Reported Decision : 60 ACSR 646 206 FLR 254 New South Wales Supreme Court CITATION : White v Shortall [2006] NSWSC 1379 HEARING DATE(S) : 24/10/06; 3/11/06; 7/11/06; 8/11/06 JUDGMENT DATE : 15 December 2006 JURISDICTION : Equity JUDGMENT OF : Campbell J DECISION : Judgment for the plaintiff for $548,452. Defendant to pay plaintiff's costs. CATCHWORDS : EVIDENCE – admissibility and weight of evidence concerning what the person giving evidence would have done in a certain hypothetical situation TRUSTS – certainty of subject matter – whether possible to have trust of a certain number of shares out of a larger parcel of shares - CORPORATIONS – nature of rights comprised in a share – whether the choses in action connected with company shares must be identified on a share by share basis – significance of individual numbering of shares – TRUSTS - equitable compensation for breach of trust – to whom payable – principles by which calculated – TRUSTS – whether contractual agreement not to dispose of any interest in shares makes it impossible to declare a trust of those shares – whether possibility of court orders to enforce restrictions on restricted securities (within meaning of ASX Listing Rules) makes it impossible to hold such securities on trust - effect of various restrictions on "restricted securities" (within meaning of ASX Listing Rules) on remedies for breach of trust concerning those securities – TAXATION – capital gains tax – operation of capital gains tax when trust is declared of some of a larger holding of shares – TRUSTS – whether the intention necessary to create a trust is objective or subjective – CONTRACT – whether the intention necessary to enter contractual relations is objective or subjective – CONTRACT – when provisions as to time are of the essence – CONTRACT – measure of damages for breach – EVIDENCE – burden of proof – of payment being a loan – SUCCESSION – EXECUTORS AND ADMINISTRATORS – specific legacy of a certain number of shares from a larger holding – operation of executor's assent – TRUSTS – of part of a debt – EVIDENCE – significance of a litigant giving evidence very important for her case only late in the development of the case – EQUITY – whether fiduciary duty owed by a wealthier de facto partner to a less wealthy de facto partner Companies Act 1862 (UK) Corporations Act 2001 Income Tax Assessment Act 1936 LEGISLATION CITED : Income Tax Assessment Act 1997 (Cth) Securities Industry Code Taxation Administration Act 1953 (Cth) Uniform Civil Procedure Rules Air Great Lakes Pty Ltd v KS Easter (Holdings) Pty Ltd (1985) 2 NSWLR 309 Anning v Anning (1907) 4 CLR 1049 In re Appleby's Estate (1930) Tas LR 126 Associated Alloys Pty Ltd v ACN 001 452 106 Pty Ltd (in liquidation) (2000) 202 CLR 588 In Re Barned's Banking Company; ex parte The Contract Corporation (1867) 3 Ch App 105 Bay Biscayne Co v Baile 73 Fla 1120, 75 So 860 (1917) Beach Petroleum NL v Kennedy and others (1999) 48 NSWLR 1 Bond Brewing Holdings Ltd v National Australia Bank Ltd (1990) 1 ACSR 445 Brady v Stapleton (1952) 88 CLR 322 Browne v Dunn (1893) 6 R 67 Busch v Truitt 160 P 2d 925 (1945) Busch v Truitt 163 P 2d 739 (1945) Re CA Pacific Finance Ltd (in liquidation) and Anor [2000] 1 BCLC 494 Cackett v Keswick [1902] 2 Ch 456 Chan v Zacharia (1984) 154 CLR 178 Chappel v Hart (1998) 195 CLR 232 In Re Cheadle [1900] 2 Ch 620 Clarke v Earl of Dunraven [1897] AC 59 Claydon v Green (1868) LR 3 Cp 511 In Re Clifford [1912] 1 Ch 29 Commissioner of Stamp Duties (NSW) v Carlenka Pty Ltd (1995) 41 NSWLR 329 Commonwealth of Australia v Booker International Pty Ltd [2002] NSWSC 292 Cook v Cook (1986) 162 CLR 376Corin v Patton (1990) 169 CLR 540 Coshott v Sakic (1998) 44 NSWLR 667 Crampton v Schmich (1904) 4 SR (NSW) 121 Re Dawson (deceased); Union Fidelity Trustee Co Ltd v Perpetual Trustee Co Ltd [1966] 2 NSWR 211 Re Delta Gold Ltd [2001] FCA 1817; (2001) 40 ACSR 347 DiLucia v Clemens 541 A 2d 765 (1988) Don King Productions Inc v Warren [2000] Ch 291 Easterbrook v Young (1977) 136 CLR 308 In re Exmouth's Annuity [1925] 1 Ch 280 FAI Insurances Ltd & Anor v Pioneer Concrete Services Ltd & Ors (No 2) (1986) 10 ACLR 801 In Re Financial Insurance Company; Bishop's Case (1869) LR 7 Ch App 296n Fire & All Risks Insurance Co Ltd v Pioneer Concrete Services Ltd (1986) 10 ACLR 760 Forbes & Bundock v Australian Yachting Federation Inc., Booth & Landenberger (1996) 131 FLR 241 George Attenborough & Son v Solomon and Another [1913] AC 76 CASES CITED : In Re Givan dec'd; Rees v Green [1966] 1 WLR 1378 Re Goldcorp Exchange Ltd (in receivership) [1995] 1 AC 74 Harrington v Browne (1917) 23 CLR 297 Re Harvard Securities Ltd [1997] 2 BCLC 369 Herdegen v Federal Commissioner of Taxation (1988) 84 ALR 271 Heydon v Perpetual Executors, Trustees and Agency Company (WA) Ltd (1930) 45 CLR 111 Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41 Hunter v Moss [1994] 3 All ER 215; [1994] 1 WLR 452 Hunter v Moss [1994] 1 WLR 614 Hyhonie Holdings Pty Ltd & Anor v Leroy & Anor [2004] NSWCA 72 In re International Contract Company; Ind's Case (1872) 7 Ch App 485 Jones v Dunkel (1959) 101 CLR 298 Kauter v Hilton (1953) 90 CLR 86 Kroger v Truitt 163 P 2d 735 (1945) In Re Lamshed [1970] SASR 224 In Re Letheby & Christopher Limited [1904] 1 Ch 815 In Re London Wine Co (Shippers) Ltd [1986] PCC 121 Lord Strathcona Steamship Co Ltd v Dominion Coal Co Ltd [1926] AC 108 Mac-Jordan Construction Ltd v Brookmount Erostin Ltd (in receivership) (1991) 56 BLR 1; [1992] BCLC 350 Marlborough Harbour Board v Charter Travel Co Ltd (1989) 18 NSWLR 223 Milroy v Lord (1862) 4 De G F & J 264; 45 ER 1185 National Australia Bank Ltd v Bond Brewing Holdings Ltd (1990) 169 CLR 271 O'Halloran v R T Thomas & Family Pty Ltd (1998) 45 NSWLR 262 Pullen v Abalcheck Pty Ltd (1990) 20 NSWLR 732 Richardson, Trustee in Bankruptcy v Shaw 209 US 365, 28 Sup Ct 512, 52 L Ed 835 (1908) Robinson v Jenkins (1890) 24 QBD 275 Rollestone v National Bank of Commerce 299 Mo 57, 252 SW 394 (1923) Rosenberg v Percival (2001) 205 CLR 434 Sandford v D V Building & Construction Company Pty Ltd [1963] VR 137 Seltsam Pty Ltd v McNeill [2006] NSWSCA 158 Shepherd v The Commissioner of Taxation of the Commonwealth of Australia (1965) 113 CLR 385 Stein v Sybmore Holdings [2006] NSWSC 1004 Sydney Futures Exchange Ltd v Australian Stock Exchange (1995) 56 FCR 236; (1995) 128 ALR 417; (1995) 16 ACSR 148 Tadcaster Tower Brewery Co v Wilson [1897] 1 Ch 705 Target Holdings Ltd v Redferns [1996] 1 AC 421 In Re Turcan (1888) 40 Ch D 5 Wise v Whitburn [1924] 1 Ch 460 Youyang Pty Ltd v Minter Ellison Morris Fletcher (2003) 212 CLR 484 PARTIES : Louise White - Plaintiff Alan Shortall - Defendant FILE NUMBER(S) : SC 2719/06 COUNSEL : K Ryan; P Castley - Plaintiff G Curtin; D Jenkins - Defendant SOLICITORS : Stephen Bottrill Solicitors & Attorneys - Plaintiff Middletons - Defendant IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION EQUITY LIST CAMPBELL J 15 DECEMBER 2006 2719/06 LOUISE WHITE v ALAN SHORTALL JUDGMENT HIS HONOUR: 1 This is primarily a claim for damages for breach of a contract relating to transfer of shares, and to enforce a trust over those shares. 2 It raises the following issues:- (a) Did the plaintiff make seven loans of money to the defendant, on the basis that they would be secured by certain shares that the defendant would hold in trust for her? I conclude that the plaintiff made the seven payments of money to the defendant that she asserted she made, that the first five of them were not loans when originally made, and that the parties came to agree that the amounts of money that the plaintiff had provided to the defendant would be treated as in effect the purchase price of shares that the defendant would hold in trust for the plaintiff. (b) Did the parties contract that 222,000 shares would be transferred to the plaintiff on the plaintiff's request after 1 August 2003? I conclude that they did. (c) Independently of that contract, did the defendant show an intention to declare a trust of 222,000 shares for the plaintiff, on terms that they were transferable to the plaintiff after 1 August 2003? I conclude that he did. (d) Did the plaintiff request transfer of the shares soon after 1 August 2003? I conclude she made such a request soon after 11 August 2003. (e) Did the plaintiff tell the defendant in January 2005 that she did not want to receive the shares? I conclude she did not. (f) What damage has the plaintiff sustained by reason of the defendant's breach of contract? I conclude $548,452. (g) Is the trust that the defendant purported to declare one that is invalid because it has insufficient certainty of subject matter? I conclude it is valid. (h) What equitable compensation is payable to the plaintiff by reason of the defendant's failure to transfer the shares to her when asked? I conclude that, subject to issue (j) below, the quantum is the same as the damages for breach of contract. (i) Has the plaintiff established that certain shares held by Roger Williamson or Merkaba Limited are held on trust for the defendant? I conclude she has not established this. (j) Does the fact that the shares in relation to which the trust was declared were restricted securities at the time of declaration of the trust, under which the shares could not be transferred from the defendant until after 1 November 2004, affect the remedy to which the plaintiff would be entitled for breach of trust? I conclude that it does, by requiring the quantum of the equitable compensation payable to the plaintiff to be measured by reference to the value of the shares held on trust, at a time after the expiry of the restriction. (k) Does the fact that, after declaration of the trust, the defendant imposed a "voluntary holding lock" on his shareholding, affect the remedy to which the plaintiff would be entitled for breach of trust? I conclude it does not. (l) Has the plaintiff made out any breach of fiduciary duty, independently of a breach of trust? I conclude she has not. (m) Has the plaintiff established an estoppel by convention concerning the existence of a trust? I conclude she has not. PART A – FACTS The Relationship Between Plaintiff and Defendant 3 In 1999 the plaintiff was either divorced or separated from her husband, and had the care of their two children, Jackson and Maverick, then aged about five and seven. Throughout the time that is relevant to this case, she has had few financial resources of her own. 4 In the course of 1999, she developed a relationship with the defendant, a man with considerably more financial resources than the plaintiff had. He arranged, in August 1999, for the plaintiff to move out of the old house that she had been living in, that was in a state of disrepair, and into more suitable accommodation at Mermaid Beach. The defendant paid the rental for that new accommodation, and various other household expenses. 5 In January 2000 the defendant moved into that rented house at Mermaid Beach. 6 After a brief separation, the plaintiff and the defendant began living together once again at Alcorn Street, Suffolk Park in March 2002. 7 By the end of June 2002 the defendant was making arrangements to acquire an option to purchase a property in Cooper's Shoot Road, Byron Bay. By this time, the defendant wished to marry the plaintiff. The location of the land at Cooper's Shoot Road was influenced by the plaintiff's desire to live somewhere near her parents. 8 Over the period from August 1999 until May 2005 the defendant paid large sums of money towards the household and general living expenses of the plaintiff. He paid the rental of the premises in which she lived, paid approximately $20,000 of the purchase price of a new car that was registered in the plaintiff's name, paid telecommunications bills and electricity bills, paid medical expenses for the plaintiff and her sons, and paid numerous other household expenses. He took the plaintiff on a holiday to Mexico, London and Hong Kong for a month in December 1999/January 2000, and on another holiday to the Maldives from 30 July 2003 to 11 August 2003. He is able to provide vouchers demonstrating expenditure on such items of the order of $230,000 over the period from August 1999 to May 2005. It is likely that his actual expenditure exceeded that amount. The Launch of Unitract Limited 9 The defendant was a shareholder in a company called Unitract Pty Limited. That company had the benefit of a patent application relating to a syringe, the needle of which would retract automatically and permanently inside the barrel once the syringe had been used. That was thought to be advantageous in preventing spread of infection arising from re-use of syringes or needlestick injuries. The shareholders in Unitract Pty Limited set about arranging for a public share capital raising by a company that would exploit the patent. 10 The chosen vehicle for making the initial public offering was Musgrave Block Holdings Pty Limited ("Musgrave"), a company that was already listed on the Stock Exchange, but whose shares were suspended. On 11 July 2002 an agreement was entered between Musgrave and Unitract Pty Limited, under which Musgrave would acquire from the shareholders in Unitract Pty Limited all their shares. In return Musgrave would issue shares in itself to the former shareholders in Unitract Pty Limited and certain other people nominated by Unitract Pty Limited. That agreement was conditional upon Unitract issuing shares in itself to raise $400,000 by 19 July 2002, a further capital raising (by means of an issue of 11,000,000 shares at 20¢ each) occurring no later than 11 October 2002, Musgrave issuing a prospectus by no later than 12 September 2002, and reinstatement of quotation of the shares occurring on or before 15 October 2002. The agreement provided for the defendant selling the 1.5 million shares he held in Unitract Pty Limited, and being issued with 1.5 million shares in Musgrave. At the time of completion of the agreement, Musgrave would change its name to Unitract Limited. I will sometimes refer to Musgrave as "Unitract". 11 ASX imposed a condition on Unitract's shares being quoted. That condition required that the defendant's 1.5 million shares (as well as certain other shares of promoters and people connected with the promotion) would be restricted securities. In broad terms, that restriction prohibited dealing in the shares to which it applied, meant that the particular shares to which it applied were not quoted on the stock exchange (and so could not be sold by an on-market transfer), and were subject to a "holding lock" that was designed to prevent any transfer of the shares being registered. (I consider it in more detail at paras [312] ff below). For the defendant's shares, that restriction would be for two years from the date of listing. Quotation of Unitract's shares was in fact achieved on 1 November 2002. Hence the restriction on the defendant's 1.5 million shares expired on 1 November 2004. 12 From 1 November 2004 to 1 May 2005 all 1.5 million of the defendant's shares, and from 1 May 2005 to 1 November 2005, 500,000 of the defendant's shares have been subject to a "voluntary escrow". The First Six Payments by the Plaintiff to the Defendant 13 The plaintiff had a cheque account with the ANZ Bank at Bundall. She asserts that seven amounts drawn on that account were lent to the defendant. Those amounts are: Payment No. Date $ Agreed by defendant 1. 21 March 2001 1000 x 2. 11 April 2001 5000 3 11 April 2001 5000 4 11 April 2001 5000 x 5 31 July 2001 1600 x 6 2 September 2002 10,000 x 7 17 March 2003 20,000 Total 47,600 As well, she says that the defendant agreed to make good to her a loss of around $10,000 that she sustained when she arranged for shares in Peptech Limited to be sold to raise funds to enable her to make loan No. 6. One way the plaintiff put her case was that the defendant had borrowed these amounts from her, and promised that the loans were secured by shares in Unitract. 14 The defendant agrees that payments 1, 4, 5 and 6 were made to him. He does not agree that payments 2, 3 or 7 were made to him. Further, he disputes that any of the payments were loans. He says that those payments that he admits the plaintiff made, were made as contributions to their joint living expenses, not as loans. 15 Bank statements of the plaintiff establish that her account was debited, on or very soon after the date of each alleged loan, with the amount of each alleged loan. The only alleged loans concerning which either party tenders a photocopy of the cheque, or the cheque butt, are payments 1, 4, 5, 6 and 7. 16 When there is a payment of money by A to B, and the sole question for decision is whether that payment is a loan or a gift, the onus of proving it is a loan lies on the person who so asserts: Heydon v Perpetual Executors, Trustees and Agency Company (WA) Ltd (1930) 45 CLR 111; Coshott v Sakic (1998) 44 NSWLR 667 at 671. 17 The plaintiff's evidence about the first alleged loan is: "The defendant wrote the cheque out and said to me words to the effect of: "I need $1,000.00. Sign this cheque for me". I do not know the purpose for which he used this money." 18 I accept the plaintiff's evidence concerning the writing of this cheque, and what was said at the time. However, that does not, in my view, establish a loan. There are no words of loan. By that time, the parties had been living in a de facto relationship for over one year. The defendant had been paying the vast bulk of the household expenses. There is nothing surprising or unlikely in the plaintiff having made money available to the defendant when he asked for it, without there being a loan. I am not satisfied, concerning this transaction, that at the time the payment was made there was any intention to enter legal relations at all. 19 The plaintiff's evidence about the circumstances in which the second, third and fourth alleged loans were made is as follows: "On 11 April 2001 I made three payments of $5,000.00 each to the Defendant. The first payment was by way of an ANZ cheque from my account being cheque number 500015, which was written on 9 April 2001. The second payment was by way of cashing an ANZ cheque number 500016 in the amount of $5,000.00 for the Defendant. The third payment was by way of ANZ cheque number 500017 which was drawn in favour of the Defendant's WA Bank Visa card. At the time the Defendant said words to the effect of: "I need $10,000.00 in cash but I do not want a cheque for this amount . Sign 2 cheques for $5,000.00 each. I do not want to have to fill out the disclosure forms required if I cash a cheque for $10,000.00" To the best of my recollection, I was with the Defendant when he cashed the two cheques for $5,000.00 each, although I do not know the purpose for which the Defendant used this money." 20 It is the payment of $5,000 to the defendant's Visa card account that the defendant admits receiving. By April 2001 the plaintiff was an additional cardholder on the defendant's Visa card. It is not established to what extent, if at all, the plaintiff actually used that card. 21 I accept the plaintiff's evidence about the making of these three payments. For the same reasons as I have given concerning the first alleged loan, I am not satisfied that the plaintiff has discharged the onus of establishing that any of the payments made on 11 April 2001 were loans. 22 Initially, the plaintiff's evidence about the making of the fifth loan was: "On 31 July 2001 I made a payment of $1,600.00 to the Defendant by way of cashing ANZ cheque number 001081 which was written on 25 July 2001, for the Defendant. The Defendant wrote out the cheque and said words to me to the effect of: "I need $1,600.00. Sign this cheque for me."" After the defendant had denied in his affidavit that he had written out that cheque, and exhibited a copy of the four cheques that he admitted receiving, the plaintiff accepted that it was her handwriting on the cheque, "and that I made an error in paragraph 4(iv) of my affidavit sworn 28 August 2006" . If the plaintiff wrote out the cheque herself, that makes implausible the words she attributed to the defendant on that occasion. I do not accept that the defendant said such words. Further, even if the plaintiff's initial version had been correct, that would not have been enough to establish that it was agreed that there would be a loan, for the same reasons as I have given concerning the first alleged loan. 23 On 14 and 16 November 2001, soon after the plaintiff had received $20,000 from her former husband, the plaintiff's parents purchased two parcels of shares in Peptech Limited, 4,800 shares in all, for a total outlay of $19,972.31. The shares were purchased through a broker, Mr David Missen, of Bell Securities. He is the same broker who acted for the defendant. These shares were treated as though they were the plaintiff's. 24 The plaintiff's account, in her affidavit of 28 August 2006, of how the payment on 2 September 2002 came to be made is as follows: "Prior to me making this payment to the Defendant, the Defendant said to me words to the effect of: "I need $10,000.00 for payment of part of the deposit on land which I am purchasing at Coopers Shoot. I know that you bought $20,000.00 worth of Peptech shares. If you let me sell them and lend the proceeds of sale to me, I will repay you the $20,000.00 which you originally used to purchase the shares so that you do not make a loss. I will make this repayment to you by way of $20,000.00 worth shares in Unitract at 20 cents per share"." 25 In her affidavit in reply of 31 October 2006 she confirmed her earlier account, and added: "… he said "I need this for the purchase of the Cooper's Shoot property" and he said "I will treat the loss on your shares as a loan which will make your loans to me total about $40,000.00"." 26 The cheque by which this payment was made was filled out by the defendant, and signed by the plaintiff. The defendant originally wrote that the cheque was payable to "Underline Pty Ltd", but above that the defendant wrote "Please pay cash" and the plaintiff signed the alteration. 27 The broker's contract note establishes that the 4,800 Peptech shares were sold on 21 August 2002, and produced total net proceeds of $10,586.26. 28 By July 2002 some difficulties had re-emerged in the relationship between the plaintiff and the defendant. Around 31 July 2002 the plaintiff first attended a Consulting Psychologist, Mr Kieran Riordan, about various difficulties she was encountering, including in her relationship with the defendant. She continued to see Mr Riordan from time to time until May 2005. The defendant paid the fees associated with those consultations, at least so far as consultations occurring after 16 September 2002 are concerned. At a time she puts at "before August 2002" she had told the defendant that she did not want to marry him, but in September 2002 she was still wearing an engagement ring he had given her, and she was still contemplating an ongoing domestic relationship with him. 29 The defendant denies the plaintiff's account of the circumstances of payment of $10,000 in September 2002. According to him, at the time of handing over the cheque the plaintiff said: "I would like to contribute towards the cost of the land and the house so that I can feel it is my home and not just yours." He says he did not need $10,000 from the plaintiff. The cheque account of Underline International Pty Ltd, that he used to fund ordinary living expenses, had a deposit of $10,000 made to it on 2 September 2002. This might be the plaintiff's cheque, but it is not possible on the evidence to make a positive finding, and if it was the plaintiff's cheque one wonders why the defendant had the cheque altered to be payable to cash. That account of Underline International Pty Ltd on 2 September 2002 also had another amount, of $59,500, deposited to it. The trust account ledger of the solicitor who acted for the defendant concerning acquisition of the Cooper's Shoot Road property shows one amount of $19,982.80 identified as "deposit monies" passing through the trust account in July 2002, and a further amount of $49,980.80 identified as "deposit" passing through the trust account in March 2003, but nothing passing through the trust account between those times. The defendant was incurring architectural fees in connection with the proposed house at Cooper's Shoot Road, but the evidence does not disclose when those fees became due. At least some of the architectural fees were paid, but the evidence does not disclose when. In this situation, it is not possible to make any positive finding about what the defendant did with the $10,000 he received in September 2002. 30 I will defer making findings about the basis on which the $10,000 was paid in September 2002 until other factual matters have been recounted. 31 The relationship between the plaintiff and the defendant broke down in October 2002. Around that time, they concluded that they should separate, but they did not separate immediately. They discussed the defendant providing some form of financial assistance to the plaintiff, because she did not have any income to support herself and her two sons. It was he who offered to provide support – it is not as though she had to drag a promise out of him. He told her he was willing to pay for the rent on the home for a period of time, and some other expenses such as medical expenses, and the boys' tutoring and sports expenses. He also indicated his willingness to continue to pay for her counselling with Mr Riordan. At no time during those discussions did the plaintiff assert that the defendant owed her the various amounts that she had paid him prior to that time, and which she now alleges were loans. 32 That the defendant made this offer of financial support is consistent with his treatment of the plaintiff throughout the relationship – concerning financial matters, he was considerate and generous. 33 Various of the notes that Mr Riordan made in the course of counselling sessions were admitted as business records. Some care needs to be exercised in using those notes, because Mr Riordan himself makes clear that he was not trying to maintain a complete record of things said to him in the course of consultations, and he recognises that sometimes – particularly when emotions were running high in the consultations – the notes might be simply inaccurate. Even so, some of his notes assist in clarifying the facts. 34 On 24 August 2002 Mr Riordan made some notes at a conference with the plaintiff. He said concerning them: "Louise White came to me hysterical and deeply distressed and very - it was like in a hysterical or distressed manner, described me money that was outstanding with Alan. And I jotted down some notes which have absolutely no - well, to my mind I wouldn't guarantee their accuracy in terms of those numbers there on the page, okay? 35 When the notes were made under those circumstances, I would not draw anything from them beyond the fact that on that day the plaintiff asserted that the defendant owed her money, that an amount of $10,000 was at least part of it, and that it had something to do with the Cooper's Shoot land. I note that this conference was three days after the Peptech shares were sold. 36 On 16 September 2002 the plaintiff told Mr Riordan that she wanted financial support – a solid commitment, written down. 37 On 28 September 2002 Mr Riordan made a note, in the course of a consultation with the plaintiff "my $10,000 invested in the land now". After cross-examination of both the plaintiff and Mr Riordan, I am satisfied that the import of that note is not that the plaintiff told him that she had made an investment of $10,000 in the land. Rather, it is that she had told Mr Riordan that she had provided $10,000 to the defendant, and that he had invested it in the land. 38 In her affidavit in reply, of 31 October 2006, the plaintiff gives many details, that she had not previously given, concerning conversations about money or shares that she had with the defendant. That evidence includes: "From as early as August 2002, the Defendant would say words to the effect of: "I will hold shares in trust for you" "You are going to be a wealthy woman when you get your shares" "You will be able to buy a house for you and the boys with the money that you will receive from the shares"." "At various times when the Defendant asked me for money, before the float of Unilife he would say words to me to the effect of: "I need your money so that I can buy shares in the company before it floats. I am able to buy shares at the promoter's rate of four cents per share." Since floating Unitract has changed its name again, to Unilife Medical Solutions Limited. It is Unitract that the plaintiff refers to as "Unilife" . 39 She says that at the time of handing over the cheque for $10,000 in September 2002 he said to her: "I am holding the shares in trust for you and once the company is floated, I will transfer the shares to you …" "The Defendant at about October 2002 rarely talked of anything else other than the subject matter of Unilife shares, as the company was about to float. The Defendant often said words to the effect: "You will be a rich woman when you get your $40,000.00 worth of shares. You will be able to buy a house …" Later on in about the middle of November, he said to me words to the effect of: "I made five million dollars last Friday from the shares"." 40 She also says that: "When discussing the shares with me, the defendant would always say, 'I am holding these in trust for you Louise'." and "The defendant had said to me about his calculation of about $40,000 in loans to him, that 'I will be able to get in before the float and buy shares at four cents each'. 41 In November 2002 the defendant and plaintiff moved to a different residence, at unit 25, The Links, 76 Broken Head Road, Byron Bay. These premises were rented, with the defendant still paying the rent. 42 On 6 January 2003 the plaintiff and the defendant separated. 43 Pursuant to leave to give oral evidence on a topic that her affidavit of 28 August 2002 had dealt with in inadmissible form, the plaintiff said that around Christmas 2002 she received a $20,000 payment from her former husband. In early January 2003 she says that she had a conversation with the defendant as follows: "He said … "I want you to think about a deal I'm going to propose to you. If you give me the $20,000 I will, in turn, give you shares at 90 cents a share and I want you to think about this because it is a good deal for you as the shares are trading at a dollar twenty so you are making a profit" and he brought up that conversation a number of times, what a deal it was for me, telling me - he said - Alan said, "you know this is a good deal for you". Q. And when you say he brought up that again was that in person or over the telephone? A. Stressed in person but it was reiterated over the phone." 44 Mr Riordan's notes of a session with the plaintiff on 5 February 2003 include the entry: "$40,000 [200,000 shares] In Alan's name until he can sell [July 2003/4] …? Anytime as needed?" Also on 5 February 2003, immediately below the note just quoted, Mr Riordan wrote, "Tax issues? Centrelink issues?". 45 Mr Riordan's evidence concerning the topic of that note was: "Louise is concerned about money, amongst other issues she is bringing to this session, roughly, I am not sure if it was 200 or more than that, but at least around 200,000 shares. She is saying in Alan's name until she can sell in July 2003/4 anytime as needed. I am not sure what the tax issues are or Centrelink issues are if I cash these shares or achieve ownership of these shares in that tax year. That is one of her worries. That is what I think it means. Q. Does the figure $40,000 bring back any memory in calculation of the 200,000 shares? A. It is obvious to me that Louise associates - she checks in with me that the $40,000 equates to 200,000 shares held in Alan's name on her behalf. That is what she is saying to me in this session." 46 Mr Riordan had earlier explained: "Q. Can I just ask you were the tax issue and Centrelink issues concerning Louise White? A. Yeah, recently separated single mum, wondering how she's going to get her life together and considering tax and Centrelink issues, around when she has access to it is written 200,000 shares in July. Q. I think the dates after July are 2003/2004? A. Yes, she was working out what earnings were in the tax years in 2003/2004. I remember in this and other sessions saying go to your accountant and get advice about this. Obviously it is of stress, it is causing anxiety for you and it an issue you need to take to the appropriate professional advisor." 47 I accept that evidence of Mr Riordan. 48 After the plaintiff and the defendant had separated, but prior to 17 March 2003, the plaintiff wrote the defendant an undated letter that asked the defendant for assurance that he would honour an agreement she said he had made in an earlier session with Mr Riordan, concerning payment of the first year's rent, and for the next two years half the rent, providing particular types of benefits for the boys, and paying for her ongoing sessions with Mr Riordan. She said: "Please re-affirm your stated commitment as I need asurety [sic] & a basis for budgeting and planning right now." 49 That letter says nothing about shares held on trust, or any alleged loans, but I do not regard that as something that detracts from the plaintiff's case. The letter had one topic, namely seeking reassurance about a particular agreement previously made about the defendant assisting with her ordinary household expenditure, when there was an immediate need for the plaintiff to know what income would be available to her for those purposes in the immediate future. 50 Some indication of the state of relations between the plaintiff and the defendant at that stage comes from the ending of the letter: "Maverick & Jax send their love. Hoping you are well and not too jetlagged. Love to you always Louise X" 51 At the plaintiff's request, the defendant agreed to attend one counselling session with Mr Riordan. That counselling session took place on 17 March 2003, at Mr Riordan's office. Early in the session he asked each to state their goals for the session. For the plaintiff, he recorded: "clarity re Alan's $ support post separation and question of shares held by him that are 'mine': no security. no paperwork." His note about the defendant's goal was: "Ditto re above", plus a topic relating to the emotional side of their relationship. He records, at one stage, the plaintiff saying "want support with boys, rent, 'transition' and "what you owe me and when I can get it"." 52 His notes of 17 March 2003 also record: "[Alan] + [Louise] agree roughly on a few issues: 1. $25,000 shares to each boy from July '03 2. [Louise] to ring [Alan] for big bills with boys up to Uni age. Then [Alan] deal direct with boys, 3. [Alan] agrees - 100% rent up to 450 p.w. 1yr + 50% rent two further years. 4. medical tuition sports education expenses [Alan] happy to contribute significantly. [Louise] "Nervous re no security with my shares" "They are in your name – I have no security. What if you die?" [Alan] Agrees to write letter indicating what shares are held in trust for Louise. Explains available in August '03." 53 Mr Riordan amplified that note in oral evidence, saying: "Louise was concerned there was no paperwork with shares held by him on her behalf. That is one of Louise's major goals, was for that session to clarify that and achieve paperwork on that." 54 The defendant gives a lengthy account, extending over approximately three pages of his affidavit, of the events of 17 March 2003. It is to the following effect. The plaintiff was very distraught through the meeting with Mr Riordan, and the defendant was also very upset. The plaintiff at various times expressed concern that he would abandon her and not pay her rent or help her, and that she would end up on the street. He tried to reassure her, by pointing to the way that he had provided for her during the relationship. Mr Riordan then said "yes but what happens if you die, she has nothing in writing to give her security that the rent would continue to be paid for a reasonable time". Up to that time there had been no mention of Unitract shares. The defendant said that he would be willing to put something in writing to give the plaintiff some level of comfort. Mr Riordan then suggested "why not agree to issue shares to cover the level of funding that would give Louise some comfort if you died? Then the executor will have something in writing." The defendant enquired how many shares the plaintiff would expect, to which Mr Riordan said "Well I understand Louise contributed some money to the household while you were in a relationship, so why not use the amount of shares that are of similar value to that?". When the defendant said he had no record of how much she might have contributed, the plaintiff then said "It's about $40,000, I estimate it would be approximately 222,000 shares". Mr Riordan enquired whether the defendant would be willing to put that in writing for Louise, and he agreed. The defendant continues: "At that time I was aware that Unilife shares were trading at approximately $0.90 per share. At the time, however, I was upset, and this conversation was taking place in an emotionally charged atmosphere. I desired to assist the plaintiff with some expenses for a reasonable time given her financial circumstances and apparent distress. For those reasons, together with the statement to the effect that any document concerning the shares was to be some form of comfort to her, I agreed with this proposal." 55 The defendant says that he did not calculate the figure of 222,000 shares, and that he adopted that figure because that was the number that the plaintiff suggested to him. He says he did not consider that he was undertaking any legally binding obligation, and "I did not give any thought to the fact that the value of 222,000 at that time was some $200,000, well exceeding the figure given to me as being the approximate total of the plaintiff's contributions. Nor did I consider how the value of those shares might compare to the total of my expected future contributions for the plaintiff's rent and other expenses. I was aware, although I cannot recall thinking of it at the time, that I would not be able to transfer any of my shares to the plaintiff after 1 August 2003 but before 1 November 2004 because of the mandatory escrow applying to my shares." 56 According to the defendant, Mr Riordan virtually dictated the terms of a document, which the plaintiff signed then and there. 57 According to the plaintiff, at Mr Riordan's office "Alan said - I am holding $40,000 worth of shares at 20 cents a share and $20,000 at 90 cents a share - and Alan calculated that - I calculated that to be 222,000 shares. Q. When you used the words "I calculated that to be 222,000 shares" were you referring to Alan or yourself? A. Alan. Q. At that stage had you paid him the $20,000 that was mentioned there? A. No I had not." She says no letter was written at Mr Riordan's office. 58 According to the plaintiff, she and the defendant then returned home, to the Links. There, the defendant said he would not write the letter until she signed a cheque for $20,000 over to him. The defendant then wrote out, in the plaintiff's chequebook, a cheque dated 17 March 2003, marked "Please pay cash", in the sum of $20,000. 59 The cheque is in evidence, and it is common ground that all of the writing on the face of the cheque, apart from the signature, is that of the defendant. The cheque butt relating to the cheque is also in evidence. It is entirely in the defendant's handwriting, and reads: "17/3/03 Alan $20,000" 60 The face of the cheque bears a stamp showing it as being processed by the bank on 18 March 2003. The plaintiff's cheque account pass sheet also records the cheque as being presented on 18 March 2003. 61 According to the plaintiff, it was when she had signed and handed over the cheque on 17 March 2003 that the defendant wrote out a document that is of central importance to the plaintiff's case. That document is undoubtedly in the handwriting of the defendant, and signed by him. Now, it reads as follows: "Louise White, 25 THE LINKS BYRON BAY NSW 2481 17/3/03 Dear Louise, THIS LETTER IS TO CONFIRM THAT I AM HOLDING IN TRUST FOR YOU 222,000 UNITRACT SHARES. THESE SHARES WILL BE TRANSFERRED TO YOUR NAME AND CONTROL, AT ANY TIME THAT YOU REQUEST, AFTER 1/AUGUST/2003. IN THE CASE OF MY DEATH, THE ABOVE TRANSFER OF 222,000 UNITRACT, TO YOUR NAME, WILL BE AUTHORISED BY MY EXECUTOR, STEVEN SHORTALL. I FURTHER COMMITT TO MAKE AVAILABLE 25,000 UNITRACT SHARES, FOR FINANCIAL SUPPORT FOR [AS] EACH [AS] BOTH MAVERICK AND JACKSON, ON OR AFTER 1/AUGUST/2003. [ALAN SHORTALL] ALAN DENIS SHORTALL 18/3/03 [AS] 62 The plaintiff says that the defendant wrote that letter when she had just signed the cheque made out to the defendant for $20,000. She says that as originally written, the final sentence included the phrase "for each Maverick and Jackson", that on 18 March 2003 the defendant amended that phrase to read "for both Maverick and Jackson", and that on 18 March 2003 he initialled that alteration, on either side of the "each" that he had crossed out, dated the document "18/3/03" at its end, and also initialled that dating. The defendant left the original of the letter with the plaintiff, and she has had possession of it ever since. 63 Mr Riordan, in evidence, denied that he was present when the document came into existence, denied that he suggested the wording to Mr Shortall, and says that the first time he saw the document was when the plaintiff brought a photocopy of it to his attention, in distress, in about August 2003. He says that in the course of the counselling session on 17 March 2003 the defendant: "… expressed a sincere desire to offer a generous level of support to Louise whilst she made a transition into independence as a sole mother." 64 Mr Riordan says: "My clear recollection in that session, I asked both parties to get independent legal counsel for any financial agreement they would come to post separation." 65 After his suggestion, on 17 March, of legal advice: "Q. Was there any response from either of the parties? A. I do recall Alan saying that won't be necessary because he's CEO or director and he's got lots of experience in these matters and they can sort that out for themselves." Digression Re Procedure 66 I interrupt the narrative to record here some matters concerning the procedural history of this case, that are relevant to assessments of credit. The proceedings were begun on 12 May 2006 with the filing of a Summons in court, and the seeking of short service of it. An application for expedition was made, that resulted in Young CJ in Eq on 29 September 2006 fixing it for hearing before me for one day on 24 October 2006. At that stage his Honour noted: "No amendment to the Statement of Claim is proposed. Note that all the evidence is filed." 67 By that stage, the plaintiff had filed two affidavits in chief, one made on 11 May 2006, and the other on 28 August 2006. Both affidavits contained material that was clearly inadmissible concerning critical parts of the plaintiff's case. 68 At that stage, the defendant had filed only an affidavit that was ultimately not read at the trial. On 20 October 2006, after advice from counsel who had only recently been briefed, the defendant swore another, and more detailed, affidavit. 69 When the matter came on for hearing before me on Tuesday, 24 October 2006, the defendant sought leave to read the affidavit of 20 October 2006. It was necessary to seek that leave, because Brereton J, on 25 August 2006, had directed that the defendant not be entitled to rely, without leave of the court, on any affidavit evidence that had not been served by 21 September 2006. I granted the leave, on the basis that it was necessary for the late affidavit to be read to enable the real issues to be decided. That resulted in an adjournment, during which the plaintiff swore, on 31 October 2006, an affidavit in reply to the defendant's affidavit of 20 October 2006. In that affidavit in reply she gave evidence of numerous matters relevant to her case for the first time. 70 As was inevitable as soon as objection was taken, central parts of the plaintiff's affidavit in chief were struck out. I then granted leave for the plaintiff to give evidence on those topics orally. As well, oral evidence was also received from the plaintiff on some topics on which she had not given affidavit evidence at all. 71 Frequently, it is very damaging to the credibility of a plaintiff's case if important evidence relating to it emerges only late in the course of evidence. The reason for this is that the Court is usually justified in assuming that the legal representatives of a plaintiff embarking on something as significant and potentially expensive as Supreme Court litigation will properly proof their client, obtain from their client all relevant details of the story relevant to the case, and include that material in affidavits in chief. 72 I cannot make that assumption in the present case. The plaintiff's evidence in chief was so clearly inadequate it could not have been properly prepared. The Statement of Claim pleads evidence (contrary to UCP Rule 14.7), and claims something unknown to the law, namely an interlocutory declaration. Notwithstanding the assurance given to Young CJ in Eq, in the course of the trial the plaintiff sought, and was granted, leave to amend her Statement of Claim in significant ways. At the end of the trial the plaintiff sought leave to make yet another amendment to the Statement of Claim which leave was refused. 73 The case was originally set down for one day. The first day's hearing concluded at 2:30pm, because of the adjournment that I have mentioned. When the hearing resumed, it continued for a further three days. On each of those three days the hearing concluded after ordinary Court hours – at 4:30pm, 4:50pm and 5:25pm. Even with those extended hours, the plaintiff's counsel needed to make his submissions in reply in writing. The plaintiff's counsel sought to call Mr Riordan to give oral evidence, as a witness in reply, when on at least some topics he should have been a witness in chief. The evidence of Mr Riordan that was really in chief was ultimately received only because the defendant could not point to any prejudice in its having been given out of the usual order. In fairness to the plaintiff's lawyers, though, I should say that the reason why no affidavit from Mr Riordan was filed, was because he felt that his obligations of confidentiality to his clients precluded him from giving an affidavit or statement when there was no legal compulsion for him to do so. Even taking into account that part of the extra length of the trial arose from the defendant's late affidavit, I have difficulty in seeing how a lawyer who understood what was involved in the case could have thought it would have been concluded in one day. 74 The plaintiff was cross-examined about why she had not included in any of her affidavit evidence mention of the defendant asking for $20,000 at any time prior to the counselling session on 17 March 2003. Her answer was, in substance, that she did not have an answer, and didn't realise it was important to put it in the affidavit. I accept that her response is truthful. Findings on Central Factual Matters 75 I accept the plaintiff's evidence in para [24] above about the circumstances in which the payment of $10,000 was made on 2 September 2002. While the defendant talked about that $10,000 being "lent", the conversation makes clear that what he was proposing was not a "loan" of the conventional type. Rather, what he was proposing was that if she paid him the money, he would in return cause her to have $20,000 worth of shares in Unitract at twenty cents per share. That is in substance a purchase, even though he called it a loan. 76 I accept that, possibly at the time of making the advance of $10,000 from the Peptech shares, and more likely than not prior to the time of the float on 1 November 2002, the defendant told the plaintiff, in substance, that all the money she had provided to him, which he quantified at $40,000, would be treated as loans -- and that he made clear that what he meant was "loans" of the same type and on the same basis as he had proposed concerning the proceeds of sale of the Peptech shares. At some stage, and prior to 5 February 2003, the defendant had stated to the plaintiff the result of the calculation that was involved in applying that basis to $40,000, namely, that he would hold 200,000 shares in trust for her. 77 I do not accept the defendant's account of the meeting on 17 March 2003, nor his account of how the document sued on came into existence. I accept the evidence of Mr Riordan and the plaintiff on those matters. At Mr Riordan's office, on 17 March 2003, the defendant clearly stated that the shares he held in trust for the plaintiff were ones that could be transferred in August 2003. 78 I am not prepared to accept uncorroborated evidence of the plaintiff about the precise date that particular conversations occurred – she has demonstrated, and herself admits to, some unreliability concerning dates. However apart from the precise dating, I accept that conversation of the general type that she deposes to, about shares (in general), and 200,000 shares in particular, being held in trust for her, occurred. In general, I find her a credible witness. I also accept that, in the early months of 2003, the defendant proposed to the plaintiff that if she would provide him with another $20,000 he would hold shares for her on the basis that they cost 90¢ each. 79 The defendant gave evidence with clarity, precision, and confidence. Unfortunately some of it is inconsistent with other independent evidence that I accept. Other parts of it are unusual, and tell the sort of story that requires very close scrutiny before it is accepted. In these circumstances, I do not regard his uncorroborated word as sufficient to discharge an onus of proof, save concerning matters that, by reference to other established facts, have a very real possibility of being correct. 80 The defendant's evidence (para [54] above) that at 17 March 2003 the price of Unitract shares was approximately 90¢ is wrong. On that day, the closing price of the shares was $1.23. The lowest closing price they had achieved during the whole of March 2003 was $1.12, on 7 March 2003. By contrast, in January 2003 the shares ranged between a closing price of 62¢ on 2 January 2003 (a day of comparatively low trading volumes, hardly a surprise at that time of the year) to a high of 91¢ on 14 January 2003. On all days bar two in January 2003 their price was below 90¢. Thus it seems to me unlikely that the defendant would have said, in January 2003, "it is a good deal for you as the shares are trading at $1.20", as the plaintiff contends (para [43] above). 81 The shares (which had been offered in the float at 20¢) had closed at 24¢ on the first day of listing, 1 November 2002. Thereafter, the trend of share prices was steadily up. I accept that, before he would sign an acknowledgement of holding 222,000 shares in trust, he insisted on being paid the $20,000 that was needed to notionally pay for the additional 22,000 shares. He actually signed the letter only after he had her cheque for $20,000. Events After Execution of the Document of 17/18 March 82 Relations between the plaintiff and the defendant continued to be cordial, even affectionate, after the letter of 17/18 March 2003 was signed. The defendant continued to visit the plaintiff and stay with her from time to time. He took her on a holiday in the Maldives between 30 July 2003 and 11 August 2003. That holiday cost him of the order of $40,000, and his itemisation of the expenses suggests it was quite luxurious. During their stay in the Maldives, the defendant said to the plaintiff words to the effect of: "You are a rich woman now Louise" "You will be able to set yourself up in a home for you and the boys when we get back" "Trust me Lou, I'll take care of everything for you" "Have you thought about where you would like to buy a house" "There is no need to worry about anything Louise, I will sort out the transfer of shares when we get home." 83 After their return, the defendant spoke to the plaintiff about the shares, and said words to the effect of: "I will look after things with your shares" "I will make sure that they are transferred to you, you will be a rich woman and can buy a house, Trust me." 84 Soon after their return from the Maldives, the plaintiff asked him to transfer the shares to her, but he did not do so. The following conversation ensued: DEFENDANT: "It's not the right time to transfer the shares now Louise." PLAINTIFF: "But I need these shares as you have promised so that I can sell them. I need this money" DEFENDANT: "I can't transfer the shares to you now, I will give you some money for Christmas." 85 That response was not an indication of a permanent inability, or an unwillingness to transfer the shares. Rather, as the plaintiff said in oral evidence, the theme of his reply was "I can't do it right now, I am too busy, I have too much going on, don't worry you will get your shares." 86 The defendant continued to subsidise the plaintiff's rental, and pay other expenses connected with her and her children, in the way he had said he would. An indication of the state of relations between them is that in September 2003 he gave her a new mobile phone. He responded, on 22 September 2003, to a message in which she thanked him for it, saying: "I miss you and no matter what we will always be soul mates, in my mind. You still have a large part of my heart in your hands. I miss you. Love, Alan" While in the Maldives, though, he had told her he would be taking another woman to his son's wedding. 87 On 29 October 2003 an electronic transfer of funds to the plaintiff's bank account occurred, in the sum of $5,000, accompanied by the message "love Alan Shortall". On 12 December 2003 another electronic transfer of $5,000 was made to her account, this time accompanied by the message "happy Christmas Alan Shortall". These were amounts additional to the financial benefits he had promised in March 2003. 88 In about the middle of January 2004 the defendant rang the plaintiff and told her that there would be a newspaper story published which would be critical of him. He said, "if Ben Hills contacts you, you are to deny everything. I cannot transfer the shares to you now as everyone is watching me." He also said to her "tell anyone who asks not to sell their shares, the price will probably drop, but it will go up again." Ben Hills is the journalist who wrote the newspaper story. 89 On the weekend of 17-18 January 2004 the article that the defendant had been talking about appeared in the Sydney Morning Herald. It was critical of both the defendant, and of Unitract. It raised allegations that Roger Williamson, who held about 24% of the shares in Unitract, was someone about whom very little was known or could be found out. 90 The plaintiff continued to make requests, through 2004, for the transfer of the shares. 91 By January 2005 the plaintiff had discovered that a form of transfer of shares could easily be downloaded from the Internet. She downloaded one, filled out her own name and address on it, signed it, and posted it to the defendant with a letter saying: "Dear Alan, Here is the form I said I would send down to you for the transfer of my shares. Not sure if you are going to give me the boys their shares as promised or not. I am thinking that it would be easiest to only go through this process once. But as it really is up to you I am unsure where I stand on this matter. My account number with Commsec is [account number]. I hope you can get to this soon. Also hope your trip to the States was fun. Take care. Love Louise" Did the Plaintiff Say She No Longer Wanted the Shares? 92 The defendant did not reply in writing to that letter. 93 He says he telephoned the plaintiff, expressing surprise about her asking for a transfer of shares. When she reminded him that he had signed a letter for her previously, he says he told her that he had only provided it on the basis that it would provide some comfort that he would continue to pay the rent and her expenses for a reasonable period of time, or in case he died. According to him, he said it was never considered to be in any way additional. 94 He also asserts that the plaintiff then said to him: "My circumstances have changed since I sent the letter and I no longer want anything from you because I am being investigated for social security fraud." 95 I do not accept any of that evidence of the defendant. 96 Even after January 2005, the defendant continued to pay certain expenses of the plaintiff. He paid amounts that she debited in the period 21 March 2005 to 19 April 2005, to a Visa Gold Card. He continued to pay fees to Mr Riordan for consultations the plaintiff had between 26 January 2005 and 1 May 2005. 97 The plaintiff denies that there was any mention of fraud by Centrelink to her, and denies that she said anything about fraud to the defendant. I accept those denials. 98 She accepts that she "had been queried" by "the Department" (who I take to be Centrelink), but the only letter she received was one that said "your Parenting Payment Single will stop after 8 February 2005 because you are now a member of a couple and no longer want to receive this payment from Centrelink", and went on to tell her about her appeal rights concerning that decision. 99 Four passages in Mr Riordan's notes were cross-examined on concerning this topic of whether the plaintiff told the defendant that she was being investigated by Centrelink for fraud. One of them was his note on 5 February 2003 "tax issues? Centrelink issues?". I have already made findings about the circumstances of the making of that note at paras [45]-[46] above. 100 The second is a note he made on 4 November 2003 "Centrelink not sorted out". The third is a note made on 15 June 2004 "5 letters from Centrelink". The fourth is a note made 13 February 2005 "rang Allan – explained being investigated. Don't want to involve Allan." 101 Mr Riordan explains the second and third of these entries by saying: "There was an ongoing issue in counselling with regards to the standing firm and persistent in order to achieve from the Child Support Agency (CSA) in relation to her ex-partner Steve in coming up with the money in, income in terms of support for her children." And, "It reached a head in late 04 with Louise and the Child Support Agency and what - actually, I remember now. It was what Steve was saying he was giving to her, Louise, was far more than what she was actually getting and that affected her Centrelink payments. There was some argy bargy with Centrelink which related to her, yeah, the lack of financial support from her partner." 102 Mr Riordan's explanation of the note of 13 February 2005 is "I think that note is saying: I rang Alan. I have explained to him that Centrelink are asking me some difficult questions and Louise is explaining to Alan I don't want to drag you into this. That would be a reasonable interpretation." I accept this evidence of Mr Riordan. 103 The plaintiff's evidence, when cross-examined about "5 letters from Centrelink", was "it is actually child support agency, not from Centrelink", that she did not write any letters to Centrelink in about January/February 2005, but that "I went into Centrelink and filled out the appropriate form the day after the gentleman rang me". I accept that the plaintiff told the defendant, in around February 2005, that she had been queried by Centrelink, to which he replied "I can't transfer them to you now as I don't want to get mixed up in any investigation". The plaintiff did not agree that the shares should not be transferred. A Final Request for Transfer 104 It is common ground that the plaintiff and the defendant saw each other in Sydney on the day of Unilife's Annual General Meeting, in November 2005. I accept that, after the meeting, the plaintiff telephoned the defendant and asked when he would transfer the shares, to which the defendant replied "I will do it first thing tomorrow morning". 105 He did not do so. 106 On 15 November 2005 a solicitor who the plaintiff had engaged wrote to the defendant saying: "Dear Mr Shortall, Declaration of Trust – Louise White I act for Louise White who has sought my advice regarding Unilife shares. These shares are held in Trust by you, and owned beneficially by her in accordance with the Declaration of Trust signed by you on 18 March 2003. Pursuant to the provisions of that Declaration, Ms White now requires that you transfer 247,000 shares in Unilife to her. 222,000 of these shares she will hold as beneficial owner, and the remaining 25,000 she will hold as Trustee for Maverick and Jackson White. I look forward to receiving a Standard Transfer Form executed in favour of Ms White." 107 The defendant did not reply to that letter. Would the Plaintiff have Sold the Shares? 108 The plaintiff asserts that if she had received the shares in August 2003 she would have sold them with the exception of $60,000 worth at that time. She says that she would have sold them all after the defendant called her in January 2004, and the Sydney Morning Herald article appeared. 109 Mr Curtin, counsel for the defendant, submits that I should not accept that evidence. First, Mr Curtin reminds me that evidence given by a person, about what he or should would have done if some event in the past had happened differently, needs to be looked at with caution. In Cackett v Keswick [1902] 2 Ch 456, a case about a material omission from a prospectus, Farwell J, at 463-4, said: "Now, it cannot be enough for a man to swear that he would not have entered into the contract if he had known something that was concealed from him. It is easy to be wise after the event, and many men can honestly persuade themselves when a company has failed that they would have been influenced by a circumstance which in all probability would have made no impression whatever on their mind when considering an investment or speculation." 110 Farwell J is not there saying, however, that such testimony should not be accepted. Rather, he is saying it is not sufficient in itself. He goes on to say, at 464: "… if the court sees that the fact omitted is of such a nature that it might reasonably deter, or tend to deter, the ordinary investor from entering into the contract, this is sufficient. It is in great measure an inference of fact to be drawn by the Court or a jury from the circumstances of the case … It would no doubt be a matter of comment if a plaintiff was not called nowadays to swear that the fact omitted would have deterred him from contracting; but neither his testimony nor his absence is conclusive." 111 That decision was upheld by the Court of Appeal (the judgments commencing at [1902] 2 Ch 471), on grounds that did not depend upon how the plaintiff's evidence of how he would have reacted in a hypothetical situation should be treated. 112 Mr Curtin also reminds me that in Rosenberg v Percival (2001) 205 CLR 434, a medical negligence case concerning failure to warn of a slight but foreseeable risk, McHugh J, at 444, [26] said: "… human nature being what it is, most persons who suffer harm as the result of a medical procedure and sue for damages genuinely believe that they would not have undertaken the procedure, if they had been warned of the risk of that harm." 113 Mr Curtin also points out that Kirby J, in Rosenberg v Percival at 486, [158] referred to his own remarks in Chappel v Hart (1998) 195 CLR 232 at 272-3. There, in considering whether in a medical negligence case the court should adopt a "subjective" approach to causation of damage which looked at what the particular patient's response would have been had proper information been given, or an "objective" approach, which looked at the response of a reasonable person in the patient's situation, Kirby J said: "The subjective criterion involves the danger of the "malleability of the recollection" even of an upright witness. Once a disaster has occurred, it would be rare, at least where litigation has commenced, that a patient would not be persuaded, in his or her own mind, that a failure to warn had significant consequences for undertaking the medical procedure at all (where it was elective) or for postponing it and getting a more experienced surgeon (as in this case). Yet, these dangers should not be overstated. Tribunals of fact can be trusted to reject absurd, self-interested assertions." McHugh J in Chappel v Hart at 246, footnote 64, made similar remarks. 114 In Seltsam Pty Ltd v McNeill [2006] NSWSCA 158 at [115]-[123] Bryson JA, with whom Handley and Tobias JJA agreed, held that evidence by a witness of what he or she would have done, if some aspect of the past had occurred differently to the way it in fact occurred, is admissible, though its weight should be carefully assessed because [at 121]: "Observations on the limited value, and self-serving and hindsight nature of evidence of this kind have considerable force …" 115 One objective circumstance that Mr Curtin points to concerns the way in which the plaintiff acted concerning some Unitract shares in a superannuation fund that she and her former husband were involved in. That superannuation fund obtained around 520,000 shares in Unitract when it floated. The plaintiff and her former husband were the trustees of that fund. The former husband made all the decisions in relation to that fund, and was the sole signatory on the bank accounts. The plaintiff did not obtain control of the fund by herself until September 2005. Unitract shares in the superannuation fund were not sold until 16 June 2005 (when 130,000 were sold), 10 August 2006 (when a further 378,000 were sold) and 11 August 2006 (when 10,500 were sold). 116 The plaintiff contacted her former husband in January 2004, after the Sydney Morning Herald article, and discussed the movement in the share price of Unitract. However, she did not suggest, or ask, that he sell the shares in Unitract that the fund held. At that time relations between the plaintiff and her former husband were difficult, and she was reluctant to say anything to him at all. 117 As well, the plaintiff explains her reason for not asking her former husband to sell the Unitract shares as being that the fund bought the shares as a long-term investment. 118 If the defendant had transferred 222,000 shares to the plaintiff in August 2003, it cannot be concluded that the plaintiff would have dealt with those shares in the same way that the superannuation fund dealt with its shares in Unitract. In the last few months of 2003, the situation that the plaintiff was in was that of a single mother, with two children to look after. While the defendant had said he would pay the whole of the rent for a year, and half of the rent for two years, on her premises, she was close to the end of the time when his full rental subsidy would expire. She and the defendant had previously discussed a possibility that, when she got her shares, she would buy a house for herself and the boys. Housing was her single greatest need. 119 The price of Unitract shares had trended upwards in the first half of 2003. On 3 January 2003, the first day on which the volume of trades exceeded 100,000 in the year, the closing price was 65¢. From 9 April 2003 the price was consistently above $2.00, and reached its highest point at $2.93 on 18 August 2003. Thereafter, the trend was down until the end of 2003, but not markedly so – the lowest price achieved in that period was $2.06 on 9 October 2003 (a day when an unusually large number of shares traded) and in December prices were in a range from $2.23 to $2.55. The appearance of the Sydney Morning Herald article coincided with the price dropping from $2.17 on 16 January 2004 to $1.87 on 19 January 2004. Thereafter, the trend of prices was down until 17 March (when it reached $1.35), but the price then recovered somewhat, to $2.12 by 4 May 2004. After that, the trend has been continually down. The share price had sunk below $1.00 by 26 October 2004, below 70¢ by 18 March 2005, below 60¢ by 23 June 2005, below 50¢ by November 2005, and have continued a general downward trend until, on 1 November 2006 the price was 22¢. 120 The agreement between Musgrave and Unitract Pty Ltd (para [10] above) provided for the company to have an issued capital of over 66 million shares. The entire on-market trading history of the company since flotation is in evidence, and suggests that even if a sale of 222,000 shares occurred on a single day, that would not have a significantly depressing effect on the share price. 121 If the plaintiff had received 222,000 shares in August 2003, and the share price had been rising from its high on 18 August 2003, I think it possible that the plaintiff may have held onto the shares at least for another few months. Her need for money would be acute when the defendant's full rent subsidy ceased, in January 2004. However, when the trend of the price was down, and the time when the plaintiff's need for money would become particularly pressing was only a few months away, it seems to me likely that if she had received the shares on 1 August 2003, or promptly after she first asked for them, she would have sold them by mid-September 2003. There was some volatility in the market price around that time. $2.55 is a fair estimate of the amount she would have received for the shares, taking into account that a small amount of brokerage would have been payable. 122 I see no reason to reject the plaintiff's admission that she would not have sold $60,000 worth of the shares at that time. No explanation was given in evidence of where that figure came from, but I note that it is approximately equal to the amount of money that she paid to the defendant in the course of the relationship, and up to 17 March 2003, including the loss made on sale of the Peptech shares. Thus, it is approximately equal to what amounts to the purchase price of the 222,000 shares that the defendant agreed to hold on trust. 123 It seems to me that the plaintiff was likely to have sold such Unilife shares as she kept within a few days of appearance of the Sydney Morning Herald article. The defendant had told her before the article had published that the share price would probably be detrimentally affected. He had also told her that the price was likely to recover, but in my view it is likely that the plaintiff would not have seen herself as able to afford the risk that it might not recover. As well, if the share price recovered, there were shares in the superannuation fund that had been bought at the float price, and that would benefit from any such recovery. 124 In my view, the remaining shares would be likely to have been sold by the end of January 2004. Given the range of prices over the period from 19 January 2004 to 30 January 2004, a fair estimate of the price that would have been realised is $1.80 per share. PART B – INTENTION TO ENTER LEGAL RELATIONS 125 The defendant submits that there was no intention to enter legal relations in the execution of the document dated 17 and 18 March 2003, or in any of the conversations that immediately preceded its execution. 126 In assessing that submission, one needs to bear in mind that (as Mr Ryan put it in address) there are "two limbs of the plaintiff's case, the declaration of trust and the promised transfer of the shares after the 1 August". Mr Ryan submits that "we have this declaration of trust sitting on top of a contract or promise to transfer the shares for consideration". 127 When one considers whether there is an intention to enter legal relations, the objective theory of contract formation has the consequence that those objective circumstances from which an observer would reach a conclusion about whether contractual relations were intended or not, play a significant, and possibly exclusive, role. The reason for putting it that way is that subjective intention can be relevant to whether a contract is formed, in the sense that it can stop what would otherwise be a contract from being a contract – as when there are words which on their face are sufficient to amount to a contract, but both parties know that the other does not intend to contract, as happens with playacting. As well in Air Great Lakes Pty Ltd v KS Easter (Holdings) Pty Ltd (1985) 2 NSWLR 309 at 330-331 Mahoney JA says that it is "relevant" that parties intend to enter a contract, although his Honour gives no guidance as to how or by reference to what principles that relevant information is applied. 128 So far as the type of intention that is needed to create a trust is concerned, the law is settled, for a judge of first instance in New South Wales, by the decision of the Court of Appeal in Hyhonie Holdings Pty Ltd & Anor v Leroy & Anor [2004] NSWCA 72. In that case Hodgson JA (with whom Mason P and Handley JA agreed) accepted, at [43] the following statement made by Bray CJ in In Re Lamshed [1970] SASR 224 at 239: "It is clear law that despite the unambiguous words of the declaration the trust apparently created by them can be rebutted by evidence of a contrary intention ( Commissioner of Stamp Duties (Qld) v Jolliffe (1920) 28 CLR 178). But the onus is on those who seek to prove such an intention and strong evidence is required for the purpose ( In Re Steele [1925] SASR 272). Many cases were cited to me where this had been done successfully. In some of these cases the depositor was alive and gave evidence of his own intention and was believed ( Jolliffe's case ; Starr v Starr [1935] SASR 263). In other cases when the depositor was deceased there was evidence of specific declarations made by him during his life time ( Winter v Grady (1921) SR (NSW) 686 at 691), though sometimes these related to the interest only and the trust stood as to the principal ( Kauter v Hilton (1953) 90 CLR 86; Re Armstrong (Deceased) [1960] VR 202 at 206). And in some cases the trust was held to be rebutted after the death of the depositor by evidence entirely or largely circumstantial ( In Re Appleby's Estate (1930) 25 TasLR 126; Re McGuire, Deceased (1937) 41 WALR 120; Teasdale v Webb (1940) 57 WN (NSW) 151; Abbot v Miles (unreported, Supreme Court of South Australia, Napier CJ, 12 May 1952); Jeffrey v Miles (unreported, Supreme Court of South Australia, Mayo J, 10 December 1952)." 129 In other words, so far as declaration to create a trust is concerned, it is the subjective intention of the settlor that is critical. Even so, frequently the subjective intention is ascertained, as a matter of evidence, by inference from objective circumstances. 130 In my view, there was both an intention to contract, and an intention to declare a trust, in the present case. 131 During the relationship, the defendant had been particularly generous to the plaintiff. Even though it was in October 2002 that they decided to separate, they did not actually separate until January 2003, and in the period before separation they discussed in some detail, and with assistance from Mr Riordan, what their future relations would be, including financial relations. It was during that period that the float of Unitract occurred. The evidence provides no basis for believing that the defendant's view was anything other than that the company would be a success. There is nothing unusual in the defendant putting to the plaintiff the proposition that he would treat the money that she had caused to be invested in Peptech shares as a loan to him, in return for which she would have some Unitract shares. Throughout the relationship, the plaintiff had been sensitive about the fact that she could make no financial contribution. The defendant had said to her "your place is in the home Louise. It is your job to stay at home", and "if you get a job, it will be the end of our relationship", but she was still concerned that she was not making a financial contribution. 132 Even though he had, before they actually separated, made promises to her about providing her with future support, by the time she wrote the letter referred to in para [48] above the plaintiff was apprehensive about her financial future, and wanted a more solid assurance. I see nothing unusual, when the time came for them to talk about how they would separate their lives, in the defendant agreeing, in substance, that the amounts that she had given him in the course of the relationship would be treated as loans (with some rounding up of the total of the sums paid), and applied in the acquisition, at a favourable rate, of shares in Unilife. Indeed, agreeing to wind up their financial affairs on that basis was considerate and sensitive on his part, and it allowed him to confer a benefit on her in a way that did not yet again draw attention to her lack of financial resources. 133 An agreement to provide the shares was confirmed in substance in front of Mr Riordan, in a session where they had both stated, at its outset, that they shared a goal of arriving at "clarity re Alan's $ support post separation and question of shares held by him that are "mine"." That was in a context where the plaintiff said one of the problems about them was "no security. no paperwork". Mr Riordan says that at that meeting the defendant: "… expressed a sincere desire to offer a generous level of support to Louise whilst she made a transition into independence as a sole mother." 134 Even though there was agreement in principle on some of the topics that were discussed at the meeting – the various periodical payments that the defendant would make, and assistance with particular types of bills that he would provide – the plaintiff did not seek, and the defendant did not offer, any written agreement concerning those topics. However, concerning the shares, the defendant agreed "… to write letter indicating what shares are held in trust for Louise. Explains available in August '03". 135 The defendant gives evidence, which seems to me inherently likely, that "I had, in my business career, become aware of trusts". He accepts that his business experience "… would include the meaning of the word trust in terms of its legal significance …". 136 On 29 September 2002 he had written a letter to the architect that he had engaged in connection with the Cooper's Shoot house, Mr Ian McKay. It said: "Dear Ian, Further to our recent conversation and also refering to your invoice 19/02. I wish to confirm that 200,000 shares in the company Unitract Ltd, soon to be listed on the ASX, will be held in trust for you. These shares will be tradable by you at any time after the listing. This document is to also acknowledge the transfer of title of the 200,000 Shares in Unitract to you. A deed of execution will be issued to you in the not too distant future, confirming your right and entitling you to execute the sale of such shares at a time of your choice. I hope that this meets with your approval." 137 I infer that this is a letter that the defendant drafted without legal assistance. It shows an understanding of one of the common features of a trust, namely the right of the beneficiary to call on the trustee to transfer the trust property, and the ability of the beneficiary to sell the shares held on trust when such transfer has occurred. 138 The first sentence of the document the defendant signed on 17/18 March 2003 on its face is clearly indicative of an intention to hold 222,000 shares on trust. On its face it is not itself a declaration of trust made for the first time, but rather a confirmation that a trust already exists. It is unnecessary to decide whether any of the conversations that the plaintiff and defendant had prior to or on 17 March 2003 are themselves declarations of trust – the letter is on its face a clear statement of intention that thenceforth 222,000 shares were held on trust. 139 When the letter says that the transfer will be authorised by the defendant's executor if the defendant were to die, that is a powerful indication of an intention to enter legal relations, as an executor can part with property of a deceased only for purposes of administration, to give effect to a provision of the Will, or in discharge of a legally enforceable obligation that the deceased has entered during his lifetime. It is only the last of those possibilities that could apply here. "Achieving paperwork" concerning the shares was one of the plaintiff's stated objectives at the counselling session. A written statement of a purely moral obligation is of little use while the person making the statement is alive, and no use if that person has died (except possibly as an admission relevant in Family Provision Act 1982 proceedings – but that possibility was not one that these parties had in mind.) 140 That the defendant left the letter with the plaintiff is also indicative of an intention to enter legal relations. 141 I do not accept the defendant's evidence that he did not intend to declare a trust, or that he did not intend to enter into a binding obligation to transfer 222,000 Unitract shares to the plaintiff at any time she requested after 1 August 2003. 142 Part of what the defendant told the plaintiff, both at the counselling session with Mr Riordan and previously, was that the shares would be able to be transferred after 1 August 2003. It was in that context that the plaintiff paid $20,000 in return for an extra 22,000 shares. In my view there was a contractual obligation for the defendant to transfer 222,000 shares after 1 August 2003, when the plaintiff requested. PART C – THE BREACH OF CONTRACT CASE 143 The contractual requirement to transfer the shares upon request, after 1 August 2003 was one in which, from the nature of the subject matter of the contract, the common law would have regarded time as essential. Listed shares in a newly listed company with no established business operations are the sort of thing whose price can be quite volatile: cf Claydon v Green (1868) LR 3 Cp 511; Tadcaster Tower Brewery Co v Wilson [1897] 1 Ch 705 (sale of licensed premises as a going concern); Harrington v Browne (1917) 23 CLR 297 (sale of livestock); Lindgren, Time in the Performance of Contracts, 2nd edition, 1982 page 49-50. 144 The defendant breached his contractual obligation to transfer 222,000 shares in Unitract to the plaintiff upon her request. For the purposes of assessing damages for that breach of contract, it does not matter whether the defendant ever declared a valid trust over 222,000 Unitract shares. Nor does it matter whether all the shares that the defendant held were, on 1 August 2003, subject to a restriction on transfer – the shares that he promised to transfer were 222,000 Unitract shares, not 222,000 Unitract shares that were subject to a restriction on transfer. The plaintiff did not know, on 17 March 2003, that the shares of which the defendant was the holder were the subject of a restriction on transfer until 1 November 2004. (Indeed, she did not know that they were subject to a restriction on transfer of any kind, just that she could not have the shares until 1 August 2003.) Nor does it matter whether Roger Williamson held any shares in Unitract on trust for the defendant, that the defendant could have used to transfer shares to the plaintiff, or sold to acquire other Unitract shares in the market. 145 The measure of damages for breach of contract is that sum of money that would place the plaintiff into the position she would have been in if the contract had been performed. 146 The plaintiff never articulated precisely what she meant when she said that, if the shares had been transferred to her, she would have sold them all "except for $60,000 worth". The only realistic meaning, it seems to me, is $60,000 worth of shares, at the unit value that the shares had around the time of transfer. The only other alternative is shares that had a cost price to the plaintiff of $60,000 – but that would be all of the shares, and that is clearly not what she meant. 147 At the price of $2.55 per share that I have adopted in para [121] above, $60,000 worth of shares equates to approximately 23,530 shares. Thus, if the defendant had performed his agreement, the plaintiff would have sold 198,470 shares at $2.55 (thereby receiving $506,098) and a further 23,530 shares at $1.80 (thereby receiving $42,354). The total loss she has suffered in consequence of the defendant's breach of contract is $548,452. PART D – WAS THERE A VALID TRUST? 148 In case the Court of Appeal decides that I was mistaken in concluding that there was a valid contract that had been breached, I turn now to consider whether, even if there had been no contract between the plaintiff and the defendant, there was nonetheless a valid trust. 149 There is no doubt that a share can be held on trust. Lord Shaw said in Lord Strathcona Steamship Co Ltd v Dominion Coal Co Ltd [1926] AC 108 at 124: "The scope of the trusts recognised in equity is unlimited. There can be a trust of a chattel or of a chose in action, or of a right or obligation under an ordinary legal contract, just as much as a trust of land." 150 At the time the letter of 17/18 March 2003 was written the defendant was registered as the holder of 1.5 million ordinary shares in Unitract. Mr Curtin submits that it is impossible to have a trust of some only of the shares of a particular class registered in the name of a particular shareholder. 151 In Kauter v Hilton (1953) 90 CLR 86 at 97 Dixon CJ, Williams and Fullagar JJ reiterated: "… the established rule that in order to constitute a trust the intention to do so must be clear and that it must also be clear what property is subject to the trust and reasonably certain who are the beneficiaries." Those "three certainties" that are necessary for the existence of a trust arise from the sort of thing that an express trust is. 152 Mr Curtin submits that in the present case trust property is not adequately identified by saying that it is 222,000 of the 1.5 million shares that the defendant held in Unitract. Rather, the defendant submits, before one can identify the property with certainty, it is necessary to be able to state which 222,000 shares were held on trust, and which were the remaining shares that were not held on trust. Hunter v Moss 153 On 21 December 2003 the English Court of Appeal (Dillon, Mann and Hirst LJJ) delivered an ex tempore judgment in Hunter v Moss [1994] 3 All ER 215; [1994] 1 WLR 452. That case concerned a company that had 1,000 issued shares, all of one class. The defendant held 950 of those shares. The Court of Appeal treated the trial judge as having in substance found that the defendant had declared that he held 50 of those 950 shares on trust for the plaintiff. The Court did not accept a submission that that purported trust was ineffective because its subject matter was uncertain. Thus, Hunter v Moss is directly against the contention that Mr Curtin puts. 154 However, Mr Curtin points out that, as a decision of the English Court of Appeal, Hunter v Moss is not binding on me, and is useful only to the degree of the persuasiveness of its reasoning: Cook v Cook (1986) 162 CLR 376. He submits that the reasoning in Hunter v Moss is not persuasive, and the conclusion it arrived at mistaken in principle. The Reception Accorded to Hunter v Moss 155 Very promptly after the decision in Hunter v Moss was delivered, Professor Hayton (as his Honour then was) criticised it as erroneous: Hayton, "Uncertainty of Subject-Matter of Trusts", (1994) 110 LQR 335. Professor Hayton later repeated that criticism in other publications: Underhill and Hayton, Law of Trusts and Trustees, 16th edition, 2003 page 78-79; Hayton and Marshall, Commentary and Cases on the Law of Trusts and Equitable Remedies, 12th edition, 2005, para 3-82 - 3-85. 156 Professor Hayton is not the only critic of the decision. Professor Birks, in an article predominantly devoted to the Privy Council decision in Re Goldcorp Exchange Ltd (in receivership) [1995] 1 AC 74 says in passing, "One inference is that the Court of Appeal's decision in Hunter v Moss must be wrong." ("Proprietary Restitution: An Intelligible Approach" (1995) 9 (2) Trust Law International 43, at 45). Ford & Lee, Principles of the Law of Trusts, page 4-4054 to 4-4055 in para [4130] accepts Professor Hayton's criticisms, at least in a situation where no value has been given for the purported creation of the trust. Ockelton, "Share and Share Alike?" [1994] 5 CLJ 448 criticises Hunter v Moss, saying, at 450, "My claim to ownership, whether legal or beneficial, is a nonsense unless I can say what it is that I own, and, in consequence, that you don't". Hunter v Moss is also criticised in PJ Clarke, "Land Law and Trusts" in All ER Rev 1994 at 249-251. 157 Jacobs', Law of Trusts in Australia, 7th edition, 2006, at [523] says: "… if there is no property upon which the trust can take effect, or if it is so described by the settlor that it cannot be identified, there can be no trust. For example if a settlor leaves a $1,000 to A and requests that if anything of it remains at A's death, it be left to the Sydney Hospital 'what remains of it' is too vague a description to enable the court of enforce any trust in respect of it" [citations omitted] Likewise, where the subject matter is an undifferentiated portion of a parcel of shares ( Herdegen v Federal Commissioner of Taxation (1988) 84 ALR 271), or of a deposit in a bank account ( Re Appleby's Estate (1930) 25 Tas LR 126)." 158 In that same paragraph, Jacobs refers to Hunter v Moss as a "strongly criticised decision". The same passages appeared in Jacobs, 6th edition (1997) at [522]. 159 However, the decision in Hunter v Moss has its defenders. Jill Martin, "Certainty of Subject Matter: A Defence of Hunter v Moss" [1996] The Conveyancer 223 deals with some of the criticisms of Hunter v Moss in a fashion Martin substantially repeats in Hanbury & Martin, Modern Equity, 17th edition, para 3-023. Support also comes from Professor Goode in "Are Intangible Assets Fungible?" [2003] LMCLQ 379, and from Sarah Worthington, "Sorting Out Ownership Interests in a Bulk: Gifts, Sales and Trusts", [1999] JBL 1, at 13-21. Hunter v Moss was relied on without criticism in Sarah Worthington, "Proprietary Remedies: The Nexus Between Specific Performance and Constructive Trusts" (1996) 11 JCL 1 at 22. 160 Dal Pont & Chalmers, Equity and Trusts in Australia, (3rd edition, 2004) para [16.65] supported Hunter v Moss, concluding that specific items need not be identified or separated from any pre-existing bulk held by the settlor where intangibles such as shares, money or debt are the subject matter of the trust. The discussion of Hunter v Moss in Moffatt, Trusts Law Text and Materials, 4th edition 2005 at 166-7 appears favourable to Hunter v Moss. 161 Lewin On Trusts, 17th edition, (2000) at 3-06 does not say outright that the decision is wrong – rather that it "should perhaps be treated with reserve", and that, "Until the question is considered again by the Court of Appeal, however, the safest course must remain precision, and segregation of the settled assets. Alternatively, shares can easily be given to the trustees by transfer and delivery of the certificate …" 162 Theresa Villiers, "Certainty of Subject Matter in Trusts: The Controversy Continues" (1998-9) 9 Kings College LJ 112 is also cautious without being outright condemnatory. Heydon & Loughlan, Cases and Materials on Equity and Trusts, 6th edition, 2002, page 520 refer to Hunter v Moss with no hint of criticism. 163 The decision has been followed by Neuberger J in Re Harvard Securities Ltd (in liq), Holland v Newbury & Anor [1997] 2 BCLC 369. As a first instance judge in the English judicial hierarchy, Neuberger J would in any event be found to follow Hunter v Moss. It has also been followed by Yuen J in the Court of First Instance, Hong Kong Special Administrative Region, in Re CA Pacific Finance Ltd (in liquidation) and Anor [2000] 1 BCLC 494. 164 An application for leave to appeal to the House of Lords from the decision in Hunter v Moss was dismissed. The dismissal of that application occurred on 29 March 1994: Hunter v Moss [1994] 1 WLR 614 (Lord Templeman, Lord Goff of Chieveley and Lord Woolf). Some academic commentators have pointed out that this dismissal was before the Privy Council gave its decision in Re Goldcorp Exchange Ltd (in receivership) [1995] 1 AC 74, on 25 May 1994. However, the dismissal was after the argument in Goldcorp had concluded, on 30 November 1993. While the advice of the Privy Council in Goldcorp was delivered by Lord Mustill, who was not a member of the Appeal Committee that dismissed the application for leave to appeal in Hunter v Moss, Lord Templeman was a member of the Board in Goldcorp, and also of the Appeal Committee that dismissed the application for leave to appeal in Hunter v Moss. 165 No Australian court appears to have considered the decision, or to have decided the question with which it deals. In those circumstances, I must consider the matter on the basis of general principle. Is the Reasoning in Hunter v Moss persuasive? 166 In this part of the judgment I will refer to pages in Hunter v Moss by their pagination in WLR. The part of the judgment in Hunter v Moss dealing with the present point runs from 457B to 459F. It starts uncontroversially by recognising that · a trust requires certainty of subject matter; · a trust of personalty can be created orally; · if a settlor shows that he intends to create a trust by transferring property to someone else to hold on trust, that will not be construed as an intention for the settlor himself to hold that property on trust; · the maxim that equity will not perfect an imperfect gift has no application if there has been an effective voluntary declaration of trust of property that the settlor already holds; and · a settlor who said "I declare that I hold 50 of my shares on trust for B", without indicating what was the company whose shares he was talking about, would not have adequately identified the property that he intended to be the subject of the trust. The Analogy of Specific Legacies of Shares 167 Next, in Hunter v Moss at 457-8 Dillon LJ noted that a specific bequest, of a particular number of shares in a named company from a larger holding of shares that the testator had in that company, was one that the testator's legal personal representatives would be bound to carry into effect: In Re Clifford [1912] 1 Ch 29; In Re Cheadle [1900] 2 Ch 620. That is clearly good law. 168 But Professor Hayton, at (1994) 110 LQR 335 at 338 points out that: "… there is a crucial difference between such a testamentary bequest, where undoubtedly the testator has effectively divested himself of his legal and beneficial ownership, and an inter vivos declaration of oneself as trustee for another, where the disputed question is whether or not the settlor has effectively divested himself of this beneficial ownership in specific property." 169 The crucial difference, according to Professor Hayton is: "It is elementary that a bequest is a perfect gift that is completed by the testator's death. Thereupon, certain property, namely the testator's whole estate, passes to the executor, who has full ownership without distinction between legal and equitable interests therein, subject to fiduciary obligations to administer it by paying debts, expenses, taxes, etc, and then implementing the executory trusts of the testator to the extent that there is sufficient property left to satisfy such trusts. The intended beneficiaries only have an equitable chose in action until the executor has completed the administration of the estate: Commissioner for Stamp Duties v Livingston (1965) AC 694." 170 While that analysis of the position of the beneficiary in an unadministered deceased estate is impeccable, it does not go on to ask "yes, but what happens once administration is complete?". It will, of course, depend upon the precise terms of the Will in question, but at least sometimes a Will will contemplate that a specific asset be held, once administration is complete, by the executor in a new capacity as trustee. If there were to be a legacy of "200 of my 500 shares in X Pty Ltd to A when he reaches 21, and the remaining 300 to B when A reaches 21", and if all executorial duties were complete well before A reached 21, would such a gift fail if the executor did not, before administration was complete, separate the shares into two parcels of 200 and 300 respectively? 171 Of course, if Hunter v Moss was incorrectly decided, the solution to that problem may be to say that until the shares had been divided into the two parcels, the executorial duties were not complete. But that solution to the problem might not sit well with the law concerning assent to specific legacies. 172 In George Attenborough & Son v Solomon and Another [1913] AC 76 at 82– 3 Viscount Haldane LC said that an executor: " … is appointed by the will, but then, by virtue of his office, by the operation of law and not under the bequest in the will, he takes a title to the personal property of the testator, which invests him with the plenum dominium over the testator's chattels. He takes that, I say, by virtue of his office. The will becomes operative so far as its dispositions of personalty are concerned only if and when the executor assents to those dispositions. It is true that by virtue of his office he has a general power to sell or pledge for the purpose of paying debts and getting in the money value of the estate. He is executor and he remains executor for an indefinite time … The office of executor remains, with its powers attached, but the property which he had originally in the chattels that devolved upon him, and over which these powers extended, does not necessarily remain. So soon as he has assented, and this he may do informally and the assent may be inferred from conduct, the dispositions of the will become operative, and then the beneficiaries have vested in them the property in those chattels. The transfer is not made by the mere force of the assent of the executor, but by virtue of the dispositions of the will which have become operative because of this assent." 173 Other authority that an assent may be informal is Wise v Whitburn [1924] 1 Ch 460 at 468-9. In keeping with the law that an assent can be informal, an assent can be in general terms, such as (where livestock were running on a particular rural property called Newlands) to "the stock at Newlands": Crampton v Schmich (1904) 4 SR (NSW) 121. Further, it is possible for an executor to assent to a particular legacy, and thereby become trustee of the subject matter of it, before all tasks of administration relating to the estate as a whole have been performed. 174 The remarks of Viscount Haldane in Attenborough v Solomon concerned specific legacies of chattels. Chattels can include both corporeal chattels and choses in action: Robinson v Jenkins (1890) 24 QBD 275 at 279; In Re Givan dec'd; Rees v Green [1966] 1 WLR 1378 at 1383. However the great width of meaning that the word "chattels" can have makes it all the more important to consider the particular context in which it is used to decide whether, in that particular context, it bears the full width of meaning of which it is capable: In re Exmouth's Annuity [1925] 1 Ch 280 at 285 per Eve J. 175 Barwick CJ, Mason and Murphy JJ in Easterbrook v Young (1977) 136 CLR 308 at 320 put it more generally than Viscount Haldane had done: " … so soon as the executor by use of his executorial powers has completed his tasks and assented to the benefactions, the testator's will begins to operate and the powers of a trustee are activated in relation to the property then subject to the terms of the will." 176 If that general proposition were right, if there were to be a legacy to a particular person of a specified number of shares out of a larger holding, it is hard to see why, once the executor assented to the legacy, he would not thereafter hold that number of those shares upon trust for the legatee. However, Viscount Haldane's remarks in Attenborough v Solomon were made in a context where his Lordship was considering a legacy of corporeal chattels, the difference between a specific legacy of a chattel and a specific legacy of a chose in action was not of any importance in Easterbrook v Young, and argument about the possibility of an assent to a legacy of part of a holding of shares was not at the centre of the debate before me. In those circumstances, I prefer not to rest a conclusion about the validity of the trust involved in the present case on a consideration of how such a legacy operates once administration concerning it is completed. Analogy of the Inter Vivos Gift of Shares 177 Another analogy that Dillon LJ drew on in Hunter v Moss, at 458, is the circumstance in which an effective gift inter vivos can be made of the equitable title in some of a parcel of shares. His Lordship said: "… if a person holds, say, 200 ordinary shares in ICI and he executes a transfer of 50 ordinary shares in ICI either to an individual donee or to trustees, and hands over the certificate for his 200 shares and the transfer to the transferees or to brokers to give effect to the transfer, there is a valid gift to the individual or trustees/transferees of the 50 shares without any further identification of their numbers. It would be a completed gift without waiting for registration of the transfer. (See Re Rose (decd), Rose v IRC [1952] 1 All ER 1217, [1952] Ch 499.) In the ordinary way a new certificate would be issued for the 50 shares to the transferee and the transferor would receive a balance certificate in respect of the rest of his holding. I see no uncertainty at all in those circumstances." 178 Re Rose did not concern the type of fact situation postulated by Dillon LJ. Rather, it concerned the execution of two transfers of a specific number of shares, each identified in the transfer by their individual identifying numbers (at 500, 501 of [1952] Ch 499), and duly stamped (at 506 of [1952] Ch 499). The two transfers, together with "the relative share certificates" (at 514, 515 of [1952] Ch 499) were delivered to the intending donee. It was in that situation that the Court of Appeal held that there had been an effective transfer of the beneficial interest in the shares prior to the transfers being registered. 179 In these circumstances, in Re Rose is not sufficient to establish that the transfer of 50 ordinary shares in ICI that Dillon LJ is contemplating would be a completed gift before the individual identifying numbers of the shares were written into the transfer form. 180 The High Court, in Corin v Patton (1990) 169 CLR 540 stated by majority, though strictly obiter, that there can be an effective voluntary equitable assignment of property transferable at law when the donor has done everything that only the donor has the power to do to transfer the legal estate, even if actions remain undone that lie within the power of the donor to do to advance the transfer but that can equally well be done by someone else. See per Mason CJ and McHugh J at 558 – 559, 582 per Deane J. Meagher Gummow and Lehane's Equity Doctrines and Remedies, 4th edition, para [6-155] expresses the view (with which I respectfully agree) that "overwhelmingly but perhaps not conclusively" Australian authority now supports the view of Griffith CJ in Anning v Anning (1907) 4 CLR 1049 that has thus been accepted by the majority in Corin v Patton. That view is consistent with the decision of the English Court of Appeal in Re Rose, because in Re Rose it was only necessary to decide whether the transfer of shares was effective at a time when the only step remaining undone was for the company to register the transfer. 181 Another problem with Dillon LJ's analogy of the ICI shares is that the principle upon which Re Rose was decided was that the transfer was valid in equity when the transferor had done everything in his power to transfer the legal title to the shares. If the company whose shares were sought to be transferred had issued numbered shares, it would depend upon the constitution of the company concerned, and any applicable rules of the general law, whether an intending transferor was required to identify the particular numbers of shares that he wished to transfer before the company could register a transfer of part of his shareholding. If, in the example being considered by Dillon LJ, the constitution of ICI required a transferor of part of a shareholding to identify the individual identifying numbers of the shares being transferred, that principle (as clarified in Corin v Patton) suggests that there would not be a valid inter vivos gift in the circumstance being considered by Dillon LJ. Even if the handing over of a transfer of a particular number of shares, that did not state the individual identifying numbers of those shares, was construed as conferring on the intended transferee an authority to fill in the blank in the form, it would still be the transferor (by his agent the transferee) who identified the particular shares that were intended to be transferred, and thus carried out the last step necessary to be done to transfer the equitable title to those shares. 182 Of course, if the constitution of ICI did not require the transferor to state the individual identifying numbers of shares intended to be transferred, or if the shares involved did not have individual identifying numbers at all, the situation might be different. Whether there had been a valid gift of part of the shareholding of an intending donor would, presumably, depend on the facts about what were the steps that only the donor could take to effect a transfer of part of his shareholding. For these reasons, I do not find this analogy very persuasive. The Analogy of a Contract for Sale of Part of a Mass of Goods 183 Next, Dillon LJ considered In Re London Wine Co (Shippers) Ltd [1986] PCC 121. That case concerned a dealer in wine that had large stocks of particular makes and vintages of wine. It sold quantities of wine to customers, with the wine being identified by make and vintage year. It gave customers a "certificate of title" for the wine purchased, charged the customers for storage and insurance of the number of cases purchased, but did not segregate or identify specific cases of wine. Oliver J held that, without appropriation, of particular cartons to meet a particular customer's contract, legal title to the wine had not passed. On the facts, it could not have been said that the wine held by the company, and the wine sold, were so related that it must have been a particular and identifiable group of cases of wine that were sold by any particular contract. 184 Dillon LJ accepted the correctness of that decision, but distinguished it, saying, at 458: "It seems to me that that case is a long way from the present. It is concerned with the appropriation of chattels and when the property in chattels passes. We are concerned with a declaration of trust, accepting that the legal title remained in the defendant and was not intended, at the time the trust was declared, to pass immediately to the plaintiff. The defendant was to retain the shares as trustee for the plaintiff." 185 I can readily accept that there were the differences to which Dillon LJ pointed between the factual situation in In Re London Wine Co (Shippers) Ltd, and the factual situation in Hunter v Moss. But the method of the law involves the application of abstract principles of law to particular fact situations. Sometimes, factual situations that are in some respects vastly different are governed by a common legal principle. His Lordship does not, with the greatest respect, explain why the undoubted differences to which he points are differences that make a difference to the legal outcome. Cases said to Require Appropriation Before a Trust Arises 186 Next, Dillon LJ turned to Mac-Jordan Construction Ltd v Brookmount Erostin Ltd (in receivership) (1991) 56 BLR 1; [1992] BCLC 350. That case concerned a builder who had a contractual obligation to a sub-contractor to hold amounts that the builder retained from progress payments as trustee for the sub-contractor. The Court of Appeal held that, as a matter of law, and without any express words, such a clause required the builder to appropriate and set aside as a separate trust fund the various amounts retained. However, the builder did not do so. As Dillon LJ records in Hunter v Moss at 459, "It was common ground in that case that, prior to the appointment of the receivers, there were no identifiable assets of [the builder] impressed with the trust applicable to the retention fund. At best, there was merely a general bank account." 187 In that situation, I can readily accept that there was no trust property at all, because the fund had not been constituted. It was not as though there was even a specific fund of money, part of which was said to be held on trust. 188 Counsel for the appellant in Hunter v Moss used Mac-Jordan Construction as the basis for a proposition that no fiduciary relationship can attach to an unappropriated portion of a mixed fund, and that the only remedy available was a floating charge over the blended fund. 189 Dillon LJ dealt with that argument at 459, as follows: "As I see it, however, we are not concerned in this case with a mere equitable charge over a mixed fund. Just as a person can give, by will, a specified number of his shares of a certain class in a certain company, so equally, in my judgment, he can declare himself trustee of 50 of his ordinary shares in M.E.L. or whatever the company may be and that is effective to give a beneficial proprietary interest to the beneficiary under the trust. No question of a blended fund thereafter arises and we are not in the field of equitable charge." 190 This reasoning, with the greatest respect, begs the question. It simply assumes, or asserts, that it is possible for a person to declare himself trustee of a particular number of the shares he holds in a particular company. It is because of the efficacy of the declaration of trust that "no question of a blended fund thereafter arises and we are not in the field of equitable charge". 191 That is the totality of the reasoning in Hunter v Moss. I do not, with the greatest respect, find it sufficiently persuasive, for the reasons I have given, to simply adopt it as the solution to the present problem. 192 In particular, a significant part of the reasoning depends upon the drawing of analogies to transactions of a kind that have some similarities to, but also some differences from, a declaration of trust of part of a settlor's holding of shares in a particular company. The difficulty with such analogies is that one cannot tell whether the similarities are such that some common legal principle unites the different transactions, or whether the differences are such that a different legal principle ought to be applied to them. While analogies can sometimes provide useful support to a legal argument, in the present case it seems to me it is preferable to look at the particular transaction under consideration, and to consider both the type of property that it concerns, and the construction of the purported dealing with that property – the declaration of trust. Nature of the Rights of a Shareholder 193 In Sydney Futures Exchange Ltd v Australian Stock Exchange (1995) 56 FCR 236; (1995) 128 ALR 417; (1995) 16 ACSR 148 Lockhart J, at 255-256 of 56 FCR, 166-167 of 16 ACSR analysed the nature of a share in a company as follows: "A share is a right to a specified amount of the share capital of a company, carrying with it rights and liabilities when the company is a going concern and in the course of its winding up. A share is a chose in action entitling its holder to the rights and subjecting him to the liabilities provided by the memorandum and articles of association and by legislation. In Borland's Trustee v Steel Bros & Co Ltd [1901] 1 Ch 279 Farwell J described the nature of a share in these terms (at 288): "A share is the interest of a shareholder in the company measured by a sum of money, for the purpose of liability in the first place, and of interest in the second, but also consisting of a series of mutual covenants entered into by all the shareholders interest in accordance with s 16 of the Companies Act 1862 (UK). The contract contained in the articles of association is one of the original incidents of the share. A share ... is an interest measured by a sum of money and made up of various rights contained in the contract, including the right to a sum of money of a more or less amount." This passage was approved by Lord Russell of Killowen in Inland Revenue Commissioners v Crossman [1937] AC 26 at 66 . The rights attaching to a share include the right to participate in dividends whilst the company is a going concern and the right to participate in the distribution of assets available for the shareholders upon a winding up. They also include the right to receive capital in excess of the company's wants which the company resolves to distribute upon a reduction of capital: Archibald Howie Pty Ltd v Commissioner of Stamp Duties (NSW) (1948) 77 CLR 143 per Williams J at 156 . In Colonial Bank v Whinney (1885) 30 Ch D 261 Fry LJ said (at 286-287): "What, then is the character of a share in a company? Is it in its nature a chose in possession, or a chose in action? Such a share is, in my opinion, the right to receive certain benefits from a corporation, and to do certain acts as a member of that corporation; and if those benefits be withheld or those acts be obstructed, the only remedy of the owner of the share is by action. Of the share itself, in my view, there can be no occupation or enjoyment; though of the fruits arising from it there may be occupation, enjoyment and manual possession. Such a share appears to me to be closely akin to a debt which is one of the most familiar of choses in action; no action is required to obtain the right to the money in the case of the debt, or the right to the dividends or other accruing benefits in the case of the share; but an action is the only means of obtaining the money itself or the other benefits in specie, the right to which is called in one case a debt and in the other case a share. In the case alike of the debt and of the share, the owner of it has, to use the language of Blackstone, a bear [ semble bare] right without any occupation or enjoyment. A debt, no doubt differs from a share in one respect, that it confers generally a more limited right to the share, and once paid it is at an end, but this distinction appears to me immaterial for the purpose now in hand." Although Fry LJ was in dissent in the Court of Appeal, the judgment of the majority was reversed by the House of Lords and reported as Colonial Bank v Whinney (1886) 11 App Cas 426 . Under the Corporations Law a share is personal property and is transferable or transmissible as provided by the articles, and, subject to the articles, is capable of devolution by will or by operation of law: section 105(1). Thus, shares in a company are personal property; but they are choses in action, not choses in possession. Personal property may of course be partly in possession and partly in action, for example, promissory notes and bills of exchange. The note or bill itself is a chose in possession, but the debt secured by it is a chose in action. I agree with the following passage from Halsbury's Laws of England (4th ed, 1981), Vol 35, in para 1205 : "For general purposes, however, the expression `chose in action' is now used in order to distinguish those chattel interests which, unlike choses in possession, are incapable of transfer by delivery of the subject matter in the manner described subsequently [ie par 1253 et seq]." 194 The precise statutory provisions referred to in this quotation are no longer applicable. These days, the statute analogous to section 16 of the Companies Act 1862 (UK) that confers the shareholder's right to sue the company for breach of some of the rights that the shareholder has by virtue of being a shareholder is section 140 Corporations Act 2001, which provides: "(1) A company's constitution (if any) and any replaceable rules that apply to the company have effect as a contract: (a) between the company and each member; and (b) between the company and each director and company secretary; and (c) between a member and each other member; under which each person agrees to observe and perform the constitution and rules so far as they apply to that person. (2) Unless a member of a company agrees in writing to be bound, they are not bound by a modification of the constitution made after the date on which they became a member so far as the modification: [does various things, none of which is presently relevant]" 195 The statutory provision that now states the nature of a share is section 1070A Corporations Act 2001, which provides: "(1) A share… : (a) is personal property; and (b) is transferable or transmissible as provided by: (i) the company's … constitution; or (ii) the operating rules of a prescribed CS facility if they are applicable; and (c) is capable of devolution by will or by operation of law. (2) Paragraph (1)(c) has effect subject to: (a) in the case of a company: (i) the company's constitution (if any); and (ii) any replaceable rules that apply to the company; and (iii) the operating rules of a prescribed CS facility if they apply to the share or interest; and (b) … (3) Subject to subsection (1): (a) the laws applicable to ownership of, and dealing with, personal property apply to a share … as they apply to other property; and (b) equitable interests in respect of a share, interest of a member in a company or other interest of a person in a registered scheme may be created, dealt with and enforced as in the case of other personal property." 196 "CS facility" is an acronym that the Corporations Act uses for a clearing and settlement facility. Section 768A Corporations Act defines "clearing and settlement facility" as: "… a facility that provides a regular mechanism for the parties to transactions relating to financial products to meet obligations to each other that: (a) arise from entering into the transactions; and (b) are of a kind prescribed by regulations made for the purposes of this paragraph." 197 Some of the rights to sue the company that a shareholder has exist simply by virtue of having the status of shareholder, regardless of the number of shares held. Such rights include rights to receive the information that statute requires shareholders to be given, the right to be given notice of and to attend at certain meetings of the company, and the right to vote at certain company meetings. Other rights that a shareholder has to sue the company are ones that a shareholder has proportionately to the number of shares held -- such as the right to a dividend, to a return of capital, or to vote on a poll at the meeting. Some of the rights of a shareholder to sue the company arise by virtue of the contract contained in the company's constitution. Other rights of a shareholder to sue the company – including some very important ones – might arise directly by statute (e.g. rights to receive accounts and reports, to join in a requisition of a company general meeting, or to appoint a proxy). Other rights that any shareholder has in a company by virtue of the status of being a shareholder can arise from a contract arising separately to the company's constitution (e.g. if the company in question holds itself out as willing to provide goods or services to a shareholder at a special discounted price). 198 Some of the rights that attach to shares are themselves inherently assignable, even in circumstances where the shares themselves are not assigned – it is possible to make an equitable assignment of the right to receive dividends from a particular parcel of shares in particular years (by analogy with Shepherd v The Commissioner of Taxation of the Commonwealth of Australia (1965) 113 CLR 385), and possible to make an equitable assignment of the right to receive some particular measure of money on a particular type of return of capital. Such assignments can take place only because the rights assigned are themselves treated as property. And the only type of property they could be is choses in action. Thus, some of the rights that a shareholder has by virtue of being a shareholder are themselves items of property that are separate to the item of property that constitutes the share itself. 199 And it is not only fractional rights in a share that are capable of being seen as separate items of property. For rights of the type where the number of shares provides the measure by reference to which a shareholder's right against the company is calculated, the chose in action can be seen as being the right to sue the company to receive some particular type of benefit. For example, when the holder of 1000 shares in a company sues to recover a dividend that has been declared but is unpaid, there is just one action that the shareholder brings, to recover the dividend – there are not 1000 separate rights to be paid a dividend: cf Marlborough Harbour Board v Charter Travel Co Ltd (1989) 18 NSWLR 223 at 231. In that way, the chose in action – the thing that the law regards as a piece of property because it can be sued for – is the single right to be paid the dividend, the measure of which is the number of shares held. 200 Thus, even though section 1070A states that a share is personal property, it does not provide an exhaustive statement of the only property rights that there are connected with shares. It is not as though the only way of dividing up the rights that a shareholder has to sue the company – and thus the choses in action that the shareholder has that are enforceable against the company - is on a share-by-share basis. Significance of Identification of Shares by Individual Numbers 201 These days, the shares in many companies are held in unnumbered and uncertificated form. The power to have unnumbered shares arises under section 1070B Corporations 2001: "(1) Except as provided in subsection (2), a company must ensure that each share in the company is distinguished by an appropriate number. Note: Failure to comply with this subsection is an offence (see subsection 1311(1)). (2) Despite subsection (1): (a) if at any time all the issued shares in a company, or all the issued shares in a company of a particular class: (i) are fully paid up; and (ii) rank equally for all purposes; none of those shares is required to have a distinguishing number so long as each of those shares remains fully paid up, and ranks equally for all purposes with all shares of the same class for the time being issued and fully paid up …. " 202 In the present case, all the ordinary shares in Unitract are and at all times have been fully paid-up, and rank equally for all purposes, so section 1070B(2)(a) permits them to be unnumbered. 203 Unitract 's shares are in fact unnumbered. The 1.5 million shares that the defendant held in Unitract were evidenced by a record in the share register of the company that showed the defendant as having a holding balance of 1.5 million shares, without differentiation between those shares. The particular register in which that record existed was the issuer-sponsored register of Unitract. 204 But even when shares were held in numbered, certificated form, there were some purposes for which the identification of the shares by number was unimportant. If a shareholder executed a transfer of the same number of shares that he owned in a company, the transfer was valid even if the identifying numbers of the shares were inserted only after the transfer was executed (In Re Barned's Banking Company; ex parte The Contract Corporation (1867) 3 Ch App 105 at 115-116; In Re Financial Insurance Company; Bishops Case (1869) LR 7 Ch App 296n) or never inserted at all (In Re Letheby & Christopher Limited [1904] 1 Ch 815). 205 It can also be unimportant that the wrong identifying numbers are inserted in the transfer. In In re International Contract Company; Ind's Case (1872) 7 Ch App 485 A had transferred to B 50 shares, numbered 11,105 to 11,154, in a particular company. In fact someone other than A owned the shares with those numbers, but at the time of the transfer A owned more than 50 shares in the company, and some of his shares were numbered 11,005 to 11,054. When the company was wound up, B alleged that he was not a contributory. He failed. Sir WM James LJ said, at 486-7: "If the creditors find a man on the list for fifty shares they do not look at the particular numbers; all that concerns them is that he is on the list of shareholders for fifty shares … I cannot think that he should be allowed to say that there was some mistake about the figures in the transfer -- a mistake which was very easily made, for it appears that the numbers ought to be from 11,005 to 11,054 instead of from 11,105 to 11,154. The substance of the transaction was that he meant to be on the list for fifty shares; he was on the list for fifty shares, and the creditors and other persons interested have a right to hold him to that." 206 Sir G Mellish LJ said, at 487: "I think the numbers of the shares are simply directory for the purposes of enabling the title of particular persons to be traced; but that one share, an incorporeal right to a certain portion of the profits of the company, is the same as the other, and that share No 1 is not distinguishable from share No 2 in the same way as a grey horse is distinguishable from a black horse. If, therefore, a holder of shares has the same number of shares which he professes to transfer, or a larger number , and by mistake the wrong distinguishing numbers are put in the transfer, that will not prevent the fifty shares which belongs to him passing to the transferee. The figures might afterwards be rectified. I think the substance of the matter is that [B] has agreed to take fifty shares as between him and the creditors of the company; he has been registered with his own consent as to these shares, and therefore he is properly on the list." (emphasis added) 207 It is part of the reasoning of Sir G Mellish LJ that statement of the identifying numbers of the shares being transferred is unimportant for the validity of the transfer. 208 The law of the United States similarly regards the numbers allotted to individual shares as unimportant for some purposes. Richardson, Trustee in Bankruptcy v Shaw 209 US 365, 28 Sup Ct 512, 52 L Ed 835 (1908), a decision of the United States Supreme Court, considered a situation where a sharebroker had received share certificates as security for a client's margin trading, and, at a time when the broker was approaching bankruptcy, had returned to the client, upon the client's demand, certificates relating to an equal number of shares to those lodged. The question at issue was whether the client had thereby received a preference. It was argued that there was a preference because, by a custom of the market: " … the broker was not obliged to return the very stocks pledged, but might substitute other certificates for those received by him, and that this is inconsistent with ownership on the part of the customer, and shows a proprietary interest of the broker in the shares" (at 378 US) 209 The Court rejected that argument, saying: " … this contention loses sight of the fact that the certificate of shares of stock is not the property itself, it is but the evidence of property in the shares. The certificate, as the name implies, but certifies the ownership of the property and rights in the corporation represented by the number of shares named. A certificate of the same number of shares, although printed upon different paper and bearing a different number, represents precisely the same kind and value of property as does another certificate for a like number of shares of stock in the same corporation. It is a misconception of the nature of the certificate to say that a return of a different certificate or the right to substitute one certificate for another is a material change in the property right held by the broker for the customer [citations omitted]. As was said by the Court of Appeals of New York in Caswell v Putnam 120 NY 153, 157, "one share of stock is not different in kind or value from every other share of the same issue and company. They are unlike different articles of personal property which differ in kind and value, such as a horse, wagon or harness. The stock has no earmark which distinguishes one share from another, so as to give it any additional value or importance; like grain of a uniform quality, one bushel is of the same kind and value as another." " (at 378-9 of 209 US)." Construction of the Declaration of Trust 210 The declaration of trust that the defendant made is, in substance, that, of those shares in Unitract that he held, 222,000 of them were held in trust for the plaintiff. In my view, that is, in substance, that 220,000 of the shares he held were on trust for the plaintiff, and the rest were on trust for himself. The trust in relation to the rest of the shares is the type of trust that one infers must have been intended, if the trust that definitely was intended concerning the 220,000 shares is to operate: cf Commonwealth of Australia v Booker International Pty Ltd [2002] NSWSC 292 at [34] – [45] and cases there cited. The declaration of trust left him free to deal with the parcel of 1.5 million shares as he pleased, provided that it was not reduced below 220,000, provided that any encumbrances on the shareholding were such that at least 222,000 were left unencumbered, and provided that the plaintiff was entitled to call for the transfer of 222,000 shares at any time after 1 August 2003. If there were to be any declaration of dividend or return of capital prior to the time that the plaintiff had the 220,000 shares transferred to her, the plaintiff would be entitled to receive an appropriate proportionate part of the dividend or return of capital. When I say "an appropriate proportionate part" I refer to the fact that the quantum of a dividend or return of capital is necessarily calculated by reference to the number of shares held by a shareholder at a particular date. The plaintiff would be entitled to a proportion of the amount of a dividend or return of capital equal to 220,000 divided by the total number of shares in Unitract held by the defendant at that particular date. 211 Once a finding has been made that there was an intention to hold 220,000 shares on trust, that intention needs to be given effect to in the way that is appropriate to the kind of property that is being talked about. Given the types of rights that are involved in holding shares in a company, the way that rights of a shareholder need not be identified only in terms of owning particular identified shares, how identification of individual shares can be unimportant for a transfer of some of the shares in a shareholding, and how these particular shares in Unitract were in any event not numbered and were held as an undifferentiated balance in a share register, there is nothing in the nature of the trust property that is inconsistent with recognising the validity of the trust. To recognise the trust is not to perfect an imperfect gift – because there is no transfer of any property involved in a declaration of trust, but rather the declarer of the trust states the terms on which, henceforth, he will hold certain property that he already holds. 212 A trust of this kind is not analogous to a simple trust, where a single and discrete item of property is held on a bare trust for a single beneficiary. Rather, it is a trust of a fund (the entire shareholding of 1.5 million shares) for two different beneficiaries (the plaintiff and the defendant himself), where powers of management are necessarily involved in the trust (to sell or encumber, within limits that such dealings do not impinge on the plaintiff's rights), and where duties on the trustee would arise as a matter of law (eg to deal with any dividends and capital distributions by distributing them in the appropriate proportions). It is because the trust is construed as being of the entire shareholding that it is not necessary for the plaintiff to be able to point to some particular share and be able to say "That share is mine". It is because of this feature of the trust that the defendant declared that an attempt to draw an analogy with cases concerning whether property passes in items of goods when the goods are not appropriated to the contract (like London Wine Co or Re Goldcorp Exchange) fails – because in those cases, identification of the individual items in which property has passed is essential if the property in them is to pass. The construction that is needed to be able to make a trust of part of a shareholding operate – and which I infer is what the defendant actually intended – is the one that I have set out in para [210] above. It does not require there to be identification of particular shares in which the beneficiary has the beneficial interest. Given the nature of shares in a company, it is perfectly sensible to talk about an individual having a beneficial interest in 222,000 shares out of a parcel of 1.5 million, even if it is not possible to identify individual shares that are held on trust. 213 Indeed, contrary to the apparent assumption of Mr Ockelton (para [156] above), the test for validity of a trust is not dependent on a beneficiary being able to identify particular property that is held on trust for him or her. In many discretionary trusts, the only interest that a particular beneficiary can claim to have at a particular time is the vested interest subject to defeasance (and sometimes contingent as well) that a taker in default of appointment has (cf Stein v Sybmore Holdings [2006] NSWSC 1004 at [25] – [26]). Because of the powers of management that the trustee of such a trust often has, it is often not possible for the taker in default of appointment to be able to point to any of the assets of the trust and say simply "that asset is mine". All that such a person can do is point to an asset and say "that asset is mine, provided the trustee does not sell it before the vesting date, provided the trustee does not make an appointment of it to someone else, and provided any other contingencies that there are before I take an interest vested in possession happen." In the present case, one can identify the property that is subject to the trust (the entire shareholding) one can identify the trustee (the defendant), and one can identify the beneficiaries (the plaintiff as to 220,000 shares, the defendant as to the rest). That is all that is needed for a valid trust. Cases Consistent With, Though Not Decisive Of, Validity of the Trust 214 It is of some relevance that one of the ways in which equity imposes a remedy for breach of trust, when trust property has become mixed with non-trust property that is indistinguishable from it, is by recognising a trust of the mixed fund, so that the wronged beneficiary can recover the equivalent of the trust property from the mixed fund, in specie. Brady v Stapleton (1952) 88 CLR 322 was such a case. When bankruptcy was looming following a large judgment to recover unpaid income-tax, Mr Coward transferred various property (including shares) to people likely to be well disposed to him. The trial Judge, Clyne J, found, " … that Coward was the head and front of a daring and scandalous scheme designed to swindle the Commissioner of Taxation, that he was actively assisted in this scheme by his wife and his brother-in-law (Brady) and that [3 other named people] were inert participants in the scheme". (At 329). 215 One such transfer was of six different parcels of shares in Canadian Pacific Tobacco Co Ltd, totalling in all 32,280 shares, to Brady. Brady at all times held 1300 shares in that company, that he owned beneficially. Brady then transferred 17,000 shares to Coward's wife. Having found that Brady held all the shares that were transferred to him as trustee for Coward, Clyne J ordered Brady to pay the trustee in bankruptcy a sum of monetary compensation. The trustee in bankruptcy appealed against that order, seeking an order that shares be transferred to him in specie. Dixon CJ and Fullagar J at 336 explained the problem they had to solve: " … it may be taken that Mrs Coward took the 17,000 shares with notice of the facts from which the trust affecting Brady's shares arose, and therefore with notice of the trust. But the difficulty is that it is impossible to identify, among the shares held by Mrs Coward and Brady, any particular shares as being the 32,280 shares which are subject to the trust for the bankrupt. The strong probability that this difficulty is not fortuitous does not seem to help towards a solution of the problem. It was this impossibility of identification which led Clyne J to refuse the orders which the trustee now seeks." 216 Even so, the High Court granted a remedy in specie. Dixon CJ and Fullagar J at 338-9 referred to the judgment of Mellish LJ in In Re International Contract Co, and said: " … where it is possible to give effect to the rights of a cestui que trust by simply taking out so much money or so many bonds or so many shares, the cestui que trust may elect whether he will take property in specie out of the mass or have a charge on the mass. … the true distinction observed by equity … is well illustrated by the contrast between the case … where a trustee has mixed trust money with his own and bought a horse, and the case where he has mixed trust bonds with bonds of his own. Yet a horse is an "indistinguishable mass" in one sense, and the bonds are an "indistinguishable mass" in almost the opposite sense. The horse is an "indistinguishable mass" in the sense that it is not practicable to attribute one part of him to the trust fund and another part of him to the trustee's own funds. The bonds are an "indistinguishable mass" in the sense that there is no practical reason for differentiating one bond from another and it is quite possible to take out so many bonds as will suffice to make good the trust fund. The real distinction which equity draws is between the case where it is, and the case where it is not, practicable to give effect to the rights of the cestui que trust by appropriating to him a specific severable part of the available property. 217 I recognise that recognising a trust by way of a remedy is not the same as declaring a trust in the first place. However, that it is possible for equity to recognise a trust of a particular number of shares out of a larger parcel, by way of remedy, is at the least consistent with it being possible for a person, out of court, to declare such a trust. 218 Milroy v Lord (1862) 4 De G F & J 264; 45 ER 1185 (the principle in which was approved by the High Court in Corin v Patton (1990) 169 CLR 540 at 549) is another case that is at least consistent with it being possible to hold part of a shareholding on trust. It concerned a purported assignment of part of the shareholding of an intending donor. The only reason why the purported assignment was not held to be an effective declaration of trust was as a matter of construction. If it was fundamentally impossible to declare oneself trustee of part of one's holding of shares, one would expect that ground to have been relied upon as well. United States Authorities 219 United States courts have seen no difficulty in recognising the validity of a trust of a specified number of shares out of a larger holding of shares. 220 In Rollestone v National Bank of Commerce 299 Mo 57, 252 SW 394 (1923) Ragland J in the Supreme Court of Missouri construed a statement of the holder of more than one million shares in a particular company as being a declaration of trust of 10,000 of those shares. At 398, [3] he referred to the settlor's shares : " … all of which were exactly alike in kind and value. There was no earmark by which any one of them could be distinguished from the others, so as to give it additional value or importance. They were like grain of a uniform quality, wherein one bushel is of the same kind and value as another… the words "10,000 shares of capital stock" embodied, therefore, an accurate description of definite property rights in the corporation. A certificate of the same number of shares would have evidenced nothing more." 221 DiLucia v Clemens 541 A 2d 765 (1988) is a decision of the Superior Court of Pennsylvania (Cirillo President Judge, Brosky and Beck JJ). The holder of more than 25,000 shares in a corporation declared a trust of 2000 of them. This was valid, at 767, because " …the identity of the shares was clear and the description sufficient because the shares were fungible. It is immaterial that no specific shares were isolated and held in trust. " it is the identity of the [trust] fund, not of the pieces of coin or banknotes, that controls. … Where the agent has mingled his own property with that of the principal, the latter may reclaim from the admixture an amount equal to his own, although it may not be the same identical property … and where a trustee has mingled trust funds with his own, and afterwards takes sums from the common mass for his own use, it will be presumed, so long as the mass is as large as the original trust funds, that the sum so taken was his own and not the trust fund's. Vosburgh's Estate 279 Pa 329, 333, 123 A. 813, 815 (1924). "" 222 The only United States decision that I located which came to a different conclusion was Busch v Truitt 160 P 2d 925 (1945), a decision of the District Court of Appeal, Second District, Division Two, California. A man owned over 17,000 shares in the capital of the company, all of which were held in escrow. He wrote a letter acknowledging that there were "1380 shares of escrowed stock that I owe you as of this date". The trial judge had held that there was an effective trust. The District Court of Appeal reversed that decision and held, at 928, that failure to identify the specific trust fund meant that there was no trust. All the cases cited in support of that conclusion were Californian ones. 223 That decision of the District Court of Appeal was in effect reversed by Busch v Truitt 163 P 2d 739 (1945), a decision of the Supreme Court of California, in Bank. Even though the ruling of the Supreme Court of California at 163 P 739 was "the judgment is affirmed", it is apparent from the reasons (which incorporate by reference the reasons given in Kroger v Truitt 163 P 2d 735 (1945)), and also from the fact that the judgment opens by stating that it is an appeal from the trial judge, that the judgment that was affirmed was that of the trial judge, not that of the District Court of Appeal. 224 Both Busch v Truitt and Kroger v Truitt arose from the activities of the president of a corporation that was encountering financial difficulties. The corporation had issued some stock that was freely transferable, and some "escrow " stock that could be sold only with permission of a public authority. The president held escrow stock. The president's way of dealing with the corporation's financial difficulties was to "borrow" from shareholders unrestricted stock, promise to replace that unrestricted stock with escrow stock, and sell the unrestricted stock. The president died before these promises were performed. At the time of his death he owned enough of the escrow stock to perform all these promises. His widow was his administratrix and sole beneficiary. She entered an agreement with the various people who had been promised stock, compromising their claims, and that agreement was approved by the probate Court. She later did not perform that agreement, so far as some of the promisees were concerned. Busch and Kroger were two promisees who did not receive stock, and who sued the executrix. Both succeeded before the trial judge. While the litigation involved questions other than the validity of the trust, in the course of the reasons in the Supreme Court of California, in Bank in Kroger v Truitt Shenk, Justice (with whom Gibson CJ, and Edmonds, Carter, Traynor, Schauer and Spence JJ concurred) said (at 163 P 737, [1]): ""the statement of the foregoing facts and supported findings … are sufficient to establish the creation of the trust in the decedent's lifetime and to identify the stock held for the purpose of discharging the obligations." 225 One of the arguments of the administratrix was that, even if there had been an express trust in the lifetime of the deceased, the litigation against her was defeated because the litigation had not been brought within the four-year period after the death of the deceased that was required by the relevant statute of limitations. The reason that Shenk, Justice, gave at 738, [1], for that argument failing was that by the action of the administratrix in "entering into a written agreement whereby she promised to transfer a certain number of shares to each of the persons named therein", and obtaining the approval of the probate Court to that agreement: "… she indicated with reasonable certainty her intention to hold the specified shares of stock for the purpose of transferring them to the designated beneficiaries. Civ Code §2221. The written agreement approved by the probate Court and given in part for the $43,500 received by the administratrix was effective to create an express trust to hold the shares released for the benefit of the former owners of stock loaned to the decedent. There is no contention that the action was filed too late if the agreement of August 12, 1942, created an express trust." 226 Thus, the reasoning of the Supreme Court of California, in Bank, in Kroger v Truitt, and hence also in Busch v Truitt involved on two separate occasions a recognition of the validity of a trust of a certain number of shares out of a larger shareholding. 227 That leaves the decision of the District Court of Appeal in Busch v Truitt with no standing as an authority. I have not found any United States decision that applies the District Court of Appeal decision in Busch v Truitt. Thus it seems not to represent the present United States law on whether it is possible to have a trust of some of the shares in a larger holding. 228 The tendency of the United States courts to look to the substance of the settlor's intention in deciding whether there is sufficient certainty of subject matter of a trust is illustrated by Bay Biscayne Co v Baile 73 Fla 1120, 75 So 860 (1917), a decision of the Supreme Court of Florida. There, $1,000 cash, a note for $1,000, and 15 promissory notes, drawn by three different debtors, for a total face value of $19,400 were all handed to a trustee, on the basis that securities to the amount of $15,000 face value would be selected by the trustee and guaranteed by the settlor, with the selected securities to be held in trust to pay the former housekeeper of the settlor $1,200 per annum, with the trustee to have power to substitute the securities by notes or securities satisfactory to the settlor. The court held, at So 869, that the fact that the trustee never selected securities did not prevent a valid trust arising: "It is claimed that, because Mr Baile did not select $15,000 of the securities from the $19,400, the trust was never completed. We cannot agree with this construction of the trust agreement. This was merely a matter of detail which could not affect the trust which had already been established. This was left for the trustee to do, and certainly it cannot be said that the trustee by some improper act or omission up on his part could destroy the trust." 229 I mention these United States decisions not because every aspect of the reasoning would be applicable in the Australian legal system, but as comfort that the same result as Hunter v Moss has been arrived at in another significant common law system, and also because some of them are mentioned in the only Australian authority that refers, even indirectly, to the present problem. Herdegen v Federal Commissioner of Taxation 230 Herdegen v Federal Commissioner of Taxation (1988) 84 ALR 271 is a decision of Gummow J as a judge of first instance in the Federal Court of Australia. It concerns the liability of a husband and wife who had been shareholders in a company, and who were assessed as liable to pay vendor shareholder recoupment tax. That was the tax imposed upon the former shareholders of companies that went out of existence with unpaid company tax and/or undistributed profits tax, as part of certain tax schemes. The legislation imposing the tax on the former shareholders created an exception to liability for the tax if the former shareholders had held their shares as "bare trustees". 231 Mr and Mrs Herdegen claimed that they had the benefit of that exception. Of the 100 issued shares in the company, Mr Herdegen held 59 and Mrs Herdegen held 41. The shares in the company were numbered. The trust was alleged to arise from a conversation (deposed to in paragraph 9 of a particular affidavit) in which Mr Herdegen said that he suggested that the shares be held as to 25 for himself and his wife, as to 38 for [A, one of the people he was talking to], and as to 37 for [B, another of the people he was talking to], and from evidence that Mr Herdegen had always regarded the assets of himself and his wife as "our joint asset". 232 There was also some oral evidence from Mr Herdegen that, later, he had had a conversation with his wife in which she assented to his suggestion that (at 278) "I should hold [A's 38] shares in trust [and] you should hold [B's] 37 shares in trust out of your share[s]". However cross-examination (set out at 278-9) on that evidence left it in a condition where no trial judge could accept it. As well, Mr Herdegen had sworn to two inconsistent views about how he regarded, at the time a particular affidavit was sworn, the shares as held on trust. 233 Gummow J concluded, at 279: "In these circumstances, I am quite unable to be satisfied that Mr Herdegen has shown there was (a) an oral declaration of trust by Mr Herdegen that he held 38 of his 59 shares in Onedin Investments on trust for [A], or alternatively, such a declaration in favour of Transia, (b) an oral declaration of trust by Mr Herdegen "as agent for Mrs Herdegen" that she held 37 of her 41 shares in Onedin Investments on trust for [B], or, alternatively, an oral declaration to this effect by Mr Herdegen, without prior authority of Mrs Herdegen, but later ratified by her in the discussion of which they gave evidence. That is how the applicants' cases were put in counsel's written submissions. (I should add that with respect to the 38 shares allegedly held on trust by Mr Herdegen, no attempt was made to indicate how they were selected from among the parcel of 59 shares numbered 1–10 and 52–100. The same is true of Mrs Herdegen's shares. As to whether such specific identification was essential to establish certainty of subject matter, or whether the shares might be treated as fungible for this purpose, the authorities appear to be unsettled: Rollestone v National Bank of Commerce (1923) 252 SW 394 at 398; Busch v Truitt (1945) 160 P 2d 925 at 928; affd 163 P 2d 739. I am also prepared to assume without deciding that it would in law have been competent for Mr Herdegen to declare a trust for his wife in the way contended for by the applicants.) What emerges from the evidence quite clearly is a failure by Mr Herdegen to focus his attention upon the distinction between the separate ownership of himself and his wife and the allocation of distinct parcels of shares between particular beneficiaries, and to frame accordingly the words relied upon to give effect to any intention to declare trusts. He may well have believed in May 1979 that what had been achieved was the creation of trusts of shares in Onedin Investments in favour of [A] and [B]. But that would not be sufficient. The whole vice in the applicants' cases is indeed manifest in para (9) of Mr Herdegen's affidavit which puts the applicants' case in its most favourable light." 234 Reading his Honour's reasoning process as a whole, it seems that the deficiency that he saw, in identification of the subject matter of the trusts, was that he could not be satisfied that there had been an intention expressed that the 38 shares intended to be held for A were to come from the shareholding of Mr Herdegen, or from the shareholding of Mrs Herdegen, and likewise he could not be satisfied that there had been an intention expressed that the 37 shares intended to be held for B would come from the shareholding of Mr Herdegen, or from the shareholding of Mrs Herdegen. 235 I do not overlook the fact that, when introducing his discussion of whether there were valid trusts, Gummow J had said, at 277: "Counsel for the applicants submitted that for the purposes of s 5(5), there might be a trust (and a "bare" trust) binding a vendor, although it was not possible for the vendor to establish which shares of a parcel held by the vendor were held for which of several beneficiaries. Thus, it was said that Mr Herdegen held 38 of his 59 shares in Onedin Investments on bare trust within the meaning of s 5(5), although he might not be able to establish which of the 59 shares were so held and for whom they were held, as between [A], Transia or [B]. In my view, this cannot be so. The trust asserted is an express non-purpose trust of personal[i]ty of the traditional type and without any of the complexities that arise in defining the nature of the rights of beneficiaries under the modern discretionary trust (as to which see Gartside v IRC [1968] AC 553). Even if it were a discretionary trust, the class comprising the objects of the exercise of the trustee's discretion still would have to be certain of identification in the sense of the authorities (as notably explained in McPhail v Doulton [1971] AC 424). And, in any event, there must be certainty also as to the property bound by the trust ( FCT v Clarke (1927) 40 CLR 246 at 283–5; Scott on Trusts , 4th ed, 1987, § 76, 77). In the present case, each applicant propounds a trust of which he or she was trustee. Their counsel rather tended to approach the matters as if there was one trust with co-owners declaring themselves trustees of jointly owned assets. That thinking tends to obscure the issues. Further, if there is the necessary certainty in identity of trustee, subject matter and beneficiary, then in any given case it will be necessary for those propounding the express trust to establish on the part of the alleged settlor the presence of the necessary intention to constitute a trust." 236 It occurs to me that a person who read in isolation the first paragraph I have quoted from paragraph 277, and of the statement "In my view this cannot be so" might think that that was a denial that it was possible for Mr Herdegen to hold 38 of his 59 shares on trust for A, when he had not identified which 38 shares were so held. However, that reading would be incorrect. The proposition that Gummow J is denying is (in part) that Mr Herdegen held 38 of his 59 shares on a bare trust. Among the authorities to which his Honour referred at 277 is Scott on Trusts, 4th ed, 1987, § 76, 77. At 444-445, in §77 Scott refers to both Rollestone and Busch v Tuitt. Scott cites Rollestone as an example of the proposition that: "A person who holds the entire legal interest may be trustee for another to the extent of a share of the property and subject thereto for his own benefit." It is exactly that type of trust that the defendant in the present case has declared. 237 If the correct way of regarding what Mr Herdegen had done was that he had declared himself a trustee of 38 of his 59 shares, that is a trust of his 59 shares that would be partly for the benefit of the beneficiary, and partly for the benefit of Mr Herdegen himself. Such a trust of the 59 shares is not a bare trust. 238 Further, the proposition that Gummow J is denying is that Mr Herdegen held 38 of his 59 shares on a bare trust, in a particular factual situation namely that he is not able to establish (i) which of the 59 shares were so held, and (ii) for whom, out of the potential beneficiaries, they were so held. Gummow J is not denying that it was possible for Mr Herdegen to hold 38 of his 59 shares on trust for some specified person. 239 It is appropriate to mention here that at §77, 445, Scott notes that the decision in Busch v Tuitt reported in 160 P was reversed by the decision reported in 163 P, but does not mention the reasons for that reversal. Concerning the decision in Busch v Tuitt that is reported in 160 P, Scott said: " … the owner of 17,145 shares of a company wrote to his creditor that he owed him 1380 shares. It was held that he did not thereby create a trust. This seems to be a proper holding, but the court expressed the opinion that a trust could not be created without a separation or identification of the shares to be held in trust." 240 That remark seems to express the author's view (with which I respectfully agree) that a statement that a certain number of shares were "owed" is inadequate to create a trust, but also to express a reservation about the court's opinion that "a trust could not be created without a separation or identification of the shares to be held in trust". It is hardly likely that Gummow J, at 277, would have intended to express views that were at odds with the authority cited as support for those views. 241 The passage from the judgment of Gummow J at 277 is also followed by the paragraph in brackets, that I have quoted above from page 279, that expressly leaves open the question of whether it is possible to have a valid trust of a particular number of shares from a larger parcel. Thus, reading his Honour's reasons as a whole, they leave open the question of whether under Australian law it is possible to have a valid trust of a particular number of shares from a larger parcel. 242 One might get the impression, from the citation of "Rollestone v National Bank of Commerce (1923) 252 SW 394 at 398; Busch v Truitt (1945) 160 P 2d 925 at 928; affd 163 P 2d 739" as authority, in the paragraph in brackets that I have quoted above from page 279, for the proposition that "As to whether such specific identification was essential to establish certainty of subject matter, or whether the shares might be treated as fungible for this purpose, the authorities appear to be unsettled", that the two American cases referred to left the law on that topic in an unsettled state. As I have endeavoured to show above, the outcome of Busch v Truitt on appeal to the Supreme Court of California is consistent with the decision in Rollestone, and the United States authorities on the topic do not appear to be unsettled. However, when the decision in Herdegen leaves open the question whether, as a matter of Australian law, it is possible to have a trust of a particular number of shares from a larger parcel, it is of no particular importance whether or not one got that impression. 243 It follows from this discussion that I do not, with respect, agree with the view expressed in Jacobs (at para [157] above) that Herdegen is authority for the proposition that an undifferentiated portion of a parcel of shares is a subject matter too vague for the court to enforce any trust in respect of, unless one uses "undifferentiated" with a very particular shade of meaning. 244 In Re Harvard Securities Ltd [1997] 2 BCLC 369 at 384-5 Neuberger J, in the Chancery Division (Companies Court) in England, decided that the Australian law was that it was not possible to have a trust of some of the shares in a larger parcel. He recognised (correctly) that Herdegen had deliberately left that point open. However, he accepted an opinion, from an unnamed lawyer or lawyers in Mallesons, that it was likely that an Australian court would hold that no such equitable rights could exist. The reasoning by which Mallesons arrived at that conclusion is not exposed. As Young J, writing extrajudicially, has pointed out ("English and Australian law as to trusts affecting shares" (1998) 72 ALJ 116) the conclusion of an English judge as to the state of Australian law is a decision of fact, which binds nobody. Further, Young J points out that the evidentiary basis on which the fact was found is at the least unusual, given that it is not apparent who had formed the opinion that was received, and suggests that an opinion about what the courts of a foreign country are likely to do at some stage in the future, concerning a topic which has not been decided in that country, "is just inadmissible". It is not necessary to form a view about whether such an opinion is totally inadmissible – it suffices for present purposes that an opinion about such a topic must be debatable. I do not, with respect, regard the course that Neuberger J adopted concerning the Australian law on this topic in Re Harvard Securities as something that in any way influences the outcome of the present litigation. Trusts of Part of a Debt 245 Because of the fairly close similarity that exists between parcels of shares and debts (in that both are choses in action), I mention here the decision in In re Appleby's Estate (1930) Tas LR 126. It concerned a pensioner who opened a savings bank account and stated on the form by which he opened it that it was in trust for a particular woman. Thereafter, he made annual declarations to a governmental authority, for a purpose connected with his pension, about the assets he held, that did not mention the amount in the bank account. Within a month of opening the account he was operating on it as if it were still his own, and he retained the bank book for a couple of years, until he handed it to a woman different to the one named as beneficiary of the account. Crisp J inferred that the pensioner had not intended a trust of the whole amount deposited, that probably he intended "a trust of such portion of the fund, as he did not require for himself; such part of it as might remain unused by him." (At 128). It was in those circumstances that His Honour concluded that there was insufficient certainty of subject matter for there to be a valid trust. 246 Jacobs, in the passage quoted at para [157] above, accurately describes the purported trust in Appleby as one of "an undifferentiated portion … of a deposit in a bank account". However it was undifferentiated because it was quite uncertain in its nature. It was not undifferentiated, in the sense that a trust to hold $200 in a bank account that contains $500 does not differentiate which particular $200 is being talked about. It is only the latter sense of "undifferentiated" that would provide any analogy to the problem that arises in the present case. 247 Associated Alloys Pty Ltd v ACN 001 452 106 Pty Ltd (in liquidation) (2000) 202 CLR 588 is another case relating to a trust of part of a debt. It concerned a Romalpa clause, in a contract for sale of raw materials to a manufacturer. The contract provided that if the purchaser used the goods in a manufacturing process, it would hold "… such part of the proceeds of such manufacturing … process as relates to the goods … in trust for the [seller]" (at 590). That trust was a valid one. As Gaudron, McHugh, Gummow and Hayne JJ said at 604, [30] " … it is no objection to the effective creation of a trust that the property to be subjected to it is identified to be a proportion of the proceeds received by the buyer; a proportion referable to moneys from time to time due and owing but unpaid by the buyer to the seller." Similarly Sandford v D V Building & Construction Company Pty Ltd [1963] VR 137 had seen no difficulty in recognising a trust of part of a debt. Academic Criticism of Hunter v Moss 248 In the academic criticism of the decision in Hunter v Moss there are some arguments raised that are not directed at the adequacy of the particular process of reasoning exhibited by Hunter v Moss, but rather at the very concept that it is possible to have a trust of a particular number of shares in a larger holding. I turn to consider some of those arguments. Effect of Capital Gains Tax 249 Two arguments concern the capital gains tax consequences of recognising such a trust. One of them is that, if the person who has declared the trust sold some of the shareholding, "how does the Revenue know whether he is selling his own shares, so that he is chargeable to capital gains tax, or if he is selling [the beneficiary's] shares, so that [the beneficiary] is so chargeable?" (Hayton, Uncertainty of Subject-Matter of Trusts (1994) 110 LQR 335 at 336). 250 I do not profess to know the answer to that question under English law. Under Australian law, capital gains tax is assessed under the Income Tax Assessment Act 1997 (Cth) ("ITAA97"), Part 3-1 and 3-3. A capital gain or loss is realised, for income-tax purposes, only if a "CGT Event" happens (section 102-20 ITAA97). One such CGT Event is event A1, "disposal of a CGT asset" (section 104-10 ITAA97). A CGT asset is any kind of property, or a legal or equitable right that is not property (section 108-5 ITAA97). It follows that a share in a company is a CGT Asset. Under section 104-10 ITAA97, subject to some exceptions not presently relevant, and omitting the examples and notes found in the section, "(2) You dispose of a * CGT asset if a change of ownership occurs from you to another entity, whether because of some act or event or by operation of law. However, a change of ownership does not occur: (a) if you stop being the legal owner of the asset but continue to be its beneficial owner; or (b) merely because of a change of trustee. (3) The time of the event is: (a) when you enter into the contract for the * disposal; or (b) if there is no contract—when the change of ownership occurs. (4) You make a capital gain if the * capital proceeds from the disposal are more than the asset's * cost base. You make a capital loss if those * capital proceeds are less than the asset's * reduced cost base." 251 Under section 121-20 ITAA97 "(1) You must keep records of every act, transaction, event or circumstance that can reasonably be expected to be relevant to working out whether you have made a * capital gain or * capital loss from a * CGT event. (It does not matter whether the CGT event has already happened or may happen in the future.) (2) The records must be in English, or be readily accessible and convertible into English. They must show what is described in this section. (They show something if they include whatever material is necessary for that thing to be easily identified or worked out.) (3) They must show the nature of the act, transaction, event or circumstance, the day when it happened or arose and: (a) in the case of an act—who did it; and (b) in the case of a transaction—who were the parties to it. (4) They must show details (including relevant amounts) of how the act, transaction, event or circumstance is relevant (or can reasonably be expected to be relevant) to working out whether you have made a * capital gain or * capital loss from a * CGT event." 252 For someone who holds a parcel of shares partly on trust for another person to keep records that comply with these requirements, those records would need to indicate whether any shares in that parcel which had been disposed of belonged beneficially to the shareholder. 253 Liability to pay tax depends upon the making of an assessment: section 166 Income Tax Assessment Act 1936. However, administratively, a self-assessment system operates, under which "… returns are generally not subject to technical scrutiny before an assessment is made. The ATO relies on post-assessment checking and auditing to determine whether a taxpayer has disclosed all assessable income and whether deductions and rebates (or tax offsets) have been properly claimed. The Commissioner has fairly wide powers to amend assessments where, for example, any post-assessment checks reveal that the taxpayer's taxable income has been understated." (CCH Australian Master Tax Guide , 38th edition 2006 ¶ 25-100) 254 Each taxpayer is obliged to lodge a taxation return, in a prescribed form: Schedule 1 Subdivision 388-B Taxation Administration Act 1953 (Cth). The prescribed form for individuals requires disclosures of capital gains: Supplementary Section item 17. 255 Thus, in the present case, the Taxation Office would know whether the defendant was selling some of his own shares, or some of the shares held on trust for the plaintiff, because in submitting his income taxation return the defendant would be required to show an amount of capital gain that was chargeable to him, and would be required to have records that contained, in sufficient detail, the information on the basis of which the calculation of that amount of capital gain had been made. That calculation would itself show whether particular shares that he disposed of were ones that he held for himself, or ones that he held on trust for the plaintiff. 256 If, at the time of making a particular sale of shares, or at the time of writing up records relating to a sale of shares, the defendant attributed a sale to either the shares held for himself, or the shares held for the plaintiff, that would be determinative, for the purpose of calculation of capital gains tax. 257 Whether any such sale was a breach of trust on his part is an entirely different question. Under the trust the defendant declared, he has no power to sell those shares that he held on trust for the plaintiff. Thus if he were to sell any shares, with the intention of thereby diminishing the number of shares he held in trust for the plaintiff, his action would be a breach of trust. If he were to sell some of his shareholding, and (contrary to his obligations under the taxation law) did not identify whether the shares that he sold were beneficially his own, the same presumption as is used in tracing would be applied, so that he would be presumed to be acting in accordance with his obligations as trustee, and thus to be selling his own shares rather than those he held on trust for the plaintiff. 258 In this way, I see no difficulty, under the Australian law relating to taxation of capital gains, in identification of whose shares have been sold, for the purpose of calculation of capital gains tax. 259 Another matter that needs to be considered, in deciding whether capital gains tax law creates a difficulty for the notion that part of a holding of shares can be held on trust, relates to the manner of calculation of capital gains tax, when part of a holding of shares is declared to be held on trust. If it were to happen that the parcel of shares of the person declaring the trust had been acquired over a period of time, and at various different prices, it would be necessary to identify the cost base of the shares that were declared to be held in trust, to be able to calculate any eventual capital gains tax liability of the person declaring the trust. 260 In the present case, the defendant acquired all the shares that are registered in his name in Unitract at the one time, and for a single consideration, namely as the purchase price for the 1.5 million shares he had held in Unitract Pty Ltd. Thus, the difficulty I have just mentioned does not have any application to the particular facts of this case. Even so, there are other factual circumstances to which the difficulty might apply, and thus the difficulty needs to be considered if one is considering whether, as a matter of general principle, such a trust is possible. 261 When a person who holds shares declares a trust of some of those shares, that is in itself a disposal. Thus, the record-keeping requirements of the taxation law would oblige the person declaring the trust to identify what was the cost base of the shares that had been disposed of. In doing so, the cost base of the shares that had not been disposed of will also, necessarily, be decided, if the records are kept properly. The person declaring the trust is given a choice about this. CCH Federal Income Tax Reporter, ¶ 151-770, page 151,144 explains: "Where there is a disposal of "shares" (sec 995-1(1)) which form part of a holding of identical shares, i.e. shares of the same class and in the same company, and it is not possible for a taxpayer to identify the particular shares disposed of, taxpayers have the option of deciding which particular shares are being disposed of (and keeping adequate records of the transaction to support the decision) or adopting the first-in first-out method as a reasonable basis of identification ( Taxation Determination TD 33). Alternatively, average cost may be used if the shares are in the same "company" (sec 995-1(1)), are acquired on the same day, and involve identical rights and obligations." 262 That choice can, in practice, be exercised after the trust has been declared, though the need to take the disposal of shares into account in the next taxation return of the person declaring the trust would require the choice to be exercised before the lodgement of the next taxation return. The exercise of that choice will decide the quantum of any capital gain or loss that the person declaring the trust sustains by reason of the disposal involved in declaring the trust, and will also be one factor in deciding the quantum of any capital gain or loss that he sustains when any of the balance of his holding is disposed of. 263 The exercising of that choice does not have any effect on the amount of capital gains tax that might eventually be payable by the beneficiary. If the beneficiary has received the shares without consideration, the beneficiary's cost base for the shares that are held on trust will be zero. If the beneficiary has provided consideration for the declaration of trust, the beneficiary's cost base for the shares will be whatever is the value of the consideration that the beneficiary provided. Operation of tracing rules 264 Another argument of Professor Hayton (110 LQR at 336) is: "If the proceeds of sale are profitably or detrimentally reinvested does the new investment belong in equity to Hunter or Moss, bearing in mind that it is only if Moss is acting wrongfully in respect of specific shares that Hunter can take advantage of the equitable tracing rules to apply whichever of them suits him best?" 265 In my view, identification of whether any shares, of the parcel, that were sold were ones that belonged beneficially to the trustee or beneficiary would be decided in accordance with the principles I have mentioned at para [257] above. Effect of a forged transfer 266 Another problem, that does not arise on the facts of this present case, but that is still appropriate to consider for the purpose of deciding whether in principle there is a problem about the recognition of a trust of a particular number of shares in a larger parcel, is: " … will all shares in a consolidated holding of 950 shares really be identical if an incorporated parcel of 50 happens to represent a forged gratuitous transfer?" (Hayton, 110 LQR at 337) 267 In my view, such problems will be solved, first, if the declaration of trust was written, and the writing was an inaccurate reflection of the true intention of the settlor, by having the trust instrument rectified to accord with that intention: Commissioner of Stamp Duties (NSW) v Carlenka Pty Ltd (1995) 41 NSWLR 329. Next, one would construe the particular declaration of trust that is involved. If there is a declaration of trust of "200 of my 1000 shares", it is a matter of construction whether the settlor's really having 1,000 shares is a condition precedent for the declaration being effective. If it is a condition precedent, and it turns out that, because some of his shares were acquired under a forged transfer, he does not have 1,000 shares, then the declaration will be ineffective. If it is not a condition precedent, then, provided the settlor has 200 or more shares once the fraud has been unravelled, the declaration of trust will be effective. That outcome would be subject to any equity that might emerge from the circumstances of the case (such as if the beneficiary had induced the belief that the share transfer that turned out to be forged was a genuine one) that led to the declaration of trust being set aside. 268 In all these circumstances I conclude that there is no difficulty of principle in recognising the validity of the trust that the defendant intended to declare. PART E REMEDY FOR BREACH OF TRUST 269 As Lord Browne-Wilkinson said in Target Holdings Ltd v Redferns [1996] 1 AC 421 at 434: "The basic right of a beneficiary is to have the trust duly administered in accordance with the provisions of the trust instrument, if any, and the general law." 270 A remedy that is frequently ordered against a trustee who has acted in breach of trust is to recoup the trust fund - to place money or other property into the trust fund, sufficient to undo the consequences of the breach of trust. However that is not the only remedy. Any equitable remedy must be moulded to be appropriate to the facts of the particular case. The objective of equitable remedies is to undo, so far as in practice can be done, the consequences of a breach of obligation. In the present case, when the breach of trust consisted in failing to transfer to the beneficiary property to which she was entitled, that objective is achieved by granting equitable compensation, payable to the beneficiary, in an amount that will put her into the same situation as she would have been in if the obligation of the trustee had been performed: Target Holdings Ltd v Redferns [1996] 1 AC 421 at 434-435, 439; O'Halloran v R T Thomas & Family Pty Ltd (1998) 45 NSWLR 262 at 273; Beach Petroleum NL v Kennedy and others (1999) 48 NSWLR 1 at 90, [431]-[432]; Youyang Pty Ltd v Minter Ellison Morris Fletcher (2003) 212 CLR 484 at 501 - 2, [43]. That amount is assessed as at the date of the trial, and with the benefit of hindsight: Re Dawson (deceased); Union Fidelity Trustee Co Ltd v Perpetual Trustee Co Ltd [1966] 2 NSWR 211; Youyang Pty Ltd v Minter Ellison Morris Fletcher (2003) 212 CLR 484 at 499, [35]. 271 Were it not for a complication arising from the fact that the defendant's 1.5 million shares were all restricted securities subject to a holding lock, the measure of that equitable compensation would, on the facts of this case, be the same as the measure of damages for breach of contract. I shall return to the consequences of the complication arising from the shares being restricted securities subject to a holding lock at para [312] ff below. PART F – TRUST OF SHARES OF WILLIAMSON OR MERKABA? 272 One of the contentions of the plaintiff's counsel is that the defendant not only had the 1.5 million shares which were registered in his own name in Unitract, but also the beneficial ownership of shares in Unitract that were held in the name of Roger Williamson or of Merkaba Pty Ltd. The plaintiff seeks to make two different forensic points by this contention. One is that the document executed on 17/18 March 2003 relates to a trust of the defendant's beneficial interest in those shares held in the name of Roger Williamson or Merkaba Pty Ltd. Another is that the defendant owed to the plaintiff a fiduciary duty, which he could, and should, have performed by causing to be transferred to her, when she asked for the shares after 1 August 2003, 222,000 of the shares in which he held such a beneficial interest. 273 I turn to whether the evidence establishes that the defendant had any such beneficial interest. The evidence concerning this topic is a collection of fragments, from which the plaintiff submits I should draw an inference. 274 In 2002 the defendant engaged Mr Paul Brown, of John McDonald & Partners, solicitors, to act for him concerning the Cooper's Shoot property. The defendant needed to pay a deposit or part deposit to the owner of that land, of nearly $20,000 (para [29] above). He told his solicitors that arrangements had been made for money to be sent to their trust account. However, the money had not arrived in the solicitors' trust account by 30 June 2002. On 30 June 2002 the defendant sent a fax to Mr Brown, saying: "… please find attached a copy of the bank statement, that the $20K was debited from and letter from my overseas financial advisor." 275 The enclosed "letter" was on paper with no letterhead, and no other indication of the address from which it came. Its text was as follows: "29 June 2002 Alan Below is a copy of my instruction to the bank. The funds were debited from my personal account at Standard Chartered Bank Jersey on 19th June with t/t reference TT53/390825/PROJMCDONALDPTNRS There is no sign on my account that the TT has been returned for any reason so if J McDonald Trust still say they have not received the funds, please let me know and I will ask the bank to put a trace on them. Regards Roger 14 June 2002 To: Ramiro dos Reis Please make the following wire transfers: 1. AUD20,000 (Twenty Thousand Australian$) to: [details of John McDonald and Partners Trust account] And debit our AUD$ a/c No. 67243422 R&E Williamson" 276 The enclosed "bank statement" is in the form of a bank statement, but is also not on letterhead. It does not identify the bank that holds the account, or the name of the proprietor of the account, or the number of the account. It does not state, and one cannot infer, who drafted the text of the narrations relating to individual transactions. It appears, from a footer on it, to have been obtained from an Internet location, the name of which includes "my-online-account.net". The entries on that "bank statement" are as follows: 14-06-02 Balance brought forward 28,353.67 14-06-02 Int. rte changed to 1.45% 28,353.67 14-06-02 T/f to JMcDonald Trust 20,000.00 8,353.67 14-06-02 Int. rate changed to 1% 8,353.67 14-06-02 US$4000 to ATM card 7,050.00 1,303.67 14-06-02 Wire fees 200.00 1,103.67 14-06-02 R W fee on above 700.00 403.67 24-06-02 T/f from ADS 27,000.00 27,403.67 24-06-02 Int. rate changed to 1.45% 27,403.67 25-06-02 T/f to Unitract 27,000.00 403.67 25-06-02 Int. rate changed to 1% 403.67 25-06-02 Wire fee 100.00 303.67 25-06-02 R W fee on above 337.50 -33.83 25-06-02 Int. rate changed to 0% -33.83 28-06-02 T/f from ADS 49,000.00 48,966.17 28-06-02 Int. rate changed to 1.45% 48,966.17 28-06-02 T/f to Unitract 48,000.00 966.17 28-06-02 Int. rate changed to 1% 966.17 28-06-02 Wire fee 100.00 866.17 28-06-02 R W fee on above 600.00 266.17 277 The "bank statement" debits the $20,000 transferred to J McDonald Trust on 14 June 2002, not 19 June 2002. 19 June 2002 was the date the $20,000 was said, in the letter, to have been debited to the R&E Williamson account with Standard Chartered Bank in Jersey. Further, it appears that each time a debit is made to the "bank account" a "wire fee" of $100 is charged for each amount, and as well the account is debited with an "R W fee". For the amounts transferred on 25 June 2002 and 28 June 2002, the "R W fee" is exactly 1.25% of the amount transferred. However, for the amounts transferred on 14 June 2002 the "R W fee" is greater than 1.25%. I also note, however, that the transfers on 14 June 2002 appear to include an amount in US$, that has been debited to the account in an amount stated in A$. If the "bank statement" was indeed a bank statement of a bank account in the name of R & E Williamson, one wonders why Mr Williamson (who I infer is "R W") would be debiting fees to his own account. I note that the entries include $27,000 transferred from "ADS" (which I infer is in some way connected with the defendant) on 24 June 2002, and transferred out the next day to Unitract, and a further $49,000 transferred from "ADS" on 28 June 2002 of which $48,000 was transferred out the same day to Unitract. 278 When the defendant was cross-examined about these entries, he said: "Well, "ADS" doesn't necessarily refer to me. I can't confirm it." 279 That answer is typical of many the defendant gave, where he says he "can't confirm" a proposition put to him, when there is no documentary back-up for the proposition available in court. 280 Other cross-examination on that "bank statement" was: "Q. And I suggest to you that the only explanation for that is that that $76,000, no doubt plus other transfers which we don't have, was used by Roger Williamson to purchase shares in Unitract Limited? A. To my knowledge I have never transferred money to Roger Williamson." 281 That evidence could be correct, if the entry "t/f from ADS" did not mean that the defendant personally had transferred the money, but rather that there had been a transfer from an account maintained in the name of, or belonging to, or in some other way connected with, the defendant, even though it was not the defendant who caused that transfer to be made. Other explanations might also be possible. However, the evidence does not enable a conclusion to be made. 282 The trust account records of John McDonald & Partners show that, in connection with the defendant's acquisition of the Cooper's Shoot property, an amount of $19,982.80 was received on 8 July 2002 from "International Funds Management", and disbursed the same day in payment of the deposit. 283 The plaintiff and the defendant lived together at 39 Alcorn Street, Suffolk Park from March 2002 until November 2002. During that time the defendant told the plaintiff that he was going to put money into the initial capital raising of the company, and that he could buy shares at 4¢ per share. He explained to her that the capital raising was raising a certain amount of money before the company could float as a public company. No direct documentary evidence of the defendant ever putting money into the initial capital raising has been tendered. 284 On some occasions the defendant would complain to the plaintiff that "I have lost a large amount of money because of the change in the exchange rate between when I transferred the money, and when I received it in Australia". The evidence discloses nothing specific about the money being talked about, the time or circumstances when it was transferred from Australia, or the time or circumstances in which it was later received in Australia. 285 The reader will recall that Unitract came to be floated through an unlisted company, Musgrave, acquiring all the shares in Unitract Pty Limited in return for the issue of shares in Musgrave. Musgrave then changed its name to Unitract Limited. The agreement dated 11 July 2002 between Musgrave Block Holdings Limited and Unitract Pty Limited does not state at the outset that anyone other than those two companies are parties to it. However, at the end, after the words "EXECUTED by the Parties" there is provision for not only Musgrave and Unitract Pty Ltd to sign, but also for each person who is named as either an existing shareholder in Unitract Pty Ltd or an intended shareholder in Musgrave, to also sign. There are multiple copies of each of the execution pages, some of which have been signed by only one or two people, as though execution pages have been executed in different geographical locations, and then collected. There is an execution page on which a signature appears opposite the place for Roger Williamson to sign, that signature purporting to be witnessed by "Mr F R Owen 293 Apartado de Corres Roges Girona Spain retired". 286 That agreement contains a warranty that at the date of the agreement the capital structure of Unitract Pty Limited is Shareholders Number of Shares Craig Stephen Thorley 7,950,000 Joseph Hermes Kaal 7,950,000 Alan Dennis Shortall 1,500,000 Roger Williamson 9,600,000 George Sim <ELM Unit Trust> 3,000,000 Grange Consulting Group Pty Ltd 1,250,000 Seed – Roger Williamson 5,250,000 TOTAL 36,500,000 287 Thus, the defendant is shown as holding 1.5 million shares, and Roger Williamson is shown as holding a total of 14,850,000 shares, of which 5,250,000 are "seed". 288 The shares that Musgrave agreed to issue, under that agreement were as follows: "(a) Craig Thorley – 7,950,000 Shares; (b) Joseph Kaal – 7,950,000 Shares; (c) Alan Shortall – 1,500,000 Shares; (d) Roger Williamson – 19,600,000 Shares; (e) George Sim as trustee for the ELM Unit Trust – 3,000,000 Shares; (f) Grange Consulting Group Pty Ltd – 1,250,000 Shares; (g) ASP – 3,000,000 Shares; and (h) Andrew Hart – 5000,000 Shares." 289 Thus, the defendant's number of shares in Unitract was to be the same as the number of shares he had held in Unitract Pty Limited, while Roger Williamson would hold 4,750,000 more shares in Unitract than he had held in Unitract Pty Limited. 290 The agreement made provision for the obligations of the parties being subject to various contingencies, one of which was "the Seed Capital Raising occurring by 19 July 2002". The "Seed Capital Raising" was defined to be "an issue of shares by Unitract [Pty Ltd] to raise $400,000". 291 A "Project Summary" dated July 2002 relating to the Unitract retractable syringe came to be in the hands of the defendant's architect, Mr McKay. That document set out the proposed capital structure for "FY 2003". It stated that 10 million shares would be issued as seed capital, with the seed raised at 4¢. 292 As it happens, the 5,250,000 shares that Roger Williamson is shown as holding as "seed" in the agreement between Musgrave and Unitract Pty Limited, plus the additional 4,750,000 shares that Roger Williamson would be allotted in the listed vehicle, total 10 million. 293 When Unitract floated, Roger Williamson was shown as holding a total of 19.6 million shares, and a further 500,000 options. Of the shares, 2 million were not restricted. The remaining shares were subject to a restriction stated to be "12 months from date of issue (15-07-03)". 294 On 1 July 2003 Unitract made application to ASX for quotation of ordinary fully paid shares which were due to be released from escrow on 19 July 2003. That application included the 17.6 million restricted shares held in the name of Roger Williamson. I infer that that application was granted. 295 On 12 September 2003 Unitract lodged with ASX a Notice of Change of Interests of Substantial Shareholder lodged by Roger Williamson. It showed that Mr Williamson's relevant interest in shares had changed in three respects – by an off market purchase on 11 June 2003 of 285,714 shares, an on market purchase attributed to the date "04/12/02-21/05/03" of 343,348 ordinary shares, and an on market sale, attributed to the period "23/12/02-05/09/03" of 1,044,749 shares. That form identified Mr Williamson as holding 1,285,714 shares registered in his own name, and as being the beneficial owner of a further 17,948,599 shares registered in the name of "Merkaba Limited". The evidence discloses nothing about the place of incorporation, directors or shareholders of Merkaba Limited. 296 On 24 December 2004 Unitract lodged another Notice of Change of Substantial Shareholding with ASX. It related to a sale by Mr Williamson of a total of 1,441,606 shares. The column headed "Date of Change" was not filled in. Individual sale prices were not stated, only "$1.26 average". After those sales, the shares in which Mr Williamson held a relevant interest decreased to 633,653 held in his own name, and 17,159,054 held in the name of Merkaba Limited, of which he was said to be beneficial owner. 297 Unitract lodged a further Notice of Change in Substantial Shareholding with ASX on 4 October 2005. It showed that Mr Williamson had, on 21 September 2005, sold a further 2,840,478 shares, and, on an unstated date, had purchased 358,998 shares. By then, according to the form, Mr Williamson had a relevant interest in 291,138 shares held in his own name, 14,170,670 shares held in the name of Merkaba Limited, 50,000 shares held in the name of Prism Nominees Ltd, <WILR 3,500>, 530,000 held in the name of Prism Nominees Ltd <SIPP 3510 A/C>, and 269,419 held in the name of Bell Potter Nominees Ltd <BB Nominees A/C>. Bell Potter Securities was a firm of brokers through which the defendant had transacted business. 298 In all these forms, the address of Roger Williamson is given as "410 Langham House, 29/30 Margaret Street London UK W1W85A" and the address of Merkaba Limited is given as "Suite 401, 302 Regent Street London UK W183HH". 299 For the purpose of proving the quantum of expenditure he had made for the benefit of the plaintiff and her family, the defendant placed into evidence certain bank statements of Underline International Pty Limited. He gives evidence that this company was incorporated in or around April or May 2001. He says: "This company did not trade, but was a vehicle by which I, through a … cheque account … would pay certain personal expenses. That account was only used by me to pay expenses for the joint benefit of myself, the Plaintiff, and her children. On occasions I would use other accounts to pay for similar expenses, but this account was the one I primarily used. I would deposit funds into that account from time to time from other assets available to me. There were no withdrawals or debits from this account other than ones made for the joint benefit of myself the Plaintiff and her children, other than insignificant amounts." 300 He exhibited the bank statements for that account relating to the period from 1 June 2001 to 2 July 2003, then from 2 April 2004 to 4 January 2005. 301 In the bank statements prior to 2 July 2003, no deposits are shown as emanating from Merkaba Pty Limited or Roger Williamson. Three amounts totalling a little less than $115,000 and identified on the statements as "offshore telegraphic transfer received" appear in the statements on 3 January 2003, 21 March 2003 and 22 May 2003. There is no other identification of the source of those monies. 302 In the statements that commence on 2 April 2004, there are transfers into the account identified on the face of the bank statement as "from Merkaba Pty Ltd R Williamson". The deposits so made are: 23 April 2004 40,000 29 April 2004 15,000 4 May 2004 13,000 24 May 2004 50,000 3 June 2004 5000 16 June 2004 25,000 22 June 2004 37,000 11 August 2004 60,000 26 August 2004 18,000 6 October 2004 78,000 15 November 2004 115,000 29 November 2004 100,000 TOTAL 556,000 303 As well there are transfers into that account with a notation "from R Williamson R Williamson" as follows: 9 July 2004 100,000 12 July 2004 80,000 TOTAL 180,000 304 The trust account ledger of John McDonald & Partners shows, in the account relating to the defendant's proposed acquisition of the Cooper's Shoot Road property, a telegraphic transfer of $102,000 into the account on 8 December 2003 identified as "Kerkaba P/l – s/duty". I infer that that is a misprint for Merkaba Pty Ltd, or Merkaba Limited. The trust account ledger shows that on 8 December 2003 an amount of $100,994 was paid out of the account to the Office of State Revenue, for stamp duty on the purchase. 305 That same trust account ledger also shows that on 17 March 2006 the Office of State Revenue refunded the stamp duty. The amount refunded was applied partly in payment of the costs and disbursements of John McDonald & Partners, and the balance, $92,552.20 was paid to Underline International Pty Ltd. It was not refunded to Merkaba. 306 The defendant had various specific propositions put to him concerning his financial relations with Roger Williamson: "Q. I am putting to you now that you used money that you had borrowed from various friends, including Louise, the plaintiff in this case, and you used that to buy shares in Unitract on the float in the name of Roger Williamson? A. I deny that. … Q. What I am putting to you is that you used the money that you had got together in 2002 to buy shares in Unitract Limited in the name of Roger Williamson? A. No. … Q. I am putting to you that you borrowed money from some of those people and used that money to buy shares in the name of Roger Williamson in Unitract Limited? A. That's not correct. … Q. And between you and Roger Williamson had a lot of shares you could sell? A. That is not correct. Q. And indeed a lot of them were sold? A. That is not correct. Q. And that is where the continuing flow of money has come to you from Roger Williamson into your account Underline? A. Yes. (I interpolate that that "Yes" was in the nature of "I'm following you" , rather than "I agree with you" .) Q. Is representing sale of shares which had been released were escrow at that period and sold? A. That's not correct. Q. I may have asked you the other day - I can't remember - can you give any explanation as to where this flow of money is coming from Roger Williamson into your Underline account which as you agreed last week, or which I put to you was over 700,000 in that period up to August '04. Can you tell the Court where that is coming from other than the sale of Unitract shares during that boom period in '03? A. I couldn't say. … Q. Mr Shortall, what I am suggesting to you is that after the 1 August '03 you had various opportunities of honouring your promise to transfer 222,000 shares to Louise, didn't you? A. I would have had, yes. Q. Why didn't you? A. My shares were restricted and there wasn't an obligation to do so. Q. Now I have already put one of those options to you, and that was the fact that you had money flowing in from Merkaba, Roger Williamson into your account with Underline, you could have used that? A. I would have just the one, yes. Q. And you could have prevailed upon Roger Williamson to give you 222,000 out of $19,600,000 to satisfy your promise, couldn't you? A. I could have. Q. Any reason why you didn't? A. I would consider it inappropriate as an officer of the company to suggest something like that to a major shareholder. Q. If Roger Williamson exists you actually are in a very intimate business relationship with him, a relationship out of which you can influence him in that prevail upon him to do your bidding? A. Um, I would not be in a position to what I consider influence Roger Williamson. … Q. And I would suggest to you that due to that relationship between you and him that you could have quite easily got him a measly, meagre 222,000 shares out of shareholding of 19 million 600? A. Now, I agree." 307 I do not regard the defendant's answers to these questions as sufficient to dispose of the submission that Mr Williamson or Merkaba Limited held shares in Unilife in trust for the defendant. But the topic was not fully explored in cross-examination. In particular, the topic of whether any of the money that Mr Williamson contributed as seed capital to Unitract Pty Ltd (not Unitract Ltd) came in some fashion from the defendant was not explored. When that topic has not been explored, the rule in Browne v Dunn (1893) 6 R 67 precludes there being any finding on it. 308 It is of particular importance that this topic was not put to the defendant, when the defendant had manifested in his answers a punctilious attention to the precise detail of questions that he was asked. 309 The plaintiff served on the defendant's solicitors a Notice to Produce the bank statements of Underline International Pty Ltd for the period 3 July 2003 to 1 April 2004. That is the period in which at least some of the seed capital was subscribed to Unitract Pty Ltd, and also the period in which the flotation of Unitract occurred. That Notice to Produce was first called on on 3 November 2006. I was informed from the Bar table that those documents were in the physical possession of accountants connected with the defendant, where they were "in storage", and the accountants had other work commitments which meant that they were not able to remove them from storage. I made clear that, when a Notice to Produce had the force of a Subpoena, it was not satisfactory for the accountants to take the attitude that they were too busy to comply with it. The Notice to Produce was called on on each of the subsequent hearing days, with the same response. In those circumstances, the groundwork is laid for the drawing of a Jones v Dunkel (1959) 101 CLR 298 inference against the defendant. 310 However, what Jones v Dunkel does is to permit an inference that is otherwise available to be more strongly, or more readily drawn. In the present case there are many unusual and unexplained features of the relationship between the defendant and Mr Williamson concerning Unitract. While one possible explanation of the evidence might be that Mr Williamson or Merkaba Limited holds some shares in Unitract on trust for the defendant, there are many other structures, besides a trust, through which an Australian resident can arrange for there to be assets offshore that he or she can in practical terms get the benefit of. If an Australian resident wanted to arrange to have assets held offshore in that fashion, a simple trust that gave the Australian resident a present right to have the assets transferred to him would be a fairly crude and ineffective way of doing it, at least partly because, unless that person was simply prepared to lie about it, any income or capital profits arising from those assets would be included in the calculation of the assessable income, for Australian tax purposes, of that person. 311 In all the circumstances, I do not infer that any of the shares held in the name of Mr Williamson or Merkaba Limited are held on trust for the defendant. PART G – EFFECT OF RESTRICTED SECURITIES 312 Mr Curtin submits that the plaintiff's case is affected by illegality. The relevant illegality is a contravention of the Stock Exchange Listing Rules relating to shares the subject of an escrow. The illegality is said to affect the plaintiff's case in two separate ways. The first is that it prevents there having been a valid declaration of trust at all. The second is that, if a trust was validly established, the Listing Rules would have prevented there being an actual transfer of the shares to the plaintiff, and hence she is unable to make out the means by which she seeks to quantify her remedy. 313 To consider those arguments, it is necessary to examine in more detail the circumstances in which these restrictions on transfer arise, their terms, the sorts of legal obligation to which they give rise, and the manner in which any contravention is enforced. 314 I turn first to how the restrictions arise. 315 No rule in the Listing Rules specifically states that the only circumstance in which an entity seeking quotation of any of its securities can issue securities to a person involved in its promotion or flotation is if the securities issued are restricted securities. However it seems to be a fairly clear assumption running through the Listing Rules that an entity seeking quotation can issue securities to a person involved in its promotion or flotation only if the securities issued are restricted securities, to the extent set out in Appendix 9B. In any event, Listing Rule 2.9 provides: "Quotation of an entity's securities is in ASX's absolute discretion. ASX may grant quotation on any conditions it thinks appropriate. ASX may grant or refuse quotation without giving any reasons." and in the present case restriction agreements were in fact entered, relating to the 1.5 million ordinary fully paid shares of the defendant. 316 Chapter 19 of the Listing Rules contains the following definition of "restricted securities": "(a) securities issued in the circumstances set out in Appendix 9B (b) securities that, in ASX's opinion, should be treated as restricted securities." 317 Appendix 9B sets out various descriptions of people who might be associated with a corporation, and states in relation to each the number of securities that are to be restricted, and the period for which the restriction is to apply. It was pursuant to Appendix 9B that the number of shares in Unitract in relation to which ASX required a restriction, and the period of that restriction, came to be ascertained. 318 Chapter 2 ASX Listing Rule sets out the requirements for quotation of any of the securities of a listed entity. The float of Unitract involved both obtaining quotation of its securities that were suspended, and the issue of new securities, of the same class as the existing ones. Listing Rule 2.4 provides: "An entity must apply for quotation of all securities (except restricted securities and securities issued under an employee incentive scheme that are subject to restrictions or transfer) that are in a class of securities that is to be quoted, or that is already quoted…" 319 Thus, it was a requirement of the Listing Rules that Unitract would apply for quotation of the new securities that it proposed to issue as part of the float, except that Rule 2.4 did not require Unitract to apply for quotation of new securities that it issued that were restricted securities. However, Listing Rule 2.12 removes the apparent freedom that Rule 2.4 gives for an entity to choose whether or not to apply for quotation of restricted securities. Rule 2.12 provides expressly: "Restricted securities will not be quoted during the escrow period". 320 Listing Rule 2.8.2 requires a listed entity to apply for quotation of restricted securities within 10 business days after the end of the escrow period. 321 Chapter 9 of the ASX Listing Rules contains, so far as is relevant to the present case, the following provision: " Application of restrictions and entry into restriction agreements 9.1 An entity which issues restricted securities, or has them on issue, must do each of the following 9.1.3 Apply the restrictions in Appendix 9B … 9.1.4 Enter into a restriction agreement with the holder … When restriction agreements must be entered 9.3 An entity must make sure that all completed restriction agreements are given to ASX before any person gets the restricted securities or any rights in relation to them. This rule does not prevent the person getting the right to receive restricted securities on condition that restriction agreements are entered into. Enforcement of restrictions 9.4 An entity must comply with, and enforce, a restriction agreement, and enforce its constitution, to ensure compliance with the requirements for restricted securities. Escrow of restricted securities 9.5 An entity must get one of the following undertakings. The entity must give the undertaking to ASX within 2 business days after the issue of the restricted securities. (a) A bank's or recognised trustee's undertaking to hold the certificate of a restricted security held on the certificated subregister for the escrow period, and not release the certificate without ASX's written consent. (b) An undertaking from the provider of registry services to the entity to impose a holding lock to a restricted security held on the issuer sponsored subregister and not remove the holding lock without ASX's written consent. 322 I interpolate that Unitract's shares were not certificated. Thus the undertaking under Rule 9.5 that was relevant to it was the undertaking from the provider of registry services to impose a holding lock. Other provisions of Chapter 9 are: Changes of restriction during escrow 9.7 During the escrow period, an entity must not do either of the following. (a) Change an executed restriction agreement. (b) Ask for, or agree to, the following. This restriction does not apply if ASX has given written consent to the release of the certificate or removal of the holding lock under rule 9.5 or rule 9.17. · Release of a certificate held on the certificated subregister by a bank or recognised trustee. · Removal of a holding lock on restricted securities held on the issuer sponsored subregister. Holding of restricted securities 9.14 An entity must do one of the following. (a) Issue certificates for restricted securities. The certificate must state that the securities are restricted securities, are not quoted on ASX and the date on which they will cease to be restricted securities. (b) Enter restricted securities on the issuer sponsored subregister. 323 Chapter 19 of the Listing Rules defines "holding lock" as having "the meaning in section 2 of the ASTC Settlement Rules." 324 ASTC is ASX Settlement and Transfer Corporation Pty Ltd. It is a subsidiary of ASX. It is an approved CS facility for settlement of securities transactions. 325 The ASTC Settlement Rules Section 2 provides: "Holding Lock" means, in relation to a Holding on either the CHESS Subregister or an Issuer Operated Subregister, a facility that prevents Financial Products from being deducted from, or entered into, a Holding pursuant to a Transfer or Conversion." 326 The ASTC Settlement Rules 8.15.18 provides: "If an Issuer receives a Message requesting authorisation of a Transfer or Conversion of Financial Products in a Locked Holding that is an Issuer Sponsored Holding: (a) the Issuer must reject the Message and notify ASTC of the rejection and the reason for the rejection; and (b) on receipt of a notification under Rule 8.15.18 (a), ASTC must notify the Participant that initiated that Transfer or Conversion of the rejection" 327 Thus, in the case of an uncertificated holding that is issuer sponsored, the responsibility for not registering a transfer of shares subject to a holding lock lies with the issuer of the securities. It is because in practice an issuer of securities engages a provider of registry services to operate its share registry that ASX requires from the provider of registry services the undertaking referred to in Rule 9.5 (b). The holding lock is an administrative arrangement whereby the provider of registry services will not add to or deduct from the balance of securities shown in the register as held by a particular person. 328 Thus, the restrictions on transfer of restricted securities are of three distinct types. First, the fact that they are not, and cannot be, quoted means that there is no practical opportunity to sell them by an on-market sale while the restriction lasts. Second, the existence of the "holding lock" places a practical obstacle in the way of any transferee of the shares becoming registered as holder of them, no matter how the transferee's claim to be registered might have arisen. Third, the terms of the restriction agreement itself gives rise to legally enforceable restrictions. The Restriction Agreement 329 The Restriction Agreement required by Listing Rule 9.1.4 was entered into, on 28 October 2002, between the defendant and Unitract. It was executed as a deed. In it, the defendant was referred to as "the holder", and Unitract was referred to as "the entity". The escrow period was stated to be 24 months from the date on which re-quotation of the entity's ordinary fully paid shares commences on ASX. 330 The document contained covenants that: " ESCROW RESTRICTIONS 1. During the escrow period, the holder will not do any of the following. (a) Dispose of, or agree or offer to dispose of, the restricted securities. (b) Create, or agree or offer to create, any security interest in the restricted securities. (c) Do, or omit to do, any act if the act or omission would have the effect of transferring effective ownership or control of the restricted securities. … 3. We will comply with chapter 9 of the listing rules. If any of us is not a listed entity, we will comply as if we were a listed entity. Each of us will take any steps we are able to take that are necessary to enable any of the others to comply." 331 The final clause of the Restriction Agreement incorporates into it definitions of terms contained in the Listing Rules. Chapter 19 of the Listing Rules includes, in Rule 19.12, a definition of "dispose" as meaning: "to dispose or agree to dispose directly or through another person by any means, including the following. · Granting or exercising an option · Using an asset as collateral · Decreasing an economic interest · Disposing of part of an asset." 332 In my view, it would be a breach of Clause 1 of the Restriction Agreement for the defendant to declare a trust of any of those 1.5 million securities. 333 The Restriction Agreement is not one to which ASX is a party. However, if there were to be a breach of the Restriction Agreement, Unilife would owe an obligation, under Listing Rule 9.4, to enforce the Restriction Agreement and ensure compliance with the requirements for restricted securities. By virtue of its admission to the official list, Unitract would owe ASX a contractual obligation to comply with the listing rules. It is not necessary for present purposes to consider whether Unitract would also owe a contractual obligation to comply with the rules to other market participants (cf Clarke v Earl of Dunraven [1897] AC 59; Forbes & Bundock v Australian Yachting Federation Inc., Booth & Landenberger (1996) 131 FLR 241). 334 The legal effect of the Listing Rules is not confined to the law of contract. As well, section 793C Corporations Act 2001 provides: " Enforcement of Operating Rules (1) If a person who is under an obligation to comply with or enforce any of a licensed market's operating rules fails to meet that obligation, an application to the Court may be made by: (a) ASIC; or (b) the licensee; or (c) the operator of a clearing and settlement facility with which the licensee has clearing and settlement arrangements; or (d) a person aggrieved by the failure. (2) After giving an opportunity to be heard to the applicant and the person against whom the order is sought, the Court may make an order giving directions to: (a) the person against whom the order is sought; or (b) if that person is a body corporate—the directors of the body corporate; about compliance with, or enforcement of, the operating rules. (3) For the purposes of this section, a body corporate that is, with its acquiescence, included in the official list of a licensed market, or an associate of such a body corporate, is taken to be under an obligation to comply with the operating rules of that market to the extent to which those rules purport to apply to the body corporate or associate. … (5) For the purposes of this section, if a body corporate fails to comply with or enforce provisions of the operating rules of a licensed market, a person who holds financial products of the body corporate that are able to be traded on the market is taken to be a person aggrieved by the failure. (6) There may be other circumstances in which a person may be aggrieved by a failure for the purposes of this section." 335 Section 761A Corporations Act 2001 contains a definition of "operating rules" that has the effect that the Listing Rules of ASX are "operating rules" for the purpose of section 793C. 336 As well, section 1101B Corporations Act 2001 provides: "(1) The Court may make such order, or orders, as it thinks fit if: (a) on the application of ASIC, it appears to the Court that a person: … (iii) has contravened a provision of the operating rules, … of a licensed market or of the operating rules of a licensed CS facility; or … (b) on the application of a market licensee, it appears to the Court that a person has contravened the operating rules, … of a licensed market operated by the licensee; or (c) on the application of a CS facility licensee, it appears to the Court that a person has contravened a provision of the operating rules of a licensed CS facility operated by the licensee; or (d) on the application of a person aggrieved by an alleged contravention by another person of a provision of the operating rules, … of a licensed market, it appears to the Court that: (i) the other person did contravene the provision or condition; and (ii) the applicant is aggrieved by the contravention. However, the Court can only make such an order if the Court is satisfied that the order would not unfairly prejudice any person. Note: For examples of orders the Court could make, see subsection (4). (2) For the purposes of paragraph (1)(d), if a body corporate contravenes a provision of the operating rules of a licensed market, a person who holds financial products of the body corporate that are able to be traded on the licensed market is taken to be a person aggrieved by the contravention. (3) Subsection (2) does not limit the circumstances in which a person may be aggrieved by a contravention for the purposes of paragraph (1)(d). Examples of orders the Court may make (4) Without limiting subsection (1), some examples of orders the Court may make under subsection (1) include: … (b) an order giving directions about complying with a provision of the operating rules, … of a licensed market or of the operating rules of a licensed CS facility to a person (or the directors of the body corporate, if the person is a body corporate) who contravened the provision; and … (e) an order restraining a person from acquiring, disposing of or otherwise dealing with any financial products that are specified in the order; and … (g) an order appointing a receiver of property (see subsection (9)) of a financial services licensee; and (h) an order declaring a contract relating to financial products or financial services to be void or voidable; and (i) an order directing a person to do or refrain from doing a specified act, if that order is for the purpose of securing compliance with any other order under this section; and (j) any ancillary order considered to be just and reasonable in consequence of the making of an order under any of the preceding provisions of this subsection." 337 Some of the history of such provisions is traced in Latimer, "Legal Enforcement of Stock Exchange Rules" (1995) 7 (2) Bond LR 1. 338 When Young J decided Fire & All Risks Insurance Co Ltd v Pioneer Concrete Services Ltd (1986) 10 ACLR 760 sections 14 and 42 of the Securities Industry Code (NSW) contained provisions conferring powers on the Court analogous to those now conferred by sections 793C and 1101B Corporations Act 2001. Young J said, at 765: "The listing requirements are, as they state themselves, standards which govern the conditions upon which a company can remain on the official list. Ordinarily the remedy for gross breach of those requirements will be de-listing, if other factors do not indicate that such is not in the public interest, and it seems to me that the powers of the court under ss 14 and 42 of the Securities Industry Code are a supplement to the powers of the exchange, a supplement that is similar to the powers which traditionally equity had in respect of the common law. The traditional role of equity in those cases was to intervene where the common law remedy was insufficient or where there was some equitable fraud or oppression or unfairness in the way in which the rules were being administered in the common law action. Likewise, under s 42 the court, to my mind, will ordinarily only interfere in analogous cases, though in so saying I do not intend to shut out the exceptional case that will arise from time to time, which may be outside these guidelines. This analysis seems to me to be consistent with what little authority there is on s 42 or its predecessor; see eg Devereaux Holdings Pty Ltd v Pelsart Resources NL (1985) 9 ACLR 879 and Repco Ltd v Bartdon Pty Ltd [1981] VR 1 at 9; 4 ACLR 787 at 796: note too Boomalli Ltd v Hake (1982) 7 ACLR 516 at 525; Designbuild Aust Pty Ltd v Endeavour Resources Ltd (1980) 5 ACLR 610 at 634 and NCSC v Industrial Equity Ltd [1982] 1 NSWLR 42 at 49; 6 ACLR 1 at 9." 339 Though some aspects of this decision of Young J were disapproved by the Court of Appeal (Street CJ, Kirby P and Samuels JA) in FAI Insurances Ltd & Anor v Pioneer Concrete Services Ltd & Ors (No 2) (1986) 10 ACLR 801, the paragraphs that I have quoted were not amongst those criticised. 340 Similarly, in Re Delta Gold Ltd [2001] FCA 1817; (2001) 40 ACSR 347 at [33], Allsop J said, concerning the then analogue of section 793C: "The terms of s 777 make it plain that a breach of the listing rules is not an unlawful act. The legislation provides for a method of enforcement of those rules; but breach of the listing rules is not to be equated with breach of a statute or acting in a contravention of a statute. Section 777(2) provides for the satisfaction of the opening words of s 777(1) in relation to listed companies: that it is a person who is under an obligation to comply with the business rules or listing rules." 341 If the defendant were to declare a trust of his restricted securities, and Unitract were to fail to take action to enforce the restriction agreement, it would be in breach of its obligation under Rule 9.4 of the Listing Rules, but that is different to the defendant being in breach of them. No argument was put that there was any implied obligation arising under the Listing Rules, that the defendant would be in breach of by declaring a trust, so that the defendant personally could be the subject of an order that the court might make under section 793C or 1101B. When no argument was put on that topic, and whether there is any such obligation might be a matter of some general importance, I prefer not to make any finding about whether there is any such implied obligation. Rather, I hold that, even if it were the case that the defendant would also be in breach of the Listing Rules by declaring a trust of any of his restricted securities, that would mean only that the court would have a discretionary power to make an order relating to those securities, which it might or might not exercise. 342 In these circumstances, in my view, it is not illegal for the defendant to declare a trust of restricted securities that he holds. 343 That conclusion seems to accord with the result in DiLucia v Clemens 541 A 2d 765 (1988), a case considered at Para [221] above. The securities over which a trust was declared in that case were restricted transfer shares, but this did not prevent the creation of a trust, because it was unnecessary for the shares to be transferred, as the Settlor already owned them. Without a fuller understanding of the precise transfer restrictions that were involved in that case than is obtainable from the report, I do not, however, rely on DiLucia v Clemens in reaching my conclusion that it is not illegal for the defendant to declare a trust of restricted securities that he holds. 344 A different, but related argument is whether the fact that the Restriction Agreement, on its true construction, contains a contractual obligation by the defendant not to declare a trust of his shares in itself makes them incapable of being held on trust. In my view it does not. A valid trust can be declared of a policy of life insurance which contains a covenant that it is not assignable: In Re Turcan (1888) 40 Ch D 5. As well, the contractual restriction on alienation contained in the Restriction Agreement is in a separate agreement, and is not part of the chose in action that constitutes the share. 345 Nor did the contractual obligation of the defendant to Unitract not to dispose of the restricted securities create any property rights in Unitract, that might have priority over any property rights that the plaintiff acquired through a declaration of trust. The contractual obligation not to dispose of the restricted securities is in some ways analogous to a negative pledge over assets, which is enforceable by an action for damages for breach of contract, sometimes by injunction (Pullen v Abalcheck Pty Ltd (1990) 20 NSWLR 732; Bond Brewing Holdings Ltd v National Australia Bank Ltd (1990) 1 ACSR 445 at 461, special leave to appeal refused National Australia Bank Ltd v Bond Brewing Holdings Ltd (1990) 169 CLR 271), and sometimes (when the person who receives the interest in the restricted securities has knowledge of the existence of the restriction) by an action for the tort of interference in contractual relations. 346 The shares of which the defendant was registered holder were already subject to a holding lock at the time that he declared a trust over them. That holding lock made it in practice impossible for the defendant to transfer the shares to the plaintiff until that holding lock expired, without the consent of ASX. ASX Guidance Note 11, para 9, says: "ASX will usually only consent to the release of certificates or a holding lock after completion of the escrow period. However, in exceptional circumstances, ASX may consent earlier. One such circumstance is if the restricted securities form part of a deceased estate and the beneficiary enters into a restriction agreement for the balance of the escrow period." 347 That Guidance Note holds out no hope that it might have been possible for the plaintiff to obtain a transfer of the 222,000 shares before the holding lock expired, in circumstances where she would have been free to sell them immediately. 348 When a trust is declared over property, it relates to the property with all the limitations and disadvantages that it might be subject to at the time of declaration of the trust. In the present case, even though the same document that declared the trust also said that the shares could be transferred after 1 August 2003, that was an attribute that the trust property in fact did not have. It is only if I am correct in holding that there was a contract to transfer the shares at 1 August 2003 that the plaintiff can obtain a remedy that gives her, in effect, the value that the shares had at or soon after the time she called for them. 349 The "voluntary escrow" that the defendant agreed to impose on the shares after 1 November 2004 (para [12] above) has no recognition in the ASX Listing Rules. I infer that it involved the share registry placing the shares under a holding lock. There is no evidence that it also involved execution of a new restriction agreement. In my view, it was a breach of his obligations as a trustee to enter any such arrangement that restricted transferability of the trust property after the trust had been declared, and after the plaintiff had called for the transfer of the trust property. 350 Equitable compensation for breach of trust is assessed by reference to what the situation would have been if the trustee had, in all respects, performed his duty. Thus, equitable compensation for breach of trust, in not transferring the shares, needs to be assessed on the basis that the shares could have been transferred at any time after 1 November 2004. 351 In light of the repeated requests for transfer that the plaintiff had made, the defendant's obligation was to transfer 222,000 shares to her promptly after 1 November 2004. If the shares had been transferred to the plaintiff at that time it is likely that she would have sold them all virtually immediately. The share price in the period a week or two after 1 November 2004 approximated $1.20 per share. If (contrary to my view) there were to be no contracts to transfer the shares after 1 August 2003, but there was a valid trust of the shares, the measure of equitable compensation to which the plaintiff would be entitled would be $266,400. PART H - OTHER Fiduciary Duty 352 The plaintiff makes an alternative claim that the defendant owed her a fiduciary duty as at 17 March 2003. That is said to arise: "1. because he undertook or agreed to act for or on behalf of, or in the interests of, the Plaintiff in the exercise of a power or discretion which would affect her interests, and she possessed the characteristic of financial vulnerability; and 2. because of the relationship of confidence giving rise to duties or disabilities upon the defendant, in whom the confidence was reposed, and the potential for abuse of this confidence." 353 Both the cases that counsel for the plaintiff referred me to concerning this submission, Don King Productions Inc v Warren [2000] Ch 291 and Chan v Zacharia (1984) 154 CLR 178, were cases involving a partnership, where the fiduciary duty that partners owe to each other is undoubted. 354 Of course, if there were a valid trust, there would be no doubt that there was a fiduciary relationship, because a trust always imposes fiduciary duties on the trustee. However, if on the correct analysis there were no trust, I am not persuaded that any fiduciary duty was owed by the defendant to the plaintiff. It is quite common in marriages, and marriage-like relationships, for one party, usually the man, to have significantly more economic power than the other, and for the other to be vulnerable to unfavourable exercises of that economic power. However, the law has traditionally not regarded that fact as giving rise to any fiduciary duty. Rather, it has resulted in the common law imposing an obligation on a man to support his wife. 355 Further, the general concept of a fiduciary relationship was explained by Mason J in Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41 at 96-97: "The critical feature of these [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. 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." 356 If there is no contract, requiring the shares to be conveyed on demand on or after 1 August 2003, and no trust, I cannot see how any separate fiduciary duty arises, as in that situation there would be no relevant undertaking or agreement by the defendant. Estoppel by Convention 357 A final way in which the plaintiff puts her case is that: "The defendant, having entered into the agreement on 17 March 2003, is estopped from denying that 222,000 shares were held in trust for the plaintiff until the plaintiff made a request for them at any time after 1 August 2003. The defendant, having entered into the agreement on 17 March 2003, is estopped from denying that he was under a duty to transfer shares when the plaintiff made a request." 358 This estoppel was not argued for at any length. As pleaded, it appears to be alleged to arise from events after the entering of the agreement on 17 March 2003. I cannot see that anything relevant to an estoppel was done after the agreement was entered. Hence I would not uphold the allegation of estoppel. Orders 1. Judgment for the plaintiff for $548,452. 2. Defendant to pay plaintiff's costs. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. 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