Cole v Kealey S235/2001 [2002] HCATrans 371 (9 August 2002)

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry

Sydney No S235 of 2001

B e t w e e n -

TERRY COLE

Applicant

and

JOHN KEALEY

Respondent

Application for special leave to appeal

KIRBY J

HAYNE J

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON FRIDAY, 9 AUGUST 2002, AT 12.13 PM

Copyright in the High Court of Australia

MR T.C. SOMERS: Your Honours, I appear for the applicant. (instructed by Beilby Poulden Costello)

MR R.P. GREENHILL, SC: May it please the Court, I, together with my learned friend, MR I. MESCHER, appear for the respondent. (instructed by V. Gazdik & Co)

KIRBY J: Thank you.

MR SOMERS: Your Honours, at issue in this case is one of the fundamental roles of appellate courts, namely, the power and duty of review of factual conclusions. Can I take your Honours to State Rail Authority of New South Wales v Earthline Constructions, which I think is No 2 in the bundle of authorities. Can I take your Honours to page 24, paragraph 69, at the top of that page. The importance of that role of duty of review was referred by Justice Kirby in Ahmedi v Ahmedi in the New South Wales Court of Appeal and restated by him when sitting in this Court in this case.

KIRBY J: I think we are pretty familiar with these principles because they come up in every case where there is a factual element. This issue is the application of them in this case, or whether there is some different nuance that you can flesh out of the principles, and on the face of things it does appear that the principles, as they normally are applied, really run against you in this case because, though one might reach a different view, the fact is that the primary judge and the Court of Appeal did not.

MR SOMERS: Yes. I suppose the thrust of my core argument, your Honours, is that the analysis of the documents was not undertaken not only by the trial judge but also not undertaken by the Court of Appeal.

HAYNE J: But it is not just the documents; it is the oral evidence that was given, is it not?

MR SOMERS: Yes.

HAYNE J: And the oral evidence was what was seen as determinative in respect of this particular transaction, is it not?

MR SOMERS: In my submission, the principles that Justice Kirby espoused later on in Earthline - and I am sure your Honours are familiar with it, but it is at pages 32 and 33 - that the duty of analysis must be performed by the appellate court. If your Honours will permit, I will take you into my submissions as to why that duty was not fulfilled either by the trial judge or by the appellate court.

KIRBY J: Yes.

MR SOMERS: Of course, in this case, as in State Rail, there were the competing claims of strong documentary evidence on behalf of the applicant, on the one hand, and the adverse credibility finding against him on the other. Of course, the other curiosity in the Cole Case was that there were also adverse credibility findings against Mr Kealey. But the relevant facts, if I could just summarise them very briefly, is that Mr Kealey was employed as the financial controller of the company in September 1995 and prior to the winding-up of the company approximately two years later he provided financial support.

The first instance of that was the letter of guarantee by Mr Kealey in favour of the electronic supplier NEC Australia. That document was executed by Mr Kealey on 3 June 1996. He then signed a second letter of guarantee to secure the debts of the company to its bankers on 16 July of the same year, and the loan, the subject of this appeal, was a cheque personally drawn by him in favour of that company on 27 September 1996. As it is formally admitted in the respondent's written summary at page 57 of the application book at paragraph 4, it was common ground that all of the proceeds of the cheque - of the $100,000, the subject of this appeal, was used by the company to discharge its debts to the supplier NEC. None of those moneys were used personally by Mr Cole.

The only way in which both the trial judge and the appellate court, in support of that finding, attributed the loan to be personal to Mr Cole were in relation - and I think it is referred to in the judgment of Justice Hodgson in the application book at page 43, the words:

lend "me" this $100,000 and the words, "I will pay it back."

But shortly after in the reasons of the trial judge she acknowledges that the evidence of Mr Kealey was that that same $100,000 was to be paid to NEC because NEC were threatening to cut the credit of the company. So, it is submitted that the reasons of the trial judge and of the Court of Appeal do not pass the test expounded in State Rail, that is, that the Court of Appeal cannot shirk its responsibility to satisfactorily explain how the cheque is said to be personal to Mr Cole.

KIRBY J: Yes, but what do you say about the matters in paragraph 5 of the respondent's submission where the respondent points out that there were features of the evidence, apart from the oral evidence of the respondent, that tend to support the trial judge's conclusion objectively?

MR SOMERS: I see at (A) of those written submissions it refers to a "purchase of a property", but the conversation that the trial judge recited immediately contemporaneous with the nub of the reasons, that is, the words "I will bay it back" - it is clearly acknowledged by the trial judge that this prospect of purchasing a property was not the subject matter of the loan at that time; it was to pay to NEC because they were threatening to cut off the debt.

HAYNE J: I understand that. Where is the failure of the Court of Appeal to conduct the analysis that you say should have occurred?

MR SOMERS: It is application book page 43, line 45, which is the reasons of Justice Hodgson.

KIRBY J: Actually, on 42 his Honour, in paragraph 33, refers to State Rail. Then in 34, which is a very important paragraph, he says he accepts your:

submission that the appeal cannot be determined simply on the basis of credit findings . . . necessary to consider the effect of the oral evidence . . . along with the documentary evidence relied on by the appellant to which I have referred.

So that in terms of the test, or the principle, his Honour appears to be approaching the matter in an orthodox and correct way.

MR SOMERS: Yes.

KIRBY J: Now, where is the failure? What is the answer to Justice Hayne's question?

MR SOMERS: You will see it at - again, if I can take you to page 43 at about line 43 where his Honour says:

I note also that payment of debts to NEC, although beneficial to Mr Kealey by reducing his exposure under his guarantee, was equally beneficial to Mr Cole -

Now, that was the point that had escaped the attention of the trial judge and which I was careful to take the appeal court to, which is the relationship between the first guarantee, the NEC guarantee, and the cheque.

HAYNE J: It may be so, but the point you say is the point of special leave is a failure to abide by accepted principles in appellate review. Where is the want of sufficient appellate review? Not why do you win. I understand you say you win, but where is the want of sufficient appellate review?

MR SOMERS: The words that I just quoted to your Honours at line 43, in my submission, do not sufficiently explore the relationship of the guarantee, the NEC guarantee, and the cheque. The trial judge did not deal with it at all and, in my submission, the appeal court did not sufficiently deal with it. The mere reference to it at line 43 - - -

KIRBY J: So the clear word is "sufficiently".

MR SOMERS: Yes.

KIRBY J: What we are dealing with here is not a misapplication of principle, not a failure to appreciate the principle, but a failure to articulate at sufficient length the consideration of the application of the principle.

MR SOMERS: Yes, and to accord - - -

KIRBY J: It does not sound like a special leave point, Mr Somers.

MR SOMERS: The upshot of their considerations of this point is whether or not procedural fairness was afforded to my client. By merely referring to the relationship that existed on my earnest submissions to them, but then failing to deduce the relationship, the effect of the relationship, between the guarantee and the cheque, does not, in my submission, abide the strong terms that were articulated by your Honour in State Rail. As I say, the analysis on the authority of State Rail had to be done. It could not be shirked by the Court of Appeal.

The strength of my client's case, of course, lay in the documents, as it did in State Rail, and the court owed a duty, as articulated in State Rail, of analysis and the provision of reasons to demonstrate and explain what analysis has been done, and there is nothing in the Court of Appeal judgment, in my submission, that satisfactorily shows that that has occurred.

KIRBY J: We can go around the mulberry bush many times but, essentially, you have a short point. You say that the principle was articulated but it was not applied.

MR SOMERS: Yes.

KIRBY J: Yes. It is a question of how lengthy Justice Hodgson - he says he had regard to the documentation and it is a question of how lengthy has to be his reasons that, as it were, demonstrate that he did. But why should we disbelieve what his Honour says when he says he did? After all, you urged the case upon him, the reasons are relatively brief, and there is no reason, on the face of them, to think that his Honour did not do what he said he did.

HAYNE J: And the factual circumstances which give rise to the reasons were likewise brief. It is not an elaborate commercial transaction occurring over 15 weeks of detailed negotiation, is it? It is a narrow field for debate.

MR SOMERS: No, your Honour. No, but again, I hark back to the words in State Rail that - - -

KIRBY J: I can see your point that you make: loan 1 and loan 3 were found one way and loan 2 found the other, and that itself is somewhat curious, but - - -

MR SOMERS: It appeared to be common ground at the trial that both loans were used solely for the purpose of the continued trading of the company.

KIRBY J: Yes. I take the force of what you have put in your written submissions, which are well constructed, and I understand what you are saying and were I sitting in the Court of Appeal maybe I would have expounded at greater length the points one way or the other, but here we have a judge of appeal who expresses the correct test, he refers to the correct case, he says that he is taking - he knows and understands that it is not just the oral evidence, that it is necessary to look at the documentary evidence and he apparently does so, and your complaint is he has not expounded enough of why he reached a different view. It is a unanimous opinion of the Court of Appeal. The facts are in a short compass and it is, in part, a matter of impression of an appellate court. We are not here sitting in a Court of Appeal. We are sitting in the High Court of Australia.

MR SOMERS: No, quite so, your Honours, but, as this Court has stated, the Court of Appeal does have a duty of analysis and the provision of reasons to demonstrate that analysis. In my submission, that of itself, is of sufficient importance that the special leave application be allowed, because it is all very well to identify aspects of the case, as the Court of Appeal did, but then to fail to articulate the reasoning as to why they dismissed the appeal is another thing. Thank you, your Honours.

KIRBY J: Yes. The Court does not need your assistance, Mr Greenhill.

It can be conceded that there were features of the objective evidence concerning what has been called loan 2 that lent some force to the applicant's arguments at trial and in the Court of Appeal of New South Wales. Nevertheless, in finding that loan 2 was personal to the applicant the primary judge relied, in part, upon a conversation to which the respondent deposed in his evidence and which the primary judge accepted. In addition, there were some objective considerations in the documents that would tend to support the primary judge's conclusion in this respect.

The applicable principles of appellate review are well settled. They were reviewed most recently in this Court in State Rail Authority v Earthline Constructions [1999] HCA 3; (1999) 73 ALJR 306 and Walsh v The Law Society (New South Wales) [1999] HCA 33; (1999) 198 CLR 73. Justice Hodgson, speaking for the Court of Appeal, referred to State Rail.

We are not convinced that, were special leave granted, there would be sufficient prospects that, applying those principles, this Court would reach a different conclusion in the evidence in the case from that given effect below. Accordingly, special leave to appeal is refused. It must be refused with costs.

AT 12.28 PM THE MATTER WAS CONCLUDED