Maria Immaculata Dominello was born in March 1934 at San Giovanni di Gerace, Italy. She migrated to Australia with her mother in 1948. She is now 83 years of age. She is presently living in a state of great uncertainty.
The property in which she is living, in Arthur Street, Ryde, is the subject of a disputed joint venture agreement. On either version of the joint venture agreement is it unclear what is her right, if any, to reside in the Ryde property. This uncertainty cannot be allowed to continue in the interests of these parties, and in particular Mrs Dominello.
The Court has decided to case manage these proceedings closely since they first came into the duty list on 2 March 2017. Since then, they have been adjourned to 7 April 2017, then to today for directions.
The Court has decided to intervene because the disputes between these parties, and these proceedings, have proceeded slowly and need now to rapidly resolve. Although there are major disputes between the parties about who was a party to, and what are the terms of, the joint venture agreement, it may readily be inferred from the circumstances that some joint venture was made. Both parties say that the joint venture was made in about September-October 2011, so it is now almost six years old.
The Ryde properties remain undeveloped. There are several reasons for this. Misunderstandings have arisen about the demolition of some of the buildings on the Ryde property contrary to at least one version of the agreement. And the third plaintiff, Mrs Dominello, is living in the remaining Ryde property.
These proceedings were commenced in April 2016. Pleadings have closed, with a Statement of Claim and a Defence filed by June 2016 and a Cross-claim by September 2016. The plaintiffs have filed their evidence. After a series of failures to file the defendants' evidence between September 2016 and February 2017, a large part of the defendants' evidence now seems to be filed. But the material filed and the directions the Court has undertaken have thrown up a number of procedural issues that need to be resolved. The Court has attempted to do this on previous directions hearings but, as will be seen, without great success. The procedural steps to follow cannot be readily understood, without some basic understanding of the underlying issues.
Mrs Dominello, the third plaintiff in the proceedings, is the mother of the first plaintiff, Millie Booth, who is married to the second plaintiff, Grant William Booth. They allege in the Statement of Claim that together, in September 2011, they entered into an oral joint venture agreement with Mr Norm Cerreto, the first defendant, and Mr Antonio Salerno, the second defendant.
The substance of the joint venture agreement, they allege, is that the Ryde property (actually a number of parcels of land) would be developed for the benefit of the plaintiffs and the first and second defendants. They accept that the third defendant, Arthur Street Facility Management Pty Limited, but not the fourth defendant, Arthur St Build Group Pty Limited, was the contemplated corporate joint venture vehicle.
The terms of the alleged joint venture were that the first and second plaintiffs, the Booths, would cause the third plaintiff, Mrs Dominello to transfer the Ryde properties into the joint venture. The net equity in the properties would represent the plaintiffs' contribution to the joint venture. The plaintiffs allege that Norm Cerreto and Antonio Salerno would for their part contribute to the joint venture by repaying the existing mortgage indebtedness secured against the properties, the financing and undertaking of the subdivision of the properties and their development, and the construction of a number of residences on the property. In the meantime, Mr Cerreto and Mr Salerno would provide alternative accommodation for the plaintiffs during the term of the joint venture.
Mr Cerreto and Mr Salerno's understanding of the joint venture is surprisingly different. They say that the joint venture was in writing and involved quite different parties. The defendants say that a joint venture was made, not with them personally but between the third and fourth defendants and the plaintiffs. Also the plaintiffs' version is that, upon development of the Ryde property, the plaintiffs would be entitled to one-half of the residences resulting from the development. The defendants' version, which is reflected in the written form of the agreement, is that the plaintiffs would be entitled only to a single residence in the development and they would otherwise be entitled to profit from the development in accordance with a formula based upon the financial contribution of each of the parties to the development. The plaintiffs' and the defendants' respective versions of the agreement would produce quite markedly different financial results for these parties.
On the last occasion, 7 April, the Court directed that the parties provide copies to the Court of their evidence filed in the proceedings. That evidence presents stark divergence in versions with the possibility of fraud having occurred, depending upon which of these parties is believed. Mrs Dominello was the registered proprietor of the Ryde properties. She is said by the first to fourth defendants to have signed a document entitled "Asset Sale Agreement". A signature purporting to be hers appears on the document. This document is largely consistent with the defendants' case. But Mrs Dominello's evidence is that it is not her signature. She says that, prior to the filing of the defendants' evidence in these proceedings, she had never seen the document. Moreover, she says she did sign the two contracts for the sale of the Ryde properties to the third defendant. Although she says they were not witnessed in her presence and she does not recognise the signature of the person who is said to have witnessed her signature on them.
But there are even more stark differences. Mrs Dominello and her daughter, Mrs Millie Booth, both say that they did not engage any independent solicitors to act for them in the making of the Asset Sale Agreement. But the defendants' case is quite different. The first to fourth defendants say that their solicitor, Mr Stefano Laface, the principal solicitor of AJL Legal, acted for them in the making of the Asset Sale Agreement and that Mrs Dominello was represented by an independent solicitor at the firm Logan Fox. Mrs Dominello and Mrs Booth say that they never engaged Logan Fox and had nothing to do with that firm at any stage in relation to this transaction.
Faced with this starkly inconsistent evidence at the directions hearing on 7 April, the Court decided to give directions to the parties to try and winkle out more detail as to what may have occurred and whether, for the purposes of case management of the proceedings, it was likely Logan Fox might need to be joined as a defendant.
What emerged as a result of the Court's directions is that Mr Stefano Laface, on behalf of AJL Legal, says in correspondence addressed to the Court that Logan Fox did act for Mrs Dominello. But the way this happened, according to Mr Laface, to use his own words, was this:
"AJL Legal and I had never acted for Mrs Dominello as set out above. She was independently represented in relation to the transaction. After Logan Fox had provided the said advice to Mrs Dominello, the signed documents were returned to Mr Cerreto, who provided them to AJL Legal."
It seems reasonable to infer from this statement that Mr Cerreto was the person who may have collected the documents from Mr Laface and taken them to Logan Fox, or been asked to take them to Logan Fox. But Mr Cerreto's affidavit is very cloudy on this subject. He simply says that he told Mrs Booth that Mr Laface could not act for her, and then goes on to explain events as follows:
"9. Contracts for the sale and purchase of land were entered into on 13 September 2012 on both properties ("Contracts for sale") true copies of which are exhibited as listed in the table below.
10. Shortly prior to entering into the Contracts for sale, Dominello, Salcorp and ASFM all entered into a tripartite deed referred to as "Asset Sale Agreement" on a date which has not been recorded, and which is exhibited as listed in the table below.
11. At the time of negotiating and finalisation of the Asset Sale Agreement, I spoke to Booth and Dominello, the exact date of which I cannot recall. A conversation took place to the following effect:
Me: "Go get advice from a lawyer that is familiar with you and your family, I don't want any issues with your brothers or sisters when this deal is done."
Booth: "I don't want to use Mattick as he will not agree with what is happening, he doesn't understand what a mess we are in, I would prefer to use another lawyer."
Me: "Well I use Laface, so you won't be able to use him, but he will deal with all the banks to advise us of what payments to be made to clear all the arrears, why don't you use the firm across the road?"
Booth: "Okay I will do that."
The affidavit does not give any more detail as to how either AJL Legal or Mr Cerreto dealt with Logan Fox. The documents produced on subpoena so far by AJL Legal (and the question of completeness of production is still a matter in dispute) do not show any correspondence between AJL Legal and Logan Fox about the Asset Sale Agreement or about Logan Fox acting for Mrs Dominello.
The final issues in this case need much better definition. If Mrs Dominello's account is accepted, then someone forged her signature on the document, at some time after it passed through Mr Cerreto's hands. And it is at least open to infer that whoever was responsible for the forgery may also have failed to communicate with Logan Fox for Mrs Dominello.
Of course the other possibility is that Mrs Dominello's evidence and that of her daughter, Mrs Booth, may not be accepted. But because of these competing allegations, it is more than likely that expert evidence in relation to the handwriting on the original Asset Sale Agreement will be required. There should be close monitoring of the production of documents relating to the transmission of the Asset Sale Agreement, once it left the hands of Mr Laface.
Mr Cerreto may choose to provide more satisfactory evidence as to what happened to the Asset Sale Agreement in his hands. His evidence, in its present form, still leaves as something of a mystery, how what he says is Mrs Dominello's signature came to be on the document. But one thing is certain at this stage: that the original Asset Sale Agreement will need to be subpoenaed by someone and put into the custody of the Court or one or other of the parties, so it can be made available for expert handwriting examination.
But the Ryde property has not been developed. One of the two residences on the property was demolished apparently due to a misunderstanding between the parties. Another property in Pymble was leased for a period of time to house Mrs Booth and her husband, and possibly Mrs Dominello. But those arrangements were terminated and Mrs Dominello is now back in the surviving residence on the Ryde property. She is no longer the registered proprietor of the Ryde property. She is, so far as the Court can see, living there more or less at the good will of the defendants. This is the unsatisfactory situation to which the Court referred at the beginning of these reasons.
To better equip the Court as to what should be done with this unsatisfactory situation, the Court made directions on 7 April to the following effect:
"1. Adjourn these proceedings for further directions to Monday 24 April 2017 at 9.30am before me.
2. Order the first and second defendants to provide by Friday 21 April 2017 by 12 noon an account to the plaintiffs of all monies paid into and out of the joint venture the subject of the Statement of Claim and the Defence since the commencement of the joint venture and up to the date of the account, including the provision of a current balance sheet of the joint venture.
3. Grant access to the documents produced on the subpoena to Mr Stefano Laface of AJL Legal Services Pty Limited.
4. List the proceedings at 9am, Wednesday 19 April 2017 before the Registrar for the return of subpoenas in this matter.
5. Direct that by 4pm on Friday 21 April 2017 that each party serve upon the other and provide to the Court a short statement of no longer than 1 page explaining to the best of that party's knowledge the dealings in relation to the joint venture that that party had with any solicitor at Logan Fox, in relation to the creation and performance of the joint venture the subject of these proceedings.
6. Note that when the matter returns for further directions on 24 April 2017 the parties should be in a position to indicate to the Court whether any party wishes to join Logan Fox solicitors as a further defendant in the proceedings
7. Further direct that each party provide to my Associate by 4pm on Wednesday 12 April 2017 a copy of the affidavits and all annexures to those affidavits that have been served by that party in the proceedings, with a view the Court reviewing that material and determining whether the case is ready to be referred for mediation.
8. The parties should come ready on 24 April 2017 and be in a position to indicate to the Court whether each party consents to mediation.
9. Order the solicitors for the parties to provide by 4pm today to the first to third plaintiffs and to the first to fourth defendants a copy of the orders made today.
10. Note that the Court has decided to case manage these proceedings to hearing or to a mediation as soon as conveniently possible in the near future in view of the fact the this joint venture the subject of these proceedings was made in 2011 some six years ago and the proceedings are still unresolved and the third plaintiff is in a position of uncertainty about her future accommodation until the proceedings are resolved.
11. Liberty to apply."
The direction which required the filing of a pro forma balance sheet in relation to the joint venture produced a less than satisfactory response. The Court accepts that the accountant, Mr Benjamin Chun, who was asked to respond to the Court's direction, did all he could within the available time to respond. But some picture of the financial position of the joint venture can be gleaned from what has been provided to the Court. The current market appraisals of the Ryde property show its market value to be of the order of $4.2 million. But there is a loan of approximately $2 million outstanding to Westpac and a loan of $575,000 outstanding to the ANZ Bank, the fifth and sixth defendants.
The accountant Mr Chun reports that the loan to valuation ratio of the lands would be approximately 61 per cent, with the joint venture's equity in the land sitting at approximately $1,632,000. He reports that some $320,000 in payments had been made on behalf of the plaintiff, pursuant to the joint venture agreement: to discharge Mrs Dominello's prior mortgage obligations, pay council rates, land tax, water rates, pay rent for Mrs Booth for alternate premises, pay maintenance on the parcels constituting the Ryde property since transfer from Mrs Dominello and pay the funeral expenses of Mr Dominello. He also notes that no rent has been paid by Mrs Dominello, which he calculates would amount to a liability of $280,000 due to the joint venture, and an asset on the joint venture balance sheet.
In summary then, the joint venture is at a stalemate. Debt levels are high. No development has occurred. There may be insufficient equity now to allow any further borrowings to occur and for the joint venture to proceed. And the case is still not ready for hearing for the reasons already given.
What are the options for the parties? The available options seem to fall into the following categories: (a) mediation, (b) hearing, (c) the appointment of a receiver.
As to mediation, the parties are not ready for this matter to go to mediation as yet until the evidentiary matters set out above are clarified. Nor are the parties ready to go to hearing, for the same reason. Neither a mediation or a hearing will be likely to reach finality, until the current financial position of the joint venture is much clearer.
The Court had assumed that Mr Laface, who was not present on 2 March, but who was present on 7 April and who is, again, not present this morning, would appear today. In order to make directions for the efficient disposition of the proceedings, this is a case where the Court needs to have legal practitioners familiar with the detail of the case before the Court on each occasion. The court expects that both sides will retain solicitors and brief counsel who are familiar with the matter to attend directions hearings, so that the overriding purpose of the court in disposing of the matter efficiently in accordance with Civil Procedure Act, s 56, can be achieved.
This morning, Ms T. Domm appeared on behalf of the first to fourth defendants. She is a city agent appearing on behalf of AJL Legal. She frankly confessed that she was not very familiar with the issues in the case. The Court does not criticise her for that. She was only engaged late on Friday. I understand her position. But this lack of assistance to the Court should not be allowed to continue. The Court expects Mr Laface to appear on the adjourned hearing, which to accommodate him will be at 2pm on 28 April.
The Court has power to appoint a receiver in this case. The Court has broad powers under the Supreme Court Act 1970 and in equity. The jurisdiction to appoint a receiver to partnerships and by extension joint ventures is well established: Tate v Barry (1928) 28 SR (NSW) 380 at 383 and see generally Meagher, Gummow & Lehane's Equity: Doctrines & Remedies (5th ed) 2014, Australia, LexisNexis Butterworths, [29-050] and the power to appoint a receiver under Supreme Court Act, s 67. This is a classic partnership-type dispute where the Court has jurisdiction to appoint a receiver, if the parties cannot agree. If nothing is done, the equity that presently exists in these properties will be eroded by a combination of interest accruing to Westpac and the ANZ banks, the non-payment of rent over the properties by Mrs Dominello and the continuation of the mounting burden of the legal fees being incurred.
If this situation continues, there is one inevitable result: the equity in the properties will diminish to the point where one of the banks will decide to sell the Ryde property, and Mrs Dominello will lose her current residence. That point may soon be reached.
But at least there is currently the possibility of the parties seeking to deal with the equity in the property to their advantage. If they cannot agree upon how to do that themselves, it may be that the best course is to appoint a receiver so that someone can do it for them to preserve that equity. They can then be allowed to fight about their shares of that equity at a later point of time. But the Court is currently reluctant to do that because of the high costs likely to be involved.
The situation is so unsatisfactory that the Court is going to take a course it does not often take, and I am going to direct that a copy of the judgment in these proceedings be sent to all parties by their solicitors, including the fifth and sixth defendants, Westpac and the ANZ Bank. I will further direct that the first to fourth defendants must attend future directions hearings by a solicitor or counsel who is familiar with all the issues in the proceedings. I see no immediate need for Westpac or ANZ to attend unless they so choose.
I will otherwise deal with the matters that have been asked for by Mr Darvall. He has indicated to the Court there has not been sufficient compliance with the orders made on 7 April 2017, and I will direct that there be full compliance with those orders and the other notices to produce to the various defendants by 10am on 28 April 2017, and the proceedings will be listed before me at 2pm the same day. I also expect the first to fourth defendants then to indicate when the other evidentiary deficiencies highlighted in this judgment will be fixed.
Mr Darvall of counsel has indicated he will proceed to issue subpoenas to ANZ and Westpac if satisfactory financial information about the joint venture is not available on Friday.
[2]
Conclusion and Orders
Accordingly, the Court makes the following orders and directions:
1. Order the First and Second Defendants to comply with Order 2 made on 7 April 2017 on or before 28 April 2017.
2. Order the Second Defendant to produce all documents under the Notice to Produce dated 15 March 2017 on or before 10am on 28 April 2017.
3. Order the Third Defendant to produce all documents under the Notice to Produce dated 15 March 2017 and addressed to Arthur Facility management Pty Ltd, third defendant, on or before 10am on 28 April 2017.
4. Order the Fourth Defendant to produce all documents under the Notice to Produce dated 15 March 2017 on or before 10am on 28 April 2017.
5. Order Mr Stefano Laface of AJL Legal to produce all documents under subpoena filed 15 March 2017 on or before 10am on 28 April 2017.
6. List these proceedings in the Duty List at 2pm on 28 April 2017.
7. Direct that copies of the judgment in these proceedings be given by the legal practitioners appearing to all the parties, including the fifth and sixth defendants.
8. The defendants must attend by a solicitor or counsel fully conversant with the issues at 2pm on 28 April.
9. The Court will note that it will, on 28 April 2017, be asking Mr Laface whether there is full production of documents in accordance with orders 1 to 5 of these orders.
[3]
Amendments
26 April 2017 - title
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Decision last updated: 26 April 2017