John Alexander's Clubs Pty Limited & Anor v White City Tennis Club Limited

[2010] HCATrans 9

[2010] HCATrans 009

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 THURSDAY, 11 FEBRUARY 2010, AT 10.01 PM

(Continued from 10/2/10)

Copyright in the High Court of Australia

__________________

MR JACKMAN:   Your Honours, there are three principles of law that we say are both well established and decisive of the appeal that we bring.  The first proposition is that a person is a necessary party to proceedings and must be joined as a party if orders made by the Court may directly affect the right to the liabilities of that person.  That, in short, is the test adopted by the Full Federal Court in News v Australian Rugby League and it is also the test correctly stated by the Court of Appeal, at least in the joint judgment of Justice Macfarlan, with whom Justice Giles agreed, at paragraph 38, which I will come to in due course.

The second proposition is that if a superior court makes an order in breach of that obligation, then while the order is not a nullity a person directly affected is entitled, as of right, to have any such order set aside.  For a modern restatement of that proposition in the context of the Supreme Court of New South Wales can I refer your Honours to the judgment of the Court of Appeal, particularly of Chief Justice Spigelman in BP Australia Ltd v Brown and Others 58 NSWLR 322 at paragraphs 133 to 134.

GUMMOW J:   Which paragraph in your written submissions are we at?

MR JACKMAN:   We make reference to that in our submissions in reply at paragraph 9(a) where we refer to BP Australia Ltd v Brown and the judgment of Sir George Rich in Cameron v Cole, that is that the non‑party as of right may set aside the orders made in his absence, although until that happens the order is not a nullity.

The third proposition is that the non‑party who is so affected does not lose the right to have the order set aside because it may have knowingly acquiesced in the proceedings being heard in the absence of that person as a party or, put slightly differently, it is the responsibility of the party prosecuting the proceedings to ensure the joinder of necessary parties, that either being the plaintiff or cross‑claimant as the case may be.

Again, News v ARL provides a powerful illustration of the point.  In that case the ARL wrote a letter to some hundreds of rugby league players advising them of the proceedings and inviting them to participate.  The players of course knew about the proceedings because the dispute had led to their salaries being tripled overnight.  The letter inviting them to participate in the proceedings did not mean that they lost their right as non‑parties to have the order set aside because it is the responsibility of the party prosecuting the proceedings to ensure correct joinder.

Again, in the New South Wales context, the proposition that it is the responsibility of the party prosecuting the proceedings was affirmed in Wentworth v Wentworth 52 NSWLR 602 at paragraph 160 in the judgment of your Honour Justice Heydon, with whom Justices Fitzgerald and Davies agreed.

Now, with those propositions in mind can I turn to the reasons of the Court of Appeal and in particular ask your Honours to go to volume 2, page 702.  At the top of page 702 one finds paragraph 38 which correctly stated the test for necessary parties drawn from News v ARL as to whether the:

orders made by the Court may directly affect the rights and liabilities of that person –

and when one goes to the passage that is referred to there, one finds referred to as an easy case or a central illustration of that proposition the case where one party claims an interest in land because that claim will, to a corresponding extent, detrimentally affect the claims of other people in the same land.

Now, paragraph 39 is a paragraph of some five sentences, each of which repays close attention, in our respectful submission.  The first sentence begins with a proviso which I will come to in due course, and then says that:

Walker Corporation is not . . . directly affected by the orders which have been made on the appeal, nor would it be by the varied orders sought by the appellant. 

Now, of course, the orders made on the appeal include the declaration of a constructive trust and an order that Poplar transfer to WCT the land, that is, its fee simple in the land which would be a registrable transfer that in due course would become indefeasible upon registration.  It is obvious, in our respectful submission, that that order directly affects the interests of anyone else who claims an interest in the land because it is a corresponding detriment to those in the position of Walker Corporation who have or claim an interest in the same land. 

As to the varied orders, they are dealt with in paragraph 48 of the judgment at page 704.  That is the variation that if Poplar does not comply with the order to transfer the land to WCTC then “the Registrar of the Court” can execute all documents to transfer the land as expeditiously as possible.  Paragraph 49 says that that is appropriate:

to ensure achievement of the objective sought to be achieved by the Court’s orders of 3 June 2009.

That is get the land out of the hands of our mortgagor, Poplar, and into the hands of WCT against whom we have no direct rights, only a priorities fight in other proceedings.

GUMMOW J:   This seems to overlook what might have been a question, namely, whether a constructive trust of that nature should be awarded in the first place, given the presence of your outstanding interest.

MR JACKMAN:   Quite.  The Court of Appeal knew about our interest.  They refer to us as the financier when they are dealing with just allowances at the end of the judgment and of course they knew about Justice Tobias’ interlocutory judgment which I am going to come to.

GUMMOW J:   It could not be a question, looking at the second sentence, of you pursuing “separate proceedings”.  The question would be whether there should be an adverse result in the first proceeding.

MR JACKMAN:   Quite.  In our written submissions we have collected the cases such as Giumelli, the point being reiterated in the Brambles Case and Farah v Say‑Dee itself that one does not readily declare constructive trusts, one uses the constructive trust as the last resort after looking at the availability of other remedies.

GUMMOW J:   Added to that there is a Judicature Act provision in New South Wales, is there not, that so far as possible the dispute should be wrapped up in the one proceeding.

MR JACKMAN:   Yes.  The first sentence, we would submit, is just obviously wrong.  The second sentence of paragraph 39 says that:

The appeal has only resolved the issues which arose between the appellant and the respondent.

If that is what the Court of Appeal thought they were doing they had no right to get into constructive trusts and indefeasible transfers of land at all.  The effect of the court’s orders is radically to affect the rights of people beyond the appellant and the respondent through the creation of indefeasible proprietary rights.  The third sentence says that:

Walker Corporation’s claim that it has an equitable interest in the land ranking in priority to that of [WCTC] may be pursued by it in separate proceedings against the appellant.

Well, yes, we can start separate priority proceedings in the event WCTC itself has started some proceedings in the Supreme Court, but if we win that priority fight we are still stuck with the Court of Appeal’s order 4, which orders that the land be transferred upon payment of 6.7 million from Poplar to WCTC.  That is an absolutely absurd result.  If we have priority to WCTC, Poplar is still bound to comply with a court order that it transfer the land to a party that lacks the priority which, on this assumption, it will be found we enjoy.  The fourth sentence says that:

In those proceedings it would be open to Walker Corporation to seek interim relief preserving the status quo pending final determination of its claim.

That is, the Court is recognising that we would need another court to stop our rights being taken away from us.  The proposition itself emphasises that the Court of Appeal’s orders do directly affect us, otherwise we would not be needing interlocutory relief to protect our position.  The appropriate order is not to set up a regime whereby we need to apply for an interlocutory injunction with an undertaking as to damages and so on because we have an entitlement as of right to have these orders set aside in the first place.  The fifth sentence is a conclusion which falls as a consequence of the earlier sentences.

Now, we do not find in our learned friend’s written submissions any contention to the effect that we were not directly affected.  It seems to be common ground between the parties that we were, and the Court of Appeal was simply wrong to have approached the matter in the way in which they did in paragraph 39.  At the end of paragraph 40 there is a further error of law:

As Walker Corporation continues not to be a party to the proceedings it is not appropriate to consider its claims for variations of the orders made in the proceedings.

That is simply wrong.  It is basically saying, well because you were not joined as a party – perhaps wrongly – therefore, you have absolutely no right to have the orders set aside.  Now, that is the direct opposite of established principle that a non‑party is entitled as of right to have orders set aside which directly affect that party.  Paragraph 41 reflects the same proposition that it is said because our “application for joinder fails” the whole motion should be dismissed with costs.  That is, we have no standing to complain about the orders being made in our absence because they were made in our absence.

News v ARL again provides a powerful illustration as to the error inherent in that proposition because the players and the coaches, who are the non‑parties there, came along, not as parties, but as non‑parties and had the orders set aside because orders had been made in their absence.  The orders, of course, were set aside on the substantive merits of the argument as well, but one of the reasons for setting aside orders on the cross‑claim was the failure to draw in necessary parties, being the players and coaches. 

FRENCH CJ:   I mean that is all informed by the conclusion that you can adequately protect your rights in separate proceedings, that you knew about the proceedings, therefore, there is no justification for joinder and go away and do your own thing.  It is not really saying, is it, that it is a precondition to your entitlements that you be joined as a party?  It is rather ‑ ‑ ‑

MR JACKMAN:   Possibly.  If one reads it rather generously to the Court of Appeal in that way, then I take your Honour’s point.  We had read it as saying that if we are not a party then the whole motion goes.

FRENCH CJ:   But that is all, I think ‑ ‑ ‑

MR JACKMAN:   But if your Honour reads it in that broader spirit, then the Court of Appeal is wrong for the reasons that I put in relation to paragraph 39.  Now, 42 to 44 pick up the proviso that is referred to at the beginning of paragraph 39.  Paragraph 42 sets out the terms of the injunction granted by Justice Tobias restraining the Registrar‑General from registering “an interest over the interest of Poplar Holdings . . . until further order”, that being subsequently extended.

Now, if one goes back to page 574I the last page of Justice Tobias’ interlocutory judgment making that injunction, paragraph 30, the culmination of the reasoning is the:

Taking all the foregoing matters into account and, in particular, the fact that the order sought will only prevent the registration of Walker’s mortgage or the registration of any other interest in the option land for a period of four weeks, in my view the order should be made without the necessity of WCC providing an undertaking as to damages whether secured or not. 

Of course, the anticipation of four weeks has now blown out to almost a year and, although there is an undertaking as to damages, it is not secured and Justice Tobias recognised back on page 574F, paragraph 18, that the evidence established that WCTC:

is unable to provide security in respect of that undertaking.  Furthermore, the undertaking would be practically worthless, as the assets of WCC do not appear to be of any real commercial value.

The injunction that is granted is therefore aimed at Walker Corporation.  It is to stop us from registering an interest, registering our mortgage or, we would say by extension, an interest in the land pursuant to exercise of our charge over the interest which is being claimed by WCTC in the proceedings.  Paragraph 44 is the way in which Justice Macfarlan saw justice being done in this case:

To ensure, if a court holds that that is appropriate, that Walker Corporation Pty Ltd . . . is able to obtain registration of an interest in the land in priority to a registered interest which the appellant may acquire ‑

Justice Macfarlan contemplates WCTC will have registered its interest:

pursuant to its orders . . . it should be clear that this injunction is subject to any different order that may be made by the Supreme Court of New South Wales in any other proceedings to which the appellant and respondents are parties.

We say several things about that.  The first is that his Honour does not seem to recognise that if we win the priority dispute we still cannot get a transfer of the land to any purchaser from us exercising our power of sale without Poplar breaching order 4, because order 4 compels Poplar to transfer the land to WCTC.  His Honour assumes here in paragraph 44 that WCTC by this point will have actually registered its interest, making it indefeasible.

The second thing we say about it is that the proviso in the last several lines is rather oddly conceived because it seems to contemplate that these other proceedings will be proceedings to which the appellant, WCTC, and the respondents, JACS and Poplar, are parties.  Our whole point is that we are a necessary party to this and there is no reference to us being a party in this proviso.  It is just not clear what kind of proceedings his Honour has in mind – while recognising at the beginning of the paragraph that the proceedings will deal with our priority dispute, at the end of the paragraph we are not referred to as a potential party in that.

Thirdly, we say we are prejudiced in the meantime because although there is now an undertaking as to damages in place it is worthless without security.  Part of our motion before the Court of Appeal was to seek security for the undertaking as to damages.  That was order 2 which your Honours will find at page 645.  Order 2, paragraph (a) sought an order that WCTC give an undertaking as to damages.  We were not aware at that time that there had been an undertaking given on the first day of the trial but, importantly, we sought security for that undertaking bearing in mind that Justice Tobias had said the undertaking was worthless.

The undertaking as to damages extends to the benefit of third parties; that is NSW UCPR rule 25.8.  We are perfectly entitled to go to the court and ask for security for the undertaking.  Nowhere does the Court of Appeal deal with that.  Justice Macfarlan and Justice Giles ignore it completely.  In a sentence which I will take your Honours to Justice Basten called the application tendentious but did not apply anything that might be described as judicial reasoning to it.

GUMMOW J:   What do you want us to do, Mr Jackman?  I have been looking at your appeal notice at pages 719 and 720.

MR JACKMAN:   What we want your Honours to do is to set aside orders 3 and 4 made by the Court of Appeal on 3 June.

GUMMOW J:   Well, if Mr Ireland was successful on his appeal, what would you want us to do?

MR JACKMAN:   If he is successful, your Honours will be setting aside orders 3 and 4, together with all the other orders that were made and our application coincides with Mr Ireland to the extent of having orders 3 and 4 set aside.

HEYDON J:   Let us just get this straight.  Orders 3 and 4 made on 3 June?

MR JACKMAN:   On 3 June.

HEYDON J:   There are so many orders.

MR JACKMAN:   If your Honours go to page 628 and in terms of 23 July 2009 orders, if your Honours go to page 709.  We would also seek to have orders 1, 2 and 5 on page 709 set aside. 

GUMMOW J:   What would happen to the injunctive system that is in place?

MR JACKMAN:   That will remain because it actually works to our benefit as well and we are not asking your Honours to make a decision about security of the undertaking as to damages.  The injunction actually – because it restrains the Registrar-General, it will stop WCTC from registering any transfer which would give it indefeasibility against us.

GUMMOW J:   But if Mr Ireland was successful on his appeal ‑ ‑ ‑

MR JACKMAN:   The injunction goes.

GUMMOW J:   Well, you say it goes, but by virtue of what order?  Do you want us – what I am trying to get at, on that hypothesis, do you want us to make an order dealing with the injunctive system that is in place or would you go back to the Supreme Court?

MR JACKMAN:   No, if Mr Ireland wins and we win then the injunction should go and Mr Ireland is seeking to have all the orders of 3 June and 23 July set aside, and a reinstatement of the trial judge’s order is what Mr Ireland wants.  We would support that, but in the event that Mr Ireland loses and we win, then we seek orders 3 and 4 of 3 June to be set aside and orders 1, 2 and 5 of 23 July set aside and on that assumption – that is Mr Ireland losing – the injunctive system would remain in place. 

HEYDON J:   Where would that leave White City Tennis Club Limited?  They would be left to continue this litigation in the Equity Division, in effect, about priorities.

MR JACKMAN:   No.  Well, if ‑ ‑ ‑

HEYDON J:   If Mr Ireland loses.

MR JACKMAN:   If Mr Ireland loses and we win then there will be a priorities dispute which is underfoot at the moment, proceedings have been commenced.

HEYDON J:   The outcome of that would end up with the register having what appearance?  Who would appear as owner of the land?

MR JACKMAN:   Either Poplar or, if WCTC pays $6.7 million, WCTC, subject to the judge in those new proceedings also finding a constructive trust, and in those proceedings we may well lead additional evidence that was not led at the trial before Justice Young concerning whether there should be a constructive trust.

HEYDON J:   I am just wondering, a person in your position in theory might be entitled, as it were, even if Mr Ireland loses, to have the whole of the Court of Appeal’s orders set aside, or alternatively might be entitled to an order for a new trial, so that you can try and do better in a new trial and any appeal from it than Mr Ireland managed to do in the appeal.

MR JACKMAN:   Yes.

HEYDON J:   You do not actually ask for that.

MR JACKMAN:   No, we do not ask ‑ ‑ ‑

HEYDON J:   But you are contemplating that type of battle in the second proceedings?

MR JACKMAN:   Yes, we are.  If Mr Ireland – as I think I have put – if Mr Ireland loses but we win we would like the injunctive system to remain in place because although we are not entirely happy with it, it does stop Mr Hutley’s client from getting indefeasibility against us.

HAYNE J:   The necessary premise for you winning is, is it not, that you are a necessary party?

MR JACKMAN:   Correct.

HAYNE J:   Yet the outcome you contemplate is fractured proceedings?

MR JACKMAN:   Yes, in view of ‑ ‑ ‑

HAYNE J:   That is, if Mr Ireland were to lose you say, well, it can all go off into the priorities fight anyway.

MR JACKMAN:   Yes.

HAYNE J:   It seems to have straddled a barbed wire fence.  You are a necessary party ‑ ‑ ‑

MR JACKMAN:   Well, yes, I take your Honour’s point.  An alternative regime would be remitting this case to a retrial in the Equity Division, and it may well be that they would be heard together with the priorities dispute; that may well be a neater solution, I take your Honour’s point.

HAYNE J:   I have not thought it through, I am just struck by an apparent disconformity; it may be apparent, not real, between the outcome you contemplate and the premise from which your argument begins.

MR JACKMAN:   Yes, an intellectually tidier regime would be the remitter of these proceedings to the Equity Division, and they would almost certainly be heard together with the priorities proceedings.

HEYDON J:   Would John Alexander’s Clubs Pty Limited be party to any new proceedings?  I mean, if there were an order for a new trial then they would be.  If there is, on the other hand, what you came here asking for, namely, just that the second trial and the equity proceedings proceed, they would not be presumably party ‑ ‑ ‑

MR JACKMAN:   They are actually party to those proceedings, they have been joined.

HEYDON J:   I see.  Of course, if you are going to run this question of whether there should have been a constructive trust at all, I suppose they are a necessary party to those proceedings.

MR JACKMAN:   Yes, yes.

HEYDON J:   It seems to me the tidiest solution is a new trial in these proceedings on terms that the other proceedings be discontinued.

MR JACKMAN:   Yes, I accept that because then the trial in these proceedings can be encompassed within ‑ ‑ ‑

HEYDON J:   Would be conducted in the way they should have been conducted if you are a necessary party and should have been joined at the outset.

MR JACKMAN:   Indeed, and the priorities issues will then be fought out in those ‑ ‑ ‑

GUMMOW J:   What was the relief you sought in your motion in the Court of Appeal?  The source of this problem in a way is that Mr Ireland won at first instance and lost in the Court of Appeal.

MR JACKMAN:   Yes.

GUMMOW J:   You are really saying he should have won in the Court of Appeal.

MR JACKMAN:   Yes.

GUMMOW J:   What was your motion in the Court of Appeal?

MR JACKMAN:   Our motion in the Court of Appeal is on page 644 and the orders are on 645 to 626.  The first order is an order that we be joined.  That, as I have submitted, is really an academic question but it was put in because there is a view reflected in what the Court of Appeal ultimately decided that you do not have standing to complain about non‑joinder unless you are joined as a party, but that is an erroneous view and order 1 is unnecessary and academic.  Order 2 deals with Justice Tobias’ injunction and the terms that we sought for that injunction to be maintained.  Order 3 was consequential.  Order 3A is really the focus of the whole application.

FRENCH CJ:   I must be missing something.  How does that relate to the order of the Court of Appeal of 3 June which I think is at 628, is it not?

MR JACKMAN:   Yes.  If your Honour goes back to 625 – there was a timing issue in all of this because 628 was not produced until 12 June, so when we ‑ ‑ ‑

GUMMOW J:   The order had not been taken out, is that the problem?

FRENCH CJ:   I see.  The references to paragraphs (c) and (d), that is in the proposed orders?

MR JACKMAN:   That is right.  Paragraphs (c) and (d) correspond to 3 and 4.

FRENCH CJ:   So in fact the relief you would be seeking would relate to the declaration in paragraph 3 of the Court of Appeal?

MR JACKMAN:   Yes.

FRENCH CJ:   Okay.

MR JACKMAN:   I accept that.  Order 3B is a rather convoluted alternative which crafts some provisos to orders 3 and 4 and that is very much a second order alternative.  Order 3A is the one that we would put forward as the more appropriate relief.

GUMMOW J:   Your problem, in a way, is that you sat on the fence until the Court of Appeal had made its orders.

MR JACKMAN:   And in that regard we are in exactly the same position as the players and coaches in News Limited v ARL.

GUMMOW J:   I realise that.  I am not worried about principle, I am worried about practicalities.  You sat on the fence.  If you had jumped off the fence before the Court of Appeal made its decision this mess might not have emerged.

HEYDON J:   Justice Gummow is a man of almost infinite optimism.

MR JACKMAN:   At any rate, that is how it occurred and we are comforted by the thought that News v ARL raised exactly the same scenario where players and coaches, with full knowledge of the proceedings, themselves did not take up the invitation to participate in the proceedings but were wrongly not joined by the party prosecuting them on the cross‑claim and in the Full Court the Full Court held that not only did the cross‑claim fail on its merits ‑ ‑ ‑

GUMMOW J:   We have grasped what that case decided, Mr Jackman.

MR JACKMAN:   Could I say some things about the separate judgment given by Justice ‑ ‑ ‑

GUMMOW J:   We have had a lot of repetition this week.

MR JACKMAN:   I am sorry.  Can I ask your Honours to go to the separate judgment of Justice Basten, in particular at page 696.

HEYDON J:   That seems to assume that one can lose a property right without a court ever sanctioning it or ordering it or investigating whether it is just or not.

MR JACKMAN:   It is astonishing reasoning, in our respectful submission.  Paragraph 23 says that his Honour does not even have to consider whether we were directly affected.  Well, that is the central question.  Justice Macfarlan recognised that and stated the test of directly affected.  Justice Basten presumably recognised we were directly affected and therefore reasons in a different way that he did not even have to consider it and then goes on in paragraph 23 to say in a very surprising sentence that it is not:

necessary to determine whether Walker Corporation would now be entitled, given the history . . . to assert that interest against the appellant in separate proceedings.

Well, Justice Macfarlan at paragraph 39 recognised that we were fully entitled to do so.  We must be fully entitled.  Paragraph 24 is the only paragraph in which his Honour deals with our application for security for the undertaking.  He simply calls it “tendentious” and moves on.  Paragraph 27 is really at the heart of Justice Basten’s reasoning.  It begins with an obvious proposition that we were trying to:

reopen the appeal so as to achieve a different result.

Obviously, because we wanted to set aside the two orders that did all the work, namely orders 3 and 4.  Then he says:

That cannot properly be done at the instigation of a party who was not only not a party to the appeal, but was not a party to the proceedings in the Equity Division.

That is, you cannot complain about orders affecting you as a non‑party because you are not a party.  Now, that is contrary to all the cases that we have referred to in our written submissions and contrary to fundamental principles of procedural fairness.

GUMMOW J:   What does Meredith say about this, Hancock?

MR JACKMAN:   Well, those cases deal with a rule of the Uniform Civil Procedure Rules (NSW). Can I hand some copies to your Honours of the relevant part of the rules and his Honour has erred in dealing with the relevant rule. We have copied there the whole of the division dealing with setting aside and variation of judgments, but the relevant rule is 36.16 which begins on page 8257. Now, 36.16 at the foot of 8257 begins in sub rule (1) by saying:

The court may set aside or vary a judgment or order if notice of motion for the setting aside or variation is filed before entry of the judgment or order.

So that is the general circumstance.

GUMMOW J:   Well, you were within (1).

MR JACKMAN:   No, we are within the special cases in (2).

GUMMOW J:   But you were moving before the orders had been taken out, were you not?

MR JACKMAN:   We were moving before it had been taken out, yes, but what we want to emphasise is that we fall within the special cases in (2):

The court may set aside or vary a judgement or order after it has been entered if:

Paragraph (b) at the top of the next page:

(b)it has been given or made in the absence of a party ‑ ‑ ‑

GUMMOW J:   But it had not been entered.

MR JACKMAN:   His Honour finds that, in effect, it had because it was recorded in the court’s computer.

GUMMOW J:   Yes.

MR JACKMAN:   So, can I assume that his Honour is right about the effect of the computer.

HAYNE J:   Where does he find that?

GUMMOW J:   If that is correct that has an enormous significance.

MR JACKMAN:   It is paragraph 3, I think.  They are taken to be entered when they are recorded in the court’s computer and so apparently that occurred on 3 June.  Let me assume that that is correct.

FRENCH CJ:   Is that a quote, the reference to “entry”?  I notice the quotes around “recorded in the court’s computerised record system”.  Is the reference to “entry” a reference to what the rule says?

MR JACKMAN:   Yes, that is a quote ‑ ‑ ‑

HAYNE J:   Could we be provided with 36.11 at some point?

MR JACKMAN:   Yes, we will do that, yes.

HEYDON J:   Can I just register this difficulty?  On page 628 we find a document headed “AMENDED JUDGMENT/ORDER”.  Judgment or order was given on 3 June and then it says “Date entered” and in handwriting “12/6/09”.  In the same handwriting on the next page it says “N Gray (LS) Chief Clerk”.  Now, that looks as if a human being, an officer of the registry, formed the view that it was entered on 12 June.  Your motion was filed on what day?

MR JACKMAN:   Our original notice of motion, I do not think, is in the appeal books. 

HEYDON J:   The amended one was ‑ ‑ ‑

MR JACKMAN:   I think it was 11 June.

HEYDON J:   But on 10 June, Justice Macfarlan, according to the last sentence at page 644, directed:

that this Notice of Motion would be determined on the papers –

So it had been received.  It was in the judge’s possession before 12 June.  How does one reconcile, on the one hand, the Court of Appeal’s reasoning and, on the other hand, the handwriting on the amended judgment?

MR JACKMAN:   One cannot.  They are contradictory and ‑ ‑ ‑

HEYDON J:   Well, do you make a submission ‑ ‑ ‑

MR JACKMAN:   We submit that the handwriting on the orders at 628 is the court’s acceptance of the date of entry of 12 June. 

HEYDON J:   That means we need not go to the special cases, if that is correct.

MR JACKMAN:   No, if that is correct we need not go to the special cases because original motion was filed on the 11th, our amended motion was filed on the 22nd and the 22nd was within 14 days.

HEYDON J:   You said your motion was filed on the 11th, but Justice Macfarlan made an order about it on the 10th.

MR JACKMAN:   Sorry, on the 10th, yes it must have been the 10th.

GUMMOW J:   Well, we need to find out the date of the original.  It should have been in the index, even if it is not reproduced.  The myriad of people assisting you should be able to find that.

MR JACKMAN:   Can I just take that question on notice and see if I can find a reference to it?

Having put that submission, assuming that Justice Basten was correct that the orders were entered on the 3rd because of the computer entry, subrule (2)(b) applies.  It was an order that:

has been given or made in the absence of a party, whether or not the absent party had notice of the relevant hearing or of the application for the judgment or order ‑

So we fall within subrule (2).

HEYDON J:   You were not a party, though, to the appeal or to the proceedings.

MR JACKMAN:   As a matter of construction of the rule that must mean in the absence of a person, whether or not actually a party to the proceedings because it follows paragraph (a) which deals with default judgments, which would be where someone is joined but is physically absent.

HAYNE J:   I am sorry.  What is the argument?  That “party” does not mean party, it means person – because?  What is the argument?

MR JACKMAN:   Because (b) adds something to (a) and (a) deals with default judgments which are where someone is actually joined but is physically absent.  If (b) is to add something to that, then the word “party” must mean “person”.  Then paragraph (3A) is what Justice Basten had in mind:

If notice of motion for the setting aside or variation of a judgment or order is filed within 14 days after the judgment or order is entered, the court may determine the matter, and (if appropriate) set aside or vary the judgment or order under subrule (1), as if the judgment or order had not been entered.

Then (3C) says that time cannot be extended.

HEYDON J:   But your motion was filed within 14 days of 3 June when the judges came on to the Bench and said:  “Appeal allowed.  I publish my reasons”.

MR JACKMAN:   Yes.  Even if one assumes that were not the case then we are entitled to move under subrule (2), which is not affected by this 14‑day requirement; that is only the generality of case under subrule (1) and in any event subrule (4) says:

Nothing in this rule affects any other power of the court to set aside or vary a judgment or order.

It is part of the inherent jurisdiction of the court to set aside orders made in the absence of a person who is directly affected by the orders.

GUMMOW J:   Stopping there for a minute, rule 36.11 has very significant consequences on one view of it by some secretive process.

MR JACKMAN:   Yes.

GUMMOW J:   No one is to know when this event has happened, are they?

MR JACKMAN:   Quite; but what we do know publicly is what appears on the sealed copy of the order, which is at 628, that is that it was ended as far as the Court is concerned on 12 June.

HAYNE J:   That document is headed “AMENDED JUDGMENT/ORDER”.  Does that matter?  The amendments appear to be those that are sidelined on page 628.  They seem to be in the nature of formal changes.

MR JACKMAN:   They are.  We do not have the original judgment or order that was entered so we do not know what date appeared on that.

HAYNE J:   Or whether a piece of paper was ever produced.

MR JACKMAN:   Indeed.

FRENCH CJ:   The date of entry under order 36.11(2) is:

Unless the court orders otherwise, a judgment or order is taken to be entered when it is recorded in the court’s computerised court record system.

Apart from whatever inferences one can draw from the handwritten entry there is no record of any order being made otherwise, yes.

MR JACKMAN:   That would be an otherwise order.

FRENCH CJ:   That is what you are suggesting.

MR JACKMAN:   The court has otherwise ordered that it is entered on 12 June.  At any rate, because it is part of the inherent jurisdiction of the court to set aside orders made in the absence of a non‑party who is directly affected, 36.16 does not apply at all.  That is, in essence, what subrule (4) says.

HAYNE J:   I am sorry to harp on about 36.11.  Regulation 36.11(2) has to be understood, perhaps, against 36.11(2A) which provides for entry “forthwith” and if there is a direction that there be entry forthwith it:

is taken to be entered:

…

(b)when the judgment or order is recorded as referred to in subrule (2) -

which seems to have a wonderfully symmetrically circular appearance to it all but seems to present a rather radical question about courts of record and what relevantly is the record.

MR JACKMAN:   Yes, I accept that, and (2A) would be relevant on any question of construction of 36.11, but in the circumstances of this case there was not - and I stand to be corrected – there was not a direction that the order be entered forthwith.

HAYNE J:   Just so.  There was not such a direction yet it is now said that things are to have occurred as if there had been a direction for entry forthwith because Justice Basten concludes that entry occurred on the day the Court of Appeal pronounced its orders, I think, does he not?

MR JACKMAN:   Yes.

HEYDON J:   Justice Basten, incidentally, points out in paragraph 5 on page 691 that the first four orders on 628 were in the computer but orders 5, 6 and 7 were not in the computer.  It seems to me one of those orders deals with costs, which is quite an important question; another deals with “certificates under the Suitors’ Fund Act”.  Surely time would begin to run again if you are going to make radical changes like that to the orders originally filed.

MR JACKMAN:   Yes.

HEYDON J:   I pose it only.

HAYNE J:   Or it may be open to conclude that the process of entering in the computer was not complete.

MR JACKMAN:   Yes, and that would suggest that subrule 11 was not activated, that is some clerical person in the court began the task of entering the orders but did not finish it.

HAYNE J:   Certainty is of the essence of these things.  People go to gaol for disobedience of orders.  There has, therefore, to be a certainty about what is ordered, when it is ordered and the like.

MR JACKMAN:   Indeed.

GUMMOW J:   You seem to be saying you slipped through the eye of this needle perhaps and you are back in 36.16(1) because for various reasons ‑ ‑ ‑

MR JACKMAN:   Well, there are two ways in which we would slip through it.  One is 36.16(2)(b), if one construes the word “party” as just meaning “person”; the other way is through subrule (4) because the rule does not affect other powers of the court to set aside or vary, and we say on the authorities it is part of the inherent jurisdiction of the superior court to set aside orders made in the absence ‑ ‑ ‑

GUMMOW J:   Thirdly, because of some glitch in the administration it may not have been electronically entered.

MR JACKMAN:   Yes, yes, we make that submission.

HEYDON J:   You also have your subrule (3A) submission, that your notice of motion was filed within 14 days of the moment when the court – the three judges in open court announced their orders orally, which is the key moment.

MR JACKMAN:   Yes, yes.

HEYDON J:   Of those the least, I think, is subrule (2)(b).  I would not put my house on that one.

MR JACKMAN:   I beg your Honour’s pardon?

HEYDON J:   I would not, from your client’s point of view, like to think of the whole case as turning on “party” meaning “person”.

MR JACKMAN:   No, it does not, and I think we have now identified four ways in which 36.16 does not apply.  His Honour Justice Basten after making that point about the 14 day rule then says:

As the orders sought in the amended notice of motion go beyond the ‑ ‑ ‑

GUMMOW J:   Sorry, which paragraph are you reading from, Mr Jackman?

MR JACKMAN:   Sorry, the top of page 698, paragraph 27:

As the orders sought in the amended notice of motion go beyond the jurisdiction of this Court, leave to file the amended notice of motion should be refused.

That is contrary to a vast body of authority that says it is our right.

GUMMOW J:   It is that that led me to ask you what was in Meredith and Hancock.

MR JACKMAN:   They are simply cases applying 36.16 in other circumstances that do not have any particular resonance with this case.  Unless there is anything else on which I can assist your Honours, those are our submissions.

FRENCH CJ:   Thank you, Mr Jackman.  Yes, Mr Hutley.

MR HUTLEY:   Your Honours have our written submissions.  Now, we propose whilst adhering to the structure of our written submissions to depart to a degree from the order of the topics as dealt with in our submissions.  Firstly, as to the issues, whilst the issues are formulated in Part I of the respective submissions, with respect to the first three paragraphs in different terms little turns on that and because the parties have come to, in effect, issue in the submissions about the scope of the debate.

Can I next turn to Part IV, the narrative statement of facts?  The narrative statement of facts in the appellant’s submissions is not relevantly disputed, and you have been taken to some of them, but we propose, at the risk of repetition, to go over quite a few of those facts again because various aspects of them were not drawn to your Honours’ attention and we think they are important.

As a matter of history, this Club had occupied part of the building on the property which was then described as Lot 3, pursuant to a series of leases, the last of which relevantly is stated to commence on 1 October 1995.  Your Honours will find that at appeal book 5, 1748, and having regard to the surrender point, it is of some significance.  That is a lease, the lease which granted to the respondent, the Club, the rights to occupy the premises. 

Can I say a few things about it.  That lease, whilst expressed to be commenced on 1 October 1995, was in fact registered, executed and registered in May 2005.  Your Honours will find that at appeal book 1, page 46, paragraph 16 in the affidavit of Mr Simpson.  It is at about line 10 or 12, your Honour. 

Now, the preceding lease commenced on 1 July – I will come back to the details of the lease in a moment, if I might, because it is important to contextualise the history having regard to some of my learned friend’s written submissions.  The preceding lease commenced on 1 July 1985 and expired on 30 September 1995, and your Honours will find that at application book 3, 800. 

Your Honours do not need to go to it, other than for me to tell you that it contained an option clause, clause 17, which your Honours will find at application book 3, 805, which all parties took as having been exercised at all relevant times, although the execution of the subsequent lease took approximately a decade, as they do.  If your Honours would note the option clause at application book 3, 805.  If your Honours would then go to application book 3, 867.  This is a letter of 5 March 1999 from Tennis New South Wales to the White City Club.  It says:

With respect to the rental lease between your company and Tennis New South Wales which terminated on 30 September 1995 and in particular your letter dated 23 March 1995 –

that is not reproduced, your Honours –

whereby you exercised your option in accordance with Clause 17 of the above mentioned expired lease, Tennis –

et cetera, it will be contacting you in the near future, and sure enough a decade later it came about. 

There was no issue between the parties that the lease registered in May 2005 was the lease which commenced in 1995.  That appears from the appellant’s submissions at paragraph 5.  As I indicated, the final lease was relevantly in identical terms, although it contained no option for renewal and had a different term.  The term of the last lease was one of 25 years to September 2020.  Your Honours will find that at appeal book volume 5, 1748, to return to the lease.  If your Honours go to 1748 the premises are described as the:

whole of the First Floor and that part of the Ground Floor shown hatched black on the plan annexed to lease registered number –

X and, your Honours, that plan is attached to one of the part of the leases which had expired.  Your Honours will find the plan at appeal book 3, page 807.  In other words, the lease gave a lease over the entirety of the first floor of this building and a portion of the ground floor of the building, the portion being identified as I indicated by reference to an attachment to a registered instrument in respect of a lease which had expired – at volume 3, page 807.

Returning to the lease at 1748, clause 3 of that lease provided – and that is at 1752, below point 30 – that it was to be used as a registered club.  Clause 18 of that document, which is at page 1755 commencing below point 40, was a clause which colloquially is referred to as a demolition clause which entitled the lessor, for the purposes of rebuilding, reconstruction or demolition, could give the lessee six months notice of termination of the lease, subject to certain rights on the part of the lessee in the event that another building of a similar variety were to be constructed on the site to occupy that building as a social club.  So the termination carried with it a right to in effect to a degree control usage of the land thereafter should a determination be made either to restore the building or build a building having a similar character on the land.

Now, at all times from at least 1995 but in fact well before, the land was zoned open space general recreation under the Woollahra local environmental plan, and your Honours will see that reference to the zoning at appeal book 4, page 1494 at about point 30.  That fact was of some significance in the period leading up to the central events with which this case is concerned because there had been a number of proposals including one to which the Club was a party, which were subject to – sorry, proposals involving the proposed redevelopment of the land which were subject to rezoning.

That was because one of the uses to which it was hoped the land might be put, at least in part, was for residential development.  Those proposals had stretched back to at least 2000, and your Honours will see that from appeal book, volume 1, in the affidavit of Mr Simpson at pages 46 to 47, where it refers from point 50 on 46 to what is called “The Manboom Proposal”. 

That proposal had prompted the putting forward of a draft LEP, local environment plan, to alter the zoning in respect of the land to permit, at least in part, some redevelopment for residential purposes.  Your Honours will see at appeal book 3, page 888, communications from Tennis NSW concerning a proposed master plan in respect of the property, and at 886 you will see references to a draft LEP and DCP in respect of the property and all I need tell your Honours is this - there was quite great dispute and a lot of opposition to such redevelopment and rezoning.

In fact, the Club entered into an agreement, which your Honours will see at appeal book 3, page 945, called a “Heads of Agreement” of 19 January 2004 between itself and the New South Wales Tennis Association, whereunder the Club acquired an option to acquire the land, relevant parts of the land, from Tennis New South Wales, however, that was subject to the “gazettal of rezoning” and “consents and approvals” in relation to the land.  I do not need to go through all the detail, your Honour, but that rezoning did not take place, it was opposed and disallowed, so the land at all times remained – had the recreational zoning which I indicated.

GUMMOW J:   Do we know if that zoning changed at any stage during this long narrative?

MR HUTLEY:   At no relevant time, so far as I am aware, your Honour, did the zoning change.  Your Honour, the LEP was intended – it is a piece of subordinate legislation – we have it available if the Court wanted it, but I do not think it is necessary.  Now, the Heads of Agreement also reflect another matter of some significance in the history of how we got to where we got, namely, a policy of Tennis New South Wales, the owner of the land, to assist the club to advance its interests, and one can see that from clauses 3, 4 and 7.

One of the difficulties your Honours may confront when your Honours look at 3, 4 and 7 commencing on 946, 947 and 949 is that somebody has carefully highlighted them in a way which makes them almost unreadable.  Your Honours can deal with that problem because there are drafts of the relevant clause at 936, which after my junior almost blinding himself I am in a position to tell your Honours they are in identical relevant terms, and with respect to clause 7 at 939 at about line 30 I am also able to give you the same assurance.

What they reflect is assistance being proffered by Tennis New South Wales to the Club as part of the proposal.  Now, that is unsurprising having regard to what Tennis New South Wales is, and also because the Club was a member of Tennis New South Wales, and that appears from Mr Simpson’s affidavit at paragraph 4 in appeal book 1, page 44.

Now, what might be described as a policy on the part of Tennis NSW continues up to and including the central events with which this case is concerned.  For example, if your Honours go to volume 3, 877, there is an announcement in 2000 by the Tennis NSW on what is called a White City update as to what has been happening.  In the third paragraph they say:

We also acknowledge the time devoted by the White City Tennis Club Executive, who continue to work with Tennis NSW and our consultants, to represent your interests and secure a sustainable future for the White City Tennis Club.

Then there is a reference to the “preferred masterplan” and they refer to that down the bottom in the two paragraphs below the box.  Now, if one goes over to 879 at about point 25, there is a description of the masterplan in a convenient way that explains to your Honour what was being proposed.  Also, your Honours will see that also part of the proposals involve residential space, and your Honours can see that at line 8, page 880 at about line 20 and following.  The actual masterplan your Honours can find at 873 of the same volume. 

Now, the heads of agreement lapsed in August 2004 with the failure of the rezoning.  However, before that occurred, the company associated with Mr Alexander, which I will refer to as JACS, because that seems to have been what everybody calls it, became involved.  The first step was a proposal by them of 16 February 2004 which is at volume 3 at page 983.  I am not going to take your Honours through this in detail because there are the two central evolutions which occur are attached to the MOU, but just to note that the language with which the proposal commenced was at 984 was a proposal:

to partner with White City tennis club (WCTC) for the continuation and perpetuation of the traditional activities and enjoyment –

et cetera.  I do not think I need to go through the rest of it at this stage because it is soon superseded by a document within a matter of days. 

Although there are changes between this and the next one the changes are essentially minor, with one exception which I will come to.  We say that from the beginning what was proposed and what was central to the proposal was that under all circumstances contemplated there would be a continuation of a club either based upon the current membership of the White City Club because of the structure to be included, or, alternatively, if that structure did not go forward there would be an opportunity for the Club to acquire the land on its own account.  Another aspect of that structure is the Club is not acting as a profit‑maximising commercial organisation.

In a sense, the proposal is one which leads to its negation as a corporate entity in all but name.  What its concern is is that its members be put in a position to enjoy tennis and associated social opportunities at the site in accordance with the tradition.  That, essentially, is what is happening.  As I said, further drafts were proposed over February.  Can I defer a detailed analysis of the central proposals for a moment?  They are attached to the MOU and it will be convenient to do them as part of the MOU but can I deal with a little of the chronology leading up to the MOU, the contextualiser.

The Club communicated with Tennis New South Wales about the approach of JACS and your Honours will see that at 3, 1054.  This is at 4 March.  It says:

WCTC has been approached by John Alexander Clubs Pty Ltd (JACPL), to operate the club under a joint ownership arrangement.

At this stage it is a joint ownership arrangement.  I will explain to your Honour the detail:

We are unable to divulge the commercial aspects of his proposal . . . 

In broad terms, the arrangement envisages a company in which existing club members may invest if they wish (but are not obliged to).  These Foundation members will continue to have full tennis playing rights, plus access to all facilities in a newly built clubhouse (including gym, pool etc).  The name White City will be retained and the club will continue to administer tennis on behalf of the group.  Suitable commitments regarding ongoing long term use as a tennis/leisure complex have been given and will be written into the final agreement.

JACPL have indicated that for the arrangement to work, they would require the existing Heads of Agreement and subsequent contract of sale be assigned to them. We seek your in‑principle agreement –

et cetera.  The obvious person for JACS to approach to seek to be involved in relation to the acquisition of this land was the Club.  They had an option, they had the relationship and that is what worked out.

Now, I would like to go to this, on 23 April as a result of certain discussions between the parties JACS forwarded a revised proposal to the Club.  The revised proposal is the second part of annexure A to the MOU.  Your Honours will have seen that the MOU’s annexure A has a proposal of February and also one of April.  This is the covering letter to the April aspect of that.  I would like to take your Honours, if I could, to the covering letter.

HEYDON J:   This is page 1072, is it?

MR HUTLEY:   Yes, your Honour.  “23 April”.  It says:

We refer to our meeting on 20 April 2004.

Attached find a document entitled “Revised Proposal” ‑

that commences at page 1074 -

in the light of matters discussed at the meeting on 20 April 2004 between the development committee of your Board and our directors.  In relation to the issues that were raised by your subcommittee in your letter of 20 April 2004 and at the meeting, you will note from the attached document the following:

Then there are some matters about the shares.  Can I pass over those for a moment – and then:

White City Tennis Club(“WCTC”) obtain an interest in the company which will own and operate the business at the new facility is agreed except that rather than agreeing to WCTC’s share being entitled to a 10% share of net profits but “capped”, we have provided for an interest equivalent to 7.5% of the net profits or a capped figure, whichever is the lesser.  You will see this is dealt with at Clause 4.

Then importantly, 3:

Your proposal that John Alexander’s Clubs Pty Ltd and/or the business company that owns and operates the new facility own no shares in the company which will own the land and improvements is agreed and this is dealt with in Clause 1.

You will recall there was discussion as to the term of the lease between the business that owns and operates the new facility and the company which owns the land and the new facility.  Because of the considerable concessions we have made, our proposal continues to contemplate a 99 year lease.  This is of more concern to us given we have agreed not to take an interest in the land and new construction.  If we are required to borrow funds to proceed with the project –

I will come to how that is contemplated to occur, in due course -

we need to provide the security of a substantial lease now that real property is not available security.

The contemplation, the, what we say change, that took place of this proposal is JACS was not to receive any interest in the company which had the land nor was the land to be available as security for any financial obligations of this and the land was to be available for the members through a company instrument.  I will come to the detail of that in a moment.

On 16 June – I am not taking your Honours to the proposal for the reason I have indicated, I will come back to it – on 16 June 2004 the Club had an extraordinary general meeting and the relevant document is at volume 3, 1126 and they are the minutes of that meeting which are part of annexure C to the MOU.  I will come to those as part of the MOU, if I could. 

Mr Alexander was cross‑examined on a part of the minutes at appeal book 3, 1129 - that is the passage which he was cross‑examined on.  At appeal book volume 1, 388, lines 1 to 25 and I will not read the whole transcript, your Honours, to you from the commencement, but the important question and answer is the one at about line 23, “And, of course, it would follow” and his answer.  But one has to contextualise it and that is cross‑examination about the portion of the minute, commencing at about line 40 on page 1129.

The meeting resulted in resolutions which your Honours will find helpfully at page 1106 in that same volume.  Now, your Honour, one of the oddities, among many, of the MOU is when I take your Honours to it, it will refer to the resolutions appearing in the documents attached.  The only place you will actually find the resolutions in terms is at pages 1106 and 1107.  You sort of can divine them from the notice, in relation to the meeting, but these are actually the resolutions.  It says:

FIRST ORDINARY RESOLUTION

That the members authorise the board to do all things necessary to enter into an agreement with John Alexander’s Clubs Pty Ltd (“JAC’s”) reflecting the terms of the JAC’s written proposal considered by the board on 26^th February 2004 and amended in writing following discussion with the board on 23 April 2004 which include the following objectives:

1.That, as a minimum, the part of the land shown as lot 5 in the Master Plan is acquired by an entity, the equity in which will be owned by qualified foundation members and qualified new members –

Your Honour will bear with me as to who they are for a moment –

The land be leased to JAC’s so they may conduct the business referred to in paragraph 2 on the land.

2.That a new tennis and sports facility be constructed and, thereafter, operated by a business owned by JAC’s at the facility for the benefit of all members –

and then it goes on and I think I can not trouble your Honours with the detail at the moment, because it will become clear later on. 

If your Honours go to the second ordinary resolution:

That the members authorised the Board to appoint John Alexander’s Clubs Pty Ltd (“JAC’s”) as a consultant to White City Tennis Club Limited to give advice in relation to:

·Marketing

·Operations

·Redevelopment of White City Tennis Club Limited and the White City site –

et cetera.  That is the resolution. 

HEYDON J:   This meeting was held on 16 June.

MR HUTLEY:   Yes.

HEYDON J:   Yes, notice of a meeting to be held on 16 June, yes, I follow.

MR HUTLEY:   Yes, I am sorry, your Honour.  Now, in December 2004, Tennis NSW resolved to sell the land by tender.  Your Honours will see that application book 4, 1290, and the next step is the MOU and that is in volume 4 also. 

HEYDON J:   Can I just get one thing straight?  I should probably have got it straight much earlier.  This decision to sell the land by tender, by that expression “land” - White City land, I think?

MR HUTLEY:   We could call it the larger parcel.

HEYDON J:   Part went to Sydney Grammar School, part went to the Maccabi club and the balance is in contest in these proceedings.

MR HUTLEY:   Is what is called generally the option land.

HEYDON J:   So they were trying to sell all three.

MR HUTLEY:   Yes, it was originally on one title. 

FRENCH CJ:   As lot 3.

MR HUTLEY:   Yes, and my learned friend took you to the sites, I do not propose to go back to them, broadly speaking, as he indicated.  Now, could I go to the memorandum of understanding.  It identifies the parties.

GUMMOW J:   Where do we see that?

MR HUTLEY:   I am sorry, your Honour, 1412.  Now, to start it says:

to record the understanding that exists between the Parties in relation to the matters herein described.

That is how it starts.  So there is much of this which is descriptive, some of which is at best aspirational, some of which is hard to understand, some of which has the character of being sufficiently certain to be binding.  It is important, in our respectful submission, to understand the structure of this case to appreciate, as it were, the detailed aspects of this and how it relates to and created the options which we say are the central, as it were, subject matter about which debates as to what, if any, entitlements to relief we have resolve.  The preamble says:

1.1WCTC has for many years conducted a tennis club on the Land and wishes to continue to provide its members with the facilities of such a club enhanced and enlarged as described in this MOU thereby perpetuating the sport of tennis at White City.

1.2The Land is owned by Tennis NSW (“TNSW”) which has leased part of a building erected on it to WCTC.

1.3TNSW appointed WCTC to manage day to day tennis activities, conduct tennis operations and maintain specified grounds and buildings on the Land.

1.4WCTC had an option to purchase part of the Land but such option has now expired.

1.5JACS has the expertise and ability to construct, erect and operate world class sporting, health, fitness racquet sports and social clubs and wishes to construct, erect and operate such a club in the Land or on part of it.

1.6The Parties have been working cooperatively to formulate a commercial proposal to achieve the aims set out in sub‑paragraphs 1.1 and 1.5 hereof.

In other words, it recites the history which I have taken your Honours through to -

1.7JACS 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 Limited” (WCH) –

One of the difficulties when one comes to the attachments is that the name of the entity, which is the entity which ultimately comes to be called White City Holdings Limited, is constantly changing, which makes some of the documents a tad confusing –

TNSW have advised JACS they now propose to offer the land for sale by tender (“the tender”).

1.8JACS is negotiating with a third party (“the third party”) –

and my learned friend, Mr Ireland, said that was 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.

I would just like to stop there because this is important.  The form of that option at law was obviously inchoate at this time.  That is, it was still subject to negotiation.  The form that option might take could have been a form – and I will come to the detail of this – which only allowed JACS to exercise the option if it was acting in accordance with 3.7.1 in the precise terms, and I will come to that in a moment.  Of course, we would say objectively, grammar and Maccabi were unlikely to be interested in effect in a form of option which enmeshed them in the operations of a common undertaking – if I can use something so I am not using any offending words – a common undertaking.

We say at the outset there was, when one looks at the position, a potential for there to be a right which would have many forms, some of which would delimit the possibility of JACS acting in its own interests and some of which might inform – allow of that – but be contrary to the object and heart of this arrangement if so exercised.

We say it is very significant when one comes to the issue of fiduciary duty to appreciate that we say the fiduciary duty arises by reason of the form of the White City option in the context of the arrangements which lay behind with the MOU.  There was no necessary dependence at the point of exercise of the MOU with respect to the form of the option because ex hypothesi its form was undetermined.  There could at law, in effect, have been formulated in a way.  Can I return to that?  We say it is important that everyone understood it was in the course of being negotiated.  Then if I go to 1.9:

In February 2004 JACS submitted to WCTC a proposal (“the Proposal”) a copy of which is Attachment “A” hereto, which proposal was considered by the directors of WCTC at a meeting on 26 February 2004 and was the subject of a discussion between representatives of the parties on 23 April 2004.

The proposal, before I go to the detail of it, has an ongoing significance as to what was truly contemplated by this arrangement under the MOU because it informs and gives content to the notion of “the Project” which your Honours will see defined on page 1414 at about line 19, the project being:

the whole of the formulation, organisation and establishment of the necessary entities, structures and agreements and of the development, construction and operation of the club as contemplated by this MOU

The Club has a similar definition at 1413, again by reference to contemplation.  Identifying the contemplation requires an assessment of the proposals which are attached and that seems clear enough when one goes to the clauses which I will come to in greater detail, such as 3.5 and 3.6, which identified fundamental aspects of the proposal and the project thus eliding the concept of the project to the proposal.

HEYDON J:   Is this line of reasoning that you are advancing something which the Court of Appeal employed in its reasoning?

MR HUTLEY:   Your Honour, we say that the Court of Appeal, particularly in paragraph 80 that Justice Gummow referred to, when they referred to the inequity in the circumstances, was harking back to the entire structure, which they – I am sorry, your Honour, if I can just get the page.

HEYDON J:   Page 613.

MR HUTLEY:   Thank you, your Honour:

In my view, however, what is critical is that it was the Club’s participation, in particular by surrendering its existing rights, which enabled JACS to obtain the option.  That participation was procured by a promise to exercise the option, if at all, for the benefit –

Now, to understand that structure and the context of the promise and the surrender one has to understand, as the Court of Appeal clearly did when they referred to earlier about what was proposed under the project, the MOU as a whole.

GUMMOW J:   The MOU is very quiet as to how this might be financed and what interest the financiers might require.

MR HUTLEY:   That is a central point, which I am going to come to and can I tell your Honour where I am going to in that regard?  The one thing which was contemplated under this MOU, when you go to the proposals, is this land would never be bought, other than with members’ money, never.  That is the only thing.  Now, there was a reference, although very obscure, which his Honour the trial judge referred to as bridging finance, but it is very important to appreciate that what was contemplated and what the members were told – and I will take your Honour through all the documents – is effectively, this will only be bought when the subscription of members to the new club gets sufficiently high to allow us to exercise the option and proceed.

KIEFEL J:   Was there any feasibility study or the like done to show that this was feasible?

MR HUTLEY:   None at all, your Honour, and ‑ ‑ ‑

KIEFEL J:   So this is wishful, at this point, is it not?  It lies entirely in prospect and it is in hope?

MR HUTLEY:   Precisely, your Honour, but it was, in effect, we say the fundamental understanding or to use language perhaps more reminiscent of Muschinski v Dodds if we get to that, which informed, as it were, the porous nature of this arrangement and left holes or lacuna, which either one fills up through implied terms - and my learned friend has made some pretty powerful submissions concerning those - or, and we say and/or, equity will assist when people depart from the fundamental substructure.  It is that very inchoate nature and that is why it is ‑ ‑ ‑

GUMMOW J:   Then that assumes a fixed character to the substructure, does it not?

MR HUTLEY:   Your Honour, I accept I have to identify the substructure and I have to persuade your Honours what that substructure ‑ ‑ ‑

GUMMOW J:   And that the structure itself, within itself, contemplated a rigidity.

MR HUTLEY:   With respect, I am not sure I have to go so far as to say it dictated rigidity.  I mean, if one takes the cases in England, the English cases – I am going to come to those in detail – one of the aspects of them is that they often allow for further negotiation.  So internal rigidity is not a precondition to the equity arising, as long as, in effect, the substance of what one is talking about is sufficiently identifiable for equity to fix upon the departure to say that the conscience of the departing party is engaged.

KIEFEL J:   When do you say the fiduciary obligation arose?

MR HUTLEY:   The fiduciary obligation arose, we say, at the moment that the option - relevantly, at the moment of the last White City agreement.

KIEFEL J:   The third agreement.

MR HUTLEY:   We would say it existed throughout the three because they were in pari materia but allowing for the theoretical possibility that they were, in effect, replacing one another, therefore the possibility to renegotiate the option.  What we said is the option, the two‑level option inform as to – I always get it wrong – 8a allowed, and my learned friend embraces this and says it – my learned friend’s client to buy it for his own account at any moment.  In a sense he could have exercised it the day after he got that option, paid his own money and it was his.

Now, we may have had some action for breach of the duty of good faith under these clauses but he would say this agreement is not specifically enforceable, which clearly it is not, and we are left with damages.  We would say that would be completely and utterly valueless.  We are a social club who is contemplating going out of business. 

All that we could hope to be left with is either the loss of the benefit of running whatever is left to us under this MOU or potentially the profits we might make from holding onto the land under our option and seeing what happened.  Now, that is what we say arises.  Now, we say the fiduciary duty arises because, by acceding to an agreement in the form that my learned friend says his client can walk away with this land at any time, we were in his hands.  We were reliant upon him – his client - totally.  We say that fiduciary duty – I am jumping a long way ahead – that fiduciary duty subsists irrespective of the continuation of the agreement, Chan v Zacharia, and that is the answer.

GUMMOW J:   Well, it is not the answer the Court of Appeal gave.

MR HUTLEY:   No.  Well, it is the alternate answer under the fiduciary duty obligation.

GUMMOW J:   I know that, but do you not need a notice of contention to agitate that?

MR HUTLEY:   Well, your Honour, I thought about whether I needed a notice of contention but the Court of Appeal’s fiduciary obligation is shortly expressed.  I do not think I am at odds with that reasoning.  If your Honours think I do, I will apply for a notice of contention to run the point.  It is certainly the way the matter has been argued in the Court of Appeal.  I have looked at the transcript, that the fiduciary duty lay in ‑ ‑ ‑

GUMMOW J:   We appreciate you were not in the Court of Appeal.

MR HUTLEY:   Your Honour, I spoke to my junior, we have obviously been thinking about this, and we are of the view we did not need a notice of contention because the duty was found.  This is really, in effect, just expressing perhaps in a little more length what we say is implicit in the Court of Appeal’s reasoning, what must have been implicit for find the dependence, but I am in your Honours’ hands in that regard.  If your Honours consider I need one, I make the application, I will file one.  Can I continue dealing with the facts.

HAYNE J:   Just before you do, do we find this chain of argument that you are developing – essentially factual at the moment – reflected in your written submissions?

MR HUTLEY:   Yes, I think fairly, your Honour.  I have not tried to put every single fact – we have 10 pages.  I think, fairly, this is the line we have maintained.  I will have my junior check but I have understood – I am not saying anything which is…..standing here.  Does your Honour ‑ ‑ ‑

HAYNE J:   You have said what you said.

MR HUTLEY:   I think so.  I will have it checked.

GUMMOW J:   On your analysis, whether the MOU is repudiated or not repudiated is not at the forefront, is it?

MR HUTLEY:   On the fiduciary duty point?

GUMMOW J:   Yes.

MR HUTLEY:   Yes.  If we are right on the fiduciary duty point and your Honours find a fiduciary duty, Chan v Zacharia would say the property, which is the option, is still fixed with the duty, so we do not need to worry about the termination point.

FRENCH CJ:   This is on the basis of the understanding said to be reflected in the MOU, is it?

MR HUTLEY:   The MOU gives the context.  In one sense its my learned friend’s argument that proves too much.  He says in effect the option on its true construction allows him to buy it – and he says it in his submissions – on his own account at any time.  That is what it says in terms.  That must mean that he was in that position under that option at law at all relevant times.

HEYDON J:   28 February 2005.  You say it follows from his submission that on 1 March 2005 he could have exercised the option by himself and kept it.

MR HUTLEY:   No.  The option was not in existence.

HEYDON J:   Once it had been brought; the day after it had been brought.

MR HUTLEY:   The point, yes.

HEYDON J:   But that would simply be subject to restraint by injunction, would it not, because it would be contrary to clause 3.7.1?

MR HUTLEY:   Your Honour, my learned friend says it is not.  Your Honour, my learned friend says there is no implied term and in one sense ‑ ‑ ‑

HEYDON J:   It is not an implied term, it is an express term.

MR HUTLEY:   It does not say that, your Honour.  Clause 3.7.1 is an interesting clause and it is one of the reasons - I do not want to go too far out of the line if I can but can I take your Honour shortly to it?

HEYDON J:   MrHutley, if this is disordering the course of your address just put it on one side.

MR HUTLEY:   Can I answer this one matter.  If your Honours go to 3.7 – this is the point, as I understand it, that is made against us.  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 and in the event it obtains the option from TNSW or the third party referred to in Clause 1.8 herein or any right to purchase the Land or any part of it then:

3.7.1In the event JACS exercises the option from TNSW or the third party that it will exercise the option on behalf of WCH, upon WCH simultaneously granting ‑

It says, as I understand it, if it comes to the exercise of the option and there has been a simultaneous grant – if that occurs at the moment then it will do it on behalf, non constat that when it comes to exercise the option nobody is there with the simultaneous lease, then it is free to do it on its own account.

HEYDON J:   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 referred to in clause 6.1(e).

MR HUTLEY:   Your Honour, that is not what my learned friend submits in clause 62 of their submissions.

HEYDON J:   That is about Carson v Wood.

MR HUTLEY:   I do apologise, 61.

HEYDON J:   Let us not tarry on this, you just tell me where this argument has been put by Mr Ireland, when you know what it is.

MR HUTLEY:   As your Honour pleases, I will come to it in due course.

GUMMOW J:   Where is all this leading, Mr Hutley?

MR HUTLEY:   Two things.  It is leading to ‑ ‑ ‑

GUMMOW J:   What was the breach of the duty?

MR HUTLEY:   The duty was this.  Come the time of the exercise there were – assume termination for the moment against me – come time of the exercise we say JACS could not exercise this option, it had to let it lapse, because any other exercise was an exercise for its benefit, not – and in breach of its duty to my client in the circumstances where ‑ ‑ ‑

GUMMOW J:   Duty to your client to what?

MR HUTLEY:   Not take advantage of that option for its own profit, a fiduciary obligation not to profit from the exercise of that option on its own account.

GUMMOW J:   And what remedy comes from that?

MR HUTLEY:   We say this, if there was a breach – assume there was a breach ‑ ‑ ‑

GUMMOW J:   I suppose what I am really asking you is, you have said there is no specific performance, if there had been specific performance what would it have been?  One has to bear that in mind before one gets into these extractions.

MR HUTLEY:   I understand, your Honour.  If, for example, there had been an express promise between JACS and White City that in the event that it was not going to exercise the option on behalf of WCH it would either assign the option to us or, for example, transfer the property to us if it exercised the option, then we could seek specific performance of that promise.  But, as we understand the case, the position, in circumstances where JACS says, “I hold an option at law which allows me to exercise it on my own account”, we say, “If you owe a fiduciary duty to my client not to, in effect, take a benefit in respect of that option, its position was it had to let the option lapse”.  That would then have meant our option, that is, the 8b option, would have been available for exercise by my client, and my client would have acquired the property, and it has been so found ‑ ‑ ‑

GUMMOW J:   And would have given a 99‑year lease to Mr Ireland’s client.

MR HUTLEY:   No, because JACS had obviously determined not to proceed with the joint venture – with the venture.  You see, they had two choices.  If they are going on with the ventures, that is why – if you assume the agreement is still on foot, if you get to the point where they are thinking about exercising an option, they have a number of possible courses at law, assuming ‑ ‑ ‑

GUMMOW J:   Anyhow, it seems to be that on this footing the joint venture on any basis has collapsed.

MR HUTLEY:   Yes.

GUMMOW J:   It has collapsed?

MR HUTLEY:   It has collapsed even if the agreement is still on foot, ie we have not repudiated it; that is, they have determined – JACS has clearly determined not to go on ‑ ‑ ‑

GUMMOW J:   You say there is no way if your client were successful in whatever relief it got of a proprietary nature that Mr Ireland’s client would be getting a 99‑year lease and there would be an operating agreement.

MR HUTLEY:   Yes.

GUMMOW J:   That is not going to happen.

MR HUTLEY:   Let it be assumed Mr Ireland’s client, the day before they purported to exercise the option ‑ ‑ ‑

GUMMOW J:   So why then do you end up with the land untrammelled with any obligations, other than payment of this price, which may go up to an infinity of value over time?

MR HUTLEY:   I accept that completely because the deal done – can I use it in colloquial terms at the moment – is ‑ ‑ ‑

GUMMOW J:   If I can just interrupt again, it seems rather punitive on Mr Ireland’s position.

MR HUTLEY:   No, no, your Honour.  Where this case is different ‑ ‑ ‑

GUMMOW J:   And you seem to be making the profit yourself.

MR HUTLEY:   No, your Honour ‑ ‑ ‑

GUMMOW J:   Rather than purging Mr Ireland’s profit.

MR HUTLEY:   I understand, your Honour, I am hearing your Honour.

GUMMOW J:   We have to know this because one, there is a notice of contention point and two, Mr Ireland ‑ ‑ ‑

MR HUTLEY:   Your Honour, I have all these notes and I was going to move through them.

GUMMOW J:   Just a minute – we need to know this to inform ourselves because the case is not going to finish today and so that we can get the relevant assistance from Mr Ireland on the resumption.

MR HUTLEY:   I understand.  Your Honour, the bargain, either in law – and we say in equity and the understanding was JACS, if it exercised the option, was doing it on behalf of the project.  They had a choice.  They did not have to exercise the option and if they did not, our option lived.  We had the default opportunity to purchase and if they had done nothing we then under 8b get another 90 days to buy.  That is our right.  That is what we have and that reflects the structure, which I want to come to, about the MOU, is that if all this fell over it was always contemplated that we would have an option.  We had, we would get an option to acquire.  That was what was going to be sought to be done in default of the deal going forward.

Now, of course, if we had not exercised the option, our default option, we do not for a moment suggest that JACS could not then have gone into the marketplace, approached Grammar and bought – if Grammar was prepared to deal with them.  Our point goes – and this is the difference about this case from most other cases.  We had got, in effect, the fallback position.  We got the option; they got an option, which in law, on its strict terms, allowed them to buy it on their own account.

They chose to do that at a time when, on any view even if the MOU is on foot or it is not, no one was ever going forward with this venture because JACS did not want to go forward if the relationship had broken down.  The question is in those circumstances can they, in effect, deny us our option by taking advantage of the legal form of their option to buy it on their own behalf.  There does not seem to be any dispute now that ‑ ‑ ‑

KIEFEL J:   Can I just ask you this - are you talking about the option under the White City agreement when you say “the option”?

MR HUTLEY:   The White City agreement, of course, your Honour.

KIEFEL J:   And you earlier said you concede that the MOU is not specifically enforceable, but was not the White City agreement specifically enforceable?

MR HUTLEY:   There were no promises inter partes between us and we will say on the true construction of the White City agreement what they did was perfectly lawful.  You see, from the point of view of Grammar and Maccabi, your Honour, they would not want an option which was alloyed by, as it were, the peculiar vulgarities of the state of our relationship and under the MOU.

KIEFEL J:   But it is your case that you were providing a benefit to them under the White City agreement?

MR HUTLEY:   Your Honour, I am coming to that in a moment.  That deals with a different point.  My learned friend says we did not give any benefit because, in effect, of the surrender.  Now, we say that that is completely wrong and if right means that all cases such as Pallant v Morgan must be wrong, also; Banner Homes, they are all wrong if that is right and I will come to that in due course.

That is broadly where we seek to go, your Honours, and we either put it on a fiduciary basis – and I understand the debate as to whether this is sufficiently “commercial” in the tension of the cases.  I am going to come to Justice Mason’s statement in Hospital Products and ‑ ‑ ‑

GUMMOW J:   But there is a further question you would need to face.  If there was to be an equitable remedy why would it not be some monetary sum in equitable compensation?

MR HUTLEY:   Your Honour, the answer is that JACS effectively had nothing.  That is why much of my learned friend, Mr Jackman’s, elegant submissions failed to address the Giumelli point.  This is a case where there is a binary outcome, effectively.  We lose everything or somebody else loses everything.  JACS has a property which, if my learned friends have priority, that is in my learned friend, Mr Jackman’s case, the company has priority, we will get nothing or precious little; probably almost nothing.  Now, if we are right they will get nothing.  It is not a case such as Giumelli where the Court was in a position to mould relief and compensate there the person who had an equitable entitlement to occupation of the premises with a monetary sum.  We say that is the reason and when I come to the facts dealing with Mr Jackman’s position, they are these. 

It is pretty clear that Mr Jackman’s client was running these proceedings on behalf of Alexander, it is pretty clear.  It is not absolutely clear.  There are some cute things in the affidavit and I do not mean cute in the sense of dishonest.  I mean it is a very well crafted affidavit.  There are agreements referred to such as the litigation agreement deed which are not referred to.  The litigation was clearly being funded by Mr Jackman’s client, just clearly being funded.

Now, this was not a case - if there was a Giumelli point somebody would have been taking it.  When we come to the transcript of the first day, when Mr Jackman addresses the Court of Appeal, it is pretty clear that Mr Jackman is saying, “We were very happy with the way this was going from the beginning until it all went a bit pear shaped the other week” and that is what was happening ‑ ‑ ‑

HEYDON J:   Mr Jackman did not address the Court of Appeal.

MR HUTLEY:   He did, your Honour.  There is a transcript of him addressing the Court of Appeal at the commencement.  I will take your Honours ‑ ‑ ‑

HEYDON J:   It was decided on the papers, according to Justice ‑ ‑ ‑

MR HUTLEY:   I accept completely, your Honour.  I will take your Honour to a transcript where my learned friend ‑ ‑ ‑

GUMMOW J:   Is it in the book?

MR HUTLEY:   It is in the book.

GUMMOW J:   What is the page?  No need to read it to us now.

MR HUTLEY:   Your Honours might have a look at page 634 and following.  The particular passages of my learned friend are at pages 637 and 638.  They appeared actually on 10 June before the motion was filed and it is pretty clear, in my respectful submission, what is happening in the world.

HEYDON J:   But none of what you have just said appears in the first Court of Appeal judgement, nothing about financial weakness and so on and binary outcomes.

MR HUTLEY:   Well, your Honour, the reasoning on the fiduciary duty case is short, there is no doubt about it, and it suffers from that and I mean suffers in the sense of is wrong, but the essence of what the court was saying is we were in their hands.  That is what they are saying.  I am merely giving explication as to why we were in their hands, and necessarily in their hands.  This is about facts which are, in effect, the constituent documents.  I am not relying on sworn evidence by anybody on our behalf.  I am just saying this is what happened.  In my respectful submission, as your Honour presciently observed in answer to my learned friend, this case was not run strictly on the pleadings.  It just simply was not.  It was run as a fiduciary duty case or unconscionable conduct case on the matrix of facts broadly pleaded in the pleading which his Honour considered.  Central to that was a consideration of the MOU, a consideration of the White City agreement and consideration of the conduct.  All I am taking your Honours through essentially is that.

KIEFEL J:    I am not entirely clear if your focus at the moment is fiduciary obligation with the constructive trust as the remedy.  Are you seeking to uphold the Court of Appeal’s approach to the constructive trust?

MR HUTLEY:   Yes.  I say it is supportable either as a fiduciary duty ‑ ‑ ‑

KIEFEL J:   Which appears to be applied from the time of the MOU?

MR HUTLEY:   Your Honour, the Court of Appeal at the end of the day said there is a fiduciary obligation but they are dealing with the property – they are concerned with the property which can only be the right under the White City agreement.  That is how it was pleaded.

KIEFEL J:   I will not take you away from your – I think you are trying to develop your argument about the fiduciary obligation.  Can I just ask you this though, if there was a fiduciary obligation in existence at the time of the grant of the options under the third White City agreement and JACS makes clear that it intends, I think, in June 2006 to proceed in another way, why were not steps taken to enforce the obligation?

MR HUTLEY:   Your Honour, there was no investigation of this, there was no pursuit.  Your Honour, social clubs are not necessarily awash with the sort of money that one necessarily needs to do things such as commence litigation, give undertakings as to damages and the like.  Your Honour, but laches was not pursued.

KIEFEL J:   I think it was put up as an estoppel.  I think it was laches and delay was pleaded at one point.  It appears to have morphed into an estoppel but in any event it affects the remedy that you are seeking, does it not, in relation to fiduciary obligation?

MR HUTLEY:   But no findings have been made that – or no notice of contention has been put forward to suggest that our delay impacts upon it.

KIEFEL J:   I thought they had pressed an estoppel argument which was rejected.

MR HUTLEY:   Yes, but before this Court our learned friends do not say that any of our conduct should deny us our entitlement to such relief as we are entitled to.  Could I return to the MOU?

GUMMOW J:   Somehow under these orders your client has to come up with 6.37 million.

MR HUTLEY:   Yes, your Honour.  It may have had to change its position from what it normally would have – his Honour the trial judge dealt with this matter at ‑ ‑ ‑

GUMMOW J:   It would be a fairly well‑funded social club.

MR HUTLEY:   Yes, all I can say is this was not really investigated in fact.  I cannot tell your Honour what the position was because it was not investigated, but this was addressed and dealt with by the trial judge at paragraph 114 and following – page 557.  That has never been contested.  If I could return to the MOU, I was explaining to you that the notion of project is tied up with the proposals.

Can I take your Honours to the proposals.  There are two documents commencing at page 1431 and then what is called the revised proposal is at page 1450.  The revised proposal was the document attached to that letter of April that I took your Honours to which was consequent on the meetings of April.  Can I go to the proposal at 1433.  It starts at 1434 with a business plan.  This is how it originally started.  It says that JACS:

have devised a business plan that enables WCTC to continue its traditional activities, while securing its future through joining with JACPL to purchase and redevelopment White City Tennis Club.

The grounds will be purchased, the site redeveloped, and the new facility operated, in accordance with a Joint Venture Agreement between WCTC and JACPL.

It then refers to foundation members, foundation members are essentially existing members of the club:

Foundation Members are assured of their continued enjoyment of their redeveloped club at the existing rates of annual membership subscription.  These rates will only be subject to CPI increases ‑

Then it says that at this stage:

Foundation Members will also have an opportunity to invest in and own part of the grounds and the new development.

JACPL will raise the necessary funds to purchase, construct and fit out the new club primarily through the sale of shares including a special category of shares to the WCTC Foundation Members.

The shareholder will have equity in the land and redevelopment and be entitled to subscribe to an annual membership of the new Club.

Foundation Members will have the right to purchase a premium category of member shares – Foundation Membership Shares.

Foundation Member Shares will be limited to the number of Foundation Members of WCTC as of the date of the Extraordinary General Meeting . . . 

There will be no more than a further 3,080 Membership shares offered for purchase.  The proposed annual subscription for Non‑Tennis Membership is expected to be ‑

Some figures are then set out.  It then says:

JACPL will be allocated 3,000 investment – non‑membership shares as consideration for the work done . . . 

The purchase price of a Foundation Membership share is $5,000.00.  Initially the cost of a Non‑foundation Member Share will also be $5,000.00 . . . 

The restriction of share membership proposed gives the White city member guarantee of an unstressed facility affording the luxury of access as and when required.

Then it says “Management strategy”.  I do not need to take your Honours through the detail of this.  This was the subject of consideration dealing with the running of the company over the interim period.

HAYNE J:   What are we to get out of this, Mr Hutley?  This is a selling document from the Alexander interests to the board of the Club.

MR HUTLEY:   I understand that.  Your Honour, one has to work out what is being contemplated as is the proposal which is being put before the members, adopted as the proposal the subject of the agreement, and what is contemplated to occur, and one can only identify that from going through the annexures to the agreement.

FRENCH CJ:   It is reasonably evident, is it not, from the general structure provisions in Part 5 of the MOU in terms of the way in which shares will be acquired and disposed of in WCH by JACS?

MR HUTLEY:   Your Honour, it is more important than that.  What we say when one reads this is that the following is made clear.  One, the land will be bought and bought with the subscriptions of members to become members of the new club.  That money – and I will take your Honours through it – that money will be used to fund the acquisition of the land, and that explains the form of clause 3.7.1.

HAYNE J:   Well, how do the numbers stack up on that?  You have got – I do not want to delay on these things unnecessarily, but the numbers just do not stack up, do they?  Page 1433, 500 members and 80 life time.  Yes?  580.  We are talking, what, 5000 a head - see 1435 - at a purchase price of 5.8 million.

MR HUTLEY:   Can I go on, your Honour?  I understand what your Honour says, but what it is saying in here – and it comes to it – it says in terms – would your Honours go over to 1437 at 4.3, it says:

JACPL will ensure the owner of the land after the option to purchase is exercised is the company in which the members will purchase shares.

HAYNE J:   Well, be it so.  We see from the MOU at clause 1.12, page 1413, that the:

development has now reached a stage where the Parties are able to enter into this MOU as an agreement of the kind contemplated by the First Resolution –

of the EGM of the Club.

MR HUTLEY:   Yes.

HAYNE J:   The first resolution, 1106, is:

That the members authorise the board to do all things necessary to enter into an agreement . . . reflecting the terms of the . . . proposal –

including, et cetera, but we begin then with the agreement, do we not?  The agreement is intended to reflect the proposal.  It may, it may not, but the MOU records that this is what we have done, this reflects it.

MR HUTLEY:   Well, with respect, no, because the project is what is contemplated by the MOU, and what is contemplated by the MOU includes, as is clear from 3.5 and 3.6, that which is the proposal which is attached.  It fleshes out the description of the general structure which appears in 5.1.

You see, the agreement in essence does not deal with many of the aspects of the precise matters.  What this agreement sets about to do is to say to this, here is the history of what happens.  We are trying in effect to put forward an agreement which will achieve the structure of the proposals.  When one goes through the agreement, the agreement does not deal with many of the aspects of the proposal because it is assumed, in our respectful submission, as appears from the - what is contemplated by the MOU, being the project, is in essence what appears in the proposals which have been agreed to by the parties and the subject of the resolution at the EGM.

So, your Honour, I accept what your Honour says, that one has to look at the terms of the agreement.  But the terms of the agreement are no more, as my learned friend has observed, as general structure.  The proposals have to also be seen as to what was being contemplated by these parties.  We say what does come out, if contemplated, is that under no contemplation was there that JACS would acquire it on its own account, neither in what might be called the body of the MOU, nor in the details of the proposal do you find that as a contemplated possibility.

They contemplate the possibility that the structure will fail, in which case there will be an option in our favour and I will come to that.  They contemplate that the structure will go forward, but that we say is on the basis that that will be funded by the membership acquiring the company which holds the land.  That is the understanding or, in effect, the body, of what this agreement is about, and what this case is about is the effect of a departure from that, whether through the fiduciary duty route, and if your Honours do not find a fiduciary duty, whether it is unconscionable conduct.

That is why we say, your Honours, it is not sufficient to – one has to, in effect, look to the detail of what these parties contemplated as reflected in the attachments.  We say that is why they are attached to the document, because the document does not descend to detailing what was contemplated by the parties in legally enforceable terms.  That is how we put it, your Honour.

KIEFEL J:   You have spoken of course in a way in which does not recognise what JACS was supposed to obtain, or the company it was setting up, I understand why.  But the company JAWCC was to hold a 99-year lease so that the Club could be conducted.

MR HUTLEY:   I accept that.

KIEFEL J:   The facilities in which the operating agreement would refer.  In the event that WCTC was to exercise the option when JACS could not – does JACS just go out of the picture?

MR HUTLEY:   Yes.  That option is an option which has no – the default option is the option where the venture is not proceeding.

KIEFEL J:   But then the venture so far as it involves JACS also disappears, so that you are left just with WCTC as holding the land for an incomplete operation?  Is that what you are saying is ‑ ‑ ‑

MR HUTLEY:   The premise is that the operation simply is not proceeding.  That is the venture or program contemplated by the MOU is simply not proceeding.

KIEFEL J:   So what would be the purpose of it holding the land when it does not have a proposal to attach to it?

MR HUTLEY:   It has a lease, which goes for 25 years, over a clubhouse.

KIEFEL J:   But it surrendered that when the option ‑ ‑ ‑

MR HUTLEY:   Your Honour, I will come to that.  It never surrendered anything.

KIEFEL J:   Under the White City agreements?

MR HUTLEY:   Yes.  This is an agreement, not even between the landlord and tenant.  This is an agreement between parties who did not own the land.

KIEFEL J:   Well promise not to enforce and convert it.

MR HUTLEY:   No, with respect, what it was, it was an agreement contemplating, in the event that the thing went forward there would be a surrender.  But it was not a surrender effected by that it was an agreement which contemplated an ultimate surrender, and there was an ultimate surrender.  But it did not, as my learned friend says, at law effectuate a surrender there and then.  It was not even between the landlord and tenant.  We say, in effect, the surrender provision is actually favourable to us.  We contributed that as part of proceeding with the venture.

KIEFEL J:   But you are saying you did not give up anything then at the time of the option agreement.

MR HUTLEY:   I am sorry, your Honour?

KIEFEL J:   You are saying then that WCTC did not give up anything.

MR HUTLEY:   It promised to surrender there is no doubt about that.

KIEFEL J:   But it had not effectuated?

MR HUTLEY:   It had not effectuated that, but it promised it.

KIEFEL J:   So there is no detriment at that point, except the promise, which was enforceable?

MR HUTLEY:   One, we say you do not have to establish detriment, but we promised Maccabi to give a surrender.  It is not a promise to JACS.  We promised Maccabi that we would ultimately surrender the lease.  That was a detriment to us.  Because, ultimately if Maccabi acquired the land ‑ ‑ ‑

KIEFEL J:   It could be enforced against you.

MR HUTLEY:   It could be enforced against us and ultimately we gave exactly that surrender when it took place.  If I can return to page 1437, a description of the “Joint Venture Agreement”?  Paragraph 4.5 refers to what JACPL says it will do.  But paragraph 4.6 says:

The option to purchase the site will be exercised once JACPL has sold a minimum of 1,300 Member Shares and the Foundation Member Shares have been fully subscribed.  Foundation Member Shares not taken up by Foundation Members will be offered for sale as ordinary member shares.

In other words, the project did not contemplate the land being acquired until the foundation shares had been taken up because that was to be partly the source of the funds to acquire it, and as I am told 1800 times 5000 is 9 million.

Then it goes on to deal with certain other aspects of it.  Then it deals at 4.12 with membership shares.  Existing members are to have a priority place in relation to the matter.  Your Honours will see what was contemplated at 4.14 is that:

Prior to 19 June 2004, existing members will have the option to purchase a Foundation Membership Share for $5,000.00 including GST.

4.15All funds received by JACPL for the sale of the shares will be deposited in an interest bearing trust account pending the securing of all necessary approvals required to commence construction and the exercise of the option to purchase the site.  Upon the gaining of approvals, shares will be issued.

So in other words, what we say is contemplated is that the moneys raised from the members are to be used for the exercise of the option and it is then and only then that the land will be purchased.  That was the project which was put before these members.  I think we can move over the administration.  Then there is a reference at 1441 to “Proposed Content of Management Agreement”.  I do not think I need trouble your Honours with the detail of that.  The development is described at 1446 and thereafter there are proposed time lines and the like.  Can I then go to the revised proposal at 1452.  It says:

White City Tennis Club Ltd (“WCTC”) and New South Wales Tennis Association Ltd (“Tennis NSW”) have entered into an agreement –

It has “an option to purchase”, and this is the history, and then it refers to the fact of the assignment.  Then it goes on at about the third dot point:

WCTC will assign to JA’s Clubs the rights under the Tennis NSW Agreement on the basis that JA’s Clubs will:

exercise the option on the basis that the land to be acquired at the White City site will be acquired and owned by White City Leisure Club Ltd -

This is, in effect, the earlier version of WCH.  Then it goes on:

In order to fund the purchase price of the White City site and the construction of the facility:

the “A” class shares in White City Leisure Club Ltd will be offered for sale to the foundation members of WCTC.  These shares will have the rights and special privileges referred to in Clause 2 below.  Initially WCTC will have the right to sell the “A” Class shares in accordance with the Underwriting referred to in Clause B –

Then it says other shares.  Then if I go down to the next dot point on 1453:

In the event there is a shortfall between the amount received for the sale of the “A” and “B” class shares and the amount required for the purchase of the White City site and the construction of the new facility, JA’s Clubs will fund the shortfall subject to the Underwriting Agreement referred to in Clause 8.

The underwriting agreement, your Honour, is a proposal which is contemplated at page 1465 that, in effect, the Club will seek to obtain an underwriter in relation to the shares in holdings to avoid any burden on JACS. 

So returning to 1453, what we say is, the project contemplated did not contemplate JACS contributing any money to the purchase price beyond a shortfall.  Then it goes on to deal with the surplus ‑ ‑ ‑

FRENCH CJ:   JACS had a responsibility under 6.1(d) at 1420 to arrange “the borrowing of monies”.  Are we to read that as the borrowing on behalf of WCH, or in the name of WCH?

MR HUTLEY:   It would appear to be that that might be – and I think Justice Young refers to it as the possibility of bridging finance.  It certainly was never contemplated that they could, in effect, say, “I will get it on my own account”.  That, I think, deals with the proposal.  Can I go back to the agreement having done so.  Going to the body of the agreement, you have a clause 3, what is called general principles:

Each of the Parties will use its best endeavours to bring the Project to fruition and will do all things in its power reasonably necessary to do so.

The Parties will work together reasonably and in good faith to bring the Project to fruition.

Then there is, in effect, a restraint on us in dealing with people, and then an obligation to keep “fully informed”, and then it sets out certain fundamental aspects of the project by reference to the proposals.  We then come to 3.7, page 1416.  Clause 3.7 in form, deals with a requirement to seek an option.  It then goes on to provide that –

in the event JACS exercises the option ‑ ‑ ‑

GUMMOW J:   Yes, we will be able to recite this together fairly soon.

MR HUTLEY:   Thank you, well I will not read 3.1 again.  Clause 3.7.2 however:

JACS will seek to procure in favour of WCTC a further option to purchase the Land or part of it exercisable by WCTC within 90 days of expiry of the Option Period in the event JACS is unable to or fails to exercise the option from TNSW or the third party in accordance with its terms.

If it is unable to, we say it will be unable to because the project has fallen through “or fails to exercise”, that may be because it comes to the conclusion that this is long term commercially unviable, which may mean it is the best thing to be done.

In those circumstances, it is agreed to leave or seek to obtain on our account an option, not an option which is tied to the further conduct of the venture.  It is the default option which allows to us the opportunity to enjoy the property in the event the venture falls over.  3.7.3 provides what occurs if one is unable to commercially organise an option in favour of the Club, in effect handing over to the Club an agreement that the Club will be able to exercise the option that JACS has if it has not pursued the venture within 30 days.

KIEFEL J:   This requires JACS to exercise the option on behalf of WCTC, does it not?

MR HUTLEY:   In 3.7.3, your Honour?

KIEFEL J:   Yes.  Would that not render JACS liable on the exercise of the option for the payment of the price?

MR HUTLEY:   Yes, certainly - but they are not obliged to exercise the option, and if the money is not there because the project has not proceeded, that is what 3.7.2 contemplates, ie if it fails or does not exercise the option, an option inures for the benefit of us, or that is what is to be sought.  What this is dealing with is – the contemplation is what happens if this project falls over?  What happens if it does not go forward?  My client is in the position then, since the land is out for tender, of – and has ex hypothesi been sold, or is up for sale – will have no land, the club will disappear.  What it requires is if the project is not to go – what is contemplated, you should negotiate with Tennis New South Wales or with Grammar, this third party, to obtain a default option for the benefit of the club in the event that the option is not exercised by you.  That is what we say is the thrust of 3.7.2 and 3.7.3, a means for us to get the property.

That is an express acknowledgment and recognition, we say, that there could be a failure to exercise, and then that will occur and is contemplated, we say, by the proposals to occur if the project does not go forward.  We say that the language of 3.7.1, which ties the exercise to the tendering of the lease, takes that form because of the assumption which really underlies the documents I have taken you to, is that the purchase will be funded by the members.  So, in effect, they will have the money to fund the purchase, that will lead to the exercise of the option, and as part of that in effect transfer of funds they will have to in effect grant a lease back over the property in favour of JACS.  In effect, that explains the somewhat strange language of 3.7.1, the assumption which we say underlay it as to the source of funds for the acquisition.

GUMMOW J:   Yes, these options to purchase - they do not seem to say “purchase at what price”.

MR HUTLEY:   Your Honour, these are not options.  These are agreements to negotiate options with third parties.  In effect, this is the template.  These are not options per say ‑ ‑ ‑

GUMMOW J:   No.

MR HUTLEY:   These are the templates to in effect, send out into the negotiation with the third party, Grammar, of the option which becomes the White City agreement.  In a sense the form of 3.7.1, we say, reflects the fundamental assumption which exists in the MOU – see the documents I have taken you to – that the funding - how this was all to come about was through the members acquiring shares and others in the company which was to hold the land.  That would be the source of funds which would be the precondition to exercising the option, because that is how the venture would go forward.

FRENCH CJ:   This assumes a particular price or a range of possible prices?  Obviously whatever price ‑ ‑ ‑

MR HUTLEY:   Whatever price it turns out.

FRENCH CJ:   It has to be viable, in terms of the background you have taken us to, does it not?

MR HUTLEY:   Quite.  They have to enter into an agreement to purchase the land at a price which is viable, having regard to that background.  They will have to obtain an option which is viable in the context of the project – at a price, in a sense – which makes sense in terms of the project, otherwise it would be pointless going forward with it.

KIEFEL J:   You say that the options which were obtained under the White City agreement were in accordance with the MOU?

MR HUTLEY:   Yes, they were, in the sense of they were in a form which could be exercised in a manner consistent with the MOU.

KIEFEL J:   If you read the MOU with it, but as they appear in the White City agreement they are rather more in simple terms, are they not?

MR HUTLEY:   I accept that, your Honour.

KIEFEL J:   It is either or, it is either JACS or, in default, WCTC.

MR HUTLEY:   I accept that completely.

KIEFEL J:   You do not have these variables anymore.

MR HUTLEY:   I accept that completely, your Honour.

KIEFEL J:   And this is the commercial agreement that we are talking about.

MR HUTLEY:   But this is a commercial agreement with a third party.

KIEFEL J:   Quite so.

MR HUTLEY:   And the third party is Grammar and Maccabi and the question is, we accept that these options were exercised according to their terms, as between JACS/Poplar and the grantor of the option, the Grammar and Maccabi organisations, we accept that completely.

KIEFEL J:   But at some point – I am interrupting you – at some point you are going to explain how 3.7 of the MOU is read into the other options?

MR HUTLEY:   I do not seek to read it into those other options, your Honour.

KIEFEL J:   You are only seeking some underlying fundamental relationship, is that what you are looking for?

MR HUTLEY:   Our claim is one of a breach of fiduciary obligation or, alternatively, unconscionable conduct.  We say that what has occurred here ‑ ‑ ‑

KIEFEL J:   But you say the fiduciary obligation does not arise until the White City agreements?

MR HUTLEY:   Your Honour, the obligation which matters is an obligation not to turn the White City agreement to its own account that is the only, in effect, property to which the fiduciary obligation can relate meaningfully.  I mean, in a sense, they acquired a piece of property, the option.  That property is property which we say was attended by fiduciary duties.

The relationship is a relationship which stems perhaps from the MOU but the duty arises because they acquire property in a form which can be used for their own benefit

KIEFEL J:   Does not the fiduciary obligation have to arise earlier then?

MR HUTLEY:   Well, your Honour, fiduciary obligations can arise, depending upon ‑ ‑ ‑

KIEFEL J:   If it does not, why are we spending so much time on the MOU?

MR HUTLEY:   Because, your Honour, two reasons:  the MOU sets the scene for how the White City agreement comes about.

KIEFEL J:   It creates a relationship between the parties on your submissions.

MR HUTLEY:   Quite, I accept that.  It creates a contractual relationship between the parties and for argument’s sake I might even say there could be in there some fiduciary obligation.

KIEFEL J:    But you have said in ‑ ‑ ‑

MR HUTLEY:   With respect your Honour, there is no relevant one to the question with which we are concerned.

KIEFEL J:   But you have said, I think, in your submissions that the MOU places WCTC in JACS hands - that is one element - and, you say, that the point to be made out of the MOU is that JACS was never intended to acquire on its own account.

MR HUTLEY:   Quite, I agree.

KIEFEL J:   Why are we not talking about the fiduciary obligation arising at this point?

MR HUTLEY:   Because the only obligation I am concerned about is an obligation not to profit at the expense of my client.  The opportunity and the obligation, we say, attached at the very latest when they acquired property which put my client in a position of vulnerability.  At this time the vulnerability of the MOU one might say we did have a vulnerability.  For example, we had a vulnerability that they could go out and negotiate an agreement which was wholly for their benefit.  That could theoretically – if that was the relevant wrong of which we complained, we might be arguing that they owed us a fiduciary duty to seek - to obtain something which was for our benefit, or for the benefit of the project.

But I accept, as I must accept, they got an option in a form, which if they complied with what we say their duty to us is not to profit by it, would not have been a breach of the duty.  They could have clearly complied with their duty to us, we say, by doing nothing; not exercising the option.  That would have been a complete fulfilment of their fiduciary duty to us, because that would have then left the ‑ ‑ ‑

KIEFEL J:   I am sorry, I am being a little slow about this, but what you are saying is the grant of option that they took under the White City agreement was impressed with this obligation at the moment they took it?

MR HUTLEY:   They were impressed with this obligation at the moment they took it.  They may have fiduciary obligations at other times, such as to go and negotiate something which was consistent with this, they may have, but the critical thing is, they could either exercise this right under 8a of the White City agreement, or they could not for their own benefit.  If they could for their own benefit they cannot be in breach of a fiduciary duty, I may have to go to unconscionable conduct, but I say they could not because the circumstances under which they acquired it impressed them with an obligation.  If one goes then back to the MOU – I would just like to finish – I think I have said all I can say about 3.7, then one goes to “The Conditions Precedent”, Clause 4.  I should take your Honours to 3.8 before that.  It says:

The Parties agree that, provided that the present members are assured of receiving the Fundamental Entitlements from the implementation of the Proposal and the Project, JACS, with the prior written approval [which approval shall not be unreasonably withheld] of WCTC may alter such details of the General Structure set out in clause 5 hereof and may make consequential changes to the Documentation set out in clause 6 hereof as may be necessary to implement the Proposal and the Project.

FRENCH CJ:   The term “fundamental entitlements”, that selection, it is not defined, is it?

MR HUTLEY:   The fundamental entitlements are identified in 3.5, your Honour. 

FRENCH CJ:   Yes, thank you.

MR HUTLEY:   Those were in effect the availability to the members of the continuation of the agreement.  I did not go through those in detail.  Under “The Conditions Precedent” it says:

The Parties acknowledge that the Project cannot proceed unless:

(a)WCH acquires the Land or a sufficient interest in the land at least so much of it as is necessary for the successful completion of the Project -

That is just an acknowledgement, we say, of the fundamental character of what is taking place.  It cannot go forward unless WCH acquires the land; that cannot occur unless WCH acquires the money, and that cannot occur unless the members have contributed the funds to purchase the land.  In effect, that is an acknowledgement of the fundamental structural element that is reflected in this MOU.

HAYNE J:   Another way in which what you assert to be the fundamental element might have been reflected in the MOU is in 3.7.2 and 3.7.2 is what you have described as the default option to the Club, which is expressed to be exercisable within a time in an event.  The event is inability of JACS or failure of JACS to exercise option in accordance with its, that is the option’s terms.  You say that the arrangement between the parties was that the default option was to be exercisable in events including the failure of the joint endeavour, even failure of the joint endeavour on the part of the Club.

MR HUTLEY:   Yes.

HAYNE J:   So if the Club, for whatever reason, chose not to pursue the joint endeavour with the commercial party, the commercial profit-making party, the Club should have the default option, is that right?

MR HUTLEY:   Yes.

HAYNE J:   So it is a joint endeavour at the will of the Club.

MR HUTLEY:   No, your Honour, and the will of our opponents too.  They can walk away too at any time.  You see, one of the difficulties with this is is that there are so many inchoate aspects, there are a few binding terms.  What, one asks, would be the consequence of our learned friends walking away, clients walking away.  What was contemplated is that there could be a myriad of reasons of failure:  financial, problems with development, change of attitude to the members, members are not interested in it.  Let it be assumed the members change their minds and do not wish to go forward.

Now, one has to deal with the question of breach, and I appreciate that, your Honour, but my learned friend’s position seems to be, as we understand it, is his position does not depend upon there being no breach.  He says we do not have a right under this agreement to specific performance or any equity under this agreement because of its inchoate nature.  True it is, we have some promises, but we are left, if left to anything, to breaches of contract for damages.  Frankly, damages here would be valueless and there is no express promise which deals with this problem.  What we say though is this, is the fundamental substructure of this agreement was, as we have said, that JACS would never have this on its own account.

FRENCH CJ:   That might be a convenient moment.

MR HUTLEY:   If your Honour please.

FRENCH CJ:   Just before we adjourn, Mr Hutley, could I foreshadow that the Court is contemplating making orders that you would file any draft notice of contention that you would seek leave to file out of time by 1 March with written submissions, with written submissions in reply by the 15th, and in contemplation of the matter being resumed on 29 March.  So I will give the parties time over lunch to consider that, but they are the orders we are contemplating.

MR HUTLEY:   If your Honour please.

FRENCH CJ:   We will adjourn until 2 o’clock.

AT 12.47 PM LUNCHEON ADJOURNMENT

UPON RESUMING AT 2.02 PM:

FRENCH CJ:   Yes, Mr Hutley.

MR HUTLEY:   Your Honours, I will endeavour to finish with the MOU shortly.  I was dealing with clause 4.1.  Clause 4.1 sets out a series of acknowledgements as to under what circumstances the project could not proceed.  One of the matters at 4.1(c) is:

sufficient shares in WCH are sold to make the Project commercially viable.

All parties understood and agreed that, in effect, the project was fundamentally dependent upon the sales of shares to make it viable.  Those sales of shares were the sales which were going to fund, wholly or in part, the purchase of the land, and that appears in another part of this document I am about to come to.  That informs the structure of clause 3.7.1 for the reasons we advanced before the adjournment.  That is, there is a fundamental assumption that this project would only proceed in circumstances when members’ contributions to the company would contribute to the purchase price, it says it.

Secondly, it proceeds on the assumption that if that does not take place, we will have an option or the right to enforce another option.  I accept what your Honour Justice Hayne has remarked that that includes, and we say it does include, where there is a determination upon breach.  In other words, my case does not depend upon the notice of contention.  We make this observation:  our learned friend’s position is right.  They were in a position to both take the land on their own account and obtain substantial damages for loss of the benefit of the project.

One cannot see analytically where the acquisition of the property for the price would have to be brought to account in that.  We say it was just fundamental to this structure that the property would either be in a members club under the project or returned to us.  That was the structure; that was the structure which led them to go on to participate in the negotiation in the White City agreement.  I will come to that in a minute but if I can proceed shortly to clause 5, General Structure.

Your Honours will see that 5.1 refers to “Attachment C”.  Attachment C is not reproduced in the bundle but I have spoken to my learned friend, Mr Ireland, and we agree - it is reproduced at pages 1386 and 1387 in this volume.  In effect it is a schematic of various relations contemplated by what takes place.  I will take your Honours to it shortly.  Then there is what is called a shareholding membership diagram A.

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

MR HUTLEY:   Your Honour, 1386, there is a diagram of the shareholder membership which is in effect a diagram indicating over time how it is to develop.  Diagram B reflects the various agreements which were contemplated.

Can I just then return shortly to clause 5.2 at 1417?  That is the commencement of the description of the structure, and my learned friend took you shortly through it, and I would ask your Honours to note (e), (f), (h), (i):

(l)when a sufficient number of shares has been allotted to fund the purchase of the Land and the construction of the Club, the holders of such shares will elect new directors and the nominees of JAWCC will retire . . . 

(m)     the matters set out –

and then they refer to what is called an “Establishment Agreement”.  The drafts of these agreements are in various schedules to the agreement and I will just take your Honours to one shortly in a minute.  Now, then clause 6 refers to responsibility for documentation, and it says:

6.1JACS will, with all appropriate legal, accounting and taxation advice, be responsible for the following activities and the preparation of the following documents . . . 

(d)the borrowing of monies to fund the purchase of the Land and the construction of the Club and the preparation of all documentation necessary in relation to such borrowings.

That has to be seen in the context of that which has gone before.  Then, your Honours at 6.2 will see a reference to the provisions which are to be incorporated in certain agreements contemplated under the MOU.  For example, schedule 2 deals with the constitution of the company, of WCH – schedule 3, I am sorry.  If your Honours go to schedule 3 on 1422 it commences, but importantly if your Honours would note clauses (c), (d), (e) and (f).  Again, there is constant repetition throughout of what we say is a fundamental structural element which is reflected in the papers, reflected in the documents, and informs the structure which this agreement took with respect to the provision which dealt with the proposed negotiation of the seeking and obtaining of the options. 

KIEFEL J:   Were any steps taken after the options taken in the White City agreements towards these structures, including the shareholders and their funds by any party?

MR HUTLEY:   No, the company was not incorporated.  I will have that absolutely checked.  Not being at first instance - there may be some evidence, such as prospectuses being drafted, or the like.

KIEFEL J:   And that would include any insistence, of course, by the Club on JACS to do something about it?

MR HUTLEY:   I understand that, your Honour, I just do not know the answer off hand. 

KIEFEL J:   Yes, thank you.

MR HUTLEY:   Could we put that in our written submissions in answer to your Honour so we can give your Honour a complete answer?

KIEFEL J:   Yes, thank you.

MR HUTLEY:   After the execution of the MOU the club obtained material concerning the acquisition of the property from Tennis NSW on 23 March, and that is at appeal book 4, page 1482 - I just note that, your Honours - so the matter went forward.  Then JACS wrote to the then president and trustee of Grammar, Mr Gonski, on 31 March at appeal book 4, 1578 seeking to work with Grammar to acquire the property.  He said he was acting with the full support of the members and boards of the Club - of course, reflected.  That led to participation in the tender and for the purposes of the tender JACS sought and obtained from the Club a description of what was to become of the land, which was a term of the tender contract that described what was to become of the land.

That was clause 6.1(a) of the tender contract, which your Honours will find at appeal book 1509.  The document supplied by the Club is at appeal book 4, page 1600 to 1601.  May I take your Honours just shortly to that.  From 1600 you can see that this is an email from, in effect, White City to a representative of JACS, supplying a document to go forward in the tender and 1601 is the tender, the document to go forward in the tender.  It sets out the historical context and White City as a leading club and it says at line 40:

Members of White City Tennis Club will continue the tradition of taking up individual player membership of Tennis NSW.  Already White City is one of the few tennis clubs in the Sydney area that is increasing its tennis memberships.  With a secure future, and a greater range of club facilities, White City expects to increase the number of tennis members by another 50%.

The White City clubhouse would continue to commemorate the historical tennis significance of the site, celebrating the great events such as the world record number of spectators at a Davis Cup match.  Traditions such as Life Membership, 50 and 40 year memberships will be respected.

I, on behalf of the White City Tennis Club Board, strongly recommend that Tennis NSW accept the offer contained in this bid document.

So, in effect, they are being called upon to, in effect, as part of the tender contract, put forward matters to Tennis NSW and then we do.

On 15 April was the first of what are called the White City agreements.  My learned friend took your Honour to the first which is at appeal book 1684 in volume 4.  I want to deal with one or two short matters which we have to an extent dealt with in answer to a question of your Honour Justice Kiefel about the nature of clauses 17 and 21.  Your Honours were taken to clause 17 on 1687 which is the lease which was then contemplated to be granted to JACS.  Clause 21 is in terms.  It says:

surrenders any rights it has, it would but for this agreement have had, in relation to the Land -

Now, In Andrews v Hogan 86 CLR 223 at 250 in the judgment of Justice Fullagar the Court stated that there cannot be a surrender without in effect a communication by the tenant to the landlord to effectuate a surrender. Secondly, for a surrender to be effectuated the landlord must accept the tendered surrender. If I can give your Honours a short – Fleeton v Fitzgerald (1998) 9 BPR 16,715 at 16,718.

GUMMOW J:  A decision of whom?

MR HUTLEY:  I was about to say a decision of the Court of Appeal, New South Wales, your Honour.  As your Honours will appreciate the first White City agreement was before the current lease, the last lease, was even executed which was - I took your Honours to at the outset - finalised in May 2005.  There was no surrender such as my learned friend advanced by that.  I will come to that in due course.  We contributed that agreement to surrender.

GUMMOW J:  You are using the word “surrender” in Andrews v Hogan and so on in the technical language of real property law.

MR HUTLEY:  Yes, there was a termination - my learned friend submitted we had no – he said in terms, our lease was at an end on that document.  All I was seeking to do was meet – I accept there is an agreement to surrender which upon, for example, SGS and Maccabi becoming owners could be specifically enforced by them.  All I was seeking to meet:  one of my learned friend’s submissions was we gave nothing because in effect we had given it up by this; it had gone.  I want to address the substance of that in due course but in point of fact not only was there not any surrender, the lease was actually executed and registered after this agreement.
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           I do not think it is necessary to trouble your Honours with the second White City agreement which is at appeal book 5, 1725, as there does not appear to be any material change.  Now, in fact, on 11 May 2005, and it appears from appeal book 5, 1801, JACS wrote to the Club raising issues as to taking over the premises, apparently seeking to rely upon clause 21.  That was done on 11 May, that is, the day after the second White City agreement.  On 27 May, Tennis NSW announced the success of the tender and that is at appeal book 5, 1821. 

Now, there followed amendments to negotiate the White City agreement and particularly clause 16 of the 10 May version of the White City agreement and that occurred, and that led to the final version of the White City agreement at volume 5, 1948.  Now, the alterations which took place here seem to have been tied up with the dispute that subsisted between the Club and JACS, which came to be reflected in the heads of agreement to which my learned friend took you at page 1919 in this volume. 

A legible and neater version is at 2049 which, in effect, incorporated the handwritten alterations as at July 2005.  I am sorry, if I said 1919 I was wrong.  My learned friend tells me it is 1911 for the heads of agreement, but 1911 will be convenient since that is the one my learned friend referred to. 

Can I just go to the final version of the White City agreement.  My learned friend was critical of the finding of the Court of Appeal as to reliance upon the significance of the preparedness of White City to agree to the surrender under clause 21.  As we understood the gravamen of his criticism, it was that we had to make that contribution because Maccabi and Grammar required it to negotiate and, therefore, quoad JACS we contributed nothing.  That is as we understood the thrust of my learned friend’s criticism of the Court of Appeal’s reliance upon its significance.  We say the criticism is misplaced.  Whether SGS and Maccabi required our preparedness to surrender the lease or not is beside the point.

The fact that they did, and our preparedness to do so, inured for the benefit of JACS in getting its option and, of course, for us it was our preparedness to contribute that to the, as it were, joint participation, using it in a loose sense, by JACS and ourselves in the negotiation with Grammar and Maccabi meant that it inured for the benefit of JACS and ourselves in obtaining the option.  It is exactly the same, we say, as the position is in all these cases when one is dealing with unconscionable conduct, such as Pallant v Morgan.  The vendor of the land in Pallant v Morgan required at an auction somebody to contribute the highest bid.  The plaintiff in Pallant v Morgan contributed to the – its contribution to the achievement of the highest bid was holding back its bid, not making it.

The fact that the owner of the land required the highest bid was there irrespective of the contribution of the agreement of one of the parties to the collusive bid not to contribute.  We say it is directly analogous to our position.  We were in a position to make a contribution to a joint exercise which was of benefit to both participants.  We did, and that inured for the benefit of JACS.

HAYNE J:   Can I just understand a little better what, if any, is the significance to be attached to clause 2 of the final agreement, or for that matter clause 2 of the first White City agreement?

MR HUTLEY:   Yes, your Honour.

HAYNE J:   Dealing first with the final agreement at 1948, it is cast in terms that recognise that by then the tender is closed, the tender has been awarded, and that there has been the heads of agreement.  So much appears from clause 1, I think.

MR HUTLEY:   Yes, your Honour.

HAYNE J:   Clause 2, whether read in isolation or read in light of the history provided by clause 2 of the original agreement, seems on its face to be saying, here is how the land is going to be used – (a) we will use this bit for that purpose, (b) we will use this bit for that purpose, et cetera.

MR HUTLEY:   Yes.

HAYNE J:   Is the content to be given to clause 21a, whether in this agreement at 1952 or in the earlier agreements – see for example, the first agreement at 1687 – to be understood as being an expression in support of what appears in the final agreement at 2c on 1948, namely:

c.WCTC will be the lessee and WCTC and JACS will use the whole . . . to undertake . . . until 30 June 2006 the operations currently carried on by WCTC.

Then e and f contemplate future dealings.

MR HUTLEY:   Yes, your Honour.

HAYNE J:   I understand you are meeting a particular point that is put against you about the effect of surrender.  Assume your argument in that regard were to be accepted and that there was not a surrender that worked for Real Property purposes vis-à-vis the landlord of that land.  Is 21a doing any more than saying, look, here is the land use that is going to occur?

MR HUTLEY:   I am perfectly happy to accept it on that basis, your Honour, because ‑ ‑ ‑

HAYNE J:   It has that character.  What is its significance, if any, for the propositions you advance of fiduciary obligation?

MR HUTLEY:   Fiduciary obligation or unconscionability?

HAYNE J:   However you wish to put it.

MR HUTLEY:   Thank you, your Honour.  What we say is this.  The opportunity to acquire these options, the option which is clause 8a option and the clause 8b option, was dependent upon a preparedness of the Club to agree to, in effect, the giving up of its lease.  That was the finding by the trial judge that it was essential to Grammar that the surrender be agreed for them to agree to negotiate with JACS and the Club and that is at appeal book 2, 552. 

Now, my learned friend says that the Court of Appeal misused and, in the sense of legally misused, that fact finding.  The way as I think he puts it is that the Court of Appeal treated that as a contribution by us, which impacted upon the inequity of the conduct by JACS.  The burden of my learned friend’s submission, as I understood it, he said no, that is wrong because that was not required by JACS or demanded by JACS or it did not have anything to do with JACS. 

It had to do with dealing with Maccabi and the Grammar.  The point we make is at a factual level, be that accepted, that is it was required by Grammar and Maccabi, but our ownership of the lease was the occasion which made us attractive to negotiate with – together with JACS – and thereby JACS benefited from our contribution.  That is all I am seeking to refute.

We say, properly analysed, that is the case in almost all cases where one is dealing with the unconscionable conduct, namely one party either withholds something that a third party, namely a person who is either selling property or giving an option, wants - either gives it or withholds it, and thereby increases the opportunity of the other party to acquire the property, which they later use contrary to conscience.  That is all we are saying.  We say that our preparedness to make that contribution was the occasion for and part of the consideration for obtaining the option, which inured for the benefit of JACS.

GUMMOW J:   I do not think 552 is the right page, is it - 552 in the primary judge.  Is that the right page?

HEYDON J:   It is 582, I think, paragraph 94.

MR HUTLEY:   I am sorry, your Honour, paragraph 94.  In the Court of Appeal – I hope it is right – it is paragraph 63 at 2, 606.

HEYDON J:   And paragraph 80 at 613.

MR HUTLEY:   Yes.  My learned friend said that this was critical to the reasoning of the Court of Appeal and it was flawed for reasons I think I have ‑ ‑ ‑

HEYDON J:   The Court of Appeal said it was critical.

MR HUTLEY:   Yes, and my learned friend said it was flawed for the reasons which I have sought to expose.  In our respectful submission, it is not only not flawed; it is the common type of characteristic in these equitable unconscionable conduct type cases.  Yes, and your Honour, there is a typo at the bottom of paragraph 63 which cross-references to paragraph 79 which we think is, in effect, a cross-reference to 94.  It should be to 94.  If your Honours bear with me for a moment.

GUMMOW J:   Where are we going now, Mr Hutley?

MR HUTLEY:   Just going on to deal with the final facts, your Honour.  Consistent with the White City agreement, steps were taken by the Club which are referred to in paragraphs 26 and 27 of our written submissions on page 6 and I will not take you.  Now, the Club then agreed to surrender its lease and other rights in reliance on completion of the project, and that was found by the Court of Appeal at appeal book 2, 606 at paragraph 63. 

The surrender was agreed in a deed of variation of 30 June 2005 at appeal book 5, 1978, and that was registered, terminating the lease on 6 April 2006, and that appeal is from appeal book 6, 2505.  I will just ask your Honours to note those things. 

On 12 April JACS purported to determine the MOU.  I will return to that.  It is six days after the registration of the variation of lease.  On 27 June there was the arrangement for Poplar to exercise the option and your Honours were taken to a notice of nomination in the document, the exercise.  As no issue seems to now arise as to the status of Poplar as opposed to JACS, I do not need to address anything in relation to that.  My learned friend accepts that Poplar stands in the same position as if it were JACS and vice versa, and I will not trouble your Honours about their relationship at all, other than to say that at the relevant time, Poplar was a wholly owned subsidiary of JACS.  I can talk to my learned friend ‑ ‑ ‑

FRENCH CJ:   Does it matter?

HEYDON J:   Mr Hutley, I personally think it would be better if we did not conduct this as a sort of private seminar between you and Mr Ireland.

MR HUTLEY:   I do apologise, my learned friend raised a question from him and disputed it, and I do apologise, your Honour.

FRENCH CJ:   Anyway, let us move on.

MR HUTLEY:   Could I now turn to the issue of fiduciary duties in those circumstances.  I defer the notice of contention point.

GUMMOW J:   We need to know what it is in your notice of contention, I think myself.

MR HUTLEY:   Would your Honour like me to proceed to that.  I am quite content to do so, I will turn to the ‑ ‑ ‑

HEYDON J:   Justice Gummow means the new notice of contention.

MR HUTLEY:   I am sorry.  The notice of contention.

GUMMOW J:   The existing notice of contention.  How long is that going to take?

MR HUTLEY:   That, unfortunately, is a slightly messy factual ‑ ‑ ‑

GUMMOW J:   I thought so.

MR HUTLEY:   ‑ ‑ ‑ analysis.  Perhaps if I could turn to that and at least try to deal with the facts as much as possible before the end of today so your Honours are not troubled.

GUMMOW J:   We need to work out before the end of today what is going to happen as to submissions and so on.

MR HUTLEY:   Yes, I am in your Honour’s hands, of course, as to the time when your Honour wishes to address that.

HEYDON J:   Having completed this factual analysis angled on fiduciary duty and unconscionable behaviour, you are going on to put some arguments of law in that regard?

MR HUTLEY:   Yes, your Honour.  The fiduciary duty cases are not really much in dispute.  I wish to take your Honours, in respect to unconscionable conduct, to some of the case, particularly starting with Muschinski v Dodds - not long, since the Court is no doubt deeply familiar with them, I propose to take your Honours to some of the statements of principles in the English authorities starting with Pallant v Morgan, and ending up with the House of Lords’ recent decision considering those classes.

GUMMOW J:   The primary judge had a fairly cogent analysis of Pallant v Morgan, did he not?

MR HUTLEY:   Yes.  We accept, essentially, what his Honour said.  There are some aspects of Pallant v Morgan which I think are important to note, that in effect it is not in any way detriment‑related.  In fact, the person who was the wrongdoer was at all material times intending to bid more than the person who was claiming the right in such matters like that.  I wish to go through those relatively shortly, and then I wish to, in effect, bring together the arguments in respect of both of them and then proceed to the notice of contention.  That was my intended course.

FRENCH CJ:   We are unlikely to get that process finished before 3 o’clock, I think.

MR HUTLEY:   No, your Honour.  If the Court thinks it is a convenient time.

FRENCH CJ:   Have you had an opportunity to consider the foreshadowed orders?

MR HUTLEY:   We are content with them.  We have nothing to say, your Honour, as long as it is convenient for everybody else.

FRENCH CJ:   Does anybody else have any - Mr Ireland?

MR IRELAND:   Your Honours, as we appreciated what was said this morning, a question was raised about whether the manner in which the case is now put conforms with the approach taken below, and a notice of contention ‑ ‑ ‑

GUMMOW J:   The appeal in the Court of Appeal seems to have occupied one day.

MR IRELAND:   Yes.

GUMMOW J:   Is that right.

MR IRELAND:   It was an expedited matter and it ought to have had more time.  But the judges were anxious to finish on that day.  I think the appellant’s submissions went well into the afternoon.  Your Honours, we are just not quite on the wavelength as to what my learned friend has in mind, but as we understand it, your Honours, we will be providing for our opposition to the notice of contention in the framework of the orders that were proposed.

FRENCH CJ:   Yes.

MR IRELAND:   We would hope that we would see the notice sooner rather than later, and the timeframe that your Honour had indicated seemed a bit lengthy to us, but my learned friend to get this on paper, it is well overdue now.  It ought to have been done long ago.  We will obviously have to apply ourselves to it, and any consequence of it that might need further substantive submissions on our side, which have not yet been touched on, on our side.  So I wondered if your Honours would contemplate making a more imperative order on the respondent, to show the Court and consequentially the rest of the appellants the material.

FRENCH CJ:   Yes, Mr Jackman.

MR JACKMAN:   The only comment I wish to make is that 29 March is not convenient for me personally.  I gather it is convenient to everybody else, and accordingly Ms Taylor is likely to conduct the reply for my client, if that is convenient for the Court.

FRENCH CJ:   Is that just that particular day, Mr Jackman?

MR JACKMAN:   I have difficulties all that week.

FRENCH CJ:   I see.

MR JACKMAN:   So I am not going to stand in the way on my account, with respect to that date.

While I am on my feet, the discussion about Part 36, rule 16 exposed some gaps in the material before the Court.  If it would be convenient, could I hand a bundle up for each of your Honours which contains first a copy of rule 36.11 that your Honour Justice Hayne asked for; second, the original notice of motion which we filed which shows it was actually filed on 11 June 2009.  The third document is the original judgment or order which was made by the Supreme Court.  Your Honours will recall that the copy in the appeal books is an amended judgment or order but the original judgment

of order also shows that it was entered on 12 June 2009.  I will hand that material up, if it please the Court.

FRENCH CJ:   Mr Hutley, having regard to what Mr Ireland said, would you be in a position to file your draft notice of contention say by 19 February?

MR HUTLEY:   Your Honour, I have completely lost track of the date this week.

FRENCH CJ:   Today is 11 February.

MR HUTLEY:   Yes, your Honour.  We will be able to put on the notice of contention by then.

FRENCH CJ:   And the other times could be left in place.  I am concerned about Mr Jackman’s inability to attend in the week we were looking at.  It would be possible for us – we would have to make some inquiries about this – perhaps to list the balance of this matter in the second week of the March sittings and move something from that sittings into the Hobart week.  The question then arises as to your availability and others.

MR HUTLEY:   Your Honour, can I say I am not available in any of that period.  I did not think it was appropriate for me to interfere.  So one will be as inconvenient as the next.

FRENCH CJ:   You are not available on the 29th either.

MR HUTLEY:   I am making myself available.  I am supposed to be somewhere else.  Arrangements have been made to deal with that.  I am committed in a case in Brisbane for quite a deal around that period.  I will just have to make arrangements to be absent for a day, so do not look to my – in a sense the later the better from my point of view.  The case starts earlier in March and one should be ‑ ‑ ‑

HEYDON J:   You mentioned one day.  Are you absolutely confident that it will only take one day?  After all it took us two hours to get to the memorandum of understanding.

MR HUTLEY:   Your Honour, I anticipate there is going to be a debate as to whether this case can be run.  I do not understand how that could be, having regard to what I have seen of submissions made in the various courts, but that is my only question.

HEYDON J:   Let us say he is wrong about that.  We have before us this new notice of contention, the existing notice of contention ‑ ‑ ‑

MR HUTLEY:   I mean, it could take more.  This is a fact‑intensive case and it has, anyway one view it suffered from having to be done too quickly, rather than an opportunity for ‑ ‑ ‑

GUMMOW J:   It is unfortunate.  It is left to us to try and give it an adequate hearing.

MR HUTLEY:   And, your Honour, the notice of contention will take a while, I accept that.

FRENCH CJ:   It sounds as though we should stay with the 29th and if we have to run over into the 30th, so be it.

MR HUTLEY:   As your Honour pleases.

FRENCH CJ:   The orders will be:

1.On or before 19 February 2010 the respondent in appeal No S309 of 2009 file and serve:

(a)any draft notice of contention for which it seeks leave to file out of time;

(b)any further written submissions on which it would rely in support of the grounds in the notice of contention were leave granted.

2.On or before 15 March 2010 the appellants in appeal No S309 of 2009 file and serve any further written submissions upon which they would rely in response to those further submissions by the respondent.

3.Stand over the further hearing of the appeals S308 and S309 of 2009 to a date to be fixed in the sittings in Canberra to commence on 29 March 2010.

Thank you.  The Court will now adjourn until 9.30 tomorrow morning in Melbourne and 9.30 tomorrow morning in Sydney.  Just a minute yes, Mr Hutley.

MR HUTLEY:   I do apologise.  Our submissions, your Honour, are due as I understand it a week after the – in two weeks time, is it?

FRENCH CJ:   Yes, along with your draft notice of contention - we are looking at 19 February.

MR HUTLEY:   Including our submissions, your Honour?

FRENCH CJ:   Yes.

MR HUTLEY:   Could we have an extra week just for our submissions.  I am just concerned that to get it all in writing and properly if your Honour would grant us that indulgence?

MR JACKMAN:   We do not oppose that, your Honour.

FRENCH CJ:   Yes, all right, well that will be:

(b)      by 26 February any further written submissions.

We will now adjourn.

AT 2.48 PM THE MATTER WAS ADJOURNED