Whalebone v Auto Panel Beaters & Radiators Pty Ltd

Court of Appeal (NSW)|2011-06-17|Before: McColl JA, Macfarlan JA, Forster J, Giles JA

Judgment 1GILES JA: The appellant was registered as proprietor of residential land in Botany Road, Botany ("the property"). By a transfer registered on 22 July 1987 he purported to transfer the property to "Auto Panelbeating and Radiator Pty Limited". There was no company of that name. 2Forster J held that it was the appellant's intention to transfer the property to Auto Panel Beaters & Radiators Pty Ltd ("Beaters"), a company of which he and his wife were the shareholders and directors; that the transfer was not a nullity; and that the transfer should be rectified and the Register amended to record Beaters as the registered proprietor: Auto Panel Beaters & Radiators Pty Ltd (In liquidation) v Barclays Services Pty Ltd [2009] NSWSC 1165. 3Many of the appellant's grounds of appeal were not maintained. He put two contentions on appeal. 4The first was that the trial judge should have disclosed that he had advised or appeared while at the Bar on behalf of companies of which the liquidator of Beaters was receiver. The appellant accepted that, if that contention was upheld, there should be a new trial irrespective of his second contention: cf Concrete Pty Ltd v Parramatta Design & Developments Pty Ltd [2006] HCA 55; (2006) 229 CLR 577 at [1]-[3] per Gummow J; [116]-[117] per Kirby and Crennan JJ; [172] per Callinan J in relation to a judge's failure to recuse. He sought that relief. 5The second was that the trial judge should have held that the appellant intended to transfer the property to a different company, formerly known as Auto Panel Beating & Radiators Pty Ltd ("Beating") but in 1987 named Barclay Services Pty Ltd. Beating had never been the appellant's company, but on his case he had thought it was and the transfer was ineffective because, contrary to his belief at the time, he had been unable to commit it to taking a transfer of the property. The appellant sought orders on appeal having the effect that he be registered as proprietor of the property. 6For the reasons which follow, the appeal should be dismissed with costs. The defensive cross-appeal by Beaters need not be addressed and should also be dismissed, with costs to be paid by the appellant.

Background 7Beating was incorporated in 1961, and took that name in 1964. Its directors and shareholders were Mr David and Mrs Eva Neale, the appellant's uncle and aunt. Through Beating, they carried on business as a dealer and repairer of motor vehicles and as a panel beater. 8In 1973 Mr and Mrs Neale transferred their shares in Beating to interests of a Mr Barclay and resigned as directors. Mr Barclay became a director. The name of Beating was changed to Taxation & Managerial Services Pty Ltd. In 1979 it again changed its name to Barclay Services Pty Ltd. Since 1973 neither Mr and Mrs Neale nor the appellant had anything to do with Beating. 9Beaters was incorporated in 1977, with Mr and Mrs Neale as its shareholders and directors. Through Beaters, they carried on a panel beating business at land in Botany Road, Botany, next door to the property. In March 1980 they transferred their shares to the appellant and his wife, as to 99 shares and 1 share respectively, and the appellant and his wife became the directors of Beaters. The appellant continued the conduct of the panel beating business through Beaters. 10In 1983 Mr and Mrs Neale sold to the appellant the property and the next door land. 11The 1987 transfer purported to be from appellant as transferor to Auto Panelbeating and Radiator Pty Limited, with the address in Botany Road, Botany, as transferee. It included that the transferor "hereby acknowledges receipt of the consideration of $100,000.00". The appellant signed as transferor, and his signature was witnessed by Mr Peter Ruggeri, solicitor. Above the words "Signature of Transferee" was imprinted a common seal bearing the name of Beating, attested by the appellant as director and his wife as secretary. 12Beaters was wound up in 2005, and Mr Stephen Parbery was appointed liquidator. The property was listed as an asset in Beaters' balance sheet. The liquidator ascertained that the registered proprietor was recorded as Auto Panelbeating and Radiator Pty Limited and that there was no company of that name. From his enquiries, Beating (then Barclay Services Pty Ltd) made no claim to the property. The appellant did, hence the proceeding decided by the trial judge.

Disclosure 13As Mr Forster SC, the trial judge had appeared for the plaintiffs in Parbery v Toda [2007] NSWSC1163. The plaintiffs included Mr Parbery as one of joint receivers of a security property. The receivers had applied for orders that the defendants permit them to inspect the books of the property owner. The application had been disposed of by consent. There was then a dispute over costs, in which Mr Forster represented the plaintiffs. 14Mr Forster also advised and appeared for a number of parties in litigation concerning a fund paid under a deed of settlement of a complex of disputes. Mr Parbery was a joint receiver of one of the parties. Mr Forster was engaged for the principal litigation, which resulted in Nauru Phosphate Royalties Trust (Receivers and Managers Appointed) v The Business Australia Capital Mortgage Pty Ltd (In liquidation) [2008] NSWSC 916, although he did not appear at the hearing. He appeared in ancillary proceedings. They were a hearing concerning whether a solicitor should be restrained from communicating with a party ( Nauru Phosphate Royalties Trust (Receivers and Managers Appointed) v The Business Australia Capital Mortgage Pty Ltd (In liquidation) [2008] NSWSC 833); a costs argument ( Nauru Phosphate Royalties Trust (Receivers and Managers Appointed) v The Business Australia Capital Mortgage Pty Ltd (In liquidation) [2008] NSWSC 1071); and an application to amend the costs order under the slip rule ( Nauru Phosphate Royalties Trust (Receivers and Managers Appointed) v The Business Australia Capital Mortgage Pty Ltd (In liquidation) [2008] NSWSC 1088). 15Mr Parbery took a number of insolvency and related appointments each year, and had frequent occasion to obtain legal advice and be engaged in litigation by reason of his appointment. There was no evidence of his meeting or speaking to Mr Forster, and he had never had a social, personal or other ongoing relationship with Mr Forster. 16The trial judge was appointed to the bench on 4 May 2009. The present proceedings were heard in late October 2009. 17An affidavit sworn by Mr Parbery was read in the trial proceedings. It annexed correspondence and other documents and provided uncontroversial information. Mr Parbery was not cross-examined. 18The appellant did not submit that the trial judge's prior advising and appearances disqualified him from hearing the proceedings. He accepted that they did not. This was a correct concession, on the facts and having regard to Re Polites, Ex parte The Hoyts Corporation Pty Ltd (1991) 173 CLR 78 at 87-8 per Brennan, Gaudron and McHugh JJ and S & M Motor Repairs Pty Ltd v Caltex Oil (Australia) Pty Ltd (1988) 12 NSWLR 358 at 378-10 per Priestley and Clarke JJA. 19The appellant's submission was that the trial judge should have disclosed in open court his prior advising and appearances as counsel in the interests of companies of which Mr Parbery was a receiver. He submitted that his Honour's failure to do so denied to the appellant the opportunity to consider whether to apply for him to disqualify himself and to make that application, and itself gave rise to a reasonable apprehension of bias. 20As was explained in Ebner v Official Trustee in Bankruptcy [2000] HCA 63; (2000) 205 CLR 33 at [68]-[71] in the joint judgment of Gleeson CJ and McHugh, Gummow and Hayne JJ, while disclosure of interests and associations may be prudent if there is "a serious possibility that they are potentially disqualifying", it is not a matter of right or duty. The question is whether the reasonable apprehension of bias test is established. That question is fully litigated on appeal or in an application for prerogative relief, and it is not relevant to ask whether the moving party was denied an opportunity to make submissions on disqualification to the judge. Their Honours said (at [70]) - " ... A failure to disclose is relevant (if at all) only because it may be said to cast some evidentiary light on the ultimate question of reasonable apprehension of bias. A failure to disclose has no other legal significance. In particular it does not, of itself, give a litigant any right to have the judge desist from further hearing the matter or to have the ultimate decision in the matter set aside for want of procedural fairness." (footnote omitted) 21The appellant submitted that Ebner v Official Trustee in Bankruptcy was concerned with non-disclosure of a shareholding, and that non-disclosure of an association was a different matter. He referred to [72] of the joint judgment, in which it was remarked that "[d]isclosure of association may raise more difficult questions than the straightforward case of ownership of shares in a corporation". This was concerned with prudent disclosure, not with right or duty in relation to disclosure, and there is no reason to treat disclosure of association differently from disclosure of a shareholding in the latter respect. Their Honours' explanation began at [69] with disclosure of "interests and associations", to which the following paragraphs applied. 22Failure to disclose the prior advising and appearances was not relevant so far as the appellant did not have the opportunity to consider and apply for disqualification. 23Where the undisclosed prior advising and appearances did not disqualify the trial judge from hearing the proceedings, non-disclosure of that association did not give rise to a reasonable apprehension of bias, in itself or as an evidentiary supplement to the association. 24The appellant relied in this respect on Antoun v R [2006] HCA 2; (2006) 224 ALR 51. There had been an appearance of prejudgment that a no case submission would not succeed. A new trial was ordered notwithstanding that there was a strong prosecution case. As I understand the appellant's submission, it was that reasonable apprehension of bias through non-disclosure should similarly lead to a new trial although the undisclosed matters would not have warranted disqualification. The reasonable apprehension of bias came from the appearance of prejudgment, not from non-disclosure or from that which was not disclosed. The submission can not stand with Ebner v Official Trustee in Bankruptcy. 25I do not think that there was occasion for a trial judge to make the relevant disclosure, even as a matter of prudence. If there was, failure to make the disclosure is not a basis for ordering a new trial.

The appellant's intention 26The trial judge said - "27 Mr Whalebone's evidence was to the following effect. He said that it was his belief that Beating was a company which he had "inherited" from his uncle and aunt, Mr and Mrs Neale. The circumstances giving rise to his belief in relation to such "inheritance" were not explored, but he gave evidence to the effect that he considered Beating to be a "shelf company", which was a company that had some unspecified "family" connection, and which he owned and controlled. He said he had found the common seal and various other documents relating to Beating in the office where the panel beating business had been carried on at 1509 and said that he believed that whoever had the common seal of a company owned it. 28 He claimed that he understood Beating to be an entity quite distinct from Beaters, in that Beaters was the company that carried on the panel beating business, whereas Beating had nothing to do with that business but was, as I have said, an otherwise inactive shelf company. 29 He claimed that he decided to transfer the Property to Beating for "asset protection" purposes, that is to say, to protect it from risks inherent in the panel beating business. However, he was unable to articulate a reason as to why he considered that moving the Property out of his own ownership into the ownership of a shelf company which he owned and controlled would assist in relation to asset protection. 30 The submission which was ultimately put on his behalf was that he was labouring under the mistaken belief that he was transferring the Property to a company that he owned and controlled, namely Beating, and that the name inserted in the Transfer as that of the transferee was the result of a clerical error, put down to sloppy paperwork. The submission continues by saying that contrary to his stated belief, Beating turned out not to be a company which Mr Whalebone either owned or controlled, but a company associated with Mr Barclay, whose interests acquired it in 1973. His evidence was that if he had not been so mistaken, he would not have sought to transfer the Property to Beating, and certainly not to a non-existent entity. 31 In those circumstances, it was submitted on his behalf that as a consequence of that unilateral mistake, the Transfer should be set aside and the Property should be returned to him." 27His Honour did not accept the appellant's evidence. He found (at [35]) - " ... that contrary to what he now claims, he intended to transfer the Property to the only company then relevantly in existence, and which he owned and controlled, namely Beaters, and in his capacity as a director and the principal decision maker of Beaters, he intended that Beaters acquire the Property from him." 28Over a number of paragraphs his Honour gave reasons for not accepting the appellant's evidence and for that finding, collected into seven overall reasons but with more within them. He then repeated his conclusion - "59 For all those reasons, I do not accept the evidence of Mr Whalebone in relation to his stated belief and intention in 1987. Instead, I accept the submission made on behalf of Beaters, and find that at the time of the Transfer, Mr Whalebone intended to transfer the Property to the one and only company that he relevantly believed he owned and controlled, Beaters, and that as a director, the majority shareholder, and principal decision maker of Beaters, he also intended on behalf of Beaters to acquire the Property and to accept the Transfer on Beaters' behalf. I find that the name placed on the Transfer, namely the name of the non-existent Transferee was placed thereon by mistake, a mistake common to both parties, their common intention being to transfer the Property to Beaters. In my view, effect needs to be given to their said true common intention." 29Apart from the evidence of Mr Parbery, evidence was given by the appellant and by the accountant for the appellant and Beaters, Mr Tom York. The reasons given by the trial judge were sound, indeed compelling, and were substantially based on his views of the credit of the appellant and Mr York. 30The judge considered that Mr York was "a relatively reliable witness" (at [19]), and said that he formed the view "that he was trying to answer the questions asked of him honestly and that he was not attempting to evade answering questions when he said that he could not recall certain events" (at [20]): he said, "Overall, I am prepared to accept his evidence" (at [21]). 31His Honour continued - "22 By contrast, I cannot say the same about Mr Whalebone. While I accept that people who are skilled in other areas may not handle their "paperwork" particularly well, I do not accept Mr Whalebone's evidence by which he sought to blame matters that he could not satisfactorily explain on sloppy paperwork on his part. I found his answers to be evasive, and it was my impression that Mr Whalebone was at least in some cases intentionally "bending" the truth. More often, it was my impression that Mr Whalebone had retrospectively convinced himself as to what his intentions had been in 1987, and persisted in that belief even if it caused him to answer questions in terms that were quite absurd. He was prone to blame others, particularly Mr York, for any matter that was inconsistent with his principal theme, and I am of the view that unless it is supported by objective or independent corroborative evidence, or unless it is inherently probable, I should not rely on his evidence. 23 Accordingly, where the evidence of Mr York and Mr Whalebone conflict, I prefer the evidence of Mr York." 32Counsel for the appellant properly acknowledged the principles of appellate restraint where there are credit-based findings considered in Fox v Percy [2003] HCA 22; (2003) 214 CLR 118 at 127-8 and other cases. It is not necessary to detail the trial judge's reasons for his conclusion set out above, save to note that one reason was that the property had been included as an asset in Beaters' balance sheet over many years. The appellant put two submissions. 33First, the appellant submitted that the trial judge had not referred to "independent corroborative evidence" which supported his case that he intended to transfer the property to Beating. 34None of the evidence which the appellant then identified answered that description. For example, letters from Mr Ruggeri concerning registration of the transfer referred to Beating as the transferee; however, they also referred to "Auto Panelbeating and Radiator", and so far as they took matters beyond the content of the transfer tended to confirm the trial judge's view that the appellant instructed the solicitor to transfer the property to Beating without attention to the name. A 1993 caveat lodged to protect a land tax charge named the registered proprietor of the property as Auto Panelbeating and Radiator Pty Limited: this was no more than a reflection of the name in the Register (and it was not Beating). I do not describe the other evidence; it was of no greater assistance to the appellant. Indeed, one item of evidence on which he relied, a 1991 letter stating that Beating carried on the panelbeating business was not consistent with the appellant's evidence that he transferred the property to an inactive shelf company. 35Secondly, the appellant submitted to the effect that Mr York's evidence concerning inclusion of the property as an asset in Beaters' balance sheet was unsatisfactory, and that the inclusion over the years since 1987 was due to perpetuation of an initial error by a computer programme. 36The trial judge accepted Mr York's evidence, given as evidence of his practice, that he would not have included the property as an asset unless it had been included by a predecessor or upon instructions from the appellant supported by documentary material. His Honour thought that it was "almost certain" (at [48]) that the appellant gave the instructions, whether to Mr York's predecessor or to Mr York. There was no error in this. The submission also did not meet the particular significance found by the trial judge in the inclusion of the property as an asset of Beaters. The accounts and corresponding tax returns from 1991 to 2004 were in evidence. The appellant had signed most of them. The trial judge accepted Mr York's evidence that he explained their most significant aspects before they were signed. His Honour said at [43] - "Even without a specific explanation, I would have expected that Mr Whalebone's eyes would have been caught by the reference to the Property in the accounts of Beaters, which reference he would have found strange if he had honestly believed that the Property had nothing to do with Beaters but had been transferred to Beating, as he now claims." 37No sufficient reason has been shown to overturn the trial judge's conclusion as to the appellant's intention.

Orders 38I propose that the appeal and the cross-appeal be dismissed, and that the appellant pay the respondents' costs of both. 39McCOLL JA : I agree with Giles JA's reasons and the orders his Honour proposes. 40MACFARLAN JA : I agree with Giles JA.

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