Alirezai v ANZ Banking Group Ltd & Anor [2006] HCATrans 279 (6 June 2006)

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Alirezai v ANZ Banking Group Ltd & Anor [2006] HCATrans 279 (6 June 2006)

Last Updated: 9 June 2006

[2006] HCATrans 279

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
Brisbane No B14 of 2004

B e t w e e n -

MOSHEN ALIREZAI

Applicant

and

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED

First Respondent

MALCOLM JACKSON

Second Respondent

Summons

CALLINAN J

TRANSCRIPT OF PROCEEDINGS

AT BRISBANE ON TUESDAY, 6 JUNE 2006, AT 10.57 AM

Copyright in the High Court of Australia

MR P.J. DAVIS, SC: Your Honour, I appear on behalf of the applicant. (instructed by Lynch & Co)

MR M.T. BRADY: May it please your Honour, I appear on behalf of both respondents, the ANZ Bank and Mr Jackson. (instructed by Blake Dawson Waldron)

HIS HONOUR: I should say – I do not think on the authorities it makes any difference, but I own 500 shares in the ANZ Bank. I do not think it would make any difference under the principles discussed in Ebner but - - -

MR DAVIS: Your Honour, my submission today has to be that there is no prejudice to the Bank, so I hardly think I am in a position to concede that the outcome of this case could affect their share price, so I certainly do not take the point.

HIS HONOUR: I think it has to be a bit more substantial than that but it as well for the parties to know.

MR DAVIS: No, I understand, your Honour.

HIS HONOUR: You had the advantage of a dissenting judgment, of course, from Justice Jerrard in the Court of Appeal.

MR DAVIS: Yes.

HIS HONOUR: Could you tell me how Justice Jerrard stated the principle, how he would have extended it beyond the husband and wife as in Garcia?

MR DAVIS: His Honour would have extended it to the – does your Honour have a copy of the judgment?

HIS HONOUR: Yes, I have that.

MR DAVIS: At paragraph 84 his Honour’s approach was not to limit the relationship of trust and confidence to any particular – for instance, marital relationship.

HIS HONOUR: I think in Garcia was it only Justice Kirby who said that there may be other relationships? I just cannot remember.

MR DAVIS: I must say I have not studied the case to that extent. The real complication is that the issue has been taken further in England.

HIS HONOUR: Yes, I saw that. Lord Nicholls, was it not?

MR DAVIS: Yes, so the question - - -

HIS HONOUR: That seems to have gone much further than anything that has been done in the High Court.

MR DAVIS: Yes.

HIS HONOUR: I think the President referred to Lord Nicholls, did she not, in her judgment – yes, at paragraph 4. Did any other member of the House of Lords support Lord Nicholls in Etridge?

MR DAVIS: Your Honour, I only concentrated on the judgment that was referred to in the present case. Your Honour, I must apologise for not being in a position to run fully the special leave application as such.

HIS HONOUR: I understand that, but any prospects of success are highly relevant to the exercise of my discretion here.

MR DAVIS: Yes, that is so. Your Honour, my submission on that is that there is certainly nothing said by this Court in Garcia which specifically limited the principles to - - -

HIS HONOUR: But Yerkey v Jones does.

MR DAVIS: Yes, it tends to.

HIS HONOUR: There is no doubt about it.

MR DAVIS: Yes.

HIS HONOUR: I suppose Amadio goes further.

MR DAVIS: Amadio goes further. There is Justice Kirby’s judgment in Garcia and then - - -

HIS HONOUR: Yes, but Justice Kirby stands alone there.

MR DAVIS: Yes, that is so, but then nothing that Justice Kirby said was necessarily inconsistent with what was said by the other Justices because, of course, Garcia only raised the point of the marital relationship.

HIS HONOUR: What was the relationship in Etridge?

MR DAVIS: I cannot say, your Honour, off the top of my head.

MR BRADY: Your Honour, rather unusually, I acted for Mr Etridge in a predecessor to that matter. It was a marriage relationship.

HIS HONOUR: What, in Australia?

MR BRADY: No, I actually acted for him in England, quite by coincidence.

HIS HONOUR: You do not mind if Mr Brady tells me this, do you?

MR DAVIS: No, your Honour. He can speak about his former client.

MR BRADY: I did not act for Mrs Etridge who was the - -

HIS HONOUR: So it was a husband and wife relationship?

MR BRADY: It was a husband and wife relationship. There were in fact a number of appeals all heard together in Etridge (No 2). Mrs Etridge was the first of the appeal and I think all of the appeals, bar one, related to a marriage. I think the other one was what might be loosely termed a de facto relationship.

HIS HONOUR: When was Etridge decided?

MR BRADY: In 2001, your Honour.

HIS HONOUR: Did their Lordships refer to Garcia, do you know?

MR BRADY: I cannot remember Lord Nicholls specifically referring to it, your Honour. Lord Nicholls provided the leading judgment.

HIS HONOUR: Yes, and the others agreed.

MR BRADY: I certainly cannot recall any specific reference to Garcia.

HIS HONOUR: Was it cited, do you know, in argument? It should show at the beginning, should it not?

MR BRADY: Yerkey v Jones is in the cases referred to. I cannot, however, see Garcia.

HIS HONOUR: Yes. I rather think Justice Dixon’s judgment in Yerkey v Jones was a ground breaking judgment, almost. I do not know whether there was much English authority to the same effect.

MR BRADY: I think that is right. The point that I make in all of this, your Honour, is this and that is that both the President and Justice Wilson also recognised that there is no closed category of cases when one is looking at - - -

HIS HONOUR: That is what I am not too sure about. It may be that husband and wife or contemporary like relationships do close the case but, look, I interrupted, Mr Davis. Thank you for that information.

MR BRADY: Yes. I apologise, your Honour.

HIS HONOUR: I interrupted you. You go ahead.

MR DAVIS: My submission really is that that is the point. There is the dissenting – well, not the dissenting judgment but the judgment of Justice Kirby in Garcia. There is the question of whether or not Yerkey v Jones does state the - - -

HIS HONOUR: But it is a dissenting judgment of Justice Kirby.

MR DAVIS: Yes.

HIS HONOUR: You have how many Judges – four Judges saying something different.

MR DAVIS: That is true.

HIS HONOUR: What were the characteristics of the special relationship between your client and the person in respect of whom he gave the guarantee?

MR DAVIS: The special relationship here was a friendship which was underpinned by a particular ethnic and religious bond which apparently led my client to repose a particular trust and understanding with Mr Sarlak.

HIS HONOUR: How would the Bank know that? Does that mean the Bank has to inquire every time of whether the guarantor and the person in respect of whom it is given are co-religionaries, how long they have known each other, how often they meet, what is the depth of their friendship?

MR DAVIS: The question is, firstly, whether they have been put on notice of any special relationship.

HIS HONOUR: What was the notice and in what terms was it given?

MR DAVIS: There is mention of this in Justice Jerrard’s judgment and I will just turn that up.

HIS HONOUR: Your client wanted to go into business with the person for whom he gave the guarantee.

MR DAVIS: At one point, yes.

HIS HONOUR: Mr Sarlak, was it not?

MR DAVIS: Yes.

HIS HONOUR: So it was a business relationship or a potential business relationship.

MR DAVIS: Paragraph [84], your Honour, which is in the judgment of Justice Jerrard. His Honour says that:

the evidence described establishes that there was a relationship of trust and confidence between Mr Alirezai and - - -

HIS HONOUR: That must surely apply to every guarantee. You do not guarantee another person unless you trust them to pay the principal debt.

MR DAVIS: That is so, save that – I could take your Honour to [83], as well. There is a finding there that:

the bank knew of the trust and confidence between the two men.

The inference being that the Bank’s knowledge was to the degree where it should have been taken to appreciate that Mr Alirezai may well not have received from Mr Sarlak any sufficient explanation of the purport and effect of the transaction.

HIS HONOUR: But is it not right to say that every time a guarantee is given there would be an expectation on the part of the guarantor that the principal debtor would pay the debt? It would be like committing financial suicide otherwise.

MR DAVIS: That would be an expectation of the guarantor, that is right, but this is obviously on the backdrop of the two men being - - -

HIS HONOUR: But why should your client not make his own inquiries about the financial situation of Mr Sarlak?

MR DAVIS: Garcia does not - - -

HIS HONOUR: That is husband and wife, and on one view of the facts there Mrs Garcia was very, very lucky.

MR DAVIS: Yes.

HIS HONOUR: I think she was a physiotherapist, was she not? She had an established practice, she was a businesswoman.

MR DAVIS: Yes.

HIS HONOUR: I think in my judgment I said that I was doubtful about the facts but I felt I could not contradict the trial judge. There is no doubt that the genesis of the rule lies in the special relationship of a husband and wife. Whether it has gone beyond that now and the extent to which it has gone beyond that are other questions but - - -

MR DAVIS: One starts from the proposition, perhaps, that the relationship of principal debtor and guarantor cannot raise the principles.

HIS HONOUR: No.

MR DAVIS: So the question then is where between that relationship and some other relationship do the principles arise.

HIS HONOUR: Your best point though really is you have Justice Jerrard dissenting. What do you say about the delays?

MR DAVIS: The relevant delay is from October 2004 until September 2005.

HIS HONOUR: No, that is not right at all, is it? I mean, I do not ignore what has happened before. When did the latest of the events in controversy occur?

MR DAVIS: Your Honour, there is a chronology that my learned friend was going to hand up and I would ask him to do that because it is accurate and I found it of assistance. The mortgages were signed in 1991 and 1993.

HIS HONOUR: So the events are 13 years old?

MR DAVIS: Yes, that is so.

HIS HONOUR: I know that evidence has already been given about them but inevitably evidence of conversations would then have involved some reconstruction.

MR DAVIS: Your Honour, there is a couple of things to be said about that. Firstly, there is no specific prejudice pointed to. There is no suggestion any witness has died or anything like that.

HIS HONOUR: But effluxion of time produces prejudice.

MR DAVIS: Certainly. One of the important witnesses was - - -

HIS HONOUR: But effluxion of time does not only produce prejudice so far as recall is concerned; it also produces prejudice in the sense that people’s affairs are unable to be concluded. People do not know where they stand. The first of the events occurred 15 years ago and the respondent is still trying to close their books on the issue. You might say that it is a relatively small amount in the overall sum of things but people have to get on with their affairs and their lives.

MR DAVIS: That is true, your Honour, but the respondent here is an institution and whilst on - - -

HIS HONOUR: But what difference does that make? Should I apply a different rule because it is a corporation?

MR DAVIS: No, but, for instance, the prejudice to a private citizen in being shut out of his rights in relation to this particular case are likely to have a much greater impact by way of hardship upon him than on the contrary approach.

HIS HONOUR: Why?

MR DAVIS: He loses his property.

HIS HONOUR: He has less.

MR DAVIS: He has substantially less.

HIS HONOUR: What you are saying is he is poorer than the defendants.

MR DAVIS: That is so.

HIS HONOUR: Does that mean that the Court has to apply a different rule for people who do not have as much money or property?

MR DAVIS: Well, to a point the effect is that the Court takes into account the respective hardship or impact upon the – that is all part of the prejudice.

HIS HONOUR: That is just another way of saying your client does not have nearly as much money as the corporation he is suing.

MR DAVIS: No, it does not go that far. That is obviously an observation that could be made but that is not the import of the submission. The submission is that if one balances the rights of the respective parties and looks at the prejudice and hardship that might be caused by a particular decision, it is likely that the Bank will suffer less by way of hardship than of a private citizen who is arguing about a substantive asset.

HIS HONOUR: You keep on saying that, but that applies to every case in which there is a disparity in resources or money or wealth. That cannot be the rule that the poorer wins because he is poorer.

MR DAVIS: I did not make a submission that it was a rule; I made a submission that it was a consideration.

HIS HONOUR: Why is it a consideration?

MR DAVIS: In my submission, it - - -

HIS HONOUR: What, it means that if a person with $100 sues a person with $10 million you have to make special allowance? The person with $100 does not have to obey the Rules of Court?

MR DAVIS: No, but in deciding the exercise of the discretion under Order 69A one can take into account prejudice by both sides. The Bank, for instance, raises particular points of prejudice and my submission is no higher than the dismissal of the application in circumstances where there may be an arguable ground is obviously something which would have a substantial effect upon my client. I would not have thought that would be contentious. The question then is, if one compares that with the prejudice to the Bank which seems, frankly, nothing more than inconvenience in keeping their books open.

HIS HONOUR: What about the $350,000 in fees and costs that are so far unrecoverable and to which further proceedings will add a very considerable sum, also almost certainly unrecoverable if your client loses? What about that for prejudice?

MR DAVIS: In my submission, the only relevant consideration now would be for the costs to be incurred in the future because the costs that have been incurred in the past have all been incurred by actions and procedural steps that my client has taken as of right. So really the issue now is what costs will be incurred in the future. In my submission, that is really limited to the costs of today and the costs of the special leave application. Conditions can be placed on the grant of special leave, if a proper case is made.

HIS HONOUR: What sorts of conditions would you - - -

MR DAVIS: Perhaps security. I had not thought that through. But, really, any real prejudice is limited, in my submission, to the costs of today and the costs of the special leave application.

HIS HONOUR: I must say the possibility of security crossed my mind. I did not raise it because on your client’s material it seemed rather unlikely that anything could have been provided.

MR DAVIS: That is so and there has been no hint of security being asked by the Bank at this point and it is really something that, in my submission, should be left to the special leave application or some other application when proper material can be put on.

HIS HONOUR: But by then some thousands of costs will have been incurred.

MR DAVIS: Some costs would have been incurred.

HIS HONOUR: Thousands.

MR DAVIS: Some thousands, yes, and on the material there has to be a danger that those costs are not recoverable. But then, although the present applicant has been the plaintiff on the record all the way through, in some respects it is the Bank that is the aggressor to the extent that it is the Bank that wishes to exercise its security and wishes to effectively take the property of the applicant.

HIS HONOUR: Has the Bank not exercised its power of sale yet?

MR DAVIS: It has done that, yes. So my submission is that other than the costs, which, in my submission, are in that limited category, the Bank really does not point to any specific prejudice. The case has been tried. The witnesses have been heard. Even if there was a retrial, the various witnesses have had their memories refreshed in the proceedings. The prejudice to my client would be significant and the delay has been explained, to a point, by the impecuniosity.

Whether the special leave application is successful is a matter for another day but, in my submission, the case does raise questions as to the operation of the principles of Garcia and the width of those principles and,
in my submission, that is sufficient for today, I submit. Unless there is anything further, your Honour.

HIS HONOUR: Thank you. Yes, Mr Brady.

MR BRADY: Your Honour, this application is, in my submission, really something part – that shows a pattern of disregard, not just for this Court’s Rules, but also for the Rules, for example, in the Court of Appeal where your Honour will see from my written outline that the applicant failed to file his outline in those proceedings until after a specific order was made by the President of the Court of Appeal with an order for costs against the applicant. Even after that, he still did not comply with his obligations in respect of the appeal record books below.

This is a case where the delay is lengthy. It is not a matter of a couple of weeks or a couple of months. This application was brought 18 months after the summary of argument was due to be filed. Can I say that the application - - -

HIS HONOUR: The application for special leave itself was within time, was it not?

MR BRADY: That was within time. That was filed on 2 March and it was by 30 March that the appeal outline was due. The Court apparently wrote to the solicitors for the plaintiff confirming the timetable, in accordance with its usual practice. No request was ever made for an extension of time. The explanation proffered by the applicant – his impecuniosity – is strange because that is okay as far as it goes but he says, “Well, 12 months after this action was deemed abandoned my solicitors agreed to run it pro bono”, but there is no suggestion as to what happened in the meantime.

HIS HONOUR: Yes, but, you know, you can well understand why solicitors might hesitate to say that they will do something pro bono because that is a considerable expense to them.

MR BRADY: I accept that, your Honour, but the decision could, in my submission, well have been made within the six month time after the appeal was instituted and not 18 months later.

HIS HONOUR: We do not really know why that delay occurred.

MR BRADY: In my submission, it really is a matter - - -

HIS HONOUR: Solicitors and barristers who undertake things on a pro bono basis do a great service to the law and to the profession generally and they are very much to be commended for doing that.

MR BRADY: I accept that entirely, your Honour, but in terms of ascertaining whether there is some reasonable explanation for an 18 month delay, in my submission, the applicant really ought to have explained why it took his solicitors 18 months. These are the solicitors who acted at the trial, in the Court of Appeal – it is not new solicitors – why it took his solicitors 18 months to decide to conduct this matter pro bono, notwithstanding they knew that a certificate of deemed abandonment had been issued.

HIS HONOUR: What do you say about its security? What would your attitude to that be?

MR BRADY: Your Honour, none has been offered. That is the first thing.

HIS HONOUR: No, I have only just raised that.

MR BRADY: Yes.

HIS HONOUR: You have not asked for it?

MR BRADY: I have not, but can I say the reason for that, your Honour, is because when one looks at the applicant’s affidavit – and we were only served with this material last week, notwithstanding it was filed some time before - - -

HIS HONOUR: Yes, but you abandoned your application for an adjournment.

MR BRADY: I accept that, but that just is another example of the delay, but in terms of security it has never been offered. When one looks at the applicant’s affidavit, it is clear that he would not be in a position to provide any. He is on $250 a week. He says that he is unable to pay his own solicitors and counsel to conduct the matter. In fact, fees remain outstanding from the Court of Appeal and from the trial. There is not the slightest glimmer in that affidavit of any hope that an order for security would be of any effect because he not only does not offer to give security, but his affidavit plainly shows that he would not be in a position to do so.

HIS HONOUR: Perhaps somebody else might be prepared to do so for the last throw of the dice, which I suppose that is what it is.

MR BRADY: Your Honour, in respect of that, if your Honour was thinking along those lines, then, in my submission, it would clearly be appropriate that any order be made well prior to the hearing of an application for special leave.

HIS HONOUR: Mr Brady, I am always reluctant in these sorts of cases to say or to form a concluded view about prospects of success. That is not the purpose of this sort of application. Anybody who gets an application dealt with by the Court, whether it is done on the papers now or whether it is done orally, gets the benefit of no fewer than two Judges, often three Judges. Whatever view I might or might not have of Justice Jerrard’s view or opinion of the principles should not be the decisive view at this stage in relation to prospects. He does at least have the benefit of a dissenting judgment.

MR BRADY: Although, in my submission, your Honour, it is a dissent not in respect of a matter of principle but a matter of the application of that principle to the facts.

HIS HONOUR: I think there is a principle involved. I suppose the principle is what are the further possible categories of special relationship. You might be able to phrase it as a principle in that way.

MR BRADY: That is so, but all of the judges of the Court of Appeal agreed that the question ultimately was whether the Bank had knowledge of the special relationship. Their Honours the President and Justice Wilson agreed with the trial judge that there was that state of knowledge and therefore, in those circumstances, the principles espoused in Amadio and Garcia did not have application because the Bank did not have any knowledge.

HIS HONOUR: I understand.

MR BRADY: Where Justice Jerrard was different was he said there were factual matters that in his view led him to a different conclusion as to the Bank’s knowledge of the nature of the special relationship.

HIS HONOUR: What would your costs be of responding and appearing on the special leave application?

MR BRADY: Your Honour, as a barrister I am notoriously - - -

HIS HONOUR: No, just instructing – I regard it as part of the professionalism of the solicitor to know immediately what the likely costs are.

MR BRADY: I will seek instructions, your Honour.

HIS HONOUR: Yes, why do you not do that?

MR BRADY: Your Honour, I am instructed to suggest that the figure would be about $25,000. Can I say that in my experience this is an appropriate case for a silk and a junior on the special leave application. In those circumstances, one would have thought counsel’s fees alone would probably have been in the region of $10,000, and then one has the costs associated with the record and the solicitor’s costs and what have you. So I would have said that something in the vicinity of $25,000 would have been appropriate, simply on the special leave application. Obviously, the costs would increase were special leave to be given.

HIS HONOUR: Do you mind if I just interrupt you for a moment, Mr Brady?

MR BRADY: No, your Honour.

HIS HONOUR: Mr Davis, you have heard that.

MR DAVIS: Yes.

HIS HONOUR: I am not in any position to comment upon the figure given. I will tell you what my inclination is to do at present, is to adjourn this matter without making any order. You have heard the debate, both of you. You have heard what Mr Brady says about costs. You may want to go away to consider your position. Obviously, your instructing solicitor needs to consider his position. My inclination is to adjourn the matter for 24 hours. Is that too short?

MR DAVIS: No, your Honour.

HIS HONOUR: We ought not to have any further longer delays than necessary. I have not decided what I am going to do yet but you have heard the matters that are exercising my mind. Do you understand that, Mr Brady?

MR BRADY: I do, your Honour, yes.

HIS HONOUR: Are both of you content then that I adjourn it for 24 hours?

MR DAVIS: Yes, your Honour.

HIS HONOUR: All right. I will re-list it for hearing tomorrow at 11 o’clock and both of you can consider your positions.

MR DAVIS: Yes, thank you, your Honour.

MR BRADY: Thank you, your Honour.

HIS HONOUR: Thank you.

AT 11.32 AM THE MATTER WAS ADJOURNED
UNTIL WEDNESDAY, 7 JUNE 2006