Farah Constructions Pty Ltd & Ors v Say-Dee Pty Ltd

[2006] HCATrans 684

[2006] HCATrans 684

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Sydney  No S347 of 2006

B e t w e e n -

FARAH CONSTRUCTIONS PTY LTD

First Appellant

FARAH ELIAS

Second Appellant

LESMINT PTY LTD

Third Appellant

MARGARET ELIAS

Fourth Appellant

SARAH ELIAS

Fifth Appellant

JADE ELIAS

Sixth Appellant

and

SAY-DEE PTY LTD

Respondent

GLEESON CJ
GUMMOW J
CALLINAN J
HEYDON J
CRENNAN J

TRANSCRIPT OF PROCEEDINGS

AT CANBERRA ON WEDNESDAY, 13 DECEMBER 2006, AT 10.05 AM

(Continued from 12/12/06)

Copyright in the High Court of Australia

__________________

MR DOUGLAS:   If it please the Court, could I just raise a procedural matter before Mr Sullivan continues.  We filed that application for special leave to appeal last night.  I think the Court must have a copy of it, together with a draft notice of appeal.  There is just one procedural aspect of it which I want to draw the Court’s attention to which we do not think should trouble your Honours.  Apparently in the original proceedings Messrs Brian Silvia and John Melluish, the receivers of the property, were parties to an application which was made by Say‑Dee to restrain them from exercising their powers.

However, when it came to the motion which was before the Court of Appeal, Justice Tobias in paragraph 12 of the judgment made it very clear that the receivers were not parties to the motion, as no relief was being sought against them.  In those circumstances, we do not see the necessity for them to be joined in the application for special leave to appeal to this Court.  If the Court were to be of a contrary view, we would obviously contact them and find out what their attitude was.

GLEESON CJ:   Mr Douglas, the evidence that was before the Court of Appeal in the matter that was decided recently, will that be before us in a supplementary appeal book?

MR DOUGLAS:   As I understand it, the respondent to this appeal has provided to the Court the affidavits of the expert evidence which was filed on that occasion.  I have not myself had the opportunity to review all of the evidence.  If there is any other evidence which we feel should be before the Court, we will provide it.  If the Court feels that it should have all of the evidence, we will attend to that.

GLEESON CJ:   The question is whether there is any evidence that is relevant or possibly relevant to the issues that we will have to decide.

MR DOUGLAS:   I would have thought that the evidence which is particularly relevant is the evidence of valuation and town planning which, as I understand it, is the evidence which is before the Court.

GUMMOW J:   We need the initiating process, for goodness sake.

MR DOUGLAS:   It is probably best, however, to put all of the material before the Court.

GLEESON CJ:   Thank you.  The other thing we wanted to clear up was this.  I got the impression that - it may be an erroneous impression - from the supplementary notice of appeal that you are appealing against this most recent decision, not because of any desire to have us review what I might call the merits of that decision, but because if you succeed in your main appeal there will be consequences of that success for the orders that were made most recently by the Court of Appeal.  Is that a correct appreciation?

MR DOUGLAS:   That is the primary ground but there is also the supplementary matter which is this, that we do complain about the power of postponement which was given to the receivers because we say that the receivers should in fact sell the properties as soon as possible.

GLEESON CJ:   So you want us to review the decision of the Court of Appeal on the question of whether the receivers should sell the property within a reasonable time or whether they should have the power to postpone the sale as they may be advised?

MR DOUGLAS:   Yes.  Looking at it in terms of power rather than what the receivers themselves should do.

GLEESON CJ:   We have not heard any argument on that, I do not think.

MR DOUGLAS:   We would put it simply in terms of what we say about remedies, namely, that to have a situation in which we have provided all of the finance for this acquisition and the matter has now been going on for

some four years and having regard to the valuations of the property, it is inappropriate for nature of relief which was granted.  It would be more appropriate that there be an order for equitable compensation, in which event we say there is none because there is no profit which has been made, or, if there is in fact some basis on which an award could be made, the more appropriate order would be one whereby an order for equitable compensation or an account of profits if they are entitled to it - and we have made the point they have not raised that - should be made and that secured by a lien over the property. 

GLEESON CJ:   What we will need is a supplementary appeal book of the kind I mentioned earlier and a written outline of argument, both from you and from your opponents, as to any submissions you want us to consider in relation to what I have described as the merits of that most recent order as distinct from the consequences for that order of any success you might enjoy in the lone appeal.

MR DOUGLAS:   Yes, your Honour.

GLEESON CJ:   Thank you.

MR DOUGLAS:   Thank you.

GLEESON CJ:   Yes, Mr Sullivan.

MR SULLIVAN:   Your Honours, may I first deal with the factual issues in this appeal.  We deal with these in our written submissions at paragraphs 10 to 23 and 25 to 58 and I will not, of course, read through those submissions.  The issues of fact which are relevant, in our respectful submission, cannot be isolated from the findings of the scope of the fiduciary duty which were made by the Court of Appeal.  The scope of the fiduciary duty, in turn, depended upon the purpose or scope of the joint venture.  That is the first matter I wish to take your Honours to because your Honour Justice Gummow yesterday raised the question, what was the project referred to in the contract or agreement which was discussed by Mr Douglas with your Honours? 

May I first of all take you to the appellant’s defence to the cross‑claim, which is set out in volume 1 of the appeal books where your Honours will see some flesh, if you like, being given on what was the scope or purpose of the joint venture.  First of all, at page 22 of the appeal book in paragraph 7 of the defence to the cross-claim, the cross defendant admitted:

(a)That the property he had in mind for a development project in which it might be suitable for them or interests associated with them to invest was the 4-unit residential property . . . 

(e)That he had prepared a budget which provided for the balance of the purchase money, refurbishment cost and development of the Property -

Likewise at page 23 in paragraph 9(a) there is an admission:

That Mr Elias would manage the development and realisation of the project –

Similarly, in paragraph 10(c) on page 23 there is the admission that the parties:

contemplated and intended . . . 

subject to Council approval –

and those words are important –

the existing building on the Property would be demolished and a new building erected thereon which would utilise the site more intensively, i.e. increase the unit density and the Property would then be realised to best advantage –

Then further reference to the scope of the joint venture appears on page 28 of the appeal book in respect of paragraph 38 of the defence where:

The Cross‑Defendants admit that Farah Constructions represented to Say‑Dee in trade or commerce that, to the best of Farah Constructions’ ability, it would conduct the purchase redevelopment and sale of the Property to the mutual benefit of Say‑Dee and itself –

So those were additional assertions or admissions which fed the scope of the joint venture.  Those matters tie into what the Court of Appeal found was the scope of the joint venture and which does not appear to have been seriously contested in the present case.  The Court of Appeal discusses the scope or purpose of the joint venture in a number of places, but perhaps the most comprehensive discussion is at paragraph 140 of the Court of Appeal’s judgment which appears at pages 876 to 877 of volume 2 of the appeal book.  His Honour Justice Tobias speaking for the court said this:

Its purpose was the redevelopment of No. 11 in such a manner and to such an extent as would, with the Council’s approval, maximise the profit which might be generated thereform.  Mr Elias accepted in cross‑examination that as a developer, the whole purpose of the exercise was to attempt to maximise the development potential of the site.

That was the major finding.

GLEESON CJ:   I think Justice Tobias actually explained the meaning of this concept of maximum potential development that you see in some of the documents in paragraph 57 on page 848.

MR SULLIVAN:   Yes, your Honour is perfectly correct, with great respect.

GLEESON CJ:   And that statement in paragraph 57 identifying what Justice Tobias said that expression means is related back to what appears on page 833 in paragraph 17, line 20.

MR SULLIVAN:   Yes, your Honour, with great respect, we would accept completely that analysis.  May I also indicate that other paragraphs, which I will not take your Honours to in which the purpose is discussed, include paragraph 134 at page 874, and perhaps I should take you very briefly to the other paragraph which is paragraph 179 at page 892 where his Honour said:

Accordingly, I am of the opinion that the primary judge erred in holding . . . that the fiduciary obligations of Farah did not extend beyond any matter material to the redevelopment of No. 11 on its own.  As Say‑Dee submitted, the subject matter of the joint venture was the redevelopment of No. 11 with a view to maximising profit.  Accordingly, the fiduciary obligations of Farah extended to all matters pertinent to any such redevelopment.

That is what we respectfully submit is the ‑ ‑ ‑

GUMMOW J:   Where are you reading from, Mr Sullivan?

MR SULLIVAN:   I was reading from paragraph 179, your Honour, on page 892 at about point 3 of the page.  I see your Honour is looking at the Internet version.  There seems to be a problem within that version, the numbering of the paragraphs is different on the Internet version ‑ ‑ ‑

GUMMOW J:   That is right.

MR SULLIVAN:   ‑ ‑ ‑ because I think there were a number of blank paragraphs in the appeal book version which have been excised for the purpose of the Internet version, so I think it is about three or four paragraphs out in the Internet version.

GUMMOW J:   Yes, it is 178.

HEYDON J:   On that very page I see that paragraph 180 does not exist.

MR SULLIVAN:   Exactly, and I think that is what has caused the discrepancy, your Honour.

CALLINAN J:   Mr Sullivan, I have to say that I have some difficulty with paragraph 179.  I can readily accept that the subject matter of the joint venture was the redevelopment of No 11 with a view to maximising profit, but I do not get any assistance at all from the next sentence:

Accordingly, the fiduciary obligations of Farah extended to all matters pertinent to any such redevelopment.

That is an extremely broad statement.  Once you say “pertinent to”, it cannot be accepted in its widest possible ambit.  Questions of practicality, finance, cost benefit, all sorts of things come into play once you go outside the boundary.

MR SULLIVAN:   We readily accept your Honour’s indication of the breadth.  What we respectfully submit is clear when one reads the rest of the Court of Appeal judgment is that what his Honour was intending to say was that the obligations so far as the proscriptive obligation not to acquire without the fully informed consent the knowledge or information which was required in respect of informing the fiduciaries or the beneficiaries of fiduciary duty was in respect of all matters material to the joint venture, material to development.

CALLINAN J:   I could accept that if it had been not necessarily confined to a development within the boundaries of No 11 but it just cannot be as broad as his Honour has put it.

MR SULLIVAN:   Your Honour, what we say and all we need to say, with great respect, for the purposes of our appeal today is that the obligation to furnish information to the Say‑Dee principals extended to all information which was material to the proposed redevelopment with council approval.

CALLINAN J:   Let me tell you another difficulty I have, and it is only a tentative difficulty because I can see problems the other way, but it seems to me that you have a problem in one respect, that the better view seems to be that your client actually received a copy of the letter as part of the correspondence from Mr Farah.  That is the letter from the council of June, I think.  I have forgotten the date of it.  Let it be assumed for present purposes that that is proved.  That letter really conveys a great deal of information.  Once you say that the development – I have forgotten the language of the letter but it says it is too big for the site in effect.  Is that not the substance of the letter?

MR SULLIVAN:   I want to take you to that letter in a little detail, your Honour.  Your Honour has in mind the notice of determination by the council?

CALLINAN J:   Yes.

MR SULLIVAN:   My learned friend on a number of occasions yesterday, and quite innocently, I know, referred to the letter as saying that that indicated the council’s view that this property had to be amalgamated with the adjoining properties.  It does not say that at all, and I will take your Honours to that in due course.

CALLINAN J:   No, so much may be accepted but, once you say that this development is too big and you know you have a site which is I think under 400 square metres – is that right?

MR SULLIVAN:   I think your Honour is ‑ ‑ ‑

CALLINAN J:   It is a very small site and it has a very narrow frontage and the council has said in effect the proposal is too big.  Anybody at all, it seems to me, who has ever entered into any business transaction at all would then be minded to ask what can be done about it.  It seems to me to convey a great deal once it is conveyed that the proposal is too big.  You would really have to be totally unsophisticated not immediately to think, “What do we do about this; get more land?”  There are only two options.  You either reduce the size of your development or you get more land.  What other possibilities are there?

MR SULLIVAN:   There are at least, with great respect, two answers to your Honour’s question.  First, there is the answer given by the Court of Appeal, which I will take your Honour to in due course, namely – and the trial judge hinted at this as well – that there was an additional dimension to this information.  A developer such as Mr Farah Elias would know that what this was doing was telegraphing, to use the language of the court, the fact that if more land was acquired then this development was likely to be favourably received.  Now, that is not something which would be conveyed by this is too big ‑ ‑ ‑

CALLINAN J:   Mr Sullivan, I think that is, with great respect, naïve.  If it is too big – I mean, you tell me – I am inviting you to tell me what other possibilities there are.  It seems to me there are only two:  either the development has to be reduced or more land has to be obtained.  If there are other possibilities, you tell me what they are. 

MR SULLIVAN:   The other possibilities are the joint venture be terminated because it is not profitable.  Another possibility is that the joint venture be varied so it becomes a venture to use the property for income‑making purposes such as rental.  Another is that the land be sold.  So there is a range of options, your Honour, in our respectful submission.

CALLINAN J:   But if you want to proceed with a development ‑ ‑ ‑

MR SULLIVAN:   Yes, your Honour, but the other aspect of the answer is this – and this is something which is pertinent really to the purchase of No 15.  What the council said was not that it has to be amalgamated with an adjoining property in the singular.  It said it has to be amalgamated with adjoining properties in the plural.  In other words, it is saying something about how the relative smallness of it – and I will take your Honour to that when we go to the report.  So that the information which was conveyed by the council’s reports which Mr Elias was fully aware of was much more than would be conveyed, in our respectful submission, by someone saying the property is too small for this development.

CALLINAN J:   You do not think that perhaps Justice Tobias was imputing to Mr Farah some special knowledge and experience, the benefits of Justice Tobias’ experience in this area?

MR SULLIVAN:   No, your Honour.  He was imputing to Mr Elias, as Mr Elias held out to our clients, an expertise in property development matters and an expertise of dealing with councils in respect of development applications and, therefore, reading the signs that the council give.

CALLINAN J:   I remain to be persuaded, and it may not be the end of the matter, that once you say, as the council did, that the proposal was too big that these other possibilities would not immediately present themselves to anybody at all who has ever had any business experience. 

MR SULLIVAN:   May I take your Honour to the notice of development which we are talking about, notice of determination of development application.  It appears in the appeal book in volume 1 at page 440 to 442.  The first two pages, with respect, would not tell anyone very much at all but ‑ ‑ ‑

CALLINAN J:   One thing that you are told is you have a right of appeal.

MR SULLIVAN:   Yes, your Honour.

GLEESON CJ:   Just before you go past page 114, the proposed development was a seven‑storey mixed commercial and residential development at a time when the planning limit said there was a maximum height of three storeys.

MR SULLIVAN:   Yes, your Honour.

GLEESON CJ:   Did anybody ever ask Mr Elias to explain how he possibly contemplated that he would get approval of a seven‑storey building on a site where, according to the current planning regulations, the maximum height was three storeys?

MR SULLIVAN:   I think the explanation given or explanation proffered, your Honour, was to the effect that there was a discretion to vary the planning requirements if there was a need for low income accommodation.  I will try to find that reference, your Honour, but I think that might have been ‑ ‑ ‑

GLEESON CJ:   The problem he ran into was with off-street parking, was it not?

MR SULLIVAN:   Of course it was, your Honour.  As Justice Tobias said, I think that here we had four car parks being provided for a seven‑storey building and, as your Honour will see from the plan, this is a site quite close to the Burwood Railway Station, so one would imagine that parking on street is highly in demand.  Yes, your Honour, all those things are, with great respect, very relevant, but again…..emphasise the fact that my clients, of course, (a) did not know what the zoning was or what the restrictions were, (b) were relying upon Mr Elias from his expertise to say, “This is the proposal.  This is what we can do here.  This is wonderful.  We will make all this money, presumably, out of this seven storeys.”  And we were trusting him to put in an application which had prospects of success. 

That is the significance of what the council was saying because the council was telegraphing that this envisaged development would have prospects of success but only if the property was amalgamated with adjoining properties.  That, in our respectful submission, was crucial information.  Not just material information, but crucial information to be conveyed to the parties in the position of the Say‑Dee principals.

GUMMOW J:   It was not confidential information though, was it?

MR SULLIVAN:   It was not confidential information, your Honour, in the sense ‑ ‑ ‑

GUMMOW J:   The council was not saying, “And, by the way, don’t tell anyone else about this.  Don’t tell your colleagues.  Don’t tell your bankers.”

MR SULLIVAN:   No, your Honour, but as was acknowledged and conceded below, and we refer to this in our written submissions, my learned friends rightly acknowledged that it was unlikely that this information would have come to our attention except through Mr Elias and, secondly, there was an agreed fact, which I think your Honours have seen, to the effect that up till 31 December 2001 anyone searching the council title will only get the formal details and not the developed reasoning, so to speak.

GUMMOW J:   Yes, I know, but a persistent person would go and interview a council officer.

MR SULLIVAN:   Yes, your Honour, we accept that.  We have said that in our submissions.  It is somewhere between the information of the type of which was in Consul and truly confidential information ‑ ‑ ‑

GUMMOW J:   And could interview a council officer and say, “I am not just a busy body but I have got a real interest in this.”

MR SULLIVAN:   Yes, your Honour.  Your Honour is perfectly correct in saying that but, in our respectful submission, that does not alter the characterisation of the obligation to disclose that to us.

CALLINAN J:   Mr Sullivan, you wanted us to look at page 442, is that right?

MR SULLIVAN:   Yes, your Honour, that is the ‑ ‑ ‑

CALLINAN J:   I mean, what could be plainer:

2.        The proposal is excessive in height, bulk and scale . . . 

3.        The inadequate provision of off-street parking . . . 

6.        The subject site is considered too small –

I mean, what could be clearer than that if you want to do this, you have to reduce it or you will need more land?  I cannot think of anything that could have been put more clearly.

MR SULLIVAN:   Your Honour, we accept that a fair reading of that would be that if you want to go ahead there is a number of alternatives.  You either go smaller, as your Honour says, or buy adjoining land but, in our respectful submission, that still is not sufficient for the reasons given by the Court of Appeal and what I have tried to articulate.  I will not try to repeat to your Honour again ‑ ‑ ‑

CALLINAN J:   I do not find those reasons persuasive because I still am not clear as to precisely what further should have been told by Mr Farah.  What other information did he have that was different and would have conveyed more than the substance of that that he did not convey in ‑ ‑ ‑

MR SULLIVAN:   He should have conveyed in substance this, your Honour – and indeed my learned friend I think has acknowledged this, that if there was a fiduciary…..he should have conveyed that council – “In respect of our present proposal, if we buy the adjoining properties” – not property again, but the properties - and by reason of the fact that No 9 was the site of a very large relatively modern office block, the only adjoining properties that could possibly have been conceived were Nos 13 and 15.  “If we buy those properties, then this venture which we have in mind not only will overcome Council’s objections, but it’s likely that they will approve that development, the development we planned”.

CALLINAN J:   Does that not make an assumption, Mr Sullivan – accept that for present purposes - that that is a prudent thing to do and is one which could be seen to be a profitable thing to do at the time?

MR SULLIVAN:   No, well, your Honour, in our respectful submission, it does not make that assumption for this reason.  The scope of the duty of disclosure of fiduciary duty, it has been set out in a number of cases, but in Biala v Mallina which we have given a reference to in our submissions – it is set out in paragraph 74 of the Court of Appeal judgment – but Justice Ipp when a member of the West Australia Supreme Court summarised the duty, and this was one of the Dallas Dempster cases.  In the ACSR at 831 to 832 - I will just read this because it is only a short passage - what his Honour said was this:

Dempster Nominees, when obtaining the co‑operation of Mallina on a matter in respect of which Mallina had no other information on the subject other than that which it, Dempster Nominees, chose to convey, was required to display the utmost candour and honesty . . . In addition, in a situation where, on the one hand, Dempster Nominees stood to gain benefits if Mallina retired from the joint venture . . . could suffer detriment by retiring . . . 

Dempster Nominees was bound to state everything with strict and scrupulous accuracy, and not only to abstain from stating as fact that which was not so, but to omit no one fact within its knowledge the existence of which might in any degree affect the decision to be taken by Mallina . . . 

Put simply, there was an obligation on Dempster . . . to make a full and accurate disclosure . . . of the facts Dempster learned from his informant ‑ ‑ ‑

CALLINAN J:   “Stood to benefit”, were not those words used?  Let us assume that that is a correct summary of what the law is for present purposes.

MR SULLIVAN:   Yes, your Honour.

CALLINAN J:   The words there “stood to benefit” reflect exactly what I suggested to you, that what you were putting to me may contain an assumption that there was benefit in this, that this would have been a profitable thing to do.

MR SULLIVAN:   Well, your Honour, may I just say three things on that.  The benefit referred to there, with great respect, is talking about in the prescriptive duty, namely, where someone is seeking to acquire an opportunity without fully informed consent, as here.  What they are talking about is material which is material to the decision whether to give the fully informed consent or not and, in our respectful submission, that is what – and the information which was required is everything that is learnt from the informant which is material to the joint venture.  So it is a very, very onerous – and quite rightly so, with great respect ‑ ‑ ‑

CALLINAN J:   Did his Honour cite authority for that, as broad a statement as that?

MR SULLIVAN:   No, your Honour, but there are many similar statements.  I can give your Honours references to other cases.  So, in our respectful submission – and indeed I did not think it was an issue in the case – my learned friend acknowledged that this information was information which should have been conveyed, at least in respect of No 13.  Remember my learned friend’s case has changed, in a sense, because he now says it was sufficient discharge of the duty – and I will come to this in a moment – not to convey seriatim the council’s views.  It was a sufficient discharge of his duty to tell what he thought about it.  In respect of No 13 and in respect of No 15 he says, “Well, that was outside the scope because there was a problem because there was an adjoining property”.

So the case which is being put against us, which has changed, is the one I have just mentioned.  In our respectful submission, for the reason I will develop, it is insufficient and inadequate for the developer to say, “Well, this is my view”, when he is not the decision‑maker.  The person who has to give the approval which is crucial to council, it must be to relay the council’s views on the matter scrupulously, accurately and not omitting any aspect of it.

GLEESON CJ:   Mr Sullivan, on page 787 there is a photograph that looks very promising as a depiction of this general area but it is very blurred as it has come out in the appeal book.

MR SULLIVAN:   Yes, your Honour.

GLEESON CJ:   I am not sure whether we can conveniently get the original at the moment, but where are these properties on that photograph?

GUMMOW J:   Burwood Road goes down the middle at right angles to the railway, but we need to know Mary Street and Deane Street.

MR SULLIVAN:   Your Honour, I cannot answer that question immediately but I am sure if I was to get some assistance from some of the people sitting behind me I might be able to answer that.

GLEESON CJ:   Maybe if somebody could get the original photograph it would be easier to read, too.

MR SULLIVAN:   Yes, your Honour.  Your Honour, I am told, if one goes to 787 - and we will try and get the original photo – can your Honour see the railway line and what appear to be the rooves over the railway station?

GLEESON CJ:   Yes.

MR SULLIVAN:   Looking towards the top of the picture, your Honours will see there is on the right‑hand side a big white rectangular building and beside that there are three smaller buildings.

GLEESON CJ:   Yes.

MR SULLIVAN:   They are the three buildings.  So, No 9 is the big office block which is the very large structure which goes right through to George Street.

GUMMOW J:   Three storeys, four storeys, maybe.

MR SULLIVAN:   Four storeys, at least.  It looks like four storeys, your Honours, yes.  Then, next door is No 11 to that building and next door is No 13 and next door to that is No 15.

GLEESON CJ:   No 15 is the one that was being used for a youth club or something like that?

MR SULLIVAN:   No, your Honour.  …..were acquired.  The youth club, I am told, was across the road, your Honour.

GLEESON CJ:   Right.  Deane Street is the street that that four‑storey building fronts.

MR SULLIVAN:   And those other three buildings, yes, your Honour.  It looks like the four‑storey building fronts both Deane Street and George Street, your Honour.

GUMMOW J:   Which is the street nearer the railway?

MR SULLIVAN:   Deane Street, your Honour.

GLEESON CJ:   Anyway, just see if Mr Esplin has the original of that photograph.  It might be easier.

MR SULLIVAN:   Mr Gray for the appellant informs me that the photo was in the Supreme Court - we are told it is with the Court already, your Honour.

GLEESON CJ:   Thank you, Mr Sullivan.

MR SULLIVAN:   Your Honours, despite the discussion I have had with your Honour Justice Callinan, in our respectful submission, in the light of the uncontested scope of the joint venture it cannot be seriously disputed that the obligation of the first and the second appellants, as found by the Court of Appeal, was to disclose to the Say‑Dee principals the council’s view of the need to amalgamate and that was particularly so because of the additional dimension that view conveyed.

We have set that out in our written submissions at paragraphs 15 and 32, but particularly 51 to 58, and if I may just give your Honours a reference to where the Court of Appeal said that without taking your Honours to the references.  In the Court of Appeal’s judgment the relevant paragraphs to consider are paragraphs 36, 59 to 60, especially 60, 61, 68, 178 to 181 and, again, 181 is an important paragraph, 183, 198 and 199.

I mentioned already that my learned friend’s response to this now in respect of No 13 anyway and No 15 was this, that not to dispute the scope of fiduciary duty or the obligation to disclose, but his case as put orally yesterday, and indeed in the written submissions for the appellant, seems to be this, that it was not necessary to convey council’s view and the additional dimension because, first of all, in respect of No 13, it was good enough to say that it was Mr Farah Elias’ own view that it was very important to purchase No 13.  Secondly, by reason of the letter of 16 July 2001 and its alleged enclosures, the respondent knew or ought to have known anyway of council’s view, albeit not of the additional dimension.  Thirdly, in respect of No 15, there was no obligation to disclose council’s view and the additional dimension because No 13 had not been acquired and it was doubtful whether it would ever be acquired.  That is the synopsis of what my learned friend now says.

Can I briefly deal with each of those points.  As to the first, for the reasons I have developed in my discussion with Justice Callinan, in our respectful submission, it was manifestly inadequate to simply disclose to the respondent the developer’s view of the importance of acquiring No 13.  It was the council, not him, upon whom depended the fate of the building application and it was the council’s view which was material to any decision which the respondents may make.  If he was to rely upon his own view to convey a sufficient discharge of his obligation, then he had to put that view in the terms of, “It’s my view that council will approve this matter if these are done for these reasons because they’ve told me these things”, but he did not do that.  All he said is, “I think it’s very important that we acquire No 13”.  In our respectful submission, that falls far short of the obligation of disclosure of a fiduciary in these circumstances for the reasons correctly found by the Court of Appeal.

As to the second point – and this is a point which I have already touched upon, so I will not be too lengthy on it – Mr Douglas yesterday repeatedly asserted that the Court should infer that the notice of determination enclosed with the letter of 16 July from the second appellant to the respondent was the council’s notice of determination dated 4 April 2001.  He also repeatedly asserted yesterday that that set out council’s view of the need to amalgamate with the adjoining sites.  We respectfully submit it does not in terms do that for the reasons I have discussed with Justice Callinan.

The problem with my learned friend’s contentions are twofold – not only the matter I have just raised but, secondly, it was found by the Court of Appeal that it had not been proved by the appellants that the notice of determination or any other document had been enclosed with the letter.  The finding appears at paragraph 62 at appeal book volume 2, page 850. 

Your Honour Justice Callinan yesterday raised a point about who bore the onus on this matter and whether there was any Browne v Dunn matter, but the only relevance of this matter is whether or not my learned friend’s client discharged its fiduciary obligation.  It was saying, “We did discharge.  It therefore bore the onus of proof, not us, it”.  It produced the letter, which is in evidence before your Honours, without any enclosures and without any evidence from Mr Farah Elias, who was called to give evidence, as to what was ‑ ‑ ‑

CALLINAN J:   You had to prove the breach of fiduciary duty, did you not?

MR SULLIVAN:   We had to prove that there was an acquisition of property ‑ ‑ ‑

CALLINAN J:   But the ultimate issue was breach of fiduciary duty, was it not?

MR SULLIVAN:   Yes, your Honour.

CALLINAN J:   You were the ones asserting that and pleading that.

MR SULLIVAN:   Yes, and we asserted ‑ ‑ ‑

CALLINAN J:   You, therefore, had to prove it.

MR SULLIVAN:   No, your Honour.  We asserted that we were never told of this information and my learned friend in riposte to that said “Yes, you were, look at this letter”, and tendered the letter.  In our respectful submission ‑ ‑ ‑

CALLINAN J:   But the letter on its face says that it enclosed the notice of determination, did it not?

MR SULLIVAN:   No, it did not, your Honour.  It said on its face ‑ ‑ ‑

CALLINAN J:   Where do I find it, Mr Sullivan?

MR SULLIVAN:   Your Honour will find the letter at page 635 of volume 2 of the appeal book.  It says, the first bullet point:

·After several months of submissions to the Burwood Council and the State government the council has refused the current development application and we enclose copies –

in the plural –

of that correspondence.

One would, and we would accept, your Honour, that an obvious matter which would form part of the correspondence there would be, one would think, the notice of determination.  One would think that would have been something which should have been included if you were enclosing copies of the correspondence relating to the refusal of the current development application.  But it does not say that.  Indeed, by reference to the fact that it is talking about submissions to the Burwood Council and the government, the correspondence referred to could well be referring to the submissions to Burwood Council and the State Government. 

HEYDON J:   There is no document in evidence, is there, from a manager of Say-Dee saying your letter is incomplete?  Where are the copies?

MR SULLIVAN:   No, your Honour, there is not.  There is no evidence from my clients to say we never got this letter or we wrote back and said what are you talking about and we were never able to produce the letter or the documents which were attached to it.  This document came to evidence, although it is addressed to us, not from our resources and materials but rather was tendered by my learned friends who had presumably kept a copy of it.

CRENNAN J:   Mr Sullivan, I think Mr Douglas told us yesterday, as I recollect, that there was no real dispute that the correspondence was enclosed.  Is that not the position?

MR SULLIVAN:   My learned friend said that.  I think, with respect, what he must have been referring to was that there was no allegation put on by us one way or the other that we had received it.  We did not put a positive case on that we had not received it. 

CALLINAN J:   It might be one of the problems conducting trials partly on affidavit and partly oral.  You can get gaps or matters that only become apparent later; not said critically of you, but it is not always a satisfactory process, I think.

MR SULLIVAN:   I could only agree with your Honour.  It is not a satisfactory process in many cases, especially where there are credit issues involved, your Honour. 

GLEESON CJ:   This is a much clearer photograph.

MR SULLIVAN:   Thank you, your Honour.

GLEESON CJ:   These….., is that right?

MR SULLIVAN:   That is right.  Yes, the brown coloured buildings are the ones we are referring to.

GLEESON CJ:   That building next door is five storeys.

MR SULLIVAN:   Thank you, your Honour.  Mathematics was never my strong point.

GLEESON CJ:   No, it is covered, you cannot tell it from the photograph in the appeal book but this photograph makes it clear.

MR SULLIVAN:   Your Honours can see from that photograph the impracticality, as was apparent in the way the case was run below, of seeking to acquire No 9.

GLEESON CJ:   This building was right up against the adjoining five‑storey building.

MR SULLIVAN:   It appears to be the case, your Honour, although – I do not know if it is just my photo, and maybe it looks like a shadow on ‑ ‑ ‑

GLEESON CJ:   Yes, have a look at that.

MR SULLIVAN:   Your Honour, in our respectful submission – and if it matters, in the course of my instructions, there does appear to be a very small gap between them and one can see, in our respectful submission, a slight shadow there on the wall of the white office block building.  Although my instructions are not evidence, I am told there is a gap between them.

GLEESON CJ:   I am not saying you could not walk between them.

MR SULLIVAN:   Perhaps, your Honour, we could see if the solicitors for the parties can reach an agreement as an agreed fact about that if it is a matter which is of relevance for your Honour.

GLEESON CJ:   No, I do not think we need anybody to agree about that.  You do get the impression that this was a very ambitious development proposal, the first one that was put in.

MR SULLIVAN:   Yes, your Honour, one does get that impression.

GLEESON CJ:   If it was for a seven‑storey building, it was going to end up being two storeys higher than the building next door to it on one side and much higher than the building on the other side, in a very narrow allotment.

MR SULLIVAN:   Yes, although there had been a modest reduction from eight storeys, your Honour, which would have been a more ambitious development.  I have just had pointed out to me, your Honour, at page 784, on how close those two buildings are together, one gets a better impression of the space between the office block and No 11.

GLEESON CJ:   It was contemplated, was it, at one stage this was going to be public housing of some kind?

MR SULLIVAN:   Our property?  Yes, your Honour.  Well, it was contemplated it was going to be – an application was made or submission made on the basis that it was going to be low cost housing.  Page 784 is the other photo, your Honour. 

CALLINAN J:   Lots of councils, I think, are encouraging inner city, particularly, cheaper housing, I think, are they not?

MR SULLIVAN:   Yes, your Honour.

CALLINAN J:   That might have given some cause for making a somewhat more ambitious application, small apartments and ‑ ‑ ‑

GLEESON CJ:   For older folk.

CALLINAN J:   Yes.

MR SULLIVAN:   Yes.  It was never part of our case, your Honour, we suggest now that Mr Elias put this application in bad faith or knowing it was doomed to failure.  Quite the contrary, at all stages we believed that his ambitious plans may come to fruition.  Now, your Honour, for the reasons I have just given – and I do not want to dwell too long on it – even if the Court was, contrary to what our respectful submission it should do, to overturn the Court of Appeal finding that it had not been proven that the respondents did not receive the notice of determination, for the reasons we have developed orally and in our written submissions, that was not sufficient information to discharge the second appellant’s duty of disclosure.

The third way my learned friend puts his case in respect of No 15, namely that there was no duty of disclosure there anyway because of the problem with the adjoining property, No 13, not being owned.  That submission, in our respectful submission, has a number of flaws in it.  May I just seek to summarise them.  First, it ignores the fact that the second appellant knew that it was council’s view that No 11 had to be amalgamated with adjoining properties in the plural and not the singular.  Each of the council’s documents says that.  May I take your Honours in that respect to one you have seen already at appeal book volume 1, page 394 at line 25.  It is about halfway through lines 20 and 30.  The paragraph begins:

The proposed development is considered an over‑development of a narrow 11m wide site as evidenced by the inability to provide for car parking due to the lack of manoeuvring space available.  The site should be amalgamated with the adjoining properties to achieve its maximum development potential –

Now, in the context of the streetscape we are talking about here, as revealed by those plans, that can only be a reference to both No 13 and No 15.  So my learned friend ignores that matter.

HEYDON J:   Did the second appellant actually get a copy of that document?

MR SULLIVAN:   Yes, your Honour, and indeed discussed it often at council meetings, on the evidence.  Secondly, my learned friend’s submission ignores the evidence of the second appellant himself which is set out in the Court of Appeal judgment at paragraph 145, and that appears at page 878 to 879.  This is a cross‑examination where Mr Weber cross‑examined the second appellant and says:

Q.I’m saying when you were first dealing with the owner of 15 your hope was first, ‘I hope I can do a deal with you’, agree?

A.With 15?

Q.Yes.  Your first hope was ‘I hope I can do a deal with you, the owner of 15’?

A.I was always hoping that I would be able to do something with 15.

Q.So that thereafter the owner of 13 might hopefully sooner rather than later come to you and say ‘I’ve decided to sell 13’?

A.Yeah, I’ve always hoped that.

Q.And so then you would have the three properties in align?

A.I was hoping that even 18 George Street could come in.

Q.Just concentrating for a moment on Deane Street.  You were hoping by this process to get the three properties in align, that’s correct, isn’t it?

A.Something to that effect.

Q.And that would allow you to develop them together, agree?

A.Maybe.

Q.In a way that would be likely to find less resistance with council than your previous attempts to develop number 11?

A.No, not really.

That is another point that goes on and there was less resistance evidence and his Honour goes on to find the three answers there, quite rightly so, were disingenuous and inconsistent.  They were matters which should have gone to his credit, in our respectful submission.  But the part I read to you shows and justifies the finding of the Court of Appeal that really Mr Farah Elias when he acquired No 15 had in mind the council dictate of “You need to amalgamate with the adjoining properties in the plural to get the three in align”, and that he was hoping then to deal with No 13.

My learned friend’s submission also assumes that, contrary to the evidence, in our respectful submission, the owner of No 13 was implacably opposed to selling, or at least was unlikely to sell, but that is not what the evidence stated.  If one goes to appeal book volume 1 at page 112 where the only evidence is contained between lines 20 and 30, or about line 18 or 19, Mr Elias’ cross‑examination:

Q.       In 1998, 1999 what, are you saying you were in constant contact with the owner of number 13 to see if he was interested in selling?
A.       That’s right.  For about three times till he really told me, “Don’t contact me.  When I’m ready to sell I will sell.”

Q.       When did you get the “don’t contact me” message?

Et cetera.  That does not imply that he will never sell.  Following up from something your Honour the Chief Justice mentioned yesterday in respect of the situation when Mr Elias acquired No 13, he was in a position to hold the owners of No 11 to ransom, one might imagine a similar commercial context arising in respect of the owner of No 13 when he was confronted with a situation of his little block surrounded by two blocks, No 15 and No 11, each owned or controlled by Mr Elias.  One might think that was a reason, although there is no evidence of this, a possible reason or even a likely reason why he found that an opportune time to sell to Mr Elias because otherwise he was in an invidious position.  Indeed, his property had a value demonstrated by reason of the quite substantial price, 1.68 million, which was paid by Mr Elias for that property in comparison with the price earlier paid for No 11 and, indeed, the price paid for No 15.

So when one considers all of those features, in our respectful submission, even if the Court was to accede to my learned friend’s submissions based on Abalos or Fox v Percy, whatever label we put on it, to the effect that the trial judge ought not to have interfered with – sorry, the Court of Appeal should not have interfered with the trial judge’s findings as to whether or not Mr Elias offered the Say‑Dee principals the opportunity to purchase Nos 15 and 13.  Nevertheless, offering that opportunity and telling of that availability was not a sufficient discharge of the obligation for full disclosure.  So, even if that was overturned, the breach of fiduciary duty would still remain.

I am gratefully reminded by my learned junior in response to a discussion I had with your Honour Justice Callinan on the question of onus with fully informed consent, this Court has considered that issue in the case of Maguire v Makaronis (1997) 188 CLR 449. In the joint judgment of Chief Justice Brennan, Justices Gaudron, McHugh and Gummow at 466 in the last paragraph, the joint judgment says as follows:

Thirdly, in the circumstances disclosed above, if the appellants were to escape the stigma of an adverse finding of breach of fiduciary duty, with consequent remedies, it was for them to show, by way of defence, informed consent by the respondents to the appellants’ acting, in relation to the Mortgage, with a divided loyalty.

So that, with respect, confirms our submission that the onus was not on us but upon ‑ ‑ ‑

CALLINAN J:   But on that page:

What is required for a fully informed consent is a question of fact in all the circumstances of each case ‑ ‑ ‑

MR SULLIVAN:   Yes, your Honour.  We do not dispute that proposition.

CALLINAN J:   An onus can shift and there are evidentiary onuses and other onuses.  On one view all I am suggesting to you is that it may be that proof of that letter referring to the correspondence may at least provide some evidence that your client received the notice of determination.

MR SULLIVAN:   Your Honour, I do not want to ‑ ‑ ‑

CALLINAN J:   No matter where the actual final onus lay, it may be that an evidentiary onus then shifted to your client which your client did not discharge.  I do not know.  I am just putting those points so that you know what is exercising my mind.

MR SULLIVAN:   I am grateful to your Honour.  I do not think I can usefully develop it any further than I have, but if your Honour wishes me to try, I shall.

CALLINAN J:   Mr Sullivan, I am sorry to keep on returning to the facts but ultimately they are determinative more often than not.  What do we make of cross‑examination of one of your clients at page 37, about line 18?  I know that that question and answer have to be seen in the setting of the time with which they deal, but nonetheless.

MR SULLIVAN:   Your Honour makes that of this, that they had no intention at the time, obviously, that this question was based of acquiring an adjoining property and that, however, is quite an irrelevant question.  Non constat from that answer that the answer would have been the same if they were informed, “We need to buy these adjoining properties because in order to maximise the development of No 11 we need to buy them.  Council has told us.” We do not know what their reaction would have been in that different circumstance.  I might say that I do not want to buy my next door neighbour’s property, I have no idea, but if some imperative occurred, if I suddenly had quadruplets or needed accommodation for a nanny or the like, my view may change.

CALLINAN J:   But the measure of the fiduciary duty depends to some extent upon all of the relations and understandings between the parties, does it not?

MR SULLIVAN:   It does, your Honour.

CALLINAN J:   That may be something that has to be fed into the circumstances.  It may be a disinclination by your clients to look beyond allotment 11 even if they were to be given an opportunity to ‑ ‑ ‑

MR SULLIVAN:   I am sorry, I did not mean to interrupt, your Honour.  Your Honour, a disinclination to look beyond No 11 is one thing when it appears to be unimportant to the proposed development.  It is a completely different thing when it is absolutely critical to the proposed development.

CALLINAN J:   You say proposed development.  Once you acquire more land it is not the proposed development, it is a different development.  It is a development involving an aggregation of land, even if it is only a sliver of land from next door.

MR SULLIVAN:   Your Honour is correct.  What I should have said was this:  when there is a vision of a development taking place on your own land to which the adjoining land appears to be irrelevant but when that vision, as told you, could only be achieved by buying adjoining properties then that becomes critical information.

CALLINAN J:   Your clients had, not in the singular but in the plural, franchises with Caltex in respect of service stations.

MR SULLIVAN:   Yes, your Honour.

CALLINAN J:   They could not have been entirely naïve about property; rather the contrary, I would have thought.  One could almost take judicial notice of the fact that multi‑national petroleum companies are not always the gentlest people to deal with.

MR SULLIVAN:   One might take judicial notice, or subject to what this Court said in the Westpac Case, I think, about bank guarantees, of the fact that my people may be experienced with entering into leases with multi‑national corporations.  It does not follow, with respect at all, one could even infer that they had any knowledge of development applications or the like.  Indeed, their evidence was completely to the contrary of that.  They said, and my learned friends have accepted, that the expertise in that regard was placed solely in the hands of Mr Elias.  Not one word in cross‑examination was addressed to our clients, your Honours, to suggest that somehow or other they were sophisticated or experienced or knowledgeable about development matters.

May I just say another thing – I will come to it in more detail.  There is evidence – and this comes to a question which your Honour the Chief Justice asked my learned friend, Mr Douglas, yesterday about whether there was evidence that a venture or development of No 11 alone could be profitable by itself - which I will take your Honours to in the course of dealing with my factual submissions, by Ms Sadie Elias that Mr Farah Elias said at the time of the so‑called discussions with Burwood Town Centre to acquire No 11 that the development in respect of No 11 by itself was not worth it.  That is in her affidavit but it is significant as one of the paragraphs which Mr Farah Elias does not deny is in his affidavit in response where he sets out- and I will come to back to that in due course. 

So that there is evidence to suggest that according to the experienced member of the joint venture team, if he is to be believed, that it was not worth, in his view, developing No 11 on its own.  That is also a relevant factual matter in answer to your Honour Justice Callinan about the scope of fiduciary duty.

Now, may we say this, although it is jumping ahead a little bit in our submissions, if we are right in our contention on this first factual point, namely, the obligation to disclose, we ask the rhetorical question:  how could it be said that the second appellant could be said to be innocent in failing to disclose to the respondent the council’s views of the need for amalgamation?  It was obviously important material information.  Counsel for the appellant yesterday acknowledged it ought to have been disclosed.  The innocence of the second appellant in this regard we say has to be viewed in the light of the evidence I have taken you too summarised by the Court of Appeal in paragraph 145, namely, that he was acquiring No 15 with an ultimate idea or hope of getting all the three in a line. 

It has to be viewed also in respect of his other inconsistent evidence and his patent falsehoods which we summarise in our written submissions – and I will take you to some of them in more detail, paragraphs 41 to 50 and in 57.  It has to be viewed particularly in the light of the Court of Appeal findings in paragraphs 74 at page 858, 109 at page 865, 121 at page 869, 124 at page 871 and 257 at page 919.

May I just take you to that last finding because it contradicts something my learned friend said yesterday.  Paragraph 257 at page 919 – this was in the context of the part of the judgment of the Court of Appeal dealing with whether or not there should be an allowance for the entrepreneurial skills of Mr Farah Elias in finding these properties and, if so, whether it should be a just allowance or a liberal allowance or the like.  The Court of Appeal clearly is of the belief, and quite rightly so, that Mr Elias’ conduct was not innocent.  Justice Tobias said:

In my opinion, although there has been a not insignificant degree of surreptitious conduct and bad faith on the part of Mr Elias as the managing director of Farah, nonetheless that should not necessarily disentitle him to some allowance for his entrepreneurial skills and efforts in acquiring Nos. 13 and 15.  However, any such allowance should not be liberal –

et cetera.  The conduct in not disclosing the council information also has to be viewed in the light of Mr Elias’ clear dishonesty in relation to the purchase of No 11 through the so-called company called Burwood Town Centre.

In our respectful submission, the inescapable conclusion from all of that, irrespective of the second factual finding, was that Mr Elias was being dishonest or at least guilty of moral turpitude in failing to inform the respondents of the council’s views re the need for amalgamation.

Now, may I then deal with the second factual point, the challenge by my learned friend, as I said, to the Court of Appeal overturning the trial judge’s credit based findings?  Your Honours, in our respectful submission, on any objective view of the evidence, the second appellant demonstrated that he was prepared to tell falsehoods or engage in deceit when it suited him.  He did that on oath, in our respectful submission, and he did it in his dealings with the respondent.  His preparedness to tell such falsehoods, in our respectful submission, when it suited his interest, is most graphically revealed by his conduct concerning the alleged offer to purchase No 11 by the company called Burwood Town Centre. 

Now, we have dealt with this in summary form at paragraphs 45 to 46 of our written submissions.  I will not take you to it in any more detail but may I point out some further matters in that regard.  First, in respect of the trial judge’s finding at paragraph 59 at page 803 of the appeal book, we submit there is an apparent tension between that paragraph and his Honour’s finding at paragraph 54 at page 802.  It is between paragraphs 54 and 59.  At paragraph 54 at page 802, about line 40, in respect of 13 and 15, his Honour says:

The two sites were obviously suitable for an amalgamated development with No 11 and there is no suggestion in the evidence of any reason, whether of animosity, necessity or greed, for Mr Elias to keep secret from Ms Dagher and Ms Elias the possibility of a larger development incorporating all three pieces of land.  It would have made obvious commercial sense –

et cetera.  Now, when one goes to paragraph 59, however, his Honour says at the foot of that page, that:

I am prepared to find that in late 2002 or early 2003 Mr Elias put forward to Ms Dagher and Ms Elias an offer to purchase No 11, representing that he was a consultant to the offeror when, in fact, his interests solely controlled the offeror.  I think that his motivation for this misrepresentation was to avoid the disputation -

Now, one may again ask the rhetorical question, if Mr Elias was to be believed that he had given our ladies the opportunity to acquire Nos 13 or 15 or participate therein, if they had declined that opportunity, if they had said, “Go ahead and do it yourself,” as he says they did, why on earth would there be any need for him to engage in a subterfuge about purchasing No 11?  Why indeed would you need to pretend someone else was buying it and then to go to the further pretence of negotiating with yourself to increase the purchase price?

Now, we have set out in our written submissions, and we repeat orally, the finding by his Honour that if the motivation was to avoid disputation it is pure speculation, because, first of all, there is no evidence whatsoever at this stage, when this offer was made, of any relevant disputation.  Secondly, and most importantly, Mr Elias did not say that he misrepresented the matter to avoid disputation because he could not because he was denying having said so.  He had told another lie on his oath by saying that he had said that he had always told Ms Dagher and Ms Elias that he was the purchaser.

Now, in that context, my learned friend’s excuse on behalf of his client yesterday was to the effect that has to be read in the context of, “I knew I couldn’t get away from you.  It’s caught out”.  Now, with great respect, there is no justification for reading the words “I always told you” as being, “Well, I gave it a try but I knew you’d find out”.  It is a quite inconsistent position.

Then, in our respectful submission, in respect of this matter, the reasoning of the Court of Appeal set out at paragraphs 105 to 107 at appeal book 864 is correct and compelling and justifies amply by itself without any more the Court overturning the trial judge’s findings.  But there was more.  It is a bit like the Demtel ads, “But there’s more”.  The lengths that the second appellant was prepared to go to deceive the respondents to whom he owed an admitted fiduciary duty is revealed by the fact that he made the offer to purchase on behalf of Burwood Town Centre the whole of No 11, not just half.

GLEESON CJ:   The Associate Judge.

MR DOUGLAS:   The Associate Judge, I am sorry.  I will improve my dictionary, but you have at least got to go through‑ unless you get the agreement of the parties that there is some profit there to be ascertained.  In order to get the orders which they sought, they needed to establish that there was some profit.  This litigation took place some time ago, and now the orders of the court have been amended by No 3 so as to enable, it would appear, the properties to be sold, if the receiver thinks appropriate, after a period of 12 months within which it is anticipated the rezoning of the properties might go through.  That is as I understand the situation at the present time.

GLEESON CJ:   Presumably there are substantial holding costs of these properties.

MR DOUGLAS:   Yes, and you will see from the correspondence which is annexed to Mr Elias’ affidavit which resisted the most recent extension of these orders that he is under substantial pressure from his bankers because of the defaults under this facility and others.

CALLINAN J:   Do objectors have rights in relation to the rezoning?

MR DOUGLAS:   Yes, in New South Wales they do.  Yes, your Honour.

CALLINAN J:   Can they go to court over it, the Planning and Environment Court?

MR DOUGLAS:   Yes.  No – sorry.  I am misleading, your Honour.

GLEESON CJ:   This is an LEP, is it not?

MR DOUGLAS:   No.  Rezoning is a matter which is within the discretion of the Minister and I do not think there is any appeal from it whatsoever.

CALLINAN J:   Can people object to the Minister?

MR DOUGLAS:   Yes, certainly it is a matter which can be the subject of negotiations and discussions ‑ ‑ ‑

CALLINAN J:   What does the evidence show the status of the rezoning to be?

MR DOUGLAS:   The evidence shows the status of the rezoning to be – and it is set out in the judgment at No  3 but it seems as though the most optimistic outcome at the present time would be that the plan would be put on exhibition and a possible rezoning about 12 months from the end of November.

CALLINAN J:   It is put on exhibition so people can object or express their views about it.

MR DOUGLAS:   Yes.

CALLINAN J:   There is some statutory procedure, I suppose, for the Minister to consider them and ‑ ‑ ‑

MR DOUGLAS:   Yes, there is a statutory procedure under the legislation and that is set out in quite some detail in the valuer’s report and I think also the town planner’s report which has not been put before the Court but which we will put before the Court in relation to Say-Dee (No 3).

HEYDON J:   There are costs contemplated by these orders that will have to be incurred if the properties are to be…..under saleable condition.  Is there a large amount of cash out of which they would be paid?  If not, where will the costs come from?  The orders do not ‑ ‑ ‑

MR DOUGLAS:   Apart from catching up with the arrears of interest, the parties, as I understand it, are not making any contributions to enable those costs to be met, and there are ‑ ‑ ‑

HEYDON J:   There is no order that they make contributions.

MR DOUGLAS:   No, none.

HEYDON J:   It seems to be a flaw.

MR DOUGLAS:   It does, and there are problems with the properties because they are derelict, so therefore there is a bit of an issue.  Do you renovate the properties so as to enable them to be leased out in the interim, or do you sell them in their current state with such development potential as they have got?  I think I had conceded that the second limb case had gone beyond what I had suggested previously in my submissions.

So far as Jones v Dunkel is concerned, I also concede that that inference was sought at first instance, but Justice Palmer did not draw such an inference and that was not the subject of a ground of appeal to the Court of Appeal, and the Court of Appeal therefore did not consider it and, up until the filing of a notice of contention by my learned friends, it was not the subject of a contention here and we would say, not having raised it in the Court of Appeal, they cannot raise it here and, in any event, we say that having accepted Mr Elias’s evidence, the trial judge’s finding should stand on that issue and that should be the end of the matter.

So far as knowledge is concerned, the decision of Justice Windeyer in Bursill Enterprises referred to in that note which my learned friend handed up seems to accept that section 164 of the Conveyancing Act can apply to Real Property Act land.  I do not have it here, but it is not a considered decision.  But anything Justice Windeyer said ‑ ‑ ‑

GUMMOW J:   That is not the view of conveyancing practice in New South Wales.

MR DOUGLAS:   Yes.  Anything he said was considered.

GUMMOW J:   A place to find it is in Mr Helmore’s book The Law of Real Property in New South Wales at 473 to 474.

MR DOUGLAS:   Thank you.

GUMMOW J:   It is all part of the machinery of Old System conveyancing to qualify the rule in Daniels v Davison about the width of constructive notice.

MR DOUGLAS:   The next matter which my learned friend said, as I understand it, was we have conceded that imputed knowledge applies to the second limb.  I am unaware of having made such a concession.  I am not aware of it having been applied to the second limb.  If, in fact, it does apply in the sense that your agent’s dishonesty is your own dishonesty, that makes it all the more important that one carefully sifts through, as Lord Justice Hoffmann, as he then was, did in El Ajou, so as to ensure precisely what is the agency, what are the duties to make inquiries, what are the obligations and entitlements to make disclosures so as to ensure that knowledge is not inappropriately attributed.

GUMMOW J:   Just going back to section 164, when the Conveyancing Act applies to the Real Property Act it says so.  For example, section 90 dealing with mortgages is a classical example of that.  The starting position though is section 6(1) which would tell you no, unless you find it does, and 164 is not ‑ ‑ ‑

MR DOUGLAS:   Section 6(1) seems to have a more general application as we would see it, in that it is not inconsistent with the Real Property Act.  If we cannot rely upon that, we can rely upon sections 42 and 43 of the Real Property Act. 

GUMMOW J:   Exactly, they are there.  That is what Torrens was on about.

MR DOUGLAS:   Apart form the matter of addressing questions in relation to Say-Dee (No 3), those are the matters which we would wish to bring before the Court.

GLEESON CJ:   Thank you, Mr Douglas.  Mr Sullivan, there was a question I wanted to ask you about this document you handed up this afternoon, headed “RESPONDENT’S NOTE”, paragraph 8.

MR SULLIVAN:   Yes, your Honour.  Paragraph 8?

GLEESON CJ:   Yes:

i.A third party who has received a benefit as a result of a breach of trust or fiduciary duty should be accountable for that benefit –

I think you said that means who was received directly a financial benefit should be accountable for that benefit.

MR SULLIVAN:   Yes, your Honour. 

GLEESON CJ:   What is the relevant benefit here?

MR SULLIVAN:   The relevant benefit of the third party is the benefit of the information which has led to the purchase of these properties so that ‑ ‑ ‑

GUMMOW J:   Is it that opportunity that you accepted the formulation from Justice Callinan?  Is that the benefit?  We need to be clear about this.

MR SULLIVAN:   I wonder if his Honour Justice Callinan would be kind enough to restate the formulation which I said sounded ‑ ‑ ‑

CALLINAN J:   I think I suggested it was the informed opportunity – and I may be paraphrasing – to participate in a development which incorporated as part of an aggregation or amalgamation Lot 11.

MR SULLIVAN:   Yes, and we would say specifically in this case it is Nos 15 and 13.

GUMMOW J:   But not 20.

MR SULLIVAN:   Not 20.

GUMMOW J:   Why not 20?

MR SULLIVAN:   Because it is not an adjoining property, your Honour. 

GUMMOW J:   I see.

MR SULLIVAN:   The council’s information was about adjoining properties to No 11, and 20 is in George Street, it is not an adjoining property.

HEYDON J:   No 15 is not either, unless you get 13, and once you get 15, 20 is adjoining.

GUMMOW J:   Yes, exactly.

MR SULLIVAN:   No, the council recommendation was in respect of adjoining properties in the plural.  The only adjoining properties, for the reasons I have given before, could only be 13 and 15.

CALLINAN J:   Anybody who has played Monopoly knows that if you get as many properties together as possible you earn a lot more money.

MR DOUGLAS:   I always did it by Whitechapel, your Honour, not ‑ ‑ ‑

CALLINAN J:   I went for those first two.  Park Lane was a bit pricey for me.

GUMMOW J:   Anyhow, for whatever illogicality, 20 is not included?

MR SULLIVAN:   No, your Honour.

GLEESON CJ:   It is the ones facing Deane Street.

MR SULLIVAN:   The ones facing Deane Street.

GLEESON CJ:   Okay.  Well, how do you account to somebody for an opportunity to participate in a real estate development?

MR SULLIVAN:   We are seeking the benefit that they got, your Honour.  Our formulation is that the benefit that the third party has received has been the benefit of acquiring the property with ‑ ‑ ‑

GLEESON CJ:   This is the step that is puzzling me.  Participation in a real estate development is a risky and expensive activity, and the opportunity to participate in a real estate development is an opportunity to participate in a risky and expensive activity.  I understand how you account for money and I understand how you account for real property, but when it comes to accounting for the opportunity to participate in a risky and expensive business venture your argument is you do that by handing over the real estate with the derelict houses on it or buildings on it that you have acquired for the purpose of that venture, being reimbursed for any costs you have occurred in that acquisition.  Is that the way it works?

MR SULLIVAN:   Yes, and to the extent to which there is a profit made, we accept we get our share of the profit.  To the extent there is a loss, we acknowledged – this is what my learned friend corrected himself on later on.  We acknowledge if there is a loss we have to share the loss as well.  We have to do equity as well as seek equity.

GLEESON CJ:   So if the holding costs, for example, over the recent years and until the sale actually occurs produced the consequence that these three Deane Street properties are ultimately sold for substantially less than their total costs of acquisition and holding costs in the meantime, not only will Say‑Dee not get its original money back, Say‑Dee will have to contribute a proportion ‑ ‑ ‑

MR SULLIVAN:   Of loss.

GLEESON CJ:   What proportion?

MR SULLIVAN:   It is set out on page 955 that after deducting the just allowance, effectively one half of the loss, if there was a loss, would be paid by the appellant, that is, Say‑Dee in this case, because it is the Court of Appeal that we are talking about, and the other half would should be paid by the respondents.

GLEESON CJ:   Does that mean that these orders that have been made by the Court of Appeal to that extent lock Say‑Dee into participation in this wider venture?

MR SULLIVAN:   Yes, but it is a wider venture which is cut off – because the orders provide for sale.  They do not provide for the development of the venture at all.  So we are locked in, yes, and we submitted to these orders.  There was a separate judgment about these orders, as your Honour knows, following submissions of the parties.  We submitted to that and we acknowledged taking the risk of that and, indeed, in our respectful submission, it is one of the things which shows the reasonableness of the

orders, because we are taking a situation where we are saying, contrary to what my learned friend is saying, we are prepared to bear our burden of the loss if that be the case.

GLEESON CJ:   Well, I suppose you would need to look at the latest set of accounts of Say‑Dee Pty Limited to work out the extent of that that risk.

MR SULLIVAN:   Your Honour, that is so.

GLEESON CJ:   Thank you, Mr Sullivan.

MR SULLIVAN:   Your Honour, just while I am on my feet, would your Honours be minded to give some timetable for directions for the supplementary appeal book and the submissions your Honour the Chief Justice adverted to?

GLEESON CJ:   Yes.  Are 14 days a convenient time?

MR SULLIVAN:   Yes.

MR DOUGLAS:   Provided it is feasible to get the books printed by the 15th we are happy to do it, your Honour.

GLEESON CJ:   By the 15th.

MR SULLIVAN:   And the parties to exchange written submissions and file them by the 22nd, your Honour.

GLEESON CJ:   All right.  We will make those directions.

MR SULLIVAN:   If your Honour pleases.  Thank you.

GLEESON CJ:   We will reserve our decision in this matter and we will adjourn until 10.15 tomorrow morning.

AT 3.26 PM THE MATTER WAS ADJOURNED