Pollak v National Australia Bank S146/2002 [2002] HCATrans 562 (5 November 2002)

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry

Sydney No S87 of 2000

B e t w e e n -

JOSEPH POLLAK

Applicant

and

NATIONAL AUSTRALIA BANK

Respondent

Application to reopen

Office of the Registry

Sydney No S146 of 2002

B e t w e e n -

JOSEPH POLLAK

Applicant

and

NATIONAL AUSTRALIA BANK LTD

Respondent

Application for special leave to appeal

GUMMOW J

CALLINAN J

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON TUESDAY, 5 NOVEMBER 2002, AT 12.35 PM

Copyright in the High Court of Australia

_______________

MR J. POLLAK: If it pleases the Court, I appear for myself.

MR S.M.P. REEVES: If it please the Court, I appear for the respondent in both matters. (instructed by Mallesons Stephen Jaques)

GUMMOW J: Yes, Mr Pollak.

MR POLLAK: Your Honour, I should first state that the trustee has indicated that he has not changed his position in regard to the letter which forms the final page of my affidavit and he will not be attending today, so we are left with the same position, as indicated in his letter, that the matters are legally and factually complex and he will not be supporting the application. So I need to, as a preliminary point establish that I have standing - - -

GUMMOW J: That is right. Well, perhaps I should begin by asking Mr Reeves about this: what is your point on competency, as it were, on standing?

MR REEVES: We submit that the applicant is bankrupt and he has no locus standi to appeal against a money judgment or to make any application in relation to it on the basis of Cummings v Claremont.

GUMMOW J: Yes.

MR REEVES: However, your Honour, we also would wish the matter to be dealt with on the other bases, because we apprehend that that will forestall potential

applications by the bankrupt under section 178, which may then lead to further applications coming to this Court.

GUMMOW J: Yes, thank you. Now, Mr Pollak, is it your intention to make an application to the Federal Court under section 178? You have heard what Mr Reeves said.

MR POLLAK: Yes, your Honour, as indicated in my affidavit, I did attempt that yesterday - - -

GUMMOW J: You do not make that application to us; your application is on a quite false basis.

MR POLLAK: If I can just qualify that, your Honour, with respect. The preliminary issue is whether the Cummings decision applies to a special leave application. It does apply to a right of appeal. However, Collins v The Queen, a decision of this Court, which appears at tab 5, sets out the special circumstances of what a special leave application is. I will only take about 60 seconds to indicate the difference and I am familiar that Justice Callinan has confronted this issue and has described a special leave application as an interlocutory matter. This is not in the ordinary course of litigation. I am not a party here, neither is the respondent. The Court in Finch [No 1] confirmed that there is a clear distinction between an appeal and an application for special leave.

GUMMOW J: Yes, but, look, just assume you are right about this and assume you have leave, you could not then pursue the appeal, could you.

MR POLLAK: Well, your Honour, in practical terms, there is no appeal until somewhere within 21 days - - -

GUMMOW J: I know that, but what I am putting to you is, just assume you are right that you have standing to seek special leave and assume you got special leave, it would be no use to you, because you could not pursue the appeal. That undoubtedly is a proceeding.

MR POLLAK: Well, if I put it this way - - -

GUMMOW J: And does that not suggest that this rule applies at the earlier level as well?

MR POLLAK: If I put it this way, your Honour, it would be a brave registrar or judge sitting in bankruptcy that would say that the grant of special leave would not be a circumstance that indicates that it is just and equitable that the decision of a trustee under section 178 should not be exercised in the court's supervisory jurisdiction in favour of deciding to let someone have a go, where this honourable Court has considered that there are special circumstances; that would be an unusual circumstance that that respect is not accorded to this Court.

GUMMOW J: Yes. Can I say this to you, gentlemen, I think it would be a most useful expenditure of your time if we were to adjourn now and come back at ten minutes to two and hear you on the substance of both applications. That is to say, forget about these procedural barriers at the moment and what would you say if you could get right to the substance of them. Do you follow what I am saying to you.

MR POLLAK: Yes I do, your Honour, with one further brief statement and that is that the Cummings decision relating to - - -

GUMMOW J: I am asking you to put that to one side.

MR POLLAK: Yes, thank you.

GUMMOW J: Do you understand what I am saying?

MR POLLAK: Yes.

GUMMOW J: We will come back at ten minutes to two and try and get to the basis of it all, apart from, and putting to one side, those procedural complexities. It is to your advantage to do that and I am telling you that is the way it will be pursued.

MR POLLAK: I appreciate that opportunity, your Honour. If it please the Court.

GUMMOW J: Very well. We will adjourn until ten minutes to two.

AT 12.40 PM LUNCHEON ADJOURNMENT

UPON RESUMING AT 1.52 PM:

GUMMOW J: Yes, Mr Pollak. Now you have two applications.

MR POLLAK: That is correct.

GUMMOW J: Which would you wish to deal with first?

MR POLLAK: The first matter, which is the subject that we were referring to before. I should mention that that issue of standing was not raised in regard to the second matter. It was not a submission made and that is - - -

GUMMOW J: Well, we are putting that beside us for the moment.

MR POLLAK: Yes, so we are dealing with this first matter.

GUMMOW J: Which one is that?

MR POLLAK: S87, which is the reopening application.

GUMMOW J: Yes.

MR POLLAK: Your Honours, as outlined in my affidavit in support - - -

GUMMOW J: And to make it clear, the time should commence now for your address.

MR POLLAK: Yes, thank you, your Honour. As outlined in my affidavit in support, the ground for reopening is that the court proceeded on an error of law by overlooking the relevant High Court decision of Stead which, I submit, is controlling in this case.

GUMMOW J: Well, Mr Reeves says it is not controlling. Have you seen his submissions.

MR POLLAK: Yes I have. They are very brief on the point of Stead on the basis that it was a situation of a judge denying the right to make a particular submission. However, the Full Court in Fletcher's Case, and many other cases, have interpreted Stead as being much broader than that and relating to making a decision in the absence of it being in contest. As I say, this was caused by the Full Court being under a misapprehension of the facts in not recognising that the trial judge confirmed in his reasons that there was no cross-examination of the central issue in the case. The manner in which the earlier determination proceeded indicated such misapprehension. The references to the right flavour being sensed in reading transcripts and the air of sarcasm while, with respect to Justice McHugh, an eminent and exceedingly competent trial advocate - and they are the remarks in that particular situation - this illustrates the misapprehension that there was a live issue as to whether there was cross-examination of the central issue. "Where a judge states that it is understandable why cross-examination did not occur on the central issue", then one has to give seriousness to the statement and accept that that means that there was no cross-examination. "The absence of cross-examination means that an essential ingredient of a fair trial was missing. Such essentiality was confirmed by Justice Wells in Reid v Kerr", which is at tab 3 in your Honours' list of authorities. It was also confirmed by the Full Court of South Australia Supreme Court in Thomas v van dan Yssel in referencing the words of Lord Herschell in the rule of Browne v Dunn. "The reason for refusing special leave was stated by reason of the various findings of the trial judge. This presumably refers to credit findings, which in an appellate court cannot challenge, with few exceptions."

GUMMOW J: No, you have to look at the transcript as a whole, Mr Pollak, if I may say so.

MR POLLAK: That is correct.

GUMMOW J: If you look at the top of page 137, "whether this appeal has sufficient prospects of success" looked at as a whole.

MR POLLAK: That is correct, and if I deal with 137 - - -

GUMMOW J: And it is not the function in determining a special leave decision to give a chapter and verse, a full exposition of the situation; you might as well be hearing an appeal if you are doing that.

MR POLLAK: Yes, your Honour. In regard to the comments at 137, the case at tab 4, Thomas v van dan Yssel and the case of Reid v Kerr, make it clear that this is not the established practice in regard to cross-examination. If I take your Honours to tab 4, wherein midway through the first paragraph Chief Justice Bray states:

Even, however, when a witness is cross-examined on some points, so that it cannot be said that no challenge at all was made to his evidence, it is necessary that any contrary version or any relevant new matter which might contradict or qualify the import of his evidence and which it is intended to prove should be put to him.

And the case of Reid v Kerr is referenced and if we go back to tab 3 and the proceeding page prior to that, which is 373 of Reid v Kerr, his Honour refers to - at the first paragraph:

The established practice is stated briefly by Odgers, Pleading and Practice -

under the heading of:

Cross-examination . . . Thus, if the plaintiff has deposed to a conversation with the defendant, it is the duty of the counsel for the defendant to indicate by his cross-examination how much of the plaintiff's version of the conversation he accepts, and how much he disputes, and to suggest what the defendant's version will be.

I should say, the subsequent addition of Odgers contains the same paragraph.

So what is involved here is that there was a conversation, there were three sentences in the relevant part of the conversation: the first was, "I am sorry to hear that your mother has died"; the second was, "The Bank can call the loan due, but we will not if you sign guarantees"; and the third was, "But when you sign the guarantees and when you assume the loan", which occurred some five years later, "then the liabilities will extinguish". Well, counsel challenged the latter part. The latter part was not particularised as a pleading.

GUMMOW J: I think what you must face up to, Mr Pollak, is the finding of the trial judge page 35, paragraph 124, beginning at about line 26. Now that is what is, in essence, put against you. That is a finding on credit, you see:

I do not accept -

Do you see that?

MR POLLAK: Yes, your Honour.

GUMMOW J: Well that is an adverse finding on credit. Now, this Court, particularly when the matter has gone through an intermediate appellate court, does not get involved in such cases, as a general proposition.

MR POLLAK: Your Honour, there are exceptions to that statement, with respect. Where a decision turns on character or demeanour or anything that a trial judge has an advantage as against an appellate court, then, as Stead says, "in such circumstance an appellate could not safely conclude that new evidence" - - -

GUMMOW J: Does Stead say that?

MR POLLAK: Yes, it does. If I take your Honours to the decision in Stead at tab 1, and this is what it comes down to. Page 146 in Stead, the second-half of the first paragraph at 146:

We do not see how the Full Court denied the important advantage of seeing and assessing the witnesses, could satisfactorily conclude that had the appellant's counsel been given a reasonable opportunity to present submissions on the issue, it could have made no possible difference to the result.

And then the court continues on page 147, stating the principle, and that is:

it was, as we have said, necessary for the Full Court to find that a properly conducted trial could not possibly have produced a different result.

Well, your Honour, there was no cross-examination; there was no denial. The Full Court found that there was no competing version of evidence and to indicate the extraordinary nature of this case, the Bank's principle witness was brought all the way from America and he gave evidence confirming that he came to the same belief as is consistent with my version of events. That appears at 143, line 14, and that is what makes this extraordinary. The Bank's principle witness confirms the inherent probability - - -

GUMMOW J: Did not Mr Macfarlan put these matters before?

MR POLLAK: Not this particular part of the transcript, your Honour. If I may read it:

Macfarlan QC: When you reviewed the file you became aware or you came to believe that the bank had taken the position that the loan was able to be called up in 1988 but that the bank had agreed not to do so if the beneficiaries signed various documents including the guarantee?

Hayrapetian: Yes, that's accurate.

Macfarlan QC: You came to believe that that was why the beneficiaries wanted to sign the documents including the guarantees because they didn't want the loan called up in 1988?

Hayrapetian: Correct.

In those circumstances, your Honour, the making of the representation was not clearly in issue as indicated by the Full Court and, with respect, the Full Court erred in such matter.

In regard to the trial judge's findings, he considered that the matter of the making of the representation was clearly in issue in the pleadings. A Court of Appeal, your Honour, can easily see that this was not the case. A Court of Appeal can look at the papers and see that there was no denial. So it was not clearly in issue in the pleadings, and that is where the error occurred in both instances.

Your Honours, I did not know that I needed to call witnesses or cross-examine the opposing side's witnesses in relation to this, the central issue of the case, and that is what it comes down to. At the end of the today I have been given a perfectly fair chance of presenting my submissions at this application, however, at trial, I was not, and that is not fair and that is not just.

GUMMOW J: But you had counsel at trial, did you not?

MR POLLAK: Yes I did.

GUMMOW J: Senior counsel in fact.

MR POLLAK: That is correct, your Honour.

GUMMOW J: Well, really.

MR POLLAK: But the trial judge pronounced a judgment that contained matters, including the central issue - - -

GUMMOW J: But in so far as you say you did not understand this was the way the case had to be run, that was your counsel's task.

MR POLLAK: Well, without giving direct evidence, your Honour, and that is the hardest - - -

GUMMOW J: Well, you cannot, because you are bound by the way your counsel conducted it, otherwise we could not carry on business.

MR POLLAK: Of course. Well there was nothing more than counsel could have done in the circumstances where the matter was not in contest. The fact is that the respondent did not make its position clear before final addresses. It did not let me know what I was facing. It was very easy for the respondent to make this clear, because they made it clear after final addresses. The inference should be drawn that that fact, the conduct, it not being a properly conducted trial, and the fact that - again an extraordinary aspect to this case - respondent did not even contact Mr Kirschbaum, the other party within 12 months from the time that the originating summons was filed. However, in final addresses there appears written submissions which in large print contains the words "Recent Invention". There is no cross-examination, no denial, no competing version of evidence, no findings on credit or demeanour.

GUMMOW J: There is a finding of credit, a very adverse one.

MR POLLAK: On credit, that is correct. Sorry, I should qualify that: not on character or demeanour or anything that a trial judge has an advantage. Now I am more than familiar that that is not an essential part of a judgment, but at the same time Stead says that the trial judge is in a permanent position of advantage, therefore you cannot transfer the Court of Appeal back into the courtroom and see how - - -

GUMMOW J: We will hear what Mr Reeves says about Stead, but that is not a case about credit, is it, a finding of credit?

MR POLLAK: Your Honours, with respect, it certainly is, and I can find the passage - - -

GUMMOW J: It is a question about argument of causation, is it not?

MR POLLAK: No, it is not, with respect, your Honour, and if I take this Court to page 145, and it is paragraph 4:

Where, however, the denial of natural justice affects - - -

GUMMOW J: No, I am inviting your attention to 144, what the complaint was about.

MR POLLAK: That is right.

GUMMOW J: Starting at the middle of the page:

One ground was that by stopping the appellant's counsel from addressing on the topic of . . . evidence with respect to causation, the primary judge -

et cetera. It is not a credit-finding case.

MR POLLAK: Well, if I just continue that one paragraph, if I may:

Where, however, the denial of natural justice affects the entitlement of a party to make submissions on an issue of fact, especially when the issue is whether the evidence of a particular witness should be accepted, it is more difficult for a court of appeal to conclude that compliance with the requirements of natural justice could have made no difference.

And Justice Kirby recently confirmed in Goldsmith the very high standard - and Justice Callinan also referred to Stead in Goldsmith - that Stead creates, that it could not possibly have been made a difference and his Honour said, especially in cases of credibility. The explanation for this was the basis that a trial judge should have all of the available evidence before him. The trial judge in this case did not have any of my witnesses, that I had not even contemplated calling, under the circumstances - - -

GUMMOW J: Not you calling, that your senior counsel called?

MR POLLAK: Yes, that counsel did not call.

GUMMOW J: And if your senior counsel thought that the trial was in any way unfair, he had the opportunity to get on his feet.

MR POLLAK: But this did not surface until after final addresses.

GUMMOW J: And to get on his feet in the Full Court, because it went through the Full Court, did it not?

MR POLLAK: Yes, it did and - - -

GUMMOW J: Again, with senior counsel.

MR POLLAK: - - - the error made - - -

GUMMOW J: And to this Court, again with senior counsel.

MR POLLAK: This Court proceeded as I have indicated on the basis that there was a live issue as to cross-examination; there was no live issue as to that. It is clear from the trial judge's reasons.

GUMMOW J: Yes, do continue.

MR POLLAK: The Full Court in Fletcher's Case, as I have indicated, made it clear that an appellate court should not speculate as to what further evidence could possibly have been led and then speculate whether the outcome would have made any difference. The matter in Stead's Case - I do not know if I need to take your Honours to that well quoted, often recited and highly respected passage in Fletcher's Case, which appears at tab 2, which is page 456, paragraph 3:

It is not clear to us that the applicants would have adduced additional evidence in order to resist a case made under Pt IVA. Indeed it is not easy to see what additional evidence could usefully have been led. But, because the matter was not raised, the applicants and their advisers had no opportunity to consider this question. We are not in a position to conclude that there was no possibility that material evidence could have been led. Moreover, as both Stead and Lewis -

both High Court decisions -

demonstrate, the question whether procedural fairness has been denied does not depend upon the question whether material evidence has been lost. The opportunity of making relevant submissions is an important ingredient of a fair trial. This statement is true in all cases.

The underlying principle, which perhaps the lay public is not aware of, is that the reason courts bend over backwards in these situations is because a decision is not to be made in the absence of a party knowing that the matter was in contest.

CALLINAN J: Mr Pollak, was it not a problem though that the person with whom the conversation was said to have taken place was dead, Mr Kirschbaum, is that right?

MR POLLAK: That is right. Mr Kirschbaum died some 12 months after the originating sums were filed.

CALLINAN J: Yes, but there were no notes of any conversation, is that right?

MR POLLAK: That is correct.

CALLINAN J: And that was a matter that you relied upon, but it was used against you, I understand that. The trial judge's finding is partly based upon the fact that there were no notes from which the inference was drawn that the conversation did not take place. But I am looking at the practical problem that there were no notes and Mr Kirschbaum was dead, then it might have been very, very difficult for counsel for the Bank, with propriety, to put a version of the conversation. In other words, there was no witness who could be called to prove the conversation, that witness was dead, and there were no notes that would have formed the basis for a cross-examination. So what was counsel to put?

MR POLLAK: The Full Court put it this way, that the respondent was under a difficulty because of the death of Mr Kirschbaum. The Full Court also found that he died some 12 months following the date, so they had 12 months.

CALLINAN J: I understand what you are saying, and you say that you would have expected an affidavit or a statement, at least.

MR POLLAK: Exactly, and to just say what the position is.

CALLINAN J: But was there any evidence that a statement had or had not been obtained from Mr Kirschbaum?

MR POLLAK: No. During opening submissions, or early in the submissions, there was an oral submission that the Bank did not know that falsity was an issue and therefore did not think of contacting Mr Kirschbaum.

CALLINAN J: How long a lapse between Mr Kirschbaum's death and the trial?

MR POLLAK: Some two years or a year and a half.

CALLINAN J: Well, not everybody obtains a statement immediately proceedings are instituted. Often statements are not obtained until the trial is imminent or, in the Federal Court, when statements have to be filed.

MR POLLAK: Your Honour, with respect, it is the duty of counsel that where the central issue of the case revolves on a conversation - - -

CALLINAN J: But the central issue is raised by the denial in the pleadings, is it not? The conversation - - -

MR POLLAK: There was no denial, your Honour.

CALLINAN J: No denial.

MR POLLAK: No denial. "We do not admit", that is all that is said.

CALLINAN J: Well, that might have been a very proper pleading in the circumstances, because they were unable to put a competing version, because they did not have a statement from Mr Kirschbaum and he was dead and they could not call him.

MR POLLAK: But, your Honour, which counsel would not contact the principal party that it is claimed made a representation within 12 months of the summons? I mean, a defence has to be filed.

CALLINAN J: It frequently happens, Mr Pollak. Cases settle often. There has been a lot of criticism about premature excessive preparation for trials well before the trial comes on.

MR POLLAK: So should they not ask him, "Well, did you have the conversation so we know how we are going to file our defence within 12 months?"

CALLINAN J: Well, I do not know. Was it distinctly alleged on your pleadings at the time of his death.

MR POLLAK: Yes, it was. The originating summons and then he died some 12 months later. No evidence that he was unavailable. As I say, the question of notes, the Full Court found, was made in the context to the latter part of the conversation and that is the part that was not particularised; "When you assume the loan the liabilities will expire." That was not particularised. Why the narrow focus? Why not just say what they were going to say after final addresses, just before, just so that I know who I need to call, what I need to put on.

GUMMOW J: It is not a question of you needing to know.

MR POLLAK: What counsel, I apologise, your Honour, I am here in posse and I am also here as a - - -

GUMMOW J: Obviously you are closely involved it, we understand that.

MR POLLAK: It is very difficult - - -

GUMMOW J: But the fact is, the bus is driven by counsel.

MR POLLAK: That is correct, your Honour.

CALLINAN J: And I find it very difficult to believe that your counsel, as an experienced counsel, did not know whether this conversation had taken place and the contents of it were matters in issue.

MR POLLAK: Your Honour, usually one relies on the pleadings of the defence and where there is no denial and there is no cross-examination - - -

GUMMOW J: But there is no admission.

CALLINAN J: No admission.

GUMMOW J: That is what matters.

CALLINAN J: And the onus is upon you to prove your case. You were the one asserting the representation. The onus was upon you to prove the case.

GUMMOW J: Anyhow, I see the red light is on, Mr Pollak. Yes, we will call on Mr Reeves now and then we will come back to your other application.

MR POLLAK: If the Court pleases.

GUMMOW J: Do you want to add anything to what is in your written submissions?

MR REEVES: Perhaps I should briefly, your Honour, deal with the decision in Stead. Your Honour, in my submission, that case can have no relevance, not simply because of the fact that it was a case where a party through its counsel was prevented from making submissions, but also because the decision proceeds upon an assumption that there has already been a finding of a denial of natural justice. If your Honours look at the judgment at page 145 - - -

GUMMOW J: Yes.

MR REEVES: Your Honours see the paragraph at about point 7 of the page:

Where, however, the denial of natural justice affects the entitlement of a party to make submissions on an issue of fact -

et cetera. So it is looking at what is to be done where there is a finding of a denial of natural justice and, similarly - - -

CALLINAN J: It was a quite different case anyway, was it not?

MR REEVES: Entirely, your Honour.

CALLINAN J: The trial judge said, "Don't address on that. You do not have to trouble with that."

MR REEVES: Indeed. That is the point we make in our written submissions.

CALLINAN J: Well, what do you say about Mr Pollak's submission though that in the ordinary course one would have expected your side to have had instructions, in full, which would have enabled them to put a complete version of the conversation?

MR REEVES: Your Honour, the fact is that it is clear, in my respectful submission, that the representation was in issue, and we do deal with that in the written submissions at paragraph 17 at page 150. The first point we make, your Honour, is that it was not admitted and as Mr Kirschbaum was dead at the time of trial, that was a perfectly proper pleading; secondly, your Honour, the respondent denied that the applicant relied upon it; and thirdly, it was put that the applicant agreed to guarantee the particular loan in consideration of the respondent agreeing to advance to the applicant's sister a further loan of $1 million. The ultimate form of that pleading can be seen in the amended defence in the respondent's bundle, which is at tab 5, your Honours. If your Honours go to page 82, your Honours see the amended offence and your Honours see paragraph 4 at page 83 where it was put that at:

about July 1988 the Applicants agreed that in consideration of the Respondent agreeing to advance to Ilana Stern as executrix of the Estate of Fani Pollak ("the Estate ") the sum of US$1,000,000 ("the Burbank Loan") and granting to the Applicants the option of assuming personal liability for the Van Nuys Loan and the Burbank Loan as borrowers thereof, the Applicants would guarantee the Van Nuys Loan and the Burbank Loan until repayment or assumption by the Applicants.

Your Honours, there was some cross-examination on the linkage between the Burbank Loan and the Van Nuys Loan and the applicant was asked whether he understood that there was a link between them and he replied, only after he saw the Bank's defence.

Now the Bank's original defence was in a slightly different form to that, as appears in the amended defence but, in my submission, the applicant did understand - this harks back to a question which arose on the original application for leave - that there was a linkage, in my respectful submission. But, your Honours, the findings made, both by the trial judge and by the Full Court, in my respectful submission, are very strong findings. If I could take your Honours first to the appeal book at page 72, to paragraph 30:

Dr Pollak was the subject of extensive cross-examination concerning this conversation -

and that is a reference to the conversation with Mr Kirschbaum. That appears from page 71 at the foot of the page. It is there noted that:

Mr Kirschbaum died before the proceedings and approximately one year after they were commenced and was unavailable to give evidence -

and your Honour sees what appears at paragraph 30, and what was being pointed out in the cross-examination was that when you took the conversation as a whole, it was totally absurd. What was being suggested by the applicant was that he was told that the loan was due, but that the Bank would not call it unless he assumed liability for the loan without liability. It was being pointed out to him in cross-examination that that was an absurd proposition.

If your Honours then look at page 73 of the application book at about line 25:

The applicants submit that the Kirschbaum conversation should be accepted insofar as it alleges that he claimed that the Bank was empowered to sell on the basis that the contrary was not expressly put in cross-examination. However, the whole conversation was put in issue in the pleadings and it was apparent that both the occurrence and context of that conversation were in issue.

If your Honours then look at page 77. This is now the judgment of the Full Court; previously I was referring to the judgment of the trial judge.

GUMMOW J: Yes.

MR REEVES: At paragraph 45, your Honours:

As we have already indicated, counsel for the Bank in cross-examination attacked Dr Pollak's evidence of the conversation by pouring scorn upon a particular element of it -

et cetera. And the Full Court notes that:

Because Mr Kirschbaum was not available to give instructions as to what happened the present was a case where counsel for the Bank was under some difficulty in putting the terms of the conversation positively to Dr Pollak. In the present circumstances of this case we do not think that it was incumbent upon counsel to put to Dr Pollak specifically that so much of the conversation as amounted to the representation, alleged by him to have been made, did not take place. Whether it did or did not was a matter which was clearly at issue between the parties.

If your Honours then go to page 78 at lines 10 to 15 at the top of the page:

Counsel for the Bank did raise with Dr Pollak whether he took a note of the conversation and did so immediately after suggesting Dr Pollak's account of the conversation involved a "bizarre proposition".

And then at lines 30 to 35, there is the finding that:

Dr Pollak had acting for him, as did his sister, that firm of attorneys in connection with the loan - - -

GUMMOW J: Yes. We do not need to hear you anymore, Mr Reeves.

MR REEVES: If it please, your Honour.

GUMMOW J: Yes, Mr Pollak, anything in reply to what Mr Reeves has said to us?

MR POLLAK: Yes, your Honour. What this involves is - if I take your Honours to page 19, which is the trial judge's reasons, and it appears at line 14. It says:

Accordingly, it is understandable why the cross-examination was not directed to that part of the alleged conversation which referred to the "due on sale" provision becoming enforceable.

That was the central issue of the case, your Honours. Preceding that, his Honour confirms at the top of that page:

submissions do not seek to rely on the alleged statement that the liability would be extinguished.

And preceding that, on page 18 down at the bottom of the page, line 44:

The conversation was only particularised in the pleadings with respect to an allegation that the Bank would not enforce the "due on sale" provision -

Now, what the trial judge and the Full Court are saying is, contrary to Reid v Kerr and the Full Court's decision in Thomas v van dan Yssel - and Thomas v van dan Yssel were cited by the Full Court - and that is, it is okay to ask - to challenge as much as you want; you go ahead and you challenge the latter part of the conversation, which was not particularised; "Don't give them the imputation, don't let them know that we are asking you about something you were telling us you did not rely on, something that you are not making submissions on and then, therefore, all of the rest of the conversation has not occurred." So therefore he did not say, "I am sorry to hear about your mother's death", because we do not believe you on the part of the conversation that you have not particularised, that you have not relied, that you have not made a submission. That, your Honour, is an incorrect principle.

Thomas v van dan Yssel, Reid v Kerr, Odgers on Pleading & Practice, that is what it comes down to. You do not wipe out the existence of the entire conversation by challenging one part that was not relied on, even when some of the conversation makes sense. If he would have said, "It was Monday afternoon and it is sunny in Los Angeles", would we knock that out of the conversation, because there was a challenge to a part? If there is an imputation to be made, your Honours, then give me the imputation. Do not do as Justice Wells stated, quoting that famous statement of Alexander Pope: "Do not wound, but not strike." And that is what has happened.

GUMMOW J: Yes, thank you.

MR POLLAK: And if I take your Honours to, just finally, page 77, this issue of, did I take a note of the conversation, and the way the Full Court dealt with that issue was, at the bottom of page 77, line 45:

However his Honour's comments about the absence of records being surprising are made in the context of the assertion by Dr Pollak that the assumption agreements would ultimately release Dr Pollak from liability.

Well, your Honours, that is consistent; you do not make a note of something you do not rely on and the reason that the Full Court approached it in this way is because, as was clear during the hearing, the question is more, why did the Bank not make a note of the conversation, rather than, why would Dr Pollak, sitting in Australia, having no experience in California lending, make a note on something that he believed.

So therefore, again, reliance on the non-particularised, the non-relied part of a conversation to say, "Hey, therefore, it is enough, we have challenged you, it does not matter we did not challenge you on what you claim you relied on, but we just do not belief anything in the rest of this statement." That is a different situation, your Honours, from saying that I was challenged on the part that I relied on; that is completely different. There I would have no defence, your Honours. It is a matter of fairness, no cross-examination, no denial. The principal witness agrees in his belief. That makes it inherently probably, and you do not contact the principal, alleged maker of the representation within 12 months of the originating summons, and the alleged maker lives 6,000 miles away. You do not ask him, "Well, did you have this conversation? What did he say? So that we know what we are going to put into our defence." Twelve months just ticks by. A lay person - it does not have to be a doctor and a barrister like myself - would simply say, "But wait on, why did they not ask this person who worked for them for 12 months? Why did they not just pick up the phone and say, did this happen, did he say this about the bicycle, did he say that?", so that we know what to put in.

Your Honours, they are extraordinary circumstances. I know the courts are not liking Browne v Dunn, and perhaps that is because law students are fed with Browne v Dunn at such early stages and perhaps that is also for the purposes of favouring finality in decisions and not opening up the issue, but, in this case, it is my respectful submission that I am only here on a second application because I did not get a fair chance. Those are my submissions, your Honours.

GUMMOW J: Thank you. That deals with the submissions in the opening matter. We will hear you now, Mr Pollak, on the second matter, which is the bankruptcy adjudication, bound up with the construction of this agreement.

MR POLLAK: That is correct, your Honours. There are two special leave points in this application: the first is whether an accord and conditional satisfaction exists in circumstances where time for performance is not fixed; the second is whether the intention of parties to a settlement agreement is to be derived objectively by analysing the effect of the acts done by the parties. The trial judge and the Full Court, with respect, erred by mischaracterising the agreement as an accord and conditional satisfaction.

GUMMOW J: I understand what you are saying, but it therefore comes down to the construction of the document, does it not; the document headed "Heads of Agreement"?

MR POLLAK: There are, with respect, two other issues and one is that there was a miscarriage of justice in that the minimum standard, which Justice Meagher discussed in Beale v GIO, was not met, and that is that the Full Court did not consider the issues raised, the significant issues, as to how an accord and conditional satisfaction could exist in circumstances where time is not fixed. There was no express statement of time of the essence and the fact also of accepting some $450,000, some one month later than stipulated, without protest, that only demonstrates time was not of the essence. Without time for performance being fixed, it is difficult to give conduct the character of non-performance.

The very nature of the obligations in one, two and four, made it inappropriate that time should be of the essence. The significant decision, in this respect, is that of Justice of Appeal Phillips, in Osborn v McDermott and that appears at tab 2, which is page 13. At the very last paragraph on page 13, his Honour says:

For a time during argument, I was attracted to the view that the agreement made on 12 February 1993 might amount to an accord and conditional satisfaction.

GUMMOW J: We can understand that, but to focus on the specifics, what do you say - can you look at the application book, page 145. Your opponent takes this up and they put what they say as an answer and I want to hear what your answer to their answer is. Paragraph 19 on page 145, and you will see in paragraph 20 they refer to Justice Phillips' judgment in Osborn.

MR POLLAK: Yes. Well that was the significant section which covers that issue in which - - -

GUMMOW J: But why are they not right in what they are saying at paragraph 19? Why is not your opponent correct in what they are saying at paragraph 19 there, on this question of timing?

MR POLLAK: Because where time is not fixed for performance, how does one describe conduct give it the character of performance and what this statement of Justice Phillips relies on is the very notion that Justice Fullagar referred to in Scott, and that is, the question arises as to how long was the effect of the judgment liability to linger on for? That is, how long was the effect of the liability suspended for? They are the words that Justice Fullagar used. "That is, by what date did the parties need to perform the observations if satisfaction was conditional?" The very nature of the obligations meant that you cannot put a time to performance. The sale of multiple pieces of real estate, contemplating multiple sale attempts, for a previously unascertained amounts, for time not to be able to be turned in advance and without any degree of precision, confirms that there was no conditional nature to the satisfaction.

Without an identifiable time limit, it is not possible to solve this question, and that is why, if we look at the judgment in Osborn v McDermott I think his Honour then proceeds, under those circumstances, of what his Honour states was the difficult questions of fact that arise, to state:

For example, at what point, if at all, did one party repudiate the bargain struck on 12 February and at what point did the other accept a repudiation or elect to proceed according to the bargain notwithstanding?

Then his Honour concludes that it was:

properly characterised as a mere accord executory . . .as the parties -

agreed -

on this appeal, time was not of the essence -

What we are dealing here with, your Honours, is a compromise agreement; parties are surrendering legal rights and a necessary rigid construction is essential. Parties need to know where they stand.

In the case of Mrs Stern, she surrendered her legal rights at the time of execution, eo instanti with execution. If one looks at the decision of Justice Fullagar, one sees the rigid construction that a compromise agreement demands, and that appears at tab 3, and I will only quote two sentences, because time is racing. On a day like today, I think that is an almost comical term. At page 454, which is at tab 3:

It is made by way of compromise in an action which has been called on for trial, and the trial is adjourned: the plaintiff must know where he stands; and the only reasonable view is, in my opinion, that the condition of abandonment of the plaintiff's claim is strict performance by the defendant. After the 24^th December 1946 I think that the plaintiff was at liberty to proceed with the action.

So parties need to know precisely where they stand.

Your Honours, this did not involve the sum of a postage stamp; it was a $10 million Australian liability that was at issue. It is not conceivable that in the circumstances, where one cannot find a conditional nature to the obligations, in view of what needed to be done, that one could conclude otherwise. In addition, there was an absence of any legal consequence should Mrs Stern not perform. It did not matter if she did not perform. This was conceded by the counsel for the respondent and, in fact, the reason why it did not matter is because under clause 7 the Bank would self-enforce if she did not do anything. And that is the language used, "anything".

So, accordingly, there was no conditional nature to the subject matter. The issue that was most important that was not accepted by the Full Court as being of significance, is that the promise to perform was taken in satisfaction. It was not the performance itself. I cite at tab 1, a case - and that appears at page 1034 - of Elton Cop Dyeing in paragraph G:

When you contemplate that the promise, that which was to be done, was something which it was it was contemplated would take at least seven weeks, and only then if then if the material was to be obtained, and when one recognises the difficulty that there was in 1917 in obtaining material of any sort, it seems to me quite plain that the consideration for the withdrawal of the claim was the promise to do the act and not the performance of the promise. Therefore . . . I think that the original cause of action was discharged.

Your Honour, what needed to be done was complicated, it was complex: sale of multiple pieces of real estate for unascertained amounts, multiple attempts, no identifiable time frame, it was complex.

Two other decisions I have referred to in the application book, that of Justice Brownie, an unreported decision of Tan Chew Piau v Dubliee Holdings and the New Zealand Court of Appeal decision in Auckland Bus, a case often cited in Australian decisions on accord and satisfaction. They both follow the same line of reasoning. If you cannot tell that you could perform the act - here the stated amount was $41/2 million - it was not attained at six months, it was not attainable. It could have taken one year and six months, two years and six months. So it was the promise to perform and if the Full Court had considered that issue it would have concluded that there was an immediate accord and satisfaction, because as Justice Dixon said in McDermott v Black, where it is the agreement itself accepted, then it is an immediate accord satisfaction, and it was the promise to perform. The very nature of what needed to be done confirmed that.

I should also add now, on the second special leave point, very briefly, the trial judge in the Full Court erred, with respect, in not finding that the intention of parties, when looked at objectively, is that a later variation was entered into. That variation contained a reservation of rights against me. This indicated that the agreement as unvaried was an immediate accord and satisfaction and that a reservation of rights was necessary to establish a contrary intention.

GUMMOW J: Well, it may just indicate some unease about the perfection of the earlier document.

MR POLLAK: Your Honour - - -

GUMMOW J: I understand what you saying, but these things happen.

MR POLLAK: Yes, it could, but it did not say that, and there is nothing in the correspondence that said anything like that. If I take your Honours to that often cited case of Cutler v McPhail, and that is at tab 4, and in that case Lord Salmon looks at - a settlement agreement was the letter. The letter contained the following sentences:

"As a matter of interest, it has not been proved possible to effect a settlement of the matter with Mr McPhail and I have instructed counsel to settle writ and statement of claim." It is suggested that those last words amount to an express reservation of rights and an intimation that this letter was intended only as an agreement not to sue.

In my judgment the letter does not contain an express reservation of rights; it is at least as consistent with the view that the solicitor writing the letter intended to release without fully appreciating the legal consequences of a release, as it is with any other suggested interpretation.

And his Honour then concludes in the following paragraph:

I feel bound to hold in this case that there has been a release of the Pinner Association officers, and that that release in law extinguishes the claim in respect of the separate tort -

and then there is the decision of Justice Burchett which confirms that what is necessary is a combination of an express reference to language of release, together with the absence of the reservation of rights against me, and that would confirm the agreement operates as an immediate release.

Your Honours, the circumstance of offering fresh consideration confirms such reservation of rights was not previously intended. The offering of consideration can only be considered as one of necessity and in the context of clause 11, this is clear.

The parties hereto agree to enter into any further deed or supplementary agreement, but only as is necessary to give full effect to the terms of these heads of agreement.

Your Honours, this submission was made to the Full Court, as was the time for performance issue, and it was made to the Full Court on my behalf at page 36, line 24; by the respondent at page 46, line 35; it was canvassed at hearing before the Full Court at page 100, line 10 and confirmed in the trial judge's reasons at page 8, line 15.

The facts present as an appropriate vehicle for this Court to answer the important question as to whether the intention of parties to a settlement agreement is to be derived subjectively or objectively. It is respectfully submitted that the test in the form of Lord Hope's test should be followed in this country, an objective test. The two special leave points of elucidating the law of the court in conditional satisfaction and the derivation and the intention of parties to a settlement agreement are germane potentially to most settlement agreements, and the subject matter would warrant, with respect, the allocation of one quarter of one day to determine these issues.

Finally, as I reiterate, the second matter has not been contested in regard to standing issue. My submission is that it does not apply; it is not a judgment enforceable against the estate. It was made subsequent to the sequestration order being made. Those are my submissions, your Honours.

GUMMOW J: Thank you. Yes, we do not need to hear you at this stage, Mr Reeves. We will take a short adjournment.

AT 2.44 PM SHORT ADJOURNMENT

UPON RESUMING AT 2.49 PM:

GUMMOW J: The applicant in each matter suffered the making against him on 5 October 2001 of a sequestration order. Before the Court today there are two applications. On is a motion to reopen an unsuccessful special leave application which the Court dismissed on 24 November 2000. That was before the making of the sequestration order. The second is a special leave application against the dismissal by the Full Court of the Federal Court of an appeal against the making of the sequestration order by Justice Madgwick.

We have heard arguments on the merits of each application. In doing so, we have put to one side the complications for the competency of at least the reopening application presented by the decision of the Court in Cummings v Claremont Petroleum (1996) 185 CLR 124.

As to the reopening application, it is a most unusual course for an applicant for special leave to have two opportunities to press the case for a grant. Nevertheless, we have considered all that has now been put on the reopening application. We are unable to say that there would be any prospects of success on an appeal were special leave to be granted and, accordingly, the application to reopen is refused.

As to the second application, this, to a significant degree, turns upon the construction, in the light of the applicable principles of law, of a particular document although the applicant relies upon what are said to be additional considerations. We are satisfied that the conclusion reached by the Full Federal Court was correct and, accordingly, that application for special leave is refused.

Accordingly, the motion to reopen is refused and the special leave application is refused; in each case, with costs.

AT 2.51 PM THE MATTER WAS CONCLUDED