal.

GLEESON CJ: Are they strict alternatives? Is it either Sample 1 or Sample 2?

MR HUTLEY: Your Honour, as your Honour will appreciate in a calculation of this variety, one has to create cash flows and the cash flows have to be based on, as it were, a set of given integers. So you have to, at the point of creating the base figure for damages, rely on one or the other because - - -

CALLINAN J: It is a question of to which profit stream you applied the discount to - which cash flow you applied the discount to.

MR HUTLEY: Quite.

CALLINAN J: And there would have been a different profit stream for each of the samples, is that right?

MR HUTLEY: Exactly, your Honour. Of course, your Honour, as we observe at a later point, even were the Court of Appeal to have been wrong and one should have adopted Sample 2 for argument's sake, that would have created a whole different calculation of a discount for contingencies. We were subjected to a very heavy discount for contingencies of 55 per cent on Sample 1.

Sample 2, which, as it were, could be conceived of as a much more conservative starting point, would obviously be subjected to a much lesser range of discounts because of the contingency of not achieving - in effect, the performance of the less profitable restaurants would be lower than the contingency of accepting the more profitable restaurants.

CALLINAN J: I could see the force in all of that, Mr Hutley, but what is your answer to the proposition that there seems to have been a misstatement of the evidence?

MR HUTLEY: Your Honour, firstly, in our respectful submission, we submit the offending sentence is ambiguous. The question becomes, ultimately, if I can take your Honours to it - and this is what we say the Full Court ultimately failed - is what do the words - this is 145, your Honour - "Mr Cowin said would be opened" qualify? The type of stores, or stores. If, as the Court of Appeal found, what his Honour was intending to say - in a sense, "Mr Cowin said would be opened" qualified stores and not the type of stores, there is no error.

What we really have here is an adjectival clause qualifying potentially a noun phrase or a noun. Now, that always has within it the potential for ambiguity. Your Honour, my learned friend's submissions that the judge fell into a basic error depends upon the assertion that his Honour uncritically accepted our submission in paragraph 36.28, which is at page 42, without reading the evidence of Mr Cowin referred to in the second-last sentence, which is footnote 229.

Now, that evidence was a number of paragraphs in an affidavit which your Honours will find in volume 2 of the application book, page 276 and following. Now, that affidavit, your Honour, and it is important in this regard, is that that affidavit was one of the central affidavits in this case and was the subject of great consideration, both in his Honour's judgment and in debate, because this was the affidavit which formed the basis of the evidence of Mr Cowin as to what would occur.

CALLINAN J: Does he say anywhere that he would have opened Sample 1 type restaurants?

MR HUTLEY: No, no. Mr Cowin did not give evidence, and we accept that, and we submit we never submitted that he did give evidence that, "I would have, over the four years, opened only restaurants within class Sample 1".

CALLINAN J: So your complete response really is that this is ambiguous, that the trial judge's expression was ambiguous?

MR HUTLEY: Yes.

CALLINAN J: Because you do not assert that on the meaning that is attributed to it by the applicant there was any evidentiary basis for it.

MR HUTLEY: Your Honour, we conceded in the Court of Appeal that if his Honour was intending to say that Mr Cowin said that he would open a particular class of restaurant, that was in error. What we submitted was that - your Honour, can I go, therefore, to the affidavit?

CALLINAN J: Just one moment, Mr Hutley. Would not Mr Cowin have been the best witness to give this evidence?

MR HUTLEY: Your Honour, there is, in a sense, always the difficulty of hypotheticals, particularly in a dynamic industry, which this was, stretching out over four and a half years about precisely where the mix - it may depend on - - -

CALLINAN J: This was the case. This was the whole case, was it not, that you were trying to get as much money as you could? So one would expect your best witness, Mr Cowin, to be putting his best foot forward on this issue and he did not give any evidence of what restaurants he would, in fact, have opened.

MR HUTLEY: He gave evidence as to the numbers. He gave evidence as to where he would open them.

CALLINAN J: No, but in terms of sample.

MR HUTLEY: No, but in terms of what would be the particular characteristic of the restaurant opened, no, because one is really there dealing with the difficult hypothetical of what sites and opportunities arise and what are the council opportunities which arise. Now, such hypothetical evidence, in one sense, becomes completely unreal. I mean, it leads witnesses - and Mr Cowin was found to be a witness of complete, impeccable veracity. To ask witnesses to try and predict every detail and element of what might or might not occur over that period of this variety is simply in our respectful - he did not express the opinion - - -

CALLINAN J: But he was giving evidence after the event, presumably.

MR HUTLEY: Yes.

CALLINAN J: So he had the benefit by then of being able to identify what had happened in that marketplace.

MR HUTLEY: Your Honour, he was prevented from, in effect, going out and participating in that marketplace. So he was not seeing the opportunities.

CALLINAN J: But he was an expert on that marketplace, was he not?

MR HUTLEY: Yes, but, your Honour, the way these opportunities arise has something to do with the properties which become available and that happens at particular times, et cetera, and if you are prevented from developing them, you are prevented from being in the picture. But, anyway, your Honour, can I just go to this affidavit? This was an affidavit, your Honour, which his Honour considered in detail.

GLEESON CJ: What page again?

MR HUTLEY: Your Honour, this is Mr Cowin's affidavit.

GLEESON CJ: Volume 2 page?

CALLINAN J: Page 276, is it not?

MR HUTLEY: Yes, 276. Your Honour will see that there has been a detailed consideration of this affidavit in application book volume 1 page 108 and from paragraph 573 your Honour will see that the trial judge considered that affidavit virtually paragraph by paragraph, other than the two with which we are concerned - I will come to that - in the course of the judgment. It was one of the central affidavits in the proceedings.

My learned friend's argument depends upon his Honour having not known what Mr Cowin said in that affidavit, that is, the high point of my learned friend's submissions is that his Honour did not read the footnote, 229, did not go to that affidavit and did not know what it said and it is not, as it were, an affidavit which was one of many which was referred to but once. It was central. There was a complete debate about virtually every paragraph of this affidavit because Mr Oslington chose, in effect, not to cross-examine on any of it.

Now, the effect of that failure to cross-examination was at the heart of submissions at first instance. It is just, with respect, passing belief that his Honour did not have an acute knowledge of what was in those paragraphs. Also telling, your Honour, is when the submission in writing was made and the oral submissions were made in court, senior counsel for the applicant was in court and no suggestion was made in any submissions that what appeared in our submissions was in any way misleading, because if one went to the footnote and read the affidavit, with which all parties were intimately acquainted who were at the trial, it was quite clear precisely what was being said by that paragraph.

CALLINAN J: Can I just ask you one question, Mr Hutley? Page 280, Mr Cowin says:

I have been asked to assume that judgment in HJPL's favour is made -

and then he says -

In my opinion, on the basis of that assumption -

and then he sets out there, as I read it, what he would have done. Is that the wrong way to read it?

MR HUTLEY: Yes. Your Honour, that paragraph - 13, your Honour is directing to?

CALLINAN J: Yes.

MR HUTLEY: That was dealing with what was called the recoupment period. That was dealing with had we won and had we got back the rights under the agreement to develop, what Hungry Jack's would do to mitigate the losses it suffered by not having been able to open restaurants for a number of years.

CALLINAN J: It is a mitigation point.

MR HUTLEY: It was a mitigation point.

CALLINAN J: Thank you.

MR HUTLEY: None of this was challenged in cross-examination.

GLEESON CJ: Mr Hutley, assuming you are right about the interpretation of the Court of Appeal put on the last sentence on page 145 - and I have to say that, for my part, I think that is the way I would have read it uninstructed by or unassisted by argument, but assuming that they were right, that that is what it meant, where does that leave you as to the basis upon which you would prefer Sample 1 to Sample 2? In other words, if it is not the result of something that Mr Cowin said, what is it the result of?

MR HUTLEY: Your Honour, the bases for preferring Sample 1 were many. The basis was this, besides what I have indicated. Hungry Jack's was moving to upgrade many, many restaurants. They were building restaurants and they were upgrading old restaurants and they were upgrading them to achieve this drive-through, higher return.

The business program of this company was to the extent possible to maximise profits. The maximisation of profits was from building this class of restaurant. That was the way that the submission was put and that was the basis upon which one could choose Sample 1.

Of course we accepted there might have to be a discount, and his Honour gave one, against the possibility that one created restaurants of other varieties because other opportunities arose which one was led to. Now, the opposite way, one could put it, was the way my learned friend puts it that, in effect, the Sample 2, because that is the history, that should be chosen. But that ignores the large amount of capital which was being invested upgrading restaurants to ensure that they came into the new configuration. Either sample had its defects. There was no doubt about that because none could be perfect.

GLEESON CJ: What you say may be perfectly correct and it may be a problem arises because we are confining our attention to one paragraph in the reasoning of Justice Rolfe and one paragraph in the reasoning of the Court of Appeal and it is difficult for us to get a grasp on the context at this stage. But giving what Justice Rolfe said on the bottom of 145 the interpretation that the Court of Appeal gave it, that seems to lead to the result, does it not, that you do not find either Justice Rolfe or the Court of Appeal giving any reasons for preferring Sample 1 to Sample 2?

MR HUTLEY: Your Honour, the way it was run in the Court of Appeal was that Justice Rolfe got it wrong. He got it wrong as a matter of fact. No argument was put in the Court of Appeal that if it was right there was an absence of reasons to justify the submission.

CALLINAN J: That might have been highly undesirable but there was so much money involved on this point, that would you not have expected some analysis?

MR HUTLEY: Your Honour, before Justice Rolfe, there were thousands of points, on one view, in this case and it was run by highly experienced counsel and counsel did not make a submission counter to the point. They simply did not ask his Honour to give any reasons.

GLEESON CJ: How much money do you say is involved in this point?

MR HUTLEY: Nothing. We will say if you choose the other sample, you have to do a complete recalculation and the contingencies will drop dramatically because, we would say, one would analyse it as a much more unfavourable sample.

GLEESON CJ: So you say if we took this matter on, allowed the appeal and remitted the matter to the Court of Appeal to seek a recalculation, it would not necessarily involve any amount of money at all?

MR HUTLEY: It could well be exactly the same figure. Firstly, we would say it is not an appropriate vehicle because the one point that is really advanced is the recasting. We say the recasting is wrong.

CALLINAN J: It is a pretty big range, is it not, nought to what, $19 million? That is the difference between the parties.

MR HUTLEY: No, it is not nought, your Honour.

CALLINAN J: No, but you say there would be no difference.

MR HUTLEY: No.

CALLINAN J: And the applicant says there would be many, many millions.

MR HUTLEY: Yes, but the applicant says there would be no need at all to reconsider contingencies, which is simply just unsustainable because it is quite clear from the Court of Appeal's judgment that they thought one of the contingencies which went into it is the likelihood that you would not achieve a complete performance of the higher grade restaurants.

Your Honour, we would submit it would be obviously a significant factor which went to Justice Rolfe's judgment. His Honour was intimately acquainted with all aspects of this. In our respectful submission, it just passes belief that his Honour would not have realised that it was possible that inner-city restaurants could be included. Your Honour, there were mountains of material and other issues about inner-city restaurants.

CALLINAN J: It is a pity he did not say that, is it not?

MR HUTLEY: We have not met as part of the appeal, and the appeal in the Court of Appeal was not run on the fact of an absence of reasons. The one error raised by my learned friend in the Court of Appeal was Justice Rolfe's decision proceeded on a factual error. That was the area which they said got them over the barrier for a re-exercise of the Warren v Coombes retrial powers. That is how they ran it.

They did not run it on saying, "Even if the submissions are right" - I see the time, your Honour, can I finish this sentence - "by the respondent, there is a failure to give reasons and therefore there has been a miscarriage of justice". That simply was not argued and therefore the Court of Appeal did not embark upon giving those reasons. They simply addressed the point argued by my learned friend.

GLEESON CJ: Thank you. Yes, Mr Finch.

MR FINCH: Your Honour, just three points. My learned friend relies very heavily on the role of contingency. There is no reason in fact or logic why the contingency would necessarily be higher or lower if one adopts a different sample. No doubt, the contingencies took into account the potential inaccuracy in the sample. His Honour did not take that expressly as a particularly important part of his adoption of 55 per cent.

GLEESON CJ: No, but the consequence of applying contingencies to more profitable restaurants is different from the consequence of applying contingencies to less profitable restaurants.

MR FINCH: It may be, but what your Honours cannot decide is whether that would be significant enough to materially change the very large amount of money which we would say would flow from the correction of the error.

GLEESON CJ: You are not suggesting, are you, that if we granted leave to appeal and allowed the appeal, this Court should recalculate the damages?

MR FINCH: No.

GLEESON CJ: You would be asking for it to be remitted to the Court of Appeal?

MR FINCH: Yes, your Honour. The other more important thing about vicissitudes, of course, if your Honours find that there has been an error by the Court of Appeal, the role of vicissitudes, of course, is not to allow for such error. It is to allow for uncertainty, not for the correction of error or for the allowance of express defects of the sort that we have pointed to.

The next point that my learned friend relied on very frequently was that there was a large amount of evidence. As I pointed out, none of that evidence went to future matters. The whole of the case had to depend on the inference available from the past evidence and nowhere does one see any analysis of that.

CALLINAN J: Was there any submission as to why Mr Cowin did not, in fact, give evidence as to what his preference would be with respect to the samples?

MR FINCH: No, your Honour. My learned friend is quite right in saying that at first instance his Honour was not assisted by us at all in this area.

CALLINAN J: No, but assuming, for present purposes, it may or may not be right that they have to prove the damages and the onus lies on them.

MR FINCH: Yes. One would have hoped that a submission had been made that he was in the best position - - -

CALLINAN J: Mr Gower was their expert. He proved three samples where Mr Cowin does not give any evidence at all as to which he would have preferred or would have been the more likely.

MR FINCH: Yes. He leaves corporate intention strictly alone except as to inference from what he was doing and we say that is the most powerful factor that is involved in this case. Otherwise, your Honours, I would be repeating what I have said earlier. They are our submissions, your Honours.

GLEESON CJ: Thank you. If there were a grant of special leave, how long would the appeal take, Mr Finch?

MR FINCH: Your Honours, accepting your Honour's strictures that we would not be asking this Court to revisit the area of contingency, we would have thought very short, half a day or so.

MR HUTLEY: Your Honour, if it came about that your Honours were also asked to determine which is the appropriate sample, not just whether there is an error, your Honours may have to have quite a deal of material and go through that at a factual level to determine which were the appropriate sample.

CALLINAN J: You would not be asking us to do that, would you?

MR FINCH: No, your Honour. We would be pointing out the error and asking for it to go back.

GLEESON CJ: Presumably, however, at some stage before the appeal finished, somebody would take a glance at the merits?

MR FINCH: Yes, your Honour.

GLEESON CJ: So it would involve not necessarily making any attempted calculation on our part but we would need to understand, would we not, what there was involved in the choice between the two samples?

MR FINCH: Yes, your Honour, and your Honour can see from the submissions in this case that what is relied on now and what was relied on in the Court of Appeal is what was always relied on, Mr Cowin's evidence. He summarises what there is about future intent and that is all there is to it. It is only in one affidavit.

GLEESON CJ: All right. In this matter there will be a grant of special leave to appeal and we will allow one day for the appeal.

MR FINCH: If the Court pleases.

GLEESON CJ: We will adjourn at this stage and resume at 2.00 pm.

AT 12.39 PM THE MATTER WAS CONCLUDED