Plaintiff v Defendants

COMMON MISTAKE AT EQUITY - Circumstances in which equity may set aside a contract based upon common mistake - Where equity may set aside a contract based upon common mistake in circumstances of equitable fraud or misrepresentation or where a condition can be found expressed or implied in the contract - Where it is otherwise difficult to conceive of other circumstances in which equity may set aside a contract for common mistake - Whether there was equitable fraud in the nature of unconscionable conduct by the Intervener in its conduct in this proceeding - Where no unconscionable conduct by the Intervener - Where mistake not fundamental - Where the parties to the contracts are not able to make restitution - Taylor v Johnson [1983] HCA 5; (1983) 151 CLR 422 applied - Australia Estates Pty Ltd v Cairns City Council [2005] QCA 328 not followed - Vadasz v Pioneer Concrete (SA) Pty Ltd (1995) 184 CLR 102_, Pacer v Westpac Banking Corporation_ (Supreme Court of New South Wales, Santow J, 2 August 1996) and Hawcroft v Hawcroft General Trading Co Pty Ltd [2016] NSWSC 555 applied.

CORPORATIONS - Shares - Application by the company to correct its register of members - Where the grounds for relief not established - Application refused - Corporations Act 2001 (Cth), Re Australian Organic Eggs Pty Ltd [2022] VSC 747 applied.

1 Border Express Pty Ltd (Border Express) seeks an order pursuant to s 175(1) of the Corporations Act 2001 (Cth) (Corporations Act) that its share register be rectified to accord with a deed made on 24 November 2022 (the deed). It submitted that its issue of shares, undertaken pursuant to contracts to which it was a party made on 5 April 1990 (the contracts), are void ab initio or alternatively should be rescinded ab initio. The defendants, who were the other parties to the contracts and the recipients of the shares, support the application and adopted the submissions of Border Express. The Court granted leave to the Commissioner of Taxation of the Commonwealth of Australia (the Intervener) to intervene. The Intervener opposed the application. I have concluded that Border Express is not entitled to an order pursuant to s 175(1) of the Corporations Act as it has not established any grounds for such an order.

2 Border Express is primarily a national transport and distribution business and is based in Albury. It operates from depots located around Australia and has approximately 1,700 staff, including sub-contractors.[1] It is a private family run business operated and managed by the Luff family. At the time of the contracts (i.e. 5 April 1990) Border Express was named "M J Luff Operations Pty Ltd". MJ Luff Pty Ltd (MJ Luff) is the holding company.[2] MJ Luff Nominees Pty Ltd (MJ Nominees) is the trustee of the Luff Family Trust. Max and Lynn Luff are married and have four adult sons, Mark, Grant, Geoffrey and Jonathon. Max was chairman of the board of directors of Border Express until he retired in 2020.[3] He remains a director of Border Express, MJ Luff and MJ Nominees (the Luff companies). Lynn has been the secretary and a director of the Luff companies.[4] Mark, Grant, Geoffrey and Jonathon have all worked for Border Express in various operational and management roles.[5] Grant retired from the business in 2019 (apart from undertaking some short term roles)[6] and the other sons still work in the business.[7] They are each a director of the Luff companies and were appointed prior to 5 April 1990, except for Jonathon, who was appointed a director of the Luff companies on 5 April 1990.

3 In the 1970s, a Mr Bruce Stanton became the accountant for Max, Lynn, the Luff companies and the Luff Family Trust.[8] Since at least the 1970s, Mr Stanton worked for various accountancy firms. Mr Stanton is deceased.[9] Mr Stanton prepared the tax returns for Border Express and the personal tax returns for Max and Lynn.[10] Mr Stanton also attended to company secretarial work such as preparing minutes of meetings and company resolutions.[11] Max met Mr Stanton at least once a year when the annual accounts and tax returns were done and sometimes during the year to obtain advice.[12] Border Express did not hold formal directors' meetings. The family did have meetings and discussed business, but these meetings were generally informal.[13] The usual practice at meetings was that resolutions, minutes and other company documents were prepared in advance by Mr Stanton and then signed with little, if any, discussion.[14] Max relied upon Mr Stanton's advice on accounting and taxation matters.[15] Mark also met with Mr Stanton from time to time. He met him alone or with Max.[16] Lynn did not usually question Max or Mr Stanton about the details of what was being signed and relied on them to tell her what needed to be signed.[17]

4 On 19 September 1985, the then Treasurer made a statement to the House of Representatives in which he stated that the Government had decided to introduce a capitals gains tax that would apply to gains on assets purchased or acquired after 19 September 1985 (CGT).[18] That same day, Max met with Mr Stanton. At this time, Mr Stanton was a partner of the firm Lange Stanton & Simpson. On 23 September 1985, Mr Stanton sent a letter to Max which stated:[19]

Dear Mr. Luff,

M. J. Luff Operations Pty. Ltd.

(formerly known as Border Building Supplies Pty. Ltd.)

We refer to the interview you had with Mr. R. B. Stanton on Thursday, 19th September, 1985 and as requested, enclose four Share Certificates pertaining to the share ownership of M. J. Luff Operations Pty. Ltd. (formerly known as Border Building Supplies Pty. Ltd.).

The four Share Certificates enclosed are as follows :-

Certificate No. 8. M. J. Luff Pty. Ltd. 600 Shares.

Certificate No. 9. M. J. Luff Pty. Ltd. 398 Shares.

Certificate No. 10. Maxwell J. Luff 1 Share.

Certificate No. 11. Lynn E. Luff l Share.

On Share Certificates Nos. 9, 10 and 11, would you please place the Common Seal of the Company, that is Border Building Supplies Pty. Ltd. and you should sign the three Share Certificates in your capacity as Director. Mrs. L. E. Luff should sign the Share Certificates in her capacity as Secretary.

Thereafter the four Share Certificates should be retained by you for safe keeping.

Yours faithfully,

LANGE, STANTON & SIMPSON,

[signed]

R. B. STANTON,

Partner.

Encl.

5 The share certificates referred to in the letter concern transfers of shares in Border Express that were the subject of resolutions passed by the directors of Border Express at directors' meetings on 28 June 1978 (Certificate No. 8) and 20 September 1983 (Certificates No. 9, 10 and 11).[20] Max does not recall the meeting with Mr Stanton on 19 September 1985.[21] I find it likely that Max requested the share certificates pertaining to the share ownership of Border Express (then named M J Luff Operations Pty Ltd) as this is specifically referred to in the letter. Max gave evidence:[22]

1. I was aware of the introduction of Capital Gains Tax (CGT) laws from my business dealings and the newspapers. The proposal to introduce CGT was big news in the leadup to its introduction and I was aware of CGT from at least the time it started.

54. From around the time CGT was introduced, I had spoken on several occasions with Mr Stanton about the impact of CGT on the Border Express business. It was my understanding, including based on what Mr Stanton had told me in those conversations, that Border Express was a pre-CGT company. In other words, I understood that all the shares in Border Express held by me, my wife and MJ Luff were all issued before CGT was introduced and therefore those shares would not be subject to any CGT on any sale.

6 I accept this evidence. Border Express submitted that in September 1985, on the eve of the introduction of CGT, Max met with Mr Stanton to confirm the pre-CGT status of the shares in Border Express.[23] I find it is likely that Max and Mr Stanton discussed the introduction of CGT on 19 September 1985 given the meeting was on the same day the Treasurer made the ministerial statement concerning CGT and concerned the shareholdings in Border Express. I also find, based upon Max's evidence,[24] that it is likely that Mr Stanton told Max around the time of the introduction of CGT that as the shares in Border Express held by Max, Lynn and MJ Luff were issued before CGT was introduced, these shares would not be subject to any CGT on any sale.[25] As a result, I also find it likely that Mr Stanton knew from no later than around the time of the introduction of CGT that the shares in Border Express held by Max, Lynn and MJ Luff were issued before CGT was introduced and that these shares would not be subject to any CGT on any sale.

7 On 24 June 1986, the CGT provisions in Part IIIA of the Income Tax Assessment Act 1936 (Cth) came into effect with retrospective effect from 20 September 1985.[26]

8 Max gave evidence that since the mid to late 1980s, it has been his intention to pass the Border Express business to his sons equally, regardless of whether they ultimately decided to work in the business.[27] Max also gave evidence that in early to mid-1990, but he could not recall precisely when, he was considering estate planning matters with Lynn.[28] He gave evidence that, as at April 1990, it was his plan that on his and Lynn's passing that their sons would between them share control of the business.[29] Max gave evidence that he has no doubt that he told Mr Stanton of his intention to eventually pass on the Border Express business equally to his four sons, but that he does not remember a specific conversation.[30] I accept this evidence.[31] Lynn also gave evidence that her intention has always been that upon her and Max's death their assets, including their shares in Border Express, would be left to their sons equally.[32] I also accept this evidence.

9 Since joining the Border Express business, Mark has had many conversations with Max about what would happen to the Border Express business upon Max's and Lynn's passing. Mark could not recall any specific conversation but did recall that Max told him that upon his passing Max wanted to leave the Border Express business to him and his brothers equally.[33] Grant gave similar evidence.[34] I accept this evidence. Max, Lynn, Mark and Grant were aware of the testamentary purpose as at 5 April 1990 and likely much earlier.

10 In about early to mid-1990, Max and Lynn engaged a Mr Bob Greig from Belbridge Hague & Co to have new Wills prepared.[35] HWL Ebsworth Lawyers have not been able to locate the files of the solicitors who prepared the Wills.[36] On 7 June 1990 Max made a Will. Clause 3(b) provides:[37]

1. IF my said wife shall not survive me for the period of thirty (30) days then:

(b) I GIVE DEVISE AND BEQUEATH all my real and personal property of whatsoever kind and wheresoever situate to such of my sons as are living at the date of my death and if more than one as tenants in common in equal shares for their own use absolutely.

11 On 19 July 1990, Lynn made a Will in similar terms.[38] Border Express submitted that Max and Lynn had a testamentary purpose to leave the Border Express business equally to their four sons. The Intervener did not submit the contrary. I find that the testamentary purpose of each of Max and Lynn, as at the date of the share issue on 5 April 1990, was to leave their property, including their shares in Border Express, to the surviving spouse[39] and then equally to their four sons (the testamentary purpose). This is consistent with their evidence concerning their testamentary purpose and their Wills which were made shortly after 5 April 1990.

Issued share capital of Border Express immediately prior to the share issue on 5 April 1990

12 The issued share capital of Border Express immediately prior to the share issue on 5 April 1990 was 1,000 ordinary shares with a par value of $1.00 held as follows:[40]

(a) Max: 1 ordinary share, being 0.1% of the share capital;

(b) Lynn: 1 ordinary share, being 0.1% of the share capital; and

(c) MJ Luff: 998 ordinary shares, being 99.8% of the share capital.

13 These shares were acquired by Max, Lynn and MJ Luff prior to the introduction of CGT on 20 September 1985 and, as at 5 April 1990, were not CGT assets.

14 On 5 April 1990, there was a meeting of the directors of Border Express.[41] At this time, the directors were Max, Lynn, Geoffrey, Mark and Grant. Jonathon was not a director.[42] Max, Mark and Grant were present at the meeting.[43] Lynn and Geoffrey were noted as apologies and did not attend.[44] Mr Stanton was in attendance.[45]

15 At the meeting, the directors of Border Express resolved that the following shares be allotted (i.e. issued) to the applications received as follows:

(a) application No. 8: MJ Luff, 2,994 ordinary shares at $1.00, fully paid; share numbers 1,001 to 3,994 and share certificate No. 12;

(b) application No. 9: Max, 3 ordinary shares at $1.00, fully paid; share numbers 3,995 to 3,997 and share certificate No. 13;

(c) application No. 10: Lynn, 3 ordinary shares at $1.00, fully paid; share numbers 3,998 to 4,000 and share certificate No. 14.

16 The directors also resolved, inter alia, that share certificates No's. 12, 13 and 14 be issued to the applicants and that the secretary of Border Express was instructed to lodge the necessary form with the Corporate Affairs Commission as soon as possible and arrange to enter the transactions in the company share register.[46]

17 It was also resolved that Jonathon be appointed a director of Border Express. Max gave evidence that it had always been his intention that all his sons have equal representation and participation in the family business.[47]

18 Lynn, Mark, Grant and Geoffrey cannot recall the applications for the shares or their issue.[48] Max, Mark, Grant and Geoffrey also cannot recall attending the meeting.[49] As I have already said, Geoffrey was noted as an apology and did not attend. I find that it is likely that on or prior to 5 April 1990 Mr Stanton prepared the documents relevant to the issue of the shares on 5 April 1990, including the applications and the minutes of meeting.[50]

19 The issue of the shares did not change the relative proportion of the shares in Border Express held by its shareholders:

(a) Max: 4 ordinary shares, being 0.1% of the share capital;

(b) Lynn: 4 ordinary shares, being 0.1% of the share capital;

(c) MJ Luff: 3,992 ordinary shares, being 99.8% of the share capital.

20 The Intervener submitted that there is no evidence that there were any spoken words at the meeting.[51] It relied upon the evidence that the directors present at the meeting cannot recall the applications or the allotment of the shares. It is not surprising that no-one can recall these matters. The events took place over 30 years ago. There was no dispute between the parties that there was, in fact, a meeting as described in the minutes. Max gave evidence that there was little if any discussion at meetings of the directors of Border Express in the 1980s and early 1990s. As a result, I find it is likely that at the meeting on 5 April 1990 there was little if any discussion but there was at least a discussion in which the directors who were present stated their agreement to the matters recorded in the minutes that had been prepared by Mr Stanton.

21 On 5 April 1990, Border Express recorded the allotment of 2,994 shares to MJ Luff and 3 shares to each of Max and Lynn in the 'Register of Members' of Border Express.[52]

22 On 6 June 1990, Border Express lodged a form titled 'Return of Allotment of Shares' with the National Companies and Securities Commission concerning the allotment of 2,994 shares to MJ Luff and 3 shares to each of Max and Lynn.[53] It was signed by Max on 5 April 1990.

23 HWL Ebsworth Lawyers have not been able to locate the applications for the shares or the share certificates relevant to the resolutions for the allotment and issuing of shares at the 5 April 1990 meeting.[54] HWL Ebsworth Lawyers have also not been able to locate, inter alia, the files of Stirlings (an accounting firm to which Mr Stanton was a part of) concerning the share issue.[55]

24 There was no dispute between the parties that Max, Lynn and MJ Luff each made an application for the shares that are recorded in the minutes of the meeting. I also find that it is likely that Border Express issued share certificates to each of Max, Lynn and MJ Luff for the shares. This is because the directors resolved to do so and there is also evidence that other steps were taken that are recorded in the minutes.

25 Max gave evidence that from the time he started operating the business of Border Express in October 1981, there has been no need to raise capital in the business.[56] Max also gave evidence that the shares were not issued to raise capital as there was no reason for it to do so.[57] Mr Earle, a solicitor of HWL Ebsworth Lawyers, gave evidence that the par value of $1.00 per share was well below the market value for those shares given the value of the net tangible assets of Border Express as at 30 June 1989 and 30 June 1990.[58] Mr Earle has 26 years' experience providing clients with corporate and commercial legal advice, particularly in relation to the acquisition and disposal of businesses and corporate restructuring, including corporate finance, capital raisings and other transactions that affect share capital or involve the issue or transfer of shares.[59] I accept that the issue of shares on 5 April 1990 was not undertaken to raise capital.

26 Max cannot recall having a discussion about CGT with Mr Stanton or anyone else around 5 April 1990.[60] There is no evidence that any member of the Luff family, including Max, sought or obtained any advice from Mr Stanton concerning the taxation, including CGT consequences, of the share issue or the contracts.

27 As a result of the share issue, the shareholders of Border Express were MJ Luff (3,992 ordinary shares), Max (4 ordinary shares) and Lynn (4 ordinary shares).

28 I find it likely that Max and Lynn applied for the shares in Border Express to facilitate the testamentary purpose, given that:

(a) the shareholdings of each of Max and Lynn in Border Express were not divisible by four immediately prior to 5 April 1990. Upon the issue of the shares on 5 April 1990 their shareholdings were divisible by 4;

(b) the shares were not issued on 5 April 1990 to raise capital;

(c) upon the issue of the shares on 5 April 1990, the relative proportion of the shares held by Max, Lynn, and MJ Luff remained the same;

(d) I accept that the shares held by MJ Luff in Border Express would not form part of Max or Lynn's Estate but is clear that the parties also intended to make its shareholdings also divisible by 4;

(e) I also refer to the issue of shares in MJ Luff and MJ Nominees that also took place on 5 April 1990 in which the shareholdings also became divisible by 4 (except for those shares held by the sons in MJ Nominees).

29 I find it likely that Mr Stanton knew that the applications and the minutes of meeting were prepared to facilitate the testamentary purpose, given Max's evidence that he had told Mr Stanton of the testamentary purpose, and Mr Stanton's likely involvement in preparing the applications and the minutes of meeting. The deed records that "[a]t that time [i.e. April 1990], Maxwell Luff and Lynn Luff were considering estate planning matters and it was their desire to divide the underlying ownership of [Border Express] to each of their four sons equally and it came to their attention that the shares each of them held personally in [Border Express] would not be divisible by 4 to enable them to bequeath an equal number of shares in [Border Express] to each of their 4 sons."[61] The deed does not record that these matters came to their attention by Mr Stanton and no member of the Luff family gave evidence that he did so.

30 On 5 April 1990, meetings of the directors of MJ Luff, and of the directors of MJ Nominees, also took place.

31 On 5 April 1990, the directors of MJ Luff resolved that the following shares be allotted to the applications received as follows:[62]

(a) application No. 4: Max, 4 8% cumulative preference shares at $1.00, fully paid; share numbers 408 to 411 and share certificate No. 8; and

(b) application No. 5: Lynn, 1 8% cumulative preference share at $1.00, fully paid; share number 412 and share certificate No. 9.

32 Max, Mark and Grant were present. Mr Stanton was in attendance. Lynn and Geoffrey were apologies and did not attend. Max cannot recall attending the meeting.[63] Lynn, Mark, Grant and Geoffrey did not give evidence about this meeting. It was also resolved that Jonathon be appointed a director of MJ Luff. As a result of these share allotments, the shareholders of MJ Luff were:

(a) MJ Nominees (200 ordinary shares);

(b) Max (108 preference shares), being an increase of 4 preference shares; and

(c) Lynn (104 preference shares), being an increase of 1 preference share.

33 Border Express submitted that these share issues were undertaken to give effect to the testamentary purpose.[64] I find it likely that Lynn applied for the shares in MJ Luff to facilitate the testamentary purpose. There was no evidence why Max applied for an additional 4 shares. Border Express was unable to explain why Max applied for these additional shares.

34 On 5 April 1990, the directors of MJ Nominees resolved that the following shares be allotted to the applications received as follows:[65]

(a) application No. 1: Max 39 ordinary shares at $1.00, fully paid; share numbers 3 to 41 and share certificate No. 3;

(b) application No. 2: Lynn 39 ordinary shares at $1.00, fully paid; share numbers 42 to 80 and share certificate No. 4;

(c) application No. 3: Geoffrey 5 ordinary shares at $1.00, fully paid; share numbers 81 to 85 and share certificate No. 5;

(d) application No. 4: Grant 5 ordinary shares at $1.00, fully paid; share numbers 86 to 90 and share certificate No. 6;

(e) application No. 5: Mark, 5 ordinary shares at $1.00, fully paid; share numbers 91 to 95 and share certificate No. 7;

(f) application No. 6: Jonathon, 5 ordinary shares at $1.00, fully paid; share numbers 95[66] to 100 and share certificate No. 6.

35 Max, Mark and Grant were present. Mr Stanton was in attendance. Lynn and Geoffrey were apologies and did not attend. Max cannot recall attending the meeting.[67] Lynn, Mark, Grant and Geoffrey did not give evidence about this meeting.

36 As a result of these share allotments, the shareholders of MJ Nominees were:

(a) Max (40 ordinary shares), being an increase from 1 ordinary share;

(b) Lynn (40 ordinary shares), being an increase from 1 ordinary share;

(c) Geoffrey (5 ordinary shares);

(d) Grant (5 ordinary shares);

(e) Mark (5 ordinary shares);

(f) Jonathon (5 ordinary shares).

37 It was also resolved that Jonathon be appointed a director of MJ Nominees.

38 Border Express submitted that these share issues were undertaken to give effect to the testamentary purpose.[68] I find it likely that Max and Lynn applied for the shares in MJ Nominees to facilitate the testamentary purpose.

39 Max deposed to the following matters in his affidavit:[69]

1. At the time of, and after the 1990 Share Issue, I believed and intended that any documents which changed the shareholding of Border Express that were prepared by Mr Stanton and I had signed would not have any CGT consequences (then or in the future), for myself, Lynn or MJ Luff, and would not change the CGT status of the shares in Border Express.

40 The Intervener objected to this. Each of Lynn, Mark, Grant and Geoffrey gave evidence substantially in similar terms to which similar objection was taken.[70]

41 Max also gave evidence to which no objection was taken:[71]

1. At the time, if I had been aware that the effect of the documents which changed the shareholding of Border Express prepared by Mr Stanton and that I signed would have CGT consequences (then or in the future), for myself, Lynn or MJ Luff, or would change the CGT status of the shares in Border Express, I would not have made the applications or resolutions or taken any other step referred to in the 1990 Minutes.

42 Each of Lynn, Mark, Grant and Geoffrey gave evidence substantially in similar terms to which no objection was taken.[72] I address the objections later in this judgment in the context of each of the grounds for relief.

Transfers of Border Express shares to MJ Luff on 6 February 2003

43 On 28 January 2003, the directors of Border Express met and approved the following transfers of shares:[73]

(a) 4 ordinary shares from Max to MJ Luff;

(b) 4 ordinary shares from Lynn to MJ Luff.

44 This represented all of the shares then held by Max and Lynn in Border Express. Max, Lynn and a Mr Stephen Hogg were present at the meeting. On 6 February 2003, Max and Lynn each transferred their four ordinary shares in Border Express to MJ Luff for a consideration of $9,000 per share, resulting in a total consideration paid by MJ Luff for the shares of $72,000.[74] As a result of these share transfers:

(a) MJ Luff became the holder of 4,000 ordinary shares in Border Express, being an increase of 8 shares;

(b) MJ Luff became the sole shareholder in Border Express and Border Express became a wholly owned subsidiary of MJ Luff;

(c) Max and Lynn ceased to be shareholders in Border Express.

45 Mr Earle gave evidence that the transfers of Border Express shares to MJ Luff in 2003 are consistent with an intention for MJ Luff to wholly own the shares in Border Express in preparation for becoming a tax-consolidated group. Mr Earle referred to the financial statements for MJ Luff for the financial year ended 30 June 2005 which provide in Note 1 under the heading 'Tax Consolidation' that "[t]he parent entity and its subsidiaries have implemented the tax consolidation legislation and have a tax-consolidated group from 1 July 2003".[75]

46 Max also gave evidence that, to the best of his knowledge, these share transfers were undertaken for group tax consolidation purposes which required Border Express to be wholly owned by MJ Luff.[76]

CGT and the issue of shares in Border Express on 5 April 1990

(a) the shares in Border Express issued prior to 20 September 1985 were not CGT assets;[77]

(b) the shares issued in Border Express on 5 April 1990 had the immediate consequence that the shares issued on that day were CGT assets;[78] and

(c) this meant that any net capital gain arising from a disposal by MJ Luff, Max or Lynn of the shares issued in Border Express on 5 April 1990, being 75% of Border Express' total share capital, would be a capital gains tax event.[79]

48 This was also supported by the evidence of Mr Schachna. He is a partner of HWL Ebsworth, the solicitors for Border Express. He has had 24 years of experience in providing taxation advice to clients, particularly the acquisition and disposal of businesses and property. He has a Bachelor of Laws and Bachelor of Economics from Monash University and is a fellow of the Taxation Institute of Australia. Mr Schachna gave evidence that the share issue on 5 April 1990 had the immediate consequence that any net capital gain arising from a disposal by MJ Luff, Max or Lynn of the shares they acquired on 5 April 1990 in Border Express would be assessable as income (and subject to tax and their relevant marginal tax rates) under the relevant taxation legislation.[80] Mr Schachna gave evidence that any net capital gain arising from a disposal by MJ Luff, Max or Lynn of the shares they acquired prior to 5 April 1990 in Border Express would not be assessable as income under the relevant taxation legislation, as they were acquired prior to 20 September 1985.[81]

Alternative transaction to achieve equal number of shares?

49 Mr Schachna also gave evidence of a possible alternative transaction to the issue of shares by Border Express on 5 April 1990. Mr Schachna gave evidence that another transaction could have been undertaken so that the number of shares that MJ Luff, Max and Lynn held were divisible by 4 so that on their deaths they could leave an equal and whole number of shares in Border Express to each of their 4 sons. Mr Schachna gave evidence that this could have been achieved in the form of a "3:1 share split".[82] He also gave evidence that the net capital gain arising from a disposal by MJ Luff, Max or Lynn of such shares would not be assessable as income under the relevant taxation legislation, and that the shares issued as a result of the share split would have all been pre-CGT assets.

50 Mr Schachna did not provide an adequate explanation as to how a 3:1 share split would have resulted in a whole number of shares divisible by 4. Self-evidently, splitting each of Max's and Lynn's 1 share into 3 shares would have created 3 shares held by each of Max and Lynn and not 4 shares. This is of no consequence, however, as I accept that it could have been achieved by a 4:1 share split.

51 The Intervener submitted that if a share split was undertaken and the shares were passed on to the sons and the sons sold the shares, then there would have been a CGT event on the sale of the shares, but that capital gain would be the increasing value after the date of death.[83] The Intervener did not otherwise develop this submission.

Discovery of the alleged mistake and subsequent events

52 In 2020, Max and Lynn became aware that the shares issue on 5 April 1990 might have CGT consequences.[84] In August 2020, Border Express engaged HWL Ebsworth Lawyers to advise it on the share issue.[85] On 22 July 2022, HWL Ebsworth Lawyers, on behalf of Border Express, MJ Luff, Max and Lynn, lodged an application to the Commissioner of Taxation of the Commonwealth of Australia for a private ruling. Border Express submitted that this private ruling was not relevant to the legal issues.[86] On 24 November 2022, Border Express, MJ Luff, Max, Lynn, the directors of Border Express (Jonathon, Geoffrey, Grant, Mark and Tom Vukovic) and the directors of MJ Luff (Jonathon, Geoffrey, Grant and Mark) entered into the deed. It is convenient to set out the Recitals:[87]

1. In April 1990, the Company only had 3 members and their shareholdings were:

(a) Maxwell Luff - 1 ordinary share;

(b) Lynn Luff - 1 ordinary share;

(c) MJ Luff - 998 ordinary shares.

1. At that time, each member had acquired their shares in the Company before the introduction of capital gains tax in September 1985.

2. At that time, Maxwell Luff and Lynn Luff were considering estate planning matters and it was their desire to divide the underlying ownership of the Company to each of their four sons equally and it came to their attention that the shares each of them held personally in the Company would not be divisible by 4 to enable them to bequeath an equal number of shares in the Company to each of their 4 sons.

3. To facilitate each of Maxwell Luff and Lynn Luff holding a number of shares divisible by four, the Company's accountant prepared documents for the application and issuing of three shares for every one share then held, with the result that their total shareholding became 4 ordinary shares (which is a number divisible by 4). The accountant did not advise Maxwell Luff, Lynn Luff, the Company or MJ Luff that the issuing of further shares in the Company would have any capital gains tax consequences.

4. At a meeting of directors of the Company on 5 April 1990 (the minutes of the meeting for which record that Maxwell Luff, Mark Luff and Grant Luff were present are attached as Annexure A) it was resolved that a further 3000 ordinary shares with a par value of $1.00 (Purported Share Issue) be allotted to the applications received (Applications) and share certificates be issued (Resolutions) as follows:

(a) In respect of Application No 8, MJ Luff be allotted and issued 2,994 ordinary fully paid shares at the par value of $1.00;

(b) In respect of Application No 9, Maxwell Luff be allotted and issued 3 ordinary fully paid shares at the par value of $1.00; and

(c) In respect of Application No 10, Lynn Luff be allotted and issued 3 ordinary fully paid shares at the par value of $1.00.

1. On or about 11 June 2021, the directors of the Company, the directors of MJ Luff as a member of the Company and Maxwell Luff and Lynn Luff as members of the Company on 5 April 1990 were advised that any capital gain to be made if and when the shares issued under the Purported Share Issue were disposed would be assessable.
2. At the time of the Applications, the Resolutions and the Purported Share Issue, Maxwell Luff, Lynn Luff, the Company and MJ Luff believed and intended that the Purported Share Issue would not have any capital gains tax consequences (then or in the future) for Maxwell Luff, Lynn Luff or MJ Luff (Mistake). If Maxwell Luff, Lynn Luff, or the directors of the Company or MJ Luff had been aware of the Mistake, they would not have made the Applications or the Resolutions which allowed the Purported Share Issue to proceed.
3. On 6 February 2003, in anticipation of the tax consolidation regime being introduced in Australia (which requires members of a tax consolidated group to be wholly owned), Maxwell Luff and Lynn Luff made the Share Transfers so that MJ Luff would own all of the issued shares in the Company.
4. On 6 February 2003, Maxwell Luff and Lynn Luff were the only directors of the Company and MJ Luff. As at the date of this deed, the directors of the Company and MJ Luff have a majority of directors in common and a majority of directors who were directors of the respective companies on 5 April 1990.
5. The Company, MJ Luff, Maxwell Luff and Lynn Luff now enter into this deed to acknowledge and declare that due to the Mistake the Purported Share Issue is of no legal effect.
6. The Company, MJ Luff, Maxwell Luff and Lynn Luff enter into this deed to acknowledge and declare that the Share Transfers must also be reversed to reflect that the Purported Share Issue is set aside and is of no legal effect.

53 It is also convenient to set out the relevant operative provisions. Clauses 2 to 4 provide:[88]

2. Mistake and reversal of Purported Share Issue

(a) By this deed, MJ Luff, Maxwell Luff, Lynn Luff and the Company acknowledge and declare that:

(i) in respectively making the Applications, the Resolutions and the Purported Share Issue, they each unwittingly made the Mistake; and

(ii) but for the Mistake they each made they would not have made respectively the Applications, the Resolutions and the Purported Share Issue.

(b) The Company, MJ Luff, Maxwell Luff and Lynn Luff each declare and record that due to the Mistake the Purported Share Issue is not, nor ever has been, of any legal effect.

(c) Having made enquiries, the Company, MJ Luff, Maxwell Luff and Lynn Luff each declare and record their belief that no third party rights or interests would be prejudiced or qualified in any way if the Purported Share Issue is of no legal effect.

(d) To give effect to declaring the Purported Share Issue to be of no legal effect:

(i) the Company has on the date of this deed repaid the issue price for the shares being the sum of $2994 to MJ Luff, and MJ Luff acknowledges receipt of that sum by signing this deed;

(ii) the Company has on the date of this deed cancelled the share certificate numbered 12 issued to MJ Luff in connection with the Purported Share Issue (it being acknowledged that the share certificate numbered 13 issued to Maxwell Luff in connection with the Purported Share Issue and the share certificate numbered 14 issued to Lynn Luff in connection with the Purported Share Issue were previously cancelled arising from the Share Transfers);

(iii) the Company has on the date of this deed repaid the issue price for the shares being the sum of $3 to Maxwell Luff, and Maxwell Luff acknowledges receipt of that sum by signing this deed;

(iv) the Company has on the date of this deed repaid the issue price for the shares being the sum of $3 to Lynn Luff, and Lynn Luff acknowledges receipt of that sum by signing this deed.

(e) Each of the current Directors of MJ Luff and the Company execute this deed to acknowledge and affirm their agreement with its terms.

(a) Consequently, the Company, MJ Luff, Maxwell Luff and Lynn Luff each declare that each of the LL Transfer (3) and the ML Transfer (3) be and is reversed and extinguished on the basis that the Purported Share Issue is and was of no legal effect.

(b) To give effect to reversing and extinguishing the share transfers as provided for in clause 3(a):

(i) Maxwell Luff has on the date of this deed repaid the sum of $27,000 to MJ Luff, and MJ Luff acknowledges receipt of that sum by signing this deed;

(ii) Lynn Luff has on the date of this deed repaid the sum of $27,000 to MJ Luff, and MJ Luff acknowledges receipt of that sum by signing this deed;

(iii) the Company has on the date of this deed cancelled the share certificate numbered 19 issued to MJ Luff in connection with the LL Transfer;

(iv) the Company has on the date of this deed cancelled the share certificate numbered 17 issued to MJ Luff in connection with the ML Transfer.

4. Application to the Court to correct the share register

(a) The Company has on the date of this deed corrected the share register of the Company in the manner set out in Annexure D, F and H to reflect that the Purported Share Issue is of no legal effect.

(b) The Company, MJ Luff, Maxwell Luff and Lynn Luff agree to co-operate and take all necessary action at the Company's cost to make any necessary application to the Supreme Court to correct the Company's register of members including to reflect the following matters:

(i) The register of members for Maxwell James Luff shown in Annexure C is corrected by:

(A) deleting the entry for 5 April 1990 in its entirety;

(B) recording the ML Transfer (1) to MJ Luff Pty Ltd on 6 February 2003,

as shown in Annexure D.

(ii) The register of members for Lynn Elizabeth Luff shown in Annexure E is corrected by:

(A) deleting the entry for 5 April 1990 in its entirety;

(B) recording the LL Transfer (1) to MJ Luff Pty Ltd on 6 February 2003,

as shown in Annexure F.

(iii) The register of members for MJ Luff Pty Ltd shown in Annexure G is corrected by:

(A) deleting the entry for 5 April 1990 in its entirety;

(B) recording the LL Transfer (1) and the ML Transfer (1) to MJ Luff Pty Ltd on 6 February 2003,

as shown in Annexure H.

54 Annexures D, F and H of the deed set out proposed corrections to the 'Register of Members' of Border Express. Mr Earle provided a convenient summary of the corrections in a table he prepared. The table shows share transactions that are proposed to be corrected in bold/italics as follows:[89]

55 Max, Lynn and MJ Luff, the parties to the contracts and the recipients of the Border Express shares on 5 April 1990, are defendants and support the application. They are also the parties to the share transfers made on 6 February 2003. Max, Lynn, Mark, Grant and Geoffrey gave evidence that they are aware that Border Express' solicitors have been corresponding with the Deputy Commissioner of Taxation and that they are otherwise not aware of any third party rights or interests that would be affected in any way if the issues of shares on 5 April 1990 is declared to be of no legal effect and void from the beginning, and the share register is corrected to reflect that.[90] Jonathon did not give such evidence. The Commissioner of Taxation, in any event, intervened in the proceedings.

56 Mr Earle gave evidence that, upon the assumption that the transfers of shares on 6 February 2003 were to enable MJ Luff to wholly own the shares in Border Express in preparation for the introduction of the tax consolidation rules, the achievement of that purpose would not be disturbed by the granting of the relief sought in the Originating Process.[91] He gave evidence that this was because, in that event, MJ Luff would still own all of the shares in Border Express in 2003.[92] This is premised, inter alia, upon the Court finding that the share transfers on 5 April 1990 are void resulting in Max and Lynn holding 1 share each as at that date which they subsequently transferred on 6 February 2003. Border Express does not seek to impugn the transfers by Max and Lynn of these single shares on 6 February 2003. This is set out in the table I have set out above from Mr Earle's affidavit.[93]

57 Mr Schachna gave evidence of the potential tax payable by MJ Luff under the relevant taxation legislation upon an assumed and confidential sale price by MJ Luff of its 4,000 shares in Border Express, including the shares issued on 5 April 1990,[94] which is confidential. This does not concern the position as at 5 April 1990.

SECTION 175(1) OF THE CORPORATIONS ACT AND THE GROUNDS FOR THE APPLICATION

58 Section 175(1) of the Corporations Act provides:

(1) A company or registered scheme or a person aggrieved may apply to the Court to have a register kept by the company or scheme under this Part corrected.

59 The applicable law is well established and was not in dispute. Section 175(1) does not confer a power to correct a register.[95] Instead, it assumes that the Court already has such a power at general law.[96] The power to order correction of a register is discretionary.[97] As observed by Fullagar J in Grant v John Grant & Sons Pty Ltd:[98]

The power to order rectification of the register must clearly, I think, be in all cases discretionary. The person claiming rectification must show that he has some equity which the court will protect. If he is a shareholder, then prima facie he shows such an equity if he establishes that a name is wrongly included in or omitted from the register of his company. Some definite reason must be shown, I would think, for refusing rectification before rectification will be refused.

...

But the power of a court of equity to order rectification is no more and no less than a part of its general jurisdiction to "act in personam" in aid of a legal right, and it must be subject to the same principles which apply generally to equitable remedies.

60 Recently, Button J conveniently summarised the applicable principles upon an application pursuant to s 175(1) in Re Australian Organic Eggs Pty Ltd:[99]

1. Section 175 does not confer jurisdiction on the Court to rectify the share register, but assumes the Court has the power to do so. It is well established that the Court has such power as part of its general jurisdiction as a court of equity. The power is discretionary, and an explanation of the practical advantages of rectifying the register is required before the power will be exercised. The person applying for rectification must demonstrate that they have an equity which the court will protect. Such an equity is prima facie established where a person's name was wrongly included or omitted from the register. The same applies where 'the number of shares attributed to that person is incorrectly recorded, so as to impose a disadvantage on that person or on other shareholders'.
2. An order may be made under s 175 to rectify the share registry nunc pro tunc, fixing a particular date for the correction.

61 Border Express relied upon the following grounds for its application:[100]

(a) the contracts are each subject to an inferred, alternatively an implied, condition precedent that was not satisfied. It submitted "we firmly elect for condition precedent as our standard bearer";[101] or

(b) alternatively, the contracts are void at common law by reason of a common mistake; or

(c) alternatively, the contracts should be set aside ab initio in equity by reason of a common mistake.

62 I accept Border Express' submission that the Court will not make an order which affects the interests of third parties in their absence.[102] The relevant third parties are defendants, being parties to the contracts and recipients of the shares on 5 April 1990 and the parties to the transfers of shares on 6 February 2003. The Commissioner for Taxation is an intervener.

63 Border Express submitted it was an inferred term, alternatively an implied term, of the contracts as follows:

It is a condition precedent to this contract that the shares to be issued hereunder are not subject to capital gains tax on sale or other disposition.

64 I accept Border Express' submission that where an occurrence of an event is a condition precedent, the existence of the contract or the obligation to perform the contract, depending upon what the parties agreed in this respect, is subject to the prior occurrence of the event.[103] This was not in dispute. Border Express submitted that as the condition precedent has not been satisfied, no contracts arose for the issue of the shares.[104] It submitted that the issue price for each of the shares must be refunded by Border Express and Border Express' share register must be corrected to reflect the fact that there are no underlying contracts to support the registration of the shares, the subject of the contracts, to MJ Luff, Max or Lynn on 5 April 1990.[105]

65 There was no dispute between the parties that the shares that were issued on 5 April 1990 were CGT assets and subject to CGT on sale or other disposition. As a result, if the alleged condition precedent is a term of the contracts, it was not satisfied.

(a) the alleged condition precedent was not an express term of the contracts;[106]

(b) the offer by each of Max, Lynn and MJ Luff to take shares in Border Express are constituted by the three written applications for the allotment of shares in Border Express and made by each of them and received by Border Express.[107] Those applications cannot be located; and

(c) separate contracts were formed between Border Express and each of MJ Luff, Max and Lynn concerning the applications and the issue of shares that were the subject of the resolutions made by the directors of Border Express on 5 April 1990.[108]

67 A company's acceptance of an offer for the issue of shares would usually be constituted by the company's issue of the shares and the communication of that to the person.[109] This is what occurred in the present case. Border Express made the entry into the register of the shares issued to Max, Lynn and MJ Luff. I have already found that it is also likely that it issued share certificates to each of them. It is not relevant to take into account what occurred at the meeting of Border Express on 5 April 1990 for the purpose of determining whether Border Express' acceptance of the offers was communicated to the persons present at that meeting. This is because the persons present attended the meeting in their capacity as directors of Border Express and not in their own personal capacity or their capacity as directors of MJ Luff. In case it is relevant to take into account what occurred at the meeting of Border Express to determine whether the acceptance of the offers was communicated[110] then, in the case of:

(a) Max, he was present at the meeting when the directors made the resolutions. As a result, the acceptance of his offer was communicated to him at the meeting;

(b) Lynn, she was not present at the meeting. As a result, the acceptance of her offer was communicated when she received her share certificate;

(c) MJ Luff, three of its directors (namely Max, Mark and Grant) were present at the meeting when the directors made the resolutions. The acceptance of its offer was communicated to it at the meeting.

68 The first step in determining the terms of a contract is to identify the express terms and ascertain their meaning. The express terms are set out in the applications for the allotments of the shares which cannot be located but are recorded in the minutes of meeting of the directors of Border Express on 5 April 1990. I have already found that the applications were likely prepared by Mr Stanton and contained express terms concerning the allotment of shares as recorded in the minutes of meeting. As a result, I find the express terms of the contracts to be as follows:

(a) contract between Max and Border Express: Border Express will issue 3 ordinary fully paid shares, being share numbers 3,995 to 3,977, to Max for $1.00 each and record this in share certificate No. 13;

(b) contract between Lynn and Border Express: Border Express will issue 3 ordinary fully paid shares, being share numbers 3,998 to 4,000, to Lynn for $1.00 each and record this in share certificate No. 14;

(c) contract between MJ Luff and Border Express: Border Express will issue _2,_994 ordinary fully paid shares, being share numbers 1,001 to 3,994, to MJ Luff for $1.00 each and record this in share certificate No. 12.

69 The words and conduct of each party must be understood by reference to what the words and conduct would have led a reasonable person in the position of the other party to believe.[111] The ultimate question is what reasonable people with knowledge of the background circumstances then known to both parties would have taken by their words and conduct to have agreed.[112] In Toll (FGCT) Pty Ltd v Alphaphram Pty Ltd[113] the High Court said:[114]

[40] This Court, in Pacific Carriers Ltd v BNP Paribas, has recently reaffirmed the principle of objectivity by which the rights and liabilities of the parties to a contract are determined. It is not the subjective beliefs or understandings of the parties about their rights and liabilities that govern their contractual relations. What matters is what each party by words and conduct would have led a reasonable person in the position of the other party to believe. References to the common intention of the parties to a contract are to be understood as referring to what a reasonable person would understand by the language in which the parties have expressed their agreement. The meaning of the terms of a contractual document is to be determined by what a reasonable person would have understood them to mean. That, normally, requires consideration not only of the text, but also of the surrounding circumstances known to the parties, and the purpose and object of the transaction.

70 Border Express initially accepted that the parties' subjective intentions are not relevant to the issue of whether a matter is a term of a contract.[115] In response to the Intervener's submissions, it submitted that the parties' subjective intentions are of no relevance but in any event, Border Express (through its directors), MJ Luff (through its directors), Max and Lynn made the assumption that the issue of shares would not have CGT consequences, and that had they been aware that it did, they would not have taken steps to allow it to proceed.[116] It also further submitted that where you have the same directing mind and will on each side of a transaction you do not have to find that someone communicated with themselves. It submitted that Max was the controlling mind of MJ Luff and Border Express and that Max's subjective intentions are relevant in determining the terms of the contracts between Border Express and him and between Border Express and MJ Luff. It submitted that this did not apply in the case of Lynn. Border Express submitted that it was common ground between Border Express and the Intervener that Max was the controlling mind of MJ Luff as the Intervener made submissions to this effect.

71 Border Express' submissions are contrary to the principle of objectivity stated by the High Court by which the rights and liabilities of the parties to a contract are determined.[117] The subjective intentions of the parties, including Max, are irrelevant.[118]

72 In case Max's subjective intentions are relevant, I am not satisfied that Max was, in fact, the controlling mind of Border Express.[119] This is a question of fact to be established by Border Express on the evidence.[120] Apart from submitting in its reply that there is evidence of this "controlling mind" it did not identify any evidence to support this submission.[121] I am not satisfied that Max was the "controlling mind" of Border Express having regard to the following evidence:

(a) as at 5 April 1990, immediately prior to the meeting of the directors of Border Express on that day, there were 5 directors of Border Express, namely Max and Lynn and three of their adult children: Mark, Geoffrey and Grant. Max was the chairman;

(b) Mark, Grant and Geoffrey were appointed directors of Border Express in 1986 as part of the process of them becoming more involved in the business;[122]

(c) by April 1990, Mark, Grant and Geoffrey were all working in the Border Express business.[123] Jonathon was too but he was not a director prior to 5 April 1990;

(d) the Luff family had regular informal meetings to discuss the Border Express business, including forming general plans.[124] It is and had always been a family business;[125]

(e) since 1985, Mark also met with Mr Stanton, sometimes with Max but sometimes alone, to seek accounting and tax advice in relation to the Border Express business;[126]

(f) Border Express also submitted that "[a]t all relevant times, Border Express has been ultimately controlled and owned by members of the Luff family".[127]

73 Border Express submitted that the alleged condition precedent is inferred in the contracts. It made the following key submissions:

(a) a term of a contract may be inferred from the parties' spoken words and conduct, and the overall circumstances, in which event the enquiry is simply "what did the parties intend"? It relied upon Realestate;[128]

(b) the question of whether the alleged condition precedent is inferred in the contracts focuses attention on what the parties actually intended by reference to surrounding circumstances.[129] Border Express submitted that "with the possibility of finding a term that's inferred from the actions and the words spoken by the parties, one is focusing upon their actual intention".[130] Border Express also submitted "these parties to these bargains did not intend that the issue of the shares would come into being if the pre-CGT status of Border Express were to be removed";[131]

(c) Border Express submitted that this application is unusual, because the decision makers on both sides of the contracts are the same, unlike most of the relevant decisions which are concerned with separate parties with competing interests.[132] It submitted that this aspect was highly probative in ascertaining that there was an objective intention that the parties only intended the contracts to come into existence if the alleged condition precedent was satisfied;[133]

(d) the terms of the contracts were not wholly reduced to writing because the applications for the shares were no more than offers to be accepted orally or by conduct.[134] There was no document titled "allotment contract".[135] Border Express submitted these contracts were not the kinds of contracts where the whole of the terms could be isolated in one document[136] and a contract to have shares allotted is simpler and shorter than other contracts, such as contracts of hundreds of pages where one could readily infer that everything the parties wanted to cover would be included.[137] It submitted that formality of a contract is a matter of degree and "the more one looks at a document and sees that it's been drafted professionally - that is, by lawyers - and signed with signature at the end in the usual way, the less room there is for drawing out inferred terms or implied terms";[138]

(e) Border Express initially submitted, in addition, that it was a term of the contracts that the shares were issued to give effect to the testamentary purpose.[139] This submission was ultimately abandoned;[140]

(f) the alleged condition precedent is "readily apparent" from the surrounding circumstances;[141]

(g) the testamentary purpose is one of the surrounding circumstances supporting the inference because otherwise the sons would not be left the Border Express business equally. Instead, they would be left with shareholdings in Border Express, MJ Luff and MJ Nominees having differing positions in terms of CGT liability.[142] It also relied upon other surrounding circumstances;[143]

(h) the alleged condition precedent was not satisfied because the shares were CGT assets and subject to CGT on a later sale;[144]

(i) the existence of the alleged condition precedent was supported by the meeting between Max with Mr Stanton, on the eve of the commencement of CGT,[145] Max and Lynn's transfer of their shares in Border Express to MJ Luff, and that no CGT was reported in Max and Lynn's personal tax returns for the financial year ended 30 June 2003;[146]

(j) there was relevant evidence of spoken words between the parties, including conversations between Max and three of his sons, Mark, Grant and Geoffrey, about Border Express not being subject to CGT,[147] Max informing two of his sons, Mark and Grant, of the testamentary purpose,[148] and Max communicating the testamentary purpose to Mr Stanton.[149]

74 The Intervener made the following key submissions in response:

(a) a term cannot be inferred in a contract articulated in writing;[150]

(b) a term of a contract can only be inferred from the parties' spoken words, conduct and/or the overall circumstances in a contract not articulated in writing;[151]

(c) the contracts were articulated in writing and were formal, not informal contracts.[152] The contracts were constituted by offers made by Max, Lynn and MJ Luff by their applications and the acceptance by Border Express by resolution of the directors on 5 April 1990 and/or the issue of share certificates.[153] The completion of the contracts occurred by entry of the share allotments in the register of members of Border Express;[154]

(d) evidence of surrounding circumstances is admissible to assist in the interpretation of the contract if the language of a contract is ambiguous or susceptible to more than one meaning;[155]

(e) evidence of surrounding circumstances is not admissible to contradict the language of the contract when it has a plain meaning;[156]

(f) in any event, there is no evidence of any spoken words between the parties;[157]

(g) the parties' subjective intention, belief, knowledge and motivation is irrelevant.[158]

75 In Realestate, the High Court considered the terms of licence agreements that were not in writing and where there was no express oral agreement for the grant of the licences.[159] The trial judge held that there were agreements containing a particular term that was to be inferred from the conduct of the parties including their course of dealings or to be implied in order to give them business efficacy.[160] Kiefel CJ and Gageler J (as he then was) said that in a case where the terms of an agreement between the parties have not been articulated, those terms must be ascertained by reference to the parties' words and conduct.[161] Their Honours also said:[162]

The words and conduct of each party must be understood by reference to what the words and conduct would have led a reasonable person in the position of the other party to believe. The ultimate question is what reasonable people with knowledge of the background circumstances then known to both parties would be taken by their words and conduct to have agreed.

An agreement and its terms may be inferred from the acts and conduct of the parties, including the absence of their words. In light of surrounding circumstances that absence may evidence a tacit understanding.

77 Gordon J said that the agreements were "informal" in the sense that they were not written agreements.[164] Her Honour said:[165]

The central question in this case is what would the words and conduct of the parties..., when judged in light of what the parties knew, have led a reasonable person to conclude were the terms of the contract between them.

As this Court held in Toll, a person who signs a contractual document conveys a representation to a reasonable reader of that document that the person has read and approved its terms or is willing to take the chance of being bound by its contents. If the document on its face appears to be a complete contract, it will contain the whole of the contractual terms. Extrinsic evidence cannot be adduced to subtract from, add to, vary or contradict those terms, except in limited circumstances. And a term will be implied only if, among other things, it is necessary to make the contract work.

The approach differs when a court is confronted with an informal contract. The first task is to consider the evidence and to find the relevant terms of the contract. Ascertaining the terms is a question of fact. The issue is not one of interpretation, because there are no definitive words to interpret; "we are here concerned not with construing a contract but with evidence as to what the terms of a contract were". The issue is one of fact and substance, not mere form: what did the parties...agree?

In determining that question in the absence of a written document containing, or a conversation constituting, the agreement in the relevant aspect - here the scope of the licence and the ability to grant a sub-licence between [the parties] - it is necessary for the court to consider the full range of circumstances, at least as those circumstances existed at the time of the contract.

79 Gordon J said that when dealing with an informal contract, finding what was the objective intention of the parties requires consideration of the whole of the evidence, not just evidence about what was said.[167] Her Honour also said:[168]

Second, in informal contracts, terms a reasonable person would conclude are terms of the bargain based on what the parties said and did, understood in light of what they knew, might be, and sometimes have been, described as "inferred" terms. It may be that describing them in that way suggests that they are a species of implied term, and indeed such terms have been described as "implied". But whether the description "inferred" or "implied" is correct depends entirely on what "inferred" or "implied" is intended to convey.

80 Gordon J found that the trial judge was correct to decide that the agreements included the particular term.[169]

81 Edelman and Steward JJ said that there is no third category of a contract called an "inferred term". Their Honours said that there are either express or implied terms. Edelman and Steward JJ said:[170]

The insistence that there is no category of contract term called an "inferred term" does not deny the relevance of the process of inference in discerning the existence of express terms. Nor does it deny that the process of inference is essential to the identification of implied terms. Inference is a method of legal reasoning that can identify the existence of an express term or the content of an implication. There is therefore a "critical distinction" between an implication and an inference.

Secondly, "[i]t is not analytically right" to say that there is a separate category of informal contracts (that is, contracts that are not, or not entirely, evidenced in a written form) which are governed by different rules. We have a common law of contract, not different common laws for different categories of contract. Of course, context can affect the application of contractual rules. Hence, the more comprehensive a written contract appears to be, and the more apparent that the instrument has been drafted professionally, the more difficult it will be to establish that the words chosen do not bear their ordinary meaning or that the parties have omitted to express a term in the written document. However, the basic rules of communication remain the same whether the contract was entirely written, partly written and partly oral, partly written and partly by conduct, partly written and partly oral and by conduct, entirely oral, partly oral and partly by conduct, or entirely by conduct.

82 Edelman and Steward JJ found that a term was implied in the agreements.[171]

83 The process of inferring a term is informed by the parties' communications, course of dealing and relationship to one another.[172] The Court of Appeal in GHM Nominees Pty Ltd v Wallace Jackson Pty Ltd[173] recently provided a convenient statement on the steps of inferring and implying a term and provided guidance on when it may be possible to infer a term in a contract:

1. The dividing line between the steps of inference and implication is not necessarily a clean one. The present case provides a good illustration of how the two steps might overlap. It is apparent that the parties had discussions about sharing the cost of making up the shortfall on the deposit, settlement figure and ongoing costs of maintaining the property. From those discussions it may be inferred, objectively, that the parties actually intended that their agreement (ultimately made with the respondent as owner of the property) include a term that they should each contribute 50% of whatever amounts were required to meet the respondent's obligations. Further, because the parties discussed some written projections prepared by Singer of the amounts that each participant would be expected to contribute over a period of years, it might be possible to infer that the agreement contained a term that the parties would continue to make contributions for some identified number of years or some other measure of duration.
2. But, the parties did not discuss at all whether the amounts so contributed would be advanced as equity or as loans or, if advanced as loans, when those loans might be repaid. Accordingly, the formulation of any terms of their agreement relating to those aspects may, arguably, be a matter of presumed or imputed intention, only to be ascertained by a process of implication. Alternatively, assuming the contributions to be loans, from the same discussions between the parties from which it might be inferred they agreed about the period over which they would contribute to the property, it might be possible to further infer a term concerning repayment of loans.

84 The alleged condition precedent is not an inferred term of the contracts. The answer to the question "what did the parties intend?" is that the parties intended for a certain number of shares to be issued in Border Express to each of Max, Lynn and MJ Luff (i.e. 3 shares to each of Max and Lynn and 2,994 shares to MJ Luff) of a particular type (i.e. ordinary shares) at a certain price (i.e. $1.00 per share). The share issue was undertaken so that the number of shares held by each of Max, Lynn and MJ Luff could be divisible by four to facilitate the testamentary purpose. The parties did not objectively intend for the contracts to be subject to the alleged condition precedent. I do not accept Border Express' submission that the alleged condition precedent is readily apparent from the circumstances. The formation of the contracts took place in circumstances in which the Border Express business is and has always been run as a family business and the parties to the contracts are two of the Luff companies (i.e. Border Express and MJ Luff), the directors of which were members of the Luff family, and two members of the Luff family (i.e. Max and Lynn).

85 First, the subjective intentions of the parties to the contracts are not relevant.[174] This includes Max's subjective intentions. I refer to the matters I have addressed earlier in this judgment concerning this matter.[175]

86 Secondly, the terms of the contracts were articulated wholly in writing. The contracts were straightforward contracts for the issue of shares, constituted by terms concerning the number and type of shares and the price per share. These matters were set out in the applications for the shares. Border Express accepted that the applications for shares were each a "short formal application drawn by an accountant".[176] Border Express initially relied upon there being a term of the contracts that the shares were issued to give effect to the testamentary purpose. It abandoned this submission.[177] Border Express then submitted that the terms of the contracts were not wholly reduced to writing as the applications were no more than offers to be accepted by conduct or orally. In my view, this does not mean that the contracts are otherwise not articulated in writing or are "informal" in the sense observed by Kiefel CJ, Gageler J and Gordon J in Realestate. As accepted by Border Express:[178]

MR COLLINSON: The fact that it styled an application suggests it's not going to be a document with a lot of clauses and terms and conditions. Because why would it, for an intra-family dealing? And if it's just a share application, that's not like a subscription contract that one might have under a prospectus or something that goes for pages.

87 Realestate can be readily distinguished from the present case. In Realestate, the terms of the agreement between the parties had not been articulated. In the present case, the contracts are articulated in writing and are not "informal" in the sense observed by Kiefel CJ, Gageler J and Gordon J in Realestate. As a result, in my view, there is no scope for the inference of the alleged condition precedent or, in case there is scope, the fact that the terms are articulated in writing and set out in the applications concerning a straightforward issue of shares is a factor that makes it unlikely that the parties objectively intended to include the alleged condition precedent as a term of the contracts.

88 Thirdly, I have already said earlier in this judgment that I accept that the contracts were entered into to facilitate the testamentary purpose and not to raise capital. This does not support the inference of the alleged condition precedent. The testamentary purpose concerned the survivor of Max and Lynn leaving, inter alia, the shares in Border Express equally to their sons. The contracts facilitated this purpose by making the shareholdings in Border Express divisible by 4. This is what the parties objectively intended. This is supported by the evidence and submissions of Border Express. The deed expressly provides as follows:[179]

At that time [i.e. April 1990], Maxwell Luff and Lynn Luff were considering estate planning matters and it was their desire to divide the underlying ownership of the Company to each of their four sons equally and it came to their attention that the shares each of them held personally in the Company would not be divisible by 4 to enable them to bequeath an equal number of shares in the Company to each of their 4 sons.

To facilitate each of Maxwell Luff and Lynn Luff holding a number of shares divisible by four, the Company's accountant prepared documents for the application and issuing of three shares for every one share then held, with the result that their total shareholding became 4 ordinary shares (which is a number divisible by 4). The accountant did not advise Maxwell Luff, Lynn Luff, the Company or MJ Luff that the issuing of further shares in the Company would have any capital gains tax consequences.

89 Border Express referred to the "testamentary "divisible by 4" ambition"[180] and submitted "[o]ne topic is, was there a purpose in doing the share issue to achieve a divisible by four testamentary purpose".[181] It also described this as the "divisible by four point".[182] It submitted that the shares were issued "for the purpose of creating shares divisible by four so as to achieve some testamentary objectives".[183] It submitted that "the [share issue] was undertaken so that on the passing of Max and his wife Lynn, they could leave an equal and whole number of shares in Border Express to each of their children, consistent with their desire that their children ultimately be the owners of the business."[184] The shareholdings of Max, Lynn and MJ Luff in Border Express became divisible by four. The share issue was undertaken as it came to Max and Lynn's attention that the shares each of them held in Border Express would not be divisible by 4 to enable them to bequeath an equal number of shares in Border Express to each of their 4 sons.[185] As I have already said, Max, Lynn, Mark and Grant were aware of the testamentary purpose as at 5 April 1990 and likely much earlier.[186] The shareholdings in the Luff companies became divisible by four, except for the shares held by the sons in MJ Nominees. The testamentary purpose does not concern the CGT consequences of a possible sale of the shares to be issued pursuant to the contracts. The Intervener submitted that the testamentary purpose was not "achievable" by the contracts because the shares held by MJ Luff in Border Express would not form part of the deceased estate of Max or Lynn.[187] In response, Border Express submitted that the testamentary purpose was achievable with regard to the other transactions concerning MJ Luff and Luff Nominees.[188] In my view, the share issue could never achieve the testamentary purpose. The testamentary purpose is achieved by the Wills themselves. It is clear, however, that the share issue was made to facilitate it.

90 Fourthly, Border Express submitted that the dealings between Max and Mr Stanton support the inference of the alleged condition precedent.[189] I do not accept this submission. I accept that Max relied upon Mr Stanton's advice on accounting and tax matters but Max did not seek or obtain any advice from Mr Stanton on the tax consequences of the issue of the shares on 5 April 1990 or the contracts. The alleged condition precedent cannot be inferred to, in effect, address a failure on Max's part to seek or obtain this advice. Border Express submitted (emphasis added) "[i]nstead, properly advised, they would have achieved their testamentary "divisible by 4" ambition by a share split which would have retained the pre-CGT status of all of the shares in the company".[190] To the extent that the parties to the contracts were not "properly advised" this is because they did not seek or obtain any such advice.

91 Fifthly, there is no evidence that Lynn spoke to Max or any of her sons about CGT, including with respect to the share issue or the contracts.[191]

92 Sixthly, Max had discussions with each of Mark, Grant and Geoffrey about Border Express being a "'pre-CGT' asset", having "'pre-CGT' status" and being "pre-CGT".[192] Prior to 5 April 1990, this was correct, as no shares had been issued or transferred after 19 September 1985. This does not support the inference of the alleged condition precedent. This is because those discussions concerned the then CGT status of shares held in Border Express. Those discussions did not concern a material change in the shareholding by the issue of further shares or the consequences of such a material change.

93 Seventhly, I do not accept Border Express' submission that the parties to the contracts all had "an identical commercial interest" in preserving the status of Border Express' shares as pre-CGT assets.[193] This is because Border Express had no such commercial interest. Its interest was limited to obtaining a payment for the shares that it issued. Further, in any event, Border Express did not rely upon this as being part of the "circumstances" upon which it ultimately relied.[194]

94 Eighthly, Border Express submitted that knowledge of the true position would have meant that the contracts would not have been made as it may be inferred that all parties to the contracts proceeded on the basis of the common assumption that the further issue of the Border Express shares would not have CGT consequences.[195] This submission does not support the inference of the alleged condition precedent. This is because Border Express submitted that the contracts would not have been made. It did not submit that the contracts would still have been made but with the alleged condition precedent.

95 Finally, there is no evidence that prior to or on 5 April 1990, the parties to the contracts discussed with one another:

(a) the CGT consequences of the share issue on 5 April 1990 or the contracts;

(b) took any steps to seek or obtain any advice from Mr Stanton or any other person on the CGT consequences of the share issue or the contracts; or

(c) or took any steps concerning any potential sale of shares in Border Express.

96 Border Express submitted that, alternatively, the alleged condition precedent is implied in the contracts as the criteria for an implied term set out in BP Refinery (Westernport) Pty Ltd v Shire of Hastings (BP Refinery)[196] are satisfied. It correctly accepted that for the alleged condition precedent to be implied these criteria must be met.[197] Border Express relied upon observations of Edelman and Steward JJ in Realestate that each of the BP Refinery criteria is flexible, as the criteria served only to answer the ultimate question as to what would have been intended by a reasonable person in the position of the contracting parties.[198] The Intervener submitted that the cases in which a court has implied a term that the existence of a state of affairs is a condition precedent to the existence of the contract is extremely rare.[199] The Intervener submitted that this case is not one of those rare cases.[200] Border Express accepted that the cases in which a Court has implied a term as a condition precedent are uncommon.[201] I address the parties' submissions on each particular criteria of the BP Refinery test in my analysis of the issue.

97 In BP Refinery, the Privy Council said:[202]

Their Lordships do not think it necessary to review exhaustively the authorities on the implication of a term in a contract which the parties have not thought fit to express. In their view, for a term to be implied, the following conditions (which may overlap) must be satisfied: (1) it must be reasonable and equitable; (2) it must be necessary to give business efficacy to the contract, so that no term will be implied if the contract is effective without it; (3) it must be so obvious that "it goes without saying"; (4) it must be capable of clear expression; (5) it must not contradict any express term of the contract.

98 In Grocon Constructors (Victoria) Pty Ltd v APN DF2 Project 2 Pty Ltd,[203] the Court of Appeal said:

[140] The conditions in the BP Test are cumulative and import different considerations.

[141] In relation to the condition that an implied term 'must be reasonable and equitable', we note that the High Court has refused to imply a term that would operate in a partisan fashion. The application of the condition will often require consideration of the matrix of facts in which a contract was agreed.

[142] The condition that an implied term 'must be necessary to give business efficacy to the contract' requires consideration of whether the term is necessary for the purposes of 'giving to the transaction such efficacy as both parties must have intended that at all events it should have', making the agreement work or avoiding an unworkable situation. Where the express terms of an agreement are sufficient to give it the business efficacy the parties intended it to have, it will not become necessary to imply additional terms. However, a term may be commercially necessary, in order for the contract to be workable in a business sense, notwithstanding that it can operate without the term. In Commonwealth Bank of Australia v Barker, French CJ, Bell and Keane JJ stated that the requirement that a term implied in fact be necessary 'to give business efficacy' to a contract can be regarded as a 'specific application' of the criterion of necessity which also supports the implication of a term in law. They also said that '[i]mplications which might be thought reasonable are not, on that account only, necessary.'

[143] The condition that an implied term 'must be so obvious that "it goes without saying"' requires consideration of whether, at the time that the parties were making their bargain, the suggestion of insertion of the implied term into the agreement by an 'officious bystander' would have been met 'with a common, "Oh, of course"' from the parties.

[144] In relation to the condition that an implied term 'must be capable of clear expression', it is worth noting the observation of Gibbs J in Ansett Transport Industries (Operations) Pty Ltd v Commonwealth that the 'width and lack of precision' of a term supplied an argument against implying it. Mason J in Codelfa refused to imply a term into a contract on the basis that, had the parties explored the term at the time that they entered into the contract, negotiation about the term 'might have yielded any one of a number of alternative provisions, each being regarded as a reasonable solution'. It has been observed by this Court that it is elementary that a contractual party who is to be subjected to an additional obligation by reason of the implication of a term into a contract should be 'left in no doubt of the extent of the obligation' and, accordingly, a term that would leave a party in a 'state of speculation' as to the extent of its obligations would not be implied.

99 Whether the circumstances for the implication of such a term are rare or uncommon is not relevant or to the point. The alleged condition precedent either satisfies the criteria in BP Refinery or it does not.

100 As I have already said, Border Express correctly accepted that the criteria must be satisfied.[204] In the context of the circumstances of the contract which they were considering, Edelman and Steward JJ emphasised that it can be especially important that the BP Refinery criteria are not applied in an over-rigid way in informal contracts[205] and that the flexibility of the BP Refinery criteria can be particularly evident in the instance of an informal contract.[206] The present contracts are very different to the contracts that were the subject of consideration in Realestate as those contracts were not written and the terms had to be ascertained by reference to the parties' conduct and words in all of the circumstances. Edelman and Steward JJ's observations on the flexibility of the BP Refinery criteria were made in that context. In the present case, all of the express terms of the contracts are set out in the applications. As a result, I do not accept Border Express' submissions that the contracts are not formal contracts where all of the terms have been spelled out.[207] It is only the acceptance that was communicated by conduct or spoken words. Border Express submitted that it did not "place undue emphasis" on its submission concerning flexibility of the criteria[208] and did not, in any event, explain how such flexibility assists in applying the criteria in BP Refinery in the circumstances of this case. The criteria in BP Refinery must be applied in the circumstances of the particular case.

101 The subjective intentions of the parties to the contracts are not relevant.[209]

102 Border Express submitted that the alleged condition precedent operates reasonably and equitably between all contracting parties. It submitted that the alleged condition precedent does not confer rights or create obligations for one side of the bargain.[210] It also submitted that it does not harm Border Express.[211] It submitted that Border Express had "an interest in the loss of pre-CGT standing that would come about in the absence of any inferred or implied condition precedent" because it was owned and controlled by the Luff family, including Max and Lynn.[212] It submitted that the implied condition precedent being made out avoids the negative consequence of 75% of the shareholding being post-CGT.[213] It also submitted that the implied condition precedent reflects the objective intention of the parties that legal relations will only be created if the shares issued are subject to CGT.[214]

The position here is that Border Express as issuer of shares had a different interest from M J Luff, Max and Lynn Luff as the recipients of the shares. There were no CGT consequences for Border Express. Its shares are not CGT assets of itself and also Border Express received $3,000 for the shares. The parties are separate legal entities. They cannot be treated as if they were one entity with the same interest and Border Express can't be treated as if it has the same interest as its shareholders.

104 The Intervener further submitted that there was no authority to suggest that clashing commercial interests is a relevant consideration in the implication of a term.[216]

105 I accept the Intervener's submission that Border Express, as the issuer of shares, had a different interest from MJ Luff, Max and Lynn Luff as the recipients of the shares. It is not to be imputed to a party that he or she is assenting to an unexpressed term which will operate unreasonably and inequitably against himself.[217] The alleged condition precedent confers rights for only one side of the bargain, being the recipients of the shares (i.e. Max, Lynn and MJ Luff). The alleged condition precedent would operate unreasonably and inequitably against Border Express. I also do not accept Border Express' submission that the objective intention of the parties was that legal relations will only be created if the shares are not subject to CGT. This submission is simply a restatement of the alleged condition precedent.

106 Border Express submitted the alleged condition precedent gives business efficacy to the contracts. Border Express submitted that the "point of the exercise was to issue shares that would not disturb the pre CGT status of Border Express."[218] Border Express submitted that the testamentary purpose assists in reaching the conclusion that the alleged condition precedent is made out, especially the business efficacy requirement.[219] It submitted that the testamentary purpose would not be achieved without the alleged condition precedent.[220] Border Express submitted that the issue of shares on 5 April 1990 was undertaken so that on the passing of Max and his wife Lynn, they could leave an equal and whole number of shares in Border Express to each of their children, consistent with their desire that the children ultimately be the owners of the business.[221] It also relied upon the shares issued on 5 April 1990 in MJ Luff and also in MJ Nominees in which, as a result of the shares being issued, all of the shareholdings became divisible by four, consistent with the testamentary purpose.[222] Border Express submitted that the share issue on 5 April 1990 in Border Express did not put the sons in the same position[223] as their tax status is different.[224]

107 The alleged condition precedent is not necessary to give business efficacy to the contracts. First, the contracts are effective and workable without the alleged condition precedent. The contracts provide for the issue of a certain number of shares to certain persons at a certain price. The alleged condition precedent is not necessary. The shares were issued and paid for over 30 years ago. I do not accept Border Express' submission that the point of the exercise was to issue shares that would not disturb the pre-CGT status of Border Express. Secondly, I refer to the matters I have addressed earlier in this judgment concerning testamentary purpose.[225] Thirdly, in any event, I do not accept Border Express' submission that the alleged condition precedent gives to the transaction such efficacy as Border Express itself must also have intended. This is because its objective interest was in obtaining a price for the issue of the shares. It had no interest in whether its shareholders would have to pay CGT on any possible sale or disposition of the shares.

108 Border Express submitted the alleged condition precedent is so obvious it goes without saying. Border Express submitted that no reasonable person in the circumstances of the parties, being effectively the same family members, would have caused the share issue to occur if they knew that it would cause the newly issued shares to attract a future tax liability.[226] It submitted that the Luffs would have said, with respect to this issue, "Of course, were the shares in Border Express not to continue to be pre-CGT assets, there is no contract".[227] Border Express also submitted that "properly advised, they [i.e. Max, Lynn and MJ Luff] would have achieved the testamentary "divisible by 4" ambition by a share split which would have retained the pre-CGT status of all of the shares in the company."[228] The Intervener submitted that if the issue was raised they would have obtained advice.[229]

109 In my view, if an officious bystander suggested the alleged condition precedent as an express term of the contracts the members of the Luff family would not have said, "Oh, of course" but would have sought advice from Mr Stanton. The primary focus of Border Express' case was that had the contracting parties been aware that their belief and intention was incorrect (i.e. concerning the CGT consequences) they would not have taken any steps to issue the shares, including entering into the contracts. This does not support the implication of the alleged condition precedent as Border Express' case is that the parties would not have proceeded with the contracts. Border Express submitted that "properly advised, they [i.e. Max, Lynn and MJ Luff] would have achieved the testamentary "divisible by 4" ambition by a share split".[230] This demonstrates that the members of the Luff family would not have answered the officious bystander by saying "Oh, of course" to the alleged condition precedent. They would have sought advice.

110 The Intervener submitted that from the alleged condition precedent, it is unclear when, how and by whom the CGT is to be determined.[231] It submitted that it affects third party rights, including the Intervener.[232] It submitted that there was no mechanism to determine whether the term was satisfied.[233] The Intervener further submitted that the alleged condition precedent would introduce substantial uncertainty as to the validity of a completed contract for an unknown period of time.[234] In response, Border Express submitted that the viability of the suggested term is assessed by reference to what was known at the date that the term was set to come into existence.[235] Border Express submitted that the alleged condition precedent is capable of clear expression.[236]

111 The alleged condition precedent is capable of clear expression. This is because whether the condition precedent has been satisfied is to be determined at the time of the contracts (i.e. 5 April 1990). Whether the shares issued under those contracts were, as at 5 April 1990, subject to CGT upon a sale or disposition, is able to be objectively determined.

112 The Intervener submitted the alleged condition precedent contradicts express terms of the contracts.[237] Border Express submitted that the alleged condition precedent does not contradict an express term because the implied term is a condition precedent.[238] I accept this submission. An implied term may be condition precedent.

113 The alleged condition precedent is not implied in the contracts as it is not reasonable and equitable, is not necessary to give business efficacy to the contracts and is not so obvious that it goes without saying.

114 As a result, Border Express has not established a ground for an order under s 175(1) of the Corporations Act based upon the alleged condition precedent being a term of the contracts.

May a common mistake render a contract void at common law?

115 Border Express submitted that a common mistake may render a contract void at common law. It relied upon the decision of the House of Lords in Bell v Lever Brothers Ltd (Bell v Lever Brothers)[239] as the leading decision_._[240] Border Express relied[241] upon the following observation by Lord Atkin:[242]

Mistake as to quality of the thing contracted for raises more difficult questions. In such a case a mistake will not affect assent unless it is the mistake of both parties, and is as to the existence of some quality which makes the thing without the quality essentially different from the thing as it was believed to be.

116 It also relied[243] upon the following observation of Lord Thankerton:[244]

The phrase "underlying assumption by the parties," as applied to the subject-matter of a contract, may be too widely interpreted so as so include something which one of the parties had not necessarily in his mind at the time of the contract; in my opinion it can only properly relate to something which both must necessarily have accepted in their minds as an essential and integral element of the subject-matter.

117 It submitted[245] that the following statement of Lord Atkin does not form part of the ratio of the decision:[246]

We therefore get a common standard for mutual mistake, and implied conditions whether as to existing or as to future facts. Does the state of the new facts destroy the identity of the subject matter as it was in the original state of facts?

118 Border Express submitted that there has been no case where this formulation concerning the destruction of the identity of the subject matter has actually been cited and applied.[247]

119 Border Express also relied upon Associated Japanese Bank (International) Ltd v Credit du Nord S.A. (Associated Japanese Bank),[248] being a more recent statement of the applicable law,[249] wherein Steyn J summarised Bell v Lever Brothers as requiring that the mistake must render the subject matter of the contract essentially and radically different from the subject matter which the parties believed to exist.[250] In particular, it relied upon the following statement by Steyn J of the applicable test:[251]

The first imperative must be that the law ought to uphold rather than destroy apparent contracts. Secondly, the common law rules as to a mistake regarding the quality of the subject matter, like the common law rules regarding commercial frustration, are designed to cope with the impact of unexpected and wholly exceptional circumstances on apparent contracts. Thirdly, such a mistake in order to attract legal consequences must substantially be shared by both parties, and must relate to facts as they existed at the time the contract was made. Fourthly, and this is the point established by Bell v. Lever Brothers Ltd. [1931] UKHL 2; [1932] A.C. 161, the mistake must render the subject matter of the contract essentially and radically different from the subject matter which the parties believed to exist. While the civilian distinction between the substance and attributes of the subject matter of a contract has played a role in the development of our law (and was cited in speeches in Bell v. Lever Brothers Ltd.), the principle enunciated in Bell v. Lever Brothers Ltd. Is markedly narrower in scope than the civilian doctrine. It is therefore no longer useful to invoke the civilian distinction. The principles enunciated by Lord Atkin and Lord Thankerton represent the ratio decidendi of Bell v. Lever Brothers Ltd. Fifthly, there is a requirement which was not specifically discussed in Bell v. Lever Brothers Ltd. What happens if the party, who is seeking to rely on the mistake, had no reasonable grounds for his belief? An extreme example is that of the man who makes a contract with minimal knowledge of the facts to which the mistake relates but is content that it is a good speculative risk. In my judgment a party cannot be allowed to rely on a common mistake where the mistake consists of a belief which is entertained by him without any reasonable grounds for such belief...

120 Border Express relied upon a decision of Sifris J (as he then was) in HWG Holdings Pty Ltd v Fairlie Court Pty Ltd (HWG Holdings),[252] submitting that in that case, common mistake at law was also found to exist in "somewhat similar circumstances".[253] In HWG Holdings, Sifris J considered an application for an order under s 175(1) of the Corporations Act based upon an agreement being void for common mistake at common law. His Honour said:[254]

[45] Although this issue is certainly not free from difficulty, was not fully argued, and was not the subject of any submissions by a contradictor (none being necessary or desirable in this case), I am inclined to the view that despite extreme difficulties in this area of the law, and in the circumstances of this case, the buy-back agreement is void at common law because of the clear common mistake of the parties. I will state my reasons briefly.

121 Border Express also relied on McRae v Commonwealth Disposals (McRae),[255] where Dixon and Fullagar JJ said:[256]

It was not decided in Couturier v. Hastie that the contract in that case was void. The question whether it was void or not did not arise. If it had arisen, as in an action by the purchaser for damages, it would have turned on the ulterior question whether the contract was subject to an implied condition precedent.

... If, on the other hand, the case of Couturier v. Hastie, and this case ought to be treated as cases raising a question of "mistake", then the Commission cannot in this case rely on any mistake as avoiding the contract, because any mistake was induced by the serious fault of their own servants, who asserted the existence of a tanker recklessly and without any reasonable ground.

122 Border Express submitted that this implied that their Honours "conceded" the existence of the doctrine of common law that there can be a common mistake which makes the contract void.[257]

123 The Intervener submitted that there is no such doctrine[258] as it has been encapsulated by the "prior condition precedent doctrine".[259] It submitted the High Court of Australia has endorsed the statements made by Denning LJ said in Solle v Butcher (Solle v Butcher)[260] about, in effect, common mistake at common law not being available.[261] The Intervener relied upon decisions of the High Court in McRae, Svanosio v McNamara (Svanosio)[262] and Taylor v Johnson (Taylor)[263] and submitted that cases in which a contract have been held to be void on the ground of common mistake are virtually unknown to Australian law.[264] The Intervener also submitted that HWG Holdings may be distinguished from the present case, or alternatively, was wrongly decided.[265]

124 In summary, there are limited circumstances in which a common mistake may render a contract void at common law. The present case is not one of these circumstances.

125 In Solle v Butcher the Court of Appeal considered whether, inter alia, a lease should be set aside based upon common mistake. Denning LJ said:[266]

Let me first consider mistakes which render a contract a nullity. All previous decisions on this subject must now be read in the light of Bell v. Lever Bros. Ld. The correct interpretation of that case, to my mind, is that, once a contract has been made, that is to say, once the parties, whatever their inmost states of mind, have to all outward appearances agreed with sufficient certainty in the same terms on the same subject matter, then the contract is good unless and until it is set aside for failure of some condition on which the existence of the contract depends, or for fraud, or on some equitable ground. Neither party can rely or his own mistake to say it was a nullity from the beginning, no matter that it was a mistake which to his mind was fundamental, and no matter that the other party knew that he was under a mistake. A fortiori, if the other party did not know of the mistake, but shared it. The cases where goods have perished at the time of sale, or belong to the buyer, are really contracts which are not void for mistake but are void by reason of an implied condition precedent, because the contract proceeded on the basic assumption that it was possible of performance. So far as cases later than Bell v. Lever Bros., Ld. Are concerned, I do not think that Sowler v. Potter can stand with King's Norton Metal Co. Ld. v. Edridge, which shows that the doctrine of French law as enunciated by Pothier is no part of English law. Nor do I think that the contract in Nicholson and Venn v. Smith-Marriott, was void from the beginning.

126 Denning LJ accepted that the landlord was under a mistake concerning the lease which was to him fundamental but held that whether that mistake was the landlord's mistake or a common mistake of the landlord and tenant, "it is not a ground for saying that the lease was from the beginning a nullity."[267]

127 In McRae, the Commonwealth Disposals Commission (the Commission) invited tenders for the purchase of an oil tanker laying on a particular reef. The plaintiff put in a tender and was successful and was provided with a sale advice note that described what was sold as an oil tanker wrecked on a particular reef. There was, in fact, no tanker wrecked on that reef.

128 Justice Dixon (as he then was) and Justice Fullagar said:[268]

When once the common law had made up its mind that a promise supported by consideration ought to be performed, it was inevitable that the theorisings of the civilians about "mistake" should mean little or nothing to it. On the other hand, the question whether a promisor was excused from performance by existing or supervening impossibility without fault on his part was a practical every-day question of which the common law has been vividly conscious...But here too the common law has generally been true to its theory of simple contract, and it has always regarded the fundamental question as being: "What did the promisor really promise?" Did he promise to perform his part at all events, or only subject to the mutually contemplated original or continued existence of a particular subject-matter? So questions of intention or "presumed intention" arise, and these must be determined in the light of the words used by the parties and reasonable inferences from all the surrounding circumstances. That the problem is fundamentally one of construction is shown clearly by Clifford v. Watts.

129 This has been described by some commentators as a "constructional approach".[269]

130 Dixon and Fullagar JJ held that it was impossible to imply any condition precedent. Their Honours stated:[270]

The terms of the contract and the surrounding circumstances clearly exclude any such implication. The buyers relied upon, and acted upon, the assertion of the seller that there was a tanker in existence. It is not a case in which the parties can be seen to have proceeded on the basis of a common assumption of fact so as to justify the conclusion that the correctness of the assumption was intended by both parties to be a condition precedent to the creation of contractual obligations. The officers of the Commission made an assumption, but the plaintiffs did not make an assumption in the same sense. They knew nothing except what the Commission had told them. If they had been asked, they would certainly not have said: "Of course, if there is no tanker, there is no contract". They would have said: "We shall have to go and take possession of the tanker. We simply accept the Commission's assurance that there is a tanker and the Commission's promise to give us that tanker." The only proper construction of the contract is that it included a promise by the Commission that there was a tanker in the position specified.

131 Dixon and Fullagar JJ held that there was a contract and the Commission contracted that a tanker existed in the position specified and, since there was no such tanker, the Commission had breached the contract.[271]

132 Dixon and Fullagar JJ also said of "mistake":[272]

...even if the view that Couturier v. Hastie was a case of a void contract be correct, we would still think that it could not govern the present case. Denning L.J. indeed says in Solle v. Butcher:- "Neither party can rely on his own mistake to say it was a nullity from the beginning, no matter that it was a mistake which to his mind was fundamental, and no matter that the other party knew he was under a mistake. A fortiori if the other party did not know of the mistake, but shared it". But, even if this be not wholly and strictly correct, yet at least it must be true to say that a party cannot rely on mutual mistake where the mistake consists of a belief which is, on the one hand, entertained by him without any reasonable ground, and, on the other hand, deliberately induced by him in the mind of the other party.

If, on the other hand, the case of Couturier v. Hastie...and this case ought to be treated as cases raising a question of "mistake", then the Commission cannot in this case rely on any mistake as avoiding the contract, because any mistake was induced by the serious fault of their own servants, who asserted the existence of a tanker recklessly and without any reasonable ground.

134 I agree with the observation of Young AJ in Hawcroft v Hawcroft General Trading Co Pty Ltd (Hawcroft):[274] "[c]ases such as McRae v Commonwealth Disposals Commission make it quite clear that a person who is in a position to know the true facts yet mistakenly believes that certain property exists and induces the other party to share that belief cannot treat the contract as void".[275] I also agree with Young AJ's observation that "Solle v Butcher was given a fair, but not complete seal of approval of McRae".[276] This is because Dixon and Fullagar JJ referred to the relevant passage in Solle v Butcher with approval but also addressed the circumstances in case it was not wholly or strictly correct.[277]

135 I also agree with the observations of the learned author of Heydon on Contracts[278] concerning the "constructional approach"[279] adopted by Dixon and Fullagar JJ in McRae:[280]

The answers to these questions of construction can reveal that the parties allocated between themselves the risk of particular states of affairs never existing or ceasing to exist before the contract was made. Hence the contract may be construed as containing a warranty that its subject matter exists.

...

The "constructional" constructional approach does not rest on the view that there is an independent general law "doctrine of common mistake". The questions it raises will, if answered one way, render it unnecessary even to consider whether there is an independent general law "doctrine of common mistake". On any view it radically narrows the potential scope of that doctrine, assuming the doctrine exists.

136 In the present case, I do not accept the Intervener's submission that, on a true construction of the contracts, one of the parties, probably the recipients of the shares (as submitted), took responsibility for the assumption that the shares would be pre-CGT assets.[281] The contracts do not address this issue.

137 In Svanosio, the appellant claimed that a contract and a conveyance were, inter alia, void on the ground that they were executed under a common mistake. The appellant submitted that there was a common mistake as to a fundamental fact as it concerned the parties' belief that the hotel, the subject of the instruments, wholly stood on the land sold. Dixon CJ and Fullagar J held that there was a common mistake but that neither instrument was void. Dixon CJ and Fullagar J said:[282]

The appellant, as has been seen, claimed by his statement of claim declarations that both the contract and the conveyance were void, and it was argued before us that both instruments were void on the ground that they were executed under a "common mistake" as to a fundamental fact, in that all parties believed that the hotel stood wholly on the land sold. But, if one thing in this case is clear, it seems to us to be that neither instrument was or is void.

So far as the contract is concerned, it may be assumed that all parties believed that the hotel stood wholly on the land sold. In that sense there was a "common mistake". It may also be assumed that the appellant, if he had known that a considerable part of the building stood on Crown land, would not have entered into the contract. But these facts do not make the contract void. The subject of "mistake" in relation to contracts has recently received a good deal of attention in the courts and in legal journals. This Court in McRae v. Commonwealth Disposals Commission adopted with respect a passage in the judgment of Denning L.J. (while saying nothing as to the actual decision) in Solle v. Butcher. To quote now from that judgment at somewhat greater length, his Lordship said: - " ... once a contract has been made, this is to say, once the parties, whatever their inmost states of mind, have to all outward appearances agreed with sufficient certainty in the same terms on the same subject matter, then the contract is good unless and until it is set aside for failure of some condition on which the existence of the contract depends, or for fraud, or on some equitable ground. Neither party can rely on his own mistake to say it was a nullity from the beginning, no matter that it was a mistake which to his mind was fundamental, and no matter that the other party knew that he was under a mistake. A fortiori, if the other party did not know of the mistake, but shared it". Denning L.J. has since expressed the same view in Frederick E. Rose (London) Ltd. v. William H. Pim Jnr. & Co. Ltd., after saying that he was "clearly of opinion that the contract was not a nullity", although "both parties were under a mistake, and the mistake was of a fundamental character with regard to the subject-matter". Reference should also be made to two learned articles - "The Myth of Mistake in the English Law of Contract" by Mr. C. J. Slade and "The Supposed Doctrine of Mistake in Contract" by Professor K. O. Shatwell.

138 In the article referred to by Dixon CJ and Fullagar J titled The Myth of Mistake in the English Law of Contract the learned author, inter alia, stated:[283]

Despite the frequent use by the judges of the word "mistake," it is submitted that there is no authority to support this proposition. Mistake as such may be a ground for affording a party some relief in equity, but in itself it is irrelevant at law. A contract is void at law only if some term can be implied in both offer and acceptance which prevents the contract from coming into operation, or if offer and acceptance on their true interpretation are found to be divergent.

139 The observations of Dixon CJ and Fullagar J in Svanosio went a step further than in McRae. This is because they adopted the passage in Solle v Butcher without any apparent limitation. I also observe that the majority in Svanasio held:[284]

The present case on analysis falls completely within the principle that, after the contract has been completed by the execution of the conveyance and the payment of the purchase money, the purchaser, apart from rights arising from the deed of conveyance or subsisting under the contract which do not merge in the deed, has no remedy at law or in equity in respect of any defects either in the title to or in the quantity or quality of the estate...

140 In Taylor, the respondent claimed she made a mistake when she entered into a contract for the sale of land as it recorded the price as "$15,000" whereas it should have been "$15,000 per acre". The trial judge found that the respondent made a mistake but that the appellant was not aware of her mistake. On appeal, the Court of Appeal allowed the appeal and set aside the contract. It did so on the basis that the respondent made a mistake and that the appellant was aware of her mistake. On appeal to the High Court, the majority referred to the approval given in Svanosio by Dixon CJ and Fullagar J to what Denning LJ said in Solle v Butcher but, in my view, added potential limits to it. The majority said in obiter:[285]

McRae and Svanosio, like Solle v. Butcher, were not cases involving a mistake as to the existence or content of an actual term of the written contract. There is, however, nothing in the joint judgments of Dixon C.J. and Fullagar J. which would exclude such a case from their acceptance of the general proposition that neither party to a contract "can rely on his own mistake to say it was a nullity from the beginning, no matter that it was a mistake which to his mind was fundamental, and no matter that the other party knew that he was under a mistake". Whether that proposition should properly be accepted as applying in the case of an informal contract or in the case where there is a mistake as to the identity of the other party are questions which can be left to another day. It would seem that it does not apply in a case where the mistake is as to the nature of the contract. For the present, but not without hesitation (see, e.g., Robert A Munro & Co v Meyer; Chitty on Contracts, 24th ed. (1977), vol. 1, par. 337; Joscelyne v Nissen), we are prepared to accept it as applicable to a case, such as the present, where the mistake is as to the existence or content of an actual term in a formal written contract. It therefore becomes necessary to consider the scope of the basis upon which relief in equity is available from the contractual consequences of unilateral mistake.

(a) left for another day the question of whether a contract may be void for a mistake concerning an informal contract or the identity of a party;

(b) stated in obiter that a contract may be void for a mistake concerning the nature of the contract; and

(c) held a contract is not void for a mistake where the mistake is as to the existence or content of an actual term in a formal written contract.

142 The learned author of Heydon on Contracts states:[286]

It is submitted that it is not open to courts below the High Court to adopt the English approach in view of the High Court's reasoning in McRae v Commonwealth Disposals Commission [1950] 1 KB 671 and its dicta in Svanosio v McNamara [1956] HCA 55; (1956) 96 CLR 186 and Taylor v Johnson [1983] HCA 5; (1983) 151 CLR 422, approving what Denning LJ said as to the common law position in Solle v Butcher [1950] 1 KB 671 (as distinct from what he said as to the position in equity, which is discussed at [15.180]-[15.210]).

143 I agree with these observations. The learned author also then goes onto to state: "Australia does not consider that a contract can be void at common law for common mistake."[287] I do not agree with this observation as it is too broadly expressed given the statements in obiter dicta of the majority in Taylor I have already referred to.[288] In Australia Estates Pty Ltd v Cairns City Council (Australia Estates),[289] the majority accepted that a contract can be void for common mistake at common law.[290] I agree with the observations of Young AJ in Hawcroft:[291]

...common mistake was traditionally only a vitiating factor at common law in two cases - res sua (where a buyer contracted to buy something that he or she already owned) and res extincta (where the buyer contracted to buy something which in fact did not exist). In each case, the purported contract was void at law. However, as the law developed, a third category of "fundamental" common mistake emerged as a further case of a common mistake for which the common law would declare a contract void.

...

The proposition that, so long as there is a common mistake as to an essential matter the purported contract must be taken to be void, must be too wide. Cases such as McRae v Commonwealth Disposals Commission make it quite clear that a person who is in a position to know the true facts yet mistakenly believes that certain property exists and induces the other party to share that belief cannot treat the contract as void.

144 On appeal, the NSW Court of Appeal in Hawcroft General Trading Co Pty Ltd v Hawcroft[292] said:

Various kinds of common mistake might have the effect of vitiating the consensus on the part of the parties that is required for any contract. For example, apart from the kinds of mistake identified by the primary judge, if the parties are not ad idem as to the subject matter of the contract or if there is a mistake as to the identity of a party to the contract, there may be a basis for concluding that there is no contract.

145 As I have already said, in HWG Holdings, Sifris J held that a buy-back agreement was void at common law. His Honour stated:[293]

Courts do not lightly declare or find contracts to be void ab initio for common mistake. However, it is ultimately a matter of construction of the particular contract made by the parties, particularly in relation to which party is to bear the risk. In the unusual case where the contract is silent, gap filing mechanisms are not available, there is no misrepresentation or misleading conduct, and the breach is serious, the result in a particular case may well be the stated narrow common law position, namely that the contract is void ab initio.

146 In HWG Holdings there was no contradictor. The plaintiff in that case made submissions based upon Taylor but only concerning the majority's statements concerning common mistake in equity.[294] His Honour makes no express reference to Taylor in the context of common mistake at common law, including the majority's statements about the restricted circumstances in which such a remedy may be available. His Honour does, however, refer to the "stated narrow common law position".[295] It is unclear, with respect, whether his Honour's reference to the "breach is serious" is a reference to the mistake itself being serious or something else (i.e. a breach of contract). A breach of contract is not relevant to a remedy for common mistake. His Honour's observations are confined to the particular circumstances of the case he was considering. In my view, his Honour did not attempt to define the limits of common mistake more generally. The present case may also be readily distinguished from HWG Holdings. This is because in HWG Holdings the mistake related to a central aspect of the agreement being the effective price of the transaction.

147 As I have already said, there are limited circumstances in which a common mistake can render a contract void at common law. The present case is not one of these circumstances. This is because, having regard to the majority's obiter statements in Taylor, the common mistake does not concern:

(a) an informal contract;

(b) the identity of a party; or

(c) the nature of the contracts. The nature of the contracts was the purchase of shares issued by Border Express. There was no mistake about the nature of the contracts. The mistake concerned a tax consequence of a possible future sale of the shares issued pursuant to the contracts.

148 As a result, Border Express has not established a ground for an order under s 175(1) of the Corporations Act based upon the contracts being void for common mistake at common law.

If the contracts may be void at common law for common mistake, what is the applicable test?

149 In the event that the present case is one of the limited circumstances in which a common mistake may render a contract void at common law, I will consider the applicable elements of the test. The parties disagreed upon this. In my view, no matter which precise formulation of the test is adopted, Border Express has not established the necessary elements.

150 Border Express submitted that the applicable test is set out in Bell v Lever Brothers and the more recent decision of Associated Japanese Bank in the passages I have identified earlier in this judgment.[296] The Intervener submitted that the applicable test is set out Bell v Lever Brothers, being the statements of Lord Atkin concerning the destruction of the identity of the subject matter as opposed to the passages of Bell v Lever Brothers relied upon by Border Express, and the more recent observations of the Court of Appeal in Great Peace Shipping Ltd v Tsavliris Salvage Ltd (Great Peace).[297] It also relied upon Associated Japanese Bank.[298] In Great Peace, the Court of Appeal said the following elements must be present if common mistake at common law is to avoid a contract:[299]

(a) there must be a common assumption as to the existence of a state of affairs;

(b) there must be no warranty by either party that that state of affairs exists;

(c) the non-existence of the state of affairs must not be attributable to the fault of either party;

(d) the non-existence of the state of affairs must render performance of the contract impossible;

(e) the state of affairs may be the existence, or a vital attribute, of the consideration to be provided or circumstances which must subsist if performance of the contractual adventure is to be possible.

151 Border Express submitted that the Court should not apply Great Peace as it submitted that the fourth element (i.e. impossibility of performance) is not an element having regard to Bell v Lever Brothers, and that such a restrictive approach has not been endorsed by the High Court or universally accepted in State Supreme Courts. It submitted that Great Peace appeared to have had in mind "impossibility" in terms of the broader contractual adventure, as opposed to the strict terms of the contract, and noted that the Court of Appeal in Great Peace referred to Associated Japanese Bank with approval though performance of the guarantee in that case "would have been entirely possible".[300] It submitted that some courts have expressed doubts about the formulation of the test in Great Peace.[301] It further submitted that the Court of Appeal in Great Peace in actually applying the test adopted a test consistent with Bell v Lever Brothers (i.e. subject matter being "essentially different").[302] It also submitted that Lord Atkin's statements in Bell v Lever Brothers concerning the destruction of the subject matter do not form part of the ratio of his Honour's decision. It submitted that it is enough that the mistake renders the subject matter of the contract essentially and radically different from the subject matter which the parties believed to exist.[303]

152 I agree with the learned author of Heydon on Contracts that Great Peace is the most recent leading statement of the English doctrine pursuant to which common mistake can render a contract void at common law.[304] The majority in Australia Estates held that the test to be applied is set out in Great Peace.[305] Justice Sifris in HWG Holdings also referred to it.[306] In the present case, in any event, the precise formulation of the applicable test makes no difference to the result. In case Great Peace should not be applied, I will also consider the elements of the other formulations of the tests relied upon by the parties set out in Bell v Lever Brothers and Associated Japanese Bank. Upon the application of each of those tests, Border Express has not established the relevant elements.

Has Border Express established the grounds for relief for common mistake at common law?

153 It is first necessary to identify the nature and extent of any common mistake.

154 Border Express submitted that at the time of the issues of the shares, each of Max and Lynn commonly believed that any documents which changed the shareholding of Border Express would not have any CGT consequences for Border Express' shareholders or total share capital.[307] Border Express submitted that the common assumption was also made by MJ Luff and Border Express given the directors of each of these companies held the common assumption.[308] It submitted that had Max, Lynn, or the directors of MJ Luff and Border Express been aware that the share issue would have CGT consequences, they would not have taken steps to allow it to proceed.[309] Border Express submitted that the mistake rendered the subject matter of the contracts "essentially different from what they believed had existed", and this was "all the more so in circumstances where the testamentary purpose could readily have been achieved by a share split of the existing shareholdings of MJ Luff, Max Luff and Lynn Luff in Border Express."[310] Border Express submitted that it was not necessary for the parties to have turned their mind to the mistake before entering into the contract, and that it was sufficient for them to have held a belief or understanding, which was incorrect.[311] It further submitted that the testamentary purpose assisted in showing that the parties' mistaken belief rendered the subject matter of the contracts essentially different from what they believed had in fact existed.[312] It also submitted that it made the assumption "because Border Express didn't have an interest in its family shareholders losing pre-CGT status on their shares. Plainly, it didn't want to see that happen."[313]

155 The Intervener objected to evidence concerning mistake as being speculation and self-serving on the basis that Max and other members of the Luff family had no recollection of the transaction.[314] The Intervener submitted that it could not correctly be said that the parties to the contracts made a mistake about a subject matter (i.e. the CGT consequences) as this is not referred to in any relevant document or discussion and they did not turn their minds to it.[315] The Intervener submitted that the subject matter was the written terms of the contract.[316] The Intervener submitted that there was no reason for Border Express to make the alleged mistake because it concerned the CGT consequences for the share recipients, not itself. The Intervener submitted that to establish a positive state of mind, the assumption must be made about a specific contract or transaction.[317] The Intervener relied upon Daley v Donaldson.[318] The Intervener also submitted that where the subject matter of the mistake is the concern of one party only, although the other party made the same mistake, the mistake can be categorised as a mere mistake as to motive of, or reason of, one party contracting.[319] It relied upon a decision of Subdivisions Ltd v Payne[320] and submitted that in that case a contract was entered into on the basis of the defendant's mistake (shared by the plaintiff) that a previous contract was enforceable. The Intervener submitted that the subsequent contract was valid as the mistake was in the nature of an inducement or motive of the defendant to accept the plaintiff's offer. The Intervener further submitted that it is likely that, on the true construction of the contracts, one of the parties would have taken responsibility for the assumption that the shares would be pre-CGT assets.[321]

156 A common mistake is where both parties are mistaken and they share the mistake.[322]

157 First, I do not accept the Intervener's submission that the evidence concerning the parties' belief is objectionable. The evidence is relevant to this issue.[323] The evidence concerning mistake establishes that each of Max, Lynn, Mark, Grant and Geoffrey had a belief at the time of the contracts on 5 April 1990. It is not mere speculation as submitted by the Intervener.

158 Secondly, I accept that each of Max, Lynn, Mark and Grant (Lynn and Geoffrey were apologies at the meeting on 5 April 1990, but Lynn was a contacting party in her own capacity) had a positive state of mind as at 5 April 1990. That positive state of mind was that each they each made a common assumption that documents which changed the shareholding of Border Express would not have any CGT consequences for the shareholders of Border Express.

159 Thirdly, I accept that Border Express made the common assumption. This is because the evidence establishes that each of the directors of Border Express made the assumption.

160 Fourthly, I accept the common assumption did not specifically concern the particular contracts. There is no reason, in principle, that a mistake must be a mistake about a particular contract as opposed to a mistake about a particular type of contract of which the subject matter forms part. The decision of Daley v Donaldson[324] does not assist the Intervener. In that case Hallen J quoted with approval, inter alia, a statement by the learned author of Cartwright on Misrepresentation, Mistake and Non-Disclosure[325] as follows: "In order to succeed in a claim based on mistake, the claimant must show that, at the moment when he entered into the contract, he held a belief, or understanding, which was incorrect."[326] His Honour also said that "[m]erely not having thought about a particular issue or just making no assumptions about a particular issue is not enough to establish a positive state of mind."[327] His Honour did not make observations to the effect that a mistake must be made about a specific contract or transaction.

161 Fifthly, I do not accept the Intervener's submission that the mistake can be categorised as a mere mistake as to motive of, or reason of, one party contracting. The decision of Subdivisions Ltd v Payne may be readily distinguished and does not assist the Intervener. In that case Napier J considered whether it would be unreasonable to hold that moneys were paid on account of an unlawful transaction if the evidence justified the conclusion of a lawful purpose to be served by that payment.[328] It was in this context that Napier J stated in the context of a defence of illegality:[329]

It would be unreasonable to hold that these moneys were paid on account of an unlawful transaction, if the evidence justifies the conclusion of a lawful purpose served by the payment, and whilst the fact may be that, in April 1929, the parties were mistaken in believing that the original contract was one which the Courts would enforce the mistake - if it involved any mistake in point of fact - was a mistake in the reason, inducement or cause, which led the defendant to accept the plaintiff's offer, and it is wholly immaterial and irrelevant in respect of the validity and operation of the contract resulting from acceptance.

162 In my view, these observations are confined to whether there was an illegal purpose and have no application to the present case concerning whether a contract is void at common law based upon a common mistake.

163 As a result, Border Express has established a common mistake in the terms alleged.

164 In _Great Peac_e, the Court of Appeal stated the non-existence of the state of affairs must not be attributable to the fault of either party. In Associated Japanese Bank, Steyn J stated a party cannot be allowed to rely on a common mistake where the mistake consists of a belief which is entertained by him without any reasonable grounds for such belief. Border Express relied upon Associated Japanese Bank. The Intervener relied upon Great Peace and Associated Japanese Bank.

165 Applying the test formulated in Great Peace, the state of affairs relied upon by Border Express is that shares issued by Border Express would not be subject to CGT on sale or disposition. It submitted that the parties to the contracts were not at fault for inducing the mistake as there was no misrepresentation or misleading conduct.[330] Border Express submitted that it is doubtful that "fault" is a relevant consideration for a contract involving family members where all parties support the relief sought and no third party rights are affected. It submitted that this case was "unique". It submitted "[s]o, fault or to the extent that it is a requirement ought to be generously interpreted in its application where you have this commonality of interest on each side of the contract".[331] It submitted that the decision makers and controlling minds on both sides of the contracts were the same, and neither side induced the other into holding the mistaken belief.[332] Border Express also submitted that there was no fault as Max, Lynn, the directors of MJ Luff and Border Express reasonably relied on Mr Stanton to advise on taxation and accounting matters and Mr Stanton did not alert the parties to any CGT consequences when he should have done so.[333] It also put it as high as "the decision maker...reasonably relied upon the advice of Mr Bruce Stanton."[334] It submitted that it can be inferred that Mr Stanton prepared the documents for the share issue on 5 April 1990, and by not alerting the parties to any CGT consequences from the share issue, the parties' mistaken assumption was not corrected.[335] Border Express submitted:[336]

MR COLLINSON: But it's primarily of Mr Max Luff's affidavit that he of course had a meeting with Mr Max Luff when the then treasurer, Mr Keating, announced the introduction of a capital gains tax and deposes that he was very aware of it.

Mr Stanton is the person who was responsible for the tax returns and the corporate record keeping of Border Express and all Luff family companies. Mr Stanton prepared the minutes and the allotment contract and all that material, and attended the board meeting on 5 April 1990 where the shares were issued.

So, in that context, those involved are entitled to put a submission, a valid submission, that reliance on ones accountant, who was fully aware of the desire to keep Border Express as a pre-CGT company, isn't conduct that can be described as lacking reasonable diligence or conduct that should be characterised as having fault.

166 Applying the test in Great Peace, the non-existence of the state of affairs (i.e. the state of affairs being that the shares issued by Border Express would not be subject to CGT on sale or disposition) was attributable to the fault of the parties. Appling Associated Japanese Bank, there were also no reasonable grounds for the parties' belief that the issue of shares in Border Express would not be subject to CGT on sale or disposition.

167 First, Border Express' submissions that fault is not a relevant consideration in the circumstances of this case given the relationship between the parties to the contracts is contrary to authority, including Great Peace[337] (i.e. "fault") and Associated Japanese Bank[338] (i.e. "no reasonable grounds"). In Associated Japanese Bank, a decision relied upon by Border Express, Steyn J explained that the notion that a party cannot be allowed to rely on a common mistake where the mistake consists of a belief without reasonable grounds is because "policy and good sense dictate that the positive rules regarding common mistake should be so qualified."[339] Further, whether the parties were at fault for the mistake is not confined to whether they induced the mistake in the other parties.

168 Secondly, applying the test as formulated in Great Peace, the non-existence of the state of affairs (i.e. the state of affairs being that the shares issued by Border Express would not be subject to CGT on sale or disposition) was attributable to the fault of the parties. This state of affairs is attributable to the fault of Max, Lynn and the directors of MJ Luff. Each of the applicants for, and recipients of, the shares, namely Max, Lynn and MJ Luff, were at fault in not seeking any advice from Mr Stanton, or any other expert, or carefully turning their own mind, as to whether the further issue of shares in Border Express on 5 April 1990 would have CGT consequences upon a sale or other disposal. This is because:

(a) Max[340], Lynn[341], Mark[342] and Grant[343] were aware of CGT by no later than 5 April 1990;

(b) the contracts for the issue of the shares were entered into approximately 4.5 years after the introduction of CGT;

(c) Mr Stanton was the accountant for Max, Lynn and MJ Luff at the time;

(d) Mr Stanton prepared the documents relevant to the issue of the shares, including the minutes of the meeting of the directors, and it may be inferred that Max instructed Mr Stanton to prepare these documents;[344]

(e) Mr Stanton attended the meeting of Border Express on 5 April 1990;

(f) Mr Stanton was not asked to advise upon the CGT consequences of the issue of the shares or the contracts;

(g) Max gave evidence that he relied on Mr Stanton's advice on accounting and tax matters, and that he had spoken on several occasions with Mr Stanton about the impact of CGT on the Border Express business.[345] Max did not seek advice from Mr Stanton on the taxation consequences of the issue of shares on 5 April 1990 and the contracts.[346] As at 5 April 1990, Max knew that all shares issued prior to 20 September 1985 were not CGT assets and would not be subject to any CGT on a sale.[347] The basis for his mistaken belief is that "Mr Stanton did not advise me that the issuing of further shares in Border Express might have CGT consequences",[348] and that Border Express was a pre-CGT company, and therefore shares in Border Express "would not be subject to any CGT on any sale."[349] As I have already said, Max did not seek any advice on the tax consequences of the issue of shares or the contracts. It was not reasonable for him to assume that further shares issued on 5 April 1990 would not be CGT assets and would not be subject to any CGT on a sale;

(h) Lynn's evidence was that she did not usually question Max or Mr Stanton about the details of what was being signed (i.e. company documents) but "relied on them to tell me what needed to be signed".[350] Lynn gave evidence that "through newspapers, television reports and discussions with people in Albury" it was her "understanding that because the Border Express transport business was started in 1981 and before the commencement of CGT, that it was not liable for this tax".[351] It was not reasonable for her to assume that further shares issued on 5 April 1990 would not be CGT assets and would not be subject to any CGT on a sale. Lynn did not seek any advice on the tax consequences of the issue of shares or the contracts nor did she even speak with Max or anyone else about this;

(i) relevantly Mark was a director of MJ Luff. Mark's evidence was that Mr Stanton never advised him that the issuing of further shares in Border Express might have CGT consequences.[352] He never asked Mr Stanton for any such advice. This is despite the fact that he gave evidence that he did see Mr Stanton by himself and together with Max. Mark gave evidence that he understood that Border Express was a "pre-CGT asset" and a "pre-CGT company".[353] He gave evidence that this was at least partially based upon discussions with Max.[354] It was not reasonable for him to assume that further shares issued on 5 April 1990 would not be CGT assets and would not be subject to any CGT on a sale. Mark did not seek any advice on the tax consequences of the issue of shares or the contracts nor did he even speak with Max or anyone else about this;

(j) relevantly Grant was also a director of MJ Luff. Grant gave no evidence concerning Mr Stanton. Grant gave evidence of his understanding about the CGT status of Border Express that was based upon discussions he had with Max.[355] Further, his mistake was based upon his understanding that Border Express had "pre-CGT" status.[356] It was not reasonable for him to assume that further shares issued on 5 April 1990 would not be CGT assets and would not be subject to any CGT on a sale. Mark did not seek any advice on the tax consequences of the issue of shares or the contracts nor did he even speak with Max or anyone else about this.

169 Finally, for the same reasons, applying the test as formulated in Associated Japanese Bank, there were no reasonable grounds for the parties' belief that the issue of shares in Border Express would not be subject to CGT on sale or disposition. I refer to the matters I have set out immediately above concerning the fault of the parties that equally applies to this issue.

Impossibility of performance? Essentially different? Essentially and radically different? Destruction of subject matter?

170 As I have already said, in summary, the Intervener submitted that the relevant test required "impossibility of performance" or "destruction of subject matter" whereas Border Express submitted that the relevant test required the subject matter of the contract to be "essentially different" or "essentially and radically different".

171 Border Express submitted that if, contrary to its submissions, Great Peace applies and impossibility of performance is required, then it is established as the issue of the shares did not achieve the testamentary purpose.[357] I do not accept this submission. The fact that the contracts have CGT consequences for Border Express' shareholders upon a possible future sale of those shares did not render performance of the contracts impossible. The contracts could be, and were in fact, performed. Payment was made for the shares and the shares were issued. I also refer to the matters I have already addressed in relation to testamentary purpose.[358] Finally, the present case may be readily distinguished from HWG Holdings. This is because in HWG Holdings the mistake related to a central aspect of the agreement being the effective price of the transaction.[359] In the present case, the mistake did not relate to a central aspect of the contracts. It concerned the CGT consequences of a possible future sale of the shares the subject of the contracts.

Essentially different and essentially and radically different?

172 Border Express submitted that, applying Bell v Lever Brothers and Associated Japanese Bank, the mistake rendered the shares that were the subject of the contracts essentially and radically different from the subject matter which the parties believed had existed, being shares that were not subject to CGT.[360] In Bell v Lever Brothers, Lord Atkin referred to the subject matter being "essentially different". In Associated Japanese Bank, Steyn J referred to the subject matter being "essentially and radically different". Border Express relied upon both formulations and did not submit that there was any substantive difference between them. I agree. It submitted that the issue of shares on 5 April 1990 exposed 75% of the share capital of Border Express to CGT upon a later sale of those shares, which in turn undermined the testamentary objective of the contracts.[361] It also submitted that as a result of the share issue on 5 April 1990, Max and Lynn's total shareholding (i.e. 8 shares) could not be divided equally between their sons as two shares were "not subject to CGT" and six shares were "liable to CGT".[362] It submitted that the contracts were entered into for a specific testamentary purpose and that it was fundamental to the contracts that the shares issued were not subject to CGT on a later sale so that they were identical to the shares already held by the shareholders.[363] It submitted that the effect of issuing 3,000 new shares that were liable for CGT was to radically and fundamentally change the identity of the subject matter of the contracts. It further submitted that the identification of pre-CGT assets was not just a matter of the quality of the shares, but went to the essential nature of the subject matter of the transaction.[364] It also submitted that had Max and Lynn and the other directors of MJ Luff and Border Express been aware of the CGT consequences they would not have allowed the contracts to proceed.[365] Border Express further submitted that the public policy favouring the upholding of contractual bargains referred to in Bell v Lever Brothers was not at risk here, as both sides of the contracts were effectively the same.[366] The Intervener submitted that the mistake did not relate to the actual subject matter of the contracts, but related to the quality of the subject matter, or motive of the parties.[367]

173 The common mistake concerning the CGT consequences for Border Express' shareholders upon a possible future sale of those shares does not concern the existence of some quality which makes the shares without the quality essentially and radically different from shares they were believed to be. They remained shares. I also refer to the matters I have already addressed in relation to testamentary purpose.[368] The shares were not "essentially and radically different". As I have already said in the Judgment at [171], the present case may be readily distinguished from HWG Holdings.

174 Border Express submitted that if, applying Bell v Lever Brothers, destruction of the identity of the subject matter forms part of the ratio of the decision, contrary to its submissions, then it is established as the state of the "new facts" (i.e. that the contracts have CGT consequences for Border Express' shareholders) destroyed the identity of the subject matter as it was in the original state of facts (i.e. that the contracts do not have CGT consequences for Border Express' shareholders). I do not accept this submission. This is because the subject matter was the shares and the new facts (i.e. that the shares are subject to CGT upon a sale or disposition) did not destroy that subject matter. They remained shares. I also refer to the matters I have already addressed in relation to testamentary purpose.[369] Again, as I have already said in the Judgment at [171], the present case may be readily distinguished from HWG Holdings.

175 As a result, even if the present case is one of the limited circumstances in which a common mistake can render a contract void at common law, Border Express has not established a ground for an order under s 175(1) of the Corporations Act based upon the contracts being void for common mistake at common law.

Circumstances in which a court may set aside a contract in equity based upon common mistake

176 Border Express relied upon Solle v Butcher as setting out the relevant test for setting aside a contract for common mistake in equity.[370] In Solle v Butcher Denning LJ said:[371]

A contract is also liable in equity to be set aside if the parties were under a common misapprehension either as to facts or as to their relative and respective rights, provided that the misapprehension was fundamental and that the party seeking to set it aside was not himself at fault.

The existence of an equitable jurisdiction to set aside a contract ab initio for mistake is recognised in a number of High Court decisions although those decisions do not deal with common mistake. Solle v Butcher was later overruled in England by the English Court of Appeal in Great Peace Shipping. Dicta of the Queensland Court of Appeal in Australia Estates appeared to endorse the reasoning in Great Peace Shipping. However, Great Peace Shipping has not been followed in Singapore and has been criticised by a number of academic commentators. A recent decision of the Supreme Court of New South Wales has observed that there are great problems in reconciling Great Peace Shipping with the High Court decisions endorsing the role of equity in cases of mistake. In this Court, McMillan J upheld the existence of the equitable doctrine of mistake in Rees v Rees, observing:

While the circumstances under which rescission is available at equity for common mistake may not be clearly defined, there is High Court authority for the proposition that the remedy exists for common mistake. Several cases since Taylor v Johnson have proceeded on the basis that the remedy exists for common mistake. To the extent that Australia Estates Pty Ltd v Cairns City Council says otherwise, I decline to follow it.

It is submitted that the jurisdiction to set aside the [share issue] in equity of a common mistake continues to exist under Australian law.

178 Border Express further submitted that although the High Court has not directly ruled on common mistake in equity, "the High Court has three times referred to Solle v Butcher without saying anything about it [being] wrong".[373] Border Express submitted that the bar in terms of significance to establish the fundamental test would not be any higher in equity than under the common law and "[t]here's some indications in some of the decisions...referred to in Great Peace where the court seems to suggest maybe it's an easier hurdle to leap over in equity".[374] It did not further develop this submission. Border Express accepted that "fault" is an element.[375] It did not further develop this submission.

179 The Intervener submitted that in the absence of fraud, misrepresentation, unconscionable conduct or a condition expressed or implied in the contract, equity will not give relief by setting aside a contract for common mistake.[376] Border Express disagreed with these submissions.[377] Border Express submitted in reply that "it might be right to say unconscionable conduct is required"[378] but also submitted that it did not "want to make that as an outright concession".[379]

(a) a contract may be set aside in equity based upon common mistake in circumstances of equitable fraud or misrepresentation or where a condition can be found expressed or implied in the contract;

(b) fraud in this context is a reference in the wide equitable sense, which includes unconscionable dealing;

(c) it is otherwise difficult to conceive of other circumstances in which a contract for common mistake would be set aside in equity;

(d) fault concerning the mistake is a relevant consideration and the issue is whether the fault is of such a nature and extent to deny entitlement to equitable relief; and

(e) the mistake must be fundamental.

181 I have already referred to the relevant observations of Denning LJ in Solle v Butcher.[380] In Taylor, in the context of unilateral mistake, the High Court said:[381]

In McRae v. Commonwealth Disposals Commission and in Svanosio v. McNamara, which were cases involving formal written contracts, Dixon C.J. and Fullagar J. referred with approval to the remarks of Denning L.J. In Svanosio, their Honours quoted those remarks and continued:

'Mistake' might, of course, afford a ground on which equity would refuse specific performance of a contract, and there may be cases of 'mistake' in which it would be so inequitable that a party should be held to his contract that equity would set it aside. No rule can be laid down a priori as to such cases: see an article by Professor R. A. Blackburn in Res Judicatae (1955), vol. 7, p. 43. But we would agree with Professor Shatwell (1955) 33 Can. B.R., at pp. 186, 187 that it is difficult to conceive any circumstances in which equity could properly give relief by setting aside the contract unless there has been fraud or misrepresentation or a condition can be found expressed or implied in the contract.

Denning L.J., in Solle v. Butcher, had likewise expressed the view that, in the absence of fraud or misrepresentation, resort must be had to equity to escape from the terms of the contract on the grounds of unilateral mistake.

... It therefore becomes necessary to consider the scope of the basis upon which relief in equity is available from the contractual consequences of unilateral mistake. Dixon C.J. and Fullagar J. referred, in the above passage from their judgment in Svanosio, to a difficulty in conceiving circumstances in which equity could properly give relief by setting aside the contract unless there had been fraud or misrepresentation or a condition could be found expressed or implied in the contract. Presumably, their Honours were referring to "fraud" in the wide equitable sense which includes unconscionable dealing. If they were not, we do not share the difficulty to which they referred. To the contrary, it seems to us that the reported cases, including Solle v. Butcher itself, readily provide concrete examples of such circumstances.

182 The High Court also stated, in the particular circumstances of the case, as follows:[382]

The particular proposition of law which we see as appropriate and adequate for disposing of the present appeal may be narrowly stated. It is that a party who has entered into a written contract under a serious mistake about its contents in relation to a fundamental term will be entitled in equity to an order rescinding the contract if the other party is aware that circumstances exist which indicate that the first party is entering the contract under some serious mistake or misapprehension about either the content or subject matter of that term and deliberately sets out to ensure that the first party does not become aware of the existence of his mistake or misapprehension.

183 I agree with the learned authors of Cheshire and Fifoot Law of Contract that "[i]n Australia the equitable rules for setting aside contracts because of mistake were unconditionally embraced by the High Court in Taylor".[383] I also agree with the observations of the learned author of Heydon on Contracts that "[t]he Australian position is that there is no general jurisdiction of the type Denning LJ described in equity [i.e. in Solle v Butcher]."[384]

184 The Court of Appeal in Great Peace did not follow Solle v Butcher.[385] It is not necessary to further consider Great Peace and the further developments in English law in relation to common mistake in equity given the judgment of the High Court in Taylor. The majority in Australia Estates said in obiter that there is no equitable jurisdiction to set aside a contract on the ground of common mistake where the contract was valid and enforceable at common law.[386] In Rees v Rees (Rees),[387] McMillan J declined to follow Australia Estates on this issue.[388] Her Honour stated that "it is established that there is an equitable jurisdiction to set aside contracts entered into under a common mistake."[389] Justice McMillan cited Taylor. Justice McMillan stated "[w]hile the circumstances under which rescission is available at equity for common mistake may not be clearly defined, there is High Court authority for the proposition that the remedy exists for common mistake."[390] Importantly, her Honour also stated:[391]

1. Critically, the defendant did not argue that the conditions for the exercise of the equitable jurisdiction to set aside contracts entered into under a common mistake (whatever those conditions may be) are not satisfied. What the defendant did argue is that there was no mistake for two reasons: the plaintiff had imputed knowledge of the true state of affairs and any mistake was the product of Mr Brack's carelessness. Those two arguments have been rejected and I have found there was a common mistake. The defendant's case was then that if the Court concluded that there had been a common mistake, the appropriate remedy is to set aside the deed in equity and put the plaintiff and the defendant back in the position that they were in prior to its execution. In other words, the defendant submitted that if a common mistake is found, the Court should set aside the deed.
2. Based on what the parties have asked the Court to do, and my findings that there were two common mistakes and that rectification is not appropriate in this case, it is appropriate to set aside the deed.

185 Her Honour did not otherwise identify the applicable elements that must be satisfied for the exercise of the jurisdiction. I agree with Justice McMillan's observation that the "the circumstances under which rescission is available at equity for common mistake may not be clearly defined".[392]

186 I also decline to follow Australia Estates insofar as the majority stated in obiter that there is no equitable jurisdiction to set aside a contract on the basis of common mistake. It is contrary to the decision of the High Court in Taylor. I also agree with the following observations of the learned authors of Cheshire and Fifoot Law of Contract (citations omitted):[393]

The Queensland Court of Appeal has chosen to endorse this development [i.e. Great Peace], despite the binding authority of the High Court in Taylor v Johnson which, as already noted, unequivocally embraced mistake in equity. Until the High Court says otherwise, the doctrine of mistake in equity is part of the law of Australia.

187 In Pacer v Westpac Banking Corporation (Pacer),[394] Santow J referred to the relevant observations of Denning LJ in Solle v Butcher and said_:_[395]

Even given the unclear state of the law in regard to mistake in providing grounds for rescission of a contract, it is clear that this statement of Lord Denning is too wide. This statement does not provide the qualification that equity will only intervene when it would be unconscionable for one party to seek to uphold the agreement in light of the mistake.

188 Santow J also said in Pacer:[396]

I am satisfied that I should follow the dicta in Taylor v Johnson that there is a general equitable jurisdiction to set aside a conveyance or contract on the grounds of common mistake where it would be unconscionable for one party to have the agreement subject to mistake, upheld.

The presence of such substantive unconscionability provides the element of "fraud" necessary to found a right of rescission under equitable principles.

1. Counsel for the Plaintiff submits that a Court of Equity will not grant rescission absent some fraud or misrepresentation on the part of the Plaintiff. He cites in support Svanosio v McNamara [1956] HCA 55; (1956) 96 CLR 186 at 196; Taylor v Johnson [1983] HCA 5; (1983) 151 CLR 422 at 444.
2. This citation is not as strong as it would first appear. The passage quoted from Svanasio actually reads that Dixon CJ and Fullagar J found it difficult to conceive of cases where relief would be given where fraud or misrepresentation or a condition expressed or implied in the contract was not demonstrated. The passage in Taylor comes from the dissenting judgment of Dawson J who took a completely different view of the case generally to that taken by the plurality.
3. The Plaintiff's submission may be broadly accepted so long as 'fraud" is taken in the sense of equitable fraud or unconscionable conduct and one substitutes "rarely' for "not", i.e. "absent equitable fraud or misrepresentation on the part of a plaintiff, equity will rarely grant rescission for common mistake".
4. However, in this case, the precise form of the principle makes little difference to the result. Both parties were represented by solicitors, neither party sought to take advantage of the other, neither party could be considered "vulnerable"; there is therefore no unconscionable conduct and no special reason has been advanced as to why equity should interfere.

190 I also agree with these observations. His Honour's reference to "plaintiff" at [67] was in the context in which it was the defendant seeking to impugn the relevant transaction on the basis of common mistake.

191 A contract based upon common mistake may be set aside in equity in circumstances of equitable fraud or misrepresentation or where a condition can be found expressed implied in the contract. Fraud in this context is a reference in the wide equitable sense, which includes unconscionable dealing. It is otherwise difficult to conceive of other circumstances in which a contract would be set aside in equity for common mistake.

192 The parties accepted that the mistake must be fundamental.[398]

193 The "fault" of the parties to the contracts is a relevant consideration in a determination of whether equity will intervene.[399] I agree with Santow J in Pacer that "fault" in equity concerns whether the "fault" is of such a nature to deny entitlement to equitable relief. As explained by Santow J in Pacer:[400]

... substantive unconscionability looks to the injustice which would result if relief were not granted, rather than concentrating upon the prior conduct of the parties. In such circumstances, the unconscionability lies in the insistence on strict legal rights in circumstances where to do so is considered to be contrary to equity and good conscience because of the hardship which would thereby be caused to the other party.

...

The jurisdiction to set aside contracts on the basis of common mistake recognizes that Equity will intervene to prevent wrongful and undue advantage being taken by one mistaken party of the other, in holding that other to a bargain both mistakenly entered into. It is an apt illustration of the general principle that "a party having a legal right shall not be permitted to exercise it in such a way that the exercise amounts to unconscionable conduct"...

Has Border Express established the grounds for relief for common mistake in equity?

194 I refer to the matters I have addressed concerning the nature of the mistake earlier in this judgment.[401]

195 Border Express submitted that if, contrary to its submissions that Solle v Butcher sets out the applicable test, fraud, misrepresentation, unconscionable conduct or a condition express or implied are necessary, then it submitted that there has been unconscionable conduct. It submitted that it relies upon the conduct of the Intervener in this proceeding "to have the bargain upheld" and that the Intervener "wants to uphold the bargain", and the Intervener "is not even a party to the contract".[402] It relied upon Pacer. It submitted that the Intervener, who has no role in the contract at all, cannot be in a better position to a party to a contract.

196 I do not accept these submissions. Pacer does not assist Border Express. In Pacer, Santow J found that Mr Pacer and Westpac entered into a contract under a common mistake whereby Mr Pacer agreed, with others, to consent to judgment by Westpac against them under a guarantee and to paying the judgment debt by certain dates.[403] Santow J found "unconscionability arises from Westpac's conduct in seeking to retain the benefit of the consent judgment entered against Mr Pacer in circumstances where it has now become apparent that Mr Pacer may have a valid and complete defence to Westpac's claim."[404] This finding was based upon his Honour's observations of the relevant principles concerning unconscionability. This included Santow J's observation that "[t]he jurisdiction to set aside contracts on the basis of common mistake recognizes that Equity will intervene to prevent wrongful and undue advantage being taken by one mistaken party of the other, in holding that other to a bargain both mistakenly entered into. It is an apt illustration of the general principle that 'a party having a legal right shall not be permitted to exercise it in such a way that the exercise amounts to unconscionable conduct': Legione v Hateley [1983] HCA 11; (1983) 152 CLR 406, per Mason and Deane JJ at 444."[405] The Intervener was not a party to the contracts and is not a defendant in this proceeding. It does not seek to retain any benefit under the contracts or to seek to exercise any legal right under them. As a result, in my view, the Intervener has not engaged in unconscionable conduct by making submissions in this proceeding in its capacity as an intervener.

197 The mistake was not fundamental.[406] It concerned the CGT consequences of a possible future sale of the shares the subject of the contracts.

198 As I have found that the Intervener did not engage in the identified unconscionable conduct and that the mistake was not fundamental, it is not necessary for me to consider whether the parties to the contracts were at "fault" such as to deny them entitlement to equitable relief. This issue also depends, in part, upon the nature and extent of the unconscionable conduct which I have found has not been established.

199 Even if Border Express established that it was entitled to relief in equity for common mistake it would not be entitled to relief that would constitute a ground upon which the Court would grant relief pursuant to s 175(1) of the Corporations Act. This is because:

(a) the contracts would be voidable and not void; and

(b) Border Express would not be entitled to rescission as Max and Lynn are unable to make restitution in the present circumstances.

200 Border Express initially accepted that if it established that it was entitled to relief in equity for common mistake the contracts will be voidable and not void.[407] It submitted "quite rightly we accept this, that if there's a mistake in equity, the contract is merely voidable".[408] Border Express then subsequently submitted that where mistake is shown, a court of equity may order a contract to be "void ab initio" pursuant to its jurisdiction to set aside a contract on such terms as the Court thinks fit.[409] It relied upon Solle v Butcher at 690 and Rees at [104].[410] The Intervener submitted that if common mistake in equity was established then the contracts would be voidable and not void.[411]

201 The law is well established and not in any doubt. The contracts will not be void if Border Express establishes an entitlement to equitable relief. The contracts will be voidable. Solle v Butcher does not assist Border Express. Denning LJ said:[412]

In order to see whether the lease can be avoided for this mistake it is necessary to remember that mistake is of two kinds: first, mistake which renders the contract void, that is, a nullity from the beginning, which is the kind of mistake which was dealt with by the courts of common law; and, secondly, mistake which renders the contract not void, but voidable, that is, liable to be set aside on such terms as the court thinks fit, which is the kind of mistake which was dealt with by the courts of equity.

202 Rees also does not assist Border Express. Her Honour set aside the deed based upon what the parties asked her Honour to do.[413] Justice McMillan did not otherwise address the basis upon which her Honour made the order. In HWG Holdings, Sifris J said in obiter:[414]

The essential remedial difference is that mistake at law renders the contract void whereas mistake in equity renders the contract merely voidable. Of course as pointed out this is not the issue in this case. This case only concerns the common law position.

203 I agree with the observations of Sifris J on this issue. I also agree with the observations of the learned authors of Cheshire and Fifoot Law of Contract (citations omitted):[415]

Agreements in respect of which equity may give relief for common mistake

Summary of jurisdiction in equity

The fact that a contract founded on common mistake is not void does not necessarily mean that all relief is refused to the parties. Equity, in the exercise of its concurrent jurisdiction, will provide possible relief by refusing specific performance; or by setting aside the transaction; or by rectifying an erroneously recorded agreement.

The most important point to note about equity's intervention in setting aside a contract for mistake is that equity's remedy is not the drastic one of declaring the contract to be void from the beginning. Flexibility in remedy has generated flexibility in the type of mistake for which a remedy is given. Thus, it will be seen that the types of mistakes that justify a court in setting aside a contract would never have provided a remedy at common law.

204 Border Express submitted that if it established an entitlement to equitable relief, the contracts should be rescinded ab initio.[416] It submitted it was entitled to rescission as Max, Lynn and MJ Luff are able to give restitution as a condition of rescission. In the case of MJ Luff, it submitted that MJ Luff still owned the shares. This was not in dispute between the parties. In the case of Max and Lynn, it submitted that, pursuant to the deed, each of their subsequent transfers of their 3 shares on 6 February 2003 were extinguished and reversed, being the 3 shares issued to them pursuant to the contracts on 5 April 1990. It submitted that restitution was "easily satisfied" as the shares (i.e. issued on 5 April 1990) would be expunged from the share register.[417]

205 Border Express referred to Vadasz v Pioneer Concrete (SA) Pty Ltd (Vadasz)[418] and submitted that there is a "well known requirement that restitution is required as a condition of rescission where the contract has been wholly or partly executed...".[419] In Vadasz, the High Court said:[420]

Where, as in this case, the court has granted equitable relief in the shape of rescission of a contract, the result is to set aside the contract ab initio. While equity followed the law in requiring restitution as a condition of rescission where the contract had been wholly or partly executed, it allowed greater flexibility in the basis upon which restitution and accounting between the parties may be ordered. Thus, equity did not require complete restitution of the position which existed before the contract but allowed its remedies, particularly an order for monetary accounts, to be utilised to achieve practical restitution and justice. That point was made by Dixon CJ, Webb, Kitto and Taylor JJ in Alati v Kruger:

If the case had to be decided according to the principles of the common law, it might have been argued that at the date when the respondent issued his writ he was not entitled to rescind the purchase, because he was not then in a position to return to the appellant in specie that which he had received under the contract, in the same plight as that in which he had received it: Clarke v Dickson. But it is necessary here to apply the doctrines of equity, and equity has always regarded as valid the disaffirmance of a contract induced by fraud even though precise restitutio in integrum is not possible, if the situation is such that, by the exercise of its powers, including the power to take account of profits and to direct inquiries as to allowances proper to be made for deterioration, it can do what is practically just between the parties, and by so doing restore them substantially to the status quo.

206 Border Express submitted that restitution, as a condition of equitable rescission, can be given by Max and Lynn in respect of the 3 shares issued to each of them pursuant to the contracts on 5 April 1990.[421] It did not rely upon any other basis to contend that restitution could be made.

207 The Intervener submitted it is not competent for the parties to rescind a non-executory contract ab initio (i.e. the transfers of the 3 shares of each of Max and Lynn on 6 February 2003).[422] It further submitted that there was no basis to avoid the transfers made on 6 February 2003 at common law or in equity.[423] It also relied upon Baird v BCE Holdings Pty Ltd[424] in which Young J said:[425]

If there has been a conveyance or transfer, then again it would seem that the parties are incompetent to rescind the transaction by agreement but would, of course, be entitled by virtue of their agreement to rescind, to have a reconveyance.

In the instant case, as there has been a transfer of shares registered and all parties have done all they are bound to do under the contract, the contractual regime is at an end. Thus there is no executory contract that can now be rescinded. Alternatively, if the parties do now rescind, there has to be a reconveyance so that capital gains tax will not only be payable once, it may be payable twice. For these reasons it does not seem to me that this matter of rescission by agreement need be pursued further.

208 Border Express submitted that the passage cited by the Intervener states the position at common law and deals with when one ceases to be able to rescind ab initio an agreement by consent.[426] It further submitted that the decision in Baird declined to follow the general rule concerning rescission in equity, and that therefore the feature that the contracts (i.e. the contracts of 5 April 1990) have been performed does not stand as an obstacle to granting rescission ab initio for mistake in equity.[427]

209 The Intervener further submitted:[428]

The plaintiff relies on the 'Deed of Acknowledgment and Declaration' executed after this proceeding commenced for the purported reversal and extinguishment of the 2003 transfer of Max and Lynn's shares issued under the Contracts (1990 Shares) to MJ Luff (2003 Share Transfers) as a basis to claim that Max and Lynn can give restitution of the 1990 Shares to Border Express.

However, the purported reversal and extinguishment of the 2003 Share Transfers is wholly dependent on the 1990 Shares being void ab initio or of no legal effect. Unless and until a court determines that the 1990 Shares were void ab initio or of no legal effect, the 1990 Shares remain valid and effective and, consequently, the 2003 Share Transfers remain valid and effective.

210 Border Express accepted that restitution, in the circumstances of this case, is required as a condition for rescission as the contracts have been fully performed.[429] It submitted that Max and Lynn can give restitution as they each still hold the 3 shares the subject of the contracts on 5 April 1990.

211 In the event that Border Express is entitled to rescission, then the parties will be treated in equity as if the contracts never occurred.[430] There is no issue that MJ Luff still holds the shares issued to it on 5 April 1990. Max and Lynn do not hold the shares and cannot give restitution as submitted by Border Express.

212 First, the purported reversal and the extinguishment of the share transfers on 6 February 2003 provided for in clause 3 of the deed is expressly consequent upon the issue of the shares on 5 April 1990 being of no legal effect (i.e. void). This is evident from the following matters set out in the deed:

(a) Recital K provides: "The Company, MJ Luff, Maxwell Luff and Lynn Luff enter into this deed to acknowledge and declare that the Share Transfers [i.e. the transfers of the 3 shares by Max and Lynn on 6 February 2003 that were issued to them on 5 April 1990] must also be reversed to reflect that the Purported Share Issue [i.e. the shares issued on 5 April 1990] is set aside and is of no legal effect."

(b) Clause 2 sets out matters concerning the reversal of the share issue (i.e. the shares issued on 5 April 1990);

(c) Clause 3(a) provides: "Consequently, the Company, MJ Luff, Maxwell Luff and Lynn Luff each declare that each of [i.e. the transfers of the 3 shares by Max and Lynn on 6 February 2003 that were issued to them on 5 April 1990] be and is reversed and extinguished on the basis that the Purported Share Issue [i.e. the shares issued on 5 April 1990] is and was of no legal effect."

213 In those circumstances, assuming that Border Express has not established the contracts are of no legal effect (i.e. void) there is no basis for the purported consequent reversal and extinguishment of the share transfers on 6 February 2003 that is provided for in the deed.

214 Secondly, I accept, in any event, the Intervener's submissions that the parties were not competent to agree to reverse and extinguish the share transfers made on 6 February 2003. It is these transfers that resulted in Max and Lynn ceasing to hold the shares issued to them on 5 April 1990. This is because the contracts for those share transfers on 6 February 2003 have been fully performed. Border Express did not seek to establish any other basis upon which the share transfers on 6 February 2003 were able to be reversed and extinguished.

215 As a result, Max and Lynn presently do not hold any shares in Border Express. Even if Border Express established the elements for common mistake in equity, Max and Lynn cannot give restitution as a condition of the rescission of the contracts made on 5 April 1990.

216 As a result, Border Express has not established a ground for an order under s 175(1) of the Corporations Act based upon common mistake in equity.

217 In conclusion, Border Express has failed to establish any ground for an order pursuant to s 175(1) of the Corporations Act. I will make an order dismissing the proceeding. I will hear from the parties on the precise form of the order and on the question of costs.

[1] Affidavit of Maxwell James Luff sworn 28 October 2022 [31] ('Max's affidavit').

[4] Court Book filed 1 March 2023, 268, 275, 376 ('Court Book').

[6] Ibid [39] and Affidavit of Grant Anthony Luff sworn 28 November 2022 [10] ('Grant's affidavit').

[9] Affidavit of Brendan Anthony Earle sworn 28 November 2022 [11(e)] ('Mr Earle's affidavit').

[17] Affidavit of Lynn Elizabeth Luff sworn 28 November 2022 [13] ('Lynn's affidavit').

[20] Mr Earles's affidavit [26], [27]. See also Court Book 176, 177.

[23] Summary of the Parties' Key Contentions filed 31 March 2023 [3(c)(ii)] ('Summary of the Parties' Key Contentions').

[26] See Plaintiff's Chronology of Events filed 24 February 2023 ('Chronology'). The Intervener only disputed the matters set out in the Chronology for 5 April 1990 concerning the belief of members of the Luff family. See also the Income Tax Assessment Amendment (Capital Gains) Act 1986 (Cth).

[39] This was subject to the surviving spouse surviving for a period of 30 days: see clause 3(b) of the Wills.

[48] Lynn's affidavit [19]-[21]; Affidavit of Mark Alexander Luff sworn 28 November 2022 [32]-[33] ('Mark's affidavit'); Grant's affidavit [16]-[17]; Affidavit of Geoffrey Phillip Maxwell Luff sworn 29 November 2022 [11]-[12] ('Geoffrey's affidavit').

[49] Max's affidavit [63], [76]; Mark's affidavit [31]-[33]; Grant's affidavit [15]-[17]; Geoffrey's affidavit [10]-[12].

[50] Transcript of Proceedings, In the Matter of Border Express Pty Ltd (Supreme Court of Victoria, S ECI 2022 04387, Attiwill J, 15 and 22 March 2023 and 11 April 2023) 136.11-136.15 (Mr Linden). All following references to the transcript in this judgment will be expressed in the format of T followed by the page number(s) and line number(s), e.g. T136.11-136.15.

[51] Summary of the Parties' Key Contentions [12].

[56] Second affidavit of Maxwell James Luff sworn 28 November 2022 [5] ('Max's supplementary affidavit').

[57] Max's supplementary affidavit [5].

[58] Mr Earle's affidavit [32]-[34].

[61] See Recital C of the deed: Judgment [52].

[64] Plaintiff's Outline of Submissions filed 30 November 2022 [2.1.27] ('Border Express' submissions').

[66] This appears to be erroneous as share number 95 is the subject of share certificate No. 7.

[68] Border Express' submissions [2.1.27].

[70] Lynn's affidavit [24]; Mark's affidavit [34]; Grant's affidavit [19]; Geoffrey's affidavit [13].

[72] Lynn's affidavit [25]; Mark's affidavit [35]; Grant's affidavit [20]; Geoffrey's affidavit [7], [14].

[73] Mr Earle's affidavit [36]. See also Court Book 240.

[79] T166.31-167.2 (Mr Linden). See also Chronology.

[80] Affidavit of Ari Schachna sworn 28 November 2022 ('Mr Schachna's affidavit') [17]-[25], especially at [23].

[84] Lynn's affidavit [30]; Mark's affidavit [89].

[86] Plaintiff's Outline of Reply Submissions filed 13 February 2023 ('Border Express' reply submissions') [2.1.1].

[90] Max's affidavit [91]; Max's supplementary affidavit [7]; Lynn's affidavit [32], Mark's affidavit [40]; Grant's affidavit [23]; Geoffrey's affidavit [16].

[94] Mr Schachna's affidavit [26]-[42].

[95] In the matter of Mogul Stud Pty Ltd [2012] NSWSC 1639 [7] (Black J).

[97] Grant v John Grant & Sons Pty Ltd [1950] HCA 54; (1950) 82 CLR 1, 51 (Fullagar J).

[99] Re Australian Organic Eggs Pty Ltd [2022] VSC 747 [117]-[118] (Button J) (citations omitted).

[100] The grounds are conveniently set out and addressed in the Joint List of Issues and the Summary of the Parties' Key Contentions.

[102] Border Express' submissions [3.1.2].

[105] Border Express' submissions [5.1.13].

[106] Border Express' reply submissions [5.1.2].

[109] Commonwealth Homes & Investment Co Ltd v Smith [1937] HCA 73; (1937) 59 CLR 443, 461 (Dixon J), 454 (Latham CJ).

[110] Border Express submitted that this was the "better approach": T266.29-31 (Mr Collinson KC).

[111] Realestate.com.au Pty Ltd v Hardingham [2022] HCA 39 ('Realestate'), [15] (Kiefel CJ and Gageler J).

[112] Ibid [15] (Kiefel CJ and Gageler J).

[113] Toll (FGCT) Pty Ltd v Alphaphram Pty Ltd (2004) 219 CLR 165.

[114] Ibid 179 [40] (Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ) (citations omitted).

[115] Border Express' reply submissions [5.1.4].

[117] See also Fisher v Divine Homes [2011] NSWSC 8, [50] (Barrett J).

[118] I uphold the Intervener's objections to the evidence I have set out earlier in this judgment at [39]-[40] insofar as it concerns the claims that the alleged condition precedent was a term of the contracts. It is not relevant.

[119] I accept that the Intervener submitted that Max was the controlling mind of MJ Luff. See, for example, T204.31-205.1 and T210.11-12 (Mr Linden).

[120] See Australasian Annuities Pty Ltd (in liq) v Rowley Super Fund Pty Ltd [2015] VSCA 9, [115]-[116] (Warren CJ).

[121] Border Express also did not address the matter in the Joint List of Issues or the Plaintiff's Supplementary Submissions filed 14 April 2023 ('Border Express' supplementary submissions') which were both filed after the reply.

[124] See Mark's affidavit [13]; Ibid [41], [51].

[127] Border Express' submissions [2.1.1]. See also Max's affidavit [29].

[128] Summary of the Parties' Key Contentions [1].

[129] Border Express' supplementary submissions [3].

[132] Border Express' reply submissions [1.1.2(a)].

[134] Summary of the Parties' Key Contentions [2].

[139] T272.16-20, T276.9-14 (Mr Collinson KC).

[140] Border Express' supplementary submissions [3].

[141] Summary of the Parties' Key Contentions [3].

[142] Border Express' supplementary submissions [3]. See also T279.4-12 (Mr Collinson KC).

[143] Summary of the Parties' Key Contentions [3].

[145] Border Express' submissions [5.1.10].

[147] Summary of the Parties' Key Contentions [3(b)(iii)]; T289.10 (Mr Collinson KC).

[148] Summary of the Parties' Key Contentions [3](b)(iv); T289.11 (Mr Collinson KC).

[149] Summary of the Parties' Key Contentions [3](c)(v); T289.11 (Mr Collinson KC).

[151] Summary of the Parties' Key Contentions [8] and [11].

[155] Summary of the Parties' Key Contentions [8].

[159] Realestate (n 111) [6] (Kiefel CJ and Gageler J).

[160] Ibid [11] (Kiefel CJ and Gageler J).

[161] Ibid [15] (Kiefel CJ and Gageler J).

[162] Ibid (Kiefel CJ and Gageler J) (citations omitted).

[163] Ibid [30] (Kiefel CJ and Gageler J) (citations omitted).

[166] Ibid [44]-[46] (Gordon J) (citations omitted).

[167] Ibid [51] (Gordon J). See also at [74] (Gordon J).

[168] Ibid [73] (Gordon J) (citations omitted).

[170] Ibid [85]-[86] (Edelman and Steward JJ) (citations omitted).

[171] Ibid [132]-[134] (Edelman and Steward JJ).

[172] GHM Nominees Pty Ltd v Wallace Jackson Pty Ltd [2022] VSCA 230, [36] (Ferguson CJ, Sifris and Macaulay JJA).

[173] Ibid [34]-[35] (Ferguson CJ, Sifris and Macaulay JJA).

[174] Summary of the Parties' Key Contentions [3(g)], [3(h)].

[177] See Border Express' supplementary submissions [3] (last sentence).

[179] See Judgment [52] (emphasis added).

[180] Border Express' submissions [5.1.12].

[184] Border Express' submissions [2.1.20].

[185] Recital C of the deed; see Judgment [52].

[187] Summary of the Parties' Key Contentions [14(c)].

[188] T287.29-288.4 (Mr Collinson KC).

[189] Summary of the Parties' Key Contentions [3(c)].

[190] Border Express' submissions [5.1.12].

[192] See Mark's affidavit [25]; Grant's affidavit [18]; Geoffrey's affidavit [7].

[193] Border Express' submissions [5.1.8].

[194] It was not one of the circumstances ultimately relied upon by Border Express: see Summary of the Parties' Key Contentions [3].

[195] Border Express' submissions [5.1.8].

[196] (1977) 180 CLR 266 ('BP Refinery'). See also Realestate (n 111) [15]-[21] (Kiefel CJ and Gageler J), [43]-[51] (Gordon J), [102]-[123] (Edelman and Steward JJ).

[198] Border Express' reply submissions [5.1.8].

[199] Intervener's Outline of Submissions filed 20 December 2022 ('Intervener's submissions') [45].

[201] Border Express' reply submissions [5.1.1].

[202] BP Refinery (n 196) 282-283 (Viscount Dilhorne, Lord Simon of Glaisdale and Lord Keith of Kinkel).

[203] Grocon Constructors (Victoria) Pty Ltd v APN DF2 Project 2 Pty Ltd [2015] VSCA 190, [140]-[144] (Santamaria, Kyrou and McLeish JJA) (citations omitted).

[204] Border Express' reply submissions [5.1.8]-[5.1.9]. See also Summary of the Parties' Key Contentions [5].

[205] Realestate (n 111) [114] (Edelman and Steward JJ).

[206] Ibid [116] (Edelman and Steward JJ).

[207] Border Express' submissions [5.1.9].

[210] Border Express' reply submissions [5.1.10(a)].

[214] Border Express' reply submissions [5.1.10].

[217] BP Refinery (n 196) 283 (Viscount Dilhorne, Lord Simon of Glaisdale and Lord Keith of Kinkel).

[219] Border Express' supplementary submissions [4].

[220] Border Express' reply submissions [5.1.10(b)].

[221] Border Express' submissions [2.1.20].

[222] T277.21-278.16 (Mr Collinson KC).

[226] Border Express' reply submissions [5.1.10(c)].

[227] Border Express' submissions [5.1.12].

[230] Border Express' submissions [5.1.12].

[236] Border Express' reply submissions [5.1.10(d)].

[238] Border Express' reply submissions [5.1.10(e)].

[239] [1931] UKHL 2; [1932] AC 161 ('Bell v Lever Brothers').

[240] Border Express' submissions [6.1.2].

[242] Bell v Lever Brothers (n 239) 218 (Lord Atkin).

[243] Border Express' submissions [6.1.4].

[244] Bell v Lever Brothers (n 239) 235 (Lord Thankerton).

[246] Bell v Lever Brothers (n 239) 227 (Lord Atkin); T23.12-16 (Mr Collinson KC).

[248] [1989] 1 WLR 255 ('Associated Japanese Bank').

[250] Border Express' submissions [6.1.5].

[251] Associated Japanese Bank (n 248) 268-269 (Steyn J).

[252] [2015] VSC 519 ('HWG Holdings'). See Border Express' submissions [6.1.6].

[253] Border Express' submissions [6.1.6].

[254] HWG Holdings (n 252) [45] (Sifris J).

[255] [1951] HCA 79; (1950) 84 CLR 377 ('McRae').

[256] Ibid 409 (Dixon and Fullagar JJ) (citations omitted); T304.13-305.27 (Mr Collinson KC).

[257] T304.21-26; T305.17-19 (Mr Collinson KC).

[258] Summary of the Parties' Key Contentions, [28].

[260] [1950] 1 KB 671 ('Solle v Butcher').

[261] Summary of the Parties' Key Contentions, [28].

[262] [1956] HCA 55; (1956) 96 CLR 186 ('Svanosio').

[263] [1983] HCA 5; (1983) 151 CLR 422 ('Taylor').

[264] Intervener's submissions [25].

[266] Solle v Butcher (n 260) 691-692 (Denning LJ) (citations omitted) (emphasis added).

[267] Solle v Butcher (n 260) 692 (Denning LJ).

[268] McRae (n 255) 407-408 (Dixon and Fullagar JJ) (citations omitted) (emphasis added).

[270] McRae (n 255) 409-410 (Dixon and Fullagar JJ).

[271] Ibid 410 (Dixon and Fullagar JJ).

[272] Ibid 408 (Dixon and Fullagar JJ) (citations omitted).

[273] McRae (n 255) 410 (citations omitted).

[274] [2016] NSWSC 555 ('Hawcroft').

[278] J D Heydon, Cases and Materials on Contract Law in Australia (Thomson Reuters, rev ed, 2019) ('Heydon on Contracts').

[279] See Judgment [128] in which the relevant passage from McRae is set out.

[280] Heydon on Contracts (n 278) [15.100] (citations omitted).

[281] Intervener's submissions [43].

[282] Svanosio (n 262) 195-196 (Dixon CJ and Fullagar J) (citations omitted).

[283] The Myth of Mistake in the English Law of Contract (1954) 70 Law Quarterly Review 385, 385 (Mr C L Slade).

[284] Svanosio (n 262) 211-212 (McTiernan, Williams and Webb JJ).

[285] Taylor (n 263) 430-431 (Mason ACJ, Murphy and Deane JJ) (citations omitted).

[286] Heydon on Contracts (n 278) [15.160] (citations omitted).

[288] I also note at the learned author also observes that "they [i.e. the majority in Taylor] reserved the questions whether [the doctrine of common mistake at common law] applied to an informal contract or to mistakes as to identity", and that "if there is any common law doctrine of mistake rendering a "contract" void, extrinsic evidence may be admitted to establish the mistake": Ibid [15.120]; [9.170].

[289] [2005] QCA 328 ('Australia Estates').

[290] Ibid [64] (Atkinson J, Jerrard JA agreeing at [14]).

[291] Hawcroft (n 274) [46], [49] (Young AJ).

[292] Hawcroft General Trading Co Pty Ltd v Hawcroft [2017] NSWCA 91 [163] (Emmett AJA).

[293] HWG Holdings (n 252) [56] (citations omitted).

[294] See HWG Holdings (n 252) [34]-[35], [38] (Sifris J). These submissions concern common mistake in equity.

[296] Judgment [115]-[116], [119].

[297] [2002] UKHL 3; [2003] QB 679 ('Great Peace').

[298] See Summary of the Parties' Key Contentions [40].

[299] Great Peace (n 297) [76] (Lord Phillips of Worth Matravers MR, May and Laws LJJ).

[300] Border Express' reply submissions [4.2.6].

[304] Heydon on Contracts (n 278) [15.160].

[305] Australia Estates (n 289) [64] (Atkinson J, Jerrard JA agreeing at [14]).

[306] HWG Holdings (n 252) [52]-[55], [57] (Sifris J).

[307] See Summary of the Parties' Key Contentions [24].

[309] Summary of the Parties' Key Contentions [24].

[310] Border Express' submissions [6.1.8].

[311] Border Express' reply submissions [4.1.2].

[312] Border Express' supplementary submissions [5].

[315] Intervener's submissions [36].

[317] Summary of the Parties' Key Contentions [37].

[318] Daley v Donaldson [2021] NSWSC 1507 (Hallen J) ('Daley').

[319] Intervener's submissions [40].

[320] Subdivisions Ltd v Payne [1934] SAStRp 48; [1934] SASR 214 (Napier J).

[321] Intervener's submissions [43].

[322] Heydon on Contracts (n 278) [15.40].

[323] The evidence is identified earlier in the Judgment [39]-[40].

[325] John Cartwright, Misrepresentation, Mistake and Non-Disclosure (5th edition, 2019, Sweet & Maxwell).

[326] Daley (n 318) [64] (Hallen J).

[328] Subdivisions Ltd v Payne [1934] SAStRp 48; [1934] SASR 214, 220 (Napier J).

[330] Summary of the Parties' Key Contentions [27]. See also Border Express' reply submissions [4.1.6].

[332] Border Express' reply submissions [4.1.6].

[333] Summary of the Parties' Key Contentions [27].

[334] T34.13-34.17 (Mr Collinson KC) (emphasis added).

[335] Border Express' reply submissions [4.1.7].

[337] See Great Peace (n 297) [76] (Lord Phillips of Worth Matravers MR, May and Laws LJJ), in which the Court of Appeal stated that the non-existence of the state of affairs must not be attributable to the fault of either party.

[338] See Associated Japanese Bank (n 248) 268 (Steyn J) in which Steyn J stated that a party cannot be allowed to rely upon a common mistake where the mistake consists of a belief which is entertained by the person without any reasonable grounds for such a belief.

[344] Summary of the Parties' Key Contentions [41].

[357] Border Express' supplementary submissions [5].

[359] See HWG Holdings (n 252) [23] (Sifris J).

[360] Border Express' reply submissions [4.2].

[367] Intervener's submissions [38].

[370] Border Express' submissions [7.1.1].

[371] Solle v Butcher (n 260) 693 (Denning LJ).

[372] Border Express' submissions [7.1.1] (citations omitted).

[374] T315.29-316.9 (Mr Collinson KC).

[375] Summary of the Parties' Key Contentions [54].

[376] Summary of the Parties' Key Contentions [58].

[381] Taylor (n 263) 430-431 (Mason ACJ, Murphy and Deane JJ) (citations omitted) (emphasis added).

[382] Ibid 432 (Mason ACJ, Murphy and Deane JJ).

[383] Nick Seddon, Rick Bigwood, Cheshire & Fifoot Law of Contract (LexisNexis Australia, 12th ed, 2022) [12.3] ('Cheshire and Fifoot Law of Contract').

[384] Heydon on Contracts (n 278) [15.200].

[385] See Great Peace (n 297) especially at [160] (Lord Phillips of Worth Matravers MR, May and Laws LJJ).

[386] Australia Estates (n 289) [50]-[64], especially [52] and [64] (Atkinson J, Jerrard JA agreeing at [14]).

[387] [2016] VSC 452 ('Rees').

[391] Ibid [104]-[105] (McMillan J).

[393] Cheshire and Fifoot Law of Contract 737 (n 383) [12.3], 736. See also ibid [99] (McMillan J).

[394] (Supreme Court of New South Wales, Santow J, 2 August 1996) ('Pacer').

[397] Hawcroft (n 274) [65]-[68] (Young AJ).

[398] Summary of the Parties' Key Contentions [53], [62]. See also Pacer (n 394) 17 (Santow J).

[399] See Pacer (n 394) 29 (Santow J).

[402] T321.16-16, T322.10-15 (Mr Collinson KC).

[406] Border Express relied upon its submissions concerning common mistake at common law. As a result, I also refer to the matters I have addressed in this Judgment in the context of common mistake at common law: Judgment [171]-[174].

[409] Summary of the Parties' Key Contentions [55].

[412] Solle v Butcher (n 260) 690-691 (Denning LJ).

[414] HWG Holdings (n 252) [47] (Sifris J).

[415] Cheshire and Fifoot Law of Contract (n 383) [12.22].

[416] Border Express' submissions [1.1.2].

[418] Vadasz v Pioneer Concrete (SA) Pty Ltd (1995) 184 CLR 102 ('Vadasz').

[419] Border Express' supplementary submissions [8].

[420] Vadasz (n 418) 111-112 (Deane, Dawson, Toohey, Gaudron and McHugh JJ) (citations omitted).

[421] Border Express' supplementary submissions [10].

[422] Intervener's submissions [58].

[423] Intervener's reply submissions filed 19 April 2023 [4].

[424] Baird v BCE Holdings Pty Ltd (1996) NSWLR 374 (Young J).

[426] Border Express' reply submissions [6.1.2].

[428] Intervener's reply submission [2]-[3] (citations omitted).

[429] Border Express' supplementary submissions [8].

[430] See Greater Pacific Investments Pty Ltd (in liq) v Australian Industries Ltd (1996) 39 NSWLR 143, 153 (McLelland AJA with whom Priestley JA and Meagher JA agreed).