John Alexander's Clubs Pty Limited & Anor v White City Tennis Club Limited
[2010] HCATrans 85
[2010] HCATrans 085
IN THE HIGH COURT OF AUSTRALIA
Office of the Registry
Sydney No S309 of 2009
B e t w e e n -
JOHN ALEXANDER’S CLUBS PTY LIMITED, ACN 097 896 109
First Appellant
POPLAR HOLDINGS PTY LIMITED, ACN 123 954 272
Second Appellant
and
WHITE CITY TENNIS CLUB LIMITED, ACN 000 476 513
Respondent
Office of the Registry
Sydney No S308 of 2009
B e t w e e n -
WALKER CORPORATION PTY LIMITED ACN 001 176 263
Appellant
and
WHITE CITY TENNIS CLUB LIMITED, ACN 000 476 513
First Respondent
JOHN ALEXANDER’S CLUBS PTY LIMITED ACN 097 896 109
Second Respondent
POPLAR HOLDINGS PTY LIMITED ACN 123 954 272
Third Respondent
FRENCH CJ
GUMMOW J
HAYNE J
HEYDON J
KIEFEL J
TRANSCRIPT OF PROCEEDINGS
AT CANBERRA ON WEDNESDAY, 31 MARCH 2010, AT 9.48 AM
(Continued from 30/3/10)
Copyright in the High Court of Australia
__________________
FRENCH CJ: Yes, Mr Hutley.
MR HUTLEY: Of the three matters which I was asked to deal with I was dealing with the first. That is particular (a) in annexure A to the appellant’s reply submissions, which gives the relevant references. I have taken your Honours to the letter, which is at appeal book 6, page 2128. That is a letter which becomes relevant – was also repeated or annexed to an email which is at page 2139, which is an internal email within the Club and the importance of that will be apparent in a moment.
As we said that letter made three allegations that there had been discussions with Next Generation, there had been negotiations with TNSW to alter the terms of the Club’s lease over the land and there had been what were discussed as, discussions with investors to secure the land. That same letter of 4 November expressly elected not to terminate the MOU and that is at 6, 2129. Your Honours will see from annexure A there are references to two pieces of transcript and your Honours will find those at appeal book 1, 302, lines 39 to 47.
If your Honours go to 302, your Honours will find those. It appears to be the second last question:
Q.And the complaint in Mr Alexander’s letter of 4 November 2005 at page 1199 was of the President entering into discussions with Peter Lloyd and Bill, is it Guile?
A.Guile.
Then the next reference, the completion of the reference actually only takes you down to the middle of the next question, but if one reads the next question as to the answer, there is a statement:
A.No, that is certainly not my understanding.
That is the entirety of the evidence which his Honour relied upon to make the finding of breach and, in our respectful submission, that is no evidence at all of anything. The actual facts going to the three allegations in the letter, can I say, are as following. Firstly, the Club answered the allegations in the letter dated 23 November 2005 at AB 2186 and it denied them. It set out the facts. Secondly, the evidence of the dealings with Tennis NSW concerned the formalising of the existing lease between Tennis NSW and the Club, and that is referred to in the affidavit of Mr Simpson at AB 1, 45, paragraph 14, and the affidavit of Mr Simpson in reply, paragraph 9, AB 1, 72. That was material which I took your Honours to on the last occasion, which dealt with the registration of the lease which had been an unregistered form for a number of years.
We say that cannot be a breach of the MOU. It is not identified what term it is said to be a breach of. Secondly, the evidence of discussions with the Next Generation shows that such discussions occurred prior to the MOU, and I referred to that yesterday, and the relevant reference in the transcript is appeal book 1, 1393. As to the allegation of other negotiations with investors it was denied by Mr Simpson in cross‑examination, and that is in appeal book 1, 302 to 303, and there was no adverse credit finding made against Mr Simpson in this respect. In fact, there was some evidence of meetings with investors.
That was in the minutes of the Club’s development committee meeting of 16 November 2005, and that appeal book 6, 2143, lines 35 to 48. That is of a meeting of unknown date, who were referred to immediately by the development committee to JACS to assist with the project. That is what appears in that document.
In other words, there was no material – firstly, there was no evidence referred to which could constitute a breach. When one went beyond the so‑called evidence to what actually happened in respect of the allegations, all the material was completely anodyne and no basis has really been identified as to why it would be a breach of the agreement. So his Honour’s finding in that regard, with respect, is wholly flawed.
The second one, if your Honours look at (b) to (e) of annexure A, and I do not propose to take your Honours through the references, but if your Honours look at them, the broader allegation appears to be that the then president of the Club, Mr Kolev, was against the JACS proposal, as were some other board members, and that there were difficulties within the Club regarding opposing views as to the project and, consequently, some difficulties in the relationship between the president and JACS.
The detail, we say, is irrelevant. We may accept it all as factually correct. That is why I am not taking your Honours to the evidence. It cannot evince an intention by the Club not to be bound by the agreement. Unhappiness about or even a strong desire to alter contractual relations is not repudiation, even if it is communicated. Nothing here was alleged to be communicated, with one exception.
The Court of Appeal observed in respect of these breaches at appeal book 2, 622, paragraph 109:
the views of individual board members of the Club . . . do not appear capable of constituting a communication by the Club to JACS that the Club was unwilling or unable to perform its obligations under the MOU.
Now, the one communication in that mass of material in those paragraphs was a letter of 7 February 2006 from Mr Kolev to JACS, and if your Honours go to appeal book 6, 2352, this letter which refers back to two pieces of correspondence – your Honours will see that in the first line, and your Honours will find those at 2184 and 2247 respectively – that communication is a communication which deals with a claim of serious breach and joins issue with it. However one reads this letter, one cannot read it as a document and evincing an intention not to be bound by the MOU.
It is wholly obscure what obligation is said to have been infringed by this letter, let alone how it constitutes a breach, particularly of sufficient gravity to warrant a termination for breach of the covenants in the MOU, which we understand could be the only covenants which would be relied upon, being the covenants in 3.1 and 3.2, which are a classic variety of what might be called intermediate terms as discussed by this Court in Koompahtoo Council v Sanpine Pty Limited 233 CLR 155 at paragraphs 47 and 49.
The last example I will deal with, your Honour, is paragraphs (i) and (k) to (l) in paragraph 77 of the annexure to the submissions, the particulars. These allegations, when compared with the notice of breach, not as of termination, are new. They do not find correspondence in the terminating notice. We accept, of course, if there were repudiatory breaches one could rely upon them, but we make that note. We say they are vague and effectively assert difficulties in the relationship of no particular specificity. The broad allegations were that Mr Kolev prevented Mr Jordan of JACS from attending the Club’s board meeting, that Mr Kolev had no time for JACS and that the relationship between the Clubs and JACS was deteriorating or had totally broken down and consequently the project was at risk.
The evidence was that whilst Mr Kolev had told JACS not to attend one board meeting, there was no evidence that it went beyond that instance. Can I give your Honour just some references. At joint appeal book 6, 2426, line 25 and joint appeal book 1, 335, line 29 to 336, line 3. Mr Simpson confirmed that his view, at the time, was that the relationship between the Clubs was putting the project at risk, and that is at appeal book 1, 336, lines 25 to 29. He also confirmed that there was a split within the board as to how to deal with JACS. That is at appeal book 1, 342, line 75 to 343, line 15. The evidence is as set out in (i) and (k) to (l).
We submit that accepting all that we ask rhetorically, what is the breach? What evidence is there evincing of an intention not to be bound? Many commercial relationships every day have serious problems in relationships. It does not constitute a breach of any of the covenants which one is dealt with and we submit his Honour fell into error in finding it.
Now, could I just make two general observations to do with general matters raised by our learned friends in this regard and I will not deal with it any further. Our learned friends criticised the respondent’s submissions to the trial judge in relation to the question of breach and say that we supplied no answer to the breaches asserted before the trial judge. That is not correct. The Club addressed the fundamental failings in the appellant’s argument, namely, that JACS had not proved the alleged conduct relied upon or that the conduct, if established, could not amount to repudiatory conduct in the sense of evincing intention not to be bound and that the views or opinions of individual board members of the Club or internal disagreements within the Club could every amount to repudiatory conduct.
Those submissions are partly set out in the appellant’s submissions in relation to this notice of contention at paragraph 4 and that sets out the three submissions that we made, or three of the five submissions, the other two do not matter, which we made, and we submit, on the basis of our written submission, conduct was not proved at all in respect of the matters at particulars (a) and (h) of annexure A. That is the three 12 April breaches. The conduct, even if correct in respect of particulars (a), (b), (c), (d), (e), (f), (g), (i), (j), (k) and (l), even if true, would not be repudiatory and there is no basis advanced as to why it would be, and the individual board members’ internal divisions, such as referred to in paragraphs (b) to (e), (i) and (k) to (l), are irrelevant. So there was response. Secondly, the appellants’ reply submissions at paragraph 11 contend that the conclusions of the trial judge at paragraphs 77 and 79:
were based in a large part, upon the cross-examination of witnesses especially Mr Simpson and the impression that was derived from cross-examination.
That is incorrect. The trial judge observed that little was gained from cross‑examination. That is the judgment at first instance, paragraph 17, appeal book 1, 522, and there were no general credit findings made by the trial judge. More importantly, the issues referred to by the appellant in their reply submissions as constituting specific credit findings, that is, at paragraph (m) of paragraph 77 in his Honour’s judgment, and paragraph 79(a) – your Honours will see that from the appellant’s reply submissions, paragraph 11 – did not depend in any way on credit findings.
As to the purported credit finding at 77(m), if your Honours would go to (m), as we understand it, the issue raised by that paragraph was whether the Club “accepted” the notice of termination served by JACS on 12 April 2006. If that notice was effective at law to determine the contract, it was effective at law to determine the contract before there was any communication by the Club about it. Its “acceptance or non-acceptance of the notice as effective at law to determine is irrelevant”.
Secondly, the cross-examination relied upon at the transcript references which your Honours will see at (m) – and they are the transcript references at joint appeal books 351 at line 33 to 352, lines 17 to 23 – was as to Mr Simpson’s understandings or opinions as to the meaning of his email of 13 April 2006, which is at appeal book 7, 2613. That is the email which is said to have constituted the acceptance, and it is in volume 7. I am not going to take your Honour to it. Whether or not the email amounted to a statement of acceptance, whatever the legal effect or meaning of that may be, depended upon an objective assessment of the email and not whether or not Mr Simpson’s explanation of the document was accepted or not.
As to the purported credit finding referred to in 79(a), which is in annexure A, paragraph 16(a), that is dealing with events after 12 April, the issue raised by that subparagraph was whether the Club had engaged in discussions with third parties in breach of clause 3.3 of the MOU. The cross‑examination of Mr Simpson is referred to in the appellant’s reply submissions at paragraph 23 and the appellants conclude:
Mr Simpson’s view (expressed during cross‑examination) that WCTC’s negotiations with third parties concerning the Maccabi Land were not in breach of clause 3.3 of the MOU because that clause related to the Option Land and not the Maccabi Land.
They go on to say that was not accepted by the primary judge and they say that this is significant in this determination. However, the primary judge’s finding was that there was a breach of clause 3.3 of the MOU and if that is a finding supportable it is not dependent on the making of any credit finding against Mr Simpson, rather it was based on whether or not it was correct as a matter of law that the discussions with Maccabi which Mr Simpson agreed took place, fell within the terms of clause 3.3 as to amount of breach and if so the extent of the breach. That is all I wish to say about the particular matters.
There is the point as to the events after 12 April. As was raised in discussions in my learned friend’s submissions, I think with your Honour Justice Heydon, post 12 April conduct alleged to be a breach was not accepted until the filing of the defence in the proceedings. We submit it is irrelevant for that reason.
In any event, as we have submitted in our written submissions all that conduct which was relied upon by our learned friend is conduct which – we have set out why we do not say it is a breach at all but even if it were a breach it was conduct taken at a time that JACS was refusing to participate at all in relation to the MOU because it was asserting the MOU was at an end. Therefore, it was repudiating its obligations and the conduct referred to is conduct – its conduct, in effect, in refusing to pursue the MOU was conduct intimately related to our conduct in seeking, for example, alternate finance to deal with the position should the MOU not go forward. They cannot, in our respectful submission, rely upon that conduct at law as a basis for termination, and we have referred to the authorities. That is all I wish to say in relation to the notice of contention.
Can I turn now to the Walker Corporation appeal. The notice of motion originally brought by the Walker Corporation on 10 or, debatably, 11 June 2009 originally did not seek to disturb the orders of the Court of Appeal but rather to be made a party. It was only on 22 June 2009 that such orders were sought in addition to being made a party. That was by the amended notice of motion. The evidence relied upon in its application to the Court of Appeal was essentially hearsay evidence on the affidavit of Ms Johnson, being the solicitor for the Walker Corporation.
Nothing was proved by that application to a standard or in a manner beyond that which was sufficient to justify a joinder application. No final determination of the nature of the interest of Walker Corporation, if any, in relation to this property was or could be made. All that was put forward and set out to be put forward was documents said to give rise to an arguable case of an entrance. The following was made clear by the evidence. Firstly, the Walker Corporation was, at all material times, aware of the proceedings. Secondly, at all material times it was funding the proceedings. In fact, the evidence disclosed reference to ‑ ‑ ‑
GUMMOW J: Are you saying your client was ignorant of those matters?
MR HUTLEY: That they were funding it, yes. It was aware of the existence of Walker Corporation, undoubtedly. There were other things which happened that I cannot tell your Honour about because it is not in evidence but I accept that we were aware of it. What we were not aware of, because there was no evidence to suggest we were aware of, they had a funding arrangement whereby they were in effect funding this litigation.
There was also in the evidence reference to what was called a litigation deed, which was never tendered in evidence by Walker Corporation. Now, your Honours will see a reference to that document at volume 9, 3654. It is called the litigation deed and it is at 9, 3654, clause 1. Your Honours see reference to a “Litigation Deed” at about line 33. I do not know what that was.
GUMMOW J: There was an unregistered mortgage too, was there not, at 3658?
MR HUTLEY: Yes, your Honour. Your Honour, there are documents which have been tendered on information and belief by the solicitor as to the extent of their interests. Now, until the orders of 3 June 2006, we know that Walker Corporation had achieved all that it sought, and that is at the joint appeal books, volume 2, page 637. This is the transcript of 10 June before Justice Macfarlan in which my learned friend, Mr Jackman, appeared. If I could take it up at 637, at about line 5. His Honour asked whether there was any initiating process:
JACKMAN: I don’t have an initiating process but we would ask to be joined as the third respondent to the appeal. The injunction which is being sought is directly contrary to my client’s interest and shouldn’t be granted without my client being heard and I submit--
HIS HONOUR: Has your client been aware of the pendency of these proceedings?
JACKMAN: My client has been aware of the pendency of these proceedings.
HIS HONOUR: And of the relief being sought?
JACKMAN: Yes.
HIS HONOUR: Why hasn’t it come forward earlier than this?
JACKMAN: Well, it –
That is, his client –
succeeded at first instance and there was no need to until the Court of Appeal reversed Justice Young’s judgment. There was no need for Walker Corporation to become involved, it had achieved everything that it had sought to. The outcome until seven days ago was entirely consistent with Walker Corporation’s interests. Now that the Court of Appeal has declared a constructive trust . . .
So my client wishes –
and it goes on.
GUMMOW J: Is this a laches argument you are putting forward?
MR HUTLEY: It is not just a laches, your Honour.
GUMMOW J: Let me put to you the bottom line, Mr Hutley? If a constructive trust is to be granted over Torrens title land, and there is an unregistered interest which would be overreached by the registration of the transfer required by the constructive trust, that is a consideration which enters into the question of whether the constructive trust should be awarded in the first place? It is a real problem with awarding constructive trusts over real property registered title where there may be third party equities out there, and if any party has an arguable claim why should they be shut out so the court does not get itself in the invidious position of making an order it should not make?
MR HUTLEY: Your Honour, in all usual cases what your Honour says would undoubtedly be correct, but as your Honour referred to the authorities in the Effem v Trawl Case long ago there is a principle that if a party who should be a proper party stands by, participates in the litigation and assists in it, they can be bound by the litigation even though they were a proper ‑ ‑ ‑
GUMMOW J: We are not talking the litigation. We are talking about the title of the real property land, Mr Hutley. That is what makes it different.
MR HUTLEY: I understand that, your Honour, and we say litigation – that principle would not be disbarred by litigation ‑ ‑ ‑
GUMMOW J: These notions of constructive trust were devised in other places where they do not have a Torrens system.
MR HUTLEY: Your Honour, at the moment I am trying to deal with whether there could be a ground upon which they could be – they, although a proper party, and let me even accept for the moment a necessary party – could be bound by the order even though they were not a party. We would say in circumstances where they have, in effect, controlled the litigation and run it, known at all material times what is taking place – and in effect as Mr Jackman frankly said, were achieving all they wanted in that litigation – an issue would arise as to whether the principles discussed by the Privy Council in the Nana Ofori Atta decision, which your Honour has familiarity with, I know, would be applicable.
That is a case which says that there can be an estoppel, a person can be estopped even though a proper and in fact necessary party by virtue of its conduct, and that appears in the speech at page 101 and following. It says:
Under the Rules of Court . . . to apply to be joined . . . but neither of them did so.
Such being the facts, there is, as between . . . a clear estoppel by res judicata . . .
The general rule of law undoubtedly is that no person is to be adversely affected by a judgment in an action to which he was not a party . . .
English law recognizes that the conduct of a person may be such that he is estopped from litigating the issue all over again. This conduct sometimes consists of active participation in the previous proceedings –
and then it goes on to discuss other aspects.
GUMMOW J: You are saying Mr Jackman’s client became privy?
MR HUTLEY: Estopped. He could have been. I would just like to say how I put it. My learned friend’s argument proceeds this way. If he is a necessary party, then as a matter of right he is entitled to have the judgment, the orders set aside. He says that that arises from the statement of principles, for example, in News Limited and the ARFL Case. We say there has never been the law that the mere failure to join a necessary party leads of necessity to the order being set aside. We accept that in the usual case it would because the object of the principle, as stated by Justice McHugh, is to afford natural justice. That is the object of the rule, to afford natural justice by a person who is immediately affected. There is a question which has not been fully worked out either in this Court ‑ ‑ ‑
GUMMOW J: There is a public interest in all of this ‑ ‑ ‑
MR HUTLEY: Of course, your Honour.
GUMMOW J: ‑ ‑ ‑ in the clarity of the registered title. There is a public interest in the maintenance of a register with a clear title situation.
MR HUTLEY: I accept that, your Honour. We say that that public interest has been achieved in this case this way. Here we have the Walker Corporation sitting back and, we say, in effect, running litigation which they knew was saying this and Mr Jackman saying, we have got all we wanted. The Court of Appeal then preserved the position, or was intending to preserve the position for there to be determined the priorities dispute which flowed out of what had taken place. I accept, your Honour, in the usual case, a case such as the ARFL Case, non‑joinder of a party would lead to the orders being set aside. But that cannot be an invariable position if principles such as are discussed in the Nana Ofori Case are right because there would have been a complete answer to that decision, namely, you are not bound by it because you can go as a matter of right and have the order set aside against you if somebody claims that you are bound by it.
That raises another question which has not been fully investigated in the cases and we say was not fully investigated in News Limited and ARFL. What does it mean by “directly affected”? If you are not bound by a judgment, which is a judgment in personam which you are not party to, when do you become directly infected by an order? Sometimes in the cases, such as in the ARFL and News Cases, obviously the parties to the player contact were directly affected by a declaration that they were illegal, that is, the relevant provisions were in breach of the Trade Practices Act.
GUMMOW J: They are directly affected because their unregistered mortgage now cannot be registered.
MR HUTLEY: But, your Honour, it can be registered. There was one injunction which affected that, that was the interlocutory injunction restraining them from registering that interest pending a further order of the court. That was, I think, order six. I accept that that directly affected it ‑ ‑ ‑
GUMMOW J: No, but if you hold on to your constructive trust ‑ ‑ ‑
MR HUTLEY: But, your Honour, if I hold on to my constructive trust and they have priority they will not – I am sorry, your Honour.
GUMMOW J: ‑ ‑ ‑ that will – it does not matter.
MR HUTLEY: I do apologise that I spoke over you. We say, if there has been a declaration of a constructive trust that will not affect their interest if they have priority. That is the position which has been preserved by the Court of Appeal for that battle to take place. So if they have priority – their interest – they will not be affected. Your Honour, what we say the aim of the Court of Appeal’s undertaking was, was to preserve the position, such that the state of the register would not be affected, either by our interest or their interest, pending the determination of the competing position of the two interests. That, we say, achieved the object of ensuring that they would be heard before their interests were directly affected, in a way that would…..the principle.
HAYNE J: Stated as shortly as you may, what is the argument that would deny Walker Corporation priority?
MR HUTLEY: We say that they were aware of all facts, all facts which gave rise to our entitlement to the relief that we obtained in the Court of Appeal, such that there is a priorities dispute. Now, that is the debate and that position is wholly preserved by the Court of Appeal and intentionally wholly preserved. It will be fought out in the case. Now, to return to your Honour, Justice Gummow’s question ‑ ‑ ‑
FRENCH CJ: What was the basis upon which their priority could be defeated?
MR HUTLEY: Notice of facts at the time they took the interest giving rise to our equity. That is the priority dispute which is taking place. In our respectful submission – I want to come to what Justice Basten said in a moment – but in our respectful submission Walker Corporation clearly sat back, took advantage of this position and, in effect, was achieving its ends. Being the funder of the litigation you can understand why they would want to do that. Then at the very heel of the hunt they applied to be joined. They then amend to seek to have the entirety of the orders set aside and this is important, your Honours. Until my learned friend, Mr Jackman, rose to his feet, at no point of time in any submissions to the Court of Appeal, in any submissions written to this Court, was it suggested by Mr Jackman, on behalf of Walker Corporation that they would lead any further evidence going to the existence of the relief which we obtained.
Now, had they raised that in the Court of Appeal and said, “One of the reasons we wish to be joined and have these orders set aside is that we want to advance further evidence”, immediately an issue would have arisen as to whether they would be estopped from doing that, under the Nana Ofori principle because of their control.
What we say is that principle demonstrates two things. One, the fact that one is a necessary party and is not joined does not ipso facto immediately lead to the setting aside of a judgment. It is a question of discretion. The discretion is informed by the principle, is somebody to be deprived of their interest without the opportunity to be heard? We say that the Court of Appeal has done everything to ensure that they do have the opportunity to be heard on the one matter that remains between us in substance, namely, is their equitable mortgage to have priority over our constructive trust interest? That will determine the course of registration. Thus, your Honour, it will preserve, as a matter of practicality in the facts of this case, the integrity of the register consistent with the aims of the Real Property Act.
That is how we put the point from the point of view – if, we say, the statement of principle in the ARFL Case, if it says that it is invariable that if you do not join the necessary party, the order must be set aside. If “invariable” is wrong, because otherwise the principles which I have referred to your Honour, which has been referred to with approval by at least one judge of this Court – and I will give your Honours a reference in a minute – cannot be inconsistent with that conclusion. What one really is dealing with is giving effect to the underlying principles stated by Justice McHugh in the Sutton Case. In usual cases we would say that what Mr Jackman said might well follow, but this case bears no relation to the usual case.
The case has been referred to in this Court by Mr Justice Kitto in Osborne v Smith (1960) 105 CLR 153 at 155. A similar principle, which is said to be cognate, has been referred to in The Administration of The Territory of Papua & New Guinea And Another v Daera Guba 130 CLR 353 at 403 and 456. I could also make reference to the principle having been applied in England on another occasion, The House of Spring Gardens v Waite (1991) 1 QB 241. Your Honour Justice Gummow, when on the Federal Court, referred to these principles and particularly their operation in the United States, in Trawl Industries of Australia Pty Ltd v Effem Foods Pty Ltd (1992) 36 FCR 406 at 417.
HAYNE J: Just before you part from this, what is the species of estoppel that you say is engaged?
MR HUTLEY: Should our learned friends wish to reagitate the existence of the constructive trust in the priorities dispute, we would submit that they by their conduct in, in effect, promoting this litigation and conducting it through funding it and, we suspect, through, in effect, managing it, there may well be a case that they are estopped from relitigating the constructive trust.
HAYNE J: So what species of estoppel is engaged?
MR HUTLEY: Estoppel by conduct, conduct ‑ ‑ ‑
HAYNE J: It is not a res judicata, you say, it is estoppel by conduct that is that somehow Walker Corporation has created or contributed to your client making an assumption?
MR HUTLEY: Contributed to the conduct of the litigation on the basis that all necessary parties were present, or they were content to run the litigation, not being present. That would be the argument. I do not say your Honour has to determine it.
HAYNE J: I understand that, but I also do need to understand, I think, what species of estoppel is said to be engaged or could be said to be engaged and that is, you say, creation or contribution to the continuation of an assumption on your client’s part that the suit was sufficiently constituted as it was.
MR HUTLEY: That would be one way of characterising it, your Honour.
HAYNE J: In circumstances where your client knew of the interest of Walker Corporation, absent any conduct on the part of Walker Corporation in funding, promoting, managing, whatever other expression is used, the litigation.
MR HUTLEY: Your Honour, I cannot refer to other evidence that may be relevant because it is not before your Honours.
HAYNE J: I understand.
MR HUTLEY: All I am putting – and your Honour can be assured there is other evidence in relation to that – all I am putting this case forward is because my learned friend on his feet said he wished to lead evidence. One of the reasons he put forward why it should go back for a new trial was that he wished potentially to lead further evidence on the substantive matter. Now, whether his client will be entitled to do that could be a matter of investigation, on the grounds that I indicate. It also demonstrates, in my respectful submission, that if that principle be correct, then there cannot be an absolute principle that failure to join a necessary party means by that fact alone, one will set aside an order affecting them.
HAYNE J: Must you not, in order to maintain the relief which you obtained in the Court of Appeal, demonstrate positively that Walker Corporation cannot now be heard to say that the suit was insufficiently constituted?
MR HUTLEY: With respect, no ‑ ‑ ‑
HAYNE J: For on the face of it, Walker Corporation have an interest in the land which is affected by the outcome. You say we can hold the current relief regardless.
MR HUTLEY: Yes, your Honour. Could I put it this way, your Honour. If the Walker Corporation had come to the Court of Appeal and said we wish to relitigate the constructive trust ab initio because we say not only are we a necessary party, but there was material in evidence which was not put before the court which would bear upon that determination. That would have been an issue which could have then joined issue in the Court of Appeal as to how this case was being run, who was running it and whether they were bound by the order. That was not a case that was ever put. The first time that there has been a suggestion is that the Walker Corporation might wish to relitigate the trust aspect in point of fact was by my learned friend on his feet in this Court. There is no evidence before the Court as to what that would be.
If that was the case they were putting, that could have been put before the Court of Appeal. We could have then had an argument as to whether they were bound. The oddity of my learned friend’s position is, my learned friend would seek to deprive us of that potential response by altering his position in this Court. What we say has happened is that the Court of Appeal has ensured that the respective positions of the parties are protected on the issues which were tendered to them for consideration, namely, it has ensured – and we say practically ensured – that Walker Corporation’s position in respect of issues of priorities are not to be prejudiced pending the determination of that dispute. We say that is all that the Walker Corporation could reasonably ask for, and they obtained that, and to seek now to, in effect, have the entire proceedings set aside and hearing ab initio – which I understand that was the ultimate position of my learned friend – is a departure from the way this case was conducted ‑ ‑ ‑
FRENCH CJ: It sounds as though you are almost running some kind of Anshun estoppel for non‑parties. The proposition is shading into abuse of process perhaps.
MR HUTLEY: Your Honour, to be told on our feet, on one’s feet at the first time when Mr Jackman told the Court that until their order, they had achieved everything they wanted. The Court of Appeal obviously was proceeding on the assumption that that was the case. They were also proceeding on the assumption that there was no evidence which was going to go to the existence of our entitlement and that all that was between the parties was a priority dispute. That is what Mr Jackman actually referred to in those pages I took you to.
The Court of Appeal structured the position to preserve that position, and they have. If, by some slip, there is perhaps a hole in that, some theoretical hole in that matrix of orders to ensure that, that would have been an oversight by the Court of Appeal and we accept should be corrected. But the place to fight these disputes is in the proceedings contemplated by the Court of Appeal, namely, a priority dispute which is actually on foot, as your Honours know as at today. Otherwise, one has the situation that we could be deprived of a legitimate defence to a reagitation of the entire suit.
Your Honours, just in respect of the question of abuse of process, a similar characterisation was given to this sort of conduct in Ann Street by Justice Finkelstein in an unreported decision of this year, 9 April. It is called Ann Street Mezzanine Pty Ltd (in liq) v Beck, and the media neutral citation is [2009] FCA 333.
Could I turn now to the question of power, that is, the power discussed by Justice Basten in his Honour’s judgment? That is at joint appeal book 2, 691, and particularly paragraph 3. Now, I handed up and explained to your Honours at the commencement of my address about the Court’s computerised system. Now, just one thing I should refer to, reference was made by my learned friend and in debate with the Court to the document at joint appeal book 2, 628. That is the amended judgment of order which has the handwritten entry of 12 June 2009.
Your Honours will see from 629 that that document was brought into existence no earlier than, or probably on, 10 September 2009, so it seems to have been brought into existence after Justice Basten’s judgment, and is, in our respectful submission, irrelevant to anything your Honours – I cannot explain the source of that 12 June, it seems inconsistent with the computer registry – I cannot take it any further, but it certainly was not material which was before his Honour, or could have been before his Honour.
HAYNE J: What is the paragraph of Justice Basten that you are referring to? Where do I find that?
MR HUTLEY: Paragraph 3 – I am sorry, your Honour, it starts at 690 at the bottom, over to 4, they are the two relevant paragraphs.
HAYNE J: Thank you.
MR HUTLEY: Now, we submit that his Honour was correct, that there was no power under Part 36 rule 36.16(2), (3) or (3A) of the Uniform Civil Procedure Rules. The only contrary submission made by my learned friend was to sub‑rule (2)(b), and the submission was made that the reference there to “party” included a reference to non‑party. In our respectful submission, that is just untenable. Therefore, the only question as to whether the Court of Appeal could have power to do that which was sought by our learned friends, having regard to the fact that they only sought to set aside the rules, the orders, on 22 June 2009, therefore more than 14 days after their entry, would be sub‑rule (4), that is:
(4) Nothing in this rule affects any other power of the court to set aside or vary a judgment or order.
As we understand it, my learned friends assert that the court had the power by reason of his client being a necessary party. He cites no authority for the proposition that that is an exception to this rule.
The statement of principle in this Court, stretching back to Bailey v Marinoff 125 CLR 529 in the passage of Sir Garfield Barwick at page 530 and the other members of the Court, particularly Justice Menzies at pages 531 to 532 and Justice Walsh at pages 534 to 535, was to the effect that there were no inherent powers of an appellate court because the appellate court is a creature of statute. That view was agreed to by this Court in Gamser v the Nominal Defendant 136 CLR 145 at page 154 by Justice Aickin, whose judgment was agreed with by the majority of the Court. A similar statement was made by the Court, although with respect to a statutory court, in DJL v Central Authority 201 CLR 226 at paragraph 38. On that basis alone, the position of our learned friends was untenable. They were left, as appropriately left, either arguing that they were not bound by the relevant order or contesting priorities in the suit which was provided for.
Lastly, can I address something shortly about Giumelli v Giumelli. Again, nothing has been advanced or suggested in evidence or otherwise by anyone at any time in this case that there was any potential for the satisfaction of any equity we had other than by the granting of a constructive trust.
HEYDON J: What about equitable compensation?
MR HUTLEY: The difficulty is the people against whom we would get compensation were either mortgaged to the hilt to Walker Corporation and therefore there was no evidence that they were in a position to meet equitable compensation and no one suggested – the only compensation would be compensation from JACS or Poplar and Poplar never suggested it was in a position to give such equitable compensation. So the Giumelli point is, in effect, a theory having no basis in the facts of this case because of what I have referred to earlier, it is a binary outcome. That is why that binary outcome is, and is appropriately, dealt with in a priorities dispute as it currently is. Those are our submissions, your Honour.
FRENCH CJ: Thank you, Mr Hutley. Yes, Mr Ireland.
MR IRELAND: If the Court pleases, what I propose to do now relatively shortly is in the first place identify the relevant written submissions, which seem to run to many documents; secondly, respond to the submissions made by Mr Hutley under the first notice of contention as it relates to the repudiation issue; thirdly, reply briefly to Mr Hutley’s construction argument that was agitated yesterday as to the memorandum of understanding; and finally and quickly, to restate our basis of opposition to leave being granted to rely on the draft second notice of contention in its application to the fiduciary duty case and to the unconscionable conduct case.
Your Honours, we noticed yesterday that Justice Heydon had been confused by the amendment of our submissions in‑chief. There was an original submission filed on 25 January. That was replaced by an amended submission of 27 January. It distorts the numbering but there was no substantive change. What happens in that amendment is that the appeal book references in some cases were found in the footnotes rather than in the body of the submissions. We would recommend to your Honours that the amended version of our submissions in‑chief on our appeal of 27 January be those to which the Court will have regard.
HEYDON J: Except that the annexures to your first submissions are valuable. The chronology is the only ‑ ‑ ‑
MR IRELAND: Yes, the chronology we did not, I think, refile. The chronology is unchanged by the amendment. Your Honours, the respondents submissions were then filed on 1 February. That is document No 2 in our appeal and our reply submissions were filed on 8 February.
Turning to the first contention – that is to say, the debate about repudiation – the respondent’s written submissions were filed on 1 February. Our reply was on 8 February and then your Honours might recall there was a third document which emerged on 10 February, the first day of the hearing, which I do not think was ever filed, but that is called respondent’s reply on the repudiation contest.
FRENCH CJ: It is headed, I think, “Respondent’s Written Submissions: Notice of Contention Reply Submissions”.
MR IRELAND: Yes. I do not think that ever got filed but it was dated 10 February. So that is now six pieces of paper in the JACS appeal. I am ignoring, for obvious reasons, anything filed in the Walker appeal with which we are not an active participant. Finally, on the second notice of contention, which flowed out of my friend’s submissions on 11 February, on the last occasion the matter was being dealt with by the Court, there are two documents. One is the respondent’s submissions in support of the second notice of contention, which is 26 February, and finally our answer or submission opposing the draft second notice of contention, which is 15 March. That is the kit of eight written documents, I think, which your Honours will need to have regard to.
Could I respond now to the submissions under the first notice of contention, which engages the repudiation issue with which my learned friend has dealt late yesterday and again this morning. Your Honours, we would say the trial judge’s conclusions that the Club had repudiated the MOU by 12 April 2006, that was a conclusion based upon the aggregation of a number of events and circumstances in late 2005 and early 2006.
By contrast, the Court of Appeal undertook no assessment of the facts. It contented itself with the observation that the trial judge had adopted the appellants’ submissions. We would respectfully say that the greatest sin was that of the Court of Appeal, which made no realistic attempt to examine the evidence at all.
The respondent, by its notice of contention, now asks this Court to undertake a fresh examination of the evidence of repudiation and to overturn the trial judge’s finding in favour of the appellant. We respectfully submit that this Court should not respond positively to that invitation. At trial, the respondent offered no assistance to the trial judge. We have set out the extent of the respondent’s submissions at trial in paragraph 4 of our written submissions of 8 February 2010. We submit they were entirely inadequate.
On appeal, the respondent did not persuade the Court of Appeal to reverse the trial judge’s conclusion of repudiation on the part of the Club, and in this Court, we venture to suggest, when invited to present the best points orally, the argument presented and the examples given were unpersuasive.
The memorandum of understanding contained in clause 3.3 an express embargo upon the Club prejudicing the progress of the development by undertaking discussions with third parties “concerning the purchase or use” of the White City land or any part of it. This was an important provision, no doubt designed to allow JACS to undertake the sensitive task of dealing with consent authorities and financiers unobstructed by alternative independent proposals by the Club to other parties. That embargo in clause 3.3 of the memorandum of understanding was expressed to continue for about 17 months, from the date of the memorandum of understanding on 28 February 2005 until 31 July 2006, and it appears on page 1415 of volume 4 of the appeal books.
One of the prominent complaints made by JACS at the time of its termination of the MOU in April 2006 was that within that period of the embargo, the Club had been talking to other interested parties. Mr Jordan gave evidence of conversations with Mr Slack when he was then president of the Club on 23 October. That evidence is at AB 1 – that is the first volume of the appeal book - at page 225, and Mr Slack’s evidence of discussions was corroborated by documents tendered in the proceedings, including a strictly confidential report compiled by Mr Allardice, a director of the Club, and provided on 26 October 2005 to Mr Kolev, who had then been elected to replace Mr Slack as president of the Club.
Could I just show your Honours that document? It is at volume 6, page 2117. Your Honours see it is headed “Without prejudice”. “This report contains commercially sensitive material”. “26/10/2005”, as I say, just following Mr Kolev replacing Mr Slack as president, and your Honours see at line 10 on page 2117:
A report compiled by James Allardice at the request of Oggie Kolev -
A series of questions seem to have been asked by Mr Kolev and responded to by Mr Allardice whom, it will be remembered, was on the joint development committee with JACS. If one passes to page 2118, on the opposite facing page at about line 45, question 12 was posed, I think, by Mr Kolev:
What is WCTC’s plan to purchase the site should JACs fail to do so?
A12.This is a critical matter and will need careful monitoring so that the WCTC can activate plan B quickly and efficiently if necessary. The DC has spoken to a number of financiers and funding underwriters who have all assured the DC that now that the cost of the land has been quantified and the development plans for the site are well on their way the funds will be available to be accessed. No definitive plan B would need to be put into place until WCTC were convinced that JACs would not deliver on their promises. Personally I believe the first warning flag will fall if development approval is not in place by 30/06/2006.
Your Honours, the Club’s discussions with third parties are corroborated by that evidence. Of course, there was a denial, your Honours will recall, which was shown to you this morning by Mr Kolev when responding to Mr Alexander. That denial is at volume 6, page 2188.
It will be recalled that a letter had been sent, reproduced at page 2128 claiming breaches of the MOU by discussions with third parties and the document at 2187 and 2188 is a letter from Mr Kolev in response. Relevantly, he says at the top of 2188:
In relation to the third alleged occasion, we deny having any meetings or negotiations between WCTC and any parties after the signing of the MOU. The only contacts WCTC made were passed on to JACs –
So it is true there was a denial by Mr Kolev of the talking with financiers, but that was rather betrayed by the strictly confidential memorandum that I have just shown your Honours. We would suggest that the Club’s discussions with third parties to acquire the land for itself were rightly the subject of complaint.
In this Court the respondent has articulated no argument which would satisfy the Court that the trial judge’s view of the significance of the Club’s actions in this respect was incorrect. When coupled with all of the other matters relied upon one is led firmly, we suggest, to a conclusion of repudiation of the MOU on the part of the Club by 12 April. Consequently Mr Justice Young’s finding at paragraph 82 of his judgment that JACS validly terminated the MOU on that date is well supported.
What the arguments of the respondent in this Court do is to seek to break down the conduct of the Club into particular elements so as to deflect attention from the full effect of the whole of the repudiatory conduct of the respondent, which had occurred before 12 April 2006. In attempting to dismantle the total conduct on the part of the respondent, and justify particular matters as inconsequential or unimportant, we suggest the respondent invites this Court to fall into error of principle.
The correct test to assess an issue of repudiation is that identified by this Court in DTR Nominees and Koompahtoo Land Council Case to which my learned friend referred this morning. That legal test was correctly identified by the trial judge at paragraph 76 of his judgment and it is submitted that his Honour’s findings at paragraph 78, reached by the adoption of the appellant’s arguments on the facts and in the absence of any competing factual submissions on the part of the respondent, were sound.
Those findings, as we have suggested, were underpinned by evidence to which references were given to the court at trial and the Court ought not be persuaded to a conclusion that his Honour fell into error. The appellants rely upon all of the matters referred to by Justice Young at paragraph 77 of his judgment and all of the matters in the appellant’s written submissions in reply, which are dated 8 February this year, as I have indicated, at paragraph 16 to 21.
An example which we suggest shows beyond doubt that the Club had repudiated the MOU before 12 April and which was relied on by the primary judge at paragraph 77(l), which appears at appeal book 2, page 545, and in relation to which Mr Simpson was cross‑examined at transcript 78 to 80, reproduced at appeal book 1, 346 to 348, was Mr Simpson’s campaign document for election to presidency dated 11 April 2006, which is the day before the termination was served.
Just to remind your Honours, what had occurred was this. Mr Oggie Kolev had come to power as president of the Club on 23 October 2005. There had then been a period of his presidency which we have submitted created the situation which strained the relationship between the Club and JACS to breaking point and in various aspects, which I will not go over in detail again, he had taken a strong anti‑Alexander view. It is true there were others on the board who were less antagonistic. The campaign document, which is reproduced at volume 7, it is called the president’s “E report ‑ ‑ ‑
GUMMOW J: Page?
MR IRELAND: Page 2570. It is entitled, “E report sanctioned by the majority of the WCTC Board”. This is on the eve of an extraordinary general meeting which had been called for the Club to redetermine who would be president, so even internally there was a degree of crisis which had been reached within the Club. It is uncontestable. This was prepared by Mr Simpson, he was a co‑author of it, and it was put forward by the majority of the board as their election platform. What they said, on page 2573, about the Club’s then relationship with JACS is reproduced at line 20 under the heading “CONCLUSION”. It reads as follows:
The decision to call this EGM has not been taken lightly and has been done only after we have concluded that relationships between your current President and JAC’s have totally broken down. Because of this, the whole redevelopment is now at risk and must be restored as a matter of urgency. The club is at this moment, subject to claims of breach of the MOU and open to potential future litigation. It must be remembered that JAC’s have a contractual right to exercise the land purchase option and have indicated they fully intend to do so. Unless we change our current path, the existing member rights (particularly those for Foundation members), may well be at risk.
Your Honours, we suggest that that document, authorised by the majority of the then board and on the eve of an election which saw Mr Simpson the following day replace Mr Kolev as president, is a reasonable statement communicated to all of its members of the Club’s sensitivity to the criticality of the situation.
During Mr Simpson’s cross‑examination he confirmed, in relation to that document, first, that he was a co‑author of it, and that is at AB volume 1, page 347, secondly, that the statements contained in the e‑report were also his belief at the time. That is appeal book 1, 347 again. Mr Simpson also confirmed in his evidence that as at 11 April he was seriously worried that the Club, through the volatility of Mr Kolev, might have been put in the exposed position on its ongoing relationship with JACS. The judge, we submit, in summary, rightly acted on the material that was before him.
As to the position after 12 April, the appellants rely upon all of the matters referred to by the primary judge at paragraph 79 and all of the matters in the appellants written submissions in reply from the first contention, those dated 8 February 2010 at paragraphs 23 to 27. We would suggest that the following examples show strongly that the Club had repudiated the MOU after 12 April. These were matters relied upon by the primary judge at paragraph 79(a) and (c) of his judgment, and in relation to which Mr Simpson was cross‑examined.
First there was the negotiation with the third parties to purchase the Maccabi land. This is a different situation from the financing discussions which had taken place late in November the previous year. There was negotiation, as I say, to purchase the Maccabi land. The evidence of the negotiations by the Club to purchase the Maccabi land is at transcript 90 – I will give your Honours the appeal book references – volume 1, 358 to 361; transcript 94, volume 1, 362 to 365 and then in documentary form the relevant documents are at appeal book, volume 7, 2692, volume 7, 2697 to 2700; appeal book volume 7, 2719 to 2726; and appeal book volume 7, 2779 to 2789.
In relation to the secret negotiations by the Club to purchase the Maccabi land we invite your Honours’ attention to the email chain at appeal book 7, 2723, especially the email from Mr Rivera to Mr Simpson with copies to certain board members, where this is said:
My view is to let them ‑
That is the other three board members of the Club -
in on the secret, but because of the sensitivity of the issue to request their cooperation and their confidentiality and remain silent on the issue until we are in a situation where we can advise the members. If they speak up the project could be put in jeopardy. JA could view it as a further breach of the “MOU” further jeopardizing the benefits we could obtain for the members.
By November 2006, almost total war has broken out between the Club and the Alexander interests. Your Honours might remember that on 9 November 2006 Mr Simpson wrote to the council, and this is reproduced at volume 7, 2852, in which he stated:
the directors of White City Tennis Club have come to the conclusion that we are no longer prepared to work with John Alexander’s Clubs P/L and are now seeking to exclude them from the redevelopment of our club.
Another e‑report, reproduced at volume 8, 3054 dated February 2007, states:
On the 09th November we wrote to Woollahra Council, Sydney Grammar and Maccabi TC advising them that we were no longer prepared to work with JAC’s on the basis that of having no confidence in their ability to deliver the redevelopment as originally planned. We further advised Council that the Club had a viable alternate plan that was more in keeping with planning guidelines for the site.
We suggest, your Honours, that by November 2006 each of the parties, both JACS and the Club, had taken up an independent position. As the trial judge found at paragraph 74 of his judgment, JACS in early June made it clear that it intended to proceed to exercise the option with finance provided by the third party.
In that year, before it occurred – further, in November 2006 in his letter to Woollahra Council, Mr Simpson proclaimed that the Club was no longer prepared to work with JACS. JACS immediate response was its letter at AB 2858 written on 10 November which made it plain that JACS was horrified at the damaging effect of the statements made by the board of the Club, both to the Council and to the members and one would infer that at this point at the very latest an election to terminate the MOU is evident.
The Grammar School and Maccabi, the other parties to the White City agreement, were also informed of the alleged breaches and by this date we suggest that as between JACS and the Club both sides were making independent commercial plans. Your Honours, we would draw attention to the fact that on the ‑ ‑ ‑
GUMMOW J: What date is that, Mr Ireland?
MR IRELAND: That is 10 November 2006. The Club’s solicitors threatened injunctive proceedings against JACS on 9 November 2006. I think that was a matter which Justice Kiefel might have referred to yesterday. The reference is appeal book 7, page 2847. Her Honour was asking my learned friend, Mr Hutley, whether was a possibility of intercepting the exercise of the option by some injunctive proceeding. That was contemplated as early as November 2006 as you will see at page 2847 but that was an empty threat and those proceedings were never brought.
Just perhaps to shorten things, while dealing with this aspect of the matter, we would say that the facts concerning events in November 2006 are also highly destructive of the respondent’s submission in relation to its case on the existence of a fiduciary duty as at June 2007 when the option was exercised. It has not been explained to this Court how any fiduciary obligation on the part of JACS could survive the complete commercial breakdown between the two parties evidenced by the events of November 2006, to which reference has just been made.
Then, of course, as Justice Heydon observed on the first day of the hearing of this appeal, there was the filing of the defence and my learned friend mentioned again this morning, there was a filing of JACS’ defence on 15 November 2007 which pleaded that it was no longer bound by the terms of the MOU. We would suggest that if JACS terminated the MOU after the exercise of the option that does not negate the effect of the termination upon any case based on fiduciary duty or unconscionable conduct which is said to arise.
Even taking the approach that the termination occurred before the remedial constructive trust was awarded by the Court of Appeal there was no equitable obligation existing at that time to form the basis for a remedial constructive trust. We just give passing reference to Justice Deane in Muschinski v Dodds 160 CLR 583 which seems to have had a fair bit of attention in this case. The passage we would respectfully point out is at 614 to 615. If I may be permitted to read it, his Honour says:
Where an equity court would retrospectively impose a constructive trust by way of equitable remedy, its availability as such a remedy provides the basis for, and governs the content of, its existence inter partes independently of any formal order declaring or enforcing it. In this more limited sense, the constructive trust is also properly seen as both “remedy” and “institution”.
Then his Honour goes on to make it clear that the date upon which a constructive trust, once declared, is said to operate is a matter of discretion for the court that provides that remedy. In this case, there can be no contest that the Court of Appeal’s order was unambiguous and the trust declared arose from the decree itself. The Court of Appeal did not fix or even contemplate any other date from which the remedial constructive trust could have arisen. Your Honours, that is what I wish to say about the first notice of contention at which we are, I think, fully at issue.
Can I say just something short about the appellant’s construction argument. As we understood the matter as developed yesterday by our learned friend, Mr Hutley, he says that the construction of clause 3.7 of the MOU, which speaks of the exercise of an option on behalf of WCH, that is White City Holdings, gathers in the definition of “third party option” or “option from the third party”, as that phrase is defined in clause 1.8 of the same document. Nowhere, as we listened intently to our learned friend’s arguments, does he grapple, however, with the problem of the interdependence of the scheme of clause 3.7 between the acquisition of the freehold by WCH on the one hand, and it granting a lengthy commercial lease to the Alexander interests on the other. His arguments have to, it seems, ignore that interdependence. In other words, he rejects the conditionality that we propose as to the proper construction of 3.7.1 that WCH only gains the freehold in that scheme if it grants the leasehold. That is the first aspect of the construction arguments which we wish to pay attention.
The next aspect of the argument which we would suggest, with respect, is important is this. These parties having signed their memorandum of understanding on 28 February 2005, then went on within two months to sign the first version of the White City Agreement. Your Honour Justice Gummow referred to it yesterday, that is the first version of 15 April 2005, and your Honour Justice Gummow in that context referred to a moving kaleidoscope. That, with the greatest of respect, was a reasonable comment because the scheme of the first White City agreement, of course, was different in substance from the scheme of the other two agreements. The scheme of the first White City agreement, which is reproduced at 1687, was that the Club itself was to lease the option land for two years from settlement. That is clause 21.
So, the Club was giving up, as is conceded, at the instance of the owning parties – that is Maccabi and the Grammar School – its freehold, but in that version of the agreement it was securing a two‑year lease of the land. It is no coincidence that the first White City agreement was 15 April 2005 because that was the moment when tenders were going into Tennis NSW. This was a working document which would accommodate all of the parties who would have an interest in, first, the acquisition of the land by the Grammar School and Maccabi from Tennis NSW and, secondly, the future development of the land in accordance with the proposals then on foot for its, effectively, partition into three areas, the Maccabi area, the option land and the Grammar School land.
So that is why 15 April 2005 becomes an important document. It is also a matter of some significance that the Club itself is a party, so this is not – although the memorandum of understanding envisaged that JACS would go and negotiate these options, the Club is a participating party in each of these three White City agreements where the terms of the options are imposed. Of course, it is noteworthy that no qualification is made in any of those agreements as to the beneficial basis upon which JACS had exercised the clause 8(a) option.
We point out that the scheme of the first White City agreement of 15 April under which the Club was to get tenure for a couple of years after settlement then changes. It changes in the third White City agreement, which is reproduced at appeal book 5, 1951. Now, it is no longer the Club that leases the land. The Tennis Club no longer has – I am sorry, I put this the wrong way around. Under the first White City agreement it is JACS that leases the land for two years – I said it was the Club – it is JACS that leases the land for two years, but the change occurs in the third document on 29 June where now we see the Club gaining its lease.
So what that underscores is that at the time of the first giving up of all of its rights on 15 April 2005, in the first iteration, as my friend called it, of the White City agreement, it is JACS that gains the benefit, and the unequivocal surrender of rights is in light of not just the Club’s knowledge of those arrangements but its contractual participation in them.
If I could move now from the construction of the agreement to my friend’s fiduciary duty case, which your Honours will appreciate is subject to a contest on our side as to whether leave should be given, but the matter has been effectively fully argued, so may I just present a few remarks in reply? Most of what we want to say is set out in our latest written submission which opposes the second contention.
As we understood my friend, who it is fair to say was pressed closely by the Court yesterday to articulate the basis of the constructive trust or the fiduciary duty, and what he said in the end is it is textual, that although these matters such as the fundamental entitlements and the fundamental intentions of the parties are referred to in his latest submissions, all of that has to be drawn from the text of the memorandum of understanding and not otherwise.
As we would submit the position, for the same reasons that the contractual case fails, one cannot get those intentions from the terms of the document. Once my friend capitulates on the proposition that he must find it within the terms of the document, the words, we would respectfully suggest, are simply not there. So that driven to that point he then puts an argument which, in our respectful submission, is more akin to an argument based upon implication of terms, but of course, he disavows that, as he must, because that was not a case run below.
So here we have a search for construction of an intention fundamental to the parties, stopping short of the implication of a term because he cannot go in that direction, and which he says makes it unconscionable ultimately for the options contained in the White City agreement, the third version being the relevant one, to be exercised untrammelled by any consideration.
In our respectful submission, your Honour, for the reasons in our latest written contention, construction of this document cannot carry our learned friend’s arguments to that extreme. To the extent that the Court of Appeal thought they could, it was in error. Those are our respectful submissions.
FRENCH CJ: Thank you, Mr Ireland. Yes, Ms Taylor.
MS TAYLOR: Your Honours, I intend to address in the following order; Mr Hutley’s knowledge point, the estoppel point, the priorities and further evidence point, Justice Basten’s 36.16 point and, finally, the Giumelli point. Your Honours, the central tenet of Mr Hutley’s argument seems to be that Walker Corporation knew at all material times of these proceedings but, in our submission, for the reasons given by Mr Jackman in‑chief, this is not an adequate reason to deny Walker Corporation the relief sought.
It does not matter how the respondent puts its argument, whether on the basis of some discretion under the rules, as is the basis put in the written submissions, an election as the basis put in the notice of contention or now on the basis of some estoppel. In Australian law, according to News Limited, Grovenor, Justice McHugh’s decision in Sutton, mere knowledge of the proceedings is not enough to disentitle a person directly affected by orders made in proceedings to which that person is not a party from applying to have those orders set aside.
Now, the respondent tries to shift blame for the outcome of these proceedings to Walker Corporation for not applying to be joined, but your Honours must remember that whilst Walker Corporation knew at all material times of the proceedings, so too did the respondent know of Walker Corporation’s interest. If any party is open to criticism in these proceedings, it is not Walker Corporation which was not a party to the proceedings below. It is the respondent which sought declaratory relief in the Court of Appeal and before Justice Young, including in the nature of the extraordinary propriety remedy of a constructive trust and a legal transfer of the land knowing that that relief would directly affect the interests of a third party, namely, Walker Corporation, with a claim to have or, in actual fact, a security interest in the same land. It is the respondent which failed apparently to draw Justice Young’s attention to Walker Corporation’s interest and also to draw it to the attention of the Court of Appeal. It is the respondent, not Walker Corporation, which is the author of the position in which it now finds itself.
The only other thing I wish to say about the knowledge point, your Honours, is that Mr Hutley has suggested at times that Walker Corporation was controlling these proceedings. The evidence does not go that far, and if that were relevant – which we say it is not - your Honours would not draw that conclusion from the evidence which is before this Court. That is all I wish to say about knowledge.
Your Honours, Mr Hutley has raised for the first time today an estoppel point. It has been put as an estoppel on the basis of the principle expressed by your Honour Justice Gummow in Trawl v Effem Foods, which I think is a ‑ ‑ ‑
GUMMOW J: I did not invent anything, I do not think.
MS TAYLOR: No, your Honour did not. I think that the estoppel that was discussed there was some kind of Anshun or res judicata estoppel. Mr Hutley accepted your Honour Justice Hayne’s proposition that this was in fact some estoppel by conduct. Your Honours, the estoppel by conduct, I submit, would require some kind of reliance with detriment, consistently with the principles discussed by this Court in Verwayen and given that the respondent knew at all material times that Walker Corporation had an interest in the land or claimed to have an interest in the land, that type of estoppel is not made out.
As for the principles discussed in Nana Ofori and House of Spring Gardens v Waite, we say that those decisions do not change the well‑settled principle expressed by this Court unanimously in Grovenor and adopted in News Limited, that the person directly affected by orders made in proceedings to which it is not a party, can apply, as a right, to have those orders set aside.
In respect, in particular, of the Nana Ofori Case, I note that it is a 1958 Privy Council decision, Mr Hutley cited a number of decisions which apparently have applied that case in this Court. One of them was the Osborne v Smith decision, 105 CLR 153, but in that decision the High Court expressed it to be a principle of probate practice developed from ecclesiastical jurisdiction and we say that in light of the old nature of the authority, based as it is on another decision in which the Court ultimately held that the non‑party was not bound by the orders of the Court, it should be confined to that narrow jurisdiction.
Your Honours, no application has been made to depart from the unanimous decision of Grovenor and it is not plainly wrong. In our submission, it applies in this case. Mr Hutley also said that Mr Jackman raised for the first time in oral submissions in‑chief that we might be entitled to relitigate this matter in the Court of Appeal. This was, of course, the very basis for Justices Macfarlan and Justice Giles’ decision in the Court of Appeal. They said, notwithstanding the proprietary nature of the remedy their Honours were granting, that it was solely a resolution of issues between the respondent and JACS and Poplar. Mr Jackman’s submissions obviously were in response to paragraph 39 of that decision. It is plain that not having been a party and having our application for joinder refused we are not bound by the decisions in that court.
There seems now to be some suggestion that we might be bound by way of the doctrine of privies. That test was discussed by your Honour Justice Gummow in the Trawl Case and your Honour is correct to say that you did not invent any new principles applying this Court’s decision in Ramsay v Pigram 118 CLR 271. Your Honour held at 415 that the relevant question was whether the plaintiff was claiming under or in virtue of any legal rights of the other applicants in the proceedings and whether it derived any relevant interest through those applicants or claimed to represent them or their interests. We say in this case we were not claiming through JACS and Poplar. There are quite different questions that arise from the nature of our security interests from those which were being litigated in these proceedings and plainly we were not a privy to the issues that were in dispute in this case and to the respondents, now the appellants, that were fighting them.
Mr Hutley’s final point on this estoppel point is that if your Honours set aside these orders, it will be deprived of some real defence, namely, one expects, a res judicata issue estoppel privy kind of an argument. Your Honours, it is only deprived of a real defence if one accepts that Walker Corporation is not entitled to have the orders set aside. These were orders that were made in our absence and that we say should never have been made and plainly the defence does not arise if the orders are set aside.
Mr Hutley then addressed a point about not having been directly affected. We say, obviously, that this overlooks the nature of the proprietary remedies in this case. In particular, your Honours, even if my client, Walker Corporation, is successful in a priorities dispute, order 4 of the Court of Appeal still exists to oblige Poplar to deliver a legal transfer of the land to the respondent. We say that, whether or not we are entitled to relitigate the existence of the constructive trust, the fact of this order for a legal transfer plainly directly affects our rights and interests.
Can I just say one thing which is partly related to that. Your Honour, Justice Gummow, asked Mr Jackman as to whether there was a Judicature Act provision that required final determination of all relevant issues in dispute in the one set of proceedings. May I refer your Honours to section 63 of the Supreme Court Act 1970 (NSW). I have copies if they assist, but that provision says that:
The Court shall grant, either absolutely or on terms, all such remedies as any party may appear to be entitled to in respect of any legal or equitable claim brought forward in the proceedings so that, as far as possible, all matters in controversy between the parties may be completely and finally determined, and all multiplicity of legal proceedings concerning any of those matters avoided.
We say that all of these matters should be determined in the one set of proceedings. Mr Hutley’s final point on this is related to further evidence and the fact that Walker Corporation has not pointed to any further evidence that it would have brought, had it been involved in the proceedings. Plainly if Walker Corporation were joined as a party the issues would have been different. Walker Corporation would have brought evidence supporting its own interest and its priority interest and the proceedings might have played out quite differently.
Your Honours, we do not need to go any further than that, if it is required at all, to show your Honours that the proceedings would have involved quite different evidence and quite different issues. We do say, of course, that we would have raised our interest as a reason not to grant a constructive trust consistently with Giumelli v Giumelli.
Can I turn to the power point, which is the section 36.16 point. Mr Hutley has procured – although we had never seen it before yesterday morning – a computerised record of the court’s record. I just wish to say a few things about that record. The first is to note the heading that expressly says on every page that:
THIS RECORD OF PROCESSING IS ISSUED FOR INFORMATION ONLY. IT SHOULD NOT BE RELIED UPON AS THE OFFICIAL RECORD OF THE COURT FILE.
The second thing is that, although there is a list of dates on every page down the left‑hand column, it does not expressly say that that is the date of entry of those particular entries. I would not make this point except, your Honours, that in several instances the dates are out of order and so one cannot take from the face of this document that the date in the left‑hand corner is necessarily the date on which it was entered into the computer.
So, by way of example I refer your Honours to page 3, about halfway down the page. The entries are 7 April, 8 April, 6 April, which is the injunction hearing before Justice Tobias. Relevantly, for our present question and for the purpose to which Justice Basten put this document, if your Honours turn to page 5 on the third‑last entry there is an entry of 10 June 2009, which refers to the signing and sealing of orders of 10 June 2009. There were, indeed, orders made on that date, but there is a notable absence of any record of the signing and sealing of 12 June 2009 orders which, of course, are the relevant ones that we seek to rely upon in this case.
The point, your Honours, is that Justice Basten having procured this document for himself in his chambers should have put it to Walker Corporation and we could have made inquiries of the registry and have found out the particular date that these particular things happened. We could have made submissions about the relevant date of entry of orders under rule 36.11 of the Uniform Civil Procedure Rules but the mere fact of this record of proceedings is not something that your Honours would place any particular weight on. If your Honours are in any doubt about that, I refer you to section 14 of the Civil Procedure Act and again – perhaps if I hand up a copy of that provision – that allows the Court to:
dispense with any requirement of rules of court if satisfied that it is appropriate to do so in the circumstances of the case.
If this had been put to us, we would have sought an order under that provision.
FRENCH CJ: Do you see that as a source of power?
MS TAYLOR: Yes, your Honour.
FRENCH CJ: How does dispensing with a rule become a source of power?
MS TAYLOR: It is a power to make orders under rule 36.16 to set aside the judgment, having exercised the power under section 14 to dispense with the particular requirements of rule 36.16. Your Honours, I do not need to go that far, though. Your Honours and Mr Jackman together identified at least four ways that we fell within rule 36.16. Those included subsection (4) and the power of the court, consistently with Grovener and News Limited, to set aside orders made in proceedings to which a necessary party was not joined.
May I add to the point that Mr Hutley raised in respect of (2)(b), which is the person party point, of course, if Walker Corporation had been joined as a party, which it sought to be joined, it would plainly have fallen within that rule because the orders would have been made in the absence of a party. That is all I wish to say about the power point. I am not familiar with the decisions that Mr Hutley cited, Bailey, Gamser, DJL, but I doubt very much that they go further than this Court’s unanimous decision in Grovener which obviously provides a founding for the power to set aside the orders.
Finally, your Honours, the Giumelli point. I took Mr Hutley to say that there was no evidence in this case of an appropriate alternative remedy. If that is true, it does not mean that the respondent necessarily gets their constructive trust. Your Honours would look to the effect on third party interests and it is not a relevant consideration that Jackson Poplar might have been mortgage to a third party, namely, in this case, Walker Corporation. The point of the principle in Giumelli, as expressed in Bathurst City Council, is that a person claiming a constructive trust does not obtain priority over other secured creditors and other persons who have an interest in the property the subject of the constructive trust.
It is not an answer to your Honour Justice Heydon’s question as to whether equitable compensation is satisfactory to say that the relevant defendants do not have any assets, or any substantial assets, that would satisfy an order in that case. The Court of Appeal should have inquired as to what effect their orders would have on the rights of third parties and the respondents should have drawn attention to the court that Walker Corporation had or claimed an interest in the land. Unless I can be of any further assistance, those are my submissions.
FRENCH CJ: What happens to the disposition of your appeal if the JACS appeal succeeds and the orders of the Court of Appeal are set aside?
MS TAYLOR: I think the issues fall away, your Honour. I think in that case, the proceedings ‑ ‑ ‑
FRENCH CJ: What would be the disposition of your appeal then?
MS TAYLOR: Strictly speaking, your Honours do not need to decide it, but your Honours can either allow the appeal in terms that we seek or if your Honours are against us, dismiss the appeal.
GUMMOW J: What about costs?
MS TAYLOR: We would seek costs, your Honour.
FRENCH CJ: Yes, all right. Thank you, Ms Taylor.
MR HUTLEY: Your Honours, can I just say one thing in reply to the first notice of contention and it is just because my learned friend referred, that is, to one document which has not been dealt with in the written submissions in relation to the first notice of contention. Other than that, all the points which my learned friend referred to have been dealt with. Your Honours were taken to the document at joint appeal book 6, 2117, the without prejudice meeting. We cannot find any reference to that in any of the submissions either to the trial judge or in this Court.
The discussion there about the potential necessity of my client to seek funding was clearly funding in relation to an 8(b) option, that is, in the event that JACS did not proceed with the exercise of the option under the MOU, we would have to be in a position to exercise our option. That cannot be a breach of the contract. It must have been contemplated that we could put ourselves in a position if necessary to acquire this land on our own behalf should the 8(b) option arise. That is all I wish to say, your Honours.
FRENCH CJ: Thank you, Mr Hutley.
The Court will reserve its decision. The Court will adjourn until 10.15 on Tuesday 13 April.
AT 11.40 AM THE MATTER WAS ADJOURNED
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