Swiss Partners & Ors v Jeffcott Holdings Ltd (In Liq) A36/1999 [1999] HCATrans 589 (26 November 1999)

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry

Adelaide No A36 of 1999

B e t w e e n -

SWISS PARTNERS PTY LTD, CRAIG PETER BALL and MICHAEL ANDREW WHITING

Applicants

and

JEFFCOTT HOLDINGS LIMITED (IN LIQUIDATION)

Respondent

Application for expedition

McHUGH J

(In Chambers)

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON FRIDAY, 26 NOVEMBER 1999, AT 10.10 AM

Copyright in the High Court of Australia

MR N. LUCARELLI: If your Honour pleases, I appear for the applicants. (instructed by Ebsworth & Ebsworth)

MR T.A. GRAY, QC: Your Honour, I appear for the respondent. (instructed by Minter Ellison)

HIS HONOUR: Perhaps I might find out what your attitude to this is, Mr Gray.

MR GRAY: Your Honour, my attitude is and my instructions are to oppose. Matters have changed a little. We had previously indicated a neutral position but we have received a summons anticipating a very early hearing by video in Adelaide. If that had occurred we could have been prepared but we have now been left, your Honour, in a position where we cannot - there simply is not time for us to fairly prepare.

HIS HONOUR: Yes. I will hear what Mr Lucarelli has to say.

MR GRAY: I might say there are other reasons why it is not suitable.

HIS HONOUR: Yes. I will hear you in due course. Yes, Mr Lucarelli.

MR LUCARELLI: I must admit I understood that there was a neutral position as well, your Honour, given the correspondence, but in any event I want to make four short points as to why, in my submission, your Honour ought make one of two orders. The first order is that the matter be expedited in such a fashion that it be heard and determined at the same time as the matters on Tuesday, and in my submission, that is possible. Alternatively, if your Honour is against me as to that, then I seek appropriate orders that there be expedition of the hearing of the special leave application to ensure that if special leave is granted as to the common legal issue, as it is described, in the Duke matter, and we would say the same ought follow in our matter, then the two appeals may at least be heard at the same time. If I may assume - - -

HIS HONOUR: That assumes that you would get special leave if the respondent did. Yours is a most unpromising vehicle for a grant of special leave. An application for special leave to appeal against the refusal of an interlocutory order refusing - - -

MR LUCARELLI: Of course, there has been instances where this Court has, of course, dealt with a very similar instance, and I point to the Esanda Case where, of course, it was effectively a pleading summons that determined an important question. In my submission, that is in a sense the same position here, although I do understand what your Honour is saying. But given that the issues are within a very narrow compass and the question of the common question, as I have called it, is one that requires resolution, then albeit that the vehicle does not look all that promising, in my submission in due course, once the leave application is heard, we would seek to persuade the Court that it is appropriate - - -

HIS HONOUR: Yes, I understand that.

MR LUCARELLI: The four points that I wish to make - and I will be very brief, your Honour - the first is that if this special leave application is heard at the same time as the others, it will give the Court a more complete set of circumstances in which to consider the point.

HIS HONOUR: But that assumes that the respondent would be in a position to assist the Court with an elaborate argument on the point. I did not know whether Mr Gray was appearing or not or there was going to be any representation for the respondent, but it appeared to me that even on the earlier correspondence, that a great difficulty would be whether or not an order should be made, given the distinct possibility that the respondent would not be in a position to adequately answer the matter.

MR LUCARELLI: On the part of the applicants, if I might say, it is intended that Mr Karkar will lead me in the matter ultimately on the special leave application. I spoke to him yesterday and it is both our views that the applicants certainly would take no more than between five and ten minutes to make any additional points and the only additional points we wish to make really relate to some points that have not yet been agitated by the respondents, now the applicants, in the Duke matter, to do with the case of Ord Forrest in the High Court which, in our submission, on the leave application we will say presents some strong dicta in favour of the proposition for which we contend. It is a case that has been run below in argument in this case but not in the Duke Case and that is one of the points that I wish to make to your Honour today which is that the Court would be greater assisted on Tuesday if it also had the applicants in our matter here to assist the Court in a very very short submission, to add anything that may be said about this issue by the applicants in Duke. We would say that that is of importance for your Honour to take into account.

I do not know that I need to take your Honour to the passages in Ord Forrest at the moment, because I know that time permits, but if your Honour would like me to, I am able to do so. I have a copy of it here and I can take your Honour quickly to the passages. So that is one of the issues. We have run Ord Forrest all the way through and it has not been run in Duke, from what we can tell.

HIS HONOUR: My inclination would be to expedite the matter if I thought that the respondent was in a position to deal with the matter. But in that, I would rely entirely on what counsel for the respondent told me as to what his position is.

MR LUCARELLI: May I make some submissions about it at the very least. I will be very brief, your Honour. The first is, in our submission there is no prejudice, no real prejudice, to the respondent. Indeed, they ought be ready for the matter for a number of reasons. First, they have known about the application squarely since 1 November on any view. Secondly, they have had the summary of argument since 11 November, on any view. This is all uncontested. The client effectively is the same. The liquidator of both companies is the same. It is a matter that certainly has been on the books, if I might say so, in our matter for a number of years and there has been correspondence, as the chronology demonstrates, which shows that we were awaiting the outcome of the Duke appeal before proceeding with our own leave application before the Full Court. And finally, in our submission, the submissions that they will make are likely to be the same. Now, I hear what Mr Gray has said but, in any event, in our submission, the submissions are likely to be the same, albeit that of course it is a slightly different vehicle and I do appreciate that point, your Honour.

HIS HONOUR: Yes, but among other things, unlike Esanda, we do not even have a set of reasons from the Full Court.

MR LUCARELLI: No, I appreciate that, your Honour, but in a sense your Honour does have the reasons of Duke which, if our submission is correct - and there appears to be no issue about this - that in effect it is effectively a common legal issue that does arise. It is no,- I do not understand, seriously contested that it is not a common legal issue. There might be slightly different ways in which the matter may be put. The difference in our case, we would say, a purer fact situation is that it was actually a scrip for scrip offer, whereas in Duke it was actually partly cash and partly scrip. The first point I wanted to make to your Honour was that it actually gives this Court a wider ambit, it gives the Court almost a complete ambit of factual circumstances in order to explore this very issue which naturally we will be submitting in due course is an important issue. It has never been determined by the Court and we say is obviously fundamental to our case that the Duke Case ran for three and a half years and our case has the hallmarks of being a long case, I think it is agreed. Naturally, if we can dispose of this matter it will save enormous time and resources.

But, your Honour, the important point is that effectively this Court now does have a full set of reasons which are apposite to our case in the Full Court in Duke, because the issue is common, albeit there are slight differences. But at the end of the day, essentially the way in which the plaintiff puts its case for damages in our case is really the way in which it put its case for damages in the Duke Case. There really is not much light between the vehicles, if I might call it that, your Honour.

HIS HONOUR: I must say I am surprised that your client is actually taking the view that it is taking and wants to come along. I would have thought that your case, in some respects, apart from the procedural points, is a much clearer, cleaner case for determining the legal issue. There are all sorts of other matters running around in the Duke Case which could well result in a dismissal of the special leave application in that particular case.

MR LUCARELLI: We would be obviously urging on the Court that because ours is a very simple and discrete issue, that that is in effect the most fundamental issue because if there is no compensable damage, then really that is the end of the case. I mean at the end of the day, there are some other minor damages that are sought - I am not seeking to put to your Honour that it is the only damage - but the rest is literally dollars and cents in comparison to the millions that are sought.

HIS HONOUR: Yes. I have heard what you have said about this issue but, Mr Lucarelli, I am not going to force on any party in these circumstances an expedited hearing if I am told by counsel - and I rely on counsel's integrity as one naturally does in these matters, as to whether or not they consider they are in a position to deal with the matter.

MR LUCARELLI: If your Honour pleases. May I move to the alternative position which is to seek at least some form of expedition because our inquiries with the Registry, your Honour, I am informed by my instructing solicitor, are such that it is unknown when the Adelaide Registry - it is unknown when this Court may sit on special leave applications in Adelaide. So what we would seek to do is what was done in Duke, which is to have some expedition of the matter and for it to be determined at a convenient location so that the matter may be dealt with.

HIS HONOUR: That is an administrative matter. That is not a matter for making an order for expedition.

MR LUCARELLI: If your Honour pleases. If your Honour does not want to embark upon that, I can understand that, so we will deal with the Registry as to that.

HIS HONOUR: Yes, thank you.

MR LUCARELLI: If your Honour pleases.

HIS HONOUR: Yes, Mr Gray. Now, why would you not be ready to deal with this matter - - -

MR GRAY: Your Honour, when this matter was being mooted a few days ago, I took a brief in the matter on the basis that I could bring a.....issue to allow it to be heard. In actual fact, the outline of argument has not been prepared. To prepare between now and Monday is very difficult. Having had a look at it, your Honour, there are some differences between the cases. Quite apart from the point that one is as it were a procedural argument and the other one a substantive argument, when one looks at what has happened, the Full Court below has not said my friend is out of court, they have just said, as a matter of procedure, strike out is not the appropriate way to go.

HIS HONOUR: That seems to be the way Justice Duggan dealt with it.

MR GRAY: Yes, entirely. The Adelaide court has said it would prefer to deal with the point in a different way. Now, your Honour, the matter is pleaded in a different way to Duke. The differences might be said to be subtle, but they might be significant because, in the Duke Case, the line of reasoning that appealed to the Full Court - - -

HIS HONOUR: Was the contract point.

MR GRAY: In the Duke court, was to do with the use of the shares as consideration in circumstances where the primary consideration by the allottee, the payment for example of par value, was done away with by a different form of consideration. They picked up and applied from Lord Green the principles that in those circumstances there has been a loss.

When one looks at the Jeffcott pleading - and I do not claim to have fully mastered it, it is quite a long document - it is not actually pleaded in terms of that precise language at all. What it pleads is a loss through different consideration paid and consideration received, but it does not analyse in the pleading the way in which that loss is addressed. Your Honour, it is a pure paper transaction. The Duke transaction is cash.

HIS HONOUR: What I am most interested in, do you tell me that you would not be able to do justice to your clients if this matter was put in for Tuesday?

MR GRAY: Your Honour, we would feel disadvantaged. Obviously we would present an argument. I tell your Honour we would feel disadvantaged. Your Honour, one of the problems is that my time is fully committed on the Duke matter and, as your Honour said, there are many other issues running around there and it is not an easy matter to focus on this and say, is this the same point, because it is not a point of law. At best, it is mixed - - -

HIS HONOUR: Are there fiduciary issues in - - -

MR GRAY: Yes, and I understand fiduciary - - -

HIS HONOUR: The Full Court decided it on the contract point really, but they went on and dealt with these other - - -

MR GRAY: Yes, they did, and equitable damages, and fiduciary, as I understand it, is not part of the Jeffcott Case. Your Honour, one of the problems is that when one looks and says, is it the same point, the answer is that these things are very subtle and that is where my client would be disadvantaged. Your Honour, from my client's point of view, if this Court wanted to hear the matter, for example, in December, we would be ready.

HIS HONOUR: Yes.

MR GRAY: I might say, when we said we took a neutral position, we took it that expedition was for the Court essentially, but we did receive a summons saying "returnable in Adelaide" and we had anticipated, your Honour, a video list in Adelaide perhaps on the Wednesday, which would have given us three or four days.

HIS HONOUR: Yes. If there is a grant in your case, and I refuse this application, Mr Lucarelli's position would no doubt be strengthened even given the fact that there is this outstanding procedural problem which always creates a difficulty in these cases.

MR GRAY: Your Honour, at the pragmatic level, if they are right and it is truly the same point, then they suffer nothing by waiting. If they are wrong and it is different, it should not be on at the same time.

HIS HONOUR: I think they want to draw the Court's attention to this passage in Ord Forrest - - -

MR GRAY: I would be surprised if the Court did not have regard to that. It was certainly drawn to the attention of the Full Court and the Full Court did not find it of assistance for very good reasons. But this Court, your Honour, it is quite wrong to say, with respect, that the Ord Case was not referred to below. It plainly was, it was.

HIS HONOUR: Yes.

MR GRAY: But to answer your Honour directly, we do feel disadvantaged and we would be concerned, because this is an area that subtleties can make a difference, that we would be disadvantaged. I cannot put it beyond that. If the Court wished to hear the matter, of course we would be presenting the best argument we could.

HIS HONOUR: Thank you, Mr Gray. Mr Lucarelli, you have heard what Mr Gray has said. This is a matter in which one simply just has to trust counsel. That is the view I take of these matters. If he says he is disadvantaged, I would feel it wrong of us to push him on. I do not think you will be prejudiced. You might give me a copy of Ord Forrest. This is the tax case.

MR LUCARELLI: It is, your Honour, which dealt - we have a copy for Mr Gray as well - - -

HIS HONOUR: Is this where the Court split two:two - - -

MR LUCARELLI: Yes, it did, your Honour. In effect, the majority was because of Justice Stephen below. It does deal squarely with - - -

HIS HONOUR: I have not read it for some years.

MR LUCARELLI: I do not know whether your Honour would be assisted by just the pages that I would have referred to, just very very quickly.

HIS HONOUR: Yes.

MR LUCARELLI: Justice Stephen sets out the facts. I will not trouble your Honour because he was at first instance. Chief Justice Barwick, who was in the minority along with Justice McTiernan, does deal with this question about whether the allocation and issue of shares constitutes a disposition of property. I draw your Honour's attention to pages 140 at the very foot of the page. I will not take your Honour fully to the passages. Also at page 141 about halfway down the page, but virtually all of that from the words "The amount is the contribution to the capital of the company" through over on to page 141, concluding with the first full paragraph.

Then on to page 142 starting at about lines 5 or 6, the paragraph, "A company in allotting a share in its capital does not sell or transfer the share" et cetera, to the end of that paragraph and generally that page. Again at page 143 in the second paragraph on that page, your Honour, starting with the words, "There are circumstances" and particularly the last paragraph on that page:

An allotment of shares, as I have pointed out, does not transfer any property from one person to another although by the allotment rights are created in the allottee which are themselves, when created, property.

Justice McTiernan agreed with the Chief Justice even though the Chief Justice was in a minority as to the question of the construction of section 4(1) of the Gift Duty Act as it then way, your Honour.

Then Justice Gibbs, forming part of the majority, if I might refer your Honour to page 148 - I do not know whether your Honour wants me to take your Honour in little detail to them - but starting at the top of the page, "The question then is, was the allotment a disposition of property?" What the Court did, virtually all of the Justices, your Honour, is they first looked at the question as to whether, as a matter of law, the allocation and issue of shares can constitute a disposition of property and then the Court went on to consider whether the very specific provisions of the Gift Duty Act in that case, which actually provided that the allotment of shares constituted a disposition of property, actually caught the transaction. And the difference between the majority and the minority was that the majority took the view that it was caught by the very words in the statute and the minority took the view that it was not.

His Honour, at page 148, the top of the page:

An allotment of shares cannot be described as a disposition of property in the ordinary meaning of that expression. When a share is allotted, nothing is transferred or conveyed from the company to the shareholder. The person who becomes a shareholder by the allotment and issue of the share does not acquire any property in the assets of the company -

The rest of that paragraph, your Honour, as well. Down the page, with the sentence commencing, "In my opinion", about six lines from the bottom:

In my opinion, the allotment of shares in a company is a "disposition of property" within the meaning of the definition, notwithstanding that the allotment could not be described as a "conveyance, transfer, assignment, settlement, delivery, payment or other alienation of property", or as a "disposition of property" in the ordinary sense of those words.

As I have said to your Honour, because the majority took the view that the statute clearly caught the transaction, because the words of the statute clearly talked about allotment of shares, that was the reason why it was decided the way it was.

Justice Mason, your Honour, at 155, on the general dicta that I have referred your Honour to:

The allotment of shares in a company is certainly not a disposition of the company's property; nor, for the reasons already stated, can it be described with accuracy as a "disposition of property" in the ordinary sense of that expression.

Obviously it would take a little more time to take your Honour in detail to all of those. I did not profess to do so. But the point about the Ord Forrest Case, your Honour, is that the Full Court does not refer to it in its reasons. Now, whether it was referred to it or not, of course, we are at a disadvantage, your Honour, because neither Mr Karkar or I were there. But we have perused the Duke decision in the Full Court and it is not adverted to and we do not know what submissions, of course, were made. We are, to some extent, in other people's hands as to that, and no doubt your Honour will - or whoever is hearing the matter on Tuesday - will be dealing with that. But it is the fact that given that it is a common issue, and another party coming with a different set of views about the way in which the point may be put, would have been of great assistance to the Court. That is why we came seeking to be heard at the same time, your Honour.

HIS HONOUR: Yes, thank you.

MR LUCARELLI: If your Honour pleases, I really cannot take the matter further.

HIS HONOUR: Yes, thank you, Mr Lucarelli.

HIS HONOUR: This is a summons the principal object of which is to have an application for special leave filed in this Court heard and determined together with applications for special leave to appeal from the decision of the Full Court of the Supreme Court of South Australia in Duke Group Limited (In Liquidation) v Pilmer & Ors, which are matters A22, A24 and A27 of 1999. The Duke matters are listed for hearing on Tuesday next on 30 November here in Sydney.

The present application arises out of an application to strike out a paragraph in a statement of claim in proceedings pending in South Australia. In February 1997, Judge Burley dismissed the application to strike out the relevant paragraph. In April 1997 Justice Duggan heard an appeal de novo in respect of those orders. He dismissed the appeal. In December 1997, the applicant sought leave from Justice Duggan to appeal to the Full Court of the Supreme Court of South Australia from his orders. His Honour refused leave on the basis that, although the issue was clearly of general importance, he was not satisfied that a sufficient substratum of fact had been established to enable the issue to be determined. Subsequently, in January 1998, the applicant applied to the Full Court of the Supreme Court of South Australia for leave to appeal in respect of the orders made by Justice Duggan in December 1997.

As a result of correspondence from the associate to the Chief Justice of South Australia in April 1998, the parties were content to allow the leave application to await the outcome of the appeal in the Duke Group litigation which was then pending in the Full Court of the Supreme Court of South Australia. On 29 September of this year the applicant's solicitors wrote to the associate to the Chief Justice asking whether the court wanted anything further put to the court now that the decision in the Duke Group had been given. Ultimately, on 21 October, the associate to the Chief Justice wrote to the applicant's solicitor's Adelaide agents informing them that the court was unanimously of the opinion that leave to appeal should be refused.

There has been correspondence between the parties in which the solicitors for the applicant have asked the respondent to agree to a timetable for expediting the hearing of the special leave application. Until today, the respondent's attitude was that it neither consented nor opposed the application for expedition of the hearing. However, this morning, Mr Gray QC, who appears for the respondent, has informed me that the application is opposed. His client has not yet filed its summary of argument. He has told me, and I accept his assurance, that, although he would be able to present an argument, his client would be disadvantaged if he were compelled to deal with this matter on Tuesday. I have no hesitation in accepting what he says. In those circumstances, I do not think it would be a proper exercise of my discretion to compel the respondent to be ready to present argument in this matter on Tuesday next.

I make orders that the time for service of the summons be abridged but that the application for expedition and for having this matter heard together with the Duke Group matter be dismissed.

Mr Lucarelli for the applicant asks that I make an order that the special leave application to be expedited to ensure that, if special leave is granted in the Duke application, the appeals would come on for hearing together. I do not think there is any need for me to make such an order. It is a matter that can be dealt with administratively. Mr Lucarelli's principal concern is that some time may elapse before there is an Adelaide special leave list. But there is no reason why, if special leave is granted in the Duke matters, that the present matter could not be heard in another special leave application either here or in Melbourne. In those circumstances, the summons is dismissed.

Any further orders?

MR GRAY: I do seek costs, your Honour. Our position has changed from neutrality to opposition but when we expressed a view of neutrality we had expected, as the summons invited us to, a hearing in Adelaide by video. Had it been heard some days ago, the matter would have been different. So we do seek an order for costs.

HIS HONOUR: Yes. What do you say about that, Mr Lucarelli?

MR LUCARELLI: With the greatest of respect, your Honour, it is a little disingenuous in this sense that they have known about the application, that it was coming on. The fact that we have not been able to get before the Court until today is hardly a matter that can be landed at our feet. We have been asking for quite a long time for consent to expedition so as not to be in this position that we are today where they can say that they are disadvantaged. They have been on notice since 1 November, they have had the summary of argument since the 11th, the correspondence is clear, we have been asking for assistance from them to get the matter ready, that has not been forthcoming. The position of neutrality is what I understood when I stood up this morning to your Honour. That has changed. I may understand why it has changed but it should not be that now the application should be such that the costs are visited upon my client. In my submission, the better order, and the order that your Honour ought make, is that they be costs in the leave application.

HIS HONOUR: What has been running through my mind in the last few seconds is that I should make them respondent's costs in the leave application.

MR LUCARELLI: If your Honour pleases, I am content with that order.

HIS HONOUR: The summons is dismissed. I order that the costs of the application be the respondent's costs in the application for special leave to appeal.

MR LUCARELLI: If your Honour pleases.

HIS HONOUR: Nothing further?

MR GRAY: No, your Honour.

HIS HONOUR: Adjourn the Court.

AT 10.41 AM THE MATTER WAS CONCLUDED