Nicholson v Gander [1909] HCA 34

Nicholson v Gander [1909] HCA 34 - HCA 1909 case summary — Zoe

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made by Zobel for a lease in virtue thereof, and of all rights and powers attaching to them, and for an injunction and other con- sequential relief. The suit came on for hearing before A. H. Simpson C.J. in Equity. It is not necessary, for the purposes of this report, to refer to the evidence in detail, the material portions being sufficiently stated in the judgments hereunder. The appel- lant relied upon an agreement made between himself, Zobel, and Gander during 1903 in reference to acquiring certain private lands then under lease to the Mount Bulga Copper Mine Co., as to which the learned Chief Judge in Equity said in delivering judgment : - * The result of the evidence I find to be that it was arranged that the plaintiff should obtain the forfeiture of the leases and do all the necessary work in the Mines Department; that some fourth person should be found to provide the necessary money ; that Gander and Zobel should peg out or otherwise take up the land after the cancellation of the leases, and the mine when so obtained should be divided into four shares, one fourth for the plaintiff, one fourth for the finder of the money, one fourth for Gander and one fourth for Zobel." His Honor, after further reference to the evidence, said in conclusion : - " The evidence as to what the original agreement between the parties was is very intricate and conflicting. There were numerous interviews, and it is practically impossible to say what took place at one inter- view and what at another. I am satisfied that it was agreed between the plaintiff, Gander, and Zobel that a fourth man should be found to bring in the money required; that the plaintiff should undertake the work in the Mines Department of getting the lease to the company cancelled and a beforehand notice issued to him ; that Gander and Zobel should take up the land ; and that the four should then be partners in equal shares. There was no definite agreement as to what was to be done if the man who was to supply the capital could not be found, as turned out to be the case, but I am inclined to think, and if necessary to hold, that there was an implied agreement that in that event the plaintiff, Gander and Zobel should be partners in equal shares. Assuming that to be so, the plaintiff contends that his share was to be taken as fully paid up in consideration of the work he did at the Mines Department. This is denied by the others and seems very

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under it had no connection with the original title of Gander. It was not in any way founded upon the earlier authority, and nothing that the appellant or any of the parties had previously done assisted him in any way in obtaining it. The value of the beforehand notice obtained by the appellant came to an end with the taking up by Gander in 1904, There is no evidence that Zobel was acting in pursuance of the original arrangement. Apart from any question of laches the title of the co-owners expired in August 1905, and they were not in any fiduciary position towards one another after that time. The rule in Keech y. Sandford (1), therefore, does not apply: In re Biss; Biss v. Biss (2). There being no constructive trust arising out of the original relationship of the parties, the appellant must show that a new fiduciary relationship was created before the acquisition of the new title by Zobel. That would require a contract for valuable consideration. There is no evidence of such a contract, nor is it suggested on the pleadings. Even if Zobel's admissions amount to evidence of a promise to hold on behalf of the appel- lant, they do not prove a prior contract. In themselves they area nudum pactum. There is no evidence of any consideration. What the appellant had contributed had been in pursuance of the original arrangement, and cannot be relied on as consideration for a renewal of that arrangement. There was no declaration of trust in favour of the appellant. That would require a clear statement of intention to hold as trustee a definite interest in a definite property in favour of named persons. It is not clear whether Zobel intended to admit only the appellant to an interest, or Gander also, and on what terms. The utmost extent to which his words can be strained is a voluntary promise to admit the appellant to an interest. A promise to create a trust must be supported by consideration. [They referred to In re D'Angibau ; Andrews y. Andrews (3).] [Hicers J. referred to Hartly v. Wilkinson (4).]

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preliminary observations as to the nature of the title and the practice of the Department, I will refer to the facts of this case. The subject matter, as I have said, is an area of 33 acres of land. In 1903, possibly before, the plaintiff and the respondents, Zobel and Gander, had been associated in mining adventures, and at that time the private mining lease now in question was held in conjunction with two Crown leases by a joint stock company called the Mount Bulga Copper Mine, and it was alleged, and seems to have been discussed between these parties, that the leases were liable to forfeiture; and it was proposed that the plaintiff should give notice to the Department that the leases were liable to forfeiture in order that he might in due course obtain a beforehand notice, and that one of them should then take advantage of the opportunity so afforded to apply for the land for the benefit of the three. As the parties had not a superfluity of money, it was contemplated that they should induce some person with capital to come in with them, so that they would then have a syndicate or partnership of four to take up the land and ultimately acquire a lease of it. Notice was given, as proposed, by the plaintiff of the breach of conditions in respect of the Crown leases and they were forfeited, and nothing more seems to have been done with them. The main question that arises is as to this agreement, which was found by the learned Judge to have been made - and there is no reason to doubt his finding - what was the real nature of the agreement, and whether it was sufficiently definite. That question has to be considered from more points of view than one. I will deal with it first of all from this point of view: how many shares each party to the arrangement was to have in the authority. There can be no question that there was an agreement to form a syndicate of three, Nicholson, Zobel and Gander, with a stipu- lation that, if they could find a fourth with the necessary capital,

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Gander said that they were only trifling, and that he did not H. zie = want anything and there the matter ended. The learned Judge has not found which version he accepted, and it is very difficult Nicnorsoy for us, not having seen the witnesses, to know which version we Fe ack should accept, but in the view [ take of the case it is not necessary to determine that question. I will proceed now with the narrative so far as the facts are not in dispute. Gander, having obtained the authority to enter, put on labour and worked the ground. I have mentioned that the authority was only an authority to prospect. It is suggested that Gander went beyond that. Possibly he did, but I do not think that is material. At that moment I think that Gander must be taken to have held the authority as trustee at any rate for himself and Zobel, and possibly for Nicholson as well. Zobel returned from New Guinea in September 1904, and went to the mine, where he continued to work with Gander until February 1905. In October 1904, being in want of money to carry on opera- tions, they sold one half share of their interest under the authority to one Anderson for cash, and in the following December bought it back, giving payment by promissory notes. They acted throughout the transaction upon the assumption that Nicholson had nothing to do with them, and no communication passed between Nicholson and Gander or between Nicholson and Zobel from August 1904 to August 1905 with respect to this adventure. Under these circumstances another question might arise whether, supposing that Nicholson's version of the conver- sation between himself and Gander, before Gander applied for the authority to enter, was correct, he would have been allowed, after the expiration of so long a time, during which the other parties were acting on the assumption that he had nothing to do with the property, whilst he remained silent, to assert a claim to a share in it, or was barred by laches. Before 2nd August 1905, on which day the authority of Gander expired, Gander, apparently acting bond fide, entered into a contract to sell the whole adventure to one Murray, who is also a party to this suit. He was paid the price agreed upon, and Gander, in order to carry out the contract of sale - it does not appear whether the authority to enter was transferable or not - shortly before the expiration of

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the authority, gave notice to the Warden of his intention to abandon it; and Murray, while the authority was still in exist- ence, applied for an authority to enter the 33 acres now in ques- tion. Zobel, who at that time was away, when he learnt what had taken place, disputed Gander's authority to sell, and opposed Murray's application, and in another litigation between those parties it was held by this Court that Gander had no authority to sell Zobel's interest, and that therefore all that he really sold was his own interest: Gander v. Murray; Zobel vy. Murray (1). On 10th August Zobel, who had been engaged in mining somewhere else, and had accidentally heard of what had been done, put in an application in his own name for an authority to enter the 33 acres. All that he knew, apparently, was that Gander had given up the land, and that Murray was trying to get it,and he desired to save it. As I have said, it is difficult to say whether it can be held that Zobel at that time was a trustee for Nicholson or whether, if he was a trustee, Nichol- son had lost his right to assert his title by silence, or laches as it is called, during the period referred to. About the same time, shortly after Zobel had put in his application for 33 acres, Nicholson became aware that Gander's authority had expired and had not been renewed, and put in an application for the 20 acres which Gander had originally held. After this there followed a sort of quasi-litigation between Murray and Zobel before the Warden, the question being who was entitled to get the authority to enter, Murray who had applied while the original authority was still in existence, or Zobel who applied after it had come to anend. In that dispute Gander supported Murray to whom he had sold. This went on for some months and finally on 12th March 1906 Zobel obtained an authority to enter, and upon that authority this suit is founded. The plaintiff claims that when Zobel took up the land under the circumstances stated he took it up not for himself, but as trustee for the plaintiff as well as himself. After this dispute friendly relations between Zobel and Gander were renewed. Zobel admitted Gander to a share in the mine, and, though he personally was willing that the plaintiff should have a share, Gander always refused to allow it. Under (1) 5C.L.R., 575.

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attached to him? As against Gander I do not think there can be any question that Zobel would have been absolutely entitled. He certainly did not take the land up for Gander. All that we know on the point is that Gander had thrown it away and that Zobel wanted to save it. What equities then had Nicholson against Zobel? Any equities that he had must be founded upon the original agreement for a syndicate of three, and must be based upon the assumption that that agreement was still in existence, and binding upon Nicholson himself as well as upon the others. It was suggested that the new title was an accretion upon the old one, to use the words of Romer L.J. in In re Biss ; Biss v. Biss (1), in which the whole of the law upon the subject was shortly stated. Upon that point I remark that exactly the same facts were the subject of litigation in Gander v. Murray; Zobel v. Murray (2). The plaintiff was not a party to that litigation and no finding by the Court in that case can affect him. But exactly the same facts were proved, and I came to this con- clusion upon them (3): " At the expiration of Gander's authority on Ist August 1905 he had no further right to the land, or in any way connected with the land. Zobel, whose share in the partner- ship had been ineffectually sold, was, when that authority expired, probably free to obtain authority for himself to enter the land. There was no privity between him and Murray. Zobel only did what he was entitled to do when he got his authority to enter the land, and it cannot be disputed that he acquired that authority free from all equities as faras Murray was concerned." Of course whether he was free from equities as far as Nicholson was con- cerned is another question. In In re Biss; Biss v. Biss (4), Romer LJ. sammed up the different grounds upon which such a claim can be supported. He said: - "To conclude, the result of my investigation of the cases is that, neither on authority nor on principle, can the appellant in the present case be held a trustee of the new lease he has obtained. He was in nowise in any

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Now I will take these questions in inverse order. In the present case Zobel was not making use of any right that a Court of Equity could recognize, belonging to other persons in obtain- ing the authority ; nor was he guilty of any fraud or concealment towards anyone. The other two questions are: Was he in a fiduciary position with respect to the land, and did he owe any duty to the plaintiff? If he owed any duty to the plaintiff it must have been by virtue of the original agreement, because no fresh one had been made. What then was the original agree- ment? How is it to be regarded? Is it to be regarded as of indefinite duration, to apply to that particular land so long as or whenever either of the parties to the agreement should take it up, or was it limited to the particular adventure, namely, that the plaintiff should give notice of the liability of the leases to the for- feiture, and then apply for the land for the benefit of the syndicate of three, who were to hold the land for twelve months and during that time apply for a lease. The original agreement certainly did not contemplate such events as actually happened, that is to say, that it should be thrown up by Gander, apparently under a misconception as to his powers - for he appears to have acted bond fide - and so brought to an end. I cannot consider the agreement upon the whole as an agreement that for an indefinite time either of these parties, if he succeeded in acquiring any interest in the land, should hold it as trustee for the others, or to put it in another way, as an agreement to extend for an indefinite time, that if any of them applied for the land in his own name he should be deemed to have acted as agent or trustee for the others. Iam unable to find any solid ground for holding that there was any nexus between the original title and the new one. If Zobel was a trustee for Nicholson, in what shares were they to participate ? The original agreement was for a partnership or syndicate of three, to be enlarged in certain events to four. What was the new one? Gander was out

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of it: was it to be a syndicate consisting of Zobel and Nicholson only? And if so, were they to hold in equal shares, and who was to find the money? For my part, I cannot think that if Nicholson's application had been successful he could have been deemed to be a trustee for Zobel, and for the same reasons I am unable to come to the conclusion that when Zobel applied for and obtained an authority he was acting as a trustee for Nicholson. 'The result is then that Zobel when he applied for the land, not being in a fiduciary position, did not owe any duty to Nicholson to hold it for him as well as himself. The case in that result seems to me somewhat analogous to a case where land, to which an equity is attached of which the holder has notice, has got into the hands of a purchaser for value without notice. When it comes into the hands of such a purchaser it is quite immaterial that the original purchaser had notice that there was this equity attaching to it. The conclusion to which Tam compelled to come is that in Zobel's hands the land was free from all equities which attached to it originally, which was the view taken by this Court in dealing with Murray's case in 1904. That being so, Nicholson's case, if it is to be supported, iust be based upon some other grounds, either upon a declaration of trust by Zobel or upon an agreement by Zobel for valuable consideration to give Nicholson a share in the adventure. There is strong evidence of admissions from which the Court would be justified in inferring, if the facts were not known, that Zobel had taken up the land as trustee for Nicholson and himself, or if the facts had been doubtful would have been strong evidence from which the Court might have found that he was acting in pursuance of a prior agreement between himself and the plaintiff. But here the facts are known. Admissions do not cut down known facts; they are evidence to prove facts. We know them all, and upon the uncontroverted facts it appears to me that Zobel was not atrustee for the plaintiff. Any admissions that he afterwards made could only operate as a declaration of trust, or as evidence of a contract for valuable consideration. But learned counsel for appellant, who argued the case with great ability, declined to rest his case upon a declaration of trust. The principal evidence of that was to be found in a letter from Zobel to the plaintiff of 17th

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was guilty of any fraud or concealment towards him. In order to come to that conclusion I do not think it necessary to enter upon the determination of any disputed facts. It is quite clear that there was no new agreement made between the parties with reference to the taking up the land in August 1905. Mr. Wise properly admitted that any case of trusteeship or contract which exists must be founded upon the first contract. 'There was an agreement between the three, Zobel, Gander and Nicholson, to take means for determining the title of the old company and for the taking up of the land by Gander on behalf of the three. But that agreement, in my opinion, did not extend beyond that venture. It was not a general agreement for a partnership. It was not even an agreement with respect to the working of that particular land whether the first authority failed or not. It was simply an agreement to hold the land and deal with it under the authority and if possible obtain a lease under the authority. That, I think, is the agreement which was come to in the first instance. And the evidence is very strong to show, on the undisputed facts, that during the course of that agreement the parties themselves abandoned it and treated it as at an end before the termination of the authority. I find that Zobel and Gander dealt with the mine as if it was their property in a sale to one Anderson, that they later on bought back from Anderson the share which they had sold to him, and that afterwards Gander sold the whole property to Murray. All these transactions took place without reference to Nicholson. Then take Nicholson's own conduct, Although the other two men were actually working the mine and expending money upon it from September 1904 to February 1905, and after that employed other men to carry on the work and fulfil the conditions under which the land was held, Nichol- son seems to have taken no part in all that, to have contributed nothing towards it, and to have had no communication whatever with them from August 1904 to August 1905. Well under those circumstances it is very difficult to suppose that Nicholson con- sidered that he was in any way interested in the mine then being worked and dealt with by the other two who, he says, were his partners. Then when it comes to the period when the first authority was running out, we find that even as between Gander

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the period named in the authority is insufficient to enable the holder to complete the prospecting (Act of 1896, sec. 2 (b)). But there was no extension of Gander's authority, or attempt to get it extended ; and there is nothing to show that the con- ditions precedent to extension could have been fulfilled. Zobel made a fresh application on 10th August 1905 without con- sulting Gander, or the plaintiff, or any one else. There was no causal or other connection between Gander's title which had expired, and Zobel's title which is the subject of this suit. Zobel was in no sense a trustee, or even co-owner, on 10th August 1905. It was not his position as co-owner of the pre- vious authority that gave him the new title; it was his position as first applicant. Zobel's title was not due in the least to Nicholson's "beforehand notice"; and as to the fact that Nicholson had caused the cancellation of the company's lease, that fact enured to the benefit of all the world except the com- pany. A trustee cannot renew for his own benefit the lease of a property held by him for the estate: Keech v. Sand- ford (1); but Zobel held no longer any fiduciary position towards the plaintiff. He may, perhaps, be treated as one of several principals, or even as one of several beneficiaries, as to Gander's authority. But in neither aspect can any constructive trust be established against him. If several principals instruct an agent to buy for them a certain race- horse, and the horse die, and one of the principals buy another horse from the same stables, he is surely entitled to keep the horse for himself. There are numerous partnership cases in which a partner has been compelled to give the firm the benefit of transactions into which he has entered on his own account. But in such cases the advantage has been gained by virtue of his position as a partner - say, by the employment of the partner- ship property, or by means of the partnership transactions. Where surviving partners were compelled by the administratrix of the deceased partner to treat a new lease of the partnership premises as held on trust for the old firm, it was because the old lease was the foundation of the new one: Clegg v. Fishwick (2).

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Judgment (110 paragraphs)