John Alexander's Clubs Pty Ltd v White City Tennis Club Ltd

• Jurisdiction: Australia Federal only
• Judge: French CJ,Gummow,Hayne,Heydon,Kiefel JJ.
• Judgment Date: 26 May 2010
• Neutral Citation: 2010-0526 HCA D,[2010] HCA 19
• Court: High Court
• Docket Number: S309/2009
• Date: 26 May 2010

[2010] HCA 19

HIGH COURT OF AUSTRALIA

French CJ, Gummow, Hayne, Heydon And Kiefel JJ

S309/2009

S308/2009

John Alexander's Clubs Pty Limited & Anor

Appellants

and

White City Tennis Club Limited

Respondent

Walker Corporation Pty Limited

Appellants

and

White City Tennis Club Limited & Ors

Respondent

Representation

J M Ireland QC with J S Cooke for the appellants in S309/2009 and the second and third respondents in S308/2009 (instructed by Colin Biggers & Paisley Solicitors)

I M Jackman SC and J K Taylor for the appellant in S308/2009 (instructed by Mallesons Stephen Jaques)

N C Hutley SC with J R Clarke for the respondent in S309/2009 and the first respondent in S308/2009 (instructed by Kemp Strang Lawyers)

John Alexander's Clubs Pty Limited v White City Tennis Club Limited

Walker Corporation Pty Limited v White City Tennis Club Limited

Equity — Fiduciary obligations — Where commercial parties entered into series of agreements — Relevance of contractual terms to existence of fiduciary relationship — Where memorandum of understanding required grantee of option to purchase land to exercise option in favour of another — Where later agreement superseded memorandum of understanding and contained no such requirement — Whether fiduciary obligations arose between parties.

Trusts — Constructive trust — Whether equitable fraud, unconscionable conduct or breach of fiduciary duty by grantee of option — Whether order to convey option land appropriate — Relevance of third party interests.

Procedure — Joinder of parties — Where constructive trust declared over land encumbered by equitable mortgage — Where party seeking constructive trust had notice of mortgage — Where mortgagee not a party — Whether mortgagee necessary party to action — Whether mortgagee entitled to be joined — Whether mortgagee entitled to have orders set aside — Whether mortgagee estopped.

Words and phrases — ‘fiduciary’, ‘injurious to third parties’, ‘necessary party’.

Uniform Civil Procedure Rules 2005 (NSW), r 36.16.

ORDER

Matter No S309/2009

1. White City Tennis Club Ltd (‘White City’) have leave to file out of time its Second Notice of Contention.

2. The appeal be allowed with costs.

3. The following orders:

(a) the orders of Tobias JA made on 6 April 2009;

(b) Order 1 of the orders of the Court of Appeal of the Supreme Court of New South Wales (‘the Court of Appeal’) made on 5 May 2009;

(c) the orders of the Court of Appeal made on 3 June 2009, as amended on 23 July 2009;

(d) Order 7 of the orders of the Court of Appeal made on 10 June 2009; and

(e) Orders 3 and 6 of the orders of the Court of Appeal made on 23 July 2009;

be set aside, and in lieu thereof:

(f) the appeal by White City to the Court of Appeal be dismissed with costs; and

(g) White City pay the costs of John Alexander's Clubs Pty Ltd and Poplar Holdings Pty Ltd of White City's Notice of Motion dated 5 June 2009.

Matter No S308/2009

1. Set aside so much of the orders of the Court of Appeal of the Supreme Court of New South Wales made on 23 July 2009 as ordered Walker Corporation Pty Ltd (‘Walker Corporation’) to pay the costs of White City Tennis Club Ltd (‘White City’) of the Amended Notice of Motion of Walker Corporation (including the costs of the Notice of Motion which the Amended Notice of Motion superseded) and in lieu thereof order that:

White City pay Walker Corporation's costs of:

(a) Walker Corporation's appearance before Macfarlan JA on 10 June 2009; and

(b) Walker Corporation's costs of its Notice of Motion dated 11 June 2009 and its Amended Notice of Motion dated 22 June 2009.

2. White City pay Walker Corporation's costs of the appeal to this Court.

3. The appeal otherwise be dismissed.

1 French CJ, Gummow, Hayne, Heydon And Kiefel JJ. These appeals relate to a tennis club which had been conducting its activities on land which it did not own. It attempted to create a regime by which some members could participate in the activities of a new club on the same land after it was sold by its owner. At trial, the tennis club was denied any entitlement to the land. An appeal was allowed, and the club was declared to be the beneficiary of a constructive trust over the land. Those orders should be overturned and the orders of the trial judge restored.

2 The appeals are not without complexity. The background and the course of proceedings must be explained in some detail before the reasons for restoring the trial judge's orders are stated.

Appeal S309 of 2009: the JACS appeal

The background

3 The origins of the appeals. The origins of these appeals lie in the desire of New South Wales Tennis Association Ltd (‘Tennis NSW’) to sell some land it owned at 30 Alma Street, Paddington, a suburb of Sydney (‘the White City Land’). As at 28 February 2005 the White City Land was about 4.448 hectares in area. On it stood tennis courts, centre court stands and a car park. The appeals concern a particular part of the White City Land known as ‘the Option Land’. The Option Land, like the White City Land as a whole, is Torrens system land.

4 For many years, the White City Land had been best known as the site of tennis competitions in which leading international players participated. However, that activity moved to a new site at Homebush once the construction of facilities there for the 2000 Olympic Games was complete. It was that event which stimulated the desire of Tennis NSW to sell the White City Land. That desire had implications for a tennis club, White City Tennis Club Ltd (‘the Club’), for another tennis club, Sydney Maccabi Tennis Club Ltd (‘Maccabi’), for the Trustees of the Sydney Grammar School (‘SGS’) and for John Alexander's Clubs Pty Ltd (‘JACS’).

5 The Club. The Club is the respondent in one of the appeals (‘the JACS appeal’) and the first respondent in the other (‘the Walker Corporation appeal’). From 1948 the Club had conducted the activities of a sporting club, particularly tennis activities, on part of the White City Land pursuant to a series of leases and licences. As at 28 February 2005, the relevant lease (‘the Lease’) ran until 2020. The leased area was the upper floor and part of the ground floor of the Northern Stand Building. That area had since 1970 been used as the Club's clubhouse. Clause 18 of the Lease gave the Lessor, Tennis NSW, the right to terminate it on six months' notice if Tennis NSW required possession for the purposes of rebuilding, reconstructing or demolishing the Northern Stand Building. Clause 18 also provided that, if a further building were constructed and the Lessor intended it to be used as a social club, the Club would have a right of first refusal of a lease. As at 28 February 2005, the relevant licence permitted the Club to use certain tennis courts on the White City Land. The licence was granted on 29 June 2004 for one year from 1 July 2004 (‘the First Licence’). The desire of Tennis NSW to sell the White City Land imperilled the future of the Club's activities at that site.

6 Maccabi. Although Maccabi's role in events began a little later than those of Tennis NSW, SGS, the Club and JACS, its interest lay in the fact that it had been conducting a tennis club on part of the White City Land, and it wished to go on doing so even if Tennis NSW sold the White City Land.

7 SGS. One of the preparatory schools operated by SGS and its playing fields are adjacent to the White City Land. The decision of Tennis NSW to sell the White City Land stimulated in SGS an interest in acquiring some of it for use as playing fields.

8 JACS. JACS is the first appellant in the JACS appeal and the second respondent in the Walker Corporation appeal. JACS was and is a company engaged in the business of developing sites for use by sporting clubs. Tennis NSW's desire to sell the White City Land created an opportunity for JACS to assist the Club in providing a place at which its members, or at least some of them, could continue to participate in tennis and other recreational activities.

9 Pre 28 February 2005 dealings. Lengthy negotiations between Tennis NSW, the Club, JACS and SGS took place in 2004. By 9 December 2004, Tennis NSW had resolved to sell by tender not just the Option Land but the whole of the White City Land. The closing date for tenders was eventually fixed as 15 April 2005.

10 The Memorandum of Understanding. On 28 February 2005 JACS and the Club entered a Memorandum of Understanding (‘the MOU’).

11 The MOU contemplated the creation of a club (‘the New Club’) for the conduct of tennis and other recreational activities on part of the White City Land. Clause 1.7 set out part of the background:

‘JACS has been negotiating with [Tennis NSW] for the purchase [of], or for the grant of an option to purchase, the Land by an entity to be established as hereinafter described and to be known as “White City Holdings Limited” (“WCH”). [Tennis NSW] have advised JACS they now propose to offer the land for sale by tender (“the tender”).’

The reference to ‘the Land’ was a reference to ‘all or part [of] lot 3 in Deposited Plan 234605 in the Parish of Alexandria, County of Cumberland, and being the whole or part of the land in Folio Identifier 9/11680.’ Lot 3 comprised the whole of the White City Land. WCH was to be incorporated by JACS: cl 5.2(d). The shareholders of WCH were in due course to comprise ‘Foundation Members’ — existing members of the Club who wished to become members of WCH — and members of the public who subscribed for shares: cl 5.2(h)-(l).

12 Despite the background described in cl 1.7, cl 1.8 made it clear that it was a third party, not JACS or WCH, which was to purchase the White City Land. Clause 1.8 provided:

‘JACS is negotiating with a third party (“the third party”) with a view to entering into an agreement with the third party to include terms whereby:

• 1.8.1 the third party and...