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[2021] WASC 159
General information, not legal advice.
Supreme Court of WA
2022-02-08
Miere J
Original judgment source is linked above.
CITATION : WRIGHT -v- DAVID JOHN NEALE LEMON as executor of the estate of MICHAEL JOHN MAYNARD WRIGHT [No 2] [2021] WASC 159
HEARD : 10-14, 17-21, 24-26, 28 FEBRUARY, 3-5 MARCH, 27-31 JULY 2020
DAVID JOHN NEALE LEMON as executor of the estate of MICHAEL JOHN MAYNARD WRIGHT
Equity - Fiduciaries' duties - Duties of executors of an estate - Conflicts of interest - No conflict rule - Fair dealing rule a sub-rule of the no conflict rule - Failure to make full disclosure of material facts - Purchase of property at an undervalue - Breach of fiduciary duties
Equity - Fiduciaries' duties - Duties of company directors - Whether directors owe fiduciary duties to shareholders - Fact based fiduciary duties - Whether special circumstances give rise to a specific fiduciary duty - No fiduciary obligation
Equity - Fiduciaries' duties - Duties of shareholders - Whether shareholders owe fiduciary duties to each other - Fact based fiduciary duties - Whether special circumstances give rise to a specific fiduciary duty - No fiduciary obligation
Tort - Deceit - Common law fraud - Whether statements made knowing they were false or with reckless disregard for whether they were true
Tort - Deceit - Common law fraud - Whether failure to disclose amounts to common law fraud - Whether mere silence amounts to fraud
Equity - Equitable fraud - Duty of disclosure - Fiduciary relationship between executor and beneficiary
Equity - Equitable fraud - Duty of disclosure - Fiduciary relationship between director and shareholder
Contracts - Construction and interpretation of contracts - Defined terms - Sophisticated commercial contract - Whether natural meaning is congruent with business sense
Contracts - Construction and interpretation of release clauses - Scope of a general release - Whether release covers claims that were unknown at the time of signing - Grant v John Grant & Sons Pty Ltd [1954] HCA 23; (1954) 91 CLR 112 - Whether release covers claims of fraud
Contracts - Deed of settlement - Equitable considerations affecting release - General words - Whether releaser was aware of claim - Grant v John Grant & Sons Pty Ltd [1954] HCA 23; (1954) 91 CLR 112
Equity - Estoppel - Estoppel by convention - Whether parties shared a common assumption - Whether injustice caused by resiling from common assumption - Whether parties acted in reliance on the common assumption
Agency - Liability of principal for misrepresentation by agent - Whether misrepresentation falls within the general class of statements or acts the principal apparently authorised - Whether agent was an 'agent to know' - Jessett Properties Ltd v UDC Finance Ltd [1992] 1 NZLR 138
Contract - Accord and satisfaction - Question of fact - Objective assessment of parties' intention - Whether objective intention was to release parties from claims that were not known at the time of signing
Limitation of actions - Limitation period - Actions in deceit - Fraudulent concealment of cause of action irrelevant - Limitation Act 1935 (WA)
Limitation of actions - Limitation period - Breach of fiduciary duty - Act has no direct application to causes of action founded on equity - Limitation period found by analogy - Common law fraud and breach of fiduciary duties not sufficiently analogous for limitation period to be applied
Equity - Laches - Whether prejudice caused to defendants as a result of delay
Limitation Act 1935 (WA)
Allcard v Skinner [1887] UKLawRpCh 151; (1887) 36 Ch D 145
Allison v Clayhills (1907) 97 LT 709
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Bale v Mills [2011] NSWCA 226; (2011) 81 NSWLR 498
Ballantyne v Phillott [1961] HCA 17; (1961) 105 CLR 379
Bank of New Zealand v Simpson [1900] UKLawRpAC 6; [1900] AC 182
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Banque Commerciale SA (in liq) v Akhil Holdings Ltd [1990] HCA 11; (1990) 169 CLR 279
Barker v Duke Group Ltd (in liq) [2005] SASC 81; (2005) 91 SASR 167
Belan (as executors of the estate of the late Frank Belan) v Casey [2003] NSWSC 159; (2003) 57 NSWLR 670
Bell Group Ltd (in liq) v Westpac Banking Corporation (No 9) [2008] WASC 239; (2008) 39 WAR 1
Bentley v Craven [1853] EngR 1103; (1853) 18 Beav 75; 52 ER 29
Blackburn, Low & Co v Thomas Vigors [1887] UKLawRpAC 40; (1887) 12 App Cas 531
Blackmagic Design Pty Ltd v Overliese [2011] FCAFC 24; (2011) 191 FCR 1
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Caboche v Ramsay [1993] FCA 920; (1993) 119 ALR 215
Cane v Allen (1814) 2 Dow 289; [1814] EngR 409; 3 ER 869
Cane v Lord Allen (1814) 2 Dow 289; [1814] EngR 409; 3 ER 869
City Inn (Jersey) Limited v Ten Trinity Square Limited [2008] EWCA Civ 156; [2008] All ER (D) 76
Coleman v Myers [1976] NZHC 5; [1977] 2 NZLR 225
Coles v Trecothick [1804] EngR 88; (1804) 9 Ves 234; 32 ER 592
Commissioner of Stamp Duties (Qld) v Livingston [1964] UKPC 2; [1965] AC 694; (1964) 112 CLR 12
Commissioner of State Taxation of the State of South Australia v Cyril Henschke Pty Ltd [2010] HCA 43; (2010) 242 CLR 508
Crawley v Short [2009] NSWCA 410; (2009) 262 ALR 654
Dabbs v Seaman [1925] HCA 26; (1925) 36 CLR 538
Dent v Bennett [1839] EngR 434; (1839) 4 My & Cr 269; 41 ER 105
Doggett v Commonwealth Bank of Australia [2015] VSCA 351; (2015) 47 VR 302
Dougan v MacPherson [1902] UKLawRpAC 5; [1902] AC 197
Duke Group Ltd (in liq) v Alamain Investments Ltd [2003] SASC 415; (2003) 232 LSJS 58
Edwards v Meyrick [1842] EngR 903; (1842) 2 Hare 60; 67 ER 25
Electricity Generation Corporation v Woodside Energy Ltd [2014] HCA 7; (2014) 251 CLR 640
El-Mir & 1 Or v Risk [2005] NSWCA 215; (2006) 22 BCL 16
Ex parte James [1803] EngR 536; (1803) 8 Ves 337; 32 ER 385
Ex parte Lacey [1802] EngR 75; (1802) 6 Ves 625; 31 ER 1228
Federation Insurance Ltd v Wasson [1987] HCA 34; (1987) 163 CLR 303
Glandon Pty Ltd v Strata Consolidated Pty Ltd (1993) 11 ACSR 543
Grant v John Grant & Sons Pty Ltd [1954] HCA 23; (1954) 91 CLR 112
Grundt v Great Boulder Proprietary Gold Mines Ltd [1937] HCA 58; (1937) 59 CLR 641
Hamersley Iron Pty Ltd v The National Mutual Life Association of Australasia Ltd (1985) 64 ALR 19
Hampson v Nicoll (1827) 6 LJ Ch 22
Hancock Prospecting Pty Ltd v Wright Prospecting Pty Ltd [2012] WASCA 216; (2012) 45 WAR 29
Hancock Prospecting Pty Ltd v Wright Prospecting Pty Ltd [No 9] [2010] WASC 44
Hatch v Hatch [1804] EngR 105; (1804) 9 Ves 292; 32 ER 615
Holman v Loynes [1854] EngR 161; (1854) 4 De GM & G 270; 43 ER 510
Hospital Products Ltd v United States Surgical Corp [1984] HCA 64; (1984) 156 CLR 41
Howard v Federal Commissioner of Taxation [2014] HCA 21; (2014) 253 CLR 83
Hunter v Atkins [1834] EngR 548; (1834) 3 My & K 113; 40 ER 43
Hutchinson v Equititour Pty Limited [2010] QCA 104; [2011] 2 Qd R 99
IBM Australia Pty Ltd v State of Queensland [2015] QSC 342
In Re Biel's Estate; Gray v Warner [1873] UKLawRpEq 113; (1873) LR 16 Eq 577
ING Bank NV v Ros Roca SA [2011] EWCA Civ 353; [2012] 1 WLR 472
Jessett Properties Ltd v UDC Finance Ltd [1992] 1 NZLR 138
Johnson v Fesemeyer (1858) 3 De Gex & Jones 13; [1858] EngR 1008; 44 ER 1174
Johnson v Trotter [2006] NSWSC 67; (2006) 12 BPR 23,339
Jones v Dunkel [1959] HCA 8; (1959) 101 CLR 298
Jones v Jones [2009] VSC 292
Jones v Linton (1881) 44 LT 601
Jones v Thomas [1837] EngR 508; (1837) 2 Y & C Ex 498; 160 ER 493
Keech v Sandford (1726) 2 White & Tud LC 706; 25 ER 223
Kendle v Melsom [1998] HCA 13; (1998) 193 CLR 46
Kirby v Sanderson Motors Pty Ltd [2002] NSWCA 44; (2001) 54 NSWLR 135
Knight v Marjoribanks [1849] EngR 1031; (1849) 2 Mac & G 10; 42 ER 4
Kuhl v Zurich Financial Services Australia Ltd [2011] HCA 11; (2011) 243 CLR 361
Kuwait Asia Bank EC v National Mutual Life Nominees Ltd [1990] 1 AC 187
Lam v Ausintel Investments Australia Pty Ltd (1989) 97 FLR 458
Lewis Securities Ltd (in liq) v Carter [2018] NSWCA 118; (2018) 355 ALR 703
Lindsay Petroleum Co Ltd v Hurd [1874] UKLawRpPC 1; (1874) 5 PC 221
Linke v Linke [2018] VSC 505
Livingston v Commissioner of Stamp Duties [1960] HCA 94; (1960) 107 CLR 411
Lord Selsey v Rhoades [1824] EngR 523; (1824) 2 Sim & St 41; 57 ER 260
Luff v Lord [1864] EngR 827; (1864) 34 Beav 220; 55 ER 619
Mac Developments (Gold Coast) Pty Ltd v Rams Financial Group Pty Ltd [2010] QCA 477
MacPherson v Watt (1877) 3 App Cas 254
Magill v Magill [2006] HCA 51; (2006) 226 CLR 551
Maguire v Makaronis [1997] HCA 23; (1997) 188 CLR 449
Margerison v Bates [2008] EWHC 1211 (Ch); [2008] 3 EGLR 165
Massey v Davies [1794] EngR 2192; (1794) 2 Ves 317; 30 ER 651
Masters v Cameron [1954] HCA 72; (1954) 91 CLR 353
McDermott v Black [1940] HCA 4; (1940) 63 CLR 161
Mineralogy Pty Ltd v Sino Iron Pty Ltd [2017] FCAFC 55
Montesquieu v Sandys [1811] EngR 536; (1811) 34 ER 331
Moratic Pty Ltd v Gordon [2007] NSWCA 106; (2007) 13 BPR 24,713
Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd [2014] NSWCA 323
Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd [2015] HCA 37; (2015) 256 CLR 104
Nadinic v Drinkwater [2017] NSWCA 114; (2017) 94 NSWLR 518
Neat Holdings Pty Ltd v Karajan Holdings Pty Ltd [1992] HCA 66; (1992) 67 ALJR 170
Nicholas v Western Australia [1972] WAR 168
Nocton v Lord Ashburton [1914] UKLawRpAC 31; [1914] AC 932
NOM v Director of Public Prosecutions [2012] VSCA 198; (2012) 38 VR 618
Noranda Australia Ltd v Lachlan Resources NL (1988) 14 NSWLR 1
Pelling v Pelling (1981) 130 DLR (3d) 761
Percival v Wright [1902] UKLawRpCh 125; [1902] 2 Ch 421
Perpetual Executors & Trustees Assoc of Australia Ltd v Wright [1917] HCA 27; (1917) 23 CLR 185
Perth Airport Pty Ltd v Ridgepoint Corporation Pty Ltd [2013] WASC 33
Peters' American Delicacy Co Ltd v Heath [1939] HCA 2; (1939) 61 CLR 457
Platt v Platt [1999] All ER (D) 818
Qantas Airways Ltd v Chief Commissioner of State Revenue [2008] NSWSC 1049
Randall v Errington [1805] EngR 82; (1805) 10 Ves 423; 32 ER 909
Re Howlett, Howlett v Howlett [1949] Ch 767
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Re Worssam (1882) 46 LT 584
Revenue and Customs Commissioners v Benchdollar Ltd [2009] EWHC 1310 (Ch); [2010] 1 All ER 174
Robinson v Robinson [2015] NSWSC 1503
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Scott v Dunbar (1828) 1 MR 442
Seltsam Pty Ltd v McGuiness [2000] NSWCA 29; (2000) 49 NSWLR 262
Shaw v Hanlon [2020] TASSC 2
Stena Line Ltd v Merchant Navy Ratings Pension Fund Trustees Ltd [2010] EWHC 1805 (Ch); [2010] All ER (D) 280
The National Mutual Life Association of Australasia; Hancock; Wright; Hancock Prospecting Pty Ltd; Wright Prospecting Pty Ltd; LSP Pty Ltd v Hamersley Iron Pty Ltd (Unreported, SCWA, 27 November 1984)
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Wood v Downes [1811] EngR 429; (1811) 18 Ves 120; 34 ER 263
Wright Prospecting Pty Ltd v Hamersley Iron Pty Ltd [2013] NSWSC 536
1 Ernest Archibald Maynard Wright was known as Peter. Peter, with his old school friend and business partner, Langley Hancock (Lang), played a significant role in developing and promoting the iron ore industry in the Pilbara region of Western Australia. Peter carried on his mineral exploration business through the seventh defendant, Wright Prospecting Pty Ltd (WPPL). Peter died on 13 September 1985.
2 Peter had three children ‑ Michael, Angela and Julian. Michael died on 30 April 2012. The first defendant, David Lemon (Lemon), is the executor of Michael's estate and is sued in that capacity. Angela is the second defendant. Julian is the plaintiff.
3 The third and fourth defendants, Leonie Baldock and Alexandra Burt, are daughters of Michael.
4 In 1987 Julian signed identical agreements with each of Michael and Angela for the sale of his interest in Peter's estate and his shareholding in WPPL for $3,413,127 each, and agreed to relinquish his position as an executor of Peter's estate (1987 Sale Agreements). On 23 February 1987 settlement under the 1987 Sale Agreements was completed. In accordance with the 1987 Sale Agreements, by order of this court made on 24 April 1987, Julian relinquished his position as an executor of Peter's estate to Michael and Angela.
5 In 2001, Julian's children, Natalie and Timothy, instituted proceedings in this court against Michael and Angela (Natalie and Timothy proceedings).[1] Michael and Angela filed a cross‑claim against Julian as third party. In April 2008 Michael, Angela, Julian, Natalie and Timothy executed a deed of settlement to resolve the Natalie and Timothy proceedings (the Deed of Settlement). The settlement included Julian's counterclaim against Michael and Angela. Michael and Angela paid Natalie and Timothy $70 million in performance of the Deed of Settlement and the proceedings were dismissed by consent.
6 In this action Julian alleges that he entered the 1987 Sale Agreements in circumstances where:
(a) the assets in Peter's estate had not been fully and accurately disclosed to him;
(b) matters material to WPPL's mining interests and royalties had not been fully and accurately disclosed to him; and
(c) he did not receive full and fair value for the interests which he relinquished.
7 Julian seeks to set aside the 1987 Sale Agreements and to be reinstated as a one‑third shareholder of WPPL and as a beneficiary of the residuary of Peter's estate.
8 Alternatively, Julian claims he is entitled to equitable compensation and damages for the loss he has sustained.
9 The corporate defendants directly or indirectly hold shares in WPPL. In 2012 the shares in WPPL owned by Michael were transferred to the fifth defendant, VOC Group Ltd (VOC). Lemon was appointed a director of VOC. Until August 2018 Ms Baldock and Ms Burt jointly owned the shares of VOC. In August 2018 Ms Baldock and Ms Burt transferred these shares in VOC to the eighth defendant, Teralani Pty Ltd, and the ninth defendant, Laremont Pty Ltd, respectively. Ms Baldock is the sole shareholder of Teralani. Ms Burt is the sole shareholder of Laremont. In July 2015 Angela transferred her WPPL shares to the sixth defendant, AMB Holdings Pty Ltd (AMB), in consideration for the issue of shares in AMB to Angela. The relief claimed by Julian includes the return by way of transfer of his shares in WPPL from VOC and AMB.
10 Julian claims his entitlement to relief arises from the following causes of action:
(a) breach of fiduciary duties owed by Michael and Angela as executors of Peter's estate in respect to the acquisition of Julian's right to a beneficial interest in Peter's estate;
(b) breach of fiduciary duties owed by Michael and Angela as directors of WPPL in respect to the acquisition of Julian's WPPL shares; and
(c) equitable and common law fraud.
11 The defendants deny every part of the plaintiff's case and deny Julian is entitled to any relief. They deny Michael and Angela owed to Julian the fiduciary duties alleged by Julian and, in any event, deny they breached any such duties. They deny the alleged fraudulent misrepresentations and/or concealment by or on behalf of Michael and Angela and deny that any such misrepresentations or concealment give rise to actionable misrepresentations. They deny that Julian has established his allegations of fraud against Michael and Angela.
12 The defendants contend that Julian released the present claims by the Deed of Settlement by which Julian gave extensive releases to Michael and Angela in connection with the 1987 Sale Agreements, interest in or title to any of the shares acquired under the 1987 Sale Agreements and Peter's estate and covenanted not to bring or continue any claim in relation thereto. Further, the defendants contend that Julian's claimed causes of action have been discharged by an accord and satisfaction arising out of the Deed of Settlement.
13 The defendants further contend that Julian's claims are time‑barred or should otherwise be dismissed on account of laches, the principles of res judicata and/or Anshun estoppel.
14 The executor of Michael's estate and Angela counterclaim a declaration that the Deed of Settlement is valid and effective as between Julian, Michael and Angela, damages for breach of the Deed of Settlement and an injunction restraining Julian from commencing any further proceedings against Michael's estate and Angela and, or alternatively, any further proceedings connected with Peter's estate or WPPL.
15 I ordered that any question of the quantum of the damages or an account of loss claimed by the plaintiff be decided separately from and after all other questions in the proceeding.
1. Julian has established his cause of action against Michael and Angela that in acquiring Julian's interest in Peter's estate Michael and Angela breached the fiduciary duty they owed as executor to Julian as a beneficiary of the estate.
2. Julian has established his causes of action in deceit and equitable fraud in relation to Michael and Angela acquiring his interest in Peter's estate.
3. Julian has not established his cause of action against Michael and Angela that in acquiring Julian's WPPL shares Michael and Angela breached the fiduciary duty as directors they owed to Julian as a director and shareholder of WPPL.
4. Julian has not established his causes of action in deceit and equitable fraud in relation to Michael and Angela acquiring his shares in WPPL.
5. Julian's claims against the first and second defendants are barred by the Deed of Settlement.
6. The claims against the third to sixth and eighth and ninth defendants are barred by the Deed of Settlement.
7. Julian breached the Deed of Settlement by instituting this action.
Michael and Angela's breach of fiduciary duty as executors of Peter's estate
17 Julian's case is that Michael and Angela breached a fiduciary duty which they owed as executors of Peter's estate to Julian in relation to the acquisition of his interest in Peter's estate.
18 Julian says that that fiduciary duty required Michael and Angela to:
(a) disclose to Julian all information concerning the value of the interest they were acquiring from him and which was otherwise material to his consent; and
(b) ensure full value was given for the interest the subject of acquisition.[2]
19 Julian says that duty was breached in both respects.
20 First, as to the failure to make full disclosure, as at the date of Peter's death the following material matters pertaining to the acquisition of Julian's interest were not disclosed to Julian:
(a) at his death Peter had a right to receive royalties under various agreements;
(b) at his death Peter had a right to receive a portion of any sum paid under the concentrator royalty arbitration;[3] and
(c) matters material to WPPL's mining interests.
21 Secondly, as to the failure to give full value, the interest in Peter's estate acquired from Julian was a valuable asset for which Julian did not receive full value.
Fraud of Michael and Angela in relation to Julian's interest in Peter's estate
(a) common law fraud - by their agents Fieldhouse and Salt, Michael and Angela deliberately or recklessly misrepresented to Julian that the statement of assets and liabilities annexed to the affidavit sworn by Michael, Angela and Julian in support of their application for probate of Peter's will was accurate and complete and disclosed all Peter's assets and deliberately or recklessly misrepresented that Peter's estate was insolvent; and
(b) equitable fraud - Michael and Angela concealed from Julian that at his death Peter had a right to receive royalties under various agreements and a right to receive a portion of any sum paid under the arbitration in relation to royalties arising from Hamersley Iron concentrating ore and concealed from Julian matters material to WPPL's mining interests.
Michael and Angela's breach of fiduciary duty as directors of WPPL
23 Julian's case is that Michael and Angela breached a fiduciary duty which they owed as directors of WPPL to Julian in relation to the acquisition of his WPPL shares.
24 Julian says that that fiduciary duty required Michael and Angela to:
(a) disclose to Julian all the information concerning the value of the shares which they were acquiring from him and which was otherwise material to his consent; and
(b) give full value for the interest acquired.
25 Julian says that duty was breached in both respects.
26 As to the failure to make full disclosure, Michael and Angela, and/or the agents through whom they effected and implemented the acquisition, Salt and Fieldhouse, failed to disclose to Julian material information relating to the potential value of his WPPL shares and relating to his decision whether to sell them.
27 Julian says that Michael and Angela, and/or Salt and Fieldhouse as their agents, failed to disclose to him information as to the mining interests of WPPL and in particular information as to:
(a) WPPL's interest in the Rhodes Ridge mining tenement, including that the tenement had value notwithstanding it was not on WPPL's balance sheet;
(b) WPPL's contractual rights to receive future royalties from other mines which were to be developed in the Pilbara;
(c) the prospective development of mines at Channar, Marandoo and McCamey's Monster from which WPPL could expect to receive future royalties;
(d) additional past and future royalties which WPPL would receive from the Mount Tom Price mine by reason of the Concentrator Royalty Arbitration; and
(e) the rights which WPPL was negotiating to acquire in relation to the split of the partnership between Hancock Prospecting Pty Ltd (HPPL) and WPPL (Hanwright Partnership).
Fraud of Michael and Angela in relation to Julian's WPPL shares
(a) common law fraud - by their agent Salt, Michael and Angela deliberately or recklessly misrepresented to Julian that the directors' report and financial statements of WPPL for the years ended 30 June 1985 and 30 June 1986 did not record any value in respect of mining tenements in which WPPL held an interest, by reason that they had no value, consequent upon the financial expenditure obligations inherent in them and that they could be potentially taken away by the Western Australian government and that WPPL had net assets of approximately $12 ‑ $15 million; and
(b) equitable fraud - Michael and Angela concealed from Julian information about WPPL's assets and value.
Breach of fiduciary duty ‑ Michael and Angela's duties as executors of Peter's estate
29 The defendants' case is that none of the duties Julian alleges Michael and Angela assumed as executors and trustees of Peter's will give rise to any actionable breach of fiduciary duty and Michael and Angela discharged any such duties that properly arose.
Breach of fiduciary duty - Michael and Angela's duties as directors of WPPL
30 The defendants accept that a director may owe a fiduciary duty to a shareholder in relation to dealings with the shareholders' shares where there are special circumstances which give rise to such a duty. The question is whether the plaintiff is in a position of disadvantage or vulnerability which causes him to place reliance upon the defendant and necessitates the protection of equity acting on the conscience of the defendant, or the defendant undertakes or agrees to act for or on behalf of the plaintiff and having regard to those matters, the circumstances are such that the court should find a fiduciary relationship including the relevant obligation alleged.
31 The defendants' case is that Julian was not in a position of disadvantage or vulnerability which caused him to place reliance upon Michael and Angela, Michael and Angela did not undertake or agree to act for on behalf of Julian, and the circumstances are not such that the court should find a fiduciary relationship including the relevant obligation alleged.
32 Julian says that Michael and Angela owed to Julian a fiduciary duty in relation to the acquisition of his interest in Peter's estate and his WPPL shares which required Michael and Angela to ensure full value was given for the interest the subject of the acquisition. The plaintiff describes this principle as the fair dealing rule. The defendants make four answers to Julian's reliance upon the fair dealing rule.
33 First, the fair dealing rule is an aspect of the no profit rule ‑ the obligation imposed by equity on a fiduciary not to obtain any unauthorised benefit from the fiduciary relationship. It does not arise in this case because there was no fiduciary relationship.
34 Secondly, if Michael and Angela were in a fiduciary relationship with Julian, the fair dealing rule is that a transaction whereby the beneficial interest of a beneficiary is purchased by the trustee is not voidable as of right but may be set aside unless the trustee can show that no advantage has been taken of the position of trustee, and that full disclosure has been made to the beneficiary and that the transaction is fair and honest. There is no obligation for the trustee to pay full value. The trustee must pay an adequate price. Further, a fiduciary is not necessarily a trustee. The defendants say that in this case Peter's estate had not been administered. Neither Julian nor Edix Pty Ltd[4] had a beneficial interest in the property in Peter's residuary estate. Michael and Angela were not trustees of Julian's WPPL shares.
35 Thirdly, if the fair dealing rule applied, the consideration under the 1987 Sale Agreements was fair and there was no breach of the fair dealing rule. Fair value must take into account the restriction in the company articles on sale of shares to a non‑member, the position of a minority shareholder, that the shares were subject to the option[5] and limits on what Michael and Angela could afford to pay.
36 Fourthly, even if Michael and Angela were in breach of their fiduciary duty in paying less than full value for Julian's WPPL shares, equity will not set aside the transaction where, as here, Julian was aware of and consented to selling the shares on those terms. Julian believed the shares were worth more than he was paid.
37 The defendants deny that Michael or Angela made any false or reckless representations to Julian. They deny Salt or Fieldhouse did so and further deny that Salt or Fieldhouse was relevantly their agent.
38 By the Deed of Settlement Julian gave to Michael and Angela releases and discharges and covenanted not to bring actions against Michael or Angela. Michael and Angela submit those releases, discharges and covenants preclude Julian maintaining this action.
39 The defendants say Julian's present claims have been discharged by an accord and satisfaction arising out of the Deed of Settlement.
40 The defendants say that Julian's causes of action for deceit accrued at the latest on 23 February 1987 when the 1987 Sale Agreements were completed and Julian suffered loss through the sale of his interests under value. Fraudulent concealment is not an answer to a statutory limitation period and so the defendants say Julian's action in deceit is barred.
41 In the absence of fraud or other circumstances rendering the application of the limitation period unconscionable, the statutory limitation period for deceit applies by analogy to the actions for breach of fiduciary duty or equitable fraud. In equity time runs from when the plaintiff discovers, or with the exercise of reasonable diligence ought to have discovered, that he is entitled to relief. If Julian cannot establish Michael and Angela engaged in fraud, his claims were barred in 1993.
42 Where fraud is an element in the cause of action time begins to run on the discovery of the fraud. In the case of fraudulent concealment, time begins to run on the discovery of the concealment and ascertainment of the cause of action which requires actual knowledge that a fraud has been committed or actual knowledge of the facts which give rise to the action. Julian's claims are that Michael and Angela knowingly acquired his WPPL shares and interest in Peter's estate for less than their true value. The defendants say that by 2008, material provided in the Natalie and Timothy proceedings armed Julian with the key elements of the claims he is now pursuing.
43 Further, the defendants say that Julian's delay in prosecuting his case would cause significant and irremediable prejudice to the defendants if he is entitled to proceed.
44 By his counterclaim in the Natalie and Timothy Proceedings, Julian claimed that Michael and Angela breached their fiduciary duties as executors of Peter's estate as a result of their alleged duress, undue influence, bad faith or unlawful conduct which induced his entry into the 1987 Sale Agreements. Julian claimed that Michael and Angela held his shares on a constructive or an implied trust for his benefit and sought the transfer of his shares in WPPL to him and an account of profits. Julian's counterclaim was dismissed by consent. Judgment was thereby entered on his action.
45 The defendants' case is that in those circumstances Julian is precluded from maintaining his present claims for breach of fiduciary duty, constructive trust, and for orders that the defendants restore to him his shares in WPPL and account for all rights, interests and benefits obtained by reason of holding those shares. The defendants say those causes of action merged in the judgment of this court in the Natalie and Timothy Proceedings and no longer exist.
46 Further and in the alternative, the defendants say that Julian is prevented from litigating his current claims against Michael and Angela by an Anshun estoppel. The defendants' case is that the subject matter of Julian's counterclaim in the Natalie and Timothy Proceedings and the relief sought by him mirrors the subject matter and claimed relief in the present proceedings and Julian could and should have raised in those earlier proceedings the matters of fact and law upon which he now relies.
47 The primary relief sought by Julian is rescission of the 1987 Sale Agreements together with the return by way of transfer of his shares in WPPL. Equity will grant rescission if it can do what is practically just between the parties and by doing so restore them substantially to the status quo. For that purpose, ancillary relief may be granted such as an account of profits or an allowance for work done or a sum paid for benefits enjoyed. The defendants' case is that in the present case it is not possible to achieve practical justice and to restore Michael, Angela and Julian to the positions that each occupied prior to the 1987 Sale Agreements whether substantially or at all.
48 In 1956 Peter incorporated WPPL. Until his death on 13 September 1985 Peter was a director of WPPL and held one life governor's share.
49 Michael became a director of WPPL sometime before 1976. In August 1976, Angela and Julian were appointed directors of WPPL. At all material times until January 1987 when Julian sold his shares in WPPL to Michael and Angela, Michael, Angela and Julian each held, in substance, one‑third of the shares in WPPL.
50 Prior to his death Peter held a life governor's share. The life governor's share, whilst held by Peter, conferred upon Peter effective complete control of the company. The articles of association attached to the life governor's share rights and privileges on the holder including the following. First, the right to hold office for however long and whenever he chose. Secondly, the right to appoint and remove any director. Thirdly, the right at every general meeting and on every poll to 76 votes out of every 100 votes cast. Fourthly, the right at any time to take any unissued shares in the company. Fifthly, the rights attaching to the life governor's share cannot be altered or extinguished on a reduction of the capital of the company without the consent in writing of the holder. When the life governor's share ceased to be held by Peter it shall rank as and become an ordinary share.
51 A director's report of 6 December 1986 for the year ended 30 June 1986 stated that WPPL's main source of income was from its share of the profit from Hancock and Wright and from royalties received. The company itself or through its subsidiaries also carried on business as printers and publishers and pastoralists and farmers, and carried on manufacturing or industrial businesses ‑ but those businesses ran at a loss or made no significant contribution to the company's profit.
52 WPPL and subsidiary companies consolidated balance sheet as at 30 June 1986 shows total assets of $22,085,551 and total liabilities of $11,120,292 ie net assets of $10,965,259. WPPL's interest in Hancock and Wright was recorded as $471,053 and stated to be 'at book value'.
53 Salt, who was a director and company secretary of WPPL, signed the WPPL consolidated accounts for the year ended 30 June 1986. The balance sheet does not include mining tenements or interests as an asset. I accept Salt's evidence that when he signed these accounts, he believed that they were correct and he did not deliberately leave out any assets from the WPPL balance sheet that he prepared for 30 June 1986. Salt's evidence is that there is no entry for mining tenements in WPPLs accounts because in preparing them he followed the way that the accounts were prepared when he first commenced with WPPL in 1976. He also thought the mining tenements were in the name of Hancock and Wright as opposed to WPPL. The statement of assets did not list as an asset any royalties because he followed what was done in prior years and there was never any valuation of future royalties.
54 During the 1950s and 1960s Peter and Lang explored the Pilbara region of Western Australia and identified large deposits of iron ore. Lang had incorporated a company called Hancock Prospecting Pty Ltd (HPPL) of which he was the life governing director. He had effective complete control of HPPL in the same manner that Peter had effective complete control of WPPL.
55 During the 1950s Peter and Lang arranged for WPPL and HPPL to commence to carry on business as partners as 'Hancock and Wright'. HPPL and WPPL did not enter into a formal partnership agreement until 1978 and subsequently entered into substituted partnership agreements in 1983 and 1984. The partnership gained control of a number of temporary reserves or tenements in the Pilbara region. The mining tenements and interests are very valuable.
The Mining Act - temporary reserves and mining leases
56 Section 276 of the Mining Act 1904 (WA) permitted the relevant Minister to temporarily reserve any Crown land from occupation and to authorise any person to temporarily occupy it on such terms as the Minister thought fit. The marginal note in the Mining Act referred to these reserves as '[t]emporary reserves'. The authorisation of temporary occupancy of Crown land was granted in respect of areas or blocks of land identified by numbers and described as temporary reserves. Often, for ease of reference, a temporary reserve was referred to by the prefix 'TR' followed by the block number.
57 Section 48 of the Mining Act authorised the Governor to grant a lease of any Crown land for purposes including mining and all purposes necessary to effectively carry on mining operations for any mineral other than gold. There was no connection made in the Mining Act between the grant of a temporary reserve and the grant of a mining lease. However, the grant of a mining lease over an area covered by a temporary reserve was only made following expiry or surrender of the temporary reserve.[6]
58 The grants of temporary reserves and mining leases relevant to this action took place within the framework of agreements made between the State and the grantees. Each agreement was approved or ratified by an Act of Parliament enacted for that purpose.
The 1962 Agreement and the 1963 Hamersley State Agreement
59 In October 1962, Hamersley Holdings Pty Ltd (Hamersley Holdings) and Hamersley Iron Pty Ltd (Hamersley Iron) were formed. Hamersley Iron is a wholly owned subsidiary of Hamersley Holdings. Hamersley Holdings is a subsidiary of Rio Tinto Ltd (Rio Tinto). Hamersley Iron was the operative company for what became known, within the Rio Tinto group, as the Hamersley project.
60 Prior to December 1962, Hancock and Wright was granted rights of occupancy over certain temporary reserves (the 1962 Hancock and Wright TRs). These reserves became the subject of an agreement on 12 December 1962 between Lang, Peter and Hancock and Wright (as Vendors), and Hamersley Iron (as Purchaser) (the 1962 Royalty Agreement) whereby the Vendors sold to Hamersley Iron all their right, title and interest in and to certain temporary reserves, the land comprised therein and all rights to prospect or mine granted thereby or flowing therefrom.
61 The 1962 Royalty Agreement provided for a royalty to be payable to the Vendors if ore was won from the area of the 1962 Hancock and Wright TRs or from additional identified areas of land over which, at that time, Hancock and Wright did not hold any rights of occupancy. The royalty is 2 ½% of the amount received on disposal of iron ore in unrefined and unmanufactured form fob the first port of shipment.
62 Pursuant to a State Agreement approved[7] on 13 November 1963 (the 1963 Hamersley State Agreement), Hamersley acquired significant temporary reserves over the areas covered by the 1962 Royalty Agreement.
63 On 22 October 1964, a deed of assignment in respect of the 1962 Royalty Agreement was entered by Stanley Perron of the one part and WPPL, HPPL, Peter, Lang and Hancock and Wright (all called the Prospectors) of the other part, whereby the Prospectors assigned Perron a 15% interest in the royalties payable under the 1962 Royalty Agreement in respect of ore won from Hamersley Iron's Mount Tom Price mine.
64 By a further State Agreement[8] approved on 23 October 1967 (the 1967 Hanwright State Agreement), Hanwright was granted temporary reserves over areas which came to be numbered as blocks 4937H (TR 4937) to 4967H (TR 4967H) for a period expiring on 31 December 1968, with successive renewals for a period of 12 months.
65 Clause 8(1) of the 1967 Hanwright State Agreement permitted Hancock and Wright to apply for a mining lease of part or parts of the total area of the temporary reserves. Eastern Range lies wholly within TR 4967H and Channar lies wholly within TR 4965H and TR 4966H.
66 On 31 January 1968, Hanwright and Hamersley Iron entered into an agreement (the 1968 Royalty Agreement). Under the 1968 Royalty Agreement, Hamersley Iron was to form a new company, Mount Bruce Mining Pty Ltd (MBM), of which Hamersley Iron would hold 75% and Hanwright would hold 25%. The 1968 Royalty Agreement also dealt with temporary reserves held by Hanwright, described as the 'Mount Bruce Reserves', which included Eastern Range and Channar A. Ore won by MBM from the Mount Bruce Reserves would be subject to payment by MBM to Hanwright of a royalty. If Hamersley Iron gave Hanwright written notice, certain temporary reserves held by Hanwright (including the Mount Bruce Reserves) were to be transferred to MBM.
67 The 1968 Royalty Agreement provided for MBM to pay to Hanwright a royalty of 2 ½% on ore won from tenements covered by the agreement.
68 The 1967 Hanwright State Agreement was amended by a further State Agreement (the 1968 Hanwright State Amendment Agreement), approved on 12 November 1968. Temporary reserves earlier issued to Hanwright were cancelled and the relevant temporary reserves were issued to Hanwright.
69 On 5 May 1970 Hanwright and Hamersley Iron and MBM entered into an agreement (the 1970 Royalty Agreement). Under the 1970 Royalty Agreement Hamersley Iron relinquished its option under the 1968 Royalty Agreement. In consideration of that relinquishment and the payment of $5 million by MBM to Hanwright, reserves (the Mount Bruce Temporary Reserves) were divided between Hanwright and MBM. Ore won by MBM from the MBM area would be subject to the payment to Hanwright of a royalty of 2 ½%.
70 On 14 September 1972, a Deed of Partition of One‑Third Royalty, in respect of the 1962 Royalty Agreement, was entered by HPPL, WPPL, Lang and Peter. The Deed was ratified and confirmed on 10 October 1972.
71 On 11 October 1972, the Rhodes Ridge Joint Venture Agreement was entered between Rhodes Ridge Mining Co Ltd, HPPL and WPPL (RRJVA).
72 Rhodes Ridge Mining Co Ltd was a subsidiary of Texas Gulf Inc. Rhodes Ridge Mining Co held 50% and HPPL and WPPL each 25% of the joint venture and the joint venture assets. The joint venture covered tenements granted by the State in the Rhodes Ridge area.
73 Rhodes Ridge was the subject of a State Agreement which was authorised by the Iron Ore (Rhodes Ridge) Agreement Authorisation Act 1972 (WA). The Sate Agreement confirmed that significant exploration of Rhodes Ridge had been undertaken by the Joint Venturers revealing large deposits of iron ore with a high grade of iron.
74 On 24 October 1973, the Marandoo Joint Venture Agreement was entered between Marandoo Mining Co Ltd, HPPL and WPPL.
75 On 2 March 1978 a deed (Deed to Avoid Dissolution of Partnership) was executed. The parties were the shareholders in HPPL, including Lang, and the shareholders in WPPL, being Peter, his wife Pauline Wright, Michael, Angela, Julian and the Wright Family Memorial Foundation Ltd. The effect of the deed was that the parties agreed that no act or thing be done to cause the determination or dissolution of the partnership of HPPL and WPPL for the period while the 1962 Royalty Agreement and the 1968 Royalty Agreement (or either of them) shall remain in force.
76 On 27 February 1981 by the Texas Gulf Iron Ore Assignment Agreement, Texas Gulf assigned its interest in the Rhodes Ridge Joint Venture to Hamersley Resources Ltd, a subsidiary of CRA, which subsequently became Rio Tinto Ltd, a part of the Rio Tinto group.
77 In 1984 HPPL and WPPL entered into a variation of partnership agreement (the 1984 Agreement). Clause 4 of the 1984 Agreement provided that each partner shall have the option exercisable at any time during the continuation of the partnership to require the transfer of the HPPL interests to HPPL and the transfer of the WPPL interests to WPPL. Schedule 1 of the 1984 Agreement set out the HPPL interests and sch 2 set out the WPPL interests. The WPPL interests include temporary reserves in the Rhodes Ridge Agreement Area and Giles Mini.
78 HPPL and WPPL entered into a further partnership agreement on 12 June 1987.
79 On 16 November 1987 CMIEC (Channar) Pty Ltd, a subsidiary of Sinosteel, and Channar Mining Pty Ltd, a subsidiary of Hamersley Iron, entered into the Channar Mining Joint Venture Agreement. Hancock and Wright were entitled to royalties from iron ore from the Channar mine.
80 In October 1990, Hanwright sold its interest in the Marandoo/Wittenoom tenements for $60 million.
81 On 2 March 2001, WPPL instituted action CIV 1279 of 2001 in this court against HPPL to, amongst other things, obtain declarations to the effect that WPPL was entitled to sole control over and responsibility for the administration, development and disposal of the Partnership's interest in the Rhodes Ridge mining joint venture.
82 After a long trial Murray J upheld claims by WPPL that it had by notice dated 11 December 1997 validly exercised a right under cl 4 of the 1984 Agreement to call for the necessary steps to be taken to transfer the partnership's interests in the Rhodes Ridge mining areas to WPPL.[9] HPPL appealed. On 30 October 2012 the appeal was dismissed,[10] with the consequence that WPPL obtained, in effect, HPPL's interest in the Rhodes Ridge Joint Venture.
83 On 30 April 2014, this court ordered that HPPL execute a deed of assignment in respect of HPPL's interest in the Rhodes Ridge Joint Venture in favour of WPPL, following which WPPL acquired HPPL's interest in that joint venture.
84 On 10 May 2013, WPPL and HPPL had been successful in Supreme Court of New South Wales action 2009/323345 in which they claimed royalties payable by Mount Bruce Mining.[11]
85 On 16 September 2014, an appeal by Mount Bruce Mining from the decision of the New South Wales Supreme Court was partially successful,[12] following which Mount Bruce Mining appealed to the High Court. On 14 October 2015, the High Court dismissed Mount Bruce Mining's appeal and the decision at first instance was reinstated.[13]
86 The 1962 Royalty Agreement provided that Hamersley Iron shall pay to the Vendors a royalty of 2 ½% of the amount received on sale or disposal of the iron ore in unrefined and unmanufactured form fob the first port of shipment. The agreement further provided that if the iron ore is beneficiated otherwise than by crushing or screening, the ore shall be deemed to have been disposed of at the time beneficiation begins and the iron ore is deemed to have been disposed of at the assumed fob price. In the absence of actual sales of equivalent iron ore and failing agreement amongst the parties the assumed fob price shall be determined by arbitration.
87 In 1979, Hamersley Iron installed a concentrator at the Mount Tom Price mine in which ore produced was to be passed through a screening, crushing and beneficiation process.
88 In late 1979, the possibility of an arbitrated dispute was being discussed between Hamersley Iron and Hancock and Wright. However, before the arbitration could progress the question of when the beneficiation or other treatment of low grade ore began within the meaning of cl 9(b) of the 1962 Royalty Agreement had to be answered by the court.
89 By action 2313 of 1982 commenced in this court, the parties to the 1962 Royalty Agreement sought an answer to this question. Olney J delivered a judgment on 23 December 1983. An appeal was successful.[14] Leave to appeal to the Judicial Committee of the Privy Council was granted by the Full Court on 6 March 1985.
90 On 11 November 1985, the Privy Council allowed the appeal and reinstated the declaration of Olney J that Hamersley was obliged to pay an amount equal to 2 ½% of the assumed fob price of all low-grade iron ore fed into the feed chute of the wet screening plant of Hamersley's beneficiation plant with the minor alteration deleting the words 'low-grade'.[15]
91 The dispute was referred to arbitration by a notice dated 15 January 1986. That is the concentrator royalty arbitration to which I will refer later. The claimants were Lang, Michael, Julian and Angela as executors of Peter's estate, HPPL, WPPL and LSP Pty Ltd and The National Mutual Life Association of Australasia Ltd. The respondent was Hamersley Iron. The dispute referred to arbitration was the determination of the assumed fob price of all ore fed into the feed chute of the wet screening plant of Hamersley's concentrator at Tom Price. Hamersley had not paid the claimants anything on account of that ore since it had commenced feeding ore into its concentrator.
92 On 30 April 1986, HPPL, WPPL, Lang and Michael, Angela and Julian (as executors of Peter's estate) produced their 'Points of Claim' in the concentrator royalty arbitration. This document was signed by Keall Brinsden, solicitors for the claimants.
93 On 12 June 1986, Hamersley Iron produced its 'Points of Defence'. Hamersley Iron admitted it was obliged to pay the claimants a royalty but did not admit the amount of that royalty.
94 As at January 1987, the concentrator royalty arbitration remained unresolved. A heads of agreement to resolve the arbitration was signed in December 1987.
95 Julian graduated with a Bachelor of Commerce at the University of Western Australia and a Master of Business Administration from North Western University in Chicago. After graduating from North Western University, Julian worked in the finance industry in Chicago before returning to Perth in June 1976.
96 On returning to Australia in June 1976 Julian commenced working as the General Manager of the Sunday Independent, a local newspaper owned by WPPL. He worked at the Sunday Independent until June 1983 except for a six month period where he worked for a transport company owned by WPPL.
97 In 1976 Peter appointed Julian and Angela as directors of WPPL.
Michael appointed chief executive of the Sunday Independent
98 Michael was appointed a director of WPPL sometime before 1976. He had commenced employment at Wrights Limited, a company owned by WPPL, as general manager during the 1970s. He ceased employment with Wrights Ltd on or about 31 July 1983 and commenced employment at the Sunday Independent as general manager and became Julian's boss. Julian became head of advertising at the newspaper. Julian reported to the general manager who reported to Michael.
99 Julian's relationship with Michael deteriorated during the time they were working at the Sunday Independent. Julian worked for WPPL in that capacity until he ceased employment in July 1983 in the circumstances to which I will refer shortly.
100 Between his appointment as a director in 1976 and ceasing employment with WPPL in July 1983 Julian regularly attended WPPL board meetings. At those meetings the directors discussed WPPL's non‑mining businesses but not its mining business. Peter told Julian and his siblings that he had agreed with Lang that the children would not be involved in the mining business.
101 Julian knew that WPPL held mining tenements and received royalties from Hamersley Iron for ore mined at Mount Tom Price. Peter had told Julian that WPPL received those royalties and Julian saw those royalties recorded in WPPL's annual financial statements which he received each year.
102 In 1982 Julian informed Peter that he did not want to be in business and he wanted to pursue his chosen career in investment finance. Julian tried to persuade Peter to let him set up an investment division within WPPL to look after its revenues to replace the royalties when they ran out. Peter did not agree. Julian decided not to work for WPPL any longer. In a memorandum of 12 November 1982 Julian recorded that Peter and Julian had agreed that Julian would continue at the Sunday Independent as advertising manager and deputy chief executive until June 1983 and that Peter had indicated that Julian would either grow closer or further away from the family and Julian was hoping for the former.
103 In late 1982 or early 1983 Julian borrowed $30,000 from Peter. Julian had traded some bank bills. He had an open position which showed a paper loss. He asked Peter to lend him the money to cover that position by buying an equal number of opposite bank bills to hold the position while he decided which way the market was going. Peter loaned Julian the money but at a family meeting Peter was furious and critical of Julian. Notes to Peter from Angela and Michael of 14 February 1983 and 1 March 1983 respectively show that by that time Julian's relationship with Angela and Michael had deteriorated and both of them held low opinions of Julian.
104 In about April 1983 Peter informed Julian that he wanted an option to acquire Julian's shares in WPPL because Julian was leaving WPPL. Julian said he did not want to give up his shares. Peter said that Julian had no choice.
105 Julian took legal advice from Rod Warren of Warren McDonald French & Harrison. Warren advised Julian that the articles of association of WPPL gave the life governing director or the directors acting in concert the right to require Julian to transfer the shares to their nominee for fair value and that the fair value could be manipulated by the life governing director exercising his power to vary the company's articles and to issue shares at a discount. Warren advised that that power may be subject to the control of the court but they could not advise on that without further investigation.
106 On 24 June 1983 Julian, Peter, Michael and Angela executed an option agreement (the first option agreement). The essential part of the agreement was that Julian granted to Peter an option for 10 years to buy all Julian's shares for $1,070,200 to be paid in annual instalments commencing on 1 January 1986 and concluding on 1 January 1995. The agreement provided that the option may be exercised at any time but if not exercised by 31 December 1985 Peter would lend to Julian the sum due on that date of each instalment. The agreement provided that in the event of Peter's death, Michael and Angela would honour the contractual obligations and abide by the terms of the agreement.
107 On 31 July 1983 Julian ceased employment with WPPL and subsequently commenced employment with Healy McKay Investment Services. Between that time (31 July 1983) and Peter's death on 13 September 1985 Julian had no further involvement with WPPL. He remained a shareholder and director but he did not attend directors' meetings and did not receive any financial reports.
108 Julian was not happy with the terms of the first option agreement and conveyed his reservations to Peter. Peter agreed to alter the option agreement. Julian, Peter, Michael, Angela and WPPL executed an option agreement dated 31 January 1985 (the second option agreement). The second option agreement provided that Julian granted to Peter an option to purchase Julian's shares in WPPL for the purchase price of $1,070,200. The option was for a period of 10 years. If Peter exercised the option before 31 December 1985, Peter was to pay the purchase price by instalments commencing on 1 August 1985 and concluding on 1 August 1994. The agreement provided that if Peter died prior to the payment of the final instalment of the purchase price, Peter's legal personal representatives agreed to fulfil all of Peter's obligations under the agreement.
109 Peter, Julian, Michael and Angela executed a loan agreement (the Loan Agreement). The Loan Agreement is dated 2 July 1983. However, Julian says that the agreement was executed at or about the time of the second option agreement, that is January 1985, because it refers to the second loan and was executed after the first option agreement. The Loan Agreement provides that if the lender, Peter, exercises the option, the lender agrees until the date on which the option is exercised to lend to the borrower, Julian, interest free each instalment of the purchase price described in cl 4 of the option agreement. Clause 4 of the second option agreement describes the instalments of the purchase price but there is no cl 4 in the first option agreement. I find that the Loan Agreement was executed at about the time of, or shortly before and in anticipation of, the second option agreement.
110 On 31 July 1985, Salt, the accountant and company secretary of WPPL, caused WPPL to pay to Julian the first instalment pursuant to the option agreement. Julian received $68,095.27, being the first payment of $170,200 less the agreed value of the property at 69 Louise Street and the Volvo sedan which Julian had in his possession.
111 Peter died unexpectedly in Thailand on 13 September 1985. He was 77 years old.
112 By his will Peter appointed Michael, Julian and Angela as executors and trustees of his will.
113 By cl 3 of his will Peter bequeathed all his shares in WPPL to be divided as to one third to Michael, one third to Angela and the remaining third to Michael and Angela upon trust for Julian's children in equal shares. By cl 4 Peter conferred a power upon Michael and Angela to apply any net income arising from the shares held in trust for Julian's children for their benefit or to accumulate any net income for their benefit until the vesting day.
114 By cl 5 of his will Peter bequeathed the residue of his estate to Michael, Angela and Julian in equal shares.
Discussions following Peter's death about Julian's WPPL shares
115 On 28 September 1985 Michael and Angela had a telephone conversation with Carnegie Fieldhouse, a Sydney lawyer who acted for Lang, Peter, HPPL and WPPL. Michael recorded the conversation and caused the recording to be transcribed. Michael asked, in relation to Julian as a director, whether they are required to advise him of meetings. Fieldhouse advised that they are. Michael then said that in relation to supplying Julian with information, his understanding is that if they send a formal notice of a meeting it is up to Julian to attend the meetings in which case he gets what everybody else gets and whatever he cares to request. Fieldhouse said that they must give Julian notice of a meeting and tell him matters that are to be discussed but they are not obliged to give him the results of the meeting. Further, if Julian later asked then they must give it to him and further, as a director Julian is entitled to all the financial accounts, both the balance sheets and all the backup information.
116 Michael, Angela and Fieldhouse discussed the option agreement. Fieldhouse advised that the executors of Peter's will could exercise the option and if Julian did not agree to that then Michael and Angela could 'force the issue'. Michael asked whether they should go ahead and exercise the option. Fieldhouse advised that it would be in their interest to exercise the option because under Peter's will a third of the shares would go to Michael, a third to Angela and a third to Julian leaving him with a one‑ninth shareholding in WPPL. There was a discussion about capital gains tax and stamp duty. Fieldhouse advised that it might be better to work out some separate sale arrangement with Julian for his WPPL shares but that if Julian was not a willing party, they would have no alternative but to exercise the option.
117 Michael, Angela and Fieldhouse discussed whether Julian's directorship could be terminated. Fieldhouse advised that it can be terminated by a meeting of shareholders and stated: 'So putting it bluntly, you and Angela could get rid of Julian'. There was a discussion about the Kanawha Coho USA venture. Fieldhouse then referred to conflict of interests. He said that Julian was coming over to see him the next day. Fieldhouse explained that he acts for Peter's estate and for Michael and Angela and if Julian wants any interpretations of Peter's will then he must seek his own legal advice because Fieldhouse would not be acting for him in anything. Fieldhouse said that his loyalty was to Michael and Angela. Michael said that he and Angela would like Fieldhouse to put his mind towards the possibility of parting of the ways with Julian. Having noted that Julian had approached Michael and Angela saying he would like to revise the option agreement, Michael said he would like to reconsider it 'in the context of getting him out one way or the other'. Angela added 'in other words, buying out the 450 shares'.[16]
118 Michael agreed that Fieldhouse should find out how much Julian would want for his shares. Fieldhouse said that he could use the deal Julian made with Peter as a weapon in talking to him. Michael instructed Fieldhouse: '[J]ust use your own imagination. The basic concept is, we'd like to buy him out one way or the other'. Fieldhouse said that he would work on that in his meeting with Julian the following day.
119 On 29 September 1985 Fieldhouse met with Julian in Sydney. Fieldhouse reported the discussion to Michael and Angela in a conversation later that day which Michael recorded and caused to be transcribed. Julian said to Fieldhouse that he was not happy with the option arrangement and it should be regarded as something between him and Peter and Peter did not intend for it to carry on after his death. Fieldhouse told Julian that he acts for Peter's estate and for Michael and Angela, that he did not act for Julian, and that Julian would have to get his own advice. Fieldhouse said that as far as he was concerned the option survived Peter's death. Fieldhouse said that he had instructions from Michael and Angela to talk to Julian about them buying out his shares. Julian said that he was entitled to his third and wants to get some figures from Salt to see about the assets and worth of the company and put a figure on his share. Fieldhouse said that Julian really only had a ninth, not a third. The matter was left on the basis that within a week Julian would tell Fieldhouse what he wants for his shares.
120 Later that day, 29 September 1985, Fieldhouse had a further telephone conference with Michael and Angela, which Michael recorded and caused to be transcribed. Fieldhouse informed Michael and Angela of the substance of his meeting with Julian as I have set it out. Fieldhouse said that he would not be surprised if the figure Julian had in mind was something in the order of $8 million or $9 million as he had mentioned that in some other context. Michael asked how realistic that was. Fieldhouse said he thought it was fairly low. Michael asked whether Fieldhouse thought Julian could reasonably demand $5 million or $6 million or $7 million. Fieldhouse said that a third of the assets and the company are worth more than that but if they held him on the one‑ninth share, one‑ninth is not worth all that. Michael said to Fieldhouse that he should emphasise to Julian that as far as the law goes he (Julian) is only entitled to one‑ninth and he ought to direct his thoughts along those lines. Fieldhouse said he had done that.
Negotiations to sell and purchase Julian's shares commence
121 In early October 1985 Julian arranged a meeting with Michael and Angela at the Kings Park restaurant in Perth. Julian said he wanted to keep his shares in WPPL. Michael said that he and Angela would be buying Julian's WPPL shares either by agreement or by the option.
122 By 4 October 1985 Julian had instructed Rod Warren of Warren McDonald French & Harrison to represent him in relation to Peter's estate and to obtain an opinion from McCusker QC as to whether the option was enforceable by Peter's executors.
123 On 4 October 1985 Michael sent Salt a memorandum, copied to Angela, about negotiations with Julian to sell his WPPL shares.
124 Michael recorded in his diary a meeting with Angela, Fieldhouse and Salt on 6 October 1985 about buying out Julian's shares. Michael's notes refer to intending to exercise the option to buy Julian's shares but not to exercise the option until a dividend is due. Michael noted that Fieldhouse will process probate of Peter's will and use Keall Brinsden, solicitors. Michael noted to use Fieldhouse as negotiating officer and that Fieldhouse will work on a counteroffer along the lines of tax free capital gain.
125 After his meeting with Fieldhouse in Sydney Julian worked out a price. His price was based on one‑ninth of the net assets of the company, one‑ninth of the mineral reserves and one‑ninth of the royalties. Julian phoned Fieldhouse. He gave Fieldhouse a figure which he (Julian) said was based on him holding one‑ninth of the shares but stressed that he did not agree that he only held one‑ninth and he believed he had one‑third of the shares. Fieldhouse rejected the proposal.
126 Lang wrote a letter dated 1 November 1985 to Michael, Angela and Julian (the Hancock letter) in which Lang said that they should meet as soon as convenient and set out, amongst others, the following things. The division of mining tenements is definite as shown in the extension to the partnership agreement. Under this division the most valuable and possible saleable ore body in 'your half' is Giles Mini. The current iron producers seem to be unanimous in their opinion that Giles is the best iron ore deposit in the whole of the Hamersley field. If Hancock is able to get McCameys off the ground it may be decades before they can work Hope Downs. If McCameys is stopped from going then Hancock may be able to activate some of the Hope Downs areas instead.
127 When Julian received the letter he wrote to Michael saying that he wished to attend the meeting with Lang.
128 On 4 November 1985 Fieldhouse instructed Max Vinnicombe of Keall Brinsden to obtain probate of Peter's estate.
129 On 11 November 1985 the Privy Council delivered judgment on the appeal from the Supreme Court of Western Australia and declared when beneficiation began for the purpose of cl 9(b) of the 1962 Royalty Agreement.
130 On 21 November 1985 Neville Boughton and Kevin Dalby, the employees of Hancock and Wright attending to the concentrator royalty arbitration, met with Wayne Martin and Phillip McCann of Keall Brinsden to discuss the concentrator royalty arbitration. On 22 November Boughton wrote a memorandum to Dalby, copied to Martin, recording the discussions at the meeting. Michael received a copy of the memorandum and read it and at some time before 28 November Michael had a discussion with Boughton about the arbitration.
131 On 28 November there was a WPPL director's meeting attended by Michael, Angela, Julian and Salt. The minutes record that Michael reported on the Hancock and Wright royalty case before the Privy Council and informed the meeting that the appeal had been lost and cost were awarded 'against us'. Michael informed the meeting the next task was arbitration, a long drawn out procedure which could take as long as a year. The Hancock letter was tabled and discussed and the meeting decided that all those present would attend a meeting with Lang at 2.30 pm and hear his intentions regarding the future of the Hancock and Wright partnership. There was other business discussed.
132 On the afternoon of 28 November Michael, Angela and Julian met with Lang (the Hancock meeting). A transcript of the meeting records, amongst other things, the following discussion:
Michael: Julian is a minority shareholder, and he has expressed the desire to sell ... we will be negotiating ... so we will probably be reduced to the two of us in the foreseeable future. He has expressed that desire a couple of times, and when the relative information comes to hand then we will be in a position to talk to him. As the position now stands in our opinion ‑ Angela's and my opinion ‑ we have 91% and Julian has 9% of the action ...
133 Lang then explained 'what Hancock and Wright have in common' and referred to the areas called the Angelas. Lang referred to his plans to mine McCameys Monster. He said that if that succeeded the Angelas would be a long way down the track but if he did not get McCameys going then the Angelas were next in line for him to push. Lang referred to a contract with the Romanians which would enable him to start the mine hopefully. Lang referred to railway lines, infrastructure, ports, CRA and the Mount Newman people. He referred to Western Ridge. Lang referred to the division of interests between him and Peter. Lang said:
In your half the most valuable thing you have got, in my opinion, is a thing called Giles Mini which most of the so‑called experts in the field will regard as the best iron ore deposits in the Hamersley Ranges. Now that is supposed to go into Rhodes Ridge but there is nothing definite about that, I don't think. I believe there is scope for using that outside of Rhodes Ridge. Now, the only thing I think you can do with that is do the same as what I have tried to do with Western Ridge, and sell it to Mt Newman, because they once made an approach to me to work that deposit.
134 Lang referred to possibly selling Giles Mini to the parent company of Goldfields UK which mined Mount Goldsworthy in a place called Area C. Lang said:
The way for them to get Area C off the ground would be to buy Giles from you because Giles is high grade and very low in impurities.
135 Michael referred to the two agreements between Lang and Peter. Michael referred to sch 2 which sets out the items which Hancock has got and the items which Wright has got. Michael referred to selling the interests. Lang said he did not think he would get very much for them at the moment because over the last 20 years governments have been against [Lang and Peter] getting something going. Lang said that if he was successful in getting McCameys Monster going that would set the pattern and show there is a big chance for Australia there. Lang said he was rather optimistic that there is a future in iron ore. There was a discussion after Angela asked about the risk of the government taking the interests away if they did not develop them. Later Lang said:
In my half you will see McCameys and Marandoo. In your half you will see big of the thing is Rhodes Ridge and Giles is the cream of it. Rhodes Ridge of course is enormous ‑ it is equal in size to a thing called Carajas in Brazil which says is worth $3 or $4 billion. It wouldn't be too bad if we could get a bit of that.
136 Michael then referred to the concentrator royalty arbitration and the Privy Council decision. Lang said it must go to arbitration now. Salt asked about Hamersley Iron making a compromise on the royalty. Lang said:
Well they did come forward previously with a compromise while Madigan was there ‑ 47.5% was the highest we got them up to. Whether that is any indication of what we will get out of them or not I don't know, but I wouldn't be at all surprised ...
137 In his evidence Julian accepted that the transcript was an accurate record of the meeting. However, Julian says that when Michael said at the beginning of the meeting that Julian is a minority shareholder and has expressed his desire to sell, so Michael and Angela will probably be reduced to the two of them in the foreseeable future, it came as a shock to Julian. He was embarrassed, angry and upset. Julian said that he did not comprehend what was said at the meeting, his mind was elsewhere, none of what was said registered with him ‑ he just did not get it.
138 In cross‑examination lead counsel for the defendants, Ms Stern SC, put to Julian that he was aware of what Lang said at the meeting, including references to the concentrator royalty arbitration, references to mineral interests, including that Giles Mini is the most valuable thing you have got, and the best iron ore deposit in the Hamersley and that Rhodes Ridge was enormous. Julian said that he did not comprehend any of that, he did not get it.
139 As I set out later in these reasons, Julian has little independent recollection of meetings and conversations. I accept that Julian now has no recollection of what was said at the Hancock meeting. However, Julian accepts that he heard what was said at the meeting and sufficiently followed the conversation to be able to respond when he was asked if he had any question. Julian accepts that Lang said that if he got McCamey's Monster going then the Angelas will be a long way down the track but if he did not get McCamey's going then they would be next in line for him to push, that Lang referred to the contract with the Romanians and that Lang referred to a proposal to get the McCamey's tenements going, but Julian said he did not comprehend it.
140 Julian accepted that he received the letter of 1 November 1985 from Lang to himself, Michael and Angela. That letter referred in some detail to Lang's intention to develop McCamey's including reference to the Romanian contract. Julian said he was not aware that there had been a split of interests between the Hancock and Wright partners and the big things in the Wright half were Rhodes Ridge and Giles Mini. The Hancock letter of 1 November 1985 referred to the division of mining tenements and the most valuable and possibly saleable ore body in the Wright half was Giles Mini.
141 I find that Julian knew the contents of the Hancock letter and the things said at the Hancock meeting in the sense that he read and heard what was written and said and received the information written in the letter and spoken at the meeting. Julian may not at the meeting have had a deep understanding of the information or appreciated why all of the information was important or how it might be applied. In that sense he may not have 'got it'. However, Julian knew the information stated by the participants in the Hancock meeting in that the information was conveyed to him and he received it.
Negotiations for the sale and purchase of Julian's WPPL shares
142 On 28 November 1985 Julian received the opinion of McCusker QC. McCusker opined that the option was personal to Peter and therefore lapsed on his death.
143 On 27 December 1985 Fieldhouse received a written opinion from Bennett QC. Bennett said that his instructing solicitor acts for Michael and Angela. Bennett opined that the option is capable of exercise by Peter's personal representatives.
144 In late January 1986 Julian spoke with Salt. Salt asked Julian whether he really wanted to sell his WPPL shares. Julian replied that he did not want to sell his shares and he would be much better off keeping them. Salt said that he would speak to Michael about this. A few days later Salt told Julian that he had spoken with Michael and that Michael had said that he and Angela did not want Julian to remain as a shareholder in WPPL.
145 In early 1986 Julian spoke with Fieldhouse about the price at which he would sell his WPPL shares to Michael and Angela. Fieldhouse conveyed to Julian the response of Michael and Angela to Julian's suggested price and a counterproposal from Michael and Angela. Michael gave instructions to Fieldhouse concerning the strategy in respect of buying out Julian.
146 During 1986 Julian was advised by Warren and later by Richard Reynolds of Robinson Cox concerning draft agreements between Michael and Angela and Julian for the purchase and sale of Julian's WPPL shares and his interest in Peter's residuary estate.
147 There were various discussions and communications between Salt and Fieldhouse on the one hand and Julian, Warren and Reynolds on the other hand in relation to the sale and purchase of Julian's WPPL shares and his interest in Peter's residuary estate.
148 On 23 April 1986, Michael and Angela made a joint offer to Julian to purchase his shares in WPPL for $3,413,127 each.
149 On 13 May 1986, Julian and Edix Pty Ltd (in its capacity as trustee of the Nattim Trust) executed a Deed of Assignment of Julian's shares in WPPL to Edix Pty Ltd as trustee for the Nattim Trust.
150 Julian says that at a board meeting Michael and Angela authorised Salt to take over negotiations with Julian. Julian says that they were arguing, it was getting heated and Salt said: 'How about I take over negotiations with Julian?' Angela said: 'I think that's a good idea' and Michael agreed, and they all agreed that henceforth Salt would negotiate with Julian.
151 Julian's evidence is that shortly after the meeting Salt came to his home to negotiate a sale of Julian's shares. I find that those things did happen. There was a board meeting on 27 May 1986. Julian's contemporaneous notes record that on 31 May 1986 Salt came to Julian's home 'to see if an agreement could be reached' and a discussion ensued about the terms of a sale of Julian's shares.
Julian alleges Salt represented WPPL's mineral reserves had no value
152 Julian says that shortly after the WPPL directors meeting Salt came to Julian's house and said to him that the WPPL mining tenements had no value because they had no tenure and because they could be confiscated at any time and they were actually a liability because expenses had to be incurred to keep them. The defendants deny that Salt said words to that effect. I will consider this factual issue later in these reasons.
153 After Peter's death Michael took over Peter's office and assumed the role of CEO of WPPL.
154 Michael and Angela gained information and knowledge about WPPL's mining and non-mining interests. Michael and Angela established a 'Where are we now' committee and a Minerals Committee which operated separately from WPPL's Board of Directors. Michael wrote an agenda for the 'Where are we going?/What are we doing?' committee meeting of 23 May 1986. Michael said that neither he nor Angela knew enough about the mineral activities of WPPL or Hancock and Wright, and that he had had briefings in relation to activities and locations and it was his intention to visit those locations during the June to July school holidays. Julian was not invited to the 'Where are we now?' committee meetings or meetings of the Minerals Committee and at the time he was not aware of their existence.
155 From 22 June 1986 to 8 July 1986 Michael undertook a fact-finding trip of the Pilbara with the company's chief geologist, Shanker Madan. During the trip Michael met with Ron Hubery of CRA. Michael prepared notes of the trip and expressed views about the extent or quality of deposits at Rhodes Ridge, Marandoo and McCamey's Monster. From that trip Michael gained an understanding about the size of the deposits and the strategic value of WPPL's mining tenements and their potential.
156 On 4 August 1986 there was a WPPL directors meeting attended by Michael, Angela, Julian and Salt. Michael did not report on the knowledge he had gained during his Pilbara fact-finding trip other than to report about exploration vehicles and security at Wittenoom.
Julian, Michael, Angela make in‑principle agreement
157 On 6 August 1986, Julian, Angela and Michael reached an in‑principle agreement for Julian to sell his WPPL shares for $10 million over six years, or a $7 million payment with $2 million payable immediately and $5 million payable by 28 February 1987.
158 On 1 December 1986, Michael, Angela and Julian reached a further in‑principle agreement for Julian to sell his WPPL shares in return for $6.8 million (being $7 million with a $200,000 deduction which had been advanced to Julian by way of a loan).
159 On 2 December 1986, Michael, Angela and Julian signed a note of an in principle agreement specifying the price of $6,826,254. There were then various discussions and communications concerning amendments to the draft sale agreement drafted by Fieldhouse.
160 Each of the draft agreements were drafted by Fieldhouse and provided for Julian to sell to Michael and Angela his interest in Peter's estate and shares in other companies as well as his WPPL shares.
161 On 17 January 1987, Julian signed the 1987 Sale Agreements. The sale agreement with Michael provided that in consideration of $3,413,127 Julian agreed to sell to Michael half of his WPPL shares and his interest in half of all other shares he owned other than shares in specified companies. Julian also agreed to procure without further cost to Michael the sale of his interest in half of Peter's residuary estate. Julian agreed to co-operate with Michael in obtaining probate of Peter's estate. Michael's agreement with Angela was in the same terms.
162 On 30 January 1987, Julian agreed to extend the completion date of the 1987 Sale Agreements from 31 January 1987 to 3 February 1987. There was a delay in completion. The 1987 Sale Agreements contained an acknowledgement and agreement that Michael and Angela intended to borrow the purchase price and WPPL would provide financial assistance in the terms of s 129 of the Companies (Western Australia) Code (WA) by providing a guarantee or by granting such other form of security over the assets of the company to secure the borrowers' obligations. There was a delay in obtaining the approval for WPPL to provide that assistance.
163 On 23 February 1987 completion of the 1987 Sale Agreements occurred with Julian handing over transfer of share forms and resigning as a director and receiving payment. Midland Bank provided finance. The Midland Bank notice of particulars of charge documents were prepared recording that the charge had been created on 23 February 1987.
164 After 23 February 1987 Michael and Angela each owned substantially half of the shares in WPPL.
165 Keall Brinsden, acting on instructions from Michael and Angela, applied for probate of Peter's will. In support of the application on 9 April 1986, Julian, Michael and Angela executed a joint affidavit in which they deposed that the contents of the Statement of Assets and Liabilities of Peter's estate annexed to the affidavit were true and correct so far as they had been able to ascertain.
166 The assets listed in the Statement of Assets and Liabilities included shares in WPPL and other companies shown at nominal value of $2. The assets did not include any entitlement to royalties. They included outstanding loans including a loan to Julian of $170,200 being $200,000.00 less $29,800.00 paid pursuant to the Loan Agreement made 21 July 1983. The liabilities included an outstanding loan owing to MAPS (Australia) Pty Ltd of $757,480.00. The statement showed that the estate was insolvent with a net deficiency of $541,592.68.
167 The documentary evidence shows that Salt was involved in the preparation of the Statement of Assets and Liabilities but he had little if any recollection of it. His reconstruction is that David (Tom) McKenna, who used to prepare Peter's tax returns, would have provided information to him, he would have viewed it and then sent it on to Fieldhouse.
168 A memorandum shows that in December 1985 Salt discussed the estate assets with Vinnicombe of Keall Brinsden. Vinnicombe said that they may have to obtain valuations but for the time being to put all shares in at par or nominal value. There is further correspondence between Keall Brinsen and Salt concerning drafts of the statement of assets and liabilities. I accept Salt's evidence that he did not deliberately exclude any assets from the statement of assets and liabilities to be sincere but, as I explain later, of no assistance in determining what he did and did not tell Julian.
169 I accept Salt's evidence that there is no asset listed for an entitlement to royalty streams by Peter because he did not believe that Peter had any entitlement to royalty streams and thought they all went through the partnership and then to HPPL and WPPL, and that at the date of Peter's death he believed the estate was insolvent, to be sincere but unreliable because of the unreliability of his recollection of events so long ago.
170 On 10 July 1986 the will was proved in this court. Julian, Michael and Angela were appointed executors and trustees of Peter's estate.
171 On 23 February 1987, Julian, Michael and Angela executed a deed of retirement of trustee by which Julian agreed to retire as an executor of Peter's estate and was discharged from the trusts arising under the will.
172 On 20 March 1987 Keall Brinsden sent a letter to Salt concerning the retirement of Julian as executor and trustee. The letter appears to have been authorised by Mr Martin of Keall Brinsden. Enclosed with the letter were five documents pertaining to the application for leave required to be made by Michael and Angela under cl 4 of the deed of retirement of trustee. The documents included a memorandum relating to the legal issues, a notice of originating motion and draft affidavits of Julian, Michael and Angela in support of the application.
173 The memorandum contained a discussion of the legal principles and submissions to be made in support of the application. It stated that the concentrator royalty arbitration was 'a significant asset of the estate' and a 'valuable asset of the estate'. The advice provided in the memorandum was that the retirement of Julian from the trusts would enable the estate to be administered more efficiently by Michael and Angela because the arbitration was a valuable asset of Peter's estate and its conduct would otherwise be delayed if Julian remained as an executor.
174 Michael received a copy of the memorandum. The defendants say, and Julian denies, that Julian received a copy of the memorandum.
175 One copy of the covering letter[17] bears a notation 'cc CRF 23/3-87, cc Julian 27/3, cc Angela cc Mike 1/4'. Salt's evidence is that the notation is in the handwriting of his secretary at the time and that the usual practice in the office at the time was that if the letters were copied then 'cc' would be written on the letter. Salt said that the notation on the letter indicates that a copy of it was sent to Fieldhouse, Julian, Angela and Michael.
176 In his evidence‑in‑chief Julian said he had not received the memorandum. In cross‑examination he said that he does not recall getting the memorandum and agreed that he could not say honestly whether or not he got it and all he could say was that he does not remember getting it. In his evidence‑in‑chief Julian said that if he had seen the memorandum he would have read it and sent it to his lawyer. In cross‑examination he agreed that he could not honestly say that if he had received the memorandum he would have read it all. As to sending the memorandum to his lawyer Julian said he thinks he probably would have sent it.
177 Salt sent a different letter to Julian on 27 March 1987.[18] The letter enclosed the proposed affidavit of Julian which had been forwarded to Salt by Keall Brinsden with their letter of 20 March 1987 but none of the other documents forwarded to Salt with the Keall Brinsden letter. In his letter to Julian, Salt asked Julian to peruse the affidavit and if necessary seek advice to see if it is in order to sign. Salt stated that the affidavit was required in connection with the retirement of Julian as an executor and trustee of Peter's will and asked Julian to attend to it as soon as possible so that they could further proceed with the royalty arbitration case and added that Mr Martin had informed them that he would be happy to discuss any aspect of the affidavit directly with Julian's solicitors.
178 I find that a copy of the Keall Brinsden letter of 20 March 1987 and its enclosures was not sent to Julian on 27 March 1987 or at all.
179 I do not infer from the notation 'cc Julian 27/3' on a copy of the Keall Brinsden letter of 20 March 1987 that a copy of that letter and its attachments was sent to Julian on 27 March 1987 or at all. It might signify that a letter containing a copy of the affidavit was sent to Julian. It might mean that a copy of the letter was prepared by the secretary to be sent to Julian but was not sent. How the notation 'cc Julian 27/3' came to be made on a copy of the Keall Brinsden letter of 20 March 1987 is a matter of speculation.
180 It is inherently unlikely that Salt sent, or caused to be sent, two letters to Julian on 27 March 1987, one containing a copy of Julian's proposed affidavit and other documents and the other containing a copy of the same affidavit but not the other documents.
181 After Julian received the draft affidavit he noted that the last words in [6] contained what he believed to be a typing error in that it was stated that the estate of Peter was 'manifestly solvent'. He telephoned Salt about the matter and Salt informed him that it would be fixed.
182 On 14 April 1987 Keall Brinsden sent a letter to Julian enclosing a further affidavit to be sworn by Julian. Keall Brinsden noted in their covering letter that the text of the affidavit is the same as the draft forwarded by Salt except for the deletion of a reference in [6] to the estate being manifestly solvent. The attached affidavit was in the same terms except for [6] which now read:
I verily believe that there are no outstanding matters pertaining to the estate which require my attention prior to my relinquishing the trust.
183 On 24 April 1987 the Supreme Court ordered that Julian have leave to relinquish to Michael and Angela the trust conferred upon him by Peter's will.
184 On 16 December 1987 Lang wrote to Michael informing him that he (Lang) had settled the concentrator royalty arbitration on favourable terms. On 23 December 1987 Hamersley sent a letter to Boughton confirming they had deposited a cheque in the amount of $5.1 million in favour of Wright Prospecting as payee in accord with a letter from Salt dated 17 December 1987. The remittance advice noted that the cheque was in settlement of claims for concentrator royalties for the period March 1979 to October 1987. Hamersley confirmed that cheques were also made in favour of HPPL and LS Perron.
185 On 23 December 1987 a WPPL director's meeting was held at which Michael, Angela and Salt were present. It was noted WPPL had received $5.1 million in settlement of the arbitration and a resolution was passed to pay Michael and Angela a dividend of $500,000 (ie $250,000 each).
186 In 2001 Julian's children, Natalie and Timothy Wright, commenced proceedings in this court against Michael and Angela (the Natalie and Timothy proceedings). Natalie and Timothy claimed that Peter exercised the option to acquire Julian's shares on or about 31 July 1985 with the result that those shares formed part of the assets of Peter's estate. Alternatively, they claimed that the option was an asset of Peter's estate which was exercisable by Michael and Angela as executors and trustees of Peter's will and that in purchasing Julian's shares under the 1987 Sale Agreements rather than exercising the option as executors, Michael and Angela breached their fiduciary duties to Natalie and Timothy as beneficiaries of Peter's estate.
187 Michael and Angela filed a cross-claim against Julian as a third party seeking a one‑third contribution from Julian in respect of Natalie and Timothy's claim and in the alternative payment of the amount paid as the purchase price under the 1987 Sale Agreements.
188 Julian filed a defence to the third party claim and a counterclaim against Michael and Angela. By Julian's counterclaim he contended that he was induced to enter into the 1987 Sale Agreements by reason of the duress or undue influence he suffered at the hands of Michael and Angela and that Michael and Angela held Julian's shares on a constructive or an implied trust for his benefit. Julian sought, in effect, an order that Michael and Angela transfer the shares to him together with an account of profits.
189 Following a mediation the parties agreed to settle the proceedings and their respective claims. The settlement agreement was given effect by the Deed of Settlement executed on 22 April 2008.
190 By the Deed of Settlement Michael and Angela agreed to pay Natalie and Timothy a total of $70 million and released Julian from their claims, any claim they may have had but for the settlement and any liability arising out of Peter's will or the proceedings. Julian gave to Michael and Angela releases and discharges and covenants not to sue which are the bases of one of Michael and Angela's defences to Julian's claims in this action.
191 The Natalie and Timothy proceedings including Julian's counterclaim against Michael and Angela were dismissed by consent on 30 July 2008.
Circumstances leading to Julian bringing this action
192 Julian gave evidence of the circumstances in which he came to make his claims in this action as follows. The process started when Michael died on 26 April 2012. There were media reports about Michael and Angela being worth $2.7 billion. Julian thought that was an absolutely outstanding figure. But he thought a lot must have happened since he left WPPL.
193 In early 2013 Julian's lawyer, Haydn Robinson, informed Julian that he (Robinson) was about to dispose of the documentation from the 2008 proceedings (the Natalie and Timothy proceedings). Julian asked a friend to pick them up for him. The friend started to read through some of that documentation and said to Julian, 'You've been had.' Julian said, 'Well, I know that, but it's all settled now, and in any case, back then the advice I had was I didn't have much of a case and I've moved on'. The friend said he had a barrister friend and he would not mind having a look at Julian's case. Julian agreed on the basis it would not cost him anything.
194 A little later there was publicity about the Mount Bruce litigation between Hancock and Wright and Mount Bruce Mining Pty Ltd, which is a subsidiary of Hamersley, about the non-payment of royalties over two more deposits ‑ Eastern Range and Channar. Julian had not heard of them. The friend introduced Julian to a barrister, Phil Clements, who offered to look into Julian's previous case and suggested that it might be fruitful to go east and look at the court files pertaining to the Mount Bruce litigation, which he did. Clements reported that the Channar joint venture agreement showed Peter's estate was a vendor. Clements further said that the transcript of that litigation showed that the royalties were paid on the same conditions as Hancock & Wright's previous agreement and the parties to that litigation agreed that that was a reference to the 1962 Royalty Agreement. Julian found what was really interesting about the Mount Bruce litigation was that Hancock & Wright were suing for royalties that had not been paid for more than 20 years, that is back to 1993 and maybe 1992, which was not long since Julian had left WPPL.
195 Clements obtained the 1962 Royalty Agreement and showed Julian that under that agreement there were four vendors and Peter was a party to that agreement. So Julian started to think that maybe the estate had an entitlement.
196 Shortly after that, in about mid-2014, Clements died. Julian learned that Peter owned the pen for the yacht at the time of his death. Julian was then introduced to another barrister, Alan Camp, who agreed to take up the case.
197 Camp procured correspondence between Lang and Michael and obtained a statement from Shanker Madan who explained to Camp the trip he had taken to the Pilbara with Michael and other correspondence and meetings he had with Michael.
198 Shortly after that, Camp had a stroke. Then Julian was introduced to a past associate of Camp, Julian's current lawyer, Robert Butcher. Butcher reviewed all of that material and in 2016 he wrote a letter to Angela's lawyers, Clayton Utz, to which he received what he thought was a dismissive and derisive response.
199 In mid-2016 Camp had recovered. Julian asked Camp to give him an opinion on where he stood. Camp gave Julian an opinion that there had been fraudulent misrepresentation. Butcher sent another letter to Clayton Utz, to which he received an unsatisfactory reply. In February 2017 Julian commenced this action.
200 Julian gave evidence and was cross‑examined. His evidence extended over six days. Julian also adduced evidence from Shanker Madan, a geologist who worked for Hancock and Wright.
201 The defendants adduced evidence from Doug Salt. Angela was available to give evidence but did not give evidence. David Lemon who is the first defendant in his capacity as executor of Michael's estate was available to give evidence but did not give evidence.
202 The trial was conducted as an electronic trial and a large volume of documents were adduced in evidence. The plaintiff submits that all of the evidence in respect of which the plaintiff seeks factual findings in respect of the conduct of Michael, Angela, Fieldhouse and Salt is contained in reliable and accurate contemporaneous documents.
203 Julian and the defendants each adduced evidence from experts concerning the value of WPPL's mining interests, relevant mining royalties, the value of WPPL and Julian's WPPL shares.
204 The defendants submit that the court should not accept any aspect of Julian's evidence unless it is confirmed by the contemporaneous record. First, the defendants say Julian is an unreliable witness who has little or no independent recollection of events during 1985 to 1987. Secondly, the defendants say Julian is not a credible witness and on many occasions he gave untruthful or implausible evidence to bolster his case.
205 Memory is a reconstructive process that is susceptible to distortion. Memory distortions can result from external information such as documents relating to a particular matter. Memory distortions can also occur simply with the passage of time and with repeated recounting of events. This is partly because over time memories typically become less highly detailed and specific and more broad and generalised as the information is repeatedly retrieved and re-encoded.
206 A witness is subject to memory biases. This reflects people's natural bias to 'fill in the gaps' of a memory, which are often inaccurate accounts of the actual events. Moreover, memories can be lost or altered. If the content of a memory is updated at the time of retrieval, memory distortion can occur of which the witness may be unaware.
207 The process of litigation itself subjects the memories of witnesses to powerful biases. In this case Julian, has a stake in particular versions of events. Considerable interference with memory is also introduced by the procedure of preparing for trial. Julian will have been asked to recall events many times before he gave his evidence at trial. He will have been asked to recall events when giving instructions and again at other stages of the litigation culminating in his outline of evidence for trial. His account of events has been 'refreshed' by reading documents. The documents considered will have included argumentative material as well as documents which he did not see at the time or which came into existence after the events which he was asked to recall.
208 In the course of his evidence Julian was asked to recount events from more than 30 years ago. He said it was not easy to recall who he did or did not see on particular occasions in 1985 and 1986, that his recollection is not strong of events in the 1980s and that he could not recall particular conversations. On numerous occasions he conceded that where he could not recall something he could not categorically say that it did not occur.
209 Julian made handwritten notes of meetings and conversations. When Julian sought legal advice from Warren, Warren advised Julian to take contemporaneous notes. Thereafter Julian took notes. His practice was that when he got back to his office or got back home he would make a note as best he could recall of what had happened at the meeting or phone call that he had just had.
210 Julian accepted that he had read his contemporaneous notes many, many times and that he had so refreshed his memory that what he knew then and what he now knows gets blurred. At times Julian acknowledged that he was reconstructing events from contemporaneous records rather than relying upon an independent recollection. Julian acknowledged that he did not recall receiving, sending or signing a large number of significant documents which he accepted he did in fact receive, send or sign.
211 The effect of all this is to cause Julian's memory of events to be based to a significant degree on the material he has viewed and later interpretations of it rather than on the original experience of the events.
212 I find that Julian has little recollection of meetings and conversations and what documents or information he did or did not receive or see during 1985 to 1987, which is independent of the documents he has read since and broad generalized memories in which he has filled in the gaps based on documents and his belief of what he did and did not know and what he was and was not told.
213 Julian did not intentionally give false or misleading evidence. In general Julian sought to give answers to all the questions asked of him. On many occasions he gave answers without distinguishing between recollection and reconstruction. More than once Julian was asked by both the court and senior counsel for the defendants to give evidence of what he recalled and not a reconstruction of events. The differentiation is elusive in at least two ways. First, it erroneously presupposes that there is a clear distinction between recollection and reconstruction, when all remembering of distant events involves reconstructive processes. Second, such a differentiation disregards the fact that such processes are largely unconscious and that the authenticity of memories is not a reliable measure of the truthfulness of the witness. On more than one occasion, on further questioning Julian conceded he did not have an actual recollection of a fact or event he had first stated in answer to a question. That reflected Julian's unconscious mental processes in attempting to answer the question put to him rather than an intention to mislead the court.
214 Madan is a geologist. He worked for Hancock and Wright as chief geologist from 1981 and as a consultant from around 1985. He ceased employment with Hancock and Wright on 30 September 1986.
215 I do not find his testimony useful. He produced memoranda received by Michael. In so far as they are relevant the memoranda speak for themselves and their relevance lies principally in what Michael made of them.
216 Madan gave evidence of a trip to the Pilbara with Michael in the June/July 1986 school holidays. Not surprisingly Madan's evidence of what he and Michael did and what was said to Michael was redolent of broad generalised memories in which he filled in gaps from his belief of the effect of what was said and done. Michael made notes of the trip. Michael's notes of the trip are more useful because they are contemporaneous and more likely to be accurate. Further, the relevance of the trip is principally what Michael learned from it and the notes are more likely to reflect what Michael learned and the meaning and significance of those things to Michael.
217 Salt was an accountant. He started working for WPPL as group accountant in 1976. He later became a director, a position he held in 1986 and 1987, and company secretary and later chairman of the board of directors. Salt retired and relinquished his position with WPPL in 1994.
218 Salt played an important role in the negotiations between Julian and Michael and Angela leading to the 1987 Sale Agreements. The plaintiff says Salt was Michael and Angela's agent and made representations and omissions the plaintiff relies upon.
219 Salt had little if any recollection of the events of 1985 to 1987. He said so. During cross‑examination when asked if he recalled receiving a particular document Salt said: 'Can I just say that I'm in my eighty first year and it's very hard to recall things like that'.
220 In his evidence‑in‑chief Salt said he never concealed information from Julian and that none of Michael, Angela or Fieldhouse ever asked him to conceal information from Julian. Salt's statement was made in answer to a question preceded by the statement that in this proceeding Julian alleges that Salt concealed information from him. Salt was responding to an allegation of wrongdoing at a high level of generality. His response which I accept to be sincere was a denial at a high level of generality. I find it of little assistance in determining specific matters of fact. For example, when Salt was asked, 'Did you conceal the fact that you were meeting as an iron ore committee from Julian?' Salt gave a more equivocal answer - 'Not that I can recall'. Salt gave the same answer to the question, 'Did you conceal the matters that you discussed in those meetings from Julian?'
221 Salt also said that his approach to dealing with Julian was the same as his approach to dealing with Michael and Angela. That is not correct in any meaningful sense. The documentary evidence demonstrates that Salt informed Michael of matters relevant to the day to day operations of WPPL and took instructions from Michael. Salt provided information to Julian only when requested to do so. Salt took instructions from Michael and Angela to negotiate with Julian for the sale and purchase of Julian's WPPL shares to Michael and Angela.
222 I find Salt's assertion that he never concealed information from Julian, and that Michael, Angela and Fieldhouse never asked him to do so, to be of no assistance.
223 Salt has no recollection of receiving or reading the Keall Brinsden memorandum of 23 March 1987. He has no recollection of whether he sent a copy of the memorandum to Julian. When Salt was asked whether his approach to dealing with Julian was the same after January 1987 he said that after Julian sold his shares 'we had no need, then, to further inform Julian anything to do with Wright Prospecting.' I find Salt's evidence in relation to the Keall Brinsden memorandum to be of no assistance.
224 A number of people who played roles of varying importance in the events giving rise to this case did not give evidence.
225 Michael died in 2012 before this action was commenced and before Julian gave notice of his intention to bring the action.
226 Angela was available to give evidence but did not do so.
227 The plaintiff submits that inferences should be drawn from Angela's failure to give evidence in accord with the rule in Jones v Dunkel.
228 Fieldhouse was a Sydney lawyer. He acted for Lang, Peter, HPPL, WPPL, Michael, Angela and Peter's estate. He died in November 2009, before this action was commenced and before Julian gave notice of his intention to bring the action.
229 David Lemon is a Sydney lawyer. He worked for Fieldhouse in 1985 to 1987 and made some communications concerning WPPL and Peter's estate. He is the first defendant in his capacity of executor of Michael's estate. On 16 April 2012, Lemon was appointed a director of VOC, the fifth defendant.
230 Lemon was available to give evidence but did not do so. The plaintiff submits that inferences should be drawn from his failure to give evidence in accord with the rule in Jones v Dunkel.
231 In the light of these considerations, the best approach for the court to adopt in this case is to base factual findings of what was said in meetings and conversations, and what documents or information Julian did or did not receive or see during 1985 to 1987 primarily on the contemporaneous documents or records, the known and probable surrounding facts, the inherent probabilities, and circumstantial evidence tending to support one account rather than the other.
232 For the reasons I have stated, I approach Julian's evidence with caution. However, that does not mean that I place no weight on his evidence. Nor do I approach Julian's evidence on the basis that it must be wholly accepted or wholly rejected. Where relevant I will give Julian's evidence weight in accord with my assessment of the reliability of the evidence having regard to relevant documents, the known and probable surrounding facts and the answers Julian gave in chief and in cross‑examination.
233 Julian and the defendants each adduced evidence from experts concerning the value of WPPL and Julian's WPPL shares.
234 Julian adduced evidence from Marcus Flis, John McGuinness and Chris Westworth. Flis is a geologist with experience in mineral exploration, assessment and development. He was exploration manager for Hamersley Iron in the Pilbara from 1997 to 2000. McGuinness is a chartered accountant with experience in valuation. Westworth is a chartered accountant and former audit Partner with Ernst & Young.
235 The defendants adduced evidence from Victor Rudenno and Tony Samuel. Rudenno is a mining engineer with experience in investment banking, mining advice and valuation. Samuel is a chartered accountant and former partner of PricewaterhouseCoopers. He now leads a forensic accounting and valuation practice.
236 Flis, McGuinness, Rudenno and Samuel participated in a conclave of experts and produced a joint expert report concerning the cost of capital. Flis and Rudenno provided a joint expert report concerning valuation of the mining interests of WPPL. Flis, McGuinness, Rudenno and Samuel gave oral evidence concurrently.
237 Westworth gave evidence by way of a report concerning applicable accounting standards in 1986. His evidence was not contested. He did not give oral evidence.
238 The expert evidence concerns the value of Peter's personal entitlement to royalties on the assumption that he had a personal entitlement, the value of WPPL's mining or mineral interests and the value of WPPL's shares. These matters of value relate primarily to Julian's case that in acquiring Julian's interest in Peter's estate and Julian's WPPL shares Michael and Angela failed to pay full value for the interests acquired and breached fiduciary duties they owed to Julian.
239 Julian alleges that Michael and Angela breached the fiduciary duties they owed to Julian, as a beneficiary of Peter's estate and a shareholder in WPPL, in their capacity as executors of Peter's estate and in their capacity as directors and shareholders of WPPL respectively by amongst other things failing to give full value for the purchase of Julian's interest in Peter's estate, which included his personal interest in the royalties (assuming he had a personal entitlement to royalties) and full value for the purchase of Julian's WPPL shares respectively.
240 The defendants submit that the expert evidence is relevant to the defendants' case in three principal ways. First, Julian's decision to enter into the 1987 Sale Agreements was made in circumstances in which his own view was that as at January 1987 the entire shareholding in WPPL was worth in the region of $75 ‑ $120 million as was the case. Secondly, Julian's decision to enter into the 1987 Sale Agreements was made in circumstances where his own view was that as at January 1987 WPPL's mining tenements were worth in the range $20 ‑ $40 million. Thirdly, as set out above, Julian has put in issue the 'full value' of his WPPL shares. If the court accepts Julian's contentions, contrary to the defendants' contentions, that Michael and Angela owed to Julian fiduciary duties as directors of WPPL it is necessary to determine whether or not Michael and Angela paid 'full value' for Julian's WPPL shares.
241 There were extensive evaluations and calculations made by the experts. There are substantial differences between them concerning methodology and application of the applicable methodology. It is not necessary to determine all of those differences. Following conferral between the parties, the parties informed the court by email of 2 March 2020 that only three questions should be addressed by the expert witnesses:
1. the valuation of Rhodes Ridge as at December 1986;
2. the proper minority and marketability discounts, if any, for WPPL shares held by Julian in December 1986; and
3. the impact upon valuation of the WPPL shares held by Julian in December 1986 of (a) the option agreement and (b) the limited financial resources of Michael and Angela.
242 Nevertheless, in closing submissions junior counsel for the plaintiff, Mr Healy, submitted that the expert evidence gives rise to a number of questions for the consideration of the court which traversed the evidence covered at trial.
243 The first question advanced by Mr Healy is: as at 31 December 1986 what was the value of Peter's personal royalty entitlement under the:
(a) 1962, 1968 and 1970 Royalty Agreements?
(b) alternatively, the 1962 Royalty Agreement?
244 I have determined for the reasons I set out later that Peter, and on his death his estate, had an entitlement to royalties under the 1962 Royalty Agreement but not the 1968 and 1970 Royalty Agreements. Accordingly, the relevant issue is the value, at 31 December 1986, of Peter's personal royalty entitlement under the 1962 Royalty Agreement. The 1962 Royalty Agreement conferred an entitlement to royalties from Tom Price.
245 There was a difference between the experts whether the calculation should be made on a before tax basis or after-tax basis. Flis made calculations on a before tax basis. Rudenno, Samuel and McGuinness made calculations on an after tax basis. McGuinness and Rudenno assessed the value of Peter's interest in the Tom Price royalties to be $16.65 million and $18.95 million respectively.
246 The plaintiff is willing to accept the after tax calculations by McGuinness for the purposes of this issue. I find that as at 31 December 1986 the value of Peter's personal royalty entitlement under the 1962 Royalty Agreement was $16.7 million.
247 Mr Healy's second question is: as at 31 December 1986 was the value of Julian's interest in Peter's estate greater than the nil consideration paid by Michael and Angela to purchase Julian's interest in Peter's estate?
248 The question assumes that Michael and Angela paid nil consideration to purchase Julian's interest in Peter's estate. I will address that question later in these reasons. Julian had a one third interest in Peter's residuary estate which included Peter's 25% interest in royalties under the 1962 Royalty Agreement which had a value of $5.55 million, that is, one third of $16.7 million.
249 The statement of assets and liabilities annexed to the affidavit of Michael, Angela and Julian in support of their application for probate of Peter's will showed a net deficiency of $541,592.68. However, the assets listed included shares in companies other than WPPL shown at nominal value of $2. The statement did not include the value of Peter's interest in the concentrator royalty arbitration, for which WPPL later received $5.1 million. The statement did not include other things that were, or might have been, assets of the estate including a pen at the Fremantle Yacht club and overseas interests.
250 On the available evidence I find that the value of Julian's interest in Peter's estate as at 31 December 1986 was in the order of $7 million.
251 The plaintiff's third question is: as at 31 December 1986 what was the value of the mining tenements comprising the Rhodes Ridge (including Giles Mini) joint venture mining area?
252 At 31 December 1986 WPPL held an interest in the RRJV area pursuant to the 1984 Hancock and Wright partnership agreement and the sale of Texas Gulf Australia's interest to Conzinc Riotinto of Australia Ltd (CRA).
253 Flis adopted a comparable sales method to value the RRJV interest. CRA bought Texas Gulf's interest in the Wittenoom joint venture (Marrandoo) and the RRJV for US$40 million in 1981. Flis treated that transaction as valuing 100% of the two joint-venture resources at US$80 million. At the prevailing exchange rate, this equated to AU$34.843 million for 50% of the ore reserves in each area. Flis was provided with documents which showed that CRA attributed the purchase value as AU$21.8 million for the 50% of the WJV (including the Marandoo deposit) and $13 million for 50% of the RRJV (including Giles Mini). Flis allocated the values between RRJV and WJV according to the CRA attribution and accordingly allocated $13 million as the purchase price for 50% of the RRJV. Flis then adjusted this value for CPI increase from 1981 to 1986, increase in known resources from 1981 to 1986 and adjustment for the change in iron ore price from 1981 to 1986.
254 Rudenno also used a comparable sales method. In Rudenno's opinion, due to the difficulty in allocating the purchase price of US$40 million agreed by CRA in 1981 for a 50% interest in both Marandoo and RRJV, it was not appropriate to use that sale as a comparable sale. Rudenno considered it appropriate to apply transaction values derived from the 11 July 1986 sale of CSR Ltd's 50% interest in Yandicoogina. Rudenno applied the purchase price to the total contained metal and total iron ore resources for ore and further reduced the value for the likely different start up dates between RRJV and Yandicoogina and increased the value range to allow for the additional value derived from the royalty payments that would be forthcoming to Hanwright. Rudenno valued a 50% interest for WPPL in the RRJV at between $1.7 million to $2.1 million with a preferred value of $1.9 million.
255 I consider the 1981 purchase by CRA of the Texas Gulf interest in the RRJV and WJV a better comparator than the Yandicoogina transaction. Rudenno accepted that the Texas Gulf transaction was a valid comparator but did not use that comparator because it did not allocate the price between Rhodes Ridge and Marandoo. Flis adopted the CRA allocation of value between the WJV and the RRJV but used his own assessment of the ore resources as a check.
256 Flis considered the Yandicoogina transaction not to be a comparable transaction because the transaction was in relation to a channel iron deposit and as at 1986 no channel iron deposit had been exported from the Pilbara. Rudenno understood that the deposit was a pisolite iron ore deposit and likened that to deposits and sales of ore from a Rhodes Ridge iron ore deposit of pisolites.
257 There was a major difference between Flis and Rudenno whether the Yandicoogina deposit is or is not a pisolite deposit. I prefer the opinion of Flis. First, the issue is essentially one calling for geological expertise. Flis is a geologist. Rudenno is not. Secondly, I found Mr Flis's reasoning more persuasive.
258 The absence of an allocation of the purchase price between the RRJV and the WJV in the CRA transaction is a difficulty. However, I am satisfied that based on all of the matters which Flis had regard to, the Texas Gulf purchase is an appropriate comparative sale.
259 I do not accept that all of the adjustments made by Flis are appropriate. I consider that it is not appropriate to adjust the value for the CPI increase for the reasons given by Rudenno. I accept that it is appropriate to adjust the value for the increase in resources (3564.4/3070 or 1.16) and adjustment for the change in iron ore price from 1981 to 1986 (0.839). Using those adjustments the adjusted value is $12.65 million.
260 For the purposes of these reasons, I find that value of a 50% interest in the RRJV as at 31 December 1986 is $12.65 million which is $6.325 million for a 25% interest.
261 By the 1987 Sales Agreements Julian sold to Michael and Angela his shares in WPPL which constituted 32.9% of the total shares in WPPL. Julian's primary position is that the value of Julian's shares is 32.9% of the value of WPPL. That position underpins the fourth question posed by Mr Healy: as at 31 December 1986 what was the full value of Julian's 32.9% shareholding in WPPL?
262 The defendants submit that the value of Julian's shares as at 31 December 1986 was not 32.9% of the value of WPPL. The defendants say that in determining the fair value of Julian's shares, allowance must be made for minority and marketability discounts and the impact upon valuation of the option agreement and the limited financial resources of Michael and Angela.
263 McGuinness and Rudenno valued WPPL by valuing its assets including its mining interests and royalty entitlements. It is first necessary to determine what mining interests WPPL had as at 31 December 1986. There are four relevant mining interests ‑ McCamey's Monster, Marandoo , Rhodes Ridge JV and the Hope Downs tenements.
264 The experts agreed that the Hope Downs tenements had no value.
265 The defendants say that for the purpose of valuing the Rhodes Ridge mineral interests of WPPL as at 31 December 1986, WPPL's interest should be valued at 25% of the value of the joint venture because CRA held a 50% interest in the joint venture and a 50% interest was held by the Hancock and Wright partnership and therefore WPPL's interest was 25%. This requires a consideration of the 1984 Hancock and Wright partnership agreement.
266 Clause 4 of the 1984 partnership agreement provided that:
Each partner shall have the option exercisable at any time during the continuation of the Partnership to require the transfer of the HPPL interests to HPPL and the transfer of the WPPL interest to WPPL.
267 The interests of HPPL and of WPPL were set out in schedules 1 and 2 respectively. The WPPL interests included the interests of the partnership in the RRJV and the RR temporary reserves.
268 The effect of cl 4 is described by the Court of Appeal in Hancock Prospecting Pty Ltd v Wright Prospecting Pty Ltd:[19]
Clause 4 is not an option to purchase property. It is an option to alter the status of the Schedule 1 and Schedule 2 assets from partnership property by WPPL transferring its legal and beneficial interest in the partnership assets in Schedule 1 to HPPL and HPPL transferring its legal and beneficial interest in the partnership assets in Schedule 2 to WPPL. The intention is that unless and until the transfer is completed, the relevant asset remains partnership property covered by clauses 1 to 3 of the 1984 Agreement [177].
269 WPPL had not given any relevant notice before 31 December 1986. Accordingly, the partnership held a 50% interest in the RRJV and hence WPPL's interest was 25% of the RRJV.
270 The experts met in conclave to confer about the value of WPPL equity. In their joint expert report of 18 December 2019[20] Samuel valued WPPL equity at $85,917,183, adopting Rudenno's calculations which included, amongst other things, a 25% interest in the RRJV. McGuinness valued WPPL equity at $91,512,353, adopting Flis's calculations with McGuinness's own adjustments which included amongst other things a 25% interest in the RRJV. Rudenno revised his valuations in his report of 29 January 2020. In his report of 31 January 2020[21] Samuel, adopting Rudenno's revised figures, valued WPPL equity at $87,417,000 which included a 25% interest in the RRJV. In his report of 31 January 2020[22] McGuinness, adopting the revised calculations of Flis, valued WPPL equity at $90,877,353 with a 25% interest in the RR JV.
271 The appropriate valuations are McGuinness's valuation of $90,877,353 and Samuel's valuation of $87,417,000. For the purposes of these reasons the difference between these valuations is not significant. The value of WPPL was about $90 million.
Discounts for minority interest, marketability and Michael and Angela's limited finance
272 Julian alleges that Michael and Angela breached the fiduciary duties they owed to him in that they failed to pay full value for Julian's WPPL shares.
273 Julian says that full value of his WPPL shares equated to their fair value, being the proportional interest of 32.9% of Julian's shares to WPPL's equity value. Julian says that this 'construction' is mandated whether one looks at WPPL's articles which prescribed that a transfer of shares was to occur at 'the fair value' or if one looks to the general principles for valuing a minority interest in a closely held family company. Having referred to a number of authorities in which the concept of 'full value' or 'fair value' was discussed and distinguished from the concept of 'market value', Julian submitted that 'full value' is to be determined by reference to the 'fair value' transfer mechanism specified in WPPL's articles.
274 WPPL's articles contain a number of provisions restricting the transfer of shares and for the determination of a transfer price where a shareholder transfers shares to another existing shareholder. Where a transfer does not occur at a price nominated by the seller, the shares are transferred at 'the fair value' set by the auditor acting as an expert.
275 McGuinness opines that the fair value is the proportional interest of 32.9% of Julian's shares to WPPL's equity value. McGuinness arrives at that conclusion after referring to a number of commentators addressing situations dissimilar from the present one.
276 Samuel equates fair value with fair market value, that is the price at which the property would change hands between a willing buyer and willing seller, neither being under any compulsion to buy or to sell and both having reasonable knowledge of relevant facts. Samuel values Julian's WPPL shares by applying discounts for marketability and minority interests.
277 I accept that the fair value of Julian's WPPL shares is not Julian's proportional 32.9% interest of WPPL. The defendants submit, and I accept, that some discount should be applied for marketability and minority interests. A minority shareholder, even one holding 32.9% of the shares, would have no access to profits except through dividends and has no control over the distribution of dividends. WPPL did not pay any dividends in 1984, 1985 or 1986 and had not declared any dividends up to 6 December 1986. Salt's evidence was that historically, when declared, dividends were for tax reasons often declared to the Wright Family Memorial Foundation.
278 There is no market for shares in WPPL. The provisions in the articles restrict sales other than to existing shareholders. A discount for lack of marketability reflects the concept that when comparing otherwise identical assets, a readily marketable asset would have a higher value than an asset with restrictions on the ability to sell the asset.
279 McGuinness applied a minority discount of 7.5%. I am not persuaded by the methodology adopted by McGuinness to arrive at this result.
280 Samuel applied a minority discount of 28.6%. His discount was heavily influenced by WPPL's dividend history. In his report of 23 October 2019 Samuel said:
As set out in Section IV above, control premiums were in the range of 25% to 40% in the 1980's. Given the very limited dividends that had been declared in the two years up to 30 June 1986 (being only $10,000 despite profits of $7,679,455 during that period), in my opinion the minority discount would be at the upper end of the range of discounts. I conclude that a control premium of at least 40% would be appropriate. This is equivalent to a minority interest discount of at least 28.6% [245].
281 Samuel chose not to take into account the dividends paid in 1987 because it was after the valuation date. Furthermore, he agreed that his assessment might be affected if, as was the case, the reason that dividends had not been paid in the years he took into account was related to an objection to a tax assessment. In my opinion Samuel should not have adopted a control premium at the top of the range but rather a premium towards the bottom of his range. If a control premium of 25% was adopted, the formula applied by Samuel to calculate a minority discount would have resulted in a discount of 20%.
282 McGuinness opined that an appropriate marketability discount is 12.5%. Samuel referred to studies which have indicated that a reasonable discount for a lack of marketability between a listed and a private company would be in the order of 33% to 35% and then stated reasons for adopting a discount for marketability of 40%. In my opinion the business valuation discounts relied upon by Samuel are not apt when calculating a 'fair value'. I find McGuinness's reasons for adopting a marketability discount of 12.5% to be more persuasive.
283 Accordingly, I find that a fair value for Julian's WPPL shares, in the context of determining 'full value' to be paid by a fiduciary acquiring the interest of a principal to be 32.9% of $90 million, less 20% less 12.5%, which is $20,727,000, say $20 million.
284 The defendants submit that the limited ability of Michael and Angela to pay is a further factor that ought to be taken into consideration in determining the 'full value' of Julian's WPPL shares in the context of determining whether there has been a breach of fiduciary duty.
285 I do not agree. There is no evidence that ordinary valuation principles allow the limited means of a prospective purchaser to be taken into account in determining a fair purchase price.
286 Samuel opined that the limited capacity of Michael and Angela to pay for Julian's WPPL shares is relevant to a valuation conducted under a 'fair value' where fair value requires consideration of the circumstances of the particular parties. In my opinion that is begging the question, the premises that are meant to support the argument assume that the conclusion is true.
287 The articles of association which provide for the auditor to determine the fair value of shares to be transferred by one shareholder to another do not require the auditor to take into account the limited resources of the purchaser. In my opinion the articles are predicated on a purchaser choosing to purchase the shares only if they have the means to pay 'fair value'.
288 In Edmunds v Pickering [No 3] the defendant trustee pleaded that if the agreed price for the purchase of an abalone licence and authority by the trustee from the principals was less than a commercial price that was because the trustee did not have the capacity to pay a higher price and the principals offered to accept that price because the principals were concerned that the licence and authority was liable to be forfeited. Lander J rejected that argument stating that if the defendant trustee did not pay a fair price he cannot claim that he is not in breach because he did not have the capacity to pay more or because the price was arrived at by negotiation.[23] Lander J said that if the defendant did not have the capacity to pay a fair price he could not purchase the beneficial interest in the property and cited Dougan v Macpherson in support of that proposition.[24]
289 The defendants submitted that given the factual circumstances in which the 1987 Sale Agreements were entered into, in determining the full or fair value of Julian's WPPL shares the court should take into account the probability of the second option agreement being exercised. Thus, the court should consider the probability of the exercise of the second option agreement. Samuel performed calculations using a 'probability weighted' approach by applying a 50% probability to each of the outcomes, namely the second option agreement being exercised and it not being exercised. He also provided a sensitivity analysis which identifies a range from 25% probability of the second option agreement being exercised to 75% probability.
290 In my opinion the probability of the second option agreement being exercised is not relevant to the determination of full value or fair value of Julian's WPPL shares. It is not contended that Julian did not hold the full beneficial interest in his WPPL shares. It is those shares which were sold and the full or fair value of those shares is the full or fair value of the full beneficial interest in the shares. In Edmunds v Pickering [No 3] the principal consented to the purchase only because the trustee would not desist from breaching the trust and threatened the possibility of cancellation of the abalone licence. Lander J took neiter of those matters into account in determining the full or fair value of the licence.
291 However, it is not necessarily a breach of fiduciary duty for a fiduciary to purchase at an under value where the beneficiary was aware of and fully consented to purchasing on such terms.
Full or fair value of Julian's interest in Peter's estate
292 The plaintiff pleads that Michael and Angela breached the fiduciary duties they owed to Julian as executors and trustees of Peter's will and estate and as directors of WPPL respectively, in that they failed to pay full value for Julian's interest in Peter's estate and full value for Julian's WPPL shares.
293 The plaintiff's 'full value' case in relation to Peter's estate is simple. The plaintiff says that Michael and Angela paid no consideration under the 1987 Sale Agreements in respect of Julian's interest in Peter's estate and that the full value of Peter's estate exceeded nil.
294 I find for the reasons set out later that Peter's estate was entitled to royalties under the 1962 Royalty Agreement. I find that as at 31 December 1986 the value of Peter's personal royalty entitlement under the 1962 Royalty Agreement was $16.7 million and the value of Julian's interest in Peter's estate was in the order of $7 million.
295 It is unnecessary to give further consideration to the quantification of 'full value' in relation to Peter's estate because if, as the plaintiff contends, Julian received nil consideration for his interest in the estate, he received less than full value.
Full or fair value of Julian's 32.9% shareholding in WPPL
296 What is 'full value' arises in relation to the plaintiff's claim that Michael and Angela failed to pay full value for Julian's WPPL shares.
297 I have found that full value for Julian's WPPL shares is $20 million.
G. Claim of breach of fiduciary duty by Michael and Angela as executors of Peter's estate
298 Julian alleges that Michael and Angela, as executors of Peter's will, owed fiduciary duties to Julian in acquiring his interest in Peter's estate, to pay full value for that interest and independently to make full, frank and accurate disclosure of all matters material to the proposed acquisition.
299 Julian says that Michael and Angela breached their fiduciary duties by failing to make full, frank and accurate disclosure to Julian of assets forming part of Peter's residuary estate and by failing to pay full value for Julian's interest in Peter's estate in that they failed to pay any consideration for that interest and the interest had a significant value.
300 Further, Julian says that Michael and Angela breached their fiduciary duties by failing to make full, frank and accurate disclosure to Julian of material matters pertaining to the value of Julian's WPPL shares, including WPPL's partial ownership of Rhodes Ridge and rights to future royalties from mines which were to be developed. Julian alleges that disclosure of those matters was required because the acquisition by Michael and Angela of Julian's WPPL shares was part of a single transaction in which Julian agreed to relinquish his rights in respect of Peter's estate.
301 A fiduciary is a person who owes fiduciary duties, and a fiduciary relationship is a relationship between two or more persons in which one, the fiduciary, owes fiduciary duties to the other, the beneficiary or principal. Several categories of relationship (status based) are accepted as fiduciary relationships. A fiduciary duty may also arise from a fact based (ad hoc) fiduciary relationship, and the circumstances of the relationship.
302 In Hospital Products Ltd v United States Surgical Corp (Hospital Products)[25] Mason J said that the critical feature of accepted fiduciary relationships is that the fiduciary undertakes or agrees to act for or on behalf of, or in the interests of another person in the exercise of a power or discretion which will affect the interests of that other person in a legal or practical sense. His Honour added:
The relationship between the parties is therefore one which gives the fiduciary a special opportunity to exercise the power or discretion to the detriment of that other person who is accordingly vulnerable to abuse by the fiduciary of his position. The expressions 'for', 'on behalf of', and 'in the interests of' signify that the fiduciary acts in a 'representative' character in the exercise of his responsibility...(96 - 97).
303 Professor Flannigan says that the function of fiduciary regulation was to control the opportunism of those who entered into or assumed limited access arrangements.[26] The fiduciary has access to the assets of the beneficiary rather than the fiduciary's own assets, to serve the beneficiary. Because the access to the assets is acquired for performing the undertaking, it is a limited access. The mischief associated with that access is that the fiduciary may take personal advantage from their limited access. The law imposes on those with limited access the duty to avoid unauthorised conflicts or benefits. That legal imposition is called fiduciary accountability. The imposed duty is not absolute. The duty may be modified by the informed consent of the beneficiary. The traditional fiduciary categories were initially identified as relations that involved one person undertaking to act for another on a limited access basis; they involved the fiduciary acquiring access to the beneficiary's assets as the means or consequence of performing the fiduciary's undertaking. Unauthorised conflicts or profits give rise to fiduciary liability. There is no defence other than informed consent.[27] It is immaterial that a transaction might be fair. It is of no consequence that others may realize a windfall gain.[28] It does not matter that a profit within the scope of the duty was not made 'by virtue of' the position.[29] Unauthorised conflict or benefit alone is the test of liability for those with limited access.[30] Fact based fiduciary liability arises from factual circumstances where the fiduciary's undertaking to the beneficiary gives the fiduciary limited access to the beneficiary's assets.
Did Michael and Angela owe fiduciary duties to Julian in acquiring his interest in Peter's estate?
304 The relationship between trustee and beneficiary is the paradigm status based fiduciary relationship: a trustee owes fiduciary duties to his or her beneficiaries.[31]
305 The offices of trustee and executor are different. The principal duties of an executor are to get in the assets of the deceased, to pay debts, to pay the legacies given by the will, and to distribute the assets. If, as in this case, a testator appoints the same persons as executor and trustee, then those persons act as executor when performing executorial duties, and thereafter while continuing to hold the property they act as trustee.
306 A beneficiary under a will does not, by reason of the will alone, obtain any title, legal or equitable, to any asset forming part of the estate. A beneficiary obtains such a title as a result of the administration of the estate in accordance with the dispositions of the will.[32]
307 Peter's estate had not been administered when Michael, Angela and Julian entered into the 1987 Sale Agreements. The executors were not trustees but were the full owners of the property. As a residuary beneficiary Julian had not obtained any legal or equitable title to any asset forming part of Peter's estate. However, a residuary beneficiary has a right against the executors to have the estate duly administered and the residue ascertained and disposed of according to the will. That right is a chose in action against the executors to compel the proper administration of the estate, which includes the ability to pursue claims for breaches of the executors' fiduciary duties.[33] The residuary beneficiary's chose in action is a form of property. The residuary beneficiary has an interest in the assets of the estate.
308 An executor stands in a fiduciary relation to a beneficiary.[34] Professor Finn says that the rules regulating purchases by persons occupying confidential positions (the purchasing rule) apply to executors, like trustees.[35] By accepting the office, the executor undertakes to act for or on behalf of or in the interests of the beneficiaries in the exercise of their powers which will affect the interests of the beneficiary in a legal or practical sense. An executor has special knowledge of the property of the estate and the beneficiary is vulnerable in transactions between the executor and the beneficiary concerning the property of the estate. Furthermore an executor has limited access to the assets of the beneficiary ‑ the beneficiary's interest in the estate.
309 Julian, Michael and Angela were executors of Peter's will and also beneficiaries. The defendants submit that the fiduciary duties of Julian, Michael and Angela were, in that sense, mutual.[36] Nevertheless, Michael, Angela and Julian were each executors and fiduciaries and subject to the duties of fiduciaries as are trustees. Each of them as executor owed a fiduciary duty to each of the others as beneficiary.[37]
310 An executor is in a fiduciary relationship with the beneficiaries under the will. As such, the executor is subject to the twin proscriptive fiduciary obligations reflected in the 'no conflict' and 'no profit' rules.[38] The no conflict rule is that a fiduciary acts in breach of a fiduciary duty where they put themselves in a position where their interest and duty conflict or there is a real sensible possibility of conflict. The no profit rule is that a fiduciary acts in breach of fiduciary duty where they make a profit by reason or by use of their fiduciary position or of opportunity or knowledge resulting from it.
311 Michael and Angela put themselves in a position where there was a real sensible possibility that their interest to obtain Julian's interest in the estate conflicted with their duty to do nothing which conflicts or may conflict with Julian's interest. Put shortly, Michael and Angela's interest was to obtain Julian's interest in Peter's estate at the lowest possible price which conflicted with their duty as executors to Julian as a beneficiary to obtain the best possible price for Julian's interest in the estate. Michael and Angela made a profit by reason of their fiduciary position a executors if they acquired Julian's interest in Peter's estate for less than its full value.
The fiduciary duties Julian alleges were owed by Michael and Angela
312 Julian submits that Michael and Angela owed a fiduciary duty to Julian to pay full value for his interest in Peter's estate and for Julian's WPPL shares and 'independently' to make full, frank and accurate disclosure of all matters material to the proposed acquisition. Put another way, Julian's submission is that in relation to each transaction Michael and Angela owed a fiduciary duty to Julian:
(1) to make full, frank and accurate disclosure of information concerning the value of the interest they acquired from Julian; and
(2) to give full value for the interests acquired.
313 Julian says that a breach of either duty is a breach of Michael and Angela's fiduciary duty entitling them to set aside the transaction or to equitable compensation.
314 A fiduciary does not owe fiduciary duties to their beneficiary in acquiring his interest in the estate, to pay full value for that interest and independently to make full, frank and accurate disclosure of all matters material to the proposed acquisition. Fiduciary duties are proscriptive and not prescriptive.[39] Fiduciaries do not owe any positive duty of disclosure to their principal. A reference to a duty to disclose in this context should be understood as a shorthand way of referring to the defence of fully informed consent by the principal. The breach of fiduciary duty is the conduct of the fiduciary in placing himself in a position of conflict. Disclosure is a means of avoiding a breach, not a duty.[40]
315 The authorities were reviewed by the Full Federal Court in Blackmagic Design Pty Ltd v Overliese (Blackmagic).[41] Besanko J, with whom Finkelstein and Jacobsen JJ agreed, described the orthodox approach as follows. There is a breach when the fiduciary places themself in the position of conflict. The breach is excused, or perhaps does not arise, if the principal consents. It is not enough that there be disclosure, there must be fully informed consent.
316 The defence of fully informed consent requires both disclosure and consent. The duty is a duty to avoid a conflict of interest and duty. The breach is the failure to comply with that duty.[42] The question of disclosure arises only in the event that the court finds that a fiduciary duty was owed to Julian by Michael and Angela and that they placed themselves in a position of potential conflict of interest and duty. It is in that context that a defence of fully informed consent becomes relevant.
317 Julian's case that Michael and Angela breached the fiduciary duties they owed to Julian by acquiring his interest in Peter's estate and by purchasing his WPPL shares for less than full value is based upon the fair dealing rule.[43] Julian says that the fair dealing rule required Michael and Angela to disclose to Julian all the information concerning the value of the WPPL shares which was material to his consent and give full value for the interest acquired.[44]
318 Julian submits that the fair dealing rule invokes two independent obligations. The first is full disclosure and therefore fully informed consent. But, Julian says, even if there is full disclosure, the court will nonetheless intervene if the consideration was inadequate. In support of these propositions the plaintiff refers to statements by Professor Finn[45] and Professor Cope.[46]
319 The fair dealing rule has been critically examined by Professor Conaglen.[47] Professor Conaglen says that the fair dealing rule is an application of the fiduciary conflict principle: a fiduciary cannot enter into a transaction with his principal which encroaches upon their fiduciary relationship without obtaining the fully informed consent of his principal; if there is fully informed consent then the fairness or otherwise of the transaction is not to the point, just as it is not in any other case where the fiduciary conflict principle applies.[48]
320 Professor Conaglen says that the presence or absence of a difference between the value of the consideration exchanged between a fiduciary and his principal is relevant evidence in determining whether the fiduciary made adequate disclosure, and hence whether the principal's consent was fully informed, rather than itself being a reason for invalidating or upholding such transactions.[49]
321 Professor Conaglen points out that there are cases where transactions falling within the fundamental conflict principle have been upheld notwithstanding the lack of 'full value'. Professor Conaglen says that Luff v Lord[50] illustrates the point that the content of the transaction can support inferences about what a fiduciary disclosed to his principal when entering into the transaction. A trustee bought his beneficiary's legacy which was worth £2,000 paying only £450. Upholding the transaction, despite the apparently gross inadequacy of consideration, the Master of the Rolls, Sir John Romilly, considered it important that the beneficiary 'perfectly well knew his position' as he had been attending to legal proceedings concerning the validity of the legacy for many years with the assistance of a solicitor. Furthermore, the sale was originally the beneficiary's idea and was only reluctantly acceded to by the trustee. Sir John Romilly MR concluded:
It is difficult to say that it can be set aside unless there was some concealment, some knowledge possessed by Mr Lord which was not possessed by the vendor or, which made the amount of the purchase money inadequate. Now upon that, it is important once more to consider what was the nature of the interest that was bought by Mr Lord (230).
322 Professor Conaglen discussed Professor Finn's conclusion that in order to uphold a purchase by a fiduciary from his beneficiary the fiduciary will need to prove (1) that he gave full value for the property, and (2) that he disclosed to his beneficiary any and all the information he has acquired concerning the value of the property, and concerning the contract itself:
[Prof Finn] noted that these two elements 'almost inevitably telescope into each other', but he did not explain the operation of this 'telescoping' effect. It is suggested that the telescoping effect exists because the value of the transaction is relevant evidence in deciding whether the fiduciary made proper disclosure of all material facts, rather than a substantive or critical consideration in its own right. Seen in this way, Finn was right to treat [self-dealing and fair-dealing transactions] as governed by the same rule, although it is suggested that references to full value ought to be understood as evidential rather than substantive ‑ after all, there are cases where transactions falling within the fundamental conflict principle have been upheld notwithstanding the lack of 'full value'.[51]
323 The thirty fourth edition of Snell's Equity[52] reflects Professor Conaglen's exposition of principle. The authors say that the fair‑dealing rule is one of the situations in which the conflict rule is applied that has become sufficiently common to have developed into a recognised 'subrule' of the fiduciary conflict rule. The fair-dealing rule is:
If a trustee purchases the beneficial interest of any of his beneficiaries, the transaction is not voidable ex debito justitiae, but can be set aside by the beneficiary unless the trustee can show that he has taken no advantage of his position and has made full disclosure to the beneficiary, and that the transaction is fair and honest.[53]
324 A transaction to which the fair-dealing rule applies can be upheld but only if the fiduciary proves that he obtained consent from his principal after making full disclosure of all material facts. The fairness of the transaction in fair-dealing situations is relevant in an evidential capacity rather than substantively: it provides objective evidence as to what was disclosed,[54] thereby assisting the court to determine whether fully informed consent was in fact obtained.
The rule is, that a trustee shall not become the purchaser, until he enters into a fair contract, that he may become the purchaser, with those interested. .... for the question was, not, whether the price was fair between the trustees and cestui que trust at the time, but, whether a person, who had a confidential situation previously to the purchase, had at the time of the purchase shaken off that character by the consent of the cestui que trust, freely given, after full information; and bargained for the right to purchase (391).
326 The authors say that the fair dealing rule is merely an application of the general fiduciary conflict principle and applies where the transaction falls within the fiduciary relationship such that there is a conflict between duty and interest.
327 Julian's reliance on the fair dealing rule is premised on two contentions. The first is that Peter's estate, and hence Julian's interest in Peter's estate, had substantial value, principally because of Peter's entitlement to royalties and a share of the expected award in the concentrator royalty arbitration. The second is that Michael and Angela paid nil consideration to Julian for his interest in Peter's estate. I will consider each of those contentions in turn.
328 Julian submits that Peter, and after his death, Peter's estate, had a personal entitlement to be paid royalties under three separate royalty agreements with Hamersley Iron:
(1) the 1962 Royalty Agreement which covered ore mined at Tom Price;
(2) the 1968 Royalty Agreement which covered ore mined from Paraburdoo; and
(3) the 1970 Royalty Agreement which covered ore mined from Mount Bruce and the subsequent Channar mine.
329 Julian submits that on Peter's death these rights were assets of Peter's Estate, they fell under cl 5 of his will and formed part of Peter's residuary estate to which Julian as a beneficiary along with Michael and Angela was entitled to a one third share.
330 Julian's interest in these rights was acquired by Michael and Angela under the terms of the 1987 Sale Agreements. Julian's case is that he was not aware of these rights prior to entering into the 1987 Sale Agreements or prior to completion under those contracts. They had not been disclosed as assets in Peter's Statement of Assets and Liabilities. They were not otherwise disclosed to Julian by Michael and Angela. Michael and Angela did not pay any consideration, let alone full value, for the acquisition of these rights under the 1987 Sale Agreements.
331 Julian says that Michael and Angela directly or by their agents Fieldhouse and Salt knowingly or recklessly falsely represented and knowingly concealed from Julian that Peter had a personal entitlement to be paid royalties under the 1962, 1968 and 1970 Royalty Agreements and that entitlement was the reason why Peter's estate was a party to the concentrator royalty arbitration. Julian also contends that Michael and Angela failed to pay full value for their acquisition of Julian's interest in Peter's residuary estate because that interest included a share of Peter's personal royalty entitlement for which Julian claims no consideration was given.[57]
332 I will first consider whether Peter and Peter's estate had a royalty entitlement as a Vendor pursuant to the 1962 Royalty Agreement.
333 The obligation upon Hamersley in cl 9 of the 1962 Royalty Agreement is to pay 'to the Vendors' the royalty. The expression 'the Vendors' is defined in the preamble as Lang, Peter, HPPL and WPPL. The obligation upon Hamersley to pay royalties under cl 14 and cl 15 is similarly an obligation to pay the royalty to 'the Vendors'.
334 Julian submits that the intention that Peter (and Lang) are intended to be Vendors is clear by reason of the fact the expression 'the Vendors' was defined in cl 24(ii) as including amongst others the 'personal representatives' of the parties falling within that description, a concept applicable only to a natural person and which evidences an intention that Peter's right would pass to his personal representatives on his death.
336 Julian submits there was no inadvertence in the use of the expression 'the Vendors' in cl 9 as signifying those parties to whom a royalty was payable. As the parties demonstrated in the earlier agreements (including the first agreement and the Barrett-Lennard Agreement which were referred to by the 1962 Royalty Agreement), where they wished to distinguish between the corporation Vendors and the non‑corporation Vendors, they did so expressly.
337 Moreover, Julian submits that the inclusion of Peter as a party to whom a royalty was payable was not something new to the parties. The same entitlement was conferred upon Peter by the first agreement. It would make little commercial sense for Peter to give up his right to royalties emanating from the first agreement (which was to be cancelled by the 1962 Royalty Agreement) without an equivalent right being conferred upon him by the 1962 Royalty Agreement.
338 Julian submits that there is no commercial inconvenience which would justify reading cl 9 contrary to its natural language so that the rights which it creates apply only to the corporate Vendors.
339 Further, Julian submits the object of construction of a contract is to ascertain what the words would mean to a reasonable person in the position of the parties. At no stage have the parties to the 1962 Royalty Agreement as between themselves conducted themselves other than in accordance with the position that Peter is entitled to be paid a royalty under the 1962 Royalty Agreement. This can most readily be seen in three dealings engaged in with Hamersley which involved not only Peter, WPPL, HPPL and Lang, but also Michael and Angela. Hamersley Iron itself has and continues to conduct itself on the basis that Peter is entitled to be paid a royalty under cl 9 of the 1962 Royalty Agreement.
340 The defendants deny that Peter had a personal entitlement or right to be paid royalties under the royalty agreements. First, they say that as a matter of construction of the royalty agreements there is no obligation on Hamersley Iron to pay royalties to Peter and no correlative entitlement of Peter to be paid royalties. Secondly and alternatively, the defendants plead that if Peter and Lang had a personal entitlement under the royalty agreements, Peter and Lang had agreed that any interest they had under the royalty agreements was held by each of them upon trust for the Hancock and Wright partnership. Thirdly and in the further alternative, the defendants say that Peter's estate would be estopped from asserting any personal entitlement to royalties under the royalty agreements.
341 The parties to the 1962 Royalty Agreement are Lang, Peter, WPPL and HPPL who are together called the Vendors, and Rio Tinto Management Services (Australia) Pty Ltd, called RTMS, Rio Tinto Southern Pty Ltd, called RTS, and Hamersley Iron which is called the Purchaser.
342 Recital (a) refers to an agreement dated 11 September 1959 (the First Agreement) between the Vendors and RTMS by which the Vendors granted to RTMS the option to acquire certain mining titles. Recital (b) refers to an agreement dated 1 December 1959 (the Second Agreement) between the Vendors and RTMS which amended the First Agreement. Recital (c) says that prior to 9 April 1961 RTMS had assigned its rights and obligations under the First and Second Agreements to RTS. Recital (d) refers to an agreement dated 9 April 1961 (the Third Agreement) between the Vendors, RTMS and RTS by which certain matters were recorded and certain other matters were agreed.
343 Recital (e) says that payments totalling £42,000 have been made to the Vendors as particularised in the First Schedule. The first four items in the schedule particularise payments by the terms of the First, Second and Third Agreements and a payment by way of loan to the Vendors by which the amount paid by the Purchaser was to be repaid by the Vendors by 30 September 1962 totalling £40,000 (the Loans) and a further payment of £2,000.
344 Recital (f) says that the Western Australian Government has granted to WPPL, HPPL and RTS certain rights and privileges in respect of the temporary reserves listed in the Second Schedule (the Temporary Reserves).
345 Recital (g) says that it is intended that the Vendors shall sell and the Purchaser shall purchase all the right title and interest of the Vendors and each of them in and to and in respect of the Temporary Reserves and the land comprised therein (called the Temporary Reserve land) and all rights to prospect or mine granted thereby or flowing therefrom.
346 Recital (h) says that it is intended that RTS shall transfer to the Purchaser its interest in the Temporary Reserves and the Temporary Reserve land and all rights to prospect or mine granted thereby or flowing therefrom and shall at the same time assign to the Purchaser the benefit of the loans referred to in cl 3, which are the Loans.
347 Clause 1 provides that the Vendors shall sell and the Purchaser shall purchase all the right title and interest of the Vendors in and to and in respect of the Temporary Reserves and the land comprised therein and all rights to prospect or mine granted thereby or flowing therefrom.
348 Clause 3 provides that RTS shall transfer to the Purchaser its interests in the Temporary Reserves, the Temporary Reserve land and all rights to prospect or mine granted thereby or flowing therefrom and shall assign to the Purchaser the benefit of the loans totalling £40,000 made by RTS and/or RTMS to the Vendors and being the Loans.
349 Clause 5 provides that the Vendors, RTS and the Purchaser shall apply for and use their best endeavours to obtain ministerial consents and when the consents are obtained, the Vendors and RTS will execute and deliver to the Purchaser such transfers, surrenders or other documents as may be necessary to enable the Purchaser to become solely entitled to the benefit of all rights and privileges granted by the Government in respect of the Temporary Reserves.
350 Clause 6 provides that upon the Purchaser being entitled to the rights and privileges in respect of the Temporary Reserves, the Purchaser shall pay to the Vendors (or as they may direct) £60,000 and shall pay to RTS £6,444 as consideration for the transfer of the interest of RTS in the Temporary Reserves and £40,000 as consideration for the assignment of the benefit of the Loans.
351 By cl 8 the Vendors acknowledge that, of the payments totalling £42,000 referred to in recital (e), payments totalling £40,000 were payments by way of loan to the Vendors and the Purchaser agrees that the total of such payments shall remain as loans to the Vendors. The payment of £60,000 referred to in cl 6 shall also be a payment by way of loan to the Vendors. The total loan amount of £100,000 shall not bear interest and shall be repayable out of the first amounts accruing to the Vendors under cl 9, cl 14 or cl 15 (which provide for payment of royalties to the Vendors) but not otherwise.
As further consideration for the foregoing the Purchaser shall pay to the Vendors in respect of all iron ore produced by the Purchaser ... from the Temporary Reserve land and sold or otherwise disposed of by the Purchaser ... an amount equivalent to 2 ½% of the amount received on sale or other disposal of that iron ore in unrefined and unmanufactured form f.o.b. the first port of shipment.
353 Clause 9 contains a number of provisos. Proviso (b) is relevant to the concentrator royalty dispute. It provides that if iron ore is beneficiated by the Purchaser it shall be deemed to have been disposed of at the time beneficiation begins. Proviso (c) provides, in effect, that beneficiated ore shall be deemed to be disposed of at the assumed f.o.b. price and that price shall be deemed to have been received by the Purchaser. Proviso (e) sets out provisions for determining the assumed f.o.b. price.
354 Clause 10 provides that for the purposes of cl 9, cl 13 and cl 15, the term Temporary Reserve land shall be deemed to include in addition to the land comprised in the Temporary Reserves any other land described in the Third Schedule in respect of which the Purchaser obtains Temporary Reserves or other titles or rights to mine iron ore at any time prior to the time of readiness for production. The Third Schedule describes pieces of land shown on an attached plan. The time of readiness for production is defined in cl 11.
355 Clause 12 provides that prior to the time of readiness for production (the pre-production) the Vendors shall disclose to the Purchaser and only to the Purchaser the location of any iron ore deposits known to them during that period in the Pilbara, West Pilbara or the Ashburton Goldfields. Clause 13 provides that during the pre-production the Vendors shall if requested by the Purchaser assist the Purchaser in obtaining from the Government rights to mine the iron ore deposits referred to in cl 12 and shall not obtain or seek to obtain any mining tenements or tenements or other rights or titles thereto on their own account or for any other person.
356 Clauses 14 and 15 provide that should the Purchaser obtain during the preproduction temporary reserves or other titles or rights to mine any of the iron ore deposits referred to in cl 12 or in any areas forming part of the Pilbara, the West Pilbara or the Ashburton Goldfields then the Purchaser shall pay to the Vendors in respect of all iron ore produced by the Purchaser from such deposits an amount equivalent to 2 ½% of the amount received on sale or other disposal of that iron ore. The provisos to cl 9 and other provisos apply.
357 Clause 19 provides that if the Purchaser sells or assigns its title to any areas of land in respect of which an obligation to pay any amount has arisen or may arise pursuant to cl 9, cl 14 or cl 15 the Purchaser shall either obtain from the buyer or assignee a covenant binding the buyer or assignee to make payments to the Vendors in respect of that land in the terms of such of those clauses as relate thereto or pay to the Vendors an amount equivalent to 33 ⅓% of the Purchaser's net profit on sale.
358 Clause 20 provides that any amounts to be paid to the Vendors may be paid to the credit of 'Hancock & Wright' at the specified bank branch and the receipt of the bank shall be sufficient evidence of payment to the Vendors.
359 Clause 22 provides that the First, Second and Third Agreements are cancelled and cease to have effect.
361 Clause 24 provides that except where the context otherwise requires:
(i) all undertakings agreements and obligations expressed in the agreement to be assumed or made by 'the Vendors' shall be deemed to be made by them jointly and severally;
(ii) the expression 'the Vendors' shall include their respective successes and personal representatives; and
(iii) the expression 'the Purchaser' except in certain specified cases include its successors and assigns and/or persons or corporations deriving title through or under the Purchaser to any areas of land in respect of which an obligation to pay any amount has arisen or may arise pursuant to cl 9, cl 14 or cl 15.
362 The 'royalty entitlement' arising from the 1962 Royalty Agreement arises from cl 9, cl 14 and cl 15 which provide that 'the Purchaser shall pay to the Vendors' the specified royalties. The 'Vendors' are defined in the part of the agreement that states the parties to be Lang, Peter, WPPL and HPPL.
363 The plaintiff says that the term 'the Vendors' in cl 9, cl 14 and cl 15 means Lang, Peter, WPPL and HPPL and hence Peter has a royalty entitlement under the agreement. The defendants say that having regard to the whole of the agreement and its context the term 'the Vendors' in cl 9, cl 14 and cl 15 means WPPL and HPPL and hence Peter has no royalty entitlement under the agreement.
364 The general principles that apply in construing a commercial contract are well-established. They were recently summarised by Buss P and Vaughan JA in CA & Associates Pty Ltd v Fini Group Pty Ltd[62] as follows:
1. The rights and liabilities of parties under a provision of a contract are determined objectively by reference to its text, context (the entire text of the contract) and purpose.
2. In determining the meaning of the terms of a commercial contract it is necessary to ask what a reasonable business person would have understood the terms to mean. That enquiry will require consideration of the language used by the parties in the contract, the circumstances addressed by the contract and the commercial purpose or objects to be secured by the contract.
3 A contract should be construed practically so as to better give effect to its commercial purpose. The law seeks to uphold commercial contractual obligations and the expectations that derive from them. The court should not adopt a narrow or pedantic approach to construction, particularly in the case of commercial arrangements.
4. The court approaches the task of giving a commercial contract an interpretation on the assumption that the parties intended to produce a commercial result, ie a commercial contract should be construed so as to avoid it making commercial nonsense or working commercial inconvenience. Reasonable minds might differ on business common sense. Nevertheless if the language is open to two constructions, that will be preferred which will avoid consequences which appear to be capricious, unreasonable, inconvenient or unjust, 'even though the construction adopted is not the most obvious, or the most grammatically accurate'.
5. Ordinarily the process of construction is possible by reference to the contract alone.
6. However, sometimes recourse to external events, circumstances or things is necessary; for example, to identify the commercial purpose or objects of the contract (by reference to the genesis of the transaction, the background, the context and the market in which the parties are operating) or to determine the proper construction where there is a constructional choice due to ambiguity.
7. An instrument must be construed as a whole. A construction that makes the various parts of an instrument harmonious is preferable. If possible, each part of an instrument should be construed so as to have some operation [51] ‑ [54].
365 In relation to the first of these principles, the plurality in Mount Bruce Mining Ltd v Wright Prospecting Pty Ltd[63] said that the context includes any contract, document or statutory provision referred to in the text of the contract.
366 Defined terms must be read in light of the context in which they appear in the contract, and any contrary intention. The sense in which a definition is used cannot be determined mechanically. It is necessary to consider the purpose as well as the text of the definition and the context in which it is used. The absence of the words 'unless the context otherwise provides' in a definitions clause does not mean that the defined term will be applied without regard to the context in which it appears in the contract.
367 However in a contract which appears to have been drafted with legal assistance as part of a complex and sophisticated commercial enterprise, the deliberate use of defined words is not to be lightly passed over. As Jacob LJ said (with which the other members of the Court of Appeal of England and Wales agreed) in City Inn (Jersey) Limited v Ten Trinity Square Limited:[64]
It is obviously a strong thing to say that where a draftsman has actually defined a term for the purposes of his document that in some places (but not others) where he uses his chosen term he must have intended some other meaning. It is not impossible however. If, approaching the document through the eyes of the intended sort of reader (here a conveyancer), the court concludes that notwithstanding his chosen definition the draftsman just must have meant something else by the use of the term, it will so construe a document [8].
368 A similar approach applies in statutory interpretation. In Qantas Airways Ltd v Chief Commissioner of State Revenue[65] Handley AJ said:
There is a presumption that defined words in a statute have their defined meanings which is not to be displaced without good reason: Pearce & Geddes 'Statutory Interpretation in Australia' 6th ed paras 3.31, 4.3, 6.62 [38].
Proper construction of 1962 Royalty Agreement ‑ entitlement to royalty payment
369 'Vendors' is a defined term; it means Lang, Peter, WPPL and HPPL. However, the defendants submit that on a proper construction of the 1962 Royalty Agreement, Peter did not have any personal entitlement to royalties. The defendants advance two principal reasons why, properly construed, the 1962 Royalty Agreement does not confer upon Peter any personal entitlement to a share of those royalties payable by Hamersley Iron.
370 First, the defendants submit that read in the contractual context, the phrase 'the Vendors' in cl 9 denotes those Vendors who had sold the tenements in respect of which royalties would be payable ‑ that is WPPL and HPPL. The defendants' argument is as follows. The tenements that were the subject of the agreement were all held by WPPL and HPPL not by Peter and Lang. Thus, where recital (g) says that it is intended that 'the Vendors' shall sell all the right title and interest of the Vendors in the Temporary Reserves, 'the Vendors' must refer to WPPL and HPPL because Peter and Lang had no right, title or interest in the tenements to sell. Every reference to 'the Vendors' should not be read as referring to each and every of the entities within the defined term 'the Vendors'. Further, given that these were assets held by WPPL and HPPL, there was no basis upon which Peter and Lang would have been entitled to be paid a royalty from tenements owned and sold by the companies and any conferral of beneficial ownership in the royalties would have been a breach of their duties as directors of those companies not to use the company's assets for their own benefit. The construction advanced by the defendants would reflect the likely intention of the parties objectively construed.
371 The construction advanced by the defendants, whilst reasonable, is not compelling. First, the consideration payable under cl 9 is not expressed to be only for the transfer by HPPL and WPPL of the Temporary Reserves to the Purchaser but also for:
(a) any right title and interest of all and any of the Vendors in and to and in respect of the Temporary Reserves and the land comprised therein and all rights to prospect or mine granted thereby or flowing therefrom; and
(b) the Vendors applying for and using their best endeavours to obtain ministerial consents and when the consents are obtained, to execute and deliver to the Purchaser such transfers, surrenders or other documents as may be necessary to enable the Purchaser to become solely entitled to the benefit of all rights and privileges granted by the Government in respect of the Temporary Reserves.
372 Secondly, the agreement creates or acknowledges rights and obligations other than those in relation to the Temporary Reserves including the following:
(a) The Vendors acknowledge that specified payments were payments by way of loan to the Vendors and the Purchaser agrees that the total of such payments shall remain as loans to the Vendors and the further payment of £60,000 shall also be a payment by way of loan to the Vendors. The total loan shall be repayable out of the first amounts accruing to the Vendors under cl 9, cl 14 or cl 15 (which provide for payment of royalties to the Vendors) but not otherwise.
(b) The Vendors shall disclose to the Purchaser and only to the Purchaser the location of any iron ore deposits known to them during that period in the Pilbara, West Pilbara or the Ashburton Goldfields. During the pre-production the Vendors shall if requested by the Purchaser assist the Purchaser in obtaining from the Government rights to mine the iron ore deposits referred to in cl 12 and shall not obtain or seek to obtain any mining tenements or tenements or other rights or titles thereto on their own account or for any other person.
(c) The First, Second and Third Agreements are cancelled and cease to have effect and accordingly the rights under them ceased.
373 The consideration provided by the Purchaser was for the bundle of rights acquired by it and the bundle of obligations undertaken and acknowledgements by the Vendors and obligations released by the Vendors.
374 The defendants second principal argument is that cl 9 creates a promise by Hamersley Iron to the Vendors jointly and not to each of the constituent Vendors separately and thus does not give rise to any obligation on the part of Hamersley Iron to make separate or proportionate payments to each of the four named Vendors nor any correlative contractual right on the part of the individual Vendors. The defendants' argument is as follows. At common law a promise made in favour of two or more promisees cannot be both joint and several but must instead be either joint or several. Whether it is joint or several is a matter of construction. The promise by Hamersley Iron in cl 9 is a promise to pay a single amount, that is, jointly. Peter's estate therefore had no contractual entitlement as against Hamersley Iron to be paid any amount by way of royalty.
375 I do not agree that cl 9 is a promise to pay the Vendors jointly. Contracts may impose obligations on co-promisors jointly, severally or jointly and severally. Since the correlative of an obligation is a right, contracts may also confer rights on co‑promisees jointly, severally or jointly and severally.[66] Whether a contractual provision is joint, several or joint and several is a matter of construction.[67]
376 The right to receive a royalty payment under cl 9 is a joint and several right. Clause 24(ii) provides that the expression 'the Vendors' shall include their respective successors and personal representatives. That is an indication that the rights conferred on them by the agreement are conferred jointly and severally. If they were merely joint, the right of each of the Vendors would not survive their death or expiration and cl 24(ii) would be otiose. Further, cl 24(i) provides that all undertakings agreements and obligations expressed in the agreement to be assumed or made by 'the Vendors' shall be deemed to be made by them jointly and severally. 'Agreements' extends beyond 'undertakings' and 'obligations'. 'Agreements' is wide enough to encompass the agreement by which they are to receive royalties under cl 9 (and cl 14 and cl 15).
377 Furthermore, the 1962 Royalty Agreement is an instrument under seal and the effect of s 51 of the Property Law Act 1969 (WA) is that the obligation to pay money to the Vendors shall be construed as being made with each of them and shall be deemed to include an obligation to do the act for the benefit of the survivor or survivors of them and their personal representatives.
378 The defendants submit that Hamersley Iron's obligation to make payment of royalties is discharged by making payment of the requisite sum to the credit of Hancock & Wright and Hamersley Iron has discharged its obligation by making payment to Hancock & Wright in accordance with cl 20. Therefore, the defendants submit, Julian has no chose in action representing the value of any royalties paid or to be payable by Hamersley Iron.
379 That submission is not to the point. Hamersley Iron's promise to pay royalties is a joint and several promise to pay the Vendors. The Vendors are joint and several promisees. The Vendors are entitled to performance of the promise jointly and severally, even though there is only one promise made to four entities. Any one of the Vendors has the power to discharge Hamersley Iron from the obligation. If Hamersley Iron pays one of the Vendors, this payment operates as a discharge of Hamersley Iron's liability under the contract. The Vendors who have not been paid may not compel Hamersley Iron to pay them, as Hamersley Iron has been discharged by the payment to the other Vendor. Clause 20 expressly provides that payment to the credit of Hancock & Wright shall be sufficient evidence of payment to the Vendors.
380 Where one of multiple co-obligors has made payment to discharge a joint and several liability, that obligor would be able to recover contribution from the other co‑obligors. A similar situation should exist where joint and several co-promisees obtain a disproportionate amount of the benefit conferred by a contractual clause. The co‑promisee receiving the benefit would need to account to the other co‑promisees for this benefit. The rationale requiring a division of the benefit between the co‑promisees is the same as that requiring contribution between joint co‑promisors, which is based on concepts of equity and fairness.[68]
381 In determining the extent to which co-obligors are required to contribute, the law adopts the principle 'equality is equity' in order to achieve equality of burden and benefit.[69] The same principle should apply to co-promisees. The presumption may be displaced by agreement but there is no evidence of such an agreement in the text of the 1962 Royalty Agreement.
382 The ordinary and natural meaning of cl 9 (and cl 14 and cl 15) is that Peter and Lang as well as HPPL and WPPL are entitled to the payment of the royalties. On analysis of the conflict of commercial realities and merits between (a) confining the entitlement to royalties under cl 9 (and cl 14 and cl 15) to WPPL and HPPL and (b) extending it to Lang and Peter, one may form the view that the greater commercial merits and realities lie in confining the entitlement to WPPL and HPPL. However, that is not the point. It is not for the court, or the reasonable observer, to rewrite the contract that parties actually made into one that the court, or the reasonable observer, think that they ought to have made.
383 The terms of cl 9 are clear and applying 'business common sense' does not mandate a construction contrary to the express words used in the clause. It makes sufficient common sense and business sense (albeit perhaps not necessarily the greatest common sense and business sense) for Peter and Lang as well as HPPL and WPPL to be entitled to the royalties. Such an analysis does not flout business common sense.
384 For these reasons I hold that 'the Vendors' in cl 9 (and cl 14 and cl 15) means the Vendors as defined and includes Peter. On the proper construction of the 1962 Royalty Agreement Peter is entitled to the payment of royalties and on Peter's death Peter's estate held a royalty entitlement as a Vendor. Peter, and each of the other Vendors, is entitled to 25% of the royalties payable to the Vendors under the 1962 Royalty Agreement.
385 The 1968 Royalty Agreement was made on 31 January 1968. The agreement is the basis of the royalties paid to WPPL for ore mined at Paraburdoo.
386 The agreement is more informal than the 1962 Royalty Agreement. It has the hallmarks of a Masters v Cameron[70] category 1 contract ‑ where the parties intend to be bound immediately, though expressing a desire to draw up their agreement in a more formal document at a later stage.
387 The parties are HPPL and WPPL trading as Hancock and Wright and as Hanwright Iron Mines (together referred to as 'Hanwright') and Hamersley Iron.
388 The preamble provides that Hanwright represent they hold 34 blocks of temporary reserves. The temporary reserves include Block 4053H (the Paraburdoo Reserves) and 33 other blocks referred to as the Mount Bruce Reserves.
389 Part 1 cl 2 provides that it is in the interests of all parties that Hamersley Iron should proceed with drilling, evaluation and probable preliminary construction of a mine in the Paraburdoo to provide complementary ore to Tom Price. It provides that Hamersley Iron may at any time require the transfer of Block 4053H to Hamersley with the approval of the Western Australian Government upon payment to Hanwright of $3.2 million (a sum which is repayable if Hamersley Iron proceeds with the transfer of Mt Bruce Reserves as provided for in the agreement).
390 Part 1 cl 3 provides:
Ore won by Hamersley from Block 4053H will be subject to the payment to Hanwright of a Royalty of 2 ½% on the same conditions as apply to Hamersley's present holdings.
391 Part II cl 1 provides that Hamersley Iron will form a new company called Mount Bruce Mining Pty Ltd (MBM). Clause 2 provides that the initial shareholding will be Hamersley 75%, Hanwright 25%.
392 Clause 5 of Section D of Part II provides that on Hamersley Iron giving notice of its intention to proceed with the development of a mine at Mount Bruce, the Mount Bruce reserves will be transferred to MBM free of consideration (other than the fact that expenditure incurred by Hanwright to date in respect of these reserves will be noted as its equity contribution to MBM).
393 Part II, Section A, cl 5 provides:
Ore won by M.B.M. from the Mount Bruce Reserves will be subject to the payment by M.B.M. to Hanwright of a royalty of 2 ½% on the same conditions as apply to Hamersley's present holdings.
394 The plaintiff contends that the 1968 Royalty Agreement entitles Peter to the payment of a royalty from iron ore produced and sold or otherwise disposed of from Paraburdoo.
395 Parts of the 1968 Royalty Agreement dealing with the Mount Bruce Reserves, including the royalty provision, were superseded by the 1970 Royalty Agreement.
396 Part 1 cl 3 provides for the payment of a royalty to Hanwright. Hanwright is defined to mean HPPL and WPPL. The ordinary and natural meaning of the clause is that the royalty is to be paid to HPPL and WPPL.
397 The plaintiff submits that the 1968 Royalty Agreement on its proper construction entitles Peter to the payment of a royalty. The plaintiff relies upon the words 'on the same conditions as apply to Hamersley's present holdings'. The plaintiff's argument is, stated briefly, as follows. The same conditions means the same conditions as apply under the 1962 Royalty Agreement. The expression 'on the same conditions' is not confined solely to the circumstances giving rise to the payment of the royalty. It encompasses provisions in the 1962 Royalty Agreement relating to parties and in particular the parties the subject of the obligation created by cl 9 of the 1962 Agreement. Clause 9 of the 1962 Royalty Agreement gives to Peter a right to royalties. Accordingly Peter has a right to royalties under the 1968 Royalty Agreement.
398 There must be strong and cogent reasons for departing from the express words 'payment to Hanwright of a royalty' and construing the clause to mean payment to Hanwright and Lang and Peter of a royalty. I find that the words 'on the same conditions as applied to Hamersley's present holdings' do not have that effect. To construe the clause to mean a payment to Hanwright and Lang and Peter of a royalty strains the meaning of the words 'payment to Hanwright of a royalty' beyond their breaking point.
399 The words 'on the same conditions as apply to Hamersley's present holdings' may be given a sensible meaning, and work to do, without departing from the ordinary and natural meaning of 'payment to Hanwright of a royalty'. The words 'same conditions as applied to Hamersley's present holdings' refer to the conditions for and of the payment of a royalty to Hanwright; they do not extend the obligation of payment to Hanwright to be an obligation to pay others.
400 I find that at the time of his death Peter did not have an entitlement to royalties under the 1968 Royalty Agreement.
401 WPPL, HPPL (together 'Hanwright'), Hamersley Iron and Mount Bruce Mining Pty Ltd (MBM) entered into an agreement dated 5 May 1970 (the 1970 Royalty Agreement). The preamble records that Hanwright holds temporary reserves referred to as the Mount Bruce Temporary Reserves which are subject to the exercise of an option by MBM. The preamble refers to the 1968 Royalty Agreement whereby Hamersley Iron may exercise an option over the Temporary Reserves. Clause 2.1 records that Hamersley Iron relinquished its option under the 1968 Royalty Agreement. Clause 2.2 provides that, in consideration of that relinquishment and the payment of $5 million by MBM to Hanwright, the Mount Bruce Temporary Reserves were divided between Hanwright and MBM in the way specified.
402 Clause 3.1 concerns the payment of royalties by MBM in relation to ore mined from areas of land the subject of the agreement. Clause 3.1 provides:
Ore won by M.B.M. from the M.B.M. area will be subject to the payment to Hanwright of a base Royalty of 2 ½% on the same conditions as apply to the existing Agreement between Hanwright and Hamersley with the exception that L.S. Perron will be eliminated as a beneficiary. M.B.M. will execute such a Royalty Agreement.
403 The natural and ordinary meaning of the clause is that a royalty is to be paid to Hanwright. However, the plaintiff says that the clause should be construed to mean that a royalty is to be paid to Lang and Peter as well as Hanwright. The plaintiff relies upon the words 'on the same conditions as apply to the existing Agreement between Hanwright and Hamersley with the exception that LS Perron will be eliminated as a beneficiary'.
404 Julian submits that his construction is supported by the decision of the High Court in Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd[71] which concerned the obligation of MBM to pay royalties under the 1970 Royalty Agreement. Following various grants contingent upon surrenders and a period of vacancy, a joint venture between CMIEC (Channar) Pty Ltd, a subsidiary of Sinosteel, and Channar Mining Pty Ltd, a subsidiary of Hamersley Iron's parent company Hamersley Holdings, obtained a mining lease for the extraction of ore over Channar A and Eastern Range. There were two issues. The first issue, which is not presently relevant, was whether Channar A and Eastern Range fell within the MBM area as defined in the 1970 Royalty Agreement.
405 The second issue was whether the joint venture had obtained title 'through or under' MBM in respect of Channar A and Eastern Range. Before the High Court, as in this case, it was common ground, that the 'existing Agreement between Hanwright and Hamersley' is a reference to the 1962 Royalty Agreement. It was also common ground that the obligation to pay royalties extended to 'all persons or corporations deriving title through or under' MBM because cl 3.1 of the 1970 Royalty Agreement incorporated, by reference, cl 24(iii) of the 1962 Royalty Agreement.
406 The High Court held as a matter of construction that the joint venturers had derived title to Channar A 'through or under' MBM. The phrase 'through or under' in the light of the text, context and purpose of the 1970 Royalty Agreement, was broader than formal succession, assignment or conveyance.
408 Clause 3.1 is concerned with the payment of royalties on ore won from the MBM area. The clause provides that the payment is to be of a royalty 'on the same conditions as apply to' the 1962 Royalty Agreement. The Mount Bruce case was concerned with on whom the obligation to pay royalties was imposed whereas the issue in this case is who has the correlative right to payment.
409 The plaintiff's argument is essentially as follows. The expression 'same conditions' is not limited to the circumstances giving rise to the obligation to pay royalties. Clause 3.1 provides that the payment is on 'the same conditions' with the exception that 'LS Perron will be eliminated as a beneficiary'. That exception necessarily implies that but for the exception Perron would be a beneficiary, that is, a person with a right to payment of royalties. Perron's entitlement to royalties arose from a deed of 22 October 1964 by which Perron acquired a 15% interest in the 1962 Royalty Agreement. The exception in cl 3.1 is premised upon the application of 'the same conditions' including the right to the payment of royalties under the 1962 Royalty Agreement.
410 It is arguable that the payment of a royalty 'on the same conditions as apply to the existing Agreement' includes the payment of a royalty to the persons with an existing right to payment of royalties under the 1962 Royalty Agreement. Clause 9 of the 1962 Royalty Agreement, on its proper construction, provides that the persons with a right to payment of royalties includes Peter.
411 By the deed dated 22 October 1964 the Vendors assigned to Perron a 15% interest in the royalty payment under the 1962 Royalty Agreement. Clause 20 of the 1962 Royalty Agreement provides that any amount to be paid to the Vendors may be paid to the credit of Hancock & Wright at the specified bank branch. By an authority dated 12 November 1967 the Vendors authorised Hamersley Iron to pay directly to Perron the royalty payment to which he became entitled under the deed of 22 October 1964.[74] The exception in cl 3.1 that Perron will be eliminated as a beneficiary ensures that the conditions in the 1962 Royalty Agreement including the condition as to the manner of payment applies and the authority to pay 15% to Perron does not apply to the 1970 Royalty Agreement.
412 However, there is a compelling reason for not accepting that construction. Clause 3.1 of the 1970 Royalty Agreement provides for payment to 'Hanwright'. Hanwright is defined to mean HPPL and WPPL trading as Hancock and Wright and as Hanwright Iron Mines. Thus, the clause expressly provides for payment of a royalty to HPPL and WPPL. It is a strong thing to say that where an agreement expressly provides that payment is to be to HPPL and WPPL, the parties intended that the payment be to other parties as well.
413 The interpretation that payment of a royalty is to Hanwright alone is reinforced by the fact that HPPL and WPPL but not Lang or Peter are parties to the agreement. A contract may confer a benefit on a non‑party. Indeed, where a contract by its express terms purports to confer a benefit directly on a third party, it is enforceable by the third party in its own name.[75] However, cl 3.1 expressly confers the benefit on 'Hanwright' not on Peter or Lang.
414 The natural and ordinary meaning of the words 'payment to Hanwright of a royalty' is that a royalty is to be paid only to Hanwright. The argument that cl 3.1 manifests a contrary intention rests upon the words 'on the same conditions as apply to the existing Agreement between Hanwright and Hamersley' and the exception relating to Perron. The argument based upon those phrases is not sufficient to overcome the express words that the payment is to be to 'Hanwright'.
415 I find that the 1970 Royalty Agreement did not confer on Peter any entitlement to royalties.
416 The defendants say that if Peter and Lang had a personal entitlement under the 1962 Royalty Agreement, the 1968 Royalty Agreement or the 1970 Royalty Agreement, which they deny, Peter and Lang had agreed that the beneficial interest in those royalties should be held by HPPL and WPPL.
417 The defendants' trust argument is set out in [237] of their written closing submissions as follows. In the Deed of Partition of One-Third Royalty executed by HPPL, WPPL, Peter and Lang on 14 September 1972[76] each of the signatories acknowledged amongst other things that the Hanwright partnership became entitled to royalties payable by Hamersley Iron under the 1962 Royalty Agreement and that in so far as Lang and Peter 'had any interest of any kind whatsoever in the said iron ore deposits such interest was held by each of them upon trust for the partnership'. In the Agreement Not to Dissolve Partnership executed by Lang, Peter, HPPL and WPPL on 2 March 1978[77] Peter and Lang acknowledged that neither of them had or ever did have any beneficial interest in the rights granted by the 1962 and 1968 Royalty Agreements. That point was reinforced by Recital (C) of the Deed to Avoid Dissolution of Partnership executed by Lang, Peter, Michael, Angela and Julian but not by HPPL or WPPL,[78] in which all parties thereto (including Julian) acknowledged that under the 1962 and 1968 Royalty Agreements, Hamersley Iron agreed to pay certain royalties to HPPL and WPPL.
418 Further, the defendants submit that all royalties paid under the 1962 Royalty Agreement were paid to the Hanwright partnership,[79] were declared as partnership income[80] and were thereafter distributed to the partners (namely, HPPL and WPPL) and then accounted for as income deriving from the Hanwright partnership in the respective enterprises of HPPL and WPPL.[81]
419 Julian submits that the defendants did not plead a case that Peter held his rights to royalties on trust for WPPL. The defendants submit that contention is wrong and refer to [9G(a)(iv)] and [9I(a)] of their defence and the opening submissions of lead senior counsel for the defendants, Ms Stern SC.[82]
420 The facts on which the defendants trust defence relies are pleaded at [9G] and in particulars [9G(a)], [9G(c)], [9G(e)] and [9G(f)] of their defence. However, the plaintiff submits, in effect, that the defence deploys those facts in support of a defence of estoppel and not the trust defence which the defendants now wish to advance.
421 The Rules of the Supreme Court 1971 (WA) provide that every pleading must contain a statement in a summary form of the material facts on which the party pleading relies for his defence.[83] Further, a defendant must plead any matter which they allege makes any claim of the plaintiff not maintainable or which, if not specifically pleaded, may take the plaintiff by surprise.[84]
422 Mason CJ and Gaudron J observed in Banque Commerciale SA (In Liq) v Akhil Holdings Ltd:[85]
'The function of pleadings is to state with sufficient clarity the case that must be met ... In this way, pleadings serve to ensure the basic requirement of procedural fairness that a party should have the opportunity of meeting the case against him or her and, incidentally, to define the issues for decision. The rule that, in general, relief is confined to that available on the pleadings secures a party's right to this basic requirement of procedural fairness.' (citations omitted) (286).
423 In Kirby v Sanderson Motors Pty Ltd,[86] Hodgson JA referred to rules of court which provide that a pleading must contain a statement in a summary form of the material facts on which the party relies and plead specifically any matter which, if not pleaded specifically, may take the other party by surprise and then made the following observations about a plaintiff pleading a cause of action:
'It might appear that these rules do not require that causes of action be stated in pleadings: the requirement is to have a statement of material facts, and indeed to have only such a statement. However, in my opinion ‑
(1) 'Material' means material to the claim, that is, to the cause or causes of action which are relied on.
(2) The requirement of a statement of material facts does not exclude the allegation of legal categories, such as duty of care, fiduciary duty, trust and contract.
(3) The general requirement to avoid surprise means that material facts must be stated in such a way that a defendant can understand the materiality of the facts, that is, how they are material to a cause of action.
Accordingly, even on the basis of these rules ... I do not take cases such as Konskier as establishing that there is never any requirement to do more than set out facts. Where there is a danger of surprise, which arises particularly where there is lack of precision and clarity in the pleading, it may well be appropriate to require a plaintiff, either in a statement of claim or in particulars, to explicitly relate the facts it pleads to specified causes of action.' (142 - 143).
424 This statement of principle applies to a defendant pleading a defence under the Rules of the Supreme Court 1971 (WA). Where, on the basis of the same facts, a number of different defences may arise, there may be an obligation on the defendant to demonstrate that its defence is clearly organized so that those matters going to each relevant legal category of defence are clearly identified. This may extend to showing the differing application to various defences of the facts common to some or all of them. The plaintiff ought not to be left in a position where he must guess about the legal significance of pleaded facts.
425 The question whether a pleading states a party's case sufficiently clearly to allow the other party a fair opportunity to meet it[87] raises questions of degree. A judgment needs to be made whether a defendant has pleaded their case with sufficient clarity to allow the plaintiff a fair opportunity to meet that case. Whether or not the defendant has done so is to be determined as a matter of practical justice. In determining whether the pleading states the defendant's case sufficiently to allow the plaintiff to meet it, the court may have regard to the way in which the case was conducted including the defendant's opening submissions.
426 Paragraph 9G of the defence responds to [15A] ‑ [15F] of the statement of claim which plead the 1962, 1968 and 1970 Royalty Agreements and that Peter held a royalty entitlement pursuant to each of those agreements. Paragraph 9G sets out the facts on which the defendants rely for their trust defence including the Common Assumption that Lang, Peter, HPPL and WPPL conducted their affairs at all material times on the basis that the royalties under the 1962, 1968 and 1970 Royalty Agreements were payable to HPPL and WPPL and not to Lang and Peter. Paragraph 9H pleads that by reason of the matters particularised in [9G] departure from the Common Assumption would occasion detriment to WPPL, Michael and Angela. Paragraph 9I then pleads:
By reason of the matters pleaded in paragraph 9G above, if, which is denied, Peter had any right to or interest in the royalties under the 1962 Royalty Agreement, the 1968 Royalty Agreement, and the 1970 Mount Bruce Royalty Agreement:
(a) Lang and Peter agreed that royalties were payable under the 1962 Royalty Agreement, the 1968 Royalty Agreement, and the 1970 Mount Bruce Royalty Agreement to the Partnership only, or alternatively the beneficial interest in the royalties should be held by HPPL and WPPL; or, in the alternative,
(b) Lang and Peter were estopped from claiming any such right or interest;
(c) Michael, Angela and Julian were estopped from claiming any such right or interest on behalf of Peter's estate; and
(d) Julian is estopped from denying that the royalties were payable to HPPL and WPPL and not to Peter or Lang.
427 Paragraph 9I does not plead in terms that Lang and Peter held any interest in the royalties on trust for HPPL and WPPL, but in its context [9I(a)] is at least arguably such a plea. Paragraph 9I(a) is not a plea of estoppel ‑ it is in the alternative to subpars (b) ‑ (d) which plead estoppel. The second limb of [9I(a)] pleads that Lang and Peter agreed that the beneficial interest in the royalties 'should be held' by HPPL and WPPL'. Having regard to the chapeau to [9I] and the facts pleaded in [9G] I understand that plea to be a plea that Lang and Peter had agreed to hold and did hold any legal interest in the royalties on trust for WPPL and HPPL.
428 Lead senior counsel for the defendants, Ms Stern SC, opened the defendant's case on the basis that the defendants denied that Peter had an entitlement to royalties under the 1962, 1968 or 1970 Royalty Agreements and in the alternative on the basis of separate defences of trust and estoppel. Ms Stern said[88] that the defendants make this submission as to the royalty entitlement on a number of different bases including the trust and estoppel submission. Ms Stern referred[89] to exhibit 43, the Deed of Partition of One‑Third Royalty, and said that is relevant to the estoppel and trust arguments and Ms Stern said[90] that those submissions were predicated on the estoppel and trust arguments. Thus, Ms Stern opened the defendants' case on the basis that the trust argument was separate from the estoppel argument and that the submissions, including the submissions concerning the Deed of Partition of One‑Third Royalty, were directed to the trust argument.
429 I find that it is open to the defendants on their pleaded defence to rely on the trust argument advanced in their closing submissions and that there is no procedural unfairness to the plaintiff in permitting the defendants to rely upon that defence.
430 The defendants' case is that Peter held his interest in the royalties on an express trust for WPPL, not a resulting or constructive trust. Express trusts are created in two principal ways: by transfer or by declaration. The alleged trust was not created by transfer but, if at all, by declaration. The three certainties ‑ of intention, subject matter and object ‑ must be found in a declaration of trust. The words of a declaration of trust must show an intention on the part of the settlor that a trust should be created. The subject matter of the trust must be certain ‑ that is, it must be clear what the property is upon which the trust is to operate. The objects of a trust must be identified with sufficient certainty.
431 Ms Stern placed reliance on the decision of the High Court in Perpetual Executors & Trustees Assoc of Australia Ltd v Wright (Perpetual Executors v Wright),[91] where a particular document was held to be not a declaration of a new trust but an acknowledgment of an already existing trust of which the document was evidence.
432 The facts in Perpetual Executors v Wright are very different from those in this case. Mr Wright sued the executors of his deceased wife's estate claiming that he was entitled to land and a bank account which stood in his wife's name. He gave evidence of purchasing the land in 1906 and of placing it in his wife's name on her request and for convenience and not as a gift. He claimed that all of the moneys in the bank account were his. He relied also on a document dated 13 June 1915, two days before her death, in which the deceased said she held the land and money in trust for her husband, adding 'it's all his'. Barton ACJ said:
I do not think the document is a declaration of a future trust: in other words, I think that it does not declare that the property comprised in it, having theretofore been the writer's own, was thenceforth to be held by her in trust for her husband. In my view it is written evidence of a trust then and theretofore subsisting. That construction, rather than the one adopted, seems to me to be indicated by the terms employed, especially by the use of the words with which the writing concludes, namely, 'it's all his' (192).
433 I do not understand his Honour to be referring to anything other than the facts of that case where the evidence disclosed a trust which had been in existence for nine years. I do not understand his Honour to be saying that in every case where a document says that the signatory holds land on behalf of someone else that is evidence of a subsisting trust. Whether such a construction is proper would depend on the circumstances in which the document was brought into being.
434 The other Justices in Perpetual Executors v Wright, Isaacs, Gavan Duffy and Rich JJ, said in their joint judgment:
He is required to establish a reasonably clear case, and ought to bring forward such evidence as is fairly available. He does adduce the corroborative evidence of two witnesses; and there is no evidence which is suggested as available but not produced. If, however, the document produced by the respondent as his wife's writing be genuine, there is not merely corroboration but actual admission of his allegation of fact (195).
The matter depends largely on the opinion formed of the respondent's veracity, and apparently he has been accepted as veracious by the primary tribunal. That seems to conclude the matter of fact, because the document does not amount to a new and independent constitution of a trust, but is an acknowledgment of a pre-existing trust, and affords as to the land the necessary written proof of such trust (196).
435 In my opinion, Perpetual Executors v Wright does not assist the defendants here because there is no evidence of any subsisting trust of which the documents relied upon by the defendants might be evidence.
436 A recital to the first document relied on by the defendants ‑ the Deed of Partition of One‑Third of Royalty[92] ‑ says that by virtue of the provisions of the 1962 Royalty Agreement the partnership of WPPL and HPPL became entitled to certain royalties payable by Hamersley Iron on the sale of iron ore produced from certain iron ore deposits. A further recital says that insofar as Lang and Peter had any interest in the iron ore deposits such interest was held by each of them upon trust for the partnership. It does not say that Lang and Peter held any interest in the royalties on trust for WPPL and HPPL. If the deed is drawn on the assumption that the partnership is entitled to the whole of the royalties payable by Hamersley under the 1962 Agreement except for the 15% interest assigned to Perron, that does not show an intention on the part of Lang and Peter to create a trust. To the contrary, it assumes that Lang and Peter have no interest in the royalties. The deed does not create a trust and is neither an acknowledgement nor evidence of a subsisting trust.
437 Recital (A) to the second agreement relied upon by the defendants ‑ Agreement Not to Dissolve Partnership of 2 March 1978[93] ‑ says that by the 1962 and 1968 Royalty Agreements Hamersley Iron covenanted to pay HPPL and WPPL certain royalties in respect of the production of iron ore. Recital (C) says that neither Lang nor Peter had or ever has had any beneficial interest in the rights granted by the Royalty Agreements. That does not show an intention of Lang and Peter to create a trust. Nor is it an acknowledgement of, or evidence of, a trust having been previously created. To the contrary, it says that Lang and Peter never had any beneficial interest in the rights granted by the Royalty Agreements.
438 Recital (C) of the third document relied upon by the defendants ‑ Deed to Avoid Dissolution of Partnership[94] of 2 March 1978 ‑ says that by the 1962 and 1968 Royalty Agreements Hamersley Iron covenanted to pay to HPPL and WPPL certain royalties in respect of the production of iron ore from specified areas. That does not show an intention on the part of Lang and Peter to create a trust. Nor is it an acknowledgement of, or evidence of, an existing trust. To the contrary, to the extent that the recital deals with entitlements to the royalties under the 1962 and 1968 Royalty Agreements it assumes that under the agreements only HPPL and WPPL have an entitlement to the royalties.
439 The other matter relied upon by the defendants in support of their trust argument is that all royalties paid under the 1962 Royalty Agreement were paid to the Hanwright partnership, and were thereafter distributed to the partners (HPPL and WPPL) and then accounted for as income deriving from the Hanwright partnership in the respective enterprises of HPPL and WPPL. That is not evidence of any existing trust. It may be that the parties considered that the partnership was entitled to the whole of the royalties or HPPL and WPPL may have retained the royalties rather than distributing any part of them to Lang and Peter on some other basis but it is not an acknowledgement or evidence of a trust.
440 In the case of legal interests other than land, a declaration of trust may be inferred from conduct.[95] However, the conduct relied upon by the defendants taken as a whole does not give rise to the inference that Lang and Peter declared that they held any interest they held in the royalties payable by Hamersley under the 1962 Royalty Agreement on trust for HPPL and WPPL respectively.
441 The defendants plead that the plaintiff is estopped from claiming that Peter had a personal right to be paid a royalty under the 1962, 1968 and 1970 Royalty Agreements.
442 The estoppel is pleaded to arise in two ways. First, Peter was estopped from claiming that he was entitled to payment of a royalty under the Royalty Agreements and consequentially his personal representatives, Michael, Angela and Julian, were bound by that estoppel. Secondly, Julian is directly estopped from claiming that Peter was entitled to payment of a royalty under those agreements.
443 The defendants' case is of estoppel by convention.
444 KR Handley gives a description of estoppel by convention:
When parties make a statement of fact or of mixed fact and law the conventional basis of their transaction they are estopped from questioning its truth for the purposes of that transaction ... Estoppels by convention can be created ad hoc, expressly, by a course of dealing, or by other acts and declarations. In such a case there must be some mutually manifest conduct by the parties with the intention of affecting their legal relationship ... This form of estoppel by representation does not depend on each party's reliance on the truth of the conventional facts. he representation is that the convention, true or otherwise, has been mutually adopted for the purpose of their transaction and each party relies on its adoption when entering into the transaction.[96]
445 In Moratic Pty Ltd v Gordon[97] Brereton J stated the elements of conventional estoppel:
In common law conventional estoppel, it is necessary for a plaintiff to establish (1) that it has adopted an assumption as to the terms of its legal relationship with the defendant; (2) that the defendant has adopted the same assumption; (3) that both parties have conducted their relationship on the basis of that mutual assumption; (4) that each party knew or intended that the other act on that basis; and (5) that departure from the assumption will occasion detriment to the plaintiff ... [32].
446 In Miller Heiman Pty Ltd v Sales Principles Pty Ltd, Macfarlan JA, with whom McColl JA and Sackville AJA agreed, adopted the principles stated by Brereton J and added that it is necessary for a person claiming the benefit of a conventional estoppel to demonstrate that they would have acted differently but for the agreed assumption. A broader enquiry as to a hypothetical counterfactual is not always required or helpful.[98]
447 The requirements for a convention as to a matter of fact or law to found an estoppel were distilled from a review of the authorities in Revenue and Customs Commissioners v Benchdollar Ltd[99] by Briggs J:
(i) It is not enough that the common assumption upon which the estoppel is based is merely understood by the parties in the same way. It must be expressly, [or implicitly by words or conduct from which the necessary sharing can properly be inferred,][100] shared between them.
(ii) The expression of the common assumption by the party alleged to be estopped must be such that he may properly be said to have assumed some element of responsibility for it, in the sense of conveying to the other party an understanding that he expected the other party to rely upon it.
(iii) The person alleging the estoppel must in fact have relied upon the common assumption, to a sufficient extent, rather than merely upon his own independent view of the matter.
(iv) That reliance must have occurred in connection with some subsequent mutual dealing between the parties.
(v) Some detriment must thereby have been suffered by the person alleging the estoppel, or benefit thereby have been conferred upon the person alleged to be estopped, sufficient to make it unjust or unconscionable for the latter to assert the true legal (or factual) position [52].
448 Michael Barnes QC summarised the elements of estoppel by convention as follows:[101]
An estoppel by convention is a form of estoppel which may arise (a) where parties to a previous transaction or relationship hold a common assumption of law or fact relating to that transaction or relationship, and (b) each party is aware that the other party has made the assumption (ie the estoppel has 'crossed the line' and so has become a shared assumption), and (c) it would be unjust or unconscionable that one party should be allowed to resile from the assumption. In these circumstances, a party will be estopped from asserting that what has been assumed is incorrect.
449 KR Handley describes the scope of estoppel:[102]
The estoppel only applies for the purposes of the transaction or relationship in which the convention was adopted... While a convention accepted for one transaction or relationship cannot create an estoppel for a different transaction or relationship, it may be available as an admission. A convention cannot estop a party against someone who is neither party nor privy.
450 The defendants' case is that HPPL, WPPL, Lang, Peter, Michael, Angela and Julian all adopted the common assumption that the royalties under the 1962, 1968 and 1970 Royalty Agreements were payable to HPPL and WPPL as partners in the HPPL and WPPL partnership (Partnership) and not to Lang and Peter,[103] which the defendants call the Common Assumption and departure from the Common Assumption would cause detriment to WPPL, Michael and Angela.
451 The defendants say that if Peter had any right or interest in the royalties under the 1962, 1968 and 1970 Royalty Agreements, which they deny, Lang and Peter were estopped from claiming such right or interest, Michael, Angela and Julian were estopped from claiming any such right or interest on behalf of Peter's estate and Julian is estopped from denying that the royalties were payable to HPPL and WPPL and not to Peter or Lang.
452 The defendants submit that the inference that HPPL, WPPL, Lang and Peter shared the Common Assumption arises from three instruments:
453 The defendants submit that detriment to HPPL and WPPL is found in the course of dealing by HPPL and WPPL with the royalties paid by Hamersley Iron in that:
(a) royalties under the 1962 and 1968 Royalty Agreements were at all material times paid to HPPL and WPPL;
(b) the Partnership prepared and filed accounts and income tax returns on the basis that the royalties were payable to and received by the Partnership and distributed to HPPL and WPPL as net income of the Partnership, including in the period when Julian was a director and shareholder;
(c) the accounts of Peter's estate were prepared on that basis and Michael, Angela and Julian swore an affidavit in support of probate which provided those accounts to the Court and Michael, Angela and Julian each deposed, in effect, that the contents of the statement of assets and liabilities of Peter's estate exhibited to their affidavit were true and correct so far as they had been able to ascertain;
(d) the Natalie and Timothy Proceedings were settled by Deed of Settlement dated 22 April 2008 to which Julian, Michael and Angela were parties on that basis; and
(e) the defendants rely upon a report dated 12 March 2008 from Mr Wayne Lonergan of Lonergan Edwards & Associates Ltd.
Deed of Partition of One-Third of Royalty of 14 September 1972
454 HPPL, WPPL, Lang and Peter are the parties to the deed. The deed cannot bind Michael, Angela and Julian except as the executors of Peter's estate.
455 The recitals to the deed contain no statement or reference to the 1968 and 1970 Royalty Agreements, and can give rise to no estoppel in relation to Peter's rights under those agreements.
456 The deed recites that the Partnership became entitled to certain royalties payable by Hamersley Iron in consequence of certain discoveries of iron ore deposits and by virtue of the provisions of the 1962 Royalty Agreement (wrongly described as dated 27 December 1962) and that, insofar as Lang and Peter had any interest in the iron ore deposits, that interest was held by each of them upon trust for the Partnership. There is nothing in the recitals which contain any statement or representation to the effect that the royalties under the 1962 Royalty Agreement were payable to HPPL and WPPL as partners in the HPPL and WPPL partnership and not to Lang and Peter. This is not a case where, whilst the language used bears directly upon the subject, its meaning may possibly be open to different constructions; cf Dabbs v Seaman.[107] It is a case where the recitals simply do not bear upon the topic of Lang and Peter's entitlement to royalties under the 1962 Royalty Agreement.[108]
457 The deed does not contain the Common Assumption.
458 In so far as the defendants rely upon the course of dealing by HPPL and WPPL with the royalties paid by Hamersley Iron as proof that Peter and his personal representatives after his death was shared by Peter, that has not been established. If the royalties under the 1962 and 1968 Royalty Agreements were at all material times paid to HPPL and WPPL, and the Partnership prepared and filed accounts and income tax returns on the basis that the royalties were payable to and received by the Partnership and distributed to HPPL and WPPL as net income of the Partnership, that was conduct by HPPL and WPPL not Peter. It does not prove that Peter or his personal representatives shared the Common Assumption.
459 Further, the evidence does not establish that Peter assumed some element of responsibility for the Common Assumption in the sense of conveying to HPPL and WPPL an understanding that he expected HPPL and WPPL to rely upon it.
460 Further, the evidence does not establish that HPPL and WPPL in fact relied upon the Common Assumption to a sufficient extent, rather than merely relying upon their own independent view of the matter.
461 In any event, I am not satisfied that the defendants have proved that the royalties paid by Hamersley Iron under the 1962 and 1968 Royalty Agreements were at all material times paid to HPPL and WPPL.
Agreement Not to Dissolve Partnership of 2 March 1978
462 Peter, Lang, HPPL and WPPL are the parties to this agreement.[109] The deed cannot bind Michael, Angela and Julian except as the executors of Peter's estate.
463 The recitals to the agreement contain no statement or reference to the 1970 Royalty Agreement and can give rise to no estoppel in relation to Peter's rights under that agreement.
464 Recital (A) to the agreement provides that by the 1962 and 1968 Royalty Agreements, Hamersley Iron covenanted to pay to HPPL and WPPL certain royalties in respect of the production of iron ore from areas specified in those Royalty Agreements. Recital (B) provides that, by an agreement of 22 October 1974, 'the parties hereto' assigned to Perron an interest of 15% in the rights granted to the parties hereto by the 1962 Royalty Agreement. Recital (C) provides that neither Lang nor Peter had, or ever has had, any beneficial interest in the rights granted by the Royalty Agreements. The purpose of the deed appears from Recital (F) which provides that the parties believe that any dissolution of the Partnership may result in financial loss or diminution of the value of the benefits that both HPPL and WPPL anticipate will flow to them directly or indirectly from the Royalty Agreements. The operative provisions then provide that, during the currency of the Royalty Agreements, HPPL and WPPL shall not dissolve the Partnership without the prior consent of the other or do anything that would provide grounds for the winding up of each of them. Lang and Peter each agree to use their powers to prevent the winding up of HPPL and WPPL respectively or the dissolution of the Partnership during the currency of the Royalty Agreements. The parties agree that upon the respective deaths of Lang and Peter the rights given to each of them under the agreement, but not the obligations, shall pass to their personal representatives.
465 Julian submits that any assumptions made by the parties in the agreement can only be regarded as being made in respect of the transaction in respect of which the deed was made, namely the rights and obligations contained in it. I accept that submission. As stated earlier in these reasons, an estoppel by convention only applies for the purposes of the transaction in which the convention was adopted.[110] The purpose of the agreement is to prevent the dissolution of the Partnership. The obligations created by the agreement relate to the dissolution of the Partnership. Any estoppel arising from the agreement does not go beyond actions or proceedings in connection with the dissolution of the Partnership. The agreement is not concerned with the entitlements of Lang and Peter to payment of royalties under the Royalty Agreements. Any shared assumption by the parties to the agreement does not go beyond proceedings in connection with the dissolution of the Partnership; it does not apply to preclude Peter otherwise asserting an entitlement to royalties under the 1962 and 1968 Royalty Agreements.
466 Julian further says, and I accept, that the agreement does not contain an assumption shared by the parties to the effect that Lang and Peter have no beneficial interest in the rights to royalties under the Royalty Agreements. The rights referred to in Recital (C) are the rights described in Recital (A), that is, the rights of HPPL and WPPL to be paid royalties by Hamersley Iron under the 1962 and 1968 Royalty Agreements. The subject of the deed is the royalty payments to HPPL and WPPL. The purpose of the deed is to prevent the dissolution of the Partnership. It is in that context that the agreement provides that Lang and Peter have no beneficial interest in the royalty entitlements of HPPL and WPPL, but makes no provision in relation to any personal royalty entitlements of Lang and Peter under the Royalty Agreements.
467 The plaintiff further says, and I accept, that if the deed gives rise to a common assumption that Lang and Peter have no beneficial interest in the rights to royalties under the Royalty Agreements, that is not the Common Assumption. That Lang and Peter have no beneficial interest in the rights to royalties under the Royalty Agreements does not say that they have no right to payment of royalties. To the contrary, it implies that they have a right to payment but no beneficial interest in the payments. Further, the recital does not say that the beneficial interest resides with WPPL and HPPL.
468 Further, in relation to the agreement, the plaintiff says that if Recital (C) creates or evidences an obligation upon Lang and Peter to hold their rights to royalties for the benefit of WPPL and HPPL, the effect of cl 7 of the deed is that that obligation is extinguished upon Peter's death. Therefore, Michael, Angela and Julian as Peter's personal representatives were not bound by that obligation. Any estoppel arising from the agreement did not bind Peter's estate. I accept that submission.
469 Further, the course of dealing by HPPL and WPPL with the royalties paid by Hamersley Iron does not prove that Peter and his personal representatives after his death shared the Common Assumption for the same reasons I have stated in relation to the Deed of Partition of One‑Third of Royalty of 14 September 1972.
Deed to Avoid Dissolution of Partnership of 2 March 1978
471 Further, the recitals to the deed contain no statement or reference to the 1970 Royalty Agreement and can give rise to no estoppel in relation to Peter's rights under that agreement.
472 Further, the deed does not contain an assumption shared by the parties to the deed that the royalties under the 1962 and 1968 Royalty Agreements were payable to HPPL and WPPL as partners in the Partnership and not to Lang and Peter. Recital (C) provides that by the 1962 and 1968 Royalty Agreements, Hamersley Iron covenanted to pay to HPPL and to WPPL certain royalties in respect of the production of iron ore from areas specified in the agreements. There is nothing in the recitals which contain any statement or representation to the effect that royalties under the 1962 and 1968 Royalty Agreements were not payable to Lang and Peter. The recitals do not bear upon the topic of Lang and Peter's entitlement to royalties under the 1962 Royalty Agreement. The purpose of the deed appears from Recital (E) which provides that the parties have agreed that no act or thing be done to cause the dissolution of the Partnership for the period while the Royalty Agreements remain in force. The subject of the deed is the royalty payments payable to HPPL and WPPL, not the right of anyone else to payments of royalties under the Royalty Agreements, including Lang, Peter and indeed Perron.
473 Further, any shared assumption by the parties to the deed does not go beyond proceedings in connection with the dissolution of the Partnership for the same reasons as in relation to the Agreement Not to Dissolve Partnership of 2 March 1978. Any shared assumption in the deed does not apply to preclude Peter otherwise asserting an entitlement to royalties under the 1962 and 1968 Royalty Agreements.
474 Further, the course of dealing by HPPL and WPPL with the royalties paid by Hamersley Iron does not prove that Peter and his personal representatives after his death shared the Common Assumption for the same reasons I have stated in relation to the Deed of Partition of One‑Third of Royalty of 14 September 1972.
475 Peter or his personal representatives would only be estopped from resiling from the Common Assumption if it would be unjust to allow him or them to go back on the assumption. The detriment alleged by the defendants consists of HPPL and WPPL having entered into the deeds and agreements, and HPPL having made the payments under the Royalty Agreements to HPPL and WPPL.
476 The evidence does not establish that HPPL made the payments under the Royalty Agreements to WPPL, or that WPPL received the payments and did not distribute any part of them to Peter in reliance upon the shared Common Assumption in the deeds and agreement.
477 No injustice would be caused to WPPL by Peter, or after his death his personal representatives, resiling from the Common Assumption.
478 The authors of the 5th edition of Spencer Bower: Reliance-Based Estoppel say that, in the context of a convention as to the rights and obligations between the parties, an estoppel by convention is not an absolute bar; rather, it will not operate after the mistaken assumption has been corrected further than is necessary to avoid the injustice that would otherwise arise by reason of commitment made before the assumption was corrected.[113] The authors suggest that the authorities support the proposition that an estoppel by convention will not operate prospectively once the error in the common assumption is revealed but this does not 'kill the estoppel stone dead there and then'. The party relying upon the assumption may be allowed a limited time after discovery of the error to protect themself before the estoppel would no longer operate, but where there is ongoing detriment to which the party has committed himself in reliance on the convention, and from which he cannot protect himself, the estoppel by convention must continue to operate in order to avoid injustice.
479 In this case, no injustice would have been caused to WPPL by Peter resiling from the Common Assumption at any time after the deeds and agreement had been executed. No injustice would have been caused to WPPL by Peter's personal representatives resiling from the Common Assumption after his death and asserting the right of Peter's estate to royalties under the Royalty Agreements.
480 For all of the reasons stated, Peter and, after his death, his estate were not estopped by convention from claiming any right or interest in the payment of royalties under the Royalty Agreements.
481 Of the three instruments on which the defendants rely to establish that HPPL, WPPL, Lang and Peter shared the Common Assumption, the only instrument to which Julian was a party is the Deed to Avoid Dissolution of Partnership of 2 March 1978. HPPL and WPPL are not parties to the deed. There can be no assumption shared by Julian and HPPL and WPPL estopping Julian from claiming that Peter's estate had an interest in the royalties payable under the Royalty Agreements.
482 The defendants also plead that the accounts of Peter's estate were prepared on the basis that Michael, Angela and Julian swore an affidavit in support of probate which provided those accounts to the Court and they each deposed, in effect, that the contents of the statement of assets and liabilities of Peter's estate exhibited to their affidavit were true and correct so far as they had been able to ascertain and the statement of assets and liabilities did not show that Peter's estate had any entitlement to the payment of royalties under the Royalty Agreements.
483 The affidavit sworn by Julian does not give rise to an estoppel by convention. The affidavit might show that Michael, Angela and Julian each held the Common Assumption, but it is not enough that each of the parties holds the common assumption; it must be shared between them. The expression of the common assumption by Julian must be such that he may properly be said to have assumed some element of responsibility for it, in the sense of conveying to Michael and Angela an understanding that he expected them to rely upon it and they must in fact have relied upon the common assumption, to a sufficient extent, rather than merely upon their own independent view of the matter.
484 The statement of assets and liabilities was prepared by Keall Brinsden on the instructions of Salt with information provided by McKenna and Julian.
485 Salt gave evidence that he always believed that royalties were payable to Hancock and Wright and had no knowledge of Peter being entitled to royalties from anything at all. He did not recall discussing that matter with Michael and Angela. Michael could not, and Angela did not, give evidence. There is no direct evidence of who Michael and Angela believed was entitled to royalties under the relevant royalty agreements.
486 Julian did not know that Peter, and on his death Peter's estate, had a right to payment of royalties under the Royalty Agreements.
487 There was no shared assumption between Michael, Angela and Julian. A common assumption to give rise to an estoppel must have 'crossed the line' in the sense that each party was aware that the other party or parties had made the same assumption. There must be some communication between them, which may be express or which may be an inference from conduct, which brings this about. The person alleged to be estopped must have intended at the time of the assumption that the party alleging the estoppel should act in some way in reliance on the assumption.[114] The evidence does not establish that. The evidence is to the contrary.
488 The defendants plead that the Natalie and Timothy Proceedings were settled by Michael and Angela by deed of settlement dated 22 April 2008 (Deed of Settlement) to which Julian, Michael and Angela were parties on the basis of the Common Assumption. In support of that contention, the defendants rely upon the Deed of Settlement and a report dated 12 March 2008 of Mr Wayne Lonergan of Lonergan Edwards & Associates Ltd.
489 The defendants' case is of estoppel by convention, not promissory estoppel. They do not rely upon an estoppel arising from a representation by Julian but upon a shared common assumption. The Deed of Settlement makes no reference to the entitlement of Peter or Peter's estate to royalties under the Royalty Agreements; it makes no reference to royalties at all.
490 Mr Lonergan's report is in the form of a letter on a Lonergan Edwards & Associates Limited letterhead addressed to Corrs Chambers Westgarth, the solicitors for Michael and Angela. Mr Lonergan states that the report has been prepared solely for the purpose of mediation. Mr Lonergan states that he has been instructed to value the loss suffered by the plaintiffs, that is, Natalie and Timothy Wright, due to the failure of Angela and Michael as executors to complete the Option Agreement; this loss being the failure to obtain one‑third of Julian's shares in WPPL, together with the associated dividends and other benefits. At [49] Mr Lonergan says that, in valuing the shares in WPPL, he has adopted a net assets approach in that the company is primarily an investment and holding company with assets including, relevantly, the 'right to benefit from 50% of the royalty payments derived by the Hancock & Wright partnership'. At [63] Mr Lonergan says:
H&W receive royalties of 2.5% from HI in respect of a range of mines (including Brockman, Marandoo, Mt Tom Price and Paraburdoo). Mt Tom Price royalties are split 1/6 direct to WPPL, 1/6 to [HPPL] and 2/3 to H&W (which is then split 50:50 between WPPL and HPPL). The net effect is that all the HI royalties are split 50:50 between WPPL and HPPL.
491 That assumption reflects different entitlements to royalties than those created by the 1962 Royalty Agreement, which on the construction of the defendants was an entitlement of the Partnership to royalties of 2.5%.
492 The Deed of Settlement, even read with the Lonergan report, does not establish any shared assumption between Julian, Michael and Angela of the Common Assumption.
493 In any event, the requirements for an estoppel by convention are not met by the Deed of Settlement so as to give rise to an estoppel by convention precluding Julian from asserting that Peter or Peter's estate had an interest in the royalties payable under the Royalty Agreements.
494 My finding that the Deed of Settlement does not give rise to the estoppel by convention pleaded by the defendants does not preclude a finding that, by the Deed of Settlement, Julian discharged Michael and Angela from liability arising from a breach of fiduciary duty, or from other claims. Indeed, later in these reasons I find that, by the Deed of Settlement, Julian did release and discharge Michael and Angela from such liabilities.
495 There will only be an estoppel if it is unjust or unconscionable in all the circumstances to allow a person to resile from the shared assumption.
496 In order for it to be unjust or unconscionable that a person should be able to resile from the shared assumption, the person who asserts the assumption must generally show: (a) that he has acted reasonably in reliance upon the assumption, (b) that he would or might suffer significant prejudice if the other person is allowed to resile from the assumption, and (c) that there are no other special factors which mean that it is not unconscionable to permit a person to resile from a shared assumption.
497 I am not satisfied that the defendants have established that if, contrary to my finding, Michael and Angela acted in reliance upon the Common Assumption for which Julian is relevantly responsible, it would be unjust or unconscionable for Julian to resile from the Common Assumption even if Michael, Angela and Julian shared the Common Assumption.
Peter had entitlement to royalties under the 1962 Royalty Agreement
498 I find that Peter had an entitlement to royalties under the 1962 Royalty Agreement, but not the 1968 and 1970 Royalty Agreements, and that Peter was entitled to participate in any award in the Concentrator Royalty Arbitration.
Julian did not know Peter had entitlement to royalties
499 I find that Julian did not know that Peter had an entitlement to royalties under the 1962 Royalty Agreement or an entitlement in respect of the Concentrator Royalty Arbitration. He did not read the relevant clauses of the 1962 Royalty Agreement, or if he did, he did not understand that the agreement gave Peter an entitlement to royalties. He did not know Peter or his estate had any entitlement in respect of the Concentrator Royalty Arbitration.
Consideration paid by Michael and Angela for Julian's interest in Peter's estate
500 Michael and Angela paid no or minimal consideration to Julian for the acquisition of his interest in Peter's estate. Two matters lead to that conclusion. First, the proper construction of the 1987 Sale Agreements is that Julian agreed to sell his interest in Peter's estate to Michael and Angela for no or minimal consideration. Second, Michael and Angela paid to Julian the whole of the monetary consideration payable to Julian under the 1987 Sale Agreements for his WPPL shares.
501 The monetary consideration paid by Michael and Angela (Purchaser) to Julian (Vendor) under each of the 1987 Sale Agreements was $3,413,127. The Purchaser acquired various interests including:
(a) Julian's shares in WPPL;
(b) shares held by Julian in any company, legal entity or as a beneficiary which is an associate of WPPL (Associated Companies) or of which Julian is entitled to any interest other than specified interests (Associated Interests); and
(c) Julian's interest in Peter's estate.
502 In addition, Michael and Angela agreed to indemnify Julian against claims in respect of:
(i) Peter's estate, including $170,200 allegedly owing by Julian to Peter;
(ii) WPPL and Associated Companies; and
(iii) liability to pay any amount in relation to the partly paid shares in WPPL and Associated Companies.
503 The agreement does not expressly allocate this consideration among the various interests acquired by the Purchaser under the agreement. The agreement contains two recitals:
(1) the Vendor is the registered holder of shares in WPPL and has interests in certain other shares and property as hereinafter described; and
(2) the Vendor has agreed to sell and the Purchaser has agreed to purchase half of the WPPL shares together with half the interest of the Vendor in such other shares and property, subject to and upon the terms and conditions hereinafter set forth.
In consideration of the sum of... $3,413,127 to be paid by the Purchaser to the Vendor...:
(a) the Vendor hereby agrees to sell and the Purchaser hereby agrees to purchase:
(i) the interest of the Vendor in the [WPPL shares]...
(ii) the interest of the Vendor in [the Associated Interests]
(b) the Vendor hereby agrees to procure without further cost to the Purchaser the sale and the Purchaser hereby agrees to purchase the right title estate share or shares interest or interests in half the property both real and personal to which the Vendor was, is or may at any time hereafter become entitled from [Peter's estate].
In consideration of these presents, the Purchaser hereby agrees to indemnify the Vendor and keep the Vendor indemnified against all claims demands [etc] against the Vendor in respect of:
(a) [Peter's estate] (and whether made against or suffered by the Vendor or as an executor or beneficiary of such estate), including an amount of [$170,200] allegedly owing by the Vendor to [Peter];
(b) [the Associated Companies], including any tax liabilities; and
(c) the liability to pay any amount in relation to the partly paid shares [in WPPL and the Associated Companies].
506 Clauses 3 and 4 contain acknowledgements by the Vendor and Purchaser. Clause 5 makes provision for the transfer of shares. Clause 6 contains warrantees by the Vendor. Clause 7 provides the Vendor and Purchaser shall bear their own legal costs. Clause 8 is an acknowledgement that WPPL shall provide financial assistance to the Purchaser to enable the purchases under the agreement. Clause 9 contains standard, miscellaneous, or general clauses.
507 Clause 1 provides that $3,413,127 is to be paid by the Purchaser to the Vendor in consideration of the sale and purchase of the shares identified in (a) and 'without further cost to the Purchaser' Julian's interest in Peter's estate. The phrase 'without further cost to the Purchaser' is ambiguous. It might mean without cost in addition to that payable under this agreement, or it might mean without cost in addition to that payable for the other interests sold and purchased under this agreement. In my view, the more natural and ordinary meaning of the phrase is the latter.
508 Extrinsic evidence of surrounding circumstances known to the parties is admissible to confirm that interpretation or to aid in the interpretation of the agreement to resolve any ambiguity. The evidence establishes that the parties negotiated the agreement on the basis that Peter's estate was insolvent. Michael, Angela and Julian swore an affidavit in January 1986 which verified the Statement of Assets and Liabilities which showed that Peter's estate had a net deficiency.
509 Dyson Heydon writes that one exception to the parol evidence rule is that extrinsic evidence is admissible to identify the price under a contract.[115] The parties negotiated and agreed the price for the sale of Julian's WPPL shares to be the total monetary consideration payable under the 1987 Sale Agreements plus $170,200 owing by Julian to Peter.
510 In fact, Michael and Angela paid the whole of the monetary consideration payable under the 1987 Sale Agreements to Julian for the transfer of Julian's WPPL shares to Michael and Angela.[116] Accordingly, Julian received minimal, if any, consideration from Michael and Angela for his interest in Peter's estate.
Michael and Angela put themselves in a position of conflict and profit
511 The defendants submit that the mere existence of a personal interest on the part of Michael and Angela does not of itself establish a breach of the no conflict rule or the no profits rule.
512 In Hospital Products,[117] Mason J said that the fiduciary's duty may be more accurately expressed by saying that he is under an obligation not to promote his personal interest by making or pursuing a gain in circumstances in which there is a conflict or a real or substantial possibility of a conflict between his personal interests and those of the beneficiary. In Warman International Ltd v Dwyer,[118] the High Court said that a fiduciary must account for a profit or benefit if it was obtained when there was a conflict or possible conflict between his fiduciary duty and his personal interest.
513 Prior to the administration of the estate, the residuary beneficiaries do not obtain any legal or equitable title to any asset forming part of the testator's estate. However, a residuary beneficiary has a right against the executors to have the estate duly administered and the residue ascertained and disposed of according to the will. That right manifests as a chose in action against the executor to compel the proper administration of the estate, which includes the ability to pursue claims for breaches of the executor's fiduciary duties.[119] The residuary beneficiary's chose in action is a form of property. The residuary beneficiary has an interest in the assets of the estate.
514 There was a real or substantial possibility of a conflict between Michael and Angela's interests and those of Julian. Each side of the sale and purchase had an interest in achieving the best price and conditions.
515 The defendants submit that if a gain or benefit is not obtained by use or by reason of the fiduciary position, or if that position otherwise had no operative part in the gaining of that benefit, then there is no breach of fiduciary duty and the fiduciary is not liable to account for the benefit acquired. The defendants refer to Howard v Federal Commissioner of Taxation[120] where French CJ and Keane J said:
If there is no possible conflict between personal interest and fiduciary duty, and if the gain or benefit is not obtained by use or by reason of the fiduciary position, the fiduciary is not liable to account for the gain or benefit [37].
516 In that case the directors of the company acting in their personal capacities conceived of a profit-making venture in which they would be involved in their personal capacities. Their entry into the joint venture did not involve dealing with any property in which the company had any interest or the use of any knowledge or opportunity derived from their positions as directors. The present case is thus quite different from Howard v Federal Commissioner of Taxation.
517 Michael and Angela, as executors of Peter's will, owed a fiduciary duty to Julian as a beneficiary of the estate. In Michael and Angela purchasing Julian's interest in the estate there was a real or substantial possibility of a conflict between Michael and Angela's interests and those of Julian. By entering into the transaction Michael and Angela placed themselves in a position of conflict between their interests and their duty to Julian. In order to avoid the transaction being set aside, or equitable compensation being awarded, Michael and Angela must show that they took no advantage of their position as executors by showing that Julian gave his informed consent to the transaction which involves showing that they made full disclosure and the transaction was fair.
518 The plaintiff submits that the same result is achieved by applying the fair dealing rule:
The fair-dealing rule is (again putting it very shortly) that if the trustee purchases the beneficial interest of any of his beneficiaries, the transaction is not voidable ex debito justitiae, but can be set aside by the beneficiary unless the trustee can show that he has taken no advantage of his position and has made full disclosure to the beneficiary, and that the transaction is fair and honest (241).[121]
519 The fair dealing rule applies to a beneficiary of an estate who is also an executor of the estate.[122]
Michael and Angela did not give full value for Julian's interest in the estate
520 Michael and Angela did not give 'full value' for Julian's interest in the estate. Peter's estate had an entitlement to royalties under the 1962 Royalty Agreement. The value of that interest was substantial. For the purposes of these reasons I have found that as at 31 December 1986 the value of Peter's personal royalty entitlement under the 1962 Royalty Agreement was $16.7 million. In addition, Peter's estate had an interest in the payment due from Hamersley Iron from the Concentrator Royalties Arbitration. Julian says that other assets of Peter's estate included the Fremantle Sailing Club boat pen and shares in Coho Resources Ltd. Peter's estate had substantial value. Julian's interest in Peter's estate had substantial value. Michael and Angela did not pay 'full value' for that interest. They paid minimal, if any, consideration for acquiring Julian's interest in Peter's estate.
521 If a person occupying a fiduciary position wishes to enter into a transaction which would otherwise amount to a breach of duty, the fiduciary must, if liability is to be avoided, make full disclosure to the person to whom the duty is owed of all relevant facts known to the fiduciary, and that person must consent to the proposed transaction. What is required for a fully informed consent is a question of fact in all the circumstances of each case.[123]
522 Before a fiduciary deals with their principal, the fiduciary must make available to the principal all the information which the fiduciary has in relation to the subject matter of the transaction. Usually, the defendant has information, and the essence of the breach of fiduciary duty is that the defendant takes advantage of the fact that the defendant has it and the principal does not.[124]
523 Julian alleges that Michael and Angela directly, and through their agents Fieldhouse and Salt, failed to give full information to Julian as to the assets which fell within Peter's residuary estate and matters pertaining to their worth or value. Julian alleges that Fieldhouse, Salt, Michael and Angela each knew that Peter and Peter's estate had an entitlement to royalties under the 1962 Royalty Agreement and the expected award in the Concentrator Royalty Arbitration or wilfully closed their eyes so as not to learn about those entitlements or deliberately refrained from acquiring such knowledge.
524 Julian further alleges that Michael and Angela, directly or through their agents Fieldhouse and Salt, knew that Peter and Peter's estate held a boat pen at Fremantle Yacht Club and overseas shares and property or wilfully closed their eyes so as not to learn about those assets or deliberately refrained from acquiring such knowledge. Julian alleges that by failing to inform him about those assets, Michael and Angela failed to make to him full disclosure of matters relevant to his decision to transfer his interest in Peter's estate to Michael and Angela for nil consideration.
525 The obligation of a fiduciary to make full disclosure extends to all material information of which the fiduciary is aware or which they have deliberately refrained from acquiring, but it does not extend to other facts of which they are unaware notwithstanding that prudent enquiry would reveal their existence.[125]
526 To establish that Julian gave his fully informed consent, Michael and Angela must establish that they made full disclosure to Julian of all information within their knowledge relevant to his decision to relinquish to Michael and Angela his interest in the estate.
527 In their closing submissions, counsel for Julian said that the failure to give full information boils down to the following:
1. Michael and Angela failed to give full information to Julian as to the assets which fell within Peter's residuary estate and matters pertaining to their worth or value; and
2. Michael and Angela failed to give full information to Julian as to the nature and value of the interest he was selling in WPPL via the disposition of his WPPL shares.
528 I have found that Peter and Peter's estate were entitled to royalties under the 1962 Royalty Agreement and to participate in any award in the concentrator royalty arbitration. Julian alleges that the defendants failed to discharge the onus on them of establishing that Michael and Angela disclosed to Julian Peter's entitlement to those royalties and to participate in any award in the concentrator royalty arbitration and other assets of Peter's estate before he entered the 1987 Sale Agreements or completed those agreements.
529 The defendants do not contend that Michael and Angela disclosed to Julian that those assets were assets of Peter's estate or their value. The defendants' case is that those assets were not assets of Peter's estate and alternatively Michael and Angela did not know that those assets were assets of Peter's estate.
Michael and Angela's knowledge of Peter's entitlement to royalties and concentrator royalty arbitration award
530 Julian submits that it can be inferred from the evidence that Michael and Angela were aware of Peter's entitlement to royalties and a share of the concentrator royalty arbitration award, or chose to close their eyes to those entitlements.
531 Firstly, Michael had sufficient knowledge of the concentrator royalty arbitration so as to know or at least have notice of facts which, upon enquiry, would lead him to know that Peter was a party and claimant to the proceedings because he was a person entitled under the 1962 Royalty Agreement to be paid a royalty. Michael took a close interest in the arbitration and associated litigation. He attended the Privy Council hearing in London.
532 There are conflicting inferences to be drawn from Michael's knowledge that Peter, and subsequently Peter's estate, was a party to the arbitration and legal proceedings. He may have thought that Peter, and subsequently his estate, was a party because he was a party to the 1962 Royalty Agreement. However, there is no evidence to support that hypothesis; it is conjecture. He may have thought that Peter, and subsequently Peter's estate, was a party to the arbitration and legal proceedings because Peter was one of the persons entitled to the payment of royalties under the 1962 Royalty Agreement. The points of claim in the arbitration state that Michael, Angela and Julian are executors of the estate of 'one of the Vendors', Peter. The points of claim further state that cl 9 of the Agreement provides for royalty payments to be made by Hamersley Iron 'to the Vendors'. The points of claim define the Vendors to be Lang, Peter, HPPL and WPPL. The more likely hypothesis is that Michael knew or believed that Peter, and subsequently his executors, were parties to the arbitration because Peter and subsequently his estate was entitled to royalties under the 1962 Royalty Agreement.
533 It is apparent from the evidence that Michael kept in close contact with Angela and informed her about important matters concerning the mining interests and it is likely that what Michael knew he passed onto Angela.
534 Secondly, there is evidence that by 23 May 1986 Michael and Angela had received and read copies of the 1962 Royalty Agreement. An agenda of 23 May 1986 for a meeting of the WPPL 'Where are we going?' committee, in which Michael wrote:
... [N]either Angela nor I know enough about the mineral activities of either W.P.P.L or H. & W. to talk about them. Both of us have received copies of the W.P.P.L and H.P.P.L Agreements and basically understand them. I have had a further briefing in relation to activities, locations etc.
1 A one page resume of every legal agreement that we have associated with the mineral industry.
535 Michael required an understanding of the 1962 Royalty Agreement for the purpose of dealing with the Hanwright partnership split with Lang and determining what should stay in the partnership.
536 Michael and Angela executed the Midland Bank Loan Agreement to obtain finance to purchase Julian's shares. The recitals to the agreement recite that under the 1962 Royalty Agreement, Hamersley Iron covenanted to pay royalties to HPPL, WPPL, Lang and Peter.
537 Thirdly, Michael and Angela received the Keall Brinsden letter of 20 March 1987 and the attached memorandum. The memorandum appears to have been written, or authorised, by Mr Martin, the Keall Brinsden lawyer with the carriage of the concentrator royalty arbitration and the associated litigation. It is likely Michael would have known that. The memorandum states that the arbitration is 'a significant asset' and 'a valuable asset' of the estate and that the conduct of the arbitration will be delayed whilst Julian continues as an executor. It is apparent from the memorandum that its author held the opinion that Peter's estate had an entitlement to royalties under the 1962 Royalty Agreement and hence an entitlement to share in any arbitration award.
538 Neither the Keall Brinsden probate file, nor any of the other large number of contemporaneous documents discovered, contain any reference to Michael or Angela querying or seeking an explanation for that advice from Keall Brinsden or from Fieldhouse.
539 Further, the affidavit drafted by Keall Brinsden in support of the application that Julian retire as an executor of Peter's estate included the statement that the estate was manifestly solvent. When Julian questioned that statement, it was removed from the final affidavit. The final affidavit made no reference to the solvency of the estate. The solvency of the estate depended upon Peter's entitlement to royalties and the arbitration which 'was a valuable asset of the estate'. There is no reference on the Keall Brinsden probate file, nor in any of the other large number of contemporaneous documents discovered, to Michael or Angela seeking or obtaining any explanation from Keall Brinsden or Fieldhouse for the statement that the estate was manifestly solvent or why the final affidavit contained no reference to the solvency of the estate.
540 The Keall Brinsden memorandum, the draft and the final affidavits, and the inferences to be drawn from them, are a form of retrospectant evidence that prior to that time, Michael and Angela knew that Peter's estate was entitled to royalties and a share of any award in the concentrator royalty arbitration or deliberately refrained from acquiring such knowledge.
541 It is open to infer that, when Michael and Angela executed the 1987 Sale Agreements, a period of less than two months before they received the Keall Brinsden memorandum, they knew that Peter's estate was entitled to royalties and a share of any award in the concentrator royalty arbitration; or at least that the lawyers familiar with the 1962 Royalty Agreement and with the conduct of the concentrator royalty arbitration and the application for an order that Julian retire as an executor of the estate held that opinion.
542 Fourthly, Angela was available to give evidence. Her solicitors filed a witness statement by her and only informed the plaintiff's solicitor that she would not give evidence on the day before the commencement of the trial.
543 Failure to provide or give evidence may give rise to an inference of fact adverse to a party.[126] The obligation to draw inferences from failure to call evidence is part of the court's obligation to consider and weigh the evidence according to the respective powers of the parties to produce evidence:
All evidence is to be weighed according to the proof which it was in the power of one side to have produced, and in the power of the other to have contradicted[127] (970).
544 An inference is not permissible unless enough has been proved to warrant a reasonable and just conclusion against the party, in the absence of explanation and contradiction.[128] The scope and operation of the principle in Jones v Dunkel was explained by Heydon, Crennan and Bell JJ in Kuhl v Zurich Financial Services Australia Ltd.[129]
The rule in Jones v Dunkel is that the unexplained failure by a party to call a witness may in appropriate circumstances support an inference that the uncalled evidence would not have assisted the party's case. That is particularly so where it is the party which is the uncalled witness. The failure to call a witness may also permit the court to draw, with greater confidence, any inference unfavourable to the party that failed to call the witness, if that uncalled witness appears to be in a position to cast light on whether the inference should be drawn [63].
545 Angela would have knowledge that would elucidate her and Michael's knowledge at the time of executing the 1987 Sale Agreements of Peter's estate's entitlement to royalties and a share of any award in the concentrator royalty arbitration. Angela would have knowledge that would elucidate her understanding of the statements in the Keall Brinsden memorandum that the arbitration was a valuable asset of the estate and would probably elucidate Michael's knowledge of that matter. Angela would have knowledge that would elucidate her understanding of the statement in the draft affidavit, in support of Julian's retirement as an executor, that the estate was manifestly solvent and no reference to the solvency of the estate in the final affidavit would probably elucidate Michael's knowledge of that matter.
546 The failure of Angela to give evidence enables me more readily to draw the inference available from the other evidence that, at the time of executing the 1987 Sale Agreements, Angela and Michael knew Peter's estate was entitled to royalties and a share of any award in the concentrator royalty arbitration. I draw that inference.
547 Alternatively, the circumstances give rise to inferences of equal degrees of probability that Michael and Angela did or did not know before 23 March 1987 that Peter (and Peter's estate) had an entitlement to royalties or deliberately refrained from acquiring such knowledge. In that circumstance as well, the defendants have failed to discharge the onus on them of establishing that Michael and Angela disclosed to Julian all of the information of which they were aware in relation to the assets and value of Peter's estate.
548 I find that the defendants have not discharged the onus of proof on them to establish that Michael and Angela disclosed to Julian all information in their possession material to Peter's entitlement to royalties and a share of any award in the concentrator royalty arbitration.
Fieldhouse and Salt's knowledge of Peter's entitlement to royalties and concentrator royalty arbitration award imputed to Michael and Angela
549 Julian submits that Fieldhouse and Salt were Michael and Angela's agents with authority to negotiate on their behalf with Julian to acquire his WPPL shares, to acquire his interest in Peter's estate, to obtain probate of Peter's will and for Julian to relinquish his executorship of the will. The defendants deny that Fieldhouse and Salt were relevantly agents for Michael and Angela, or that any misrepresentations they made to Julian were within the scope of their authority, or that their relevant knowledge is to be imputed to Michael and Angela.
550 An agent is a person, who with the consent of their principal, acts on behalf of their principal. Agency extends beyond an authority in an agent to create legal relations between the principal and third parties. It is sufficient if there is consent by the principal to the exercise by the agent of some authority and consent by the agent to their exercising such authority on behalf of the principal.[130] The classic definition of an agent is a person authorised to create contractual relations with third parties on behalf of their principal. However, this specific authority is less relevant in actions for breach of fiduciary duty or fraudulent misrepresentation. In such cases, determining whether the person performing the act or omission was an agent is not a question of whether the agent had any capacity to create or affect the legal relations on behalf of a principal by or in itself, but whether he had some form of authority or consent to act on the principal's behalf.
551 A principal is liable for a misrepresentation or other wrongful act by their agent if the agent made the misrepresentation while acting within the scope of actual or ostensible authority. The scope of an agent's authority is a question of fact to be determined by the terms of the agency and the circumstances of the case.[131] Generally, in relation to actions for breach of fiduciary duty and deceit, a principal is liable for an agent's misrepresentation or other wrongful act if the misrepresentation or act falls within the general class of statements or acts that the principal apparently authorised the agent to make.
552 The law presumes that the knowledge of an agent is imputed to the principal. A principal has imputed knowledge of what their agent discovers in the course of their agency. There are exceptions to the operation of the presumption, for example where the agent is under no legal duty to disclose the information. However, no such exception applies in this case. Knowledge acquired by an agent while acting within the scope of his or her authority will be imputed to the principal.
553 The general rule is that an agent's knowledge will not be attributed to the principal where it was acquired before the agency began, or probably even during its currency but outside the scope of the engagement.
554 However, there are exceptions to the general rule. In Jessett Properties Ltd v UDC Finance Ltd,[132] Hardie Boys J referred to two exceptions: one where the principal 'purchases the previously obtained knowledge of the agent' in relation to the particular subject‑matter; the other where the agent is 'an agent to know'. The latter expression comes from the judgment of Lord Halsbury LC in Blackburn, Low & Co v Thomas Vigors[133] where his Lordship pointed out that the somewhat vague use of the word 'agent' leads to confusion, and added:
Some agents so far represent the principal that in all respects their acts and intentions and their knowledge may truly be said to be the acts, intentions, and knowledge of the principal. Other agents may have so limited and narrow an authority both in fact and in the common understanding of their form of employment that it would be quite inaccurate to say that such an agent's knowledge or intentions are the knowledge or intentions of his principal; and whether his acts are the acts of his principal depends upon the specific authority he has received (537 ‑ 538).
555 All turns on the nature of the agent's engagement. In Jessett Properties Ltd v UDC Finance Ltd, Hardie Boys J said:
A significant feature of the present case is that Wallis was appointed to negotiate with the bank and with Mr Gate on behalf of the company to be formed by Miss Featherston and Mr Coronno because of his knowledge of the property and the business. There is therefore a strong case for concluding that he was 'an agent to know'; and indeed that his principals had 'purchased' (a word which we think is to be understood broadly) the knowledge which he had. His knowledge of UDC's interests therefore becomes that of his principals (143 ‑ 144).
556 A significant feature of the present case is that Michael and Angela instructed Fieldhouse and Salt to communicate and deal with Julian in relation to Peter's estate and his WPPL shares because of their knowledge of and familiarity with WPPL and its business and Peter's assets and liabilities.
Fieldhouse and Salt were agents of Michael and Angela
557 On 28 September 1985, 15 days after Peter's death, Fieldhouse had a telephone conversation with Michael and Angela. Michael had sent Fieldhouse a telex listing matters which he and Angela wanted to discuss. During the telephone conversation Fieldhouse advised Michael and Angela in relation to those matters which included:
1. Directors ‑ what information was Michael and Angela required to provide to Julian?
2. The option ‑ can Michael and Angela exercise the option, and should they exercise the option?
3. Appointment of directors ‑ how are directors appointed, and can Michael and Angela terminate Julian's directorship?
4. Conflict of interests - Fieldhouse's loyalty to Michael and Angela and dealing with Julian.
558 In discussing conflict of interests, Fieldhouse, Michael and Angela agreed or confirmed that Fieldhouse represented and acted for and on behalf of Michael and Angela. Fieldhouse said:
But let me explain my position there, Mike. As I understand it, I acted for your father and I act for his estate and for you and Angela following your father's death...
There will be no conflict of interest. My loyalties lie through your father to his estate through to you and Angela, and I hope they will continue for my lifetime. And so far as Julian is concerned, I would point that out.
559 Fieldhouse informed Michael and Angela that he would be acting for them and would not be acting for Julian 'in anything'. He said he was happy to talk to Julian about the terms of Peter's will, but if Julian wanted any interpretation of the will or any advice in the matter, Julian would need to obtain his own independent legal advice. Fieldhouse informed Michael and Angela that he would tell Julian that this was his position if Michael and Angela were happy for him to do so and Michael, in Angela's presence, said yes. Fieldhouse then agreed to talk to Julian on behalf of Michael and Angela in relation to their acquisition of his WPPL shares, provided Julian understood Fieldhouse was acting for Michael and Angela. Fieldhouse was instructed by Michael to tell Julian when discussing the matter that he had been asked by Michael and Angela to discuss the matter on their behalf. Fieldhouse informed Michael and Angela that he would use 'the deal [Julian] made with [Peter]' as a 'weapon' in talking to him, with a view to getting Julian to agree to sell his shares. Michael instructed Fieldhouse to use his imagination and own judgment in discussing the matter to see if he could obtain Julian's cooperation to sell his shares.
560 The following day, 29 September 1985, Fieldhouse met with Julian in Sydney. Fieldhouse informed Julian that he acted for Michael and Angela. He said that he acted 'for the estate for Angela and Michael'. Julian raised the issue whether there were grounds for the option ceasing upon Peter's death. Fieldhouse told Julian that he did not act for him and that he would need to obtain his own advice on the matter. Fieldhouse informed Julian that, in his opinion, Julian was only legally entitled to one‑ninth of the WPPL shares and that was the advice he had given to Michael and Angela. Fieldhouse informed Julian that he had instructions from Michael and Angela to talk to him about them buying him out. Julian informed Fieldhouse he would get some figures from Salt to see about the assets and worth of WPPL and get back to Fieldhouse with a price, and agreed with Fieldhouse that it would be better that he get back to Fieldhouse with the price rather than deal with Michael and Angela.
561 That same day, Fieldhouse had a further telephone conference with Michael and Angela in which he advised them about his meeting with Julian. During the conversation, they discussed the possible worth of the WPPL shares and possible prices. Fieldhouse told Michael and Angela that Julian would be getting back to him with a price and that he (Julian) would accept, or that he would offer to buy out Michael and Angela at the same price. Angela said to Fieldhouse: 'well I can tell you, he's getting out not us'.
562 The effect of the evidence is that Michael and Angela instructed or authorised Fieldhouse to undertake tasks relating to the acquisition of Julian's WPPL shares, Julian's interest in Peter's estate and obtaining probate of Peter's will and Fieldhouse undertook those tasks.
563 On 4 October 1985, Michael wrote a memorandum to Salt. Michael informed Salt of Julian's approach to the sale of his WPPL shares. He asked Salt 'to give it some thought'.
564 In his diary, Michael noted that on 6 October 1985 he and Angela met with Fieldhouse and Salt. Michael noted he intended to exercise the option to buy Julian's shares. Michael noted that Fieldhouse would process probate through Keall Brinsden. Michael noted that Fieldhouse would be used as 'negotiating officer', that Fieldhouse would work on a counteroffer and that Fieldhouse would talk to Julian.
565 I infer that Fieldhouse, on behalf of Michael and Angela, gave instructions to Vinnicombe of Keall Brinsden to obtain probate of Peter's estate on 4 November 1985. On 2 December 1985 Fieldhouse telephoned Keall Brinsden and discussed the option over Julian's WPPL shares. There were further discussions about the option. On 9 December 1985, Michael wrote to Angela and noted advice he had received from Fieldhouse that both he and Vinnicombe believed the option was valid and that he had instructed them to obtain another opinion.
566 On 13 December 1985, Michael wrote to Fieldhouse about, amongst other things, Peter's estate and the option. Michael noted that nothing could be done until probate was granted. He asked Fieldhouse to contact Salt and give him a hurry up.
567 On 17 December 1985, Michael wrote a memorandum to Salt which he copied to Fieldhouse and Angela. Michael expressed the urgency of obtaining probate and instructed Salt to give top priority and proceed quickly with all matters regarding Peter's estate with the intention of applying for probate before 24 January 1986.
568 Salt provided information and instructions to Keall Brinsden on behalf of Michael and Angela to enable Keall Brinsden to apply for probate of Peter's will.
569 On 19 December 1985, Salt wrote a memo to Fieldhouse enclosing a draft statement of assets and liabilities of Peter's estate and asking Fieldhouse to confirm that it was in order, so to provide the schedules to Michael, Angela and Julian. Salt was the person primarily responsible for preparing the statement of assets and liabilities in support of the application. He obtained the information from David (Tom) McKenna, who attended to the WPPL tax information.
570 Fieldhouse obtained, on behalf of Michael and Angela, an opinion from Bennett QC whether the option was capable of being exercised by Peter's executors. Bennett QC opined that it was.
571 On 19 March 1986, Michael sent a telex to Fieldhouse in relation to a strategy for buying out Julian's WPPL shares. Michael said there should be no delay in processing probate of Peter's will.
572 On 8 April 1986, Michael dictated a note of a discussion he had had with Fieldhouse concerning Julian. Michael noted that the proposed course of action required as a first step completing and filing the probate papers. He noted there had been several alterations to the papers by Julian and they had been delayed. Michael noted that the plan would be to give notice of the exercise of the option to Julian as soon as possible after probate had been granted.
573 On 8 April 1986, Prevost of Keall Brinsden had a telephone discussion with Fieldhouse concerning probate. Fieldhouse had a further discussion with Prevost on 6 June 1986 in which they discussed obtaining a further opinion in relation to the option.
574 On 12 June 1986, Vinnicombe wrote a memo to Roger Davis, another lawyer at Keall Brinsden, in which Vinnicombe confirmed that Keall Brinsden acted as agent for Fieldhouse in the matter. Keall Brinsden obtained an opinion from Daryl Williams QC.
575 Fieldhouse assisted in effecting Julian's retirement as an executor and trustee of Peter's will.
576 On 16 October 1986, Salt wrote a memorandum to Fieldhouse requesting, amongst other things, that he prepare a form for Julian to resign as executor/trustee of Peter's estate. Between 15 January 1987 and 29 January 1987, Salt exchanged correspondence with Richard Reynolds of Robinson Cox, who was then acting for Julian, concerning a draft deed of retirement of trustee. The draft deed had been prepared by Fieldhouse.
577 On 21 January 1987, Reynolds had a telephone conversation with Philip McCann of Keall Brinsden. Reynolds noted that Julian had not signed the Deed of Retirement of Trustee and that Julian would sign a deed subject to the necessary leave of the court, and that McCann was 'in touch with Fieldhouse'.
578 On 20 March 1987, Keall Brinsden wrote to Salt concerning the retirement of Julian as trustee and executor and enclosing the Keall Brinsden memorandum. It is likely that the memorandum was provided to Fieldhouse on or about 23 March 1987. The documents were sent to Fieldhouse by letter of 1 April 1987.
579 From 27 May 1986, Salt played the primary role in negotiating with Julian for Michael and Angela to acquire his WPPL shares. At the WPPL board meeting of 27 May 1986, Michael and Angela authorised Salt to take over negotiations with Julian. In his evidence, Salt agreed that he took over negotiations with Julian for the sale of his WPPL shares on behalf of Michael and Angela. Salt agreed that he negotiated with Julian and took his instructions from Michael and Angela. In the telephone conferences between Salt, Fieldhouse and Michael on 4 and 5 June 1986, the approach to be taken by Salt during the negotiations was discussed. The transcript of the discussions shows that Michael was liaising directly with Angela and obtaining her instructions on those matters.
580 In his evidence Salt said that he was 'there to provide Julian with any information ‑ any information that he required - requested, I would give to him'. Salt's role, amongst other things, was to provide Julian with information on behalf of Michael and Angela.
581 I find that by no later than 28 September 1985 in the case of Fieldhouse, and 4 October 1985 in the case of Salt, with the consent of Michael and Angela, Fieldhouse and Salt acted for and on behalf of Michael and Angela to, amongst other things, obtain probate of Peter's will and to negotiate with Julian to acquire his WPPL shares and his interest in Peter's estate and for Julian to relinquish his office as executor of Peter's will. The conduct of Fieldhouse and Salt in relation to obtaining probate of Peter's will, including drafting, approving and providing the statement of assets and liabilities of Peter's estate to Julian, was conduct as agent for on behalf of Angela and Michael and within the scope of their authority.
582 In all the circumstances, the knowledge of Fieldhouse and Salt concerning the assets and liabilities of Peter's estate, including Peter's entitlement to royalties and the concentrator royalty arbitration, is knowledge attributed to Michael and Angela as their principal.
583 I make those findings for the reasons I have stated. Angela's unexplained failure to give evidence gives me greater confidence in making those findings.
584 Fieldhouse was an experienced commercial lawyer. He knew the terms of cl 9 of the 1962 Royalty Agreement. That is apparent from a letter he wrote to Hamersley Iron on 5 August 1981 initiating the concentrator royalty arbitration. Fieldhouse knew that Peter and Lang, as well as HPPL and WPPL, were parties to the 1962 Royalty Agreement and that they had some right, title and interest under that agreement.
585 Fieldhouse was aware that Peter, and on his death his executors, was a party to the concentrator royalty arbitration and the associated litigation. The points of claim in the arbitration state that Michael, Angela and Julian are executors of the estate of 'one of the Vendors', Peter. The points of claim further state that cl 9 of the Agreement provides for royalty payments to be made by Hamersley Iron 'to the Vendors'. The points of claim define the Vendors to be Lang, Peter, HPPL and WPPL.
586 It is likely that Fieldhouse would have seen the Midland Bank documents before 30 January 1987 and those documents recite that under the 1962 Royalty Agreement Hamersley Iron covenanted to pay royalties to HPPL, WPPL, Lang and Peter.
587 I am satisfied that, on or about 23 March 1987, Fieldhouse received from Salt a copy of Keall Brinsden's letter of 20 March 1987 and the attached memorandum stating, amongst other things, that the concentrator royalty arbitration is a valuable asset of the estate and would be delayed whilst Julian continued as an executor. There is no evidence of any written or oral statement by Fieldhouse contradicting, questioning or otherwise responding to the statements in the memorandum. Fieldhouse's lack of response to the Keall Brinsden memorandum is evidence that, on or about 23 March 1987, Fieldhouse knew or deliberately refrained from knowing that Peter's estate had an entitlement to royalties. It is also a form of retrospectant evidence that prior to that time Fieldhouse had that knowledge or state of mind.
588 It is open to infer that when Michael and Angela executed the 1987 Sale Agreements, a period of less than two months before Fieldhouse received the Keall Brinsden memorandum, Fieldhouse knew that Peter's estate was entitled to royalties and a share of any award in the Concentrator Royalty Arbitration.
589 Angela would probably have knowledge to elucidate the knowledge or understanding or advice of Fieldhouse, the lawyer and agent of Michael and Angela in relation to their acquisition of Julian's interest in Peter's estate and his retirement as an executor to her and Michael, in relation to that matter.
590 The failure of Angela to give evidence enables me more readily to draw the inference available from the other evidence that at the time of executing the 1987 Sale Agreements, Fieldhouse knew Peter's estate was entitled to royalties and a share of any award in the concentrator royalty arbitration. I draw that inference.
591 Alternatively, the circumstances give rise to inferences of equal degrees of probability that Fieldhouse did or did not know before 23 March 1987 that Peter (and Peter's estate) had an entitlement to royalties or deliberately refrained from acquiring such knowledge. In that circumstance as well, the defendants have failed to discharge the onus on them of establishing that Michael and Angela disclosed to Julian all of the information of which they were aware in relation to the assets and value of Peter's estate.
I never believed that Mr Wright had any entitlement to royalty streams. I thought they all went through the partnership and then down to ... HPPL and WPPL.
593 I find that Salt gave that evidence sincerely and to the best of his recollection. However, for the reasons I have stated earlier, I place no weight on that evidence. Salt had little, if any, recollection of the events surrounding Michael and Angela acquiring Julian's WPPL shares and Julian's interest in Peter's estate.
594 Although he had no recollection of receiving or reading the memorandum, Salt accepted he would have done so. I find that from 23 March 1987, Salt knew that the solicitors acting for the executors of Peter's estate and WPPL in relation to the concentrator royalty arbitration and associated litigation considered that Peter's estate had an entitlement to royalties and to participate in any award in the concentrator royalty arbitration. The fact that the solicitors who had acted for the executors in obtaining probate of Peter's will and were acting for WPPL and the executors in the concentration royalty arbitration considered that Peter's estate had an entitlement to royalties and to participate in any award in the concentrator royalty arbitration was material to Julian's decision to transfer his interest in Peter's estate to Michael and Angela. Salt did not disclose that matter to Julian.
595 The defendants have not discharged the onus on them of establishing that Michael and Angela made full disclosure to Julian of the assets and value of Peter's estate and that the transaction was fair and honest.
596 Michael and Angela acquired Julian's interest in Peter's estate at an undervalue. Indeed, they acquired a very valuable interest for minimal, if any, consideration.
597 Julian did not intend to confer a bounty on Michael and Angela. In Lord Selsey v Rhoades, Sir John Leach VC said:[134]
... where the transaction proceeds, not upon motives of bounty, but upon contract there the steward is bound to make out that he gives full consideration which it would have been his duty as steward to obtain from a stranger; and, where the transaction is mixed with motives of bounty, there the steward is bound to make out that the employer was fully informed of every circumstance respecting the property... Which could tend to demonstrate the value of the property and the precise nature and extent of the bounty of the employer (263 - 264).
598 In the circumstances of this case, to establish that Julian gave his fully informed consent to the transaction, the defendants must establish that Michael and Angela gave the fullest of disclosure relevant to Julian's decision whether or not to consent to the transaction.
599 Angela could have, but failed to, give evidence of any steps taken by herself and Michael, or by Fieldhouse or Salt on their behalf, to discharge those obligations. There was little, if anything, done by or on behalf of Michael and Angela to inform Julian of all matters of which they were aware material to his decision to sell his interest in Peter's estate to them.
600 Michael caused Salt and Fieldhouse to provide instructions to Keall Brinsden in relation to the assets and liabilities of Peter's estate. He did so for the purpose of obtaining probate of Peter's will, not for the purpose of informing Julian of the assets and value of Peter's estate. Keall Brinsden used the information given to them to provide a draft statement of assets and liabilities of the estate which was provided to Julian. Again, that was provided to Julian for the purpose of obtaining probate of Peter's will not to inform Julian of the assets and value of Peter's estate. I have found that the statement omitted the interest of Peter in royalties and in any award from the concentrator royalty arbitration, and that the defendants have failed to establish that Michael and Angela gave Julian all information of which they were aware that was material to those matters.
601 At the time of his death, Peter held a boat pen at Fremantle Yacht Club. Michael knew about the pen but neither he nor Angela made any enquiries about it and gave no information to Julian about it.
602 The statement of assets and liabilities prepared by Keall Brinsden on the instructions of Salt, who in turn had obtained information from Tom McKenna, did not provide detailed information about the value of the estate assets. Shares were shown at nominal value. Insurance policies were shown at face value. Cattle were shown at book value. The statement made no reference to Peter's entitlement to royalties or a share of an arbitration award.
603 The statement made no reference to Peter's overseas interests. Fieldhouse knew that Peter had interests in overseas companies or property. Michael knew that Peter had such interests.
604 Julian's solicitor, Warren, had repeatedly written to Fieldhouse asking for information about the ownership control and activities of overseas companies controlled by nominees of the Wright family. Fieldhouse did not reply. I accept Julian's evidence that at a meeting with Michael, Angela and Salt in the first half of 1986 he asked about overseas activities, the Wright Family Memorial Foundation and sending money overseas. Michael said that Julian would have to ask Fieldhouse. Julian said he would do that. Michael said not to do that. Julian asked why not. Michael said, 'the less you know the better.'
605 I find that Michael and Angela have not discharged the onus on them of establishing that Julian gave his fully informed consent to the sale of his interest in Peter's estate to Michael and Angela.
Michael and Angela failed to make full disclosure after 23 March 1987
606 Julian submits that, if Michael and Angela did not know about Peter's estate's entitlement to royalties and to participate in the expected concentrator royalty arbitration award when Julian executed the 1987 Sale Agreement on 17 January 1987, they did know about those entitlements from 23 March 1987. Julian says that at that time the transaction by which he transferred his interest in Peter's estate to Michael and Angela had not been completed and, if Michael and Angela had disclosed those matters to him, as was their fiduciary duty to do so, Julian would not have completed, or would have rescinded, the sale of his interest in Peter's estate to Michael and Angela.
607 It is unnecessary to determine those contentions because I have found that, at and before the signing of the 1987 Sale Agreements, Michael and Angela, and their agents Fieldhouse and Salt, knew of Peter's estate's entitlement to royalties and to participate in the expected concentrator royalty arbitration. Nevertheless, I will set out my findings in relation to those contentions.
608 After 23 March 1987, Michael and Angela knew that Keall Brinsden, the solicitors who had acted for the executors in obtaining probate of Peter's will and were acting for the executors and WPPL in relation to the concentrator royalty arbitration and associated litigation, considered that Peter's estate had an entitlement to royalties and to participate in any award in the concentrator royalty arbitration. They knew that Keall Brinsden considered that the arbitration was a significant asset and a valuable asset of the estate. Those were matters material to Julian's decision to transfer his interest in Peter's estate to them. They failed to disclose it.
609 Julian submits that the execution of the 1987 Sale Agreements did not have the effect of vesting any interest in Peter's estate in Michael and Angela. In his closing submissions, senior counsel for Julian, Mr Zappia QC, submits that by cl 1(b) of the 1987 Sale Agreements Julian agreed only 'to procure the sale of his interest in Peter's estate' and the manner in which Julian procured the sale of his interest in Peter's estate was by entering into the Deed of Retirement of Trustee on 23 February 1987. Julian submits that by cl 3 of that deed, the estate and interest of Julian in the real and personal property of Peter which was subject to the trusts under cl 5 of Peter's will, which devised Peter's residuary estate to his trustees upon trust to realise and after payment of debts and expenses to hold the residue for the use and benefit of Michael, Angela and Julian in equal shares, only vested in Michael and Angela upon Julian's retirement as an executor and trustee. That event, Julian submits, by cl 1 of the deed was deemed to occur only when leave was given by the Supreme Court for Julian to retire. Accordingly, Julian submits, Julian retained his interest as a beneficiary of the residue of Peter's estate (including his right to the due administration of Peter's estate) until his retirement and the fiduciary relations between the parties with respect to that interest continued until that point.
610 Julian's interest in the estate was a presently existing equitable chose in action to enforce the proper administration of the estate. Such an interest is transmissible.[135] The interest is analogous to the interest of a partner in the partnership assets,[136] which may be sold and purchased.[137]
611 On the proper construction of the 1987 Sale Agreements Julian sold his interest in the estate to Michael and Angela. The agreements did not provide for any monetary consideration but did provide for Michael and Angela to indemnify Julian against all claims against him in respect of the estate including an amount of $170,200 allegedly owing by Julian to Peter. The 1987 Sale Agreements operated with respect to the interest of Julian in the estate to effect a transfer of Julian's chose in action (his interest in the estate) to Michael and Angela. The first part of cl 1(b) says that the Vendor (Julian) 'agrees to procure' the sale rather than sells but the second part says that the Purchaser (Michael and Angela) 'hereby agrees to purchase'. Clause 2 provides that the Purchaser 'hereby agrees to indemnify the Vendors'. Clause 3 provides that from the date of the agreement the Vendors shall not be entitled to receive any property, monies or other benefit of whatever nature from Peter's estate to which he might otherwise be entitled.
612 The purpose of the Deed of Retirement of Trustee is to provide for Julian to retire as an executor of Peter's estate. The only reference to the interest of Michael, Angela and Julian in the estate property is in cl 3. By cl 3 the parties declared that their estate and interest in Peter's property remaining subject to the trusts of the will shall on Julian's retirement vest in Michael and Angela as joint tenants for the purposes of that property. It is the full ownership of the executors of the estate property which is to be vested on Julian's retirement not Julian's interest in the estate consisting of his equitable chose in action.
613 I find that the sale and purchase of Julian's interest in Peter's estate was effected by the execution of the 1987 Sale Agreements on 17 January 1987. From that time Julian's interest in the estate was transferred to Michael and Angela. From that time Julian had no interest in Peter's estate, he had no right or interest as a residuary beneficiary.
614 Julian says that in any event the parties remained in a fiduciary relationship with respect to Peter's estate after the execution of the 1987 Sale Agreements because the agreements were subject to Michael and Angela obtaining finance before the date for completion failing which they would automatically terminate. Assuming that is correct, it has no material effect. The time for completion was extended and the agreements were completed on 23 February 1987. From that time Julian ceased to have any interest in Peter's estate and Michael and Angela ceased to be in a fiduciary relationship with Julian in relation to Peter's estate.
615 Julian has not established that after 23 March 1987 Michael and Angela, as executors of Peter's estate, breached fiduciary obligations they owed to Julian as a beneficiary.
Michael and Angela failed to make full disclosure about Julian's WPPL shares
616 Julian further submits that the fiduciary duty Michael and Angela owed to Julian as executors of Peter's estate obliged them to make full disclosure of and in relation to the value of Julian's WPPL shares because their purchase of Julian's shares was part of the same transaction by which they acquired Julian's interest in Peter's estate.
617 It is unnecessary to determine those contentions. I have found that Michael and Angela as executors of Peter's estate breached the fiduciary obligations they owed to Julian by failing to inform Julian of Peter's estate's entitlement to royalties and to participate in the expected concentrator royalty arbitration and their failure to pay fair value for Julian's interest in Peter's estate. Nevertheless, I will set out my findings in relation to those contentions.
618 I do not accept Julian's argument. Michael and Angela's fiduciary obligation did not extend to making full disclosure in connection with property that was not property of the estate.
619 The fair-dealing rule does not apply where the property involved in the transaction was not the subject of the fiduciary relationship, because there is no non-fiduciary duty in conflict with the fiduciary's interest in the transaction.[138]
620 A fiduciary's duty not to purchase property from his principal applies only to purchases of property actually dealt with in the confidential position. In support of that proposition Professor Finn cites Lord Blackburn in MacPherson v Watt,[139] a solicitor‑client case:
If he purchases from his client in a matter totally unconnected with what he was employed in before, no doubt an attorney may purchase from one who has been his client, just as any stranger may be honestly telling the truth and without any fraudulent concealment, but being in no respect bound to do more than any other purchaser would do. But when he has purchasing from a person property with respect to which the confidential relation has existed it becomes wrong of him to purchase without doing a great deal more than would be expected of a stranger (270 ‑ 271).
621 Professor Finn says that this limitation is obvious, if the fiduciary has not dealt with the property he intends to purchase, it cannot be said that he has undertaken any duty in relation to that property, or that his position has afforded him the opportunity for requiring a special knowledge of it. A trustee, for example, can purchase from his principal or beneficiaries any property untouched by the trust.[140]
622 Similarly, the authors of the 34th edition of Snell's Equity say that the fair‑dealing rule does not apply where the property involved in the transaction was not the subject of the fiduciary relationship and in support of that proposition cites the same authorities referred to by Professor Finn.[141]
There is no authority establishing, nor was it ever laid down, that an attorney cannot purchase from his client what was not in any degree the object of his concern as attorney; the client making the proposal, himself proposing the price, no confidence asked or received in that article, and both ignorant of the value. Under such circumstances he is not the attorney in hack re; and therefore, not being under any duty as attorney to advise against the act, he may be the purchaser (336).
624 Professor Conaglen says that similar statements abound in the case law.[144]
625 Again, Professor Cope, in considering the equitable obligation of a purchaser, who is a fiduciary, to make full disclosure of material information, says that the duty to make full disclosure arises when the subject matter of the contract forms the subject matter of the confidential relationship but the duty is not imposed upon a fiduciary who purchases property 'which is not in any degree the object of the confidential relationship'.[145] Professor Cope sites further authorities in support of that proposition.[146]
626 The WPPL shares which Michael and Angela purchased from Julian were not part of Peter's estate, and were not the subject of the fiduciary relationship arising from Michael and Angela's position as executors of Peter's estate. Michael and Angela did not deal with Julian's WPPL shares as executors of Peter's estate. Michael and Angela did not acquire any special knowledge of or about Julian's WPPL shares in their capacity of executors.
627 Julian agreed to sell his interest in Peter's estate to Michael and Angela, or to procure such a sale, in the same instruments by which he agreed to sell his WPPL shares to Michael and Angela ‑ the 1987 Sale Agreements. However, in the relevant sense, the purchase and sale of Julian's WPPL shares was not part of the same transaction by which Julian sold, or agreed to procure the sale of, his interest in Peter's estate to Michael and Angela. The price for the purchase and sale of Julian's WPPL shares was negotiated and agreed separately from the sale and purchase of Julian's interest in Peter's estate.
628 The sale and purchase of Julian's WPPL shares did not form part of the consideration for the sale and purchase of Julian's interest in Peter's estate. Julian's case is to the contrary. Julian's case is that the parties negotiated and reached agreement on the basis that Julian's interest in Peter's estate had no value. That is reflected in cl 1(b) of the 1987 Sale Agreements by which Julian agreed to procure the sale of his interest in Peter's estate to Michael and Angela 'without further cost' to Michael and Angela. Julian's case that Michael and Angela breached the fiduciary duty they owed to Julian as executors of Peter's estate is premised on Michael and Angela having paid no consideration for acquiring Julian's interest in Peter's estate.
629 Michael and Angela did not breach their fiduciary duty as executors in acquiring Julian's interest in Peter's estate by failing to make full disclosure about the value of Julian's WPPL shares.
Michael and Angela breached their duty as executors
630 In summary, in acquiring Julian's interest in Peter's estate, Michael and Angela placed themselves in a position where their interest conflicted with the fiduciary duty they owed as executors of Peter's estate to Julian as a beneficiary of the estate, or there was a real and sensible possibility of such conflict. Michael and Angela acquired Julian's interest in the estate at an undervalue. They acquired an interest worth in the order of $7 million or more for minimal if any consideration.
631 The defendants have not established that they made full disclosure of matters material to Julian's decision to sell his interest in Peter's estate to Michael and Angela. The defendants have not established that Julian gave his fully informed consent to the sale of his interest in Peter's estate to Michael and Angela. Accordingly, in acquiring Julian's interest in Peter's estate, Michael and Angela breached the fiduciary duty they owed as executors of the estate to Julian as a beneficiary of the estate.
H. Claim of common law fraud by Michael and Angela in relation to Peter's estate
632 Julian asserts common law fraud, that is deceit, and equitable fraud causes of action in relation to both Michael and Angela's acquisition of Julian's interest in Peter's estate, and Michael and Angela's acquisition of Julian's WPPL shares.
633 I will first address some relevant principles of law in relation to common law and equitable fraud. I will then address Julian's claim of common law fraud (deceit) by Michael and Angela in acquiring Julian's interest in Peter's estate. I will next consider Julian's claim of equitable fraud by Michael and Angela in acquiring Julian's interest in Peter's estate.
634 I will consider Julian's claims of common law fraud (deceit) and equitable fraud by Michael and Angela in acquiring Julian's WPPL shares after considering Julian's claim that in acquiring Julian's WPPL shares Michael and Angela breached the fiduciary duty they owed as directors of WPPL to Julian as a director and shareholder.
635 In Magill v Magill,[147] Gleeson CJ said 'the concept of "fraud" is wider in some legal contexts than in others'. The plaintiff distinguishes two senses in which 'fraud' is used in civil litigation which correspond to different meanings at law and in equity. The difference turns on the state of mind of the person said to have committed fraud. At common law, 'fraud is proved when it is shewn that a false representation has been made (1) knowingly, or (2) without belief in its truth, or (3) recklessly, careless whether it be true or false'.[148]
636 The contrast with equity was explained by Viscount Haldane LC in Nocton v Lord Ashburton:[149] '[i]n Chancery the term "fraud" thus came to be used to describe what fell short of deceit, but imported breach of a duty to which equity had attached its sanction'. His Lordship emphasised that a person who misconceived the extent of the obligation which a court of equity imposed upon him or her, 'however innocently because of his ignorance', was taken to have violated an obligation which he was taken by the court to have known, and with the result that the conduct was labelled fraudulent. He said of fraud in this sense:[150]
What it really means in this connection is, not moral fraud in the ordinary sense, but breach of the sort of obligation which is enforced by a Court that from the beginning regarded itself as a Court of conscience (954).
637 In Magill v Magill[151] Gummow, Kirby and Crennan JJ set out the five elements required to establish the tort of common law fraud or deceit:
(1) the defendant made a false representation;
(2) the false representation was made with the knowledge that it was false, or the defendant was reckless or careless as to the falsity of the representation;
(3) the false representation was made with the intention that the plaintiff would rely on it;
(4) the plaintiff acted in reliance on the false representation; and
(5) the plaintiff suffered damage which was caused by reliance on the false representation.
638 A court should not lightly make a finding that, on the balance of probabilities, a party to civil litigation has been guilty of fraudulent conduct.[152]
639 Generally, a failure to disclose does not amount to a misrepresentation. There is no obligation on a contracting party to ensure that the other party knows all aspects of the transaction they are about to enter.
640 A failure to disclose in the sense of silence alone does not amount to common law fraud but a vendor's silence about some aspects of the transaction, while making statements about other aspects of the transaction, may constitute misrepresentation. In Brunninghausen v Glavanics[153] Priestley JA said:
A case of 'mere' silence is very hard to imagine. What happens in fact in the decision of litigation in which the proposition is invoked is that the court considers whether, in all the circumstances of the case, the conduct of the impugned party should be considered as having misled the other party [1].
641 However, certain relationships may impose an obligation to make disclosure. For example, the plaintiff says that Michael and Angela were in a fiduciary relationship with Julian which obliged them to make full disclosure of matters material to Julian's decision to enter the transaction.
642 The plaintiff says Michael and Angela acted fraudulently in failing to disclose to Julian at any time prior to the execution of the 1987 Sale Agreements; alternatively, the completion of the 1987 Sale Agreements on 23 February 1987, or alternatively, his resignation as an executor and trustee under the will on 24 April 1987, that Peter had a personal right to the payment of royalties under the 1962, 1968 and 1970 Royalty Agreements and Peter's estate was a claimant in the Concentrator Royalty Arbitration and was entitled to payment of past royalties found to be payable to the Vendors under the 1962 Royalty Agreement.
643 Julian says that, but for the fraudulent conduct of Michael and Angela, Julian would not have entered the 1987 Sale Agreements, would not have completed performance of the 1987 Sale Agreements and would not have retired as an executor and trustee of Peter's estate on 24 April 1987 and accordingly Julian is entitled to rescind the 1987 Sale Agreements.
644 In his written closing submissions,[154] Julian submits that Michael and Angela directly, and/or by their agents Fieldhouse and Salt, misrepresented to Julian that:
(a) the Statement of Assets and Liabilities was accurate and complete and disclosed all Peter's assets; and
(b) Peter's Estate was insolvent.
645 However, that is not the case pleaded by Julian. His pleaded case at further re‑amended statement of claim [17C] and [17D] is that Fieldhouse and Salt, on behalf of Michael and Angela, made the estate representations to Julian. The plaintiff is bound by his pleading. Accordingly, his case is confined to the allegation that the estate representations were made to Julian by Fieldhouse and Salt on behalf of Michael and Angela.
646 Michael and Angela instructed Fieldhouse and Salt to act on their behalf in relation to and for the purpose of obtaining probate of Peter's will. Instructing Keall Brinsden to obtain probate of Peter's will and providing the necessary information and instructions to do so fell within the scope of their authority. Drafting, approving and providing a statement of assets and liabilities of Peter's estate to Keall Brinsden fell within their authority. Providing a statement of assets and liabilities to Julian for the purpose of Julian swearing an affidavit in support of the application for probate fell within the scope of their authority.
647 Fieldhouse approved a draft of the statement of assets and liabilities to be provided to Keall Brinsden for the purpose of the application for probate of Peter's will. Fieldhouse knew and intended that the statement of assets and liabilities would be provided to Julian; Fieldhouse knew that it was necessary for Julian to swear the affidavit in support of the application for probate of Peter's will and that the affidavit should verify the statement of assets and liabilities.
648 Salt was involved in the preparation of the Statement of Assets and Liabilities.
649 Vinnicombe of Keall Brinsden received instructions to obtain probate of Peter's estate on 4 November 1985. The plaintiff says it can be inferred that he received the instructions from Fieldhouse. I agree.
650 In his evidence, Salt had little or no recollection of his involvement in the preparation of the Statement of Assets and Liabilities. He agreed that he 'would have been involved' but said that, as he did not prepare Peter's tax returns, he believed that:
Any information that came would have been provided by David McKenna, known as Tom McKenna, that would certainly pass over my desk and then would be forwarded on to Mr Fieldhouse.
651 Salt had no recollection whether Keall Brinsden was involved in preparing the Statement of Assets and Liabilities, but having regard to documents shown to him, accepted that they were. Salt had no recollection of any assets that were not included in the Statement of Assets and Liabilities. He said that Tom McKenna would have been the person who provided the information, the information would have passed over his (Salt's) desk, he would have viewed it, and then it would have been sent on to Fieldhouse.
652 The documentary evidence shows that Salt was actually involved in obtaining probate of Peter's will on instructions from Michael and gave instructions to, and dealt with, Keall Brinsden to obtain probate. Indeed, by letter of 28 July 1986 to Salt, Keall Brinsden enclosed a certified copy of the grant of probate, asked if there was anything further 'you' require the firm to do in connection with the administration of the estate and enclosed a note of the firm's costs and disbursements in connection with the application for a grant of probate.
653 Salt attached schedules detailing assets and liabilities of Peter's estate to a memorandum of 19 December 1985 to Fieldhouse. In the memorandum Salt said that he had discussed the schedules with Vinnicombe and that 'we' may have to obtain valuations but for the time being put all shares et cetera in at par or nominal value. Salt asked if it was in order to pass the schedules to Michael, Angela and Julian. I infer that Fieldhouse gave approval.
654 On 2 January 1986 Salt sent a statement of assets and liabilities to Vinnicombe and asked Vinnicombe to let him know if Vinnicombe required any further information.
655 At this time Julian was receiving advice from Warren about Peter's estate. On 9 January Warren advised Julian that it would be better if Julian renounced as executor thus avoiding the problem of there being a conflict of interest.
656 On 22 January Salt sent the death certificate and original will to Keall Brinsden.
657 On 23 January Prevost (of Keall Brinsden), who had been instructed by Vinnicombe to prepare an application for probate, sent to Salt an affidavit to be sworn by each of the executors and a statement of assets and liabilities referred to in the affidavit to be signed by each of the executors. Salt presented the statement of assets and liabilities to Michael, Angela and Julian.
658 On 29 January Julian telephoned Keall Brinsden and left a message for Vinnicombe to the effect that there were errors in the statement of assets and liabilities to be discussed with Salt and Fieldhouse and he would get back to them. Julian telephoned Salt and informed him that he did not think a few items on the statement of assets and liabilities pertaining to insurance policies were correct. Salt invited Julian to contact Prevost and take it up with him.
659 On 20 February Julian met with Prevost and discussed the statement of assets and liabilities. Julian raised a number of queries. Prevost said he would liaise with Salt on the matter.
660 On 4 February Warren had advised Julian not to swear any affidavits or sign any statements of assets and liabilities about which he was unsure and added:
You will deal with Max Vinnicombe, the estate's solicitor, in the normal way. You will request Mr Vinnicombe to correspond with you directly and keep you appraised of all developments in relation to the estate.
You are not happy with certain aspects of the statement of assets and liabilities and you are speaking to Mr Vinnicombe direct in order to obtain amendments.
661 On 4 March Prevost sent to Salt an amended statement of assets and liabilities which he had prepared after discussion with Julian.
662 On 20 March Salt wrote to Prevost and informed him that the amendments to the statement of assets and liabilities 'have been agreed to by all concerned'. Salt asked Prevost to make two further amendments. First, to increase the amount due to MAPS (Australia) Pty Ltd. Secondly, to include as an asset a tax refund that had been received. Salt requested that the further amended statement of assets and liabilities be sent to him.
663 On 27 March Prevost sent Salt the further amended statement of assets and liabilities and asked that it be returned together with the affidavit and other documents for filing with the Supreme Court.
664 On 2 April Prevost had a telephone conversation with Julian in which Julian said he would send the statement of assets and liabilities back to Prevost for further amendment. Julian wanted it noted on the statement of assets and liabilities that the loan which he owed Peter should refer to the Loan Agreement dated 21 July 1983. On 8 April Prevost had a telephone discussion with Julian concerning the reference to the Loan Agreement and Prevost also had a telephone conversation with McKenna of WPPL. McKenna was acting in place of Salt who was away for six weeks.
665 On 8 April Prevost sent Fieldhouse a letter enclosing the final amended statement of assets and liabilities and the affidavit of the executors for execution by Michael and Angela. The amendment suggested by Julian in relation to the Loan Agreement had been made to the statement of assets and liabilities. The letter stated that Keall Brinsden would arrange for the documents to be signed by Julian.
666 On 9 April the joint affidavit of the executors annexing the Statement of Assets and Liabilities was sworn by Michael, Angela and Julian. By [9] of the affidavit they each deposed:
As far as we have been able to ascertain the contents of the Statement [of Assets and Liabilities] are true and correct.
667 By their participation in the preparation of the Statement of Assets and Liabilities and the presentation of the statement to Julian with the intention that Julian should verify the statement for the purpose of the application by Michael, Angela and Julian for probate of Peter's will, Fieldhouse and Salt, on behalf of Michael and Angela, made the estate representations to Julian, or at least represented that in their opinion the statement of assets and liabilities was accurate and complete and disclosed all of Peter's assets.
Salt and Fieldhouse made estate representations knowing them to be false
668 The representations were continuing representations. Fieldhouse and Salt, on behalf of Michael and Angela, negotiated with Julian for the sale of Julian's interest in Peter's estate in circumstances where, on behalf of Michael and Angela, they had made the estate representations to Julian.
669 I have found that by the time Julian executed the 1987 Sale Agreements, Fieldhouse, Salt, Michael and Angela knew that the estate representations were false because Peter's estate had an entitlement to royalties and to participate in the expected concentrator royalty arbitration, or had no honest belief in the representations. Therefore, by failing to withdraw the representations and inform Julian that they no longer maintained the representations, they falsely represented to Julian that the estate representations were true.
Julian relied on representations by Salt or Fieldhouse
670 Julian received independent legal advice in relation to the completion of the Statement of Assets and Liabilities from Warren. Julian reviewed the draft statement of assets and liabilities and caused Keall Brinsden to make changes to it. However, Julian accepted that insofar as the statement of assets and liabilities did not include any entitlement to royalties or to participate in the concentrator royalty arbitration award, it was correct. Julian accepted the accuracy of the statement of assets and liabilities in that respect. He relied upon it in concluding that Peter's estate had no net assets or any substantial net assets. Julian was induced to accept the accuracy of the Statement of Assets and Liabilities and to sell his interest in Peter's estate in reliance, amongst other things, on the statement.
Fraud claim in relation to estate representations established
671 Julian has established that Fieldhouse or Salt, on behalf of Michael and Angela, made the estate representations knowing they were false or with reckless disregard for whether they were true and Julian relied on the representation.
672 Alternatively, to his claim for common law fraud, Julian says, by reason of the fraudulent nondisclosure, Julian lost the opportunity to terminate the 1987 Sale Agreements or rescind the 1987 Sale Agreements at or about the time the 1987 Sale Agreements were entered into and thereby lost the opportunity to retain his interests in Peter's estate and his WPPL shares respectively and has suffered damage and is entitled to the other relief he claims.
673 Julian has established this cause of action for essentially the same reasons that he has established that in acquiring Julian's interest in Peter's estate Michael and Angela breached their fiduciary duty owed as executors to Julian as a beneficiary of Peter's estate.
J. Claim of breach of fiduciary duty by Michael and Angela as directors of WPPL
674 The plaintiff's claim for breach of fiduciary duty in relation to Michael and Angela's acquisition of his WPPL shares is as follows. Michael and Angela, as directors of WPPL, owed fiduciary duties to Julian, as a shareholder, in acquiring his WPPL shares, to make full, frank and accurate disclosure of all matters material to the proposed acquisition of Julian's WPPL shares and to pay full value for those shares, which was the fair value of those shares calculated in accordance with the WPPL articles.
675 The plaintiff says that Michael and Angela and by their agents, Fieldhouse and Salt, breached their fiduciary obligation by failing to make full, frank and accurate disclosure to Julian of critical matters concerning the nature and quality of WPPL's mining and royalty interests including:
1. WPPL's 50% (alternatively 25%) interest in Rhodes Ridge including the extent and quality of the reserves in that tenement, its protection under a State Agreement and the joint venture arrangements with CRA pertaining to it, and its potential attractiveness to buyers;
2. Hamersley Iron's potential to increase the longevity of Tom Price mine by mining product from Marandoo which could be mixed with the product mined at Tom Price, which would result in additional royalties being paid to the vendors under the 1962 Royalty Agreements;
3. the 1962, 1968 and 1970 Royalty Agreements and the rights created thereunder which entitled WPPL to receive ongoing attractive royalties in respect of new mines developed by Hancock and Wright or other entities within certain areas of the Pilbara;
4. information regarding the prospective development of mines at Channar, Marandoo and McCamey's Monster pursuant to which WPPL would receive ongoing long-term royalties;
5. the potential rights which WPPL was negotiating to secure from HPPL in relation to a split of the Hanwright Partnership; and
6. the nature and progress of the concentrator royalty arbitration, including that:
676 Further, the plaintiff says that Michael and Angela breached their fiduciary obligations by failing to pay full value for Julian's WPPL shares.
Fiduciary duty may be owed by director to shareholder
677 Directors have a fiduciary obligation to the company, recognised as a status obligation, to execute their duties without pursuing their own interests.
678 Directors do not have status fiduciary obligations to shareholders.[155] In the ordinary course directors do not undertake or agree to act for or on behalf of or in the interests of individual shareholders in the exercise of their powers as directors, they act for or on behalf of and in the interests of the company. Shareholders grant open access to the company, their subscriptions are conveyed to the corporation for its purposes and the corporation thereafter makes its assets (acquired from shareholders) available to its directors on a limited basis. Shareholders do not give the directors limited access to their assets.
679 Shareholders do not, as a matter of status, owe fiduciary obligations to each other.[156] Shareholders do not undertake or agree to act for or on behalf of or in the interests of the other shareholders in the exercise of their powers as shareholders. When considering the power to alter corporate rules Justice Dixon explained:[157]
The power of alteration is not fiduciary. The shareholders are not trustees for one another, and unlike directors, they occupy no fiduciary position and are under no fiduciary duties. They vote in respect of their shares, which are property, and the right to vote is attached to the share itself as an incident of property to be enjoyed and exercised for the owner's personal advantage (504).
680 Similarly, shareholders may buy or sell shares to or from other shareholders in their own self-interest.
683 Professor Flannigan contends that the fiduciary analysis of the court in Coleman v Myers is wrong and that there has been an apparent departure from the conventional function of fiduciary accountability.[164] I am bound to follow the decisions of the New South Wales Court of Appeal to the effect that special facts may give rise to a fiduciary relationship between a director and a shareholder. Those authorities reflect an extension and enlargement of the usual signs of a fiduciary relationship. It is necessary to scrutinise the circumstances of each case to determine whether they give rise to a fiduciary relationship between the director and the shareholder in respect of the sale and purchase of the shareholder's shares.
684 In Brunninghausen, B was a director and shareholder of a company which conducted the business of importing ski gear. G was also a director and held one sixth of the shares. As a result of a breakdown in trust between B and G in 1983, G remained a director of the company ‑ but, this was a mere formality which brought him no information or insight into its affairs, and there were no meetings of its directors or shareholders. G did not receive accounts for the company for any period after 31 March 1983. In late 1987 B and G commenced negotiations for the sale by G of his shares in the company to B. During the negotiations between B and G, B received an offer from third parties to buy the assets of the company. B did not disclose the negotiations for the sale of the company to G. G eventually agreed to sell his shares in the company for a price substantially below the price paid by the third parties. The trial judge held that B owed a fiduciary duty to G, as a shareholder, and that B's failure to disclose to G the existence of his negotiations with the third parties was a breach of that duty.
685 The New South Wales Court of Appeal dismissed B's appeal. Handley JA, with whom Priestley and Stein JJA agreed, held that in limited circumstances there can be a fiduciary relationship between a director and shareholder. His Honour applied the reasoning of the High Court in Hospital Products and held that B was in a fiduciary relationship with G in that B, as the sole effective director, occupied a position of advantage in relation to G and B was in breach of the duty owed to G when he preferred his own interests by not disclosing the negotiations to sell the business.
686 Handley JA identified the following critical factors. G was almost totally powerless. He had no legal rights as a shareholder to inspect the company's books of account or financial records. He was entitled to copies of the annual accounts but realistically chose not to exercise the right. Those annual accounts alone would not provide any real guide to the value of his shares. He had no effective right to be informed of the negotiations for the sale of the company's business. B, as the sole effective director, occupied a position of advantage in relation to G. He could, if he saw fit, disclose information about the pending negotiations for the sale of the business but could not be compelled to do so. This gave B the capacity to affect the interests of G 'in a practical sense', and in the context of the negotiations with him 'a special opportunity' to exercise that capacity to the detriment of G who was 'at the mercy' of B and 'vulnerable to abuse' by B 'of his position'.[165]
687 Handley JA said that the question is not whether in fact the beneficiary expected the fiduciary to act in their joint interests but whether the vulnerable party 'is entitled to expect' a particular standard of conduct. There was a factual basis for some expectation by G. G had no idea of the real value of his shares to B and made no attempt to find out. Justice Handley held:
'A fiduciary duty owed by directors to the shareholders where there are negotiations for a takeover or an acquisition of the company's undertaking would require the directors to loyally promote the joint interests of all shareholders. A conflict could only arise if they sought to prefer their personal interests to the joint interest. That is the very conduct which would be proscribed by the duty' [106].
688 Crawley v Short[166] concerned shareholdings in two companies that owned and operated hotels in and around Sydney. The shareholding structure of each company was that each company had three shares held by Messrs Crawley's, Short's and Davis's interests. Crawley's interests acquired Davis' interests in each of the companies in circumstances which were found by the primary judge to have been oppressive and in breach of the articles of association of each of the companies. The facts and issues at trial and on appeal were complex. The presently relevant matter is that the New South Wales Court of Appeal found that the primary judge should have found that Crawley breached a fiduciary duty which he owed to Short.
689 Young JA, with whom Allsop P and Macfarlan JA relevantly agreed, held that there will be a variety of situations where a shareholder or director/shareholder holds a special position where he or she may owe duties to another shareholder. His Honour said that without being an exhaustive list, this will occur where: one shareholder undertakes to act on behalf of another shareholder; where one shareholder is in a position to have special knowledge and knows that another shareholder is relying on her to use that knowledge for the advantage of another shareholder as well as herself; and where the company is in reality a partnership in corporate guise.[167]
690 In Jones v Jones,[168] Jeffrey and David were business partners who were the directors of and shareholders in the companies which owned and operated a technology business. David, on his own behalf and on behalf of companies he controlled, sold his interests to Jeffrey and his (Jeffrey's) interests for $575,000 and the release of a debt of $200,000. A few days later Jeffrey sold the business to a third party for $4,050,000. Judd J held that Jeffrey breached a fiduciary duty he owed to David. The case involved similar facts to Brunninghausen. Judd J held that the factual basis for the fiduciary duty was stronger than it was in Brunninghausen. His Honour said that the strong factual basis for the fiduciary duty was augmented by representations made by Jeffrey to David during the course of his negotiation with the third party. The negotiations for the sale of David's shares had stalled and at around the time they were reactivated by Jeffrey it appeared to become a matter of urgency. The sense of urgency caused David to believe that there must have been a deal on the go. David enquired and was told that there was no deal in the wings.
691 A fiduciary relationship between a director and shareholder is a fact based fiduciary relationship. Austin and Ramsay offer the following comment on the special circumstances which will give rise to such a relationship:
In summary, pointers towards the existence of a fiduciary obligation include shareholders' dependence upon information and advice, the existence of a relationship of confidence, the significance of some particular transaction for the parties and the extent of any positive action taken by, or on behalf of, the directors to promote the transaction and the structure of shareholdings in the company.[169]
Factors relevant to existence of fiduciary relationship
692 As the existence of a fiduciary relationship is fact‑dependent and depends upon the existence of special circumstances, it is necessary to examine the relevant facts and circumstances of this case.
693 The cases in which it has been held that a director is in a fiduciary relationship with a shareholder relate to companies with few shareholders, very few directors and where their relationships are not impersonal but close. The first factor which Julian submits establishes that a fiduciary obligation was owed by Michael and Angela to Julian in his capacity as a WPPL shareholder is that WPPL was a closely held family company and had all the characteristics of a quasi-partnership with Michael, Angela and Julian jointly engaged in WPPL's business endeavours as equal shareholders.
694 At the time of the negotiation of the 1987 Sale Agreements WPPL was a closely held company in the sense that the shares in WPPL were effectively held by Michael, Angela and Julian in equal shares, they were the directors of the company, they were siblings and the articles of association placed restrictions on the sale or transfer of shares to others.
695 However, it is not accurate to describe the company as a quasi‑partnership. WPPL did not possesses the characteristics of a partnership at the time of negotiating the 1987 Sale Agreements. Angela and Julian were not executive directors, they did not work in the business of the company. Importantly, there was no relationship of mutual trust and cooperation between them. There was mutual cooperation and a level of trust between Michael and Angela but there was no such relationship between them and Julian. Nor was it a case of the three of them having formed or become parties to a quasi‑partnership and subsequently the mutual cooperation and trust between them having broken down.
696 It is artificial to regard WPPL as a 'close corporation' in the Coleman v Myers sense. Even if WPPL could have been so described before Peter's death, and the evidence points to the contrary, it had ceased to be one by January 1986. By that time Michael and Angela made it known to Julian that they did not want Julian to remain as a shareholder in WPPL and that they would exercise the option over his shares if an agreement for the sale and purchase of his shares could not be reached. Michael and Angela negotiated with Julian at arm's length, using Fieldhouse and Salt as intermediaries in the negotiations.
697 It is doubtful that being members of a closely held company is itself a feature that gives rise to a fiduciary duty. The separate entity doctrine is an established legal principle and is not to be ignored. In Brunninghausen Handley JA said:
Where a director's fiduciary duty is owed to the company this prevents the recognition of concurrent and identical duties to its shareholders covering the same subject matter [58].
698 It is more likely that a fiduciary relationship will be found between directors or between directors and shareholders in closely held companies because it is more likely that the members will place trust and confidence in each other in such companies. However, it is the mutual co‑operation, trust and confidence that is the factor giving rise to the fiduciary relationship not merely the fact of the company being closely held.
699 Julian did not place trust or confidence in Michael or Angela for the purpose of negotiating his sale of his WPPL shares to Michael and Angela or more generally in his interests in WPPL. Julian did not trust Michael[170] and had told him so.[171] Michael had told Julian that he did not trust him.[172]
700 It is not a necessary element of the fiduciary relationship that trust is in fact reposed in the fiduciary by the beneficiary. However, trust and confidence are relevant in determining the existence of a fiduciary relationship.[173] The circumstances of the relationship must be such that the beneficiary is entitled to expect that the fiduciary will act in his interests in and for the purposes of the relationship.[174] The expressed lack of mutual trust and confidence points against a fiduciary relationship in this case.
701 Julian submits that following Peter's death, Michael and Angela took over complete management and control of WPPL and set about gaining as much information and knowledge as they could about WPPL's mineral interests and became fully appraised of the fact that WPPL's interests in mining tenements, such as the Rhodes Ridge iron ore deposit, and that future royalties from Tom Price, Channar, Marandoo, McCamey's Monster and other deposits would result in significant intergenerational wealth being created for them as WPPL shareholders.
702 Julian submits that the gathering of that information and knowledge was essential for Michael and Angela to be able to negotiate on behalf of WPPL a split of the Hanwright Partnership and, for the same reasons that information and knowledge was essential for Julian to properly protect his interests, because that information would have enabled him to ascertain the true nature and value of the interest that he was negotiating to sell.
703 It is to be expected that Michael, as chief executive officer, had more knowledge of the company's affairs than Julian. Where directors have been held to owe particular fiduciary duties to shareholders, such duties have arisen from a special factual relationship between the director and the shareholder. The special relationship must be something over and above the usual relationship that any director of a company has with its shareholders, or a managing director with a non-executive director. It is not enough that the managing director as such has more knowledge of the company's affairs than a shareholder or non-executive director has. Since the managing director manages the day-to-day operations and functions of the company, this would almost inevitably be the case.
704 The sort of relationship that has given rise to a fiduciary duty to a shareholder has been where there has been some particular knowledge relevant to the transaction which the director has concealed from the shareholder.
705 Julian was not precluded from informing himself as he saw fit with respect to any aspect of WPPL's business, any assets of WPPL or the Hanwright partnership. Julian asserted the right and took the opportunity to do so inform himself. In particular:
(a) Julian was sent, received and retained the letter from Lang of 1 November 1985;[175]
(b) Julian was in attendance at the meeting with Lang on 28 November 1985, together with Michael, Angela and Salt, at which Lang provided information about the various mining assets held by WPPL through the Hanwright partnership;
(c) Julian, together with Lang, Michael, Angela and Salt, received a detailed memorandum from Dalby dated 3 January 1986 providing comments upon the minutes of the meeting with Lang on 28 November 1985;
(d) Julian knew that Lang was the person who was likely to have the most knowledge about the mining tenements held by the Hanwright partnership, and that he could seek to meet with Lang at any time. Indeed, after the meeting of 28 November 1985 Julian arranged a further one-on-one meeting with Lang approximately two weeks after that meeting;
(e) Julian had access to the books and records of WPPL and was provided with WPPL's financial accounts;
(f) Julian attended, and was otherwise advised of, meetings of the directors of WPPL and he took the opportunity to request information at those meetings;
(g) Julian was advised to, and did, exercise his rights in relation to WPPL by demanding information about activities of the company;
(h) Julian regularly attended the offices of WPPL and looked at WPPL documents;
(i) Julian arranged meetings, and communicated directly, with Fieldhouse;
(j) Salt provided Julian with information if he requested it; and
(k) Julian made his own inquiries in relation to the treatment of WPPL's assets by the accountants for WPPL and had a private meeting with WPPL's auditors Ernst & Whinney in July 1986 at which WPPL's financial performance and value were discussed.
706 Julian's participation in the management of WPPL and his knowledge of and access to information concerning the assets and affairs of WPPL in relation to Michael and Angela is therefore qualitatively different from the fiduciary relationship considered in Brunninghausen, where the directorship of the beneficiary was characterised as a mere formality.
Significance of knowledge of some particular transaction
707 The cases in which a fiduciary duty has been held to arise are cases where the directors had special knowledge affecting the value of the company or its shares, mostly knowledge about a takeover or sale of the company's undertaking.
708 In Brunninghausen, it was critical to the finding of a fiduciary duty that the sole effective director and majority shareholder took advantage of his special knowledge of a proposed sale of the company business to acquire the shares of the only other shareholder at a gross undervalue without disclosure of the negotiations for sale. Similarly, the concealment of a proposed sale of the companies' assets was critical in Jones v Jones. The concealment of the defendant's plan to acquire the company at an undervalue and sell its assets was critical in Coleman v Myers.
709 In this case Michael and Angela were not aware of any offer to purchase WPPL or its assets. To the contrary, they wished to retain the company and its assets.
710 The significant matter which Julian submits was concealed from him is the extent, nature and value of WPPL's mineral assets. Michael and Angela did not conceal those matters from Julian.
711 The factors affecting the value of WPPL were equally apparent and available to each of Michael, Angela and Julian. There was no impediment to Julian obtaining further information, or conducting his own inquiries, with respect to the value of any of the assets of WPPL or the Hanwright partnership if he wished to do so. Julian could have sought more information about WPPL's interest, whether directly or through its participation in the Hanwright partnership, in exploration or mining assets. Julian could have sought relevant information from Lang who Julian knew had a great deal of relevant information. Julian could have sought such information from Madan. Julian could have sought a valuation of his shareholding or of the interests held by WPPL. He was advised by his solicitors to obtain a valuation. Julian chose not to follow that advice and not to make any relevant inquiries.
712 Julian formed his own view as to the value of WPPL, identifying that in February 1986 it was worth between $75 million and $120 million. The valuations in evidence show that Julian's opinion as to value at the time was broadly correct. This is not a case whereby the putative fiduciaries had 'special knowledge' of some concealed anterior or other matter, such as a proposed sale of the company as in Brunninghausen or an impending advantage to the company which would appreciate the value of its shares as in Coleman v Myers.
713 In Hospital Products, Mason J identified the critical feature of a fiduciary relationship to be that the fiduciary undertakes to act for or on behalf of or in the interests of another person in the exercise of a power or discretion which will affect the interests of that person. Therefore, his Honour said, the fiduciary relationship is one which gives the fiduciary 'a special opportunity to exercise the power or discretion to the detriment of that other person who is accordingly vulnerable to abuse by the fiduciary of his position'.[176]
714 Julian submits that he was vulnerable, not because Michael and Angela were able to exercise a power or discretion affecting his interests but because he was unable to protect himself from Michael's and Angela's superior bargaining position because they held 'inside knowledge' by virtue of them effectively controlling WPPL. Julian says he was dependent on the information disclosed to him about WPPL's business operation and value, because no disclosure was made about the value of WPPL's mining interests and royalties at WPPL directors' meetings or in WPPL's financial accounts. Julian says he did not have a proper and full understanding of WPPL's mining and royalty interests, and at the same time Michael and Angela were acquiring significant information about WPPL's mining interests which indicated the significant nature and extent of those interests and the potential value of those interests. Michael and Angela did not disavow Julian from his erroneous understanding as to the WPPL business.
715 There was a knowledge disequilibrium. Michael, and to a lesser extent Angela, had a superior knowledge and understanding of WPPL's mining interests and royalties. However, Michael and Angela did not have insider information about WPPL's assets, plans, finances or opportunities that was not available to Julian and that could give them an unfair advantage. Unlike in cases like Brunninghausen or Coleman v Myers, they did not know about a takeover or proposed third party acquisition or other event that would significantly affect the value of the company or its shares.
716 Julian was not dependent upon Michael and Angela to provide him with information or explain to him the nature, quality and value of WPPL's mining interests and royalties. There was no impediment to Julian obtaining further information, or conducting his own inquiries, with respect to the value of any of the assets of WPPL or the Hanwright partnership if he wished to do so. For instance, Julian could have sought more information about WPPL's interest, whether directly or through its participation in the Hanwright partnership, in exploration or mining assets at any time. Madan worked at the WPPL offices which Julian attended regularly. Julian knew that Lang had a great deal of information about those matters and Julian could have asked Lang about those matters. Julian could have sought a valuation of his shareholding or of the interests held by WPPL, and indeed he was advised by his solicitors to do so. Julian elected not to follow that advice and elected not to make any relevant inquiries.
717 Julian had a view as to the value of WPPL, identifying that in February 1986 it was worth between $75 million and $120 million, and based on the valuations I have referred to, his opinion as to value at the time was broadly correct.
718 Julian was advised by Fieldhouse to take, and took, independent legal advice in respect of the 1987 Sale Agreements and negotiations with respect to the terms of those agreements were conducted by his solicitors on his behalf. Julian sought and obtained various amendments to the terms of those agreements prior to their finalisation.
719 Julian was advised by his lawyers to undertake further inquiries in connection with the subject matter of the 1987 Sale Agreements and he declined to do so. Julian sought tax and accounting advice in late 1985 or early 1986 in order to be better informed as to the risks in relation to the option and the consequences both of selling his shares and of the option being exercised.
720 Julian was not vulnerable to abuse by Michael or Angela of their respective positions in the requisite sense for the purpose of the 1987 Sale Agreements such as to give rise to a fiduciary relationship.
721 Julian was not forced to sell his shares at a price nominated by Michael and Angela. The articles of association of WPPL restrict the transfer and transmission of shares. A shareholder may not transfer shares to a non‑member so long as any shareholder selected by the directors is willing to purchase the shares at their fair value. If Julian offered his shares for sale and another shareholder was willing to purchase the shares then they would be purchased either at the 'fair value' specified by Julian or at the option of the purchaser at the fair value to be fixed by the Auditor who in determining the fair value acts as an expert and not as an arbitrator. Thus, the articles of association provide a means by which Julian could sell his shares for 'fair value'.
722 Michael and Angela did not undertake or purport to act on Julian's behalf in connection with the 1987 Sale Agreements. Michael, Angela and Julian were in a state of conflict. It was the conflict or hostility between Julian and Michael that led to Salt taking over the negotiations for the sale of his shares. From October 1985 to January 1987, there was no good will between Julian, Michael and Angela. Their relationship was such that in Julian's view it was 'untenable' for the three to remain together as functioning directors of WPPL. Julian lacked confidence in Michael's integrity and considered that the way he was being treated by Michael and Angela rendered his own position one of 'hardship'.
723 Julian did not depend on Michael and Angela for information or repose trust and confidence in them. That factual matrix, and the way in which the parties conducted themselves, tells against any fiduciary relationship as between Michael and Angela (on the one hand) and Julian (on the other) in respect of the transaction.
724 In the circumstances in 1986 and 1987 of arm's length negotiations it is difficult to see how Julian was 'entitled to expect' that Michael or Angela would subordinate their own interests and afford paramountcy to those of Julian, according him that selfless loyalty that a fiduciary owes to a beneficiary of such a trust.
725 The relationship between Julian, Michael and Angela at the relevant time does not bear any of the hallmarks which led the Court to recognise the existence of fiduciary obligations in cases such as Brunninghausen or Coleman v Myers. It does not fall within that special category of case in which a director owes fiduciary obligations to an individual shareholder.
726 To the extent that Michael and Angela took some steps, which Julian did not, to inform themselves about the Hancock and Wright partnership's mining assets, that does not give rise to the sort of special knowledge which gave rise to a fiduciary relationship in Brunninghausen, Crawley v Short and Jones v Jones. To the extent that Julian sought to inform himself about the affairs of WPPL, he did so by communicating directly with WPPL's auditors and in seeking information from Salt regarding WPPL's royalty streams. Julian also sought to inform himself about the affairs of WPPL without involving Michael or Angela when he arranged a private meeting with WPPL's auditor Ian Lyon of Ernst & Whinney.
727 The plaintiff's case that Michael and Angela breached fiduciary duties owed to Julian in respect of the acquisition of Julian's WPPL shares fails because Michael and Angela did not owe fiduciary duties to Julian in respect of the acquisition of Julian's WPPL shares.
728 Michael and Angela, as directors of WPPL, were not in a fiduciary relationship with Julian as a shareholder in WPPL and owed no fiduciary duty to Julian in purchasing his WPPL shares.
729 That finding is fatal to Julian's claim that in acquiring Julian's WPPL shares Michael and Angela as directors of WPPL breached the fiduciary they owed to Julian. It is unnecessary for me to determine whether, if there was a duty, whether it was breached and, if so, whether Julian is entitled to rescission of the 1987 Sale Agreements or equitable compensation. There are occasions on which it may be desirable to make contingent findings, against the possibility of a different approach being adopted on appeal. This is not such a case. Findings of fact in relation to breach are interwoven with findings concerning Michael and Angela's special knowledge, if any, of WPPL and its mineral interests.
730 The plaintiff pleads that Salt, on behalf of Michael and Angela, represented to Julian:
(a) the director's report and financial statements of WPPL for the years ended 30 June 1985 and 30 June 1986 did not record any value in respect of mining tenements in which WPPL held an interest, by reason that they had no value, consequent upon the financial expenditure obligations inherent in them and that they could be potentially taken away by the Western Australian government; and
(b) WPPL had net assets of approximately $12 ‑ $15 million.
731 In answer to a request for further and better particulars of those pleas the plaintiff said that Salt orally told Julian that WPPL had net assets of approximately $12 ‑ $15 million in about July 1986 and is recorded in Julian's handwritten notes dated 21 July 1986 of his conversation with Ian Lyon of WPPL's auditor Ernst and Whinney.
732 Julian's evidence is that shortly after the WPPL directors meeting Salt came to Julian's house and the following took place. Julian presented to Salt a suggested price at which he would sell his shares and a payment schedule. Julian presented what he described as a little valuation model which included WPPL's net assets of $15 ‑ $20 million. Salt said the net assets were more like $12 ‑ $15 million. Julian accepted that because he knew he had inflated the figure; the balance sheet only had net assets of $7 million. Salt rejected Julian's reserve valuation, that is, Julian's valuation of WPPL's mineral reserves. Julian said they must have some value and asked why they were not on the balance sheet. Salt said they were not on the balance sheet because they had no value because they have no tenure and they can be confiscated at any time and in fact they are a liability because you have to incur expenses to keep them. Julian accepted what Salt said about the reserves having no value.
733 Salt had no recollection of attending Julian's house to negotiate the sale of his shares. When Julian's account of the meeting was put to him Salt said that he had no recollection of the meeting in any shape or form. Salt said he had no recollection of saying to Julian that the reserves had no value because they had no security and could be confiscated at any time or that they were a liability because you have to incur expenses to keep them but said that sounded a bit like the handwritten note from Fieldhouse.
734 Salt's reference to the handwritten note from Fieldhouse appears to be a reference to the facsimile message from Fieldhouse to Salt of 31 July 1987, in connection with the assessment of the value of the mineral reserves in connection with the 1987 Sale Agreements:
The mineral tenements have a value only if exploration proves positive reserves of minerals of sufficient quantity and quality to make a mining venture a commercial proposition which is not the case at present. The tenements are a liability as specified amounts must be expended each year on these tenements in the terms of the Mining Act.
735 That message could not have been the origin of, or informed, what Salt said to Julian at Julian's house, more than 12 months earlier, on 31 May 1986.
736 The plaintiff says that Julian's evidence that Salt told him that WPPL's mining tenements had no value because they had no tenure and because they could be confiscated at any time and were actually a liability because expenses have to be incurred should be accepted for a number of reasons. First, Julian had a clear recollection of being told those things by Salt at a meeting at his house in Nedlands. I do not find that compelling. Memories are records of people's experiences of events and not, as for example a video or audio recording, a record of the events themselves. Remembering is a reconstructive process. Recollection of specific details does not guarantee that they actually occurred. The memory may be at least in part the result of another experience. For example, Julian's memory of what Salt said at the meeting about the value of the mining reserves might be a result of his memory of reading Mr Fieldhouse's note in 1987 or later. Julian's detailed recollection of the conversation is inconsistent with Julian's lack of recollection of other discussions and conversations around that time, which is consistent with Julian's recollection of what Salt said at the meeting being the result of another experience or experiences, such as his recollection of the Fieldhouse note.
737 Secondly, the plaintiff says Julian's evidence did not alter under cross‑examination. A self-contradiction may show a defect either in the memory or in the honesty of the witness but mere consistency in recounting an event on one occasion is a poor indicator of an accurate record of what actually occurred.
738 The third reason given by the plaintiff that Julian's evidence should be accepted is that Salt did not deny that he said those things to Julian, although he could not recall it. Salt's lack of recollection of the meeting or what he said to Julian about Julian's proposal for the sale of his shares is consistent with Salt's lack of recollection of meetings and discussions at the time. It is hardly surprising given the passage of time and Salt's general lack of memory.
739 Fourthly, the plaintiff says that Salt saying that the mining tenements had no value is consistent with:
(a) those mining tenements not being recorded in the WPPL financial statements for the financial years ended 30 June 1985 and 30 June 1986;
(b) his letter to the Commissioner of Corporate Affairs dated 26 August 1986; and
(c) the advice provided from Fieldhouse and the instructions provided to Keall Brinsden at the time of having the 1987 Sale Agreements as assessed for stamp duty liability ‑ the 31 July 1987 facsimile from Fieldhouse to Salt and the letter from Salt to Keall Brinsden dated 3 August 1987 for the purposes of assessment of stamp duty.
740 Salt's letter of 26 August 1986 to the Commissioner for Corporate Affairs referred to Michael and Angela's application under s 129(10) of the Companies (Western Australia) Code (WA) to enable WPPL to give financial assistance to Michael and Angela in connection with their acquisition of Julian's WPPL shares. The letter attached a copy of WPPL's balance sheet for the year ended 30 June 1985. Neither the balance sheet nor the letter makes any reference to WPPL mining tenements having no value consequent upon financial expenditure obligations inherent in them or that they could be potentially taken away by the Western Australian government.
741 Salt was cross-examined about whether in 1986 he believed WPPL's mining tenements had value. His evidence was that the only thing he could recall is that they were not included on the balance sheet. He did not agree that he thought the mining tenements had value ‑ he said he was not a valuer. He did not agree that the mining tenements were not on the balance sheet because they had no value, although he accepted that one of the reasons they were not on the balance sheet was because expenditure needed to be incurred on them. Salt said that he 'just followed mainly on what had been done in the past and that was the way that they were treated before he was engaged with' WPPL.
742 Fieldhouse's facsimile of 31 July 1987 to Salt, which I have already referred to, does not advance the plaintiff's argument. On its face it is putting forward the view of Fieldhouse not Salt. The facsimile was sent 12 months after the Nedlands meeting. It could not have informed Salt's belief as to the value of the mining tenements.
743 Salt's letter of 3 August 1987 to Keall Brinsden stated that:
The mineral tenements have a value only if Exploration proves positive reserves of minerals of sufficient quantity and quality to make a mining venture a commercial proposition which is not the case at present. The tenements are a liability as specified amounts must be expended each year on these tenements in the terms of the Mining Act.
744 That letter was written more than 12 months after the Nedlands meeting and, importantly, after Salt had received Fieldhouse's facsimile of 31 July 1987.
745 The matters referred to by the plaintiff offer little support for Julian's evidence. Julian's evidence must be weighed against the following considerations.
746 First, there is no reference to the alleged representation in any document. The allegation that Salt made the representation rests entirely on Julian's uncorroborated testimony of a recollection of a conversation more than 33 years ago.
747 Julian's notes refer to a meeting on 21 July 1986 with Mr Lyon of Ernst and Whinney in which Julian wrote that 'net assets were estimated at only $12 ‑ $15 kk by D.S.'. The net assets are apparently a reference to the net assets other than the mining tenements, which Julian considered separately. The note offers no support for the contention that Salt said to Julian that the mining tenements had no value because they have no tenure and they can be confiscated at any time and in fact they're a liability because you have to incur expenses to keep them.
748 Secondly, Julian's detailed recollection of the conversation is inconsistent with Julian's lack of recollection of other discussions and conversations between 1985 and 1987.
749 Thirdly, there is no reference to any such representation in Julian's notes. Julian has a note of a meeting with Salt on 31 May 1986 which Julian identified as the meeting at his house. The note refers to Julian's suggested price and payment schedule, Salt's response and further things said by each of them but nothing about the mining assets having no value or indeed that the net assets being between $12 ‑ $15 million. When it was put to Julian in cross‑examination that he would have recorded Salt's alleged representation in his note where he was seeking to record all the material events and information around this time, he answered: 'Well, yes, you would think so, but I didn't record his comment about net assets either'.
750 Fourthly, in his affidavit sworn on 13 December 2001 in the Natalie and Timothy proceedings in opposition to the defendants' (Michael and Angela) application for summary judgment, Julian referred to negotiations for the sale of his WPPL shares but did not refer to Salt saying anything about WPPL's balance sheet not including any value for its interest in mining tenements because they had no value. In his affidavit Julian referred to Salt putting a proposal to him at about the end of May 1986 but says nothing about Salt saying anything about the value of WPPL's mining assets. In cross‑examination it was put to Julian that if, in 2001, when he swore the affidavit he had any actual recollection of Salt telling him that the mineral deposits of WPPL were effectively valueless, surely he would have referred to that in his affidavit. Julian answered: 'Well, I don't know why I didn't. Yes. You would think I would have'. When it was then put to him that he would have, Julian responded: 'Yes' and then said 'Perhaps it is because I hadn't made a note'.
751 The standard of proof on the balance of probabilities requires the fact finder to reach a state of 'actual persuasion of the occurrence or existence of the fact in issue before it can be found'.[177] A '[m]ere mechanical comparison of probabilities independent of a reasonable satisfaction will not justify a finding of fact'.[178]
752 I am not satisfied on the balance of probabilities that Salt made the alleged WPPL representations.
753 That finding is fatal to Julian's claim of common law fraud in relation to Michael and Angela's acquisition of Julian's WPPL shares. It is unnecessary, and undesirable, that I should make a finding whether the representation was fraudulent in circumstances where I have found the representation was not made.
754 Julian alleges that Michael and Angela fraudulently concealed matters from him in relation to the acquisition of his interest in the Estate and the acquisition of his WPPL shares.
755 It is difficult to discern Julian's claim of fraud by nondisclosure in relation to the sale and purchase of his WPPL shares. Julian's pleading of fraudulent nondisclosure in Julian's statement of claim is interwoven with his pleas of breach of fiduciary duty, pleas of fraudulent misrepresentation and other circumstances.
756 Julian's case is not made any easier to follow in his written closing submissions notwithstanding that they comprise 559 pages without associated schedules. Section R of Julian's written closing submissions deals with 'Fraudulent misrepresentations by Michael and Angela about WPPL'. This section of the closing submissions deals with the alleged WPPL misrepresentations which I have considered in the previous section of these reasons. Then, Julian's closing submissions address the topic 'Concealment of information relating to value of WPPL and its interest in the value of WPPL'. The submissions say:
All of the material information concealed from Julian, or at least recklessly not disclosed to him about WPPL's value are detailed comprehensively in the Section P above and the detail set out there is not repeated here. Rather, what Julian does in the below submissions is emphasise that the information not disclosed to him was material to him when he was negotiating to sell his WPPL shares and relinquish his entitlement to Peter's estate, and as explained below he relied on the representations made to him.
757 Section P of Julian's written closing submissions addresses Julian's claim that Michael and Angela breached the fiduciary duty they owed, as directors of WPPL, to Julian as a shareholder.
758 In their written closing submissions the defendants submit that to make out his claim of concealment in support of a cause of action in deceit Julian must establish each of the five elements of that tort I have referred to earlier in these reasons. The defendants further submit that 'mere silence, however morally wrong, will not support an action in deceit'.[179] The defendants submit that Julian must demonstrate either that the alleged non-disclosures gave rise to some positive misrepresentation of fact, which case has not been pleaded or advanced in submissions, or that Michael and Angela had a legal or equitable duty to disclose the purportedly concealed matters. I agree. That is consistent with the principles expounded by the High Court in Magill v Magill.[180]
759 Mere silence, however morally wrong, will not support an action of deceit or common law fraud.[181] For example, in Lam v Ausintel Investments Australia Pty Ltd[182] the New South Wales Court of Appeal held that no obligation was imposed upon the respondents to disclose to the appellant new facts which might improve his bargaining position in the transaction in which they were engaged. The new facts did not render false the representations that had been made to him. In the absence of some special relationship giving rise to a duty of disclosure, there was no obligation upon the respondents to disclose the new facts to the appellant. Gleeson CJ, with whom Samuels AJA and Meagher JA agreed, said:
Where parties are dealing at arms' length in a commercial situation in which they have conflicting interests it will often be the case that one party will be aware of information which, if known to the other, would or might cause that other party to take a different negotiating stance. This does not in itself impose any obligation on the first party to bring the information to the attention of the other party, and failure to do so would not, without more, ordinarily be regarded as dishonesty or even sharp practice. It would normally only be if there were an obligation of full disclosure that a different result would follow. That could occur, for example, by reason of some feature of the relationship between the parties, or because previous communications between them gave rise to a duty to add to or correct earlier information (475).
760 Julian has not made out, or indeed advanced, a case that Michael and Angela concealed facts which give rise to some positive misrepresentation of fact. Julian's case is that Michael and Angela had a duty to bring material information to Julian's attention and they concealed the information from him. I understand this case to be characterised by counsel for the plaintiff, Mr Zappia QC, as equitable fraud.
761 The only duty advanced by Julian is the alleged fiduciary duty of Michael and Angela as directors of WPPL. I have found that Michael and Angela did not owe such a fiduciary duty. Julian's case of common law fraud by nondisclosure must fail.
762 Michael and Angela had a duty to disclose material information to Julian if, and only if, there was a relationship between them which gave rise to a duty to disclose the information. Julian alleges that that special relationship is the fiduciary relationship between Michael and Angela as directors of WPPL and Julian as a shareholder. I have found there was not a fiduciary relationship between Michael and Angela as directors and Julian as a shareholder. Accordingly, Michael and Angela owed no duty to disclose information to Julian. Julian's case of equitable fraud fails. Julian has not made out a cause of action based upon fraudulent concealment of the sale and purchase of his WPPL shares.
M. Defendants' defences based on the Deed of Settlement
763 The defendants plead that as a consequence of Julian entering into the Deed of Settlement on 22 April 2008, the claims brought by Julian against the defendants:
(a) are the subject of a release and discharge by Julian in terms of cl 5.3 of the deed;
(b) are the subject of the covenant not to sue and release by Julian in terms of cl 5.5 of the deed;
(c) are the subject of the further release and discharge in terms of cl 5.10 of the deed;
(d) are the subject of the bar against suit in terms of cl 5.11 of the deed; and
(e) were discharged and satisfied by the execution and performance of the deed, so Julian is barred from bringing further claims falling within the Julian Counterclaim (as defined in the deed) by reason of the doctrine of accord and satisfaction.
764 Julian submits that the Settlement Deed is no bar to these proceedings for the following reasons:
(a) properly construed in accordance with equitable doctrine, the deed does not apply to the claims in this proceeding;
(b) even if it does, it cannot apply because of the concealment from Julian of matters pertaining to the claims in this proceeding;
(c) it cannot apply to the fraud claims if they are established; and
(d) it cannot operate as a defence if the Court would conclude that Michael and Angela ought to have disclosed matters to Julian (as alleged) before he retired as a Trustee.
765 A release in a settlement deed should be construed in the same way as other contractual provisions.[183] The meaning of the terms of a contractual document is to be determined by what a reasonable person would have understood them to mean. That, normally, requires consideration not only of the text, but also of the surrounding circumstances known to the parties, and the purpose and object of the transaction.
766 The Deed of Settlement was executed after Michael, Angela, Julian and Julian's children, Natalie and Timothy, had agreed to settle the Natalie and Timothy proceedings.
767 The Natalie and Timothy proceedings related to Julian's WPPL shares, Peter's will and the 1987 Sale Agreements. Under his will Peter bequeathed one third of his shares in WPPL to Michael, one third to Angela and one third to Michael and Angela to hold on trust for Julian's children, Natalie and Timothy. The option agreement had not been exercised by Peter at the time of his death. A dispute arose between Michael and Angela on the one hand and Julian on the other hand as to whether the option was an asset of Peter's estate exercisable by his executors after his death or whether it was personal to Peter and died with him. In the negotiations leading to the 1987 Sale Agreements Michael and Angela bargained with Julian on the basis that if he did not sell his WPPL shares to them they would exercise the option in their capacity as executors, with the consequence that Julian would only hold one ninth of WPPL's shares. Under the 1987 Sale Agreements Julian's WPPL shares passed to Michael and Angela. The right under the option did not pass to the estate.
768 In 2001 Natalie and Timothy commenced proceedings in this court against Michael and Angela. By their statement of claim Natalie and Timothy claimed that Peter exercised the option to acquire Julian's WPPL shares on or about 31 July 1985 with the result that those shares formed part of the assets of Peter's estate. Alternatively, they contended that the option was an asset of Peter's estate which was exercisable by Michael and Angela as executors and trustees of Peter's will, and that in purchasing Julian's shares under the 1987 Sale Agreements rather than exercising the option as executors, Michael and Angela breached their fiduciary duties to Natalie and Timothy as beneficiaries of Peter's estate.
769 Michael and Angela rejected the claim. They asserted that the option did not survive Peter's death and alternatively if the option passed to the estate, it formed a part of Peter's residuary estate, such that the shares were not caught by cl 3 of the will in any event. In their defence Michael and Angela also asserted that if they were liable then Julian as a co‑trustee was also liable for breach of trust by selling his shares to them and that any remedy granted by the court should be on condition that they be indemnified by Natalie and Timothy to the extent of the purchase price they had paid Julian for his shares.
770 Michael and Angela issued third party proceedings against Julian. They claimed that if they were liable to Natalie and Timothy, and did hold one third of the shares on trust for them, they were entitled to repayment of the purchase price they had paid Julian on account of monies had and received or total failure of consideration. Alternatively, they sought contribution from Julian as a co-executor and co-trustee who breached fiduciary duties owed to Natalie and Timothy. The contribution claim was also advanced on the basis that Julian was knowingly concerned in the alleged breach of fiduciary duty by Michael and Angela. They claimed damages asserting that if they were liable to Natalie and Timothy then Julian was liable to them for breach of the 1987 Sale Agreements.
771 Julian filed a defence and counterclaim to Michael and Angela's third party claim. By his defence and counterclaim Julian contended that:
(a) Michael and Angela acted in breach of the fiduciary duties owed to Natalie and Timothy, which conduct was alleged to be unlawful or in bad faith or both; and
(b) Julian had suffered duress or undue influence at the hands of Michael and Angela, which induced him to enter into the 1987 Sale Agreements. The duress or undue influence consisted of the threat by Michael and Angela as executors of the estate to exercise the option in circumstances where they had omitted any reference to the option being an asset of the estate in the probate application and denying Julian any benefits in holding the shares so as to render them valueless to him, but for which Julian would not have transferred his WPPL shares to Michael and Angela or ceased to act as executor of Peter's estate.
(a) Michael and Angela held his WPPL shares on a constructive or implied trust for his benefit;
(b) Michael and Angela were obliged to transfer to him his WPPL shares and account to him for all rights, interests and benefits obtained or procured by them by reason of their holding his shares between February 1987 and the date of judgment; and
(c) an account of profits.
773 Michael and Angela filed a reply and defence to Julian's defence and counterclaim. They claimed Julian threatened legal proceedings against them in the event that they attempted to exercise the option and that it was for this reason they entered into negotiations with him to purchase his shares. In response to Julian's allegation that they had omitted to list the option as an asset of the estate they asserted that they did not believe the option was an asset of the estate. They also asserted that it was their view that if the option did form part of the estate it formed part of the residuary estate. They pleaded that even if they did exert undue influence or duress over Julian this did not induce him to sell to them.
774 On 13 December 2001, Julian swore an affidavit in the Natalie and Timothy proceedings annexing a copy of the minutes of the WPPL board meeting of 23 December 1987. The minutes record that WPPL had received $5.1 million in settlement of the concentrator royalty arbitration.
775 The Keall Brinsden file in relation to probate of Peter's will was discovered to Julian in January 2008.
776 The Keall Brinsden memorandum of 20 March 1987 was discovered to Julian by Michael on 4 November 2004 and again by Michael and Angela on 24 January 2008.
777 I find that Julian had knowledge of the facts giving rise to Peter's estate having an entitlement to royalties and an entitlement to participate in the expected award in the concentrator royalty arbitration, and hence that Peter's estate was not insolvent, by January 2008.
778 I have found that by 28 November 1985 Julian had knowledge of WPPL's mining interests, and the Hancock & Wright partnership split, which appear in Lang's letter of 1 November 1985 and the transcript of Lang's meeting with Michael, Angela and Julian on 28 November 1985. Julian also received a copy of Dalby's memorandum of 3 January 1986 which commented on the notes of the meeting with Lang on 28 November 1985 and attached a copy of a letter of 25 February 1981 from CRA to HPPL and WPPL concerning CRA's acquisition of the tenements from Texas Gulf.
779 By 22 April 2008, at least, Julian knew, or ought to have known, the essential facts concerning WPPL's mining interests which he alleges Michael and Angela failed to disclose to him before he entered into the 1987 Sale Agreements.
780 On 24 January 2008 Michael discovered to Julian in the Natalie and Timothy proceedings exhibit 501 which was described in this action as the Iron Ore Committee Booklet. The booklet is entitled 'Mineral prospects controlled by Wright Prospecting Pty. Ltd. status as at 19 May 1986'. The booklet contains a list of mining tenements controlled by WPPL and a list of mining tenements which are controlled by HPPL and in which WPPL has an interest. The booklet then contains a summary by Madan of all mineral tenements held by WPPL. The summary says in relation to Rhodes Ridge that the Rhodes Ridge Agreement areas are managed by CRA Iron Ore Services for the joint venture between CRA and Hancock and Wright and that the Hancock and Wright share of the joint venture was made the responsibility of Wright Prospecting some time ago. The summary includes tonnages of drilled high grade iron ore reserves, says that the one bright spot in the entire agreement area for the immediate or medium term future is Giles Mini and that the reserves at Giles Mini (353 million tonnes) should be particularly attractive to both the CRA and Mount Newman Mining companies and a number of options to capitalise on this deposit should be the active concern of Wright Prospecting.
781 The Iron Ore Committee Booklet contains a summary of the 24 May 1983 Hancock and Wright partnership agreement and the 15 February 1984 Variation to Partnership Agreement, which states that as from 1 January 1984 HPPL and WPPL are to be each solely responsible for their own interests and contains a schedule of the HPPL interests and the WPPL interests. The booklet contains a summary of agreements for the Rhodes Ridge Iron Ore areas. It says that the area is the subject of an act of Parliament as well as several agreements between HPPL, WPPL and their partners and that under the agreements CRA has sole responsibility for management of all activities.
782 The Iron Ore Committee Booklet contains a summary of royalty income to Hancock and Wright from iron ore sales. It refers to the original agreement of 12 December 1962, which Julian had long been aware of. It says that on 31 January 1968 a second agreement was signed covering the site of the present Paraburdoo mine and other reserves described as the Mount Bruce Reserves. It says that the only royalties presently being received are from the Hamersley mines at Tom Price and Paraburdoo from which Hancock and Wright, after Perron's deduction, is currently receiving between $1 million and $1.6 million per month and the total royalties which have been paid to Hancock and Wright from 1966, when mining commenced up to May 1986 amount to $138 million. The note says that in early 1979 Hamersley Iron commenced operating its concentrator plant at Tom Price but paid zero royalty on the feed to the plant and the resulting dispute has been referred to arbitration, that the full 2 ½% royalty on concentrator product during that period would be almost $14 million and hopefully Hancock and Wright will receive at least 50% of this as a result of arbitration. There is a note about the royalty agreements in relation to the Wittenoom and Rhodes Ridge Agreement areas and the McCamey's Agreement area. In relation to duration of royalties, the note says there is no provision for cessation of royalty payments either after a certain time or after payment of a certain amount of money.
783 Julian had a copy of the memorandum of 26 February 1986 from Salt to Michael entitled 'Where are we going?' by January 2008 when it was discovered to him by Angela in the Natalie and Timothy proceedings.
784 On the instructions of Natalie and Timothy, Wayne Lonergan produced an expert valuation report dated 12 March 2008 (the Lonergan report) for the purpose of the mediation in the Natalie and Timothy proceedings. Julian agrees that he saw the Lonergan report for the purposes of the mediation and that he read Natalie and Timothy's position paper, which summarises opinions in the Lonergan report, although Julian says it is unlikely he read the whole of the Lonergan report.
785 Lonergan referred to royalty streams received by WPPL in respect of Channar, Hamersley, Hope Downs and Jimblebar. Lonergan valued WPPL's interest in Rhodes Ridge at between $164.5 million and $487.5 million on the assumption that WPPL had a 25% interest in the Rhodes Ridge joint-venture and between $329 million and $975 million on the assumption that WPPL had a 50% interest in the Rhodes Ridge joint-venture. Lonergan assumed that but for the alleged misconduct of Michael and Angela, the executors of Peter's estate would have exercised the option so that Julian's WPPL shares would have become part of Peter's estate and Natalie and Timothy would have been entitled to one third of those shares under Peter's Will (ie one‑ninth of the issued WPPL shares). Lonergan valued WPPL at between $905.6 million and $1,725.4 million. Lonergan valued the WPPL shares that Natalie and Timothy would have received, that is one‑ninth of the issued shares, at between $86.5 million and $163.7 million after a allowing a 15% discount for being an unlisted minority holding.
786 In his position paper for the mediation Julian made the following assertions.
1. Throughout the negotiations for the sale and purchase of Julian's WPPL shares it was known that Julian's shares were worth considerably more than the $6,826,254 paid by Michael and Angela.
2. That the value of Julian's shares was worth substantially more than $6,826,254 is revealed in Salt's letter of 26 August 1986 to the Corporate Affairs Office where it is acknowledged that the main asset of WPPL does not appear in its balance sheet, but those assets result in annual royalties payable in cash monthly of approximately $7 million per annum; if capitalised at say 10% the value of those assets was then at least $70 million.
3. The conduct of Michael and Angela was reprehensible. It enabled them to cause Julian to sell his shares in WPPL to them at a price that did not reflect anything like their true value.
4. The 1987 Sale Agreements should be rescinded with consequential relief because the conduct of Michael and Angela was illegitimate or unconscionable and within the boundaries of conduct for which relief should be granted under the doctrines of economic duress, undue influence and unconscionable conduct.
787 The parties attended a mediation conference. Julian's evidence is that at the mediation conference his daughter told him that the other parties had reached an agreement but Julian needed to sign as well. Julian told his daughter that if she was happy with the settlement then he was content with it because he had come to the view that he did not have much of a case. Julian recalled that all of the parties signed a brief one page agreement.
788 On 22 April 2008, Natalie, Timothy, Michael, Angela, Julian and Edix Pty Ltd as trustee for the Nattim Trust (Edix) executed the Deed of Settlement. By the deed Michael and Angela agreed to, and did, pay Natalie and Timothy $70 million and released Julian from their claims, any claim that they may have had but for the settlement and any liability arising out of Peter's will or the proceedings.
789 The Natalie and Timothy proceedings, including Julian's counterclaim against Michael and Angela, were dismissed by consent on 30 July 2008. In the Deed of Settlement Julian gave to Michael and Angela extensive releases and covenants not to sue which the defendants rely upon as a complete defence to Julian's claims in this action.
790 Julian acknowledges that he signed the Deed of Settlement but he does not recall signing the document and he does not recall any of the circumstances surrounding signing the document.
791 Julian was represented by solicitors and counsel in the Natalie and Timothy proceedings, including at the mediation. The Deed of Settlement was signed by Julian and witnessed by his solicitor. By cl 4.1 Julian warranted that he had entered into the deed and the settlements constituted by the deed on the basis of independent financial and legal advice.
792 Julian contends that the release clauses should be construed in accordance with the principles expounded by Dixon CJ, Fullagar, Kitto and Taylor JJ in Grant v John Grant & Sons Pty Ltd.[184]
793 Grant v John Grant was helpfully analysed by Pembroke J in The Owners Corporation of Strata Plan 61390 v Multiplex Corporate Agency Pty Ltd (No 2).[185] Pembroke J's observation about the principle for which Grant v John Grant stands was adopted by Whelan JA in Doggett v Commonwealth Bank of Australia:[186]
As Pembroke J observed in The Owners Corporation of Strata Plan 61390 v Multiplex Corporate Agency Pty Ltd (No 2), the principle for which Grant v John Grant stands is sometimes described more widely than is justified. It is not authority for the proposition that a release can only ever apply to matters then known to the parties. It is possible to enter into an arrangement which does settle 'all conceivable further disputes' [63].
794 In The Owners Corporation of Strata Plan 61390, Pembroke J explained that there are two aspects to the reasoning in the joint judgment in Grant v John Grant. First, the High Court held, as a matter of construction, that the general words of the release should be construed by reference to the subject matter of the particular disputes which the recitals said the parties had resolved to settle on the terms of the deed. The resolution of the first aspect of the decision in Grant v John Grant depended on the interpretation of the release according to settled rules of construction. Pembroke J referred to the statement in the joint judgment of the High Court:
The question depends primarily on the application of the prima facie canon of construction qualifying the general words of a release by reference to particular matters which recitals show to be the occasion of the instrument ... prima facie the release should be read as confined to the matters forming the subject matter of the disputes which the deed recites ... (131).
795 Pembroke J then referred to the second aspect of the decision in Grant v John Grant, which involves the application of equitable principle. The joint judgment explained that the facts in that case made it inequitable for the releasee to set up the general words of the release in answer to the particular liability that the releasor now sought to enforce. That is because the liability had nothing to do with the subject matter of the deed of release. It was quite extraneous to it. And the releasee's attempt to defend the liability by resort to the general words of the release was unconscionable and opportunistic. The releasor did not know of the liability now sought to be enforced, did not intend to release it as part of the transaction and did not know of any intention on the part of the releasee that it should be released.[187]
796 Pembroke J explained the basis of the High Court application of the equity principle:
The court held that in the circumstances it would be unconscientious to allow the general words of the release to be relied upon. The equity was described as one 'to have the general words of a release confined to the true purpose of the transaction ascertained from the scope of the instrument and the external circumstances': Grant v John Grant & Sons (above) at 130. It is clear from what appears earlier on the same page that 'the circumstances' might include the actual intention of the releasor. The joint judgment referred to the 'state of knowledge of the respective parties concerning the existence, character and extent of the liability in question and the actual intention of the releasor': Grant v John Grant & Sons (above) at 130 [28].
797 This aspect of the reasoning was a particular illustration of one of the many ways in which equity restrains a party from any unconscientious reliance on legal rights. The trigger for the application of the equitable principle must be some feature of the facts or conduct of one of the parties that is against conscience. That is why the joint judgment in Grant v John Grant endorsed Kerly's statement in his Historical Sketch of the Equitable Jurisdiction of the Court of Chancery that:
The peculiar construction of releases in equity, which restricts their operation to matters within the contemplation of the parties, rests also partly on mistake of expression and partly on mistake going to the substance of the transaction.
798 In other words, equity permits an investigation of the circumstances, including consideration of the actual intentions of the parties, in order to determine whether enforcement of the general words of a release would be against conscience.[188]
799 Pembroke J then explained, in a passage adopted by Whelan JA in Doggett,[189] that it is possible to enter into an arrangement which does settle all conceivable further disputes and there will be no room for the application of the equitable principle referred to in the joint judgment in Grant v John Grant if it is clear that the parties intended the general words of a release to encompass all conceivable further disputes:
Significantly however, the joint judgment in Grant v John Grant & Sons (above) also recognised that there will always be cases where, properly characterised, the parties should be taken to have intended that the general words of a release should operate to encompass all conceivable further disputes, whether disclosed or not and whether within the knowledge of a party or both parties, or outside of it: Grant v John Grant & Sons (above) at 129. In such a case there is no room for the application of equitable principle. The equitable principle only has a role to play when it appears from the terms or the context or other admissible evidence, that the enforcement of the legal right would, by a literal application of the general words of a release, be against conscience. It would not be against conscience if the court is satisfied that the parties intended 'upon a particular and solemn composition for peace' to release uncertain demands and presently unknown claims: [30].
801 The recitals identify the subject matter of the differences and disputes resolved by the deed to include:
1. the entitlements of Julian, Natalie and Timothy under Peter's Will;
2. the 1987 Sale Agreements (defined as the Michael Contract and the Angela Contract); and
3. the title of Michael and Angela to Julian's WPPL shares (defined as the Subject Shares).
802 The recitals identify the areas of dispute between the parties resolved by the deed:
1. disputes between Michael, Angela and Julian in purported resolution of which in January 1987, Julian sold to Michael and Angela his WPPL shares (the Subject Shares) pursuant to the 1987 Sale Agreements (the Michael Contract and the Angela Contract);
2. Natalie and Timothy's claim to an entitlement under cl 3(c) of Peter's will to the WPPL shares that Julian sold to Michael and Angela under the 1987 Sale Agreements; and
3. Julian's claims (in the Natalie and Timothy proceedings) that Michael and Angela held the WPPL shares he sold to Michael and Angela under the 1987 Sale Agreements on a constructive or implied trust for his benefit and are obliged to transfer the shares to him and account to him for profits obtained by holding the shares since January 1987.
803 By cl 5.3(a) Julian provides extensive releases and discharges to Michael and Angela. The subclause may be broken down into its constitutive elements which provide that Julian releases and discharges Michael and Angela from:
(1) the Julian counterclaim, which is:
(a) the counterclaim brought by Julian in the Action;
(b) any claim or right of action that Julian (or Edix or any related party of Edix) may have had in respect of or arising in relation to:
(i) Julian Estate Rights, which means the entitlement of Julian as a residual beneficiary of Peter's will;
(ii) the Subject Shares, which means Julian's WPPL shares; or
(iii) the Edix agreement;
(2) any liability arising out of or in connection with:
(a) Peter's will;
(b) the 1987 Sales Agreements; and
(c) the Action (defined as the Natalie and Timothy proceedings).
804 The evident purpose of cl 5.3(a) is to release Michael and Angela not only from the claims made by Julian in the Action, but from all conceivable claims that Julian might make connected in any way with Julian's entitlement under Peter's will, Julian's WPPL shares and the 1987 Sales Agreements.
805 The words of cl 5.3(a) encompass Julian's claims in this action. However, Julian submits that they should be construed so as not to cover any liability of which he was not aware at the time of executing the deed and at the time of executing the deed Julian was not aware of the claims which he advances in this action.
806 As I have said earlier in these reasons, a release may encompass unknown claims. The inclusion of the words 'any claim or right or action that Julian ... may have had in respect of or arising in relation to Julian Estate Rights' (emphasis added) indicates that the parties intend the release to cover claims about which they may not be conscious.
807 That construction of cl 5.3(a) is supported by the evident purpose of the deed. The recitals and operative parts of the deed, particularly recitals I and L and cl 5.5, reveal that a fundamental purpose of the deed is to preserve Michael and Angela's title to Julian's WPPL shares (the Subject Shares). The recitals and operative parts of the deed, particularly the extensive release and discharge provisions in cl 5, reveal that a further fundamental purpose of the deed is to prevent any further claims in connection with any entitlements of the parties under Peter's will, the 1987 Sale Agreements, Julian's WPPL shares and WPPL. Those purposes would be frustrated if Julian was at liberty to bring new claims in relation to Peter's estate, Julian's WPPL shares or the 1987 Sale Agreements based on facts discovered after execution of the deed or deployment of known facts to raise a claim based on a new legal characterisation of those facts.
808 Clause 5.5 is a release and covenant not to sue. It provides that none of the parties (or their privies) will bring any claim against any other party and each party releases the other parties in respect of any claim that is in any way connected with (amongst other things):
3. Michael and Angela's conduct as executors of Peter's estate; and
4. the validity of the title of Michael and Angela to Julian's WPPL shares acquired by Michael and Angela pursuant to the 1987 Sale Agreements.
809 Those words encompass all of the claims brought by Julian in this action. I reject the submissions of Julian to the contrary which are based on grammatical analyses of the clause. Julian further argues that the releases are confined to claims that were in fact known to Julian. I reject that argument essentially for the same reasons I reject that argument in relation to cl 5.3.
810 Julian's contention that the releases are confined to claims that were in fact known to Julian at the time of execution of the Deed of Settlement is not open in relation to cl 5.10. By cl 5.10 the parties released and discharged each other from:
(1) any other claims et cetera existing between them
(a) arising out of the circumstances of the claim, the subject matter of the Action;
(b) connected with
(i) Peter's estate;
(ii) WPPL
whether or not the parties are aware of such claims or action at the date of signing the deed. (Nb format changed for emphasis)
811 Julian submits that cl 5.10 does not bar these proceedings for several reasons. The first reason advanced by Julian is that cl 5.10 applies to claims other than those covered by cl 5.3 and cl 5.5. Julian relies upon the opening words of the clause 'from any other claims' and says that must mean claims other than those which fall within cl 5.3 and cl 5.5.
812 I do not agree. The evident purpose of cl 5.10 is that it is a catchall provision. It is intended to cover all possible claims connected with the disputes between the parties not covered by the other release and discharge clauses. The claims cover, or at least overlap, the claims covered by the other release clauses ‑ claims arising out of the circumstances of the claim, the subject of the Action and Peter's estate and WPPL. Clause 5.10 then extends the relief to claims 'irrespective of how such liability arises' and 'whether or not the parties are aware of such claims or action at the date of signing the deed', or confirms that the releases cover such claims.
813 The construction of cl 5.10 advanced by Julian is not a reasonable, sensible construction. Parties would not sensibly release each other from claims they are aware of connected with their disputes (widely described) but not from claims connected with those disputes of which they are not aware whilst at the same time releasing each other from claims not connected with those disputes of which they are not aware.
814 Julian advances other grammatical arguments that cl 5.10 does not cover the claims in this action. I do not accept those arguments. The ordinary and natural meaning of cl 5.10 extends to cover the claims in this action.
815 Julian next submits that the release does not apply to claims in fraud and that absent evidence to the contrary, Julian could not be taken to have intended to release Michael and Angela in respect of such claims.
816 A party may in a compromise agreement agree to release claims which encompass claims based on misconduct, deliberate wrongdoing or fraud in its many manifestations, if appropriate language is used to disclose that that is the parties' intention. That is both good law and good sense. It is not the court's function to frustrate the intentions of contracting parties once their intentions have been objectively ascertained; nor is the compromise and settlement of litigation advanced if parties are subsequently at liberty to bring claims which their agreement was intended to bar. A party that releases a fraud claim may later challenge that release on the ground that it was fraudulently induced only if it can identify a separate fraud from the subject of the release. Were this not the case, no party could ever settle a fraud claim with any finality.
817 The release clauses do not refer to misconduct, deliberate wrongdoing or fraud. That is because the parties have used language directed at subject areas rather than causes of action. In the subject area of Julian's counterclaim, objectively the parties would have had in contemplation claims of misconduct, deliberate wrongdoing or fraud. The claims by Julian in the counterclaim were based on misconduct, deliberate wrongdoing or fraud of Michael and Angela. The releases would have been empty if they did not cover such conduct. Julian's claims in relation to his entitlement as a residual beneficiary under Peter's will, the WPPL shares and the 1987 Sale Agreements (the Michael Contract and the Angela Contract) were similarly based on misconduct, deliberate wrongdoing or fraud of Michael and Angela and the releases in relation to those subject areas would be empty if they did not extend to claims based on misconduct, deliberate wrongdoing or fraud.
818 Equity prevents a releasee relying upon a general release as a release from a claim of which the releasor was not aware and did not intend to release the releasee from. Equity intervenes where it would be unconscionable to allow the releasee to rely on the strict legal construction of the release. It is part of equity's jurisdiction to restrain a party from any unconscientious reliance on legal rights.[192]
819 The parties' subjective intention can be relevant to the equity 'to have the general words of a release confined to the true purpose of the transaction ascertained from the scope of the instrument and the external circumstances'.[193] In Grant v John Grant Dixon CJ, Fullagar, Kitto and Taylor JJ stated that the application of the equitable doctrine can depend on proof, amongst other things, of the surrounding circumstances including the state of knowledge of the respective parties concerning the existence, character and extent of the liability in question and the actual intention of the releasor.[194]
820 Julian's evidence is that at the time of signing the Deed of Settlement, 22 April 2008, he 'did [not] know of the claims that are the subject of these proceedings'. The probative weight of that evidence is undermined by his evidence that he did not recall signing the document or the circumstances surrounding signing the document. Importantly, by 22 April 2008 Julian knew the critical facts upon which his case in this action depends if not the legal consequences or characterisation of those facts.
1. the contents of the letter of 1 November 1985 from Lang to Julian, Michael and Angela;
2. the matters discussed at the meeting of Julian, Michael and Angela with Lang on 28 November 1985; and the contents of the memorandum dated 3 January 1986 from Dalby to Michael commenting on the matters discussed with Lang, which was discovered by Julian in the Natalie and Timothy proceedings;
3. the contents of the Keall Brinsden memorandum of 20 March 1987, which was discovered by Michael in the Natalie and Timothy proceedings;
4. the minutes of the WPPL directors meeting of 23 December 1987 which record that WPPL received $5.1 million from the settlement of the concentrator royalty arbitration;
5. the terms of the 1962, 1968 and 1970 Royalty Agreements;
6. the terms of the 'Iron Ore Committee Booklet' which was discovered to Julian in January 2008 except for the map on the final page of the booklet;
7. the contents of the Keall Brinsden probate file in respect of Peter's will; and
8. the contents of the memorandum 'Where are we going?' dated 26 February 1986 from Salt to Michael.
822 In the Natalie and Timothy proceedings Julian was represented by solicitors and counsel. Julian entered into the settlements constituted by the Deed of Settlement on the basis of independent financial and legal advice. The terms of the releases as well as the circumstances of the compromise settlement show that the parties intended that all claims including claims based on misconduct, deliberate wrongdoing or fraud ‑ whether presently known or not ‑ should be released.
823 There is no evidence that Julian did not intend to release Michael and Angela from all possible claims, known or unknown, in connection with Peter's estate, the 1987 Sale Agreements or Julian's WPPL shares.
824 In the circumstances there is no basis for applying the equitable principle applied in Grant v John Grant. The very point of the contractual language chosen by the parties in the Deed of Settlement in cl 5.3, cl 5.5 and cl 5.10 and in the definitions of Julian Counterclaim and Julian Estate Rights appears to have been to cover all conceivable claims in connection with Julian's entitlement under Peter's will, Julian's WPPL shares, the 1987 Share Agreements and the conduct of Michael and Angela in relation to those matters including claims based on misconduct, deliberate wrongdoing and fraud and unknown claims.
825 There is no evidence that the parties subjective intention did not accord with the intention of the Deed of Settlement objectively ascertained. It is not unconscionable for Michael and Angela to rely upon their legal rights resulting from the releases objectively construed.
826 Further, or in the alternative to the defendant's defence that Julian is barred from bringing or maintaining this action by the releases in the Deed of Settlement, the defendants submit that Julian's present causes of action have been discharged by an accord and satisfaction arising out of the execution of the Deed of Settlement.
827 Julian advanced brief oral submissions that there are two broad answers to the defendants' defence of accord and satisfaction. First, on the proper construction of the Deed of Settlement, what was being released was the subject of the Natalie and Timothy proceedings and does not cover Julian's claims in this section.
828 Secondly, Julian submits, in reliance upon McDermott v Black,[195] that an accord and satisfaction only arises where a promise is made by the party liable that the party liable will satisfy the claim of the other party by doing something and the other party agrees to accept not the promise but the act in satisfaction of his claim. Junior counsel for Julian, Mr Healy, submitted: 'that [can] only apply where the parties exclusively refer to the cause of action the subject of that accord. The accord and satisfaction doctrine can have no application to Julian's claim based on his submissions advanced in relation to what was captured by the [Deed of Settlement]'. Julian submits that there was no release from liability for claims that Julian did not have any knowledge of and Julian did not agree to accept any act in exchange for the cause of action which he now advances in this action.
829 The effect of Julian's submissions is that if claims in the present proceedings are covered by the releases in the Deed of Settlement, as I have found they are, then in the circumstances of this case it will follow that Julian's present claims have been discharged by an accord and satisfaction.
830 The defendants have advanced separate submissions in relation to the defence of accord and satisfaction which in substance I accept.
831 Whether there has been an accord and satisfaction is a question of fact.[196] It turns upon an objective assessment of the parties' intentions, which may be discerned from the terms of their written agreement or from the surrounding circumstances and context in which the relevant conduct took place.[197]
832 The Deed of Settlement came into existence as a result of a mediation between the parties to the Natalie and Timothy proceedings. The evident purpose of the agreement was to effect a compromise between the parties' competing claims to the WPPL shares in question. Under cl 3.3 of the Deed of Settlement, Natalie and Timothy accepted Michael and Angela's promise to transfer to them $70 million in consideration of the matters in cl 3.2(a) ‑ (b) and in order that Michael and Angela could retain title to the shares in question. Mutual releases, discharges and covenants not to sue were given. Julian accepted the benefit of keeping the purchase price paid to him by Michael and Angela under the 1987 Sale Agreements, without himself making any contribution to the payment made by Michael and Angela to Julian's children to settle those proceedings in which Natalie and Timothy alleged wrongdoing by Michael and Angela as executors of Peter's estate in respect of the 1987 Sale Agreements. Julian also received the benefit of the mutual releases and covenant not to sue, particularly in cl 5.2 and cl 5.5.
833 By cl 5.3(a) Julian released and discharged Michael and Angela from:
(a) the Julian Counterclaim (defined to include 'any claim or right or action that Julian ... may have had in respect of or arising in relation to Julian Estate Rights, the Subject Shares or the Edix Agreement but for this settlement'); and
(b) any liability arising out of or in connection with Peter's Will, the Michael Contract, the Angela Contract or the Action.
834 By cl 5.5 Julian also promised not to bring or continue any other claim or proceeding against Michael and Angela:
in any way connected with ... the Julian Counterclaim, the Will, ... Michael and Angela's conduct as executors of [Peter's estate] or the validity of the title of Michael and Angela to the Subject Shares acquired by Michael and Angela pursuant to the Michael Contract and the Angela Contract
and released Michael and Angela in respect of any claim or proceeding referred to in that clause. Michael and Angela gave correlative promises not to sue.
835 The broad language chosen by the parties and the context of an agreement evincing an intention to settle all claims between the parties in connection with the Subject Shares and the Will, leads to the conclusion that, on its proper construction, cl 5.5 was not confined to claims that were known to Julian. Further, or alternatively, if Julian's claims are not caught by cl 5.5, they are released and discharged by cl 5.10. Further, by cl 5.11 the parties expressly agreed that the Deed of Settlement may be pleaded as a bar to 'any claim, cause of action, proceedings, demands, damages, losses, costs or expenses or action' which is the subject of legal proceedings brought by or on behalf of Julian, in respect of the circumstances referred to in the deed. The circumstances referred to in the deed include those set out in cl 5.3, cl 5.5, and cl 5.10. The bar to proceedings in cl 5.11 captures all of the claims brought in this proceeding, whether or not Julian was aware of them at the time of signing the Deed of Settlement Deed.
836 The defendants submit, and I accept, that the Deed of Settlement should be construed as embodying mutual promises by the parties to forbear from pursuing their respective claims to the WPPL shares in question by agreeing to dismiss those claims. The requirement of consideration is satisfied by the significant payment made under the deed, the forbearance by Michael and Angela from pursuing a return of any part of the purchase price they paid to Julian under the 1987 Sale Agreements, and the parties' mutual promises not to proceed with their claims, to bear their own costs of the Natalie and Timothy Proceedings and to provide mutual releases and discharges.
837 Julian's present causes of action against Michael and Angela have therefore been discharged.
838 Further and in the alternative to their defences of release and discharge and accord and satisfaction, the defendants submit that Julian's claims against Michael and Angela are time barred.
839 It is common ground that the Limitation Act 1935 (WA) (the Act), which applies to causes of action that accrued before 15 November 2005, applies in this case.
840 The defendants submit that Julian's present causes of action accrued, at the latest, on or about 23 February 1987, being the date of completion of the 1987 Sale Agreements when, in accordance with Julian's case, Julian suffered loss through the sale of his interests in the WPPL shares and Peter's estate at an undervalue.
841 In relation to Julian's cause of action in deceit or common law fraud, the Act stipulates, in relation to torts such as deceit, a limitation period of six years after the cause of action accrued. That cause of action was complete when damage was first suffered by Julian, that is, by no later than 23 February 1987 on which date Julian effected the transfer of his shares to Michael and Angela. Accordingly, Julian's claims in deceit (embracing all of the various allegations of fraudulent misrepresentation and concealment) have been time barred since approximately 23 February 1993, irrespective of his actual or claimed state of knowledge at that time.[198]
842 Whether or not the existence of Julian's cause of action was fraudulently concealed from him by the defendants is irrelevant to the application of that time bar.[199]
843 Julian has not advanced any submissions concerning the statutory limitation period barring his cause of action in deceit. I accept the defendant's submissions that Julian's causes of action for fraudulent misrepresentation or fraudulent nondisclosure are time barred.
844 The defendants further submit that Julian's delay in prosecuting his case is such that it would cause significant and irremediable prejudice to the defendants if he were permitted to proceed. Julian's claim should therefore be dismissed on account of laches.
845 Laches is an equitable defence to an equitable claim. In this case the defendants rely upon laches as a defence to Julian's claims for breach of fiduciary duty and equitable fraud. The defendants rely upon laches in the form of delay involving prejudicial change of circumstances.
846 The essential elements of the doctrine of laches are (a) knowledge by the plaintiff of the wrong; (b) delay; and (c) unconscionable prejudice caused to the opponent by the delay. The key element is whether, in all the circumstances, it would be practically unjust to give a remedy. Normally, that means that the defendant must show both delay and detriment suffered by the delay.[200]
847 An important question concerns knowledge. The authors of the fifth edition of Meagher, Gummow and Lehane's Equity Doctrines and Remedies distinguish between 'the kind of laches which really consists of waiver implied by conduct' and 'the kind of laches which consists of a plaintiff's long delay leading to the defendant reasonably altering their position to their detriment in reliance thereon'. The authors say that in the latter case, which is the way in which the defendants put their defence, there seems to be no reason why the fact of the plaintiff's ignorance of his or her rights should bar a defence of laches.[201]
848 Professor Dal Pont says that time begins to run once the plaintiff becomes aware of the facts upon which the right to relief is founded[202] and cites numerous authorities in support of that proposition.[203] Professor Dal Pont further says that the court may enquire whether it was reasonable for a plaintiff with knowledge of the underlying facts to be ignorant of his or her rights. In support of that proposition Professor Dal Pont refers to Williams v Auckland Council[204] where the New Zealand Court of Appeal said that determining whether the plaintiffs' delay disqualified them from relief required a balancing of competing rights and equities. The court said the question is whether with knowledge of the facts giving rise to a right of action the plaintiffs have by their inactivity placed the defendant in the position where it would be inequitable or unreasonable if the remedy were later asserted. After reviewing relevant authorities including the classical authorities of Allcard v Skinner,[205] Re Howlett[206] and Lindsay Petroleum Co Ltd v Hurd,[207] the court rejected the argument that it should adopt as 'the chronological starting point for our enquiry into delay the date or dates upon which [the plaintiffs] learned of both (a) the facts giving rise to their rights to sue and (b) the legal consequences of those facts'.[208]
849 The critical matters Julian relies upon in his claim for breach of fiduciary duty in relation to Peter's estate is that Peter's estate had an entitlement to royalties and an entitlement to participate in the expected award in the Concentrator Royalty Arbitration, and consequently Peter's estate was not insolvent, and Michael and Angela did not disclose those matters to him.
850 The delay is measured from the time a party knew or ought to have known the facts comprising the right.[209]
851 Julian possessed copies of the 1962, 1968 and 1970 Royalty Agreements at least by January 2001 when he gave discovery of them in the Natalie and Timothy proceedings.
852 Julian discovered a copy of the Keall Brinsden memorandum of 20 March 1987 in these proceedings. If, as I have found, Julian did not receive a copy of the memorandum in March 1987 he must have received a copy after it was discovered by Michael in the Natalie and Timothy proceedings on 4 November 2004 or after it was again discovered by Michael and Angela on 24 January 2008. I find that Julian was in possession of a copy of the Keall Brinsden memorandum no later than January 2008. That memorandum is a critical matter on which Julian relies to establish that Michael and Angela knew that Peter's estate had an entitlement to royalties and an entitlement to participate in the expected award in the Concentrator Royalty Arbitration.
853 For the reasons set out earlier in these reasons I find that before signing the Deed of Settlement on 22 April 2008 Julian had sufficient knowledge of the facts upon which he brings the present action, or he ought to have known or ascertained the facts.
854 Julian did not commence the present proceedings until 24 February 2017, a delay of nine years. In that time, he agreed with Michael and Angela to settle his claim against them in the Natalie and Timothy Proceedings by entering into the Deed of Settlement, thereby facilitating a payment to his children of $70 million, dismissing his counterclaim against Michael and Angela with respect to the shares in question and providing broad releases in respect of any claims related to those shares.
855 His failure to do anything to obtain more detail or prevent the defendants from proceeding on the basis that there was no challenge to their rights, despite asserting unconscionable conduct by Michael and Angela against him, brings laches into application. Julian claims not to have appreciated the significance of the information in his possession, but the 'availability of the means of knowledge is as good as knowledge'.[210]
856 Substantial prejudice is caused to the defendants as a result of Julian's delay in bringing these proceedings. Fieldhouse and Michael were central participants in the events the subject of the allegations in this action. Both are alleged to have been the agents or perpetrators of fraud. Fieldhouse died in November 2007, and Michael died on 26 April 2012. There is prejudice and unfairness arising out of the inability of each of Fieldhouse and Michael to defend the allegations now levelled against them.
857 The seriousness of a finding of dishonesty or reckless indifference to the truth will ordinarily mean that it may not be made without an opportunity being given to deal with the criticism.[211] Michael and Fieldhouse have each been denied that opportunity.
858 Michael, Michael's estate and Angela have each been deprived of the use of the $70 million paid to Natalie and Timothy pursuant to the Deed of Settlement in exchange amongst other things for their title to the shares now sought by Julian.
859 In the period since (relevantly) 23 February 1987 Michael and Angela expended time and effort in acting as directors of WPPL. The company has not only been a passive recipient of royalties, it has engaged in very substantial litigation to assert and maintain its rights in relation to the Rhodes Ridge and Mount Bruce mineral deposits during the time Michael and Angela were directors.
861 In view of my finding that Julian is precluded from maintaining this claim by laches it is unnecessary to determine this defence. I will set out my finding in a summary way.
862 The Act does not specifically deal with actions for breach of fiduciary duty or equitable fraud. Where the Act has no direct application to causes of action founded on equity, the Act may be applied by analogy under doctrines developed by equity.
863 It is a prerequisite for a limitation period by way of analogy that there is a requisite analogy between the equitable cause of action and one to which the statutory limitation period applies. To determine the closeness of the respective causes of action, the court examines, amongst other things, the scope, policy and purpose of each.
864 The defendants submit that Julian's actions for breach of fiduciary duty are analogous to claims for breach of contract or deceit.
865 A claim for breach of fiduciary duty founded upon the same facts as would justify a claim in tort or contract attracts the same limitation period as would apply to a claim in tort or contract.[214] Some differences between the elements of the cause of action or remedies afforded at law and the elements of cause of action or remedies afforded in equity does not prevent the identification and application of the appropriate analogy.[215]
866 It is difficult to determine whether there is sufficient correspondence between Julian's case for breach of fiduciary duty and his allegations of fraud. Some of the matters underpinning the alleged breaches of fiduciary duty, for example misrepresentations that the Statement of Assets and Liabilities was accurate and complete and disclosed all Peter's assets and that WPPL's financial statements did not record any value in respect of WPPL's mining tenements because they had no value because they required financial expenditure and they could be potentially taken away by the government, are based on the same factual allegations as the common law claims of fraud. However, other allegations do not found the common law fraud claims, for example the failure to disclose matters relating to the Hancock and Wright partnership split or that Rhodes Ridge had extensive reserves of iron ore, security of tenure and CRA as a joint venture partner responsible for carrying out exploration and expenditure.
867 I am not satisfied that there is sufficient correspondence between Julian's claims for breach of fiduciary duty and his claims for common law fraud so as to apply, by analogy, the limitation period for the common law fraud claims to the breach of fiduciary duty claims.
868 It is unnecessary to consider Julian's further claims that there are circumstances which make the application of the statute unconscionable and that the court should, in the exercise of its discretion, having regard to considerations similar to those applied in respect of the doctrine of laches, declined to apply the statutory limitation period by analogy.
869 Where an action has been brought and judgment entered on the action, no other proceeding may be maintained on the same cause of action. In determining what the judgment decided, a court will examine the pleadings and the judgement. An issue that appears on the record to have been decided cannot be raised again.
870 The defendants submit that the issue or issues that have been decided, and which Julian seeks to litigate again, are raised at [14], [16] and [21] of Julian's counterclaim in the Natalie and Timothy proceedings. Paragraph 16 pleads that the defendants acted in breach of the fiduciary duties owed to the plaintiffs which conduct was unlawful or in bad faith or both by reason of the matters pleaded in [14]. Paragraph 14 refers to the defendants forcing Julian to sell his shares by threatening to exercise the option and refusing to provide Julian with any benefits from or through WPPL. Paragraph 21 pleads that by reason of the pleaded duress or undue influence Julian entered into the 1987 Sale Agreements.
871 The issue is not clear. I am inclined to the view that Julian is not precluded by a res judicata from pursuing this action. However, in view of my other findings it is unnecessary to come to a final view.
872 The defendants submit that Julian is prevented from litigating his claims against Michael and Angela by an Anshun estoppel. An Anshun estoppel precludes the assertion of a claim or of an issue of law or fact between parties to a proceeding or their privies 'if the claim or issue was so connected to the subject matter of the first proceeding as to make it unreasonable, in the context of the first proceeding, for the claim or issue not to have been made or raised in it'.[216]
873 The defendants submit that the subject matter of Julian's counterclaim in the Natalie and Timothy proceedings and the relief sought by him mirror the subject matter and claimed relief in the present proceedings and Julian could and should have raised in those earlier proceedings the matters of fact and law upon which he now relies.
874 Julian submits that Anshun estoppel does not apply because the causes of action in this proceeding are not related to the earlier proceedings and even if they were the court should exercise its discretion to not allow such an estoppel to be raised in these proceedings because of the nondisclosures of which Julian complains in these proceedings.
875 In view of the findings I have reached, particularly in relation to the Deed of Settlement it is unnecessary to consider questions of nondisclosure in the context of Anshun estoppel.
876 The primary relief sought by Julian is rescission of the 1987 Sale Agreements together with the return by way of transfer of his shares in WPPL.
877 The defendants submit that at common law, the court would only allow rescission where precise restitution was possible and that a contract may only be rescinded for fraudulent misrepresentation. The defendants submit that in order for Julian to obtain rescission by reference to his cause of action based on deceit, he must establish that Michael and/or Angela engaged in fraud, and he must establish that precise restitution is possible. The defendants submit that precise restitution is not possible.
878 The defendants agree that equity is more flexible and will grant rescission if it can do what is 'practically just' between the parties and by doing so restore them 'substantially to the status quo'.[217] The defendants submit that it is not possible to achieve practical justice and to restore Michael, Julian and Angela to the position is that each occupied a prior to the 1987 Sale Agreements for substantive reasons. One of those reasons is that the Deed of Settlement would need to be set aside in order to achieve substantial restitutio in integrum. Julian has not sought an order setting aside the Deed of Settlement and two of the parties to that agreement, Natalie and Timothy, are not parties to this proceeding.
879 It is unnecessary to consider these issues because I have decided that the Deed of Settlement precludes the granting of relief to Julian. It is inappropriate to consider these matters further because it would be necessary to do so on the basis of particular hypothetical findings and the outcome would be affected by which particular hypothetical findings I adopted for that purpose.
Julian's claim against third to sixth and eighth and ninth defendants
880 Julian's case is that Michael and Angela breached the fiduciary duties they owed to him and any benefit gained is held by them as constructive trustee. Michael's WPPL shares which he held at the time of his death are now held by VOC Group Pty Ltd, the fifth defendant. The shares in WPPL held by Angela are now held by AMB Holdings Pty Ltd, the sixth defendant.
881 Julian joined the third to sixth and eighth and ninth defendants because the alleged breaches of fiduciary obligations and fraudulent concealment engaged in by Michael and Angela resulted in Julian's WPPL shares and his interest in Peter's estate which they purchased from Julian under the 1987 Sale Agreements being impressed with a trust in favour of Julian, such that those shares, any dividends paid by WPPL in respect of those shares and his interest in Peter's estate are liable to be accounted for by those defendants to Julian.
882 I have found that Michael and Angela did not breach any fiduciary duty in acquiring Julian's WPPL shares.
883 I have found that in acquiring Julian's interest in Peter's estate Michael and Angela breached the fiduciary duty they owed as executor to Julian as a beneficiary of the estate and were liable in deceit and in equitable fraud.
884 However, by the Deed of Settlement Julian released and discharged Michael and Angela from those claims. Clause 2.1(f) of the deed provides that a reference to a party includes the party's successors and permitted assigns. The third to sixth and eighth and ninth defendants are successors and assigns of Michael and Angela.
885 Julian's claim against third to sixth and eighth and ninth defendants are not maintainable in this action.
886 Julian joined WPPL, the seventh defendant, because it maintains the register of its members and Julian seeks orders that its register of members is rectified such that Julian is registered as the holder of the shares transferred by him under the 1987 Sale Agreements. The effect of my findings is that no order should be made requiring Julian to be registered as the holder of the shares transferred by him under the 1987 Sale Agreements. No other relief is sought against WPPL.
887 The defendants plead, and I find, that by instituting the action Julian has breached the terms of cl 5.3, cl 5.5 and cl 5.10 of the Deed of Settlement. The defendants plead that they will suffer loss and damage by reason of Julian's breach of the Deed of Settlement. The particulars of loss and damage pleaded by the defendants is that the defendants will lose the difference between their recoverable legal costs in these proceedings and the costs they will actually occur in their defence of the claims against them.
888 The defendants counterclaim for various relief. First, the defendants seek a declaration that the Deed of Settlement is valid and effective as between Julian, Michael and Angela. The validity of the deed was not in issue. The issue was whether or not the deed barred Julian's claims in this action.
889 Secondly, the defendants seek damages for breach of the Deed of Settlement and interest. That was not the subject of evidence or submissions at trial.
890 Thirdly, the defendants seek a permanent injunction restraining Julian from commencing any further proceedings against Michael's estate and Angela and, or alternatively, any further proceedings connected with Peter's estate or WPPL. That was not the subject of submissions at trial.
891 I will hear from the parties as to what, if any, orders are appropriate in relation to the defendants' counterclaim.
1. Julian has established his cause of action against Michael and Angela that, in acquiring Julian's interest in Peter's estate, Michael and Angela breached the fiduciary duty they owed as executor to Julian as a beneficiary of the estate.
2. Julian has established his causes of action in deceit and equitable fraud in relation to Michael and Angela acquiring his interest in Peter's estate.
3. Julian has not established his cause of action against Michael and Angela that, in acquiring Julian's WPPL shares, Michael and Angela breached the fiduciary duty as directors they owed to Julian as a director and shareholder of WPPL.
4. Julian has not established his causes of action in deceit and equitable fraud in relation to Michael and Angela acquiring his shares in WPPL.
5. Julian's claims against the first and second defendants are barred by the Deed of Settlement.
6. The claims against the third to sixth and eighth and ninth defendants are barred by the Deed of Settlement.
7. Julian breached the Deed of Settlement by instituting this action.
893 I will hear from the parties as to the orders which should be made to give effect to these findings.
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
CITATION : WRIGHT -v- DAVID JOHN NEALE LEMON as executor of the estate of MICHAEL JOHN MAYNARD WRIGHT [No 2] [2021] WASC 159 (S)
DAVID JOHN NEALE LEMON as executor of the estate of MICHAEL JOHN MAYNARD WRIGHT
Costs - Whether costs should be paid on indemnity basis - Whether claim was hopeless
Costs - Whether the defendants should pay the plaintiff costs of issues - Whether the defendants introduced new issues - Whether those issues were present in the plaintiff's pleadings
Costs - Special costs order - Whether costs under costs determination inadequate - Legal Profession Act 2008 (WA) s 280(2)
Limitation Act 1985 (ACT)
Plaintiff pay all of defendants' costs of the action
Amaca Pty Ltd (Formerly James Hardie & Co Pty Ltd) v Patricia Margaret Hannell as Executor of the Estate of David Richard Hannell (Dec) [2007] WASCA 158 (S)
McKechnie v Connell (WASC, Nicholson J, Lib No 940023, 20 December 1993, unreported)
Ruddock v Vadarlis (No 2) [2001] FCA 1865; (2001) 115 FCR 229
Strzelecki Holdings Pty Ltd v Jorgensen [2019] WASCA 96; (2019) 54 WAR 388
Wagdy Hanna & Associates Pty Ltd v National Library of Australia [2012] ACTSC 126; (2012) 7 ACTLR 70
Warren v Lawton [No 3] [2016] WASC 285 (S)
894 On 2 July 2021, I delivered reasons for judgement in which I found:
1. The plaintiff (Julian) has established his cause of action against Michael Wright[218] and the second defendant (Angela) that in acquiring Julian's interest in the estate of Ernest 'Peter' Wright (Peter's estate) Michael and Angela breached the fiduciary duty they owed as executor to Julian as a beneficiary of the estate.
2. Julian has established his causes of action in deceit and equitable fraud in relation to Michael and Angela acquiring his interest in Peter's estate.
3. Julian has not established his cause of action against Michael and Angela that in acquiring Julian's WPPL shares Michael and Angela breached the fiduciary duty as directors they owed to Julian as a director and shareholder of WPPL.
4. Julian has not established his causes of action in deceit and equitable fraud in relation to Michael and Angela acquiring his shares in WPPL.
5. Julian's claims against the first and second defendants are barred by the Deed of Settlement.
6. The claims against the third to sixth and eighth and ninth defendants are barred by the Deed of Settlement.
7. Julian breached the Deed of Settlement by instituting this action.
895 On the same day, 2 July 2021, to give effect to those reasons, I ordered that the plaintiff's claim be dismissed. I further ordered that the matter be referred to a directions hearing for the parties to be heard regarding orders relating to the defendants' counterclaim and orders relating to costs. I have not made any further directions in relation to the defendants' counterclaim which remains to be resolved. I made directions for the filing of submissions and affidavits in relation to the question of costs. These are my reasons for determining the question of costs.
896 For the reasons which follow, I find that the plaintiff shall pay the defendants' costs of and incidental to the proceedings, including reserved costs, and there should be a special costs order as set out in these reasons.
897 The defendants claimed that the plaintiff should pay their costs of and incidental to the proceeding on an indemnity basis. The defendants put their claim on two bases. The first basis is that the plaintiff, properly advised, should have known that he had no chance of success. The defendants submit that, relevantly, indemnity costs may be awarded where litigation is commenced in the face of a deed of settlement. The defendants refer to the decision of Refshauge J in Wagdy Hanna & Associates Pty Ltd v National Library of Australia[219] in support of their submissions.
898 In Wagdy Hanna & Associates Pty Ltd v National Library of Australia, the plaintiff was an unsuccessful tenderer for the provision of a new storage facility for the defendant. The plaintiff complained of the defendant's tender process and commenced proceedings in the Federal Court of Australia. The proceedings were discontinued and the parties entered into a deed of settlement. Subsequently, the plaintiff commenced new proceedings in the Supreme Court of the ACT, claiming damages or compensation alleging that there had been a breach of a duty of confidentiality in respect of information supplied with its tender and unjust enrichment. The defendant denied it had disclosed any confidential information. It also pleaded that (i) the plaintiff's action was barred by the Limitation Act 1985 (ACT); (ii) the deed of settlement released the defendant from any further claims; and (iii) the plaintiff was estopped (Anshun estoppel) from prosecuting its new claims as it had not raised them in the Federal Court proceedings. The defendant also pleaded a counterclaim, claiming that the plaintiff had breached a covenant in the deed of settlement by commencing proceedings. The orders sought by the defendant in its counterclaim included damages for breach of the deed of settlement and costs to be paid on the indemnity basis. The plaintiff claimed the defendant had breached the deed by disclosing the terms to a journalist and was not entitled to the release. It also claimed that time was postponed under s 33 of the Limitation Act. Justice Refshauge held that the defendant had not breached the deed of settlement, that the plaintiff's claim was covered by the deed of settlement and the defendant could rely on it in its defence and counterclaim.
899 In addressing the defendant's counterclaim Refshauge J first considered its claim to damages. His Honour determined that the proper measure of damages was an award of indemnity costs. His Honour then considered the costs order sought by the defendant and observed that there was a 'convergence' with its claim for damages. His Honour referred to the power of the court to award costs on an indemnity basis and said that one ground for such an order is where proceedings are commenced or continued in circumstances where the applicant, properly advised, should have known that he had no chance of success. His Honour observed:[220]
Of course, such cases should be distinguished from 'marginal' cases, else every unsuccessful litigant would, by definition, be at risk of paying costs on an indemnity basis as the court has rejected their claim or defence. That is neither the law nor appropriate.
Of course, the distinction between a case so hopeless that it ought to be visited with an indemnity costs order and a merely marginal one is not easy to draw [332] ‑ [333].
Nevertheless, it seems to me that there is a case here for an award of indemnity costs on the traditional basis, both because the litigation was commenced in the face of the deed of settlement and then its continuance in the light of the comprehensive evidence of the defendant's witnesses which showed the flimsiness of the inferences that were necessary to underpin the plaintiff's case.
In any event, I am also satisfied that this would be the measure of the damages payable to the defendant for the breach of the deed of settlement. There should be an award of costs of the claim and counterclaim on the indemnity basis to the defendant [339] ‑ [340].
901 This case is distinguishable from Wagdy Hanna & Associates Pty Ltd v National Library of Australia on two grounds. First, the defendants' claim for damages in their counterclaim has been expressly reserved.
902 Secondly, I am not persuaded that the plaintiff commenced or continued the proceedings in circumstances where, properly advised, he should have known that he had no chance of success. The question must be looked at not with hindsight but having regard to the circumstances as they appeared to the plaintiff when he commenced and continued the proceedings. I have found against the plaintiff and in particular I have found that his claims are barred by the deed of settlement. However, I am not persuaded that the plaintiff's arguments that his claims were not covered by the deed were so hopeless that he should be ordered to pay the defendants' costs on an indemnity basis.
903 It is not sufficient that I have found the plaintiff breached the deed of settlement by bringing these proceedings and that it is likely that the damages to which the defendants are entitled are the actual costs of defending the proceedings which would amount to indemnity costs. The court has inherent jurisdiction to make an indemnity costs order. The discretion to make such an order must be exercised judicially. The defendants' counterclaim has not been determined. It would be wrong in principle to make an order for indemnity costs in anticipation of that being the likely outcome of the defendants' counterclaim.
904 The court might, in an appropriate case, order indemnity costs where a plaintiff brings proceedings in breach of a deed. However, there is no principle that a court should order indemnity costs merely because the proceeding was brought in breach of a deed or contract not to do so. Whether or not an indemnity costs order should be made will depend on all the circumstances. In this case, I find that the plaintiff's case was not hopeless. The plaintiff's conduct in bringing the action in the face of the deed of settlement does not of itself warrant an order for indemnity costs.
905 The costs of proceedings are in the discretion of the court but, without limiting the general discretion, the court will generally order that the successful party recover their costs.[221] Nevertheless O 66 r 1(3) of the Rules of the Supreme Court 1971 (WA) provides that where a party though generally successful in an action has, by the introduction of some issue or issues on which they have failed, increased the costs the court may order such party to pay the costs of such issue or issues. It is common ground that the defendants were the successful parties. However, the plaintiff submits that the defendants increased the costs by the introduction of issues on which they failed.
906 The plaintiff and the defendants referred to the following statement concerning O 66 r 1(3) by the Court of Appeal in Strzelecki Holdings Pty Ltd v Jorgensen:[222]
Under O 66 r 1(3) RSC, where a party, though generally successful in an action, has, by the introduction of some issue or issues on which it has failed, increased the costs, the Court may order such party to pay the costs of such issue or issues. It is well‐recognised that an order that a successful party recover only a portion of its costs, where it has not been wholly successful, should not be made as a matter of course, for at least two reasons. First, it is often the case that a successful party will not succeed on every issue raised. Secondly, to attempt, in every case, an analysis of which party was successful on which issue would add uncertainty and complexity to the outcome of litigation, and add to the time and cost of costs arguments. Consequently, the power to apportion costs in this way should only be exercised where there are discrete and severable issues on which the generally successful party failed, and which added to the cost of the proceedings in a significant and readily discernible way. Furthermore, while parties should be encouraged to consider carefully what matters they put in issue, justice may not be served if, by too ready a resort to deciding questions of costs according to success on particular issues, parties are dissuaded by the risk of costs from canvassing all issues which might be material to the decision in the case [51].
907 The plaintiff submits that the success or failure on issues can be summarised as follows:
Peter's Estate breach of fiduciary duties and equitable fraud
WPPL shares breach of fiduciary duty owed by Angela and Michael as directors
Proper construction of 1968 and 1970 Royalty Agreements
Valuation of Peter's personal royalty interest under 1962 Royalty Agreement
Fieldhouse and Salt being Angela's and Michael's agents
908 The defendants submit that the court should not order the defendants to pay the costs of any issues for three reasons. First, the defendants did not introduce discrete or severable issues on which they failed. Rather, the defendants met the case that was put against them regarding the issues on which they failed. Further, the defendants submit it was entirely reasonable for them 'to put the [plaintiff] to proof of all of the issues necessary to establish [his] cause of action', which is a reference to a statement by the Court of Appeal in Amaca Pty Ltd (Formerly James Hardie & Co Pty Ltd) v Patricia Margaret Hannell as Executor of the Estate of David Richard Hannell (Dec).[223]
909 I do not agree that the defendants did not introduce the issues on which they failed for the purposes of O 66 r 1(3). In this sense 'issue' does not mean a precise issue in the technical pleading sense, but any disputed question of fact or law.[224] An 'issue' refers to a question in dispute in the action between the parties where one side affirms and the other denies a contention. What is in issue is determined on the pleadings. A defendant may relevantly introduce an issue by denying facts pleaded by the plaintiff. A contrary interpretation of the rule would defeat its purpose which is to encourage parties not to incur unnecessary costs by unnecessarily disputing facts or contentions.
910 The defendants submit that the factual and evidentiary substratum to each of the issues on which the plaintiff succeeded was substantially common to all issues that arose in the proceedings. I do not agree. A significant amount of time was taken up with evidence and submissions concerning the issues on which the plaintiff succeeded which was not relevant to the issues on which he failed.
911 Secondly, the defendants submit that their conduct in contesting the issues on which they failed did not add to the cost of the proceedings in a significant and readily discernible way. I do not agree. The issues on which the defendants failed added significantly to the time, and accordingly costs, of the trial. It is not practicable to go through the evidence of each witness and the submissions of each counsel and attribute parts of the evidence and submissions to the issues on which the defendants failed. To do so in a trial which occupied 22 sitting days would be oppressive and an unjustified use of judicial resources. The appropriate course is to take a pragmatic approach and, if such an order is made, to award the successful party a proportion of their costs but not the full amount so as to reflect the costs incurred in relation to the issues on which they failed.
912 Thirdly, the defendants submit that as a matter of discretion the court should not apportion costs in this case. They submit that the fact that Julian obtained favourable findings of fact on some, but not all issues, is not to the point given that the case was brought on causes of action which have been held to be barred or discharged and was settled in 2008. The justice of the case, and the proper exercise of the discretion, they submit requires that the court should fully compensate the defendants for the costs incurred in defending proceedings which were, in effect, held to be improperly brought.
913 I agree. The issues on which the defendants failed included findings of serious misconduct. However, the issues in relation to those matters arose from the plaintiff's pleading and the defendants did not act unreasonably in contesting those matters. The plaintiff failed on all his pleaded causes of action because they were all barred by the deed of settlement. In that sense the defendants were wholly successful.
914 The defendants should have all of the costs of the action, including reserved costs.
915 I am of the opinion that the amount of costs allowable in respect of this action under the relevant costs determinations is inadequate because of the unusual difficulty and the complexity and the importance of the matter. I have formed this opinion as the judge who case managed the matter to trial, conducted the trial and reviewed the evidence and legal submissions for the purpose of writing my reasons for judgement, and having regard to the matters deposed to by Gareth Jenkins, the solicitor with the day-to-day conduct of the proceeding on behalf of the defendants, in his affidavit sworn on 16 July 2021. For that reason, I exercise my discretion to make a special cost order pursuant to Legal Profession Act 2008 (WA) s 280(2).
916 In his written submissions of 15 July 2021 the plaintiff agreed that by reason of the complexity of the case, it is an appropriate case for there to be an uplift in the scale items under the relevant costs determinations but said that the defendants had not provided any evidence in respect of such uplifts and the matter should not be left 'at large' for the costs assessor and reserved his position with respect to making specific submissions in response to the defendants' special costs order submissions. Subsequently, the defendants filed the affidavit of Gareth Jenkins sworn 16 July 2021 and submissions in which they submitted that the circumstances warrant a lifting of all scale limits and orders in the form proposed in their minute of proposed orders filed 20 July 2021. The plaintiff made no submissions in response.
917 In the exercise of my discretion, I consider the appropriate order is that proposed by the defendants, which is:
The plaintiff pay the defendants' costs of and incidental to the proceeding, including reserved costs, to be taxed if not agreed. Any such taxation of costs is to be undertaken:
(i) without reference to the limits provided for in Table B at cl 13 of the Legal Practitioners (Supreme and District Courts) (Contentious Business) Determination 2020 (2020 Scale), cl 14 of the Legal Profession (Supreme and District Courts) (Contentious Business) Determination 2018 (2018 Scale), cl 13 of the Legal Profession (Supreme Court) (Contentious Business) Determination 2016 (2016 Scale) and cl 9 of the Legal Profession (Supreme Court) (Contentious Business) Determination 2014 (2014 Scale);
(ii) without reference to the hourly rates and the daily rates provided for solicitors (senior, junior and restricted), Clerks and Paralegals, Junior Counsel and Senior Counsel in Table A at cl 11 of the 2020 Scale, cl 12 of the 2018 Scale, cl 11 of the 2016 Scale and cl 8 of the 2014 Scale; and
(iii) including reasonable allowances for work undertaken by Senior Counsel and Junior Counsel.
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
[1] Proceedings brought in this court by Julian's children, Natalie and Timothy, against Michael and Angela and in which Julian was a third party.
[2] The plaintiff says this principle is sometimes referred to as the fair dealing rule.
[3] Any sum that was payable in respect of the concentrator royalties payable under a royalty agreement dated 12 December 1962 between Lang, Peter, WPPL, Hancock Prospecting Pty Ltd (HPPL), Rio Tinto Management Services (Australia) Pty Ltd, Rio Tinto Southern Pty Ltd and Hamersley Iron Pty Ltd (Hamersley Iron).
[4] By deed of assignment made 13 May 1996 Julian assigned to Edix Pty Ltd his interest in or to Peter's residuary estate. Edix was the trustee of the Nattim Trust, a discretionary trust of which Julian was guardian and appointor and the beneficiaries included Julian's children, Natalie and Timothy.
[5] In June 1983 and January 1985 Julian executed agreements by which he granted to Peter an option to buy all of Julian's shares in WPPL for $1,070,200.
[6] Nicholas v Western Australia [1972] WAR 168, 171.
[8] Iron Ore (Hanwright) Agreement Act 1967 (WA).
[9] Hancock Prospecting Pty Ltd v Wright Prospecting Pty Ltd [No 9] [2010] WASC 44.
[10] Hancock Prospecting Pty Ltd v Wright Prospecting Pty Ltd [2012] WASCA 216; (2012) 45 WAR 29.
[11] Wright Prospecting Pty Ltd v Hamersley Iron Pty Ltd [2013] NSWSC 536.
[12] Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd [2014] NSWCA 323.
[13] Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd [2015] HCA 37; (2015) 256 CLR 104.
[14] The National Mutual Life Association of Australasia; Hancock; Wright; Hancock Prospecting Pty Ltd; Wright Prospecting Pty Ltd; LSP Pty Ltd v Hamersley Iron Pty Ltd (Unreported, SCWA, 27 November 1984).
[15] Hamersley Iron Pty Ltd v The National Mutual Life Association of Australasia Ltd (1985) 64 ALR 19.
[16] If Peter's executors exercised the option, Julian's 1,350 shares would form part of Peter's residuary estate to which Julian would be entitled to one‑third, that is, 450 shares.
[19] Hancock Prospecting Pty Ltd v Wright Prospecting Pty Ltd [2012] WASCA 216; (2012) 45 WAR 29.
[20] Exhibit 1312, Joint Report of John McGuinness and Tony Samuel, 18 December 2019.
[21] Exhibit 1323, Report of Tony Samuel, 31 January 2020 [18].
[22] Exhibit 1324, Report of John McGuinness, 31 January 2020, page 2.
[23] Edmunds v Pickering [No 3] [1999] SASC 510; (1999) 75 SASR 407 [1237] - [1238].
[24] Edmunds v Pickering [No 3] [1999] SASC 510; (1999) 75 SASR 407 [1304].
[25] Hospital Products Ltd v United States Surgical Corp [1984] HCA 64; (1984) 156 CLR 41.
[26] Flannigan R, 'The Court Nature of Fiduciary Accountability' (2009) 39 New Zealand Law Review 375, 376.
[27] Flannigan R, 'The Court Nature of Fiduciary Accountability' (2009) 39 New Zealand Law Review 380 ‑ 381, citing Massey v Davies [1794] EngR 2192; (1794) 2 Ves 317; 30 ER 651; Ex parte Lacey [1802] EngR 75; (1802) 6 Ves 625; 31 ER 1228; Randall v Errington [1805] EngR 82; (1805) 10 Ves 423; 32 ER 909; Dent v Bennett [1839] EngR 434; (1839) 4 My & Cr 269; 41 ER 105; Bentley v Craven [1853] EngR 1103; (1853) 18 Beav 75; 52 ER 29.
[28] Flannigan R, 'The Court Nature of Fiduciary Accountability' (2009) 39 New Zealand Law Review 380 ‑ 381, citing Regal (Hastings) Ltd v Gulliver [1967] 2 AC 134.
[29] Flannigan R, 'The Court Nature of Fiduciary Accountability' (2009) 39 New Zealand Law Review 380 ‑ 381, citing United Pan‑Europe Communications NV v Deutsche Bank AG [2000] 2 BCLC 461 [47].
[30] United Pan-Europe Communications NV v Deutsche Bank AG [2000] 2 BCLC 461 [47].
[31] McGhee J and Elliott S (eds) Snell's Equity, (34th ed, 2019) [7-004] citing Keech v Sandford (1726) 2 White & Tud LC 706; 25 ER 223; Dougan v MacPherson [1902] UKLawRpAC 5; [1902] AC 197.
[32] Heydon JD and Leeming MJ, Jacobs' Law of Trusts in Australia (8th ed, 2016) [2‑40].
[33] Commissioner of Stamp Duties (Qld) v Livingston [1964] UKPC 2; [1965] AC 694; (1964) 112 CLR 12.
[34] Heydon JD and Leeming MJ, Jacobs' Law of Trusts in Australia (8th ed, 2016) [20‑02].
[35] Finn PD, Fiduciary Obligations: 40th Anniversary Republication with Additional Essays (1st ed, 2016) [402].
[36] See Trinker v Beale [2009] NSWCA 30; (2009) 72 NSWLR 365 [46].
[37] Brine v Carter [2015] SASC 205 [124]; Johnson v Trotter [2006] NSWSC 67; (2006) 12 BPR 23,339 [23]; Brooks v Young [2018] SASCFC 81; (2018) 131 SASR 365 [93].
[38] Brine v Carter [2015] SASC 205 [124] ‑ [135]; Brooks v Young [2018] SASCFC 81; (2018) 131 SASR 365 [93].
[39] Breen v Williams [1996] HCA 57; (1996) 186 CLR 71; Blackmagic Design Pty Ltd v Overliese [2011] FCAFC 24; (2011) 191 FCR 1.
[40] Blackmagic Design Pty Ltd v Overliese [2011] FCAFC 24; (2011) 191 FCR 1 [105].
[41] Blackmagic Design Pty Ltd v Overliese [2011] FCAFC 24; (2011) 191 FCR 1.
[42] Blackmagic Design Pty Ltd v Overliese [2011] FCAFC 24; (2011) 191 FCR 1 [108] ‑ [109].
[43] Re‑amended plaintiff's closing submissions [757] and following.
[45] Finn P, Fiduciary Obligations: 40th Anniversary Republication with Additional Essays, (1st ed, 2016) [430] ‑ [431].
[46] Cope M, 'The Equitable Obligation of a Purchaser, Who is a Fiduciary, To Make Full Disclosure of Material Information' [1982] UQLawJl 7; (1982) 12 University of Queensland Law Journal 74, 76.
[47] Conaglen M, 'A Re-appraisal of the Fiduciary Self-dealing and Fair-dealing Rules' (2006) 60 Cambridge Law Journal 366.
[48] Conaglen M, 'A Re-appraisal of the Fiduciary Self-dealing and Fair-dealing Rules' (2006) 60 Cambridge Law Journal 384.
[49] Conaglen M, 'A Re-appraisal of the Fiduciary Self-dealing and Fair-dealing Rules' (2006) 60 Cambridge Law Journal 388
[50] Luff v Lord [1864] EngR 827; (1864) 34 Beav 220; 55 ER 619.
[51] Lord Selsey v Rhoades [1824] EngR 523; (1824) 2 Sim & St 41; 57 ER 260, 49 - 50; Rudd v Sewell (1840) 4 Jur 882, 882; Hatch v Hatch [1804] EngR 105; (1804) 9 Ves 292; 32 ER 615; Coles v Trecothick [1804] EngR 88; (1804) 9 Ves 234; 32 ER 592; Hunter v Atkins [1834] EngR 548; (1834) 3 My & K 113; 40 ER 43, 135 ‑ 136; Jones v Linton (1881) 44 LT 601, 602; Luff v Lord [1864] EngR 827; (1864) 34 Beav 220; 55 ER 619.
[52] McGhee J and Elliott S, (eds) Snell's Equity, (34th ed, 2009).
[53] Tito v Waddell (No 2) [1977] Ch 106, 241.
[54] McGhee J and Elliott S, (eds) Snell's Equity, (34th ed, 2009) [7-022] citing Luff v Lord [1864] EngR 827; (1864) 34 Beav 220; 55 ER 619, 623; Re Worssam (1882) 46 LT 584, 591.
[55] McGhee J and Elliott S, (eds) Snell's Equity, (34th ed, 2009) [7-022] citing Lord Selsey v Rhoades [1824] EngR 523; (1824) 2 Sim & St 41; 57 ER 260, 263 ‑ 264.
[56] Ex parte James [1803] EngR 536; (1803) 8 Ves 337; 32 ER 385.
[57] Defendant's closing submissions [189].
[58] Agreement 11 September 1959 between Lang, Peter, WPPL and HPPL as 'the Vendors' and Rio Tinto Management Services (Australia) Pty Ltd as the Purchaser.
[59] Agreement 1 December 1959 between Lang, Peter, WPPL and HPPL as 'the Vendors' and Rio Tinto Management Services (Australia) Pty Ltd as the Purchaser.
[60] Agreement 9 April 1961 between Lang, Peter, WPPL and HPPL as 'the Vendors' and Rio Tinto Management Services (Australia) Pty Ltd and Rio Tinto Southern Pty Ltd as the Purchaser.
[61] Agreement 21 October 1959 between Lang, Peter, WPPL, HPPL, Arthur Viveash Barrett‑Lennard, Frank St Aubyn Barrett‑Lennard and Edward Guy Barrett‑Lennard as the Vendors and Rio Tinto Management Services (Australia) Pty Ltd as the Purchaser.
[62] CA & Associates Pty Ltd v Fini Group Pty Ltd [2020] WASCA 31.
[63] Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd [2015] HCA 37; (2015) 256 CLR 104 [46] ‑ [52]; Electricity Generation Corporation v Woodside Energy Ltd [2014] HCA 7; (2014) 251 CLR 640 [35].
[64] City Inn (Jersey) Limited v Ten Trinity Square Limited [2008] EWCA Civ 156; [2008] All ER (D) 76 (Mar); see also Margerison v Bates [2008] EWHC 1211 (Ch); [2008] 3 EGLR 165.
[65] Qantas Airways Ltd v Chief Commissioner of State Revenue [2008] NSWSC 1049.
[66] See eg Thomson JA, Warnick LA and Martin KJ, Commercial Contract Clauses: Principles and Interpretation (3rd ed, 2019) [25050].
[67] White v Tyndall [1888] UKLawRpAC 23; (1888) 13 App Cas 263, 269; Kendle v Melsom [1998] HCA 13; (1998) 193 CLR 46; Federation Insurance Ltd v Wasson [1987] HCA 34; (1987) 163 CLR 303, 317 ‑ 318 (Gaudron J).
[68] See eg Thomson JA, Warnick LA and Martin KJ, Commercial Contract Clauses: Principles and Interpretation (3rd ed, 2019) [25190].
[69] Dal Pont GE, Equity and Trusts in Australia (7th ed, 2018) [14.145] footnote 143.
[70] Masters v Cameron [1954] HCA 72; (1954) 91 CLR 353.
[71] Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd [2015] HCA 37; (2015) 256 CLR 104.
[72] See eg Wickman Machine Tool Sales Ltd v L Schuler AG [1972] 1 WLR 840.
[73] The LexisNexis Australian Legal Dictionary (2nd ed, 2016) page 319.
[74] See Points of Claim in the Concentrator Royalty Arbitration (exhibit 476) [8].
[79] See royalty statements eg exhibit 238.
[80] Exhibit 595 - Hancock and Wright - Income Tax Return 1 July 1985 to 30 June 1986; exhibit 1055 ‑ Partnership Tax Return for the period 1 July 1986 to 30 June 1987 for Hancock Prospecting Pty Ltd and Wright Prospecting Pty Ltd.
[81] Exhibit 597 - WPPL Tax Return for YE 30 June 1986 with attachments; see also exhibit 1051 (WPPL financial documents for 30 June 1987.
[83] Rules of the Supreme Court 1971 (WA) O 20 r 8(1).
[84] Rules of the Supreme Court 1971 (WA) O 20 r 9(1).
[85] Banque Commerciale SA (in liq) v Akhil Holdings Ltd [1990] HCA 11; (1990) 169 CLR 279.
[86] Kirby v Sanderson Motors Pty Ltd [2002] NSWCA 44; (2001) 54 NSWLR 135.
[87] Banque Commerciale SA (in liq) v Akhil Holdings Ltd [1990] HCA 11; (1990) 169 CLR 279.
[91] Perpetual Executors & Trustees Assoc of Australia Ltd v Wright [1917] HCA 27; (1917) 23 CLR 185.
[95] Heydon JD and Leeming MJ, Jacob's Law of Trusts in Australia (8th ed, 2016) [6‑23]; Tucker L, Lewin on Trusts (20th ed, 2020) [3‑004].
[96] The Hon K R Handley AO, Estoppel by Conduct and Election, (2nd ed, 2016), [8-001] citing, amongst other authorities, Amalgamated Investment & Property Co Ltd v Texas Commerce International Bank Ltd [1982] QB 84, 126, 130 ‑ 131; Dabbs v Seaman [1925] HCA 26; (1925) 36 CLR 538, 548 ‑ 552; Grundt v Great Boulder Proprietary Gold Mines Ltd [1937] HCA 58; (1937) 59 CLR 641, 676.
[97] Moratic Pty Ltd v Gordon [2007] NSWCA 106; (2007) 13 BPR 24,713. This statement of principles has been approved by the Full Court of the Federal Court of Australia (Mineralogy Pty Ltd v Sino Iron Pty Ltd [2017] FCAFC 55) the Court of Appeal of Victoria (Bannon v Nauru Phosphate Royalties Trust [2019] VSCA 303; (2019) 59 VR 515 [72]) and the New South Wales Court of Appeal, most recently in Miller Heiman Pty Ltd v Sales Principles Pty Ltd [2017] NSWCA 106; (2017) 94 NSWLR 500 [42] ‑ [44].
[98] Miller Heiman Pty Ltd v Sales Principles Pty Ltd [2017] NSWCA 106; (2017) 94 NSWLR 500 [70] ‑ [71].
[99] Revenue and Customs Commissioners v Benchdollar Ltd [2009] EWHC 1310 (Ch); [2010] 1 All ER 174. This formulation is adopted by Feltham et al in Spencer Bower: Reliance-Based Estoppel, (5th ed, 2017) [8.7] and by Kunc J in Webster v Strang [2018] NSWSC 495 [252] and Brett J in Shaw v Hanlon [2020] TASSC 2 [35] ‑ [36].
[100] Briggs J amended his formulation to this effect in Stena Line Ltd v Merchant Navy Ratings Pension Fund Trustees Ltd [2010] EWHC 1805 (Ch); [2010] All ER (D) 280 [137].
[101] Barnes M QC, The Law of Estoppel, (1st ed, 2020) [5.94].
[102] The Hon K R Handley AO Estoppel by Conduct and Election (2nd ed, 2016) [8‑018].
[103] First, second, fifth, sixth and seventh defendants' re‑amended defence and counterclaim [9G(f)].
[107] Dabbs v Seaman [1925] HCA 26; (1925) 36 CLR 538, 550.
[108] See Caboche v Ramsay [1993] FCA 920; (1993) 119 ALR 215, 237.
[110] See also Barnes M QC, The Law of Estoppel (1st ed, 2020) [5.90]: '... the assumption should not go beyond the transaction in which it arose'; citing Amalgamated Investment & Property Co Ltd v Texas Commerce International Bank Ltd [1982] QB 84 at 126 and ING Bank NV v Ros Roca SA [2011] EWCA Civ 353; [2012] 1 WLR 472 [64(iv)].
[112] The Hon K R Handley AO, Estoppel by Conduct and Election (2nd ed, 2016) [8‑018].
[113] Feltham P, Spencer Bower: Reliance Based Estoppel (5th ed, 2017) [8.54].
[114] Barnes M QC, The Law of Estoppel (1st ed, 2020) [5.100], [5.101].
[115] Heydon JD, Heydon on Contract (2019) [9.600] citing Bank of New Zealand v Simpson [1900] UKLawRpAC 6; [1900] AC 182.
[116] The share transfers are exhibit 967.
[117] Hospital Products Ltd v United States Surgical Corp [1984] HCA 64; (1984) 156 CLR 41, 103.
[118] Warman International Ltd v Dwyer [1995] HCA 18; (1995) 182 CLR 544, 557.
[119] Commissioner of Stamp Duties (QLD) v Livingston [1964] UKPC 2; [1965] AC 694; (1964) 112 CLR 12.
[120] Howard v Federal Commissioner of Taxation [2014] HCA 21; (2014) 253 CLR 83.
[121] Tito v Waddell (No 2) [1977] Ch 106 (Sir Robert Megarry VC).
[122] In Re Biel's Estate; Gray v Warner [1873] UKLawRpEq 113; (1873) LR 16 Eq 577; Johnson v Trotter [2006] NSWSC 67; (2006) 12 BPR 23,339.
[123] Heydon JD, Leeming MJ and Turner PG, Meagher, Gummow and Lehane's Equity: Doctrines and Remedies, (5th ed, 2015) [5‑130], Maguire v Makaronis [1997] HCA 23; (1997) 188 CLR 449, 466.
[124] Heydon JD, Leeming MJ and Turner PG, Meagher, Gummow and Lehane's Equity: Doctrines and Remedies, (5th ed, 2015) [5-205].
[125] BLB Corporation v Jacobsen (1974) 48 ALJR 372, 378 (McTiernan, Mason & Jacobs JJ).
[126] Jones v Dunkel [1959] HCA 8; (1959) 101 CLR 298.
[127] Blatch v Archer [1774] EngR 2; (1774) 98 ER 969 (Lord Mansfield).
[128] Jones v Dunkel [1959] HCA 8; (1959) 101 CLR 298 [321] (Windeyer J).
[129] Kuhl v Zurich Financial Services Australia Ltd [2011] HCA 11; (2011) 243 CLR 361.
[130] Dal Pont GE, Law of Agency (4th ed, 2020) [4.14] and the cases cited by Dal Pont at footnote 88.
[131] Dal Pont GE, Law of Agency (4th ed, 2020) [7.1] citing Blackburn, Low & Co v Thomas Vigors [1887] UKLawRpAC 40; (1887) 12 App Cas 531, 537 ‑ 538.
[132]Jessett Properties Ltd v UDC Finance Ltd [1992] 1 NZLR 138.
[133] Blackburn, Low & Co v Thomas Vigors [1887] UKLawRpAC 40; (1887) 12 App Cas 531.
[134] Lord Selsey v Rhoades [1824] EngR 523; (1824) 2 Sim & St 41; 57 ER 260.
[135] Re Leigh's Will Trusts [1970] Ch 277.
[136] Livingston v Commissioner of Stamp Duties [1960] HCA 94; (1960) 107 CLR 411, 453 (Kitto J).
[137] See eg Commissioner of State Taxation of the State of South Australia v Cyril Henschke Pty Ltd [2010] HCA 43; (2010) 242 CLR 508.
[138] McGhee J and Elliott S, (eds) Snell's Equity (34th ed, 2019) [7‑022].
[139] MacPherson v Watt (1877) 3 App Cas 254.
[140] Finn PD, Fiduciary Obligations: 40th Anniversary Republication with Additional Essays (1st ed, 2016) [417].
[141] Montesquieu v Sandys [1811] EngR 536; (1811) 34 ER 331, 336; Cane v Lord Allen (1814) 2 Dow 289; [1814] EngR 409; 3 ER 869, 871 ‑ 873; MacPherson v Watt (1877) 3 App Cas 254, 270 ‑ 271; Allison v Clayhills (1907) 97 LT 709.
[142] Conaglen M, 'A Reappraisal of the Fiduciary Self-dealing and Fair-dealing Rules' (2006) 65 Cambridge Law Journal 366.
[143] Montesquieu v Sandys [1811] EngR 536; (1811) 34 ER 331.
[144] Professor Conaglen cites Cane v Allen (1814) 2 Dow 289; [1814] EngR 409; 3 ER 869; Jones v Thomas [1837] EngR 508; (1837) 2 Y & C Ex 498; 160 ER 493; Edwards v Meyrick [1842] EngR 903; (1842) 2 Hare 60; 67 ER 25; Knight v Marjoribanks [1849] EngR 1031; (1849) 2 Mac & G 10; 42 ER 4; Holman v Loynes [1854] EngR 161; (1854) 4 De GM & G 270; 43 ER 510. See also Wood v Downes [1811] EngR 429; (1811) 18 Ves 120; 34 ER 263; Hampson v Nicoll (1827) 6 LJ Ch 22; Scott v Dunbar (1828) 1 MR 442; Austin v Chambers [1836] EngR 982; (1838) 6 Cl & Fin 1; 7 ER 59; Noranda Australia Ltd v Lachlan Resources NL (1988) 14 NSWLR 1, 15.
[145] Cope M, 'The Equitable Obligation of a Purchaser, Who is a Fiduciary, To Make Full Disclosure of Material Information' [1982] UQLawJl 7; (1982) 12 University of Queensland Law Journal 74, 84.
[146] Jones v Thomas [1837] EngR 508; (1837) 2 Y & C Ex 498; 160 ER 493, 502; Johnson v Fesemeyer (1858) 3 De Gex & Jones 13; [1858] EngR 1008; 44 ER 1174.
[147] Magill v Magill [2006] HCA 51; (2006) 226 CLR 551 [17].
[148] Magill v Magill [2006] HCA 51; (2006) 226 CLR 551 [113] (Gummow, Kirby & Crennan JJ), citing Derry v Peek (1889) 14 App Cas 337, 373 (Herschell L).
[149] Nocton v Lord Ashburton [1914] UKLawRpAC 31; [1914] AC 932, 953 ‑ 954.
[150] Nocton v Lord Ashburton [1914] UKLawRpAC 31; [1914] AC 932.
[151] Magill v Magill [2006] HCA 51; (2006) 226 CLR 551 [114].
[152] Neat Holdings Pty Ltd v Karajan Holdings Pty Ltd [1992] HCA 66; (1992) 67 ALJR 170.
[153] Brunninghausen v Glavanics [1999] NSWCA 199; (1999) 46 NSWLR 538.
[154] Re‑amended plaintiff's closing submissions filed 27 October 2020 [994].
[155] Percival v Wright [1902] UKLawRpCh 125; [1902] 2 Ch 421.
[156] Flannigan, R 'Fiduciary Duties of Shareholders and Directors' (2004) Journal of Business Law 277, 285 citing Kuwait Asia Bank EC v National Mutual Life Nominees Ltd [1990] 1 AC 187; Pelling v Pelling (1981) 130 DLR (3d) 761.
[157] Peters' American Delicacy Co Ltd v Heath [1939] HCA 2; (1939) 61 CLR 457.
[158] Brunninghausen v Glavanics [1999] NSWCA 199; (1999) 46 NSWLR 538; Jones v Jones [2009] VSC 292; Crawley v Short [2009] NSWCA 410; (2009) 262 ALR 654.
[159] Coleman v Myers [1976] NZHC 5; [1977] 2 NZLR 225, 286.
[160] Platt v Platt [1999] All ER (D) 818; Valastiak v Valastiak [2010] BCCA 71.
[161] See Austin RP and Ramsey IM, Ford, Austen and Ramsay's Principles of Corporations Law, (17th ed, 2018), [9.050.6].
[162] Brunninghausen v Glavanics [1999] NSWCA 199; (1999) 46 NSWLR 538, 538.
[163] Crawley v Short [2009] NSWCA 410; (2009) 262 ALR 654.
[164] Flannigan R, 'Fiduciary Duties of Shareholders and Directors' (2004) Journal of Business Law 277, 295 ‑ 296.
[165] Brunninghausen v Glavanics [1999] NSWCA 199; (1999) 46 NSWLR 538, 558 citing Hospital Products Ltd v United States Surgical Corp [1984] HCA 64; (1984) 156 CLR 41, 96 ‑ 97 (Mason J).
[166] Crawley v Short [2009] NSWCA 410; (2009) 262 ALR 654.
[167] Crawley v Short [2009] NSWCA 410; (2009) 262 ALR 654 [121] ‑ [122].
[168] Jones v Jones [2009] VSC 292.
[169] Austin RP and Ramsey IM, Ford, Austen and Ramsay's Principles of Corporations Law (17th ed, 2018) [9.050.6].
[173] Glandon Pty Ltd v Strata Consolidated Pty Ltd (1993) 11 ACSR 543, 557.
[174] Glandon Pty Ltd v Strata Consolidated Pty Ltd (1993) 11 ACSR 543, 556 ‑ 557.
[176] Hospital Products Ltd v United States Surgical Corp [1984] HCA 64; (1984) 156 CLR 41, 101.
[177] NOM v Director of Public Prosecutions [2012] VSCA 198; (2012) 38 VR 618 [124]; Seltsam Pty Ltd v McGuiness [2000] NSWCA 29; (2000) 49 NSWLR 262 [136].
[178] NOM v Director of Public Prosecutions [2012] VSCA 198; (2012) 38 VR 618 [124].
[179] Defendants' closing submissions [491], citing Magill v Magill [2006] HCA 51; (2006) 226 CLR 551 [37] (Gleeson CJ).
[180] Magill v Magill [2006] HCA 51; (2006) 226 CLR 551 [38] (Gleeson CJ), [129] (Gummow, Kirby & Crennan JJ).
[181] Magill v Magill [2006] HCA 51; (2006) 226 CLR 551 [37] (Gleeson CJ).
[182] Lam v Ausintel Investments Australia Pty Ltd (1989) 97 FLR 458.
[183] See eg Perth Airport Pty Ltd v Ridgepoint Corporation Pty Ltd [2013] WASC 33 [133] and Mac Developments (Gold Coast) Pty Ltd v Rams Financial Group Pty Ltd [2010] QCA 477 [32] ‑ [38]; IBM Australia Pty Ltd v State of Queensland [2015] QSC 342 [38].
[184] Grant v John Grant & Sons Pty Ltd [1954] HCA 23; (1954) 91 CLR 112.
[185] The Owners Corporation of Strata Plan 61390 v Multiplex Corporate Agency Pty Ltd (No 2) [2012] NSWSC 322.
[186] Doggett v Commonwealth Bank of Australia [2015] VSCA 351; (2015) 47 VR 302.
[187] Grant v John Grant & Sons Pty Ltd [1954] HCA 23; (1954) 91 CLR 112, 130.
[188] The Owners Corporation of Strata Plan 61390 v Multiplex Corporate Agency Pty Ltd (No 2) [2012] NSWSC 322 [29].
[189] Doggett v Commonwealth Bank of Australia [2015] VSCA 351; (2015) 47 VR 302.
[190] In addition to Doggett v Commonwealth Bank of Australia [2015] VSCA 351; (2015) 47 VR 302 see eg Sarina v Fairfax Media Publications Pty Ltd [2018] FCA 521; Linke v Linke [2018] VSC 505.
[191] See eg Dal Pont GE, Equity and Trusts in Australia (7th ed, 2019) [30.155].
[192] The Owners Corporation of Strata Plan 61390 v Multiplex Corporate Agency Pty Ltd (No 2) [2012] NSWSC 322 [29]; Grant v John Grant & Sons Pty Ltd [1954] HCA 23; (1954) 91 CLR 112, 130 (Dixon CJ, Fullagar, Kitto & Taylor JJ referring to the equity as one 'to have the general words of a release confined to the true purpose of the transaction ascertained from the scope of the instrument and the external circumstances.)
[193] Grant v John Grant & Sons Pty Ltd [1954] HCA 23; (1954) 91 CLR 112, 129 ‑ 130.
[194] Grant v John Grant & Sons Pty Ltd [1954] HCA 23; (1954) 91 CLR 112.
[195] McDermott v Black [1940] HCA 4; (1940) 63 CLR 161, 184 ‑ 185 (Dixon J).
[196] El-Mir & 1 Or v Risk [2005] NSWCA 215; (2006) 22 BCL 16 [54] (McColl JA, Handley & Ipp JJA agreeing).
[197] Ballantyne v Phillott [1961] HCA 17; (1961) 105 CLR 379, 398 (Menzies J); El-Mir & 1 Or v Risk [2005] NSWCA 215; (2006) 22 BCL 16 [54] (McColl JA, Handley & Ipp JJA agreeing); Robinson v Robinson [2015] NSWSC 1503 [45] (Darke J).
[198] Hutchinson v Equititour Pty Limited [2010] QCA 104; [2011] 2 Qd R 99 [39].
[199] Lashansky v Legal Practice Board of Western Australia [No 3] [2013] WASCA 260 [57] (Newnes JA), [21] (Pullin JA), [72] (Murphy JA).
[200] Crawley v Short [2009] NSWCA 410; (2009) 262 ALR 654 [163] ‑ [164].
[201] Heydon JD, Leeming MJ and Turner PG, Meagher, Gummow and Lehane's Equity Doctrines and Remedies (5th ed, 2015) [38-070].
[202] Dal Pont GE, Law of Limitation (2nd ed, 2020) [13.12]
[203] Brine v Carter [2015] SASC 205 [124]; Johnson v Trotter [2006] NSWSC 67; (2006) 12 BPR 23,339 [23]; Brooks v Young [2018] SASCFC 81; (2018) 131 SASR 365 [23].
[204] Williams v Auckland Council [2015] NZCA 479, appeal dismissed in Williams v Auckland Council [2016] NZSC 20.
[205] Allcard v Skinner [1887] UKLawRpCh 151; (1887) 36 Ch D 145.
[206] Re Howlett, Howlett v Howlett [1949] Ch 767.
[207] Lindsay Petroleum Co Ltd v Hurd [1874] UKLawRpPC 1; (1874) 5 PC 221, 239 ‑ 240.
[208] Williams v Auckland Council [2015] NZCA 479 [103] ‑ [109].
[209] Williams v Auckland Council [2015] NZCA 479 [103] ‑ [109].
[210] Bell Group Ltd (in liq) v Westpac Banking Corporation (No 9) [2008] WASC 239; (2008) 39 WAR 1 [9306].
[211] Kuhl v Zurich Financial Services Australia Ltd [2011] HCA 11; (2011) 243 CLR 361 [67]; Bale v Mills [2011] NSWCA 226; (2011) 81 NSWLR 498 [66] ‑ [67].
[212] Crawley v Short [2009] NSWCA 410; (2009) 262 ALR 654 [177], [179] - [180].
[213] Crawley v Short [2009] NSWCA 410; (2009) 262 ALR 654 [164].
[214] Belan (as executors of the estate of the late Frank Belan) v Casey [2003] NSWSC 159; (2003) 57 NSWLR 670 [149].
[215] Lewis Securities Ltd (in liq) v Carter [2018] NSWCA 118; (2018) 355 ALR 703 [214]; Duke Group Ltd (in liq) v Alamain Investments Ltd [2003] SASC 415; (2003) 232 LSJS 58 [130]; Barker v Duke Group Ltd (in liq) [2005] SASC 81; (2005) 91 SASR 167.
[216] Timbercorp Finance Pty Ltd (in liq) v Collins [2016] HCA 44; (2016) 259 CLR 212 [27] (French CJ, Kiefel, Keane & Nettle JJ).
[217] Nadinic v Drinkwater [2017] NSWCA 114; (2017) 94 NSWLR 518 [23] (Leeming JA), [1] (Beazley P).
[218] The first defendant is the executor of the estate of Michael Wright.
[219] Wagdy Hanna & Associates Pty Ltd v National Library of Australia [2012] ACTSC 126; (2012) 7 ACTLR 70.
[220] Wagdy Hanna & Associates Pty Ltd v National Library of Australia [2012] ACTSC 126; (2012) 7 ACTLR 70.
[221] Rules of the Supreme Court 1971 (WA) O 66 r 1(1).
[222] Strzelecki Holdings Pty Ltd v Jorgensen [2019] WASCA 96; (2019) 54 WAR 388.
[223] Amaca Pty Ltd (Formerly James Hardie & Co Pty Ltd) v Patricia Margaret Hannell as Executor of the Estate of David Richard Hannell (Dec) [2007] WASCA 158 (S) [9].
[224] Ruddock v Vadarlis (No 2) [2001] FCA 1865; (2001) 115 FCR 229 [11]; McKechnie v Connell (WASC, Nicholson J, Lib No 940023, 20 December 1993, unreported); Warren v Lawton [No 3] [2016] WASC 285 (S).
(1954) 91 CLR 112
(2018) 131 SASR 365
(1999) 46 NSWLR 538
(2010) 242 CLR 508
(2009) 262 ALR 654
(2015) 47 VR 302
(1985) 64 ALR 19
(2001) 54 NSWLR 135
(2018) 355 ALR 703
(1960) 107 CLR 411
(1961) 105 CLR 379
(2019) 59 VR 515
(2005) 91 SASR 167
(1974) 48 ALJR 372
(1996) 186 CLR 71
(2014) 251 CLR 640
(1984) 156 CLR 41
(1959) 101 CLR 298
(1998) 193 CLR 46
(2011) 243 CLR 361
(1997) 188 CLR 449
(1940) 63 CLR 161
(2015) 256 CLR 104
(2012) 38 VR 618
(1988) 14 NSWLR 1
(2000) 49 NSWLR 262
(2016) 259 CLR 212
(2012) 7 ACTLR 70
(2011) 81 NSWLR 498
(1990) 169 CLR 279
(2003) 57 NSWLR 670
(2008) 39 WAR 1
(2011) 191 FCR 1
(1993) 119 ALR 215
(1964) 112 CLR 12
(1925) 36 CLR 538
(1987) 163 CLR 303
(1937) 59 CLR 641
(2012) 45 WAR 29
(2014) 253 CLR 83
(1989) 97 FLR 458
(1954) 91 CLR 353
(2009) 72 NSWLR 365
(1995) 182 CLR 544
(2001) 115 FCR 229
(2019) 54 WAR 388
(2006) 226 CLR 551
(2017) 94 NSWLR 518
(1992) 67 ALJR 170
(1917) 23 CLR 185
(1939) 61 CLR 457
(1999) 75 SASR 407
(2017) 94 NSWLR 500