Dome Resources NL v Silver
[2008] NSWCA 322
•27 November 2008
Reported Decision: 72 NSWLR 693
New South Wales
Court of Appeal
CITATION: DOME RESOURCES NL v SILVER [2008] NSWCA 322 HEARING DATE(S): 11 and 12 March 2008
JUDGMENT DATE:
27 November 2008JUDGMENT OF: Beazley JA at 1; Basten JA at 2; Bell JA at 2 DECISION: (1) Dismiss the appeal.
(2) Dismiss the cross-appeal.
(3) Order that the appellants pay the respondents’ costs in this Court.
CATCHWORDS: CORPORATIONS – constitution – interpretation – directors’ powers – retirement deed – whether board of directors had authority to enter into retirement deed with director – whether board had to adopt scheme or plan before conferring retirement benefits on director - CORPORATIONS – directors – retirement benefits – conferral without member approval – whether retirement deed contravened provisions relating to termination payments in Part 2D.2 of Corporations Law – qualification of prohibition in s 200B on giving retirement benefits by s 200G – payment limit fixed by s 200G(2) – whether payments to third party for provision of director’s services constituted part of director’s total remuneration – definition of “remuneration” by reference to disclosure requirements in accounting standard (AASB 1017) – whether remuneration to be calculated by reference to period during which recipient was an officer of corporation – Corporations Law, ss 200B, 200G - INTEREST – pre-judgment interest – whether third party should be paid interest on amount ordered – whether proceedings for specific performance were “proceedings for the recovery of any money” – whether order that money be paid involved “amount for which judgment is given” – whether judgment referred only to judgment in action at law – Civil Procedure Act 2005 (NSW), s 100 - REMEDIES – standing of plaintiffs to seek relief – where specific performance sought – whether director and third party provided consideration for variation deed - STATUTORY INTERPRETATION – accounting standards – purposive interpretation – interpretation of “remuneration” in Corporations Law by reference to accounting standard (AASB 1017) – Australian Securities and Investments Commission Act 1989 (Cth) ss 224, 228 – Corporations Law, s 9 - STATUTORY INTERPRETATION – correction of typographical error – Corporations Law, ss 200B - WORDS & PHRASES – “action” – “indirectly” – “may be effected” – “otherwise made available” –“payment limit” – “remuneration” LEGISLATION CITED: Acts Interpretation Act 1901 (Cth), s 46A
Australian Securities and Investments Commission Act 1989 (Cth), ss 224, 228
Civil Procedure Act 2005 (NSW), ss 3, 100
Corporate Law Economic Reform Program Act 1999 (Cth), Schedule 3, item 187
Corporations Act 2001 (Cth), ss 140, 181-183,198A; Pt 2D.2
Corporations Law, ss 9, 200A, 200B, 200E, 200G, 200J, 202A, 202B, 208, 211, 226A, 228, 229, 237, 334; Pt 2D.2; Ch 2D, Ch 2E
Supreme Court Act 1970 (NSW), ss 16, 94
Supreme Court Act 1981 (UK), s 35A
Trade Practices Act 1974 (Cth), ss 52, 80, 87CATEGORY: Principal judgment CASES CITED: Bloch v Bloch [1981] HCA 56; 180 CLR 390
Bluebottle UK Ltd v Deputy Commissioner of Taxation [2007] HCA 54; 232 CLR 598
Commissioner of Stamp Duties v Shortland County Council (1989) 20 ATR 417
Commissioner of State Revenue v Politis [2004] VSC 126; 55 ATR 491
Deputy Commissioner of Taxation v Bluebottle UK Ltd [2006] NSWCA 360; 68 NSWLR 558
Hermann v Charny [1976] 1 NSWLR 261
In Shoppe Pty Ltd v Smith (1976) 6 ATR 242
IRG Technical Services Pty Ltd v Federal Commissioner of Taxation [2007] FCA 1867; 165 FCR 57
Lindner v Wright (1976) 14 ALR 105
McCann v Switzerland Insurance Australia Ltd [2000] HCA 65; 203 CLR 579
Musumeci v Winadell Pty Ltd (1994) 34 NSWLR 723
Re H 1976 Nominees Pty Ltd v Joel Auctions Pty Ltd [1988] FCA 245
State Bank of New South Wales Ltd v Commissioner of Taxation [1995] FCA 1652; 62 FCR 371
Tinyow v Lee [2006] NSWCA 80
Trade Practices Commission v The Gillette Company (No 1) [1993] FCA 496; 45 FCR 366
Transfield Shipping Inc v Mercator Shipping Inc [2008] UKHL 48, [2008] 3 WLR 345
Vezitis v McGeechan [1974] 1 NSWLR 718
Wigan v Edwards (1973) 47 ALJR 586
Wilkie v Gordian Runoff Ltd [2005] HCA 17; 221 CLR 522
Williams v Roffey Bros & Nicholls (Contractors) Ltd [1991] 1 QB 1 (EWCA)
Woodhouse AC Israel Cocoa Ltd SA v Nigerian Produce Marketing Co Ltd [1972] AC 741
Woolwich Equitable Building Society v Inland Revenue Commissioners [1993] AC 70TEXTS CITED: Austin RP and Ramsay IM, Ford’s Principles of Corporations Law (13th ed 2007) at [6.080]
Meagher RP, Heydon JD and Leeming MJ, Meagher, Gummow and Lehane’s Equity – Doctrines & Remedies (4th ed, 2002) at [20-050]
Pearce DC and Geddes RS, Statutory Interpretation in Australia (6th ed, 2006) at [2.24]PARTIES: Dome Resources NL (First Appellant)
Durban Roodepoort Deep Ltd (Second Appellant)
Michael Bernard Silver (First Respondent)
Fair Choice Ltd (Second Respondent)FILE NUMBER(S): CA 40461/07 COUNSEL: TGR Parker SC/SJ Davis (Appellants)
JE Thomson/MJ Watts (Respondents)SOLICITORS: Allens Arthur Robinson (Appellants)
Bull, Son & Schmidt (Respondents)
LOWER COURT JURISDICTION: Supreme Court LOWER COURT FILE NUMBER(S): SC 2586/01 LOWER COURT JUDICIAL OFFICER: Hamilton J LOWER COURT DATE OF DECISION: 9 May 2007; 29 June 2007 LOWER COURT MEDIUM NEUTRAL CITATION: Silver v Dome Resources NL [2007] NSWSC 455; Silver v Dome Resources NL [2007] NSWSC 699
CA 40461/07
SC 2586/0127 November 2008BEAZLEY JA
BASTEN JA
BELL JA
In the mid-1990s, the first appellant, Dome Resources NL (“Dome”), operated as a mining company. In March 2000, Durban Roodepoort Deep Ltd (“DRD”), the second appellant, acquired almost all the shares in Dome. Dome became a subsidiary of DRD.
On 26 June 1998, Mr Silver, the first respondent, was appointed a director of Dome. A company controlled by Mr Silver, Goldspark Pty Ltd (“Goldspark”), provided Mr Silver’s services pursuant to a consultancy agreement. In late 1999, Fair Choice Ltd (“FCL”) took over providing Mr Silver’s services to Dome.
Clause 11.5 of Dome’s constitution gave the directors power to provide a retirement benefit to present and future non-executive directors. On 31 May 1999, Dome’s board of directors resolved to execute a retirement deed in favour of Mr Silver. On 9 May 2000, the board resolved to vary the 1999 deed (“the variation deed”) and Mr Silver stepped down as managing director, but remained as a non-executive director. On 26 May 2000, the variation deed was executed by Dome and Mr Silver. On 31 August 2000, Mr Silver resigned as a director of Dome.
Pursuant to the retirement deed, Mr Silver claimed payment of a retirement benefit of approximately $474,000 to FCL from Dome, whose liability was guaranteed by DRD. Both companies denied liability to pay FCL. The trial judge, Hamilton J, upheld Mr Silver’s claim and ordered the appellants to pay the full amount claimed, together with interest, to FCL. Before the Court of Appeal, the appellants challenged the validity and effect of the retirement deed.
The issues for determination on appeal were whether:
(i) cl 11.5 required a pre-existing “plan or scheme” to be adopted by the board of directors, pursuant to which benefits were conferred or agreed to be conferred;
(ii) the payments made to Goldspark and FCL under the consultancy agreements were included within the payment limit set by s 200G of the Corporations Law;
(iii) Mr Silver (and FCL) provided consideration in respect of the variation deed and, therefore, had standing to seek relief; and
(iv) FCL should be paid interest on the amount the subject of the appropriate order.
The Court held, dismissing the appeal (per Basten and Bell JJA, Beazley JA agreeing):
In relation to (i)
1. Subject to constraints imposed by the statutory regime, a provision in a corporation’s constitution conferring power on directors should be given as broad an operation as is reasonably available on the language and without imposing procedural constraints on the board, absent some contextual indication or purpose requiring the language to be so construed: [12], [16].
Bluebottle UK Ltd v Deputy Commissioner of Taxation [2007] HCA 54; 232 CLR 598; Wilkie v Gordian Runoff Ltd [2005] HCA 17; 221 CLR 522; McCann v Switzerland Insurance Australia Ltd [2000] HCA 65; 203 CLR 579; Deputy Commissioner of Taxation v Bluebottle UK Ltd [2006] NSWCA 360; 68 NSWLR 558, applied.
2. The language of cl 11.5 did not, in express terms, impose a requirement that a precondition to any agreement or provision of a retirement benefit was the adoption by the board of some general scheme or plan, not limited to a particular individual: [15]. The opening words of cl 11.5 did not in terms require a formal resolution, nor any particular content: [16].
3. That cl 11.5 empowered the board to provide for benefits in whatever way it thought appropriate in the interests of the company, for example, by relevant agreements, was consistent with the clause envisaging that the scheme or plan itself may operate to confer benefits on a director: [17].
In relation to (ii)
4. Corporations Law, s 200G(1)(c) fixed a limit on the value of the retirement benefit which could be approved by directors, without approval by a general meeting. Section 200G(2)(b) fixed this limit by reference to the retiring person’s total remuneration from the company during the period of three years, ending when the person retired: [34].
5. A director’s remuneration was defined by reference to the disclosure requirements in the relevant accounting standard, which was AASB 1017 at the time of Mr Silver’s retirement: Corporations Law, ss 9, 334: [37]–[38].
6. Section 228 of the Australian Securities and Investment Commission Act 1989 (Cth) provided that AASB 1017 had to be construed purposively. Remuneration had to be assessed in the same way as for the purposes of the disclosure obligations imposed on the company: [40]–[41], [46].
7. Where a director arranges for his or her services to be made available through the medium of a third party, and requests payments to be made to it, the court should generally accept that such a payment has been made available, indirectly, to the director, for the purposes of paragraph 4.2 of AASB 1017. The remuneration was that provided “in connection with the management of the affairs” of the company, whether as a director or otherwise: [47].
Trade Practices Commission v The Gillette Company (No 1) [1993] FCA 496; 45 FCR 366; Commissioner of State Revenue v Politis [2004] VSC 126; 55 ATR 491, applied.
8. The payments made to both Goldspark and FCL by Dome, for the provision of Mr Silver’s personal services, constituted part of his total remuneration from the company. It was, therefore, a sum which could properly be inserted in the calculation required by s 200G(2): [48].
9. Section 200G did not require that the calculation be made by reference to a period during which the officer held the particular office from which he or she retired; therefore, Mr Silver’s payments for his services prior to becoming a director on 26 June 1998 could be included: [51].
In relation to (iii)
10. Mr Silver (and FCL) provided consideration for the variation deed by promising not to walk away from Dome without notice or reason. The conclusion reached by the trial judge that there was consideration for the variation deed should be accepted: [67]–[68].
Wigan v Edwards (1973) 47 ALJR 586; Musumeci v Winadell Pty Ltd (1994) 34 NSWLR 723; Transfield Shipping Inc v Mercator Shipping Inc [2008] UKHL 48, [2008] 3 WLR 345; Williams v Roffey Bros & Nicholls (Contractors) Ltd [1991] 1 QB 1; Woodhouse AC Israel Cocoa Ltd SA v Nigerian Produce Marketing Co Ltd [1972] AC 741, referred to.Tinyow v Lee [2006] NSWCA 80, considered.
In relation to (iv)
11. Section 100 of the Civil Procedure Act 2005 (NSW) does not delimit the power which it confers to include interest in the amount for which judgment is given by reference to whether the cause of action was brought under general law, equity or statute. So long as the judgment included an order for payment of money, the trial judge could include an amount by way of interest: [78].
Bloch v Bloch [1981] HCA 56; 180 CLR 390; Hermann v Charny [1976] 1 NSWLR 261; In Shoppe Pty Ltd v Smith (1976) 6 ATR 242; Vezitis v McGeechan [1974] 1 NSWLR 718; Woolwich Equitable Building Society v Inland Revenue Commissioners [1993] AC 70, referred to.Commissioner of Stamp Duties v Shortland County Council (1989) 20 ATR 417; Re H 1976 Nominees Pty Ltd v Joel Auctions Pty Ltd [1988] FCA 245; State Bank of New South Wales Ltd v Commissioner of Taxation [1995] FCA 1652; 62 FCR 371, considered.
CA 40461/07
SC 2586/0127 November 2008BEAZLEY JA
BASTEN JA
BELL JA
1 BEAZLEY JA: I agree with Basten and Bell JJA.
2 BASTEN and BELL JJA: In the mid-1990s the first appellant, Dome Resources NL (“Dome”), operated as a mining company, its principal commercial operation being a gold and silver mine at Tolukuma in Papua New Guinea.
3 On 26 June 1998 Mr Michael Silver, the first respondent, was appointed a director of Dome. A company controlled by Mr Silver, Goldspark Pty Ltd (“Goldspark”) was a significant shareholder in Dome and provided Mr Silver’s services pursuant to a consultancy agreement. In September 1999 the second appellant, Durban Roodepoort Deep Ltd (“DRD”), acquired a substantial shareholding in Dome. In March 2000 it made a takeover offer which was successful, Dome becoming a subsidiary of DRD. Mr Silver resigned as a director of Dome on 31 August 2000.
4 The present proceedings concern Mr Silver’s claim for payment of a retirement benefit in an amount of approximately $474,000 to a company, Fair Choice Ltd (“FCL”), which provided his services to Dome at the time of his resignation. The amount was said to be payable by Dome, Dome’s liability being guaranteed by DRD. Both companies denied liability to make any payment to FCL. The trial judge, Hamilton J, upheld the claim made by Mr Silver and ordered the appellants to pay the full amount claimed, together with interest, to FCL: see Silver v Dome Resources NL [2007] NSWSC 455; 62 ACSR 539. His Honour dealt with questions of interest and costs in a second judgment: Silver v Dome Resources NL [2007] NSWSC 699.
Issues
5 Mr Silver’s entitlement turned upon the validity and effect of a retirement deed executed by the board of Dome on 31 May 1999 (“the 1999 deed”) and varied on 9 May 2000 (“the variation deed”). The appellants challenged the authority of the directors of Dome to enter into such a deed without shareholder approval, which was not obtained. Secondly, they challenged the validity of the deed on the basis that it provided for payment of a benefit in contravention of provisions relating to termination payments, now found in Part 2D.2 of the Corporations Act 2001 (Cth), but as at August 2000 in the Corporations Law. Thirdly, they challenged the standing of Mr Silver to seek the relief and, fourthly, the inclusion in the judgment of an amount by way of interest. Fifthly, and independently of success on the other challenges, the appellants said that they should have obtained a costs order against FCL, which did not recover in its own right. There was a cross-appeal by the respondents, seeking relief in the name of FCL.
6 It is convenient to consider first the authority of the directors to enter into the retirement deed pursuant to which an amount was said to be payable. The second question is whether the amount payable pursuant to the deed was within the payment limit set by the Corporations Law, s 200G.
7 The issue raised for consideration concerns the powers of a company, acting through its board of directors, to enter into an agreement with one or more directors to provide a financial benefit on that person’s retirement. Following the enactment of the Company Law Review Act 1998 (Cth), Dome adopted a constitution which provided, consistently with s 226A of the Corporations Law (as then in force) that the business of the company was to be managed by the directors. (See now Corporations Act, s 198A.) In particular, cl 11.1 of its constitution read as follows:
- “ 11.1 Management of the Company
- Subject to the Corporations Law and to any other provision of this Constitution, the business of the Company must be managed by the Directors, who may pay all expenses incurred in promoting and forming the Company, and may exercise all such powers of the Company as are not, by the Corporations Law or by this Constitution, required to be exercised by this Company in general meeting.”
8 Directors may have financial dealings with the company in any one of a number of respects. They may be paid for their services as directors and additionally for attending meetings of committees and other bodies. They may receive further remuneration for particular services provided to the company. There may also be an arrangement pursuant to which they receive a benefit on retirement or resignation. Directors are not precluded from dealing with the company, but they are subject to fiduciary obligations, including those now found in ss 181-183 of the Corporations Act.
9 There were a number of provisions in the constitution of Dome, dealing with such matters. In particular, cl 10.7 provided that the remuneration for their services as directors was to be not more than the sum fixed by the company in general meeting. The specific clause relied upon by Mr Silver to support his entitlement to have a payment made to FCL was cl 11.5 of the constitution which read as follows:
- “ 11.5 Retirement benefits for Directors
- The Directors may at any time adopt any scheme or plan which they consider to be in the interests of the Company and which is designed to provide retiring or superannuation benefits for both present and future non-executive Directors, and they may from time to time vary any such scheme or plan. Any scheme or plan may be effected by agreements entered into by the Company with individual Directors, or by the establishment of a separate trust or fund, or in such other manner as the Directors consider proper. The Directors may attach such terms and conditions to any entitlement under any such scheme or plan as they think fit, including, without limitation, a minimum period of service by a Director before the accrual of any entitlement and the acceptance by the Directors of a prescribed retiring age. No such scheme or plan may operate to confer upon any Director or any of the dependants of any Director any benefits not permitted by Section 237 of the Corporations Law.”
10 Dome contended that the steps taken to provide a retirement benefit to Mr Silver had involved the company entering into an agreement with him and, following his resignation, making a payment in accordance with the agreement. In order to exercise their powers under cl 11.5, the directors were required to adopt a “scheme or plan”, which could be varied from time to time, and which could be effected by entering into an agreement with Mr Silver individually or by conferring a financial benefit upon him in some other manner. There was no relevant “scheme or plan” and accordingly the conferral of the benefit did not fall within the powers conferred by cl 11.5.
11 Although a company’s constitution has effect as a contract between the company and its officers and members, and between the members (Corporations Act, s 140), it is self-evidently a document having features which distinguish it from a commercial agreement between identified parties. Nevertheless, the approach to construing the clauses of a constitution is closely analogous to that adopted in relation to commercial contracts: see Austin RP and Ramsay IM, Ford’s Principles of Corporations Law (13th ed 2007) at [6.080]. Accordingly, it is appropriate to approach the task so as to give the document a “businesslike interpretation”, paying “attention to the language used by the parties, the commercial circumstances which the document addresses, and the objects which it is intended to secure”: see McCann v Switzerland Insurance Australia Ltd [2000] HCA 65; 203 CLR 579 at [22] (Gleeson CJ), language adopted in Wilkie v Gordian Runoff Ltd [2005] HCA 17; 221 CLR 522 at [15] (Gleeson CJ, McHugh, Gummow and Kirby JJ, Callinan J agreeing at [53]). Even where a company’s constitution adopts the language of the Corporations Law (or now the Corporations Act) the importance of construing the language in its new contractual context requires a broader set of considerations to be addressed, not excluding, but not limited to, the statutory context: see Bluebottle UK Ltd v Deputy Commissioner of Taxation [2007] HCA 54; 232 CLR 598 at [31]; and see Deputy Commissioner of Taxation v Bluebottle UK Ltd [2006] NSWCA 360; 68 NSWLR 558 at [107]-[108].
12 Applied in the present context, and subject to constraints imposed by the statutory regime, those principles require that a provision conferring power on the directors should be given as broad an operation as is reasonably available on the language and without imposing procedural constraints on the board, absent some contextual indication or purpose requiring the language to be so construed.
13 In the present case, the question is whether there should be a pre-existing “plan or scheme” identified by the board, pursuant to which benefits are conferred or agreed to be conferred or whether, on the other hand, cl 11.5 empowers the board to provide for benefits in whatever way it thinks appropriate, in the interests of the company. Dome contended for the former, two-stage, approach. It argued that the second sentence of the clause made clear the dichotomy between the “scheme or plan” and the agreements or other mechanisms by which the scheme or plan “may be effected”. It also sought to draw some support for that approach from the reference to the adoption of a scheme or plan “for both present and future” non-executive directors.
14 Whilst the language of the clause may be so read, a different reading is available. The verb “to effect” has more than one connotation. Thus, while a scheme may be put into operation by means of an agreement, it is also possible that the scheme may be constituted by the agreement. Which connotation is intended may of course be affected by the use of the passive tense. Whether or not that is so will depend upon context. It may make a difference to say that ‘an election may effect a change in government’, as opposed to ‘a change in government may be effected by an election’; but the correct connotation may depend largely on where the emphasis is to placed.
15 In effect, Dome’s contention relies upon the inference that a precondition to any agreement or provision of a benefit is the adoption by the board of some general scheme or plan, not limited to a particular individual or individuals. The language of the clause does not in express terms impose such a requirement. The reference to “present and future” directors may be understood as involving an explanation of the breadth of the power, rather than imposing a limitation.
16 In addition, to give cl 11.5 a constrained reading would tend to ignore the language of the opening words, namely that the directors may “at any time adopt any scheme or plan” having the desired purpose. This language does not in terms require a formal resolution, nor any particular content. This language may be compared with that of cl 10.5, for example, dealing with removal of one director and the appointment of another in his or her place, each of which must be done “by resolution”; or by comparison with cl 11.3, which requires appointment of attorneys “by power of attorney”. The breadth of the language in cl 11.5 is consistent with the proposition that it does no more than spell out, in respect of a particular matter, the general power contained in cl 11.1 for the management of the business of the company and the “exercise” of all powers, not otherwise constrained.
17 The less constrained approach may also follow because the clause envisages that “an entitlement” may arise under any such scheme or plan and may be the subject of terms and conditions. It is envisaged that the scheme or plan itself may operate to confer benefits on a director, thus engaging s 237 of the Corporations Law. These characteristics are consistent with the scheme or plan itself being constituted by the relevant agreements (or trust fund). (On 13 March 2000 s 237 was replaced by ss 200A-200J, following the enactment of the Corporate Law Economic Reform Program Act 1999 (Cth) (“CLERP Act”): it was not contended that the changes affected the construction and operation of the constitution.)
18 It follows that the directors were not constrained by a two-stage process involving the formulation of a plan at a level of generality, followed by individual agreements between the company and a particular director. Or, if there was a two-stage approach, it may be seen in the decision to enter into an arrangement, which will only result in a benefit being given on resignation. If the establishment of a general policy or common rule was not required, the appellants’ contention must fail.
(b) application of principles
19 It is necessary next to consider how these principles operated in respect of the arrangements made by Dome with Mr Silver.
20 The primary judge put to one side the resolution of 31 May 1999 adopting the proposed retirement deeds, on the basis that, although the 1999 deed continued in force to the extent that it was unaltered by the later variation deed, no reliance was placed upon the 1999 deed in support of the claim for payment to FCL. Although the benefit could only be calculated under cl 3 of the 1999 deed, that approach was accepted by the appellants during oral argument on the appeal: Tcpt, NSWCA, 11/03/08, pp 24-25. In their written submissions they stated (par 28):
- “Mr Silver’s Retirement Variation Deed was not entered into pursuant to any such scheme or plan; in fact the Board had not, at any stage prior to 9 May 2000, established any such scheme or plan for retirement benefits for non-executive Directors. Mr Silver’s Deed was simply a ‘one-off’ transaction, which the Board approved as part of the general business of the company. As such, it was not supported by clause 11.5 and was beyond the Board’s power.”
21 It is necessary, nevertheless, to identify certain features of the 1999 deed. In particular, it is necessary to refer to the circumstances in which payment was to be made to Goldspark and the basis of calculation of that payment, as set out in part 3. Thus, cl 3(a) provided:
- “(a) Where, in any of the circumstances described in clause 3(b) :
- (i) the Director retires from the office of director of the Company; or
- (ii) the Director is dismissed or removed as a director of the Company or as an Executive Director,
- then, immediately on the retirement, dismissal or removal (as the case may be), the Company must pay to Goldspark, a payment equal to (A) the total Emoluments of the Director during the period of 3 years ending on the date of his retirement, dismissal or removal calculated in accordance with the formula in section 237(6)(b)(ii) of the Corporations Law and excluding, as permitted by section 237(6) , pensions or payments to which section 237(5) applies, minus (B) the amount (if any) previously paid to Goldspark under clause 3(d) below.
22 The circumstances identified in cl 3(b) included resignation or removal for reasons of sickness, accident, death or achieving 72 years of age and failure to obtain re-appointment at a general meeting. In addition, cl 3(b) provided:
- “(vi) … if the Director ceases to be an Executive Director of the Company by reason of the Company electing not to renew or continue the existing consultancy agreement dated 3 May 1999 between the Company and Goldspark on the same terms as the existing agreement or as varied from time to time by mutual agreement;
- (vii) if the office of the Company at which the Executive Director normally works is relocated from Sydney and the Executive Director resigns for this reason.”
23 Clause 3(c) provided that payment would not be made under cl 3(a) upon resignation, other than for a reason identified in the relevant paragraphs of cl 3(b). Clause 3(d) made separate provision for the payment to be received by Goldspark upon resignation as an executive director of the company in other circumstances. This provision was removed by the variation deed and need not be considered further. Clause 3(e) then provided:
- “(e) The parties acknowledge and agree that in calculating Emoluments for the purposes of clause 3(a) and (d) there shall be included directors’ fees and consulting fees paid directly or indirectly to the Director in connection with the management of the Company. This will include all fees paid to Goldspark, under the consultancy agreement between the Company and Goldspark dated 3 May 1999.”
24 Adopting the appellants’ approach set out above, the relevant directors’ meeting was that held on 9 May 2000. Of the five members of the board at that time, Mr Silver and the Secretary, Mr Hutt, were in Sydney, one director was in Perth and two were in Johannesburg. The meeting was conducted by teleconference. Under the item “Directors retirement variation deeds”, the minutes recorded the following:
- “At this point, Mr Silver and Mr Hutt disclosed an interest in the matter about to be discussed and left the Board Room, leaving the conference telephone connected to DRD’s Johannesburg office.
- After being advised by a telephone call on Mr Silver’s mobile phone to return to the Board Room and the conference telephone call, Mr Silver and Mr Hutt were informed by Mr Mostert that the other directors had discussed the retirement variation deeds and had RESOLVED to execute them.
- Mr Mostert said that he understood that the retirement benefits were only to be paid on the retirement of each director. Both Mr Silver and Mr Hutt agreed with this. Mr Mostert said that Mr Hutt would also be paid the amount in lieu of three months notice on his retirement.”
25 The minutes also noted that Mr Silver stepped down as managing director, but remained as a non-executive director. The retirement deed in respect of Mr Silver was executed some time later. Signed copies of the deeds were sent to Mr Silver and Mr Hutt by facsimile from DRD in Perth on 26 May 2000. Each was invited by the facsimile to sign the copy and return it by facsimile. It seems likely that the originals were signed thereafter. The parties to the variation deed were Dome, Mr Silver and DRD. The recitals to the variation deed were as follows:
- “A. The Company and the Director entered into a Retirement Deed dated 31 May 1999 (“ Retirement Deed ”).
- B. DRD is the ultimate holding company of the Company.
- C. The Company, the Director and DRD have agreed to vary the terms of the Retirement Deed on the terms and conditions of this Deed.”
26 The key variation involved the insertion of new clauses 7 and 8 in the 1999 deed. New cl 7 was as follows:
- “7. Continuation as Non-Executive Director
7.1 In the event that the Director:
- (a) retires, resigns or is dismissed or removed as an Executive Director; and
(b) is appointed at or about the time of such dismissal or removal, or continues, to hold the office of director of the Company; and
(c) subsequently ceases to hold the office of Director of the Company for any reason,
7.2 Payment made in accordance with clause 7.1 will be in substitution for any other payment to which the Director might otherwise have been entitled under this Deed in respect of his ceasing to hold office as a director of the Company.”
27 New cl 8 involved a guarantee on the part of DRD of the performance by Dome of its obligations under the deed, together with an indemnity in respect of liabilities incurred by Mr Silver in connection with any fault or delay by Dome in performance of its obligations under the deed. The guarantee was expressed to be given in consideration of Mr Silver entering into the deed at the request of DRD.
28 As will be seen from new cl 7.1(c), the right to payment, although related to ceasing to hold the office of executive director, was engaged only upon ceasing to hold the office of director of the company. It may thus be understood (the contrary not being argued) that the deed was designed to provide a retirement benefit for Mr Silver as a non-executive director. The amount payable was to be calculated by reference to the “Emoluments of the Director during the period of 3 years ending on the date of his retirement … calculated in accordance with the formula in section 237(6)(b)(ii) of the Corporations Law and excluding, as permitted by section 237(6), pensions or payments to which section 237(5) applies”: 1999 Deed, cl 3(a). For the purpose of calculating those emoluments, the parties to the 1999 deed had agreed that “there shall be included directors’ fees and consulting fees paid directly or indirectly to the Director in connection with the management of the Company [including] all fees paid to Goldspark under the consultancy agreement between the Company and Goldspark dated 3 May 1999”: 1999 Deed, cl 3(e).
29 Approaching this material in accordance with the principles set out above, it is clear that the deed was designed to provide a retirement benefit to Mr Silver when he resigned as a non-executive director; it identified the circumstances in which the entitlement would accrue and it sought to operate so as not to confer a benefit beyond that permitted under the Corporations Law. Whether it was successful in the last endeavour is a matter considered below. However, for the purposes of cl 11.5, the deed (and in particular the variation deed) should be understood to incorporate the terms of a plan which, if accepted by Mr Silver, would give rise to entitlements of a kind referred to in cl 11.5. The plan was not effected until (a) the deed was executed by both the company and Mr Silver and (b) Mr Silver resigned. The suggestion that the directors did not have power to act in this way pursuant to the constitution of Dome should be rejected.
(2) Corporations Law: requirement for approval of members
30 Mr Silver resigned as a director of Dome on 31 August 2000. At that time, according to his claim, he became entitled to payment under the retirement variation deed. His Honour accepted, as did the parties on the appeal, that the relevant date to determine the lawfulness of such a payment was the date at which the alleged entitlement accrued. There is no reason to depart from that approach.
31 In August 2000, a company was prohibited from giving a person a benefit in connection with that, or another, person’s retirement from a board or managerial office in the company: Corporations Law, s 200B(1). The payment to which entitlement was claimed was a payment to FCL; it was not in dispute that such a payment was caught by the prohibition. Although s 200B did not in terms state that it was subject to other provisions in Part 2D.2, Div 2, other provisions expressly stated that s 200B(1) did not apply in specified circumstances. Those provisions had effect as qualifications on the operation of the prohibition. Section 200B(1) is itself subject to a qualification, namely that the benefit is given “without member approval under s 200E”. (Whether the payment was informally approved by DRD, which held more than 97% of the shares of Dome and was itself not a company was not raised.) Reliance was placed by way of exception on the terms of s 200G, which, so far as relevant, were as follows:
- “ 200G Genuine payments of pension and lump sum
(1) Subsection 200B(1) does not apply to a benefit if:
- (a) the benefit is a payment in connection with a person's retirement from a board or managerial office (the relevant office ) in a company or a related body corporate; and
(b) the payment is for past services the person rendered to:
- (i) the company …; and
32 It was not disputed that the precondition in paragraph (a) applied: were it otherwise, s 200B(1) would not have been engaged. (The very last reference to sub-s (1A) was a mistake: there was no such provision, the payment limit being set by sub-s (2). The reference should be so understood. The correction was made with the commencement of the Corporations Act on 15 July 2001. The Corporations Law should be read subject to that correction: see Lindner v Wright (1976) 14 ALR 105 at 109 (Muirhead J) and other authorities referred to by Pearce DC and Geddes RS, Statutory Interpretation in Australia (6th ed, 2006) at [2.24].)
33 In relation to paragraphs (b) and (c), it was accepted that no issue arose in respect of directors’ fees paid directly to Mr Silver: the issue concerned payments which had been made by Dome to companies associated with Mr Silver, namely Goldspark and FCL, in respect of managerial services provided to Dome, through the agency of Mr Silver. In relation to the latter, which exceeded, in the three years prior to his resignation, $400,000, Dome argued that the services were rendered to it by Goldspark and FCL respectively and not by Mr Silver, being the person whose retirement triggered the entitlement to payment. Accordingly, it was argued that paragraph (b) was not engaged. It is, however, convenient to defer that issue until the requirements in paragraph (c) have been addressed, as it was on the latter that the primary argument presented for Dome was focused.
34 The operation of the third condition required consideration of the “payment limit” set by sub-s 200G(2). That issue raised two questions: the first concerned the calculation of the payment provided for in the deed. That involved an issue as to the proper construction of the deed, which may also be deferred for present purposes. The second issue concerned the permissible limit fixed by the statute. For that purpose, it was necessary to identify the amount calculated under sub-s (2), which relevantly provided as follows:
- “(2) The payment limit is:
- (a) …; or
(b) otherwise – the total remuneration of the person from the company and related bodies corporate during the period of 3 years ending when the person retired from the relevant office.”
35 A note to sub-s (2) referred to the definition of “remuneration” in s 9. That definition was as follows:
- “ remuneration of an officer or employee of a corporation. A benefit given to an officer or employee of a corporation is remuneration if and only if the benefit, were it received by a director of the corporation, would be remuneration of the director for the purposes of an accounting standard that deals with disclosure in companies' financial reports of information about related parties.”
36 That part of the definition was followed by a list of persons who are not officers of a corporation for the purposes of the definition, but nothing turned on those exclusions, dealing with receivers and administrators and officers of a similar class.
37 In relation to a director, being an officer of a corporation, the definition must be understood as identifying the remuneration of that director (as it would any other officer) by reference to the disclosure requirements in the relevant accounting standard.
38 The term “accounting standard” is defined by reference to an instrument in force under s 334: see s 9. Such an instrument is one made by the Australian Accounting Standards Board (“the AASB”), which is a disallowable instrument under s 46A of the Acts Interpretation Act 1901 (Cth). The relevant standard for the present purposes was identified as AASB 1017, apparently released in February 1997 and still in force in August 2000. It was headed “Related Party Disclosures”. The term “related parties” was defined in s 228 of the Corporations Law and included directors of a public company. (It was not in dispute that Dome was a public company as defined in s 9.)
39 Section 4 of the standard dealt with disclosures relating to directors and, relevantly, “remuneration of directors”. The primary provision was paragraph 4.2. Paragraph 4.4, to which 4.2 was subject, was not relevant for present purposes. Paragraph 4.2 referred to “income”, a term defined (or described) in paragraph 4.5. That description in turn referred to “remuneration” which was further identified in paragraph 4.6. It is therefore convenient to set out each of paragraphs 4.2, 4.5 and 4.6, so far as relevant.
- “4.2 Subject to paragraph 4.4, the accounts must disclose:
- (a) the aggregate of the income paid or payable, or otherwise made available, in respect of the financial year, to all directors of the entity, directly or indirectly, by the entity or by any related party ; and
(b) …
- (a) in connection with the management of the affairs of the entity, or any of its subsidiaries, whether as a director or otherwise; and
(b) by way of brokerage or commission in consideration of:
- (i) subscribing or agreeing to subscribe … for shares …; or
(ii) procuring or agreeing to procure subscriptions for shares … of the entity or any related party; and
- (a) in relation to a person who is a director of an entity, amounts in payment or reimbursement of out-of-pocket expenses incurred for the benefit of the entity … .”
40 Usually, in construing a statutory provision, it is important to identify the purpose of the provision; its effect, particularly where it may give rise to criminal liability; and its statutory context. A purposive construction of an accounting standard was required by the Australian Securities and Investments Commission Act 1989 (Cth), s 228. In particular, it provided that a construction should be preferred which promoted the objects of Part 12 of that Act and, not inconsistently with those objects, a purpose or object of the standard itself. (The objects were contained in s 224 and related broadly to transparency in financial disclosure. Provisions to similar effect are now found in the Australian Securities and Investments Commission Act 2001 (Cth).) In the present case, the prohibition in s 200B may be seen as part of the regulation of benefits provided to directors of companies from company funds. Excessive benefits paid, either by way of remuneration or on termination, may be seen as furthering the interests of directors at the expense of the company and its members. Accordingly, control of such payments is placed in the hands of members in general meeting, subject to exceptions and variations. In relation to remuneration, that has long been dealt with in express terms, at the relevant time by s 202A, which was a replaceable rule. Further, directors’ remuneration was (and still is) subject to disclosure requirements contained in s 202B, which was obligatory, in the circumstances where it operated, and not a replaceable rule. Section 202B provided that the company must disclose “all remuneration paid to the director, regardless of whether it is paid to the director in relation to their capacity as director or another capacity”.
41 By contrast, termination payments were dealt with by way of a qualified prohibition, contravention of which gave rise to the payment being made the subject of a trust in the hands of the recipient: s 200J. However, when identifying the remuneration of a director for the purposes of the exception in s 200G, the definition required that remuneration be assessed in the same way as for the purposes of the disclosure obligations imposed on the company.
42 In this context, it must be understood that directors were “related parties” of the company: s 228(2). Spouses, de facto spouses, parents and children of directors were also related parties (s 228(2)(b) and 228(3)), as were entities (including bodies corporate) controlled by a director or a member of his or her close family referred to above: s 228(4). Related party transactions may give rise to conflicts of interest, as for example where a director controls a company which provides services of value to the first company. Thus, a director of a mining company might arrange for it to contract to obtain a drilling rig from a separate company, which the director owned or controlled. The situation is somewhat different, however, where it is the personal services of the director which are being provided by a separate entity, such as family company or trust controlled by the director or his or her family.
43 Related party transactions were covered by Ch 2E of the Corporations Law. As with termination payments, a company was required to obtain the approval of members to a financial benefit given to a related party, unless the benefit fell within an exception: s 208(1). One exception applied in respect of a benefit described as “remuneration to a related party as an officer … of … the public company”: s 211(1)(a)(i). For the exception to apply, the remuneration had to be “reasonable” given, amongst other things, “the responsibilities involved in the office or employment”: s 211(1)(b)(ii). A financial benefit “given to a person because of the person ceasing to hold an office … is remuneration paid or provided to the person in a capacity as an officer of the body”: s 211(3)(b).
44 On a strict interpretation, this last exception would not apply if the termination payment were made to a third party, even if that third party were also a related party. As the exception would not apply, the terms of Ch 2E would be engaged and the prohibition in s 208 would operate. That would be a result which should be avoided if possible, on the basis that Ch 2D, which included ss 200A-200J, and Ch 2E were not intended to apply to the same benefit. In relation to Ch 2E, that problem could readily be avoided by applying s 229, which was relevantly in the following terms:
- “ 229 Giving a financial benefit
- (1) In determining whether a financial benefit is given for the purposes of this Chapter:
- (a) give a broad interpretation to financial benefits being given, even if criminal or civil penalties may be involved; and
(b) the economic and commercial substance of conduct is to prevail over its legal form; and
(c) disregard any consideration that is or may be given for the benefit, even if the consideration is adequate.
- (a) giving a financial benefit indirectly, for example, through 1 or more interposed entities
(b) giving a financial benefit by making an informal agreement, oral agreement or an agreement that has no binding force
(c) giving a financial benefit that does not involve paying money (for example by conferring a financial advantage).”
45 It follows, that in determining what is the “remuneration” which may require disclosure under s 208, if s 211 does not operate, the Court is required to ensure that the economic and commercial substance of the conduct prevails over its legal form. It is therefore clear that providing a payment to a party associated with the director is to provide a financial benefit to the director. It would be irrelevant for that purpose to ask whether the director were a majority shareholder of the related party and whether, in law or otherwise, the director could control the use of the funds by the related party. Nor is it necessary to trace a payment through a related party in order to identify that the precise benefit provided by the company has found its way to the director.
46 While it is true that no similar provision was to be found in Ch 2D, the inter-relationship of the chapters suggested that a similar approach to such matters should properly operate in respect of their common elements, in order to avoid unintended consequences. To similar effect, it is important that the statute did not seek to identify with precision what constituted remuneration for the purposes of s 200G. Rather, it was content, as with other provisions in the Corporations Law, to adopt relevant accounting standards prepared for the purposes of disclosure in financial reports.
47 In the accounting standard, the terms “income” and “remuneration” were used as part of a broad description of amounts paid or payable to directors. In relation to income, paragraph 4.2 made it clear that the amount may be paid or payable, “or otherwise made available” to the director, “directly or indirectly”. As in a statute, the word “indirectly” should be given work to do which is not within the ordinary scope of “otherwise made available to”: see Trade Practices Commission v The Gillette Company (No 1) [1993] FCA 496; 45 FCR 366 at 376 (Burchett J); Commissioner of State Revenue v Politis [2004] VSC 126; 55 ATR 491 at [22]-[24] (Nettle J). Where a director arranges for his or her services to be made available through the medium of a third party, and requests that payments be made to it, the court should generally accept that such a payment has been made available, indirectly, to the director. Further, the remuneration was that provided “in connection with the management of the affairs” of the company, whether as a director or otherwise. Finally, the amount of the remuneration was “determined on the basis of the cost of the remuneration to the entity”, rather than by valuing the benefit in the hands of the director: paragraph 4.6.1.
48 In a practical and commercial sense, Dome was not managed by the corporate entities, Goldspark or FCL: rather, it obtained from those companies the skills, expertise and time of Mr Silver. It was Mr Silver who was the person responsible for managing Dome, in relevant respects. The payment in a practical and commercial sense was made for his services. Neither he nor Dome expected that he would obtain no financial benefit for his time. Nor should the scope of the term “remuneration” be governed by ascribing a literal meaning to the introductory words of the definition, namely a benefit “given to” an officer, or one “received by” a director. For the purposes of disclosure provisions, it would make a mockery of the Corporations Law if directors had been able to avoid disclosure of their remuneration by having companies contract with their family trusts or other entities and make payment to those trusts or other entities, which did not constitute remuneration payable “to” the director. The statutory requirements, as in other fields, may require that conduct be traced through corporate entities, not stopping the analysis at the point where a new entity is introduced: cf Politis (above) and IRG Technical Services Pty Ltd v Federal Commissioner of Taxation [2007] FCA 1867; 165 FCR 57 (Allsop J), both cases involving taxation laws. On this approach, the payments made to both Goldspark and FCL by Dome, for the provision of Mr Silver’s personal services, constituted part of his total remuneration from the company. It was therefore, subject to other issues which should now be dealt with, a sum which could properly be inserted in the calculation required by s 200G(2).
49 A further question, raised by Dome on the appeal (but not before the trial judge) was whether it was open to Mr Silver to include in the calculation amounts which he had received for his services prior to becoming a director of Dome on 26 June 1998. His claim covered a three year period from 31 August 2000 back to 1 September 1997. Some 10 months of that period predated his appointment as a director. For that period, Dome contended, he did not receive remuneration as an officer or employee of Dome and hence any part of that payment fell outside the definition of “remuneration”.
50 Whether it would be appropriate to allow the appellants to raise that argument for the first time during the oral hearing of the appeal is open to doubt. If it were a pure question of law, and clearly a good point, it might be permissible to allow that argument, subject to questions of costs, if it were the only point on which Dome succeeded. However, it is not clearly a good point. As already noted, the definition of “remuneration” is somewhat awkward. Also, the reference to a benefit “given to” a director should not be understood as a limitation, but merely as introductory words, the scope of which must be understood in the light of the accounting standards by which their meaning is to be determined. Similarly, reference to remuneration “of an officer or employee” should not, for reasons already given, be understood as excluding payments made to a director, technically an independent contractor at law, whose services have been provided by a related party. It follows that the only remaining question is whether the statutory provisions required that the payments were made at a time when the director was a director or otherwise an officer of the corporation.
51 Section 200G did not in terms require that the calculation be made by reference to a period during which the officer held the particular office from which he or she retired. Such a restriction might be found in a provision requiring that the payment be for past services the person rendered to the company, but that requirement, in s 200G(1)(b), did not purport to limit the services to services rendered in the capacity from which the officer was retiring. To impose such a restriction would be artificial in circumstances where the definition of remuneration, in accordance with the accounting standard, expressly covered payments made by the company to the person in connection with the management of its affairs “whether as a director or otherwise”: paragraph 4.5(a). The additional argument should be rejected.
52 The final question is whether the amount claimed by Mr Silver as payable under the terms of the deed otherwise exceeded the amount calculated as the payment limit under s 200G(2). If the calculation required by cl 3(a) and (e) of the deed did in fact exceed the payment limit, a further question would have arisen as to whether the limitation imposed by reference to s 237 of the Corporations Law, as in force when the deed was drafted, limited the amount payable and thus prevented a breach of the payment limit. (That in turn would have raised a question as to whether importing into the constitution s 237, which required calculations by reference to “emoluments” would have achieved a different result to that under s 200G, using the definition of “remuneration” introduced by the CLERP Act, Schedule 3, item 187, in March 2000.) However, on the basis that Mr Silver were successful on the issues raised above, no additional complaint was made that the calculation under the deed achieved a different figure to that accepted by the trial judge.
53 Accordingly, subject to questions of standing with respect to the equitable relief granted, the conclusion reached by the trial judge was correct and the appeal must be dismissed.
(3) Mr Silver’s claim: availability of relief
54 The arrangements with respect to retirement benefits were entered into under seal, thereby avoiding the need for there to be consideration passing in order to allow them to be enforceable at law. However, to the extent that an equitable remedy in the nature of specific performance or a mandatory injunction was sought, the appellants contended that equity would not lend its aid to a volunteer and that no consideration supported the promise contained in the variation deed to pay an amount to FCL on Mr Silver’s retirement. Claims for damages were also made by the respondents in the Court below, but were apparently not pursued and have not been reagitated on appeal. Nor, on the other hand, was it contended that equitable relief should be withheld because damages would constitute an adequate remedy. This was understandable, the case of a promise by one party to a second to provide a benefit to a third being a common situation in which damages will not provide an adequate remedy: see Meagher RP, Heydon JD and Leeming MJ, Meagher, Gummow and Lehane’s Equity – Doctrines & Remedies (4th ed, 2002) at [20-050]. Rather, the point relied upon by the appellants was that there had been no consideration provided by Mr Silver in respect of the variation deed. In respect of the calculation of the payment, the 1999 deed was invoked; in respect of the event triggering the entitlement, namely Mr Silver’s resignation as a non-executive director, the variation deed was relied upon.
55 The circumstances, including Mr Silver’s experience and expertise in the mining industry, and in particular in relation to the Tolukuma mine, were identified by his Honour as relevant to the question of consideration. He continued at [124]:
- “In mid 1998, when a director of Dome, he formed the view, and communicated it to Mr Boyer, that his remuneration for the services he was rendering to Dome was inadequate and that he was not prepared to continue devoting to Dome the degree of time and effort that he had been devoting, unless remuneration arrangements were improved. Following that communication, Mr Boyer indicated an intention to confer a retirement benefit on each director equal to his remuneration during his last three years of service. … A directors’ meeting was held on 31 May 1999 and Mr Silver was told that the retirement deed had been approved by Dome. He thereafter continued to furnish consultancy services to Dome. He continued as a director and subsequently became managing director.”
56 In considering the question of consideration, his Honour referred to the general rule “that a promise to perform an existing duty is no consideration, at least when the promise is made by a party to a pre-existing contract, when it is made to the promisee under that contract, and it is to do no more than the promisor is bound to do under that contract”: at [127], quoting Mason J in Wigan v Edwards (1973) 47 ALJR 586 at 594.
57 As the trial judge had earlier noted, the contractual arrangement pursuant to which Goldspark, through Mr Silver, provided services to Dome was uncertain, at least in the period prior to 3 May 1999 when it was regularised as part of the arrangement which included the payment of the retirement benefit: at [7]-[9] and [15]-[17]. That consideration was given in respect of this arrangement appears not to have been in dispute. The appellants’ case focused rather upon the arrangements with respect to the variation deed, the issue being defined with respect to the payment to FCL: Tcpt, NSWCA, 11/03/08, p 2(45) and 50(3).
58 In respect of the variation deed, his Honour’s findings were summarised further at [124] in the following terms:
- “When he came to stand down as managing director, he was asked to stay on as a non executive director. He agreed to do so, but on the basis that the payment obligations under the retirement deed would be met when he retired as a non executive director and that Fair Choice, which was now the vehicle through which his consulting services were provided, would be substituted for Goldspark as the payee. The retirement variation deed was considered at a board meeting of Dome on 9 May 2000 and Mr Silver was informed it had been approved. It was subsequently executed, including by DRD as guarantor. Mr Silver continued to be a director of Dome and to make endeavours on behalf of the company.”
59 The appellants objected that what happened in fact was irrelevant and that the real question was whether any consideration was supplied for the variation deed, viewed at the time it was agreed upon. They contended that absent a binding agreement by Mr Silver (and possibly FCL) to continue to act as director and provide services, Mr Silver could have departed the following day.
60 In his affidavit (sworn on 5 April 2002) Mr Silver referred to a change in September 1999 whereby Mr Boyer had retired as a director of Dome and Mr Charles Mostert had been appointed. Two months later, in November 1999, Mr Silver terminated his association with Goldspark and commenced a similar relationship with FCL. Dome accepted the change in arrangements and agreed to continue to pay the fee to FCL, as set out in a memorandum of 7 December 1999. Mr Silver gave evidence that shortly after making that arrangement, he had a conversation with Mr Mostert to the following effect:
“Mostert: Michael, I would like you to maintain an association with Dome and remain as a non-executive director. Your knowledge of Dome’s business affairs is seen as important.
Mostert: OK Michael, I understand and agree. I will arrange for a new version of your Retirement Deed to be prepared which attends to those matters and DRD will guarantee Dome’s obligations under the deed.[Silver]: Yes, I am prepared to continue as a director but this will require a change to my retirement deed, so that the retirement benefit will still be paid if I resign as a non-executive director for any reason. Also, like the present position, the retirement payment must be calculated by taking into account the fees paid to me as a director and the fees Dome has paid in relation to my consultancy services for the three years preceding the date of my retirement. That means payments to both Goldspark and Fair Choice must be taken into account.
- Based on my discussion with Charles Mostert … I continued to devote my services to Dome and gave up other significant business and consulting opportunities then available to me.”
61 His Honour treated this as a contractually binding arrangement. He stated at [121]:
- “The defendants did not seriously contest that Mr Silver promised that he would continue as a director of Dome and would continue to furnish consulting services to it, if given the entitlement to benefits as promised by the retirement deed and the varied retirement deed. I find on the evidence that he did make those promises. However, the defendants said that he was free at all times to resign his directorship and to cease providing consulting services to Dome at a moment’s notice: he could have done so the very next day. In light of this, they say that his promises which Mr Silver relies on as providing consideration are of no value whatever and therefore do not constitute valuable consideration.”
62 In support of this contention, on appeal, the appellants noted that, in cross-examination, Mr Silver had conceded that the variation deed contained no provision requiring him to stay for any particular period: Tcpt, 08/04/05, p 268(35). He agreed with the proposition that, under the variation deed, as he understood it, he could leave the very next day and collect a substantial retirement benefit. He noted however that he had not done so and that he continued on the existing basis until, after a meeting in South Africa, he had come to the conclusion “that DRD was not interested in expanding Dome along the lines that Mostert and I had considered was in the best interests for Dome”: Tcpt, p 269(30).
63 Whether the primary judge accepted the submission in the terms set out above is not entirely clear although it appears he did not: after noting it, his Honour moved to a discussion of whether there was a “practical benefit”, “factual benefit” or the avoidance of a “disbenefit” or detriment for the purposes of the doctrine relating to consideration: at [122]. He did so by reference to the discussion of those terms in Williams v Roffey Bros & Nicholls (Contractors) Ltd [1991] 1 QB 1 (EWCA), Musumeci v Winadell Pty Ltd (1994) 34 NSWLR 723 (Santow J) and Tinyow v Lee [2006] NSWCA 80.
64 Although in Tinyow at [61], Santow JA (Handley and Ipp JJA agreeing) affirmed that there was sufficient consideration in a “practical benefit” enjoyed by the respondents as a result of the appellant’s action, his Honour had already held that the actions of the appellant in repaying certain company debts, for which the respondents, as directors, had each agreed to pay the appellant a specified sum, constituted a contract enforceable by the appellant.
65 The question of a “practical benefit” constituting consideration has been considered in cases (other than Tinyow) where the promise was said to be illusory because the promisor was already contractually bound to do what he or she was promising. That is not this case: it is accepted by the appellants for the purposes of their argument that after, and therefore before, the variation deed, Mr Silver was entitled to resign without notice.
66 Whether or not that was so was not determined by the trial judge, nor was it governed by the responses of Mr Silver in cross-examination. It was, as his Honour otherwise recognised, a question to be resolved by the court in the circumstances of the case.
67 The proposed retirement of Mr Silver as managing director was undoubtedly treated by Dome (through Mr Mostert) as raising a question as to whether he would continue to serve as a director and to supply further consultancy services. Mr Silver agreed to do so, an agreement which should be understood to include FCL. He and FCL submitted that that promise was not illusory or worthless and should be construed as implying “an obligation to continue in that role for a reasonable time absent any material change in circumstances”. A relevant change in circumstances would, no doubt, have been the location of Dome’s office, its relocation out of Sydney being an acknowledged basis for resignation, triggering the benefit payable under the 1999 deed. No doubt a significant change in direction in respect of development of the mine, which would have affected the services Mr Silver could provide, would also have been a basis for resignation. The contrary was not contended by the appellants; the respondents’ submission should be accepted. It follows that the agreement reached between Mr Mostert and Mr Silver involved a promise binding Mr Silver (and in practice FCL) which precluded them walking away from Dome without notice or reason.
68 The conclusion reached by the trial judge that there was consideration for the variation deed should be accepted. It is not necessary for present purposes to consider whether the concept of “practical benefit” involves any departure from established principles relating to consideration or whether it is simply a new formulation of the well-established principle requiring the Court to identify the preconditions to a contract, as it would the proper construction of the contract, having regard to commercial realities and the manner in which business people have conducted their affairs: see Woodhouse AC Israel Cocoa Ltd SA v Nigerian Produce Marketing Co Ltd [1972] AC 741 and, in relation to expectations of the scope of loss for breach, Transfield Shipping Inc v Mercator Shipping Inc [2008] UKHL 48, [2008] 3 WLR 345.
69 The next question is whether FCL should be paid interest on the amount the subject of the appropriate order. The right to pre-judgment interest turned on the operation of s 100 of the Civil Procedure Act 2005 (NSW). That section relevantly states:
- “ 100 Interest up to judgment
- (1) In proceedings for the recovery of money (including any debt or damages or the value of any goods), the court may include interest in the amount for which judgment is given … .”
70 The question, which his Honour resolved in favour of the respondents, was whether proceedings for “specific performance” were “proceedings for the recovery of money” and whether an order that money be paid involved an “amount for which judgment is given”. His Honour held that the judgment should include an award of interest on the basis that, although it involved an order for specific performance, being relief similar to a declaration, it involved a judgment in proceedings for recovery of money, following the authorities of In Shoppe Pty Ltd v Smith (1976) 6 ATR 242 at 248 (Hutley JA, NSWCA) and Bloch v Bloch [1981] HCA 56; 180 CLR 390 at 398-399 (Wilson J): [2007] NSWSC 699 at [6]-[7].
71 The appellants’ arguments were twofold. First, it was said that the order made against Dome was “an order in the nature of specific performance”, language presumably intended to reflect the fact that it was an order for performance of an executed contract, rather than an order that steps be taken under an executory contract to confer rights upon a promisee. However, such an order, the argument proceeded, would not necessarily involve the payment of a sum of money and therefore should not take its character from the fact that, in the present case, it did. The second argument was that the term “judgment” was, according to “traditional definition”, a judgment in an action at law and thus did not include orders made, for example, by way of a decree in equity proceedings.
72 It is true that, in some statutory contexts, the term “action” will properly be construed as applying only to an action at common law for damages in tort: see, eg, Vezitis v McGeechan [1974] 1 NSWLR 718 at 719-720 (Taylor J). However, each case will turn upon its own statutory context. It would be highly implausible if s 100 (and its predecessor, s 94 of the Supreme Court Act 1970 (NSW)) were to be construed as applying only to actions at law, and not those seeking equitable relief. Indeed, such a construction would be untenable unless the term “action” applied to a specific claim for relief, as claims for equitable and common law relief may properly be joined in one proceeding. Indeed, the same may be said of the term “proceedings” for the recovery of money: it is unlikely that this language was intended to be referable either to equitable or common law claims only.
73 It is also clear that one could have an “action” under equity, for example for an account of profits: see Hermann v Charny [1976] 1 NSWLR 261 at 269. As interest was payable at equity in such circumstances, it would again be surprising if the language of s 100 were intended to preclude a statutory claim for interest in such a case.
74 In State Bank of New South Wales Ltd v Commissioner of Taxation [1995] FCA 1652; 62 FCR 371, Wilcox J considered a claim for interest on sales tax paid by the State Bank under protest, where the amounts were recoverable. The State Bank claimed an entitlement to interest either by way of restitution, trust or statute: at 376D. Although his Honour upheld an entitlement to interest on the basis of “restitution”, many of the cases discussed under that heading dealt with the question on the basis of statutory rights to interest in proceedings for the recovery of a debt: see, eg, Woolwich Equitable Building Society v Inland Revenue Commissioners [1993] AC 70, applying the Supreme Court Act 1981 (UK), s 35A.
75 In the Federal Court, orders for payment of interest have frequently been made in relation to cases involving statutory compensation under s 87 of the Trade Practices Act 1974 (Cth), in proceedings where the primary relief sought was injunctive relief under s 80. However, in Re H 1976 Nominees Pty Ltd v Joel Auctions Pty Ltd [1988] FCA 245, Jenkinson J rejected a claim for interest on certain payments ordered by the Court. Declarations, damages and interest had been claimed for breach of s 52 of the Trade Practices Act, but the claim was settled on the basis that the respondent would repurchase two paintings (the subject of the alleged misrepresentations) sold at auction, and would return the price paid for each by the applicant. Jenkinson J held that the proceedings were not “for the recovery of any money” but were for specific performance of a contract, namely the settlement agreement. His Honour further held that the “contractual terms of which orders for specific performance are sought are not terms stipulating merely for the payment of money”: at [10]. There was no reference to authority or any closer consideration of the reasons for these conclusions.
76 In Commissioner of Stamp Duties v Shortland County Council (1989) 20 ATR 417, Priestley JA (with whom Gleeson CJ and Samuels JA agreed) held that Re H 1976 should be treated as a case confined to its particular facts, without commenting upon the general principle: at 421. Their Honours concluded that interest was payable on a repayment of stamp duty, to the extent that it had been overpaid. Further, Gleeson CJ noted, in respect of the phrase “proceedings for the recovery of any money” (at 418):
- “Those words are plainly not limited to money claims where the plaintiff is seeking the repayment of moneys which he has previously paid to the defendant. To take the simplest possible example, an action for debt for goods sold and delivered is in no sense an action in which the plaintiff is seeking to get back any moneys from the defendant, being moneys that he has previously paid to the defendant.”
77 In the present case, the order which was proposed at that stage of the proceedings (ignoring questions of interest) was that “the defendants pay to the second plaintiff forthwith the sum of $X …”. The submission that such an order “could not usually be described as a ‘judgment’ for the purposes of s 100(1) of the Civil Procedure Act” is obscure. To the extent that it takes the matter any further, the term “judgment” as defined in s 3(1) of the Civil Procedure Act “includes any order for the payment of money …”. For most purposes a judgment is the order of the Court. As defined in the Supreme Court Act, “judgment” includes “any rule, decree or order”: s 16(4)(b). It is the order which the successful party will seek to enforce and it is the order from which the unsuccessful party will seek to bring an appeal.
78 Properly understood, s 100 does not delimit the power which it confers to include interest in the amount for which judgment is given by reference to whether the cause of action was brought under the general law, equity, or statute. Just as it was designed to expand the limited circumstances in which interest could be awarded on a judgment for payment of money under the general law, so it expanded the circumstances in which interest was payable at equity. So long as the judgment included an order for the payment of money, it was appropriate for his Honour to include an amount by way of interest. The appeal with respect to so much of the order as included interest should be dismissed.
(5) Costs of the proceedings brought by FCL
79 The final issue which needs to be addressed in relation to the appeal concerned his Honour’s order that the defendants pay both plaintiffs costs of the proceedings (with specific exceptions not presently relevant). The appellants contend that, FCL having been unsuccessful in obtaining relief in its own right, the appellants should have obtained their costs of the proceedings in so far as they were brought by FCL. This claim was dealt with in the second judgment: Silver v Dome Resources NL [2007] NSWSC 699.
80 His Honour rejected that claim at [16] in the following terms:
- “There is only one set of plaintiffs’ costs in the proceedings. Both plaintiffs, as is required, were represented by the same solicitors and counsel. Furthermore, in reality, they conducted only the one principal case on the one subject matter, namely, whether the first defendant or the second defendant ought be ordered to pay the retirement payment …, although that claim was put on various alternative bases. … In the end, the basis on which relief was obtained was that, at the suit of the first plaintiff, the defendants ought be ordered to make payment to the second plaintiff by way of specific performance. That is, one of the various bases on which the first and second plaintiffs made the claim for payment of the retirement benefit succeeded. Although that relief was not at the suit of the second plaintiff, there is no basis on which the second plaintiff’s case should be regarded as separate from the first plaintiff’s case so that the second plaintiff ought be ordered to pay the defendants’ costs on the basis that the second plaintiff was unsuccessful.”
81 In substance the challenge to this conclusion would require that costs be ordered on the basis of success or failure on individual issues. In one respect, his Honour did make such a distinction, removing from the entitlement to costs a part of the claim which had been abandoned and then reinstated, and which was unsuccessful. However, the basis on which the present complaint is made is that the appellants were successful in relation to FCL, despite having to make a payment to it, and therefore “costs should follow the event”.
82 In terms of practical reality, the appellants were unsuccessful and were required to make payment to FCL of all moneys claimed to be owing to it. His Honour was correct in treating the claims, albeit brought on behalf of two plaintiffs, as being in substance one claim brought on various bases. Once it was determined that costs should not be allocated according to those bases on which the plaintiffs succeeded and those on which they failed, no error has been demonstrated in relation to the manner in which his Honour exercised the discretion with respect to costs. Nor was any error shown in respect of the decision not to distinguish as to the bases on which relief was sought, beyond the distinction already noted. The appeal with respect to the costs order should also be dismissed.
(6) Cross-appeal
83 Mr Silver and FCL filed a notice of cross-appeal seeking relief for FCL on the basis that the rules of privity of contract did not preclude that result and, secondly, that the variation deed was enforceable by FCL as a deed poll. The cross-appeal was defensive and it is not necessary to deal with the issues raised by it, the appellants’ appeal having been dismissed: see Tcpt, NSWCA, 12/03/08, p 63(12). It is appropriate to dismiss the cross-appeal, but the costs in respect of it should be treated as costs in the appeal.
Conclusion
84 All the grounds of appeal having failed, the appropriate orders are that the appeal be dismissed and that the appellants pay the defendants’ costs.
85 The Court was not addressed on the question of whether a settlement offer which gave rise to an order for indemnity costs in the Court below on and from 21 February 2002 should be taken into account with respect to the appropriate costs order in this Court. Nor is it known whether any further offer has been made. The parties should have leave to a file a notice of motion within 14 days seeking any variation of the orders proposed.
86 Subject to that leave, we would propose the following orders:
(1) Dismiss the appeal.
(3) Order that the appellants pay the respondents’ costs in this Court.(2) Dismiss the cross-appeal.
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