Atkinson v Atlas Investments Limited

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

4086/03 George Atkinson v Atlas Investments Limited (5204/03) JUDGMENT 1 His Honour: In this matter, the plaintiff seeks to renew a conflict that was fought and lost, at first instance and on appeal. Of course, the laws of res judicata and issue estoppel do not allow him to fight on exactly the same ground as before. So his fresh actions attack an anterior assumption on which the earlier case was founded. In essence, the first question before me is whether to raise this issue now is an abuse of process. 2 In 1994, Mr Atkinson was an aging investor of substantial means, then married for 23 years, whose marriage had come to an end. His wife launched proceedings in the Family Court of Australia in which she sought a property settlement. Mr Atkinson, who was in the process of negotiating the purchase of a building in Muswellbrook (referred to as the State Bank building) for almost $1 million, decided to hide the purchase, when made, from his wife and the Family Court. The method he adopted was complex, and became more so as discovery appeared imminent. First, the defendant company, Atlas Investments Limited (Atlas), which was incorporated as a shelf company in Vanuatu, was adopted as the vehicle for the purchase, and a shelf trust, the Sabra Trust, also set up in Vanuatu, was utilised to hold its shares. The original idea seems clearly enough to have been that Mr Atkinson would be the beneficiary of the Sabra Trust. However, as I have foreshadowed, the approach of detection came breathing down Mr Atkinson's neck, and he decided to remove himself still further by the interposition of yet another Vanuatuan trust entity, Satellite Holdings Limited (Satellite). There is some variance in different accounts of precisely how the arrangements of which I am speaking were organised, and there may have been another entity as well, but essentially the procedure was as I have described. And instead of making himself Satellite's beneficiary, he was advised to arrange for it to declare a trust in favour of someone resident in a distant place not too readily accessible by his wife's Australian lawyers or the Family Court. He hit upon the idea of using an old friend of his who was living in Istanbul, a Mr Noall. 3 It is at this point that an event occurred around which a bitter dispute later arose. Either (as Mr Atkinson denied in Family Court proceedings, through a hearing at first instance and then a Full Court appeal, but asserted, again through two hearings, in the Supreme Court and Court of Appeal of Vanuatu) he retained in reality the beneficial interest in all the shares in Atlas, setting up merely another screen by arranging the creation of a purported trust in favour of Mr Noall, or (as the Supreme Court of Vanuatu, affirmed by the Court of Appeal, has held) he actually transferred his beneficial interest for full consideration provided by Mr Noall. 4 Two decisions of the Supreme Court of Vanuatu now stand in the way of Mr Atkinson's claim to be beneficially interested in the shareholding of Atlas. One is an order made on 27 May 1997, in a company proceeding, declaring as follows: "THAT JAMES OGILVEY NOALL is now, and has been since 15 June 1995, the beneficial owner of all issued shares in ATLAS INVESTMENTS LIMITED." The other is the decision of Saksak J made on 8 August 2001, affirmed by the Court of Appeal (Robertson, von Doussa and Fatiaki JJ) on 26 April 2002, in the Vanuatuan litigation to which I have referred. That litigation actually involved two proceedings - a company case in which Mr Atkinson sought a declaration to the effect that he was the beneficial owner of all the issued shares in Atlas, and a civil action against Mr Noall and a Vanuatuan solicitor in which he sought further relief to enforce his claimed beneficial interest in the shares in Atlas. Those proceedings comprehensively failed, Mr Atkinson's evidence being rejected as false and Mr Noall's evidence in support of his having acquired the status of beneficiary under the trusts appertaining to the shares being accepted as true. 5 I can now come to the present proceedings in this court. Those advising Mr Atkinson claim to have discovered a stone that was previously unturned. If he could show that, by the provision of the purchase money for the State Bank building, he had become the beneficiary of a resulting trust binding Atlas itself, the trust over its shares affirmed by the Court of Appeal of Vanuatu in favour of Mr Noall would be worthless, so far as concerns the effect it would otherwise have in relation to the control and disposition of the State Bank building. It could not affect Mr Atkinson's position as beneficial owner by resulting trust, not of the shares, but of the building itself. Indeed, since the shares in Atlas were only acquired, and the trusts set up, to be the vehicle for the purchase, control and disposition of the State Bank building - and no evidence to the contrary was led - the inference is overwhelming that there is no other asset in Atlas but the building and the rental income from it, so Mr Noall's victory would be wholly Pyrrhic. And on the assumption, which cannot now be challenged, that the courts of Vanuatu were right, a consequence would be that Mr Noall was seriously cheated when he was persuaded to pay full consideration equivalent to the value of the State Bank building for his Atlas shares - but that is an issue that may be left to one side. What Mr Atkinson has done is to have a summons issued out of this court against Atlas seeking declaratory relief based on his allegation that his payment of the purchase price created a resulting trust in respect of the State Bank building. As the summons had to be served on Atlas in Vanuatu, it was necessary for Mr Atkinson to take out a motion for leave to proceed under Pt 10 r 2 of the Rules. The defendant Atlas, for its part, has filed a motion to set aside the plaintiff's originating process under Pt 11 r 8(1)(a) and to seek an order declining to exercise jurisdiction under Pt 11 r 8(1)(g). There is also an application by the plaintiff for leave to lodge a further caveat on the relevant land title, and the court heard all three matters concurrently. It was accepted that the fate of the caveat application would depend on the court's decision upon the motions. 6 A number of issues were raised, but in substance only two were pursued in the argument presented by senior counsel for Atlas. His first contention was that, upon the uncontradicted facts, the law would not erect a resulting trust from Mr Atkinson's provision of the purchase moneys (which for the purposes of the present proceeding only he was prepared to accept as proved), because an actual intention that Atlas should hold the property beneficially was unqualifiedly manifested by the complex arrangements in relation to the shares in the company. It was through the shares, and thus through the company itself, that rights in relation to the land were intended to exercised. In the circumstances of the case, this argument is plainly of great weight, but it faces the difficulty of the very high standard, equivalent to that for summary dismissal, which is attracted by the ruling of the High Court in Agar v Hyde (2000) 201 CLR 552 at 576. It is therefore convenient to turn first to the alternative argument, that upon the principle of Port of Melbourne Authority v Anshun (1981) 147 CLR 589 the proceedings brought by the plaintiff in this court are an abuse of process. In my opinion, the motions can be decided on that basis. 7 Anshun is authority for the proposition that there is an extended principle of res judicata by which a party may be estopped from raising a matter in a second action that "was so relevant to the subject matter of the first action that it would have been unreasonable not to rely on it": per Gibbs CJ, Mason and Aickin JJ at 602 - 603. That the focus in this statement is on the word "unreasonable" was emphasised by Meagher JA (with whom Spigelman CJ - on this point - and Ipp JA agreed) in Ruddock v Taylor [2003] NSWCA 262 at [82], when he said: "An overall requirement of an Anshun estoppel is reasonableness. It does not arise unless it was unreasonable of the party sought to be estopped not to plead the cause of action in question." 8 There have, however, been slightly varying formulations of this principle in different courts. In Miller v University of New South Wales (2003) 200 ALR 565 at 590, Ryan and Gyles JJ, in their joint judgment, referred to the decision of the Court of Appeal of New South Wales in Rippon v Chilcotin Pty Ltd (2001) 53 NSWLR 198 and to the decision of the House of Lords in Johnson v Gore Wood & Co [2002] 2 AC 1, where Lord Bingham (at 31 -32) said of the corresponding principle in England, which is there referred to as Henderson v Henderson abuse of process: "But Henderson v Henderson abuse of process, as now understood, although separate and distinct from cause of action estoppel and issue estoppel, has much in common with them. The underlying public interest is the same: that there should be finality in litigation and that a party should not be twice vexed in the same matter. This public interest is reinforced by the current emphasis on efficiency and economy in the conduct of litigation, in the interests of the parties and the public as a whole. The bringing of a claim or the raising of a defence in later proceedings may, without more, amount to abuse if the court is satisfied (the onus being on the party alleging abuse) that the claim or defence should have been raised in the earlier proceedings if it was to be raised at all. … It is, however, wrong to hold that because a matter could have been raised in earlier proceedings it should have been, so as to render the raising of it in later proceedings necessarily abusive. That is to adopt too dogmatic an approach to what should in my opinion be a broad, merits-based judgment which takes account of the public and private interests involved and also takes account of all the facts of the case, focusing attention on the crucial question whether, in all the circumstances, a party is misusing or abusing the process of the court by seeking to raise before it the issue which could have been raised before." In Rippon v Chilcotin Pty Ltd at 203 Handley JA (with whom Mason P and Heydon JA agreed) said: "Counsel for the appellant did not contend for an Anshun estoppel, but the fact that the present claim could, and perhaps should, have been included in the Supreme Court proceedings, emphasises the close connection between the two proceedings and is relevant in considering whether the present action is an abuse of process." Plainly, it is implicit in what his Honour was saying that a "close connection" between a claim sought to be brought forward later and the issues in an earlier proceeding may make it "unreasonable", to use the language of the High Court, not to have brought the matter forward at the earlier time, or, in Lord Bingham's language may lead to the conclusion that the matter "should have been raised in the earlier proceedings if it was to be raised at all". 9 In the present case, it is inescapable that the whole substratum of the conflict fought out in Vanuatu was the right to control and dispose of the State Bank building. There is no prospect of such a precise inconsistency in law between a decision about the beneficial interest in the shares in a company and a decision whether the company holds a particular property that a point fundamental to the earlier decision, then assumed without being put in issue, would be involved in the later action, as was the case in Hoystead v Commissioner of Taxation (1926) AC 155, as to which see Blair v Curran (1939) 62 CLR 464 at 532; Brewer v Brewer (1953) 88 CLR 1 at 15; and Multistar Pty Ltd v Minister for Urban Affairs and Planning (No 2) (2000) 111 LGERA 319 at 325 - 328. But the shares were worthless if the company did not have the beneficial interest in the property, and it is inconceivable that the parties would have gone to the expense and trouble of the litigation had they not assumed that it would determine whether or not Mr Atkinson was the ultimate beneficiary of the building. There was indeed mention made of a sum of over $90,000 in that litigation, and a claim to it was also at stake; but this sum represented rent of the same building, and the fact that it was involved does not remove the litigation from the building but rather emphasises that the real nature of the dispute was not limited to a theoretical question about shares. 10 Furthermore, the close connection between the proceedings in Vanuatu and the question whether Atlas was indeed the beneficial owner of the State Bank building was not left to inference to be drawn from the absence in Atlas of any assets unconnected with that building and the consequent worthlessness of the shares in Atlas apart from it. In an affidavit sworn on 19 November 1997 in the company case in Vanuatu, Mr Atkinson gave evidence as follows: "5. By 3 August 1994 Atlas Investments Limited became the owner of the Muswellbrook property. … 16. The principal asset of Atlas Investments is a property at Muswellbrook in the Hunter Valley, New South Wales. That property has a net value of approximately AUD$950,000 and it generates rental of approximately AUD$92,000 per annum … The rental is paid to the bank account of Atlas Investments in Port Vila… . … 22. In these circumstances I seek a declaration that I am the true owner of Atlas Investments Limited." It would have been easy, in that proceeding, to have added an alternative claim to be entitled to the assets of Atlas upon a resulting trust. 11 In the submissions presented on behalf of Mr Atkinson in the Supreme Court of Vanuatu, it was expressly submitted that "the Family Court of Australia had no doubt that Mr Atkinson was the true beneficial owner of Atlas Investments which in turn owned the Muswellbrook property." In fact, this was a reference to a decision at first instance which was set aside on appeal upon a ground irrelevant to the present matter, but what is presently important is the assertion about the ownership of the Muswellbrook property (the State Bank building) by Atlas. 12 Again, the failure to make any claim of a resulting trust in Vanuatu left the Supreme Court of Vanuatu in the position where it was a plain underlying assumption of the litigation that it related to claims to the Muswellbrook property asserted indirectly through the shares. For in the judgment of Saksak J (at 14) the statement appears, in the course of a discussion of evidence bearing on whether Mr Noall or Mr Atkinson was beneficially entitled: "That admission is consistent with his [Mr Atkinson's] instructions to the trustee to transfer AU$92,000 to Mr Noall's account in Switzerland on 23rd March, 1997. What Mr Atkinson was doing in effect was simply administering the funds from the Muswellbrook property on behalf of Mr Noall, the beneficiary." Here, again, the property ultimately the subject of the dispute was seen as the State Bank building at Muswellbrook. 13 It accords with this view of the proceedings in Vanuatu that consent orders made by the Family Court of Australia on 16 December 1997 included a section: "THE COURT NOTES: ... 7. The Husband [i.e. Mr Atkinson] and Atlas Investments Limited [which joined in the making of the orders as a consenting party] acknowledge that proceedings with respect to Atlas Investments Limited, and the property situated at and known as Corner Bridge and Brook Streets, Muswellbrook, New South Wales being the whole of the land comprised in Folio Identifier [a number is stated which is difficult to read in the copy in evidence] ("the Muswellbrook Property") are continuing in The Republic of Vanuatu, and are the subject of orders made by the Supreme Court of the Republic of Vanuatu on 12 December 1997." The statement quoted from the consent orders directly asserts a close connection between the proceedings in Vanuatu and the question, now sought to be raised in this court, of the ownership of the State Bank building. 14 During the hearing, I raised the question whether an answer to the present application by Atlas might be available to Mr Atkinson on the basis that it was appropriate, in the light of what has been called the Moçambique principle, to leave any issue concerning the beneficial title to land in New South Wales to be dealt with in a proceeding in New South Wales: Inglis v Commonwealth Trading Bank of Australia (1972) 20 FLR 30; British South Africa Co. v Companhia de Moçambique [1893] AC 602; Hesperides Hotels Ltd v Muftizade [1979] AC 508; Re Doyle (dec'd), Ex parte Brien v Doyle (1993) 112 ALR 653, especially at 669 - 670. 15 However, further reflection has convinced me that counsel for Atlas were right when they submitted that a claim to a resulting trust would not fall within the Moçambique principle, but within a recognised exception to it. In Deschamps v Miller [1908] 1 Ch 856 at 863 - 864, Parker J said: "In my opinion the general rule is that the court will not adjudicate on questions relating to the title to or the right to the possession of immovable property out of the jurisdiction. There are, no doubt, exceptions to the rule, but, without attempting to give an exhaustive statement of those exceptions, I think it will be found that they all depend on the existence between the parties to the suit of some personal obligation arising out of contract or implied contract, fiduciary relationship or fraud, or other conduct which, in the view of a Court of Equity in this country, would be unconscionable, and do not depend for their existence on the law of the locus of the immovable property. Thus, in cases of trusts , specific performance of contracts, foreclosure, or redemption of mortgages, or in the case of land obtained by the defendant by fraud, or other such unconscionable conduct as I have referred to, the court may very well assume jurisdiction ." (Emphasis added.) When the House of Lords, in Hesperides Hotels Ltd v Muftizade, affirmed the continuing validity of the Moçambique principle, Lord Wilberforce (at 534) expressly excepted "actions in equity (Penn v Lord Baltimore (1750) 1 Ves. Sen. 444) and other special cases", while Lord Fraser of Tullybelton (at 544) said: "Moreover the courts both in England and in Scotland have asserted jurisdiction in actions to enforce contracts relating to foreign land although enforcement can only be by indirect means." 16 It follows that the Supreme Court of Vanuatu would have jurisdiction to hear an equitable claim alleging the existence of a resulting trust arising, in the context of the arrangements (including trusts of shares) involved in Mr Atkinson's transaction, from the payment of the purchase price under the contract entered into by Atlas for the purchase of the State Bank building. In assuming jurisdiction under an exception applicable to a resulting trust alleged to arise out of the personal relationship between Mr Atkinson (as provider of the money) and Atlas when it made payment of the purchase price, the Supreme Court of Vanuatu would be acting strictly within the scope of the exceptions to the Moçambique principle to which I have referred. No question of comity could arise, both for this reason, and also because the courts of New South Wales actually themselves claim a wider jurisdiction over cases involving foreign land by virtue of the Jurisdiction of Courts (Foreign Land) Act 1989. That Act provides (by s 3): "The jurisdiction of any court is not excluded or limited merely because the proceedings relate to or may otherwise concern land or immovable property situated outside New South Wales." Curiously, the heading to s 3 refers to the abolition of "the Mozambique [sic] rule". 17 In the result, I have reached the conclusion that Mr Atkinson's proceedings in this court are an abuse of process upon the principle in Anshun. Therefore his motion for leave to proceed must be dismissed with costs; the motion brought by Atlas Investments Limited to set aside the plaintiff's originating process must be allowed with costs (although, of course, the costs of the hearing are allowed as of a single motion); and the Amended Summons with respect to the caveat should be dismissed with costs. In the motion taken out by Atlas, indemnity costs are sought, but I do not exercise my discretion to enlarge any of the costs orders in that way, although Mr Atkinson should be aware that a similar discretionary decision might not be made in the future if further proceedings in relation to this matter are found to be abusive.

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