Plaintiff v Defendant

Skouloudis Group Pty Ltd (in liq) & Anor v Planet Enterprizes Pty Ltd

CORPORATIONS - Corporations Act 2001 (Cth), s.471B - Application for leave to proceed against company in liquidation - Proposed proceeding seeking declarations that company held property on trust for applicant director's family trust, that applicant held licence to occupy property rent-free for life, that company was removed as trustee of family trust and that the property be transferred to the applicant as trustee - Whether applicant established prima facie case, "serious claim" or "real dispute" regarding valid entitlement to occupy property - Application refused.

Equuscorp Pty Ltd & Anor v Glengallan Investments Pty Ltd & Ors

Goldsworthy Mining Ltd v Federal Commissioner of Taxation

ICI Alkali (Aust) Pty Ltd (in vol liq) v Federal Commissioner of Taxation

CORPORATIONS - Supreme Court (General Civil Procedure) Rules 2005, Order 53 - Application by liquidator for recovery of possession of the property - Whether defendant had arguable defence based on valid lease or entitlement to occupy under deed of agreement and settlement - Whether alternative arguable defence based on licence coupled with equity to occupy property due to mortgage repayments and guarantee - Whether reasonable doubt that company entitled to possession - Application allowed.

Nick Kritharas Holdings Pty Ltd (in liq) v Gatsios Holdings Pty Ltd

1 These reasons for judgment relate to: (a) an application for leave to appeal from the decision of a Master ("the appeal") in proceeding number 4484 of 2006; (b) an application for leave to proceed pursuant to s.471B of the Corporations Act 2001 (Cth) ("the Act") in proceeding number 4484 of 2006; and (c) an application for recovery of land pursuant to Order 53 of the Supreme Court (General Civil Procedure) Rules 2005 ("Supreme Court Rules") in proceeding number 5288 of 2007. The applications were heard together.

2 In the applications, it is necessary to determine whether Mr George (or Constantinos) Velissaris, the sole director and shareholder of Maryvell Investments Pty Ltd (in liq) ("Maryvell" or "the company"), has at least an arguable case that he is entitled to occupation or possession of a property situated at 333-335 Sydney Road, Brunswick ("the property"). The company is the registered proprietor of the property, which contains a two-storey terrace house from which a restaurant business has been conducted for many years. The company was ordered to be wound up in insolvency on 19 June 2006 and Mr Laurence Fitzgerald was appointed the liquidator.

3 After the winding up order was made, Mr Velissaris claimed to be entitled to possession of the property as lessee under a lease from the company dated 15 May 2006 ("the 2006 lease"). On 15 February 2007, Master Efthim declared that the 2006 lease was void and unenforceable as an uncommercial transaction pursuant to s.588FF(1)(h) and (j) of the Act. Mr Velissaris appeals against that order of Master Efthim. He has, at all times, remained in occupation or possession of the property.

4 The liquidator, by originating motion dated 22 March 2007 in proceeding number 5288 of 2007 pursuant to Order 53 of the Supreme Court Rules ("the liquidator's recovery application") seeks to recover possession of the property from Mr Velissaris. Mr Velissaris opposes the liquidator's recovery application. Initially, his opposition was based solely on his rights under the 2006 lease. Subsequently, Mr Velissaris also relied on the alternative and arguably inconsistent ground that he is entitled to possession of the property independently of the 2006 lease, pursuant to a deed of agreement and settlement dated 10 March 1998 ("deed of agreement and settlement"), whereby the company conferred on him a right to occupy or possess the property rent-free for life, or as long as he wished. In resisting the liquidator's recovery application, Mr Velissaris subsequently also asserted that he had "a licence coupled with an equity" to occupy the property, on the ground that he had made mortgage payments in relation to the property and given a guarantee and indemnity in reliance on his entitlement to lifelong, rent-free occupancy.

5 Mr Velissaris, by an application pursuant to s.471B of the Act, seeks, inter alia, leave to bring a proceeding against the company to establish his claimed entitlement to occupy the property pursuant to the deed of agreement and settlement and an order that the property be transferred to him in his capacity as the trustee of a family trust.

6 By a Notice of Appeal dated 21 February 2007, Mr Velissaris appeals from the order of Master Efthim made on 15 February 2007, in which the Master ordered:

(1) There be a declaration pursuant to section 588FF(1)(h) of the Corporations Act 2001 that the purported lease between Maryvell Investments Pty Ltd (ACN 080 327 073) (in liquidation) and Mr George Velissaris in respect of the property at 333-335 Sydney Road, Brunswick Victoria...was void at and after 15 May 2006, being the date on which the said lease was purportedly made.

(b) There be a declaration pursuant to 588FF(1)(j) of the Corporations Act that the said lease is unenforceable.

(c) The respondent [Mr Velissaris] pay the liquidator's costs of the interlocutory application of 22 September 2006 including reserved costs.

7 Mr Velissaris appeals against "the complete orders of Master Efthim made on 15 February 2007".

8 The application was referred to Master Efthim by my order made on 18 December 2006, so (although it was not formally sought) leave to appeal is required under Rule 16.5 of the Supreme Court (Corporations) Rules 2003 ("the Rules").

9 Rule 16.5 of the Rules states:

(1) Subject to sub-rules (2) and (3), an appeal lies from the order of a Master made under these Rules as though it were an appellable order of a Master under Chapter I of the Rules of the Supreme Court.

(2) No order of a Master made on an application referred to the Master by a Judge shall be subject to an appeal except by leave of a Judge.

(3) Without limiting the discretion to grant or refuse leave, leave may be granted if the Judge is satisfied, whether with or without oral argument, that the decision of the Master is arguably affected by error.

10 No authority on the scope of Rule 16.5 was identified. It is apparent, from its terms, that the Court could, in its discretion, refuse to grant leave where there was arguable error if, for example, it was of no consequence. Similarly, as (subject to sub-rules (2) and (3)) the appeal lies as if it were an appellable order of a Master under Chapter 1 of the Supreme Court Rules, it would seem that the appeal under Rule 16.5 is not an appeal in the strict sense. The emergence of new evidence could, in some circumstances, constitute a ground for leave in the absence of arguable error.

11 In the present case, Mr Velissaris contended that evidence about his prior entitlement to occupy the property was relevant to the appeal. I indicated that I would hear the application for leave and the appeal together. Counsel for both parties sought and obtained leave to rely on further affidavits filed in both proceedings.

12 Maryvell, as the plaintiff in proceeding number 5288 of 2007 commenced by originating motion dated 22 March 2007 for recovery of land under Order 53 of the Supreme Court Rules, seeks recovery of the property from the defendant, Mr Velissaris, and from every person in occupation of the property.

The application for leave under s.471B of the Corporations Act

13 By an amended interlocutory application dated 6 June 2007 ("the s.471B application") made in proceeding number 4484 of 2006, Mr Velissaris, as plaintiff, seeks an order under s.471B of the Act for leave to bring a proceeding against the first defendant, Maryvell, and the second defendant, the liquidator, to seek relief, including declarations that:

"(a) A declaration that at all relevant times Maryvell Investments Pty Ltd has held the property known as 335 Sydney Road, Brunswick, Victoria, and more particularly described in Certificate of Title Volume 4621 Folio 189 ("the property") on trust on the terms of the Deed of Settlement, dated 30 January 1998, as trustee of the Maryvell Family Trust;

(b) A declaration that Constantinos George Vellisaris has a right to occupy the property as licensee and to conduct the business situated thereat in accordance with the terms of the Deed of Agreement and Settlement dated 10th March, 1998;

(c) A declaration that by notice, dated 5th June 2006, under the terms of the Maryvell Family Trust, created by Deed of Settlement, dated 30 January 1998, the power vested in the Constantinos George Vellisaris as appointor, Constantinos George Vellisaris validly removed Maryvell Investments Pty Ltd as trustee of the Maryvell Family Trust;

(d) An order that the Maryvell Investments Pty Ltd and/or the Second Defendant forthwith transfer the property to Constantinos George Vellisaris as trustee of the Maryvell Family Trust; and

(e) An order that the winding up of Maryvell Investments Pty Ltd be stayed pending the hearing and determination of the proceedings contemplated in paragraphs 1 (a) to (d) inclusive hereof."

Appeal and applications to be heard and determined together

14 The hearing of the appeal was fixed for 5 June 2007 in the Corporations List. Master Kings had ordered that the s.471B application and the liquidator's recovery application would be heard together and fixed them for 31 August 2007.

15 At the hearing of the appeal (and application for leave) on 5 June 2007, Mr Selimi, counsel for Mr Velissaris, sought that the appeal be adjourned until the hearing and determination of the s.471B application and the liquidator's recovery application, on the ground that, as the matters arose from the same factual background and transactions, it was convenient and cost-effective to hear all three together. Further, that course would avoid the risk of inconsistent findings which would arise if the appeal were heard and determined prior to the other two applications.

16 Mr Selimi submitted that in the s.471B application, Mr Velissaris sought leave to bring a proceeding against the company to, inter alia, establish his entitlement to occupy the property rent-free for life or for as long as he wished ("the prior occupation entitlement") which predated the 2006 lease the subject of the appeal. An arguable or prima facie case for the prior occupation entitlement was both a necessary precondition of a grant of leave under s.471B and the basis of Mr Velissaris' opposition to the liquidator's recovery application. Mr Selimi submitted that the prior occupation entitlement was also crucial to the determination of the appeal, because the low rental payable under the 2006 lease was not uncommercial when evaluated by reference to the prior occupation entitlement, under which no rent at all was payable.

17 Given the common factual background and the inter-dependence of the appeal and the two applications, I proceeded to hear the appeal (and application for leave to appeal) as scheduled on 5 and 6 June 2007, adjourned the further hearing of the appeal (and related leave application) until 19 June 2007, and fixed the hearing of the s.471B application and the liquidator's recovery application to be heard together by me on 19 and 20 June 2007.

18 The appeal, the s.471B application and the liquidator's recovery application have a common factual background. Although this is set out chronologically below, it differs from the account originally presented to the Court. Some of the significant facts and documents emerged at different stages, as Mr Velissaris frequently introduced new assertions or documents and modified or retracted assertions which he had previously made.

19 The company was incorporated on 8 October 1997. Mr Velissaris is the sole director. There are 1,000 issued shares in the company. Its registered office is the property situated at 335 Sydney Road, Brunswick.

20 Mr Velissaris purchased the property in 1984. He became the registered proprietor on 18 April 1984 and thereafter conducted a restaurant business from the premises.

21 The property was subject to a mortgage in favour of the Bank of Melbourne, which was registered in January 1997. Following defaults in payments due under the mortgage, the mortgagee auctioned the property on 11 October 1997.

22 Mr Velissaris' daughter, Mary Velissaris, by an affidavit sworn 28 May 2007, deposed that she purchased the property at the mortgagee's auction on 11 October 1997, pursuant to a contract with the Bank of Melbourne dated 11 October 1997 and nominated the company (incorporated on 8 October 1997) as the purchaser, pursuant to the nomination clause. The instrument of transfer in favour of the company was executed by the Bank of Melbourne on 10 February 1998.

23 The contract of sale for the property dated 11 October 1997 is signed by Mary Velissaris as purchaser, at a price of $425,000 with a 90 day settlement. An attached receipt dated 11 October 1997 acknowledges $42,500 from "the Vellissaris" [sic] for the deposit.

24 The Maryvell Family Trust was established by Deed of Settlement dated 30 January 1998 ("Trust Deed"). Maryvell was the trustee of the Maryvell Family Trust. The settlor was Mark Koroneos. The Primary Beneficiaries were Helen Velissaris and Alexandros Velissaris. The appointor was George Velissaris. Clause 12 of the Trust Deed provides for the trustee's right of indemnity against the assets of the trust for liabilities "incurred in the execution or attempted execution of the trust, or as a consequence of the failure to exercise its powers or discretions, or by virtue of being trustee."

25 By clause 1.1 of the Trust Deed, 'Beneficiary' is defined to include, inter alia, the parents of each of the Primary Beneficiaries. It is not disputed that Mr Velissaris is the father of the Primary Beneficiaries and there was no evidence that he fell or falls within the class of 'Excluded Persons' as defined. He is therefore a beneficiary of the Maryvell Family Trust.

26 By clause 17 of the Trust Deed, the appointor is empowered to remove any trustee and appoint additional or new trustees, although the appointor, if a beneficiary, is not eligible to be appointed trustee.

27 By clause 19 of the Trust Deed, the office of trustee is automatically determined and vacated if, inter alia, the trustee is a company which goes into liquidation.

28 By the transfer of land dated 10 February 1998, the Bank of Melbourne transferred the property to Maryvell for a stated consideration of $425,000.

29 On 10 March 1998, a document entitled "Deed of Agreement and Settlement" was executed by George Velissaris both on his own behalf and on behalf of "Maryvel [sic] Investment Pty Ltd acting as trustee of the Maryvell Family Trust dated 30 January 1998."

30 The deed of agreement and settlement is signed by George Velissaris and bears the common seal of Maryvell. It is neither stamped nor witnessed.

"1). That: CONSTANTINE VELISSARIS (Also Known as GEORGE VELISSARIS) AGREES AND CONSENTS to Transfer his Commercial Property situated at 333-335 Sydney Rd Brunswick 3056 in the State of Victoria, and being Title Volume: 4621 Fol. 189, being Purchased by him Since the 18th of April 1984 in his own Capacity as the Proprietor, and holds this Property up to now as the Sole Proprietor on the Certificate of Title under the 'Transfer of Land Act 1915'.

HEREBY AGREES AND CONCENTS TO TRANSFER HIS PROPERTY TO: MARYVELL INVESTMENTS PTY LTD WHICH IS A TRUSTEE COMPANY ONLY, FOR HIS FAMILY TRUST, NAMED (MARYVELL FAMILY TRUST), AND TO BE KEPT IN TRUST FOR THE BENEFIT OF CONSTANTINE VELISSARIS AND OR GEORGE VELISSARIS WHO IS THE APPOINTOR OF THIS FAMILY TRUST DATED 30 JAN 1998.

2). IT IS HEREBY STATED AND AGREED THAT CONSTANTINE VELISSARIS (ALSO KNOWN AS GEORGE VELISSARIS) IS THE FULL SHAREHOLDER OF THE SHARES OF MARYVELL INVESTMENTS PTY LTD AND HE WILL OWN AND CONTROL ALL THE ASSETS OF THE MARYVELL FAMILY TRUST INCLUDING THE PROPERTY SITUATED AND KNOWN AS 333-335 SYDNEY RD BRUNSWICK AND BEING VOLUME 4621 FOL. 189 IN THE CERTIFICATE OF TITLE.

3). IT IS FURTHER AGREED BETWEEN THE TWO PERTIES IN THIS DEED OF AGREEMENT AND SETTLEMENT THAT CONSTANTINE VELISSARIS ALSO KNOWN AS GEORGE VELISSARIS WILL FULLY OCCUPY AND HOLD THE PROPERTY HEREIN TRANSFERRED (BEING 333-335 SYDNEY RD BRUNSWICK 3056) AS BEING HIS OWN PROPERTY AND TO CONTINUE TO RUN 'THE GREEK BAR TAVERN' BUSINESS BEING ESTABLISHED BY HIM SINCE 1990 ON THIS PROPERTY AND THE BUSINESS IS FULLY OWNED AND OPERATED BY CONSTANTINE AND OR GEORGE VELISSARIS FOR AS LONG AS HE WISHES DOING SO.

4). IT IS FURTHER AGREED UPON THAT WHILE MARYVELL INVESTMENTS PTY LTD WILL BECOME THE REGISTERED PROPRIETOR OF THE PROPERTY OF 333-335 SYDNEY RD BRUNSWICK IN VICTORIA ON THE CERTIFICATE OF TITLE VOLUME 4621 FOL. 189 IT WILL ONLY HOLD IT IN TRUST FOR AND ON BEHALF OF: CONSTANTINE VELISSARIS AND OR GEORGE VELISSARIS FULL BENEFIT, AND OR HIS FAMILY MEMBERS NAMED IN THE FAMILY TRUST AS BENEFICIARIES IN THE TRUST DEED OR WHOEVER OTHER HE APPOINTS.

5). AND IT IS FURTHER AGREED AND UNDERTAKEN BY MARYVELL INVESTMENTS PTY LTD THAT NO RENTAL WILL BE DUE AND PAYABLE TO MARYVELL INVESTMENTS PTY LTD, BY CONSTANTINE VELISSARIS, ALSO KNOWN AS GEORGE VELISSARIS, FOR AS LONG AS HE OCCUPY THE PROPERTY AND RUNS AND OPERATES 'THE GREEK BAR TAVERN' BUSINESS, AND THERE IS NOT ANY REQUIREMENT TO HAVE ANY PAYMENTS BE MADE TO MARYVELL INVESTMENTS PTY LTD BY BEING THE REGISTERED PROPRIETOR OF THE PROPERTY, AND IT IS AGREED UPON THAT IT WILL ALWAYS BE A FREE AND UNINTERAPTED OCCUPANCY OF THE PREMISSES TO SO BE ABLE TO CONTINUE TO OPERATE THE BUSINESS BY CONSTANTINE VELISSARIS ALSO KNOWN AS GEORGE VELISSARIS."

32 On 20 March 1998, the company was registered as proprietor of the property.

33 In 1999, Mr Velissaris was declared bankrupt. He completed and signed a Statement of Affairs dated 29 October 1999, which stated that the company, as trustee, was owner and operator of the restaurant business.

34 The Statement of Affairs stated that Mr Velissaris had assets with a total value of $1,922.56, made up of cash, furniture and effects and tools of trade. It acknowledged that he had conducted The Greek Bar Tavern and restaurant business and that some business assets were not owned by him. It stated that the business was not still operating. It stated "Bank enter into possession in July 97", and, in relation to the requirement to "List books of account/records kept in relation to each business", wrote "No Records" and indicated that there were no books of account written up or any persons holding them.

35 It stated that Mr Velissaris had been a director and shareholder of Maryvell in the last five years; that the company records were held by Mary Velissaris; that the company was the trustee of the Maryvell Family Trust, the beneficiaries of which were Helen, Mary and Alexandros Velissaris; and that the Maryvell Family Trust's assets included 333-335 Sydney Road, Brunswick, valued at $600,000 and 19 Clarence Street, Brunswick, valued at $200,000. (The nominated beneficiaries of the Maryvell Family Trust do not precisely coincide with those listed in the schedule to the Trust Deed. The Statement of Affairs refers to two other trusts.)

36 The Statement of Affairs thus indicated that the property was the property of the company, which was the trustee of the Maryvell Family Trust and that Mr Velissaris personally owned and had operated the business, but had virtually no assets. In particular, it did not acknowledge that Mr Velissaris claimed any interest in the property, whether pursuant to the deed of agreement and settlement or on any other basis.

37 On 30 October 2002, Mr Velissaris was discharged from bankruptcy.

38 On 16 June 2005, BankWest offered the company a loan of $1.1 million, to be secured by a mortgage over the property. BankWest's internal document dated June 2005 noted that the company was entitled to an indemnity from trust assets. The trust and the company executed warranty and consent forms dated 23 June 2005.

39 On 27 June 2005, the company executed a mortgage over the property in favour of BankWest.

40 A Statement of Affairs under the Judgment Debt Recovery Act 1984 stated that the company owned the property, which was stated to be valued at $2.5 million and subject to a mortgage for $1 million.

41 By a deed of variation dated 15 July 2005, Mr Velissaris purported to amend the Maryvell Family Trust Deed by removing the trustee's right to an indemnity from the trust assets.

42 On 3 February 2006, an originating process applying to wind up the company was issued by Tolhurt Druce & Emmerson, in reliance on non-compliance with a statutory demand for $37,690.62 dated 14 October 2005 ("the statutory demand").

43 On 11 November 2005, the company issued an application to set aside the statutory demand. The application was dismissed by Master Efthim on 25 January 2006.

44 A number of supporting creditors appeared in or supported the winding up application, including the following:

• Coadys, a firm;
• Sigma Constructions Pty Ltd;
• David Cheong;
• Eales & McKenzie, a law firm;
• Moreland City Council; and
• Shayne Daley, a legal practitioner.

45 The application for winding up was opposed by the company, which relied on the affidavit of Mr Velissaris sworn 7 March 2006. Mr Velissaris there deposed that the company was solvent and that the amounts claimed by the creditors had not been paid because the claims were disputed. He deposed that the company had been denied natural justice in, inter alia, a proceeding in the Magistrates' Court.

46 In that affidavit, at paragraph 15, Mr Velissaris stated:

"The two major assets of the company are the premises located at 333-335 Sydney Road, Brunswick, and an action against Sigma Constructions (Vic) Pty Ltd which is pending in the Victorian Civil and Administrative Tribunal ('the Tribunal')."

47 Mr Velissaris exhibited a valuation of the property for $1,620,000. He deposed that it was only a site valuation and that the property was likely to be valued at approximately $3,500,000 on a full market valuation. He deposed that it was encumbered by a mortgage to BankWest securing indebtedness of $900,000 and had a further borrowing capacity of $100,000 under the mortgage. It had no other liabilities.

48 Mr David Brett, on behalf of Coadys, a supporting creditor, by affidavit sworn 10 April 2006, deposed that the company had applied to the Melbourne Magistrates' Court to pay the judgment debt of $6,250 plus interests and costs to Coadys by instalments. Only two instalments had been paid, in February and March 2005. The payments had then ceased.

49 Mr Velissaris, by an affidavit sworn 25 May 2006, deposed to his dissatisfaction with various law firms successively retained to act on the company's behalf. He also deposed to his ill-health and heart condition.

50 He reiterated that "The defendant [company] is the sole proprietor of premises located at 333-335 Sydney Road, Brunswick" and operated a restaurant business from the premises. He deposed that the company had borrowed from BankWest in order to make capital improvements to the property and had mortgaged it to BankWest in order to secure the loan. Mr Velissaris deposed that the company was solvent because it had a credit facility with BankWest for a total of $1.1 million, on which $68,779 in credit remained available.

51 Further, he deposed that a market valuation of the property by Savills dated 9 May 2002 had valued the property at $2 million - $2.1 million.

52 By his affidavit sworn 13 June 2006, Mr Velissaris deposed, inter alia, that the company's restaurant business had been operated since 1990 by family members.

53 He again deposed that "The Company is solvent and its assets far exceed its liabilities. The Company is able to pay its debts as and when they fall due."

54 He exhibited the accounts of the company as trustee of the Maryvell Family Trust as at 31 May 2006 dated 5 June 2006, prepared by Gregoriades Sofocleous & Associates and signed by Mr Velissaris. The notes stated that:

"the company acts solely as Trustee has [sic] incurred liabilities at the 30th June 2006. Such liabilities will be discharged out of the assets of the trust and not out of the assets of the company..."

55 The accounts stated that the total assets as at 31 May 2006 were $3,577,605.85, including land and buildings at the director's valuation of $2.9 million, beneficiary loans of $396,897.54, stock on hand of $3,320 and a BankWest business loan of $68,779.12.

56 The liabilities comprised the BankWest Business Loan of $1.1 million. Net assets were stated to be $2,439,375.40. The net operating profit was stated to be $40,082.09.

57 Mr Velissaris deposed that "The Company is the sole proprietor of the land and buildings...at 333 to 335 Sydney Road, Brunswick," and referred to the mortgage in favour of BankWest taken out in June 2005.

1. The Company operates a business at the property. The business is a restaurant and trades under the business name of 'The Greek Bar Tavern' ('Kalamata') (the business). Now produced and shown to me and marked GV2 is a copy of a Certificate of Registration of Business name dated 6 July 2004.
2. A planning permit no. P138/1990 was issued by the then City of Brunswick to the property on 5 October 1990 to operate the business. The permit provides for the operation of a bar and restaurant with seating capacity of 135 people.
3. The business has been operating since 1990. I am involved in the running of the business. I manage the business and am also the head chef and the food safety supervisor. The business employs family members plus two/three part-time casuals. The business operates from 5pm to 12pm seven nights a week.
4. ...
5. The net operating profit of the Company for the year ending 31 May 2006 is $40,082.09. It is my intention for the Company to continue operating the business as an ongoing concern and then to sell the business and to lease out the property for a minimum of $3,000.00 per week. Offers have been made to me recently for the purchase of the business."

59 Mr Velissaris deposed that all plant and equipment necessary to operate the business were purchased and owned by the company. Mr Gardiner, counsel for Maryvell and the liquidator, submitted that the accounts and the ownership of plant and equipment were consistent with the company operating and owning the business.

60 On 15 May 2006, the company purported to grant Mr Velissaris a lease of the property for a five year term, with an option for a further term of five years. The initial nine months of the term was to be rent-free and thereafter rental was payable at the rate of $220 per week exclusive of GST.

61 On 5 June 2006, Mr Velissaris, as appointor of the Maryvell Family Trust, took steps to remove the company as trustee and to appoint Mary Velissaris (also known as Mary Patroungas) as trustee in substitution.

62 On 19 June 2006, Master Efthim ordered the company to be wound up in insolvency pursuant to s.459P of the Act and Mr Fitzgerald was appointed liquidator. The Master also ordered that the order be stayed until 4.00 pm on 23 June 2006 or until further order.

"On the question of insolvency no audited accounts have been filed. Unaudited accounts are not ordinarily probative of solvency. (See Ace Contractors & Staff Pty Ltd v Westgarth Developments Pty Ltd [1999] FCA 728). The accounts put before the Court are unaudited and unsigned. There are creditors not referred to in the accounts. For example Land Tax and David Cheong. The accounts give no clear description of the debts of the Plaintiff. Two opportunities were given for proper accounts to be filed but proper accounts were not filed. A presumption of insolvency has not been rebutted. The director of the Defendant has sworn that the Defendant operates a restaurant. On the evidence before the Court it is a business by the Director himself or someone else. An offer was made by the Company to pay $15 000 into Court with a further $20 000 after 30 days. That amount does not satisfy all of the supporting creditors. The creditor and the supporting creditors refused the offer. The order to wind up was stayed for 4 days as the creditors generally would not be prejudiced by the short stay."

64 By summons filed 23 June 2006, the company sought that the stay be extended until 10 July 2006. That application was opposed by the petitioner and supporting creditors. On 23 June 2006, I dismissed the application for an extension of the stay.

65 Mr Velissaris, by Notice of Appeal dated 22 June 2006, sought to appeal against the Master's order that the company be wound up.

66 On 7 July 2006, I dismissed the Notice of Appeal dated 22 June 2006.

67 By an interlocutory process filed 22 September 2006, the applicant, Mr Fitzgerald, as liquidator of the company, sought that "the purported lease dated 15 May 2006 wherein the company leased Mr Velissaris the property at 333-335 Sydney Road, Brunswick" be declared void and unenforceable, as an uncommercial transaction within terms of s.588FB of the Act.

68 By his affidavit sworn 22 September 2006 in support of the application to have the 2006 lease declared void and unenforceable, Mr Fitzgerald deposed that on 26 June 2006, he wrote to Mr Velissaris requiring the delivery of the books and records of the company and that Mr Velissaris submit a Report as to Affairs ("RATA") by 10 July 2006.

69 Mr Fitzgerald deposed that despite numerous requests, Mr Velissaris failed to provide a RATA. Further, most of the company's books and records were not delivered, without any reasonable excuse.

70 Mr Fitzgerald deposed that the company's sole principal asset was the property, from which the company operated a restaurant business.

71 Mr Fitzgerald deposed that Mr Velissaris had not co-operated with him or his staff, but his investigations had identified a number of creditors, including the mortgagee, BankWest, for over $1 million.

72 In support of the contention that the 2006 lease was an uncommercial transaction, Mr Fitzgerald relied on Mr Velissaris' assertions in paragraphs 15 - 17 of his affidavit sworn 13 June 2006, where he had deposed that the company owned the property, exhibited valuations indicating an average rental of $98,000 per annum, and asserted that the company operated the business.

73 Mr Fitzgerald referred to Mr Velissaris' claim, made by a letter dated 26 June 2006 to the liquidator's firm, Horwaths, that the company had leased the property to him and that he lived in the upstairs area.

74 Mr Fitzgerald deposed that as Mr Velissaris had not provided any documentation about the alleged lease, he had concluded that Mr Velissaris had a monthly tenancy of the property. The liquidator's solicitors, Robert James Lawyers, accordingly wrote to Mr Velissaris on 18 July 2006 giving notice of the termination of the monthly tenancy from 19 August 2006.

75 On 18 July 2006, Mr Velissaris forwarded to the liquidator's solicitors a purported handwritten lease document in relation to the property, with an execution clause completed by Mr Velissaris on his own behalf and that of the company on 15 May 2006. The lease document comprised only a single front page of a Law Institute of Victoria standard lease and a handwritten schedule, completed by Mr Velissaris. The schedule stated Mr Velissaris to be the tenant of the property and the company to be the landlord. The rent was stated to be $220 per week, exclusive of GST.

76 The term of the lease was five years, commencing 19 May 2006. An option for a further five years was conferred. The permitted use was stated to be "Bar Tavern and Restaurant".

"The Landlord Agrees and Concents [sic] with the tenant that no rent is due and payable by the tenant for the first nine months of the lease and the landlord is owing Monies to the Tenant as Wages."

78 The 2006 lease document was signed by Mr Velissaris on his own behalf and on behalf of the company, the common seal of which was affixed.

79 Mr Velissaris' affidavit of 13 June 2006 had not referred to the 2006 lease, although it predated the affidavit by about a month. Rather, the affidavit had indicated that the property could be rented for substantial rent and that he proposed to rent it in future for a minimum of $3,000 per week. It did not mention that the company was no longer trustee of the Maryvell Family Trust.

80 Mr Gardiner, counsel for the liquidator, submitted that this demonstrated a lack of candour and poor credit on Mr Velissaris' part. He submitted that when it had suited his purpose in the context of the winding up proceeding, Mr Velissaris contended that the company owned the business and the property. In the context of the uncommercial transaction application, however, he argued that, (contrary to the import of the accounts) he owned the business and that the company did not own the property beneficially.

81 In the affidavit sworn 22 September 2006, Mr Fitzgerald also noted that:

(1) entry into the lease was an event of default under the BankWest mortgage without the mortgagee's consent, which (he was informed) had been neither sought nor obtained;

(2) the company entered into the purported lease on 15 May 2006 at a time when the company was presumed to be insolvent, because it had failed to keep financial records which recorded its position in accordance with s.286(1) of the Act and had failed to retain the financial records for seven years, in breach of s.286(2) of the Act.

82 Further, the company was, in Mr Fitzgerald's view, insolvent as at 15 May 2006 (the date of the lease) on the basis of his investigations, which had revealed the following:

(2) It had failed to pay council rates for four years.

(3) It had no income, debtors, stock or cash inflow from trading or assets.

(5) It was continuing to incur debts through interest charges to BankWest and statutory charges (amounting to $6,500 per month on the mortgage).

(6) The company had total funds of $5,280, which was insufficient to discharge its liabilities.

(7) The company's main asset was the property, which would take some months to realise.

(8) The appointment of a liquidator had complicated the capacity to refinance.

(9) Mr Velissaris had informed the liquidator that he would not pay any creditor without a court order.

(10) The 2006 lease provided that no rent would be payable for the first nine months of the lease - until February 2007 and thereafter, rent would be $953 per month ($220 per week).

83 Mr Fitzgerald referred to Mr Velissaris' affidavit sworn 13 June 2006, which asserted, in reliance on the valuation of Savills, that as at May 2002, the property had a current rental income of $117,400 per annum or $9,800 per month, and an assessment of rental set the rental as approximately $8,000 per month. As that was about 10 times the rental payable by Mr Velissaris under the 2006 lease, Mr Fitzgerald concluded that, on the basis of Mr Velissaris' own evidence, the rental under the 2006 lease was uncommercial.

84 The affidavit of Mr Fitzgerald sworn 19 October 2006 exhibited correspondence between the liquidator and Mr Velissaris. By his letter dated 10 October 2006, the liquidator again requested Mr Velissaris to deliver the RATA and the books and records of the company. Mr Velissaris acknowledged that letter. The handwritten letter of Mr Velissaris dated 12 October 2006 contained what purported to be an undated RATA and a proof of debt by Mr Velissaris for $4 million.

85 Mr Fitzgerald deposed that Mr Velissaris had, as at 19 October 2006 (despite his assertions to the contrary), still not provided the company's books and records.

86 Further exhibited correspondence included a handwritten letter of Mr Velissaris to the liquidator received on 19 October 2006, which asserted that he was entitled to occupy the property without paying any rental to the company.

87 Mr Velissaris, by affidavit sworn 4 December 2006, deposed that he was a restaurant owner, a "contributory" of the Maryvell Family Trust and the appointor of the Trust under the Trust Deed of Settlement dated 30 January 1998.

88 He referred to the company's litigation against a truck driver and a Magistrates' Court order against Maryvell, against which he had appealed. He complained that Mr Fitzgerald had, despite repeated requests, abandoned the company's appeal against the order of the Magistrates' Court, which he claimed to be unjust.

89 Mr Velissaris also complained of the conduct of a number of his previous solicitors and of injustice. He complained that he had been refused finance by more than two dozen banks, because he could not prove that he could service the loan if the business was in liquidation.

90 He deposed that the company did not own the business. Rather, it was owned by him personally "since 1990, and up to now".

"I have bought the 333-335 Sydney Road property ... on my own name and I became the proprietor on the 18th April 1984 and have spent a lot of monies through the years and up to 1990 to fully renovate it and I have obtained a Town Planning [Certificate] to operate a restaurant named The Greek Bar Tavern and is my own business since then ... ".

92 Mr Velissaris also deposed that in early 1998, he had received legal advice to create a trustee company and:

"to transfer my property...to the trustee company and with a discretionary Family Trust and for me to be the Appointor in the Trust Deed with certain and absolute powers to control the Trustee Company and control and own all the assets of the Family Trust and of course the property which was always my asset and I believe it still is as I personally have put all the monies to purchase it and to renovate it from my own house properties and also monies I have saved."

93 He deposed that he created the trustee company, Maryvell, and the discretionary family trust dated 30 January 1998. He was the sole director, secretary and shareholder of the company and the appointor of the Family Trust. He had been in full occupation of the property, from which he ran his tavern business, since 1984. He deposed that he transferred his property to the trustee company on 20 March 1998 and was advised by his lawyers that he would be entitled to continue to occupy the property rent-free, and to run the business, as he had full equity.

94 He referred to the deed of agreement and settlement dated 10 March 1998 between himself and the company, which provided that he could occupy the property rent-free as long as he wished to occupy it and run his business. He deposed that he had transferred the property to the company gratuitously, on the basis that the company would permit him to occupy it rent-free.

95 Mr Velissaris stated that the 2006 lease was prepared on legal advice to allow him to remain in occupation for a nominal rental and to run his business. He also deposed that he, as appointor, had removed Maryvell as the trustee on 5 June 2006 and that he and Mary Patroungas were now the trustees. Mr Velissaris disputed the contention that he did not hand over the company's books and records.

96 He complained of his previous legal advisers and stated that he had been compelled to sign his affidavit dated 13 June 2006 at the last moment, without reading it.

97 The affidavit of Mr Fitzgerald sworn 14 December 2006 deposed that BankWest provided him with a copy of the Deed of Settlement of the Maryvell Family Trust, which was produced from BankWest's file and provided to it in June 2005 when the lending facility was approved. In contrast to the copy exhibited to Mr Velissaris' affidavit, the copy of the Trust Deed produced by BankWest did not contain the handwritten annotations by Mr Velissaris, which purport to exclude the trustee's right of indemnity against the trust assets and to amend the clause providing that beneficiaries are disqualified from holding office as trustee by providing that only primary beneficiaries are disqualified. This is discussed further below.

98 Mr Fitzgerald, by affidavit sworn 22 March 2007, deposed to the background of the winding up, and the declaration of Master Efthim on 15 February 2007 that the 2006 lease was void.

99 He deposed that Mr Velissaris, despite six successive written requests by the liquidator made in February and March 2007, refused to vacate or give up possession of the premises.

100 On 19 March 2007, Mr Fitzgerald attended the property with a security officer, police and a locksmith.

101 Mr Fitzgerald deposed that Mr Velissaris called his lawyer, argued, and was angry and threatening. He asked that the locks not be changed. Although the locks were changed, Mr Fitzgerald gave Mr Velissaris a key to enable him to remove his belongings. He then left the premises. Mr Velissaris had since refused to leave.

102 The affidavit of Mr Velissaris sworn 30 March 2007 deposed that he purchased the property on 18 April 1984 and renovated it. He operated a restaurant business from 1988 under the name "The Greek Bar Tavern" and then "The Greek Bar Tavern The Kalamata and Mediterraneo Restaurant". He exhibited a certificate showing that he was the owner of the business name as at 3 June 1998.

"On the 10th March 1998, before I transferred the property to Maryvell Investments to be held on trust, and in order to ensure that the basis upon which I was to transfer the property was clear and that there could not be any later disputes of the basis upon which Maryvell Investments was to hold the property, I drew up a Deed of Agreement and Settlement ("the Deed of Agreement") between myself and Maryvell Investments ... ."

104 Mr Velissaris deposed that he drew the deed of agreement and settlement after speaking to his then solicitors. He then:

"placed the company seal to the Deed of Agreement in my capacity as director and I signed beneath the common seal and also signed it in my personal capacity".

"In March 1998 I valued the property at about $1.2 million. I did not receive payment for the transfer of the property from myself to Maryvell Investments. I did not seek payment because I believed that the property was being held on trust on my behalf and for my family members pursuant to the Deed of Agreement and Deed of Settlement.

On about 20th March 1998 a mortgage was given to the mortgagees identified on the certificate of title in order to secure a loan of about $570,000, on the security of the property to discharge a then existing mortgage. I also guaranteed payment of the loan.

The primary liability of Maryvell Investments as Trustee for the Maryvell Family Trust was under the mortgages of the property. Currently there is a mortgage to BankWest in the sum of about $1.1 million, for which I have given full guarantee and indemnity.

Maryvell Investments has not traded. Its primary function has always been to hold the property on the above trusts...

Since about 1988 I have conducted my restaurant business from the property and provided all funds for the payment of Maryvell Family Trust's liabilities.

The restaurant business has never been owned by Maryvell Investments. I believe that I have always owned the business as I am the one who has conducted the business since it was established in about 1988."

106 Mr Velissaris deposed that on 5 June 2006, by a deed of removal of trustee, he, as appointor, removed the company as trustee and appointed Mary Patroungas. On 9 November 2006, Mary Patroungas resigned and Mr Velissaris became trustee of the trust in her place.

107 In relation to the 2006 lease, Mr Velissaris deposed:

"On about April 2006 under legal advice from my then lawyers I drew up a lease with Maryvell Investments, dated 15 May 2006. I was unsure as to why this was necessary as I believed I already had the right to occupy the property, however, following legal advice I did draw up a lease.

Under the lease I would continue to occupy the premises and continue to run the business for a nominal rent. The rent was nominal because I believed that the property was held by the company on my behalf and by reason of the Deed of Agreement. On about 26 June 2006 and subsequently I notified the liquidator that I had a lease with Maryvell Investments and I provided to him a copy of the lease".

108 Mr Velissaris deposed to the liquidator's successful application to have the lease declared uncommercial and his demand that Mr Velissaris vacate the property, although Mr Velissaris believed that "I am entitled to remain on the property", as the company had merely held the property on trust for him and his family members and had now been removed as trustee.

109 He stated "I believe that I have a strong case that the property is held on trust for me and my family ...".

110 In contrast to the assertions that the company owned the property (made in his earlier affidavits) filed in proceeding number 4484 of 2006 (including affidavits prepared by legal firms on his behalf) following the winding up of the company and the declaration that the 2006 lease was void, Mr Velissaris contended that he was entitled to occupy the property under the deed of agreement and settlement. He made no reference to his bankruptcy and contended that he had transferred the property to the company gratuitously.

111 By an affidavit sworn 18 April 2007, Ms Annette Dreese deposed that Mr Velissaris was declared bankrupt in October 1999.

112 When his bankruptcy in 1999 was disclosed by the affidavit of Ms Dreese sworn 18 April 2007, Mr Velissaris, by an affidavit sworn 24 May 2007, admitted that he was declared bankrupt on 29 October 1999 and was discharged from bankruptcy on 30 October 2002. He denied, however, that his trustee in bankruptcy had acquired any interest in the property based on his entitlement under the deed of agreement and settlement.

113 He deposed that the property was the "sole fixed asset of the Family Trust" and "The Family Trust is the real owner of the property".

114 He also denied that the company had ever been the owner of the restaurant business.

115 He deposed that he had no assets "other than the business which I own and operate together with personal effects and furniture".

116 Mr Velissaris sought to characterise his claimed entitlement to occupy the property as a licence, but also contended that he had "sole possession" of the property. He deposed that:

"I have occupied the premises as a licensee pursuant to an agreement entered into between myself and the [company] on 10th March, 1998 and I have had the sole possession and occupation of the property since 1984. I deny [the liquidator's] assertions that the Trustee Company is 'the owner of the property' as it is holding the property in Trust, as per the Deed of Settlement of the Discretionary Trust dated 30 January 1998..."

"Due to my lack of legal training and knowledge, in my previous Affidavits prepared by myself, I have described myself as the 'full beneficial owner' of the property and I have also described the property as 'my property'. Having received legal advice in relation to the law of Family Discretionary Trusts, I now understand that I was incorrect in making these statements. I am not the beneficial or real owner of the property at all.

Previously, I was the full legal and beneficial owner of the property until it was transferred to the Family Trust. The property forms part of the Family Trust which was created for the sole benefit of the beneficiaries of the Family Trust. I am not, and have never been, a beneficiary of the Family Trust. The property was transferred out of my name and into the name of the Plaintiff...I believe that the property...is owned by the Family Trust for the benefit of the beneficiaries...

I intend to discharge my duties as current Trustee of the Trust...I am not named as a beneficiary of the Trust, but I intend to continue to assume sole possession and control of the trust property to run my restaurant business and with a view of ultimately developing the rear land of the property into motel rooms or apartments and selling them for the best possible price and thereafter distribute the capital proceeds to the beneficiaries specified in the Family Trust."

118 Mr Velissaris reiterated that the company was not the beneficial owner of the property, but had merely been the trustee. He deposed that it had borrowed the $1.1 million from BankWest in that capacity. He deposed that he had removed the provision for the indemnity of the trustee from the trust property on 15 July 2005 at the direction of David Pryse, an officer of BankWest.

119 Mr Velissaris stated that he had previously characterised the property as an asset of the company, because it was the registered proprietor, and he "did not intend to convey any impression that it was the equitable owner of the property".

120 Mr Velissaris acknowledged that he had told the liquidator that he owned the assets of the trust, but he now understood that he was mistaken, as he had "never been a beneficiary of the trust" although, as he was old fashioned, "I often still call myself the owner of the property".

121 Wayne Robins, the manager of Business Recoveries BankWest, by an affidavit sworn 29 May 2007, deposed that Mr Pryse was no longer employed by BankWest. He had inspected the relevant BankWest file and found no record that Mr Velissaris had been advised by David Pryse or any other person to amend the Trust Deed, as Mr Velissaris had deposed.

122 Mr Robins deposed that it was contrary to BankWest's usual policy to request that a trustee's right of indemnity be removed and:

"indeed it would be contrary to BankWest's interests to do so, as otherwise it would simply be lending money to an entity which could incur liabilities without the right to be indemnified for those liabilities out of the trust assets".

123 Mr Robins exhibited a standard lending form document of BankWest completed by the company on 17 June 2005, which stated that the trustee had a right to indemnity from the trust assets, subject to some stated limitations.

"I consider it highly improbable that any member of the BankWest's former or present staff would give any advice of the nature claimed by Mr Velissaris".

125 In his affidavit sworn 15 June 2007, Mr Velissaris deposed to the purchase of the property by Mary Velissaris, the company's nomination as substituted purchaser, the deed of trust dated 30 January 1998 and the deed of agreement and settlement.

126 He deposed that he and the company entered the deed of agreement and settlement with the full knowledge and consent of Mary Velissaris, who:

"Gave me her Authority and Consent that I Could Remain on the Premises and Continue to Run my Restaurant Business for as long as I wished to do so. On the basis of that promise I have Assisted the Beneficiaries in Servicing the Mortgage Repayments Owed by the Plaintiff to its Different Lenders and I Continue to Assist in Servicing the Mortgage Repayments. Further, I have Executed a Guarantee and Indemnity in Favour of all Lenders who have provided Financial Accommodation to the Company as Trustee of the Maryvell Family Trust. I would not have Executed any such Documents unless I was Assured of my Right of Occupation to Continue to Run my Business.

I am informed by my Current Lawyers and Verily Believe that, on the basis of the Deed entered into between Myself and the Plaintiff (Trustee Company) coupled with the fact that I have Contributed Towards the Mortgage Payments falling due on the mortgage since 1998, I Have the Right to Continue to Occupy the Property for as long as I wish."

127 Mr Velissaris deposed to the variation of the Trust Deed made on 15 July 2005 (with his written consent as appointor dated 14 July 2005), and to the removal of the company as trustee on 5 June 2006.

128 Mr Velissaris referred to his previous claim to be full beneficial owner of the property and asserted:

"I DO NOW UNDERSTAND I WAS WRONG AND I WANT TO RETRACT THOSE STATEMENTS, And AS I Do Understand Now, After Proper Legal Advice Being Given to Me I am Not the Owner of this Property And is Not Beneficially Held for Me By the Trustee Company..."

129 He deposed that the property was, rather, held in trust for the beneficiaries of the Maryvell Family Trust.

130 Mr Velissaris deposed that he was the victim of injustice and was not legally trained. He asserted that he had relied on different lawyers and barristers in relation to the company's affairs, who had "let him down" and had proven "very negligent".

131 Mr Velissaris exhibited voluminous correspondence between himself and the liquidator.

INTEREST UNDER DEED OF AGREEMENT AND SETTLEMENT

132 The nature and strength of Mr Velissaris' claimed entitlement to occupy the property pursuant to the deed of agreement and settlement is relevant to the determination of the appeal, the s.471B application itself and the liquidator's recovery proceeding.

133 First, if the claimed entitlement were established, it could be contended that the 2006 lease was not uncommercial, despite a rental significantly below prevailing market rates, because the prior entitlement made the property unavailable for lease to any person other than Mr Velissaris, at least without his consent and co-operation.

134 Secondly, unless a claim with "a solid foundation" giving rise to "a serious dispute" in relation to the prior entitlement were established, leave pursuant to s.471B would not be granted, even if all other relevant factors favoured a grant of leave.

135 Thirdly, if Mr Velissaris were able to establish an arguable case for the claimed entitlement, it is unlikely that the liquidator could succeed in the recovery application, as the summary procedure is usually inappropriate for significant factual disputes which cannot ordinarily be readily and fairly resolved in such a context.

136 The deed of agreement and settlement was drafted by Mr Velissaris, who lacks legal training. It exhibits a number of fundamental internal contradictions and confusions. No clear, coherent picture of mutually consistent, recognised legal rights and interests emerges.

137 There is uncertainty over the identity of the trust on which the property is to be held. While the document at one point states that the property is to be transferred by Mr Velissaris to the company "as a trustee company only for his family trust named (Maryvell Family Trust)", at another point, it states that "the property is to be kept in trust for the benefit of Constantine Velissaris and/or George Velissaris who is the appointor of this Family Trust dated 30 January 1998." The document further states that the company:

"will only hold [the property] on trust for and on behalf of Constantine Velissaris and/or George Velissaris full benefit, and or his family members named in the family trust as beneficiaries in the trust deed or whoever other he appoints".

138 While the many ambiguities and contradictions of the document cannot be resolved, when read as a whole, it suggests that the property is to be held on trust for Mr Velissaris himself as full beneficial owner, rather than on the terms of the Maryvell Family Trust. Mr Velissaris had an absolute power of disposition, so that the property would be applied to the objects of the Maryvell Family Trust only at his election.

139 Mr Velissaris' full beneficial ownership of the property would, practically speaking, render otiose the narrower entitlement to occupy it rent-free for life, or for as long as he wishes. The document expressly states that Mr Velissaris may occupy the property "free and uninterrupted" in order to conduct the restaurant business. As the document, at other points, confers a full beneficial interest on Mr Velissaris, the reference to the conduct of the business may be descriptive of the purpose of the occupancy, rather than indicative of a conditional or determinable interest. Whatever the nature of the occupancy entitlement, it is clear that exclusive possession and extensive control of the property would be essential for the conduct of the business.

140 Mr Selimi contended that the occupancy entitlement claimed under the deed of agreement and settlement was a licence and therefore did not vest in Mr Velissaris' trustee in bankruptcy in 1999. He contended, however, that it was nevertheless irrevocable and conferred sufficient rights of possession and control to permit the conduct of a restaurant business.

141 Exclusive possession is a characteristic hallmark of a lease. In Australian law, it is the decisive factor which distinguishes a lease from a licence.[1] The interests of Mr Velissaris, if any, pursuant to the deed of agreement and settlement, must be determined principally by reference to the substance of the rights conferred, rather than the terminology or label selected to describe them. They cannot be selectively characterised in order to avoid, on the one hand, the Scylla of a proprietary right which vested in his trustee in bankruptcy or, on the other hand, the Charybdis of a revocable occupancy right, which would be vulnerable to the liquidator's recovery application.

142 In my opinion, while the contradictions of the deed of agreement and settlement preclude a coherent summation of the interests created, the rights and powers conferred on Mr Velissaris suggest an equitable fee simple, together with, redundantly, a narrower equitable life estate pur sa vie, which entailed the control and exclusive possession of the property necessary to conduct a restaurant business. The equitable fee simple or life estate (if valid and enforceable against the company) would both, pursuant to s.116 of the Bankruptcy Act 1966, have vested in the trustee in bankruptcy in 1999, unless, alternatively, either or both determined due to the cessation of the business.

143 There are, however, significant impediments to the enforceability of any interest based on the deed of agreement and settlement. While it purports to document a trust by transfer, whereby Mr Velissaris, as owner, conveyed the property to the company on trust, and was accorded various rights and interests, the evidence clearly establishes that this was not the case.

144 Despite the many successive, mutually contradictory assertions of Mr Velissaris, he ultimately conceded that he did not transfer the property to the company gratuitously, as he initially deposed. Rather, the company acquired the property as a substituted purchaser for the sum of $425,000 pursuant to a contract of sale with the mortgagee dated 11 October 1998.

145 The evidence disclosed that, at the auction on 11 October 1997, Mary Velissaris purchased the property and nominated the company as purchaser. By 10 February 1998, the company was registered as proprietor of the property. The deed of agreement and settlement dated 10 March 1998 was thus executed at a date on which, (contrary to its terms), the company already owned the property and Mr Velissaris had no interest in it. The deed of agreement and settlement therefore takes the form of a legally effective transaction which, in the circumstances, could not have been intended to have the apparent consequences.[2]

146 Although the deed of agreement and settlement is expressed to be "an agreement" between Mr Velissaris and the company, it was conceded that the stated consideration (transfer of the property by Mr Velissaris) was not in fact given. The contractual basis of any licence arising from the described transaction is necessarily illusory.

147 In summary, in so far as the deed of agreement and settlement is capable of bearing any sensible construction, it suggests that any interests of Mr Velissaris thereunder, if enforceable, were such as would have vested in his trustee in bankruptcy in 1999. The uncertainty, contradictions and admittedly false description of the transaction (including the consideration by transfer of the property) indicate, however, that any interests would not have been enforceable. The document purports to record an agreement to transfer a property to be held on certain trusts or otherwise to benefit the transferor, when there could have been no intention to change the ownership, as it was already vested in the company.

148 Mr Velissaris progressively advanced many widely fluctuating and mutually contradictory versions of events, and at intervals, produced various documents apparently calculated to serve his immediate goals in the litigation, without any adequate explanation for the failure to produce them previously.

149 He originally asserted, in opposition to the winding up application, that the company was the legal and beneficial owner of the property. He did not, at that stage, refer to any trust. Subsequently, Mr Velissaris asserted that the company had held title to the property only as a trustee of the Maryvell Family Trust and had, in that capacity, conferred on him the entitlement to occupy it rent-free for life. Mr Velissaris initially asserted that the company operated the business, but subsequently maintained that he personally owned and operated it. He also asserted that the company's right to an indemnity from the trust assets had been removed pursuant to an amendment he made to the trust deed, at the direction of an officer of BankWest, the secured creditor. A representative of the BankWest deposed that it was highly unlikely that such a direction (which was contrary to its policy and interests) had been given. Mr Velissaris ultimately disclaimed any proprietary interest in the property (while simultaneously maintaining that he had a non-proprietary, irrevocable licence to occupy it rent-free for life). He also maintained, incorrectly, that he was not a beneficiary of the Maryvell Family Trust.

150 Although he originally deposed that the property was available for lease at market rates, Mr Velissaris subsequently asserted that the company had leased him the property for a nominal rental, pursuant to the 2006 lease. When the 2006 lease was held to be uncommercial, he asserted that he had a prior entitlement pursuant to the deed of agreement and settlement, which was inconsistent with the 2006 lease. He then falsely deposed that he had transferred the property to the company gratuitously. He did not disclose that the company purchased the property pursuant to a mortgagee's sale, for consideration. He did not disclose his bankruptcy in 1999, which was revealed only by the inquiries of the liquidator. His statement of affairs in bankruptcy made no reference to any interest in the property pursuant to the deed of agreement and settlement. In his response to the questionnaire of the secured creditor, he falsely stated that he had not been declared bankrupt. Despite his many different assertions on the identity of the party who owned and operated the business, Mr Velissaris ultimately conceded that the company had incurred all its liabilities, including liabilities for the business, as a trustee. He neither conceded nor denied, however, that the liabilities were properly incurred.

151 The widely fluctuating assertions in his many affidavits and the exhibited voluminous correspondence in support of the changing submissions advanced on Mr Velissaris' behalf, indicated a scant regard for the truth. Mr Velissaris attributed the many changes in his evidence to the defaults of his successive legal advisers, his failure to read and understand affidavits prepared by his lawyers, or his lack of legal training. I am satisfied, however, that he was actively engaged in the conduct of the litigation, exhibited a considerable capacity to understand legal issues and personally devised and prepared many affidavits, documents and letters. Numerous assertions were repeatedly made with apparent deliberation, but were subsequently retracted.

152 Given the ambiguities, uncertainties and contradictions of the unwitnessed deed of agreement and settlement, its sudden and opportunistic production, the impediments to the enforceability of interests purportedly created or recorded by a document falsely predicated on a non-existent transfer of property to the company by its sole director, the repeatedly false and unreliable evidence of Mr Velissaris and the fact that any valid interest which was, on a reasonable construction, otherwise created by the deed of agreement and settlement would, in any event, have vested in his trustee in bankruptcy in 1999, I am not persuaded that Mr Velissaris has established an arguable case or serious question to be tried that he has any subsisting entitlement to occupy the property based on the deed of agreement and settlement or on the transactions it purports to document.

"Stay of proceedings and suspension of enforcement process

While a company is being wound up in insolvency or by the Court, or a provisional liquidator of a company is acting, a person cannot begin or proceed with:

(a) a proceeding in a court against the company or in relation to property of the company; or

(b) enforcement process in relation to such property;

except with the leave of the Court and in accordance with such terms (if any) as the Court imposes."

154 The section imposes a stay on proceedings against a company or its property and a suspension of any enforcement process against such property where, inter alia, as in the present case, the company is being wound up in insolvency or by the Court, unless the Court gives leave, which may be subject to terms.

155 In Ogilvie-Grant v East[3], McPherson J acknowledged that:

"It, of course, follows that it is quite impossible to state in an exhaustive manner all the circumstances in which leave to proceed may be appropriate, but in the past they have been said to include factors such as the amount and seriousness of the claim, the degree of complexity of the legal and factual issues involved, and the stage to which the proceedings, if already commenced, may have progressed".

156 Ford's Principles of Corporations Law summarises the factors which might be relevant to a grant of leave under s.471B as follows:

• " '...the amount and seriousness of the claim, the degree of complexity of the legal and factual issues involved, and the stage to which the proceedings, if already commenced, may have progressed': Ogilvie-Grant v East (1983) 7 ACLR 669 at 672; 1 ACLC 742 at 744-5. It does not necessarily follow from the claim being much larger than other claims against the company that leave should be granted. The fact that proceedings have already been in train does not of itself lead to a grant of leave: Meehan v Stockmans Australian Café (Holdings) Pty Ltd (1996) 22 ACSR 123; 15 ACLC 62 (a case on similar provisions in s.444E relating to companies under a deed of company arrangement).
  • Whether the claim is in the nature of a test case for the interests of a large class of potential claimants: Fielding v Vagrand Pty Ltd (in liq) [1992] FCA 617; (1992) 39 FCR 251; 111 ALR 368; 9 ACSR 505 affirmed Vagrand Pty Ltd (in liq) v Fielding (1993) 41 FCR 550; 113 ALR 128; 10 ACSR 373.
  • Whether it is clear that the liquidator will reject the claim so that, if the claimant wishes to press the claim, an appeal to the court will be inevitable in which case leave may be more readily granted: Capita Financial Group Ltd v Rothwells Ltd (1989) 18 NSWLR 306; 15 ACLR 348; 7 ACLC 634; Meehan v Stockmans Australian Café (Holdings) Pty Ltd (1996) 22 ACSR 123; 15 ACLC 62.
  • Whether the granting of leave will unleash an 'avalanche of litigation': Capita Financial Group Ltd v Rothwells Ltd (1989) 18 NSWLR 306; 15 ACLR 348; 7 ACLC 634.
  • Whether the applicant has claims against other persons raising substantially the same issues in which case there is a question whether the inconvenience of the applicant having to follow different procedures in respect of all its claims outweighs the prejudice to other creditors that would follow a grant of leave: Meehan v Stockmans Australian Café (Holdings) Pty Ltd (1996) 22 ACSR 123; 15 ACLC 62.
  • Whether the resources available to the company are relatively meagre and the cost of a hearing, if leave were granted, would be quite considerable: Meehan v Stockmans Australian Café (Holdings) Pty Ltd (1996) 22 ACSR 123; 15 ACLC 62."

157 Further, an applicant for leave under s.471B must also, as a necessary pre-condition, establish that its claim amounts to "a prima facie case" (Capita Financial Group Ltd v Rothwells Ltd[4]) or "a serious claim and a real dispute" (Vagrand Pty Ltd (in liq) v Fielding[5]).

158 Although Rogers CJ in Capita Financial Group Ltd v Rothwells Ltd (No 2)[6] referred to evidence of "a prima facie case", in Vagrand Pty Ltd (in liq) v Fielding ("Vagrand"), the Full Federal Court considered that he did not use that term in the technical sense.

159 It did not consider that an applicant was required to "adduce evidence of every element of its claim", because "to impose that burden would be to shut out many meritorious claims". Discovery or interrogation (which could not be undertaken until the action was commenced) might be necessary in order to adduce evidence of all elements of the claim.

160 The Full Federal Court also referred to Manning J's judgment in Thompson v Mulgoa Irrigation Co Ltd,[7] where his Honour stated that the purpose of the then equivalent provision was to ensure that:

"a company in liquidation is not to be harassed and its assets wasted by unnecessary litigation, and the leave of the Court is therefore required as a safeguard. Before any action can be brought or continued against a company, the court must investigate the intended litigation".

161 Manning J did not require proof of all the elements of an applicant's claim, but considered that it was sufficient that the applicant for leave "pledge his oath that he had a valid and unimpeachable mortgage" in a foreclosure suit that was subject to challenge.

"Upon a close reading of the relevant authorities, it is apparent to us that the courts have not in fact required applicants for leave to demonstrate a prima facie case against the company in liquidation, in the technical sense of that term. They have required to be affirmatively satisfied that the claim has a solid foundation and gives rise to a serious dispute. Having regard to the course actually taken by the courts, the term "prima facie case" is misleading. Perhaps it should be avoided in the future.

The test which has actually been applied is akin to that now used in considering whether interlocutory relief should be granted: 'a serious question to be tried'."[8]

163 In essence, it required "affirmative satisfaction that the claim had a solid foundation and gave rise to a serious dispute".

164 In my opinion, although the authorities establish that an applicant need not prove every element of its claim, mere assertion, which is unsupported by a solid foundation, will not suffice. In Vagrand, the Full Federal Court emphasised that "the question of leave is always a matter of discretion". Where, as in the present case, an applicant presents an inconsistent and fluctuating account of his claim based on a contradictory document with a false factual foundation, and repeatedly makes false assertions under oath without any credible explanation or excuse, it is unlikely that the Court could be affirmatively satisfied that his claim has a solid foundation or gives rise to a serious dispute.

165 As stated above, in my opinion, Mr Velissaris has not established a credible claim based on a solid foundation to any current entitlement to occupy or possess the property pursuant to the deed of agreement and settlement. Irrespective of Mr Velissaris' poor credit, there are significant obstacles to the validity of any interests created under or by it. Moreover, any enforceable interest which was created would have vested in Mr Velissaris' trustee in bankruptcy in 1999.

166 Mr Selimi submitted that the company had a surplus of assets and was precluded from refinancing due to the winding up. The liquidator did not, however, concede that there was a surplus of assets. The company has a number of creditors identified to date, including BankWest, the secured creditor, for a principal loan of over $1 million, secured by a mortgage over the property. Although Mr Velissaris contended that he had made mortgage payments, Mr Gardiner submitted that interest on the secured debt had been capitalised.

167 In the proposed proceeding for which leave is sought, Mr Velissaris also seeks to have the property transferred to him and the winding up stayed. In the circumstances, there is, in my opinion, no prospect that such relief would be granted, by reference to the applicable principles.[9]

168 Mr Velissaris' failure to establish a serious dispute over, or solidly based claim to, an entitlement to occupy or possess the property pursuant to the deed of agreement and settlement is fatal to his application for leave to proceed against the company. It is therefore unnecessary to consider whether any other factor relevant to a grant of leave pursuant to s.471B is established.

THE APPEAL - WHETHER 2006 LEASE UNCOMMERCIAL TRANSACTION

169 The failure to establish a serious dispute or solidly based claim to an entitlement to occupy the property pursuant to the deed of agreement and settlement is also fatal to Mr Velissaris' contention, in his appeal from the order of Master Efthim, that the terms of the 2006 lease were not uncommercial when the prior occupancy entitlement was taken into account.

"(1) A transaction of a company is an uncommercial transaction of the company if, and only if, it may be expected that a reasonable person in the company's circumstances would not have entered into the transaction, having regard to:

(a) the benefits (if any) to the company of entering into the transaction; and

(b) the detriment to the company of entering into the transaction; and

(c) the respective benefits to other parties to the transaction of entering into it; and

(2) A transaction may be an uncommercial transaction of a company because of subsection (1):

(a) whether or not a creditor of the company is a party to the transaction; and

(b) even if the transaction is given effect to, or is required to be given effect to, because of an order of an Australian court or a direction by an agency."

(b) it is proved, or because of subsection (4) or (8) it must be presumed, that the company was insolvent at a particular time during the 12 months ending on the relation-back day;

it must be presumed that the company was insolvent throughout the period beginning at that time and ending on that day."

"A transaction of a company is an insolvent transaction of the company if, and only if, it is an unfair preference given by the company, or an uncommercial transaction of the company, and:

(a) any of the following happens at a time when the company is insolvent:

(ii) an act is done, or an omission is made, for the purpose of giving effect to the transaction; or

(b) the company becomes insolvent because of, or because of matters including:

(ii) a person doing an act, or making an omission, for the purpose of giving effect to the transaction."

"(4) Subject to subsections (5) to (7), if it is proved that the company:

(a) has failed to keep financial records in relation to a period as required by subsection 286(1); or

(b) has failed to retain financial records in relation to a period for the 7 years required by subsection 286(2);

the company is to be presumed to have been insolvent throughout the period.

"(7) If the recovery proceeding is an application under section 588FF, subsection (4) of this section does not have effect for the purposes of proving, for the purposes of the application, that an unfair preference given by the company to a creditor of the company is an insolvent transaction, unless it is proved, for the purposes of the application, that a related entity of the company was a party to the unfair preference."

(a) it is an insolvent transaction of the company; and

(b) it was entered into, or an act was done for the purpose of giving effect to it:

(i) during the 6 months ending on the relation-back day; or

(ii) after that day but on or before the day when the winding up began.

(a) it is an insolvent transaction, and also an uncommercial transaction, of the company; and

(b) it was entered into, or an act was done for the purpose of giving effect to it, during the 2 years ending on the relation-back day."

176 In Demondrille Nominees Pty Ltd v Shirlaw,[10] the Full Federal Court concluded that a company's contract to sell a property for $180,000, but to forego receipt of $120,000 of that amount, was void as an uncommercial transaction. The Court found that the contract provided no benefit to the company or, indirectly, to its unsecured creditors. Even if there were some commercial benefit to the company, the purchaser had "At [the company's] expense obtained a bargain of such magnitude that it could not be explained by normal commercial practice." Their Honours referred to s.109H of the Act and stated:

"The purpose or object of the provisions with which we are concerned is to prevent a depletion of the assets of a company which is being wound up by, relevantly, 'transactions at an under-value' entered into within a specified limited time prior to the commencement of the winding up..."

177 In Skouloudis Group Pty Ltd (in liq) & Anor v Planet Enterprizes Pty Ltd,[11] Windeyer J dismissed a liquidator's claim that the sale of the company's newspaper business to the director's wife in return for her assumption of its liabilities totalling about $60,000, was an uncommercial transaction for the purposes of s.588FB. Although there was evidence that a creditor was, at the date of the hearing, willing to pay $100,000 for the business, at the date of the impugned transfer that creditor could not have purchased the newspaper business, as the company had acquired it on condition that it not be sold to the creditor for a specified period, which, at the time, had not expired.

178 Windeyer J reiterated that a purposive approach to the construction of s.588FB(1) was required. He agreed with the observation of Young J in McDonald v Hanselmann[12] that where:

"the purchaser is a related entity in the corporate sense, or a relation by blood or by law in the individual sense, then the court should look at the transaction far more closely and be less inclined to excuse a sale at an undervalue because of some commercial factor".

179 His Honour accepted that it was a benefit to the company to have its liabilities discharged and there could be a detriment to the company only if "it could have obtained a higher price for the business or, if it were able to continue running the business in the future, some profits would eventually be obtained as a result of it doing so."

180 Mr Selimi contended that the 2006 lease was not relevantly uncommercial. Rather, it was of benefit to the company, and occasioned no detriment, in circumstances where the company was already subject to a binding and more onerous arrangement in favour of Mr Velissaris, who was entitled to lifelong rent-free occupancy under the deed of agreement and settlement. In contrast, the rental under the 2006 lease, although nil for the first nine months of the five year term (with the option to renew for a further five years), was thereafter $960 per month.

181 As the 2006 lease provided for some rental payments by Mr Velissaris in return for exclusive possession of the premises for a maximum term of 10 years, if he were, in substance, already entitled to rent-free exclusive possession of the property for a potentially longer period, it would be unavailable for lease to any other party. In such circumstances, the rent payable under the 2006 lease, although merely nominal and approximately one-tenth of the market rate, could be seen as beneficial to the company, as it would otherwise receive no rent at all. That conclusion would not necessarily apply if, on analysis, the 2006 lease subjected the property to a greater or longer encumbrance than that entailed by the prior occupancy entitlement. Due to the lack of clarity in the definition of the interest purportedly conferred on Mr Velissaris under the deed of agreement and settlement, a comparison for such purposes is problematic. Further, as recognised in Demondrille, even if an element of commercial benefit were established, it would be necessary to consider whether the transaction nevertheless constituted a bargain of such magnitude that it could not be explained by normal commercial practice. It is, however, unnecessary to determine those questions, as, in my view, Mr Velissaris has failed to establish even an arguable case that he currently has an entitlement to occupation or possession of the property based on the deed of agreement and settlement.

182 I am also satisfied that the other elements of an uncommercial transaction are made out. The company was ordered to be wound up on 19 June 2006. The relation-back day was 3 February 2006.

183 The 2006 lease was entered into on 15 May 2006.

184 As Mr Gardiner submitted, the evidence establishes that the company failed to keep and retain financial records as required by s.286(1) and s.281(2) of the Act. It is thus presumed insolvent for seven years preceding the winding up date and the presumption has not been rebutted by credible evidence.

185 Further, the evidence establishes that the company was actually insolvent on the date of entry into the lease on 15 May 2006.

186 Mr Velissaris' own evidence establishes that a commercial rental for the property was approximately $9,600 per month, being about ten times that of the $960 rental per month payable under the 2006 lease. I have found that there is no solidly-based, arguable case or serious dispute that Mr Velissaris had an enforceable right to rent-free occupancy of the property pursuant to the deed of agreement and settlement. There was thus no benefit to the company from the 2006 lease, which subjected the company to a maximum 10 year term for a merely nominal rental. I am satisfied that the 2006 lease was an uncommercial transaction which was void on the date of entry and unenforceable.

187 I observe that the entitlement to occupancy claimed by Mr Velissaris under the deed of agreement and settlement in substance entailed exclusive possession and, were the property subject to that entitlement, the company, lacking the right to exclusive possession, would, prima facie, not have been able to grant the 2006 lease. The 2006 lease is, in that sense, inconsistent with the claimed prior entitlement under the deed of agreement and settlement on which, however, Mr Velissaris necessarily relies in the appeal. Further, if Mr Velissaris succeeded in his claim to the prior entitlement, any rights under the 2006 lease would be, in effect, otiose. Mr Velissaris deposed that the prior entitlement was his principal claim and that the 2006 lease was a transaction advised by his lawyers.

188 In such circumstances, I consider that leave to appeal should be refused.

189 Order 53 of the Supreme Court Rules provides for a summary procedure for the recovery of land, which is usually reserved for relatively clear-cut cases in which the defendant occupier has no arguable defence and there is no reasonable doubt as to the plaintiff's claim to possession.

190 In Palazzo v Pullen ("Palazzo"),[13] Brooking J stated:

"I begin by saying something about O.53 itself. So far as I am aware, that Order has not thus far been the subject of any judicial consideration. The Order corresponding to it in England is O.113. It is said in the notes to that Order in the Supreme Court Practice, 1991. 'Its machinery is summary, simple and speedy ie, it is intended to operate without a plenary trial involving the oral examination of witnesses and with the minimum of delay, expense and technicality'.

[T]his Order would normally apply only in virtually uncontested cases or in clear cases where there is no issue or question to try, ie where there is no reasonable doubt as to the claim of the plaintiff to recover possession of the land or as to wrongful occupation of the land without licence or consent and without any right, title or interest thereto.

This note, or I should say, the corresponding note in the Supreme Court Practice 1979, was in part disapproved by two members of the Court of Appeal in Shah v Givert (1980) 124 SJ 513, where Lord Justice Bridge, one of the members of the Court to disagree with the note, said that there was nothing in the Order which disentitled the Court from trying an issue which emerged in the proceedings and that where the issue was clear and straightforward there was no reason why the Court should not deal with it.

In Henderson v Law (1984) 17 HLR 237 Lord Justice Griffiths, in whose judgment the Master of the Rolls agreed, dealt at 241 with what should be done when it became apparent in proceedings under the corresponding County Court Order that a substantial issue has to be tried: 'There will obviously be cases in which, although proceedings are started by way of a summary procedure, it quickly becomes apparent that a substantial issue has to be tried. If it was apparent to the applicant that a serious issue was bound to arise as to whether a tenancy or a holding over existed, no doubt the judge would regard the use of the summary procedure as inappropriate, or even in an extreme case as an abuse of the process, and dismiss the application; but I would expect such cases to be rare, because I would not anticipate that solicitors would seek to steal a march by using an inappropriate procedure. From time to time there are bound to be cases such as this where, from the applicant's point of view, an unexpected issue surfaces which raises the question of a tenancy or a holding over. In such cases, the judge must exercise his discretion and decide whether it is wiser to continue the summary hearing, or to adjourn it for a further hearing after the parties have had a chance to reconsider the position or possibly to dismiss the application and leave the applicant to have the issues determined in a subsequent action. But merely because a respondent chooses, without warning, to assert that there is either a tenancy or a holding over cannot of itself be a sufficient reason to say that the use of O.24 was an inappropriate procedure. In the present case, the assistant recorder was, in my view, entitled to determine the issue of surrender or a holding over in the O.24 proceedings'."[14]

191 In Palazzo, there were disputed issues over whether the defendant had an arguable case to continue in occupation of the land and if so, whether particular legislation had the effect of destroying his entitlement. Brooking J considered that the material adduced by the defendant, leaving aside "legal considerations," made out "no fairly arguable case" that the defendant was party to an agreement for a lease, as distinct from mere negotiations. He considered, however, that the defendant had an arguable case that he held the land as a licensee. His Honour therefore refrained from making an order for possession at that stage, but set down certain questions for trial.

192 Mr Selimi submitted that in the present case, there were substantive factual disputes which rendered the Order 53 procedure inappropriate. He submitted that certain issues, including the company's trustee status and the propriety of its incurring liabilities, could only be resolved at trial, in which evidence from Mr Velissaris, his daughter and other relevant parties would be required.

193 The authorities establish that the Order 53 procedure does not preclude the determination of a disputed factual or legal issue, provided that it can be done readily and fairly, although practical considerations will frequently preclude that. In Pappas v Bowmark Pty Ltd,[15] Tadgell JA (with whom Callaway JA agreed) allowed an appeal against an order for recovery of possession under Order 53 on the ground that there was a complex factual dispute over whether the defendant was a licensee or a tenant under a lease. The application had been determined in the Practice Court, in circumstances where the defendant had filed only a "modest" affidavit and her request for an adjournment had been refused, so that it had not been possible "readily and fairly" to resolve the factual disputes.

194 Tadgell JA acknowledged, however, that the mere existence of a factual dispute would not deny the application of Order 53.[16]

195 Similarly, in Palazzo, Brooking J appeared to endorse the approach of Bridge LJ who, in Shah v Givert,[17] did not consider that the procedure was confined to virtually uncontested cases or cases where there was no issue or question to try, but, rather, permitted the court in its discretion to determine the disputed issue where appropriate.

196 Mr Velissaris' failure to establish a good arguable claim to an occupancy entitlement under the deed of agreement and settlement would not be fatal to his resistance to the liquidator's recovery application if he could establish a right to occupancy of the property on some alternative basis, or if there were sufficient doubt that the company was entitled to possession.

197 In that context, Mr Velissaris now contends that he has a "licence coupled with an equity" to occupy the property by reason of his payment of mortgage instalments and provision of a guarantee and indemnity, in reliance on his entitlement to lifelong, rent-free occupancy under the deed of agreement and settlement. Mr Velissaris deposed:

"On the 10th March, 1998, the Plaintiff and I entered into the Deed of Agreement and Settlement with the full knowledge and consent of my daughter, Mary Velissaris, which Recorded the Fact that I Have a Right to Occupy the Premises for the Purpose of Operating my Restaurant Business for as long as I wished. My Daughter, Mary Velissaris, Gave me her Authority and Consent that I Could Remain on the Premises and Continue to Run my Restaurant Business for as long as I wished to do so. On the basis of that promise, I have Assisted the Beneficiaries in Servicing the Mortgage Repayments Owed by the Plaintiff to its Different Lenders and I Continue to Assist in Servicing the Mortgage Repayments."

198 Further, Mr Selimi contended that the company, although the registered proprietor of the property, was not entitled to possession because it initially held its title to the property only in the capacity as the trustee of the Maryvell Family Trust, and had now been removed as such by Mr Velissaris on 5 June 2006.

199 Mr Velissaris' claim that he was entitled to occupy the property because he had paid mortgage instalments and executed a guarantee and indemnity was made in his affidavit sworn 15 June 2007. No details of the dates, number or quantum of the mortgage payments were provided. The affidavit was filed and served without leave and the liquidator did not have sufficient time to file responsive material. Mr Gardiner did not object to the filing of the affidavit, but observed, correctly, that much of it was argumentative and inadmissible. Mr Gardiner also submitted that no reliance could be placed on any of Mr Velissaris' assertions, given his lack of credit.

200 An equity of acquiescence or a constructive trust has been recognised in a variety of circumstances where a claimant has suffered detriment and/or conferred benefits on the title-holder in the belief (induced by the title holder) that the claimant would be permitted to occupy the land.[18] Similarly, an equitable interest in land pursuant to a constructive trust has been recognised in circumstances where it would be unconscionable or inequitable in the title holder to deny the claimed interest[19].

201 In the present case, the company, as title holder (whether or not as trustee of any trust), was wholly controlled by Mr Velissaris, who was its sole director and shareholder, and on his own evidence, its "directing mind and will".[20] In such circumstances, Mr Velissaris' belief, if any, in the validity of the lifelong, rent-free occupancy rights under the deed of agreement and settlement (which was drafted and executed only by Mr Velissaris, albeit in different capacities), and in the survival of such rights following his bankruptcy was, in substance, self-induced.

202 Further, if, as Mr Velissaris claimed, he made unspecified mortgage repayments and gave a guarantee and indemnity based on an erroneous belief that he was entitled to occupy the property rent-free for life under the deed of agreement and settlement, which falsely represents that he transferred the property to the company, it is not disputed that he has also occupied the premises paying no rent from 1998 until the present.

203 In such circumstances, even were Mr Velissaris' imprecise factual assertions accepted, any claim that it would be unconscionable to deny him life-long rent-free occupancy is necessarily weak and subject to significant obstacles. I am, in any event, in view of the fluctuating, self-serving evidence advanced by Mr Velissaris, unable to place any weight on his evidence.

204 I am therefore not persuaded that Mr Velissaris has established an arguable case that he has an enforceable entitlement to occupy or possess the property, whether pursuant to the deed of agreement and settlement or on any other basis.

205 The question arises whether sufficient doubt attends the company's entitlement to possession of the property to deny its recovery of the land under Order 53.

206 The liquidator ultimately did not concede that the company held the property as trustee of the Maryvell Family Trust or indeed, of any other trust. Mr Gardiner submitted, correctly in my opinion, that the deficient state of the evidence did not permit a conclusion as to whether the company held its title beneficially or on trust.

207 The Maryvell Family Trust was established on 30 January 1998. The company acquired title to the property as a purchaser under the contract of sale dated 11 October 1997. No document clearly establishes that the property was transferred to the company on trust for the Maryvell Family Trust or that the company made a declaration of trust to that effect. Mr Velissaris, an unreliable and self-serving deponent, (contrary to the clear import of his earlier evidence) ultimately asserted that the property was held on trust for the Maryvell Family Trust. Ms Mary Velissaris, however, who swore an affidavit in the proceeding, did not make such an assertion.

208 The principal document said to evidence the company's acquisition of its registered title as a trustee, is the deed of agreement and settlement. As stated above, there is no fairly arguable case that the document was effective to create or evidence the trust or trusts it purported to describe. Further, in my view, it suggests that if the property were held on trust, it was for Mr Velissaris, rather than on the terms of the Maryvell Family Trust. The claimed entitlement to occupy the property rent-free and the equitable fee simple, in so far as they were otherwise valid, would have vested in the trustee in bankruptcy in 1999 and Mr Velissaris would have no subsisting entitlement pursuant to the deed of agreement and settlement, nor any standing to remove the company as registered proprietor.

209 If, on the other hand, the company held title to the property on the terms of the Maryvell Family Trust, while Mr Velissaris has removed the company as trustee and has assumed that role himself (albeit contrary to the terms of the trust deed, which, absent his handwritten amendment, preclude a beneficiary holding such office), in my view, there is no reasonable doubt that the company remains entitled to possession, and is entitled to bring the application pursuant to Order 53.

210 Although Mr Velissaris has successively altered his account of the ownership of the restaurant business, ultimately Mr Selimi conceded that the company had operated and incurred liabilities only in its capacity as the trustee of the Maryvell Family Trust.

211 As Mr Gardiner contended, the trustee clearly had a right of indemnity for recoupment or exoneration under the trust deed and pursuant to equitable principles in respect of liabilities properly incurred in the execution of the trust, which is secured by a lien against the trust assets.

212 The terms of the trust deed may also extend the right of indemnity beyond that allowed by equitable principle.[21] The Maryvell Family Trust Deed does not, in terms, limit the indemnity to liabilities properly incurred, but refers to liabilities to be incurred in the execution or attempted execution of the trust or in the status as trustee.

213 The lien has priority over the claims of beneficiaries and successive trustees. It affords a right to possession. In Octavo Investments Pty Ltd v Knight[22], Stephen, Mason, Aickin and Wilson JJ recognised that a trustee's right to be indemnified from the trust assets against liabilities for debts incurred in business transactions in discharge of the trust was secured by a charge or right of lien over the trust assets and:

"if the trustee has incurred liabilities in the performance of the trust then he is entitled to be indemnified against those liabilities out of the trust property and for that purpose he is entitled to retain possession of the property as against the beneficiaries".

214 In Re Suco Gold Pty Ltd (in liq)[23] King CJ, (with whom Jacobs and Matheson JJ agreed), stated:

"The trustee's lien is an equitable lien which confers on him a charge over the trust property, whether in his possession or not, for the purpose of protecting and enforcing the right of indemnity. It also confers on the trustee a right to possession of the trust property for the purpose of protecting and enforcing the right of indemnity, Jennings v Mather [1902] 1 KB 2. The right of possession of the trustee, until his right of indemnity is exercised, is superior to those of a new trustee or the cestuis que trust. The rights conferred by the lien passed to the liquidator. They would enable him to obtain and retain possession of the trust property until the right of indemnity has been exercised, and to realize the trust property in the course of exercising it."

215 Further, when the incurring of a liability is not authorised by the trust deed, if it is in good faith and to the benefit of the trust assets, the trustee is entitled to an indemnity.[24] Mr Velissaris deposed that the company borrowed from BankWest in order to make capital improvements to the property.

216 Mr Selimi relied on the purported removal of the right of indemnity by Mr Velissaris in July 2005, allegedly at the instance of the mortgagee. I reject Mr Velissaris' evidence on that issue.

217 Mr Selimi expressly conceded that all the liabilities incurred by the company were incurred solely in its capacity as the trustee of the Maryvell Family Trust, but neither conceded nor denied that the liabilities were "properly incurred"[25] by the company. No evidence supporting a contention that the company incurred the liabilities improperly was advanced, despite the opportunity to do so. In any event, the company incurred its liabilities through the agency of Mr Velissaris himself, who constituted its directing mind and will, with, on his own evidence, the acquiescence of his family members, who were the beneficiaries of the Maryvell Family Trust. In such a context, the submission that Mr Velissaris needed "to see evidence that [the liabilities] were properly incurred" was unpersuasive. Given the terms of the indemnity in the Trust Deed, the propriety or otherwise at the incurring of relevant liabilities may not be decisive. The principal liability of approximately $1 million to the secured creditor, BankWest, was, in any event, incurred to effect capital improvements to the property and prior to the purported removal of the right of indemnity. There appears to be no basis to doubt that, whether the removal was valid or not, the right of indemnity would apply to those liabilities.

218 As Mr Gardiner submitted, due to the unsatisfactory state of the evidence, certain factual issues, such as whether the company holds the property as a trustee and, if so, on what trusts, cannot currently be resolved. The evidence indicates that the company may hold title beneficially or (if it originally held title in the capacity of trustee of a trust, and has now validly been removed from office) it would have, in addition to its registered title, a right to possession pursuant to a lien securing its indemnity for liabilities incurred in the execution of the trust property.

219 The relevant uncertainties are not due to the summary nature of the Order 53 procedure and are unlikely to be further clarified or resolved by a full trial. They are attributable to Mr Velissaris' failure to maintain or provide the company's books and records, his deposition to a "moveable feast" of mutually inconsistent assertions and his refusal to clarify matters exclusively within his knowledge, such as the propriety of the company's incurring of liabilities as a trustee.

220 In contrast to Pappas v Bowmark Pty Ltd, in the present case, the application for leave to appeal and the two other applications were heard together. The parties had the opportunity to prepare and filed and served numerous affidavits with voluminous exhibits. Mr Selimi correctly described the material as "mountainous" and initially submitted that it was sufficient for an immediate trial of Mr Velissaris' proposed proceeding.

221 The unknown matters do not, in my opinion constitute a genuine, substantive factual dispute, but are rather due to the failure of Mr Velissaris to keep proper records or to adduce coherent evidence of facts apparently within his ready command.

222 While the Court should approach an application under Order 53 cautiously, in the present case, the uncertainties are not the basis of reasonable doubt that the company is entitled to possession of the property, whether because it holds title beneficially or, if as a current or former trustee, because it is entitled to a lien over the property securing its right to indemnity for liabilities incurred in the execution or for the benefit of the trust. It follows that, in my opinion, the company is entitled to recover possession of the property.

I certify that this and the 51 preceding pages are a true copy of the reasons for Judgment of Dodds-Streeton J of the Supreme Court of Victoria delivered on 2 August 2007.

[1] Radaich v Smith [1959] HCA 45; (1959) 101 CLR 209; Metcalfe and Morris Pty Ltd v Reekie [1963] NSWR 459 at 463; Goldsworthy Mining Ltd v Federal Commissioner of Taxation [1973] HCA 7; (1973) 128 CLR 199; ICI Alkali (Aust) Pty Ltd (in vol liq) v Federal Commissioner of Taxation [1977] VicRp 48; [1977] VR 393.

[2] Equuscorp Pty Ltd & Anor v Glengallan Investments Pty Ltd & Ors [2004] HCA 55; (2004) 218 CLR 471.

[3] (1983) 7 ACLR 669 at 672.

[5] (1993) 41 FCR 550 at 557.

[7] (1893) 4 BC (NSW) 33.

[9] Re Telescriptor Syndicate Ltd [1903] 2 Ch 174; Re Skay Fashions Pty Ltd (in liq) (1986) 10 ACLR 743.

[10] [1997] FCA 1220; (1997) 25 ACSR 535.

[11] [2002] NSWSC 239; (2002) 41 ACSR 369.

[12] [1998] NSWSC 171; (1998) 28 ACSR 49 at 56.

[13] BC9200663 (Unreported, Supreme Court of Victoria, 24 July 1992).

[14] BC9200663 (Unreported, Supreme Court of Victoria, 24 July 1992) at 3.

[15] [1998] VSCA 120; (1999) V ConvR 54-594.

[18] Inwards v Baker [1965] EWCA Civ 4; [1965] 2 QB 29; [1965] 1 All ER 446; Hohol v Hohol [1981] VicRp 24; [1981] VR 221.

[19] Baumgartner v Baumgartner Court of Appeal of NSW: (1985) 2 NSWLR 406; on appeal to the High Court: [1987] HCA 59; (1987) 164 CLR 137.

[20] Lennard's Carrying Co Ltd v Asiatic Petroleum Co Ltd [1915] AC 705 at 713.

[21] Nick Kritharas Holdings Pty Ltd (in liq) v Gatsios Holdings Pty Ltd [2001] NSWSC 343; (2001) 38 ACSR 57.

[22] [1979] HCA 61; (1979) 144 CLR 360.

[23] (1983) 1 ACLC 895 at 902; (1983) 33 SASR 99.

[24] Vyse v Foster (1872) LR8 ChApp 309; Nolan v Collie (2003) 7 VR 287; [2003] VSCA 39 at [58] ff.

[25] See Nolan v Collie [2003] VSCA 39; (2003) 7 VR 287 at 303-310; [2003] VSCA 39 at [58] ff.