Ejs Developments Pty Ltd v Dunmore Street Pty Ltd

[2021] NSWSC 351

Supreme Court

New South Wales

Medium Neutral Citation:

EJS Developments Pty Ltd v Dunmore Street Pty Ltd [2021] NSWSC 351

Hearing dates:

30 and 31 March 2021

Date of orders:

31 March 2021

Decision date:

08 April 2021

Jurisdiction:

Equity - Duty List

Before:

Kunc J

Decision:

Notice of motion to extend caveat dismissed

Catchwords:

LAND LAW — Caveats — Extension of operation of caveat — Serious question to be tried — No issue of principle

Cases Cited:

Costa and Duppe Properties Pty Ltd v Duppe [1986] VR 90

Category:

Procedural rulings

Parties:

EJS Developments Pty Ltd (Plaintiff)
Dunmore Street Pty Ltd (Defendant)

Representation:

Counsel:

B Leybourne (Solicitor) (Plaintiff)
C Bolger (Defendant)

Solicitors:

Australian Legal and Migration Services (Plaintiff)
Sanford Legal (Defendant)

File Number(s):

2021/76673

Publication restriction:

No

Judgment

Summary

1. The plaintiff, EJS Developments Pty Ltd (EJS), in its capacity as trustee for the Eli Sukkar Family Trust holds five units (equivalent to 23.18%) in the Dunmore Street Unit Trust (the Trust). The defendant, Dunmore Street Pty Ltd (Dunmore St) is the trustee of the Trust, which was established by a deed made on 15 May 2007 (the Deed). The purpose of the Trust was to build a multi-unit residential development in Wentworthville (the Development).

2. The Development has been completed and the Trust is in the process of being wound up by distribution to the unitholders. EJS disputes the distribution proposed to be made to it. It lodged a caveat over certain lots in the Development. Upon receiving a lapsing notice issued by Dunmore St, EJS applied in the Duty List for an order to extend its caveat.

3. I heard the application on 30 and 31 March 2021, at the conclusion of which the Court made these orders:

“1.   The plaintiff’s notice of motion filed 23 March 2021 and prayer 2 of the plaintiff’s summons filed 23 March 2021 are dismissed.

2.   The plaintiff is to pay the defendant’s costs of the plaintiff’s notice of motion filed 23 March 2021.

3.   The proceedings to continue by pleadings.

4.   The plaintiff is to file and serve its statement of claim by 30 April 2021.

5.   The proceedings are listed for further directions before the Registrar on 12 May 2021.”

4. In summary, there were two reasons for these orders. First, EJS was unable to identify a serious question to be tried in relation to any final relief to which it might be entitled. Second, and closely related to the first reason, EJS had unacceptably delayed attempting to identify any legal basis for final relief.

5. Mr B Leybourne, Solicitor, appeared for EJS. Mr C Bolger of Counsel appeared for Dunmore St.

The facts

6. The Trust was established by the Deed in May 2007. The Deed included (emphasis added):

“BACKGROUND

(A)    It is intended by this Deed that the Trustee will accept the monies paid by the unit holders who have signed this Deed which are to be invested under this Deed and the Trustee may from time to time accept further funds or otherwise for investment under this Deed.

(B)   The Trustee agrees to hold the assets of the trust upon the trusts and subject to the terms and conditions of this Deed. …

INITIAL UNITS

2.   (a)   The Trustee intends on or after execution of this Deed to accept from the other party or parties who have executed this Deed such sums of money as are set out opposite their names on the page they have signed and the beneficial interest in the Trust Fund is to be divided into units of $1.00 each and those parties are deemed to be the holders of their respective units and the Trustee may issue to each of those parties who have paid the sum stated opposite their names, certificates in the form annexed or similar form. …

Trustee May Act Despite Personal Conflict of Interest

7.3   (a)   The Trustee is entitled to appointment to any position whatsoever in any company, firm, trust or organisation despite the fact that such appointment will or may cause conflict with the Trustees duties under this Deed.

(b)   Any company, firm, trust or organisation in which the Trustee is in any way interested may deal and enter into contracts with the Trustee provided that the Trustee previously declares the nature of their interest in such company, firm, trust or organisation and in any dealing or contract.

(c)   Inadvertent failure to make such disclosure will not operate to avoid or render voidable any such dealing or contract if such disclosure is made within a reasonable time after the inadvertent omission being discovered.

(d)   The Trustee will not be disqualified from dealing or contracting with itself beneficially and is empowered to enter into contracts with the Trust, despite clause 7.3(b). …”

7. While the land for the Development was purchased in 2007, the Development itself was not completed until October 2019. Dunmore St sold 24 lots in the Development to pay out its financier, the ANZ Bank. There remained 30 lots in the Development, all of which were leased.

8. At a meeting of unitholders in the Trust on 21 December 2019 (which EJS’ principal Mr Eli Sukkar did not attend) the unitholders resolved, among other things, that in certain events (which have transpired) the Trust would be wound up and the residual lots would be distributed in specie to all unitholders proportionately to the value of their interest in the Trust. Moore Stephens, a firm of accountants, were retained to prepare accounts for the winding up of the Trust and to calculate the distribution of lots to unitholders.

9. On 18 April 2020, the unitholders, including EJS, were presented with a distribution table prepared by Moore Stephens (the Distribution Table). Unitholders were invited to raise any issues with Dunmore St within two weeks if they did not agree to the Distribution Table. All unitholders other than EJS have indicated their agreement to the Distribution Table. EJS, for its part, requested further documents and raised a number of issues.

10. There then followed a period of without prejudice negotiations between the legal representatives of Dunmore St and EJS. The parties have been unable to resolve their differences.

11. On 23 September 2020, Dunmore St’s solicitor wrote to EJS’ solicitor:

“We refer to your email dated 10 September 2020 and have not had any further communication from you.

To date, the Trustee has refrained from making the distribution to the Unit holders in accordance with the distributions table resolved at the meeting held on 18 April 2020 (the Distribution).

We are instructed that our client has:

1.    Made all reasonable endeavours to comply with the requests for documents and information by EJS; and

2.   Attempted unsuccessfully to resolve any dispute with EJS.

We are instructed that the trustee will now proceed to making the Distribution.”

12. It was not until 5 March 2021 that EJS lodged the caveat, the subject of the present proceedings, over Lots 4, 35, 37, 39, 42, 44, 46 and 53 (the Caveat). Under the Distribution Table, EJS was allocated lots 18, 32, 39, 42, 46 and 53. There is no dispute between the parties about lots 39, 42, 46 and 53. However, it appears that EJS does not wish to accept lots 18 and 32 but prefers lots 4 and 35. It is in relation to these latter lots that EJS has sought extension of the Caveat.

13. The interest claimed in the Caveat is:

“Estate in Fee Simple

By virtue of: Beneficial Interest In Trust

Details Supporting The Claim: Equitable interest in land as unitholder in Dunmore Street Unit Trust and equitable interest in land pursuant to a constructive and/or an implied or resulting trust arising upon contribution.”

14. In response to Dunmore St’s lapsing notice, on 23 March 2021 EJS approached Robb J sitting as Duty Judge and obtained leave to file a summons, which sought relief including:

“[1] A declaration that the defendant, either personally, as trustee or as a director of the corporate entity with ownership of the relevant properties being lots 4 and 35 of the subject development holds said property on trust for the plaintiff by reason of advances made to the defendant for the development of that site.

[2] Upon the plaintiff by his Counsel giving to the Court the usual undertaking as to damages that the operation of caveats (sic) AP 946442 continue until there is an order of the Court finalizing the matter or the parties resolve the matter.”

15. With the summons, EJS filed a notice of motion which sought relief in identical terms to that set out in the preceding paragraph.

Consideration

16. Mr Leybourne, for EJS, put at the forefront of his submissions that EJS had a proprietary interest in all the assets of the Trust. He pointed to the recitals and clause 2 of the Trust Deed which are reproduced at [6] above, and, in support of the proposition, drew the Court’s attention to the decision of Brooking J in Costa and Duppe Properties Pty Ltd v Duppe [1986] VR 90. In that decision, which considered a trust deed with not dissimilar words to those which I have emphasised at [6], Brooking J concluded that a unitholder under the trust deed in that case had a proprietary estate or interest in each piece of land which was included among the assets of the trust sufficient to support a caveat.

17. For the purposes of dealing with EJS’ extension application I assumed in EJS’ favour, without deciding, that Mr Leybourne’s submission was correct. However, as is well understood, a caveat is no more than a form of injunction to preserve the status quo pending the determination the plaintiff’s claim for some identified final relief. The difficulty for EJS became that it was unable to identify any cause of action for final relief about which it could be shown there was a serious question to be tried. This is the primary reason why the Court refused to extend the Caveat.

18. I accepted Mr Bolger’s submission that EJS was unable to demonstrate any cause of action which would entitle it to relief in relation to lots 4 and 35 in particular. Those lots did not exist at the time the Trust was established and no advances had been made by EJS for the purpose identified in the declaration sought in EJS’s summons and notice of motion. While nothing turns on it for present purposes, I have not overlooked that initially EJS held its units in the Trust for its own benefit absolutely.

19. It was clear that what had occurred was that EJS had purchased units in the Trust and its rights were governed, primarily, by the provisions of the Deed. EJS was unable to point to any particular provision of the Deed which it said had been breached such that it would be entitled to relief consequential, I was prepared to assume, upon the making of a declaration of the kind sought in the summons.

20. When I asked Mr Leybourne what his client’s underlying cause of action was, he indicated that EJS, through Mr Eli Sukkar, held numerous concerns about the way in which the Development had been conducted and how the Trust had been administered. However, Mr Leybourne acknowledged that those concerns were set out in correspondence, none of which was before the Court. In recording this, I of course make no personal criticism of Mr Leybourne, who had to do the best he could with his instructions.

21. One matter which Mr Leybourne said was of great concern to his client was that the company which had undertaken the construction of the Development was controlled by Dunmore St’s director, Mr Joseph Sukkar. However, there are at least two difficulties with this concern if it was said to have any legal significance.

22. First, Mr Leybourne was unable to identify why this could be a breach of trust when clause 7.3 of the Trust Deed was taken into account (see [6] above). Second, he candidly acknowledged that EJS’ principal (Mr Eli Sukkar) had known about the construction company’s connection to Mr Joseph Sukkar since 2017, but had done nothing to raise his concerns at that time and apparently had now only done so relatively recently.

23. This reference to delay is an example of the second reason why the Court refused to extend the Caveat, being EJS’ delay in attempting to ascertain its cause or causes of action.

24. EJS had been given a copy of the Distribution Table in April 2020. In September 2020, it was informed by Dunmore St’s solicitors that the distribution in accordance with the Distribution Table would proceed in that same month. However, when I inquired of Mr Leybourne as to how EJS proposed to contend that it had some entitlement to Lots 4 and 35 instead of those lots which were proposed to be distributed to it under the Distribution Table, Mr Leybourne replied that he was in the process of retaining Senior Counsel to advise on and draft a statement of claim that would articulate the case which EJS might wish to make. There was great force in Mr Bolger’s responsive submission that without being able to identify ultimate relief about which there was a serious question to be tried, EJS should not be permitted to maintain the Caveat and prevent Dunmore St from dealing with the lots in accordance with the Distribution Table while EJS searched for a cause of action.

25. At that point in the argument, I acceded to Mr Leybourne’s application for an adjournment overnight to give him an opportunity to better articulate the case his client wished to make. The next day Mr Leybourne provided the Court and Dunmore St with a proposed amended summons which included:

“[1] Judgment in favour of the plaintiff against the defendant in the amount of the full sale value of the two subject properties.

[2] A declaration that the defendant, either personally, as trustee or as a director of the corporate entity with ownership of the relevant properties being lots 4 and 35 of the subject development, holds said property on trust for the plaintiff, in addition to the 4 properties within the complex already allocated to the plaintiff, by reason of advances made to the defendant for the development of that site. Alternatively, a declaration that the two subject properties stand charged in favour of the plaintiff secure the money claims made by the plaintiff.

[3] The plaintiff holds a proprietary interest in the unit trust Dunmore St Pty Ltd A.C.N. 125391791 to the extent of 23.81% based on 5 units out total of 21 units. The Trustee of Dunmore St Pty Ltd has not distributed the Plaintiffs correct share, and the plaintiff seeks relief for the correct distribution to be made. The Trustee has breached his duty towards unit holders, and mismanaged the Development located at 1 Dunmore St, Wentworthville, to the detriment of the plaintiff.

[3] (sic) Upon the plaintiff by his Counsel giving to the Court the usual undertaking as to damages that the operation of caveats AP 946442 continue until there is an order of the Court finalizing the matter or the parties resolve the matter.”

26. The relief sought in the proposed amended summons did not improve EJS’ position. I accepted these submissions made by Mr Bolger:

1. There was no basis disclosed in the evidence or as a matter of law as to how EJS might be entitled to a judgment in debt as sought in proposed prayer 1 of the amended summons.

2. The amendments in proposed prayer 2 did not resolve the fundamental difficulty already apparent in the summons, namely that EJS (in its predecessor capacity as absolute owner of the units in the Trust) had not made advances to Dunmore St for the purchase of the land for the Development as such, but had purchased units in the Trust with its rights to be determined in accordance with the Deed. No basis was disclosed in the evidence for the “money claims” referred to in the proposed amendments.

3. On the basis of the evidence that had been provided, proposed prayer 3 in the amended summons did no more than make a bare, unsubstantiated allegation. EJS was unable to explain why the distribution to be made to it under the Distribution Table was not its “correct share”, nor could it identify any alleged breaches of duty or mismanagement.

Conclusion

27. Notwithstanding having been given a further opportunity to articulate its case, EJS was not able to do so. EJS therefore failed to make out an entitlement to interlocutory relief in the form of an extension of the Caveat over the two lots which it claimed. Nor did EJS put anything before the Court that could have provided any basis to justify granting even a short extension of the Caveat while a statement of claim was prepared. The Court therefore made the orders set out at [3] above dismissing EJS’ notice of motion and making directions for EJS to file a statement of claim if it wished to do so without the benefit of the Caveat.

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Decision last updated: 08 April 2021