Plaintiffs v Defendants

INTERLOCUTORY INJUNCTION - Alleged transfer of properties from unit trust in breach of trust - Application to restrain defendants from dealing with property said to have been acquired in breach of trust and breach of fiduciary duty - Prima facie case established - Potential injustice to parties - Real risk assets will be dissipated - Injunction may be granted despite questions of standing where other requirements for granting an injunction are met - Injunction granted where a real connection between the relief sought and the final relief sought, where balance of convenience favours granting the injunction and there is a real risk of injustice if the injunction is not granted.

* Mills Oakley ceased to act for the Sixth Defendant on 15 March 2022.

1 These reasons concern applications in two proceedings arising from disputes between participants in a multi‑unit residential development project in Windsor ('Windsor development'), which was completed in 2020. The first proceeding ('caveat proceeding') is an application under s 90(3) of the Transfer of Land Act 1958 (Vic) ('TLA') to remove caveats lodged over the titles of five apartments constructed as part of the Windsor development ('Windsor units') and a house in Clendon Road, Toorak ('Toorak property'). The registered proprietors of the Windsor units are Mr Glenn Reindel (as to one of the Windsor units), and Blizzard Winds Pty Ltd ('Blizzard Winds'), a company of which Mr Reindel, a property developer by profession, is the sole director and shareholder (as to four of the Windsor units). The registered proprietor of the Toorak property is Mr Reindel's wife, Ms Anne Runhardt. An application by Mr Reindel and Blizzard Winds to remove caveats lodged over the Windsor units by AB Property Consultancy Pty Ltd ('ABPC'), a company controlled by a business associate of Mr Reindel, Mr Anthony Baker (the project manager of the Windsor development), was the subject of orders and reasons delivered on 4 April 2022.[1]

2 The second proceeding ('investors' proceeding') is a proceeding brought by the first and second defendants in the caveat proceeding, Confreight Pty Ltd and Supply Chain Logistics Pty Ltd. Confreight Pty Ltd and Supply Chain Logistics Pty Ltd ('investors') are controlled by Mr Vincent Murone and Mr Dale Monson respectively.

3 Mr Reindel and Mr Murone have worked together on successful property developments in the past. In or around 2015, they, along with Mr Monson, an associate of Mr Murone ('unit holders') joined forces to carry out the Windsor development, which involved the construction of 69 residential units and two restaurants. A special purpose vehicle, Windsor Development Company Pty Ltd ('WDC') was incorporated to carry out the Windsor development as the trustee of the Windsor Development Company Unit Trust ('unit trust'), in which the investors held 35 per cent of the units. An entity associated with Mr Reindel held 65 per cent of the units.

4 Each of Messrs Reindel, Murone and Monson were directors of WDC, but it appears that Mr Reindel was the driving force behind the Windsor development. Messrs Murone and Monson say the investors were passive investors in the Windsor development, and say that they were reliant upon Mr Reindel for information about the progress of the Windsor development and the finances and other affairs of the unit trust. Mr Reindel disputes this characterisation of the investors' involvement in the Windsor development.

5 WDC was wound up in December 2020, and a liquidator is now in control of its affairs. The return to the investors from the Windsor development was negligible, and the investors (and others) have now made a number of serious allegations against Mr Reindel with respect to the conduct of the affairs of WDC and the unit trust.

The investors' caveats and the investors' proceeding

6 The investors' caveats were lodged on 9 March 2021, 12 March 2021, and 30 June 2021. Two of the caveats lodged on the Windsor units claim an entitlement to the freehold estate of the Windsor units, on the grounds of an "implied, resulting or constructive trust", while the third caveat relies upon an agreement with the registered proprietor made on 25 January 2021.

7 While the evidence relied upon by the investors in the caveat proceeding refers to a meeting between Messrs Monson and Murone and Mr Reindel on 25 January 2021, during which Mr Reindel is said to have made certain admissions and proposals, the investors advanced no submissions in support of the caveat relying upon the asserted agreement, presumably because the asserted agreement, if it was indeed made, was not reduced to writing, and was therefore unenforceable to give effect to any property transfers.[2]

8 The caveat lodged by the investors on the title of the Toorak property relies upon an "implied, resulting or constructive trust" as the grounds for the investors' claim to the freehold estate of the Toorak property.

9 The investors' proceeding was issued on 24 August 2021. In summary, the investors allege that they relied upon Mr Reindel to manage the Windsor development in the interests of the unit holders, and that Mr Reindel promised them that the Windsor development would realise a profit of approximately $13 million. In August 2020, the investors were told by Mr Reindel that while all third party creditors had been paid (the investors also having made loans to WDC for the purposes of the Windsor development), the Windsor development had failed to make a profit. However, the investors say that in late 2020 and early 2021 they discovered that Mr Reindel had caused WDC to transfer cash and the Windsor units to himself and his associated entities to the value of approximately $9 million for little or no consideration, and that WDC had outstanding debts to, among others, the Australian Taxation Office ('ATO') on account of unpaid GST at the time it went into liquidation.

10 The investors allege that by reason of Mr Reindel's alleged breach of fiduciary duty and breach of trust, the investors are entitled to, among other things, orders that property of the unit trust be transferred to WDC (in its capacity as trustee of the unit trust), and/or equitable compensation for the value of property transferred from WDC to Mr Reindel, Blizzard Winds and others in breach of trust, equitable compensation for the value of property transferred from WDC to third parties for less than market value, compensation for any amount the investors may be obliged to pay in respect of any unpaid GST liability incurred by WDC to the ATO when Messrs Murone and Monson were directors of WDC, and an account of profits.

11 The defendants to the investors' proceeding are Mr Reindel, Ms Runhardt, Blizzard Winds, the Registrar of Titles,[3] WDC, Nicholson Brunswick East Pty Ltd and Mondrian Developments Pty Ltd. The latter two defendants, along with Blizzard Winds, are controlled by Mr Reindel, save that Nicholson Brunswick East Pty Ltd has now been deregistered, and is not playing an active part in this proceeding.

12 Mr Reindel, Blizzard Winds and Mondrian Developments Pty Ltd deny all of the factual allegations made by the investors in the investors' proceeding, including the allegation that Mr Reindel misappropriated funds and real estate from WDC, and asserted that Messrs Murone and Monson were experienced property developers, had played an active role in the Windsor development and the affairs of WDC, and, as directors of WDC, were subject to the non-delegable statutory and general law duties imposed upon company directors. They denied that the Windsor units were transferred by WDC in breach of trust, and asserted that they were transferred in reduction of the amount owing by WDC to Blizzard Winds.

13 The investors also allege that some of the funds of WDC were diverted by Mr Reindel towards the payment of the mortgage secured by the Toorak property, and for renovations carried out to the Toorak property. As noted above, the registered proprietor of the Toorak property is Mr Reindel's wife, Ms Anne Runhardt. Mr Reindel admitted that these funds were paid by WDC into a bank account held jointly by him and Ms Runhardt, but denied that those funds were misappropriated from WDC.

14 The investors allege that Ms Runhardt participated in Mr Reindel's breach of fiduciary duty and breach of trust by receiving trust property with knowledge of Mr Reindel's breaches, such knowledge to be inferred by Mr Reindel's role as her agent in, among other things, managing renovations to the Toorak property. Ms Runhardt denied any detailed knowledge of Mr Reindel's business affairs or the operations of WDC, denied any knowledge of any breach of trust on the part of Mr Reindel, denied that Mr Reindel was her agent, and denied any knowledge of the source of funds in their joint bank accounts and for the renovations to the Toorak property.

The caveat proceeding and the injunction application

15 The allegations in the investors' proceeding are said to support the investors' caveats. Alternatively, the investors say that, in the event that the investors are found not to have a caveatable interest in the Windsor units and/or the Toorak property, they should be entitled to restrain Mr Reindel, Blizzard Winds, and Ms Runhardt ('Reindel parties') from selling, encumbering, disposing of or otherwise dealing with the Windsor units and the Toorak property. To that end, on 10 September 2021, the investors filed a summons in the investors' proceeding seeking orders pursuant to rr 37.01 and 38.01 of the Supreme Court (General Civil Procedure) Rules 2015 (Vic) ('Rules') pending the hearing and determination of the investors' proceeding ('injunction application'). This application was made shortly after a hearing in the caveat proceeding concerning notices to produce served by the investors, where counsel for the Reindel parties went into some detail regarding the arguments they relied upon in support of their application to remove the investors' caveats. I can infer, therefore, that the injunction application is, in effect, a fallback position in the event that the Reindel parties' applications in the caveat proceeding are successful.

16 The Reindel parties issued the caveat proceeding on 28 July 2021. Since that time there have been a number of hearings and applications along the way. Initially, the Reindel parties sought an urgent hearing of the caveat proceeding on the basis that Mr Reindel needed to use the Windsor units as security for a loan to pursue an investment opportunity in Queensland. However, that issue has now fallen away.

17 During the course of August and September 2021 the parties returned to Court on a number of occasions to deal with preliminary matters, such as notices to produce issued by the investors and ABPC, and an application by the liquidator of WDC ('liquidator') to be joined as a party to the caveat proceeding.

18 The liquidator's application for leave to intervene in the caveat proceeding was issued on 14 September 2021, and was supported by an affidavit of the liquidator, Mr Matthew Gollant of CJG Advisory, which exhibited the statutory report prepared by his firm regarding the affairs of WDC on 15 February 2021 ('liquidator's report') and a letter sent by him to the unit holders on 3 February 2021 ('liquidator's letter'). On 27 September 2021, the solicitors for the liquidator informed the parties and the Court that he no longer pressed his application to be joined to the caveat proceeding, but otherwise reserved all of his rights. The issues raised in the liquidator's report and the liquidator's letter are relevant to the issues in both the caveat proceeding and the injunction application.

19 Mr Reindel and Blizzard Winds relied upon the following affidavits in the caveat proceeding:

(a) affidavits of Mr Reindel affirmed on 28 July 2021, 5 August 2021, 12 August 2021, and 3 September 2021; and

(b) an affidavit sworn by his solicitor, Mr George Papandreou, on 6 August 2021, and an affidavit affirmed by another solicitor, Ms Colette Chrzanowski, on 9 September 2021.

20 Ms Runhardt relied upon the affidavits of Mr Reindel referred to in paragraph 19(a) above, but otherwise did not file any affidavits in support of her application in the caveat proceeding or in opposition to the injunction application.

21 The investors relied upon the following affidavits filed by them in the caveat proceeding:

(a) an affidavit sworn by their solicitor, Mr Dominic Esposito, on 6 August 2021, and an affidavit sworn by Mr Michael Pianta, another solicitor, on 13 September 2021;

(b) affidavits sworn by Mr Murone, one of the unit holders, on 16 August 2021 and 13 September 2021; and

(c) an affidavit sworn by Mr John McKenzie, an accountant retained by the investors, on 9 September 2021.

22 A subset of the affidavits enumerated above were also relied upon by the parties in the injunction application, along with a further affidavit sworn by Mr Murone on 9 September 2021.

23 The evidence relied upon by the investors, in particular the affidavits of Mr Murone and the exhibits to those affidavits, was voluminous, and included bundles of primary financial records such as bank statements and records of accounting journal entries. The evidence, in effect, sought to provide further particulars of the allegations made by the investors that Mr Reindel had transferred the Windsor units to himself and Blizzard Winds for little or no consideration, and had diverted funds from WDC for his own purposes, including, among other things, paying the expenses of a separate development project he was involved in with Mr Baker, meeting his own obligations to Mr Baker and ABPC unconnected with the Windsor development, reducing the balance of the loan secured by the mortgage over the Toorak property and improving the value of the Toorak property.

24 Prior to the commencement of the hearing of the caveat proceeding and the injunction application on 18 October 2021, the Reindel parties foreshadowed a number of objections to the admissibility of the evidence relied upon by the investors. However, it was ultimately agreed that these objections (largely to the effect that the evidence amounted to no more than speculative opinion evidence, verging on scandalous) largely went to the weight to be given to the evidence relied upon by the investors for the purpose of determining the caveat proceeding and the injunction application.

25 However, given the manner in which the applications were argued, the weight to be given to the evidence relied upon by the investors is a secondary consideration, at least insofar as the caveat proceeding is concerned. For the avoidance of doubt, insofar as the evidence available to me is relevant, I consider the findings and issues raised by the liquidator's report and the liquidator's letter, which are canvassed later in these reasons, along with the accounting records of WDC in evidence, as being a generally reliable guide to the issues which have arisen concerning the affairs of WDC and the unit trust, although it is not necessary for present purposes to determine whether the concerns raised in the liquidator's report and the liquidator's letter have been made out.

26 The question of whether the investors' caveats should be removed and, perhaps to a lesser extent, the question of whether the injunction application should be granted largely turns upon legal issues rather than factual disputes. These legal issues include the capacity of the claims made by the investors relying upon the principles in Barnes v Addy[4] ('Barnes v Addy claims') to support the investors' caveats, the standing of the investors to bring proprietary claims with respect to the property of the unit trust, and whether the Court's jurisdiction to grant injunctive relief of the nature sought by the investors has been enlivened. However, as the determination of the injunction application requires some evaluation of the merits of the investors' claims against the defendants in the investors' proceeding, I have had regard to the Reindel parties' objections to the evidence when determining what weight ought to be given to the evidence relied upon by the investors to support their claims which is not supported by the liquidator's letter, the liquidator's report, or the accounting records of WDC.

27 The application in the caveat proceeding and the injunction application was heard on 18 and 19 October 2021, and judgment was reserved. The delivery of these reasons have been delayed for reasons beyond the control of the parties. Since that time, there has been no progress of any note in the investors' proceeding, although the pleadings are now closed.

28 There have, however, been other developments. In June 2021 a proceeding was initiated by Mr Reindel against Mr Baker ('Baker proceeding'),[5] which concerns a series of alleged loan agreements between Mr Reindel, Mr Baker, and ABPC. An unsuccessful mediation was held in the Baker proceeding over the course of January and February 2022, and a directions hearing was held before Connock J ('managing judge') on 15 March 2022.

29 In 'Other Matters' accompanying the orders made in the Baker proceeding on 15 March 2022, the managing judge referred to a proceeding issued by the liquidator in this Court on 18 January 2022 ('first liquidator's proceeding'),[6] whereby the liquidator seeks, among other things, the approval of the Court to enter into an agreement with Mr Baker to assign certain causes of action to him. On 15 March 2022, the managing judge made orders in the first liquidator's proceeding setting down a timetable for the hearing and determination of a dispute between the liquidator and Mr Reindel (as an interested party in the first liquidator's proceeding) regarding the production to Mr Reindel of confidential affidavits filed by the liquidator in the first liquidator's proceeding. This dispute was resolved, and consent orders giving effect to the agreement between the parties were made by the managing judge on 3 June 2022.

30 The liquidator also seeks an order appointing him as the receiver of the unit trust, and Court approval of an agreement to assign certain (unspecified) claims to Mr Baker. The liquidator deposed that he believed it was necessary for him to be appointed by the Court as the receiver of the unit trust, as clause 12.5 of the trust deed establishing the unit trust ('trust deed') provides that the appointment of WDC as trustee of the unit trust terminated upon the liquidation of WDC.[7]

31 The substantive applications in the first liquidator's proceeding have not yet been listed for hearing, with timetabling orders having been made by the managing judge on 3 June 2022. A further directions hearing in the first liquidator's proceeding has been scheduled for 9 September 2022. If the application for Court approval of the agreement to assign certain causes of action to Mr Baker is successful, Mr Baker has indicated that he may apply to amend his counterclaim in the Baker proceeding to join the claims assigned to him by the liquidator. It is unclear from the publicly available evidence in the first liquidator's proceeding whether the claims sought to be assigned to Mr Baker include any claims the liquidator may have against the investors, or claims which traverse the same ground as the claims made against Mr Reindel and his associated entities in the investors' proceeding, but I can safely infer that there is a substantial overlap. Timetabling orders have also been made in the Baker proceeding, with a further directions hearing scheduled for 8 December 2022.

32 More recently, on 8 July 2022, the liquidator issued a further proceeding in this Court ('second liquidator's proceeding'),[8] seeking orders for the examination of a number of people connected with the Windsor development, including Mr Reindel, Ms Runhardt, Mr Murone, Mr Monson, Mr Baker, Mr Baker's fiancée, WDC's bookkeeper, and accountants engaged by WDC and/or Mr Reindel. The second liquidator's proceeding also seeks the production of books and records from a number of people and entities, including, among others, Blizzard Winds, the investors and ABPC.

33 It is apparent from the first liquidator's proceeding and the second liquidator's proceeding that the liquidator is continuing to take steps to investigate and pursue claims concerning the apparent irregularities in the conduct of the affairs of WDC (and, by extension, the unit trust).

34 As noted above, the liquidator's report and the liquidator's letter have identified a number of issues concerning the conduct of the affairs of WDC and the unit trust. These documents provide some support for some of the claims made by the investors in their statement of claim in the investors' proceeding.

35 In his affidavit, the liquidator stated that his investigations into the affairs of WDC had focussed on, among other things:

(a) payments made by WDC to Mr Reindel and his associated entities;

(b) property transferred by WDC to Mr Reindel and Blizzard Winds and other parties for little or no consideration; and

(c) other payments or transfers of units in the Windsor development to the investors and their associated entities.

36 In the liquidator's report, the liquidator noted that there appeared to be no secured creditors of WDC, and noted that the following unsecured creditors had made claims in the liquidation.

37 The liquidator also identified the following transactions as potentially being "unreasonable director related transactions":

(a) the transfer of 11 units in the Windsor development to related parties for less than market value, including, among other things, where the market value was offset against existing loans made to WDC; and

(b) other suspected irregular transactions, such as the transfer of purchaser deposits to an expense account,[13] the payment of project management and consulting fees to related parties, and payments made in reduction of loan accounts of related parties, possibly in preference to other unsecured creditors.

38 In the liquidator's letter, the liquidator sought information and explanations from the unit holders regarding a number of transactions about which he had concerns. The liquidator referred to potential claims against Mr Reindel and his associated entities, including the transfer of the Windsor units valued at approximately $2 million to him and to Blizzard Winds, said to have been in satisfaction of invoices issued by Blizzard Winds and Mr Baker, and claims associated with transfers to Mondrian Developments and the NBE Trust, both entities controlled by Mr Reindel, and other payments made from WDC to Blizzard Winds and other entities associated with Mr Reindel in the order of approximately $3 million.

39 The liquidator also queried the transfer of units in the Windsor development to the investors and their associated entities valued at approximately $2 million.

40 Prior to turning to the application in the caveat proceeding and the injunction application, I will address an issue that was raised during the course of the hearing of the applications as to whether the investors had standing to bring their claims in the investors' proceeding. The relevance of the standing issue is that if the investors do not have standing to bring their claims in the investors' proceeding, or their standing is in doubt, then that undermines any argument on their part that they have a good prima facie case which, subject to issues concerning the balance of convenience, would be capable of supporting the investors' caveats (if their claims did in fact give rise to a proprietary interest in the properties), or would support the granting of an injunction.

41 In my view, there are real doubts as to whether the investors have standing to, in effect, recover property belonging to WDC in its capacity as trustee of the unit trust, particularly given that any real estate and/or monetary compensation recovered in any proceeding would need to be returned to the unit trust, and the investors hold only 35 per cent of the units in the unit trust. Alternatively, any claim for damages and/or equitable compensation would have to be calculated by reference to the investors' shares in the unit trust.

42 A deceptively simple expression of a principle which is often complex in its application is to be found in the following passage of the decision of the Court of Appeal in Daunt v Daunt:[14]

It is a fundamental principle that, in the absence of specific exception, a wrong done by B to A cannot be vindicated by C.[15]

43 In the current case, all of the property said by the investors to have been misappropriated by Mr Reindel for the benefit of himself and others was the property of WDC in its capacity as trustee of the unit trust. The investors rely upon their status as unit holders not only to support their claim that they have an equitable interest in the Windsor units and the Toorak property, but also to support their contention that, as beneficiaries of the unit trust, they have standing to pursue their claims against the Reindel parties, which, as earlier indicated, overlap with a number of issues raised by the liquidator, and which may also be the subject of the proposed assignment by the liquidator to Mr Baker for which Court approval is sought in the first liquidator's proceeding.

44 The claims being advanced by the investors in the investors' proceeding meet the description in Commissioner of Stamp Duties (Qld) v Livingston:[16]

The basis of such proceedings is that they are taken on behalf of the estate and, if they are successful, they can only result in the lost property being restored to the estate for use in the due course of administration. Thus, while they assert the beneficiary's right of remedy, they assert the estate's right of property, not the property right of creditor or legatee; indeed, the usual situation in which such an action has to be launched is that in which the executor himself, the proper guardian of the estate, is in default, and thus his rights have to be put in motion by some other person on behalf of the estate.[17]

45 The investors rely upon a number of authorities[18] to support their contention that, as unit holders, they have a proprietary interest in the property of the unit trust, including, among other things, the Windsor units, such as to confer upon them the necessary standing to bring their claims in the investors' proceeding.

46 Ordinarily, the proper party to bring a claim to recover trust property is the trustee. In Alexander v Perpetual Trustees WA Ltd,[19] the High Court referred with approval to the following statement:

The interests of the beneficiaries of a trust are protected against a third person acting adversely to the trustee through proceedings brought against him by the trustee and not by the beneficiaries. As long as the trustee is ready, willing and able to take proper proceedings against the third person, the beneficiaries cannot maintain a suit against him.[20]

47 The general rule (one rationale for which was said to be the avoidance of vexation to third parties by multiple suits) yields only where there are "special circumstances", which may include collusion between the third party wrongdoer and the trustee, or the insolvency of the trustee.[21] Special circumstances may also encompass a situation whereby the trustee is unwilling or unable to take action to recover trust property.

48 Alternatively, the investors, in their capacity as shareholders of WDC, could make an application under s 237 of the Corporations Act 2001 (Cth) to bring a derivative action to bring the claims in the investors' proceeding on behalf of WDC. No such application has been made, although in their supplementary written submissions filed on 8 April 2022, the investors made an informal application for leave to continue this proceeding standing in the shoes of WDC in its capacity as trustee of the unit trust.

49 In their supplementary submissions, the investors submitted, in summary, as follows:

(a) the property of the unit trust did not pass to the liquidator upon his appointment, as WDC ceased to be the trustee of the unit trust;

(b) the only rights conferred upon the liquidator upon his appointment which survived the cessation of WDC's appointment as trustee was WDC's right of indemnity from the assets of the unit trust, which in turn is not available to WDC by reason of its breach of trust;[22] and

(c) accordingly, WDC's right to bring any claim against third parties has been lost.

50 The investors also rely upon cl 37 of the trust deed, which provides as follows:

"the rights of the trustee to indemnity for losses or liabilities incurred in the administration of the trust fund and to recoupment for expenditure incurred shall, in respect of any matter whatsoever, be limited to the monies and property comprising the Trust Fund from time to time and no unitholder nor any other person directly or indirectly benefiting from the trusts of this deed nor the directors or shareholders of any company being a trustee nor any person disposing of property to the trustee on the trusts hereof, shall be personally liable in any way directly or indirectly to indemnify or recoup the trustee or any one or more of them in respect of any liability, loss or expenditure incurred by the trustee in the administration of the Trust Fund, but this clause shall not be construed as in any way limiting the liability of any trustee (or of any director of a company which is a trustee here of) to the unit holders for any breach of trust involving the dishonesty or wilful act or omission of that trustee or director."

[emphasis added]

51 The investors submitted that the effect of cl 37 of the trust deed was to confer upon a unit holder a right of action against WDC and/or a director of WDC with respect to their dishonest conduct. As such, the investors' claims in the investors' proceeding are not derivative claims.

52 Alternatively, the investors submitted that the following matters amount to "exceptional circumstances" entitling them, as beneficiaries of the unit trust, to bring the claims in the investors' proceeding in their own names (omitting citations):

1. The liquidator has been in possession of the facts since before the issue of the proceeding by the investors. He chose not to issue proceedings allegedly because of a lack of funding.
2. Indeed, he sought leave to intervene in the proceedings brought by the investors and the caveat removal proceedings brought by Reindel but ultimately, having been provided with all of the materials filed by the parties in each of those cases and having had the benefit of legal advice, He chose not to participate in those proceedings.
3. Further, if the liquidator believed that the trustee was entitled to exoneration from the trust fund then the liquidator has failed to protect the property of the trust by neglecting to lodge caveats against the units which the investors claim were transferred in breach of trust and in respect of which, the liquidator in his report expressed concern.
4. In their proceeding, the investors are alleging not only that Reindel acted in breach of his duty to them but that the trustee acted in breach of its duty to the investors in permitting the transfer of the units and funds without any consideration.
5. There is doubt as to whether the trustee is entitled to a right of indemnity or exoneration.
6. The quantum of the investors claim is far greater than the trustee claim to indemnity or exoneration.
7. The liquidator has refused to disclose to the investors precisely what actions he proposes to issue and has refused to disclose the terms of the deed of assignment and indemnity in respect of which he is seeking the orders in his application. In the absence of such full disclosure the investors should be entitled to continue the proceeding they have issued.
8. It is submitted that the claim brought by the investors have reasonable prospects of success. In this regard it is relevant to consider that the Reindel parties have not filed any substantive material in response to the sworn evidence of the investors.
9. In circumstances where the liquidator refused to issue proceedings up until the issue of his current application the investors were entitled to issue the proceeding and they are entitled to be granted leave to continue the proceeding if leave is thought be necessary.
10. In the event that Reindel is successful in his application seeking removal of the caveats and the Court were to find that leave was required by the investors then the property the subject matter of the action may be lost because there would be nothing to prevent Reindel and his related entities from disposing of the property. It is significant that the liquidator does not propose to issue any proceedings until such time as he has obtained the orders that he seeks in his application. By that time there may be nothing left to pursue.

53 The investors submitted that the question of whether the investors require the leave of the Court to pursue their claims in their capacity as beneficiaries of the unit trust is not settled. If leave is required, that leave should be granted, but in any event, given the confined nature of the current applications, and the fact the investors' proceeding is in its infancy, the absence of leave should not preclude the investors from maintaining their caveats, or from being successful in the injunction application.

54 In response, the Reindel parties submitted, in summary, as follows:

(a) the termination of WDC's appointment as trustee of the unit trust has no bearing upon the standing of the investors to lodge the investors' caveats and/or to bring their claims in the investors' proceeding;

(b) the investors must plead their entitlement to standing, including the relevant special circumstances, and have not done so, which is of particular relevance to their entitlement to lodge the investors' caveats, given that the interest claimed in the caveats must be in existence at the time the investors' caveats were lodged;

(c) the fact that the liquidator has applied to be appointed as the receiver of the unit trust militates against there being special circumstances, as it is clear he is taking steps to pursue claims on behalf of WDC in its capacity as trustee of the unit trust;

(d) further, WDC has standing (and indeed a duty) to recover trust property, including the pursuit of a Barnes v Addy claim relying in part upon its own alleged misconduct; and

(e) in order to have standing to pursue the claims in the investors' proceeding, the investors must apply to amend their statement of claim, and seek leave to proceed from the Court, with notice to the liquidator.

55 The position in the current case is somewhat fluid, and far from clear cut. The liquidator has some doubts, which I share, as to whether WDC continues to be the trustee of the unit trust following the liquidation of WDC. The trust deed is silent as to what should occur should WDC cease to be trustee of the unit trust prior to the termination of the trust. The liquidator has, in the first liquidator's proceeding, applied to be appointed as the receiver of the unit trust, but apparently for the purpose of assigning any claims WDC may have to Mr Baker. Accordingly, there is currently some doubt as to whether the liquidator is ready, willing, and able to pursue any claim WDC may have against third parties for the benefit of the beneficiaries (and creditors) of the unit trust, although the initiation by the liquidator of the second liquidator's proceeding, where the liquidator is clearly seeking to use the tools at his disposal to make further investigations into the affairs of WDC and the unit trust, suggests that the liquidator has not reached a final position on the matter.

56 I accept that cl 37 of the trust deed preserves an entitlement of the beneficiaries of the unit trust to pursue claims against the trustee and the directors, at least on their own behalf. I also accept that a trustee of the unit trust is not precluded from pursuing claims against third parties to recover trust property even where the integrity of its own conduct is in question, and indeed, failing to do so may also amount to a breach of its duties to the beneficiaries of the trust.[23]

57 Further, I also agree that, in order to press their claims in the investors' proceeding, insofar as they are seeking to recover trust property, the investors need to plead the material facts supporting their entitlement to sue, and, arguably, they need to seek leave of the Court to proceed. In their later written submissions, the investors submitted, with respect to the question of whether the beneficiary of a trust requires leave to proceed to bring claims against third parties in circumstances where the trustee cannot or will not bring those claims, that leave of the Court is not required, and, as transpired in the case of Robert Deutsch v Erwin Deutsch,[24] the question of standing could be determined during the course of the running of the trial. The investors submitted that I should not follow the decision of Sifris J in Randa Lee Investments Pty Ltd v Ballan,[25] where his Honour, while not being required to finally decide the issue, expressed the view that leave was required.

58 In Randa,[26] a beneficiary of a trust issued a proceeding against the directors of the former trustee of a unit trust, in circumstances where receivers and managers (and subsequently liquidators) had been appointed to the assets of the unit trust, but they had not taken action to pursue the claims sought to be made by the plaintiffs in the action before him. His Honour held that leave was required, but refused leave on the grounds that, among other things, the pleading was deficient, and the plaintiffs' claims did not have a good prospect of success.

59 On the question of whether leave was required, Sifris J stated:

In my opinion, it is clear from a review of the authorities that leave is required. Where, as in this case, a cause of action is truly that of another party, namely a Trustee, special and exceptional circumstances must be shown before a unitholder is permitted to proceed. In my view, and despite certain authority to the contrary as submitted by Randa Lee (referred to below), it must be established prior to the issue of proceedings, or at the time of issue, that the party that otherwise does not have standing should be permitted to proceed because the party that does have standing is unable or unwilling to do so. There is no point in doing this at the end as part of the case. Issues of standing are fundamental and foundational and must or should be addressed first. Finally, although the position of a shareholder and unitholder may differ, in the context of the present discussion they are similar. Both seek to agitate a cause of action of another party. Logic, principle and of course authority suggest that leave must be sought. [27]

60 His Honour then went on to canvass the authorities concerning when "special circumstances" conferred standing upon the beneficiaries of a trust to pursue claims against third parties,[28] and went on to say as follows [footnote omitted]:

Although I am firmly of the view that leave must be obtained at the outset, and respectfully disagree with authority to the contrary, it is not necessary to finally resolve this issue, because the issue has, in this case, been raised at an early stage in the context of the plaintiffs' application for leave to amend and leave to proceed. Having been raised it should be dealt with. Further, in my opinion the Civil Procedure Act 2010 (Vic) ('the CPA') effectively compels the determination of this issue at the earliest possible stage. [29]

61 The desirability of resolving questions of standing in proceedings of the current kind at an early stage of the proceeding was reinforced by the following remarks made by Hargrave J in Deutsch:[30]

As I have said, however, where a corporate trustee is deadlocked and cannot act, the proper course is to appoint a new trustee with power to act - either consensually or by Court order. That is what competent lawyers ought to have advised both brothers in this case. Had that happened, this dispute could have been wholly or substantially avoided. The failure to adopt this course has resulted in the waste of large amounts of money and time; and the parties and their families have had to bear the strain of the proceeding as it slowly made its way to trial. Further, there has been significant waste of Court resources. However, none of these results can be undone. The fact remains that the money has been spent, the time wasted and the proceeding fixed for trial. Taking all of that into account, together with the need to resolve the bitter disputes to the maximum extent the Court is able, the Court should proceed to determine the dispute. However, if an application to appoint new trustees had been made early in the proceeding, it ought to have been granted.[31]

62 I agree that it would be highly desirable, if not essential, for case management purposes at the very least, for the question of the proper party to bring any claim of the nature pressed by the investors in the investors' proceeding, to be resolved as soon as possible. However, it is not necessary or appropriate to deal with the question of leave in the context of this application, particularly given the informal nature of the investors' application for leave, and the absence of the liquidator.[32]

63 Accordingly, given the current lack of certainty about the liquidator's intentions, and the uncertain fate of any application by the investors for leave to proceed with their claims in the investors' proceeding, it is difficult for present purposes to finally resolve the standing issue. Consequently, it is difficult to see how the investors' claim to have standing to pursue claims in the investors' proceeding is so hopeless such that the injunction application should be refused on that ground alone. I do agree, however, that the standing issue does further undermine the investors' position with respect to the validity of the investors' caveats, given that the entitlement to lodge a caveat must be in existence at the time of lodgement.

64 I now turn to the applications in the caveat proceeding and the injunction application. As previously indicated, I do not propose to traverse in any great detail the evidence relied upon by the parties. However, it is apparent from the liquidator's affidavit in support of his application to intervene in the caveat proceeding, the liquidator's letter, the liquidator's report and some of the WDC accounting records relied upon by the investors that there is at least some evidence to support allegations that units in the Windsor development were transferred to Mr Reindel and his associated entities for no consideration or at an undervalue, although it is not possible at this time to conclusively determine whether these transfers were made in breach of trust or were otherwise invalid. Mr Reindel also accepts that funds were transferred from WDC to him, which were applied to the loan secured by the mortgage over the Toorak property,[33] but denies that these funds were misappropriated from WDC. Clearly, these are disputes which can only be resolved after discovery and a full trial.

65 A further observation that I would make is that not only does the statement of claim fail to plead the necessary material facts said to confer standing upon the investors to bring their claims as beneficiaries of the unit trust, there are some other aspects of the statement of claim which require attention. While it is tolerably clear from reading the statement of claim in the context of the investors' submissions in the current applications that the investors seek to recover the Windsor units (or that the Windsor units be recovered by the unit trust), the statement of claim could be much clearer in that regard. Further, the defence in the investors' proceeding asserts that some of the claims in the statement of claim are vague and embarrassing. It is not necessary for present purposes to adjudicate upon the adequacy of the statement of claim, but highlight these matters as being matters which I consider require attention. For present purposes, I have taken what might be described as a beneficent view of the statement of claim.

66 There was no real dispute between the parties as to the applicable legal test in applications to remove caveats.

67 In BCA Asset Management Group Pty Ltd v Sand Solutions (Vic) Pty Ltd,[34] Derham AsJ summarised the principles applicable to applications to remove caveats as follows:

(i) the Court's power under s 90(3) of the TLA is discretionary;

(ii) the Caveator bears the onus of establishing that there is a prima facie case to be tried that it does have the estate or interest in land as claimed;

(iii) if the Caveator establishes a prima facie case to be tried in relation to the estate or interest claimed, the Caveator must further establish that the balance of convenience favours the maintenance of the caveat until trial; and

(iv) there is a relationship between the strength of the case in establishing a prima facie case to be tried and the extent to which the Caveator must establish the balance of convenience favours the Caveator; the stronger the prima facie case, the more readily the balance of convenience might be satisfied. It is sufficient that the Caveator show a sufficient likelihood of success that, in the circumstances, justifies the practical effect which the caveat will have on the ability of the registered proprietor to deal with the Land in question in accordance with its normal proprietary rights.[35]

68 His Honour observed that the authorities refer to both the "prima facie case" test and the "serious question to be tried" test. He preferred the former, saying that:

That does not mean that the Caveator must show that it is more probable than not that at trial the plaintiff will succeed. The Caveator must show that they have a prima facie case with sufficient likelihood of success to justify the maintenance of the caveat, and the preservation of the status quo pending trial.[36]

69 While the investors in their submissions referred to there being a "serious question to be tried" that the investors have an equitable interest in the Windsor units and the Toorak property, I agree with Derham AsJ that the "prima facie case" test is to be preferred, and while the difference between the tests is one of degree, the difference is material, and the more stringent test acknowledges the potentially adverse consequences to a registered proprietor of a property being restrained from dealing with their property, in circumstances where a caveator is generally not required, in the absence of an express order of the Court to the contrary, to provide an undertaking for damages.[37]

70 Finally, Derham AsJ referred to the two stage process to be undertaken in applications of the current kind, as follows:

First, the Caveator must establish that there is a prima facie case - that there is a probability on the evidence before the Court that the Caveator will be found to have the asserted legal or equitable rights or interest in the land. Second, having done so, the Caveator must establish that the balance of convenience favours the maintenance of the Caveat on the title until trial and that the probability of success is sufficient to justify the practical effect which the caveat has on the ability of the registered proprietor to deal with the property in question in accordance with their normal proprietary rights.[38]

71 The Reindel parties seek the removal of the investors' caveats from the Windsor units on the following grounds:

(a) the investors' caveats based upon a claim to an implied, resulting or constructive trust over the Windsor units and/or the Toorak property are not supported by a recognised cause of action, based upon either the evidence filed on behalf of the investors, or the statement of claim in the investors' proceeding. In particular, the authorities, including the decision of the Court of Appeal in McNab v Graham,[39] provide that a remedial constructive trust of the kind sought by the investors only arises once the investors make good in Court their claim to relief for their in personam claims against the Reindel parties, and only if the Court considers the imposition of a constructive trust to be an appropriate remedy. No caveatable interest in any property arises prior to that time, and the authorities provide that the interest claimed in a caveat must be in existence at the time the caveat is lodged;

(b) further, the trust deed expressly provides that the unit holders do not have a proprietary interest in the units in the Windsor development or any other assets of the unit trust;[40]

(c) in the case of the Windsor units, any claim the investors may have ignores the fact that the current registered proprietors of the Windsor units have acquired an indefeasible title by reason of s 42 of the TLA; and

(d) in the case of the Toorak property, Ms Runhardt observed that the only claim made against her in the investors' proceeding is a Barnes v Addy claim based upon her knowing receipt of trust funds allegedly misappropriated from WDC by Mr Reindel. However, the investors do not point to any authority in support of the proposition that the requisite knowledge to support a Barnes v Addy claim could be sheeted home to Ms Runhardt solely by reason of the investors' allegation that Mr Reindel was Ms Runhardt's agent for the purpose of carrying out the renovations to the Toorak property.

72 Accordingly, the Reindel parties contend that the claims made in the investors' proceeding are not capable of supporting the equitable interest claimed in the investors' caveats.

73 In response, the investors submitted that there was a serious question to be tried which supports the investors' caveats, and that the balance of convenience supports the maintenance of the investors' caveats. In particular, the investors submitted that the available evidence supports a conclusion that Mr Reindel, as the managing director of WDC, caused WDC to transfer trust property to him and Blizzard Winds in breach of trust. The doctrine of equitable tracing enables the investors to trace any misappropriated property into the hands of the transferees, and a trust over that property in favour of the investors comes into existence at the time of the relevant transfers.

74 As noted in paragraph 45 of these reasons, the investors relied upon the decisio[41] of _Cost[42]_41 Schmidt42,[43]nd _Charles_43 in support of their contention that, as unit holders, the investors had a proprietary interest in any property held by WDC in its capacity as the trustee of the unit trust. As Mr Reindel caused WDC to transfer the Windsor units in breach of trust to himself and Blizzard Winds, the transferees take the legal title of the Windsor units subject to the equitable interest of the investors. The investors also say that, if funds wrongly transferred from WDC were used to pay for renovations to the Toorak property, and/or to pay the loan secured by the mortgage over the Toorak property, then those funds are impressed with a trust which gives rise to an equitable interest in the Toorak property.

75 The investors relied upon the decision of the Court of Appeal in AE Brighton Holdings Pty Ltd v UDP Holdings Pty Ltd[44] in support of their contention that the property transferred from WDC in breach of trust was impressed with an institutional trust in favour of the investors at the time the recipient of the property acquired the knowledge of the breach of trust. Further, the beneficial owner of misappropriated property is entitled to recover the property or its traceable proceeds, subject to any defence that the current owner is a bona fide purchaser for value without notice.

76 The investors submitted that the decision of the Full Court in Swanston Mortgage Pty Ltd v Trepan Investments Pty Ltd[45] does not affect the investors' claim that the Windsor units and the Toorak property are impressed with a trust in their favour. In Swanston Mortgage,[46] Brooking J held that a claim by a mortgagor against a mortgagee for breach of duty when exercising its power of sale gave rise to a "mere equity", rather than an equitable interest in the land in question, with only the latter giving rise to a caveatable interest, at least until the claim was made good in a court. The investors submitted that the decision of Swanston Mortgage[47] was distinguishable on the basis that in that case, the Full Court was concerned with a priority dispute, not with a trustee acting in breach of trust.

77 The investors submitted, in summary, as follows, with respect to the Windsor units:

(a) WDC held the units in the Windsor development on trust for the unit holders, and as such, the unit holders held an equitable proprietary interest in the units in the Windsor development, and as such, the Windsor units are trust property;

(b) Mr Reindel and Blizzard Winds became the registered proprietors of the Windsor units for no consideration as a consequence of the dishonest conduct of Mr Reindel, and as recipients of trust property in breach of trust, Mr Reindel and Blizzard Winds hold the Windsor units on trust for the investors; and

(c) Mr Reindel personally benefitted from his breach of trust, because:

(i) he became the registered proprietor of one of the Windsor units; and

(ii) he was a beneficiary of and received dividends from the trust of which Blizzard Winds was trustee, and he also received dividends from funds paid to Mondrian Developments Pty Ltd, one of the defendants in the investors' proceeding.

78 The investors submitted that Mr Reindel was the agent of both Ms Runhardt and Blizzard Winds, the latter on the basis that Mr Reindel was the sole director of Blizzard Winds. The investors also submitted that Ms Runhardt represented (jointly with Mr Reindel) to the ANZ Bank that the Windsor units belonged to them both, and that she knew the source of the funds used to acquire the Windsor units.[48]

79 The investors submitted that Ms Runhardt received property of WDC in breach of trust, because:

(a) funds were transferred from an account of WDC to an account held jointly by her and Mr Reindel;

(b) funds belonging to WDC were used to fund renovations to the Toorak property;

(c) she is a beneficiary of the trust of which Blizzard Winds is the trustee; and

(d) funds transferred from WDC to Mondrian Developments Pty Ltd were applied for her benefit, as she received a dividend from Mondrian Developments Pty Ltd.

80 Turning first to the question of whether the investors have established that they have an equitable interest in the Windsor units and the Toorak property, it seems to me that the position with respect to the Toorak property is quite straightforward. It is abundantly clear from the authorities that a tracing claim founded on the principles of Barnes v Addy[49] are not capable of supporting a caveat. It was never suggested by the investors that the claim against Ms Runhardt went beyond a claim for accessorial liability for Mr Reindel's (and WDC's) alleged breach of trust.

81 The distinction between the position of a trustee who has lawfully and voluntarily assumed fiduciary obligations in relation to trust property (including trustees de son tort) and those who "have exposed themselves to equitable remedies by virtue of their participation in the unlawful misapplication of trust assets"[50] was discussed by the United Kingdom Supreme Court in Williams v Central Bank of Nigeria,[51] the reasoning in which was in turn referred to with approval by Tate JA in McNab v Graham.[52] In cases of ancillary liability for a breach of trust, the imposition of a trust over the property concerned arises only where a court determines that the imposition of a constructive trust over the property concerned is an appropriate remedy to meet that liability, which can only occur once the necessary factual and legal foundations for a finding of ancillary liability for a breach of trust have been established in court. Until that time, a claimant in the position of the investors in the investors' proceeding has no proprietary interest in any property belonging to the alleged knowing recipient (in this case, Ms Runhardt), even where it is said that trust property can be "traced" to a particular property. Accordingly, the caveats over the Toorak property ought to be removed.

82 The weakness of the investors' claim to a proprietary interest in the Toorak property is also highlighted by the fact that any "notice" Ms Runhardt had of Mr Reindel's alleged breach of trust does not impeach Ms Runhardt's title to the Toorak property, given that she has been the registered proprietor of the Toorak property since May 2015, before the commencement of the Windsor development, and therefore the transactions which are the subject of the investors' proceeding.[53]

83 The position is a little less clear‑cut in the case of Windsor units, in circumstances where the investors have made allegations that Mr Reindel has, in his capacity as managing director of WDC, breached his fiduciary duty to the investors, such that any liability on his part is direct and not accessorial in nature. However, only one of the Windsor units is owned by Mr Reindel personally: the other four are owned by Blizzard Winds. Conceptually, while Mr Reindel is the sole director of Blizzard Winds, Blizzard Winds is in no different position than Ms Runhardt, in that no allegation is made in the statement of claim in the investors' proceeding of any breach of trust or breach of fiduciary duty on the part of Blizzard Winds. If any breach of trust or fiduciary duty on the part of WDC and/or Mr Reindel is established by the investors, the evidentiary hurdle facing them with respect to Blizzard Wind's knowing receipt of trust property may well be lower than in their claim against Ms Runhardt, given that Mr Reindel controls Blizzard Winds. However, based upon the allegations in the statement of claim in the investors' proceeding, any liability of Blizzard Winds is also only accessorial in nature, such that the distinction referred to in Williams[54] applies equally to the Windsor units owned by Blizzard Winds.[55]

84 It may be that, if the allegations made by the investors against Mr Reindel are proven, the transfer of the Windsor units was arguably tainted by fraud, which could be sheeted home to Blizzard Winds, thus losing the protection of indefeasibility of title conferred by s 42 of the TLA. However, while Mr Reindel's control of Blizzard Winds may rebut any defence based upon s 42 of the TLA, and may lead the Court to ultimately conclude that the imposition of a constructive trust over the Windsor units owned by Blizzard Winds is an appropriate remedy, it does not assist the investors in the caveat proceeding, as the authorities provide that the entitlement of a former registered proprietor to set aside a transfer of Torrens System land on the basis that the transfer of land had been procured by fraud is an in personam claim giving rise to a "mere equity", not an equitable interest in the land, as discussed further below.

85 In Super Jacobs Pty Ltd v Faalogo,[56] I held that a claim by the former registered proprietors of a property to set aside a transfer of that property on the basis of fraud, while open to be made based upon the limited evidence available at the time, did not confer upon the victims of the alleged fraud an equitable interest in the property concerned, but rather simply a "mere equity", pending the final determination of their claims by the Court. Accordingly, I ordered that the caveat over the relevant property be removed.

86 In reaching the conclusion that the claim for fraud did not confer a caveatable interest in the relevant property upon the caveators, I followed and applied the reasoning of the Full Court in Swanston Mortgage,[57] where, relying upon the decision of the High Court in Latec Investments Ltd v Hotel Terrigal Pty Ltd (in liq),[58] Brooking J held that where a mortgagee exercised the power of sale in breach of its duty to the mortgagor, the mortgagee has the power to set aside the transfer made or to be made as a consequence of the alleged breach of duty, but that equity conferred no proprietary interest in the land in question capable of supporting a caveat.

87 In my reasons in Super Jacobs,[59] I observed that the reasoning in Swanston Mortgage[60] has been the subject of academic and judicial criticism and its correctness has been doubted by the Court of Appeal.[61] However, the reasoning in Swanston Mortgage[62] remains binding upon me, and must be applied where it is not able to be distinguished. In Super Jacobs,[63] I held there was no material distinction based upon, in effect, the identity of the alleged wrong‑doer and the character of the transaction sought to be impugned. I see no material distinction in the current case either, and the line of authority to the effect that in personam claims do not give rise to an interest in land unless and until they are made good in Court supports my conclusion in that regard. Indeed, that line of authority also supports a conclusion that the claim against Mr Reindel with respect to the transfer to him of the Windsor unit owned by him is also an in personam claim not capable of supporting a caveat.[64]

88 In their submissions, the investors sought to distinguish the decision of the Full Court in Swanston Mortgage[65] on the basis that this decision concerned a dispute over priorities, and did not preclude the investors from asserting an equitable interest in the Windsor units. I accept that the immediate dispute before the Court in that proceeding concerned a priority dispute, but I do not think the reasoning in that decision can be so confined. Indeed, the resolution of the dispute in Swanston Mortgage[66] required the Court to determine the character of the interest claimed by the caveator. The competing interest was the interest claimed by the as yet unregistered purchaser, who had purchased the land from the mortgagor against whom the allegations of breach of duty had been made, and accordingly, had an undoubted equitable interest, and the interest claimed by the caveator, being the disgruntled mortgagor. Accordingly, no question of competing priorities would arise unless and until it was found that the caveator had an equitable interest.

89 In forming the view that a claim by the registered proprietor to set aside a transfer of land on the basis that the mortgagee had breached its duty to the mortgagor under s 77(1) of the Transfer of Land Act 1958 (Vic) was a mere equity, Brooking J (with whom Southwell and Teague JJ agreed) referred to and relied upon the decision in Re Pile's Caveats[67] "as an example of the characterisation of the equitable right to assail a transfer of land for fraud as a mere equity, not an equitable interest, for the purposes of a right to a caveat".[68] His Honour also dismissed the caveator's reliance upon observations in a decision said to be to the contrary effect, Davies v Herbert,[69] as "plainly obiter".

90 Finally, in the decision of the Court of Appeal in Macquarie Bank v Sixty-Fourth Throne Pty Ltd,[70] the Court of Appeal described a claim by a mortgagor to set aside the registration of a mortgage on the grounds that the mortgage was procured by fraud (and thus not protected by the indefeasibility provisions of the TLA) as an in personam claim, that is, a personal right against the alleged wrongdoer, not a right which subsists in the relevant property. While that decision was largely concerned with what conduct could amount to fraud within the meaning of s 42 of the TLA, rather than the question of whether the mortgagor's claim in that proceeding conferred an equitable interest capable of supporting a caveat, the Court's characterisation of the claim as an in personam claim is consistent with the characterisation of the caveator's claim in Swanston Mortgage[71] as a mere equity. Further, and relevantly for present purposes, Tadgell JA (with whom Winneke P agreed) rejected the proposition that the registered proprietor of Torrens land who was the subject of a Barnes v Addy claim based upon the knowing receipt of trust property (not amounting to fraud) could be held to be a constructive trustee of the property in question.[72]

91 Accordingly, the following relevant propositions can be derived from the authorities:

(a) any claim by the investors to set aside the transfer of the Windsor units upon the grounds of fraud is an in personam claim, which is a "mere equity", not an equitable interest capable of supporting a caveat;

(b) while, notwithstanding the observations made by the Court of Appeal in Macquarie Bank,[73] to the effect that it would be undesirable for a Barnes v Addy claim to circumvent the indefeasibility provisions of the TLA, a party found to be liable as an accessory pursuant to a Barnes v Addy claim may be liable as a constructive trustee with respect to Torrens system land;[74] however

(c) in cases where the registered proprietor of Torrens System land has been found to be liable for their knowing assistance of a breach of trust, or as the knowing recipient of trust property, no liability to account as a constructive trustee will arise prior to the imposition of a constructive trust by the Court.[75] Put another way, the equitable interest of a beneficiary of a constructive trust over Torrens system land only arises once a remedy to that effect has been conferred by the Court, and not beforehand.

92 For completeness, I make the following observations regarding the propositions and authorities relied upon by the investors in support of their submissions that, as at the time the investors' caveats were lodged, the investors held an equitable interest in the Windsor units capable of supporting the investors' caveats.

93 First, the investors' submissions to the effect that they are entitled to trace trust property is correct as it goes, as is the proposition that misappropriated trust property which passes into the hands of another with knowledge of the breach of trust is impressed with the original trust. However, the caveat proceeding is concerned with whether the investors had, at the time of lodging the investors' caveats, an equitable interest in the Windsor units. The decisions in Swanston Mortgage[76] and McNab v Graham[77] make it clear they do not, given that WDC was no longer the registered proprietor of the Windsor units.

94 Secondly, while I accept that the authorities provide that a beneficiary of a unit trust has an equitable interest in the property of a unit trust, even when the trust deed contains a provision in similar terms to cl 6.4 of the trust deed (see footnote [[78]](#_Ref1108637 > Inspection, detention etc. of property

(1) In any proceeding the Court may make an order for the inspection, detention, custody or preservation of any property, whether or not in the possession, custody or power of a party.

(2) An order under paragraph (1) may authorise any person to -

(a) enter any land or do any other thing for the purpose of obtaining access to the property;

(b) take samples of the property;

(c) make observations (including the photographing) of the property;

(d) conduct any experiment on or with the property;

(e) observe any process.

105 I agree with the Reindel parties that the jurisdiction conferred upon the Court by r 37.01 is not enlivened in the current case, as neither the Windsor units or the Toorak property constitute the "subject matter" of the investors' proceeding. In particular, while there is a more direct connection between the Windsor units and the investors' claims in the investors' proceeding, in that the transfer of the Windsor units to Mr Reindel and Blizzard Winds by WDC was said to have been in breach of trust, the connection between the Toorak property and the claims in the investors' proceeding is tenuous indeed. Further, while the transfer of the Windsor units to Mr Reindel and Blizzard Winds was said to have been made in breach of trust, in my view it is the conduct amounting to the breach of trust, not the assets said to have been transferred in breach of trust which is the real subject matter of the investors' proceeding for the purposes of r 37.01. Finally, while real property is not expressly excluded from the ambit of r 37.01, it is apparent from the terms of r 37.01(2) set out above that the primary objective of the rule is to facilitate the preservation and inspection of tangible property.

When Court may grant

The Court may grant an injunction at any stage of a proceeding or, in the circumstances referred to in Rule 4.08, before the commencement of a proceeding.

107 The Reindel parties submitted that what the investors were really seeking was a freezing order, and relied upon the summary of the relevant principles governing the making of freezing orders by J Forrest J in Zhen v Mo,[82] where his Honour stated as follows (omitting citations):

First, that a freezing order, by its very nature, is a drastic remedy and a court must exercise a high degree of caution before taking a step which will interfere with a party's capacity to deal with his or her assets.

Second, the order is not designed to provide security for the applicant's claim. It is solely directed to preserving assets from being dissipated, thereby frustrating the court process.

Third, the applicant bears the onus both in satisfying the Court that the order should be continued and in satisfying the Court as to the amount which is to be the subject of the order.

Fourth, that an order can only be made on the basis of admissible evidence which supports the contentions made by the party seeking the order. Speculation and guesswork is no substitute for either the facts or inferences properly drawn from proved facts.

Fifth, that before such an order can be made it is necessary that the applicant establish -

(a) an arguable case against the defendant; and

(b) that there is a danger that the prospective judgment will be wholly or partly unsatisfied as a result of the defendant's actions in either removing the assets or disposing or dealing with them so as to diminish their value.

Sixth, the balance of convenience must favour the granting of the freezing order.

Seventh, that there is no set process determining the exact nature of an order. The order will be framed according to the circumstances of the case.

Eighth, the applicant must establish with some precision the value of prospective judgment. The order should not unnecessarily tie up a party's assets and property.

Finally, there may be discretionary considerations which militate against the granting of a freezing order, such as delay in bringing the application on before the court or a lack of candour in the materials placed before the court.[83]

108 However, while there is substantial overlap between the principles enumerated by J Forrest J in Zhen v Mo[84] and the principles governing the grant of an injunction, the investors have not made an application for a freezing order, which, given the terms of Order 37A, would often have a more draconian effect than the granting of an injunction over the Windsor units and/or the Toorak property. The test for granting an interlocutory injunction was recently restated by the Court of Appeal in Siemens Gamesa Renewable Energy Pty Ltd v Bulgana Wind Farm Pty Ltd,[85] as follows:

Plaintiffs seeking an interlocutory injunction must establish that they have a prima facie case for the relief that they seek and that the balance of convenience favours the granting of an injunction. The Court will consider either separately or as part of the consideration of the balance of convenience whether the plaintiff is likely to suffer injury for which damages would not be an adequate remedy. In considering how strong the plaintiff's case needs to be, the Court will take into account 'the nature of the rights [the plaintiff] asserts and the practical consequences likely to flow from the order [sought]'.

Whether the relief sought is prohibitory or mandatory, the Court should take whichever course appears to carry the lower risk of injustice if it should turn out to have been wrong to grant or refuse the injunction.[86]

109 The injunction application is not dissimilar to an application for a freezing order, in that it seeks to restrain the Reindel parties from dealing with certain assets. Accordingly, the principles governing the granting of freezing orders enumerated in Zhen v Mo[87] have some relevance to the injunction application, in particular, the caution against engaging in speculation and guesswork, and the statement to the effect that a freezing order is not designed to provide security for an applicant's claim.

110 However, the provisions of the Rules empowering the Court to make a freezing order ('freezing order provisions') do not displace the Court's power to grant an injunction, either pursuant to s 37 of the Supreme Court Act 1986 (Vic) or pursuant to its inherent jurisdiction, or the principles governing when an interlocutory injunction may be granted. The freezing order provisions enact a statutory code for the making of orders of a particular kind, and the criteria for granting a freezing order provided for by the freezing order provisions can do no more than inform the discretion of the Court when determining whether to grant an injunction of the kind sought in the injunction application.

111 The freezing order provisions do not necessarily require that there be any connection between the assets sought to be enjoined and the applicant's cause of action: the primary purpose of the freezing order provisions is to prevent the frustration of the Court's processes by preventing the dissipation of assets with the aim or effect of rendering any judgment valueless. Indeed, a freezing order may be granted against a party against whom the applicant has no existing or prospective cause of action.[88] In contrast, in the case of an application for an interlocutory injunction, there must be a close connection between the interlocutory relief sought and the final relief sought by an applicant, as follows:

A right to obtain an interlocutory injunction is not a cause of action. It cannot stand on its own. It is dependent upon there being a pre-existing cause of action against the defendant arising out of an invasion, actual or threatened by him, of a legal or equitable right of the plaintiff for the enforcement of which the defendant is amenable to the jurisdiction of the court. The right to obtain an interlocutory injunction is merely ancillary and incidental to the pre-existing cause of action. It is granted to preserve the status quo pending the ascertainment by the court of the rights of the parties and the grant to the plaintiff of the relief to which his cause of action entitles him, which may or may not include a final injunction.[89]

112 The primary question in the injunction application is whether the strength of the applicant's claim, the possibility that damages would be an inadequate remedy in the event that the claim succeeds, and the surrounding circumstances warrant the preservation of the status quo pending trial.

113 Accordingly, the Reindel parties' submissions to the effect that the injunction application must fail because the investors have not applied to enjoin all of the assets of the Reindel parties, or because they have not quantified their claims in the investors' proceeding with any degree of precision somewhat misses the point, as the freezing order provisions do not apply to the injunction application.

114 The merits of the investors' claims against the defendants in the investors' proceeding are a criticial factor in determining whether an injunction ought to be granted, and as such, it is necessary for me to form a view as to whether the investors have established a prima facie case against the Reindel parties, and where the balance of convenience lies. Given that the injunction application seeks relief only with respect to the Windsor units and the Toorak property, then, strictly speaking, it is not necessary to consider the other claims made in the investors' proceeding concerning the alleged misappropriation of funds from WDC (save where it is alleged that those funds were directed towards the Toorak property). The purpose of granting the injunction application is not to provide security for any pecuniary claim the investors may have against the defendants in the investors' proceeding: it is to preserve the status quo pending the resolution of the investors' claims with respect to the Windsor units and the Toorak property which, if made good, are likely to result in the grant of relief of a proprietary character.

115 In the caveat proceeding the relevant test was whether the investors had a proprietary interest in the Windsor units and/or the Toorak property at the time the investors' caveats were lodged: in the injunction application the test is whether there is a sufficiently strong likelihood that the Court would order that the Reindel parties hold the relevant properties, or any of them, on a constructive trust for the investors (or the unit trust), or would set aside the transfers relying upon the fraud exception under s 42 of the TLA. Accordingly, the evaluation of the merits of the other claims made by the investors in the investors' proceeding is of limited relevance to the injunction application, except insofar as that evidence might tend to lend colour to the concerns about the transfer of the Windsor units to Mr Reindel and Blizzard Winds, and the payment of $750,000 towards the loan secured by the Toorak property.

116 While it is undesirable in an application of the current kind to undertake a close analysis of the facts, I accept that, notwithstanding Mr Reindel's denials, there is evidence to support the investors' claims that Mr Reindel has caused funds and real estate to be transferred from WDC to him and other persons and entities associated with him, and that those transfers were inconsistent with the obligations of WDC to the unit holders and other creditors of WDC. The evidence concerning the transfer of the Windsor units to Mr Reindel and Blizzard Winds (noting that it appears that WDC paid the stamp duty and other conveyancing costs associated with the transfers), the reduction of Blizzard Winds' loan account with WDC by millions of dollars over the course of a few months, and payments to Mr Baker and ABPC which appear to be in excess of their contractual entitlements is at this stage uncontradicted in any meaningful sense, and supports the allegations made in the investors' proceeding. Further, while there are legitimate doubts about the investors' standing to bring the claims made by them in the investors' proceeding, as discussed earlier in these reasons, the situation remains uncertain and fluid, and the question of the investors' standing cannot be finally resolved in the context of the current application.

117 However, it seems to me that the investors' claims against Ms Runhardt are quite weak. While there is some authority to support the proposition that the fraud exception to indefeasibility may apply by reason of the knowledge and conduct of the agent of the party relying upon the indefeasibility provisions of the TLA,[90] I agree that the proposition that the knowledge of an agent could be imputed to a person in the position of Ms Runhardt for the purpose of establishing knowing receipt of trust property under Barnes v Addy principles cannot be unquestioningly accepted. Further, I accept that the allegation that Mr Reindel was Ms Runhardt's agent for relevant purposes is poorly particularised, and somewhat unconvincing. While the facts as presently available may raise a triable issue, and more may emerge following discovery, it could not be said that the case against Ms Runhardt is particularly compelling at this point in time.

118 Further, there are other matters which would cause me to decline to exercise my discretion to grant an injunction over the Toorak property. While the investors are a little unclear as to how much of WDC's allegedly misappropriated funds have made their way into the Toorak property, it seems that the investors are only confident that they have a claim for $750,000. While there is no admissible evidence regarding that issue, I do not need admissible evidence to infer that the value of the Toorak property would be many multiples of that sum, given its address.[91] There is also no evidence that there is any real risk of the Toorak property being put beyond the reach of the investors or any other creditors, such that the potential injustice to the investors of not granting the injunction would outweigh the injustice to Ms Runhardt of being precluded from dealing with her property.

119 Finally, even taking the investors' case at its highest and best, it is difficult to see the Court imposing a remedy which would involve the transfer of the Toorak property to the unit trust: at most one might expect an order for damages or equitable compensation, perhaps secured by a charge over the Toorak property.

120 In short, the imposition of an injunction over the Toorak property would be a draconian response to what at this stage does not look to be a particularly strong claim.

121 However, the position is different in the case of the Windsor units. Mr Reindel has not (on his own behalf or on behalf of Blizzard Winds) proffered on oath any cogent explanation for the transfer of the Windsor units to him and Blizzard Winds for what appears to be little or no consideration. The evidence regarding the treatment of these transactions in the accounts of WDC do not support a conclusion that the transfers were made in lieu of monies due from WDC to Mr Reindel and/or Blizzard Winds. The transfers were made on 18 September 2020, and were said by Mr Reindel to have been made in reduction of the amount owing to Blizzard Winds by WDC. However, the balance sheet of WDC as at 30 September 2020 shows that Blizzard Winds owed WDC over $4 million at that time. It is hard to understand how that came about, but the records of WDC are inconsistent with the matters pleaded in the defence in the investors' proceeding.

122 I can also see why the payments to Mr Reindel and Blizzard Winds and the accounting transactions concerning the loan accounts of Blizzard Winds and others in the accounts of WDC do, to put it neutrally, warrant explanation, although those issues are not directly relevant to the investors' claims regarding the Windsor units. Given the evidence establishes that Mr Reindel had day‑to‑day conduct of the financial affairs of WDC, any explanation of these unusual transactions can probably only come from him. In short, I consider that there is, in the absence of any evidence from Mr Reindel which goes beyond a bare denial, a prima facie case that the Windsor units were transferred by WDC to Mr Reindel and Blizzard Winds for little or no consideration. Further, I accept that, while it would be open to the Court to make a monetary order for compensation in the event that the Windsor units were found to have been transferred from WDC in breach of trust, it would also be open to the Court to make an order compelling the transfer of the Windsor units back to the unit trust, or to declare that the units were held on a constructive trust for the unit trust, such that the investors' claim for interlocutory relief is supported by a viable cause of action.

123 The standing issue is, as previously observed, relevant to the question of there is a good cause of action or a serious question to be tried, as it follows that, if the investors do not have the necessary standing to bring their claims in the investors' proceeding, they do not have a good cause of action. However, the standing issue is not necessarily fatal to the success of the injunction application. First, as discussed earlier in these reasons, the standing issue cannot be finally resolved in the context of the current applications, given the uncertainties about the identity of the trustee of the unit trust in circumstances where a liquidator has been appointed to WDC. Secondly, while I have not been directed to any authority on the point, there seems to me to be no barrier in principle for an injunction to be granted in circumstances where there is some doubt about the standing of the party making the claim in the proceeding, provided that there is a proceeding on foot with a viable cause of action to support the interlocutory and final relief sought, and provided that the requirements for granting an interlocutory injunction are otherwise satisfied.

124 Further, I do not consider that, all other things being equal, the deficiencies in the statement of claim identified in the defence and earlier in these reasons preclude the grant of injunctive relief. I accept that the statement of claim was prepared in some haste, given that the caveat proceeding was at that time to be heard on an expedited basis. It appears that to some extent the statement of claim was tailored to support the investors' caveats, which is no longer necessary, and I appreciate that investigations into the affairs of the unit trust are ongoing. However, the deficiencies in the statement of claim need to be remedied sooner rather than later, particularly given the gravity of the allegations made against the defendants in the investors' proceeding.

125 The Reindel parties submitted that the investors have not advanced evidence to support their contention that there is a real risk that the assets of Mr Reindel and Blizzard Winds would be dissipated, such as to defeat any judgment obtained against them in respect of the claims made in the investors' proceeding. The investors do, indeed, rely upon the nature and gravity of the allegations against Mr Reindel in the investors' proceeding (said by senior counsel for Mr Reindel and Blizzard Winds to amount to "general skulduggery", which is a fair characterisation of the allegations) in support of their assertion that Mr Reindel and Blizzard Winds should be restrained from dealing with the Windsor units. I accept that the existence of a prima facie case of misappropriation and/or breach of trust is not of itself necessarily sufficient to support a conclusion that there is a real risk or likelihood of assets being dissipated prior to trial, to the extent that this is relevant to the issues in the injunction application.

126 However, the Reindel parties' submissions to the effect that there is no evidence that Mr Reindel and Blizzard Winds do not have any other assets to satisfy any judgment debt, and that there is no evidence of any real risk that the Windsor units will be dealt with in such a way as to put them beyond the reach of the investors ignores Mr Reindel's own evidence in the caveat proceeding.[92]

127 Originally, Mr Reindel gave evidence in the caveat proceeding to the effect that he needed the caveats (including the Baker caveats) over the Windsor units removed, because he wanted to make the Windsor units available as security to fund an investment opportunity in Queensland ('Queensland investment'). He deposed that if he was not able to use the Windsor units for the purpose of the Queensland investment, he would be unable to take advantage of a potentially lucrative investment opportunity.

128 The purpose of this evidence was two-fold: first, in support of a submission that the hearing of the caveat proceeding be expedited, and secondly, as being relevant to the question of the balance of convenience in the caveat proceeding. The significance of this evidence receded somewhat as alternative arrangements were made by Mr Reindel to fund his participation in the Queensland investment. However, the following matters emerged from Mr Reindel's evidence:

(a) Mr Reindel and/or Blizzard Winds wished to utilise the equity in the Windsor units (which are largely unencumbered) to pursue other property investment and development opportunities, unremarkably, given that is Mr Reindel's profession; and

(b) given that Mr Reindel deposed that he would not be able to pursue the Queensland investment without using the equity in the Windsor units, I can infer that neither he and/or Blizzard Winds have any other readily realisable assets of substance to deploy for the purpose of funding his participation in the Queensland investment. As it turns out, he later deposed that his participation in the Queensland investment was funded by borrowings from one of his investment partners, but did not say whether those borrowings were secured by any other real property owned by him and/or Blizzard Winds or any of his other associated entities.[93]

129 Further, the Baker caveat over the Windsor unit owned by Mr Reindel has not been removed, and this caveat was lodged in support of what is said to be a charge over that property granted by Mr Reindel to secure borrowings from ABPC. While the existence of the debt and the validity of the security remains in dispute in the Baker proceeding, it may be that ABPC has the first call upon any equity held by Mr Reindel in this property.

130 Accordingly, it is not necessary for me to find that there is a real risk that Mr Reindel and/or Blizzard Winds would deliberately seek to defeat a judgment against them in the investors' proceeding in order to form the view that there is a real risk that the Windsor units, which may be their only substantial assets, may be sold or encumbered in the ordinary course of their business, or realised to meet other liabilities prior to the trial of the claims in the investors' proceeding. While I accept that there is nothing inherently special, or difficult to value about the Windsor units, such that a monetary remedy would be inadequate, the authorities indicate that a remedy in the nature of damages must have some practical value before an injunction can be denied on that basis alone.[94] A monetary award for the value of the Windsor units will be of no practical value if the Windsor units have been sold and/or encumbered and Mr Reindel and/or Blizzard Winds have no other assets to meet any judgment.

131 Of course, the fact that the Windsor units would, in the absence of any injunctive relief, be available for Mr Reindel and/or Blizzard Winds to use for business and investment purposes is a relevant factor when considering the balance of convenience in the injunction application.[95] The impediment to their usual business activities is a factor weighing against granting an injunction. On the other hand, Mr Reindel's evidence is to the effect that he was able to obtain an alternative source of funding for the Queensland investment, and it could not be said that the Windsor units have any other special character or value. An injunction would not prevent Mr Reindel and Blizzard Winds using the Windsor units to generate rental income, or for other investment purposes by agreement with the investors. Further, the investors have proffered an undertaking as to damages, which, as previously noted, has not been said to be valueless.

132 For completeness, I do not consider that the maintenance of the Baker caveat over the Windsor unit owned by Mr Reindel has much impact upon the question of the balance of convenience. While the Baker caveat precludes Mr Reindel from dealing with the property concerned for the time being, at least until the determination of the Baker proceeding, there is nothing to prevent Mr Reindel and Mr Baker from reaching an accommodation of the disputes between them, unlikely as that seems at the moment, without the investors having any notice of any settlement of the Baker proceeding, or the removal of the Baker caveat over the Windsor unit owned by Mr Reindel.

133 Accordingly, there is a real risk of injustice if an injunction is not granted to restrain Mr Reindel and/or Blizzard Winds from disposing of or encumbering the Windsor units. I will grant an injunction restraining Mr Reindel and Blizzard Winds from disposing of or encumbering the Windsor units upon confirmation of the investors' undertaking as to damages. However, in my view, the doubts concerning the investors' standing to bring their claims in the investors' proceeding, and the deficiencies in the investors' statement of claim, means that the injunction should not be granted on an open‑ended basis, for the reasons explained below.

134 Ordinarily, an injunction of the nature sought by the investors would be granted pending the hearing and determination of the claims in the investors' proceeding. Of course, there would be liberty to apply in the event that circumstances changed, such that there was a material shift in the balance of convenience. However, in the current case, the doubts about the investors' standing arises because, ordinarily, the proper plaintiff would be WDC, as trustee of the unit trust. However, WDC is no longer the trustee of the unit trust, although it may be a bare trustee of the assets of the unit trust. The application by the liquidator in the first liquidator's proceeding to be appointed as the receiver of the unit trust is unlikely to be heard and determined before 2023.

135 Accordingly, as previously discussed, a number of uncertainties remain. The liquidator may choose to bring a proceeding against the Reindel parties and others regarding the subject matter of the investors' proceeding, or successfully assign those claims to another party, despite not having done so to date. If that were to occur, the investors' proceeding (or a later proceeding) may well be stayed so as to avoid a multiplicity of proceedings, depending upon how the standing issue is finally resolved, or vice-versa. If the investors' proceeding is stayed, the investors may understandably seek to resile from their undertaking as to damages going forward, and there may be scope for further argument about the merits of continuing the injunction in those circumstances.

136 Alternatively, if no other proceedings concerning the subject matter of the investors' proceeding are brought within a reasonable period of time, the investors' claim to have standing to bring their claims as beneficiaries of the unit trust by reason of there being special circumstances may be strengthened, by reason of the inability or failure of the trustee of the unit trust to bring claims to recover trust property. This, of course, would have to be pleaded.

137 If no other proceeding with respect to the transfer of the Windsor units to Mr Reindel and Blizzard Winds is issued, then there would be no reason to depart from the usual position, subject to the grant of liberty to apply in the event that circumstances change. However, if the liquidator or his assignee issues a proceeding, it seems to me to be appropriate to revisit the position. Accordingly, I will grant the injunction until the conclusion of the investors' proceeding, or until, say, 30 days after the commencement of a proceeding by the liquidator or his assignee which makes any claims with respect to the transfer of the Windsor units to Mr Reindel and Blizzard Winds, whichever is the earlier.

138 Accordingly, I will order that the investors' caveats over the Windsor units and the Toorak property be removed, and that the investors' applications in their summons filed 10 September 2021 be granted, insofar as they seek to restrain Mr Reindel and Blizzard Winds from dealing with the Windsor units. The application to restrain Ms Runhardt from dealing with the Toorak property will be dismissed.

139 I accept that there are some deficiencies in the statement of claim which will need to be addressed sooner rather than later, including, but not limited to the failure of the investors to plead the special circumstances said to confer standing upon them to bring the investors' proceeding. While those deficiencies have not been fatal to the injunction application, in that they may well be able to be easily and promptly remedied, they should be addressed, and if they are not, it is foreseeable that the Reindel parties will bring a strike out application, which may have the ultimate effect of bringing the proceeding to an end. Further, it is my view that the investors need leave to proceed to bring their claims in the investors' proceeding in their capacities as beneficiaries of the unit trust, and that leave should be sought sooner rather than later.

140 Given that the Baker caveats have been dealt with in my earlier reasons, then, subject to the determination of the question of costs in the applications which are the subject of these reasons, paragraphs 1 to 7 of the originating motion in the caveat proceeding have been dealt with. A further hearing in the caveat proceeding will be scheduled in the forthcoming weeks to deal with the claims for injunctive relief in paragraphs 8 and 9 in the originating motion (if pressed), and directions for the further conduct of the application in paragraph 10 of the originating motion (being an application for compensation under s 118 of the TLA, if pressed. If any party seeks costs on any basis other than the default position (being that costs follow the event, payable on a standard basis, to be taxed in default of agreement) ('usual basis'), then that party should inform my chambers within seven days of the date of these reasons, following which directions will be made to provide for the determination of the issue of costs by way of written submissions.

141 As for the injunction application, I will hear submissions from the parties as to whether the 30‑day period referred to in paragraph 137 above is necessary or appropriate. Further, if any party seeks orders for costs on any basis other than the usual basis, then that party should inform my chambers within seven days of the date of these reasons, following which directions will be made to provide for the determination of the issue of costs by way of written submissions.

142 Finally, I will direct that the investors serve a proposed amended statement of claim in the investors' proceeding for consideration by the defendants, and the investors' proceeding be listed for directions shortly after that time. The parties should confer as to whether that hearing should be listed before the managing judge, or be made returnable before me in the first instance.

WINDSOR DEVELOPMENT COMPANY PTY LTD (EXTERNALLY ADMINISTERED) (A.C.N. 609 746 045)

[1] Reindel v Confreight Pty Ltd (No 1) [2022] VSC 163. The orders provided that the caveat lodged by ABPC over the Windsor unit owned by Mr Reindel personally could be maintained ('Baker caveat'), while the caveats lodged over the Windsor units owned by Blizzard Winds be removed.

[2] See s 126 of the Instruments Act 1958 (Vic).

[3] The Registrar of Titles is not playing an active part in this proceeding.

[4] [1874] UKLawRpCh 20; (1874) LR 9 Ch App 244.

[7] Upon becoming aware of this issue, the parties were invited to make further submissions regarding the impact (if any) upon the standing of the investors to build their claims in the investors' proceeding, and the parties did file and serve further submissions in April 2022.

[11] A sub-contractor for the Windsor development.

[12] Referable to unpaid project management fees.

[13] Presumably these deposits would ordinarily have been kept in a trust account.

[14] [2015] VSCA 58.

[16] [1964] UKPC 2; [1965] AC 694.

[18] See Charles v Commissioner of Taxation [1954] HCA 16; (1954) 90 CLR 598 ('Charles'); Costa & Duppe Properties Pty Ltd v Duppe [1986] VicRp 9; [1986] VR 90 ('Costa'); Schmidt v 28 Myola Street Pty Ltd [2006] VSC 343; (2006) 14 VR 447 ('Schmidt').

[19] [2004] HCA 7; (2004) 216 CLR 109.

[20] Ibid [55], quoting Scott on Trusts, 4th Ed (1989), Vol 4, s 282.

[21] Ramage v Waclaw (1988) 12 NSWLR 84, 91-92.

[22] IMO Brimson Pty Ltd (in liq) [2019] FCA 1023 [48]-[49].

[23] See Garawin Pty Ltd v 1A Eden Pty Ltd [2022] NSWSC 333 [159]; Marshall Futures Ltd v Marshall [1992] 1 NZLR 316; and Nicholson Street Pty Ltd (recs and mgrs apptd (in liq) v Letten [2016] VSCA 157, where Kaye JA stated (at [90]) as follows: "a trustee is obliged to take action to recover trust funds, notwithstanding that the trustee was, or might have been, itself, involved in the breach of trust that is a basis of the claim made against the defendants".

[24] [2012] VSC 227 ('Deutsch').

[25] [2015] VSC 178 ('Randa').

[28] Joseph Hayim Hayim v Citibank N.A. [1987] 1 AC 730; Ramage v Waclaw (1988) 12 NSWLR 84; and Deutsch [2012] VSC 227.

[29] Randa [2015] VSC 178 [44].

[30] [2012] VSC 227.

[32] Noting that in Randa, the liquidator was present and represented before Sifris J.

[33] Transcript of Proceedings, Reindel v Confreight (Supreme Court of Victoria, S ECI 2021 02659, Daly AsJ, 18-19 October 2021), T170-1.

[34] [2021] VSC 177.

[37] That the "prima facie case" test is to be preferred is consistent with the language used by the Court of Appeal in AE Brighton Holdings Pty Ltd v UDP Holdings Pty Ltd [2020] VSCA 235 [25], although in that decision there was no discussion of any difference between the stringency of the tests. The terms "serious question to be tried" and "prima facie case" were used interchangeably by the Court of Appeal in Lee v Yap [2021] VSC 297, but this decision concerned the correctness of the primary judge's findings concerning where the balance of convenience lay, and again, there was no discussion about which test is to be preferred.

[38] [2021] VSC 177.

[39] [2017] VSCA 352; (2017) 53 VR 311.

[40] See cll 6.4, 7 and 15.1 of the trust deed. Clause 6.4 of the trust deed provides that: "The beneficial interest of the unit holders in the Trust Fund shall be divided into units. Each unit shall confer an equal interest in the Trust Fund but shall not confer any interest in any particular part of the Trust Fund nor in any Investment but only such interest in the Trust Fund as is conferred on a Unit under the provision [sic] contained in this Deed". [Emphasis added]

[41] [1986] VicRp 9; [1986] VR 90.

[42] (2006) 14 VR 477.

[43] [1954] HCA 16; (1954) 90 CLR 598.

[44] [2020] VSCA 235 ('AE Brighton').

[45] [1994] VicRp 47; [1994] 1 VR 672 ('Swanston Mortgage').

[48] Although elsewhere the investors allege that the Windsor units were transferred to Mr Reindel and Blizzard Winds in specie, which is what in fact occurred_._

[51] [2014] UKSC 10; [2014] AC 1189 ('Williams').

[52] [2017] VSCA 352; (2017) 53 VR 311.

[54] [2014] UKSC 10; [2014] AC 1189.

[56] [2019] VSC 778 ('Super Jacobs').

[57] [1994] VicRp 47; [1994] 1 VR 672.

[58] [1965] HCA 17; (1965) 113 CLR 265.

[59] [2019] VSC 778.

[60] [1994] VicRp 47; [1994] 1 VR 672.

[61] Vasiliou v Westpac Banking Corporation [2007] VSCA 113; (2007) 19 VR 229, where the Court said (at [121]) "It may be that the correctness of the Swanston Mortgage decision requires reconsideration. But, unless and until that decision is overruled after a full hearing before a bench of five appellate judges, we are bound by it."

[62] [1994] VicRp 47; [1994] 1 VR 672.

[63] [2019] VSC 778.

[64] See McNab v Graham [2017] VSCA 352; (2017) 53 VR 311; Williams [2014] UKSC 10; [2014] AC 1189.

[65] [1994] VicRp 47; [1994] 1 VR 672.

[67] [1981] Qd R 81 (which was also relied upon in Ex Parte Goodlet & Smith Investments Pty Ltd [1983] 2 Qd R 792).

[68] Swanston Mortgage [1994] VicRp 47; [1994] 1 VR 672, 682.

[69] (1995) 11 VLR 386.

[70] [1998] 3 VR 133 ('Macquarie Bank').

[71] [1994] VicRp 47; [1994] 1 VR 672.

[74] McNab v Graham [2017] VSCA 352; (2017) 53 VR 311.

[76] [1994] VicRp 47; [1994] 1 VR 672.

[77] [2017] VSCA 352; (2017) 53 VR 311.

[78] Schmidt [2006] VSC 343; (2006) 14 VR 447 [37]-[39].

[79] Schmidt [2006] VSC 343; (2006) 14 VR 447; Costa [1986] VicRp 9; [1986] VR 90.

[80] [2020] VSCA 235.

[81] From that submission, I can infer that the Reindel parties say that the inunction application is an abuse of process, but that submission was not strongly pressed.

[82] [2008] VSC 300.

[85] [2019] VSCA 318.

[87] [2008] VSC 300.

[89] Siskina (cargo owners) v Distos Compania Naviera S.A. [1979] AC 210, 256.

[90] Cassegrain v Cassegrain (2015) 254 CLR 425 [32]. However, the conduct complained of by the investors post-dates the acquisition of the Toorak property, as Ms Runhardt became the registered proprietor of the Toorak property in May 2015.

[91] Noting that in their proposal to the ANZ Bank, Mr Reindel and Ms Runhardt provided an estimated value of the Toorak property at $10 million. There is also evidence that the Toorak property is mortgaged to Westpac for approximately $2.7 million, such that there is probably ample equity in the Toorak property, which is also the family home of Ms Runhardt and Mr Reindel.

[92] No orders were made in either the caveat proceeding or the investors' proceeding to the effect that the evidence in one application would be evidence in the other application. However, if necessary, I would make those orders now as for then. The applications were managed together, and, insofar as they concerned the investors' caveats, heard together, and there was a substantial overlap in the factual issues between the applications. References were made in the parties' oral and written submissions to the pleadings and evidence in the caveat proceeding, the investors' proceeding, and the first liquidator's proceeding interchangeably.

[93] In their submission to the ANZ Bank in October 2020, which was in evidence in the caveat proceeding, Mr Reindel and Ms Runhardt referred to six units in Gladesville, New South Wales, said to be valued at $4.8 million, which may or may not be encumbered, although there was also reference to an ANZ investment loan of $2.9 million which may be referable to those properties. However, there was no information in this document regarding who the registered proprietor(s) of those properties are.

[94] By way of example, in American Cyanamid Co v Ethicom [1975] UKHL 1; [1975] AC 396 (which is no longer good law in Australia, but not on this point), Diplock LJ said at [408]: 'If damages in the measure recoverable at common law would be [an] adequate remedy and the defendant would be in a financial position to pay them, no interlocutory injunction should normally be granted, however strong the plaintiff's claim...' (emphasis added). See also Kambrook Distributing v Delaney (1984) 4 IPR 79, 98, where the likely inability of the defendant to meet an order for damages was a critical factor in determining where the balance of convenience lay.

[95] Noting that the Baker caveats lodged over the Windsor units owned by Blizzard Winds have now been removed.