Alston v Cormack Foundation Pty Ltd

Case [2018] FCA 895

FEDERAL COURT OF AUSTRALIA

Alston v Cormack Foundation Pty Ltd [2018] FCA 895

File number: VID 1270 of 2017
Judge: BEACH J
Date of judgment: 14 June 2018
Catchwords:

TRUSTS AND TRUSTEES – Trust over shares in corporation – express trust – objective theory as to ascertaining intention – whether intention to create trust in the future or with immediate effect – whether a trust over directors’ powers – validity or enforceability of trust – trust in favour of unincorporated association – whether a trust for members – whether a non-charitable purpose trust – whether a trust with ascertained object(s) – “contract holding” theory discussed in Neville Estates Ltd v Madden [1962] Ch 832 – whether immediate or postponed vesting – rule against perpetuities – “wait and see” approach – necessarily implied “lives in being” in terms and context of relevant trust instrument – breach of trust – causal consequences flowing from breach of trust – innocent third parties – scope of equitable remedies

CORPORATIONS – Cancellation of shares – validity of cancellation where trust thwarted or breached –
re-instatement of shares and rectification of the register – s 140(2) and s 175(1) of the Corporations Act 2001 (Cth)

Legislation:

Corporations Act 2001 (Cth) ss 140(2), 175(1), 258D

Perpetuities and Accumulations Act 1968 (Vic) s 6

Cases cited:

Bacon v Pianta (1966) 114 CLR 634

Bahr v Nicolay [No 2] (1988) 164 CLR 604

Barnes v Addy (1874) LR 9 Ch App 244

Byrnes v Kendle (2011) 243 CLR 253

Fistar v Riverwood Legion and Community Club Ltd (2016) 91 NSWLR 732

Gambotto v WCP Limited (1995) 182 CLR 432

In re Kayford Ltd (in liq) [1975] 1 WLR 279

In re Schebsman, Deceased; Ex parte Official Receiver v Cargo Superintendents (London) Ltd [1944] Ch 83

Leahy v Attorney-General for New South Wales (1959) 101 CLR 611

Legal Services Board v Gillespie-Jones (2013) 249 CLR 493

Neville Estates Ltd v Madden [1962] Ch 832

Registrar of the Accident Compensation Tribunal v Commissioner of Taxation (1993) 178 CLR 145

Date of hearing: 19, 20 and 21 March 2018
Registry: Victoria
Division: General Division
National Practice Area: Commercial and Corporations
Sub-area: Corporations and Corporate Insolvency
Category: Catchwords
Number of paragraphs: 328
Counsel for the Plaintiffs: Mr BW Walker SC and Mr MD Wyles QC with
Mr CE Shaw and Dr COH Parkinson
Solicitor for the Plaintiffs: Hope Earle
Counsel for the Defendants: Mr AJ Myers QC and Dr IJ Hardingham QC with
Mr JS Graham and Mr MD Tehan
Solicitor for the Defendants: John Edgar Frenkel Partners
Table of Corrections
18 June 2018 In paragraph 244, the word “beneficially” has been replaced with “non-beneficially”.

ORDERS

VID 1270 of 2017
BETWEEN:

RICHARD KENNETH ROBERT ALSTON

First Plaintiff

ALAN ROBERT STOCKDALE

Second Plaintiff

RUSSELL DAVID HANNAN

Third Plaintiff
AND:

CORMACK FOUNDATION PTY LTD (ACN 006 935 119)

First Defendant

CHARLES BARRINGTON GOODE

Second Defendant

PETER ALGERNON FRANC HAY (and others named in the Schedule)

Third Defendant

JUDGE:

BEACH J

DATE OF ORDER:

14 JUNE…

Continue reading Alston v Cormack Foundation Pty Ltd

Sign in free to access the full text

Details
AGLC
Alston v Cormack Foundation Pty Ltd [2018] FCA 895
Case
[2018] FCA 895
Decision Date

CaseChat Overview and Summary

The case of Alston v Cormack Foundation Pty Ltd involved a dispute over shares in the Cormack Foundation, an entity that was established to hold a radio broadcasting licence. The parties were in contention regarding whether the shares were held on trust for the Liberal Party, the validity of the trust, and the consequences of any breach of trust. The court was tasked with determining the validity of the trust, whether the shares were held in trust for the Liberal Party, and the appropriate remedies for any breach of trust. The court held that the shares were indeed held on trust for the Liberal Party, that the cancellation of those shares was invalid, and that the shares should be transferred to nominees of the Liberal Party. The court also noted that the plaintiffs were entitled to some measure of success, but refrained from making a definitive order on costs, reserving the matter for further submissions from the parties. The court's decision hinged on the objective theory of ascertaining intention, the validity of the trust, and the equitable remedies available for breach of trust.

Orders

Orders of the court

1. Within 7 days of the date of these orders, the plaintiffs file and serve minutes of proposed orders and short submissions (limited to 3 pages) to give effect to these reasons and on the question of costs.

2. Within 7 days of receipt of the plaintiffs’ minutes of proposed orders and submissions, the defendants file and serve minutes of proposed orders and short submissions (limited to 3 pages) to give effect to these reasons and on the question of costs.

3. Costs reserved.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Background

Background to the litigation

For the reasons that I will now discuss in more detail, I have concluded that this fourth option is the correct solution to the present problem. But first it is necessary to elaborate on some background matters.BACKGROUND It is convenient to set out some background on the following matters:(a)The history of Station 3XY Pty Ltd;(b)The sale of the 3XY licence and the origins of the Cormack Foundation;(c)Michael Kroger’s knowledge and involvement;(d)The activities of the Cormack Foundation;(e)The Cormack Foundation’s constitution; and(f)The Liberal Party’s constitution.(a) The history of Station 3XY Pty Ltd In 1932, an application was made on behalf of the Young Nationalist Organisation (YNO) and the United Australia Party (UAP) for a radio broadcasting licence. It was perceived by those organisations that such a licence was necessary because Trades Hall had a radio station and it was thought necessary for the YNO and the UAP to have a similar facility. On 30 September 1932, a group representing the UAP visited the Director-General of the Postmaster-General’s department seeking a radio broadcasting licence for the UAP. On 4 April 1934, Mr Robert Archdale Parkhill (who was knighted 2 years later), the Postmaster-General, wrote to the Acting Postmaster-General, making an enquiry about a radio broadcasting licence in Melbourne. On 14 August 1934, Mr Parkhill prepared a note stating that Federal Cabinet was favourably disposed towards an application by the UAP in Victoria for a radio broadcasting licence. It was recommended that a licence be issued to Mr EW Willis, the organising secretary of the UAP and its representative in Victoria. Further, on 29 August 1934, Mr Francis William Thring (father of the later well-known stage and film actor Frank Thring) wrote to Mr Parkhill advising that Mr Willis anticipated that a licence would be issued to the UAP, but that the UAP would be prepared to enter into a reciprocal arrangement with Mr Thring for him to operate the proposed radio station on lease, which arrangement was satisfactory to Mr Thring. On 6 December 1934 in Federal Parliament, Mr John McEwen (later Prime Minister of Australia from 19 December 1967 to 10 January 1968 and knighted in 1971) referred to the announcement by the then Prime Minister, Mr Joseph Lyons, that the UAP in Victoria was to be given a radio broadcasting licence. In an exchange between them, Mr Lyons confirmed that such a licence was to be issued to the UAP and that this was as a result of a Cabinet decision. On 16 May 1935, a radio broadcasting licence (the 3XY licence) was issued to Station 3XY Pty Ltd for an initial period of 3 years from 17 May 1935 to 16 May 1938. Station 3XY Pty Ltd had been incorporated as a separate legal entity on 24 October 1934 for the purpose of holding such a licence. The 3XY licence contemplated that the location of the station was to be in the ballroom of the Princess Theatre building, Spring Street, Melbourne. On 2 May 1935, Station 3XY Pty Ltd entered into an agreement with Efftee Broadcasters Pty Ltd (Mr Thring’s company) to operate the 3XY licence.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

Second, the plaintiffs assert that the rights attaching to Mr Calvert-Jones’ and Mr Morgan’s shares at issue, namely, the right to appoint a director, must be re-instated. I disagree. The resolutions which effected relevant changes to the constitution decoupling shareholding from an entitlement to appoint directors have not been shown to be invalid. Moreover s 140(2) has no application. The decoupling has removed an entitlement. It has not imposed or increased a restriction. Moreover, this decoupling has nothing to do with the right to transfer. The plaintiffs’ challenge requires establishing a causal chain justifying a remedy commencing with a breach of trust and ultimately leading to the infection of the relevant resolutions. But none of this works for the reasons I have previously explained.CONCLUSION In summary, I have reached the following overall conclusions. First, Mr Calvert-Jones and Mr Morgan have at all relevant times held their shares in the Cormack Foundation on trust for the Liberal Party. Second, the cancellation of those shares should be set aside, those shares should be transferred to nominees of the Liberal Party, and the register of members of the Cormack Foundation should be rectified accordingly with such nominees being entered in the register as the shareholders. I will hear further from the parties as to the precise form of orders to give effect to these reasons. On the question of costs, I am inclined to make no order as to costs as each side has had some measure of success. But I will give the parties an opportunity to make submissions on that question if they so choose.

Ratio Decidendi

Legal Principle Established

Full text does not contain this section.