Tasmanian Seafoods Pty Ltd v MacQueen (No 2)
[2004] TASSC 40
•6 May 2004
[2004] TASSC 40
CITATION: Tasmanian Seafoods Pty Ltd v MacQueen (No 2) [2004] TASSC 40
PARTIES: TASMANIAN SEAFOODS PTY LTD
v
MacQUEEN, Malcolm Clive
MacQUEEN, Lesley Faye
TITLE OF COURT: SUPREME COURT OF TASMANIA
JURISDICTION: ORIGINAL
FILE NO/S: 186/1998
DELIVERED ON: 6 May 2004
DELIVERED AT: Hobart
HEARING DATES: 25 – 28 November, 1 - 4 December 2003
Written Submissions 4, 10, 12, 19 December 2003
JUDGMENT OF: Slicer J
CATCHWORDS:
Primary Industry - Fish - Licences - Fishing licence - Impact of regulatory changes - Nature of proprietary interest in quota units issued under licence - Personal right in licensee - Trustee entitled to proceeds.
Kelly v Kelly (1990) 64 ALJR 234; Harper v Minister of Sea Fisheries (1989) 168 CLR 314, considered.
Living Marine Resources Management Act 1995 (Tas).
Fisheries (Abalone) Rules 2000 (Tas).
Aust Dig Primary Industries [28]
Equity - Trusts and trustees - Constitution and classification of trusts generally - Classification of trusts in general - Constructive Trusts - Independent of intention - General principles - Variation by agreement.
Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41, considered.
Aust Dig Equity [102]
REPRESENTATION:
Counsel:
Plaintiff: S B McElwaine
Defendants: W A Ayliffe and M A Nettlefold
Solicitors:
Plaintiff: S B McElwaine
Defendants: Ayliffe & Ayliffe
Judgment Number: [2004] TASSC 40
Number of Paragraphs: 62
Serial No 40/2004
File No 186/1998
TASMANIAN SEAFOODS PTY LTD v MALCOLM CLIVE MacQUEEN
and LESLEY FAYE MacQUEEN (NO 2)
REASONS FOR JUDGMENT SLICER J
6 May 2004
This action concerns a claim for damages and equitable relief arising from a contract and the existence and/or terms of a trust. The plaintiff ("Tasmanian Seafoods") is a corporation engaged in the processing and marketing of fish and, as an incidence of its operations, the holder of commercial licences and/or fish quotas for the catching of fish, in particular, the harvesting of abalone. The first defendant is a commercial diver entitled by licence and quota allocation to harvest and sell abalone. The second defendant, the wife of the first defendant, was at all times a party to the contractual arrangements between the parties.
The plaintiff's claim is one of equitable entitlements said to have arisen following a contract entered into between the parties in April 1988 ("the agreement") and statutory amendment to the legislative and regulatory scheme which affected the nature and terms of that agreement. The relief sought is by way of declarations, partition, account and damages. The defendants admit the making and terms of the original contract, but claim subsequent amendment to its terms provided for entitlements to the plaintiff which have been honoured. They further plead that the regulatory amendments created a composite or fused entitlement which affected the respective returns due to the parties.
Legislative framework
Abalone is a valuable resource and has attracted detailed legislative attention, much amended, to accommodate both modern commercial practice and attempts to circumvent legal and fiscal obligations imposed by Parliament and the Executive (Harper v Minister of Sea Fisheries (1989) 168 CLR 314; South Australian River Fishery Association Inc and Warrick v South Australia (2003) 85 SASR 373). Relevant to this action is the dichotomy between the right to take abalone as a licence holder and a quota system which permits the sale or transfer of a "right" in respect of a specified quantity of the resource. Licences and quotas were previously constrained by regulatory reference to area and type of abalone and remain so in relation to species and season.
The agreement, when made, was subject to the Sea Fisheries Regulations 1962, which relevantly provided for:
(1)the issue of an annual licence;
(2)the delivery of abalone to a licensed processing premises;
(3)prescribed waters defined geographically which determined varying rights to licence holders;
(4)power for the Minister to vary the quantity of abalone that a licence holder may take pursuant to such licence;
(5)an obligation to maintain and lodge returns containing prescribed particulars.
The first defendant held a licence under the 1962 Regulations which permitted the taking of abalone from the "Furneaux" waters. Before stricter regulatory control in 1972, there had been 120 licensed abalone divers in Tasmania. In that year, five additional licences were issued to residents of Flinders Island. Those licences were restricted in certain respects. The first defendant was, at the date of the agreement, the holder of a "Furneaux" licence. Until 1985, there were no quota allocations, except restrictions which might attach to a licence as a condition, but those conditions related primarily to the assessment of a licence fee, rather than resource management. In 1985, quota management of the fishery was introduced, setting a "total allowable catch". In that year, the allocated quota was 1.1 tonnes per unit, a figure which has been adjusted according to assessment of the viability of the resource.
In 1991, there was a significant modification to the management plan and the method of holding and transferring quota allocations (Statutory Rule 153 of 1991), further modified shortly thereafter (Statutory Rule 20, 129 of 1992). Each licence holder was entitled to 28 quota units which could be "split" and transferred to non-licensees. The quota maintained the entitlement of each licence holder at 28 units. Preparatory to the regulatory change, the then Minister advised the representative of the divers' association that the existing quota of 16.8 tonnes would be retained, but that in view of the removal of the "Furneaux" boundary and the creation of "one fishery open to all divers":
"The existing 5 Furneaux divers will be issued with additional, non-transferable quota."
On 13 November 1989, the Minister consistent with the intended regulatory change, advised the first defendant that:
"I have decided that from 1 January 1990 the Furneaux Islands abalone fishing boundary will be removed. This will mean that Furneaux group divers will no longer be prevented from fishing in the State waters accessed by other abalone divers and non-Furneaux group divers may dive in the waters of the Furneaux Island.
I have also decided that each Furneaux diver will be issued an additional eight quota units, giving all Tasmanian divers the same catching capacity. This arrangement applies only to Furneaux group divers who hold licences today and will take effect from 1 January 1990. These additional units will not be re-issued to a new diver should an existing Furneaux group diver surrender his licence nor will the diver be permitted to have these units deleted from his licence for re-issue to another diver."
The first defendant, upon the proclamation of the Regulations, became entitled to an allocation of 28 units, 8 of which were non-transferable and lapsed on the death of the recipient or surrender or cessation of a grant of licence.
These proceedings concern the status of those 8 additional quota units, and the effect of regulatory change on the relationship between the plaintiff and defendants, and their respective entitlements.
In 1994, Parliament enacted the Fisheries Amendment (Contracts) Act 1994, s7(1), which provided for the power of the Minister to:
"… enter into a deed of agreement in respect of the right to take and acquire abalone for commercial purposes in State fishing waters …".
In 1995, it further enacted the Living Marine Resources Management Act 1995 ("the Act"), which provided a comprehensive legislative framework for the management of fish resources and the protection of marine habitats. In so doing, Parliament repealed the Fisheries Act 1959 on which the 1962 Regulations depended. The Act was in general form and, as permitted, the Executive proclaimed Fisheries Amendment Rules 108 of 1996, 55 of 1997 and 62 of 1998. Part 3 of the 1996 Regulations, rescinded by Statutory Rule 62 of 1998, provided for the abalone fishery. Its replacement, by the Fisheries (Abalone) Rules 1997 and the Fisheries (Abalone) Rules 2000, does not specifically refer to the "Furneaux" provision nor affect the status of the 8 quota units allocated, as a transitional or compromise policy arrangement in 1991.
The current status of the quota units in question remains the same as existed in 1991, but differs from that possessed in 1988. In 1988, the first defendant held a licence (No 123) which entitled him to take abalone. Attached to the licence was a right to take 20 units which constituted a quota. However, he was entitled to take abalone within Furneaux waters, an area restricted to a limited number of divers. In 1991 those waters were made available to other divers. The increased competition and decreased opportunity was offset by a temporary "offset" of the allocation of 8 additional quotas which, in turn, were limited to his "personal" use and not transferable. The first defendant retained his "right" to enter into commercial arrangements for the disposition of the return of the 20 units (as had been the commercial practice before regulatory reform) but was restricted in his use of the additional 8 units.
Those 8 units and their status form the core of this dispute. The plaintiff claims entitlement to the "fruits" of those 8 units, either by reason of the continuing terms of the agreement or by virtue of the law of trusts. It claims entitlement by reason of the relationship between the parties. The defendants claim that they have afforded the plaintiff its entitlement, but that the 8 units, being personal to the "diver", ought not be regarded as common property to the contracting parties. They contend that the plaintiff's entitlement is limited to a one third share of 4 of those units.
Pleadings
The plaintiff's claim is primarily dependent on principles of equity. Its claim is substantial, which, together with interest, amounts to some $530,000 as of 30 June 2003. In addition to that claim referable to the Furneaux units is the claim:
"14AIn addition, or in the alternative, for restoration to the Plaintiff of the value of the Plaintiff's interest in the divers licence and the fishing licence (abalone dive) and in the Furneaux Group licence, which the Defendants have had the use of since 1994;
14BIn addition, or in the alternative, that the Defendants pay equitable damages to the Plaintiff equal to the detriment suffered by the Plaintiff in not having available to it its interest in the divers licence and the fishing licence (abalone dive) and the Furneaux Group licence or alternatively calculated by reference to the profit or value of each of these entitlements in the hands of the Defendants together with interest;"
On one approach to the claim, the plaintiff seeks to have the first defendant continue to dive for a period, far beyond a safety age, until retirement at a statutory age ¾yet the Furneaux quota attaches to the person of the first defendant. Although the claim was eschewed by his counsel during the hearing which might, in turn, explain the abandonment in par3 of the remedy sought for the sale of the licence, the examination of the plaintiff's appeal to equity ought be made in light of its conduct. The plaintiff as the holder of many quotas, could be seen as seeking control or retribution, rather than equitable redress.
The respective amended pleadings relevantly state:
| statement of claim | defence |
| "2 By a deed dated 13 April 1988 between the plaintiff and the defendants it was agreed, inter alia: (a) That the plaintiff and the defendants had purchased commercial abalone fishing licence entitlement No 123 for a price of $610,000 of which $305,000 was provided by the plaintiff and $305,000 by the defendants (the licence); (b) That the plaintiff was a beneficial owner of one half of the licence as a tenant in common with the defendants; (c) That the defendants would be permitted to use the licence in connection with the conduct of their business as commercial abalone divers in accordance with the provisions of the deed; (d) That the defendants would pay to the plaintiff one third of the average price payable to the defendants for the sale of abalone caught by them pursuant to the licence; (e) That the defendants would not assign or part with any quota pursuant to the licence without the consent of the plaintiff; (f) That the defendants would carry on business as a commercial abalone diver to the best of their ability and take all reasonable steps to ensure that they catch and deliver quota pursuant to it to the plaintiff. | Admitted |
| 3 Between 13 April 1998 and 1 January 1991 the right to take abalone in State fishing waters was regulated pursuant to the provisions of the Sea Fisheries Regulations 1962 which regulations provided, inter alia: (a) That no person shall take any abalone in State fishing waters unless he is the holder of a subsisting commercial abalone licence issued and sold for that purpose (regulation 17A); (b) That a commercial abalone licence continues in force from the date of its issue until 31 December in each calendar year (regulation 17A(3); (c) That the Minister may issue exploratory licenses to persons to take abalone in State fishing waters (regulation 17C). | Admitted |
| 4 The Sea Fisheries Regulations 1962 were amended by the Sea Fisheries Amendment (abalone licenses & fees) regulations 1990 with effect from 1 January 1991 and as amended: (a) Commercial abalone licenses ceased to exist and were replaced by abalone quota licenses and commercial abalone divers licenses; (b) An abalone quota licence authorised the holder of the licence and any person authorised by that person to take abalone under that licence (regulation 16G); (c) The holder of an abalone quota licence was entitled to apply to the Minister for approval for a licensed commercial abalone diver to take abalone pursuant to that licence (Regulation 16H); (d) The Minister was entitled to approve or not approve the authorisation of a licensed commercial abalone diver to take abalone quota pursuant to a quota licence (Regulation 16J); (e) The Minister was entitled to issue a commercial abalone divers licence to specified persons (Regulation 16R). | Admitted save as to 4(a) |
| 7 By a deed of partition entered into in or about October 1993 between the plaintiff and the defendants it was agreed to partition the party's respective interests in the 20 abalone quota units in equal shares with the plaintiff becoming the sole owner and registered proprietor of ten of those units and the defendants becoming the sole owners and registered proprietors of ten of those units (the deed of partition). | Admitted |
| 9 Despite: (a) The fact that the licence ceased to exist after 31 December 1990 and was replaced by the quota licence and the divers licence, and more recently by the fishing licence (abalone dive); (b) The deed of partition; (c) The fact that the first defendant is now the holder of a fishing licence (abalone dive) the defendants have held and continue to hold:
(iii) The fishing licence (abalone dive) as an express or alternatively a constructive trustee on behalf of the plaintiff particulars of the trust (a) As to the express trust, the plaintiff relies upon the provisions of the deed of agreement and the deed of partition; (b) As to the constructive trust the plaintiff relies upon its one half contribution to the cost of acquiring the licence and the provisions of the deed of agreement and the partition deed and in the premises says that a denial of its interest would in the circumstances be unconscionable. | 9 As to paragraph 9 the Defendants say (a) they admit that the license ceased to exist after the 31st December, 1990 but deny the other allegations in paragraph 9(a) of the Statement of Claim. (b) the Defendants admit the allegations in paragraph 9(b); (c) they admit that the first Defendant is now the holder of a fishing license (abalone dive); (d) they admit that the Defendants have held and continue to hold the fishing license (abalone dive); (e) they deny that this license is held in trust as to one half interest for the Plaintiff. (f) they deny the allegations in paragraph 9 of the Statement of Claim. |
| 10 In addition, or in the alternative, upon a proper construction of the provisions of the deed of agreement and the deed of partition and of the facts and circumstances which led to the execution of such documents, the defendants at all material times have owed and continue to owe to the plaintiff fiduciary duties and in particular: (a) A duty to avoid conflicts or possible conflicts of interest; (b) A duty not to make a profit without the informed consent of the plaintiff; (c) A duty to hold any property acquired by them in their capacity as a fiduciary upon trust for the plaintiff. | Denied |
| 11 In the premises, and by reason of such fiduciary obligations, the defendants have held and hold upon constructive trust for the plaintiff: (a) … (b) The fishing licence (abalone dive) in proportions equal to the plaintiff's one half interest in such … licence, which interest the defendants have denied. | Denied |
| 12 Since entry into of the deed of partition in 1993, | Denied |
| 13 The defendants have failed to account, or to fully account, to the plaintiff for the value of the divers licence and the fishing licence (abalone dive) which has been used by them to generate income. | Denied |
| 14 In the premises, the defendants must: (a) Account to the plaintiff for its share of the value of the divers licence and the fishing licence (abalone dive) which has been utilised by the defendants, together with interest; (b) Restore to the plaintiff, as beneficiary of an express or constructive trust, the value to the plaintiff of its interest in the divers licence and the fishing licence (abalone dive), together with interest; and or (c) Pay equitable damages to the plaintiff calculated by reference to the value of the plaintiff's interest in the divers licence and the fishing licence (abalone dive), deprived to the plaintiff or alternatively the value of those licences to the defendants, together with interest. | |
| 15 In relation to the claims made in paragraphs 9 and 14 of the Statement of Claim, the Defendants say on a proper construction of the Deed of Partition together with the surrounding facts and circumstances, the Plaintiff gave up, abandoned and forewent any interest it had in the divers licence and the fishing licence (abalone dive). particulars of surrounding facts and circumstances By reason of the partition of the twenty units the Plaintiff received half the revenue from twenty units rather than one third of the revenue from the unit and between 1994 to 2001 enjoyed a financial advantage of approximately $1 million (particulars of all to be supplied) that it would not have enjoyed had he remained receiving from 1994 one third of the income from the twenty units. Further the Plaintiff made no demand of the Defendants or any interest in the divers licence of fishing licence (abalone dive) between 1994 and the issuing of the Writ in this action in 1998. | |
| 16 Further and or in the alternative by reason of the failure of the Plaintiff to make any demand to the Defendants with respect to divers licence or fishing licence (abalone dive) between 1994 and the issuing of the Writ in 1998 the Plaintiff abandoned and gave up any interest it might have in the said licenses and further released the Defendants from any interest it might have in the licenses. | |
| 17 By reason of the failure of the Plaintiff to make any demand of the Defendants with respect to any interest (which is denied) of the Plaintiff in the divers licence and fishing licence (abalone dive) between 1994 and 1998 the Defendants say it would be unreasonable and unconscionable by reason of such a delay and laches for the court to make any order in favour of the Plaintiff with respect to the said licenses. | |
| 18 Further and in the alternative if the Deed of Agreement does determine the interest of the parties in the divers licence and fishing licence (abalone dive) then the Defendants say that they have been rightfully in possession of those licences pursuant to the Deed and no basis under the Deed exists to alter their possession. | |
| 20 In addition, since | |
| 20A The Furneaux Group licence was issued by the Minister for Primary Industry and Fisheries to the first named defendant upon the following terms: (a) It is granted for the personal diving use only of the first defendant; (b) It entitles the first named defendant to take an additional 8 quota units of abalone in each calendar year; (c) The entitlement and the units are non transferable; and (d) The entitlement and the units must be surrendered by the first named defendant when he ceases to be licensed commercial abalone diver [sic]. | 20 As to paragraph 20A the Defendants admit the allegations in paragraph 20A of the Statement of Claim. |
| 20B The first named defendant became entitled to the Furneaux Group licence by reason of him having been the holder of the licence. | 21 The Defendants admit the allegations in paragraph 20B of the Statement of Claim. |
| 21 In the premises, and by reason of the plaintiff's interest in such licences or entitlements as pleaded in paragraphs 9 and 11, the first named defendant has held and continues to hold his interest in the Furneaux Group licence upon trust for the plaintiff in accordance with the plaintiff's interest | 22 The Defendants deny the allegations in paragraph 21 of the Statement of Claim. |
| 22 | 23 The Defendants deny the allegations in paragraph 22 of the Statement of Claim. |
| 23 In the premises, the first defendant must account to the plaintiff for his share of such income together with interest thereon. | 24 The Defendants deny the allegations in paragraph 23 of the Statement of Claim. |
| 24 Alternatively, if the defendants have not derived income, in whole or in part, from the Furneaux group licence referred to at paragraph 21, then the plaintiff says that the Furneaux group licence was a valuable commercial asset capable of deriving income and in the premises the defendants are obliged to account to the plaintiff for the income which ought to have been derived from the use of that asset, together with interest thereon. | 26 Further and/or in the alternative with respect to the claim in paragraphs 20 – 26 of the Statement of Claim, the Defendants say: (i) in 1994 the parties agreed that the Defendant would pay the Plaintiff one third of the proceeds from the fishing of four of the Furneaux quota units which the Defendants acknowledged they held in trust for the Plaintiff. particulars The Agreement was reached in the following circumstances :‑ |
| 25 In addition to the plaintiff's claims against the defendants for the imposition of a trust and an account, the plaintiff claims: (a) That the defendants restore to the plaintiff the value of the plaintiff's interest in the Furneaux group licence which the defendants have had the use of since 1994 without the making of payments for such use to the plaintiff; (b) Alternatively, that the defendants pay equitable damages to the plaintiff equal to the detriment suffered by the plaintiff in not having available to it its interest in the Furneaux Group licence or alternatively calculated by reference to the profit or value of each of this entitlement in the | (a) At the time of the Deed of Petition, [sic] the parties discussed the eight Furneaux units and the parties agreed that the Defendants would either :‑ (i) pay the Plaintiff one third income of four units; or (ii) if the Plaintiff authorised the first Defendant to catch the ten quota units transferred to the Plaintiff pursuant to the Deed of Petition, [sic] then the Defendants would pay the Plaintiff one third of twenty-eight units that is one third of the twenty quota units the subject of the Deed of Petition, [sic] and one third of the eight Furneaux units. (b) The above arrangement was confirmed by letter sent by the Defendants to the Plaintiff in December of 1993 |
| hands of the defendants, together with interest; (c) For the tracing, on the part of the plaintiff, of the income derived for the use by the defendants of the Furneaux Group licence into any hands into which it has been paid or any property acquired by its application, in whole or in part, together with interest. | (c) In 1994 the Plaintiff did not authorise the first‑named Defendant to fish the ten units which had been transferred to it pursuant to the Deed of Partition and consequently the Defendants paid the Plaintiff one third of the income of four Furneaux group units in that the Plaintiff retained from the beach price for the eight units only one third of the beach price referable to four of the said eight Furneaux units and paid the Defendants two thirds of the beach price for those four units and paid the Defendants all of the beach price for the remaining four units. By this course of dealing the Plaintiff confirmed and ratified the Agreement. (d) In 1995 the Plaintiff authorised the first‑named Defendant to catch its ten quota units and the Defendants paid the Plaintiff one third of the income pursuant to the whole twenty eight units. (e) Since 1995 the Plaintiff has not authorised the first Defendant to catch its ten quota units transferred to the Plaintiff pursuant to the Deed of Petition [sic] and the Defendants have each such year paid the Plaintiff one third of the beach price from four of the Furneaux Group units without complaint or demurrer by the Plaintiff prior to the issue of these proceedings. (f) There has been no complaint, dispute or protest about the arrangements since 1994 by the Plaintiff prior to the issue of a Writ in 1998. |
| 27 Further and/or in the alternative, the Defendants say that the payments made by the Defendants to the Plaintiff with respect to the Furneaux Group unit since 1994 are fair and equitable and in accordance with the equities provided for in the Deed of Agreement and Deed of Partition and the facts set out in the particulars to paragraph 26 and no further account or monies are owed by the Defendants to the Plaintiff with respect to the Furneaux Group unit and it would be unreasonable and unconscionable to order any further account or payment of monies. | |
| 28 Further and in the alternative the Defendants repeat Paragraph 15 hereof and say that the financial advantage therein pleaded is a further or alternative reason why the court should make no further award or order in favour of the Plaintiff of and incidental to the Furneaux units or at all. The Defendants have always recognised and never denied the Plaintiffs interest four units of the eight Furneaux units. | |
| 29 Further and in the alternative the Furneaux units were issued to the First Defendant after the Deed of Agreement on a basis that was personal to the first Defendant in that when the First Defendant ceases to commercially dive the units will no longer be issued." |
Counsel for the plaintiff contended at trial that the defendants had amended their pleadings as a reflection of differing and contradictory responses and substantive alterations of their case. He also claimed that amendment to the pleadings constituted significant admissions of the validity of the plaintiff's cause. Whilst the findings make it unnecessary to consider the contentions in detail, they ought be generally rejected. The defendants' case is clearly understood and depends on identified issues of fact, interpretation of the status of the units post-regulatory change, and the effect of the conduct of the parties between 1991 and 1994. They identify the issue as being whether the plaintiff is entitled to a share of 4 or 8 of the Furneaux units. Amendments to the plaintiff's statement of claim also show a change of position in relation to the status of the units and the basis of entitlement.
The agreement
In 1988 the plaintiff was the operator of a processing plant on the north west coast of Tasmania. Its executive director, Allen Hansen, was well known within the fishing industry and involved himself in the "day to day" operations of participants within it. In 1988 he was interested in expanding the operations of his company. The strategy was to increase volume by direct purchasing and regular supply which, in turn, involved the advancement of capital to divers through the purchase of portion of their quota entitlement attached to their diving licences, or a loan guarantee to the equivalence of a purchase price. Mr MacQueen, who had held a licence between 1980 and 1985, wished to re-enter the industry and because of regulatory change and its commercial implications, needed capital to do so. He approached Mr Hansen and, despite their differing accounts as to preliminary negotiations, it is reasonable to conclude that the parties negotiated from equal positions. The first defendant would undertake a hazardous task requiring skill, in return for payment by an institution possessed of financial resource. The capital sum advanced would secure the co-operation of a skilled operator prepared to undertake the risks of the industry. The outcome was the agreement dated 13 April 1988. It recited the purchase by the first defendant of an abalone licence from a third party, an acknowledgement of the involvement of the second defendant, and the nomination of the plaintiff as the beneficiary of a trust created by the first defendant. The agreement, cumbersome in its terms and definitions, was necessarily drafted to accommodate a commercial, but artificial, means of dealing with the produce of a resource at a time when regulatory provisions had yet to provide an appropriate means of dealing with that public resource. As such, it used an existing methodology permitted by law. The effect, irrespective of later legislative or regulatory change, was to create a trust, a beneficiary of which was the plaintiff.
The licence was defined as:
"… the Commercial Abalone Fishing Licence issued by the Minister of Fisheries bearing the number 'Entitlement No 123' and will include each commercial abalone fishing licence issued under the provisions of the Act or the Regulations hereafter in succession to or otherwise in the place and stead of that licence."
Clause 2(b) provided that the first defendant would hold the licence "as a Trustee for the Company and Lesley Faye MacQueen" and the price paid for the purchase of the licence:
"… viz $610,000.00, $305,000.00 thereof was provided by the Diver and $305,000.00 was provided by the Company."
There can be little doubt as to the intentions of the parties. The regulatory regime required the construct that Tasmanian Seafoods, as the provider, obtained security for its advance, whilst the first defendant obtained the means to purchase a licence in order to re-enter the industry. However, the terms of the agreement further provided for the means of repayment of the money advanced and did so by requiring "exclusivity in dealing". In doing so, the parties constrained the terms of the original trust by providing:
"The Diver shall make payments to the Company as follows :‑
(a)For the period from the date of this Deed until termination as hereinafter provided the sum calculated at one third of the average price payable to the Diver for the sale of all abalone which may be caught by them pursuant to the quota.
(b)The Diver shall sell and deliver their total catch to the Company and to no other person or Company and the Company shall purchase his total catch as delivered by the Diver and shall pay the average price for those abalone delivered. Abalone shall be delivered to the Company in the mainland of Tasmania in containers empty of water and free of rocks sponge mussels and other foreign objects.
(c)The Company shall be entitled to deduct from amounts payable for the purchase of abalone from the Diver such sums as are payable to the Company by the Diver in accordance with this Agreement.
(d)The Diver shall not sell the quota or any part thereof without the consent of the Company having been first obtained. The Company shall be entitled to impose such terms and conditions on the sale of any part of the quota as it sees fit. Any such sale shall be deemed to be a sale of abalone by the Diver and the Diver shall pay to the Company an amount equal to one third of the average price calculated as at the date of the sale by reference to the quantity of the abalone which legally may thereafter be caught by the purchaser during the currency of the licence.
4(a) The parties acknowledge that under the terms of the Licence the licence holder is permitted to assign part of the quota and the Diver agrees that he shall assign the remainder of the quota for a current year of the licence to the Company or its nominee at the request of the Company or at any time within three months of the expiration of the quota period in each year of the term of these presents if the Company is reasonably of the opinion that the Diver might not fulfil the yearly quota.
…
10 That the Diver will not during the term of these presents without the previous consent in writing of the Company offer for sale, grant any option, sell, hire, lease, assign, mortgage, charge or otherwise encumber the Licence or any rights attaching to it or attempt to do any of those things and the Company may give its consent upon such terms and conditions as the Company may in its absolute discretion think fit to impose and without prejudice to the right of the Company to refuse to give its consent to any such transactions the Company may impose as condition to the giving of its consent to the intended Transferee of the Licence that the Transferee shall execute in the favour of the Company a Deed in the same or similar form as these presents.
…
15 (a) Upon the happening of any of the following events, that is to say :-
(i)…
(ii)any incapacity of Malcolm Clive MacQueen [sic] to carry out his work as a Diver which may be permanent or for a lengthy and indefinite period;
(iii)the giving of three months notice in writing by the Diver of its intention to terminate this Agreement;
(iv)the Diver committing a breach of any term or condition hereincontained;
(v)…;
(vi)cease diving for any reason for a period of one calendar month without the consent of the Company;
…
The Company may elect to purchase the interest of the Diver in the Licence for such a price as may be agreed to as shall be equal to one half of the then current market price for Furneaux Island Group Abalone Licences in Tasmania.
…
(f)Provided that should no party elect to succeed the share in the Licence of the retiring or deceased party the Licence shall be offered for sale at large and sold at the best price reasonably obtainable and the proceeds of such sale shall be divided between the parties with one half payable to the Diver and one half payable to the Company subject to any adjustments being made between the parties for any payments owed to each other in respect of this Agreement. Until the Licence is sold or transferred as provided in this Clause the parties shall remain bound by the terms of this Agreement."
The effect of the agreement was:
(1)the purchase of a licence by the first defendant with portion of the money provided by the plaintiff;
(2)the declaration of trust;
(3)to secure the repayment of the money provided by the plaintiff for the purchase of the licence;
(4)to provide the plaintiff with certainty of supply of the resource.
The parties worked, satisfactorily, within the terms of the agreement. Between 1991 and 1994, the plaintiff received its share of the proceeds of the catch taken by the first defendant, who paid the relevant licence fees. The plaintiff paid the first defendant the beach price for the catch and the apportionment was determined on the basis of that price. There were no substantive alterations to their working agreement as a result of the regulatory change.
Variation of contract
In late 1993, the first defendant decided that he would like to change the way he worked which would require an alteration to his obligation to supply the full amount of the allotted quota. He approached Mr Hansen and there was general agreement as to the future dealings with the 20 units, but the dealings with distribution of the proceeds of the 8 units remained a matter of difference.
The parties have different recollections or understandings of the terms of the preliminary discussions, but in general terms there was agreement that at least the parties would retain, in some form, 10 units and continue with a working relationship. The first defendant said that at an earlier meeting in Burnie he had suggested to Mr Hansen that he take his 10 units back and keep one-third of the money derived from 4 of the Furneaux units, but that his proposal had been rejected. However, on 2 December 1993 the first defendant wrote to the plaintiff in the following terms:
"Two years ago I put this proposal to you I would appreciate it if you accept my offer this Time as you will gain financialy [sic] & I will be happier catching less fish. I would like you to take your ten units back & I will dive for the eighteen left but I must be paid in full for these units to make this arangement [sic] work. I will pay all licence fees. I acknoledge [sic] that we agree to disagree on the eight special units given to the Furno divers & you have half share of my dive entitelement [sic]. I put it in writing that this matter would not be discussed with anyone especially Underhill & Kosman [sic] whom I never see anyway. I agree to sell all my fish to you as previosley [sic] aranged [sic]. Have enclosed contract with white out sections should I send the original to the fisheries?"
The plaintiff did not then reply to the letter.
The issue had not been resolved during the preceding two years and an impasse remained. If the first defendant was the owner of the 8 units, he was to receive the full price for his catch on those units. If the plaintiff owned one-half of those units, then it was required to pay two-thirds of the beach price on the whole quota. Between 1991 and 1993 the catch price had been split in the proportion one-third/two-thirds with the defendants paying the statutory fees. On 14 December 1993 the first defendant again wrote to the plaintiff stating:
"I spent some time with my accountant in Launceston last week and went through my offer to you on the second of December and I think a fairer offer to you would be you take your ten quota back pay me in full for fourteen and you take thirty three and a third of the other four quota. I will be a little down money wise but would be happy with this arrangement. I would like to know where I stand before xmas so please respond to the letter Al."
No formal reply was made to the letter, but on 30 December 1993 Mr Hansen spoke with the second defendant by telephone. The terms of that conversation are central to the contentions by the defendants stated in their defence, par26, that the original agreement was varied. Lesley MacQueen recounted the conversation in the following terms:
"He said that he wanted - he was ringing, he wanted to speak to Mal about the letter that Malc had written previously about the deal - changing the deal from the original deed, and that he was happy about it and wanted to speak to Malc to tell him.
So he said he was happy about it? ... Yes, he said he was happy and he wanted to speak to Malc to talk about it.
Now what did you then do? ... I called for Malc and said, 'Al's on the phone and he's happy with the arrangement that you've put in your letter a couple of weeks ago.'
And did you then see your husband take the phone? ... I did.
And did you hear him have a conversation? ... I did, but I can't recall the whole conversation."
Mrs MacQueen said that a note of the event was made in a work diary in which the entry records:
"Al Hannon rang to say I I [sic] could be paid in full for 14 Quota & he would take 33⅓ the other 4 Quota. He would take the other 10 Quota back himself."
She stated at trial that she would not have agreed to depart from the 1988 deed without the 30 December variation or fresh agreement.
The first defendant was more precise in his account of the conversation. He claimed that Mr Hansen said that he accepted the terms of the letter which he, MacQueen, had written and that he would be paid in full for the remaining catch derived from the 8 units. He said that the diary entry accurately reflects the term of the conversation. In his evidence at trial, he stated:
"And what happened then? … Well then she gave me the phone and I –
She gave you the phone? … Well, yep.
And Mr Hanson is on the phone? … He was.
And what did he say to you? … He said – I think he said, 'I accept the letter you wrote me, without any problems at all'.
Yes. And did he go through the detail about the fourteen ten? ... Yep. Well I – I'd – I actually said that. I said, are you sure', you know. And he said, 'yes, that's fine, that's fine'.
So you went through the detail of your letter on the phone? ... Yes, I said 'you'll take the ten back, and I'll dive for fourteen, and you will receive one third of four.
Yep … And he said 'no, that's fine'.
You said 'I'll be paid in full for fourteen'? ... Mm.
And he said 'that's fine'? … Yep.
And you said 'I'll take thirty three of your – thirty – sorry, he'd take 15 thirty three and a third of the other four, and he said that was fine? ... Yep.
And he'd take his other ten back? ... Yep.
And he said that was fine? ... Yep.
Now that was obviously an important phone call? ... Well, it certainly was.
Yes. And you keep a diary? ... .I do.
And did you make a note of that telephone call? ... I did, yes.
When did you make that note? ... I write the diary up every night."
Mr Hansen has a differing understanding of the conversation of 30 December, which from his vantage was but a compendium of the previous proposals with an end result that Mr MacQueen, who did not wish to continue to catch the quota permitted by the plaintiff's 10 units, would either catch the 8 Furneaux units or allocate to the plaintiff its share of the beach price of the 4. In his evidence he stated:
"There was a discussion, or he discussed with me that he would like to probably dive less and he thought it would be a good idea if we separated the units. In fact there's a reference in one of the letters where he mentions that –
Well forget about the letters yet, just tell us about the discussion … Okay. I can't recall anything specific on it, other than we did have phone calls and discussed it.
Who was your solicitor in 1993? … Jonathon Smith.
When you had this discussion, did you approach Mr MacQueen or did he approach you? … He approached me.
Did you agree with him that you would do anything as a result of that discussion? … Yes.
What did you agree to do? … I agreed to do a partition agreement. And we would do a new operating agreement.
Did you discuss with him what was going to be in the partition agreement? … Yes it was fairly simple in the sense that there was twenty units were divided up into two lots of ten, ten for him, ten for Tas Seafoods.
Did you discuss with him what was to be in the new operating agreement? … Yes
What did you discuss? … Well my belief in the discussion was that –
Well you can't recall the words, the exact words so are you giving us the substance of what was said? … Yes the substance is that I believe that we were going to carry on substantially the same way as we had in the previous agreement other than we could each have our own ten units caught, him catch his ten, we have ours caught by whoever we wanted etcetera and that eight Furneaux group units be actually sent other than the letters I've indicated I can't remember exactly what was said."
All parties seek findings of fact, supportive of their respective cases, in relation to this conversation and much of the respective cross-examinations of the witnesses and submissions of counsel concerned the issue of credibility. No findings on this point, adverse to the credibility of Mr Hansen or either defendant, are made. The respective parties heard and interpreted what they honestly believed to be the case, but each did so with the supposition of what was being said accorded with their own position. In this case, the defendants' claim is that the original agreement was varied and they have not shown affirmatively such to be the case. There was no meeting of minds. The diary entry may well be an honest interpretation of the perception or interpretation of the defendants, but does not prove corresponding assent. The letter written by Mr Hansen on 4 January likewise, of itself, does not show agreement as to a new or varied agreement. However, it does support the inference that Mr Hansen had not understood the conversation in the same terms as the defendants. On that day he had requested the plaintiff's solicitors to prepare a new agreement in a letter stating:
"Please arrange new agreement as follows:
1Partition Agreement – to partition to 10 units each of the 20 Furneau [sic] Group Units that are jointly owned by the Company and McQueen [sic].
2Entitlement or Diving Licence to be owned 50% each (McQueen [sic] & Company).
3New Operating Agreement
A McQueen [sic] to continue to supply the Company McQueen's [sic] 14 units for which the Company will pay full price.
B McQueen [sic] to continue to catch abalone from the remaining 4 units held in trust for the Company and the Company to pay 1/3 of beach price to McQueen [sic] for the catching.
C Fees etc to be paid by McQueen [sic].
4Other arrangements as per usual."
Following those instructions a new draft agreement was prepared. It purported to rescind the 1988 agreement and recited the holding by the first defendant of the 8 non-transferable units and an agreement "to regulate the use and benefit of the eight (8) Units on the terms and conditions ...". The terms of the draft agreement were complex and many of its terms encompassed matters and circumstances, not within the original agreement, which had arisen because of the change of statutory regime. Nor were they matters which, on any version of the respective parties, had been either agreed or discussed in any of the December conversations or written proposals. The differences can be illustrated by a selection of the clauses appearing in the draft:
"2 The parties agree that:-
(a) The Company licences the Diver to use its undivided one half interest in the Diver's Licence from the date hereof until termination as hereinafter provided.
(b) malcolm clive macqueen will continue to hold the Company's interest in the Diver's Licence in his name as Trustee for the Company.
(c) The Diver shall be permitted to use the Diver's Licence in connection with the conduct of his business as a commercial Abalone Diver and for no other purpose and subject to the terms and conditions hereinafter set forth.
(d) The Company licenses the Diver to continue to use the Company's interest in the eight (8) Units from the date hereof until termination is hereinafter provided.
(e) malcolm clive macqueen will continue to hold the Company's one half interest in the eight (8) Units as Trustee for the Company until otherwise provided herein.
3For the duration of this Deed the Diver must sell to the Company and the Company must purchase from the Diver all Abalone caught by the Diver pursuant to the Diver's Licence and together with all Abalone caught by the Diver pursuant to any right entitlement or licence to which clause 9(a) relates.
4The Company must pay to the Diver the average price for all Abalone caught by the Diver and delivered to the Company.
5The Company shall be entitled to retain for its own use one third (1/3rd) of the average price paid for any Abalone caught by the Diver pursuant to the eight (8) Units. The remaining two thirds (2/3rds) of the average price must be paid by the Company to the Diver.
9(a) Should the Diver or malcolm clive macqueen be offered, issued with, acquire or taken any additional or extra exploratory licences, developmental licences, Abalone Quota Licence Units or any other rights, licences or privileges attaching to or issued or offered in respect to the Diver's Licence or as a consequence of the Diver holding the Diver's Licence or the eight (8) Units enabling or authorising the Diver to catch and sell Abalone, not being an Abalone Quota Licence Unit referred to in sub-clause (b) hereof, then the Diver shall hold any such right licence or privilege on trust for the Company in the share one half for the Company and one half for the Diver.
(b) The Diver shall be free to purchase or acquire any Abalone Quota Licence Units and the Diver must sell and deliver all the Abalone caught by the Diver to the Company and to no other person or company and the Company must purchase the Abalone as delivered by the Diver and must pay the average price for those Abalone delivered.
10(a) In respect to any Abalone resource to which clause 9(a) refers which is the Abalone resource now known as and referred to as the "North Coast Abalone" or "Stunted Abalone" for which occasional exploratory licences have previously been issued, the following agreements apply:
(i)The Diver must catch all Abalone available to be caught pursuant to any such entitlement.
(iv) The Company shall be entitled to 50% of the net proceeds of sale for the Abalone caught pursuant to any following deduction of any amounts for hiring an ocean-going vessel calculated in accordance with the previous sub-clause.
(b)(ii) Should the Diver not catch and deliver Abalone available to be caught pursuant to any entitlement by which Clause 9(a) relates, then the Diver must pay to the Company any royalty payment or fees paid by the Company for such entitlement and the value of the Company's interest in the entitlement on the basis that the Abalone where [sic] caught and delivered to the Company and the Company paid the average price for Abalone then prevailing on the last day on which any such entitlement may have been lawfully caught. Such sum to be paid to the Company within thirty (30) days of the last day on which the Abalone may have been lawfully caught.
12(1) The Diver and malcolm clive macqueen hereby agrees with the Company that unless the prior consent in writing of the Company to the contrary is had and obtained, at all times during the currency of these presents:-
(a)to carry on business as a Commercial Abalone Diver to the best of his ability to ensure that he catches and delivers to the Company all the Abalone allowed to be caught by him under the Diver's Licence.
17(a) Upon the happening of any of the following events, that is to say:-
(i) the death of the Diver;
(ii)any incapacity of the Diver to carry out his duties as a Diver which appears to be permanent or for a lengthy and indefinite period;
(iii)the Diver committing a breach of any term or condition herein contained;
(iv)the Diver committing an act of bankruptcy or becomes bankrupt or insolvent or call any meeting of Creditors or entering into any composition with their Creditors or going into liquidation, voluntary or otherwise or have a Receiver appointed;
(v)The Diver giving three (3) months written notice to the Company of the Diver's intention to terminate this Deed;
The Company may elect to purchase the Diver's interest in the Diver's Licence and the Diver's one half interest in the eight (8) units(and to nominate a person to hold the Diver's Licences in such case) for such a price as may be agreed to as shall be equal to the then current market price of the Diver's interest in the Diver's Licence and the eight (8) units.
(b) Upon the Company giving three (3) months notice in writing to the Diver terminating this Deed the Diver may elect to purchase the interest of the Company in the Diver's Licence, and the eight (8) Units at a price as may be agreed to as shall be equal to the then current market price of the Company's interest in the Diver's Licence and the eight (8) Units.
(f) Following the termination of this Deed if the eight (8) Units remain held in the name of malcolm clive macqueen and are then not [sic] be assignable or divisible so as to enable the Company to take the Company's one half interest in the eight (8) Units into the Company's name then the Diver and malcolm clive macqueen must:
(i)Continue to hold the Company's one half interest in the eight (8) Units in trust for the Company; and
(ii)Continue to pay to the Company one third (1/3rd) of the average price of the Abalone caught pursuant to the eight (8) Units or at the election of the Company catch and deliver the Abalone caught pursuant to the eight (8) Units to the Company and the Company must pay to the Diver two thirds (2/3rds) of the average price for these Abalone."
The draft neither reflected the terms of an oral agreement nor created a new basis for the contractual relationship. Its terms might be a reflection of Mr Hansen's interpretation or understanding of what he had agreed in December, with secondary matters added by the legal advisers to give effect to the primary agreement. But the terms did not reflect the understanding of the defendants. The terms of the letter supplied by their solicitors show general agreement that the terms of the contractual relationship ought be modified or freshly agreed to take into account statutory change and entitlement, but not agreement as to the status of, and respective rights pertaining to, the Furneaux units. The terms of the letter dated 7 July 1994 state:
"I act for Mr and Mrs Macqueen and have to hand the draft Agreement which you recently forwarded.
The draft is generally acceptable but it would be appreciated if the following changes could be made:
1 Clause 5 – reference to 'eight (8) Units' should read as reference to 'four (4) Units'.
I understand that our clients reached agreement on this matter between themselves on 30th December, 1993.
2 Clause 6 – requested that delivery be made to your client's facility on Flinders Island.
I understand that this arrangement has been in force for some time and that it applies to at least one other Diver on Flinders Island.
3 Clause 8(b) – whilst this may not need to be amended, would you advise me of the period of time within which the Company actually pays the Diver after abalone have been delivered.
4 Clause 10(a)(iv) – I understand that the agreed apportionment should be 1/3 to the Company and 2/3 to Mr Macqueen.
5 Clause 10(b)(i) – agreed, but the delivery point should be specified as Flinders Island as per Point 2 above.
6 'Clause 11' – appears to be missing. Presumably, the existing Clause 12 and subsequent clauses should be re-numbered.
7 Existing Clause 13(c) – with regard to 'the eight (8) Units' I understand that the Diver will pay all fees etc in respect of four of the units. With regard to the balance four units, the Diver should pay 2/3 and the Company 1/3.
8 Existing Clause 17(f)(ii) – I understand that references to 'eight (8)' should be reference to 'four (4)'.
I look forward to receiving your comments."
The differing terms of the draft were discussed by the respective solicitors until September 1994 when each acknowledged the impasse. Objective circumstances (Fox v Percy (2003) 77 ALJR 989) support the conclusion that there was no agreement as to a variation of the terms of agreement. There was little cause for the plaintiff to depart from a long held position and agree less advantageous terms. There was no commercial pressure, other than the maintenance of goodwill on the plaintiff to accommodate the first defendant's desire to alter his workload. The terms of a letter written by the first defendant to the plaintiff on 8 February 1995 suggest a return to the original proposal rather than outrage at betrayal of word given. Each party interpreted what they heard to their own desired outcome. It may be that each intended, absent agreement, to wait until government further altered the status of the units to the market advantage of each party. In any event, expectations and some of the terms of the draft document apparently forwarded to the Minister on 18 May 1994, proved futile. On 7 June 1994 the Director (Sea Fisheries) of the Department of Primary Industry and Fisheries Tasmania wrote to the first defendant advising:
"I am writing in relation to the 8 'special units' that are conditionally granted to you as a 'Furneaux Diver'. You will recall that the Minister wrote to you on 26 November 1992 confirming that:
'The units in question will retain their special status and will be subject to the following conditions in all subsequent reissues:
·they are granted for your personal diving use only; and
·they will remain non-transferable; and
·they must be surrendered when you cease to be a licensed diver.'
I can confirm that these Ministerial conditions still apply. They are, however, incompatible with the provisions of the Deed – a copy of which was forwarded to you on 18 May 1994.
The 8 'special units' will therefore, not be offered to you under the terms of a Deed but will retain their status as units issued under an abalone quota licence (No TO5562).
The offer to enter into a Deed in relation to your remaining 10 units is as described in the letter of 18 May 1994.
If you have any enquiries in relation to this matter please do not hesitate to contact Karen Webb on (002) 336723 or Peter Banks on (002) 336632."
The status of the 8 units had changed between the time of their issue to the period in mid-1994. They:
‑ remained attached to the diving licence;
‑ continued to provide a means of calculating the permitted catch;
‑ were, at one time capable of conversion to an ordinary unit; and
‑ subsequently were confined to ones which attached only to the holder of the identified diver's licence, were non-transferrable and expired concurrently with surrender or deprivation of the licence.
One test of their status affecting the respective rights under the quotas of the parties might be whether the plaintiff could have required their purchase and conversion as of July 1992 or whether the defendants could have required contribution from the plaintiff for such purchase. That question impacts on whether the plaintiff is entitled to an interest in the units themselves or is confined to the fruits of their use.
Concurrent with negotiations concerning the 8 units, the parties agreed as to the disposition of the 20 original and assignable quotas. They agreed by deed dated 8 January 1994 to the partition of the quota units and provided that the plaintiff and the first defendant would become sole owner and registered proprietor of 10 units respectively. That agreement itself supports the conclusion that there was no mutuality in respect of the Furneaux units.
During 1994, the relationship between the parties became uneasy. They were unable to negotiate new terms which accommodated the first defendant's desire to work less hard or gain greater benefit from what he perceived to be his entitlement for greater risk and physical effort and the plaintiff's requirement of regular and guaranteed supply and the optimum return on its capital investment. There was some tension over whether the first defendant would continue to dive for and catch the quota permitted by the 10 units, undisputedly held by the plaintiff, and whether sufficient notice had been given to enable the plaintiff to make alternate arrangements. During that year the plaintiff claims that it was deprived of its entitlement to the product of 8 units, receiving instead a one-third share of the product of 4 units. By 1995 the defendants were selling the catch elsewhere and paying a cash equivalence to the plaintiff. On 8 February 1995 the first defendant stated his desire to maintain what he regarded as the 1994 "arrangement" in the following terms:
"I would like the same arrangement as we thought we had last year that is you keep your 10 quota I dive for 18 pay you 33⅓% of 4 quota & I get paid in full for 14 quota. If you are not happy with this please send your 10 quota to me so, we know where we stand and you will receive 33⅓ of 28 quota."
The defendants continued to pay a cash equivalence to the plaintiff based on a calculation of one third of the return on 4 Furneaux units. This continued until the end of 2002 and the Court has been told during the hearing that they would do so for the calendar year 2003.
The plaintiff did not accept the method of calculation or concede the defendants' claim of entitlement. It made formal demand and these proceedings commenced on 22 July 1998.
Contract and Furneaux units
The deed of April 1988 provided for beneficial ownership of the licence and delivery and sale of the resource "caught … pursuant to the quota". It defined quota as meaning:
"the annual quantity of abalone fish which pursuant to the provisions of the Licence, the Act and the Regulations, the holder for the time being of the Licence may catch."
It provided for exclusivity of dealing and restricted the licence holder's right to sell any part of the quota, nor encumber the licence or attached rights, without the plaintiff's consent. The agreement, cl 15, provided that upon the happening of certain events, which included death, incapacity, bankruptcy, breach of certain conditions, and the like, certain rights of purchase were afforded the plaintiff. Similar rights were afforded to the first defendant. Relevant to these proceedings, cl 15 provides:
"(a) Upon the happening of …
…
(ii) any incapacity of Malcolm Clive MacQueen to carry out his work as a Diver which may be permanent or for a lengthy and indefinite period;
…
(vi) cease diving for any reason for a period of one calendar month without the consent of the Company;
…".
The statutory and regulatory reforms post the agreement and the terms of allocation of the 8 Furneaux units, did not permit those quotas to be subject to the above terms. The severance of the terms of the licence and the quota by government created concurrent rights and obligations stated by contract and equity. Given the finding that there had been no variation of contract by agreement, the relationship between the parties became determined by both the 1988 agreement and the principles of trust. The contract might determine the terms of the constructive trust, but the rights and obligations of the parties were co-existing (Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41; Breen v Williams (1996) 186 CLR 71). The accommodation by law and equity to co-existing rights has its origin in the principles stated in Koech v Sandford (1726) Sal Cas: 25 ER 223. The plaintiff and first defendant were trustees of one-half of an interest in (i) the diving entitlement; and (ii) the 8 Furneaux units. The interest might fall short of full beneficial ownership since the grant of the units and thereby the right of the first defendant to dive for them is extinguished upon the decision of the diver to cease diving. The claim by the plaintiff, eschewed by its counsel in the course of submissions that it was entitled to require the first defendant to continue diving or to an award of compensation in lieu thereof, illustrates the limitation of the interest. Illness, age or a disinclination to dive because of risk and hazard, would entitle the first defendant to discontinue his activity and extinguish the quota right. (For the purpose of this determination, it will be assumed, although not strictly correctly, that there is no distinction between the respective rights and obligations of the defendants.)
Terms of the trust
There is no dispute between the parties as to the contractual and/or equitable rights in respect of the 20 units. In 1988, the parties had entered into a joint venture which created both contractual and fiduciary rights (Consul Developments v DPC Estates (1975) 132 CLR 373; United Dominion Corporation v Brian Pty Ltd (1985) 157 CLR 1). The regulatory changes of 1991 might well have rendered certain terms of the contract inoperable, but nevertheless the 20 units remained held by the parties upon trust, the terms of which were defined by the 1988 agreement (Chan v Zacharia (1983 – 1984) 154 CLR 179). The 8 units were likewise held subject to a trust, the terms of which differed from the original since they lacked assignability and permanency and were personal to the first defendant.
Between 1991 and 1993 when the parties began discussions as to variation of the terms of the agreement, they treated the proceeds of the 8 units in the same manner as the original quota entitlement. In doing so they adopted, as terms, those governing the 1988 agreement. The formula by which the respective monetary entitlements were calculated resulted in a return to the first defendant of 66 per cent of the catch, whilst he remained responsible for the payment of licence fees and for the catching of the resource.
The defendants contend that the 8 Furneaux units had become fused with the 1988 entitlements and that the annual issue of licence 123, with a separate quota licence which provided for an entitlement to 28 quotas, showed that their combination represented a direct successor to the 1988 licence. The contention is that 4 units of the Furneaux units attached to the 10 ordinary units which were transferred to the plaintiff and the first defendant and that accordingly the calculation ought be made as being:
- 100 per cent to the defendants for the 4 units attached to their 10;
- 33 per cent to the plaintiff attached to its 10, in accordance with the original agreement.
The contention is not accepted. The provision of the 8 units was compensation for the regulatory change. They differed in nature in that they:
- did not come within the existing definition of quota or licence;
- lacked the characteristics of permanency or assignability;
- were personal to the first defendant.
The first defendant did not avail himself of the opportunity afforded by the Minister to convert them into units or entitlements equivalent to those originally held.
Nature of interest
In Fitti v Minister for Primary Industry (1993) 117 ALR 287, O'Loughlin J determined that a regulatory management plan designed to reduce the number of quota units allocated to commercial fishermen amounted to acquisition of property within the meaning of the Commonwealth Constitution, s51(XXXI). He concluded, consistent with an earlier decision of the Full Court of the Supreme Court of South Australia in Pennington v McGovern (1987) 47 SASR 27, that the licence was "proprietary in nature". However, he had no reason to consider further the nature of "property rights" in the sense that it is here relevant. In Banks v Transport Regulation Board (Vic) (1968) 119 CLR 222, Barwick CJ concluded that a taxi licence was property for the purpose of deciding whether an appeal was justiciable under the provisions of the Judiciary Act 1903 (Cth). Similar conclusions have been reached in cases involving the existence or otherwise of property in areas peripheral to the issue raised here (De Tozzer v Tasmanian Seafoods A86/1992; Austell Pty Ltd v Commissioner of State Taxation (WA) 89 ATC 4905; cf Burns Philp Trustee Co Ltd v Ironside Investments Pty Ltd [1984] 2 Qd R 16; Pyke v Duncan [1989] VR 149).
The issue here is the nature of that "proprietary right". While property might form the subject of legal or equitable relationships, it does not necessarily result in beneficial ownership of an asset in its own right. In Edwards v Olsen (1996) 67 SASR 266, the Full Court of the Supreme Court of South Australia considered the tensions between policy considerations under statutes and their attempted requirement to affix responsibility to a natural person. In considering the issue, Ollson J stated, at 281 – 282:
"There does not appear to have been any policy consideration under the statutes or regulations which would found a prohibition against the vesting of beneficial interests in licences, registrations, authorities or permits in parties other than the actual holder, because this would have had no impact on the proper management of relevant fisheries or the due discharge of the legal and practical responsibilities of the legal holder, which would remain unaltered. Licences, registrations, authorities and permits are clearly 'property', the beneficial ownership of which can form the subject matter of legal relationships, absent some express statutory provision to the contrary (see Pennington v McGovern (1987) 45 SASR 27; Kelly v Kelly (1990) 64 ALJR 234). I would therefore hold that this was the situation. There is no perceivable basis on which it could be asserted that any such transaction required the approval of the Director, because it nevertheless remained the legal responsibility of the person in whom the licence, authority or permit was vested, actually to exercise the relevant rights and discharge all legal obligations under the applicable statute and regulations. Whether or not, on a licence, registration, authority or permit coming up for renewal, the Director could, legitimately, take into consideration any beneficial divesting of interest is a matter for debate, but it does not arise for consideration on the questions as posed.
The capacity of corporations to hold licences, registrations, authorities or permits raises some issues which are not readily resolved. Prima facie, the regulations under both relevant statutes appear to contemplate that authorities and permits are to be held by natural persons. Particularly in the case of abalone permits, they impose certain obligations which can only be discharged by a natural person. It is, however, difficult to see why, except in the case of an abalone permit, a licence, registration or authority could not be held jointly by several persons who were in fact in partnership, as seems to have been recognised by the Department over the years. By virtue of the Acts Interpretation Act 1915 (SA) the singular word 'person' is to be taken to include the plural. In the situation postulated the holding would be by the several partners, but not in the name of the partnership, as such, because such a body is not a separate legal entity.
In the case of the FA 1917, not only is the word 'person' defined to include a body corporate, but the sections dealing with the issue of licences manifestly contemplate that a body corporate may, with certain exclusions, as to type of body, be issued with and hold a fishing and related employee licence. A similar concept is carried through into section 31 of the FA 1971. The question posed ought to be answered accordingly."
In Kelly v Kelly (1990) 64 ALJR 234, the High Court resolved a partnership dispute concerning an abalone permit on the basis that since it had not been intended as partnership property at the time of the formation of the agreement, it did not so become when its status altered to that of an authority. In Harper v Minister for Sea Fisheries (supra), the High Court was concerned with Tasmanian regulations which attempted to limit the exploitation of a natural resource liable to damage, exhaustion or destruction by uncontrolled exploitation by the public, whilst conferring statutory rights on licensees to exploit the resource to a limited extent which confers on licensees a privilege analogous to a profit a prendre in or over the property of another. Mason CJ, Deane and Gaudron JJ said, at 325:
"Under that licensing system, the general public is deprived of the right of unfettered exploitation of the Tasmanian abalone fisheries. What was formerly in the public domain is converted into the exclusive but controlled preserve of those who hold licences. The right of commercial exploitation of a public resource for personal profit has become a privilege confined to those who hold commercial licences. This privilege can be compared to a profit a prendre. In truth, however, it is an entitlement of a new kind created as part of a system for preserving a limited public natural resource in a society which is coming to recognize that, in so far as such resources are concerned, to fail to protect may destroy and to preserve the right of everyone to take what he or she will may eventually deprive that right of all content."
Brennan J considered the right to lawfully take fish and said, at 335:
"As licensees under the Act are the only persons who enjoy the right to take abalone from the Tasmanian fishery, the public being excluded, the right they enjoy is similar to the common of piscary - a right of fishing in another's waters to the exclusion of the public. Such a common law right is a profit a prendre (see Halsbury's Laws of England, 4th ed, vol 6, p 215, pars 581, 582) but at common law it is not available in tidal waters. When a natural resource is limited so that it is liable to damage, exhaustion or destruction by uncontrolled exploitation by the public, a statute which prohibits the public from exercising a common law right to exploit the resource and confers statutory rights on licensees to exploit the resource to a limited extent confers on those licensees a privilege analogous to a profit a prendre in or over the property of another. A limited natural resource which is otherwise available for exploitation by the public can be said truly to be public property whether or not the Crown has the radical or freehold title to the resource. A fee paid to obtain such a privilege is analogous to the price of a profit a prendre; it is a charge for the acquisition of a right akin to property. Such a fee may be distinguished from a fee exacted for a licence merely to do some act which is otherwise prohibited (for example, a fee for a licence to sell liquor) where there is no resource to which a right of access is obtained by payment of the fee."
In Associated Alloys Pty Ltd vACN001 452 106 Pty Limited (2000) 202 CLR 588, the High Court considered the "flexible interplay of law and equity" (Quistclose Investments Ltd v Rolls Razor Ltd [1970] AC 567 at 582) in the context of "proceeds", "charge" and their equivalence with a "chose in action". At issue was whether proceeds could be characterised as "trust property". In their joint judgment, at 869 – 870, Gaudron, McHugh, Gummow and Hayne JJ said at pars30 - 32:
"In the present case, it is no objection to the effective creation of a trust that the property to be subjected to it is identified to be a proportion of the proceeds received by the Buyer; a proportion referable to moneys from time to time due and owing but unpaid by the Buyer to the Seller.
In respect of those proceeds from time to time bound by the trust, there is nothing in the terms of the trust to negative the ordinary consequence that the trustee (the Buyer) is bound to apply that sum by accounting to or at the direction of a beneficiary (the Seller). It is convenient to identify the condition which limits the beneficiary's entitlement to call upon the trust property later in this judgment. As Professor Hayton points out, with reference to authority, because equity treats as done that which ought to be done, even if the proceeds were paid into a general bank account of the Buyer there could be a tracing remedy where the recipient was obliged to hold a particular portion of the proceeds on trust.
In the situation just considered, where the trust is performed and discharged by appropriation of the proceeds by the Seller, the relevant trust relationship between the Buyer and the Seller is brought to an end. A question may then arise whether, despite the Seller having been funded in this way, it might retain a good claim for that amount by an action in debt against the Buyer. The answer to that will be found not in trust law but in the terms, express or implied, of the contract between the Buyer and the Seller. In the formulation of those terms, particularly any implied terms, there is, to adapt the words of Lord Wilberforce, 'surely no difficulty in recognising the co-existence in one transaction of legal and equitable rights and remedies' and the giving of effect to 'practical arrangements' by 'the flexible interplay of law and equity."
Here the terms of the trust govern the proceeds of the catch which, upon payment during each calendar year, is discharged with respect to that period. There is no specific identified sum of money which might be subject to "lien" or susceptible to tracing, but a liability to pay a sum of money calculated in accordance with the amount of the catch and the relevant "beach price". Likewise, with the Furneaux quota units themselves. They were not susceptible to assignment or lien and by law could not be subject to a proprietorial interest of another. They were a form of interest personal to the first defendant analogous to a profit a prendre in the sense stated by Brennan J in Harper (supra).
The plaintiff was entitled to the proceeds as a result of the trust, but not to a declaration of interest in the quota right. The claims of the plaintiff as made in the amended statement of claim, pars14, 21, 25(a), (b) (portion) and (c), are not sustained.
1993 – 1994 division
The parties entered into a deed of partition dated 7 December 1993. The plaintiff and first defendant became sole owner and registered proprietor of 10 units respectively. The plaintiff became liable for the payment of licence fees and the costs of catching for its 10 units and the defendants were relieved of their obligation to supply. The partition did not affect the respective interests of the parties in the remaining units. That such was understood by the parties were their attempts to agree a separate resolution of the economic disposition of the proceeds of resource caught under the 8 quota units. Partition relieved the first defendant of the responsibility to catch 10 units and he could not assign the remaining 4. Thus the plaintiff remained entitled to the same disposition of proceeds as before, whilst the first defendant remained responsible for catching the abalone permitted by the 8 units. The attempts by the parties to resolve the status of the remaining units proved futile. The first defendant had proposed a greater share of the proceeds of sale. Before partition, the plaintiff was entitled to the revenue of one-third of the 8 units, whilst the defendants' proposal was a reduction to one-third of 4. The defendants' contention is that each party became entitled to a notional interest in 4 units upon which the defendants were obliged to pay one-third of the notional interest in 4 to which the plaintiff was entitled. Such was a substantial departure from the allocation made between 1991 and January 1994.
The 8 units remained subject to the trust, of which the first defendant, as the licence and quota holder, remained trustee. The plaintiff was entitled to strict compliance, namely that the defendants pay over the share in the trust property and not be entitled to benefit by the control possessed by the first defendant (Youyang v Minter Ellison (2003) 77 ALJR 895). The first defendant was required to make full disclosure of the financial return (Birtchnell v Equity Trustees (1929) 42 CLR 284; Spellson v George (1992) 26 NSWLR 666), nor permitted to require the plaintiff to either adopt the proposal or elect another course offered by him (Spellson (supra)).
The Court does not accept the claim by the plaintiff that the first defendant intentionally attempted to deceive the plaintiff through its letter of 2 December 1993. But the first defendant was attempting to advance his own commercial position to the economic detriment of another. Understandably he wished to reduce his level of hard work and exposure to hazard, but in so doing, was not entitled to increase his return at the expense of a beneficiary.
Course of dealings
The defendants continued to account to the plaintiff for a share of the resource caught in 1993. The plaintiff seeks, by its claim, to quantify the dealings on the basis of one-third of its share for the years 1994 – 1995 and 50 per cent of its claimed equity for the period 1996 – 2003. During the period 1994 – 2002, the defendants paid to the plaintiff a total of $305,606, whilst the plaintiff claims that it was underpaid by an amount of $356,510. As of the date of hearing, the defendants had not accounted to the plaintiff for its entitlement for the year 2003, an entitlement calculated by the plaintiff to be $72,545. No account is taken, in these reasons for judgment, of either amount claimed, since the defendants concede an obligation to make payment and the amount payable can be assessed by the parties in accordance with the general terms of these reasons.
The plaintiff did not acquiesce in the defendants' claimed calculation for the year 1994. The respective solicitors continued with their attempts to draft a fresh agreement and the parties were doubtless content to await the outcome of those attempts. The tension between the plaintiff and the first defendant in the period 1994 – 1995 primarily concerned the supply of abalone to the plaintiff's processing plant and its desire to service the market. The parties did not resolve their differences and did not abandon their respective positions. This is not a case where a party, conscious of infringement, abstains from enforcing a right (De Bussche v ALT (1878) 8 Ch D 286; Spellson (supra); Orr v Ford (1988 – 1989) 167 CLR 316). Failure by the plaintiff to give notice of repudiation or entitlement to rights is explicable by reference to the ongoing attempts to negotiate a fresh agreement and by acceptance in 1995 that the plaintiff was unlikely to maintain supply. Such acceptance did not constitute abandonment of its economic entitlement to proceeds of sale (Orr v Ford (supra); Stilbo Pty Ltd v MCC Pty Ltd (2002) 11 Tas R 63).
That the plaintiff did not acquiesce is shown by letters dated 8 February 1995, 30 November 1996, 30 July 1997 and 18 January 1999 written by the first defendant to the plaintiff advising that if it was not satisfied with the arrangements, it could return the 10 quota units, whereupon it would be paid one-third of the proceeds of the 28 units.
Proceedings were commenced by the plaintiff by writ issued on 22 July 1998.
Terms of trust and remedy
The trust as of 1991, absent the requirement to supply, as it applied to the 8 units was one of entitlement to a percentage of sales, less payment of royalties, licence fees and the provision of labour and skill by the first defendant. The plaintiff had provided capital for the purchase of the original licence/quota entitlement and was entitled to a return on its investment. The first defendant provided skills and labour, accompanied by hazard and effect on health, and was required to meet statutory fees. Partition of the 20 units deprived the remaining 8 of the characterisation of property. The trust was that of entitlement to proceeds, not property in its own right. The terms of the trust were as before, namely one-third/two-third division of the value of the catch. The plaintiff is entitled to enforcement of the terms, but does not acquire thereby the right as claimed in the statement of claim, pars14A, 25(a) to (c):
"14AIn addition, or in the alternative, for restoration to the Plaintiff of the value of the Plaintiff's interest in the divers licence and the fishing licence (abalone dive) and in the Furneaux Group licence, which the Defendants have had the use of since 1994.
25In addition to the plaintiff's claims against the defendants for the imposition of a trust and an account, the plaintiff claims:
(a) That the defendants restore to the plaintiff the value of the plaintiff's interest in the Furneaux group licence which the defendants have had the use of since 1994 without the making of payments for such use to the plaintiff;
(b) Alternatively, that the defendants pay equitable damages to the plaintiff equal to the detriment suffered by the plaintiff in not having available to it its interest in the Furneaux Group licence or alternatively calculated by reference to the profit or value of each of this entitlement in the hands of the defendants, together with interest;
(c) For the tracing, on the part of the plaintiff, of the income derived for the use by the defendants of the Furneaux Group licence into any hands into which it has been paid or any property acquired by its application, in whole or in part, together with interest."
It is entitled to its entitlement in the form of equitable damages.
Assessment of entitlement and damages
It is difficult to disentangle the two heads. The plaintiff has presented calculations based on gross return on the annual, but variable, quota, less the costs of diving and royalties, and claims one-third of the nett balance (less payments received) for 1994 – 1995 and one-half of entitlement, less costs of landing the catch. In doing so, it seeks to maximise its commercial return rather than a practical equitable re-adjustment. (Vadasz v Pioneer Concrete (SA) Pty Ltd (1995) 69 ALJR 678; Baumgartner v Baumgartner (1987) 164 CLR 137). It seeks enforcement of the terms of a constructive trust on the one hand and a commercial return permitted by contract on the other. The calculations relied on by the plaintiff state:
| 1994 | 1995 | 1996 | 1997 | 1998 | 1999 | 2000 | 2001 | 2002 | |
| 8 Furneaux Units | 4800 | 4800 | 4800 | 5760 | 5760 | 5760 | 6240 | 6400 | 5800 |
| Daily Average Beach Price per kg | $30.85 | $22.62 | $25.58 | $33.60 | $29.49 | $32.26 | $45.78 | $38.64 | $43.57 |
| Total Gross Value for Year | $148,080 | $108,576 | $122,784 | $193,536 | $169,862 | $185,818 | $285,667 | $247,296 | $252,708 |
| Less: Diving Costs Cost per kg | $4.00 | $4.00 | $4.00 | $4.00 | $4.00 | $4.00 | $4.05 | $4.29 | $4.53 |
| Total Dive Cost | N/A | N/A | $19,200 | $23,040 | $23,040 | $23,040 | $25,280 | $27,456 | $26,274 |
| Gross Value Less Dive Costs | $103,584 | $170,496 | $146,822 | $162,778 | $260,387 | $219,840 | $226,432 | ||
| Less Royalties Payable | |||||||||
| Royalty per kg | $3.87 | $1.86 | $2.02 | $2.95 | $1.95 | $2.41 | $5.37 | $3.85 | $4.70 |
| Total Royalty Cost | N/A | N/A | $9,696 | $16,992 | $11,232 | $13,882 | $33,509 | $24,640 | $27,260 |
| Gross Value net of Dive & Royalty Costs | $93,888 | $153,504 | $135,590 | $148,896 | $226,878 | $195,200 | $199,172 | ||
| Tasmanian Seafoods share 1/3 of Gross Value | $49,360 | $36,192 | |||||||
| Tasmanian Seafoods Equity Share – 50% | $0 | $0 | $46,944 | $76,752 | $67,795 | $74,448 | $113,439 | $97,600 | $99,586 |
| Less: Payments Received | $25,600 | $36,320 | $19,300 | $3,360 | $58,800 | $32,160 | $49,387 | $38,560 | $42,119 |
| Accounts Unpaid | $23,760 | -$128 | $27,644 | $73,392 | $8,995 | $42,288 | $64,052 | $59,040 | $57,467 |
The terms of the trust permit a different calculation, namely one-third of the value of the resource as delivered to the processor:
| 1994 | 1995 | 1996 | 1997 | 1998 | 1999 | 2000 | 2001 | 2002 | |
| Gross | $148,080 | $108,576 | $122,789 | $193,536 | $169,862 | $185,818 | $285,667 | $247,296 | $252,706 |
| 1/3 Share | $49,360 | $36,192 | $40,929 | $64,512 | $56,620 | $61,939 | $95,222 | $82,432 | $84,235 |
| Less Paid | $25,600 | $36,320 | $19,300 | $3,360 | $58,800 | $32,160 | $49,387 | $38,560 | $42,119 |
| Balance | $23,760 | -$128 | $21,629 | $61,152 | -$2,180 | $29,779 | $45,835 | $43,872 | $42,116 |
The sum calculated amounts to $275,834.
Interest
The plaintiff claims interest in accordance with the principles stated in Wallersteiner v Moir (No 2) [1975] 1 All ER 849. It seeks a commercial rate for the lending of money comparable to that permitted in cases involving tort and contract as stated by the High Court in Hungerfords v Walker (1990) 171 CLR 125. It further seeks compound interest in accordance with the principles in State of Tasmania v Shaw (No 2) [2002] TASSC 12, another case involving tort. It claims entitlement because the defendants were able to use the retained moneys for business purposes and debt reduction and that it is irrelevant as to what use the plaintiff would have made of the money. However, this is a case of
equitable compensation and absent legislative reform (Supreme Court Civil Procedure Act 1932, s34), any rate of interest must accord with the equitable principles stated in Wallersteiner (supra). In that case, a rate was fixed at 1 per cent over the then minimum lending rate. In Hagen v Waterhouse (1991) 34 NSWLR 308, Kearney J allowed interest in a trust case at a mercantile rate, compounded by yearly rests. He did so in part, citing the statement in Ford and Lee, Principles of the Law of Trusts (1990) 2nd ed, par 1713.2 "to minimise the possibility that any profit can remain in the trustee's hands". Here the circumstances differ somewhat. The commercial arrangement was that the defendants would deliver the catch to the plaintiff which, in turn, paid on delivery, a percentage calculated in the landed beach price. It would process the catch and sell on to the market, doubtless for profit. But the cost of the purchase of the resource would comprise a component of the unit cost of production and sale. Here the plaintiff is to receive the full value of the catch withheld and its entitlement to a share of the beach price. The issue is made more complex by the differing claims by the plaintiff for declarations, entitlement and damages. If the sum of $275,834 represents entitlement because it represents a return on its original investment in providing capital for the purchase of the original licence, then compound interest at a rate above that fixed by the Reserve Bank would be appropriate. If it represents equitable compensation for an amount equivalent to the unsupplied resource to which it was entitled, then the sum awarded, without interest, represents a fair return since it is free of associated costs. My reasoning requires adoption of the former approach and interest will be awarded. However, this remains a case in equity, not commercial contract, and consistent with Wallersteiner and Hagan (supra), interest will be calculated at yearly rests. The defendants will be deprived of profit, but not punished in an award of damages. Counsel are requested to submit amended calculations in accordance with these reasons for judgment.
Conclusion
The plaintiff is entitled to equitable compensation in an amount of $275,834, together with interest to be assessed. It is entitled to a declaration that it ought receive one-third of the return, calculated in accordance with the market beach price, for the catch of abalone derived by the defendants pursuant to the 8 Furneaux units during such period as the licence and the quota units remain in force.
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