Panton v Bailey & Ors [2005] HCATrans 41 (11 February 2005)

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Panton v Bailey & Ors [2005] HCATrans 41 (11 February 2005)

Last Updated: 21 February 2005

[2005] HCATrans 041

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
Sydney No S79 of 2004

B e t w e e n -

BERNARD JOHN PANTON

Applicant

and

BRUCE LEONARD BAILEY

First Respondent

PETER CHARLES MATTOCK

Second Respondent

PETER JOHN SACCASAN T/AS SACCASAN BAILEY PARTNERS

Third Respondent

Application for special leave to appeal

GLEESON CJ
HEYDON J

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON FRIDAY, 11 FEBRUARY 2005, AT 11.33 AM

Copyright in the High Court of Australia

__________________

MR B.J. PANTON appeared in person.

MR R.E. DUBLER, SC: May it please the Court, I appear for the respondent. (instructed by Phillips Fox)

GLEESON CJ: Yes, Mr Panton, go ahead.

MR PANTON: I would first like to ask leave to introduce the affidavit that was included in my authorities. On the front of it it says it is an affidavit which appeared before Justice Bryson in the Court of Appeal and was, for some inexplicable reason, not included in the application book for this Court.

GLEESON CJ: Is that objected to?

MR DUBLER: No, your Honour.

GLEESON CJ: Yes, you have that leave.

MR PANTON: Thank you, your Honour. The issue I bring to the Court is whether or not the law as stated in Hedley Byrne v Esanda has the power to prevent a plaintiff arguing a case in negligence based on the law of Donoghue, Caltex and Perre, on the finding by the judge on the strike-out motion, that the pleadings cannot escape the laws of negligent misstatement, whatever that be.

In Caltex, before coming down to his decision which had – I would like to go back to Justice Bryson and the Court of Appeal. I had sought to file an amended statement of claim seeking to allege that the respondents had entered into the books of account of a corporation a sham transaction, so founding the falseness of the financial statements and the letters sent by the respondents to a bank in support of a loan application. It is the case that it was the – I am saying the respondents cooked the books, not the corporation.

Notwithstanding any submission that this was not pleaded at the time because it was not known, the matter was conducted before Justice Bryson and the Court of Appeal on the basis that such allegation was part of the applicant’s cause of action. It was conducted on the basis that the letter postulated as likely to have been sent to the bank, at paragraph 34 h) of the statement of claim, had been sent. As set forth in the respondents’ summary of argument before this Court, the applicant brings his action on the basis – I bring my action on the basis that Bailey dishonestly, and with conscious impropriety, sent information – sent products.....information to the bank.

In striking out my case, Bryson J said that the New South Wales Court of Appeal continues to treat communication and reliance as necessary elements in cases of negligent misstatement. Further, his Honour said that:

Given . . . the carefully crafted boundaries of the law of negligent misstatements . . . a simple claim to resort to first principles does not seem to me to be reasonably arguable.

His Honour found at paragraph 51 that the applicant’s case – my case, sorry – cannot escape its reality as based on an alleged misstatement. Being beyond the bounds of the laws set by negligent misstatement, communication of and reliance of the misstatement are necessary elements.

It is submitted that this is an error and that this case cannot be categorised as belonging to a narrower subset of negligent misstatement to the exclusion of the general law of negligence. It is as if the New South Wales Court of Appeal has given a shorthand name of “negligent misstatements” to the law stated in Hedley Byrne v Esanda and then extrapolated the meaning of “negligent misstatement” to the full extent of the words’ literal meaning such that any case in which there is a misrepresentation might be found to be, on a strike-out motion, in reality a claim for negligent misstatement, subject to the elements necessary – said to be necessary in Hedley Byrne v Esanda.

Further, it is submitted that contrary to the findings of Bryson J, the applicant’s case does not cut across any developed doctrine, and there is as yet no published doctrine about dissemination of information which fixes boundaries which would exclude a case falling within the boundaries set by a general law of negligence. I have tried to find any reference to the law of dissemination of information and I am about the only case – there is one other involving the ABC – that can be found on any of the Internet networks at all.

The law on the matter, your Honours, as I say, that in Caltex the Chief Justice, who was about to make what probably could be called a momentous decision, considered that in that case:

it would be possible to argue that Decca’s action in making available an erroneously marked chart amounted to misrepresentation as to the situation of the pipeline.

In other words, the basic error was a – the basic negligence was a misrepresentation. Justice Gibbs said he would not accept that argument. If he had accepted it, then Caltex would not have – the misrepresentation would not have been communicated to Caltex. They would not have relied on it because they were not operating the dredge; it was simply their pipeline.

The presence of misrepresentation as to what may be said to be the underlying cause of loss did not prevent, for want of communication of and reliance upon the misrepresentation, the Court from making the landmark decision. In San Sebastian, this Court said:

Conscious of the factors already mentioned, courts have sometimes dealt with the duty of care in relation to negligent misstatement without relating it to Lord Atkin’s exposition in Donoghue v Stevenson. However, the correct view is that, just as liability for negligent misstatement is but an instance of liability for negligent acts and omissions generally, so the treatment of the duty of care in the context of misstatements is but an instance of the application of the principles governing the duty of care in negligence generally.

So what I am saying is that – what I am leading to is that I cannot be denied the right to argue the law as said in Donoghue, Caltex and Perre by anything said in Hedley Byrne v Esanda. In Hill v Van Erp Justice Brennan, who is referred to quite a lot in the judgments of the Acting Master and Justice Bryson, said:

Hedley Byrne is properly to be understood as a case in which damages for pure economic loss were held to be recoverable when they were suffered as a result of the plaintiff’s reliance on a statement made by a defendant who had undertaken to the plaintiff, by reason of the relationship between them, to exercise reasonable care in making the statement. The assumption of responsibility by the defendants in Hedley Byrne was a characteristic of the conduct to which a plaintiff’s economic loss has to be causally related through inducement and reliance, not an element that exhausted the circumstances in which damages for economic loss could be recovered. In my respectful opinion, Hedley Byrne is one type of case in which damages for pure economic loss can be recovered but it does not deny the possibility of recovery in other types of case.

My submission is that the presence of misrepresentation does not of itself deny the application of the liability for negligence acts generally, nor does it constrain the plaintiff from relying at trial, other than under the law as stated in Hedley Byrne v Esanda, until it is found that there are peculiar factors which constrain or otherwise impact upon the application of the law of negligence in general in the presence of misrepresentation, then the plaintiff may at trial invoke the general law of negligence.

There is presently no line of authority which sets forth what causes of action involved in misrepresentation are cases of negligent misrepresentation, which requires communication and reliance in order to establish causation, and which cases involving misrepresentation do not require communication and reliance to establish a duty of care and causation, as happened in Caltex.

The application submits that if a plaintiff must rely on his own reliance on the misrepresentation to establish causation, he may be bound by the laws as stated in Hedley Byrne v Esanda. Otherwise, if a duty of care and causation can be argued without reliance on the misrepresentation, then it is open to the plaintiff at trial to invoke the general law of duty of care and causation. The law relating to a duty of care was correctly said in Johnson Tiles v Esso, which is a Victorian Supreme Court case, and the law relating to causation is established by the rule of law said in March v Stramare.

Justice Bryson said that the three-point test that I was referring to had not been accepted in the Australian courts. I was not referring to the three-point test that has been mentioned in the English courts and has been thoroughly rejected in the Australian courts. I was referring to the three-point test that Justice Gillard, I think it was, mentioned in Johnson v Esso.

On causation I argued that by paraphrasing Chief Justice Mason as follows. This document is in front of your Honours if you – sorry, I am on page 25 now. I am sorry, I should have mentioned this earlier. I knew I was going to read from it so I sent a copy to the respondents and added it to my authorities. On causation I argued below by paraphrasing Justice Mason – this is in March v Stramare:

Bailey should have appreciated that the making of false statements to NAB, would in the circumstances of the facts pleaded constitute a danger to Panton’s investment in the partnership – because whereas other than in the event of failure to make repayments due on the loan, the bank could not demand repayment of the loan for 14 years. NAB could demand immediate repayment, repossesses or even take possession of the land without demand –

because of Bailey’s actions –

Bailey’s wrongful conduct generated the very risk of loss that occurred and that loss occurred in the ordinary course of things.

That is just.....the words of the judge –

. . . the defendant’s negligence satisfies the but for test and is properly –

again, I am paraphrasing the judge –

to be regarded as a cause of the consequence because there is no reason in common sense, logic or policy for refusing to so regard it.

In Hedley Byrne it was said by Lord Devlin that:

following Derry v Peek it was thought that the tort of negligence must be confined entirely to deeds and could not extend to words . . . It would be unthinkable that the law could permit directors to be as careless as they liked in the statements they made in a prospectus.

Today I say it would be unthinkable that the law would not regard making false entries into books of accounts of a corporation is an act that an accountant should avoid when he can readily foresee his act would likely directly cause loss to the known client of his.....on the grounds that a statement reduced from the act was not communicated and relied on by that client.

A lot is said about what Chief Justice Cardozo said over in America back in the 1930s – this is the indeterminate liability for an indeterminate time and amount. The case before that judge was in two parts; one in which the accountant had made a blunder, and in the other case where he deliberately falsified the statements. The statement of indeterminate liability applied only by that judge to where there had been a blunder or a mistake or something else. It did not apply to the judge’s views where the accountant had deliberately cooked the books and produced statements from those books and sent information to a bank on those books.

That is the issue that I bring before the Court. The courts in New South Wales are misdirecting themselves to the extent that they can look at
a case and say, “This is a negligent misstatement and you must plead”, as the Master did, and Justice Bryson said, “the Brennan factor”. Do I have to say what the Brennan factor is?

GLEESON CJ: Please yourself.

MR PANTON: The Brennan factor is where in every case the plaintiff must have seen and relied upon the document. I go to the Master’s judgment - Justice Bryson - I am sorry, I am wasting your time. It is the passage from Esanda in which the Chief Justice said words to the effect that in every case the plaintiff must have seen and relied upon the document in question, which clearly I admit I did not.

The second point of my case that I would argue is that ABCOS, which is a case in the Full Federal Court, looked at that statement by Chief Justice Brennan and said it had not to be read literally, and went on to find that in the circumstances of that case, although the plaintiffs had not seen the document, they had acted upon it.

A final point is that the Master found that I did have a case under the Fair Trading Act, but erroneously – and it was found by Justice Bryson to be erroneously – required me to replead that I was within the time limits to bring that case. Justice Bryson found it to be in error. It is my argument that given the prejudice of the Master’s finding, it was quite proper for me to go before a judge and argue that error and remove that prejudice. The argument that I was given leave to amend and could have amended the statement of claim and disregarded what the Master said would have only taken us around the loop again because it was the decision of the Master that I had to plead something, and I was not going to plead it. So it was only proper that I appeal to a judge to remove that prejudicial requirement imposed on me by the court. That is the end of my oral submissions.

GLEESON CJ: Thank you very much, Mr Panton. We do not need to hear you, Mr Dubler.

We are of the view that there are insufficient prospects of success of an appeal in this matter to warrant a grant of special leave to appeal and the application is dismissed with costs.

We will just adjourn for a short time to reconstitute.

AT 11.51 AM THE MATTER WAS CONCLUDED