FEDERAL COURT OF AUSTRALIA Abriel v Australian Guarantee Corporation Ltd [2001] FCA 165 Trade Practices Act 1974 (Cth), s 51AA Evidence Act 1995 (Cth), s 38 Stead v State Government Insurance Commission (1986) 161 CLR 141 applied RUDOLPH ABRIEL, VERA ABRIEL and PREMIER KNITS PTY LIMITED v AUSTRALIAN GUARANTEE CORPORATION LIMITED and WESTPAC BANKING CORPORATION NG 1018 OF 2000 HEEREY, SUNDBERG and MERKEL JJ 2 MARCH 2001 SYDNEY IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY NG 1018 OF 2000 BETWEEN: RUDOLPH ABRIEL FIRST APPELLANT VERA ABRIEL SECOND APPELLANT PREMIER KNITS PTY LIMITED (ACN 005 879 920) THIRD APPELLANT AND: AUSTRALIAN GUARANTEE CORPORATION LIMITED (ACN 000 015 485) FIRST RESPONDENT WESTPAC BANKING CORPORATION (ARBN 007 457 141) SECOND RESPONDENT JUDGES: HEEREY, SUNDBERG and MERKEL JJ DATE OF ORDER: 2 MARCH 2001 WHERE MADE: SYDNEY THE COURT ORDERS THAT: 1. The appeal be dismissed. 2. The appellants pay the respondents' costs of the appeal. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY NG 1018 OF 2000 BETWEEN: RUDOLPH ABRIEL FIRST APPELLANT VERA ABRIEL SECOND APPELLANT PREMIER KNITS PTY LIMITED (ACN 005 879 920) THIRD APPELLANT AND: AUSTRALIAN GUARANTEE CORPORATION LIMITED (ACN 000 015 485) FIRST RESPONDENT WESTPAC BANKING CORPORATION (ARBN 007 457 141) SECOND RESPONDENT JUDGES: HEEREY, SUNDBERG and MERKEL JJ DATE: 2 MARCH 2001 PLACE: SYDNEY REASONS FOR JUDGMENT BACKGROUND 1 The following account of the circumstances leading to the dispute determined by the primary judge and of the claims made by the appellants are taken largely from his Honour's judgment. No exception was taken to his Honour's account. The first and second appellants ("the Abriels" or "Mr and Mrs Abriel") are married, and for present purposes can be treated as controlling Premier Knits Pty Limited ("the third appellant". In the early 1990s companies associated with the Abriels, including the third appellant, obtained finance from one or other of the respondents in circumstances that led to a legal dispute. The dispute was purportedly resolved by a deed of release dated 5 April 1994. In 1995 the appellants commenced fresh proceedings (NG338/95) to have the deed of release set aside and for other relief incidental to the causes of action that had been compromised by it. Those proceedings were purportedly compromised by a deed of settlement dated 28 April 1998 ("the deed"). Pursuant to the deed judgment was to be entered on the amended statement of claim in proceeding NG338/95 in favour of the respondents. The application and cross‑claim were to be dismissed with no order as to costs. The proposed orders were made on 8 May 1998. THE APPLICATION 2 In the application before the primary judge the appellants claimed an order setting aside the deed and the consent orders made pursuant thereto, a declaration that the deed was no bar to their prosecuting the claims pleaded in proceeding NG338/95 and damages. In substance the appellants' case was that the respondents were guilty of unconscionable conduct under the general law or pursuant to s 51AA of the Trade Practices Act 1974. Alternatively, it was alleged that the appellants had been subjected to undue influence exercised over them by their counsel, and that this conduct induced them to execute the deed. 3 The appellants claimed they were unable to afford legal representation in connection with proceeding NG338/95 and were, to the respondents' knowledge, relying upon their legal advisers not requiring payment unless and until proceedings were concluded in their favour. It was said that by early 1998 the respondents were also aware that the appellants had retained Ms Bennett SC on this basis. At that time the parties agreed to a mediation conference. It was alleged that the respondents agreed to participate only upon the condition that Ms Bennett represented the appellants. Mr Morling QC was mediator. The conference took place on 31 March 1998. The Abriels were present, and were represented by a solicitor, Mr Levitt, and by Ms Bennett. The respondents were represented by Mr Dowdy of counsel and his instructing solicitor, Mr Opperman. Mr Curd, a solicitor employed by the first respondent, was also present. 4 According to the Abriels, at some stage on 31 March, Ms Bennett and Mr Levitt told them they would not take the action to trial. The Abriels alleged that Mr Dowdy had caused Ms Bennett to withdraw from the case, and that the respondents, through Mr Dowdy, had deliberately acted to achieve that result and to cause Ms Bennett to persuade the appellants to accept terms of settlement offered by the respondents. The appellants alleged that they were thereafter unable to obtain other legal representation, and that Ms Bennett repeatedly advised them that they should accept the respondents' offer. On 28 April the appellants executed the deed, which reflected that offer, and the proceedings were discontinued. The appellants were paid $90,000. They alleged that in executing the deed they relied on Ms Bennett's advice and were influenced by the fact that they were unable to obtain alternative legal representation in the prosecution of the proceedings. They claimed that they had executed the deed without knowledge of Mr Dowdy's conduct or that such conduct had influenced Ms Bennett. 5 The appellants contended that the respondents "took advantage of the appellants' special disadvantage", thereby engaging in unconscionable conduct under the general law and/or contrary to s 51AA of the Act. Alternatively it was said that the appellants entered into the deed because of undue influence exercised by Ms Bennett and/or that the respondents knowingly caused her to breach her duty to the appellants to give legal advice free of any conflicting or potentially conflicting interests of her own without first disclosing that interest to them. FINDINGS OF FACT 6 The primary judge summarized in detail the evidence of the Abriels, Mr Levitt and Ms Bennett, and the less significant evidence of Mr Moses, an accountant advising the appellants who was also at the mediation, and Mr Johns a solicitor who was previously employed by the first respondent. The applicants, Mr Levitt and Ms Bennett are members of the Sydney Jewish community. In his evidence Mr Levitt said that in the course of the mediation, after speaking to Mr Dowdy, Ms Bennett said Mr Dowdy had just shown her a letter Mr Levitt had sent to another solicitor, Mr Gary Grunstein. Mr Grunstein was a potential witness and Mr Levitt's letter enclosed a draft of an affidavit he was being asked to swear. Mr Levitt's account of what Ms Bennett said was as follows: "Phillip [Dowdy] has just shown me a letter which Stewart sent to Gary Grunstein in which he talked about Rabbi Woolstone asking us to act for Rudi, as if there was some Jewish obligation to take on Westpac ‑ bringing to bear Jewish pressure on AGC and Westpac ‑ I don't know ‑ as part of some organized attack. It is really quite embarrassing. The suggestion that you and I have lent ourselves to some kind of Jewish attack on Westpac." Mr Levitt said that Ms Bennett later told him the letter had confirmed the correctness of her decision not to continue with the matter. Mr Abriel said that in June 1998 Mr Levitt told him of the conversation between Mr Dowdy and Ms Bennett in which he showed her the Grunstein letter. Ms Bennett recalled being shown the letter during the mediation. She scanned it but did not read it carefully. She did not pay a great deal of attention to it at the time as it had nothing to do with her or the mediation. She did not recall any specific discussion concerning it at the mediation. His Honour then summarized in detail the evidence of Mr Opperman, Mr Curd and Mr Dowdy. 7 The primary judge's findings and associated observations can be rendered in the following form: · It was inherently unlikely that an experienced barrister such as Ms Bennett, who had taken silk, would react in the dramatic way alleged by Mr Levitt simply because of the Grunstein letter. · The above finding was based in part on his Honour's observations of Ms Bennett as a witness. · Mr Abriel offered extreme and not always consistent views concerning Ms Bennett, and sought to maintain the almost impossible position that she was a victim of Mr Dowdy's misconduct, having virtually no responsibility for her own decision to withdraw from the case despite her alleged earlier undertaking. · The Abriels lacked any capacity for objectivity concerning the case, and it was likely that this incapacity affected their reliability as witnesses. · Mr Levitt's evidence was not entirely reliable. He seemed anxious to assist the appellants in a way that caused him to be unfair to others. Examples of this were his conduct in attributing Ms Bennett's withdrawal to the receipt of the Grunstein letter from Mr Dowdy and his criticism of Mr Dowdy's conduct. · Ms Bennett's evidence that she may have suggested that the Grunstein letter was embarrassing, but not that it was embarrassing to her, was preferable to Mr Moses' evidence that she told him she was embarrassed by it. · Ms Bennett was an honest witness. There was nothing in her demeanour to suggest she was concealing the truth in order to protect her own professional standing. · Mr Opperman's and Mr Dowdy's accounts of what happened were quite plausible. There was nothing in their demeanour to suggest that they, or Mr Curd, were other than truthful. · Mr Dowdy's account of the circumstances in which he came to disclose the Grunstein letter ‑ as an explanation to Ms Bennett as to why the respondents were taking an apparently intransigent position ‑ was "particularly plausible". · Mr Abriel received Mr Levitt's costs letter of 28 March 1998 with interlineations (including one stating that nothing in the costs agreement placed any party under an obligation to continue in a solicitor‑client relationship beyond 31 March 1998) before the mediation, and agreed with it before then. · In the light of the Abriels' awareness that Mr Levitt was not finally committed to the trial, it was difficult to see how they could have felt sure that Ms Bennett was so committed. · The primary judge preferred the evidence of Ms Bennett that at no time had she committed herself to take the matter to trial, to that of the Abriels and Mr Levitt. · The Grunstein letter had no effect on Ms Bennett at the time she glanced at it at the mediation. 8 Having made these findings the primary judge observed, especially in reference to the last five of them: "These conclusions mean that any conduct on the part of Mr Dowdy could not have had actionable consequences, but I do not leave the matter there. The allegation of premeditated action by him on behalf of the respondents might well be thought to reflect adversely on him, the respondents, Mr Opperman and Mr Curd. Yet there is, in the end, simply no evidence of any such action. The applicants' claim is based upon mere suspicion, raised, as I conclude, in the minds of the first and second applicants by Mr Levitt's disclosure to them of his own perceptions concerning the reasons for Ms Bennett's withdrawal, firstly in conversation, and then in his letter of 27 June 1998. At best for him, this perception was based upon a misunderstanding concerning Ms Bennett's commitment to the trial and an incorrect assumption as to the effect upon her of the Grunstein letter." 9 His Honour then went on to make some "peripheral observations", at the conclusion of which he made some additional "express findings of fact": · There was no evidence that any of the respondents, Mr Dowdy, Mr Opperman or Mr Curd desired that Ms Bennett should cease representing the appellants. The evidence suggested the contrary. · Mr Dowdy's disclosure of the Grunstein letter to Ms Bennett was motivated solely by his desire to demonstrate the reasons for the respondents' reluctance to pay money to the appellants in order to settle a claim which the respondents considered to be without merit. · Ms Bennett at no time committed herself to acting for the appellants at trial. Disclosure of the Grunstein letter had no effect upon her decision not to do so. · That disclosure had no relevance to, and no effect upon, any advice given by Ms Bennett to the appellants or her conduct of the mediation. · Ms Bennett gave advice to the Abriels in accordance with the certificate attached to the deed. · In entering into the deed the appellants did not act upon that advice. 10 The primary judge concluded his reasons with the following comment: "Clearly the Court has credited the applicants' claims with more substance and respectability than they have ever deserved. Unfortunately, in ensuring that meritorious claims are not shut out, we often permit unmeritorious claims to be ventilated. Further, in conducting the trial, I felt compelled to allow a certain latitude to the applicants, given that they did not have legal representation. Both in their evidence and in their conduct of the case, they were permitted to express speculative views concerning Mr Dowdy's conduct although they could not have known what he had said or done. Similarly, they were permitted to speculate concerning Ms Bennett's conduct. I regret that on this occasion, concern that the applicants should have an opportunity to vindicate their claims has resulted in the circulation of unsubstantiated allegations of misconduct against Ms Bennett, Mr Dowdy, Mr Opperman, Mr Curd and the respondents. Those allegations have been accorded an appearance of credibility which they do not deserve. I can compensate for that only by saying that they are without any substance whatsoever." GROUND OF APPEAL 11 Only one ground of appeal was pursued. This was that the primary judge denied the appellants procedural fairness in refusing to allow them to cross‑examine Ms Bennett. Two factual matters were said to be crucial to the outcome of the litigation. The first concerned whether Ms Bennett was prepared to take to trial on a pro bono basis a less complicated version of the total dispute between the parties. The Abriels' and Mr Levitt's evidence was that she said she was. Her evidence was that she made no such commitment and advised Mr Levitt, and possibly the Abriels as well, that she was not prepared to take that version of the dispute to trial. The second crucial matter concerned Ms Bennett's reaction to the Grunstein letter. Mr Levitt said she was particularly sensitive about being treated as part of a Jewish combination or conspiracy against Westpac. Because of this she was embarrassed and intimidated as a result of being shown the letter. Ms Bennett's evidence was that she was not personally embarrassed by the letter, that Mr Levitt should have been embarrassed at having written it, that she was not intimidated by it, and that it did not bear on her decision not to undertake the trial. It was said that Mr Abriel wanted to cross‑examine her about these two matters, but was denied the opportunity because his application under s 38 of the Evidence Act 1995 (Cth) for leave to do so was refused. REASONING ON THE APPEAL 12 Before any witness was called the primary judge explained to Mr Abriel that he could not cross‑examine his own witnesses. The explanation arose out of Mr Abriel's desire to cross‑examine Mr Opperman, whose affidavit had been filed by the respondents. His Honour explained at some length that if counsel for the respondents decided not to rely on Mr Opperman's affidavit, that affidavit would not form part of the evidence in the case. Mr Abriel could call Mr Opperman as his own witness and elicit evidence in chief, but could not cross‑examine him. At that stage Mr Abriel said he had "read a course on evidence", and informed the primary judge that he had a discretion to allow a hostile witness to be cross‑examined. His Honour then explained the meaning of "hostile witness". Mr Abriel agreed with his Honour's exposition and said he recalled a ruling by Sholl J in Bassett v Ferguson [1952] VLR 481 in which it was said that if the witness was not credible, the judge had a discretion to allow cross‑examination. In response to an enquiry by Mr Abriel about the limits of his ability to question a witness called by him, his Honour said Mr Abriel would not be allowed to ask the witness questions that suggested the answers. He would only be able to ask questions that invited the witness to give his version of what the relevant events were. He would not be able to suggest to the witness, unless he was a hostile witness, that he was not telling the truth. He would not be able to put to the witness other aspects of the evidence for the purpose of suggesting that he was not telling the truth. 13 Later Mr Abriel called Ms Bennett to give evidence. It soon became apparent that her evidence was damaging to the appellants' case. Ms Bennett said she made it clear to Mr Levitt in the days leading up to the mediation that she would conduct the mediation but would not take the case to trial, and that she said the same thing to the Abriels "at least the day before the mediation". On several occasions Mr Abriel cross‑examined the witness without objection. On other occasions objection was taken, and the primary judge reminded him that he could not cross‑examine her. After one such ruling his Honour referred to the earlier discussion about Mr Opperman, and told Mr Abriel he could only cross‑examine Ms Bennett if she was declared hostile, and he said there was at present no basis for treating her as hostile. Reference was made to s 38 of the Evidence Act, sub‑s (1) of which is as follows: "A party who called a witness may, with the leave of the court, question the witness, as though the party were cross‑examining the witness, about: (a) evidence given by the witness that is unfavourable to the party; or (b) a matter of which the witness may reasonably be supposed to have knowledge and about which it appears to the court the witness is not, in examination in chief, making a genuine attempt to give evidence; or (c) whether the witness has, at any time, made a prior inconsistent statement." Sub‑section (3) provides: "The party questioning the witness under this section may, with the leave of the court, question the witness about matters relevant only to the witness's credibility." Sub‑section (6) provides in part: "Without limiting the matters that the court may take into account in determining whether to give leave … under this section, it is to take into account: (a) whether the party gave notice at the earliest opportunity of his or her intention to seek leave; and (b) the matters on which, and the extent to which, the witness has been, or is likely to be, questioned by another party." 14 After reference was made to the section his Honour asked Mr Abriel ‑ "Are you saying something to me about it?" ‑ which we understand to be an invitation to Mr Abriel to seek leave to cross‑examine Ms Bennett. Mr Abriel replied that the section suggested he could cross‑examine. He then changed the subject, and asked whether his Honour would prefer Ms Bennett's evidence to his own in case of conflict. His Honour declined to answer the question, and returned to s 38, again asking Mr Abriel ‑ "Are you saying something to me about it?". In response Mr Abriel again asked whether his Honour would prefer Ms Bennett's evidence to his in case of conflict, and his Honour again declined to answer the question. A short time later, after Mr Abriel had described evidence Ms Bennett had just given as "fiction", his Honour said: "Well as I say, you haven't yet made an application pursuant to section 38 of the Evidence Act, which you say you are familiar with and you seem to be familiar with the idea of a hostile witness. You haven't made any applications." Mr Abriel repeated that the evidence was "total fiction", and did not seek leave under s 38. In the light of that exchange, the primary judge was entitled to take the view that Mr Abriel was not pursuing an application under s 38. We do not accept Mr Rothman's submission that Mr Abriel should be treated as having applied for leave and his Honour as having refused it. 15 In any event we do not regard the course that was followed as involving a denial of procedural fairness to the appellants. The primary judge accorded great leeway to Mr Abriel in dealing with witnesses. Although on some occasions Mr Abriel was stopped from cross‑examining Ms Bennett, her evidence was in large part elicited as a result of cross‑examination. Thus on one occasion this exchange occurred: "MR ABRIEL: Ms Bennett, I put it to you ‑ and I've got my life here on the line ‑ I put it to you that you said to my wife and you said to me that you will go to mediation on Premier Knits which will take three weeks ‑‑‑‑ MRS ABRIEL: Not to mediation, to trial. MR ABRIEL: To trial, I am sorry. That you will go to trial on Premier Knits which will take only three weeks and this is absolutely true and I could ‑ and you're denying it? … THE WITNESS: I do deny it. I never said I would take it to trial. … In fact I said the opposite. 16 Another exchange was as follows: MR ABRIEL: So in other words, Mrs Bennett, will you agree that there is a possibility that you did say to us that you'll go to trial if the mediation fails? ‑‑‑ No, there's no such possibility. No possibility, you say? ‑‑‑ No, I was quite clear about that." After Mrs Abriel had taken over questioning Ms Bennett, this exchange occurred: "MRS ABRIEL: I remember very, very clearly several occasions on each time you said you would take the case to trial? ‑‑‑ It was a commitment that I was ‑ I thought I was quite clear that I was not prepared to make. MRS ABRIEL: You said that you wouldn't take the Abriel case to trial, but that the Premier which would only, in your estimation, would only take three weeks you were prepared to? ‑‑‑ … I said to you that it would probably take three weeks of hearing plus at least another three weeks of preparation, and that I simply was not prepared to commit to taking that case to trial." As can be seen, on the factual aspect said to be crucial to their case the Abriels were permitted to cross‑examine Ms Bennett. To have formally granted them leave under s 38 to cross‑examine would not have advanced their case. 17 On the other issue said to be important, the effect of the Grunstein letter on Ms Bennett, this exchange occurred: MR ABRIEL: … we discussed every detail of the mediation at great length …. How come that you never mentioned the incident in the letter to me? ‑‑‑ Well, that assumes that I didn't …. As I said, first, when you say how come, the letter wasn't something that in my opinion had any impact upon the mediation; secondly, to the best of my recollection the letter was mentioned in the room in which we were …. And thirdly, I suppose, it wasn't my letter, it wasn't a matter for me. … You admitted that it was embarrassing to you? ‑‑‑ No, I never said it was embarrassing to me. Not embarrassing to you? ‑‑‑ No that's not my recollection. My recollection is …. You just said to your Honour that it was embarrassing, you found the letter embarrassing. … HIS HONOUR: She said it was embarrassing to Mr Levitt, I think. … HIS HONOUR: Ask her if it embarrassed her. MR ABRIEL: Did it embarrass you? ‑‑‑ Me, no. … And it wasn't embarrassing to you at all? ‑‑‑ I didn't say it wasn't ‑ to say it was embarrassing, it wasn't embarrassing directly to me at all, no. It was an unfortunate letter. And Mr Moses in his affidavit, and this is already the second witness, said that you came in and said it's very embarrassing? ‑‑‑ Yes it was, it was an embarrassing letter. Not to you at all. You are Jewish? ‑‑‑ Well, yes, I am Jewish and I try to say this in a general sense, there was an embarrassment involved in the letter having been written but it wasn't an embarrassment that fell on my shoulders other than in the most general sense …." All Mr Abriel could perhaps have added to what he had already put to Ms Bennett, had he been given leave under s 38, was to suggest that Mr Levitt's account of her embarrassment was correct, in the same way as he had already put to her Mr Moses' account. In the light of her disagreement with Mr Moses' account, and her constant denial that she was embarrassed by the letter, it is inconceivable that she would have meekly conceded personal embarrassment if the Moses' line of cross‑examination had been adopted in relation to Mr Levitt's evidence. 18 Based on the alleged failure of the primary judge to allow cross‑examination of Ms Bennett, the appellants seek a new trial "at least in so far as it deals with the cross‑examination of Ms Bennett". In Stead v State Government Insurance Commission (1986) 161 CLR 141 at 147 Mason, Wilson, Brennan, Deane and Dawson JJ said: "… if the Full Court is properly to be understood as saying no more than that a new trial would probably make no difference to the result, their Honours failed to apply the correct criterion. All that the appellant needed to show was that the denial of natural justice deprived him of the possibility of a successful outcome. In order to negate that possibility, it was, as we have said, necessary for the Full Court to find that a properly conducted trial could not possibly have produced a different result." For the purpose of dealing with the submission that there should be a new trial we will assume, contrary to our view, that the primary judge wrongly refused to allow Mr Abriel to cross‑examine Ms Bennett. In our opinion, had he permitted that cross‑examination, it could not possibly have produced a different result from that reached. In order to succeed on their unconscionability claim the appellants had to establish unconscionable conduct on the part of the respondents. This they could do only by reference to those in the respondents' camp ‑ effectively Mr Dowdy, Mr Opperman and Mr Curd. The primary judge's acceptance of the evidence of all three, and two unchallenged findings based on that evidence (see par 9), must spell the end of the appellants' case. The first finding is that none of these people desired that Ms Bennett should cease representing the appellants. The second finding is that Mr Dowdy's disclosure of the Grunstein letter to Ms Bennett was motivated solely by his desire to demonstrate to her the reasons for the respondents' reluctance to pay money to the appellants in order to settle a claim the respondents considered to be without merit. The same findings spell the end of the alternative claim that the respondents knowingly assisted in creating the undue influence Ms Bennett was alleged to have exercised over the appellants, and that they knowingly assisted in her breach of her duty to give legal advice to the appellants free of any conflicting or potentially conflicting interest of her own without first disclosing that interest to the appellants. CONCLUSION 19 The appeal must be dismissed with costs. I certify that the preceding nineteen (19) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Heerey, the Honourable Justice Sundberg and the Honourable Justice Merkel. Associate: Dated: 2 March 2001 Counsel for the Appellants: S Rothman SC Counsel for the Respondents: P M Wood Solicitors for the Respondents: Henry Davis York Date of Hearing: 27 February 2001 Date of Judgment: 2 March 2001