Barton v Armstrong

December 5. The majority judgment of their Lordships was delivered by LORD CROSS OF CHELSEA.

This is an appeal by leave of the Supreme Court of New South Wales from a decree of that court (Mason J.A. and Taylor A-J.A., Jacobs J.A. dissenting) made on June 30, 1971. That decree dismissed the appeal of the appellant, Alexander Barton, against a decree of Street J. made on December 19, 1968, which dismissed a suit brought by the appellant against the respondents in which he sought a declaration that a deed dated January 17, 1967, made between the appellant md the first 14 respondents and certain deeds ancillary thereto had been executed by him under duress exerted by the first respondent, Alexander Ewan Armstrong, and were void so far as concerned him.

The case is the outcome of a struggle between Armstrong and Barton for control of the 14th respondent, Landmark Corporation Ltd., a public company with an issued capital of 1,753,000 dollars divided into shares of 1 dollar each which is now in liquidation. In the middle of 1966 — when the story begins — Armstrong was the chairman of Landmark and either himself or through the medium of one or other of the second to the sixth respondents (which are family companies controlled by him) held 300,000 shares in the company — the largest single shareholding in its capital. Barton was the managing director of Landmark and was a substantial shareholder in it — though his holding was less than that controlled by Armstrong. The other directors were John Osborne Bovill, the eighteenth respondent, and a Mr. Cotter. The seventh to thirteenth respondents are subsidiaries of Landmark.

In 1966 the principal activity of Landmark was the development through the medium of the eighth respondent, Paradise Waters (Sales) Pty. Ltd. (hereinafter called “Sales”), and the ninth respondent, Paradise Waters Ltd., of a building estate near Surfer's Paradise in Queensland which was to be known as “Paradise Waters.” The land in question had been owned by the tenth respondent, Goondoo Pty. Ltd., which was then controlled by Armstrong. Goondoo sold the land, which was “swamp,” to Paradise Waters Ltd. and Goondoo's shares were bought by Landmark. All the shares in Paradise Waters Ltd. were held by Sales but only 60 per cent. of the shares in Sales were owned by Landmark, the remaining 40 per cent. being held by one of the Armstrong companies, the third respondent, Finlayside Pty. Ltd. Of the purchase price payable in respect of the sale of the Paradise Waters land, 400,000 dollars remained unpaid. This sum was secured by mortgages given by Paradise Waters Ltd. to the respondent, George Armstrong and Son Pty. Ltd., which provided, inter alia, that the sum secured with interest should become payable forthwith if Armstrong should be removed from the chairmanship of Landmark. It will be seen therefore that Armstrong through his companies was interested in the Paradise Waters project in three different ways. Fir as a secured creditor for 400,000 dollars; secondly as holder of 40 per cent. of the share capital of Sales, and thirdly as the largest shareholder in Landmark which held 60 per cent. of the capital of Sales.

The “Paradise Waters” project involved the expenditure of large sums in dredging and forming canals to provide water frontages for the lots into which the land was to be subdivided for sale. This expenditure was being financed by advances made by United Dominions Corporation (Australia) Ltd. (hereinafter called “U.D.C.”) which were secured by mortgages on the land which had priority over the mortgage for 400,000 dollars to George Armstrong and Son Pty. Ltd. By November 1966, a sum of over 400,000 dollars had been advanced by U.D.C. in respect of development costs which were running at the...