Burgess v Zinc Port Melbourne & Ors [2013] VSC 599

Supreme Court of Victoria|2013-11-07|Before: RANDALL AsJ

Hunt & Hunt until 31 October 2013, Mason Black Lawyers thereafter

Richard O'Brian Junior, Director, appeared and was excused from further attendance

2 Zinc Port Melbourne Pty Ltd (in liquidation) ("Zinc") is the registered proprietor of apartments:

208/50 Dow Street, Port Melbourne ("208");
301/52 Dow Street, Port Melbourne ("301");
210/50 Dow Street, Port Melbourne ("210"); and
TH6/117 Rouse Street, Port Melbourne ("117").

3 Paul Andrew Burness ("the liquidator") in his capacity as liquidator of Zinc Port Melbourne Pty Ltd (in liquidation). The liquidator was initially appointed provisionally on 27 February 2012 and as liquidator of Zinc on 1 March 2012.

4 Zinc, by its liquidator, seeks directions pursuant to s 479(3) of the Corporations Act 2001 (Cth) that the liquidator is justified in disposing of the apartments.

5 Mercier Rouse Street Pty Ltd ("Mercier Rouse") was under the effective management and control of Michael Emery ("Emery"). Pursuant to an undated joint venture deed made between Mercier Rouse, Cymbol Rouse Pty Ltd ("Cymbol Rouse"), Zinc, 119 Rouse Street Pty Ltd ("119 Rouse Street") and AM Port Melbourne Pty Ltd ("AMPM"), those participants formed an unincorporated joint venture ("the joint venture") to purchase the property situate at 117-123 Rouse Street, Port Melbourne. Mercier Rouse acted as the trustee of the Mercier Rouse Street Trust ("the Emery Trust"). Mercier Rouse seeks that Zinc execute an instrument of transfer, transferring 301 and 208 to Mercier Rouse.

6 Emery had been admitted to practice as a lawyer in or about 1990 or 1991. He had not held a practising certificate since about 1998 and had been involved in property development either through Becton or through his own companies for approximately 18 or 19 years.

7 Cymbol Rouse Pty Ltd ("Cymbol Rouse") was under the effective control of Richard O'Bryan ("O'Bryan Jr"). Cymbol Rouse was a participant in the joint venture. Cymbol Rouse sought a declaration that it was entitled to be registered as the registered proprietor of 117 and 210. At the commencement of the hearing leave was granted to Cymbol Rouse to discontinue its counterclaim filed 28 June 2012. Cymbol Rouse did not thereafter participate in the hearing.

8 Julianna O'Bryan ("Mrs O'Bryan"), together with her husband Mr O'Bryan, are the parents of O'Bryan Jr. Mrs O'Bryan claims to have purchased 210 pursuant to a contract of sale bearing date 24 May 2007. Mrs O'Bryan seeks declarations that she has paid the whole of the purchase price with respect to 210, Zinc holds its interest in 210 on trust for her subject to a mortgage granted by Zinc in favour of Equity-One Mortgage Fund limited ("Equity One").

9 Juldic Pty Ltd ("Juldic") was a company controlled by Mrs O'Bryan and her husband.

10 The shares in Zinc were held at all relevant times by 119 Rouse Street. 119 Rouse Street was a company jointly controlled by Emery and O'Bryan Jr. 119 Rouse Street was a participant in the joint venture.

11 On 21 December 2012, Equity-One entered into a facility agreement and guarantee with Zinc by which it agreed to lend to Zinc the sum of $632,500. On the same day Equity-One entered into a further facility agreement and guarantee with Zinc by which it agreed to lend to Zinc up to $1,267,500. Zinc executed real property mortgages and deeds of charge in favour of Equity-One over the whole of its assets and undertakings. Equity-One seeks possession of 208, 301, 210 and 117.

12 Andrew Beck and Glenn Anthony Crisp in their capacities as receivers are managers of the property of Zinc Port Melbourne Pty Ltd (the receivers). The receivers were appointed by Equity-One over the whole of Zinc's property in accordance with the deed of charge by a deed of appointment made 1 May 2010. Glenn Crisp subsequently retired as receiver and Andrew Beck continues to fulfil that role.

13 On 9 May 2007 Zinc was incorporated. Emery was appointed director on 9 May 2007. The initial shareholders were AMPM and 119 Rouse Street. Now all shares are owned by 119 Rouse Street.

14 On 15 May 2007, 119 Rouse Street was incorporated with Emery and O'Bryan Jr appointed as directors on 15 May 2007. The shares in 119 Rouse Street are owned by Emery O'Bryan Holdings Pty Ltd. Ultimately, the owners of the shares in 119 Rouse Street are Emery and O'Bryan Jr.

15 Pursuant to a contract dated 24 May 2007, Zinc agreed to sell 210 to Mrs O'Bryan (and/or nominee). Although that is the contract date, the precise date on which it was executed is not clear.

16 By a partnership deed dated 25 May 2007 (the partnership deed), 119 Rouse Street and AMPM as partners agreed to establish a partnership known as the Rouse Street Partnership and to appoint Zinc as the manager of the partnership. Zinc was to hold all the partnership assets on behalf of the partners as agent and to receive all income and receipts as agent for the partners.

17 Through Zinc as the manager, the partners intended to, among other things, complete the purchase of property situate at 117-123 Rouse Street, Port Melbourne pursuant to the exercise of an option dated 3 October 2003. Zinc was to develop approximately 83 dwellings and ultimately market and sell the same.

18 By a loan agreement dated 4 October 2007 Juldic entered into a loan agreement with 119 Rouse Street to advance $100,000 by Juldic to 119 Rouse Street.

19 By a note subscription agreement dated July 2008, Juldic provided a further sum of $750,000 to 119 Rouse Street. The note subscription agreement was executed by 119 Rouse Street by its directors Emery and O'Bryan Jr. It contained a provision "It is understood by all parties to the agreements that at the time of repayment of monies Richard and Julianna O'Bryan will be offered for purchase an apartment in the development known as 119 Rouse Street Pty Ltd. The specific unit offered will be as per agreement between Richard J J O'Bryan (O'Bryan Jr) and Michael Emery".

20 By deed made in 2009 made between Zinc as manager, Mercier Rouse (as trustee of the Mercier Rouse Street Trust) (described in the join venture deed as the Emery Trust), Cymbol Rouse (as trustee for the Cymbol Rouse Street Trust (the O'Bryan Trust")), 119 Rouse Street and AMPM ("the Partnership"), the Partnership, along with the Emery Trust and O'Bryan Trust established a joint venture to be managed by Zinc.

21 I will refer to the documentation in more detail hereafter but for the time being I note that by clause 18.1, the joint venture participants established a management committee comprising members of the two partners, AMPM (Hennessey) and 119 Rouse Street (Emery)

22 The joint venture deed, among other things, identified six units as Emery Dwellings which included 208 and 301, six units as O'Bryan Dwellings which included 210 and AC (117). The balance of 72 dwellings were identified as Partnership Dwellings. These units, if not sold were to be transferred to the respective participants as appropriate.

23 On or about 15 October 2009, Emery, as a representative of the partnership management committee and joint venture management committee of 119 Rouse Street met with Hennessey as the representative of AMPM. At the meeting, the management committee resolved that the payment of the Contribution Amount would be undertaken contemporaneously with the transfer to Mercier Rouse of any units it beneficially owned.[1]

24 By an agency agreement entered into in 2009, Cymbol Rouse and Mercier Rouse engaged Zinc, in its capacity as the manager of the joint venture, to sell respectively 301 and 506 (Emery Dwellings) and 406 (O'Bryan Dwelling) and to pay Zinc a fee in the event that the dwellings were sold. 301 was not sold. 406 was.

25 On 24 December 2009, an occupancy permit was issued for building C which included 208.

26 On 16 February 2010, Zinc became the registered proprietor of 210 and 208.

27 An occupancy permit was issued for building B (which included 301) on 11 March 2010.

28 On 26 March 2010, Zinc became the registered proprietor of 117.

29 On 3 May 2010, Juldic sought legal advice from Aitken Partners.[2]

30 In the period from 30 August 2010 to 15 September 2010 Juldic obtained legal advice from Aitken Partners in relation to, among other things, preparation of requisitions on title, preparation of notices of acquisition, and attending settlements in relation to another property forming part of 117-123 Rouse Street.[3] Apparently O'Bryan Jr attended to this without consultation with Mrs O'Bryan.[4]

31 In the period from 16 September 2010 to 27 October 2010, Juldic received legal advice from Aitken Partners which included "Review procedure for flow of funds and potential to overcome cheque-swapping scenario, drawing diagram and memorandum to you...".[5]

32 On 20 September 2010, Zinc, Mercier Rouse, Cymbol Rouse, 119 Rouse Street and AMPM entered into an exit deed,[6] pursuant to which AMPM exited the joint venture and the Partnership in return for payment of a Relinquishment Fee totalling $6.15 million. Completion was to occur on the date on which the last of the payments was to take place which transpired to be 9 November 2010.

33 On 21 October 2010, Hennessy of AMPM sent an email to O'Bryan Jr (which was subsequently forwarded to Emery) which included what was described as Zinc amended contribution worksheet.[7] The worksheet after adjustments set out what was required to be contributed by Emery and O'Bryan. Payment of the respective contributions would give rise to the right to call for transfer.

34 During the period 28 October 2010 to 24 November 2010, Juldic received advice from Aitken Partners in relation to, among other things, "the obtaining of finance from Dawning Investments Pty Ltd, drafting a caveat...advising Juliana and Richard re refinance and advising Richard O'Bryan re finance; and on 24 November 2010 'preparing for a meeting with Richard O'Bryan, meeting with Richard O'Bryan to discuss issues and refinancing of A(117) and C210(210).[8] The Dawning finance was required to assist in paying out APAM.

35 On 3 November 2010, Ash Morgan Winthrop, who had previously been a financier to the project, received payment of $1.5 million.[9]

36 On 9 November 2010, AMPM exited the joint venture (and the Partnership).

37 On 12 November 2010, Mr and Mrs O'Bryan lodged a caveat claiming an interest in 210.[10]

38 On or about 24 November 2010, Equity One received loan applications from Zinc signed by O'Bryan Jr for:

(a) a first mortgage business loan of $632,000 to Zinc with the security being a first ranking mortgage over 210;

(b) a first mortgage business loan of $1,237,500.00 to Zinc with security being a first ranking mortgage over 117.[11]

39 The security documentation also included a charge over the property of Zinc.

40 On 3 December 2010, Equity-One sent two separate letters of offer to the directors of Zinc. In addition to the securities outlined, the letters also required O'Bryan Jr and Emery to provide first registered mortgages over the properties referred to therein and a fixed and floating charge from Zinc. O'Bryan Jr and Emery were also to execute guarantees.

41 In the period 8 December 2010 to 14 December 2010, Aitken Partners attended upon Juldic in relation to the refinancing to Equity One including "a memorandum for Juldic, advice in relation to documentation, telephone attendances on both Richard and Juliana, consideration in relation to settlement procedures, consideration in relation to mortgage and the transfer of the properties subject to the mortgage".[12]

42 Attendances upon Aitken Partners on 14 December 2010 included the finalisation of a deed of rectification and letter to 119 Rouse Street, executing and receiving Zinc documents for mortgages over 117 and 210.[13]

43 On 14 December 2010, Mrs O'Bryan and Zinc executed a deed of rectification relating to the contract of sale which was dated 27 May 2006.[14]

44 On 15 December 2010, O'Bryan Jr made out, and subsequently provided to Equity-One, two declarations.[15] The declarations included that:

(a) he was a director of Zinc and was authorised to make the declaration on behalf of the company;

(b) Zinc does not act as the trustee of any fund or settlement nor does it hold any assets on behalf of or in any fiduciary capacity for any other person except as noted in Item 2 of the Schedule (the Schedule did not contain any notation).[16]

45 The documents executed on behalf of Zinc included answers to requisitions with respect to 117 and 210. The answer to requisition 19 with respect to each was to the effect that Zinc did not hold the units on trust.[17]

46 On 20 December 2010, Aitken Partners prepared a withdrawal of the caveat lodged on behalf of Mrs and Mr O'Bryan and attended upon Equity One's solicitors.[18]

47 On 20 December 2010, the finance broker Adam King emailed O'Bryan Jr and Aitken Partners which cheque directions for settlement the next day.[19]

48 The Equity One facility agreements and guarantees were dated 21 December 2010.[20]

49 On 21 December 2010, Equity One lodged mortgages with respect to 210 and 117.

50 By deed of charge dated 21 December 2010, Zinc charged its assets and undertaking.[21] The charging clause is in the following terms:

3(1) The Mortgagor (Zinc) as beneficial owner and, if the Mortgagor is the trustee in any schedule Item 2, in its capacity as trustee of that trust HEREBY CHARGES in favour of the Mortgagee with the payment of the moneys hereby secured the whole of its undertaking and assets whatsoever and wheresoever both present and future including the goodwill of its business and its uncalled and called but unpaid capital including all premiums.

The deed of charge were registered with ASIC on 23 December 2010.

51 On 21 December 2010, a round robin of cheques occurred. Zinc had received sums from Equity One pursuant to the facilities providing Zinc with a balance of $767,385.56. On that day, the following cheques were provided:

52 On 4 January 2011, Mrs O'Bryan lodged a further caveat on 210 claiming an interest as purchaser pursuant to a contract of sale.[22]

53 By Tax Invoice dated 22 December 2010, Aitken Partners sought payment from Juldic of an account referable to services provided in the period 30 November 2010 to 21 December 2010.[23] The settlement referred to related to the Equity One loan.

54 By Tax Invoice dated 31 January 2011, Aitken Partners sought payment from Juldic with respect to services provided in the period 21 December 2010 to 25 January 2011.[24] The narration includes "Consider transfer subject to mortgage, email to Catherine Byrne in draft and forwarding to you for approval and receiving your advice to send."

55 By Tax Invoice dated 31 March 2011, Aitken Partners sought payment from Juldic of an account referable to services provided in the period 24 February 2011 to 29 March 2011. The entry for 18 March 2011 is "Attending potential re-financing and consideration of contract issues regarding C210 and A6(117). The narration for 28 March 2011 refers to "Telephone attendance on Julianna O'Bryan re land transfer."[25]

56 On 17 May 2011, Mrs O'Bryan made an application at VCAT. The value of the claim was recorded as $1.2 million.[26] The grounds of the claim are in the following terms:

Purchase of an apartment at C210, 50 Dowse Street, Port Melbourne

In anticipation of a soon to be completed transfer of the C210 title we moved into the said unit on 27 January 2010. In September 2010 we discovered that the previous April and without the knowledge of the other director Michael Emery had used money set aside for the payment of the C210 to fund the release of other Zinc apartments. These units C207/50 Dow Street and B301/50 Dow Street have been used a security deposit on a building project in Elizabeth Street Melbourne. Both units remain in the name of Zinc Pty Ltd.

In November 2010 Ash Morgan Winthrop, financiers to the Zinc Project, were paid out. As there were not sufficient funds from sales to pay out Ash Morgan Winthrop the remaining units (C210/50 Dow Street and A6/177 Rouse Street) were mortgaged.

On 15 December 2010 a series of bank transfers are evidence that monies invested by the RJ & JL O'Bryan in Zinc and the interests that attach to this investment were transferred into the purchase monies of the C/210 unit.

The units transferred out of the Zinc project in April 2010 and used as security for the Elizabeth project are still so employed. We want the C207 and B301 units to continue to be owned by Zinc Pty Ltd until the mortgage over the C210 property is discharged.

Discussions have over several months been attempted by Julianna O'Bryan and the second Zinc director Richard J J O'Bryan with Emery but always there is an excuse by Emery as to why the title transfer of title C210 cannot proceed.

This application to VCAT is to ensure that the units employed as security on the Elizabeth Street project are returned to Zinc and either sold or mortgaged to release the mortgage on the C210. The C210 property to be registered in the names of R J and J L O'Bryan.

57 On 20 May 2011, Mercier Rouse lodged a caveat on 208 and 301. The grounds claimed were pursuant to an existence of an interest as beneficiary of a trust in respect of which Zinc was the trustee.[27]

58 On 10 November 2011, Michael Emery and the Emery companies, which included Mercier Rouse, O'Bryan Jr and the O'Bryan Jr companies, which includes Cymbol Rouse, and the Emery/O'Bryan companies (which included Zinc) executed a deed of agreement.[28] The deed set out how the participants were to sever their business associations. The deed provided among other things:

(a) pursuant to clause 4.1, Zinc was to transfer 117 to Cymbol Rouse and, simultaneously with that transfer, fund the discharge of the Equity-One mortgage;

(b) pursuant to clause 4.2, Zinc was to transfer 210 to Juldic and the O'Bryan group was to fund the discharge of any mortgage over 210;

(c) pursuant to clause 4.3, Zinc was to transfer 301 and 208 to Mercier Rouse free of any encumbrances and, the Emery/O'Bryan companies were to fund the discharge of any mortgage over those units;

(d) the parties entered into mutual releases and covenants not to sue.

59 On 21 December 2011, Mrs O'Bryan and Mr O'Bryan obtained orders in VCAT that Zinc was to pay Mrs O'Bryan and Mr O'Bryan the sum of $1.2 million.[29]

60 In February 2012, Mercier Rouse requested that Zinc transfer title to units 301 and 208 to Mercier Rouse pursuant to clause 4.3 of the November 2011 agreement. On 1 February 2012, Mercier Rouse and Emery commenced proceedings against O'Bryan Jr, inter alia, seeking an order that O'Bryan Jr complete the execution of the transfer by Zinc of 301 and 208 to Mercier Rouse.

61 The Deputy Commissioner of Taxation made a winding up application against Zinc in respect of a debt unpaid to the DCT of $135,875.78.

62 By an interlocutory process issued in the Federal Court and dated 24 February 2012, Mrs O'Bryan and Mr O'Bryan, as supporting creditors, sought leave to intervene in the winding up proceeding in the Federal Court and sought the appointment of provisional liquidators.[30] The appearance by Mrs O'Bryan and Mr O'Bryan set out that they were creditors of Zinc in the sum of $1,200,000.00.

63 During the course of submissions before North J in the Federal Court, counsel for Mrs O'Bryan and Mr O'Bryan informed the court:

But it doesn't do anything about satisfying my client's claims against Zinc, and my clients intend to seek substitution if the Commissioner withdraws. They are a significant creditor. Whatever the status of the VCAT judgment, they are a significant creditor of the company...[31]

64 On 1 March 2012, the liquidator was appointed liquidator Zinc.

65 On 23 March 2012, Equity-One served a notice to pay pursuant to s 76 of the Transfer of Land Act upon Zinc.[32]

66 By letter of demand dated 13 April 2012, Equity-One sought repayment of the amounts due under the first loan and the second loan.

67 By deed of appointment of receivers and managers dated 1 May 2012, Beck and Crisp were appointed as receivers and managers pursuant to the Equity-One charge.[33]

68 The partnership deed between Zinc, 119 Rouse Street and AMPM appointed Zinc as manager.[34] There is nothing of great import contained in the document. It sets out as follows:

...

D. Through the manager (Zinc) the partners intend to:

D.1 fund the continued payment of option fees under the option and fund consultants and marketing costs required to achieve a minimum pre-sale hurdle agreed by the partners;

D.2 complete the purchase of the property by exercise of the option;

D.3 develop a number of multi-storey residential buildings on the property consisting of approximately 83 dwellings; and

D.4 sell the dwellings to third parties.

E. The purchase of the property, development of the building and the sale of the dwellings is the current business of the partnership. The partners may choose to engage in other business from time to time.

F. The partners agree that the business will be conducted and run by the manager (Zinc) subject to the terms and conditions of this deed.

G. The partners agree to control and supervise the manager and to carry on the business in a partnership subject to the terms and conditions of this deed.

H. to assist in the payment of the purchase price for the property and the development costs of the building the partners propose to secure third party finance.

I. to supplement third party funding of the project the partners have agreed to provide advances to the business in the proportions set out in this deed.

69 The joint venture deed[35] made in 2009 contains the following relevant provisions:

Recitals

A. The partnership was established on 25 May 2007 pursuant to the partnership deed...

B. The business of the partnership is to purchase the property pursuant to the option, develop the building and sell the dwellings to third parties.

C. The manager (Zinc) is the manager of the partnership.

D. On 18 August 2007, the partnership invited the Emery Trust and the O'Bryan Trust to form an unincorporated joint venture to purchase the property and develop the building.

E. The partnership, the Emery Trust and the O'Bryan Trust (Participants) wish to appoint the manager (Zinc) as manager of the joint venture (in addition to its management of the partnership).

F. The participants will each contribute the following to the joint venture:

F.1 The partnership will contribute the right to acquire the property pursuant to the option, expertise and property development and funding by way of capital contributions;

F.2 The Emery Trust will contribute funding by way of capital contributions; and

F.3 The O'Bryan Trust will contribute funding by way of capital contributions.

G. In return for their respective contributions to the joint venture each participant's interests in the joint venture assets on and from the commencement date will be:

G.1 Emery Trust - 8.29%

G.2 O'Bryan Trust - 9.08% and

G.3 Partnership - 82.63%.

H. The parties intend for each participant's interests to be satisfied via an allocation of the dwellings at project completion as below:

H.1 The Emery Trust: The Emery dwellings;

H.2 The O'Bryan Trust: The O'Bryan dwellings and

H.3 The partnership: The partnership dwellings.

I. The partnership will appoint Zinc Port Melbourne Pty Ltd (in its capacity as manager of the joint venture) as its agent to sell the partnership dwellings. The Emery dwellings and the O'Bryan dwellings will otherwise be dealt with in accordance with the terms and conditions of this deed.

...

21.1 Allocation of dwellings.

Subject to clauses 21.3, 21.4, 21.5 and 21.6, at the direction of the management committee:

21.1.1 The manager must take all steps necessary to register legal ownership of the Emery dwellings in the Emery trust;

21.1.2 The manager must take all steps necessary to register legal ownership of the O'Bryan dwellings in the O'Bryan Trust; and

21.1.3 The manager must deal with the partnership dwellings in accordance with the terms of the agency agreement.

21.2 Emery and O'Bryan dwellings

Following a resolution by the management committee in accordance with clause 21.1 that the manager must register legal ownership of the Emery dwellings in the Emery Trust and O'Bryan dwellings in the O'Bryan Trust, but subject to clauses 21.4, 21.5 and 21.6:

21.2.1 The contribution amount must be paid in accordance with clause 21.4;

...

21.4 Contribution amount

21.4.1 The Emery Trust and O'Bryan Trust agree to pay to the partnership the contribution amount before legal ownership of any of the dwellings is registered in accordance with clause 21.1.1 or 21.1.2.

21.4.2 Subject to clause 22, each trust is liable for, and responsible for the payment of, the following amount as part of the contribution amount:

21.4.2.1 $2,541,719.26: Emery Trust;

21.4.2.2. $2,784,969.74: O'Bryan Trust;

21.4.3 If only one of the trusts referred to in clause 21.4.2 pays the part of the contribution amount for which it is liable... the manager may take steps in accordance with clause 21.1 to transfer the dwellings to which the paying trust is entitled to the exclusion of the trust that fails to pay its part of the contribution amount...

21.4.4 For the avoidance of doubt, a paying trust is not liable for the part of the contribution amount for which a non-paying trust is liable.

...

22.1 Payment of amount

Upon completion of the project, but prior to the transfer of any dwelling in accordance with clause 21.2, the Emery Trust and O'Bryan Trust must pay to the partnership the contribution amount in accordance with clause 21.4

22.2 Determination of amount

The parties acknowledge and agree that:

22.2.1 the methodology for calculation of the contribution amount is set out in Schedule 4;

22.2.2 the quantum of the contribution amount as determined in Schedule 4 may change if the amount provided for construction costs is greater or lesser than the actual construction costs of the project;

22.2.3 if the actual construction cost is greater than the assumed construction cost, the contribution amount will increase;

22.2.4 if the actual construction cost is less than the assumed construction cost, the construction contribution amount will decrease.

22.3 Management Committee determination

The parties agree that the management committee will determine, before the transfer of any dwelling under clause 21, the contribution amount pursuant to clause 22.2.

22.4 Transfer prohibition

The Emery Trust and O'Bryan Trust specifically acknowledge and agree that no dwelling will be transferred by the manger in accordance with clause 21.2 until such time as the contribution amount has been paid in accordance with clause 21.4.

23. No sale of dwellings

23.1 The Emery Trust and the O'Bryan Trust may not dispose of an interest in the Emery dwellings or the O'Bryan dwellings, as the case may be, without the prior written consent of the partnership.

23.2 The partnership must not unreasonably withhold its consent under this clause 23.

70 The exit deed between Zinc, Mercier Rouse, Cymbol Rouse, 119 Rouse Street and AMPM provided for AMPM to relinquish its interests in the joint venture on the terms of the deed.[36]

71 Clause 2.2 provided for payment of the exit fee to APMP by the other parties, namely Zinc, Mercier Rouse, Cymbol Rouse and 119 Rouse Street. The relinquishment fee was to be paid in a number of tranches in consideration for AMPM agreeing to relinquish AMPM's interest and procuring the Debt Facility in according with clause 3.1.

72 Some of the features of the exit deed were as follows:

4. Security properties and project accounts

4.1 Security properties

(a) Zinc acknowledges that the Security Properties are currently encumbered by a registered mortgage of land in favour of a related entity to AMPM.[37]

(b) Notwithstanding clause 4.1(a), Zinc hereby mortgages the security properties in favour of AMPM as security for its obligations under this deed. If required by AMPM, Zinc Port Melbourne will execute any documents and render such assistance as to give effect to the mortgage granted to AMPM.

...

(d) Zinc and the other parties must dispose and effect settlement of the security properties on terms reasonably acceptable to AMPM before or on the sunset date with the proceeds of the disposal to be distributed by AMPM as authorised by the irrevocable authority.[38]

(e) Zinc Port Melbourne and the other parties must keep AMPM informed of all material developments relating to the disposal of the security properties and must provide the irrevocable authority to the representative of the purchaser.

(f) AMPM will provide a release of any encumbrance held by AMPM over the security properties to enable settlement to occur, subject to receipt of settlement proceeds set pay pursuant to the irrevocable authority and Zinc and the other parties complying with their obligations under this deed.

73 The deed of agreement made 10 November 2011 between Emery, the Emery companies and O'Bryan Jnr and the O'Bryan Jnr companies dealt with the separation of their interests. Some relevant features of that agreement included:

4. The Zinc Project

4.1 On the first to occur of the Zinc settlement date, or the expiry of 7 days after a Cymbol Rouse request so do to:

(a) Zinc must transfer [117] to Cymbol Rouse Pty Ltd or its nominee and free of all encumbrances, and, in that event, simultaneously with such a transfer, the O'Bryan group must fund the discharge of the Equity-One mortgage; and

(b) Zinc must transfer 210 at the Zinc Project to Juldic, or to its nominee free of all encumbrances, and, in that event, simultaneously with such transfer, the O'Bryan group must fund the discharge of any mortgage over lot 210.[39]

74 The loan agreement between Juldic and 119 Rouse Street is made on 4 October 2007.[40] The loan amount was $100,000 to be advanced on 4 October 2007. The loan incurred interest from the drawdown to the repayment date at the rate of 20% per annum.

75 The note subscription agreement between 119 Rouse Street and Juldic was entered into in July 2008.[41] Pursuant to the notes subscription agreement Juldic advanced $75,000 to 119 Rouse Street. The note was to bear interest at the rate of 25% per annum and was repayable on the redemption date. Redemption date was not defined but there is a definition of "settlement date" in the agreement. It is defined as follows:

"Settlement date" means the date five business days after all of the monies from the sales of the apartments which form the project are available to the company [119 Rouse Street] in immediately available funds.

The project is defined as the apartment complex to be constructed by the Company located at 117-123 Rouse Street, Port Melbourne, Victoria. The note subscription agreement does not bear the imprint of any firm of solicitors. The note subscription agreement contains an addendum in the following terms:

This is to be attached to and form part of the debenture charge and note subscription agreement to lend monies to 119 Rouse Street Pty Ltd.

It is understood by all parties to the agreements that at the time of repayment of the monies Richard and Julianna O'Bryan will be offered for purchase an apartment in the development known as 119 Rouse Street Pty Ltd. The specific unit offered will be as per agreement between Richard J O'Bryan and Michael Emery.

The addendum has been executed by 119 Rouse Street Pty Ltd by each of Emery and O'Bryan Junior. The addendum has been executed by Juldic Pty Ltd by each of Mrs O'Bryan and Mr O'Bryan.

76 The natural inference arising from the addendum to the note subscription agreement is that as at July 2008 neither Juldic nor Mrs O'Bryan had entered into any contract to purchase any unit in the project. Although the contract of sale entered into by Mrs O'Bryan is dated May 2007 I determine that it could not have been executed by the parties until some time after the note subscription agreement. As at July 2008, the apartment to be purchased had not been identified.

77 The contract of sale signed by Mrs O'Bryan appears to be a pro forma prepared by Baker McKenzie.[42] The particulars of sale set out a purchase price of $1,200,000.00 payable by a deposit of $120,000 on the day of sale which has been filled in as 24 May 2007. The residue of $1,080,000.00 was payable on the later of:

(i) 14 days after notification to the purchaser of registration of the plan; or

(ii) 7 days after notification to the purchaser that an occupancy permit has issued for the property; or

(iii) payment of loan under special condition 37.

The wording in (iii) has been inserted by hand. However, no special condition 37 is included in the contract.

78 On 14 December 2010, Zinc and Mrs O'Bryan entered into a deed of rectification and confirmation of contract conditions.[43] That deed recited that the contract had been entered into with respect to 210 on 24 May 2007 and that on 8 July 2008 the contract had been amended by adding in (iii) payment of loan under SC37. The deed acknowledged the oversight not to include special condition 37 in the contract. The deed recited the two loans advanced by Juldic.

79 The operative revisions of the deed were that the parties agreed that special condition 37 is to be incorporated in and form part of the contract in the following terms:

37.1 The words 'payment of loan under SC37' referred to in paragraph (iii) of the 'payment of balance' section of the contract mean that date upon which the total amount of the two loans plus interest is made by Juldic by 119 Rouse Street.

37.2 In the event that 119 Rouse Street does not repay the total amount of the two loans plus interest to Juldic within two days after a demand is made by Juldic to 119 Rouse Street, Julianna O'Bryan has the right to terminate the contract with no cost or expense whatsoever to Julianna O'Bryan by giving notice of termination to Zinc.

80 Zinc and Mrs O'Bryan acknowledge that Mrs O'Bryan had not paid the deposit of $120,000 referred to in the contract and was not required to pay the said deposit until the settlement date of the contract. That agreement is executed by Zinc in accordance with s 127 of the Corporations Act with Emery and O'Bryan Jr signing as directors.

• deeds of charge bearing Personal Property Security Register registration number 201112221127381 and 201112221127296.

82 As appears in these reasons for judgment, issues of credit were not pivotal to arriving at any determination. Counsel for Mercier Rouse submitted that I should view O'Bryan Jr's evidence with caution and draw inferences from his failure to provide any appropriate explanations in support of his mother's claims.

83 I agree that O'Bryan Jr's evidence was less than satisfactory, but in the end, nothing hinged upon the same. In the same way, although Emery was generally direct in giving evidence, I do not accept his attempts to distance himself from the Equity-One arrangements. However, given my findings, again, nothing turns upon the veracity of any material submitted to Equity-One in this proceeding.

84 Mrs O'Bryan impressed me as a frank witness. Unfortunately, it appears that she left some matters to her son and undertook other matters when she should have been assisted by legal practitioners.

85 The two major issues for determination in relation to Mrs O'Bryan's claims are whether or not Mrs O'Bryan is entitled to a transfer of 210 subject to the Equity-One mortgage and if the VCAT order and subsequent conduct constitute an election disentitling Mrs O'Bryan to an order for specific performance.

86 I am satisfied that the contract of sale was entered into in or about July 2008 or sometime prior thereto. I do not need to determine whether it was entered into in May of 2007.

87 I determine that the purchase price for 210 was paid in full on 21 December 2010. The purchase price was effected by the round robin of cheques referred to in paragraph 51 hereof.

88 In Equuscorp Pty Ltd v Glengallan Investments[44] the High Court, citing the decision of the Full Court of the Federal Court in Sharrment Pty Ltd v Official Trustee in Bankruptcy[45] described a sham as a transaction 'which takes the form of a legally effective transaction but which the parties intend should not have the apparent, or any, legal consequences'.

89 The critical question in determining whether a transaction is a sham is the question of whether the parties to it commonly intended that it could merely be a disguise or a façade. In Sharrment, the Full Court of the Federal Court made some particular comments in relation to the issue. The court observed:

a round robin of cheques does not establish that the transaction is a sham even if no party has funds to meet the cheques
artificiality does not give rise to characterisation as a sham, nor does complexity

a purported disposal of property, or creation of a debt, may be a sham where the parties intend and agreed that there will be in fact no change in ownership, or no sum owing. The conduct of the parties may give rise to this inference

the existence of an 'inacceptable purpose' or of an 'ulterior purpose', such as an intention to shield assets from creditors or to avoid tax, does not result in a transaction being characterised as a sham, although it may be liable to be set aside or avoided pursuant to the provisions directed to that end in the Bankruptcy Act or the Income Tax Assessment Act.[46]

90 In NPV WA Securities v Interactive Services & Anor[47] Whelan J noted that as tax arrangements typically involve an element of artificiality, 'flexibility' is often involved in such transactions. Absent of finding that the underlying transaction was a sham, an exchange of cheques which are intended to cancel each other out, and which could not be met if presented because neither party has the funds available to meet them, is not, by virtue of those circumstances, a pretended payment or a payment which is not in the relevant sense 'real': Perpetual Trustee Co Ltd v Barnett;[48] and Fletcher v Federal Commissioner of Taxation.[49]

91 The NPV case reviewed cash neutral settlement transactions (in one relevant day) finding that just as in Equuscorp, NPV Finance applied the money lent as required by INS in payment of the purchase price to the extent of $2,500,000. His Honour found the fact that TAJ Walker or other companies in the Village group determined to return the sum to NPV Finance the same day, pursuant to the arrangements between them and NPV Finance, however they were characterised, did not alter that position. The transactions might result in the conclusion that the tax consequences desired were not achieved, but they did not result in the conclusion that no loan at all was made, unless the transactions were indeed a sham, which were said to be a separate issue.

92 On 21 December 2010, Mrs O'Bryan had an obligation to pay for 210 of she wished to complete the sale. 119 Rouse had obligations to Juldic pursuant to the loan and the note issue. 119 Rouse Street was a participant in the joint venture. I am uncertain as to the obligation of Zinc to make any advance to 119 Rouse Street, however I do not need to make any determination with respect to the same. Mrs O'Bryan was a straightforward witness but it was clear that she acted at the behest of her son and abdicated responsibility to her son which was understandable in the circumstances. However, I am satisfied that Mrs O'Bryan intended to purchase the unit, Zinc intended to sell the same, that the round robin of cheques was intended to discharge 119 Rouse Street's liability to Juldic and effect settlement of the purchase. The round robin did not occur until Zinc had received funds from Equity One and although the circulation twice seems somewhat artificial, I determine that it was effective to complete the purchase.

93 It is unclear if a transfer was delivered prior to the settlement or whether Mrs O'Bryan merely omitted to receive the same at settlement. Nothing turns on that issue. If the transfer was not provided beforehand, it merely delayed Zinc's obligation to provide the same duly executed. In Bunny Industries Ltd v F.S.W. Enterprises Pty Ltd,[50] Connolly J, after referring to a statement by Kitto J in Harque v Harque [No.2],[51] said:

The principles may be summed up for present purposes as follows:

(1) On the execution of the contract the vendor becomes a trustee for the purchaser. He is not however a bare trustee for he has a personal and substantial interest to the extent of the unpaid purchase moneys. He is "in progress towards" bare trusteeship and finally become such when the whole of the purchase moneys are paid and he is bound to convey ...

(2) The purchaser may devise, alienate and charge his equitable interest so that it is plainly not a mere right in contract.

(3) The extent of the equitable interest is measured by the amount of the purchase moneys paid. Thus, to the extent of the payments the purchaser requires a lien exactly as if the vendor had given a mortgage to secure them ...

94 I determine that, as from 21 December 2010, Zinc held 210 on trust from Mrs O'Bryan and that she was entitled to call for a transfer (subject to the Equity-One mortgage) from that time.

95 I am unclear when a transfer was provided by Mrs O'Bryan. However, it was signed by Emery as a director of Zinc.[52] By reference to the tax invoices from Aitkin Partners it would seem that the transfer was prepared sometime after 25 January 2011 but prior to 17 May 2011 when Mrs O'Bryan made application at VCAT. Therefore, Zinc's obligation to provide the executed transfer did not arise until sometime shortly prior to 17 May 2011.

96 I accept that, but for the subsequent conduct, Mrs O'Bryan was entitled to call for and receive a transfer of 210 (subject to the Equity One mortgage). I also note that if the liquidator has any views about the efficacy of the transfer under part 5.7B of the Corporations Act, that is a matter for the liquidator to pursue on material.

97 VCAT is a creature of statute. VCAT does not have any inherent jurisdiction. It was put against Mrs O'Bryan that by making application to VCAT or accepting the judgment of VCAT, she had elected between inconsistent rights. Certainly the application to VCAT was consistent with seeking a transfer of 210.[53] Extensive submissions were made by the parties as to the efficacy of the VCAT orders. It was put on behalf of Mrs 'Bryan that:

The dispute between Zinc and Mrs O'Bryan was not a 'consumer and trader dispute' under the Fair Trading Act 1999 since, relatively, it did not relate to the supply (or possible supply of either 'goods' or 'services').
'Goods' could not be applicable. In Thea Holdings Pty Ltd v Hockey[54] Dowsett J stated [at 9]:

The principal commentators have generally treated the definition [of goods] as reflecting the traditional common law distinction between "fixtures" and "movables" with some specific extensions. In Australian Trade Practices Reporter, 1988, CCH Australia Ltd, Sydney, at p 1363, this passage appears:

This extended definition of "goods" leaves intact the common law distinction between fixtures and movables (except in regard to minerals, trees and crops). At its narrowest, goods include all chattels of which physical possession is possible. If they become permanently attached to land or buildings, they lose their character as goods or personality and become part of the reality.

The definition of 'services' is not broad enough to incorporate the contract of sale for the purchase. I also note that it was not argued whether or not the private purchase of the unit occurred in trade or commerce.
The decision made by VCAT without jurisdiction is invalid and of no legal effect. In Minister for Immigration and Multicultural Affairs v Bhardwaj[55] it was stated:

A decision that involves jurisdictional error is a decision that lacks legal foundation and is properly regarded, in law, as no decision at all.

98 Although I lean to the view that the VCAT decision was without efficacy, there is no need for me to decide the question in this proceeding. Mrs O'Bryan attended VCAT unrepresented. The proceeding was informal. The decision was a disconnect considering what she had sought. Further, as to election, Mason J in Sargent v AS. Developments Ltd[56] as follows:

It will make for greater certainty, therefore, if the present cases are regarded as cases of election. A person is said to have a right of election when events occur which enable him to exercise alternative and inconsistent rights, ie when he has the right to determine an estate or terminate a contract for breach of covenant or contract and the alternative right to insist on the continuation of the estate or the performance of the contract. It matters not whether the right to terminate the contract is conferred by the contract or arises at common law for fundamental breach - in each instance the alternative right to insist on performance creates a right of election.

Essential to the making of an election is communication to the party affected by words or conduct of the choice thereby made and it is accepted that once an election is made it cannot be retracted ... No doubt this rule has been adopted in the interests of certainty and because it has been thought to be fair as between parties that the person affected is entitled to know where he stands and that the person electing should not have the opportunity of changing his election and subjecting his adversary to different obligations.

A person confronted with a choice between the exercise of alternative and inconsistent rights is not bound to elect at once. He may keep the question open, so long as he does not affirm the contract or continuance of the estate and so long as the delay does not cause prejudice to the other side. An election takes place when the conduct of the party is such that it would be justifiable only if an election had been made one way or the other ... So, words or conduct which do not constitute the exercise of a right conferred by or under a contract and merely involve a recognition of the contract may not amount to an election to affirm the contract.

99 The observations of Mason J must be read together with those of Stephen J in the same case.[57] Stephen J, after referring to the Coastal Estates Case,[58] said:

Where election is in question between contracting parties and, as in these appeals, the contract itself confers the inconsistent rights there can be no question whether a party had knowledge of his choice of rights. He is deemed to know the terms of his own contract and the rights he confers, at all events he cannot take advantage of his own ignorance ...; moreover he must take his contract as bearing whatever meaning the Court will assign to it when it is called upon to interpret it, he is bound "by the interpretation which a court of law may put upon the language of the instrument". ...

With other instances of election, not involving a choice between contractually conferred rights, these appeals are not concerned, but it may be that a failure to give weight to the distinction between those instances and the case of contractually conferred rights has led to misunderstanding; thus where Jordan CJ in O'Connor v SP Bray Ltd insists upon the need for knowledge only of the facts, he illustrates the point by reference to cases contractually conferred rights whereas Sholl J, when, in the Coastal Estates Case he regards that insistence as unsound, is concerned with quite another right, the right conferred by law to rescind ab initio for fraudulent misrepresentation. ... I am not to be taken as concluding that where contractually conferred rights are not an issue there can be no binding election without knowledge of the right to elect. It is not necessary for me to decide the point and I do no more than draw attention to the distinction made by Herring CJ in the Coastal Estates Case ...

100 The contract between Mrs O'Bryan and Zinc does not of itself provide for the consequences of Zinc's failure to transfer. That contract incorporated table A which was repealed in 2009 by s 71 of the Land Legislation Amendment Act 2009.

101 Paragraph 5 of table A provided that time would be the essence. If either party defaulted, the offended party would not be entitled to exercise any of the rights arising out the default (subject to exceptions) until he had served the offender with a written notice specifying the default, and his intention to exercise his rights unless the default is remedied.

102 Paragraph 6 of table A provided that where the contract was rescinded, and notice given by the purchaser, the purchaser would be entitled to repayment.

103 No rescission notice has been provided by or on behalf of Mrs O'Bryan. It cannot be said that she has made an election in accordance with the provisions of the contract. It is clear that it could not be said of Mrs O'Bryan that she had the requisite knowledge of her entitlement to elect, nor the effect of making application to VCAT and accepting the order made (insofar as she was able to do so). I make the latter observation as her application was not for the payment of money. The form of the order was proposed by the member and it seems that Mrs O'Bryan had little choice in accepting the same.[59] Further, it cannot be said that what transpired in the Federal Court in relation to the appointment of a provisional liquidator also constituted an independent election. As to standing to participate in the application the following exchanges took place:

Counsel: ...What we do know is, Zinc is a debtor of my clients in one way or another, either a judgment debtor or a contingent debtor by reason of my client's rights to insist on a specific performance and damages in lieu if the existing mortgage does not allow for them to get their apartment.[60]

... What [Counsel for Mercier Rouse] doesn't contest is that at some stage my client has paid $1.2 million to Zinc. He doesn't contest that they are counterparties to a signed contract by which the apartment was to be transferred. ...

His Honour: But I, mean, the trouble is that the judgment [referring to VCAT] doesn't make any sense at all ...

...The position is unexplained and confusing and I mean, on the one hand, I mean, you come along saying, "protect the property", but you're really not clear in respect of what. You know, what legal right? I mean, I don't really, frankly, take much notice of the VCAT judgment. It just doesn't make sense in a picture that is painted.[61]

104 The observation of North J are consistent with my view that the VCAT order may lack efficacy.

105 I am more concerned with the letter forwarded by Mrs O'Bryan's solicitors to Zinc dated 22 February 2012.[62]

We are instructed that the title to the property was never transferred to our client ...

We are instructed that our client has made numerous requests to have the mortgage removed from the Property and the title to the Property transferred into her name, with no success.

We are instructed that on or around 17 May 2011 Julianna lodged an application with ... VCAT for the removal of the mortgage and the transfer of the Property to Julianna and her husband, Richard.

On 21 December 2011, Member Buchanan of VCAT made an order requiring Zinc to pay Julianna and Richard the sum of $1,200,000. VCAT also made a finding that Zinc had been served with a copy of the application and notice of the hearing on 21 December 2011.

Accordingly, we are instructed to demand payment of the sum of $1,200,000 on or before 28 February 2012.

In the alternative, our clients are prepared to consider accepting the immediate transfer of the title to the Property into their names, following removal of the mortgage by Zinc at its costs, rather than payment of the sum of $1,200,000.

106 That letter, written by Mrs O'Bryan's solicitors might be said to constitute an election to require repayment. However, I am satisfied that it does not constitute an unequivocable election. The solicitors are taken to have known that they were required to serve a recession notice pursuant to the contract before rights crystallised. That was not done. Further, the letter clearly leaves it open that both remedies might be resorted to and, in those circumstances, I find there has not been a final unequivocable election. Accordingly, there is no impediment to Mrs O'Bryan calling for the transfer.

107 The propositions put on behalf of Mercier Rouse included:

(i) Mercier Rouse was the beneficial owner of 301 and 208 as at the date of the grant by Zinc of the charge in favour in Equity-One either because the joint venture deed was a specifically enforceable contract to convey or create a legal estate in 301 and 208 and accordingly, pursuant to the principles out in Lysaght v Edwards,[63] upon execution of the joint venture deed, Zinc became in equity a trustee for Mercier Rouse of 301 and 208 with beneficial ownership of same passing to Mercier Rouse, with Zinc having the right to the purchase money (in this case the payment of the contribution amount) and a charge or lien on the estate for the security of that purchase money (or contribution amount paid);

(ii) alternatively, on a proper construction of the joint venture agreement the equitable interests in the relevant properties arose and from 18 August 2007;

(iii) alternatively, in the event that payment of the contribution amount by Mercier Rouse was required before the equitable interest arose (which is not accepted) Mercier Rouse made payment of its contribution amount;

(iv) the Equity-One charge did not by its terms attach to Mercier Rouse's equitable interests in 301 and 208;

(v) whilst Zinc may have a right to payment of the contribution amount by Mercier Rouse and the associated charge or lien if the contribution amount was not paid... the Equity-One charge did not attach to that either because Zinc held that right as agent for the partnership and accordingly Zinc was not the holder of that right either;

(vi) in any event, any obligation on the part of Mercier Rouse to pay the contribution amount was the subject of a release from Zinc to Mercier Rouse in the terms of the November 2011 deed and in lieu thereof, Zinc agreed to transfer 301 and 208 to Mercier Rouse upon written requests by Emery, which written request occurred;

(vii) Mercier Rouse is not estopped from contending that the Equity-One charge does not attach to Mercier Rouse's beneficial interest in 301 and 208;

(ix) the right of indemnity of the liquidator does not extend to the assets beneficially owned by Mercier Rouse.

108 I reject the contention that Mercier Rouse was the beneficial owner of 301 and 208 from 18 August 2007. The contractual provisions to which I have referred to dictate the terms upon which Mercier Rouse was entitled to call for a transfer. That entitlement arose upon payment of the contribution amount and not otherwise. Further, on a proper construction of the provisions of the joint venture deed, the parties provided for how any profits were to be distributed taking units in specie rather than an actual monetary distribution. The joint venture deed does not seek to impose a trust upon Zinc save to the extent that it is charged with the management of the joint venture and holds the property for the joint venture.

109 In Hospital Products Ltd v United States Surgical Corporation,[64] Mason J said:

That contractual and fiduciary relationships may co-exist between the same parties has never been doubted. Indeed, the existence of a basic contractual relationship has in many situations provided a foundation for the erection of the fiduciary relationship. In these situations it is the contractual foundation which is all important because it is the contract that regulates the basic rights and liabilities of the parties. The fiduciary relationship, if it is to exist at all, must accommodate itself to the terms of the contract so that it is consistent with, and conforms to, them. The fiduciary relationship cannot be superimposed upon the contract in such a way as to alter the operation which the contract was intended to have according to its true construction.

110 Likewise, I reject the proposition that Zinc could be considered a bare trustee. Text book authors have sought to define the term 'bare trustee' in the following terms:

A precise use of the term "bare trustee" is to identify a trustee who has no interest in the trust assets other than existing by reason of the office of trustee and the holding of legal title, and who never has had active duties to perform or who has ceased to have those duties with the result that in either case the property awaits transfer to the beneficiaries or that their direction.[65]

111 Even so, the term "bare trustee" is widely used without always being aptly used. Clause 21 provided for the circumstances. I reject the notion of bare trustee on the same basis that I did so in relation to the superimposition of the trust in circumstances where the contract between the parties dictates their relationship and terms. In addition to the terms of clause 21, Zinc's role could not be described as that of bare trustee. It had defined duties and obligations set out in the joint venture deed.

112 On or about 21 October 2010, Hennessy from AMPM forwarded to O'Bryan Jr (who forwarded to Emery) the amended contribution worksheet.[66] The amended contribution worksheet was prepared by Hennessy in accordance with the required Emery contribution of 8.29%. The purpose of preparing the contribution worksheet was to ascertain what amounts, if any, were required to meet the respective contributions before a resolution could be passed pursuant to clause 21 of the joint venture deed. I was taken through the various steps outlined in the worksheet. The net result after taking into account equity contributions and liabilities paid by or on behalf of Mercier Rouse was that there was a negative sum due by Mercier Rouse. In other words, Mercier Rouse had paid $66,846 to Zinc in excess of what was determined as the contribution amount.

113 Further, counsel for Mercier Rouse submitted that Zinc was estopped by deed from disputing the excess contribution by the Emery trust to Zinc of $66,846. Mercier Rouse relies upon the separation deed of November 2011 wherein that amount is included.

114 Notwithstanding the use of the worksheet as the basis for the calculation of the contribution amount:

• Mr Emery agreed whether the documents was efficacious or not really didn't matter, it's just what was used by Emery and O'Bryan Jnr to calculate how to adjust the rights and obligations between them;[67]

• Mr Emery agreed that "funds distributed to the partnership without all costs and expenses necessarily being met";[68]

• Emery agreed that he had made out and certified a report as to affairs dated 19 March 2012.[69] He agreed that the creditors listed therein were creditors relating to the project managed by Zinc. In other words, those were project costs which ought to have been discharged in calculating the contribution amount.

115 It was put on behalf of Mercier Rouse that it was not credible that AMPM would exit without all the expenses being paid. However, I reject that proposition as the only interest AMPM had was to make sure that it was paid its exit fee.

116 Further, in submissions, counsel for Mercier Rouse set out:

166. First, it has not been established that all of those included on the RATA in fact represented creditors of Zinc as at the date of the receipt of the Hennessy email although it is conceded that some no doubt are (e.g. Compass Environment - see T142, 143).

167. Secondly, many of the creditors may be creditors of Zinc but their claims may not be costs that fell within the contribution amount -see Schedule 4. Zinc's creditors as at the date of liquidation need not necessarily be those creditors whose debts comprised project costs, and hence needed to be taken into account as per Schedule 4. Zinc's creditors as at the date of liquidation need not necessarily be those creditors whose debts comprise project costs, and hence needed to be taken into account as per Schedule 4. As Emery explained these represented the "hard" development costs or to pick up the language of the JV deed, "project costs".

...

169. Those creditors may in theory be creditors of Zinc (possibly inter- [company] group loans) but their debts may not have constituted project costs and as such fall within Schedule 4.

...

171. Thirdly, and even assuming that the outstanding creditors are all project costs and indeed were, or ought to have been included as project costs and hence in the calculation of the contribution amount, all that the existence of outstanding creditors of Zinc means is that Zinc has not paid those creditors.

117 These concessions reinforce my determination that Mercier Rouse has not discharged its onus to demonstrate that the entitlement to call for the transfers arose. I did not receive any evidence that Zinc acted otherwise in its capacity as manager of the partnership and manager of the joint venture. The natural inference is that all liabilities incurred by Zinc related to the joint venture project. The extract of the creditors of Zinc as at 14 March 2012 sets out unsecured creditors of Zinc in the sum of $1,318,825.[70]

118 The onus rests upon Mercier Rouse to demonstrate that the prerequisite for an entitlement to call for the transfers arose. I cannot be satisfied that the contribution amount has been met notwithstanding a schedule utilised by the parties to arrive at a result.

119 Further, I do not accept that the liquidator need have regard to the concept of estoppel by deed. The 10 November 2011 deed was a deed to sever the interests between the Emery interests and the O'Bryan Jr interests. Albeit that Zinc was a party to the deed, it cannot be described as an arm's length transaction. In effect it was the two directors working out amongst themselves their respective rights and obligations arising out of their interests in Zinc (and other companies). It would be fatuous to suggest that any liquidator is bound by such a document. If that be so, any recalcitrant directors could formulate any terms or provisions by deed and argue that a subsequently appointed liquidator is bound by the same. That is a non-sequitur in the circumstances.

120 Accordingly, I determine that units 208 and 301 are not held on trust by Zinc for the benefit of Mercier Rouse.

121 Given my determination that apartments 208 and 301 are not held by Zinc on trust for Mercier Rouse, much of the argument relating to the Equity-One charge falls away. Further, Mrs O'Bryan recognised that her entitlement to a transfer was subject to the Equity-One charge. The failure to discharge that security is a matter for Mrs O'Bryan in another forum but is not a matter vis a vis Equity-One in this proceeding.

122 Notwithstanding my determination with respect to units 208 and 301 it is appropriate that I make some observations about the issues ventilated.

123 In Crozo Pty Ltd v Total Australia Ltd,[71] the charging clause included:

Further security. As further security for repayment of all moneys hereby secured all the right title estate interest which the mortgagor now has or may hereafter during the currency of this mortgage acquire in any freehold or leasehold property shall by force of the execution of this mortgage stand charged by the mortgagor (as beneficial owner) with the payment of all monies hereby secured.

124 Andrew CJ (with whom Shepherdson and Vasta JJ agreed), dismissed the appeal. The trial judge's finding that F held lot 41 on trust for C who then held it on trust for the beneficiaries was upheld. The trial judge had ordered that F transfer lot 41 to the plaintiff C and that T lodge for registration a release of the bill of encumbrance. The Full Court of the Supreme Court of Queensland held that clause 11.02 by including the phrase (as beneficial owner), restricted itself to property, in whatever interest or estate beneficially owned by the mortgagor. Andrew CJ said:

However the words are to be interpreted in context of part of the document in which they appear, and intended by the parties to have a meaning relevant to their expressed purposes. Fairweather was legal owner of a number of items of reality, some as trustee and some as beneficial owner. Contractual intent is to be gleaned from the terms used in the contract. A simple way of including all realty in the property to be subject to the charge would be to strike out the phrase "(as beneficial owner)".[72]

125 Accordingly, it was held that the words "as beneficial owner" clarified that the charge did not operate over property held on trust.

However, I accept generally the proposition which those cases support namely that the phrases such as "all the right title estate and interest which the mortgagor now has or may....acquire" do not extend to properties held "in autre droit" and relate to no more than the person creating the interest in question has....[73]

127 In Custom Credit Corporation Ltd v Ravi Nominees Pty Ltd,[74] the charging clause was as follows:

The coventor as beneficial owner while any moneys remain outstanding hereunder charges all the interest which the coventor may have or hereafter acquire in any freehold or leasehold property by way of security for the payment of the moneys hereby secured.

128 The Custom Credit case concerned the removal of caveats at an interlocutory stage. The Full Court held that "since the trustee does not beneficially own trust property it cannot be said to convey 'as beneficial owner'".[75]

129 In Saraceni v Mentha (No 2),[76] the charging clause was as follows:

The chargor charges the secured property to the security trustee to secure the payment of the secured money.

There was a question as to, among other things, the meaning of "secured property". The plaintiffs argued that the deed containing the charge on its proper construction, was ineffective to charge any of the mortgagor's assets. This was because secured property was a defined term, defined in another document, and the result was that the secured property meant property already secured under the first mortgage. This meant that the charge did not more than charge property that was already mortgaged.

130 The defendant submitted, and Corboy J accepted, that the commercial circumstances of the transaction were relevant when construing the ambiguous charging clause. A condition of the mortgage providing funds to the mortgagor was that the mortgagor granted a fixed and floating charge over all its assets and undertakings. The existence of this condition was supported by draft versions of the deeds and covering emails. The circumstances were not controversial. Corboy J held that the plaintiff's construction of the deed would defeat the parties' intentions. Corboy J accepted the defendant's construction of the charging clause, and held that the secured property referred to property pledged as security in agreements other than the facility agreement. Accordingly, the charging clause was effective over all the plaintiff's assets and undertakings.[77]

131 Crozo and Custom Credit were followed by the Supreme Court of Queensland in Amberley Aerospace Park v Heartwood Architectural Timber & Joinery.[78] The charging clause was as follows:

At a glance

Court

Decision date

Before

Source

Judgment (255 paragraphs)

Parties

Legislation Cited (2)

Cases Cited (10)