Masters v Garcia [No 2] [2006] NSWCA 15 (15 February 2006)

CITATION: MASTERS v GARCIA [NO. 2] [2006] NSWCA 15

FILE NUMBER(S):

40425/05

HEARING DATE(S): 30 November 2005

DECISION DATE: 15/02/2006

PARTIES:

Raymond Henry Masters - First Appellant

Gweneth Hazel Masters - Second Appellant

Paul Joseph Garcia - First Respondent

Darren McAsey - Second Respondent

JUDGMENT OF: The Court Basten JA Campbell AJA

LOWER COURT JURISDICTION: Supreme Court - Equity Division

LOWER COURT FILE NUMBER(S): 6442/04

LOWER COURT JUDICIAL OFFICER: Einstein J

COUNSEL:

Mr M. Einfeld QC/Mr A. Harding - Appellants

Mr J.J. Garnsey QC/Mr A. Hatzis/Mr D. Hand - Respondents

SOLICITORS:

Verekers - Appellants

Deutsch Partners Lawyers Pty Ltd - First Respondent

Angela M. Frost - Third Respondent

CATCHWORDS:

Practice and Procedure – determination of appropriate form of orders – whether order in the nature of specific performance should be made with respect to the transfer of poker machine entitlements created by the Gaming Machines Act 2001 (NSW) – consideration of consequences of a failure to file a notice of contention – whether damages would be an adequate remedy

LEGISLATION CITED:

Gaming Machines Act 2001 (NSW), s19, s20

DECISION:

1. Allow the appeal and set aside Declarations 1 and 2 and Orders 3-9 made by Einstein J on 23 May 2005 and Order 1 made on 31 May 2005

2. In lieu of the declarations and orders made by Einstein J, order that

(1) the Second Respondent do all things, including signing all documents and making all applications as requested or directed by the First Respondent, at the cost of the First Respondent, in order to

(a) transfer the poker machine entitlements allocated in respect of hotelier’s licence no. 100094 to such person, being the holder of an hotelier’s licence issued under the Liquor Act 1982, as the First Respondent may nominate

(b) make or cause to permit to be made, an application to the Liquor Administration Board for its approval of such transfer or transfers of the poker machine entitlements

(c) give effect to any variation of the authorisation under Part 5 of the Gaming Machines Act, pursuant to s 20(7) of that Act, with respect to such transfers, and

(d) account to the First Respondent, in such manner as the First Respondent may in writing direct, for the proceeds of sale of such poker machine entitlements

(2) the Second Respondent be restrained from dealing with or disposing with or purporting to deal with or dispose of any of the poker machine entitlements otherwise than in accordance with a direction given by the First Respondent

(3) the Second Respondent be restrained from doing anything to obstruct or hinder the sale and transfer of the poker machine entitlements at the direction of the First Respondent

(4) the Appellants pay 75% of the First Respondent’s costs of the proceedings in the Equity Division and of the appeal

3. Liberty to the First Respondent to apply to a judge of the Equity Division on 48 hours’ written notice to the Appellants in the event that the Appellants attempt to interfere unlawfully with the compliance by the Second Respondent with Orders 2(1), (2) and (3) above

4. The parties be discharged from further compliance with condition (ii) attaching to the stay granted by the President on 24 May 2005

JUDGMENT:

IN THE SUPREME COURT

OF NEW SOUTH WALES

COURT OF APPEAL

CA 40425/05

ED 6442/04

TOBIAS JA

BASTEN JA

CAMPBELL AJA

15 February 2006

MASTERS & ANOR v GARCIA & McASEY [No. 2]

Judgment on orders and costs

1 THE COURT: The background to this matter is set out in the judgment of this Court in Masters v Garcia [2005] NSWCA 287 delivered on 26 August 2005 (the substantive judgment). The effect of that judgment was to foreshadow that the declarations and orders made by the primary judge on 23 May 2005 should be set aside, with the exception of an inconsequential order which in turn set aside certain interlocutory orders.

2 The relief granted by his Honour included two declarations. The first was that the present Appellants “do not have any financial interest” in the hotelier’s licence with respect to the premises known as the Alexandria Hotel, for the purposes of s 19 of the Gaming Machines Act 2001 (NSW). In its substantive judgment the Court decided that that declaration should be set aside. That declaration was set aside on the basis that the Gaming Machines Act required the Liquor Administration Board (“the Board”) to form a view with respect to that matter and that, absent any error of law on the part of the Board, which had in fact not then considered the matter, it was inappropriate for the primary judge to have granted that form of relief.

3 The second declaration made by the primary judge was to the effect that the second Respondent in these proceedings, being the licensee of the Alexandria Hotel, Mr Darren McAsey, held certain poker machine entitlements allocated in respect of his hotelier’s licence “on trust for” the previous licensee, Mr Paul Joseph Garcia, who is the First Respondent in these proceedings. In its substantive judgment the Court decided that that declaration should also be set aside but upon the basis that it purported to create in Mr Garcia, a person who did not hold a relevant hotelier’s licence, an interest in the poker machine entitlements which would have been inconsistent with the terms of the Gaming Machines Act.

4 The substantive orders, numbered 4-8, made by the primary judge were consequential upon the second declaration and were to be set aside for that reason. Nevertheless, because it appeared that Mr Garcia might be entitled to relief in similar form on the basis of a contractual entitlement, the matter was stood over for further submissions with respect to what, if any, declarations or orders should be made by this Court.

5 The dispute between the Appellants, who were the owners of the hotel, and the former licensee, Mr Garcia, turned on an agreement for the sale of the hotel business (the sale agreement), entered into between Mr Garcia and Mr McAsey. The critical clause in that agreement was clause 11: see [2005] NSWCA 287 at [28]. On behalf of the Appellants it was argued both before the primary judge and this Court that this clause was void for uncertainty.

6 Clause 11 was successfully relied upon by Mr Garcia before the primary judge as the basis of a constructive trust of the poker machine entitlements. Alternatively, it was relied upon as creating in Mr Garcia certain contractual rights to direct Mr McAsey to transfer the entitlements to a third party hotelier: [2005] NSWCA 287 at [7], [10], [63] and [65]. However, having found a constructive trust based on clause 11, his Honour did not determine this alternative basis for relief.

7 Although the language of clause 11 was infelicitous, that appears to have resulted, at least in part, from doubts in the mind of the drafter as to the precise nature of the “poker machine entitlements” created by the Gaming Machines Act, and which formed part of the hotel business subject to the sale agreement.

8 The benefit of the entitlements had been obtained by Mr Garcia whilst he held the hotelier’s licence for the Alexandria Hotel. The value of the entitlements, which were transferable so long as the requirements of the Gaming Machines Act were complied with, were several times the value of the remainder of the hotel business. It would appear that, when Mr Garcia decided to sell the hotel business to Mr McAsey, the latter was either unable or unwilling to purchase the poker machine entitlements at the going price. However, once he had disposed of the hotelier’s licence to Mr McAsey, Mr Garcia was no longer eligible to hold the poker machine entitlements, in compliance with the requirement of the Gaming Machines Act. Nevertheless, this Court held that Mr Garcia, even though no longer the holder of an hotelier’s licence, could enjoy a contractual right to direct the licensee to transfer the poker machine entitlements to a third party for valuable consideration and require the licensee (Mr McAsey) to account for the proceeds of the transfer of the poker machine entitlements. The Court further held that clause 11 of the sale agreement gave effect to that intended outcome. The Appellants’ primary argument, namely that clause 11 was void for uncertainty, was therefore unsuccessful as it was before the primary judge. Accordingly, Mr Garcia's alternative argument before his Honour was upheld.

9 In these circumstances, the matter was re-listed for further hearing as to the appropriate orders to be made. As identified by senior counsel for the Appellants, four issues were agitated at the further hearing, which it is convenient to address independently, namely:

(a) failure of the First Respondent to file a notice of contention;

(b) whether the contractual entitlement was subject to a temporal limitation which had expired prior to its exercise;

(c) the effect of interlocutory orders made by consent, and

(d) whether ‘specific performance’ should lie to give effect to clause 11.

If orders are to be made the form of the orders will need to be considered. It will also be necessary to address questions of costs in relation to both the trial and the appeal, depending on the conclusions reached with respect to the orders now sought by way of ‘specific performance’.

Notice of contention

10 Some little time was devoted at the further hearing of the appeal to the failure of Mr Garcia to file a timely notice of contention seeking to support the orders made below, or orders to the same effect, on the basis of a contractual entitlement. Although, in the course of his reply, he did provide a notice of contention, his reluctance to do so at an earlier stage, and at least after the delivery of the judgment of the Court on 26 August 2005, was relied on by the Appellants. Mr Garcia largely restricted his argument on this point to the proposition that the primary judge had in fact addressed both contractual and trust issues in the course of his judgment. That was indeed true, although this Court held in the substantive judgment that the declaration and consequential orders were based solely on his Honour’s conclusions with respect to the existence of a constructive trust.

11 On one view, the real question may have been whether Mr Garcia should have filed a notice of cross-appeal, to the extent that he sought to uphold, at least in the alternative, a different form of orders to those made by the primary judge. This possibility arose in part because, following interlocutory orders made by consent in this Court pending the initial hearing of the appeal, certain steps had been taken to give effect to the conclusions reached by the primary judge, which steps did not need to be repeated and were therefore not properly the subject of further orders.

12 However, once it is accepted, as it should be, that no issues of procedural fairness arise, compliance with procedural formalities should not be allowed to prevent the formulation of appropriate orders in these proceedings. Any procedural impropriety in the manner in which the proceedings have been conducted can properly be dealt with by a costs order if considered appropriate.

13 As was noted in the substantive judgment, Mr McAsey, the current holder of the hotelier’s licence, has not been an active participant in the proceedings at any stage. Because the orders proposed will bind him, and indeed require him to take positive steps, it is necessary to take care to ensure that he is at least on notice as to the matters which are sought to be argued, and as to the manner in which they may affect his position. However, as will be seen below, the essential thrust of the orders which the Court proposes to make are not different in substance to those which Mr Garcia had sought and obtained from the primary judge, except to the extent that they are of more limited effect. The absence of a timely notice of contention will not, therefore, in any practical sense, affect Mr McAsey’s position.

Possible temporal limitation

14 In considering the intended operation of clause 11 in the Court’s earlier judgment, Basten JA expressed a concern as to the absence of evidence as to the exercise by Mr Garcia of his right to direct Mr McAsey to transfer the poker machine entitlements to the holder of another hotelier’s licence and to account to him for the proceeds of that transfer. Properly understood, it appeared to Basten JA that clause 11.2, which prohibited Mr Garcia from commencing proceedings after 30 November 2004 “to exercise or enforce that right”, contemplated that a relevant direction had been given prior to that date which was capable of enforcement. That “possible temporal limitation” was referred to at [94] of the Court’s earlier judgment.

15 However, as noted by Tobias JA (Campbell AJA agreeing) at [11], no submission had been made to the primary judge or to this Court to suggest any such constraint or limitation. His Honour expressed the view that it might now be too late to raise any such issue: at [14].

16 It is beyond argument that the parties to litigation may not, on appeal, seek to raise factual issues which were not addressed at trial. As stated by the High Court in the joint judgment in Coulton v Holcombe [1986] HCA 33; (1986) 162 CLR 1 at 7:

“To say that an appeal is by way of re-hearing does not mean that the issues and the evidence to be considered are at large. It is fundamental to the due administration of justice that the substantial issues between the parties are ordinarily settled at the trial. If it were not so the main arena for the settlement of disputes would move from the court of first instance to the appellate court, tending to reduce the proceedings in the former court to little more than a preliminary skirmish. ... In a case where, had the issue been raised in the court below, evidence could have been given which by any possibility could have prevented the point from succeeding, this Court has firmly maintained the principle that the point cannot be taken afterwards ... .”

On occasion, a pure question of law has been dealt with on appeal, the issue not having been raised below: see, generally, O’Sullivan v Watson (1986) 7 NSWLR 693 at 699 (Mahoney JA) and 702 (McHugh JA, Hope JA agreeing). However, that will only be permitted where the Court is persuaded that the defending party could not have answered the challenge by way of evidence.

17 The present proceedings were commenced by Mr Garcia, seeking declaratory relief and consequential orders, based upon a right, abstractly identified but sourced in clause 11 of the sale agreement, and with no temporal limitations, to the benefit of the poker machine entitlements. The amended summons sought, by way of alternative relief, damages for breach of the sale agreement. No statement of claim was ordered and the affidavit evidence did not identify any such breach. No doubt because this aspect of the case was not pursued, and the precise nature of the right asserted by Mr Garcia based on clause 11 was never clearly identified, little attention was given to the factual matrix within which the claims were made, and the times at which particular things were done or not done.

18 As will appear below, steps were taken as a result of the interlocutory orders made as part of a conditional stay of the primary judge’s orders which have changed the factual matrix within which any final orders made by this Court are to operate. Again, prior to the further hearing of the appeal, no attempt was made to put evidence before this Court as to those matters. However, during the course of the further hearing, Mr Garcia tendered two documents entitled “Poker Machine Entitlement Transfer Form”, each bearing a date in May 2005 which, taken together, constituted executed transfers by Mr McAsey of the six poker machine entitlements associated with his hotelier’s licence: Exhibit “A” on the appeal. The Court was invited to infer that these were executed by Mr McAsey in favour of transferees identified by Mr Garcia and that, if approved by the Board, the transfers would be completed and the proceeds of sale conveyed to Mr Garcia. For some reason about which there was no evidence, each form was signed by the Appellants as the “licence owner” and by Mr McAsey as “business owner”. Nevertheless, Mr McAsey was identified as the “seller”. Each document bore a notation, apparently signed by the chairperson of the Board, which read as follows:

“Approved on condition that the s 20(7) variation to authorisations not be effected until the parties to Court of Appeal action 40425/2005 request the Board to make the transfers effective.”

19 The form of these proceedings is further complicated by the fact that the sale agreement under which Mr Garcia’s rights are said to arise, was an agreement solely between him and Mr McAsey. Yet, as already noted, Mr McAsey was not an active participant in the proceedings and appears not to have opposed the orders sought by Mr Garcia. The Appellants were the only active opponents in the Court below and in this Court.

20 In considering whether to grant relief by way of ‘specific performance’, it may be necessary to consider whether damages would provide an adequate remedy for a breach of contract. Because Mr Garcia has not established facts which would demonstrate a breach of the sale agreement by Mr McAsey, that may be a difficult question to answer. There is some irony in the fact that he now seeks to resist any question of a temporal limitation existing on his rights to direct a transfer of the poker machine entitlements on the basis that that argument was not addressed below, when the factual basis for his claim to damages would seem to depend on him establishing that steps were taken prior to the commencement of the proceedings, and therefore prior to the date identified in clause 11.2 of the sale agreement. Nevertheless, enough has been said to demonstrate that the steps taken to exercise the right relied upon must involve questions of fact and ones which were not litigated below. The Appellants may be entitled to rely upon the absence of such facts in resisting orders for ‘specific performance’: they are not entitled, however, to seek to raise a new issue by way of defence which depends upon such facts. Thus, the nature, timing and content of any direction given by Mr Garcia to Mr McAsey could only have been established by evidence from one or other of those parties. That did not happen. Accordingly, the Appellants are not entitled to rely upon any possible temporal limitation identified in clause 11 of the sale agreement.

Interlocutory orders

21 Orders were made by the primary judge on 23 May 2005. A notice of appeal was filed the same day, at which time the Appellants sought a stay of the orders made by the primary judge. Consent orders were made by the President the following day, granting the stay pursuant to certain conditions, which were themselves subject to further conditions. No doubt the haste with which these steps were taken and the continuing uncertainty as to the precise nature of the rights of each party, may have contributed to the complexity of the orders to which the parties consented.

22 The first condition of the stay was that “the parties” jointly execute transfers of the poker machine entitlements to such holders of hotelier’s licences as the First Respondent (Mr Garcia) directed. In this context, “the parties” referred to Mr McAsey and, because of the practice adopted by the Board, the Appellants. The transfers were executed as required.

23 The second condition of the stay required that the transfer forms be submitted to the Board “for immediate conditional approval”. That also took place on 26 May, as required, as appears from Exhibit A in the appeal: see [18] above

24 The condition to which the Board’s approval was subject was that “the transfers not be effected until the parties request the Board to make the transfers effective”. That condition, as noted in the endorsement on the transfer forms set out above at [18], was apparently accepted by the Chairperson of the Board. However, the Court was not taken to any statutory provision which permits the Board to grant approval in some form of escrow, and there may be some doubt as to the effectiveness of such an approval.

25 Although the Board played its part as proposed in the consent orders, the parties were further constrained as to the manner in which they could “deal with the approval”. The further conditions applicable envisaged three circumstances, namely that the primary judge erred in making the first declaration, erred in making the second declaration, or did not err in making the declarations and other orders. This Court having set aside the orders made by the primary judge, it would appear that the first and second circumstances have eventuated and that the third is irrelevant. However, that fact gives rise to some difficulty in construing the effect of the “conditional approval” given by the Board on 26 May 2005.

26 In the event that the primary judge erred in declaring that the Appellants did not have a financial interest in the hotelier’s licence, the approval was to be dealt with subject to the following condition:

“(i) ... the Appellants may make such objection as they see fit to the Liquor Administration Board on the ground that they have a financial interest in the hotelier’s licence and may apply for any conditional transfer granted by the Board to be revoked ... .”

As will be apparent, this condition was not formulated to take into account the ground on which the first declaration was set aside by this Court, namely that it was not a matter for the Court, but for the Board, to determine whether the Appellants had a financial interest or not.

27 In the event that the second declaration were to be set aside, the parties were required to apply to the Board jointly for “the revocation” of any conditional transfer and were required to do all things necessary to achieve such revocation or otherwise render the conditional transfers void or ineffective. Again, the condition was posited on the assumption that his Honour’s error in declaring that Mr McAsey held the entitlements on trust for Mr Garcia was an end to Mr Garcia’s rights under the sale agreement. Again, the assumption was at least partly false.

28 In these circumstances, the consent orders may be treated as having an equivocal effect in one, not unimportant, respect. Two transfer forms have been executed in accordance, the Court should infer, with the directions given by Mr Garcia to Mr McAsey and, if it be relevant, the Appellants. Those forms have been lodged with the Board for it to consider and, if thought appropriate, grant approval to the transfers pursuant to s 19(2) of the Gaming Machines Act. Beyond acknowledgement of those facts, it is undesirable to place reliance on the continuing operation of the interlocutory orders. That is because to do so would require the Court to determine the effectiveness of the “conditional approval” given to the transfers, especially in circumstances where, if the Appellants were to object, the Board would need to take a step which has apparently not yet been taken, namely to determine for itself whether the Appellants have a financial interest in the hotelier’s licence for the purposes of s 19(3)(c): see [2005] NSWCA 287 at [76]- [87].

Availability of specific performance

29 At one stage, in the course of the further hearing, the Appellants appeared to argue that ‘specific performance’ should not lie unless Mr Garcia had a proprietary interest in the poker machine entitlements which, in accordance with the substantive judgment, he did not and could not have, not being the holder of an hotelier’s licence. No authority was cited in support of that proposition and it would appear to be inconsistent with general principle in relation to the availability of injunctive relief: see, eg, Meagher, Heydon and Leeming, Meagher, Gummow and Lehane’s Equity: Doctrines and Remedies at [21-015] and [21-025].

30 It is convenient to note that, although there was talk of a remedy by way of ‘specific performance’, in the case of an executed contract of which the obligation of one party to perform a particular obligation is outstanding, the relief may better be described as injunctive relief: see Burns Philp Trust Co Pty Ltd v Kwikasair Freightlines Ltd (1963) 63 SR(NSW) 492, 496-497 (Sugerman, Hardie and Collins JJ). Further, the Court will grant, where appropriate, an injunction in affirmative or mandatory form where the obligation is properly regarded as an affirmative obligation and not only to enforce a negative stipulation: ibid at 499.

31 It is necessary to identify, therefore, the contractual obligation which is sought to be enforced. In the present case it must be clause 11 of the sale agreement. That agreement is, however, a contract solely between Mr Garcia, as vendor, and Mr McAsey, as purchaser. The Appellants are not party to that contract. Indeed, their role in relation to the agreements appears to have been limited to the grant of a lease, known in the sale agreement as “the new lease”, in favour of Mr McAsey and the acceptance of the surrender of the “current lease” which had been granted to Mr Garcia. That condition of the sale agreement had been completed satisfactorily to the parties prior to the commencement of the proceedings and was thereby not the subject of any relief sought therein. The Appellants not being party to clause 11 of the sale agreement, no injunctive relief can be granted against them in respect of any aspect of that provision absent any threat by them to interfere with Mr Garcia's right under that provision to direct Mr McAsey to execute a transfer of the entitlements, which has already occurred pursuant to the consent orders made by the President and, subject to the approval of that transfer by the Board, to receive the proceeds of their sale. That there was such a threat at the time of the proceedings before the primary judge is probably reflected in [6] and [8] of his Honour’s orders.

32 However, it should be noted that the Appellants' primary case in resistance to any relief being granted to Mr Garcia arising out of clause 11 of the sale agreement was that that provision was void for uncertainty. Their secondary case was that clause 11 did and could not result in Mr McAsey holding the entitlements on constructive trust for Mr Garcia. However, once that primary case was rejected and even on the acceptance of their secondary case, the Appellants were still faced with the entitlement of Mr Garcia to relief based upon his contractual rights under clause 11. Although the possibility of injunctive relief against the Appellants does not now arise, given the consent orders made by the President as a condition of a stay of the primary judge's orders, nonetheless they continued to resist any form of relief being granted to Mr Garcia which recognised his contractual rights against Mr McAsey with respect to the entitlements.

33 So far as Mr McAsey is concerned, there is no opposition to an appropriate order requiring him to comply with the terms of clause 11. Indeed, by executing the transfers as directed, and joining in the lodgement of those transfers with the Board for its approval, he has already taken the primary steps required of him. Such further limited injunctive relief as would require him not to withdraw his support from or otherwise impede the favourable consideration of the application by the Board and to give effect to any variation of the authorisations which would be required upon approval being granted, pursuant to s 20(7) of the Gaming Machines Act, may be appropriate and may properly be made. Further, he may be directed to account for the proceeds of sale of the entitlements, either by directing that payment be made by the transferees to Mr Garcia, or in such other manner as may be agreed between him and Mr Garcia.

34 A question was raised as to whether injunctive relief against Mr McAsey could properly be granted in the absence of evidence that damages would not provide an adequate remedy in case of his breach of the sale agreement at some future stage in the process. More properly, there may be some doubt as to whether injunctive relief should be given at all, on the basis that there is, as far as one can tell, no outstanding dispute between Mr Garcia and Mr McAsey. If there were a relevant dispute or the possibility of a breach, the inadequacy of damages may be inferred from the circumstances envisaged by the statutory scheme for several reasons. First, because on each transfer of a block of three entitlements, one is forfeit to the Board, the market is for a limited and declining number of statutory entitlements, which would tend to have a unique value and not be readily replaceable. Secondly, a transfer requires the approval of the Board which may depend upon a number of factors, including the acceptability of the transferee, who must be the holder of an hotelier’s licence. These conditions, it was submitted, suggest that damages may well be an inadequate remedy or at least that proof of damage, retrospectively, in the absence of an agreed sale, may be difficult to establish. Further, the transfers produced in evidence indicate that the total consideration for the three blocks of entitlements to be transferred was $660,000. As purchaser of the hotel business, Mr McAsey obtained assets worth $100,000. There was no evidence before the Court as to whether he would be able to meet a judgment of more than six times the value of the hotel business at the time of its purchase.

35 These circumstances might be less than persuasive if an order by way of injunctive relief were opposed by the party against whom it was sought. That is not this case. Accordingly, the Court is entitled to infer from limited material that damages would not be an adequate remedy and that an order requiring performance of clause 11, according to its terms, should be made.

Form of order

36 The evidence did not make clear to the Court whether there was any real dispute between Mr Garcia and Mr McAsey. However, as Mr McAsey has taken no part in the proceedings in opposition to the orders sought by Mr Garcia, there is no reason why Mr Garcia should not obtain orders against Mr McAsey giving effect to his legal rights under the sale agreement.

37 In terms, it may be unnecessary to make orders with respect to the execution of transfers or applications to the Board for approval thereof, those steps having been taken by Mr McAsey pursuant to the conditions under which the stay was granted. Nevertheless, the Court is not aware of the circumstances affecting the proposed transferees, nor the terms of the contracts of sale of the poker machine entitlements, which have no doubt been entered into. Accordingly, in case the passage of time has made it necessary for further documents to be executed, to give effect to such rights as Mr Garcia has under clause 11 of the sale agreement, it would seem that the orders made by the Court should extend to each of the steps which may be necessary to give effect to those rights, even if they have, as would appear, already been fulfilled.

38 For reasons given in the substantive judgment, to the extent that Mr Garcia sought to have the Court determine the role which the Appellants might play in relation to an application to the Board for transfer of the poker machine entitlements, that aspect of the proceedings was misconceived and premature. Mr Garcia was not entitled to a declaration against the Appellants in respect of this issue. Further, because the Appellants were not party to the sale agreement and as there is no threat by them to interfere, except as permitted by s 19(3)(c) of the Gaming Machines Act, with the transfer by Mr McAsey of the entitlements at the direction of Mr Garcia, the latter is neither entitled to nor requires injunctive relief against them in order to protect his rights under clause 11 of the agreement.

39 However, liberty to apply to a judge of the Equity Division should be inserted into the orders to be made by this Court in case an attempt is made by the Appellants to interfere unlawfully with the compliance by Mr McAsey with the orders proposed to be made against him.

40 So far as the interlocutory orders made by the President on 25 May 2005 are concerned, there is no issue before this Court on the appeal as to the effect of any steps which have been taken pursuant to the conditions on which the stay was granted. The effect of order 2 made by the President was to stay the operation and effect of orders 4, 5, 6 and 8 made by the primary judge, pending the hearing and determination of the appeal. Those orders of the primary judge were set aside on 26 August 2005 and, accordingly, the stay ceased to operate on that date.

41 So far as the conditions attaching to the stay are concerned, the position of the Appellants, in the event which has occurred, was protected by the first condition and no steps are required on the part of this Court to give effect to that condition.

42 The position with respect to the second condition is less clear. It is convenient to set the condition out in full:

“(ii) In the event that it is determined (in these proceedings or this appeal) that Einstein J erred in finding that the poker machine entitlements allocated in respect of the hotelier’s licence are held by the Second Respondent on trust for the First Respondent and that the First Respondent was not and is not otherwise entitled thereto, the parties will jointly apply to the Liquor Administration Board for the revocation of any conditional transfer of the poker machine entitlements, and the parties jointly agree to do all things necessary to revoke any condition or transfer(s) and to render any conditional transfer void or otherwise ineffective.”

43 There was discussion during the course of the further hearing as to whether this condition was engaged: the first limb of the defining events is clearly satisfied in that the Court has held that the primary judge erred in finding that the entitlements were held by Mr McAsey “on trust for” Mr Garcia. On the other hand, there is doubt as to whether or not the second limb is satisfied, the Court having accepted that Mr Garcia has certain contractual rights as against Mr McAsey with respect to those entitlements. Further, the orders to which Mr Garcia is entitled as against Mr McAsey are inconsistent with the apparent intention of the condition. And, as already noted, the terminology adopted is inapt: the role of the Board is not to transfer the entitlements, but to grant approval to a proposed transfer. That approval appears to have been granted conditionally as requested by the parties, although the statutory basis for that course is unclear. Accordingly, the condition must be understood as referring to revocation by the Board of its conditional approval. The transfer itself will be effected pursuant to the combined operation of a sale agreement (not in evidence) between the vendor and the purchaser of the entitlements, which is no doubt conditional upon compliance with the statutory requirements. In those circumstances, the appropriate course appears to be to declare that if condition (ii) is engaged, the parties are released from the obligations therein referred to.

44 The third condition envisaged by the stay order, namely that the primary judge did not err, has not been engaged.

45 The intention in dealing with the conditions of the stay in this manner is to leave the applications for transfer of the poker machine entitlements made to the Board on 25 May 2005 as having been validly made but arguably not yet dealt with by the Board in accordance with its statutory functions and powers. Mr McAsey will be constrained in relation to the steps he is able to take with respect to those applications, but the Appellants are not insofar as they may assert that they have a financial interest in the relevant hoteliers licence and, as such, do not support the proposed transfer.

The question of costs

46 On 31 May 2005 the primary judge made orders in terms of short minutes of order which included an order that the Appellants pay Mr Garcia’s costs of the proceedings. The latter seeks to uphold that order and, in addition, seeks an order that the Appellants pay his costs of the appeal. This is opposed by the Appellants who seek orders for costs in their favour with respect to both the proceedings at first instance and on the appeal.

47 It is true that the Appellants have been successful in the appeal insofar as they are entitled to have the declarations and orders made by the primary judge on 23 May 2005 set aside. In particular, Mr Garcia has been unsuccessful on the appeal in defending the primary judge’s first declaration with respect to the Appellants’ financial interest in the poker machine entitlements.

48 However, although the Appellants have ultimately been successful in resisting part of the relief sought by Mr Garcia in the Equity Division, their primary argument with respect to the first declaration was directed to the question of whether they had a financial interest or not, rather than to the appropriate body to determine that question. In relation to the construction of clause 11 of the sale agreement, the Appellants argued both that the clause was void for uncertainty and that Mr Garcia was not the beneficiary of a trust. The latter argument succeeded but the critical former argument did not with the result that Mr Garcia is entitled to orders having the same intended, although more limited, effect as the second declaration. In substance, therefore, Mr Garcia has largely succeeded both at first instance and on the appeal in resisting the Appellants' claim that he had no rights with respect to the poker machine entitlements.

49 Although the Appellants submitted that Mr Garcia was wholly unsuccessful on the two substantive issues argued on the appeal based on the two declarations made by the primary judge, in substance they have succeeded only with respect to the first. As already observed, both before the primary judge and this Court the Appellants sought to deny that Mr Garcia had any rights whatsoever to direct the transfer of the poker machine entitlements by Mr McAsey and to receive the proceeds for the sale thereof. On this issue the Appellants have failed although the relief granted by this Court in recognition of those rights will be different in form but not in substance from that granted by the primary judge. That fact does not detract from the success of Mr Garcia in maintaining that he had rights with respect to the poker machine entitlements which he was entitled to have protected, subject to the financial interest issue, from any claim by the appellants thereto.

50 Accordingly, in our opinion Mr Garcia has substantially, though not wholly, succeeded on the appeal in maintaining the substance of his claim at first instance. Furthermore, the appellants have been wholly unsuccessful in respect of each of the four issues referred to in [9] above which they sought to raise on the further hearing.

51 In the foregoing circumstances the Court is of the view that Mr Garcia should have 75% of his costs of the appeal and of the proceedings in the Equity Division. The reduction is in recognition of the Appellants success in having Declaration 1 made by the primary judge set aside, and in limiting Mr Garcia’s claim to a contractual right, which does not run against the Appellants.

52 Mr Garcia has obtained relief as against Mr McAsey. However, that relief was not resisted and no costs order should be made between those parties.

Conclusions

53 The Court therefore makes the following orders:

1. Allow the appeal and set aside Declarations 1 and 2 and Orders 3-9 made by Einstein J on 23 May 2005 and Order 1 made on 31 May 2005.

2. In lieu of the declarations and orders made by Einstein J, order that:

(1) the Second Respondent do all things, including signing all documents and making all applications as requested or directed by the First Respondent, at the cost of the First Respondent, in order to:

(a) transfer the poker machine entitlements allocated in respect of hotelier’s licence no. 100094 to such person, being the holder of an hotelier’s licence issued under the Liquor Act 1982, as the First Respondent may nominate;

(b) make or cause to permit to be made, an application to the Liquor Administration Board for its approval of such transfer or transfers of the poker machine entitlements;

(c) give effect to any variation of the authorisation under Part 5 of the Gaming Machines Act, pursuant to s 20(7) of that Act, with respect to such transfers, and

(d) account to the First Respondent, in such manner as the First Respondent may in writing direct, for the proceeds of sale of such poker machine entitlements.

(2) the Second Respondent be restrained from dealing with or disposing with or purporting to deal with or dispose of any of the poker machine entitlements otherwise than in accordance with a direction given by the First Respondent;

(3) the Second Respondent be restrained from doing anything to obstruct or hinder the sale and transfer of the poker machine entitlements at the direction of the First Respondent;

(4) the Appellants pay 75% of the First Respondent’s costs of the proceedings in the Equity Division and of the appeal.

3. Liberty to the First Respondent to apply to a judge of the Equity Division on 48 hours’ written notice to the Appellants in the event that the Appellants attempt to interfere unlawfully with the compliance by the Second Respondent with Orders 2(1), (2) and (3) above.

4. The parties be discharged from further compliance with condition (ii) attaching to the stay granted by the President on 24 May 2005.

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LAST UPDATED: 01/03/2006