White City Tennis Club Ltd v John Alexander's Clubs Pty Ltd

[2008] NSWSC 1225

CITATION:	White City Tennis Club Ltd v John Alexander's Clubs Pty Ltd [2008] NSWSC 1225
HEARING DATE(S):	27, 28 and 29 October 2008
JUDGMENT DATE :	21 November 2008
JURISDICTION:	Equity Division
JUDGMENT OF:	Young CJ in Eq
DECISION:	Proceedings dismissed with costs.
CATCHWORDS:	CONTRACTS [130]- Repudiation- Held on facts that plaintiff was not prepared to perform the memorandum of understanding ("MOU")- Defendants justified in terminating the MOU. EQUITY [36]- Fiduciary obligations- MOU- First defendant or its nominee agree to seek and exercise option on behalf of company to be formed in which members of the plaintiff company would be shareholders- Liberty of one party to make business decisions "on behalf" of another not a determinative indicia of fiduciary relationship- Parties in this case are commercial persons of equal bargaining power- Plaintiff considers MOU arrangement as "collaborative" in nature- No fiduciary obligations. EQUITY [53]- Unconscionable conduct/equitable fraud- Whether second defendant's exercise of the option unconscionable in the sense of the Pallant v Morgan equity- Agreement that plaintiff would surrender rights and defendants would obtain option for benefit of plaintiff's shareholders- Held that alleged detriment suffered by plaintiff's surrender of rights was its contractual duty under contract now terminated- In light of plaintiff's repudiation of contract, no fraud or unconscionable conduct found.
LEGISLATION CITED:	Trade Practices Act 1974 (Cth) ss 45, 51AA, 51AC
CATEGORY:	Principal judgment
CASES CITED:	Abau Holdings Pty Ltd v J & C Reid Pty Ltd (Young J, 20 March 1987, unreported) ACCC v Amcor Printing Papers Group Ltd (2000) 169 ALR 344 ASIC v Citigroup Global Markets Australia Pty Ltd (No 4) (2007) 160 FCR 35 Assets Co Ltd v Mere Roihi [1905] AC 176 Avondale Printers & Stationers Ltd v Haggie [1979] 2 NZLR 124 Bahr v Nicolay (No 2) (1988) 164 CLR 604 Banner Homes Group plc v Luff Developments Ltd [2000] Ch 372 Barnes v Addy (1874) LR 9 Ch App 244 Barrios v Chiabrera (1984) 3 BPR 9276 Brambles Holdings Ltd v Bathurst City Council (2001) 53 NSWLR 153 Breen v Williams (1996) 186 CLR 71 DTR Nominees Pty Ltd v Mona Homes Pty Ltd (1978) 138 CLR 423 Enkelmann v Glissan (1982) 2 BPR 9631 Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89 Fileman v Liddle (1974) 2 BPR 9192 Francis v Dingman (1983) 2 DLR (4th) 244 General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125 Holiday Inns of America Inc v Broadhead (Megarry J, 19 December 1969, unreported) Holiday Inns of America Inc v Broadhead (1974) 232 EG 951 Homeward Bound Gold Mining Co NL v McPherson (1896) 17 LR (Eq) 281 Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41 Jessica Estates Pty Ltd v Lennard [2007] NSWSC 1434 Jones v Peters [1948] VLR 331 Keith Henry & Co Pty Ltd v Stuart Walker & Co Pty Ltd (1958) 100 CLR 342 Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd (2007) 233 CLR 115 Lonrho plc v Fayed (No 2) [1992] 1 WLR 1 Mortimer v Bailey [2005] 2 BLR 85 News Ltd v Australian Rugby Football League 64 FCR 410 Pallant v Morgan [1953] Ch 43 Paragon Finance plc v D B Thakerar & Co [1999] 1 All ER 400 Paul Dainty Corporation Pty Ltd v The National Tennis Centre Trust (1990) 22 FCR 495 Presbyterian Church (NSW) Property Trust v Scots Church Development Ltd (2007) 64 ACSR 31 Tasman Capital Pty Ltd v Sinclair [2008] NSWCA 248 Westminster Estates Pty Ltd v Calleja (1970) 91 WN (NSW) 222 White City Tennis Club Ltd v John Alexander's Clubs Pty Ltd (2007) 13 BPR 24,835; [2007] NSWSC 1210 White City Tennis Club Ltd v John Alexander's Clubs Pty Ltd (2007) 13 BPR 24,851; [2007] NSWSC 1430 Wik Peoples v Queensland (1996) 187 CLR 1
PARTIES:	White Tennis Club Limited (P) John Alexander's Clubs Pty Limited (D1) Poplar Holdings Pty Limited (D2)
FILE NUMBER(S):	SC 3359/07
COUNSEL:	S T White SC and J R Clarke (P) J M Ireland QC and J S Cooke (D)
SOLICITORS:	Kemp Strang (P) Avendra Singh Strati & Kam (D)

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

YOUNG CJ in EQ

Friday 21 November 2008

3359/07 – WHITE CITY TENNIS CLUB LTD v JOHN ALEXANDER’S CLUBS PTY LTD

JUDGMENT

1 HIS HONOUR: The present case concerns the rights of the parties to these proceedings in respect of the White City tennis complex at Rushcutters Bay.

2 At all material times prior to about 1 July 2005, the registered proprietor of the relevant land was a company known as Tennis NSW. In that year, Tennis NSW resolved to offer the land for sale by tender.

3 I will refer to the whole parcel of land as “White City” and as will be seen, it is also necessary to put tags on portions of the land which were of particular interest to some of the parties involved in these proceedings.

4 On 28 February 2005, White City Tennis Club Ltd (“WCTC”) (the plaintiff) and John Alexander’s Clubs Pty Ltd (“JACS”) (the first defendant) entered into a memorandum of understanding (“MOU”). The basic principles of the MOU were that the plaintiff would not submit a tender to Tennis NSW and the first defendant would seek an option to purchase White City on behalf of a company to be formed, White City Holdings Pty Ltd (“WCH”) a company which would be incorporated by the first defendant and in which members of the plaintiff and other persons would be the shareholders.

5 On 29 June 2005, the plaintiff, the first defendant, the trustees of the Sydney Grammar School (“SGS”) and Sydney Maccabi Tennis Club Ltd (“Maccabi”) entered into an agreement called during the hearing the “White City Agreement”. There had been two previous versions of the White City Agreement in April and May 2005, but these were subsumed by the final document made in June 2005. Essentially, this agreement recognised that SGS was the successful tenderer for the White City land. The document provided in cl 8(a) that SGS and Maccabi granted to the first defendant or its nominee, an option to acquire the majority of the land. This is called in these reasons the “Option Land”. The option was to be exercised by 30 June 2007. The agreement further provided in cl 8(b) that, should the first defendant not exercise that option, the plaintiff had an option to purchase the Option Land by 30 September 2007.

6 SGS completed the purchase of White City on 1 July 2005.

7 The title search of White City seems to suggest that Lot 1 of the White City land is owned outright by SGS, but Lot 2, which would appear to be the Option Land, is held as tenants in common as to 348 one-thousandth shares by SGS, 502 one-thousandth shares by Poplar Holdings Pty Ltd (“Poplar”) (the second defendant) and 150 one-thousandth shares by Maccabi. The title, however, has on it caveats by the plaintiff affecting both the land of Poplar and the land of SGS.

8 It would seem that there is some agreement between the proprietors that SGS use some land for school purposes, Maccabi uses some of the land which is referred to in evidence as the Maccabi land for tennis courts, and the balance, sometimes referred to as the land south of the stormwater channel other than the Maccabi land is that which is referred to as the Option Land.

9 On 27 June 2007, Poplar exercised the option granted to JACS by the White City Agreement at a cost of about $7.3 million. Poplar came into that position because of a notice of nomination by JACS nominating Poplar, its associated entity, as the person to exercise the option.

10 The plaintiff says that the MOU imposed a fiduciary duty on JACS that if it exercised the option, it would do so and only do so on behalf of WCH. The plaintiff says that JACS breached this fiduciary duty and because of that breach of the fiduciary duty, the plaintiff was deprived of the opportunity (which it would certainly have taken up) to exercise the option that it had in default of JACS exercising its option. It says that but for JACS not abiding by its fiduciary duty, it has lost the right to the land. Accordingly, upon paying JACS the amount it paid for the land, JACS should hold the land on trust for it.

11 The defendants take the view that they never owed the plaintiff any fiduciary duty, or that if JACS did owe it any fiduciary duty, any duty that arose in respect of the MOU ceased either from the coming into force of the White City Agreement on 29 June 2005 (vide clause 42) or on and after 12 April 2006 when it formally terminated the MOU.

12 I believe that what I have just said puts the dispute in context and it is now necessary to look at the questions raised between the parties in greater detail.

13 Paragraphs 25 and 26 of the plaintiff’s outline of submissions submitted at the commencement of the case read as follows:

“Fiduciary Duty Owed by JACS
25. The intention of the parties, as evident from the provisions of the MOU and the White City Agreement, was that clause 8(a) option to purchase the land held by JACS was held on behalf of and in the interests of the participants in the Project set out in the MOU, not for JACS’ benefit alone, and the clause 8(b) option to purchase the land held was available to be exercised by WCTC in its own right in the event that the redevelopment arrangements described in the MOU were not to proceed.
26. Accordingly, JACS held the option for and on behalf of the participants in the Project, including WCTC. It is uncontentious that a party who holds property for or on behalf of others holds the property on trust, and such a trustee of property owes fiduciary duties to the beneficiaries of the trust in respect of the trust property. Further, there is ‘ little difficulty ’ in applying the fiduciary principle to a person who is bound to purchase a property on behalf of, or for the benefit of, another; or perhaps, who is bound, if he purchases the property at all (he may not be obliged to do so), to purchase it for the benefit of or on behalf of another … . It follows that JACS owed a fiduciary duty to the participants in the Project, including WCTC, in respect of the exercise of the option.”

14 It is put that: (a) if JACS had not exercised the option at all, it would have meant that the plaintiff could then have exercised its option; (b) JACS only had capacity to exercise the option on behalf of WCH; (c) JACS did not exercise the option on behalf of WCH; (d) JACS obtained title for itself; (e) therefore Poplar must hold the property on constructive trust for the plaintiff, because JACS should not be in a better position by its breach of fiduciary duty than if the option had not been exercised.

15 There are alternative claims involving alleged unconscionable conduct/equitable fraud, the first limb of the principle in Barnes v Addy (1874) LR 9 Ch App 244 and claims for breach of the Trade Practices Act 1974 (Cth) ss 51AA and 51AC. As an alternative to the constructive trust, the plaintiff claims an account of profits or damages and a declaration that a licence deed between the plaintiff and Maccabi was effective. However, it must be noted that Maccabi was never a party to the proceedings.

16 The proceedings came on for hearing before me on 27, 28 and 29 October 2008. Mr S T White SC and Mr J R Clarke appeared for the plaintiff, and Mr J M Ireland QC and Mr J S Cooke appeared for the defendants. Both sets of counsel provided the court with written submissions as to their clients’ case, both at the commencement and at the conclusion of the oral hearing.

17 The basal primary facts were not really in dispute, though there was dispute as to the secondary facts and the motives of the players. Despite this, cross-examination of witnesses occupied over two days of hearing, mostly without any effect. A factual contest was whether the words and conduct of the plaintiff justified the termination of the MOU by the first defendant on the basis that the plaintiff had repudiated it by 12 April 2006. I will deal with this factual matter under heading 4 of the list of topics which I am about to set down. However, it must be noted that the plaintiff alleges that even if the MOU was terminated as a contract, the fiduciary obligations which stemmed out of it still continued up to and including the date when JACS’ nominee exercised the option, namely, 27 June 2007.

18 It seems to me that it is convenient to deal with the problems that arise in this case under the following 18 headings:

1. Whether there was a fiduciary relationship between the parties.

2. Whether the MOU was never intended to create legal relations.

3. Whether the MOU was void for uncertainty.

4. Whether the plaintiff repudiated the MOU.

5. Whether the first defendant validly terminated the MOU on 12 April 2006.

6. Whether fiduciary obligations based on the MOU continued beyond 12 April 2006.

7. Whether the indefeasibility provisions of the Real Property Act 1900 protect Poplar from any rights the plaintiff may assert against it.

8. Unconscionable conduct/equitable fraud under the general law.

9. Unconscionable conduct under ss 51AA and 51AC of the Trade Practices Act.

10. Whether Poplar should be held to recognise the rights of the plaintiff.

11. Whether the suit is defective for want of parties or inadequate pleadings.

12. Whether the plaintiff is estopped from asserting its rights or has waived them.

13. Whether the defendants are liable under the principle of Barnes v Addy.

14. Whether the court should declare a constructive trust in favour of the plaintiff.

15. Whether the plaintiff is entitled to damages or equitable compensation.

16. The significance of the licence from Maccabi to the plaintiff.

17. Other matters.

18. The result of the case.

1. Whether there was a fiduciary relationship between the parties

19 The plaintiff says that the foundation of the fiduciary relationship is the obligation to act in the interests of another in a particular matter. It says that here, in the MOU and in the White City Agreement, JACS was obligated to act in respect of the exercise of its option on behalf of WCH. That created a fiduciary duty. The defendants deny this. They do not quarrel with the general proposition that a fiduciary is a person who undertakes to act on behalf of another, but say that not all situations where one finds that factor will be situations where a fiduciary duty exists and the plaintiff must not only find that there is some fiduciary duty existing in cyber space, but must show that there is a fiduciary duty owing to it.

20 As to the first of the defendants’ points, Messrs Ireland and Cooke refer to [38] of Brereton J’s judgment in interlocutory proceedings in this case which is now reported as White City Tennis Club Ltd v John Alexander’s Clubs Pty Ltd (2007) 13 BPR 24,835; [2007] NSWSC 1210. At [38] Brereton J said, referring to the fact that cl 7.1 of the MOU noted it was not to be taken to constitute the parties as partners or joint venturers for any purpose whatsoever:

“This creates a significant obstacle to the super-imposition generally of the fiduciary obligations of joint venturers on the contractual relationship between the parties, and tends to show that they did not intend their relationship be attended by such fiduciary obligations.”

21 I should interpolate here that this led the first defendant to seek to strike out part of the statement of claim. However, Hamilton J in White City Tennis Club Ltd v John Alexander’s Clubs Pty Ltd (2007) 13 BPR 24,851; [2007] NSWSC 1430, said at [7] and [8]:

“[7] Had the Memorandum of Understanding in terms provided that no fiduciary relationship could arise out of the contract or in relation to its subject matter, Mr Ireland’s argument as to this aspect of the matter would have been unanswerable. However, it used the very much more equivocal language, that nothing in the Memorandum of Understanding should be taken to constitute the parties as partners or as joint venturers for any purpose whatsoever. And a fiduciary relationship can, of course, arise in appropriate circumstances outside an arrangement formally characterised as a joint venture arrangement, which the arrangement in the Memorandum of Understanding is proclaimed not to be.
[8] While, as I have said, there is a great deal of force in what Mr Ireland has put … “

His Honour then decided that under the General Steel test he had to dismiss the application.

22 The essential nature of a fiduciary relationship has been expounded in a number of authorities, particularly those emanating from the High Court of Australia, but of course human conduct is so diverse that it is impossible to be completely definitive.

23 In Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41 at 96-97, Mason J said:

“As the courts have declined to define the concept [fiduciary relationship], preferring instead to develop the law in a case by case approach, we have to distil the essence or characteristics of the relationship from the illustrations which the judicial decisions provide. …
The critical feature of these relationships is that the fiduciary undertakes or agrees to act for or on behalf of or in the interests of another person in the exercise of a power or discretion which will affect the interests of that other person in a legal or practical sense. The relationship between the parties is therefore one which gives the fiduciary a special opportunity to exercise the power or discretion to the detriment of that other person who is accordingly vulnerable to abuse by the fiduciary of his position. The expressions ‘for’, ‘on behalf of’, and ‘in the interests of’ signify that the fiduciary acts in a ‘representative’ character in the exercise of his responsibility … .”

His Honour continued later at 97:

“That contractual and fiduciary relationships may co-exist between the same parties has never been doubted. Indeed, the existence of a basic contractual relationship has in many situations provided a foundation for the erection of a fiduciary relationship. In these situations it is the contractual foundation which is all important because it is the contract that regulates the basic rights and liabilities of the parties. The fiduciary relationship, if it is to exist at all, must accommodate itself to the terms of the contract so that it is consistent with, and conforms to, them. The fiduciary relationship cannot be superimposed upon the contract in such a way as to alter the operation which the contract was intended to have according to its true construction.”

24 His Honour then went on to say that because the alleged fiduciary was at liberty to make some business decisions by reference to its own interests, there was an overwhelming obstacle to the existence of a comprehensive fiduciary relationship, but that did not exclude the existence of a more limited fiduciary relationship.

25 Gibbs CJ in the same case, discussed the indicia of a fiduciary relationship at 68 and following. His Honour commented that an indicator of a fiduciary relationship is the special vulnerability of the person whose interests are entrusted to the power of another, to abuse of that power. A relation of confidence and inequality of bargaining power is often a feature of the relationship, but the absence of these factors does not necessarily negate there being a fiduciary relationship. He then continued at 70:

“On the other hand, the fact that the arrangement between the parties was of a purely commercial kind and that they had dealt at arm’s length and on an equal footing has consistently been regarded by this Court as important, if not decisive, in indicating that no fiduciary duty arose.”

26 His Honour cited four decisions of the High Court in support of that proposition, the most recent being Keith Henry & Co Pty Ltd v Stuart Walker & Co Pty Ltd (1958) 100 CLR 342. That case was between an importer and its former customer as to who had title in equity to the goods that were imported, a matter that was significant because of import restrictions. The High Court said at 351 that 0there was no recognisable equity:

“The position is simply that businessmen … were engaged in ordinary commercial transactions with each other, dealing with each other, as the saying goes, at arm’s length.”

27 In Breen v Williams (1996) 186 CLR 71, Brennan CJ said at 82:

“Fiduciary duties arise from either of two sources, which may be distinguished one from the other but which frequently overlap. One source is agency; the other is the relationship of ascendancy or influence by one party over another, or the dependence or trust on the part of that other.”

28 In the same case at 106, Gaudron and McHugh JJ said that the term “fiduciary relationship” defies definition. At 107 they said:

“[T]he courts have identified various circumstances that, if present, point towards, but do not determine, the existence of a fiduciary relationship. These circumstances, which are not exhaustive and may overlap, have included: the existence of a relation of confidence; inequality of bargaining power; an undertaking by one party to perform a task or fulfil a duty in the interests of another party; the scope for one party to unilaterally exercise a discretion or power which may affect the rights or interests of another; and a dependency or vulnerability on the part of one party that causes that party to rely on another.”

See also Wik Peoples v Queensland (1996) 187 CLR 1 at 95-96 (Breenan CJ) and News Ltd v Australian Rugby Football League Ltd (1996) 64 FCR 410 at 541 (FC).

29 Reliance is an element in all fiduciary relationships. In the Canadian case of Francis v Dingman (1983) 2 DLR (4th) 244 at 249, the Ontario Court of Appeal said:

“Normally courts will not find a fiduciary relationship to exist between experienced businessmen who enter into a contract at arm’s length with the benefit of legal advice.”

30 Courts are somewhat reluctant to find a fiduciary relationship in a commercial arrangement, but it is always a matter of examining each situation on its own facts to see whether in a particular case there is such a relationship.

31 In commercial transactions where there is equal bargaining power between parties who have voluntarily entered into ordinary arm’s length commercial arrangements, no fiduciary relationship arises because there is no need for equity to intervene. As the Full Federal Court said in Paul Dainty Corporation Pty Ltd v The National Tennis Centre Trust (1990) 22 FCR 495 at 516:

“A fiduciary relationship is a relationship found by equity in circumstances where equity considers that it is right to protect the interests of a disadvantaged party which are, or seem to be, under threat.”

32 Thus, people can, by contract, completely remove any possibility of a fiduciary obligation arising; see eg ASIC v Citigroup Global Markets Australia Pty Ltd (No 4) (2007) 160 FCR 35 at 84.

33 In the instant case there are some indications that there could be a fiduciary duty. In cl 3.7.1 of the MOU it is provided that:

“In the event JACS exercises the option … it will exercise the option on behalf of WCH … “.

34 However, there are a large number of counter factors. There is no question of a weaker vulnerable party relying on the representations of a stronger party. Although the plaintiff is a tennis club rather than a trading corporation, the minutes of its board meetings and other papers in evidence show that it was at all material times run by experienced business people who seemed to know exactly what they were doing. Furthermore, the parties do appear at all material times to be assisted by solicitors independent of each other and the parties put their rights and obligations into detailed documents.

35 Furthermore, there is hardly any evidence of reliance by the plaintiff on JACS.

36 Illustration of this point is found in the exchange of communications between Dr Girgensohn on behalf of the plaintiff and Mr Alexander on behalf of the first defendant between 31 March and 4 April 2005. Dr Girgensohn sent an email on the former date to Mr Peter Jordan who was the liaison man representing the first defendant in the transaction. Dr Girgensohn wrote, inter alia:

“Peter, this situation is very different from what was articulated following the signing of the MOU: we would sit down together, work out the bid strategy together as well as the PR. You are now basically saying: Trust us.
When we discussed this situation at the board meeting that night, the board was extremely uncomfortable with this situation. If your bid does not succeed, you have just missed an opportunity and wasted a lot of time. For WCTC, it threatens our very existence.
We therefore resolved that I ask you to confirm to us in writing by the end of business Monday, 4 April that you have an arrangement in place with Sydney Grammar for the bid or alternatively, have other finances in place. If you cannot provide us with this assurance, WCTC needs to take immediate action to ensure that the site ends up in our hands.”

37 Mr Alexander replied that there was an arrangement in place and that the first defendant was currently working on all aspects of the tender. After a certain consent was obtained:

“[W]e would like to meet with you and your board’s chosen representatives to review progress and discuss the process of finalising, in accordance with our Memorandum of Understanding, an offer to purchase.
We are concerned that the email forwarded to us on March 31st 2005 implied that you do not intend to comply with our Memorandum of Understanding and suggests that you will deal with others. This concern is heightened by our knowledge that there has been undisclosed communication between your organisation and Next Generation Clubs.”

38 This correspondence suggests that at the end of March 2005, the arrangement was that far from the plaintiff leaving everything to the first defendant to arrange in trust and confidence that it would do so on behalf of the plaintiff or associated entities of the plaintiff, the plaintiff considers that the arrangement was that the parties would work out the bid strategy together, a situation that Mr Alexander appears to have accepted. Furthermore, the plaintiff was threatening that unless something happen by 4 April 2005, it would take immediate action to do something else. This implies that at all material times it considered that it was free to take such action.

39 I pointed out the difficulties that I had with this correspondence when Mr White was cross-examining on it at p 145 of the transcript, that is, that the correspondence and the cross-examination on it gave the strong impression that instead of there being an arrangement whereby the plaintiff entrusted JACS to act on its behalf, the plaintiff was going to act on its own behalf unless JACS complied with its demand. However, that point was never really addressed by the plaintiff in its final submissions.

40 However, Mr White did continually say: “Look, here is a promise to act on behalf of another”. I would quote what then Professor Finn said in T G Youdan, Equity, Fiduciaries and Trusts (Carsville, Canada, 1989) at p 31:

“[I]t is trite, but necessary to note, that one party’s contractual obligation to do acts for the benefit of the other does not of itself mean that person’s purpose in the relationship is to act in the other’s interests. If it did, contract law would be revolutionized with the consideration doctrine itself becoming the touchstone of the fiduciary principle.”

41 A further problem in the instant case is to look at the entity to whom any fiduciary duty would be owed. The undertaking, if that’s what it be, in the MOU was not to hold the option on behalf of the plaintiff, it was to hold it on behalf of WCH. WCH was a company to be formed by JACS. The shareholders of the proposed company were to be those of the members of the plaintiff who chose to subscribe for shares plus members of the public. There was no identity with the people who were to receive the benefit that ownership of those shares at WCH might give and the plaintiff. The mere fact that these people may have been the majority of the shareholders in the plaintiff is immaterial. The plaintiff only really comes into the picture if the option is not exercised. In that situation, then the plaintiff itself may bid for the land and the potential beneficiaries under the “Project” (as defined in the MOU) miss out on any benefits. What the plaintiff appears to be saying is that its club in some form or other would have been conducted on the Option Land either because its members would be the members of a new club (assuming that all the members took up their entitlements), or alternatively, if the option was not exercised by JACS on behalf of WCH then it would exercise the option and would be able to be master of the situation as to how its members would enjoy the land in the future. As Mr White put it in his closing address, “but for” JACS not exercising the option on behalf of WCH the plaintiff lost its right.

42 I very much doubt whether, if there were a fiduciary duty, it could be said that it was a fiduciary duty owed to the plaintiff. However, I can understand the argument (not that it was put), that the duty might be owed to the plaintiff in a sort of representative capacity because there was nobody else who could enforce it and it was the plaintiff that was giving up rights such as its rights to use a club house through to 2020 that was paving the way for the whole Project. I do not have to decide the point which is in a rather grey area as to who can enforce a fiduciary duty. However, the fact that there is the problem makes it less likely that there is such a fiduciary duty at all.

43 Accordingly, putting all things together, I find that the plaintiff has not established any fiduciary duty. The way the parties framed their MOU and the way they behaved (which I will be dealing with under heading 4 later), shows that they did not have a relationship in which the first defendant was to act on behalf of the plaintiff in a manner in which the plaintiff stood back and allowed the first defendant to carry through a relevant transaction on its behalf.

2. Whether the MOU was never intended to create legal relations

44 This was one of the defences. However, it did not play any substantial part in the final argument.

45 Almost by definition, an MOU is not a contract. In another connection, namely s 45 of the Trade Practices Act, Sackville J said in ACCC v Amcor Printing Papers Group Ltd (2000) 169 ALR 344 at 359 [75]:

“An arrangement or understanding for the purposes of s 45(2) of the TP Act is apt to describe something less than a binding contract or agreement”.

He then went on to say at 360:

“There is no necessity for an element of mutual commitment between the parties to an arrangement or understanding, although in practice such an arrangement or understanding would ordinarily involve reciprocity of obligation.”

46 However, one cannot stop there because: (a) there may be within the understanding some contractual aspects such as an obligation by each party not to do anything that would set the understanding at nought; and (b) the understanding together with the parties’ subsequent conduct may demonstrate that the whole or part of the memorandum of understanding was to operate as a contract; see Brambles Holdings Ltd v Bathurst City Council (2001) 53 NSWLR 153 at 163 [25] and Tasman Capital Pty Ltd v Sinclair [2008] NSWCA 248 at [37] and the authorities there referred to. Accordingly it is necessary to look at the terms of the MOU and subsequent treatment by the parties of it.

47 The memorandum of understanding was produced in collaboration between Messrs Pigott Stinson & Co, solicitors for the plaintiff, and Gayle Meredith & Associates, solicitors for the first defendant. Clause 1 is headed “Preamble”, but really sets out what, if the document were a deed, would be called “Recitals”, that is, it does not include any promissory clauses. Clause 2 deals with definitions, the only one I need worry about is “the Project” which is said to have the meaning “the whole of the formulation, organisation and establishment of the necessary entities, structures and agreements and of the development, construction and operation of the Club as contemplated by this MOU”. “The Club” was defined as “the sporting, health, fitness, tennis, racquet sports and social club, the development, construction and operation of which is contemplated by this MOU”.

48 Clause 2.2(c) notes that:

“JACS hereby agrees the covenants on its part set out in this agreement apply to any subsidiary of JACS and any entity controlled by JACS.”

This denotes that there are covenants on behalf of JACS which have contractual effect in the document.

49 I need to set out some parts of clause 3 which is headed “General Principles” verbatim.

“3.1 Each of the Parties will use its best endeavours to bring the Project to fruition and will do all things in its power reasonably necessary to do so.
3.2 The Parties will work together reasonably and in good faith to bring the Project to fruition.
3.3 WCTC has agreed that until 31 July 2006, it will not enter into any discussions … with any person … concerning the purchase or use of the Land or any part of it, the development of the Land or any part of it, or the construction or operation of any club or sporting facility on the Land or any part of it. …
3.4 Each Party will keep the other fully informed of all progress in the Project including but not limited to the negotiations for, or the tendering for the purchase of the Land and the acquisition of the Approvals.”

50 Clause 3.5 then set out fundamental entitlements which were the availability to members of the facilities of a world class sporting, health, fitness, tennis, racquet sports and social club and the right to be a member of that club. The details were set out in Schedules 2, 3 5 and 7 of the MOU.

51 Clause 4 set out various conditions precedent which are no longer of any moment.

52 Clause 5 set out a general structure of the relationships between the parties which appears to be a set of intentions rather than promises.

53 Clause 6 defines what documents will be prepared.

54 Clause 7 says:

“Nothing in this MOU shall be taken to constitute the Parties as partners or as joint venturers for any purpose whatsoever.”

55 The MOU appears to be signed under the common seal of the plaintiff and the first defendant. There are then a series of schedules setting out in detail how the matter is to be progressed.

56 It seems to me on the mere reading of the document that it contains some promissory elements. This would include the obligation of the parties to work together reasonably and in good faith, to inform each other of the progress of the Project and like obligations in clause 3.

57 Furthermore, the MOU was a document created by two corporations after deep consideration by their respective solicitors, the corporations being at arm’s length and each wanting to develop valuable property rights vital to each of them.

58 If there were any doubt about the matter, the subsequent correspondence between the parties shows that at most times prior to the 12 April 2006, the parties appear to have acknowledged to each other that they did have obligations to each other arising out of that MOU.

59 Accordingly, in my view the MOU, at least in part, intended to create legal relations between the parties.

3. Whether the MOU was void for uncertainty

60 I cannot see any uncertainty. The document contains some very detailed provisions and was settled by two firms of solicitors and speaks for itself.

4. Whether the plaintiff repudiated the MOU

61 Before dealing strictly with the question as to whether the plaintiff repudiated the MOU I need to deal with the submission made by counsel for the defendants that for most purposes the vital parts of the MOU ceased with the White City Agreement.

62 The White City Agreement went through three drafts. It is probably wrong to call them drafts because each was duly executed and operated until the next one took its place. When the MOU was executed on 28 February 2005, the Option Land was owned by Tennis NSW and there were rights in WCTC to purchase the land if certain things happened. As time went on, those certain things did not happen. The plaintiff’s right to acquire the land ceased, and Tennis NSW put the land out for tender. There were various interested tenderers, and eventually SGS was the successful tenderer. The White City Agreement accordingly was modified and re-executed as circumstances developed.

63 The first edition of the White City Agreement bears date 15 April 2005. Clause 8 is the grant of an option by SGS and Maccabi to JACS to acquire the Option Land for the option amount. There is no mention of JACS doing that on behalf of any other party. Clause 8(b) then gives an option to the plaintiff for 3 months from the expiry of JACS’ option. Clause 21(a) provided that the plaintiff surrendered any rights it had but for that agreement in relation to the land. Clause 24 was a promise that each party would co-operate with the other from time to time for the use of the land. Clause 40 provided that the agreement reflect the complete commercial agreement between the parties. I should also note clause 3:

“Each party will do all things necessary and desirable to give effect to their own and each others’ intentions and that each party will co operate fully with the others with the aim of giving effect to and fully supporting those intentions.”

64 The second edition is dated 10 May 2005. Clause 3 is the same. Clause 8 is the same. The amount payable for the land defined as the “option amount” is increased. Clause 40 is virtually the same.

65 The final version of 29 June 2005 again contains the same cl 3 and the same cl 8. The option amount is the same as the previous edition. Clauses 41, 42 and 43 now read:

“41. This agreement binds the parties, their successors and assigns. It replaces the agreements dated 15 April and 10 May 2005 and reflects the complete commercial agreement between the parties, subject to clause 42. …
42. WCTC and JACS agree that their MOU dated 28 February 2005 and their agreement dated 18 June 2005 continue in accordance with their terms and each agrees to carry out its obligations under this agreement in accordance with those agreements.
43. To the extent of any inconsistency between this agreement and any other agreement between any of the parties, this agreement will prevail, unless specifically stated. … “.

66 Mr Ireland put that that history of the White City Agreement shows that the MOU was dead until resurrected by cl 42 of the final edition of the White City Agreement. However, cl 42 only resurrected the MOU to operate “in accordance with [its] terms” and in so far as that was not inconsistent with the White City Agreement. Accordingly, he says that any obligation in cl 3.7.1 of the MOU must be read down in the light of the White City Agreement.

67 I do not see any necessity for reading down cl 3.7 of the MOU in the light of the White City Agreement. It seems to me to be perfectly consistent to have a grant of an option by SGS and Maccabi to JACS with no mention at all of JACS’ obligation if it exercises such option with the provision of cl 3.7.1 in which JACS promises the plaintiff that it will only exercise it on behalf of WCH.

68 Accordingly, I proceed on the basis that the MOU was in force, at least through to 12 April 2006.

69 On that day, JACS gave the plaintiff a notice which, omitting formal parts, was as follows:

“NOTICE OF TERMINATION
WHEREAS:
A. [Recites the MOU]
B. It was an express term of the MOU that:
(a) by clause 3.1, each of the parties would use its best endeavours to bring the Project to fruition and to do all things in its power reasonably to do so;
(b) by clause 3.2, the parties would work together reasonably and in good faith to bring the Project to fruition;

C. In breach of such terms WCTC has not:
(a) used its best endeavours to bring the Project to fruition;
(b) done all things in its power reasonably to do so;
(c) worked with JACS reasonably or in good faith to bring the Project to fruition;
[Particulars were given which I will set out shortly]
D. In acting in the manner described in the Particulars under paragraph D (sic) above WCTC has evinced an intention not to be bound by the MOU and has repudiated its obligations thereunder.
NOW TAKE NOTICE that JACS hereby accepts such repudiation of the MOU and terminates the same, reserving to itself the right to sue WCTC for damages for breach of the MOU.”

70 In summary, the particulars were as follows:

1. The plaintiff had entered into discussions and negotiations and entered into an agreement with Tennis NSW concerning the purchase of the land.

2. The plaintiff had entered into a deed of variation of lease and licence with Tennis NSW.

3. On 23 October 2005, the plaintiff by its then president told its members that JACS had insufficient funds to proceed with the Project.

4. On 23 October 2005, the plaintiff by its then president told its members that the plaintiff had approached prospective financiers to enable it to undertake the Project when JACS was unable to do so.

5. Prior to 23 October 2005, the plaintiff had approached prospective financiers and entered into discussions and negotiation concerning the purchase and development of the land.

6. On 23 February 2006, the president of the plaintiff purported to remove from the Development Control Committee the director of the plaintiff with the greatest continuous knowledge of the Project without consulting JACS.

7. In February 2006, the plaintiff failed to support JACS’ submissions to the Woollahra Council in respect of the White City Development Control Plan and made a submission that encouraged the council to restrict the scale of the Project against the interests of JACS.

8. On 9 March 2006, the plaintiff by its then president interfered in arrangements between JACS and the real tennis fraternity to promote the investigation of possible expressions of interest in acquiring shares in WCH.

9. On 9 April 2006, the plaintiff at an extraordinary meeting, falsely represented details of the Project, JACS’ role in it and otherwise denigrated JACS in an attempt to persuade members of the plaintiff to oppose the Project.

71 On 12 April 2006 itself, there was an extraordinary general meeting of the plaintiff and at that meeting the president, Mr Kolev, was removed from office and Mr Geoff Simpson was installed as president. The next day he emailed Mr Alexander and Mr Jordan to the effect that the board now was committed to working with JACS. He wrote:

“With regard to the MOU, I understand your position and as James A [Mr Allardice] and I had previously indicated, we were prepared to look at an updated version in any case.”

He finished by saying:

“Hopefully, the unpleasantness is now all behind us and we can both move forward with confidence.”

72 It may be that because of the upheaval in the plaintiff with there being suggestions that there were defects in the meeting appointing Mr Simpson as chairman or because informally JACS and the Simpson regime each indicated that they may be able to work together, that there was no formal response to the notice of termination. At AX1648 is a minute of a board meeting of the plaintiff held on 2 May 2006 where someone moved that a letter of refute be sent to JACS in response to recent termination letters, but the minutes show that it was argued that such a letter would only antagonise and the motion was withdrawn, and that it was agreed that Mr Simpson should begin the meeting proposed for 9 May 2006 with JACS’ representatives by refuting the claims in the JACS’ termination letters.

73 AX1669 is a memo to Mr Simpson of a telephone conversation with Mr Allardice and Mr Alexander on 19 May 2006. This includes a statement that JACS’ position on the MOU stands and “our public rejection of the termination notice carries no legal tenure.” There was a possibility of a new agreement, but there were dissenters and trouble-makers within the plaintiff and an indication of possible legal action being brought by JACS in respect of the MOU. Some without prejudice correspondence then followed.

74 JACS at least in early June 2006 made it clear that it intended to proceed to exercise the option with finance provided by a third party. It will be remembered that a fundamental matter of the Project was that, apart from bridging finance, the acquisition of the land would be funded by the issue of shares in WCH, a key factor being that it would be the members of the plaintiff that would subscribe for those shares.

75 The proceedings were commenced on 27 June 2007.

76 The High Court has made it clear more than once that there is a repudiation of a contract entitling the other party to terminate it if a party to the contract demonstrates that it is unwilling to perform it: DTR Nominees Pty Ltd v Mona Homes Pty Ltd (1978) 138 CLR 423; Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd (2007) 233 CLR 115 at 135 [43] and following.

77 Paragraph 14 of Mr Ireland’s final submissions, set out the following (omitting references to tender bundles, transcripts and affidavits):

“(a) shortly after Mr Kolev became president of WCTC in October 2005, WCTC engaged in conduct that was incompatible with the MOU and in breach of the aforementioned clauses and which directly threatened the Project. This included entering into discussions on behalf of WCTC with third parties in breach of clause 3.3 and undertaking actions to disrupt the Project described in the MOU in breach of clauses 3.1 and 3.2;

(b) Mr Kolev took the helm as President in October 2005. He was the voice of members of WCTC who were averse to JACS’ involvement in the project described in the MOU. By being elected to President, Mr Kolev and his supporters prevailed. Mr Kolev was a strongly minded representative of a group that did not like the JACS’ proposal. Between the period November 2005 and 12 April 2006, by virtue of his position as President he was the one who took the lead on behalf of WCTC in its initiative in dealing with JACS;

(c) other WCTC board members shared Mr Kolev’s views concerning JACS’ role in the MOU. For example, on 19 January 2006 Mr Wengdal wrote to the WCTC board indicating that the MOU was very unfairly in favour of JACS and the associated companies and that a new MOU needed to be renegotiated. Even WCTC directors who disagreed with Mr Kolev’s generally, such as Mr Simpson, believed at the time that the MOU did not reflect reality post the White City Agreement and needed to be renegotiated (or in Mr Simpson’s words ‘up-dated’). Mr Simpson believed that a new agreement needed to replace the MOU to deal with the number of tennis courts being used by Maccabi. Mr Simpson conceded that Maccabi would have had to be a party to that agreement. Mr Kolev also wanted to change certain aspects of the MOU and the White City Agreement;

(d) as recognised in Mr Allardice’s report dated 4 November 2005, Mr Kolev’s actions engendered a period of instability at the Club. Mr Allardice stated that it was urgent to rebuild the Club’s relationship with JACS. Similarly, on 24 January 2006, at a WCTC board meeting Mr Wigney, a WCTC director, said that ‘it is essential we restore a strong working relationship to move the development forward’. He also said that the letters received from JACS should have been dealt with by face-to-face meetings which approach Mr Simpson agreed with. In contrast, Mr Kolev wanted to reply to letters sent in December 2005 in which Mr Alexander had accused Mr Kolev of wrongdoing. There was great disunity in the WCTC board. Nevertheless, Mr Kolev’s approach prevailed and a letter dated 7 February 2006 was sent to Mr Alexander. This letter underscores the disintegration of the relationship between WCTC and JACS;

(e) as at February 2006, Mr Simpson regarded Mr Kolev as holding views which were dangerous to the continuing relationship between JAS [sic] and WCTC;

(f) in breach of the MOU (including clause 3.3) WCTC were making direct submissions to the Woollahra Council complaining about JACS’ proposals for the redevelopment of the site despite WCTC being aware that delicate discussions were taking place between JACS and the Council;

(g) contrary to JACS’ express wishes and without advising JACS, WCTC released the MOU to its members at a time that JACS was negotiating and dealing with the Woollahra Council;

(h) there was a fiery dispute between WCTC and JACS concerning the television interview with Channel 10 concerned with the proposed White City development. The February 2006 letter from Mr Turner, the Vice President of WCTC, to Mr Alexander states that the ‘White City Tennis Club Board is unanimous’ in its complaint concerning its rejection of Mr Alexander’s complaints concerning Mr Kolev;

(i) despite Mr Jordan previously attending WCTC Board meetings on a regular basis to discuss development issues, at least as at 28 February 2006, Mr Kolev had advised JACS not to attend the Board meeting. Mr Kolev had put an end to that procedure. Mr Simpson conceded that Mr Kolev’s actions were typical of the pattern of his behaviour at that stage and that he had no time for JACS. This was of concern to Mr Simpson because it jeopardised the project;

(j) WCTC’s caveat over the White City land was inconsistent with the MOU. Under the MOU, WCTC had no recognisable interest in the land;

(k) Mr Simpson’s evidence was that by at least 5 March 2006, a crisis was developing with the JACS’ relationship with WCTC so it was therefore decided to have an EGM. The position that had been reached by this date was that there was a difference of views of the board members of WCTC in respect of JACS. There was a split in relation to the approach to JACS. The board of WCTC had become unworkable. Mr Simpson conceded that the board had become divided on many matters concerning the relationship with JACS. Mr Kolev and his supporters wanted to take a hard line with JACS whereas Mr Simpson and his supporters wanted to renegotiate the MOU in light of the four party situation which had since developed. Mr Simpson’s view at the time which he articulated to at the EGM on 9 April 2006 was that ‘We have two choices, we continue arguing with JACS or try and negotiate with JACS for the best deal’;

(l) Mr Simpson’s campaign document for election to presidency (which he at least co-authored) stated that the relationship between current membership and JACS had totally broken down. It also stated ‘Because of this, the whole redevelopment is now at risk and must be restored as a matter of urgency. The club is at this moment, subject to claims of breach of the MOU and open to potential future litigation.’ This was Mr Simpson’s view at the time;

(m) JACS served WCTC with its notice of termination of the MOU on 12 April 2006, Mr Simpson became aware of the notice on that day (as it had been announced at the general meeting. The following day, on 13 April 2006, Mr Simpson wrote an email to Mr Jordan and Mr Alexander in which he said ‘With regard to the MOU, I understand your position and as James A [Allardice] and I had previously indicated, we were prepared to look at an undated version in any case.’ The defendants submit that by this statement Mr Simpson clearly accepted the position that the MOU had been validly terminated. Mr Simpson’s denial of this should not be accepted. This is reinforced by the fact that had Mr Simpson taken the view that the MOU had not been validly terminated by JACS then he would have immediately contested the validity of the termination. Although it was first raised (by a person other than Mr Simpson at a board meeting on 2 May 2006), Mr Simpson did not purport to formally contest the validity of the termination until July 2006. This is telling.”

78 I cannot see any answer to those submissions, nor can I see where the plaintiff has provided any such answer. The real question is whether adding them all up they amount to a party indicating that it was not prepared to perform its contract. In my view there is no doubt that the answer to that question is “Yes”. Accordingly, JACS was entitled to terminate the MOU on 12 April 2006.

79 In paras 15 and 16 of his submissions, Mr Ireland puts submissions in the alternative, that if the MOU was on foot after 12 April 2006, it was subsequently repudiated and the repudiation accepted. In para 16, he puts as follows:

“(a) despite clause 3.3 of the MOU, in May 2006 WCTC entered into discussions with third persons including Mr Alan Lintz, Mr Saville (financier) et al concerning the purchase of part of the ‘Land’ as defined in the MOU. Mr Simpson’s view was that WCTC’s negotiations with third parties concerning the Maccabi Land was not in breach of clause 3.3 of the MOU because clause 3.3 related to the Option Land and not the Maccabi Land. A plain reading of clause 3.3 and the definition of ‘Land’ in the MOU reveals that Mr Simpson’s view should not be accepted. The MOU defined ‘Land’ in Schedule 1 as being ‘The land being all or part lot 3 in Deposited Plan 234605 … and being the whole or part of the land in Folio Identifier 9/11680’ (this included the Maccabi Land). Contrary to Mr Simpson’s view, it is self evident that WCTC’s discussions concerning and consideration of purchasing the Maccabi land was incompatible with the MOU. This is supported by the assertion that it is ‘Agreed that the preference would be for WCTC to purchase the land rather than JACS’. WCTC did not involve Mr Alexander in the discussions concerning the acquisition of the Maccabi land;

(b) WCTC wished to exclude JACS from the project and instead wanted the JCA proposal to come to fruition. As Mr Simpson conceded the JCA proposal was incompatible with JACS’ proposal;

(c) unequivocal and damaging statements were made by WCTC to the local council protesting about WCTC’s proposed developments. In addition, it was made expressly clear to the council by letter dated 9 November 2006 from Mr Simpson that ‘the directors of White City Tennis Club have come to the conclusion that we are no longer prepared to work with John Alexander Clubs P/L are now seeking to exclude them from the redevelopment of our club’. Similar statements were made in Mr Simpson’s letter to council dated 12 February 2007 and in a President’s report in December 2007;

(d) despite WCTC being aware that JACS or its nominee intended to exercise the clause 8(a) option having acquired the financial backing of Walker Corporation, it nonetheless continued opposing JACS’ proposal. WCTC’s behaviour was entirely incompatible with the MOU.”

80 Again, I think this is correct even though it is unnecessary to make this decision.

81 Accordingly, I find that the plaintiff did repudiate the MOU.

5. Whether the first defendant validly terminated the MOU on 12 April 2006

82 It follows that the first defendant validly terminated the MOU on 12 April 2006.

6. Whether fiduciary obligations based on the MOU continued beyond 12 April 2006

83 Mr White says that notwithstanding any termination of the MOU, the fiduciary duties and obligations continued. He says that when fiduciary obligations spring from contract, it does not follow that just because the contract is terminated that the fiduciary duties cease. Certainly it is correct that there are situations such as the case of agents and company directors where their contract of agency or their contract with the company as a director ceases, that fiduciary duties will remain at least to some extent. However, those are completely different situations to the present. It seems to me that the fiduciary duties arise solely from the contract and were coterminous with the contract. Accordingly, I reject that submission.

7. Whether the indefeasibility provisions of the Real Property Act 1900 protect Poplar from any rights the plaintiff may assert against it

84 I now pass to indefeasibility. It is clear that Poplar has a registered title to Torrens system land and is accordingly entitled to the protection that the Real Property Act gives to such registered proprietors commonly called indefeasibility.

85 Although it is unarguably clear that the registered proprietor of Torrens system land has an indefeasible title, there are various exceptions to indefeasibility. One is fraud; another is that the registered proprietor remains subject to personal equities. As to this second, as explained in the authorities (see eg Bahr v Nicolay (No 2) (1988) 164 CLR 604 and Presbyterian Church (NSW) Property Trust v Scots Church Development Ltd (2007) 64 ACSR 31), the term “personal equities” covers personal rights that bind the registered proprietor whether in equity or at law.

86 It is arguable that some of the rights asserted by the plaintiff may come under this exception. However, that needs to be analysed in the light of what are the relevant rights of a plaintiff. The only point to be made here is that the fact that Poplar has an indefeasible title would probably not of itself defeat those rights.

87 The plaintiff also relies on the fraud exception. The submissions put forward the proposition that the defendants have been dishonest and that their alleged fraud extends well beyond what is covered by the term “equitable fraud”. The significance of this is that as the plaintiff acknowledges, ordinarily “constructive or equitable fraud is insufficient” to fall within the fraud exception to indefeasibility: see Assets Co Ltd v Mere Roihi [1905] AC 176 at 210. The fraud that constitutes statutory fraud that can affect indefeasibility is “actual fraud, personal dishonesty or moral turpitude”: see Bahr v Nicolay (No 2) at 614.

88 The plaintiff truly says that more recent cases show that some forms of equitable fraud may qualify as statutory fraud. I agree. However, I disagree that what happened in the instant case in the defendants’ camp which is more closely analysed under headings 8 and 9 below qualifies as statutory fraud. My reasons for this view are contained within headings 8 and 9, but basically are that the only fiduciary rights that the plaintiff could have had were rights which were connected with the MOU which came to an end on 12 April 2006 well before Poplar acquired the legal fee simple.

8. Unconscionable conduct/equitable fraud under the general law

89 The allegation of equitable fraud/unconscionable conduct appears to be based on what is sometimes called the Pallant v Morgan [1953] Ch 43 equity, though in more recent times some prominent judges have said that this is not a separate equity, but merely an instance of the doctrine of remedial constructive trust under which where a defendant obtains control of property in circumstances which make it unconscionable for him thereafter to assert a beneficial interest in the property, equity will interfere (Paragon Finance plc v D B Thakerar & Co [1999] 1 All ER 400 at 409 per Millett LJ). However, it must be noted that Lord Millett in that case distinguished between the Pallant v Morgan situation where the constructive trustee really is a trustee from the case where the defendant was implicated by fraud where he was liable to account as a trustee. Unfortunately, the submissions in the instant case tend to confuse the two ideas, but I will endeavour not to focus too much on technicalities as I review them.

90 In Pallant v Morgan itself, the facts were that two neighbouring landowners reached an understanding that as they were both interested in a neighbouring property it would be best if one of them would refrain from bidding and that the other, if the successful bidder, would divide up the land according to a formula which was outlined, but not settled in detail. The defendant obtained the property, but declined to fulfil the understanding. Specific performance was refused because the agreement was too uncertain, but C E Harman J held that the defendant’s agent had made his bid on behalf of himself and the plaintiff’s agent, and thus the property was held by the defendant on trust for himself and the plaintiff jointly.

91 The Supreme Court of New Zealand in Avondale Printers & Stationers Ltd v Haggie [1979] 2 NZLR 124 is in some ways analogous to the present case. There the plaintiff and the defendants had a common interest in acquiring a block of land. They were shop proprietors in a building in which they had little security of tenure. The defendants contracted to buy the land. In discussions between the plaintiff and the defendants it was agreed that the defendants would nominate the plaintiff as purchaser. The plaintiff had difficulty in getting satisfactory finance, and eventually, according to the plaintiff, it was agreed that the defendants would complete the purchase and give the plaintiff a pre-emptive right to buy the land at the end of two years. The defendants did so. The plaintiff spent about $34,000 in work on its proposed development but the defendants denied the agreement and would not transfer the land back.

92 Mahon J gave relief on the basis of a constructive trust. However he said more, that the plaintiff not only had to reimburse the defendants for the purchase money, but also for their costs and disbursements of the purchase. Mahon J seemed to consider that although proprietary estoppel had not been established and he held that there was no general doctrine of unjust enrichment then applicable in New Zealand, that he could extend the law of constructive trust to deal with the situation.

93 Powell J reviewed this case together with Pallant v Morgan in Barrios v Chiabrera (1984) 3 BPR 9276 and his Honour seems to say that if A induces B to spend money on the basis of a promise, that A will have an interest in property which B has or B acquires, then B may hold an interest in that property for A because there is fraud in equity or unconscionable conduct. However, again, it does not seem to me that the facts in the instant case come within the principle as so expressed.

94 It is clear that the plaintiff did suffer a detriment in the transaction. It had a lease terminating in 2020 over a club house and it had licences to use the tennis courts, both of which it surrendered as of 30 September 2007. However, it was bound to do that whether the option was exercised by anybody or not. The only way in which people in different interests to the plaintiff and the defendants would carry on negotiations and grant an option, was if this occurred. Accordingly, although there is a detriment, it is not something that flows from the plaintiff to the defendants and was really a condition precedent in a collateral transaction. Accordingly, although I have taken it into account, I do not consider that it affects any proprietary interest between the parties.

95 In 1985, the Right Honourable Sir Robert Megarry, Vice Chancellor of the Supreme Court of England and Wales in a paper in Sydney published as “Wither Equity” (Centre for Legal Information and Publications, College of Law, Sydney, 1985) said of Pallant v Morgan:

“The theoretical basis of the equity is by no means clear. I do not think that it can be based on inequitable conduct making an indefinite agreement sufficiently definite to be specifically enforceable, as one passage in Pallant v Morgan appears to suggest. Instead, it seems to be based on an innominate equity derived, perhaps, from a constructive trust, or else, as I thought in Holiday Inns of America Inc v Broadhead [1969] December 19, founded on proprietary estoppel. Yet though Pallant v Morgan may be thought to be short on theory, it is satisfactorily firm in its result.”

96 Megarry J’s judgment in the Holiday Inns case which was a judgment on an application for interlocutory relief, is set out in detail as part of Chadwick LJ’s judgment in Banner Homes Group plc v Luff Developments Ltd [2000] Ch 372 at 390-391. The view that the Pallant v Morgan equity was akin to proprietary estoppel mentioned by Megarry J was picked up in subsequent cases, and indeed, when the Holiday Inns case came on for final hearing as reported at (1974) 232 EG 951.

97 In Lonrho plc v Fayed (No 2) [1992] 1 WLR 1 at 10, Millett J, as his Lordship then was said of Pallant v Morgan that the equity derived from the fact that the defendant’s agent had been kept out of the bidding by an arrangement which the defendant later repudiated so that he lost his chance to bid for the property. The defendant’s wrong lay not in the acquisition of the property, but in his subsequent denial of the plaintiff’s beneficial interest.

98 The English Court of Appeal reviewed the authorities in the Banner Homes case where at 398 Chadwick LJ who gave the leading judgment said:

“It is necessary that the pre-acquisition arrangement or understanding should contemplate that one party (‘the acquiring party’) will take steps to acquire the relevant property; and that, if he does so, the other party (‘the non-acquiring party’) will obtain some interest in that property. Further, it is necessary that (whatever private reservations the acquiring party may have) he has not informed the non-acquiring party before the acquisition (or, perhaps more accurately, before it is too late for the parties to be restored to a position of no advantage/no detriment) that he no longer intends to honour the arrangement or understanding.”

99 Accordingly, for this equity, one needs to look at the understanding or arrangement made between the parties which kept the plaintiff out of the market. We just do not know what the details of the underlying arrangements were. There can be speculation that neither party felt that it could proceed without involvement by another party. It is not a situation where there were necessarily two competing bidders and one decided not to bid on an understanding with the other.

100 The MOU makes it clear that the way the parties intended to proceed was that initially JACS would acquire the land and then would incorporate a company in which shareholders of the plaintiff would be invited to take up shares.

101 The Pallant v Morgan equity, if it is a separate equity, does not arise and proprietary estoppel as such has not been pleaded. However, there is a general principle that if there is some fraud in a person acquiring property which was to be in part the property of someone else, equity may interfere. There have been various illustrations of this vague general principle in different circumstances such as Homeward Bound Gold Mining Co NL v McPherson (1896) 17 LR (NSW) (Eq) 281 at 297 and following (FC).

102 In the present case, there was a conditional arrangement made. That arrangement was dependent upon co-operation from both sides. The facts and circumstances which I have already related dealing with repudiation show that the plaintiff was not keeping up its side of the bargain. It is accordingly no fraud or unconscionable conduct on the part of the first defendant to give notification that any obligation was at an end as it did on 12 April 2006 and thereafter without any clandestine behaviour find another source of finance so that it could exercise the option beneficially.

103 A number of submissions were directed under this head as to whether Poplar was the agent of JACS and how far Poplar was affected by the equitable burdens on JACS. In view of my determination, there is no need to go into these matters.

104 Accordingly, in my view the plaintiff cannot succeed on this issue.

9. Unconscionable conduct under ss 51AA and 51AC of the Trade Practices Act

105 For the reasons set out under heading 8, the plaintiff is also unable to succeed on the counts under ss 51AA and 51AC of the Trade Practices Act.

10. Whether Poplar should be held to recognise the rights of the plaintiff

106 It accordingly follows, that whilst Poplar should be held to recognise any rights of the plaintiff which are enforceable against it in equity, that matter is rather academic.

11. Whether the suit is defective for want of parties or inadequate pleadings

107 No-one appears to be concerned about this point except myself and so I will shortly mention it and then move on. The plaintiff seeks an order in equity that the second defendant Poplar holds the land on trust for it. It can only succeed in that claim if it demonstrates a breach of fiduciary duty and that it must follow that it is entitled to the land as a result of that breach of fiduciary duty.

108 Causation in equity is rather a complex matter and does not follow the rules at common law. The plaintiff says that if the defendants had abided by what is claimed to be their fiduciary duty mapped out by the MOU, they would have exercised the option on behalf of WCH. Their only capacity was to exercise the option on behalf of WCH. They did not exercise the option on behalf of WCH. That must count as if they had not exercised it at all. However, they did at law exercise it in a way that precluded the plaintiff from exercising the option and obtaining the fee simple in the Option Land. Therefore the consequences of the defendants’ breach were that the plaintiff was denied the land. The defendants hold the land; therefore they must hold it on constructive trust for the plaintiff.

109 That is a possible argument as has been demonstrated from the fact that Hamilton J refused to strike out this part of the statement of claim. However, it is not the only scenario.

110 The plaintiff was not to be the designated beneficiary of any fiduciary obligation. Had the agreement worked out, then it was the members of the plaintiff who would have obtained an interest in WCH, WCH being the registered proprietor of the land. The plaintiff, an independent corporation, would not have benefited.

111 A possible claimant to the equitable interest in the property was a representative of the members of the plaintiff. That representative was never appointed. I made the point during the argument, but neither plaintiff nor defendants took it up. In the ultimate it does not matter, but I do consider that where the court is asked to consider the equitable rights and titles of a piece of land, then at least all possible claimants should have knowledge of what is happening at the very least, even if not made a party.

112 The other problem I found in the statement of claim was that there was no offer to do equity. The nearest the plaintiff got was para 26 where it is pleaded that the plaintiff was entitled to an order that upon it paying to Poplar the option amount payable under the cl 8(b) option, Poplar convey the Option Land to the plaintiff and this is also reflected in prayer 2. However, that is not an offer, or alternatively a sufficient offer to do equity. Poplar has almost certainly suffered far more detriment than merely payment of the option fee including its own conveyancing costs. A person seeking equitable relief must offer to do equity or the suit is demurrable.

113 Having said what needed to be said because this point does not affect the outcome of the case, I move on.

12. Whether the plaintiff is estopped from asserting its rights or has waived them

114 The allegation in the defence is that the plaintiff had fair notice of the first defendant’s intention to have Poplar as its nominee exercise the option without regard to any right of the plaintiff or its associates. Because it did not take any action before the option was exercised, and the defendants then acted to their detriment by raising money and entering into arrangements with financiers and acquiring the Option Land in fee simple, and there is no offer to indemnify against that detriment, there is an estoppel against the plaintiff now raising the matter.

115 The plaintiff says that it was not bound to seek injunctions to prevent the defendants from so acting, and I was referred to the judgment of Brereton J in Jessica Estates Pty Ltd v Lennard [2007] NSWSC 1434 at [46]. Without in any way making any adverse comments against that decision, it is clear from that paragraph that his Honour took that view because of the special circumstances of that particular case. Indeed, his Honour noted that the English Court of Appeal in Mortimer v Bailey [2005] 2 BLR 85 (noted (2006) 80 ALJ 12) considered that whether or not a plaintiff had sought interim relief was a relevant, although by no means determinative, consideration as to whether final equitable relief should be given.

116 I could more understand an argument of delay defeats equity than of estoppel. Equity does expect people not to sleep on their rights, and if there is to be a challenge, then to mount that challenge as soon as practicable, and if that is not done, and rights at law are obtained by the opponent, then it may be that equity will consider in its discretion that it will not give relief.

117 However, for an estoppel there really needs to be a situation engendered under which the opponent is given the impression that it can go ahead with a transaction to its detriment because the inaction of the other side means that they recognise that they have no rights, or alternatively are not pressing those rights. That was not the scenario in the instant case.

118 I do not consider there is any estoppel here nor any waiver.

13. Whether the defendants are liable under the principle of Barnes v Addy

119 The principle in Barnes v Addy was raised by the plaintiff. This is not an uncommon submission in cases dealing with fiduciary duties. The submission does raise matters of some complexity and the court would need to consider in some depth the recent utterances of members of the High Court in Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89. However, my finding that there was no breach of fiduciary duty makes it unnecessary to delve into these matters.

14. Whether the court should declare a constructive trust in favour of the plaintiff

120 It follows that the court has no reason to declare any constructive trust in favour of the plaintiff.

15. Whether the plaintiff is entitled to damages or equitable compensation

121 It likewise follows that the plaintiff is not entitled to damages or equitable compensation. However, there is one matter which I need to mention because it seems there has been some confusion in the plaintiff’s camp about it. An order was made that the quantification of any damage could be postponed. That appears to have been taken to mean that all matters concerned with damages were postponed. That is not in accordance with the practice of the Division. Where quantification of damages is postponed, the plaintiff needs to prove at the hearing that it has suffered some damage, and unless it does so, the court will not order that the matter be referred to an Associate Judge to determine the quantum; see eg Enkelmann v Glissan (1982) 2 BPR 9631 and my decision in Abau Holdings Pty Ltd v J & C Reid Pty Ltd ( 20 March 1987, unreported).

16. The significance of the licence from Maccabi to the plaintiff

122 A relatively recent amendment to the statement of claim was to raise the validity of a licence granted by Maccabi to the plaintiff for six months from 1 October 2007 to 31 March 2008. I heard nothing about this at the final hearing, it may well be because Brereton J in his interlocutory judgment to which I have already referred, has already held that this licence was revocable by Poplar and had been revoked by Poplar. Although that decision was made in an interlocutory application, the decision, being a decision on a matter of law and construction, is binding on the parties. In any event, the licence has expired. I thus need not consider this point further.

17. Other Matters

123 The submissions on both sides were very detailed and raised a large number of matters. I doubtless have not dealt with every minute argument, but I believe I have considered all that needs to be addressed to decide this expedited case. Doubtless any party who reasonably requires supplementary reasons will so indicate as soon as practicable.

124 I should however deal with one matter where I considered that the plaintiff’s submissions were based on a fundamental misconception.

125 Mr White put the argument that for the purpose of exercising the option, JACS arranged for Poplar to be incorporated and nominated as the nominee in respect of the exercise of the option. In nominating Poplar as the nominee, JACS was acting as agent for Poplar, because once Poplar was nominated by JACS as the nominee for the purposes of the option, everything JACS was doing in respect of the acquisition of the Option Land was being done for the benefit of Poplar as the chosen nominee.

126 It was then put that the relationship of principal and agent can be constituted retrospectively by ratification and Jones v Peters [1948] VLR 331 at 335 was cited in support. Ratification of an unauthorised act has the effect of creating an agency relationship: see Dal Pont, Law of Agency (2001) at [5.5] and [5.32]-[5.37]. As at the date Poplar accepted its nomination as nominee, or alternatively as at the date the Option Land was transferred to Poplar, Poplar impliedly ratified, retrospectively, all of the actions and conduct of JACS leading to the transfer.

127 However one must look at the actual grant of option. The option in the White City Agreement was to JACS or its nominee. The usual analysis of this situation is that the grantor is held to have made multiple offers: (a) to the named person; and (b) to any nominee that that person might specify. Thus the exercise by the nominee is as principal and not as agent for the original named grantee: see Westminster Estates Pty Ltd v Calleja (1970) 91 WN (NSW) 222 at 229 and Fileman v Liddle (1974) 2 BPR 9192.

128 Thus I do not consider that the submissions as to Poplar as agent was affixed with its principal’s knowledge are not apposite to the situation. However, this is of little moment.

18. The result of the case

129 Thus, for the reasons that I have given, the result of the case is that the proceedings must be dismissed with costs. The exhibits may be returned on the basis that should there be an appeal they will be restored to the court.

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