Thompson v White

2685/03 THOMPSON v WHITE & ANOR JUDGMENT 1 HIS HONOUR: This is an application by Julian White, the first defendant in these proceedings, for injunctive relief. The first form in which Mr White sought relief was to restrain the completion of the sale of a property at Seaforth ("the Seaforth property") by the plaintiff, Byron Thompson, and the completion of the purchase by the plaintiff and his wife of a property at Somersby ("the Somersby property"). Both transactions are due for completion tomorrow, 14 May 2003. In relation to the Somersby property, a notice to complete has been issued by the vendor. Mr White, as I have said, is the first defendant. The second defendant is Romeo Libut, who has been present in Court throughout the hearing before me, but is not strictly a party to the application before me in the sense that he is neither an applicant nor a respondent in the present motion. 2 The defendants' claim is in two parts. They claim that they were involved in a joint venture with the plaintiff in the development of the Seaforth property; that there was a verbal agreement that, although the title was to be taken in Mr Thompson's name, the property was to be held by him for the three of them as beneficial owners in equal shares; and that this agreement was subject to a subsequent variation of the profit shares from the one-third, one-third, one-third basis. The defendants also claim that each of them lent money at interest to the venture and that those moneys were to be repaid before the profit shares were calculated. Their claim, as quantified provisionally in an affidavit of Mr White, totals some $678,000 for the debts and some $783,000 for the profit shares, a total in excess of $1.4 million. The plaintiff's case is that there was no such joint venture; that there was no loan by the second defendant; and that the loan by the first defendant was smaller than the first defendant claims. 3 With the settlement of the conveyancing transactions approaching, this matter was commenced on 6 May instant by summons returned last Friday, 9 May 2003, before Barrett J sitting as the Duty Judge of this Division. The summons was essentially for the withdrawal of caveats which the defendants had placed on the title to the Seaforth land and which would have prevented or impeded settlement of the sale of that land, the proceeds of which, it is clear on the evidence, are necessary for the settlement of the purchase of the Somersby land. By prayer 4, the plaintiff claimed an order pursuant to s 74MA of the Real Property Act 1900 for withdrawal of the caveats and by prayer 5 an injunction to restrain the defendants from lodging any further caveat in respect of a joint venture or alleged constructive trust in relation to the Seaforth land. By prayer 6 the plaintiff made the following offer: "That the orders sought in paragraphs 4 and 5 above be conditioned upon the plaintiff providing to Jennifer E Darin, Solicitor, of Suite 505, 282 Victoria Street, Chatswood, New South Wales, on or before 4 pm, Friday, 9 May 2003, an irrevocable authority substantially in accordance with the form annexed hereto and marked A in respect of the sum of $900,000, or such other sum ass this honourable Court may order."

The irrevocable authority to Ms Darin was for her to hold out of the proceeds of the sale of the Seaforth property, in a controlled moneys account, the sum of $900,000 to be released only by agreement among the parties, or the order of a competent court, or on 23 May 2003. 4 The matter proceeded to be part heard before Barrett J. On that occasion the second defendant was represented by Mr Greg George of counsel. The first defendant appeared then, as he does now, in person. Mr James Stevenson of counsel, who appears before me today with Mr Hogan-Doran for the plaintiff, appeared for the plaintiff before Barrett J. During the course of the hearing, the matter was settled and orders were made by his Honour by consent. Those orders were for the withdrawal of the caveats; to restrain the lodging of fresh caveats; for the payment of $800,000 from the proceeds of sale of the Seaforth property into a controlled moneys account in the joint names of the solicitors for the plaintiff and the second defendant; and for the payment of $100,000 to the defendants. The $800,000 was to be held in the controlled moneys account until further order or until agreement among the parties for release. There is, of course, no judgment of Barrett J upon the application, nor is there available to me any transcript of what occurred before his Honour. The only thing that I know of those proceedings, other than the matters already stated, is the evidence of the plaintiff's solicitor (undisputed) that, in open court before Barrett J, Mr Stevenson stated that the amount of $900,000 referred to in prayer 6 of the summons was calculated as being about twice the amounts mentioned in the caveats as advanced by the defendants. 5 The terms of the caveats were similar. That alleged by the first defendant claimed an estate or interest in the land in the following terms: "The caveator contributed the sum of $305,500.00 towards a joint venture of said property. The moneys were used to build a house and other improvements to the property. The contribution of funds was part of a constructive trust in favour of the caveator with interest to be paid at 10 per cent on said moneys and the obtaining of a 25-33 1/3 per cent share of all profits from the venture trust."

The orders of Barrett J also provided for the filing by the defendants of a cross claim and points of claim by 15 May 2003 - that day has not yet arrived and the cross claim and points of claim have not yet been filed. The caveat lodged by the second defendant stipulated the sum of $191,760 as contributed towards a joint venture. The statements in the caveats differ somewhat from the way in which the case is now formulated. I have already set out how the defendants now claim both loans that are repayable and a share of profits. 6 It seems to me that the first defendant may be able to make out a claim to injunctive relief on two bases: one is upon the proprietary basis that the defendants have an equitable interest in the Seaforth property and the proceeds of its sale. The other is that they are unsecured creditors in respect of their lendings, together with interest, and that they have an apprehension of the dispersal of moneys so as to fall within the principle laid down by Gleeson CJ, when Chief Justice of this Court, in Patterson v BTR Engineering (Aust) Ltd (1989) 18 NSWLR 319 at 321 - 322. 7 In answer to these claims, Mr Stevenson says that there are no grounds for the apprehension which would ground Mareva relief. Furthermore, he says that all these matters, having been open and in play before Barrett J last Friday, and the application then before Barrett J having been settled, the principle in Henderson v Henderson (1843) 3 Hare 100; 67 ER 313, or in Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589, applies and the application represents an abuse of process in its attempt to go behind or beyond the settlement of last Friday. Mr Stevenson says that the issues for determination before Barrett J extended beyond whether there was a caveatable interest. He says that they extended to what orders were necessary to protect the interests of the caveators in light of the impending removal of the caveats. He says that it is clear that issue was open and being debated, although no originating process or interlocutory process had been brought forward by the defendants. He says that any element of claim for Mareva relief should have been brought forward at that time and that, if it were not brought forward at that time, the Anshun principle now precludes it being sought. 8 Mr Stevenson has referred me, in regard to the application of the Anshun doctrine to settlements, to the recent decision of the House of Lords Johnson v Gore Wood & Co (a firm) [2002] 2 AC 1. In that case Lord Millett said at 59: "In one respect, however, the principle goes further than the strict doctrine of res judicata or the formulation adopted by Sir James Wigram V-C, for I agree that it is capable of applying even where the first action concluded in a settlement. Here it is necessary to protect the integrity of the settlement and to prevent the defendant from being misled into believing that he was achieving a complete settlement of the matter in dispute when an unsuspected part remained outstanding."

As to the circumstances on the basis of which the Anshun principle should apply, or not apply, in the case of settlements, Lord Bingham of Cornhill said at 33: "The question of whether the parties to the settlement of WWH's action (relevantly, Mr Johnson and GW) proceeded on the basis of an underlying assumption that a further proceeding by Mr Johnson would not be an abuse of process and whether, if they did, it would be unfair or unjust to allow GW to go back on that assumption. In my judgment both these conditions were met on the present facts. Mr Johnson was willing in principle to try to negotiate an overall settlement of his and the company's claims but this was not possible in the time available and it was GW's solicitor who said that the personal claim 'would be a separate claim and it would really be a matter for separate negotiation in due course'." 9 I do not attempt to trace in this interlocutory judgment the history of the Anshun doctrine in Australia since the decision of that case. I shall mention only that in Tanning Research Laboratories Inc v O'Brien (1990) 169 CLR 332 Brennan and Dawson JJ (at 344) expressed the view that the Anshun principle would not necessarily prevent a party from litigating a claim which it might or even should have brought by counterclaim in an earlier proceeding. That is of some relevance in this matter. Also in Johnson supra Lord Bingham of Cornhill (at 31) emphasised it does not automatically flow from the fact that an issue could have been raised in earlier proceedings that it should have been raised. 10 In this case, the only process which had been filed was the plaintiff's summons for the withdrawal of caveats. This was heard on an urgent basis. The hearing was in a sense a final hearing, at least of the claim for withdrawal of caveats, but the proceeding was in reality interlocutory in its nature, and the time for the propounding of the defendants' claims had not yet come, as was indeed acknowledged by the inclusion of a direction for the filing of a cross claim in the orders by which Barrett J otherwise put into effect the settlement achieved on that day. 11 I bear in mind the interlocutory nature of the proceedings of last Friday. I bear in mind the urgency with which they were heard, the matter having been commenced only three days previously. I bear in mind the exiguous evidence before me as to what occurred and what was debated before Barrett J, as well as the fact that that debate was peremptorily determined by that settlement. I find it impossible to come to the conclusion, in the circumstances, that there was an assumption by both parties that all possible matters between them by way of interlocutory relief were to be determined by the orders for withdrawal of caveats made on that day, subject to the setting aside of some $900,000, being the sum offered by the plaintiff in his summons. I find it equally impossible to conclude that it can be said that the defendants, on the run, as it were, should have brought forward all heads of interlocutory relief that they might claim so as to be precluded from subsequently making out a case for more ample interlocutory protection, as is now claimed by the first defendant. The interlocutory relief sought by the first defendant will, therefore, not be refused on that ground. 12 In my view, the first defendant has made out, in the requisite way, an arguable claim for a constructive trust over the property, as he alleges, and for lendings by the first defendant and the second defendant as alleged. The second defendant is, of course, not a party to the present application, but unless provision is also made for payment of the second defendant's claims, the money available to satisfy the first defendant's claims, whether proprietary or in debt, is likely to be reduced. The first defendant says that is his apprehension. In relation to the arguable cases, I should say that, whilst the first defendant's affidavits cover in some detail the relationship between the parties, the plaintiff's affidavits are quite short, having clearly been prepared in the first instance for the caveat application. They have not been amplified in the proceedings before me heard yesterday and today. The first defendant says that he did not sign written agreements concerning the joint venture that were tendered to him for signature on behalf of the defendants and that that was because those documents did not correctly reflect any agreement that there was between the parties. He has not to date denied (although, no doubt, he may subsequently deny) the conversation deposed to by the first defendant as to the parties all having a beneficial interest in the Seaforth property. However, if he had placed a denial on oath, that would not alter the situation; it would simply raise a conflict of fact which could and would not be resolved on an application such as the present. In the case of the debts, he has partly admitted and partly denied them and, of course, that matter equally will not be determined on this application. 13 The first defendant's apprehension of dispersal of the funds (or property into which funds may be translated) arises, he says, from dishonest or deceitful or unfrank dealings with him and the second defendant by the plaintiff. He was aware that the plaintiff, as the registered proprietor, was intending from about November last year to sell the Seaforth property. However, he was not frankly apprised of the steps taken to sell it and was told by the first defendant that the expected price was $2 million only a few days before a price of $3.1 million was obtained. Furthermore, the evidence indicates that the plaintiff raised an additional $250,000 under a mortgage of the Seaforth property and disbursed those moneys without informing the defendants of this fact, which he would certainly be obliged to do, if they were, as they allege, his co-owners beneficially of the property. Equally, he and his wife engaged in a transaction relating to the purchase of the Somersby property as early as 24 December 2002. On that day the plaintiff's wife exchanged a contract for the purchase of that property for $780,000 and paid a $39,000 deposit in respect of it. The plaintiff has deposed in an affidavit that he intended from that time to purchase that property and to employ proceeds from the sale of the Seaforth property in its purchase. The contract in favour of the wife was novated to the plaintiff and the wife jointly on 30 March 2003. It was only late in the day that the existence of this transaction, the identity of the purchasers and the intention to use funds from the Seaforth property in the purchase of the Somersby property was revealed to the defendants. I should add that there has been today no evidence by the plaintiff justifying or explaining his behaviour in relation to the transactions with the Seaforth property and the Somersby property that I have just mentioned. 14 On all the evidence, including the circumstances which I have set out in [13], I am of the view that the test stipulated in the Patterson case has been fulfilled. There is, therefore, a case under the proprietary claim and under the Mareva claim together for funds up to $1.4 million to be held aside by appropriate restraint until the rights between the parties are determined. 15 The first defendant would be under great hardship if the available funds were unrestricted in the hands of the plaintiff and were dispersed so that the benefit of any judgment obtained by him (bearing in mind the potential necessity to meet a judgment in favour of the second defendant) were lost. The plaintiff would be under great hardship if restrained, as was originally asked by the first defendant, from completing the sale of the Seaforth property and the purchase of the Somersby property. However, I do not intend to restrain those transactions and suitable relief can be moulded that does not prevent their completion. If those transactions can be completed, there is no evidence before me that would suggest that any hardship would be imposed on the plaintiff by the granting of the restraint that I propose. 16 The situation is an unusual one, in that the overall interlocutory regime depends in part upon proprietary relief and in part upon Mareva relief. Bearing in mind that, on the evidence, as I understand it, the plaintiff will have available to him after the settlements some $100,000 in addition to the sums he needs to settle the Somersby transaction, I do not at this stage, build in any right to use part of the moneys frozen, such as is incorporated conventionally in Mareva relief. But, allowing for the fact that the relief to be granted is supported in part at least on Mareva grounds, I shall reserve to the plaintiff liberty to apply to vary or discharge the injunctions now granted. 17 The orders I propose are:

(1) That out of the proceeds of settlement of the sale of the Seaforth property an additional sum of $200,000 be deposited into the controlled moneys account established under order 4 made by Barrett J on 9 May 2003 making a total principal sum of $1,000,000 in that account. (2) That the plaintiff by himself his servants and agents be restrained from selling or disposing of any interest in the Somersby property until further order. 18 This relief will be granted on the basis of the usual undertaking as to damages given by the first defendant. I have explained the terms of and the consequences of the usual undertaking as to damages to Mr White in open Court.

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