Rubino v Australia and New Zealand Banking Group Ltd

Court of Appeal (NSW)|2014-08-27|Before: Basten JA, Ward JA, Emmett JA, Bellew J

Judgment 1BASTEN JA: I agree that this matter should be disposed of in the way proposed by Emmett JA and that the parties should prepare the appropriate short minutes of the orders and undertakings. I also agree with the reasons given by Emmett JA. 2WARD JA: I agree with Emmett JA. I wish only to emphasise the following. First, that, as his Honour has noted at [70], the material put before the Court on the present application goes considerably beyond what was before the primary judge. There was no error in the manner in which the primary judge dealt with the application on the materials before him. Second, my concurrence in the grant of the stay sought by the applicant involves no expression of opinion as to the merits of the applicant's case in the Equity Division proceedings; simply that there is a serious question to be tried and that the balance of convenience favours the grant of the stay provided that the applicant's undertaking as to damages is secured by payment to the Bank of statutory interest on the monetary judgment while the stay is in force. I also note that it is incumbent on the applicant to prosecute her claims in the Equity Division proceedings expeditiously, unlike the manner in which the proceedings were commenced and have been prosecuted to date. 3EMMETT JA: Mrs Biagina Rubino seeks leave to appeal from orders made by a judge of the Common Law Division on 10 June 2014. By the orders, the primary judge dismissed her application for a stay of the execution of writs for possession of adjoining parcels of land known as 5 Calderwood Road, Galston (the Calderwood Property) and 45 Pine Valley Road, Galston (the Pine Valley Property). The writs were issued at the behest of the respondent, Australia and New Zealand Banking Group Ltd (the Bank), following the making of orders in the Common Law Division for possession of the Calderwood Property and the Pine Valley Property (together the Galston Properties) in favour of the Bank. 4Possession was ordered in favour of the Bank on the basis of mortgages of the Galston Properties granted to the Bank by Pineview Property Holdings Pty Ltd (Pineview), the present registered proprietor of each of the Galston Properties. The stay of execution of the writs was sought in aid of proceedings commenced in the Equity Division by Mrs Rubino and her late husband, Alfio Rubino, in which they claim orders that the transfer of the Galston Properties to Pineview and the mortgages of the Galston Properties by Pineview to the Bank be set aside on the ground that they were obtained as a result of fraud in which the Bank was relevantly implicated (the Equity Proceedings). In order to consider the allegations advanced by Mr and Mrs Rubino, it is necessary first to canvass in some detail the events surrounding the granting of the mortgages.

Background facts 5For many years, Mr and Mrs Rubino resided in the Calderwood Property. Mrs Rubino has continued to reside there and Mr Rubino continued to reside there until his death on 21 October 2013. They or their associates also engaged in flower farming operations on the Galston Properties. 6Prior to December 2011, moneys had been advanced by the Bank on the security of mortgages over the Pine Valley Property and the Calderwood Property, together with a third property (the Arcadia Property). A dispute arose between Mr and Mrs Rubino, on the one hand, and the Bank, on the other hand, concerning the amount secured by those mortgages, which the Bank asserted was in excess of $6,000,000. Between July 2011 and December 2011, the Bank and Mr and Mrs Rubino engaged in a farm debt mediation and, on 20 December 2011, Mr and Mrs Rubino, on the one hand, and the Bank, on the other hand, signed an agreement that gave effect to a settlement of their dispute (the Heads of Agreement). 7Clause 5.3 of the Heads of Agreement provided that Mr and Mrs Rubino could retain the Calderwood Property unencumbered and that the Bank would give a discharge of its mortgage over the Calderwood Property on or 16 January 2012. Under cl 5.1 of the Heads of Agreement, Mr and Mrs Rubino had the choice of either giving the Bank vacant possession of the Arcadia Property and the Pine Valley Property by 16 January 2012 or retaining one or both of them by paying the Bank $1,050,000 in respect of the Pine Valley Property or $1,650,000 in respect of the Arcadia Property. Thus, for Mr and Mrs Rubino to retain the Pine Valley Property, it was necessary for them to raise the sum of $1,050,000. If they wished also to retain the Arcadia Property, it was necessary for them to raise a further $1,650,000. 8In circumstances that are by no means clear, it appears that Wyse & Young International Pty Ltd (Wyse) was retained by Mr and Mrs Rubino to raise those funds. Mr George Dimitriou of Wyse thereafter engaged in discussions with Mr David Waniata, who is or was an employee of the Bank. Mr Waniata is married to Ms Terri Dawson, who was in some way associated with Mr Dimitriou at Wyse. In the present application, Mrs Rubino places great reliance upon an email exchange that took place between Mr Waniata and Mr Dimitriou early in the morning of 31 December 2011. It is therefore necessary to say something about that email. 9At 12.01am on 31 December 2011, Mr Dimitriou sent an email to Ms Dawson's email address (though apparently to the attention of Mr Waniata) under the subject "Galston, Galston, Arcadia". The email began by saying that all three properties were currently "with ANZ". The email said that "we" will have title of the first property with no debt owing, having a value of $1,350,000. That appears to be a reference to the Calderwood Property, which was to be discharged from the mortgage to the Bank as part of the terms of the Heads of Agreement. The email said that that could only happen when "we pay over the following". That may be a reference to a proposal to acquire all three of the properties. As I have outlined above at [7], while the Calderwood Property was to be discharged without further payment, payments were required for the other two properties if all three were to be acquired. The email said that the Bank either wants the keys for the Pine Valley Property and the Arcadia Property or bank cheques. It said that for the Pine Valley Property, "we" need $1,050,000, the value of that property being $1,350,000. The email said that for the Arcadia Property, $1,650,000 was required. Those references are, clearly enough, references to the amounts contemplated by cl 5.1 of the Heads of Agreement. The email then referred to the value of the Arcadia Property as being $2,575,000 twelve months previously. There is then an obscure reference to "MJ 14 months 1,950,000 that was requested down". 10The email then went as follows: So I thought the following: 2 sales contracts separately - For Galston at $1,050,000 to someone in trust - show the payment made of 20% to the vendor. Second valuation needed for stamp duty purposes ... probably use Susan in a trust set up - Susan can be the private lender [.] The family will pay her the fees for that probs 20k for her trouble. There's the car issue sorted. The reference to the "car issue" is obscure, but may not be relevant. The email then went on as follows: For Arcadia at $1,650,000 to someone in trust - show the payment made to Vendor ie 20% and stamp duty paid and calculated. Property bought for investment purposes. Second valuation needed for Stamp Duty purposes. ... probably use Danny in a Trust set up. At settlement the Galston unencumbered property transferred to the company trustee and the trust, so as the assets are quantified. We then re-finance all or even just the unencumbered or sell it to the niece or re-finance in business 1mil payback trustee directors on both for the use of their money - raise the money. The trust setup - director of Trustee Co Danny - beneficiaries Nicole and her brother Tony Rubino 21 and 28 year old. Then we do a share transfer to the beneficiaries - set up a new trustee director - being the beneficiaries and transfer the shares of the trustee company. So monies needed to be raised to pay back based on unencumbered property. 200k my outstanding lend amount. Danny fees lend outstanding 28k. 3% of total lend amount split between you and I [sic]. The references to "fees" and "3%" are not entirely clear, but appear to be references to commissions of some sort. The email then continued: Arcadia - Danny's 20% returned and also stamp duty returned and fees for the lend $. Galston - Danny's and Susan's money returned plus interest and costs and stamp duty paid monies. 20% deposit raised by Danny on Arcadia - based on $1,650,000 = 345k plus stamp duty as needed at settlement to supplement your monies raised (can you calculate stamp duty, based on this type [of] property). 20% raised by Danny on Galston - based on $1,050,000 = 210k plus stamp duty as needed at settlement to supplement your monies raised (can you calculate stamp duty, based on this type [of] property). Just need 2 new sales contracts. 2 transfers for new purchase. To raise money to pay back everyone. 1 trust - 1 trustee company - trustee director Nicole - beneficiaries Nicole and brother [i.e. Tony Rubino]. As there is no debt against this prop the Trust ca[n] just re-finance to pay everyone back. You've done loans for Danny and Susan so I can make Sarinda 1 trustee company and Susan of Green Global the other. Susan has trust already so that's a bonus. Danny has his trust as well so that's a bonus. Both investment props - both should be approved swiftly. Can you work out stamp duty on both, actually all three, the other property may as well go to a trust set up once unencumbered. 11The references to "Susan" and "Danny" are to Ms Susan Huybers and Mr Danny Kalashich, who subsequently funded the advance of the sum of $1,050,000 to Mr and Mrs Rubino to enable them to obtain the discharge of the Pine Valley Property from the mortgage to the Bank. It is quite unclear how Ms Huybers and Mr Kalashich came to be introduced to Mr and Mrs Rubino, except that it appears to have been through the intervention of Wyse. The reference to "Green Global" is to Green Global Pty Ltd (Green Global), a company of which Ms Huybers was a director. 12It is clear that Mr Dimitriou was referring to the three properties that were the subject of cl 5.1 and cl 5.3 of the Heads of Agreement. The email seems to have been putting forward proposals for financing the discharge from the Bank's mortgages of the properties referred to in cl 5.1, being the Pine Valley Property and the Arcadia Property. 13At 1am on 31 December 2011, Mr Waniata responded to Mr Dimitriou's email, indicating the amount of stamp duty on the transfer of each of the three properties. He then said: I have everything for Susan. What I'll need is Danny's NOAs for 2010 & 2011. I have his accts. I'll submit the deals on the 1st Jan and probably go through ING to keep it separate to ANZ. Thus, Mr Waniata appeared to be saying that he would submit an application for funding along the lines proposed by Mr Dimitriou in his email. 14At 2.13am, Mr Dimitriou sent a further email to Ms Dawson's email address, saying as follows: Be careful - trust and companies is that Resi or business banking? Is the accreditation for both[?] We can't delay at all. How fast is ING - and how many have been put thru - are they reliable to meet deadlines[?] Are they low doc or full doc facilities[?] Do they rely on sales contracts or do they need to do valuations as well? The valuers will slow us down ... later down track. So the smart play would be - business facility in your area after the other set so as deed priority - oppose[d] to using the unencumbered. This must be a positive - what I will do is register a first mortgage over that title so as our monies are all secured in any event, we will grab title deeds. So as it stands the risk is timing, we have till the 9th to settle. Maybe I can stitch time if we can get at least one done, the [Galston] at $1,050,000, and then get them the deposit for Arcadia hand it to the bank in good faith or hold in our solicitor's trust, as Sal is still the parents' solicitor and sales contracts are already done. I suppose with Susan's and Danny's money and mine we can probably discharge that one at $1,050,000. Leave them on title so as the stamp duty not needed to be paid, so as we say buy the mortgage from ANZ at $1,050,000. We take their place. Then sell it soon after. What we then do is put Danny trust and company as the mortgagor - we then take possession then refinance to buy Arcadia using the unencumbered again as Danny trust. 15The precise nature of the proposal is difficult to discern. It appears to involve the transfer of the Pine Valley Property and the Arcadia Property to trustees on unspecified terms. The beneficiaries were apparently to be Nicole and Tony Rubino, who it was said are the children of one of Mr and Mrs Rubinos' sons. There is no indication in the email that the proposal had been the subject of any consultation with Mr and Mrs Rubino. 16Without apparent knowledge of the proposal in the above email exchange, on 6 January 2012, Mr and Mrs Rubino, through their then solicitors, Messrs Watson & Watson, informed the Bank that they intended to give possession of the Arcadia Property and the Pine Valley Property to the Bank on 10 January 2012. For this option, no funds were required. The letter recorded that Mr and Mrs Rubino had earlier made an offer to purchase the two properties at prices lower than those given in cl 5.1 of the Heads of Agreement, but that the Bank had rejected that offer. At a settlement meeting at the offices of Minter Ellison on 12 January 2012, the Bank's solicitors, attended by Mr Quinn of Watson & Watson, Mr Quinn was given the certificate of title for the Calderwood Property. 17However, it appears that Mr and Mrs Rubino changed their minds. Also on 12 January 2012, Mr and Mrs Rubino signed a letter of authority addressed to the Bank, to Watson & Watson and to Minter Ellison, stating that Mr George Dimitriou was authorised to act on their behalf "to ensure the successful settlement" of all three of the Calderwood Property, the Pine Valley Property and the Arcadia Property, and that they intended to discharge the mortgages over the Pine Valley Property and the Arcadia Property on or before 16 January 2012. The letter further stated that Watson & Watson had "no instructions whatsoever" to procure settlement, nor had they been provided with any instructions other than to advise the Bank of their intention "to discharge the [Pine Valley Property] and the [Arcadia Property] pursuant to the [Heads of Agreement] and within the time specified." 18The letter of authority was sent under cover of a letter dated 13 January 2012 from Wyse, signed by Mr Dimitriou. That letter stated that Mr and Mrs Rubino had elected to pay the Bank $1,050,000 by way of redemption and discharge of the mortgage over the Pine Valley Property. Minter Ellison received the letter on 15 January 2012 and informed Wyse, by letter of 16 January 2012, that the Bank was not prepared to proceed without hearing from Watson & Watson. On 16 January 2012, Watson & Watson sent to Minter Ellison a letter stating that Mr and Mrs Rubino had terminated their retainer and appointed Mr Salvatore Russo of Russo & Partners as their solicitor. 19Also on 16 January 2012, Minter Ellison received a letter from Russo & Partners stating that that firm had taken over from Watson & Watson and that Wyse had been appointed as settlement agents to complete the transaction on behalf of Mr and Mrs Rubino. The letter stated that Russo & Partners understood that Watson & Watson was in the process of forwarding authorities signed by Mr and Mrs Rubino confirming the authority of Russo & Partners. The letter said that Mr and Mrs Rubino had instructed Russo & Partners to tender $1,050,000 in exchange for a discharge of mortgage over the Pine Valley Property and the certificate of title for the Pine Valley Property. 20On the same day, Mr and Mrs Rubino attended with Mr Russo at the offices of Watson & Watson, where they were given the certificate of title and discharge of mortgage in respect of the Calderwood Property. They acknowledged to Watson & Watson on that day that they understood that the Calderwood Property would be used for the purposes of short-term financing and that they were content for the discharge of the mortgage and certificate of title to be handed to Mr Russo on their behalf. Mr Russo thereafter gave the certificate of title for the Calderwood Property to a Mr Andrew Jetson of Wyse, and Mr Jetson gave the certificate of title to Mr Dimitriou of Wyse. 21On 17 January 2012, Mr Jetson, purporting to act as agent for Mr and Mrs Rubino, attended at the offices of Minter Ellison. In exchange for payment of the sum of $1,050,000, Mr Jetson was given the certificate of title for the Pine Valley Property and a discharge of the mortgage to the Bank over the Pine Valley Property. Mr Jetson then delivered the certificate of title for the Pine Valley Property to Mr Dimitriou. Thus, from 17 January 2012, Wyse, acting for Mr and Mrs Rubino, had possession of the certificates of title for both of the Galston Properties. 22The intention of Mr and Mrs Rubino was apparently that the Galston Properties would be used as security for short-term funding of the sum of $1,050,000 that had been applied to obtain the discharge of the mortgage of the Pine Valley Property. It appears that that funding was provided, through the agency of Wyse, by Ms Susan Huybers, as to $570,000, and Mr Danny Kalashich, as to $480,000. There is no evidence as to the terms of those advances, except that the certificates of title for both of the Galston Properties were apparently received by Wyse as some form of security.

The mortgage of the Galston Properties to Pineview 23Pineview was incorporated on 9 January 2012 and, on 10 January 2012, Ms Dawson, acting as a broker employed by DJET Financial Solutions, lodged an application to the Bank for finance on behalf of Pineview. The application sought two loans for a purpose described as "purchase of investment properties", being the Galston Properties. The application was lodged directly using an electronic system that allows a broker to make an application and track it, on the basis that the broker then faxes supporting documentation to the Bank. There was no mention in the application of the somewhat complicated arrangement proposed in the 31 December 2011 exchange of emails. 24The Bank subsequently received various documents in support of the application on behalf of Pineview. Two of the documents forwarded to the Bank consisted of draft contracts for the sale of the Calderwood Property and the Pine Valley Property. Each contract showed Mr and Mrs Rubino as vendor and Pineview as purchaser, and "c/- [Wyse]" was named as "Purchaser's solicitor". Both contracts bore the date 7 December 2011, but neither was signed by any party. 25Subsequently, the application lodged by Ms Dawson was transferred into a different loan system operated by the Bank and was split into two separate applications, one for the Calderwood Property and one for the Pine Valley Property. At that stage, Pineview was seeking funding in the sum of $2,000,720, split between the two applications. On 12 January 2012, Ms Dawson sent a facsimile to the Bank requesting that the Bank "escalate" the application so as to be assessed as soon as possible, since settlement was fixed for 16 January 2012. 26On 13 January 2012, the Bank sent a facsimile to Ms Dawson declining the application. The reasons given were as follows: Guarantor is unacceptable. Guarantor checklist indicates Guarantor is under pressure to provide guarantee. In addition, document has not been signed by broker. The facsimile also raised "other issues", including confirmation that the loans and securities were to be in the name of Pineview as trustee of the Pineview Trust. The facsimile indicated that the Bank would require long-form valuations for each of the Galston Properties, including confirmation of the rent for the properties. 27On 1 February 2012, Ms Dawson sent a further facsimile to the Bank in response to the Bank's facsimile of 13 January 2012. Ms Dawson confirmed that the loans were to be in the name of Pineview as trustee of the Pineview Trust. Valuations for both of the Galston Properties were attached and Ms Dawson said that the rent for the properties had been confirmed through the valuations. The valuation for the Calderwood Property was $1,350,500 and for the Pine Valley Property was $1,150,400. The valuation for the Calderwood Property assessed the unfurnished rental value at $650 per week and for the Pine Valley Property at $400 per week. 28A copy of the trust deed for the Pineview Trust was also enclosed with Ms Dawson's facsimile of 1 February 2012. That showed that the Pineview Trust had been created on 16 January 2012 by Mr Jetson. Ms Huybers was shown as the principal beneficiary. 29On 14 February 2012, the Bank offered two residential investment loans to Pineview. One was for the sum of $1,080,400, to be secured by a mortgage over the Calderwood Property. The other was for the sum of $920,320, to be secured by a mortgage over the Pine Valley Property. At that time, Pineview was not the registered proprietor of either of the Galston Properties. Both facilities, of a total of $2,000,720, were to be secured in addition by guarantees and indemnities by Ms Huybers and Green Global. The purpose of each facility was stated to be "purchase investment property" and the loan funds were not to be used for any other purpose without first obtaining the Bank's approval in writing. 30Those offers were accepted by Pineview on 23 February 2012. On the same day, Pineview executed mortgages of each of the Galston Properties in favour of the Bank (the Mortgages). 31The Bank's diary notes record that certain documents were received by the Bank at 10.03am on 1 March 2012. The diary notes record that, at 4.50pm, a transfer of land and contracts for sale were still outstanding, indicating that the Bank required transfers to Pineview of the properties that were to be the security for the advance to Pineview, together with contracts for the sale of those properties to Pineview. 32The diary notes also record that, at 10.21am on 6 March 2012, a transfer of land and contracts for sale were received. The transfer showed a total consideration of $2,450,900. There was no dispute that that transfer was signed by Mr and Mrs Rubino or that their signatures were witnessed by their son, Mauro Rubino. 33In addition, the Bank received the first page of two forms of contract for sale: one for the Calderwood Property for a total price of $1,350,500 and the other for the Pine Valley Property for a total price of $1,150,400. The Bank's diary notes indicate that the documents were not satisfactory because the consideration shown in the transfer was different (by $50,000) from the aggregate sum of the purchase prices shown in the two contracts for sale. The next entry in the diary notes refers to a telephone call from Mr Waniata calling from the Bank's Chatswood branch to advise another employee of the Bank that the outstanding documents had been received, saying that settlement was due on 8 March 2012. 34Subsequently, Mr and Mrs Rubino executed a transfer of the Calderwood Property and the Pine Valley Property (the Transfer). The transferee was Pineview and the Transfer stated that the consideration payable by Pineview to Mr and Mrs Rubino was $2,500,900. The Transfer was witnessed by another of their sons, Frank Rubino. The Transfer was dated 8 March 2012. 35A diary entry at 8.39am on 7 March 2012 records that a transfer of land had been received and verified. That is a reference to the Transfer. The consideration shown in the Transfer was equal to the total of the prices shown in the two contracts for sale. 36Also on 7 March 2012, Mr Dimitriou of Wyse wrote to the Bank referring to the proposed advances to Pineview and directing that the balance of the advances, after deducting the Bank's usual fees and charges, be paid as follows:

$123,059.50 to Wyse;
$1,867,491.50 to Wyse Accounting Pty Ltd. The total was therefore $1,990,551.00. The second cheque was said to be "to discharge Torrens Title 1/610450 & 2/610450". Those title references are for the Calderwood Property and the Pine Valley Property. The reference to "discharge" of the titles is unclear. However, it may be a reference to the fact that Wyse was holding the certificates of title for the Galston Properties as security for the advances made by Ms Huybers and Mr Kalashich. However, the amount required to repay those advances to Mr and Mrs Rubino was only $1,050,000. 37On 8 March 2012, the Transfer, which had been executed by Mr and Mrs Rubino, was delivered to the Bank in exchange for a payment by the Bank of the sum of $1,990,551 in accordance with the direction referred to above. It is unclear whether the Mortgages, which had been executed by Pineview, were delivered on that day or whether they had already been received by the Bank on 1 March 2012 along with other documents. The Transfer and the Mortgages were subsequently registered, probably on 14 March 2014. 38Part of the advance was apparently applied in the repayment of the sum of $1,050,000 borrowed from Ms Huybers and Mr Kalashich to obtain the discharge of the Bank's mortgage of the Pine Valley Property. The balance of the funds advanced by the Bank to Pineview appears to have been applied for the benefit of parties other than Mr and Mrs Rubino. The net effect of those arrangements was that Mr and Mrs Rubino ceased to be the owners of the Galston Properties, but received only part of the consideration expressed to be payable under the contracts for sale and the Transfer. 39Vacant possession of the Arcadia Property was apparently surrendered to the Bank. It is of no continuing relevance.

The Common Law Proceedings 40Pineview defaulted in the performance of its obligations to the Bank in relation to the advances made to it on 8 March 2012. The Bank then made demand for repayment of the whole of the amount outstanding, which was secured by the Mortgages. Pineview failed to comply with the demand. On 8 April 2013, the Bank commenced proceedings in the Common Law Division against Pineview, Ms Huybers and Green Global (the Common Law Proceedings). It claimed possession of the Galston Properties and also claimed judgment in sums in excess of $2,000,000 from Pineview, Ms Huybers and Green Global. 41No defence was filed in the Common Law Proceedings and, on 18 June 2013, money judgments were entered in favour of the Bank, as well as judgment for possession of the Calderwood Property and the Pine Valley Property. Writs of possession were issued on 9 July 2013 and notices to vacate were served on the occupiers of each of the Galston Properties on 16 July 2013. 42Mr and Mrs Rubino subsequently made an application by notice of motion filed in the Common Law Proceedings seeking orders that they be joined as defendants in the Common Law Proceedings and that the writs of possession be stayed. On 5 September 2013, an order was made that Mr and Mrs Rubino be joined as defendants and a stay was granted up to and including 9 October 2013. On 8 October 2013, Mr and Mrs Rubino commenced the Equity Proceedings, against the Bank, Pineview, the Registrar-General, and Mr Russo, who had acted in connection with the transfer of the Calderwood Property and the Pine Valley Property to Pineview. 43Following the death of Mr Rubino, Mrs Rubino continued with the application in the Common Law Proceedings and with the prosecution of the Equity Proceedings. After further hearings of the notice of motion for a stay on 3 December 2013, 12 February 2014, 25 February 2014, and 18 March 2014, a judge of the Common Law Division (the primary judge) ordered on 10 June 2014, for reasons published on that day, that the application for a stay of the writs of possession be dismissed with costs. 44Mrs Rubino now applies for leave to appeal from the orders made on 10 June 2014 by the primary judge, those orders being interlocutory: Supreme Court Act 1970 (NSW), s 101(2)(e). She also applied to this Court for a stay of the writs of possession pending the hearing of the application for leave to appeal and of the appeal, if leave be granted. Orders have been made that the appeal be heard concurrently with the application for leave. In the meantime, the Bank has consented to a stay pending the outcome of the application for leave to appeal.

The reasons of the primary judge 45In his reasons for dismissing the application for a stay, the primary judge summarised the contentions advanced on behalf of Mrs Rubino. Mrs Rubino had asserted that there were unusual features surrounding the relevant transactions, involving the execution of the Transfer and the delivery of the Transfer and the Mortgages to the Bank, such that an inference should be drawn that the Bank knew of, and participated in, a fraud perpetrated on Mr and Mrs Rubino by Pineview. The primary judge considered that, even if it were accepted that a fraud was in fact perpetrated and that some aspects of the transactions were unusual, they were no more than that. His Honour considered that the matters relied upon by Mrs Rubino fell short of establishing knowledge of the Bank of any fraud committed on Mr and Mrs Rubino by Pineview, much less any participation in such a fraud, within the terms of Farah Constructions Pty Ltd v Say-Dee Pty Ltd [2007] HCA 22; 230 CLR 89 at [177]. His Honour had regard to the following circumstances:

There was no suggestion that Mr and Mrs Rubino had not signed the Transfer;
It was not suggested that any representative of the Bank was present at the time when the Transfer was executed; and
It was not suggested that any representative of the Bank had direct knowledge of the circumstances in which the Transfer was executed. 46The primary judge also regarded it as significant that the Bank had advanced a sum in excess of $2,000,000. His Honour considered that that was an objective circumstance that tended against the proposition that the Bank knew of, and participated in, a fraud alleged to have been perpetrated by Pineview, the very entity to which the Bank advanced the funds. 47In addition, his Honour had regard to what he characterised as a significant, and largely unexplained, delay on the part of Mr and Mrs Rubino in bringing the application for a stay. Mrs Rubino said, in an affidavit read in support of the application for a stay, that she had not, until September 2013, seen the notice to occupier that was sent to the Pine Valley Property and the Calderwood Property on 14 April 2013. She said that she did not understand what the document meant and then said that she did not "believe" that she had seen the document or any other document like it before. The primary judge attached significance to what his Honour described as a subtle, but important, inconsistency between the assertion, on the one hand, that Mrs Rubino had not seen the document and the assertion, on the other hand, that she did not "believe" that she had seen it. 48Moreover, an affidavit by Mrs Rubino's daughter-in-law, Lee Rubino, established that the Transfer had come to the notice of Mrs Rubino in the latter part of 2012, when a rate notice was received indicating that Mr and Mrs Rubino were no longer shown as the owners of the Galston Properties. That resulted in a complaint being made to the police and to the Registrar-General in about January 2013. His Honour considered, therefore, that the fact that Mr and Mrs Rubino may not have become aware of all relevant matters until August 2013 was largely immaterial. His Honour attached importance to the fact that Mr and Mrs Rubino became aware of the Transfer in the latter part of 2012, but waited until September 2013 to make the application for a stay. His Honour did not consider that that delay had been satisfactorily explained. 49Finally, the primary judge had regard to an affidavit of service in which Mr Steve Vanderveer deposed that on 14 April 2013, service of notices (the Notices) under r 6.24 of the Uniform Civil Procedure Rules 2005 (NSW) (UCPR) were effected at the Galston Properties on a person named "Gina". The person served told Mr Vanderveer that she lived with Mr and Mrs Rubino and would pass the Notices on to them. No suggestion was made on behalf of Mrs Rubino that the Notices were not properly served in accordance with the UCPR. Nevertheless, the Notices were not acted upon and his Honour regarded that fact, of itself, as significant, the more so having regard to the fact of Mr and Mrs Rubinos' knowledge of the Transfer in the second half of 2013. His Honour found that the failure to act on the Notices had not been satisfactorily explained. 50Notices to vacate were served at the Calderwood Property and the Pine Valley Property on 16 July 2013. The delay of more than six weeks from then until 3 September 2013 was similarly not explained.

The proposed grounds of appeal 51According to her draft notice of appeal, Mrs Rubino proposes to raise the following grounds, if leave is granted:

The primary judge erred in finding that Mrs Rubino did not have an arguable case that the Bank had the requisite knowledge or constructive knowledge of a fraud by Pineview sufficient to entitle her to have the Mortgages set aside;
The primary judge erred in finding that Mrs Rubino had not provided an appropriate explanation of the time taken to make the application;
The primary judge erred in failing to consider or take into account the minimal prejudice that would have been inflicted upon the Bank by continuing the stay in circumstances where there was still equity in the Galston Properties;
The primary judge erred in failing to take into account the substantial prejudice that would be caused to Mrs Rubino by dissolution of the stay;
The exercise by the primary judge of his discretion miscarried insofar as he failed to take account of the above matters.

The Claims in the Equity Proceedings 52As I have said, the application for a stay of the writs of possession is made in support of the relief claimed in the Equity Proceedings. It is therefore necessary to consider the claims made in the Equity Proceedings. An amended statement of claim was filed on 18 February 2014 (the Amended Statement of Claim). A further amended statement of claim foreshadowed on 26 March 2014 was apparently not filed. 53The case pleaded against the Bank in the Amended Statement of Claim may be summarised as follows: (1)In December 2011, following a mediation conducted from July 2011 to December 2011, the Heads of Agreement was entered into between the Bank, on the one hand, and Mr and Mrs Rubino, on the other, by way of settlement of a dispute relating to a farm debt; (2)On 12 January 2012, the Bank provided to Mr and Mrs Rubinos' solicitors the certificate of title for the Calderwood property and a discharge of a mortgage to the Bank of the Calderwood Property and on 16 January 2012, those solicitors delivered the certificate of title and discharge of mortgage to Mr Russo; (3)On 17 January 2012, the Bank discharged the mortgage over the Pine Valley Property pursuant to the provisions of the Heads of Agreement and the certificate of title and discharge of mortgage were received from the Bank's solicitors by Wyse; (4)On 10 January 2012, Pineview made applications to the Bank for loans to enable the purchase of the Calderwood Property and the Pine Valley Property; the first page of unsigned contracts for the sale dated 7 December 2011 by Mr and Mrs Rubino to Pineview of each of the Calderwood Property and the Pine Valley Property were attached to the loan applications; (5)On 14 February 2012, the Bank stated to Pineview that signed contracts for sale of the Galston Properties would have to be provided to the Bank prior to settlement of the loans; (6)On 23 February 2012, the Bank offered to make advances to Pineview for the purchase of the Calderwood Property and the Pine Valley Property on security consisting of mortgages of those properties to the Bank; (7)On 23 February 2012, Pineview executed the Mortgages; (8)On 5 March 2012, the Bank received signed copies of the first page of contracts for the sale from Mr and Mrs Rubino to Pineview of the Pine Valley Property and the Calderwood Property; (9)Neither Mrs Rubino, nor Mr Rubino, signed the contracts for sale and the signatures purporting to be the signatures of Mr and Mrs Rubino on those documents are manifestly different from the signatures of Mr and Mrs Rubino on the Transfer; (10)The Transfer and the Mortgages were registered on 14 March 2012; (11)On 8 March 2012, Mr Russo prepared the Transfer but at no time had Mr or Mrs Rubino instructed Mr Russo or any person to prepare a transfer of the Galston Properties; (12)The Transfer was signed by Mr and Mrs Rubino, but at no time did they know or understand that they had signed a transfer of the Galston Properties; at the time of signing the Transfer, Mr and Mrs Rubino understood that it was a loan document in respect of an advance to procure the discharge of the mortgage of the Pine Valley Property under the Heads of Agreement; (13)On 8 March 2013, three cheques totalling $2,000,720.00 were issued by the Bank by way of advance to enable payment of the consideration of the transfer of the Galston Properties, being $1,074,663.80 in favour of Wyse Accounting Pty Ltd, $123,059.50 in favour of Wyse and $792,827.20 in favour of Wyse Accounting Pty Ltd; (14)Mr and Mrs Rubino did not receive any part of the proceeds of those cheques; (15)Pineview was incorporated on 9 January 2012 and therefore was not in existence as at 7 December 2011, being the date of the unsigned contracts for sale attached to the loan applications made to the Bank in the name of Pineview on 10 January 2012; (16)Pineview became the registered proprietor of the Galston Properties by reason of fraud, in that it took the Transfer in circumstances where it knew that Mr and Mrs Rubino did not intend to transfer the Galston Properties and knew that the purported sales were not bona fide transactions; (17)The Bank assisted Pineview in respect of the transactions that resulted in Pineview's fraudulently becoming the registered proprietor of the Galston Properties and the Bank's becoming the registered mortgagee in respect of the Galston Properties under the Mortgages, in that: ● the moneys advanced by the Bank were paid to agents of Pineview; ● none of those moneys was paid to Mr and Mrs Rubino as vendors of the Galston Properties; ● the Mortgages were executed on 23 February 2012 at a time when Mr and Mrs Rubino were still registered as owners of the Galston Properties and Pineview was not; (18)At the time of the Bank's assistance to Pineview in respect of the transactions, the Bank had knowledge of Pineview's fraud in that: ● the Bank had knowledge of circumstances that would indicate the fraudulent conduct of Pineview to an honest and reasonable person; or ● the Bank wilfully and recklessly failed to make such enquiries as an honest and reasonable person would make; or ● the Bank wilfully shut its eyes to the obvious; (19)The Bank's knowledge arose by reason of the following: ● The loan applications made by Pineview to the Bank attached two pages of unsigned standard forms of contract for sale dated 7 December 2011; ● The loan documentation checklist dated 10 January 2012 sent to the Bank stated that full copies of the contracts for sale were enclosed with the applications for loans but no such copies were enclosed; ● The unsigned contracts stated that deposits of $135,000 and $115,040 had been paid respectively for the Calderwood Property and the Pine Valley Property; ● To the knowledge of the Bank, no deposit had been paid to Mr and Mrs Rubino by Pineview as was stated in the unsigned contracts; ● The unsigned contracts stated that Pineview's solicitor was "c/- Wyse", which is not a firm of solicitors and the contracts did not state a solicitor's name or address; ● Pineview was not incorporated as at the date of the unsigned contracts for sale, namely, 7 December 2011; ● On or about 5 March 2012, the Bank received a copy of the first pages of the forms of contract for sale dated 7 December 2011 purportedly signed on behalf of Mr and Mrs Rubino; ● The signatures of Mr and Mrs Rubino on the Transfer are patently different from the signatures on the first pages of the forms of contract; ● The Mortgages were executed by Pineview at a time when Mr and Mrs Rubino were registered as the proprietors of the Galston Properties; ● None of the parties attended a settlement in respect of the purported sales of the Galston Properties by Mr and Mrs Rubino to Pineview; ● The Bank, as financier and mortgagee, knew that there was no settlement statement or payment directions from Pineview as the alleged purchaser of the Galston Properties; ● A valuation of the Galston Properties made by the Bank on 12 January 2012, said to have taken place after an inspection of the Galston Properties on that day, stated that the Galston Properties were not encumbered, whereas at that time they were mortgaged by Mr and Mrs Rubino to the Bank and the Bank held the certificates of title in relation to both of the Galston Properties as at the date of the valuation; ● The valuation said that fully executed and dated contracts for sale were to be sighted, but no such document was ever sighted; ● The Bank knew, by reason of its previous dealings with Mr and Mrs Rubino, as its customers, and by reason of the mediation in 2011, that Mr and Mrs Rubino were aged respectively 85 and 82 years; ● The Bank knew, by reason of those same matters, that Mr Rubino was wholly illiterate and that Mrs Rubino is substantially illiterate; ● The Bank knew, by reason of those matters, that the Calderwood Property was the family home of Mr and Mrs Rubino, that they had lived there since 1966, that they wished to own the Calderwood Property unencumbered and wished to continue to reside in it; ● The Bank knew, by reason of those matters, that Mr and Mrs Rubino, by reason of their age, inexperience and illiteracy, were under a disability at all material times in relation to the transactions described; (20)In the circumstances outlined above, the Mortgages are defeasible by reason of the fraud of Pineview, the knowing assistance of the Bank in Pineview's fraud, and the personal equity created in Mr and Mrs Rubino by reason of the conduct of the Bank in receiving the Mortgages in circumstances of its knowing assistance in the fraud; (21)The personal equity was created in Mr and Mrs Rubino by reason of the Bank's taking the Mortgages in circumstances where Mr and Mrs Rubino suffered from a special disability, the Bank knew of the special disability, and the Bank unconscientiously took advantage of the special disability. 54In addition, the Amended Statement of Claim alleges defeasibility of the title of the registered proprietor, Pineview, by reason of unilateral mistake and the Bank's knowledge of that unilateral mistake. Those allegations may be summarised as follows: (1)At all material times, Mr and Mrs Rubino believed that the Transfer was a document relating to a loan on the security of the Galston Properties for the purposes of discharging indebtedness to the Bank secured by mortgages of the Galston Properties; (2)Accordingly, the Transfer was executed by Mr and Mrs Rubino in circumstances of unilateral mistake; (3)Pineview knew, or ought to have known, of Mr and Mrs Rubinos' mistake at the time that they executed the Transfer; (4)Accordingly, the mistake of Mr and Mrs Rubino and the knowledge, actual or constructive, of Pineview of that mistake would make it unconscionable for Pineview to remain as registered proprietor of the Galston Properties; (5)In the circumstances outlined, Mrs Rubino, as surviving joint tenant of the Galston Properties, has an equitable right in personam against Pineview for the retransfer of the Galston Properties to her; (6)The Bank knew, or ought to have known, of the unilateral mistake by reason of the matters alleged above in relation to the Bank's participation in the fraud; (7)Accordingly, the Bank is not a bona fide third party who would be prejudiced by the retransfer of the Galston Properties to Mr and Mrs Rubino; (8)Further, the Bank assisted Pineview in respect of the transactions described above, which were vitiated by unilateral mistake and resulted in the Bank's thereby becoming registered as mortgagee under the Mortgages; (9)By reason of the matters alleged above in relation to the Bank's participation in the fraud, the Bank had knowledge of circumstances that would indicate the unilateral mistake to an honest and reasonable person, or it wilfully and recklessly failed to make such enquiries as an honest and reasonable person would make, or it wilfully shut its eyes to the obvious.

Disposition of the Leave Application and of the Appeal 55The first question is whether there is evidence capable of supporting the allegations made in the Amended Statement of Claim. If so, it would then be necessary to consider the balance of convenience as between Mrs Rubino, as a successful plaintiff deprived of the Galston Properties, and the Bank, as a successful defendant deprived of its opportunity to exercise its power of sale under the Mortgages.

Serious question to be tried 56The Court must approach the issue as to whether there should be a grant of leave and whether there is a serious question to be tried on the basis that Mrs Rubino's case should be accepted at its highest, insofar as there is evidence to support the case. There is evidence that Mr and Mrs Rubino, when they signed the Transfer, believed they were signing documents in connection with an advance to enable them to obtain a discharge over the mortgage of the Pine Valley Property to the Bank. There is evidence that they did not understand that they were signing contracts for sale or a transfer of their ownership of the Calderwood Property and the Pine Valley Property. The substantive basis upon which the Bank contends that there is no serious question to be tried is that the Bank was not in any relevant sense implicated in the alleged fraud. 57Thus, the Bank says, it simply advanced funds to Pineview on a straightforward basis to enable Pineview to buy two investment properties. Its security was unexceptional in that it required registered mortgages from Pineview as the registered proprietor of the Galston Properties. It received a direction that the funds advanced under the facilities granted to Pineview be paid to Wyse. 58It is significant that, for the purposes of the present application, the Bank accepts that the knowledge of Mr Waniata can be taken to be the knowledge of the Bank. Accordingly, the Bank is to be taken to be aware of the exchange of emails that took place on 31 December 2011 between Mr Waniata and Mr Dimitriou. That exchange indicates that proposals were being considered, without any apparent authority from or consultation with Mr and Mrs Rubino, for somewhat unusual transactions involving the Galston Properties, as well as the Arcadia Property. The Bank must be taken, for the purposes of the present application, to be aware of the arrangements that were the subject of discussions to which Mr Waniata was a party. 59The Bank approved the facilities to Pineview on the basis that Pineview was a trustee. Indeed, the Bank was provided with a copy of a declaration of trust in respect of the Pineview Trust. Notwithstanding that in the emails of 31 December 2011, reference was made to the transfer of the relevant properties to trusts under which the beneficiaries would be persons who were said to be grandchildren of Mr and Mrs Rubino, the declaration of trust of the Pineview Trust shows that the significant beneficiary is Ms Huybers. 60Mrs Rubino contends that the circumstances surrounding the application for finance by Pineview was such as to put the Bank on knowledge of the alleged fraud whereby some $900,000 of funds advanced by the Bank on the security of the Mortgages is alleged to have been misappropriated by Wyse or Pineview. Mrs Rubino relies heavily upon the email exchange that took place on 31 December 2011. 61Mrs Rubino contends that the terms of that email exchange give rise to sinister inferences by reason of the following:

the reference to "3%" of the "total lend amount" being split between Mr Waniata and Mr Dimitriou;
the "loose" references to new sales contracts;
the reference to titles "in a cavalier tone";
the absence of any reference to consultation with Mr and Mrs Rubino, who were the owners of all three properties at that time. 62Mrs Rubino then points to the contrast between the proposals outlined in the exchange of emails, on the one hand, and the loan application that was made on behalf of Pineview, on the other hand. Mrs Rubino accepts that the loan application itself contains nothing out of the ordinary, but says that, insofar as it seeks a loan for the purchase of investment properties, it was lacking in frankness having regard to the proposals outlined in the exchange of emails. 63On the basis that the knowledge of Mr Waniata is the knowledge of the Bank, the Bank was aware that the exchange of emails on 31 December 2011 had taken place in which various proposals that were quite different from the loan application actually submitted on behalf of Pineview were under consideration. The 31 December 2011 proposals involved trusts for the benefit of persons who were said to be grandchildren of Mr and Mrs Rubino and a trust for the benefit of Ms Huybers. The original application submitted to the Bank on 10 January 2012 was accompanied by unsigned contracts dated 7 December 2011 showing Pineview as purchaser, notwithstanding that Pineview was not incorporated until 9 January 2012. There is nothing to indicate that Mr Waniata understood that Mr and Mrs Rubino had been consulted in relation to the proposal or that they in any way consented to the arrangements that were discussed in the email exchange or the quite different arrangements that were the subject of the applications made to the Bank on behalf of Pineview to borrow for the purpose of investment in the Galston Properties. 64The thrust of the complaint by Mrs Rubino is that neither she nor Mr Rubino received any part of the sum advanced by the Bank, although part of that sum of money, $1,050,000, was applied in payment of the amount required under the Heads of Agreement to be paid to obtain a discharge of the Pine Valley Property from the mortgage to the Bank. That left approximately $900,000 that ought to have been received by Mr and Mrs Rubino. However, their case is that they did not receive any part of the excess, which was paid to Wyse. 65Ms Huybers and Mr Kalashich contributed $570,000 and $480,000 respectively to the $1,050,000 paid on behalf of Mr and Mrs Rubino to discharge the mortgage of the Pine Valley Property. Wyse took possession of the certificates of title in relation to both of the Galston Properties, which, it appears, Wyse held as security for the advances totalling $1,050,000. 66Without expressing any view as to the strength of Mrs Rubino's case, I am satisfied that there is sufficient material to indicate that there is at least an arguable case that the Bank, through Mr Waniata, was aware of circumstances that would cause an honest and reasonable person to make further enquiries as to the understanding of Mr and Mrs Rubino about the nature of the transactions and that the Bank, through Mr Waniata, wilfully and recklessly failed to make such enquiries.

The balance of convenience 67The Bank accepts that payment of interest accruing would be sufficient to obviate any prejudice to it by the grant of the stay, without conceding that Mrs Rubino is entitled to a stay, having regard to the unexplained delay in commencing proceedings and the other factors referred to by the primary judge. If Mrs Rubino ultimately fails, the Bank would be entitled to recover the statutory rate of interest on the judgment that it has against Pineview, Ms Huybers and Green Global. That, therefore, would be the measure of damages that the Bank would suffer by reason of the grant of a stay if, ultimately, when the Galston Properties were sold, there was a shortfall. 68The Bank did not contend that, as a term of any stay, Mrs Rubino should be required to provide security in respect of the $1,050,000 that was advanced by Ms Huybers and Mr Kalashich to enable that amount to be paid to the Bank. It is certainly arguable that Mr and Mrs Rubino received a benefit to the extent of those advances. If they are ultimately successful, it will be necessary to give credit for that amount to someone. However, since the Bank accepts that there will be no prejudice if the interest is paid as security for the undertaking as to damages that must be proffered on behalf of Mr and Mrs Rubino, it is unnecessary to pursue that matter further. 69The question of delay, as a bar to the grant of interlocutory relief, involves a balancing exercise. In the present case, there is evidence of considerable delay without any satisfactory explanation, other than that Mr and Mrs Rubino are not highly educated and did not understand the full ramifications of receiving a rate notice showing that they were no longer the owners of the Galston Properties. They ought to have taken some step well before they received notice that possession was being sought by the Bank. However, the Bank does not point to any specific prejudice by reason of their having failed to move earlier to be joined as defendants in the Common Law Proceedings and to make the claims in the Equity Proceedings. In those circumstances, I would not regard the delay in this case as being such as to constitute a bar to the granting of interlocutory relief. The primary judge regarded the delay as fatal in circumstances where he was not persuaded that there was a serious question to be tried as to whether or not the Bank had notice of circumstances that could possibly implicate it in any fraud.

Conclusion 70The hearing of this application has taken place on three separate hearing days. Evidence has been adduced piecemeal on each of the three days. Even so, it is clear that considerably more material is likely to be available for a final hearing of the Equity Proceedings, or even for a further interlocutory hearing. Accordingly, it should be made clear that the Court proposes to intervene on the basis of the considerable additional evidence that has been adduced before this Court, which was not available to the primary judge. The appropriate course is to grant leave to appeal and to allow the appeal. The applicant should file the draft notice of appeal in the white book, further service being dispensed with. 71The orders made by the primary judge should be set aside. In lieu of the orders made by the primary judge, there should be a stay of execution of the writs for possession pending the final disposition of the Equity Proceedings. However, liberty should be reserved to the Bank to apply, if it is so advised, to vary the terms of, or discharge, the stay on the basis of any additional evidence that becomes available in the course of preparation for the hearing of the Equity Proceedings. For the avoidance of doubt, leave should also be granted, nunc pro tunc, for the filing of the further evidence that was adduced during the hearing of this application. 72The grant of a stay should be on terms that Mrs Rubino gives the usual undertaking as to damages; pays to the Bank, as security for any damages that might be awarded pursuant to the undertaking, the amount of interest payable to the Bank on the money judgment that the Bank has obtained against Pineview; and gives an undertaking to the Court to prosecute the Equity Proceedings with all possible expedition. The costs of the application for leave to appeal and the appeal should be treated as costs of the parties in the Equity Proceedings, subject to any further order that may be made by the judge of the Equity Division in dealing with the Equity Proceedings. 73The parties should bring in short minutes to reflect the orders proposed.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 27 October 2014

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