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

[2009] HCATrans 285

[2009] HCATrans 285

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Sydney  No S134 of 2009

B e t w e e n -

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

First Applicant

POPLAR HOLDINGS PTY LIMITED, ACN 123 945 272

Second Applicant

and

WHITE CITY TENNIS CLUB LIMITED, ACN 097 896 109

Respondent

Office of the Registry
  Sydney  No S198 of 2009

B e t w e e n -

WALKER CORPORATION PTY LIMITED ACN 001 176 263

Applicant

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 123 945 272

Third Respondent

Application for special leave to appeal

FRENCH CJ
HEYDON J

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON TUESDAY, 3 NOVEMBER 2009, AT 9.38 AM

Copyright in the High Court of Australia

__________________

MR J. M. IRELAND, QC:   May it please the Court, I appear with MR J.S. COOKE on behalf of the applicants in S134 of 2009 and the second and third respondents in S198 of 2009.  (instructed by Colin Biggers & Paisley Lawyers)

MR S.T. WHITE, SC:   May it please the Court, I appear with MR J.R. CLARKE for the respondent in S134 of 2009.  (instructed by Kemp Strang Lawyers)

MR I.M. JACKMAN, SC:   May it please the Court, I appear with my learned friend, MS J.K. TAYLOR, for the applicant in S198 of 2009.  (instructed by Mallesons Stephen Jaques)

MR S.D. ROBB, QC:   May it please the Court, I appear with my learned friend, MR R.C. SCRUBY, for the first respondent in S198 of 2009.  (instructed by Kemp Strang Lawyers)

FRENCH CJ:   Yes, Mr Ireland.

MR IRELAND:   Might I inquire of the Court the course that will be taken in dealing with these two applications, particularly in the circumstance that White City Tennis Club Limited is a two-headed hydra here this morning – four-headed perhaps.

FRENCH CJ:   We are content to deal with the two applications consecutively but in respect of the Walker Corporation application we will call on the respondent first.

MR IRELAND:   Dealing then, your Honour, with the application for special leave which is brought by John Alexander’s Clubs Pty Limited and its associated company, Poplar Holdings, your Honours, we point out that the decision of the New South Wales Court of Appeal in this case reversing the trial judge depended upon recognition of a constructive trust over land at Rushcutters Bay, which one can I think almost see from here. 

That land was acquired by Poplar Holdings Pty Limited on 27 June 2007 in what we would seek to characterise as unusual circumstances.  Poplar’s acquisition of the Rushcutters Bay land followed from the exercise of an auction conferred by a four‑party agreement made on 29 June 2005 referred to in the courts below as the White City Agreement to which Poplar itself was not a party.

FRENCH CJ:   This followed, did it, the asserted repudiation and termination of the MOU?

MR IRELAND:   That is correct, your Honour.  The memorandum of understanding, or if I may abbreviate it, MOU had been agreed between two of the ultimately contracting parties, that is to say, JACS or John Alexander’s Clubs Pty Limited and White City Tennis Club Limited which if I may refer to as the Club.

FRENCH CJ:   That was the basis of the proposed joint venture?

MR IRELAND:   That is so.  The initial dealings between the parties in February 2005 included provisions, which are found reproduced in the application book commencing at page 67 at about line 50, which contemplated the acquisition by JACS of options with respect to the land.  The mechanism of that clause, which goes over to the following page, page 68 of the application book, portrays a couple of things.  In the first place there was a company which was to be called White City Holdings, the idea being that that company would be promoted in the future to acquire the land.  The abbreviation for White City Holdings is WCH which the Court will see in that clause.  The critical obligation which ultimately was vindicated by the Court of Appeal is found in the words in clause 3.7.1:

In 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 –

Interpolating, JAWCC was another Alexander entity that was once again contemplated but never came into existence which would have the on the ground operation of the tennis complex once it was developed.  So one can see that the scheme of this clause, which is the fulcrum of the court’s decision below, is that a new company, White City Holdings, would have the benefit of the land where it simultaneously granted to another new company, an Alexander company, a 99 year lease.  That was what was contemplated at that stage.

The four‑party White City Agreement later on 29 June 2005 referred to the memorandum of understanding and the terms of the options which were ultimately granted are reproduced in the judgment of the Court of Appeal, that is to say, Justice Macfarlan’s judgment with whom the other two members of the Court agreed at application book 71.  It is commencing at about line 22 where the Court recites the options actually granted.  The clause 8(a) Option, as it is put:

to JACS an option to acquire the Option Land for the Option Amount –

Then the clause 8(b) option, which is a sort of backstop provision, says that:

if JACS does not exercise the Option within this period –

in effect, then there is a short further period of three months in which the Club itself might acquire the land.  Your Honours, we emphasise that Poplar itself, which ultimately did acquire the land as the nominee of JACS, was not, of course, a party either to the memorandum of understanding or to the White City Agreement.  It was another company formed later by Mr Alexander. 

We would say, your Honour, that the case raises for consideration the essence of a constructive trust an institution which a number of authors have regarded as almost impossible to define satisfactorily.  In Muschinski v Dodds at page 616 Justice Deane stated that a constructive trust may be imposed where an applicable equitable principle requires that a person who owns property should hold it for the benefit of another.  The question is, what kind of applicable equitable principle will count for these purposes?

We would submit that equity will readily respond by imposing a constructive trust in the case where a party who holds property has gained the benefit of that property through misrepresentation, undue influence or some other form of unconscientious positive conduct, including abuse of a fiduciary position or, indeed, making use of a special disadvantage of the opposite party.  But none of these factors existed in this case.  The major question is whether the Court of Appeal was correct in the present case in holding that the linchpin of the requisite equitable obligation could be a particular term of a contract now terminated in antecedent commercial dealings between some of the parties. 

The focus here was, of course, on the terms of the memorandum of understanding.  Could I ask your Honours to look at application book 68, line 34, where it will be seen that the memorandum of understanding fundamentally contemplated the incorporation of White City Holdings, or WCH as it is called, and it provided that in the event that the first applicant exercised an option negotiated in the future, it would exercise that option on behalf of White City Holdings, but upon White City Holdings simultaneously granting another new Alexander company this 99 year lease.

That was characterised as a condition precedent and it was an acknowledgement of those parties that the project cannot proceed unless WCH acquires the land.  That is all a telltale of the fact that the mechanisms which the parties contemplated at the time of the memorandum of understanding and the entities which the parties contemplated would hold property rights changed completely.

FRENCH CJ:   You say at 33 of your submissions at page 140 the Court of Appeal’s finding as to unconscionability was based on misconception and contrary to the decisions of the Court, so how do you identify succinctly the error of the Court of Appeal in terms of principle?

MR IRELAND:   In terms of principle, your Honour, we would submit this.  The Court of Appeal seized upon clause 3.7.1 of the memorandum of understanding, which I have taken your Honours to.  We would submit that a contractual provision of that type unattended by conduct, which is identifiable as engendering equitable relief, offends the principle, going to the very general words which Justice Deane articulated, where an applicable equitable principle requires that a person who owns property should hold it for the benefit of another.

It cannot be the case that parties, particularly in a commercial context, who have declared themselves – and I will come to this separately – not to be in a joint venture arrangement, a matter which the Court of Appeal treated in a very hot and cold fashion, as I will seek to demonstrate, it cannot be the case that parties in commercial dealings of a very complex kind, as this undoubtedly was an example, can find themselves committed in an equitable sense by long gone contracts.  People at a commercial level bargain their rights and obligations by reference to a contract.  The normal overlay of the doctrine of contract operates and, in the usual case, once the contract is gone, future obligation, non-accrued obligations evaporate. 

To transplant, as we would suggest, an ancient obligation between different parties into an equitable claim on the part of the Club – and I wanted to emphasise that there is no contemplation in clause 3.7.1 that the Club itself has the benefit of this land.  Only WCH, which as I have sought to develop, never came about.  There was no allegation – there might have been an allegation, one could pause to consider of breach of contract, but there was not and, of course, there could not be because Poplar was not privy to the contract upon which these antecedent considerations rest.

Can I just say a little more about the joint venture aspect.  At 69 Justice Macfarlan referred to clause 7.1 of the memorandum of understanding and one could hardly imagine parties could be clearer in their intent.  They said:

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

His Honour then went on to reach a conclusion, nonetheless, in the following paragraph, paragraph 26 of the judgment, that the arrangements made in the memorandum of understanding:

clearly constituted some type of “joint venture” –

and, as we would submit, this was a view denied by the plain terms of 7.1.

FRENCH CJ:   That is no more controversial than the general proposition that labelling something does not alter its substance.

MR IRELAND:   That is true, except this, that in a commercial setting such as this one cannot ignore a record made by the parties, for good or for bad and operating no doubt in both directions, that the things that they are agreeing for the future, which depend upon all kinds of eventualities and commercial steps, should not constitute a joint venture.  That ought to be read, in our respectful submission, as a good indicator that such contractual terms as may presently operate would not form the genesis of new future and tortured equitable obligations.  Then just passing over the page to page 70, Justice Macfarlan then reflects in what we would suggest a rather quizzical way:

Describing the arrangements as a “joint venture” does not however have any particular legal consequences.

One wonders what was the significance of all this.  But the thing to emphasise from our point of view, if I may, your Honours, is that at the outset of the judgment – this is at page 62 of the application book – in paragraphs 4 and 5 Justice Macfarlan expressed in general terms the nature of the case and his conclusion and the outcome and it is noteworthy, we would suggest, that in those passages his Honour refers to the first applicant and the respondent no less than three times as joint venturers and to the memorandum of understanding no less than three times as the joint venture or the joint venture agreement.

With that emphasis, it is impossible to conclude, we would submit, that notwithstanding his Honour’s disclaimer in paragraph 27 at AB 70, great significance was not placed upon the fact, in his Honour’s eyes at least, that this was a joint venture which made it somehow right for the imposition of equitable obligations.  However, under clause 7.1 the parties had expressly disallowed their arrangement being regarded as joint ventures, as I say, for any purpose.

Your Honours, it is a truism that the evaluation of whether a constructive trust should be recognised depends upon all of the circumstances of the particular case.  Some of the cases to which reference was made by the Court of Appeal, Pallant v Morgan and the like, involve assurances which are given falling short of binding contracts.  Two people go to an auction and one says, “I will buy the land, let’s not give the vendor a special prize and later on we will sort something out”.  The courts in those sort of cases have said occasionally, well, that is a representation from which you cannot resile without a breach and if you do resile from it, a constructive trust is an appropriate remedy, but this case is far short of that.

There was nothing in this case, we would submit, which could have led to the conclusion reached in the Court of Appeal other than the terms of the memorandum of understanding.  The memorandum of understanding was, as I have mentioned, overtaken by the White City Agreement and the linkage between the White City Agreement and the memorandum of understanding was found in clause 42 of the latter, reproduced at page 72.  Clause 42 said that:

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.

We would say that inevitably that should be construed as “so long as they survive”.  So that whereas here the memorandum of understanding was terminated on account of repudiatory conduct by the Club in various respects, it could not have been contemplated that nevertheless something found in a different context in the memorandum of understanding such as clause 3.7.1 would carry forward.

FRENCH CJ:   The reasoning of Justice Macfarlan relevant to that appears, I think, at paragraph 70 of his judgment, does it not, page 86, the notion that the Club’s rights had accrued and continued:

JACS’ obligation to exercise its option “on behalf of WCH” was in my view an accrued one which was enforceable notwithstanding the subsequent termination ‑ ‑ ‑

MR IRELAND:   One thing his Honour does not address there is the difference in the entities.

FRENCH CJ:   Yes.

MR IRELAND:   Not only was the Club not WCH, but the clause, as I have sought to stress, made the simultaneous grant of a lease protective of the Alexander interest a condition of that entitlement.

FRENCH CJ:   WCH was to be a repository of the Club’s interests, in effect, was it not?

MR IRELAND:   A little more than that.  They were going to give foundation members of the Club a special rate to buy units or shares, I think, and they were also going to go to the market to try and sell other memberships at a higher level and that money was to be used to fund the construction and primarily for the acquisition of the land.  So we would say, your Honour, that the explanations, as it were, in paragraphs 70 and 71 are full of shortcomings.

Your Honours, I wanted to concentrate on that point, as I see my time is ending, but we would say there is a related point of particular significance with respect to the Real Property Act.  The qualification in section 42 of the Real Property Act is the so-called personal equity and the reach of that – this Court has said in Farah, for example, that there must be a primary wrongdoing.  We would say that even on the conclusion to the Court of Appeal, that could not be said of Poplar.  Any wrongdoing here is a sort of imagined breach of contract on the part of JACS itself.  Poplar, the

registered proprietor, is unaffected by that and we would say that there is a logical hiatus between the personal equity exemption in section 42 and the outcome here. 

Your Honours, we would suggest this is a case of importance and in which special leave might be considered.

FRENCH CJ:   Thank you, Mr Ireland.  Yes, Mr White.

MR WHITE:   Your Honours, can I just take you back to some critical aspects of the contractual relationship between the parties.  Your Honours were taken to application book 68, clause 3.7 of the MOU.  Your Honours were taken to 3.7.1 where your Honours saw the obligation that in the event JACS obtained the option, it would exercise it on behalf of White City Holdings, and 3.7.2 of course there was the further requirement that:

JACS will seek to procure in favour of WCTC a further option to purchase the Land –

in its own right, and in 3.7.3 in the event that it could not acquire the second option and determined not to exercise the first option on behalf of White City Holdings, then the Club would have the opportunity to exercise or require JACS to exercise the option on the Club’s behalf.  Now, they are critical matters which found their way into, at least in part, the White City Agreement.  If your Honours go to paragraph 31 of the judgment, page 71, your Honours will see there what you have been taken to is clause 8 of the White City Agreement which, in effect, reflects the obligations that were imposed by the MOU, that in the event that JACS obtained the first option, it would have to exercise it on behalf of White City Holdings. 

In other words, the clause 8 options reflect the clause 3.7 options in the MOU, and that was uncontroversial at trial.  In other words, it was always understood that if JACS exercised the option, it could not do so on its own right but must do so on behalf of White City Holdings which is a company it was required to incorporate, which it never did, and in lieu of that, to allow the Club the opportunity to exercise the option.

Now, they are critical matters which the court regarded as important when coming to the conclusion that there was a fiduciary duty owed to the Club, namely, to give it the opportunity to exercise the option in the event that JACS decided not to exercise the option on behalf of White City Holdings and that it would be unconscionable to allow JACS or its nominee, Poplar, to exercise the option in their own right.

FRENCH CJ:   What is the basis of the unconscionability?

MR WHITE:   Well, firstly, you see in paragraph 33 under the White City Agreement the Club had about 15 years to run of its leasehold interest on the option land which it surrendered together with its licence agreement with Tennis New South Wales in return for the promise that the option would be exercised by JACS in the way that it had stated it would in the MOU.  The critical findings in that regard are at paragraphs 63 and 64 of the judgment in application book 83.  In 63 there the Court of Appeal referred to clause 3.7 of the MOU and set out basically what I think I have properly construed as saying:

The parties had agreed that if the option was available and was not exercised by JACS on behalf of WCH, the Club would be entitled to acquire the property.  If JACS had exercised the option and done so on its own behalf, it would have acquired property which JACS and the Club had contractually agreed the Club would be entitled to acquire if the option was not exercised on behalf of WCH.

and here comes the nub –

Further, it would have done so in circumstances where the option had been acquired by JACS by reason of the Club’s involvement in White City Agreements and the Club’s undertaking, given by those agreements, to surrender its existing rights to a long term lease over –

the land.  That was a critical aspect of the Court of Appeal’s finding that not only did the Club rely upon a promise that the option would be exercised in a particular way but that in return it relinquished valuable rights it had over the land by foregoing and giving up the lease that had another 15 years to run.  Then as their Honours say in 64:

It is a short step from this point to the conclusion that if JACS had exercised the option on its own behalf that it would have held the property so acquired upon a constructive trust for the Club.  In my view there would have been no need to enquire whether there was a pre‑existing fiduciary duty.  It is sufficient if the conclusion is reached that, in all the circumstances, it would have been unconscionable for JACS to maintain that it was the beneficial owner –

If I can take you to paragraph 80 of the judgment at AB 90, where their Honours say:

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. 

If I can just go back, it was quite clear that the parties with whom JACS was negotiating the option had made it clear that they would not give JACS the option unless the Club surrendered its rights over the land.  That is what the Club did in the expectation that JACS would keep its promise to exercise the option on behalf of White City Holdings, alternatively, failing that, to allow the Club to exercise the option in its own right.

FRENCH CJ:   I know the concept of unconscionability is broad, but is this going a little broader than established categories?

MR WHITE:   Not at all, your Honour, because, for example, one of the leading texts in this country, Jacobs’ Law of Trusts, in paragraph 1341, which we have referred to in our list of authorities, points to this very instance of a plaintiff relinquishing rights in respect of property owned by a third party based upon a promise by a defendant and the circumstances where the defendant acquires the third party himself.  The three cases that the learned authors refer to in support of that category, which is category 2, in Jacobs, are the very three cases the Court of Appeal relies on here, Carson v Wood, Avondale Printers v Haggie and Pallant v Morgan.  Three cases in which each of the courts found that it would be unconscionable to allow the defendant to deny the plaintiff’s entitlement to the property because of the promise that it would exercise its rights in a particular way. 

This is par excellence, your Honour, a circumstance where a constructive trust would be imposed.  Paragraph 87 again is another important instance and finding by the Court of Appeal as to why there was unconscionable conduct:

By contractually agreeing to a provision in terms of clause 3.7.1, the Club was relevantly placing itself in the hands of JACS.  From that point on it had to trust that JACS would exercise any such option “on behalf of WCH”, as it said it would.  It relied on JACS commitment to do so by surrendering its rights in respect of the White City site.  It was vulnerable to abuse of that commitment by JACS as such abuse might lead to the loss to the Club of the opportunity to acquire a valuable property and the opportunity to continue on the White City site an activity it had been conducting there for over 55 years.

All of these matters, your Honours, quite clearly indicate that the Club was vulnerable to JACS and it relied on JACS to exercise the option in the way that it promised to do.  It is quite clear that JACS would never have got that option had my client not agreed to surrendering its rights, which it did.  In those circumstances we respectfully submit that the Court of Appeal was doing no more than applying orthodox equitable principles in relation to the facts of this case and, importantly, at trial there was no issue that if the Club had been given the opportunity to exercise the option as JACS promised it would if it did not exercise it on behalf of White City Holdings, it could and would have exercised the option itself.

It was not able to do so because by the time the window of opportunity for the Club to exercise the option came about, JACS or its nominee, Poplar, had already exercised the option there by denying the Club the opportunity.  That was the unconscionable conduct, your Honours.  They did not seize on clause 3.7.1 without more, as my friend would have you accept.  They looked at 3.7.1 and then also recognised the significant prejudice that the Club would suffer if JACS was not required to adhere to its promise.  If I can take you also to paragraph 75 of the reasons of the Court of Appeal and in particular at page 88, the last few sentences:

Having had that assistance in acquiring the opportunity to purchase the property upon the basis that the property would be used for the purposes of the joint venture and, failing that, made available to the Club, it would have been unconscionable for JACS to claim the property for its own use and benefit, whether or not JACS had terminated the MOU.

In relation to the question of fiduciary duty, your Honours, the court found it was not necessary to find a fiduciary duty, and your Honours are aware of the line of cases which do not require the finding of fiduciary duty before an inequity can be found or a constructive trust imposed.

FRENCH CJ:   There is a reference to it in 91, is there not, in the judgment:

any exercise by JACS of the contemplated option for its own benefit would have been a breach ‑ ‑ ‑

MR WHITE:   Yes, but the Court of Appeal found that it was not necessary to find a fiduciary duty in order for a constructive trust to be imposed or for a finding of unconscionable conduct.  But what they did find was not, as my friend would have it, a joint venture where one superimposes a general duty of mutual trust and confidence in respect of all interactions between the parties.

FRENCH CJ:   On their reason they did not need that.

MR WHITE:   They did not need it, but what they did find was a very confined fiduciary duty in relation to the exercise of the 8(a) option.  In other words, at paragraphs 84 and 85 of the judgment, at page 91, the court found:

It is not necessary to enquire whether the relationship generally between JACS and the Club was fiduciary in character.  It is sufficient to consider whether in exercising the option which the MOU contemplated may later be acquired, JACS was to be subject to a fiduciary duty –

At 85 they find that whilst there was no general fiduciary relationship, there was a fiduciary duty in relation to the way in which the option could be exercised.  Now, that is wholly consistent with the Court of Appeal recognising that this was not a joint venture relationship.  They did not treat it as such.  They simply had regard to the obligations that were imposed by the contract on JACS and what ‑ ‑ ‑

FRENCH CJ:   Is that saying anything additional to their primary finding in the fact in relation to the commitment to purchase for the benefit of WCH and the corresponding agreement of the Club to surrender various rights, that that meant departure from the arrangement was unconscionable in supporting the constructive trust?  Now, does the finding of breach of fiduciary duty do anything more than put a label on that?

MR WHITE:   No.  It probably does not, your Honour, but it does underscore to some extent the importance that this obligation had as between the parties because, as their Honours found in 80, the participation and the surrender of the rights by the Club was based upon the promise to exercise the option in a particular way.  They were vulnerable to that.  It was incumbent upon JACS to exercise it in that way.  The agreement contemplated that if the project, as envisaged by the MOU, could not proceed for whatever reason, because WCH could not acquire the land or because JACS decided to pull out of the arrangement, the opportunity to exercise the options fell to the Club. 

That very instance occurred in this case because JACS decided it did not want to continue with the project, for whatever reason and in those circumstances, the agreement provided that we have the opportunity to exercise the option, in circumstances where we had given up 15 years of our leasehold interest to continue an occupancy of the land.  Your Honour, as I say, par excellence circumstance in which a constructive trust would arise and, as the Court of Appeal said, the existence or otherwise of an enforceable contract is not particularly relevant to the question of whether there is an enforceable duty of this kind.

Unconscionable conduct is not dependent upon an enforceable contract and indeed maybe not even a contract at all.  Jacobs again, at 1341, is authority for that proposition, that the cases say you do not need an enforceable contract.  As their Honours found, the trial judge’s findings that there had been a proper termination were unsound and, in our submission, there is effectively no finding concerning whether there had been a valid termination of the contract.  Your Honours will see at paragraph 104 at page 98, the Court of Appeal said that:

Ordinarily, it would be appropriate for me to nevertheless express my views as to the correctness of the primary judge’s conclusion that the Club about repudiated the MOU –

but they were unable to do so –

because of the absence of detailed consideration by the primary judge of matters relevant to the repudiation issue.

What the trial judge apparently did was adopt the submissions of the defendant without giving any consideration to whether there was any support for those matters and the Court of Appeal found that that was unsatisfactory and, as a consequence, we would submit, that there is no sound finding that the MOU had been terminated.  But as their Honours found, in any event, it was of no moment for the outcome of this case and we respectfully submit that it is correct.

FRENCH CJ:   The obligation referred to at paragraph 102 “to give the Club the opportunity to acquire the Option Land”, that was not, on your submission or indeed the way the analysis proceeded, a contractual obligation?

MR WHITE:   It was a contractual obligation.  It was a contractual obligation because, if one goes back to the MOU, 3.7.2, which is at page 68, imposed upon JACS an obligation that in the event they procured White City Tennis Club, a further option and that option could be exercised by the Club within 90 days of expiry of the option period.

FRENCH CJ:   Sorry, perhaps I misunderstood your submissions.  I thought you were saying it did not matter whether in the end it was characterised as contractual.

MR WHITE:   No, it does not, but that is where one finds the obligation and also inequity.

FRENCH CJ:   That what I was wondering.  You are asserting an equitable obligation really, are you not?

MR WHITE:   Yes.

FRENCH CJ:   Is that the character of the obligation that is being referred to in 102, that was my question.

MR WHITE:   Yes.

FRENCH CJ:   Yes to what?

MR WHITE:   Well, can I put it this way.  The question is whether it would be a fraud on the part of JACS to deny the rights of my client to this land, in other words, that it holds the land on trust for my client.  The Court of Appeal found it would be for the reasons that I have indicated.  Plainly, in circumstances where my client gives up a right which is procured by a promise to exercise the option a particular way and they refuse to do so, we submit that that does give rise to a constructive trust.

Poplar was the alter ego of Mr Alexander and JACS.  The evidence is not in dispute that Mr Alexander controlled Poplar and JACS.  Poplar was simply created to exercise the option.  The Court of Appeal on the evidence found that it was a primary wrongdoer and so section 42 indefeasibility did not defeat the claim.  They referred to Farah v Say‑Dee in support of that conclusion and, in my respectful submission again, their findings on this point are uncontroversial and are consistent with authority.  Their Honours make that finding at 102 but also 94 and 95 where your Honours see that there was significant evidence as to the role of Poplar and the fact that it was controlled by Mr Alexander who I think was at least if not the sole shareholder, the controlling shareholder and director of both companies. 

So, your Honours, this is not simply a question in which the court has used clause 3.7 as the linchpin to the outcome of this case.  There were significant issues of unconscionability that gave rise to the finding that a constructive trust should be imposed.  Your Honours, unless there is something further that your Honours wish me to address, I think I have dealt with each of the issues that my friend has raised. 

FRENCH CJ:   Yes, thank you, Mr White.

MR WHITE:   May it please the Court.

FRENCH CJ:   We will not need to hear from you in reply, Mr Ireland.  There will be a grant of special leave in this matter.  Obviously it will be heard together with Walker Corporation, but what would your estimate of time be?

MR WHITE:   Your Honour, I mentioned in submissions there was one issue in relation to the question of termination of the ‑ ‑ ‑

FRENCH CJ:   You mean if we grant special leave in Walker, of course.

MR WHITE:   Yes, the issue of termination of the memorandum of understanding.  The Court of Appeal – I think I have taken you to the paragraph – said in effect that the trial judge’s findings were unsound but do not appear themselves to have gone any further than that.  We would submit on that basis there have been no findings or certainly no sound findings in relation to the issue of whether the memorandum of understanding has been terminated.  That raises the question how that issue might be dealt with at the appeal.  We would submit that the onus rests on the appellant to show that the MOU was validly terminated.  If your Honours, however, find that there are findings in relation to the termination of the MOU, then it may be that we need to file a notice of cross-appeal.

HEYDON J:   Not cross-appeal, because you are content with the Court of Appeal’s orders, are you not?

MR WHITE:   Yes.

HEYDON J:   Would it not be a notice of contention ‑ ‑ ‑

MR WHITE:   Notice of contention, yes.

HEYDON J:    ‑ ‑ ‑ which you file as of right contending that the Court of Appeal ought to have reversed the Chief Judge in Equity’s conclusion about termination?

MR WHITE:   Yes. 

FRENCH CJ:   Yes, all right.

MR WHITE:   In relation to timing, your Honour, I would have thought about a day.

FRENCH CJ:   Yes, all right.  Thank you.  Yes, Mr Robb.

MR ROBB:   Your Honour, will I be heard if I make my submissions from here?

FRENCH CJ:   You will be heard wherever you make your submissions from, Mr Robb.

MR ROBB:   May it please the Court.  Your Honour, Walker Corporation’s application, in our submission, depends upon the proposition that a party who claims a security interest in property can apply to be joined even after the determination of an appeal, and presumably that would be even an appeal in this Court, and ask and have a right to any orders be set aside where the subject matter of the proceedings concerns entitlements to interest in the property and that that right would arise irrespective of the consequences for the other parties and irrespective of the conduct of the applicant for leave to be joined.

Your Honour, in our submission, the relevant arguments are effectively exposed in the judgment of Justice Macfarlan at pages 124 to 126 of the application book.

FRENCH CJ:   This all turns on, in part, the common directorship point, does it not, that Walker Corporation was, in effect, aware of what was going on at all times?

MR ROBB:   Yes, in part.  We would start by going to paragraph 37 of Justice Macfarlan’s judgment where he sets out the rule, that is, the relevant rule for this application.  That is Part 6 Rule 6.24(1).  As your Honours see it says:

If the court considers that a person ought to have been joined as a party, or is a person whose joinder as a party is necessary to the determination of all matters in dispute in any proceedings, the court may order that the person be joined as a party.

In our submission, the starting point is that this rule is discretionary and, in our submission, it starts as a matter of discretion and ends as a matter of discretion and there is no absolute rule that requires that discretion to be exercised in a particular way in any particular circumstances.  Now, in paragraphs 35 and 36 Justice Macfarlan makes some observations with respect to some extent passing observations on the factual issues that were in contest on the notice of motion for joinder.  As he says in paragraph 35:

Walker Corporation’s evidence indicates that it funded the acquisition of Poplar’s interest in the Option Land.

Then it refers to Walker’s claim of having –

both fixed and floating security interests in the land from JACS and Poplar.

Now, as the evidence below demonstrated, these security interests that were claimed were not registered or supported by caveat until two days after the first Court of Appeal judgment.  On 5 June 2009 Walker Corporation lodged a caveat in which it claimed a security interest in the land arising no later than 5 June 2009 on the basis of the crystallisation of a floating charge.  It has since emerged that Walker Corporation claims as well fixed securities over the land the subject of the dispute. 

For present purposes the point is this.  In News Limited there are statements made about the appropriateness in proceedings concerning title to property that all parties claiming an interest in the property be joined, and it may be that that is unexceptional and a perfectly appropriate arrangement in circumstances where it is known to the plaintiff and it is a matter of open knowledge that contrary claims of security are made by a third party.  Justice Macfarlan went on in paragraph 36 to say:

It is not in contest that Walker Corporation was at all times aware of the subject proceedings. 

There is no elaborate findings, so I have to accept that it is not appropriate to make submissions at this time which are overly contentious as to what the ultimate facts would be found, though we would say they would be findings of fact that would have to be considered by this Court on any appeal.  The documents that came to light and were tendered in the Court of Appeal demonstrated that, speaking relatively generally, Walker Corporation had an arrangement in a deed with the defendants in the proceedings which substantially gave Walker Corporation the only commercial interest in the ultimate ownership of the land. 

There is scope for debate about the precise nature of that, but it also came to light that Walker Corporation was funding the defence of the proceedings at first instance.  As their Honours did find, Walker Corporation at all times knew of the existence of the proceedings.  It was effectively conducting them.  Apparently it chose not to seek to be joined even though the reality of it is that it is Walker Corporation that is the only party that is in a position fully to know the nature of the interest that it may claim in the proceedings. 

FRENCH CJ:   This is reflected in the finding at paragraph 22, I think, of the judgment, is that right?

MR ROBB:   Yes, your Honour.  Quite so, your Honour.  Now, Justice Macfarlan then extracted the argument from Walker Corporation’s submissions in its paragraph 20 where it said there was no need for Walker Corporation to be applied to be joined prior to 3 June as the court below had made orders which were consistent with Walker Corporation’s interests and as other remedies were available to the appellant, et cetera.  Walker Corporation was effectively saying to the Court of Appeal, notwithstanding the status of the knowledge vis-à-vis the rest of the world of the security interest we claim, which were at the least oblique, and notwithstanding that we made a decision to fund the defence because we saw that as a vehicle for achieving the success we needed, once we lost in the Court of Appeal we changed our mind and at that point the facts demonstrate that a caveat was lodged. 

Now, the lodging of that caveat has led to the commencement of proceedings in the equity division which are presently stayed and which fully ventilate at the level of first instance decision the facts and the nature of the claims of Walker Corporation and White City and the issue of priorities.  Essentially what the Court of Appeal decided on this application was that to the extent that the underlying rationale of the relevant part of Rule 6.24 was to ensure that no decision was made which directly affected the interests of a party claiming an interest in property in circumstances where that party had not been given a proper opportunity to be heard, that principle was not invoked in the present case because the nature of the findings in the Court of Appeal was that as between Poplar and White City, Poplar’s interest was held on a constructive trust for White City. 

That was not a finding which directly contradicted or undermined whatever security interest Walker Corporation might ultimately be able to prove.  There is no issue about Walker Corporation having interests in the property.  The issue is at the level of the contest concerning priorities and that was not a matter touched upon in any way in the decision of the Court of Appeal and was not an issue in those proceedings.  Consequentially, what in effect the Court of Appeal has decided in paragraphs 38 and 39 of the judgment is that in its discretion it will not permit Walker Corporation to be joined after judgment on the Court of Appeal on the basis that Walker Corporation would have a right to set at naught the whole of the deliberations of the Court of Appeal and what went before, principally because, as is made clear in paragraph 39, in a relevant sense the interests of Walker Corporation is not directly affected and nothing has happened which has denied Walker Corporation natural justice.  As your Honours will know, Justice Macfarlan said in paragraph 39:

Subject to one matter which should be clarified and to which I return below, Walker Corporation is not in my view directly affected –

That matter was clarified at paragraph 44 where the Court of Appeal adjusted the terms of the injunction to ensure that the injunction that had previously been formulated simply to protect the interests of White City could not impede in any way Walker Corporation’s entitlement to be registered if it ultimately succeeded in subsequent equity proceedings.

HEYDON J:   There seems to be a problem with those subsequent equity proceedings because one of the judges in the Court of Appeal questioned whether Walker Corporation would be entitled even to agitate those.

MR ROBB:   Justice Basten raised that, I think, as an issue.  I have to say, those proceedings have been commenced and on that issue we would respond by submitting that – I have to say, if I appear to dither, the issues on those proceedings have not crystallised, so I am in some way hypothesising.  But if it is possible that the conduct of Walker Corporation in relation to the instant proceedings has any effect on its entitlement to priority in the new equity proceedings, that would, so to speak, be an issue arising outside the existing proceedings and just by reference to whatever it happens to have done along the way.

In our submission, all that the Court of Appeal decided in the present case is an issue of constructive trust as between White City and Poplar.  In fact, to the extent that Walker Corporation did not as a party on the record take place in that contest, it was a result of a decision by Walker Corporation in circumstances where Walker Corporation had not made it clear to the world whether and if so what the nature of any security rights it claimed in the property were.  When, for instance, as is said by the Full Court in News Limited 64 FCR 410 at the bottom of page 524:

There are some classes of case where the ascertainment of the necessary parties who “ought to have been joined” is not difficult.  Where the orders sought establish or recognise a proprietary or security interest in land, chattels or a monetary fund, all persons who have or claim an interest in the subject matter are necessary parties.

That is the statement of principle that is put most against us and we understand that.  In our submission, that proposition has to be understood in the context that it is an elaboration of a discretionary power which the court has to exercise on the facts of a particular case.  Where it is talking about “all persons who have or claim an interest in the subject matter”, that does not put the plaintiff in the position of risk that if it commences proceedings against a property owner in circumstances where somebody else has a claim that is not made known to the world, that third party has a right to wait and at such time as a judgment is made by a court, as we say including this Court, contrary to the interests of that party, the party can then step in, be joined as of right and have the judgment set aside to the detriment of all parties.

In our submission, this application puts the matter as if there is a right involved, whereas what in fact there is involved is the exercise of a discretion that is no less dependent upon the principle in House v The King as any other exercise of a discretion.  The Court of Appeal has found and referred to some of the facts.  There are further facts that underlie this on the evidence before the court.  This is a very special case which is not of general application in which, by reason of the nature of the conduct of the claimant concerning its own interest in the land which were not made public

in relation to the involvement of the claimant with the defendants and the claimant’s choice not to intervene, that it was proper for the Court of Appeal in the exercise of its discretion to take the view that all of the underlying legal and factual issues should be determined by separate equity proceedings and that if it should turn out that any conduct of the claimant Walker Corporation in relation to these proceedings may have an arguable relevance in relation to the priority issues, that should be determined in that case.

In our submission, there is no special leave question that the exercise of the discretion miscarried and, ultimately, the proposition that the Court of Appeal made some error of law in the sense that there was just a yes/no answer to the question before it is illusory and that when it is possible to look at the issue in proper detail, that illusion will become manifest.  May it please the Court.

FRENCH CJ:   Thank you, Mr Robb.  We will not need to hear from you, Mr Jackman.  There will be a grant of special leave in this matter.  Two matters we would expect would take no more than one and a half days all told.

AT 10.38 AM THE MATTER WAS CONCLUDED