[Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.]
[2]
[This headnote is not to be read as part of the judgment]
Silvana Mangano (the appellant) brought an appeal against the dismissal of her claim asserting that her father Rosario Mangano (the deceased) and his partner Rosemary Bullen (the respondent) obtained their interests in a property in Glebe (the property) by fraud, and seeking to set aside the transfer of the property. The appellant also sought to set aside a further transfer which converted the interests of the deceased and the respondent from tenants in common to joint tenants. The appellant, as the executor of the deceased's estate, ultimately sought for the estate to regain a one-half interest in the property.
The respondent and the deceased were the directors of a company, Camfield Pty Ltd (Camfield). Camfield purchased the property in 1980, and the respondent and the deceased repaid the mortgage over the property jointly. Camfield bought and sold a number of other properties, however it ceased its activities around 1982.
Around 27 June 1983, the National Companies and Securities Commission (NCSC) issued a notice under s 459(1) of the NSW Companies Code, indicating it had reasonable cause to believe that Camfield was not carrying on business. Camfield was deregistered on 3 March 1984. The appellant pleaded that upon deregistration, the property was vested in the NCSC (and now its successor, ASIC). The respondent gave evidence that she did not know that Camfield had been deregistered.
On around 25 December 1986, the property was purportedly transferred from Camfield to the respondent and the deceased. On 21 May 2015, their interests in the property were converted to a joint tenancy. The deceased died in July 2015. Proceedings involving the appellant and respondent under the Succession Act 2006 (NSW) were settled at mediation, with the respondent relying on the fact that she owned the property.
The Court of Appeal dismissed the appeal with costs.
Did the deceased acquire his title to the property by fraud?
i) Fraud here means actual fraud, personal dishonesty or moral turpitude, and it is appropriate to take into account the gravity of the allegation: [73]-[74] (Bathurst CJ); [91] (Meagher JA); [92] (Payne JA).
Assets Co Ltd v Mere Roihi [1905] AC 176; Butler v Fairclough (1917) 23 CLR 78; [1917] HCA 9; Bahr v Nicolay (No 2) (1988) 164 CLR 604; [1988] HCA 16; Briginshaw v Briginshaw (1938) 60 CLR 336; [1938] HCA 34; Neat Holdings Pty Ltd v Karajan Holdings Pty Ltd [1992] HCA 66; (1992) 67 ALJR 170, referred to.
ii) It was not established that the deceased obtained his title by fraud. The appeal should be dismissed for this reason: [81] (Bathurst CJ); [91] (Meagher JA); [92] (Payne JA).
Issues in relation to the reinstatement of Camfield
i) Even if the appellant could be described as a person aggrieved under the NSW Companies Code, she would require an extension of time under s 539(4)(d) of the Code, and would have to demonstrate that no substantial injustice would be caused to any person as per s 539(6)(c) of the Code. The prospect of reinstating Camfield is at best speculative: [86] (Bathurst CJ); [91] (Meagher JA); [92] (Payne JA).
Re Jury & Spiers Pty Ltd [2016] NSWSC 900; 114 ACSR 336; Baird v WJT Howes Investments Pty Ltd [2008] NSWSC 1232; 68 ACSR 485, referred to.
ii) If Camfield was reinstated, the deeming provision in s 459(6) of the Code would validate steps taken in the name of the company whilst it was deregistered: [87] (Bathurst CJ); [91] (Meagher JA); [92] (Payne JA).
Pollnow v Ash Street Properties Pty Ltd (1996) 130 FLR 235; Video Excellence Pty Ltd v Cincotta (1998) 44 NSWLR 742, referred to.
Issues in relation to the limitation period
i) Any right ASIC would have had to set aside the transfer under s 118 of the Real Property Act 1900 (NSW) would be statute barred by virtue of s 27 of the Limitation Act 1969 (NSW), or alternatively by s 51 of that Act: [84] (Bathurst CJ); [91] (Meagher JA); [92] (Payne JA).
ii) Assuming that Camfield was able to be reinstated, any cause of action which Camfield would have to set aside the transfers for fraud would be statute barred by s 51 of the Limitation Act: [88] (Bathurst CJ); [91] (Meagher JA); [92] (Payne JA).
[3]
Judgment
BATHURST CJ: This is an unusual case. It involves a claim by Silvana Maria Mangano (the appellant), the executor of the estate of her father, the late Rosario Mangano (the deceased), asserting that the deceased and the first respondent Rosemary Anne Bullen (the respondent) obtained their interests as registered proprietors of 39 Talfourd Street, Glebe (the property) by fraud and seeking to set aside the transfer. It is unusual because the object of the proceedings is not to benefit the party defrauded, but rather to undo a subsequent transfer converting the interests of the deceased and the respondent in the property from interests held as tenants in common to a joint tenancy. The appellant ultimately seeks for the estate of the deceased to regain a one half interest in the property. In the proceedings below, she sought relief accomplishing that object directly. The relief sought on appeal has narrowed materially, and the appellant now seeks only a declaration that the transfers were affected by fraud.
A further unusual feature is that the pleadings, the case presented at trial and the written submissions on appeal contended that the respondent actually participated in the fraud. The appellant also alleged in the pleadings that the respondent perpetrated a "fraud" both on the Family Court and the deceased by filing forged documents in the Family Court, which were said to have unduly influenced the deceased to alter the tenancy to a joint tenancy. By contrast, on the hearing of the appeal it was alleged that the respondent was a victim of the fraud, notwithstanding that the ultimate aim of the proceedings was to deprive her of a one half interest in the property. It should be noted that there was no particularisation of the alleged fraud by the respondent on the deceased or the Family Court, notwithstanding the requirement to properly particularise any allegation of fraud.
[4]
The acquisition of the property by Camfield Pty Ltd
Camfield Pty Ltd (Camfield) was a company of which the deceased and the respondent were directors. The respondent gave evidence that the company was acquired by her and the deceased as a shelf company on or around 31 May 1979. The property was acquired by Camfield by Memorandum of Transfer dated 10 August 1980.
The primary judge accepted the respondent's evidence of the background leading up to the acquisition of the property by Camfield. This evidence was not challenged and may be summarised as follows.
The respondent and the deceased first met in about 1967 and started a relationship in 1968. She stated that at that time she was working as a registered nurse, whilst he was working as a site manager for a construction company. At the time they met they were each separated from their spouses. Although they formed a de facto relationship, the deceased and the respondent were never married.
The respondent gave evidence that when she and the deceased started going out together she was renting premises at Edgecliff. The deceased told her that he was living with his parents at Haberfield. The respondent stated that in around 1969 the deceased told her he had a wife and children and that he had moved out of the marital home in Haberfield and was living in a granny flat at the back of his parents' house in Miller Street, Haberfield.
The respondent gave evidence that from 1972 to 1978/1979 the deceased was living and working in Nelson Bay on development projects. She said she was renting at Double Bay but subsequently moved to Rose Bay.
The respondent gave evidence that by 1979, the deceased was taking steps to wind up his projects in Nelson Bay and began visiting Sydney more frequently.. Apparently both he and the respondent were frustrated at paying rent. In those circumstances, the respondent said the deceased told her that he had come up with a plan to buy and renovate property and use the profits to buy a house without a mortgage. He told her that he thought that if they renovated and sold five properties, they would have enough money to buy a house for themselves.
The respondent gave evidence that eventually she and the deceased agreed to put their savings together, about $4,000 each, and to borrow the balance in order to purchase properties. She stated that the deceased told her, "We'll get a company together and everything will be above board".
[5]
The deregistration of Camfield, the transfer of the property to the respondent and the deceased and subsequent events
After the sale of the Glebe Point Road property, Camfield ceased its development activities. The respondent gave evidence she returned to nursing whilst the deceased focused on a building company he had set up, Mangano Constructions Pty Ltd.
It appears that at some time around 27 June 1983, the National Companies and Securities Commission (NCSC) issued a notice under s 459(1) of the 1981 Companies (New South Wales) Code (the Code) indicating it had reasonable cause to believe that Camfield was not carrying on business. As a consequence, the company was deregistered on 3 March 1984 pursuant to s 459(4) of the Code. The effect of such deregistration was that the company was dissolved and any outstanding property vested in the NCSC pursuant to s 461(1) of the Code.
The respondent gave evidence that she did not know anything about the company being deregistered. She stated, however, that in 1986 the deceased went to see his accountants, Socratous, Joannou & Co (Socratous), and was advised about a possible land tax liability because the property was in the company's name. She said that the respondent came home and informed her that the accountant had said that "because the house is in the Company's name we may have to pay land tax. We're not using the Company and not doing anything more to the property so let's get it put into our names".
The respondent gave evidence that on 21 November 1986 the mortgage on the property was discharged. The respondent stated that to the best of her recollection she and the deceased came up with the funds to repay the mortgage as Camfield would not have had the funds to pay it off in its own right.
On or around 25 December 1986 the property was purportedly transferred to the respondent and the deceased, the consideration in the transfer being expressed to be $80,000. The transfer was registered on 16 February 1987. The respondent stated that Mr Passaro acted in relation to the transfer. She gave evidence that Mr Passaro subsequently ran into difficulty for fraudulent misappropriation of trust monies, was struck off and served three years imprisonment. Some reliance was placed on this by the appellant in her written submissions but not at the hearing of the appeal. The respondent in her affidavit stated she did not know where Mr Passaro was and had been unable to locate any correspondence from him.
[6]
The pleaded case and the relief sought
The Further Amended Statement of Claim pleaded without particularisation that the transfer of the property from Camfield to the respondent and the deceased was a fraud on the NCSC.
It was also pleaded, again without particularisation, that the transfer converting the title from a tenancy in common to a joint tenancy was a fraud on Land and Property Information (NSW). In support of this allegation, the alleged fraud by the respondent on the Family Court and the deceased to which I referred at [2] above was relied upon. It was also stated to be a fraud on the deceased and his estate.
It should be noted that it was further pleaded that between 3 August 2015 and 18 June 2018 the property was transferred into the respondent's name alone. This was admitted in the Defence to the Amended Statement of Claim. That transfer was said in the Further Amended Statement of Claim, without elaboration, to be a fraud on "Land and Property Information NSW".
Finally, the Further Amended Statement of Claim pleaded that from 13 March 1984 the property was vested in and remains vested in the NCSC and now its successor, the Australian Securities and Investments Commission (ASIC). It was pleaded that from 13 March 1984 the deceased and the respondent were in adverse possession of the land and that from 13 March 2014 were entitled to be recorded in the register as tenants in common in equal shares of an estate in fee simple.
In that context the following relief was sought:
"1 A declaration that the transfer of land in Certificate of Title Volume 13853 Folio 176 on 25 December 1986 from Camfield Pty Limited (ACN 001 732 261) to Rosario (otherwise known as 'John') Mangano and Rosemary Anne Bullen was invalid void ab initio.
2 A declaration that on upon the de-registration/dissolution of Camfield Pty Limited on 13 March 1984 the land in Certificate of Title Volume 13853 Folio 176 ('the land') vested in the National Companies and Securities Commission.
3 A declaration that pursuant to section 45D of the Real Property Act 1900 on 13 March 2014 the Estate of the late Rosario Mangano and Rosemary Anne Bullen each became entitled to be recorded in the Register as a proprietor as tenants in common in equal shares of an estate in fee simple in the land.
4 An order pursuant to section 66G of the Conveyancing Act 1999 [sic] that trustees for sale be appointed and the land sold and the net proceeds of the sale be divided equally between the Estate of the late Rosario Mangano and Rosemary Anne Bullen.
4A declaration the Transfer Altering Tenancy dated 31 May 2015 was void ab initio."
By the time the appeal was heard, declaration 3 and order 4 were no longer pressed.
[7]
The particulars of fraud
As I indicated, the allegations of fraud in the Further Amended Statement of Claim were quite unparticularised. To rectify this, counsel for the appellant in the Court below provided the following particulars:
(i) The fraud had to be fixed upon the respondent for the appellant to succeed.
(ii) The relevant fraud was in regard to the execution of the transfer from Camfield to the respondent and the deceased. It was stated that the fraud infected everything between the parties subsequently.
(iii) Establishing fraud against the respondent depended upon establishing the fact of her knowledge of the state of registration of Camfield at the day of the execution of the transfer.
(iv) The specific act of fraud was knowing that the consideration of $80,000 in the transfer was false and signing on behalf of Camfield when it was known it was deregistered.
(v) The entity defrauded was the NCSC, which was defrauded to avoid the reinstatement process which may have alerted creditors. However, no creditors could be pointed to, nor could it be positively said that the ex-wife of the deceased was defrauded.
(vi) If the transfer was infected by fraud, it was void and liable to be set aside and had no legal effect, and the respondent and the deceased remained in adverse possession from 1984 to 2014.
(vii) It was conceded that the usual rule in regard to possessory title is that the persons entitled to an estate by virtue of adverse possession hold such an estate as joint tenants, and hence it was necessary to establish, contrary to that principle, that the deceased and the respondent were entitled to the property as tenants in common.
The assertion that it was necessary to establish fraud against the respondent and the claim for adverse possession were abandoned on the appeal.
[8]
The primary judgment
The primary judge dealt at the outset with the credibility of the respondent. He said that at the heart of the case was a contention that the respondent really did remember a fraud on the NCSC in which she had been closely involved, which she was now seeking to conceal, and which she had been concealing for a long time. He stated that she was thoroughly tested on this case and that her credibility survived the searching cross-examination. The primary judge found at [15] that the respondent was not involved in any fraud on the NCSC or anyone else. The primary judge stated correctly that for there to be fraud within the concept of s 42 of the Real Property Act 1900 (NSW), there must be dishonesty or moral turpitude.
The primary judge accepted the evidence of the respondent that the deceased told her he had consulted his accountant Socratous and was advised about a possible land tax liability, and her evidence that the deceased reported to her what had passed between him and the accountant (see [19] above). He also stated that it was likely, in his view, that Socratous had told the deceased of Camfield's deregistration, having regard to the fact that the respondent had in her possession a company search of Camfield carried out at the direction of Socratous, which showed that Camfield was deregistered on 13 March 1984.
The primary judge stated at [43] that there was much to be said for the respondent's submission that it could not be established that the deceased was committing a deliberate fraud upon the NCSC. He noted that neither the NCSC nor its successor ASIC asserted a beneficial interest in the assets of the deregistered company or opposed its reinstatement. He stated it could reasonably have been expected that had an application been made in 1986 to reinstate Camfield, the NCSC would not have opposed the action, and that all that would have been required of the deceased was a little time to initiate the application for reinstatement and some legal and filing fees. The more probable mental state to be inferred was that the deceased may have preferred to avoid the inconvenience of trying to reinstate the company. The primary judge stated at [44] that trying to defraud the NCSC was not an obviously tenable theory about his state of mind in late 1986. He stated that there was no evidence that Camfield had any significant creditors.
[9]
The grounds of appeal and the relief sought
The appellant relied on the following grounds of appeal:
"1 The primary judge erred in not deciding the proceedings in accordance with the principles set down by the High Court of Australia in Cassegrain v Gerard Cassegrain & Co Pty Ltd [2015] HCA 2 and Gerard Cassegrain & Co Pty Limited v Felicity Cassegrain [2013] NSWCA 453
2. The primary judge found facts which were contrary to the objective documentary evidence.
3. The primary judge found facts which were inconsistent with the objective documentary evidence.
4. The primary judge made inferences for which there was no factual basis
5. The primary judge's judgment contains factual errors".
The matters argued at the hearing before this Court did not bear a close resemblance to these grounds. As has already been explained, the case ultimately put on appeal was materially narrower than that put below. The appellant sought a declaration that the transfer of the property from Camfield to the deceased, and the subsequent conversion of the interests of the respondent and the deceased into a joint tenancy, were affected by fraud. It would follow, it was said, that either ASIC or, if reinstated, Camfield, in which the estate and the respondent each had a 50% shareholding, would be in a position to recover the deceased's notional share in the property, and presumably then to transfer that share to the appellant.
[10]
The relevant legislation
The following provisions of the Code, the Real Property Act and the Limitation Act 1969 (NSW) are relevant.
[11]
a The Code
Section 459 dealt with the power of the NCSC to deregister a defunct company, and applications for its reinstatement. So far as relevant it is in the following terms:
"459. (1) Where the Commission has reasonable cause to believe that a company is not carrying on business or is not in operation, it may send to the company by post a letter to that effect and stating that, if an answer showing cause to the contrary is not received within one month from the date of the letter, a notice will be published in the Gazette with a view to cancelling the registration of the company.
(2) Unless the Commission receives an answer within one month from the date of the letter to the effect that the company is carrying on business or is in operation, it may publish in the Gazette and send to the company in the prescribed manner a notice that, at the expiration of 3 months from the date of that notice, the registration of the company mentioned in the notice will, unless cause is shown to the contrary, be cancelled and the company will be dissolved.
…
(4) At the expiration of the time mentioned in a notice sent by the Commission under sub-section (2) or (3), the Commission may, unless cause to the contrary is previously shown, by notice in writing published in the Gazette, cancel the registration of the company and, on the publication in the Gazette of the last-mentioned notice, the company is dissolved, but -
(a) the liability (if any) of every officer and member of the company continues and may be enforced as if the company had not been dissolved; and
(b) nothing in this sub-section affects the power of the Court to wind up a company the registration of which has been cancelled.
…
(6) If a person is aggrieved by the cancellation of the registration of a company, the Court, on an application made by the person at any time within 15 years after the cancellation, may, if satisfied that the company was, at the time of the cancellation, carrying on business or in operation or otherwise satisfied that it is just that the registration of the company be reinstated, order the reinstatement of the registration of the company and, upon an office copy of the order being lodged with the Commission, the company shall be deemed to have continued in existence as if its registration had not been cancelled, and the Court may by the order give such directions and make such provisions (including directions and provisions relating to the re-transfer of property vested in the Commission under section 461) as seem just for placing the company and all other persons in the same position as nearly as may be as if the registration of the company had not been cancelled."
[12]
b The Real Property Act
Section 42 of the Real Property Act is critical in the present case. So far as relevant it provides as follows:
"42(1) Notwithstanding the existence in any other person of any estate or interest which but for this Act might be held to be paramount or to have priority, the registered proprietor for the time being of any estate or interest in land recorded in a folio of the Register shall, except in case of fraud, hold the same, subject to such other estates and interests and such entries, if any, as are recorded in that folio, but absolutely free from all other estates and interests that are not so recorded …"
As is apparent from what I have written above, the appellant relied on the fraud exception to s 42.
Section 118 deals with proceedings for recovery of land against the registered proprietor. So far as relevant it is in the following terms:
"118 Registered proprietor protected except in certain cases
(1) Proceedings for the possession or recovery of land do not lie against the registered proprietor of the land, except as follows:
…
(d) proceedings brought by a person deprived of land by fraud against:
(i) a person who has been registered as proprietor of the land through fraud, or
(ii) a person deriving (otherwise than as a transferee bona fide for valuable consideration) from or through a person registered as proprietor of the land through fraud".
[13]
c The Limitation Act
Section 27 of the Limitation Act deals with limitations on actions for recovery of land. Section 27(1) and (2) provide as follows:
"(1) An action on a cause of action to recover land is not maintainable by the Crown if brought after the expiration of a limitation period of thirty years running from the date on which the cause of action first accrues to the Crown or to a person through whom the Crown claims.
(2) Subject to subsection (3) an action on a cause of action to recover land is not maintainable by a person other than the Crown if brought after the expiration of a limitation period of twelve years running from the date on which the cause of action first accrues to the plaintiff or to a person through whom the plaintiff claims."
Section 51 contains an absolute bar to proceedings. It is in the following terms:
"(1) Notwithstanding the provisions of this Part, an action on a cause of action for which a limitation period is fixed by or under Part 2 is not maintainable if brought after the expiration of a limitation period of thirty years running from the date from which the limitation period for that cause of action fixed by or under Part 2 runs.
(2) This section does not apply to a cause of action in relation to which an order has been made under Subdivision 3 of Division 3 (Discretionary extension for latent injury etc)."
Section 55, which appears in Part 3 of the Limitation Act and is accordingly subject to s 51, deals with causes of action based on fraud and deceit. It is in the following terms:
"55 Fraud and deceit
(1) Subject to subsection (3) where:
(a) there is a cause of action based on fraud or deceit, or
(b) a cause of action or the identity of a person against whom a cause of action lies is fraudulently concealed,
the time which elapses after a limitation period fixed by or under this Act for the cause of action commences to run and before the date on which a person having (either solely or with other persons) the cause of action first discovers, or may with reasonable diligence discover, the fraud deceit or concealment, as the case may be, does not count in the reckoning of the limitation period for an action on the cause of action by the person or by a person claiming through the person against a person answerable for the fraud deceit or concealment.
(2) Subsection (1) has effect whether the limitation period for the cause of action would, but for this section, expire before or after the date mentioned in that subsection.
(3) For the purposes of subsection (1), a person is answerable for fraud deceit or concealment if, but only if:
(a) the person is a party to the fraud deceit or concealment, or
(b) the person is, in relation to the cause of action, a successor of a party to the fraud deceit or concealment under a devolution from the party occurring after the date on which the fraud deceit or concealment first occurs.
(4) Where property is, after the first occurrence of fraud deceit or concealment, purchased for valuable consideration by a person who is not a party to the fraud deceit or concealment and does not, at the time of the purchase, know or have reason to believe that the fraud deceit or concealment has occurred, subsection (1) does not, in relation to that fraud deceit or concealment, apply to a limitation period for a cause of action against the purchaser or a person claiming through the purchaser."
[14]
The position of ASIC
ASIC was joined as a defendant to the original proceedings and respondent in the appeal. Evidence which was tendered without objection on the appeal showed that on 10 October 2018, ASIC was served by the solicitors for the appellant with an application for the reinstatement of Camfield. ASIC noted it did not oppose the application subject to certain conditions.
The application was not proceeded with.
The Amended Summons filed in the proceedings was apparently served on ASIC in February 2019. By letter dated 28 October 2019 to the solicitors for the appellant, ASIC noted that the proceedings were listed for hearing before Slattery J on 29 October 2019. The letter stated that ASIC had no knowledge of the specific circumstances or background of the proceedings and that ASIC did not intend to take any steps on behalf of Camfield to exercise any rights it may have. ASIC stated that it did not oppose the orders sought in relation to adverse possession.
On 3 March 2020 the Notice of Appeal was served on ASIC. On 17 April 2020 a further copy was sent by the solicitors for the appellant to ASIC, seeking confirmation that ASIC did not oppose the relief sought. On 18 April 2020 a further letter was sent to ASIC by the solicitors for the appellant, expressing confidence in their client's case. On 30 April 2020, ASIC wrote to the Court that its position remained the same as was advised to the appellant in relation to the proceedings at first instance.
[15]
a The appellant
Senior counsel for the appellant referred to the conclusion of the primary judge at [75] that neither the deceased nor the respondent participated in any fraud upon the NCSC. He submitted that finding did not stand up with a number of other factual findings made by the primary judge. He submitted that the finding that the respondent did not know that Camfield was deregistered at the time she signed the transfer necessarily inculpated the deceased.
He also referred to the finding made by the primary judge that the solicitor Mr Passaro did not know of the deregistration of Camfield, stating that that meant that the deceased was concealing the deregistration from his solicitor who, had he known of the deregistration, would have prevented the transfer from going ahead.
He submitted that the primary judge erred in confining the question of fraud on behalf of the deceased "as some sort of intention to deprive the NCSC of something rather than to cure a result that was affected by the dishonesty". He submitted that the deceased's interest in the property was infected by the fraud, which "ultimately infects everything". It should be noted that the primary judge could hardly be criticised for focusing on an intention to defraud the NCSC, as that was how the case was both pleaded and argued in the Court below.
Senior counsel for the appellant identified the fraud as the deceased making a false transfer, knowing that the vendor of the property did not exist and concealing that fact from the respondent and his solicitor. He accepted that it did not involve defrauding creditors of Camfield.
Senior counsel for the appellant referred to the primary judge's finding at [57] that it was unlikely that the deceased and the respondent were cleverly concealing their fraud upon the NCSC from their solicitor. He submitted that conclusion was reached in the context of it being claimed that the solicitor was aware the company was deregistered, noting that he thought it may have been put that the solicitor was participating in the fraud.
In dealing with the fact that the application for reinstatement had been abandoned, senior counsel for the appellant explained the purpose of the appeal in the following terms:
"Can I explain to your Honour my reasoning on that point. First of all, my client is also a beneficiary of the estate, and she stands to inherit the residue which would include the shares of a reinstated company. There is utility in the declarations which were sought below and in the Court making a declaration about the existence of a fraud because that would assist - first of all it would resolve the legal controversy in the case, and it's a critical legal controversy, and it would assist in my client's dealings either with ASIC in seeking ASIC just to deal with the property in a way that it sees fit, potentially without even having to reinstate the company. Alternatively, it would assist in any application, subsequent application for such declaratory relief to go through the process of seeking to reinstate the company. There would be absolutely no point reinstating the company if ultimately the answer to the question is there was no fraud by Mr Mangano and nothing in the company to reinstate."
[16]
b The respondent
Senior counsel for the respondent pointed to the fact that the application for the reinstatement of Camfield had been dismissed. He submitted that in the event an order for reinstatement was made, the effect would be that its affairs were considered on the basis that deregistration did not happen.
He emphasised that ASIC had elected not to take any part in the proceedings. He also submitted that any application by ASIC under s 46C of the Real Property Act to be registered as proprietor of the property would be barred by the Limitations Act.
He referred in addition to the settlement of the Succession Act proceedings, which he submitted the respondent agreed to on the basis that she was the owner in fee simple of the whole of the property. He submitted that either gave rise to an estoppel by convention or resulted in the current proceedings being an abuse of process.
In the respondent's written submissions, it was contended that the primary judge was correct in concluding there was insufficient evidence to demonstrate that the deceased acted fraudulently in causing the transfer to be executed.
[17]
Consideration
For the appellant to succeed, it would be at least necessary to show that the deceased acquired his title to the property by fraud. Fraud in that sense means actual fraud, personal dishonesty or moral turpitude: Assets Co Ltd v Mere Roihi [1905] AC 176 at 210; Butler v Fairclough (1917) 23 CLR 78 at 90, 97; [1917] HCA 9; Bahr v Nicolay (No 2) (1988) 164 CLR 604 at 614; [1988] HCA 16. A design to cheat a person of a known existing right is fraudulent in that sense: Waimiha Sawmilling Co Ltd (in liq) v Waione Timber Co Ltd [1926] AC 101 at 106-107.
In considering whether such a claim is made out on the balance of probabilities it is appropriate to take into account the gravity of the allegation: Briginshaw v Briginshaw (1938) 60 CLR 336; [1938] HCA 34; Neat Holdings Pty Ltd v Karajan Holdings Pty Ltd [1992] HCA 66; (1992) 67 ALJR 170 at 170-171; Evidence Act 1995 (NSW) s 140.
Having regard to the way the case was ultimately put on appeal, it would have to be shown that the deceased knew that Camfield had no title to the property by virtue of the fact that the property had vested in the NCSC and, knowing that Camfield did not have the capacity to execute a transfer, caused the transfer to be executed and registered whilst concealing his knowledge from his solicitor and the respondent.
In that context it was not sufficient to show that the deceased knew that Camfield was deregistered. Even if that were the position, as the primary judge found at [41] to be "likely", it would have to be demonstrated that he knew of the consequences and deliberately set out to avoid them. There is no evidence to demonstrate that and indeed such evidence as there is is to the contrary.
First, it was not disputed that the conversation to which I have referred at [19] above took place. That conversation is reflective of a belief that the property was still owned by Camfield and that as a consequence there would be a liability for land tax. That is inconsistent with knowledge of the consequence of deregistration.
Second, that conversation is inconsistent with any inference which could otherwise be drawn that Socratous had explained the consequences of deregistration to the deceased.
Third, reinstating the company was not a complex procedure, and if the deceased had been told of the consequence of deregistration there is no reason to suggest he would not have been advised that there was a process by which the company could be reinstated. As it now appears to be conceded that there were no creditors affected by the deregistration, it is inherently improbable that the deceased embarked on a fraudulent procedure to give effect to something which could have been achieved both simply and legally.
[18]
Conclusion
The appeal should be dismissed with costs.
MEAGHER JA: I have had the benefit of reading the Chief Justice's judgment in draft, and agree that the appeal should be dismissed with costs for the reasons his Honour gives.
PAYNE JA: I agree with Bathurst CJ.
[19]
DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.
Decision last updated: 12 November 2020
Parties
Applicant/Plaintiff:
Mangano
Respondent/Defendant:
Bullen
Legislation Cited (11)
Companies (Application of Laws) Act 1981(NSW)
Companies (New South Wales) Code Corporations (New South Wales) Act 1990(NSW)
Corporations Law of New South Wales Evidence Act 1995(NSW)
The property was the first property purchased by Camfield. It was purchased for $42,000, the solicitor acting for Camfield on the purchase being a Mr Tom Passaro (Mr Passaro). To enable the purchase to take place Camfield borrowed $33,000 from clients of Mr Passaro. The respondent gave evidence that she and the deceased "paid this mortgage jointly".
The respondent gave evidence that a significant amount of work was carried out by her and the deceased on the property in 1980. She stated that all the work was carried out by them personally, except for plumbing and electrical works.
The respondent stated that the original plan was to sell the property and use the profit to buy the property next door to continue with the development. She said, however, that she determined she did not want to sell the property and the deceased agreed. She said that she moved into the property in about December 1980.
The respondent stated that at the time she and the deceased were carrying out work on the property the next door property, 41 Talfourd Street, came up for sale. She stated it was purchased by Camfield for $46,000, using borrowed funds. She said that she and the deceased undertook works to renovate the property and sold it for $72,000. She said that in 1981 Camfield purchased another property on Gottenham Street, Glebe for $52,000 which after renovation and refurbishment was sold for $75,000.
The respondent stated that in about July or August 1981 the deceased moved into the property with her. She said that in August 1981 the property was refinanced by a mortgage from the National Australia Bank. She estimated the amount of the loan as $85,000 based on what she stated was the rate of stamp duty on loans at that time. However the primary judge correctly calculated the total amount of the loan based on such rates as $22,000. The respondent stated that she and the deceased made repayments for this mortgage over time out of their savings.
Later in that year, Camfield bought a fourth property at Darghan Street, Glebe. The respondent stated that this was sold with a small profit.
The final purchase by Camfield was a boarding house located at 261 Glebe Point Road. The respondent stated that was sold within a two to three month period of being purchased in order to cut costs. She stated she could not recall if a profit was made.
The respondent gave evidence that on or around 31 December 1986 a mortgage in favour of the National Australia Bank was registered on the property. She stated that that loan was ultimately repaid in full by her and the deceased.
The respondent gave evidence that in February and March 1989 she and the deceased undertook a number of alterations and an extension to the property.
It appears that by the end of 2014 the deceased was very unwell and knew he did not have long to live. On 11 February 2015 the deceased executed his last Will which gave the respondent a life interest in the property and the personal effects contained in it. The balance of his estate was divided between the appellant and the deceased's son, David Mangano.
The respondent gave evidence that on a number of occasions she requested the deceased to agree to change the title in the property from tenants in common to joint tenants. She said that he was slow to act on this and that she eventually had to commence Family Court proceedings in order to get him to act. On 21 May 2015 the interests of the deceased and the respondent as tenants in common were converted to a joint tenancy by a Memorandum of Transfer Altering Tenancy.
The deceased died on 28 July 2015 aged 81 years.
The respondent gave evidence which the primary judge accepted that between 2016 and 2017 she again renovated the property, spending $60,797.99.
Thereafter, both the appellant and the respondent commenced proceedings under the Succession Act 2006 (NSW) for further provision out of the deceased's estate. The primary judge found that both sets of proceedings were settled at mediation on 16 December 2016. In that context the respondent gave the following evidence which the primary judge accepted:
"58. During the course of both lots of Family Provisions proceedings, Silvana deposed affidavits to the effect that the Number 39 Property was owned jointly by John and myself prior to his passing. There was no allegation that he had, at the time of his passing, any shareholding in the Company.
59. I settled my Family Provisions claim against his estate and provided appropriate releases on the basis of representations having been made about the inventory of the estate and the status of ownership of property. I would not have agreed to settle my claim or provide any releases if I was not induced by representations made about the legal title to the Number 39 Property.
60. At mediation of both the proceedings on 16 December 2016, I agreed to settle the matter with Silvana. On or around 18 April 2018, Silvana sent me a letter stating that the Company had been deregistered in 1984 and the Transfer of title of the Number 39 Property was invalid. Until I read this letter and made my own enquires I did not know the Company had been deregistered prior to the transfer of the Number 39 Property. If I knew then that Silvana was planning on commencing more proceedings regarding the Number 39 Property, I would not have settled the Family Provision proceedings on the terms I did as these proceedings may mean I no longer have a home. I also would not have expended funds to undertake the work to the Number 39 Property set out in paragraph 47."
The primary judge referred to the fact that an account rendered by Socratous on 18 September 1986 for "Investigations of Camfield Pty Ltd and discussions on subject Company" was sent to an address at Miller Street, Haberfield. The primary judge concluded in those circumstances that the only conversation the respondent ever had with the deceased was to the effect that land tax was payable on the property because it was in Camfield's name, and therefore it was a good idea to transfer it into each of their names. He stated that the respondent did not deal with Camfield's external legal and accounting advisors but left this entirely to the deceased. He stated at [49] that consistently with that, the invoice from Socratous was addressed to the deceased at Miller Street, Haberfield, where he had been staying.
So far as the transfer of the property from Camfield to the deceased and the respondent was concerned, the primary judge noted the respondent's evidence that she did not recall signing any transfer of the property on Christmas Day. He noted that she was extensively cross-examined as to how she could have believed that the consideration for the transfer was $80,000. The primary judge noted, however, that part of the consideration was provided by the refinancing of the existing mortgage. He said that given the extensive renovation, restoration and development work that the respondent and the deceased had undertaken on some five properties owned by Camfield, she could have and did honestly hold the belief that this consideration represented money that Camfield owed the deceased and her on various accounts. The primary judge at [54] declined to find that the respondent was aware or even suspected that this was or might have been some falsely calculated figure.
The primary judge inferred that the solicitor, Mr Passaro, did not know that Camfield did not exist. He stated at [56] that it was unlikely that he too was participating in a deliberately false act which would have misled the Registrar General and which could have been calculated to defeat Camfield's unsecured creditors. He said that if the solicitor did not know, the improbable alternative scenario was that the legally unqualified deceased and respondent were cleverly concealing their fraud on the NCSC from their own solicitor. The primary judge stated that was a possible explanation of events but "not the first one that would be adopted".
The primary judge referred to the proceedings under the Succession Act to which I have referred at [28] above. He noted and accepted the respondent's evidence that she would not have settled those proceedings on the terms she did if she had been aware that the appellant would be commencing the proceedings. The primary judge accepted her evidence that she relied in settling those proceedings on the appellant's evidence which asserted that the property was owned jointly by the respondent and the deceased.
The primary judge articulated further reasons why it could not be established that the respondent participated in the alleged fraud at [70]-[74]. As it was not alleged on the appeal that she did participate in such a fraud, it is unnecessary to set out those reasons.
Section 461(1) provided that any outstanding property of the dissolved company vested in the Commission, whilst s 462 provided for the manner in which the Commission was to deal with the property. It is unnecessary to set out either of those sections.
Senior counsel for the appellant submitted that on deregistration, the property vested in the NCSC, and that ASIC stood in the shoes of the NCSC. He referred in that context to the decision of Barrett J (as his Honour then was) in Baird v WJT Howes Investments Pty Ltd [2008] NSWSC 1232; 68 ACSR 485. In that case, his Honour concluded that the Court had power to order reinstatement of a company under s 459(6) of the Code, since by virtue of the operation of s 85 of the Corporations (New South Wales) Act 1990 (NSW), the Code continues to apply of its own force in relation to matters arising before 1 January 1991, insofar as the matters are not dealt with by the Corporations Law of NSW or the Corporations Act 2001 (Cth). That case did not deal with the question of whether property previously vested in the NCSC vested in ASIC. In fact, property held by the NCSC was vested in ASIC by the transitional provisions in the Australian Securities and Investments Commission Act 1989 (Cth) (ss 254-257). The assets which became assets of ASIC included those which were described as trust assets, which were said to include property held under s 462 of the Code. That Act was replaced by the Australian Securities and Investments Commission Act 2001 (Cth) which by s 261 continued the corporate existence of ASIC.
In that context, senior counsel for the appellant emphasised that ASIC could have the transfer set aside without reinstating the company. He submitted that if Camfield was reinstated the chose in action to set aside the transfer could vest in it.
In submissions in reply, senior counsel for the appellant submitted that the judgment of Brereton J (as his Honour then was) in Re Jury & Spiers Pty Ltd [2016] NSWSC 900; 114 ACSR 336 was incorrect in stating that following the repeal of the Code as a result of the repeal of the Companies (Application of Laws) Act 1981 (NSW) by which the Code was established, the provisions of the Code were no longer available as a jurisdictional basis for the reinstatement of a company. He submitted that conclusion was incorrect because s 85 of the Corporations (New South Wales) Act remains in force.
In relation to the evidence of the respondent that she would not have consented to the settlement of the Succession Act proceedings had she known of the claim against the property, senior counsel for the appellant submitted that neither party was aware of the claim at the time the Succession Act proceedings were resolved.
The primary judge's finding at [44] as to the most probable explanation for the conduct of the deceased was that he "preferred to avoid the inconvenience of trying to reregister the company". His Honour appears to have presumed that such a motive was necessarily inconsistent with a finding of fraud. Whether or not that is right, mere convenience is an unlikely motive for deliberate concealment by the deceased of the fact of deregistration despite knowledge of its consequences.
In those circumstances it has not been established that the deceased obtained his title by fraud, and for that reason the appeal should be dismissed.
Even if fraud could be shown, there were numerous other difficulties confronting the appellant which would make the grant of declaratory relief of no utility. In the circumstances, however, these matters can be dealt with briefly.
First, although ASIC, in which the property was vested as a consequence of the deregistration, was a party to the proceedings, it has taken no interest in them and has not asserted an entitlement to the property.
Second, and perhaps more fundamentally, any right ASIC would have had to set aside the transfer under s 118 of the Real Property Act would have accrued on the date of the registration of the transfer from Camfield to the respondent and the deceased, namely 16 February 1987, and thus would be barred by virtue of s 27 of the Limitation Act, the 30 year period expiring in 2017. It should be noted that even if it could be argued that the cause of action was fraudulently concealed such that s 55 of the Limitation Act could operate, the absolute bar of 30 years provided for by s 51 would apply.
Third, although it is unnecessary finally to decide the point, ASIC, having failed to assert any claim in these proceedings, may well be estopped from doing so in subsequent proceedings by virtue of principles in cases such as Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589; [1981] HCA 45.
Fourth, the prospect of reinstating Camfield is at best speculative. Assuming without deciding that the decision of Brereton J in Re Jury & Spiers Pty Ltd is incorrect and the appellant could be described as a person aggrieved, the appellant would require an extension of time under s 539(4)(d) of the Code, extending the 15 year period for applications for reinstatement prescribed by s 459(6): see Baird v WJT Howes Investments Pty Ltd at [18]. To succeed she would have to demonstrate that no substantial injustice would be caused to any person: see s 539(6)(c) of the Code. Having regard to the fact that the ultimate aim of the reinstatement would be to enable Camfield to bring proceedings to deprive the respondent of a half interest in the property in circumstances where she settled the Succession Act proceedings against the estate on the basis she held that interest, she would be likely to suffer substantial injustice as a result of the reinstatement.
Fifth, assuming Camfield was reinstated, the effect would be that it would be deemed to have continued in existence as if its registration had not been cancelled: see s 459(6) of the Code. The deeming provision would have the effect of validating steps taken in the name of the company whilst it was deregistered: see Pollnow v Ash Street Properties Pty Ltd (1996) 130 FLR 235; Video Excellence Pty Ltd v Cincotta (1998) 44 NSWLR 742 at 745.
In that context, any cause of action which Camfield had to set aside the transfers for fraud would be taken to have accrued from registration of the transfer to the respondent and the deceased, which took place outside the 30 year period being the absolute bar provided for by s 51 of the Limitation Act. The claim would be statute barred.
In all these circumstances, even if fraud by the deceased could be established there would be no utility in making the declarations sought.