Namul Pty Ltd v Milovan Stankovic

ex tempore Judgment 1Rein J: This matter was in the Equity Duty Judge's list yesterday and was referred to me, due to the Duty Judge's inability to hear a matter that was estimated to take at least three hours. It indeed has taken more than that period of time. 2On or about 14 September 2010 Eric Newham Namul Pty Ltd, ("ENHPL"), purchased a property at Kellyville, which I shall refer to as "the Property". The Property was at the time of the purchase registered in the name of Terry Grant Van Der Veldt and Jason Shane Cronin jointly as trustees of the bankrupt estate of Milovan Stankovic and Milka Stankovic, in equal shares. Mr Milovan Stankovic is the defendant, and he appears for himself in these proceedings. Mrs Stankovic is the ex-wife of Mr Stankovic. 3The trustees of Mr Stankovic's bankrupt estate were appointed following the making of a sequestration order on 12 May 2009 by Federal Magistrate Raphael, which in turn followed on an act of bankruptcy by the defendant, held by Federal Magistrate Raphael to have occurred on 30 December 2007. The defendant was declared bankrupt because he failed to comply with an order by the Land and Environment Court to pay approximately $22, 000 to Baulkham Hills Shire Council, who had taken action against the defendant in respect of the use of the Property. 4ENHPL bid $6.7M at an auction for the Property, on a contract which required GST to be paid by the purchaser, and was successful in obtaining the property at the auction. Subsequently ENHPL transferred the Property to a related company, Namul Pty Ltd ("Namul"), which is the plaintiff in these proceedings. Mr Allan Newham is the managing director of Namul and he was also a director of ENHPL. 5In due course Namul became the registered owner of the Property, and following a subdivision it has commenced endeavouring to sell lots within the subdivision of what was known as Lot B, and also of lots within what was known as Lot A. Lot A was owned by Namul previously and no issue arises as to the lots which were wholly within that portion of the Property. One of the newly created lots within Lot B, Lot 3, has been sold (see the diagram in Exhibit A, tab 1) and sales of several other lots are due for completion. One sale was due to be completed yesterday, another is due to be completed tomorrow, and two further lots were due for completion by 22 February 2013. 6The defendant challenges the plaintiff's right to ownership of the land and asserts that he is the rightful owner of the land. He has made manifest by his conduct rejection of the title of the plaintiff. He has entered onto the land in question and removed chains on gates and has held a BBQ on the land advertised by means of notice (see Exhibit A, tab 10, p 43). He has affixed notices to the land asserting that he is the owner of the land, and setting out some of the same material that he relies on in this case and stating that trespassers will be prosecuted (see Exhibit B). There is also evidence that he has demanded the removal of equipment owned by the agent of Namul which has been located on the Property. 7His activities have led to the plaintiff commencing these proceedings, and has led to purchasers of the lots wishing to delay settlement until the outcome of these proceedings are determined. The need for those proceedings arises out of actions taken by the defendant, and the position which he maintains in these proceedings. Those actions of the defendant were likely to, and have had, the effect of impeding the plaintiff's orderly and efficient sale of the abovementioned lots, other than Lot 3. 8The plaintiff seeks to put an end to the claims of the defendant so far as its title is concerned, and to prevent the defendant continuing to impugn its title to the Property. 9The defendant by cross-claim seeks in effect the opposite relief, namely, that his right to the Property be affirmed, I assume by declaratory relief, and to stop any further attempts by the plaintiff having him evicted from the Property, or from entering on to the Property, and also to preclude the plaintiff and its agents from going on to the land. 10Mr C Alexander, counsel for the plaintiff, submits that the evidence provided by his client (being two affidavits of Mr Allan Newham and two affidavits of Namul's solicitor, Mr Robert McLaughlin, and various documents) establishes that: (1) ENHPL purchased the Property from the trustees and Mrs Stankovic at auction. (2) That the trustees and Mrs Stankovic were the registered proprietors of the Property in equal shares. (3) That the Property was transferred to the plaintiff. (4) That the plaintiff became the registered owner of the Property. 11Mr Alexander submits: (5) That the plaintiff by s 42 of the Real Property Act 1900 (NSW) takes title to the land, unimpeded by any interest other than those noted on the title, of which there are relevantly none, and that an exception to the indefeasibility principle, namely, fraud, relates to the fraud of the purchaser, and not some third party and that the plaintiff has no involvement in any fraud. (6) Further, that the appointment by a superior court of record, namely the Family Law Court, means that the plaintiff's predecessor in title and the plaintiff are entitled to rely on the sale by the trustees as an order was made by the Family Court for sale by the trustees and Mrs Stankovic (see Exhibit A, tab 10, pp 19 - 23, para 4 of those orders and s21(2) of the Family Law Act 1975 (Cth)). (7) That even if the defendant has some valid complaint about what occurred in the Federal Magistrate's Court, which the plaintiff does not concede he does, this Court has no jurisdiction to enter into that issue, given that bankruptcy jurisdiction is exclusively conferred on the Federal Magistrates Court and the Family Law Court by virtue of s 27 of the Bankruptcy Act 1966 (Cth). (8) The decision of Justice Emmett precludes ventilation by the defendant of a claim that the sequestration order was invalid, irregular, and should have been set aside. 12It will be apparent from what I have said about the plaintiff's position that its primary case is that there is no basis on which its title can be impugned, as not only did it purchase the Property for valuable consideration from the registered proprietor, but it purchased it from the parties entrusted by the sale of the Family Court. 13Mr Alexander accepted that s 42 of the Real Property Act does provide an exception to indefeasibility, namely fraud, and he pointed out that for the fraud to operate against Namul, the knowledge of fraud must be sheeted home to Namul, in this case through its director, Mr Newham, and that no such conclusion can be reached. 14Section 42 of the Real Property Act is in the following terms: 42 Estate of registered proprietor paramount (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 except: (a) the estate or interest recorded in a prior folio of the Register by reason of which another proprietor claims the same land, (a1) in the case of the omission or misdescription of an easement subsisting immediately before the land was brought under the provisions of this Act or validly created at or after that time under this or any other Act or a 1Commonwealth Act, (b) in the case of the omission or misdescription of any profit à prendre created in or existing upon any land, (c) as to any portion of land that may by wrong description of parcels or of boundaries be included in the folio of the Register or registered dealing evidencing the title of such registered proprietor, not being a purchaser or mortgagee thereof for value, or deriving from or through a purchaser or mortgagee thereof for value, and (d) a tenancy whereunder the tenant is in possession or entitled to immediate possession, and an agreement or option for the acquisition by such a tenant of a further term to commence at the expiration of such a tenancy, of which in either case the registered proprietor before he or she became registered as proprietor had notice against which he or she was not protected: Provided that: (i) The term for which the tenancy was created does not exceed three years, and (ii) in the case of such an agreement or option, the additional term for which it provides would not, when added to the original term, exceed three years. (iii) (Repealed) (2) In subsection (1), a reference to an estate or interest in land recorded in a folio of the Register includes a reference to an estate or interest recorded in a registered mortgage, charge or lease that may be directly or indirectly identified from a distinctive reference in that folio. (3) This section prevails over any inconsistent provision of any other Act or law unless the inconsistent provision expressly provides that it is to have effect despite anything contained in this section. A copy of s 42 has been provided to the defendant and overnight he has had an opportunity to consider it. 15The defendant relies on the fraud exception and asserts that Mr Newham knew of the fraud which is, on the defendant's case, the irregular appointment of the trustees by "a fraudulent instrument". The allegedly fraudulent instrument is a document to be found at tab 10 of Exhibit A p 13, a document signed on behalf of the official receiver Julia Inga and dated 18 May 2009. The defendant alleges that the sale of the Property was improper since, he contends, the trustees were not properly appointed and had no right to act on the sale. 16The defendant asserted from the Bar table that he had told Mr Newham about the complaint he has about the conduct of the trustees, and his attack on their sale of the Property, together with his ex-wife. Mr Newham did not dispute that the defendant has, since the plaintiff bought the Property, asserted that the land is his and has claimed that a wrong has been done to him (see para 13 and 15 of Mr Newham's affidavit 4 February 2013). The defendant gave no evidence of his alleged conversations with Mr Newham in his affidavit saying only that "Alan [sic] Newham knew of all of these mischievous dealings and used the situation to his advantage by 'buying' my property" (see para 17 of the defendant's affidavit of 7 February 2012). 17The defendant in effect asserted that Mr Newham was not honest in his answer to this Court when he said yesterday that he only had one meeting, a breakfast meeting with the defendant, but there is no evidence which establishes that Mr Newham's evidence is incorrect or false. The only significance of the meetings on unspecified dates claimed by the defendant to have been held is that the defendant asserts that he told Mr Newham that the trustees were not validly appointed. 18To the extent that the defendant should be taken as having asserted that Mr Newham was not honest in his answer to this Court, when Mr Newham said yesterday in cross-examination that he did not know of any irregularity in the appointment of the trustees, I should note that in answering a question put by the defendant, and reformulated by me, to reflect what I understood the defendant was seeking to ascertain, Mr Newham said that had he known that the trustees were not relevantly appointed, he would not have entered into the contract of sale: see T11.16 - 39. 19Mr Newham denied that he had on the day of the auction and before the auction been told by Mr Jim Clifford that the defendant had told Mr Clifford that there was fraud involving the trustees and the solicitors acting for the trustee: see T10.3 - 34. Mr Newham said he did not recall a conversation with the defendant in which the defendant said he had paid his debts and claimed that the trustees should not have been appointed when the defendant had paid his debts: see T11.44 - T12.3. In respect of two areas of questions the defendant seemed to be relying on conversations with persons other than Mr Newham but to the extent that questions were put concerning conversations, other than the auction day conversation, they were not specific as to their supposed date. The defendant has failed to provide any evidence of a conversation, prior to the purchase in which he told Mr Newham that there had been fraudulent conduct on the part of the trustees. 20The only relevant time to establish knowledge of fraud in the context of s 42 of the Real Property Act is before the purchase of the Property and the payment of money. In this case a very substantial amount, $6.7M, together with a further 10 per cent of that amount for GST, was paid following the auction on 14 September 2010. 21I have no hesitation in accepting Mr Newham's evidence. I do not think Mr Newham's credibility was impugned at all by the cross-examination of him by the defendant and there was nothing substantive from the defendant's affidavit to contradict his evidence. Not only that, his agreement with the proposition to which I have earlier referred to, only reinforces the likelihood that he did not know that there was any irregularity in the appointment of the trustees. 22Further, the defendant's assertions about misconduct do not amount to evidence of misconduct, irregularity or fraud. I am not satisfied that Mr Newham knew before he purchased the Property, and therefore that Namul knew, that the trustees had not been regularly appointed. On the contrary, Mr Newham and Namul were, in my view, entitled to act on the basis that the trustees had been validly appointed. Not only is the appointment of the trustee evidenced by a certificate (Exhibit A, tab 10, p 13) Mr Newham and Namul were also entitled to rely on the registration of the trustee on the register at the Land Titles office. 23I should also comment on what I perceive to be the central core of the defendant's case, which links to his contention that the appointment of trustees and the sale by them of the Property in conjunction his wife was irregular and fraudulent, which is that since Federal Magistrate Raphael stayed all proceedings under the order he made on 12 May 2009 for a period of 21 days, (see Exhibit A, tab 10, p 10) and that he, the defendant, paid the council the debt that council had claimed from him within that period, the bankruptcy should have ended and no trustees ever been appointed. 24There are a number of problems with the defendant's argument and analysis. 25The defendant ignores the fact that although the council was paid, another creditor, Kent Attorneys, who had previously acted for the defendant in various proceedings, and who had issued memoranda of costs to him, sought to take over the petition claiming that they were creditors of the defendant in an amount of $244,000 approximately. 26The learned Magistrate did not determine whether Kent Attorneys were entitled to be substituted, but he left open the prospect that they could be substituted, and he informed the defendant of that fact: see Exhibit 3 (tendered by the defendant) at p 25 line 24. After the Federal Magistrate had been informed by the defendant that he would pay the money in protest to the council, his Honour said this: FEDERAL MAGISTRATE: You can come back to this Court and you can seek to have the order dismissed. You have to do that. Do you understand that? Just paying him isn't going to be good enough, because there's this gentleman here who's got a problem. MR STANKOVIC: Well, that gentleman have to do proper way (sic). FEDERAL MAGISTRATE: Yes, well, that may be the case. I am not going to make my mind up about that. MR STANKOVIC: Yes, okay. FEDERAL MAGISTRATE: All right? If you can't do it in 21 days then you have to talk your trustee". [p 26, line 16.] "FEDERAL MAGISTRATE: So you're going to have to tell him if you want to come back. Otherwise if you don't come back to the Court the bankruptcy - the sequestration order will take effect. Do you understand that? MR STANKOVIC: Yes, all right. FEDERAL MAGISTRATE: If you don't come back here within that three weeks the sequestration order will take effect. MR STANKOVIC: Yes, your Honour. FEDERAL MAGISTRATE: Do you understand that? MR STANKOVIC: Yes I do, your Honour. FEDERAL MAGISTRATE: Whether you've paid him or you haven't. Do you understand that? MR STANKOVIC: Okay your Honour. FEDERAL MAGISTRATE: So if you get the money from the ANZ Bank and you pay Mr Ash's client, you have still got to come back to this Court and ask the Court to dismiss the petition". 27That passage which I have just read follows a reference to a Mr Kent of Kent Attorneys and his bill: see Exhibit 3, p 26. 28On 2 June 2009 the defendant sought to strike out the sequestration order made by Federal Magistrate Raphael, but Federal Magistrate Barnes refused to strike it out: see para 15 of the defendant's affidavit of 7 February 2013 filed in these proceedings. 29The defendant asserts in his affidavit that Federal Magistrate Raphael had promised that the bankruptcy would come to an end if the defendant paid the council's debt, but the portion of the transcript I have read out reveals that the defendant's recollection is faulty. 30The application to bring the bankruptcy proceedings to an end was made by Mr Charles Hockey, who is recorded on Exhibit 1 as the defendant's solicitor in those proceedings (see Exhibit A, tab 10, p 17), as the defendant in his affidavit says he was: see para 16 of the defendant's affidavit of 7 February 2013. The defendant now says from the Bar table that Mr Hockey was not retained by him, and that he cannot remember what occurred in relation to Mr Hockey. But again his recollection does not accord with his own evidence. 31On 13 October 2009 it appears from Exhibit A, tab 10, p 18 that the defendant's application for annulment of the bankruptcy and other orders, which have been filed on 20 May 2009, was dismissed by consent: the document recording the consent is to be found at Exhibit 4. Once again, the defendant denies that Mr Hockey had authority to execute that document on his behalf, and does not accept that Mr Hockey was retained to act for him. 32As far as the Federal Magistrate was concerned, the orders were made, as I have said, on the same date as the consent document, albeit by Federal Magistrate Smith (Exhibit A, tab 10, p 18), as opposed to Registrar Hannigan, whose name appears on Exhibit 4. 33The orders that were made on 13 October 2009 have never been set aside, but it appears from the judgment of Justice Emmett (see tab 10 of Exhibit A, pp 31-36), that the defendant did seek to have the sequestration order of 12 May 2009 set aside, which application was refused by his Honour. 34The defendant has recently commenced proceedings in the Federal Court, which he says will be heard in March 2013, in which he has joined the trustees, the solicitors who acted for them, Mr Hockey, and others, including Kent Attorneys: see Exhibit 6. He says he intends to join Mr Newham in those proceedings, although how that application could be made without affecting the hearing date is unclear. 35The defendant, in those proceedings, seeks an order that his bankruptcy be annulled, and an order for restoration of the Property to him, and interlocutory relief preventing the sale of Lot B, by which I take it to mean any lot newly created within Lot B. Those proceedings appear to have a number of difficulties not the least which is the effect of the determination of Emmett J adverse to the defendant, to which I have earlier referred and the need for this Court, rather than the Federal Court, to determine the rights of Namul vis-á-vis the defendant who, it is agreed, is no longer a bankrupt. 36I should note in 2010 the defendant filed a caveat against dealings with the Property which the trustees took action to remove. Orders were made by this Court that the defendant withdraw his caveat: see Exhibit A tab 10, p 26. From the Bar table the defendant has asserted that those orders were made irregularly and improperly. There is no evidence in relation to those proceedings in the affidavit that the defendant has filed in these proceedings. In subsequent proceedings in this Court Stankovic v Hills Shire Council [2012] NSWSC 738 the defendant brought proceedings against the Hills Shire Council claiming that, inter alia, his bankruptcy should have been annulled. These proceedings were dismissed: see Exhibit A, pp 37 - 40. 37The defendant was prosecuted, I infer for trespass on the Property of the plaintiff, and he was convicted and fined $100, in November last year: see para 14 - 21 of Mr Newham's affidavit of 4 February 2013 and Exhibit A, tab 10, pp 45 - 46. I understand that he has appealed from that conviction, but that appeal has not yet been heard. 38Given that the Property was sold to Namul on 14 September 2010, well after the consent orders were filed in the Federal Magistrates Court, and however they came about, any assertion that the earlier appointment of the trustees within the 21 day period of the stay of proceedings seems to be of no consequence. It also seems to be inconsistent with Federal Magistrate Raphael telling the defendant that he needed to speak with his trustees since, if the defendant was correct, there would have been no trustees appointed. 39The defendant has failed to demonstrate that the appointment of the trustees was invalid or irregular. His core premise, which he has repeated many times before me, "I paid my debts, the property is mine", is based on a misconception. His assertion that Namul knew of the "fraud" also cannot be accepted since fraud has not been established. 40At the close of submissions the defendant raised some further points in relation to the contract for sale with ENHPL (see Exhibit 5). He first made the point that clause 41(ii)(b) (relating to the vendor's right to rescind) and clause 47 (relating to the payment by the purchaser of GST) of the contract for sale made the contract fraudulent. He also claimed that GST is not payable on a residential property. I do not understand the defendant's submissions on this point, and he has not persuaded me there is any basis for his assertion that the contract is fraudulent by reason of the inclusion of those clauses. 41The defendant also made the point that the contract has not been signed by the trustees themselves or his ex-wife. The contract notes that the same solicitors were acting for the trustees and Milka Stankovic, and it does appear to have been signed by Mr Hathway on behalf of the trustees in bankruptcy. It does not appear that Mrs Stankovic's signature is on the document. 42The defendant asserts that the consequence of the absence of their signatures establishes that the contract is a fraud. I do not accept this submission. There are a number of possible reasons why the signature of Mrs Stankovic was not obtained on that document one of them being that there is another copy which she has signed, and the fact that the third party has signed on behalf of the trustees may be dependent upon some authority given to that person on behalf of the trustees and accepted by the purchaser as binding the trustees. There is nothing to suggest that the trustees or Mrs Stankovic have sought to challenge the efficacy of the execution of the contract. 43Whatever the true position about the execution of the contract for sale is, there is a short answer to the point, as Mr Alexander has pointed out, and that is that the contract was proceeded with, settlement took place, ENHPL or Namul paid over the money that led to Namul's registration, which ended in registration of Namul as the registered proprietor: see p 28 tab 10 Exhibit A. 44In my view, the plaintiff is entitled to the relief which it seeks in paragraph 1, and a declaration in terms of paragraph 3 of the Amended Summons which was filed recently, and which is found at tab 1 of Exhibit A. 45I now need to deal with the application for order 2 in the Amended Summons, which is correctly described by Mr Alexander as being in the nature of a quia timet injunction, restraining the defendant and his servants, agents and employees from taking various steps as set out in the order. Effectively, what is sought is to prevent any continuation of the slander of title in which the defendant has been engaging. 46There is discussion about the nature of the history of this type of action in the judgments in Palmer Bruyn & Parker Pty Ltd v Parsons (2001) 208 CLR 388, 405-406 per Gummow J; [2001] HCA 69; (2001) 185 ALR 280; (2001) 76 ALJR 163; (2001) 22(20) Leg Rep 9; (2002) Aust Torts Reports 81-630. The elements of the tort are outlined in Young & Another v The Owners -- Strata Plan No 3529 and Others (2001) 54 NSWLR 60, 75-76 per Santow J (as his Honour was then); [2001] NSWSC 1135; (2001) 10 BPR 19, 153; (1) falsity (2) publication and disparagement of the plaintiff's title (3) malice and (4) where necessary, special damage to the plaintiff. Even were it open to the defendant to argue that up until now he has not understood that he does not now have any rights to the Property and hence that what he has done so far does not involve the requisite "malice" on his part (which I very much doubt), once the other orders are made that the plaintiff seeks, and to which it is entitled, there can be no basis for the defendant's continued assertions. 47The plaintiff does not seek any damages for the past infringement, but does seek an order preventing the defendant from conducting himself in the fashion which he has in the past, in the terms of the Amended Summons. In my view there is a proper basis for the order being sought and being made, and I propose to make it. 48In the course of the proceedings, both in the written material, and orally, the defendant has asserted that he has a right to trial by jury. He has asserted that in at least some of the other proceedings in which he has been involved. Jury trials, other than defamation cases, are extremely rare in this state in civil proceedings, and even rarer in the Equity Division of this Court. The Supreme Court Act 1970 (NSW) by s 85 provides that there will be trial without jury, unless a jury is required in the interests of justice for that to occur. Proceedings are therefore to be tried without a jury unless the Court orders otherwise, and there would need to be a requisition for a trial with a jury, and a fee paid under the Civil Procedure Act 2005 (NSW) as set out in the Act. In my view it would be wholly inappropriate for a matter such as this to be determined by a jury, and I would not order otherwise in this case had a proper application been made.