Howie v New South Wales Lawn Tennis Ground Ltd [1956] HCA 11; (1956) 95 CLR 132 (8 March 1956)

HIGH COURT OF AUSTRALIA

HOWIE v. NEW SOUTH WALES LAWN TENNIS GROUND LTD. [1956] HCA 11; (1956) 95 CLR 132

Contract

High Court of Australia
Dixon C.J.(1), McTiernan(1) and Fullagar(1) JJ.

CATCHWORDS

Contract - Tennis ground vested in company - Grant by company of right of special membership for valuable consideration - Right to enter ground and occupy allotted seats - Nature of right - Duration - Whether in perpetuity - Voluntary winding-up - Discontinuance of company's business - Transfer of assets in specie to named association - Clause negativing rights "by way of compensation damages or otherwise" in certain events - Whether equitable rights included - Company disabling itself from performing contract - Implication of terms (if any) - Nature of terms to be implied - Whether assignee association takes assets with burden of special membership rights.

HEARING

Sydney, 1955, November 23-24;
Melbourne, 1956, March 8. 8:3:1956
APPEAL from the Supreme Court of New South Wales.

DECISION

1956, March 8.
THE COURT delivered the following written judgment:
This is an appeal by special leave from a decree of the Supreme Court of New unusual character, and presents difficulties. Each of the plaintiffs claimed, and sought to enforce, a right to have certain seating accommodation exclusively reserved for him in the grandstand on a lawn tennis ground in Sydney, known as the "White City", the freehold of which is owned by the firstnamed defendant company. The facts are stated in full detail in the judgment of McLelland J. For present purposes, it will suffice to state them in somewhat more summary form. (at p147)

2. Before 1920 the control of the game of lawn tennis in New South Wales was in the hands of a body known as the New South Wales Lawn Tennis Association Ltd., which had been incorporated under the Companies Acts in 1907 or 1908. This company owned and managed lawn tennis courts at Double Bay. In 1920 an opportunity arose of acquiring for the purposes of lawn tennis an area of land formerly used as an amusement park known as the White City. In order that this purchase might be effected, the existing company was wound up, and two new companies were formed. The one was incorporated under the same name - New South Wales Lawn Tennis Association Ltd. - and it will be convenient to refer to it as "the association". The other was incorporated under the name of New South Wales Lawn Tennis Ground Ltd., and it will be convenient to refer to it as "the ground company". The ground company was incorporated on 26th September 1921, and the association on 6th October 1921. These two companies are the defendant companies. The primary object of the ground company was to acquire, maintain and manage, tennis courts, while that of the association was to control the game of lawn tennis in New South Wales. The relations between the two bodies were governed by an agreement made on 7th October 1921, to which the liquidator of the old association was a party. The courts at Double Bay were sold, and the ground company in due course became, and it still is, the owner of the White City property. (at p147)

3. The nominal capital of the ground company was 15,000 pounds divided into 5,000 fixed cumulative eight per cent preference shares of one pound and 10,000 ordinary shares of one pound. Article 4 of the company's articles provided that the ordinary shares should be available for allotment only to the association. In fact 4,987 preference shares were issued to various holders, and 5,440 ordinary shares were issued to the association. There was also an issue of first debentures to the value of 30,000 pounds, and an issue of second debentures to the value of 14,000 pounds. No dividend was ever paid on the preference shares, and there was only one payment of debenture interest. (at p148)

4. The moneys raised by the issue of shares and debentures were, of course, required for the purchase of the White City property, the construction of tennis courts, the erection of a club-house and the provision of seating accommodation for spectators. Within two years of its incorporation the ground company was in financial difficulties. Its directors were of opinion that greatly increased revenue could be obtained if a new grandstand were erected, and one of them, Mr. M. H. Marsh, conceived the idea that finance for such a stand could be obtained by offering for 100 pounds three seats "in perpetuity" in the stand to be erected. A "grandstand committee" was constituted, and in the minutes of that body of 21st September 1923 appears the following: "It was decided that, to finance the erection of a grandstand, a certain number of seats be sold, which were to be held in perpetuity by the buyers, subject to special provisions in the event of any unforeseen circumstances . . . It was decided that three seats be sold for 100 pounds." Shortly thereafter the scheme was approved by the directors of the ground company, and a circular, accompanied by an application form, was forwarded to persons likely to be interested. This circular is the central element in the case, and it is desirable to set out a considerable part of it. (at p148)

5. The document is headed: - "N.S.W. Lawn Tennis Ground Ltd. - Circular showing conditions for special membership of the company's ground". It states the company's intention to proceed with the construction of the new grandstand "as soon as the required number of formal applications for special membership as hereinafter defined have been received by the company." It proceeds: "A central section of the grandstand will be provided with special seating accommodation, and will be exclusively reserved for bearers of special membership tickets, Vice-regal parties, and special guests of the company". Under the heading "Privileges of Special Members" it is stated that a person who is accepted by the company as a special member will be entitled (1) to three tickets entitling each member (a) to free admittance to the ground, (b) to all the rights of a non-playing member on the ground except the right to use the club-house, (c) to the occupation of a particular seat in the reserved section of the grandstand to be allocated by the directors . . . (3) to transfer the said tickets or any of them and all rights appurtenant thereto to any persons by notice in writing to the company, whereupon the transferee shall step into the shoes of the special member as regards the transferred ticket or tickets: (4) upon his death, and upon notice in writing to the company, to have his legal personal representatives, or any person or persons nominated by them in writing, recognized and enrolled as special members in his stead with the same rights which he would have possessed if alive. The company is to keep a register of all special members, entering therein from time to time the names and addresses of all special members, and recording all transfers and transmissions. Under the heading "Obligations of Special Membership", it is stated that all special members and the bearers of their tickets are to be bound by the regulations and by-laws of the company, and that, in the event of any breach of any regulation or by-law or other misconduct, the special membership may be suspended or, after the member has been heard by a special meeting of directors, terminated. Then follows a clause which was the subject of much argument. It is headed: "Provision in the event of change of ground", and it is in the following terms: - "In the event of the company at any time acquiring a new ground in lieu of the present ground the company will as soon as practicable obtain for its special members then enrolled, rights on the new ground as similar as possible to the rights which they are to enjoy on the present ground in accordance with this circular, but except as herein provided a special member shall have no rights against the company whether by way of compensation damages or otherwise in the event of the company discontinuing its business through winding up sale or any other cause whatsoever". (at p149)

6. The application form, which accompanied the circular, requested the company to enrol the applicant as a special member and to allot to him or her tickets "upon and subject to the terms of the circular". Each of the appellants is a successor in title of a person who signed an application form in these terms, paid the required sum, and was entered on the register of special members. It is admitted by the respondents that each of the appellants is entitled to whatever rights (if any) his predecessor would have had in the events which have happened. (at p149)

7. It would appear that about 700 persons applied for special membership and were enrolled as special members. With moneys wholly or principally obtained from the moneys paid by these persons for special membership the grandstand, which is known as the southern stand, was in due course erected. Special seats were appropriated to "special members", particular seats being allocated to each such "member". The seats of special members appear also to have been painted a distinctive colour, and the rights claimed by the plaintiffs are referred to in the amended statement of claim as rights to occupy "green chairs" having specified numbers. Each such seat was divided from the one adjoining, and was individually numbered. A register was kept of special members and of the seats allocated to each of them, and every special member was given a metal ticket for each of his seats bearing the number of the seat. (at p150)

8. The ground company continued to be in financial difficulties, and an involved and generally unsatisfactory position arose by reason of this fact and of the fact that serious differences occurred from time to time between the ground company and the association with regard to the use of the ground and other matters. Before the war steps had been considered, and legal advice had been taken, with a view to creating a more satisfactory position, and even at this stage it seems to have been considered that the only satisfactory solution lay in the acquisition by the association of the assets of the ground company. It was not, however, until after the war that practical steps were taken on an opinion obtained from counsel in 1948. By 27th May 1952 certain first debentures and preference shares had been forfeited, presumably because they had not been paid in full, and the association had acquired, and held on that date, all the first debentures of the ground company except 100 pounds, all the second debentures, and all the preference shares except fifty. It had, of course, held from the beginning all the ordinary shares. The association then, by steps which need not be detailed, released the ground company from liability to pay arrears of dividend on the preference shares held by it and from liability for interest on the second debentures. At a meeting of holders of first debentures a resolution was passed that the ground company's liability for interest on the first debentures should be cancelled. Then at a meeting of shareholders of the ground company, held on 19th September 1952, it was resolved that the company be wound up voluntarily, and that Mr. C. J. Foxall (who is one of the respondent-defendants) be appointed liquidator. It was further resolved (subject to satisfaction of the rights of the holders of the outstanding first debentures and preference shares) "that the liquidator be and he is hereby authorised to divide in specie the assets of the company". This meant, of course, a transfer of the assets of the ground company to the association. In fact a transfer of the land (which is under the Real Property Act 1900) was subsequently executed and lodged for registration, but registration is held up by a caveat lodged by the second-named appellant. The appellants' suit was commenced on 18th December 1952. It may be mentioned that complications arose by reason of the discovery, after the commencement of this suit, that the meeting of 19th September 1952 had not been duly convened. It is sufficient to say that the resolution then passed was passed again at a duly convened meeting on 8th June 1953, and that the suit proceeded on the basis that a formally valid resolution for winding up and distribution in specie had been passed by the shareholders of the ground company. (at p151)

9. The plaintiffs' claim, as has been seen, is not for damages. They seek exclusively equitable relief by way of declarations and injunctions, the substance of which may be stated shortly. They claim, in the first place, declarations (1) that the ground company holds the White City property subject to the rights of the plaintiffs to enter on the ground and to use and occupy the green chairs allocated to them respectively, and (2) that, if the White City property is conveyed or transferred to the association, the association will hold it subject to the said respective rights of the plaintiffs. They also claim a general injunction against both companies restraining them from in any way interfering with the entry by the plaintiffs on the ground for the purpose of using or occupying their green chairs, or with their using or occupying those green chairs. So far, relief is claimed on the footing that there is no legal objection to the transaction which is in progress, but that its carrying out will not affect the rights of the plaintiffs in respect of their green chairs. The defendants, of course, accept the first of these propositions, but deny the second. The rest of the relief claimed is claimed on the alternative footing that the transaction which is in progress will, if completed, have the effect of destroying the plaintiffs' rights in respect of their green chairs. On this footing the plaintiffs seek to prevent the transaction from being carried out at all, or to prevent it from being carried out otherwise than subject to the protection of their rights in respect of their green chairs. Accordingly they claim (1) an order staying the winding up of the ground company and an injunction restraining that company from entering into voluntary liquidation, from discontinuing its business, and from transferring its assets to the association, or (2) alternatively an injunction restraining the ground company from doing any of these things otherwise than subject to protection of the rights of the plaintiffs in respect of their green chairs. This statement of the relief claimed does not reproduce the terms of the prayer of the statement of claim, but it does, we think, represent a logical analysis of that prayer and of the alternative bases on which it is founded. (at p152)

10. Before proceeding further it is desirable to obtain as clear an idea as possible of the nature of the contract which is the ultimate basis of the plaintiffs' claims. It is clear that a contract was made between the ground company and each of the allottees of green chairs, and it has not been disputed that the contract was one for breach of which an injunction would be an appropriate remedy. The express terms of the contract are to be found in the circular, and we think that McLelland J. was right in holding that they are to be found exclusively in the circular. It is apparent, however, that a number of implications must of necessity be made. So far as the seat-holder is concerned, when he has paid his 100 pounds, the contract may be regarded as completely executed on his part, though he remains bound, when he enters the ground, to observe the regulations and by-laws of the company. The ground company may or may not have been under an enforceable obligation to erect a grandstand when it had received a certain number of applications, but, if it did erect a grandstand - and it did in fact do so - it was under an obligation to include therein a central section containing three special indentifiable seats for each special member. It was also, we would think, bound to maintain the green chairs in reasonably usable condition. Having provided the green chairs, it was bound (a) to permit each special member to enter the ground free of charge and to occupy by himself or his friends his three green chairs, (b) not to permit any other person to occupy any of those chairs. But we would certainly not take this to mean that any special member was entitled to enter the ground and occupy a green seat at any hour of any day or night, and for any period, however long. The contract must be construed reasonably in the light of its main purpose, and we would think it clear that the special member's right was at most a right to enter and occupy green chairs for the purpose of watching the playing of lawn tennis - or perhaps any other game or spectacle that might be played or produced there. We would also think it clear that the ground company was under no obligation to arrange for tennis competitions or exhibitions on the ground or otherwise for the playing of tennis or any other game or for the provision of any other spectacle on the ground. The company cannot be regarded as saying more than: "If and when we procure or allow tennis to be played, or any other game or spectacle to be played or produced, on our ground, you may enter the ground and use your green chairs and watch the entertainment". It seems to us impossible to imply any term to the effect that the company will provide spectacles for the special member to watch. There was in fact in existence an agreement between the ground company and the association that the association would not play matches or tournaments promoted by it on any ground other than the White City ground, and the association was the de facto controller and organizer of the playing of lawn tennis in New South Wales. It was no doubt anticipated that this agreement would continue and would be observed. But we would think it difficult to maintain that the ground company would have committed a breach of an implied term of its contracts with special members if, consulting its own interests or the interests of tennis players generally, it had released the association from its obligations under this agreement or had agreed that some other ground should be substituted for the White City ground. These considerations suggest a degree of analogy between the present case and the cases of Rhodes v. Forwood (1876) 1 App Cas 256 and Hamlyn & Co. v. Wood & Co. (1891) 2 QB 488 , and suggest that, even in the absence of that clause in the circular which is headed "Provision in the event of change of ground", the appellants might have been in difficulties. It is unnecessary, however, to pursue this matter further, because we think that McLelland J. was right in holding that that clause excludes the appellants from the remedies which they seek against the ground company as for breach of contract. (at p153)

11. It may be thought that, as a matter of drafting, the clause in question is open to criticism. The use of the word "obtain" is curious, because, in the event supposed, the company would itself be in a position to grant the equivalent rights to the special members: it would not be a matter of procuring them to be granted by some other person. But there is no doubt, we think, about the meaning, and there is no serious difficulty in reading the words "obtain for its special members rights on the new ground" as meaning "take all necessary steps to see that rights on the new ground are secured to special members". The words "except as herein provided" can only refer to the earlier part of the clause, and must mean "apart from the special right expressly given by this clause". The general purport of the clause is thus, we think, seen to be (1) to give to the special member a special right in an event which would or might otherwise render his privileges ineffective, and (2) to provide that in no other event of that nature is he to have any enforceable right against the company. (at p154)

12. It was suggested that the words "whether by way of compensation, damages or otherwise" should be read as excluding only legal remedies resulting in a payment of money and not equitable remedies such as an injunction. We can see no justification for so limiting the words "or otherwise", and it seems to attribute a very remarkable intention to the parties if we regard them as meaning to exclude only particular remedies. The clause is in terms dealing with rights and not merely with remedies, and the clear purpose seems to be to exclude all rights enforceable by action for damages or in any other way. (at p154)

13. The it was sought to limit the concluding words of the clause in one of two ways. The event in respect of which the clause protects the company is its discontinuing of its business through winding up, sale, or any other cause whatsoever. Again the language of the clause is somewhat curious: the preposition "through" is used somewhat unnaturally. But again the meaning does not seem in doubt. First, it was said that the clause applied only where the event was brought about by causes beyond the control of the company itself, as by a compulsory winding up or a sale by a mortgagee. It did not apply, it was said, where the event was brought about by the voluntary act of the company itself. It might possibly have been answered that the winding up here was, in substance though not in form, a creditors' winding up. But, however this may be, again we can see no reason for limiting in the manner suggested the literal meaning of the words used, and we think that affirmative reasons for giving them their literal meaning exist. The active voice is used, and in their most natural meaning the words "in the event of the company discontinuing its business" refer primarily to a voluntary act of the company itself, though they are, of course, apt to include the case where a discontinuance is forced on the company. Again, it is extremely difficult to regard the word "sale" as limited to a sale by some person other than the company itself: the word itself suggests an act of the company itself. Then the words "or any other cause whatsoever" are very wide: they include prima facie any cause, whether it be a voluntary act or something to which the company is forced to submit. Again the literal meaning fits in very much better with the first part of the clause, which is protective of the special member. The clause, as a whole, then means that, so long as the company continues its business of staging sporting spectacles, whether on the White City ground or on some other ground, the rights of the special member are preserved, but, if and when it ceases for any reason to carry on that business, the rights of special members are to cease. Finally, the meaning for which the respondents contend seems much the more reasonable meaning. It might well be envisaged as a possibility that the company's business would be carried on at a loss, and that an advantageous offer to buy the property for a factory site or for some other purpose would be received. It would not seem very reasonable that a single special member should be able to compel the company to carry on until it was forced into liquidation, by which time the offer might no longer be available. The construction for which the appellants contend hangs, we think, in the last analysis on a connotation attributed to the word "through", which is perhaps more appropriate to an event in which the company is passive than to an event in which it is active. But the preposition cannot, in our opinion, carry the weight attributed to it. There are too many countervailing considerations. The word, in our opinion, means no more than "as a result of". (at p155)

14. The other limitation for which the appellants contended was this. They said that the latter part of the clause did not protect the company if it went into voluntary liquidation, or sold the White City property of its own motion. This meant something less than an implication that a liquidation would be a breach if it would not have been resolved upon but for the actual purpose of evading or escaping from its obligations to special members. With regard to the purpose of what was done, McLelland J. has found that it was not done in order to defeat the rights of the special members. This finding is not, in our opinion, open to challenge. We think it is fully supported by the evidence. We do not think that the transaction was occasioned by the existence of the rights of special members. They were regarded as merely incidental. The transaction was occasioned, we think, by the desire of the association, in what it conceived to be the interests of lawn tennis players and the lawn tennis public generally, to eliminate the ground company as a separate entity. It seems to have been believed either that the special members had in any case no legally enforceable rights, or that they would have no legal rights if the transaction were carried out. But we do not think that the exclusion of the rights of special members was in any real sense an object of the transaction. McLelland J. said: - "The proper inference to be drawn from the facts is, I think, that those who controlled the association believed that the special members had no legal rights which needed to be considered in connection with the taking over of the assets by the association, although it was recognized that special members had moral rights." The reference to "moral rights" is a reference to the fact that the association did not actually propose to rest strictly upon its view that special members' rights were legally either nonexistent or extinguished. It was prepared to concede certain modified rights for the future to special members. As to the lesser implication, that the company would not resolve upon a voluntary liquidation of its own motion, whatever its exact extent, it is enough to say that it is quite unwarranted by the terms and character of the transaction. (at p156)

15. The view which we have expressed of the effect of the "Provision in the event of change of ground" was, we think, rightly regarded by McLelland J. as fatal to the whole of the plaintiffs' claim. It might be suggested that it is not ex facie necessarily inconsistent with the argument of the plaintiffs that the association, as an assignee with notice, must take the White City property subject to the rights of special members. But the construction which McLelland J. adopted, and which we think is correct, really means, as it seems to us, that the assignment brings the contract to an end to all intents and purposes. The plaintiffs could, in our opinion, only succeed on the view that there was in the contract an implied term, the benefit of which was preserved, or at least not taken away, by the "provision in the event of change of ground". (at p156)

16. We would not think, in any case, that the plaintiffs could succeed in laying the burden of the contract on an assignee with notice. Mr. Holmes said that he relied on Tulk v. Moxhay (1848) 2 Ph 774 (41 ER 1143) . But the doctrine of Tulk v. Moxhay (1848) 2 Ph 774 (41 ER 1143) is limited to negative covenants, and to covenants made for the benefit of land of the covenantee: London County Council v. Allen (1914) 3 KB 642 . The latter limitation of the doctrine appears to have been recognized in Lord Strathcona Steamship Co. Ltd. v. Dominion Coal Co. Ltd. (1926) AC 108, at p 121 , though one would have thought, with respect, that, apart from any other consideration, its recognition would have been fatal to the plaintiff in that case. That was a case of a sale of a chartered ship. This is a case of a conveyance of land, and, whatever may be the position with regard to chattels, the doctrine of Tulk v. Moxhay (1848) 2 Ph 774 (41 ER 1143) cannot, consistently with London County Council v. Allen (1914) 3 KB 642 , be applied to it. Some colour for a contention that the contract in this case created equitable interests in land may be thought to be lent by certain very recent decisions and dicta in England, but, in our opinion, it would be inconsistent with long established authority to hold that such a contract as that with which we are concerned here was binding in equity on a purchaser with notice. It need only be added that, if the contract were regarded as conferring equitable interests in land, the application to it of the rule against perpetuities would have to be considered. (at p157)

17. The appeal should, in our opinion, be dismissed. (at p157)

ORDER

Appeal dismissed with costs.