Dueeasy Pty Ltd v D and M Hughes Civil Engineering Pty Ltd (in liq)
[2006] NSWSC 333
•28 April 2006
CITATION: Dueeasy Pty Ltd v D & M Hughes Civil Engineering Pty Ltd (in liq) [2006] NSWSC 333 HEARING DATE(S): 13-17 March, 19 April 2006
JUDGMENT DATE :
28 April 2006JURISDICTION: Equity Division JUDGMENT OF: Rein AJ DECISION: See [59]. CATCHWORDS: EQUITY - company in liquidation - deed by which interest of joint venturer in property development transferred to two other joint venturers prepared after date of liquidation and executed by director void and of no effect - no oral declaration of trust or transfer of interest by company prior to liquidation established and alternatively ineffective due to absence of writing - no estoppel - other joint venturers precluded from maintaining arguments of which no notice given at commencement of hearing or until close of evidence - consideration of precise nature of relief in circumstances LEGISLATION CITED: Conveyancing Act 1919, ss 23C, 37A
Corporations Act 2001, s 471BCASES CITED: Carl Zeiss Stiftung v Herbert Smith & Co (No 2) [1969] 2 Ch 276
Huynh v Helleh Holdings Pty Ltd (2001) 10 BPR 19,333; [2001] NSWSC 1162
Ramsden v Dyson (1866) LR 1 HL 129
Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387PARTIES: Dueeasy Pty Limited ACN 002 861 341 (Plaintiff)
D & M Hughes Civil Engineering Pty Limited (in liq) ACN 002 135 579 (First Defendant)
W & G Lambiris & Sons Pty Limited ACN 001 908 363 (Second Defendant)
Rabobi Pty Limited ACN 002 557 691 (Third Defendant)FILE NUMBER(S): SC 6191/04 COUNSEL: F Donohoe (Plaintiff)
V Gray (Second and Third Defendants)
J Clarke (First Defendant)SOLICITORS: Carneys (Plaintiff)
Abbott Tout (Second and Third Defendants)
Baker & McKenzie (First Defendant)
IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
Rein AJ
28 April 2006
6191/04 Dueeasy Pty Limited v D & M Hughes Civil Engineering Pty Ltd (in liq) ACN 002 135 579 by its Joint Liquidators & 2 Ors
JUDGMENT
1 HIS HONOUR: The First Defendant, D & M Hughes Civil Engineering Pty Ltd (“the Company”), went into voluntary liquidation on 15 July 2004.
2 From 13 December 2001, and as at the date of liquidation, the Plaintiff (“DPL”) was pursuing the Company in the District Court in relation to monies ($117,000 plus interest) which DPL claimed the Company owed it in respect of building work carried out by DPL at a site in Kellyville as the Company’s subcontractor. The fact of liquidation halted the proceedings (by virtue of s 471B of the Corporations Act 2001). Mr F Donohoe of counsel appears for DPL.
3 Following the appointment of Mr De Vries and Mr Tayeh as joint liquidators, certain books and records of the Company were handed over to them, through their employee Ms Sue McCallum (“Ms McCallum”). One of the documents which was handed over to Ms McCallum was a deed bearing the date 9 September 2002 (see paras 7 and 11 of her affidavit). The deed related to Lot 6 Railway Rd Mulgrave (“Lot 6”) and was one made between the Company, Rabobi Pty Ltd (“Rabobi”) and W & G Lambiris & Sons Pty Ltd (“Lambiris”), the Second and Third Defendants to these proceedings. Mr V R W Gray of counsel appears for Lambiris and Rabobi. The liquidators have filed an appearance on behalf of the Company, but effectively it is a submitting appearance.
4 Lot 6 adjoins Lot 7 and Lot 209, and those three lots were the subject of a plan of subdivision approved by the Hawkesbury City Council (“the Council”), and the subdivided lots have been sold. The lots comprised in former Lot 6 were sold for more than $5 million. Some of the proceeds of sale of the lots have been placed in a bank account of the solicitor handling the sale of the lots pending the outcome of this case. The amount deposited was $820,000. Rabobi and Lambiris claim that the proceeds belong exclusively to them. DPL claims that those proceeds and all the proceeds from the subdivided lots of Lot 6, subject to due allowances, belong to the Company.
5 There are in fact two versions of the deed to which I have referred, one dated 9 September 2002 and one dated 14 September 2002. Both versions have been executed by Mr Hughes as a director of the Company, but only the document bearing the date 9 September 2002 has the seal of the Company affixed. The two versions are annexed to Ms McCallum’s affidavit and both have been executed by Lambiris and by Rabobi. Lambiris is a company the shares in which are owned by Mr Lambiris; Rabobi is a company the shares in which are owned by Mr Hughes and his wife; and shares in the Company are owned by Mr Hughes and Rabobi.
6 It is conceded by Rabobi and Lambiris that the deeds were not executed on 9 or 14 September 2002 (concession by counsel at T5.5-10), and indeed that the deeds were not prepared until August 2004 (see T164.45-50) (although Mr Lambiris sought to distance himself at T226 from the concession made on behalf of Lambiris (and Rabobi)). It is also conceded by Rabobi and Lambiris that since the Company had been placed in liquidation on 15 July 2004, Mr Hughes had no authority to bind the Company, and that the documents purporting to be deeds have no effect at law.
7 So far as DPL’s claim against the Company is concerned, it is conceded by Rabobi and Lambiris that DPL, which is asserting a claim against the Company in liquidation, has standing to bring these proceedings and would be prejudiced by any assignment which constituted an attempt to defraud creditors under s 37A of the Conveyancing Act 1919: see T12.20-34. Submissions of Rabobi and Lambiris which appeared to challenge DPL’s standing were, it was agreed on 19 April, no longer relevant. It was agreed that it is no part of the Court’s function to make any assessment of whether the Plaintiff’s claim upon the Company is valid and if so, to what extent.
8 There were no pleadings in the matter. On 9 February 2006 when the matter was listed before me for directions, I directed, inter alia, the parties to exchange statements of issues and outlines of submissions. These orders were complied with but there was a lack of agreement about the description of issues, which continued at the hearing: see T4.21-11.25. Whether the real differences over the categorisation of issues was slight as Mr Donohoe thought (T4.26-29) is not important for present purposes – what is important is the way in which Lambiris and Rabobi put their case through the outline of submissions tied to the list of issues filed on their behalf and to the cross summons filed. The reason for its importance is that it is DPL’s contention that the subsequent submissions, advanced by Lambiris/Rabobi at the close of evidence, were quite different to those advanced in the first submissions, and that to permit such a change of tack was unfair and prejudicial to DPL. I shall refer to this as the “new case” point.
9 I will need to return to the “new case” point but the question of divergence will be better understood after I have dealt with the issues that were presented by counsel as at the commencement of the hearing.
10 DPL’s case is that the liquidators on behalf of the Company, and therefore creditors, should be able to have access to all of the net proceeds of sale of the subdivided lots that formerly made up Lot 6.
11 DPL’s starting point is that (a) the Company purchased Lot 6 in its name; (b) it paid the deposit of $42,500; (c) it together with Rabobi and Lambiris borrowed in excess of six million dollars from Suncorp Metway (“Suncorp”) to finance the balance of the purchase of Lot 6, the balance of the other lots’ purchase prices and the construction costs; and (d) it has never transferred the land (i) at law; or (ii) in equity.
12 Rabobi and Lambiris accept (a), (b) and (d)(i) but asserted that in July 2002, the Company by express oral declaration of trust transferred its equitable interest in Lot 6 to Rabobi and Lambiris. Whilst (c) was accepted as a fact, there was some attempt by Mr Hughes to minimise the importance of it.
13 Rabobi/Lambiris read, inter alia, the affidavits of Mr Hughes and Mr Lambiris in support of that case. The thrust of Rabobi/Lambiris’ position was that although the deeds dated 9 September 2002 and/or 14 September 2002 were ineffective, they reflected a transfer of interest to Rabobi and Lambiris orally agreed between Mr Hughes on behalf of the Company and Rabobi on the one hand, and Mr Lambiris on behalf of Lambiris on the other.
14 DPL asserts that:
(a) there was no declaration of trust as Rabobi and WPL assert because even if the conversation deposed to was accepted as having occurred (there was an attack on the credit of Mr Hughes and Mr Lambiris) it was insufficient to amount to a declaration of trust, and in any event, it preceded the advice to Mr Hughes that $80,000 would be incurred by such a transfer, an expense that he was not willing to incur;
(c) if it was not otherwise void or ineffective it constituted a fraud on creditors within the meaning of s 37A of the Conveyancing Act .(b) if there was an oral declaration of trust it was ineffective because it did not meet the requirement of s 23C of the Conveyancing Act ;
15 Section 23C of the Conveyancing Act is in the following terms (emphasis added):
(1) Subject to the provisions of this Act with respect to the creation of interests in land by parol:“ 23C Instruments required to be in writing
- (a) no interest in land can be created or disposed of except by writing signed by the person creating or conveying the same, or by the person’s agent thereunto lawfully authorised in writing, or by will, or by operation of law,
- (b) a declaration of trust respecting any land or any interest therein must be manifested and proved by some writing signed by some person who is able to declare such trust or by the person’s will,
- (c) a disposition of an equitable interest or trust subsisting at the time of the disposition, must be in writing signed by the person disposing of the same or by the person’s will, or by the person’s agent thereunto lawfully authorised in writing.
- (2) This section does not affect the creation or operation of resulting, implied, or constructive trusts.”
16 Section 37A of the Conveyancing Act is in the following terms:
(1) Save as provided in this section, every alienation of property, made whether before or after the commencement of the Conveyancing (Amendment) Act 1930 , with intent to defraud creditors, shall be voidable at the instance of any person thereby prejudiced.“ 37A Voluntary alienation to defraud creditors voidable
(2) This section does not affect the law of bankruptcy for the time being in force.
(3) This section does not extend to any estate or interest in property alienated to a purchaser in good faith not having, at the time of the alienation, notice of the intent to defraud creditors.”
17 There are some incontrovertible facts:
(1) the Company purchased Lot 6 from Caltex by contract for sale dated 16 May 2002;
(2) the Company paid to Caltex a $42,000 deposit of the $850,000 purchase price;
(3) Rabobi and Lambiris together bought Lot 209 from Caltex and Lambiris alone bought Lot 7 from Caltex;
(4) the Company together with Rabobi and Lambiris borrowed in excess of $6 million from Suncorp for the balance of the purchase price of each of the lots;
(5) the Company paid out of the loan from Suncorp $85,000 for GST on the purchase of Lot 6 and received in due course a refund of $85,000 from the Australian Taxation Office (“ATO”). It paid the $85,000 so received into a joint venture account in the name of Rabobi, Lambiris and the Company, and the money was used to repay Suncorp (see pp 560-562 for the style of the Suncorp account);
(7) the signed accounts of the Company (signed by Mr Hughes on 1 March 2004) for the year ending 30 June 2003 showed the land as an asset of the Company at cost at $855,500.46 (the figure appears to include legal and related costs): see Exhibit “C”.(6) no document or note was created in 2002 reflecting the alleged joint venture arrangement nor the alleged transfer;
18 In paragraphs 31-40 of the Outline of Submissions of 10 March 2006 presented on behalf of Rabobi and Lambiris are set out their submissions. I shall set out those submissions (verbatim save for using the terminology adopted in these reasons and with emphasis added by me relevant to the “new case” point):
(1) The transfer of interest as purchaser under the uncompleted contract in Lot 6, Deposited Plan 235303 by the Company to Lambiris and Rabobi occurred in July-August 2002.
(2) As from that date, in equity, title to Lot 6 passed to and was held by Lambiris and Rabobi and it therefore follows that the Company was merely a trustee first of the rights under the purchase contract and then, following completion, of the legal estate for Lambiris and Rabobi .
(3) At July-August 2002 the Company was solvent.
(4) At July-August 2002 the Company did not have access to the resources required either to complete the purchase of Lot 6 on 30 September 2002 or to undertake the development thereof. Alternatively, it became apparent to the Company that Lot 6 was not suitable as a depot and would not have been economically sensible to develop in isolation.
(5) It therefore follows that had the Company not transferred equitable title to Lot 6 to Lambiris and Rabobi in August 2002 , the Company stood to forfeit the $42,500 deposit it had paid to Caltex (and its financial position would, in any event, have been worse than it was when it transferred the benefit of the purchase contract to Lambiris and Rabobi).
(6) It therefore follows that the transfer of its rights to purchase Lot 6 to Lambiris and Rabobi was the best, if not the only, course reasonably open to the Company (and that the directors of the Company would have been in breach of their duties to the Company if they had not procured a transfer and reimbursement of the full deposit paid).
(7) It therefore follows that the transfer by the Company to Lambiris and Rabobi of the rights under the uncompleted contract to purchase Lot 6 was not an alienation with intent to defraud creditors within s 37A of the Conveyancing Act. DPL has the burden to establish fraudulent intent, which it is submitted it cannot and the facts recited above sufficiently rebut any inference of fraud. See Huynh v Helleh Holdings Pty Ltd (2001) 10 BPR 19,333; [2001] NSWSC 1162.
(8) Following the transfer of those rights, Lambiris and Rabobi completed the purchase of Lot 6 and undertook the subdivision and incurred substantial expense in doing so. Accordingly, the Company is precluded by the rule in Ramsden v Dyson (1866) LR 1 HL 129; Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387 (or possibly on the basis of conventional estoppel) from now denying that at all relevant times Lambiris and Rabobi were entitled to the benefit of the contract of purchase and, following completion, to beneficial ownership of the fee simple estate in Lot 6.
(10) If, contrary to the above, the transfer is void under s 37A and Lambiris and Rabobi are accountable to the Company,(9) It follows that there is no basis on which the court could set aside the transfer to Lambiris and Rabobi of the rights under the uncompleted contract for the purchase of Lot 6 or disturb Lambiris and Rabobi’s beneficial ownership of Lot 6.
- (a) They are accountable for the shortfall between the value of the property acquired (ie the rights under the uncompleted contract for sale as at July-August 2002) and the value of the consideration provided (ie $42,500 plus indemnity for any liability under the uncompleted contract);
(c) Lambiris and Rabobi are entitled to a just allowance on a liberal basis for the time talent entrepreneurial skill they utilised and the very substantial risk which they assumed to undertake the development and subdivision of Lot 6 (as a constituent part of their own much larger subdivision).(b) On no basis could they be accountable for the gross sale proceeds of the ultimately subdivided lots created by the subsequent development and subdivision of Lot 6;
19 Although the Plaintiff bears the onus of proof, there is no dispute that proceeds derived from the sale of Lot 6, of which the Company is registered owner, have been paid into the account of the solicitor handling the sale of subdivided lots forming part of Lot 6. The Plaintiff has established that the Company was the legal owner of Lot 6 and that it paid the deposit of $42,500 and was a joint borrower of the balance of the funds.
20 The witnesses called on behalf of Lambiris and Rabobi included Mr Fisher, a solicitor who relevantly, after contracts had been entered into between Caltex and the Company but before settlement, was asked to advise Mr Hughes as to whether Rabobi could be substituted for the Company. He advised Mrs Lisa Shepherd (Mr Hughes’ daughter) that stamp duty may be payable and that a change would lead to delay in the settlement on the property. He heard no further from Mrs Shepherd or Mr Hughes on the topic. Mrs Shepherd also gave evidence by affidavit and was cross-examined. She stated, inter alia, that it had always been her intention to arrange the transfer of the land from the Company to Rabobi and to arrange a joint venture deed as instructed by her father. She ascribed her failure to raise the question of the joint venture deed with Mr Fisher as an oversight due to her having recently given birth to her third child, and her failure to progress the transfer to the same cause.
21 I have mentioned that it was conceded by Rabobi and Lambiris that the deeds transferring the beneficial interest to them were created in August 2004 and dated 9 and 14 September 2002. Mr Hughes gave evidence that he had asked his solicitor, Mr Stratford of Low Doherty & Stratford, to arrange the documentation, and Mr Hughes asserted that he had done so to reflect what had been agreed in July 2002: see T169.5-25. There is no doubt that the documents were created in the office of Mr Stratford in August 2004 with the year 2002 typed in (the day and month were not typed on the document). Mr Stratford’s explanation for having prepared a document in 2004 with a 2002 date was that it was a typographical mistake: T45.36-37. He said he saw the document before it was sent out (T46.11) and seemed to accept that he had seen the date (T46.20-30) but then said he could not remember seeing the date on it: T45.40. He did not unequivocally deny that he was ever told by Mr Hughes that the Company had been placed in liquidation (T46.32) which adds a further disturbing quality to his evidence.
22 Mr Hughes gave evidence on behalf of Rabobi and Lambiris. He was a most unimpressive witness.
23 He admitted that he had given instructions in August 2004 for a document to be prepared with a date in 2002, but T157.44-164.43, forming part of the cross-examination of Mr Hughes, are replete with contradictions, admissions followed by retractions and denials, and indeed evidence that supported and then contradicted Ms McCallum, who attended for cross-examination on 14 March 2006 and whose evidence was never challenged in affidavit or by cross-examination. I will not burden this judgment with the full extent of Mr Hughes’ evidence on that aspect, but I will set out some portions of it, which included Mr Donohoe putting to Mr Hughes the contents of para 4 of Ms McCallum’s affidavit, in which she set out her version of a conversation with Mr Hughes on 11 August 2004:
“DONOHOE: Q. Do you remember having a meeting with Mrs McCallum on 11 August 2004?
A. Mrs McCallum, who is that?
Q. Would you agree with me that the company was placed into liquidation on 15 July 2004?
A. That's right, yes.
Q. Do you remember having a meeting with Mrs McCallum of de Vries & Tayeh on 11 August 2004?
A. Well I was there several times. If I was there, I was there, yes.
…Q. I am asking if you recall that meeting on that date?
A. I don't recall that meeting on that date but if you mention the conversation I will tell you yes or no.
Q. Do you remember responding "It was bought for the purpose of the joint-venture between one of my companies Rabobi and another company W & G Lambiris & Sons Pty Ltd and is mortgaged to Suncorp Metway”?
A. I wouldn’t have said I bought it for development purposes with Billy Lambiris because I know that I didn't.
…Q. You are saying that you did not say that to Mrs McCallum?
A. I didn't say them words, I bought the land for a specific reason to develop.
Q. She expressed interest in finding out what was happening with that property?
A. I told her what had happened. I probably told her what had happened with the property.
Q. Do you remember her asking you for a copy of the agreement?
A. I honestly can't, no.
Q. But you would not deny that she did?
A. No.
Q. You are aware, are you not, that she swore in her affidavit that she had asked you to produce a copy of the agreement of 11 August 2004?
A. I haven't seen her affidavit, no.
HIS HONOUR: Q. You haven't seen her affidavit, Mr Hughes?
A. I don't think so.
(His Honour requested that a copy of Mrs McCallum’s affidavit be shown to the witness)
Q. Have a look at the affidavit that is being shown to you and just see if that jogs your memory as to whether you have seen it or not before (shown)?
A. No, I haven't.
Q. You haven't read it yet?
A. I have seen the pages. I haven't seen it, no.
Q. Your solicitor has not shown you a copy of that affidavit before today?
A. I will read it now and find out.
DONOHOE: Q. Mr Hughes, his Honour's question was, have you previously seen a copy of that affidavit?
A. No.
Q. Are you telling his Honour that you were not asked - would you read paragraph 4 of that affidavit please Mr Hughes?
HIS HONOUR: He might have just done so, if not he can read it again.
DONOHOE: Q. If you have not read that affidavit previously, were the contents of that paragraph brought to your attention by your solicitor?
A. Yes, yes I have read this affidavit before, I’m sorry.
DONOHOE: Q. Now, do you agree that the conversation referred to in paragraph 4 of the affidavit took place in the terms that are stated by Ms McCallum?
A. More or less, yes. I did say we did buy it and it was part of a joint venture between two other companies.
Q. I am not asking you that question. I am asking you whether there was a conversation specifically in the terms set out in paragraph 4?
A. Yes, yes.
Q. You did not tell your solicitor or your counsel to challenge Ms McCallum on that version of the conversation, did you?
A. What is there to challenge?
Q. You agree with it, then?
A. Yes, that is okay.
…
Q. Did you send her a copy of the agreement?
A. I think my office sent her a copy, yes.
Q. It says it came from you. Do you dispute that?
A. I probably do, yes.
…
Q. She is asking you, isn't she, when it was executed?
A. I didn't - I don't remember that part, but anyway.
Q. You know what "executed" means, don't you?
A. Yes, signed.
Q. And you said, "I can't remember the exact date but I think it was executed around mid September 2002"?
A. No, I didn't say that.
Q. You didn't say that?
A. No.
Q. I am suggesting that you're trying to mislead the court, Mr Hughes.
A. Well, I will tell you that you're wrong.
Q. Because soon after that conversation you sent her a document which was dated 14 September 2002, didn't you?
A. That's right but we, we, we backdated this document.
Q. Just answer my question.
A. On a hand shake.
…
Q. So I am suggesting to you that she had asked you for the document. Do you agree with that?
A. Yes.
Q. So you’re saying that she is not telling the truth? Is that what you're saying?Q. Two days later you gave her what purported to be the document?
A. Well, I will be honest with you, this is not right. This is not right because there is no way in the world we got that document back to her that quick. I don't --
A. That's right. I don't operate that way.”
24 Where Mr Hughes’ evidence contradicts Ms McCallum I unhesitatingly accept the word of Ms McCallum over that of Mr Hughes. I have had regard to Mr Gray’s submissions on the question of Mr Hughes’ credit and I accept that Mr Hughes did make ready admissions in cross-examination in relation to the date of preparation of the deeds, but given Mr Stratford’s evidence about the date of his instructions to prepare the deed, he had little choice. Nothing in Mr Gray’s submissions on credit causes me to view Mr Hughes as reliable or worthy of credit. I make the following findings of fact on the topic of the deeds:
(1) In August 2004 Mr Hughes arranged for the preparation of documents that were to be backdated to 2002 which he then arranged be signed with the dates 9 and 14 September 2002. He told his daughter Mrs Lisa Shepherd to insert the “9th September” in the first form of the deed.
(2) Mr Hughes executed the first of those documents purportedly on behalf of the Company, when as at that date he knew that the Company was in liquidation (T166.24-37) and knew that he had no power to execute the document: T167.50-57.
(3) Mr Hughes told Ms McCallum on 11 August 2004 that the document relating to Lot 6 had been executed in around mid-September 2002 when he knew full well either that it had not been executed at all or had been executed less than eight days before that conversation (he did not receive the draft document until 4 August 2004 at the earliest).
(4) The deed was drafted and dated on Mr Hughes’ instructions with “2002”, and executed by Mr Hughes and Mr Lambiris on behalf of Rabobi, Lambiris and purportedly the Company, and then sent to Ms McCallum.
(6) Whilst it is probably not relevant, and although Mr Tayeh seemed to resist the proposition initially (see T119.21), Mr Tayeh’s letter of 31 August 2004 (p 535 of Exhibit “A”) and his evidence at T119-120, point to the deception having been successful.(5) I draw the inference that the reason that the document was ordered to be prepared by Mr Hughes, and prepared and executed in the way that it was, was in order to deceive Ms McCallum and Mr Tayeh.
25 The evidence to which I have already referred was sufficient to leave me with the clear impression that Mr Hughes was not a witness of truth. There were however further matters upon which I found his credibility wanting, which I set out below. One of the themes in Mr Gray’s submissions on credibility is the proposition that the Company had been fully compensated for its interest in Lot 6 and that no deposit was lost. Mr Tayeh’s evidence at T107.55 is cited in support of that proposition. Apart from the fact that that argument was part of the new case (which I deal with later) Mr Tayeh’s evidence was, after further cross-examination by Mr Donohoe, left entirely equivocal: see T115.19-31; T118-119. Not only that, but it was not part of Mr Hughes’ evidence that the Company had been reimbursed by any means – on the contrary he contended that he had told Mr Lambiris that the Company would forfeit the deposit, and as I set out below the theme of Mr Hughes’ evidence (unlike the submissions made after the evidence was concluded) was that Lot 6 had had to be unloaded as a problem lot.
26 The further matters were these:
(1) He stated in para 29 of his affidavit that the Company (which in para 1 of his affidavit he had defined as “Hughes”) had received a benefit from an agreement to transfer Lot 6 – receiving approximately $950,000 worth of works. That paragraph, which was struck out, is connected to the conversation to which Mr Hughes deposes in para 18 of his affidavit in which he says, according to his evidence, that “Hughes” will forfeit the deposit because “it is going to do all the construction at market rates and get its return that way”. He admitted in cross-examination (T151.2-49) that “Hughes” did not do the work and in fact received no benefit from the development of Lot 6. He then tried to justify the statement in his affidavit on the basis that he used “Hughes” to mean any of his companies (T151.40-57) but shortly after said that he only had that looseness of expression in “word of mouth”. Incidentally, the reason the Company did not carry out the work on the project was because Mr Hughes decided to establish a new company, DMH Civil Engineering Pty Ltd (“DMH”), in November 2002. It is owned by Mr Hughes and his wife: T203.
(3) His attempts to explain that he had not ever intended the Company to buy Lot 6 were several – they ranged from:(2) His assertion that he did not authorise the affixing of the seal of the Company to the deed was not plausible – he signed as a director of the Company, when he knew he was not, and he sent the deed dated 9 September 2002 to Ms McCallum.
(a) an assertion that the Company cheque book happened to be the cheque book he carried with him: para 11 of his first affidavit;
(c) the Company was not his development company: para 9 of his first affidavit and T153.30.(b) that he did not have time to get a cheque book (for Rabobi) from his office: T173.9-14;
(5) Mr Hughes gave a number of different explanations for why he wanted to transfer the land from the Company:
(4) The property was not bought at auction and the purchase contracts were arranged over time with “D M Hughes or his nominee” originally on the contract. As early as March 2002 (ie well before 16 May 2002) it was clear that the Company was contemplated as being involved in the purchase and development of Lot 6: see p 49 Exhibit “A”. A loan was sought from Suncorp with the Company as one of three borrowers. In these circumstances the explanations were implausible.
(a) that Lot 6 was a “problem lot” and that he was in effect doing the Company a favour by transferring it (without refund to it of the deposit of $42,500): see T153.30-50;
(c) that Mr Lambiris wanted Rabobi in and the Company out as a price for him joining in the joint venture and putting in Lot 7.(b) that the Company would be earning money on the building contracts (para 18);
(6) Given that, on Mr Hughes’ own evidence, he wanted to transfer Lot 6 to Rabobi but did not do so because Rabobi would have had to pay $80,000, and that he was a director of Rabobi, which owned a substantial number of shares in the Company, it did not make any sense at all that, leaving aside the problem of the stamp duty, Lot 6 was good enough for Rabobi but not the Company. As I have mentioned, the explanation of the Company earning money was not pressed, but rather Mr Hughes asserted that he had not meant the Company.
(7) Mr Hughes said that he was not aware the Company had transferred the work in progress from the Company to DMH for $1.5 million. He said $1.5 million was a very small amount of money in terms of his Company. Mr Hall, the Company’s accountant, however said that $1.5 million was a considerable amount of money to the Company. Mr Gray submitted that if the $1.5 million was written out of the books of the Company “by transfer”, it may not be seen as significant. I do not think this explains Mr Hughes’ assertion that $1.5 million was a small amount for the Company, and I think it unlikely that Mr Hughes was not aware that that figure had been written in the books as the transfer fee, whether it had any connection with a genuine transaction or not.
(8) Mr Hughes told me that the Company had no problems with creditors (other than DPL) and that DPL brought the Company down. DPL’s claim for $117,000 plus interest was however not recorded in the accounts of the Company in any year, and Mr Hall, the Company’s accountant, was not aware of such a claim. Mr Hall said that the Company was forced into liquidation because of its debt to the ATO. That debt was in excess of $198,000. Mr Gray submitted that Mr Hughes’ comments should be seen as broad generalisations about the Company and there may have been a number of reasons for failure of the Company. I do not think that the explanation provided by Mr Gray is supportive of Mr Hughes’ credit.
(9) Mr Hughes seemed reluctant to agree that the Company was really a joint borrower from Suncorp, and when he did agree he asserted that it was only Rabobi that could be the effective borrower. There was no objective justification proferred for that assertion. Since the Company owned Lot 6 it had at least that as a valuable asset over which a mortgage would be of utility.
(10) Mr Hughes said that it was his practice to go through the accounts with his accountant before he signed them (T205.35) but later said he was not aware of Lot 6 being included: T211.5. He said he had failed to tell his accountant about Lot 6 being transferred (T210.55), which is remarkable if it had been an important matter to him.
(12) A number of his answers were non-responsive and he often contradicted himself as can be best seen at T159-164 but see also, for example, (11) above, T147.45-53. T154.21-36, T155.25-29, T156.6-21.(11) Mr Hughes said he did not speak to Mr Lambiris about Rabobi in July (T155.50), but then he said he probably did: T155.57.
27 There were several objective items of evidence that pointed to the Company being a joint venturer:
(1) The fax at p 408 of Exhibit “A” pointed to a letterhead having been prepared by someone in the Company showing just that.
(3) The Suncorp loan arrangement and documentation.(2) There were other documents that indicated that the three companies were involved together in the development of the three lots: see pp 48 and 133 of Exhibit “A”.
- Mr Tayeh, not surprisingly, concluded that the Company was a joint venturer: T129-130. Mr Hughes denied having seen the letterhead at p 408 and his daughter supported the contention that the letterhead was a mistake. Taken on its own, the letterhead is of limited weight but taken with the other material I think it makes Mr Hughes’ assertion of never having seen the letterhead in use and Mrs Shepherd’s corroborative evidence less plausible.
28 I did not find Mr Lambiris to be a credible witness. Again in this context I have had regard to Mr Gray’s submissions but they do not lead me to form a positive view on his reliability as a witness. My reasons are as follows:
(1) He was prone to answer questions unresponsively using the opportunity for advocacy for his cause, see for example T215.40-216.10, T221.9-19 and T227.55-228.6.
(2) He denied that he agreed that the document should be backdated (T217.50-58) but it bore the date 2002 and it was not executed by him on behalf of Lambiris until August 2004 (T218.49-51), at a time when he knew that Mr Hughes was not authorised to bind the Company: T223.09-15.
(3) He asserted that the possibility of subdividing Lots 6 and 7 in conjunction with Lot 209 had never even crossed his mind: T227.24-50. This is contrary to the letter Caltex provided to the Council authorising Lambiris, Rabobi and the Company to lodge a development application for subdivision of the three properties (see p 49 of Exhibit “A”), which I infer on the balance of probabilities was arranged by or on behalf of Lambiris, Rabobi and the Company. Mr Lambiris’ evidence in which he endeavours to deal with the fact of his earlier evidence in the light of the Caltex letter (T227.24-228.54) is also indicative of his unreliability.
(4) He said at T235.1-50 that it made no difference to him which company Hughes used to purchase Lot 6 but at T235.10-11 he said that it made a difference so far as development was concerned. Then at T235.47-52 he said it made no difference as long as the costs were apportioned equally. At T236.14-28 he said it would make apportionment of costs more difficult, but could not explain why: T236.25-28. Then at T236.40-43 he said it was a matter of personal preference. At T236.56-237.9 he said that his concern was to ensure that Lot 6 could not be included without expenses being borne equally. The latter concern is not in any way inconsistent with the Company continuing to own the land both legally and beneficially.
(6) He stated that he believed that the deeds were just to “put it in a folder” (T225.56), which I found most unconvincing in a context where he knew the Company had gone into liquidation (T223.10, and see T170.30) and Mr Hughes was signing a document as director.(5) He described Lot 6 as being landlocked (T237.40-43) (which was given as an explanation of why Lot 6 was unattractive), but he agreed at T238.56-239.15 that it was not landlocked, and then referred to stormwater problems. I did not find the so-called stormwater problems a convincing explanation as to why Lot 6 was “undesirable” to the Company or at all.
29 So far as Mrs Shepherd’s evidence is concerned, I accept that Mr Hughes in August 2002 asked her to investigate whether Lot 6 could be transferred to Rabobi before settlement of the purchase, and further that she contacted Mr Stratford and then Mr Fisher about the transfer, who advised her that transfer would incur stamp duty and possibly delay settlement with consequent interest charges, and that Mr Fisher recommended leaving Lot 6 in the name of the Company. It is clear from Mr Hughes’ evidence that he was informed that it would cost $80,000 in stamp duty and decided to leave the Company as the purchaser of Lot 6.
30 There were a number of other aspects of Mrs Shepherd’s evidence relevant to her credibility:
(1) She professed inability to indicate when it was, even approximately, that she appended the date “9th September” to the deed on her father’s instructions, saying she had no idea and was unable to say whether it was before or after the Company had gone into liquidation. This seemed unlikely, and I think it was designed to avoid the uncomfortable reality that she knew the insertion of a date “9th September” alongside “2002” amounted to participation in a deception given that as a fact her insertion of “9th September” occurred in August 2004.
(2) Her explanation for why a fax sent in her name (but not signed by her) had a joint venture heading which included the Company, was that a junior in her office had created that letterhead on her own initiative, when on Mrs Shepherd’s evidence, Mrs Shepherd had other templates on the computer with the “correct” heading. This explanation is difficult to believe, and quite unlikely. She could offer no explanation for why Mr O’Keefe of Rothsay Accounting to whom the fax was sent would have written “3 way joint venture” on another document (Exhibit “A” p 94) (T91-92) (and why that had been amended to “2 way joint venture”).
(3) She also asserted that the cheque book was relevant to the entry into the contract for Lot 6 by the Company (T94-96), which is difficult to accept for reasons I have already given in relation to Mr Hughes’ evidence.
(4) She said in para 8 of her affidavit that her responsibilities at the Company and Rabobi were “to handle bookkeeping including accounts payable” but at T82.56-83.1 she denied that she was bookkeeper, then at T96-97 she said she and her sister were both bookkeepers: T97.5. When questions were asked about the Company, she said she did not handle its bookkeeping: see T97.56-98.31.
(6) Her explanation for not mentioning the need for a partnership deed to Mr Fisher was very weak, as was her explanation for her failure to ever prepare the documentation for transfer. The much more likely and obvious reason is that her father had decided not to proceed with transfer to Rabobi because he had ascertained that it would cost $80,000 in stamp duty: see T154.20.(5) I found Mrs Shepherd’s assertion that it was she who raised the holding of the land in the name of the Company as a concern (because it was, she said, the contracting company, not the development company), as rather surprising in any event, but even more so in the light of her most limited role in the affairs of the Company, of which she gave evidence at T97.56-98.31.
31 I do not regard Mrs Shepherd as a reliable witness. The matters to which I have referred, coupled with her demeanour in giving her evidence, left me with no confidence as to her truthfulness. All that I am prepared to accept of her evidence is that her father did tell her that he was considering transfer of Lot 6 to Rabobi and that he asked her to find out what the consequences would be, which she did, and that she reported back to him, and that she dated the deed with “9th September” next to “2002”. I have already indicated that Mr Hughes’ evidence was that he would not proceed with the transfer because that involved payment of $80,000 stamp duty.
32 I make the following further findings:
(1) Mr Lambiris in August 2004 executed the documents described as deeds.
(2) At the time Mr Lambiris did so, he knew that the Company had been placed in liquidation and Mr Hughes had no authority to execute the document on behalf of the Company.
(4) Mr Lambiris had no interest in whether the Company or Rabobi was the owner of Lot 6.(3) Contrary to his protestations, I find on the balance of probabilities that Mr Lambiris well knew that the documents falsely represented themselves to have been created in September 2002 when they had not been created until August 2004.
33 I would not be prepared to accept any statement of Mr Hughes, Mr Lambiris or Mrs Shepherd unless it is corroborated by independent evidence, or is an admission against interest, and I am not satisfied that there was any discussion between Mr Lambiris and Mr Hughes that the Company would forfeit the deposit, or an agreement that the Company would transfer Lot 6 to Lambiris and Rabobi or to anyone without receiving the benefit of the proceeds of sale.
34 The objective evidence supports a finding that Mr Hughes did consider, at a stage after entry into the contract between the Company and Caltex for the purchase of Lot 6 and before settlement, transferring Lot 6 from the Company to Rabobi, but when he was informed that it would involve payment of $80,000 stamp duty he decided against that course.
35 There is objective evidence that supports that conclusion that there was agreement between Mr Hughes (on behalf of the Company and Rabobi) and Mr Lambiris (on behalf of Lambiris) that Lots 6, 7 and 209 would be developed together as a joint venture and that the respective owners of Lots 6, 7 and 209 would receive the net profits of the sale of land. What is less clear is the precise basis on which the profits would be divided and I shall return to that point.
36 There is no dispute between the parties that a joint venture was formed. DPL’s case is that the joint venture, however it may have been subsequently been presented by Mr Hughes, did not involve the Company transferring its legal and beneficial interest in the land to Rabobi and Lambiris (or to Rabobi) and then the right to the net proceeds of sale of the land arising from the development.
37 The joint venture aspect, involving the three lots and the three companies, and in that sense the appropriation to the joint venture is, in my view, the kernel of truth. The assertion by Mr Hughes that the Company transferred its interests in any fashion beyond permitting Lot 6 to be developed as part of the joint venture with Lots 7 and 209, with the consequential payment of net proceeds to the Company, has not been established by any credible evidence.
38 Some considerable effort was made in the case to establish what value Lot 6 had as at July 2002. There was controversy between two valuers, Mr Hubbard and Mr Brandson. The Plaintiff wanted to establish that what the Company gave away had considerable value and that it had received nothing in return.
39 I do not think it is necessary to determine what value the land had as at July 2002, because in my view the land was owned by the Company at all relevant times and was never effectively alienated by it to Rabobi or to a joint venture constituted by Rabobi and Lambiris, save in the sense that Lot 6 was utilised for the joint development of Lots 6, 7 and 209.
40 Even were I to accept Mr Hughes’ version of the conversation in para 18 of his affidavit of 8 February 2006, I do not think it is effective to amount to a declaration of trust.
41 If, contrary to the conclusion to which I have come, there was a transfer of an interest by what occurred, the interest was one in land and, to be effective, the requirements of s 23C of the Act had to be complied with and those requirements were not met. In oral argument Mr Gray advanced the proposition that the accounts of the Company constituted writing capable of satisfying s 23C, but the accounts on which he relies were not signed and the argument was abandoned, and in its place came the following day a new argument which sought to avoid the problems of s 23C entirely, which I shall outline below.
42 Returning then to the Rabobi/Lambiris submissions of 10 March 2006, I have found that there was no agreement to transfer the interest of the Company in Lot 6 (or its interest in the contract for purchase of Lot 6) to Lambiris and Rabobi. Further I find that there is no credible evidence:
(2) that the Company in and after March 2002 was buying Lot 6 for any purpose other than that of subdivision (there having been a statement by Mr Hughes that he had been contemplating at an earlier stage using Lot 6 as a depot for the Company).
(1) in support of the conclusion that the Company did not have access to the resources to complete the purchase of Lot 6;
43 In fact the Company borrowed (as did Lambiris and Rabobi for the other lots), the balance of the purchase price for Lot 6 and construction costs and became a borrower jointly with Lambiris and Rabobi.
44 There is no credible evidence that there ever was any realistic prospect that the Company would need to forfeit the deposit, nor was there any reason for it to transfer the land to Rabobi and Lambiris at a loss to it.
45 It does appear that although the Company paid the $42,500 deposit for the land (and legal fees) and was a joint borrower from Suncorp, the bulk of the work on the project has been carried out by others (DMH in particular). It is not clear what payments have been made by Lambiris and Rabobi that did not come out of the joint loan account of which the Company was a participant, and whether or not for example Council rates levied on the Company (see TB575) were paid by the Company or not. I accept that it would not have been intended that the Company should receive the benefit of the sale of subdivision without deduction for a proportionate share of the costs of the subdivision. I do not accept the contention in the Rabobi/Lambiris submissions of 10 March 2006 that Rabobi and Lambiris took the risk (and not the Company) in a context where the Company was a joint borrower from Suncorp of the funds.
46 It seems to me that there are three views that can realistically be taken as to what occurred:
(1) That Rabobi, Lambiris and the Company agreed that they would jointly develop the total site (ie Lots 6, 7 and 209), with each to receive a one third share of profits or Lambiris 50% and Rabobi/the Company 50% (ie 25% each), because Lambiris owned 50% of Lot 209 and 100% of Lot 7, Rabobi owned 50% of Lot 209 and the Company 100% of Lot 6. Lot 209 being 10 acres and Lots 7 and 6 being 5 acres.
(3) That the evidence is insufficient to determine which of (1) or (2) is the case and the Court should treat Rabobi and Lambiris as having utilised Lot 6 to achieve benefits of sale and should pay to the Company the gross proceeds of sale. Equitable considerations would then apply to take into account improvements made to the property by Lambiris and Rabobi for which allowance would need to be made.(2) That Rabobi and Lambiris would each receive 50% of the net proceeds of sale referable to Lot 209 after the deduction of apportioned costs for the whole project and offsetting payments, and Lambiris would receive 100% of the net proceeds of sale from lots within Lot 7 after apportioned deductions and offsetting payments, and the Company would receive 100% of net proceeds of sale from Lot 6 after apportioned deductions and offsetting payments.
47 I am inclined to think that approaches (2) and (3) are very similar and that (2) achieves a fair result. If approach (2) is taken it means that Rabobi and Lambiris will recover a proportionate share of expenditure they have outlaid (beyond monies jointly borrowed from Suncorp). Mr Hughes was a director of the Company as well as Rabobi, and the evidence was that he was the person with some expertise in property development. There would be no occasion, in my view, for any amount to be attributed to Rabobi for expertise in arriving at a net figure and there is no basis whatsoever for a Ramsden v Dyson or Waltons v Maher estoppel. Mr Hughes and Mr Lambiris at all times knew that there had been no transfer of interest to Rabobi and Lambiris, just as Rabobi and the Company knew that there had been no transfer of interest by Lambiris of Lot 7, and approach (2) takes into account any excess of expenditure by Rabobi and Lambiris. Given the absence of credible evidence to the contrary, approach (2) is the one that I shall adopt.
48 It would appear very likely that the amount of $820,000 at least is an amount to which the Company is entitled, but the case before me was not concerned with the detail of what amount precisely is due to the Company, it being agreed that further enquiry would be required, perhaps by an Associate Judge, or by reference to an expert accountant (the latter course seeming to me to be more appropriate and either course one that should only be adopted after appropriate attempts by the parties (including the liquidator) have been made to achieve agreement on what are the proceeds due to the Company).
The alternative arguments
49 At one point during the evidence, objection was taken to Mr Donohoe cross-examining on matters that seemed to be directed to establishing that Mr Hughes had endeavoured to siphon off other assets from the Company ie not just Lot 6. I upheld the objection. During submissions, Mr Gray put arguments that appeared to have no connection with the arguments advanced in the Rabobi/Lambiris outline of submissions of 10 March 2006. Mr Donohoe objected to what he described as a change of tack and he submitted that DPL would be irretrievably prejudiced by permitting such a new case to be mounted. There was argument on the point and I indicated that I would consider this further: see T285.
50 At T291.56-292.31, Mr Gray set out his argument:
“GRAY: … Our case is that as at July 2002 the company held an interest as purchaser under an uncompleted contract in respect of which a deposit of 42,500 had been paid. We say that Mr Hughes in his capacity as the governing mind and will of both the company and Rabobi contracted with Mr Lambiris that Mr Hughes would cause the interests of the company under the Caltex contract to be transferred to Rabobi ; that Rabobi would contribute lot 6 which it then acquired to the joint venture or stage 2 of the joint venture just as Mr Lambiris would cause the Lambiris company to contribute lot 7, and that the proceeds of stage 2 would be divided between them through their respective corporate entities, the Rabobi and Lambiris company.
HIS HONOUR: 50/50?
GRAY: Probably. But at some stage at least Mr Lambiris was going to retain part of lot 7 for his own use, it wasn't going to be sold. So that when we talk about 50/50 there would have been recognition that part of his 50 would be retained inspici. If Rabobi was going to take the net profit of lot 6 alone, then that would be an alternative. But the parties may or may not have met some final agreement on that, it doesn't affect the position of the company because we say the company was out of the picture.
GRAY: We say it doesn't affect the position of the company, D & M Hughes Civil Engineering, because the company was out of the picture. It had no interest in whatever happened to lot 6 and lot 7.” [emphasis added]HIS HONOUR: Sorry, can you say that last point again.
51 It will be noted that Mr Gray has introduced a new note – that Mr Hughes on behalf of the Company and Rabobi contracted with Mr Lambiris on behalf of Lambiris that Mr Hughes would cause the interests of the Company under the Caltex contract to be transferred to Rabobi, and that Rabobi would contribute Lot 6, which it had then acquired. The agreement asserted by Mr Hughes had been that the Company had agreed to transfer its interest to Rabobi and Lambiris and the Statement of Issues and the cross summons reflect that. The change in tack seemed to be consequent on the failures of Mr Hughes to establish the previously expressed reasons for the transfer to Rabobi and Lambiris and the fact that there was evidence corroborated by Mr Fisher (and less importantly Mr Hughes’ daughter) that Mr Hughes had at one point considered transferring the land out of the name of the Company and into that of Rabobi.
52 At T300 Mr Gray asserted that there was a constructive trust (T300.10-301.2). At T301.36, Mr Gray in answer to my question as to whether it was a new point said:
- “Certainly in the way it's now put.”
53 In written submissions of 5 April 2006, Mr Gray responds to the Plaintiff’s assertion that the Lambiris/Rabobi position has changed, saying that “is incorrect. The stance Lambiris and Hughes have taken throughout this litigation has never changed.” If by using the phrase “Lambiris and Hughes” Mr Gray was drawing a distinction between Mr Lambiris and Mr Hughes on the one hand and Lambiris and Rabobi on the other, then I do not think that is relevant. What the Court is presently concerned with is whether Lambiris and Rabobi are running a new and different case to that foreshadowed in the outline of submissions of 10 March 2006.
54 Not only were the original submissions directed to the contention that there was a transfer of interest to Rabobi and Lambiris, but it was Mr Hughes’ evidence that the deed he instructed Mr Stratford to prepare, which became the deed dated 9 September 2002, reflected the agreement which he asserted.
55 In my opinion, DPL was entitled to assume and proceed upon the basis that what was in issue was whether there had, in July 2002, been an agreement reached between Mr Hughes on behalf of the Company, with Rabobi and Lambiris, that the Company would transfer the beneficial interest in the contract for purchase and or in Lot 6 to Lambiris and Rabobi and if so whether that agreement was void either because of the absence of compliance with s 23C or because it was void as a fraud on creditors, and further there was a question of whether Lambiris and Rabobi were entitled to rely on the principles of Ramsden v Dyson, or conventional estoppel against DPL’s claim. No question arose of contract for the transfer of Lot 6 from the Company to Rabobi. One of the evidentiary matters upon which Mr Gray seeks to rely in relation to the alleged constructive trust is the contents of the accounting records of the Company. These records were prepared after the financial accounts for the year ending 30 June 2003 and had been signed off on 1 March 2004 and amount to book entries, the justification for which were not explored by DPL. Nor was the solvency, or lack thereof, of the Company post-March 2004 under consideration.
56 The use which Mr Gray seeks to make of them now was not known to DPL (because the issue had not been advanced as an issue) and I do not think it is appropriate for DPL to have to deal with such evidence without having been forewarned. In my view, the submissions now advanced do involve a significant change of tack and the new case is one that Lambiris and Rabobi ought not, in the circumstances, be permitted to run.
57 Whilst it is therefore strictly not necessary to do so, I will however, deal briefly with the submissions advanced on behalf of Lambiris and Rabobi. The further written submissions of 5 April 2006 helpfully re-state the “thesis” at para 15:
“(a) Mr Hughes was the controlling mind and will of both Rabobi and the Company,
(b) The relevant agreement between Mr Hughes and Mr Lambiris was made in July-August 2002;
(c) Initially Mr Hughes gave instructions to transfer legal title to Lot 6 from the Company to Rabobi but when he discovered the stamp duty liability which would arise, he rescinded that decision and decided (as is indisputable from his subsequent actions) to transfer the beneficial interest only.
(d) As between Rabobi and the Company, the transfer of the beneficial interest was completed no later than 2004 when book entries were made transferring the interest in Lot 6 out of the Company to Rabobi (Tayeh T. 107/55)
(f) Never at any time did anyone intend to transfer legal title to Lot 6 to both Lambiris and Rabobi (just as never at any time did anyone intend that Lambiris would transfer legal title to Lot 7 to Lambiris and Rabobi) – all that the parties were interested in was the entitlement to the proceeds of sale of Lot 6 had passed out of the company no later than 2004 ((d) above).”(e) At that moment, if not before, there was constituted a perfect trust whereupon Rabobi held that beneficial interest for Lambiris and Rabobi as joint venturers,
58 Dealing with these contentions seriatim:
(a) It was Mr Hughes’ evidence that he and his wife owned the Company and Rabobi (T153.9-14), so I do not think that the first proposition ought be assumed to be made out.
(b) (i) The agreement now asserted is quite different to that which Mr Hughes was asserting through his evidence. In any event, I am not satisfied on the balance of probabilities that any agreement was made by Mr Hughes and Mr Lambiris in July-August 2002 other than that set out in [35] above.
(ii) It follows that I am not satisfied on the balance of probabilities that there was any agreement between Mr Hughes and any other party to transfer the Company’s beneficial interest in Lot 6 to Rabobi.
(iii) If there was any such agreement there was no consideration for it, and it was ineffective by virtue of s 23C of the Conveyancing Act .
(c) I accept that Mr Hughes did consider transferring the benefit of the contract with Caltex to Rabobi in August 2002 but I have found that he decided not to proceed with that. Once again, I am not satisfied, on the balance of probabilities, that Mr Hughes, subsequent to the advice about stamp duty costs, then decided to transfer the beneficial interest in Lot 6 out of the Company to Rabobi. If it was Mr Hughes’ intention to transfer, and that were sufficient absent any recorded decision of the Company to that effect, then no consideration was offered or provided by Rabobi for the transfer, and no legitimate reason has been advanced for it.
(d) The book entries have no validity whatsoever in my view, unless they reflected a genuine transaction and none has been demonstrated by the evidence. They do not sit with accounts signed by the director as at 1 March 2004. Further it was Mr Hughes’ contention that no money was payable by Rabobi (or Lambiris) for the transfer which he asserted.
(e) No “trust” was constituted or perfected by the entry in books for which entry there has been established no basis at law. Mr Hughes knew as at 2004 that DPL was a contingent creditor of the Company. There is insufficient evidence as to when the ATO became a creditor, but that is a matter which would need to have been explored.
(g) Mr Gray spoke of a constructive trust at para 16 of the submissions of 5 April 2006, saying that “It is the name given to the relationship which exists when a vendor has received the consideration for a transfer of an asset but still retains legal title”. Other than a book entry made in 2004, and it would appear after 1 March 2004, there is no evidence of consideration being paid to the Company by Rabobi. Mr Hughes gave no evidence in that connection or as to how the book entry was made, nor did the accountant, save that the instructions on which it was undertaken were given by Mr Hughes. The book entries in 2004, so close in time to the placing of the Company in liquidation, without evidence of actual consideration received, are in my view, no different in character to the deed of 9 September 2002. No funds were provided by Rabobi for the purchase of Lot 6, and substantial monies were borrowed from Suncorp equally by the Company, Rabobi and Lambiris. The demands of justice and good conscience (matters with which constructive trusts have generally been seen as being concerned – see Edmund Davies LJ in Carl Zeiss Stiftung v Herbert Smith & Co (No 2) [1969] 2 Ch 276) all point in the opposite direction to that for which Rabobi and Lambiris contend.(f) Neither the Company, Mr Hughes, nor Rabobi and Lambiris, had a legitimate interest in or after March 2004 in the proceeds “passing out of the Company”. The only interest in such an occurrence, it would seem to me, was to ensure that neither DPL nor any other creditor of the Company, including the ATO, would be able to have access to the funds, leading to the need to consider s 37A of the Conveyancing Act .
59 It follows that in broad terms, the Plaintiff is entitled to orders 1, 2A, 3A, 3B and/or 6F, but with some adjustment required to take into account the need for apportionment of any amount incurred solely by Rabobi and/or Lambiris relating to the development of Lot 6, and adjustments to the amounts due as a result of such apportionment and amounts paid by Rabobi and Lambiris and/or due to be repaid by Rabobi and Lambiris from monies each of those entities have received. The parties should be given an opportunity to agree on the appropriate form of declarations and orders before the matter is re-listed before the Corporations List Judge.
Other matters
60 There are a number of disturbing matters about this case that go beyond the matter between DPL, Lambiris and Rabobi, and they are:
(1) it is clear that purporting to act as director of the Company Mr Hughes dated and signed a document that bore a date he knew to be false;
(2) Mr Lambiris executed a document as director of Lambiris, knowing it falsely described the date of execution and contained reference to Mr Hughes as a director when he no longer had authority as a director;
(3) Mr Hughes lied to the liquidators about the document and presented a false document to them in order to persuade them that something had occurred when it had not;
(5) There is evidence that Mr Hughes set up a new company, DMH, to take over the work in progress and contracts from the Company with no obvious reason emerging other than that the Company was at the time facing a known claim from DPL and possibly a liability for tax, which liability for tax, according to the Company’s accountant, was the reason that liquidation was required. There are book entries that purport to justify removal of assets.(4) There is clear evidence which indicates an attempt by Mr Hughes (aided, it would seem, by Mr Lambiris) to mislead the liquidators in relation to a significant asset of the Company.
61 The activities in relation to the deeds, the evidence concerning transfer of the business of the Company to DMH, and the book entries after 1 March 2004 raise concerns as to whether Mr Hughes has had proper cognisance of his duties as a director both to the Company and to creditors and contingent creditors, not only after liquidation but before. I make no findings beyond those to which I have earlier referred but I think that the whole question of the conduct of Mr Hughes needs to be examined further by the liquidators or ASIC.
62 The liquidators, who were appointed under a voluntary liquidation, chose not to have the Company represented through the case but on 19 April 2006, Mr Clarke of counsel appeared for the liquidators, expressing a concern, following comments of mine at T281.41-46 (and at which point I raised with Mr Donohoe and Mr Gray the question of whether the liquidators should be encouraged to attend) that there may be an adverse finding made against his clients and a costs order. That a costs order might be made against Mr Clarke’s client was foreshadowed by Mr Donohoe on 16 March 2006 at T285, but I made it clear then (and again on 19 April 2006) that no adverse findings or costs orders would be made against the liquidators without them being given an opportunity to be heard. Mr Clarke mentioned that since the liquidators’ conduct was not the focus of the case, there was material relevant to the enquiries made, which has not been put before the Court and which, I accept, may well dissipate the Court’s concerns. This case is not concerned with the liquidators’ conduct but the Court has a general supervisory power in relation to liquidation. I think the matter should be referred to the Corporations List Judge for further consideration of this aspect of the case, and I will raise this matter with counsel when these reasons are published.
63 In addition there is evidence before me that Mr Hughes instructed Mr Peter Stratford, a solicitor and officer of this Court, to prepare documents in August 2004 with a date in September 2002. Mr Stratford was cross-examined before Mr Hughes gave the evidence about the preparation of the document and stated that the 2002 date was a typographical error. Mr Stratford’s explanation seemed most unlikely at the time, and if Mr Hughes was telling the truth on this point then Mr Stratford’s explanation was a false one. A separate point is the question of whether Mr Stratford did know that the Company had been placed in liquidation at the time he took instructions from Mr Hughes purportedly on behalf of the Company. I do not make any findings against Mr Stratford on the issue but I intend to instruct the Registrar of this Court to provide the Office of the Legal Services Commissioner with a copy of this judgment so that it can consider the matter further.
Costs
64 It was agreed that the issue of costs would be left in abeyance, since the Plaintiff may be seeking special costs orders. That matter and any other costs issues should be raised with the Corporations List Judge.
0
2
2