Australian Softwood Forests Pty Ltd v Attorney-General (NSW) (Ex Rel Corporate Affairs Commission)

148 CLR 121
36 ALR 257

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(Judgment by: WILSON J)

Between: Australian Softwood Forests Pty Ltd
And: Attorney-General (NSW) (ex rel Corporate Affairs Commission)

Court:

Judges: Gibbs CJ
Stephen J
Mason J
Murphy J

Wilson J

Hearing date: 4 December 1980
Judgment date: 18 September 1981

Canberra

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Judgment by:
WILSON J

This is an appeal by special leave from the unanimous decision of the Court of Appeal of the Supreme Court of New South Wales (Reynolds, Hutley and Samuels JJ.A.) dismissing an appeal from Helsham C.J. in Eq. There is a cross appeal by the respondent with respect to the form of relief granted by the Court of Appeal.

Each of the first three appellants ("the plantation company") is the owner of land suitable for growing pine trees. Such areas are described in the facts of this case as plantations. Each plantation is divided into a number of portions, each portion being thought to be capable of accommodating approximately three hundred pine trees. The agreed statement of facts provides details concerning six plantations, containing altogether more than 9,000 portions. The procedure employed by each plantation company is the same. Brokers are engaged, each with responsibility for recruiting participants from within a defined locality. His task is to interview any person in his area who wishes to participate in the scheme, secure the execution by him of an agreement with the plantation company in question and payment of the moneys required, and forward the agreement and the money to the company for acceptance by it. If the agreement is accepted, that person is known as a grower. The agreement provides for the allocation to the grower of one or more portions as the case may be of the land comprised in a plantation, and for the purchase by him of three hundred infant trees for each portion. The company undertakes to plant the trees, and to tend and maintain them until maturity, and the grower undertakes not to interfere in that work. The grower pays to the company the sum of $50.00 for each three hundred trees, plus a sum of $340.00 for planting and tending, the latter sum being payable by monthly instalments over a period of years.

Upon maturity, or when the trees are in the opinion of the company marketable, the company is to notify the grower; the grower must within six months thereafter cause the trees on his portion to be felled and removed at his risk and expense as his property, but he must have given notice to the company of his intention to do this within one month of service upon him of the notice from the company of maturity or marketability; in the absence of such notice to the company, he is deemed to have appointed another named company, the fourth appellant ("the agency company") as his agent to fell and remove the trees and to dispose of the same as timber at such price as it can reasonably obtain and to pay him 80 per cent of the net proceeds of realization. The relationship between the grower and the agency company is the subject of a separate agreement, which, it would seem, the grower is obliged to complete when entering into the agreement with the plantation company.

The agreement between the plantation company and the grower records that the company has entered into a trust deed, and that the trustee under that deed will act as the representative of the grower. In the trust deed the company covenants to perform its obligations under the agreement, and the deed gives the trustee in the event of breach by the company the right to enter and perform those obligations.

Clearly there is but one scheme involved in all this. Details are given of six plantations, which are obviously worked as one. All four appellant companies are wholly owned subsidiaries of Percheron Investments Pty. Ltd., which owns the equipment which is used on the plantations. The agency company employs about forty-five persons in the planting and maintenance of the plantations and in administration and other related duties. Both the parent company and the agency company make appropriate charges on each of the plantation companies for equipment used and work done.

The question that has arisen is whether in these circumstances the appellants are required to comply with the provisions of Div. 5 of Pt IV of the Companies Act 1961 (NSW) ("the Act"). In general terms, those provisions seek to protect the investing public by controlling the manner in which 'interests', other than shares or debentures, are issued or offered to the public. Section 81, so far as material, provides:

"(1)

No person, except a company or an agent of a company authorised in that behalf under the seal of the company, shall issue or offer to the public for subscription or purchase or shall invite the public to subscribe for or purchase any interest."

"Interest" is defined in s. 76 (1), as is the term "Investment contract":

"'Interest' means any right to participate, or interest, whether enforceable or not and whether actual prospective or contingent -

(a)

in any profits, assets or realisation of any financial or business undertaking or scheme whether in the State or elsewhere;

(b)

in any common enterprise whether in the State or elsewhere in which the holder of the right or interest is led to expect profits, rent or interest from the efforts of the promoter of the enterprise or a third party; or

(c)

in any investment contract, whether or not the right or interest is evidenced by a formal document and whether or not the right or interest relates to a physical asset, but does not include -

(d)

any share in or debenture of a corporation;

(e)

any interest in or arising out of a policy of life insurance;

(f)

an interest in a partnership agreement, unless the agreement or proposed agreement -

(i)

relates to an undertaking, scheme, enterprise or investment contract promoted by or on behalf of a person whose ordinary business is or includes the promotion of similar undertakings, schemes, enterprises or investment contracts, whether or not that person is, or is to become, a party to the agreement or proposed agreement; or

(ii)

is or would be an agreement, or is or would be within a class of agreements, prescribed by the regulations for the purposes of this paragraph; or

(g)

a prescribed right or interest or a right or interest of a prescribed class or kind declared by the regulations to be an exempt right or interest for the purposes of this Division.

'Investment contract' means any contract scheme or arrangement which in substance and irrespective of the form thereof involves the investment of money in or under such circumstances that the investor acquires or may acquire an interest in or right in respect of property whether in the State or elsewhere which under or in accordance with the terms of investment will, or may at the option of the investor, be used or employed in common with any other interest in or right in respect of property whether in the State or elsewhere acquired in or under like circumstances."

The words "a company" in s. 81 refer to a public company.

Mr. Bainton Q.C., counsel for the appellants, argues that these provisions have no application to his clients. In the first place he says that the growers do not acquire an "interest" within the meaning of that term as defined by the Act; in the second place he says that in any event, there was no issue or offer to the public for subscription or purchase nor was there any such invitation to the public. On the other hand, Mr. Bannon Q.C., counsel for the Corporate Affairs Commission, points to the breadth of language with which the concept of 'interest' is defined. He argues that the present scheme is caught under any or all ofest' is defined. He argues that the present scheme is caught under any or all of that the agreed facts detailing the different ways in which growers are recruited establish an "issue or offer to the public for subscription or purchase".

I agree with Helsham C.J. in Eq. and the members of the Court of Appeal that the agreement confers on a grower an interest in the assets of a business undertaking or scheme. Each plantation company is engaged in a business undertaking; furthermore, it seems to me that there is clearly a "scheme": Clowes v. Federal Commissioner of Taxation (1954) 91 CLR 209 . It is conceded that the grower enjoys a profit a prendre in respect of that portion of the land which is allocated to him. It is immaterial whether the grower owns the trees from the moment they are appropriated to the contract or only at maturity, as Helsham C.J. in Eq. was inclined to think. Both the land and the growing trees form assets of the scheme. Although the growers have no right under the agreement to enter the land during the growing period, they can call on the trustee to protect their interests and to ensure that the trees are properly cared for. Both the land and the growing trees constitute "assets... of any... business undertaking or scheme". Furthermore, it is immaterial that upon maturity ownership of the trees on severance vests in the grower and his interest in the land is extinguished. The time for considering the existence of an "interest" is the time when the arrangement is implemented.

In the light of this conclusion, it is unnecessary to consider whether the arrangement creates an "interest" pursuant to pars. (b) or (c). However, I may say that I would find little difficulty in perceiving the existence of a common enterprise between the individual grower and the plantation company. It is an enterprise in which the grower furnishes a capital sum with which the infant trees are acquired and makes a regular contribution over a lengthy period of time to the costs of fostering growth; on the other hand the owner of the land makes available that without which the growth could not take place, and is responsible for the care and nurture of the trees. It is from the efforts of the promoter of the enterprise that the grower, the holder of the interest, is led to expect profits. Whether or not the arrangement also constitutes an "investment contract" is a question of greater difficulty, the definition of such a contract raising a number of issues which it is neither necessary nor profitable to discuss.

Whether there was in this case an issue or offer to the public of an interest for subscription or purchase is a question of some difficulty. The facts on which an answer must depend are set out in a statement of agreed facts as follows:

"8.

Persons described as 'brokers' are appointed by the defendant Percheron Acceptance Corporation Pty. Limited to operate generally in particular areas. The form of broker's agreement which is entered into with the said persons is annexed hereto and marked 'D '....

9.

The method by which contracts... are entered into with 'growers' is that either -

(a)

such a person makes contact with one of the defendant companies seeking to enter into a grower's agreement and is referred by that company to a broker operating in the area where such person lives and with whom he has further discussions which may lead to his entering into a grower's agreement; or

(b)

such persons make a direct approach to a broker usually on the recommendation of an existing grower to whom such person is or has become known and by whom the name of the broker is furnished; or -

(c)

such persons are approached by a broker at the request of an existing grower to whom - usually, if not invariably - a request has previously been made by such person that the broker be asked to call when next in the area.

10.

Except as is stated in the preceding paragraph none of the defendants takes any steps, either by advertising or personal approach, to solicit clients to execute agreements for the sale planting and tending of pinus genus plants on the said Plantations.

...."

The form of broker's agreement referred to in par. 8 is to the effect that the broker is given the right within the allotted area to seek or solicit orders from prospective clients who wish to buy trees to be planted on a plantation. The broker arranges for the client to complete the form of agreement and pay the necessary moneys and he then forwards them to the company. The agreement is not binding on the company until accepted by it. The broker is remunerated by reference to the number of trees the sale of which arises from the broker's "sole initiative". It is expressly provided that "the Broker shall not publish or distribute or cause to be published or distributed any advertisement circular or other advertising matter relating to the sale of trees in accordance with the provisions of this Agreement".

In the Court of Appeal, Hutley J.A., with whom the other members of the Court agreed, dealt summarily with the question of an invitation to the public by referring to the description in the judgment of Helsham C.J. in Eq. of the method of wining growers, and commenting that once the accuracy of that description was conceded the matter became unarguable. However, in arguing the appeal to us, Mr. Bainton submitted that his Honour's description was inaccurate in so far as he summed up the third method of recruiting growers outlined in par. 9 of the agreed facts with the simple statement "where the broker calls on him". It was argued that such a summation overlooks a material element, namely, that such an approach is made at the request of an existing grower to whom usually, if not invariably - a request has previously been made by such person that the broker be asked to call. If attention is confined to the precise description in par. 9, I would have to say, with respect to his Honour, that I think Mr. Bainton's point is well made. The impression conveyed by par. 9 is that the broker does not exercise any initiative at all in the way of approaching prospective growers. He deals only with persons who are referred to him by the company, or with persons who come to him usually on the recommendation of an existing grower, or with persons whom he approaches at the request of an existing grower. It is unnecessary to consider whether, so interpreted, the facts in par. 9 establish an invitation, offer or issue "to the public" because that paragraph does not stand alone. It must be read with par. 8, which exhibits the form of broker's agreement. As I have already noted in referring to that agreement, it speaks of contracts with growers arising from the broker's "sole initiative", and contemplates the broker's role as one in which he seeks or solicits orders (cf. cll. 4 and 12).

Essentially, Mr. Bainton's submission on this question is that because there was no advertising, no public solicitation, then it cannot be said that there was an issue or offer to the public. He argued that "issue" means no more than "proffer" and so adds little to "offer". There must, he says, be a making known to the public at large, or to a sufficiently large element of the public so that any of them may come in and take up the offer. On the other hand, Mr. Bannon argues that it is not the manner in which the offer is made, but the character of the person to whom it is addressed. Is he invited in his character as a member of the public or by reasons of his standing in a special relationship to the invitor?

In Lee v. Evans (1964) 112 CLR 276 this Court had occasion to consider the meaning of the phrase "invitation to the public" in a South Australian statute. The judgments in that case emphasise that the determination of the true nature of an invitation is a question of fact and degree dependent upon the particular enactment and the circumstances of each case. The manner in which the invitation is conveyed, whether by public advertisement or by personal solicitation is not decisive. But, however conveyed, to be an invitation or offer to the public, it must be general in the sense of being available to be acted upon by any member of the public. After stating such a proposition, Kitto J. continued (1964) 112 CLR, at p 287:

"I am not intending to hold, however, that the size of the immediate audience is necessarily conclusive of the question whether the invitation is an invitation to the public. That is a question of the true scope of the invitation.... an invitation even to one person only may be seen, when considered in the light of all the circumstances, to be part of, even though only the first step in, the communication of the invitation to the public generally, so that if the lone hearer were to tell some stranger of it the stranger would be right in treating it as open to acceptance by him no less than by the hearer."

Taylor J. said (1964) 112 CLR, at p 290:

"... it is necessary to draw a distinction between the essential character of the invitation and the manner of its communication or publication and it is the former element and not the latter which is ultimately of critical importance... ".

The same point is made succinctly by Wynn-Parry J. in Governments Stock and Other Securities Investment Co. Ltd. v. Christopher (1956) 1 WLR 237 , at p 242 in a case in which he held that an offer to shareholders to purchase shares was not an offer to the public:

"... the test is not who receives the circular, but who can accept the offer put forward."

The facts show that at the material time 4,866 agreements had been made between growers and the plantation companies covering 7,871 portions. It is obviously a scheme that largely depends for its promotion on communication by word of mouth, with existing growers playing a significant role. But brokers are not required to confine their efforts to prospective growers who satisfy any particular criterion. Any member of the public may become a grower provided that he or she pays the requisite fee and executes the agreement, and provided, of course, that the company accepts the agreement. It was not suggested in argument that this latter requirement affects the character of the invitation or offer. Having regard to the number of participants the fact that the sole characteristic which they have in common is that they are members of the public, the nature of the scheme, and the protective purpose of the legislation, I conclude that the circumstances were such as to establish an offer to the public of an interest for subscription or purchase or an invitation to the public to subscribe for or purchase any interest. In the context of this case I do not find it necessary to consider the precise scope and meaning of the word "issue" in s. 81.

It remains to consider the propriety of the grant of an injunction, and the cross appeal of the respondent. The cross appeal seeks the restoration of the declarations made at first instance. Helsham C.J. in Eq. granted both declarations and injunctions. The Court of Appeal took the view that the declarations were no more than an unnecessary preface to the grant of an injunction, and it varied accordingly the order from which the appeal was brought. In this Court there was no suggestion that the conduct with which the case has been concerned was continuing and the respondent did not press for the injunction to be maintained. However, it did press for the restoration of the declarations made by Helsham C.J. in Eq. I agree that this would be a proper course to follow, save that no declaration should be made respecting Plantations 65A, 71A, 72A and 73A. There is no satisfactory evidence before the Court touching these plantations, and the relief should therefore be confined to the remaining five plantations to which the agreed facts referred.

I would therefore dismiss the appeal save that the order for an injunction should be set aside, and allow the cross appeal. I would make declarations in the terms that I have indicated.