(1) Thompson v White (2) White v Thompson

[2006] NSWSC 110

CITATION:	(1) Thompson v White (2) White v Thompson [2006] NSWSC 110
HEARING DATE(S):	02/03/06
JUDGMENT DATE :	2 March 2006
JURISDICTION:	Equity Division
JUDGMENT OF:	Barrett J
EX TEMPORE JUDGMENT DATE:	03/02/2006
DECISION:	Applications dismissed with costs
CATCHWORDS:	REAL PROPERTY - caveat - application for extension - caveator shown to be party to joint venture - property subject to caveat purchased with proceeds of sale of joint venture asset - whether caveator shows prima facie claim to interest in property - need for undertaking as to damages - caveator having liabilities substantially exceeding assets - undertaking not of substance - PROCEDURE - order quarantining funds pending determination of entitlements to them - one party seeks release of part of funds - whether Mareva-type exception for legal expenses applicable
LEGISLATION CITED:	Real Property Act 1900, s.74K
CASES CITED:	Cardile v LED Builders Pty Ltd (1999) 198 CLR 380 Stern v McArthur (1988) 165 CLR 489
PARTIES:	(1) Byron Ward Thompson - Plaintiff Julian John White - First Defendant Romeo Medina Libut - Second Defendant (2) Julian John White - Plaintiff Jennifer Joy Thompson - First Defendant Byron Ward Thompson - Second Defendant
FILE NUMBER(S):	SC (1) 2685/03; (2) 1563/06
COUNSEL:	(1) Mr S.J. Blanks, Solicitor - Plaintiff First Defendant in person (2) Plaintiff in person Mr S.J. Blanks, Solicitor - Defendants
SOLICITORS:	(1) SBA Lawyers - Plaintiff First Defendant in person (2) Plaintiff in person SBA Lawyers - Defendants

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

BARRETT J

THURSDAY 2 MARCH 2006

2685/03 BYRON WARD THOMPSON v JULIAN JOHN WHITE & ANOR
1563/06 JULIAN JOHN WHITE v JENNIFER JOY THOMPSON & ANOR

JUDGMENT

1 On 8 December 2005, Gzell J delivered a judgment concerning a dispute between Mr White, Mr Thompson and Mr Libut centred upon a property at Seaforth of which Mr Thompson was previously the registered proprietor, a property at Somersby into which part of the proceeds of the sale of the Seaforth property was channelled and a sum of $1 million being a quarantined segment of the Seaforth sale proceeds. The sum of $1 million is held in a controlled moneys account under the control of solicitors in accordance with an order made by me on 9 May 2003 and varied by Hamilton J on 13 May 2003. The orders I made were made by consent. Those made by Hamilton J were made upon a contested hearing in which his Honour found that there was an arguable case of a proprietary interest in the Seaforth property on the part of Mr White.

2 The orders in respect of the deposit part of the proceeds of sale of the Seaforth property in the controlled moneys account included Order 6 as follows:

“The solicitors hold the sum in the account until further order or until agreement is reached between the plaintiff and the defendants as to the further retention or release of the sum.”

The plaintiff was Mr Thompson. The defendants were Mr White and Mr Libut.

3 The proceedings in which those orders were made thereafter continued. There was a hearing before Gzell J over nine days in November 2005 which resulted in the judgment to which I have already referred. Following that judgment, Gzell J made certain declarations as follows:

“(a) Declares that the plaintiff [ie Thompson] and the first and second defendants [ie White and Libut] agreed to form a joint venture company (‘the Company’) in which each of the plaintiff and the first and second defendants would hold a one third interest.
(b) Declares that the plaintiff [ie Thompson] and the first and second defendants [ie White and Libut] intended the company to purchase, develop and sell properties with a combination of third party finance and profits generated in Aerated Concrete Design and Construction Pty Ltd
(ACN 070 297 291) (‘ACDC’).
(c) Declares that the land known as 65 Ellery Parade Seaforth, being all of the land contained in folio identifier 276/4889 [the ‘Seaforth Property’], was purchased in the plaintiff’s [ie Thompson’s] name with the intention that it would be a joint venture asset.
(d) Declares that the plaintiff, the first defendant and the second defendant agreed in September 2000, that:
(i) The plaintiff [ie Thompson] would receive 50% of the profits from the sale of the land up to $500,000 and the first defendant and second defendant [ie White and Libut] would share 50% of the profits from the sale of the land up to $500,000 between them; and
(ii) The plaintiff, the first defendant and the second defendant would share equally the profits from the sale of the land in excess of $500,000.”

4 Gzell J also referred out to a referee certain questions of quantification and calculation relevant to the ultimate question of the shares and amounts of profit and loss attributable to the joint venture participants. That reference has not yet been completed.

5 It is against that background that Mr White, a litigant in person, has today advanced claims for two orders. The first is an order for the payment to him of $150,000 out of the controlled moneys account. The second is an order under section 74K of the Real Property Act 1900 extending the operation of a caveat which he has caused to be entered on the title in the Somersby property.

6 In making these claims, Mr White contends that he had an equitable interest in the Seaforth property, which interest is traceable into and continues to subsist in both the quarantined part of the proceeds of the Seaforth sale retained in the controlled moneys account and the Somersby property purchased with part of the proceeds of the Seaforth sale. The estate or interest claimed in the caveat is described as follows:

“The proprietor has purchased the property with assets and moneys improperly received from an equitable joint venture involving the caveator and the proprietor. The Supreme Court of NSW orders prevent the sale of the property by the proprietor and the caveat is to fully protect my equitable and financial interest in the property".

7 A lapsing notice was served by the registered proprietor of the property in consequence of which Mr White, claiming the estate or interest thus described in the caveat, applies for an order under s.74K for the extension of the caveat. Under that section, the court may make an extending order "if satisfied that the caveator's claim has or may have substance".

8 The real questions before me here in relation to the caveat are, I think, whether by virtue of the declarations made by Gzell J Mr White should be regarded as having an equity to restrain by injunction a sale of the Somersby property and, if so, whether that amounts to an interest within the purview of the caveat provisions.

9 The third declaration made by Gzell J was a declaration that the land at Seaforth was purchased in Mr Thompson's name "with the intention that it would be a joint venture asset". The reference to the joint venture is clearly enough a reference to the joint venture referred to in the first declaration made by his Honour, that is, a joint venture in which each of Mr Thompson, Mr White and Libut "would hold a one-third interest" apparently through a joint venture company. There was thus a recognition in the declarations that Mr Thompson was not free to dispose of the Seaforth property as he wished, because it was earmarked as a joint venture asset. There was also recognition in the declarations his Honour made that Mr Thompson, Mr White and Mr Libut were the parties to the joint venture, that is, that there was a contract among them.

10 It follows, in my view, that Mr White is shown by the declarations to have been in a position in relation to the Seaforth property where he could obtain an injunction to restrain application or dealing with the Seaforth property except in accordance with and for the purposes of the joint venture. In line with present thinking about the nature of equitable interests, as reflected in the judgments of Deane and Dawson JJ in the High Court in Stern v McArthur (1988) 165 CLR 489 (where it was recognised, in line with “Sir Frederick Jordan’s footnote”, that not only a right to specific performance in the traditional sense but also a right to injunction is sufficient to give rise to an equitable interest), Mr White must be taken to have shown, at least to the prima facie level contemplated by s.74K, that, having regard to the declarations the court has already made, he had an equitable interest in the Seaforth property which interest may to the same level be said now to subsist in the Somersby property.

11 The power of the court to extend a caveat under s.74K where it is satisfied that the caveator's claim to an interest through the caveat has or may have substance is a discretionary power. The principles applying are generally the equivalent of those which apply to the grant of interlocutory injunctive relief. Normally, therefore, an undertaking as to damages would be required.

12 In the present case I am satisfied that Mr White has shown to the level contemplated by s.74K an interest of a caveatable kind in the Somersby property. But because the matter is shown, even on the basis of the existing declarations, at a prima facie level only, there would be no extending order unless an undertaking as to damages were given. The need for an undertaking as to damages in the present case is emphasised by the circumstance that the extent of the interest to which I have referred is not quantified in value or in any other way, that being something that will in due course emerge following the completion of the reference to the referee; added to which Mr White’s position is already substantially safeguarded by the retention of the sum of $1 million in the controlled moneys account.

13 I turn now to the application concerning the funds in the controlled moneys account and the claim of Mr White for an order that a sum of $150,000 be paid out of the account to him, he being in need of funds in connection with the reference to the referee.

14 The fact that I have held that Mr White had an interest of the kind I have described in the Seaforth property and that that is traceable into the proceeds of sale of the Seaforth property does not mean that Mr White has any entitlement actually to obtain any part of the moneys in the controlled moneys account. The same questions of the extent of the interest and quantification again arise. There is the added point that the entitlement to maintain a caveat is reflective of maintenance of the status quo, something that would be upset by a payment out of the controlled moneys account. The obvious intent of the order under which the controlled moneys account was established and funds were paid into it was that the funds should be quarantined intact pending a full determination of the parties' entitlements flowing from what has now been found to be the joint venture that was entered into by them. Payment out of the account at this stage would be inconsistent with the maintenance of that holding pattern pending final determination.

15 I have considered the question whether principles applicable generally in Mareva cases are applicable here. I have in mind in particular the principle (reflected in Order 1(b) of the order set out in the joint judgment of Gaudron, McHugh, Gummow and Callinan JJ in Cardile v LED Builders Pty Ltd (1999) 198 CLR 380 at p.410) that Mareva orders should not operate to prevent proper expenditure of funds on legal proceedings. The difference, as I see it, is that while, as I have said, Mr White may be regarded as having an unquantified and at this stage unquantifiable interest in the moneys in the controlled moneys account flowing from the interest arising from the joint venture arrangement, the moneys in the account are not shown to be his in the way that assets typically subjected to Mareva orders are the assets of the persons concerned. It is one thing for the court to prevent a person dealing with his own property and in that context to make exceptions for proper expenditure for legal expenses. It is quite another thing for the court to quarantine a fund entitlements to which are unascertained and unascertainable so they will remain intact pending final resolution. Until that resolution is reached, no one can say that any particular amount in the fund is his. This present case is of the latter kind.

16 In the result, therefore, provided that a meaningful undertaking as to damages is offered and accepted, there will be an order extending the caveat until further order but there will be no order for payment of money out of the controlled moneys account.

[Mr White offered the usual undertaking as to damages. Mr Blanks and Mr White addressed]

17 Mr White has indicated a willingness to offer the usual undertaking as to damages. Mr Blanks, on behalf of Mr Thompson, has however submitted that the undertaking should not be regarded as acceptable. He submits that it is not an undertaking of any worth or meaning because Mr White has no assets from which any damages ultimately referable to the undertaking could be met. Mr White's affidavit of 22 February sets out his financial position. He refers to assets which he puts at $356,600, including his entitlement to certain elements referable to the Seaforth joint venture which are the subject of the reference to the referee. Against that he lists liabilities and estimated liabilities of $459,500. Because the court is not at this stage in any position at all to make an estimate of the extent in value terms of Mr White's interest in the joint venture it can only approach the matter without reference to that and therefore on the footing that Mr White has liabilities substantially exceeding his assets. That being so, the undertaking as to damages would not have the substance that I have indicated would be necessary to constitute the proper price for the order extending the caveat.

18 Both applications must accordingly be dismissed. I so order. The applicant will pay the costs of the respondent in each case.

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