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

[2010] HCATrans 8

[2010] HCATrans 008

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Sydney  No S309 of 2009

B e t w e e n -

JOHN ALEXANDER’S CLUBS PTY LIMITED, ACN 097 896 109

First Appellant

POPLAR HOLDINGS PTY LIMITED, ACN 123 954 272

Second Appellant

and

WHITE CITY TENNIS CLUB LIMITED, ACN 000 476 513

Respondent

Office of the Registry
  Sydney  No S308 of 2009

B e t w e e n -

WALKER CORPORATION PTY LIMITED ACN 001 176 263

Appellant

and

WHITE CITY TENNIS CLUB LIMITED, ACN 000 476 513

First Respondent

JOHN ALEXANDER’S CLUBS PTY LIMITED ACN 097 896 109

Second Respondent

POPLAR HOLDINGS PTY LIMITED ACN 123 954 272

Third Respondent

FRENCH CJ
GUMMOW J
HAYNE J
HEYDON J
KIEFEL J

TRANSCRIPT OF PROCEEDINGS

AT CANBERRA ON WEDNESDAY, 10 FEBRUARY 2010, AT 2.02 PM

Copyright in the High Court of Australia

__________________

MR J.M. IRELAND, QC:   If the Court pleases, in appeal No 309 of 2009 I appear with my learned friend, MR J.S. COOKE, on behalf of the appellants, that is John Alexander’s Clubs and Poplar Holdings and in 308 of 2009 we appear for the first and second respondents, those same companies.  (instructed by Colin Biggers & Paisley Solicitors)

MR I.M. JACKMAN, SC:   May it please the Court, in matter 308 I appear with my learned friend, MS J.K. TAYLOR, for the appellant.
(instructed by Mallesons Stephen Jaques)

MR N.C. HUTLEY, SC:   If your Honours please, in matter No 308, I appear with my learned friend, MR J.R. CLARKE, for the first respondent and in 309 we appear for the respondent.  (instructed by Kemp Strang Lawyers)

FRENCH CJ:   Can I just indicate to the parties before we start argument that we will sit until 4.30 this afternoon.  Because of special leave commitments on Friday, we will need to rise probably at about 3 o’clock tomorrow afternoon.  We will see how we go.  Yes, Mr Ireland.

MR IRELAND:   Your Honours, appeal No 309 of 2009 is the appeal against what I might call the substantive issue determined by the Court of Appeal of New South Wales reversing the trial judge and upholding the existence of a constructive trust.  Your Honours, there is a mechanical matter which requires my attention to a summons which I think is also filed in that proceeding.  When special leave was granted by this Court on 3 November, the terms of that special leave extended to leave to appeal against the Court of Appeal’s original judgment of 3 June 2009.

FRENCH CJ:   Just picking up the variation in the orders.

MR IRELAND:   There was a variation in the orders and the special leave does not extend to a challenge to that variation.  I do not understand it to be contentious, but by the summons, your Honour, we seek an extension of special leave to the amended orders and a consequential amendment to our notice of appeal, so that it directs itself to the orders in their final form.

FRENCH CJ:   Yes, you have that leave.

MR IRELAND:   Turning to the substance of the matters, your Honour, perhaps it may be of some utility if I refer to the commercial context in which the affairs of these companies arose at the time of the first of their operative contracts in February 2005.

GUMMOW J:   Just before you do that, Mr Ireland, what was the relief initially sought?  I cannot find it in the statement of claim.

MR IRELAND:   The relief sought in the statement of claim by the Club, if I can use that shorthand, was for a constructive trust ‑ ‑ ‑

GUMMOW J:   Where do we see it in the pleadings?

MR IRELAND:   Volume 1 at page 3 of the book, that is the relief claimed.  It goes up the front of the statement of claim these days, your Honour.

GUMMOW J:   I see.  I read somewhere in the materials that the other claims had dropped away?

MR IRELAND:   Yes.

GUMMOW J:   At trial?

MR IRELAND:   Yes, the claims that were ‑ ‑ ‑

GUMMOW J:   In particular, the claim for money remedies.

MR IRELAND:   Correct.  Those were dropped at trial and not resurrected in the Court of Appeal.  Your Honour, there is annexed to our written submissions filed on 27 January as annexure A the form of relief that was finally pressed in the Court of Appeal – annexure A, page 21 of that bundle.  You will see it was a declaration on a “constructive trust” and an order that, upon payment of the “$6.73 million, and/or such other amount” considered, a transfer of the land to the Club – if I can use that shorthand – so no other equitable remedy ‑ ‑ ‑

GUMMOW J:   He uses this expression “right, title and interest in the land”.  This is Torrens title land, it is not old system land.

MR IRELAND:   No, that is right.

GUMMOW J:   Is the present registered proprietor, Poplar Holdings Pty Limited?

MR IRELAND:   Yes, it is.  The amended order that we now have leave to refer to in this case provided some machinery for transfer of the title, conformably with the declaration, but that has all been stayed now pending your Honours’ consideration of the appeal.

GUMMOW J:   Stayed on an undertaking as to damages, or what?

MR IRELAND:   Yes.

GUMMOW J:   Was there an undertaking?

MR IRELAND:   Yes, there was.

GUMMOW J:   I see.

HEYDON J:   As to damages?

MR IRELAND:   I will check that.  There was an undertaking given.  I will check its terms, your Honour.  I just cannot tell you off the top of my head, we will check that.

GUMMOW J:   Do we know the actual state of the title?  We know that Poplar Holdings is the registered proprietor.

MR IRELAND:   It is.

GUMMOW J:   Are there any registered mortgages?

MR IRELAND:   No.

GUMMOW J:   But Mr Jackman’s client says it has and has had since 2007, is it not?

MR IRELAND:   Yes.

GUMMOW J:   Various securities including an unregistered mortgage.

MR IRELAND:   Yes.

GUMMOW J:   The effect of these orders, if there were to be a transfer, would be to replace Mr Hutley’s client on the title.  Would that be right?

MR IRELAND:   It would be to replace Poplar with Mr Hutley’s client on the title.

GUMMOW J:   Yes.

MR IRELAND:   Correct.  Your Honours will know because of what has been said in the Walker part of the case that there is a priorities battle yet unfought between the unregistered mortgage held by Walker and this equity vindicated by the Court of Appeal’s orders.  That is yet to be resolved.

GUMMOW J:   I understand your submission, but the two appeals seem to get connected.  It would be wrong to make an order of this sort for transfer without the Equity Court following the law.  The law says – 43A of the Real Property Act would say, would it not, that Mr Jackman’s client’s unregistered mortgage ‑ ‑ ‑

MR IRELAND:   At settlement he is in no worse position on the question of notice.

GUMMOW J:   At settlement is there, and it could be displaced by a later equitable interest only if that was for value without notice.

MR IRELAND:   As I understand it, your Honour, the ‑ ‑ ‑

GUMMOW J:   And Mr Jackman says there is plenty of notice on the part of Mr Hutley’s client.

MR IRELAND:   Yes, but the priorities contest, as I understand it – and I will leave it to Mr Hutley to develop because it is his assertion – goes this way, that prior to the settlement on 29 or 30 June 2007, Walker was on plenty of notice that the Club was asserting a constructive trust and, therefore, it takes its interest postponed to that of the Club.  I hope I am not doing disservice to his client’s position by summarising it that way. 

GUMMOW J:   If the Court is imposing what they are pleased to call a constructive trust, which is really an order for transfer on payment of money, on a Torrens title it would have to have regard to the state of the title and unregistered interest that might be displaced, would it not?

MR IRELAND:   Yes.  We have made that submission, your Honour.

GUMMOW J:   You have made that submission.  That is why I say the two appeals seem to be connected.

MR IRELAND:   Yes.  We had assumed on this side of the Bar table that the logical approach to this would be for me to deal with what I call the merits.

GUMMOW J:   Yes I know, but ‑ ‑ ‑

MR IRELAND:   That ought to be sorted out ‑ ‑ ‑

GUMMOW J:   I am trying to ascertain what Sir Garfield Barwick said to Mr Handley on occasion.  It is good to know the last station on the railway line before you get on the train.

MR IRELAND:   They have planes flying to Canberra now.

GUMMOW J:   You say this has gone off the rails?

MR IRELAND:   Yes, we do.  I mean to be open about it the connection is necessary, as we would say, but we might debate the merits and win or we might debate the merits as I call them and lose and yet Mr Jackman might well trump the position by saying, well the whole thing has miscarried because of lack of consideration of his client’s position and whatever the outcome of the merits it has to go back.

GUMMOW J:   If that was right Mr Hutley is left with no remedy because of the way the other relief was abandoned.  Would that follow, as you see it?

MR IRELAND:   I would not make that strong assertion now.  I would have to think about that.  But we do point out that so far as the claim is made in these proceedings it is supportable only on the constructive trust that was awarded and there are no other second prizes for Mr Hutley in this litigation now, as against my clients.

HEYDON J:   Just going back, did not Justice Tobias on 6 April 2009 when he expedited the hearing of the appeal grant an injunction restraining the Registrar-General – this is page 576.

MR IRELAND:   Without an undertaking.

HEYDON J:   And he did so without an undertaking.

MR IRELAND:   Yes, but what happened in the hearing of the appeal, which does not appear from this material, is that I complain about that and an undertaking as to damages was given.  This was before the appeal was heard.  I complained at the hearing of the appeal and Justice Giles said if you want a continuation of the injunction you have to give that undertaking as to damages.  So that is in place, as I understand it.

GUMMOW J:   Page?

MR IRELAND:   Volume 2, I think, 579 – “Upon the Appellant, by its Counsel”, line 52.

GUMMOW J:   Yes, thank you.  And that has been extended.

MR IRELAND:   And that has been extended.  Can I go back on my train?  Your Honour, the commercial context I would just like to emphasise is this.  For many years an organisation called Tennis New South Wales had owned land at Rushcutters Bay in Sydney, which was the traditional home of the Australian Open until the New South Wales Government constructed, for the Olympics I think, the Homebush site. 

That left Tennis NSW with a large piece of land which it wanted to get rid of.  Adjacent to the land was Sydney Grammar School and it had a natural interest in participating in acquisition of it because it wanted to extend its playing fields at Weigall.  The respondent, who I have called the Club, was a well‑established operation on the land and at the time that Tennis NSW was looking to sell it in 2004 the Club had secured an option to purchase. 

The Club also had some existing lease rights but limited to the grandstand area and those extended until 2020, and there were some licence rights to derive from Tennis NSW.  Tennis NSW determined to go ahead with a tender process in order to realise the land.  So there were these three at least entities that were most interested in the sale and acquisition.  One was the Grammar School, I have mentioned them.  The other was the Club because it wanted to stay where it was and in some fashion arrange new and permanent tennis facilities and the third was my client, Mr John Alexander, whom you have read had some background in the sport of tennis and in some business connected with the development of sports clubs.

It was in this way that the three came together in discussions about the opportunity that might arise for some sort of acquisition of the land and ultimately division of it or partition of it to serve the interests of those different entities.

Then on 28 February 2005, after a lot of discussion between the Alexander interests and the Club, the first document, which is the critical document in this case, was executed.  It is called a memorandum of understanding and it is found in the fourth volume of the appeal books at 1412.  Your Honours see that the memorandum of understanding recites in clause 1 some of the things I have just referred to, that is the history of the Club on the land, the ownership of Tennis NSW and so on.  Then at 1.5:

JACS –

which is shorthand for my client, John Alexander’s Clubs Pty Ltd –

has the expertise and ability to construct, erect and operate world class sporting –

facilities and so on.  “The Parties have been working cooperatively”; “JACS has been negotiating with TNSW for the purchase”.  Over the page at 1413 the Grammar School is referred to anonymously.  Clause 1.8 at the top says:

JACS is negotiating with a third party . . . with a view to entering into an agreement with the third party to include ‑

and this clause is significant -

terms whereby:

1.8.1the third party and JACS prepare and lodge the tender . . . 

1.8.2the third party grants to JACS on behalf of WCH an option to purchase ‑

Could I pause there and indicate what is WCH.  Across the page on 1414 you will see that WCH is the abbreviation for White City Holdings Limited.  White City Holdings Limited was to be formed.  The obligation to form it was upon my client.

FRENCH CJ:   It is mentioned in 1.7 of the preamble, is it not?

MR IRELAND:   Yes, your Honour.  The notion was that a new company would be formed and that would be the land‑owning company and that that company would be not a creature of the Alexander interests but a company which would be effectively floated to the public but in relation to which existing members of the Club – not the Club itself – who were current at a certain date would have special privileges.

The special privileges are conveniently identified in a schedule to the MOU at 1428 – schedule 6.  The idea was that members of the Club would have the right but not the obligation to take up shares in WCH.  They would become shareholders at a fixed price – I think $6,000 per share – or they could be given some kind of playing facilities on the land.  The expectation was that another company – if your Honours are still on 1414 - JAWCC, that was yet another company to be incorporated which would operate the tennis facilities.  So this was very much a prospective plan to realise the practical interests of the parties.  Notably it is not a document to which the grammar school was a party.  It is just alluded to as a third party who is in negotiations also with Tennis NSW.

While I am with that document, your Honours, could I please ask the Court go to 1421, clause 7 of the agreement under the heading “Disclaimer”:

Nothing in this MOU shall be taken to constitute the Parties as partners or as joint venturers for any purpose whatsoever.

GUMMOW J:   What was the status of this in Masters v Cameron analysis?  It was an agreement, was it, with provision for a further agreement?

MR IRELAND:   Yes.  I forget which category that is.  It is either the third or the fourth.

GUMMOW J:   But it does seem to have been an agreement of some sort.

MR IRELAND:   Yes, operating in praesenti in some ways and yet looking to further agreements to be worked out in other aspects, and there was no contest ultimately that this was not a binding agreement in some respects, as the trial judge records.

HAYNE J:   Is the description you have given us of what you say to be the commercial ‑ ‑ ‑

MR IRELAND:   Content.

HAYNE J:   ‑ ‑ ‑ content a description of what you say is contractually agreed, a description of what one or more people had in mind as a commercial objective, or a mixture of the two?

MR IRELAND:   A mixture of the two.  Undoubtedly, I would submit they were features of the commercial relationship because ultimately the ‑ ‑ ‑

HAYNE J:   Well, commercial relationship may be obscuring much more than it is revealing.

MR IRELAND:   Yes, I accept that.  Ultimately, when one comes to analyse the critical matter here a finding is made in the Court of Appeal contrary to the trial judge that there were intentions underlying this agreement, and notably intentions about what would happen in respect of options – and I am just about to come to those provisions now – which, in effect, influence the conscience of my clients – and here I am not making any distinction between JACS, which is the contracting party here and Poplar, which is another Alexander company that comes much later ‑ ‑ ‑

GUMMOW J:   But not then in existence?

MR IRELAND:   But not then in existence.  So the Court of Appeal says that this intention, which it identifies, pervades everything that happens in a manner affecting the conscience of both of the Alexander companies so that it cannot exercise an option which, under the contract of option, it is free to do for its own benefit.  In addition to all of that which underpins the decision of the Court of Appeal is the provision of clause 3.7 of the document that I am now referring to, which is reproduced at 1416 of the appeal book.  This really is the critical matter.  Line 39, clause 3.7:

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 to JAWCC a 99 year lease of the land entering into the operating agreement referred to in clause 6.1(e) herein -

That is really the clause that this case is all about.  We characterise that as an entirely conditional framework whereby a number of conditions would have to fall in.  One would be that WCH was, in fact, brought into existence and it never was.  Number two, WCH would grant JAWCC, which is again another future company as I have endeavoured to point out, a 99‑year lease of the land because that would then be the only real commercial benefit to the Alexander interests and the third thing conditionally would be the entry into an operating agreement. 

So all of those things were envisaged to happen simultaneously and the outcome of all of that would be, we would say as a matter of plain construction of the clause, that JACS would have exercised the option on behalf of WCH, which is this company that is contemplated to be brought into existence as the land‑owning company, the shareholders of which would be an indeterminate class, members of the public, those members of the Club – and I interpolate again not the Club itself – who might become shareholders of that new company.  The Court of Appeal’s decision really ‑ ‑ ‑

GUMMOW J:   Is there a word missing in 3.7.1?  The last three lines:

upon WCH simultaneously granting to JAWCC a 99 year lease –

Should it say “and entering into”?

MR IRELAND:   It could say that and that is the sense in which we read it.

GUMMOW J:   That is how it is understood.

MR IRELAND:   We think that is implicit.  It makes it clearer if one does put the word in.

FRENCH CJ:   It is to be read on the assumption that WCH is in existence at the time of the exercise of the option.

MR IRELAND:   Correct, and that seems to be fortified by a number of other provisions which I need not go to.  But when this agreement was written and signed in February 2005 it seems to have been fully anticipated that WCH would be brought into existence sooner rather than later.

FRENCH CJ:   Well, that is conveyed by the word “simultaneously”.

MR IRELAND:   Yes.  But, of course, the period of the option is unclear.  That was a matter for negotiation with whoever might – as it turns ‑ ‑ ‑

GUMMOW J:   Does it simultaneously link with granting and entering?

MR IRELAND:   Yes.  But, could I just point this out, your Honours.  In 3.7.1 there is reference to Tennis NSW.  Everybody knew that tenders closed – and this is an important fact – tenders closed, had been called for and tenders closed on 8 April.  So it would be known – if that tender process was followed – that the fate of the land and its purchaser would be ascertained and known within a period of weeks.  Now, what happened, of course, was that the negotiations with the Grammar School, which had been alluded to in clause 1.8 that I took your Honours to, rounded out in this way.  The Grammar School bought all of the land.  About this time there enters another party that I have not mentioned, which is the Maccabi organisation. 

GUMMOW J:   What is the relationship in terms of area between the land the school bought and the land of which Poplar is now owner?  Is there a map or anything?

MR IRELAND:   I will give your Honour the figures in a minute.

GUMMOW J:   But is there a map?

MR IRELAND:   There is a map.  The map is in volume 5.  There is one at 1744.  That would give your Honours some kind of orientation – if you go to 1744.  Does your Honour see the Weigall sportsground?

GUMMOW J:   Yes.

MR IRELAND:   Your Honour might remember that.

GUMMOW J:   And it says “Option Land”.

MR IRELAND:   The option land is that roughly triangular piece of land bounded on the east by the Maccabi courts.

FRENCH CJ:   Was that already in separate lots?

MR IRELAND:   There were, I think, your Honour – it was all originally lot 1 and then there was a breakdown throughout this period of the title because they were moving towards, effectively, a splitting up of the land.  But all of the land was owned by Tennis NSW and that was - your Honours see to the north of the drain, it is a drain that goes roughly north‑west to south‑east, SGS Land. 

That was the bit of the total that the Grammar School was going to obtain.  It is said to be north of the drain, I think, or canal.  Then the option land is below it and then on the eastern side the Maccabi courts.  Does your Honour see that?  So those were the three roughly - the three areas of the whole that was the ultimate plan would be divided in that way.  But what Tennis NSW had to sell was all of those things, I think, originally in one title.

HAYNE J:   Can I just go back to the MOU for a moment?

MR IRELAND:   Yes, your Honour.

HAYNE J:   You said 371 is critical.  Is that right?

MR IRELAND:   Yes.

HAYNE J:   Is 5.2(d) on 1418 significant?

MR IRELAND:   Yes.

HAYNE J:   That is, do I read it aright as the Alexander interests being bound to cause WCH to come into existence?

MR IRELAND:   Your Honour, we submit that that should not be construed as a covenant, but rather a statement of what was contemplated.  In other words, one could hardly sue for damages if they did not.  That would be the test, whether it was promissory or merely affirmatory of ‑ ‑ ‑

FRENCH CJ:   But 3.7.1 contemplated, of course, that WCH would have been brought into existence at least at the time of the exercise of the option, otherwise it does not work.

MR IRELAND:   Well, insofar as any tenure of the land was contemplated it was by the new Alexander company which had to come into existence and take a lease.  It was going to get the 99‑year lease.  The new landlord was going to come into existence too, WCH.  So this clause was at a time when neither the putative landlord nor the putative lessee had been formed – quite futuristic in those senses, in the future. 

As we have always submitted, it was a scheme that had a certain level of assumption in it and that one critical foundation of that assumption was that the Alexander participation in the deal would be vindicated by getting a 99‑year lease which would allow it commercial operations on the land – to make it worthwhile commercially.  What happens in the end is the Alexander interests through JACS, the contracting party, get the land and it is taken away from them with no recompense, apart from reimbursement of the price and some costs of acquisition.

So those, your Honours, seem to us to be the most important features of the scheme of this MOU.  Could I point also to one other matter?  Clause 3.7.2, again on page 1416, and this again is critical in the reasoning of the Court of Appeal:

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.

Now, the significance of that provision is – and it is a fair point, if I may put it this way, made against us – that an order, a pecking order, is established there.  The first opportunity to buy the land, if both of these things were negotiated – and they were, as you will see when I come to the White City agreement which is the – then the order of events would be that JACS would have the first option and then there would be – in the event that JACS did not exercise that option there would be a subsequent option which the Club itself could exercise.

It is that subordination, if I can use that expression, of opportunity that the Court of Appeal fixes on in part because it says the Club places itself in that sense by entering this scheme into the hands of JACS.  I am putting the case at its highest, I think, trusting it to exercise the first option, not for its own benefit, but for the benefit of WCH as clause 3.7.1 provides.  So those, it seems to us, are the important provisions of the memorandum of understanding that I should take you to in some detail.

There are – and the trial judge refers to this at paragraph 36, and I will take your Honours to it a bit later – there is then a period of some uncertainty whilst the tender process pans out – and as I was saying when we broke off to look at the map – another player enters the field, which is the Maccabi tennis organisation.  On 8 April 2005 tenders close.  By this date it seems there is an agreement in principle between the Grammar School and the Maccabi Club that Maccabi will take its section of the land, which on the arithmetic approximates about 15 per cent of the land by area, and contribute pro tanto to the ultimate purchase price.

There is then an acceptance of the Grammar School tender and a contract is entered on 10 May 2005.  In the meantime – and this is a matter of some significance – there is another document signed by all parties and that document is the first emanation of what comes to be referred to as the White City agreement.  Your Honours will find that at volume 4, 1684 and following.  This is the White City agreement dated 15 April 2005, so whereas the MOU that I have taken your Honours to is, of course, a bipartite agreement, or a two party agreement, this now is a four party agreement to which the Grammar School and Maccabi Tennis Club are also parties.  It cites in clause 1 the ‑ ‑ ‑

GUMMOW J:   Sorry, this is 18 April?

MR IRELAND:   I think it is 15 April.

GUMMOW J:   15 April, and you said there was a tender closure on?

MR IRELAND:   The 8th.

HEYDON J:   This document in clause 1 says:

The date for submission of tenders is 15 April 2005.

Which is right?  Is it the 8th or the 15th?

MR IRELAND:   Your Honour, I should have checked that myself this morning.  At 1482 there is a letter which suggests - from the solicitors for the tennis association:

The tender will close on 8 April 2005.

I think that may have been changed.  That is why I gave your Honours that date.  For the purposes of what I am submitting it does not matter very much whether this is just before or just after the closure of tenders.  It has certainly been drawn, as your Honour no doubt instinctively saw in contemplation of the closure of tenders.  But the essence of it is that the parties – clause 2:

The parties have agreed that SGS will submit a conforming tender for the Land (‘Tender’) with the intention that use of the Land be allocated between the parties as set out –

and then the division of the land in the way I have sought to describe by reference to the diagram is set out with a stormwater channel.  Then it goes on, clause 3:

Each party will do all things necessary and desirable to give effect to their own and each others’ intentions and that each party will cooperate fully with the others with the aim of giving effect to and fully supporting those intentions.

Now, the most important feature of this agreement for the present dispute is over the page on 1685.  Do your Honours see at line 30 a heading in the agreement “Option to JACS or its associated nominated entity (together referred to as ‘JACS’ in this section)” and under that clause 8 which are the options that ultimately come to be the subject of exercise:

Subject to Settlement –

and that means settlement of the purchase by SGS and Maccabi –

SGS and Maccabi (‘Grantors’) grant the following rights, referred to as the ‘Option’:

a.to JACS an option to acquire the Option Land for the Option Amount (as defined below) payable solely by JACS, exercisable by JACS giving written notice to the Grantors and paying the Option Amount at any time from completion of the purchase of the Land until 24 months after Settlement, but

b.if JACS does not exercise the Option within this period –

that is the 24 months after settlement –

the Grantors grant WCTC an Option for 3 months from expiry of the Option to JACS, exercisable by WCTC giving written notice to the Grantors and paying the Option Amount during that 3 month period.

This is the working out of what clause 3.7 was addressing.

FRENCH CJ:   Although, with respect, to a lesser portion of the land.

MR IRELAND:   Yes, because now Maccabi has entered the frame and the Grammar School has entered the frame and its requirements seem to be more clearly known because the areas to which each will ultimately accede are now well defined.  Could I just mention this in response to the Chief Justice’s comment?  In the memorandum of understanding the land is defined as the whole land or a part thereof so there might be some ramifications there.  That is 1422, schedule 2 in the same book, I am sorry maybe schedule 1.  So if I can revert now to 1685 in volume 4.

HAYNE J:   Sorry, what is the reference at 1422 to the whole or part?  If it is unimportant so be it, but ‑ ‑ ‑

MR IRELAND:   I just gave your Honour the reference.

FRENCH CJ:   You have the definition of “the land” at 1414, which is “the land described in Schedule 1 hereto” and then we go to Schedule 1.

MR IRELAND:   Schedule 1, which is at the top of 1422:

The land being all or part lot 3 . . . and being the whole or part of the land in Folio Identifier 9/11680.

My only point was, your Honour Justice Hayne, that by the time we get to the first White City agreement of 15 April, the parties have carved up the land, at least in their expectations in the manner in which it will be divided.

GUMMOW J:   This document at 1684 is expressed to be an agreement and it has other parties, but did it have the two parties to the memorandum of understanding?

MR IRELAND:   Yes, it did.

GUMMOW J:   They are there?

MR IRELAND:   They are two of the four.

GUMMOW J:   Do they say anything in their agreement about the memorandum of understanding?

MR IRELAND:   Yes, they do.  Your Honour, in the end there are three versions of this agreement.  In this one, which is the first, to answer your Honour’s question, they do not deal with the memorandum of understanding at all and our submission, which found no favour in the Court of Appeal, was that really the memorandum of agreement is overtaken in many respects by that fact but this becomes the statement of the four parties of all of their rights.  I think there is the usual all provisions clause.

GUMMOW J:   Were these parties acting with – it seems – with solicitors at all times in these agreements?

MR IRELAND:   Yes.  Your Honours will in the end of this explanation – I hope it is not too long – will see three of these agreements.  Can I point out the important difference in this first one from the ultimate?  If I go back to 1685, clause 8, I referred to the option provisions in 8a and 8b at lines 32 and following.  Could I make this observation?  It may be of some significance, although this has not been concentrated on in the courts below, that the “Option to JACS” as it is called, is “to JACS or its associated nominated entity”.  A consideration could well arise as to the validity of these provisions.  It is funny because ‑ ‑ ‑

FRENCH CJ:   Sorry, that reference to the associated nominated – I see, it is defined as JACS to include ‑ ‑ ‑

MR IRELAND:   It says “this section” which one would take to be clauses 8 to 12, I think.  So this is expressed to be an option to JACS but that is to be read in some kind of extended way as an option extended to JACS or its associated nominated entity.  We know that ultimately Poplar, which I think fairly bears the description “associated nominated entity” buys the land.  The only point I am pausing to make here is the terms of the option itself may be a little uncertain, and the 8b option is the fallback position for the Club itself in the event that the first one is not exercised.

What happens, quite strangely as a matter of conveyancing, you do not see a contract annexed to this.  It is conventional when you do a commercial contract which is an option to annex the contract that will become the ultimate agreement between the parties.  That does not happen in this case.  This is a contract – it is what we used to call “the three Ps” - price, promises and property, the essential constituents of a valid contract satisfying the writing requirements of the Statute of Frauds.

Could I take this a little out of turn – volume 9 - and just show your Honours what happened because the conveyancing is very odd.  There is no detailed contract even though in the books there is reproduced a most detailed contract in the sale from Tennis NSW to the Grammar School.  What happens in the end here is this – if your Honours could please go to volume 9, page 3446.  This is the document which is finally, some two‑and‑a‑bit years later, the exercise of the option.  It is the exercise by Poplar, which has meantime come into existence as I think fairly described as an associated nominated entity.  It is nominated over the page, at 3447, by JACS, upon which was conferred the option.

There is a notice of nomination.  There is an exercise and then there is a transfer.  We will find that document.  So the conveyancing for this very large transaction, I would say surprisingly, is the option at 1685, the exercise at 3446 and a transfer to follow.  The other feature of, if I may call it that, the first White City agreement of 15 April 2005 is that the scheme has two other aspects.  May I please invite your Honours’ attention to 1687, line 46, clause 21.  Your Honours will see WCTC – that is the Club:

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

So there is a surrender in this document and it can fairly be pointed out that that is contemporaneous with the acquisition of whatever rights arise under clause 8 that I have just shown your Honours.

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Above that do your Honours see a heading at 1687, “Lease to JACS”?  It says:

SGS and Maccabi as joint owners of the Land grant JACS a lease (‘Lease’), commencing on the date on which Settlement takes place for the term set out in paragraphs 17a –

which is two years, with certain features in one year and in the other.  So the scheme of this was that JACS would acquire the option and with the consent of the Club the Grammar School and Maccabi were promising once they settled on the acquisition to grant a two year lease.  That is significant because it changes later in a manner that I will identify, in the later agreements.  Your Honour, I think those are the parts of the first White City Agreement that I wanted to draw particular attention.

The next document is the second White City Agreement, which is reproduced at appeal book volume 5 at page 1733.  This is the White City Agreement dated 10 May 2005.  The trial judge said, and I think the Court of Appeal said it as well, that this supersedes the first White City Agreement of 15 April that I just showed your Honours.

GUMMOW J:   Is it expressed to do so?

MR IRELAND:   It says in the last sentence in clause 1:

This agreement reflects the renegotiated arrangements and amends and replaces the previous agreement between the parties dated 15 April.

Now, clause 8 of this agreement materially is in the same terms as clause 8 of the first White City Agreement.  That appears at 1734 commencing at about line 32 once again.  Once again, one has, as it were, the JACS option followed by the Club’s option for a three month window after the JACS option period has expired if it is not exercised.

Then if I could just confirm this, at page 1736 commencing at clause 16 there is provision for a lease, again to JACS, the Alexander company, and at clause 21 on page 1736 again the surrender.  Our submission has been that the surrender has already been effected on 15 April.  There is next in the same volume at 1911 something called the “Heads of Agreement”.

FRENCH CJ:   Just before we leave, there is nothing in the second agreement about the MOU?

MR IRELAND:   No, your Honour.  I am just about to show your Honours where this becomes introduced.  At 1911 is the “Heads of Agreement”.  This is between the Club and what appears to be a partnership, ATWC and JACS.  What it says is:

That in consideration of JACS agreeing to a variation o the Agreement between the trustees . . . in accordance with Schedule 1 hereof, and in particular variations to –

various clauses.  JACS and the operative parties here:

agree that for the period of the term of the new lease that the arrangements as set out in Clauses 2 to 15 hereof between WCTC and ATWC be in place.

This is in a sense odd because it is an agreement between two of the parties to the four partite White City Agreement, namely the Club and JACS.

GUMMOW J:   What page are you reading from?

MR IRELAND:   I am looking at 1911, your Honour, which is the start of the agreement and I was pointing to clause 1 which said that there was an agreement between these three parties to vary the four partite agreement, which only two of the relevant four are agreeing with.  Your Honours, the changes that are supplied are in schedule 1 at 1917 and this is the first mention that is introduced of the memorandum of understanding to respond to the Chief Justice’s inquiry.  Does your Honour see in the middle of the page 1917:

Clause 3:

Insert 3(ii) “WCTC and JACS acknowledge that the Memorandum of Understanding between them of 28 February 2005 remains in place despite this Agreement”.

There was no evidence or explanation why that happened.  It may have been, and this is only speculative, upon the realisation that somebody thought that, as I have submitted, that the first agreement or indeed the second agreement may have put an end in some fashion to those obligations.  Any way, it is revised or resurrected in that way not by at this stage amendment of the White City Agreement with the four parties, but by this document which has other purposes as well. .This is remarked on by Justice Macfarlan in the Court of Appeal as that were the precursor to a clause in the third agreement, but I point out that that precursor was not something agreed by all the parties.

FRENCH CJ:   This is simply JACS undertaking to agree to a variation which had not yet been agreed, of course, that involves SGS coming in?

MR IRELAND:   And Maccabi.

FRENCH CJ:   Yes.  So that this was foreshadowing what JACS would sign up for?

MR IRELAND:   Yes, and that did occur, more or less.  I come to the final version – a certain sense of relief – of the White City Agreement which commences at 1948.  This is the White City Agreement which remains operative thenceforth.  It is dated 29 June 2005 and it exhibits a number of differences.  Importantly for the purposes of the respondent’s case, one still sees at 1949, across the page, at about line 34, the clause 8b under that heading as before.

In clause 21 on page 1952 at around line 12, there is another restatement of the surrender of rights.  Of some significance, I submit, at 1951, clause 16 which is about line 15 on 1951, the scheme has now changed because no longer is JACS going to get this two year lease after settlement.  Now the Club is going to get that lease.  So, there is a significant change in the scheme.

FRENCH CJ:   And where does the MOU feature?

MR IRELAND:   Finally, your Honour, if I may now at 1955, clause 42 there is introduced what was contemplated in the heads of agreement that I just took your Honours to - clause 42:

WCTC and JACS agree that their MOU dated 28 February 2005 and their agreement dated 18 June 2005 continue in accordance with their terms and each agrees to carry out its obligations under this agreement in accordance with those agreements.

While I am there, if I may, your Honours, clause 43 says:

To the extent of any inconsistency between this agreement and any other agreement between any of the parties, this agreement will prevail, unless specifically stated.

That, I think, brings me to the end of the operative documents in this case and the parts of those documents which we see to be of significance for the resolution of the appeal.

If I could just trace over the facts before I come to the judgments now, a few more facts after that date.  None of this will be very contentious.  This third version of the White City agreement is 29 June 2005.  So now the parties are in their final contract under which – I should interpolate, this roughly coincides with settlement of the purchase by the Grammar School and Maccabi of the land.  So I think the following day on 30 June they own the land so Tennis NSW is out of the picture.  There are novations of licence arrangements and there is also a deed of variation of the lease, which is extant, but I point out that ‑ ‑ ‑

GUMMOW J:   Did there have to be a subdivision of this land?  The Chief Justice was asking you.  Is there evidence of this?

MR IRELAND:   There is evidence of this.  Can I summarise it?  What happened was that the contract with Tennis NSW was in the name of the Grammar School, so it was obligated to settle.  But it acknowledged, I think, in that contract that it contracted for itself and on behalf of Maccabi.  So the conveyancing meant that Maccabi chipped in at settlement its share which was about $3 million, that the Grammar School supplied the rest.  They then became tenants in common in uneven shares, roughly 15 per cent to Maccabi, 85 per cent to the Grammar School.  There was then a plan for subdivision, which was part of what was put into the council by JACS.  It had the carriage of both the subdivision and then the development of the land, which would see the option land developed as a premium tennis facility.

But the title, as at this date 30 June 2005, is that we now have the Grammar School and Maccabi as tenants in common of the land in unequal shares, rateably according to their contribution, roughly rateably according to their contribution of the price.

FRENCH CJ:   And the subdivision was provided for or the obligation to apply for it provided for in the final agreement I think at clauses 33 and following, is that right?

MR IRELAND:   That is so, yes.

FRENCH CJ:   1953.

MR IRELAND:   So that the subdivision was something all parties wished.  Maccabi wanted its own title.  The option land, which is the land we are concerned of in this case, was to be in a separate title.  Of course, I do not need to say that all we are talking about now is options.  There is no binding obligation as at this date for anybody to buy the option land.  There is just an option over the option land, hence the name. 

Many things may have happened.  JACS could have exercised its option, which it does.  The Club might have exercised its default option, or nobody may have exercised the option.  At the moment it is just a series of possibilities.  What next happens is that there is a lot of evidence now about meetings and dialogue with the council about the development, and to a lesser degree about the subdivision.

There was a sort of political factions developed within the Club, some people favouring JACS in this endeavour and in favour of their proposals, others quite against it.  So there is a sort of political toing‑and‑froing within the Club which results from time to time in support for what JACS is doing and in later dates, which we rely on, positive antagonism to what JACS is doing with respect to the development. 

The next milestone probably is best seen at volume 7, page 2588.  This is 12 April 2006 where there is a notice of termination given by JACS of the MOU.  At line 25, it recites the MOU.  “B” refers to express terms of clauses 3.1 and 3.2.  “C” alleges breaches by the Club of certain obligations.  I should point out, the second page of the notice of termination is out of order.  It is found at 2590, so the document is not as short as it looks when you open that page.  The particulars of “C” commence at 2590, line 10.  Do your Honours see that?  So there are particulars of breach alleged.  Those then continue back on 2589 in subparagraphs 8 and 9, and then it goes on:

NOW TAKE NOTICE that JACS hereby accepts such repudiation of the MOU and terminates the same, reserving to itself the right to sue WCTC for damages for breach of the MOU.

Now, could I pause there, if it is convenient.  Those are probably the factual milestones that need to be emphasised.  The termination which was purported to be effectuated by that notice is a termination which the trial judge upholds.

The Chief Judge in Equity, Justice Young, adopts arguments which we put on the facts, which included submissions about the veracity of Mr Simpson, the Club President, on some particular matters.  He unequivocally accepts the factual case that we put up and I will give your Honours the passage in his judgment in a second.  To summarise what it says, he goes on to say that he does not think there is any answer to that and he upholds the termination.  He says by this date there was repudiatory conduct and an effective termination.

Pausing there, the significance of that finding in this case is that according to one of our primary arguments, once the MOU is gone by a valid termination on the part of my clients there is nothing left, we would say, to constitute the equitable obligation because the option is exercised some 15 months later, well after that event.  It is in that sense that we submitted to the courts below that the landscape had changed by the time it came for the option to be exercised.

In the Court of Appeal – and the principal judgment is given by Justice Macfarlan with whom the other members of the court agree - his Honour criticises the trial judge’s approach and says that because the judge adopted the factual submissions he somehow fell into error and that it was an unsatisfactory way to go about it.  We say two things in response to that that we would like to put forward prominently while your Honours are still giving this matter acute attention.  The first is ‑ ‑ ‑

FRENCH CJ:   Are you suggesting there will be a diminution as the afternoon wears on?

MR IRELAND:   Well, I have been watching your Honours on television for the last couple of days and it has been a weary couple of days.

GUMMOW J:   That is a reflection on your colleague.

MR IRELAND:   I have lost my place.

HAYNE J:   That was the objective.

HEYDON J:   Well, you wanted to make a couple of points about the Court ‑ ‑ ‑

MR IRELAND:   I want to make two points about the criticism of the Court of Appeal of the trial judge on the factual finding of termination.  Number one – and the references are in our written arguments – there was no alternative factual scenario offered to the judge, as he records in his judgment, by the Club; no analysis, no reference to evidence, no arguments.  There was one paragraph in a written submission that said we had the onus to show termination and the facts did not bear it out.

In those circumstances one could hardly be critical of the trial judge for adopting the approach he did, but it is clear from what he did – and we have given in a later document our support for this – that all of the statements that he found factually in our favour were well supported by evidence to which reference was given.

FRENCH CJ:   What was terminated?  His Honour found at paragraph 59 that the MOU at least in part intended to create legal relations between the parties.

MR IRELAND:   Yes.

FRENCH CJ:   So to the extent that it is not a document with contractual force the termination presumably has no legal significance?

MR IRELAND:   We would say so.  I think his Honour is saying that carefully because, as Justice Gummow I think and perhaps your Honour also earlier mentioned, in a sense the memorandum of understanding was a mix of promises and a mix of hopes and expectations.  There may be some matters that were certain and contractual and others that were not binding in that contractual sense.  The second thing that we wish to say about ‑ ‑ ‑

FRENCH CJ:   Well, is then 3.7 accepted as contractual?

MR IRELAND:   Yes, it has been in this case, and we do not pull back from that.

FRENCH CJ:   Okay.

MR IRELAND:   The next thing we would like to submit with respect to Justice Macfarlan in the Court of Appeal and those who agreed with him is that his Honour does not descend to any analysis of the facts at all; you will not see any real consideration of that.  Moreover, after criticising the trial judge for the route by which his Honour reached the factual conclusion of termination, Justice Macfarlan simply moves on.  He does not set aside the finding, and the consequence of that is that we still have the benefit of the trial judge’s finding that the contract was valid – that it be terminated – and it is that that gives rise to my learned friend’s notice of contention in these proceedings before you.

I do not propose, unless I am required to do so, to address the notice of contention at this stage.  I would like to say something in reply when my learned friend maintains his arguments about that when he follows.  We have put a document in which summarises what we will say, if your Honours have any interest at all in looking at it either before or when my learned friend is making his factual re‑examination said to support the criticism of Justice Young.  We proceed in these arguments upon the footing that his Honour’s finding that the MOU was terminated is operative.

HEYDON J:  That is the Court of Appeal’s basis of thinking too.

MR IRELAND:  Yes, it is.  I should add this that the trial judge also was minded to accept an alternative submission and that is even if the memorandum of understanding was not validly terminated on 12 April 2006, nonetheless, other repudiatory conduct had occurred after that date and it was justifiably terminated later.  Could I give you, if your Honours please, a reference to the judgment?  This will be in volume 2  Starting at page 546, paragraph 78 – this is the trial judge.  After referring to the factual matters which are the subject of our submissions his Honour says:

I cannot see any answer to those submissions, nor can I see where the plaintiff has provided any such answer.  The real question is whether adding them all up they amount to a party indicating that it was not prepared to perform its contract.  In my view there is no doubt that the answer to that question is “Yes”.  Accordingly, JACS was entitled to terminate the MOU on 12 April 2006.

79       In paras 15 and 16 of his submissions, Mr Ireland puts submissions in the alternative, that if the MOU was on foot after 12 April 2006, it was subsequently repudiated ‑

His Honour recites what we said.  That carries over to page 548, at the top, at the end of the excerpt.  Then his Honour then says in paragraph 80 on page 548:

Again, I think this is correct even though it is unnecessary to make this decision.

HEYDON J:  By what means did JACS accept the repudiation?  The judge says it was repudiated ‑ ‑ ‑

MR IRELAND:  Your Honour, the submission we made was that by pleading the termination in the action, in the proceedings, we had exercised a right of termination based on matters after 12 April.

HEYDON J:  Also after the transfer to Poplar.  So is it not too late?  The pleading occurred after the transfer of the land to Poplar.

MR IRELAND:  Yes, it did.

HEYDON J:  Is that not too late?  I have some considerable difficulty in seeing what the relevance of the MOU is.  If the Court of Appeal thought its continued existence was not relevant to their reasoning, very well, one can examine their reasoning, but if it is from some point of view important that it continued in force, to terminate it after the proceedings had commenced or when the proceedings commenced is too late, is it not?

MR IRELAND:  We would submit not.

HEYDON J:  Why not, because whatever equitable obligations it threw up were still in force at a time when the option was exercised and Poplar took title.  Therefore there was arguably a breach of them.  The termination of the MOU in April 2006 I understand.  That is significant.

MR IRELAND:   On reflection I accept what your Honour says.  There is an interregnum.

GUMMOW J:   Yes.  As I understand the Court of Appeal’s reasons they are saying Poplar became a constructive trustee eo instanti when it took title.

MR IRELAND:   Namely on 30 June 2007.

GUMMOW J:   Yes, which is significant to what Justice Heydon has been putting to you.

MR IRELAND:   No, I think I have given up on what I said before and I readily concede that once the – the operative date to test the obligation is the date upon which Poplar took title.

GUMMOW J:   That seems to be what the Court of Appeal is saying.

MR IRELAND:   I am sorry?

GUMMOW J:   There is a question about whether that is the right way of awarding that sort of relief, but they seem to have been treating it as ‑ ‑ ‑

MR IRELAND:   Yes, or whether it is imposed later in the proceedings.  It depends how you look at the constructive trust.  If it springs from the court’s decree ‑ ‑ ‑

HEYDON J:   Then maybe your pleading is not too late.

MR IRELAND:   ‑ ‑ ‑ then my pleading in paragraph 11(a) would be good enough.  That point has not been raised against us.  I have not thought about it and I do not think I will finish this afternoon.

GUMMOW J:   I think the answer is bound up with the ambiguity in the Court of Appeal’s order as to when it is effective as distinct from when it is made.

MR IRELAND:   Yes, because the orders do not make that clear in this case.

GUMMOW J:   Mr Jackman is very angry about that.

MR IRELAND:   I saw that.  There is nothing worse than an angry Jackman, as all filmgoers will tell you, your Honour.

GUMMOW J:   This is all documentary material.  Insofar as there was any fiduciary basis for this relief, was that founded at the primary level on the supplementation of the written record by oral evidence?

MR IRELAND:   Not really.

GUMMOW J:   I notice you cross‑examined Mr Simpson for some pages?

MR IRELAND:   I did.  Your Honour, the evidence of Mr Simpson upon which I cross‑examined, the trial judge was kind enough to say that all the cross‑examination was of no effect - or almost, I think he said almost no effect.  I think that was levelled at my opponent as well as me.  But the design of a cross‑examination against Mr Simpson was to tackle him on the repudiatory conduct.

GUMMOW J:   I see.  Was he the lead witness for the Club?

MR IRELAND:   Yes, he was the president of the Club and he was their only witness, I think, relevantly, so that is why we tackled him on those matters.  So just to draw together what I was trying to submit, we would say that the criticisms of the Court of Appeal of the trial judge in his treatment of the repudiation issue and the termination issue were badly based.  They themselves made more severe errors of approach, we would say with the greatest respect, than the trial judge did.  They leave the matter hanging.  So we now have a criticised approach to a finding of fact, no reversal of that finding of fact and we submit that that entitles us to say that in this case the facts upon which this Court ought act are that there was a termination at the earlier date, namely 12 April 2006, which is before Poplar takes its title to the land, about 15 months before.

GUMMOW J:   There is an ambiguity in all of this.  Insofar as there is said to be some supplementation of these contractual arrangements by fiduciary law, the question then is when do those fiduciary characteristics arise.

MR IRELAND:   When do they begin and end?

GUMMOW J:   Yes, and what is their effect on their continuation of the fate of the MOU?  Is it determinative against a continued subsistence of the fiduciary situation?

MR IRELAND:   Yes.  That is a subtle, if I may say, and a critical question because the foundation of the fiduciary duty or the unconscionability, we would say, whichever way one looks at it, the fons et origo of both these things is the MOU in its terms.  The structure of the MOU which is played out in the White City agreement whereby we get – we JACS get the first dibs, get the first option ahead of them, but intrinsic, absolutely intrinsic to their argument seems to be an assertion that the Club gave up rights on the faith of this arrangement. 

The point we have made in our written submissions which I want to develop a little later is there is no foundation for that in the evidence, in the findings or otherwise in the facts.  What happened was that SGS and Maccabi insisted upon the Club giving up its tenure of the Club building, which went until 2020, and some licence rights as a precondition of its own to proceeding to acquire the land.  Otherwise, those buyers from Tennis NSW would have been stuck with the lease of part of it, which would have been commercially most annoying.

There is a finding of fact here which is made by the trial judge and commented on in the Court of Appeal that it was the insistence of those parties, the Grammar School and Maccabi, which led to the Club giving up those rights.  That effects a disconnection between the release of those rights which I have shown your Honours in each version of the White City agreement was unconditional, an unconditional surrender of those rights, and JACS itself.  There is not a shred of evidence nor a finding to say that JACS somehow leant on the Club to give up those rights in return for the scheme of the memorandum of understanding.

We would submit that the absence of that fact and such a finding is entirely destructive of the case based upon unconscionability or the case based upon fiduciary duty because they are really in this case two sides of the same coin.  The argument proceeds in this way against us, as the Court of Appeal has articulated it.  One looks at the structure of the arrangement, the order in which the options were conferred.  One then somehow gleans, in a way that is not shown, an underlying intention.  They say that intention is expressed in the MOU in clause 3.7.1 that JACS will hold the option – sorry, will exercise the option, not hold it – exercise the option on behalf of White City Holdings.  All of those things and nothing else are accumulated to construct a dependence on the part of the Club which founds a fiduciary duty.

GUMMOW J:   It gives them a remedy they could not have got for breach of contract.

MR IRELAND:   Correct.

HEYDON J:   They do not sue for breach of the MOU in contract.  They sue ‑ ‑ ‑

MR IRELAND:   No, they do not.  They never sued on the MOU for breach, as we point out in our written submissions, and they dropped any case based on breach of the White City agreement; that was abandoned.

HEYDON J:   Is it worth bothering with the statement of claim or has life moved on since then, because what you have offered as a summary of the Court of Appeal’s reasoning does not really correspond with the statement of claim?

MR IRELAND:   No, it does not, and we make that point in our submissions in reply.

HEYDON J:   Should we just ignore the statement of claim except to the extent that it drops ‑ ‑ ‑

MR IRELAND:   Well, your Honour, I am perhaps slightly ambitiously trying to say it does not matter very much, but certainly if one regresses to the 19th century and holds us to our pleading, or them to their pleadings, unconditionally ‑ ‑ ‑

“Encumbrance” is defined back on 3707, a third of the way down the page, paragraph (b), any:

right, interest or arrangement which has the effect of giving another person a preference, priority or advantage over creditors –

Paragraph (d) is any:

third party right or interest or any right arising as a consequence of the enforcement of a judgment -

In other words, whenever it was that the constructive trust arose over the land, that was an encumbrance as defined under either paragraph (b) or paragraph (d), and within the meaning of 5.1(a) there is a breach by Poplar by reason of Poplar creating or allowing “to exist another Encumbrance over the Secured Property”.  Relevant also is clause 5.2(e), that is:

Without the consent of the Chargee, the Chargor may not and may not agree . . . to, do any of the following…

(e)deal in any other way with the Secured Property or any interest in it, or allow any interest in it to arise or be varied.

Again, the creation of a constructive trust in favour of WCTC would be a breach of 5.2(e), so whenever it was that the constructive trust arose, whether it was late June 2007, whether it was upon the Court of Appeal giving judgment, whether it was upon Poplar exercising the option, this charge fixed automatically, so in terms of temporal priority with this charge, this charge became fixed, and therefore the equitable interests under that charge arose at exactly the same time as the constructive trust, whenever that was.  Temporal priority is not going to solve the priority fight on the charge, one will be looking at where the merits lie.

As to the unregistered mortgage, temporal priority would favour us because our mortgage was granted on 26 June 2007 which is prior to any time when WCTC says its constructed trust arose.

GUMMOW J:   This charge does not have any immediate impact on the register though, does it?

MR JACKMAN:   No, it is the company that is registered, not the Torrens register.

GUMMOW J:   It is the Torrens register we have to worry about do we not, and that is your unregistered mortgage?

MR JACKMAN:   Yes.

GUMMOW J:   That became effective - what was the date?

MR JACKMAN:   27 June 2007.  The mortgage was executed the day before Poplar actually acquired the land.  The mortgage was granted on 26 June 2007, settlement occurred the next day, 27 June when Poplar acquired the fee simple in the land.

GUMMOW J:   If the proper understanding of the order of the Court of Appeal is that the constructive trust only arose on the making of the order, you at that stage undoubtedly had your earlier unregistered Torrens system mortgage?

MR JACKMAN:   Quite, and in any event we say that ‑ ‑ ‑

GUMMOW J:   The question then is, should that circumstance have been taken into account in deciding whether to make such an order for a so‑called constructive trust?

MR JACKMAN:   Quite, and this was evidence before the – the deed between the parties on our side of the Bar table which obliged Poplar to grant a mortgage and the charge were all in evidence before the trial judge.

GUMMOW J:   We said in Giumelli v Giumelli with some hope that it would be read, that before these constructive trusts were imposed the Court would look around.

MR JACKMAN:   And we respectfully adopt that.

HEYDON J:   Your point is that it was not in Mr Ireland’s interest to be taking any such point, he was destroyed in the Court of Appeal, but if you had been there you could have taken the point because you were the party whose interest it was to take the point and no one else’s?

MR JACKMAN:   Quite.  Well, yes, it was certainly in our interest to take the point and we would have done, and it is a point that the Court of Appeal ought to have considered by reason of what – as your Honour points out - this Court said in Giumelli v Giumelli that one does think about the position of other parties with interests in the land before one jumps to a conclusion about constructive trusts.

Now, when we went to the Court of Appeal to say that our interests had been directly affected and the Court of Appeal’s order – or declaration as to a constructive trust in order for a transfer from Poplar to WCTC should be set aside we had some affidavit evidence on information and belief.  Your Honours will see that in volume 2 beginning at page 650.

HEYDON J:   Incidentally, was there any oral argument before the Court of Appeal when you sought to intervene?

MR JACKMAN:   No, there was not.  It was dealt with on written submissions.  Justice Macfarlan asked the parties whether they would consent to the matter being dealt with by way of written submissions to save the inconvenience of reassembling the Court of Appeal, one infers, and we acceded to that, in hindsight perhaps it was a mistake on our part, because had we known what the Court of Appeal was actually thinking we could have put the answers that we are now putting to your Honours.  But that is how it happened, the answer to your Honour’s question is, no there was not oral argument. 

At volume 2 page 650 is the first affidavit of my instructing solicitor of 10 June.  Relevantly in paragraph 3 that annexed the relevant documents for Walker Corporation’s interest, and in particular paragraph 3(d) was the unregistered mortgage, 3(e) was the charge granted by Poplar which I have taken your Honour to.  On the next page, paragraph 4(f) culminated with the proposition that:

Walker Corporation claims an interest in the Land and priority to any interest of the appellant.

Then if I can ask your Honours to go forward to page 658.  In a further affidavit of Ms Johnson sworn 22 June 2009, she set out some evidence as to what happened in June 2007.  In paragraph 4 on 659, Mr Hughes, the managing director of Walker Corporation, informed her that:

in early June 2007, he met with representatives of . . . 

White City Tennis Club –

including Mr Geoff Simpson . . . 

(i)Mr Hughes informed those present Walker Corporation was looking to provide funding to Mr Alexander’s company to enable it to purchase an interest in the White City land . . . and to fund the costs of the purchaser in obtaining a development approval in respect of the land and that the financing would give Walker Corporation the right but not the obligation to participate in the development on the site.  Mr Hughes also told them that the proposed financing involved Walker Corporation taking security over the land.

Then Mr Simpson said they were ‑

seeking an assurance from Mr Alexander, that –

WCTC –

would get the benefits promised by Mr Alexander in relation to the club being membership in the club to be developed on the site;

(iii)Mr Geoff Simpson asked Mr Hughes whether or not Walker Corporation was funding the acquisition and Mr Hughes informed him that the appellant could proceed on that basis.

He had really already said that in what is set out higher up the page.  Then going over to the top of page 661, at line 10:

(f)at no time prior to the completion of the initial funding by Walker Corporation of the purchase of the Original Land on or about 27 June 2007 did the Appellant inform him, nor did he understand it to be the case, that the Appellant was claiming that the Original Land, if acquired, would be held on trust for the Appellant; and

(g)had he been informed that the Appellant claimed that Poplar or the purchasing vehicle, if it acquired the Original Land, would hold that interest on trust for the Appellant, Walker Corporation would not have proceeded to fund Poplar.

Then in paragraph 5 Mr Livanes, a solicitor retained by Walker Corporation, informed Ms Johnson that:

(a)he attended a meeting with the Appellant on 5 June 2007 together with a meeting with the White City Steering Committee on 6 June 2009;

(b)at no time in either of the meetings of 5 or 6 June 2007 did the Appellant inform Walker Corporation that it claimed that on acquisition of the Original Land, such land would be held on trust for the Appellant or that any fiduciary duty was owed to it by any of the respondents;

Then he refers to the finance documents “executed on or about 25 June 2007”.  It seems to be 26 June the actual date of execution.  Settlement “took place on 27 June” and then some interesting evidence, indeed:

(d)prior to settlement of the funding referred to in paragraph 5(c) above, he was aware that the Appellant had lodged a caveat –

That is to be found on page 664.  WCTC lodged a caveat over the land and the interest is described at the top of page 665, line 10 as “A legal interest as a party granted an option to purchase the land.”  Then, going back to page 661, sub‑paragraph (e):

at settlement, a representative of Kemp Strang who acted for the Appellant produced to the solicitor for the Trustees of the Sydney Grammar School, the vendors of Original Land, a withdrawal of the caveat over the Original Land, together with a cheque for the fees of the Registrar General in respect of the withdrawal of the caveat –

So they now say, “Well, we are no longer claiming any proprietary interest.  Here is a withdrawal of caveat.”

GUMMOW J:   I am not following this, Mr Jackman.  What is the significance of all this, Mr Jackman?

MR JACKMAN:   Well, this is really outlining the nature of our argument for priority, that is that we, between two competing equitable interests, the merits are with us because ‑ ‑ ‑

HEYDON J:   You gave them notice.

MR JACKMAN:   ‑ ‑ ‑ at the time that we became involved, that is 27 June, WCTC actually withdraws the caveat that they had lodged which was the only expression by them in any evidence that they held any proprietary interests in this land.  They say we are no longer claiming a proprietary interest and we will withdraw our caveat.  In paragraph (f), at no time did WCTC claim any fiduciary duty or that the land was to be held on trust and paragraph 6 is evidence from Mr Archer that at no time prior to the initial funding did he, JACS or Poplar inform Walker Corporation that – sorry:

that, if JACS’ nominee purchase an interest in the Original Land, the Appellant claimed the Original Land was to be held on trust for the Appellant. 

GUMMOW J:   Now, was there any response to this affidavit?

MR JACKMAN:   No.  So what was put forward to the Court of Appeal was not any contradiction of that evidence but a supplementation of the evidence in an affidavit beginning at 667.

GUMMOW J:   Mr Rozdal.

MR JACKMAN:   Mr Rozdal’s affidavit of 12 June which annexed some correspondence which begins at page 670.  So on 25 June at 670 Kemp Strang, WCTC’s solicitors, write to the managing director of Walker Corporation saying at about line 35:

We understand that Walker Corporation is in discussion with John Alexander’s Clubs Pty Limited –

Well, there had been no secret, we had told them that early June –

regarding the exercise of an option to purchase certain lands at White City.

We enclose for your information a copy of our letter forwarded to John Alexander today -

So they obviously wrote to us because they knew we were about to become the secured financier of John Alexander’s company.

The letter begins at 673 and goes through to 675.  It is all about contractual rights and says – I will not read it in view of the time – but the submission that we put about it is that it says a great deal about contractual rights under the MOU and says absolutely nothing about any constructive trust, fiduciary duty, proprietary interest or anything beyond the law of contract in relation to what is going to happen with the land.  There is another letter that ‑ ‑ ‑

FRENCH CJ:   The Court of Appeal considered this material is solely for the purpose of determining whether Walker Corporation should be joined as a party and ‑ ‑ ‑

MR JACKMAN:   And for the purpose of considering whether its orders of 3 June should be set aside and ‑ ‑ ‑

FRENCH CJ:   But the precondition of that was getting you in as a party, was it not?

MR JACKMAN:   No, that is not a precondition because a non-party – joinder as a party is really an academic issue on that point.  A non‑party is entitled as of right to have orders set aside if they directly affect it.  Whether or not we are joined as a party is not a precondition to our right to have the orders set aside.  Your Honours will see that in many cases, News v ARL ‑ ‑ ‑

FRENCH CJ:   I am just looking at the way that they dealt with it.

MR JACKMAN:   They dealt with it in that way.  They regarded joinder of us as a party as a discretionary matter.  They say they are not going to exercise their discretion in our favour, and therefore they are not going to consider the rest of what we want, namely setting aside the orders.

FRENCH CJ:   Yes.  That appears at paragraph 40 on 702, I think.

MR JACKMAN:   They had no right to do that, because a non-party is entitled as of right to have orders set aside, if the orders directly affect him.

GUMMOW J:   Now, sensible methods of what are now called case management, which some would call commonsense, would suggest an alarm bell had gone off in the Court of Appeal with their orders, something would have to be done about it with this constructive trust.

MR JACKMAN:   Well, they do not do anything about it, that is our complaint, and even if we win the priorities fight we are stuck, it seems, with an order declaring a constructive trust and an order that Poplar transfer the land not to us but to WCTC, so even if we win the priorities fight we are never going to be able to exercise our rights as mortgagee or chargee because the only transfer that can be made it seems is going to go to WCTC.  Now, that is absurd.

GUMMOW J:   Is there judgment of Justice McHugh on this question of parties?

MR JACKMAN:   Yes, that is the case in 195 CLR that we refer to.

GUMMOW J:   Sutton.

MR JACKMAN:   Sutton.  It is the case involving the BLF, and we refer to that.  That is another authority in support of our entitlement as of right to have the order set aside.  There is also Cameron v Cole 68 CLR, there is Grovenor v Permanent Trustee 40 ALJR, there is a decision of the New South Wales Court of Appeal in BP Australia v Brown that we refer to in our submissions; many, many cases.  It does not matter if you are joined as a party or not.  If you are a non‑party who is directly affected by orders then you are entitled as of right to have them set aside.  That is our point.  That is why we regard joinder as certainly not any pre‑condition to my rights, it is irrelevant to my rights.  The Court of Appeal was wrong to say, well, just because – they are wrong to regard the issue of joinder as discretionary, it is not, it is mandatory for necessary parties, that is why they are necessary.  In any event, they were wrong to regard the issue of joinder as resolving our application, they had to go on and consider the setting aside of orders that do directly affect us.

FRENCH CJ:   Mr Jackman and other counsel, are we safe to resume at 10 o’clock tomorrow morning on the assumption we have to rise by about 3?

MR JACKMAN:   I have not finished, I have got ‑ ‑ ‑

GUMMOW J:   I hope you have not finished ‑ ‑ ‑

FRENCH CJ:   You seem to be just getting warmed up.

GUMMOW J:   It is much more important to get proper submission than to get some rushed operation because we have to write judgments.

MR JACKMAN:   Well, I have a good half hour, but less than an hour.

MR HUTLEY:   I just cannot see any circumstances - we will be finished by 3 o’clock in the light of that.  One has to deal with – and I should endeavour to shorten it – we have prepared some submissions in reply on the response of our learned friends to the notice of contention to say as much as we can in writing on ‑ ‑ ‑

GUMMOW J:   We get deluged with paper.

MR HUTLEY:   Well, your Honour, I am happy not to deluge your Honour, except that I am very conscious of the fact that your Honours have a deadline tomorrow ‑ ‑ ‑

GUMMOW J:   It is not a deadline.

FRENCH CJ:   It can stand over part heard, if it comes to that.

MR HUTLEY:   Your Honour, if it can stand over part heard, would your Honour mind allowing for that possibility and still being deluged in the sense that we have endeavoured to deal with what are really, in effect, evidentiary points, in a written form which will be convenient to your Honours to familiarise yourselves with the issues before ‑ ‑ ‑

GUMMOW J:   It is much more helpful if you rub our noses in the appeal book.

MR HUTLEY:   I intended to speak to it, your Honour.  Your Honour, the opportunity to talk here is something - your Honours might have noticed - I do not exactly decline, but there is a sort of a grainy detailed element to this that your Honours may find some assistance as being able to, in effect, spot it in advance.  But they are strictly in reply to – have your Honours received them or I can read them to your Honours otherwise in due course.  Your Honours are very kind.

FRENCH CJ:   We will start again at 10 o’clock tomorrow morning and perhaps the parties might think overnight about if the matter does have to stand over and we certainly do not want, as already been indicated, to unnecessarily or undesirably truncate the submissions and the assistance we can get from them.  Think about dates in that last sitting in March that would ordinarily have been in Hobart, but will now be in Canberra.

GUMMOW J:   I think it starts on 28 March.

FRENCH CJ:   All right.  The Court will adjourn then until 10 o’clock tomorrow morning.

AT 4.41 PM THE MATTER WAS ADJOURNED
UNTIL THURSDAY, 11 FEBRUARY 2010