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[2005] NSWSC 778
Supreme Court of NSW
2004-11-20
Smart AJ
Original judgment source is linked above.
CITATION : Nick Kardiasmenos v Pioneer Management Pty Limited & 3 Ors [2005] NSWSC 778
HEARING DATE(S) : 20 November 2004, 1, 2 & 3 December 2004
DECISION : Publication of Reasons. No orders made.
CATCHWORDS : Motion of Mr Vescio for reconsideration dismissed - payment of debts of 1st deft, costs of the petitioning creditor of winding-up of 1st deft and costs, fees and expenses of liquidatoe - order for transfer of property to pltf upon conditions - orders for removal of caveat - plaintiff's equitable interest covers whole of land so that any equity of 4th defendant purely theoretical
Bankruptcy Act 1966 LEGISLATION CITED : Partnership Act Real Property Act 1974
Abigail v Lapin (1934) 51 CLR 58 Birtchnell v Equity Trustees & Agency Co Ltd (1929) 42 CLR 384 Butler v Fairclough (1917) 23 CLR 78 Canny Gabriel Castle Jackson Advertising v Volume Sales (Finance) Pty Ltd (1974) 131 CLR 321 Calverley v Green (1984) 155 CLR 242 Charles Marshall Pty Ltd v Grimsley (1956) 95 CLR 365 CASES CITED : Daemar v Industrial Commission of NSW No 2 (1990) 22 NSWLR 178 Foyster v ANZ Banking [1999] NSWSC 300 - BC 99 02230 Lapin v Abigail (1930) 44 CLR 166 Moffitt v Dillon [1992] 2 VR 480 Pegler v Dale 1975 1 NSWLR 265 Platzer v Commonwealth Bank of Australia 1997 1 Qd R 266 UDC Ltd v Brian Pty Ltd (1985) 59 ALJR 676
PARTIES : Nick Kardiasmenos v Pioneer Management Pty Limited & 3 Ors
R Sofroniou (P) M B Duncan (2nd & 4th defts) COUNSEL : Mr Vescio in person No appearance for 1st deft
Verekers for 1st deft SOLICITORS : No other solicitor.
IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION
5469/02: NICK KARDIASMENOS v PIONEER MANAGEMENT PTY LTD PETER ROBERT LEE, MICHAEL VESCIO and SAI MENG LEE
PUBLICATION OF REASONS
Pioneer filed a Notice of Appearance in November and a defence on 16 June 2003. In February 2004 its solicitor filed a Notice of Ceasing to Act, having first given the company the requisite notice. Although the company was subsequently informed of the progress of this suit including various interlocutory orders and duly notified of the hearing dates, the company did not appear or participate in the hearing. Since the hearing and after the Court notified that judgment was being given today, the Court was notified that Pioneer was wound up on 2 May 2005. These reasons are therefore being delivered on a provisional basis to enable the liquidator to consider them and make any application he may be advised. No orders will be made nor judgment entered pending further hearing. Peter Robert Lee (PRL) and Sai Meng Lee (SML) appeared and were represented by the same counsel. Michael Vescio (MV) represented himself at all stages of the proceedings .
The plaintiff alleged that in about March 2001, he, together with PRL and MV agreed to form a partnership to carry out a development project in respect of the larger and smaller blocks. They allegedly agreed that: (a) the properties would be purchased by a company to be acquired for the purpose of the project; and (b) PRL would arrange for the financing of the purchase and development of the property; and (c) the plaintiff would provide "top up security" if required, should the project not be able to be entirely funded by the provision of security over the properties; and (d) nett profits from the project were to be divided on completion by the plaintiff, PRL and MV in equal shares.
PRL disputes that there was a partnership but MV asserts that there was a partnership as alleged. Pioneer was utilised from about March 2001 to carry out the project. It was undisputed that PRL was appointed a director and the secretary of Pioneer about 19 March 2001 and the plaintiff was appointed a director of Pioneer on or about 21 April 2001. MV could not be appointed as a director.
In about April 2001 the plaintiff obtained finance of $200,000 from HSBC Bank Australia Ltd (HSBC) by an overdraft facility (the "HSBC facility") applied to a new HSBC cheque account No 011-188810-031 opened in his name about 17 May 2001 for that purpose (the "HSBC account"). The funds provided pursuant to the HSBC facility were secured by a registered first mortgage over the plaintiff's property, 31 Lackey Street, Summer Hill.
About 6 May 2001 the plaintiff borrowed a further amount of $200,000 from Perpetual Trustees Victoria Ltd (the "Perpetual funds"). These funds were secured by a registered first mortgage over the plaintiff's property, 78 Batt Street, Sefton.
In about late May 2001 the plaintiff deposited the Perpetual funds into his "Everyday Cheque" account No 041353718 held in his name with St George Bank (the "St George account").
The facts in paragraphs 5, 6 and 7 were undisputed.
About 8 June 2001 the plaintiff purchased both the properties for a total price of $310,000 in the name of Pioneer as purchaser. The purchase of the properties and associated costs were all paid for by the plaintiff as Pioneer, PRL and MV well knew. Such purchase price and costs were funded entirely from funds drawn by the plaintiff from the HSBC account and from the St George account. PRL and MV did not contribute any funds to the purchase of either property. Pioneer did not contribute any funds of its own to the purchase of either property.
Thus, at all material times from the purchase of the properties on 8 June 2001 the plaintiff claimed an equitable interest in each of the properties and that Pioneer held each of the properties in trust as a bare trustee for the plaintiff under a resulting trust with no beneficial interest in either of them.
In the alternative, the plaintiff claimed that by reason of the purchase of the properties and payment of all associated costs entirely with the plaintiff's funds: (a) Pioneer held each of the properties in trust as a bare trustee for each of PRL, MV and the plaintiff. (b) to the extent that PRL and MV did not contribute moneys towards the purchase of the properties any beneficial interest they held in the properties was itself held subject to a resulting trust in favour of the plaintiff. Claims Involving Pioneer and SML
About 8 August 2001 the plaintiff agreed to resign as a director of Pioneer and SML was appointed as a director of Pioneer. PRL remained a director of Pioneer at that time. This is not disputed.
About 27 August 2002 the plaintiff lodged caveat number 8901807A over the larger block and also lodged a caveat over the smaller block. This was not disputed. About 11 September 2002 at the demand of PRL and SML, the plaintiff agreed to the withdrawal of his caveat over the smaller block. The plaintiff has never been reimbursed as to any of the moneys provided by him for the purchase of the properties and associated costs.
About 11 September 2002 the smaller block was transferred by Pioneer to Ngoc Ly on the apparent instructions of PRL and/or SML.
About 19 September 2002 Pioneer purported to enter into a contract for the sale of the larger block to Long Gin Mo and Ken Lu for $625,000. The contract provided for completion 35 days after exchange. The plaintiff asserts he has an equitable interest in the larger block by virtue of the resulting trust existing in respect of the properties to his benefit or by reason of the charge arising from the facts and circumstances mentioned earlier. While Pioneer remained the registered proprietor of the larger block the plaintiff feared that either PRL or SML or both would cause Pioneer to sell the larger block.
The plaintiff alleged, in the alternative, that at a meeting held about 24 April 2001, the plaintiff, PRL and MV orally agreed that any and all moneys provided by the plaintiff for the purchase of the properties would be reimbursed to him first, in priority to other payments, together with an additional two per cent above the purchase moneys contributed by him, and in addition to his one-third share of any nett profits earned by the project.
The plaintiff further alleged, and in the alternative, that the purchase moneys were provided by the plaintiff upon the basis of the express representation and agreement of MV and PRL, that such moneys would be reimbursed to the plaintiff, as an expense of the project and prior to the distribution of the nett profits of the project among each of the partners. In the circumstances it was alleged the purchase of the properties for the benefit of the partnership amounted to a capital contribution made to the partnership by the plaintiff. The plaintiff asserted that as the object and purpose of the partnership being the Project, had failed it was just and equitable that the partnership be dissolved. About 10 April 2003, the plaintiff served notices on PRL and MV dissolving the partnership as from that day.
Claim against SML 18. SML has lodged a caveat (registered number 96669133) over the larger block, claiming this equitable interest in it: "Deposit of Certificate of Title by Pioneer .. to Sai Meng Lee and signature by directors of the said company of six payment vouchers each dated 9 August 2001". This was not disputed.
A declaration that the partnership between the plaintiff, PRL and MV was dissolved as from the date of filing the statement of claim (30 March 2004).
An order appointing Receivers and Managers of the Partnership and that they be empowered to sell the larger block and account for the proceeds to the partnership.
An order that an enquiry be held as to the assets and liabilities of the partnership, the respective interests of the partners in any such assets and all the dealings and transactions of the partnership and of the said partners or any of them in relation thereto.
An order that the partnership assets be realised and the proceeds thereof be applied in due course of administration.
A declaration that SML has no interest in the larger block.
A declaration that Pioneer is not indebted to SML for any sum.
An order that the caveat lodged by SML on the larger block be removed.
An injunction restraining SML from selling, transferring, encumbering or otherwise dealing with the larger block. 25. Other ancillary relief was sought.
The Amended Defence filed on behalf of PRL admitted that the plaintiff MV and he agreed that the properties would be purchased by a company to be acquired for the purpose of the project and that he (PRL) was to arrange for financing of the purchase and development of the project.
PRL denied that the partnership alleged existed or came into existence. He asserted that the profits of the development were to be shared in equal shares among the shareholders of the company acquired to own the land. PRL asserted that the true legal characterisation of the arrangement between him and the plaintiff was a joint venture whereby a company of which they were already shareholders and directors, Ocean Park Financial Holdings Pty Ltd was to raise the finance to construct the development project on land to be acquired by another company (Pioneer).
PRL denied the existence of any partnership involving MV. At all material times from about February 2001 to about at least October 2001 MV was an undischarged bankrupt.
PRL denied that Pioneer was the corporate vehicle utilised by the partnership from about March 2001 to carry out the project. PRL asserted that Pioneer was acquired as the vehicle to be the registered proprietor of the parcels of land the subject of the joint venture and that Ocean Park was to be the vehicle to acquire the finance to build and develop the project on the land.
PRL denied that about 8 June 2001 the plaintiff purchased each of the properties as vendor in the name of Pioneer as purchaser and that Pioneer, PRL and MV well knew that the purchase of the property and the associated costs were all paid for by the plaintiff. PRL denied that Pioneer held each of the properties as a bare trustee for each of himself, MV and the plaintiff and that to the extent that PRL and MV did not contribute moneys towards the purchase of the properties any beneficial interest they held in the properties was itself held subject to a resulting trust in favour of the plaintiff.
PRL denied that the plaintiff had an equitable interest in the smaller block or in the larger block by virtue of the resulting trust to his benefit or by reason of the alleged charge. (The circumstances were said, in the alternative, to give rise to a charge).
PRL asserted that he remained liable as a contributory of Pioneer.
PRL also asserted that any funds contributed by the plaintiff were investment funds provided to Pioneer for the purpose of it purchasing the land and becoming its registered proprietor in furtherance of the terms of the joint venture.
PRL asserted that the plaintiff had no greater interest in the land than him, i.e., the interest of an equal shareholder subject to an accounting adjustment at the completion of the joint venture for the true value of the contributions of the joint venturers (including a cash value attributable to PRL for his efforts in securing the development finance).
PRL asserted that in pursuance of the joint venture, he expended time, effort and money in securing finance for the development of the land and on 8 August 2001 the plaintiff, PRL and SML entered into an agreement whereby SML advanced the sum ($600,000) on terms acknowledged and accepted by the plaintiff and PRL. By way of particulars PRL relied on the written agreement of 8 August 2001 between Pioneer and SML. The plaintiff and PRL signed as directors of Pioneer.
PRL relied on the moneys being paid into an account of Ocean Park in pursuance of the joint venture, inter alia, because it operated a cheque account and Pioneer did not. PRL denied that the plaintiff had any right, entitlement or interest and particularly a caveatable interest in the land. PRL contended that the plaintiff was estopped by certain Local Court proceedings which he instituted.
PRL asserted that by reason of the plaintiff agreeing at the demand of PRL and SML to the withdrawal of the plaintiff's caveat over the smaller block, that block being transferred by Pioneer to Ngoc Ly and the plaintiff's consent to the sale of the smaller block the plaintiff is estopped from asserting an equitable interest in the land.
PRL asserted that because the plaintiff had agreed voluntarily to release his caveat to allow the transfer of the smaller block to a third party, any equitable interest which the plaintiff may have had was defeated by the registration of the purchaser, who was a bona fide purchaser for value without notice.
PRL further, and in the alternative, asserted that the release of the caveat by the plaintiff constituted an election on his part not to assert an equitable interest in the land.
As to the contract for sale of the larger block and the plaintiff's alleged equitable interest therein, PRL asserted that a further agreement was reached between the parties about 2 December 2002 that, in return for the payment of a sum certain, the plaintiff would release his caveat over the larger parcel of land and allow it to be transferred to a purchaser under an exchanged contract for sale, but this agreement was frustrated by the purchaser failing to complete. Save for the frustration of the agreement, PRL repeated the assertions and particulars supplied as to the smaller block (summarised earlier).
PRL relied on the proceedings initiated by the plaintiff in the Local Court (1771/02) on 17 December 2002 against PRL, for $21,815.45 and interest claimed as the balance due in respect of various amounts allegedly lent by the plaintiff to the defendant, on a personal basis, totalling $99,953.45 after repayments of $78,138. PRL alleged that the moneys had been lent to him in pursuance, inter alia, of his obligation to secure development finance under the joint venture. PRL asserted that the Local Court proceedings were brought at a time when the plaintiff's allegation of a partnership subsisting between the plaintiff and PRL was still on foot but unresolved in this Court and at a time when the Local Court had jurisdiction under the Partnership Act to adjudicate matters between the parties inter se if they were partners.
PRL asserted that the causes of action available to the plaintiff that were within the jurisdiction of the Local Court merged into judgment on 11 November 2003 and that the plaintiff was either estopped from raising any such matters and particularly the question of the existence of a partnership under the principle Port of Melbourne Authority v Anshun or was issue estopped from raising or continuing such a claim by reason of the judgment in his favour in the Local Court.
There were major issues whether the amounts claimed by the plaintiff in the Local Court were related to the development project and who had to bear the costs of endeavours to secure development finance.
In his statement of defence, some of which was incorrect as to form, MV admitted the agreement to form a partnership and the terms alleged by the plaintiff. MV asserted that he provided the shelf company (Pioneer) and that the two directors were to be the plaintiff and PRL. MV asserted that he was unaware of the plaintiff obtaining finance of $200,000 from HSBC with the overdraft facility being secured by a registered first mortgage over 31 Lackey Street, Summer Hill and of the plaintiff borrowing a further $200,000 from Perpetual Trustees Victoria Ltd secured over 78 Batt Street, Sefton. MV asserted that the larger and the smaller blocks were to have been used as security for the loan and the plaintiff was to use his properties only as "top-up" if required. MV accepted that the larger and smaller blocks were purchased for $310,000 with funds raised by the plaintiff.
MV denied that he did not contribute funds to the purchase of either of the properties. He asserted that he contributed to the partnership by negotiating the purchase price of the properties down from $375,000 to 310,000 thereby making a contribution of $65,000. MV accepted that Pioneer did not contribute funds of its own to the purchase of either of the properties. The three men were bound to use their best endeavours to advance the project. MV's skills in negotiating a reduced price is not the equivalent of a cash contribution. This reduction probably indicates that the initial asking price was too high.
MV agreed that Pioneer held each of the properties in trust as a bare trustee for each of the partners (the plaintiff, PRL and himself).
MV asserted that it was agreed that the plaintiff would be reimbursed first in priority to other payments together with an additional two per cent above the purchase moneys contributed by him, and in addition to his one-third share of any nett profits.
MV accepted that the purchase moneys were provided by the plaintiff upon the basis of the express representation and agreement of MV and PRL that such moneys would be reimbursed to the plaintiff as an expense of the project and prior to the distribution of the nett profits of the project among each of the partners and that the purchase of the properties for the benefit of the partnership amounted to a capital; contribution made to the partnership by the plaintiff.
MV asserted that the partnership agreement had been complied with by the plaintiff and MV, but PRL had not fulfilled his part of the agreement and actually hindered the partnership by diverting into other ventures and introducing other parties and causing the plaintiff to withdraw as a director so PRL could have full control.
MV sought wide ranging relief which need not be summarised now and some of which could not be granted even assuming that part of the defence was treated as a cross-claim.
SML admitted that Pioneer executed a transfer of the smaller block to Ngoc Ly but did not admit that the transfer was executed on his instructions.
SML denied that the loan agreement was not capable of and does not constitute a mortgage or convey any equitable interest to him. He denied, in the alternative, that any such interest is conditional upon the loan the subject of the loan agreement being made to Pioneer. SML asserted that he had made a loan of $600,000 to Pioneer and that funds were received by Pioneer from SML. He denied the plaintiff's claims that he (SML) had no interest in the larger block, that Pioneer is not indebted to SML and that he has no power or right to sell the larger block or to recover any moneys from the sale of the larger block.
SML denied that the plaintiff has any interest in the land which would give him priority over his (SML's) interest. SML denied that the plaintiff was entitled to any relief. SML asserted that he had an equitable set-off against any claim by the plaintiff.
PRL, by his cross-claim repeated the facts and circumstances set out in his Defence to the Further Amended Statement of Claim the substance of which has been mentioned earlier and sought these declarations against the plaintiff (the cross-defendant). (a) that the cross-defendant is estopped from pursuing any claim arising out of a cause of action relating to a partnership between the cross-claimant and the cross-defendant (b) that Pioneer is solely legally and beneficially entitled to the land (c) that the cross-claimant (PRL) and the cross-defendant (the plaintiff) are the sole shareholders of Pioneer.
SML has lodged a second cross-claim nominating the plaintiff as first cross-defendant and Pioneer as the second cross-defendant, seeking the following declarations: 1. "…that pursuant to an agreement between the First ('Kardiasmenos') and Second ('Pioneer') Cross-Defendants to the Second Cross claim and the Cross-claimant to the Second Cross-claim ('SML') dated 8 August 2001, SML advanced and Kardiosmenos and Pioneer acknowledged receipt of and accepted the sum of $600,000being an advance for development finance to develop the land comprised in Lot 10/DP700704 and Lot 42/DP700701 at Ambervale in the state of New South Wales on the terms and conditions set out in the said agreement." 2. "… that the said advance was secured by the deposit of the title deeds for the said land by way of mortgage on deposit." 3. "… that in the circumstances, SML has and/or had an equitable interest in the said land giving rise to a caveatable interest." 4. "… that SML has a caveatable interest over so much of the said land that remains unsold." 5. "… that SML's interest is in priority to any interest of Kardiasmenos or Pioneer." 6. "… that, pursuant to the agreement, Pioneer owes SML the sum of $900,000 together with accrued interest less any amount received to date by SML on Pioneer's behalf ('the mortgage debt')." 7. "… that the mortgage debt is secured over so much of the land as remains unsold by way of an equitable mortgage by deposit of title deeds." The Background And Early Meetings
As at March 2001 the plaintiff owned four properties. He lived at 78 Batt Street, Sefton, which he acquired in about 1977. It was unencumbered. 31 Lackey Street, Summer Hill, an investment property was acquired in about 1983 and was also unencumbered. 80 Batt Street, acquired in about 2001 or a little earlier, was an investment property. PRL assisted the plaintiff by doing the bidding on the plaintiff's instructions. This property was and is subject to a mortgage which was obtained to finance the purchase. The fourth property, 92 Columbine Avenue, Punchbowl, was transferred to the plaintiff as a result of a divorce settlement. It was unencumbered. PRL had known the plaintiff since about 1985, being former brothers-in-law. Despite divorces they had remained friends and business associates.
In about either late 2000 or early 2001 MV approached PRL with a development proposal for the purchase of land at Ambervale, the construction of townhouses and villas and their subsequent sale. MV said that he asked PRL if he had any source of finance., PRL replied that he had a good source of funds.
About late February-early March 2001 PRL introduced MV to the plaintiff at his home. At one stage PRL and MV had a discussion in which the plaintiff was not involved. He asserted that PRL had used the plaintiff's home for business meetings in the past and that he (the plaintiff) was happy for PRL to use his home in this way. On an occasion in early March 2001, PRL, with his family, arrived at the plaintiff's home. PRL: said, "I have Michael the builder coming to discuss some business with me". PRL and the plaintiff talked socially pending MV's arrival. The plaintiff stated that a conversation to the following effect followed: MV : (To PRL) How are we going with the loan? Are we going to get some money to do the project? PRL: I am going to get some money but only if Nick is involved in it. I want Nick to be in the project and I want us to split the profits equally in three ways. MV: That will be fine. 59. The plaintiff stated that this was a complete surprise but that he was immediately interested. The plaintiff stated that the conversation continued: MV: It's a great project, Nick. There's a lot of money to be made here.. Pltf: How much money is to be made. MV: (after a pause for consideration by himself and PRL): We're going to do X buildings (the plaintiff's best recollection was 26 but he was not sure), it's going to cost us about $80,000 to do each building, we'll buy the land for $375,000 and sell for $4 million and so we'll make about $1.2 million after the other expenses. PRL: I estimate a bit less than that but I think $1 million would be quite easily achieved. We will split the profits three ways. Each of us stand to make at least $350,000 profit. MV: Sure. Pltf: How long is it going to take to be finished? MV: It can be done in six months. PRL: Let's call it one year. In one year we'll have $1-1.2 million profit, Michael. MV: We have to move quickly. I've got the contracts here and they're at a really good price. Pltf How much? MV: $375,000. 60. The plaintiff said that MV handed him the front page of two contracts. The plaintiff noted that they involved vacant land at Ambervale in two parcels. The conversation continued: MV: We need to do this with two companies, one to buy the land and one to do the construction. Pltf: Why do you want to do it that way? 61. The plaintiff said that MV gave a lengthy explanation for proposing two companies, which he did not fully understand. The plaintiff said that he understood the effect to be that if the construction company went broke then the other company could still hold the land and that during MV's explanation PRL did not have much to say. MV said, amongst other things, "I've had so much trouble with construction in the past. So many things can go wrong. This is the safe way to do it."
PRL: We'll buy the land ourselves Pltf: How are we going to do that? PRL: I'll ring Mary tomorrow at HSBC and we'll apply for a loan. We'll have to use our own personal property as security for the loan and that way the land will have a clear title so it can be used to get the construction finance. 63. In about mid-April 2001 by an arrangement made by PRL, he and the plaintiff saw Mary Mak, at the HSBC. She was an Account Manager, Personal Financial Services. PRL and the plaintiff in each other's presence, filled out individual applications for finance. At her request the plaintiff supplied her with a number of documents.
Shortly thereafter Ms Mak telephoned the plaintiff and advised that HSBC was prepared to lend him a maximum of $200,000 subject to a satisfactory valuation on the Lackey Street property and the plaintiff paying the Bank $1100 for arranging the valuation. Within a few minutes of that call Ms Mak telephoned PRL who reported to the plaintiff "She's not going to give me any money. They've rejected my application." PRL said that he would check with BMC (a mortgage broker for whom PRL had once worked as an agent) and see if he could "get some more money on this house" (that is 78 Batt Street).
The circumstances surrounding the obtaining of the loan of $200,000 from Perpetual Trustees Victoria Ltd raise serious queries as to the actions of PRL. The plaintiff did not recall completing any application for finance to BMC. He believes that the application was completed by PRL. There is an application bearing date 20 April 2001, purporting to be signed by the plaintiff, to BMC which the plaintiff said that he had not seen until late in 2002 when he contacted BMC and an officer of BMC said he would send the plaintiff a copy of his original application and did so to assist the plaintiff with a further application which he wished to make.
It is possible that PRL had the plaintiff sign the original application without him appreciating what was involved at the time. By letter bearing date 23 April 2001 and addressed to the plaintiff at 78 Batt Street, Sefton, BMC Mortgage Corporation Pty Limited thanked him for completing his application for a secured loan facility and confirmed its intention to arrange a loan for him for $200,000. He was asked to sign an acknowledgment, initial a copy of the letter and attached schedule (setting out the terms) and return them along with his cheque for $850, the application fee.
The plaintiff said that about 23 April 2001 PRL came to his house and requested a cheque for $850 for the application fee for BMC for the loan. PRL made out the cheque drawn on the plaintiff's account with the St George Bank and the plaintiff signed it. The cheque bears date 23 April 2001 as does the receipt issued by BMC for $850.
The plaintiff recalled initialling a copy of the letter from BMC and giving it to PRL. That may have been on the day he signed the cheque. If the dates on the document are a reliable guide it would seem that about 23 April 2001 PRL handed or produced to the plaintiff the letter of 23 April 2001 from BMC and had the plaintiff initial a copy, sign a cheque for $850 and hand them to him and that PRL took them to BMC.
The plaintiff said that he next heard from PRL on 2 May 2001 when he telephoned and said that he had the approval from BMC for the plaintiff for $200,000. On 3 May 2001 the plaintiff received by post a letter from BMC of 2 May 2001 that a satisfactory valuation report had been received for 78 Batt Street, The plaintiff was somewhat surprised to receive the approval without having filled out any documents or having had an interview. However, he was happy to accept the loan.
In the meantime there had been efforts to acquire the properties. About 19 March 2001 PRL telephoned the plaintiff and advised "Michael's given me the company. It's called Pioneer Management Pty Limited. I'm now on it as a director" and "I'm very pleased we now have a company to use in order to go ahead with the project."
The plaintiff said that on 23 April 2001 PRL advised that MV had negotiated a new price of $310,000 for both blocks and arranged a meeting with the real estate agent for the following day. MV had advised that the vendor required a $1500 goodwill deposit straight away. The plaintiff advocated going ahead.
Later that evening MV telephoned the plaintiff and verified that he was going to the meeting. On 24 April 2001 the plaintiff and PRL went to the estate agent's office at Kellyville As soon as MV arrived they went into the agent's office and MV introduced PRL and the plaintiff, describing them "as my two partners". After some discussion about the proposed development, it was noted that MV was going to do the building. The plaintiff directed the agent to put the name of Pioneer Management Pty Ltd as the purchaser on the contracts for sale and gave the agent the plaintiff's personal cheque for $1500, drawn on his St George personal cheque account, to secure the land. Later that day a further meeting was held at MV's home. A conversation to this effect took place: MV: How are we going with the finance? Pltf: Everything seems to be okay. There's not going to be any problem with it. MV: So you've got the construction finance ready? Pltf: No that's Peter's job, I'm only talking about buying the properties. MV: (specifically to Pltf but in PRL's presence) Any money that you put in, you get out first, with a couple of percent on top.
On leaving MV's house the plaintiff told PRL that he (the plaintiff) needed to be a director of Pioneer because he was putting all the money in. PRL agreed. About 19 May 2001 PRL advised that MV also wanted the plaintiff to be a director of Pioneer. The forms were signed on 21 May 2001 and the plaintiff became a director.
The plaintiff did not believe that he had lent money to Pioneer but expected to recover his money from the sale of the townhouses.
About 1 June 2001 MV dropped into the plaintiff's letterbox a draft agreement which he wanted the plaintiff and PRL to sign. That recapitulated the original arrangement with some variations, but it provided for extensive remuneration for MV. Neither PRL nor the plaintiff (acting at least partly on PRL's advice) signed it. The matter kept on being postponed.
The plaintiff said that on 14 June 2001 he and MV lodged preliminary development applications with Campbelltown Council. On 12 July 2001 the Council requested further information and on 13 July 2001 the plaintiff and MV met with the Council's Town Planner.
By FAX of 17 July 2001 the Council advised of its preliminary assessment of the proposed development. Some of the issues raised appear to be substantial. MV telephoned the plaintiff, advised of the faxes and arranged to come to the plaintiff's house from where they would proceed to the Campbelltown Council together. MV said that he provided the Council with more information in response to its queries.
On arriving at the plaintiff's house MV handed the plaintiff a document and said that this was what they agreed in March 2001. The plaintiff read the document and signed it. PRL never signed it. Broadly, this document followed the terms of the agreement alleged by the plaintiff and set out earlier. PRL did not attend any of the Council meetings and told the plaintiff that he (PRL) could not work with MV and that the plaintiff would have to look after satisfying the Council's requirements. The plaintiff said that throughout June and July MV regularly raised with him the question of obtaining construction finance, there existing some friction between MV and PRL.
The plaintiff stated that following the purchase of the properties PRL made no attempts of which the plaintiff was aware to obtain finance. In July 2001 on an occasion when PRL was visiting the plaintiff's home he mentioned MV's view they had to hurry up with the finance. PRL replied to tell MV to look after the Council and that he (PRL) would worry about the construction finance. The plaintiff said that he raised the topic with PRL in July 2001 who responded, "We'll use our own money to build. I'll get money from overseas." The plaintiff said that as at the time PRL was travelling extensively overseas, he (the plaintiff) believed that PRL was capable of raising such funds.
In cross-examination by counsel for PRL, the plaintiff insisted that the land was to remain in the name of Pioneer, which was to develop the land.
As to Ocean Park Financial Holdings the plaintiff said that PRL asked him to assist PRL and Count Albert Shih Chiang to establish a company in Australia which would be a vehicle for overseas investors wishing to invest in property in Australia. The plaintiff said that although he did not know much about what was proposed he thought that he had nothing to lose and that as a shareholder he might make some money if the company made some money. On that basis he agreed to become a director and shareholder and did so in June 2000 as did PRL.
Count Albert, who was a distant relation of PRL became a director in October 2000. There were four directors of the company, namely Count Albert Chiang and Phoebe Yuen, his de facto wife, both of whom lived overseas, PRL and himself. Count Albert was the Chairman. Phoebe Yuen became a director in March 2001. Count Albert gave a Singapore address and Phoebe Yuen one in Hong Kong. PRL was the company secretary. He supplied the address of 78 Batt Street, Sefton, the home of the plaintiff.
Between the company's incorporation and 9 August 2001 the plaintiff had not been called upon to do anything except to attend a few meetings about proposals which did not eventuate.
The plaintiff found out long after he joined Ocean Park, probably later in 2001, that PRL had opened an account in the company's name without consulting him .
The plaintiff said he was told that PRL was using the Ocean Park account to transact his business. The plaintiff stated that he told PRL that he should not be using this account. PRL told the plaintiff that there was no money in the account and stopped using the company's bank account.
The evidence reveals that PRL and Count Albert used Ocean Park as the vehicle to do their bidding and that the plaintiff was left on the sidelines.
The plaintiff accepted that MV suggested that one way of proceeding was to have one company purchase the land, and another company develop it. MV said that if one company ran into trouble the other one would not necessarily be in trouble. The plaintiff said that he did not pay too much attention to this discussion as he did not understand what MV was talking about. The plaintiff said that in the course of the conversation no mention was made of Ocean Park and that it was never mentioned in relation to the project. MV was never involved in or with Ocean Park.
The plaintiff said that the proposal to have one company own the land and another do the development was never agreed. It was his understanding that Pioneer was going to do the lot. The plaintiff said that the agreement was that MV would provide the company and that they would use the company for everything. The plaintiff agreed that for this to happen Pioneer would need to have a bank account in the future. It did not have a bank account because it had no money. The plaintiff did not want a second company. He agreed to the land being purchased in the name of one company and that company doing the development.
MV deposed to PRL in March 2001 introducing him to the plaintiff at the latter's home and continued: "We made a simple verbal agreement that I would introduce the property for the benefit of the partnership being 1. Myself 2. Nick Kardiasmenos and 3. Peter Lee and that the primary roles for Peter was to arrange financial for Stage 1 to purchase the properties lot 10 and lot 42 Stage 2 to provide construction finance for the project Nick Kardiasmenos was to provide TOP UP security The proceeds would be distributed equally after all loan costs would be paid."
At the urging of PRL there was a departure from these arrangements in that the purchase moneys for the properties was provided solely out of the funds provided by the plaintiff from mortgage facilities secured over his two properties. This left the Ambervale properties unencumbered so that finance for the construction of the project could more readily be obtained on the security of these properties.
PRL confirmed that there was an initial approach by MV to him with a development proposal as to land at Campbelltown (Ambervale) and that he introduced MV to the plaintiff as he owned land and might be interested. PRL said that he did not have any money himself.
PRL deposed to a meeting shortly after inspection of the land in which MV told him and the plaintiff that he could obtain the land for $320,000. PRL said that shortly afterwards he became aware that MV was an undischarged bankrupt. [MV became bankrupt about 20 May 1999. His bankruptcy ended on 17 July 2002].
In his affidavit of 11 November 2004 PRL said that he and the plaintiff discussed various options for the acquisition and development of the land. PRL stated that ultimately MV proposed that the plaintiff and PRL should acquire a shelf company.
In his oral evidence PRL stated that he told the plaintiff that MV had a shelf company and was prepared to use that company to acquire the properties.
Difficulty was experienced with PRL when giving evidence. He tended to give what he believed were the conclusions reached in various conversations rather than tell the Court what was said. Some of his answers were unresponsive to the questions asked. At times he preferred not to answer the question but to tell the Court what he wished.
PRL said that at an early meeting the plaintiff stated that if PRL could not get the finance to purchase the property he was willing to provide the security (to obtain the money) for the purchase of the land upon the condition that Pioneer owned the property. PRL said that he was to be responsible for sourcing the development finance but no other finance. That does not accord with the initial agreement reached with the plaintiff and MV.
PRL said that the plaintiff stated that he would try and secure $400,000 on 31 Lackey Street to finance the purchase of the land. PRL said that there was no discussion about what his contribution would be and no discussion about development finance at that stage (April 2001). The attention was on having the ability to purchase the land.
According to PRL, subsequently he and the plaintiff discussed various means of obtaining development finance and he (PRL) said that he would try to source development funds from overseas as Count Albert Chiang was capable of helping them out with finance and was a very capable man.
In cross-examination by MV, PRL gave a version of events substantially similar to that given by the plaintiff of the first part of the first meeting between the plaintiff, himself and MV although at that stage the purchase price of the land had not been determined. PRL said that after returning from the inspection of the land both he and the plaintiff indicated that they were interested in proceeding with the development, and that MV said that he had a shelf company he could provide for the development of the land. MV said that he could put in the development application and do the building. PRL said that he stated that he and the plaintiff would do their part in promoting the development. PRL said that his role would be to source finance and to promote the selling of the units when completed and that the plaintiff's role would be to assist in the search for capital to purchase the land.
PRL said that it was very clear when the meeting concluded that the project and MV's part in it was dependent on MV's ability to procure development approval and finish the construction of the project. MV was to be paid accordingly a percentage of profit. PRL was to organise finance and to attend to resale (of the units). There was a need to know where the full purchase price of the land was to be obtained. PRL confirmed that MV's role was on the construction side and the application to the Council. PRL agreed that the plaintiff complied with his obligations under the agreement by providing the security and helping with the finance.
PRL insisted that MV still had to obtain development approval to discharge his obligations, that he (PRL) had sourced $600,000 from SML and that was the first stage of the finance which he had organised. The overall construction cost of the buildings was about $2.5 million. I understood PRL to be asserting that financing was contingent on development approval being obtained. As Pioneer did not have a bank account, $600,000 was deposited into the account of Ocean Park.
In answer to counsel for the plaintiff in cross-examination PRL stated that Count Albert Chiang arranged for the plaintiff and PRL to give Count Albert Chiang a power of attorney over Ocean Park. A Corporate Resolution of Ocean Park Financial Holdings Pty Limited signed by Count Albert Chiang, PRL and the plaintiff on 1 January 2001 provided that the Count Albert Chiang: "is authorised and empowered for on and behalf (sic) of this Corporation to commit cash funds for the purpose of investing the said amount in bank and secured Private Placements for profit. B. Said officer or his legally empowered representative is hereby granted the fullest authority (to) act on behalf of the Corporation with respect to said Private Placement including authority … for 1. To fully represent this Corporation and grant Powers of Attorney to carry out the Private Placement … 2. To give … instructions to the holder of the Power of Attorney and to Banks with respect to the matter referred to above …" 103. The Corporate Resolution conferred wide-ranging powers on Count Albert Chiang. Attached to that resolution was a document on the letterhead of Ocean Park Financial Holdings Pty Ltd headed Power of Attorney executed under the seal of that company and signed by PRL and the plaintiff as directors. By that document the company appointed and authorised Count Albert S C Chiang; "for and on behalf of our name, we do hereby appoint and grant Power of Attorney to Count Albert S. C. Chiang and do thereupon constitute and appoint said individual as Our Attorney-in-fact and our Trustee".
Wide powers were conferred on the Attorney In Fact. The document further provided, amongst other things: "Investment profits from all transactions should be transferred to the Bank Account provided by Count Albert S.C. Chiang in his name, and for its distributions …"
When PRL swore his affidavit of 15 November 2002 he described the arrangement between himself, the plaintiff and MV as a partnership. (He now contends that this is an incorrect description of their relationship). He also said that he understood that there was an arrangement between the three of them. PRL agreed that the plaintiff paid for both the properties and the expenses associated with the purchase.
PRL maintained he had played his part by obtaining $600,000 from SML and that this sum was for the Ambervale development
Over the time the plaintiff had known PRL, he had often spoken of his friend SML. About early August 2001 PRL telephoned the plaintiff and advised that SML had found some available money in Malaysia and that he was going to send SML the contract. PRL added, "He's got $500,000 but I asked him to push for more." The plaintiff said that the next morning PRL telephoned and advised that SML was here, having arrived that morning, and that he had the contract with him. When the plaintiff asked PRL what was in the contract PRL replied in a raised voice, "Do you want me to read all this over the phone?"
The plaintiff said that about an hour later PRL, SML and Johnathong Song (whom he had not previously met) came to his house and that on being introduced to Jonathong, PRL said, "Get ready - we're going to Parramatta". The plaintiff asked PRL what was in the contract and that PRL took a contract document from SML's hands and gave it to him saying, "Don't take too long, we've got to go soon".
The plaintiff started reading the contract. SML said, "Can I have your driver's licence? I need to make a copy of it. Yours too Peter." Both men handed over their licences. SML went over to the plaintiff's computer. PRL said to the plaintiff, "he (SML) needs to make a copy of the licences for the people in Malaysia. Can I also have the title deeds? They want a copy of them as well."
The plaintiff said that he handed the title deeds to PRL and that this was the last time he had them in his possession. He continued to read the contract. SML asked him for an ink cartridge for the computer but when the plaintiff did not know where it was SML used his.
As the plaintiff resumed reading the contract, he noticed SML printing copies of the driving licences of the plaintiff and PRL. SML handed a number of copies of a document with copies of the driver's licences at the top and signature blocks for PRL, the plaintiff and SML. Between the driver's licences and the signature blocks there was no writing. SML said, "Put your signature here" (indicating the place). The plaintiff said that he signed the documents thinking that he was merely acknowledging that it was a copy of his driver's licence.
SML's solicitors produced seven copy documents apparently bearing his signature. The plaintiff asserted that the table and writing appearing between his driver's licence and the signatures were not on the documents which he signed and that he has never signed documents in the form produced. On the first of the documents there are, at the top of the page photocopies of the driving licences of the plaintiff and PRL. Next these words appear: "We the undersigned and identities as shown above acknowledged that we have received the sum of Australian dollar: Six Hundred Thousand Only (A$600,000.00) as per the payment voucher No SL/PM 001-006 dated 9/8/2001."
Underneath these words are: ( Pltf's signature ) ( PRL's signature ) Acknowledged By Acknowledged By Nick Kardiasmos (sic) Robert Lee DL No 7912 SN (NSW) DL No 4332 W.J (NSW) 114. The name (and apparent signature) of "Erin Bleasdale", International Officer appear as witness. Beside Mr Bleasdale's signature is the stamp of the National Australia Bank Limited, Marrickville BBC NSW, No 082-357.
No Particulars Amount 1 Friendly Loan Using Lot 10 AUD 100,00.00 and Lot 42 Whitechapel Close Ambervale NSW 2560 as collateral
Amount in words: AU$ One Hundred Thousand Only <Cheque No Cash (SML's signature) (Pltff's signature) (PRL's signature) Approved By Acknowledged By Acknowledged By
Sai Meng Lee Nick Kardiasmos (sic) Robert Lee DL No 9929AH (NSW) DL No 7912 SN (NSW) DLNo4332WJ (NSW) 116. The plaintiff said that from his brief reading of the contract he noticed that Pioneer was the borrower, the loan was for $600,000 for the purpose of construction, he was to resign as a director immediately and SML was to take his place. PRL was to resign as a director in three months time. The plaintiff noticed that the land would be returned to himself and PRL once the loan was repaid. The plaintiff said that he did not understand a lot of things in the contract. He trusted PRL and as PRL had spoken highly of SML he (the plaintiff) was not wary of him. At SML's request the plaintiff returned the contract to SML. PRL, SML and the plaintiff then travelled to Parramatta and went to the Court house. There a Justice of the Peace witnessed PRL and the plaintiff sign the agreement as directors of Pioneer, its Common Seal being affixed and SML sign it as lender.
Q. But you couldn't know you were going to get your money back? A. Of course I know I was going to get my money back.
Q. How? A. If you develop you divide the land.
Q. What if the development falls over? A. How will it fall over?
Q. If the same company that owned the land borrowed the money for the development finance and something went wrong with the building and the development financier called in the loan, you wouldn't get your money back, would you? A. I didn't see that happening.
Q. No, you didn't think of it, did you? A. I didn't see that happening." 147. When cross-examined about the telegraphic transfer forms the plaintiff said that PRL filled out such a form and brought it to him to sign. The bank officer did not accept that form and typed out another one which only PRL signed. The plaintiff said he had a glance at the forms and saw the name of Ocean Park. He did not recall whether the amount of money was specified on the form.
The plaintiff said that he did not see the document transferring $600,000 on 9 August 2001 nor the one transferring money to Hong Kong (to Count Albert Chiang).
The plaintiff said that he did not speak to either PRL or SML about changing the directors of Pioneer because they were selling his land and this seemed to be one way to stop them. The plaintiff agreed that the change of directors had been reversed, PRL had filed some documents.
The plaintiff agreed that he had found out that the smaller block had been sold. The plaintiff said that he did not agree to lift the caveat so that Ngoc Ly could buy the smaller block. He reiterated the explanation earlier summarised as to why he withdrew the caveat over the smaller block.
The plaintiff agreed that when he lodged the caveat he inserted these particulars under the sub-heading Estate or Interest Claimed: "The Properti (sic) Were Purchased With The Proceeds of A Loan Wich (sic) Was Taken Out With My Own Property Being Used as Security."
The plaintiff said that he meant that "the properties were purchased with the proceeds of the land after I go the land, when I got to security my own property to buy them." As recorded in the transcript this answer is hard to follow.
The plaintiff said that when he agreed to withdraw the caveat he believed that they (PRL and SML) "were capable of bringing more financing." He thought that up to that point they had contributed nothing.
The plaintiff agreed that the reason he was prepared to resign as a director of Pioneer and allow SML to become a director in his place was that he believed that loan funds would be advanced for the development of the properties.
Counsel for PRL and SML pressed the plaintiff to agree that he had signed the form of resignation as a director on 9 August 2001 after he had seen $600,000 advanced but the plaintiff was adamant that he had signed the document at his home on 8 August 2001 after returning from Parramatta. He had noted that the form of resignation was dated 9 August 2001.
In cross-examination by counsel for PRL and SML the plaintiff asserted that it was agreed between the plaintiff, PRL and himself that Pioneer would own the land. The development application was submitted to the Council on behalf of Pioneer.
In cross-examination by counsel for the plaintiff MV said that none of the plaintiff, PRL and himself ever nominated a company to be in charge of the development of the property at Ambervale. MV said that he was not consulted as to whether Pioneer should enter into the agreement of 8 August 2001. Throughout 2001 and 2002 MV (and the plaintiff) were hoping the development would continue.
PRL said that he set about enquiries to secure finance to enable the development of the land. PRL said that his efforts required him to travel overseas and some of those trips were financed by the plaintiff. PRL said that he eventually managed to secure an agreement from SML to inject $500,000 which later became $600,000, for development finance. PRL said that he was keen to raise as much money as possible to maximise the profit on the project and that it was his intention to use SML's contribution as "seed capital" to raise further finance.
SML required the execution of the loan agreement of 8 August 2001. PRL said that after execution of that agreement by Pioneer SML paid over $600,000 in cash at the Marrickville branch of the National Australia Bank on 9 August 2001. PRL said that an acknowledgment of the receipt of those funds was executed by him and the plaintiff in the presence of Erin Bleasdale, an officer of that bank. PRL stated that as Pioneer did not have a bank account the funds were deposited into Ocean Park's account and from there telegraphically transferred. At SML's request the title deeds to the two parcels of land were provided to him by the plaintiff. PRL said that the $600,000 had not been repaid although the smaller block had been sold with the plaintiff withdrawing the caveat over it. PRL denied that he said to the plaintiff the matters attributed to him by the plaintiff as having been said on 10 September 2002 as to the smaller block and withdrawal of the caveat (and summarised earlier) and asserted that he had no power to bind SML.
In para 11 of his affidavit of 15 November 2002 PRL stated that Council approval would not be forthcoming for the development. PRL said that he no longer holds that view as he now held hopes that the development application could be modified so as to meet Council's requirements and still deliver a project. He was also of the belief based on his knowledge of the market, the increase in Sydney property prices, the pressures on outlying areas of Sydney for housing development and lending conditions generally that the land has increased considerably in value since it was purchased.
PRL stated that some of the loans the plaintiff alleged and for which he has recovered judgment related to overseas trips for which he advanced money to PRL when the latter was short of funds. PRL asserted that those trips were taken in obtaining or attempting to obtain finance for the joint venture and that there never was a partnership intended between the plaintiff, him and MV. PRL continued: "To the extent that my affidavit of 15 November 2002 mentions a partnership, I say that affidavit was drafted for me by my then legal adviser and the word partnership was not being used by me in a technical legal sense. I do not understand involvement in a company to be the same as a partnership."
In cross-examination by MV, PRL agreed that on 5 August 2001 he had a conversation with SML in which the question was canvassed as to what was a fair return to SML for lending or finding a loan of $500,000 for three months. SML replied that he wanted 1½ times what he lent plus some additional amount if things went smoothly and the development took off. SML said that he would take the Ambervale property as collateral, pay in cash and see if he could find an extra $100,000. SML also said that he prepared an agreement based on one a Malaysian lawyer had previously prepared.
PRL said that the $900,000 to be paid to SML in three months was going to come from Count Albert Chiang. PRL said "We believed that we should invest this $600,000 in return for the $2.5 million full development fund for Campbelltown."
When PRL was asked what was the purpose of the transaction of 8 and 9 August 2001 he replied that MV had not made any attempt to obtain development approval. However, he (PRL) had to carry out his duty to obtain finance. The plaintiff and he knew that "$600,000 was for initial money to be sent to the Count to get a development approval for $2.5 million for the Campbelltown block of land."
PRL described the arrangement with Count Albert Chiang thus: "… we gave him an initial amount of money in return for him to get the full amount that is required for our purposes in Australia …".
PRL said that it was correct to say that he and the plaintiff were entering into a joint venture as shareholders of the corporate entity that owned the land and that MV was not part of the joint venture. He was to be engaged as the builder if he was able to perform. PRL said that he and the plaintiff as directors of Pioneer were under no obligation to consult with MV. In accordance with his understanding with the plaintiff MV was never allowed into any discussions about financing. PRL did not notify MV that Pioneer was going to give title deeds as security to SML. Nor was MV appraised of the agreement between Pioneer and SML or any of the dealings which occurred between Pioneer and SML.
PRL asserted that Pioneer received $600,000 from SML but agreed that that sum was paid into the bank account of, or went to Ocean Park. None of the $600,000 had been used to pay for any Council application costs or development costs as to the Ambervale land.
PRL was cross-examined as to the purported copy agreement of 8 August 2001 annexed to his affidavit of 15 November 2002. That copy did not contain the cover sheet and the first page. The agreement annexed referred to "the land" and the lender being deemed to have taken control over the land. As earlier mentioned, cl 3.1 of the agreement (on p 3 thereto) provides: "The parties hereto shall agreed (sic) to involve in the Project Development or any other development and guarantee the Lender (SML) the Bonus Amount within two years from this agreement …".
Page 1 of the agreement defines the Project Development as meaning "the development of Macquarie Tower or Cinema Village whichever apply" and the Bonus Amount as meaning AUD2.5 million. The affidavit was filed after the plaintiff had obtained urgent interlocutory relief on 13 November 2002 extending the plaintiff's caveat 8901807 over Lot 10 (the larger block) until further order of the Court. The matter was listed before a Registrar on 18 November 2002 and thereafter from time to time.
PRL denied that he had endeavoured to mislead by omitting the cover sheet and page 1, that is, he denied that he was trying to conceal that the true purpose of the payment of $600,000 was not to advance the Campbelltown development but the development of Macquarie Tower or Cinema Village and that Pioneer was providing unencumbered collateral security for a loan essentially for these other developments from which substantial profits were anticipated PRL said that the omission of the coversheet and page 1 was accidental. I doubt if this was so. PRL struck me as devious, deceitful and calculating. He was adept at taking advantage of the trust which the plaintiff placed in him and manipulating the plaintiff to his (PRL's) own advantage.
Examples of the manipulation included PRL arranging to collect one-third of the profits of the venture while putting no money of his own into the venture, but just undertaking to raise construction finance, the events of 8 and 9 August 2001, the reasons advanced by PRL for the plaintiff withdrawing his caveat over the smaller block and PRL, borrowing money from the plaintiff for expenses he was supposed to meet, agreeing to pay these moneys back and then suggesting that they should be paid as expenses of the partnership/joint venture. In effect that meant they would be paid by the plaintiff. PRL treated the plaintiff as a useful financial resource to be utilized for funds at his (PRL's) convenience.
PRL agreed that Ocean Park had two accounts with the National Australia Bank; the business cheque account and the US dollar account. The $600,000 produced by SML was transferred to the US dollar account of Ocean Park.
PRL agreed that the transfer of USD204,000 on 9 August 2001 to the account of Count Albert Chiang was part of the sum of $AUD600,000 provided by SML. PRL denied that Count Albert Chiang was not receiving those funds for anything in respect of the development of the Ambervale property. PRL said that Count Albert "received those funds knowing those were moneys deposit (sic) for Ambervale development loan." PRL agreed that there was no evidence in these proceedings that the transfer of $US204,000 to the Count was for any purpose associated with the Ambervale development. PRL also agreed that there was nothing to suggest in the statements he had made that $US204,000 sent to Count Albert Chiang had anything to do with the Ambervale development.
It should also be noted that on 9 August 2001 on the signed authorisation of PRL, USD 45,000 was sent by telegraphic transfer from the account of Ocean Park to Count Albert Chiang, A/C 0882603010, Overseas Chinese Banking Corporation, 111 Cannon Street, London.
By facsimile letter of 5 August 2001 addressed to PRL, Ocean Park Count Albert Chiang wrote:
"After our last telephone conversation, I phoned the Trustee concerning the possibility for us to 'ride on' their SLC this month. I told them that there is a possibility that we can get the full US$1 million soon, so they suggested that if I am 100% confident this could be done and the sum of US$250,000 could be obtained before 11th August morning, then they will include us in the SLC and give us time to get the funds of US$1 million before 25th August 2001.
What this means is that we still have a chance, so you do not need to rush on Tuesday, but please study the various options with Nick carefully to send me the following:-
US$205,000 to reach me in Hong Kong by 11 August morning (Saturday) US$45,000 to reach me in London by 11th August 2001 $US$300,000 to reach me in Hong Kong by 25th August 2001 US$200,000 to reach me in London by 25th August 2001. For your information, there is now a chance that my friends might pull out of their $US300,000, so in case they do this, then we will have to look for a total of US$1 million before 25 August 2001. They have waited rather a long time for us, but I am trying to convince them that we are definitely going through this month. This is the latest report so please do your best. Kindly phone me after you have read this fax." 176. PRL agreed that that letter required him to send certain amounts of money to reach Count Albert by various dates and that the purpose of that money was "Ride on", "SLC this month". The need was to get funding to pass on to some trustee by 11 August 2001.
There is correspondence between the amounts sent by telegraphic transfer on 9 August 2004 (US$204,000 and US$45,000), with those mentioned in the letter, namely US$205,000 to Hong Kong by 11 August morning and US$45,000 to London by 11 August 2001.
On 16 August 2001 USD48,000 was transferred from the US dollar account of Ocean Park into its business cheque account. The equivalent amount in Australian dollars was $89,786.76. PRL agreed that on 17 August 2001 he caused Ocean Park to pay $11,000 off his own personal Mastercard account. The sum of USD48,000 came from AUD600,000 provided by SML. PRL said that SML gave AUD600,000 to Pioneer.
PRL said that his Mastercard account was used for travelling purposes including buying aeroplane tickets and not (mainly) for his personal expenses. The one-page statement produced for the period 21 July 2001 to 20 August 2001 does not bear this out. There is no satisfactory documentary evidence as to how the balance of $10,290 from the previous statement is composed. PRL estimated that the majority of the expenses, 80 to 90 per cent incurred on his National Gold Mastercard account were business expenses. PRL produced a sheet from a notebook which was far from convincing. It did not help to establish that the expenses listed were incurred as to the Ambervale development.
The position which emerges is that Count Albert S C Chiang ended up receiving in his overseas bank accounts the bulk of the money (USD 204,000 and USD 45,000) provided by SML ostensibly to Pioneer but deposited in the USD account of Ocean Park and SML ended up with the title deeds to the Ambervale property. The Ambervale property had not been paid for by SML, but out of moneys raised by the plaintiff on his personal properties. According to PRL, he and the plaintiff agreed not to disclose this latter matter to SML.
It was evident that Count Albert Chiang had provided no security for the money (USD 249,000) he had received at the direction of PRL via Ocean Park and SML. PRL claimed that Count Albert Chiang knew that the money sent to him was "to be returned for $2.5 million for development of Campbelltown property." PRL also said, "The Count's duty is to receive money for lending, obtaining the money that he will for Ocean Park development of Campbelltown land." This was a specious answer.
PRL agreed that on his case the profits of the development were to be divided amongst Pioneer's shareholders. As at the hearing PRL was the only shareholder. PRL agreed that as at November 2002 he and the plaintiff each held one share in Pioneer. The Annual Return of Pioneer declared on 11 April 2003 and signed by PRL revealed that PRL had crossed out the plaintiff's holding of one share in Pioneer and changed his (PRL's)own shareholding from one to two. PRL agreed that he did not pay the plaintiff for his share or give him any other consideration. PRL claimed that the plaintiff had surrendered his share at a mediation. The settlement did not eventuate.
PRL said that the plaintiff was aware that all Pioneer's money was invested with Count Albert Chiang. PRL further said that the plaintiff's money will be returned to him "when we have successfully finished the development project. It will still be returned to him" and "He knew all along we were waiting for the money from the Count."
I do not accept this evidence of PRL. The plaintiff was not aware that all Pioneer's money was invested with Count Albert. Nor do I believe that the plaintiff's money will be returned to him. I do not accept that the plaintiff knew all along that they were waiting for the money from the Count. PRL and Count Albert were engaged in a project of their own, the details of which have not been disclosed to the Court.
In re-examination PRL, in answer to the question how was he going to use the money sent to Count Albert Chiang as seed capital, gave this explanation: "Myself as a finance consultant, if we need $2,5 million we need to have a deposit of at least 10 per cent or 20 per cent in order to raise $2.5 million. We have all along needed seed capital to kick off, to obtain development funds for Campbelltown. Very clearly my partner and I, we understood we needed to send money to the Count for him for whatever money he raised to come back quickly to us in order to proceed." 186. I do not accept that explanation. PRL caused the money to be remitted to Count Albert for the purposes of Count Albert and PRL. It had nothing to do with the Ambervale development. PRL was using the plaintiff and the money for his own purposes. However, I do accept PRL's use of the word "partner" when referring to the plaintiff.
SML said that the plaintiff arrived about an hour later and that PRL showed him a copy of the agreement which he read through for a period. In response to questions from the plaintiff SML said that his legal adviser in Malaysia drafted the agreement.
SML said that the plaintiff told PRL that he must stay in the company so that the land would not be sold within the next three months. PRL agreed, stating that he would stay in the company and only resign if they could not perform.
SML said that PRL affixed the common seal to the agreement and that he (SML) insisted that they go to the Court House to have the agreement witnessed and then go to the Stamp Duty Office to stamp the agreement. They went to the Parramatta Court House where a Justice of the Peace witnessed their signatures. At SML's direction they next went to the Stamp Duty Office in Parramatta where an officer said that they did not deal with that type of case.
SML said that on 9 August 2001 he telephoned PRL and said "Now I have the agreement signed I can lend you the money." PRL picked him up and they collected the plaintiff from a house at Summer Hill. They drove to the National Australia Bank at Marrickville. SML said that when they arrived at the bank he gave PRL a bag containing about $A600,000. PRL showed the bag and the money to a bank officer. They were shown to an inside area. When told by a bank officer that they were $A300 short of $600,000 SML said that he gave the officer the $300 and that one of the bank officers gave PRL or the plaintiff a printout which disclosed the amount deposited with the bank. SML said that he next asked PRL and the plaintiff to sign the vouchers which he produced, acknowledging receipt of the money. SML said that he asked the bank officer to help acknowledge the transaction which had taken place. He agreed.
SML said that PRL and the plaintiff then signed the six payment vouchers which he had previously prepared. SML denied the plaintiff's assertion that he did not sign the payment vouchers as they now appear. SML said that the bank officer, PRL and the plaintiff then signed and stamped the acknowledgment and receipt. SML said that PRL then drove the plaintiff and SML to PRL's house.
SML said that on the way to the house, or shortly after he arrived, PRL handed him an envelope containing the Certificates of Title for Lots 10 and 42, that solicitors retain the Certificate of Title for Lot 10 on his behalf pending a sale or resolution of these proceedings and that Pioneer has sold Lot 42 and accounted to him for the purchase price of $80,000.
SML said that when they were at the house PRL, the plaintiff and he signed ASIC change of officeholders forms for Pioneer and Form 304 and he made copies on PRL's fax machine. SML said that on that day (9 August 2001) PRL and he lodged the forms and the plaintiff's resignation as a director with ASIC.
SML said that Pioneer did not repay the loan on 8 November 2001 (or subsequently) and that he had a series of telephone conversations with PRL in which he promised to resolve the situation soon. Proposed refinancing did not proceed.
SML said that he had handed the certificate of title to Lot 42 to the purchaser, Ngoc Ly after the plaintiff had agreed to release his caveat over that Lot.
During SML's cross-examination difficulty was experienced in having him attend to the question he was being asked. He wished to add other matter. He seemed to accept that he was at the plaintiff's house for a period on 8 August 2001. SML did not agree that the payment vouchers were signed at the plaintiff's house on 8 August 2001.
SML said that he used the scanner (apparently in the plaintiff's house) to produce a copy of the driving licences and told him (the plaintiff) that he was "going to create the payment voucher". SML denied that the signature blocks only and no other material appeared on the pages bearing the copies of the driver's licences at the time the plaintiff signed the vouchers.
SML gave this evidence: "Q. And I suggest to you that you were not typing up the entire tables and contents of the documents while everyone was just sitting around. That was added on at some later time, that material. A The second one was printed after this scan because you can't scan everything together, the memory would be very high. So I put this one later, yes. I scan the licence with photo first because the memory is too high. I can't do everything together. The next one is printed on the same paper here. Yes I did it."
SML disagreed that between scanning and printing of the table the plaintiff signed the document, that is, before any tables or other materials were added.
SML agreed that the acknowledgment was also produced by scanning the licences. SML explained, "Yes, the licence was scanned only once and print out seven copies." SML denied that at the time the plaintiff signed the acknowledgment the material in between the copies of the driving licences and the signature had not yet been printed. SML said, "It's already, it was signed at bank. I don't do that. It's unprofessional to do it that way." SML agreed that the acknowledgment did not contain any reference to Pioneer.
As I understand the evidence the acknowledgment and the payment vouchers were prepared on 8 August 2001 using the plaintiff's equipment and at his house with the date 9/8/01 being inserted. SML insisted that they were signed on the following day and when signed contained all the writing which now appears on them.
It does appear that after the licences were scanned once seven sheets or copies were printed with the licences on them. Thereafter the sheets were separately completed. One subsequently contained the acknowledgment. Each of the six payment vouchers contained a separate number (001-006). SML said that each of then payment vouchers and the acknowledgment was typed on his own laptop with its own printer. As to the payment vouchers SML agreed they were payment vouchers from him to Pioneer. They specified they were in cash and contained the signatures and acknowledgments of PRL and the plaintiff, and not a receipt or acknowledgment by Pioneer. Curiously the acknowledgment and receipt does not purport to come from Pioneer (whether under its common seal or otherwise) but with signed acknowledgments from PRL and the plaintiff.
SML said that he had not previously seen the handwritten but official receipt issued by National Australia Bank Limited on 9 August 2001 acknowledging having received $600,000 in cash from Ocean Park Finance. That receipt bears the bank's stamp and the signatures (or initials) of two bank officers.
SML did not agree that he had paid $600,000 to Ocean Park Finance rather than Pioneer.
There was some doubt whether SML met with the plaintiff on 1 August 2001. The plaintiff contended that he met SML on a social visit in July and then not again until 7 August 2001. At one stage SML seemed to agree with this. It is probable that SML only met with PRL on 1 August 2001 and that he is confused when he asserts that the plaintiff was present at a meeting on 1 August 2001.
SML did not accept that he received the Certificates of Title as a director of Pioneer. He believed he was receiving them as the lender.
SML agreed that on 11 December 2002 he and PRL went to the plaintiff's house and that PRL (not SML) told the plaintiff that he had to withdraw the caveats over the Ambervale property. This was at SML's insistence. SML said that he did not hear PRL say to the plaintiff that SML required the small lot back so that he could pay back people in Cabramatta who were giving him trouble. SML said that this happened, but he was not listening. SML said that his payment back to the people in Cabramatta was a family matter.
This case has a number of features requiring comment. SML is a Malaysian financier who usually lives in Malaysia. It was surprising to find him travelling the streets of suburban Sydney with almost $600,000 in cash in a bag. The exigencies of this litigation did not require an investigation into the source of this unusually large cash sum. Unwisely, the plaintiff trusted PRL and PRL was able to prevail on the plaintiff to do what PRL wished. PRL and MV had no money or assets which would provide security for any substantial loan to enable the development to proceed.
I am satisfied that initially it was orally agreed between the plaintiff, PRL and MV that: (a) the properties known as Lots 10 and 42 Whitechapel Road and introduced by MV should be purchased and developed by the construction thereon of townhouses and villas as may be approved by Campbelltown City Council. (The Council referred to the properties as Lot 10 Dickens Road). Upon completion of construction, the townhouses and villas were to be sold
(b) the properties would be purchased in the name of a shelf company to be made available by MV. It was subsequently known as Pioneer Management Pty Limited
(c) PRL would arrange for financing of both the purchase and development of the properties.
(d) The plaintiff would provide "top up security" if required should the project not be able to be entirely funded by the provision of security over the properties and
(e) nett profits from the project were to be divided on completion between PRL and MV and the plaintiff in equal shares. 218. Some subsidiary matters were also agreed at an early stage: (a) The directors of the shelf company, Pioneer, were to be PRL and the plaintiff.
(b) MV was to attend to the lodging of the requisite development application and associated plans and to obtaining development approval. Thereafter, he was to attend to the construction side of the venture.
(c) MV was to negotiate for the purchase by the shelf company of the land and the purchase price and act in conjunction with PRL and the plaintiff.
(d) While there was initially some discussion about using one company to do the development and another to own the land, this division of function did not proceed and Pioneer was the vehicle chosen to do both the purchase of the land and its development. 219. At an early stage PRL prevailed upon the plaintiff to raise $400,000 on the security of two of his properties for the purpose of providing the purchase money for Lots 10 and 42, such lots to be placed in the name of Pioneer. They would be unencumbered and thus allow finance to be raised for a substantial development on these unencumbered lots. This would facilitate the raising of finance.
MV (principally) negotiated a purchase price of $310,000 for the two properties with the concurrence of the plaintiff and PRL and the purchase was completed.
PRL was to undertake the task of raising finance for the project using his own resources and at his own expense. He was hoping to raise finance using his overseas contacts. The plaintiff bore the cost of obtaining the loans from HSBC and Perpetual Trustees Victoria Ltd.
Upon the plaintiff providing the funds to purchase the Ambervale properties and to meet the associated expenses it was agreed on 24 April 2001 between the plaintiff, MV and PRL at the instigation of MV that the plaintiff would be reimbursed first in priority to other payments together with an additional two per cent above the purchase moneys contributed by him and that this would be in addition to his one-third share.
Set out in the Schedule to this judgment are the expenses incurred and paid by the plaintiff in respect of the purchase of the properties and the mortgages obtained from HSBC and Perpetual Trustees Victoria Ltd. The amounts are considerable.
The plaintiff struck me as gullible and very trusting of PRL, whom he had known for many years. It did not occur to him that PRL would let him down or manipulate him as happened. There was a great difference between the financial acumen, ability and understanding of the plaintiff and that possessed by each of PRL and SML. PRL impressed me unfavourably and I have felt unable to rely on his evidence on matters which were in issue. SML also impressed me unfavourably and I entertained a similar inability to rely on his evidence as to matters in issue.
It was common ground that the acknowledgment and receipt bearing date 9 August 2001 and the payment vouchers of the same date were prepared on 8 August 2001. I think that the payment vouchers were probably signed on that date at the plaintiff's house by the plaintiff, PRL and SML. As to the acknowledgment and receipt, I am unable to say where that document was signed by the plaintiff and PRL. The bank officer purported to witness the acknowledgment by those two men. That document incorrectly states that the plaintiff has received AUD600,000 as per the payment voucher No SL/PM001-006 dated 9/8/2001. Whether the cash was physically handed to PRL or directly to the bank is debatable. The plaintiff said that SML placed the bag containing the cash on a table in the bank. The bank wrote that it had received $600,000 from Ocean Park Finance. SML was present during the counting of the money by the bank officers and the issue of the receipt as were PRL and the plaintiff.
I do not accept the suggestion made by PRL that he had invested Pioneer's money with Count Albert Chiang. Nor do I accept that USD249,000 ($204,000 and $45,000) was sent to Count Albert Chiang to enable him to raise significant further finance for the Ambervale development. These moneys were remitted for the purpose of advancing the financial interests of PRL and Count Albert Chiang. SML was present while arrangements were made to remit the moneys from Ocean Park to the nominated accounts of Count Albert Chiang.
PRL was prepared to and did use a pretext to prevail upon the plaintiff to withdraw the caveat over the smaller block.
During the final address of counsel for the plaintiff, counsel for the second and fourth defendants made this clarifying statement: "There is no question whatsoever that money flowed from the plaintiff; the question … in issue is what that money is for and it will be my submission that on his own evidence he wanted to inject capital into the property and it was not just the purchase price he paid because on his own evidence he is talking about various other contributions that he made and that is entirely in accord with Mr [PR] Lee's evidence about what happened to the other $80,000 odd that came from the $400,000. So we are at issue on that point. There is no doubt originally it was money he borrowed, the question is how did it get into the company and what happened then."
The plaintiff pointed out that not only has he encumbered two properties which he previously owned outright to raise $400,000 for the purchase of Lots 10 and 42 (the Ambervale properties) and associated expenses, but he has consequently had to make continuing monthly interest payments on those mortgages.
The plaintiff's counsel submitted that his evidence was to the effect that in purchasing the Ambervale properties in the name of Pioneer he had no intention of donating those properties to Pioneer. That is correct. The plaintiff believed he was carrying out the partnership development project that he understood to be in place between himself, PRL and MV.
The position as to the A$600,000 provided by SML and the disbursal of the majority (USD249,000) of that sum to Count Albert Chiang and the transfer of USD48,000 from Ocean Park's US dollar account to its business cheque account has been summarised earlier. The plaintiff continues to be liable on the mortgages. SML, in effect, claims to be entitled to sell the remaining Ambervale property, asserting that his interest is in priority to any interest of the plaintiff or Pioneer and that Pioneer owes SML $900,000 together with accrued interest, less any amount received to date by SML.
The plaintiff pointed out, correctly, that there was no evidence that Count Albert Chiang had provided any consideration for the moneys he received from Ocean Park, nor repaid any part of them to SML, Pioneer or the plaintiff. The plaintiff further correctly pointed out that there was no evidence upon which the court could safely rely that any of the $600,000 had been applied to the development of the Ambervale properties or in furtherance of any partnership or joint venture between the plaintiff, PRL and MV.
The plaintiff submitted that equity would not permit the plaintiff to endure the effective loss of the Ambervale property without recognising the plaintiff's beneficial interest in it as the sole provider of funds for its purchase.
The plaintiff submitted that the first issue for determination was: "Whether Pioneer holds its interest in the remaining Ambervale property as trustee for the plaintiff as a result of his contribution of the entirety of the purchase moneys and associated expenses."
In Calverley v Green (1984) 155 CLR 242, the appeal turned up[on presumptions of equity, especially those of advancement and resulting trust. At 266 Gibbs CJ said: "Where a person purchases property in the name of another, or in the name of himself and another jointly, the question whether the other person, who provided none of the purchase money, acquires a beneficial interest in the property depends on the intention of the purchaser. However, in such a case, unless there is such a relationship between the purchaser and the other person as gives rise to a presumption of advancement, i.e., a presumption that the purchaser intended to give the other a beneficial interest, it is presumed that the purchaser did not intend the other person to take beneficially. In the absence of evidence to rebut that presumption there arises a resulting trust in favour of the purchaser … For the presumption to apply the money must have been provided by the purchaser in his character as such - not, e.g., as a loan."
At 251 Gibbs CJ stated that the presumption of a resulting trust may be rebutted by evidence of the actual intention of the purchaser and that where one person alone has provided the purchase money it is his or her intention alone that has to be ascertained. At 252 Gibbs CJ remarked that the extent of the beneficial interest of the respective parties must be determined at the time when the property was purchased and the trust created. The judgment of Mason and Brennan JJ also embodies these principles.
At 266 Deane J stated this presumption of equity: "Where a person pays the purchase price of property and causes it to be transferred to another or to another and himself jointly, the property is presumed to be held by the transferee or transferees upon trust for the person who provided the purchase money."
At 269 Deane J referred to these observations in the judgment of the Full Court in Charles Marshall Pty Ltd v Grimsley (1956) 95 CLR at 365: "The presumption [of a resulting trust] can be rebutted or qualified by evidence which manifests an intention to the contrary. Apart from admissions the only evidence that is relevant and admissible comprises the acts and declarations of the parties before or at the time of the purchase … or so immediately thereafter as to constitute a part of the transaction".
Deane J described the passage as guidance to the evidence which will ordinarily be relevant and admissible, but added that it should not be accepted as good law to the extent that it purports to lay down that no evidence other than that mentioned will ever be admissible. Evidence of the legal and factual relationship between the parties will always be admissible. As the subjective intention of the plaintiff was relevant, his evidence of his intention at the time is admissible "notwithstanding that it must in every case be liable to observations which tend to diminish its weight."
Counsel for the second and fourth defendants submitted that no trust could have arisen because of the plaintiff's intention, which was that he was injecting funds into the company. He was not purchasing the land for Pioneer. This was nothing more than a contribution to the company. Reliance was placed on para 10 of the plaintiff's affidavit of 12 November 2002 used to obtain an order extending the operation of the plaintiff's caveat over the remaining Ambervale property on an ex parte application made that day. It does not purport to be comprehensive. In that affidavit the plaintiff said that at the time of exchange of contracts for sale of each of the properties, and in the presence of PRL; and MV, he directed that the purchase be recorded not in his own name but in Pioneer's name. This was against the background of the agreement made between them. The plaintiff said he did this because Pioneer was the vehicle for the partnership development project. The second and fourth defendants relied on these words "The reason that I bought the property in the name of Pioneer was because I wanted to inject funds into the start up of the land development project." The plaintiff continued: "I never intended to gift the property to Pioneer and would never have purchased the properties with my own monies or monies borrowed and secured by myself alone."
As against Pioneer these words were read "had I not understood that the defendant (Pioneer) would repay me the monies in full." In the context of the circumstances of the present case I do not regard these words as the evincing of an intention sufficient to rebut the presumption of a resulting trust. I do not agree that the plaintiff was doing no more than making a contribution to the company. The plaintiff was buying the land for the company so the development project on which they had agreed to embark could be facilitated.
Counsel for the second and fourth defendants acknowledged that, on the evidence, Pioneer had no bank account and submitted that this was why the plaintiff paid the money directly to the vendor. The inability of Pioneer to receive moneys makes it more difficult to say that the plaintiff was just making a contribution to Pioneer's funds. This also points to the plaintiff buying the land on behalf of Pioneer.
Counsel for the second and fourth defendants pointed out that when Ocean Park came into the picture and when the Corporate Resolution was signed and a power of attorney was given to Count Albert S C Chiang, the plaintiff was a director. Chiang became a director about 11 October 2000 Prior to October 2000 that company was primarily run by PRL and from October 2000 by PRL and Chiang. PRL effectively controlled and manipulated the plaintiff. As at January 2001 the plaintiff had not been told of MV's proposal.
Counsel for the second and fourth defendants further relied on the plaintiff stating in para 36 of his affidavit of 5 December 2003 "I directed Mr Kahn (the real estate salesman) to put the name Pioneer Management Pty Ltd as the purchaser on the contracts for sale and gave him a cheque for $1500 drawn on my personal account to secure the land." Counsel also relied on para 42 of his affidavit. In that the plaintiff referred to paras 8-10 of his earlier affidavit. In para 9 of that affidavit the plaintiff stated that on 8 June 2002, with the facilities and funds provided by HSBC and Perpetual he purchased the properties from Londonderry Real Estate Pty :Ltd and also paid all the outstanding fees, rates, costs and expenses associated with the purchase of the properties. I have earlier referred to para 10 of that earlier affidavit. After the references to paras 8-10 the plaintiff said that he always regarded Pioneer as being a company vehicle for the business between PRL, MV and himself and that he did not believe that, by paying the purchase price and expenses for the properties, he was lending money to Pioneer. He expected to recover his money from the sales of the townhouses at the completion of the project and that after all of the other expenses were paid the partners would split any profits equally. This reflected the plaintiff's belief and understanding.
When regard is had to all the material on which the second and fourth defendants rely, it cannot be said that the intention of the plaintiff was such that the presumption of a resulting trust has been rebutted.
The plaintiff submitted that PRL, MV and he formed a partnership and relied on s 2 of the Partnership Act, contending that the indicia of a partnership is "the relation which exists between persons carrying on a business in common with a view of profit." Counsel submitted that this relationship could be found in the arrangement between the three men.
The second and fourth defendants submitted that there was a joint venture which, in the circumstances, did not amount to a partnership. In view of my conclusion that there was a resulting trust it may not be strictly necessary for me to express a view, but as this case may go further, it is probably better if I do.
Whether a particular joint venture amounts to a partnership is often not easy to determine. Similarly, "the borderline between what can properly be described as a 'joint venture' and what should more properly be seen as no more than a simple contractual relationship may on occasion be blurred." (UDC Ltd v Brian Pty Ltd (1985) 59 ALJR 676 at 679).
In UDC AT 679 Mason, Brennan and Deane JJ said: "The term 'joint venture' is not a technical one with a settled common law meaning. As a matter of ordinary language, it connotes an association of persons for the purposes of a particular trading, commercial, mining or other financial undertaking or endeavour with a view to mutual profit with each participant usually (but not necessarily) contributing money, property or skill. Such a joint venture (or, under Scots law, 'adventure') will often be a partnership., The term is, however, apposite to refer to a joint undertaking or activity carried out through a medium other than a partnership, such as a company, a trust, an agency or joint ownership … The most that can be said is that whether or not the relationship between joint venturers is fiduciary will depend upon the form which the particular joint venture takes and upon the context of the obligations which the parties to it have undertaken. If the joint venture takes the form of a partnership the fact that it is confined to one joint undertaking as distinct from being a continuing relationship will not prevent the relationship between the joint venturers from being a fiduciary one. In such a case the joint venturers will be under fiduciary duties in relation to property the subject of the joint venture which are the ordinary incidents of the partnership relationship, though those fiduciary duties will be moulded to the character of the particular relationship."
At 680 the joint judgment pointed out that a fiduciary relationship can arise and fiduciary duties can exist between parties even where a formal agreement has not been executed. The judgment continued: "A fiduciary relationship can arise and fiduciary duties can exist between parties who have not reached and who may never reach agreement upon the consensual terms which are to govern the arrangement between them. In particular, a fiduciary relationship with the attendant fiduciary obligations may and ordinarily will, exist between prospective partners who have embarked upon the conduct of the partnership business or venture before the precise terms of any partnership agreement have been settled … the relationship between prospective partners or participants in a proposed partnership to carry out a single joint undertaking or endeavour will ordinarily be fiduciary if the prospective partners have reached an informal arrangement to assume such a relationship and have proceeded to take steps involved in its establishment or implementation."
In Birtchnell v Equity Trustees Executors & Agency Co Ltd (1929) 42 CLR 384 at 408 Dixon J said: "The subject matter over which the fiduciary obligations extend is determined by the character of the venture or undertaking for which the partnership exists, and this is to be ascertained not merely from the express agreement of the parties, whether embodied in written instruments or not, but also from the course of dealings actually pursued by the firm."
In UDC at 681 Dawson J said: "A single adventure under our law may or may not, depending upon its scope, amount to the carrying on of a business … Perhaps in this country, the important distinction between a partnership and a joint venture is for practical purposes the distinction between an association of persons who engage in a common undertaking for profit and an association of those who do so in order to generate a product to be shared among the participants. Enterprises of the latter kind are common enough in the exploration for and exploitation of mineral resources and the feature which is most likely to distinguish them from partnerships is the sharing of product rather than profit."
Dawson J was not departing from the statements of principle in the joint judgment. He was endeavouring to give some practical examples.
In Canny Gabriel Castle Jackson Advertising v Volume Sales (Finance) Pty Ltd (1974) 131 CLR 321 a financier agreed to finance certain contracts arranged by a concert promoter for public performances by two world famous singing stars. There was a detailed written agreement. The Court's conclusion that the joint venture was a partnership rested upon the following considerations: 1. The parties became joint venturers in a commercial enterprise with a view to profit
There was only a written note of the agreement signed by the plaintiff and MV. PRL did not sign that agreement and it seems that he was reluctant to sign an agreement. It appears that the initial oral agreement left a number of matters to be agreed and details to be finalised. What was agreed was that the Ambervale properties were to be acquired and developed with the construction of townhouses and villas, that MV was to negotiate the price for the acquisition of the properties, that PRL was to obtain acquisition and development finance, that the plaintiff was to provide top-up security and that the profits arising from the acquisition and development of the land and the sale of the townhouses and villas after the deduction of all expenses were to be shared equally between the three men. It is true that PRL denied that he was under an obligation to raise acquisition finance. PRL was incorrect, but with the plaintiff providing the funds for the acquisition of the properties this point of difference did not become a live issue. The provision of finance by the plaintiff led to the variation earlier mentioned. MV was also to make available a shelf company in whose name the land was to be placed. It was also agreed that MV would lodge the development application and procure development approval.
The three men attended at the real estate agent's office, when details of the purchase of the land were finalised and confirmed.
It was obvious that the undertaking was going to require much attention from all three men and take some considerable time. A development application and associated plans would have to be prepared and lodged with the Council. The requirements of Council would have to be ascertained and met and amendments made. Development approval would need to be procured. Thereafter a building application, with detailed plans and specifications would have to be prepared and lodged with the Council. A process of consultation with Council officers and amendment would follow. Development or construction finance would have to be finalised and obtained. Thereafter a builder or project manager would have to be employed. Subcontractors would have to be engaged by either the builder or project manager. During the construction phase which could vary from six to eighteen months, the construction works would have to be closely supervised. Various approvals would have to be obtained at various stages and a completion certificate permitting occupancy obtained. The three men would have to agree on a marketing plan for the various dwellings and the purchase price fixed for each dwelling. During the sale processes the partners would have to be available to supervise and consider offers. Once the proceeds of sale of all dwellings had been received and all expenses had been paid the profits were to be shared.
It is apparent that this would be an extended process and undertaking of considerable substance with the construction and sale of an appreciable number of dwellings. The evidence does not enable me to say how many. The Council regarded 26 dwellings as too many and there were reservations about 20 dwellings. An estimate of 12-15 dwellings would probably not be unreasonable.
This venture gave rise to fiduciary obligations. There was the initial relationship of trust between the plaintiff and PRL, springing from their long association and doing business together, the introduction by PRL of MV to the plaintiff along with the proposal to acquire and develop the two properties, with PRL hoping and intending to use the plaintiff's properties and the finance which could be raised by using them to launch the project and PRL believing that the plaintiff was likely to act on his suggestions (as in fact happened), the arranging of finance by PRL using the assets standing in the name of Pioneer provided out of the plaintiff's funds, and the duty of PRL to safeguard those assets and not use them for an ulterior purpose, that is, to make any funds raised on these assets available for the proposed development. By way of breach the majority of the funds provided by SML were sent out of the jurisdiction to Albert S C Chiang without security and where recovery would be difficult, if not impossible. They ceased to be immediately available for the development.
A joint venture was created. That joint venture was a partnership. PRL, MV and the plaintiff became joint venturers in a commercial enterprise with a view to profit. The profits were to be shared between them. There were many matters of policy and practice which had to be agreed between them.
By way of additional comment I note that the plaintiff carried out his obligations under the agreement. MV provided the shelf company in whose name the land was to be placed on acquisition, lodged a development application and attempted to comply with some of the Council's requirements. PRL insisted that he discharged his obligations to endeavour to obtain finance, albeit that I do not accept his evidence on that point. He seems to have made some enquiries. Each of PRL, MV and the plaintiff depended on the other. The plaintiff endeavoured to assist MV in his efforts to procure Council's consent. Ultimately PRL took this matter out of MV's hands and caused plans to be prepared and lodged which were rejected by the Council.
As earlier mentioned I am persuaded that at a meeting held at MV's home on or about 24 April 2001 the plaintiff, PRL and MV orally agreed that any and all moneys provided by the plaintiff for the purchase of the properties would be reimbursed to him first in priority to other payments together with an additional two per centum above the purchase moneys contributed by him and in addition to his one-third share of any nett profits earned by the project. Such an agreement is the natural and probable outcome of what had occurred. It was motivated by a sense of fairness on the part of MV and PRL could not and did not resist such an agreement. He went along with it and did not dissent.
I am satisfied of the existence of a partnership between PRL, MV and the plaintiff to carry out a development project on Lots 10 and 42, Whitechapel Road, Ambervale. However, in view of the conclusion I have reached as to the resulting trust and the relief I am considering as to that, the question of further consequential relief does not arise but I would have considered the relief sought in the Further Amended Statement of Claim (paras 7 and following) as being along the lines of the relief I would have considered had I rejected the resulting trust claim.
PRL contended that the plaintiff was estopped from pursuing his claim because of the Local Court proceedings between them.
The evidence before this Court included of a letter of 26 November 2004 from the Registrar, Local Court, Bankstown advising: "Please note that at the hearing on 11/11/2003 the Court made the following order in respect of the above matter Verdict For The Plaintiff Against The Defendant Claim $21,815.45 Costs $ 147 Disbursements 100 Interest 2,630.41 Total $24,692.86"
A copy of the magistrate's reasons, if any, was not available. There was some suggestion that there may have been an arbitration.
The plaintiff's statement of liquidated claim sought $21,815.45 and interest in resect of the following cause of action: "'BETWEEN MARCH 2001 AND JUNE 2002 THE PLAINTIFF DID LEND TO THE DEFENDANT VARIOUS SUMS OF MONEY WHICH WERE TO BE PAID BACK AS SOON AS THE DEFENDANT HAD SOME MONEY. THE DEFENDANT HAS MADE SUM (sic) REPAYMENTS CHICH CEASED IN JUNE 2002. AS OF THE 17TH DECEMBER 2002 A BALANCE OF $21,815.45 IS STILL OWING AND THUS THE PLAINTIFF CLAIMS THE SUM OF $21,815.45 WHICH THE DEFENDANT REFUSES TO OR HAS NEGLECTED TO PAY." 269. The defendant by his Further Amended Notice of Grounds of Defence raised the following grounds: "1. The defendant denies that he is indebted to the plaintiff as alleged or in any amount at all and further the defendant denies that the plaintiff advanced funds to him, and says that the plaintiff advanced funds to a company styled Pioneer Management Pty Ltd CAN: 00094 746 139 and/or Ocean Park Financial Holdings Pty Ltd and at the relevant time both the plaintiff and defendant were Directors of this compan y ies. (sic) 2. Further the defendant denies that he has repaid funds to the defendant (sic) and says that he has advanced funds to Pioneer Management Pty Ltd and/or Ocean Park Financial Holdings Pty Ltd . In the respective amounts of $38,190.00 on 6 February 2002 and $40,000.00 on 3 June 2002."
In his statement of 27 March 2002 lodged with the Court the plaintiff alleged that from 12 February 2001 to 12 June 2002 PRL had borrowed $99,953.45 in a series of loans and repaid $78,138 and that the money was lent on a personal basis.
The plaintiff alleged that each time he lent PRL money PRL promised that he would repay him soon. The statement contains a detailed account of the events and occasions surrounding the lending of the money - and what was said.
The Local Court accepted the plaintiff's case and rejected that of PRL. It is apparent that it was the plaintiff's case that the sum for which he was suing was the balance of personal advances to PRL which he promised to repay and most of which he did repay.
There is no sufficient material to found an Anshun type defence. Further, the materials which the Court has suggest that an Anshun type defence is not available. As counsel for PRL acknowledged he was handicapped by the absence of relevant detailed docunments. The estoppel defence based on the Local Court proceedings must be rejected.
PRL advanced a further estoppel argument based on the plaintiff withdrawing his caveat over the smaller Lot. PRL submitted that the plaintiff had a valid caveat which prevented any dealing with the smaller block. By withdrawing his caveat over the smaller block the plaintiff chose not to protect his interest in the smaller block. He knew that Pioneer wanted to sell that land and he consented to the sale. While it is true that Pioneer sold the land, this was at the behest of PRL and SML. The plaintiff was not a director of Pioneer as at September 2002. Her had resigned as part of SML's requirements on 9 August 2001. The directors of Pioneer in September 2002 were PRL and SML.
I accept the plaintiff's version of the conversation of 10 September 2002 with PRL and also the plaintiff's version of the conversation with PRL and SML about 11pm on 11 September 2002. It is apparent from these that PRL knew how to manipulate the plaintiff. SML's comment to the plaintiff that the land was going to come back to him was incorrect. That was never intended. In view of the transfer of the smaller block to Ngoc Ly, the statement of PRL that the smaller block was to go to SML's family until SML returned the money they had given him was misleading as was SML's statement that the smaller block would be returned.
PRL and SML asserted that because of his conduct the plaintiff is estopped from asserting an equitable interest in the Ambervale properties generally because he did not pursue that interest in relation to the part which was sold. It was further submitted that the plaintiff was not entitled to say, "I will have an equitable interest over one part and not over another part;" the equitable interest arises or it does not. I do not accept these contentions. If, as I think, the plaintiff had an equitable interest in both the blocks I do not see why, if he releases his interest in one of the blocks, albeit the smaller block, he loses his equitable interest in both blocks. This is particularly true in the circumstances of the present case.
SML relied on a further reason. Even if the plaintiff did release his equitable interest because of the representation of PRL, that could not be evidence against SML. There is no evidence that SML was aware of what PRL had previously said to the plaintiff. The plaintiff is not seeking any relief in respect of the smaller block.
PRL and SML further submitted that even if the plaintiff signed the withdrawal of the caveat as to the smaller block as a result of PRL's representation he did so to secure development finance for Pioneer to develop the remainder of the land. The plaintiff signed as a result of the total effect of the representations made by PRL and his trust in PRL. PRL and SML each stated that the smaller block was going to come back to the plaintiff, or the plaintiff and PRL. That was untrue and never intended. The sale to Ngoc Ly went through and SML received the proceeds of about $80,000.
Counsel for PRL and SML submitted that there was no plea of non est factum, or claim for rectification and specific delivery up. The affidavit evidence of the plaintiff served before the hearing set out in considerable detail the course of dealing between the parties and what was said and done. The plaintiff has never suggested that he did not sign the release (or withdrawal) but has pointed to the circumstances in which it was signed.
The plaintiff submitted that there was no evidence that any moneys were recovered by Pioneer and in that regard the agreement of 8 August 2001 was not performed and that SML appears to have presumed that moneys were received on behalf of Pioneer. The 8 August agreement was executed under the common seal of Pioneer and signed by the plaintiff and PRL as directors. It was also signed by SML. There is no receipt evidencing that Pioneer received $600,000. The acknowledgment and receipt is signed personally by the plaintiff and PRL. It does not mention that they are directors of Pioneer or purport to be an acknowledgment and receipt on behalf of Pioneer. It does contain a reference to payment vouchers 001-006 which contain the name of Pioneer, but that is ambivalent in the context.
The plaintiff submitted that crucially no authority appears from Pioneer authorising Ocean Park to receive funds on its behalf on 9 August 2001 and that the plaintiff's resignation as a director was effective on that day. The receipt issued by the Bank for the $600,000 is expressed to be for money received on behalf of Ocean Park Finance. The plaintiff submitted that whatever claim SML may have against PRL for signing the telegraphic transfers sending the funds to Ocean Park and then offshore or to his own account, SML is unable to show receipt by Pioneer of $600,000 pursuant to the 8 August 2001 agreement. The plaintiff submitted that the "payment vouchers", even if signed in the form they now bear (although the plaintiff's denials are detailed), evidence that the only intention of SML was to advance the funds to Pioneer. The funds were diverted to Ocean Park.
SML asserted that when they (PRL, SML and the plaintiff) arrived at the bank he gave PRL a bag containing $600,000 and that PRL showed the bag and the money to a bank officer (para 29 of his affidavit of 26 November 2004). In his oral evidence he insisted that this was done in the plaintiff's presence. SML said that the bag went to PRL and from him to the bank officer. The plaintiff said that PRL led the way into the bank and spoke with a bank officer, and that they went into a private room where SML put the bag on the table.
The plaintiff said (T65) that he did not see a connection when he was at the bank on 9 August 2001 between being at the bank and seeing $600,000 counted out and having signed the contract the day before. It was when he went upstairs at the bank and the forms were filled out that he realised the money was going to Ocean Park. The plaintiff could not be described as quick witted. He did not understand all that was happening and its significance. He did not see the receipt which the bank issued until he saw the affidavit of PRL. Essentially, the plaintiff was left on the sidelines. In para 14 of his affidavit of 11 November 2004 PRL stated that SML paid over $600,000 in cash at the Marrickville branch of the bank at a meeting attended by him, the plaintiff and SML on 9 August 2001 and that an acknowledgment of the receipt of those funds was executed by him and the plaintiff in the presence of bank officer Erin Bleasdale.
The plaintiff pointed out that the notion that Ocean Park was itself a corporate vehicle for the development of the Ambervale property was not part of PRL's original evidence. It was submitted that it was a more recent formulation in an attempt to overcome the problem of sending the $600,000 to an entity other than that specified in the agreement. The plaintiff submitted that specifically there was no document of Ocean Park itself indicating any such involvement and no correspondence between the two companies evidencing any such arrangement. Te early notion of using two companies did not proceed and no second company was appointed - see especially the evidence of MV at T104. MV was not aware of Ocean Park.
The 8 August agreement did not provide for payment in the form that ultimately occurred. At least PRL was aware at that time that Pioneer did not have a bank account. The plaintiff contended that as Pioneer had no bank account and was, on PRL's account, the vehicle for purchase, as distinct from the development of the Ambervale properties, there was no apparent reason for making Pioneer a party to the 8 August agreement rather than the purported vehicle (according to PRL) with a bank account, i.e., Ocean Park. The reason for having the agreement in the form drafted was to make available Pioneer's valuable asset, i.e., the Ambervale properties.
SML relied on the certificates of title to the Ambervale properties being in his possession. As the plaintiff submitted, this raised two issues: (1) Whether the passing of the certificates of title to the Ambervale properties was effective to give an equitable interest in those properties, and
(2) if so, the priority as between any such equitable interest and the plaintiff's equitable interest. 287. As to whether an equitable mortgage was created, Fisher & Lightwood's Law of Mortgages, Aust Ed (Butterworths 1995) at para 3.55 states: "The delivery to the creditor or his agent of deeds or other documents of title with intent to create a security thereon constitutes an equitable mortgage".
It is a mistake to concentrate solely on what was happening to and with the plaintiff. PRL was also a director of Pioneer and was the moving force behind it. I find that PRL intended that Pioneer should grant an equitable mortgage over the Ambervale properties to SML by deposit of the title deeds. I doubt if the plaintiff ever addressed or considered the question directly whether a mortgage was being given over the Ambervale properties but he was aware of when a mortgage was required and, in a broad way, the consequences of default. The plaintiff took no steps to recover the title deeds or, it seems, to enquire where they were. PRL as a director of Pioneer would have been entitled to handle the deeds and ensure their safekeeping.
It should be concluded that Pioneer intended to grant an equitable mortgage over the Ambervale properties to SML by deposit of the title deeds.
The plaintiff submitted that his earlier equitable interest (by way of resulting trust) takes priority over any subsequent equitable mortgage.
In Platzer v Commonwealth Bank of Australia 1997 1 Qd R 266 at 278-279 McPherson JA said: "As between equitable estates or interests created in succession in or in respect of the same property … where the merits are equal, the first in time prevails … Mrs Platzer's interest was no 'mere' equity but the full beneficial ownership of the land … but Mrs Platzer's claim to the prior and superior right in equity does not, at least in the first place, rest on proof that the Bank had knowledge or even notice of her subsisting interest. The onus of displacing her priority rests upon the holder of the later equitable interest …" (citations omitted)
In Moffitt v Dillon [1999] 2 VR 480 the Victorian Court of Appeal also applied the principle that prima facie the equitable title of the appellants, being prior in point of time took priority of the equitable title of the respondent and continued: "and it is not for [the latter] to show facts which render it inequitable for the appellant to insist as against him on that priority … the possessor of a subsequent equity is not to be postponed to the possessor of the prior equity unless the act or omission proved against him has conduced or contributed to a belief on the part of the holder of the subsequent equity, at the time when he acquired it that the prior equity was not in existence."
This followed closely the statement of principle of the Privy Council in Abigail v Lapin (1934) 51 CLR 58 at 66 where their Lordships adopted a passage from the judgment of Griffiths CJ in Butler v Fairclough (1917) 23 CLR 78 at 91-92.
In Lapin v Abigail in the High Court (1930) 44 CLR 166 at 204 Dixon J said: "In general an earlier equity is not to be postponed to a later one unless because of some act or neglect of the prior equitable owner. 'In order to take away any pre-existing admitted equitable title, that which is relied upon for such a purpose must be shown and proved by those upon whom the burden to show and prove it lies, and . . . it must amount to something tangible and distinct, something which can have the grave and strong effect to accomplish the purpose for which it is said to have been produced.' (per Lord Cairns L.C., Shropshire Union Railways and Canal Co. v The Queen). The act or default of the prior equitable owner must be such as to make it inequitable as between him and the subsequent equitable owner that he should retain his initial priority. This, in effect, generally means that his act or default must in some way have contributed to the assumption upon which the subsequent legal owner acted when acquiring his equity."
While the Privy Council reversed the decision of the High Court in which Dixon J was one of the majority, there does not seem to have been any dispute as to this statement of legal principle. The Privy Council also relied on the earlier decision and statement of principle by Lord Cairns.
The plaintiff did not on or before 9 August 2001 tell SML that he had an equitable estate or interest in the Ambervale properties and that he had provided the whole of the purchase moneys to acquire those properties. However, the person who handled the dealings with SML was PRL. SML set the agenda as to what was to be done, issued directives and negotiated the terms of the loan with PRL. PRL and SML directed the plaintiff. PRL and SML were probably in the same room at the plaintiff's house when PRL asked the plaintiff for the title deeds for copying for the people in Malaysia. This was after PRL and the plaintiff had handed over their driving licences for copying. Those licences, but not the title deeds, were returned.
As a general rule, if the plaintiff had handed over the deeds to SML voluntarily and without misconduct, such as deceit, on SML's part , SML would have the better equity. However, the plaintiff did not hand over the deeds to SML. PRL procured the title deeds in the underhand way earlier mentioned and delivered them to SML. I am far from persuaded that SML was not aware of what was happening. While SML did on occasions speak forcibly to PRL he left it primarily to PRL to handle the plaintiff, paying close attention to what was happening. PRL was acting on his own behalf and not that of the plaintiff.
There was no disentitling conduct on the plaintiff's part. His prior equity should prevail. SML went along with the $600,000 being credited to the account of Ocean Park and PRL sending much of it overseas to Count Albert S C Chiang.
I have treated MV's Statement in Reply to the Amended Statement of Claim as being both a defence and a cross-claim and a submission that the plaintiff should be given relief which differs from that which primarily he seeks. MV sought a declaration that the larger block is held in trust for the plaintiff and MV proportionally; the portion of the plaintiff to be equal to half of the larger block's updated value plus moneys provided by him together with an additional two per cent, the balance to be held proportionally by MV. MV sought an order that PRL be disqualified from the partnership for not carrying out his duties and for causing delays in fulfilling the partnership agreement. MV sought equitable damages and an account of profits in respect of the sale of the smaller block, Lot 42, damages generally including loss due to delays caused mainly by PRL diverting from the original agreement. MV sought declarations that SML has no interest in either the larger or smaller block and that Pioneer is not indebted to SML, an order that the caveat lodged by MV be removed and an injunction restricting SML from selling, transferring, encumbering or otherwise dealing with the larger block.
PRL and SML submitted that MV lacked standing because he was an undischarged bankrupt from 20 May 1999 until 17 July 2002, which covered the relevant events. Counsel for PRL and SML endeavoured to piece together MV's claim from MV's statement in reply to the Amended Statement of Claim and MV's affidavits. Counsel submitted, correctly, that, in essence, MV asserted that there was a partnership. It was submitted that there was no evidence which would support relief to the effect that Pioneer was controlled by MV and the plaintiff and that Pioneer owned the Ambervale properties free of encumbrances.
Counsel assumed that MV's next assertion was that Pioneer was and remains a corporate vehicle utilised by the remaining partnership to carry out the project described in para 3 of the relief sought, that is that the larger block is held on trust for the plaintiff and MV proportionally in the manner summarised two paragraphs previously. Counsel pointed out that the partnership allegedly agreed would have contemplated sharing out the profits of the completed project. As the project has never been completed, those profits have remained contingent. This is so whether what occurred was a joint venture, or a partnership, or something else. As a division of profits was contemplated and those profits have not yet crystallised, they were at all times contingent.
Section 5 of the Bankruptcy Act 1966 provides: "Property means real or personal property of every description, whether situate in Australia or elsewhere, and includes any estate, interest or profit, whether present or future, vested or contingent arising out of or incident to any such real or personal property."
(b) … (c) … (d) … is property divisible amongst the creditors of the bankrupt. 317. Section 116(2) provides that s 116(1) does not apply to certain specified types of property. None of the exceptions applies to the property here in question.
Any interests or rights which MV acquired during 2001 and up to 16 July 2002 formed part of his property divisible amongst his creditors.
Section 58 of the Bankruptcy Act provides: "58.(1) Subject to this Act, where a debtor becomes bankrupt (a) the property of the bankrupt not being after acquired property, vests forthwith in the official Trustee or, if, at the time when the debtor becomes a bankrupt, a registered trustee becomes the trustee of the estate of the bankrupt by virtue of section 156A, in that registered trustee (b) after-acquired property of the bankrupt rests, as soon as it is acquired by, or devolves on, the bankrupt in the Official Trustee or, if a registered trustee is the trustee of the estate of the bankrupt, in that registered trustee."
MV's rights arose after he was made bankrupt and vested in the registered trustee.
Section 153(1) of the Bankruptcy Act provides that subject to s 153 where a bankrupt is discharged from a bankruptcy the discharge operates to release him or her from all debts provable in the bankruptcy. Section 153(2)-(4) deals with various exceptions to the general rule which are not of present relevance.
Section 152 provides that a discharged bankrupt must, even though discharged, give such assistance as the trustee reasonably requires in the realisation and distribution of such of his or her property as is vested in the trustee. It was pointed out by Needham J in Pegler v Dale 1975 1 NSWLR 265 at 267, and by Kirby P in Daemar v Industrial Commission of NSW No 2 (1990) 22 NSWLR 178 at 184-185 that s 152 assumes that property vested in a trustee at the time of sequestration remains vested in that trustee even after the discharge. While MV's contingent right to share in the profits arose after sequestration and is caught by s 58(1)(b) as after-acquired property, s 152 envisages that all property vested in the trustee (whether under s 58(1)(a) or s 58(1)(b) remains so vested after a bankrupt is discharged. Pegler and Daemar were applied by Hidden J in Foyster v ANZ Banking [1999] NSWSC 300 - BC 99 02230.
Counsel for PRL and SML correctly submitted that the consequence of MV being an undischarged bankrupt at the time of dealing with a contingent expectancy is that anything he was entitled to must, by operation of law, be vested in his trustee.
There was no evidence that the trustee of MV's estate had assigned any of his rights to MV. Those rights belong to the trustee. MV has no standing to maintain an action or claim against the plaintiff or the other defendants. Nor will the relief to which the plaintiff is entitled be affected. The evidence did not suggest that MV acquired any rights after his discharge from bankruptcy.
As earlier stated, I do not propose to make any orders or enter judgment until after the parties and the liquidator of Pioneer have had an opportunity to consider these reasons and make any desired application.
In his facsimile letter of 11 May 2005 counsel for PRL and SML, in advising the Court of the winding up of Pioneer, stated that this was on the application of the Office of State Revenue. I do not know what State taxes or debts were involved. It may be that they are payable, whether the plaintiff or SML succeeds in these proceedings. I do not know what other creditors Pioneer has.
The hearing of these proceedings extended over four days and they were quite complex, as these reasons demonstrate. The proceedings were seemingly hard but properly fought and the various issues comprehensively covered. SML travelled from Malaysia to Sydney for the hearing.
I propose to stand the matter over for 28 days for further hearing. Within 21 days the liquidator should advise the Court and the parties by letter what course he or she proposes to take and the plaintiff should prepare short minutes of the orders he seeks. The parties and the liquidator may restore the matter to the list on two days notice if a different regime is preferred.
KARDIASMENOS v PIONEER MANAGEMENT PTY LTD & ORS THE SCHEDULE
EXPENSES INCURRED From the plaintiff's personal St George account he paid the following by personal cheque: Date Expense $ 23/4/01 BMC mortgage establishment fee 850.00 23/4/01 HSBC loan application fee 1,100.00 24/4/01 Deposit for land paid to vendor's real estate agent 1,500.00 23/5/01 Office of State Revenue - stamp duty on BMC loan 741.00 17/12/02 BMC loan valuation fee 250.00
From the plaintiff's personal HSBC bank account he paid the following by personal cheque: Date Expense $ 8/6/01 Office of State Revenue - Stamp duty on land 7,838.00 8/6/01 Land and Property Information 232.00 18/7/01 Pioneer Management Annual Return - ASIC 50.00 13/8/01 Anthony Bennett - survey of Summer Hill Property 440.00 14/8/01 Ashfield Council Building Certificate 50.00 11/3/02 Development application fee 2,526.85 17/5/02 Australian Project Funding - valuation 3,575.00 5/6/02 Campbelltown City Council - rates 1,785.55 5/6/02 Australian Project Funding fee 15,950.00 11/6/02 REA Australia - valuation 5,500.00
From the plaintiff's personal St George Bank account he paid the following by bank cheque: Date Expense $ 8/6/01 National Australia Bank - (settlement) 85,000.00 8/6/01 National Australia Bank - (settlement) 110,000.00
From the plaintiff's HSBC bank account he paid the following by bank cheque: Date Expense $ 8/6/01 National Australia Bank- (settlement) 105,746.44 8/6/01 Stratford Marketing - vendor's real estate agent 6,505.00 8/6/01 Christopher M Edwards - vendor's solicitor 1,537.56 8/6/01 Campbelltown City Council Rates - (settlement) 521.00
From the plaintiff's personal HSBC bank account the following automatic withdrawals were made in relation to his loan Date Expense $ 4/6/01 Title Search 10.00 7/6/01 Office of State Revenue - Stamp duty on HSBC loan 741.00 7/6/01 Land and Property Information registration fee 58.00 8/6/01 Establishment fee 500.00
The following amounts were withheld from the loans from BMC at loan settlement: Date Expense $ 6/5/01 Solicitor's fees Re: first BMC loan 810.00 13/2/03 Solicitor's fees Re: second BMC loan 453.25 13/2/03 Office of State Revenue - Stamp duty on second BMC loan 320.00 13/2/03 Application fee - BMC loan 410.00
The following amounts were paid by the plaintiff in cash: Date Expense $ 19/7/01 Valuation 1,200.00 22/5/01 Office of State Revenue Clearing Certificate 15.00 27/8/02 Land and Property Information - Caveat 60.00 Property searches - 2 title searches and 2 final searches 16.00 Line fee 500.00
From the plaintiff's HSBC bank account the following direct debits have been made for interest charges as at 15 October 2003
Interest on HSBC loan Date $ 28/6/01 586.01 30/7/01 964.22 28/8/01 893.47 28/9/01 1,258.23 26/10/01 1,317.71 28/11/01 1,272.08 28/12/01 1,274.48 29/1/02 1,336.24 28/2/02 1,146.50 28/3/02 1,090.23 29/4/02 1,271.62 28/5/02 1,196.54 28/6/02 1,280.44 29/7/02 1,331.53 28/8/02 1,307.59 30/9/02 1,450.88 28/10/02 1,228.25 28/11/02 1,367.76 30/12/02 1,426.62 28/1/03 1,288.97 28/2/03 1,127.82 28/3/03 776.49 28/4/03 879.45 28/5/03 907.48 30/6/03 1,042.84 28/7/03 903.53 28/8/03 1,120.54 29/9/03 1,075.72
Interest charges on the Perpetual Trustees loan as at 15 October 2003
Interest on Perpetual Trustees Loan Date $ 25/6/01 1,452.03 25/7/01 1,451.16 25/8/01 1,451.16 25/9/01 1,451.16 25/10/01 1,420.53 23/11/01 1,386.63 24/12/01 1,386.63 25/1/02 1,353.33 25/2/02 1,353.33 25/3/02 1,353.33 24/4/02 1,353.33 24/5/02 1,353.33 25/6/02 1,385.75 25/7/02 1.419.12 23/8/02 1,419.12 25/9/02 1,419.12 25/10/02 1,419.12 25/11/02 1,419.12 24/12/02 1,419.12 28/1/03 1,419.12 25/2/03 1,419.12 25/3/03 2,000.48 24/4/03 2,000.48 23/5/03 2,000.48 25/6/03 2,000.48 25/7/03 2,000.48 25/8/03 2,000.48 25/9/03 2,000.48
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.
Nick Kardiasmenos
Pioneer Management Pty Limited & 3 Ors
(1934) 51 CLR 58
(1929) 42 CLR 384
(1917) 23 CLR 78
(1974) 131 CLR 321
(1984) 155 CLR 242
(1956) 95 CLR 365
(1990) 22 NSWLR 178
(1930) 44 CLR 166
(1985) 59 ALJR 676