Westpac Banking Corporation v Victor Warren Ollis & Ors

LEGISLATION CITED : Conveyancing Act 1919 (NSW) Real Property Act 1900 (NSW)

Alexander and Others v Cambridge Credit Corporation Ltd (Receivers Appointed) and Another (1985) 2 NSWLR 685 Associated Alloys Pty Ltd v ACN 001 452 106 Pty Ltd (in liq) (2000) 202 CLR 588 Bank of Credit and Commerce International SA (No 8), In Re (Morris & Rayners Enterprises Inc) [1998] AC 214 Evans v European Bank Ltd (2004) 61 NSWLR 75 French Caledonia Travel Service Ltd (in liq), Re (2003) 59 NSWLR 361 CASES CITED : Guardian Mortgages Pty Ltd v Miller [2004] NSWSC 1236 King Investment Solutions Pty Ltd v Hussain [2005] NSWSC 1076 Mango Media Pty Ltd v Mertes [2006] NSWSC 1460 Penrith Whitewater Stadium Ltd v Lesvos Pty Ltd [2007] NSWCA 103 Westpac Banking Corporation v Ollis (2007) NSWSC 956 Yarrangah Pty Ltd v National Australia Bank Ltd [1999] NSWSC 97

TEXTS CITED : Professor Scott - Law of Trusts 3rd edition, Little, Brown & Co, 1967

Westpac Banking Corporation (Plaintiff) Victor Warren Ollis (First Defendant) Gail Anne Shields (Second Defendant) Koala Development Pty Limited (Third Defendant) Aaron Lye (Fourth Respondent) Christopher Lye (Fifth Respondent) New South Wales Crime Commission (Sixth Respondent) Peter William Flynn (Seventh Respondent) PARTIES : Richard Maurice Hawkins (Eighth Respondent) Kathryn Joan Hawkins (Ninth Respondent) Green Parkes Estate Pty Limited (Tenth Respondent) Docos Estate Parkes Pty Limited (Eleventh Respondent) Roger Wylie Developments Pty Limited (Twelfth Respondent) Holmes Conveyancing Pty Limited (Thirteenth Respondent) Lee-Lin Weissel (Fourteenth Respondent) Michael Joseph Ross (Fifteenth Respondent) Jennifer Anne Ross (Sixteenth Respondent) Secure Funding Pty Ltd (Seventeenth Respondent)

Mr J Stevenson SC, Mr N Kabilafkas (Plaintiff) COUNSEL : Mr CJ Dibb (Second Defendant and Third Defendant) Mr Rundle appeared for the seventh, eighth, ninth and eleventh respondents. Mr Josh Abdurahman and Mr Ian Brown, secretary and director of the respondent Green Parks Estate Pty Limited, appeared unrepresented

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION COMMERCIAL LIST

Friday 28 March 2008 ex tempore Revised 1 April 2008

50045/06 Westpac Banking Corporation v Victor Warren Ollis & Ors

JUDGMENT 1 There are before the Court a number of notices of motion. The principal judgment in the proceedings Westpac Banking Corporation v Ollis (2007) NSWSC 956 was handed down on 31 August 2007. It is unnecessary to repeat, for obvious reasons, what is to be found in that judgment. 2 Importantly, however, paragraphs 61 and 62 were in the following terms: "61. There are some complexities which require to be taken into account in circumstances where the New South Wales Crime Commission apparently obtained various orders against Mr Ollis and Ms Shields. In those circumstances the plaintiff presently confines its claims to relief to a number of declarations together with the Court standing the proceedings over to a further date for the making of such further orders as may later be seen as appropriate.

62. The appropriate course is to announce in general terms the declarations and orders presently to be made and to require that the Bank bring in short minutes of order accordingly. The interest calculations will require to be updated to the date of the making of the actual orders. Hence the terms of the following orders are to be taken as reflective only of the position as it would have been had the interest calculations been as at 24 August 2007." 3 There then followed a number of declarations, the Court inter alia entering judgment against the first defendant in favour of the plaintiff in the amount of $14,692,968.03 and ordering that the proceedings be stood over to a date to be fixed for further orders. 4 One of the notices of motion today pursued by the Bank [by an amended notice of motion filed on 18 February 2008] seeks orders enforcing the trusts and charges over the property of the first defendant, Mr Ollis, and the second defendant, Ms Shields, and the third defendant, Koala, declared by the orders to which I have referred. The respondents to the notice of motion are the three defendants and all persons known by the Bank to have or to claim a proprietary interest in the property the subject of the orders. 5 The reasons for judgment included the following findings: (a) that Mr Ollis dishonestly appropriated $10,955,360 from the Bank in the period 17 June 2005 to 11 January 2006;

(b) that immediately upon acquiring the money or upon acquiring property using that money, the money and the property was respectively held on trust for the Bank;

(c) that Ms Shields and Koala received $4,838,752.07 of the funds stolen by Mr Ollis in knowing receipt of Mr Ollis' dishonesty; and

(d) that upon Ms Shields and Koala acquiring property using those funds, that property was immediately impressed with a trust or charge in favour of the Bank (depending upon whether the property was acquired solely with those funds or with moneys mixed with those funds). 6 At the time that judgment was delivered by the Court the property the subject of the orders was also the subject of:

(1) restraining orders made in favour of the New South Wales Crime Commission by Sully J on 19 January 2006 until further order;

(2) an asset forfeiture order made in favour of the Commission by Justice Rothman on 19 June 2006; and

(3) freezing orders made in these proceedings by Justice Bergin on 21 November 2006, extended by her Honour until further order by orders made on 16 February 2007. 7 On 2 November 2007, the Court of Appeal delivered judgment in proceedings between the defendants and the Commission which had the effect inter alia of discharging the asset forfeiture order.

8 On 14 December 2007, Justice James discharged the Commission's restraining orders. 9 The freezing orders which were made by Justice Bergin remain in force (apart from certain property owned by Koala, those orders being discharged by consent in these proceedings by Justice Campbell on 16 January 2008). 10 Now that the commission has no interest in or any order affecting the property, the Bank moves to enforce the declarations made in the orders. 11 Essentially, Mr Dibb of Counsel, who appears for the second defendant and the third defendant, has submitted on their behalf that none of the orders sought by the Bank in its sale application motion should be made at this stage. Procedurally what is sought is a stay of the orders made by myself on 6 September 2007, insofar as affecting the second and third defendants. 12 In support of the resistance by the second and third defendants to the Bank's sale motion, Mr Dibb has submitted that the second and third defendants have lodged an appeal against the judgment of 31 August 2007 and the subsequent orders. Apparently when that appeal was called over on 13 March 2008, counsel briefed to appear on that occasion arrived in court shortly after the matter had been dealt with and the matter was placed in the dormant matters list for further mention this very afternoon at 3.30 p.m. 13 Mr Dibb has submitted that the Court should in the circumstances, stay the judgment pending resolution of that appeal. The second and third defendants have today from me, obtained leave to file in Court, an amended notice of motion adding a prayer for such a stay in the form of a particular draft. The principles 14 The principles applicable to the discretion to stay a judgment pending appeal are well known. I accept as binding on this Court the summary of the principles given by McColl JA in Penrith Whitewater Stadium Ltd v Lesvos Pty Ltd [2007] NSWCA 103. In short, as her Honour put it:

[18] "The overriding principle in an application for a stay is to ask what the interests of justice require."

[19] "The detailed principles concerning the grant of a stay are as set out in Alexander v Cambridge Credit Corporation (1985) 2 NSWLR 685 as follows: (a) where there is a risk that an appeal will prove abortive if the appellant succeeds and a stay is not granted, the Court will normally exercise its discretion in favour of granting a stay;

(b) the onus is upon the applicant to demonstrate a proper basis for stay;

(c) it is a matter of discretion whether the court grants a stay and if so the terms which would be fair as part of a granting of a stay;

(d) what is important in considering whether or not a stay ought be granted is the balance of convenience and the competing rights of the parties before it;

(e) it is not necessary that special or exceptional circumstances should be made out; it is sufficient for the applicant to demonstrate a reasonable or an appropriate case to warrant the exercise of a discretion in its favour." 15 Mr Dibb has sought to pray in aid all of those principles, his proposition being that importantly, the second defendant, Ms Shields, was engaged in the business of property development including subdivisions. His submission [but there is no evidence to support this], is that the second defendant says that the real property the plaintiff seeks to have transferred to it, would realise a great deal more if she were allowed to deal with it by completing the projects she had in hand at the time the Bank obtained its original freezing orders than if it were sold by the plaintiff. 16 The central contention is that should the appeal be successful, Ms Shields would be returned to a position of being a borrower liable to whoever holds the mortgages she gave for the funds she received from the first defendant. The submission is that if between the present time and the time the appeal is determined, the subject real estate has been sold by the Bank, it will be impossible to restore her to be in the position she should have been in, and impossible to do more than speculate what the outcome would have been had she been able to complete her project. Hence, it is suggested that this is a case in which the appeal would be abortive unless the judgment be stayed and that therefore, the Court should exercise its discretion to grant the stay. 17 The Court, as is well known, every day of the week in damages claims, common law claims and the like, exercises the jurisdiction to determine what a particular loss is and does so after the event, usually with the aid of much evidence, including expert evidence. In this particular instance, as Mr Dibb has indicated, there is no evidence at all from Ms Shields to sustain even the matters which fell from Mr Dibb in submission Westpac Banking Corporation is not suggested as being otherwise than of the highest substance. In the event that an appeal would succeed, it is fanciful to imagine that the remedies available to Ms Shields could not be satisfactorily determined by appropriate court process. In the circumstances, there is no substance whatever in the application for a stay of the Bank's sale application motion. That application is dismissed. 18 The appropriate order is that the second defendant pay the costs of the application for a stay pursued in the notice of motion filed on 28 March 2008. The sale applications 19 At this time, travelling through the tranches of the respective applications, the Court is called upon to rule in terms of the applicant's submissions on the sale application, that being the matter treated with in the plaintiff's amended notice of motion filed on 18 February 2008. The orders now sought by the Bank and not already made pursuant to the document entitled "Order" are to be found in paragraphs numbered 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12 and 16 and 17 of the proposed orders. 20 Here again, it is unnecessary to refer back to the principal judgment 2007 NSWSC 956, save perhaps to observe that at paragraph 55 of that judgment, the finding recorded was that Ms Shields had received trust property from Mr Ollis for no consideration and with notice of the breach of trust, and to record also, as that paragraph did, that the acceptance of that proposition, made good her liability for equitable compensation to the extent that full restitution of the trust property is not made to the Bank. 21 The declarations made in paragraph 63 of that judgment included a declaration numbered 5, to be found at page 32, identifying property which was subject to a charge in favour of the plaintiff in the sum of $5,575,170.36 with interest then calculated to 24 August 2007. The figure to be found in the proposed order pursued by the Bank today of $5,897,407.24, [being the figure referred to in the proposed declaration 11 and the judgment in the proposed paragraph 12], represents that same earlier figure, but updated with interest at court rates. 22 One matter which has received attention at the Bar table in term of an accommodation comprises the application in paragraph 2 of the second defendant's amended notice of motion filed today for an order that the freezing orders be varied so as to permit the second defendant to sell her motel property at Kempsey to a particular transport company for the sum of $620,000. 23 That matter is the subject of the affidavit of Ms Shields of 13 March 2008. It eventuates that it is unnecessary for the second defendant to pursue such an order for the reason that the Bank will undertake to expedite its inquiries in terms of whether or not it has a serious objection to such a course, it being apparently quite possible that, depending upon the Bank's inquiries, and the veracity of that which is said to have been a mortgage, the Bank may well not oppose that course. 24 For that reason that particular matter can be the subject of the Court standing over the application to a convenient date. 25 Dealing with the orders which are sought then, but excluding from my remarks presently the order sought in paragraph 6(g) which Mr Dibbs still wishes to address in submissions, it seems to me that all of the other orders which the Bank has sought should be made in the principled exercise of the Court's discretion. Enforcing a charge - the principles

26 In relation to the authorities concerning enforcement in this type of circumstance, Mr Stevenson SC has conveniently taken the Court to the authorities and I adopt his submissions as in principle correct in each matter dealt with:

i. The authorities indicate that the mechanism for enforcing a trust and a charge are distinct.

ii. The principal means by which a charge is to be enforced at general law is by a judicial sale. In King Investment Solutions Pty Ltd v Hussain [2005] NSWSC 1076 at [51]; see also at [81]: "an order for judicial sale is the standard way of enforcing an equitable charge , Campbell J (as his Honour then was) held that: "Where there is a charge simpliciter, and not a mortgage, or an agreement for a mortgage, the right of the party having such a charge is a sale, and not foreclosure …

Under the general law a charge can be enforced only by application to the Court for an order for the sale of the charged property, not by the chargee taking unilateral action out of court]".

iii. Hussain was followed on this point (in relation to a second or unregistered mortgage) by Brereton J in Mango Media Pty Ltd v Mertes [2006] NSWSC 1460 at [31], where his Honour stated that, contrary to some earlier decisions, the remedy of judicial sale was not a remedy of last resort.

iv. In Hussain, Campbell J applied previous authorities [ Yarrangah Pty Ltd v National Australia Bank Ltd [1999] NSWSC 97 at [29] per Young J and Guardian Mortgages Pty Ltd v Miller [2004] NSWSC 1236 at [121] per Wood CJ in CL] which had held that the Court possessed an inherent general jurisdiction in equity to order a sale of land registered under the Real Property Act 1900 (NSW) analogous to the jurisdiction vested in the Court by section 103 of the Conveyancing Act 1919 (NSW) in relation to old system land [at [81] - [82]].

v. The Bank submits, however, that the appropriate remedy to enforce the trusts is for conveyance of the legal title back to it, an order that operates in personam .

vi. This was stated most clearly by the majority of the High Court in Associated Alloys Pty Ltd v ACN 001 452 106 Pty Ltd (in liq) (2000) 202 CLR 588 at [6] per Gaudron, McHugh, Gummow & Hayne JJ: "In Re Bank of Credit and Commerce International SA (No 8) [1998] AC 214 at 226, Lord Hoffmann, with whose speech the other Law Lords agreed, gave a description of an equitable charge in which he emphasised that the proprietary interest created thereby is held by way of security, so that the chargee may resort to the charged asset only for the purpose of satisfying some liability due to the chargee. The charge is subject to the equity of redemption retained by the owner. However, the beneficial interest held under an express trust is not so limited in nature. The remedy of the beneficiary is to proceed in equity for the performance of the trust, not for the sale of trust property to satisfy a secured liability". vii. In relation to the duties imposed upon a constructive trustee, Professor Scott noted in his work the Law of Trusts 3rd edition, Little, Brown & Co, 1967 at 462 that "[i]n the case of an express trust the trustee ordinarily has active duties of management. In the case of a constructive trust, the duty is merely to surrender property".

viii. Whether the trusts arising in these proceedings are best described as "presumed" or "resulting" trusts, rather than a "constructive" trusts [see Evans v European Bank Ltd (2004) 61 NSWLR 75 at [109] - [116] per Spigelman CJ, Handley & Santow JJA agreeing. See also Re French Caledonia Travel Service Ltd (in liq) (2003) 59 NSWLR 361 at [83], where Campbell J held that trust property which had been traced could eventually be the subject of "an order for restitution in specie"], the nature of the trustee's duty is clear: to get in the trust estate and re-convey to the beneficiaries. It would, of course, make no sense to impose any "active duties of management" upon a person made a trustee by virtue of their fraud, apart from such steps as might be required to preserve and get in the property impressed with the trust.

ix. The Bank submits that there being no longer any impediment to the enforcement of the trusts and charges declared in the Orders, and such enforcement is the only means by which the Bank might recoup some or all of its loss, that - subject to the question of priorities - the Court ought make the orders sought. 27 There is no substance in the second defendant's claims sought to be pursued in paragraphs 3 and 4 of the amended notice of motion of 28 March 2008. In each case the freezing order variation would permit the second defendant to have recourse to particular funds and the context makes it inappropriate for those orders to be made. 28 Mr Dibbs, as a closing exercise in the Court's dealing with the Bank's so-called sale motion, contended that it is inappropriate for order 6(g) to be made in its present form without the excision of the words in the third line which read "as trustee for a trust". In my view his submission is misconceived, bearing in mind the findings in the principal judgment in terms of the second defendant holding particular assets on trust and the template put forward by the orders which are reflected, for example, in order 3(a), (b) and (c). In the result the principled exercise of the Court's relevant power is to make order 6(g) as sought. 29 Further orders are to be made in accordance with paragraphs 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 16 and 17 of the orders. Costs 30 The principled exercise of the Court's discretion is to make no order as to costs with respect to the slip rule notice of motion pursued by the Bank in its amended notice of motion on 17 March 2008, that motion having been the subject of a consensus following the amendment. The appropriate order will be that, insofar as the Bank's sale and transfer notice of motion filed on 18 February 2008 is concerned, the three defendants pay the Bank's costs of that notice of motion. 31 Insofar as the amended notice of motion filed on 28 March 2008 by Ms Shields is concerned, save for the costs of the application pursued in paragraph 2 of that motion [which application is to be adjourned], the order will be that the second defendant pay the Bank's costs of that notice of motion.

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