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Date: Mon, 28 May 2007 03:34 From: Neil Foster Subject: Say-Dee in the High Court of Australia
Dear Kit et al The case could have been disposed of on the basis that the Court of Appeal were wrong to overturn the trial judge's findings. That is the conclusion reached at [100] after a lengthy review of the facts - on the key issue whether Mr Elias was in breach of his fiduciary duty to offer Say-Dee a chance to share in the profits of a development of the combined properties, the HC says that the trial judge was right: he was not in breach, because he did offer Say-Dee a chance to join in. This was sufficient disclosure because the Say-Dee principals were experienced enough to know what was going on - [109]. But the judgement goes on to offer some views on the legal issues which, while perhaps not technically ratio since the appeal could have gone off on the factual point, clearly enough indicate the views of a majority of the present Court. (Since Kirby & Hayne JJ were not involved we don't know their views.) (1) On the question of the first limb of Barnes v Addy, "knowing receipt", there is no liability where what is received is "mere information" - [119]; {in the circumstances here another reason for rejecting this liability is that Mr Elias was not on the facts acting as "agent" for Mrs Elias and the girls, and hence they could not be "imputed" to have his knowledge - [125]ff}. (2) On the wider question whether Mrs Elias and the girls were liable to account for the property because they had been "unjustly enriched", the HC first of all rejected this ground of the CA holding because it had not been actually put by any of the parties! (cf [134]) Secondly it said that to interpret the first limb of Barnes v Addy this way (by removing a requirement for "notice") was wrong as it contradicted previous binding comments by the HC in Consul Development v DPC Estates. (3) On the broader issues of restitution I hesitate to say too much given my limited understanding of the area. But the HC criticised what it said was confusion engendered by the CA decision in lower courts - [137]. On the substantive issue of whether a "restitution-based" liability could be found (summarised at [141]) the Court fairly clearly rejected the approach of Hansen J in Koorootang Nominees and could find no other relevant authority which accepted the validity of this approach to this sort of case. (It dismissed Lipkin Gorman at [143] as not relevant to fiduciary duties or Barnes v Addy, so presumably left it open for argument that it might be relevant to other situations.) So in the end, as Kit says, it did leave a large area of the law still open for further debate. Still, the tone of the judgement was not encouraging - Gummow J is quoted at [154] (and it seems hard to doubt that he was the main architect of the majority judgement here) as saying that there are good reasons for "considerable scepticism respecting any all-embracing theory in this field", and he refers to the "distortion" of equitable doctrines by the introduction of a wide-reaching theory of unjust enrichment. There is also a certain air of schadenfreude at the revelation in [155] that Peter Birks himself retracted his earlier views that the first limb of Barnes v Addy could be analysed as an example of unjust enrichment theory. Considerations of "ideal taxonomy" are decried at [157]. (4) Interestingly there is then a discussion of the second limb of Barnes v Addy, "knowing assistance" - and the clear view is expressed that if the decision of the Privy Council in Royal Brunei Airlines expresses a "broader" test than the traditional view (picked up for Australia in Consul Development v DPC) then Australian courts should for the moment follow Consul - [166], [180]-[181]. However, in this case, whatever view was taken there was no liability here because there was no knowledge by Mrs Elias and the girls. (5) A possible "tracing" remedy was rejected because Mrs Elias and the girls were (contrary to the finding of the CA) not volunteers - [191]. (6) Finally, and this point is of most interest to Australian property lawyers, the HC ruled on the controversial question whether a possible liability under Barnes v Addy based on "notice" could amount to an in personam exception to indefeasibility under the Torrens system. There have been conflicting State appellate decisions on the point, and I am glad to see the Court follows the line represented by Macquarie Bank v Sixty-Fourth Throne (Vic) and LHK Nominees v Kenworthy (WA), and rejects the line represented by Tara Shire Council v Garner (Qld). Here, even if Mrs Elias and the girls had some sort of liability based on "notice", that should not have overridden the specific provisions of s 42 of the Real Property Act which gave them as registered proprietors indefeasible title. The policy of the Torrens system is to make "notice" alone not relevant to registered title.
Regards Neil Foster
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