Leonard v Booth - [1954] HCA 64

BOOTH AND OTHERS

RESPONDENTS. PLAINTIFFS,

ON APPEAL FROM THE SUPREME COURT Contract - Deed - Illegality - Consideration - Companies (Vict.) - Registration

-Syndicate consisting of more than twenty persons formed in Victoria for the purpose of acquiring options of purchase of mining rights in Northern Territory- MELBOURNE,

Transfer of shares having effect of reducing number of members below twenty May 21, 24,

Whether syndicate "formed for mining purposes "-Title to property acquired in the course of carrying on business unlawfully as consideration-Companies SYDNEY,

Act 1938 (No. 4602) (Vict.), SS. 358, 395.

Section 358 in Pt. I of the Companies Act 1938 (Vict.) provides that "No company association or partnership consisting of more than twenty persons shall be formed for the purpose of carrying on any business for its object the acquisition of gain by the company association or partner- ship or by the individual members thereof unless it is registered as a company under this Part or is formed in pursuance of some other part of this Act

Section 395 in Pt. II of the same Act provides that "Notwith- standing anything in section three hundred and fifty-eight of this Act any company association or partnership formed for mining purposes may be formed, and, if incorporated as a company for mining purposes on the No- Liability System under this Part or any corresponding previous enactment, may carry on any mining business that has for its object the acquisition of gain to such company association or partnership or to the individual members thereof, without being registered as a company under Part I or formed in pursuance of any other Act of the Parliament of Victoria or of letters patent"

A syndicate was formed in Victoria for the purpose of acquiring an option of purchase of certain rights in mining leases in the Northern Territory. The trial judge found that from April 1951 until November 1951 the syndicate purported to carry on business in Victoria. After November the only business

91 CLR 453

carried on was a meeting, in December 1951, concerned with proposals for the buying out of the shareholders. During this period twenty-five persons were members of the syndicate. Uncertainty existed as to whether the last five persons to join did SO in Victoria. In March 1952 twenty-three members respectively executed deeds agreeing to transfer their respective interests in the syndicate to L. in consideration of certain payments to be made by him. According to the terms of the deeds, each was deemed to be in escrow until each of the other named members had executed similar deeds. This condition was fulfilled. In actions brought against L. for payment of moneys due under the deeds L. claimed that the syndicate, having consisted of more than twenty members, was illegal under S. 358 of the Companies Act 1938 (Vict.) and, consequently, the deeds were tainted with illegality and members of the syndicate could not acquire or give legal title to property.

Held (1) that the defence of…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

Continue reading Leonard v Booth

Details

AGLC: Leonard v Booth [1954] HCA 64
Case: [1954] HCA 64
Decision Date: 22 November 1954

CaseChat Overview and Summary

The case of *Leonard v Booth* involved multiple appeals from the Supreme Court of Victoria to the High Court of Australia. The primary dispute concerned the enforceability of deeds executed between syndicate members and the appellant, Mr. Leonard, whereby the members agreed to transfer their interests in the syndicate to Mr. Leonard in consideration of certain payments. Mr. Leonard sought to avoid these payments by arguing that the deeds were tainted by illegality due to the syndicate's contravention of Section 358 of the *Companies Act 1938* (Vict.).

The central legal issues before the High Court were whether the syndicate, by having more than twenty members and engaging in business activities, had contravened Section 358 of the *Companies Act 1938* (Vict.), and if so, whether this illegality rendered the deeds unenforceable. A further issue was whether there had been a total failure of consideration for the deeds. The court was required to determine the scope and application of Section 358, which prohibited the formation of associations of more than twenty persons for the purpose of acquiring gain unless registered as a company, and Section 395, which provided an exception for associations formed for mining purposes.

The High Court, by a majority, held that the defence of illegality failed. Several judges reasoned that even if Section 358 applied, the deeds in question were designed to terminate the association, not to carry out the forbidden purpose of an unregistered company. Another line of reasoning was that Section 358 did not apply because the syndicate was lawfully formed for mining purposes under Section 395, and any subsequent unlawful business activities did not invalidate the formation itself. The defence of total failure of consideration was also rejected, with judges noting that the promises were made by deed, thus not requiring consideration, or that the consideration provided (the members' interests in the property) was valid even if acquired during unlawful business activities.

The High Court affirmed the decision of the Supreme Court of Victoria, with the result that the plaintiffs (syndicate members) were entitled to recover the moneys due under the deeds. The appeals by Mr. Leonard were dismissed.

Orders