OLIVERI v JONES & ORS

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

JUDGMENT 1 HIS HONOUR: The first defendant and cross-claimant, Michael Jones, who is trustee of the bankrupt estate of Dominic Laurence Oliveri, has appealed from the certificate of Master Macready of 21 May 1999. On 18 December 1996 I made orders declaring the interests of parties in three properties, and orders for taking accounts of dealings by the cross-defendants with the Petersham property and for an inquiry as to the amount of damage suffered by Mr Jones by reason of the conduct of the cross-defendants in dealing with the Petersham property, subsequent to the sequestration order. After hearing the accounts and inquiry the learned Master certified that two of the cross-defendants Giovanni Oliveri and Emanueli Oliveri were liable to pay Mr Jones $368.52 and interest of $104.55 a total of $473.01 in respect of dealings with the property, and that no sum was due in respect of damages. The Master gave reasons on 5 March 1999 and 7 May 1999. 2 The first ground of appeal contended that it was erroneous to hold that the appellant was not entitled to damages for occupation of Flat 1 at 57 Station Street from the Sequestration Order on 23 December 1993 until Mr Jones recovered possession on 3 February 1997. The claim for damages before the Master was a claim for mesne profits. When Mr Jones' entitlement to the property arose Emanueli Oliveri was in occupation of Unit 1 as his residence and he had the practical management of all four units in the building at Petersham; he did not have any leasehold interest, and he was in occupation with the permission or at least at the sufferance of Dominic Oliveri. The registered proprietors were Dominic Oliveri and Joseph Oliveri, but Joseph Oliveri was not a beneficial owner. The position taken by Giovanni Oliveri and the explanation offered by Emanueli Oliveri was to the effect that Emanueli Oliveri acted at the direction of Giovanni Oliveri who, as my earlier decision established, had no beneficial interest in the property. At the time of the Sequestration Order Emanueli's occupation was lawful, as he had the permission of the beneficial owner. Mr Jones did not in the cross-claim or in any other way bring proceedings in ejectment against Emanueli Oliveri, and did not make any demand for possession, re-entry or attempt to re-enter. On one occasion he asked for access for the purpose of inspection, which was refused, but to do so was not to effect a re-entry or attempt one. Possession was eventually yielded voluntarily on or about 3 February 1997. 3 The acts of Emanueli Oliveri, and of Giovanni Oliveri at whose direction (and it was claimed by both, and not disputed, that he acted at his direction) can only be said to be trespass by resort to a legal fiction. Mr Emanueli Oliveri did not establish control of the premises by an unlawful entry but he was actually there when Mr Jones' title to the premises arose. In actuality he did not ever become a trespasser by withdrawal of his permission to be present, by actually re-entering after possession had been taken by Mr Jones. However an owner of land is entitled to recover damages for trespass, referred to as mesne profits, under a fictitious doctrine referred to as trespass by relation, stated by Taylor J. in Minister of State for the Interior v RT Company Pty Ltd & Ors (1962) 107 CLR 1. At p5 his Honour said: "In support of the primary submission … it was pointed out that a claim for mesne profits is a particular form of the action for trespass, that as such it is based upon an injury to the plaintiff's possession and that the plaintiff is enabled to recover only upon the doctrine of trespass by relation. That is to say, that upon entering into possession the plaintiff is deemed by a legal fiction to have been in possession ever since his right to possession arose." His Honour went on to show, with references to authority and texts, that the principle on which the submission were based was clearly established and that (p6) "… at common law a plaintiff suing for mesne profits could not, in general, succeed unless he proved that pursuant to a right to do so he had entered into possession." Taylor J went on to indicate some exceptions, but the present case did not fall within any exception. The best-known exception itself involves a further fictitious step in that issuing proceedings claiming ejectment and mesne profits is treated, for the purpose of the claim for mesne profits, as itself a re-entry. Having regard to the form of the cross-claim that reasoning and the fiction which it involves are not available in these proceedings. 4 Some expressions in Taylor J's judgment show that his Honour did not regard the law in this area as altogether satisfactory (and in my view it could not be regarded as satisfactory), but however that may be the law is well established, and it is only an owner who has taken possession of the property, or has taken some step which is treated as its equivalent such as commencing ejectment proceedings, who has the benefit of a claim for damages for mesne profits relating back to the time when the owner's title accrued. 5 The unusual facts of The Minister of State for the Interior v. RT Co. Pty Ltd led Taylor J to a conclusion in which the plaintiff's claim for mesne profits was defeated on the ground that the writ was issued and the claim for damages was made before re-entry was effected; hence there was no entitlement to damages at the time of commencement of the proceedings; while the unusual facts of that case meant that fictitious relation back was not available. 6 In the present case not only was the cross-claim claiming damages commenced before possession was taken by Mr Jones, and without commencing ejectment proceedings with a claim for mesne profits, which would have given Mr Jones the advantage the second fiction to which I have referred; the order for the assessment of damages was made before possession was taken. At the time the cross-claim was commenced and at the time of my order a claim for damage for mesne profits was not maintainable; cf the reasoning of Taylor J at 7. See too Baldry v Jackson [1976] 2 NSWLR 415. The procedural effects of this shortcoming and the law as established in Baldry v Jackson might have been overcome by an amendment granted under Pt.20 r.1(1) of the Supreme Court Rules, with the effect prescribed by subr.(3A), but there has been no application for an amendment of that kind. In my view the Master's reasons, which are found at paras 23 to 25 of his judgment of 5 March 1999, were correct. 7 Counsel's submissions in support of this ground went little further than to contend that the outcome appears very anomalous as Emanueli Oliveri remained in occupation and control for well over three years after the Sequestration Order, resisted these proceedings and in probability would not have given up possession had it been demanded, particularly having regard to his response to the request for access. The submissions did not come to terms with the reality that the law has been established as the Master applied it. 8 Counsel also contended that the Master should have taken the view that an award of damages was available as an alternative to the grant of an injunction restrained continuing trespass. The Master's reasons for not acting on this basis were to the effect that there was no basis on which an injunction to restrain continuing trespass could be granted, and in my view this holding was clearly correct. Mr Jones' right to possession could have been enforced by ejectment proceedings, and having regard to the facts there was no basis on which an equitable remedy could be granted. In any event, there was no claim for an equitable remedy relating to possession of the premises. 9 In my opinion the Master's certificate relating to damages was correct. 10 The other ground of appeal related to the taking of accounts. The principal matter charged on the respondents was the rent received by Emanueli Oliveri with the authority of Giovanni Oliveri from Units 2, 3 and 4, which were let out at most times while Emanueli Oliveri was in control of the premises. In taking the account the Master made allowances for moneys paid by Emanueli Oliveri relating to the premises, and for other matters, and in so doing allowed mortgage repayments which had been made against a bank mortgage charged on the property. The contention was to the effect that one-quarter of the mortgage repayments should not have been allowed as a just allowance, having regard to Emanueli Oliveri's occupation of Unit 1. The Master's reasons for not reducing the allowance in this way are found at para.5 of his judgment of 7 May 1999. The Master found in fact that there was no agreement between these respondents regulating a quarter of the mortgage payments (and that finding is not challenged), and otherwise disposed of the point by saying "… the trustee has benefited from the payment of the mortgage. On sale he has to pay less to discharge the mortgage." In my opinion that was a complete and correct dealing with the subject. Although the respondents are accountable for the rents which Emanueli Oliveri collected, fairness requires that they be allowed money paid, while receiving those rents, in reduction of a mortgage debt over the property. The fact that he lived in part of the property makes no difference to this; it is no less true that Mr Jones has the advantage of reduction of the debt. The argument is an oblique way of seeking to charge the respondents with a small part of the claim for damages for mesne profits for occupying Unit 1. I do not regard it as appropriate to give that partial and limited recognition to the mesne profits claim at an altogether different part of the parties' controversy. In my view this part of the Master's decision was correct. 11 During argument I considered the possibility that the just allowance to be made might be limited to the reduction in principal, and not to mortgage interest for the period during which Emanueli Oliveri was in occupation. However the evidence does not lay the ground for establishing what the interest was, no such point was taken before the Master or in the Notice of Appeal, the materials on which the point could be decided are not before me, and it is not appropriate to resolve that question in the appeal. In my opinion the appeal from the Master's decision should be dismissed. 12 Mr Jones' counsel also brought before me further consideration of the costs of the inquiry, which I reserved in my orders of 13 December 1996. I then said "My present impression is that if any significant sum is found to be payable to the first defendant in the course of that inquiry the first defendant should recover all costs of the inquiry, but that cannot be decided now as some further circumstances might emerge in the course of the inquiry." The amount recovered is not an amount which should in ordinary circumstances bring with it an order for costs. The provisions of Rules of Court establishing scales do not literally apply in the Equity Division although they are sometimes applied by analogy. There are some unusual circumstances in this case, as the inquiry was ancillary to litigation relating to property of significant value which could only be brought in the Supreme Court. Further, the respondents did not participate in an appropriate way in the Inquiry so as to produce accounts of their dealings and give effect to my direction that there be an inquiry on a subject in relation to which, for practical purposes, almost all information was in the hands of the respondents and not of Mr Jones. I was referred to several affidavits and pieces of correspondence which contain, in no systematic way, indications of what might be in accounts. These served only to illustrate that the respondents did not produce accounts in any intelligible form. The respondents took their position as an accounting party in no way seriously until the hearing of the inquiry was approaching. On 30 October 1998 Master Macready made a number of procedural directions including one requiring Emanueli Oliveri to file a statement setting out his best accounting showing the amount received, expenses paid and any credits given to tenants. Thereafter Emanueli Oliveri made and filed an affidavit of 23 November 1998 in which, without complying with the court's practices relating to accounts, and in an inadequately systematic manner, he set out accounts which formed the basis of the hearing before the Master. The cross-claimant responded with a document indicating the matters in dispute which became Exhibit 1. Emanueli Oliveri's affidavit was extremely belated, in an inquiry which was directed on 13 December 1996 where the hearing was to commence on 1 December 1998. 13 It is unlikely that Emanueli Oliveri would ever have made any accounting at all unless Mr Jones had pressed on with the inquiry and obtained the procedural directions, and it was only when he made this affidavit that Mr Jones and those advising him were in a position to address what was truly in issue and the likely outcome in any realistic way. The events demonstrate that Emanueli Oliveri has followed a course of protraction and failure to comply with the obvious requirements of his position as an accounting party until the last minute; he exploited the Court's procedure. To my mind this is a justification, at least to some extent, of the course taken by Mr Jones in pressing on with the inquiry, and is a consideration of weight in favour of allowing some costs notwithstanding the no more than nominal success of the exercise. In my opinion the events show that it was necessary to attain justice that Mr Jones should, with legal advisers, continue proceedings in the inquiry, compel Emanueli Oliveri to give his version of the accounts, and then come to some conclusion on them. Giovanni Oliveri is in no better situation as he did not ever file any evidence at all or make any gesture towards accounting for what had been done under his authority. 14 On the other hand some aspects of the conduct of the inquiry appear to me to have been excessive. The hearing continued for three days and Mr Jones was represented by senior and junior counsel. In both these respects the costs exceed any costs which respondents ought justly be required to pay. 15 In the circumstances I propose to make an order for costs, but to limit costs to be recovered in several ways. 16 My Order is:

(1) On the Notice of Appeal dated 9 June 1999 order that that the Appeal be dismissed with costs.

(2) On the further consideration of the costs of the proceedings on the Inquiry reserved by my Order of 13 December 1996:

(1) Order that the cross-defendants Emanueli Oliveri and Giovanni Oliveri pay the cross-claimant's costs of the Inquiry assessed in accordance with this order.

(2) On the assessment of costs the cost of preparation for the hearing and of procedural directions and of hearing the proceedings on 1 December 1998 are to be allowed, but the costs of hearing the proceedings after 1 December 1998 and the costs of senior counsel are not to be allowed.

(3) Order that the cross-defendants Emanueli Oliveri and Giovanni Oliveri pay the cross-claimant's costs of the application relating to costs of 2 August 1999.

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