IIB Global NV & Anor v Scott Darren Pascoe & Ors

Judgment 1By Summons filed on 13 September 2011, the First Plaintiff, IIB Global NV, ("IIB Global") and the Second Plaintiff, Mr Linden Dyason, ("Mr Dyason") seek an order extending the operation of a caveat dated 11 April 2011 which was lodged by IIB Global ("Caveat") pending specified events, namely: (1) The distribution of the assets of the Partnership of Arthur Linden Dyason and Lindsey Jane Dyason by a Receiver; or (2) Until the final hearing of proceedings brought by the First Defendant, Mr Scott Pascoe as trustee in bankruptcy for Arthur Dyason ("Mr Pascoe"), or by the Plaintiffs, or by the Partnership; or (3) The completion of certain investigations. 2The application to extend the caveat needs to be determined promptly, since I have been informed that caveat will expire today. The Plaintiffs also seek certain other substantive orders. The Plaintiffs rely on an affidavit of Mr Dyason sworn 10 August 2011 which was previously filed in other proceedings in this Court; an affidavit of William Liu sworn 15 August 2011 also filed in those other proceedings; and an affidavit of Mr Dyason sworn 13 September 2011. Mr Pascoe relies on an affidavit of Patrick Ferguson sworn 20 September 2011. Whether the proceedings are properly commenced and carried on by IIB Global 3IIB Global is a company registered in the Netherlands Antilles. Mr Dyason seeks to represent IIB Global and also appears in person. A preliminary question arises as to whether these proceedings are properly commenced and carried on by IIB Global. 4UCPR Pt 7 r 7.1 relevantly provides that a corporation (other than a company within the meaning of the Corporations Act ) may commence or carry on proceedings by a solicitor or by a duly authorised officer of the corporation. IIB Global is a corporation within the meaning of s 57A of the Corporations Act although it is not a company within the meaning of that Act. In order to establish that Mr Dyason may commence and carry on the proceedings on IIB Global's behalf under this Rule, it must be shown both that Mr Dyason is an officer of IIB Global and that he is duly authorised to carry on the proceedings on its behalf. There is good reason for such a rule, since otherwise a corporation could be exposed to the significant consequences of carrying on legal proceedings, including the risk of adverse costs orders, without those proceedings have been properly authorised by it and a defendant could be required to defend proceedings purportedly commenced by a corporation but not properly authorised by it. UCPR r 7.2 provides for the filing of an affidavit as to authority of the authorised officer of a corporation containing specified statements. Mr Dyason has not filed an affidavit under that rule, but has filed the other affidavits to which I refer above which seek to establish his control of IIB Global. 5The terms "authorised officer" and "officer" do not appear to be defined for the purposes of UCPR rr 7.1 and 7.2 and my attention has not been drawn to any authority as to their scope in those rules. The term "officer" is widely defined in s 9 of the Corporations Act as including not only a director or secretary of a corporation, but also a person who makes or participates in making decisions that affect the whole or a substantial part of the corporation's business; who has the capacity to affect significantly the corporation's financial standing; or in accordance with whose instructions the directors of the corporation are accustomed to act (with an exclusion for professional advisers in specified circumstances). The width of that definition is readily understandable since it is used in provisions in the Corporations Act that impose liability for improper conduct on, inter alia, officers of corporations. 6I do not consider that the terms "authorised officer" and "officer" in UCPR r 7.1 should be given a similarly wide meaning. First, a strong textual indicator to the contrary appears, relevantly, in UCPR r 7.2(3) which requires a statement in the officer's affidavit as to authority (which, as noted above, Mr Dyason did not file) that he or she is the holder of a "specified office" in the corporation. This language is apt to refer to an appointment to a particular corporate office, for example as director or managing director, rather than to concepts such as "shadow" or "de facto" director. Second, I can see no basis on which the policy underlying UCPR r 7.1, of ensuring that proceedings by corporations are only commenced or carried on by persons who are officers of the Court or officers of the corporation with proper authority, would be promoted by giving an extended meaning to the term "officer" in that rule. 7The evidence before me does not establish that Mr Dyason has been properly appointed as an officer of IIB Global or holds any specified office within that entity. Mr Dyason's affidavit dated 10 August 2011 seeks to establish that he is the "beneficial owner" of IIB Global. It annexes a corporate diagram, which Mr Dyason stated from the bar table had been prepared by accountants in the United Kingdom. It also annexes a Deed of Assignment which refers to a transfer of the "Founder's authorities" for the Institute for Independent Business Private Foundation to Mr Dyason; however, there is no evidence to which my attention has been drawn as to the content of the "Founder's authorities" under the law of the Netherlands Antilles. The third document annexed to that affidavit establishes that the Institute for Independent Business Private Foundation holds 6000 shares of the stock of IIB Global. A fourth document appears to establish that Mr Dyason has authorised the payment of an invoice rendered to IIB Global from a bank account, and there is also evidence before me which indicates that Mr Dyason gave instructions to Barclays, in respect of IIB Global, to pay off Mr Arthur Dyason's mortgage and that evidence suggests he exercised a degree of practical control over at least one bank account held in the name of that entity. 8Mr Liu's affidavit sworn 15 August 2011 indicates that he is the Managing Director of IIB Global and that he has held that position since 13 December 2004. He indicates that Mr Dyason is founder and principal of the Institute for Independent Business, a not for profit company registered in the United Kingdom and that IIB Global was incorporated in the Netherland Antilles on 13 December 2004 and Citco Curacao, a global consultancy company, and Mr Liu were appointed as its Managing Directors. He gives evidence that Mr Dyason "continues to be active in the control of IIB Global" but gives no more specific evidence as to the nature of or extent of that activity. Mr Dyason accepted in submissions that there may be good commercial reasons why persons would or would not be appointed as or act as officers of foreign companies. 9When the matter was listed for judgment this morning, Mr Dyason indicated that two further documents had come into his possession which were relevant to matters for issue. I asked Mr Dyason whether he sought to reopen the case of IIB Global and himself so as to tender those documents and he indicated that he did seek that leave. That leave was opposed by Mr Pascoe, not on the basis that he would be prejudiced by the tender of the two further documents but on the basis that they would not assist in resolving the question whether the proceedings were properly commenced and carried on by IIB Global. In particular, Mr Pascoe did not suggest that he required any time to lead evidence in response to the tender of the additional documents. 10Although it would not generally be desirable that parties seek to reopen matters and lead further evidence at the time the proceedings are listed for judgment, each application must be considered on its merits and having regard to sections 56-58 of the Civil Procedure Act. The Court must, by s 56, have regard to the overriding purpose, being the just, quick and cheap resolution of the real issues in the proceedings. Section 57 deals with the process of case management and requires the practice and procedure of the Court to be regulated to ensure the attainment of the objects specified in the section, including the just determination of the proceedings, the efficient disposal of the Court's business, the efficient use of available judicial and administrative resources, and the timely disposal of the proceedings and all other proceedings in the Court at an affordable cost. Section 58 requires the Court, in dealing with amendments, to seek to act in accordance with the dictates of justice. In the present circumstances, having regard to the desirability of a determination of the proceedings on their underlying merits and the absence of any identified prejudice to Mr Pascoe from permitting the reopening of the case to tender the additional documents, I propose to grant leave to Mr Dyason to reopen his case to seek to tender the documents. 11I will also admit the tender of the additional documents in evidence because no objection was taken to them by Mr Pascoe. However, the documents are not admissible as business records under s 69 of the Evidence Act since they are obviously prepared in contemplation of litigation and they should not be treated as proof of historical facts asserted in them. 12The first of these documents is an email dated 21 September 2011 from Mr Dyason to Mr Liu requesting that Mr Dyason be formally appointed as the "Aus[tralian] Op[eration]s Director" by execution of an attached document. It appears from the text of that email that it was drafted in order to be tendered before the Court. Mr Dyason relies on the email, and Mr Liu's compliance with that request in the manner noted below, to indicate his control of IIB Global. Although that email has a somewhat self-serving character, I treat it and Mr Liu's actions in response as evidence that Mr Dyason exercises a substantial degree of practical control or at least significant influence over IIB Global. 13The second document is dated 21 September 2011, the date of the hearing before me. I will assume that date is accurate, although the email requesting it was not sent by Mr Dyason until 10.20pm on that date. The document is signed by Mr Liu as Managing Director of IIB Global and confirms the operational fact that since the incorporation of IIB Global NV, Mr L.P. Dyason as the hands on owner of all shares has been in practise [sic] and effect a director of the company. I give little weight to this assertion given its generality and conclusory form. I also note that the evidence before me demonstrates that Institute for Independent Business Private Foundation holds shares in IIB Global and there is no other evidence of Mr Dyason holding such shares. 14By this document, Mr Liu also appoints Mr Dyason as "Australian Director of Operations" of IIB Global "to act for and on behalf of the Company in any way as he believes will benefit the Company and its interests in Australia." There is, however, no evidence before me that the law of the Netherland Antilles or IIB Global's constitution or other constituent documents (which are not in evidence) permit Mr Liu to make such an appointment either at all or without the concurrence of the other Managing Director of IIB Global, Citco Curacao. There is also no evidence before me that the law of the Netherland Antilles or IIB Global's constitution or other constituent documents recognise an office of the kind to which Mr Dyason has purportedly been appointed or whether the powers attached to that office would be such that Mr Dyason is an officer of IIB Global within the general law meaning of that term. 15While the evidence before me establishes that Mr Dyason has a connection with IIB Global, has made decisions affecting its interests and exercises a substantial degree of practical control or at least significant influence over it, it does not establish that he is an officer of IIB Global within the narrower concept of a person properly appointed to an office within that entity. In any event, there is no evidence before me either that any corporate step has been taken by IIB Global to authorise Mr Dyason to commence or carry on proceedings on its behalf or that Mr Dyason personally has the ability to take such a step to the exclusion of those who are the appointed statutory officers of IIB Global. 16Accordingly, I find that the requirements of UCPR Pt 7 r 7.1 are not satisfied. The court has power to dispense with these requirements of this rule pursuant to s 14 of the Civil Procedure Act 2005: Connectland Pty Ltd v Porthaven Pty Ltd [2011] NSWSC 616. However, I consider that there are good reasons not to do so, where that course would expose IIB Global and Mr Pascoe to the risks of proceedings that have not been shown to be properly authorised by the entity in whose name they are purportedly commenced . 17On the basis that the application in paragraph 1 of the Summons to extend the Caveat is not properly brought by IIB Global, I should dismiss IIB Global from the proceedings and dismiss the Summons so far as it is concerned: Von Risefer v Permanent Trustee Co Pty Ltd [2001] FCA 544. Mr Dyason does not personally have standing to bring an application to extend the operation of the caveat lodged by IIB Global under s 74K of the Real Property Act 1900 (NSW) and the application brought in paragraph 1 of the Summons to extend the Caveat must therefore fail. The merits of the application to extend the Caveat 18Notwithstanding that the findings I have reached above are sufficient to require dismissal of the application to extend the Caveat brought in paragraph 1 of the Summons, I consider that it is appropriate to set out my findings as to the merits of that application, in case a different view were taken as to the question whether the proceedings were properly commenced by IIB Global or as to Mr Dyason's standing to seek an order to extend the Caveat in his own right. 19Section 74K of the Real Property Act provides that, on the hearing of an application for an order extending the operation of a caveat under s 74K(1) of the Real Property Act , the Court may, if satisfied that the caveator's claim has or may have substance, make an order extending the operation of the caveat for such period as is specified in the order or until the further order of the Court, or may make such other order as it thinks fit, but, if that Court is not so satisfied, it shall dismiss the application. The principles applicable to an application to extend a caveat are well established. The Court must be satisfied that there is an arguable case that the caveator's claim to an interest in the property raises a seriously arguable case for final relief to justify maintenance of the caveat and that the balance of convenience favours extending the caveat pending a trial to substantiate the estate or interest claimed. 20The first basis of the application to extend the Caveat, as set out in the Summons filed by IIB Global and Mr Dyason, is that Mr Pascoe does not have standing to lapse the Caveat over "partnership property". I can deal with that application shortly. Mr Pascoe as trustee in bankruptcy for Mr Arthur Dyason is a registered proprietor of the relevant property and, under s 74J of the Real Property Act , the Registrar-General shall, on an application made by the registered proprietor, serve notice on the caveator that, unless the caveator has before the expiry of 21 days after the date of service of the notice, obtained an order extending the operation of the caveat, the caveat will lapse. The process contemplated by that section has been invoked and, in that situation, it is necessary for IIB Global to establish its entitlement to an order extending the operation of the Caveat or it will lapse. 21I turn now to the second and third bases identified for extension of the Caveat. I should first note that the Caveat claims an interest as mortgagee which is stated to arise from the following facts: On 31 March 2011 the Trust Company (PTAL) Limited ACN 008 412 913 (formerly known as Permanent Trustee Australia Limited ACN 008 412 913) transferred the mortgage to IIB Global N.V. The interest claimed in the Caveat can only be supported by reference to the facts stated in it and the Court has no power to extend a caveat to protect an interest not claimed in it. In Multi-Span Constructions No 1 Pty Ltd v 14 Portland Street Pty Ltd [2001] NSWSC 696; (2001) 10 BPR 19,253, Barrett J noted that "[a] caveat is not an ambulatory or flexible means of maintaining a blocking position in aid of whatever interest, if any, the caveator may have from time to time". His Honour also observed that it was central to s 74F of the Real Property Act that a party lodging a caveat asserted an entitlement to a particular estate or interest, with the caveat prohibiting the recording of any dealing affecting that estate or interest. This proposition is sufficient to indicate that the second and third bases on which IIB Global and Mr Dyason seek an order extending the Caveat cannot be sustained, for the reasons noted below. 22The second basis for the extension of the Caveat is that Mr Pascoe should not be allowed to act to the "further detriment" of IIB Global until there is an investigation into his conduct. There is evidence before me that Mr Dyason has made complaints as to Mr Pascoe's conduct which may or may not lead to further inquiries by bodies with jurisdiction to make such further inquiries. These matters do not support the interest claimed in the Caveat and are in any event not sufficient to establish an arguable case that IIB Global has a legal or equitable estate or interest in the property so as to support a caveat lodged under s 74K of the Real Property Act 1900. 23The third basis for extension of the Caveat is that IIB Global contends that it has an interest in the property as an unregistered first mortgagee as it is subrogated to the position of the first registered mortgagee, Trust Company of Australia (formerly Permanent Trustee Australia Limited) ("PTAL") after payment of the registered first mortgagee was made in full. First, the claim for an extension cannot be supported on that basis because the Caveat does not claim an interest arising in that manner; indeed, such an interest had been claimed in a previous caveat which had lapsed and leave had not been sought or granted to lodge a further caveat based on the same facts. 24Second, it is likely that such a claim would fail because the presumption that a third party which pays off a mortgage intends the mortgage should be kept alive for its own benefit ( Ghana Commercial Bank v Chandiram [1960] AC 732 at 745; Re Hill (1974) 23 FLR 329 at 332-333) would be rebutted in the present facts. The evidence before me establishes that, when IIB Global paid off the indebtedness to PTAL secured by the mortgage held by PTAL, it intended that mortgage be discharged rather than maintained for its own benefit. A letter dated 28 April 2008 from solicitors acting for Mr Arthur Dyason, Mr Dyason and IIB Global to solicitors acting for PTAL stated that an amount had been transferred to PTAL in payment of the amounts due under the mortgage and requested those solicitors to forward the certificate of title and a discharge of the mortgage. That letter plainly contemplated that the effect of the transaction would be that the mortgage would be discharged rather than that it would be retained for the benefit of IIB Global. A discharge of mortgage was executed by PTAL on 9 May 2008. A caveat dated 21 October 2008 was subsequently lodged by IIB Global that referred, not to an interest by way of subrogation to PTAL's mortgage, but instead to an oral agreement with the registered proprietors to provide a mortgage to IIB Global. I could not, in these circumstances, find that IIB Global has established the third basis for extension of the Caveat. 25The fourth basis of IIB Global's claimed interest in the property is that it has an interest as unregistered first mortgagee which should be protected by the Caveat and possession of the certificate of title pending registration of its transfer of mortgage. By letter dated 28 March 2011, solicitors for PTAL advised that the mortgage had been transferred to IIB Global. A copy of an undated transfer of mortgage signed on behalf of PTAL is in evidence. As noted above, the Caveat claims an interest on that basis. 26It appears that the transfer of mortgage from PTAL to IIB Global was not registered and did not take effect under s 65 of the Real Property Act . Accordingly, the Caveat could only be supported on the basis that it protects an equitable interest arising from an agreement by PTAL to transfer the mortgage to IIB Global. There is no evidence before me of such an agreement as distinct from the fact of the transfer of the mortgage. In any event, IIB Global could not acquire a better interest by reason of such an agreement than PTAL itself had. As noted above, by letter dated 28 April 2008, solicitors acting for (inter alia) Mr Arthur Dyason advised solicitors for PTAL that an amount had been transferred to PTAL in payment of the amounts due under the mortgage and requested those solicitors to forward the certificate of title and a discharge of the mortgage. Although the evidence before me is far from comprehensive, it suggests that PTAL received the relevant payment on the basis of its agreement that it would discharge the mortgage once that payment was received. As noted above, PTAL in fact executed a discharge of the mortgage on 9 May 2008 that was lodged, together with the certificate of title, with the Land Titles Office by IIB Global's solicitors by letter dated 17 August 2009. 27No submissions where put before me to indicate, and I do not see, any basis on which PTAL could have enforced its mortgage against Mr Arthur Dyason (or Mr Pascoe as his trustee in bankruptcy) after it had agreed to discharge it, had received payment of the amount due on that basis and a discharge of mortgage had been executed and lodged for registration. In these circumstances, I could not have found that IIB Global had established a caveatable interest on this basis, even if proceedings had been properly commenced by it. 28The fifth basis on which the Caveat is sought to be extended is that Mr Pascoe's lapsing notice "is bad in form and substance". It is difficult to understand this contention since, as noted above, the relevant notice appears to have been served by the Registrar-General in the circumstances provided by s 74J of the Real Property Act . So far as the basis of this contention is set out in the Summons filed by IIB Global and Mr Dyason, it does not seem to me to be of substance. 29I should also note that no substantive relief seems to be sought in the Summons in respect of the first, second, third and fifth bases on which IIB Global and Mr Dyason seek to support the extension of the Caveat. In my view, the application could also not be sustained on those bases in the absence of a corresponding claim for final relief, by reason of the principle that a caveat should only remain on the title pending an application claiming an equitable or other interest to vindicate that interest: Iaconis v Lazar [2007] NSWSC 1103; Wu v Dardaneliotou [2008] NSWSC 1319; Waco Kwikform Ltd v Jabbour [2010] NSWSC 1379. 30Since I am not satisfied that IIB Global's claim on these bases has or may have substance, I would have been obliged to dismiss the application for an extension of the Caveat, even if the application had properly been brought by IIB Global or Mr Dyason has standing to bring it. Other matters 31Mr Pascoe submitted that, if I were to find that the basis for extension of the Caveat was not established, the Summons filed 13 September 2011 should be dismissed in its entirety. Mr Dyason confirmed before me that he would press the balance of the relief sought in the Summons notwithstanding the failure of any application to extend the Caveat. On the basis that the proceedings are not properly commenced by IIB Global, it appears I should strike out the Summons in respect of IIB Global: Von Risefer v Permanent Trustee Co Pty Ltd [2001] FCA 544. So far as Mr Dyason brings the balance of the proceedings in his own right, the legal basis for several of the orders sought is not clear to me. It seems to me the proper course is to grant leave to Mr Pascoe to file a motion returnable before me, if so advised, seeking orders striking out the balance of the relief claimed by Mr Dyason personally in the Summons. 32Mr Pascoe sought an order that, upon lodgement of a copy of this order and payment of the prescribed fee, the Registrar-General register the discharge of the mortgage dated 9 May 2008. Mr Pascoe did not make substantive submissions to support that order and I do not consider it appropriate to make it in the absence of such submissions. 33Mr Pascoe has been substantively successful in the proceedings and should have his costs of and incidental to the hearing before me on 21 September 2011. Having regard to the findings which I have reached above in respect of IIB Global's role in the proceedings, it is appropriate that I order that Mr Dyason pay those costs. 34Accordingly, I order that: