The evidence
28 The respondents read an affidavit of John Michael Barbouttis. The applicant read two affidavits of James Michael Thompson and one of Heather Lindsay Sandell, the applicant's solicitor. No deponent was required for cross-examination, which was appropriate given the level of the test to be applied. In doing so, clearly neither side was accepting the evidence of the other without reservation or disagreement. Also, in my treatment of the evidence below I do not intend to make any final findings of fact. The preliminary nature of the task that I am engaged in precludes that.
29 Mr Barbouttis's evidence of the events up to 1 May 2015 may fairly be summarised as follows.
30 Mr Barbouttis is a solicitor, having been admitted in New South Wales in 1978. He is a sole practitioner, and has been for many years.
31 Between 2007 and 2015, Mr Barbouttis was closely involved in the business affairs of what he describes as the "Neil Sutton group of companies" - as solicitor on retainer, later as employee and as friend and adviser to Neil Sutton. One of those companies, of which Mr Barbouttis was a director, is Enares Pty Ltd. The applicant in the present proceeding is a subsidiary of Enares and is accordingly in the Sutton group.
32 A venture that Mr Barbouttis was involved with on behalf of the Sutton group was to purchase pleasure yachts in Greece, of which Hunter was one. On the advice of a Greek shipping and tax lawyer, the yachts were purchased into NEPA companies. NEPA is the acronym for the Greek words for Maritime Company for Pleasure Yachts. The advice that was received was that the shareholders of NEPA companies must be Greek or EU citizens holding more than 50% of the ownership of the yachts. As Mr Barbouttis is a dual Greek/Australian citizen, the Sutton group could take advantage of owning the yachts through the NEPA companies by Mr Barbouttis's nominee shareholding.
33 Also, the management of a yacht through a NEPA company in Greece gains significant tax and financial advantages. There must be a minimum of three representatives, being the Greek equivalent of company directors. Thus, a Greek management company was also established with three Greek directors appointed by the Sutton group, namely Mr Barbouttis, his brother George and Mr Takis Nikiforides. The management company was Megisti Blue Yacht Charters Ltd. I was told from the Bar table that that is the same company as one of the caveators which was misdescribed on the caveat as "Megisti Yacht Charters Ltd" and which has hence been named as the first respondent with the same misdescription.
34 The shares in Megisti Blue were owned as to 25% by Mr Barbouttis, 25% by George, 25% by George Panagakos and 25% by Takis Nikiforides. Later, Panagakos transferred his shareholding to his wife.
35 Iris (now known as Iris 1) and Proteus (now known as Hunter) were purchased in 2009 in a single purchase for €6 million and registered in the names of the newly formed NEPA companies, Megisti Iris NEPA and Megisti Proteus NEPA respectively. Nemesis was purchased later in the same year for €205,000 and registered in the name of Megisti Nemesis NEPA. The shares in the NEPA companies were owned as to 75% by Mr Barbouttis, and 25% by George. The three directors of the NEPA companiess, as with Megisti Blue, were Mr Barbouttis, George and Mr Nikiforides.
36 A fourth far smaller (9m) yacht, described as a Sirocco yacht and built in China, was also purchased but it was held in the name of Mr Barbouttis himself.
37 All of the purchases were done on the instructions of Neil Sutton utilising funds provided by the Sutton group. More specifically, Mr Barbouttis in a "background paper" he prepared in 2014 for Neil Sutton and Mr Thompson who was a senior manager in the Sutton group (and who is the deponent to the applicant's affidavits), stated that the Enares assets in Greece were the three NEPA companies, 50% of the shares in Megisti Blue (being those in the names of him and George) and the Sirocco yacht. He also stated that these assets were held beneficially for Enares.
38 The three yachts that were owned by the NEPA companies were traded under the management of Megisti Blue, with the operation as a whole being overseen by Mr Barbouttis. From 1 January 2010 to 31 December 2014, Mr Barbouttis worked under an employment contract with the Sutton group.
39 Over a period of time, perhaps in 2013 or 2014, the relationship between Mr Barbouttis and Neil Sutton began to cool. Mr Barbouttis attributes that to the increasing influence of Mr Thompson on Neil Sutton and his son Scott. The cause of the change in the relationship does not matter for present purposes.
40 The point is, in about August 2014, Mr Barbouttis learnt that the Sutton group was investigating sending at least Nemesis to Australia.
41 It was submitted on behalf of the respondents that the attempt to remove Nemesis to Australia was done "behind Mr Barbouttis's back" and as a "trick", but that is not borne out by what Mr Barbouttis says in his affidavit or by the tendered documents. Mr Barbouttis may not initially have known of the plan, but his "background paper" in "late 2014" shows that he was fully aware, at least at that time, of the intention of closing down the Greek yacht charter business and removing the three NEPA yachts from Greece.
42 Further, Mr Barbouttis deposes to a meeting in mid-March 2015 with Neil Sutton, Kel Fitzalan of PwC Sydney (a tax advisor to the Sutton group), George and himself where it was decided that he and Mr Fitzalan would go to Greece to arrange to close the businesses down and "bring the boats back".
43 Mr Barbouttis had written in advance of the meeting recording his and George's position as "remaining the same", thereby implying that it had earlier been expressed, namely:
Provided we are effectively indemnified for all liabilities, the boats thereafter can be moved to Neil's order.
44 One of the difficulties that arose at about the time that Neil Sutton apparently resolved to close down the chartering business was a tax audit by, and tax liabilities to, the Greek tax authorities. Both Mr Barbouttis and George faced potential personal liability for any outstanding tax obligations of the Greek companies of which they were directors. Further, the removal of the yachts from Greece would give rise to further tax obligations which, if not met, would be visited upon Mr Barbouttis and George.
45 It is in that context that Mr Barbouttis spoke of him and George requiring an indemnity. The first draft was prepared by Mr Fitzalan, and negotiations ensued as to its terms.
46 In March 2015, in an email to his "legal adviser" in which he sought advice on a draft of the indemnity, Mr Barbouttis explained that Enares had lent the funds to capitalise the companies to purchase the boats and, upon sale of the boats to Neil Sutton or one of his companies, there would have to be mutual debt forgiveness, the intent being that the initial purchase price and loan would be equal to the sale price, so there is debt forgiveness on both sides.
47 Ultimately, a suite of agreements was concluded in order to document and bring about an end to the Greek yacht chartering operation. Mr Barboutti's affidavit does not mention the conclusion of the agreements. I take what follows from the documents tendered by the applicant.
48 Bills of sale, each dated 9 April 2015 and signed by Mr Barbouttis for the transferors, recorded the sale and transfer of Proteus (now Hunter), Iris and Nemesis from the respective owning NEPA company to the applicant. Each bill of sale records the purchase price.
49 There is also a bill of sale, this time dated 11 May 2015 (i.e. after the agreements referred to below), recording the sale and transfer of a vessel named Megisti Blue (which I understand to be the Sirocco yacht - it has the same dimensions) from Mr Barbouttis to the applicant.
50 There are promissory notes, all dated 1 May 2015 and corresponding with the purchase price of each yacht as recorded in the bills of sale, issued by the applicant to the NEPA company owners of the yachts, but endorsed first to Mr Barbouttis and then by him to Motor Yacht Charters Sydney Pty Ltd (MYCS), another Enares subsidiary. Thus, the purchase price in each case was paid by an Enares company and ultimately returned to an Enares company.
51 That is explained by deeds of restatement of loan and deeds of forgiveness of debt, all dated 1 May 2015.
52 First, there is a deed of restatement of loan between MYCS, as lender, and Mr Barbouttis and George, as borrowers. It records that on or about 12 December 2009, the parties entered into an oral agreement whereby MYCS would loan the principal sum of €6,220,000 to Mr Barbouttis and George. It records that the principal sum was advanced and that the deed records the terms of the oral agreement. The principal sum accords with the purchase price of the first two yachts.
53 It is recorded that the loan is interest free and that repayments will be made by way of any dividends or other distributions payable to the borrowers by each of the NEPA companies. Aside from repayments in that way, it recorded that the borrowers were not required to make any additional payments or repayments to the outstanding balance on the principal sum.
54 Second, there is a deed of forgiveness of debt between MYCS, as releasor, and Mr Barbouttis and George. It releases the borrowers under the deed of restatement of loan (i.e. Mr Barbouttis and George) from their obligations to repay the principal debt and terminates the deed of restatement of loan "on and from Completion". "Completion" has the same meaning as given in the deed of indemnity which I will deal with shortly. The point is that at that particular point in time, i.e. when completion occurs, the indemnities and releases under the deed of indemnity would arise, and the debt under the deed of restatement of loan would be forgiven and the deed of restatement of loan would terminate.
55 Third, there are deeds of restatement of loan between each NEPA company, as lender, and Megisti Blue, as borrower. Each states that on or about 1 April 2009, the parties entered into an oral agreement whereby the lender agreed to advance amounts from time to time to the borrower. It then records that various amounts were advanced and that the deed records the terms of the oral agreement. The term of each deed of restatement of loan is the period of 10 years commencing on 1 April 2009 (i.e. ending on 31 March 2019, which now is in the past) and provides that the repayment date is the last day of the term. It records that the lender has advanced funds to the borrower from time to time, that the loan is unsecured and that it is interest free. It provides that the borrower must repay all amounts advanced to it by the lender on the repayment date.
56 Fourth, there is a corresponding deed of forgiveness of debt between each NEPA company and Megisti Blue which forgives the debt recorded in the deed of restatement of loan. The deed of forgiveness of debt in each case records that the release is conditional upon "completion" taking place, and again "completion" is given the same meaning as in the deed of indemnity. Thus, from that date, the indebtedness recorded in each deed of restatement of loan by Megisti Blue to each NEPA is forgiven.
57 There are similar restatement of loan, promissory notes and deed of forgiveness of debt in respect of the Sirocco boat.
58 Fifth, there is the deed of indemnity. It has 15 parties, which can be divided into Enares group entities and indemnified parties. The former include Enares, MYCS and the applicant. The latter include Mr Barbouttis and George, as well as each of the NEPA companies and Megisti Blue.
59 The deed of indemnity records that each NEPA company owns its respective vessel and that each intends to transfer that vessel from the relevant NEPA company to Enares. There is a sunset date, which is defined as being three calendar months from the date of the deed or such later date as determined by the operation of clause 2.2. Reference to that clause shows that the sunset date can be extended for a reasonable period if it is required in order to achieve completion, but that the sunset date may not be extended beyond six calendar months from the date of the deed. That means, at the latest, the sunset date was 1 November 2015.
60 As will be seen, that is relevant only in as much as one of the justifications that the respondents advance for the caveat is that they have a right to terminate the deed of indemnity. To the extent that it is said that that right arises under cl 2.4(i), it ended within seven business days of the sunset date, which is to say 8 November 2015 at the latest. I will return below to deal with the other expressed grounds for termination.
61 The indemnity granted under the deed of indemnity by the Enares group to the indemnified parties is conditional upon "completion" taking place but is not otherwise subject to any condition before the indemnity has full and unrestricted effect (cl 2.1).
62 The indemnity in cl 3.1 is that on and from completion each of the Enares group entities, releases and indemnifies the NEPA companies and Megisti Blue and holds them indemnified to the extent that they, or any of them, become liable for any tax liabilities, operating costs, various specified claims and expenses and "any other liabilities, present or future Claim … no matter how arising or having arisen or occurring…". Consistent with that broad wording, "claim" is defined as meaning any claim, and includes, without limitation, any demand, determination, award, judgment, notice, hearing, enquiry or proceeding of any kind, no matter where made, given, initiated or held.
63 Clause 4.1 gives a similar release and indemnity to Mr Barbouttis and George.
64 There are provisions of clause 2.4 which are particularly pertinent and therefore require being quoted:
2.4 Sunset Date, Termination and Unwinding
(i) If the Condition is not satisfied or waived by the Sunset Date and provided that the party giving notice has substantially complied with its obligations under clause 2.2, any party may terminate this Deed by written notice to the other parties within 7 Business Days of the Sunset Date.
(ii) In the event that such notice is given, all parties will be obliged, at the cost of Enares, to reverse all the steps identified in the definition of Completion so as to restore full title and possession of each of the Yachts to their previous owner.
(iii) To the extent to which a transfer of title or possession of any of the Yachts has occurred prior to Completion, Enares Group shall hold that title and possession of and the Yachts in trust for the Megisti Entities until Completion shall have occurred and shall if required at any time prior to Completion immediately reconvey title and possession and the Yachts to the Megisti Entities.
65 The definition of completion is as follows:
Completion means the transfer of the title of the transferor of:
(i) MY Iris Yacht from Iris to Enares or a person nominated by Enares;
(ii) MY Proteus Yacht from Proteus to Enares or a person nominated by Enares;
(iii) MY Nemesis Yacht from Nemesis to Enares or a person nominated by Enares; and
(iv) Sirocco Yacht from John Michael Barbouttis to Enares or a person nominated by Enares,
and the physical delivery to Enares of MY Iris Yacht, MY Proteus Yacht, MY Nemesis Yacht and the Sirocco Yacht to the location in Athens, specified by Enares prior to execution of this Deed or in default of such specification, the delivery to Enares of a declaration that the transferors are holding the yachts to the order of Enares as trustee of Enares; …
66 It will be observed that under the definition of "Completion" there are two requirements, namely (1) transfer of title and (2) physical delivery or a declaration that the transferors are holding the yachts to the order of Enares as trustee of Enares.
67 That introduces the final document in the suite of agreements, namely a declaration of trust, also dated 1 May 2015. It is executed by each of the vessel owners, namely Mr Barbouttis and the NEPA companies, who are collectively referred to as the trustees, and declares that each of the trustees holds with immediate effect each of the vessels identified in the deed of indemnity "upon trust for Enares".
68 Thus, with immediate effect from 1 May 2015 the second requirement for completion was satisfied. Also, by 1 May 2015 transfer of title had already occurred in respect of the three NEPA vessels under the bills of sale dated 9 April 2015 - although I will return to the respondent's contention that since Iris remains on the Greek register its title did not transfer with the bill of sale. Transfer of title in respect of the Sirocco yacht (named Megisti Blue) occurred under the bill of sale dated 11 May 2015.
69 It follows that on one view completion had occurred by 11 May 2015. I will however return to the respondents' submissions to the effect that completion had not only not occurred by that date, but that it has still not occurred.
70 Returning now to the evidence of Mr Barbouttis, after execution of the suite of agreements, various debts were claimed in Greece that had to be paid. That was as had been anticipated prior to the suite of agreements being concluded.
71 The debts included in relation to superannuation amounts owing arising from the employment of crew for the yachts (referred to by the Greek acronym NAT).
72 Proteus and Nemesis were successfully removed from Greece, but some sort of block was put on the removal of Iris on account of a claim by the Greek tax authorities. Ultimately Iris was also removed, and there is some evidence that it was removed without proper authorisation. Whilst that is not clear on the evidence, for present purposes I am prepared to accept that that is so.
73 Mr Barbouttis also faces various criminal charges in respect of outstanding obligations of the NEPA companies and Megisti Blue. These include arising from the failure to make certain returns to the tax authorities and non-payment of debts to the Greek State in respect of Iris, Proteus and Nemesis. There is some hearsay evidence that Mr Barbouttis's house in Greece has been seized by the Greek tax office due to the debts of the companies. It is said that the seizure is an administrative measure and takes place under the administrative-tax procedure. It is not said that it is a forfeiture, at this stage at least.
74 In respect of the departure of the Iris from Greece, there is a summons to Mr Barbouttis dated 18 May 2017 requiring him, within two days from delivery of the summons, to appear before an officer of the Port of Piraeus "in order to be witnessed with regard to the sailing/departure, without permission, and the failure to check the prescribed under law maritime documents from the ZEUS Port Authority, on 9th.10.20 16, of the vessel IRIS". Mr Barbouttis explains that he had to attend and give evidence before a hearing with regard to the removal of Iris, and he notes that the Iris remains registered on the Greek shipping register.
75 Through the latter part of 2015 and 2016 there is inter-solicitor correspondence in which Mr Barbouttis and the Greek companies assert claims for funding from Enares under the deed of indemnity to meet the various obligations referred to above, and various reasons are advanced in response as to why the funds were not required to be paid, at least not yet. I will return to that correspondence shortly. The point is that not long after the suite of agreements was concluded and concerted efforts were made to wind up the chartering business in Greece, a dispute arose as to Mr Barbouttis and the Greek companies being indemnified for their liabilities and expenses arising from Mr Barbouttis's work for the Sutton group in relation to the Greek charter business.