Scotts Head Development Pty Ltd & Anor v Pallisar Pty Ltd & Ors S149/1994 [1995] HCATrans 164 (12 May 1995)

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry

Sydney No S149 of 1994

B e t w e e n -

SCOTTS HEAD DEVELOPMENT PTY LIMITED

First Applicant

JOHN CHARLES HARRISON

Second Applicant

and

PALLISAR PTY LIMITED

First Respondent

ERIC ABRAHAM JURY

Second Respondent

RAYMOND GEORGE WINSLETT

Third Respondent

REGISTRAR-GENERAL

Fourth Respondent

Application for special leave to appeal

DEANE J

TOOHEY J

McHUGH J

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON FRIDAY, 12 MAY 1995, AT 2.30 PM

Copyright in the High Court of Australia

_______________________

MR R. KELLER (Solicitor): May it please the Court, I appear for the applicants.

MR D. P. COWLING: May it please the Court, I appear for the first respondent. (of Clayton Utz)

MR W. G. HODGEKISS: If the Court pleases, I appear for the second respondent. (instructed by David Balog and Associates)

DEANE J: I have a certificate of the Deputy Registrar which certifies that the Registrar-General, the fourth respondent in this matter, submits to any order of the Court except as to costs. I have a further certificate from the Deputy Registrar certifying that she has received a letter from Clayton Utz, solicitors for Pallisar Pty Ltd advising that no written submission will be filed or relied on by the first respondent. I also have a certificate from the Deputy Registrar certifying that Tonya Winslett has advised the Court that the third respondent, Raymond George Winslett, has no objection to the grant of special leave to appeal in this matter and does not propose to have any representation on his behalf during the application. Yes, Mr Keller.

MR KELLER: If your Honours please - - -

DEANE J: Mr Keller, in view of what has happened the last two matters, do you understand the time system that operates in this Court?

MR KELLER: Yes, your Honour, I do.

DEANE J: You do, and red means stop.

MR KELLER: Yes, I understand that. Thank you, your Honour, yes.

DEANE J: And it is not directed to you only; Mr Cowling and Mr Hodgekiss I know will know. The time will commence now.

MR KELLER: Thank you, your Honour. If your Honours please the central question for review by this Court is whether the transfer from the first appellant Scotts Head Development Pty Limited to the first respondent Pallisar Pty Limited should stand having regard to the scandalous circumstances in which it came about. "Scandalous" was the word used by his Honour Mr Justice Young the primary judge in the New South Wales Supreme Court. The same question put in another way is whether Scotts Head should be restored to the register.

There are other subsidiary questions but this tandem of questions are the ones - - -

TOOHEY J: But is that right, Mr Keller? Is not the real question whether Scotts Head Development has a beneficial interest in the land which would justify restoring it to the register?

MR KELLER: My submission is no, your Honour, because the manner in which Pallisar became the registered proprietor is, if I may use Mr Justice Young's term again, a scandalous one. It was based on a forgery and a fraud. The persons who signed the transfer were not validly appointed and consequently their transfer is a forgery and it is my submission that in those circumstances that transfer cannot stand.

Your Honours, if I could take you to page 14 of the appeal book, or rather the leave book where his Honour Mr Justice Young said this:

I do not think one can say that the transfer out of Scotts Head at $995,000 was part of the purpose -

and the purpose that he refers to there is to defeat the revenue because this is really a transaction completely separate from the acquisition of the property. The question I am asking now is what property is his Honour referring to? The shares, because the only property that passed hands was shares in those companies Ausam and Scotts Head. So, your Honours, the share transfer agreement or share sale agreement which was completed on 24 August 1988 was one for shares. There was never any contractual relationship between the parties here as to the property, that is the land, of which Scotts Head Pty. Limited was at all times the registered proprietor.

TOOHEY J: But could I just take you to page 16, Mr Keller, in the judgment of the trial judge, at line 9:

The persons who signed the transfer purporting to be directors of the Scotts Head company were never validly appointed as such. However, as equity does nothing in vain and Pallisar is the beneficial owner of the land, it would be a complete waste of time making any decree, subject to the considerations referred to in Section G of these reasons.

MR KELLER: Yes, your Honour.

TOOHEY J: This is an application for special leave and if the Court were looking for any sort of principle which might attract a grant of special leave it is rather hard to find one in view of the trial judge's conclusion that whatever the immediate merits or demerits of the transaction between Scotts Head and Pallisar, if in the end Pallisar is shown to be the beneficial owner of the land, then what is to be gained by restoring Scotts Head to the register is perhaps one step in setting aside a variety of transactions so that Pallisar ends up as the owner of the land in any event?

MR KELLER: Your Honour, my submission is that that transfer to Pallisar was only the last of a number of steps in a scheme which essentially was contrary to the Crimes (Taxation Offences) Act and that scheme was an arrangement of a kind which really was not enforceable in which certain parties were engaged in certain shuffling of documents and the creation of directorships and shareholdings which were intended to avoid any taxation implications to the ultimate beneficiaries of the transaction, namely Jury, or his interests as his Honour referred to.

It might assist the Court if I were to hand up a diagram of a corporate structure of these various companies before the share sale agreement was completed on 24 August 1988 and also after its completion, and I have a further diagram which shows how the moneys that were advanced by the Jury group found their ways to Winslett and through him to those various companies. Your Honours will see that starting with Mr Vogt who was the vendor, and he was the only vendor, of his shares in Ausam, by virtue of the sale of those shares, then the purchaser of the shares would control Ausam and through it Scotts Head Development Pty Limited. The moneys were provided - - -

TOOHEY J: But, Mr Keller, if I could interrupt you, if the purpose of this exercise is to seek to persuade this Court to review all the various steps that were taken in this web of transactions, it does not really shape up as a case for special leave. What is the principle that you suggest is raised by the judgments in this case?

MR KELLER: Mr Justice Young, and I say this very respectfully, made a mental leap or a quantum leap which I respectfully submit he could not make. He was dealing with a transaction concerning shares and then he said that the company Pallisar was entitled to be the beneficial owner of land whereas the transaction was at all times one concerning shares. Also, your Honour, if I may refer you to page 91 of the leave book which sets out, in effect, the summons or application by the Jury interests, if I may put that this way, and what was sought there. And then, if your Honours would turn to page 22, the declarations made by his Honour in those proceedings have no bearing, I submit, to the applications.

His Honour determined that Pallisar was the owner of the land when, in fact, the determinations being sought were as to the ownership of the shares and a transfer of shares and certain declarations concerning the shares. There was never any real doubt that subject to the submission that I am persisting in, with respect, that this was part of a scheme to avoid payment of something like $15 million in income tax because that was the real value of the land, that moneys were advanced to a company which was a shelf company which was controlled by a man of straw, Winslett, who was legally defenceless because he was a bankrupt. He was just a conduit pipe who was just being used by the solicitor, Walker, and Jury who ultimately then adopted that scheme in order to channel funds through Donavon into Vogt and Ausam and have control of the shares, but Scotts Head Development remained, at all stages, the registered proprietor of the land itself.

It was part of the scheme that Winslett was to then sign a transfer of the land, being a director and shareholder in Scotts Head Development by this scheme, sign a transfer to a nominee of Jury which it turned out was Pallisar. He did not do this because he had wanted $100,000 plus ten blocks of land as consideration and Jury said he was not going to pay it. So, as a result, the blank contract of sale and the blank transfer that Winslett signed before the share sale agreement was completed, that is before 24 August 1988, showed the wrong company seal; Donavon instead of Scotts Head, therefore, it was unusable.

Consequently, Jury decided that he wanted the land and he appointed two of his employees, directors of Scotts Head, even though they could not be validly appointed and his Honour clearly made mention of that. So they then signed a transfer of the land for a consideration of $995,000 which was fictitious and which was never paid. It is my submission, your Honours, that it is a matter of public importance that a scheme of this kind which, in so many respects, contravenes the Crimes (Taxation Offences) Act and which amounts to an arrangement under section 3(4) in paragraph (d) of that Act should stand in this form. I submit that that is one particular reason.

The other matter that I want to bring to your Honour's attention is the statement by his Honour Mr Justice Young that equity does nothing in vain. It is my respectful submission that there is no such principle as his Honour referred to. If he meant that equity regards as done what ought to be done, then the question is when somebody has helped themselves to land, engaged in organising a transfer in this irregular way, to say the least, or to use the word "scandalous" way, by means of forgery and fraud, should that person be helped. If that person does not simply volunteer, could there be any equity in favour of that person or that person's nominee, Pallisar? This, in my submission, is a matter for review by this Court.

Your Honours would be aware of the case of Muschinski v Dodds where Mr Justice Gibbs, the Chief Justice as he then was, at page 56 was saying:

the view that the court can disregard legal and equitable rights and simply do what is fair is not supported in England by the decisions of the House of Lords in Pettit v Pettit and Gissing v Gissing -

and, of course, also Wirth v Wirth is being quoted. His Honour, Justice Dean on page 65 of that case said:

Under the law of this country - as, I venture to think, under the present law of England - proprietary rights fall to be governed by principles of law and not by some mix of judicial discretion, subjective views about which party "ought to win" and "the formless void of individual moral opinion".

Your Honours, I submit that the quantum leap, if I may put it that way, that his Honour made from any entitlement that may have existed as to shares to a company nominee being entitled to the land of Scotts Head Development is a leap that his Honour Mr Justice Young could not make.

If I could also please refer your Honours to page 93 of the leave book which sets out the applications that were made by the opponents of the Jury interests for the land to come back into Scotts Head. And then if I could refer your Honours to page 25 of the same book. On page 25 are the orders that his Honour Mr Justice made Young in pursuance or resulting from the application set out at page 93. Your Honours will see that there seems to be no correspondence between the two. I submit very strongly, your Honours, that his Honour misdirected himself in relation to these proceedings and made this leap without any justification, that is, without any evidence. In any case there was no evidence before him where this question of the land was debated.

If, therefore, the Crimes (Taxation Offences) Act applies to this scheme which is described in his Honour's judgment on page 7 and which is adopted by us from about paragraph 15 to paragraph 40 and which is also mentioned in the written summary of argument that we have presented to the Court, that is the brief statement of facts starting on page 2 of that summary this is a scheme that contravenes and consists of an arrangement mentioned in section 3(4) of paragraph (d) of the Crimes (Taxation Offences) Act. Therefore, there is no resulting trust, your Honours, in my submission, to Jury, the Jury interests or any of his nominees and that, I submit, is a matter of public importance and/or it is a question that, in the interests of the administration of justice, ought to be reviewed by this Court.

The Court of Appeal, your Honours, simply adopted his Honour's reasoning. It related the facts again and then repeated and reiterated his reasoning and came to the same conclusions. In my respectful submission, the Court of Appeal did not, in fact, examine that judgment in a way in which, perhaps, it should have done. The Court of Appeal spent a great deal of time attacking one of the applicants in this application, Mr Harrison, who is the second applicant and also his right to appear before the Court of Appeal.

I will be running out of time, your Honours, in a moment but I wanted to address myself to the submission of Mr Hodgekiss or the second respondent, as I assume I should do this now rather than in reply. I am referring to page 4, paragraph (B) of his submission. In that regard, your Honours, I am sorry to interrupt. I have a supplementary summary of argument which I seek leave to hand up. The only reason I am doing this is that it may be easier for your Honours to consider what I would otherwise say by looking at this supplementary summary of argument.

DEANE J: Yes.

MR KELLER: Thank you, your Honour. Your Honours, I am referring to page 4, paragraph (B) and I am saying with regard to that that there was no trust in favour of anyone in this scheme, there was no resulting trust of any trust and that Napier v Public Trustee to which his Honour Mr Justice Young referred to on page 6 of his judgment does not apply and that the presumption of trust would be defeated by actual intention as it was manifested here or the loan because there was a loan, in fact, a loan transaction, in a strict sense a loan transaction, and not one for sale and purchase so far as the Jury interests were concerned.

I have run out of time so I may just make this observation and that is that in my respectful submission, Mr Hodgekiss' argument does not address itself to any of the issues in this matter and simply attacks Mr Harrison and the manner in which or the legitimacy of the acquisition by him of shares in Scotts Head Development which was never one of the issues in this case. Thank you, your Honours.

DEANE J: Thank you, Mr Keller. The Court need not trouble you, Mr Cowling, nor you, Mr Hodgekiss.

This case turns completely on its own facts. An appeal would give rise to no question of general principle appropriate to attract the grant of special leave to appeal to this Court. Accordingly, the application for special leave to appeal is refused.

MR HODGEKISS: Costs, your Honour?

DEANE J: There is nothing you can say about costs, is there, Mr Keller?

MR KELLER: There is nothing I can say, your Honour.

DEANE J: The application is refused with costs.

AT 2.55 PM THE MATTER WAS CONCLUDED