Halloran & Ors v Minister Administering National Parks and Wildlife Act 1974 [2005] HCATrans 239 (22 April 2005)

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Halloran & Ors v Minister Administering National Parks and Wildlife Act 1974 [2005] HCATrans 239 (22 April 2005)

Last Updated: 3 May 2005

[2005] HCATrans 239

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
Sydney No S331 of 2004

B e t w e e n -

WARREN HALLORAN AND THE PERSONS NOMINATED IN THE ATTACHED SCHEDULE OF OWNERSHIP

Applicants

and

MINISTER ADMINISTERING NATIONAL PARKS AND WILDLIFE ACT 1974

Respondent

Application for special leave to appeal

GLEESON CJ
McHUGH J
GUMMOW J

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON FRIDAY, 22 APRIL 2005, AT 11.28 AM

Copyright in the High Court of Australia

MR S.D. RARES, SC: May it please the Court, I appear with my learned friend, MR A.S. BELL, for the applicant. (instructed by Blake Dawson Waldron)

MR A.H. SLATER, QC: If it please the Court, I appear with my learned friend, MR P.K. BRUCKNER, for the respondent. (instructed by Crown Solicitor for New South Wales)

GLEESON CJ: Yes, Mr Rares.

MR RARES: Your Honours, this matter really involves something that occurs every day in the offices of solicitors and accountants, telling clients about how they should give effect to their intentions to dispose of property, deal in company meetings and the like.

GLEESON CJ: Mr Rares, is there any reason why two or 10 or 200 company meetings cannot be held at the one time?

MR RARES: We would say absolutely no, your Honour.

GLEESON CJ: Well, that could have been done here, could it not?

MR RARES: It was, with respect, when one looks at what was said, and the facts that were found, at pages 80, 81, of the book. The meetings – what Mr Seller proposed to those present - - -

GUMMOW J: This is the statement at the bottom of application book 79?

MR RARES: Yes.

GUMMOW J: Line 45?

MR RARES: That is correct, your Honour, going across to the end of paragraph [19] in the principal judgment and then in the trial judge’s judgment which was quoted there, and in paragraph [20].

GLEESON CJ: What does he mean, “they occur in the same order”?

MR RARES: Well, what he meant, in our submission, was clearly, “We are going through this one transaction as the transaction for each of these matters because we can’t do it any other way. Everybody is going to play their role and do what they have to do in that way, and you will assent to that. Do you understand?” and they do. Then at paragraph [24], the judgment on page 81, the next day they confirm their assent to that proposal by saying, “Well, we’ve in effect done it, and now all we’re doing is - - -

GLEESON CJ: But he talks about going through one transaction. Why cannot you go through all transactions at the one time? I do not know what the answer to this question is. Am I right in thinking that in this case the individuals who were present, gathered together with Mr Seller, were the holders of all the issued shares in the capital of all the companies who had to decide to do something?

MR RARES: Yes, and each of them played exactly the same role in each of the sets of transactions.

GLEESON CJ: Now, I may have misunderstood what was going on here, but I interpreted what Mr Seller said, and what the Court of Appeal was considering as a proposition, that they would hold a meeting of one company and that it was not necessary to hold any meetings of any other companies, which would be a different thing, would it not, from saying, “We are the shareholders in X companies, we are gathered together, and we will meet in our capacity as shareholders of all of those companies now, and in that capacity we will pass the resolutions recorded in the documents that have been distributed to us prior to the meetings”.

MR RARES: Your Honour, in our submission, that is what the effect of what was done in this case was, and what the trial judge, having seen and heard these witnesses, Mr Howell and Mr Seller, give evidence about this and be cross-examined about this, found, by reciting that the Pacinette transactions occurred as they did.

GUMMOW J: Your real complaint is, I guess, what the Court of Appeal said you had to do.

MR RARES: Yes. Hold 10,000 meetings. That it was a fiction, that it was all a pretence.

GLEESON CJ: Can you not hold – I ask this. Can you hold 10,000 meetings at one time?

MR RARES: Yes. And what we say is that by Mr Seller saying, “Look, as regards each other transaction and transfer of land, they occur in the same order and fashion. You will understand this”, what he was saying to them was, “We couldn’t possibly hold 10,000 meetings. We are all agreeing that we’re doing this transaction as the transaction for each of the different entities involved”. You also get something to the same effect on page 81 of the book in the paragraph starting at line 13 or 14.

GLEESON CJ: I thought the Court of Appeal understood the evidence to be that they held a meeting of one company and then said, “There will be no need for us to have any meetings of any of the other companies. We’ll just agree between ourselves that we will treat the other companies as having had similar meetings”.

MR RARES: In our submission, that is a completely wrong interpretation by the Court of Appeal. That is, in one sense, what they said. What Seller says at the top of 80 is:

What I propose, and I think it is the only way to effectively deal with these matters so that they are valid, is for us to hold all the meetings and sign all the documents for one transaction . . . and then for you all to agree that, as regards each other transaction and transfer of land, that they occur in the same order and fashion.

In other words, they say, “Look, this is what we have done and we adopt that convention for all of the others at the time”. So the substance of what your Honour the Chief Justice was putting to me a moment ago, of holding, concurrently, the meetings for each of the two 770 transactions, was what they assented to. They role-played the first one, as it were, and agreed that their role playing was the role playing for the lot of them. That is a practical way of dealing with an everyday situation you get in companies all over the place.

GLEESON CJ: Was there anything in the articles of association or was there anything in the constitution of these companies that provided for circulating minutes?

MR RARES: Your Honour, that was not the subject, I do not think, of any evidence.

GLEESON CJ: That is a common arrangement still, is it not?

MR RARES: Yes.

GLEESON CJ: That companies, particularly proprietary companies, provide that instead of actually holding meetings you can circulate minutes amongst the people who have to be present, and that will be taken to be a meeting.

MR RARES: Yes. But also you can have the situation that we point out at page 153 of the book, of the courts, including this Court, saying that where all the corporators are there and all the parties involved, as they were the trustees.....trust, they can do things informally and agree to them being done less formally, or by circulating minutes or whatever, and it can be valid and effectual.

GLEESON CJ: I think there is a difference between following a procedure, such as a procedure for circulating minutes, and purporting to agree that you will pretend that something happens that does not happen.

MR RARES: Well, your Honour, in our submission, they were not purporting to pretend. They were really sitting there with the solicitor saying, “This is how we are going to get through the 770 sets of books of documents”.

GLEESON CJ: The statement made on the top of page 80 seems to presuppose that these transactions will be done sequentially. Could they have all been done at the one time?

MR RARES: They could have been all done at the one time - - -

GLEESON CJ: Well, is that not where this might have gone wrong, the proposal that they be done sequentially, and then all except the first one not actually done at all?

MR RARES: If you look at the end of what Mr Seller says in that passage:

All the transactions are exactly the same and by going through one transaction we are effectively going through all the transactions and then all that remains is the signing of the completed documents.

He was communicating to them “That is the effective way of doing it”. The real point, in our submission, is that the formality of saying – the way he said it and expressed it was “Effectively, we’re all doing all of the transactions together. We have to have a structure, in a sense, of treating one of them as the example, but we are doing them all together”.

GLEESON CJ: Why?

MR RARES: Because of what he said. He said:

All the transactions are exactly the same and by going through one transaction we are effectively going through all -

So he is saying to them - - -

GLEESON CJ: Why did he have to isolate one of them?

MR RARES: Well, he did not have to, but he did. What he said was “When we do this, in a moment, we’re effectively doing them all. Do you agree?” and they all said “Yes.” So they have identified what it is they are embarking on. They are looking at one set of transactions and going through one book, as it were – because these were in two – each transaction was in two little books of documents about the size of an application book each – and they are agreeing that that was the meeting and the steps for each of the 770 other sets of documents.

GLEESON CJ: Did they ever bring into existence the 770 other documents?

MR RARES: Yes, they did, yes.

GLEESON CJ: Why could they have not brought them all into existence before the meeting, given them to the shareholders and said, “You read them or not read them as you please - - -

MR RARES: They did.

GLEESON CJ: - - - and we’ll meet together at 10 o’clock and we will do all these transactions at 10 o’clock”?

MR RARES: They did.

GLEESON CJ: Instead of saying, “We’ll do one transaction at 10 o’clock and not bother about the others”.

MR RARES: They had all the documents; everything was prepared in advance. Everything was ready. Everything was there. They knew what they were embarking on. So they were all there at the time, they all existed, and over a period of days, as your Honours would imagine, the signing of the documents occurred and they put dates on them. But the fact is that they intended, as he is saying, “What we’re about to do is effectively doing everything”.

GLEESON CJ: But the signing was just to record what had happened, was it not?

MR RARES: Yes.

GLEESON CJ: That could have lasted over months and it would not have made any difference.

MR RARES: That is right.

GLEESON CJ: If what it was purporting to record had happened.

McHUGH J: What about the sentence, line 12:

That is why we are going through one trust and transfer exercise in the specific order we require. All the transactions are exactly the same and by going through one transaction we are effectively going through all the transactions –

MR RARES: Yes. That is the point. He was telling them that “By doing this, you are doing” what the Chief Justice put to me, but he is not using the clarity with which your Honour expressed yourself, with respect. Instead of having the 770 meetings simultaneously, he is saying, “Effectively, we’ll do it this way and that’s how we’ll achieve this result”, and they all agree that that is what they want to do. I mean, why would they not want to do – they are getting the advice of the solicitor, they are saying, “This is the way we’re to do it, and effectively we are agreeing to do this for every one of these”.

McHUGH J: There is the dictum of Justice Street in a case of Field v NSW Greyhound Breeders, Owners & Trainers Association Ltd, where, I think, from recollection, he holds that you can have a meeting of directors, even though the participants did not realise they were having a meeting, but they had conversations between them and made a particular resolve to do something. It was a meeting, even though that was the last thing on their mind.

MR RARES: Yes. And this is effectively doing it concurrently in a practical way. To say this is a pretence, a fiction, a falsehood, is, in our submission, a complete mischaracterisation of what they were doing. They were all - - -

GUMMOW J: What is the particular paragraph in the Court of Appeal’s judgment you are upset with?

MR RARES: Your Honour, there is one at page - - -

GUMMOW J: At page 100, paragraph 65, there is a recitation of the sentence Justice McHugh put to you.

MR RARES: Yes, and at paragraph 70 on 102, at the end of line 39, that they “fictitiously promoted”. Paragraph 72, line 16:

The acceptances, and the orality of the acceptances, are fiction and nothing else. The lack of commercial reality is particularly strongly exemplified by the dealings with the bill of exchange drawn by each transaction.

In our submission, that is all completely contrary to what the Court has subsequently held in Equuscorp, dealing with reality. There was a bill of exchange, it was valid on its face, it might have been an accommodation bill that was still outstanding at the end of the transactions. It could have been - - -

GUMMOW J: It is lines 35 to 40 on page 102, is it not?

There is nothing . . . which supports the view that a complex course of events including not only the formation of a number of contracts but also some oral communications which took place only fictitiously can be promoted into facts - - -

MR RARES: Yes. And there is a passage also at 99 in paragraph 62, line 23:

There is no possibility that any of the immediate parties could show reliance on any statements in the documents: it was clear to all individuals concerned that the events recorded did not happen.

Now, every day people go to their accountants and they are told, “You have to hold a meeting”, an annual meeting and things like that, “Sign these documents”. They do not necessarily sit down and make a formal resolution. Are they all to have their agreements set aside? The Court has said in contract cases you sign documents which record, you assent to things that have happened, you understand things. You are bound by what you sign. The whole point of having these procedures in place to record these series of transactions was to take advantage of a recognised exception to the stamp duties legislation which allowed an equitable interest to pass.

GLEESON CJ: What are those “oral communications” that are referred to on page 102 at line - - -

McHUGH J: It is the acceptance, is it?

MR RARES: They are the acceptances of the offer to sell the land on the terms of the written contract that was proffered by, I think, the vendor in each case to the trust in exchange for units.

McHUGH J: This is so there is no written agreement.

MR RARES: Yes. So that is the oral acceptances.

GUMMOW J: The question there is whether there is value.

MR RARES: At that point, there was not. The way the scheme worked was that the vendor offered to sell the land. The trustee said, “I’ll issue these units in the trust” and there is the oral offer and acceptance, but, in effect, the beneficial ownership cannot change because the only unit holder is the vendor. Then the trustee in its personal capacity takes up units in the trust equivalent in amount, but in a different class, to the units issued to the vendor.

GUMMOW J: Then there is a cancellation - - -

MR RARES: Then the vendor redeems his units and gets the cheque or the bill of exchange endorsed over to it. The vendor then ceases to have any interest in the unit trust. The only person with an interest in the unit trust is the trustee, which then becomes the beneficial owner of the land because that is the only asset of the trust. That has been held to be effective by the - - -

GUMMOW J: If you succeed in getting a grant of special leave, you might have to face an attack on that earlier decision of the New South Wales Court of Appeal, might you not?

MR RARES: Well, there may be, but the same approach has been taken by the Court of Appeal of Victoria and the Court of Appeal of Queensland. The Commissioner of Stamp Duties accepted, on the basis that these documents were effectual, as opposed to fictitious, that there was no duty assessable.

GUMMOW J: The Act has been changed, has it not?

MR RARES: The Act has been changed. The Duties Act has been changed. There was no – and my friends have abandoned this point – there is no duty payable, but they had objected to all the documents going in on the basis of the stamp duty objection, and so we, finally, in the Court of Appeal got an assessment.

Your Honours, for those reasons, in effect, we say that as a matter of practicality and common sense these people intended to bring this about. There are concurrent findings they all intended to bring this about. Why would the courts say that they were engaged in a pretence and fiction when there is no misleading conduct? If a liquidator had come in, for example, would a liquidator have been able to have his claim defeated against somebody on the bill of exchange or one of these contracts on the basis, “We were just engaged in a fiction. We didn’t really do it”? That is contrary to the whole way that the Court has laid down in Toll and Alphapharm and recent cases that people conduct themselves. They were
intending to act honestly and properly, and they ought to have their bargain upheld.

You have this new type of sham category, in effect, of saying, “It’s not a sham” – there was a concession it was not a sham – “but it’s a pretence, a fiction, a series of falsehoods”. What is that?

GUMMOW J: Well, it seems to turn on the significance that Justice Bryson gave to this word “fact”, does it not? Whether a fact had occurred.

MR RARES: Yes, well, there is another question as to whether or not the Court of Appeal was, at the end of the day, entitled to interfere on a question of fact.

GUMMOW J: Yes.

MR RARES: Because the jurisdiction was only on the question of law. There is no question of law, at the end of the day, as to whether or not they - - -

GUMMOW J: Or whether you could say there was a “fact” of a meeting.

MR RARES: Yes. Those are our submissions, your Honour.

GLEESON CJ: Yes, Mr Slater.

MR SLATER: Your Honours, the dispute which arises in this case needs to be put, to some extent, in context. The context is very briefly summarised at the beginning of the judgment of Justice Bryson, but if I may run over it very quickly. There is a very large area of land down near Jervis Bay, which is bushland. It was subdivided around the turn of the century and it was resumed. The idea was conceived that on resumption a higher value could be obtained if each of the subdivided lots were sold separately.

Now, whether or not that idea is correct remains to be debated in the Land and Environment Court, but, in order to put themselves in a position to make that argument, the applicants sought to transfer the land from its then owners, three of four companies, to 770 different owners. To do that would have incurred a huge amount of stamp duty, which would have made the exercise pointless. So what was done here was an attempt to avoid the stamp duty. The arrangement by which the stamp duty was to be avoided was one which involved the holding of a sequence of meetings and the making of offers which were to be orally accepted.

Now, your Honour the Chief Justice put to my friend that the signing was just a matter of record. That is not entirely correct. Some of the minutes, yes, the signing was just a matter of record, but, in order to make the scheme work, things had to be done in a particular order.

GLEESON CJ: That is what I am interested in. This had to be sequential, did it?

MR SLATER: It did, your Honour.

GLEESON CJ: It could not all be done at the same time.

MR SLATER: The essence of it appears from the table at page 76 and page 77 of the application book. One starts off with the land being owned, beneficially, by a company which in this table is called the “second company”. The object is to get the beneficial ownership from that company into the company which acted as trustee without having anything in writing which would attract stamp duty. That was done by constituting a trust – so that was the first step – then by issuing units in the trust, then by making a written offer to acquire land in consideration for the allotment of units, orally accepting it and relying on equity’s protection to enforce the contract thus said to arise, notwithstanding the prohibition in the Conveyancing Act.

Then there was to be a redemption of units and then an allotment of units. It was the redemption and allotment of units which was the trick which was to avoid stamp duty, in reliance on the ISPT decision. Then there was to be a written offer to sell the land and an oral acceptance of that.

GLEESON CJ: Now, that was one transaction.

MR SLATER: The sequence I have described was the transaction which was to occur in relation to one of the parcels of land.

GLEESON CJ: Yes. Now, accepting that each transaction required that sequence of events, why could not all transactions have been done at the same time? I am not suggesting they were, but why could they not have all be done at the same time, if the parties to all the steps in the transactions were identical in the case of each transaction?

MR SLATER: We cannot say that they could not have been done concurrently in the sense that at each stage they would say, “We agree that we’re passing this resolution in each of the 700 companies” – no, we cannot say that - - -

GLEESON CJ: That would be the way to do it. Leaving aside the circulating minute possibility, you would, I would have thought, distribute the documentation – suppose you just wanted to have meetings of 700 companies, and that was all there was to it. You could, could you not, distribute draft resolutions to the shareholders, assuming there were only two shareholders of all 700 companies, and say, “We will meet at 10 o’clock on Tuesday morning”. At 10 o’clock on Tuesday morning they could then say, “We, in our capacity as shareholders of companies 1 to 700 inclusive, resolve in accordance with these draft minutes”.

MR SLATER: Yes, that could have been done that way, yes. It was not, but it could have been. What was done was what my friend fairly accurately described as a role-playing exercise.

GUMMOW J: As a?

MR SLATER: A role-playing exercise. They played out the role in one company and then said – and it is really quite clear in the evidence, at the top of page 81 of the application book:

what we did was to have one meeting which we all understood was the same as the meetings that would occur for all of these transactions.

Then there was a manifest belief that they were going away and signing the documents sequentially at some later stage. By “sequentially”, I mean one person would sign them and then the next person would sign them and so forth, but that would cause the other meetings to happen. But that clearly was not the case. There was in fact only one meeting of one company or one group of companies. There was never any contest, never any suggestion, that it was otherwise. The language of Mr Seller, who was the architect of the arrangement, is all consistent with that in the passages on page 80 that your Honours took my friend to earlier.

GUMMOW J: What about the phrase, “we’re effectively going through all the transactions”? Top of page 80, line 16, 17.

MR SLATER:

That is why we are going through one trust and transfer exercise in the specific order we require. All the transactions are exactly the same –

yes.

GUMMOW J: Why, as a matter of fact finding or inference, should the Court favour a conclusion which is destructive rather than effective of what was done, given the intention?

MR SLATER: The intention, your Honour, was one which depended upon things being done in a particular order, which depended upon there being actual offers and actual acceptances, oral acceptances. Now, it is one thing to say, “Yes, you can record minutes, you can waive the formality of compliance with a company’s constitution”, which is what the Duomatic principle is about - - -

GUMMOW J: But, if you can have a meeting, you do not have to all sit around a table engaged in a ceremony.

MR SLATER: It is not the ceremony of the meeting, your Honour. It is the making of the offer and the oral acceptance, where the oral acceptance is the essence of it.

GUMMOW J: You do not even have to use the word “meeting”.

MR SLATER: No, you do not, but, if you are going to make an oral contract, you do have to have oral agreement. You cannot just say, “It would be nice if we had had the oral agreement, but we can’t be bothered doing that”. There has to actually be the action. If you are going to rely on the protection of equity to say intention should be carried out, you have to manifest the intention, not just by saying, “We’ll treat it as if we have the intention” or “We’ll treat it as if we had made the offers and acceptances”. One has to go further than that. It does not really help to describe that proposal of actually making written offers and orally accepting them, the essence of which is fundamental to the scheme, as being a solemn farce, as our friends do. The law is more than a solemn farce.

In our submission, this arrangement depended on there being real meetings, even if they were all held concurrently, and real offers and real acceptances. When one goes past - - -

GUMMOW J: What do you mean by “real meetings”?

MR SLATER: Well, it depended upon there being – I have slightly misstated that, your Honour. I accept that meetings can be held in the sense that all the parties agree that they are to be treated as being held, but oral contracts, in our submission, cannot be so dealt with.

If your Honours are against us on that point, there remains the other question which the court did not find it necessary to go to, but did address. That is whether what was done in this case was sufficient to invoke the protection of equity, in that all that this arrangement depended upon, in the end, for value was the unsecured promise of indemnity given to the putative vendor, so that no value actually passed to it at any stage. In that respect, as the court found, it differed materially from the transaction which was held to be effective in ISPT. If there is no more than a series of oral agreements which say that party A will pass the land to party B and no value is given for that, merely a promise to pay, or an implied undertaking to pay, in our submission, that is not enough.

GUMMOW J: Why is that not consideration?

MR SLATER: It is consideration at law, your Honour, but not, in our submission, consideration which is sufficient consideration to support an action for specific performance, nor is it sufficient consideration to discharge the trustee of its obligations as trustee. In the end, that was what this arrangement depended upon, that the putative trustee should acquire the property beneficially and be discharged of its obligations.

Now, the principles which govern that, in our submission, are relatively well settled. This is just an application of those principles to a particular set of facts, not, as our friends say, an everyday - - -

GUMMOW J: I am not so sure about that. I do not think you sit down and have a notional specific performance suit.

MR SLATER: Well, that is more or less our point, your Honour. The beneficial interest does not pass unless you can get the benefit of specific performance.

GUMMOW J: Equity regards as done that which ought to be done.

MR SLATER: Yes, but it has to be - - -

GUMMOW J: You do not have a notional specific performance suit, do you, every time you enforce an assignment of future property for value?

MR SLATER: There have to be grounds for it, your Honour, grounds for equity to regard that as done on the ground that it ought to be done.

GUMMOW J: Quite.

MR SLATER: In our submission, that precondition is not met in this case. Moreover, or more particularly, in the context of this application, the question whether it is is a matter of applying established principle to particular facts. Although I have not otherwise addressed that point, it is our submission that all of the issues which are sought to be agitated in this application involve settled principle and merely the question of whether they can be applied to existing facts. The question whether a meeting can be held without the formalities required by the constitution of a company is
a well-settled principle. Our friends advert to some of the cases in their submissions in reply; we do not controvert that.

The question whether the liability to duty could be avoided by this mechanism has been settled, and the Act in question has now passed into history. So there is no special leave point in that, in our submission. The question of the equitable principles upon which they rely are also well settled. So, again, we say there is no special leave issue in that. If your Honours please.

GLEESON CJ: Thank you, Mr Slater. Yes, Mr Rares.

MR RARES: Your Honours, all of the documents that exist are the contracts existing at the time of the meeting for each of the 770 transactions, so they could be accepted orally. There was identified property; everything could be dealt with at the meetings. The trial judge found all that at 8 to 9 in the application book.

Your Honours, what my learned friend’s case is seeking to do is to elevate a triumph of form over substance to have occurred. Justice Bryson in the court below, dealing with my friend’s latter point of the specific performance suit that Justice Gummow raised, at 111 of the book in paragraph 91 said there was another reason, which my friend touched on, of the putative trustee getting these things, that this was a “self-dealing” by the trustee which equity would not authorise and:

it is not likely that a Court of Equity would enforce it.

GUMMOW J: What would be the “registrable transfer” spoken of in the third line of paragraph 91? This is Torrens land, is it not?

MR RARES: Yes. There would be an assumption that we could deal with it in equity anyway but, in our submission, there is not a case that exists that says a trustee, where all parties to a transaction of the trust consent and all the beneficiaries consent and intend the trustee to wind up with the property, should not be able to deal with that, and these parties all set out to achieve the very result.

GUMMOW J: By definition these would be unregistrable interests, would they not?

MR RARES: Yes.

GUMMOW J: Then how can you have a registered transfer of them?

MR RARES: Quite, and that is why there is no reason that equity would not enforce these. So there were not well-settled principles applied. Whatever the principles were, they were not well settled or not applied, in our submission. These matters raise important issues and there has been a very substantial injustice done to my clients by the result in the Court of Appeal.

GLEESON CJ: We will adjourn for a short time to consider the course we will take in this matter.

AT 12.00 PM SHORT ADJOURNMENT

UPON RESUMING AT 12.05 PM:

GLEESON CJ: In this matter there will be a grant of special leave to appeal.

AT 12.05 PM THE MATTER WAS CONCLUDED