Berry & Anor v CCL Secure Pty Ltd [2020] HCATrans 69 (3 June 2020)

Last Updated: 3 June 2020

[2020] HCATrans 069

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
Sydney No S315 of 2019

B e t w e e n -

BENOY BERRY

First Appellant

GLOBAL SECURE CURRENCY LIMITED (COMPANY NUMBER 05127761)

Second Appellant

and

CCL SECURE PTY LTD ACN 072 353 452

Respondent

BELL J
GAGELER J
KEANE J
NETTLE J
EDELMAN J

TRANSCRIPT OF PROCEEDINGS

FROM CANBERRA BY VIDEO LINK TO BRISBANE, SYDNEY AND MELBOURNE

ON WEDNESDAY, 3 JUNE 2020, AT 10.03 AM

Copyright in the High Court of Australia

____________________

MR J.T. GLEESON, SC: May it please the Court, I appear with MR C.S. WARD, SC and MR P.F. SANTUCCI for the appellants. (instructed by Marque Lawyers)

MR G.K.J. RICH, SC: May it please the Court, I appear with MS J.L. ROY and MS J.E. TAYLOR for the respondent. (instructed by Arnold Bloch Leibler)

BELL J: Yes, Mr Gleeson.

MR GLEESON: Your Honours, if I could invite you to look at our outline and then indicate the order in which I propose to deal with the topics, if that is convenient.

BELL J: Indeed.

MR GLEESON: We propose first, at paragraph 2, to make some observations about the issues of law and fact which arise on the appeal looking at the matter at the level of some generality. We then proposed in paragraph 3, and this will take a little time, to review the concurrent factual findings on eight core topics which will be relevant to the disposition of the appeal and also to the disposal of the notice of contention, which as you know is a heavily factual challenge to the findings of both courts below.

We then proposed to make submissions upon the way in which the case developed through the pleadings and the onus that was therefore upon the respondent and at that point we then proposed to contrast the primary judge’s approach, which we commend, up until the 2010 policy decision. As indicated on special leave and the notice of appeal, we do not seek to defend the damages award beyond 2010.

Then we will deal with the errors that we assert arise in the Full Court’s judgment and then the notice of contention, depending on time, may be best left for reply. Your Honours, is it convenient if I proceed in that order?

BELL J: Yes, thank you, Mr Gleeson. I might just indicate for the parties’ benefit the Court does propose taking a morning adjournment for 15 minutes at around 11.15.

MR GLEESON: May it please the Court.

BELL J: I may also just indicate, Mr Gleeson, I am told that difficulties have been experienced in hearing the audio link from the Sydney courtroom, so if anyone has that difficulty please let me know.

MR GLEESON: Thank you, your Honour. Your Honours, the issues arose in this fashion. We have two parties who were in a long‑term contractual relationship. The appellants are the agent, the respondent is the principal, and the contract automatically renews every two years, but it has the ability to be brought to an early end upon the giving of notice.

Next, we have an employee of the respondent, Mr Chapman, who forms an intention to remove the appellants as agent and put in their place two companies, one of which is his private company, SPT, and associated with that is his private purpose of using that company to earn the commissions for himself and pay bribes. Next, we have Mr Chapman who is not a decision‑maker, making an internal recommendation to his senior management that the appellants’ contract should be terminated.

The relevant senior management are Mr Curtis and Mr Ellery. Next – which is the critical point in the appeal – Mr Chapman, quite deliberately, does not recommend to his superiors that they use the lawful means available under the contract to terminate the appellants, either immediately or in the near future. There is a simple reason why he does not recommend lawful means which is that he fears that if the appellants know that they have been terminated they will be alienated, naturally enough, and that may alienate the ultimate client, Nigeria, causing the respondent to lose the valuable invoice sales. That is the primary reason Mr Chapman does not wish to use lawful means. Associated with that is he realises that if the appellant is given notice that they are dismissed or terminated, there is likely to be a claim for commissions made by them.

What Mr Chapman then does is put forward to his superiors a recommendation that they approve a consensual termination. He does that on the basis of a lie that Dr Berry wishes to be released from the contract because he is ill. His superiors approve that course and then what Mr Chapman does is to tell a further lie to the appellants that it is safe for them to sign the release letter because their rights as agent will continue to be protected in a suitable fashion.

It is that second lie, the lie to the appellants, which is the contravening conduct under the Trade Practices Act. The appellants then sign the letter, believing in the truth of Mr Chapman’s representations. They thereby in law surrender their rights to commission under the contract because it is now extinguished. However, believing in the truth of Mr Chapman’s representations, they continued to act as agent.

Finally, Mr Chapman never intended to put in place the substitute arrangement that he represented he would, and he never did, and it is not until at the earliest, some 12 months later, that the appellants start to find out that they may have been duped and that is when the currency scandal erupted publicly.

So, your Honours, against those facts which are common ground, it is now accepted by the respondent that the conduct of the respondent through Mr Chapman was misleading and deceptive in contravention of section 52 of the Trade Practices Act, or now section 18 of the ACL. The conduct as found was a contravention at the highest end of the scale, if I can use that expression. It was intentionally deceptive conduct that would have amounted to fraud at common law, and it is accepted that the contravening conduct induced the appellants to act to their detriment and suffer loss in the form of the lost commissions that would have been payable under the agency agreement while it remained in force.

The ultimate question in the appeal then is, how does the law under section 82 of the Trade Practices Act or section 236 of the ACL approach a contention raised by the respondent wrongdoer that in the assessment of damages, the loss ceases on a date ‑ ‑ ‑

[TECHNICAL INTERRUPTION]

BELL J: These are the modern difficulties we are confronting ‑ ‑ ‑

[TECHNICAL INTERRUPTION]

MR GLEESON: I will just pause, your Honour.

BELL J: Yes, thank you, Mr Gleeson. Do I take it that someone in courtroom No 2 is ‑ ‑ ‑

MR GLEESON: Your Honour, the court officer has just left, I think, to gain assistance from the Registry.

[TECHNICAL INTERRUPTION]

BELL J: That is a court officer in the Federal Court where you are?

MR GLEESON: Yes, that is right, your Honour, yes.

BELL J: I think what we are going to do is the Court will adjourn briefly until this technical difficulty can be sorted out.

AT 10.13 AM SHORT ADJOURNMENT

UPON RESUMING AT 10.27 AM:

BELL J: Mr Gleeson, by my reckoning we have lost something of the order of 12 minutes, I think the convenient course will be to sit on until lunchtime without a morning break in the hope that we do not have further difficulties of that kind.

MR GLEESON: Thank you, your Honour. Your Honour, I was seeking to identify that the ultimate issue on the appeal is how does the law under section 82 of the Trade Practices Act or its modern analogue approach a very particular, and one might think unusual, contention by the wrongdoer, which is this: that when it comes to assessing the damages I should be placed in the position as if I had taken lawful means of termination, when in the actual world I quite deliberately chose to resort to wrongful conduct instead, and that, we submit, breaks down perhaps into these legal issues.

The first is who bears the onus on that respondent‑based counterfactual and we submit it is the respondent who bears the onus, whether legal or alternatively evidential. The second is what is the standard of proof on that respondent‑based counterfactual and we submit that primarily it is a balance of probabilities, the only alternative being a Malec v Hutton standard.

The third question is what approach is a tribunal of fact entitled to take to the evidence where it is left with uncertainties and difficulties and we submit based on the Pitcher Partners approach the tribunal of fact is entitled to take a robust approach which resolves any difficulties against the wrongdoer whose conduct has created the need to engage in a such an unusual counterfactual.

The fourth question is what is the role for presumptions or inferences, and we submit there is a rich role for presumptions or inferences in this area. If a respondent in the actual world is not prepared to pursue the path of honesty because it fears adverse commercial consequences, it could hardly be supposed that in the counterfactual world it would have behaved otherwise.

Now, that is a presumption of fact, not of law, and it is open to be rebutted. The primary way it would be rebutted is if the respondent could prove a set of facts, matters and circumstances wholly independent of its contravening conduct in the actual world which would have led it to take lawful meanings. That is what on the Full Court’s finding the respondent did manage to prove in respect to the 2010 policy decision and so the assessment of damages must take that into account.

EDELMAN J: Your underlying premise is that the “but for” or counterfactual approach applies, is it, with the modifications that you have mentioned?

MR GLEESON: Your Honour, the answer to that is yes, we are not submitting that it is unavailable in law to a respondent, but with the modifications I have mentioned.

EDELMAN J: Why would one necessarily start from that premise when in a case of deceit or fraudulent misrepresentation the approach of the law is to say that a victim of deceit can recover losses that they have suffered even if they would have acted in exactly the same way but were only induced in the sense that a factor in their decision‑making process was the fraudulent misrepresentation?

MR GLEESON: Your Honour, we are not disavowing – in fact, we are fully supporting and encouraging the richness of the approach which deceit would take and which, by analogy, would be available under section 82 where one has intentional misleading and deceptive conduct. So the observations of the House of Lords in Smith New Court Securities and so on, are observations we support.

The area where we were seeking to allow an intentional wrongdoer some possibility is really illustrated by the 2010 policy decision. In 2010, on the findings of the Full Court the respondent made a general decision that it would cease using any agents for this business and the Full Court says that Dr Berry would not have been immune from that decision.

That is a hypothetical past fact and we have accepted in the construction of our grounds of appeal ‑ and I answered a question from your Honour Justice Bell on the special leave to this effect – that we do not seek to reinstate the damages beyond 2010

EDELMAN J: That may be because beyond 2010 the damages become too remote, not because the link between the wrongdoing and the damages is not established.

MR GLEESON: Yes, your Honour, that may be correct, and I should make it clear that to the extent we are allowing for the respondent to have any attempts at these counterfactuals we are not disavowing that causation was established. Causation of loss was established because before 24 February 2008 we had a long‑term contract which gave us valuable commissions. After that date, we lost that and we had nothing and we know in the actual world the first time they did exercise lawful means was 2018.

Causation, we submit, has been established and we have moved into the assessment of damages and on the revenue account we asserted that the loss was the loss of those commissions, which would have continued until at least 2010.

BELL J: Mr Gleeson, just taking up that last matter, you pleaded loss of commissions but there was also a pleading of loss of chance. When one comes to see the computations at paragraph 231 in appeal book 216 to 217, it is consistent with an approach adopted below by the parties based on calculation of loss by reference to what you describe as the “on revenue account”, the loss of commissions. Is that the way the litigation was conducted?

MR GLEESON: Yes, it is, your Honour. It could have been conducted on a basis of claiming the loss of the value of the contract as of 24 February 2008, taking into account all future contingencies. It was not. It was done on the basis that the loss was the loss of the commissions and it was then a question of, would that loss have relevantly ceased at some point? Looking at that paragraph 231, it is line 6 or 7 which is an identical number, 27 million, that is the loss that we assert.

BELL J: Yes.

NETTLE J: Those calculations do not allow for any discounting or the possibility that the victims had established a realistic chance that they would have terminated lawfully at some point, do they?

MR GLEESON: That is correct, your Honour.

NETTLE J: But you allow, as it were, theoretically, that if they had established that realistic possibility at some stage, those amounts of loss would have to be discounted by that factor.

MR GLEESON: Your Honour, we have made that concession in the written submissions, consistent with, for example, what was said in Amann Aviation or, in particular, Chappel v Hart.

NETTLE J: Yes.

MR GLEESON: If they had proved on the balance of probabilities a realistic chance of that, then one might have to look at discounting but in the present case, we were not in that territory, we were in the territory where it was wholly speculative ‑ ‑ ‑

NETTLE J: Yes.

MR GLEESON: ‑ ‑ ‑ whether they would have behaved in any other fashion, up until 2010. Your Honours, could I then draw attention to paragraph 3 of our outline, which are the core facts. The Agency Agreement you will find in the appellant’s primary book of further materials and page 69 contains the primary provisions, particularly clause 3.2, which is to be read together with the definition of the expiry date on page 91. The lawful means of termination are clause 2.6(a).

EDELMAN J: Which page was this?

MR GLEESON: Page 69. The lawful means of termination are clause 2.6(a), or 3.2 has within it the notice provision, and that is the critical provision. The agreement entitled the appellants to commissions in accordance with clause 8 on invoice sales as defined on page 65, and contained in clause 5.1, duties of accounting.

If I could then ask your Honours to pick up the core appeal book and go to page 43. Paragraph 114 contains the memorandum which was the source of the ill‑health lie and it is in paragraph 2 that Mr Chapman told his superiors the lie that Dr Berry had:

ongoing health issues which might impact on his travelling and therefore his capacity to fulfil his duties under the agreement. We should therefore have a succession plan for this eventuality.

And the succession plan was SPT – that is Mr Chapman’s company – and another company, called JHM and he wanted to appoint them within the same scope as the entities they are replacing. So at the outset SPT and JHM were only ever put forward by Mr Chapman to his superiors as replacements because Dr Berry was unable to perform his agency due to ill health.

There are ample findings from the primary judge that that was a lie, and the Full Court affirmed those findings in an important passage, which is at page 191 of the core book. It is paragraphs 124 to 126. It is important to observe that on the appeal grounds 1 to 29 were a factual challenge to the trial judge’s findings on misrepresentation, inducement, reliance and loss, and all of those challenges failed. In particular at 124 to 126 the Full Court dealt with the contention that Dr Berry consented to the new companies coming in. It observed his Honour’s findings that Mr Chapman was involved in establishing SPT. He “engaged in personal transactions with SPT” and he used them to pay bribes.

Then at 125 the court affirms the finding that Chapman wanted to replace Berry. It had nothing to do with any ill health. At 126 the credit findings are affirmed and, importantly, paragraph (c):

the termination of the Agency Agreement occurred not because Dr Berry was suffering from ill health, but because the removal of Dr Berry and GSC was necessary to make way for SPT –

So Mr Chapman’s scheme was to tell a lie to his superiors in order to induce them to allow him to put in place two companies, particularly SPT, for his private corrupt purposes.

Your Honours, the third fact we identify which is important is the November 2007 meeting which is reviewed by the trial judge at paragraph 137 and following on page 50. The importance of this meeting is that it proved the evident worth of Dr Berry because of his close relations with the relevant Nigerian ministers that he was able to perform his agency at the time in London and in particular in the passage extracted from Mr Brown’s evidence, Mr Brown conceded that the arbitration or dispute which Dr Berry had with Nigeria in no way impeded his performance at the agency. That is one of a number of pieces of evidence which destroy ground 1 of the notice of contention.

So his Honour reviews this important activity of Dr Berry over to about paragraph 151 and those findings are affirmed by the Full Court at page 189, paragraph 110. The Full Court in that important paragraph affirms that Dr Berry’s conduct both in November 2007 and in March 2008 after the termination letter was valuable performance of an agent. This explains the finding that the respondent did not wish to alienate Dr Berry by giving him notice of termination; if they did they would lose their valuable contact with the Nigerian Government. So that is one of the two reasons why in the actual world the respondent was unwilling to behave lawfully and why it chose the path of contravening conduct.

Your Honours, the fourth fact can be found in the primary judgment at paragraph 161 on page 57 and this is that in January 2008 as the culmination of Dr Berry’s work, Nigeria is sent some valuable orders and you will see over at the end of paragraph 162 that they also proposed further orders during the year. The significance of that is that this really provides the second reason why the respondent would not comply with the law because, if it gave open notice of termination to Dr Berry just at the point that his work was coming to this valuable fruition, of course he would ask for his commissions to be paid and the respondent did not wish to comply with its obligations in that respect.

If your Honours pass on to paragraph 164, this is the second and operative communication from Mr Chapman to his superiors which again repeats the ill‑health lie and is supported by Mr Brown. The next fact is then the misleading conduct is the representation which can be picked up from the Full Court. The Full Court at paragraph 16 sets out the termination letter. Dr Berry was induced to sign a letter which was a retrospective termination to 31 December, the purpose of that being to cheat him out of the commissions.

Paragraph 17(1) is the operative representation which survived in the Full Court, and the Full Court upheld that finding at paragraphs 136 to 138 and at 163 they upheld the finding of reliance or causation. So what happened in the actual world was that the respondent through Mr Chapman resorted to the contravening conduct against the appellants because he not only wished to advance his private scheme with SPT, but also because he did not wish to run the risks of a lawful termination that I have identified.

Your Honours, the work of Dr Berry after the termination is set out by the primary judge at paragraphs 237 to 240, and this includes an important meeting in March with Nigeria at 237 and some critical findings at 240 which show that not only was Dr Berry still performing the agency and critical to its success as of March, but also his Honour’s finding at about line 18, which is this is further evidence that his “arbitration against the Nigerian Government” in no way impeded his performance at the agency. That is another piece of evidence destructive of ground 1 of the notice of contention.

Your Honours, the further performance of the agency during that year is evidenced by a series of text messages and findings which commence at paragraph 242 and run through to paragraph 272 and they include the important findings by the primary judge at 271 and 272 to show that throughout that period, that is through until at least the end of 2008, Dr Berry believed he was still the agent – he acted as the agent. He was encouraged to do so by Mr Chapman, and there were no difficulties with him meeting Governor Soludo posed by his arbitration.

The scandal erupts then finally in mid‑2009 which the primary judge deals with at paragraphs 275 and following. Your Honours, against that factual background, we first would draw attention to the credit findings of the primary judge which have survived in the Full Court. We do that, in particular, because the respondent seeks to pass over them in its written submissions. In respect to Dr Berry, the finding is at page 15, at paragraphs 19 to 23 and the finding is that Dr Berry overall is a witness of credit even though there was one area in which his evidence was unsatisfactory.

Then, in respect to Mr Chapman, the findings are at paragraph 35. There are comprehensive findings against Mr Chapman’s credit. At the end of that paragraph, there is a further finding against the credit of Mr Brown. In our written submissions in‑chief at footnotes 22 and 23, we have collected all the findings. I just mention that because on ground 2 on the notice of contention, the respondent asks you to resuscitate some limited part of the evidence of Mr Chapman and Mr Brown. We submit that course should clearly be rejected. These are comprehensive credit findings and, unless there were an attempt to completely explode these findings which were confirmed by the Full Court, that ground of the notice of contention should be rejected. The decision‑makers, Mr Curtis and Mr Ellery, did not give evidence.

BELL J: Mr Gleeson, I think there was reference to another decision‑maker, Mr Mamo, was it?

MR GLEESON: Your Honour, he was the CFO and we submit not a decision‑maker for this purpose. The “hire and fire” was Curtis and Ellery on recommendations from Brown and Chapman. So, those credit findings were the subject of the appeal – grounds 1 to 29 – and the Full Court, between paragraphs 19 and 163, upheld the credit findings.

Can I then come to point 5 of our outline which is the question of pleading and onus – conscious, also, of your Honour Justice Edelman’s earlier question? If your Honours go back to our book of further materials, at page 14, paragraph 26, we pleaded the operative representation. Paragraph 26C pleaded reliance, as did 28. Then, the plea of detriment, or damage, or causation, is paragraph 32. By reason of the wrongful termination, the agreement was not automatically renewed for a further term of two years and there are then further consequential aspects of detriment, including roman (iv) and (v). This is the identification that detriment is the failure to receive the commissions. Paragraph 40 then identifies the loss or damage consistently with that. What is then critical is to see how the respondent put its defence, in particular paragraph 32 on page 40 to 41.

EDELMAN J: I am not quite sure precisely what you say, either in the pleading or now, the loss was. It seems to me there are two possibilities. One is that the loss was the loss of the contractual rights which occurred immediately in February 2008 when the termination letter was signed. The alternative is that the loss was the loss of the commissions that would have flowed from a continuation of the agency. Which of the two bases do you put your case upon? It may be that this is the same point that divided the majority and the minority in The Golden Victory as Lord Sumption puts it in Bunge v Nidera.

MR GLEESON: Yes. I think the accurate answer is, if they are true alternatives, your Honour, it is the second because we say that the representation led to the signing of the letter. Once the letter was signed, as a matter of law the contract ceased to exist and therefore the contractual rights and indeed duties under it ceased to exist.

KEANE J: At that point, the primary liability to pay you commissions became a secondary liability to pay you compensation for the loss of that entitlement.

MR GLEESON: That is correct, your Honour, and then within that compensation we had put that it would have been open in law to measure that compensation in different ways under section 82. One way would have been to place a value on the lost entitlement at that date having regard to all future contingencies. Another way, as per Murphy v Overton, paragraphs 47 to 52, would have been to measure it by the commissions which would then have been received under the now lost entitlement, and it was the second way the parties chose to join.

Your Honours, I wish to identify in the defence at paragraph 32 on pages 40 and 41 that the relevant plea is in paragraph 32B and it was a plea that, if the letter of termination had not been signed the defendant would have terminated the agreement by no later than 30 June 2008, and then the particulars which are critical identified two reasons why the respondent would have, it is said, taken that course. The first reason is Dr Berry’s ill health, and that is a reference then back to paragraph 26AA(a). The second reason is that Dr Berry’s arbitration, it was said, damaged his working relationship and so he was no longer a good agent, and that is the reference back to 26AA(b).

The witness that is referred to in each of those 26AA paragraphs is Mr Brown. So the issue that was propounded by the respondent was we will seek to prove through Mr Brown two facts. Firstly, Berry was in ill health. Secondly, his arbitration damaged his relationship with Nigeria and we will seek to prove that, in the hypothetical world, those two facts would have motivated us to give notice of lawful termination by no later than 30 June.

Our immediate submission then is that the pleadings correctly recognised that there was an onus upon the respondent to prove the matters alleged. They had to prove ill health existed in fact, they had to prove the arbitration damaged his working relationship and they had to prove that those matters would have motivated them in the counterfactual to terminate the appellants.

Your Honours, as to the nature of that onus, the possibilities are that it is a strict legal onus for which the best authority would be Currie v Dempsey, which I will simply refer to. It is in the supplementary authorities at tab 16 between pages 513 and 516 of the book. The alternative is it was an evidential onus within Purkess v Crittenden, which is in volume 2 of the authorities, tab 8, particularly in the passages at pages 278 and Justice Windeyer at page 280 to 281.

At page 278, at about point 7, Chief Justice Barwick, Justices Kitto and Taylor say that in that particular personal injury context where the defendant wishes to argue that the plaintiff had a pre‑existing incapacity, it is necessary for the defendant to lead evidence which, if accepted, would establish with some reasonable measure of precision both what the condition was and its future effects were likely to be.

And only if that was done would it then fall for the plaintiff, on the whole of the evidence, to satisfy the tribunal of fact of the extent of injury, and Justice Windeyer to somewhat similar effect, at pages 280 to 281. The difference between the parties on this topic is that the respondent says it bore no onus of any sort in respect to these matters.

The reason that must be wrong can be tested this way. Assume the respondent had not pleaded paragraph 32, and had simply denied the appellant’s case. Would it have been incumbent upon the appellant to seek to go into evidence to negative a whole series of possible hypothetical lawful means terminations on any and every date within the period in which the loss was otherwise prima facie established and claimed? We would say not.

Your Honours, that brings me to paragraph 8 of our outline, which is to defend the primary judge’s decision on this part of the case. The first matter we would observe is that not only was Mr Brown’s credit rejected generally but the primary judge gave six compelling reasons for rejecting the hypothetical evidence that he gave and it is important to address this because the respondent tends to pass over these findings in its submissions. If your Honour’s have the primary judge at paragraph 302, on page 94 to 95, the primary judge accurately recorded the key evidence which Mr Brown gave orally as to why there would have been a lawful means termination.

The evidence you will see tracks fairly closely paragraph 32 of the defence. The assertions are he was “not travelling into Nigeria”, “not carrying out his functions as agent”, “uncontactable”, “he was ill”, he was in hospital in India, and most compelling of all, the Contec arbitration.

So, the primary judge focuses closely on the hypothetical evidence and then, between paragraphs 314 and 318, gives six reasons why he rejects Mr Brown, and if I could just emphasise these aspects of 314 to 318. In 314 the first reason for rejecting Mr Brown is that a unilateral termination, that is a termination lawfully, would have converted him from a person using his influence with Nigeria to advance the respondent’s interests into a person likely to impede those interests, and the importance of Dr Berry to Nigeria and to the respondent’s interest is evidenced from the meetings before and after the date of termination.

So the first finding of fact is, I cannot believe you, Mr Brown, because here is a very clear reason from the behaviour in the actual world why you did not and, indeed, would not have been prepared to run the risks of being honest. The third reason at 316 and 317 disposes of the proposition that the Contec arbitration was a problem and those findings destroy ground 1 of the notice of contention. The fifth reason in 317 rejects the ill‑health argument and the sixth reason at 318 points out that there was not a single piece of evidence where, in the actual world, the respondent ever contemplated issuing a lawful means notice.

So, pausing there, in those five paragraphs the primary judge has done two things. Firstly, he has found as a matter of fact that there was no ill health and that Contec was not a problem. Secondly, he has found consequentially that Mr Brown’s evidence about those matters could not be accepted. Thirdly, he has gone even further and said, here are the reasons why in the actual world the respondent was not prepared to risk lawful means. Here is why they resorted to contravening conduct and to fraud, and the reason was – it is a fairly grubby reason – they wanted to keep Dr Berry on the books, believing he was an agent advancing their interests with Nigeria and did not want to run the risk of alienating him and did not want to pay him his commissions. It is a fairly grubby fraud.

Now, could I come then to 319 through to 322 which are paragraphs which the respondent seeks to criticise? It is important to understand what his Honour is doing in these paragraphs. He has already made all of the findings of fact that were needed to dispose of the respondent’s defence. He could have stopped at 318 and said, I reject paragraph 32. I go ahead and I assess the damages as the applicant seeks. What his Honour does in 319, first sentence, is draw an inference about the actual conduct of the respondent at the time, that their action in tricking Dr Berry into signing the letter suggests it was not prepared at the time to use its contractual right to terminate.

Now, pausing there, that inference is simply inescapable on the material thus far looked at. That is an inference about the choice which the respondent made in the actual world: I will not go down the lawful means route because I fear its adverse consequences. What his Honour then refers to as a policy of the law that:

a court will be disinclined to allow a party to a contract to take advantage of its own wrongdoing ‑

Now, we, of course, are not in the territory of contract; we are in the territory of the Trade Practices Act or perhaps common law fraud. What his Honour is doing is simply identifying cases from various areas of the law which lend assistance to how one would approach this, as I say, rather unusual contention by the respondent and his Honour is identifying that every policy of the law would tend to strain against allowing a person in the actual world to resort to fraud in order to avoid the risks of honesty and then when it comes to the assessment of damages say but they should be assessed as if they were an honest person.

That takes me through to paragraph 322 and I want to put a number of submissions on how the Court should understand that sentence because it is a sentence heavily criticised by the respondent. His Honour says the respondent:

having committed the fraud that I have found, by making the two false representations on 24 February 2008, cannot now be permitted to assert that it had a lawful alternative path, that it chose not to take . . . to achieve the very position that its fraud procured.

It is immediately clear that his Honour is not putting a proposition that the respondent wrongdoer could never be permitted to assert that the damage might have come about by another means and his Honour is not excluding the possibility of such an argument. His Honour is identifying a narrower proposition, which is if you commit a fraud in these circumstances where you quite deliberately chose not to pursue the path of rectitude you will not then be allowed in the damages to get the benefits of a hypothetical pursuit of rectitude and that, we submit, is consistent with the policy of the law and the policy of section 82 of the Trade Practices Act.

A further proposition we make about 322 is his Honour could not be taken to mean literally they would not be allowed to be heard on their defence. They were heard on their defence. Mr Brown was called and he was disbelieved between 314 and 318. A further way of supporting paragraph 322 is that his Honour is employing a presumption of fact, which is that if, in the actual world, you chose fraud rather than lawful means and you are not prepared to accept the burdens and risks of honesty it may be presumed that, absent fraud, likewise those burdens and risks would not be run.

NETTLE J: That presumption would be rebuttable by sufficient evidence, would it not?

MR GLEESON: By sufficient evidence and that is why, in one sense, at a factual level the answer is: you sought to call your evidence and your evidence was soundly rejected and ‑ ‑ ‑

NETTLE J: It cannot be right, as you accept I think, that a fraudster could not be heard to say, well, although I did it fraudulently, had I not done so I can demonstrate, at least on the balance of probability, that I would have done so lawfully.

MR GLEESON: I am not seeking to shut down that possibility, your Honour. In law, we are clearly saying that it failed on this case.

NETTLE J: It failed on this case, I think you would say, undoubtedly.

MR GLEESON: Yes.

NETTLE J: Do you contend for a proposition that because it committed fraud it cannot be heard to say that there was a lawful alternative open and it would have pursued had it not acted fraudulently?

MR GLEESON: Your Honour, we do not go that far in writing. I do not go that far today. I have sought to draw attention that in fact his Honour is putting a narrower proposition in 322. What he is drawing attention to is, really, what I am defending as a presumption of fact that where, in the actual world, you had the lawful means available to you and you quite deliberately chose not to take them, the ordinary inference would be that you would not have taken them in any hypothetical world. And then the way in which the fraudster would seek to rebut that presumption of fact is to say, well, here are a set of circumstances independent of the fraud which would have provided me with compelling reasons to terminate you.

And that, of course, is what they did. Mr Brown said, I have got ill health and I have got an agent who is overly litigious with my ultimate client, and for those reasons I would have got rid of him. Now, those two reasons, had they been proven to be in existence and operative, would have been reasons completely independent of the fraud that was perpetrated on the appellants. The failure to prove those reasons is what was fatal to the respondent’s case.

EDELMAN J: On one view, this is the weaker version of a Smith New Court type of case. The analogy with Smith New Court would be the point that Justice Nettle put to you which is that you could never even make the argument. Your weaker version is that you can make the argument, they just did not make it here.

MR GLEESON: You can make the argument and they did not make it here. There is one matter I am going to need to add to that quite shortly, which is the way in which the respondents seek to get around what, otherwise, appears to be an insuperable problem for them. What the respondents seek to argue – it is around paragraph 66 of their written submissions ‑ ‑ ‑

BELL J: Mr Gleeson, we seem to be encountering another technical hitch. I do not know whether you are still able to see the members of the Bench but we are no longer able to see you. I note the time. Contrary to my earlier revised indications, the Court will now take a morning adjournment for 15 minutes.

AT 11:17 AM SHORT ADJOURNMENT

UPON RESUMING AT 11.35 AM:

BELL J: Yes, Mr Gleeson.

MR GLEESON: Thank you, your Honour. I was going to move to point 10 of our outline, which was to deal with the errors in the Full Court’s judgment, if that is convenient.

BELL J: Yes, it is.

MR GLEESON: The first point we make is that the credit findings against Mr Brown were not overturned by the Full Court, which is apparent from the first sentence of paragraph 230 of the Full Court on page 216. In particular, the Full Court specifically affirmed each of the findings against Mr Brown on the ill‑health lie and the Contec arbitration.

That can be seen – I took you this morning to the Full Court at paragraphs 124 to 126 on page 191, which affirmed that ill health was a lie and in respect to the Contec arbitration, these findings indicate that the Full Court affirmed the primary judge. Firstly, the last sentence of paragraph 126 affirmed the finding that the reason the appellants were sought to be removed was to make way for SPT. Then at paragraph 130 between lines 20 to 40, the court refers to this evidence of Mr Brown about Contec, and says:

This rationale not only faced the hurdle that Securency did not suggest this reason at the time of the proposed termination, but was also rejected because the evidence strongly suggested that SPT –

was what drove Mr Chapman. Then finally at paragraph 149, in the last sentence, the Full Court refers with evident approval to his Honour’s finding that:

the supposed inability of Dr Berry to perform his functions was an excuse invented after the fact to justify termination when the ruse of using the alleged illness of Dr Berry was no longer tenable.

Now, the shortest way in which this appeal could be disposed of is to say that given the ground was rejected for comprehensive reasons, given that the Full Court affirmed those findings, the case pleaded in paragraph 32 of the defence failed, and that was the end of the matter and that would be a short‑form way in which to say there was error in the Full Court.

If one goes further, can I then come to the key paragraphs in the Full Court’s judgment, and firstly commence with paragraphs 219 to 221 on page 214. In those paragraphs, the Full Court rejects the respondent’s lawful means argument at three dates. They reject it at 24 February, 26 March and 22 April. So we have no complaint about it being rejected. The reasoning by which it is rejected is, however, incomplete, and fails to recognise the full reality of the matter.

The Court will see that the Full Court uses the language each time “no need”. If you had been wanting to issue a notice lawfully on that date, there would have been no need to engage in misleading and deceptive conduct. With respect, this was far more than a case of no need. The reason they did not exercise lawful means, as I have shown, is that lawful means would have carried adverse commercial consequences, which they were not prepared to run, and instead Mr Chapman was prepared to resort to fraud. That is the reason why the lawful means case failed up until at least the third of these three dates.

Then can I come to paragraphs 224 to 230, which is the core of the Full Court’s reasoning. In doing so, it is important to set the context back from paragraph 204 because that is the argument the Full Court was addressing. The argument the respondent ran on appeal was that, in circumstances where it patently wished to terminate the agreement, in particular having regard to its attempts to do so, where Dr Berry was unable to fulfil his obligations as a result of the Contec arbitration and where the respondent had in fact appointed other agents, the overwhelming likelihood is it would have exercised lawful means to terminate on one or more dates. That is the argument the Full Court addressed between 224 and 230.

Can I pause immediately to observe that the only part of that argument that reflected the pleaded case was the middle limb which was the reliance upon the Contec arbitration and that limb, as we have seen, was rejected by the Full Court as well as the primary judge. So the argument that succeeded at 224 to 240 is really the first and the third limbs and the argument was, because in the actual world I wanted to terminate the agency agreement, as can be seen by the fact I tried to do so and because I in fact appointed other agents, then it should be inferred that I would have done the same in the counterfactual.

The problems with the Court accepting that argument are manifest. Firstly, it was not a pleaded case. Secondly, it is not based on Mr Brown, who was the witness put forward to make out the counterfactual. What then is this case? It seems to be a case that the respondent had a generalised desire to get rid of the appellants which, for some unidentified reason, would not have been acted on through lawful means up until 22 April 2008 – that is, paragraph 221 – but would, some five weeks later on 1 June, have impelled the respondent to issue a lawful means notice. That seems to be the case that was run on appeal and accepted by the court.

It is not based on Mr Brown because of paragraph 230. One immediately asks which employee or officer of the respondent is the Full Court telling us would have acted in this fashion on 1 June, when they were not prepared to act on that fashion some five weeks earlier?

The Full Court never deigns to say whether it is Chapman, Ellery, Curtis, or some combination of them. Let us assume for the moment, the Full Court has Chapman in mind. If it is Mr Chapman, he was a recommender not a decision‑maker – for the reasons given in our reply at footnote 14. So, for this counterfactual to have any life it needs to contemplate why would Mr Chapman have made a hypothetical recommendation for lawful means termination and also, why would Curtis and Ellery accept it?

Now, if it is based on Mr Chapman, the Full Court does not identify a single piece of evidence from the discredited fraudster on which it was based. It is important to recall that Chapman was found to be pursuing the fraudulent scheme of getting his company, SPT, in as agent to get his hands on the commissions to pay bribes and it is important to recall his credit was comprehensively destroyed and not resuscitated on appeal.

Nowhere does the Full Court identify any evidence from Chapman to support this counterfactual. Nor does the respondent, in its submissions, point to any evidence from Mr Chapman to support this counterfactual. There is a very good reason for that. Mr Chapman never deposed to this counterfactual. He never admitted his fraudulent scheme with SPT. He denied he was telling lies to Dr Berry. He never admitted that in the actual world he resorted to fraud over lawful means. He never said, come 1 June, I would have recommended lawful termination for so and so reason.

Now, in the absence of any such evidence, it is unsustainable to think that Mr Chapman supports this counterfactual. Could I then turn to Mr Ellery and Mr Curtis? The first problem is they did not give evidence. The trial judge drew a Jones v Dunkel inference against the respondent – paragraphs 27 to 31. But whether you draw the Jones v Dunkel or not, the simple fact is neither of them deposed to this hypothetical.

In terms of what we know about their thinking in the actual world, all we know is that they were prepared to authorise a release of Dr Berry on the assertion that he was too ill to perform the agency. There is simply no other evidence that in the actual world they ever considered lawful termination, that they ever considered what would be the position if Dr Berry was not in ill health, that they ever conducted any assessment of the relative merits of the appellants and the alternative agents or that they ever went through a calculus as to the risks they would face of using lawful means at 1 June. Finally, the Full Court never identified what it was that changed in that five‑week period that would have justified running the risks that earlier were too great to run.

So, your Honours, coming to paragraph 13 of our outline, as well as factual error in the Full Court, the legal errors we assert are the failure to have regard to the relevant onus, the failure to have regard to the appropriate presumptions to be drawn against the intentional wrongdoer who resorts to fraud over lawful means and the Pitcher Partners principle that the intentional wrongdoer should bear the risks of the uncertainties in assessing the damages created by its wrong.

In terms of Pitcher Partners, which is in volume 3 of the materials, we rely upon the observations of the Full Court particularly between paragraphs [109] and [116], which is at 465 to 467 of the book. On page 467 the Full Court refers to this Court in Murphy v Overton at paragraph 74 where the Court affirmed the earlier observations in, not only Armory v Delamirie, but LJP Investments and Houghton v Immer in some detail on the earlier page and in [116] refers to Amann Aviation as an example where in the area of contract, if the breach makes it difficult for the plaintiff to prove it would have recovered its expenses, the onus shifts to the defendant to prove the plaintiff would not have done so.

Your Honours, the references that are given there are Chief Justice Mason and Justice Dawson, Justice Brennan and Justice Deane all put the principle on the case of a shifting onus. The softer way in which it is put is by the other majority judge, Justice Gaudron, which is to say it is an assumption or an evidential onus, it does not matter too much which it is. So, your Honours, all of those principles were not applied by the Full Court when they should have been.

Your Honours, in our supplementary book of authorities could I just indicate that we have provided at tab 17 the classic decision in L. Albert v Armstrong of Justice Learned Hand, the key passage being at page 189 of the report or 531 of the reprint in the second column. That is the key passage which is picked up by the various judgments in Amann Aviation and in turn informs Pitcher Partners.

Could I simply add to that submission that if you look at footnote 11 on that page, which is the footnote to the classic statement of principle, the case relied upon is Story Parchment which is a US Supreme Court decision which we have provided at tabs 18 and 19. Story Parchment contains quite a useful discussion between pages 561 and 565 of the report of this underlying proposition of how the court approaches situations where the respondent’s wrongdoing has created the uncertainty and the onus of proof.

Could I make one particular submission on Story Parchment? The case was in fact a Sherman Act case, where the wrongdoing involved the respondent’s acting in combination to engage in predatory pricing to destroy a new entrant into the market. On page 561 of the report, the first head of damage at the top found by the jury was a head of damage on the revenue account, which was the difference between the amounts which the petitioner would have received had its sales been at reasonable prices but for the unlawful acts of the respondents, and what it actually received. On that page there is a discussion about the natural and probable effect of the combination and the price cutting being to destroy the normal prices and that being the way in which the loss was identified.

Over on page 562, the first full paragraph is important because the lower court, the intermediate court, had upheld a contention which is very similar to the respondent’s contention in this case which is that, well, if we had not engaged in the illegal combination we could and might have dropped our prices individually and therefore we would have put the petitioner in exactly the same position as we did through our lawful conduct.

So it was a case where the respondents chose unlawful means over lawful means for the obvious purpose that they thought that would better achieve their objective. The Supreme Court dismissed that proposition in very simple language that it was quite unsound and then it went on to say in the assessment of damages a robust approach could be taken in favour of the petitioner because the wrongdoers had created the difficulties in the onus of proof.

Your Honours, could I come finally on the appeal to paragraph 14 of our outline and this was the point I had adverted to just before the last small adjournment, which is what is the respondent’s ultimate answer to the.....we have made? The ultimate answer seems to be found in the respondent’s submissions at paragraphs 61 and 66.

So if I could go to paragraphs 61 and 66 of the respondent’s submissions, in 61 the respondent seeks to defend paragraph 225 of the Full Court by saying, well, when it said there is no reason to assume in the counterfactual Securency would not have acted to terminate the agreement, there was no longer any reason to make the same assumption against them which had led it reject their contention.

So there is a building of onus into that and onus against us. But at 62 they say all that was happening is the Full Court is saying that by June their “contention was no longer overwhelmed by an inherent contradiction”. What is it that has changed between 22 April and 1 June which means that the respondent’s contention is no longer overwhelmed by an inherent contradiction? It is simply not identified anywhere by the respondent.

Then if I could come to paragraph 66, the respondent here appears to be making a submission to this effect - “We are now forced to accept the findings that Mr Chapman, contrary to his evidence, was driven by a dishonest desire to install SPT so that he could get his hands on the commissions and pay bribes. Let us now accept that”. That is a fact from the actual world.

Mr Chapman’s desire – this seems to be the argument – to pursue the course of corruption was so intense and so powerful that, even though on 22 April he would not have recommended lawful means, somehow by 1 June he would have. Indeed, the final submission is, if Mr Chapman had not tried to trick Dr Berry into consensual termination, then a lawful termination was the most probable if not the only alternative course for him to pursue.

Now, we would immediately say there is an obvious alternative course for him to pursue which is the course of honestly continuing in an agency agreement with Dr Berry. But more than that, what this task seems to be doing would run contrary to every principle of the law.

What the Court is being asked to do is to say let us contemplate Mr Chapman’s fraudulent desires and let us contemplate that in the actual world he chose to lie to the appellants rather than use lawful means because he thought that was a better way for him to carry out his overall corrupt scheme.

What we now ask the Court to do in the counterfactual world is to disentangle Mr Chapman’s fraud, to leave intact his fraudulent SPT scheme and say that he would have been so keen to advance that fraudulent scheme that he would have brought about the termination by lawful means.

Your Honours, we have found after research no case in any area of the law in which, in the assessment of damages, the court is asked by the wrongdoer to engage in that sort of exercise – namely, continue to contemplate my fraudulent schemes from the actual world and then make findings as to how they might have caused me to behave in ways which I refuse to behave in the actual world. The task is quite foreign to any task done under the assessment of damages. The short answer to it is, “Mr Chapman, if you were prepared to run the risks of lawful means, you would have done so in the actual world and really that is very much the end of the matter.”

Your Honours, could I then return with that context to the final paragraphs of the Full Court’s judgment, which are 226 to 230. At 226, the Full Court says in the first sentence that if the respondent:

wanted to engage another agent it was free to do so -

That is true:

and it is clear that in the first half of 2008, it did want to do so.

Pausing there, that fails to grapple with who we are speaking of in the respondent and what their full intentions were. We know from the recommendations I have shown you that the original recommendation was replace Berry, because he is ill, with SPT and JHM. There was never any evidence of an intention in the actual world to replace Berry with SPT or JHM in the minds of Curtis or Ellery, absent the ill-health lie. So to simply say, “Well, you appointed JHM later in the year” and abstract that from the rest of the material I have been to provides no insight into the counterfactual. Then if your Honours drop down to about line 30, the court says, and we agree, that:

As we noted at [110] above, one of the practical consequences of the contravening conduct was to bring Dr Berry’s agency to an end without unnecessarily alienating him, which allowed Securency to continue to make some limited use of Dr Berry possibly . . . as late as November 2008 -

So what that is telling us is that the work which the fraud did in the actual world was not only to extinguish the contractual rights to the commissions, but to do so in a way which left Dr Berry believing he remained agent, and that he should be representing the interests of the respondent with Nigeria through as late as November 2008.

So what the fraud achieved in the practical world was that benefit over Dr Berry. One might immediately say, well, on what basis could they claim in the counterfactual world that they would lawfully have terminated him, when that would have deprived them of this benefit which they achieved in the actual world? Now, at 227, there is a very difficult sentence in the middle, which is that:

What is evident is that any post February Meeting involvement of Dr Berry was limited and although the misleading conduct of [the respondent] made that limited involvement possible, in the counterfactual, absent the misleading conduct, the factors that motivated the replacement of Dr Berry would have ensured that his agency would have been brought to an end.

One immediately asks what are the factors and who are the persons we are speaking of from the respondent? It seems from the respondent’s submissions that the way they defend that sentence is to say the factors are the corrupt desires of Mr Chapman and that the reason that would have brought the agency to an end is that Chapman would have created some sort of recommendation to his superiors, which they would have accepted, and that is why it would have been brought to an end.

Now, in the absence of Chapman deposing to that, in the absence of the superiors giving any evidence of that, and given the task that this is asking the court to undertake, namely, making findings as to how the fraudster would have implemented its larger fraud in a different means is quite invidious for a court in a compensation exercise, we submit that paragraph displays error.

Your Honours, the final paragraph is 230, and I would observe that Mr Brown is not being relied upon by the Full Court. What then happens is there are a series of observations about his evidence, without reinstating his credit. Could I draw attention to the sentence at about line 40:

As to the factor that a unilateral termination would have converted Dr Berry into a person who would be likely to impede [the respondent’s] interests rather than advance them, in our view, this is a neutral consideration since the wrongful termination would also have had that effect.

The problem with the logic is that the wrongful termination which was done in the actual world would not have that effect unless and until Dr Berry found out he had been tricked. The whole point of the fraud was to trick him into thinking he was still on the books, so that he would be advancing Securency’s interests, whereas the wrongful termination produced this benefit that he is still working for them, not knowing he has been terminated, whereas the unilateral termination, that is a lawful one, would have provided him with immediate notice that he was terminated and the adverse consequences would ensue.

Your Honours, paragraph 15 of the outline refers to three passages from Amann Aviation, which is in volume 2, at tab 5 and the part to which we are referring is the material in support of – it is tab 5, at page 67 of the report, or 74 of the reprint. Holding number (4) the Chief Justice, Justices Dawson, Gaudron and then Brennan said that there should be no discount on the damages for the possibility that the contract would have been lawfully terminated under clause 2.24, even though there was a 20 per cent chance of that.

The reasoning to that conclusion, albeit this is a contract case, not a tort case, and therefore there may be more scope for this type of argument, can be seen very clearly by Justice Brennan at page 114. At about point 4, where his Honour says:

The inference that I would draw from the events of 12 September –

that is the termination date:

is that the Commonwealth, faced on the one hand with the threat by Skywest to dispose of their aircraft if Amann’s contract were not terminated, and faced on the other with a relatively protracted procedure for termination under cl. 2.24 . . . chose to repudiate Amann’s contract in order to preserve the service –

So his Honour is dealing with a case analogous to but not identical to the present where, in the actual world, the party is faced with the choice of going through a particular lawful means termination, clause 2.24, but it carries risks and burdens and the alternative is to resort to an unlawful termination. And his Honour is observing that, because of that choice made in the actual world, in the next paragraph:

the Commonwealth has failed to discharge that onus of showing –

there would have been a termination under clause 2.24. And so, really, the best evidence of what would have happened in the counterfactual is what you did when faced with that situation in the factual. And to like effect the Chief Justice and Justice Dawson, at page 89 of the case, in the last full paragraph – that is, page 96 of the book – and Justice Gaudron at page 150.

NETTLE J: Of course.....reliance damages and not expectation damages, were they not?

MR GLEESON: Yes, your Honour is correct. They were claiming reliance damages and ‑ ‑ ‑

NETTLE J: Justice Brennan points out in the last paragraph on page 114 if the claim had been for expectation damages the possibility of lawful termination would have had to be applied as a discount factor.

MR GLEESON: Yes, and that comes back, perhaps, to your Honour’s earlier question – is there a possibility, depending on where the onus is, that those discount matters might have to be considered. So, the difference between the majority and the minority on this damages issue in Amann was the majority did not give any allowance for the 20 per cent for the reasons they identified which were heavily hinged on the contract breakup being under a legal or, alternatively, evidential burden on this particular question.

NETTLE J: Ultimately, your best point, surely, is that Chief Justice Mason and Justice Dawson considered a 20 per cent chance to be de minimis, at least not sufficiently significant to have to apply as a discount factor.

MR GLEESON: Yes, that is correct, your Honour. Justice Gaudron reached the same result at page 150 – I am sorry, at page 158, at the top, that is 158 of the report, where she regarded the 20 per cent chance as unlikely and, therefore, not to be taken into account. Her Honour did that against a context where, as seen at page 156 of the report, when she considered Justice Learned Hand in L. Albert & Son, she regarded the matter as being:

a practical or evidentiary onus –

rather than a strict legal onus that is passing to the defendant in this case.

NETTLE J: Yes.

MR GLEESON: So, in terms of our argument, in one sense we do not need onus because their evidence was comprehensively destroyed but, to the extent that one looks at onus – whether it is legal or whether it is evidential – given it was left wholly speculative on this evidence as to whether they would have engaged in lawful means when they chose not to in the actual world, one would not discount the damages. Unless your Honours had questions, I thought it might be more convenient if I then handed over to Mr Rich and dealt with any further points on the notice of contention in reply.

BELL J: Yes, very well. Thank you.

MR GLEESON: Thank you, your Honours.

MR RICH: I trust your Honours have received our written outline of oral argument.

BELL J: Yes, we have, Mr Rich.

MR RICH: If it is convenient to the Court we propose to proceed in the order that is suggested by that document, which if we might summarise starts by addressing the principles by which our learned friends seek to argue that the Full Court erred in its decision on this particular matter, and then proceed to factual matters, which support the conclusion of the Full Court that in the counterfactual a termination would, on the balance of probabilities have occurred, as at 30 June 2008 and finally to address the notice of contention.

BELL J: Yes, thank you.

MR RICH: Thank you, your Honour. Your Honours, we start in paragraph 2 of our outline, by referring to the stipulation in the statute, that is section 82 of the Trade Practices Act, that a person may recover damage suffered by conduct done in contravention of the Act, signifies that the connection that we are searching for and that the Full Court was seeking to identify between the recoverable damages and the contravention is one of causation. And we make the observation in paragraph 3 that the ascertainment of that causal connection requires the Court to do what the Full Court did in this particular case and that is to consider both what has happened and what would have happened absent the misleading conduct. And we do submit that it is only by comparing those two sets of facts, one actual and one hypothetical, that the causal impact of the misleading conduct can be sensibly evaluated.

In particular, as we will come to in more detail momentarily, that when one is considering the hypothetical or the counterfactual, one ought not to change any of the actual facts, other than the assumption that the misleading conduct or the contravention did not occur. As I say, we will develop this, but the important reason why that must be so is that the more facts one changes in the counterfactual, the more the causation exercise departs into unreality and moves away from what is likely to have actually happened between these particular parties.

Could we just in this context refer your Honours briefly to the pleading that you were taken to our learned friend in the appellant’s book, the second further amended statement of claim, and take your Honours very briefly back if we may to paragraph 32, the end of the appellant’s book. It is that paragraph where your Honours will see the detriment which was said to have been suffered by reason of the contravention.

Your Honours will notice the first particular is that by reason of the wrongful termination the agreement was not automatically renewed. Pausing there, we would submit to your Honours that immediately on the appellant’s own case the question of causation arises as to whether it is correct to say that by reason of the wrongful termination the agreement was not automatically renewed, and we add the automatic renewal is on 30 June or would have occurred, if at all, on 30 June 2008. On the appellant’s own case below, therefore, they were putting an argument to the court that this conduct caused us or caused the result that the agreement was not renewed, and that is a matter which, in our submission, they had to make good on the balance of probabilities.

The same question would arise in respect of the commissions which are the subject of subparagraph (iv) because the pleading of a non‑payment of commissions immediately raises a question as to for how long or in respect of what period do you say those commissions would otherwise have been paid absent the misleading conduct.

Now, the trial judge, in our respectful submission, did not undertake the essential comparison between the actual world and the hypothetical world that is required in order to establish causation. Could we in that connection ask your Honours to go to the core book at page 102 and return again to paragraph 322 at the very top of that page? Your Honours will recognise that this is the paragraph where the trial judge observed that:

Securency, having committed the fraud . . . cannot now be permitted to assert –

Our learned friends addressed your Honours on what this was intended to convey and drew your Honours’ attention to earlier paragraphs where the judge dealt with the proposition that there would have been a lawful termination instead of an unlawful one in February 2008. But what his Honour does not do – that is, the trial judge in these reasons – is engage in working out what would have happened thereafter. If your Honours drop immediately on the same page down to paragraph 324 your Honours will see a reference to the policy decision made by the board of Securency in 2010 to terminate all agencies.

His Honour the trial judge does not deal, or did not deal, with the evidence which was unchallenged in respect of that matter ‑ that is that all agents all over the world were terminated in 2010. His Honour does not deal with that evidence and explain why it would not have applied to Dr Berry. Instead, what happened is in paragraph 325 where his Honour said that:

had Securency engaged in honest dealing in Nigeria and with Dr Berry . . . it is likely that they would have had the opportunity to construct and operate an opacification plant ‑

Now, if your Honours would just keep your fingers on that page, we should take you briefly to page 209 of the Full Court’s reasons where your Honours will see that in paragraph 198 it is recorded that on appeal the appellants accepted that at trial they never asked for their loss to be assessed on the basis of the lost opportunity to construct an opacification plant in the way that his Honour found would have happened in paragraph 325.

If we then go back to the primary judge’s reasons and look at page 103, paragraph 327, we find what became the foundation for his Honour’s damages ruling. He expressed the preliminary view that:

one basis on which Dr Berry’s and GSC’s damages can be assessed is by reference to the presumed continuation of the . . . agreement, as automatically renewed, based on . . . sales to Nigeria –

and we interpolate for a further 10 years after 2008, including right through the trial. The ultimate aware which his Honour made was to award commissions up to and including the entire period of the litigation and only ending after the litigation on the basis that a notice of termination was sent after the case.

BELL J: Accepting that, Mr Rich, Dr Berry does not seek to support that aspect of the primary judge’s analysis. Where is this taking us? The Full Court accepted certain factual findings of the primary judge which, as I understand it, are important to the way Dr Berry puts his case in this Court, including the desire on Securency’s part not to have Dr Berry put offside by the termination in accordance with the terms of the agency agreement, either on 24 February 2008 or on dates up to 1 June 2008. I am just not sure where taking us back through the primary judge’s analysis in this respect really gets us.

MR RICH: Thank you, your Honour. The reason I am doing this is essentially to explain to your Honours why it was appropriate for the Full Court to find error in the trial judge’s approach to the counterfactual and to the assessment of damages. I accept, as your Honour says, we are no longer arguing about 2010.

But it is important to understand, having regard – if I could take your Honour to page 276 of the core book. If we look at the notice of appeal, the first ground, which is number 2, seeks to impugn the Full Court’s finding of error in the trial judge’s approach in saying that:

the Respondent, as a person guilty of misleading and deceptive conduct and fraud, could not be heard to say that there was a lawful means –

I am sorry if I am taking too long with it, your Honour, but the essential point is that ground number 2 seeks to say that the Full Court was in error in finding a difficulty with the trial judge’s approach but in fact they were entirely correct to find error with that approach and the appellants, at least for the period prior to 2010, seek to say that the way the trial judge approached the matter in paragraph 322 was correct. We would say that your Honours would not find the error that is identified in ground number 2.

BELL J: I understood that Mr Gleeson was inviting us not to consider that paragraph 322 is to be understood literally, and that the real complaint raised by the ground numbered 2 is as set out in the statement of issues on the appeal in Dr Berry’s submissions at paragraph 2.

MR RICH: Yes, your Honour. Perhaps, your Honour, I really simply wanted to start by pointing out the way in which the trial judge approached the matter, and bring to your Honours’ attention that, in our submission, the trial judge did not undertake an appropriate exercise in terms of finding what would have happened in the counterfactual.

EDELMAN J: How would the trial judge have gone about finding the counterfactual in relation to the pleading at paragraph 32(iv), particularly the counterfactual as to whether or not the contracts would have been terminated?

MR RICH: The trial judge would have considered all of the facts that it found on the evidence, and compared those facts with a counterfactual in which Dr Berry was not misled into terminating with retrospective effect in February, and asked the question, is it probable that the agreement would have been terminated at some later date lawfully and, if so, when ‑ ‑ ‑

EDELMAN J: For what reason? When one examines the counterfactual universe one does not assume that contracts are terminated almost at random, they would be terminated for some reason. And there was a reason in 2010, what was the reason – what is the lawful reason that would have existed before that, that was put by the respondents?

MR RICH: The respondents had a contractual right to terminate for no reason, and the question of fact was could they have exercised that right? And the reason ‑ ‑ ‑

EDELMAN J: So, rather than reason I would say purpose. For what purpose would they exercise the right that they could exercise without reason?

MR RICH: Well, on the trial judge’s findings, the purpose that Mr Chapman had, we must accept, was in order to remove Dr Berry and he had a scheme, according to the trial judge’s findings, to benefit himself in due course through SPT. That was his purpose. There was an intention to replace Dr Berry with JHM, which we will come to.

Coming back to your Honour’s, I think, initial question as to why the trial would engage in this exercise in the first place, the answer is that it is essential to ascertain whether the wrong – that is, the misleading conduct directed at Dr Berry ‑ caused the agreement not to automatically renew in June, which is the subject of paragraph 1, and the commissions in effect come off the back of that, because if there had been a termination then obviously there would be no further commissions after that date.

KEANE J: Mr Rich, in 2010 when Securency resolved to terminate all its own agencies, it did not actually give the appellants a notice.

MR RICH: That is correct, your Honour, yes.

KEANE J: Does the evidence explain why no notice was given?

MR RICH: The Full Court deals with this ‑ if your Honour would bear with me one second ‑ I think it is in paragraph – yes, on page 216, paragraph 230, your Honour will find that the Full Court’s reasons at line 25, at the end of that line:

For completeness however, we note that the fact that Securency did not issue another written notice until 2018 suggests that it regarded the wrongful termination as effective, rather than supporting an inference that Securency would not have terminated the Agency Agreement.

So in other words ‑ ‑ ‑

KEANE J: Is that not a problem, though, in the counterfactual, in the sense that with Mr Chapman, the recommender, advising the decision‑makers that he had not unlawfully procured the release agreement with the appellants, they had no occasion to seek lawfully to terminate. The decision‑makers within Securency were in a sense fooled by Mr Chapman’s fraud into believing that there had been a lawful termination and that they had no liability to the appellants – no liability secondary to the liability to pay commissions. So why is it not the case that in the counterfactual Securency would have been fooled by Mr Chapman’s fraud on them and so there would not have been a notice in the hypothetical just as there was no notice in the real world until May 2018?

MR RICH: The answer to your Honour’s question is that in the counterfactual, Mr Chapman does not mislead Dr Berry. So, the termination letter and the misleading representation which induced him to sign it do not occur.

KEANE J: Yes, but, as you are at pains to tell us in your outline, you do not alter the counterfactual beyond the assumption that the unlawful conduct vis‑à‑vis Dr Berry and the other appellant occurred. You are wanting to say that in the counterfactual not only did that not occur, you want to say that the decision‑makers within Securency were not, themselves, misled into believing that they had effectually terminated – and lawfully terminated – the appellants. I am struggling to see how you introduce – or you attribute – to the decision‑makers within Securency a fact contrary to the actual fact which is that they appreciated that they had a liability which they could only cap by issuing a notice.

MR RICH: The answer we would make to your Honour’s observation is that, if Mr Chapman does not induce Dr Berry to sign a termination letter, there would be no foundation for anybody anywhere in Securency to believe that Dr Berry had been terminated. So there is no situation in which anybody thinks that he has been terminated if that never occurs.

NETTLE J: In that event, what would have motivated the decision‑makers to want to terminate Dr Berry?

MR RICH: Could I in answer – it is apparent from your Honour’s questions that it may be of more assistance if I skip beyond a few of the paragraphs of the outline and come directly to the facts which your Honour Justice Keane has just asked me about. Is that convenient to the Court if I take that approach?

BELL J: Yes, indeed.

MR RICH: With respect, that question needs to be answered. In terms of telling your Honours where we are up to, I am going to now start at paragraph 11 of the written outline and address the matters in that paragraph.

In general terms, what we say to your Honours is that the trial judge’s findings as to why people within Securency chose to mislead Dr Berry and terminate the agency agreement, make it more probable rather than less probable that if that had not have happened there would have been a lawful termination. Now, the principal advantage of the termination letter – as opposed to a lawful termination – can be seen if one goes to page 13 of the core book and considers its terms in paragraph 13, on page 13.

Your Honours will see that the effect of the termination letter, had it been valid, was to terminate the agency agreement as from 31 December 2007. The trial judge’s findings – and we will come to a few of them – directly link the retrospective operation of that letter to Securency’s plan to deprive Dr Berry and his company of commissions on large orders that were made in January and further orders that were shortly anticipated. The first of those findings can be seen in paragraph 12 on page 12. Your Honours see the reference to the fact that:

on 23 January 2008, the Mint –

that is, the Nigerian mint, had:

placed an order.

Your Honours then see in the second sentence:

And, before 28 January 2008, the managing director of the Mint had informed Securency that it would be placing further orders . . . These were very valuable orders –

But your Honours see that:

Securency did not tell Dr Berry or GSC –

about those orders:

although he and GSC would be entitled to their 15% commission –

Your Honours see the last sentence:

That is because Securency –

We will take your Honours to the detail of this, but we do emphasise Securency, because it is not just Mr Chapman, on the trial judge’s findings:

had hatched a surreptitious plan to replace Dr Berry and GSC.

BELL J: That being a surreptitious plan hatched, as you emphasise, by Securency, which I take to be a reference to the decision‑makers, as opposed to the recommenders, to replace Dr Berry and his company at a time when they would be otherwise in receipt of very substantial commissions.

MR RICH: Yes.

BELL J: The point you are making is that the decision‑makers were a party to that surreptitious plan, is your contention, based on his Honour’s finding at paragraph 12?

MR RICH: Yes, your Honour.

BELL J: I see.

MR RICH: Could we then go to page 58 of the trial judge’s reasons and direct your Honours’ attention to the end of paragraph 162 where there is again a reference to the orders of January 2008. In paragraph 164 -your Honours I think were taken to this, the handwritten note to Mr Ellery saying that Dr Berry needs to be released because of his continuing ill health. Now, just going over to page 60, your Honours will see the trial judge’s finding was that that note was not written in January at all and he found at about line 17:

Having regard to the whole of the evidence, I am of the opinion that Mr Chapman and Mr Ellery –

who is one of the decision‑makers:

created the note well after its date . . . to create a false audit or paper trail.

EDELMAN J: Sorry, which paragraph are you reading from there?

MR RICH: I am sorry, your Honour, it is paragraph 170 on page 60. Your Honours then see the trial judge went on to say:

They did so to explain why, despite the contemporaneous commercial success . . . Securency had “released” Dr Berry . . . as from 31 December 2007 and so would not be liable to pay them all the commission that they would otherwise have been entitled to receive.

NETTLE J: Surely this makes it even worse for you, if you got the decision‑maker involved in the fraud? It would make it even more unlikely that he would have been prepared to act lawfully?

MR RICH: Well, we submit not, your Honour, because if this was their purpose, as has been found, then if they could not achieve the purpose of retrospectively depriving Dr Berry of commissions that he was about to become entitled to, then we do say in all probability they would have exercised their legal right to terminate the contract upon the expiry of the first two‑year term on 30 June.

EDELMAN J: But that in “all probability” point assumes that the options of acting lawfully and acting pursuant to a surreptitious scheme, including unlawful representations by Mr Chapman, were options that were equally attractive and either of them would have been open to be pursued to achieve the ultimate objective. But the findings are that there was a very obvious reason why the fraudulent scheme was adopted, at least by Mr Chapman. That was to keep Dr Berry in the dark.

MR RICH: Well, in relation to that finding, your Honours – we will come back to I think paragraph 230, which your Honours were taken to and the Full Court found that that was a neutral consideration and we would make the same submission to your Honours for this reason. Whether one terminates Dr Berry’s right to commissions in a lawful fashion or whether one does it unlawfully he is not going to be ignorant for very long of the fact that he is not being paid his commissions and either course runs the risk of alienating him, and the risk of alienating Dr Berry was not so imperative as to stop Securency from taking the course that they did, that is, terminating his agreement.

KEANE J: But they had terminated his agreement by lying to him about making a new agreement.

MR RICH: Yes, your Honour, but the question ‑ ‑ ‑

KEANE J: So they did not face up to what is going to happen if we terminate his agreement? They terminated his agreement by lying to him to the effect that they were going to enter into a new agreement with him. They were not facing up to the risk of alienating him.

MR RICH: They were prepared to take that risk, though, your Honour, and that must be so because if Dr Berry were fooled at the time of the misrepresentation that, surely, could not have lasted forever, and they did not regard his goodwill or his participation as so necessary to their success as to not run the risk, which they inevitably did run, in doing what they did.

KEANE J: The sooner they gave him lawful notice, the sooner he was likely to sue them.

MR RICH: Well, if they gave him lawful notice he would not have had any basis upon which to sue them because they were entitled to terminate the contract ‑ ‑ ‑

KEANE J: That is precisely what they avoided by lying to him.

MR RICH: Yes, your Honour is correct, and that is why Dr Berry is entitled to compensation. The only question is whether had Securency not terminated in the way that they did this relationship would have come to an end, in any event, in a lawful fashion.

BELL J: Mr Rich, the Full Court found that the relationship would have lawfully come to an end by termination effective on 30 June 2008. But, the findings of the primary judge, accepted by the Full Court, included that by late 2008 not only did Dr Berry still understand that he was the agent of Securency but Securency had not disabused him of that.

Why does not the inference flow from that circumstance that it continued to be in Securency’s interest that Dr Berry believe he was their agent and that the Nigerian Government believe Dr Berry and Securency were still working co‑operatively since, important to the Nigerian Government, was the understanding that there would be the opacification plant built in Nigeria and that Securency would be in some way involved with that venture. Those matters were important and Securency understood they were important on the primary judge’s findings, not overturned by the Full Court.

MR RICH: We accept what your Honour says. The argument that we are putting, though, is that in the counterfactual world that Dr Berry had not been misled in the way that he was, the question that arises is would Securency have allowed this agreement to roll over pursuant to the “automatic renewal provision” on 30 June, or would Securency, at that point, have said, no, we do not wish to continue to engage Dr Berry, we propose to rely on our lawful right to terminate.

BELL J: Mr Rich, perhaps we can come back to this after the luncheon adjournment.

MR RICH: If your Honour pleases.

BELL J: Yes. Adjourn the Court until 2.15 pm.

AT 12:47 PM LUNCHEON ADJOURNMENT

UPON RESUMING AT 2.15 PM:

BELL J: Mr Rich.

MR RICH: Thank you, your Honour. Your Honours, might we return to approximately where we were in the court book before lunch – that is, at page 58, within the reasons of the primary judge. On that page, I think we had taken your Honours to paragraph 164. Could we then take your Honours to paragraph 166, which contains the trial judge’s findings where he refers to the knowledge of Mr Chapman, Mr Brown, and he finds Mr Ellery of the January orders and related communications, that Securency would receive those orders.

The proposal to release Dr Berry from the agency agreement without mentioning a word to him of any information concerning those orders is a reflection of the lack of commercial integrity of Securency. Then on page 59 at paragraph 168, there is reference to the behaviour of the three men and their concealment of the actual and expected new orders and your Honours will see at the last sentence of that paragraph Mr Brown and Mr Ellery are found to be knowing participants in Mr Chapman’s deceit of Dr Berry in procuring him to sign the termination letter in February. Could we also just briefly take your Honours back to page 54, and paragraph 152, where there is a reference to what the trial judge described as a “curious document”.

EDELMAN J: Can I just take you back to 168? In what respect was Mr Ellery a knowing participant in Mr Chapman’s deceit of Dr Berry?

MR RICH: The trial judge’s findings as we read them is that Mr Ellery was a party to the attempt to persuade Dr Berry to end the termination agreement prematurely – I should say, retrospectively – so as to ensure that he would not become entitled to commissions on the orders which have been made and are expected as at January 2008.

EDELMAN J: So the understanding or the belief about ill‑health was neither here nor there, then?

MR RICH: That is what we would submit to your Honour, is that Mr Ellery is not fooled in any respect about ill health, that Mr Ellery, on the trial judge’s findings – the trial judge found, as your Honour knows, that that note was written later in any event.

EDELMAN J: Yes.

MR RICH: That is the note of – and also that Mr Ellery was a participant in the misleading conduct that occurred in February.

I am sorry, your Honours, could we then go back to page 54 and just note in paragraph 152 there is another document. It is dated 1 January and it is a request for the appointment of an agent, the relevant agent being SPT. Your Honours will see in the next paragraph, 153, that the document was signed by Mr Ellery and Mr Curtis. Your Honours will see Mr Curtis referred to at the top of the next page. But the trial judge found that there was no such company until 26 May 2008.

Over onto page 56 of the core book in paragraph 156 there was a finding that your Honours will see at about line 20. The request was backdated from its creation much later in 2008, certainly after late May 2008, to 1 January, to the knowledge, his Honour found, of each Securency officer who signed it in order to provide a paper or audit trail, “But it was a false audit trail”, his Honour found, and the importance of it, his Honour said:

will become evident from Securency’s desire to backdate to 31 December 2007 the date from which the agency agreement came to be terminated –

BELL J: That was a finding that you challenged in the Full Court on the basis that the creation of a false paper trail was not pleaded nor put to any witness.

MR RICH: Your Honour is entirely correct and ‑ ‑ ‑

BELL J: The Full Court accepted that but in essence found it really did not matter in terms of the essential factual findings made by the primary judge. Is that a fair way of putting it?

MR RICH: We do not think they accepted it, your Honour. What they said is they were “problematic”. The relevant passage which we are going to go to but we go straight away is at page 191 in paragraph 121. Their Honours said that the findings in relation to false dating are “problematical” and then, as your Honour fairly put it, said to the effect, it does not matter - does not matter ‑ there they are addressing the liability question. So they are saying well whether they were backdated or not does not really matter. Then over the page there is another reference at paragraph 125. What their Honours said was - they talk about the conclusion that:

Mr Chapman had procured the removal . . . to make way for STP . . . was important . . . but even if one accepts it was not open to his Honour to find parts of the paper trail to be falsely backdated . . . this error does not undermine the critical conclusion -

As we read their Honours’ reasons, they thought the findings were problematic, but they have not overturned them, so we take the view ‑ ‑ ‑

BELL J: What use does Securency seek to make of findings that it challenged in the Full Court on the basis that they were findings in respect of matters not pleaded and not put to any witness? What are you asking us to make of the finding of the false paper trail?

MR RICH: Well, we have to determine what would have happened or make submissions to your Honours about what would have happened in the counterfactual in light of the findings that have been made.

EDELMAN J: So you basically want to run a case that your clients were far more fraudulent than you had suggested in the Full Court, in order to bolster the counterfactual?

MR RICH: We are certainly putting that – we are relying on factual findings of the trial judge that we challenged below. That is absolutely correct, your Honour.

BELL J: But the Full Court in addressing the counterfactual, as I read their Honours’ reasons, did not rely on those facts. I am just taking us back to the criticisms that you make of the primary judge’s findings on the counterfactual may not deal with the issue of the complaints that Dr Berry and his company make about the flawed reasoning, so it is suggested, of the Full Court in dealing with the counterfactual on the facts that the Full Court accepted, which do not appear to include the false paper trail.

MR RICH: Your Honour, I think, is directing us to paragraphs 227 and 230, in particular, of the Full Court’s reasons.

BELL J: Yes.

MR RICH: As has been pointed out earlier, their Honours do mention, at about line 50, the factors that motivated the replacement of Dr Berry. That would seem to include the reasons why Mr Chapman and others behaved in the way that they did. But, your Honour is right – they do not rely upon backdating, or refer to backdating, in that context. But they do rely upon the motivations, or the reasons that were motivating the employees within Securency, as we read it.

KEANE J: Is not a practical problem with this, Mr Rich, that to the extent that Mr Ellery and Mr Curtis might have been engaged or complicit in preparing false audit trails, what that suggests is that to the extent that they were covering up the corruption that was in prospect in terms of appointing SPT, and so forth, that the more determined they were and the more deeply involved they were in the fraud, does that not tend to suggest that the prospect of doing things lawfully was unacceptable to them in the sense that to do things lawfully they would not have been able to present the same faults.....to justify the termination of Dr Berry and the corrupt appointment of SPT. Is not all this stuff just demonstrating that the more determined the fraud, the less likely the adoption of lawful means – transparent lawful means?

MR RICH: We would submit not, your Honour. What we would submit to your Honours is the fact that these men were prepared to go to the lengths that they did go to sever their ties with Dr Berry and deprive him of commissions even on orders that had been received makes it more probable that if they could not achieve their ends in that fashion then they would have exercised the freely available rights which they had under the contract to terminate.

KEANE J: But then they would have had to explain to their auditors why they had appointed SPT and got rid of Dr Berry.

MR RICH: In relation to that, there were objective facts which they could have relied upon, which in our submission were entirely legitimate reasons to terminate should they wish to do so. In particular, it is the fact that Dr Berry had not travelled and could not safely travel to Nigeria since mid‑2006.

BELL J: Mr Rich, I will just interrupt you for a moment. We seem to have another problem with the link to the Federal Court room. We can still hear you, but now we have lost the visual component of the link. I do not know whether it is something that can be readily solved. Perhaps you might have - since the problem seems to be at the Federal Court end, I wonder, Mr Rich, can you have one of your instructors speak with the court officer to find out if there is a ready means of re‑establishing the link?

MR RICH: We will try, your Honour. Unfortunately, there is no court officer in the room at the moment.

BELL J: I see.

MR RICH: They are coming in and out but we will seek to find them. Your Honour may wish to adjourn the court and establish ‑ ‑ ‑

BELL J: The alternative would be – I was going to suggest to continue but I think that is perhaps unfair to you, Mr Rich, if you cannot see the Bench. In the circumstances, the Court will adjourn and we will endeavour to have the link fully restored.

MR RICH: Could I just say, your Honour, I can actually see – I must say it is very small but I can actually see your Honours. Your Honours cannot see me, but I can actually see your Honours and I am told that the officer is coming.

BELL J: I see. Mr Rich, if you can see the Bench, are you content for us to continue in the interim with us having the difficulty we cannot see you but we can hear you quite clearly?

MR RICH: I am content, if your Honours are.

BELL J: Yes. I think you can take it that we are. Do go on.

MR RICH: Thank you, your Honour. We will obviously, in the meantime, see if that link can be restored.

BELL J: Yes, thank you.

MR RICH: I am sorry, your Honours. Could I just deal with the submission which is referred to by the Full Court in paragraph 230, and this question of, as it has been put in our friend’s submission, risking the golden goose or alienating Dr Berry, and that being a reason why the termination would not have occurred.

The first thing we say about that is that if Securency truly thought that Dr Berry was essential to its success in Nigeria, then there would have been no termination, fraudulently or otherwise. Securency would not have terminated an agent whom it thought was essential to its success.

The second point we would make about that is that Securency had, for some months, been planning to appoint JHM in the appellant’s place. In that regard, could we ask your Honours to pick up the respondent’s book of materials and go, in the first instance to page 8, where your Honours will find an email from Mr Chapman to Mr Ellery attaching a company profile for JH Marketing. Your Honours will see the reference to the fact that:

this is the profile of the company we are considering to provide wider coverage in Nigeria and for the region.

The company profile we will not go to, but your Honours will find it at pages 9 and 10. Could we then ask your Honours please to go to page 12.

BELL J: Just while we do that, I will indicate to you, Mr Rich, the visual link has now been restored and we can see you.

MR RICH: Thank you, your Honour.

BELL J: Yes.

MR RICH: Then at page 12 your Honours will see a further email about a similar topic, or the same topic really, at about line 30, an email from Mr Chapman this time copying in Mr Brown as well as Mr Ellery, attaching a “reference from Energizer” who – we will come to the document later in the bundle - they seem to have used JH Marketing in Nigeria.

Then over at page 14, your Honours will see an email from Mr Ellery to Mr Chapman and Mr Brown, this time in August, attaching a draft – he calls it “K & H Marketing” but if your Honours look at page 15, you will see that it is “JH Marketing”. We have not included the full agreement in the bundle, but your Honours have the table of contents. If we go to page 19, your Honours can see the proposed commencement date at that stage is September 2007. There is a proposed expiry date 10 years later. The territory, at about line 30, is:

Nigeria and Ecowas States –

being the same territory that was the subject of the appellant’s agency. Over on page 21 we see Mr Ellery asking a different employee, a Mr Harrison, to:

undertake an investigation on K&H Marketing who Securency is considering appointing as an agent in Nigeria.

At page 23 is the Energiser letter that we mentioned, and could we then take your Honours to page 31, where your Honours will find that Mr Curtis is being told in early February that Mr Chapman has received the:

Nigerian Agency Agreement and is arranging with the MD of JH Marketing to have the agreement executed and returned immediately.

We then see that happening on page 33, 6 February 2008 letter from JH Marketing to Mr Ellery. At page 37 your Honours will see that Mr Ellery sends an email to Chapman, Brown and Curtis attaching the:

Termination letter to BB –

is Mr Berry:

that requires his signature –

and a:

Copy of the executed page of the Agency Agreement re JH Marketing . . .

I confirm my understanding that the JH Marketing (Africa 2000) Ltd Agency Agreement will not be given to them until BB has executed the attached termination letter.

Mr Curtis responds:

Good progress we need to get the ducks in a row re BB and getting the new one finalized. Keep up the good work.

At page 41 we find the executed version of the agency agreement with JH Marketing and if we could take your Honours to the last page of it, page 59, both Mr Curtis and Mr Ellery have signed, so that ‑ ‑ ‑

BELL J: That is an agreement of 14 February 2008. Is that right?

MR RICH: Yes, I believe that is the date that it was signed by Securency. It was signed earlier - it was signed I think on the 6th. Your Honours will see at page 33 it appears that JH Marketing signed a copy on the 6th. As we understand it, it is Securency that is the party signed on the 14th.

BELL J: Without knowing whether or not Dr Berry would agree to the termination of his agency at a time when he was about to come into substantial receipts following the orders made by the Central Bank of Nigeria in January, two weeks earlier Securency executes the agreement with JH Marketing. What is the inference that the Full Court drew from all of that material?

MR RICH: I am sorry, your Honour?

BELL J: What is the inference that is to be drawn from that material? On the face of things the ducks are not in a row, if one appreciates that in a world in which Dr Berry was not being tricked into signing a termination letter, the fact is at the time when the agreement with JH Marketing was executed by Securency, it could not be known whether or not Dr Berry would sign the termination, and yet no 60 day notice was given, which one would think would be the obvious thing to do if the position of Securency was, come what may, we want JH Marketing to be our agent in Nigeria and not Dr Berry.

MR RICH: Yes. The inference we submit the Full Court can draw or did draw appears from paragraph 226 of their Honours’ reasons on page 215 of the core book. That is that the Full Court found it is clear that in the first half of 2008, that is, Securency did want to engage another agent.

BELL J: In the first half of 2008, as the Full Court accepted, Securency was not prepared to do that at the price of alienating Dr Berry having regard to his relationship with the Nigerian Government and the Central Bank of Nigeria.

MR RICH: We would submit to your Honour that if one reads paragraph 230 and what appears at about line 40 that the Full Court did not regard the alienation or risk of alienation of Dr Berry as a matter which would have precluded Securency from proceeding to appoint another agent had the misleading conduct not occurred. Really, as your Honours know from what we looked at earlier, the findings about Dr Berry being tricked in February are directly linked by the trial judge to a desire to ensure he does not become entitled to certain commissions.

That would seem to be the reason why, going back to your Honour Justice Bell’s question, the 60‑day notice was not the option that was taken at the point in time before Mr Chapman has had his meeting which, with respect, your Honour is right that that would be normally what you do, is you would give notice and then appoint the new agent. The findings of the trial judge would indicate that there was a decision within Securency to seek to retrospectively terminate Dr Berry so that he would not become entitled to these commissions. But what we see from this material is over a period of some months before that Securency planning and working towards appointing a new agent which would not have happened unless it were true, as the Full Court found, that Securency wanted to engage someone else.

BELL J: What is the primary ‑ ‑ ‑

MR RICH: There is just no reason – I am sorry, your Honour?

BELL J: I appreciate the point you make with relation to the advantage of the termination letter in backdating the date of termination, but the trial judge found and, as I recollect it, the Full Court accepted that the other factor operating, at least on Mr Chapman’s mind, was that Dr Berry should not be actively, as it were, working against Securency’s interests and that might happen if his agency was terminated.

MR RICH: Yes. What the Full Court said on page 189 of the core book, in paragraph 110 – they accepted that it was not as if Mr Chapman wanted Dr Berry to be alienated in the process. But what they say in paragraph 230, as we have sought to indicate, is that if one considers the counterfactual as to whether that possibility would have stopped them from proceeding to appoint a new agent, their Honours were persuaded that it would not have stopped them because they were prepared to take the risk of alienating Dr Berry and their Honours’ reason to that conclusion because what they did do by terminating in the way that they did ran the same or similar risk.

BELL J: Where do we get the analysis of why it was that their Honours accepted that a notice would not have been issued on 22 April but might have been issued on 1 June?

MR RICH: Yes. So your Honours will see that, I think, on page 214 to 215 of the core bundle. Now, as your Honours know, our argument was that there would not have been this delay until 30 June. The court did not accept that. They did not accept that contention – in paragraph 220, this is – because had we:

been intending to issue a termination notice . . . there would have been no need to engage in the misleading and deceptive conduct.

They saw that, as they put it in paragraph 225, as having a “lack of internal logic”. In our submission, if one is in the world of the counterfactual and the misleading conduct does not happen, there is not an impediment to that logic at all. Their Honours thought there was. But what they were persuaded of is that Securency – they did not think Securency would have precipitated a unilateral termination on those earlier dates, but they did accept that once you got to the potential rollover of 30 June, when the contract in effect gives both sides an opportunity to decide do we want to continue this relationship or not, that that was a logical point in time at which Securency – and this is why they went back to ‑ if your Honours see in paragraph 223, after turning to 30 June ‑ the agreement and they made the observation that clause 3.2 did not give either side security on a rollover.

Then having accepted that Securency wanted to end its agency with Dr Berry – and we would submit that that is a correct inference to draw from the conduct involving the plans to replace him with JHM – that once one got to 30 June, or just before that, and Securency has to turn its mind to will we roll over or will we not roll over for another two‑year term, then it was probable that the decision would have been taken to terminate at that point.

What their Honours seem to have – their Honours’ reasoning seems to have been, we do not accept that Securency would have unilaterally terminated before the rollover date. They saw what happened in the actual world as making that unlikely. But, what they did accept was that because the contract, in effect, gave us an option, as at 30 June, do we want to rollover or not, the likelihood is, given the willingness we have displayed to terminate, that at that point in time we would have exercised our lawful right to terminate.

BELL J: Now, this was a counterfactual not pleaded in Securency’s defence. This is a different counterfactual. If you go to Securency’s defence at pages 40 and 41 of the appellant’s book of further materials, it is pleaded in subparagraph (b), that the agreement would have been terminated:

shortly after February 2008 –

and by no later than 30 June 2008 for the reasons further particularised there including, of course, Dr Berry’s health, the damage to his relationship with the government of Nigeria and a breach, so it is said, of clause 16 of the agreement.

MR RICH: Yes, your Honour. Those were the only, as it were, affirmative reasons that were put forward in the pleading.

BELL J: Yes.

MR RICH: Our submission is that, as we said earlier, in any event the plaintiff bears the onus of proving causation. If on the facts as found by the court, the probabilities are that the termination would have occurred in any event, then no causation is established. It would not be an impediment to finding an absence of causation that the particular reason why the agreement would have been terminated was not pleaded by the defendant.

BELL J: The defendant sought to establish a number of propositions that would lead to the conclusion that the agreement would have been terminated not later than 30 June 2008 and the Full Court does not appear to have accepted those matters. What is the basis for the conclusion? What facts did the Full Court rely on in coming to the counterfactual that it did?

MR RICH: I think the Full Court relied – if we come back to paragraph 226 – upon what we might describe as a demonstrated preparedness and a desire to terminate the agreement. In other words, in the actual world, Securency did terminate the agency relationship with Dr Berry. It saw that as an important fact which pointed to the probability that it would have taken similar action in the counterfactual – that it would not have just let the agreement subsist indefinitely because the actual conduct of Securency in bringing the agreement to an end demonstrated that it was prepared to sever that relationship.

EDELMAN J: That is on the assumption that Securency would have expected there to be no gap in time between what might be described as a fraudulent termination and a lawful termination and Dr Berry’s anguished response. In other words, Securency would be operating on the assumption that they would be in just as bad a position if they terminated lawfully in terms of Dr Berry’s frustration as they would if they terminated by reference to the misleading conduct.

MR RICH: I am not, with respect, sure that that is what the Full Court is saying. As we read paragraph 230 and the reference to the mutual consideration, it does not necessarily mean that the consequences are identical vis-à-vis Dr Berry’s reaction, but rather it was a risk they were prepared to run and therefore they would have run that risk in any event.

EDELMAN J: How would we know that? What would be the basis of the finding then that, given that there was a risk that he might impede the progress of their developments, they were prepared to run that risk?

MR RICH: Firstly because they did appoint a new agent and brought his agreement to an end. Secondly, because, as the Full Court finds in paragraph 227, the post‑February involvement of Dr Berry was limited and so it is not a situation where Securency post‑February 2008 required Dr Berry personally to perform anything other than what is described there as “having limited involvement”, and as your Honours know, the meeting in March, which is referred to in paragraph 230, as the Full Court points out, is some months before the date of 30 June. So any need to attend the meeting in March does not stand in the way of a probable termination effected from June 2008 and the evidence was very limited in terms of any involvement after that time.

An objective fact that we would point to as well is, if one sees paragraph 231 and the substantial commissions there referred to, remembering that they represent 15 per cent of invoice sales in each of the years identified, your Honours can see that it is not as though Securency’s business in Nigeria came to a screaming halt after Dr Berry’s agency was terminated. So that supports the calculus that this was a risk that Securency was prepared to run and would have been prepared to run in the counterfactual.

BELL J: All of that being an inference from the entry into the agreement with JHM. I mean, there was no other evidence; no one from Securency gave evidence in the terms that you suggest the facts should be found.

MR RICH: I think your Honour is right. Mr Chapman and Mr Brown gave evidence as to the reasons for the termination, which was not accepted by the trial judge.

BELL J: Indeed, Securency’s case was the representation was not made.

MR RICH: Indeed.

BELL J: Yes. Was there any evidence that JHM did anything on Securency’s behalf in the period after the termination of the agreement?

MR RICH: I do not think that was the subject of evidence, your Honour, as to what Securency was doing after its appointment but the agreement was executed and exchanged and they became the agent after that time. There is no finding that there is – implicating, if I can put it this way, JHM in some fraudulent scheme in the sense that they appear to have been appointed as agent to carry out the work as per the agreement.

BELL J: The unchallenged evidence, if I may come back to it, Mr Rich, was that the Governor of the Central Bank of Nigeria – and I think the government of Nigeria – were very focused on the establishment of the opacification plant in Nigeria and that there was a risk that Nigeria might return to all paper currency, or at least not subscribe for more polymer currency, if they knew that the opacification plant was not going to be established. That was an issue of some importance to them.

Securency was happy to let the Central Bank of Nigeria and the Nigerian Government believe that it was moving with Dr Berry towards an arrangement for the establishment of the opacification plant on the property that Dr Berry had acquired in Nigeria. Is that so?

MR RICH: I am not sure about the last bit about the property but certainly what your Honour otherwise put is our understanding as well. In other words, that the matter of the preparedness to consider building an opacification plant was a matter of some importance to the Nigerian Government, and that Dr Berry was understood to be someone who would be involved in that in the future. I am not sure about the connection with the particular land in the minds of the Nigerian Government, that is all.

BELL J: Yes.

MR RICH: I am sorry, your Honour, the ‑ ‑ ‑

BELL J: I am just wondering, Mr Rich, given the significance of the government’s desire that such a plant be established in Nigeria and the government’s understanding that Securency and Dr Berry were likely to be involved in the establishment of such a plant, what would have led Securency not to have an interest in maintaining at least the appearance of good relations with Dr Berry throughout 2008; for that matter, right up until the scandal erupted and it became clear to Dr Berry that all his past association with Securency had come to an end?

MR RICH: We have to accept, your Honour, that Securency would not and did not want to alienate Dr Berry in this process and no doubt partly for the reason that your Honour has referred to. But what we can say about that is that, notwithstanding that risk and notwithstanding its possible implications, Securency deliberately took steps to sign an agreement with a replacement agent, namely JHM, executed it and then approached Dr Berry to terminate the agency relationship, the whole of which involves taking the risk that they would alienate Dr Berry and that may cause some risks in Nigeria, but they took the calculation in the real world that it is something that they could do, or should do.

Could we just refer your Honours then to this question of who within Securency – it is perhaps not necessary to take your Honours to the transcript references now, but could we just indicate that on pages 81 to 83 of the respondent’s materials one finds the evidence from Mr Beeby that the appointment and firing of agents was a matter that was dealt with by Mr Curtis, Mr Ellery, Mr Brown and Mr Chapman.

So there was no one else who would have needed to have been consulted or to approve a termination, and your Honours have seen each of those four persons were involved in the documents over a period of some time for contemplating the appointment of JHM to replace Dr Berry. We would submit that it is probable that each of them would, therefore, have supported a decision not to renew or roll over the agency agreement in June 2008.

BELL J: What is your submission as to the reason for the lie concerning Dr Berry’s health on the submission you now make?

MR RICH: I think the submission on that would have to be what the trial judge found. The trial judge found that the purpose was to create a false audit trail so that there would be an explanation on file as to why these officers acted as they did. I think that is the finding.

NETTLE J: Does that mean that one is to infer that they were concerned if the auditors found out that they had terminated Dr Berry for no cause?

MR RICH: Certainly, your Honour, one would infer that they felt they needed to have an explanation for somebody if it was looked into.

NETTLE J: Lest it be thought that they were not acting bona fide in the interests of the company as a whole in terminating an efficacious agent.

MR RICH: I do not know, your Honour. I am not sure that there is any evidence I can point to which would explain what they thought. It is obvious ‑ ‑ ‑

NETTLE J: Why would they wish to keep it from the auditors? The auditors’ only function is to keep them honest in the performance of their duties, relevantly.

MR RICH: Yes.

NETTLE J: They feared the auditors would take the view that they would not be acting in accordance with their duties in terminating Dr Berry for no cause?

MR RICH: I am sorry, your Honour. Would your Honour just excuse me for one moment? Your Honour, I have just been referred to – I think it is relevant to your Honour’s question – page 41 of the core book, paragraph 109, there is a reference to a particular meeting where Mr Curtis is said to have reported that the RBA – who, at this time was a joint owner of Securency:

had expressed concerns about the arrangements Securency had with its agents –

and noted that there would be:

audit scrutiny –

and your Honour can then read the rest of it. I cannot tell your Honours whether that has a causal connection with the records that were then created but that is something that occurred and that the trial judge made a finding about.

NETTLE J: Thank you.

MR RICH: Could we then, your Honours, go back to just a couple matters of principle before we proceed to the notice of contention? Where I am in terms of the outline is paragraph 7, your Honours.

BELL J: Thank you.

MR RICH: We are there addressing principle 1 in our learned friend’s submissions which, among other things, raises the notion that the onus is on the wrongdoer in these circumstances. Now, we submit, firstly, that that submission is at odds with the basal principle that a plaintiff must make out the essential elements of its case, which includes proving causation of loss.

GAGELER J: What do you say, Mr Rich, about Purkess v Crittenden and its application in these circumstances?

MR RICH: We say, firstly, that the legal onus does not change – that is, at the beginning it was on the plaintiff and it does not alter during the case so that is the legal onus of proving causation. Insofar as there is a question about evidentiary onus we were about to take your Honours to some cases, but I might just anticipate – so that at common law, if you had a contract case and it had been wrongfully terminated and there was then a suit for damages – and let us just assume there was no evidence on the question either way – the common law would assume, sometimes referred to as a natural inference from the contract, that the contract breaker would have terminated the contract, in any event.

So in terms of an evidentiary onus, if there was no evidence we would say that the plaintiff would still fail because they had not proved that the contract would have subsisted beyond 30 June and the natural inference that you would draw from the terms of the contract is that it would have been terminated at that time.

But of course, ultimately, your Honour, what we say about the evidentiary onus is that it is not decisive for the purposes of this case because both parties did go into evidence and findings have been made relevant to the counterfactual. The real question is, that having been done, did we establish on the balance of probabilities that the contract would have been terminated as at 30 June? But we do say, as a matter of principle, that the legal onus remained at all times on the plaintiff and, at least initially, there was an evidentiary onus on them to establish some reason why it would not have been terminated in accordance with the ability to do so under the contract.

NETTLE J: That does not fit very well with Justice Brennan’s analysis in Amann, does it, applying The Mihalis Angelos principle?

MR RICH: Justice Brennan’s analysis in Amann, your Honour, we would submit has to be read in light of the important fact that their Honours were dealing with reliance damages under contract where the onus of proof is reversed. So that they were dealing with a situation where the plaintiff, Amann Aviation, was claiming its expenses under the contract rather than expectation damages and in ‑ ‑ ‑

NETTLE J: But it surely was that if there were proved by the defendant to be a prospect that it would lawfully have terminated the verdict otherwise that would have been recovered were to be discounted by that possibility?

MR RICH: Yes, but his Honour is addressing that question in a circumstance where the Commonwealth actually had the onus on this issue because reliance damages were being claimed. So that unless the Commonwealth could establish on the balance of probabilities that there would not have been a renewal of the contract, the Commonwealth actually failed to show that Amann Aviation would not have recovered its expenses. In our submission, that is why Justice Brennan puts the onus on the Commonwealth in that case. It does not speak ‑ ‑ ‑

NETTLE J: It may have at page 113 of the report, which is 174 CLR. You see there at the bottom of 113 his Honour deals with The Mihalis Angelos principle as being a foregone certainty that the defendant would act in a particular way lawfully to terminate his contract, then you have got to..... As Justice Brennan says over the page at 114:

Clearly enough, this principle applies when it is found as a fact –

that they were bound to happen. There is no such finding in this case.

MR RICH: In relation to the “bound to happen” or “inevitability” idea, that expression came from the judgment of Justice McGaw and that was not the expression used by Lord Denning or – now I have forgotten the name of the second judge. Perhaps I should go to it, rather than speak about it. If your Honours go to the case of Bunge v Nidera, which you will find in Part D, volume 3, behind tab 9, I think.

NETTLE J: Mr Rich, it looks like the better view is that it needs only to be established on the balance of probabilities, but nonetheless, it must be established by the defendant, must it not, or at least be established by the defendant as a realistic prospect sufficient to be more than negligent or necessary to take into account that it would have terminated ‑ ‑ ‑

MR RICH: We submit no. Could we support our submission by taking your Honours to Hayden Enterprises, which is in volume 3, so the same volume we were going to go to, behind tab 14, and take your Honours within the judgment of Justice Hope at page 156 of the report, page 498 of the bundle, where your Honours will see at about point B on page 156 of the report:

In some cases, the evidence may be silent as to whether the defendant would have exercised the option apparently favourable to himself; in other cases, although not silent, the evidence may not justify a finding that the defendant would not have exercised it. In these cases it can be said that it is “a natural inference from the terms of the contract” that the defendant would have exercised that option which in terms benefits him –

Then his Honour goes on to observe that:

It is not a natural inference when the facts point to the opposite conclusion.

In that case, he did reach the opposite conclusion. But the point of principle is that if there were no evidence on the question, or there was evidence but it did not justify a finding that the defendant would not have exercised the right of termination, then the inference that is drawn is the defendant would have terminated the contract. Now, that particular passage is cited in Amann Aviation at pages 92 to 93 of the report.

EDELMAN J: That is an inference that is based upon an assumption that terminating the contract would be expected to be the most beneficial course to be taken by the defendant, is it not, whereas here the very issue is that assumption?

MR RICH: It is actually ‑ in our submission, your Honour, the reason that inference is drawn is to ensure that the plaintiff – or rather, the defendant is not made liable for failing to do something that it never promised to do. So if the contract – the contract contains certain obligations but it contains a right of termination. If you never promised to – let us take this case, we never actually promised that we would definitely pay commissions in respect to the period after 30 June 2008. We gave ourselves the right to terminate. If you render the defendant liable for commissions in respect of the period after 30 June 2008 you are, on one view, making the defendant liable for commissions that it never promised to pay.

EDELMAN J: Even if, in the circumstances, by far the most beneficial course to the defendant would have been not to terminate the agreement? That surely cannot be the case.

MR RICH: No, I accept that. So that if on the facts – what your Honour has posited to me is a circumstance where the court would say, on the balance of probabilities, the defendant would not have terminated. In the circumstance your Honour put to me, you would say, well, although the defendant had the right to terminate, it would not have been in its interests to do so, and therefore I find ‑ ‑ ‑

EDELMAN J: That was the very issue here. It is at best unclear whether it was in the interests of the defendant to terminate and, at worst for your client, it was plainly not in their interests to terminate in the lawful fashion because it would put Dr Berry offside.

MR RICH: Your Honour is right. That is precisely where we are in the sense that, as a matter of fact or probability, would the defendant have terminated on 30 June or not. One of the things which would bear upon that question is would it have been in its commercial interest to do so? As your Honour no doubt knows, one of the observations of Lord Sumption in paragraph 23 of Bunge - I will not take the Court to it - but in effect his Honour says, well, regardless of the defendant’s motives, the only question is whether he would in fact have terminated, and that question is one which in practice would probably have been determined by his financial interest.

We do submit that ultimately the court would have a look at the facts and would determine on the balance of probabilities what would have happened. Our submission to the Court is that strictly the onus is on the plaintiff to prove that it would not have been terminated.

The last authority we wish to take the Court to on this particular topic is the decision of the New South Wales Court of Appeal in Martinez, which your Honours will find in the same bundle as Hayden, volume 3 of Part D, commencing at tab 12, page 417. Your Honours will see in paragraph 29 the nature of the issue:

The respondent claimed damages on the basis that he lost the benefit of an employment contract which, unless terminated, was likely to have continued until he reached the age of 65 years –

The firm responded that:

the least onerous means of performance, consistent with the desire to bring the contract to an end, was to terminate with immediate effect by payment of three months’ salary -

His Honour – this is in the judgment of Justice Meagher, with whom the rest of the court agreed - in paragraph 30 his Honour cited Amann Aviation and the fact that:

The onus of proving damages sustained lies on a plaintiff –

In paragraph 31, Justice Meagher made the point:

In assessing those damages the relevant principle is that where the defendant could have performed the contract in one of several ways “damages are assessed assuming performance in the way least onerous to the defendant. This mode of performance will not be employed where the least onerous method of performance in in fact highly unlikely -

and reference there to Heydon on Contract. There are then citations from Hayden Enterprises which we have already taken the Court to ‑ ‑ ‑

BELL J: Mr Rich, can I just ask you this. In taking us to this decision dealing with contractual damages, whilst it is recognised that statutory compensation - the principles that govern it may be assisted by analogies, particularly in the case of misleading or deceptive conduct with the tort of deceit, nonetheless, the emphasis is upon the statutory scheme and the objects of that scheme - why would one take that particular – the principle enunciated in paragraph 31 of his Honour’s reasons in relation to contractual damages as necessarily a principle to be applied in relation to damages in the case of an intentionally misleading representation contrary to the statutory norm.

MR RICH: We would accept that it does not necessarily apply but we would say to your Honour that where you have a case, as this one is, where the loss claimed is -as your Honours will recall, the first particular is that the loss caused or the result of the misleading conduct was that the agreement was not renewed. That is the first relevant particular. The second relevant particular is that commissions were not paid although commissions were payable under the agreement. So the nature of the loss claimed is the agreement and the rights to commissions which would otherwise have accrued thereunder.

It is for that reason why we submit that this reasoning is very pertinent to the way in which the court would assess loss in this particular case. It is the rights under the contract and the benefits that would otherwise have flowed under the contract that are the subject of the claim for damages under section 82.

Might we just then complete the reference to Martinez, your Honours. If your Honours go to paragraph 34, what his Honour here says – and he is quoting from Amman Aviation – is pertinent to the answer I gave your Honour Justice Edelman a while ago about why is this inference drawn, and it is the:

“manifestation of the principle that damages will not be awarded for not doing that which there is no obligation to do”.

It is also relevant to remember, as his Honour Justice Meagher sets out in paragraph 35, that:

damages “ordinarily” payable for wrongful termination where the employer is entitled to terminate by giving a period of notice are the amount which would have been payable had that notice been given -

That ordinary measure is the result of the application of these principles to contracts of employment. We would lastly just give your Honours a reference - in paragraph 36 his Honour Justice Meagher makes the point, particularly in the last line on the page, that in the counterfactual, the hypothetical is one in which:

no other fact or circumstance is to be assumed to be changed -

If we take the employer who misleads an employee into consensually terminating their employment without lawful notice, for no reason other than personal animus, the counterfactual has to assume that that animus remains. In other words, we do not substitute the employer for a different person who is entirely reasonable in answering the question whether that employer would have terminated with notice in any event. We do not substitute in the counterfactual somebody other, for example, than Mr Chapman and his motivations.

So we would submit to your Honours that principle 1 as relied on by our learned friends would reverse the onus of proving causation in section 82. Now, our learned friends appear to say not in every case but only in cases of deliberate wrongdoing. That is an unstable category which would seem to depend upon the degree of moral obloquy that attends the contravention.

As your Honours would appreciate, most misleading conduct cases involve a degree of deceit. There is a spectrum, but most fall somewhere in between inadvertent and deliberate misrepresentation. Where along that spectrum does this reverse onus begin? There is nothing in the language of section 82 which requires or justifies the application of differing onuses of proof on the question of causation of loss when there has been a contravention of the Trade Practices Act. So, your Honours would not embrace, in our submission, that principle.

The second principle for which our learned friends contend is in paragraph 50(b) of their submissions, is that the lawful means of termination must be wholly independent of the wrong. We submit that that approach really does involve changing the counterfactual in a way that it becomes unreal. To say that we exclude everything that is not independent of the wrong from the counterfactual would determine causation on an improbable hypothesis. We submit that one has to look at what would have happened absent the misleading conduct, in light of all of the facts – if I can use the expression, “warts and all”.

We submit that the independence principle does not emerge from the authorities which our learned friends cite in their written submissions. Could we just note that in Amann Aviation – we will just give your Honours the references – at pages 73, 96 and 129 of the report, the particular breach which is being considered – in other words, would the Commonwealth have terminated the contract on account of a breach? It is the same conduct.

Perhaps I should take your Honours to it. Firstly, at page 73 – this is in Amann Aviation in volume 2, Part C. If your Honours kindly go to page 73 of the report, page 80 of the bundle, your Honours will see at about point 5 of the page, the reference to 12 September 1987:

Amann commenced coastwatch flights –

But, at that time:

Amann did not then have all its aircraft ready –

et cetera. Then if one drops to the bottom of the page we see that it was on the same day that the Commonwealth terminated the agreement. That termination of course was wrongful under the contract. If we go to page 96 of the report on page 103 of the bundle your Honours will see at about point 7 on the page a reference to:

Beaumont J. found that Amann breached the contract on 12 September in four respects –

They are set out, and then their Honours say, in the last sentence of that paragraph:

The breaches were not trivial and, with the exception of the fourth, they would have continued for some time.

Then if we could take your Honours to page 129 of the report, page 136 of the bundle, within the judgment of his Honour Justice Deane, at about point 8 on the page his Honour said:

The first problem is that, at the time of the Commonwealth’s repudiation, Amann was itself in breach of the contract. Like the majority of the Full Federal Court, I consider that that existing breach of contract on the part of Amann was sufficient to found a proper exercise of the power of cancellation conferred upon the Secretary by cl. 2.24 and that there was a significant possibility –

et cetera. The point we wish to make to your Honours is that there is nothing in Amann which indicates that if one wants to contend that the agreement would have been terminated in any event we do not need to identify some separate breach of contract or some separate reason that was not previously relied upon or did not motivate the earlier wrongful termination.

What their Honours are there talking about is a termination, lawfully, for the same reasons as the agreement was wrongfully terminated in the first instance. So Amann Aviation certainly does not support, in our submission, the need for a defendant to identify some independent reason for terminating which did not motivate the initial termination. Your Honours, I think, could I then, lastly – I hope lastly – turn to the notice of contention.

BELL J: Yes.

MR RICH: The notice of contention - this is the subject of paragraph 14 of our outline, I should say. The notice of contention is directed at findings that we submit the Full Court should have made as matters which increase the probability of a lawful termination. These are, if you like, additional matters which made it more likely than not that had the agreement not been terminated by misleading conduct there would in any event have been a termination.

The first matter we point to in paragraph 1 of the notice of termination relates to Dr Berry’s inability to travel to Nigeria. Could we take your Honours to page 11 of the core bundle at paragraph 9? Your Honours will see a reference to the fact that in about late 2006 and 2007, Dr Berry’s other company, Contec, became involved in a dispute with the Nigerian Government.

At page 83, paragraph 258, your Honours will see that that dispute continued until an award was made on 14 August 2008 by which Dr Berry’s company was awarded over $US250 million in damages. Your Honours will see the last sentence:

Contec has so far –

this is nine years later, been unable:

to enforce the award.

Now, at page 15 of the core bundle, paragraph 12, your Honours will see in paragraph 20 the primary judge’s finding in relation to Dr Berry having:

lied . . . about visiting Nigeria in the period between mid‑2006 and mid‑2010. That lie related to an important issue, namely Dr Berry’s capacity to conduct the obligations of an agent when he could not, and did not, visit the country with the officials of which he had to deal for Securency. Clearly enough, the reason that he said, initially, that he had visited Nigeria several times in the four year period . . . was to create the false impression –

We emphasise “false”:

that his and Contec’s evolving commercial and legal dispute with the Nigerian Government had not created any problem for him in visiting that country and dealing there with both its officials and his own business or in performing his role as Securency’s agent.

At paragraph 23, the trial judge then said:

At the end of the day, Dr Berry did continue his business dealings in Nigeria throughout the four year period . . . He was able subsequently, in early 2010, to travel –

et cetera, and he met with the governor – these meetings were in London, of course, in November 2007. His Honour said at about line 7:

He was reluctant or, more probably, not able safely to travel to Nigeria during the four year period about which he lied. There is no evidence that the nature Dr Berry’s (and Contec’s) commercial and legal dispute . . . had any substantive inhibitory or negative effect on his ability to perform his (or Contec’s) existing contractual obligations . . . or interact with . . . officials -

Those findings were the subject of appeal ground 12. We will not take the Court to it but it is to be found at page 131 and that ground was dealt with by the Full Court at page 197 of the book, paragraph 147. We start there. The Full Court approached the matter in this way. They were here dealing with the question of liability, rather than damage. They said that these grounds – amongst them was ground 12:

do not undermine the central findings –

the central findings being that Dr Berry was misled. In paragraph 149, specific reference is made to ground 12 attacking the primary judge’s finding at paragraph 23:

that there was no evidence that the nature of Dr Berry’s dispute with the Nigerian government inhibited his ability to perform his obligations . . . It might be thought that given that Dr Berry had deliberately lied on oath about his ability to travel to Nigeria between 2006 and 2010, Dr Berry subjectively believed that his inability to be present in Nigeria may well have inhibited his ability to perform his functions.

Now we submit that that is indeed the inference that ought to have been drawn. Their Honours then referred to:

some further evidence, from Mr Brown . . . which would support such a conclusion. Be that as it may, the true liability issue was whether -

Now, in our submission, their Honours ought to have overturned the finding in paragraph 23 because that is the inference that one would draw from Dr Berry’s deliberate lie on this important matter and from what the trial judge himself found in paragraph 20 about the attempt to create a false impression. The Full Court did not do that because they did not think it was of importance to the question of liability but it is of importance insofar as there is to be assessed the likelihood in the counterfactual of a lawful termination.

Now, we should also take your Honours to page 193, at paragraph 130, where their Honours do deal with the evidence of Mr Brown – yes, I think it is – at about line 128, yes, their Honours talk about the oral evidence of Mr Chapman and Mr Brown:

was that the commercial dispute between Dr Berry and the Nigerian Government prevented travel by Dr Berry to Nigeria. This rationale –

As your Honours will appreciate, they put forward this rationale as the reason and their Honours are saying that was not – we do not accept that that was the reason why they acted. It faced the hurdle that they:

did not suggest this reason at the time –

and it was:

rejected because the evidence strongly suggested that SPT, associated with Mr Chapman –

and this desire motivated him. Therefore, it was open on the evidence to conclude, et cetera:

that Securency, through Mr Chapman, misled Dr Berry –

So, their Honours make the point that that inability to travel was not the reason why Mr Brown and Mr Chapman terminated Dr Berry. We do not seek to suggest that that finding is to be overturned. Our point is that it is the fact – it is not controversial that Dr Berry could not go to Nigeria safely for four years – and we say the Full Court should have inferred that that inability to travel to the country where his agency centred was an inhibition on his ability to perform his obligations and that is why he lied about it. If that finding is made, that would have been a further reason supporting the probability of a lawful termination, effective from 30 June.

BELL J: One difficulty with the finding that you now suggest should have been made, might be the primary judge’s finding at appeal book 57, paragraph 161, that order by the mint made on 23 January 2008 was, one understands, a significant order in the scheme of things which:

closely connected to Dr Berry’s earlier work and the recent discussions he . . . had had in London with Governor Soludo in late November 2007.

The primary judge made a finding there of the significant value of Dr Berry’s work on Securency’s behalf in late 2007, during the period when he did not feel it safe to travel to Nigeria. But it is accepted he was meeting with the Governor of the Reserve Bank – the Central Bank of Nigeria in London.

MR RICH: Yes, your Honour. We do not say that he was unable to perform any of his duties by reason of this matter – clearly not. The point simply is, he is our Nigerian agent and he is unable to visit the country for a significant period and that that undoubted fact is a reason why a lawful termination is more probable than it might otherwise be.

I mean if Dr Berry was spending all of his time in Nigeria, et cetera, then the probabilities of a termination would be lower. But this fact, that he could not travel, and his lie, indicating a concern on his part or a belief on his part that it did have some inhibitory effect on his ability to perform duties, are matters which would have made it more probable.

The matters which we rely upon in paragraph 2 of the notice of contention are simply additional – are additional reasons why a termination is probable. We do not put to your Honours that these are the reasons why Dr Berry was terminated. We are saying that these are findings, or these are factors, which support the Full Court’s finding that a termination was probable, namely, the undisputed fact that he had been unable to travel to Nigeria since mid‑2006, the undisputed fact that he was suing the Nigerian Government, and the fact that JHM was an entity associated with Mr Harding who had met with the governor of the Reserve Bank in Nigeria and who was a part owner of the first appellant, or the second appellant, I should say, and that all four individuals who could have been involved in the decision to terminate lawfully had shown a preparedness to do so.

As I say, we say that those are facts which support the likelihood that the Full Court found and could have been relied upon as additional matters by them.

BELL J: Yes.

MR RICH: Unless there are any further matters we can assist your Honours with, those are our oral submissions.

BELL J: Thank you, Mr Rich.

MR GLEESON: Your Honours, can I respond first on the notice of contention if that is convenient?

BELL J: Yes.

MR GLEESON: As per Mr Rich’s paragraph 14, the first ground of the notice of contention appears to be a reformulation of the pleaded Contec arbitration defence. It is not the full defence, because that was the defence rejected thoroughly by the primary judge and the Full Court has confirmed that. It is not the argument that because he is locked in litigation with them, that has damaged his ability to work with them. It clearly cannot be that argument because of the many findings on that topic I showed you this morning at paragraph 137 of the primary judge, that Mr Brown agreed very readily that the dispute with the government was not having any impact on the work being done with the governor. So it is not that.

It appears to be as especially clarified this afternoon an argument that because he could not travel to Nigeria that limitation upon his performance of the agency would have been a reason to terminate him. As Mr Rich has put it, he has said that he does not suggest that this in fact was in the thinking of any of the relevant officers or employees of Securency at the time, and that is a significant matter.

When he addressed you on paragraph 130 of the Full Court at page 193 he said he accepted that the inability to travel to Nigeria was not the reason at the time in the minds of these people and, indeed, we know it was not even suggested as a reason a year or two later when the matter blew up internally.

So what you are being asked to find is that a matter which did not occur to any of the relevant people at the time as a reason why a lawful termination should have been brought about somehow was required to be given significant and decisive weight in the counterfactual. At least one reason why that would not be so is, as your Honour Justice Bell observed from the primary judge at paragraph 161, the substantial performance of this agency was occurring in a highly successful fashion through meetings in London.

Your Honours will observe in paragraph 14(a) of the respondent’s outline that they ask you to go to certain evidence from Mr Chapman and Mr Brown and somehow say that you should find that evidence to be plausible. In circumstances where each of those witnesses was thoroughly rejected as a matter of credit and there has been no general attempt to restore their credit, this Court would not take up that invitation.

If you could then look at paragraph 14(b) please – this is ground 2 – these are said to be four factors which make it more likely that there would have been a lawful termination. Taking them in turn, the first factor seems to be a repeat of ground 1. The second factor seems to be an attempt to resuscitate the Contec arbitration, notwithstanding no attempt has been made to show error in the concurrent findings. The third factor is a suggestion that Mr Harding of JHM was already known to Nigeria.

Now, pausing there, that appears to be an attempt to make an argument that the purpose for the termination might have been, or could lawfully have been, replacing Mr Berry with JHM and that argument was advanced a little earlier this morning and it is raised in paragraph 12(b) of the outline.

Can I just dispose of the JHM argument – whether it is put as something which was said to be a relevant factor at the time or hypothetically a relevant factor. The first argument is that a desire to replace Dr Berry with JHM was never pleaded by the respondent. Secondly, none of the material ever suggested there was a desire to appoint JHM independently of SPT, or independently of the ill-health lie – and I took you this morning to the 15 August 2007 memorandum which tied JHM to SPT and to a plan to replace Dr Berry because he was ill. There is not a single piece of evidence to suggest there was some independent desire to replace Dr Berry with JHM.

Nextly, if I could ask your Honours to go back to the respondent’s book of materials, you were taken to a number of pages to say well, there are some attempts to engage JHM. You were taken to page 8. There is a reference to JHM. If your Honours observe the date, it is 9 July 2007, and all that is said there is:

this is the profile of the company we are considering to provide wider coverage –

Page 12 is to similar effect. Then you were taken to page 14, which is 20 August, about a month later, and it is said here is a draft agreement with JHM. The critical step in the chronology that Mr Rich has stepped over is that by that date we already have the 15 August 2007 memorandum set out at paragraph 114 of the trial judge, page 43 of the book.

EDELMAN J: That was backdated, though, was it not?

MR GLEESON: There is a finding – your Honour is correct, there is a finding. It is backdated. As discussed earlier, that finding was challenged in the Full Court and doubt was cast upon it, but it was not regarded as central to the argument. But let me accept for the moment the finding of backdated. Even if it has come into existence later on, what it has shown is that any plans to use JHM are intricately tied to SPT and tied to the ill‑health lie.

But, your Honours, the clincher on this topic – and your Honour Justice Bell asked a question about the timing – is that when one comes to the agreement signed on 14 February, that is page 35, which is intended to take effect from 1 January, we see from page 37 at line 45 that that document is not to be handed over to JHM until Dr Berry has executed the attached termination letter. So what that shows in terms of the actual conduct of the respondent at the time is it was not prepared to engage JHM as an agent unless it had terminated Dr Berry and it was not ‑ ‑ ‑

BELL J: Mr Gleeson, I do not know whether you can still hear us, but we have now lost the audio, and indeed the visual component of the link. We might just have an inquiry made to see if the link can be re‑established promptly without the need for the Court to adjourn.

COURT OFFICER: Your Honour Justice Bell, this is the Court Crier in Canberra. I will go and establish that right now.

BELL J: Thank you.

COURT OFFICER: Justice Bell, it is the Court Crier here.

BELL J: Yes.

COURT OFFICER: It appears that about every two hours, the Federal Court system cuts itself off, and we are trying to re‑establish the link but we need to do that via a court officer in the Federal Court, and at the moment we are having difficulty finding the court officer. So it may be that we adjourn for five minutes or so until we can re‑establish the link.

BELL J: Yes. Indeed, that is the course that we will follow. The Court will adjourn briefly until the link can be re‑established.

AT 4.03 PM SHORT ADJOURNMENT

UPON RESUMING AT 4.12 PM:

BELL J: Yes, Mr Gleeson.

MR GLEESON: Thank you, your Honours. The submission in respect to page 37 of the respondent’s materials, at line 45, is that the intention of the respondent, in the actual world, was not to activate any agency with JHM, unless and until Dr Berry had been induced by the fraud to sign the release letter and thus in the actual world the respondent was not prepared to give notice to Dr Berry as the means to replace him with JHM. They were prepared only to achieve their objectives through fraud, and there is no basis to infer that they would have acted in any other way in the hypothetical world.

Your Honour Justice Edelman asked me about the significance of the backdating of the 15 August memorandum, at least to this part of the case. If I could refer the Court to the primary judge at page 216, paragraph 216 to 219. The role which JHM play in the trial, given that it was not pleaded as a separate reason for a termination, was in fact that it was yet another one of Mr Chapman’s lies.

Mr Chapman, as one of his many lies, said that the reason that Dr Berry voluntarily pursued his agreement was because he attended certain meetings with Mr Harding of JHM and pursuant to that process it was agreed that Dr Berry would hand over to Mr Harding, and his Honour found that to be a further series of lies and a further reason to reject Mr Chapman. Now, that is the way in which the respondent sought to deploy JHM at the trial, not in the fashion that is now suggested.

Your Honours, the final matter on the notice of contention is said to be that all four individuals who could have been involved in a decision had shown a preparedness to do so. That really takes the respondent’s argument no further than the matters that you have heard today on the appeal because that is not really the question. They showed a preparedness to do so if they could use a fraud upon Dr Berry and if they could achieve the benefits of that fraud. What they never demonstrated in the actual world was a preparedness to accept the costs of a lawful termination.

Your Honours, in respect to the appeal, the matters that I wish to deal with in reply – I am sorry, your Honours. I see the time. I had a couple of submissions in reply but I am in your Honours’ hands as to how you wish me to deal with that.

BELL J: I think it might ‑ of all the difficulties we have had today, Mr Gleeson, if you just continue.

MR GLEESON: All right, thank you, your Honour. What we wanted to say in reply was this. Firstly, the respondent has never really grappled with the nature of the fraud that it perpetrated. The fraud involved a representation that it is safe for you to sign the letter because you will continue to be our agent and you will be protected by a substitute agreement into the future. So, the fraud was thus intended to operate immediately and procure the termination letter but to have that ongoing work.

So, the natural and probable consequences of the fraud – which, again, the respondent fails to grapple with – are that, firstly, it would induce Dr Berry to believe he remained an agent bound by his obligations. Secondly, it would induce him to continue to advance the opacification plant plan which was essential to Nigeria. That is dealt with by the primary judge between paragraphs 141 to 147.

Your Honour Justice Bell raised the question about the land. Your Honour’s question is answered by paragraphs 67 to 68 of the primary judge. It was part of the plan. The further natural and probable consequence was that the fraud would continue to work over time – as it did, in fact, until at least November 2008 and, most probably, May 2009, and that is the Full Court at 110, 226 to 227. Its final natural and probable consequence was that Dr Berry would lose his rights to commission from 31 December 2007, just as the big orders came in that he had worked to achieve.

As to why the respondent in the actual world was not willing to resort to lawful means, it now seems fairly clear that the reasons why they wanted Dr Berry to remain on hook for the commissions – I am sorry, why would they not resort to lawful means? The first is, if they did, he would remain entitled to commissions up until the date of termination, the second is it is likely it would accelerate his demands for accounting, and third is once he realised the truth it would alienate him and Nigeria. The central matter which the respondent simply cannot answer is why would one infer that the respondent would have been prepared to face up to and accept those risks in the counterfactual world when it was unwilling to do so in the actual world?

If your Honours could go back to the respondent’s outline at paragraphs 11 and 12 which is their key answer, paragraphs 11(a) and (b) say that, well, fraud had an advantage over honesty that we could retrospectively eliminate the commissions and that is no doubt true. At 11(b) you heard an argument this morning that the respondent asked you to decide the case on the basis that the senior management were themselves complicit in the plan to deceive Dr Berry.

At paragraph 11(c) the proposition is that if the primary goal was to make way for SPT, that is, to pursue the corrupt agenda of Mr Chapman, or to shut down the appellant from commissions, the only other way to do it apart from fraud was to terminate lawfully. The essential problem, of course, with that submission is that that assumes that the respondent’s desire to pursue the corrupt SPT scheme would have operated at all cost, and because it would have operated at all cost the respondent would have been prepared to wear all of the consequences that would follow from lawful means and none of the matters in paragraph 12 establish that the respondent would have behaved in that fashion.

Your Honours, could I conclude, without making any presumption, in the event that the appeal were successful on the basis upon which we have presented it, we have provided to the Court a slightly revised form of order, which I can indicate the respondent does not object to, on the assumption that I have just made. The purpose of that revised order is simply – I am not sure if it has come to your Honours’ attention?

BELL J: It has, Mr Gleeson, yes.

MR GLEESON: It does not change any matter of substance, but it is to avoid an infelicity in the earlier proposed wording. The point would be in order 1, that the judgment would be in the sum of 37‑odd million dollars, to take effect from 17 August 2018, which was the date of the primary judge’s order, and it therefore includes the principal plus the interest up until that date, 17 August 2018. The effect of such an order would be that interest post that date would simply run under the ordinary Court rules for post‑interest judgment.

BELL J: I see, yes.

MR GLEESON: Your Honours, could I say I think on behalf of both parties that we are very grateful the Court has been able to make available this hearing in this difficult time and the Court has borne with the parties’ arguments through the difficulties of today. And it is of great benefit to the parties that we have been able to present our arguments orally and we are very grateful. I think Mr Rich might agree or would add to that.

MR RICH: I certainly agree.

BELL J: Thank you.

MR RICH: We certainly do, your Honours. Thank you very much for enduring the difficulties that you have had to endure, to listen to the parties dispute it today.

BELL J: Thank you, Mr Rich. The Court will reserve its decision in this matter. Would you adjourn the Court to 9.30 am on Friday, 5 June, in Canberra, by video connection to Sydney.

AT 4.23 PM THE MATTER WAS ADJOURNED