It is important, however, to distinguish between liability for an employee's representations on the one hand and authority to contract on the other. It is common that persons, particularly large corporations, are represented by others such as members of staff, in the dealings and negotiations which inevitably precede the making of a contract, in circumstances in which, as everyone understands, only some person more highly placed in the corporate hierarchy or even only the board of directors has authority to contract. But it is not only the misrepresentations or misleading or deceptive conduct of those with actual or apparent authority to contract for which the person or corporation is liable. Indeed, a consequence of the contrary view would be that there would be a substantial opportunity to escape responsibility for the pre-contract conduct of agents and other representatives.
In my view, the passages quoted above do not establish that the Bank is not answerable for the alleged statements by Peter Dray and David Anderson deposed to and pleaded by Mr and Mrs Anderson.
(e) "the Agreement was wholly in writing and the discussions leading up to its creation are not justiciable"
Even if the Arbitration Agreement contained an exclusion clause in the nature of an "entire contract" clause, this would not be conclusive of the question whether Mr and Mrs Anderson had been induced to enter into it by misleading or deceptive conduct, the question being the factual one of reliance: many cases could be cited, such as Henjo Investments Pty Ltd v Collins Marrickville Pty Ltd (1988) 79 ALR 83 (FCA/FC) at 98-99 (Lockhart J with whom Burchett and Foster JJ relevantly agreed); Lezam Pty Ltd v Seabridge Australia Pty Ltd (1992) 35 FCR 535 (FC) at 556-557 (Burchett J); Demagogue Pty Ltd v Ramensky (1992) 39 FCR 31 (FC) at 37-38 (Gummow J with whom Black CJ relevantly agreed), 47-48 (Cooper J). The position is a fortiori where, as here, the Arbitration Agreement did not contain such a provision.
(f) "the Applicants elected to have a hearing on liability only it is nonsense to suggest that the Bank agreed not to contest liability when all of the surrounding facts point to the opposite conclusion"
The Bank took me to evidence of the negotiations which led to the making of the Arbitration Agreement dated 14 June 1994, and in particular, to the communications in that respect between the Andersons' solicitor at the time, Mr Mark Symonds of Cedric R Symonds, solicitors, and the Bank's solicitor, Mr Stephen Purcell of Henry Davis York. The evidence shows that on 31 January 1994, pursuant to sub-s 74 (5) of the Bankruptcy Act 1966, the Andersons' bankruptcy was annulled and this was made possible by the Bank's not voting against the annulment as part of the agreement that the disputes between the parties be arbitrated; that the content of the Arbitration Agreement was the subject of close attention and negotiation in which Mr and Mrs Anderson had the advice of both solicitors and counsel; and that there were references to the fact that liability was in issue. For example, a diary note of Mr Stephen Purcell shows that on 16 May 1994 Mr Mark Symonds raised the possibility that the Bank was accepting that it was
liable and that it was only quantum that was to be in issue in the arbitration, to which, according to the diary note, Mr Purcell replied that he "should make it clear that liability is definitely in issue".
On 17 May 1994 Mr Mark Symonds advised Mr Purcell that as of 1.00 pm - 2.00 pm on the preceding day, 16 May, he had "formally pulled out of the case" and that he did not know what Mr and Mrs Anderson wished to do regarding the arbitration. From this time for the time being Mr Anderson conducted negotiations for himself and his wife.
On 19 May 1994 Mr Anderson wrote to Henry Davis York acknowledging that if the arbitrator made an award in favour of the Bank, the Bank would be entitled to enforce the terms of the award. Negotiations continued until 9 June 1994 when Harry Freedman of Milne Berry & Berger advised Mr Purcell that his firm was now representing the Andersons. In a letter dated 16 June 1994 from Henry Davis York to Milne Berry & Berger, the former solicitors mentioned that the Bank would be represented by senior counsel in the arbitration.
On 29 July 1994, Milne Berry & Berger wrote to Henry Davis York advising that the Andersons would apply, either formally or with the Bank's consent, "that the proposed hearing in November 1994 address solely the question of liability." The letter continued as follows:
"The reason for the application and the suggestion made to you is primarily so as to avoid incurring unnecessary costs by either party in the event that the question of liability is determined against our client. It is our belief that the time of a hearing to address the issue of liability alone should take only two to three days whereas the question of damages sustained by our client appears to be an extremely complicated one and one likely to take two weeks of hearing at a minimum."
The Bank agreed to the suggestion.
Of course, it could not be other than common ground that the arbitration hearing was to be on the question of liability and not damages, and I have given the above account only to show how this came about. It is not, and could not properly be, pleaded that the Andersons relied on an assurance that the Bank would not contest liability.
For the purpose of the Bank's application for summary dismissal, it is important to understand the case which Mr and Mrs Anderson seek to make, without undue emphasis on pleading deficiencies. For this purpose, it is necessary to read both Mr Anderson's affidavit and paras 23 and 29 of the further amended statement of claim. Mr an Mrs Anderson clearly wish to say that on 22 December 1993, Peter Dray and David Anderson caused them to believe that the Bank would conduct itself in an arbitration in a way which was more favourable to their interests than the way in which the Bank would conduct itself in litigation, and, as events transpired, than the way in which the Bank in fact conducted itself in the arbitration
before Mr T R Morling QC. Since it is common ground that liability was to be determined by the arbitrator, it is common ground that there might be, as it transpired that there was, a determination wholly for the Bank and wholly against Mr and Mrs Anderson. What then is the way in which it is said that the Bank misled the Andersons into believing that it would conduct itself which was consistent with the Bank's contesting liability and obtaining the result wholly favourable to itself which the arbitrator awarded?
The starting point is the alleged statements that the Bank officers were authorised to offer a forgiveness of the company's debt and a return of its assets but not a payment of money as was being insisted upon by Mr Anderson; that there were probably good grounds why Mr Anderson should not accept that offer; that a reasonable resolution lay somewhere between the Bank's offer of a "mere" forgiveness of the company's debt and return of its assets on the one hand, and this coupled with a payment of $9,700,000 by the Bank on the other hand; and that in an arbitration the Bank would "vigorously work to minimise any damages payout".
The case sought to be made seems to be that this led Mr Anderson to assume that what separated the parties was the amount which the Bank was to pay over and above a forgiveness of the debt and return of assets, and that because of the way in which the Bank would conduct itself in the arbitration, the Andersons would finish up no worse off than they would be if they accepted the offer of a debt forgiveness and return of assets.
On the basis of the pleading and the evidence of the conversation in Mr Anderson's affidavit to which I have referred, I can understand that Mr Anderson may have expected that the arbitration would result in an award for some amount in his favour, and that the things allegedly said by Peter Dray and David Anderson may have contributed to or strengthened that expectation. For example, let it be assumed that the opinion was expressed by either of them that a reasonable settlement lay somewhere between the parties' respective positions: this might have been apt to contribute to or reinforce an expectation by Mr Anderson that he would do no worse in an arbitration than if he accepted the Bank's offer. But the Andersons do not, and could not, suggest that this somehow gives rise to an entitlement to relief.
From at least 29 July 1994 down to the commencement of the arbitration hearing on 21 November 1994, the Andersons knew that the Bank was contesting liability. They knew that the Bank was represented by solicitors and counsel, and at least their solicitors knew that senior counsel would be representing the Bank. They knew that the arbitrator would hear evidence and decide whether the Andersons were entitled to any relief at all, and if so, what relief. In the light of this, I have the greatest difficulty, as I indicated to counsel for Mr and Mrs Anderson on the hearing, in understanding what any assurance given that the Bank would not contest liability as vigorously as it would do in a court hearing could possibly have signified to the Andersons, at least as from 29 July 1994 when their solicitors wrote to the Bank's solicitors. From that date at least, the Andersons knew that the Bank would be pressing for the result that the Andersons were not entitled to any relief whatever.
A contest on liability normally means that both parties will, according to the means and expertise available to them, press their respective cases to the maximum extent possible. It seems a nonsense to say that the Bank did not adhere to its statement because it briefed senior counsel while a less "vigorous" approach would have led it to brief junior counsel only or to lead less evidence than it might do.
In any event, Mr and Mrs Anderson do not plead that in any particular respect the Bank did not adhere to the representations by Peter Dray and David Anderson by contesting liability more vigorously than it should have done consistently with their representations.
Mr Higgs of counsel for Mr and Mrs Anderson, in his usual way, has put everything that could be put on behalf of his clients. He submits that notwithstanding the difficulties to which I have referred, all that matters is that Peter Dray and David Anderson said things to Mr Anderson which were intended to have a significance and which were intended to, and did in fact, induce the Andersons to execute the Arbitration Agreement. I see the force of this submission. But by at least 29 July 1994, and certainly well prior to the beginning of the arbitration hearing, Mr and Mrs Anderson knew either in person or through their then solicitors, that the Bank would, through senior and junior counsel, be contending that it had no liability whatever to them and that they were not entitled to any relief whatever against it. Yet they elected to proceed with the arbitration rather than to exercise any right which they may have had of rescinding the Arbitration Agreement: cf Sargent v ASL Developments Ltd (1974) 131 CLR 634 at 646 (Stephen J), 656 (Mason J); Immer (No 145) Pty Ltd v Uniting Church in Australia Property Trust (NSW) (1993) 182 CLR 26 at 30 (Brennan J), 41-42 (Deane, Toohey, Gaudron and McHugh JJ).
Other electing conduct by Mr and Mrs Anderson was their continued participation in the arbitration hearing after it began on 21 November 1994 until it concluded on 28 November 1994. It was not until 10 February 1995, two months and 13 days after the end of the arbitration hearing, that Mr and Mrs Anderson launched the third Federal Court proceedings and even then they did not attack the Arbitration Agreement. The preceding day, 9 February, there was further electing conduct by them in the form of the making of their written submissions to the Arbitrator. Mr and Mrs Anderson did not apply to have the Arbitration Agreement set aside until August 1995, more than a year after its date and more than a year after they knew that the purpose of the arbitration hearing was to be to determine liability. However, I should record that on 22 February 1995 Mr Anderson told me that he and his wife had been misled and deceived "into going down that track [of arbitration]", that he repeated this on 12 April 1995 and that the Amended Application filed on 13 June 1995 sought the setting aside of the Arbitration Award. Notwithstanding these matters, it is clear beyond question that Mr and Mrs Anderson were not willing to apply to set aside the Arbitration Agreement until they knew that the result of the arbitration was unsatisfactory to them. Until then they preferred to take their chance.
In my view there is no triable issue that they had not elected in favour of the Arbitration Agreement and against its being rescinded or set aside.
In the alternative to having made an effective election, Mr and Mrs Anderson are estopped from asserting the case which they propound for the setting aside of the Arbitration Agreement and the Arbitration Award. By their conduct from 14 June 1994 down to the filing of their Amended Application on 13 June 1995 at the earliest, they led the Bank to assume that they were treating themselves as bound by the arbitration process and its result. To the Andersons' knowledge, the Bank acted on that assumption to its detriment by incurring the substantial costs associated with the arbitration (fees of solicitors and senior and junior counsel of a six day hearing and of written submissions down to 9 March 1995, the arbitrator's fees and cost of transcription services which the Arbitration Agreement required the Bank to bear, and the time of the Bank's staff) and it would be unconscionable for Mr and Mrs Anderson now to renege. For the proposition that an estoppel arises in such circumstances many authorities could be cited, but it suffices to refer to Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387.
For the foregoing reasons, I think that no reasonable cause of action exists for the setting aside of the Arbitration Agreement or the Arbitration Award.
(g) "the representations, if made, did not cause any loss"
The Bank points out that the proceedings were heard over six days before Mr T R Morling QC, a retired Judge of this Court of great eminence and experience when Mr and Mrs Anderson were represented by solicitors and counsel and given every opportunity to adduce whatever evidence they thought appropriate. The Bank submits that the Court should be satisfied that there was no prospect of the Andersons' succeeding if the proceedings had gone to a hearing before this Court (it referred to Malec v J C Hutton Pty Ltd (1990) 169 CLR 638).
For Mr and Mrs Anderson it is submitted that all that matters is that they lost the chance of success in a court hearing.
One should not close one's eyes to the obvious: according to the Arbitrator's Award, the Bank succeeded and Mr Anderson failed on every issue. Mr and Mrs Anderson did not submit before me that there was any particular reason why they would be more likely to have succeeded before a court than before the learned arbitrator. The parties were legally represented, evidence was heard over a period of six days and the parties made written submissions. In my view there is no triable issue that Mr and Mrs Anderson suffered any loss or damage.
For this further reason, there is no reasonable cause of action of which the suffering of loss or damage is an essential element and so the proceedings should be dismissed in so far as the further amended application seeks damages.
(h) "for reasons of public policy the Applicants cannot now seek to have the Arbitration Agreement set aside"
The Bank submits that quite simply the case is one in which Mr and Mrs Anderson, being dissatisfied with the outcome of the arbitration, seek now to go behind the Arbitration Agreement and to have their claims re-litigated. The Bank referred me to Baltic Shipping Company v Dillon ("Mikhail Lermontov") (1991) 22 NSWLR 1 (CA) at 9C,D (Gleeson CJ) and Hobartville Stud Pty Ltd v Union Insurance Co Ltd (1991) 25 NSWLR 358 (Giles J) at 368C,D. The passages referred to relate to the law's policy of encouraging settlement by compromise. For example, in the case first cited, Gleeson CJ said this:
"... there is a particular policy of the law to encourage resolution of litigation by settlement, and that particular policy is not advanced by encouraging plaintiffs who settle litigation and later repent of their bargains to seek to avoid their contracts on the basis that they were made in circumstances of emotional vulnerability." (at 9C)