FEDERAL COURT OF AUSTRALIA
Smolle v Australia and New Zealand Banking Group Limited [2008] FCA 1065
VID 400 of 2008
VID 401 of 2008
JESSUP J
18 JULY 2008
MELBOURNE
| IN THE FEDERAL COURT OF AUSTRALIA |
|
| VICTORIA DISTRICT REGISTRY |
| BETWEEN: | HARALD SMOLLE First Applicant
ELKE SMOLLE Second Applicant
|
| AND: | AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED First Respondent
LEO JOHN REYNOLDS Second Respondent
LINDA GROSS Third Respondent
|
| JESSUP J | |
| DATE OF ORDER: | 18 JULY 2008 |
| WHERE MADE: | MELBOURNE |
THE COURT ORDERS THAT:
1. The application for an extension of time to file and serve a Notice of Appeal from the judgment of the court given on 7 November 2007 be dismissed.
2. The applicants pay the costs of the first respondent.
3. The applicants have leave within 21 days to make such application as they may be advised with respect to the imposition of an obligation upon third parties to pay or to compensate the applicants for the costs required to be paid by them in connection with this proceeding.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
| IN THE FEDERAL COURT OF AUSTRALIA |
|
| VICTORIA DISTRICT REGISTRY | VID 401 of 2008 |
| BETWEEN: | HARALD SMOLLE First Applicant
ELKE SMOLLE Second Applicant
|
| AND: | AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED First Respondent
LEO JOHN REYNOLDS Second Respondent
LINDA GROSS Third Respondent
|
| JUDGE: | JESSUP J |
| DATE OF ORDER: | 18 JULY 2008 |
| WHERE MADE: | MELBOURNE |
THE COURT ORDERS THAT:
1. The applicants’ motion of which notice was filed on 3 June 2008 be refused.
2. The applicants pay the costs of the second and third respondents.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
| IN THE FEDERAL COURT OF AUSTRALIA |
|
| VICTORIA DISTRICT REGISTRY | VID 400 of 2008 |
| BETWEEN: | HARALD SMOLLE First Applicant
ELKE SMOLLE Second Applicant
|
| AND: | AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED First Respondent
LEO JOHN REYNOLDS Second Respondent
LINDA GROSS Third Respondent
|
| JUDGE: | JESSUP J |
| DATE: | 18 JULY 2008 |
| PLACE: | MELBOURNE |
REASONS FOR JUDGMENT
INTRODUCTION
1 In a proceeding in the court commenced on 18 August 2004, the applicants, Harald and Elke Smolle, made claims against the first respondent, Australia and New Zealand Banking Group Limited (“the Bank”), and against the second and third respondents, Leo John Reynolds and Linda Gross, who carried on practice in Adelaide as Reynolds Prescott, later known as Reynolds Lawyers (“Reynolds”), and whom the applicants engaged as their solicitors. The proceeding concerns certain investments which the applicants made on the advice (so they allege) of the Bank and certain omissions of, and advice given by, Reynolds in connection with those investments.
2 On 7 November 2007, the docket Judge, Weinberg J, dismissed the proceeding as against the Bank pursuant to O 20 r 2 of the Federal Court Rules: see Smolle v Australia and New Zealand Banking Group Limited [2007] FCA 1673. The first of two applications now before the court is an application by the applicants for an extension of time to file and serve a Notice of Appeal from that judgment. However, the applicants accepted that the judgment was interlocutory, and that leave to appeal was required. Their application was treated as an application for an extension of time within which to apply for leave to appeal and, in the event that such an extension were granted, as the application for leave to appeal itself.
3 On 5 May 2008, Weinberg J dismissed the proceeding as against Reynolds pursuant to O 35A r 3(1) of the Rules of Court, alternatively for want of prosecution: see Smolle v Reynolds [2008] FCA 621. The second application now before the court is an application by the applicants for leave to appeal against that judgment. However, that application was itself out of time, and proceeded as an application for an extension of time to apply for leave to appeal and, in the event that an extension were granted, as the application for leave itself.
THE FACTS
4 The applicants are Austrians who have made regular visits to Australia over the years. They propose to retire here, and have placed some of their funds in Australian investments. In 2000, they invested the sum of $243,500 in a “balanced trust investment” of the Bank. They claim to have made that investment upon the advice of the Bank. However, the applicants soon discovered that the investment would not be tax effective for them, and raised that concern with the Bank. They say that the Bank then advised them to transfer their funds to another product of the Bank, a “superannuation bond”. They claim that the Bank advised them that there would be no Austrian tax to pay on that bond, and that they would receive a net return of 8.54% per annum. The applicants redeemed their earlier investment and used the proceeds to acquire an “ANZ Personal Superannuation Bond”. However, they later discovered that this bond was not as tax effective as they had been led to believe, and that they were required to pay Austrian tax at the rate of at least 2.5% of the value of the bond each year.
5 At about the time of making the superannuation investment to which I have referred, the applicants engaged the services of Reynolds. They instructed Reynolds to advance on their behalf a claim for compensation for the loss which was said to have arisen from their original investment in the balanced trust. The essence of the claim, it appears, was that the Bank’s original advice caused them to place their funds into a financially disadvantageous product, and that the extent to which they were worse off by that investment than they might have been with a superannuation bond was the measure of the compensation which should be paid to them by the Bank. They also sought compensation for what were described as the transaction costs of transferring their funds from the balanced trust investment into the superannuation bond.
6 The applicants also allege that they instructed Reynolds to change their investment from the superannuation bond to a life insurance product, since they had then become aware that life insurance held for more than ten years would be wholly tax exempt in Austria. They say that Reynolds failed to make that change, and failed even to notify the Bank of the applicants’ intentions. As a result of Reynolds’ inaction, according to the applicants, the “cooling off period” within which they might have withdrawn from the superannuation bond expired.
7 It seems that Reynolds had a measure of success in their representations to the Bank, since, on 17 April 2001, the Bank corresponded with Reynolds in the following terms:
I act on behalf of Australia and New Zealand Banking Group Limited.
I refer to your letter dated 20 February 2001 in which your clients claim compensation in relation to funds invested with ANZ Funds Management (“Investment”).
In relation to the Investment your clients are concerned that:
· They have not have been properly advised of the risks, return and market volatility associated with an investment in the ANZ Balanced Trust;
· They may not have been properly advised of non resident tax implications associated with an investment in the ANZ Balanced Trust; and
· The taxation rate on their Investment is higher than they expected and the return is lower than they expected.
ANZ instructs me that it properly advised your clients of the risks, return, market volatility, fees and, so far as ANZ accepted responsibility, the non resident tax implications associated with their Investment.
Your clients are valued investors and ANZ wishes to maintain a strong relationship with your clients. On the basis that your clients were dissatisfied with their Investment and elected to re-invest their funds with ANZ, ANZ is prepared to offer your clients re-imbursement of the transactional costs they paid to move the funds from the ANZ Balanced Trust to PSB Growth. This transactional cost amounts to $1,750 which is calculated at 0.7% of $250,000.
ANZ’s offer is without admission of liability and subject to the execution of ANZ’s receipt and release in the enclosed form.
Please let me have your client’s instructions in relation to the offer. Should you wish to discuss this matter further please to not hesitate to contact me on 9273 0849.
The deed of release referred to in the letter was in the following terms:
A. We, Dr Harald Smolle and Dr Elke Smolle,
B. of Kremsel Landstrasse 107, A-3100 St. Poelten, Austria have made a claim against Australia and New Zealand Banking Group Limited ACN 005 357 522 (“ANZ”) in relation to our investment into the ANZ Balanced Trust, Investment No. 7481751 and our investment into the PSB Growth, Investment contract 06/4834698 C212 (“the Claim”).
C. ANZ has paid to us the sum of $1,750 in full and final settlement of the Claim.
D. The Claim relates to alleged losses incurred by us personally of a wholly private or domestic nature.
We hereby:
(a) Release ANZ and its agents and employees from any further claim or demand which in any way relates to or is connected with or arises out of the Claim;
(b) We will not disclose the terms upon which the Claim has been settled or the contents of this Receipt & Release to any other person without the prior written consent of ANZ unless such disclosure is required:
(A) by operation of law; or
(B) to assist professional advisers to give professional confidential advice in relation to this Deed.
The “PSB Growth Investment” was the superannuation bond to which I have referred. The deed of release forwarded by the Bank on 17 April 2001 was not executed.
8 In June 2001 Reynolds advised the Bank that the applicants had received the proceeds of the balanced trust investment and calculated that this sum fell short by $7,658.60 of the amount which would have been received, over the same period, under the superannuation bond investment.
9 On 19 July 2001, the Bank corresponded with Reynolds in the following terms:
I refer to your letter dated 21 June 2001 in which your clients claim against ANZ the sum of $7,658.60 in relation to this matter.
I also refer to our telephone conversation on 6 July 2001 in which it was agreed that ANZ would pay your clients the sum of $7,658.60 in full and final settlement of their claim subject to the execution of ANZ’s usual deed of release. In this regard I enclose a deed of release to be executed by your clients.
Upon receipt of the executed deed I will arrange payment, please let me know the method of payment your clients would prefer.
The draft deed of release enclosed with the letter was as follows:
A. We, Dr Harald Smolle and Dr Elke Smolle, of Kremsel Landstrasse 107, A-3100 St. Poelten, Austria;
B. Have claimed against Australia and New Zealand Banking Group Limited ACN 005 357 522 (“ANZ”) compensation in relation to our investment into the ANZ Balanced Trust, Investment No. 7481751 and our investment into the PSB Growth, Investment contract 06/4834698 C212 (“the Claim”).
C. ANZ will pay to us the sum of $7,658.60 in full and final settlement of the Claim within seven days from the receipt of this Deed executed by us.
D. The Claim relates to alleged losses incurred by us personally of a wholly private or domestic nature.
We hereby:
(a) Release ANZ and its agents and employees from any further claim or demand which in any way relates to or is connected with or arises out of the Claim;
(b) Warrant that we have not received any payment or reimbursement from any other person in respect of the Claim.
(c) Agree that if:
(A) We receive any payment or reimbursement from any other person in respect of the Claim; or
(B) We are in breach of any warranty set out herein;
We will immediately pay that payment or reimbursement to ANZ, or repay to ANZ the full amount of the Claim.
(d) Agree that we will not disclose the terms upon which the Claim has been settled or the contents of this Deed to any other person without the prior written consent of ANZ unless such disclosure is required:
(A) by operation of law; or
(B) to assist professional advisers to give professional confidential advice in relation to this Deed.
10 On 16 August 2001, the applicants signed the deed of release, but added some hand-written amendments. That which is significant for present purposes was a qualification to operative clause (a) of the proposed deed in the following terms:
With the exception of the transaction costs when switching from the Balanced Trust to the Personal Superannuation F. (see letter from 23 July 2001 and document enclosed).
The significance of the reference to the “transaction costs” will become apparent presently.
11 On 30 October 2001, the Bank corresponded with Reynolds, pointing out that it required the deed of release to be executed “in the form proposed”. That is to say, the Bank rejected the applicants’ handwritten amendments. The same point was made in a further letter from the Bank to Reynolds dated 29 November 2001, enclosed with which was a further deed of release “containing the terms by which ANZ consents to settle this proceeding”. The deed enclosed with the Bank’s letter of 29 November 2001 was in the following terms:
A. We, Dr Harald Smolle and Dr Elke Smolle, of Kremsel Landstrasse 107, A-3100 St. Poelten, Austria;
B. Have claimed against Australia and New Zealand Banking Group Limited ACN 005 357 522 (“ANZ”) compensation in relation to our investment into the ANZ Balanced Trust, Investment No. 4781751 and our investment into the PSB Growth, Investment contract 06/4834698 C212 (“the Claim”).
C. We have received from ANZ a cheque in the sum of $2,116.61 representing the final distribution from the ANZ Balanced Trust, Investment No. 7481751 (“final distribution”).
D. ANZ will pay to us the sum of $7,658.60 less the final distribution referred to in clause C resulting in a payment of $5,541.99 in full and final settlement of the Claim within seven days from the receipt by ANZ of this Deed executed by us.
E. The Claim relates to alleged losses incurred by us personally of a wholly private or domestic nature.
We hereby:
(a) Release ANZ and its agents and employees from any further claim or demand which in any way relates to or is connected with or arises out of the Claim;
(b) Warrant that we have not received any payment or reimbursement from any other person in respect of the Claim.
(c) Agree that if:
(A) We receive any payment or reimbursement from any other person in respect of the Claim; or
(B) We are in breach of any warranty set out herein;
We will immediately pay that payment or reimbursement to ANZ, or repay to ANZ the full amount of the Claim.
(d) Agree that we will not disclose the terms upon which the Claim has been settled or the contents of this Deed to any other person without the prior written consent of ANZ unless such disclosure is required:
(A) by operation of law; or
(B) to assist professional advisers to give professional confidential advice in relation to this Deed.
Save for the amendment of a minor typographical error, the applicants executed the deed in those terms on 25 March 2002.
12 Unbeknown to the Bank, on 11 February 2002 the applicants communicated with Reynolds in the following terms:
We regret to say that none of the issues concerning our ANZ-investments is finished:
We got no payment until now in compensation for losses caused by investing in the ANZ Balanced Trust and caused by switching from the ANZ Balanced Trust to the Personal Superannuation Bond (transaction costs)………(ISSUE1)
Tim Germein, the financial planner in Adelaide was convinced the Personal Superannuation Bond is final taxed and data protected. Otherwise he would not give us the advice to invest the total amount of the Balanced Trust (investor Elke and investor Harald proportionately 50 %) in Elke’s name alone for saving management fees (0,5 % p.a. of the value of the portfolio for the first three years while the investment is less than AUD 300.000,--) because he knew, we both are partner and owner of a veterinary hospital in Austria and liable to pay income tax and the additional income of capital gains will cause a tax progression when Elke is the sole investor of the P.S.A.B.! (In addition we are now informed that a further serious taxation problem occurs in Austria: an additional tax payment of 2,5 % from the value of the P.S.A.B. at the year’s end!). – Combined with the disclosure information of other ANZ-employees to the Austrian government (………ISSUE 2) it was a poor advice to invest the money in the P.S.A.B. and therefore we demand the change of the P.S.A.B. into a life insurance (which is final taxed in Austria) immediately! (………ISSUE 3). Also we demand a compensative payment if we loose [sic] money since inception of P.S.A.B until the switch to a life insurance similar to issue 1 (…….ISSUE 4). Finally we demand the refund of taxes paid in Austria from the time when ANZ got the document 1 “Taxation for Austrian Residents as owner of Australian Personal Superannuation Bonds” and 2 “Tax avoidance”, written by our tax advisor Mag. Hoechtl dated 20. July 2001 (……ISSUE 5).
To fulfill [sic] these demands Elke and me authorize you to go to court against the ANZ.
Please contact us if you have any queries in relation to these issues.
There is no evidence of a written reply from Reynolds specifically to that letter, but on 11 March 2002 they forwarded the latest version of the proposed deed of release to the applicants for execution. They did so under cover of a letter in the following terms:
Re: ANZ Bank – Investment
We refer to previous correspondence in this matter.
Without entering into the other issues raised and dealt with, the one matter that we can deal with shortly is the compensation for your investment with the ANZ Balance Trust which was previously agreed.
The Deed of Release which was previously signed by you and returned to our office, was varied by you and is unacceptable to the ANZ bank. We therefore enclose a subsequent Deed of Release which we suggest that you sign without alteration. It simply resolves the issue of the outstanding compensation for that one investment. The cheque in the sum $2,116.61 referred to [in] recital C is currenttly [sic] held in our trust account. Upon receipt of the signed Deed of Release from you, the balance will be paid by the ANZ and we can then compensate you in the full amount.
In relation to the balance of the issues relating to the ANZ investments including the superannuation issue, in your correspondence issues 2-5 we are pursuing this matter with firstly Tim Germain and secondly the ANZ Legal Department.
We will forward correspondence to you shortly in relation those other issues.
13 In their Further Amended Statement of Claim filed on 3 July 2007, the applicants alleged that the Bank had given them certain advice, and had made certain representations, about their investments, specifically about investing in the superannuation bond. Very broadly, the applicants alleged that the Bank had been negligent in the advice which it gave (both in tort and in breach of implied terms of the contract pursuant to which the advice was given) and had contravened s 851 of the Corporations Law and s 945A of the Corporations Act 2001 (Cth) (“the Corporations Act”). They alleged also that the representations made by the Bank were misleading or deceptive and thus in contravention of s 12DA of the Australian Securities and Investments Commission Act 1989 (Cth), of s 12DA of the Australian Securities and Investments Commission Act 2001 (Cth), of s 995 of the Corporations Law, of s 1041H of the Corporations Act and of s 52 of the Trade Practices Act 1974 (Cth).
14 The applicants alleged that they engaged Reynolds to advise them, and to act as their solicitors, in relation to a claim against the Bank for compensation in respect of the balanced trust investment and the investment of funds in the superannuation bond; that it was a term of Reynolds’ retainer that they exercise due care, skill and diligence in the performance thereof; that they (the applicants) instructed Reynolds to change their investment from a superannuation bond to life insurance; that Reynolds failed to do so; that this amounted to negligence on the part of Reynolds; that Reynolds advised the applicants that they should execute a deed of release prepared by the Bank, and that the deed related solely to the applicants’ claim in respect of the balanced trust investment; that, acting in reliance upon that advice, they (the applicants) executed the deed; that the Bank contended that the deed released it from claims in respect of the superannuation bond investment; that, if the Bank were correct in this regard, Reynolds’ advice had been misleading and deceptive within the meaning of s 52 of the Trade Practices Act; and that Reynolds had been, relevantly, negligent.
15 Unsurprisingly perhaps, in its Defence to the applicants’ claims, the Bank relied upon the executed deed of release. In their Defence, Reynolds made it clear, at least in one formulation of their case, that they would resist any suggestion that the release had the effect of precluding the applicants from proceeding against the Bank with respect to the superannuation bond. As counsel for Reynolds made clear in the hearing of the applications before me, Reynolds proposed to support the thrust of the letter sent to the applicants on 11 March 2002.
16 In his reasons for judgment given on 7 November 2007, Weinberg J laid out what he described as “a long and somewhat tortured history” of the proceeding. His Honour said at par 16:
The Smolles speak only moderate English. They filed their originating application and their first statement of claim as far back as 18 August 2004. At that time they were represented by Rigby Cooke Lawyers. However, after an apparent falling out with that firm, in March 2005 they retained Baldwins Lawyers. That retainer lasted until September of that year when Tisher Liner took over the Smolles’ representation. However, in December 2005 Tisher Liner also withdrew.
17 On 18 January 2007, the Bank filed a Notice of Motion that it would, on 14 March 2007, move for the dismissal of the applicants’ proceeding pursuant to O 20 r 2(1) of the Rules of Court, or alternatively that what was then the Amended Statement of Claim be struck out pursuant to O 11 r 16 of the Rules of Court. The Bank also sought orders (presumably in the further alternative) that particulars of loss and damage filed by the applicants be struck out pursuant to O 11 r 16, and that the applicants provide discovery of specified categories of documents. The Notice of Motion was originally listed for hearing on 14 March 2007. On 16 March 2007, the Bank filed an outline of the submissions proposed to be made in support of its motion. In that outline, counsel for the Bank submitted that, despite “numerous applications by [the Bank] to obtain the barest of procedural compliance [,] [t]he affidavits filed by the [applicants] … fall drastically short of the evidentiary onus on them.” It was submitted that the principles applicable to summary dismissal, as referred to by Drummond J in Faessler v Neale (1994) 29 IPR 1, 2, were applicable in the circumstances. Counsel for the Bank also submitted that the proceeding was an abuse of process in that the applicants’ claim that the Bank acted wrongfully by disclosing their superannuation investment to the Austrian tax authorities implied an attempt to avoid paying Austrian tax. Counsel submitted also that the Amended Statement of Claim should be struck out under O 11 r 16, that particulars provided by the applicants should be struck out under the same rule, and that the applicants should provide the discovery referred to in the Notice of Motion.
18 When the Bank’s Notice of Motion came before Weinberg J on 23 March 2007, his Honour adjourned the hearing of it to 3 May 2007. His Honour also gave the respondents leave to file cross-claims. Pursuant to that leave, the Bank and Reynolds filed Cross-Claims against each other. In its Cross-Claim against Reynolds, the Bank referred to the applicants’ allegations against it, and against them. It claimed, pursuant to Part IV of the Wrongs Act 1958 (Vic) (“the Wrongs Act”), “or alternatively at law” to be entitled to an indemnity or to contribution from Reynolds –
… in respect of any sum which the applicants may recover against the first respondent to the extent that such amount may be found by the Court to be just and equitable having regard to the extent of the responsibility of the second respondent and/or the third respondent for such damages on the grounds that by his or her acts the second respondent and/or the third respondent caused or alternatively contributed to the loss and damage suffered by the applicants.
Reynolds made a corresponding and, it seems to me, almost identical, Cross-Claim against the Bank.
19 What occurred on 3 May 2007, the adjourned date for the Bank’s Notice of Motion, was described by Weinberg J at par 18 as follows:
On 3 May 2007 Dr Harald Smolle appeared in person to seek an adjournment. As at that date the Smolles had not engaged new solicitors. I ordered that the matter be further adjourned to 6 June 2007, after being assured by Dr Smolle that he and his wife would retain new solicitors. I made a self-executing order which required the Smolles to file and serve a notice of change of solicitor by no later than 3 June 2007, failing which their application would be dismissed. I again ordered the Smolles to pay the respondents’ costs on an indemnity basis.
20 By 6 June 2007, the applicants were again represented by new solicitors. Weinberg J then adjourned the Bank’s Notice of Motion to 2 August 2007, and ordered the applicants to file and serve any further list of documents by 29 June 2007, a draft Further Amended Statement of Claim by the same date and any further affidavits upon which they intended to rely at trial by 20 July 2007. The applicants did file (on 3 July 2007) a draft Further Amended Statement of Claim, and two further affidavits upon which they proposed to rely at trial. However, according to his Honour:
When this matter next came before the Court, it was apparent that two previous affidavits upon which the Smolles had sought to rely, and the two new affidavits which they had just filed, were in a form that was entirely unacceptable. For example, there was no attempt to set out in direct speech what discussions had taken place between representatives of the bank and the Smolles, merely their general impressions of what had been said. No documents were exhibited to the affidavits. However, reference was made in the vaguest of terms to a number of documents that were said to be of critical importance. The affidavits were also replete with hearsay. This made it difficult to determine whether the Smolles actually had a case or not. It also made it difficult for the respondents to know how to meet any such case.
In the circumstances, Weinberg J arranged for the first applicant (who was going to be the main witness on behalf of the applicants) to give evidence in chief on oath, setting out his version of events in detail. That evidence would stand in the place of an affidavit. That occurred on 25 September 2007, at which time the first applicant was extensively questioned by his own counsel.
21 The Bank’s Notice of Motion eventually came before Weinberg J on 18 October 2007. It was no part of the Bank’s case that the applicants’ claims be summarily dismissed because of the inevitability of its defence based on the deed of release succeeding. However, his Honour raised the matter of the deed, and counsel for the Bank said that it was “a total answer”. His Honour then asked counsel where it would leave the Bank if the deed were a complete answer to the applicants’ case against it. Here his Honour had in mind the Bank’s position apropos Reynolds’ Cross-Claim. There followed an exchange between his Honour and counsel as to where the Bank would be left, in the course of which counsel said that she was “not focussing on the deed of settlement [sic] this morning”.
22 In his reasons for judgment of 7 November 2007, his Honour summarised the submissions made on behalf of the Bank. That summary was as follows (at pars 25-29):
Ms Loughnan, counsel for the bank, submitted that the entire proceeding against her client should be summarily dismissed as disclosing no cause of action. She noted that it had been extraordinarily difficult for the bank to obtain proper particulars of loss and damage from the applicants, and submitted that the latest version of the statement of claim was no better, in that regard, than the two earlier versions. She submitted that the Court should refuse leave to file and serve the proposed further amended statement of claim for that and other reasons.
Ms Loughnan raised a number of objections to the proposed new pleading. These turned mainly upon a lack of adequate particulars, though there were some points of greater substance. She referred to the deficiencies in the various affidavits that had been sworn by the applicants, both those sworn in November 2006 and those sworn in July 2007. She complained about the applicants’ failure to give proper discovery. She noted that there were significant discrepancies between the accounts given by the Smolles in their November 2006 affidavits, and in their later affidavits. She also noted that Dr Smolle had departed from the evidence which he gave in his earlier affidavits during the course of his evidence before me.
Ms Loughnan complained that the applicants had never adduced evidence of any additional tax that they had been obliged to pay in Austria, though they claimed that tax as one limb of their loss and damage. She complained that they had provided no satisfactory explanation as to why they had waited more than four years to redeem their investment in the Bond. She also reminded me of the many indulgences that I had granted the applicants to enable them to put their case in order, and of their repeated failure to do so.
Ms Loughnan went further and submitted that it was evident from Dr Harald Smolle’s first affidavit, in November 2006, that his real grievance against the bank was that it had informed the Austrian tax authorities about the investment in the Bond. He stated that he was unhappy about the bank’s conduct because it had assured him that his affairs would remain secret.
Ms Loughnan submitted that I should infer that the Smolles had sought such an assurance of secrecy from the bank because they were engaged in defrauding the Austrian revenue. She submitted that the Court should take a strong stance against such conduct, and that it should mark its disapproval of what the Smolles had sought to do by dismissing their application.
MR WILLIAMS: So, I’m in a situation of having one party responsibly advised saying to me it is, and one party responsibly advised saying to me it’s not, where the same issues are going to be agitated before the court in any event, and where I say I don’t want to abandon my case against the ANZ on the grounds that it’s so obviously a complete bar that it’s unarguable, and then find that, at trial, Mr Meyer’s client succeeds in an argument that actually – well, that it was all based on a misinterpretation, it’s actually not a bar at all, and my case against him is misconceived on that basis.
HIS HONOUR: But if I were of the view now that the ANZ has a complete answer through the deed of settlement, what would be my responsibility in those circumstances? Plainly, it would be to dismiss your application against the ANZ.
MR WILLIAMS: If your Honour was minded that the matter was beyond doubt
HIS HONOUR: If all the other points were, as it were, run-able or arguable but there was no answer to the deed of settlement point, then the solution would be, as far as the ANZ are concerned, that they would be let out, as against your client – they would still be here by virtue of a cross-claim as a result of your action against the solicitors.
MR WILLIAMS: If it was beyond doubt, yes, that’s so, your Honour. But it would have to be, in my respectful submission, absolutely beyond doubt.
HIS HONOUR: What argument would you advance to say that upon the proper construction of the deed of settlement, it doesn’t constitute a bar to your action?
MR WILLIAMS: Well, I will need to get it out, your Honour. It’s not a very well drawn document, with respect, and it’s not easy to deal with. Could I just have a moment to get it out?
…
HIS HONOUR: It’s a series of recitals. I think it’s about the second recital that might be important.
MR WILLIAMS: Yes. Yes, the issue is about what the claim is.
HIS HONOUR: It’s defined.
MR WILLIAMS: It’s defined as:
…have claimed against ANZ compensation in relation to our investment in the ANZ balanced trust investment number, and our investment into the PSB growth investment contract.
HIS HONOUR: So the claim covers both the balanced fund
MR WILLIAMS: Yes.
HIS HONOUR: and the superannuation bond, as defined.
MR WILLIAMS: Yes. Yes:
… compensation in relation to our investment.
And what I would submit about that, your Honour, is that it’s not at all clear, from that description of the claim, that it’s wide enough to capture all pre-existing advice, including advice as to taxation matters given by Ms Santa-Maria and Mr Germein. It could be no more than compensation arising out of the investment performing poorly.
HIS HONOUR: But Dr Smolle had said that his complaints against the ANZ Bank, as passed on to the ANZ Bank, related to two matters. The first was the decision to put the money into the balanced trust; and the second was the decision to put the money into the superannuation bond. He said he had discussions and negotiations about settling the matter, and he was offered a particular sum; but both limbs, both things, were matters that agitated him, and he was concerned about them, and they were his claim.
MR WILLIAMS: Yes.
HIS HONOUR: Now, this document says that:
We have received from the ANZ a cheque in the sum of 2000, representing the final distribution in the balanced trust, and that ANZ will pay to us the sum of 7600 less the final distribution referred to in clause I, in full and final settlement of the claim –
full and final settlement of the claim –
as defined in paragraph (b), the claim being the claim as defined, namely, a complaint about the investment in the balanced fund and our investment into the superannuation bond.
What could be clearer?
MR WILLIAMS: Well, it would be clearer if it defined what complaints are being covered. And one has to bear in mind that this is a settlement which was reached while the moneys were still in there, and they continued to be in there for some time thereafter. So that one could also argue that the continuing claim was not one which was settled.
HIS HONOUR: It might be a very bad deal as far as the Smolles are concerned. It might be they were badly advised by their solicitors. It might be they shouldn’t have gone near signing this document, but the document itself, on a reasonable interpretation, seems to encompass both limbs; namely, the claim in relation to putting them into the balanced fund, and the claim in relation to putting them into the superannuation fund.
MR WILLIAMS: Yes, but what I’m saying, your Honour, is that the claim in relation to putting them into it might be different from the claim in relation to prior advice about its efficacy as a taxation – or final taxed – however one expresses that conclusion, “The only tax you will pay is” – that’s contained in the letter from Ms Santa-Maria in June.
HIS HONOUR: You have to interpret a deed of this kind in the way that ordinary business people would do, don’t you?
MR WILLIAMS: Yes.
HIS HONOUR: Isn’t that the principle that governs the interpretation of contracts and deeds of this type?
MR WILLIAMS: Yes. It’s an objective test.
HIS HONOUR: Objective test. And you say that the ordinary bystander, aware of these facts, would conclude that no part of this settlement reached by signing this deed of release accommodated losses incurred or to be incurred from being put into the superannuation bond?
MR WILLIAMS: I don’t think I could go that widely, your Honour. But it’s a different matter to say that it encompasses all such losses, whether already incurred or to be incurred; and it’s also a different matter to say whether it encompasses losses arising from bad prior advice.
HIS HONOUR: The bad prior advice is inextricably linked to the decision to put the money into the superannuation bond, isn’t it? You can’t really artificially hive those two off.
MR WILLIAMS: It’s difficult, your Honour.
HIS HONOUR: It is.
MR WILLIAMS: I don’t know that I can put it any more highly than that.
HIS HONOUR: No, but that’s what’s troubling me, that there’s a pretty powerful argument – whether it’s irresistible or not may be another matter of debate – a pretty powerful argument in favour of the ANZ Bank on their construction of the deed.
MR WILLIAMS: One can see the argument, your Honour.
…
HIS HONOUR: But I’m trying to understand the alternative, plausible construction, and what you say is that the ordinary business person plausibly might have understood this deed of [release] to cover only such losses as were incurred up to the time that the deed of release was signed, but to leave the ANZ Bank exposed to an action for future losses arising out of the investment into the superannuation bond. That’s your submission.
MR WILLIAMS: Yes.
24 At the conclusion of the hearing on 18 October 2007, Weinberg J indicated that the Bank had not, in the case upon which its Notice of Motion was based, satisfied the demanding test for the summary dismissal of the proceeding under O 20 r 2. His Honour then made the following pronouncement:
But, on the other hand, it seems to me the deed of release is in a different category, and I just think it’s unarguable; the deed of release doesn’t provide an answer to the claim against the bank, and that leaves your claim against the solicitors to be pursued, and it will be pursued, as far as I’m concerned. I will give reasons, brief reasons, for this ruling on the motion and hear further arguments about costs and various other matters at a later time.
What his Honour intended by so much of the first sentence of this passage as is divided by the semicolon was that it was unarguable that the deed did not provide an answer to the claim against the Bank. By “your claim against the solicitors”, his Honour meant the applicants’ claim against Reynolds. After a short exchange with counsel as to procedural matters, his Honour said:
So, as I say, within about a fortnight or so I will publish short reasons for judgment. Those reasons will set out why I think the deed provides a complete answer to the claim against the bank.
His Honour emphasised that the dismissal of the case against the Bank was not an excuse “for doing nothing”, and counsel for the applicants said that he regarded it “as an encouragement to do something, because I know that I’ve got a case to run”. His Honour continued:
Well, it’s a strong encouragement, because this matter is going to proceed as against the solicitors, and therefore you will need to get your case in order in terms of proper particulars. You will need to get whatever evidence that’s going to be adduced in support of your case, at least, organised, assembled, and identified.
25 Weinberg J gave his reasons, and made his formal orders, on 7 November 2007. In those reasons, his Honour noted that, in its Defence, the Bank had alleged that the applicants had claimed against the Bank compensation in relation to the balanced trust investment and the superannuation bond, and that they had released the Bank from any further claim or demand which was in any way related to, connected with, or arose out of, those claims. His Honour continued at par 31:
In earlier submissions, Ms Loughnan had argued that because of the Deed of Release, if for no other reason, the Smolles’ case against the bank was clearly foredoomed to fail. That submission was consistent with the original defence which contended that by reason of the Deed of Release the Smolles were estopped, barred and/or excluded from making the claims for loss and damage. Ms Loughnan submitted that the only possible construction that could be given to the Deed of Release was that it reflected a complete settlement of all matters in dispute between the Smolles and the bank. In effect, the Smolles had signed away any rights they may have had to be compensated by the bank for losses incurred by reason of both the balanced trust investment and the Bond.
26 Weinberg J then considered the terms of the draft deed of release forwarded by the Bank on 19 July 2001 and of the final version of the deed of release as executed by the applicants. He considered the applicants’ letter to Reynolds of 11 February 2002, and Reynolds’ letter to the applicants of 11 March 2002. His Honour then set out all but the first paragraph of the exchange which he had with counsel for the applicants as set out in par 23 above.
27 His Honour considered the principles which applied to the construction of deeds, particularly deeds of release. He considered Grant v John Grant & Sons Pty Ltd (1954) 91 CLR 112, Commonwealth Development Bank of Australia Limited v Kok [2003] FCA 90, Torrens Aloha Pty Ltd v Citibank NA (1997) 72 FCR 581 and Banque Bruxelles Lambert v Australian National Industries Ltd, an unreported judgment of the New South Wales Court of Appeal given on 26 February 1997.
28 Weinberg J concluded this part of his reasons in the following terms:
The principles established by these authorities illustrate why, on 18 October 2007, I concluded that the bank was entitled to rely upon the Deed of Release as a complete answer to the Smolles’ claim against it. I rejected Mr Williams’ attempt to read the Deed of Release down so as to cover only the balanced trust investment and those losses incurred by reason of the investment in the Bond prior to the execution of the Deed. I could see no basis for reading the Deed of Release as permitting the Smolles to sue for future losses arising out of their investment in the Bond. Mr Williams’ submission seemed to me to involve an artificial and entirely implausible interpretation of the plain language of the Deed of Release, and the clear and unambiguous definition of the “claim” that was to be settled by it.
Mr Williams’ submission also seemed to me to be inconsistent with the “surrounding circumstances”. The bank clearly intended that any settlement should apply to all claims made by the Smolles, including their claims in relation to the Bond. Notably it had rejected the amended version of the Deed of Release, executed by the Smolles on 16 August 2001, which sought to exclude certain transaction costs in relation to the switch from the balanced trust to the Bond. Reynolds Lawyers’ letter of 11 March 2002 stated that the variations to the Deed of Release were “unacceptable” to the bank. As finally executed on 25 March 2002, the Deed of Release dealt specifically with the Smolles’ claim against the bank for “compensation in relation to” their investment in the balanced trust and the Bond.
Having regard to the plain language of the Deed of Release, and the surrounding circumstances, I am of the view that the principles expressed in Grant v John Grant cannot be invoked to exclude any of the Smolles’ claims in relation to the Bond from the settlement.
It was on this basis that I indicated that I would summarily dismiss the Smolles’ claim against the bank, and provide reasons at a later date. However, I made it plain that I would do so solely on the basis of the Deed of Release, and not by reason of any of the other matters upon which Ms Loughnan relied.
29 For the reasons which he gave, Weinberg J dismissed the applicants’ proceeding as against the Bank, pursuant to O 20 r 2 of the Rules of Court. On the same day, the applicants’ then solicitors emailed his Honour’s judgment to the applicants’ tax adviser in Austria, and said that they, together with counsel engaged by the applicants, would “review the judgment and prepare a strategy for the 19 November 2007 directions hearing”. The judgment did come to the attention of the applicants either on 7 November, or thereabouts.
30 The proceeding next came before Weinberg J for directions on 19 November 2007. His Honour gave directions for the exchange of submissions with respect to the Bank’s claim that its costs be paid on an indemnity basis. His Honour directed that, on or before 29 February 2008, the applicants file and serve their expert evidence, their affidavits and particulars of their loss and damage. Directions were made for Reynolds to file and serve their expert evidence, and their affidavits, by 18 April 2008. That directions in these terms should be made was substantially a matter of consensus. In the course of that directions hearing, counsel for the Bank indicated that she was not involved in the matter of the further procedural directions for the conduct of the case. The basis of that submission, fairly obviously, was that the applicants’ claim as against the Bank had just been dismissed. However, Weinberg J indicated to counsel that her client was “still in this case”. In response, counsel referred to what was described as an arrangement between the Bank and Reynolds “that once the appeal period has expired, each party will be filing Notice of Discontinuance in relation to the Cross-Claims”. His Honour said, “for the moment anyway you are still in this case”, and, after a brief comment by counsel for the Bank, counsel for the applicants said: “On my present instructions, your Honour, I have no reason to think that is going to change if that is the criterion.”
31 By notices filed on 16 January 2008, the Bank and Reynolds discontinued their Cross-Claims against each other.
32 On 25 November 2007, the first applicant wrote a letter to the applicants’ then solicitors, which contained certain adverse reflections as to the applicants’ experience with the Bank, and in which the writer said: “We cannot and will not accept these permanent wrong decisions by a Federal Court Justice and therefore you have to lodge an appeal in relation to miscarriage of justice ….” By letter dated 26 November 2007, the applicants’ solicitors referred the substance of that letter to counsel engaged on behalf of the applicants, and sought advice on a number of matters, including whether an appeal ought to be lodged against the judgment of Weinberg J dismissing the applicants’ case against the Bank. By letter dated 4 December 2007, the solicitors passed on to the applicants counsel’s estimate of the costs of providing that advice, and required the applicants to provide funds. It seems that those funds were subsequently provided. In an email to the applicants’ solicitors sent on 22 February 2008, counsel confirmed his view “that an appeal is hopeless and should not be brought”. He said that he would shortly provide his detailed reasons in writing.
33 At the directions hearing on 19 November 2007, Weinberg J had proposed that the applicants and Reynolds should consider mediation. In the months following, there was some correspondence between the applicants and their solicitors on this subject, but the applicants were insistent that an appeal be lodged against his Honour’s judgment in favour of the Bank, and that, before there was any such mediation as his Honour had proposed, there should be a meeting by way of “pre-mediation”, which was also attended by representatives of the Bank. The applicants received advice from their solicitors that the presence of the Bank at any subsequent mediation would be irrelevant to the matters remaining in dispute. It seems that the applicants’ counsel provided his formal advice against the lodgement of an appeal in about mid-March 2008, since, by letter dated 17 March 2008, the applicants were advised by their solicitors that they, and counsel, took the view that an appeal should not be commenced because it would not be successful. For various reasons, the relationship between the applicants and their solicitors deteriorated, and, by letter dated 27 March 2008, the applicants terminated their solicitors’ retainer. On 16 April 2008, those solicitors filed a notice that they had ceased to act for the applicants; and they filed also an affidavit referring to the attempts which the applicants had made to engage new solicitors, and to advice which they had received from the proposed new solicitors that they did not act for the applicants.
34 The applicants did not comply with the court’s directions, given on 19 November 2007, that they file their expert’s material, affidavits and particulars by 29 February 2008. On 21 April 2008, Reynolds filed a Notice of Motion, returnable on 5 May 2008, that the proceeding be dismissed for want of prosecution. When the matter came before Weinberg J on the latter date, the applicants were no longer legally represented, and the first applicant appeared for himself with the assistance of an interpreter. Because of the nature of the complaint made by the applicants as to his Honour’s judgment of that date, it will be necessary to refer to the course of the hearing of the Notice of Motion in some detail.
35 His Honour commenced by noting that the applicants had terminated the retainer of the solicitors by whom they had been represented on the previous occasion. He said that he had a note indicating that the applicants were going to retain a Sydney firm, Thomson Playford. He said that that firm had not filed a notice indicating that they acted for the applicants. He said that they regarded themselves as conflicted, that they had endeavoured to find other solicitors for the applicants, but that that endeavour had been unsuccessful. The first applicant explained some problems which he had had with his solicitors in 2006, and there was a short exchange as to whether the applicants had, at some point, objected to his Honour hearing the case.
36 Weinberg J noted that the applicants had not filed and served an expert’s report by the date specified in the orders which he had made on 19 November 2007, and asked the first applicant whether that meant that he did not propose to rely upon the report of an expert. The first applicant replied “quite the contrary”. His Honour asked the first applicant why the evidence in chief of the applicants’ Austrian tax adviser had not been filed as ordered. The first applicant said that his former solicitor “is collaborating against me and not submitted these documents by the end of February”. He gave the same answer to his Honour’s question as to why particulars of loss and damage had not been filed by the end of February. When his Honour asked him whether the explanation for the applicants’ failure to comply with the court orders was that their former solicitors “did not carry out their task properly”, the first applicant replied “yes, in most dramatic fashion.” Weinberg J then said:
Mr Smolle, you’ve been told by me repeatedly that you cannot conceivably run this litigation yourself without legal representation and I’ve told you that face to face on a number of occasions. Not only do you not speak English but you also have no knowledge or understanding of the way in which Australian courts operate.
The first applicant said that he had dismissed his solicitor because he had not filed the documents by the end of February, as previously ordered by his Honour.
37 The exchange between Weinberg J and the first applicant then moved to the matter of the applicants’ attempts to engage new solicitors. The first applicant suggested that he would submit “the entirety of the correspondence” between the solicitors he was attempting to engage, Thomson Playford, and himself. His Honour made the point that Thomson Playford did not act for the applicants, to which the first applicant responded that he has “a valid and current contract” and that the applicants’ file was currently located at the premises of Thomson Playford. His Honour then had the first applicant confirm that his position was that Thomson Playford were contractually obliged to act for the applicants, notwithstanding that they had purported to decline to do so, on grounds of conflict of interest.
38 His Honour then received submissions from the solicitor appearing for Reynolds. The latter confirmed that, during February and March 2008, he and the applicants’ then solicitor had corresponded by email and telephone in an attempt to arrange a date for a mediation. That was why no steps had been taken on behalf of Reynolds to find out why the applicants had not complied with his Honour’s order to file documents by 29 February 2008.
39 The first applicant then made further submissions. He said that he had in his possession an expert’s report made by an accountant based in Melbourne and, when asked by his Honour why that report had not been filed, the first applicant replied that the failure to file the report was the reason why he had dismissed his former solicitors. With the consent of Reynolds’ solicitor, his Honour read the report, and marked it for identification. The first applicant produced also a document from his Austrian tax adviser, which was also read by his Honour and marked for identification. A letter from a certified financial planner also produced by the first applicant was dealt with in the same way. Weinberg J told the first applicant that he required an explanation as to why the orders of 19 November 2007 had not been complied with. The first applicant said that he was aware that the applicants were required to file affidavits and experts’ reports by the end of February, and that his former solicitors’ failure to do so was the reason why he dismissed them.
40 His Honour asked the first applicant whether he was aware that there was a possibility of a further mediation, after which the interchange proceeded as follows:
[FIRST APPLICANT]: I requested a mediation in a letter from November, that the mediation were to take place prior to Christmas. If the ANZ is not dismissed from this ---
HIS HONOUR: Your claim against the ANZ has been dismissed, Mr Smolle, I understand that. That’s because you settled with the ANZ. The remaining claim that you have is a claim against your solicitors, basically, for negligence.
[FIRST APPLICANT]: Yes, and I appealed against that, against his decision.
HIS HONOUR: You appealed against what decision, you appealed against my judgment? Have you brought an appeal against my judgment of November of last year?
[FIRST APPLICANT]: Yes.
HIS HONOUR: When is that appeal going to be heard?
[FIRST APPLICANT]: He didn’t do that either.
HIS HONOUR: You told him to appeal, but he hasn’t lodged an appeal.
[FIRST APPLICANT]: Yes, in writing.
HIS HONOUR: You told him, you instructed your solicitors to bring an appeal against my judgment, but no appeal has been filed so far as I’m aware?
[FIRST APPLICANT]: Yes, that’s correct, that’s quite – that’s what I wrote to him, and that’s why due to his legal inactivity I sacked him.
HIS HONOUR: Yes.
The first applicant said that he was “always in favour” of mediation. He said he had, in correspondence to the interpreter engaged at the time, confirmed that he would be attending a mediation on 2 May 2008.
41 His Honour then turned to the solicitor for Reynolds, and confirmed that the date of 3 May 2008 had been fixed for a mediation. After some further exchange on that subject, his Honour said to the solicitor for Reynolds:
Mr Meyer, the sense I’m getting is that quite a lot was done by Mr Muir in February, March towards progressing a mediation to the point that even the availability of counsel was arranged, that expert reports were obtained, but never ultimately filed, and that there’s been a complete falling out between Dr Smolle and his former solicitor to the point where Dr Smolle has now reached a stage where he believes, whether justified or not, that his solicitor has been actively working – former solicitor was actively working against him.
His Honour inquired whether it might be possible for the mediation to proceed that very week, to which the first applicant responded, “[a]ny time”. The solicitor for Reynolds said that it would be difficult, and referred to the fact that the applicants’ expert’s report, marked for identification, apparently fixed the applicants’ loss and damage at a higher figure than had previously been mentioned. The following exchange then occurred between his Honour and that solicitor:
HIS HONOUR: I’m not concerned with the figures, as I say, Dr Smolle’s figures may amount to a vast overstatement of his claim. The only question in my mind is whether there would be any utility in having some discussions if it became obvious to Dr Smolle that those figures just aren’t on the table.
[REYNOLDS’ SOLICITOR]: My concern is that it would not be – there would be little utility without ---
HIS HONOUR: There would be utility in a mediation if it were to occur in a few weeks time.
[REYNOLDS’ SOLICITOR]: If, in my submission, Dr Smolle has got legal advice on what may or may not be ---
HIS HONOUR: Realistic.
42 In the light of that exchange, his Honour informed the first applicant that he could not pursue his case without lawyers in Australia. The first applicant responded that he had a lawyer. His Honour said that he did not have a lawyer “at the moment as far as the court is concerned”. The first applicant said that “this is illegal”. His Honour reiterated that, since there was no lawyer on the court file representing the applicants, the fact was that they did not have a lawyer. He said that the court would not allow the matter to drag on for weeks, months or years while the applicants sorted out their dispute with Thomson Playford. He noted that Thomson Playford were the “sixth set of solicitors” that the applicants had had. The first applicant said that he had paid those solicitors, to which his Honour responded:
I don’t care whether you’ve paid them or not. The fact is every time you retain a firm of solicitors, you have a falling out with them and you terminate their retainer. Every time.
The first applicant said that it was “illegal” for Thomson Playford to have performed “a check for conflict of interest after having entered into the contract”. His Honour responded:
I’ve tried to explain to you at least three times. Please listen. Any dispute that you have with the firm of Playford in Sydney doesn’t concern me in the slightest. They do not represent you; they will not represent you. You are not presently represented. Now, you may sue them, you may take proceedings against them, you may complain to various regulatory bodies, but as things stand, you do not have solicitors. All you’re telling me is that you do have solicitors and they are the firm of Playford. That is not helping your case.
After a further contribution from the first applicant which was, in my assessment, unhelpful, and does not need to be set out, his Honour gave judgment for Reynolds on their Notice of Motion.
43 In his settled reasons for that judgment published on 5 May 2008, Weinberg J referred to the applicants’ failure to comply with his Honour’s orders of 19 November 2007, and observed that the applicants had never, so far as he could recall, “complied in a timely and proper manner” with any orders or directions which he had made or given. His Honour noted that the applicants had by then retained and dismissed “at least six sets of solicitors”. His Honour continued:
Dr Smolle is resident in Austria, speaks little English, and has no knowledge of Australian court procedures. He has been told repeatedly over the past three years that he cannot hope to conduct this complex litigation himself and that he must ensure that he has adequate representation and complies with court orders. Virtually every time the matter has come back before me, his last set of solicitors has either had their retainer terminated or elected to walk away from this proceeding.
Having heard the submissions advanced by Dr Smolle this morning, and those put forward by Mr Meyer on behalf of the second and third respondents, I am entirely satisfied that this case now, finally, warrants summary dismissal. As indicated, there have been repeated failures on the applicants’ part to comply with court orders. Dr Smolle was given, even today, a last opportunity to indicate a capacity to retain future solicitors to pursue this litigation. He did not, and would not, avail himself of that opportunity. I have no confidence whatsoever, based on his current stance, that any solicitors will be able to work with him or that they would be likely to take on his case. It is entirely unfair to the second and third respondents to allow this proceeding to hang over their heads indefinitely.
In the circumstances, acting both under O 35A r 2(1)(a) of the Rules of Court, and under the court’s general power to dismiss proceedings for want of prosecution, his Honour dismissed the proceeding as against Reynolds.
THE APPLICATION REGARDING THE JUDGMENT OF 7 NOVEMBER 2007
44 O 52 r 10(2A) of the Rules of Court reads as follows:
Order 19 applies to an application under subrule (2), and the notice of motion must be filed:
(a) if the interlocutory judgment is in the nature of a decision on a question under Order 29 — within 21 days after the date on which the interlocutory judgment was pronounced; and
(b) in any other case — within 7 days after the date on which the interlocutory judgment was pronounced;
or within such further time as the Court or a Judge may allow.
Before me, counsel for the applicants submitted that Weinberg J’s judgment of 7 November 2007 was “in the nature of a decision on a question under Order 29” and that, therefore, the time within which an application for leave might have been made was 21 days. Quite where this would leave the applicants in the present matter is not clear, since their application for an extension of time was not filed until 3 June 2008. Perhaps the applicants would say that there is some significance in the circumstance that they instructed their solicitors to appeal on 25 November 2007 – within 21 days, but outside the seven-day period for which par (b) of the subrule provides.
45 However these considerations may be, I must say that I am quite unable to perceive how a decision might be “in the nature of a decision on a question under Order 29” unless it is in fact a decision on such a question. Order 29 permits the court to make orders for the decision of any question separately from any other question in a proceeding. A decision on a separate question pursuant to orders made under O 29 would be interlocutory in the sense that it would not, or at least would not necessarily, fully determine the justiciable claims in the proceeding. However, such a decision would resolve some part of the substantive issues in the proceeding, and do so in a binding way. Order 52 r 10(2A)(a) recognises that, in such circumstances, it is appropriate to give an intending appellant the same period within which to challenge the decision as he or she would have in the case of an appeal as such. In the present case, no order was made for the separate decision of any question. I appreciate that the approach taken by Weinberg J on 18 October 2007 might have lent itself to the O 29 approach, but that was not what actually happened. In the circumstances, I would reject the submission that par (a), rather than par (b), of O 52 r 10(2A) governed the applicants’ obligations in the matter of seeking leave to appeal.
46 Paragraph (b) of O 52 r 10(2A) requires a Notice of Motion for leave to appeal to be filed within seven days after the date upon which the interlocutory judgment was pronounced “or within such further time as the Court or a Judge may allow”. The applicants apply for further time to file their Notice of Motion for leave. As the case was argued both on behalf of the applicants and on behalf of the Bank, the significant questions which arise concern the merits, or prospects, of the proposed appeal, the explanation proffered for the applicants’ failure to file the Notice of Motion within the time limited by the Rules, and the nature and extent of the prejudice, if any, which the Bank stands to suffer if further time be allowed.
47 On the matter of prospects, the questions which would arise on the application for leave are whether the judgment of Weinberg J dismissing the proceeding as against the Bank was attended by sufficient doubt to warrant reconsideration by a Full Court, and, if so, whether substantial injustice would be caused to the applicants if leave to appeal were refused, assuming the decision below to be wrong: Decor Corporation Pty Ltd v Dart Industries Inc (1991) 33 FCR 397, 398. In the present case, the question decided by the primary Judge was whether the applicants’ case disclosed no reasonable cause of action, was frivolous or vexatious, or was an abuse of process, within the meaning of O 20 r 2(1) of the Rules of Court. The power to dismiss a proceeding under that rule should be exercised only with exceptional caution, and should never be exercised unless it is clear that there is no real question to be tried: Webster v Lampard (1993) 177 CLR 598, 602. In the circumstances of the present case, therefore, the question before his Honour was whether it was clear beyond argument that the Bank would succeed in so much of its defence to the applicants’ claim as relied upon the deed of release.
48 Here the starting point must be the terms of the deed itself. The operative provision was that the applicants released the Bank “from any further claim or demand which in any way relates to or is connected with or arises out of the Claim”. By Recital B, “the Claim” was the claim which the applicants had made against the Bank in relation to the balanced trust investment and the superannuation bond investment. It should be noted that the further claims and demands from which the applicants released the Bank were those which related to, were connected with, or arose out of, the claim, not those which related to, were connected with, or arose out of, the investments or either of them. It seems that, at the time of the execution of the deed, the only claim which the applicants had made for compensation in relation to the superannuation bond investment concerned the losses allegedly suffered as a result of the transaction costs incurred in switching into that investment from the balanced trust investment. There was no claim as to the inappropriateness of the superannuation bond investment as such, or as to the quality of the advice given by the Bank in that regard. The applicants’ claim that the Bank was in breach of various duties it owed to them when it advised them to invest in the superannuation bond, particularly with respect to its failure to warn them of the probable Austrian taxation consequences of that investment was, therefore, a “further claim or demand” within the terms of operative clause (a) of the deed. Had the matter proceeded to trial, therefore, the question would have been whether that claim (or demand) related to, was connected with, or arose out of, the claim referred to in Recital B. On the Bank’s application under O 20 r 2, it was not his Honour’s task to decide whether it was so, but, rather, to decide whether the contrary proposition was, in effect, not arguable.
49 As is clear from the reasons of Weinberg J, his Honour approached the question with reference to the well-established jurisprudence as to the construction of deeds of release, notably as enunciated in Grant. However, it should be borne in mind, in my respectful view, that the joint judgment in Grant recognised two distinct lines of jurisprudence in presently relevant respects. The first was that which is relevant to the construction of a deed of release, in the way of any other commercial document. As explained in the judgment, this concerns the construction at law of a deed of release. As noted by Weinberg J in the present case, their Honours in Grant expressly adopted the dictum of Lord Westbury in Director of the London and South Western Railway Co v Blackmore (1970) LR 4 HL 610, 623:
The general words in a release are limited always to that thing or those things which were specially in the contemplation of the parties at the time when the release was given.
Of that principle, their Honours in Grant said (91 CLR at 124):
The principles involved seem really to be no more than special applications of the very general principle expressed by Bacon : “It is a rule, that general words shall never be stretched too far in intendment, which the civilians utter thus : Verba generalia restringuntur ad habilitatem personae, vel ad aptitudinem rei.” (Bacon, Maxims of the Law, Regula III). “All words, whether they be in deeds or statutes or otherwise, if they be general and not express and precise, shall be restrained unto the fitness of the matter or person." (Ibid. Regula X).
The second line of jurisprudence to which their Honours referred in Grant related to what they referred to as construction in equity. Here the principle was stated as follows (91 CLR at 129-130):
… equity proceeded upon the principle that a releasee must not use the general words of a release as a means of escaping the fulfilment of obligations falling outside the true purpose of the transaction as ascertained from the nature of the instrument and the surrounding circumstances including the state of knowledge of the respective parties concerning the existence, character and extent of the liability in question and the actual intention of the releasor.
Although both principles are concerned with the construction of general words in a deed of release, the principle applied in equity is concerned essentially with the conscience of the parties to the deed, even in circumstances where a construction at law would result in a broad meaning being given to general words. For the Bank to make good its defence based on the deed in the present case, it would have to succeed as a matter of construction and avoid the intervention of equity in a way that precluded it from relying on the terms of the deed as so construed.
50 In the present case the nub of the constructional question would have been concerned with the familiar, but ever-difficult, legal jargon of connection – “relates to or is connected with or arises out of”. In his reasons for judgment of 7 November 2007, Weinberg J did not expressly consider the meaning or operation of this phrase. Indeed, as I read his Honour’s reasons, he seems to have taken the view that the claim being made by the applicants was one and the same as, or at least was entirely within the boundaries of, the claim referred to in the deed. If so, of course, the claim would not be a “further claim” within the meaning of operative clause (a) of the deed. However, I see nothing in his Honour’s reasons which recognises that the “Claim” as defined in the deed was a claim which had been made at the time of the execution of the deed, and that the claim then being pursued by the applicants was a claim which arose subsequently. Had he done so, his Honour would, in my respectful view, have been obliged to give explicit attention to the question whether the claim then being pursued related to, was connected with, or arose out of, the claim as defined in the deed.
51 Issues of the kind to which I have referred above are difficult ones, and it is not my function to go further than the minimum necessary to apply the test for leave to appeal as articulated in Decor v Dart. In that context, it is significant that the question before Weinberg J was not whether the applicants’ claim against the Bank was defeated by the deed of release: it was whether the contrary was unarguable. For reasons expressed above, I am persuaded that it was not, and that his Honour’s conclusion that the Bank was entitled to summary judgment under O 20 r 2 is attended by sufficient doubt to warrant reconsideration by a Full Court.
52 If the Bank argued that substantial injustice would not be visited upon the applicants if leave to appeal were refused, supposing the judgment below to be wrong, it did so faintly. Since his Honour’s judgment was a final one against the applicants, and prevented them forever from advancing claims against the Bank of the kind referred to in their Further Amended Statement of Claim, I would regard it as self-evident that such injustice would arise. I would hold, therefore, that the applicants would have a reasonable prospect of securing leave to appeal, should they be granted the extension of time which they now seek.
53 The next question is whether the applicants have advanced an acceptable explanation for their failure to apply for leave to appeal within the seven days limited by the Rules of Court. As noted above, the applicants’ representatives were on notice from the conclusion of the hearing on 18 October 2007 that their case against the Bank was going to be dismissed under O 20 r 2, because of the effect of the deed of release. Next, the applicants were informed, virtually immediately, of Weinberg J’s judgment of 7 November 2007. There was no direct evidence before me as to why no application for leave to appeal was filed within seven days of his Honour’s order (ie within 27 days after his Honour’s intimation on 18 October). The only comment apparently made to the applicants at the time by their then solicitors related to what might be done at the directions hearing listed for 19 November. From that comment, from the nature of the submissions made on behalf of the applicants on 19 November, and from the terms of the legal advice which the applicants later received as to the prospects of an appeal, it may be inferred that the applicants’ advisers from the outset took the view that an appeal would not succeed. If so, that may provide the reason why no step was taken within the seven days limited by the Rules, but it does not constitute an explanation for a failure to take that step against an assumed context that his Honour’s judgment was wrong and should be corrected. Indeed, if the applicants’ advisers considered that the judgment was right, and decided not to advise that an application for leave to appeal be filed, that would be the effective antithesis of an acceptable explanation for the applicants’ failure to take that step.
54 With respect to the applicants, I do not think it is acceptable merely to say that they always had it in mind to appeal (or to seek leave), and that it was only the failure of their advisers to act in accordance with their actual or assumed instructions that led to no step being taken within the time limited by the Rules. Although they were in Austria at the time, it was no part of the applicants’ case (and in any event I would not find) that they were disadvantaged by an inability to communicate or that they were generally naïve in matters of legal procedure. As to the latter, in oral evidence before me the first applicant made it clear that he was something of an experienced litigator and knew that appeals could be lodged against adverse court decisions and that there were, usually, time limits of some order in this regard. He claims (perhaps not unreasonably) that he relied on his Australian legal advisers to inform him of such matters, but it was not until 25 November 2007 that the applicants first intimated that they desired to appeal from the judgment of Weinberg J. Relevantly to the present point, what the applicants have put before me goes no further than to provide a statement of what happened: it does not justify the making of an exception to a time limit in the Rules which, prima facie, ought to be complied with.
55 This is not a case in which some mistake or oversight in the office of a legal practitioner, for example, is said to be responsible for the applicants’ failure to apply for leave within the time limited by the Rules. Although the period of seven days is short, there was no evidence that anyone on the applicants’ side was ignorant of that period, or assumed that the appeal period of 21 days applied in the circumstances. From what appears in the evidence before the court, it was never the intention of the applicants’ advisers that leave to appeal should be sought.
56 For the foregoing reasons, I am not persuaded that the applicants have an acceptable explanation for their failure to seek leave to appeal within the time limited by the Rules. This does not mean that their application for an extension of time must fail, since I have held above that an application for leave, if permitted to be made, would have a reasonable prospect of succeeding. However, the Bank has submitted that it would be prejudiced if time were extended, and that I should give weight to that element of prejudice in the exercise of my discretion.
57 The Bank submitted that, it having discontinued its Cross-Claim against Reynolds in January 2008 in reliance upon Weinberg J’s orders dismissing the proceeding as against it on 7 November 2007, any attempt now to claim contribution from Reynolds would be time-barred: see Wrongs Act, s 24(4). Counsel for the applicants accepted that that would indeed be the effect of s 24(4), but submitted that the Bank’s entitlement to contribution from Reynolds would not, in the circumstances of the case, be governed by Victorian law at all. He submitted that, since the applicants were in South Australia when they executed the deed of release and when they engaged, and received services from, Reynolds, it would be the law of that State that applied, and that the Bank’s claim to contribution would not be time-barred under s 6(4) of the Law Reform (Contributory Negligence and Apportionment of Liability) Act 2001 (SA). Counsel for the Bank accepted that s 6(4), if it applied, would permit the making of a claim for contribution against Reynolds, but submitted that it was not at all clear that the subsection would, under the relevant choice of law rules, be applicable in the circumstances.
58 It would clearly be inappropriate for me to attempt to determine how questions of the kind referred to in the previous paragraph would be resolved at trial. For one thing, Reynolds themselves would, presumably, have a deal to say about the availability of the Bank’s right to contribution from them, yet their counsel did not participate in the debate over the question, for the obvious reason that it does not arise for resolution in any issue to which his clients are presently a party. For another thing, it would be embarrassing, and therefore inappropriate, for me to determine such questions on an application for an extension of time when such determination might well differ from that ultimately made by the trial Judge. In like vein, counsel for the Bank submitted that it was none of the applicants’ business to purport to advise the Bank as to its prospects of successfully navigating a claim for contribution through the maze of limitation provisions arguably applicable, and that I should not decide the prejudice point adversely to her client’s interests unless such an outcome was clear beyond argument.
59 I think there is substance in the approach of counsel for the Bank. The Bank claimed contribution under Part IV of the Wrongs Act. It has discontinued that claim. It is common ground that that claim is now time-barred. I should not presume to advise the Bank as to avenues of securing contribution other than the one upon which it actually relied in its Cross-Claim. The fact is that the Cross-Claim, as made, would no longer be available. I should recognise this as a source of prejudice for the Bank, should the applicants be given an extension of time to institute a proceeding the point of which would be to reverse the judgment which the Bank obtained in November 2007.
60 The applicants’ own contribution to the circumstances in which the Bank would find itself if an application for leave to appeal were now to be permitted should also be taken into account. They, or at least their legal representatives, knew from 18 October 2007 that Weinberg J proposed to dismiss their proceeding against the Bank because of the terms of the deed of release. The orders made by his Honour on 7 November could have come as no surprise. As noted earlier in these reasons, at the directions hearing on 19 November, counsel for the Bank made it clear that, once the “appeal period had expired” (from which I infer that counsel was working on the basis of a 21-day period), the Bank would discontinue its Cross-Claim against Reynolds. Counsel for the applicants said that he had no reason to think that that was going to change (ie, as I read him, that no appeal would be lodged). The applicants thereafter implicitly permitted the Bank to work on the assumption that no appeal (or similar proceeding) would be instituted, knowing that the Bank intended to base its discontinuance of the Cross-Claim on that assumption. I appreciate, of course, that the applicants blame their then legal representatives for the omission to seek leave to appeal in a timely way, but that circumstance does not diminish their responsibility, vicarious though it may be, for the prejudice which the Bank would suffer if further time to file a motion for leave to appeal were now to be granted.
61 Counsel for the applicants also submitted that, even if the Bank’s claim for contribution were no longer available, it had (in its Amended Defence) relied on the proportionate liability provisions of s 24AI of the Wrongs Act. It was said that the operation of those provisions would effectively give the Bank the same end benefit as a successful claim for contribution against Reynolds. Counsel intimated that his clients would not object to the Bank relying on the corresponding provisions of South Australian legislation. In response, counsel for the Bank submitted that the Bank could expect the applicants to oppose the claim for proportionate liability, and that the claim was different from its original claim against Reynolds, even if the outcomes might have been similar. Here again, I would dispose of the submission by holding that to point to the potential for the Bank to achieve a reduction on the damages which it might otherwise be obliged to pay the applicants is no answer to the loss of something in the nature of a provisional cause of action against third parties, Reynolds. Neither should I exclude the fair possibility that the Bank’s ability to establish the culpability of Reynolds would be materially impaired if it were obliged to litigate the point without the participation of Reynolds themselves. I consider that the prejudice which the Bank would presumptively suffer if the applicants were now to be permitted to challenge his Honour’s judgment is not diminished in impact merely by the prospect of the Bank achieving a diminution of its liability to the applicants under the proportionate liability provisions referred to.
62 Taking account of all the matters to which I have referred above, I am not persuaded that the applicants should have the further time that they seek. Although they seem to have a case of some prospects, the question arising under O 52 r 10 (2A) is whether further time should be allowed, against a presumed circumstance that an intending appellant has an appeal worth prosecuting. In this respect, the explanation proffered for the failure to move within the time limited in the rule is important. As I have concluded above, the applicants’ explanation in the present case should not be regarded as acceptable. Further, I accept that the Bank would be prejudiced, to a degree at least, by an extension of time, and that the way the applicants conducted their case before Weinberg J has made some contribution to the cause of that presumptive prejudice.
63 For the above reasons, I propose to dismiss the applicants’ application to be allowed further time to seek leave to appeal from the orders made by Weinberg J on 7 November 2007.
THE APPLICATION REGARDING THE JUDGMENT OF 5 MAY 2008
64 The judgment given by Weinberg J on 5 May 2008 involved the exercise of a power under O 35A of the Rules of Court. His Honour dismissed the proceeding as against Reynolds because the applicants had failed to comply with orders of the court, or had failed to serve an affidavit or other document: see r 2(1)(a) and (d). His Honour also identified the relevant power as one to dismiss a proceeding for want of prosecution, that is to say, effectively by reference to par (f) of r 2(1). However it may be viewed, his Honour’s judgment of 5 May 2008 was one which involved the exercise of a judicial discretion which will be disturbed on appeal only if infected by error, such as by his Honour having acted upon a wrong principle, having taken extraneous or irrelevant matters into account, having mistaken the facts, having omitted to take some material consideration into account, or the like: House v R (1936) 55 CLR 499, 505. Additionally, his Honour’s judgment was upon a matter of practice and procedure, in which respect an appellate court will exercise particular restraint: Adam P Browne Male Fashions Pty Ltd v Philip Morris Inc (1981) 148 CLR 170, 177. All of this was accepted by counsel for the applicants.
65 It was submitted on behalf of the applicants that Weinberg J had fallen into identifiable error in the following respects. First, it was submitted that his Honour had shut the applicants out from advancing a fairly arguable case against Reynolds by preferring considerations of efficient case management to the interests of justice, contrary to the injunction of Dawson, Gaudron and McHugh JJ in State of Queensland v JL Holdings Pty Ltd (1997) 189 CLR 146, 155. Secondly, it was submitted that his Honour should have recognised that the dismissal of the proceeding as against the Bank was responsible for the “blow-up” which the applicants had experienced with their solicitors, and that this should have been regarded as a mitigating consideration apropos the applicants’ failure to comply with his Honour’s directions. Thirdly, it was submitted that his Honour ought to have viewed the applicants’ omissions more leniently because of the circumstance that they were taking active steps to have the dispute between themselves and Reynolds mediated.
66 As to the first matter, counsel for the applicants submitted that the fact that the first applicant appeared in person on 5 May 2008 should have made it overwhelmingly clear to his Honour that the applicants’ failure to comply with his orders of 19 November 2007 was, or at least might well have been, a consequence of their inability to secure legal representation, and was in no respect inconsistent with a conscientious approach by them to the taking of the necessary interlocutory steps in the proceeding.
67 The exchange which his Honour had with the first applicant on 5 May 2008, to which I have referred earlier in these reasons, makes it clear that, on that day, Weinberg J was fully alive to the predicament in which the applicants found themselves, and to the circumstance that that predicament most probably explained their failure to comply with the orders made on 19 November 2007. His Honour gave the first applicant every opportunity to demonstrate an ability, even then, to establish and maintain a professional relationship with Australian solicitors, but the first applicant’s only response was the quite unrealistic one that Thomson Playford were contractually obliged to represent the applicants, notwithstanding their conflict. That was never going to be a legitimate response to Reynolds’ motion. Weinberg J granted that motion because the applicants were unable, without representation, to conduct the litigation which they had commenced, and because his Honour took the view that there was no reasonable prospect that that state of affairs would change in the near future.
68 I would reject the submission that his Honour preferred efficient case management to the interests of justice. To the contrary, his Honour was, it seems to me, anxious to see that justice was done, but recognised that the achievement of justice was an objective which cut both ways. It was, I consider, implicit in his Honour’s approach that the applicants’ continued failure to comply with procedural directions was denying Reynolds the timely and just determination of the proceeding which had been brought against them.
69 As to the second matter, I do not accept that it should have been apparent to his Honour that it was the dismissal of the proceeding as against the Bank that led to the applicants’ difficulties with their solicitors. To the contrary, although the first applicant mentioned that he had instructed those solicitors to file an appeal, by far the substantial burden of the submissions he made that day was concerned with the solicitors’ failure to comply with the directions given on 19 November 2007. Those directions were made on the assumption that Weinberg J’s judgment of 7 November 2007 dismissing the proceeding as against the Bank was a closed event. The applicants’ case on 5 May 2008 simply was not based, either expressly or implicitly, on the proposition which they now, in this second point, say should have been apparent to his Honour.
70 As to the third matter, as I read Weinberg J’s indications on 7 May 2008, his Honour was prepared to treat the applicants’ omissions leniently by reason of the steps in which they had been involved to bring the proceeding to mediation. His Honour enquired whether a mediation might be conducted that week, while the first applicant was in Melbourne. However, the steps referred to had been taken on behalf of the applicants by solicitors whose retainer they had terminated. The solicitor for Reynolds made it clear that his clients were well-disposed towards mediation, but that, unless the applicants furnished themselves with legal representation, they (Reynolds) took the view that a mediation could not realistically occur. His Honour effectively accepted that submission, and nothing which has been put before me justifies the conclusion that he was, even arguably, in error to have done so.
71 Accordingly I reject each of the bases upon which the applicants submitted that his Honour’s judgment of 5 May 2008 was, or may well have been, infected by error. To the contrary, I consider, with respect, that that judgment was the obvious one to make in the circumstances which then obtained. His Honour had had direct experience, over many months, of the applicants’ failures to comply with directions. The fair and just resolution of their claims against Reynolds was, in effect, put on hold by those failures. When the matter came before his Honour, there appeared to be no light at the end of the tunnel. I consider that the circumstances which confronted him then were pre-eminently those to which the power referred to in O 35A is directed.
72 For the reasons set out above, I would hold that the judgment of Weinberg J given on 5 May 2008 is not attended by sufficient doubt to warrant reconsideration by a Full Court. Indeed, should it matter, I would express the view that his Honour’s judgment was attended by no doubt at all. If I were to grant the applicants the extension of time which they seek, I would dismiss their application for leave to appeal. In the circumstances, I see no point in granting the extension of time, and I consider that the matter is most appropriately disposed of by refusing to do so.
| I certify that the preceding seventy-two (72) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Jessup. |
Associate:
Dated: 18 July 2008
| Counsel for the Applicant: | Mr P Willis |
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| Solicitor for the Applicant: | Shayne Daley & Associates |
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| Counsel for the First Respondent: | Ms M Loughnan |
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| Solicitor for the First Respondent: | Deacons |
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| Counsel for the Second and Third Respondents: | Mr M Gronow |
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| Solicitor for the Second and Third Respondents: | Monahan & Rowell |
| Date of Hearing: | 10, 11, 14 & 15 July 2008 |
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| Date of Judgment: | 18 July 2008 |
