Case: Hadjiloucas v Crean [1988] 1 WLR 1006
Outcome: considered
of the cases to which their Honours refer, at para 33 in the passage quoted, is Hadjiloucas v Crean [1988] 1 WLR 1006. In particular, their Honours draw attention in their joint judgment to remarks made by Mustill LJ at page 1019, with reference to earlier remarks as to sham, made by Diplock LJ in Snook v London and West Riding Investments Ltd [1967] 2 QB 786 at 802. What Mustill LJ had to say was this: [I]t is necessary to distinguish between three situations in which, aside from any question of rectification, the court may take an agreement otherwise than at its face value. The first exists where the surrounding circumstances show that the arrangement between the parties was never intended to create any legally enforceable obligation. The second is the case of the "sham", in the sense in which that word has been used in numerous cases, including Snook v London and West Riding Investments Limited (1967) 2 QB 786 at 802. Correctly employed, this term denotes an agreement or series of agreements which are deliberately framed with the object of deceiving third parties as to the true nature and effect of the legal relations between the parties. The third situation is one in which the document does precisely reflect the true agreement between the parties, but where the language of the document (and in particular its title or description) superficially indicates that it falls into one legal category, whereas when properly analysed in light of the surrounding circumstances it can be seen to fall into another. As I have mentioned by reference to Mustill LJ's observations in Hadjiloucas , there are three situations in which a court might take an agreement otherwise than at its face value. A fair reading of the Commissioner's appeal statement, as originally cast, takes one to the position, confirmed in open court by the statement on the Commissioner's behalf, that a sham in the sense described by Mustill LJ was not being relied upon, as opposed to one or perhaps both of the other bases upon which a court might choose to take an agreement otherwise than at its face value. It was submitted on behalf of the Commissioner that the amended appeal statement was merely an extension of sentiments already apparent in the appeal statement as filed in February. It is true to say that the use of the word "purported" raised or might be thought to raise an interrogative note as to exactly the case the Commissioner was seeking to have a taxpayer meet by way of discharging the burden of proving an assessment to be excessive. Whatever interrogative note there may be in that word was answered on 20 March. Mr Prescott deposes in his affidavit to the particular consequences which he apprehends would fall upon Pacific Exchange in the event that leave to amend were granted. These statements are not challenged: If the new allegations are allowed to be pressed, then I believe that the trial dates will have to be vacated. We will need to seek particulars of the allegations, apply for limited discovery, prepare affidavits in reply, including an affidavit for Mrs Catherine Cea against whom the allegation of sham has been made in and because of her absence as a witness, and prepare an amended appeal statement. Having regard to the time taken to date in preparing the case to date, this will take a significant amount of time. It is further relevant to note that both Mr Philip Cea and Ms Michelle King have finalised their travel arrangements to attend before the Court in three weeks time. Having discussed the issue with Mr Robertson of counsel, my reasons for deciding not to produce an affidavit from Mrs Catherine Cea were two-fold: (a) Counsel was satisfied that the material provided and evidence sworn by Mr Phillip Cea and Ms Michelle King was, when read in conjunction with the other affidavit material and evidence provided, sufficient to adequately address the issues which I believed, at the time were to be resolved by the Court, and (b) More importantly, Mrs Catherin Cea's medical condition was such that she was house-bound and would not be able to travel to Australia to give evidence on medical advice. [sic]