Ryan, Eunice Catherine Mary & Ors v Carstensz Properties Pty Ltd & Ors [1979] FCA 87

AND: WILLIAM PATRICK RYAN ~ \W.P. RYAN PTY. LIMITED EUNICE CATHERINE MARY RYAN ' MAUREEN PATRICIA TAYLOR WILLIAM PATRICK RYAN, Jnr. ! ° by his next friend EUNICE CATHERINE MARY RYAN PATRICIA LOUISE RYAN by her next friend EUNICE CATHERINE MARY RYAN

' AND: CARSTENSZ PROPERTIES PTY. LIMITED PAUL JAMES REARDON FAITH ANNE SMALL ELMSLEA PTY. LIMITED FRANCIS PAUL REARDON JOHN BEDE REARDON

~ HARRY CASSIDY FOREST PASTORAL COMPANY PTY. LIMITED

AND: J.C. RENNES PTY. LIMITED VINCENT GALLAGHER J.C. RENNES ™~ PAITH ANNE SMALL CARSTENSZ PROPERTIES PTY. LIMITED

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BOWEN C.J.: I have read the reasons for judgment of Fisher J. and I 'am in agreement with them. The parties should have an opportunity of considering the form of order which this Court shovld make. I propose that the matter be

adjourned for a period to enable the appellants to bring in

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MAUREEN PATRICIA TAYLOR WILLIAM PATRICK RYAN, Jnr. by his next friend

EUNICE CATHERINE MARY RYAN ' W.P. RYAN PTY. LIMITED

W.P. RYAN PTY. LIMITED EUNICE CATHERINE MARY RYAN MAUREEN PATRICIA TAYLOR WILLIAM PATRICK RYAN, Jnr. by his next friend

CARSTENSZ PROPERTIES PTY. LIMITED PAUL JAMES REARDON

ELMSLEA PTY. LIMITED FRANCIS PAUL REARDON JOHN BEDE RDCARDON HARRY CASSIDY

. - J.C. RENNES i - FAITH ANNE SMALL ; CARSTENSZ PROPERTIES PIY. LIMITED

DEANE J: Elmslea Pty. Limited ("the Company") was, on 23 July, 1971, incorporated in New South Wales under the provisions of the Companies Act 1961 of that State. On 13 August, 1971,

the Company entered into a contract to purchase a property known as Eimslea which is situated near Bungendore in New South Wales. In September, 1971, the Company allotted 50 fully paid shares of $1 each in its capital to the respondent Carstensz Pty. Limited ("Carstensz") which is a company which had been incor- poratcd in the Australian Capital Territory on 31 October,

1969. Those shares were held in the name of Carstensz until April, 1974 when a transfer of them from Carstensz to the respondent Cassidy was registered by the directors of the Company. I shall, on occasion, refer to those fifty shares as

The primary issuc involved in this appeal is whether,

at the time of their transfer to Mr. Cassidy, Carstensz held the subject shares upon trust for its shareholders or whether, at that time, it held the shares in its own right as beneficial owner. I£ Carstensz held the shares beneficially, they are now held upon trust for Carstensz. IfCarstensz held the shares

upon trust for shareholders in particular proportions, they are

now held upon the same trusts and in the same proportions.

e * The shareholders in Carstensz included, at relevant times, a number of members of the family of Mr. William Patrick Ryan ("Ryan") and a family company, W.P. Ryan Pty. Limited associated with Ryan. It will, on occasion, be convenient to refer to those shareholders collectively as "the Ryan Group". The Ryan Group held between them 15,600 of the 24,200 issued shares in the capital of Carstensz. The remaining shareholders were Mr. Paul James Reardon ("Paul Reardon") (1200 shares), J. C. Rennes Pty. Limited (2400 shares), Dr.J.H. Small (who died before the_-hearing at first instance) and his wife and children (2400 shares in all) and Mr. V.C. Gallagher ("Gallagher") and members of his family (a total of 2600 shares). Each of Paul Reardon, J.C. Rennes Pty. Limited, Gallagher and Mrs. Small who represents her late husband's estate is a respondent to

the proceedings. JI shall, on occasion, refer to them as "the

The subscription for the subject shares was associated with the advance to the Company by Carstensz (either on its own behalf or acting on behalf of its shareholders) of one half of the funds necessary to enable the Company to complete ~he

purchase of Elmslea, It is common ground between the parties -

if indeed there would, in any event, be room to doubt it - that the advance of loan funds to the Company was not a transaction in the ordinary course of Carstensz's business to be funded completely from Carstensz's general funds. It was treated by all as an extraordinary transaction to be financed mainly from funds made available either to or through Carstensz by its

shareholders. Completion of the purchase of Elmsiea by the -

The shareholders who comprise the Ryan Group maintain that the subject shares have, at all times since their allotment, been owned by Carstensz beneficially and that the shareholdings of the various shareholders in Carstensz should be adjusted to reflect their contribution to the funds advanced to the Company to enable the purchase of Elmslea. This adjustment would reduce the Ryan Group's proportionate shareholding in Carstensz. The respondent shareholders maintain that the subject shares have at all such times been held upon trust for the shareholders in Carstensz according to the proportionate amounts of their

The learned judge at first instance (Fox J.) found that, at the time of the transfer, the shares in the Company were not held by Carstensz beneficially but were held upon trust for the shareholders in Carstensz in the proportion to which they had contributed (either by way:of cash or the provis- ion of security) to the funds which were made available to the Company to enable it to purchase Elmsiea. That trust was not

a constructive or resulting trust established by presumption

of law. It was a trust established by agreement or understanding DEANE, J,

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between, or common intention of, Carstensz as trustee and, i . . . presumably, all of its shareholders as cestuts que trust. That | . : . . agreement, understanding or common intention was, so his Honour

found, to be inferred from the facts established before him.

The Company was promoted by Ryan and the respondent Mr. John Bede Reardon ("John Reardon") to purchase Elmslea from the trustees of the Christian Brothers. At the time of the. purchase, the property was occupied by John Reardon, eho is the father of Paul Reardon. After the purchase, John Reardon has continued to make Elmslea his family home. The subscribers to the Company's Memorandum and Articles, each in respect of one share, were John Reardon and his brother, the respondent Francis Paul Reardon ("Francis Reardon"). These two subscriber's shares may have subsequently been overlooked when it came io the allotment of further shares. Ignoring them, the share- holdings of the Carstensz interest and Reardon interests corres- ponded: the 50 shares held by Carstensz were balanced by 50 shares held by the Reardon interests, namely, Francis Reardon, two members of his family and Forest Pastoral Company Pty. Limited, which is a family company associated with John Reardon. The one half of the funds necessary to enable the Company to purchase Elmslea which was advanded by or through Carstensz

was matched by corresponding amounts advanced to the Company by

shares from Carstensz to the respondent Cassidy was executed,

the ostensible directors of the Company included Ryan and his

daughter Miss Eunice Ryan. The view was taken by Paul Reardon DEANE , J.

-6- and some of the other respondent shareholders that neither Ryan nor Miss Eunice Ryan validly held office as directors. Paul Reardon organized a purported meeting of directors at which the decision was made to execute a declaration of trust of the shares and the transfer of the shares to Cassidy. None of the Ryan Group was informed that that meeting was to be held or participated in that declaration of trust and transfer. At the meeting of the Company at which the transfer was registered, Ryan, who was a director of the Company, voted against its registration. Plainly, as between the parties to the present proceedings, neither the declaration of trust nor the transfer of the shares constitutes evidence of a trust or removes from those who assert it the onus of establishing that the shares in the Company were

not held by Carstensz beneficially but were held by Carsténsz

The evidence before the Supreme Court consisted of a large body of documentary evidence and the oral evidence of seven witnesses. All but two of those witnesses have a direct interest in the subject matter of the proceedings. Neither o£ the remaining two, Mr. Neville Houston and the respondent John Reardon, could properly be regarded as independent witnesses. Mr. Houston participated in some of the events involved in the proceedings as accountant and representative of the respondent J.C. Rennes Pty. Limited, John Reardon, in addition to his relationship to his son, Paul Reardon, who has a direct interest in the proceedings, has an obvious indirect interest. If, as he maintains, Carstensz did not own its shares in the Company beneficially but held them upon trust for its shareholders

including his son, the position would be that John Reardon, his

brother and their families controlled the Company which, for

~7- its part, owned the property on which he lived and, apparently,

It was submitted on behalf of the appellants that the

judgment of the learned trial judge contained a number of significant mistakes as to primary facts. That submission was net, in my view, made good. The identified errors of primary

fact in his Honour's judgment (e.g., the names of the shareholders 'in the Company other than Carstensz and the statement of the amount of the deposit for which the final agrecment for the purchase of Elmsiea made provision) are not, in my view, signific- ant. They can readily be explained by the general confusion of

'documentary evidence with which his Honour was required to cope

and plainly were not crucial to his ultimate conclusion.

Of greater importance were two more general submissions as to the factual content of his Honour's judgment which were made on behalf of the appellants. The first was that a general conclusion as to the source of the funds provided by or through Carstensz to the Company for the purchase of Elmslea was wrong. The second was that his Honour had misconceived the nature of the appellants' case before him. I proceed to consider these

submissions in the order in which I have mentioned them.

At a late stage in his judgment, his Honour expressed the conclusion that "it was no part of the arrangements for Carstensz to pay any of the purchase money out of its own general funds, and when the overall position is examined, it is apparent that it did not do so" (italics added). It was

submitted that his Honour was in error in this conclusion. If

the reference to "the purchase money" is' the $50 subscription / . money for the 50 shares, it was pointed out that, by book entry

at least, the so was debited against Carstensz's general funds. If, as would appear to be the case, his Honour was referring to the source of the one-half of the overall funds necessary to enable the Company to purchase Elmslea, the statement, in the context in which it appears in his Honour's judgment, was inaccurate in that, for example, it is incorrect to say in :

relation to the $2500 paid by Carstensz as one-half of the

initial deposit that "it is apparent" that no part of it came

'out of Carstensz's general funds. If this unqualified conclusion

had played an integral part in his Honour's reasoning leading to his decision that the subject shares were held by Carstensz as trustee, there would be considerable force in the appellant's submission. Examination of his Honour's judgment (particularly the immediately following sentences) makes it clear however that

his Honour's generalization as to the source of the funds

" followed upon his conclusion of the existence of a trust and

was not crucial to the decision that that trust existed.

The submission that his Honour had misconceived the nature of the appellants' case was based upon his statement that the appellants had contended "that it was eventually agreed

that Carstensz was to acquire this one-half interest for

itsel£" (italics added). The appellants' case before his Honour was, it was said, the same as was advanced before this Court , namely, that Carstensz was, from the outset, participating in the acquisition of Elmslea on its own account and not as trustce for others. Assuming that this is so, it is not, hovever,

apparent to me that any misapprehension as to the manner in

which the present appellants put their case contributed to

his Honouy's finding that the subject shares were held upon

In my view, the appellants have failed to identify, in the learned trial judge's reasons for judgment, any significant mistake or misapprehension as to the facts which he found to be established by the evidence as distinct from any inferences to be drawn from those facts. Nor, in my view, does examination of his Honour's reasons for judgment disclose

that it is vitiated by any identifiable error of principle or

shares were held upon trust was plainly, to some extent, based on his assessment of the witnesses who gave evidence before him. He expressed his substantial acceptance of the evidence of Rennes, Gallagher and Paul Reardon. He intimated distrust of

"I do not see how Mr. Ryan could have avotded knowing that his co-venturers were interested in "Elmstea", and not in "Yalana", and that what they were wanting, and working towards, was dtreet partietpatton in the "Elmstea" enterprise by holding shares in Emslea (sic) Pty. Limited. fhe inlerventton of Carstensz was to them a complication, not involving a radical change of plan, and I think Mr. Ryan must have apprectated that fact. It ts posstble that some- where towards the end of 1971 he came to believe that partiectpation was only to be in Carstensz, leaving that Company as owner of the investment tn Elmslea Pty. Limiced, but on balanee I do not think he did".

His Honour did not find it necessary to indicate any view of the

not, seen and heard give their evidence or to over-rule the trial judge's findings of fact which are based, in whole or in part, upon such an assessment. This does not, however, mean that an appellate court which is under a duty to hear appeals as to both facts and law and is empowered to draw inferences for itself is entitled, in the absence of such error, mistake or misapprehension, to assert impotence when called upon to examine a decision on contested issues of fact by a judge who has had the advantage of sceing and hearing witnesses give oral evidence before him. In such a case, the trial judge's reasons for decision must be examined in an effort to determine which findings of primary fact were based upon the trial judge's assessment of witnesses and the extent to which the decision

necessarily followed from the findings of primary fact which

I have already stated my conclusion that the appellants have failed to identify, in his Honour's reasons for judgment, any Significant mistake or misapprehension as to fact or any error of principle or mistake of law. Nor is there any basis for inferringthat his Honour's assessment of witnesses or findings of primary fact were affected by any such mistake, misapprehension or error, The appellants have failed to demonstrate that there is any proper basis either for refusing to accept the learned trial judge's assessment of witnesses or for interfering with any particular findings of primary fact - as distinct from inferences from such facts - which were based, in whole or in part, upon that assessment. It

therefore becomes necessary to consider ihe extent to which

his Honour's ultimate decision that there was a trust necessarily

followed from his assessment of the trustworthiness of witnesses . | : .

who gave evidence before him or from conclusions of fact based

The basic facts relating to the incorporation of the Company, the actual purchase of Elmslea, the subscription for the subject shares and the manner in which the funds advanced

to the Company were obtained and paid were largely not*in real dispute. The significant arca of dispute was confined to the ,existence and content of any agreement or understanding between Carstensz and its shareholders that the subject shares be held by it upon trust. Even in that area of dispute, there was Significant agreement as to basic fact: the shares were in the name of Carstensz, there was no resolution of either directors or shareholders of Carstensz that they be held other than beneficially, the $50 subscription money for them was debited by the Company against Carstensz, no-one at any time before the dispute came to a head expressly stated that the shares were held upon trust even when it must have been clear

that Ryan, the person who arranged the transaction, maintained

learned judge's assessment of witnesses and any findings of

primary fact based on that assessment did not resolve the issue of whether there was a trust of the shares. That issue remained to be resolved by inferences to be drawn from the primary facts

established by the evidence. There was material in the

establisned facts supporting his Ilonour's inference of a trust' DEANE | J.

some specific illustrations will subsequently be given. In these circumstances, it becomes necessary to define with some precision the question which arises for the consideration of this Court.

Is that question the question whether it has been shown that the inference of a trust which his Honour made was not reasonably open to him? If that be the appropriate question, I would have little difficulty in deciding that the inference of a trust was reasonably open. Or is that question the question whether this Court, on the facts established before his Honour, is itself of

the view that a trust of the shares should have been inferred?

In Edwards v. Noble ((1971) 125 C.L.R. 296), the Full

High Court, in over-ruling a decision of the Full Court of the Supreme Court of South Australia which had substituted its own finding for that of the trial judge on a question of negligence, gave some apparently general guidance as to the approach which should be adopted by an appellate court when it is required 1o review an opinion or inference based or drawn from the established facts. In the course of his judgment,

"In any appeal against a finding of fact, whether or not by way of rehearing, however much the appellate court may be in an equal position with the trial judge as

to the drawing of inferences, in my opinion, the appellate court ought not to reverse the finding of fact unless it is convineed that itt is wrong. If

that finding ts a view reasonably open on the evidence, tt is not enough in my opinion to warrant is reversal that the appellate court would uot have been praparad on that evidenee to make the same finding. wUerelu differing views do not establish thal either vtew is wrong. But tn dectding that tts own vtew is right

and that of the primary judge wrong, the nature oj the "faet" found by the primary 'judge ts a matter for eonsideratton. Many of the "faels" wtthin the province of the jury involved elements of judgment, some evaluative aspects akin bo an exerctse of dtserettion. Perhaps the "fact" of negligence or no negligence is

of this kind. Others of such facets are mere tnferences from other faets or combinations of facts, though

even in that ease there is an element of judgment in the dectston to draw or not to draw an inference or

to prefer one where more than one inference is reasonably open. But, in any case, the appellate

court in my opinion ts not bound to veverse a primary judge's finding of fact merely because it held a different opinion to that of the primary judge. Where the members of the appellate court are themselves not of a unanimous vtew, there would seem to be good

reason to doubt the propriety'of reversing the primary judge if his finding was reasonably open on the material before him".

McTiernan J. adopted a not dissimilar approach when he

" In my opinton this was not a ease in which a court of appeal might legitimately substitute its econeluston for the judgment of the primary judge"

" The Full Court seemed to me to accept the Learned trial judge's findings as to the ecireumstances of the accident but to reject his inference that the defendant was not negligent in his drtving. In my opinion the evidence does not afford any convincing reason for rejecting that inference. It may well be that tf his Honour had found that the defendant did not take proper cave to avotd the colliston his econeluston could not have been successfully enhallenged before a court of appeal. But consistently with the prinetples which would dictate that result tt should be hetd, in my optnton, that the Full Court ought not to have tnterfered with the dectston which tis the subject of the present appeal".

On .the approach which he adopted, it was nol necessary for McTiernan J. to express the conclusion which he would himself have reached on the established facts and he refrained from

Windeyer J., in his judgment, distinguished between the function of an appellate court when Lhe question is whether a qualitative finding of negligence should have been made when the facts of the occurrence are clear and its function in the ordinary case, such as the present, when the question is simply whether a particular inference should be drawn from established facts (ibid, at pp. 312-313). The fourth of the majority Justices

(Menzies J. dissented) was Walsh J. His Honour wrote (ibid at

" My first observation is that I did not intend by what I wrote in DA COSTA'S CASE ((1970) 124 C.L.R. at p. 817) to assert that in a case of the kind there being considered the appellate court should simply make its own evaluation of the reasonableness or other- wise of the conduct of a party charged with negligence, without any regard to the deetsion of the trial judge. I did not mean to deny the principle whien has been variously stated as being that the court must be econvineed that the trial judge was wrong or that 1t must be satisfied that he was wrong or that it must be persuaded that he was "clearly wrong" or "plainly wrong". My statement that in that ease the judges who formed the majority of the Full Court of Western Australia were not precluded from giving effect to their own conclusions was based upon my view of the etreumstances of that case.

My second observation ts that I have always found much difficulty in distinguishing, in a practical sense, between a conelusion that a trial gudge was wrong and a conclusion that he was elearly wrong.

I think, also, that in the practteal apptteatton of the principle it does not matter much whether tn the statement of it the word "convineed" or the word "satisfied" is used. It may be said, tn my optnion, that in whatever form of words the principle tis ex- pressed, it requires, even in a ease in which the evedtbility of witnesses ts not involved and in whitch

• the contest is as to the inference or coneluston that should be drawn from a set of primary facts, that if a choice has to be made between two eonelustons both of whteh are open on the evidence and which are fairly evenly balanced, then the deetiston of the teest judge should stand. fhe appeltate eourt should not deal with the case as if tl were trying it at first instance. But, as has often been stated on high authority, the court hes a duty to make up t£s own

gudgnent of the primary judqe and recognizing that it

ought not to be set astde merely because of a slight

preference for a different view upon a questton upon

| which two vtews are open and as lo which there is no definite preponderance of one vtew over the other. Subject to that limitation and subjeet to the well- recognized limitalions concerning conflicting testimony and the eredtbility of witnesses, the appellate court should give effect to its own eoneluston".

Edwards v. Noble (supra) at least established that, in the

words of Walsh J., "even in a case in which the credibility"

of witnesses is not involved and in which the contest is as

to the inference or conclusion that should be drawn from a

set of primary facts, ... if a choice has to be made between

two conclusions both of which are open on the evidence and which are fairly evenly balanced, then the decision of the trial

judge should stand". On that at least, it would have seemed

to me that Barwick C.J., McTiernan and Walsh JJ. were all in

agreement. In Warren v. Coombs ((1979) 23 A.L.R. 405) however,

a majority of the Full High Court (Gibbs, Jacobs and Murphy JJ.)

concluded that this was not so. Their Honours stated (ibid

"The dteta of Menates and Walsh JJ. in EDWARDS v. NOBLE are opposed to those of Barwick C.d. and VWindeyer J, and Mefternan J decided the ease on the facts. The case ts a useful repository of state- ments of principle, but tt is not a binding authority tin favour of any particular view".

In Warren v. Coombs (supra), Gibbs, Jacobs and Murphy

JJ., after consideration of a number of House of Lords and High Court decisions, laid down the approach to be adopted by an Australian appellate court in a case such as the present as

"Shortly expressed, the established princtples are,

we think, that in general un appettute courl is in as good a posttion as the trtal judge to dectde on the proper tnferenee to be drawn from facts which are undisputed or which, having been disputed, are estab- lished by the findings of the trial judge. In deciding

. what is the proper inference to be drawn, the appellate court wtll give respect and weight to the eoncluston of the trtalt judge, but, once having reached its own conetusion, will not shrink from giving effeet to it. These princtples, we venture to think, are not only sound tn law, but benefictal in their operation".

It may appear, at first sight, that the approach laid

down in Warren v. Coombs (supra) is, in substance, that, stated

by Walsh J. in Edwards v. Noble (supra), where his Honour, in

terms, stated that the appellate court had "a duty to make up

its own mind" and to "give effect to its own conclusion". While the results of the two approaches will commonly coincide, there is, however, a difference of principle between them. In Walsh J's overall view, the primary question was whether there was

such "a definite preponderance of one view over the other" as to justify the intervention of the appellate court at all. If there was not, that was the end of the matter and it was not necessary for the appellate court to reach any further conclusion for it-

self. Thus, in Edwards v. Noble (supra), Walsh J., like

McTiernan J., refrained from indicating what his own conclusion

would have been. On the other hand, in the majority judgment

in Warren v. Coombs (supra) at p. 424, their llonours stated that

the New South Wales Court of Appeal had been "obliged to reach its own conclusion as to the inferences to be drawn from the primary facts found by the learned trial judge".

Warren v. Coombs (supra), spell out precisely what was involved

un the obligation to give ''respect and weight" to the conclusion

af the trial judge. The reason may have been that observance

of the obligation will involve differences in emphasis and approach from cdse to casc. [I have, in the present case, endeavoured fully to discharge the obligation by approaching

the question whether an inference of a trust should be drawn, through his Honour's judgment and with a conscious predisposition in favour of his Honour's finding that there was a trust of

There was, as has been mentioned, material in the facts which supported his Honour's inference of a trust. The strongest supporting documentary evidence was Gallagher's letter of 6 July, 1971, in which he expressly stated that part of the funds advanced by him were "for the acquisition of 1200 shares of $1.00 in Elmslea". The force of that written contem- poraneous statement is diminished by some of the contents of Gallagher's own notes of the meeting of directors of Carstensz o£ 14 August, 1971 ("Discussion mainly on Co's acquisition of shares in Elmslea Pty. Ltd" and "50% of Elmslea Pty. Ltd. 1s acquired/held by Carstensz Prop. Pty. Ltd. Access to Elmsica is .. by way of Carstensz Props. & "Carstensz" individuals have no direct holding in Elmslea"). It is also diminished by the fact that the shares to which that letter purportedly referred (i.e.
1200 shares at $1.00 in Elmslea) were never issued and that subsequently, in his letter of 17 August, 1972, Gallagher indicated , that the relevant $1200.00 was part of a "loan to Carstensz ... repayable at call". Another item of documentary evidence which would militate against any suggestion of "recent

invention" on the part of the Reardons is the loan agreement

relating to a loan made by lrancis Reardon to Paul Reardon hy

which Paul Reardon charged "the whole of the shares in his name

or hereafter to be allotted to him" in the Company with repay- ment of the loan. The strongest oral evidence is probably that relating to the statement made by Dr. Small on 15 August, 1971. The evidence as to exactly what Dr. Small said varies. The version which most clearly favours the drawing of an inference of a trust is that of Paul Reardon to the effect that Dr.

Small stated ''that the cash or security raised for the purchase of Elmslea would be a direct investment in Elmslea". A number of other examples, including some passages in the cross-examination of Ryan, could be given of oral evidence which lends some support for the respondent shareholders' case. One such example is the evidence of Gallagher that at the Junc, 1971, Meeting of Directors of Carstensz he stated that he had "practically decided to take up 5% in Elmslca and that I was

not interested at all in taking up any further shares in

Notwithstanding the material in the evidence which supports the drawing of the inference which his Honour drew and the respect and weight which should be accorded to his Honour's finding of a trust, I have reached the conclusion that the inference that the shares were heid on trust should not be drawn. In my view, the correct inference to be drawn from the facts is that the subject shares were held by Carstensz beneficially.

That overall vicw is the result of a reading and re-reading of the record of both oral and documentary evidence rather than the result of the identifiable effect of particular items of cvidence. I shali-however indicate, in summary form, some of the particular

aspects of the evidence which have played a part in leading me

The Minutes of the Annual General Meeting of Carstensz which was licld on 9 August, 1970 make clear that it was the company Carstensz

in its own right that was seen as the nominee of Ryan to acquire an intcrest in the property Elmstea. The interest in the property Eimslea subsequently became the fifty shares if the Company which acquired the property;

The balance sheet and accounts of Carstensz which were received by directors and shareholders and which were not, when received, questioned in this regard, are consistent only with the shares held by Carstensz in the Company being held by it beneficially and with the moneys advanced to the Company in connection with the purchase of Elmslea either coming (as in the case of half of the first payment by way of deposit) from Carstensz's own funds or being borrowed by Carstensz from the Bank or its share- holders and-lent by Carstensz to the Company. They show that the subscription moneys ($50) were treated as coming from Carstensz, that the shares were treated as an asset of Carstensz, that the associated funds advanced to Elmsica were scen as loans by Carstensz, that the moncy advanced by the Bank comprised a loan to

Carstensz and that moneys advanced by shaie- DeEque , J.

~21- liolders were likewise-by way of loan to Carstcnsz;

The Minutes of subsequent meetings of directors of Carstensz (at one or more of which each of

the shareholders (or a representative) was present) clearly, in my view, support the conclusion that the shares held by Carstensz

for example, the Minutes of the Directors' Meeting of 14 August, 1971 (the day after the final contract for the purchase of Elmslea-is dated) state: "It was agreed that shareholdings in Carstensz Properties Pty. Limited would have to be reviewed after the final figures were known

as to the cash and security invested by each shareholder in Carstensz Properties Pty. Limited". In that regard, and while there are no doubt

some errors in these Minutes, I was not persuaded by the arguments of senior counsel for the respondents aimed at generally discrediting

Gallagher's agenda item and the decision of the meeting of directors of Carstensz of 20 November, 1971 as to the payment by Carstensz to Ryan

payment related at least in part, to "recognition" of Ryan's efforts in relation to the Elmstea

The balance sheets (and, presumably, the books) of the respondent J.C. Rennes Pty. Limited showed its investment as being in shares in Carstensz and loans to Carstensz and the Company. It would seem that there was no suggestion in them of J.C. Rennes Pty. Limited having any beneficial interest in the shares held by Carstensz in the Company. This seems to have accuratcly represented J.C. Rennes Pty. Limited's understanding at the relevant time. Thus when Mr. Houston, the accountant for J.C. Rennes Pty. Limited, went to the meeting of directors of Carstensz of 18 December, 1971 it was not to suggest that Carstensz's shares in the

Company were held in trust for, inter alios, his client. It was to suggest, among other things, that one way in which Carstensz could raise money was, to use his words, "to sell

the shares in Elmslea or to sell Yalana" (a property which Carstensz owned) "one or the

The evidence of Paul Reardon as to the conver- sation between himself and Mr. Ryan in July, 197]: 'ne were discussing wy - the fact thal if Elmslea was purchased in the name of Carstensz Properties because I held 5% of

Carstensz Properties, I would automatically PeanF 7.

hold 2%% of Elmslea". This evidence is only consistent with the view that, in July, 1971, it was proposed that Carstensz would hold its interest "in Elmslea" beneficially and not as

(vii) The complete absence in the evidence of any unequivocal contemporaneous statement to the effect that Carstensz held the shares in the Company in trust for its shareholders. In my view, the absence of any suggestion of any such statement in a situation where the shares were held in the name of Carstensz and had,

My conclusion that the shares were held by Carstensz beneficially has not been reached with any degree of confidence. It could not be said that the trial judge's finding of a trust was not reasonably open on the evidence. It could not be said,

to adapt the words used by Barwick C.J. in Edwards v. Noble

(supra), that I am convinced that that finding is wrong. Particularly in the situation where the other members of the Court are in agreement with the trial judge, I have hesitated

In Cashman v. Kinnear ((1973) 2 N.S.W. L.R. 498 at p.

509. Jacobs J., when President of the New South Wales Court

of Appeal, propounded the duty of an appellate judge in dealing with an appeal on the facts against a finding of negligence in terms which, apart from any difference between giving "great weight" and giving "respect and weight" to the conclusion

of the trial judge, correspond with what was said in the majority

judgment in Warren v. Coombs (supra). His Honour decided, in

the circumstances of Cashman v. Kinnear (supra}, that his

"initial inclination" was outweighed by the weight he should give to the findings of primary and secondary fact by the trial judge and that he was, therefore, obliged to endorse the trial judge's finding and adopt the same conclusion. The. view which I have formed, on the facts of the present case, that no trust

of the subject shares can be properly inferred is, however, more than an inclination: it is a considered conclusion. In the circumstances, I regard myself as constrained by what was said

in the majority judgment in Warren v. Coombs (supra) to give

I would allow the appeal and discharge the orders made by the learned trial judge. I would declare that the subject shares are held by the respondent Cassidy upon trust for Carstensz. I would adjourn the further hearing to a convenient day for hearing any submissions which the parties might wish to make as to any ancillary orders and as to the appropriate

NEW SOUTH WALES DISURICT REGISTRY ) No. G.37 of 1978 a ) GENERAL DIVISION )

BETWEEN: EUNICE CATHERINE MARY RYAN eenere PATRICIA _ TAYLOR VILLIAM PATRICK RYAN, Jnr. by his n

WP. RYAN PTY, LIMITED BUNICE CATHERINE MARY RYAN MAURTEW PATRICIA TAYLOR WILLIAM PATRICK RYAN Gnx. by his next friend

AND: CARSTENSZ PROPERTIES PTY. LIMITED PAUL JAMES "REARDON

HARRY CASSIDY FOREST T PA STORAL COMPANY PTY. LIMITED

FISHER J.: Thas is an appeal against a decision of the Supreme Court of the Australian Capital Territory (Fox J.) reasons for

which were delivered on 19 December 1974. The orders which his Honour made on 3} January 1975 in effect dismissed the plaintiffs claim and granted the declarations and relief sought by the defendants in thezr counterclaim. The plaintiffs lodged an appeal to the High Court. However, sections 51 and 52 of the Australian Capital Territory Supreme Court Act 1933, which conferred juris- diction upon the High Court to hear appeals from the Supreme Court, were repealed by the Australian Capital Territory Supreiie Court Amendment Act 1976. This repeal took effect from 1 Yebruary 1977, the commencing day for the purposes of the Federal Court of Australie Act 1976. After that date the right to appeal was in fact converte into a right to appeal to the Federal Court (see Tederal Court of Australia Act 1976 section 24). Following this change the

appellants obtained special] leave to appeal from the Federal Court.

The litigation arose in circumstances which to the extent relevant I shall relate as far as the evidence permits in chronological order. On 31 October 1969 Carstensz Properties Pty. Limited ("Carstensz") vas incorporated 1n the Australian Capital Territory for the puspose of acquiring for a group of investors a grazing property known as Yalana, Mr. W.B. Ryan ("Ryan"), who together with members of his family, wore the plaintiffs an these proceedings was the prancipal promoter of Carstensz and his family at all times held in one way or another the majority of the sharos (64%) an that company. Other parties to the proceedings, namely Paul James Ttcardon ("Paul Reardon"), Yiuncent Gallagher ("Gal }acher"),, J.C. Rennes ("Reames") wore through chareholdinyge held duis cts, or in the case of Rennes through an investment company members of

Carstens?" at the relevant time. One James Small, the anterest> cf i

whose family 1n consequence of his death,were represented in the proceedings by his widow Failh Aiuc Sinall was also a member. A111

Barly 12n 1970 Ryan together with members of his family stayed with John Bede Reardon ("J.B. Reardon") the father of the defendant Paul Reardon in a house leased by J.B. Reardon on a grazing property known as Elmslea. The property which was owned by Trustees for the Christian Brothers was understood to contain certain valuable sand deposits. J.B. Reardon was avare that the property.was currently for sale and in January 1970 he discussed with Ryan the possibility of ats purchase equally by the Reardcn and Ryan farilies However, when a draft contract was produced in mid April 1976 Carstensz was shown as purchaser of a one half interest and J.B. Reardon or his nominee as purchaser of the other half. On 15 April a deposit of $5,000 was paid, coniributed equally by the named purchasers. It happened that on 13 April Carstensz had received from Rennes the sum of $2,400 being an amount payable in respect of the acquisition by him of shares in that company from W.P. Ryan Pt

Lamited and this sum was credited to the latter company in the

During the succeeding months there was nuch discussion betwoen Ryan and J.B. Reardon as to the manner in which the purchase of Elmslea could be financed. Ryan's efforts to obtain finance by way of mortgage secured on the Elmslea property were not successful and a proposal that commercial bill finance be used was not favoured by J.B. Reardon. In about the month of May 1970 the property was

On 9 August 1970 Ryan transferred his subscriber's share in

Carstens2 to ™ P. Ryan Pty. Lamited and that company transfered

1200 ehaves tu uur members jointly of the Ryan family. At ne

stage during the proceedinyjs was any significance attached to the various interests of the Ryan family or W.P. Ryan Pty. Lamated and Ryan and his daughter Eunice who both gave evidence were at all times taken to be speaking on behalf of the family group and not any particular individual interest. |

At the Annual General Meeting of Carstensz held on 9 August 1970 Ryan reported to the members on what was described as a proposed joint venture with J.B. Reardon in the purchase of Elmslea. This report was appropriate in that the property was again on the market at a price of $150,000 with the vendors hoping to complete a sale in January 1971. A draft contract to this end was prepared in the month of August 1970 when J.B. Reardon and Carstensz were named as purchasers and settlement date was fixed

In the month of October 1970 Small paid $2,400 to Carstensz in

respect of the allotment of shares 3n Carstensz to him.

Notwithstanding theizr difficulties in obtaining finance for theix purchase of Elmslea both Ryan and J.B. Reardon entered into negotiations for the sale of the sand on the property first of all wath Pioncer Concrete in October 1970 and then with Canberra Washed Sand Pty. Lamated in December 1970. fn May of the folloving year a Graft contract was prepared between Canberra Washed Sand Pty. Lamited, Carstensz and J.B. Reardon. A further draft preparcd in the month of June 1971 inserted a company The Forest Pastoral]

In the months of June, July and fuyust 1971 many different avenues for the financing of the purchase were explored mainty by Ryan. He had discussions with J.B. Reardon concerning the usc

of two coanmerc1al bills, dascounted by the A.M.P. Society, th.

term of which appears to have been understood to be three years. Ryan also had discussions with Rennes and Gallagher an June not only as to the manner of financing the purchase but also as to the respective anterests of the investors in Carstensz 1n the nev venture. He appears to have indicated that for his part he did

not contemplate that he (or more correctly his family group) would have the same interest in Elmslea as he had in Carstensz. Moreover, Rennes stated that he would put up $20,000 in respect of the purchase of Elmslea but was not interested in additional shares

an Carstensz. 'This amount of $20,000 was in excess of the

proportionate share to which his ianterest in Carstensz would have

In June the vendors required the increase of the deposit from $5,000 already paid to $15,000, otherwise they indicated that they proposed to negotiate clsewhere. In carly July the sum of $10,000 was paid to the vendors, $5,000 of which was contributed by Carstensz and $5,000 by J.B. Reardon. By letter dated 6 July 1971 Gallagher paid $8,100 an cash to Carstensz. The letter andicated that $400 vas to complete his shareholding in Carstecnsz, $1,200 was for the acquisition of 1,200 shares in Elmslea and the balance of $6,500 was on loan in connection with the Commercial

By this tame the A.M.P. Society had advised by letter datod 2 July 1971 that through A.M.P. Discount Corporation Limited it would discount a bill for a term of up to six months provided it vas accepted by Lhe Australisau and Nw % aland Founkane Gre up

Lamited (the "A.N.Z. Bank") but that Chere mus: be one bill fo

the Carstensz interest in the Elmsiea venture and not separate

pills for each investor. The letter further indacated that the bill could be re-drawn at maturity up to a total term of 3 years. At a meeting of Carstensz directors on 18 July there was much discussion of the amount each would contribute to the venture, and whether such contribution would be by way of cash or security

put up in support of the acceptance of the bi]1l. Nothing appears

On 23 July 1971 a company Elmslea Pty. Lamited was incorporatod for the purpose of becoming the purchaser of the property. It was contemplated that each group, the Reardon and the Carstensz group, would hold a half anterest in the new company and on the succeeding 11 September, 50 shares were allotted to Carstensz and likewise the Reardon group's holdinjwas increased to 50 shares.

3t 2s the parcel of 50 shares allotted to Carstensz which 1s the

The day after the incorporation of Elmslea 1t appears thit J.B. Reardon visated Ryan at his home in Canberra. J.B. Reardon says Ryan offered to him some of his shares in the Elmslea ccipany. Moreover it seems to have been acknowledged that 1t was not contemplated at that time that Paul Reardon would take any anmtcrest in Elmslea in his capacity as a member cf the Carstens7 group as he would have an antecest through his father's involvement an the

On 26 July, J.B. Reardon and Miss Eunice Ryan visited the Camirnicalth Bank at Goulburir canesrping the acceptance of tty commercial bill and Miss Ryan had wilh her details of the

securities to be provided by the Carstensz members.

It appears that the Commonwealth Bank was not prepared to endorse a commercial bill to the extent 1t was taken out by Carstensz. Subsequently the aA.N.Z. Bank agreed to endorse that company's bill but insisted on it being discharged at the end of six months. Thus what was, in the minds of at least some members of the Carstensz group, understood to be the method of financing the purchase of Elmslea had in two ways changec. They would not be contributing directly to the purchase in that A.M.P. Discount Corporation Limited wovld only deal with the company and not with each of them indivadually. Moreover such Finance would" be available only for a period of six months after which time those who had provided security could \ell be required to find cash to support their securities. This caused particular' concern an

that there had been a general understanding that 1f£ necessary the

Elmslea property could be sold in about three years tame. be

The agreement for sale and purchase of the Elmslea property bears date 13 August 1971, and Elmslea Pty. Limited was disclosed as the purchaser. On the following day at a meeting of darectors of Carstensz there was further discussion on the method of financing the purchase of Elimslea and each individual's coutcibution whether it be by way of cash or security. It was also agreed that Paul Reardon would take an interest 1n the ventuce, the cash for which would be found for him by his family. The next day Ryan, Rennes and Small visited J.B. Reardon and inspected both the Yalana and the Elmslea properties. Again there was discussion on the financing and the acquisition of individual interests. During : this discussion Smal] stated that he oniy wanted an investinent ,

an EBlwrlea aid was pot prepared bo pul a vent ante Yalaunal He

further said that the interest an Elmslea of each investor was | to be obtained either by cash or cccurity. Paul Meardon's eviacnes |

as confirmatory in that he stated Small said that the cash or security raised for the purchase of [lmsLea would be a direct

{ At the beginning of September, Paul Reardon paid $3,750 to

Carstensz being 5% of the purchase price of Elmslea, and $250 on account of contingencies. This money was obtained by Paul Reardon by way of loan from his uncle Frank Reardon and the loan purported

On 6 September the A.N.2. Bank endorsed a bill of exchange drawn by Carstensz (in support of the endorsement taking securities hereafter mentioned) which bill was discounted by A.M.P. Discount Corporation Limited. The amount thus obtained enabled. Carstensz to make avazlable to Elmslea Pty. Limated its share of the purchase

fanance payable on settlement, which settlement took place on 7

The purchase of Elmslea had been concluded but the Carstensz group had not resolved e1lther the nature or the amount of their andividual anterests an Elmslea Pry. Limited or hoy those who had put up security would meet their obligations when the bill «was due for payment. Nor were the terms agreed in respecc of the advances of cash. Ryan and Gallagher discussed a possible solution vhen they met together on 20 November 1971 and the matter was again under consideration at a mecting of directors of Carstensz held cn 18 December 1971. Notwithstanding these many discussions there was at no time any indication of a consensus having been reached by the

On 2 Hareh LU72 the Cansiens. ball matures arma tas dae for payment. Tach of the investors had in his capacity as director

guaranteed the account of Car olenez with the ALW.Z. Bank, anu

Ryan, Rennes and Small had put up security in support of the bill. Ryan had committed security to the extent of $26,000 Rennes $20,000 and Small $12,000. It would appear that the A.N.Z. Bank allowed two months' grace for the purpose of redemption of securities andicating 1t would net proceed to realize prior to 2 May. Ryan redeemed his securities, paying to Carstensz in fact more than 'his $26,000 share of the commitment. Small was unable to raise his agreed share of the required cash, and his securities were due to be realized. At a meeting of directors of Elmslea conducted ° in part by telephone on 1 May 1972 Ryan indicated his unw2rllingness

Small's difficulties were resolved in the following manner. Rennes paid the sum of $8,000 to Carstensz on account of his liability of $20,000 and $12,000 to Elmslea which latter sum was a loan subsequently agreed to carry interest at the rate of 10% per annum. A sum of $21,600 was then paid by Elmslea into Carstensz' bank account, which sum was sufficient to satisfy the balance of $12,000 due by Rennes and $9,800 on account of the amount due from Small. The crediting of these monics to Carstensz' pank account was sufficient te satisfy the liability of Carstensz to the

A.N.Z. Bank in consequence of the payment of the will.

Even though the A.N.%. Bank was satisfied, there still rumcaned for resolution the problems associated sth the holding by Carstensz of 50 shares in Elmslea and the interests of thoze who had provided in one way or another the cash required to pay a half share of the purchase price of the Rlmslea property. The problem Vas auqravabtid der tlhe Lact thit ou 1? snguce 1972 Callaghbcr purported to call up for repayment the full amount advanced 'we hain

Lo Carstensz, namely $10,100. Subsequently and just prior to the

Annual General Meeting of Carstense on 26 August he withdrew this demand. At this meeting Ryan indicated his view Lhat it was appropriate that the shareholdings of members an Carstensz should be adjusted to takeanco account the amounts provided by members to

purchase Elmslea, but then and thereafter no agreement could be

reached as to how or whether this could or should be done.

The matter was brought to a head in the following manner. On 28 March 1974 and 18 April 1974 meetings ot directors of Carstensz were purportedly held. However, neither Ryan nor his daughter Eunice Ryan were present, not having been given noticc of either of the meetings. The other directors contended that they could and did hold valid meetings in their absence because WLP. Ryan and his daughter were not directors at the time, ne.ther holding the requisite share qualification under the Articles cf Association. lt was a fact that Ryan was not a member, havang transterred his subscriber's share, as recounted above, on % August 1970 to W.P. Ryan Pty. Limited. Moreover Miss Ryan's only interest as a sharcholder was as one of the joint holders of 1,200 shares transferred also on 9 August by W.P. Ryan Pty. Limited. | At these meetings the directors on the assumption that Carstensz had no beneficial anterest in the 50 shares in Elmslea Pty. Limited resolvod that the shares be transferred to a new trustec, aamely Harry Cassidy ("Cassidy") who 1s named as a defeidant to the? proceedings. A trust deed was prepared pursuant to which Cassidy acknowledged that he held the shares in trust in the proportions 1

therein specified for Paul Reardon, W.P. Ryan PLy. Limited, :

The plaintiffs in the action before Fox J. (who are the appellants before us) took proceedings by way of writ ot sumirons 1ssued on/3 May 1974. The statement of claim sought orders declaring that the meetings of directors were a nullity and the decisions of no effect, and likewise that the transfer of shares to Cassidy should be set aside. The defendants countered wath the contention that the meetings were validly held and that Carstensz had no beneficial interest in the Elmslea shares Whach it held on trust for the persons and in the proportions specified in the trust

The trial judge after hearing much evidence and recciving many documents, much of which evidence both oral and documentary being not only vague but of peripheral significance, held that the meetings were not anvalid and that Carstensz held the Elmsilea shares in trust for the persons and tn the proportions contended for by the defendants, He also found that the sum c£ $53,150 oving by Elmslea Pty. Limated to Carstensz was likewise held in txrust for the same pexsons but he did not specify the proportion to which each was entatled. There were also ancillary aid

At the commencement of Lhe hearing before this court 1t was accepted that the crucial question was whether Carstensz held tho Elmsilea shaces benefi.c1ally or on trust for the investors and that a decision on this assue would render it unnecessaiy to determine the validity or otherwise of the meetings of directors.

Where was therefore no arguinenl presented on the first assur

There therefore arises for determination on this appeal

aiffacult and complex assues, whicl) tosues are however at least in

the first insLance primarily questions of fact. Counsel for the

appellants stated at the outset of his submissions the factual issue

which arose for decision by the trial judge and before this court, namely whether it was the intention of the shareholders of Carstensz (the investors) to acquire an individual interest in Elmslea, or whether Carstensz would acquire the shares 1n Elmslea an its own right, leaving 1t to the investors to have their

interests reflected 1n increased sharehoeldang in Carsteri'sz.

A crucial finding of the trial jyaudge was that 1m his view it was reasonably plain that it was nok the intention of the parties that Carstensz take the shares beneficially. He made this finding after hearing o1a] cvadence from thrce of the shareholders of Carstensz who sought such a finding, namely Rennes, Gallagher and Paul Reardon and from W.P. Ryan, the principal protegonist for the contrary view, and his daughter [.C.N. Ryan. However the latter

had little to add on thas particular aspect of the case.

The trial judge accepted the evadence of Rennes, Gallacher and Paul Reardon as to the basas upon which they contrabuted funds, and accepted the substance of what they said. He had of conrse the inestimable advantage of seeing and hearing these persons when giving thear evidence and in particular whilst under cross- -

it follows that there was evidence upon the basis of wlach was open cod ve acenably opem vo the teral gudeqe to make thy 3 fanding of fact, 1n whach case this court should not interfere on

appeal even 2f 1t would not, un the whole of the evidence, he.-

been prepared to make the same finding. Ddvards v Noble (1971)

Since the hearing of this appeal the High Court has given

judgment in Warren v Cooinbes (1979) 23 A.L.R. 405, an which the

reasons of the majority, consisting of Gibbs A.C.J., Jacobs and Murphy JJ, iundacate that if after giving respect and weight to the conclusions of the trial judge, I were of the opinion that he had made a wrong finding of fact or dravm a wrong inference tnen this court of appcal would be obliged to interfere. However, I £ind that 1£ I adopt thas approach to the judge's conclusion 1 do not reach any daftferent result. For my part, upon a reading of the

evidence both documentary and oral, I would arrive at the same

I am of this view after reading carefully all the evidence and in particular the cross-examination of Rennes, Gallagher : and Pauli Reardon and giving consideration to the submissions of counse] for the appellant. Was primary contention was that more

weaght should have been attached by the trial judge to the conlemp-

oraneous documentary evidence, and Lhal the oral evidence upor which the trial] judge relied was, when considered alongside the

For py part I do not gain the assistance from the docam rtary evidence vhich counsel submils 1 should. 1n so far as parts of 1t may be said to bear directly upon the subjective antentior Ot Jue scar peer adr, In the majesty of anstenees te chet oe

ments therern: usc abs guora ant capuble of bearing ditfLerert

interpretations, depending upon the cause espoused. They are not necessarily 3nconsistent with stated intentions. Furthermece inuch of the documentary evadence which 1s said to be of indirect relevance to the stated intentions 25 to be found in the minutes of meetings, which minutes were subjected to such a critical analysis hy counsel for the respondents that one 1s undersLlandably cautious about placing any reliance thereon in so far as they ' purport to indicate views expressed by persons at the meetings.

The trial judge made his decision in reliance very sub- stantially upon the oral evidence of the three participants Rennes, Gallagher and Paul Reardon in circumstances where such oral evidence was tested by reference to contempcrancous material. He accepted the substance of their evidence and I am prepared

However in andicating that I am of the opinion that the trial judge was cocrect in his findings on this aspect of the case, namely the antention of the parties, I would wash to state unreservedly that this view in no way smounts to a dis- crediting of Ryan, who contended for the opposite finding. in my view much of the criticism of Ryan in the proceedings before us was unvarranted and unjustitied. The trial judge made no adverse finding as to the part played by Ryan, but merely statcd that he did not see how Ryan could have avoided knowing that his co-venturers were interested 1m EBlinslea and not Yalane, and that what they were wanting and working towards was direct

partrcrwsslacn un the Thech aoeuhorprie by hoaldang shotes ai '

Elmslea Pty. Limitcd. Again 1 agree that this Landing 15 open

Moreover I believe that this is how in a vague and general way Ryan himself in the first anstance saw the venture and how he introduced the proposition to the other investors. But there- after he, as the sponsor of the transaction, was caught in the vice of events. Not only was the plan as conceived by him 2) 1- defined and incomplete in matters of detail, but was dependent upon the goodwill of the other investors and obtaining thear concurrence to variations necessitated by chatging circimstances. In the events that occurred From time to time, it was impossible ever to obtain a consensus and he was Left, 1n his own words "trying to make vork an unworkable plan". Moreover his own position as initiator of che scheme was ultimately complicated by the fact that has family group contributed not only morc funds to Carstensz than any other investor but also more than its agreed share. It 1s understandable that when other parties appeared unable or unwilling to fulfiJ thear oblagations he should then give consideration to protecting the interests of

The trial judge was satisfied that at the relevant times, Which was August - - September 1971, all the investors had an mind that Carstensz would. provide purchas: funds to Elmslca wath a view to them becoming aS soon as possible anvestors in that company. Such money would be made available to Carstensz by cash contcabutions from its shareholders or by borrowangs by Carstensz

Bpon Serux1Ls wade avaslable by those sherehrxidars who dad not

put up cash. Tt seems to have been accepted by all thc co- venturers that the participation at this stage, at least, of Carstens" waS inevitable, because the bill sccomodation was only available to a company and not to the andividual partacipants. However 1t was not contemplated that investors would participate aun the Elmslea venture in like proportions to the1r shareholdings an Carstensz, as Ryan 12n particular acknowledged that he wished

a reduced interest and Rennes sought an increased interest.

Additionally all shareholders in Carstensz were most reluctant

to ancrease their interest in that company and in particular in the

The trial judge found that those vho provided cash, Paul Reardon and Gallagher, were entitled to participate in the Elinslea venture according to the amount of cash each paid, and those whe

provided security Ryan, Small and Rennes in accordance ''1th theo

amount of security each piovided. As to those Who provided sovurtec y Bp

the interest of each was subject to his fanding sufficient cash at the relevant time to discharge his security, or allowing che security to be realised, ro meet that amount. Again I would «qice that thas was the appropriate finding an this regard, though ao later appears, I am of opanion that an account may have to be taken, or an enquiry directed, for the purpose of determining

the manner and consequencies of implementing, 1n the events that

The fact that some participants introduced cash and cemc provided cemtuiiiy urtroduced a complacatien ot the outseb,

the tom Lpor tlich catch ate Pabd vere mews, 8S LU aly :

thereon or repayment thereof, agreed upon. Moreover those providing security had at least anitially, the understanding that either the loan by way of bill accommodaticn would be available for three years, or:that the bill itself could be rolled over during that period. 4n apprec2zstion that they would be oblaged to fund cash to discharge their securitios after only six months antroruced further complications, and 1n some instances cmbarrassment. Ultimately the Ryan group provided more than its share of cash, Small could not find any cash from his ovn resources and Rennes paid a portion only of his agiced share to Carstensz and th: balance direct tc Elmslea by way of an anterest bearing loan. The latter payment was made, Rennes acknowledged, for the purposes

of protecting his position in that a loan to Elmslea was morc secure, in his opinion, than a loan to Carstensz. As can be imagined these complications made more d:fficult, 1f not ampussible, an the absence of goodwill, the determination of the quantum of the interest each was to take in the venture. Ryan seems to hve seen the only way of ultimately implementing the plan as being through an adjustment of shareboldangs in Carstensz, that ccmnany being left to hold the flmslea shares beneficially, whereas Ronnies, Paul Reardon, Gallagher and Small were pressing for the amplu: car- ation of the proposal for a direct znterest in Elmslea. In the absence of a4 viable alternative acceptable to all, the wishes of the latter persons musk prevail and Lhe original scheme inust 3x. amplemented (one could aimost say 'cy-pres')} in a manner which does justice as Far as possible to the conflicting interests of

le follow. th. am seo Par oat the Pensa Laval gus ae

Geclaration to the effect that the 50 shares in ElmSlea wore hele

by Carstensz 1n the first instance and currently by the defendant Harry Cassidy upon trust for the following persons in the

proportions respectively set out beside their names, namely

Paul James Reardon 3.75W.P. Ryan Pty. Limited 31.75J.C. Rennes 20.06Estate of J.il. Small 12.00 ' 75 ' Vincent Gallagher 7.50 aun my view this 18 a correct finding subject however to this qualification, namely that the abovementioned interests of J.C. Rennes and Estate J.H. Small are subject to Lhe receipt by

Carstensz of their respective contributions to the funding

of the purchase monies of the Elmslea venture. As to Rennes he

gave security for $20,000 but the full amount of this sum has not been directly received in cash by Carstensz from Rennes. $8,000 was paid by Rennes direct to Carstens=s and he is entitled to credit for this amount. As to the balance of $12,000 this was paid by Rennes to Cimslea as an interest hbcacing loan, and subsequently made availablc by Elmslca to Carstensz in reduction of Elinsiea's andebtedness to Carstensz, and applied in satisfaction of the balance owing by Carstens2z to the bank on calling up of the bill.

An adjustment 1s necessary in this regard, otherwise the end result 1s that either Carstensz has contributed this amount or alternatiyi:-, ly it has been contributed by the other anvestors in that ' Carstensz' loan to Elmslea (which the trial judge ultimately declares Carstense holds in trust for the a2ivestors)has been reduced. This adjustment can be made by Elinsiea repaying the Joan

to Mennes, Who wall then male at available to Carstrnsz Which will

As to the interest of the estate of J.N. Small, no cash contribution has been made by Chas aivesto.r as L£ unde) stand the position, notwathstanding the ofter made by the Smalls by letter dated 21 March 1974 to pay $12,000 in exchange for a share certificate for the holding in Elmslea. Whe trial judge on this aspect of the case acknowledged that no payment had been made hy o.H. Small for his family's interest but found that the $12,000 had been provided as to $9,800 by other participants when the bank vas an the process of realising his security and as to $2,200 by Carstensz." He dealt with this situation in his reasons for judgment by 'commenting that "the provision of the amount of $2,200, as wath the amount of $9,800 was a matter between J.Ji. Small and those who provided the

In my opinion tnis comment does not adequately cover the position in that the sum of 59,600 paid by Elmsleca to Carstens;: ' bank account was debited to Carstensz 1.¢. applied in reduction of the balance of the monies owang by Elinslea to Carstensz. Therefore 1n the ultimate both the sum of $9,800 and the sum of $2,200 were provided by Crrsiensz. In that Carstensz has no ' beneficial interest in the shares it 1s appropriate, as acknowl¢ ducd Iby the Smali interests, that the sum of $12,000 be paid into Carstens2z. Carstensz would then doubtless return these funds ta Elmslea for the purpose of again adding to the loan funds which,

as abovementioned, are held in trust for the investors,

The trial jJudae also mado an order in respect of the sum of $53,150 oving by Flmslea to Carslencs, namely that Carsctenge Tule Las foe ma trulk Yor th oar oe mp, eh ure he Ll dee

1S no discussion in his reasons for judgment of this consequer tial

matter. Again ain Las regard unless agreement can be obtained

between the parties it may be necessary for accounts to be taken

or an enquiry held for the purpose of making the necessary and proper adjustments to this portion of the trial judge's order.

As mentioned above if the Small interests make payment of their $12,000 conetr2zbution and all the necessary adjustments to the loan

by Carstensz to Elmislea are made, the consequence will be that this

amount awing by Elmslea will be ancreased by $21,800 to $74,950

which sum vi11ll be held in my view in trust for the investors,in the

1 agree with the proposal of the Chief Judge that the parvies

should have the opportunity to bring in short minutes of order.

I certify that this ano the /2 preceding pages are a true copy of the Reasons tor Juagment of ivir. Justice F ishet_/,