Mariconte v Batiste

[2000] NSWSC 288

Supreme Court of NSW|2000-04-05|Before: Austin J

View original source

At a glance

Source facts

Court

Supreme Court of NSW

Decision date

2000-04-05

Before

Austin J

Catchwords

plaintiff's application denied

Source

Original judgment source is linked above.

Catchwords

plaintiff's application denied

Judgment (52 paragraphs)

[1]

CITATION : Mariconte v Batiste [2000] NSWSC 288 CURRENT JURISDICTION: Equity FILE NUMBER(S) : SC 4582/99 HEARING DATE(S) : 14 & 24 March, 3 & 5 April 2000 JUDGMENT DATE : 10 April 2000

[2]

John Mariconte (P1) PARTIES : Jomar Investments Pty Ltd (P2) Donna Batiste (D1) Biscom Holdings Pty Ltd (D2) JUDGMENT OF : Austin J

[3]

J Ireland QC (P) (14 March 2000) COUNSEL : M J Lawler (P) (24 March, 3 & 5 April 2000) L J Aitken (D1) M R Aldridge SC (Receiver) McGirr James Hall & Associates (P) 14 March 2000 SOLICITORS : Selby(anderson) (P) (24 March, 3 & 5 April 2000) Horowitz & Bilinsky (D) Thomas Laycock (Receiver) CATCHWORDS : EQUITY - Court-appointed receiver - Court's power to give directions LEGISLATION CITED : Supreme Court Act 1970 (NSW) s 23 Davis v Gray (1872) 83 US 203 Glazier Holdings Pty Ltd v Australian Men's Health Pty Ltd (Supreme Court of New South Wales, 30 April 1998, unreported) CASES CITED : Law Society of New South Wales v Milios (1999) 33 ACSR 396 Re I00F Australian Trustees Limited [1999] SASC 461 Sanderson v Classic Car Insurances Pty Ltd (1985) 10 ACLR 115 DECISION : On Receiver's application, direction that he would be justified in selling the property to the first defendant on the terms and conditions submitted by her, and that he would not be justified in selling it to the first plaintiff on the terms and conditions submitted by him; plaintiff's application denied

[7]

The acquisition and refurbishment of the Tattersalls Club 3 The property was acquired by Biscom in January 1998. At that time Mr Mariconte was the sole director, secretary and shareholder of Biscom. He incorporated a company called Chasen to act as the management company for the refurbishment of the Tattersalls Club, and he was the sole director, secretary and shareholder of that company. He was also the sole director and shareholder of Jomar. 4 Biscom was advanced $600,000 by the Provident Capital Group on behalf of a syndicate of lenders. Ms Batiste and Mr Mariconte were guarantors of the loans. Biscom used the money in the acquisition and refurbishment of the Tattersalls Club. Jomar is now the mortgagee in both mortgages, but it is not clear to me on the evidence how this occurred and specifically, whether the result was achieved by Mr Mariconte providing funds to purchase the mortgages from Provident Capital. 5 Mr Mariconte and Jomar paid $265,000 towards the cost to Biscom of the acquisition of the property. During the period from January 1998 until August 1999, Mr Mariconte, Jomar and Chasen spent money on the refurbishment of Tattersalls, the payment of interest on the loans, costs and charges associated with the loans and outgoings payable in relation to the property. Ms Batiste alleged in August 1999 that her personal account with St George Bank was in debit in the amount of $104,000 plus interest of $16,000 which she claimed to be attributable to funds she provided to Mr Mariconte for the refurbishment of Tattersalls, although those allegations were denied by Mr Mariconte. 6 The renovation of the building has not yet been completed, in circumstances which I shall describe. The money spent in renovating the building was, for the most part, specifically designed for the purposes of the Tattersalls Club of Newcastle. The Club vacated the premises and the evidence before me is that they still wish to resume occupation under a lease. Mr Mariconte is concerned that with the passage of time, the Club will lose members and the use of the building for the purposes of the Club will cease to be viable.

[10]

The Settlement Deed 11 By a deed made on 12 August 1999 ('the Settlement Deed') Mr Mariconte, Ms Batiste, Biscom, Jomar and Chasen made an agreement intended to resolve at least some of the issues that had led to the 'joint venture' proceedings. Under the Settlement Deed Mr Mariconte transferred one of his shares in Biscom to Ms Batiste, who became a director of that company. That situation continues to the present time. 12 The Settlement Deed also provided that an agent for sale of the property would be appointed, with irrevocable authority to sell it at a public auction at which both Ms Batiste and Mr Mariconte would be free to bid. It was agreed that no work or other activity would occur on the property pending sale of the land, other than necessary repairs, and that telephone and fax lines and the gas supply would be disconnected. Arrangements were made for the security of the premises. It was agreed that the 'joint venture' proceedings would be dismissed, and mutual releases were given. 13 Clause 10 of the Settlement Deed dealt with the destination of the proceeds of sale of the property, setting out an order of priority for payment. It stated: 'The proceeds of the sale of the land shall be paid to the agent to be held on trust for Biscom and disbursed as follows and in the following order: (i) first, by payment of the agent's fees, expenses and commission, the conveyancing fees of the solicitors and the fees and disbursements of the referee appointed pursuant to clause 11; (ii) second, by discharge of the liability of Biscom to pay of [sic] the principal of $600,000 under the mortgages; (iii) third, by payment of the sum of $70,000 to Mariconte or at his direction (being the sum which Batiste agrees to allow and Mariconte, Jomar and Chasen agree to accept in settlement of the claims by Mariconte, Jomar and Chasen for interest payments made by them on the loans and interest on other payments referred to in this clause); (iv) fourth by payment to Mariconte or at his direction of the sum of $265,000; (v) fifth by: (a) payment to Batiste of the sum of $8000 (which sum Mariconte agrees to allow and Batiste agrees to accept in settlement of the interest component of the St George debt); (b) payment of that portion of the balance of $104,000 of the St George debt that has been expended on the refurbishment of Tattersalls as determined by the referee in accordance with the procedure in clause 11 below; (c) payment to Mariconte or at his direction of all payments of money made, or all debts incurred by him, Jomar, Biscom, or Chasen, for the purposes of the refurbishment of Tattersalls prior to 13 August 1998, with the exception of any amounts paid or owed to Ray Powell for the construction of a boat bow on a wall of Tattersalls, and subject to the verification of such payments and debts under the procedure in clause 11 below; provided, however, that if the proceeds of sale of the land are insufficient to enable the payments referred to in this sub-clause to be made in full, the available proceeds are to be paid to Batiste and Mariconte in the proportions that the amounts found to be payable bear to the sum of those amounts. (vi) sixth, by payment to Mariconte or at his direction of all costs, duties and charges associated with the loans and properly paid or incurred by Mariconte, Biscom, Jomar or Chasen, such amounts to be verified by the referee in accordance with the procedure in clause 11 below; (vi) [sic] seventh, by payment to Mariconte or at his direction of all sums paid or incurred by Mariconte, Biscom, Jomar or Chasen for outgoings on the land or Tattersalls, such amounts to be verified by the referee in accordance with the procedure in clause 11 below; (vii) eighth, the balance to be divided equally between Mariconte and Batiste.' 14 If one assumes costs payable under paragraph (i) of, say, $150,000, then paragraph (v) will not operate unless the purchase price is at least $1,085,000. That is to say, if the purchase price is below that figure, then all of the money after the payment of costs and the discharge of the mortgages, will go to the Mariconte interests. That would be the case if Mr Mariconte's current bid of $935,000 were accepted. 15 If the purchase price exceeds that figure, Ms Batiste stands to receive some of the surplus under paragraph (v). The exact amount is unclear. The evidence before me does not indicate how much the Mariconte interests have paid for the purposes of paragraph (v)(c). Nor does it indicate how much of the $104,000 referred to in paragraph (v)(b) was expended on the refurbishment of Tattersalls. I am therefore unable to conclude that, if Ms Batiste's current bid of $ 1,320,000 were accepted, the whole of the top layer (that is, the amount remaining after paragraphs (i) to (iv) have been satisfied) would be distributed under paragraph (v), or whether some of it would be distributed under paragraph (vi), or even under the second paragraph (vi) or paragraph (vii). I note that the two paragraphs numbered (vi) benefit the Mariconte interests rather than the Batiste interests, although the amount of those benefits is not in evidence.

[12]

The appointment of the receiver 18 While the final relief may appear to be uncontroversial, controversy of the most intense kind has surrounded various interlocutory applications. The matter first came before me on 24 November 1999, when the plaintiffs applied for the appointment of a receiver on an interlocutory basis. There was a dispute as to the selection of the receiver and in particular, whether a receiver should be appointed who had no substantial connection with Newcastle. There was also a dispute as to whether the sale of property would take place on 8 December 1999 as planned. After the matter went into evidence, the parties agreed to the appointment of an official liquidator as receiver, and invited the Court to nominate three official liquidators selected at random from the Court's list, on the basis that none of those selected would be a person conducting business in Newcastle. I nominated three official liquidators as requested. 19 When the matter came before me on the following day, I was informed that the parties had agreed on the appointment of one of my nominees as receiver and I was invited to make orders. To overcome the problem that the orders would affect the property of Biscom, which at that time was owned by Ms Batiste and Mr Mariconte in equal shares but was not separately represented, it was arranged that a meeting of the board of directors of Biscom would be held, at which Ms Batiste's solicitor would be instructed on behalf of Biscom to appear solely for the purpose of consenting to the appointment of the receiver. That was duly done. 20 Biscom, though a party to the proceedings, has not been represented at any subsequent stage. As far as I can see, that is not a problem at the present time, having regard to the nature of the orders which I am now invited to make. 21 On 25 November 1999 I ordered by consent that John Duncan Green be appointed receiver without security of the property for the purpose of selling it, with the necessary powers to do so, and I directed him to report to the Court by 29 November 1999 with respect to the proposed auction on 8 December 1999. I decided that I had the power to make such an order on the ground that the dispute was analogous to a dispute between partners with respect to partnership property. 22 Mr Green duly reported to the Court, saying that despite the time constraints he had been able to take advice and form the view that to proceed with the sale on 8 December 1999 would not prevent a satisfactory price from being obtained.

[16]

The 'deposit' proceedings 31 On 21 December 1999 Ms Batiste commenced proceedings against Mr Green in this Court (No 5129 of 1999), seeking a declaration that the contract made as a result of the auction remained on foot. She also sought a declaration either that the terms of the contract had been varied to permit late payment of the deposit, or that Mr Green was estopped from insisting upon strict compliance with the terms of the contract regarding payment of the deposit. An abridgment of the time for service was ordered by Simos J on that day, and the matter returned to him on 23 December 1999. 32 The basis of those proceedings was an allegation by Ms Batiste that at the auction on 8 December 1999 she had a conversation with the estate agent in the presence of the receiver's representative and her solicitor. She told the estate agent that a trust cheque was being deposited into her account and that she would have funds in her account to meet the deposit cheque only if the trust cheque was cleared in time. She alleged that the estate agent's representative said to her, in the presence of the others, that the cheque should clear in time but that he would call her if it did not. She says that she had made arrangements with Mr David Hall, a director of the Newcastle Breakers Soccer Club, that the Club would purchase the property and provide her with funds to enable her to pay the deposit. 33 By a letter dated 10 December 1999, a firm of accountants called Turnbull & Turnbull wrote to the estate agent saying that the Newcastle Breakers Soccer Club was to be the nominee under the contract for sale of the property, and advising that the firm had been provided with the relevant funds. The letter said that upon those funds being cleared through the firm's trust account, the firm had instructions to remit the deposit direct to the estate agent. 34 Ms Batiste alleged that she was shocked by Turnbull & Turnbull's letter because Mr Hall had told her that the deposit money would be placed directly into her account to cover her cheque. 35 On 22 December 1999 Rodney Shields & Co, solicitors, wrote to Mr Green saying they acted on behalf of an unnamed client, who had instructed them to offer to purchase of the property for $1,300,000. 36 At the hearing in Proceedings No 129 of 1999 on 23 December 1999, the Court was informed of the new offer. An order was made restraining Mr Green from selling the property until 5pm on 31 December 1999 . The Court noted an undertaking by Ms Batiste that if she did not pay the deposit in cleared funds by that time, then she acknowledged that the contract was terminated for all purposes, although Mr Green would retain his right to claim damages under the contract. The Court ordered Ms Batiste to pay Mr Green's costs of those proceedings. 37 In fact Ms Batiste did not pay the deposit by 31 December 1999 or at all. Mr Green says that consequently, the contract has been validly terminated and he is entitled to recover damages from Ms Batiste. Ms Batiste says that she did not endeavour to pay the deposit at that time because she understood that there was a purchaser willing to pay at least $1,300,000. In January 2000 there was further correspondence between Mr Green and Rodney Shields & Co, the outcome of which was that, although a draft contract for sale in the name of Mr Joseph Lenthen was submitted, the mooted offer to purchase did not materialise.

[17]

New negotiations for purchase of the property 38 On 13 January 2000, when Ms Batiste's solicitor had discovered that the sale at $1,300,000 had fallen through and that the receiver was entertaining Mr Mariconte's offer to buy for $935,000, he wrote to Mr Green asking for time to obtain Ms Batiste's instructions to submit a higher offer than Mr Mariconte's. Mr Green replied, initially by letter dated 14 January 2000, that any further offer by her must provide for payment by bank cheque of the deposit and also half of the difference between her new price and the initial contract price. Additionally, late in January 2000 Mr Green's solicitors made a demand upon Ms Batiste for payment of his costs in Proceedings No 5129 of 1999 in the sum of $11, 869.20. Ms Batiste subsequently contended that this amount was excessive. 39 By a letter dated 27 January 2000 Ms Batiste's solicitor made a new offer for purchase to Mr Green. The new purchase price was to be $1.1 million, with a 5 percent deposit. Settlement was to take place within six to eight weeks. The letter told Mr Green that the deposit and balance of the purchase price were being provided by Provident Capital, and invited him to telephone Mr Michael O'Sullivan, a director of that company, for confirmation. 40 The letter did not accede to Mr Green's stipulation that 50% of the difference between the new price and the auction price be paid. Indeed, by a letter dated 31 January 2000 Ms Batiste's solicitor argued that it would be unreasonable and improper for Mr Green to impose such a condition, or to require payment of his costs as a condition of sale, since to do so would be inconsistent with his duty as receiver to obtain the best possible price for the property. The letter of 31 January 2000 concluded by asserting, in effect, that if Mr Green proceeded to sell the property to Mr Mariconte he would be in breach of his duty and damages may result to Ms Batiste. 41 Meanwhile Mr Green's negotiations with Mr Mariconte proceeded. By letter dated 3 February 2000 Mr Mariconte's solicitor proposed immediate exchange of contracts, still at the purchase price of $935,000, with a 5 percent deposit and the addition of a special condition. The new special condition would make the contract conditional upon a direction being obtained from this Court requiring the vendor at completion to pay the proceeds of sale in the manner set out in clause 10 of the Settlement Deed, with a right of rescission if the Court's direction was not obtained. 42 On 9 February 2000 Mr Mariconte's solicitor wrote to Mr Green informing him that Mr Mariconte would object to any contract being exchanged with Ms Batiste or her corporate entities in view of her past failure to perform a binding contract. The letter said that Mr Mariconte would hold Mr Green liable for any resulting loss to him as mortgagee or as a shareholder in Biscom. In a letter of 6 March 2000 Mr Mariconte's solicitor stated that Mr Mariconte reserved his right to seek damages from Mr Green in respect of unnecessary delay. 43 During February there was further correspondence between Mr Green and Ms Batiste's solicitor, in which the solicitor claimed that Provident Capital had approved a loan for 100 percent of Ms Batiste's proposed purchase price of $1.1 million, and that Provident Capital would prepare documentation within five to ten days of a contract being submitted. Not surprisingly, Mr Green requested documentary evidence that Provident Capital had approved such a loan. 44 On 29 February 2000 Mr O'Sullivan, as managing director of Provident Capital, wrote to Mr Green confirming that his company was prepared to advance the full purchase price of $1.1 million 'subject to our standard underwriting and legal requirements'. The letter pointed out that Provident Capital was familiar with the property because it had previously managed a first mortgage over the property, and was currently holding a first mortgage over the lease of the Great Northern Hotel. The letter also confirmed that contractual arrangements between the vendor and borrower would be finalised within seven to ten days of Mr Green's acceptance of Ms Batiste's offer, the settlement to take place 'on a standard six-week (plus two) contract'.

[18]

Mr Green's application for judicial advice 45 By early March 2000 Mr Green was in an unenviable position. He had an offer from Mr Mariconte at $935,000, comfortably above the highest 'external' bid at the auction but substantially lower than the successful bid at the auction, and also substantially lower than Mr Mariconte's own bid. Mr Mariconte wanted a special condition allowing him to set off the balance of purchase money due on settlement against the moneys which would be due to him through the application of the settlement proceeds under clause 10 of the Settlement Deed. Additionally, he initially offered only a 5 percent deposit, though it appeared likely, by early March, that he would pay a deposit of 10 percent. 46 He had to weigh that offer against the much higher offer by Ms Batiste, of $1.1 million. But Ms Batiste's offer was problematic. She had previously defaulted under the auction contract, and Mr Green claimed to be entitled to damages measured by the difference between the auction price ($1.295 million) and the subsequent sale price, together with his costs. Therefore by entering into a contract with Ms Batiste at the lower price of $1.1 million he would be crystallising a right of recovery against her. 47 Further, he knew that Ms Batiste wished to borrow the whole of the purchase money, and although he had some evidence of the financier's willingness to lend, that willingness was expressed to be 'subject to... standard underwriting and legal requirements'. Therefore there was a cloud over Ms Batiste's ability to complete, and if she failed to do so, the delay would cause loss to Mr Mariconte. Additionally, she was offering only a 5 percent deposit. 48 It must have appeared to him likely, on the basis of the correspondence which I have reviewed, that if he sold to Ms Batiste he would be sued by Mr Mariconte, and if he sold to Mr Mariconte he would be sued by Ms Batiste. In those circumstances he took the only sensible course of action, by applying to the Court for directions. 49 His application, by notice of motion dated 10 March 2000, seeks a direction that he would, or would not, be justified in selling the property to Ms Batiste on the terms and conditions submitted by her, and a direction that he would, or would not, be justified in selling the property to Mr Mariconte on the terms and conditions submitted by him. 50 Mr Green's application came before me on 14 March 2000.

Mariconte v Batiste

At a glance

Court

Decision date

Before

Catchwords

Source

Catchwords

Judgment (52 paragraphs)

Parties

Legislation Cited (1)

Cases Cited (1)

Cited By (7)