SAVAGE v LUNN

Court of Appeal (NSW)|1997-09-18

SAVAGE v LUNN SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL

SHEPPARD AJA, HANDLEY and SHELLER JJA 8, 9,10,11, 12, 15,16, 17 and 18 September 1997, 9 March 1998

COMPANIES - shares - share register rectification - onus of proof EQUITY - laches - onus of proof - plaintiffs' knowledge of cause of action EVIDENCE - further evidence on appeal - may be led by respondents EVIDENCE - circumstantial - weight depends on combined strength FORGERY - requirement of fraud

PRACTICE - directions for filing of affidavits - witness held in reserve - attempt to call witness - discretion of trial Judge

The appeal arose out of a dispute over the ownership of shares in Cardiff Coal Company, which was incorporated under a private Act of

Parliament on 30 December 1863. It ceased mining in the last century but remained the registered proprietor of 299 acres of freehold land at Belmont until 1993. Title to the shares was claimed by the respondents (plaintiffs) through the will of their ancestor, James Lunn, who died on 31 August 1912 while registered as the owner of the disputed shares. The appellants (defendants) alleged that the shares were owned by Belmont Colliery Pty Ltd which had acquired them from a Mr Blackwood in April 1938, he having acquired them from the estate of James Lunn in November 1916. The respondents asserted that these transfers were forgeries. The trial Judge, acting on uncontradicted evidence from a handwriting expert, and circumstantial evidence covering the period from 1916 to 1977, found that the relevant share transfers, company minutes, and entries in the share register were forgeries, rejected defences of limitation and laches, and upheld the plaintiffs' claim. The defendants appealed.

HELD: Dismissing the appeal: (1) Where the plaintiff seeking rectification of the share register relies on an earlier registration of himself or a predecessor, the company has the onus of establishing its right to remove his name, or that of his predecessor, from the register. Cardiff had failed to establish a valid transfer from the Lunn estate to Mr Blackwood. (2) The defendant bears the onus of proof of laches. The defendant must prove that the plaintiff had sufficient knowledge of the facts and the interference with his rights to justify the commencement of proceedings. The defendants failed to establish that the plaintiffs or their predecessors had any knowledge of the forged share transfers until shortly before action was commenced. Lindsay Petroleum Co v Hurd (1874) LR 5 PC 221 and Erlanger v The New Sombrero Phosphate Co (1878) 3 App Cas 1218 applied; Orr v Ford & Anor (1988-89) 167 CLR 316 considered. (3) Applications to adduce further evidence on appeal after a trial or a hearing on the merits will only be granted by the Court on special grounds. While applications are usually made by appellants, there is no reason why they cannot be made by respondents. (4) Proof of intent to defraud is an essential

element of forgery. The standard of proof is not the criminal standard, but should take into account the seriousness of the allegation. Brott v The Queen (1991-92) 173 CLR 426, Briginshaw v Briginshaw & Anor (1938) 60 CLR 336, and Redlek & Ors v McElroy & Anor (1965) 112 CLR 517 applied. (5) In finding a fraudulent purpose behind falsified documents, the Court may look to circumstantial evidence. The weight to be given to circumstantial evidence depends on its combined strength. R v Exall (1866) 4 F & F 922 (176 ER 850) and The Bellhaven Peerage (1875) 1 App Cas 278 applied. (6) The trial Judge's rejection of the limitation defences was correct. Because a forged transfer is a nullity it does not affect the rights of the true owner and confers no cause of action. Time only starts to run when a demand for rectification of the register is refused. Barton v North Staffordshire Railway Co (1888) 38 Ch D 458 and Welch v Bank of England & Ors [1955] Ch 508 applied. (7) The trial Judge made no error in ruling that the appellants should not be permitted to lead evidence from a witness who had deliberately been in reserve contrary to directions for the filing of affidavits. When a Judge is called upon to consider whether a party should be permitted to rely upon an affidavit to be filed out of time, the overriding principle is the interests of justice. Brown & Anor v Petranker (1991) 22 NSWLR 717 applied.

This is an extraordinary case and for more than one reason. It concerns a dispute as to the ownership of shares in the long defunct Cardiff Coal Company (Cardiff), incorporated by a private Act of Parliament on 30 December 1863. It ceased mining in the 1860s but became the registered proprietor of 299 acres of freehold near Belmont in the 1880s (the land) which it retained until 1993.

The respondents claim title to 100 shares in Cardiff (the shares) through the will of their ancestor, James Lunn (the deceased), who became proprietor of the shares on 23 September 1885 and died on 31 August 1912 while still on the register. The respondents assert that the estate of the deceased (the estate) still owns the shares and that a purported transfer to Mr Ludovic Blackwood (Mr Blackwood), apparently registered on 22 November 1916, was a forgery. The appellants claim title through Belmont Colliery Pty Ltd (Belmont), which apparently acquired the shares on 6 April 1938 by transfer from Mr Blackwood. The respondents claimed that the transfer to Belmont was also a forgery.

Mr Leslie Savage (Mr Savage), one of the appellants, came on the scene in August 1973 when his company, Carrington Holdings Pty Ltd (Carrington), acquired the issued capital in Belmont on completion of a share sale agreement entered into in December 1972. Belmont was in occupation of the land, having originally gone into possession under a title derived through a lease or agreement for lease granted by Cardiff in 1910. Belmont had long since ceased to pay rent and had a possessory title (see Spark v Whale Three Minute Car Wash Pty Ltd (1970) 92 (WN) (NSW) 1087), but at that time it could not obtain a registered title (Spark v Meers & Ors [1971] 2 NSWLR 1).

The vendors of the shares warranted in the sale agreement that Belmont had been in exclusive possession of the land since it was incorporated in 1937, and that its shareholders and their predecessors had been in occupation since 1918. They also warranted that no trace of Cardiff had been found "for upwards of 40 years". Mr McPhail, a solicitor practising in Newcastle, acted for all parties on this sale. He continued thereafter to act for Mr Savage in relation to Belmont and the land until March 1975.

In January 1975 a law clerk employed by Mr McPhail caused a company to be incorporated under the name Cardiff Coal Company Pty Ltd. When the existence of this company came to the knowledge of Mr Savage, he arranged for its shares

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to be transferred to Belmont and himself. In July 1975 he caused this company to register Cardiff Coal Company as a business name.

Mr Savage claimed that in November of that year Mr Tom Robertson handed him some Cardiff documents which Mr McPhail had asked him to deliver which included its deed of settlement and share register and its bound minute book. He said that after a short inspection he appreciated that Belmont was a shareholder in Cardiff but he put the documents aside until February 1976. He then inspected the minute book and share register with some care and learned for the first time that Belmont controlled Cardiff. He decided to revive Cardiff and held a special general meeting on 7 April 1976 at which he and his son were elected directors. Minutes were taken but they were not entered in the minute book.

On 17 May 1976 Mr Savage attended at the office of Allen Allen and Hemsley (Allens) by arrangement following a letter to that firm on the letterhead of Cardiff Coal Company, the business name he controlled. In this way he obtained possession of a metal deed box containing documents of Cardiff that had been in Allens' possession. According to a card retained by Allens, the box contained two land grants, a large bundle of correspondence, Cardiff's deed of settlement, cost sheets, its minute book, cargo book, cash book, share ledger, letter book, share certificate book, and miscellaneous papers.

Mr Savage claimed that the box did not contain the land grants, minute book or share register. The fact that the grants were missing was not in dispute because the following year Mr Savage caused Cardiff to apply to the Registrar-General for new certificates of title. There was, however, a strong challenge to his evidence that the box did not include the minute book and share register.

In due course Cardiff obtained new certificates of title. The revival of Cardiff came to the attention of the respondents in some way which was never established, and in 1989 they commenced proceedings to enforce their title to the shares.

The proceedings were heard by Hulme J who held that the relevant Cardiff share certificates, entries in its share register, and the handwritten minutes in its minute book for all meetings after April 1910, had been fabricated and signatures on these documents had been forged. He held that Mr Blackwood had not acquired the shares in 1916 and Belmont had not acquired them in 1938.

Mr Arthur Wigram Allen (Mr Allen), Cardiff's solicitor for many years, its chairman in 1909-1910, and a partner in Allens, kept a personal diary until shortly before his death on 2 October 1941. It was later deposited in the Mitchell Library from where it was obtained by the respondents and tendered. It contained many references to Cardiff and its affairs but none to the meetings or transactions which were challenged. Belmont had no record of owning or paying for the shares, and had not acted as owner of Cardiff between 1938 and 1973.

The Judge upheld the respondents' claim to the shares and ordered that the register be rectified by removing the name of Belmont and restoring that of the deceased. He ultimately found that the forgeries had either occurred in or about 1939 at the instigation of Mr Allen, or in or about 1976 at the instigation of Mr Savage, and that the latter was more probable.

It is necessary to trace the events affecting Cardiff and the shares since 1909. In a letter to shareholders dated 1 September 1909, Allens, Cardiffs solicitors, stated that the land was Cardiffs only asset, it had a number of liabilities, and they canvassed the possibility of a sale. On 30 December 1909, Cardiff agreed to lease the land to Archibald Forsyth, Thomas Evans and Valentine Geary (the lessees), and to enter into a contract to sell it to them subject to such lease.

On 15 April 1910 Cardiff executed a lease in favour of the lessees which was never registered, and also agreed to sell them the land for £10,465 "payable upon the terms and conditions therein set forth" (the contract of sale). These transactions are referred to in the minutes of a meeting of directors held that day which were not challenged.

Newcastle-Belmont Collieries Ltd (Newcastle-Belmont) was incorporated on 17 May 1910 and became the first assignee of the benefit of the April 1910 agreements. According to Allens' trust ledger (ledger sheets) for Cardiff, Newcastle-Belmont made payments to the firm up to July 1913 on account of purchase money and interest under the contract of sale. The ledger sheets show that these amounts were distributed to some of the Cardiff shareholders. Newcastle-Belmont went into liquidation on 12 September 1913 but in the meantime there had been further assignments of the benefit of the contract of sale ending in assignments on 31 October 1912 and on 20 March 1913 to The Co-operative Pty Ltd of which Mr Blackwood was a director.

The deceased died on 31 August 1912 and on 24 February 1913 probate of his last will was granted to his sister, Mrs Parry. The will left the estate to the deceased's children living at his death (the beneficiaries). The estate solicitor was Mr J Arthur Wood. The stamp affidavit disclosed real estate at Kahibah, the shares valued at 35/- each, and a debt of £300 to Robert Parry. On 8 May 1914 Mrs Parry said in an affidavit that she had paid the estate's debts and expenses.

Allens' 1916 ledger sheets for Cardiff show a number of pro-rata payments to shareholders including, on 3 November, "Lunn dec'd - Chq to JA Wood Solicitor... £325". These created a substantial debit balance in the trust account. Some of these payments are described as "To Purchase money for shares" and "Sale of shares". The debit balance was cleared on 30 June 1924 when an amount of £5,000 was transferred from the account of J Blackwood & Son Ltd (the Blackwood company).

The 1916/1917 ledger sheet for that company shows a credit "1916 August 21 By chq of Company re Cardiff Coal Co... £6,000". The 1924 ledger sheet for this company showed on 30 June, "To Cardiff Coal Co amount received on 21/8/16. Chq of Company £6,000 less chq to Ludovic Blackwood 24/1/1919 £1,000".

There were no minutes in Cardiff's minute book between April 1910 and April 1916. The minutes of a general meeting held on 19 April 1916 which were challenged state that the contract of sale had been terminated because the purchasers failed to make the required payments, and that Mr Blackwood had offered to buy the shares in Cardiff for £3.5.0 each. A meeting of directors held the same day resolved that the company's solicitors be instructed to draw up an agreement for Mr Blackwood's consideration requiring him to deposit £6,000 in trust prior to the purchase of the land or the shares. Mr Allen was shown as present at both meetings and apparently confirmed the minutes. The minutes refer to the possibility that Mr Blackwood might require the shares to be transferred to the Blackwood company.

At a meeting of directors on 22 August 1916, Mr Allen is said to have advised that an agreement had been signed with Mr Blackwood and £6,000 had been lodged in trust. The minutes also record that a letter from Allens setting out proposed amendments to the Deed of Settlement had been read and discussed. At a special general meeting of the same date, it was noted that Mr Blackwood had lodged £6,000 in trust to cover the purchase of shares, and the chairman said it was necessary to amend the Deed of Settlement and moved the amendments. Mr Allen purported to confirm the minutes.

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According to the minutes of a special general meeting held on 5 October 1916, the amendments to the deed adopted on 22 August were confirmed. Mr Allen is said to have advised that the board was in a position to authorise transfers of shares to Mr Blackwood "& payments would be disbursed as signed transfers came to hand". He purported to confirm the minutes.

The minutes of a meeting of directors on 22 November 1916 record approval of transfers of shares to Mr Blackwood, including shares described as "JA Wood 100 Promoters". They appear to be signed by Mr Blackwood. Minutes of a general meeting on 5 April 1917 record that he and Mr J Blackwood were elected directors. Minutes of a directors' meeting held the same day record Mr Allen's resignation as chairman and Mr Blackwood's election. Further transfers to Mr Blackwood were also approved. The minutes record that Mr Blackwood held 1,175 of 1,300 promoters' shares and 375 of 675 subscribing shares (1,550 in all). Both minutes appeared to be signed by him.

The next minutes, after a gap of 22 years, purport to record a special general meeting on 6 April 1938 at which Mr Blackwood, Mr J Blackwood and Mr Allen were said to be present. Mr Blackwood was elected chairman and explained that the purpose of the meeting was to elect directors to deal with the transfer of shares to Belmont. Minutes of a directors' meeting held the same day record approval for the transfer of 175 shares from AW Allen & Ors to Mr Blackwood and of 1,550 shares from Mr Blackwood to Belmont. They appear to be signed by Mr Blackwood.

On 10 May 1938, according to the minute book, a special general meeting was held at which Mr William Robertson was elected chairman.

He and Miss Laura Robertson were shown as representing 1,720 shares. Minutes of a directors' meeting the same day record a resolution that arrangements for Belmont's use of the land be continued for ten years. Both minutes purport to be signed by Mr Robertson.

The share register showed that the deceased became proprietor of the shares on 23 September 1885 and that they were transferred to Mr Blackwood on 22 November 1916. Mr Blackwood was shown as the holder of 1,175 promoters' shares acquired on 22 November 1916 and 5 April 1917 and 550 subscriber shares acquired on 12 November 1916, 5 April 1917 and 6 April 1938, and his purported signature appears in the column "Registered By". As from 6 April 1938 the holder is shown as Belmont, registered by "William Robertson".

Share certificates 10 and 17 dated 5 April 1917, which certified Mr Blackwood as the holder of 375 subscribing and 1,175 proprietors' shares, were apparently signed by L and J Blackwood. Share certificate 11 of 6 April 1938 certified Mr Blackwood as the holder of a further 175 subscribing shares and purport to be signed by L and J Blackwood.

On the reverse side of the share certificates were transfers dated 6 April 1938 from Mr Blackwood to Belmont of 375 subscribing shares for £843.15.0, 1,175 proprietors' shares for £2,643.15.0, and 175 subscribing shares for £393.15.0. They bore what appeared to be Belmont's common seal and the signatures of L and J Blackwood, W Robertson, L Robertson, and C E Ingall (all since deceased). They had impressed duty stamps of $4.25, $13.25 and $2 respectively. Needless to say, these transfers could not have been stamped until after February 1966 when Australia adopted decimal currency. The date and circumstances of the stamping were not established. Although pre 1916 share transfers obtained by Mr Savage from Allens on 17 May 1976 were available, the 1916 and 1917 transfers,

including the transfer from Mrs Walsh to Mr Blackwood, and the transfer of 175 shares from AW Allen & Ors to Mr Blackwood on 6 April 1938, were not.

Mr Allen's personal diary referred to meetings of Cardiff or its board on 1 September 1909, 7 January 1910 and 15 April 1910, when the minutes record that meetings were held. He also referred to the affairs of Cardiff in 1913, 1918, 1919, 1928, 1930 and 1938. He did not record his attendance at any meeting of Cardiff or its board in 1916, 1917 and 1938 when the minutes record that meetings were held at which he was present.

The Blackwood company was wound up voluntarily on 30 August 1920 and the liquidator sold its assets to a new company of the same name. The minute books of these companies in evidence contain no reference to Cardiff, shares in Cardiff, the land or the money paid to Allens in 1916.

Lesley Avonia Perry (Mrs Perry) was a director of Belmont from 1959 until 1972 and was company secretary between 1961 and 1970. The other directors were Messrs John and Tom Robertson. John died in 1969 and was replaced by Jennifer Stallard. Mr W Robertson and Miss L Robertson, who were referred to in the minutes of 10 May 1938, died on 13 September 1939 and 13 December 1943 respectively.

Mrs Perry had never heard any suggestion that Belmont owned shares in Cardiff. The Judge said that this, and Belmont's minute book, ledger and journal, provided compelling evidence that it did not acquire shares in Cardiff and did not pay the consideration referred to in the 1938 transfers. It follows that the share transfers in favour of Belmont were not stamped prior to its takeover by Carrington and it may be inferred from Mr Savage's evidence that they were stamped after 17 May 1976 when, according to his evidence, he collected them from Allens in the deed box.

Mrs Perry said that Mr McPhail had attempted to locate the owners of the shares in Cardiff without success. While she was secretary, Belmont had only one common seal which was different from that used on the 1938 transfers and Ex K, the typewritten amended Deed of Settlement dated 6 April 1938. An imprint of the genuine seal appeared on a document in evidence.

Mr Blackwood died on 2 July 1939. The stamp affidavit for his estate did not refer to any interest in Cardiff or the land despite his caveat 521381 lodged on 16 or 17 December 1919 which claimed an interest as purchaser under an agreement for purchase dated 21 August 1916. This was the day, according to the ledger cards, that the Blackwood company paid £6,000 to Allens. On 13 January 1920 Mr Geary lodged a caveat claiming an interest in one-fourth of the land referred to in Mr Blackwood's agreement of 21 August 1916.

The evidence included a carbon copy of a typed document headed "Cardiff Coal Company Particulars of Moneys Received and Disbursed", which was among the documents obtained by Mr Savage from Allens on 17 May 1976. This showed in the debits for 1916 amounts apparently paid to shareholders as "Purchase money for shares" similar to the entries in Cardiff's ledger sheets. On the credit side was £6,000 paid by the Blackwood company cheque on 21 August 1916 "less cheque to Ludovic Blackwood 24/1/1919 £1,000". Mr Tytell, an expert document examiner, concluded, without challenge, that this was typed on paper in use at Allens in or after mid-1930 on a typewriter made between 1908 and 1923 and in use at Allens at that time. He also concluded that Ex K was typed on a typewriter manufactured between 1930 and the early 1960s, possibly in use at Allens.

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On 16 June 1989 a statement of claim was filed in the Equity Division on behalf of the personal representatives of nine of the eleven beneficiaries. The other beneficiaries were Mabel and Vera Lunn, but Mabel's personal representative was a defendant along with Mr Savage, Belmont, Carrington and Cardiff.

On 10 May 1993 an amended statement of claim was filed which pleaded that Mr Savage, Belmont, Carrington and a new defendant, Tudor Land Pty Ltd (Tudor), claimed that Belmont owned the shares. The plaintiffs pleaded that Tudor had become the majority shareholder in Belmont. Paral4 of the amended statement of claim was as follows:

"[Mr Savage, Belmont, Carrington and Tudor] have no interest, direct or indirect, in any of the shares in [Cardiff].

[Belmont's] alleged ownership of shares in [Cardiff] is dependent upon a number of documents referred to in schedule 'A' hereto which purport to evidence the transfer of the said shares to Mr Ludovic Blackwood in 1916, 1917 and 1938 and the transfer of those shares from Mr Blackwood to [Belmont] in 1938. The Plaintiffs say that these documents are not genuine and are fraudulent".

The schedule "A" documents included minutes of meetings of proprietors and directors from 19 April 1916 to 10 May 1938, entries in the share register for transactions after 1910, share certificates issued in 1917 and 1938, and the amended Deed of Settlement (Ex K). A declaration was sought that the plaintiffs had an equitable interest in the shares.

The hearing began on 14 February 1994 when Mr McAlary QC for the plaintiffs applied for letters of administration of the estate with the will annexed. On 24 February the Judge granted letters of administration durante absentia to the plaintiff William Herbert Lunn (the administrator). The hearing continued until 28 February when the plaintiffs were given leave to file an amended statement of claim. On the same day a third and then a fourth further amended defence were filed. The defendants relied in the latter upon the Limitation Act 1623, s15 and s47 of the Limitation Act 1969 and s69(3) of the Trustee Act 1925, laches, gross delay, acquiescence, estoppel by deed and asserted that the plaintiffs never had an interest in the shares.

The Judge delivered reasons for judgment on 14 October 1994 (the 1994 judgment). The most important issue was the authenticity of the documents which evidenced the chain of ownership from the estate to Belmont. The Judge noted that Mr McAlary sought, on behalf of the administrator only, orders for rectification of the register, an account, and the appointment of a receiver to Cardiff. In essence the plaintiffs' claim was that the deceased was a shareholder, his name was removed from the register without authority, and the administrator was entitled to have the deceased restored to the register. His Honour continued:

"The complaint against [Cardiff] is that its register is erroneous and should be rectified. It is implicit that the removal was by, or at the instigation of, someone, who may have been Mr Savage. Except to the extent to which [Carrington] and [Tudor] may be responsible for Mr Savage's actions, have derived benefits

therefrom, or be affected by the removal of Mr Lunn's name there is no particular claim against them. The other Defendants are joined because of their actual or potential interest in the result or in the consequences of the forgery rather than because of conduct on their part".

Other parts of the judgment were headed: 3.2 Estoppel, 3.3 Accrual of any cause of action, 3.4 Statutes of Limitation, 3.5 Trustee Act 1925, 3.6 Limitation Act 1969, 3.7 Laches, Acquiescence and Delay, 3.8 He who seeks equity must do equity, 3.9 Conclusions.

The defence of estoppel was based on a Deed of 4 January 1947 by which Mrs Parry appointed Edwin Clyde Parker Lunn and John Charles Lunn as new trustees of the estate and retired. The Deed recited that the executorial duties had been completed. The new trustees died prior to the commencement of the proceedings. The Judge disposed of this defence by saying there was no evidence that the defendants had relied on the Deed.

In 3.3 he referred to what he described as matters of complexity in the arguments, and said:

"These factors and my ultimate decision to publish these reasons and stand the matter over for a period lead me to the view that the conclusions expressed in this section of my reasons should be regarded, at this stage at least, as tentative".

He then considered when the forgery occurred, and after excluding a number of possibilities said, "One is left, it seems to me with Mr Allen and/or Mr Savage as participants in the forgery".

"There are thus arguments for and against the forgery having been done by, or at the instigation of, each of Mr Allen and Mr Savage. If the former, the forgery occurred most probably in about 1939: if the latter, it occurred during 1976. It is at one or other of these times that, it seems to me, any cause of action the plaintiffs or their predecessors in title may have, arose....

However, in light of the way the case has been pleaded and argued before any further addressing of the issues of when, and by whom, the forgery occurred, it seems to me I should consider the application of the limitation of action provisions and the defences of laches, acquiescence and delay".

After dealing with various limitation defences, which he rejected, his Honour considered laches, acquiescence and delay. He said that Mr McAlary's primary submission was that these defences only applied to claims for equitable relief and the plaintiffs' claims were not of this description. The Judge concluded:

".. there is nothing in the fact that the plaintiffs claim is under s212 of the Corporations Law which prevents reliance on laches, acquiescence and delay as defences to the plaintiffs' claim. This conclusion makes it unnecessary for me to consider whether [Cardiff] is a company to which the Corporations Law applies. If that law is not applicable it would in my view be inappropriate to hold Mr McAlary QC to his denial of any claim for any equitable relief by way of rectification, particularly when I have decided not to make final orders when delivering these reasons".

On the basis of the 1916 ledgers, the Judge thought that Mrs Parry probably sold the shares, executed a transfer and received the purchase money. He continued:

"Providing Mr Savage is entirely free of any involvement in any forgery the inaction of the representatives of James Lunn has no doubt also been a factor contributing to Mr Savage or his companies expending, at least since 1976, the

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time energy and money to which I have referred. In my view if the forgery occurred in 1939 it would be both inequitable and unreasonable for the plaintiffs to succeed.

On the other hand if the cause of action accrued in 1976 it arose from forgery by, or at the instigation of, Mr Savage".

This led on in para3.9 to the following conclusions amongst others:

"(ii) (Tentatively) the forgery was effected either -

(a) in about 1939 by or at the instigation of Mr Allen

(iii) (Tentatively) any liability [Belmont] has accrued no earlier than 1976.

(vi) The plaintiffs' claim under s212 of the Corporations Law, or otherwise for rectification of the... share register, is liable to be defeated by equitable defences.

(vii) If the forgery occurred in 1939, the defendants are entitled to succeed by reason of the defence of laches.

(viii) If the forgery occurred in 1976, the plaintiffs are entitled to succeed".

The case was stood over to enable the parties to consider the reasons.

On 24 October 1994 Mr Callinan QC for the defendants asked the Judge to dismiss the action because the possible issue raised in the tentative findings had neither been pleaded nor litigated. Mr White for the plaintiffs stated that they wished to amend. The Judge said that it seemed to him that on the pleadings the plaintiffs were not entitled to address on laches. On 16 December he granted the plaintiffs conditional leave to amend to include an allegation that the forgeries were committed by or with the connivance of Mr Savage. On 20 February 1995 this Court granted the defendants leave to appeal. The plaintiffs abandoned the amendment and the defendants abandoned the appeal.

On 28 June 1996 the Judge delivered further reasons for judgment (the 1996 judgment) and dismissed a motion by the defendants that he disqualify himself. He rejected the plaintiffs' submission that the defence of laches did not apply and confirmed that this defence succeeded unless the forgery occurred in 1976. He held that the onus of proving laches lay on the defendants and he was not persuaded that the forgery did not occur in (or about) 1976 by or with the connivance of Mr Savage.

Final orders were made on 6 September. Mr Savage, Belmont, Carrington, Cardiff and Tudor appealed from those orders and the 1994 and 1996 judgments. The grounds of appeal included error in finding that the challenged documents were forgeries, error in making findings as to the identity of the forger, error in rejecting the defences of laches, acquiescence and limitation, error in ordering rectification, procedural unfairness, apprehended bias, and error in failing to order the plaintiffs to answer certain interrogatories. The appellants did not press an application to adduce further evidence.

The respondents filed a notice of contention which raised issues about laches, and challenged the findings that the contract of sale had been terminated and that Mrs Parry had sold the shares in 1916. They also applied to adduce further evidence.

Did the statement of claim entitle the respondents to conduct the case as they did?

The Judge's finding that, if the forgeries occurred in 1939, the defendants were entitled to succeed on the defence of laches meant he could not escape the issue of when, and by whom, the forgeries were committed "and the associated topic of the way in which the case had been pleaded".

The only allegation of fraud was in the particulars to paral4 of the amended statement of claim. The Court was told that the pleading took this form because plaintiffs' counsel thought that the identity of the forger could not be proved, and as a matter of professional ethics should not be alleged.

Fraud must be specifically pleaded and particularised: (SCR Pt15 r13 and Ptl6 12). In Middleton v O'Neill & Ors (1943) 43 SR (NSW) 178 at 184 Jordan CJ said: "a statement of claim is demurrable if it merely alleges fraud without pleading the facts alleged to constitute it... On the other hand, if facts amounting to fraud are plainly alleged it is no defect... if the word 'fraud' is not used...". See also Banque Commerciale SA en Liquidation v Akhil Holdings Ltd (1990) 169 CLR 279 at 285. Fraud should be properly pleaded and not merely particularised and paral4 was defective but the point was never taken. The appellants' complaint was that the Judge considered that it was open to him on this pleading to find that Mr Savage was responsible for the forgeries.

In his affidavit of 9 November 1993 (para52) read at the trial, Mr Savage said that in November 1975 Mr Tom Robertson gave him a bound deed of settlement and share register (DD4) and a bound minute book (DD3) which he said Mr McPhail had asked him to deliver. These books, when tendered, contained the signatures which his Honour found were forgeries and entries he found were fabricated. Mr Savage said, "The documents (DD3 and DD4)... are still in my possession and are presently in an identical state to their state when I first received them". He was not cross-examined on these statements because, we were informed, plaintiffs' counsel considered that he had no proper basis for suggesting that Mr Savage was responsible for the forgeries.

"Tn para52 and para56 of his Affidavit of 9 November 1993, Mr Savage made assertions to the effect that the minute book, the share register, the three share certificates and transfers and two share scrip books 'are presently in an identical state to their state when I first received them.'... I need only to believe him for the onus the Defendants bear to be discharged.

However, the findings I have made previously concerning Mr Savage's evidence on a number of significant matters, including the circumstances in which two of the documents just mentioned came into his possession show that at least on some matters I did not. In light of my findings concerning Mr Savage's credibility I doubt if any Judge could be satisfied with the accuracy of his evidence that the documents... remain in an identical state. I certainly am not.

Nevertheless, Mr Savage was not cross-examined on this evidence and, according to the Defendants' submissions 'therefore, the uncontroverted and unchallenged evidence at the trial is that the irregular signatures came onto the documents prior to them coming into Mr Savage's possession'."

The substantive issue in the 1996 judgment was laches on which, in the Judge's view, the defendants had the onus. The plaintiffs could have said, but did not, that it was no part of their case to demonstrate who the forger was or when the forgery took place. However Mr Savage's evidence was an essential part of the defendants' case, as then propounded, being inconsistent with him being the

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forger, and inconsistent with the forgery having taken place in 1976. The question is whether the plaintiffs, not having cross-examined on this evidence, were bound by it.

Mahoney JA considered this question in Seymour v Australian Broadcasting Commission (1977) 19 NSWLR 219, and at 236 said:

"Where, in a civil case, a witness is not cross-examined, it may normally be assumed that the evidence of that witness is not in contest. Therefore... a party who has not cross-examined a witness will not normally be entitled to submit in address that the witness's evidence should not be accepted. But the circumstances of the particular case may negative such an assumption".

Prima facie the Judge's findings about the date and source of the forgeries were not open while this part of Mr Savage's evidence remained unchallenged by cross-examination. However we have concluded that these findings did not cause a mix-trial because the Judge erred in holding in the 1994 judgment that the defendants should succeed on laches if the forgery occurred in 1939. In our judgment the plaintiffs were entitled to succeed on the findings, not described as tentative, in the 1994 judgment, which were not affected by the later irregularities.

On 15 December 1993 the Judge granted the defendants leave to administer interrogatories which Mr Edward Lunn then answered on behalf of all plaintiffs, except for 5, 6, 7, 8, 11 and 12. These were not directed to the date the plaintiffs became aware of the fraud.

On 2 February 1994 the Judge ordered the plaintiffs to answer the interrogatories personally, and on or about 9 February each filed verified answers which included objections to answering 5, 6, 7 and 8. On 14 February, the first day of the hearing, the defendants were granted leave to administer other interrogatories which were duly answered. The plaintiffs were never interrogated as to when they first became aware of the fraud, and no issue as to the sufficiency of the objections to 5, 6, 7 and 8 was ever raised. There is no substance in this ground of appeal.

Refusal to allow the affidavit of Robert James Savage to be read

The affidavit of Mr Savage of 9 November 1993 annexed his statutory declaration of 25 February 1977, lodged in support of the application for new certificates of title. Mr Savage there declared that the box received from Allens on 17 May 1976 included "one old minute book" and "one old share register'. There was thus a major inconsistency between para52, previously referred to, and the statutory declaration which engaged Mr McAlary's attention during his cross-examination of Mr Savage on 22 and 23 February. The morning after this cross-examination concluded, Mr Callinan sought leave to file and read an affidavit of Mr Robert Savage.

Mr Robert Savage said in his affidavit that he recalled his father showing him the minute book and share register at the end of 1975, that the books were then placed in their office safe, and in early 1976 he and his father read them.

Mr McAlary said he objected to the affidavit though he assumed that the Judge would admit it. The Judge asked why the affidavit was not put on earlier and Mr Callinan stated that it arose from questions put to Mr Savage about the date the books came into his possession and stated that "yesterday evening" was the first occasion on which it became apparent that there would be an issue about this

matter. As an alternative he offered to call the witness. Asked by the Judge whether consideration was given to filing an affidavit by Mr Robert Savage during the preparation of the case, Mr Callinan stated that he had kept Mr Robert Savage out of court so that, if an issue was raised in relation to the evidence of his father, he could be called without the criticism that he had heard that evidence.

Orders had been made for the filing of affidavits but, as the Judge recognised, failure to comply with time limits in such orders did not necessarily preclude the use of an affidavit prepared later. He continued:

"Tt is argued by Mr Callinan QC that... that affidavit is directed to certain evidence of Mr Leslie Savage which was the subject of cross-examination by Mr McAlary, in particular Mr Leslie Savage's evidence that certain of the documents tendered in the proceedings were received by him from a Mr McPhail.

Mr Cullinan submitted that prior to the cross-examination of Mr Leslie Savage there was no indication that that evidence was to be challenged. In this, it seems to me that Mr Cullinan QC is correct. However, it is clear that the plaintiffs' case was that the documents relied on by Mr Savage and the other defendants for what I might call their title were to be the subject of challenge, it being contended that a significant number of them were forgeries.

In that situation, it seems to me that Mr Savage's possession or circumstances of acquisition of all of those documents was a relevant factor for the defendants to address evidence to. The defendants elected - and I think that is an appropriate term - not to serve an affidavit of Mr Robert Savage, notwithstanding apparently Mr Robert Savage can give evidence on that topic.

A decision whether or not to adduce evidence from a particular witness is often

taken with a consciousness of the advantages and disadvantages of using that witness's evidence. In the circumstances of the issues in this case and the evidence now sought to be obtained from Mr Robert Savage, it does not seem to me that I should give leave to adduce evidence from a witness in respect of whom a conscious decision was made not to use him.

It seems to me that though there has been, prior to the cross-examination yesterday, no suggestion directed at Mr Leslie Savage personally, as opposed to a suggestion that what I might call the forgery was made by a person or persons unknown, of whom he may have been one, this latter suggestion is such as to indicate to the defendants that they should adduce all evidence on the question of authenticity of documents upon which they sought to rely by affidavits served in accordance with the Court's orders".

The Judge also refused the alternative application.

The appellants submit that the Judge should have received the affidavit and that they are entitled on this ground to a new trial. When a judge is called upon to consider whether a party should be permitted to rely upon an affidavit filed out of time, the overriding principle is the interests of justice. In Brown & Anor v Petranker (1991) 22 NSWLR 717, this Court considered a decision refusing leave to recall a witness. At 728 Clarke JA said:

"... Ordinarily the interests of justice would favour the grant of leave where the evidence sought to be adduced had been overlooked and the other patty would not be prejudiced by the fact that the additional evidence is to be given after cross-examination and re-examination of the witness has been completed.

URJ SAVAGE v LUNN (Sheppard AJA, Handley and Sheller JJA) 13

On the other hand if counsel had deliberately refrained from leading the evidence when the witness was being examined in chief in the hope of gaining some tactical advantage or it appeared that the opposing party would suffer prejudice if leave was granted there would be sound reasons for rejecting the application".

Mr McAlary did not suggest that the plaintiffs would be prejudiced if the affidavit were read, but the evidence of Mr Robert Savage had been held back until his father had left the witness box. If a trial proceeds on affidavit evidence, each party has the advantage of knowing the opponent's evidence-in-chief in advance. It is obviously unfair if one party withholds evidence until it has seen how the trial has proceeded. A judge may properly refuse to allow a party to read an affidavit produced in such circumstances to prevent that party obtaining an inappropriate tactical advantage from disregard of court orders. Other judges may have taken a different view, but that is beside the point. The Judge made no error in ruling that the defendants should not be permitted to lead evidence from Mr Robert Savage when a deliberate decision had been made to keep him in reserve.

After a judge has heard the evidence and the parties' submissions, either on the whole case or on separate issues, he or she should deliver reasons for judgment which dispose of the issues. A judge should not make "tentative" findings or reach "tentative" conclusions preliminary to a further final judgment on the same issues. Parties recalled for further argument in these circumstances may well feel that the judge has already made up his or her mind and entertain a reasonable apprehension of pre-judgment. A judge, after reserving judgment, may seek further assistance before delivering his reasons, but in that situation the result remains open. Any conclusions the judge may have formed remain private and, since there is to be further argument, they also remain tentative.

The course which his Honour followed was aggravated by the uncertainty surrounding the allegation of forgery and fraud. If the question whether the forgery took place in 1939 or 1976 had been critical, it should have been fully addressed before the Judge expressed views about the result.

A fair reading of the 1994 judgment suggests that the Judge had all but made up his mind on this question. This was confirmed by his judgment of 16 December 1994 on the plaintiffs' application for leave to amend the statement of claim. The Judge said:

"On [the forgery] issue the Plaintiff... succeeded. I found the forgery had occurred either in about 1976 by or at the instigation of [Mr Savage] or in or about 1939 by another person".

The forgery and fraud issues should have been properly defined and one set of reasons should have been delivered which finally disposed of the substantive issues. Instead the appellants were required to re-argue questions against the background of tentative views and express findings about Mr Savage's credit. However for reasons which will appear, in our opinion these irregularities do not require a new trial.

The respondents applied to adduce further evidence to support the challenge, in their notice of contention, to the Judge's findings that the contract of sale had been terminated and that Mrs Parry had sold the shares in 1916. The further evidence included documents annexed to the affidavit of Dianne Gaye Dowling (Mrs Dowling) of 9 June 1997 and Larry Raymond Hafey of 2 September 1997.

Mrs Dowling was a great niece of Mr Geary, one of the purchasers under the contract of sale, who had died on 13 August 1933. His personal papers passed to his wife, then to his daughter, then to Mrs Dowling's father, then to Mrs Dowling and her sister. The documents annexed to her affidavit related to Mr Geary's claims to the land, and tended to establish that Mr Blackwood never became a shareholder in Cardiff, and Cardiff did not terminate the contract of sale.

Mrs Dowling paid little attention to these papers until she watched an interview with Florence Lunn on "A Current Affair" on 24 October 1996 when Mr Geary, Mr Blackwood and land at Belmont were mentioned. She contacted Channel 9 and Florence Lunn then contacted her. Until she saw the programme she did not know of the parties or the proceedings.

Mr Hafey, the respondents' solicitor, did not know of Mrs Dowling's existence, her relationship to Mr Geary, or that she held these papers until November or December 1996. He was instructed that the respondents did not become aware of these matters until shortly before he did.

S75A (7) of the Supreme Court Act enables this Court to receive further evidence on appeal, but subs(8) provides that where the appeal is from a judgment after a trial or hearing on the merits, the Court shall not do so except on special grounds. This ordinarily involves three requirements. It must be shown that the late discovery of the evidence was not due to any lack of diligence before or during the trial, the evidence must be credible and there must be a high degree of probability that it would lead to a different result.

Applications to adduce further evidence are normally made by appellants, but there is no reason why a respondent should not seek to adduce further evidence to support findings in his favour or attack findings which were adverse. Tamas v Streimer (CA 10/7/81, reported in Ritchie, Vol 2, paral3027) establishes that further evidence may be admitted more readily where it can be dealt with on the hearing of the appeal and will not require the whole case to be tried again.

The appellants relied upon the affidavit of Ms Yeats that some of the material was available for public access in the State Archives. However, the bulk was only available through Mrs Dowling, and the most diligent inquiry before trial was unlikely to reveal the existence of either body of material. The appellants also submitted that it merely evidenced claims by Mr Geary, was unreliable and confusing, and incapable of displacing the findings under challenge.

The appellants objected to annexures B, D, E, F, & G to Mrs Dowling's affidavit on the further ground that they would not have been admissible at the trial in 1994 but were only made admissible by the Evidence Act 1995(s63, s69) which did not apply as the trial commenced before that Act came into force (Evidence (Consequential and Other Provisions) Act 1995). However they advanced no reason why the 1995 Act should not apply to evidence in an appeal by way of rehearing heard after the Act came into force.

There are no living witnesses to the events of which the documents speak which occurred many years ago. The finding his Honour made about the sale of the shares was based on documentary evidence. In all the circumstances we think that the further evidence should be admitted.

The critical question in this appeal is whether this Court should confirm his Honour's finding that the challenged documents were forgeries. In Brott v The Queen (1991-92) 173 CLR 426 at 445, McHugh J referred to R v Parkes and Brown (1797) 2 Leach 775 at 785 (168 ER 488 at 492), where Grose J said that

URJ SAVAGE v LUNN (Sheppard AJA, Handley and Sheller JJA) 15

forgery was the false making of an instrument with intent to defraud. The necessity for the element of fraud was recognised in the particulars to paral4 of the amended statement of claim.

Fraud is, of course, a serious matter. Although proof need only be on the balance of probabilities, the seriousness of the allegation must be taken into account by the tribunal of fact when determining whether it is satisfied that the allegation has been established. See Briginshaw v Briginshaw & Anor (1938) 60 CLR 336 per Dixon J at 362 who said that "In such matters 'reasonable satisfaction' should not be produced by inexact proofs, indefinite testimony, or indirect inferences". This was emphasised again in Redlek & Ors v McElroy & Anor (1965) 112 CLR 517 but the Court said at 521 that no matter how grave the fact to be found in a civil case, the mind had only to be reasonably satisfied and had not to attain that degree of certainty which was required for a conviction on a criminal charge. In Neat Holdings Pty Ltd v Karajan Holdings Pty Ltd (1992) 67 ALJR 170 at 171 and Krakowski & Anor v Eurolynx Properties Ltd v Anor (1995) 183 CLR 563, the Court sounded a note of caution at an over literal application of the statement of Dixon J in Briginshaw, but the principle remains valid.

The Judge said that he had commenced his analysis of the evidence with a predisposition in favour of the view that forgery and falsification of so many documents was unlikely and with a recognition that the misconduct alleged was of a very serious nature. Before he reached any conclusions in the respondents' favour on these matters, he recognised that he should bear in mind the considerations referred to in Briginshaw and Neat Holdings. His reference to the large number of documents was apt. The case which he found established involved an extraordinarily well planned course of conduct which brought into existence handwritten minutes of meetings held upwards of eighty years ago which had to pass examination by those who read them, and reflect the general situation at the time.

One of the principal attacks made on the Judge's conclusion is that it involved such a large and complex enterprise that it is improbable that it ever took place. In the appellants' submission there had to be another explanation for the fact that the handwriting and signatures of some of the participants had been simulated.

Counsel for the appellants referred to a judgment of Bryson J of 10 November 1992 on an unsuccessful application by the plaintiffs to restrain Cardiff from selling the land. Bryson J said that he made no endeavour to predict the outcome of the trial but he pointed out that he had not received any submission from the respondents' counsel which he regarded as dealing satisfactorily with "the plain need, when advocating such a case, to show either by name or in some other way, who it was who might have had a motivation to concoct all these documents, when that motivation operated, and where there was an opportunity to do all these enormities". Bryson J was not saying that forgery could not be proved unless the forger was identified but what he said serves to emphasise the difficulty of proving a case such as this.

The first question which must be considered is the Judge's findings about the falsification of Cardiff's records. If these findings cannot be disturbed, one can then review the surrounding circumstances to determine whether the falsifications were for a fraudulent purpose.

Mr Westwood, an expert called by the plaintiffs, gave evidence about the authenticity of the 17 disputed signatures of Mr Blackwood, the 7 of Mr J Blackwood, the 8 of Mr William Robertson, the 4 of Miss Laura Robertson, and the 14 of Mr Allen. His conclusions were expressed with different degrees of confidence. He concluded that the Blackwood signatures were not genuine but "the product of some person attempting to simulate" them from a model signature. He concluded that the signatures of the Robertsons were probably the product of a person attempting to simulate genuine signatures. His conclusion in relation to Mr Allen's signatures was "more guarded". There were features of these signatures as a group which caused him to entertain serious doubt as to their genuineness.

The appellants called no handwriting evidence. The Judge accepted Mr Westwood's conclusions as to the Blackwood signatures and added that the matter was so clear in the light of the details on which Mr Westwood relied that he did not think it necessary to refer to that evidence. The appellants made no real attempt to challenge Mr Westwood's conclusions about these signatures.

Mr Westwood had reservations about the Robertson signatures because he had to work with microfilm copies of specimen signatures. In reaching the conclusion that these signatures were probably simulations, he relied particularly on a marked degree of consistency in the questioned signatures not evident in the undisputed ones. His Honour said that this was "demonstrated" by photographs and transparencies and he was persuaded that Mr Westwood's conclusions should be accepted "unless there is other persuasive evidence tending to the contrary".

Mr Westwood was handicapped in considering Mr Allen's disputed signatures because he was originally provided with only two original signatures which he regarded as genuine, together with some reproduction signatures. Although instructed that Mr Allen's signatures on the minutes of 15 April 1910, and beside the dates 1 September 1909, 25 May 1910 and 7 October 1910 on folio 3 of the share register were genuine, he did not accept that they were.

Mr Callinan seized on this, as well he might. He argued that because these four signatures displayed the poor line quality noted in the suspect signatures, but not in the two accepted as genuine, this did not demonstrate forgery, but only that Mr Allen's genuine signatures varied in quality. The Judge did not find these arguments convincing.

Mr Westwood was not prepared to say that, on the probabilities, Mr Allen's signatures were not genuine, nor would he agree that his position was neutral. He said "No, stronger than neutral. What I am saying is that with my experience I have grave reservation with accepting that as a genuine signature". The Judge understood him to be referring to the suspect Allen signatures generally. Despite Mr Westwood's doubts, the Judge found in the 1994 judgment that the disputed Allen signatures were forged.

Mr Westwood's opinion that Mr Allen's signature on the minutes of the directors' meeting of 15 April 1910 was suspect was consistent with the probabilities and supports, rather than undermines, his opinion about the disputed Allen signatures. The meeting was referred to in Mr Allen's diary and was not challenged. The minutes in copperplate handwriting were probably written up later to be confirmed and signed at the next meeting. On the Judge's findings, this was the last genuine meeting recorded in the minute book. The next recorded meeting was on 19 April 1916 when the minutes of the previous meeting were confirmed. If this meeting was fictitious, the earlier minutes were never

URJ SAVAGE v LUNN (Sheppard AJA, Handley and Sheller JJA) 17

confirmed, and it would not be surprising that Mr Allen's signature on those minutes was forged. This analysis was not brought to Mr Westwood's attention but it supports his opinion, contrary to his instructions, that the signature on the 1910 minutes was not genuine.

Such an explanation is not available in relation to the signatures appearing on folio 3 of the share register for 1 September 1909, 26 May 1910 and 7 October 1910. The entries against these signatures record a number of persons as shareholders.

The minute book shows that there was a general meeting of Cardiff on 1 September 1909 and the minutes state that the Deed of Settlement was signed by Messrs George Stone, Charles Henderson, George Lloyd Lindsay and William Bullard, who are among those recorded as shareholders on folio 3 of the share register. Other persons noted in the register as having become members that day are not mentioned in the minute book. The persons mentioned in the minutes did sign the Deed. The minute book does not show any meeting, either of shareholders or directors, for the other dates on which suspect signatures appear in the share register, namely 25 May 1910, 7 October 1910 and 4 October 1911. If the dealings noted in the register on those dates had been genuine, there should have been some reference to them in the minute book, but there is none. All this is not particularly important, but it demonstrates that little weight should be given to the plaintiffs' instructions to Mr Westwood that the 1909 and 1910 signatures of Mr Allen in the share register could be assumed to be genuine.

The defendants did not call a handwriting expert to contradict the evidence of Mr Westwood. This was remarkable in itself, especially in the light of Mr Westwood's doubts about some of the Allen signatures. It is made even more remarkable by the fact that the defendants called Mr Tytell, a document examiner from New York, who gave evidence as to when various typewritten documents could have been prepared having regard to their type face and paper.

Mr Tytell was highly qualified in relation to handwriting and disputed signatures but he was not asked by the defendants to consider the disputed signatures. This attracts the principle approved in Commercial Union Assurance Company of Australia Ltd v Ferrcom Pty Ltd and Anor (1991) 22 NSWLR 389 at 419 that:

".. the omission to interrogate a friendly witness... is more significant than the failure to call such a person as a witness, and... the presumption that the testimony would not have been favourable to the party's case is stronger...".

It is significant that many of the documents found to be forged are open to challenge on more than one ground. The signatures of both Blackwoods appear on the following -

(1) Share certificates for 1,175 and 375 shares dated 5 April 1917;

(2) A share certificate for 175 shares dated 6 April 1938;

(3) Transfers on the back of those certificates in favour of Belmont dated 6 April 1938.

The same share transfers bear imprints of Belmont's false seal witnessed by disputed Robertson signatures. On folio 5 of the share register one of Mr Blackwood's disputed signatures, and one of Mr William Robertson's, appear consecutively against 6 April 1938, the date of the directors' meeting which supposedly approved the transfers to Belmont.

The disputed Allen signatures included those confirming the minutes of the meetings from 15 April 1910 to 5 October 1916, and those in the share register from 1 September 1909 to 19 April 1916. Later minutes and later entries in the

share register bear disputed signatures, first of Mr Blackwood and then of Mr Robertson. The handwritten Deed of Settlement in the same book as the share register bears 7 disputed signatures of Mr Allen and 3 by Mr Blackwood. The typed, amended Deed of Settlement (Ex K) bears disputed signatures of Mr Blackwood, Mr Robertson and Miss Robertson, and the imprint of Belmont's false seal.

Mr Westwood's opinions on these signatures are like pieces of circumstantial evidence which, in accordance with authority, can reinforce each other and increase the probability that documents bearing such signatures were false and fraudulent. Thus in R v Exall (1866) 4 F & F 922 at 929 (176 ER 850 at 853), Pollock CB directed the jury:

"... circumstantial evidence... is like... a rope composed of several cords. One strand... might be insufficient to sustain the weight but three stranded together may be... of sufficient strength".

Similarly in The Bellhaven Peerage (1875) 1 App Cas 278 at 279 Lord Cairns said:

"... in dealing with circumstantial evidence we have to consider the weight which is to be given to the united force of all the circumstances put together. You may have a ray of light so feeble that by itself it will do little to elucidate a dark corner. But on the other hand you may have a number of rays, each of them insufficient, but all converging and brought to bear on the same point, and when united producing a body of illumination which will clear away the darkness... ".

Mr Allen noted in his diary on 1 September 1909 a meeting of Cardiff shareholders that day, the first for 23 years. He had had great trouble in getting "representatives" together. On 15 December he wrote that he had been very busy all the morning "especially over Cardiff Coal Co matters". On 30 December 1909 he wrote, 'I am glad to say I settled the Cardiff Coal Co's sale to TJ Evans and Forsyth this afternoon at 4.5. It was a very satisfactory sale in every way". On 7 January 1910 he wrote that he had had a meeting of Cardiff at 10.30 and on 15 April 1910 he referred to the fact that he had had such a meeting "after lunch". There is no mention by Mr Allen in his diary of any meeting of Cardiff on 19 April 1916. He records that he went to town that day for lunch and then went to the office.

The 1916 ledger sheets for Cardiff record payments to proprietors or their personal representatives on 31 August, 4, 8, 12, 25 and 29 September, 3 November, then (out of order) 6 September, 6 December, and (again out of order) 20 October 1916. Some, but not all, of these payments are described as "purchase money for shares". The payment of £325 on 3 November to J A Wood "re Lunn, dec'd" was not stated to be purchase money for shares. The typewritten disbursement sheet found in the deed box contained similar information. The share register records that the shares were transferred to Mr Blackwood on 22 November 1916.

Mr Callinan submitted that the entry in the share register showing that the shares were transferred to Mr Blackwood must be genuine because it is supported by these documents from Allens. Whatever the circumstances it followed, in his submission, that the shares were transferred in 1916 and the respondents had no claim to them. This question will have to be considered later in these reasons, but some further comments are appropriate at this point.

URJ SAVAGE v LUNN (Sheppard AJA, Handley and Sheller JJA) 19

The minutes of the general meeting held on 5 October 1916 record Mr Allen as chairman stating that the Board was in a position to authorise the transfer of shares to Mr Blackwood, and that payments would be disbursed as signed transfers came to hand. The ledger sheets record the payment of £6,000 on 21 August, but ten payments had already been made to shareholders prior to 5 October which is strange in the light of these minutes.

The minutes of a directors' meeting held on 22 November authorised transfers of shares to Mr Blackwood, including one described as "J A Wood 100 Promoters" so that J A Wood, who was the estate solicitor, appears as the transferor. The transfer should have been executed by Mrs Parry, but she is not mentioned in the minute book, the share register, or in the disbursement sheet. On the other hand, Mr Wood's connection with the estate could have been ascertained from the disbursement sheet which came into Mr Savage's possession on 17 May 1976.

The share register shows the shares standing in the name of James Lunn until 22 November 1916, and no transfer to Mr J A Wood, but his name appears in the remarks column where the names of the legal personal representatives of other deceased shareholders (eg Permanent Trustee Co) were entered. The author of the minutes and of the entries in the share register may therefore have thought that J A Wood was the executor of James Lunn.

There are further problems. The minutes for the general meeting of 5 April 1917 stated that Mr Blackwood then held 1,550 shares comprising 1,175 proprietors and 375 subscribers, and the estate of G W Allen, Mr Allen's father, held 175 subscribers' shares. The next general meeting was shown as being held at the office of Allens on 6 April 1938. A directors' meeting held the same day, also at Allens' office, approved a transfer of 175 shares from Mr Allen and others to Mr Blackwood, and a transfer of 1,550 shares from Mr Blackwood to Belmont. If the minutes are correct the Board did not approve of a transfer of the 175 shares from Mr Blackwood to Belmont. The share register however records that three transfers from Mr Blackwood to Belmont for 1,725 shares were registered that day and they are in evidence, as is Mr Blackwood's certificate for the 175 shares, but not the transfer of those 175 shares to Mr Blackwood.

The next minutes purport to record the proceedings of meetings of the proprietors and the directors held at Allens' office on 10 May 1938. Both record Mr W Robertson and Miss L Robertson among those present representing 1,726 shares, but there is still no reference to a transfer of the 175 shares to Belmont.

If the third transfer to Belmont for 176 shares was tabled and approved at the directors' meeting on 6 April 1938, it is strange that the minutes should omit all reference to it. It is strange that the share register should be inconsistent with the minutes and that the transfer from Mr Allen and others to Mr Blackwood should not be available although the three transfers to Belmont are. It is also strange that new share certificates were never issued to Belmont.

It will be helpful at this point to refer to entries in Mr Allen's diary between 1916 and 1938 insofar as they relate to the affairs of Cardiff. There are no references to Cardiff at all during 1916 and 1917. The entry for 19 April 1916 has already been referred to. On 22 November, the date of a supposed directors' meeting, he records having gone into town after 10.40am and having remained at the office until 6.30pm. On 6 April 1917, the date of another supposed directors' meeting, Mr Allen recorded that he should have gone to meetings of other companies that day which he named, but instead he went into town and did

some shopping and other things. He was otherwise in the office and had apologised for his absence from the meetings referred to.

On 2 July 1918 Mr Allen said that he went to his office and later he dined at his club. He returned to the office at 7.30pm and spent the evening with a Mr Wallace looking into Cardiff matters and fixing up some things for Mr Blackwood. He went home at 9.30pm.

On 4 November 1918 Mr Allen said that he had an appointment with Mr Bean to go into matters connected with Cardiff at 7.30pm. Mr Bean mistook the place of the appointment and went to Mr Allen's home. He came to the office later and they worked together until 9.00 pm. On S November 1918 Mr Allen recorded that he arrived at the office at 8.35am. He was with one of his secretaries or assistants until 12.00 "specially in connection with Cardiff Coal Co. Very tiring and tedious work".

There is then no relevant entry for over a year. On 26 December 1919 (ie Boxing Day) the diary records that Mr Weatherburn came to Mr Allen's home after breakfast. He dictated to him until 1.15pm "devoting most of the time to Cardiff Coy matters". On New Year's Eve, 31 December 1919, Mr Allen recorded a long conference with counsel "in reference to Cardiff Coy, matters which are very complicated". The only event established by the evidence which could account for Mr Allen working on Cardiff matters on those days was the lodgment of Mr Blackwood's caveat on 16 or 17 December 1919.

On 1 July 1928 he had begun to look into "old papers connected with the Cardiff Coy: this took me some time". Two years later he recorded, on 21 July 1930, that he went into town in the afternoon and had a long conference with his partners, Minton Taylor and Alfred Hemsley, in regard to a matter "re: Cardiff Coal Company, which worried us all very much". Two days later on 23 July 1930, Mr Allen was busy all the afternoon until he went into town. He was going through Cardiff papers "for a long while". On 6 April 1938, when the minute book records meetings of Cardiff, he refers to going to town after 3.15pm and attending "the Kembla board" meeting, but there is no reference to Cardiff. On 7 April 1938 Mr Allen said that he looked through a deed box containing Cardiff papers. He added, "It is a very old matter causing a lot of trouble". He dictated to Mr Weatherburn and then went into "the Agency and Gas Company meetings". However the minutes for the previous day record that Mr Allen and others had then transferred their 175 shares and Belmont had taken over Cardiff.

On 8 April 1938 Mr Allen recorded that Minton Taylor had lunch with him at home so they could discuss Cardiff matters. Mr Taylor was going to see a Mr Ash and decide the best course to adopt. Mr G W Ash, who was Mr Blackwood's solicitor, had his office at 115 Pitt Street, Sydney where the minutes show that the directors' meeting of 10 May 1938 was held. However, according to the minutes, Mr Blackwood had transferred all his Cardiff shares to Belmont on 6 April, and he was not shown as attending the meeting of 10 May.

On 26 April 1938 Mr Allen recorded that Minton Taylor had lunch with him and they went through some Cardiff papers. When he left, Mr Allen continued on the Cardiff matter with Mr Weatherburn. He did not go into town until 4.00pm. On 29 April 1938 he took nearly the whole morning going into Cardiff matters as he had a special appointment with Mr Ash and Mr Taylor that afternoon.

On 30 April 1938 Mr Allen noted that he dictated to Mr Weatherburn until lunch time: "after lunch I went on with him again until 3 o'clock trying to get to the bottom of some Cardiff matter troubles". On 1 May 1938 he was busy all

URJ SAVAGE v LUNN (Sheppard AJA, Handley and Sheller JJA) 21

morning looking through Cardiff papers and on 2 May 1938 he was busy "most of today" over Cardiff matters. This is the last diary entry relating to Cardiff.

The diary entries do not sit well with the minutes. There are of course the gaps in time and the fact that Mr Allen for some unknown reason was worried about Cardiff. He does not refer to Mr Robertson, Miss Robertson or any takeover by Belmont, but during 1938 he remained in contact with Mr Blackwood's solicitor, Mr Ash. A possible cause of Mr Allen's concern may have been a demand by Mr Blackwood for the return of the balance of the £6,000 paid to Allens in trust in 1916.

The inconsistencies between Mr Savage's affidavit of 9 November 1993 and his statutory declaration of 25 February 1977, which have already been referred to, create major difficulties for the appellants. These are compounded by Mr Savage's further statutory declaration of 30 July 1981. According to his affidavit, Mr Savage received from Mr McPhail, via Mr Tom Robertson, the bound deed of settlement and share register, and the bound minute book.

Mr Savage said that when he received these books, he inspected them briefly and appreciated that Belmont was a shareholder in Cardiff.

He either learned this from the last page of the share register or from folios 51 or 53, the last written-up pages of the minute book. In either case he could not have failed to appreciate that Belmont was the major shareholder, but according to his evidence he did not examine them carefully at that stage. This evidence strains credulity.

In his 1977 statutory declaration Mr Savage said that he was not aware of any other person who may have custody of the land grants and he made no reference to Mr McPhail. His 1981 statutory declaration again made no reference to Mr McPhail. It seems strange that Mr Savage did not refer to Mr McPhail in these declarations if he was the source of these Cardiff records.

Mr Savage's evidence about the source of these records is also highly improbable having regard to Mrs Perry's evidence that Mr McPhail had been instructed to trace the current owners of Cardiff and had been unable to do so. Mr McPhail acted for all parties on the sale of Belmont in 1972 and it would be extraordinary if at that time he or Belmont had in their possession the minute book and share register of Cardiff in their present form when the vendors warranted that they had found no trace of Cardiff for over 40 years.

Between 1938 and 1973 Belmont acted as if it had no interest in Cardiff although it was in possession of its land. It is impossible to imagine any reason why the takeover of Cardiff by Belmont in 1938 could have been forgotten so completely if it actually occurred.

In an attempt to answer some of these points, the appellants relied on evidence from Mr Savage that many of the old records of Cardiff and Belmont were destroyed in the Newcastle earthquake in December 1989. It was said that the lost records may have included some which evidenced Belmont's acquisition of the Cardiff shares in 1938 or acts of ownership in the years that followed. However during the period of some 17 years while these records were in Mr Savage's possession before their destruction, including most of 1989 after the caveats had been lodged in January, he apparently made no attempt to have these records carefully examined.

The problems do not end there because the minute books of the Blackwood companies contain no entries relating to Cardiff, the land or the £6,000 paid to Allens in 1916. Mr Ash, Mr Blackwood's solicitor, was in contact with Allens in 1938 about Cardiff, but the stamp affidavit for Mr Blackwood's estate, following

his death on 2 July 1939, contained no reference to Cardiff, the contract of sale of August 1916, or the land, although his caveat of December 1919 was still on the register.. The involvement of Mr Blackwood or his companies with Cardiff and the land in August 1916 is established by the ledger cards and the caveat. However there is no evidence, outside Cardiff's minute book and share register, that he or his companies ever acted as if they controlled Cardiff or had any interest in it, or ever took possession of the land. Belmont's documentary chain of title to the shares through Mr Blackwood dates from 1916, but this title was not accompanied by any acts of possession or enjoyment by the owners until after 1976. These conclusions are reinforced by the further evidence.

The effect of the payment to the Lunn estate in 1916

The Judge "ultimately" held that there was never a transfer of the estate's shares, authorised by Cardiff, to Mr Blackwood although on the basis of the ledger cards he thought "there was some transaction (not necessarily a binding contract) entered into by Mr Blackwood with other persons purporting to act on behalf of Cardiff or its shareholders". He thought that the ledger cards displayed a belief, or perhaps an intention on the part of Mr Allen, that the transactions should involve the sale of shares, that monies were in fact paid as recorded, and that the nature of those payments as stated would have been communicated to the payees. The Judge therefore thought that the payees probably provided executed transfers to Mr Allen.

Mr Callinan sought to find support for these views in the terms of the 1947 deed which stated that Mrs Parry had completed her executorial duties. He drew attention to her stamp affidavit for the estate which disclosed a debt of £300 to Mr Parry which must have been paid before 1947. Since the estate still retained most of the deceased's land which was transferred to the new trustees, but nothing was then done about the shares, he submitted that the Court should infer that they had been sold in 1916 to meet estate liabilities.

The argument in this form must fail because it ignores Mrs Parry's affidavit of 8 May 1914 in which she stated that she had paid the estate's debts and expenses. The payment of £175 by Allens on 6 March 1913 would have been available and some of the estate's land could also have been sold by this time. The 1947 deed does not support a finding that the estate had sold and been paid for the shares in 1916.

The Cardiff ledger sheets record payments to shareholders from purchase money and interest received from Newcastle-Belmont. These commenced on 21 November 1911 with a payment of £300 to Makinson & Plunkett, Solicitors "on a/c of refund promoters' shares" which suggests a return of capital. On 6 March 1913 the payment of £175 to Mrs Parry is recorded "100 shares @ 35/- per share (promoter)", and then on 16 April a cheque to the Bank of New Zealand "re Mrs Elliott's shares". Payments to other shareholders contain no reference to shares or the nature of the payments until 19 March 1915, when a payment of £700 to W H Bean is recorded "on acct next distribution".

At a glance

Court

Decision date

Source

Judgment (269 paragraphs)

Parties

Cases Cited (10)