Re James Bartholomew Cummings and Noel Sidney Leckie v Desmond Rundle; John Bradshaw; Paul Isherwood and Michael Terence Lewis [1993] FCA 149 (6 April 1993)

FEDERAL COURT OF AUSTRALIA

Re: JAMES BARTHOLOMEW CUMMINGS and NOEL SIDNEY LECKIE
And: DESMOND RUNDLE; JOHN BRADSHAW; PAUL ISHERWOOD and MICHAEL TERENCE LEWIS
No. N G488 of 1991, 392 and 406 of 1992
FED No. 190
Number of pages - 99
Appeal - Practice and Procedure - Contribution - Costs
(1993) 113 ALR 285
(1993) 41 FCR 559

COURT

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
Sheppard(1), Neaves(1) and Cooper(2) JJ.

CATCHWORDS

Appeal - whether appellant precluded from relying upon representations (found by the trial judge) which were not pleaded or which diverged from those pleaded - whether trial conducted on pleadings - whether respondents may have conducted their cases differently if they had known nature of case made against them for the first time on appeal.

Practice and Procedure - pleadings - whether alleged representations as to future conduct - whether alleged representations promissory - statutory reversal of onus of proof - whether necessary for an applicant to plead representation clearly.

Contribution - scheme for the syndication of horses in a tax-attractive manner and marketing thereof to clients of accounting firms - whether appellants entitled to contribution from respondents for losses resulting from purchase of bloodstock - whether circumstances such that an order for contribution should be made.

Fair Trading Act 1987 (NSW), s. 41, s. 42.

(Trade Practices Act 1974 (Cth), s. 51A, s. 52)

Costs - appeal against order for costs depriving successful respondents of part of their costs - whether trial judge entitled to take into account conduct of respondents in failing to concede matters which ought to have been conceded - whether conduct of respondents unreasonable - whether circumstances in which Full Court entitled to interfere with exercise of discretion by trial judge.

Federal Court of Australia Act 1976, s. 43(2).

HEARING

SYDNEY, 14-17 September 1992
6:4:1993

Counsel for the Appellant: Mr F.S. McAlary QC and Mr V.R.W.Gray

Solicitors for the Appellant: Malcolm Johns and Company

Counsel for the First, Second
and Third Respondents: Mr D.E. Horton QC and Mr J.T. Gleeson

Solicitors for the First,

Second and Third Respondents: Freehill, Hollingdale and Page

Counsel for the Fourth and

Fifth Respondents: Mr T.E.F. Hughes QC and Mr P.M. Jacobson

Solicitors for the Fourth

and Fifth Respondents: Norton Smith and Co.

ORDER

1. The Appeal is dismissed.
2. The Appellants pay the Respondents' costs of and incidental
to the appeal.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

DECISION

SHEPPARD and NEAVES JJ. In this matter we have had the advantage of reading the judgment to be delivered by Cooper J. We agree with his conclusion that the three appeals should be dismissed and generally with his reasons.

2. The appeal by Mr. Cummings, with which we first deal, has been concerned with two causes of action, an action by Mr. Cummings for contribution and an action by him for misleading or deceptive conduct engaged in by the respondents brought pursuant to s.41 of the Fair Trading Act 1987 (NSW) rather than s.52 of the Trade Practices Act 1974 because the respondents who were sued were individuals and not corporations. A third cause of action for breach of contract was dismissed by the primary Judge (Wilcox J.). No appeal has been brought against his Honour's decision in that respect.

3. We agree that the contribution claim should fail for the following resons. Athough his Honour found no contract or partnership, he accepted, as was clearly the case, that the parties were in a business relationship. The way his Honour explained it, correctly in our opinion, was that the relationship between Mr. Cummings and Mr. Leckie on behalf of Coopers and Lybrand was not that of client and accountant; rather Mr. Leckie was acting in an entrepreneurial capacity. He would market certain tax avoidance schemes - "tax effective packages" is the way they were described in the evidence - to his partners, to clients of Coopers and Lybrand and to others. Likewise Mr. Lewis and Mr. Rundle acting on behalf of KPMG Peat Marwick Hungerfords ("Peats") would market interests in syndicates to their partners and to clients and others.

4. The syndicates were to be partnerships in which numbers of people would together own horses which were believed to have potential as race horses. These would be trained and, if appropriate, raced. In due course some might be sold. It was important, if the schemes were to be attractive to taxpayers wishing to minimise their income tax, particularly their provisional tax, that they be available before the end of the 1988/89 financial year. In order for them to be marketed, bloodstock had to be acquired to provide the syndicates with the principal assets necessary for their operation.

5. Both Mr. Cummings and Mr. Leckie were confident that the project would be successful. So were Mr. Lewis and Mr. Rundle. Peats had not been involved in the marketing of similar syndicates in 1988. Peats were Mr. Cummings' usual accountants. Mr. Lewis and Mr. Rundle were extremely anxious that Peats have an interest in the project. No-one thought of failure or loss. The confidence of all parties was substantially, if not entirely, due to the success which the 1988 exercise had enjoyed.

6. Mr. Cummings acquired several million dollars worth of bloodstock at sales which took place in the early months of 1989. The acquisitions were made on the basis that Mr. Cummings could postpone the payment of the purchase price until later in the year. All turned into disaster when the marketing of the shares in the syndicates failed. Mr. Cummings has been left with a large indebtedness for the horses he acquired. He seeks to recover either the whole of the amount in his action for misleading or deceptive conduct or a proportion of it in his action for contribution.

7. In relation to his claim for contribution we consider the following to be the essential facts (they were either common ground or found by the primary Judge):-

1. There was no contract or partnership between Mr. Cummings
and any of the accountants or accounting firms.
2. There was a loose arrangement pursuant to which Mr. Cummings
would acquire horses and the two firms of accountants would
prepare the tax effective packages through which the horses
would be marketed, and would market those packages.
3. At the time these arrangements were made none of the parties
contemplated failure.
4. Mr. Cummings spent several million dollars in the
acquisition of horses. He is liable to the vendors or
auctioneers for the prices which he agreed to pay.
5. The parties were not in a fiduciary relationship. It was
not submitted that they were.
6. In relation to this matter Mr. Cummings was not a client of
either firm of accountants. No relevant accountant/client
relationship existed.
7. The accountants prepared the tax effective packages. They
attempted to market them but without success. They are out
of pocket in the sense that the work thus done is their
loss. There is no client who can be charged for it.

8. The question is whether, those being the essential facts, they give rise to a claim for contribution. A number of suggested analogies were referred to in argument. These have been dealt with in the judgment of Cooper J. They do not help Mr. Cummings' case because none is truly analogous to the circumstances of this case. An insurer who pays out a loss is entitled to recover contribution from another insurer who is liable for the same loss. A surety, who has paid out the principal debt, is entitled to contribution from another who is also surety for the same debt. Here Mr. Cummings assumed the liability for the purchase price of the bloodstock which he bought. No one else assumed responsibility for that liability. Allegations relied upon by him at the trial that the horses were purchased at the request of the two firms of accountants or that the accountants had agreed to indemnify him for the purchase price were rejected by the primary Judge. His conclusions in this respect are not the subject of any appeal.

9. In these circumstances we think that the relationship between Mr. Cummings and each of the two firms of accountants was a loose one under which each would make a contribution of a different kind to the enterprise. The advantage each expected from it was a different one. Mr. Cummings would bring in quality bloodstock and make them available. For their part, the accountants would prepare and market the tax effective packages which would consist of syndicates having as their principal asset numbers of horses, all believed to be thoroughbreds and all with successful racing potential. Mr. Cummings would gain sufficient money to enable him to pay for his acquisitions. He would have the benefit of stabling the horses, training them and operating them as race horses should they show adequate promise. The accountants would be reimbursed for the costs of preparing and marketing the packages, i.e. the interests in the syndicates, and would have the benefit of fees earned as investors' representatives and as accountants to the syndicates, and, probably, to a number of the individual members. No direct financial benefits other than those referred to could have been contemplated. However, there may have been other more intangible benefits. Mr. Cummings' already substantial reputation as a trainer would be likely to be maintained and indeed enhanced because of the large number of high quality horses he would train. For their part the accountants may have gained a reputation for the marketing of tax effective packages in this area and also gained additional accountancy work from existing or new clients, such work not being related directly to the syndicates.

10. Subject to what is to be said about the cause of action for misleading or deceptive conduct, we think that the transaction here was one entered into by the parties at arm's length. It was not governed by any contract. It was an informal arrangement entered into by two parties (really there were two arrangements, one between Mr. Cummings and Coopers and Lybrand and the other between him and Peats), each bringing to the relationship a different expertise and skill. These were to be combined for the benefit of each of the parties, not in the sense that each would share profits from a common enterprise or a common benefit such as a separate utilisation of a single product or service produced by the combined efforts of the two, but in the sense that each would, as a result of his interest in the project, take to his own business undertaking the advantages and benefits to which we have referred. On no basis does such an arrangement impose obligations on one party to contribute to the losses of the other.

11. Before we turn to the representation claims, two further matters need to be mentioned. An attempt was made to imply into the arrangement an obligation to contribute to losses. This cannot succeed because there is no contract into which such an obligation could be implied. Even if there were, Mr. Cummings would encounter the further problem of demonstrating that the term to be implied was necessary to give the contract business efficacy. In this respect, we would reject the submission made by counsel for Mr. Cummings that the judgment of Deane J. in Hawkins v. Clayton (1988) 164 CLR 539 at 571-2 discloses an intention to depart from the principles expounded in BP Refinery (Westernport) Pty. Limited v. Hastings Shire Council (1977) 52 ALJR 20 at 26, Secured Income Real Estate (Australia) Limited v. St. Martins Investments Pty. Limited [1979] HCA 51; (1979) 144 CLR 596 and Codelfa Construction Pty. Limited v. State Rail Authority of New South Wales [1982] HCA 24; (1982) 149 CLR 337 to all of which authorities Deane J. refers in his judgment.

12. The second matter concerns the way the claim for contribution was pleaded and the way it was advanced at the trial. Counsel for all respondents complained strongly that the case made on appeal was new. It had never before been pleaded or prosecuted in the way that it was on appeal. We record this submission but do not deal with it because of our conclusion that the claim for contribution must in any event fail.

13. As counsel for all respondents emphasised, the case made on appeal in relation to the claims based on misleading or deceptive conduct also suffered f4rom the problem that it was never pleaded nor presented at the trial in the way that it was presented to us. There is no question about this. Accordingly, if we were to take the view that the claim had substance, our only course would be to order a new trial; it would not be appropriate to substitute for the dismissal of the claim a judgment in Mr. Cummings' favour.

14. The representations now relied upon were all found by his Honour after he had conducted an extensive review of the evidence. He rejected the pleaded case that the two firms of accountants had made representations to the effect that the syndicates would all be sold, or be substantially sold, no later than 30 June 1989. But he said that he had no doubt that, on a number of occasions, Mr. Leckie had made statements to Mr. Cummings about the prospects for 1989 which encouraged Mr. Cummings to purchase yearlings at the four sales at which he acquired horses. His Honour also said that he had no difficulty in accepting that Mr. Leckie gave Mr. Cummings to understand that he, Mr. Leckie, believed that, with a dealer's licence and plenty of time, it would be possible to sell down units worth $10 million in 1989 His Honour thought that something of this kind had been said on 8 September 1988 and concluded that it was not unlikely that similar statements were made subsequently. Furthermore, there was no suggestion that Mr. Leckie ever retracted his optimism or warned Mr. Cummings of over spending.

15. Later his Honour said:-

"Consequently, although I accept that Mr. Leckie made
statements such as: 'We'll have no trouble selling down $10
million'; 'It will be easier this year when you get your
licence'; 'We will have no problem selling the syndicate';
and so on, I see no reason to believe that, when he made
such statements, Mr. Leckie lacked genuine intentions and a
genuine belief in the accuracy of his prediction, or that he
was indifferent to those questions. I think that he
genuinely believed his encouraging assertions. He turned
out to be wrong, of course; grievously wrong, from Mr.
Cummings' point of view. But that fact does not establish
misleading conduct."

16. His Honour said that his conclusion in relation to Peats was similar. He said that the predictions attributed to Peats' representatives were less numerous. But he did not doubt that Mr. Cummings was encouraged in the purchase of horses by Peats, especially by Mr. Lewis. He said that, on any version of the evidence, it was clear that, until Peats' intervention, nobody contemplated a 1989 syndicate exceeding $10-12 million. Yet two weeks after a visit to Mr. Cummings by Mr. Lewis on 16 March 1989 Mr. Cummings spent $13 million at the Easter sale taking his total outlay to over $20 million. Wilcox J. said, "I think that it is an inescapable conclusion that Peats' intervention constituted a massive spending spur."

17. But his Honour then said:-

"However, having said all this, there is no evidence to
suggest that Mr. Lewis, or anybody else in Peats, lacked an
honest belief in the prospects of selling down the
syndicate. Once again, Peats had nothing to gain from an
unsuccessful syndicate. On the contrary, they would
jeopardise their relationship with a long standing client
whose business provided for them a steady and substantial
stream of income."

18. In order to reach a conclusion on what should be done about this problem, it is necessary to make reference to s.41 of the Fair Trading Act. It is as follows:-

"41. (1) For the purposes of this Part (Part 5 in which
s.42 also appears), where a person makes a representation
with respect to any future matter (including the doing of,
or the refusing to do, any act) and the person does not have
reasonable grounds for making the representation, the
representation shall be taken to be misleading.
(2) The onus of establishing that a person had
reasonable grounds for making a representation referred to
in subsection (1) is on the person.
(3) Subsection (1) shall not be taken to limit by
implication the meaning of a reference in this Part to a
misleading representation, a representation that is
misleading in a material particular or conduct that is
misleading or is likely or liable to mislead."

19. We put on one side for the moment the strong complaints made by counsel for the respondents concerning the difference between the case advanced on Mr. Cummings' behalf at the trial and the case advanced for him on appeal. That is a matter to which we shall return. For the moment, it is important to note that s.41 is of significance for two reasons. Subsection (1) provides that a representation with respect to any future matter shall be taken to be misleading if the person making it does not have reasonable grounds for doing so. The second matter to note is that the onus of establishing that a person had reasonable grounds for making a representation with respect to a future matter is on the person making it.

20. The representations which his Honour found established were representations with respect to future matters. They were the representors' opinions of what the likely outcome of the marketing of the syndicates would be. So s.41 was a relevant provision to be considered. It was relied upon in written submissions made on Mr. Cummings' behalf lodged with his Honour. But there is no reference to it anywhere in his judgment. His Honour said, in relation to Mr. Leckie's representations, that he saw no reason to believe that, when Mr. Leckie made the statements which his Honour found to have been made, he lacked "genuine intentions and a genuine belief in the accuracy of his prediction, or that he was indifferent to those questions." His Honour thought that Mr. Leckie genuinely believed his "encouraging assertions". Genuine or honest belief is not what s.41 of the Act refers to. It refers to the person making a representation not having reasonable grounds for making it. The distinction is perhaps a fine one, but the fact that a person may honestly believe in a particular state of affairs does not necessarily mean that he has reasonable grounds for his belief that the statement he makes is correct.

21. In relation to Peats, his Honour said, as the quoted passage from his judgment shows, that there was no evidence to suggest that Mr. Lewis or anybody else in Peats lacked an honest belief in the prospects of selling down the syndicate. Again the same problem exists.

22. That problem is compounded when one takes into account subsec.(2) of s.41 which casts the onus of establishing that a person had reasonable grounds for making a representation with respect to a future matter on to the person making it. No evidence was given by Mr. Leckie or Mr. Lewis in relation to the matter at hand. Neither dealt with the question whether he had reasonable grounds for saying what his Honour has found each said. There is of course good reason for this. They denied that any such representations were made.

23. That raises a practical difficulty about the application of subsec.(2) of s.41 to some cases. There are many cases, whether under s.52 of the Trade Practices Act or s.42 of the Fair Trading Act, where the principal protagonists are not dishonest or fraudulent. Each gives evidence to the best of his or her ability of conversations which took place before a transaction was entered into or other steps were taken. One party alleges inducement by misleading or deceptive conduct. The other party denies it because he or she says that nothing of that kind was said. That evidence is given honestly and to the best of the witness's recollection. Yet so often a judge will find that party's evidence unreliable, but it will be rejected, not because it is dishonest but because it is mistaken. The question arises how, from a practical point of view, can a witness in that situation face up to what is to him or her a false position. Evidence needs to be given to show reasonable grounds for the making of a statement that the witness claims never to have made. That was the position both Mr. Leckie and Mr. Lewis would have been placed in if an attempt had been made to elicit evidence of reasonable grounds from them.

24. Evidence of reasonable grounds may be established by evidence other than that of the persons who are alleged to have made particular representations as to a future matter. Indeed, as in so many other areas, a court may find the overall probabilities to which the circumstances of a given case give rise, the background to it and the conduct of parties prior to conversations taking place as providing better guides to whether or not they had particular states of mind or whether particular factors existed which would establish evidence of something such as reasonable grounds. It was the overall circumstances of the case which enabled his Honour to say, in relation to both Mr. Leckie and Mr. Lewis, that each genuinely believed the encouraging assertions which his Honour found them to have made. If one changes the exercise to an inquiry, not into genuine or honest belief, but into whether there were reasonable grounds, it is again the overall circumstances of the case which will provide more reliable guidance than would oral evidence on the part of interested parties.

25. An important factor for present purposes is the common ground between the parties that the 1988 syndicate had been a great success. There is no question about this. There are signs in the evidence that the one disappointment which Mr. Cummings and Mr. Leckie had about 1988 was that they did not have a sufficient number of horses. They both thought that if more horses were bought, particularly if Mr. Cummings had the dealer's licence which he obtained, they would have no trouble marketing the interests in the 1989 syndicates.

26. The case having been conducted differently on the appeal and his Honour not having adverted to the provisions of s.41, this Court has to make up its mind what to do. Still omitting from account the submissions made by counsel for the respondents on the question whether Mr. Cummings ought to be allowed to make the new case at all, the question arises whether it is realistic to think that, if the case went back, reasonable grounds would not be established. The entirety of the circumstances point to the likelihood that Mr. Leckie and Mr. Lewis would use the experience of 1988 to demonstrate without any question that there were reasonable grounds for the making of the statements which his Honour found. His Honour concluded that honest belief would be established. It seems to us that we can safely draw the conclusion that the likelihood is that reasonable grounds would also be established so that a new trial would serve no purpose.

27. There is another difficulty. It is the way that his Honour has qualified his findings about the representations which he found. He introduced his discussion of this matter under the heading, "The representation claims" and in one of the early paragraphs said that, whether or not these precise statements (referring to the evidence) were made, "and it is unlikely that they were," he had no doubt that on a number of occasions Mr. Leckie made statements to Mr. Cummings about the prospects for 1989 which encouraged him to purchase yearlings at the sales. As we read his Honour's judgment, each of his findings in relation to representations is qualified by these opening words and, in relation to Peats, all he could say was that he did not doubt that Mr. Cummings was encouraged in the purchase of horses by Peats, especially by Mr. Lewis. If this matter were to go back for a new trial on the representation claims, it would have to go back generally. Moreover it would be likely that it would go back to a judge other than the trial judge.

28. Counsel for the respondents have emphasised that they were given no notice of the case which is now relied upon and did not contest the case on behalf of their clients with such a case in mind. Both counsel have emphasised to the Court the prejudice which their clients would suffer if the case now advanced were allowed to be made on the basis of representations in terms of those found by his Honour. If the case now made had been the one made at trial, they may have cross-examined quite differently, other witnesses may have been called or witnesses who were called may have been asked questions about this aspect of the matter. Naturally counsel could not identify precisely the extent of the prejudice which each claimed was involved. That is understandable. It is very difficult for counsel, having conducted a case on one basis, to say precisely how the case would have been conducted if it had been put in a different way. Courts do not accept as of course statements made by counsel as to possible prejudice to their clients in circumstances such as this. Courts, however, recognise that counsel are placed in a substantial difficulty when asked to specify a claim of prejudice with any precision. If prejudice is claimed, a court is likely to give effect to that claim unless the circumstances clearly point to there being in fact no prejudice. This case is not in that category. It follows that, if it were to go back, a different judge may not find representations of the kind found by his Honour at all or may find different representations. If any representations were found, the further question would arise whether there were reasonable grounds for making the statements so found.

29. This takes us back to the beginning of this discussion because the sticking point, at least in our opinion, is that the overall circumstances of the case point to the respondents, particularly Mr. Leckie and Mr. Lewis, having had reasonable grounds for the making of the statements.

30. In all the circumstances, when we put that matter together with the fact that what Mr. Cummings' advisers sought to do was to make a different case for him, we think the grounds of appeal concerning the representation claims should not be upheld.

31. The discussion into which we have entered has saved us the need to express a view in relation to the question whether s.41 of the Fair Trading Act (or s.51A of the Trade Practices Act) needs to be specifically pleaded or raised in order for it to be relied upon. In Western Australia v. Bond Corporation Holdings Limited (1991) ATPR Case No. 41-081 French J. said (at 52,279) that a party invoking s.51A should make it clear that it is doing so. In that way a respondent will know that, if the representation was made, it will have the burden of showing and must plead, that it had reasonable grounds for making it. His Honour said that the duty of an applicant to make it clear that s.51A was invoked was discharged if it pleaded that the respondent did not have reasonable grounds for making the representation and that it was thereby misleading or deceptive. We would wish to leave open, until the question more directly arises, the correctness of these views. Our provisional view is that s.51A of the Trade Practices Act and its counterparts such as s.41 of the Fair Trading Act, are evidentiary provisions, not directed at what a party must plead. The rules of the Court in relation to pleading require the pleading to contain, and only contain, a statement in a summary form of the material facts on which a party relies; see Order 11, r.2. The cause of action which is relied upon is a cause of action for breach of s.52 (or s.42). Sections such as s.51A are designed to facilitate proof. They affect the onus of proof but they are not part of the law which provides for the cause of action for which sections such as s.52 provide. We think there is a real question whether there is any requirement that there needs to be specific reference to the section in a pleading or the adoption of words which it uses. However, the matter does not in our opinion arise for consideration here and we express no concluded view about it.

32. In the result we would dismiss Mr. Cummings' appeal with costs.

33. In relation to the appeals against his Honour's orders disposing of the costs of the trial, we agree with the reasons and conclusions of Cooper J. and have nothing to add.

THE APPLICANT'S APPEAL ON LIABILITY
COOPER J. This is an appeal from a decision of a Judge of this Court (Wilcox J.) wherein his Honour held that the respondents had no liability to the appellant ("Cummings") under section 42 of the Fair Trading Act 1987 (NSW); nor to contribute to the losses sustained by the appellant in consequence of the failure of certain horse racing syndicates, namely Cups King Syndicates Nos. 1, 2 and 3. The appellant also seeks an order against the respondents for his costs of the trial which order would be in lieu of his Honour's supplementary judgment as to costs (delivered 29 May, 1992), whereunder the appellant was ordered to pay to the first, second and third respondents three-quarters of their taxed costs, and to the fourth and fifth respondents one-half of their taxed costs.

THE APPELLANT'S CASE UPON APPEAL
2. Upon appeal, the appellant did not challenge the findings of the trial judge. Relying on these findings, the appellant submitted:-

(i) That the appellant was entitled to damages for misleading
and deceptive conduct under section 42, on the basis that
the fourth respondent ("Leckie") and KPMG Peat Marwick
Hungerfords ("Peats") made false predictions as to future
events without establishing the existence of reasonable
grounds for the making of the predictions or, alternatively,
without qualifying the statement or disclosing the risk of
non-fulfilment.
(ii) That the appellant was entitled to contribution:-
(a) on the basis that the appellant, Peats, and Coopers and
Lybrand ("Coopers") were engaged in a contractual
joint venture and that a term that losses would be
shared equally between the joint venturers should be
imputed into the contract as stating the presumed
intention of the parties;
(b) on the basis that equity requires that all parties
contribute rateably to a loss sustained by one arising
in the course of a venture pursued for the benefit of
all;
(c) pursuant to the doctrine of contribution.

3. It should be noted these arguments differed in significant respects from the basis on which the appellant's case was pleaded and conducted at trial. Counsel for the respondents submitted that, in these circumstances, the appellant ought to be precluded from arguing the appeal on these grounds. Whether this is so will be determined as each ground is considered below.

THE SECTION 42 CLAIM
The Pleadings and the Judgment
4. As pleaded, the representations founding the section 42 claim were essentially promissory. In the third amended statement of claim, the appellant alleged that the first and second respondents ("Lewis" and "Rundle") on behalf of Peats, and Leckie on behalf of Coopers, represented that Peats and Leckie, respectively, would devise a tax attractive structure for the syndicate; would prepare all the accounting and financial material required for the syndication prospectus; would arrange with financiers for 100% funding of prospective investors in the said syndicate; and, in Peats' case, would procure Peats' partners and clients to subscribe and pay for all shares in the syndicate by 30 June, 1989; and, in Leckie's case, would procure that all shares in the said syndicate would be subscribed and paid for on or before 30 June, 1989. (See the amended statement of claim, paras. 21 - 24; 39 - 40). In his judgment Wilcox J. summarises the representation case by saying that "in each case, the representation alleged by Mr. Cummings includes representations by Mr. Leckie and Mr. Rundle that the relevant accountancy firm would procure subscribers for all shares by 30 June 1989."

5. In relation to Peats, it is alleged that in reliance on the representations of Lewis and Rundle, the appellant contracted to purchase approximately $10 million top quality yearling bloodstock at the Sydney Easter Sales and caused the promotion of Cups King Syndicates Nos. 2 and 3. In relation to Coopers, it is alleged that in reliance on Leckie's representations, the appellant contracted to purchase approximately $10 million top quality yearling bloodstock at auctions commencing in January 1989 and caused the promotion of Cups King Syndicate No. 1.

6. The falsity alleged in each case was the failure to procure that all the syndicate shares were subscribed and paid for.

7. The representations that Peats would procure Peats' partners and clients to subscribe and pay for all shares in the syndicate by 30 June, 1989; and that Leckie would procure that all shares in the said syndicate would be subscribed and paid for on or before 30 June, 1989 were also pleaded as express contractual terms to found a claim by the appellant for breach of contract.

8. Wilcox J. rejected the contract claims against all respondents. He found that, as against Coopers, there was no evidence of any express promise by Leckie to procure subscriptions for all units in the syndicate by 30 June. His Honour dismissed the contract claim against Peats because he was persuaded to "accept Peats' version of their becoming involved in the syndicate" and because he rejected the appellant's account of Peats' initial involvement. His Honour thought that a clear picture emerged from the contemporaneous documents. His Honour noted in respect of certain evidence, that "the statements attributed to Mr. Hancock and Mr. Rundle fall well short of an undertaking by Peats to procure that all of the units were taken by 30 June" . There is no appeal from his Honour's rejection of the contract claims.

9. In rejecting those contract claims, his Honour necessarily rejected the promissory representations pleaded by the appellant because, as Peats' Counsel rightly submitted, there was complete identity of the pleaded warranty (ie. contract) and representation claims. Indeed, when dealing with the representation claims, his Honour did not refer to the pleaded representations at all. He based his consideration of the section 42 claim on other representations which he found were made by Leckie and Peats. In considering the representation claims, his Honour did not advert to the effect of section 41 of the Fair Trading Act (even though he was clearly cognisant of it: see trial transcript p 1944). Nor did he specifically address the issue whether the respondents had reasonable grounds for making the representations he found them to have made.

10. Relevantly, his Honour found (at pp 102, and 104-6 of the judgment) :-

In relation to Leckie
"Whether or not these precise statements were
made, and it is unlikely that they were, I have
no doubt that, on a number of occasions, Mr
Leckie made statements to Mr Cummings about the
prospects for 1989 which encouraged him to
purchase yearlings at the four sales. It is
clear that, from the outset, Mr Leckie discussed
marketing with Cummings. At the very first
meeting, on 6 May 1988, he offered Coopers'
network as a marketing aid. He spoke of
'tax-effective packages' and he emphasised the need
for a dealer's licence. Mr Leckie admits that,
on 8 September, he compared the 1988 result with
the prospects for 1989. The comparison was to
the disadvantage of 1988. Mr Leckie spoke of
the 1988 syndicate having been 'rapidly put
together and internally marketed', in contrast
to 1989 when there would be more time and Mr
Cummings would have the benefit of a dealer's
licence. So it is unlikely that Mr Leckie ended
with the limp statement: 'You would really be
selling into an unknown market'. The logic of
his comparison was that the prospects ought to
be better in 1989 than in 1988, when units worth
$4.8 million had been sold in two or three
weeks. I have no difficulty in accepting that
Mr Leckie gave Mr Cummings to understand that he
(Mr Leckie) believed that, with a dealer's
licence and plenty of time, it would be possible
to sell down units worth $10 million in 1989.
And, if something like this was said on 8
September, it is not unlikely that it was
repeated subsequently; the precise occasions do
not matter. Certainly, there is no suggestion
that Mr Leckie ever retracted his optimism or
warned Mr Cummings against over-spending.
.....
Consequently, although I accept that Mr Leckie
made statements such as: 'We'll have no trouble
selling down $10 million'; 'It will be easier
this year when you get your licence'; 'We will
have no problem selling the syndicate'; and so
on, I see no reason to believe...
....."
In relation to Peats
"But, I do not doubt that Mr Cummings was
encouraged in the purchase of horses by Peats,
especially by Mr Lewis. On any version of the
evidence, it is clear that, until Peats'
intervention, nobody contemplated a 1989
syndicate exceeding $10-12 million. Yet, two
weeks after Mr Lewis' 16 March visit, Mr
Cummings spent some $13 million at the Easter
sale; taking his total outlay on uncommitted
horse interests to over $20 million. I think
that it is an inescapable conclusion that Peats'
intervention constituted a massive spending
spur. I can understand Mr Anthony Cumming's
angry comment to Mr Rundle on 10 July.
.....
However, having said all this, there is no
evidence to suggest that Mr Lewis, or anybody
else in Peats, lacked an honest belief in the
prospects of selling down the syndicate. Once
again, Peats had nothing to gain from an
unsuccessful syndicate. On the contrary, they
would jeopardise their relationship with a long
standing client whose business provided for them
a steady and substantial stream of income. It
is true that, only a few weeks later on 12
April, Mr Rundle apparently expressed some
doubts to Mr Hinton. Perhaps, as Hinton's note
has it, Mr Rundle agreed with Mr Hinton's
doubts. But that does not mean that, on 16
March, Mr Rundle had a belief contrary to Mr
Lewis' assertions on that day. It is not clear
to what extent Mr Rundle knew of those
assertions. He gave evidence that he did not
know of Mr Leckie's visit until afterwards, and
then only in general terms. In any event, a
financial climate can quickly change. Pessimism
on 12 April does not negate optimism four weeks earlier."

11. Perhaps not surprisingly, it is these findings and representations, rather than the pleaded representations, on which the appellant seeks to rely upon appeal.

The Appellant's Submission on Appeal:
12. Before considering the appellant's submissions upon appeal, the provisions of section 41 should be noted. Relevantly, that section provides:

"41(1) For the purposes of this Part, where a
person makes a representation with respect to
any future matter (including the doing of, or
the refusing to do, any act) and the person
does not have reasonable grounds for making the
representation, the representation shall be
taken to be misleading.
(2) The onus of establishing that a person had
reasonable grounds for making a representation
referred to in subsection (1) is on the person."

13. It should also be noted that sections 41 and 42 of the Fair Trading Act are effectively the same as the provisions of, respectively, sections 51A and 52 of the Trade Practices Act 1974 (Commonwealth); the latter applying to corporations, the former to persons.

14. Upon appeal, referring to his Honour's findings set out above, Counsel for the appellant submitted that Wilcox J. had held that predictions were made by Leckie and Peats to the appellant. It was submitted that the predictions were as to future events and were false, and that, by virtue of section 41 of the Fair Trading Act, such predictions are deemed to be misleading and deceptive when made, unless the representor proves he had reasonable grounds for the making of the same. Importantly, according to the appellant's written submissions:

"At the trial, the case was fought by the
(respondents) on the basis that the predictions
were not made. No attempt was made to establish
the existence of reasonable grounds for the
making of the predictions.
.....
As the (respondents) only denied the making of
the prediction as to future events and did not
seek to establish reasonable grounds for same
they are deemed misleading and deceptive, and
damages are recoverable for the loss suffered in
consequence of acting thereon."

15. In the appellant's written submissions, it was submitted that the predictions could be construed as saying :-

"that a sufficient number of units, structured
in a tax effective manner, in a syndicate owning
a number of blood stock yearlings selected by J
B Cummings at the annual yearling sales could be
sold to the public before the end of the 1989
financial year to make viable the enterprise of
purchasing and syndicating such yearlings"
(underlining added).

16. In oral submissions, it was further submitted that the representations made could be construed as saying that :-

"the representors, Peats, Coopers, Leckie and
Lewis would be able to sell a sufficient number
of units in a syndicate which was constructed in
a tax effective manner of yearlings selected by
Cummings before 30 June to make the enterprise
of embarking on such purchase in syndication a
viable enterprise" (underlining added).

17. Counsel sought to rely on the statements of McHugh J.A. (as he then was) in Wright v. TNT Management Pty. Ltd. (1988) 15 NSWLR 679 at 690 that:-

"s. 51A must be taken to have abolished the distinction
between a promise and a representation with respect to a
future event. A promise to do something in the future
is to be regarded as a representation that it will be
performed. It will be deemed misleading, therefore,
unless the corporation proves that it had reasonable
grounds formaking the promise."

18. The appellant's Counsel also submitted that misleading and deceptive conduct within the meaning of section 42, could be founded on an alternative basis. Counsel relied on the statement of Lee J. in Wheeler Grace and Pierucci Pty. Ltd. v. Wright (1989) 11 ATPR 40-940 at 50,251, approved by French J. in Famel Pty. Ltd. v. Burswood Management Ltd. (1989) 11 ATPR 40-962, at 50-509:

"A positive unqualified prediction by a corporation may be
misleading conduct in trade or commerce if relevant circumstances
show the need for some qualification to be attached to that
statement or the possibility of its non-fulfilment to be
disclosed as a requirement of fair trading. The fact that the
corporation believed or had reasonable grounds for belief that the
prediction would be fulfilled, would not answer the question as to
whether the conduct was misleading or deceptive conduct in trade
or commerce. The misleading or deceptive conduct may be found in
the failure to qualify the statement or disclose the risk of
non-fulfilment and the event of non-fulfilment of a prediction or
promise may be evidence that raises an influence that such a risk
of non-performance existed or that qualification of the positive
statement, prediction or promise was required."

19. Leckie, it was submitted, never warned the appellant against over spending and Peats provoked massive spending.

The Conduct of the Trial
20. It seems clear that the trial, prior to addresses, was conducted on the pleadings. At the commencement of trial, the appellant's Counsel applied for, and was granted leave to further amend the statement of claim. In the course of the appellant's opening, there was reference to the pleadings and the appellant abandoned several pleaded causes of action. Immediately before Peats' Counsel commenced cross-examination of the appellant, there was discussion about the pleadings and reference to the representation case, and both his Honour and the appellant's Counsel reiterated that the representations founding the claim were those specified in the statement of claim. There is nothing to suggest that evidence was elicited other than by reference to the pleadings.

21. In evidence, the appellant and his witnesses gave their versions of the relevant conversations; the respondents gave theirs. As is emphasised in the appellant's submissions, the trial was conducted by the respondents on the basis that they did not make the representations alleged. It seems equally clear that for the appellant, the trial was conducted on the basis that the obligation of establishing reasonable grounds rested on the respondents and the appellant's Counsel had no need to deal with that issue. At trial, Counsel for the appellant simply stood back and did not raise that issue in examination or cross-examination. It was not suggested to this court by the appellant's Counsel or otherwise that it was ever put to any of the respondents' witnesses either :-

(a) that the respondents had no reasonable grounds for making a
prediction/representation/promise that the relevant
accountancy firm would be able to sell a sufficient number
of syndicate units by 30 June, 1989 to make the syndication
enterprise viable; or
(b) that there were circumstances showing the need for some
qualification to be attached to such prediction; or
(c) that there were circumstances showing the need to disclose
the possibility of non-fulfilment of such prediction.

22. In the appellant's final address at trial the section 42 claim was dealt with by the appellant's Counsel, in writing, in Section D at page 12 of the Outline of Applicant's Submissions and orally (as recorded at pages 1944 to 1948 of the transcript of proceedings at trial). Essentially, the appellant's submissions in relation to sections 41 and 42 were limited to those appearing in the written Outline. At pages 12 - 15 of the Outline, there appeared extracts from the evidence of the appellant dealing with conversations beteween the appellant and Leckie, Lewis, Rundle and Hancock. The extracts appeared under and as part of the submission: "THE CONDUCT THAT IS MISLEADING OR DECEPTIVE IS THE REPRESENTATIONS MADE BY LECKIE, RUNDLE AND LEWIS AT:". Against each quotation of the evidence was cited a page reference in the transcript. The evidence cited against Leckie was :-

"...we'd do it bigger and better next year...the
market's right and we'd have no trouble..."
"...10 million will be alright".
(Leckie said) "We'll do another one for $12
million ... (I said) "let's do it for $10
million" (He said) "...when you get your
licence we'll be able to sell it easier next
year because you'll be able to advertise to the
broader public".
"...you've got the ability to pick the eyes out
of the sale to acquire the horses to win the
Group One races. I as an accountant have the
ability to package them in a tax effective
manner to sell them down to the clients and
partners in Coopers and Lybrand...the next
syndicate we do, we should have no problem
filling it because it makes it much easier for
me when your licence comes through".
"...with the proper prospectus and starting
early next year,...you should have - wouldn't
have any trouble doing another syndicate..."
"...there was a lot of people with 50,000 to invest..."
"There's so many more people that can afford
$50,000 to buy units in the syndicate and it
would make it much easier and I'm comfortable I
could be able to sell it at that - price of those units".
"...at 50,000 I would be very comfortable at
that figure for the units because it makes it a
lot easier and I'll be comfortable to sell it
down at that price".
"...we should buy again at the Magic Million
Sale for 10 million or 12 million".
"...racing's booming, the prize money's on the
up and up and in this climate it would be very
easy to sell a syndicate down of 10 to 12
million...We should start at the Magic Million..."
"...racing is booming, the prize money is still
on the rise and I'm very confident I could sell
a syndicate down of 10 or 12 million".
"...we'd start at the Magic Million because the
value might be better there..."
"...we'll start the next syndicate by purchasing
to the Magic Million...the demand at the moment
is very strong and we should have no problem in
seeling it down".
(I said) "We should spend between $1 million and
$2 million..."
(Noel said) "it seems all right..."
"...you have to buy that type to win the Group
One races...I said to him that we spent about
three million, or something in the vicinity of
three million, and I said we've got seven
million to spend and he said, we'll get that in
New Zealand..."
"...you couldn't go wrong buying that for the
syndicate, it's one of the top lookers in the sale".

The evidence cited against Lewis was :-

"...you guys have some news for me down
there...yes, you been speaking to Grant Hancock
and I said yes, he told me that you wanted to
buy some yearlings for the sale - from the sale
to package for the clients,...yes...I'm very
pleased they decided to do this because I think
that Des is quite confident about it...how much
did Coopers and Lybrand ask you to buy for their
syndicate,...10 million...that's exactly the
amount we decided upon in the boardroom".
"...I think he was impressed with the number of
Group One winners that the stable was having..."
"...the market's pretty good at the moment and
with your successes it should be very easy for
us to market".
"...buy quality rather than quantity..."

The evidence cited against Rundle was :-

"...I just want to confirm that we want you to
buy the horses so that we could package them in
this tax effective way so we'll be able to sell
it down at the end of the financial year...your
performance is very good and I'm quite relaxed
about you buying the yearlings for us".
"...there's a very strong market for a good
product like this and I think the time's right,
we could sell it down comfortably..."

The evidence cited against Hancock was :-

"...we have almost spent the 10 million and I
said he should be comfortable with that and he
said, yes I am".

23. This was the first time that it was indicated that these particular statements were relied on by the appellant in any way. At paragraph 2.4 of submission (2) of the Outline, the appellant submitted:-

"By S51A of TPA and S41 of FTA, if a statement
is made as to the future, it will be deemed to
be misleading or deceptive unless made on
reasonable grounds. The onus of proof in
establishing reasonable grounds lies on the
representor and no evidence to discharge the
onus was given by any of the respondents who
confined their case to a denial of the representations".

24. It must be noted that the appellant's submissions in relation to the representation claims were, considering the complexity of the case and the evidence, very brief and quite skeletal. The submissions advanced on behalf of the appellant in relation to sections 41 and 42 did not:-

(a) refer to the pleadings or the pleaded representations at
all;
(b) refer to the predictions advanced on appeal (quoted above);
(c) make it clear whether the representations relied upon in
submissions as constituting misleading and deceptive conduct
were in support of, in substitution for, or in addition to,
those pleaded;
(d) refer to Wright v. TNT Management Pty. Ltd. or McHugh J.A.'s
view of s. 51A as enunciated therein;
(e) refer to Wheeler Grace v. Wright or any of the elements
founding the alternate case based on the principle
enunciated by Lee J therein; in particular, there was no
reference to the relevant circumstances showing need for
qualification to the alleged statements or for the
possibility of its non-fulfilment to be disclosed; or to
the respondents failure to qualify the statement or disclose
the risk of non-fulfilment.

25. Counsel for the respondents treated the extracts of Cummings' evidence referred to in Section D of the appellant's written submissions as evidence proffered by the appellant in support of the appellant's pleaded representations. They did not treat each of them, or any combination of them, as constituting a separate and distinct representation, in itself founding a cause of action by virtue of sections 41 and 42. It seems clear that they did not think it was necessary to do so.

26. Counsel for Leckie and Coopers virtually commenced his oral submissions on the representation case by referring to the statement of claim, paragraphs 39 to 43, stating that "it is the last representation (being the pleaded representation that Leckie would procure that all shares in the said syndicate would be subscribed and paid for on or before 30 June, 1989) that assumes significance in the context of this case as it has been run" and "the breach or the failure to make good the representation more accurately, is pleaded in paragraph 42. It is that Leckie did not on or before 30 June 1989 or at all procure that all shares in the said syndicate were subscribed and paid for."

27. Counsel for Leckie and Coopers then went on to deal with the statements extracted from the appellant's evidence referred to in section D of the appellant's Outline. He did so by comparing the alleged statements with the pleaded representation. He frequently referred back to the pleaded representation; and on several occasions, submitted that the alleged statement could not be tortured or elevated on analysis into the pleaded representation that full subscription would be procured by 30 June, 1989. It is clear that Counsel for Leckie and Coopers addressed on the basis that the representations referred to in Section D of the appellant's Outline were to be treated as the evidence in support of the pleaded representations. He did not treat each of them, or all of them combined, as founding a new and distinct section 42 claim.

28. At trial, Counsel for Peats handed up written submissions entitled "PEATS' RESPONSE TO OUTLINE OF APPLICANTS' SUBMISSIONS". The written submission deals with the Fair Trading Act case (at pages 18 - 22) as follows :-

"28. The submissions against Peats under
the Fair Trading Act 1987 (N.S.W.) ... in
Section D on pages 12 and 14-16 of the
'Outline...', do not match the case as most
recently pleaded.
The pleaded case (in paras. 20 and 21 of the
latest pleading) is that Messrs. Lewis and
Rundle made representations to the effect that:-
...
(4) Peats would procure Peats partners and
clients to subscribe and pay for all
shares in the syndicate by 30th June 1989.
Peats' liability under section 42 of the Fair
Trading Act is then alleged to arise simply
because Peats did not procure Peats' partners
and clients to subscribe and pay for all shares
in the syndicates called Cups King Syndicates
Numbers 2 and 3 - paras. 26 and 27 of the latest
pleading. That case ... must involve reliance
on section 41 of the Fair Trading Act.
29. The representation upon which Peats
have been sued by Mr. Cummings therefore must be
shown in the evidence to have been made in terms
which amount to 'a representation with respect
to any future matter (including the doing of ...
any act)'. In connexion with representation (4)
referred to in 28 above as the representation
alleged in paragraphs 20 and 21 of the latest
pleading, these terms must emerge from the
evidence to the effect that there would be full
subscription by 30th June, that the subscription
would be from Peats' partners and clients, and
that Peats would procure that subscription.
The evidence cited on pages 14 and 15 in Section
D of the 'Outline...' does not make does not
make good any of these necessary parts of the
alleged representation, let alone the other
representations alleged (albeit without any plea
of misleading or deceptive character) in the
latest pleading. The passages at T 120
allegedly spoken by Mr. Lewis are at their
highest to the effect that Mr. Rundle was 'quite
confident about it'. The passage at T 121
allegedly spoken by Mr. lewis would describe the
market as 'pretty good at the moment' such that
'it should be very easy for (Peats) to market'.
The passage alleged against Mr. Lewis from T 127
says nothing about marketing at all. The
passage allegedly spoken by Mr Rundle from T 121
refers to 'selling down at the end of the
financial year' only as a reason for the alleged
purchase on commission (itself abandoned as a
case by Mr. Cummings), and refers to Mr. Rundle
being 'quite relaxed' about such a purchase,
together with his reference to a 'very strong
market ...' the time being 'right', so that
Peats 'could sell it down comfortably'. Each of
these statements, being the only ones relied on
by Mr. Cummings to support the alleged
representation, achieves at its highest the
status of an expression of present optimism (not
unqualified in terms), rather than the status of
a prediction that complete success would be achieved.
Accordingly, the case against Peats based on
this representation should fail at the outset.
The passage allegedly spoken by Mr. Hancock at T
126 says nothing about the prediction of success
which is sued upon, is nowhere referred to in
the pleading, and by definition postdates rather
than precedes the Sydney Easter Sales said to
have been attended by Mr Cummings in reliance on
the relevant representation."

29. The appellant's submissions in reply at trial were partly oral and partly written. Two things should be noted about the written submissions. First, they are premised upon identity between the "contractual terms and/or representations". Secondly, in support of the submission that there was no lack of definition or precision in the contractual terms and representations, it was submitted (at page 3 paragraph 1) that :-

"The contract evolved from a developing
situation in which negotiations proceeded from
core concepts to a firming-up as the date of
implementation grew closer. The contractual
terms are not to be found in any particular
words or conversation. The final contractual
terms and representations are to be distilled
from the development of the agreement running
through the conversations.
The situation is analogous to a contract made by
the exchange of a number of letters, none of
which contains the whole agreement and none of
which contains any term in full." (Underlining added)

30. Thereunder, at paragraph 3 on page 4, there are five paragraphs numbered (i) to (v) setting out the essential elements of five exchanges between Cummings and Leckie, from which "the final ... representations are to be distilled". In (iii) it was submitted that "again Leckie reaffirmed 'he was confident about being able to sell it', meaning that he would be able to sell by 30th June all the units, or, at least sufficient to allow the syndication to proceed".

31. Peats, by their Counsel, responded with written submissions in "PEAT'S OBJECTIONS TO THE APPLICANT'S WRITTEN SUBMISSIONS IN REPLY". Peats objected "to the reply on the grounds that rather more than 90% of it is not in reply at all. Furthermore, some of the reply purportedly made against Coopers bears upon the case against Peats". Specifically, Peats objected to paragraph 1 at page 3 of the Reply because this was contrary to the particulars pleaded and to the pleading. It is also contrary to the opening, to the whole trend of the evidence and to the closing address by Counsel for Cummings. Sub-paragraph (i) of paragraph 4 (sic) - it seems clear that it should be sub-paragraph 3(i) - is objected to because :-

"It is not pleaded nor was it ever suggested
that the terms of the alleged contract or
representation are to be found in, or based
upon, Leilani Lodge 1-3. If that had been put
it would have been apparent that the proposed
syndication of the Cups King Syndicates were a
complete departure from the now alleged source
of the terms of the contract or representation."

Should the appellant be precluded from relying upon representations which were not pleaded? 32. In submitting that the appellant ought to be so precluded, Counsel for the respondents rely upon the decision of the High Court in Banque Commerciale SA en Liquidation v. Akhil Holdings Ltd. [1990] HCA 11; (1990) 169 CLR 279. There, in their joint judgment, Mason C.J. and Gaudron J. stated (at pp 286-7) :-

"The function of pleadings is to state with
sufficient clarity the case that must be met:
Gould and Birbeck and Bacon v. Mount Oxide Mines
Ltd. (In liq.)(1916) [1916] HCA 81; 22 CLR 490 at 517, per
Isaacs and Rich JJ. In this way, pleadings
serve to ensure the basic requirement of the
procedural fairness that a party should have the
opportunity of meeting the case against him or
her and, incidentally, to define the issues for
decision. The rule that, in general, relief is
confined to that available on the pleadings
secures a party's right to this basic
requirement of procedural fairness.
Accordingly, the circumstances in which a case
may be decided on a basis different from that
disclosed by the pleadings are limited to those
in which the parties have deliberately chosen
some different basis for the determination of
their respective rights and liabilities. See,
e.g., Browne v. Dunn (1893) 6R at p 76; Mount
Oxide Mines (1916) 22 CLR, at pp 517-518.
Ordinarily, the question whether the parties
have chosen some issue different from that
disclosed in the pleadings as the basis for the
determination of their respective rights and
liabilities is to be answered by inference from
the way in which the trial was conducted. It
may be that, in a clear case, mere acquiescence
by one party in a course adopted by the other
will be sufficient to ground such an inference."

33. In reply upon appeal, the appellant's Counsel contended that this was not authority which would justify this court in refusing the appellant the ability to invoke the trial judge's findings and to claim relief based on those findings. The circumstances in which an appellate court can grant relief on a basis raised for the first time upon appeal have been clearly enunciated by the High Court. In Water Board v. Moustakas [1988] HCA 12; (1988) 62 ALJR 209, Mason C.J., Wilson, Brennan and Dawson JJ. in their joint judgment stated (at 211):-

"More than once it has been held by this Court
that a point cannot be raised for the first time
upon appeal when it could possibly have been met
by calling evidence below. Where all the facts
have been established beyond controversy or
where the point is one of construction or of
law, then a court of appeal may find it
expedient and in the interests of justice to
entertain the point, but otherwise the rule is
strictly applied.
.....
In deciding whether or not a point was raised at
trial no narrow or technical view should be
taken. Ordinarily the pleadings will be of
assistance for it is one of their functions to
define the issues so that each party knows the
case which he is to meet.
.....
It is necessary to look to the actual conduct of
the proceedings to see whether a point was or
was not taken at trial ..."

34. In Banque Commerciale (at p 284), Mason C.J. and Gaudron J., quoting from the joint judgment in Moustakas (at p 212), noted that in Moustakas "refusal to allow the appellant to raise a new case was rested on 'the possibility that the (other party) may, if it had been raised below, have wished to call evidence in response to it'". As Mason C.J. and Gaudron J. also noted, "the relevant consideration is not that the other party is put in a worse position but that he or she may have been so placed".

Have the parties deliberately chosen some basis different from the pleaded case as the basis of determination?
35. This question must be answered in the negative. The way in which the trial was conducted does not give rise to the inference that the parties have chosen issues different from that disclosed in the pleadings as the basis for the determination of their respective rights and liabilities on the representation claims.

36. Nothing in the conduct of the trial prior to addresses alerted the respondents that the case which the appellant sought to make against them was that they had predicted, represented and/or promised that they would be able to sell by 30 June, 1989 sufficient syndicate units to enable the syndicate to succeed; rather than that they had promised that they would sell all the syndicate shares by 30 June, 1989. There was nothing to alert them that the onus was on them to prove that they had reasonable grounds for making a prediction/representation/promise that they would be able to sell by 30 June sufficient syndicate units to enable the syndicate to succeed; rather than for making a promise that they would sell all shares by 30 June, 1989. There was nothing in the appellant's conduct of the trial to suggest to the respondents that they had to meet a case that there were circumstances showing the need for some qualification of the prediction allegedly made by them that they would be able to sell sufficient units by 30 June 1989; or for them to disclose the possibility of non-fulfilment of that alleged prediction. In short, there was nothing to suggest to the respondents that the appellant was seeking to found its representation claim on other than the pleaded representations. Indeed, as stated above, immediately before Peats' Counsel commenced cross-examination of the appellant, both his Honour and the appellant's Counsel reiterated that the representations founding the claim were those specified in the statement of claim.

37. The appellant first attempted to raise his new case in his Outline and addresses. In both, the submissions in respect of the representation case were brief and ambiguous. As a result of this brevity and ambiguity, it was not clear what case the appellant was making. In the appellant's Outline, on one view of the submissions, each statement extracted in Section D from the appellant's evidence is set forth as constituting a separate and distinct representation /promise/prediction in itself founding a section 42 claim. However, the appellant's position becomes more confusing with his reply. The submissions therein seem inconsistent with the position that each statement in isolation constituted an actionable representation/promise/prediction. They reassert the identity between the contract and representation cases and say that the relevant representation/promise did not arise from any single statement, but could be distilled from five separate verbal exchanges. This seems to suggest that each extracted statement in the Outline did not constitute in itself an actionable representation/promise/prediction, but that taken together they at once constituted a contractual promise AND a promissory representation. Given that the appellant did not ever amend or abandon the basis of his contractual claim (namely, that the respondents promised that they would sell all of the units by 30 June, 1989), and given the identity which the appellant asserts in his own submissions between the contract and representation cases, it seems clear that the contractual-promise-cum-promissory-representation relied upon is that the respondents would sell all syndicate units by 30 June, 1989.

38. Peats immediately appreciated that the appellant's case in the Outline differed in some way from the pleaded case and objected to it on that basis. However, both respondents, by their Counsel's submissions, responded to the appellant's case by reference to the pleaded case. Peats, in all their written submissions, continued to object to matters raised by the appellant which were apparently inconsistent with its pleaded case.

39. Only two other things need to be noted: first, the only express reference (in para. 3(iii) of the appellant's reply quoted above) to an alleged promise that the respondents would be able to sell the units in the respective syndicates by 30 June, 1989, refers both to selling all or, at least, sufficient to allow the syndication to proceed. The appellant upon appeal alleges that the promise or prediction was that they would be able to sell sufficient. Thus the appellant's case has altered from the pleaded allegation of a representation/promise that they would sell all; to a promise that they would be able to sell all, or at least, sufficient; to a promise that they would be able to sell sufficient. Further confusion arises because the appellant has never attempted to explain what is meant by "sufficient" in this context. All representations which the appellant seeks to rely upon were made by the respondents prior to May 1989. It was not until 17 May, 1989 that the financier imposed a term that provision of finance for investors in any particular syndicate depended upon acceptance by 30 June, 1989 of applications for not less than 80% of the units in that syndicate. Thus "sufficient" in this context cannot simply be taken to mean 80% of the units in each syndicate, because at the time the representations relied on were made, the necessity for selling 80% had not been mentioned or contemplated.

40. Secondly, the closest the statement of claim came to pleading the facts necessary to found the alternative case of failure to qualify or disclose risk of non-fulfilment, was an allegation that Peats:-

"owed to Cummings a duty to warn Cummings of the
financial risks inherent in Cummings purchasing
such a quantity of top quality yearling
bloodstock having regard to Cummings' financial
strength and the limits of his financial
capabilities and resources unless there was in
place an enforceable arrangement for Cummings to
be indemnified or otherwise reimbursed for the
$10 million approximately Cummings would be
undertaking a personal liability to meet or
alternatively positively to ensure that Cummings
had independent expert advice in relation to
such financial risks"

and that Peats failed to so warn or so ensure. (See statement of claim, paras. 15 - 20.) This cause of action was abandoned by the appellant's Counsel in his opening at trial and was not adverted to in address, nor in the judgment.

41. The parties did not deliberately choose to litigate the action on any basis other than that pleaded in the appellant's amended statement of claim.

If the new case had been raised below, is there the possibility that the respondents may have wished to call evidence in response to it?
42. This question must be answered in the affirmative. This is so even though the respondents have not indicated any particular evidence which they wished to adduce. There is no suggestion in Moustakas that this is necessary; and in that case, the High Court did not allude to any specific evidence which the defendant had indicated it wished to adduce.

43. In the present case, the respondents' election merely to deny the making of the representations as pleaded cannot be relied on to infer that they would not have wished to call evidence in response to the new case sought to be made against them. The respondents' conduct of their cases was vindicated by his Honour's findings: their denials that they had made the pleaded representations/promises were accepted, so in the event it was unnecessary to establish that they had reasonable grounds for making those representations/promises. But they may well have conducted their cases differently if they had known that what was alleged against them was that they had predicted/promised that they could sell sufficient of the shares by 30 June, 1989 to make the syndication enterprise viable.

44. In particular, it is possible that each of the respondents may have wished to call evidence :-

(a) supporting a denial that they stated, represented, promised
or predicted that a sufficient number of syndicate units
could be sold, or that they would be able to sell a
sufficient number of syndicate units, before the end of the
1989 financial year to make the syndicate enterprise viable;
(b) alternatively, establishing that, at the time they allegedly
made the prediction/promise that a sufficient number of
syndicate units could be sold, or that they would be able to
sell a sufficient number of syndicate units, before the end
of the 1989 financial year to make the syndicate enterprise
viable, they had reasonable grounds for doing so;
(c) showing in detail the relevant circumstances at the time
they made the alleged prediction/promise, including expert
evidence as to the state of the syndication market;
(d) supporting a denial that the relevant circumstances showed
need for some qualification to be attached to the alleged
prediction/promise or for the possibility of its
non-fulfilment to be disclosed;
(e) establishing that they did attach some qualification to the
alleged prediction/promise and/or disclose the risk of
non-fulfilment.

45. The fact that some evidence of this nature may have been tendered by the respondents at trial does not indicate that these matters have been established beyond controversy. The possibility still most definitely exists that if they had been aware of the case now made against them, they may have wished to call further or better evidence in response. Given the reversal of the onus of proof under section 41 of the Fair Trading Act, it would seem particularly unjust to allow an appellant upon appeal to substitute an unpleaded representation/promise for a pleaded one as a basis for a section 42 claim, unless it was abundantly clear from the conduct of the trial that the former was being relied upon by the appellant. The fact that one representation imports the other (as a promise that one will sell imports with it a promise that one will be able to sell); or that the difference between the unpleaded and pleaded representation may be subtle makes it more, rather than less, likely that a respondent will fail to realise exactly which representation is being litigated. In those circumstances, if the representations relied upon are not clearly stipulated, a respondent may well fail to appreciate that the onus is upon him to establish that he had reasonable grounds for making a representation other than that which has been pleaded against him. That is what occurred in the present case.

46. Accordingly, I am of the view that the appellant is not entitled on appeal to rely on a case which was neither pleaded, litigated nor argued during the trial. Nor is it permissible for the appellant, having failed on the case pleaded, to attempt to construct a new and different case by reference to the observations and findings of the trial judge in rejecting that case.

THE CLAIM FOR CONTRIBUTION
47. It was submitted by the appellant that he was entitled to contribution :-

(a) On the basis that the appellant, Peats and Coopers, were
engaged in a contractual joint venture and that a term that
losses would be shared equally between the joint venturers
should be imputed into the contract as stating the presumed
intention of the parties;
(b) On the basis that equity requires that all parties
contribute rateably to a loss sustained by one arising in
the course of a venture pursued for the benefit of all;
(c) Pursuant to the doctrine of contribution.

The Claim to a Contractual Joint Venture
48. The appellants' claim for contribution against Lewis Rundle and Peats is pleaded in paragraphs 59 - 64 of the third amended statement of claim. In essence it alleges :-

(a) Between approximately 1 March, 1989 and 28 March, 1989
Cummings "agreed with Lewis and Rundle that they would
together purchase approximately $10 million top quality
yearling bloodstock to be selected by Cummings at the Inglis
Easter Yearling Sales and would cause a tax attractive
syndicate to be promoted to acquire such bloodstock in which
syndicate shares would be available for acquisition by
partners and clients of Peats and which would be subscribed
by investors by 30 June, 1989";
(b) "Pursuant to the agreement...Cummings purchased
approximately $10 million...bloodstock at the 1989 Sydney
Easter Yearling Sales...and caused a tax attractive
syndicate to be promoted" (Cups King Syndicate Numbers 2 and 3);
(c) "Pursuant to the agreement...Peats devised a tax attractive
structure for the syndicate and prepared all the accounting
and financial material required for the syndication
prospectus and arranged with financiers for 100% funding of
prospective investors in the syndicate";
(d) "Pursuant to the agreement...Cummings and Peats sought to
sell shares in the syndicate to prospective investors...";
(e) The syndicate was not fully subscribed by 30 June, 1989 and
thereby failed.

49. The appellants' claim for contribution against Leckie and Coopers is pleaded in paragraphs 53 - 58 of the third amended statement of claim. The case as pleaded is in its structure the same as that pleaded against Lewis, Rundle and Peats. The agreement is alleged to have been made between 1 May, 1988 and 29 October, 1988 between Cummings and Leckie to together purchase approximately $10 million of bloodstock at auctions commencing in January, 1989. It is alleged that Cummings purchased the horses and caused a syndicate to be promoted. That syndicate is particularised as "Cups King Syndicate Number 1". It is alleged that Leckie devised the tax attractive structure etc. and arranged the necessary finance for purchasers. It is alleged that Leckie and Cummings sought to sell shares in the syndicate but that by 30 June, 1989 it was under-subscribed and failed.

50. The trial judge rejected the contention on behalf of Cummings that the purchase of the horses at the Easter Sale was on account of Peats and that the purchases at the other sales were on account of Coopers when he rejected Cummings claim for indemnity. His Honour found that there was no partnership between Cummings and Peats, Cummings and Coopers, or, Cummings, Peats and Coopers. His Honour did not find there was a joint venture between all or any of the parties. He left the issue open when he said :-

"If, nonetheless, it was a joint venture, it was
a joint venture in relation to which there was
no agreement for the common ownership of
property or for the sharing of losses".

51. His Honour's findings in this regard preclude any contractual arrangements of the type pleaded whereby Cummings purchased on joint account for himself and Lewis, Rundle, and Peats, or himself and Peats at the Easter Sale and for himself and Leckie or himself and Coopers at the other sales.

52. The appellant contends that it is sufficient that Cummings purchased the horses for the purpose of the joint venture to entitle him to have imputed into the contractual joint venture an obligation to contribute or the implication of a term to like effect. Such a contract is different from that pleaded, particularly if the contractual joint venture contended for is a tripartite agreement involving Cummings, Peats and Coopers as to all the horses purchased. His Honour's reasons dealing with the contribution claim would suggest that the argument was put to him on a wider basis.

53. The joint venture claim was put to his Honour as a series of steps leading to a conclusion. The first step was that the role played by the accountants was more than as accountant to Cummings and was an entrepreneurial role. His Honour accepted this submission. However I do not read his Honour's reasons thereafter as more than a recitation of the argument detailing the steps contended for without any acknowledgment that he accepts the contentions as legally or factually correct. He said :-

"Counsel then say that the nature of the
entrepreneurial role is discernible from the
various conversations between Mr. Cummings and
Mr. Leckie, in the latter half of 1988, when
there was talk of repeating in 1989 a
syndication like Leilani Lodge 1-3, but bigger.
The concept underlying Leilani Lodge 1-3, say
counsel, was one of mutual, but differing,
benefits to two parties. Mr. Cummings gained
the benefit of retaining in his stable promising
young horses which he could not afford to keep
indefinitely, thereby earning training fees,
prize money and incidental financial benefits.
The benefit to Coopers was two-fold; the
earning of substantial fees as the investors'
representative and accountants for the
syndicate, and the availability of an acceptable
product to offer to clients seeking to minimise
their taxation liability. So, counsel say, when
Mr. Cummings and Mr. Leckie decided to repeat
the exercise in 1989, they had in mind an
arrangement whereby they would share an
entrepreneurial role, but each take a share of
the overall benefits of a successful syndicate
in his own way. When Peats invited themselves
into the exercise, say counsel, they had in mind
adopting the same position as Coopers' 1988
role. They also were entrepreneurs on a joint
venture basis. Counsel say that their industry
in marketing the syndicate is consistent with
the acceptance of an entrepreneurial role. They
point to the notes made by Mr. Hinton - the note
of 23 March 'Adelaide - $10m syndicate - Michael
Lewis to organise', and 5 April, 'Divide with
Peats on 50/50 basis (i.e. $9m to sell each)',
and 11 April, 'Peats place $9m and we place $9m'
- as indications that Mr. Cummings had always
understood that Peats would actively market the
syndicate.
There was, of course, one difference between the
1988 syndicates and those offered in 1989: the
horses syndicated in 1988 were already owned by
Mr. Cummings; those used in 1989 had yet to be
paid for. Counsel accept that this circumstance
imposed a time limit, making it critical that
the venture be successfully concluded by 30 June
- when, under the extended credit arrangements
made with auctioneers, payments would fall due -
but they say that this did not affect the
substance of the arrangement. The gist of the
arrangement remained the same: Mr. Cummings was
to contribute his name and his selection skills,
the two firms of accountants their expertise in
'tax-effective packaging' and their marketing
contacts. Instead of providing horses, for
which he had to be paid, as in 1988, Mr.
Cummings was to provide the opportunity for the
syndicates to obtain horses, for which they
would have to pay the auctioneers.
Counsel say that, when the arrangements were
made, nobody contemplated the possibility that
the syndicates would fail, so that the debt to
the auctioneers would remain unpaid. But this
was a risk inherent in the arrangements. The
parties never agreed to abandon their
obligations to each other".

54. The essence of the submissions is that the arrangement in 1989 and the roles played by the accountants in that year were no different from the arrangements which had been in place in 1988 relating to the Leilani Lodge syndication, save that in 1988 Cummings owned the horses and in 1989 he had to buy the horses on credit, looking to the syndicate members to provide the funds with which he would pay the auctioneers. On the basis of these submissions the nature and terms of the arrangement contended for by the appellant must be ascertained from the 1988 arrangements between Cummings and Leckie and Coopers.

55. His Honour did make some findings as to what occurred in relation to the Leilani Syndicates and the circumstances in which Leckie became involved with Cummings in relation to that syndication. There has been no challenge as to his Honour's findings in that respect. His Honour said :-

"Leilani Lodge 1-3 syndicates, which were
filled, or substantially filled, in 1988, do not
give rise to any claim for damages. But Mr.
Cummings' counsel say that this syndication is
the back-drop against which the 1989 syndication
is illuminated. So it must be considered.
During the years 1986 and 1987, Mr. Cummings
bought several yearlings which he did not
immediately resell. He put them into training.
Some, at least, were raced. Those horses
included "Beau Zam" and "Sky Chase", each of
which proved to be large stake-winners. About
the end of 1987, Mr. Cummings decided to free up
his capital by syndicating this group of horses.
He formed a syndicate, to contain 20 shares each
having a value of $250,000; $5 million in all.
The syndicate would own interests in 22 listed
two and three year old horses. Mr. Cummings
prepared a letter setting out his scheme. This
was sent to stable clients and some other
people. Almost immediately, two shares were
purchased. Perhaps encouraged by that result,
Mr. Cummings purchased some more yearlings at
the auctions which occurred in early 1988. But
no more purchasers appeared.
On 6 May 1988 John Roger Darvall, an Associate
Director of the private banking division of NZI
Securities Australia Limited ("NZI"), introduced
Mr. Leckie to Mr. Cummings. Mr. Darvall had
previously discussed with Mr. Cummings the
possibility of syndication. He knew Mr. Leckie
through NZI's financing of brood mare syndicates
and he had previously asked him whether he would
be interested in coming into a Cummings
syndicate as the independent investors'
representative. Mr. Leckie had said that he
would; and he had mentioned the possibility of
marketing syndicate shares through the '500
partners in Coopers and Lybrand'.
The meeting of 6 May was held at Mr. Cummings'
office at "Leilani Lodge". Those present were
Mr. Cummings, his son Anthony who acted as his
stable manager, Mr. Darvall and Mr. Leckie. The
four men discussed the possibility of
'repackaging' the 1987 syndicate, in conjunction
with the 1988 yearling purchases, in a more
'tax-effective' form. Mr. Leckie told Mr.
Cummings that he understood how to do this from
his experience with breeding syndicates and he
spoke of selling units through Coopers. Mr.
Darvall indicated that NZI would provide the
necessary investor finance.
According to Mr. Darvall, during this discussion
he outlined the task of an independent
investors' representative; namely, to advise
the people who came into the syndicate,
independently of Mr. Cummings, about matters
such as the structure of the syndicate and to
look at 'the tax angle and the cheques and as to
the running of the syndicate'. According to Mr.
Darvall, he asked Mr. Leckie whether he would
like to fulfil that role. He said that he would.
Mr. Cummings' account of this conversation is
less detailed than that of Mr. Darvall. But it
covers much the same ground and is consistent with it.
.....
The significance of these conversations,
according to Mr. Cummings' counsel, is that they
show that, right from the beginning, Mr.
Leckie's role was not that of Mr. Cummings'
accountant but of an independent person
undertaking an entrepreneurial role for which he
would be remunerated by others.
Mr. Leckie's version of this conversation has
much in common with the other accounts. He
acknowledges that he outlined the concept of a
taxation-geared syndicate and talked about
finance. He also says that he talked about
marketing, although his version is lower keyed:
'I'd be prepared to send a memo to all of my
partners within the firm'. I think that the
only real points of difference are that Mr.
Leckie makes no reference to any conversation
about his acting as investors' representative
and he says that, at this meeting, there was
discussion about the need for Mr. Cummings to
obtain a dealer's licence. I do not think that
the differences matter much. Both of these
topics were certainly discussed at either this
meeting or the following meeting; perhaps at both.
Mr. Cummings agreed, either on 6 May or shortly
afterwards, to take the course suggested by Mr.
Darvall and Mr. Leckie. Mr. Cummings and Mr.
Leckie discussed the need for legal advice. Mr.
Cummings mentioned Brian Agnew of Moray and
Agnew, whom he had used in the past and who was
known to Mr. Leckie. A meeting was arranged.
During the course of that meeting, Mr. Darvall
suggested advertising the syndicates. Mr. Agnew
pointed out this would be illegal unless the
advertiser held a dealer's licence under the
Securities Industries (sic) (New South Wales)
Code. He asked Mr. Cummings whether he held
such a licence. Mr. Cummings said that he did
not. He asked Mr. Agnew to explain what a
dealer's licence was and why it was necessary.
Mr. Agnew did so, pointing out that the licence
would take some months to issue; it would not
be available for use in the then current
financial year. According to Mr. Cummings, Mr.
Leckie said that he thought that Mr. Cummings
should obtain a licence anyway 'because when we
do a syndicate next year you'll need it because
it will be a big help to keep up with the
opposition'. Mr. Cummings agreed that a licence
should be sought. Mr. Darvall agrees that Mr.
Leckie 'suggested that we get that licence
immediately' and says that he undertook to do
so. Apparently Mr. Leckie did lodge the
necessary application, naming as the applicant a
company, International Bloodstock Management
Pty. Limited, of which Mr. Bart Cummings and Mr.
Anthony Cummings were the directors.
With the assistance of Mr. Agnew, a syndicate
prospectus was formulated. The two existing
unit-holders agreed to aggregate their interests
in the 1987 syndication with interests in the
yearlings purchased in 1988, making a total
complement of interests valued at $12,121,578.
(In some cases, a part interest in a particular
horse had been purchased from Mr. Cummings by a
client. So it is more accurate to speak of
'horse-interests' than horses). This capital
sum was broken down into six syndicates
('Leilani Lodge 1-6'), each containing twenty
units. So each unit-holder would have an
undivided 1/120th share in the aggregated
interests, and in each individual horse-
interest. The price of a unit was $143,483, a
'horse component' price of $100,000 and $43,483
by way of contribution to 'working capital'.
Finance was to be available to approved
applicants through NZI.
A prospectus setting out the above information
was published early in June 1988. Under the
heading 'Venture Manager', the prospectus stated
the name 'J Bart Cummings'. The 'Accountants'
were shown as 'Noel Leckie, Coopers and Lybrand,
Scone NSW, 2337'.
In view of the shortness of time before the end
of the 1988 financial year, it was decided to
market in that year only three syndicates; that
is, 60 units. They were Leilani Lodge 1-3. In
the period of approximately three weeks between
the issue of the prospectus and 30 June, 48
units were sold. According to Mr. Darvall, who
processed the applications on behalf of NZI, 40
of the 48 units were sold through the Coopers'
network - either to clients of the firm or to
Coopers partners. Mr. Leckie says that this is
incorrect, that eight units were sold to
Coopers' partners and twelve to Coopers'
clients. I have no way of knowing who is
correct about this matter."

56. It is clear from his Honour's reasons that the purpose of the syndication in 1988 was to free up capital which the appellant had invested in horses while at the same time retaining the horses in training for the prospect of earning training fees and possible race winnings. The role of Leckie was to assist Cummings to achieve this end in the best way possible. He was introduced to Cummings by Mr. Darvall of NZI Securities Australia Ltd. ("NZI") for this purpose. Leckie agreed to perform a number of functions, namely :-

(a) To package the syndicates in a tax-effective way to enhance
their saleability;
(b) To provide general advice on syndication of the horses;
(c) To assist with the marketing of the syndicate interests,
particularly through the partners of Coopers;
(d) To agree to become on behalf of Coopers, the independent
investors' representative and to perform certain accounting
and management functions on behalf of investors once the
syndications were in place. He also appears to have agreed
to allow his name to be used in the marketing of the
syndicates in that capacity.

57. Any financial reward to Leckie and Coopers for the work involved flowed from contracts with third party investors who themselves engaged in a joint venture of owning and racing horses.

58. In the discharge of these functions the role undertaken by Leckie went beyond that of being a mere accountant acting on behalf of Cummings or in his interests. It was an independent role and was entrepreneurial in the sense that his ultimate remuneration for performing these functions would be provided by persons other than Cummings. No doubt Leckie had an interest in the success of the syndication as it was in the role of "independent investors' representative" that Coopers stood to earn income from fees payable to them by the syndicate members for the services provided as investor representative. However, Leckie and Coopers' position was no different to the position of Darvall and NZI in respect of the association of the latter with Cummings and the syndication of the horses. Darvall and NZI had a role to play as providing finance to would-be investors to purchase a share in the syndicate. In this way their role was to better facilitate syndication of the horses for the benefit of Cummings. NZI had a similar interest to that of Coopers in the success of the syndication because the ability of the financier to earn income lay in the interest payable on loans advanced to syndicate members.

59. There is, in my view, nothing joint in the arrangements entered into in 1988. The benefits which Cummings, Leckie and Coopers, and Darvall and NZI sought to achieve out of a successful syndication by Cummings were several and not joint. There was no contribution of capital or skill to a joint undertaking. There was no burden being undertaken by Cummings to enable the various interests to achieve a common end or purpose. Cummings was, of his own initiative, selling the horses to syndicates of investors for the purpose of obtaining a realisation of his investment in the horses and to secure, because of the terms of the syndication, a right to earn profits and prize money from the continued training of the horses for the syndicates. If the syndication of the horses in 1988 had failed, Cummings would have retained his horses. If at that time the horses were worth less than at the time when he either originally acquired them or embarked on the syndication, that loss in value would have had to have been borne solely by him.

60. Likewise Leckie and Coopers and Darvall and NZI acted in their own self-interests. The arrangement was an arm's length commercial business arrangement whereby each of the parties to it sought to obtain a separate and different benefit in the event that Cummings succeeded in syndicating his horses.

61. In my view the submission of Counsel for Cummings before the trial judge and before this Court, that nothing essentially changed between the 1988 and 1989 arrangements is correct. Cummings as principal acquired horses at auction with a view to selling interests in the horses to syndicate members. He purchased the horses on credit in the expectation that the funds to satisfy the purchase price would be provided by the investors. The benefit to Cummings from the sale of the horses was a benefit to himself alone, in that it provided to him the funds to discharge a personal liability which he had undertaken in order to acquire the horses to on-sell. The purpose of the syndication in substance did not change; it was the syndication of horses to realise money for the benefit of Cummings which in 1989 would be used to discharge his indebtedness to the auctioneers and to retain the horses in training with a view to earning training fees and race winnings. The entrepreneurial role to be undertaken by Leckie and Coopers was the same as that undertaken in 1988 and the interests of Leckie and Coopers were again separate and distinct from that of Cummings.

62. Peats, on the findings of his Honour, were to perform the same entrepreneurial role as that provided by Coopers in relation to the 1988 syndicates and it was on that basis that Peats approached Cummings seeking an involvement in the 1989 syndication of interests in horses to be acquired by Cummings.

Did the Entrepreneurial role of the accountants as found by the trial judge constitute a contractual joint venture?
63. The term "joint venture" is not a technical term, nor is it one with a settled common law meaning (United Dominions Corporation Limited v. Brian Pty. Ltd. [1985] HCA 49; (1985) 157 CLR 1 at 10). In United Dominion Corporation, Mason, Brennan and Deane JJ. in a joint judgment defined the meaning of a joint venture as a matter of ordinary language. They said of the term "joint venture" (at 10):-

"As a matter of ordinary language, it connotes
an association of persons for the purposes of a
particular trading, commercial, mining or other
financial undertaking or endeavour with a view
to mutual profit, with each participant usually
(but not necessarily) contributing money,
property or skill. Such a joint venture (or,
under Scots' law, 'adventure') will often be a
partnership. The term is, however, apposite to
refer to a joint undertaking or activity carried
out through a medium other than a partnership:
such as a company, a trust, an agency or joint
ownership. The borderline between what can
properly be described as a 'joint venture' and
what should be seen as no more than a simple
contractual relationship may on occasion be blurred."

64. Dawson J. thought that the term included the concept of an association of persons who engage in a common undertaking "to generate a product to be shared among the participants", eg. exploration for and exploitation of mineral resources. His Honour said (at 15-16) that the feature most likely to distinguish a joint venture from a partnership was the sharing of product rather than profit. The view, that an association of persons engaged in a common undertaking to produce a product which was shared by them in joint ownership constituted a joint venture, was the view adopted by the Court of Appeal in Pursell v. Newberry (1967) 67 SR (NSW) 415 in respect of the building of a boundary fence by adjoining landowners.

65. The concept of a joint venture as ordinarily understood involves three essential elements :-

(a) an association of persons as co-venturers;
(b) that the persons be engaged in a common undertaking; and
(c) that the common undertaking be for the purpose of generating
mutual profit or to produce a product which is to be shared.

66. The short answer to why the relationship between the appellant and the respondents was not a contractual joint venture is that, whether or not the relationship was founded in contract, the purpose, if there was a common purpose, was one of generating several and not joint profits to the appellant on the one hand and the respondents on the other. The essential purpose of the 1988 and 1989 arrangements was the syndication of horses by Cummings to enable him to earn income from training and racing horses owned by others with the added purpose in 1988 that the sale of the horses would free up the capital he had invested in them. Although it may be said that the others provided services and skill with the purpose of his achieving that end, the essential purpose of the accountants and others was to generate profits from providing professional services to the syndicate members if the syndication proved successful.

67. Although the relationship of joint venture is more fully defined in American jurisprudence and care must be taken in applying uncritically the American authorities, the concept in America requires a community of interest in the performance of the purpose of the parties to the contract. In Carboneau v. Peterson 95 P 2d 1043 (1939), the Supreme Court of Washington, Steinert J. (with whom Beals, Robinson, Simpson and Jeffers JJ. concurred) observed at 1055 :-

"Next, there must be a community of interest in
the performance of the purpose. While this
element is usually connected, and often
identified, with the purpose to be accomplished,
it is nevertheless, a distinct factor. The
parties may have a common objective or purpose,
and still a community of interest may be
lacking. For instance, two parties may be
engaged in the performance of a purpose or
object, which may be for the sole interest or
advantage of one, and from which the other is to
derive no benefit whatever, or the interest of
the one may be different and distinct from that
of the other; in either of such cases there
would not be a joint adventure".

68. The arrangement between Cummings and the accountants falls within the category of arrangements not constituting joint ventures for want of a community of interest in the performance of the purpose as explained by Steinert J. Such a community of interest forms part of the ordinary understanding of the term "joint venture" as appears from the observations in United Dominion Corporation set out above.

The Implied Term of Agreement
69. If the agreement of the accountants to undertake an entrepreneurial role as identified earlier in these reasons in the packaging and marketing of syndicated interests in horses acquired by Cummings for that purpose was contractual in nature, then upon the application of general principles as to the implication of a contractual term (see Codelfa Construction Pty. Ltd. v. State Rail Authority of New South Wales [1982] HCA 24; (1982) 149 CLR 337 at 346-347), the implication of a term that the accountants would share in the losses was neither necessary to give business efficacy to the contract, nor obviously a term the parties would have agreed upon if the matter had been brought to their attention. Nor can it be shown that the implication of such a term is both reasonable and equitable, having regard to the role agreed to be undertaken by the accountants or to the possible benefits which would accrue to them if the syndications had been successful. There is nothing in the observations of Deane J. in Hawkins v. Clayton (1988) 164 CLR 539 at 570-571, referred to in argument by Counsel for Cummings, which would enable the Court to imply into any contract between the parties, the term contended for. Likewise the decisions, such as McInroy v. Hargrove (1867) 16 Law Times (NS) 509, referred to by Counsel for Cummings do not assist. Upon analysis, those cases involved either a purchase of property on joint account, an agreement to share in losses on the proper construction of the contract, or a partnership. In the instant case, Wilcox J. specifically found that these elements did not exist.

The General Doctrine of Contribution
70. It is convenient as the appellant did, and, as the authorities are wont to do, to commence any consideration of the law of contribution with an examination of the judgment of Dering v. Earl of Winchelsea (1787) 1 Cox 318; 29 ER 1184. The case concerned the question of contribution by sureties bound by different instruments for the same principal and for the same engagement. Eyre L.C.B. said (at 321; 1185) :-

"If we take a view of the cases both in law and
equity, we shall find that contribution is
bottomed and fixed on general principles of
justice, and does not spring from contract;
though contract may qualify it...it is clear
that one surety may compel a contribution from
another, towards payment of a debt to which they
are jointly bound. On what principle? Can it
be necessary to resort to the circumstance of a
joint bond? What, if they are jointly and
severally bound? What difference will it make
if they are severally bound, and by different
instruments, but for the same principle, and the
same engagement? In all these cases the
sureties have a common interest, and a common
burthen; they are joined by the common end and
purpose of their several obligations, as much as
if they were joined in one instrument, with this
difference only, that the penalties will
ascertain the proportion in which they are to
contribute, whereas if they had joined in one
bond, it must have depended on other
circumstances. In this case the three sureties
are all bound that Mr. Dering shall account for
the monies he receives; this is a common
burthen; all the bonds are forfeited at law;
and in this Court, as far as the balance due;
the balance might have been so great as to have
exhausted all the penalties and then the obligee
forces them all to pay; but here the balance is
something less than one of the penalties. Now
who ought to pay this? the one who is sued must
pay it to the Crown, as in the case of prisage,
but, as between themselves, there shall be a
contribution, for they are in equali jure. This
is carried a great way, where they are joined in
one obligation, for if one should pay the whole
12,000 pounds and the second were insolvent, the
third shall contribute a moiety, though he
certainly never meant to be liable for more than
a third; this circumstance, and the possibility
of one being liable for the whole, if the other
two should prove insolvent, suggested the mode
of entering into separate bonds; but this does
not vary the reason for contribution, for there
is the same principal and the same engagement;
all are equally liable to the obligee to the
extent of the penalty of the bonds when they are
not all exhausted: if, as in the common case of
a joint bond, no distinction is to be made, why
shall not the same rule govern here? As in the
case of average of cargo in a Court of law, qui
sentit commodum sentire debet et onus. This
principle has a direct application here, for the
charging one surety, discharges the other, and
each therefore ought to contribute to the onus.
In questions of average there is no contract or
privity in ordinary cases, but it is the result
of general justice from the equality of burthen
and benefit: then there is no difficulty or
absurdity in making a contribution take place in
this case, if not founded on contract, nor any
difficulty in adjusting the proportions in which
they are to contribute; for the penalties will
necessarily determine this".

71. The doctrine was again considered in relation to sureties in Stirling v. Forrester (1821) 111 Bligh 575; 4 ER 712. Redesdale L.J. said (at 596; 719) :-

"At the bar it was contended, that the rights
and obligations of co-sureties are founded upon
a supposed contract between them; and that in
this transaction they entered into the
obligation without communication with each
other. The question depends upon equity, not
upon contract; and in this case a contract is
to be implied. The decision in Dering v. Lord
Winchelsea (1 Cox, 318; 2 Bos. and Pul. 270)
proceeded on a principle of law which must exist
in all countries, that where several persons are
debtors, all shall be equal. The doctrine is
illustrated in that case by the practice in
questions of Average, etc. where there is no
express contract, but equity distributes the
loss equally. On the prisage of wines, it is
immaterial whose wines are taken; all must
contribute equally: so it is where goods are
thrown overboard for the safety of the ship;
the owners of the goods saved by that act must
contribute proportionally to the loss. The duty
of contribution extends to all persons who are
within the scope of the equitable obligation".

72. Eldon L.J. in Coope v. Twynam (1823) 1 Turn and R 426; [1823] EngR 803; 37 ER 1164, while recognising the principle in Dering v. Lord Winchelsea as to contribution between co-sureties, held that the principle had no application where each separate bond related to a separate and distinct transaction as opposed to the same transaction split into different parts.

73. The distinction drawn by Eldon L.J. in Coope v. Twynam echoes the same distinction he earlier drew in Craythorne v. Swinburne [1807] EngR 343; (1807) 14 Ves Jun 160 at 165; [1807] EngR 343; 33 ER 482 at 484. Lord Eldon observed that the principle "equality is equity" operates to prevent a creditor, who can call upon all who are bound to satisfy the one obligation, fixing one of the sureties with payment of the whole of the debt. The Court in requiring contribution does justice as between the sureties in circumstances where the creditor has failed to do justice by requiring equal contribution. Central to the principle as explained by Lord Eldon is a co-ordinate obligation to pay the same sum because the obligation is a common obligation, although it may be undertaken separately by each of the sureties.

74. The appellate courts in Australia and the United Kingdom have stressed the necessity for a common obligation to found a right of contribution.

75. In Cock v. Smith [1909] HCA 64; (1909) 9 CLR 773, Isaacs J., in a dissenting judgment as to the application of the doctrine of contribution to the facts of the appeal, said (at 831) :-

"The basis of contribution is, as its name
denotes, a common obligation. The liability,
upon the discharge of which one person demands
contribution from another, must be the same, not
a similar, liability; and the discharge of it
by the defendant must not have been voluntary,
but enforced or enforceable. It is of course
immaterial so long as the obligation is the
same, how many instruments there are." (Original emphasis).

76. On appeal, the Privy Council ((1911) AC 317 at 326 per Lord Mersey delivering the opinion of the Privy Council) held that the case was one where the doctrine of contribution had no role to play and stated the principle to be :-

"Before there can be any question of
contribution there must be a common obligation
upon those who are required to contribute".

77. In Albion Insurance Co. Ltd. v. Government Insurance Office (NSW) [1969] HCA 55; (1969) 121 CLR 342, the issue was the obligation, if any, of several insurers to contribute to the payment of a loss where the insurers by separate insurance cover agreed to indemnify the insured against the same risk. Kitto J., with whom Windeyer J. agreed, referred (at 351) to the long-standing existence of a general doctrine of contribution at common law (see Godin v. London Assurance Co. [1758] EngR 138; (1758) 1 Burr 489; 97 ER 419 and Newby v. Reed [1746] EngR 86; (1763) 1 Bl W 416; 96 ER 237) and in equity (Dering v. The Earl of Winchelsea). His Honour continued (at 351-352) :-

"The right arises at law when 'one of several
persons has paid more than his proper share
towards discharging a common obligation':
Davies v. Humphreys (1840) 6 M and W 153, 168-169; [1840] EngR 56;
151 ER 361 at 367, 368; Dimdore v. Leventhal
(1936) 36 S R (NSW) 378 at 385, and it arises
in equity when a liability of one of several to
pay more than his share has been ascertained:
Wolmershausen v. Gullick (1893) 2 Ch 514;
McLean v. Discount and Finance Limited [1939] HCA 38; (1939) 64
CLR 312 at 341; but for present purposes this
difference is immaterial: what is important is
the reason, namely that payment by the one
discharges not only himself but each of the
others and qui sentit commodum sentire debet et
onus (he who enjoys the benefit ought also to
bear the burden).
What attracts the right of contribution between
insurers, then, is not any similarity between
the relevant insurance contracts as regards
their general nature or purpose or the extent of
the rights and obligations they create, but is
simply the fact that each contract is a contract
of indemnity and covers the identical loss that
the identical insured has sustained; for that
is the situation in which 'the insured is to
receive but one satisfaction' (to use Lord
Mansfield's expression) and accordingly all the
insurances are 'regarded as truly one
insurance': Sickness and Accident Assurance
Association Ltd. v. General Accident Assurance
Corporation Ltd. (1892) 19 Rettie at 980; 29
SCLR 836 at 837".

78. More recently the Privy Council in Scholefield Goodman and Sons Ltd. v. Zyngier (1986) AC 562 has expressed the principle in these terms (at 575) :-

"Contribution is founded on the principle that
equality is equity, and there is no room for the
application of this doctrine unless the surety
against whom contribution is claimed has placed
himself on the same level of liability as the
surety who claims contribution from him".

79. Is the principle of contribution limited to cases where there is a common obligation or a co-ordinate liability? Or will contribution be ordered in any circumstances where those circumstances give rise to an equity in favour of a person who has suffered a loss because of an act intended to benefit others?

80. The statement of principle of Redesdale L.J. in Stirling v. Forrester, set out above, has been treated in subsequent cases as an authoritative statement of the law. The statement makes clear that the equity which founds the duty to contribute does not arise until the loss has been suffered and the issue has arisen as to its distribution. The circumstance which gives rise to an equity to compel contribution where there is a common liability or a common risk is that satisfaction of the liability or the loss occasioned by the risk has been borne by one of a number. Once the equity has arisen it is then that "the duty of contribution extends to all persons who are within the scope of the equitable obligation". It is the equity which has arisen which the Courts enforce (see In Re Snowden; Ex parte Snowden (1881) 17 Ch D 44 at 48 per Cotton L.J.; Ramskill v. Edwards (1886) 31 Ch D 100 at 110 per Pearson J.; Birmingham and District Land Co. v. London and North Western Railway Co. (1886) 34 Ch D 261 at 274). The principle of equity which operates to create the equity is: he who enjoys the benefit ought also to bear the burden.

81. The partnership cases prior to the passage of the Partnership Act 1890 (UK) (section 24(1)) establish that at common law every partner was liable to the demands of the partnership creditors (Buck v. Robson (1870) 10 LR Eq 629 at 634), that partnership members were liable to contribute to the partnership losses (Lowe and Sons v. Dixon and Sons (1885) 16 QBD 455 at 457), and, "in ordinary mercantile partnerships where there is a community of profits in a definite proportion, the fair inference is that the losses are to be shared in the same proportion" (per Jessel M.R. in Re: Albion Life Assurance Society (1880) 16 Ch D 83 at 87).

82. Although a partnership is a fiduciary relationship, the obligation to contribute to losses does not arise out of that relationship. The obligation to contribute to losses is either expressly or impliedly contained in a contract of partnership (Canny Gabriel Castle Jackson Advertising Pty. Ltd. v. Volume Sales (Finance) Pty. Ltd. [1974] HCA 22; (1974) 131 CLR 321 at 327), imposed by statute (see section 24(3) of the Partnership Act 1892 (NSW), as amended), or one arising from the circumstances of the particular partnership as a matter of legal or equitable obligation.

83. The payment by one partner of a loss to which all partners are exposed operates as a benefit to those partners who do not pay and a detriment to the partner who has paid. It is this circumstance which explains and founds the right to contribution both at common law and in equity between partners.

84. A similar analysis may be undertaken of the position of co-sureties, co-insurers, different parties interested in realty, and co-adventurers to a maritime adventure. General average contributions, as an example, reflect the underlying principle, although, in that case, the principle is neither founded in the common law nor equity.

85. Contribution to general average by parties to a common maritime venture is a principle of law which has its roots in the Rhodian sea law which was later embodied in the Digest of Justinian under the title "De Lege Rhodia de Iactu". Although it was suggested by Lord Bramwell in Wright v. Marwood (1881) 7 QBD 62 at 67, that the right to general average contribution arose out of implied contract, the better view is that the right arises not out of contract but from the old Rhodian laws which have become incorporated into the laws of England and ultimately Australia as part of the law maritime (see Halsbury's Laws of England 4th Ed. Vol. 43, para. 742, footnote 6; Arnould, "Law of Marine Insurance and Average" 16th Ed. para. 917, footnote 10 and the cases there cited).

86. The right to contribution in general average arises because the property of one co-adventurer to a maritime adventure has been sacrificed in order to preserve the property of all other co-adventurers. The property of all co-adventurers to the maritime venture is at risk throughout the voyage depending upon the necessitous circumstances which may arise. The principle exemplifies the equitable maxim qui sentit commodum sentire debet et onus (he who enjoys the benefit ought also to bear the burden) which the authorities show is the principle which gives rise to the equity to contribute between co-sureties, co-insurers, and different parties interested in realty. Coincidentally, in each of these relationships there is a common obligation, co-ordinate liability, or, an exposure to a common risk.

87. There are however at least three decisions where a right of contribution did not depend upon there being a common obligation or risk which was satisfied or suffered by one or more of a number exposed to that common obligation or risk.

88. In the matter of The Direct Birmingham, Oxford, Reading and Brighton Railway Company (Spottiswood's Case) (1855) 6 De GMand G 345, 43 ER 1267, the question arose as to the obligation of a member of a management committee, and a sub-committee thereof, of a provisionally registered railway company to contribute to the overall losses of the railway company in the winding up of it after the project had been abandoned. The external creditors had been paid by contributions from a number of the committee and the question to be determined was the liability inter se of all committee members to contribute to the final loss. Turner L.J., with whom Knight-Bruce L.J. concurred, said (at 371; 1277) :-

"The question before us is one, not of original
liability to creditors, but of contribution and
questions of contribution often depend not upon
contract, but upon the general principles of
equity. The law upon the subject is well laid
down in Dering v. Lord Winchelsea (1 Cox 319).
I collect from that case and the authorities
there referred to, that where persons are joined
together for one common end or purpose, they
must bear equally the expenses incident to the
attainment of that end or purpose. As it is
expressed in one of the cases there referred to,
in aequali jure, the law requires equality.
The principle appears to me to apply to the
directors of companies. They are united
together for the purpose of effectuating the
objects for which the companies are formed and
so far as they have acted together or have
adopted each other's proceedings, I think they
must bear equally the burdens consequent upon
their acts. The case of directors who have not
acted does not of course fall within this rule,
whatever other considerations may apply to it;
and the rule may not and probably ought not to
apply to directors who, upon sufficient grounds,
have objected to acts which have been done by
their co-directors; but no such case of
exception arises here".

89. The relevant circumstance giving rise to the equity to contribute in Spottiswood's Case was an association for one common end or purpose (the benefit) which exposed the co-adventurers to bear equally the expenses incident to the attainment of the end or purpose (the burden). The obligation is equitable and does not rely upon some actual imputed contract for its existence.

90. In Ashhurst v. Mason (1875) 20 LR Eq 225, Bacon V-C was concerned with the right of one director to obtain contribution from his co-directors in relation to a transaction to which they all agreed whereby the plaintiff was required to pay a call on shares and thereby incurred a loss. The defendants were the co-directors of the plaintiff in the English Assurance Company. One of their previous number who held 250 shares wished to resign and requested the manager of the company to get the director relieved of his shares. At a meeting of the Board attended by the plaintiff who was chairman, and one other of the directors, it was resolved that the 250 shares should be transferred into the name of the manager alone to be held as trustee for the company. At a subsequent meeting of the board attended by four different directors the earlier resolution was confirmed. At a subsequent meeting attended by three of the directors who had attended at the second meeting, it was resolved that the shares should be placed in the names of both the plaintiff and the manager. In consequence the shares were transferred into the joint names of both the plaintiff and the manager in trust for the company. It was subsequently also resolved that another parcel of 100 shares, which formed part of the estate of John Elder deceased, and in respect of which his widow and executrix applied to the company to find a purchaser for the shares, be transferred into the joint names of the plaintiff and the manager. There was no complete commonality of directors at the meetings where the decisions were taken ultimately leading to the plaintiff and the manager becoming the holders of all the shares.

91. The English Assurance Company was placed into liquidation and the plaintiff and the manager were settled on a list of contributories in respect of the 250 and 100 shares. The manager being unable to pay calls in respect of the shares or to repay to the company the 100 pounds paid by the company to the estate of Elder in respect of the acquisition of the shares from the estate, these sums were paid by the plaintiff. The plaintiff sought contribution from his co-directors in respect of the payments made by the plaintiff.

92. The acquisition of the shares of the company in trust for the company was an ultra vires act of the directors; as was the payment of 100 pounds.

93. The case was argued as one of equitable contribution and the decision in Dering v. Lord Winchelsea was relied upon as authority to support such a right. It was argued by Kay QC for the plaintiff (20 LR Eq at 232) :-

"The liability in respect of these shares has
been incurred by the common act of all the
directors, who would each and every one of them
be entitled to compel the others to contribute
to this common liability; and the right of
contribution is not affected by the circumstance
that these shares, for which they all became
liable as trustees for the company, were, as a
matter of convenience, transferred into the
names of one of themselves (the Plaintiff), and
Leyland as their servant or agent".

94. It is clear from the submission of Kay Q.C. that the case was put as one of a common liability of all directors discharged by one of their number.

95. Bacon V-C in giving judgment for the plaintiff, stated as follows (at 233-234) :-

"The first proposal was that Mr. Leyland, the
manager, should take these shares into his name,
that the company might have the benefit of them.
That was afterwards changed by adding the name
of Mr. Ashhurst, the Plaintiff; and Mr.
Ashhurst did not object to do that which he and
they thought was right at the time. They
thought it was beneficial, for the company did
not know, as I am very willing to believe, that
it was beyond the powers of them as directors,
or of the company however represented, to
acquire shares. Accordingly, that piece of
machinery having been resorted to, and resorted
to by persons who counsel it and who act in it,
if and when a liability arises, no matter from
what cause or by what accident, it would be, in
my opinion, against the very first principles of
law and justice to say that any of them who have
caused this thing to be done should escape from
the consequences that ensue. That is really the
whole case, and, as alleged upon the bill, it
is, I think, sufficiently proved.
It would be out of all reason to suppose that
either Leyland, who was merely the manager of
the company, or Ashhurst, who happened to be
chairman, should take upon themselves any risks
or any consequences personally. It is not their
invention, it is not their first suggestion, but
it is a common design entertained by several
persons, and the means of carrying that design
to its accomplishment is that the transfer
should be made in these two names. Unless I
could say that, in justice, Mr. Ashhurst is
bound to bear the whole of this burden, because
he had imprudently permitted his name to be
used, the next consequence must be that they who
have procured his name to be used, who have
adopted his name to carry into effect their
design, must reasonably contribute to the loss,
since loss has happened. That rests upon
universal principles".

Bacon V-C continued (at 234) :-

"No pecuniary advantage was to result to any of
the persons connected with that transaction, and
it having been done by the common assent of the
gentlemen who were present at the meeting, it is
impossible, in my opinion, to resist the
conclusion that they are all equally liable to
bear ay burden that has ensued thereupon".

96. As was pointed out by Swinfen Eady J. in Jackson v. Dickinson (1903) 1 Ch 947, the liability in respect of which contribution was sought in Ashhurst v. Mason, was the liability to pay a call on shares registered in the name of the plaintiff, which was not a common liability between the plaintiff and his co-directors. The co-directors were not liable to the plaintiff to pay calls in respect of the shares held by the plaintiff as trustee for the company. The co-directors were not shareholders in the company and had not thereby exposed themselves to any liability to pay a call to the company on the shares. Their liability to the company for misfeasance as parties to an ultra vires transaction stands aside as a separate matter.

97. In Jackson v. Dickinson, the plaintiff and one Dickinson were the trustees of a settlement and invested part of the trust funds in the purchase of 400 shares in the Cheque Bank Limited. The investment was unauthorised and was made after consultation between the trustees and their brokers with a view to assisting a life tenant, a widow in poor circumstances. Dickinson died and the bank placed the shares in the sole name of the plaintiff. The defendants to the action were Dickinson's executors. The shares could not be sold as there was no market for them and ultimately the bank went into liquidation. A call was made on the shares and the plaintiff paid the sum of 800 pounds in consequence of the call. The defendants refused to pay half of the amount of the call, and the plaintiff brought the action to enforce a right of contribution in respect of the payment he had made. The plaintiff argued that the liability of the plaintiff had arisen out of the joint act of the plaintiff and his co-trustee and thus the plaintiff was entitled to contribution, and cited Ashhurst v. Mason as authority for such a proposition. The defendants argued that the right to contribution only arose where two persons were liable for the same debt or liability and that the right to contribution arose where one only was sued. In support of this proposition the defendants relied upon Dering v. Earl of Winchelsea, Stirling v. Forrester, Craythorne v. Swinburne and Duncan, Fox and Co. v. North and South Wales Bank (1880) 6 App Cas 1 at 12, 19.

98. In delivering judgment for the plaintiff Swinfen Eady J. said (at 952) :-

"It was contended that the liability to
contribution only arose where both parties were
liable to be sued for the same debt or
liability. But in Ashhurst v. Mason LR 20 Eq
225, 233, two lots of shares of a company were
(pursuant to an ultra vires resolution of the
board) transferred into the names of Ashhurst, a
director, and Leyland, the manager, in trust for
the company. Ashhurst had subsequently to pay
calls on both lots of shares, Leyland being
unable to pay. Ashhurst thereupon sued his
co-directors for contribution. Now the
co-directors were not liable at law as
contributories as they did not hold the shares.
If the company had been unable to recover the
call from Ashhurst, the co-directors might
possibly have been liable for their misfeasance
in placing the shares in the name of a man
unable to pay. But they were not liable for the
call, which was the liability in respect of
which contribution was claimed. Ashhurst,
nevertheless, recovered contribution in respect
of this call. It was contended that there was a
special contract in that case. But even if it
existed it did not bind all the directors, nor
did it bind the same directors in respect of
each lot of shares. Moreover Bacon V-C stated
the facts quite independently of the alleged
contract, and held on those facts that the
co-directors were liable to contribution. After
stating that the board had arranged that
Ashhurst and Leyland should take the shares and
hold them in trust for the company, he said:
'They thought it was beneficial, for the company
did not know, as I am very willing to believe,
that it was beyond the powers of them as
directors, or of the company however
represented, to acquire shares. Accordingly,
that piece of machinery having been resorted to,
and resorted to by persons who counsel it and
who act in it, if and when a liability arises,
no matter from what cause or by what accident,
it would be, in my opinion, against the very
first principles of law and justice to say that
any of them who have caused this thing to be
done should escape from the consequences that
ensue. That is really the whole case, and as
alleged upon the bill, it is, I think,
sufficiently proved'. That statement of the law
is quite apart from the allegation as to the
existence of a special contract.
On these several grounds I think it is clear
that, as well before as after the death of J.E.
Dickinson, he or his estate was liable to contribution".

99. It has not been suggested in any of the subsequent cases or in the texts, where they continue to be cited, that Ashhurst v. Mason and Jackson v. Dickinson were wrongly decided. In the absence of an equity arising out of a satisfaction by one of a debt or liability that all parties were liable to be sued for, the equity, in the facts of Ashhurst v. Mason and Jackson v. Dickinson, to enforce contribution must lie in the circumstance that the persons involved were all parties to a common design to achieve a common end and that in furtherance of the attainment of the common end one party has with the knowledge and concurrence of the others done an act which has resulted in that person incurring expense or suffering loss.

100. The reasoning of Bacon V-C in Ashhurst v. Mason and Swinfen Eady J. in Jackson v. Dickinson falls squarely within the statement of the Court of Appeal in Spottiswood's Case (at 371; 1277) :-

"Where persons are joined together for one
common end or purpose, they must bear equally
the expenses to the attainment of that end or
purpose..., the law requires equality".

101. That the conclusion reached in Spottiswood's Case, Ashhurst v. Mason and Jackson v. Dickinson is a correct one gains some support from the principles which support the creation of an equitable right of indemnity.

102. In Eastern Shipping Co. v. Quah Beng Kee (1924) AC 177, Wrenbury L.J., in delivering the opinion of the Privy Council stated the principle as follows (at 182) :-

"A right to indemnity generally arises from
contract express or implied, but it is not
confined to cases of contract. A right to
indemnity exists where the relation between the
parties is such that either in law or in equity
there is an obligation upon the one party to
indemnify the other. There are, for instance,
cases in which the state of circumstances is
such that the law attaches a legal or equitable
duty to indemnify arising from an assumed
promise by a person to do that which, under the
circumstances, he ought to do. The right to
indemnity need not arise by contract; it may
(to give other instances) arise by statute; it
may arise upon the notion of a request made
under circumstances from which the law implies
that the common intention is that the party
requested shall be indemnified by the party
requesting him; it may arise (to use Lord
Eldon's words in Waring v. Ward 7 Ves 332, 336;
a case of vendor and purchaser) in cases in
which the Court will 'independent of contract
raise upon his (the purchaser's) conscience an
obligation to indemnify the vendor against the
personal obligation' of the vendor. These
considerations were all dealt with by the Lords
Justices in Birmingham and District Land Co. v.
London and North Western Ry. Co. 34 Ch D 261.
The question of indemnity commonly arises in the
case in which a trustee claims to be indemnified
by his cestui que trust. This class of case was
particularly discussed by Lord Lindley in
Hardoon v. Belilios (1901) AC 118.

103. The right to indemnity will exist "if there is a state of circumstances to which the law attaches a legal or equitable duty to indemnify, there being many cases in which a remedy is given upon an assumed promise by a person to do what, under the circumstances, he ought to do" (per Bowen L.J. in Birmingham and District Land Co. v. London and North Western Railway Co. (1887) 34 Ch D 261 at 274).

104. Where there is a common design entertained by several persons and the means of attainment of the common end requires that one of their number do an act which will expose him or her to expense or loss, there is no difficulty in that situation in perceiving the notion of a request to perform the act and a promise to do what under the circumstances the others ought to do in relation to any expense or loss incurred in performing the act. What equity requires as ought to be done is that a burden imposed upon one for the benefit of all should be borne by all of those who stand to enjoy the benefit if it is attained. The parties to a common design to attain a common end fall within what Lord Redesdale described in Stirling v. Forrester as "the scope of the equitable obligation" to share equally the burden.

105. To succeed on the appeal the appellant must show that the respondent had a common liability to discharge the debt to the auctioneers or to meet the loss on resale which he alone has discharged or incurred, or that he has against the respondents an equity to enforce equitable contribution in the circumstances found by the trial judge.

106. On the findings of his Honour there was no co-ordinate liability on the part of the accountants for the purchase price of the horses to the auctioneers which has been satisfied by Cummings. Nor is there any co-ordinate liability inter se because Cummings did not buy the horses on joint account of himself and the accountants. There is nothing in the facts as found by his Honour which would bring into play the principle to be found in Spottiswood's Case, Ashhurst v. Mason, and Jackson v. Dickinson because the characteristics of joining together for a common end or purpose is lacking. Additionally, the burden in buying the horses as principal was not a burden undertaken for the benefit of all as a means to achieve the common end. Thus there is no equity enforceable against the respondents that they should bear rateably the burden.

107. Even if the appellant is allowed to depart from the pleadings as to the basis of his claim for contribution, the facts as found by the trial judge as to the relationship between the parties and the circumstances of that relationship will not support a claim for contribution.

APPEAL No. G392 of 1992
APPEAL No. G406 of 1992
THE RESPONDENTS' APPEALS ON COSTS
108. On 29 May, 1992 Wilcox J. delivered a separate judgment on the question of costs. His Honour ordered :-

1. The applicant pay to the first, second and third respondents
three-quarters of their costs, as taxed or agreed, of the
principal proceeding, including this motion for costs.
2. The applicant pay to the fourth and fifth respondents one-half
of their costs as taxed or agreed, of the principal
proceeding, including this motion for costs.

109. The relevant circumstance which led his Honour to deprive the respondents of part of their costs was the conduct of the respondents on the trial of the action in denying that certain statements were made by the respondents to the applicant. His Honour said :-

"In the present case the respondents contested
the applicant's allegations that they encouraged
him to purchase horses by making optimistic
statements concerning the sale of syndicate
units. Those allegations were raised in
connection with the claims under s.42 of the
Fair Trading Act. It is true that these claims
failed; but that was only because I was not
persuaded that those who made the optimistic
statements lacked a bona fide belief in their
correctness. I was satisfied that statements to
the effect of those claimed by Mr. Cummings were
made by representatives of each set of
respondents and that they directly affected the
extent of his purchases. The allegations, of
course, concerned a matter within the knowledge
of the respondents; this is not a case of
respondents putting an applicant to proof of
facts about which they had no knowledge and
which, therefore, they reasonably declined to admit.
In exercising a discretion on costs it may be a
mistake to dissect too much. But I do not think
that it goes too far to break up a particular
cause of action into its major elements,
especially where one element involved a
considerable amount of court time. See the
comment by Toohey J. in Hughes v. Western
Australian Cricket Association ((1986) [1986] FCA 382; 8 ATPR
40-748) at 48,136 that, in this context,
''issue' does not mean a precise issue in the
technical pleading sense but any disputed
question of fact or of law'. The contest
regarding the sale of the units was an 'issue'
in this sense. This issue made a major
contribution to the length of the case. It
occupied much of Mr. Cummings' six days in the
witness box and a part of the time of several
other witnesses; in the case of Mr. Leckie, a
major part. If the respondents had conceded
that these encouraging statements were made, and
concentrated their defence to the s.42 claim on
their bona fide belief, they would have saved
many hearing days".

110. The first, second and third respondents and the fourth and fifth respondents by separate notices of appeal seek orders that the order of Wilcox J. as to costs be wholly set aside and that in lieu thereof it be ordered that the applicant to the principal proceedings pay the whole of the respondents' costs of and in connection with the principal proceedings, including the costs of each appellant's motion for costs.

111. The grounds of appeal are common to both appeals. They are :_

1. His Honour erred in failing to order that the respondent pay
the whole of the appellants' costs of the proceedings,
including the costs of the motion for costs.
2. His Honour erred in finding that statements to the effect of
those claimed by Cummings were made by or on behalf of the
appellants.
3. His Honour erred in finding that statements to the effect of
those claimed by Cummings directly affected the extent of
his purchases of yearlings.
4. His Honour was in error in depriving the appellants of part
of the costs of the proceedings upon the basis that the
appellants should have conceded that they made the
statements claimed by Cummings.

112. It was submitted on behalf of the respondents that the statements respectively found by his Honour to have been made by them did not establish the case pleaded against them under section 42 of the Fair Trading Act. For the reasons set out in my judgment on the applicant's appeal, I agree with this submission. However, his Honour, in my view, was not moved to make the order for costs which he did because he was of the view that the respondents would otherwise have failed on the section 42 claim but for his finding as to the bona fides of their belief at the time the statements were made.

113. Although his Honour regarded the conduct of the respondents as incitement of the applicant to purchase horses, and, as such, a relevant circumstance on the question of costs, he said that he did not give the matter any significant weight. His Honour said in his reasons:-

"If too much emphasis is placed upon the
circumstance that the litigation would not have
arisen but for an action of the defendant, few
successful defendants would recover their costs.
I do not say that the conduct of the defendant
giving rise to the underlying dispute is
irrelevant to the proper decision on costs; but
I think that it ought rarely be given much
weight. (I distinguish a situation where, the
underlying dispute having arisen, the successful
defendant has unreasonably provoked the
litigation. Different considerations might
apply to that type of case: see the reference
by Mason C.J. in Latoudis to conduct of the
defendant 'after the events constituting the
commission of the alleged offence'.)
Accordingly, although I do not disregard the
respondents' incitement of Mr. Cummings to
purchase horses, I do not think that I should
give that conduct significant weight. If that
conduct was the only relevant matter, I would
not be disposed to depart from the usual
practice of ordering that the unsuccessful
applicant pay the whole of the successful
respondents' costs".

114. As I read his Honour's judgment, it was the conduct of the respondents on the trial in contesting, as a matter of fact, whether the statements were made, which was decisive to his ultimate decision on costs. The effect of the statements as found by his Honour on the applicant's conduct or motivation in buying horses, or, his Honour's view as to the exposure of the respondents to a claim under section 42 of the Fair Trading Act but for the finding of bona fide belief were not material considerations to his Honour's decision.

115. The question whether factually certain statements were made was in issue in the trial as part of a chain of proof relied upon by the applicant to make out his claim both in contract and under section 42 of the Fair Trading Act. It is true that all of the statements alleged by the applicant against the respondents were not accepted by his Honour. His Honour found that it was unlikely that the precise statements alleged were made and his rejection of the contract claim clearly indicates that he did not accept all of the statements alleged against the respondents were in fact made in the terms alleged. Nevertheless, his Honour found that certain statements were in fact made by the respondents and it is these statements which he describes in his supplementary reasons as "optimistic statements".

116. It is the statements his Honour has found were made (as opposed to the statements which his Honour did not accept were made, or, found were not made) which, in his Honour's view, ought not to have been denied and the denial persisted in by the respondents at the trial. It is clear that his Honour considered the cross-examination of Cummings and his witnesses ought not to have been on the basis that these statements were not in fact made when the respondents, as a matter of their own knowledge, knew that they had made the statements. Likewise, his Honour was of the view that the respondents in their own evidence ought not to have persisted in denying that these statements were, in fact, made. It is in this sense that his Honour says that the statements ought to have been conceded. His Honour's reference to the decision of Hughes v. Western Australian Cricket Association [1986] FCA 382; (1986) 8 ATPR 40-748 at 48,136 makes clear that he was not considering the matter in the limited sense of an issue arising on the pleadings, but rather in the broader sense of an issue arising because of disputed questions of fact. Therefore it does not assist the respondents' argument to contend that the statements were not pleaded against them and thus could not be admitted.

117. His Honour exercised his discretion as to the quantum of costs in light of the conduct he found unreasonable in the following way:-

"In considering the significance of this matter,
it is necessary to bear in mind that the course
taken by the respondents not only had the effect
of adding to the costs which they seek to
recover from the applicant but also of putting
the applicant to additional expense in relation
to his own costs. If, as a matter of principle,
the respondents should bear the burden of the
applicant's unnecessary costs, as well as be
deprived of their own costs in respect of the
time expended on this issue, it is necessary to
do more than select a proportion of the
respondents' costs equivalent to the proportion
of the hearing spent on that issue. That
approach would deprive the respondents of their
costs of the relevant issue but make no
reparation to the applicant.
In this case, computation of a precise figure is
impossible; the evidence concerning this issue
is too intermingled with evidence on other
matters. It is possible only to make a broad
estimate. But my judgment is that the hearing
time could have been reduced by about one-third
if the respondents had admitted the applicant's
allegations of optimistic statements. In
translating that estimate into orders, it is
necessary to distinguish between the two sets of
respondents. The evidence concerning statements
by Mr. Leckie, on behalf of Coopers, occupied
much more time than that relating to statements
on behalf of Peats. Cooper's contribution to
the additional hearing time was probably twice
that of Peats.
Applying the principles set out above, and
making a broad judgment as to what is reasonable
in the whole of the circumstances, it seems to
me fair to order that the applicant pay to the
first, second and third respondents - that is,
Peats - three quarters of their taxed costs in
connection with the proceeding and to order him
to pay to the fourth and fifth respondents -
Coopers - one half of their taxed costs. The
taxed costs should include the costs of this
motion, thereby giving to each of the
respondents the proportion of their costs of the
motion which corresponds to their degree of
success upon it".

118. The nature of the discretion vested in a trial judge as to the award of costs and the principles which guide the exercise of the discretion are set out by Toohey J. in Hughes v. Western Australian Cricket Association at 48,136 :-

"Subsection 43(2) of the Federal Court of
Australia Act 1976 vests the award of costs 'in
the discretion of the Court or Judge'. The
Federal Court Rules do not purport to qualify
that discretion. The only rule to which
reference is necessary is O.62 r.15 whereby,
when costs are reserved, those costs follow the
event 'unless the Court or a Judge otherwise orders'.
The discretion must of course be exercised
judicially. There are decisions, both of
Australian and English courts, that throw light
on the way in which the discretion is to be
exercised. I shall not refer to those decisions
in any detail; I shall simply set out in a
summary way what I understand to be their effect.
1. Ordinarily, costs follow the event and a
successful litigant receives his costs in the
absence of special circumstances justifying some
other order. Ritter v. Godfrey (1920) 2 KB 47.
2. Where a litigant has succeeded only upon a
portion of his claim, the circumstances may make
it reasonable that he bear the expense of
litigating that portion upon which he has
failed. Forster v. Farquhar (1893) 1 QB 564.
3. A successful party who has failed on
certain issues may not only be deprived of the
costs of those issues but may be ordered as well
to pay the other party's costs of them. In this
sense, issue' does not mean a precise issue in
the technical pleading sense but any disputed
question of fact or of law. Cretazzo v.
Lombardi (1975) 13 SASR 4 at p 12".

119. This statement of principle was approved by the Full Court in Queensland Wire Industries Pty. Ltd. v. Broken Hill Proprietary Co. Ltd. (1987) 17 FCR 211 at 222.

120. It is within the discretion of a trial judge to award only a proportion of a successful party's costs if the conduct of that party in the trial was such as to unreasonably prolong the proceedings (Latoudis v. Casey [1990] HCA 59; (1990) 170 CLR 534 at 544, 565; In Re Elgindata Ltd. (No.2) (1992) 1 WLR 1207 at 1214, 1217).

121. Wilcox J. was of the view that to persist in a denial that the statements as found were made was unreasonable and was conduct which unreasonably prolonged the proceedings. It is no answer to say that a party is entitled to test the evidence to show that nothing was said which might amount to the representations as pleaded. A party always has that right in litigation. However, the question which is relevant to the issue as to costs is whether or not the exercise of that right, or the manner in which it was exercised, was reasonable in all the circumstances; and, whether the exercise of the right had the effect of unreasonably prolonging the proceedings. It was this issue which Wilcox J. found against the respondents and upon which he based his decision.

122. The principles which regulate the circumstances in which an appellate court may review the exercise of a judicial discretion are set out in House v. The King [1936] HCA 40; (1936) 55 CLR 499 at 504-505, where Dixon, Evatt and McTiernan JJ. said :-

"The manner in which an appeal against an
exercise of discretion should be determined is
governed by established principles. It is not
enough that the judges composing the appellate
court consider that, if they had been in the
position of the primary judge, they would have
taken a different course. It must appear that
some error has been made in exercising the
discretion. If the judge acts upon a wrong
principle, if he allows extraneous or irrelevant
matters to guide or affect him, if he mistakes
the facts, if he does not take into account some
material consideration, then his determination
should be reviewed and the appellate court may
exercise its own discretion in substitution for
his if it has the materials for doing so. It
may not appear how the primary judge has reached
the result embodied in his order, but, if upon
the facts it is unreasonable or plainly unjust,
the appellate court may infer that in some way
there has been a failure properly to exercise
the discretion which the law reposes in the
court of first instance. In such a case,
although the nature of the error may not be
discoverable, the exercise of the discretion is
reviewed on the ground that a substantial wrong
has in fact occurred".

123. These principles apply to an appeal against an order for costs (Queensland Wire Industries Pty. Ltd. v. Broken Hill Proprietary Co. Ltd. at 222).

124. The error made in the exercise of a discretion must be one that vitiates the original decision (Minister for Aboriginal Affairs v. Peko-Wallsend [1986] HCA 40; (1986) 162 CLR 24 at 48). Where there is no identifiable error of fact or positive law, the appellant court must be persuaded that the order stands outside the limits of a sound discretionary judgment before the appellate court will intervene (Norbis v. Norbis [1986] HCA 17; (1985) 161 CLR 513 at 520).

125. In the cases referred to in the reasons of Wilcox J. and in his application of them there is no demonstrable error of law or application of a wrong principle of law. There was in my view sufficient evidence to enable his Honour to find that certain statements which he described as "optimistic statements" were in fact made by the respondents. The conclusion of his Honour that but for the bona fide belief of the respondents in the statements made by them the applicant would have established a cause of action under section 42 of the Fair Trading Act, although erroneous, was not a conclusion which operated upon his Honour's mind in determining to make a proportionate award of costs. Likewise, his Honour's conclusion that the optimistic statements incited the applicant to buy horses, whether or not it is a correct conclusion, was not in the end a circumstance which was material to his decision on costs. The circumstance which was decisive to his Honour's decision was the unreasonable prolongation of the trial caused by a failure by the respondents to concede that certain statements, as found by his Honour, were in fact made. There is no identifiable error of fact or law in the reasoning of his Honour which vitiates his decision.

126. As was said by the Full Court in Queensland Wire Industries v. Broken Hill Proprietary Co. Ltd. (at 222) as to the position enjoyed by the trial judge :-

"He had had the conduct of the trial and thus
had a grasp of the issues as they emerged and an
appreciation of the manner in which they were
handled by the parties that put him in a special
position".

127. Looking at the orders made, considering his Honour's reasons as a whole and having regard to his special position, I am not persuaded that the orders appealed from stand outside the limits of a sound discretionary judgment on costs.

128. In the circumstances this Court has no power to intervene and itself exercise the discretion as to an appropriate order for costs.

129. I would dismiss each of the appeals on costs and order that the respondents pay Cummings' costs of and incidental to the appeals on costs.