Price v Powers
[2006] WASCA 262
•30 NOVEMBER 2006
PRICE -v- POWERS & ORS [2006] WASCA 262
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2006] WASCA 262 | |
| THE COURT OF APPEAL (WA) | |||
| Case No: | CACV:90/2005 | 11 SEPTEMBER 2006 | |
| Coram: | MARTIN CJ WHEELER JA PULLIN JA | 30/11/06 | |
| 23 | Judgment Part: | 1 of 1 | |
| Result: | Appeal dismissed | ||
| B | |||
| PDF Version |
| Parties: | DAVID ROBERT PRICE ALAN JOHN POWERS SHEILA POWERS ROBERT WILLIAM BAZELEY IMAGINATION ENTERPRISES PTY LTD (ACN 008 963 648) |
Catchwords: | Fiduciary duties Breach Existence of a fiduciary duty where the respondents were unit holders in a trust and shareholders and directors in a company Duty not to do anything inconsistent with the appellant's beneficial interest in units in a trust or to effect the appellant's powers in relation to those units Duty and breach not established Turns on own facts Remedies Claim for retrospective rectification of the register not made out Costs Claim for costs where a concession is made late Unlikely earlier concession could have avoided trial Exercise of discretion not interfered with |
Legislation: | Nil |
Case References: | Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41 Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589 Powers v Hayes [2001] WASC 277 Price v Powers [2005] WASC 154 Whitehouse v Carlton Hotel Pty Ltd (1987) 162 CLR 285 Australian Coal & Shale Employees' Federation v The Commonwealth (1953) 94 CLR 621 Bahr v Nicolay [No 2] (1988) 164 CLR 604 Consul Development Pty Ltd v DPC Estates Pty Ltd (1975) 132 CLR 373 House v The King (1936) 55 CLR 499 Kelly v CA & L Bell Commodities Corporation Pty Ltd (1989) 18 NSWLR 248 New Zealand Netherlands Society "Oranje" Inc v Kuys [1973] 1 WLR 1126 Noranda Australia Ltd v Lachlan Resources NL (1988) 14 NSWLR 1 Royal Brunei Airlines Sdn Bhd v Tan [1995] 2 AC 378 Whitehouse v Carlton Hotel Pty Ltd [1983] 1 Qd R 336 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA TITLE OF COURT : THE COURT OF APPEAL (WA) CITATION : PRICE -v- POWERS & ORS [2006] WASCA 262 CORAM : MARTIN CJ
- WHEELER JA
PULLIN JA
- Appellant
AND
ALAN JOHN POWERS
First Respondent
SHEILA POWERS
Second Respondent
ROBERT WILLIAM BAZELEY
Third Respondent
IMAGINATION ENTERPRISES PTY LTD (ACN 008 963 648)
Fourth Respondent
(Page 2)
ON APPEAL FROM:
Jurisdiction : SUPREME COURT OF WESTERN AUSTRALIA
Coram : LE MIERE J
Citation : PRICE -v- POWERS & ORS [2005] WASC 154
File No : CIV 1124 of 2002
Catchwords:
Fiduciary duties - Breach - Existence of a fiduciary duty where the respondents were unit holders in a trust and shareholders and directors in a company - Duty not to do anything inconsistent with the appellant's beneficial interest in units in a trust or to effect the appellant's powers in relation to those units - Duty and breach not established - Turns on own facts
Remedies - Claim for retrospective rectification of the register not made out
Costs - Claim for costs where a concession is made late - Unlikely earlier concession could have avoided trial - Exercise of discretion not interfered with
Legislation:
Nil
Result:
Appeal dismissed
Category: B
(Page 3)
Representation:
Counsel:
Appellant : Mr J Gilmour QC & Mr A Metaxas
First Respondent : Mr S Penglis
Second Respondent : Mr S Penglis
Third Respondent : Mr S Penglis
Fourth Respondent : Mr S Penglis
Solicitors:
Appellant : Arthur Metaxas & Co
First Respondent : Freehills
Second Respondent : Freehills
Third Respondent : Freehills
Fourth Respondent : Freehills
Case(s) referred to in judgment(s):
Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41
Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589
Powers v Hayes [2001] WASC 277
Price v Powers [2005] WASC 154
Whitehouse v Carlton Hotel Pty Ltd (1987) 162 CLR 285
Case(s) also cited:
Australian Coal & Shale Employees' Federation v The Commonwealth (1953) 94 CLR 621
Bahr v Nicolay [No 2] (1988) 164 CLR 604
Consul Development Pty Ltd v DPC Estates Pty Ltd (1975) 132 CLR 373
House v The King (1936) 55 CLR 499
Kelly v CA & L Bell Commodities Corporation Pty Ltd (1989) 18 NSWLR 248
New Zealand Netherlands Society "Oranje" Inc v Kuys [1973] 1 WLR 1126
Noranda Australia Ltd v Lachlan Resources NL (1988) 14 NSWLR 1
Royal Brunei Airlines Sdn Bhd v Tan [1995] 2 AC 378
Whitehouse v Carlton Hotel Pty Ltd [1983] 1 Qd R 336
(Page 4)
1 MARTIN CJ: I have had the advantage of reading the reasons for decision given by Wheeler JA and agree that the appeal must be dismissed for the reasons she gives. I will, however, add a few observations of my own.
2 The essence of the appellant's case, both at first instance and on appeal, was an allegation of breach of fiduciary duty. As Mason J said in Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41 at 102:
"The categories of fiduciary relationships are infinitely varied and the duties of the fiduciary vary with the circumstances which generate the relationship."
3 Accordingly, in any case in which breach of fiduciary duty is alleged, it is necessary to define with precision the circumstances which are said to give rise to the fiduciary relationship and the scope and content of the duties which are said to arise from that relationship. As Wheeler JA points out, this litigation has been characterised by a degree of imprecision and uncertainty in the identification of the precise nature and scope of the fiduciary duties which are said to have been breached.
4 One source of the fiduciary duties that were said to have been breached is an assertion to the effect that the appellant ("Mr Price") had a beneficial interest in the units in the trust owned by Mr Hayes. However, the trial Judge held that the evidence did not establish the existence of any such beneficial interest (at [70]). That conclusion was challenged before us essentially in reliance upon a recital in a deed made on 16 April 1996 between Mr and Mrs Powers and Mr Price. Absent any allegation of estoppel as against Mr and Mrs Powers (and no such allegation has been pleaded or advanced at trial), the trial Judge was plainly correct in his conclusion that the recital in the deed was, of itself, quite incapable of establishing that Mr Price held the beneficial interest in the units owned by Mr Hayes.
5 The other asserted source of fiduciary duty was said to be the agreement to the effect that Mr Price's special units would be converted back to 10 ordinary units if he should personally request that conversion. It is not immediately clear to me that an agreement of that kind would give rise to a fiduciary relationship of any kind, let alone the fiduciary duties asserted by Mr Price. As Mason J observed in Hospital Products (supra), the critical feature of the relationships giving rise to fiduciary obligations is that:
(Page 5)
- "… the fiduciary undertakes or agrees to act for or on behalf of or in the interests of another person in the exercise of a power or discretion which will affect the interests of that other person in a legal or practical sense. The relationship between the parties is therefore one which gives the fiduciary a special opportunity to exercise the power or discretion to the detriment of that other person who is accordingly vulnerable to abuse by the fiduciary of his position." (at 96 - 97)
6 In my opinion, the agreement relied upon by Mr Price as the source of the asserted fiduciary obligation did not give to any of the asserted fiduciaries a special opportunity to exercise a power or discretion to the detriment of Mr Price. The powers and opportunities which the asserted fiduciaries had to affect the rights of Mr Price, and which it is said they failed to exercise in his interest, do not derive from the agreement, but from their pre-existing capacities within the structure which had been created prior to the agreement, namely; their capacities as directors of the trustee, shareholders and unit holders respectively. It seems to me to follow that the trial Judge was plainly correct in finding that any actions taken by those persons in their respective capacities as unit holders, shareholders and as director of the trustee company could not constitute a breach of a fiduciary duty said to arise from the conversion agreement (see reasons at [81] - [85]).
7 The fiduciary duties owed as a company director are, of course, generally those created by the general law of fiduciary obligation. They arise because a director has a power to affect the interests of the company he or she directs and a corresponding duty to protect the company's interests. In this case, there is no allegation of breach of a general fiduciary duty of that kind, but only of a specific duty said to arise in respect of particular units by reason of the conversion agreement. Unit holders and shareholders do not ordinarily owe fiduciary obligations to others in respect of the exercise of their rights as such, because those rights create powers which are to be exercised in the protection of their own interests as unit holder or shareholder, as the case may be, and not in the interests of others. In my opinion, there is nothing in the conversion agreement that would give rise to any fiduciary obligations in relation to the exercise by the parties to that agreement of powers or capacities which they enjoy as unit holders or shareholders. It is theoretically possible that the circumstances may have given rise to a contractual claim in respect of the exercise of those powers, but as Wheeler JA observes, that claim was not pursued at trial.
(Page 6)
8 It was also suggested at various points in argument before us that fiduciary obligations had been breached by the misuse of funds impressed with a fiduciary obligation; but that case was not pleaded, nor advanced at trial and in the end, not pressed on appeal.
9 Accordingly, it seems to me that the trial Judge was plainly correct in concluding that Mr Price had failed to establish breach of either of the substantive fiduciary obligations he asserted. The various grounds of appeal which challenge those conclusions must therefore fail, with the result that the appeal must be dismissed.
10 WHEELER JA: The background facts, and an overview of the appellant's pleaded case, are contained in [1] - [41] inclusive of the reasons for decision of Le Miere J (Price v Powers [2005] WASC 154). No issue is taken with those facts, nor, as I understand it, with his Honour's summary of the way in which the appellant put his case at trial, with one exception. That exception is that the appellant maintains that his Honour erred in the view that he expressed in [34] that, at the conclusion of the trial, counsel for the appellant abandoned the appellant's pleaded cause of action for breach of contract.
11 It is asserted that an examination of the transcript reveals that the pleaded cause of action for breach of contract was not abandoned. In support of that proposition, the appellant referred us to some half dozen pages of transcript, primarily from the appellant's oral closing submissions. It appears that there were also written submissions. We were not supplied with either a full copy of the transcript or with a copy of the written submissions. Making as much as one can from the pages we were given, it seems to me that there was an abandonment of breach of contract or, at least, that the claim was not pressed. In opening at trial, counsel for the appellant said:
"We don't press that [par 28.9 of the statement of claim] and nor do we press 28.10 [of the statement of claim], the damages, that is, damages for breach of contract."
- In closing, he said:
"The plaintiff's claim in this case is for breach of fiduciary duty, as I endeavoured to make clear during my learned friend's address; that is, that although I agree that in paragraph 24 of the statement of claim it sounds in terms of a breach of contract, really the way in which that has become structured with the amendment was that it's the facts which appear in paragraph 24
- upon which reliance is placed to found the breaches of fiduciary duty ... "
12 There was no ground of appeal claiming that his Honour failed to deal with a live issue at trial, or that he wrongly concluded that an issue raised on the pleadings was not a live issue. A proposed ground of appeal raising that very point was formulated by the appellant some three days prior to the hearing of this appeal, only to be abandoned by the appellant on the morning of the hearing. Not surprisingly then, this assertion was one with which the respondent was unable to deal, and did not deal, at the hearing of the appeal. In the light of those circumstances, it is my view that, if it be relevant, this Court should accept his Honour's characterisation of the proceedings, including his Honour's view that any express cause of action for breach of contract had been abandoned.
13 As I have noted, no issue is taken with any other portion of [1] - [41] inclusive of his Honour's reasons, by any party. I therefore adopt his Honour's summary of the proceedings, and incorporate it into these reasons without repeating it.
The trial: issues and findings
14 The course which the proceedings took at trial included a concession by the respondents immediately before the commencement of trial, and significant alterations in the pleadings and the way in which the appellant put his case during the course of the trial. Immediately before commencement of the trial, the first, second and third respondents' outline of submissions made it clear that those respondents did not oppose any order properly consequential on or facilitative of the declarations made by White AUJ. In particular, the respondents did not oppose an order that the 13,125 special par units held by the appellant be cancelled and that he be registered as holding 10 ordinary one dollar units. However, they submitted that the entry should be dated as at the date of the Court's orders, and should not be retrospective.
15 So far as the development of the appellant's case was concerned, it appears that the case of breach of fiduciary duty in its final form was found in par 25A and par 25B of the statement of claim, introduced on the second day of the trial. The appellant developed his case somewhat in the course of closing written and oral submissions, and then delivered further written supplementary submissions after his Honour had reserved judgment. His Honour expressly indicated, therefore, that "the [appellant] has had a thorough opportunity to consider how his case should be put. I will consider the [appellant's] case as it was finally formulated by counsel
(Page 8)
- ... in his closing oral and written submissions and subsequent supplementary written submissions" ([64]).
16 As they developed at trial, it appears that the alleged fiduciary duties had two distinct limbs. The first, and the one upon which it appears that the appellant primarily relied, was that, by reason of the recitals to the April 1996 deed, there arose in the first and second respondents fiduciary duties not to take any steps or do anything "which was inconsistent with the [appellant's] beneficial interest in the Hayes units" ([66]). Central to that contention was either an assumption or a contention that the appellant had a beneficial interest in the units which had, at the time of the deed, been owned by Mr Hayes.
17 His Honour dealt with that contention or assumption at [68] to [72] of his reasons. He noted that the statement of claim did not plead that Mr Hayes had declared that he held the ordinary units in the trust for, inter alia, the appellant as trustee; rather, it pleads that the deed of April 1996 contained a recital to that effect. His Honour noted that, of itself, the recital in the April 1996 deed that Mr Hayes had declared that he held the ordinary units in the trust for, inter alia, the appellant, was not evidence that he held the units in that way ([69]). This conclusion was conceded by the Senior Counsel for the appellant before us, as being correct.
18 His Honour noted that the appellant did not give evidence that Mr Hayes made any such declaration. The outcome was that there was no evidence that, in or about August 1990 (that being the only relevant time at which the beneficial interest could apparently have arisen), any beneficial interest of the appellant in the units of Mr Hayes arose. His Honour - correctly - held that the recital in the April 1996 deed was not capable of creating in the appellant a beneficial interest in the units of Mr Hayes, since Mr Hayes was not a party to that deed.
19 His Honour also expressly noted that it was not part of the appellant's case that the respondents were estopped from denying such a beneficial interest; that is, his Honour noted that no attempt was made by the appellant to establish a case of estoppel by deed ([72]). In that connection, I should note that the appellant's minute of proposed amended grounds of appeal dated 8 September 2006 did contain in its proposed ground 1 an assertion that the first and second respondents were estopped from denying such a beneficial interest by reason of the deed, but that proposed ground was not maintained in the appellant's minute of proposed amended grounds of appeal dated 11 September 2006, which was the
(Page 9)
- minute upon which the appellant sought to proceed at the hearing of the appeal.
20 So far as the alleged beneficial interest in the Hayes units was concerned, his Honour in effect held that there was no evidence that there was such a beneficial interest. Therefore any claim for breach of fiduciary duty founded upon an assumption or assertion of such an interest, could not succeed.
21 The second limb of the alleged fiduciary duty was that it was said that the agreement between the first and second respondents and the appellant that the appellant's special par units would be converted back to 10 ordinary units if the appellant should personally request that conversion, made orally and confirmed by the first and second respondents in the April 1996 deed, gave rise to a fiduciary duty owed by the first and second respondents to the appellant not to "act or do anything in their respective capacities as unitholders in the Trust, shareholders in the fourth [respondent] and, in the case of the [first appellant], in his capacity as a director of the fourth [respondent], which would or might prevent them ... from ensuring or which would or might affect their ability to ensure that the fourth [respondent] ... issued the [appellant] with 10 ordinary units in the Trust" (par 25 statement of claim). The breach of duty which is pleaded in relation to that fiduciary duty is that the first and second respondents "procured Hayes to transfer his 10 ordinary units in the Trust to the third [respondent]" (par 25B statement of claim).
22 In relation to this alleged duty, his Honour's findings at [80] - [83] are as follows. His Honour accepted that the first and second respondents had a contractual duty to cause the appellant's special units to be converted to 10 ordinary units upon the appellant so requesting. His Honour noted that the trust deed provided that the trustee may issue units in the trust, but that no additional units could be issued without the approval by special resolution of the unit holders. Once the appellant's ordinary units in the trust had been converted into special units, the first and second respondents, together with Mr Hayes and Mr Ryan, had the power to reconvert those special units to ordinary units, and to that extent the appellant was vulnerable to abuse by those parties of their position. His Honour held that the power of the other parties to affect the appellant's position arose from their position as unit holders in the trust shareholders and directors of the company, and that the relevant power of the first and second respondents was the power or discretion to exercise the rights "attaching to their units in the Trust and their shareholding or directorship of the Company".
(Page 10)
23 His Honour held that any fiduciary duty owed by the first and second respondents to the appellant should be confined to the exercise of their powers and discretions as unit holders, shareholders and directors. That is a finding which is closely aligned with the pleading in par 25 of the statement of claim, which refers to a fiduciary duty owed by the first and second respondents in their respective capacities as unit holders, shareholders and as a director. The making of the agreement with Mr Hayes was not, his Honour held, conduct by the first and second respondents in the exercise of the rights and powers arising from their unit holding, or their shareholding or directorship in the company. His Honour further noted at [85] that the first and second respondents were under no fiduciary obligation to the appellant "in relation to the Hayes units".
24 So far as the appellant's claim for rectification of the register was concerned, his Honour noted that he had found that the appellant had not made out his case that there was a breach by the first and second respondents of fiduciary duties owed to him. He also noted that the appellant had not established any legal right to be registered as the holder of ordinary units at any time up to and including the time at which orders were made by White AUJ and EM Heenan J on 24 October 2001 and 5 August 2003 respectively. For that reason, his Honour found that the claim for retrospective rectification was not made out. The other relief claimed by the appellant was considered by his Honour to be relief which would have flowed only from a breach of fiduciary duty and/or from the establishment of some retrospective right to rectification of the register. He therefore found that the claims to other relief were also not made out. He noted that the appellant had initially claimed equitable compensation and damages, but that those claims were abandoned at trial.
Issues in the appeal
25 Turning to the issues in the appeal, they are not easy to discern. That is because the grounds of appeal as contained in the appellant's case were replaced on 8 September 2006 by a minute of proposed amended grounds of appeal which abandoned most of them, and substituted new and different grounds. The written submissions attached to those grounds naturally deal with the issues which they raise.
26 However, on 11 September 2006 (the date of the hearing of the appeal) at about 10 am, the appellant delivered a fresh minute of proposed amended grounds of appeal. That minute contained all of the original grounds, which one assumes the appellant on 8 September 2006 had
(Page 11)
- considered were not able to be maintained, and added a new proposed ground 8. It does not seem that this minute was ever filed.
27 For reasons which were canvassed at the hearing on 11 September, proposed new ground 8 was withdrawn. The appellant's submissions before us were therefore directed to the original grounds of appeal.
28 However, substantial portions of the oral submissions appeared to reflect contentions to be found in the proposed amended grounds and submissions of 8 September, which were not live issues in this appeal. As a result, although many interesting issues were canvassed during the course of the oral hearing, it was not easy to ascertain how they were said to be relevant, or to understand the basis upon which many of the grounds of appeal were advanced. Doing the best that I can to understand them, the grounds as advanced on 11 September seem to me to be as follows.
Grounds 1, 2 and 3
29 Ground 1 asserts that his Honour erred in finding that the recital in the April 1996 deed to the effect that the first and second respondents, Hayes and Ryan, held the ordinary units in the trust for themselves and the appellant, was not evidence of that agreement. As I have noted, Senior Counsel for the appellant conceded, however, that it was not evidence of that agreement. That is, his Honour was correct in that finding.
30 Ground 2 is premised upon an acceptance of ground 1, since it asserts that his Honour erred in finding that the April 1996 deed was not capable of creating in the appellant a beneficial interest in Hayes' units in the trust. However, it plainly was not, since Hayes was not a party to it. The particulars of the assertion that his Honour erred are not, in fact, directed at demonstrating that the deed created a beneficial interest in Hayes' units in the trust in the appellant, but are rather directed at establishing that the deed demonstrated that the first and second respondents had actual knowledge of the appellant's interest in Hayes' units; that interest, as his Honour correctly held, was not the subject of evidence at trial, and therefore was not proved.
31 Ground 3 is, as its concluding sentence makes clear, premised upon acceptance of grounds 1 and/or 2. All these grounds, on their face, must fail.
32 Before us, Senior Counsel for the appellant sought to reformulate grounds 1 to 3 inclusive, without actually moving to amend them.
(Page 12)
- However, he correctly conceded that there was no proof of any actual agreement in 1990 giving rise to a trust in respect of Hayes' units. He also conceded that in order for fiduciary duties to arise in the first and second respondents, more was required than a mere declaration in relation to someone else's (Hayes') units, and he correctly conceded that it was not open to him to rely upon estoppel by deed.
33 In the end, during the course of an exchange with the Chief Justice, counsel made it clear that he was not suggesting that any fiduciary duty was owed by the first and second respondents in respect of the Hayes' units in 1996 (at the time of the April 1996 deed). Rather, he asserted that the duty arose through a combination of that deed and the "events of 1999", those events being, as the appellant put it, "an intermeddling by [the first and second respondents] with the subject matter of the trust ... ". There are two difficulties with this proposition. The first is that it depends upon a finding that there was a trust in relation to the Hayes' units, which trust the appellant was unable to prove. The second is that if one looks at the way in which the case was pleaded, which was, so far as one can tell, the way in which the case was run at trial, it was the appellant's case that simply by reason of the declarations in the April 1996 deed, the first and second respondents owed a fiduciary duty to the appellant in respect of Hayes' units. That was the contention rightly rejected by his Honour. It appears to me, therefore, that the appellant's attempt to recast grounds 1 to 3 inclusive must also fail.
Grounds 4 and 5
34 Ground 4 appears to be concerned with what I have described as the second limb of the alleged breach of fiduciary duty. The opening words assert that his Honour was wrong in finding that the conduct of the first and second respondents in procuring Mr Hayes to transfer his units to the third respondent "as asserted in 2 above" (presumably a reference to ground 2) was not conduct by the first and second respondents in the exercise of their rights and powers as unit holders, shareholders or directors. The reference to ground 2 appears to be erroneous, since, as I have noted, that ground is concerned with an alleged beneficial interest in relation to the Hayes' units. I assume, rather, that it is intended to refer to the breach of the alleged fiduciary duty which may in shorthand be described as the duty not to do anything to put it out of their power to reissue 10 units to the appellant. Ground 4 is subdivided, in turn, into two parts.
(Page 13)
35 Part 4.1 of ground 4 can be dealt with briefly. It asserts that the first and second respondents' agreement with Hayes "to pay him one half of the increase in the value of the Cottesloe properties plus a further $100,000, being a payment from property of the Trust, was made by the [first and second respondents] as shareholders of the [fourth respondent] and not otherwise". However, there is no assertion in the pleading, and it was not asserted at trial, that there was any breach of fiduciary duty arising from the payment to Hayes. The breach of fiduciary duty was, as I have pointed out, alleged to be the procuring of Hayes to transfer his units to the third respondent (statement of claim par 25B(a)). No payment to Hayes could of itself breach the alleged fiduciary duty not to do anything which might prevent the first and second respondents from ensuring that 10 ordinary units could be issued to the appellant. Part 4.1, rather than being concerned with this issue at all, appears to raise in another form the assertion in the withdrawn proposed ground 8 that the payment to Hayes was made from moneys out of the trust fund (and, as the argument was developed, made improperly). This was simply a matter which was not canvassed at trial and which does not arise on the pleadings.
36 Part 4.2 of ground 4 asserts that as part of the agreement with Hayes, the first and second respondents "agreed" that the Hayes' units be transferred to the third respondent when "they could have directed that they be transferred to any other nominee(s) including themselves and the [appellant]".
37 The assertion that the first and second respondents "agreed" that the units be transferred to the third respondent, and the assertion that they could have directed otherwise, is a shift, and an important one, from the pleaded case that the first and second respondents "procured Hayes" to transfer those units to the third respondent. That pleaded claim was the one dealt with by his Honour, when he found, at [83], that that alleged breach was not conduct by the first and second respondents in the exercise of the rights and powers arising from their unit holding or their shareholding or directorship.
38 So far as I can tell, the assertion that the first and second respondents could have directed that the units be transferred elsewhere was not canvassed before his Honour. Further, the appellant's counsel did not direct our attention to any part of the trust deed which, in his submission, had the effect that the first and second respondents could have directed that the Hayes' units be transferred to any other nominee. The respondents' counsel, in submissions which were not the subject of comment on behalf of the appellant, asserted that there was no
(Page 14)
- requirement in the trust deed for unit holder approval of a conveyance of the units. A perusal of the trust deed suggests that the respondents' submission was correct. The deed, by cl 6(4), provides that no additional units of any class may be issued without the approval by special resolution of the holders of all of the units in existence at the time of the proposal, but there is no similar provision in relation to transfer. By contrast, cl 9(1) provides that a unit holder may transfer any number of the units held by him. Clause 9(8) does provide that the trustee in its absolute discretion may refuse to register a transfer of units, with certain exceptions. However, that was not the subject of any submission before us, or apparently before his Honour. The positive case that the first and second respondents did something which prompted or facilitated the transfer of the Hayes' units to the third respondent, when it was open to them to have directed some other course, in their capacity as shareholders, unit holders or directors, is not made out.
39 Ground 5 is said to depend upon grounds 1 - 4 inclusive. It is a ground which asserts that his Honour erred in restricting the scope of the first and second respondents' fiduciary duties "to the powers and rights as directors, shareholders and unitholders limited to the units owned by the first and second [respondents] only, and not the Hayes' units". It is not clear whether the focus of the ground is upon the restriction to powers and rights as directors, shareholders, etcetera, or whether the focus is upon the Hayes' units. To the extent that the ground appears to depend upon some breach of trust in relation to the Hayes' units, because of some beneficial interest by the appellant in them, it must fail for the reasons given above. To the extent that it is directed to an alleged error in restricting the scope of the first and second respondents' fiduciary duties to duties owed by them in relation to their powers and rights as directors, shareholders and unit holders, no argument was directed to it. His Honour's conclusions in that respect appear to me to rest upon a correct apprehension both of the way in which a fiduciary duty may arise, and of the relevant agreements between the parties, at [81] - [82] of his Honour's reasons.
40 The appellant also sought to rely (in relation to these grounds, as I understand it) on a principle said to emerge from Whitehouse v Carlton Hotel Pty Ltd (1987) 162 CLR 285. The principle for which that case is authority sufficiently emerges from the headnote. It was a case in which one of the company's articles of association provided that so long as a named director held office as a governing director, all powers of the board of directors were vested in him alone. Another article provided that all new shares should be offered in the first instance to all then members of any class in proportion to the amount of capital held by them in the class
(Page 15)
- of shares to be issued. The governing director allotted shares to his sons to ensure that his former wife and their daughters would not gain control of the company on his death. The High Court held that the allotment was made for the impermissible purpose of defeating the voting power of existing shareholders by creating a new majority, in breach of the directors' fiduciary duty to act bona fide in the interests of the company as a whole. At page 290, Mason, Deane and Dawson JJ observed that it was no part of the function of a director, acting as a director, to favour one shareholder, or group of shareholders, by exercising the fiduciary power to allot shares for the purpose of diluting the voting power attached to issued shares held by other shareholders.
41 That authority is not relevant to any of the issues raised in the pleadings or in the grounds of appeal. That is because the focus of the decision is upon the purpose of the directors. No pleading suggested that, as the appellant's counsel submitted to us, the first and second respondents had procured the transfer of shares to Bazeley (or taken any other step) for the purpose of ensuring that it would then be out of their power to procure the issue of 10 ordinary units to the appellant. Although the witness statements of the first and second respondents, which are contained in the green appeal book, do touch upon their reasons for entering into the agreement with Hayes, his Honour's reasons do not contain any findings in relation to that issue. There is, as I have noted, no ground of appeal containing any allegation of a failure by his Honour to deal with a live issue. It was not suggested to us that there was any cross-examination of the first and second respondents in relation to their purpose, or that this issue of purpose was ever raised directly with them at trial. There are references, in the few pages of transcript with which we were provided, to the alleged "purpose" of the first and second respondents, in the transaction with Hayes, but it is not clear from that transcript how that issue arose, if it did, as an issue in the trial.
42 It seems to me that the reference to Whitehouse v Carlton is irrelevant to any ground of appeal.
Ground 6
43 Ground 6 is the most difficult to understand. This is in part because it is by no means clear how this issue was run at trial, in part because of the way in which some issues were apparently abandoned at trial, and in part because of an erroneous understanding of the sequence of events which infected the course of argument before us. I turn to that last problem first.
(Page 16)
44 As his Honour found, the "Rotary resolutions of Directors" dated June 2000 record the transfer of 10 ordinary units in the trust from Hayes to Bazeley, and record the resolution to register that transfer and issue the appropriate certificate to Mr Bazeley. In the agreed chronology, the relevant entry, dated 9 June 2000, records that the agreement between the first and second respondents and Hayes was put into effect and 10 units and one share were transferred to Mr Bazeley on that date.
45 From 1998, an action to which that transfer would have been relevant had been wending its way through this Court. The initial proceedings and the course of the action are not before us, but the decision of White AUJ, who heard the matter, is contained in the appeal books (Powers v Hayes [2001] WASC 277). It is apparent that the action was heard on 20 to 23 August 2001 inclusive and judgment was delivered on 10 October 2001. Oddly, the title to the action records it simply as an action between Mr and Mrs Powers as plaintiffs and Mr Hayes (who had by the time of judgment settled his disputes with the Powers), Mr Price and the company as defendants. There is no mention of a counterclaim in the title, and his Honour does not set out the whole of the pleadings, but it is apparent from a number of passages in his Honour's reasons that there was a counterclaim by Mr Price (see, for example, [18], [47] and [72]).
46 White AUJ did not grant the relief which was sought by Mr Price, having formed the view that that relief, whatever it was, had been "overtaken by events". His Honour took the view that it would be appropriate instead to make a declaration that the deed of declaration of trust was binding upon the Powers and should be performed by them. His Honour made that declaration and granted leave to Mr Price to apply for consequential or facilitative orders to give effect to it. The order which his Honour in due course made, presumably following such an application, was dated 24 October 2001, and was that the first and second respondents "within 28 days, take all steps and do all things necessary to convert the special par units issued to the [appellant] to 10 ordinary units ... and to appoint the [appellant] a director of the [company]". Further orders were made by EM Heenan J on 5 August 2003, substituting for the orders made by White AUJ, a declaration that the Powers and Mr Price were each bound by the terms of the deed of declaration of trust, and requiring the Powers within 28 days of 24 October 2001 to take the steps referred to above. There is no information before us as to how or why those further orders came to be made.
47 One assumes that there was discovery, and an obligation to give continuing discovery, during the course of the action before White AUJ.
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- It seems clear from [64] of his Honour's reasons that counsel for the appellant at that time had access to the company's books, since he cross-examined on them. At [63], a portion of the cross-examination of Mrs Powers is recorded. It relevantly reads:
"Tell me, has Mr Bazeley got 10 units now?---Yes, he has.
And you gave them to him?---They were transferred from Mr Hayes to Mr Bazeley and that was part of the agreement."
"At the very least your Honours will appreciate that following the judgment of White [AU]J but before those orders could be given effect to ... Mr Bazeley had become a unit holder as to 10 units."
49 Senior Counsel for the appellant came, as we understand it, very late to this appeal, so that the misapprehension is perhaps understandable, but it is unfortunate.
50 It is also necessary to understand the shifting alliances which seem to have formed during the course of those earlier proceedings, and to appreciate what demands were made, the dates on which they were made, and on whom they were made. The agreed chronology records that in August 1998, the appellant wrote to the first and second respondents demanding that they convert his special par units to 10 ordinary units. There is no pleading and no apparent record of any demand being made upon Hayes, who was at that time also a holder of 10 units. That is perhaps not surprising, since in November of that year the Powers commenced their action against both Hayes and the appellant. It seems at that time that Hayes and the appellant had some common interest, and it may have been assumed by the appellant that it was not necessary to make any formal demand upon Hayes. In any event, for whatever reason, there is no evidence before us of any such demand.
51 The respondents in this action have admitted in their defence that Hayes was a party to the 1990 agreement by which it was agreed that 10 units would be retransferred to Price upon Price making a demand, but, as I have noted, there is no evidence of any demand having been made on
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- Hayes. At trial before Le Miere J, counsel for the appellant appears to have accepted that Hayes was not bound to facilitate the issue of units to the appellant, since he said in closing that " ... Mr Hayes might have voted against it and might have stymied it in that way ..." (trial transcript page 502).
52 Against that background, it seems to me that there is a difficulty with the appellant's ground 6, which has at its heart particular 6.3, which reads as follows:
"6.3 as His Honour found the first and second [respondents] had a contractual duty to cause the [appellant's] special units to be converted upon his so requesting [80] and so should have performed their contractual obligations so soon as they were able. Had this been done the [appellant] would have been the owner of 50% of all issued units at the latest when Hayes was paid out;"
53 The more accurate characterisation of the position is that, had the first and second respondents performed their contractual obligations as soon as they were able, then the appellant would have been able to have become the owner of 50 per cent of all issued units, assuming that he had made a demand of Hayes, and had done so before the Hayes units were transferred to Bazeley.
54 There is also a difficulty with particular 6.5 of the grounds which reads as follows:
"6.5 the omission or failure of White AUJ in CIV 2251 of 1998 to order the fourth [respondent] to convert the special units was not relevant to the determination of the plaintiff's right to the conversion from 18 August 1998."
55 The "omission or failure", it seems to me, was not that of White AUJ, but that of the present appellant. At a time subsequent to the issue of units to Bazeley, the appellant chose to seek a remedy only against the first and second respondents to the present action, and not apparently to make any claim which could have resulted in rectification of the register, although all the facts upon which it appears that the appellant presently relies in order to prove the entitlement to retrospective rectification were then known and appear to have been in evidence before his Honour.
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56 In the present proceeding, perhaps because it was by no means clear what it was that the appellant asserted in relation to the rectification claim, counsel for the respondents submitted only that "whatever cause of action ... may have existed in regard to the contract it was subsumed in the orders made by White J ... ". There is, it seems to me, a real question, not raised by any party because of the combination of mistake of fact on the part of the appellant's counsel and lack of clarity of the ground, as to whether some form of issue estoppel or "Anshun" estoppel (Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589) would arise in relation to the action before White AUJ, to the extent that the appellant now seeks to rely upon an entitlement to rectification which is said to arise from what is apparently the same allegation of breach of contract which was in issue in those earlier proceedings.
57 In the present matter, it appears that the learned trial Judge did not understand the claim for rectification to be made upon the basis upon which the appellant sought to put it in ground 6 and before us. His Honour dealt with the matter at [102] of his reasons in this way:
"102 White AUJ did not order that the company issue 10 ordinary shares to the [appellant] or that the register of unit holders be corrected to record the [appellant] as the holder of 10 ordinary units. The [appellant] has not established that he has any legal right to be registered as the holder of ordinary units at any time up to and including the time when orders were made by White AUJ and Heenan J on 24 October 2001 and 5 August 2003 respectively. The [appellant] has not made out his case that the first and second [respondent] breached fiduciary duties owed to him. The [appellant] has not established that he had any right or equity that supports the register being retrospectively rectified."
58 It will be apparent from the preceding analysis, that I agree with his Honour's conclusions that the appellant had not established any legal right to be registered as the holder of ordinary units up until the time of the orders made by White AUJ and EM Heenan J and also with his Honour's conclusion that the appellant had not made out a case that the first and second respondents breached fiduciary duties owed to him. Those appear to be the two bases upon which the appellant submitted before his Honour that he was entitled to rectification, and it is my view therefore that ground 6 also must fail.
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Grounds 7, 9, 10 and 11 (original grounds 7, 8, 9 and 10)
59 It is apparent on the face of these grounds that they each depend upon the correctness of grounds 1 to 6 inclusive, or some of them. None of grounds 1 to 6 having been made out, these grounds must fail.
Ground 12
60 This is an assertion that his Honour erred in the exercise of his discretion in failing to order that the respondents pay the appellant's costs of the action up to and including 24 August 2004, that being apparently the date upon which, if the respondents had made their concession that the appellant was entitled to the issue of 10 units to him pursuant to O 24A of the Rules of the Supreme Court1971 (WA), the appellant would have been able to accept that offer.
61 His Honour's order was that there should be no order as to the costs of the action. His reasons for doing so, delivered orally on 8 July 2005, were in summary that the appellant had been partly successful, in the sense that the concession in relation to the 10 units had been made, but that the appellant was unsuccessful in all the other issues litigated at trial. It appears to me that that exercise of discretion should not be interfered with. It is true that the respondents' concession was made late. However, it is not clear to me that the late concession meant that there was substantial preparation for trial which had been wasted. It seems to me unlikely that the concession could have avoided the trial, since the appellant wished to press his claim for retrospective rectification and for the cancellation of Mr Bazeley's share. Those were, of course, the issues in the present appeal. I should note for completeness, that there is also contained in this ground an assertion that the continuance of the hearing for two of the days was largely attributable to the extent of passages of the respondents' witness statements, which were struck out. That contention is disputed by counsel for the respondents, and was neither developed nor pressed by the appellant before us.
Conclusion
62 For the reasons given above, it is my view that the appeal should be dismissed.
63 PULLIN JA: The case was opened by Senior Counsel for the appellant at the appeal in these terms:
"… what the appellant has sought is in effect orders that there was a declaration of trust over what I might describe as the
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- Hayes' units which were acquired pursuant to an agreement made by Mr and Mrs Powers and Mr Hayes in July of 1999, but upon the direction of the Powers the units were actually transferred to the third defendant, Mr Bazeley. The way the matter had been run at trial on the question of a trust was that arising out of an agreement made in August of 1990 it was acknowledged by Mr Powers, by Mr Price, by Mr Hayes and then at that time by Mr Ryan, that … Mr Price would surrender his 10 units because he was facing financial difficulties and acquire 13,125 special par units but that upon demand, once his financial difficulties were overcome, … the unit holders would procure the trustee to issue 10 units back to him and that in April of 1996 in a deed entered into between Mr Price the appellant and Mr and Mrs Powers that declaration of trust was acknowledged as between them."
64 An examination of the evidence given about the agreement made in 1990, an examination of the 1996 deed, a reference to the consent orders made at the commencement of trial and a brief reference to the trial Judge's reasons show that the appellant's appeal should be dismissed.
65 In [8] of his reasons the trial Judge set out the evidence given by the appellant about the 1990 agreement. His Honour said by reference to that evidence:
"It was proposed by Mr Hayes that if Mr Price surrendered his ordinary units in the Trust that would mean there would not be interference by any trustee in the running of the Trust and the commune and Mr Price's creditors could still have access to units nominally valued at $13,125. The directors and unit holders agreed in due course, once Mr Price's financial troubles were over, he would be reinstated to his previous position as a director and a holder of 10 ordinary units in the trust. Mr and Mrs Powers, Mr Ryan and Mr Price agreed with Mr Hayes' proposal."
66 Subsequently, the 16 April 1996 deed was executed by the appellant and Mr and Mrs Powers. It contained within it a recital which read:
"On or about 9 August 1990 Price exchanged his 10 ordinary units in the trust for 13,125 special par units in the trust in consideration of a promise by the company, Powers, Hayes and Ryan that the special par units would be converted back to
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- 10 ordinary units if he should personally request them to do so and in consideration of a declaration by Powers, Hayes and Ryan that they each hold the ordinary units in the Trust issued to them for one another and for Price as tenants in common in equal shares."
67 It may be observed immediately that the recital first recites in broad terms the agreement which had been reached about the surrendering of ordinary units, the issue of 13,125 new units and the agreement to "convert back" to ordinary units should the appellant request this. However, the recital also adds that there was a "declaration" by Hayes and others that they would hold "the ordinary units in the Trust issued to them for one another and for Price".
68 At the commencement of the trial before Le Miere J, an order was made by consent which secured for the appellant the 10 units which the parties to the 1990 agreement agreed he should have. There had been a delay in the performance of the steps necessary to achieve this result. The appellant had first made demand in August 1998 that the conversion take place. The appellant may have been entitled to damages for breach of contract, which would have been calculated by reference to the difference in the financial position he would have been in if the contract had been performed on time compared with the time when it was performed. However, the claim for damages for breach of contract was abandoned at trial.
69 The appellant then struggled to achieve what perhaps he saw as a method of achieving a similar or perhaps superior financial result by seeking to prove that the Powers had breached fiduciary duties allegedly owed by them to the appellant.
70 As the Chief Justice has said in his reasons for decision, he sought to do this in two ways. One was to assert that the source of fiduciary duty arose from the 1990 "convert back" agreement (referred to in the first part of the recital) about which Mr Price gave evidence. As the Chief Justice says, it is not clear how an agreement of that kind would give rise to a fiduciary relationship of any kind. In my opinion it conferred contractual rights but nothing more.
71 The other source of fiduciary duty was said to have arisen as a result of the appellant having a beneficial interest in the units in the trust owned by Mr Hayes. The contention was that these units were then transferred by Hayes to the Powers who were "knowing recipients" of the units. The
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- appellant sought to prove that there was a declaration of trust by Mr Hayes by referring to the latter part of the recital which I have set out above. However, the trial Judge said (at [70]):
"The [appellant] did not give evidence that the first and second [respondents], Mr Hayes and Mr Ryan made such a declaration in August 1990. Recital G of the April 1996 deed recites that, in effect, Mr and Mrs Powers, Mr Hayes and Mr Ryan declared that they each held the ordinary units in the Trust issued to them for one another and for the [appellant] as tenants in common in equal shares. The [appellant] did not give evidence to verify the truth of the recital. The outcome is that there is no evidence that in about August 1990 the first and second [respondents] Mr Hayes and Mr Ryan made a declaration as recited in recital G to the April 1996 deed. It follows that there is no evidence that there was any declaration by Mr Hayes made in or about August 1990 that created in the [appellant] any beneficial interest in the Hayes' units."
73 As a result, like the Chief Justice and Wheeler JA, I agree that the appeal must be dismissed. I agree with Wheeler JA's reasons concerning ground 12.