Esperance Cattle Company Pty Ltd v Granite Hill Pty Ltd - [2014] WASC 279

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CIVIL

CITATION: ESPERANCE CATTLE COMPANY PTY LTD -v- GRANITE HILL PTY LTD [2014] WASC 279

CORAM: MARTIN CJ

HEARD: 17 FEBRUARY 2014

DELIVERED : 5 AUGUST 2014

FILE NO/S: CIV 1594 of 2013

BETWEEN: ESPERANCE CATTLE COMPANY PTY LTD
Plaintiff
AND
GRANITE HILL PTY LTD
First Defendant
NAVARAC PTY LTD
Second Defendant
MAMMOTH INVESTMENTS PTY LTD
Third Defendant
BOTT LIVESTOCK PTY LTD
Fourth Defendant
BOTT CROPPING PTY LTD
Fifth Defendant
(BY ORIGINAL ACTION)
AND
GRANITE HILL PTY LTD
Plaintiff
AND
ESPERANCE CATTLE COMPANY PTY LTD
First Defendant
NAVARAC PTY LTD
Second Defendant
MAMMOTH INVESTMENTS PTY LTD
Third Defendant
ALLEN BRUCE CARATTI
Fourth Defendant
MADDELEINE CARATTI
Fifth Defendant
(BY COUNTERCLAIM)
AND
GRANITE HILL PTY LTD
Plaintiff
AND
NAVARAC PTY LTD
First-named Third Party
MAMMOTH INVESTMENTS PTY LTD
Second-named Third Party
ALLEN BRUCE CARATTI
Third-named Third Party
MADDELEINE CARATTI
Fourth-named Third Party
(FIRST DEFENDANT'S THIRD PARTY CLAIM)
AND
NAVARAC PTY LTD
First Plaintiff
MAMMOTH INVESTMENTS PTY LTD
Second Plaintiff
MADDELEINE CARATTI
Third Plaintiff
AND
GRANITE HILL PTY LTD
First Defendant
ESPERANCE CATTLE COMPANY PTY LTD
Second Defendant
ALLEN BRUCE CARATTI
Third Defendant
(BY SECOND, THIRD AND FIFTH DEFENDANTS BY COUNTERCLAIM'S COUNTERCLAIM)

Catchwords:

Torts - Trespass - Requirement of occupation or control over land prior to alleged trespass before a claim can be brought for trespass - Meaning of occupation or control - Nature of relief - Nature of award of mesne profits - Whether plaintiff entitled to account of profits

Trusts law - Effect of appointment of new trustee on shares held by previous trustee in that capacity - Whether new trustee member of companies pursuant to shares which are trust property regardless of whether transfers are executed or effective

Corporations law - Effect at law of notation of beneficial shareholding on company register of members - Reference in company register of members to shareholding as beneficial or on trust

Corporations - Management and administration - Directors - Indoor management rule - Person 'having dealings with a company' - Statutory assumptions - Sublease signed by a person not named as a director in records held by ASIC - Whether company can rely on the assumptions

Trade practices - Conduct likely to mislead or deceive - misleading and deceptive conduct in relation to capacity to execute and honour lease

Legislation:

Acts Interpretation Act 1901 (Cth), s 15AA
Australian Consumer Law (WA), s 18
Companies (New South Wales) Code 1981 (NSW), s 68A
Companies and Securities Legislation (Miscellaneous Amendments) Act 1983 (Cth)
Companies Act 1961 (WA), s 140(3)
Companies Act 1981 (Cth), s 68, s 80, s 68A, s 68D
Company Law Review Act 1998 (Cth)
Corporations Act 1989 (Cth), s 164
Corporations Act 2001 (Cth), s 127, s 128, s 129, s 130, s 169, s 231, s 249A, s 250D, s 1071B
Corporations Regulations 2001 (Cth), r 7.11.14, r 7.11.22, sch 2A
Transfer of Land Act 1893 (WA), s 138B
Trustees Act 1972 (WA), s 7(6), s 10

Result:

The lease between Esperance Cattle Company Pty Ltd and Navarac Pty Ltd executed on 10 December 2012 is valid and enforceable, and Esperance Cattle Company Pty Ltd are entitled to an order for possession and a declaration to that effect

Esperance Cattle Company Pty Ltd is entitled to damages for trespass from Granite Hill Pty Ltd, but is not entitled to an account of profits, nor to declaratory relief against Bott Cropping Pty Ltd or Bott Livestock Pty Ltd

Granite Hill Pty Ltd is entitled to assume that Mammoth Investments Pty Ltd duly executed a sublease in its favour, and Mammoth Investments Pty Ltd is prevented from denying that assumption, and Granite Hill Pty Ltd is entitled to declaratory orders to that effect

Granite Hill Pty Ltd is entitled to damages from Mammoth Investments Pty Ltd for breach of the sublease

Granite Hill Pty Ltd is entitled to damages from Mr Allen Caratti for misleading and deceptive conduct

The claim by Granite Hill Pty Ltd against Mammoth Investments Pty Ltd and Ms Maddeleine Caratti for misleading and deceptive conduct is dismissed

Mammoth Investments Pty Ltd is entitled to damages for misleading and deceptive conduct from Mr Allen Caratti

Category: A

Representation:

Original Action

Counsel:

Plaintiff:     Mr D J O'Callaghan QC & Ms H Tiplady
First Defendant              :     Mr J A Thomson SC & Mr J C Yeldon
Second Defendant         :     Mr D R Ryan SC & Ms P M Tantiprasut
Third Defendant            :     Mr D R Ryan SC & Ms P M Tantiprasut
Fourth Defendant           :     Mr J A Thomson SC & Mr J C Yeldon
Fifth Defendant              :     Mr J A Thomson SC & Mr J C Yeldon

Solicitors:

Plaintiff:     Lavan Legal
First Defendant              :     Pacer Legal Pty Ltd
Second Defendant         :     Lemonis & Tantiprasut Lawyers
Third Defendant            :     Lemonis & Tantiprasut Lawyers
Fourth Defendant           :     Pacer Legal Pty Ltd
Fifth Defendant              :     Pacer Legal Pty Ltd

Counterclaim

Counsel:

Plaintiff:     Mr J A Thomson SC & Mr J C Yeldon
First Defendant              :     Mr D J O'Callaghan QC & Ms H Tiplady
Second Defendant         :     Mr D R Ryan SC & Ms P M Tantiprasut
Third Defendant            :     Mr D R Ryan SC & Ms P M Tantiprasut
Fourth Defendant           :     Mr J W K Burnside AO QC & Mr A Metaxas
Fifth Defendant              :     Mr D R Ryan SC & Ms P M Tantiprasut

Solicitors:

Plaintiff:     Pacer Legal Pty Ltd
First Defendant              :     Lavan Legal
Second Defendant         :     Lemonis & Tantiprasut Lawyers
Third Defendant            :     Lemonis & Tantiprasut Lawyers
Fourth Defendant           :     Arthur Metaxas & Co
Fifth Defendant              :     Lemonis & Tantiprasut Lawyers
First Defendant's Third Party Claim
Counsel:
Plaintiff:     Mr J A Thomson SC & Mr J C Yeldon
First-named Third Party       :     Mr D R Ryan SC & Ms P M Tantiprasut
Second-named Third Party   :     Mr D R Ryan SC & Ms P M Tantiprasut
Third-named Third Party     :     Mr J W K Burnside AO QC & Mr A Metaxas
Fourth-named Third Party    :     Mr D R Ryan SC & Ms P M Tantiprasut
Solicitors:
Plaintiff:     Pacer Legal Pty Ltd
First-named Third Party       :     Lemonis & Tantiprasut Lawyers
Second-named Third Party   :     Lemonis & Tantiprasut Lawyers
Third-named Third Party     :     Arthur Metaxas & Co
Fourth-named Third Party    :     Lemonis & Tantiprasut Lawyers
By Second, Third and Fifth Defendants by Counterclaim's Counterclaim
Counsel:
First Plaintiff                  :     Mr D R Ryan SC & Ms P M Tantiprasut
Second Plaintiff             :     Mr D R Ryan SC & Ms P M Tantiprasut
Third Plaintiff                :     Mr D R Ryan SC & Ms P M Tantiprasut
First Defendant              :     Mr J A Thomson SC & Mr J C Yeldon
Second Defendant         :     Mr D J O'Callaghan QC & Ms H Tiplady
Third Defendant            :     Mr J W K Burnside AO QC & Mr A Metaxas
Solicitors:
First Plaintiff                  :     Lemonis & Tantiprasut Lawyers
Second Plaintiff             :     Lemonis & Tantiprasut Lawyers
Third Plaintiff                :     Lemonis & Tantiprasut Lawyers
First Defendant              :     Pacer Legal Pty Ltd
Second Defendant         :     Lavan Legal
Third Defendant            :     Arthur Metaxas & Co

Case(s) referred to in judgment(s):

Ainsworth v Criminal Justice Commission [1992] HCA 10; (1992) 175 CLR 564
Andrews v Hogan [1952] HCA 37; (1952) 86 CLR 223
AON Risk Services Australia Ltd v Australian National University [2009] HCA 27; (2009) 239 CLR 175
Attorney‑General v Blake [2000] UKHL 45; (2001) 1 AC 268
Australia and New Zealand Banking Group Ltd v Frenmast Pty Ltd [2013] NSWCA 459
Australian Capital Television Pty Ltd v Minister for Transport and Communications (1989) 86 ALR 119
Australian Securities and Investments Commission v Hallmark Gold NL [1999] FCA 360; (1999) 30 ACSR 688
Australian Securities Commission v Marlborough Gold Mines Ltd [1993] HCA 15; (1993) 177 CLR 485
Avon Downs Pty Ltd v Federal Commissioner of Taxation [1949] HCA 26; (1949) 78 CLR 353
Barrett v Morgan [2000] 2 AC 264
Broadway Pty Ltd v Lewis [2012] WASC 373
Bunnings Group Ltd v CHEP Australia Ltd [2011] NSWCA 342; (2011) 82 NSWLR 420
Burmine Ltd v Mt Edon Gold Mines (Aust) Ltd (No 2) [1994] FCA 971; (1994) 13 ACSR 60
Canvey Island Commissioners v Preedy [1922] 1 Ch 179
Carpathian Resources Ltd v Hendriks [2011] FCA 41; (2011) 81 ACSR 542
Carr v Western Australia [2007] HCA 47; (2007) 232 CLR 138
Clement v Jones (1909) 8 CLR 133
Codelfa Construction Pty Ltd v State Rail Authority of New South Wales [1982] HCA 24; (1982) 149 CLR 337
Correa v Whittingham [2013] NSWCA 263; (2013) 278 FLR 310
Dalgety Downs Pastoral Co Pty Ltd v Federal Commissioner of Taxation [1952] HCA 54; (1952) 86 CLR 335
Dayeian v Davidson [2010] NSWCA 42; (2010) 76 NSWLR 572
Ebbels v Rewell [1908] VLR 261
Eden Energy Ltd v Drivetrain USA Inc [2012] WASC 192; (2012) 90 ACSR 191
Edwards v Attorney-General [2004] NSWCA 272; (2004) 60 NSWLR 667
Errichetti Holdings Pty Ltd v Western Plaza Hotel Corporation Pty Ltd [2006] WASC 113; (2006) 201 FLR 192
Fischer v Secretary, Department of Families, Housing, Community Services & Indigenous Affairs [2010] FCA 441; (2010) 185 FCR 52
Franklins Pty Ltd v Metcash Trading Ltd [2009] NSWCA 407; (2009) 76 NSWLR 603
Glennon v Federal Commissioner of Taxation [1972] HCA 52; (1972) 127 CLR 503
Hampton v BHP Billiton Minerals Pty Ltd [No 2] [2012] WASC 285
Hemmings v Stoke Poges Golf Club Ltd (1920) 1 KB 720
Hospitality Group Pty Ltd v Australian Rugby Union Ltd [2001] FCA 1040; (2001) FCR 157
Houssein v Under Secretary, Department of Industrial Relations and Technology (NSW) [1982] HCA 2; (1982) 148 CLR 88
Jones v Chapman (1847) 2 Exch 803
Kopilovic v Gatley [2005] WASC 62; (2005) 53 ACSR 64
Kynoch Ltd v Rowlands (1912) 1 Ch 527
LED Builders Pty Ltd v Eagle Homes Pty Ltd (No 3) (1996) 70 FCR 436
Lederberger v Mediterranean Olives Financial Pty Ltd [2012] VSCA 262
Lollis v Loulatzis [2007] VSC 547
Lows v Telford & Westray (1876) 1 App Cas 414
McDermott v Black [1940] HCA 4; (1940) 63 CLR 161
MDN Mortgages Pty Ltd v Caradonna [2010] NSWSC 1298
Minister of State for the Interior v RT Co Pty Ltd [1962] HCA 29; (1962) 107 CLR 1
Ministry of Defence v Ashman (1993) 25 HLR 513
Ministry of Defence v Thompson (1993) 25 HLR 552
Newcastle City Council v GIO General Ltd [1997] HCA 53; (1997) 191 CLR 85
Ocean Accident and Guarantee Corporation v Ilford Gas Co (1905) 2 KB 493
Pacific Carriers Ltd v BNP Paribas [2004] HCA 35; (2004) 218 CLR 451
Pennell v Payne [1995] QB 192
Project Blue Sky Inc v Australian Broadcasting Authority [1998] HCA 28; (1998) 194 CLR 355
PW & Co v Milton Gate Investments Ltd [2004] Ch 142
Royal Botanic Gardens and Domain Trust v South Sydney City Council [2002] HCA 5; (2002) 240 CLR 45
Royal British Bank v Turquand (1856) 6 El & Bl 327; (1856) 119 ER 886
Scaffidi v Perpetual Trustees Victoria Ltd [2011] WASCA 159; (2011) 42 WAR 159
Scott v English [1947] VLR 445
Soyfer v Earlmaze Pty Ltd [2000] NSWSC 1068
Story v Advance Bank Australia Ltd (1993) 31 NSWLR 722
Swan v Rawsthorne (1908) 5 CLR 765
TCN Channel Nine Pty Ltd v Anning [2002] NSWCA 82; (2002) 54 NSWLR 333
Telstra Corporation Ltd v Hurstville City Council [2002] FCAFC 92; (2002) 118 FCR 198
Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165
Toyota Finance Australia Ltd v Dennis [2002] NSWCA 369; (2002) 58 NSWLR 101
Western Export Services Inc v Jireh International Pty Ltd [2011] HCA 45; (2011) 282 ALR 604
Wilson v Kelly [1957] VR 147
Yara Australia Pty Ltd v Oswal [No 2] [2013] WASCA 187

Table of Contents

Summary
The facts

The family
The Family Court proceedings
Zel Nominees Pty Ltd and the Maddeleine Caratti Trust
The transfer of shares to Harvard and Zel
Were the shares transferred to Harvard and Zel as trustees?
Share trading in Zel
Purchase of Young River Station
The Torradup fraud
Another scheme to deceive the bank
The bank's response
Mr John Caratti replaces Zel as trustee of the Maddeleine Caratti Trust
The circulating resolutions removing Mr Allen Caratti as a director, and appointing Mr Aaron Caratti
The advice to NAB

Tosman
The documents lodged with ASIC
The 2002 proceedings
The 2002 annual returns
Attempts to enforce the deed of compromise
Execution of documents on behalf of Caratti group companies
Young River Station - leasing arrangements
The lease of Young River Station to Esperance Cattle, and the sublease of Young River Station from Mammoth to Granite Hill
Alteration of the ASIC records with respect to Mr Allen Caratti's directorships
The telephone call on 1 November 2012
Further dealings with Esperance Cattle
January 2013
February 2013 - the war of words
The battle for possession of Young River Station
The first confirmed sighting of the ABC version of the Granite Hill sublease
More requests for a copy of the Granite Hill sublease
The second instalment of rental
Granite Hill's farming operations at Young River Station
Who executed the ABC version of the lease and when?
The evidence of Ms Maddeleine Caratti
The evidence of Mr Allen Caratti
The evidence of the document analysts
Summary of findings in relation to the ABC version of the Granite Hill sublease

The issues

The pleadings
Esperance Cattle's claim
Granite Hill's defence and counterclaim
The defence of Navarac and Mammoth to Esperance Cattle's claim
Granite Hill's third party proceedings against Mammoth, Navarac, Ms Maddeleine Caratti and Mr Allen Caratti
The defence of Navarac, Mammoth and Ms Maddeleine Caratti to Granite Hill's third party claim
Mr Allen Caratti's defence to Granite Hill's third party proceedings
Mr Allen Caratti's defence to the Navarac parties' counterclaim

Granite Hill's reply to the Navarac parties' defence and defence to the Navarac parties' counterclaim
The directorship of Ms Nicole Caratti
Mr Allen Caratti's unsuccessful attempts to introduce new issues at trial

Issues for determination
Issue 1: was Mr Allen Caratti a director of Mammoth and Navarac between October 2012 and February 2013?

Issue 1(a): were the shares which Zel held in Mammoth, Harvard, Venetian and Tosman held by it as beneficial owner in its own right, or in its capacity as trustee for the Maddeleine Caratti Trust?
Issue 1(b): was the appointment of Mr John Caratti as trustee of the Maddeleine Caratti Trust and the transfer of shares in each of Mammoth, Harvard, Venetian and Tosman to him in that capacity effective to make him a member of each of those companies?
Issue 1(c): even if the shares held by Zel in each of Mammoth, Harvard, Venetian and Tosman were held by it as beneficial owner in its own right, were the transactions which took place on 13 May 2002 nevertheless effective to make Mr John Caratti a member of each of those companies?
Issue 1(d): were the memoranda of circulating resolutions of each of Harvard, Mammoth, Tosman, Venetian and Navarac effective?

Issue 2: is Mr Allen Caratti precluded from challenging the efficacy of his removal as a director of each of Mammoth and Navarac by reason of the deed of compromise made on 26 September 2002?
Issue 3: was the lease to Esperance Cattle validly executed by Navarac?
Issue 4: was the deed of surrender of Mammoth's sublease executed on 22 February 2013 effective?
Issue 5: did Mr Allen Caratti have the general or specific authority of his mother to endorse her name, in her capacity as a director of Mammoth on the GH version of the Granite Hill sublease?
Issue 6: is Granite Hill entitled to make any, and if so, which, of the assumptions to which reference is made in s 128 and s 129 of the Corporations Act, and if so, what is the effect of those assumptions as between Mammoth and Granite Hill on the one hand, and as between Esperance Cattle and Granite Hill on the other?

The assumption
The conditions upon which the assumption may be made
The dealings to which the assumption relates
The legislative history of the provisions
The cases relating to the statutory assumption

Story v Advance Bank Australia Ltd
Soyfer v Earlmaze Pty Ltd
MDN Mortgages Pty Ltd v Caradonna
Errichetti Holdings Pty Ltd v Western Plaza Hotel Corporation Pty Ltd

Issue 8 - is Esperance Cattle entitled to an order for possession?
Issue 9 - did Esperance Cattle take possession of Young River Station on 1 March 2013?
Issue 10 - is Esperance Cattle entitled to mesne profits, or damages, or an account of profits as against Granite Hill and if so what is the appropriate measure of each?

The claim in tort
Damages for trespass - compensatory or restitutionary?
Losses other than the loss of the value of possession
Esperance Cattle's claim for an account of profits

Issue 11 - is Esperance Cattle entitled to declaratory relief against Bott Cropping Pty Ltd and Bott Livestock Pty Ltd?
Issue 12 - are Mammoth and Navarac estopped from denying the efficacy of the Granite Hill sublease?
Issue 13 - is Granite Hill entitled to damages from Mammoth for breach of the Granite Hill sublease?
Issue 14 - is Granite Hill entitled to damages from Mammoth for misleading and deceptive conduct, and if so, what is the appropriate measure of those damages?
Issue 15 - is Granite Hill entitled to damages from Mr Allen Caratti for misleading and deceptive conduct, and if so, what is the appropriate measure of such damages?
Issue 16 - is Granite Hill entitled to damages for misleading and deceptive conduct from Ms Maddeleine Caratti, and if so, what is the appropriate measure of such damages?
Issue 17 - is Mammoth entitled to damages for misleading and deceptive conduct from Mr Allen Caratti and, if so, what is the appropriate measure of such damages?

Summary

MARTIN CJ:

Summary

Young River Station is a rural property situated 90 km west of Esperance. It has a combined area exceeding 7,000 ha and is well suited to mixed farming (cropping and grazing). Each of Esperance Cattle Company Pty Ltd (Esperance Cattle) and Granite Hill Pty Ltd (Granite Hill) claims to be entitled to possession of Young River Station.
Esperance Cattle claims to be entitled to possession by virtue of a lease granted by Navarac Pty Ltd (Navarac). Navarac is the registered proprietor of the land comprising Young River Station. Granite Hill claims to be entitled to possession by virtue of a sublease granted by Mammoth Investments Pty Ltd (Mammoth). Mammoth was the lessee of Young River Station pursuant to a lease granted by Navarac at the time Granite Hill asserts that Mammoth executed a sublease in its favour.
Navarac and Mammoth are both companies controlled by members of the family of the late Sergio (Mick) Caratti. Sergio Caratti was survived by his wife, Maddeleine, and their two sons John and Allen. Since at least 2002 there has been an internecine dispute between the members of the Caratti family with respect to the management and control of the various companies which together comprise the Caratti group, and the very substantial assets owned by the companies within that group. The major protagonists in that dispute are Ms Maddeleine Caratti and Mr John Caratti on the one side, and Mr Allen Caratti on the other.
The events which have given rise to the dispute between Esperance Cattle and Granite Hill are a manifestation of the long‑running battle for control of the companies within the Caratti group. For reasons which will be explained, determination of the competing claims for possession of Young River Station turns to a large extent upon the determination of issues with respect to the entitlement to control of Navarac and Mammoth. Those issues are raised in counterclaims and third party proceedings to which Ms Maddeleine Caratti and Mr Allen Caratti are parties.
There was a contest for physical occupation of Young River Station between representatives of Esperance Cattle and representatives of Granite Hill in the early hours of 1 March 2013. Following that contest, Granite Hill ended up in possession, and Esperance Cattle commenced these proceedings in which it claims an order for possession of Young River Station and, as against Granite Hill, mesne profits or damages or an account of profits.

If Granite Hill is not entitled to possession of Young River Station, it claims damages from Mammoth for breach of the sublease which it claims, and from Mammoth, Mr Allen Caratti and Ms Maddeleine Caratti for misleading and deceptive conduct. Mammoth also claims damages from Mr Allen Caratti for misleading and deceptive conduct.
It was common ground that the competing claims of Esperance Cattle and Granite Hill would be mitigated by the early determination of the question of which of them was entitled to possession of Young River Station, especially if that question could be determined prior to the commencement of the 2014 cropping season. For that reason, a case management timetable was set by reference to a trial taking place in February 2014. At the conclusion of the hearing on 27 February 2014, the parties agreed with my suggestion that I should announce my conclusion with respect to the entitlement to possession of the property for reasons to be published later. Accordingly, on 7 March 2014, I announced my conclusion that Esperance Cattle was entitled to possession of the property, and orders were made to give effect to that conclusion.
My reasons for that conclusion follow, together with the reasons for my conclusion that:
(a)Esperance Cattle is entitled to damages from Granite Hill for trespass, but not to an account of profits;
(b)Granite Hill is entitled to damages from Mammoth for breach of the sublease, and to damages from Mr Allen Caratti for misleading and deceptive conduct;
(c)Granite Hill is not entitled to damages for misleading and deceptive conduct from Mammoth and Ms Maddeleine Caratti;
(d)Mammoth is entitled to damages from Mr Allen Caratti for misleading and deceptive conduct.
A more detailed description of the complex web of issues that required determination in these proceedings depends upon a detailed description of the facts giving rise to those issues. I will commence by setting out my findings of fact. Those findings span events which took place over more than 20 years and are derived from a substantial body of documentary evidence, together with the evidence of various witnesses.
For reasons which I will develop, I have very serious reservations with respect to the testimony given by Ms Maddeleine Caratti and Mr Allen Caratti, and reject their evidence in a number of material respects. However, generally speaking, I have no such reservations with respect to the evidence given by the other witnesses. In particular, the evidence given by Mr John Caratti and Mr Aaron Caratti was, in each case, plausible and generally consistent with the documentary evidence, except for some of the documents filed with the Australian Securities and Investments Commission (ASIC) which I find were prepared and submitted without attention to detail. I accept their evidence generally. Although I found Mr Bott to be somewhat evasive during cross‑examination as to the extent of his knowledge of the difficulties within the Caratti family during February 2013, and in his attempts to explain his repeated failure to provide a copy of the sublease upon which Granite Hill relied despite repeated request, in the result, the incontrovertible documentary evidence with respect to communications which took place during that month provides a quite sufficient basis for any necessary findings with respect to Granite Hill's knowledge at that time, at least for present purposes.

The facts

The family

Sergio (Mick) Caratti and his wife, Maddeleine, had two sons, John and Allen. John Caratti was born in January 1950, and Allen Caratti was born in February 1956. Maddeleine Caratti was born in April 1929 and was almost 85 years old at the time she gave evidence. Sergio Caratti died in May 1992.
Sergio Caratti was a very successful farmer and property developer. He was assisted in the development of his business by his wife and by his sons when they came of age. The family business has been carried on through a series of related corporate entities since at least 1960 when Caratti Holding Co Pty Ltd was incorporated. Since then, related corporate entities have been used to buy and sell farming and other properties throughout Western Australia. During the 1980s and 1990s, various farming properties were acquired near Esperance, using those related corporate entities.

The Family Court proceedings

In 1991, Mr Allen Caratti was involved in contested Family Court proceedings against his ex wife, Ms Marcia Spargo, who was seeking a property settlement. Ms Spargo was endeavouring to establish Mr Allen Caratti's interest in the companies within the Caratti group for the purposes of those proceedings. In early 1991, according to Mr John Caratti, Mr Allen Caratti advised him that he wanted to move 'everything' out of his name in order to protect himself and the group from Ms Spargo's claims. In February 1991, Mr Allen Caratti resigned as a director of Caratti Holding Co Pty Ltd, Harvard Nominees Pty Ltd (Harvard), Mammoth, Robinswood Pty Ltd, Tercon Holdings Pty Ltd, Tosman Pty Ltd (Tosman), and Venetian Nominees Pty Ltd (Venetian), all of which are companies within the Caratti group.

Zel Nominees Pty Ltd and the Maddeleine Caratti Trust

Zel Nominees Pty Ltd (Zel) was incorporated in 1973. In 1991, one of the two issued shares in Zel was transferred to each of Mr Allen Caratti and Mr John Caratti, who have remained its only shareholders at all material times. In 1991, the only directors of Zel were John and Allen Caratti. However, during 1992, according to records filed with the Australian Securities Commission, the composition of the board was altered, such that the only directors were Ms Maddeleine Caratti and Ms Maria Panizza, who is Ms Maddeleine Caratti's mother.
By an undated deed stamped in December 1991 between Ms Maria Panizza and Zel, the Maddeleine Caratti Trust was created. Ms Maddeleine Caratti was, and has at all material times, remained the appointor of the trust. Zel was named as trustee in the trust deed. The appointor of the trust has the power to remove the trustee and appoint another or others in its place. The Maddeleine Caratti Trust is a discretionary trust, in that the trustee has the power to allocate and distribute both income and capital as between the beneficiaries of the trust. The capital beneficiaries of the trust are, and at all material times have been, Mr John Caratti and Mr Allen Caratti.

The transfer of shares to Harvard and Zel

According to Mr John Caratti, during 1991, in the context of the proceedings in the Family Court, Allen stated that he wished to move any shares in companies within the Caratti family group out of his name. However, Allen was concerned that John Caratti might disavow his interest in the companies later on. According to Mr John Caratti, he (John) proposed that shares in the family companies held by either of them should be transferred across to the S Caratti Family Trust and the Maddeleine Caratti Trust, because he and Mr Allen Caratti were both beneficiaries of those trusts. The S Caratti Family Trust was a unit trust, but Mr Allen Caratti and Mr John Caratti were beneficiaries of the trusts which sat underneath the unit holders who were Venetian as trustee of the J M Caratti Family Trust, and Kelena Nominees Pty Ltd as trustee of the M Caratti Trust.
In his first witness statement, which became part of his evidence in chief, Mr Allen Caratti made no reference to these matters, other than to baldly assert that in 1991, when the Maddeleine Caratti Trust was created, he did not transfer any shares to Zel as trustee for that trust. Significantly, he does not deny a transfer to Zel in its own right, as beneficial owner and he expressly pleads that Zel was the beneficial owner of shares which he previously held.
In his second witness statement, in which he responds directly to a number of assertions made in Mr John Caratti's first witness statement, and which also formed part of his evidence in chief, after referring to the relevant paragraphs in Mr John Caratti's statement, Mr Allen Caratti does not deny the conversation asserted by Mr John Caratti in relation to the Family Court proceedings, or endeavour to explain his resignations as a director in 1991, but instead asserts that the share which he owned in Zel was owned by him beneficially and had never been transferred into the Maddeleine Caratti Trust. Plainly, that assertion does not respond directly to the evidence given by John Caratti with respect to their conversation, as the relevant role of Zel was as trustee of the Maddeleine Caratti Trust, and Ms Maddeleine Caratti as appointor had power to remove Zel as trustee if and when she wished. Accordingly, the ownership of shares in Zel is not to the point of the conversation described by Mr John Caratti, which was directed to the ownership of shares in companies which held assets beneficially in their own right.
During cross‑examination, Mr Allen Caratti denied any conversation with his brother relating to moving assets out of his name to protect them from Ms Spargo's claim. However, he admitted that he resigned as a director at the time of her claims in order to distance himself from the companies concerned, and it is clear from other evidence, including his own later admissions, that he was at some pains to conceal his true worth from Ms Spargo, and that he initially succeeded in that objective.
As will be seen, subsequent events relating to the ownership of shares in relevant family companies are entirely consistent with the evidence given by Mr John Caratti with respect to his conversation with his brother, and I accept that evidence, and reject Mr Allen Caratti's evidence on that subject.
Mr John Caratti gave evidence to the effect that at some time after this discussion with Mr Allen Caratti, instruments were prepared and executed which had the effect of transferring shares in Caratti group companies which were held in his name or in the name of Mr Allen Caratti to either Zel, in its capacity as trustee of the Maddeleine Caratti Trust, or to Harvard in its capacity as trustee of the S Caratti Family Trust. Mr John Caratti has searched for those transfer documents but has been unable to find them. He thinks that they may have been provided to Mr Allen Caratti for his use in the Family Court proceedings in which he was engaged, or perhaps kept in a folder in an office occupied by Mr John Caratti at 524 Hay Street, Perth, when he was preparing his defence of criminal proceedings brought against him. When Mr John Caratti was convicted of those offences and incarcerated, that office was cleaned out, and he has not seen the share transfers since that time.
In his second witness statement, Mr Allen Caratti denies Mr John Caratti's evidence to the effect that the shares were transferred to Zel, in its capacity as trustee of the Maddeleine Caratti Trust, and points to the fact that transfer documents having that effect have never been produced. In the context of his pleaded case to the effect the shares were held by Zel beneficially and not as trustee, this evidence must be construed as not denying that the shares were transferred to Zel, but as only denying that they were transferred to Zel in its capacity as trustee of the Maddeleine Caratti Trust.
Mr John Caratti's evidence to the effect that shares in Caratti group companies were transferred by him and Mr Allen Caratti to Harvard and Zel is corroborated by the annual returns for each of Mammoth, Venetian and Tosman filed from 1993 onwards, in which Harvard and Zel are reported as the only shareholders in those companies, whereas Sergio Caratti and John Caratti had been previously reported as the only shareholders in Mammoth and Venetian, and John Caratti and Allen Caratti had previously been reported as the only shareholders in Tosman. The annual returns of Harvard from 1993 onwards reported Ms Maddeleine Caratti and Zel as the only shareholders in that company, in place of Mr Allen Caratti and Mr John Caratti. It is to be remembered that Harvard acted as the trustee of the S Caratti Family Trust. As I have noted, no change was reported in the shareholders of Zel, who have been reported as Mr Allen Caratti and Mr John Caratti at all material times.
There is no evidence to suggest that Mr Allen Caratti made any complaint or demur with respect to the repeated lodgement of annual returns showing Harvard and Zel as the only shareholders in Mammoth, Venetian and Tosman, and Ms Maddeleine Caratti and Zel as the only shareholders in Harvard. This seems most unlikely unless, as I find, he acquiesced in the transfer of the shares. Further and in any event, as he expressly pleads that the shareholdings in each of Mammoth, Venetian, Tosman and Harvard were as depicted in the annual returns of those companies, he cannot be heard to deny that the transfers took place.

Were the shares transferred to Harvard and Zel as trustees?

The annual returns filed with ASIC on behalf of Mammoth, Venetian and Tosman are not consistent with Mr John Caratti's evidence to the effect that the shares were transferred to Harvard and Zel in their capacities as trustees. That is because, in each relevant annual return, in answer to the question 'Are shares beneficially owned? (Y/N)', the letter 'Y' has been placed on the relevant form. Many of the annual returns were signed by Mr John Caratti. His evidence was to the effect that he did not notice that the returns incorrectly asserted that the shares were beneficially owned by the relevant shareholder at the time he signed them. His evidence was that the returns were prepared by an accountant employed by the Caratti group, Mr Isaac Ellison.
Mr Ellison gave evidence in which he confirmed that he was responsible for the preparation of the relevant annual returns. His evidence, which was not challenged, was to the effect that in October 1993 he took the relevant annual returns for that year to Mr John Caratti, who advised that the shareholders in the companies needed to be changed not just because of the passing of the late Mr Sergio Caratti but also 'because Marcia is attacking Allen in the Family Court'. According to Mr Ellison, Mr John Caratti instructed him to cross out the names of the previous shareholders and to write in the names of Zel and Harvard as the shareholders in Mammoth, Tosman and Venetian, and in the case of Harvard, the shareholders were to be Zel and Ms Maddeleine Caratti. According to Mr Ellison, when he asked where the documents relating to the change in shareholding were, and who was transferring shares to whom, he was told not to worry about it, and to just write the new shareholders in. According to Mr Ellison, he specifically asked Mr John Caratti whether Zel and Harvard were to own the shares beneficially, to which he received an affirmative response.
As I have noted, Mr Ellison's evidence, which was given in the form of the tender of a written witness statement, was not challenged. Notwithstanding the lack of challenge to that evidence, I nevertheless entertain a doubt as to his capacity to recall conversations with Mr John Caratti which took place more than 20 years ago in the level of detail reported in his statement, given that the subject matter of those conversations was unlikely to have been of great moment to Mr Ellison. However, it does not seem to me to matter whether or not Mr John Caratti told Mr Ellison to report Harvard and Zel as the beneficial owners of the shares in the relevant companies given that there is no doubt that he signed many annual returns which contain that assertion. That is because I have concluded, for the reasons which follow, that the assertions contained in the annual returns with respect to the beneficial ownership of the shares held by Harvard and Zel in the relevant Caratti group companies, and any direction given by Mr John Caratti to Mr Ellison to prepare the annual returns in that form were a mistake, and did not reflect the true intentions of the parties to the transactions for the transfer of the shares to Harvard and Zel. Those parties were relevantly Mr John Caratti and Mr Allen Caratti in their personal capacities and as agents for the relevant corporate entities (Mammoth, Tosman and Venetian).
There can be no doubt that the purpose of Mr Allen Caratti's resignation as a director of various companies within the Caratti group, and the purpose of the various transactions which resulted in the alterations to the shareholding in relevant companies within that group, was to attempt to shield Mr Allen Caratti, and the companies within the group, from the claims being made by Ms Spargo in the Family Court proceedings involving Mr Allen Caratti. No other possible explanation for those events has been proffered in the evidence or in submissions on behalf of Mr Caratti. Indeed, during cross‑examination, counsel for Mr Allen Caratti put to Mr John Caratti that this was the purpose of the changes in shareholdings in the family group of companies during 1992, and that Mr Sergio Caratti was the instigator of the scheme to protect the companies within the group from claims by Ms Spargo, though he denied this latter proposition.[1]
[1] ts 395.
It seems clear that the attempts to conceal Mr Allen Caratti's worth from Ms Spargo were successful, at least at first. In 1992, she commenced proceedings to set aside the property settlement initially ordered by the Family Court in late 1991 on the ground that Mr Allen Caratti had not fully disclosed his wealth, and in 1995 succeeded in obtaining another order for property settlement, substantially increasing the value of the property which Mr Allen Caratti was ordered to provide to her.
As I will explain below, Mr Allen Caratti asserts that certain steps and transactions which were undertaken in 2002 were invalid because Zel did not own the share which it held in each of Harvard, Mammoth, Venetian and Tosman in its capacity as trustee of the Maddeleine Caratti Trust, but beneficially, in its own right. He relies upon the entries in the annual returns to which I have referred in support of that assertion. However, it is an assertion which would entirely defeat the purpose of the various steps which were taken between 1991 and 1993 in an attempt to defeat Ms Spargo's claim against Mr Allen Caratti and is therefore inconsistent with the intention which should be imputed to the parties to those transactions.
Essentially that is because Mr Allen Caratti has at all material times held one of the two issued shares in Zel. The annual returns for Zel report that he holds that share beneficially and, as I have noted, in his evidence Mr Allen Caratti asserted, 'The share I owned in Zel was owned by me beneficially'. Accordingly, if Zel held a share in each of Mammoth, Venetian and Tosman beneficially, and not as trustee of the Maddeleine Caratti Trust, Mr Allen Caratti would have held, in effect, a beneficial interest in half of that share, through his beneficial interest as the holder of one of the two shares issued in Zel. Further, if the annual returns were correct, and the shares held by Harvard in each of those companies were held by it beneficially, and not in its capacity as trustee of the S Caratti Family Trust, once Zel became the holder of one of the two issued shares in Harvard, Mr Allen Caratti would have held, in effect, a 25% interest in Harvard through his 50% shareholding in Zel. So, if the annual returns were correct, and all the shares held by Harvard and Zel were held beneficially, and not as trustees, Mr Allen Caratti's 50% shareholding in Zel would have given him, in effect, an interest equivalent to 25% in Harvard, and an interest equivalent to 37.5% of each of Mammoth, Venetian and Tosman.
On the other hand, if Mr John Caratti's evidence as to the conversation which he had with Mr Allen Caratti is accepted, and their common intention was to transfer the shares to Harvard in its capacity as trustee of a unit trust in which the units were held ultimately by other trusts in favour of Mr John Caratti and Mr Allen Caratti, and by Zel in its capacity as trustee of a discretionary trust, the beneficiaries of which were Mr John Caratti and Mr Allen Caratti, the objective of depriving Mr Allen Caratti of any immediate beneficial interest, and rendering the achievement of any such interest subject to the exercise of a trustee's discretion in his favour was achieved. Mr Allen Caratti did not have apparent control of either trustee - by 1992 he was not a director Zel and was only one of three directors of Harvard, and by 1993 he was not a director of either Harvard or Zel.

It is significant that Mr Allen Caratti's pleaded case expressly asserts that the shares were held as depicted in the annual returns - including by Harvard and Zel as beneficial owners. However, he provides no evidence as to how or why the shares (some of which were his) were transferred to Harvard and Zel as beneficial owners, nor has any explanation for that course been suggested in submissions on his behalf. His evidence on these issues ultimately comes down to nothing more than a bald denial of John's evidence to the effect that the shares were transferred to Harvard and Zel as trustees, without proffering any evidence as to what actually took place.
During cross‑examination, Mr John Caratti readily accepted that he had previously described the transfer of shares in the family group companies out of Mr Allen Caratti's name as a 'sham' in a statement which he gave to Ms Marcia Spargo's solicitors after she commenced proceedings in the Family Court to reopen the orders made with respect to the settlement of property as between her and Mr Allen Caratti.[2] However, he denied using the word 'sham' in the sense in which it is used by lawyers - that is, to denote a transaction which is not intended to have any effect or an effect different to its terms.[3] What he meant to convey by the word 'sham' was the proposition that despite the transfer of shares to Zel and Harvard, they were still effectively held on behalf of him and Mr Allen Caratti, through their interests as beneficiaries in the trusts which sat under those companies. Although Mr John Caratti accepted in cross‑examination that Mr Allen Caratti was not named as a beneficiary in the deeds of settlement creating the J M Caratti Family Trust and the M Caratti Trust, his evidence was that Mr Allen Caratti was named as a beneficiary by deeds altering the trusts after they were executed.[4] He was not asked when those alterations took place and the evidence does not establish it. In any event, it is clear that Mr Allen Caratti has always been a named beneficiary in the Maddeleine Caratti Trust.
[2] ts 400 ‑ 401.
[3] ts 401.
[4] ts 402.
The evidence given by Mr John Caratti in relation to these matters is plausible, consistent with the undoubted objective of the various steps which were taken in an attempt to defeat Ms Spargo's claim, and is also consistent with such documents as have been adduced in evidence, with the exception of the entries on the annual returns relating to the beneficial ownership of the shares, which I find to be mistaken. I accept his evidence on this subject and reject that given by Mr Allen Caratti.

Share trading in Zel

In that portion of Mr Allen Caratti's witness statement in which he responds to Mr John Caratti's evidence with respect to the transfer of shares to Zel, he asserts that he used Zel to trade shares during the 1990s. In cross‑examination he accepted that his evidence was intended to convey the impression that the shares in which he traded were not held on behalf of the Maddeleine Caratti Trust. He also accepted that he borrowed $638,000 from Leveraged Equities in order to finance the share trading which he undertook through Zel, and that Leveraged Equities took security over the shares acquired with those funds. Mr Allen Caratti also accepted that an accountant from Ernst & Young, who were the accountants for Zel and the Maddeleine Caratti Trust, had informed Leveraged Equities that the shares were held by the trust and not by the company (Zel) in its own right.
The profit and loss account prepared for the Maddeleine Caratti Trust for the year ended 30 June 1993 was tendered in evidence. Those accounts record a secured loan in favour of Leveraged Equities in an amount of $638,850 as one of the non‑current liabilities of the trust.
Also in evidence is a copy of the income tax return lodged on behalf of the Maddeleine Caratti Trust for the financial year ended 30 June 1994. A manuscript addition to that copy of the income tax return records an adjustment to losses for the year ended 30 June 1993 'to reflect transfer to Zel Nominees of Shares (dividends) + Leveraged Equity Account (interest) on advice from client'.
The accounts for the Maddeleine Caratti Trust for the year ended 30 June 1994 were also tendered in evidence. Those accounts show that the secured loan of $638,850 shown in the 1993 accounts for the trust was not recorded in the 1994 accounts. A manuscript addition on the relevant page of the accounts reports, 'this loan transferred to Zel Nominees'.
During cross‑examination, Mr Allen Caratti asserted that the loan to Leveraged Equities, and the share trading should never have been recorded in the accounts of the trust, as those activities were undertaken by Zel in its own right. However, in cross‑examination he accepted that accountants would know the difference between the correction of an error in past accounts, and a transfer of a loan.[5] He also accepted that he had never disclosed an interest in shares in listed companies in the course of his Family Court proceedings with Ms Spargo,[6] consistently with his earlier acceptance of the proposition that it was in his interests to conceal his true financial interests from her. Those concessions support my conclusion that Mr Allen Caratti conducted share trading in 1993 using Zel as trustee of the Maddeleine Caratti Trust with a view to concealing his interest in the shares in which he was trading from Ms Spargo, and that the only reason those arrangements were altered during the financial year ending 30 June 1994 was because the financier of that share trading, Leveraged Equities, discovered from the accountants for the trust that the shares were held in the trust and insisted that the arrangements be changed, in order that Zel could provide good security for the funds advanced, through its interest in the share purchases financed.
[5] ts 676.
[6] ts 677.
This finding of fact significantly reinforces the findings which I have made in relation to the objective of the restructure which was implemented following the discussions between Mr Allen Caratti and Mr John Caratti in 1991, and my rejection of Mr Allen Caratti's evidence to the effect that he did not transfer shares to Zel in its capacity as trustee for the Maddeleine Caratti Trust.

Purchase of Young River Station

In 1995, Navarac purchased Young River Station. As Navarac was incorporated in 1995, it seems a fair inference that it was acquired as a vehicle for the acquisition of Young River Station. Navarac has two issued shares, one of which has been held at all material times by Venetian and the other by Tosman.

The Torradup fraud

In early 2000, farming land adjoining Young River Station known as 'Torradup Farm' became available for purchase. Torradup Nominees Pty Ltd (Torradup) was incorporated by Allen and John Caratti in order to acquire Torradup Farm and to form part of the Caratti group of companies. The directors and shareholders of Torradup were Mr Allen Caratti and Ms Maddeleine Caratti. As Mr John Caratti had by then been convicted of tax offences, he was not permitted to be a company director.
At this time, the National Australia Bank (NAB) was the principal financier to the Caratti group. Banking transactions were conducted through the Perth office of NAB. Mr Allen Caratti was advised by representatives of NAB that the group had reached its lending limit, and that no further funds would be made available unless and until an information memorandum relating to the group had been prepared by a top tier firm of accountants.
Mr Allen Caratti concocted a scheme to circumvent NAB's requirements in conjunction with Mr Viv Jenaway, the manager of the Kewdale branch of NAB. The essence of the scheme involved an advance of around $2 million to Torradup, organised through the Kewdale branch of NAB, while concealing the fact that Torradup was a Caratti group company. For some reason not explained by the evidence, another component of the scheme involved an advance of $600,000 to Mr Kevin Pollock, who was a business acquaintance of Mr Allen Caratti.
Torradup's connection with the Caratti group was concealed by Mr Allen Caratti, who altered the annual return which had been prepared for Torradup to lodge with ASIC by crossing out his own name and the name of his mother as directors and inserting the name of Mr Peter Drayton as sole director, and by completing the form so as to assert that Mr Peter Drayton was the sole owner of the two issued shares in the company. Mr Peter Drayton was a close personal friend of Mr Allen Caratti, who had worked as a farm hand on the Caratti farms. Mr Allen Caratti also prepared, signed and lodged with ASIC another form advising that Mr Drayton had replaced him and his mother as directors of Torradup. At the same time, Mr Allen Caratti prepared a written agreement with Mr Drayton, signed by each of them, which provided a put and call option in relation to the shares in Torradup - pursuant to which Mr Allen Caratti had the right to call for the shares at a price of $1 each, and Mr Drayton had the right to put the shares to Mr Allen Caratti at the same price. The agreement provided that in the event Mr Allen Caratti exercised the call option, a fee of $300,000 would be paid to Mr Drayton. Obviously this was Mr Drayton's reward for participating in the scheme to deceive the bank. Mr Caratti conceded in cross‑examination that the $300,000 to be paid to Mr Drayton was effectively a fee for his services.[7]
[7] ts 681.
Mr Jenaway requested Mr Allen Caratti to provide documents which would establish that Torradup had a sufficient income stream to service the funds which were to be advanced. In order to satisfy that requirement, Mr Allen Caratti photocopied a letter agreement between Mammoth and a third party, YYH Holdings Pty Ltd (YYH), recording an agistment agreement under which YYH would pay Mammoth $260,000 over one year in order to agist stock on Torradup. Mr Allen Caratti altered the photocopy so as to show that the agreement was between YYH and Torradup, not Mammoth, to provide for a term of four years, not one, and to impose the obligation to fertilise the property upon YYH, not Mammoth. The forged letter was provided to NAB.
Plainly, this scheme was both corrupt and dishonest, as was Mr Allen Caratti's involvement in it. However, in cross‑examination and in his responsive statement, Mr Allen Caratti denied that characterisation of the scheme or his conduct and sought to implicate his mother in the scheme, when there is no other evidence to sustain that assertion.[8] Mr Allen Caratti's involvement in this fraudulent scheme, and his denial of its dishonesty under oath are amongst the reasons why I approach all of his evidence with extreme caution.

Another scheme to deceive the bank

[8] ts 686 ‑ 687.

Mr John Caratti gave evidence to the effect that Mr Allen Caratti had also concocted a scheme for the transfer of earthmoving and farming machinery owned by members of the Caratti group to a company apparently controlled by Mr Peter Drayton. The earthmoving equipment was then mortgaged to NAB to secure additional loan funds. In the implementation of this scheme, Mr Allen Caratti sent letters to NAB on the letterhead of Mammoth asserting that contracts had been entered into with Mr Drayton for the hire of the equipment in question which would provide a revenue stream which would enable Mr Drayton to service the loans. According to Mr John Caratti, the letters were false, as the equipment referred to was never owned by Mr Drayton or any company associated with him and was never hired by Mammoth, nor required at the projects referred to in the letters.
As I have noted, Mr Allen Caratti's second written statement responded to a number of the assertions made in, inter alia, Mr John Caratti's first written statement, which contained the evidence of the matters to which I have just referred. Mr Allen Caratti did not respond to those assertions in his responsive statement, nor in his oral evidence, nor was Mr John Caratti's evidence with respect to these matters challenged in cross‑examination. There is therefore no reason why Mr John Caratti's evidence with respect to these matters should not be accepted. This is further evidence of Mr Allen Caratti's dishonesty and provides another reason why I approach all of his evidence with great caution.

The bank's response

In the result, Mr Jenaway committed suicide and the scheme was discovered. In the responsive statement to which I have referred, Mr Allen Caratti asserted that Mr Jenaway was the architect of the Torradup scheme and that it was he who suggested that the documents which were ultimately submitted to NAB be prepared. Mr Allen Caratti also asserted in that statement that the agreement with Mr Drayton for a put and call option was Mr Jenaway's suggestion. Of course, Mr Jenaway is unable to contradict these assertions, which I consider to be inherently implausible, given that it was Mr Allen Caratti who was to obtain the substantial benefits from the scheme, not Mr Jenaway. In his responsive statement, Mr Allen Caratti attempted to diminish his role in the scheme by asserting that, 'Mr Jenaway … was not misled or deceived by any of the documents submitted to him', as if that assertion somehow diminished the deception of NAB, on the basis that Mr Jenaway was an officer of NAB. Mr Allen Caratti's attempt to attribute primary responsibility for this scheme to Mr Jenaway, and to diminish his own role in its propagation are also matters which reflect adversely on his credit.
After Mr Jenaway's death, NAB conducted an investigation into its dealings with the Caratti group which revealed the matters to which I have referred. Unsurprisingly, NAB advised Mr John Caratti that it had decided that in due course it would call up all the facilities it had extended to the Caratti group. Mr John Caratti and his mother then engaged in negotiations with NAB, the thrust of which was to establish that neither had any knowledge or involvement in the fraudulent transactions to which I have referred. At the conclusion of those negotiations, they were advised that NAB would renew its credit facilities to the group but only on condition that Mr Allen Caratti ceased to be a director of relevant companies within the group, and ceased to be a signatory to any of the bank accounts.
That advice was incorporated as a condition of NAB's offer to provide credit facilities to companies within the Caratti group, as evident in a letter from NAB dated 1 May 2002 relating to the facility in favour of Navarac. A specific condition of the approval of that facility was:
Allen Caratti is to step down as a director of all group companies, apart from Tosman Pty Ltd as trustee for the AB Caratti Family Trust No 1., with advice from a legal firm acceptable to the Bank to be provided to the Bank by 15/5/2002. Allen Caratti must not have any signatory capacity in relation to any Group accounts.
Similar conditions were attached to the offer of facilities to other companies within the group.
After receiving the letters from NAB, Ms Maddeleine Caratti and Mr John Caratti asked Mr Allen Caratti to resign as a director of the group companies. He refused. Despite repeated requests that Mr Allen Caratti resign, he remained intransigent and suggested that finance be obtained from another lender.
As a consequence of the position adopted by Mr Allen Caratti, steps were taken to effect his removal as a director from various companies within the Caratti group. As the validity of those steps is at issue in these proceedings, it is necessary to set them out in detail, and in logical sequence.

Mr John Caratti replaces Zel as trustee of the Maddeleine Caratti Trust

As I have noted, Ms Maddeleine Caratti is the appointor of the Maddeleine Caratti Trust, with power to remove and appoint the trustee of that trust. That power was exercised by a deed dated 13 May 2002, executed by Ms Maddeleine Caratti and Mr John Caratti. The effect of the deed was to remove Zel as trustee of the trust, and to appoint Mr John Caratti as trustee of the trust. The deed also purports to convey the legal interest in all the property and assets of the trust from Zel to Mr John Caratti, although it seems doubtful that such a provision was either necessary or effective, because legal title to the assets in the trust would have passed in any event by virtue of the appointment.[9]
[9] Trustees Act 1962 (WA), s 7(6), s10(1); subject to title, in respect of the shares owned, being perfected by amending the register of members: s 10(3); [59].
Forms recording the transfer of one share in each of Harvard, Mammoth, Tosman and Venetian from Zel as trustee of the Maddeleine Caratti Trust to Mr John Caratti as trustee of the Maddeleine Caratti Trust were also executed on 13 May 2002, by Ms Maddeleine Caratti on behalf of Zel as transferor, and Mr John Caratti as transferee. By this time the directors of Zel were Ms Maddeleine Caratti and Mr Allen Caratti. In each form the consideration for the transfer was expressed to be 'Deed made 13 May 2002'.
I digress to observe that s 10 of the Trustees Act 1962 (WA) relevantly provides:
(1)Where a new trustee is appointed, the execution of the instrument of appointment vests, subject to the provisions of this section, the trust property for which the new trustee is appointed in the persons who become and are the trustees, as joint tenants for the purposes of the trust, without any conveyance.
…
(3)Subsections (1) and (2) do not apply -
(a)to land conveyed by way of mortgage for securing money subject to the trust, except land conveyed on trust for securing debentures or debenture stock; or
(b)to any property, including property subject to the operation of the Transfer of Land Act 1893, which is transferable only in books kept by a company or other body or in manner directed by or under an Act of Parliament.
(4)In the case of any property referred to in subsection (3), the execution of the instrument of appointment of a new trustee or of the instrument of discharge, as the case may be, for the purposes of the trust vests in the persons who become and are the trustees or in the continuing trustee, as the case may be, the right to call for a conveyance of the property and to sue for and recover the property.
Although the matter was not debated at any length in the course of argument in this case,[10] it is at least arguable that s 10(3)(b) applies to shares in companies, with the consequence that a written conveyance of the share from Zel to Mr John Caratti was required in order to perfect the transfer of legal title, notwithstanding s 7(6) and s 10(1) of the Trustees Act. There is a contrary argument, deriving from s 1071B(5) of the Corporations Act 2001 (Cth), which provides that s 1071B(2), which prohibits a company from registering a transfer of shares unless a proper instrument of transfer has been delivered to the company, does not prejudice the power of a company to register as the holder of shares a person to whom the right to the shares has devolved by operation of law. In any event, if a written conveyance was required to effect the transfer of legal title in the shares, s 10(4) of the Trustees Act conferred upon Mr John Caratti a right to call for the written conveyance from Zel, and Zel was obliged to execute such a conveyance, either by implication from s 10(4) of the Trustees Act, or by operation of the general law.
[10] See ts 824, 839.
Attached to Mr John Caratti's first witness statement are documents which he describes as true copies of the register of members for each of Mammoth, Harvard, Tosman, Venetian and Navarac as at 13 May 2002. His oral evidence was to the effect that he caused those documents to be prepared.
In the case of Harvard, the document described as 'register of members' records that Zel, in its capacity as trustee for the Maddeleine Caratti Trust, ceased to be the holder of one ordinary share on 13 May 2002, and Mr John Caratti as trustee for the Maddeleine Caratti Trust became the holder of that share with effect from 13 May 2002. The document also records that Ms Maddeleine Caratti remained the holder of one ordinary share.

In the case of each Mammoth, Venetian and Tosman, the documents entitled 'register of members' record that Zel as trustee of the Maddeleine Caratti Trust ceased to be the holder of one ordinary share in the company on 13 May 2002, and that Mr John Caratti as trustee for the Maddeleine Caratti Trust became the holder of that share on that date. In each case, Harvard Nominees is recorded as the holder of the other issued share in the company.
As I have found that the shares held by Zel in each of Harvard, Mammoth, Venetian and Tosman were held in its capacity as trustee of the Maddeleine Caratti Trust, and that the appointor of that trust removed Zel as trustee appointing Mr John Caratti as trustee in its place, and that instruments recording the transfer of the shares from Zel to Mr John Caratti were executed, there is no reason to doubt the accuracy of the documents entitled 'register of members' produced by Mr John Caratti.
In the case of Navarac, the document entitled 'register of members' bears no date, but is said by Mr John Caratti to be a true copy of the register as at 13 May 2002. The document records that Venetian and Tosman each hold one of the two ordinary shares issued in Navarac. There is no reason to doubt the accuracy of this document, which corresponds with Mr Allen Caratti's pleaded case.

The circulating resolutions removing Mr Allen Caratti as a director, and appointing Mr Aaron Caratti

Documents dated 14 May 2002, each described as 'Memorandum of Circulating Resolution signed pursuant to CORPORATIONS ACT 2001 SECT 249A' were executed in respect of each of Harvard, Mammoth, Tosman, Venetian and Navarac. Each document was executed by Mr John Caratti and Ms Maddeleine Caratti, and appears to have been witnessed by Ms Valerie Oddie, who is a neighbour of Ms Maddeleine Caratti, except in the case of Navarac, where the document is executed only by Ms Maddeleine Caratti and also apparently witnessed by Ms Valerie Oddie.
In the case of Harvard, the document records that the sole shareholders of Harvard are Mr John Caratti in his capacity as trustee of the Maddeleine Caratti Trust, he having been appointed to that office by deed made 13 May 2002, and Ms Maddeleine Caratti. The document records unanimous resolutions to the effect that Mr Aaron Caratti (who is one of the sons of John Caratti) be appointed a director of the company, and that Mr Allen Caratti be removed as a director of the company, and that Ms Maddeleine Caratti be appointed as the corporate representative of Harvard, to exercise all of any of its powers at meetings, or relating to resolutions to be passed without meetings, pursuant to s 250D of the Corporations Act.
I digress to observe that it is common ground that the Articles of Association of each company (or in more contemporary terms, the Constitution of each company) empowered the shareholders to remove a director of the company, and to appoint new directors of the company. It is also common ground that the Articles (or Constitution) of each company contain no express provision as to the manner in which the power to appoint a corporate representative conferred by s 250D of the Corporations Act is to be exercised.
In the case of each of Mammoth, Tosman and Venetian, the documents record that the sole shareholders are Mr John Caratti in his capacity as trustee of the Maddeleine Caratti Trust, having been appointed to that office by deed made 13 May 2002, and Harvard, represented by Ms Maddeleine Caratti as its duly appointed corporate representative, by appointment made that day. Each document records resolutions to the effect that Mr Aaron Caratti be appointed as a director of the company, and that Mr Allen Caratti be removed as a director, and that Ms Maddeleine Caratti be appointed as the corporate representative of the company for the purposes of exercising all or any of its powers at meetings or with respect to resolutions to be passed without meetings, pursuant to s 250D of the Corporations Act.
In the case of Navarac, the document records that the only shareholders of the company are Venetian and Tosman, and that Ms Maddeleine Caratti, as authorised representative of each company, has resolved that Mr Aaron Caratti be appointed as a director, and Mr Allen Caratti be removed as a director, and that Ms Maddeleine Caratti is appointed as the corporate representative of Navarac for the purposes of exercising all or any of its powers at meetings or with respect to resolutions to be passed without meetings pursuant to s 250D of the Corporations Act.

The advice to NAB

It will be recalled that NAB required advice from a legal firm acceptable to it confirming Mr Allen Caratti's removal as a director of all group companies (other than Tosman) by 15 May 2002, as a condition of the facilities which were offered on 1 May 2002. In satisfaction of that condition, Davies & Co, solicitors, wrote to each of NAB and Ms Maddeleine Caratti confirming that in their view, the resolutions of various companies within the Caratti group, including Harvard, Tosman, Venetian, Mammoth and Navarac, each made on 14 May 2002, had removed Mr Allen Caratti from the office of director in each company.

Tosman

I digress to observe that the condition of approval required by NAB did not require the removal of Mr Allen Caratti as a director of Tosman, apparently on the basis that Tosman was the trustee of the AB Caratti Trust. However, it is clear that the same steps were taken in relation to his removal from Tosman as were taken in relation to his removal from each other relevant company. In cross‑examination, Mr John Caratti justified that course on the basis that Tosman was a guarantor to the facilities provided by NAB, and NAB refused to deal with Mr Allen Caratti, so he needed to be removed.[11] He denied that the reason Mr Allen Caratti was removed as a director of Tosman was because Tosman was a shareholder in Navarac and Mr Allen Caratti's removal as a director of Tosman was necessary to enable him to be removed as a director of Navarac. I accept Mr John Caratti's evidence in this respect, as it is entirely plausible. Mr Allen Caratti's removal as a director of Navarac was achieved by a written resolution executed by Ms Maddeleine Caratti as the corporate representative of each of Venetian and Tosman. Her appointment as corporate representative of Tosman was secured by resolution of its shareholders who were, at the relevant time Harvard, also represented by Ms Maddeleine Caratti, and Mr John Caratti as trustee of the Maddeleine Caratti Trust. The composition of the board of Tosman had no bearing upon the steps that were taken to remove Mr Allen Caratti as a director of Navarac, as those steps all depended upon the resolution of the members of the relevant companies, not their boards of directors.

The documents lodged with ASIC

[11] ts 399 ‑ 400.

On 17 June 2002, documents were lodged with the ASIC in respect of each relevant company, reporting that Mr Aaron Caratti had commenced as a director, and that Mr Allen Caratti had ceased to hold office as a director, in each case with effect from 14 May 2002. The forms were signed by Ms Maddeleine Caratti.
Mr Allen Caratti did not, and still does not, accept that he had been validly removed from office as a director of the relevant companies within the Caratti group. On 26 July 2002, he took matters into his own hands, and lodged a document with ASIC purporting to record his appointment as a director of Mammoth with effect from 14 May 2002. He signed the document. There is no suggestion that he had the authority of either the board of directors or the shareholders of Mammoth to lodge that document, or that in fact he was appointed as a director of Mammoth on 14 May 2002.
On 5 August 2002, Mr Allen Caratti lodged a similar document with ASIC in relation to Navarac, purporting to record his appointment as a director with effect from 14 May 2002. The document is signed by him. Again, there is no suggestion that Mr Allen Caratti had the authority of either the shareholders or the board of directors of Navarac to lodge that document, or that in fact he was appointed as a director of Navarac on 14 May 2002.
Mr Allen Caratti's actions in lodging documents at ASIC without the authority of the companies in respect of which the documents were lodged, and which falsely assert that he was appointed a director of these companies on 14 May 2002, also reflect adversely on his honesty and credit.

The 2002 proceedings

On 22 August 2002, Mr Allen Caratti commenced proceedings in this court against his mother and Mr Aaron Caratti seeking, amongst other things, declaratory relief to the effect that he remained a director of relevant companies within the Caratti group, who were also named as defendants to those proceedings.
Those proceedings were compromised by a deed executed by Ms Maddeleine Caratti, Mr John Caratti and Mr Allen Caratti on 26 September 2002. As the proper construction and effect of the deed is one of the issues in the case, it is necessary to set out its relevant terms in some detail.
The deed recites that the parties either jointly or severally control various entities including Harvard, Mammoth, Navarac, Tosman and Venetian, each of which are given a number between one and seventeen in the clause of the deed entitled 'Background'.
The operative terms of the deed record Ms Maddeleine Caratti's covenant to appoint John and Allen Caratti jointly to be joint appointors of any trust of which she is appointor with effect from her death, and another covenant by her to make a will bequeathing any assets other than personal effects to John and Allen Caratti in equal shares. The deed includes a further covenant by Ms Maddeleine Caratti to exercise any powers she has a director or shareholder of any of the corporations named in the document so as to further the terms of the agreement.
Relevant clauses of the agreement include the following:
4.The shareholdings in all corporations 1‑13 above will be adjusted so that Allen Caratti and John Caratti will hold equal beneficial interests.
5.Allen Caratti will be entitled to nominate a person to act as a director of each of:
5.1Caratti Holdings
5.2 Jamesway
5.3Navarac
5.4Mammoth
5.5Harvard
5.6Venetian
…
7.Maddeleine Caratti's interests in the corporations 1‑13 shall by her will pass to John Caratti and Allen Caratti jointly.
8.In corporations 1‑9 above, there shall be 2 directors only, 1 appointed by Allen Caratti and 1 by the other shareholders. There will be no other directors to those corporations without the unanimous approval of John Caratti and Allen Caratti. In corporations 10, 11 and 12, Allen Caratti presently acts as sole director and he shall continue as sole director. No chairman of directors or members meetings shall have a casting vote. There will be no coram without 2 directors.
…
10.On John Caratti attaining the age of 60 years all beneficial interests of John Caratti and Allen Caratti will be divided equally between them in specie with cash adjustment as necessary.
…
12.All powers of corporations named above and parties as trustees or appointors of any trusts will be used so that beneficial entitlements are equalised as between Allen Caratti and John Caratti or the children of Allen Caratti and the children of John Caratti as the case may be.
13.All powers to acts [sic] as trustees or appointors will if exercisable by Allen Caratti or John Caratti alone be amended so as to be exercisable by them or their nominees jointly.
14.No new entities will be incorporated by the parties without them incorporating equality of beneficial interests.
15.[Rural Bank] will be advised that Allen Caratti is chief executive of:
15.1Mammoth
15.2Navarac
16.Allen Caratti will be the only authorised account signatory with [Rural Bank]. Maddeleine Caratti and John Caratti will each be authorised signatories to National Australia Bank accounts of the corporations.
17.This agreement is binding notwithstanding that parties contemplate there may be further documents to implement its terms.
18.Supreme Court action CIV 2188 of 2002 will be discontinued with no order as to cost.

The 2002 annual returns

The 2002 annual returns for each of Harvard, Mammoth, Venetian and Tosman were all lodged in November 2002. Relevant entries in the returns appear to have been written in hand by Mr Isaac Ellison. However, although Mr Ellison was called, he gave no evidence as to the circumstances in which those entries were made. The returns do not reflect the transfer of the share in each company from Zel to Mr John Caratti, and report Zel as a shareholder in each company. The returns continue to erroneously report Harvard and Zel as beneficial owners of the shares held in Mammoth, Venetian and Tosman. The returns appear to reflect the state of the records maintained at ASIC with respect to the directors of each company, and report Ms Maddeleine Caratti, Mr Aaron Caratti and Mr Allen Caratti as directors of each of Mammoth, Venetian and Tosman, and Ms Maddeleine Caratti and Mr Aaron Caratti as the directors of Harvard. However, there is no evidence to suggest that any action was taken to appoint Mr Allen Caratti as a director of Mammoth, Venetian or Tosman following his removal on 14 May 2002. The evidence generally leads me to the conclusion that the members of the Caratti family were less than punctilious in ensuring the accuracy of the information provided in the annual returns of the many companies within the Caratti group.

Attempts to enforce the deed of compromise

The evidence does not disclose what, if anything, occurred following the execution of the deed of compromise in September 2002. The evidence to which I will now refer gives rise to an inference, and I find, that nothing occurred with respect to the implementation of the 2002 deed, and in particular, neither Ms Maddeleine Caratti, nor Mr Aaron Caratti resigned as directors of any companies within the Caratti group. Nor does the evidence provide any reason for the apparent failure to take any immediate action to implement the settlement agreement.
By letter dated 15 March 2004, Mr Allen Caratti wrote to his mother and his brother referring to the compromise agreement made in September 2002, and enclosing a copy of that agreement. The letter asserts:
3.I now propose to implement the terms of our agreement by securing:
3.1the appointment of Jeremy Birman as my nominee as a director of the various companies;
3.2the removal of other directors so that there will be two directors only;
3.3allocation of shares to achieve equality as between John and me.
The letter then contains a detailed series of instructions with respect to the steps to be taken in each company which were said to effect implementation of the deed. Relevantly to these proceedings, the letter proposed that Mr Aaron Caratti should resign as a director of each of Harvard, Mammoth, Navarac, Tosman and Venetian, and that Mr Jeremy Birman should be appointed as a director of each. The letter also proposed that share transfers should occur to secure the result that Mr John Caratti and Mr Allen Caratti each held one of the two issued shares in those companies.
On 30 March 2004, solicitors acting on behalf of Mr Allen Caratti wrote to Ms Maddeleine Caratti demanding that she comply with the requests made in his letter of 15 March 2004. The letter foreshadowed convening extraordinary general meetings of the various companies in order to remove Mr Aaron Caratti as a director if he did not resign voluntarily. The letter also foreshadowed the commencement of proceedings if the steps demanded were not taken within seven days of the date of the letter.
On 6 April 2004, solicitors acting on behalf of Mr Allen Caratti wrote to Mr John Caratti referring to Mr Allen Caratti's letter of 15 March 2004 and demanding that Mr John Caratti take such steps as were within his power to give effect to the terms of the deed of compromise. A copy of the letter to Ms Maddeleine Caratti was enclosed with that letter.
On 22 April 2004, Mr Allen Caratti commenced proceedings in this court against his brother, his mother, Mr Aaron Caratti, and named various companies within the Caratti group, including all companies relevant to these proceedings as additional defendants. In a statement of claim endorsed on the writ, the deed of compromise dated 26 September 2002 was pleaded, together with the correspondence in March and April 2004 demanding implementation of that deed. The relief sought included specific performance of the deed of compromise and various mandatory injunctions requiring the parties to take various steps which were said to implement the deed of compromise.
In May 2004, Mr Allen Caratti issued a chambers summons in the proceedings to which I have referred, seeking interlocutory injunctive relief including an order restraining Mr John Caratti from acting as a director of any of the companies in the group (relying upon his conviction and subsequent disqualification from acting as a director for a period of five years following conviction), and seeking the appointment of Mr Jeremy Birman as a director of each of the companies in the group.
The evidence does not establish what, if anything, occurred in these proceedings, or how they were resolved, but it seems clear that Mr Jeremy Birman was never appointed as a director of any of the companies within the Caratti group.
On 6 September 2005, Ms Maddeleine Caratti wrote to ASIC on the letterhead of Mammoth, and in her capacity as company secretary of both Mammoth and Tosman. In the letter she asserts:
Allen Bruce Caratti, a family member who is not but often pretends to be a director of the company Mammoth Investments Pty Ltd has apparently lodged false forms with respect to the appointment of his daughter Nicole to the board of both companies.
This has been done without any consultation with the directors and without any proper meetings being held or resolutions to either make or ratify any such appointment being passed.
…
We have only just become aware of this and have reported it promptly.
…
The documents have been falsely lodged and we believe that this constitutes an offence under the regulations.
The evidence does not establish what, if anything, occurred as a consequence of this letter.

Execution of documents on behalf of Caratti group companies

Mr Allen Caratti has produced and tendered in evidence 57 documents bearing dates between 14 June 2002 and 19 March 2010 which appear to have been executed by him and his mother purportedly in their capacity as directors of one or more of Mammoth, Harvard, Tosman, Navarac, Venetian and Zel.
It is clear that from time to time Mr Allen Caratti simulated his mother's signature in documents purportedly executed by Caratti group companies. Mr Allen Caratti admitted as much. It will be necessary to review the evidence on that topic in detail as a result of the controversy relating to the execution of the two versions of the sublease from Mammoth to Granite Hill. For present purposes it is sufficient to note that without detailed inquiry and investigation, it is impossible to know which of the 57 documents produced by Mr Allen Caratti were in fact signed by him and his mother, and which were signed only by him, by applying his signature and simulating his mother's signature at the appropriate point in the document.
It is, however, clear that a significant number of these documents were in fact signed by Ms Maddeleine Caratti and Mr Allen Caratti purporting to act in their capacities as directors of the various groups within the Caratti group, including the companies relevant to these proceedings. By at least 2004, issues had arisen with respect to the authenticity of Ms Maddeleine Caratti's signature on company documents. I infer that those issues had arisen as a result of Mr Allen Caratti's practice of simulating his mother's signature on company documents from time to time. These issues had become known to those dealing with the Caratti group, including the financiers to that group. As a consequence, some of the parties dealing with the Caratti group required documents that were to be executed by Ms Maddeleine Caratti on behalf of a company within the group to be signed by her in the presence of a solicitor who would then attest to her execution of the document.

Consistently with this approach, it is sufficient at this stage of these proceedings to rule that any and all losses suffered by Esperance Cattle which are established to be the natural and probable consequence of Granite Hill's trespass are recoverable as and by way of damages. Of course those losses will have to be quantified by reference to the net loss caused by dispossession. So, to take an example, Esperance Cattle's claim for the costs incurred agisting stock which could not be placed on Young River Station will have to be quantified taking account of the fact that Esperance Cattle would have had to pay rental in order to graze that stock on Young River. So, the net loss suffered by reason of dispossession would be assessed by reference to the difference between the cost of agisting the stock on property owned by others, and the cost of grazing the stock on Young River Station.

Esperance Cattle's claim for an account of profits

Esperance Cattle claims, in the alternative to its claim for damages, an account of the profits earned by Granite Hill during its unlawful occupation of Young River Station. Esperance Cattle accepts that it cannot receive an account of profits in addition to damages for trespass, and that the two are alternative rather than cumulative remedies, but also asserts that it is entitled to elect the alternative which it wishes to pursue after all the evidence is in, including the evidence relating to quantum.[137]
[137] Relying upon LED Builders Pty Ltd v Eagle Homes Pty Ltd (No 3) (1996) 70 FCR 436.
Esperance Cattle does not contend that an account of profits is a remedy ordinarily granted in respect of trespass. Indeed, it cites no case in which an account of profits has been ordered in an action for trespass. Rather, it places reliance upon general principles pertaining to unjust enrichment and claims an entitlement to an account of profit pursuant to those general principles.
Although the House of Lords has recognised the availability of an account of profits as a possible remedy for breach of contract,[138] it recognised that such a remedy would only be appropriate in exceptional circumstances.[139] Esperance Cattle has not cited any authority to the effect that an account of profits has been recognised as a remedy available in tort, and, of course, Esperance Cattle's claim is essentially a claim in tort. The grant of such a remedy in tort would appear to be inconsistent with the general principles underpinning the award of damages for tort, which are directed to compensating the plaintiff for the loss suffered because of the commission of the tort. According to those principles, the fact that the tortfeasor may have derived a benefit from the commission of the tort is irrelevant to the plaintiff's remedy, which is assessed by reference to the plaintiff's loss, rather than the defendant's gain.[140]
[138] Attorney‑General v Blake [2000] UKHL 45; (2001) 1 AC 268.
[139] Attorney‑General v Blake (285) (Nicholls LJ).
[140] Hospitality Group Pty Ltd v Australian Rugby Union Ltd [2001] FCA 1040; (2001) FCR 157 [159] ‑ [162] (Emmett J).
However, it may be that torts relating to the misuse of the property of another, such as trespass or conversion, constitute an exception to this general principle. As I have noted, the authorities relating to the assessment of damages for trespass acknowledge that, in some circumstances, a restitutionary approach may be appropriate, under which account may be taken of the value derived by the defendant from the commission of the tort. However, even in those cases, the award is one of damages assessed by reference to the benefit derived by the defendant, not an account of profits.
As I have noted, Esperance Cattle's claim for an account of profits proceeds by reference to an assertion that if Granite Hill is not ordered to account for profits which it has made by its unlawful occupation of Young River Station, it will thereby be 'unjustly enriched'. The question posed by that plea is whether Granite Hill would be unjustly enriched unless it was required to disgorge to Esperance Cattle any profits which it derived from its occupation of Young River Station. In the circumstances of this case, any such profits were derived by Granite Hill as a result of its reliance upon the validity of a sublease which I have found was forged by Mr Allen Caratti, unbeknown to Granite Hill. Any such profits will also have been derived from its investment of capital and the application of Granite Hill's skill, labour and resources to the conduct of farming operations on the property. On the other hand, I have held that Esperance Cattle is entitled to damages which will include any and all losses which it has suffered which are the natural and probable consequence of Granite Hill's trespass, including losses flowing from Esperance Cattle's inability to remain in possession of the property after 1 March 2013.
Presumably Esperance Cattle would only elect an account of profits if the amount to be derived from such a election exceeded the damages recoverable from Granite Hill, to be assessed as I have proposed. In such a circumstance, allowing Esperance Cattle to elect an account of profits would have the potential to confer upon it a windfall gain in excess of its losses, and to unjustly deprive Granite Hill of profit derived from the application of its capital and labour. For that reason I conclude that, at least in the circumstances of this case, Granite Hill would not be unjustly enriched by its retention of any profits derived from the farming operations conducted on Young River Station during the period it was in occupation of the property, given its obligation to pay damages to Esperance Cattle which will compensate Esperance Cattle for all losses which it suffered as the natural and probable consequence of Granite Hill's trespass.
So for these reasons, Esperance Cattle is entitled to damages from Granite Hill to be assessed by reference to any loss which Esperance Cattle has suffered as the natural and probable consequence of Granite Hill's trespass. However, Esperance Cattle is not entitled to an account of Granite Hill's profits.

Issue 11 - is Esperance Cattle entitled to declaratory relief against Bott Cropping Pty Ltd and Bott Livestock Pty Ltd?

There are two reasons why Esperance Cattle is not entitled to declaratory relief as against Bott Cropping Pty Ltd and Bott Livestock Pty Ltd. The first is that I have found that Esperance Cattle is not entitled to an account of profits from Granite Hill, so that the grant of declaratory relief would be of no assistance or utility to Esperance Cattle. The second reason is that on the evidence, there has never been any controversy as to the obligation of Bott Cropping Pty Ltd and Bott Livestock Pty Ltd to account to Granite Hill for any profit derived from their activities on Young River Station. Accordingly, there is no live controversy sufficient to justify the grant of declaratory relief.

Issue 12 - are Mammoth and Navarac estopped from denying the efficacy of the Granite Hill sublease?

Granite Hill pleads that each of Mammoth and Navarac are estopped from denying the validity of the Granite Hill sublease by reason of:
(a)Mammoth admitting that Granite Hill paid $357,500 to it on or about 25 February 2013;
(b)Mammoth having been aware since about 2 November 2012 that Granite Hill claimed that it had entered into a sublease, and that Granite Hill was acting in reliance upon that sublease;
(c)Mammoth retaining the amount of $357,500 without offering to repay it;
(d)Mammoth sending a tax invoice to Granite Hill dated 29 July 2013 claiming a further rental payment for Young River Station;
(e)Mammoth not taking any step to require Granite Hill to vacate the property prior to 31 July 2013;
(f)Navarac and Mammoth having common directors with the result that the directors of Navarac have at all material times been aware of the matters upon which Granite Hill relies as against Mammoth; and
(g)Navarac not taking any steps to require Granite Hill to vacate the property until 31 July 2013.
However, in closing submissions a rather narrower case was advanced, focusing largely upon Mammoth's acceptance of the rent paid by Granite Hill on 25 February 2013. Granite Hill accepts that if, by this time, Mammoth had effectively surrendered its interest as lessee to Navarac, the estoppel which it asserts could not create a proprietary interest as Mammoth had no capacity to create such an interest. In that circumstance, Granite Hill accepts that the most that could be created by the estoppel which it asserts is a contractual claim to damages against Mammoth for breach of the sublease.
I have found that Mammoth effectively surrendered its interest as lessee to Navarac by the deed which was executed on 22 February 2013. I have also found that in these proceedings Granite Hill is entitled to rely upon the due execution of the GH version of the sublease, and that Mammoth cannot deny the execution of that document. It follows that Granite Hill is entitled to damages from Mammoth for breach of the sublease in any event, and that the estoppel argument which it asserts is otiose. However, for the sake of completeness I will briefly express my reasons for concluding that neither Mammoth nor Navarac are estopped from denying the Granite Hill sublease (except, in the case of Mammoth, by reason of s 128(1) of the Corporations Act).
Neither Mammoth, nor Navarac made any representation to Granite Hill to the effect that Granite Hill had a valid sublease of Young River Station. To the contrary, Mr John Caratti repeatedly requested Mr Bott to verify his claim to a sublease, and by at least mid February, Mr Aaron Caratti and Ms Maddeleine Caratti had authorised solicitors acting on behalf of Esperance Cattle to expressly deny that Granite Hill had any proprietary interest in Young River Station. Although money was paid into Mammoth's bank account on 25 February 2013, Mr Bott was then aware that the account was under the control of Mr Allen Caratti. Two days later, on 27 February 2013, the directors of Navarac again authorised the solicitor acting on behalf of Esperance Cattle to advise Granite Hill that any claim by it to a proprietary interest in Young River Station was denied.
Granite Hill took possession of Young River Station in the knowledge that the registered proprietor of the property denied its claimed interest. Although the directors of Mammoth, Mr Aaron Caratti and Ms Maddeleine Caratti, became aware that funds had been paid into its bank account by Granite Hill some time after the funds had been received, as a result of seeing the bank statement for that account, and took no action to reimburse the funds, in the circumstances the failure to offer to return the funds cannot have induced a reasonable belief on the part of Granite Hill to the effect that either Mammoth or Navarac accepted the validity of its sublease. Further, later that year when Mr Allen Caratti caused an invoice to be sent claiming the second instalment of rental due under the sublease to Granite Hill, before any funds were tendered in response to that invoice, each of Mammoth and Navarac filed pleadings in these proceedings in which it was made abundantly clear that they disputed the validity of the Granite Hill sublease and denied Mr Allen Caratti's authority to act on behalf of either company.
Having regard to the findings of fact which I have made, neither Mammoth nor Navarac made any representation to Granite Hill to the effect that the sublease upon which it relied was valid. Nor could it be said that either company stood by, taking no action, in the knowledge that Granite Hill was acting in reliance upon its assumption that it had a valid sublease, such that it would be inequitable for either company to resile from the assumption which Granite Hill had made. To the contrary, during February 2013, Navarac's directors, who are, of course, the same as Mammoth's directors, expressly authorised the solicitor acting on behalf of Esperance Cattle to advise Granite Hill that the interest which it claimed in Young River Station was denied. In those circumstances, apart from the statutory assumption of due execution of the Granite Hill sublease which Mammoth is prevented from denying, neither Mammoth nor Navarac are estopped from denying the validity of the Granite Hill sublease.

Issue 13 - is Granite Hill entitled to damages from Mammoth for breach of the Granite Hill sublease?

It follows from my conclusion that Granite Hill is entitled to rely upon the assumption of due execution of the GH version of the Granite Hill sublease that it is entitled to damages from Mammoth for breach of that sublease. The conventional measure of damages will apply to the quantification of that claim, with the result that Granite Hill will be entitled to damages from Mammoth equal to the amount required to put Granite Hill in the position it would have been in if the Granite Hill sublease had been performed and it had been entitled to possession of Young River Station in accordance with the terms of that sublease.

Issue 14 - is Granite Hill entitled to damages from Mammoth for misleading and deceptive conduct, and if so, what is the appropriate measure of those damages?

As I have noted, Granite Hill's claim against Mammoth for misleading and deceptive conduct is cast narrowly. Granite Hill pleads that by executing the sublease in its favour and by accepting rent paid under the sublease, Mammoth represented to it that it had no present intention to cause the determination of its estate in the subleased property, nor would it cause the determination of that estate at any time in the future.
There are a number of reasons why this claim must fail. First, although s 128 of the Corporations Act prevents Mammoth from denying its execution of the GH version of the sublease, that is the only fact which Mammoth is prevented from denying by operation of that section. Mere execution of the sublease does not give rise to any representation as to Mammoth's intention with respect to its interest as lessee, given that the consensual termination of that interest would have had no effect upon the validity of the sublease, consistently with the principles enunciated in Pennell v Payne and PW & Co v Milton Gate Investments Ltd.[141] Second, by the time Granite Hill paid the amount tendered in respect of rent into Mammoth's bank account, it was aware that the validity of its sublease was disputed by the registered proprietor of the land, and that the bank account into which the funds were paid was under the control of Mr Allen Caratti. The only actions of Mammoth which could be said to have given rise to any representation to Granite Hill in respect of that payment was its failure to offer to repay those funds, but by then Granite Hill was well and truly aware that the validity of its interest in the land was disputed, as a result of the email which was sent on 27 February 2013, with the authority of Navarac, and by reason of the confrontation which took place on the property on the morning of 1 March 2013, together with the correspondence that was exchanged in the weeks that followed.
[141] [286].
The conduct upon which Granite Hill relies did not give rise to the representations asserted and this aspect of Granite Hill's claim must be dismissed.

Issue 15 - is Granite Hill entitled to damages from Mr Allen Caratti for misleading and deceptive conduct, and if so, what is the appropriate measure of such damages?

As I have noted, Granite Hill claims that by executing the sublease in its favour, Mr Allen Caratti represented, in trade or commerce, that he was a director of Mammoth, that he was authorised to sign on behalf of Mammoth, that by his signature he was binding Mammoth to the terms of the sublease and that the sublease would take effect and would bind Mammoth. Granite Hill further asserts that by providing the GH version of the sublease to it, Mr Allen Caratti represented that the lease had been signed by the signatories who appeared on the face of the lease.
In his defence Mr Allen Caratti admits the representations alleged by Granite Hill, and, in the case of the representation relating to the execution of the GH version of the sublease, admits that it was misleading or deceptive. Although he denies the misleading and deceptive character of the representations made with respect to his capacity to act on behalf of Mammoth, it follows from the findings I have made that those representations were also misleading and deceptive. I make that finding notwithstanding my conclusion that Granite Hill is entitled to rely on the statutory assumption of due execution by Mammoth because, as I have also found, the benefit of that statutory assumption is not equivalent to actual execution by Mammoth, which was the representation effectively made by Mr Allen Caratti.
There is no doubt that the representations attributed to Mr Allen Caratti were made by him in trade or commerce. Nor is there any doubt that Granite Hill acted in reliance upon those representations. The precise extent of Granite Hill's reliance upon those representations will be a matter to be determined in the course of the quantification of its claim for damages, if it pursues that claim having regard to its entitlement to damages from Mammoth in an amount equivalent to the amount required to put it in the position it would have been in had the sublease been performed. If it does wish to pursue its claim for damages against Mr Allen Caratti for misleading and deceptive conduct, the conventional measure will apply to the quantification of those damages, which will be assessed by reference to the amount required to put Granite Hill in the position in which it would have been if Mr Allen Caratti had not engaged in the misleading and deceptive conduct which I have found.

Issue 16 - is Granite Hill entitled to damages for misleading and deceptive conduct from Ms Maddeleine Caratti, and if so, what is the appropriate measure of such damages?

Granite Hill's claim for misleading and deceptive conduct against Ms Maddeleine Caratti is based upon representations said to arise from her execution of a sublease in its favour. As I have found that she did not execute that sublease, that aspect of Granite Hill's claim against her must be dismissed. Granite Hill further claims that she is liable for having aided Mammoth's misleading and deceptive conduct or, alternatively, was knowingly concerned in its misleading and deceptive conduct. As I have found that Mammoth did not engage in the misleading and deceptive conduct asserted by Granite Hill, it follows that this claim must also be dismissed, and that Granite Hill's claim against Ms Maddeleine Caratti for misleading and deceptive conduct generally must be dismissed.

Issue 17 - is Mammoth entitled to damages for misleading and deceptive conduct from Mr Allen Caratti and, if so, what is the appropriate measure of such damages?

Mammoth asserts that the representations made by Mr Allen Caratti upon which Granite Hill relies were misleading and deceptive. It also asserts that if the purported signature of Ms Maddeleine Caratti on the ABC version of the Granite Hill sublease is in fact her signature, it was obtained by a trick and that the trick was misleading and deceptive. As I have found that it is slightly more likely than not that Ms Maddeleine Caratti's signature on the ABC version of the Granite Hill sublease was forged by Mr Allen Caratti, this aspect of Mammoth's claim against Mr Allen Caratti does not arise.
However, as I have found that the representations made by Mr Allen Caratti, at the time he executed the Granite Hill sublease and provided it to Granite Hill, were misleading and deceptive, it follows that Mammoth is also entitled to claim damages if it suffered loss by reason of that conduct. As I have found that Mr Allen Caratti's purported but unauthorised execution of the GH version of the Granite Hill sublease has rendered Mammoth liable to Granite Hill in damages for breach of that sublease, it follows that Mammoth's liability to Granite Hill was relevantly caused by Mr Allen Caratti's misleading and deceptive conduct, and it is entitled to recover those damages from Mr Allen Caratti, together with its costs of defending Granite Hill's claim and any costs it is ordered to pay Granite Hill.

Summary

For these reasons:
(a)the lease between Esperance Cattle and Navarac executed on 10 December 2012 is valid and enforceable, and declaratory orders can be made to that effect in addition to the order for possession already made;
(b)Esperance Cattle is entitled to damages for trespass from Granite Hill, but is not entitled to an account of Granite Hill's profits, nor to declaratory relief against Bott Cropping Pty Ltd or Bott Livestock Pty Ltd;
(c)although Granite Hill is entitled to assume that Mammoth duly executed a sublease in its favour, and Mammoth is prevented from denying that assumption, Granite Hill has no proprietary interest in Young River Station, and declaratory orders can be made to that effect;
(d)Granite Hill is entitled to damages from Mammoth for breach of the sublease;
(e)Granite Hill is entitled to damages from Mr Allen Caratti for misleading and deceptive conduct;
(f)Granite Hill's claim against Mammoth and Ms Maddeleine Caratti for misleading and deceptive conduct must be dismissed; and
(g)Mammoth is entitled to damages for misleading and deceptive conduct from Mr Allen Caratti.
In more general terms, Esperance Cattle will recover damages from Granite Hill in respect of any losses which it suffered which are the natural and probable consequence of Granite Hill's trespass. However, Granite Hill is entitled to damages from Mammoth in the amount necessary to put Granite Hill in the position in which it would have been if the sublease from Mammoth had been performed. On the face of it, that amount will include any and all of Granite Hill's liability to Esperance Cattle. Mammoth is in turn entitled to damages for misleading and deceptive conduct from Mr Allen Caratti which, on the face of it, would extend to and include all of its liability to Granite Hill. In addition, Mr Allen Caratti is liable to Granite Hill in damages for misleading and deceptive conduct.
So, in general terms, subject to the continuing solvency of all relevant parties, Esperance Cattle will recoup its losses from Granite Hill, Granite Hill will recoup its losses from Mammoth, and Mammoth will recoup its losses from Mr Allen Caratti. Given Mr Allen Caratti's role in the causation of those losses, and the manner in which he has conducted his defence of these proceedings, that outcome appears to me to be both just and appropriate.