Appeal Outcome: Special leave application dismissed by the High Court - 29 February 2008 New South Wales Court of Appeal CITATION: Johnston v McGrath [2007] NSWCA 231 HEARING DATE(S): 24/07/07 JUDGMENT DATE: 4 September 2007 JUDGMENT OF: Giles JA at 1; Young CJ in Eq at 2; Handley AJA at 44 DECISION: Extend time to file summons for leave to appeal. Leave to appeal refused with costs. CATCHWORDS: APPEAL- Practice and procedure- When appeal lies- By leave of court- Interlocutory orders and judgments- Judgment dismissing claimant's appeal against first opponent's rejection of proof of debt submitted in liquidation of second opponent- Whether primary judge erred in holding that second opponent's misleading statements not material contributing cause of claimant's loss- Primary judge made no error in holding claimant's case not proven on the facts- Leave to appeal refused. Civil Procedure Act 2005, s 60 LEGISLATION CITED: Corporations Act 2001 (Cth), s 563A Supreme Court Act 1970, s 101(2)(r) Trade Practices Act 1974 (Cth), s 52 Boyd Knight v Purdue [1999] 2 NZLR 278 Carolan v AMF Bowling Pty Ltd (NSWCA, 16/11/1995, BC 9501771) CASES CITED: Henville v Walker (2001) 206 CLR 459 P Dawson Nominees Pty Ltd v Multiplex Ltd [2007] FCA 1061 Sons of Gwalia Ltd v Margaretic (2007) 81 ALJR 525 Brian Alexander Johnston (Claimant) PARTIES: Anthony Gregory McGrath and Christopher John Honey in their capacities as Liquidators of HIH Insurance Limited (First Opponent) HIH Insurance Limited (In liquidation) (Second Opponent) FILE NUMBER(S): CA 40082/06 COUNSEL: M R Gracie (Claimant) A J Sullivan QC and J R Kirk (First Opponent) SOLICITORS: Dennis & Company (Claimant) Blake Dawson Waldron (First Opponent) LOWER COURT JURISDICTION: Supreme Court - Equity Division LOWER COURT FILE NUMBER(S): 6644/04 LOWER COURT JUDICIAL OFFICER: Gzell J LOWER COURT DATE OF DECISION: 23/11/05 LOWER COURT MEDIUM NEUTRAL CITATION: Johnston v McGrath & Ors [2005] NSWSC 1183 IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL 40082/06 GILES JA YOUNG CJ in EQ HANDLEY AJA Tuesday 4 September 2007 JOHNSTON v McGRATH Judgment 1 GILES JA: I agree with Young CJ in Eq. 2 YOUNG CJ in EQ: This is an application for leave to appeal from a decision of Gzell J who dismissed the claimant's appeal against rejection of a proof of debt submitted by the claimant in the liquidation of HIH Insurance Ltd (HIH), a company of which Messrs McGrath and Honey ("the opponent") are the liquidators. 3 Essentially, the claimant's claim was for damages for breach of the statutory duty imposed by s 52 of the Trade Practices Act 1974 (Cth) that is that HIH made statements in trade and commerce which resulted in the claimant purchasing shares in HIH on 2 January 2001 for $10,269, which shares were valueless. 4 On 23 November 2005, Gzell J dismissed the appeal on the basis that the claimant had not shown to his Honour's satisfaction that the relevant statements which were admitted to have been made, were the cause of the claimant's loss. 5 His Honour then said, though it was unnecessary for him to do so in view of his former finding, that, even if the claimant had succeeded, his claim would have been postponed under s 563A of the Corporations Act 2001 (Cth). 6 It is admitted before us that in the light of the subsequent decision of the High Court in Sons of Gwalia Ltd v Margaretic (2007) 81 ALJR 525, if it become relevant, this latter finding must be reversed. 7 Leave to appeal is necessary because the application before Gzell J may well have been an interlocutory application, but, even if it were not, the amount in issue appears to be no more than about $10,300 (probably much less as HIH is unlikely to pay a dividend of 100c in the dollar), certainly well under the limit prescribed by s 101(2)(r) of the Supreme Court Act 1970 for appeals as of right. 8 The issues on the application for leave to appeal are: (a) Whether the time for lodging the application for leave to appeal should be extended; (b) Whether the factors of (i) the small amount involved in the appeal and/or (ii) that the appeal is on a question of fact, lead to refusal of the application. 9 The claimant also wishes us to consider additional evidence. 10 The application was heard on 24 July 2007, Mr M R Gracie appeared for the claimant and Mr A J Sullivan QC and Mr J Kirk appeared for the opponent, the liquidators of HIH. 11 At the conclusion of the hearing we indicated that the summons for leave to appeal must be dismissed with costs and that we would give our reasons later. These reasons are now furnished. 12 The decision was made on 23 November 2005. The ordinary summons for leave to appeal was filed on 23 February 2006. However, the delay was occasioned by a mistake in process and caused no prejudice. 13 In accordance with past practice and in the circumstances, at the end of the oral hearing we extended the time for filing the application for leave to appeal. 14 As to the relatively small amount in issue, the Court is very reluctant to grant leave to appeal where relatively small amounts are involved; see Carolan v AMF Bowling Pty Ltd (NSWCA, 16/11/1995, BC 9501771). There must usually be something significant about the case to overcome that reluctance. 15 Indeed, after the enactment of s 60 of the Civil Procedure Act 2005, the Court is obliged by statute to consider the proportionality of the costs involved in litigation and the result sought to be achieved. 16 In the instant case, the claimant says that the present is of the nature of a test case. If it succeeds, the precedent will be set which may mean that the many other cases which might follow will be shortened. 17 If the decision stands, the liquidators have indicated that they would reject all similar proofs of debt. Some of these might arguably be in respect of more than $100,000. 18 On the other hand, the opponent says that: (a) A very small amount of money is involved; (b) The case was decided on its own facts and has no precedent value; (c) The judge's relevant findings were necessarily findings on the claimant's credit; (d) The additional evidence is irrelevant; (e) The case could in no sense be considered a "test case"; (f) There are no real prospects of success on the appeal. 19 The claimant has put before us further affidavits which he would wish the Court to consider if leave to appeal were granted. 20 If these affidavits were to be accepted, the Court would be informed that there were a number of newspaper stories about HIH in the last quarter of 2005 not before Gzell J, and that there were a series of other investors in HIH who would have similar claims to the claimant. 21 The claimant makes a number of complaints about Gzell J's judgment. The principal matters can be summarized as follows: (a) The primary judge falsely assumed that he had all the relevant newspaper articles etc before him.; (b) The primary judge erroneously thought that the information relied on by the claimant was six months old; (c) The primary judge erroneously found that other newspaper reports overtook, counteracted or corrected the misleading impression that some other reports may have conveyed; (d) The primary judge took those other reports as constituting a warning of possible danger without the truth of those other reports being established; (e) The primary judge acted on unproved newspaper commentaries as to the state of HIH and that his critical findings were, in any event, based upon evidence which was not properly put to the court; (f) The primary judge failed to apply the right approach as to causation; (g) The primary judge appears to have failed to apply the law that so long as one cause of the loss is the misrepresentation, a plaintiff is entitled to succeed; (h) The primary judge seems to have applied some concept of contributory negligence; (i) The primary judge failed even to consider a number of the plaintiff's counsels' submissions. 22 Some of these matters are relatively trivial. For instance, it may well be that the primary judge was wrong when he announced in paragraph 10 of his reasons that the opponent had assembled all newspaper articles in the relevant period that mentioned HIH. However, it is difficult to see, in light of the whole judgment, how this error affected the result. 23 The claimant put forward a six page document setting out in full part of the written submissions made to the primary judge to which he does not seem to have referred in his reasons for judgment. 24 The Court was also given a complete copy of the written submissions put to the primary judge. 25 It is not incumbent on a judge to acknowledge and deal with every paragraph of written submissions put to him or her. A fortiori is this so when, as here, the submissions contain extensive quotations from cases that are not as significant as others in the field. There is no error shown here. 26 The claimant says that everyone was misled by the way the opponent presented the assembly of additional newspaper articles. However, apart from the claimant's own proposed further evidence, there is no support for this. The material itself shows that it could not be all the articles, and the second affidavit which was served actually used the word "some". It may be that the claimant's lawyers did not pick this up, but that is not ground for challenge on appeal. 27 As to the information being six months old, this was true in one sense, though not in another, but again, had no bearing on the result. 28 Further, it is hard to see how this case could be described as a test case. It depended on and was decided on its own facts. Any other case of a person buying HIH shares about the same time would depend on its own facts and how the statements impressed themselves on the mind of each individual plaintiff. 29 I accept the opponent's submission that the reason why the claimant was unsuccessful is that, in [26] and [27] of the judgment, the learned judge did not accept either that newspaper coverage of HIH's media release as to its financial position, or statements in the financial report, played any part in the claimant's decision to buy HIH shares. 30 The primary judge took the view that although misleading statements were made about the prosperous state of HIH, there were many other statements in the press to the contrary. 31 The claimant says that this amounts to considering whether there were other factors contributing to the loss or some sort of application of a concept of contributory negligence. 32 When one considers the judgment as a whole, however, these matters and the cross-examination of the claimant on them led to the judge being able to determine as a fact that what the claimant said was the cause of his loss was not a material cause at all. 33 The claimant also complains that the judge did not apply the law as laid down by the High Court in Henville v Walker (2001) 206 CLR 459. 34 The learned judge in fact cites that judgment extensively and indeed, at [32], considers whether the false statements in the media release and financial report were a material contributing cause of the purchase and when he applied that criterion to the facts, found against the claimant. 35 This was a question of fact well within the judge's mandate to determine. 36 An attack was made on [38] of the judgment as to whether the chain of causation was cut by subsequent events. This may have provided an interesting debate as to its validity, but as it was secondary to the reason why the claimant lost the case, even if the point were to be found in his favour, it would give him no comfort. 37 Another interesting by way was the submission that the claimant could invoke the doctrine of "Fraud on the Market". We were referred to the recent decision of Finklestein J in the Federal Court in P Dawson Nominees Pty Ltd v Multiplex Ltd [2007] FCA 1061, [11]. 38 This doctrine has not (yet) been successfully invoked locally, and has been downplayed by Blanchard J in New Zealand in Boyd Knight v Purdue [1999] 2 NZLR 278, 292 (CA). However, even if it has validity in Australia, the present case does not raise it. 39 The statement of claim simply said (stripped down and omitting particulars): " 25. The misleading and deceptive conduct … induced the Plaintiff to acquire the Shares … . 26. The Plaintiff relied when acquiring the Shares upon the misleading and deceptive information … . 27. The Plaintiff would not have acquired the Shares had the true … position … been known to him." 40 Then on page 2 of the transcript, the learned primary judge said to senior counsel for the claimant "Your client says he read this material and in reliance upon it he bought shares" to which the reply was simply, "Yes". 41 Senior counsel for the claimant maintained that position even in his closing address. 42 The case presented by the claimant was simply one of reliance on misleading information and the primary judge did not accept it on the facts. 43 Putting all these matters together, including the small monetary amount involved, I would refuse leave to appeal with costs. 44 HANDLEY AJA: I agree with Young CJ in Eq. ******************** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. 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