White v Thompson

Thompson v White [2008] NSWSC 1 CASES CITED : Thompson v White & Ors [2006] NSWCA 350 White v Thompson [2009] NSWSC 1103 Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589

4817/08: 1st Plaintiff: Julian John White 2nd Plaintiff: Romeo Medina Libut 1st Defendant: Byron Ward Thompson PARTIES : 2nd Defendant: Jennifer Joy Thompson 3rd Defendant: Paul Weston as trustee of the bankrupt estate of Byron Ward Thompson 1563/06: Plaintiff: Julian John White 1st Defendant: Jennifer Joy Thompson 2nd Defendant: Byron Ward Thompson

Plaintiffs: In person COUNSEL : 1st and 3rd Defendants: D Brown 2nd Defendant: G Rich

Plaintiffs: n/a SOLICITORS : 1st and 3rd Defendants: Brown & Partners 2nd Defendant: Peninsula Law

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

4817/08 Julian John White & Anor v Byron Ward Thompson & Ors 1563/06 Julian John White v Jennifer Joy Thompson & Anor JUDGMENT 1 HIS HONOUR: The plaintiffs seek orders "That the orders and notes [sic] of his Honour Acting Justice Windeyer made on 15 October 2009 ... be stayed until the determination of the appeal process commenced 29 October 2009." 2 In proceeding 4817 of 2008 Windeyer AJ on 15 October 2009 directed entry of judgment for the defendants on the plaintiffs' claim and ordered the plaintiffs to pay the defendants' costs. His Honour also noted that the undertaking of Mr Weston, who is the trustee in bankruptcy of Mr Thompson, not to deal with the Somersby property, is to be discharged. 3 In proceeding 1563 of 2006 his Honour ordered the plaintiff to withdraw caveat AC155XXX within 21 days and ordered that the summons in those proceedings be dismissed. 4 The only evidence read on the application by either party was an affidavit of Mr White, one of the plaintiffs, that a notice of intention to appeal from his Honour's orders was filed and served on 29 October 2009. The time for filing a notice of appeal is still running. 5 The defendants do not point to any hardship if orders were made extending the time by which the caveat is to be withdrawn until the determination of the appeal or earlier further order, or staying the order that Mr Weston's undertaking not to deal with the property be discharged. However, on the application for a stay it is incumbent upon the plaintiffs to show that there are reasonably arguable grounds for succeeding on the appeal and thereby showing, or having the matter remitted for further hearing for the purposes of showing, that the plaintiffs are entitled to a beneficial interest in the Somersby property, as sought in the further amended statement of claim filed in proceedings 4817 of 2008. 6 The relevant background facts are for the most part to be found in the following judgments. First, a judgment of Hamilton J (Thompson v White [2003] NSWSC 401); secondly, the judgment of Gzell J (Thompson v White [2005] NSWSC 1257); thirdly, the judgment of Barrett J (Thompson v White [2006] NSWSC 110); fourthly, the judgment of the Court of Appeal on the appeal from the orders of Gzell J (Thompson v White & Ors [2006] NSWCA 350); fifthly, the judgment of Biscoe AJ (Thompson v White [2008] NSWSC 1); sixthly the further judgment of Biscoe AJ on the making of orders (Thompson v White [2008] NSWSC 157), and finally the judgment of Windeyer AJ (White v Thompson [2009] NSWSC 1103). 7 Given the exigencies of the time for delivering these reasons, I will not set out all of the relevant background facts. They can be found in those judgments. It suffices to say that it has been established that the Seaforth property was purchased in Mr Thompson's name with the intention that it would be a joint venture asset. (See declaration 3 made by Gzell J on 15 December 2005 and upheld on appeal.) The proceeds of sale of the Seaforth property were effectively $3 million. Those moneys, or if not those moneys, other moneys, of Mr Thompson, if he had any, should have been applied by Mr Thompson in discharging the debts owed to the plaintiffs and to Aerated Concrete Design & Construction and other creditors, as found by Biscoe AJ, and by accounting to the plaintiffs for their share of the profits as determined by Gzell J. Instead, $774,647 from the proceeds of sale of the Seaforth property was used by Mr Thompson towards the purchase of the house at Somersby, initially in his wife's name and later by novation into their joint names (Thompson v White [2008] NSWSC 1 at [9]). 8 On 13 May 2003 Hamilton J ordered, amongst other things, that Mr Thompson, by himself, his servants and agents, be restrained from selling or disposing of his interest in the Somersby property until further order. His Honour made that order on essentially two bases. The first was that his Honour found that the present plaintiffs had an arguable claim for a constructive trust over the Seaforth property, whose proceeds of sale were used, or were to be used, to acquire the Somersby property. Secondly, insofar as the present plaintiffs asserted claims in debt for repayment of loans, his Honour was satisfied that the present plaintiffs were entitled to Mareva type relief to restrain potential disposition of the Somersby property in a way which might be intended to defeat a judgment. 9 In the 2003 proceedings, as appears from the reasons of the Court of Appeal, the present plaintiffs filed a cross-claim and amended points of cross-claim in which they asserted that at all material times Mr Thompson held the Seaforth property on trust for the benefit of himself and the present plaintiffs (Thompson v White & Ors [2006] NSWCA 350 at [48], [56] and [138]). Gzell J ordered the separate trial of quantification issues and ordered that all other issues be heard prior to the quantification issues. His Honour did not in his reasons deal with the present plaintiffs' claim that the Seaforth property was held on a constructive trust for them. In the Court of Appeal that claim was considered and was rejected (at [140], [141] and [143]).

10 In essence the Court of Appeal found that the effect of the findings of the primary judge was that the Seaforth property would be acquired by Mr Thompson, would be developed, sold, and the profits divided between the parties in accordance with their agreement, the profits being struck after repayment of loans with interest. 11 So far as appears from the reasons for judgment, no claim was made in the 2003 proceedings by the present plaintiffs that the Somersby property, as distinct from the Seaforth property, was held on trust for the joint venturers. If any such claim were to have been made, and were to have been based upon the contention that the Seaforth property was trust property and the proceeds of sale could be traced to the Somersby property, then any such contention would have failed in light of the Court of Appeal's findings as to the absence of a trust over the Seaforth property. 12 So far as appears no claim was pleaded in the 2003 proceedings seeking a declaration that the proceeds of sale of the Seaforth property were held on trust for the joint venturers, except any such consequential claim that arose from the claim that the Seaforth property itself was held on trust for them. 13 The quantification issues, which were referred to Biscoe AJ, did not include as a question what were the assets of the joint venture. (See those issues set out, amongst other places, at [17] of Thompson v White [2008] NSWSC 1.) 14 In argument before me, the plaintiffs contended at one point that it was common ground before Biscoe AJ that the Somersby land was a joint venture asset. Mr White referred to a draft balance sheet, which is an annexure to the judgment, and which sets out the parties' contentions. At paragraph [20] of his judgment, (Thompson v White [2008] NSWSC 1) Biscoe AJ said that the disputes and agreements between the parties in relation to all quantum items were crystallised during the hearing in a draft joint venture profit and loss account, balance sheet and statements of entitlements of parties and related entities as at 15 May 2003. 15 I was referred to the draft joint venture balance sheet which set out the contentions of the present plaintiffs on the one hand and Mr Thompson on the other as to, amongst other things, the total assets of the joint venture. The present plaintiffs contended that the total assets amounted to $2,291,486 and Mr Thompson contended that the total assets amounted to $2,110,045. Each party's contentions included as assets of the joint venture "moneys paid from Ellory Parade [i.e. the Seaforth property] ... to purchase of Somersby property". These amounts totalled the $774,647 referred to earlier. 16 Those draft accounts then contained a statement of each party's contentions as to the entitlements of the various parties as at 15 May 2003. That document records that the present plaintiffs contended that as at 15 May 2003 Mr Thompson owed the joint venture $428,165. That was then updated in a further sheet leading to a contention that as at 20 December 2007 Mr Thompson owed the joint venture $579,891 by reason of matters occurring after 15 May 2003, or by the incurring of interest. 17 Biscoe AJ found substantially in favour of the plaintiffs' contentions. On 29 February 2008 his Honour declared that Mr Thompson owed and, that subject to the provisions of the Bankruptcy Act 1966 (Cth), ordered that he pay the joint venture the sum of $561,571. In claiming that Mr Thompson owed the joint venture as at 15 May 2003 an amount of $428,165, the plaintiffs debited him with the amount of $774,709 described as moneys paid to purchase Somersby's property from sale funds. Mr Thompson also treated that amount as a debit in his contentions as to the quantum of the debt owed. 18 So far from its appearing to have been common ground before his Honour that the Somersby land was a joint venture asset, it appears rather to have been common ground that Mr Thompson was indebted to the joint venturers for the moneys he directed from the sale of the Seaforth property towards the purchase of the Somersby property. This was an integer in the later declaration and order as to Mr Thompson's personal indebtedness. 19 In his reasons of 15 October 2009 Windeyer AJ said (at [24]-[25]): " 24 There can be no doubt that the two parts of the action in the proceedings before Gzell J and Biscoe AJ were argued and determined on the basis of that the payments from the proceeds of sale of Seaforth so far as they were applied to the Somersby property should be treated as payments to Thompson from the joint venture. They were accounted as such and when taken into account gave rise to a liability in Thompson to the joint venture. It would be no different from a partner overdrawing entitlements being found in a suit for partnership accounts to be liable to the partnership to the extent of the overdrawn account.

25 The question is whether, having proceeded on that basis and accepted the accounts were to be taken on that basis, the plaintiffs can in another action seek to have the land brought to account as a joint venture asset. If that can be done there can be no doubt there is a possibility and really a certainty of conflicting judgments. To some extent the plaintiffs seek to overcome this problem by seeking what would be a charge over the proceeds of sale of Somersby sufficient to enable the debt Thompson owes to the joint venture to be paid but at the same time requiring any surplus to be added to the controlled moneys account and thereafter to be credited to the joint venture. So far as the first point is concerned, what this really amounts to is an attempt to get security for a judgment debt owed by one venturer to the joint venture partners. So far as the balance is concerned, it would require rewriting of the joint venture accounts. " 20 Up to the time Biscoe AJ delivered his reasons for judgment, namely, 15 January 2008, it appears from the judgments and from such parts of the file as I have been able to read - and no other information was put to me to the contrary - that the only proprietary claim raised by the present plaintiffs was for a declaration of trust in respect of the Seaforth property. That claim, although not formally dismissed, was not upheld and was rejected in the reasons of the Court of Appeal. Hamilton J had considered that there was a reasonably arguable claim for a constructive trust in respect of the Somersby property, but the ground for considering that claim to be arguable was removed by the Court of Appeal's decision. 21 On 18 February 2008, that is, after reasons for judgment were delivered by Biscoe AJ but before final orders were made, the present plaintiffs filed a notice of motion which relevantly sought in paragraph 3 an order that "the final orders in the matters before the Court include for Enforcement Orders with regard to the Somersby property including transfer of the said title [sic]". On 29 February 2008 his Honour gave leave for that motion to be listed before the duty judge. It was not determined before final orders were made in the 2003 proceedings. In his reasons, Windeyer AJ observed (at [12]) that "what happened as to this part of the notice of motion is not clear from the file". It can be seen in the light of steps later taken in 2008, namely, the filing of the statement of claim in proceedings 4817 of 2008, that the notice of motion was apparently designed to belatedly assert the claim that the Somersby property was held on trust for the joint venturers. 22 I do not think it is seriously arguable that Windeyer AJ erred in concluding that the relief sought in the 2008 proceedings in which the plaintiffs seek to have Somersby land brought to account as a joint venture asset is inconsistent with the orders made in the 2003 proceedings, which were, as his Honour said, determined on the basis that the payments from the proceeds of sale of the Seaforth property should be treated as payments to Mr Thompson from the joint venture giving rise to a personal claim in debt. As his Honour observed at [27], had an alternative claim been made to have the property included as a joint venture asset, the plaintiffs would have been required to elect before judgment which remedy they sought, assuming they were successful in establishing their entitlement to both. 23 The fact is that no such claim had been made in the 2003 proceedings, except belatedly and in ambiguous terms by the filing of a notice of motion which was not dealt with before final orders were made. Given that the only proprietary claim raised before Gzell J was rejected by the Court of Appeal and no proprietary claim was raised before Biscoe AJ, except perhaps by the notice of motion, I do not consider that the appeal from the orders of Windeyer AJ has a reasonable prospect of success. 24 The present plaintiffs' response was that if that were so, they would seek leave to appeal out of time from the orders of Biscoe AJ. But there is no arguable error in Biscoe AJ's having decided only those questions which were in issue before him. The present plaintiffs' contention would have to be, I think, that his Honour ought to have treated the notice of motion filed on 18 February 2009 as an application for leave to amend and to re-open to propound a claim on an alternative and inconsistent basis from that which had been litigated for almost five years. 25 Given that the Court of Appeal's decision in any event stands as a serious obstacle to the most obvious way in which a claim for a constructive trust of the Somersby property could be raised, I think the prospects of the plaintiffs' establishing on appeal that Biscoe AJ erred in not so treating the notice of motion are remote. I do not consider that the argument to the contrary is seriously arguable. 26 There is no doubt that the plaintiffs have personal claims against Mr Thompson. They apprehend that his disposition of the proceeds of sale of the Seaforth property was designed, and has had the effect, of putting property out of their reach to satisfy those claims. The further amended statement of claim filed in proceedings 4817 of 2008 did not include a claim under s 37A of the Conveyancing Act 1919 (NSW) to avoid the disposition of the proceeds of sale of the Seaforth property as a disposition in fraud of creditors. The failure to make such a claim in the 2008 proceedings would stand as at least a very serious obstacle to such a claim being raised in later proceedings by reason of the principles in Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589. In any event no proceeding in which such a claim is made is pending. It is unnecessary therefore to consider whether it might be appropriate to grant injunctive relief in respect of that property at the instance of the plaintiffs. 27 It may be that Mr Thompson's trustee in bankruptcy is entitled to bring an action under s 121 of the Bankruptcy Act to avoid that disposition. There is nothing to indicate that if such an action is available to the trustee, it is one he is not properly considering. Any such action, of course, is for the trustee in bankruptcy and not for the plaintiffs. 28 For these reasons, because I am not satisfied that the plaintiffs have demonstrated an arguable case on appeal, I refuse the relief sought in each notice of motion. 29 In each proceeding I order that the notice of motion filed for the plaintiffs on 30 October 2009 be dismissed. I order that the plaintiffs pay the defendants' costs of each notice of motion.

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