Hadid v Schwartz [2013] HCATrans 313 (13 December 2013)

Last Updated: 20 December 2013

[2013] HCATrans 313

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
Sydney No S124 of 2013

B e t w e e n -

ALBERT HADID

Applicant

and

JERRY SCHWARTZ

Respondent

Application for special leave to appeal

FRENCH CJ
BELL J

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON FRIDAY, 13 DECEMBER 2013, AT 9.50 AM

Copyright in the High Court of Australia

MR D.F. JACKSON, QC: If the Court pleases, I appear with my learned friend, MR D.A. ALLEN, for the applicant. (instructed by Dib Lawyers)

MR J. SLEIGHT: May it please the Court, I appear for the respondent. (instructed by Neville and Hourn Legal)

FRENCH CJ: Yes, Mr Jackson.

MR JACKSON: Your Honours, we need an extension of time for filing the application.

FRENCH CJ: Is that opposed, Mr Sleight?

MR SLEIGHT: No, it is not.

FRENCH CJ: Extension of time is granted.

MR JACKSON: Thank you, your Honour. Your Honours, the application involves two aspects. One concerns the obligations of the respondent under the agreement in question. The other relates to a loan from the respondent to the applicant. May I deal with them in that order? Your Honour, so far as the agreement is concerned, at the heart of the matter is the application - and I will come back to that in a moment – application of the principles referred to by Justice Mason in Codelfa Constructions (1982) 149 CLR 337 at 352.

Your Honours, in speaking of the application of the principle I am conscious immediately, of course, that reference to the application of a principle rather than identification or description of it may militate against the grant of special leave but, your Honours, a case like the present, in our submission, demonstrates that the practical application of the principles in Codelfa requires further consideration by the Court, more examples in a sense, if I may so put it, of how the concept actually works and, your Honours, we would also rely on this being a visitation case.

The submissions I have just made are demonstrated, in our submission, by the diversity of opinions in the courts below. I will come to the detail very shortly about - - -

FRENCH CJ: So far as the principles are concerned, I think there was an express agreement by Justice Basten with the principle stated by Justice Meagher in his - - -

MR JACKSON: Yes, your Honour. Your Honour, so far as the judge’s judgments below are concerned, the primary judge held in our favour that he was entitled to go to extrinsic material which would decide the issue again in our favour, a similar view taken by Justice Basten in the Court of Appeal. Justice Macfarlan in the Court of Appeal was against us and his reasons are very much against the use of any extrinsic material. The third judge in the Court of Appeal, Justice Meagher, thought it was a case where there could be resort to extrinsic material but he does not seem to have made any – or perhaps I should say any significant use of that material.

Your Honours, may I seek to go to the basic facts for just a moment to seek to demonstrate what I have said? There were four blocks of land involved in Victoria. They are called A, B, C and D in the reasons. The applicant’s family held that interest via some trusts in block A. Your Honours will see that at paragraph 4 of the primary judge’s reasons at page 3 of the application book. Block A was adjoined by B and D, and C adjoined B and D, and acquiring B meant that access could only be gained to C and D either through A and B. Your Honours will see that referred to in paragraphs 6 and 7 at page 3 of the application book.

FRENCH CJ: So once the respondent had acquired B the applicant was, as it were, locked out unless C and D came into the picture as well?

MR JACKSON: Well, there was access to A, I think, your Honour.

FRENCH CJ: I see.

MR JACKSON: But the key to it all was acquiring B because that meant that C - - -

BELL J: The bargaining power was the greater; the two other blocks were locked in?

MR JACKSON: Yes, indeed. Quite, your Honour. Your Honour, the relationship between the parties was such that the applicant was, amongst other things, bringing investment proposals to the respondent. You will see that in paragraph 3 at page 2 of the primary judge’s reasons, and he did so in relation to the pieces of land. Your Honours will see that referred to in paragraphs 8 to 10, commencing at page 3 of the application book.

Now, your Honours, could I invite your Honours to note in relation to paragraph 10, the last two paragraphs on page 4 commencing at about line 52, and then the matters described as strategy in the last line of the quotation at about line 11 on page 5? So, your Honours, there were then further discussions which ensued; you will see those referred to by the Court of Appeal at paragraphs 70 to 71 at page 60 and you will see paragraph 70 sets out the document to which I referred, and then paragraph 71 goes on to deal with the further communings, as it were, of the parties. Now, your Honours, on 23 August 2007 two events occurred - - -

FRENCH CJ: So what appears at 70 and 71, the essential extrinsic material?

MR JACKSON: Yes, your Honour. Your Honours, there may be sort of little frills, but that is the heart of the matter.

FRENCH CJ: Yes, sure, but that is the core of it.

MR JACKSON: Yes. Now, your Honours, two things happened on 23 August 2007, as you will see from paragraph 72. The respondent had agreed to purchase B and then the parties entered into the deed in question, and you will see that - it is, as I said, in paragraph 72. There was also evidence, your Honours, of three conversations between the parties to which Justice Meagher refers in paragraphs 101 to 104. They are conversations which have been – I am sorry, your Honours, that is page 74 – they are conversations which have been put in shorter form and the passage to which your Honour the Chief Justice referred a moment ago.

Your Honours, could I go then to the deed, which is set out in various places? You will see it at pages 5 and 6, it commences at the bottom of page 5 and then goes on to page 6. Your Honours will see that consists of what are described as recitals and then the parties further agree. If one goes to the deed your Honours will see that in the part under “The parties further agree”, paragraphs 2, 3 and 4 refer to properties in the plural. It is necessary to go to extrinsic evidence to identify at least the properties.

Then if one goes to the recitals at paragraph 1.2, about line 8 on page 6, there is a reference to an agreement “at his discretion to buy one or more” such properties. So the question arose, what was the agreement and, in connection with that, what was the discretion referred to? Now, your Honours, the view adopted by the primary judge is at page 8, paragraphs 26 and 27, and may I say in relation to the last five lines of paragraph 26, site B was, of course, being bought, and to give sensible effect to the document the discretion had to relate to something other than one simply buying one property.

Now, your Honours, Justice Meagher appears to have accepted that there was ambiguity. Your Honours will say – I am sorry, your Honours, I will not go to Justice Basten because his views were to the same effect, a little stronger actually than the primary judge. Justice Meagher appears to have accepted that there was ambiguity. You will see that at page 66, paragraphs 84 and 85. In paragraph 84 he sets out the issues that gave rise to possible differences of views, or susceptibility to more than one meaning, and he referred in paragraph 85, at the commencement of it, to the fact that the language was “ambiguous or susceptible of more than one meaning”.

BELL J: But he did not find, did he, that it was susceptible of the meaning for which you contended?

MR JACKSON: No, your Honour, because he decided against us, yes.

BELL J: Yes, and so whilst his Honour accepted that the language was ambiguous and that that had consequences in terms of the approach to construction, nonetheless his Honour considered the relevant recital to be one which simply did not admit of the construction for which you contended. Is that right?

MR JACKSON: Well, yes and no, your Honour. I am sorry to put it in that fashion in a way. But if one looks to see what his Honour is doing and goes to page 69, paragraph 90, fourth line you will see he says there that:

it is accepted that at the time the Deed was made Dr Schwartz had decided to proceed to purchase site B on terms which had been negotiated –

Your Honours, if one goes to paragraph 93 at pages 70 and 71 it is difficult to see quite, with respect, that in relation to this area that he did give consideration to what was the earlier agreement between the parties and I do not know, your Honour, with respect, that it appears quite as clearly as your Honour was putting it to me, that - - -

BELL J: I had in mind his Honour’s analysis at application book 68, paragraph 86, and then one also has to take into account his Honour’s further analysis at application book 74, paragraph 100, that:

The parties are not likely to have intended to create legal relations –

and so forth.

MR JACKSON: Well, your Honour, may I just say, however, that if one looks at those two paragraphs, the first of them is a statement of the law generally speaking.

BELL J: Well, I think does it – I am sorry, yes, one has to read that statement though with his Honour’s further conclusions at 91 respecting its – I am sorry, application book 70, paragraph 91 respecting the available constructions of an admittedly ambiguous clause.

MR JACKSON: Well, your Honour, could I just say that if one goes back to paragraph 84, that seems to be one of the issues that he regards as giving rise to ambiguity or susceptibility to more than one meaning, and the point I am seeking to make is that in resolving what was the appropriate meaning his Honour did not, in reality, go back to the extrinsic evidence. Your Honours, the view given by Justice Macfarlan – if I could go to the central passage of it, that is at page 52 - - -

FRENCH CJ: Sorry, just before you do that, the errors identified by Justice Meagher in relation to the primary judge’s decision - one is identified I think at the end of paragraph 93 on 71, that is he gave effect to:

what is said to be the actual intention or expectation of the parties as recorded in the investment proposal in a way which necessarily contradicts the language of the clause.

So he has found some opposition between those two things which he says the trial judge has not addressed.

MR JACKSON: Yes.

FRENCH CJ: The other one was, I think, the other identification of specific error was at the beginning of 98, but that is just on the difference of construction, is it not?

MR JACKSON: Your Honour, could I just say that needless to say those are matters that would be in issue, but the point I am seeking to make about it is that one has arrived at a situation where – and I do not mean to be counting up judges – but you do have a minority judge in the Court of Appeal, taking exactly the same view as the judge at first instance. You have Justice Macfarlan at paragraphs 48 and 49 at page 52 taking, in effect, the hard view, if I can put it that way.

FRENCH CJ: Are you hoping for anything more than that the numbers might fall out differently?

MR JACKSON: Well, your Honour, I would always prefer to have a majority, if I can put it that way. But, your Honour, the point I am seeking to make is that one does have a situation where if one goes, for example, to the two paragraphs of Justice Macfarlan, to which I referred, at page 52, paragraphs 48 and 49 – I do not think I have actually taken your Honours to that in terms before – but looking at those two paragraphs, you will see that in paragraph 49 he speaks of something taking “precedence over the words appearing in”, in effect, the earlier statement.

But what we would submit, your Honours, is those earlier statements, in our submission, could not be regarded as superseded when reference to the earlier discussions was necessary, at least in some respect, to make them intelligible. If one were to look at them for one purpose, one should be looking at them for the purpose and seeing them in the whole context in which they appear. I am sorry, I am putting that badly. Your Honours, that is what I wanted to say about the first point.

So far as the loan issue was concerned, your Honours, it was in reality a very simple issue. There was a finding that the respondent had lent the applicant $260,000 in October 2007. When was it to be repaid? The initial date for repayment was, I think, 11 August 2008. The applicant’s contention was that there was an agreement that repayment was to be – there was a variation to the effect that there was to be repayment when profit was made from some ventures in which they were involved.

The primary judge erroneously, as the Court of Appeal held, did not accept the applicant’s evidence. You will see that at page 13, paragraph 45 of his Honour’s reasons. The essential reasoning in the Court of Appeal is contained in the reasons of Justice Meagher at page 80, paragraph 115. Your Honours will see from what appears then at paragraphs 116 to 118 that the applicant’s case failed because it was said that the variation was not supported by consideration.

Could we just say this, your Honours? The position was this. Prior to the variation agreement the money would be repayable by a particular date. Any claim to repayment would not be the repayment from a particular fund or source, but the effect of the arrangement that we say amounted to a variation was that, first of all, the time for repayment was deferred, but on the other hand the respondent obtained an additional right as against the applicant to require that moneys up to the $260,000 be paid to him from particular sources when that became available, so it was an additional right he obtained.

If I could just take your Honours for a moment to page 55 you will see the evidence at paragraph 56 and so, in our submission, your Honours, it was a case where there was consideration.

FRENCH CJ: Sorry, how do you characterise that consideration again?

MR JACKSON: Your Honour, in this way. Prior to the variation agreement the money had to be repaid at a particular date and it was not in any way secured or required to be paid from a particular sum, and the respondent could not insist on payments from any particular sum. The effect of the variation was that, so far as we were concerned, the time for repayment was extended and the sources of repayment were made specific in the sense that whilst, no doubt, there was a personal obligation which remained to pay, there was also an entitlement as between the respondent and us to require us to pay money as it became available from particular sources.

FRENCH CJ: Was that an obligation to pay from those sources or rather this will be your opportunity to repay, a statement to that effect?

MR JACKSON: Well, if one bears in mind that the respondent did not give evidence and this issue has not been finally decided because of a view erroneously taken by the primary judge, and the Court of Appeal was saying if we succeed on this there would have to be a new trial on this point.

FRENCH CJ: Yes.

MR JACKSON: But if one goes to what is said on page 55 at about line 26:

‘Ok you can repay it from whatever comes first, when we resell the 5 acres we bought from Ted Cooper, Vicbuy sells its land, from commissions you receive on Bali, or you start receiving income from the shopping centre’.

So that is referring to the availability of sources from particular – funds from particular sources. Your Honours, those are our submissions.

FRENCH CJ: Yes, thank you very much. We will not need to trouble you, Mr Sleight.

MR SLEIGHT: As your Honour pleases.

FRENCH CJ: The applicant complains that the Court of Appeal in this matter took too narrow a view of the use of extrinsic evidence of prior conversations and dealings between the parties in construing a deed of agreement between them. There was no dispute between the majority judges and the dissenting judge in the Court of Appeal on the applicable principles. The difference was as to their application and, in our opinion, no question warranting the grant of special leave is disclosed.

The second dispute concerned the question of whether a loan agreement between the applicant as borrower and the respondent as lender had been varied to allow the applicant to repay the loan out of the proceeds of future business dealings. The Court of Appeal held that absent consideration the alleged variation could not be enforced. No question warranting the grant of special leave is disclosed on that matter. Special leave will be refused with costs.

AT 10.11 AM THE MATTER WAS CONCLUDED