Hallas & Ors v The National Mutual Life Association of Australasia

[1990] HCATrans 244

N,r	·!ll,~USTRALIA,,~
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IN THE HIGH COURT OF AUSTRALIA

Office of the Registry

Brisbane No B17 of 1990

B e t w e e n -

JOHN WILLIAMS HALLAS

First Applicant

KATHLEEN CLARE HALLAS

Second Applicant

ROBERT GEORGE HALLAS

Third Applicant

LISA ADELE STROHFELDT

Fourth Applicant

and

THE NATIONAL MUTUAL LIFE

ASSOCIATION OF AUSTRALASIA

Respondent

Application for special leave

to appeal

DEANE J

DAWSON J

TOOHEY J

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON FRIDAY, 12 OCTOBER 1990, AT 11.49 AM

Copyright in the High Court of Australia

Hallas 1 12/10/90

MR G.L. DAVIES, QC, Solicitor-General for the State of

Queensland: If it please the Court, I appear with

my learned friend, MR B.D. O'DONNELL, for the

applicants. (instructed by McCullough Robertson)

MR D.F. JACKSON, QC:  May it please the Court, I appear with

my learned friends, MR E.G. LENNON, QC and

MR R.G. BAIN, for the respondent. (instructed by

Henderson Trout)

MR DAVIES:  Your Honours, there is a preliminary point.

Order 69A rule 7(6) requires that an applicant for

special leave -

DEANE J: Should we look at the rule, what you are going

to - - -?

MR DAVIES:  I do not know that Your Honours need.

Your Honours, I am sure, are familiar with it.

DAWSON J: Well, I would not draw that -

DEANE J:  It is quite false in my case. I have no idea what

it says.

MR DAVIES: Well, I can tell Your Honours about it shortly.

I do not think there is a serious problem, so far

as our learned friends are concerned anyway. It is

a matter in the end for Your Honours' discretion.

The Order, which is Order 69A rule 7(6),

requires an applicant for special leave to file the

application books:

Within 30 days after the receipt of the

index -

and what happened in this case is the index was

received on 19 May and the application books were

not filed until 22 June which was a delay of four

days. Order 69A rule 10(1) then provides that:

the application shall be deemed to be

abandoned -

by reason of the late filing of the application

books -

unless the Court -

otherwise orders.	And I ask Your Honours' leave to
read and file an affidavit by Mr Hallas.	What it

says, in short, Your Honours, is that the reason

for the four-day delay was a misunderstanding
between the applicants and their solicitors as to

whether the applicants intended to proceed with the

application for special leave. And once that

Hallas 2 12/10/90

misunderstanding was resolved, the matter was

quickly rectified. There is no suggestion of
prejudice because of late filing on the part of the

respondents.

MR JACKSON:  we take no point, Your Honours.

DEANE J:  Very well. You are asking the Court to make an

order under Order 69A rule 10, was it?

MR DAVIES: Order 69A rule 10(1), Your Honour.

DEANE J:  We had better have a look at what it says,

Mr Davies.

MR DAVIES:  Yes.

DEANE J: Very well, the Court orders pursuant to Order 69A

rule 10(1) that the application in the present

matter be not deemed to be abandoned.

MR DAVIES:  Thank you, Your Honour.

DEANE J: Yes, Mr Davies?

MR DAVIES:  Your Honours, the only ground of defence which

was argued on appeal in the Full Court, as ·

Your Honours would have seen, was that the loan

agreement sued on was unenforceable on the ground

of public policy and the primary question which is

sought to be argued on appeal to this Court is

whether, in order to render a contract

unenforceable it is sufficient, as we argued below,

that it was part of an arrangement intended by the

party seeking to enforce it to deceive a third

party. We can state that a little more narrowly:

whether it was intended by that party to deceive

the Commissioner of Taxation contrary to the policy

of full and true disclosure contained in the Income

Tax Assessment Act.

The Full Court, on the other hand, said that that was not sufficient but that it was necessary

for unenforceability that the arrangement be

intended by that party to defraud the

Commissioner. That the Full Court thought that the

second of those steps was necessary appears from

the judgment of His Honour Mr Justice McPherson

with whom the others agreed at the bottom of

page 56 and the top of page 57.

It had been argued before the Full Court that

though paragraph 34A of the defence which,

incidentally, is set out at page 45 of the

application book, it had been argued that though

that paragraph alleges both an intention to conceal

from the Commissioner the true nature of the loan

Hallas 3 12/10/90

and its connection with the reduction in volume

bonus commissions payable by National Mutual, and

it also alleged an intention thereby to defraud the

Commissioner of Taxation, it was not necessary in order to succeed to prove the later of those.

That argument was really rejected during the course of submissions or appeared to be being

rejected during the course of submissions by

Mr Justice McPherson and, of course, it was

rejected in the judgment of the Full Court.

TOOHEY J: But in this particular context, Mr Davies, what

difference is there between deceiving and

defrauding?

MR DAVIES: The difference is this, Your Honour: the Full

Court seemed to have accepted that one of the

purposes of National Mutual in the arrangement was

to conceal from the Commissioner of Taxation the connection between the reduction in volume bonus commissions and the so-called interest free loans.

The fact was - and I will take Your Honours to this passage in a moment - that the volume bonus

commissions were reduced by an amount which was a

percentage of the loans - seven and a half per cent

of the loans which were being advanced.

TOOHEY J: Yes, I understand that.

MR DAVIES: So, by concealing that connection from the

Commissioner they thereby deprived the Commissioner

of the opportunity of determining for himself

whether, in fact, that connection resulted in a tax

assessment against - well, in particular, National

Mutual but also against the agents.

DAWSON J: But the difference between concealing and

defrauding is that they concealed notwithstanding

that they believed that they were not liable for

tax to avoid an expensive and inconvenient argument

with the Tax Commissioner but not to defraud. That

is what is said, is it not?

MR DAVIES: That is what is said, Your Honour. That is

precisely what is said, and we say we really only

need to go to that first step because what they are

really doing is, in effect, favourably judging the

legal result of the case for themselves and

dishonestly depriving the Commissioner of Taxation

of the opportunity of determining that question for

himself and ultimately for a court to determine

that question on an appeal from the Commissioner if

necessary.

Your Honours, the nature of the connection

between the reduction in volume bonus commission

Hallas 4 12/10/90

and the so-called interest free loan is explained

in the judgment of the court commencing at the

bottom of page 50 and going through to page 52 at

about point 6. Your Honours have read that and I

will not take Your Honours through it again except

that I should mention there is a simple factual

mistake in His Honour's statement of the facts on

page 52. At line 8, he says - perhaps I should

read from line 4, the sentence commencing on

line 4:

The margin of reduction was designed to vary

according to several factors, including the

length of service of the agent in question;

but it is said to have amounted, on average,

to 7.5 per cent -

that should be "of the loan advanced". So that

what happened in each case was that volume bonus

commissions were reduced by 7.5 per cent to the

loan advanced. So that, really, National Mutual

effectively charged interest on its loans by

reducing non-deductible payments to the lenders.

Your Honours will recall that those volume bonus commissions payable by National Mutual were,

because of the provisions of section 111 and

section 112 of the Income Tax Assessment Act,

non-deductible to it.

So, it really managed to, in effect, charge

interest by reducing those non-deductible payments

to lenders which included the first defendant and,
correspondingly, each of the lender agents

received, in lieu of commissions which were

taxable, in their hands recurring monetary benefits

in receiving the loans interest free.

DEANE J: Well, that was not concealed, was it?

MR DAVIES: Yes.

DEANE J: What, that they were receiving the loans interest

free?

MR DAVIES:  No. Sorry, not that they were receiving the

loans interest free but - - -

DEANE J:  I mean, what precisely is the complaint: that the

agreement did not contain a recital saying

"whereas, whereas, whereas" or - - -?

MR DAVIES:  No, but that they were - what really happened

with this arrangement, Your Honours, was that not

only were all the connections between the reduction

in volume bonus commissions and the interest free

loan arrangement erased from contemporaneous

documents, the subsequent records, and not only

Hallas 12/10/90

were the agents told that they should not disclose

any of this, this all should be kept secret from

the Commissioner, but the documents by which the

interest free loans and the volume bonus

commissions were executed on separate days.	The
arrangement involved them being executed on
separate days.

So, in the case, for example, of National

Mutual, it would not appear that National Mutual

was, in consideration of making those loans

interest free, reducing non-deductible payments to

the agents.

TOOHEY J: It is not suggested the documents were shams, is

it?

MR DAVIES:	No, between the parties they were - - -
DAWSON J:	What should they have done to avoid these

proceedings?

MR DAVIES:	What we are saying is that what they should have done to avoid these proceedings is not enter into
an arrangement, one of the purposes of which was to
conceal that connection from the Commissioner of
Taxation.

DAWSON J: Well, you can enter into an arrangement, there is

nothing wrong with that but it comes to the same
question that the presiding judge asked, should

they have set it all out in explanation?

MR DAVIES:  No. Our point, Your Honour, really is that it

was all set out in the contemporaneous memoranda

and erased from those contemporaneous memoranda.

DAWSON J:  But the point is you are allowed to enter into an

agreement of that sort. There is nothing wrong

with that.

MR DAVIES:  No, nothing wrong with it at all unless the

arrangement entered into has, as one of its
purposes, the deception of a third party.	And what
we say is that one of the purposes of this
arrangement was - - -

DAWSON J:  Why is the agreement deceptive? I mean, you

would look at the surrounding circumstances - - -

MR DAVIES:  No, the total arrangement of which the agreement

is an essential part.

DAWSON J: Yes.

MR DAVIES:  I would not like to isolate the loan agreement.

It is a total arrangement. The arrangement

Hallas 6 12/10/90

involved reduction of volume bonus commissions by
seven and a half per cent of a loan that was being

advanced.

DAWSON J: Well, the arrangement is there. It may have been

entered into in such a fashion as to make it more
difficult for the Tax Commissioner to discover what

the true situation is but that is not unusual.

MR DAVIES: Well, it was entered into in such a way as to

conceal from the Tax Commissioner what the real

position was.

TOOHEY J: Well, I do not understand that. How did it

conceal the real position? The real position is as

reflected in the documents. The Commissioner's

power to attack the documents under Part 4A or

whatever other provisions of the Act are relevant
was not affected by the execution of the two

agreements.

MR DAVIES:  Not by their execution but by the total

arrangement which was made between the parties

which was an oral arrangement pursuant to which

this would all be done and would be concealed from

the Commissioner.

DEANE J: Well now, where is the finding as to that,

Mr Davies?

MR DAVIES: Perhaps if I could take Your Honours to the

evidence which was put before the Court on that.

Your Honours, it really, I suppose, commences

about - first of all, perhaps, I should take

Your Honours back to page 58 where the allegation

is set out. That is the first part of the

allegation in paragraph 34A is set out at the

beginning of the paragraph in the middle of

page 58.

Then His Honour, commencing just below the

middle of page 59 said:

The evidence relied on by the defendants

on appeal is summarized in their written

outline of submissions as comprising the

plaintiff's actions in: (a) destroying some

documents and altering others, so as to remove

references to the connection between reduction

in the amount of volume bonus payable to

agents and the interest-free loans;

(b) describing the loans as "agency

development loans", falsely implying a limit
on the use to which the loans might be put,

when in fact no restriction at all was imposed

Hallas 7 12/10/90

and I would add, and the respondent did not care -

(c) conveying to the Commissioner the

impression that the loans were a long term

strategy unrelated to changes in commission

payments -

it was a letter written to the Commissioner of

Taxation -

(d) stating to agents and employees that they

should not disclose any such connection.

And he goes on to say:

The evidence in support of (a) came

principally from the testimony of the
plaintiff's officers Webb, Tomlinson and
Ractliffe, all of whom occupied senior positions in the plaintiff's management

hierarchy in Australia. The high water mark

for the defendants is found in Ractliffe's

statement that material in ex. 12 concerning

the making of the loan "could be seen as a tax

avoidance strategy", and that deletions from

it and other documents were carried out

because the Commissioner might see a

connection between reductions in commissions

and the making of the loan. Webb said that he

destroyed copies of those documents that

showed that relationship and that he did so

for the purpose of "acting on our tax advice".

Item (b) speaks for itself. With respect

to -(c), attention was directed to the terms of

ex. 114, which was a letter written by

Mr Hoskins on behalf of the plaintiff -

Hoskins was the Australian manager, I think, at the time or certainly a person in charge -

to the Commissioner.

And he says it was after the date of the

arrangement, of course; the letter discusses income

tax implications and so on -

but it does not disclose anything about the
connection between commission reductions and

the making of the loans.

As regards (d), reference was made to ex.

12, which is a confidential paper discussing

the proposed loans; it contains a paragraph

that "communication of this information must

be by word of mouth for the reasons mentioned

to you on Monday". It was in reference to

Hallas 8 12/10/90

that paragraph that Ractliffe said that the

Commissioner might see a connection between

the commissions and the loans. Reference was

also made to an aide memoir prepared by

Hoskins for his meeting with agents'

representatives on 10 November, 1986. It

contains an item numbered 6, reading "No

desire to tell the tax people". Mention has

already been made of some of what was said on

the subject at that meeting. In addition,

Webb agreed in evidence that he had discussed

with the plaintiff's solicitors

Messrs. Herbert, Geer & Rundle, the basis on

which the loans were to be made by the

plaintiff; he instructed them that "steps

(would] be taken to avoid linking the making

of the loans to the drop in the agents' volume

bonus commission".

There are some other statements and

matters in evidence more or less comparable in

their effect to those I have identified.

What follows from all this? Mr Davies QC

stressed that the evidence in question was

uncontradicted. So it was; but that does not mean that the defendants have established the

allegation in para. 34A. Even if it be

accepted that the plaintiff's intention was,
if possible, not to make known to the

Commissioner that the specified connection

existed, the result was not that in executing
the agreement ex. 3 the plaintiff must be
taken also to have intended by that means to

defraud him of tax payable -

that is the second aspect of paragraph 34A -

by the plaintiff and by the first defendant.

And then he goes on to say on page 62, if

Your Honours go to that page, just below about

point 6, a sentence towards the end of the line -

this is the explanation:

It is equally, if not more readily, open to

the interpretation that it did not wish to

attract the attention of the Commissioner to

something that, although not in truth a tax
scheme, might be suspected by him or his

officers of being one.

So, His Honour accepts that the evidence

establishes a desire to conceal from the

Commissioner but says, "Well, there's another explanation than an intention to defraud the

Hallas 9 12/10/90

Commissioner, namely, that it may have been simply

to - - -"

DEANE J: Except, does that put it fully? I mean, is not

the finding that it cannot be said that the

agreement itself as such was entered into for any
of the alleged purposes and when all that has been

proved is did not wish to attract the attention of the Commissioner to something that although not in

truth a tax scheme might be suspected of being so?

Now, if those are the findings, why would the

agreement be rendered void for illegality?

MR DAVIES:  Your Honour, the way His Honour approached this

was really to look at the two allegations which

were made in paragraph 34; the first one being an

allegation of concealment and the second being an allegation of thereby in consequence intending to

defraud the Commissioner, and he seemed to deal

with those separately and he seemed to accept that

the first of those - I am sorry, and I should add:

and he said throughout that we, the defendants, had

to prove both of those to succeed.

DEANE J: But is not your problem this: that if you want to

attack the way the case has been approached and the

findings, that is one thing, though you might have

some difficulties getting leave but in so far as

principle is concerned, we must start on the basis

of the way the case has been dealt with factually.

MR DAVIES: Yes.

DEANE J: Well now, it just does not appear to me that

anybody has said this agreement was entered into

for the purpose of concealing something. What has

been said is the agreement - or the finding is the

agreement was entered into; it was thought that

the Commissioner might wrongly say it was a tax

scheme and that being so, they set out to conceal

material. Now, if that is the right approach I

have difficulty in seeing how you can, as it were,

take it back to the illegality of the agreement.

MR DAVIES:  Can I just put what Your Honour said in a

slightly different way and that is that it does

seem to have been accepted that one of the purposes

of the arrangement was concealment of this

connection from the Commissioner without going

further as to what the ultimate purpose was. But

Their Honours do seem to have accepted that because of the way they divided the allegations up.

Now, we say that that is sufficient but if, in fact, the purpose was to conceal from the

Commissioner and if one accepts that the - - -

Hallas 10 12/10/90

TOOHEY J: Can I just ask you: to conceal what from the

Commissioner?

MR DAVIES:	The connection between the reduction in volume bonus commissions and the granting of a so-called
interest-free loan.

TOOHEY J: So, there is no question of concealing the

agreements from the Commissioner?

MR DAVIES:  No question of concealing the loan agreement

from the Commissioner.

DAWSON J: And it was not fraudulent? It did what it said

it did? In that sense, it was not fraudulent.

MR DAVIES:  It did not for taxation purposes do what it said

it did.

DAWSON J:  No, no, what it said was to be done was to be

done.

MR DAVIES: Yes. Inter partes, it was an effective

document.

DAWSON J: Yes.

TOOHEY J: Well, it may have been effective as against the

Commissioner, one does not know.

MR DAVIES: Well, one does not in the end although, we would

submit - - -

DAWSON J: In fact, the Commissioner would rely on the

document.

MR DAVIES:  He would rely upon the document as part of a

total scheme by which he would say, we would submit

DAWSON J:  He would say it was genuine.

MR DAVIES:	He would say it is a genuine document but he would say that, in fact, what was really being done
was that by the total scheme interest was being charged on that loan at seven-and-a-half per cent.

DAWSON J: That does not make the document void.

MR DAVIES:  Does not make the document fraud, Your Honour?

We are not suggesting that it makes the document

fraud, Your Honour, or that the Commissioner has,

in fact, been defrauded of money because we say we

do not have to go as far as that.

TOOHEY J: But you appear to be saying it is the oral

agreement?

Hallas	11	12/10/90
MR DAVIES:	The total arrangement.	I mean, there is no

doubt there was one arrangement.

TOOHEY J:  I have difficulty - it is a bit like

quicksilver - in putting my finger on the

particular agreement or arrangement that is said to

be avoided.

MR DAVIES: The arrangement is this, Your Honour: the

arrangement was one between National Mutual and its

agents whereby volume bonus commissions would be

reduced by seven-and-a-half per cent of the capital

amount of a loan advanced to each agent.

TOOHEY J: But that is not the agreement that was sued on.

MR DAVIES: No, the agreement that was sued on appears, on

its face, to be an agreement to make a loan

interest free.

TOOHEY J: Well, not "appears on its face", it is.

MR DAVIES: Well, it is on its face.

TOOHEY J:  It is what it says. You accept that it is not a

sham.

MR DAVIES:  I accept it is not a sham. What I say is that

from an income tax point of view that is really the

effect of what was done.

TOOHEY J:	I mean, the motives of the parties in entering into this arrangement may be highly suspect but no
one has suggested that either agreement does not
mean what it says. It operates according to its tenor.
MR DAVIES:	I accept that subject to the argument we are

advancing about unenforceability of it.

DAWSON J:  You are really saying that the parties entered

into or devised a scheme to avoid taxation - evade

taxation, if you like - of which this agreement was

part and they did not tell - or they concealed a

scheme from the Commissioner.

MR DAVIES: That is right.

DAWSON J: But that does not make the individual agreement

illegal.

MR DAVIES: Well, we submit with respect that that is

sufficient and that there is authority which would

support the proposition that that is sufficient,

that is, that where parties enter into an

arrangement, one of the purposes of which is to

deceive a third party, that that arrangement is

Hallas 12 12/10/90

contrary to public policy and it is not necessary

to go further and establish that one of the

purposes of the arrangement was to actually defraud

that third party. I mean, there could be no doubt,

in our respectful submission, that if one of the

purposes of the arrangement was to defraud a third
party, that the arrangement would be unenforceable

on the ground of public policy. And in our

respectful submission, we say that one does not
really have to go that far, that it is sufficient that one of the purposes is actual deception of a third party, short of defrauding.

I mean, there are cases, and we referred them to the Full Court. Can I just mention two of them

which really support that proposition?

DEANE J:  Mr Davies, just taking you back: I still do not

see where you have a finding that a purpose of this

agreement was to conceal anything as distinct from

on the basis that this agreement would be executed,

the parties then set out to conceal things.

MR DAVIES: Well, the purpose of concealment arose before

the execution of the documents, Your Honour.

DEANE J: They decided they would conceal some facts

relating to the document.

MR DAVIES:	Yes.
DEANE J:	I have trouble seeing that is a purpose of the

agreement or a finding to that effect.

MR DAVIES:	No, I would put it this way, Your Honour, that that is the purpose of the arrangement which was
entered into between the parties, the total
contract between the parties, of which the
agreement was part of the implementation.
DEANE J:	I follow that but it seems· to me that what the

Full Court has said is, in effect, it is not

established that the agreement was entered into for
any purpose of concealment or anything else.	It

was entered into to compete with the AMP and so on.

All that is established is, collateral to the

agreement, the parties tried to conceal facts

relating to it.

MR DAVIES:	Your Honours, all I can say in answer to that is this: what I have said to Your Honour before about
when the purpose arose and, secondly, that the
arrangement which was entered into might not have been of any use to National Mutual and they might
therefore have entered into a quite different
arrangement and perhaps one less favourable to its
agents, had there not been this tax advantage. I

Hallas 13 12/10/90

mean, the way it was set out on the basis -

assuming, for example, no intention to disclose the

connection to the Commissioner of Taxation, at
least on a reasonably arguable view, the respondent
here, National Mutual, is escaping a tax liability
of seven-and-a-half per cent on the amount of the

total loans advanced to its agents.

DEANE J:  I follow that but move away from this field. Say,

A is selling property to Band there is a recital

which says, "Whereas A purchased this properly

11 months ago, and whereas he has held it only for

11 months and whereas he has now decided to sell it

to B" and the agreement is entered into and the

parties say, "Hey, we'd better cross out those

recitals and destroy everything that shows that A

bought the property within 12 months of the time of

resale because it will have awful taxation effects

if the Commissioner finds that out." That would

not have any effect on the contract of sale of the

property. It would have an effect if anybody tried

to enforce the arrangements for concealment or what

have you. Well now, obviously you say this case is

not within that sort of example.

MR DAVIES:  Yes.

DEANE J: Well now, that is what I am groping for when I am

looking for findings.

MR DAVIES:  Your Honour, I cannot point Your Honour to

specific findings. What I can do is simply say to

Your Honour that all of the evidence to which

His Honour referred in his judgment was in the

context of this arrangement and for the purposes of

this arrangement. All of this was done for the

purpose of this arrangement. The example

Your Honour gave to me is an example of something

which is wholly collateral to the arrangement

between the parties and the concealment of tax

really appears to have been throughout - and I
really cannot take Your Honours to this without

will not do that - but Your Honours can see it from	taking Your Honours to specific evidence, and I
the summary of the evidence which I took
Your Honours to earlier that the whole thing was
done in the context of the income tax consequences
both for National Mutual and for the agents, and I
have concentrated on those consequences for
National Mutual.

So, the arrangement really arose in that

context and no doubt when National Mutual is

weighing up the financial aspects of making loans

on a so-called interest-free basis, it would be

weighing up whether, in fact, it could afford to

Hallas 14 12/10/90

reduce volume bonus commissions without getting a

compensating tax advantage.

So, it is a necessary inference, in our

respectful submission, from the fact that all of this was in the context of the total arrangement

which was reached between the parties but it was an

essential part of that arrangement. But I accept

that if it was wholly collateral to the arrangement

then the point that we make cannot be made.

Your Honours, can I just then briefly mention

the principles and the authorities to which we

intend to refer? The wider principle, as we have

said at the outset is that an agreement is

unenforceable if one of the purposes in making it

or one of the purposes in making an arrangement of

which it is an essential part or which it

implements is to deceive a third party. The most

recent statement of that principle, Your Honours,
is a statement in a case called Mitsubishi v

Alafouzos. Could I hand up some copies of that to

the Court?

Your Honours, the facts appear from the

judgment of Mr Justice Steyn. If Your Honours take

it up in the second paragraph in the second column

on page 192, Your Honours will see:

The background can be sketched quite

briefly. By a shipbuilding contract dated

November 1, 1984, Mitsubishi Corporation

agreed to -

sell this ship to Pharal Corporation.	And then the
following page:

The price of the vessel was Y4,000,000,000,

payable in stages ranging from the signing of
the agreement to eventual delivery of the

vessel.

And then if Your Honours go down to the indented

paragraph which is a reference to an affidavit,

down the bottom of the page, and commence about the

middle of that paragraph:

The Defendant's allegation is that although

the contract price was 4,000,000,000 Japanese

Yen, there was a side agreement whereby the price was reduced and that the purpose of this

arrangement was to effect an illegal deception

of the Japanese government authorities.

Now, "illegal" may be putting it too strongly,

Your Honours, because if you look at the top of the

following column you really see that it is a policy

Hallas 15 12/10/90

matter rather than a matter of law. Then under the

heading "Good arguable case" at the bottom of that

column, His Lordship said:

The case on behalf of the guarantor was

simple and straightforward: the shipbuilding

contract, when read with the side agreement,

misstated the price; it was so drafted in

order to achieve the sellers' design of

misleading the Japanese authorities as to the

true price; the motive was to obtain the

necessary permits.

And then, finally, Your Honours, can I take

you to the following page, 194, the second column,

the last paragraph. If I can just take up after
the reference to - perhaps I should read the whole

of the last paragraph:

In referring to these dicta I do not wish

in cases like

to be understood as suggesting that the public policy enunciated

Alexander v Rayson. On the contrary, in an

age in which commercial fraud is increasing,

it seems imperative that the Court should

refuse to allow a party to rely on a contract

which was drafted or structured to deceive

third parties.

Your Honours, to similar effect is a decision of the Court of Appeal in Brown Jenkinson & Co Ltd

v Percy Dalton. Can I hand up some copies of it?

And I need, I think, refer only to the headnote in that case. If Your Honours read the headnote on

page 621 and just down to the end of the first

paragraph on page 622 it might be sufficient

to - - -

DEANE J:	I am sorry, what page, Mr Davies?
MR DAVIES:	The headnote on page 621, Your Honour, and if

you would just go over to the end of the first

paragraph on page 622 - I mean, perhaps if

Your Honours would like to read all the headnote -

but that would sufficiently explain the case for

our purposes.

Your Honours, I just mention that case because

it is yet another example of a case in which there

was no intention to defraud but an intention to

deceive a third party. And perhaps I should also

mention that Alexander v Rayson itself was a case

in which the lease which was sued on, there was

nothing illegal about it but it was part of a wider

arrangement, the purpose of which was deception of

Hallas 16 12/10/90

a third party, the rating authority, but I do not

think I need take Your Honours to that case.

Your Honours, I mentioned at the outset that a

narrower way of stating the same proposition in

this case is to not say deception generally but say it was part of an arrangement of which an essential

part of the purpose was to avoid making full and

true disclosure to the Commissioner of Taxation
contrary to a policy of full and true disclosure in

the Income Tax Assessment Act. They are our

submissions, may it please the Court.

DEANE J: Thank you, Mr Davies. The Court need not trouble

you, Mr Jackson.

On the basis of the factual findings made

below, the Court is of the view that the actual

decision of the Full Court of the Supreme Court was

plainly correct. In these circumstances, the

application for special leave is refused.

MR JACKSON:  I ask for costs in the application?

DEANE J: Mr Davies? The application is refused with costs.

AT 12.25 PM THE MATTER WAS ADJOURNED SINE DIE

Hallas 17 12/10/90