DV Brookwood Pty Ltd v Damjanovski
[2001] VSC 390
•19 October 2001
| IN THE SUPREME COURT OF VICTORIA | Not Restricted | |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
No. 6257 of 2001
| DV BROOKWOOD PTY LTD (ACN 007 192 501) | Plaintiff |
| v | |
| TOME DAMJANOVSKI and others | Defendants |
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JUDGE: | Byrne J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 8 October 2001 | |
DATE OF JUDGMENT: | 19 October 2001 | |
CASE MAY BE CITED AS: | DV Brookwood Pty Ltd v Damjanovski | |
MEDIUM NEUTRAL CITATION: | [2001] VSC 390 | |
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Land – caveat – application for removal – share in land pursuant to express, implied or constructive trust – no serious issue to be tried.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr P.G. Willis | John Branov |
| For the Defendants | Mr P.R. Best | Belleli King & Associates |
HIS HONOUR:
By originating motion filed on 13 June 2001 the plaintiff, DV Brookwood Pty Ltd (“Brookwood”), applied pursuant to s. 90(3) of the Transfer of Land Act 1958 for the removal of two caveats over land situate at and known as 503-523 Melton Highway, Sydenham and being the land more particularly described in Certificate of Title volume 10150 folio 855. The fourthnamed defendant, Menika Lodge Pty Ltd (“Menika”), a company owned and controlled by the first and secondnamed defendants, Tome Damjanovski and his wife Pandora Damjanovski, and which is the trustee of their family trust, is the caveator in each of the caveats which were lodged on 3 October 2001 in dealing X787834C and on 5 October 2001 in dealing X793869R, respectively. The thirdnamed defendant, the Registrar of Titles, as is customary, indicated that he did not intend to appear in the action.
The caveator did not before me seek to maintain the caveat of 3 October 2001. The interest in the land asserted by it in the 5 October caveat, X793869R, is “a beneficial interest to a 43% share pursuant to an express, implied or constructive trust”. The grounds of the claim are as follows:
“By virtue of an agreement made by and between the caveator and the registered proprietor whereby the registered proprietor agreed to grant to the caveator a 43% interest in the undertaking of the caveator and the freehold property.”
In fact, these two caveats are the third and fourth caveats lodged on behalf of the Damjanovskis or interests associated with them over the land.
The events giving rise to the asserted interests date back to early 2000. Brookwood is and at all material times was the trustee of the Paskoski Family Trust and holds the land in that capacity. The moving spirit behind Brookwood appears to have been its director, Drage Paskoski. In his affidavit sworn 6 June 2001 Mr Paskoski says that in late 1999 he was developing the land for use as a reception centre. Funds for the development had been obtained from the Colonial State Bank by a loan of nearly $1M secured by first mortgage over the land, by loans from the directors of Brookwood of about a further $1M and “a contribution from relatives (Mr Lube and Mrs Blage Paskoski jointly) in the amount of $350,000”. He says that the reception centre business conducted on the land is conducted by another company associated with him, Diana Receptions Pty Ltd, under an informal arrangement made with Brookwood.
Mr Damjanovski told me that he is an electrician who became friendly with Mr Paskoski in mid-1999. He said that in September Mr Paskoski asked him for a loan for the reception centre project. The sum of $300,000 was apparently required to complete the development. He says that over the ensuing months Mr Paskoski and he spoke of becoming partners in the reception centre which opened for business on 31 December 1999. Discussions regarding the proposed partnership continued between the two men and their wives and on 24 January 2000 Mr Paskoski said he was in urgent need of $30,000 for the project. The sum was paid, according to Mr Damjanovski, “on the basis that if the partnership proceeded, the sum of $30,000 would form part of our partnership contribution and if it did not proceed then the money would be repaid within three to four months”. On 24 February 2000 a further sum of $70,000 was provided and Mr Damjanovski was made a signatory on the reception business bank account. The agreement between the parties is said by Mr Damjanovski to have been made in February 2000, presumably after this second sum was paid. In paragraph 17 of his affidavit, sworn on 24 July 2001, he describes the making of the agreement as follows:
“17.One evening in February, 2000, we met with Mr. Paskoski’s brother and Mr. Paskoski’s sister-in-law, Blage Paskoski at the reception centre. We held discussions and during those discussions it was confirmed that the arrangements that had been made were that Mr. & Paskoski would have a 43% interest in the freehold, that my wife and myself would have a 43% interest in the freehold and that Mr. Paskoski’s brother would have a 14% interest in the freehold. It was also agreed that myself and my wife would have 50% interest in the business and Mr. & Mrs. Paskoski would have a 50% interest in the business. At the conclusion of the discussions there were congratulations all round. It was at approximately this time that I was also given a key to the premises and we confirmed that the partnership arrangements had been finalised.”
A further $300,000 was paid on or about 3 March taking the total to $400,000. The matter of documenting this agreement was then passed to the solicitors for the respective parties.
In his affidavit sworn 6 June 2001 Mr Paskoski says that the discussions between the parties never advanced beyond mere negotiations. He agrees that the three payments totalling $400,000 were made but said that they were made by Menika. He too says, in paragraphs 11 and 12, that the first two payments were by way of loans repayable in three to four months. But with respect to the third payment, simply that it “was made after Menika stated its intention to proceed with the matter subject to satisfactory documentation”. In paragraph 13 of this affidavit Mr Paskoski says this:
“After discussions and correspondence in February and March 2000, a general framework for agreement was reached by about 21 March 2000, to the effect that Menika Lodge would contribute $1,075,000 in aggregate for a direct or indirect 43% interest in the property and a direct or indirect 50% interest in the reception business. In general terms, the $400,000 advanced by Menika Lodge was to form part of the $1,075,000 payable and Menika Lodge was to assume a liability for existing and new borrowings from the bank in the amount of $675,000.”
It is clear from the correspondence of the following months between the solicitors charged with documenting the arrangement that different legal structures were investigated between March and the end of May. These matters were never resolved because it was on 21 May 2000 that the parties fell out and shortly thereafter Mr Damjanovski ceased attending the reception centre. The correspondence between the solicitors then contains assertions and denials of the existence of any agreement between the parties.
On 14 June 2000 the Damjanovskis lodged the first caveat over the title to the land. It should be noted that the caveators are shown as Mr and Mrs Damjanovski and that they claim an estate in fee simple in the land on the following ground:
“By virtue of an agreement, partly oral and party in writing made by and between the caveators and the registered proprietor as to the sale of a 43% interest in the freehold property which agreement has been part performed.”
On 22 August 2000 Menika and the Damjanovskis commenced a proceeding (No. 2083 of 2000) in the Commercial List of this Court against the Paskoskis, Brookwood, Diana Receptions and Lube Paskoski. They seek various relief including a declaration that Brookwood holds its assets and undertaking including the land on trust as to 43% for Menika. I have been told that the proceeding is no longer in the Commercial List.
In November 2000 the parties were contemplating a mediation of their disputes. The correspondence between their solicitors at this time shows that an amount equal to the sum of $400,000 which I have mentioned, together with a further $3000 paid by Menika to or for Brookwood, was paid to the solicitors for the plaintiffs in the Commercial List proceeding on 16 December 2000. I express myself in this way because it is not altogether clear who was the payor and who the payee and, further, the solicitors are not in agreement as to the nature of the payment. According to the solicitors for the Paskoski interests the sum was a repayment of the amounts paid by Menika in January to March 2000. The solicitors for the Damjanovski’s interests, in their letter of 16 November 2000, assert that they received the money “on account of the various claims made by our clients in the proceeding, but without prejudice in any way to any claim they make”.
In any event, in order to enable the Paskoski interests to raise the money for this payment, it was necessary for the Damjanovskis to remove the first caveat, and this they did. It was, however, replaced by a second caveat lodged on their behalf, again not on behalf of Menika, on 23 November 2000 in dealing X170009X. The nature of the interest claimed and the grounds of the claim are identical to those in the first caveat.
It is this second caveat which was the subject of this application when it was commenced against the Damjanovskis on 13 June 2001.
To complete the story I should record that in January 2001 the reception premises were severely damaged by fire. They have since been reinstated and the business re-opened on 27 May 2001.
On 31 August 2001 Brookwood sold the land to a third party on the basis that settlement will occur upon the payment of the whole of the price on 7 November 2001. The price was $2,325,000 for the land and, pursuant to a collateral agreement with Diana Receptions, for the purchase of certain reception business chattels and for certain pre-bookings for the reception centre.
When the matter was called on before me on 8 October 2001 I was told that the parties were agreed that Menika be added as a fourth defendant and that, in lieu of an order pursuant to s. 90(3) of the Transfer of Land Act 1958 for the removal of the second caveat, the relief sought was directed to the two recently lodged caveats, the third and fourth caveats to which I have referred. Orders by consent to this effect were made. The caveator in each case is the added defendant, Menika. The second caveat had been withdrawn on 3 October 2001 and, as I have mentioned, the third caveat was not pressed. The claimed interest of Menika and the grounds of claim in the fourth caveat are those set out above in paragraph [2].
In an application of this kind I should order the removal of a caveat unless I am satisfied that the caveator has shown a serious issue to be tried as to the existence of the asserted interest. Even where such a serious issue has been demonstrated I may order removal upon terms or otherwise, or refuse this relief, as a matter of discretion.
It will be apparent from my summary of Mr Damjanovski’s version of the agreement that the fourth caveat cannot stand on the facts asserted in his affidavit of 24 July 2001. He does not depose to an interest of Menika nor does his account of the February transaction provide any basis for the interest asserted in the caveat.
Mr Damjanovski has on 4 October 2001 sworn a second affidavit in which he addresses these difficulties. He says in paragraph 3 that the negotiations which he had referred to in his earlier affidavit were “at all times on the basis that Menika would, as the corporate entity of myself and my wife, be the party entering into an agreement with [Brookwood] and would be the party taking an interest in the property and the reception business”.
He develops this in paragraphs 4 and 5 of his affidavit which I set out in full:
“4.I have outlined the negotiations, briefly, in my first affidavit at paragraphs 9 to 19 and in particular paragraph 17. Although I have referred in places to my wife and I having a 43% interest in the property and the business, it was always intended by my wife and I and understood by Mr. Paskoski as indicated by his affidavit, that these interests would be acquired and held by Menika.
5.The essential terms of the agreement between the Plaintiff and the Menika are set out in more detail in paragraphs 11 and 12 of the Statement of Claim in proceeding number 2083 of 2000 (‘the related proceeding’), and the particulars to those paragraphs, which is Exhibit DP6 to the Paskoski affidavit. For the sake of brevity I repeat the paragraphs by reference and confirm that they are true and accurate.”
It is entirely unsatisfactory for a party who bears the burden of establishing an agreement or a trust to seek to do so by adopting the words of a pleader. It is even less so in a case such as the present, where counsel relied upon Mr Damjanovski’s unfamiliarity with English as an explanation for his having sworn an affidavit in July 2001 which is at variance to what he now asserts to be the truth on such an important matter.
I, nevertheless, turn to paragraphs 11 and 12 of the statement of claim in proceeding 2083 of 2000 which have been verified by Mr Damjanovski to determine whether they raise a triable issue as to the existence of the asserted beneficial interest. Paragraph 11 is in the following terms:
“11.By an agreement made on or about 1 March 2000 (‘the agreement’) between Menika Lodge, the Damjanovskis, the Paskoskis, Lube, Brookwood and Diana Receptions and in consideration of:
(a)Menika Lodge paying $400,000.00 to Brookwood as capital to complete the construction of the reception centre;
(b)Lube foregoing repayment of the debt owed to him in the sum of $350,000.00 and agreeing to treat the same as a contribution to Brookwood’s capital;
the Paskoskis agreed inter alia:
(i)to cause Brookwood to grant to Menika Lodge a 43% interest in Brookwood’s assets and undertaking including the land which it held as trustee for the Paskoski Family Trust by an allotment to Menika Lodge 43% of Brookwood’s issued share capital and 43% of the units in a reconstituted trust of which Brookwood would be trustee;
(ii)to cause Brookwood to allot to Lube 14% of the issued share capital of Brookwood on terms entitling him only to a dividend from profits of 10% per annum calculated on the amount of his contribution to capital; and
(iii)to cause Mrs Paskoski to transfer to Mr Damjanovski 50% of the issued share capital of Diana Receptions for a nominal consideration of $1.00;
(iv)to cause one of the Damjanovskis and one of the Paskoskis to be appointed directors of each of:
(x)Brookwood; and
(y)Diana Receptions;”
It will be seen that, on the pleading, the agreed vehicle for Menika to acquire an interest in the land is by the allotment of 43% of Brookwood’s share capital and 43% of the units in a reconstituted trust, the terms of which are not known. An examination of the particulars, which are also verified by Mr Damjanovski and which extend over some four pages in the pleading, does not give me any confidence that the contract as pleaded, at least insofar as it concerns the land, will be made out. There is no mention of the unit trust nor of the transfer of shares in Brookwood.
It is, of course, necessary that the caveator show a triable issue as to the interest claimed. This is a beneficial interest pursuant to an express, implied or constructive trust. I see no such interest in the pleaded agreement. The asserted interest has not been made out even to the modest standard imposed upon a caveator in an application of this kind.
I mention finally, lest it be thought that I have overlooked it, the argument put on behalf of Menika that it had an interest in the land arising from its contributions towards the project in accordance with the principles set out in Baumgartner v Baumgartner[1]. The factual basis for such an interest does not exist here. The contributions, at least those prior to March, were simply loans. Moreover, there is here no element of unconscionability, particularly having regard to the fact that the $400,000 has been repaid and Menika was never called upon to guarantee the bank advances to Brookwood. Finally, this is not the ground asserted in the caveat before me.
[1](1987) 164 CLR 137.
The third and fourth caveats should, therefore, be removed. I propose the following orders:
(1)The thirdnamed defendant do forthwith remove from the register caveat number X787834C lodged on 3 October 2001 and caveat number X793869R lodged on 5 October in respect of Certificate of Title volume 10150 folio 855.
(2)The costs of the plaintiff including reserved costs be paid by the first, second and fourthnamed defendants.
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