John Alexander's Clubs Pty Limited & Anor v White City Tennis Club Limited
[2010] HCATrans 84
[2010] HCATrans 084
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 TUESDAY, 30 MARCH 2010, AT 12.01 PM
(Continued from 11/2/10)
Copyright in the High Court of Australia
__________________
FRENCH CJ: Mr Hutley, it would assist us if you would just give us an outline, before you begin, of the structure of your presentation today.
MR HUTLEY: Thank you, your Honour. Your Honour, firstly I propose to address shortly the submissions in response to my learned friends concerning whether we should be granted leave to put forward the second notice of contention. Assuming that your Honours are minded to allow us to address on the basis that that may be accepted, I then propose to address the following matters: firstly, the appeal on fiduciary duties; secondly, the appeal on unconscionable conduct; thirdly, whether the Club repudiated the MOU either prior to the purported termination by JACS on 12 April 2006 ‑ ‑ ‑
FRENCH CJ: This is your first notice of contention point.
MR HUTLEY: That is the first notice of contention. That is the subject of the first notice of contention in joint appeal book 2, 732 - and, fourthly, the appeal by the Walker Corporation in the notice of contention of the Club at joint appeal book 2, 723. Now, as part of that there has to be a short reference to the question of just allowances, but I propose to do that as part of the unconscionable conduct case at the end.
FRENCH CJ: Yes. So far as your submissions in relation to the second notice of contention are concerned, it would assist us, I think, if you addressed us on both the leave issue and the merits, which I understand you propose.
MR HUTLEY: Thank you, your Honour. Firstly, your Honour, I have arranged for two documents to be before your Honours. Firstly, there is a document entitled “DOCUMENT FOR KIEFEL J: STEPS TAKEN POST WHITE CITY AGREEMENT”. That is in answer to your Honour’s question at transcript 118. Secondly, your Honours will recall there was some debate concerning the import of the references in the Court of Appeal’s judgment in the Walker matter, in the judgment of Justice Basten, which is relevantly at joint appeal book 2, 690, paragraphs 3 and 4 to his Honour’s reference to the computerised record system and what it indicated.
We have arranged, and we to have supplied it to my friends, for your Honours to have that computerised record system. The relevant entry is the entry on page 5 of that document at about point 6 of 3 June 2009. It is apparent that his Honour is reading from that because it is apparent ‑ ‑ ‑
GUMMOW J: Just slow down, Mr Hutley.
MR HUTLEY: I do apologise, your Honour.
GUMMOW J: You are on page 5 of this instrument?
MR HUTLEY: Yes, 5, the long entry of 3 June 2009 at about point 6.
GUMMOW J: Yes.
MR HUTLEY: That is the entry which his Honour is apparently reading from and that can be seen from paragraph 4 on page 691, because his Honour refers to the fact that all that has been reproduced in the entry is orders (a) to (d).
That reference to (a) to (d) is a reference to the alphabetical listing of the orders which your Honours will find at page 625 of the joint appeal book volume 2 at paragraph 115 where the Court of Appeal’s judgment of 3 June sets out the orders and declarations in (a) through (g).
HEYDON J: Is anything disclosed as to why orders (e) to (g) on page 626 are not on page 5 of the document you showed us?
MR HUTLEY: None, your Honour. It is obscure, as Justice Basten observed. Thus, as I indicated, could I turn then to the second notice of contention. I would like to deal firstly with the question as to whether leave should be granted. It is put by our learned friends in their submissions that there is a new case which centres upon a submission on the part of our learned friends that the true foundation of the commercial relationship stands outside the terms of the MOU. That, as we understand, is what is being put is the case we are now advancing.
That, in our respectful submission, mischaracterises what we seek to advance. Our whole case takes the MOU in its entirety, including the annexures to it and particularly annexure A, the two documents I took your Honours to in some little detail, which are defined, as your Honours will recall, or may recall, as the proposal in clause 1.9 of the MOU which your Honours will find in volume 4 of the joint appeal book commencing at page 1412.
The concept of the proposal and thus those annexures are themselves recognised within what our learned friends characterised as the binding terms of the MOU expressly in clauses 3.5 and 3.6. The elements of the MOU associated with acquisition of the land reflect the character of the undertaking which we submit is contemplated both in what might be called the binding terms of the MOU, the non‑binding terms of the MOU and the attachments to the MOU. In other words, our case is, reading the entirety of the MOU, we say our case is based on that. We do not venture outside the terms of the MOU for those propositions. Of course, we venture outside it with respect to the sequelae to the MOU.
As observed by the appellants in their submissions on this point, the MOU suffers from – or what we would perhaps more accurately describe as “characterised by” – is characterised by the fact that only parts of it are binding in law. There is a debate as to what those parts are. Our learned friends differ from the position taken, or the conclusion which the Court of Appeal came to, particularly with respect to clause 5.2.
Whilst the second notice of contention refers to parts of the MOU which do not have a binding character - we say that is hardly new, this is exactly what the trial judge had regard to - the trial judge at joint appeal book volume 2, 542, paragraph 74 – and your Honours were taken to this on the last occasion – describe that apart from bridging finance:
a fundamental matter of the Project was that . . . the land would be funded by the issue of shares in WCH, a key factor being that it would be the members of the –
Club who would subscribe for those shares. That, we say, is only consistent with his Honour looking beyond what might technically be called “the binding” or terms of the MOU, and has had, in effect, regard to the entirety of the document in the way that we advance. His Honour returns to that at paragraph 100 of the joint appeal book, volume 2, 554. I will not take your Honours to the detail of that.
We say it follows that the submission of the appellants in paragraph 10 of their submissions on this point is unsustainable. The trial judge clearly saw the character of the scheme as divined from the MOU as an entire document, as being relevant and central to the case as a whole. Our case goes no further than that. We take a different approach, conclusion what comes from it, but the issue as to what could be taken as to the structure of the arrangements was a matter divined from the document as a whole.
The Court also treated those matters – that is matters other than the binding aspects of the MOU as relevant, and your Honours will see that at paragraphs 13 to 27 of the Court of Appeal’s judgment, and they commence at volume 2, page 588. It was fundamental to their analysis, there appearing, that there was a consideration of the MOU beyond its strict binding terms. One cannot understand the MOU, we say, by simply limiting it to what our learned friends would characterise as “their binding terms”. We say that ‑ ‑ ‑
GUMMOW J: What do you say about paragraph 11 of Mr Ireland’s submissions.
MR HUTLEY: Paragraph 11, your Honour.
GUMMOW J: Yes, he says you are “convoluting” again.
MR HUTLEY: I am convoluting?
GUMMOW J: Yes. Have a look at a paragraph 11.
MR HUTLEY: I am always doing that, your Honour:
It is only by convoluting its case away from clause 3.7.1 -
If the point is that we are referring to other parts of the MOU besides 3.7.1, I confess, if that is convoluting I am completely guilty, but then again so is the trial judge, so is the Court of Appeal, and when I come to the submissions of Mr White, who preceded me in the Court of Appeal, he also was guilty of exactly the same sin. We are doing nothing more than everybody has done in this case from beginning to end.
Now, just to return to paragraphs 13 to 27, your Honour will see that the conclusions in paragraph 26 about the arrangements between the parties puts that beyond doubt, that one is not looking to what our learned friends characterise as ‑ ‑ ‑
GUMMOW J: These arrangements between the parties, are they found simply in the documents?
MR HUTLEY: Yes. Your Honour, to understand how the ‑ ‑ ‑
GUMMOW J: No oral evidence needed?
MR HUTLEY: Your Honour, no. Can I explain it this way? There was evidence as to how the document got into the state it was, and I took your Honours through that and everybody has gone through that and I will take you to where Mr White did exactly the same thing in the Court of Appeal. But at the end of the day, that merely is there to serve to explain how the structure of the document got into the state it was and what it meant. But we are not saying there is an oral understanding outside the document. We are saying you can divine from the document, read in its entirety, including all its annexures, what the, in effect, objective understanding of these parties were about what was to take place.
GUMMOW J: Objective understanding?
MR HUTLEY: In the sense of what they expressed was their understanding, and we say it is from that that you divine ‑ ‑ ‑
GUMMOW J: The erection of a fiduciary duty would not really be based in objective understanding.
MR HUTLEY: Your Honour, the erection of the fiduciary duty we say, at the end of the day, is a combination of two facts: one, when properly understood what 3.7 does, there is an undertaking by the other side, in the event that they acquire a ‑ ‑ ‑
GUMMOW J: We are talking the language of trust and confidence, are we not, which is normally not objective?
MR HUTLEY: Your Honour, as texts which members of this Court have been authors of have said, at the end of the day with a fiduciary duty one is talking about an undertaking by the fiduciary which precludes him, her or it from taking advantage of powers for their own benefit.
GUMMOW J: That is the end. The beginning is to find the duty.
MR HUTLEY: Quite. But, your Honour, that duty does not necessarily turn on a finding of actual trust and confidence. It can be, as the cases have shown, in point of fact, none. The question is really analysing what the position of the alleged fiduciary is, quoad those to whom it, in this case, owes those obligations.
GUMMOW J: When you have a contract you normally say that is the parameters of their relationship. In some particular cases you have a fiduciary superimposition. The question is how do you go about the superimposition?
MR HUTLEY: I accept that, your Honour, and we say this case is of a classic variety for that because what we say at the end of the day is what was contemplated by the MOU - and can I set aside exactly the precise obligations at the moment, because I have to come to that. The MOU contemplated that there would be a negotiation to acquire a right and we say a right to be exercised on behalf of WCH or not all, and I will take your Honours to the terms of that.
That, we say, carried with it, whether by express contractual obligation or by understanding or necessary intendment, an undertaking by JACS not to turn it to its own account. It was a binary outcome, we say, or there were two possibilities. One, they exercised it on behalf of WCH, a company not then in existence or, if that was not available, they would not exercise it at all and it would fall to us.
We say, properly analysed, this arrangement is of the classic variety to give rise to a fiduciary duty because what was contemplated as a possibility is that JACS would come into possession of a power, namely a power under the option which, if misused, could be turned to its own account.
HAYNE J: By reference to the draft second notice of contention, particularly to subparagraphs (2) and (3), which appear at page 2 of that draft document, what is the process by which ‑ ‑ ‑
MR HUTLEY: Is this if the project did not proceed, your Honour?
HAYNE J: Yes. What is the process by which you say one passes from the text of the arrangement that is recorded in the MOU to the conclusions that are expressed in line 1 of subparagraph (2) and line 1 of subparagraph (3), “would allow” something to happen, “never intended” something else to happen?
MR HUTLEY: Outside the text of the document, your Honour, or within it?
HAYNE J: What is the process by which you pass from the text and reading it to the conclusion that is there expressed?
MR HUTLEY: Yes, your Honour. What we say is the text contemplated a negotiation for a right. That negotiation for a right could give rise to a right in terms, which allowed for the other side to exercise it in circumstances where, on its face, they could exercise it for their own benefit. But, we say, the understanding reflected in the text was that one was acquiring a right on behalf of WCH (or in default leave the option to be exercised by us).
What we say is once that course of conduct was embarked upon, together with the participation of my client in the White City agreement, that is giving up the rights and acceding to it, it moved - we have a situation of an undertaking, properly understood, or an understanding that someone would have a right which could not be used for its own account ‑ ‑ ‑
HAYNE J: Well that, as expressed, is a proposition about construction of the MOU. Is that what is intended to be conveyed or is some broader proposition being conveyed?
MR HUTLEY: Your Honour, if by construction one is talking about construction of binding terms of the MOU ‑ ‑ ‑
HAYNE J: One is taking the words and reading what is conveyed by them as conveying that the parties, as here asserted, never intended John Alexander interests would exercise on its own behalf. But is the process one of construing the text?
MR HUTLEY: If one takes the broad text to give rise to an understanding/agreement, yes, I would accede to that, but my learned friend says the moment we are in construction we are in construction of binding terms. He says that there is no relevant binding term. We say it does not matter. Properly understood, what the MOU amounts to is an understanding or agreement, even if it is not contractual, that if a right is acquired by a process of negotiation, it will be held for the benefit of a company to be incorporated, WCH, or in default thereof of non‑exercise, we would have an option. That is how we would put it, your Honour, if that is an answer to your Honour’s question.
GUMMOW J: Mr Hutley, have you got Hospital Products there?
MR HUTLEY: I am sure I do. Yes, your Honour.
GUMMOW J: It is 156 CLR 41.
MR HUTLEY: Yes, your Honour.
GUMMOW J: All right. Can go to page 97, the paragraph at about point 6 of 97.
MR HUTLEY: I am sorry, your Honour?
GUMMOW J: The paragraph beginning, “That contractual and fiduciary relationships”, do you see that?
MR HUTLEY: Yes, your Honour. I propose to take your Honours to that in due course.
GUMMOW J: Do you accept that?
MR HUTLEY: Yes, your Honour.
GUMMOW J: I imagine you do. Then if you go on to page 101, 101 is the end of the process of what Justice Mason calls the superimposition. You see the last sentence of the paragraph on 97 he talks about “superimposed upon the contract”, do you see that?
MR HUTLEY: At 97, your Honour?
GUMMOW J: Yes, the paragraph we have just been talking about.
MR HUTLEY: Yes, your Honour.
GUMMOW J: Then he sets out on that task. I think he comes to the end of it, or near the end of it, at page 101, the paragraph beginning at about line 10, “U.S.S.C., by entrusting”, et cetera, “effectively constituted”, et cetera, “Its responsibility”, et cetera. He is saying the contract gave the special opportunity. That is what he is saying. He is getting it out of the terms of the contract.
MR HUTLEY: Yes, your Honour.
GUMMOW J: Now, the other members of the Court, the majority of the Court, disagreed with that process.
MR HUTLEY: Yes, your Honour; I appreciate that.
GUMMOW J: But how do you fit your case within that sort of structure that Justice Mason is applying in USSC to this case, other than matters of contractual construction which you have been putting to Justice Hayne?
MR HUTLEY: We put it this way, your Honour. There is a debate as to the meaning of the MOU. My learned friend – and I was going to come to answer a question of your Honour Justice Heydon about this – puts it expressly. He says 3.7.1 is what he calls wholly contingent. He says 3.7.1 engaged and only was intended to engage upon the happening of three events, effectively; his client’s exercise of the option, a company which then did not exist, WCH, proffering to his client a lease, and the entry into between that company that did not exist and another company that did not exist is an agreement and, therefore, he says, there was no binding, as we say it, obligation with respect to the MOU with respect to ownership of this property.
We say that if one divines what we say is wrong as a matter of construction – and I will have to take your Honours through the detail of that – and we say even if he is right, as a matter of strict obligation he does not – 3.7.1 means what he means, one can look to the relationship as a whole, constituted by the MOU, to divine that what was contemplated by this arrangement was that he was acquiring on behalf of WCH, and in default of exercise us, an option. If that understanding, that, in effect, arrangement, is sufficient to constitute an undertaking, even if it is not contractually enforceable, to acquire property on our behalf and when acquired, hold it on behalf of the interested parties, that is sufficient in accordance with conventional principles to give rise to a fiduciary duty.
I have to make each of those steps along the way but, as we would put it, that is the process of reasoning which Sir Anthony Mason was essentially going through in USSC. True it is he had precise contractual terms, but we say it is not necessary that one, for the arrival of a fiduciary duty, prove that there is a binding contractually enforceable undertaking.
GUMMOW J: He is saying that the contractual terms had the effect of conferring a powerful position upon the other party, namely, a position to act adversely to the interests of the other party with respect to its distributorships. That is not the case here? What you seem to me to be doing is trying to imply a term where you cannot meet the requirements for an implication of contractual terms.
MR HUTLEY: Your Honour, if we cannot, and that is fatal to the fiduciary duty case, then we say we fall straight into the constructive trust area because the whole essence of those constructive trust cases was that there was not a binding. One looked, in effect, to a broader arrangement than the contract between the parties. So we say, properly understood, if it is essential to having a fiduciary duty, we find our contractual obligation to hold it solely on our behalf and we fail in that as a matter of construction. Then we say that if you look at this arrangement as a whole – it was porous, it had holes all over it, that seems to be common ground. Everybody says it is very hard to work out what is binding and what is not.
We say that is exactly the circumstances such as were considered in Pallant v Morgan, Banner Homes and the like and we may at that point have to move to constructive trust. But in the first instance we say that logically one – as your Honour observed on the last occasion, see if one can establish a fiduciary duty, because that is logically the first inquiry. It is only after one – because if there is, and it is continuing, we win.
GUMMOW J: Wait a minute, Mr Hutley. Constructive trusts are becoming a sort of excuse for lack of analysis. I am not saying on your part, but among certain ‑ ‑ ‑
MR HUTLEY: I am trying to be short, your Honour.
GUMMOW J: In certain places, they are. To get yourself within Pallant v Morgan and those cases, you have got to show some equitable fraud.
MR HUTLEY: I am sorry, your Honour.
GUMMOW J: You have got to show some equitable fraud.
MR HUTLEY: Yes, quite.
GUMMOW J: What is the equitable fraud if there is no fiduciary duty?
MR HUTLEY: We say the equitable fraud is like Banner Homes. There was ex hypothesi for this argument a failure to set out in clear contractual binding terms what was clearly the subject of an overall understanding.
GUMMOW J: The overall understanding would have to be proved by evidence.
MR HUTLEY: No, we say that is and is solely in the MOU because the MOU has a whole lot of attachments, it has provisions which are asserted by everybody not to be binding, but on any view are in what might be called the body of the MOU.
GUMMOW J: You see, the idea of the overall understanding as giving rise to some equitable fraud is really a response to the Statute of Frauds where you have land involved. You have some overall understanding which does not comply with the Statute of Frauds but it is then said, equitable fraud, we can get a constructive trust.
MR HUTLEY: Your Honour, Banner Homes, and for that matter, Pallant v Morgan, did not go off on the absence of writing. They went off on the point that there was an absence of sufficiency of agreement and the Court in both those cases, and other cases, has said, if the ‑ ‑ ‑
GUMMOW J: Those cases are single judge cases, are they not?
MR HUTLEY: No, Banner Homes is the Court of Appeal in the United Kingdom.
GUMMOW J: All right, in another country in another time.
MR HUTLEY: It did actually meet the approval in Jacobs’ Trusts, each one of them, a not inconsiderable achievement in this country, as being considered correct and, your Honour, we would say they are correct. No superior court, certainly not the High Court, has had occasion to pass upon them, but ‑ ‑ ‑
GUMMOW J: That is right. We have it now.
MR HUTLEY: That is where I end up. Unless I can persuade your Honours they are a fiduciary duty and I will be reading to your Honours ‑ ‑ ‑
GUMMOW J: All I am saying is you cannot just read out Pallant v Morgan and say “So there”.
MR HUTLEY: No, your Honour, I have just started this morning. If I thought it was that easy – but, your Honour, I accept I have to, for a fiduciary duty, go through and make out the propositions which are, in effect, stated by Sir Anthony Mason, and that is what I propose to do. If I fail in that I go to the unconscionable conduct cases – not the constructive trust, unconscionable conduct – to get the relief and that is where I am going. Then I have to deal with the notice of contention, because if the MOU is on foot there is obviously a different analysis, such as, I think, Justice Heydon put to me on the last occasion.
FRENCH CJ: Mr Hutley, you have put your submissions on the basis of the way in which the case was conducted before the primary judge and in the Court of Appeal. There does not seem to be any particular reference in your pleadings, but do I take it that you maintain that the case you now advance under the second notice of contention falls within your pleading of the breach of fiduciary duty and also of unconscionable conduct?
MR HUTLEY: Yes, your Honour, if I could take your Honours ‑ ‑ ‑
FRENCH CJ: At paragraph 19, I think, or page 14 of volume 1.
MR HUTLEY: Yes. Your Honours have to go through the pleading. It says - that is the pleading that they were:
At the time of entering into the White City Agreement -
in a fiduciary obligation, your Honours will see, and then there are various matters. We then go over, your Honour, and paragraph 21 alleges “purport to” – “knew” certain matters. Then the pleading is 22:
In the circumstances described in paragraphs 19, 20 and 21 above, JACS . . . owed fiduciary duties –
et cetera. Then there is a breach alleged in 23, and then it is:
By reason of those breaches, WCTC lost the entitlement -
Then it says reaps the benefit “as a nominee”. Then 25A says:
Further and in the alternative, in the circumstances described in paragraphs 19, 20 and 21 above, the Option Land was acquired by Poplar in circumstances involving equitable fraud and it would be unconscionable for Poplar to claim absolute title to the Option Land and deny WCTC title to the Option Land.
Now, whilst that is in terms tied to the fiduciary duty, it is also tied to the circumstances which we rely upon, so even if we failed in the fiduciary duty the pleading would be good enough to ‑ ‑ ‑
GUMMOW J: Sorry, which ‑ ‑ ‑
MR HUTLEY: I am referring to 25A, your Honour, on page 17.
HAYNE J: Do we find any mention in this pleading of what the overall arrangement upon which you now depend is to be understood as embracing?
MR HUTLEY: Your Honour, if one goes back to paragraphs 9 and following, your Honour will see that there is reference in paragraph 9 to the recitals.
HAYNE J: I understand that, and I understand also in the last line of paragraph 19, for example, that the joint undertaking is described – the expression used is “the joint undertaking described in the MOU”. Now, you seemed at a recent point in the debate to embrace some notion of an overall undertaking that is somehow larger than or embracing more than the MOU.
MR HUTLEY: No, your Honour. Well, your Honour, there is an ambiguity, and I am no doubt guilty of it, as to what the MOU is. My learned friends say the MOU is the binding terms. I say it is the document in its entirety, including its annexures.
HAYNE J: Yes.
MR HUTLEY: In our respectful submission, when it is looked at how the case has been run, throughout reference has been made by all parties, both my learned friend and my predecessors and the judges, to an understanding of that undertaking by reference not solely to what might be called “the terms of the MOU ‑ ‑ ‑
HAYNE J: But the arrangement between the parties – and I use the term arrangement advisedly – is as recorded in the MOU which includes, of course, its annexures.
MR HUTLEY: I accept that, your Honour.
HAYNE J: But that is the premise for all of the arguments you seek to advance under the second notice of contention, is it?
MR HUTLEY: Yes. Properly interpreted, the entirety of ‑ ‑ ‑
HAYNE J: The words “properly interpreted” at once raise great danger signals, Mr Hutley.
MR HUTLEY: Your Honour understands that what I am saying is, we say you can find in the document every proposition which we have advanced. When we say that there is an assumption underlying the MOU, I said on the last occasion, I am saying read the document as a whole, all parties contemplated objectively on the MOU that this land would be bought by and with, wholly or in part, subscriptions from the public, including ex‑members. We say that is not going outside the MOU, your Honour.
I say that is, in effect, what is to be divined from the document as a whole. I am not trying to, in effect, cavil with your Honour’s characterisation of it but that is how we put it. We say that is how it has always been put. In the Court of Appeal and at first instance that is how his Honour the trial judge understood it because his Honour went to those things to get an explanation as to what was he described as fundamental to the MOU and if you go to the terms you will not find that in effect expressed in binding terms, one finds it from the entirety of the arrangements.
HAYNE J: But a circumstance not dealt with explicitly in the text of the MOU, you say, is to result in the conclusion expressed in the two subparagraphs of your second notice of contention to which I drew attention earlier?
MR HUTLEY: If your Honours, for example, find that 3.7.2 in the words “is unable to or fails to exercise the option” ‑ ‑ ‑
HAYNE J: Which words?
MR HUTLEY: At pages 1416 to 1417, we say that 3.7.2, when it says “JACS is unable to or fails to exercise the option”, that covers the universe.
HAYNE J: Yes, I see.
MR HUTLEY: I think your Honour asked me some questions about that on the last occasion. We say that is, in effect, the universe. But if one is against me on that meaning of it, then I have to deal with what we say is dealt with in the document as a whole, and it can come down to this. This document manifests that no one contemplated objectively that if this right was acquired, JACS could buy it for its own account. We say that is really what is either contractually provided or, if my learned friend’s construction is right, not contractually provided, it is manifest that that was the understanding or arrangement expressed in this document through non‑binding and binding provisions. The departure from that by our learned friends’ client is either a breach of fiduciary obligation or involves unconscionable conduct.
FRENCH CJ: So everything you are putting can be derived from the pleading and from the documents?
MR HUTLEY: Yes.
FRENCH CJ: I find the mental assumptions you refer to at paragraph 17 of your written submissions are simply characterisations of some of the things set out in the document, is that right?
MR HUTLEY: Yes, your Honour. I do not put a case that somewhere outside these documents there is a state of mind different. There was some evidence, which I took your Honours to on the last occasion, from Mr Alexander, who accepted that no one contemplated at the time of these arrangements that property would end up other than with JACS. I took your Honours to that. The evidence – in our respectful submission, you cannot really, when you look at this document and interpret it, really rationally be in dispute.
FRENCH CJ: As you are putting this argument, do you need a notice of contention?
MR HUTLEY: Your Honour, I thought on the last occasion I did advance the submission that I did not, but when I am met by five members of the High Court saying that I do, I turn to my junior and say, “Start drafting”. That is what I did. If I could just go to a few points made by my learned friend in his ‑ ‑ ‑
HAYNE J: Just before you do, can I pause at the point we have reached. The events that have happened were not expressly permitted by the MOU is step one in your argument – that is, the exercise by the Alexander interests of the option.
MR HUTLEY: Yes.
HAYNE J: The events that have happened were not expressly permitted by the MOU.
MR HUTLEY: Yes, your Honour.
HAYNE J: The absence of express permission demonstrates that what was done wears the description – here insert “term of opprobrium”, “equitable fraud”, “unconscionability” - the various terms are employed throughout your submissions. That is the essence of the argument, is it, Mr Hutley?
MR HUTLEY: Accepting my learned friend’s construction of the MOU, for example, what your Honour Justice Heydon referred to as a potentially rather compressed expression, which your Honour – excuse me for one second. I am not limiting myself to the subsequent conduct on the unconscionability of putting up the rights and things like that, your Honour. I had not intended that. That is apparent from our submission. I am concentrating on the MOU.
To return to where I was, your Honour Justice Heydon suggested that a potential compressed meaning of 3.7.1 was one which was expanded into terms of obligation, that is, there was an obligation, I think your Honour described it as, upon JACS in the event that it exercised the option that the property would be put into the name of WCH. I am going to come to those questions of construction in due course but that construction is between our learned friends and ourselves. Our learned friend says read strictly, 3.7.1 is clear. It is purely contingent. It is at that point, firstly, one has to answer that question but if my learned friend is right, we then come to the point that your Honour Justice Heydon, in effect, put to me. I will just return shortly to a few matters.
FRENCH CJ: This might be a convenient moment. We will adjourn to 2.15 pm.
AT 12.45 PM LUNCHEON ADJOURNMENT
UPON RESUMING AT 2.17 PM:
FRENCH CJ: Yes, Mr Hutley.
MR HUTLEY: Thank you, your Honour. I would just like to make a few final points on the notice of contention just to draw your Honour’s attention to some of the references in the Court of Appeal transcript in the argument advanced by Mr White on behalf of the Club and some of these references from my learned friend’s argument. Firstly, at transcripts 4 to 6 your Honours will see, and I do not want to take your Honours in detail to it now, that there was a detailed discussion of the circumstances leading up to the MOU as explaining the source of the attachments to the MOU and the explanation of the significance of the attachments, particularly attachment A as a means of understanding the nature of the arrangement between the party was made by Mr White, particularly at transcript 8, line 40 and following and transcript 10, lines 11 to 35 and transcript 26, 8 to 28.
In other words, the argument we are advancing here when your Honours read those transcripts is really no different to the explication that Mr White was undertaking of the significance of the attachments to explain the understanding or arrangement between the parties. In fact, at the last reference, that is transcript 28, lines 13 to 19 Mr White makes absolutely explicit that the inequitable behaviour has in part been a…..for what he calls the arrangement reflected in the MOU, including its attachments. The next complaint, as we understand it, by our learned friends, is that in some way ‑ ‑ ‑
GUMMOW J: Just stopping you there for a minute, Mr Hutley. What is being said on page 30 ‑ ‑ ‑
MR HUTLEY: Page 30, your Honour?
GUMMOW J: Yes, the very last sentence.
MR HUTLEY: “The evidence clearly was that each of JACS and Poplar was the alter ego”?
GUMMOW J: The sentence before that:
it has acted unconscionably within s 42 the in personam section of s 42 of the Real Property Act.
MR HUTLEY: Your Honour, that was speaking to a point which is no longer alive in this Court. The question was, was there conduct such as would give rise to an personam equity against Poplar such as to overcome section 42, the indefeasibility provisions? As my learned friends have conceded, Poplar can be in no different position to JACS, no superior position to JACS. The section 42 point, as we understand, has gone, it being accepted that if we are right, there would be a relevant personal equity such as to overcome the problems concerning indefeasibility.
My learned friends make in paragraph 11, as your Honours observed before lunch, that the submission made against us is to overcome the true contractual consequences of the MOU and that the case we advanced laid solely in the terms of the MOU so far as the fiduciary duty was concerned – that is paragraphs 12 to 15 of their submissions. Firstly, we submit it was quite clear that Mr White was advancing a case which sourced obligations in respect of the clause 8 option – that is the option in the White City agreement – in fiduciary obligations rather than in contractual ones and clause 25 of the submissions, quoted in paragraph 13 of my learned friend’s submissions, must be viewed in the light of that oral argument.
Mr White explained the argument at transcript 20, lines 35 to 22, line 15. We say - and I do not want to take your Honours in detail to it because of the time - it is in substance the argument that we seek to advance here and we say it is wrong to say that one is going outside the MOU or putting an argument that was not advanced in the Court of Appeal. Whilst my language may not wholly mirror that of Mr White, we say in substance it is identical.
At paragraph 18 of the appellant’s submissions reference is made to how the Court of Appeal dealt with the matter. That submission as to how the Court of Appeal dealt with it may be right or it may be wrong. It is conceded that we never pleaded any relevant breach of the MOU, or more importantly, the existence or breach of an implied term.
We accept that. Whether the Court of Appeal was correct in its approach does not mean that the respondent conducted its case in a manner inconsistent with allowing the second notice of contention to proceed, as I will point out later. The only reference to “implied terms” in the whole of the submissions before the Court of Appeal was one by learned friend, Mr Ireland, and not by Mr White.
HEYDON J: Just going to a point the Chief Justice raised with you, you shun, as it were, the Court of Appeal, and that is maybe why you need this second notice of contention. You may wish to put an argument which the Court of Appeal did not fully grasp or deal with, but which is nonetheless an available and tenable argument. In that sense, perhaps, your second notice of contention could survive.
MR HUTLEY: Your Honours, my learned friend advances an argument – I will come to it – that the Court of Appeal turned on an implied term. On one view, all that the Court of Appeal was doing is if you construe the promise in the way that, for example, your Honour suggested it might be construed, that carries with it the obvious negative consequence that you cannot do contrary to the promise. That may well not be the, in effect, finding of an implied term but merely, in effect, setting out the logical entailment of the positive finding. That is all. That is why when I say we do not shun the Court of Appeal but we do accept that we never ran an implied term contact and if that is what the Court of Appeal has found, then I have to accept that was neither pleaded nor argued and we certainly did not suggest a breach of it.
Finally, it is submitted by the appellants at paragraph 6 of their submissions that our reference to my learned friend’s oral submissions before the Court of Appeal – that is at paragraph 4 of our submissions – are taken out of context in that they were made by reference to the meaning of clause 3.7.1. We say that that criticism misses the point.
My learned friend’s position was that there was no fiduciary duty and that remains his position. However, he had to address and deal with the whole MOU and the structure contemplated by it in addressing that point and that is our point. JACS’ position was and remains that everything turned on it being a commercial contract and their posited construction of 3.7.1. But that did not mean even for them that that was all one looked at, 3.7.1, in coming to the conclusion. So we say we are doing nothing more than they were doing. That is all I wish to say on that second notice of contention, beyond that which is in our written submissions.
Can I now turn to the first issue, fiduciary duties? Your Honours had been taken before lunch to the pleading in relation to fiduciary duties, paragraphs 19 to 25 and 26 at joint appeal book 1, 14 to 18. The appellant’s written submissions are at paragraphs 78 to 88 in‑chief and in reply at paragraphs 16 to 18 and in response to the second notice of contention paragraphs 20 to 27. The Club’s principal submissions are at 56 to 76 and at 11 to 20 in respect to the second notice of contention.
The Court of Appeal addressed the issue at paragraphs 83 to 91 of the joint appeal books, 2613, Justice Macfarlan having previously set out the reasoning of Justice Young at first instance at paragraphs 45 to 47 of the Court of Appeal judgment. That is at volume 2, page 598.
Whilst Justice Macfarlan addressed this issue after the unconscionable conduct case, it is our respectful submission logical to ascertain what, if any, relationship existed between the parties as a first step. As the meaning of clause 3.7 formed an important part of the analysis of the Court of Appeal can we start there. Your Honours will find clause 3.7 at 1416 of volume 4.
One reading of clause 3.7.1 is this. If JACS exercises the option that has been acquired, that exercise will be on behalf of WCH if WCH does two things; one, grants a 99‑year lease to JAWCC – that is a company that is not in existence – and, secondly, entering into an operating agreement which is 6.1(e), which your Honours will find on page 1420, again an agreement with JAWCC. That is the construction which we understand the appellants advance, namely, the MOU does not in clause 3.7.1 bind JACS to only exercise the option for the benefit of WCH. That is what we understand paragraph 61 of our learned friend’s principal submissions advances. It actually goes slightly beyond that, but I think once one understands it in the terms of my learned friend’s oral address where he reiterated the principal position at transcript page 11 where he characterised 3.7.1 as “entirely conditional framework”.
HEYDON J: I think you have a wrong reference there. Paragraph 61 is about Wentworth v Wentworth.
MR HUTLEY: I am sorry, your Honour. If your Honour goes towards the bottom of that paragraph I think you will see – it is maybe over on the next page.
HEYDON J: It is four lines long.
MR HUTLEY: If your Honour goes to my learned friend’s submissions in‑chief, page 13.
HEYDON J: Page 16 contains paragraph 61.
MR HUTLEY: No, your Honour is looking at another document. There may be a second set of submissions.
HEYDON J: I am looking at the appellant’s written submissions filed on 25 January. What one are you looking at?
MR HUTLEY: They were amended and your Honour should have a document of 27 January, I am sorry. They were amended to take out footnotes. There was a difficulty with those submissions. The Registry considered the footnotes should be taken out.
HEYDON J: Just at the moment, I, personally, cannot find that document filed on 27 January. That does not mean it does not exist in my possession, but I cannot find it.
MR HUTLEY: Your Honour might find around there a paragraph starting,“Contrary to the Court of Appeal’s observation at CA [66]”? Does your Honour find a paragraph – it is quite a long paragraph.
HEYDON J: Do not worry, Justice Gummow will tell me what it is later.
MR HUTLEY: Right. If your Honour has the transcript and I have not erred in giving your Honour the correct page, you will find, in effect, what I understand the gravamen of my learned friend’s submission at about – I do not understand the numbering of it – 373. Page 11.
That is really all that this case is all about. We characterise that as entirely conditional framework, whereby a number of conditions would have to fall in. One would be that WCH was in fact brought into existence, and it never was. Number two, that WCH would grant JAWCC, which is again another future company, as I have endeavoured to point out, a 99‑year lease of land because that would be the only real commercial benefit to Alexander and the third thing, conditionally, would be the entry into an operating agreement.
So my learned friend’s case, as we understand it, is that clause 3.7.1 is, in effect, merely a contingent arrangement and carries with it no obligation; it either occurs or it does not occur, and if the conditions precedent occur, so be it.
GUMMOW J: How do you say it works in terms of the language, Mr Hutley?
MR HUTLEY: I am coming to that, your Honour. To understand 3.7.1 one has to actually start with clause 1.7. Can I explain to your Honour a few things about it? These are in the preamble. It says:
JACS has been negotiating with TNSW for the purchase, or for the grant of an option to purchase, the Land by an entity to be established as hereinafter described and to be known as “White City Holdings” ‑ ‑ ‑
GUMMOW J: This is 2.7?
MR HUTLEY: This is 1.7. So what this refers to is discussions with TNSW whereby there is to be an agreement with TNSW in favour of WCH, and that is called - “they now propose to offer the land”. Can I take you then to 1.8, which is the important one to explain the distinction. It says:
JACS is negotiating with a third party –
and your Honours know that that is actually Grammar –
with a view to entering into an agreement with the third party to include terms whereby:
1.8.1the third party and JACS prepare and lodge the tender for the purchase of the Land which will provide for the Land to be purchased by the third party;
1.8.2the third party grants to JACS on behalf of WCH an option to purchase part of the land . . . with a period –
and that is called “the option from the third party”. The option from the third party is an option granted to JACS on behalf of WCH. That is a defined term. One then comes to 3.7 with that defined term in mind, and then you start:
JACS agrees that it will seek to obtain an option to purchase the Land or part of it from TNSW or the third party ‑ ‑ ‑
GUMMOW J: Wait a minute, just stopping there for a minute. When it says at 1.8.2:
the third party grants to JACS on behalf of –
a company to be formed.
MR HUTLEY: Quite, WCH, yes.
GUMMOW J: So it is that sort of situation, well known in contract law.
MR HUTLEY: I understand, your Honour, and we are not dealing with, in effect, the pre‑incorporation contracts position because the company was ex hypothesi never formed, but what it does say is that they are negotiating to buy something called “the third party option” and that is an option acquired on behalf of WCH. That is part of the defined term. The importance is the defined term, your Honour, because the defined term then is taken up in 3.7. So it says:
JACS agrees that it will seek to obtain an option to purchase the Land or part of it from TNSW or the third party –
That is, in effect, the agreement to go and try and get the option –
and in the event it obtains the option from TNSW or the third party referred to in Clause 1.8 -
So in the event it acquires from the third party an option to acquire the land on behalf of WCH from the third party or any right to purchase the land or any part thereof – of it then:
in the event JACS exercises the option from TNSW or the third party -
That is, in the event it exercises the option acquired on behalf of WCH, from the third party, then:
it will exercise the option on behalf of WCH, upon WCH –
doing certain things. Now, what we say is, properly understood, the option is as a matter of arrangement an option acquired on behalf of a third party, that is, acquired to be used for the benefit of that third party subject to that which goes thereafter about the situation of non‑exercise when it returns to the Club. The option reverts to the Club.
GUMMOW J: That third party to be formed.
MR HUTLEY: I accept that, your Honour, I do, I accept that completely. But what we say is that carries with it, whether by contract law or arrangement, an agreement not to use it for your own benefit.
GUMMOW J: Even if the third party is never formed?
MR HUTLEY: Quite.
GUMMOW J: That is what it seems to come to.
MR HUTLEY: Quite, because the agreement contemplates that if the option is not exercised, which we say it will not be exercised unless it is on behalf of the third party by JACS, then the parties have agreed for a default position. The default position is – I am sure I used that word wrongly.
GUMMOW J: No, no.
MR HUTLEY: The default position will be at this point there will be an assignment of this option on behalf of the third party to an arrangement for the exercise by the Club of that option during the 90 days prior to the expiry. That is what is contemplated by 3.7.2, that is one possibility. In other words if you only get an option, being the option on behalf of WCH, if you have not exercised it, we say, on behalf of WCH up to 90 days prior to its exercise, then you will procure in favour of WCT, the Club, a further option – you can do that.
KIEFEL J: But that is not an assignment of the first option, is it? It is freestanding.
MR HUTLEY: Your Honour, I do apologise. I got two clauses upside down. They will seek to procure an option under 3.7.2 for us. If they cannot do that one moves to 3.7.3 - I am sorry, your Honour, I got confused. If they cannot obtain the option on behalf of us then for the:
30 days prior to its expiration of the Option Period, then upon WCTC giving written notice to JACS that WCTC requires JACS to exercise the option on behalf of WCTC, that JACS will proceed to exercise the option from TNSW or the third party on behalf of WCTC.
In other words, you will get an option and you will try to get an option on our behalf for 90 days from the non-exercise of that option.
KIEFEL J: Was WCTC ever in a position to exercise an option?
MR HUTLEY: Yes.
KIEFEL J: That has been proved on the evidence as findings to anything?
MR HUTLEY: Yes, we have got an order that upon payment of the ‑ ‑ ‑
KIEFEL J: No, at the relevant time. I do not mean now, at the relevant time.
MR HUTLEY: I think at the relevant time it was proven, and your Honour will recall there was reference for certain evidence of us being in breach by trying to raise finance to exercise the 8(b) option, if they did not exercise their option. There was evidence that in the event they did not exercise, we would move to exercise our option. So what the arrangement is, whether you call it 3.7.1 – how binding you call it, I do not want to enter into at the moment – is that the agreement is to get an option on behalf of an entity to exist and it has a default provision ‑ ‑ ‑
GUMMOW J: And no other option?
MR HUTLEY: And no other option, other than ‑ ‑ ‑
GUMMOW J: The whole thing is driven by 1.7 to start off, is it not?
MR HUTLEY: Paragraph 1.7, or 1.0?
GUMMOW J: Paragraph 1.7.
MR HUTLEY: That is dealing with TNSW, your Honour. Paragraph 1.8 is dealing with the third party. There seems to have been in contemplation the possibility you might be able to buy direct from Tennis NSW under 1.7 or have to negotiate via the third party.
GUMMOW J: Yes.
MR HUTLEY: But what we say is, 1.7 contemplated an option actually in favour of the company to be formed, 1.8 says that you are getting an option on behalf of the company to be formed, and that is the defined term.
GUMMOW J: Yes.
MR HUTLEY: So what we say is, that is the true construction of what is involved. Another way of viewing it is, with respect, as your Honour Justice Heydon suggest it might be viewed as a matter of compression at transcript 95 where your Honour said:
It is rather compressed, but does it not mean, one: if JACS exercises the option it must tell the seller to put the land in WCH’s name; two, WCH is obliged to grant a 99‑year lease simultaneously and WCH is, three, obliged to enter the operating agreement –
As we understand the point made against that construction is that the last two characterisations are obligations in favour of or between two companies that do not exist.
KIEFEL J: Mr Hutley, was it accepted that WCTC could not enforce what you say are the obligations under 3.7.2 or 3.7.3?
MR HUTLEY: Your Honour, 3.7.2 was complied with. They obtained the option under clause 8(b).
KIEFEL J: But 3.7.3 was not?
MR HUTLEY: Was not, because 3.7.3 did not attach because they had satisfied 3.7.2 in the event they are unable to procure the further option referred to in 3.7.2.
KIEFEL J: I will put the question another way. Was it accepted that WCTC could do nothing in order that it could enforce its own option?
MR HUTLEY: It could not because the antecedent option, the one they had procured under clause 8(a) was in fact exercised and therefore the option in favour of ‑ ‑ ‑
KIEFEL J: But it was not. It was not exercised on behalf of WCH, is that not the point?
MR HUTLEY: Your Honour has come exactly why we are in the field of either fiduciary duty or unconscionable conduct.
KIEFEL J: But if, colloquially, all bets were off, why did WCTC not seek to exercise its own options?
MR HUTLEY: The time for arrival of its option had not occurred before the antecedent option obtained in favour of or in the name of JACS or its nominee was exercised. That is why the option acquired under 8(b) could never be exercised because the antecedent option had been exercised by JACS.
KIEFEL J: So it was bound by strict contractual terms.
MR HUTLEY: Because the contract it had with the Maccabi organisation and Grammar was unconcerned in point of form with any limitation upon JACS in the exercise that it be on behalf of WTC, no doubt as a matter of negotiation, a matter of no concern to ‑ ‑ ‑
KIEFEL J: So its position is that it really falls between two stools. On your view, it is not in a position to enforce any contractual provisions. On the other hand, it is said to be owed fiduciary obligations despite those contractual provisions but it cannot, with notice that JACS is going to exercise the option, do anything to prevent that?
MR HUTLEY: Whether it could or it could not, it did not. We say that is not determinative because if we are right that there is a fiduciary obligation, it does not matter and we say that one of the problems with this contract as a whole is it is supremely porous. As my learned friend submitted ‑ ‑ ‑
HAYNE J: Is that another way of saying that the circumstances that have happened are not dealt with expressly in the agreement, or at all, Mr Hutley?
MR HUTLEY: Your Honour, I do not accept that. The question becomes, is there a contractual promise whereby we could have sought specific performance against them having exercised the option to get the property back? The answer is, no, because there is no promise in this agreement which says in the event they obtain an option and they utilise it for their own benefit, we can require them to transfer the property to us. That is not stated. Why it is not stated, we say, is because the option they had acquired was an option on behalf of WTC and we say that is a classic indicia of – I am sorry, JACS – WCH, I do apologise. We say that that, together with the acts of acquisition, are classic indicia of the arising of a fiduciary duty, namely, the acquisition of a power under circumstances where one is restrained from using it for your own benefit.
GUMMOW J: This is all happening on 28 February 2005, all right?
MR HUTLEY: Yes, the option is acquired in May. The final one is in May.
GUMMOW J: Then by 15 April your client is party to another agreement.
MR HUTLEY: Yes, I accept that, your Honour.
GUMMOW J: And it says it surrenders any rights it would have in relation to the land.
MR HUTLEY: Well, your Honour, that is the surrender of the lease, which is the lease which I took your Honours to on the last occasion, that being the lease over the club house and as it was found it was a requirement of Grammar and Maccabi before they would deal with us, that is, us and JACS, that the Club agree to surrender of that lease in due course.
GUMMOW J: I am just looking at recital 2 on page 1684 under the heading “Background”. Your client is a party to this. It says:
The parties have agreed that SGS will submit a conforming tender ‑
et cetera. The goal posts, as they say, are changing, I would have thought.
MR HUTLEY: Page 1684, I do apologise, your Honour.
GUMMOW J: Well, the numbers are all over the place – it is 822 down the bottom.
MR HUTLEY: Yes. Your Honour is drawing my attention to?
GUMMOW J: Recital 2 under the heading “Background”.
MR HUTLEY: Yes.
GUMMOW J: We cannot consider a Hospital Products Case by just looking at 1412, without putting it together with 1684. The whole thing seemed to be a moving kaleidoscope in this period.
MR HUTLEY: When your Honour says “a moving kaleidoscope”, what has happened is this ‑ ‑ ‑
GUMMOW J: Because there were so many actors who were independent of the particular links that you say existed between these two litigants.
MR HUTLEY: Your Honour, if your Honour is referring to by that, the people who we entered into a contract with, being the people referred to on 15 April, we accept that. That is, in effect, the third party which was ‑ ‑ ‑
GUMMOW J: The real problem is Tennis NSW, is it not?
MR HUTLEY: Tennis NSW had to, in effect, grant the option; it was putting the land up for sale. It has to go through that exercise.
GUMMOW J: It is a company formed by guarantee, is it?
MR HUTLEY: Tennis NSW, I think so, but Tennis NSW owned the land, they were proposing to sell it and they were proposing to sell it by tender. The MOU was an arrangement or an agreement which contemplated, inter alia, steps being taken to acquire options to acquire land to be exercised to be transferred into the name of WCH, or failing exercise, giving an option to the Club. This agreement is the agreement with the third party contemplated by ‑ ‑ ‑
GUMMOW J: It is an agreement to which you are a party.
MR HUTLEY: Yes, I accept that, your Honour. We were a necessary party because the third party insisted as part of dealing with us that we agree to surrender the lease. In effect, we had to put something forward before these options could be acquired. The options contemplated by the MOU were required by this ‑ ‑ ‑
GUMMOW J: I realise that, Mr Hutley. What it comes down to is what, I think, Justice Hayne was putting to you. This particular wrinkle that has turned out to be critical years later simply was not dealt with in this documentation. The question is, in the legal system, how does that fall out? You want it to fall out by these notions that you seek to inject into it.
HAYNE J: If I may add, in a circumstance where the arrangement between the parties as recorded in the MOU and annexures has come to an end at the time of the impugned exercise.
MR HUTLEY: I have to deal with that. I accept that, your Honour. Your Honour, we would say, if there is a fiduciary duty, that is ‑ ‑ ‑
GUMMOW J: No, you keep saying “if there is”. The question is if there was and when did it arise and what was its duration?
MR HUTLEY: I accept that, your Honour.
GUMMOW J: We will not get anywhere unless you have those parameters fixed.
MR HUTLEY: Your Honour, I am trying to do this in a step‑by‑step process.
GUMMOW J: We are just floating in the sky otherwise.
MR HUTLEY: I know all the steps, with respect.
GUMMOW J: All right.
MR HUTLEY: Your Honour, I accept all that. I am not trying to run away from – firstly, one has to get to the meaning of 3.7.1. We advance the construction, which I have, is that 3.7.1 was an agreement to arrange to acquire an option on behalf of a company to be formed. That was the nature of the option. It was, as it were, in terms, one, to be bought on behalf of that company to be formed with a further arrangement that in the event of the non‑exercise of that option, an option would exist on behalf of my client. In essence, that is what one is talking about. That was what the arrangement for negotiation was.
There was then negotiated such options and they are the options which ultimately found expression in the third White City agreement in clause 8 which is in volume 5 at 1949. That is a third iteration of the contract that your Honour took me to as of 15 April. Your Honour will recall that my learned friend took your Honour through that it was amended a number of times. That option at 1949 at about line 35 says:
Option to JACS or its associated nominated entity (together referred to as ‘JACS’ in this section)
Then two options are granted:
Subject to Settlement –
and settlement is settlement of the purchase from Tennis New South Wales –
SGS and Maccabi (‘Grantors’) grant the following rights, referred to as the “Option’:
a.to JACS an option to acquire the Option Land for the Option Amount (as defined below) payable solely by JACS, exercisable by JACS giving written notice –
et cetera. Now, JACS of course there means JACS or its associated nominated entity. That is an option of the character contemplated by 3.7 in the first instance. Now, in point of form it has no limitation on it of JACS at any time exercising that option solely for its own benefit. That is hardly surprising having regard to the fact that it is an arrangement with a third party who is no doubt supremely uninterested in the dealings between JACS and the Club.
GUMMOW J: It is an agreement to which you are all parties.
MR HUTLEY: I accept that, your Honour. Then:
b.If JACS does not exercise the Option within this period, the Grantors grant WCTC an Option from 1 July –
that is, the day after –
to 30 September 2007, exercisable by WCTC giving written notice to the Grantors and paying the Option Amount –
So, in effect, they are the two forms of options contemplated. Question, what, if any, obligations attached were owed by JACS to us upon acquisition of that right and for how long did they subsist? Our case is JACS had agreed to buy an option on behalf of WCH. That was the character of the arrangement in one. Two, it obtained an option and got an option for us. It obtained an option in form which allowed it to exercise it solely for its own benefit at any time. By that fact, my client became vulnerable to JACS doing precisely what it did.
If, for example, this option had been informed, JACS can only exercise the option if it places it in the name of WCH, then you may not say we were vulnerable because there could not be a rightful exercise of the option without, in effect, giving effect to that which was contemplated by the MOU. But in point of form, in our agreeing to this, we became vulnerable to them doing what they have done.
HAYNE J: You say in point of form, the form of 8 has to be read against the provision of clause 42 at 1955 and the restatement of, in effect, the acceptance of obligations under the MOU, is that right?
MR HUTLEY: As a matter of construction quoad the person who granted the option ‑ ‑ ‑
HAYNE J: No, as a matter of construction as between, relevantly, your client and the Alexander interests.
MR HUTLEY: I understand, your Honour.
HAYNE J: That is right, is it not? So that you know where the points are going, but what is the consequence when the MOU is terminated?
MR HUTLEY: Your Honour, we would say this. We say on acquisition of that right that power was held subject to fiduciary obligations and, as this Court found in Zacharia, just because a relationship terminates does not mean a power acquired subject to a fiduciary duty is released there from.
GUMMOW J: Not necessarily, but it may.
MR HUTLEY: I accept that it may. What we say is ‑ ‑ ‑
FRENCH CJ: But what is the point to the power after the MOU is terminated? I mean, what is the point to the fiduciary obligation after the MOU is terminated?
MR HUTLEY: Because the arrangement which was originally entered into was, it shall go, this land shall be for the benefit of WCH and failing that, we acquire entitlement, an option to buy it. The point of the fiduciary obligation to my client is that if they exercise it other than for the purposes of WCH, they take away from us the benefit of our option. This in point of form, which has allowed them to take it forever for their own benefit, has rendered us vulnerable to them turning this to their own account. That is why we say it was charged with a fiduciary obligation upon acquisition arising from the original agreement, depending upon whether you consider the fiduciary obligation arose at contract, at the MOU or later, but what happened is that we became vulnerable to an individual exercise in accordance with a term for their benefit.
We say that is an indicia of the occasion for the arise of a fiduciary obligation and once it arose, its duration would be whilst so ever that option existed. My learned friend’s client has, if we have breached the MOU, a right to damages and it can sue for that right to damages. It did not. It did not acquire a default right to acquire this land free of its obligation to hold it on behalf of WCH. That is how we put it. It follows from what we have said that if the true meaning of this agreement, 3.7.1, is any option will only be an option acquired on behalf of WCH, there is no necessity to imply a term at law that JACS could not exercise it for its own benefit. That position arises upon acquisition of the option because JACS has agreed only to exercise it for the benefit of a third party or not at all.
GUMMOW J: As agreed and is still under agreement?
MR HUTLEY: Was at all times obliged, up to the time of its exercise, not to utilise it for its sole benefit, yes. Because that is the character of the fiduciary obligation which attached upon acquisition of the option because of the character of the promise it made under the MOU. Can I turn at that point to the judgment of the Court of Appeal.
HAYNE J: Just before you do that, the construction of the arrangement in 3.7 for which you contend is that in the event that there is repudiation by your client of its obligations, repudiation of its willingness to abide the terms of the arrangement, with the consequence that the Alexander interests cannot exercise the option on behalf of WCH, your client nonetheless is entitled to the benefit of the option that was conditioned upon, amongst other things, there not being an exercise by the Alexander interests on behalf of WCH.
MR HUTLEY: That is a rather complex proposition, your Honour.
HAYNE J: It is a complex proposition which I think you have to make good.
MR HUTLEY: With respect, rather than responding directly, I have to make this good, that the consequences of our construction is that upon acquisition of the right it was subject to a fiduciary obligation of duration longer than the term of the MOU, your Honour. That, we would submit, is different to what your Honour puts to me and that proposition I have to make good.
Now, if I can then turn to the reasoning of the Court of Appeal, and your Honours will find that at paragraph 87 in the judgment of Justice Macfarlan particularly, his Honour said at page 615:
By contractually agreeing to a provision in terms of clause 3.7.1, the Club was relevantly placing itself in the hands of JACS. From that point on it had to trust that JACS would exercise any such option “on behalf of WCH”, as it said it would. It relied on JACS commitment to do so by surrendering its rights in respect of the White City site. It was vulnerable to abuse of that commitment by JACS as such abuse might lead to the loss to the Club of the opportunity to acquire a valuable property and the opportunity to continue –
Then their Honours refer to the statement of Justice Mason, and then refer onto Professor Finn’s statement. It then goes on at the top of page 616:
In light of the terms of the MOU and the assistance provided by the Club after the MOU to procure the option for JACS, including by surrender of the Club’s existing rights, the option was one which the Club was entitled to expect would not be exercised by JACS in its own interests. The relationship meets the test formulated by Professor Finn: “a person will be a fiduciary –
and then they refer to it, et cetera. Their Honours then referred to the fact, and that is what they say. Justice Macfarlan came to that point in relation to fiduciary duty from his construction of clause 3.7.1, which your Honours will find at paragraphs 51 to 53 of the judgment at 602 of the joint appeal books. His Honour said at paragraph 53 that it ‑
was an essential element in the Club’s submissions. It was not sought to be contradicted by the –
appellants – the matters which there appear. Now, we understand our learned friends to submit that that is a reference to an implied term and we submit that it is not. It is merely, in effect, what is entailed in his Honour’s view as at paragraph 51 by his Honour’s determination as to what clause 3.7 meant. His Honour said at 51:
The next question is: What does clause 3.7 mean? Here, there was no debate on appeal nor do I think that there could reasonably have been. The meaning of the clause is clear: if JACS obtained from Tennis NSW or “the third party” (being SGS) an option to purchase the Land, or part of it, and if it exercised that option, it would do so on behalf of WCH which was a company the parties had agreed JACS would cause to be incorporated and to have agreed directorships and memberships.
52 The intent of clause 3.7 was reinforced by clause 1.8 (see [15] above) which recited that JACS was negotiating to have SGS grant to it “on behalf of WCH an option to purchase part of the Land”. Thus it was both contemplated that an option obtained by JACS would be held by it “on behalf of WCH” and agreed that if it was exercised by JACS, JACS would do so “on behalf of WCH”.
53 As the position stood after execution of the MOU, if JACS obtained such an option and exercised it professedly on its own behalf and not on behalf of WCH, JACS would in my view have been in breach of the contract constituted by this part of the MOU. It would have been in breach because the positive stipulations that JACS cause WCH to be incorporated and that the option be exercised on behalf of WCH necessarily implied that JACS would not exercise the option on its own behalf. This proposition was an essential element in the Club’s submission. It was not sought to be contradicted by the respondents.
Your Honours, to be fair, it does not appear to have been common ground between at least Mr Ireland and Mr White in the appeal that that was the case and certainly here Mr Ireland does not accept that there is an obligation to incorporate WCH.
Now, we have made our submissions as to the true construction of clause 3.7 but whichever view is correct, whether it be Mr Ireland’s or ours, each would entail that the Club was in the hands of JACS to the extent that the Club allowed JACS to procure an option in the form where JACS could exercise solely on its own behalf. Obviously, obtaining that option was the fundamental first step in carrying forward the relationship contemplated by the MOU and, as I have said, that was done through various iterations of the White City agreement and as I have observed, the option in form allowed JACS to exercise it at any time on its own behalf.
Even if the true construction of 3.7.1 would be as posited or suggested by your Honour, Justice Heydon, we would still submit that that demonstrates the vulnerability of the Club to JACS because of what might be called the inchoate nature of that formulation and the obligations attended on it.
GUMMOW J: This word “vulnerable” why does that keep intruding here? It comes out of the cases on undue influence about people who are liable to have undue influence exercised upon them because they are elderly and infirm or illiterate or under a religious domination or whatever. It does not usually apply to corporations.
MR HUTLEY: Not solely, with respect, your Honour. The courts have said that - your Honour, in one sense ‑ ‑ ‑
GUMMOW J: Any contracting party is vulnerable to non‑performance by the other but we do not talk about that in contract law.
MR HUTLEY: I accept that, your Honour, one can sue for breach. But if one has allowed a party to acquire property which in point or form allows them to take property for their own benefit, such as would exist in many commercial arrangements where people acquire property to be held for a venture, that has often been described as giving rise to a vulnerability on the other party to the venture of that property which in point of form is held by one party at law to be turned to its own account and this is, in a sense, what has happened here. This is what we say. So it is, in that sense, vulnerable and I am not saying vulnerability that is kind of old and infirm, but we agreed to them ‑ ‑ ‑
FRENCH CJ: Is it a metaphor for anything other than a relationship of trust which might be betrayed?
MR HUTLEY: Quite.
HAYNE J: And the trust, relevantly, that might be betrayed is there might be a departure from that which is agreed.
MR HUTLEY: Yes.
HAYNE J: And the obligations as identified in paragraphs 51 and following, most notably at paragraph 53, are obligations which constitute a statement of the arrangement between the parties and that is all they are, is it not, to which is superadded a series of terms like “vulnerability”, “in the hands of”, et cetera.
MR HUTLEY: I accept that.
HAYNE J: But that is always so in any agreement. You expect your opposite party to abide its agreement.
MR HUTLEY: But, your Honour, there is a difference. True it is, but if part of that arrangement contemplates a person acquiring property on behalf of someone else, we say that that is a different ‑ ‑ ‑
HAYNE J: On behalf of a company to be incorporated in connection with which your client was to participate in particular ways reflected in the arrangement between the parties, an arrangement which, relevantly the hypothesis is, your client repudiated.
MR HUTLEY: I understand I must get to the “what’s-a-name”, but, your Honour, we would say that the arrangement only contemplates one outcome with respect to ownership and the outcomes are either WCH or us, not ownership by them. They may have contractual rights, they may have contractual rights to sue us for breach of clause 3.1 or 3.2, but not to take the option. Now, we accept that vulnerability is not sufficient to establish the existence of a fiduciary duty. What is further critical here is that on whatever view one comes to about 3.7 it is clearly an acquisition of an option by one, not for the sole benefit of JACS and we say that structure has been departed from and because that which was contemplated was an arrangement whereby they would not acquire it for their own benefit, that is an indicia or, in effect, the classic statement for the conditions for the arising of a fiduciary duty.
We would refer in this regard to the statement of Sir Anthony Mason in Hospital Products, and we are not going back to it, but also the formulation from the 4th edition of Meagher Gummow & Lehane, particularly the statement at paragraph 5‑005, a passage repeated from the 3rd edition, namely
The distinguishing characteristic of a fiduciary relationship is that its essence, or purpose, is to serve exclusively the interests of a person or group of persons; or, to put it negatively, it is a relationship in which the parties are not each free to pursue their separate interests.
We say the MOU is such an arrangement, together with the White City agreement. The principles are not in dispute, except as to the statement that commercial contracts usually do not give rise to fiduciary relationships, and that the termination of the MOU brought any fiduciary duty to an end. Obviously commercial contracts are often attended with fiduciary obligations, the classic case being agency, UDC v Brian 157 CLR 1, particularly at 10 to 11.
We submit that the reluctance of the courts to impose fiduciary duties is one which succumbs to an analysis of the contractual relationships involved which demonstrate the characteristics of powers such as this with respect to property, such as this being agreed to be utilised solely for the benefit of parties. The survival of it does not turn on the survival of the agreement, and I have referred to Chan v Zacharia.
Finally, can we turn to particular points of criticism by the appellants for the fiduciary case. Firstly, at paragraph 85 and 86 of the submissions, the appellants submit that the trial judge was correct to find no fiduciary duty because of the background fact. The Court of Appeal was correct, in our submission, to concentrate on the particular aspect of the relationship involving the option, as they did. The trial judge at paragraphs 34 to 39 referred to aspects of the relationship generally, which demonstrated that the Club was being active in the venture rather than taking a role of passive dependant.
This diverted attention from the two‑pointed issue, namely, was there a fiduciary relationship with respect the exercise of the option? Criticism is also made at paragraph 87 of the Court of Appeal in the failure to come to terms with as to which party the duty was owed to. WCH of course did not exist. There could be no exercise on WCH’s behalf of the option. The only person then interest in JACS approach to the option was the Club, which had the default option, and that is the party to whom, absent the incorporation of WCH, any duty was to be owed. That is all we wish to say in relation to the fiduciary point, subject to coming to the notice of contention.
Can I now turn to the unconscionable conduct or equitable fraud. This is addressed at paragraphs 44 to 49 of our principal submissions and 21 to 25 of our submissions in relation to the second notice of contention. We have referred to the text and case law which expresses at various levels of analysis the principles which inform equity’s intervention by way of - in relation to conduct which is characterised as unconscionable or equitable fraud in relation to the acquisition of property.
Could we start with Muschinski v Dodds 160 CLR 583. The statement in the judgment of Justice Deane commences at 613 where his Honour considers the institutional and remedial character of constructive trust and the circumstances which justify their recognition or establishment. Can I take your Honours shortly to 615?
GUMMOW J: Muschinski v Dodds has to be read with his Honour’s views which attracted no support from anyone else in the Court in Hospital Products, namely, that there could be constructive trust in that case without any fiduciary characteristic.
MR HUTLEY: Yes, your Honour, although his Honour’s statements in this regard, I think, found favour with the Court in Baumgartner v Baumgartner.
GUMMOW J: That may be so. It may be necessary to look at those cases someday.
MR HUTLEY: As your Honour please. Can I just make some reference – I want to go shortly to the passages. His Honour at about 615 at about point 2 says:
Indeed, in this country at least, the constructive trust has not outgrown its formative stages as an equitable remedy and should still be seen as constituting an in personam remedy attaching to property which may be moulded and adjusted to give effect to the application and interplay of equitable principles in the circumstances of the particular case . . . The fact that the constructive trust remains predominantly remedial does not, however, mean that it represents a medium for the indulgence of idiosyncratic notions of fairness and justice. As an equitable remedy, it is available only when warranted by established equitable principles or by the legitimate processes of legal reasoning, by analogy ‑ ‑ ‑
GUMMOW J: What were the equitable principles in this case?
MR HUTLEY: The equitable principles, we will say, in this case, if your Honours do not find ‑ ‑ ‑
GUMMOW J: No, in Muschinski.
MR HUTLEY: In Muschinski? Muschinski v Dodds, your Honour, was dealing with the situation where there was an unmarried couple and there were various contributions to the acquisition, land having been transferred to them in equal shares, but there were unequal contributions and the issue was as to whether the parties were bound by the legal title of the circumstances of the case.
GUMMOW J: Something like a failed joint venture?
MR HUTLEY: Yes, quite.
GUMMOW J: Between domestic parties.
MR HUTLEY: Yes, I accept that, your Honour, but the principles and the statements by his Honour deals with a broader range of circumstances than just that. If I could then move over again, your Honours, to page 616. It says at about point 5:
Such equitable relief by way of constructive trust will only properly be available if applicable principles of the law of equity require that the person in whom the ownership of property is vested should hold it to the use or for the benefit of another. That is not to say that general notions of fairness and justice have become irrelevant to the content and application of equity. They remain relevant to the traditional equitable notion of unconscionable conduct which persists as an operative component of some fundamental rules or principles of modern equity.
His Honour then turns to the broader statement at 618 and the second full paragraph commencing:
Both common law and equity recognize that, where money or other property is paid or applied on the basis of some consensual joint relationship or endeavour which fails without attributable blame –
I know I have got to deal with that –
it will often be inappropriate simply to draw a line leaving assets and liabilities to be owned and borne according to where they may prima facie lie, as a matter of law, at the time of the failure. Where there are express or implied contractual provisions specially dealing with the consequences of failure of the joint relationship or endeavour, they will ordinarily apply in law and equity to regulate the rights and duties of the parties between themselves and the prima facie legal position will accordingly prevail. Where, however, there are no applicable contractual provisions or the only applicable provisions were not framed to meet the contingency of premature failure of the enterprise or relationship, other rules or principles will commonly be called into play. If, in the last-mentioned case, the relevant relationship is merely contractual and the contract has been frustrated without fault on either side, the present tendency of the common law is that contributions made should be refunded at least if there has been a complete failure of consideration in performance . . . If the relevant relationship is a partnership, the prima facie rule of equity on premature dissolution is, as in the case of an ordinary dissolution, that the parties are, after the discharge of the partnership debts, entitled to be repaid their respective capital contributions. More important for present purposes, if a premium has been paid by a fixed term partner ‑ ‑ ‑
GUMMOW J: We can read it all, Mr Hutley. We can read it to ourselves.
MR HUTLEY: I am sorry, your Honour, yes. I am happy to let your Honours read it.
GUMMOW J: Just point out what you want to get out of it.
MR HUTLEY: To the end of that paragraph. Could your Honours then go to 620, the paragraph after the reference to Atwood v Maude, and to the bottom of that paragraph.
GUMMOW J: Do you fix upon 619 at about line 12? It does not help, does it:
If the relevant relationship is not a partnership but takes the form of a contractual joint venture –
premature collapse, preclusion of the attainment of objective, joint venture to proportionate repayment. That is not this case. In 618 and 619 he is talking about repayment cases, is he not?
MR HUTLEY: Quite, but we would say, by parity of reasoning, where one has an asset acquired which is an asset in the venture which is to be dealt with in one of two ways, namely, either exercised on behalf of (a) or not exercised at all, as we say, and that is the contemplation, then to depart from that, because in point of form one has acquired an asset which allows one to take it to one’s own account, is unconscionable.
GUMMOW J: Then you go to 620, about line 12, the sentence beginning “Those circumstances”.
MR HUTLEY: Yes, your Honour.
GUMMOW J: That is the ratio of that case or his judgment in that case.
MR HUTLEY: Yes.
GUMMOW J: Then you come back to Justice Mason, the other member of the Court, and there are only two, who decided on this footing, I think. Come back to Justice Mason at 598, similar ideas.
MR HUTLEY: Yes, your Honour, that is right.
GUMMOW J: What do you get out of Muschinski v Dodds other than the uncontroversial proposition that there may be a constructive trust in circumstances of equitable fraud?
MR HUTLEY: We say the statements point to this, firstly, to the analysis of the ‑ ‑ ‑
GUMMOW J: And there was a particular species of equitable fraud in that case, as Justice Deane was at pains to demonstrate across those many pages.
MR HUTLEY: I agree, with respect. Your Honour, we say these points come out of a relevant - firstly, they point to the analysis of the contractual relationship being the commencement point to ascertain the effect on property of interests or the failure of the relationship. That is the first point. Secondly, it points out that where there is a lacuna in the arrangements one looks to other principles to ascertain what flows from the occurrence of the events not in terms dealt with by contract. Those two points come out.
The lacuna we say here can be demonstrated by the absence of any binding obligation or relationship – I am assuming no fiduciary relationship, of course – which would control JACS, the appellant, exercising the option for its own benefit having regard to the structure of the arrangement established by the MOU and the White City agreement.
HEYDON J: What about breach of contract, an action for breach of contract?
MR HUTLEY: My learned friend’s point is that there is no arrangement, contractual basis for getting specific performance and if my learned friend’s construction is right ‑ ‑ ‑
HEYDON J: Injunction.
MR HUTLEY: If my learned friend’s construction is right, your Honour, if his view of this contract is right then what injunctions could you get? At most it would seem that you could get a breach of contract case under clause 3.1 for failing to use their best endeavours to bring the project to fruition. That is not the territory of injunctions.
KIEFEL J: You could not get an injunction to restrain them from exercising the option other than to WCH?
MR HUTLEY: Your Honour would have to then have construed the agreement to provide that they have acquired this solely on the basis they will exercise it on behalf of WCH.
KIEFEL J: Yes, that is what 5.7.1 says, does it not? I thought that is what you said the obligation was, it was either/or. It was either that or WCTC gets it.
MR HUTLEY: My learned friend. I accept, but, your Honour, we say if that is the true interpretation then that is the classic indicia, we would say, of a fiduciary duty attaching when you have acquired the property because you have, in effect, undertaken not to exercise the right other than for another person, not to exercise it for your own benefit. We would say that the cases say that is the indicia.
KIEFEL J: Just putting aside the jump towards a fiduciary obligation, is it a contractual obligation that might not sound in damage but which might be negatively enforced by prohibiting them from exercising an option otherwise than in terms of the MOU? Is it capable of an injunction in those terms?
MR HUTLEY: If it is interpreted as a negative stipulation not to.
KIEFEL J: Yes.
MR HUTLEY: That would be usually an implied negative stipulation.
KIEFEL J: I thought that negative stipulation underlay, or was part of the foundation, if not the foundation, for your fiduciary obligation?
MR HUTLEY: Your Honour, we say the fiduciary obligation arises from a promise to do something on behalf of others ‑ ‑ ‑
KIEFEL J: Yes, WCH.
MR HUTLEY: ‑ ‑ ‑ and, therefore, that carries with it the intent that you cannot do it for yourself personally. Non constat that you necessarily have to have an implied contractual term, because every fiduciary relationship then would be, in effect, contractual and have an implied contractual term and, therefore, you would run into a ‑ ‑ ‑
KIEFEL J: I think we are at cross‑purposes.
MR HUTLEY: I am sorry.
KIEFEL J: I am interested to know whether or not there was something which WCTC could do contractually, rather than talking about fiduciary obligations and if it had some contractual, even negative, stipulations to enforce, it makes it rather more difficult to talk about fiduciary obligations, does it not?
MR HUTLEY: Your Honour, if there was – and can I answer that two ways – if there was a promise not to exercise it, other than for the purposes of WCH, a contractually enforceable promise, that could have been enforced by an injunction before it occurred. The threat could have been injunctive. It having occurred, all that one would be left with was an action for damages and it having occurred, we would say it is not inconsistent with a fiduciary obligation.
KIEFEL J: But you have to deal – as was discussed earlier today – with the contractual setting, the contractual obligations and somehow find fiduciary obligations co‑existing and not altering the contractual obligations.
MR HUTLEY: One may say of a partnership agreement that it goes without saying as a matter of common law that you cannot take the assets for your own benefit of the partnership. One might say, as a matter of contractual law, all the standard tests of Codelfa Construction in this High Court would be met with ease of any contractual partnership. That would not be inconsistent with the existence of a fiduciary relationship, often because, we would submit, that a negative stipulation is only of use practically, subject to damages actions, prior to breach and most relationships where one would have an agreement to act solely in the interests – or not in one’s own interests – would be ones where one might imply a term, to the extent they are contractual, that you could not do so. But we say that is not inconsistent with a fiduciary relationship.
Often it will be a hallmark of a fiduciary relationship. The critical thing is the undertaking not to deal with property or assets, other than for the benefit of a third party. We say it is a fortiori when the third party does not exist and, therefore, it is particularly vulnerable, if that answers your Honour’s question.
Now, as we were saying, if there be a flaw in these relationships, such that we cannot enforce it contractually to prevent this or to recover our property we say that is a lacuna which, in a sense, is a hallmark of this MOU which everyone has agreed, although it has some aspects which are contractual, is overwhelmingly an arrangement which, in effect, whilst establishing some form of relationship is not principally contractual.
Now, his Honour Justice Deane referred to the fact of absence of attributable blame in the breakdown of the relationship and that needs to be addressed, either by establishing an absence of attributable blame or that the conduct relied upon as constituting the attributable blame does not address the basis of the asserted inequity.
If the relationship assumed or provided that the party would enjoy the property if the venture did not come to fruition, then even if that party was at fault in the failure of the venture, the blame for failure of the venture is not attributable blame, we would submit, within the meaning of the principle. As your Honour Justice Gummow observed in Re Stephenson Nominees 76 ALR 485 at 506 – and I will not take you to the passage – of Muschinski v Dodds, the attributable blame must remove the substratum of the relationship. If the substratum is that one party shall not enjoy the property for its own account, that is not removed by the failure of the relationship for whatever reason.
Now, it is obvious that the constructive trust remedy contemplated in Muschinski v Dodds is not one which depends upon the availability or re the specific performance in its strict sense or an order to comply with the terms of an executive contract, either mandatory or in prohibitive form. It is the unavailability of such relief which may be the occasion for the application of the principles, as Justice Deane stated at page 618 and following.
The leading cases in England bearing upon this case are the cases which commence with Pallant v Morgan [1953] Ch 43. The facts are adequately set out in the headnote. The statement and the facts were, as your Honours are aware, that there was some arrangement, non‑contractual, between the parties as to participation in an auction and one party, in effect, absented itself from the auction. The auction went forward and the other party was successful at the auction. It is noteworthy that the party who went to the auction – and this is from page 46 at about point 4 and following – was the party who had authority to go to the highest price, other than the other party who could only go to a lower price.
GUMMOW J: Before you leave Muschinski v Dodds, why was not the appropriate remedy an equitable charge for the relevant contribution? That is what Sir Harry Gibbs would have preferred.
MR HUTLEY: For the relevant contribution to the acquisition of the property.
GUMMOW J: We do not know if it has gone up in value, of course.
MR HUTLEY: Quite, but before I come to that, if the understanding was, as we submit, that it will either be for the joint venture company or not at all and then the option would fall to us, then the unconscionability is not one which contemplates either a charge for, in effect, some financial contribution, but the deprivation of our opportunity to buy it in toto. That is how we put it, your Honour. A charge would not meet the inequity. A charge would, in effect, merely confirm the inequity of the departure from the understanding.
GUMMOW J: You were also asked in the alternative for an account of profits I see at page 18.
MR HUTLEY: Yes, that of the pleading. Your Honour, all other relief was not pursued. I will come to that when we come to the point about Giumelli. This is a case which essentially was run on the basis there was a binary outcome. We either got nothing or everything. That explains, we say, the way it was conducted and why there was no participation of Mr Jackman’s client. They knew that, because there was no way of meeting our interests which we had sought to preserve by the arrangements, namely, the option to acquire in default of the acquisition on behalf of the – I will use – although my learned friend is going to - venture company.
GUMMOW J: I took you off Pallant v Morgan.
MR HUTLEY: The point I wish to draw your Honours’ attentions to at page 46 is that the party who went to the auction was a party who had authority to bid up to a figure of £3,000 and therefore had the two parties ultimately gone to the auction together would have acquired the land in all likelihood because the other party, the one who agreed not to go, only had authority to go to £2,000. The court found at page 48 in the first full paragraph that there could not be specific performance of the arrangement:
In my judgment he cannot, for there is too much left undecided. There is the margin between £3 and £5 an acre –
and various things. So in other words, the contract – there was no contract which was capable of specific performance, set aside questions of writing. His Lordship then went on to consider Chattock v Muller and I do not think there is need to trouble your Honour. His Honour comes to the point at page 50 at about point 2:
The present case is if anything stronger than that one, but I do not follow the Vice‑Chancellor in his suggestion that the defendant could become bound to hand over the whole property to the plaintiff at the price he gave for it. In my judgment, the proper inference from the facts is that the defendant’s agent, when he bid for lot 16, was bidding for both parties on an agreement that there should be an arrangement between the parties on the division of the lot if he were successful. The plaintiff and the defendant have failed to agree on a division, and the court cannot compel them to agree. The best it can do is to decree that the property is held by the defendant for himself and the plaintiff jointly, and if they still fail to agree on a division the property must be resold, either party being at liberty to bid, and the proceeds of sale divided equally ‑ ‑ ‑
In other words there was found that absent a contract, in fact inchoate, because of the arrangements between the parties the parties could be subject to relief in respect of the property.
GUMMOW J: Just stopping there for a minute, there was a contract, was there?
MR HUTLEY: No, your Honour. There were discussions. There was an understanding. In fact, at page 48 at about point 4 Mr Justice Harman held there was insufficient certainty for there to ‑ ‑ ‑
HEYDON J: To justify a degree of specific performance, but it does not mean there was not a contract.
MR HUTLEY: Except that his Honour said ‑ ‑ ‑
GUMMOW J: A contract would have been met by the Statute of Frauds.
MR HUTLEY: Your Honour, then there would be an issue of part performance, of course.
GUMMOW J: Exactly, and then there would still be in evidence a sufficient specificity even to get specific performance. So at the root of it ‑ ‑ ‑
MR HUTLEY: I understand that, your Honour. That is why one says ‑ ‑ ‑
GUMMOW J: Just a minute, Mr Hutley. At the root of it was an absence of writing initially because that pushed the parties into specific performance or nothing, that pushed them into part performance, but it still left a necessity for sufficient specificity, even on the moral understanding.
MR HUTLEY: Your Honour, it would appear, at 48 at about point 4, the problems with the so‑called agreement so reached would be one which would also deny them contractual force.
GUMMOW J: But it may, nevertheless, found equitable fraud, that is the question.
MR HUTLEY: That is all we seek to rely upon it for, namely, you can have equitable fraud absent a binding promise, firstly, and, secondly, a departure from an understanding which is sufficiently ‑ ‑ ‑
GUMMOW J: Absent an enforceable promise anyway.
MR HUTLEY: An enforceable promise – present a sufficiently certain understanding for equity to consider the departure from it was unconscionable such as to give rise to the remedy which was awarded. That is what we say the case stands for. That is the commencement of this, what you might call, line of country. The next case in England which has dealt with this is Banner Homes Group v Luff Developments [2000] Ch 372. The facts, again for introduction purposes, are adequately set out ‑ ‑ ‑
GUMMOW J: What is the remedy in Pallant v Morgan?
MR HUTLEY: The remedy was an order for the sale of a property in the division of the proceeds equally subject to the parties agreeing on a contrary approach.
GUMMOW J: Not the lot.
MR HUTLEY: No, because there the understanding was not the lot. Here:
The plaintiff and the first defendant were both potential purchasers of a site which they proposed to acquire and develop together through a joint-venture company. The first defendant subsequently decided to proceed without the plaintiff’s participation, effecting its purchase of the site through the second defendant, its own wholly‑owned subsidiary. The plaintiff claimed to be entitled to an interest in the property either pursuant to contract or by way of a constructive trust over the half shares in the second defendant. The judge found that the first defendant led the plaintiff to understand that it intended to enter into a joint venture but subsequently had second thoughts, which it kept to itself for fear that the plaintiff, if alerted, might make a rival bid. He found that no contract was concluded –
and that was upheld. Could I take your Honours now ‑ ‑ ‑
GUMMOW J: Just before you do that, if you look at the argument of counsel at page 375?
MR HUTLEY: Page 375, your Honour, yes.
GUMMOW J: Yes, Mr Brisby, QC at about letter F.
MR HUTLEY: Mr Brisby, your Honour?
GUMMOW J: Yes, after referring to Rochefoucauld v Boustead:
the role of equity was to ensure that the parties’ true intentions were not thwarted to the benefit of one party, and that a statutory requirement was not to be used as an instrument of fraud. That fact, coupled with the realisation that one party would obtain the beneficial receipt . . . justified invoking equity. Pallant v. Morgan –
Right?
MR HUTLEY: I understand, yes, I accept that, your Honour. Certainly issues associated with writing went to the very heart of the commencement of this principle. But, in my respectful submission, it has gone beyond that.
GUMMOW J: Was the Statute of Frauds gone in England by the time of Banner Homes?
MR HUTLEY: It does not feature in this judgment.
GUMMOW J: Anyhow, we can find that out.
MR HUTLEY: I will find that out overnight, your Honour. Your Honour, consideration of the law in the judgment of Lord Justice Chadwick commences at page 383. His Lordship went through a consideration of a large series of cases which have considered the Pallant v Morgan‑type position. Some of them are unreported English cases which we have attempted to get hold of, your Honour, but have been unable to. But there are statements in it – and I will not take your Honours to Paragon Finance and other cases, because here, in effect, the statements of principle are conveniently collected. His Lordship at page 383 at point D turned to a judgment of Lord Justice Millett in Paragon Finance v D.B. Thakerar & Co and there his Lordship considered questions of constructive trust and at about letter F he said:
A constructive trust arises by operation of law whenever the circumstances are such that it would be unconscionable for the owner of property (usually but not necessarily the legal estate) to assert his own beneficial interest in the property and deny the beneficial interest of another.
His Lordship then sets out, towards the base of that:
Well‑known examples of such a constructive trust are . . . a secret trust . . . (where the defendant agreed to buy property for the plaintiff but the trust was imperfectly recorded). Pallantv. Morgan [1953] Ch. 43 (where the defendant sought to keep for himself property which the plaintiff trusted him to buy for both parties) is another. In these cases . . . control make it unconscionable for him thereafter to assert a beneficial interest in the property.”
He then refers to the judgment of Lord Justice Walker and then a reference is made that these cases having “much in common with those of proprietary estoppel” and there are large areas where they overlap. Then there is a reference to certain other cases which I can pass over about the statements of principles. Then his Lordship turns to certain decisions at first instance at 385 and says:
With those principles in mind, I turn to examine the first instance decisions in which equity has imposed a constructive trust on property acquired by one person in furtherance of some arrangement or understanding with another –
His Lordship referred to Chattock v Muller, and then at 387, at about E, to Pallant v Morgan. Then his Lordship turns, at about 389, to a series of subsequent decisions such as Holiday Inns v Boadhead, which all have this characteristic in common where there are, in effect, what can be only described as informal arrangements between business people as to potential participation in property ventures which do not reach a form of sufficient certainty to be contractually enforceable, but one party departs from it. He refers to a judgment of Sir Robert Megarry. Can I take you over to 391 at about letter A out the judgment of Sir Robert Megarry. That is an unreported decision which we have not been able to obtain, your Honours. It says:
“Second, I would not regard equality as being of the essence of the Pallant v Morgan equity. If, for instance, the arrangement between the parties is for a division in other fractions, such as one‑quarter and three‑quarters, or one‑tenth and nine‑tenths, and specific performance is impossible because too much of the detail is left undecided, I do not see why equity should not make a Pallant v Morgan decree in corresponding fractions, such as are well known in the case of joint purchases made with purchase money that has been provided in unequal shares. Where a reasonable certainty as to the fractions is unattainable then no doubt equity will delight in equality. In the case before me the disparity and uncertainty in the interests of lessor and lessee in respect of a lease with rents varying with the takings of a hotel would, I think, in the absence of valuation –
et cetera. Then there is a reference to what Sir Robert Megarry says about Pallant v. Morgan in terms which ‑ ‑ ‑
GUMMOW J: An inducement.
MR HUTLEY: I am sorry, your Honour?
GUMMOW J: Letter D, 391, “is thereby induced to refrain”, then there is a reference to the estoppel cases. That is not the way this case is being put.
MR HUTLEY: Your Honour, as we say, whether one is induced to refrain or to something, we say, what this arrangement induced the parties to do is to pool their resources to, in effect, acquire these options. In fact, induced us, as the Court of Appeal found, to put up our secured interest in the lease to acquire the rights.
FRENCH CJ: He collects a number of propositions, I think, at 397 and following. Are you directing us to any of those, in particular?
MR HUTLEY: Your Honour, at 397, your Honour ‑ ‑ ‑
FRENCH CJ: We are just trying to get to precisely what it is you want to get out of the judgment and then if there is a convenient summary of the principles he extracts from those cases.
MR HUTLEY: Your Honour, we say that, principle (1), we have the arrangement which precedes the acquisition of the right being the MOU:
(2) It is unnecessary that the arrangement or understanding should be contractually enforceable. Indeed, if there is an agreement which is enforceable as a contract, there is unlikely to be any need to invoke the Pallant v Morgan equity; equity can act through the remedy of specific performance and will recognise the existence of a corresponding trust.
It is our point that if one comes to this, one is, in effect, acknowledging that we are not in that position as our learned friends advanced the case:
(3) It is necessary that the pre‑acquisition arrangement or understanding should contemplate that one party (“the acquiring party”) will take steps to acquire the relevant property –
that we have here, they go forward to negotiation and acquire the option –
and that, if he does so, the other party (“the non‑acquiring party”) will obtain some interest in that property.
We say yes. The option:
(4) It is necessary that, in reliance on the arrangement or understanding, the non‑acquiring party should do (or omit to do) something which confers an advantage on the acquiring party in relation to –
et cetera. That is exactly what the Court of Appeal here has found. In reliance upon the understanding ‑ ‑ ‑
FRENCH CJ: All of this is to be found in 63 and 64 at page 606 of the Court of Appeal judgment you would say?
MR HUTLEY: Yes, quite. All these characteristics, we say, are present in our case in point of fact.
HAYNE J: But what is also present is that the arrangement under which the option was obtained, even on your construction of the arrangements, was that the option would be exercised in favour of the company to be incorporated from which amongst your client hoped to benefit but also so did the Alexander interests and it is because your side repudiated that that limb of the arrangement could not be given effect and despite that fact, you say, that the second limb of the arrangement which obtained only if the first limb was not effected at the wish of the Alexander interests, you should have the benefit of it?
MR HUTLEY: Yes, your Honour.
HAYNE J: That is having the cake, the penny and the shop window in which it sits, is it not, Mr Hutley?
MR HUTLEY: No, your Honour. We are still subject to an action for damages. What one has here is, we are still subject to an action for damages and they have the property, which is the one thing which was never contemplated in this arrangement and that is our point. This arrangement divided up or dealt with the universe of ownership in contemplation. I accept your Honour’s point that if, in effect, repudiation terminates it, then I have to win the notice of contention, and I will come to that, but we say that these parties, in effect, dealt with the arrangement or what would happen in the event of failure and, namely, non‑exercise because of the character in which this option was acquired. That is how we put it.
Therefore we say these cases which, in effect, say that if you depart from that sort of arrangement, there can be constructive trust. Can I just give your Honours a reference to the House of Lords decision in Cobbe v Yeoman’s Row Management [2008] 1 WLR 1752, Part 2. In the speech of Lord Scott, which was the speech of the majority, his Lordship referred to the decision of Justice Deane in Muschinski v Dodds. At paragraphs 30 and following approved the authorities which I have taken your Honour to and referred to in relation to unconscionable conduct. I do not think it is necessary to take your Honours through them in detail. It is from paragraph 24 and then paragraphs 30 and following.
GUMMOW J: What was the remedy in this case?
MR HUTLEY: In Yeoman’s Row - I will just have that checked, your Honour. It just escapes me at the moment.
GUMMOW J: Quantum meruit, was it not?
MR HUTLEY: I will not take your Honours to it, but a similar approach to this line of authorities has been taken in New Zealand in Avondale Printers & Stationers Ltd v Haggie [1979] 2 NZLR 124 and the relevant passage is at, I think, paragraph 163. In Yeoman’s they lost on the proprietary remedy and got a quantum meruit.
GUMMOW J: That is right.
MR HUTLEY: But what I take from it is that they approved of the cases, the authorities which I have taken your Honour to, point of fact there, the case was determined ‑ ‑ ‑
GUMMOW J: It was an equitable estoppel case, was it not?
MR HUTLEY: It was put on a propriety estoppel basis, yes, your Honour. The United Kingdom cases and the New Zealand cases have been referred to in the 4th edition of Meagher, Gummow and Lehane at paragraphs 12‑050 to 12‑055 and, again, in the 7th edition of Jacobs’ Law of Trusts at paragraph 1341, generally with approval. I will not take your Honours to the relevant passages.
GUMMOW J: Is there any academic commentary on Yeoman’s?
MR HUTLEY: On Yeoman’s?
GUMMOW J: Yes.
MR HUTLEY: None that I am aware of on Yeoman’s, your Honour.
GUMMOW J: I think there is.
MR HUTLEY: Thus we submit that the circumstances which led to the conferral on JACS and its associated entity of the capacity to acquire the property and its seizure by Poplar on nomination by JACS involved unconscionable conduct depriving the Club of its option to acquire the land, so that Poplar should be held to hold the property upon constructive trust for the Club. The Club, of course, must fulfil the obligation to pay the specified sum. We say that maintains whether the agreement is terminated or not. That is because the White City agreements were procured by the efforts of both JACS and the Club and a central contribution of the Club to that process was the preparedness to surrender its lease. As the Court of Appeal observed:
The primary judge held that “the only way in which” SGS and Maccabi “would carry on negotiations and grant an option, was if this [surrender] occurred” –
by the Club. That is the Court of Appeal at paragraph 63, volume 2, 606.
Now, the options in clause 8, of course, I have made that crafted to reflect the substance of 3.7. We submit that the cases, particularly in the United Kingdom are, whilst in point of fact distinguishable, are in fact of a piece with this case and they stand broadly for the propositions that if you have an agreement or arrangement which deals with the acquisition of property and the arrangement fails to address, either by its uncertainty, deficiency, or unenforceability, an eventuality which is contrary to the central land arrangement this failure - and this failure leads to conferring upon a party or its nominee an opportunity to seek to act in its self‑interest and acquire the property for its own account contrary to the central tenant, the act by that party in so doing and thereby denying the other party the opportunity which it has obtained as a result of the arrangement is unconscionable.
Can I then turn to the question of just allowances. The submissions we wish to make in this respect are set out in our written submissions at paragraphs 81 to 83. The approach of the Court of Appeal was wholly correct and should be upheld, and that is the Court of Appeal’s judgment at paragraphs 113 and 114 at appeal book 623 to 625.
The appellants place store in a document handed up by the Club at the conclusion of the appeal setting out the Club’s proposed relief. That document followed the form of the orders set out in the further amended statement of claim, and that is order 2 at appeal book 1, page 3, except that in identifying the amount to be paid by the Club to Poplar for the transfer of the land, it added words “such other amount as the Court considers appropriate”. The appellants chose not to lead any evidence upon that matter and therefore cannot now be heard to complain that the Court of Appeal did not make just allowances.
In that regard also, I should make reference to the reliance now placed by the appellant in their original submissions at paragraph 76 to Giumelli v Giumelli. That case formed no part of the appellants’ submission either at first instance or in the Court of Appeal. That, we submit, was because the only relief which was practically available to meet the position of the club was a constructive trust. That was because Poplar was a single purpose company and there was no suggestion or evidence that JACS was a company of substance beyond what it had acquired under this arrangement.
It was not as in Giumelli where the case proceeded on the basis that the right of occupation could be the subject of adequate compensation by the payment of moneys. This case was conducted on a binary outcome basis, namely we either succeeded in establishing a constructive trust, or we would wholly fail because the relevant companies had nothing which was, as it were, able to meet our needs. It was not because - and I will come to that when I deal with the Walker appeal - the position of JACS was at odds with that of the Walker Corporation and therefore were not likely to put forward that point. It was because there was no point to put forward.
Can I now turn to the first notice of contention. Was the MOU terminated by JACS? This is dealt with in submissions in‑chief on the first notice of contention and our reply submissions which we handed up on the last occasion. The trial judge dealt with the matter at appeal book 2, 538 at paragraph 69 and following. Can I take your Honours shortly to that? At paragraph 69 your Honours will see the notice of termination.
Paragraph 70 sets out the particulars advanced which were appended to the notice of termination. Your Honours will find the actual notice of termination at joint appeal book 7, 2588 to 2590. The second and third pages are reversed which makes it a tad confusing. The notice particularised nine breaches which were summarised by his Honour at paragraph 70. It is not the case that every breach which appears in paragraph 70 was pursued by the appellant at first instance. The breaches pursued by the appellant at first instance are set out at paragraph 77 of the trial judge’s judgment at page 542 and these are the breaches which are said to justify the notice of termination of 12 April 2006 and those breaches are set out (a) to (m) in paragraph 77.
Your Honours will see at the beginning of paragraph 77 that his Honour referred to Mr Ireland’s final submissions “omitting references to tender bundles, transcripts and affidavits”. Your Honours will find the relevant submissions and the relevant evidentiary references cross‑referenced to the appeal book now as annexure A to the appellants’ reply submissions on this notice of contention. If your Honours have that before your Honours as we go through this issue, it will be the easiest source of the relevant material to deal with it because his Honour excluded references to those in his Honour’s judgment.
HAYNE J: What document am I looking for?
MR HUTLEY: If your Honours go to the document “Appellants’ Reply Submissions – Contention” filed on 8 February 2010 and your Honours go to page 6 of that, your Honours will find annexure A, which is the actual final submissions of our learned friends, but the relevant references cross‑referenced to the appeal book. Just to explain what happened, to return, if I can go back to the judgment, his Honour dealt with that at paragraph 78 of his Honour’s judgment at page 546. It says:
I cannot see any answer to those submissions, nor can I see where the plaintiff has provided any such answer. The real question is whether adding them all up they amount to a party indicating that it was not prepared to perform its contract. In my view there is no doubt that the answer to that question is “Yes”. Accordingly, JACS was entitled to terminate the MOU on 12 April 2006.
His Honour then turned to the alternate case put by our learned friends at paragraph 79 which, in effect, relied on matters which were said to be a breach from 12 April to the trial.
FRENCH CJ: Now, what you have done, I think, in your written submissions is to go through on a fairly detailed basis with essentially factual responses to all of these matters in 77, is it not?
MR HUTLEY: It is not just a question of factual responses in a sense, your Honour.
FRENCH CJ: Yes, and characterisation and so forth.
MR HUTLEY: It is a question of - yes.
FRENCH CJ: You are not proposing, are you, to take us through each of those, paragraph by paragraph?
MR HUTLEY: Well, your Honour, I am in your Honour’s hands. Justice Gummow on the last occasion suggested that we should rub your Honours’ noses in the facts. Well, the question is it was particularly vis-à-vis this particular ‑ ‑ ‑
GUMMOW J: I suggested really it should have been happening in the Court of Appeal, I think.
MR HUTLEY: Your Honour, the matter was debated in the Court of Appeal. I was going to come to the Court of Appeal judgment. It simply was not done. The question is what is the best and most expeditious way to assist your Honours?
FRENCH CJ: Well, it seems to me that we can read all of those for ourselves, and have. But perhaps if you want to take us to – I hesitate to call them killer points, but the salient points.
MR HUTLEY: I will give your Honour a flavour of some of ‑ ‑ ‑
HAYNE J: At this stage without developing them, your three best points. I once heard Chief Justice Gibbs say to counsel, “State without developing them your three best points” followed by “The Court would not be assisted by the development of any of those points. We are not stopping you. We simply inform you of that fact.”
GUMMOW J: We are not like that.
FRENCH CJ: No, not at all, Mr Hutley.
MR HUTLEY: It gives you warm huggy welcoming feeling. Your Honour, the difficulty one has with this is – could I take your Honours, for example, to just the first point to show the quality of the problem which has arisen; that is point (a)? Now, it says the breach which his Honour found, or the event which is said to be either a breach or part of a breach, he is not quite sure, it says:
shortly after Mr Kolev became president of WCTC in October 2005, WCTC engaged in conduct that was incompatible with the MOU and in breach of the aforementioned clauses and which directly threatened the Project. This included entering into discussions on behalf of WCTC with third parties in breach of clause 3.3 and undertaking actions to disrupt the Project described in the MOU in [breach of clauses 3.1 and 3.2 –
Now, if your Honours go to annexure A and your Honours go to tab (a) to see the references, the evidence which is relied upon your Honours will see is tender bundle 1199. Now, that is a letter at volume 6, page 2128 and 2129. Now, that is a letter of 4 November 2009.
FRENCH CJ: 2005.
MR HUTLEY: 2005, thank you, your Honour. That is all it is. It is a letter and it says:
This letter is to serve as notice to the White City . . . of breaches by the Club . . .
The breach is of Clause 3.3 which reads “WCTC has agreed . . .
1. When the President entered into discussions with David Lloyd and Bill Guile of Next Generation Clubs -
Now, if your Honours go through our submissions those discussions in fact took place before the MOU was signed. In fact, we have referred to in our submissions the cross‑examination in relation to it in which his Honour observed that this could hardly be a breach of the contract. In fact, he described our response in cross‑examination as a pretty good point. Then it says:
When WCTC negotiated with TNSW to alter the conditions of their lease of the clubhouse and the licence agreement on the land -
It goes on and says:
When the President was involved in negotiations with investors to secure the site for the Club as revealed on Sunday 23 October 2005 during the then Presidents presentation to members of the plans to redevelop.
Notwithstanding these breaches, JACs remains committed to the Club and its members, however we reserve our rights under the MOU.
One then, in effect, goes to - could I take your Honours to make out the first point. The discussions with Next Generation your Honours will find the subject of cross‑examination at transcript 124 to 125 which is at application book 1, 329, line 20 to 393, line 23. If your Honours go to that, your Honours will see that the trial judge said that could hardly be a breach because it is before the events. Then if one goes – I see the time, your Honours. This is, with respect to his Honour, when one goes through these things, often we have the position that there are assertions in correspondence which are never proved.
FRENCH CJ: Mr Hutley, can I get an indication from you of how much longer you are likely to be?
MR HUTLEY: Your Honour, I will truncate what I wish to say about this down to the shortest of short points since your Honours consider that it is appropriate to go to the transcript and just give some highlights, then after that I will essentially be engaged in dealing with the Walker appeal, which should not take more than an hour or so, an hour and a half, two hours ‑ ‑ ‑
HAYNE J: That is delightfully vague, Mr Hutley.
MR HUTLEY: Your Honour, the difficulty one has is, I have some notes. I could get through those notes in about an hour and a half. I am only concerned that there are some knotty questions in that and I am anticipating quite a deal of questioning. I will certainly finish well in the morning.
FRENCH CJ: I think you really should give some consideration to a fairly focused presentation on Walker.
MR HUTLEY: As your Honour pleases.
FRENCH CJ: Without wishing to constrain you unduly.
MR HUTLEY: Your Honour, I will.
FRENCH CJ: It is really not the same scale as this. Mr Ireland, how long are you likely to take?
MR IRELAND: I would think about half an hour at the most.
FRENCH CJ: Thank you. Ms Taylor.
MS TAYLOR: I should not think more than about 20 minutes, your Honour.
FRENCH CJ: All right. Thank you. We will resume this matter at 9.45 tomorrow morning and the Court will otherwise adjourn until 9.15 am for publication of reasons.
AT 4.21 PM THE MATTER WAS ADJOURNED
UNTIL WEDNESDAY, 31 MARCH 2010
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