King Tide Company Pty Ltd (ACN 602 611 423) v Arawak Holdings Pty Ltd (ACN 157 865 195)

[2018] HCATrans 188

[2018] HCATrans 188

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Brisbane  No B67 of 2017

B e t w e e n -

KING TIDE COMPANY PTY LTD (ACN 602 611 423)

Applicant

and

ARAWAK HOLDINGS PTY LTD (ACN 157 865 195)

Respondent

Application for special leave to appeal

GAGELER J
KEANE J

TRANSCRIPT OF PROCEEDINGS

AT BRISBANE ON FRIDAY, 14 SEPTEMBER 2018, AT 11.05 AM

Copyright in the High Court of Australia

MR M.L. ROBERTSON, QC:   If the Court pleases, I appear with MR S.J. CARIUS, for the applicant.  (instructed by Small Myers Hughes Lawyers)

MR B.W.J. KIDSTON:   If it please the Court, I appear with MR A.N. QUINN, for the respondent.  (instructed by Enyo Lawyers)

GAGELER J:   Yes, Mr Robertson.

MR ROBERTSON:   If the Court pleases.  Could I ask the Court to go to the judgment of the Court of Appeal which commences at 27 of the application book and on the next page we have a short concurring judgment of Justice Fraser at paragraph [1].  Now, the final sentence of that paragraph is:

I also agree with Bond J’s reasons . . . for rejecting the appellant’s contention that the matter should be remitted to the Trial Division for an assessment of damages for breach of a different contract, an antecedent partnership agreement which the respondent denied was binding upon it.

Now, the hearing before the Court of Appeal was conducted on the basis that the respondent admitted that the partnership agreement was binding on it, so the court appears to have overlooked ‑ ‑ ‑

KEANE J:   Well, no, that is not right, is it?  That is actually – what happened was you sought to seize upon a particular – something that had been said and erect that into a change of position.

MR ROBERTSON:   The respondent admits here ‑ ‑ ‑

KEANE J:   It was a forensic exercise, was it not?

MR ROBERTSON:   The respondent admits before this Court that it made that concession and says that the Court of Appeal, by reason of Hollis v Vabu, was entitled to reject it.

KEANE J:   Well, as a concession on a question of law, that is right.  To the extent that it rose that far that would be a good answer to it.

MR ROBERTSON:   Perhaps if I take you to the respondent’s submissions because this submission was made unequivocally on three occasions – or started off equivocally with paragraph 9 of their original submissions.  On the morning of the trial the respondent put in supplementary submissions and ‑ ‑ ‑

GAGELER J:   Mr Robertson, it is really a matter of the scope of the justiciable controversy as framed between the parties which was before the trial judge and then taken on appeal to the Court of Appeal.  There may have been an understanding – let us assume for a moment that there was an understanding that there was an underlying partnership agreement, any dispute that might have existed about that underlying partnership agreement simply was not, at least on one view, at least on my understanding, before the primary judge or taken in any way on appeal.

MR ROBERTSON:   It was before the primary judge.  If I take you to Justice Bond’s reasons at page 47 of the application book – I am sorry, your Honours, if you go to the bottom of page 46, paragraph [96], that is what Justice Bond records was before the primary judge, and at paragraph [97] on page 47 we see that the appellant claimed at paragraph (b):

The respondent’s conduct was in breach of:

(i)       the contract allegedly formed in October 2014;

(ii)the requirement in clause 4.4(j) of the partnership agreement that neither partner take any steps in relation to the compromise or release of any claim vested in the partnership without obtaining the prior agreement of the Board; and

(iii)fiduciary duties which the respondent owed the appellant as its partner.

That was what was before the primary judge and if we go over to paragraph [100] we see the first sentence:

In its written submissions to the learned judge dated 18 November 2016, the appellant persisted with its contention that the injunction which it sought might also be founded on breach of the partnership agreement or of fiduciary duties owed as between partners, but did not seek to meet the point raised by the respondent or otherwise explain how it was that the respondent had become bound by the terms of the partnership agreement.

So if we go back to the earlier page, we see Justice Bond recording what case the respondent ran below at [98], and at [98] the case that was run below in the trial by the respondent was that:

the respondent was not a party to the partnership agreement and it denied that it was bound by the partnership agreement –

and it asserted that:

the partnership had become dissolved –

If we then go to the respondent’s outline of argument before the Court of Appeal at page 101 ‑ your Honours, if you have that – so we see that the respondent was contending that it was not a party to the partnership agreement and the partnership had been dissolved.  If we go to page 101 at paragraph 5, we see:

There was no evidence of . . . the Partnership having been dissolved.

So this about face continues at paragraph 19 on the next page, page 102:

absent some new contractual regime being agreed between the parties, their relationship and how the proceeding would be conducted, funded and the spoils divided, was already regulated by the Partnership Agreement –

Then we go to page 104 of the application book where the respondent put on a supplementary outline of argument, or sought leave and was given leave ‑ we did not object on the morning of the hearing of the appeal ‑ and it refers at paragraph 3 to the statement of claim, being the statement of claim that was filed against Bullish Bear.  At paragraph 4 it says:

the statement of claim pleads a cause of action by the two partners to the Partnership with each of them named as first and second plaintiff, and it is that proceeding that was carried on and litigated.

At paragraph 5:

The true position is that nothing was done pursuant to the agreement contended for.

That is the October agreement – because what the respondent’s case has now become is that the conduct – we were putting a proposition that there was a contract by performance.  The respondent changed its position and said all the performance that occurred was explicable by reference to the partnership agreement, the original partnership agreement.  We resile from everything we said at the trial below.  We say that we were in partnership but there was no variation because our conduct is explicable by reference to the partnership agreement.

If you think about it, what the respondent was seeking to do was uphold the decision of the trial judge by reference to a finding contrary to the finding of the trial judge.  So, the respondent should have put on a notice of contention because it was seeking to uphold the decision below but on a new basis, contrary to the trial judge’s finding that there was no partnership.  Now, it did not do that; that is a matter of form.  We were not prejudiced, we accepted this new case.

KEANE J:   You embraced it, as a matter of tactics.

MR ROBERTSON:   We embraced it, and then it came to – well, it was not a matter of tactics because we have always contended that there was a partnership agreement between the parties.  Of course, we embraced their contention because we said that the respondent could not approbate and reprobate, could not accept the benefits that came to him but therefore fell straight within the negative stipulations in the partnership agreement.  If we go to the oral submissions of the respondent which is at 113, your Honours.  So, at line 28 Mr Kidston says:

Can I start as a convenient point with the partnership agreement and the manner in which these parties’ relationship was regulated prior to this new agreement that’s contended for?

My learned friend then took the court through the partnership agreement, and on the next page, 114, at line 24:

That was the state of play when we come to looking at what occurred with the variation.

At the bottom, at 42:

So under the state of play, at the time that the parties find themselves dealing with each other . . . they were – remained partners to a partnership agreement on these terms.

Over on page 115 repeated it, and at line 6:

what in fact happened is that proceedings were commenced on behalf of the partnership.

GAGELER J:   What are you trying to get out this, that the Court of Appeal misunderstood the nature of the issue before it?

MR ROBERTSON:   They overlooked that what had been a live issue had been quelled by the respondent agreeing, contrary to what was in issue at the trial, that it was in partnership with the applicant.

GAGELER J:   So, it is miscarriage of justice in the individual case ‑ ‑ ‑

MR ROBERTSON:   Yes.

GAGELER J:   ‑ ‑ ‑ by failing to appreciate a narrowing of issues.  Is that right?

MR ROBERTSON:   That is correct.  There is a miscarriage of justice because of the failure to appreciate that a live issue which was open had been closed.  If, for example, the respondent had before the trial judge said, we agree we are in partnership with the applicant, then the applicant would have been entitled to the injunction that it sought.  If before Justice Martin the respondent had said, yes, we were in partnership, then we would have been entitled to our injunction that they not unilaterally try and settle the proceedings with Balmain Trilogy.

So, we have to respond to this new case not supported with notice by a notice of contention and we did and we said, well, your Honours – to the Court of Appeal – this should be remitted for damages because the horse has already bolted, we cannot get an injunction to stop the respondent treating with the third party who is being sued because after judgment was reserved the litigation was compromised.  So we wanted damages in lieu of the remedy that we would have got, and we applied for that, and the court accepted that we could seek that.

If I can take you to the exchange that I had with Justice Fraser.  There were some pages omitted from the transcript, your Honour, and also the original application was omitted from the appeal book and so we gave notice that we might ask for further material for you to look at which we gave to the other side the other day.  If I could hand up the reference in the transcript to where we sought this ‑ ‑ ‑

GAGELER J:   Just tell us what you sought to do.  Did you seek leave to amend the notice of appeal?

MR ROBERTSON:   Yes, Justice Fraser said:

nowhere in the grounds of appeal do you say the judge made a mistake by not granting an injunction simply pursuant to the unamended partnership agreement . . . 

I say:

That’s right.  Okay, your Honour, that is correct.

Justice Fraser says:

what you wish to seek is simply an injunction in terms of that which you’ve sought – sorry, not an injunction, damages to be remitted to the trial division in terms of 3.3(b) –

That is of the amended originating application –

either on the basis of the varied agreement or on the basis of a clause of the partnership agreement>

MR ROBERTSON:  Yes, your Honour.

FRASER JA:   All right.  Okay.

MR ROBERTSON:  If the court pleases.  Yes.

GAGELER J:   What did all that amount to?

MR ROBERTSON:   That amounted to, we say, an acceptance, at least in argument, by the court that the case had changed and that it was no longer an issue that the parties were in partnership when the litigation commenced, and because an injunction was no longer appropriate because the litigation had settled, we sought damages in lieu.  So we saw it at least in the hearing that the court accepted that there was a change in position by the respondent and allowed us to seek damages for breach of the original partnership agreement.

That was not recorded anywhere in the judgment by Justice Bond.  It has simply been overlooked by the court.  Justice Bond, if we go back to his judgment where we were at, on page 47, if we go to [99], second sentence:

the contention that the respondent was not bound by the partnership agreement was significant –

that is, the contention that was made at the trial level:

because the proposition that the respondent was not a party to the partnership agreement was correct.

So his Honour has failed to have regard to the written submissions and the oral submissions of the respondent which were embraced by the applicant that the respondent was a party to the partnership agreement and then dealt with the arguments which were run below as if the respondent was still running them before the Court of Appeal.

KEANE J:   Why is the Court of Appeal dealing with the other agreement on which you rely?

MR ROBERTSON:   Because we say that the measure of damages depends on whether the profit and cost share had been varied.  We said it is still relevant for the Court of Appeal to determine whether there was a variation of the partnership agreement because it was common ground that it was a 50/50 sharing of expenses and costs under the partnership agreement.  We said that under the variation we agreed to pay all the costs but we were entitled to 87.5 per cent of the proceeds of the successful litigation and so the only relevance of the variation went to the measure of damages of the breach of the partnership agreement.

We say we have lost the opportunity to continue suing Balmain Trilogy.  We were suing them for $5 million and we say we were entitled to 87.5 per cent of the proceeds of success, whereas under the original partnership agreement we were only entitled to 50 per cent of the proceeds of success.  So that is how the dispute was narrowed between the parties.  It simply became a question of whether a partnership – an existing partnership relationship was varied.  That failure by the court to deal with the concession infected its analysis of whether there was a variation.

GAGELER J:   Well, what do you say about paragraphs [103] to [108]?  There were shifting positions.  At the end of the day, there was no application to amend the notice of appeal and no complaint that the trial judge made some error.

MR ROBERTSON:   It was common ground before the Court of Appeal that the trial judge erred in not finding there was an agreement between the parties.  That was the error.  It was common ground.  What Justice Bond has failed to do in his analysis of those paragraphs you mention is realise that it was common ground that the trial judge was in error.  We did not make any submissions about that.  We did not need to because it was common ground. 

If the respondent had continued with his position at the trial judge we would have then taken the court to the exact evidence that the respondent took the court to to demonstrate that there was a partnership agreement.  Whether there was a new agreement, our case was that that has to be looked at in the context that the parties were in an existing partnership agreement.  The criticism we made of the trial judge’s decision, which is an error repeated by Justice Bond ‑ ‑ ‑

KEANE J:   Well, can I ask you – what do you say about the last sentence in paragraph [108] where his Honour says:

I agree with the respondent that it is not open to the appellant to contend on this appeal that it has any entitlement to ancillary relief in the event that it fails on its contract formation argument.

That looks like the respondent has said they are entitled to ancillary relief only if they succeed on the contract formation argument.  That looks distinctly inconsistent with the notion that they have accepted that there is another basis, that is to say, the partnership agreement.

MR ROBERTSON:   Well, where Justice Bond goes wrong there is to characterise it as ancillary relief.  If we go to the originating application we have a discrete application for an injunction to prevent a breach of – an injunction to stop them treating with the other party to the litigation.  We then have a separate application for a declaration of terms of an agreement. 

So it was not ancillary relief to the agreement of variation.  It was an immediate application for an injunction to stop a breach of the partnership agreement and that is what Justice Bond correctly recorded in his statement of facts and contentions, that we were seeking an injunction for breach of the original written partnership agreement, not ancillary relief.  So his Honour’s use of the word “ancillary” is simply wrong.  We converted that to a claim for damages because the horse bolted.

GAGELER J:   Where did you convert it to a claim for damages in that passage that you have just read?

MR ROBERTSON:   Yes, Justice Fraser said, “The horse has bolted.  You are seeking equitable damages instead, are you not, Mr Robertson?” and I said, “Yes, your Honour”, and we agreed that is what we were seeking.

GAGELER J:   Thank you.  Do you have anything further to say?  Your time is very short.

MR ROBERTSON:   Yes.  I wanted to say that not only was this related to the relief but it also related – this error in failing to accept that the parties were in partnership, which was the issue before them, led to the error in the court’s analysis of whether there was a further agreement, because the partnership agreement that both parties agreed bound the parties had Mr Hartnett and Mr Perry as key persons.

In that context, when they were communicating via email, one can see inevitable that they were communicating as key persons pursuant to the partnership agreement.  The Court of Appeal found, having overlooked this concession, that they were communicating with each other personally and were trying to seek their own personal agreement and were not communicating pursuant to an existing partnership agreement.

So this overlooking of the concession denied us relief which we would have been entitled to at the trial judge had the respondent made the concession back then, and it also infected the court’s error – the court’s analysis, proper analysis, of whether there was a variation of the partnership agreement.  If the Court pleases.

GAGELER J:   Thank you.  Yes, Mr Kidston.

MR KIDSTON:   If it please the Court.  Might I take your Honours first to exhibit JBO‑1 to the affidavit of James Bernard O’Brien filed by the applicant’s solicitors.  It appears at page 5 of the exhibit bundle.  This is the amended originating application as was before the trial judge.  Paragraph 1 of the relief sought concerns some interim relief and it did not trouble the trial judge.

KEANE J:   I am sorry, we do not seem to have this document.

GAGELER J:   We do not have this affidavit.  Is this the affidavit that was sought to be filed late?

MR KIDSTON:   Yes, it was, your Honour.

GAGELER J:   You wish us to look at this document?

MR KIDSTON:   Sorry, I understood it had been filed.  Yes, I seek leave for it to be filed.

GAGELER J:   All right.

MR KIDSTON:   Apologies, your Honours.  It is at page 5 of the exhibit bundle.  The page numbers are at the top of the page.

GAGELER J:   Yes.

MR KIDSTON:   This is the amended application that was before the learned trial judge.  Paragraph 1 dealt with interlocutory relief and did not trouble the trial judge when the matter came before him.  Paragraph 2 concerns a declaration in respect of what styled the “October 2014” agreement.  That is the agreement that was contended for on an exchange of correspondence by the applicant.  Paragraph 3 seeks an order that that agreement be specifically performed.  Paragraph 4 seeks a mandatory injunction prohibiting the respondent from – and set out there are certain things which we are sought to be enjoined from which arise out of the October 2014 agreement.

The learned trial judge dealt with paragraph 4 on that basis, that it was a breach of the agreement contended for, not some other partnership agreement or other agreement, and so much is plain from paragraph [75] of the learned trial judge’s reasons which appear at page 20 of the appeal book.

Having already found that the agreement contended for and the exchange of correspondence was not an agreement and/or alternatively was not binding, the relief at paragraph 4 is dealt with on the basis that the mandatory injunction is sought to enforce that agreement, that is, the October 2014 agreement.

When one comes to the notice of appeal at page 22 that was before the Court of Appeal, the grounds of appeal concern solely the failure to find that the October 2014 agreement was entered into.  It is not said that the learned trial judge was in error by failing to find that there was some other basis upon which the mandatory injunction or other relief might have been granted.  The case was confined at first instance for a claim in respect of a breach of the agreement contended for on the exchange of correspondence.

Having made no complaint about that, the notice of appeal proceeds on the basis solely that the learned trial judge was in error by not finding that the agreement of October 2014, now referred to as “31 October 2014” agreement, had not been entered into and was not binding.  It is in that context that the outline of argument was filed in the respondent’s – sorry, I should say ‑ before we leave the learned trial judge reasons, your Honours will note that nowhere does the learned trial judge make a finding that the parties were not bound by the partnership agreement because it was not contended – sorry, a claim was not pressed for breach of the partnership agreement.  When one gets to the Court of Appeal it is the case that the position of the respondent changes from that at first instance.  It says that the partnership agreement regulated the relationship.

GAGELER J:   Between?

MR KIDSTON:   Between the then parties to the proceeding.  That was in circumstances where there had been an assignment of – sorry, there had been an appointment of new trustees, numerous of them.  Since the time the partnership agreement was entered into, new trustees had been appointed on either side and there was no evidence that a deed of acknowledgment or partnership agreement had been entered into by the new partners on similar terms.  The parties to the proceeding were then not parties to the actual partnership agreement itself.  However, it was asserted on the – sorry, the submission was made before the Court of Appeal that the partnership agreement regulated the relationship.  What was then sought – what then happened ‑ ‑ ‑

KEANE J:   Are you saying regulated the relationship at the time before the assignment?

MR KIDSTON:   No, I cannot put it in those terms.  It was put on the basis that the then parties to the proceeding who were new trustees and not parties to the partnership agreement, those parties were – their relationship was regulated by the partnership agreement, despite not having signed an – despite not being parties to the earlier partnership agreement or having entered into a new agreement or contracted on those terms.  It was a concession of law.

KEANE J:   Why was it relevant to make it?  What did you think you were doing?

MR KIDSTON:   It was relevant to make it on this basis.  It had never been – it was not the case at first instance in respect of the relief sought that the parties were in breach of the partnership agreement.  An explanation was sought to be ‑ ‑ ‑

KEANE J:   Quite apart from questions of breach, no attempt was made to enforce it in its terms.

MR KIDSTON:   In respect of what is sought in the amended originating application, that is so.

KEANE J:   Yes.

GAGELER J:   In respect of what was sought in the proceedings at first instance?

MR KIDSTON:   In the amended originating application, which is all we have before the Court, it is as I have outlined.  There was something akin to pleadings in the statement of facts or contentions or something so described which was filed in exchange between the parties.  That is not in the application book or put before you by the applicant, nor is the partnership agreement which they say was varied and relief – which they say they are entitled to relief in respect of.  That is not before the Court either.

So to answer your Honour’s question – I digress – it was sought to explain that – it was said against us that the conduct in commencing the proceedings was only referable and could only be explained by having entered into this new agreement of 31 October 2014 that was contended for and it was said that, well, there are other explanations.  One is the parties were already bound by the partnership agreement. 

That was the concession – the concession arises out of that submission, that there is some other explanation from some other arrangement as to why they did what they did.  There of course are other reasons, as Justice Bond found, that the parties might simply have been protecting their position by commencing proceedings.

KEANE J:   On any view, the terms as to division of the spoils and responsibility for funding that the other side were seeking to enforce were not those of the partnership agreement.

MR KIDSTON:   That is so, and the ‑ ‑ ‑

KEANE J:   The only charter that contained those rights and obligations was this other agreement.

MR KIDSTON:   That is right.

KEANE J:   The agreement in principle.

MR KIDSTON:   Yes, what is said to be the 31 October 2014 agreement.

KEANE J:   Right.  So the only document or the only charter that was said to be the operative charter of rights and duties in the case was that one?

MR KIDSTON:   That was – sorry, at first instance or on appeal?

KEANE J:   Well, either.

MR KIDSTON:   Yes.

GAGELER J:   Let us start with first instance.  Let us work it through systematically.

MR KIDSTON:   At first instance the case was set up and in the nature of the relief sought, as is said in the amended originating application.

KEANE J:   Certainly Justice Martin thought the only charter of rights and obligations that he was being asked to enforce was this later agreement.

MR KIDSTON:   That was the way his Honour approached it.  I understand that was the way it was argued at first instance.  Now, trawling back – looking back through what has occurred, the notice of statements of facts and circumstances or contentions, as is referred to in Justice Bond’s decision, that document is not in the appeal book.  But his Honour dealt with it on the basis and disclosed it on the basis at first instance that if the agreement contended for was not made out then the injunction fell away.  That is how his Honour dealt with it, and his Honour was not said to be in error.

KEANE J:   Because no other basis for making those orders was advanced.  Is that not right?

MR KIDSTON:   I hesitate, your Honour, because I do not have the transcript before me.  I did not conduct the ‑ ‑ ‑

KEANE J:   All right.  But Mr Kidston, look, we have Justice Martin’s judgment.  We have the notice of appeal from that.

MR KIDSTON:   Yes.

KEANE J:   There is absolutely no suggestion at all in the notice of appeal that Justice Martin did not deal with the basis on which the claim was advanced.

MR KIDSTON:   That is so; that is what is revealed in the notice of appeal.  There is a statement of facts, matters and circumstances which was filed at first instance.

KEANE J:   We do not have that ‑ ‑ ‑

MR KIDSTON:   We do not have that in the application book.

KEANE J:   ‑ ‑ ‑ and no one is relying on it.

MR KIDSTON:   Leaving that to one side, then the position is as your Honour said.

GAGELER J:   Let us get to the Court of Appeal then.

MR KIDSTON:   And to the Court of Appeal no complaint was made about the manner in which Justice Martin dealt with it.  When one turns to paragraphs [107] and [108] of Justice Bond’s reasons at page 49, your Honours will see how this attempt to change the case was dealt with.

GAGELER J:   Are you saying that paragraph [107] is a reference to the passage in the course of argument to which we were taken?

MR KIDSTON:   Yes.

GAGELER J:   So that is taken into account and what is made of it then appears at paragraphs [107] and [108]?

MR KIDSTON:   That is so.

GAGELER J:   What do you say about paragraph [99] where in the second sentence Justice Bond is said to have misunderstood the position as advanced by you?

MR KIDSTON:   It seems that the position is not that he misunderstood it, but he did not accept the submission as to the conclusion of law in the circumstances of this case, having set out what the position was adopted by the respondent at first instance that it was not a party to the partnership agreement and was not bound by it.

KEANE J:   His Honour sets out his reasons for that in paragraph [99].

MR KIDSTON:   That is right.  His Honour simply does not accept the submission of law, which his Honour is perfectly entitled to, and deals with it, as he does, at [99].  Importantly – and I make the point at paragraphs [107] and [108] – no complaint is made about in the application for special leave it is not set as a ground of appeal that the learned judge has erred in dealing with the attempt to vary the case or to raise a new ground or to run claims which were not run at first instance by dealing with them in the manner they did at [107] and [108].  Their Honours are not said to be in error in that regard.

The grounds of appeal proceed on the assumption that their Honours have made such an error and were wrong to approach it in the way they did at paragraphs [107] and [108], and are made as if they have already passed through that gate and that is just to be presumed.

So there is no proposed ground of appeal challenging the manner in which their Honours dealt with the attempt to seek relief on the basis that the partnership agreement had been breached or had been – the variation was a variation to the partnership agreement.

Now, it is said against us in the submissions – and of course as has been indicated by my learned friend the respondent says that on the basis of Hollis v Vabu the court was perfectly entitled to do that.  It does not have to accept submissions of law.  It is said against us that that is authority for the proposition that a concession in a different proceeding, the court is not obliged to follow the concession of law.  With respect, that misstates what their Honours said, and I refer your Honours to paragraphs [29] and [31]. 

It is plain there the references to the concession in the Court of Appeal that your Honours are referring to is the concession made in that proceeding before them and when they later refer to the Court of Appeal in the taxation decisions – that is, the different proceeding which my learned friend seeks to say they were having regard to when they said they were not bound by the submission of law – that much is made clear because it is the court’s earlier decision of Bowes v Chaleyer (1923) 32 CLR 159 at 172 that their Honours refer to in the footnote in Hollis v Vabu. 

Of course, in that decision it concerned a case where the parties had agreed on a construction to be applied to a particular contract in respect of which the appeal was made – sorry, I withdraw that.  In that case the parties had agreed on a particular construction of an agreement and the court did not follow it.

That construction was agreed on the earlier hearing of the matter in respect of which the decision under appeal was being considered by the court.  So that was a decision where the concession was made in the same proceeding, not some different proceeding, and that was the case that their Honours were referring to when they had regard to Hollis v Vabu – or made their relevant statement in Hollis v Vabu.

Can I say this in respect of the miscarriage of justice point.  The position seems to be that the appellant is an empty shell.  Orders have been made for personal costs orders against the director in respect of the trial at first instance and later in respect of the Court of Appeal by Justice Morrison.  That decision is in the affidavit of Liam Patrick McMahon, which was filed on 13 July 2018.  There, the effect of the conclusion of both the learned judges is that the applicant company is one of straw and, having had the opportunity to put on evidence as to their financial position, not only do they not do that, they concede that they cannot say they are a company of substance.

When one looks at Exhibit LPM‑1 to that affidavit of Mr Liam Patrick McMahon, your Honours will recall from the Court of Appeal decision that the satellite proceeding had been settled by that time but the terms were not revealed.  It is submitted in our outline that it is obvious why it was settled and that was because it was doomed to fail.  It was a claim advanced by a subsequent trustee seeking damages under the Trade Practices Act which, it not being the entity which had suffered the loss, was doomed to fail.

We were told the things set out in this letter at LPM‑1, and that proceeding has discontinued, but the applicant still will not tell us the terms upon which that proceeding was settled.  Your Honours will note in the penultimate paragraph on page 1:

Should your firm fail to respond by the deadline above –

that is, to tell us the terms upon which you settled that proceeding, which we apprehend to be “just walk away and bear your own costs”:

we intend on relying on this correspondence to support a submission that the special leave application currently before the High Court has no legitimate commercial purpose and is being pursued to avoid a personal costs order as against your Mr. Hartnett.

The case seems to have been advanced, at least by the time it came on for trial at first instance and certainly by the time the Court of Appeal hearing came on, by a company which has no financial resources and the only legitimate purpose it seems for continuing to prosecute the appeal and then to make this appeal is to avoid personal costs orders which have been made by the controlling director.

In those circumstances and where the claim sought to be raised and pressed for which special leave is sought is a claim not advanced in the original proceeding and not the subject of relief which was sought or declarations or orders sought in the first proceeding, it was not the subject of the notice of appeal and it was raised for the first time at the hearing of the Court of Appeal and has been disposed of by their Honours on what appears to be a sound basis and that basis is not challenged, then the application for special leave ought be denied. Unless there is anything I can particularly take your Honours to, I otherwise rely on my written outline.

GAGELER J:   It sounded like you were building up to an application for a special order as to costs.  You are or are not pressing that?

MR KIDSTON:   We intend to make an application.  If I am required to make that application now, I will.  If successful in resisting the application for special leave it is our intention to file an application to seek a costs order against the director.

GAGELER J:   File a further application?

MR KIDSTON:   Yes.

GAGELER J:   We will defer hearing you further on that at the moment.  Mr Robertson, what do you say?

MR ROBERTSON:   My learned friend said that our case is rejected on a sound basis.  I have taken your Honours to paragraph [1] of Justice Fraser’s judgment where he was plainly in error in saying that the respondent denied that there was a partnership.  That is quite different from saying the respondent conceded that there was a partnership but we do not, having looked at all the material, accept that.

Justice Fraser was plainly wrong when he said that the respondent denied that it was in partnership with the applicant.  There was no sound basis upon which the applicant’s case was disposed of.  My learned friend persisted with an argument, which was rejected below, that the original partnership agreement was not pressed before Justice Martin.  That was argued fully below and found against my learned friend in the judgment of Justice Bond, at paragraph [100].  This is page 48 of the judgment.  It has already been argued and found against my learned friend.  He is reviving it.

In its written submissions to the learned primary judge dated 18 November 2016, the appellant persisted with its contention that the injunction which it sought might also be founded on breach of the partnership agreement ‑ ‑ ‑

KEANE J:  

but did not seek to meet the point raised by the respondent or otherwise explain how it was that the respondent had become bound by the terms of the partnership agreement.

MR ROBERTSON:   Yes, that is right, and Justice Martin did not deal with it at all in his judgment - at all.  But the submission which was made to the court was that this is a new point taken on appeal.  We have always persisted that there was a partnership agreement between the parties before this variation and contrary submission was rejected by the Court of Appeal.  In our notice of appeal itself – if you go to page 22 ‑ ‑ ‑

KEANE J:   You do not have a ground of appeal, do you, about paragraph [101]:

As far as the appeal record reveals, the argument at the hearing before the learned primary judge did not further pursue the proposition that the injunction case could succeed if the contract formation case failed.  If it had, it would have had to explain to the learned primary judge how the burden of contractual obligations owed as between the original parties, were passed on to the respondent as new trustee.

MR ROBERTSON:   Well, there is not any – there was not any indication in the appeal record other than that the applicant relies on its written submissions.  The judge, Justice Bond, criticises the point, again having failed to recall that at the hearing the contractual obligations were on the new trustees.  So he persisted with – Justice Fraser was clearly in error in thinking that the respondent denied that there was a partnership agreement.  The respondent accepted it.  Justice Bond has made precisely the same error.  It is quite a different thing for the court to record that the concession was made and then reject it, as opposed to overlooking it.

KEANE J:   Justice Bond is recalling that you had no viable case, that the charter of your entitlements was the partnership agreement.

MR ROBERTSON:   Well, he has recorded the charter of the entitlements ‑ ‑ ‑

KEANE J:   And your case was that your entitlements were quite different.

MR ROBERTSON:   Not at all.  If we go back to [97], the charter of the entitlement to the injunction is clause 4.4(j) of the partnership agreement.  That was the negative stipulation that a partner could not unilaterally settle proceedings.

KEANE J:   Yes, but it is not setting out  your obligations in relation to sustaining litigation and your entitlements to the proceeds in the event of success.

MR ROBERTSON:   Well, the shifting or the variation of entitlements, rights and audits is not the charter of the injunction to restrain a unilateral settling of the litigation.  That is clause 4.4(j).

KEANE J:   But you have to have an operative charter of rights.

MR ROBERTSON:   And we did.

KEANE J:   The one you were relying on was the one that gave you a bigger slice of the pie.

MR ROBERTSON:   We were relying on the original charter of rights as varied to give us a slice of the pie.  The original charter of rights stayed there.

GAGELER J:   None of this is in your originating application.  The trial judge certainly did not understand you to be putting your case that way.

MR ROBERTSON:   The case was put before the trial judge.  Then the horse bolted.  Then an appeal was made against the decision of the trial judge.

GAGELER J:   No ground of appeal raised this as an error.

MR ROBERTSON:   That is because we could not seek the injunction any more because the litigation had settled.  There was no point seeking the injunction ‑ ‑ ‑

KEANE J:   But there was always a point in putting your case on its proper footing, the footing that you are trying to put it on before us now.

MR ROBERTSON:   Yes, and if we go to the notice of appeal that has been done.  If you go to paragraph 23 – page 23, at appeal ground 2.4:

The learned primary judge erred in not identifying the commercial improbability that on 31 October 2014, either Mr Hartnett or Mr Perry would have in fact commenced the litigation through the plaintiffs on no terms ‑ ‑ ‑

KEANE J:   But this is an assertion about the conduct that is said to give rise to the October agreement.

MR ROBERTSON:   No, it is an assertion about commercial improbability.

KEANE J:   It has nothing to do with the partnership agreement, Mr Robertson.

MR ROBERTSON:   Your Honour, accepting that it does not have anything to do ‑ ‑ ‑

KEANE J:   Not a sausage.

MR ROBERTSON:   Accepting that it has no sausage to do with the partnership agreement what we have is a situation where effectively a new contention has been put by a party contrary to everything put by that party below.  We will win this case on the basis that there is a partnership agreement.  Having made that contention and it having been accepted we say it is contrary to fundamental justice that we not be able to revive our original claim that there was a partnership agreement.

The other side is saying it is contrary to justice that they can look at our notice of appeal and say “Aha, now that the issue of whether there is a partnership has gone we will admit that there was a partnership and we will win on a different basis”.

GAGELER J:   I think we understand your argument.

MR ROBERTSON:   If the Court pleases.

GAGELER J:   We are not satisfied that there is even an arguable case that the Court of Appeal failed to appreciate the scope of the controversy before the primary judge or before it on appeal.  The applicant’s argument that the Court failed to perform its appellate function is wholly without foundation.  The application otherwise raises no question of principle warranting the grant of special leave to appeal.  Special leave is refused.

MR ROBERTSON:   If the Court pleases.

KEANE J:   Now, in relation to ‑ ‑ ‑

GAGELER J:   What do you want to do with the costs?

MR KIDSTON:   Costs of the application for special leave are sought against the respondent.  They will follow the event and I foreshadow ‑ ‑ ‑

KEANE J:   Your response actually foreshadowed an application for an order against Mr Hartnett as well.

MR KIDSTON:   Yes, if you are prepared to entertain that now I will make it but I have foreshadowed ‑ ‑ ‑

KEANE J:   Would it not be better to deal with it now rather than have more proceedings subject to what Mr Robertson has to say?

MR KIDSTON:   It would.

GAGELER J:   You give the reason there that the order was made at trial?

MR KIDSTON:   I give the reasons that a personal costs order was made against the director, Mr Beau Hartnett, in respect of the trial.  A personal costs order was made against Mr Beau Hartnett by his Honour Justice Morrison in respect of the Court of Appeal proceedings.  There are findings made in respect of those proceedings – sorry, in respect of those decisions, neither of which have been challenged on appeal and they hold true now and on the same basis a personal costs order will be made against Mr Beau Timothy Hartnett in respect of the costs of this application for special leave.  Unless there is anything I can specifically address, your Honour, those are our submissions.

GAGELER J:   Thank you. 

MR ROBERTSON:   Your Honour, the Court has to exercise its discretion anew on this point and the fact that the courts below have looked at considerations that affected the situation below is not reason for you to follow them.  We say that this was an ordinary application for special leave and that such personal costs orders pierce the corporate veil and are extraordinary and that apart from the fact that other courts have exercised their discretion in that way, no grounds have been given by my learned friend for the Court to make an extraordinary order here.  What my learned friend had to do was revisit all those matters which might have been relevant or irrelevant below and he has not done that.  He has just relied on precedent.  If the Court pleases.

GAGELER J:   Having regard to the history of the litigation between the parties we consider it appropriate to make a special order for costs in this application.  The orders we therefore make are:

1.The application for special leave to appeal is dismissed.

2.The applicant and Mr Beau Timothy John Hartnett pay the respondent’s costs of the application. 

The Court will now adjourn to Tuesday, 9 October at 10.00 am in Canberra.

AT 12.03 PM THE MATTER WAS CONCLUDED