Keith Henry and Co Pty Ltd v Stuart Walker and Co Pty Ltd [1958] HCA 33

May 2, 5, licences included by both plaintiff and defendant in respect to totale

6,7; period - Minister of Customs - Benefit of imports on plaintiff's licences Aug. 13. defendant - Licences granted accordingly - Discretion of Minister in g ices licences - Claim by plaintiff for equitable relief - Declaration sought that McTiernan" held in trust by defendant for plaintiff - Doctrine of Keech v. Sandford ruled, sy, of equity in plaintiff.

In November 1950 K.H., having been in communication with manufacturers of hog casings in Ireland, ascertained that a quantity casings was available for importation into Australia. _ It offered this qu to S.W., and s.W. said that it would take them. K.H. then ne import licence for the goods under the Customs (Import Licensing) Reg 1939, and ordered the goods from the suppliers in Ireland. The good ordered for delivery direct to 8.W., and S.W. established a letter of the price. K.H., with the consent of the Department of Custor available to S.W. its import licence for the purpose of obtaining the credit and later for the purpose of clearing the goods through the Cu 'The goods were invoiced to S.W. and cleared through the Customs by acu agent employed by 8.W., and delivery was made direct to S.W. Late Irish suppliers paid to K.H. a commission on the transaction. A of transactions carried out in the same way took place between 1950 In 1955 the policy of granting import licences was altered by the Depart of Trade and Customs which thereafter proposed to issue licences importation of goods based upon the value of, in the instant case, imported during a base period of fifteen months ended 31st March 19% ;

__K, Hand 8. W. sought licences in respect of hog casings and both claimed H.C. or A.

to include in the value of the hog casings imported during the base period the value of the hog casings cleared through Customs in the manner above men- tioned. K. H., knowing of the inclusion of the value of such hog casings in _ s.1W.'s claim, demanded that 8. W. exclude them but this S. W. refused to do. 'The department with knowledge of the facts allocated licences for the impor- tation of specified quotas of hog casings both to K. H. and 8. W. upon the basis that S. W. was in fact the importer of the goods brought in under K. H.'s licences. K. H. then instituted proceedings in the equitable jurisdiction of _ the Supreme Court of New South Wales seeking declarations that S. W. held the licence quota allotted to it to the extent to which such quota was calcu- lated upon the value of the hog casings in question in trust for it and that S. W. 'was liable to account to K. H. for all profits made by it by the use of such licence. Held, that K. H. had established no title to equitable relief and that the suit _ was properly dismissed. 2 The doctrine of Keech v. Sandford (1726) Sel. Cas. Ch. 61 [25 E.R. 223] explained.

Decision of the Supreme Court of New South Wales (McLelland J.), affirmed.

in the Supreme Court of New South Wales in its equitable iction against Stuart Walker and Company Proprietary d and the Minister for Trade and Customs seeking declarations the defendant company held certain licensed quotas for the ation of goods allotted it by the defendant Minister, to the to which such licensed quotas were based upon the value of s entered by the defendant company for home consumption by eans of import licences of the plaintiff, in trust for the plaintiff nd that it was accountable to the plaintiff for the profits resulting

the defendant company in pursuance thereof. An injunction ought restraining the defendant Minister from dealing further

defendant company on the basis that it was beneficially

he suit came on for hearing before McLelland J., who dismissed

this decision the plaintiff appealed to the High Court. e relevant facts appear in detail in the judgment of the Court

B. BP: Maefarlan Q.C. and A. F. Mason, for the respondent 'Walker and Co. Pty. Ltd.

ed Kerra Henry & Co. Pry. Lrp. a Srvart WaLKER & Co. Pry. Lrp.

Kerra Henry & Co. Pry. Lrp. v Sruarr WALKER & Co. Pry. Lro.

JS. Cripps, for the respondent Minister for Trade and

sought and was granted leave to withdraw. i Cur. adv,

Tur Court delivered the following written judgment : -

South Wales (McLelland J.) in an equity suit, in which the pr appellant was plaintiff and the present respondents were de The second defendant, the Minister for Trade and Customs of Commonwealth, though he is still technically a party to ceedings, was not represented - apart from a formal appear withdrawal of counsel - upon this appeal, and no relief is against him. For the purposes of this appeal the facts, which set out in detail in the judgment of McLelland J. may be st fairly shortly, but first it is necessary to refer to certain reg which form, so to speak, the background of the case. The the Customs (Import Licensing) Regulations, which were made w the Customs Act 1901-1936 (Cth.) and came into force on th lication in the Commonwealth Gazette on 1st December 19: Regulation 3 of these regulations prohibits the importation of goods without a licence. Succeeding regulations provide making of applications to the Minister for licences. By regs. 11 an absolute discretion is given to the Minister to grant or n a licence or to grant a licence subject to such terms and cot as he may approve or determine. Regulation 12 provides that Minister may revoke any licence, and reg. 13 that a licence not be transferable. It should be mentioned that, at the tim the events with which we are concerned began and for some | thereafter, it was not the practice, in the administration o regulations, to grant a licence except for goods which were actt available abroad for exportation. 4 The plaintiff, which is a company incorporated in New s Wales, carries on the business of an importer and distributor. defendant company (which we will call the defendant) is also i porated in New South Wales. It carries on a business of suppli butchers' requisites, including hog casings used in the manuf of sausages. At all material times hog casings were in short s1 in Australia. In 1948 the plaintiff interested itself in the obtai of casings from Ireland, and by 1950 it had established bu relations with three suppliers in Ireland. These were Dillon Clover Meats Ltd. and Roscrea Bacon Factory Ltd. Mr. Keith Henry spoke in his evidence of " correspond written agreements " with these firms, no written ag

ered in evidence, but what was proved was that a course of g was adopted which, with minor variations in individual cases, ras followed throughout. The Irish suppliers from time to time nade known to the plaintiff - either of their own motion or in sponse to an inquiry from the plaintiff - the quantities of casings hich they had available for export to Australia. The plaintiff offered these quantities to purchasers in Australia. There was any difficulty in disposing of them. e first dealing between the plaintiff and the defendant in Irish casings was in November 1950. The plaintiff, having ascer- that certain quantities were available in Ireland, offered a ity to the defendant, which the defendant said that it would The plaintiff then, after obtaining a licence to import the sent to the Irish supplier an order for this quantity. The was in the following terms : - 13 November 1950

0 (one thousand) bundles of Hoc Casrycs - unselected

Plus £2 per cask. Sterling per bundle to be paid to our Commission Account. ity Certificate covering this shipment must be supplied.

svorces: Direct to: Messrs. Stuart Walker & Co. Pty. Ltd., Butchers' Suppliers,

Payment: Irrevocable Letter of Credit for £1350 Sterling will be established your favour by Messrs. Stuart Walker. ANCE: Please Declare under our Open Policy with Blom & Van der AA, 23 Birchin Lane, London, England.

is to be noted that the invoices are to be sent direct to the it, and that it is the defendant who is to establish the letter On the other hand, the insurance is to be effected under plaintiff's open policy. The order having been despatched, the nex step was for the defendant to establish its letter of credit. In

goods should be produced to the defendant's bank, and the plain made its licence available to the defendant for this purpose. In course the goods, preceded no doubt by the shipping docume arrived in Sydney, invoiced to the defendant. The goods cleared through the Customs by a customs agent employed by defendant, and the defendant took delivery of them. For the p pose of clearing them through the Customs it was, of course, nec again that an import licence should be produced to the o the Customs Department. For this purpose the plaintiff made its import licence available to the defendant, having prey obtained from the department an indorsement upon it to the that there was "no objection " to the entry by the defen the goods to which it applied. Later the Irish supplier paid to plaintiff its commission of 2/6d. sterling per bundle. The pr originally quoted to the defendant by the plaintiff was the pri quoted to the plaintiff ry the Irish supplier plus the amount of #l plaintiff's " commission ". The sale of goods effectuated in this wa would seem to have been a sale of goods by the Irish supplier to tl defendant. The goods were delivered by the supplier to defendant, and the defendant paid the price to the supplier. and about the transaction the plaintiff rendered services in bringit the parties together, in giving the order, in causing the goods tob insured under its open marine policy, and (last but not least) obtaining and making available its import licence. The entire t1 action might, of course, have taken another form, and, if it possibly have foreseen what was going to happen five years la is at least probable that the plaintiff would have seen to it thal did take a different form. But it could not foresee the future, a the form which the transaction did take was doubtless adoj a McLelland J. observes, because, from a business point of seemed convenient and advantageous both for the plaintiff and | the defendant. Between 1950 and 1955 there were a large number of si transactions in hog casings, in which the plaintiff and the and one or other of the three Irish firms took part. The transactit took the same form in each case. There appear, indeed, to h been three cases in which the letter of credit was established by plaintiff. It would appear also that after 1952 the insurance effected with the defendant's insurer. But for the purposes of present case these variations are immaterial. Government policy with regard to the licensing of impor naturally varied from time to time during the relevant years.

have been fixed. That is to say, the total quantity for which licences would be granted in a given period was subject to a fixed maximum. One would gather that the quota was never in danger being exceeded, for there seems to have been no difficulty in sbtaining a licence for any hog casings shown to be available abroad. Between April and September 1954 the quota was removed, and this period is referred to in the evidence as the N.Q.R. (no quota restriction) period. On Ist October 1954 a quota restriction was again imposed. These things were matters merely of administrative discretion and practice, which were doubtless made known from 'time to time to those concerned. Changes made do not appear to we affected transactions between the plaintiff and the defendant respect of Irish hog casings up to the end of 1954. About this time, however, there was a new departure in administrative policy, nd it is out of this new departure that the trouble between the plaintiff and the defendant has arisen.

Up to this point, as has been seen, the practice was to issue licences for specific quantities of hog casings shown to be available export in a specific country. ach licence was, so to speak, an hoc licence. The new departure lay in a departmental decision issue general licences on a quarterly basis, i.e. licences authorising 'the importation in each quarter of a year of a fixed quantity of "casings from Canada, Northern Ireland, Eire, or New Zealand. 'These countries were the only then available sources of supply. ©. In explaining the new policy the department referred to the new ' proposed licences as " global" licences. The new policy obviously wolved (1) the fixing of a total or " quota" for a given period, and (2) the proportionate allocation of that quota among applicants "forlicences. So far as the second matter is concerned, it was decided to make the allocation on the basis of the value of hog casings imported during the fifteen months ended 31st March 1955. This decision was notified to importers by a circular letter of 29th April 1955, which read : - " To assist the Department in determining the extent to which each importer should be granted licences to cover 'the importation of hog casings, it is desired that the following information be furnished to this office not later than 13th May 1955, Covering imports of hog casings entered at the Customs on either

import entries' or ' warehousing entries', during the 15 months ended 31st March 1955 : - (1) Importer's name and address. (2) 'Entry number, date of entry and nature of entry. (3) Country of origin, (4) Value for duty £4." This circular was received both

e earlier years, so far as hog casings are concerned, a quota appears H.C. or A.

Kerr Henry & Co. Pry. Lrp. v. Srvarr WALKER & Co. Pry. Lap.

Keira Henry & Co. Pry. Lrp. v. Srvarr WALKER & Co. Pry. Lro.

It would appear from a passage in the cross-examinat Mr. Stuart that at some earlier date the defendant had comm with the Irish suppliers with a view to dealing with them dire so avoiding the payment of commission to the plaintiff. It js be inferred that the Irish suppliers replied that the plaintiff y their agent in Australia, and that they would only deal with defendant through the plaintiff. The defendant had also on |; December 1954 itself made an application to the department. licence to import hog casings from Ireland to the value of £2,01 but McLelland J. was not satisfied that any licence had issw this application. The impending change in licensing policy m have become known before the circular of 29th April 1955 went ou for on 29th March 1955 the defendant wrote to the departm enclosing a list of what it said were its importations of hog casi from Ist January 1954 to 31st December 1954. It did not i letter mention the fact that all, or almost all, of these importati had been made under the plaintiff's licences. i

After receipt of the circular of 29th April 1955 both the plai and the defendant made returns in which were included the h casings imported from Ireland during the fifteen months under plaintiff's licences. In other words, as McLelland J. put it, "t casings coming to the defendant from the three Irish prin the plaintiff were common to the returns of the plaintiff and defendant'. It must be mentioned that the defendant this tin put the position quite straightforwardly to the department. letter accompanying its return it said : - '' We would like to out in connection with the Irish Hog Casings, that these purchased through Messrs. Keith Henry & Co. Pty. Ltd., wh the Australian Agents for three large Hog Casing Packers in and the Import Licences covering all these, were issued by Department to Messrs. Keith Henry & Co. Pty. Ltd., but this not alter the fact that we, Stuart Walker & Company Pty. Lt were, in actual fact, the Importers of the Casings." 4

The plaintiff knew that the defendant had included these impo tions in its return, and it demanded that they should be exclud but the defendant refused to exclude them. The plaintiff also un upon the department that these importations should be eredit it and not to the defendant. The department, in the exercise 0 discretion, ultimately decided to make the quarterly allocati on the basis of a twelve-months period (31st March 1954 to March 1955), and, apparently taking the view that the de and not the plaintiff, was the " importer " of the casings in quest within the meaning of its circular of 29th April 1955, issued qual

import licences to the plaintiff and the defendant respectively on that basis. For the quarter July to September 1955 the plaintiff's allocation was £1,141 and the defendant's £2,820. Ifthe importations "under the plaintiff's licences had been credited to the plaintiff, it is said that the plaintiff's allocation would have been £2,332 more (ie. £3,478) and the defendant's £2,332 less (i.e. £488). It is of no

• consequence in the present case whether the departmental view that " the defendant was really the " importer " of the casings in question was sound or not. When the circular of 29th April 1955 was "4 drafted, the problem which would arise as to the respective positions of the plaintiff and the defendant was presumably not foreseen. When that problem did arise, it affected nobody except the plaintiff =* and the defendant, and one would not have expected a rigid adher- ence to the formula of the circular. Since future licences were in "question, and since in the past nobody could have imported without = a licence, one would rather have expected that the allocation would be made on the basis of past licences to the extent to which they had been acted upon. But the problem which arose was a problem for the department to solve. It was a matter for the discretion of the department, and (provided, of course, that it did not act on » wholly irrelevant considerations) that discretion was absolute. Only one other matter need be mentioned. On Ist November 955 the defendant wrote to the plaintiff, asking it to obtain quota- ions for hog casings from its "principals" in Ireland. The acm Plaintiff did not reply to this letter, and on 7th November 1955 the » defendant sent a cable and a letter to each of the three Irish suppliers, » saying that it had written to the plaintiff and received no reply, and asking them to forward quotations direct. None of the Irish iers replied to the cable or to the letter. The whole of the relevant facts have now been stated. That . Keith Henry should be resentful over what has happened is ily understandable. But it is impossible to find in the facts of case any cause of action at law or in equity. If the defendant induced any of the Irish suppliers to break a contract with the intiff, the plaintiff might have had an action for damages at common law. But there is no suggestion that anything of the kind as taken place. The immediate source of grievance to the plaintiff

i lies in the decision of the department, and a secondary source

lies in the fact that the defendant tried to procure that decision

ind succeeded in doing so. But, whether such conduct receives Approval or disapproval in the commercial world, the defendant _ committed no legal wrong. If it had, in its approach to the depart- _ ment, been guilty of any misrepresentation or fraudulent conceal- , the plaintiff again might have had its remedy at common law.

Kerra Henry & Co. Pry. Lrp. v. Srvarr WALKER & Co. Pry. Lr.

Kerra Henry & Co. Pry. Lrp. v Srvarr WALKER & Co. Pry. Lrp.

But again there is no suggestion of anything of the kind. 4 position was put quite frankly to the department. It occurs to that another remedy at common law might have been sought b plaintiff, and that is by way of application for a writ of ma directed to the Minister. The difficulties in the way of s application are obvious enough. But at least it would have had merit of bringing the real issues - the real substance of the matt out into the open. {i

The relief which the plaintiff has sought is purely equi McLelland J. could find " no recognisable equity " in the in truth nothing resembling an equity can be found in it. whole substance of the situation can be stated in a few words, Minister for Customs has in his disposition certain rights, which of value, and which he is entitled to grant at his discretion. announces that he will grant them on a certain basis. A. cont that on this basis the rights should be granted to him. B.

in the exercise of his discretion, makes the grant to B. really no more in this case than that. A. is very strongly of op that it was contrary to commercial ethics for B. to apply for grant at all. But neither the making of the application not acceptance of the grant can be made a ground for any lege equitable relief against B.

What the plaintiff has set out to do in this suit seems to b bring his case somehow within the equitable principle laid down Keech y. Sandford (1). The substantial relief claimed is by wi declarations that the defendant holds in trust for the plaintifl rights given by the quarterly licences granted to it, and all pn made by it by the use of those licences. The doctrine of Keech Sandford (1) is shortly stated by saying that a trustee must use his position as trustee to make a gain for himself: any prop acquired, or profit made, by him in breach of this rule is held him in trust for his cestui que trust. The rule is not con cases of express trusts. It applies to all cases in which one p stands in a fiduciary relation to another: it has been applie between partners, as between principal and agent, and as bet master and servant: see, e.g., Re Biss; Biss v. Biss (2); Prebbl Reeves (3) and Wicks v. Bennett (4). The case of Birtchnell v. Hy Trustees Executors and Agency Co. Ltd. (5) may be regarded a instance of the application of the same rule. But there is non

(1) (1726) Sel. Cas. Ch. 61 [25 E.R. (3) (1910) V.L.R. 88. 223). (4) (1921) 30 C.L.R. 80. (2) (1903) 2 Ch. 40, (5) (1929) 42 C.L.R.

for the application of any such rule. It cannot be suggested

iness men - or business firms - were engaged in ordinary com- cial transactions with each other, dealing with each other, as saying goes, at arm's length. Nor is there, in any case, any

ed by any misuse of its position vis-a-vis the plaintiff. It seems be put in the statement of claim that the defendant's action in lying for and accepting the new quarterly licences involved some some unconscionable use - of the plaintiff's licences under h the casings were imported from Ireland between 1950 and . But it cannot be said that the defendant in any intelligible "used" the plaintiff's licences for any purpose other than for which they were entrusted to it - viz. first, the obtaining etters of credit, and later the clearing of the goods through the The licences were returned to the plaintiff after they had these purposes, and indeed there was then no further purpose they could serve.

seems clear enough that the decision of McLelland J. was right, and the appeal must be dismissed.

Keirn Henry & Co. Pry. Lro. v Sruarr WALKER & Co. Pry. Lrp.