Stafford & anor v Kekatos & anor

Stafford & anor v Kekatos & anor - [2008] NSWSC 810 - NSWSC 2008 case summary — Zoe

[14]

4 The matter came before me for case management on 13 December 2007, when the matter was fixed for hearing for seven days commencing on 8 September 2008, and the following directions (inter alia) were made: 1. Direct that each party serve on the other and lodge with the Trial Judge's associate, a list of pleadings and affidavits proposed to be relied on by that party (by 4 June 2008). 2. Direct that each party serve on the other and lodge with the Trial Judge's associate, a list of witnesses who are required for cross-examination and, in respect of each, the estimated time required for cross-examination (by 11 June 2008). … 8. Note that: no party proposes to amend its pleadings. 9. Order (pursuant to UCPR r 31.1(3)) that the evidence in chief of all witnesses at the trial be given by affidavit. 10. Direct that no party may read at the hearing, without the leave of the Court, any affidavit which has not already been served. 11. Grant liberty to any party to apply to the Trial Judge concerning directions for the hearing on two days notice, by arrangement with the Trial Judge's Associate, any such application to specify the directions to be sought. … 13. Standover to 15 July 2008 at 0930 before Brereton J for pre-trial check. 5 On 27 May 2008, new solicitors for Mrs Kekatos - Kells - wrote to my associate, indicating that it was intended to mediate the dispute, but that if the mediation failed, then there would be an application to strike out the claim, and requesting that the matter be relisted, as "we consider that it is not appropriate for his Honour to have committed 7 days' hearing time to this matter in circumstances where, in our view, there need to be further interlocutory steps before any final trial dates are fixed". On 30 May, Kells filed a motion on behalf of Mrs Kekatos, returnable on 16 June, claiming an order that the Statement of Claim be stayed or dismissed generally pursuant to UCPR r 13.4 or 14.28. So far as the evidence before me reveals, this was the first occasion - eighteen months after the original Statement of Claim was filed, and only three months before the final hearing - that any objection was taken to the pleading. On 2 June, Kells explained that upon the matter being relisted they would seek the vacation of the directions made on 13 December 2007, and directions for the hearing of the motion.

[46]

36 Mrs Kekatos submits that any claim based on any such agreement relating to the acquisition of the Penrose Land cannot succeed, because of (NSW) Conveyancing Act 1919, s 54A, which provides that no action or proceedings may be brought upon any contract for the sale or other disposition of land or any interest in land, unless the agreement or some memorandum or note of it is in writing signed by or on behalf of the party charged. However, it is at least seriously arguable that the Staffords' claim is not one "upon a contract for the sale or other disposition of land", and that the Penrose Trust Agreement is not such a contract: it was not an agreement between vendor and purchaser, or disponor and disponee, but an agreement between three people who hoped to become purchasers. It is far from manifestly clear that an agreement between three persons that, in the event that one of them purchases land, she will hold it on trust for all three, is a contract for the sale or other disposition of land within s 54A. Moreover, even if it were within s 54A, it is not manifestly clear that a reply alleging part performance would be doomed to fail; nor that the requirement for writing would not be circumvented by the alternative pleadings of estoppel [cf Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387]. 37 For Mrs Kekatos, Conveyancing Act, s 54A, is again invoked for the proposition that enforcement of any agreement that she would take the Global Charge subject to some equitable obligation to the Staffords would require a sufficient written note or memorandum. However, it is at least arguable that a suit to enforce an equitable obligation arising from a common intention as to how land is to be held is not an action on a contract for sale or other disposition of an interest in land. The requirement for writing to create interests - including equitable interests -in land (as distinct from the enforcement of contracts for sale etc) is governed by Conveyancing Act, s 23C, but resulting, implied and constructive trusts are expressly exempted from its operation. Again, it is not manifestly clear that any requirement for writing would not be circumvented by the alternative causes of action asserted, and in particular estoppel. 38 Moreover, if s 54A is an answer to the Amended Statement of Claim, it was also an answer to the original Statement of Claim, yet this has not previously been suggested, let alone pleaded; it would be inappropriate in all the circumstances to allow its belated invocation to result in summary dismissal of the proceedings. 39 Mrs Kekatos further submits that there is embarrassing inconsistency between the allegation that the Staffords' assignment of the Global Charge was in consideration of Mrs Kekatos' promise made in August 2004 to use her home as additional security to raise funds for the acquisition of the Penrose Land [40], the allegation that the Staffords assigned their interest in the Global Charge pursuant to the Variation or the Novation on 21 September 2004 [42], and the allegation that the assignment was induced by Mr Kekatos' alleged misrepresentation on 21 September 2004 that it was unnecessary for express reference to be made to the trust on the face of the documentation and that such reference would have adverse fiscal consequences [43, 52R]. However, no inconsistency is involved: paragraph 40 refers to the agreement to make the assignment and its purpose; paragraph 42 refers the actual assignment pursuant to that agreement; and paragraphs 43 and 52R allege that the assignment took a particular form - in that it contained no express reference to the trust - because of the alleged misrepresentation.

[47]

40 Mrs Kekatos makes extensive submissions as to why the allegations in relation to the Global Charge could not result in the Staffords having any claim to the Settlement Proceeds, and in particular that, as it secures only the amounts owing by Global to the Staffords and Mrs Kekatos, and as no amount has been paid by Global in reduction of that amount, it could not catch the Settlement Proceeds. However, those submissions proceed on the misconceived basis that the charge caught only moneys paid by Global in reduction of the loans made by the Staffords and Mrs Kekatos, whereas the true characterisation is that the Charge attached to all Global's assets, including the Penrose Land, though it only secured Global's obligation to repay the loans. The advances to Global were recorded in the Loan Deed, clause 6 of which charged to the Staffords and Mrs Kekatos "any interest in any freehold and or leasehold property of which it is now or may hereafter at any time be possessed or to which it is now or may hereafter become entitled …". The Global Charge secured all moneys owing by it to the Staffords and Mrs Kekatos (clause 2) (which included the amounts owed by Global to the Staffords and Mrs Kekatos under the Load Deed), including by way of a fixed charge as regards Global's real and leasehold property (clause 3). Moreover, also on 10 April 2000, Global mortgaged the Penrose Land to the Staffords and Mrs Kekatos, also securing "all moneys" due by it to them. The Penrose Land was real property of Global, and was accordingly caught by the Global Charge; and it was expressly caught by the mortgage. While Mrs Kekatos submits that all the Global Charge did was to create some priority in certain circumstances and enable the appointment of a receiver, that overlooks that it created a security interest in the charged assets; moreover, the purpose of the appointment of a receiver is the realisation of the charged assets - including the Penrose Land - and the application of the proceeds to the chargee. Upon sale of the land, the proceeds must be applied to discharge the encumbrances in priority order - seemingly, first the assigned Heggies/Collex Mortgage, and secondly the Global Loan Deed, Charge, and Mortgage - and then to the registered proprietor. The notion of "proceeds of the Global Charge" is not limited to moneys paid by Global in reduction of the loans, but extends to moneys realised pursuant to the sale of the security to which the chargee is entitled pursuant to the charge. 41 Mrs Kekatos' submissions in this respect do not grapple with the fundamental contention that it was substantially in respect of her interest as chargee that Mrs Kekatos had any claim to the proceeds of the Penrose Land. The Staffords' case is that Mrs Kekatos received the 38% of the proceeds that she agreed to accept, substantially because she held the Global Charge. It is true, as Mrs Kekatos submits, that the Amended Statement of Claim contains no explicit allegation that she received the Settlement Proceeds pursuant to or in respect of the Global Charge. But it is not correct that "there is not one jot as to the First Defendant entering into [the Short Minutes] in any capacity other than in her own personal capacity", nor that there is no allegation that she received any of the Settlement Proceeds as trustee. While the Staffords put their case primarily on the basis that the sale of the Penrose Land to Adelaide Brighton resulted in a failure of their joint venture, whereupon Mrs Kekatos is said to have become liable to account to the Staffords for their proportionate interest [65A], paragraph 66 pleads (alternatively) that she held 50% of the Settlement Proceeds in trust for the Staffords, reflecting their claim to a beneficial interest in the Global Charge and its proceeds, whether as beneficiary of the Penrose Trust (see Amended Statement of Claim paragraphs 29, 40 and 40A), or on the basis of one or other of the alternative claims in paragraphs 42B to 52J.

[48]

42 Moreover, paragraphs 65A and 66 make clear enough that it is contended that she received the Settlement Proceeds in respect of the Global Charge (in that they are described as proceeds of the charge). Elsewhere, the Amended Statement of Claim pleads that her entitlement to the Settlement Proceeds was founded in an entitlement to a share of the proceeds of sale of the Penrose Land [62], and also pleads the factual history of the title to the Penrose Land in a way that demonstrates that the only interests in the land which Mrs Kekatos had were pursuant to the assignments of the Heggies/Collex Mortgage and the Global Charge - both of which interests she is alleged to have held as trustee. Thus the Amended Statement of Claim sufficiently discloses the Staffords' case that she received the Settlement Proceeds in respect of the Global Charge, and the material facts that comprise it. 43 That conclusion is reinforced, in the context of the present belated application, in the light of the evidence now adduced, which might be accepted at the trial. In Proceedings 3054/04, Heggies and Collex asserted, as against Global, that they were entitled to a lease over the Penrose Land and to the Heggies/Collex Mortgage in priority to the Ostabridge mortgage. A settlement on 15 October 2004 saw Mr Cvitanovic, as receiver of Global, take an assignment of the Heggies/Collex Mortgage; Global agreed that the Heggies/Collex Mortgage secured the sum of $29,300; and Heggies agreed to consent to any application by Global to substitute it or its nominee as plaintiff. Mrs Kekatos was not a party to the settlement but provided a bank cheque for $29,300 to Heggies, whereupon the receiver directed the assignment of the Heggies/Collex Mortgage to her, and on 21 October 2004, Mrs Kekatos was substituted as plaintiff. Accordingly, Mrs Kekatos became the holder of a mortgage securing $29,300, and substituted plaintiff in Proceedings 3054/04, in which there was no longer any dispute with Global, the only substantive dispute remaining being the priority of the assigned Heggies/Collex Mortgage vis-à-vis the Ostabridge mortgage. In her Second Further Amended Statement of Claim in those proceedings, Mrs Kekatos claimed an interest under the assigned Heggies/Collex Mortgage, and also an interest as chargee pursuant to the Global Charge and as mortgagee pursuant to the Global Mortgage, including as assignee of the Staffords' interests. The relief she claimed all pertained only to her interest in the Heggies/Collex Mortgage and the Global Charge and Mortgage. The final settlement, on 10 March 2005, provided that Mrs Kekatos would receive 38.56% of the balance proceeds of sale of the Penrose Land - in consequence of which she received, in about September 2005, the Settlement Proceeds. 44 From this, the following is at least arguable, as the Staffords submit: · Mrs Kekatos had no claim in Proceedings 3054/04, other than in respect of her interests under the assigned Heggies/Collex Mortgage and the assigned Global Charge and Mortgage; · Mrs Kekatos could not assert that the assigned Heggies/Collex Mortgage secured a sum greater than $29,300, because that was the amount, which the mortgagor and mortgagee agreed was owing at the time of assignment. Moreover, when Mrs Kekatos received the Settlement Proceeds, the sum secured by the assigned Heggies/Collex Mortgage had been paid out, by the royalty payments which Mrs Kekatos received.

[53]

49 Mrs Kekatos also submits that the cause of action pleaded in paragraphs 52K to 52R, for misleading and deceptive conduct, is defective in that the pleading (1) contains no material facts to support the allegation that the defendants had no reasonable grounds for making the alleged representations, and (2) does not allege that insofar as the representations were made by Mr Kekatos, they were within his actual or ostensible authority, nor set out any material facts to support such allegation. 50 The passage invoked by Mrs Kekatos from the judgment of Katz J in Aussie Home Security Pty Ltd v Sales Systems Australia Pty Ltd [1999] FCA 1458, [19] - which in fact is a quotation from Goldberg J in Phoenix Court Pty Ltd v Melbourne Central Pty Ltd (1997) ATPR ¶46-179, 54,431-2 - is concerned with the requirements of a pleading before the enactment of (CTH) Trade Practices Act 1974, s 51A [cf Fair Trading Act, s 41]. It is clear from the following paragraph of Katz J's judgment that his Honour did not intend to suggest that the same strictures applied to a pleading that invoked s 51A, although for that purpose it was necessary to specify what representations were alleged to be in respect of future matters. 51 Here, rather like in Aussie Home Security, the relevant representation is said to be misleading (1) because what was represented did not come to fruition [52P], and (2) because they related to future matters and there were no reasonable grounds for making them [52Q]. As in Aussie Home Security, so in this case, the matters alleged in paragraph 52P are insufficient to establish a contravention of s 42: the mere fact that a future state of affairs does not come about does not make the representation misleading. Paragraph 52P should be struck out. However, unlike in Aussie Home Loans, in this case paragraph 52Q plainly identifies what representations are said to relate to future matters, and alleges that the defendants did not at the time have reasonable grounds for making them. I do not accept that an allegation that a defendant had no reasonable grounds for a representation necessarily requires further particularisation, but even if it admits of further particulars, the material fact - absence of reasonable grounds - has been asserted. 52 Paragraph 52N alleges that in making the representations, Mr Kekatos was an agent and attorney of Mrs Kekatos. That is plainly an allegation that he made the representations in the scope of his authority as such agent. The agency is pleaded in paragraphs 4c and 5, which are unamended from the original Statement of Claim. The agency alleged may admit of further particularisation (that is, the usual particulars of whether it was oral, written, or implied, etc), but the material fact - that Mr Kekatos was for relevant purposes the agent of Mrs Kekatos - is sufficiently pleaded. 53 Paragraph 52P should be struck out, but the balance of the Trade Practices pleading is sufficient.

[57]

57 Other submissions, to the effect that no breach of the Penrose Trust Agreement, the Variation or the Novation is alleged, are beside the point. Those transactions are pleaded not to found a case of breach of contract, but to found the allegation that Mrs Kekatos' acquisition of the Staffords' interests in the Global Charge involved the assumption by her of equitable obligations to the Staffords, whether in the form of a trust (express, resulting, or constructive arising from their common intention, or a conventional estoppel arising from their common assumption). The relevance of the Trust Agreement [29], the Trust [29A], the Variation [40] and the Novation [40A] is, first, that each is an alternative way of characterising the dealings pursuant to which the Staffords claim to have retained an equitable interest in the Global Charge, notwithstanding the assignment; secondly, that they demonstrate the basis upon which it is contended that Mrs Kekatos' subsequent dealings with the Penrose Land were qua trustee; and, thirdly, that they form the factual substratum for the primary way in which the Staffords put their claim: namely, that the Penrose Trust Agreement, the Penrose Trust, the Variation and/or the Novation amounted to a joint venture for the acquisition of the Penrose Land [52F], that for the purpose of the joint venture the Staffords contributed their interest in the Global Charge [52G], that the joint venture failed without attributable blame by reason that the Penrose Land was not purchased but sold to a third party [52H, 62, 64, 65] yet Mrs Kekatos retains the Staffords' interests in the proceeds of the Global Charge [52I], which she holds upon trust for the Staffords according to their proportionate contributions [52J, 65A]. 58 I have not, in the foregoing, sought to address every one of the criticisms made of the Amended Statement of Claim. It may not be a model of the pleader's art, and it may include some matters that are more properly characterised as evidence than material facts or particulars; and it may admit of further particularisation. However, I am satisfied that insofar as any of these criticisms can be made of it, the prejudice or difficulties which might be occasioned to Mrs Kekatos are slight, and manifestly insufficient to justify the striking out or summary dismissal of the claim at this belated stage. Conclusion and Orders

[60]

61 The material facts said to underpin the allegations in paragraph 58, that Mrs Kekatos was a trustee of the Heggies/Collex Mortgage, are to be found in paragraphs 29, 29A, 33, 33A, 40, 40A, 41. They are sufficient for that purpose. 62 There is no inconsistency between paragraph 40 (which refers to the agreement to make the assignment and its purpose); paragraph 42 (which refers the actual assignment pursuant to that agreement); and paragraphs 43 and 52R (which refer to the form which the assignment took). 63 Paragraph 63 of the Amended Statement of Claim is irrelevant, and should be struck out. But it is not crucial to the Staffords' claim. 64 Though not explicitly, the Amended Statement of Claim sufficiently discloses that it is contended that Mrs Kekatos' receipt of the Settlement Proceeds was attributable to the Global Charge [65A, 66], that her entitlement to the Settlement Proceeds was founded in an entitlement to a share of the proceeds of sale of the Penrose Land [62], and that her only interests in the Penrose Land were pursuant to the assignments of the Heggies/Collex Mortgage and the Global Charge - both of which she is alleged to have taken as trustee. In the present context, illuminated by the case outline document and the evidence, and given that both defendants have already pleaded to the original Statement of Claim, the contention that Mrs Kekatos is not able to understand the case against her in this respect, nor the material facts said to underly it, is unsustainable. 65 It is at least seriously arguable that the Staffords' claim is not one "upon a contract for the sale or other disposition of land" within Conveyancing Act, s 54A, and that neither the Penrose Trust Agreement, nor any agreement or common intention that the Staffords retain an equitable interest in the Charge, is such a contract. Conveyancing Act, s 23C, does not apply to resulting, implied or constructive trusts. Moreover, it would be inappropriate in all the circumstances to allow its belated invocation to result in summary dismissal of the proceedings.

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