McMillan Investments Holdings Pty Ltd v North Coast Beach Property Pty Limited

Judgment 1This is an application pursuant to r 6.24 of the Uniform Civil Procedure Rules that a company Beach Coast Property Pty Limited ("Beach Coast") be joined as a defendant in the proceedings. The present parties to the proceedings are the plaintiff McMillan Investment Holdings Pty Ltd (which I will sometimes refer to as "McMillan Investment") and the defendant North Coast Beach Property Pty Limited (which I will sometimes refer to as "North Coast Beach"). Both the plaintiff and the defendant opposed the application by Beach Coast to be joined as a defendant. 2In the proceedings the plaintiff claimed judgment for possession of the land in Folio Identifier 2/301117 known as 161 Mitchell Street Stockton ("the property") and judgment for a monetary sum. The proceedings were brought pursuant to a loan agreement and a mortgage both dated 7 August 2007, the original parties to which were a company named Byville Pty Limited ("Byville") as lender or mortgagee and the defendant North Coast Beach as the borrower or the mortgagor. The plaintiff alleged that on or about 18 May 2010 Byville assigned all its right, title and interest in the loan agreement and the mortgage to a company Santai Corporation Limited ("Santai") and that on or about 20 October 2010 Santai assigned all its right, title and interest in the loan agreement and the mortgage to the plaintiff. 3The defendant did not defend the principal proceedings and on 13 May 2011 a consent judgment was entered. 4It is convenient to identify a number of natural persons, firms and companies having some connection with the principal proceedings or the application. 5Mr Dennis McCamley was originally and for some time the sole director of North Coast Beach. Mr McCamley was associated with the companies Byville and Santai. His solicitors were Messrs Mahoney and Dominic (Mr Caldwell) and his accountants were Messrs Moore Stephens (Mr Morton). 6Mr Brian McMillan is associated with the applicant Beach Coast. His solicitors were Messrs Clark McNamara (Mr Elias Yamine an employed solicitor and Mr Clark a partner). Mr McMillan's accountants were Messrs Einfeld Symonds and Vince (Mr Geoffrey Vince). 7Mr Brian McMillan's wife is Mrs Karin McMillan ("Mrs McMillan"), who was once the owner of the property. Elizabeth McMillan and Barbara McMillan are sisters of Brian McMillan. 8Mr Robert McMillan is associated with the plaintiff. He is not related to Mr Brian McMillan, although the two men have known each other for some years. 9Beach Coast's application was instituted by a notice of motion dated 13 May 2011. Directions were made for the filing of affidavits on the application and a large number of affidavits were filed. These affidavits included:- 1.For the applicant, two affidavits by Mr Brian McMillan, two affidavits by Mrs McMillan and an affidavit by Barbara McMillan. 2.For the respondents, an affidavit by Mr McCamley, an affidavit by Mr Caldwell, an affidavit by Mr Adams who is the liquidator of Byville, affidavits by the solicitors for the plaintiff in these proceedings and three affidavits by Mr Robert McMillan. 10The exhibits to these affidavits were voluminous, occupying many lever arch folders. As well as the exhibits to the affidavits, a number of documents were admitted into evidence as independent exhibits. 11Consistently with the nature of Beach Coast's application, there was no cross-examination of any deponent. 12Extensive written submissions were lodged by all of the applicant, the plaintiff and the defendant and oral argument on the application lasted almost three days. 13Rule 6.24 of the Uniform Civil Procedure Rules provides as follows:- " (1) If the court considers that a person ought to have been joined as a party, or is a person whose joinder as a party is necessary to the determination of all matters in dispute in any proceedings, the court may order that the person be joined as a party. (2) Without limiting subrule (1), in proceedings for the possession of land, the court may order that a person (not being a party to the proceedings) who is in possession of the whole or any part of the land (whether in person or by a tenant) be added as a defendant." 14The principal proceedings in the present case are proceedings for the possession of land. However, it was not suggested that Beach Coast was in possession of the land or any part of it and, accordingly, sub-r (2) of r 6.24 has no application. 15As to sub-r (1) of r 6.24, counsel for the applicant submitted, and counsel for the plaintiff and counsel for the defendant contested, that Beach Coast ought to have been joined as a party or was a person whose joinder as a party was necessary to the determination of matters in dispute in the proceedings. 16Counsel for the plaintiff, supported by counsel for the defendant, submitted (leaving aside any question of onus) that there was no matter genuinely in dispute requiring the joinder of Beach Coast. It was submitted by counsel for the plaintiff that I should be prepared to entertain extensive argument, directed to establishing that there was no matter genuinely in dispute. An analogy was drawn by counsel with an application for summary judgment in relation to which Barwick CJ in his judgment in General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125 said at 130:- "Arguments, perhaps even of an extensive kind, may be necessary to demonstrate that the case of the plaintiff is so clearly untenable that it cannot possibly succeed". 17I considered that I should proceed in accordance with these submissions by counsel for the plaintiff. Undisputed or clearly established facts 18At the hearing the following facts were either undisputed or established beyond any argument. 19For a number of years down to 2007, Mr Brian McMillan operated through companies controlled by him an Audi authorised motor vehicle body repair business ("the bodyworks business") in premises at Five Dock. By 2006 the bodyworks business was struggling financially. In February 2007 a receiver was appointed to a number of companies in Mr Brian McMillan's group of companies, including the company operating the bodyworks business. 20From October 2001 to September 2007 Mrs McMillan was the registered proprietor of the property. The property had been mortgaged to the Commonwealth Bank of Australia to secure loans made to the McMillan group of companies and in early 2007 the Commonwealth Bank was pressing for payment of the amount due to it. 21In 2006 discussions commenced between Mr Brian McMillan and Mr McCamley with a view to Mr McCamley acquiring an interest in the bodyworks business. There were a number of conversations between Mr McMillan and Mr McCamley and, in particular, a conversation on 5 March 2007, to which I will return later in this judgment. 22By a letter dated 27 April 2007 Audi Australia Pty Limited confirmed that it was prepared to allow Byville to operate the bodyworks business. 23On 4 May 2007 Byville purchased the bodyworks business from the receiver for the sum of $218,000. 24On 16 May 2007 a company controlled by Mr Brian McMillan which was the owner of the premises at Five Dock, granted a lease of the premises to Byville. 25On 7 June 2007 the Commonwealth Bank advised that it was prepared to discharge its mortgage over the property in consideration of payment to it of not less than 1.5 million dollars. 1.5 million dollars was the amount of a recent valuation of the property. 26On 25 June 2007 North Coast Beach was incorporated. By agreement between Mr Brian McMillan and Mr McCamley, Mr McCamley became its sole director. 27On 13 July 2007 a trust deed for the North Coast Beach Property Trust ("the Trust") was executed. The settlor was Mr Vince. The trustee was North Coast Beach. Mr McCamley executed the trust deed on behalf of North Coast Beach. The appointor under the trust deed was Elizabeth McMillan. The principal beneficiary named in the trust deed was the Australian Red Cross New South Wales. 28In late July Byville provided 1.568 million dollars to its solicitors. 29On 7 August 2007 a settlement took place of a purported loan from Byville to North Coast Beach, the discharge of the mortgage to the Commonwealth Bank in consideration of payment to the Bank of the sum of 1.5 million dollars, a transfer of the property from Mrs McMillan to North Coast Beach and a purported mortgage from North Coast Beach to Byville. Mr McCamley had executed the loan agreement and the mortgage as a director of Byville and the sole director of North Coast Beach. 30On 18 September 2007 North Coast Beach was registered as the proprietor of the property. 31In 2008 and even more in 2009 relations between Mr Brian McMillan and Mr McCamley became seriously strained. 32On 13 August 2008 Elizabeth McMillan appointed her sister Barbara McMillan as the new appointor of the Trust. 33On 3 September 2009 Barbara McMillan purported as appointor to give North Coast Beach notice of its removal as the trustee of the Trust. On the same day Barbara McMillan purported to appoint Beach Coast as the trustee of the Trust. Mr Brian McMillan is the sole director and shareholder of Beach Coast. 34On 18 May 2010 Byville as assignor and Santai as assignee entered into a deed of assignment. In October 2010 Santai as assignor and McMillan Investment as assignee entered into a further deed of assignment. McMillan Investment was registered as the proprietor of the mortgage originally granted to Byville. 35On 8 June 2011 Beach Coast purportedly declared that Mrs McMillan had been a beneficiary of the Trust since 2007 and that two of her children were to be beneficiaries of the Trust as from 7 June 2011. The draft defence 36A draft defence has been prepared which the applicant would file, if it were joined as a defendant. The draft defence is a lengthy document, which I will not attempt to summarise in full. 37In the draft defence Beach Coast denies that Byville made a loan to North Coast Beach and asserts that North Coast Beach paid 1.5 million dollars to Mrs McMillan out of its own resources; Beach Coast challenges the validity of the purported assignment from Santai to the plaintiff; Beach Coast alleges that North Coast Beach acted in breach of trust and that Mr McCamley acted improperly in relation to the loan agreement and the mortgage; Beach Coast alleges that Mr Robert McMillan had knowledge of the breach of trust and the improper conduct, before the assignment from Santai to the plaintiff; and Beach Coast denies that any defaults occurred under the mortgage. 38A very large number of issues were raised in the written or oral submissions. It seems to me that the principal issues raised were as follows:- 1.Did Mr Brian McMillan and Mr Dennis McCamley make an agreement in March 2007 that certain transactions should occur 2.Whether the payment which Byville made was a loan by Byville to North Coast Beach 3.Whether there was any breach of trust by North Coast Beach or any improper conduct by Mr McCamley 4.If there was a breach of trust by North Coast Beach or improper conduct by Mr McCamley, did Mr Robert McMillan on behalf of the plaintiff have notice of the breach of trust or improper conduct, before the plaintiff took the assignment from Santai 5.Whether there was an effective assignment by Santai to the plaintiff of its right, title and interest in the loan agreement and the mortgage 6.If there was a breach of trust by North Coast Beach or improper conduct by Mr McCamley and if Mr Robert McMillan had notice of the breach of trust or improper conduct before the assignment from Santai to the plaintiff, would that constitute an exception to the indefeasibility of title the plaintiff would otherwise have as the registered proprietor of a mortgage 7.Was Beach Coast validly appointed as trustee of the Trust 39On an application of this sort it is my function to determine whether an issue is genuinely arguable but, if I conclude that it is genuinely arguable, I should not proceed to attempt to determine the issue. 40A number of the issues are interdependent, so that if I determine that a particular issue is not genuinely arguable, some other issues will simply not arise. 41I will now commence to consider these issues.