Ryan, Eunice Catherine Mary v Carstensz Properties Pty Ltd

RYAN v. CARSTENSZ PROPERTIES PTY. LTD. (1979) 37 FLR 20
Appeal

COURT

FEDERAL COURT OF AUSTRALIA

GENERAL DIVISION
Bowen C.J.(1), Deane(2), Fisher(3) JJ.

CATCHWORDS

Appeal - Principles applicable to - Primary judge found crucial facts on his impression of witnesses - Whether appellate court entitled to draw its own inferences.

HEADNOTE

In 1971 the respondent Elmslea Pty. Ltd. allotted fifty fully paid shares in its capital to the respondent Carstensz Properties Pty. Ltd. ("Carstensz"). Those shares were held in the name of Carstensz until 1974 when their transfer to the respondent H. Cassidy was registered by the directors of the respondent. Later in 1974 the plaintiffs (appellants) sought a declaration from the Supreme Court of the Australian Capital Territory that at the time of the transfer of the shares Carstensz were the beneficial owners of the shares and that the respondent H. Cassidy held the subject shares in trust for Carstensz. The learned trial judge found that Carstensz in the first instance and then the respondent H. Cassidy held the shares in trust for the persons and in the proportions contended for by the defendants. The plaintiffs obtained special leave to appeal to the Federal Court of Australia against that decision.

Held:(1) Per curiam - If, after giving respect and weight to the conclusions of the trial judge, the court of appeal were of the opinion that he had drawn a wrong inference then the court would be obliged to interfere.

Warren v. Coombes (1979), 53 ALJR 293, applied.

Edwards v. Noble (1971), 125 CLR 296; Powell and Wife v. Streatham Manor Nursing Home, (1935) AC 243; The Julia (1860), 14 Moo PC 210; 15 ER 284; S. S. Hontestroom (Owners) v. S. S. Sagaporack (Owners), (1927) AC 37, considered.

(2) Per Bowen C.J. and Fisher J., Deane J. dissenting - The trial judge's finding that the fifty shares in Elmslea Pty. Ltd. were held by Carstensz Properties Pty. Ltd. in the first instance and currently by the defendant (respondent) H. Cassidy upon trust was correct.

HEARING

Sydney, 1978, October 10-13, 17; 1979, September 10. #DATE 10:9:1979

APPEAL.

This was an appeal from a decision of the Supreme Court of the Australian Capital Territory (Fox J.) to the Federal Court of Australia.

The facts are set out in the judgment of Fisher J.

J. S. Lockhart Q.C. and I. A. Curlewis, for the appellants.

D. E. Horton Q.C. and R. S. Hulme, for the respondents.

Cur. adv. vult.

Solicitors for the appellants: Davies, Bailey & Cater.

Solicitors for the respondents: J. B. and L. A. Mullen.

E. F. FROHLICH

JUDGE1

September 10.

The following judgments were delivered.

BOWEN C.J. I have read the reasons for judgment of Fisher J. and I am in agreement with them. The parties should have an opportunity of considering the form of order which this Court should make and I propose that the matter should be adjourned for a period to enable the appellants to bring in short minutes of the order. (at p21)

JUDGE2

DEANE J. Elmslea Pty. Ltd. ("the company") was, on 23rd July, 1971, incorporated in New South Wales under the provisions of the Companies Act, 1961 of that State. On 13th August, 1971, the company entered into a contract to purchase a property known as Elmslea which is situated near Bungendore in New South Wales. In September 1971 the company allotted fifty fully paid shares of $1 each in its capital to the respondent Carstensz Pty. Ltd. ("Carstensz") which is a company which had been incorporated in the Australian Capital Territory on 31st October, 1969. Those shares were held in the name of Carstensz until April 1974 when a transfer of them from Carstensz to the respondent Mr. Cassidy was registered by the directors of the company. I shall, on occasion, refer to those fifty shares as "the subject shares". (at p21)

The primary issue involved in this appeal is whether, at the time of their transfer to Mr. Cassidy, Carstensz held the subject shares upon trust for its shareholders or whether, at that time, it held the shares in its own right as beneficial owner. If Carstensz held the shares beneficially, they are now held upon trust for Carstensz. If Carstensz held the shares upon trust for shareholders in particular proportions, they are now held upon the same trusts and in the same proportions. (at p21)
The shareholders in Carstensz included, at relevant times, a number of members of the family of Mr. William Patrick Ryan and a family company, W. P. Ryan Pty. Ltd. associated with Mr. Ryan. It will, on occasion, be convenient to refer to those shareholders collectively as "the Ryan Group". The Ryan Group held between them 15,600 of the 24,200 issued shares in the capital of Carstensz. The remaining shareholders were Mr. Paul James Reardon (1,200 shares), J. C. Rennes Pty. Ltd. (2,400 shares), Dr. J. H. Small (who died before the hearing at first instance) and his wife and children (2,400 shares in all) and Mr. V. C. Gallagher and members of his family (a total of 260 shares). Each of Paul Reardon, J. C. Rennes Pty. Ltd., Mr. Gallagher and Mrs. Small who represents her late husband's estate, is a respondent to the proceedings. I shall, on occasion, refer to them as "the respondent shareholders". (at p21)
The subscription for the subject shares was associated with the advance to the company by Carstensz (either on its own behalf or acting on behalf of its shareholders) of one-half of the funds necessary to enable the company to complete the purchase of Elmslea. It is common ground between the parties - if indeed there would, in any event, be room to doubt it - that the advance of loan funds to the company was not a transaction in the ordinary course of Carstensz's business to be funded completely from Carstensz's general funds. It was treated by all as an extraordinary transaction to be financed mainly from funds made available either to or through Carstensz by its shareholders. Completion of the purchase of Elmslea by the company took place on 7th September, 1971. (at p22)
The shareholders who comprise the Ryan Group maintain that the subject shares have, at all times since their allotment, been owned by Carstensz beneficially and that the shareholdings of the various shareholders in Carstensz should be adjusted to reflect their contribution to the funds advanced to the company to enable the purchase of Elmslea. This adjustment would reduce the Ryan Group's proportionate shareholding in Carstensz. The respondent shareholders maintain that the subject shares have at all such times been held upon trust for the shareholders in Carstensz according to the proportionate amounts of their contributions to those funds. (at p22)
The learned judge at first instance (Fox J.) found that, at the time of the transfer, the shares in the company were not held by Carstensz beneficially but were held upon trust for the shareholders in Carstensz in the proportion to which they had contributed (either by way of cash or the provision of security) to the funds which were made available to the company to enable it to purchase Elmslea. That trust was not a constructive or resulting trust established by presumption of law. It was a trust established by agreement or understanding between, or common intention of, Carstensz as trustee and, presumably, all of its shareholders as cestuis que trust. That agreement, understanding or common intention was, so his Honour found, to be inferred from the facts established before him. (at p22)
The company was promoted by Mr. Ryan and the respondent Mr. John Bede Reardon to purchase Elmslea from the trustees of the Christian Brothers. At the time of the purchase, the property was occupied by John Reardon, who is the father of Paul Reardon. After the purchase, John Reardon has continued to make Elmslea his family home. The subscribers to the company's memorandum and articles, each in respect of one share, were John Reardon and his brother, the respondent Francis Paul Reardon. These two subscribers' shares may have subsequently been overlooked when it came to the allotment of further shares. Ignoring them, the shareholdings of the Carstensz interest and Reardon interests corresponded: the fifty shares held by Carstensz were balanced by fifty shares held by the Reardon interests, namely, Francis Reardon, two members of his family and Forest Pastoral Company Pty. Ltd., which is a family company associated with John Reardon. The one half of the funds necessary to enable the company to purchase Elmslea which was advanced by or through Carstensz was matched by corresponding amounts advanced to the company by the Reardon interests. (at p23)
At the time the purported transfer of the subject shares from Carstensz to the respondent Mr. Cassidy was executed, the ostensible directors of the company included Mr. Ryan and his daughter Miss Eunice Ryan. The view was taken by Paul Reardon and some of the other respondent shareholders that neither Mr. Ryan nor Miss Eunice Ryan validly held office as directors. Paul Reardon organized a purported meeting of directors at which the decision was made to execute a declaration of trust of the shares and the transfer of the shares to Mr. Cassidy. None of the Ryan Group was informed that that meeting was to be held or participated in that declaration of trust and transfer. At the meeting of the company at which the transfer was registered, Mr. Ryan, who was a director of the company, voted against its registration. Plainly, as between the parties to the present proceedings, neither the declaration of trust nor the transfer of the shares constitutes evidence of a trust or removes from those who assert it the onus of establishing that the shares in the company were not held by Carstensz beneficially but were held by Carstensz upon trust for its shareholders. (at p23)
The evidence before the Supreme Court consisted of a large body of documentary evidence and the oral evidence of seven witnesses. All but two of those witnesses have a direct interest in the subject matter of the proceedings. Neither of the remaining two, Mr. Neville Houston and the respondent John Reardon, could properly be regarded as independent witnesses. Mr. Houston participated in some of the events involved in the proceedings as accountant and representative of the respondent J. C. Rennes Pty. Ltd. John Reardon, in addition to his relationship to his son, Paul Reardon, who has a direct interest in the proceedings, has an obvious indirect interest. If, as he maintains, Carstensz did not own its shares in the company beneficially but held them upon trust for its shareholders including his son, the position would be that John Reardon, his brother and their families controlled the company which, for its part, owned the property on which he lived and, apparently, desired to continue to live. (at p23)
It was submitted on behalf of the appellants that the judgment of the learned trial judge contained a number of significant mistakes as to primary facts. That submission was not, in my view, made good. The identified errors of primary fact in his Honour's judgment (e.g., the names of the shareholders in the company other than Carstensz and the statement of the amount of the deposit for which the final agreement for the purchase of Elmslea made provision) are not, in my view, significant. They can readily be explained by the general confusion of documentary evidence with which his Honour was required to cope and plainly were not crucial to his ultimate conclusion. (at p24)
Of greater importance were two more general submissions as to the factual content of his Honour's judgment which were made on behalf of the appellants. The first was that a general conclusion as to the source of the funds provided by or through Carstensz to the company for the purchase of Elmslea was wrong. The second was that his Honour had misconceived the nature of the appellants' case before him. I proceed to consider these submissions in the order in which I have mentioned them. (at p24)
At a late stage in his judgment, his Honour expressed the conclusion that "it was no part of the arrangements for Carstensz to pay any of the purchase money out of its own general funds, and when the overall position is examined, it is apparent that it did not do so" (italics added). It was submitted that his Honour was in error in this conclusion. If the reference to "the purchase money" is to the $50 subscription money for the fifty shares, it was pointed out that, by book entry at least, the $50 was debited against Carstensz's general funds. If, as would appear to be the case, his Honour was referring to the source of the one-half of the overall funds necessary to enable the company to purchase Elmslea, the statement, in the context in which it appears in his Honour's judgment, was inaccurate in that, for example, it is incorrect to say in relation to the $2,500 paid by Carstensz as one-half of the initial deposit that "it is apparent" that no part of it came out of Carstensz's general funds. If this unqualified conclusion had played an integral part in his Honour's reasoning leading to his decision that the subject shares were held by Carstensz as trustee, there would be considerable force in the appellant's submission. Examination of his Honour's judgment (particularly the immediately following sentences) makes it clear, however, that his Honour's generalization as to the source of the funds followed upon his conclusion of the existence of a trust and was not crucial to the decision that that trust existed. (at p24)
The submission that his Honour had misconceived the nature of the appellants' case was based upon his statement that the appellants had contended "that it was eventually agreed that Carstensz was to acquire this one-half interest for itself" (italics added). The appellants' case before his Honour was, it was said, the same as was advanced before this Court, namely, that Carstensz was, from the outset, participating in the acquisition of Elmslea on its own account and not as trustee for others. Assuming that this is so, it is not, however, apparent to me that any misapprehension as to the manner in which the present appellants put their case contributed to his Honour's finding that the subject shares were held upon trust. (at p25)
In my view, the appellants have failed to identify, in the learned trial judge's reasons for judgment, any significant mistake or misapprehension as to the facts which he found to be established by the evidence as distinct from any inferences to be drawn from those facts. Nor, in my view, does examination of his Honour's reasons for judgment disclose that it is vitiated by any identifiable error of principle or mistake of law. (at p25)
His Honour's ultimate conclusion that the subject shares were held upon trust was plainly, to some extent, based on his assessment of the witnesses who gave evidence before him. He expressed his substantial acceptance of the evidence of Mr. Rennes, Mr. Gallagher and Paul Reardon. He intimated distrust of the evidence of Mr. Ryan when he said: "I do not see how Mr. Ryan could have avoided knowing that his co-venturers were interested in 'Elmslea', and not in 'Yalana', and that what they were wanting, and working towards, was direct participation in the 'Elmslea' enterprise by holding shares in Elmslea (sic) Pty. Ltd. The intervention of Carstensz was to them a complication, not involving a radical change of plan, and I think Mr. Ryan must have appreciated that fact. It is possible that somewhere towards the end of 1971 he came to believe that participation was only to be in Carstensz, leaving that company as owner of the investment in Elmslea Pty. Ltd., but on balance I do not think he did." His Honour did not find it necessary to indicate any view of the trustworthiness of the other three witnesses (Mr. Houston, John Reardon and Miss Eunice Ryan). (at p25)
In Powell and Wife v. Streatham Manor Nursing Home (1935) AC 243, at p 265 Lord Wright identified two principles applicable to an appeal such as the present which he stated to be "beyond controversy". The first was that where the decision of the trial judge is based on his opinion of the trustworthiness of witnesses whom he has seen, the appellate court "must, in order to reverse, not merely entertain doubts whether the decision below is right, but be convinced that it is wrong" (per Lord Kingsdown in The Julia (1860) 14 Moo PC 210, at p 235; 15 ER 284, at p 293 , cited with approval by Lord Sumner in S. S. Hontestroom (Owners) v. S. S. Sagaporack (Owners) (1927) AC 37, at p 47 ). The second was that the appeal court has no right "to ignore what facts the judge has found on his impression of the credibility of the witnesses and proceed to try the case on paper on its own view of the probabilities as if there had been no oral hearing" (1935) AC, at p 266 . His Lordship went on to state, in effect, that these principles are properly to be regarded as applicable only to cases where the judge has found crucial facts on his impression of the witnesses as distinct from cases which turn on inferences from facts which have been found by the judge or which are not in doubt or on documents (1935) AC, at pp 267 et seq . (at p26)
An appellate court would be acting presumptuously and wrongly if it were, in the absence of identified or, in some circumstances, inferred error of principle or mistake or misapprehension of fact, to disregard the trial judge's assessment of the witnesses whom he has, and the appellate court has not, seen and heard give their evidence or to overrule the trial judge's findings of fact which are based, in whole or in part, upon such an assessment. This does not, however, mean that an appellate court which is under a duty to hear appeals as to both facts and law and is empowered to draw inferences for itself is entitled, in the absence of such error, mistake or misapprehension, to assert impotence when called upon to examine a decision on contested issues of fact by a judge who has had the advantage of seeing and hearing witnesses give oral evidence before him. In such a case, the trial judge's reasons for decision must be examined in an effort to determine which findings of primary fact were based upon the trial judge's assessment of witnesses and the extent to which the decision necessarily followed from the findings of primary fact which were so based. (at p26)
I have already stated my conclusion that the appellants have failed to identify, in his Honour's reasons for judgment, any significant mistake or misapprehension as to fact or any error of principle or mistake of law. Nor is there any basis for inferring that his Honour's assessment of witnesses or findings of primary fact were affected by any such mistake, misapprehension or error. The appellants have failed to demonstrate that there is any proper basis either for refusing to accept the learned trial judge's assessment of witnesses or for interfering with any particular findings of primary fact - as distinct from inferences from such facts - which were based, in whole or in part, upon that assessment. It therefore becomes necessary to consider the extent to which his Honour's ultimate decision that there was a trust necessarily followed from his assessment of the trustworthiness of witnesses who gave evidence before him or from conclusions of fact based on that assessment. (at p26)
The basic facts relating to the incorporation of the company, the actual purchase of Elmslea, the subscription for the subject shares and the manner in which the funds advanced to the company were obtained and paid were largely not in real dispute. The significant area of dispute was confined to the existence and content of any agreement or understanding between Carstensz and its shareholders that the subject shares be held by it upon trust. Even in that area of dispute, there was significant agreement as to basic fact: the shares were in the name of Carstensz, there was no resolution of either directors or shareholders of Carstensz that they be held other then beneficially, the $50 subscription money for them was debited by the company against Carstensz, no one at any time before the dispute came to a head expressly stated that the shares were held upon trust even when it must have been clear that Mr. Ryan, the person who arranged the transaction, maintained that they were not so held. (at p27)

Ultimately, I have reached the conclusion that the learned judge's assessment of witnesses and any findings of primary fact based on that assessment did not resolve the issue of whether there was a trust of the shares. That issue remained to be resolved by inferences to be drawn from the primary facts established by the evidence. There was material in the established facts supporting his Honour's inference of a trust: some specific illustrations will subsequently be given. In these circumstances, it becomes necessary to define with some precision the question which arises for the consideration of this Court. Is that question the question whether it has been shown that the inference of a trust which his Honour made was not reasonably open to him? If that be the appropriate question, I would have little difficulty in deciding that the inference of a trust was reasonably open. Or is that question the question whether this Court, on the facts established before his Honour, is itself of the view that a trust of the shares should have been inferred? Or is it some other, and if so what, question? (at p27)
In Edwards v. Noble (1971) 125 CLR 296 the Full High Court, in overruling a decision of the Full Court of the Supreme Court of South Australia which had substituted its own finding for that of the trial judge on a question of negligence, gave some apparently general guidance as to the approach which should be adopted by an appellate court when it is required to review an opinion or inference based or drawn from the established facts. In the course of his judgment, Barwick C.J., wrote: "In any appeal against a finding of fact, whether or not by way of rehearing, however much the appellate court may be in an equal position with the trial judge as to the drawing of inferences, in my opinion, the appellate court ought not to reverse the finding of fact unless it is convinced that it is wrong. If that finding is a view reasonably open on the evidence, it is not enough in my opinion to warrant its reversal that the appellate court would not have been prepared on that evidence to make the same finding. Merely differing views do not establish that either view is wrong. But in deciding that its own view is right and that of the primary judge wrong, the nature of the 'fact' found by the primary judge is a matter for consideration. Many of the 'facts' within the province of the jury involved elements of judgment, some evaluative aspects akin to an exercise of discretion. Perhaps the 'fact' of negligence or no negligence is of this kind. Others of such facts are mere inferences from other facts or combinations of facts, though even in that case there is an element of judgment in the decision to draw or not to draw an inference or to prefer one where more than one inference is reasonably open. But, in any case, the appellate court in my opinion is not bound to reverse a primary judge's finding of fact merely because it held a different opinion to that of the primary judge. Where the members of the appellate court are themselves not of a unanimous view, there would seem to be good reason to doubt the propriety of reversing the primary judge if his finding was reasonably open on the material before him" (1971) 125 CLR, at p 304 . (at p28)
McTiernan J. adopted a not dissimilar approach when he wrote: "In my opinion this was not a case in which a court of appeal might legitimately substitute its conclusion for the judgment of the primary judge . . . (at p28)
"The Full Court seemed to me to accept the learned trial judge's findings as to the circumstances of the accident but to reject his inference that the defendant was not negligent in his driving. In my opinion the evidence does not afford any convincing reason for rejecting that inference. It may well be that if his Honour had found that the defendant did not take proper care to avoid the collision his conclusion could not have been successfully challenged before a court of appeal. But consistently with the principles which would dictate that result it should be held, in my opinion, that the Full Court ought not to have interfered with the decision which is the subject of the present appeal" (1971) 125 CLR, at pp 307-308 . On the approach which he adopted, it was not necessary for McTiernan J. to express the conclusion which he would himself have reached on the established facts and he refrained from so doing. (at p28)
Windeyer J., in his judgment, distinguished between the function of an appellate court when the question is whether a qualitative finding of negligence should have been made when the facts of the occurrence are clear and its function in the ordinary case, such as the present, when the question is simply whether a particular inference should be drawn from established facts (1971) 125 CLR, at pp 312-313 . The fourth of the majority justices (Menzies J. dissented) was Walsh J. His Honour wrote: "My first observation is that I did not intend by what I wrote in Da Costa v. Cockburn Salvage & Trading Pty. Ltd. (1970) 124 CLR 192, at p 217 to assert that in a case of the kind there being considered the appellate court should simply make its own evaluation of the reasonableness or otherwise of the conduct of a party charged with negligence, without any regard to the decision of the trial judge. I did not mean to deny the principle which has been variously stated as being that the court must be convinced that the trial judge was wrong or that it must be satisfied that he was wrong or that it must be persuaded that he was 'clearly wrong' or 'plainly wrong'. My statement that in that case the judges who formed the majority of the Full Court of Western Australia were not precluded from giving effect to their own conclusions was based upon my view of the circumstances of that case. (at p29)
"My second observation is that I have always found much difficulty in distinguishing, in a practical sense, between a conclusion that a trial judge was wrong and a conclusion that he was clearly wrong. I think, also, that in the practical application of the principle it does not matter much whether in the statement of it the word 'convinced' or the word 'satisfied' is used. It may be said, in my opinion, that in whatever form of words the principle is expressed, it requires, even in a case in which the credibility of witnesses is not involved and in which the contest is as to the inference or conclusion that should be drawn from a set of primary facts, that if a choice has to be made between two conclusions both of which are open on the evidence and which are fairly evenly balanced, then the decision of the trial judge should stand. The appellate court should not deal with the case as if it were trying it at first instance. But, as has often been stated on high authority, the court has a duty to make up its own mind. It will do this taking into account the judgment of the primary judge and recognizing that it ought not to be set aside merely because of a slight preference for a different view upon a question upon which two views are open and as to which there is no definite preponderance of one view over the other. Subject to that limitation and subject to the well-recognized limitations concerning conflicting testimony and the credibility of witnesses, the appellate court should give effect to its own conclusion" (1971) 125 CLR, at p 318 . (at p29)
Unaided by authority, I should have thought that Edwards v. Noble at least established that, in the words of Walsh J., "even in a case in which the credibility of witnesses is not involved and in which the contest is as to the inference or conclusion that should be drawn from a set of primary facts, . . . if a choice has to be made between two conclusions both of which are open on the evidence and which are fairly evenly balanced, then the decision of the trial judge should stand." On that at least, it would have seemed to me that Barwick C.J., McTiernan and Walsh JJ. were all in agreement. In Warren v. Coombes (1979) 53 ALJR 293 , however, a majority of the Full High Court (Gibbs, Jacobs and Murphy JJ.) concluded that this was not so. Their Honours stated: "The dicta of Menzies J. and Walsh J. in Edwards v. Noble are opposed to those of Barwick C.J. and Windeyer J., and McTiernan J. decided the case on the facts. The case is a useful repository of statements of principle, but it is not a binding authority in favour of any particular view" (1979) 53 ALJR, at p 299 . (at p30)
In Warren v. Coombes Gibbs, Jacobs and Murphy JJ., after consideration of a number of House of Lords and High Court decisions, laid down the approach to be adopted by an Australian appellate court in a case such as the present as follows: "Shortly expressed, the established principles are, we think, that in general an appellate court is in as good a position as the trial judge to decide on the proper inference to be drawn from facts which are undisputed or which, having been disputed, are established by the findings of the trial judge. In deciding what is the proper inference to be drawn, the appellate court will give respect and weight to the conclusion of the trial judge, but, once having reached its own conclusion, will not shrink from giving effect to it. These principles, we venture to think, are not only sound in law, but beneficial in their operation" (1979) 53 ALJR, at pp 300-301 . (at p30)
It may appear, at first sight, that the approach laid down in Warren v. Coombes is, in substance, that stated by Walsh J. in Edwards v. Noble, where his Honour, in terms, stated that the appellate court had "a duty to make up its own mind" and to "give effect to its own conclusion". While the results of the two approaches will commonly coincide, there is, however, a difference of principle between them. In Walsh J.'s overall view, the primary question was whether there was such "a definite preponderance of one view over the other" as to justify the intervention of the appellate court at all. If there was not, that was the end of the matter and it was not necessary for the appellate court to reach any further conclusion for itself. Thus, in Edwards v. Noble, Walsh J., like McTiernan J., refrained from indicating what his own conclusion would have been. On the other hand, in the majority judgment in Warren v. Coombes, their Honours stated that the New South Wales Court of Appeal had been "obliged to reach its own conclusion as to the inferences to be drawn from the primary facts found by the learned trial judge" (1979) 53 ALJR, at p 301 . (at p30)
Their Honours did not, in the majority judgment in Warren v. Coombes, spell out precisely what was involved in the obligation to give "respect and weight" to the conclusion of the trial judge. The reason may have been that observance of the obligation will involve differences in emphasis and approach from case to case. I have, in the present case, endeavoured fully to discharge the obligation by approaching the question whether an inference of a trust should be drawn, through his Honour's judgment and with a conscious predisposition in favour of his Honour's finding that there was a trust of the subject shares. (at p30)
There was, as has been mentioned, material in the facts which supported his Honour's inference of a trust. The strongest supporting documentary evidence was Mr. Gallagher's letter of 6th July, 1971, in which he expressly stated that part of the funds advanced by him were "for the acquisition of 1200 shares of $1 in Elmslea". The force of that written contemporaneous statement is diminished by some of the contents of Mr. Gallagher's own notes of the meeting of directors of Carstensz of 14th August, 1971, ("Discussion mainly on company's acquisition of shares in Elmslea Pty. Ltd." and "Fifty per cent of Elmslea Pty. Ltd. is acquired/held by Carstensz Properties Pty. Ltd. Access to Elmslea is therefore by way of Carstensz Properties & 'Carstensz' individuals have no direct holding in Elmslea"). It is also diminished by the fact that the shares to which that letter purportedly referred (i.e. 1200 shares at $1 in Elmslea) were never issued and that subsequently, in his letter of 17th August, 1972, Mr. Gallagher indicated that the relevant $1,200 was part of a "loan to Carstensz . . . repayable at call". Another item of documentary evidence which would militate against any suggestion of "recent invention" on the part of the Reardons is the loan agreement relating to a loan made by Francis Reardon to Paul Reardon by which Paul Reardon charged "the whole of the shares in his name or hereafter to be allotted to him" in the company with repayment of the loan. The strongest oral evidence is probably that relating to the statement made by Dr. Small on 15th August, 1971. The evidence as to exactly what Dr. Small said varies. The version which most clearly favours the drawing of an inference of a trust is that of Paul Reardon to the effect that Dr. Small stated "that the cash or security raised for the purchase of Elmslea would be a direct investment in Elmslea". A number of other examples, including some passages in the cross-examination of Mr. Ryan, could be given of oral evidence which lends some support for the respondent shareholders' case. One such example is the evidence of Mr. Gallagher that at the June 1971 meeting of directors of Carstensz he stated that he had "practically decided to take up five per cent in Elmslea and that I was not interested at all in taking up any further shares in Carstensz". (at p31)
Notwithstanding the material in the evidence which supports the drawing of the inference which his Honour drew and the respect and weight which should be accorded to his Honour's finding of a trust, I have reached the conclusion that the inference that the shares were held on trust should not be drawn. In my view, the correct inference to be drawn from the facts is that the subject shares were held by Carstensz beneficially. That overall view is the result of a reading and re-reading of the record of both oral and documentary evidence rather than the result of the identifiable effect of particular items of evidence. I shall however indicate, in summary form, some of the particular aspects of the evidence which have played a part in leading me to that view. These are: (i) The minutes of the annual general meeting of Carstensz which was held on 9th August, 1970, make clear that it was the company Carstensz in its own right that was seen as the nominee of Mr. Ryan to acquire an interest in the property Elmslea. The interest in the property Elmslea subsequently became the fifty shares in the company which acquired the property. (ii) The balance sheet and accounts of Carstensz which were received by directors and shareholders and which were not, when received, questioned in this regard, are consistent only with the shares held by Carstensz in the company being held by it beneficially and with the moneys advanced to the company in connexion with the purchase of Elmslea either coming (as in the case of half of the first payment by way of deposit) from Carstensz's own funds or being borrowed by Carstensz from the bank or its shareholders and lent by Carstensz to the company. They show that the subscription moneys ($50) were treated as coming from Carstensz, that the shares were treated as an asset of Carstensz, that the associated funds advanced to Elmslea were seen as loans by Carstensz, that the money advanced by the bank comprised a loan to Carstensz and that moneys advanced by shareholders were likewise by way of loan to Carstensz. (iii) The minutes of subsequent meetings of directors of Carstensz (at one or more of which each of the shareholders, or a representative, was present) clearly, in my view, support the conclusion that the shares held by Carstensz in the company were held beneficially. Thus, for example, the minutes of the directors' meeting of 14th August, 1971, (the day after the final contract for the purchase of Elmslea is dated) state: "It was agreed that shareholdings in Carstensz Properties Pty. Ltd. would have to be reviewed after the final figures were known as to the cash and security invested by each shareholder in Carstensz Properties Pty. Ltd." In that regard, and while there are no doubt some errors in these minutes, I was not persuaded by the arguments of senior counsel for the respondents aimed at generally discrediting the minutes of meetings of directors and shareholders of Carstensz. (iv) Mr. Gallagher's agenda item and the decision of the meeting of directors of Carstensz of 20th November, 1971, as to the payment by Carstensz to Mr. Ryan of $2,500. It would seem clear that this payment related at least in part, to "recognition" of Mr. Ryan's efforts in relation to the Elmslea investment. It was a payment to be made or credited to Mr. Ryan by Carstensz itself. (v) The balance sheets (and, presumably, the books) of the respondent J. C. Rennes Pty. Ltd. showed its investment as being in shares in Carstensz and loans to Carstensz and the company. It would seem that there was no suggestion in them of J. C. Rennes Pty. Ltd. having any beneficial interest in the shares held by Carstensz in the company. This seems to have accurately represented J. C. Rennes Pty. Ltd.'s understanding at the relevant time. Thus when Mr. Houston, the accountant for J. C. Rennes Pty. Ltd., went to the meeting of directors of Carstensz of 18th December, 1971, it was not to suggest that Carstensz's shares in the company were held in trust for, inter alios, his client. It was to suggest, among other things, that one way in which Carstensz could raise money was, to use his words, "to sell the shares in Elmslea or to sell Yalana" (a property which Carstensz owned) "one or the other". (vi) The evidence of Paul Reardon as to the conversation between himself and Mr. Ryan in July, 1971: "We were discussing my - the fact that if Elmslea was purchased in the name of Carstensz Properties because I held five per cent of Carstensz Properties, I would automatically hold two and a half per cent of Elmslea." This evidence is only consistent with the view that, in July 1971, it was proposed that Carstensz would hold its interest "in Elmslea" beneficially and not as trustee for its shareholders according to their respective contributions. (vii) The complete absence in the evidence of any unequivocal contemporaneous statement to the effect that Carstensz held the shares in the company in trust for its shareholders. In my view, the absence of any suggestion of any such statement in a situation where the shares were held in the name of Carstensz and had, according to Carstensz's books, been paid for by Carstensz, is of considerable significance. (at p33)
My conclusion that the shares were held by Carstensz beneficially has not been reached with any degree of confidence. It could not be said that the trial judge's finding of a trust was not reasonably open on the evidence. It could not be said, to adapt the words used by Barwick C. J. in Edwards v. Noble (1971) 125 CLR 296 , that I am convinced that that finding is wrong. Particularly in the situation where the other members of the court are in agreement with the trial judge, I have hesitated to give effect to my own view to the contrary. (at p33)
In Cashman v. Kinnear (1973) 2 NSWLR 495, at p 509 Jacobs J., when President of the New South Wales Court of Appeal, propounded the duty of an appellate judge in dealing with an appeal on the facts against a finding of negligence in terms which, apart from any difference between giving "great weight" and giving "respect and weight" to the conclusion of the trial judge, correspond with what was said in the majority judgment in Warren v. Coombes (1979) 53 ALJR 293 . His Honour decided, in the circumstances of Cashman v. Kinnear that his "initial inclination" was outweighed by the weight he should give to the findings of primary and secondary fact by the trial judge and that he was, therefore, obliged to endorse the trial judge's finding and adopt the same conclusion. The view which I have formed, on the facts of the present case, that no trust of the subject shares can be properly inferred is, however, more than an inclination: it is a considered conclusion. In the circumstances, I regard myself as constrained by what was said in the majority judgment in Warren v. Coombes to give effect to it. (at p34)

I would allow the appeal and discharge the orders made by the learned trial judge. I would declare that the subject shares are held by the respondent Mr. Cassidy upon trust for Carstensz. I would adjourn the further hearing to a convenient day for hearing any submissions which the parties might wish to make as to any ancillary orders and as to the appropriate orders as to costs. (at p34)

JUDGE3

FISHER J. This is an appeal against a decision of the Supreme Court of the Australian Capital Territory (Fox J.) reasons for which were delivered on 19th December, 1974. The orders which his Honour made on 31st January, 1975, in effect dismissed the plaintiffs' claim and granted the declarations and relief sought by the defendants in their counterclaim. The plaintiffs lodged an appeal to the High Court. However, ss. 51 and 52 of the Supreme Court Act 1933 (A.C.T.), which conferred jurisdiction upon the High Court to hear appeals from the Supreme Court, were repealed by the Supreme Court Amendment Act 1976 (A.C.T.). This repeal took effect from 1st February, 1977, the commencing day for the purposes of the Federal Court of Australia Act 1976. After that date the right to appeal was in fact converted into a right to appeal to the Federal Court (see Federal Court of Australia Act 1976, s. 24). Following this change the appellants obtained special leave to appeal to the Federal Court. (at p34)

The litigation arose in circumstances which to the extent relevant I shall relate as far as the evidence permits in chronological order. On 31st October, 1969, Carstensz Properties Pty. Ltd. ("Carstensz") was incorporated in the Australian Capital Territory for the purpose of acquiring for a group of investors a grazing property known as Yalana. Mr. W. P. Ryan who together with members of his family, were the plaintiffs in these proceedings, was the principal promoter of Carstensz and his family at all times held in one way or another the majority of the shares (sixty-four per cent) in that company. Other parties to the proceedings, namely Paul James Reardon, Vincent Gallagher, J. C. Rennes Pty. Ltd. were through shareholdings held directly, or in the case of Rennes through an investment company, members of Carstensz at the relevant time. One James Small, the interests of whose family in consequence of his death were represented in the proceedings by his widow Faith Anne Small, was also a member. All of these persons I call "the investors". (at p34)
Early in 1970 Mr. Ryan together with members of his family stayed with John Bede Reardon ("J. B. Reardon") the father of the defendant Paul Reardon in a house leased by J. B. Reardon on a grazing property known as Elmslea. The property which was owned by trustees for the Christian Brothers was understood to contain certain valuable sand deposits. J. B. Reardon was aware that the property was currently for sale and in January 1970 he discussed with Mr. Ryan the possibility of its purchase equally by the Reardon and Ryan families. However, when a draft contract was produced in mid April 1970 Carstensz was shown as purchaser of a one-half interest and J. B. Reardon or his nominee as purchaser of the other half. On 15th April a deposit of $5,000 was paid, contributed equally by the named purchasers. It happened that on 13th April Carstensz had received from Mr. Rennes the sum of $2,400 being an amount payable in respect of the acquistion by him of shares in that company from W. P. Ryan Pty. Ltd. and this sum was credited to the latter company in the books of Carstensz. (at p35)
During the succeeding months there was much discussion between Mr. Ryan and J. B. Reardon as to the manner in which the purchase of Elmslea could be financed. Mr. Ryan's efforts to obtain finance by way of mortgage secured on the Elmslea property were not successful and a proposal that commercial bill finance be used was not favoured by J. B. Reardon. In about the month of May 1970 the property was taken off the market by the vendors. (at p35)
On 9th August, 1970, Mr. Ryan transferred his subscriber's share in Carstensz to W. P. Ryan Pty. Ltd. and that company transferred 1200 shares to four members jointly of the Ryan family. At no stage during the proceedings was any significance attached to the various interests of the Ryan family of W. P. Ryan Pty. Ltd. and Mr. Ryan and his daughter Eunice who both gave evidence were at all times taken to be speaking on behalf of the family group and not any particular individual interest. (at p35)
At the annual general meeting of Carstensz held on 9th August, 1970, Mr. Ryan reported to the members on what was described as a proposed joint venture with J. B. Reardon in the purchase of Elmslea. This report was appropriate in that the property was again on the market at a price of $150,000 with the vendors hoping to complete a sale in January 1971. A draft contract to this end was prepared in the month of August 1970 when J. B. Reardon and Carstensz were named as purchasers and settlement date was fixed at or before 2nd January, 1971. (at p35)
In the month of October 1970 Dr. Small paid $2,400 to Carstensz in respect of the allotment of shares in Carstensz to him. (at p35)
Notwithstanding their difficulties in obtaining finance for their purchase of Elmslea both Mr. Ryan and J. B. Reardon entered into negotiations for the sale of the sand on the property first of all with Pioneer Concrete in October 1970 and then with Canberra Washed Sand Pty. Ltd. in December 1970. In May of the following year a draft contract was prepared between Canberra Washed Sand Pty. Ltd., Carstensz and J. B. Reardon. A futher draft prepared in the month of June 1971 inserted a company the Forest Pastoral Co. Pty. Ltd. in place of J. B. Reardon. (at p36)
In the months of June, July and August 1971 many different avenues for the Financing of the purchase were explored mainly by Mr. Ryan. He had discussions with J. B. Reardon concerning the use of two commercial bills, discounted by the A.M.P. Society, the term of which appears to have been understood to be three years. Mr. Ryan also had discussions with Mr. Rennes and Mr. Gallagher in June not only as to the manner of financing the purchase but also as to the respective interests of the investors in Carstensz in the new venture. He appears to have indicated that for his part he did not contemplate that he (or more correctly his family group) would have the same interest in Elmslea as he had in Carstensz. Moreover, Mr. Rennes stated that he would put up $20,000 in respect of the purchase of Elmslea but was not interested in additional shares in Carstensz. This amount of $20,000 was in excess of the proportionate share to which his interest in Carstensz would have qualified him. (at p36)
In June the vendors required the increase of the deposit from $5,000 already paid to $15,000, otherwise they indicated that they proposed to negotiate elsewhere. In early July the sum of $10,000 was paid to the vendors, $5,000 of which was contributed by Carstensz and $5,000 by J. B. Reardon. By letter dated 6th July, 1971, Mr. Gallagher paid $8,100 in cash to Carstensz. The letter indicated that $400 was to complete his shareholding in Carstensz, $1,200 was for the acquisition of 1,200 shares in Elmslea and the balance of $6,500 was on loan in connexion with the commercial bill negotiated to purchase Elmslea. (at p36)
By this time the A.M.P. Society had advised by letter dated 2nd July, 1971, that through A.M.P. Discount Corporation Ltd. it would discount a bill for a term of up to six months provided it was accepted by the Australian and New Zealand Banking Group Limited (the "A.N.Z. Bank") but that there must be one bill for the Carstensz interest in the Elmslea venture and not separate bills for each investor. The letter further indicated that the bill could be re-drawn at maturity up to a total term of three years. At a meeting of Carstensz's directors on 18th July there was much discussion of the amount each would contribute to the venture, and whether such contribution would be by way of cash or security put up in support of the acceptance of the bill. Nothing appears to have been finalized. (at p36)
On 23rd July, 1971, a company Elmslea Pty. Ltd. was incorporated for the purpose of becoming the purchaser of the property. It was contemplated that each group, the Reardon and the Carstensz group, would hold a half interest in the new company and on the succeeding 11th September, fifty shares were allotted to Carstensz and likewise the Reardon group's holding was increased to fifty shares. It is the parcel of fifty shares allotted to Carstensz which is the subject matter of these proceedings. (at p37)
The day after the incorporation of Elmslea it appears that J. B. Reardon visisted Mr. Ryan at his home in Canberra. J. B. Reardon says Mr. Ryan offered to him some of his shares in the Elmslea company. Moreover it seems to have been acknowledged that it was not contemplated at that time that Paul Reardon would take any interest in Elmslea in his capacity as a member of the Carstensz group as he would have an interest through his father's involvement in the Reardon group. (at p37)
On 26th July, J. B. Reardon and Miss Eunice Ryan visited the Commonwealth Bank at Goulburn concerning the acceptance of the commercial bill and Miss Ryan had with her details of the securities to be provided by the Carstensz members. (at p37)
It appears that the Commonwealth Bank was not prepared to endorse a commercial bill to the extent it was taken out by Carstensz. Subsequently the A.N.Z. Bank agreed to endorse that company's bill but insisted on its being discharged at the end of six months. Thus what was, in the minds of at least some members of the Carstensz group, understood to be the method of financing the purchase of Elmslea had in two ways changed. They would not be contributing directly to the purchase, in that A.M.P. Discount Corporation Ltd. would only deal with the company and not with each of them individually. Moreover such finance would be available only for a period of six months after which time those who had provided security could well be required to find cash to support their securities. This caused particular concern in that there had been a general understanding that if necessary the Elmslea property could be sold in about three years time. (at p37)
The agreement for sale and purchase of the Elmslea property bears date 13th August, 1971, and Elmslea Pty. Ltd. was disclosed as the purchaser. On the following day at a meeting of directors of Carstensz there was further discussion on the method of financing the purchase of Elmslea and each individual's contribution whether it be by way of cash or security. It was also agreed that Paul Reardon would take an interest in the venture, the cash for which would be found for him by his family. The next day Mr. Ryan, Mr. Rennes and Dr. Small visited J. B. Reardon and inspected both the Yalana and the Elmslea properties. Again there was discussion on the financing and the acquisition of individual interests. During this discussion Dr. Small stated that he only wanted an investment in Elmslea and was not prepared to put a cent into Yalana. He further said that the interest in Elmslea of each investor was to be obtained either by cash or security. Paul Reardon's evidence is confirmatory in that he stated Dr. Small said that the cash or security raised for the purchase of Elmslea would be a direct investment in Elmslea. (at p38)
At the beginning of September, Paul Reardon paid $3,750 to Carstensz being five per cent of the purchase price of Elmslea, and $250 on account of contingencies. This money was obtained by Paul Reardon by way of loan from his uncle, Frank Reardon, and the loan purported to be secured on "his shares in Elmslea". (at p38)
On 6th September the A.N.Z. Bank endorsed a bill of exchange drawn by Carstensz (in support of the endorsement taking securities hereafter mentioned) which bill was discounted by A.M.P. Discount Corporation Ltd. The amount thus obtained enabled Carstensz to make available to Elmslea Pty. Ltd., its share of the purchase finance payable on settlement, which settlement took place on 7th September, 1971. (at p38)
The purchase of Elmslea had been concluded but the Carstensz group had not resolved either the nature or the amount of their individual interests in Elmslea Pty. Ltd. or how those who had put up security would meet their obligations when the bill was due for payment. Nor were the terms agreed in respect of the advances of cash. Mr. Ryan and Mr. Gallagher discussed a possible solution when they met together on 20th November, 1971, and the matter was again under consideration at a meeting of directors of Carstensz held on 18th December, 1971. Notwithstanding these many discussions there was at no time any indication of a consensus having been reached by the interested parties on any aspect of the problem. (at p38)
On 2nd March, 1972, the Carstensz bill matured and was due for payment. Each of the investors had in his capacity as director guaranteed the account of Carstensz with the A.N.Z. Bank, and Mr. Ryan, Mr. Rennes and Dr. Small had put up security in support of the bill. Mr. Ryan had committed security to the extent of $26,000, Mr. Rennes $20,000, and Dr. Small $12,000. It would appear that the A.N.Z. Bank allowed two months' grace for the purpose of redemption of securities indicating it would not proceed to realize prior to 2nd May. Mr. Ryan redeemed his securities, paying to Carstensz in fact more than his $26,000 share of the commitment. Dr. Small was unable to raise his agreed share of the required cash, and his securities were due to be realized. At a meeting of directors of Elmslea conducted in part by telephone on 1st May, 1972, Mr. Ryan indicated his unwillingness for Elmslea to make funds available to Dr. Small. (at p38)
Dr. Small's difficulties were resolved in the following manner. Mr. Rennes paid the sum of $8,000 to Carstensz on account of his liability of $20,000 and $12,000 to Elmslea which latter sum was a loan subsequently agreed to carry interest at the rate of ten per cent per annum. A sum of $21,800 was then paid by Elmslea into Carstensz's bank account, which sum was sufficient to satisfy the balance of $12,000 due by Mr. Rennes and $9,800 on account of the amount due from Dr. Small. The crediting of these moneys to Carstensz's bank account was sufficient to satisfy the liability of Carstensz to the A.N.Z. Bank in consequence of the payment of the bill. (at p39)
Even though the A.N.Z. Bank was satisfied, there still remained for resolution the problems associated with the holding by Carstensz of fifty shares in Elmslea and the interests of those who had provided in one way or another the cash required to pay a half share of the purchase price of the Elmslea property. The problem was aggravated by the fact that on 17th August, 1972, Mr. Gallagher purported to call up for repayment the full amount advanced by him to Carstensz, namely $10,100. Subsequently and just prior to the annual general meeting of Carstensz on 26th August he withdrew this demand. At this meeting Mr. Ryan indicated his view that it was appropriate that the shareholdings of members in Carstensz should be adjusted to take into account the amounts provided by members to purchase Elmslea, but then and thereafter no agreement could be reached as to how or whether this could or should be done. (at p39)
The matter was brought to a head in the following manner. On 28th March, 1974, and 18th April, 1974, meetings of directors of Carstensz were purportedly held. However, neither Mr. Ryan nor his daughter Eunice Ryan were present, not having been given notice of either of the meetings. The other directors contended that they could and did hold valid meetings in their absence because W. P. Ryan and his daughter were not directors at the time, neither holding the requisite share qualification under the articles of association. It was a fact that Mr. Ryan was not a member, having transferred his subscriber's share, as recounted above, on 9th August, 1970, to W. P. Ryan Pty. Ltd. Moreover Miss Ryan's only interest as a shareholder was as one of the joint holders of 1,200 shares transferred also on 9th August by W. P. Ryan Pty. Ltd. At these meetings the directors on the assumption that Carstensz had no beneficial interest in the fifty shares in Elmslea Pty. Ltd. resolved that the shares be transferred to a new trustee, namely Harry Cassidy who is named as a defendant to these proceedings. A trust deed was prepared pursuant to which Mr. Cassidy acknowledged that he held the shares in trust in the proportions therein specified for Paul Reardon, W. P. Ryan Pty. Ltd., Mr. Gallagher, Mr. Rennes and Dr. Small. (at p39)
The plaintiffs in the action before Fox J. (who are the appellants before us) took proceedings by way of writ of summons issued on 3rd May, 1974. The statement of claim sought orders declaring that the meetings of directors were a nullity and the decisions of no effect, and likewise that the transfer of shares to Mr. Cassidy should be set aside. The defendants countered with the contention that the meetings were validly held and that Carstensz had no beneficial interest in the Elmslea shares which it held on trust for the persons and in the proportions specified in the trust deed. (at p40)
The trial judge after hearing much evidence and receiving many documents, much of such evidence both oral and documentary being not only vague but of peripheral significance, held that the meetings were not invalid and that Carstensz held the Elmslea shares in trust for the persons and in the proportions contended for by the defendants. He also found that the sum of $53,150 owing by Elmslea Pty. Ltd. to Carstensz was likewise held in trust for the same persons but he did not specify the proportion to which each was entitled. There were also ancillary and consequential orders made. (at p40)
At the commencement of the hearing before this Court it was accepted that the crucial question was whether Carstensz held the Elmslea shares beneficially or on trust for the investors and that a decision on this issue would render it unnecessary to determine the validity or otherwise of the meetings of directors. There was therefore no argument presented on the first issue determined by the learned trial judge. (at p40)
There therefore arise for determination on this appeal difficult and complex issues, which issues are, however, at least in the first instance, primarily questions of fact. Counsel for the appellants stated at the outset of his submissions the factual issue which arose for decision by the trial judge and before this Court, namely whether it was the intention of the shareholders of Carstensz (the investors) to acquire an individual interest in Elmslea, or whether Carstensz would acquire the shares in Elmslea in its own right, leaving it to the investors to have their interests reflected in increased shareholding in Carstensz. (at p40)
A crucial finding of the trial judge was that in his view it was reasonably plain that it was not the intention of the parties that Carstensz take the shares beneficially. He made this finding after hearing oral evidence from three of the shareholders of Carstensz who sought such a finding, namely Mr. Rennes, Mr. Gallagher and Paul Reardon and from W. P. Ryan, the principle protagonist for the contrary view, and his daughter E. C. M. Ryan. However the latter had little to add on this particular aspect of the case. (at p40)
The trial judge accepted the evidence of Mr. Rennes, Mr. Gallagher and Paul Reardon as to the basis upon which they contributed funds, and accepted the substance of what they said. He had of course the inestimable advantage of seeing and hearing these persons when giving their evidence and in particular whilst under cross-examination. (at p40)

It follows that there was evidence upon the basis of which it was open and reasonably open to the trial judge to make this finding of fact, in which case this Court should not interfere on appeal even if it would not, on the whole of the evidence, have been prepared to make the same finding. Edwards v. Noble per Barwick C.J. (1971) 125 CLR, at p 304 . (at p41)
Since the hearing of this appeal the High Court has given judgment in Warren v. Coombes (1979) 53 ALJR 293 , in which the reasons of the majority, consisting of Gibbs A.C.J., Jacobs and Murphy JJ., indicate that if after giving respect and weight to the conclusions of the trial judge, I were of the opinion that he had made a wrong finding of fact or drawn a wrong inference then this Court of Appeal would be obliged to interfere. However, I find that if I adopt this approach to the judge's conclusion I do not reach any different result. For my part, upon a reading of the evidence both documentary and oral, I would arrive at the same conclusion as the trial judge. (at p41)
I am of this view after reading carefully all the evidence and in particular the cross-examination of Mr. Rennes, Mr. Gallagher and Paul Reardon and giving consideration to the submissions of counsel for the appellant. His primary contention was that more weight should have been attached by the trail judge to the contemporaneous documentary evidence, and that the oral evidence upon which the trial judge relied was, when considered alongside the contemporaneous material, quite ambivalent. (at p41)
For my part I do not gain the assistance from the documentary evidence which counsel submits I should. In so far as parts of it may be said to bear directly upon the subjective intention of particular persons, in the majority of instances the statements therein are ambiguous and capable of bearing different interpretations, depending upon the cause espoused. They are not necessarily inconsistent with stated intentions. Furthermore much of the documentary evidence which is said to be of indirect relevance to the stated intentions is to be found in the minutes of meetings, which minutes were subjected to such a critical analysis by counsel for the respondents that one is understandably cautious about placing any reliance theron in so far as they purport to indicate views expressed by persons at the meetings. (at p41)
The trial judge made his decision in reliance very substantially upon the oral evidence of the three participants Mr. Rennes, Mr. Gallagher and Paul Reardon in circumstances where such oral evidence was tested by reference to contemporaneous material. He accepted the substance of their evidence and I am prepared to do likewise. (at p41)
However in indicating that I am of the opinion that the trial judge was correct in his findings on this aspect of the case, namely the intention of the parties, I would wish to state unreservedly that this view in no way amounts to a discrediting of Mr. Ryan, who contended for the opposite finding. In my view much of the criticism of Mr. Ryan in the proceedings before us was unwarranted and unjustified. The trial judge made no adverse finding as to the part played by Mr. Ryan, but merely stated that he did not see how Mr. Ryan could have avoided knowing that his co-venturers were interested in Elmslea and not Yalana, and that what they were wanting and working towards was direct participation in the Elmslea enterprise by holding shares in Elmslea Pty. Ltd. Again I agree that this finding is open on the evidence and in my view correct. (at p42)
Moreover I believe that this is how in a vague and general way Mr. Ryan himself in the first instance saw the venture and how he introduced the proposition to the other investors. But thereafter he, as the sponsor of the transaction, was caught in the vice of events. Not only was the plan as conceived by him ill-defined and incomplete in matters of detail, but was dependent upon the goodwill of the other investors and obtaining their concurrence to variations necessitated by changing circumstances. In the events that occurred from time to time, it was impossible ever to obtain a consensus and he was left, in his own words "trying to make work an unworkable plan". Moreover his own position as initiator of the scheme was ultimately complicated by the fact that his family group contributed not only more funds to Carstensz than any other investor but also more than its agreed share. It is understandable that when other parties appeared unable or unwilling to fulfil their obligations he should then give consideration to protecting the interests of his family group. (at p42)
The trial judge was satisfied that at the relevant times, which was August to September 1971, all the investors had in mind that Carstensz would provide purchase funds to Elmslea with a view to them becoming as soon as possible investors in that company. Such money would be made available to Carstensz by cash contributions from its shareholders or by borrowings by Carstensz upon security made available by those shareholders who did not put up cash. It seems to have been accepted by all the co-venturers that the participation at this stage, at least, of Carstensz was inevitable, because the bill accomodation was only available to a company and not to the individual participants. However it was not contemplated that investors would participate in the Elmslea venture in like proportions to their shareholdings in Carstensz, as Mr. Ryan in particular acknowledged that he wished a reduced interest and Mr. Rennes sought an increased interest. Additionally all shareholders in Carstensz were most reluctant to increase their interest in that company and in particular in the Yalana property. (at p42)
The trial judge found that those who provided cash, Paul Reardon and Mr. Gallagher, were entitled to participate in the Elmslea venture according to the amount of cash each paid, and those who provided security, Mr. Ryan, Dr. Small and Mr. Rennes, in accordance with the amount of security each provided. As to those who provided security the interest of each was subject to his finding sufficient cash at the relevant time to discharge his security, or allowing the security to be realized, to meet that amount. Again I would agree that this was the appropriate finding in this regard, though as later appears, I am of opinion that an account may have to be taken, or an inquiry directed, for the purpose of determining the manner and consequences of implementing, in the events that occurred, this arrangement. (at p43)
The fact that some participants introduced cash and some provided security introduced a complication at the outset, as the terms upon which cash was paid were never, as to any interest thereon or repayment thereof, agreed upon. Moreover those providing security had at least initially, the understanding that either the loan by way of bill accommodation would be available for three years, or that the bill itself could be rolled over during that period. An appreciation that they would be obliged to find cash to discharge their securities after only six months introduced further complications, and in some instances embarrassment. Ultimately the Ryan group provided more than its share of cash, Dr. Small could not find any cash from his own resources and Mr. Rennes paid a portion only of his agreed share to Carstensz and the balance direct to Elmslea by way of an interest bearing loan. The latter payment was made, Mr. Rennes acknowledged, for the purpose of protecting his position in that a loan to Elmslea was more secure, in his opinion, than a loan to Carstensz. As can be imagined these complications made more difficult, if not impossible, in the absence of goodwill, the determination of the quantum of the interest each was to take in the venture. Mr. Ryan seems to have seen the only way of ultimately implementing the plan as being through an adjustment of shareholdings in Carstensz, that company being left to hold the Elmslea shares beneficially, whereas Mr. Rennes, Paul Reardon, Mr. Gallagher and Dr. Small were pressing for the implementation of the proposal for a direct interest in Elmslea. In the absence of a viable alternative acceptable to all, the wishes of the latter persons must prevail and the original scheme must be implemented (one could almost say "cy-pres") in a manner which does justice as far as possible to the conflicting interests of the investors. (at p43)
It follows that in so far as the learned trial judge made a declaration to the effect that the fifty shares in Elmslea were held by Carstensz in the first instance and currently by the defendant Harry Cassidy upon trust for the following persons in the proportions respectively set out beside their names, namely

Paul James Reardon 3.75

75 W. P. Ryan Pty. Ltd. 31.75

75 J. C. Rennes 20.00

75 Estate of J. H. Small 12.00

75 Vincent Gallagher 7.50

75

in my view this is a correct finding subject, however, to this qualification, namely that the above mentioned interests of J. C. Rennes and the estate of J. H. Small are subject to the receipt by Carstensz of their respective contributions to the funding of the purchase moneys of the Elmslea venture. As to Mr. Rennes, he gave security for $20,000 but the full amount of this sum has not been directly received in cash by Carstensz from Mr. Rennes. $8,000 was paid by Mr. Rennes direct to Carstensz and he is entitled to credit for this amount. As to the balance of $12,000 this was paid by Mr. Rennes to Elmslea as an interest bearing loan, and subsequently made available by Elmslea to Carstensz in reduction of Elmslea's indebtedness to Carstensz, and applied in satisfaction of the balance owing by Carstensz to the bank on calling up of the bill. An adjustment is necessary in this regard, otherwise the end result is that either Carstensz has contributed this amount or alternatively it has been contributed by the other investors in that Carstensz's loan to Elmslea (which the trial judge ultimately declares Carstensz holds in trust for the investors) has been reduced. This adjustment can be made by Elmslea repaying the loan to Mr. Rennes, who will then make it available to Carstensz which will lend it on to Elmslea. (at p44)

As to the interest of the estate of J. H. Small, no cash contribution has been made by this investor as I understand the position, notwithstanding the offer made by the Smalls by letter dated 21st March, 1974, to pay $12,000 in exchange for a share certificate for the holding in Elmslea. The trial judge on this aspect of the case acknowledged that no payment had been made by J. H. Small for his family's interest but found that the $12,000 had been provided as to $9,800 by other participants when the bank was in the process of realizing his security and as to $2,200 by Carstensz. He dealt with this situation in his reasons for judgment by commenting that "the provision of the amount of $2,200, as with the amount of $9,800 was a matter between J. H. Small and those who provided the money". (at p44)
In my opinion this comment does not adequately cover the position in that the sum of $9,800 paid by Elmslea to Carstensz's bank account was debited to Carstensz i.e. applied in reduction of the balance of the moneys owing by Elmslea to Carstensz. Therefore in the ultimate both the sum of $9,800 and the sum of $2,200 were provided by Carstensz. In that Carstensz has no beneficial interest in the shares it is appropriate, as acknowledged by the Small interest, that the sum of $12,000 be paid into Carstensz. Carstensz would then doubtless return these funds to Elmslea for the purpose of again adding to the loan funds which, as above mentioned, are held in trust for the investors. (at p45)
The trial judge also made an order in respect of the sum of $53,150 owing by Elmslea to Carstensz, namely that Carstensz held this sum in trust for the five groups of investors. However there is no discussion in his reasons for judgment of this consequential matter. Again in this regard unless agreement can be obtained between the parties it may be necessary for accounts to be taken or an inquiry held for the purpose of making the necessary and proper adjustments to this portion of the trial judge's order. As mentioned above if the Small interests make payment of their $12,000 contribution and all the necessary adjustments to the loan by Carstensz to Elmslea are made, the consequence will be that this amount owing by Elmslea will be increased by $21,800 to $74,950 which sum will be held in my view in trust for the investors in the same proportions as the fifty shares are held. (at p45)
I agree with the proposal of the Chief Judge that the parties should have the opportunity to bring in short minutes of order. (at p45)

ORDER

Orders accordingly.

[1979] FCA 87

10 SEPTEMBER 1979