Tracy v Mandalay Pty Ltd

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88 C.L.R.]

OF AUSTRALIA.

215

[HIGH COURT OF AUSTRALIA.]

TRACY AND OTHERS

Appellants

D efendants,

AND

MANDALAY PROPRIETARY LIMITED

R espondents.

Plaintiff and D efendants,

Com.'pany—Formation— Promoters property— Sale to new company— Absence of

H. C. OF A.

fu ll disclosure and approval by independent board— Sale voidable at option of

1952-1953.

company—Affirmation of transaction—“ Promoter ” .

1952.

In the absence of approval by an independent board after full disclosure

Sy d n e y ,

sales by a promoter to a company formed by him are in the same position

Dec. 1-4;

as any other sales by a trustee of his property to a person towards whom he

stands in a fiduciary relation. Such sales are voidable at the mere option

1953.

of the purchaser, but if the purchaser decides to affirm the transaction he

Me l b o u r n e ,

must affirm it according to its terms.

March 12.

Dixon C.r., Williams

I t is not only the persons who take an active part in the formation of a

company and the raising of the necessary share capital to enable it to carry

and

on business who are promoters, but persons who leave it to others to get up

Taylor JJ.

the company upon the understanding th a t they also will profit from the

operation may become promoters.

Decision of the Supreme Court of New South Wales {Roper C.J. in Eq.),

subject to a variation of the decree, affirmed.

Appeal from the Supreme Court of New South Wales.

In a suit brought in the equitable jurisdiction of the Supreme Court of New South Wales by Mandalay Pty. Ltd. against Norman Salon, Maxwell Colin Willard, Kenneth Dickson Tracy, Mavis Lorraine Salon (wife of Norman Salon), Ada Elizabeth May Withy, Joseph Griffith and R.S.C. Trading Co. Pty. Ltd., the statement of claim was substantially as follows :—

1. The plaintiff was a company incorporated on 10th December 1948 as a proprietary company limited by shares under the pro visions of the Companies Act, 1936-1940 (N.S.W.). The principal objects of the company were ;—(a) To acquire the fee simple in

216 HIGH COURT

[1952-1953.

H. C. OF A.all that piece or parcel of land situated at Potts Point Sydney 1952-105:!.having a frontage to Wylde Street and being part of the land com

T racy

prised in Certificate of Title vol. 4224 folio 95 and the whole of

V.the land mentioned in Instrument of Transfer No. D854665

Man da la y

registered in the Land Titles Office at Sydney, (b) To provide

1’t y .

Lt d .

healthy and comfortable homes on co-operative principles and in particular to erect upon the said land specified in cl. 3 (a) hereof a modern concrete building comprising basement ground floor and eight upper floors with provision of garages in the basement also restaurant shops offices and professional rooms on the ground and first floors for letting purposes and forty-nine home units on the seven upper floors for disposal to members and by the installation and maintenance of the latest labour saving sanitary and other conveniences to render- and keep those homes suitable and available for occupation as first-class homes by the members of the company or their tenants sub-tenants assignees or other persons approved of by the board of directors, (c) To purchase take on lease or in exchange hire or otherwise acquire any real or personal property (including shares) or any rights or easements or any invention trade mark patent or other rights or privileges which the company may think necessary or convenient for the purposes of its business and in particular any land buildings easements shares machinery plant stock-in-trade trade-marks and patent and other rights.

2. The defendant R.S.C. Trading Co. Pty. Ltd. is a company

incorporated on 14th September 1945 as a proprietary company limited by shares under the provisions of the Companies Act 1936 1940. The principal objects of the defendant company were ;— (1) To carry on in any part of the world the business of manu facturers of toys of all kinds and descriptions and articles of furniture ornaments clothing of all kinds and description and particularly articles manufactured from or products of sheepskins. (2) To carry on in any part of the world the business wholesale as well as retail of manufacturers of articles goods materials provisions produce and commodities of all kinds and of wholesale and retail merchants dealers in and exporters and importers of articles goods materials provisions produce and commodities of all kinds and to carry on any business (trading manufacturing or otherwise) which may seem to the company capable of being carried on with advan tage or calculated directly or indirectly to enhance the value of any of the company’s property and rights for the time being. (3) To dispose of personal property on the time payment or hiring system and for consideration to issue orders for goods wares and merchandise on other persons firms and companies.

88 C.L.R.] OF AUSTRALIA.

217

H. C. o r A,

3. On or about 14tb April 1948 the issued capital of the defendant company was £1,002 divided into 1,002 shares of £1 each which

1952-1953.

were held as to 668 by the defendant Norman Salon and as to

T ea c y

334 by the defendant Mavis Lorraine Salon and those defendants

Ma n d a l a y

were the only directors of the defendant company the defendant

P t y . L t d .

Kenneth Dickson Tracy being its secretary.

4. The minutes of directors’ meetings of the defendant company record that on 14th April 1948 a meeting of directors was held at which were present Norman Salon, Mavis Lorraine Salon and Kenneth Dickson Tracy, the last named as secretary, and that it was resolved that the said land in Wylde Street on which a deposit of £600 had been paid by Norman Salon should be purchased by the defendant company the balance payable on the purchase being £5,400 and that an offer by Norman Salon to lend the defendant company £5,000 together with the amount of the said deposit and legal fees of £60 free of interest was accepted.

5. On or about 22nd June 1948 the said land being part of the land comprised in Certificate of Title vol. 4224 folio 95 was trans ferred by memorandum of transfer registered number D854665 by one Stanley Edward Chatterton to the defendant company the consideration for the said transfer being the sum of £6,000. Sub sequently a new Certificate of Title was issued to and in the name of the defendant company in respect of the said land being Certificate of Title vol. 5951 folio 42.

6. On or about 28th July 1948 250 of the shares in the defendant company held by Norman Salon were transferred by him to the defendant Joseph Griffith and 250 of the shares held by Mavis Lorraine Salon were transferred by her to the defendant Ada Elizabeth May Withy. On or about 29th December 1948 200 of the remaining shares in the defendant company held by Norman Salon were transferred by him to the defendant Maxwell Colin Willard and 50 of the remaining shares in the defendant company held by Mavis Lorraine Salon were transferred by her to Maxwell Colin Willard.

7. The minutes of directors’ meetings of the defendant company record that on 29th December 1948 a meeting of directors was held at which were present Norman Salon, Mavis Lorraine Salon and Kenneth Dickson Tracy, the last named as secretary, and that applications were received from Maxwell Colin Mallard for 342 shares, from Kenneth Dickson Tracy for 66 shares, and from Mavis Lorraine Salon for 1,090 shares in the capital of the defendant company, and that it was resolved that the said applications be accepted. The shares were on or about 4th January 1949 allotted

218 HIGH COURT

[1962-1953.

H. C. OF A. to the said applicants respectively who paid or became liable to

1952-1953.

pay to the defendant company the sum of £1 for each of those

T racy

shares.

V.8. The minutes of directors’ meetings of the defendant company record that on 31st December 1948 a meeting of directors was

Man da la y

P t y .

Lt d .

held at which were present Norman Salon, Mavis Lorraine Salon and Kenneth Dickson Tracy, the last named as secretary, and that it was reported that all the members of the defendant company wished to offer their shareholdings in the company to the plaintiff company at £8 12s. Od. per share in conjunction with the said land in Wylde Street for £2,650 and that it was resolved that the secretary should make the offer in writing to the plaintiff company.

9. The minutes of shareholders’ meetings of the plaintiff company record that on 7th January 1949 a general meeting of shareholders of the plaintiff company was held at which there were present Norman Salon, Maxwell Colin Willard, Ada Elizabeth May Withy and Kenneth Dickson Tracy, the last named as secretary. The first three-named of these defendants were signatories to the memor andum of association of the plaintiff company each having sub scribed for one share of £1 in the capital of the plaintiff company. 10. The said minutes record that at that general meeting it was resolved that Maxwell Colin Willard and Norman Salon be appointed directors and that Kenneth Dickson Tracy be appointed secretary at a salary of £1,000 per annum and that it was further resolved that the directors be instructed to negotiate for the purchase by the plaintiff company of the whole of the shares in the defendant company at the price of £8 12s. Od. per share and of the said land at Wylde Street of the defendant company.

11. The minutes of directors’ meetings of the plaintiff company record that on 10th January 1949 a meeting of directors of that company at which were present Maxwell Colin Willard and Norman Salon as directors and Kenneth Dickson Tracy as secretary, it was reported that offers had been received from the shareholders of the defendant company offering to sell their shares in such company to the plaintiff company for £8 12s. Od. per share together with an offer from the defendant company to sell the land at Wylde Street for the sum of £2,650 and that it was resolved that those offers be accepted, and that on the same day at another meeting of directors of the said company at which the same persons were present it was resolved to accept an application by one Bernard Cecil Greene for 1,800 shares in the plaintiff company and the application moneys of £900 which accompanied that application

88 C.L.R.] OF AUSTRALIA.

219

and thereupon 1,800 shares were allotted in accordance with the R-

OJ" A,

application.

1952-1953.

12. The plaintiff company charged and alleged that the fact was that a t no time was any negotiation or bargaining conducted by

Tsacy

Ma n d a l a y

the said directors in respect of the purchase either of the said shares

P t y . L t d .

or the said land in accordance with the resolution recorded as having been passed at the said general meeting and that the price to be paid for the said shares and the said land had already been decided upon by the defendants prior to 7th January.

13. The plaintiff company further charged and alleged that the fact was that prior to 7th January aforesaid the defendants had already made offers in writing to the plaintiff company to sell their respective shares for the price of £8 12s. Od. each and the said land at the price of £2,650 and Norman Salon, Maxwell Colin Willard and Kenneth Dickson Tracy with the knowledge and approval of the other defendants and purporting to act on behalf of the plaintiff company had already given authority to L. J. Hooker Ltd. a company carrying on business in New South Wales as estate agents to sell to members of the public home units in the plaintiff company’s building project on the said land such home units to be acquired by application for shares in the plaintiff company and the said resolutions recorded as having been passed at the said general meeting were a sham and a fraudulent device on the part of the defendants to procure the apparent consent of the plaintiff company to the purchase of those shares and the said land and the plaintiff company has never consented to such purchase.

14. The plaintiff company further charged and alleged that the fact was that a t all material times the defendant company was impecunious as the defendants and each of them well knew.

15. At all material times the said land was of no greater value than the sum of £5,200 and the said shares in the defendant company were of no value as the defendants and each of them well knew.

16. The articles of association of the plaintiff company incorporate

inter alia arts. 72 and 82 of Table A in sched. 2 under the Companies Act 1936. The relevant portion of art. 72 is as follows :—“ 72. The office of director shall be vacated if the director— . . , (g) is directly or indirectly interested within the meaning of section one hundred and twenty-nine of the Act in any contract with the company or participates in the profits of any contract with the company : Provided, however, that a director shall not vacate his office by reason of his being a member of any corporation, firm, society or association which has entered into contracts with or done any work for the company if he shall have declared the nature

220 HIGH COURT

[1952-1953.

H. C. OF A.of his interest in manner required by section one hundred and 1952-1953.twenty-nine of the Act; but the director shall not vote in respect

Tii.\cv

of any such contract or work or any matter arising thereout, and

V.if he does so vote his vote shall not be counted.”

Ma n iu l a y

Article 82 is as follows :—“ 82. The quorum necessary for the transaction of the business of the directors may be fixed by the directors, and unless so fixed shall when the number of directors exceeds three be three, and when the number of directors does not exceed three, be two.”

T t y .

L t d .

17. Norman Salon and Maxwell Colin Willard were directly interested in the purported contract to purchase the shares and land aforesaid and were bound to declare the nature of their respective interests therein at the said meetings of directors held on 10th January 1949 and were not entitled to vote in respect thereof nor to be taken into account in determining whether a quorum was present at the said meeting nevertheless the said defendants did not duly declare their said interests and did purport to vote and there was no quorum present.

18. The minutes of directors’ meetings of the plaintiff company record that on 17th January 1949 a meeting of directors was held at which were present Norman Salon and Maxwell Colin Willard as directors and Kenneth Dickson Tracy as secretary, and that it was resolved that the secretary be instructed to draw cheques on the plaintiff company’s banking account for the purchase price of the shares in the defendant company and the land in Wylde Street aforesaid, and that it was further resolved to accept an application for one share in the plaintiff company by one Henry John Higgins, and that the said share was thereupon allotted to him and that it was then resolved that he be appointed a director. 19. The minutes of directors’ meetings of the plaintiff company record that on 24th January 1949 a meeting of directors was held at which were present Henry John Higgins, Norman Salon and Maxwell Colin Willard as directors, and Kenneth Dickson Tracy as secretary and that applications for shares in the plaintiff company were received from various members of the public for shares in the plaintiff company aggregating 8,100 shares and that the same were accompanied by application moneys representing 10s. per share and that the said applications and moneys were accepted and shares allotted to the applicants in accordance with their applications. Thereafter on various dates up to and including 16th May 1949 further applications for shares were received from other members of the public together with application moneys representing 10s. per share and the said applications and moneys

88 C.L.R.] OF AUSTRALIA.

221

were accepted and shares allotted in accordance with the said H . C. of A. applications. By the last mentioned date 52,100 shares in the 1952-1953.

plaintiff company had been allotted to members of the public

T ea c y

and application moneys amounting to £26,050 had been received.

M a n d a l a y

20. On or about 21st January 1949 the said secretary drew

P t y .

L t d .

cheques bearing the said date in favour of the several defendants for the amounts set forth hereunder being the amounts claimed to be payable to each in respect of the shares in the defendant company and the land in Wylde Street alleged to have been sold to the plaintiff company :—

Norman Salon . . ..£1,866 4

Maxwell Colin Willard 5,091 4

Kenneth Dickson Tracy 567 12

Mavis Lorraine Salon . .9,657 160

Ada Elizabeth May Withy 2.150 0

Joseph Griffith.. ..2.150 0

R.S.C. Trading Co. Pty. Ltd.2,650 0

£24,132 16 0

21. The plaintiff company charged and alleged that the fact was that it was quite unable to meet the said cheques on 21st January aforesaid as the defendants well knew. All the said cheques were subsequently met out of application moneys received from members of the public from time to time with the exception of those in favour of Ada Elizabeth May Withy and Joseph Griffith.

22. Notwithstanding the drawing of a cheque in favour of the defendant company for £2,650 in respect of the purported purchase of the land and that such cheque was met out of application moneys received from members of the public as aforesaid no transfer of the land from the defendant company to the plaintiff company was effected nor was any contract for the sale of the land executed until 23rd December 1949 when a contract in writing for the sale of the land from the defendant company to the plaintiff company was signed by Norman Salon purporting to act on behalf of the defendant company as vendor and by Maxwell Colin Willard purporting to act on behalf of the plaintiff company as purchaser. The Certificate of Title vol. 5951 folio 42 in respect of the land has been and still is held by the Bank of New South Wales, King and George Streets branch to secure an overdraft of the defendant company. Maxwell Colin Willard had no authority from the plaintiff company to sign on its behalf.

222 HIGH COURT

[1952-1953.

H. C. OF A. 23. The minutes of directors’ meetings of the defendant company

1952^5.^ rocQixl tiiat on 4th Fei)ruary a meeting of directors of the

T racy company was held at wliich were present Norman Salon, Maxwell

V. Colin Willard as directors and Kenneth Hickson Tracy as secretary,

P ty " in n ' meeting documents purporting to be transfers

----

of shares from the undermentioned defendants to the plaintiff

company were approved as under :—

Mavis Lorraine Salon . . . . ..

33 shares

Mavis Lorraine Salon . . . . .. 1,090

„

Maxwell Colin Willard . . . . .. 342 „

Maxwell Colin Willard . . . . . . 200 „

Maxwell Colin Willard . . . . .. 50

„

Norman Salon . . . . .. .. 134

„

Norman Salon . , . . . . . . 83

„

Kenneth Dickson Tracy .. .. 66

„

1,998 shares

The balance of the issued shares in the defendant company were at that date and still were held by the undermentioned defendants as follows :—

Joseph Griffith . . . . . . ..

250 shares

Ada Elizabeth May Withy . . .. 250

„

Norman Salon . . .'. . . .. 1

Mavis Lorraine Salon .. . . .. 1

„

502 shares

24. In March 1949 proceedings were instituted in the Supreme Court of New South Wales by Ada Elizabeth May Withy against the plaintiff company for payment of the sum of £3,500 alleged to be due in respect of the sale by her to the plaintiff company as aforesaid of the 250 shares held by her in the defendant company. Subsequently, Norman Salon, Maxwell Colin Willard and Kenneth Dickson Tracy caused to be paid to Ada Elizabeth May Withy out of the moneys of the plaintiff company the sum of £2,150 but that action has not been discontinued nor have those shares been transferred to the plaintiff company.

In March aforesaid proceedings were instituted in the Supreme Court of New South Wales by Joseph Griffith against the plaintiff company to recover the sum of £3,500 alleged to be due in respect of the sale by him to the plaintiff company as aforesaid of the 250 shares held by him in the defendant company. Subsequently,

25.

88 C.L.R.] OF AUSTRALIA.

223

Norman Salon, Maxwell Colin Willard and Kenneth Dickson Tracy, H. C. OF A.

caused to be paid to him out of the moneys of the plaintiff company

1952-1953.

the sum of £500 but that action has not been discontinued nor

T ea c y

have those shares been transferred to the plaintiff company.

Ma n d a l a y

26. At the time of the transfer of the land to the defendant company referred to in par. 5 hereof the defendants had the intention that that land should be acquired by the plaintiff company to be formed for the purpose of erecting thereon flats of approxi mately ten floors occupying the greater part of the land and the defendants were and each of them was at all material times a promoter of the plaintiff company which was formed for such purpose.

P t y . L t d .

27. On 3rd September 1948 the Local Government (Areas) Act, 1948 (N.S.W.) was assented to and under that Act as from 1st January 1949 the City of Sydney, as reconstituted by the Act, became subject to ’the Local Government Act 1919-1948 (N.S.W.), and in particular to s. 309 and sched. 7 which had the effect of prohibiting the erection on the said land of a building of the height and floor space proposed by the defendants to be erected by the plaintiff company when formed.

28. Notwithstanding that the defendants were at all material times aware of the matters referred to in the last preceding paragraph hereof they proceeded with the incorporation of the plaintiff com pany and after its incorporation sold to it and caused it to purchase the said land and the shares without disclosing the said prohibition or restrictions and without disclosing the unfair profit which they themselves were making from the transaction.

29. No moneys had been paid to the plaintiff company in respect of the three signatory shares aforesaid or the share issued to Henry John Higgins as aforesaid but on or about 30th June 1949 the sum of £2 was drawn from the petty cash of the plaintiff company and applied in the purported payment of 10s. per share on each of the said four shares.

30. The defendants and each of them were at all material times promoters of the plaintiff company and as such promoters committed the following amongst other breaches of duty towards the plaintiff company :—

(a) Acquired property for resale to the plaintiff company and sold the same to the plaintiff company at a gross overvalue thereby wrongfully making an unfair profit for themselves.

(b) Sold such property to the plaintiff company as aforesaid without making proper disclosure of the following matters :— (i) Their respective interests in the transaction; (ii) The said profit

224 HIGH COURT

[1962-1953.

H. C. OF A.which they were making ; (iii) That the land being part of the 1952-1953.said property was subject to an equitable mortgage in favour of

TuAcra tliiixl party ; (iv) That in the then state of the law and of the

V.negotiations being conducted by the defendants the said land

M.andalay

could not be used for the purpose for which it was to be acquired

P t y .

Lt d .

by the plaintiff company.

(c)

Failed to secure the appointment of a board of directors of

the plaintiff:' company independent of themselves as such promoters

and vendors.

31. Norman Salon and Maxwell Colin Willard at all material times acted as directors of the plaintiff company and in that capacity committed with the knowledge and approval and for the benefit of the other defendants the following amongst other breaches of duty towards the plaintiff' company :—(a) Engaged the company to acquire property from themselves and the other defendants as vendors at a gross over-value, (b) Engaged the company to acquire the same by resolution at a meeting of directors of the plaintiff company at which they did not declare their respective interests. (c) Engaged the company to acquire the same by resolution pur ported to be passed by their votes as directors when they were disqualified from voting and there was no quorum present. (d) Acted as directors after they were disqualified from so doing. (e) Wrongfully paid away moneys of the plaintiff company to them selves and to others.

32. The plaintiff company had at all material times been ready and willing and still was ready and willing and thereby offered to retransfer to the respective defendants the shares in the defendant company which were transferred to the plaintiff company subject to any charge and lien to which the plaintiff company was entitled. 33. The plaintiff company feared that unless restrained by the order and injunction of the court the defendant company would sell, mortgage, alienate, or otherwise deal with the said land to the prejudice of the lien or charge thereon to which the plaintiff company was entitled under and by virtue of the matters hereinbefore set forth.

The plaintiff company claimed ;— referred to in par. 11 of the statement of claim.

(1) That it be declared that no binding and enforceable contract

was made by the plaintiff company to purchase the land in Wylde

(2) Alternatively if such a contract was made, that it be declared that it was a voidable contract and that it be ordered that the same be rescinded.

88 C.L.R.] OF AUSTRALIA.

225

(3) That the defendant company be ordered to deliver up to the R-

plaintiff company to be cancelled the contract for sale dated 23rd

1952-1953.

December 1949 referred to in par. 22 of the statement of claim. (4) That the defendants and each of them be ordered to pay to

T e a c y

Ma jid alay

the plaintiff company the sum of £24,132 16s. Od. referred to in

P t y . L t d .

par. 20 of the statement of claim together with interest thereon at such rate as the Court shall think fit from 21st January 1949 until payment.

(5) That the defendants and each of them be ordered to pay to the plaintiff company any legal and other costs properly incurred by the plaintiff company under the said supposed contract for the purchase of land and shares as aforesaid.

(6) That it be declared that the defendants are and each of them is bound to indemnify the plaintiff company against all debts and liabilities (if any) whether for Federal land tax municipal or water rates or in respect of proceedings instituted against the plaintiff company or otherwise which the plaintiff company has or may become subject and liable to pay for or on account of the land or shares or the dealings and transactions relating thereto set forth in the statement of claim.

(7) That the sum of £24,132 16s. Od. and interest thereon as afore said and the said costs and any amount due under the said indemnity be declared to be a charge upon the land and a lien upon the shares until payment.

(8) That the defendants and each of them be restrained by them selves their servants and agents from selling, mortgaging, alienating, or otherwise dealing with the land and shares in such a manner as to prejudice the charge and lien of the plaintiff company.

(9) That the defendants Ada Elizabeth May Withy and Joseph Griffith respectively be restrained by themselves their servants and agents from continuing or prosecuting the proceedings commenced by them in the Supreme Court of New South Wales in its common law jurisdiction referred to in pars. 24 and 25 of the statement of claim.

(10) Alternatively to the declarations and orders asked for in prayers (1) to (7) inclusive that the defendants and each of them be ordered to pay to the plaintiff company the sum of £18,932 16s. Od. being the difference between the price charged to the plaintiff company for the land and shares, namely, £24,132 16s. Od. and the value of the land and shares, namely, £5,200 Os. Od. together with interest at such rate as the court shall think fit from 21st January 1949 until payment.

VOL. L x x x v in .— 15

226 HIGH COUKT

[1952-1953.

H. C. OF A.(11) Alternatively that an account be taken of the profit made by 1952-1953.the defendants upon the sale to the plaintiff company of the land

'rii.-vcYand shares aforesaid and that the defendants be ordered to pay the

V.amount of such profit when ascertained to the plaintiff company

MANO.A.LAY

together with interest at such rate as the Court shall think fit

Pt y .

Lt i ).

from 21st Jaaiuary 1949 until payment.

(12) Alternatively that an incjuiry be had as to the damages suffered by the plaintiff company by misfeasance, breach of trust, breach of duty or otherwise by reason of the act or default of the defendants as promoters, directors, officers or agents of the plaintiff company and that the defendants be ordered to pay to the plaintiff company the amount of such damage when ascertained.

(13) That such other orders and declarations be made accounts taken inquiries had and directions given as to the Court may seem fit.

(14) That the defendants be ordered to pay the plaintiff company’s costs of this suit.

(15) That the plaintiff have such further or other relief as the nature of the case may require.

In their joint statement of defence the defendants Withy and Griffith said they did not know and could not admit the allegations appearing in the statement of claim in pars. 3-5, 7, 8, 9 (except the final allegation therein), 10, 11, 14, 15, 17-23, 27, 29 and 31. Similarly as regards par. 6, as to the transfer to Willard of 200 shares by Salon and of 50 shares by Mrs. Salon ; par. 12, except the final allegation which was denied ; par. 13, except the allegations as to the making of offers in writing to the plaintiff company to sell shares and land ; that with their knowledge or approval authority had been given to L. J. Hooker Ltd. to sell to members of the public home units in the plaintiff’s building project; and that the resolutions were a sham or a fraudulent device to secure the apparent consent of the plaintiff to the purchase of certain shares and the land; these allegations -were denied. In answer to pars. 24 and 25 they admitted that subsequent to March 1949, Salon paid to Withy £2,150 and to Griffith £500 but they did not know and did not admit the other allegations therein. The allegations in par. 26 were denied and those in pars. 28 and 30 were denied and not admitted. These defendants denied that at any time they knew or approved of or had any benefit from all or any of the acts and omissions alleged in par. 31 on the part of Salon or Willard. They submitted that the plaintiff had no equity entitling it to proceed against them or either of them in the equitable jursidiction of the Supreme Court, and that its proper remedy, if any, was at law and

88 C.L.R.] OF AUSTRALIA.

227

they craved the same benefit from that defence as if they had H. C. OF A.

pleaded or demurred to the statement of claim. They further

1952-1953.

submitted that the plaintiff was barred by laches acquiesence and

T ea c y

delay from claiming the relief sought or any relief.

Ma n d a l a y

The defendant Willard, in answer to pars. 9 and 10 of the state ment of claim, said that on 7th January 1949 there were only three shareholders in the plaintiff, all of whom were present at the general meeting mentioned in those paragraphs ; pars. 11 and 12, that at the general meeting of the plaintiff held on 7th January 1949 the shareholders therein had decided that the said shares should be bought by it at the price of £8 12s. Od. per share ; par. 13, that he denied that the resolutions referred to were a sham and a fraudulent device on his part to procure the apparent consent of the plaintiff to the purchase of the shares and the land, and he denied that the plaintiff had never consented to such purpose ; pars. 14 and 15, that he did not know and could not admit these allegations ; par. 17, that he did not know and could not admit these allegations (the allegation that he and Salon were directly interested was not referred to) ; par. 22, that at the date therein mentioned the Certificate of Title was not held by the Bank of New South Wales, King and George Streets branch, and he denied that he had no authority from the plaintiff to sign the contract on its behalf; pars. 24 and 25, that no transfer of shares by Withy or Griffith had been presented at the time when transfers of shares of the defendant company by other shareholders therein to the plaintiff were made and approved ; par. 26, that at the time of the transfer of the land to the defendant company he was not a shareholder in that company, and that he was not at that time or in any way connected with the defendant company. He denied that all the defendants then had and he did not know and could not admit that any of the defendants then had the intention that the land should be acquired by the plaintiff to be formed for the purpose of erecting thereon fiats as alleged and he denied that he was at any material time a promoter of the plaintiff; pars. 27 and 28, that prior to 1st January 1949 the Sydney City Council had granted a preliminary approval to the erection on the land of the proposed building. He denied that he was a promoter of the plaintiff, that he proceeded with the incorporation of that company, that he caused it to purchase the land and the shares, and that he was making an unfair- profit from the trans action ; par. 29, that he did not know and could not admit the facts alleged therein ; par. 30, that he denied that he was a promoter of the plaintiff, that, therefore, as such promoter he committed any breaches of duty towards the plaintiff, that he in fact acquired

P t y .

L t d .

228 HIGH COURT

[1952-1953.

H. C. ON A. property for resale to the plaintiff and sold it to that company

at a gross overvalue, that he wrongfully made an unfair profit

T bacyfor himself, that he sold the property to the plaintiff without making

V.proper disclosure to it of any matters which he had a duty to

Man da la y

disclose (he repeated his answers to pars. 27 and 28 as above) ;

P t y .

Ltd.

par 31, that he denied that he committed with the knowledge and approval or for the benefit of the other defendants or at all breaches of duty towards the plaintiff alleged in par. 31, that he repeated statements previously made as above, and denied that he wrong fully paid any moneys of the plaintiff to himself or to others, and that he did not know and could not admit that Salon committed the alleged breaches of duty or any of them towards the plaintiff; and par. 32, that he did not know and could not admit that the plaintiff had at all times been and still was ready and willing to retransfer to the respective defendants the shares in the defendant company which were transferred to the plaintiff.

The defendant Mavis Lorraine Salon, in answer to pars. 12, 14, 15 and 29 of the statement of claim, said that she did not know and could not admit the allegations therein ; par. 13, that she did not know and could not admit that Salon, Willard and Tracy with the knowledge and approval of the other defendants and purporting to act on behalf of the plaintiff had already given authority to L. J. Hooker Ltd. to sell to members of the public home units in the plaintiff’s building project such units to be acquired by application for shares in the plaintiff. She denied that the said resolutions were a sham and a fraudulent device on the part of the defendants to procure the apparent consent of the plaintiff to the purchase of the said shares and land and that the plaintiff had never consented to such purchase ; par. 26, that she did not know and therefore could not admit that she was at all material times a promoter of the plaintiff; par. 28, that she did not disclose the said prohibition or restrictions because she was unaware that they affected the land, and she denied that she was making any unfair profit from the transaction as alleged ; and par. 30, that she denied all the allegations made therein.

The defendant Norman Salon admitted pars. 4, 7-11, 18 and 23 of the statement of claim, and as to par. 13, said that he denied that the said resolutions were a sham and a fraudulent device on the part of the defendants to procure the apparent consent of the plaintiff to the purchase of the said shares and land and that the plaintiff had never consented to such purchase ; par. 15, that he denied that the land was of no greater value than £5,200 and that the said shares in the defendant company were of no value and

88 C.L.R.] OF AUSTRALIA.

229

that he well knew such to be the fa c t;

par. 28, that he did not dis

close the said prohibition or restrictions because he was unaware that

1952-1953.

they affected the land, and he denied that he was making any unfair

T ra cy

profit from the transaction ; par. 30 (a) that he denied that he sold

Ma n d a l a y

property to the plaintiff at a gross overvalue thereby making an

P t y .

L t d .

unfair profit for himself; par. 30 (b), that he disclosed to the plaintiff that he was interested in the transaction and that at the time when he made such disclosure namely on the 3rd and 7th days of January 1949 the directors and shareholders of the plaintiff knew fully the nature and intent of his interest in the defendant company and the price at which the land had been purchased from Chatterton ; par. 31 (a), that he denied that he engaged the company to accjuire at a gross overvalue ; and par. 31 (e), that he denied that he wrongfully paid away moneys of the plaintiff to himself and to others.

In an amended statement of defence, the defendant Tracy, as to pars. 9 and 10 of the statement of claim, said that on 7th January 1949 there were three shareholders and no more in the plaintiff company all of whom were present at the said general meeting ; pars. 11 and 12, that a t that general meeting the shareholders therein had decided that the said shares should be bought by it at the price of £8 12s. Od. per share and that the land should be bought at the price of £2,650 ; par. 13, that he denied (a) that purporting to act on behalf of the plaintiff or at all had already given authority to L. J. Hooker Ltd. to sell to members of the public home units in the plaintiff’s building project on the land such units to be acquired by application for shares in the plaintiff or otherwise, and (b) that the said resolutions so recorded were a sham and a fraudulent device on his part to procure the apparent consent of the plaintiff to the purchase of the said shares and the land, and he denied that the plaintiff had never consented to such purchase ; pars. 14 and 15, that he did not know and could not admit these allegations ; par. 17, that he did not know and could not admit that Salon and Willard or either of them were or was bound to declare the nature of their respective interests in the contract at the meeting of directors held on 7th January 1949 or were or was not entitled to vote in respect thereof or to be taken into account in determining whether a quorum was present at that meeting or that the said defendants or either of them did not duly declare their interests and that there was no quorum present; par. 22, that at the date therein mentioned the Certificate of Title was not held by the Bank of New South Wales, King and George Streets branch, and he denied that Willard had no authority from the plaintiff to sign the contract on its behalf;

230 HIGH COURT

[1952-1963.

H. C. o r A. pars. 24 and 25, that no transfer of shares by Withy or by Griffith ""1952-1 or):}*liad been presented at the time when transfers of shares of the defen

9 'rac:vdant company by otlicr shareholders therein to the plaintiff were

V.made and approved, and he denied that he caused to be paid out

Man dalay of the moneys of the plaintiff to Withy the sum of £2,150 and to

1‘t v .

Lt d .

Griffith the sum of £500, or any other sum ; par. 26, that at the time of the transfer of the land to the defendant company he was not a shareholder in the company and that Willard, Withy and Griffith were not shareholders nor was any of them a shareholder in the defendant company at such time. He denied that he or all the defendants then had and he did not and could not admit that any of the defendants then had the intention that the land should be acquired by the plaintiff to be formed for the purpose of erecting thereon flats as alleged or for any purpose, and he denied that he was at any time a promoter of the plaintiff; pars. 27 and 28, that prior to 1st January 1949 an application had been made to the Sydney City Council for approval to the erection on the land of the proposed building and that a preliminary approval had been granted, and that he was not a promoter of the plaintiff. He denied that he proceeded with incorporation of the plaintiff, that he caused it to purchase the said land and shares, and that he was making an unfair profit from the transaction ; par. 29, that he did not know and could not admit that no moneys were paid to the plaintiff in respect of the three signatory shares or the shares issued to Higgins ; par. 30, that he denied that he was a promoter of the plaintiff, therefore as such promoter he committed any breaches of duty towards the plaintiff, that he in fact acquired property for resale to the plaintiff and sold it to the plaintiff at a gross overvalue, that he wrongfully made an unfair profit for himself, that he sold the property to the plaintiff without making proper disclosure to it of his interest in the transaction or proper disclosure of any matters which he had a duty to disclose, that the land could not be used for the purpose for which it W'̂ as to be acquired by the plaintiff, that he was a promoter of the plaintiff, that he had any obligation to the plaintiff to secure the appointment of a board of directors indepen dent of the promoters and vendors, and that he failed to secure such appointment. He repeated the statements made by him in answ'er to pars. 27 and 28 ; par. 31, that he did not know and could not admit that Salon and Willard committed any of the breaches of duty towards the plaintiff alleged therein ; and par. 32, that he did not know and could not admit the facts alleged therein. In answer to the statement of claim generally he offered to refund to the plaintiff the sum of £567 12s. Od. together with interest at such rate

88 C.L.R.] OF AUSTRALIA.

231

and from such date as the Court determined and to accept a transfer H. C. OF A.

of the 66 shares from the plaintiff and to pay costs, stamp duty

1952-1953.

and other expenses proper of such transfer.

Tea c y

The plaintiff joined issue with the respective defendants upon their statements of defence save in so far as those statements contained

Ma n d a l a y

P t y . L t d .

admissions.

Statements of defence filed out of time on behalf of the defendant the R.S.C. Trading Co. Pty. Ltd. and the defendant Mavis Lorraine Salon, respectively, were, upon application therefor, and after argument, allowed by the Court to be used.

Roper C.J. in Eq., declared inter alia, that the contract for sale between the plaintiff and the defendant R.S.C. Trading Co. Pty Ltd. of land in Wylde Street, Potts Point, the formal substituted contract for sale dated 23rd December 1949 executed by the same parties of the same land and the contracts for sale between the plaintiff and each of the personal defendants of their respective parcels of shares in the R.S.C. Trading Co. Pty. Ltd. were respectively voidable contracts and they were ordered to be and were rescinded. I t was ordered (a) that the R.S.C. Trading Co. Pty. Ltd. deliver up to the plaintiff to be cancelled the said contract for sale dated 23rd December 1949 and the counterpart thereof, and (b) that the defendants jointly and severally pay within twenty-eight days to the plaintiff the sum of £22,482 16s. Od. together with interest at four per cent per annum upon the respective amounts constituting that sum from the respective dates of payment of those amounts by the plaintiff until payment, as set out. I t was further declared that the defendants were jointly and severally liable to pay to the plaintiff all legal and other costs properly incurred by the plaintiff under or in connection with the respective abovementioned contracts for sale of land and shares, and it was ordered that upon the amount of the costs being ascertained by the Master in Equity the defendants and each of them pay the amounts thereof within fourteen days after the filing of the Master’s certificate. The defendants were declared to be jointly and severally bound to indemnify the plaintiff against all debts and liabilities which the plaintiff had or might become liable to pay for or on account of the land or shares or the proceedings, dealings and transactions relating thereto set forth in the statement of claim and they were ordered to pay within a specified period the amount thereof as determined by the IMaster in Equity. The said sum of £22,482 16s. Od. together with interest thereon, and the amounts of the said debts and liabilities were declared a charge upon the

2H2

HIGH COURT

[1962-1953.

K. (J. o r A. ]n ,„ | „ p ,„ , I-I,,. until payment. Each of the defen-

l!)r)2-li)r):i. njHtraiued Ity tliemHclvcH their Hcrvants and agents from

T haoyselling, mortgaging, alienating or otherwise dtsaling with that land

V.and sha,r(!s in such a mamuir as to prejudice the said charge or lien

Mandalay

of th(‘, [jlaintilf, and uf)on payment of the said sum interest and

I ' l'Y.

Lt d .

a-moutd,s tin; said (diargt! and lien to be discharged and upon request ther(!for the sa,id shar(!S to be transhirred to the respective defendants who tra,ns(e.rre,d them to the f)laintiff. The defendants Withy and (jlrillith resp(!ctiv(;ly were restrained by themselves their servants a,nd agents from continuing or prosecuting certain common law proc(H‘,dings respectively commenced by them against the plaintiff in March 1919.

From that decision the parties other than Miandalay Pty. Ltd. a[)pealed to the High Cemrt.

F. G. Myers Q.C. (with him A. B. Kerrigan), for the appellant Tracy. There was not any evidence of anything done by the appellant exce[>t as secretary of R.S.C. Trading Co. Pty. Ltd. and secretary of Mandalay Pty. Ltd., excluding the purchase and sale of shares. He did not have any interest in the property. There is not any suggestion that the appellant took any active part in floating the company, nor is there any evidence of concealment that the R.S.C. Trading Co. Pty. Ltd. and the defendants were vendor to Mandalay Pty. Ltd. The shareholders were only interested in getting a f la t; they were not interested in the vendor’s profit. Every defendant was charged with fraud, but there was not any atLunpt to prove it and mme was found. The appellant who did nothing but contract to sell 66 shares for £567 has been declared liable to £20,000 and interest and all the costs. If selling his owti property a [)roTtioter must see that the company has an inde|)endent board. He is not prevented from making ])rofits nor is he bound to disck)se a profit. There was not any evidence that th(‘- ap[)ellatd'. was a promoter; Palmer s Com'pany Precedents, 15th ed. (19.33), pages 107, 1 10, 111 ; Eynma Silver Mining Co. Ltd. V. Ijcwis & Son (1) ; Lydney & Wigpool Iron Ore Co. v. Bird (2). If the appellant was a promoter he owed a duty. The consequence of the l)reach of duty was that the contract he made was liable to be rescinded {Frlanger v. New Sombrero Phosphate Co. (3) ). The directors were discjualified before the contracts were made in January 1949, therefore there were not any contracts. The consent

(1) (IS79) 4 C.i’.O. S9(i, at pj). 407,

(3) (1878) 3 App. Cas. 1218, at pp.

408. J2.30, 1250.

(2) (1880) 33 Ch. 1). 8,5, at pp. 92-94.

88 C.L.R.] OF AUSTRALIA.

233

H. C. OF A. 1952-1953.

of corporators cannot make any difference. Salon and Willard

were directly and indirectly interested—in shares and land.

They

passed a resolution approving of the purchase of shares and land.

T racy

They were disqualified from voting, therefore there was not any

Ma n d a l a y

resolution, and, hence, no acceptance. Article 88 only helps

P t y .

L t d .

where the director’s capacity is not in question {People s Prudential Assurance Co. Ltd. v. Australian Federal Life & General Assurance Co. Ltd. (1) ; Grant v. John Grant & Sons Pty. Ltd. (2)).

A. Bridge (with him P. G. Evatt) for the appellants Withy and Griffith. The argument addressed to the Court by Mr. Myers Q.C. is adopted on behalf of these' appellants. Neither Withy nor Griffith was a promoter : Buckley on The Companies Acts, 12th ed. (1949), pp. 108, 109. Neither of them was conscious of what was occurring. They were concerned with two acts only, namely, they invested money and were consulted about the loan.

C. A. Walsh, for the appellant Willard.

This appellant was

never in control of the land.

K. W. Asprey Q.C. (with him D. J. Benjamin) for Norman Salon, Mrs. Salon and R.S.C. Trading Co. Pty. Ltd.

N. H. Bowen (with him R. Else-Mitchell) for the respondent Mandalay Pty. Ltd. The adoption of a resolution or matter by a meeting of shareholders may be vitiated by lack of honesty or presence of fraud. The procedure at the general meeting was not honest. The company did not have any money. The later activities in getting in the money show that it was a scheme to get the money for the promoters. The real reason for the change of scheme was because the proportionate interests of each had been altered. On 31st December 1948 all the shareholders fixed them own price and the sale was a farce. The company never really had an opportunity of affirming or refusing. The failure to call a general meeting, although asked for in August 1949 and again in October 1949, indicates dishonesty. They were all promoters. Salon committed the breach of trust and the others were involved in i t : see Lydney & Wigpool Iron Ore Co. v. Bird (3) and Emma Silver Mining Co. Ltd. v. Lewis & Son (4). There was not any competent general meeting until the flotation shares had been issued.

(1) (1935) 35 S.R. (N.S.W.) 253 ; 52

(3) (1886) 33 Ch. D. 85.

W.N. 72.

(4) (1879) 4 C.P.D. 396.

(2) (1950) 82 C.L.R. 1, a t p. 33.

234 HIGH COURT

[1952-1953.

H. C. OF A. Corporators, being promoters or the majority being promoters, 1052-1953.were not capable of binding the company. There were not any

'I'h/Vcy

legal rights to any particular H at; see Gluckslein v. Barnes (1) ;

V. In re Olym/pia Ltd. (2). An informal meeting may be good enough

M.\N DA1..A.Y

{In re Express Engineering Works Ltd. (3) ). North-West Transporta

Pt y .

L t d .

tion Co. Ltd. V. Beatty (4) was not a “ promoter ” case. Shares in a ship were involved in llatsall v. Griffith (5) and Keay v. Fenwick (G). The contract is voidable. Even if separate contracts, in a case of this type ecpiity would still decree joint and several liability. Rescission in eipnty is different from common law. It can take accounts as to profits and interest. If complete restitution is not possible rescission may still be granted. The plaintiff cannot be compelled to give back all the land and not be able to get all its money. I t may only get portion of the payments. To relieve is within the consequential power. As to rescission see Phosphate Sewage Co. v. Hartmont (7). A remedy is available even in rescis- Sion.For the consequences of fiduciary relationship see Cavendish Bentinck v. Fenn (8) and Halsbury’s Laws of England, 2nd ed., vol. 5, p. 109.

Cur. adv. vult.

March 12.

T h e Co u r t delivered the following written judgment:—

These are appeals by each of the defendants from a decree of the Supreme Court of New South Wales in its equitable jurisdiction (Roper C.J. in Eq.) in which the plaintiff was granted relief on the basis that all the defendants were its promoters and that certain contracts which they had made with the plaintiff had been entered into without proper disclosure to the plaintiff and were voidable and should be rescinded.

Before referring to the decree in more detail it will be convenient to refer to the material facts. They commence early in 1948. The defendant company was then in existence having been incor porated on 14th September 1945. But it was not carrying on any business. I t had first carried on the business of making and selling toys and later of selling bricks, but it had disposed of the latter business to the defendant Willard at the end of 1947. Its authorized capital was £2,500 divided into 2,500 shares of £1 each. But only 1,002 shares had been issued. The defendant Salon held

(1) (1900) A.C. 240.(6) (1876) 1 C.P.I). 745.

(2) (1898) 2 Ch. 153, at js. 165.(7) (1877) 5 Ch. 1). 394, at p. 455.

(3) (1920) 1 Ch. 466.

(8) (1887) 12 App. Cas. 652, at pp.

(4) (1887) 12 App. Cas. 589.658-659.

(5) (18,34) 2 C. & M. 679 [149 E.R.

933].

88 C.L.R.] OF AUSTRALIA.

235

668 of those shares and his wife, the defendant Mavis Lorraine H. C. OF A.

Salon held 334. Salon had been a director of the company from

1952-1953.

its commencement. Mrs. Salon was appointed a director on 14th

T ea c y

April 1948. Early in 1948 Salon had made a contract for the

Ma n d a l a y

purchase of a block of land in Wylde Street, Potts Point, with a view

P t y . L t d .

to erecting thereon a modern building of ten storeys divided into a

Dixon C.J.

number of flats of different sizes. Salon made the purchase on

Williams J. Taylor J.

behalf of the defendant company and intended to promote another company to which the defendant company would sell the land at a profit. The new company would then erect the building and sell the flats.

In June 1948, Salon persuaded the defendants Griffith and Miss Withy, who were associated in other business transactions, to purchase 250 shares each in the defendant company from himself and Mrs. Salon, at £10 per share, the inducement held out to them being that by so doing they would become in effect half owners of the land at Potts Point and would receive half the profit on the sale of that land to the new company. The price at which the land was purchased by Salon, according to the contract, was £6,000 but Griffith and Miss Withy said that he told them that he had paid £8,000, that he proposed to sell the land to the new company for £24,000, and that the profit would be £16,000 of which they would receive half, thereby making a profit of £3,000 on their investment of £5,000 in shares in the defendant company. Salon lent the £5,000 received from Griffith and Miss Withy to the defendant company and it was used towards payment of the purchase money for the land which was transferred to the defendant company towards the end of June 1948. Miss Withy received a minor post in the office of the defendant company at a salary of £5 a week less tax. The defendant Tracy was the secretary.

Salon went ahead with the preparations for the new building. He obtained the general approval of the City Council to sketch plans prepared by an architect and commenced negotiations with the Maritime Services Board either to purchase or obtain rights of light over a small adjoining piece of land necessary to the success of the scheme. The board eventually agreed to sell this land for £250. Towards the end of 1948 Salon wanted to raise some money on the security of the land at Potts Point, but Griffith and Miss AVithy objected. Salon and Mrs. Salon then sold 250 of their shares in the defendant company to Willard for £10 each. Willard, like Griffith and Miss AVithy, also knew of the proposed formation of the new company and bought his shares with a view to making a profit out of the sale of the land to the new company.

23G HIGH COURT

[1962-1953.

H. C. OF A.

The j)laintifT company was incorporated on 10th December 1948,

11)52-1953.as a proprietary company limited by shares under the provisions

T hacy

of the Companies Act, 1936-1940 (N.S.W.). The land was not

V.immediately sold to the new company. Salon conceived the idea

Mandalay

that the profit on the sale mipht be taxable and proceeded to devise

Pt y .

L t d .

a new scheme by which the land would be sold by the defendant

Dixon

IVillimu.-i ,1.

company to the plaintiff for £2,650, the amount required to discharge

Taylor ,1.

the debts of the defendant company, and the shareholders in the defendant company would sell their shares to the plaintiff at £8 12s. Od. per share. Griffith and Miss Withy naturally objected to the new scheme, because under it they would not receive a profit on the transaction but would make a loss of £700. After some negotiations Griffith and Miss W îthy said they would be satisfied if they got their money back, and Salon and Mrs. Salon agreed to give Griffith and Miss Withy promissory notes for £700 to make good the loss.

At a meeting of directors of the defendant company held on 29th December 1948, those present being Salon and Mrs. Salon as directors and Tracy as secretary, applications were received and accepted from Mrs Salon, Willard and Tracy for the issue of the whole of the unissued capital of the defendant company, namely 1,498 shares. These shares were allotted to the respective applicants at a sub sequent meeting of directors held on 4th January 1949, Willard receiving 342, Tracy 66 and Mrs. Salon 1,090 shares.

The share holdings in the defendant company were then as follows : Salon 218 shares, Mrs. Salon 1,124 shares, Willard 592 shares, Griffith and Miss Withy 250 shares each and Tracy 66 shares. At a meeting of directors of the defendant company held on 31st December 1948, at which Salon and Mrs. Salon were present as directors and Tracy as secretary, it was reported that all the members of the defendant company wished to offer their share holdings to the plaintiff at the price of £8 12s. Od. per share in conjunction with the land at Potts Point at the price of £2,650 and the secretary was instructed to make that offer in writing to the plaintiff. Each of the shareholders about this time signed a letter offering his or her shares to the plaintiff at £8 12s. Od. per share. What purported to be a general meeting of the plaintiff was held on 7th January 1949. There were then only three shareholders, Willard, Salon, and Miss Withy, each of whom had signed the memorandum and articles of association of the plaintiff for one share. Willard and Salon were appointed directors and Tracy secretary of the company and the directors were instructed to negotiate for the purchase by the plaintiff of the whole of the shares

88 C.L.R.] OF AUSTRALIA.

237

in the defendant company at £8 12s. Od. per share and also for the H. C. of A.

purchase of the land at Potts Point. A meeting of directors of the

195^2^53.

plaintiff "was held on 10th January 1949, Willard and Salon being

T racy

present as directors and Tracy as secretary. At this meeting the

Ma n d a l a y

directors resolved to accept the offer of the shares in the defendant

P t y . L t d .

company at £8 12s. Od. per share and to accept the offer of the

Dixon C.J.

defendant company to sell the land at Potts Point for £2,650.

■Williams J. Taylor J.

On the same day, presumably at another but later meeting of directors, at which the same persons were present, an application by one Greene for 1,800 shares in the plaintiff accompanied by a cheque for £900 was accepted and the shares were allotted.

The result of accepting the offers of the defendants was, as his Honour pointed out, that a company with a capital of £3 had agreed to pay £24,150 for the land and shares. Obviously the money to pay this sum and to finance the erection of the building, estimated to cost about £140,000, had to come from outside sources. The plaintiff soon got busy. I t had already received the above applica tion from Greene and it placed the business of selling the flats in the building which had not been commenced and for which final approval had not been obtained in the hands of a company, L. J. Hooker Ltd., which carries on the business of real estate agents. Mr. Lightfoot, an associate director of that company, was in charge of the selling and he commenced operations early in January 1949. Inquirers were informed that the building was to be of ten storeys comprising basement, ground floor and eight upper floors each comprising seven self-contained home units of which the basement, ground floor and seven flats on the first floor would be let and the rent would pay the outgoings and running expenses of the building and the rest of the flats, forty-nine in all, would be sold as home units. I t was said that it was expected that the building would be ready for occupation in January 1950, and that each unit would be sold separately and would be acquired by the purchase of £1 shares in the plaintiff company, payments to be 10s. per share on application and the balance by four equal quarterly instalments. The public, no doubt owing to the housing shortage, rose to the bait. Applications for 52,102 shares were received by the plaintiff and the shares allotted in the next few months. The sum of £29,958 was raised by the issue of these shares and was used very largely to pay for the land and the shares in the defendant company sold to the plaintiff. The defendant company was paid £2,650, Salon £1,866 4s. Od., Mrs. Salon £9,657 16s. Od., Willard £5,091 4s. Od., and Tracy £567 12s. Od. The dates these payments were made appear later. Griffith and Miss Withy were not so

238 HIGH COURT

[1962-1953.

H. C. OF A.fortuiiiite. Tliey received notliing at first and had to commence 1952-1953.actions against the plaintiff after which Griffith received £500 and

T racyMiss Withy £2,150. All these payments total £22,482 16s. Od. The

oilier shareholders have, but Griffith and Miss Withy have not, trans

M an d a l a y

ferred their shares to the plaintiff.

The contract of sale of the land to

1’t y .

Lt d .

Dixon t'.,r. the new company was not signed until 23rd December 1949, although

Willium.'i

the defendant company was paid for the land on 21st January of

Til y lor J .

that year. The building has never been erected. An amendment of the law on 1st January 1949 made it impossible to carry out the intended plans. I t was hoped that the law would be altered so that the project could proceed, but in October 1949 the plaintiff received advice that nothing could be done.

In the statement of claim the plaintiff sought relief on four alternative bases :—

(1) that the contracts of sale of the land and the shares were all part of one inseverable transaction, the whole of which was voidable and should be avoided, the contracts being cancelled and each of the defendants being held jointly and severally liable to repay the whole of the moneys paid by the plaintiff;

(2) that the defendants should be ordered to pay the plaintiff £18,932 16s. Od. alleged to be the difference between the price charged to the plaintiff for the land and shares and their real value ; (3) that an account should be taken of the profits made by the sale to the plaintiff of the land and shares and that the defendants should be ordered to pay the amount of such profits to the plaintiff; (4) that an inquiry should be had as to the damages suffered by the plaintiff by misfeasance, breach of trust, breach of duty or otherwise by reason of the act or default of the defendants as promoters, directors, officers or agents of the plaintiff and that the defendants should be ordered to pay to the plaintiff the amount of such damages when ascertained.

His Honour gave the plaintiff relief on the first of these bases and ordered that each of the contracts should be rescinded and that the defendants jointly and each of them severally should pay the sum of £22,482 16s. Od. together with interest at four per cent, per annum upon the respective amounts constituting that sum from the respective dates of payment of those amounts by the plaintiff until repayment; that is to say upon £2,650 from 21st January 1949 (the amount paid to the defendant company) ; £1,866 4s. Od. from 28th January 1949 (the amount paid to Salon) ; £5,091 4s. Od. from 28th February 1949 (the amount paid to Willard) ; £567 12s. Od. from 13th April 1949 (the amount paid to Tracy); £9,657 16s. Od. from 26th April 1949 (the amount paid to

88 C.L.R.] OF AUSTRALIA.

239

Mrs. Salon) ; £2,150 from 17th May 1949 (the amount paid to H. C.

OF A.

Miss W ithy); £500 from 19th August 1949 (the amount paid to

1952-1953.

Griffith).

T racy

His Honour also declared that (1) the defendants are jointly and each of them is severally liable to pay to the plaintiff all legal

Ma n d a l a y

P t y . L t d .

and other costs properly incurred by the plaintiff under or in con

Dixon C.J.

nection with the contracts for the sale of the land and shares (2)

Williams J. Taylor J.

the defendants are jointly and each of them is severally bound to indemnify the plaintiff against all debts and liabilities (if any) whether for Federal land tax, municipal or water rates or in respect of proceedings against the plaintiff or otherwise which the plaintiff has or may become liable to pay for or on account of the land or shares or the proceedings dealings and transactions relating thereto set forth in the statement of claim.

His Honour ordered that when the whole of the purchase money £22,482 16s. Od. had been repaid with interest and these other liabilities had been discharged, the plaintiff should upon their request and at their cost transfer the shares to the respective defendants who transferred the same to the plaintiff.

His Honour ordered the defendants jointly and severally to pay the plaintiff’s costs of the suit up to and inclusive of the decree. Further consideration of the suit and all further questions of costs were reserved.

We are of opinion that the basis on which his Honour granted relief was the proper basis. The land and shares sold to the plain tiff were assets owned by the respective vendors at law and in equity. They were not assets which the vendors held on trust for the plain tiff. They were the absolute property of the defendants. The plaintiff could not affirm the contracts of sale and at the same time ask for an account of profits or for damages as this would be, in effect, asking the court to vary the contracts of sale and order the defendants to sell their assets at a lesser price. In Cook v. Decks (1) Lord Buckmaster, L.C., delivering the judgment of the Privy Council said : “ In their Lordships’ opinion the Supreme Court has in sufficiently recognized the distinction between two classes of case and has applied the principles applicable to the case of a director selling to his company property which was in equity as well as at law his own, and which he could dispose of as he thought fit, to the case of a director dealing with property which, though his own at law, in ec|uity belonged to his company. The cases of North-West Transportation Co. Ltd. v. Beatty (2) and Burland v. Earle (3)

(1) (1916) 1 A.C. 554.(3) (1902) A.C. 83.

(2) (1887) 12 App. Cas. 589.

240 HIGH COURT

[1952-1953.

H. C. OF A. ijQj;]) belonged to the former class. In each, directors had sold 1952-1<)5:l company property in which the company had no interest

at liiw or in ecpiity.

If the company claimed any interest by reason

Til AC Y

of the transaction, it could only be by affirming the sale, in which

Manda la y case such sale, though initially voidable, would be validated by

P t y .

Lt d .

subsoipient ratification.

If the company refused to affirm the sale

Dixon C..I.

Williams J. the transaction would be set aside and the parties restored to their

Taylor J.

former position, the directors getting the property and the company receiving back the purchase price. There would be no middle course. The company could not insist on retaining the property while paying less than the price agreed. This would be for the Court to make a new contract between the parties. I t would be quite another thing if the director had originally acquired the property which he sold to his company under circumstances which made it in equity the property of the company. The distinction to which their Lordships have drawn attention is expressly recog nized by Lord Davey in Burland v. Earle (1) and is the foundation of the judgment in North-West Transportation Co. Ltd. v. Beatty (2) and is clearly explained in the case of Jacobus Marler Estates v. Marler (House of Lords, April 14th, 1913) a case which has not hitherto appeared in any of the well-known reports ” (3). (It is now reported in (4) and (5)).

Promoters may sell their property to the new company but they are under a fiduciary duty to disclose to the new company that they are doing so and under a duty to place it in a proper position to decide whether to accept the offer or not by appointing an indepen dent board and fully disclosing the whole position to that board. In Erlanger v. New Sombrero Phosphate Co. (6) Lord Penzance said : “ I t was the vendors, in their character of promoters, who had the power and the opportunity of creating and forming the company in such a manner that with adequate disclosures of fact, an independent judgment on the company’s behalf might have been formed. But instead of so doing they used that power and oppor tunity for the advancement of their own interests. Placed in this position of unfair advantage over the company which they were about to create, they were, as it seems to me, bound according to the principles constantly acted upon in the Courts of Equity, if they wished to make a valid contract of sale to the company, to nominate independent directors and fully disclose the material facts ” (7). Lord Cairns, L.C. said : “ it is now necessary that I

(1) (1902) A.C. 83.(5) (1913) 85 L.J. (P.C.) 167 (ii).

(2) (1887) 12 App. Gas. 689.(6) (1878) 3 App. Gas. 1218.

(3) (1916) 1 A.C., at pp. 563, 564.(7) (1878) 3 App. Gas., at p. 1229.

(4) (1913) 114 L.T. 640 (n).

88 C.L.R.] OF AUSTRALIA.

241

should state to your Lordships in what position I understand the

of A

promoters to be placed with reference to the company which they

1952-1953.

proposed to form. They stand, in my opinion, undoubtedly in a

T e a c y

fiduciary position. They have in their hands the creation and

Ma n d a l a y

moulding of the company ; they have the power of defining how,

P t y . L t d .

and when, and in what shape, and under what supervision, it shall

Dixon C.J.

start into existence and begin to act as a trading corporation. If

Williams J.

Taylor J.

they are doing all this in order that the company may, as soon as it starts into life, become, through its managing directors, the purchaser of the property of themselves, the promoters, it is, in my opinion, incumbent upon the promoters to take care that in forming the company they provide it with an executive, that is to say, with a board of directors, who shall both be aware that the property which they are asked to buy is the property of the promoters, and -who shall be competent and impartial judges as to whether the purchase ought or ought not to be made ” (1). See also Omnium Electric Palaces Ltd. v. Baines (2).

I t is clear from these passages, and there are many others to the same effect, that in the absence of approval by an independent board after full disclosure sales by a promoter of his property to the new company are in the same position as any other sales by a trustee of his property to a person towards whom he stands in a fiduciary relation. That is to say they are voidable at the mere option of the purchaser. But if the purchaser decides to affirm the transaction he must affirm it according to its terms. He cannot ask the Court “ to fix a proper price between vendor and purchaser, and estimate the damage with reference to such price. This the Court cannot do ” per Lord Parker of Waddington in Marler’s Case (3).

The word “ promoter ” has been said on many occasions to be a word which has no very definite meaning. I t is sufficient to refer to the discussion of its meaning in Emma Silver Mining Co. Ltd. V. Lewis & Son (4). There Lindley J., as he then was, said : “ With respect to the word ‘ promoters ’, we are of opinion that it has no very definite meaning : see Twycross v. Grant (5). As used in con nection with companies the term ‘ promoter ’ involves the idea of exertion for the purpose of getting up and starting a company (of what is called ‘ floating ’ it) and also the idea of some duty towards the company imposed by or arising from the position which the so- called promoter assumes towards it. I t is now clearly settled that

(1) (1878) 3 App. Gas.at p. 1236.(4) (1879) 4 C.P.D. 396.

(2) (1914) 1 Ch. 332.

(5) (1877) 2 C.P.D. 469.

(3) (1913) 114 L.T. 640 (n), a t p. 641; 85 L.J. (P.C.) 167(n), a tp . 168.

VOL. LXXXVIII.---16

242 HIGH COURT

[1952-1953.

H. C. OF A.persons who get up and form a company have duties towards it

1952-1953.before it comes into existence ; see Bagnall v. Carlton (1) and per T r .vcyLord Cairns C., in Erlanger v. New Sombrero Phosphate Co. (2).

V.Moreover, it is in our opinion an entire mistake to suppose that

Man da la y after a company is registered its directors are the only persons who

P tal

L t d .

are in such a position towards it as to be under fiduciary relations

Dixon C..1.

Williams J.

A person not a director may be a promoter of a company which is already incorporated, hut the capital of which has not been taken up, and which is not yet in a position to perform the obligations imposed upon it by its creators. The defendants say they owed no duty to this company. But in our opinion this contention cannot be supported. In the first place, the defendants left Park to get up the company upon the understanding that they as well as he were to profit by the operation ; they were behind him ; they were in the position of undisclosed joint adventurers; and in respect of their interest his obligations and theirs are in our opinion undistinguishable. The defendants in fact were, partly by assisting Park and partly by leaving him to do the best he could for them as well as himself, in the position of promoters of the company ” (3). (The italics are ours.)

to it.

Taylor J.

In the present case Salon was admittedly a promoter of the plain tiff. He was directly responsible for its incorporation. I t was on his instructions that the memorandum and articles of association were prepared and registered and incorporation effected. Some of the other defendants also took an active part in the promotion of the plaintiff, and we shall refer shortly to some of these activities. But it is not only the persons who take an active part in the forma tion of a company and the raising of the necessary share capital to enable it to carry on business who are promoters. I t is apparent from the passage cited that persons who leave it to others to get up the company upon the understanding that they also will profit from the operation may become promoters. Salon, Griffith and Miss Withy gave evidence ; Mrs. Salon, Willard and Tracy did not do so. Willard, Tracy and Mrs. Salon were, in our opinion, all promoters. Willard bought his original parcel of 250 shares from Salon and Mrs. Salon with a view to sharing in the profit expected to be made out of the incorporation of the new company. On 29th December 1949, the balance of the capital of the defendant company was allotted at par, when Willard received 342 shares, Mrs. Salon 1,078 shares and Tracy 66 shares. The whole purpose of this allotment was to enable the recipients to resell the shares

(1) (1877) 6 Ch. D. 371.(3) (1879) 4 C.P.D., at pp. 407, 408.

(2) (1878) 3 App. Cas., at p. 1236.

88 C.L.R.] OF AUSTRALIA.

243

to the plaintiff at £8 12s. Od. each.

The meeting of directors of

the defendant company followed on 4th January 1949, when it 1952-1953.

was resolved to olfer all the shares to the plaintiff. The next step

T ea c y

was the purported general meeting of the plaintiff on 7th January

Ma n d a l a y

1949, when Salon and Willard were appointed directors and Tracy

P t y . L t d .

secretary, Willard being appointed to the chair. The unanimous

Dixon C.J.

resolution was passed that the directors should be instructed to

WilUams J. Taylor J'

negotiate for the purchase of the share holdings in the defendant company and for the purchase of the land. But no negotiations were necessary because the shares and the land were already under offer at prices which had been fixed and the same persons who had fixed the prices at which these assets were to be sold intended to decide that these prices were acceptable to the new company. There followed the directors’ meeting of the plaintiff on 10th January 1949, Willard, Salon and Tracy being present, when it was resolved to purchase the land and the shares.

The stage was then set for the intended profits to be made. The plaintiff had no real shareholders. Yet over £24,000 had to be subscribed to pay the total purchase moneys. Ah application had been received from Greene for 1,800 shares on 20th December 1948. His cheque had been received on 22nd November 1948, but no allotment of shares was made to him until the directors of the plaintiff met for the second time on 10th January 1949. The only reasonable inference from these facts is that the persons floating the plaintiff were determined that the plan for the sale of the land and the shares to the plaintifi’ should be perfected and the plaintiff saddled with this huge obligation before the shareholders whose money was to be used to discharge it were introduced into the company.

There followed the series of directors’ meetings of the plaintiff subsequent to 10th January 1949, at which applications from the general public anxious to acquire fiats in the new building were disposed o f ; substantial parcels of shares were allotted and the allotment moneys applied not to pay for the new building or held, in trust for that purpose but used to pay for the land and the shares in the defendant company. Willard, Salon and Tracy were the persons present at all these meetings. Salon was admittedly a promoter of the plaintiff, Willard took an active part in its promo tion. By purchasing 250 shares from Mr. and Mrs. Salon at £10 each he paid a substantial sum to be let into the scheme. These shares were transferred to him at a meeting of directors of the defendant company on 29th December 1949, and at the same meeting he was allotted the 342 further shares. He became chair man of directors of the new company and played a leading part

244 HIGH COURT

[1952-1953.

H. C. OF A. in accepting the new capital and disposing of it. He saw to it

1952-1953.

that he was paid the purchase money for his own shares and made

T racy

tlie intended profit. He was implicated in the scheme up to the

V.hilt.

Man da la y

Tracy assumed the role of secretary throughout, first of the

P t y .

Lt d .

J)ixon C.J. defendant company and later of the plaintiff. As secretary it

Williams J.

was his duty to give many instructions, such as the instructions

Taylor J.

to Mr. Lightfoot about the manner in which the fiats were to be sold, which could be attributable wholly to this office. But the inference was clearly open to his Honour that he was taking an active part in forming and floating the new company. He received 66 shares in the defendant company on 29th December 1948. I t was suggested by his counsel that at that time his salary was in arrears to the extent of £624, and the profit he expected to make on the shares when they were sold to the plaintiff was to be the means of recouping his salary. On the other hand, it was contended for the respondent that he was paid these arrears. I t is not clear from the evidence whether the arrears were paid or not. Assuming they were not, Tracy’s interest in the sale of the land and shares to the plaintiff was even greater than if they were. Undoubtedly he became a shareholder in the defendant company so that he would have an interest in the profit to be made out of the promotion and formation of the new company. If his activities were merely ministerial he was at least ministering to two boards the members of which were actively engaged on his behalf as well as their own in seeing that the scheme was carried through and he was fully aware and assisted in the means by which that purpose was achieved. Nor can there be any doubt that Salon was acting on behalf of his wife with her knowledge and consent. As for the defendant company, it was a mere puppet in the hands of Salon and Mrs. Salon. I t was bound by the steps they took on its behalf to sell the land to the new company. In our opinion his Honour was justified in holding that Mrs. Salon and the defendant company were promoters of the plaintiff.

The liability of Griffith and Miss Withy requires more considera tion. Originally they purchased their shares in the defendant company from Salon and Mrs. Salon with a view to making a large profit when the land at Potts Point was sold to the new company. But this scheme was not carried out. A new scheme was substituted for it. Under the new scheme they would have sold their shares to the new company at a loss if they had not been recouped by the promissory notes. They were left out of the distribution of the balance of the capital of the defendant company on 29th December

1948. There is no evidence that either of them took any active

88 C.L.R.] OF AUSTRALIA.

245

part in the formation of the plaintiff or in the attraction and dis-

C. of A

position of the new capital.

Miss Withy held a minor position in 1952-1953.

the office of the defendant company, but she only had a hazy idea

T e a c y

of what was going on. She does not appear to have realised that

Ma n d a l a y

she was taking part in a meeting of shareholders of the plaintiff

P t y . L t d .

on 7 th January 1949.

They were not paid for their shares or on

Dixon C.J.

the promissory notes until they resorted to litigation. Even then

AVilliams J.

Griffith only received £500 of his £2,150. But it is clear that they

Taylor J.

agreed to participate in the scheme to promote the plaintiff and sell the land and the shares to it provided Mr. and Mrs. Salon gave them the promissory notes so that they would not lose on their investment by selling their shares at £8 12s. Od. In the end they had to be content to get their money back and the only way that they could do so was by accepting the new scheme and standing behind Salon in the operation. They were joint adventurers in the new scheme. As Salon and the other active promoters failed to discharge the fiduciary duties which that operation involved to make it legally binding on the new company, the transaction must be voidable not only against Salon but also those on whose behalf he was acting.

For these reasons we are of opinion that his Honour was right in holding that the plaintiff was entitled to have the contracts of sale of the land and shares set aside. But we cannot agree that all the defendants should be made jointly and severally liable to repay the whole of the purchase moneys amounting to £22,482 16s. Od. Nor can we agree that the defendants should be made jointly and severally liable to pay all legal and other costs properly incurred by the plaintiff under or in connection with the contracts for the sale of the land and shares. Nor can we agree that the defendants should be bound jointly and severally to indemnify the plaintiff against all debts and liabilities (if any) whether for Federal land tax, municipal or.water rates or in respect of proceedings against the plaintiff or otherwise which the plaintiff has or may become liable to pay for or on account of the land or shares or the proceedings dealings and transactions relating thereto set forth in the statement of claim.

The contracts for the sale of the land and the shares were inter dependent in the sense that the promoters did not intend to allow the plaintiff to purchase the land unless it also purchased the shares. But each is a separate contract for the purchase of separate assets and there is no principle of law or equity of which we are aware which would justify more than separate orders for the rescission of each contract and separate orders for repayment of the purchase money paid to the respective vendors. Each of these defendants

246 HIGH COUKT

[1962-1953.

H. C. OF A. should be ordered severally to repay to the plaintiff the purchase

1952-1953. nioneys which it or he or she has received with interest at four

T racy

per cent from the date the payments were respectively made. The

V.declarations to which we have referred should also be varied so that

M an da la y

each defendant will be made severally liable to repay to and bound

P t y .

L t d .

to indemnify the plaintiff in respect of legal and other costs and rates and taxes &c. relating to their respective contracts of sale. The decree should give each defendant the right to have the property he or she sold and transferred to the plaintiff retransferred to him or her at their respective costs upon payment to the plaintiff of their respective liabilities. The decree below should be varied accordingly. Otherwise the appeal should be dismissed. But the appellants achieved a substantial measure of success and there should be no order as to the costs of the appeal.

Order that decree below he varied by omitting that portion immediately after the order that the defendant company deliver up to the plaintiff to be cancelled the contract for sale dated 23rd December 1949 and the counterpart thereof down to the order for retransferring the shares and by substituting therefor orders that the defendant company pay to the plaintiff the sum of £2,650 together with interest at the rate of four per cent per annum from 2\st January 1949, that the defendant Norman Salon pay to the plaintiff the sum of £1,866 4s. Od. together with interest at the rate of four per cent j)er annum from 2^th January 1949, that the defendant Willard pay to the plaintiff the sum of £5,091 4s. Od. together with interest at the rate of four per cent per annum from 28th February 1949, that the defendant Tracy pay to the plaintiff the sum of £567 12s. Od. together with interest at the rate of four per cent per annum from 13th April 1949, that the defendant Mavis Lorraine Salon pay to the plaintiff the sum of £9,657 16s. Od. together with interest at the rate of four per cent per annum from 2Qth April 1949, that the defendant Withy pay to the plaintiff the sum of £2,150 together with interest at the rate of four per cent per annum from 11th May 1949, and that the defendant Griffith pay to the plaintiff the sum of £500 together with interest at the rate of four per cent per annum from Wth August 1949 ; all the above sums to be paid on or before 30th April 1953 ; a declaration that each of the defendants is severally liable to pay to the 2)laintiff all legal and other costs properly incurred by the plaintiff under or in connection with their respective contracts for the sale of the land and shares ; an order that

88 C.L.R.] OF AUSTRALIA.

247

it he referred to the Master in Equity to inquire what are

H. C. OF A.

the respective amounts of such costs ; an order that each of

1952-1953.

the defendants severally pay the respective amounts thereof

T ea c y

within fourteen days after the filing of the certificate of the

Ma n d a l a y

Master in Equity in resqject thereof) a declaration that

P t y . L t d .

each of the defendants is severally hound to indemnify the plaintiff against all debts arid liahilities (if any) whether for Federal land tax, municipal or water rates or in respect of proceedings against the plaintiff or otherwise ivhich the plaintiff, has or may become liable to pay in the case of the defendant company for or on account of the land and in the case of the other defendants for or on account of the respective shares transferred by them to the plaintiff or the proceedings dealings and transactions relating thereto set forth in the statement of claim ; order that it he referred to the Master in Equity to inquire what is the amount of such debts and liabilities ; an order that each of the defendants severally pay the amounts thereof to the plaintiff within fourteen days after the filing of the certificate of the Master in Equity in resqoect thereof; an order that the respective sums hereinbefore ordered to be repaid to the plaintiff by each of the defendants and interest thereon and the amounts of their said respective debts and liahilities be a charge upon the said land and a lien upon the said shares respectively as the case may be until payment of the respective amounts ; an order that each of the defendants their servants and agents be restrained from selling mortgaging alienating or otherwise dealing with the land or shares in such a manner as to prejudice the charge or liens of the plaintiff) an order that upon payment by the defendants of the above-mentioned respective sums the charge upon the land and the respective liens upon the shares be discharged. Otherwise appeal dismissed. No order as to costs. Liberty to apply.

Solicitors for the appellant Tracy, Bawson, Waldron, Edwards &

Nicholls.

Solicitors for the appellants Withy and Griffith, Morgan, Potts,

Cullen & Malouf.

Solicitors for the appellant Willard, Dowling, Tayler, Macdonald

& Pratt.

Solicitors for the appellants Norman Salon, Mavis Lorraine Salon and R.S.C. Trading Co. Pty. Ltd., Walter Linton & Bennett.

Solicitors for the respondents. Tress, Cocks d Maddox.

J. B.

[1953] HCA 9

12 March 1953