Helimount Pty Ltd (In Liq.) v Cappola
[2016] VCC 201
•10 March 2016
| IN THE COUNTY COURT OF VICTORIA | Revised Not Restricted Suitable for Publication |
AT MELBOURNE
COMMERCIAL DIVISION
GENERAL DIVISION
Case No. CI-14-01954
| HELIMOUNT PTY LTD (IN LIQ.) | Plaintiff |
| v. | |
| JOHN CAPPOLA & ANOR | Defendants |
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JUDGE: | His Honour Judge Anderson | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 22-23 & 29 February 2016 | |
DATE OF JUDGMENT: | 10 March 2016 | |
CASE MAY BE CITED AS: | Helimount Pty Ltd (In Liq.) v. Cappola & Anor | |
MEDIUM NEUTRAL CITATION: | [2016] VCC 201 | |
REASONS FOR JUDGMENT
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Catchwords: Mortgage – Assignment of securities by bank to guarantor – Effectiveness of deed between the registered proprietor of a property and a company in liquidation which had guaranteed a bank loan to the registered proprietor – Payment by guarantor to the bank of the registered proprietor’s indebtedness – Transfer of mortgage by the bank to the guarantor – Whether guarantor entitled to possession of the mortgaged property – Whether the registered proprietor held the property beneficially for a family trust.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr A. Phillips of Counsel | JR Watson Legal Services |
| For the Defendants | Mr R. Mitchell | Wilmoth Field Warne Lawyers |
HIS HONOUR:
1Helimount Pty Ltd (“Helimount”), the plaintiff, is in liquidation. It was wound up by order of the Federal Court on 26 July 2006. Hugh Sutcliffe Martin was appointed liquidator. Domenico John Callipari, the second defendant, was the sole director of Helimount. He is the registered prorietor of the property at 813 Deakin Avenue, Mildura (“the Roadhouse”).
2In this proceeding, Helimount seeks possession of the Roadhouse. In 2013, John Cappola, the first defendant, was in occupation of the Roadhouse. Since 21 May 2013, Mr Cappola has been the trustee of the DJ & AC Callipari Family Trust (“the Family Trust”). He was appointed by Mr Callipari to replace Helimount as trustee. Mr Callipari has been in possession of the Roadhouse for at least the last 6 months.
3Mr Callipari has since 1988 conducted part of his business affairs through Helimount and the Family Trust. In 2006, Helimount and Mr Callipari were each registered as the properietor of a number of properties. Some, but not all, of the properties registered in the name of Helimount were held on behalf of the Family Trust. Mr Callipari asserts that he held the Roadhouse as trustee for the Family Trust.
4Helimount claims to be entitled to possession of the Roadhouse by reason of the following matters:
a.Mr Callipari borrowed monies from the ANZ Banking Group Ltd (“the Bank”) in early 2006 to refinance and consolidate previous loans and to borrow further monies;
b.on 3 November 2005, Helimount executed a Commercial Guarantee and Indemnity (“the Corporate Guarantee”) in respect of the advances to be made by the Bank to Mr Callipari;
c.the borrowings by Mr Callipari were also secured by mortgages granted to the Bank, including a mortgage dated 12 February 2006 in respect of the Roadhouse (“the Mortgage”);
d.when Helimount was wound up on 26 July 2006, Mr Martin commenced to sell the properties registered in Helimount’s name;
e.Mr Callipari’s son, Jason Callipari, through a company, entered into contracts for the purchase of a number of properties registered in both the names of Helimount and Mr Callipari;
f.Jason Callipari told Mr Martin that he could not settle the purchase contracts without the transfer to him of some of the properties so that he could use them as security for the loan he was obtaining from a financier for the purchases;
g.on 28 February 2007, a deed was executed by Jason Callipari, his company Jason Callipari Property Group Pty Ltd, Mr Callipari and Helimount (in liquidation);
h.on 9 March 2007, Helimount paid the amount of $1,551,461.62 owing to the Bank by Mr Callipari;
i.on 1 February 2008, the Bank assigned to Helimount (in liquidation) its rights under the securities it held, including the Mortgage;
j.on 18 July 2008, the Bank transferred its interests under the Mortgage to Helimount;
k.Mr Martin’s efforts to sell the Roadhouse by public auction or tender were unsuccessful;
l.Mr Martin’s attempts to keep the Roadhouse vacant and free of trespassers required applications to VCAT and changing the locks;
m.by deed of variation executed on 21 May 2013, Mr Cappola was appointed by Mr Callipari to replace Helimount as the trustee of the Family Trust. At that time, Mr Cappola was in possession of the Roadhouse;
n.by letter dated 7 June 2013, Mr Callipari’s solicitors asserted that the Roadhouse was held by Mr Callipari on behalf of the Family Trust;
o.later, Mr Callipari went into possession of the Roadhouse;
p.the writ in the proceeding was issued on 22 April 2014;
q.on 10 June 2015, Helimount issued an amended writ in the proceeding seeking possession of the Roadhouse and injunctive relief to prevent Mr Cappola and Mr Callipari from retaking possession or otherwise frustrating the sale of the property. A claim for damages was abandoned by Helimount’s counsel, Mr Phillips, during his opening.
5Helimount brings the action pursuant to its rights as the registered first mortgagee of the Roadhouse. Mr Cappola and Mr Callipari were represented, pro bono, at the hearing by Mr Callipari’s long-time solicitor, Mr Mitchell.
6The claim was defended on the basis that:
a.the deed dated 28 February 2007 was not enforceable by Helimount as it was only executed by Mr Callipari as a result of fraud by Mr Martin as the liquidator of Helimount;
b.the Roadhouse, although registered in the name of Mr Callipari, was held on trust by him for the Family Trust.
7 Helimount relied upon a certificate dated 21 February 2016 given pursuant to clause 9.9 of the Memorandum of Common Provisions (“the Certificate”) as “conclusive evidence of the accuracy of its contents”.
8 The issues for determination in the proceeding are:
1. Was Mr Martin’s conduct fraudulent and was it responsible for Mr Callipari executing the deed dated 28 February 2007, and as a consequence, is it unenforceable against him?
2. Is the Roadhouse held on trust by Mr Callipari for the Family Trust, and if so, does this fact prevent the sale of the property by Mr Martin as the liquidator of the mortgagee, Helimount?
3.Is Helimount entitled to rely upon the Certificate as conclusive evidence of its contents?
4. Is Helimount entitled to possession of the Roadhouse?
5. Is Helimount entitled to the injunctive relief sought?
Credibility of witnesses
9Two witnesses gave oral evidence, Mr Martin for the plaintiff and Mr Callipari for the defendants. Mr Cappola did not give evidence or attend the hearing. Mr Mitchell informed the Court that Mr Cappola was unwell.
10Mr Martin’s evidence was given as a coherent account. At times, he had difficulty recalling the detail of certain matters. This was not surprising as the events occurred many years ago. However, as the evidence developed, it was apparent that Mr Martin’s testimony was supported by the contemporaneous documents, particularly in relation to the circumstances leading up to the deed dated 28 February 2007.
11In contrast, Mr Callipari’s evidence, on critical matters, comprised mere assertions which derived little support from the documentary evidence. Much of his evidence seemed improbable, for example, his belated denial that the handwriting on the report as to affairs in his name as a director of Helimount was not his, and his denial that he had received a copy of the letter from his solicitors dated 12 November 2010. Also, matters which had appeared to be in issue as a consequence of the way Mr Mitchell ran the case, including his cross-examination of Mr Martin, were conceded by Mr Callipari when he came to give his evidence.
12In the circumstances, I have primarily relied upon the documentary evidence. Where there was a conflict of evidence between Mr Martin and Mr Callipari about matters which could not be resolved by reference to the documentary evidence, I have preferred the evidence of Mr Martin.
13Mr Martin’s solicitors in relation to the Helimount liquidation had for many years been Darzins Legal. During the course of the trial, it became apparent that Mr Phillips intended to rely upon correspondence from the solicitors and an affidavit of service of a notice of demand upon Mr Callipari sworn by the principal of the firm Darzins Legal. I then confirmed to counsel my acquaintance with Mr Darzins. In order for the trial to proceed and to avoid a possible application that I disqualify myself, the parties agreed that the plaintiff would not seek to tender or rely upon the affidavit of service of Mr Darzins or correspondence from Darzins Legal that might necessitate a finding concerning Mr Darzins’ credit.
Sequence of events
14Helimount was incorporated prior to April 1988. Mr Callipari was its sole director. A deed of settlement dated 6 April 1988 established the Family Trust. Mr Callipari was the “appointer” and Mr Callipari and his wife were the “primary beneficiaries”. Helimount was the trustee.
15Over many years, both Helimount and Mr Callipari had each acquired a number of properties in the Mildura area. Some of the properties registered in the name of Helimount or Mr Callipari have been claimed by Mr Callipari to be held on trust for the Family Trust. Although since April 1988 Helimount had been the trustee of the Family Trust, Mr Callipari has never been the trustee. As the appointer named in the deed of settlement dated 6 April 1988, Mr Callipari did have the power to remove the trustee and to appoint “new and additional trustees”.
16In 2005, Mr Callipari sought refinance from the Bank in order to repay the indebtedness of both himself and Helimount pursuant to various loans which included:
a.the repayment of $90,493.79 and $107,198.48 to the Commonwealth Bank for loans obtained by Mr Callipari to purchase 4 properties including the Roadhouse;
b.the repayment of $156,988.55 to LaTrobe Building Society to apparently improve a property at Buronga in the name of Helimount;
c.the repayment of $476,028.82 to Perpetual Trustees which sum had been borrowed by Helimount;
d.the repayment of $427,566.15 to Regional One obtained by Mr Callipari to purchase properties at Walnut Avenue, Mildura and Little Cowra Road, Yelta.
17Before advancing money to Mr Callipari, the Bank required Helimount and Mr Callipari to execute the Corporate Guarantee. Helimount, both “in its own capacity and as trustee for the DJ & AC Callipari Family Trust” was the “guarantor” and Mr Callipari was recorded as the “customer”. The security for the guarantee included mortgages over a number of properties and a “mortgage debenture over assets and undertaking of the company given by Helimount”.
18By the Corporate Guarantee, Helimount guaranteed that Mr Callipari would pay to the Bank “all money owing to [the Bank] for any reason … now or in the future”. By the terms of Schedule 1 of the Memorandum of Common Provisions, Mr Callipari acknowledged that the Mortgage:
a.was “binding on me both personally and in my capacity as trustee”;
b.charged the whole of the legal and “beneficial interest” in the Roadhouse;
c.secured “all the secured money, whether I owe it on my own behalf or as trustee”.
19On 26 July 2006, Helimount was placed into liquidation by a creditor, to whom both Helimount and Mr Callipari apparently owed money. After his appointment, Mr Martin met with Mr Callipari and requested the company’s records. Mr Callipari said he had none and referred Mr Martin to his previous accountants, BCFR Chartered Accountants, and to his current accountants, Thomsons. Eventually, BCFR provided Mr Martin with four archive boxes of documents.
20Mr Martin said in evidence that the company records were not in good order. He made further enquiries from a number of sources, including the company’s creditors so that he could ascertain the financial position of Helimount. At some stage, Mr Callipari signed a report as to affairs in relation to Helimount. The document is undated but is completed in handwriting which Mr Callipari variously said was his, and not his.
21By email dated 13 November 2006, the Bank informed Mr Martin that $1,494,890.37 was owing as at that date “for the Callipari debts”. The Bank referred to 11 mortgages over real property given by Mr Callipari and 4 mortgages over real property supporting the Corporate Guarantee given by Helimount.
22Mr Martin commenced to sell the Helimount properties. Mr Callipari’s son, Jason, purchased one property and then indicated to Mr Martin that he wanted to purchase the other properties through one of his companies. He offered Mr Martin a total of about $2.2m for all the properties. Later, Mr Jason Callipari told Mr Martin that, in order to purchase the properties, he needed to use some of them as security in order to raise finance.
23Mr Martin said that the approach by Mr Jason Callipari was made on behalf of the “family” which was endeavouring to preserve the family properties. Mr Martin said that at an early meeting, Mr Callipari, his brother Bruno and Mr Jason Callipari had attended. Mr Callipari denied that he was present at this meeting. Notwithstanding this evidence, I consider it more likely than not that Mr Callipari was involved in and aware of the circumstances of the proposed sale. He appears to have cooperated by executing sale authorities in relation to the properties in his own name.
Deed dated 28 February 2007
24A deed was entered into on 28 February 2007. These were three groups of parties, “Jason Callipari and J Callipari Property Group Pty Ltd c/- Eggleston Mitchell Lawyers”, “Domenico Callipari” and “Helimount Pty Ltd (in liquidation)”. Mr Callipari gave evidence that he was given the deed by his son Jason and that he signed it without reading the document.
25Mr Martin said that when the document was returned to him by his lawyers the deed was signed by all parties except Helimount. The deed had been dealt with “between lawyers”. Recital P had been included at the request of Eggleston Mitchell, but crossed out from the final version of the deed at Mr Martin’s request. Mr Martin understood that Mr Mitchell was also acting for Mr Callipari. Mr Mitchell was given the opportunity at the trial to call further evidence, including by giving evidence himself, to explain whether Eggleston Mitchell had also been acting for Mr Callipari before the deed was executed.
26In the absence of any further evidence, or an express denial by Mr Callipari that Mr Mitchell was acting as his solicitor at the time he executed the deed, I am unable to accept that Mr Callipari did not sign the deed voluntarily and without pressure and had understood, at least in a general way, that the deed was designed to facilitate the transfer of properties in the names of Helimount and himself to his son Jason’s company.
27The deed contained a number of recitals, A to T. Clause 2.1 of the deed provided that, “The recitals are true and correct and form part of this deed”. The recitals record the following matters:
a.Mr Callipari and Helimount had borrowed from the Bank in early 2006;
b.the Bank was owed $1,523,939.57, of which $749,992.30 was Mr Callipari’s debt and $773,947.27 was Helimount’s debt;
c.Mr Callipari had agreed to sell a number of properties known as “the first group of properties” to Jason Callipari and his company;
d.Jason Callipari and his company would use the first group of properties as security by way of a registered first mortgage in order to purchase the Helimount properties;
e.the proceeds of sale of the first group of properties would be used, together with the proceeds of the sale of the Helimount properties, to reduce Mr Callipari’s borrowing from the Bank;
f.any shortfall in the amount owing to the Bank would be met by:
i.the proceeds of sale of four further properties by Mr Callipari (including the Roadhouse);
ii.any “shortfall”, by Mr Callipari paying it “in full”.
g.Helimount, by using the net proceeds of sale of its properties to pay its share of the Bank debt, would subrogate the Bank as the owner of mortgages given to the Bank, including the Mortgages given by Mr Callipari;
h.the mortgages given by Mr Callipari to the Bank included the Mortgage in respect of the Roadhouse.
28Mr Martin said that, although Mr Callipari was liable to the Bank for the whole of the debt of approximately $1.5m in February 2007, he considered that some of Mr Callipari’s debt was that of Helimount and he calculated the apportionment as best he could from the information that was available to him. This included information that had been provided by the Bank.
Events following the execution of the deed dated 28 February 2007
29Settlement of the sales to Mr Jason Callipari and his company occurred on 8 March 2007. From the sale of the first group of properties and the Helimount properties, Mr Martin paid to the Bank $1,551,461.62. Mr Martin then discussed with Mr Callipari the sale of the remaining four properties in the name of Mr Callipari, including their preparation for sale. Three of the four properties were sold, although this took some time.
30On 31 January 2008, a deed of assignment was entered into between the Bank, Helimount and Mr Martin as the liquidator (“the deed of assignment”). By the deed of assignment, the Bank assigned “absolutely to [Helimount] all the [Bank’s] right, title, estate and interest in and to” four registered mortgages as set out in the schedule to the deed including the Mortgage in respect of the Roadhouse, and the Corporate Guarantee. The deed of assignment recorded that, on 9 March 2007, Helimount had paid to the Bank the sum of $1,551,461.62.
31On 11 January 2008, Mildura solicitors Gallagher Holcroft Lawyers wrote to Mr Martin on behalf of their client Mr Callipari. The letter recorded that, “We are instructed by the ANZ Banking Group that they have assigned the mortgage to you”. The mortgage the solicitors were referring to was not for the Roadhouse but for 1597 Deakin Avenue, Mildura. Mr Callipari had sold the property in November 2007 and the solicitors were looking for a discharge of mortgage, which the Bank said should be given by Helimount, as the party to whom the Bank had assigned the mortgage. The sale of the three properties, other than the Roadhouse, settled in 2008 or 2009. On 19 July 2008, the Bank transferred the Mortgage in respect of the Roadhouse to Helimount.
32On 19 August 2009, Mr Callipari became bankrupt and Mr Peter Goodin was appointed the trustee of Mr Callipari’s estate. On 1 September 2009, Mr Goodin lodged a caveat in respect of the title to the Roadhouse. Mr Callipari had apparently been seeking to enter into a Part 10 arrangement. When that arrangement did not proceed, the bankruptcy ceased on 22 September 2009. Mr Callipari was later made bankrupt on 5 November 2010. He was discharged from bankruptcy on 8 June 2014. Mr Phillips submitted that Mr Callipari’s bankruptcy effected a transfer of any rights Mr Callipari had under the Mortgage to his trustee in bankruptcy. The trustee in bankruptcy had never challenged Helimount’s rights as the registered first mortgagee to enter into possession of the Roadhouse.
33Over many years, Mr Martin has attempted to sell the Roadhouse. The property was twice auctioned and was also offered for sale by tender. Mr Martin wished to sell the property with vacant possession. On a number of occasions, he found that the property was occupied by tenants. On two occasions, Mr Martin obtained orders for possession from VCAT and changed the locks.
34At some stage, in about 2013, Mr Cappola went into possession of the property. Mr Martin had arranged for new locks to be fitted to the Roadhouse shortly prior to November 2012. In June 2013, the Mildura police provided to Mr Martin a letter that they had been given by Mr Cappola. The letter is addressed to Mr Cappola, care of Mr Callipari and was written by Mr Mitchell and dated 7 June 2013.
35The letter noted that, “pursuant to a deed of variation executed on 21 May 2013, [Mr Cappola was] appointed trustee of the DJ & AC Callipari Family Trust”. The letter confirmed that the Roadhouse “is a property that belongs to the trust”. The letter stated that when Mr Callipari entered into the deed dated 28 February 2007, he “believed that he was owner of the Mildura property [the Roadhouse]. He was subsequently informed some time after executing the Deed that he was in fact not the owner of the Mildura property and it belonged to the DJ & AC Callipari Family Trust. At the time, Mr Callipari did not have the power to enter into the Deed on behalf of the Trust and therefore the Deed against the trust property is in our view void”.
36In his evidence, Mr Callipari admitted that Mr Cappola had “asked him to come and live” at the property. Mr Callipari had been living at the property “for the last 6 months”.
Did fraud by Mr Martin induce Mr Callipari to enter into the deed dated 28 February 2007?
37Mr Callipari, in his defence dated 19 June 2015, pleads that he “was not and is not bound by the deed” dated 28 February 2007, because Mr Martin had made “representations fraudulently all knowing the same to be false and untrue or recklessly and not caring as to whether they were true or false”.
38Mr Callipari alleges that “acting on the faith and truth of the representations and induced thereby and not otherwise”, Mr Callipari entered into the deed. The representations were that Mr Callipari:
a.was “the principal owner of four properties”, including the Roadhouse;
b.“had borrowed funds from the ANZ Bank to either repay existing loans on the properties or to improve existing land”;
c.“in so doing [he had] derived a personal benefit to the detriment of [Helimount] to the extent of $749,992.30”.
39The representations were said to be “false and untrue” because Mr Callipari:
a.did not own four properties as “they were owned by the DJ & AC Callipari Family Trust”;
b.“did not derive a personal benefit from the ANZ loan to the extent of $749,992.30”.
40The defence alleged that the representations were made “fraudulently” because, upon the winding up of Helimount:
a.Mr Martin had “immediately seized all financial records of” Helimount;
b.“a proper examination of the financial records by the liquidator would have established that:
[i.]the four properties [including the Roadhouse] were owned by the DJ & AC Callipari Family Trust”;
ii.Mr Callipari “did not derive a personal benefit from the ANZ Bank loan”.
41During his final submissions, Mr Mitchell stated that, “Given the evidence of the liquidator, I don’t think we can make out fraud”, although, “there is evidence of misrepresentation”. In light of this concession, it is difficult to see any further relevance of the allegations. I will, however, briefly examine the matter as an argument as to why the Court should not enforce the deed dated 28 February 2007 as a basis for the claim by Helimount for possession of the Roadhouse and for continuing injunctive relief to permit the orderly sale of the property.
42In my view, the evidence establishes that Mr Callipari voluntarily entered into the deed in circumstances where he had legal advice available to him and would generally have understood the nature and intent of the deed. There is no basis for finding that Mr Callipari was induced by any representations by Mr Martin (whether partly or,“not otherwise”) to enter into the deed.
43Mr Callipari agreed by his execution of the deed that, “The recitals are true and correct”. The recitals included each of the representations alleged to have been made by Mr Martin. I am not satisfied that any of these representations were false or untrue or that a proper examination of the financial records the liquidator “seized” or acquired through his investigations would have established that the four properties, including the Roadhouse, were the property of the Family Trust or that Mr Callipari had not derived a personal benefit from the ANZ Bank loan.
44Mr Mitchell’s letter to Mr Cappola dated 7 June 2013 confirms that when Mr Callipari entered into the deed dated 28 February 2007, he “believed that he was [the] owner of the Mildura property” and that he was “subsequently informed some time after executing the deed that he was in fact not the owner of the Mildura property and it belonged to the ... Family Trust”. Accordingly, for all these reasons, this defence must fail.
Is the Roadhouse held beneficially by Mr Callipari for the Family Trust?
45The evidence that the Roadhouse may be held by Mr Callipari beneficially for the Family Trust is confined to the following matters:
a.the assertions to that effect by Mr Callipari in his evidence and by Mr Mitchell in his letter to Mr Cappola dated 7 June 2013;
b.financial statements included in the Court Book;
c.financial statements tendered as exhibits D4, D5 and D6;
d.paragraph 24 of an affidavit sworn by Mr Martin on 31 August 2006 in Federal Court proceedings.
46The material in the Court Book comprises financial statements for the Family Trust for the year ended 30 June 2005 apparently prepared by BCFR Chartered Accountants, dated 17 May 2006 and signed on the introductory page by Nicola Formichella, a partner of the firm. There was no evidence of when the statements were prepared or how and when they came into the possession of Mr Callipari or his solicitors.
47The Balance Sheet as at 30 June 2005, included the following entry under “Non-current assets”:
“Land & Buildings – Roadhouse (5/03) 2005 - $161,720 (2004 - $161,720)”.
48The “Notes to the financial statements for the year ended 30th June 2005” contained the following entry under “Plant & Equipment”:
“Plant & Equipment – Roadhouse 2005 - $149,623 (2004 - $149,623)
Less: accumulated depreciation 2005 - $5,744 (2004 - $1,835)”.
49The “Taxation Depreciation Schedule – Detailed, period 1/07/2004 – 30/06-2005” shows, under the entry “Plant & Equipment – Roadhouse”, a number of entries for “electrical wiring, fencing, property improvements – Roadhouse”, which reflect the totals in the previous document.
50Exhibit D4 comprises photocopies of two pages of what appear to have been part of 72 pages of documents faxed by someone at Thomsons Accounts and Advisors (perhaps by Mark McMillan) on a date which may be 13 January 2005, if one compares the imprint on the first page of exhibit D6. The pages were apparently refaxed by Mr Callipari on 13 December 2010. The document purports to be the “Balance Sheet as at 30th June 2004” for the Family Trust.
51The Balance Sheet as at 30 June 2004, under the heading “Fixed assets” contains the following relevant entries:
“Land & Buildings 2004 - $428,071 (2003 - $395,843)”
“Plant & Equipment – Roadhouse 2004 - $147,788 (2003 - $19,552)”.
52These figures compare with the following entries in the “Balance Sheet as at 30th June 2005”:
“Land & Buildings – Roadhouse (5/03) 2005 - $161,720 (2004 - $161,720)”
“Land & Buildings 2005 - $428,071 (2004 - $428,071)”
“Plant & Equipment 2005 - $328,031.27 (2004 - $336,679)”.
53A comparison of these two sets of figures suggests that:
a.“Land & Buildings” in the Balance Sheet as at 30th June 2004 did not include the Roadhouse. The entry for “Land & Buildings” in the Balance Sheet as at 30th June 2005 for 2004 is for the same figure ($428,071) as in the balance sheet as at 30 June 2004;
b.“Land & Buildings – Roadhouse (5/03)” appears in the Balance Sheet for the first time as at 30 June 2005, although that entry suggests that it had been recorded for the same amount ($161,720) in the previous year (2004);
54“Plant & Equipment – Roadhouse” is included in the earlier Balance Sheet with a small figure for 2003 ($19,552) and a larger figure in 2004 ($147,788). In the 2005 Balance Sheet, “Plant & Equipment” is not broken down, as it was in 2004, between the “Roadhouse” $147,788 and a small amount ($708) for “Flats”.
55The Roadhouse was purchased in 2005 by Mr Callipari. The date on the 2005 Balance Sheet suggests that it was in May 2003 (“5/03”). This is consistent with the Certificate of Title which records Mr Callipari as being registered as the proprietor of the Roadhouse on 6 June 2003.
56Exhibit D5 is a single page photocopy “Taxation Depreciation Schedule from 01/07/2002 to 30/06/2003” for the Family Trust. None of the items on the document appear to be relevant to the Roadhouse.
57Exhibit D6 is a two page “Balance Sheet as at 30th June 2003” for the Family Trust. The first page was apparently faxed by Thomsons Accounts and Advisors as part of the 72 page fax on 13 January 2005. The second page, which is cut off at the top, was refaxed by Mr Callipari on 13 December 2010. The second page includes, under the heading “Fixed Assets”, the entry:
“Land & Buildings 2003 - $410,651 (2002 - $395,843)”.
58Although Mr Mitchell apparently handwrote beside “Land & Buildings” the words “Roadhouse 17th St.”, the entry is unlikely to relate to the Roadhouse because of the comparison made earlier between the entries for “Land & Buildings” in the 2004 and 2005 Balance Sheets and the fact that the figure for the item for 2002 in the 2003 Balance Sheet is $395,843 and the same figure for 2003 of $395,843 is in the 2004 Balance Sheet.
59Paragraph 24 of Mr Martin’s affidavit sworn on 31 August 2006 in a Federal Court proceeding was tendered during his cross-examination after he said that he had not seen the financial statements for the Family Trust included in the Court Book, until they were discovered by the defendants in the proceeding. There is, however, a similarity of the figures in paragraph 24 of the affidavit to figures included in the “Trading, Profit and Loss Statement for the year ended 30th June 2005” which forms part of the financial statements in the Court Book.
60Paragraph 24 of the affidavit reads as follows:
“In 2003 the Defendant earned $78,916.00 from the sale of wine grapes and made a profit of $1,510.00. In 2004 earned $105,000.00 from the sale of wine grapes and $124,228.00 as a profit on the sale of property and made a profit of $150,623.00. In 2005 it made sales of $472,015.00 and made a profit of $159,247.00. In 2006 the Defendant could not sell its wine grapes. At this time no financial statements have been prepared for the last year”.
61The “Trading, Profit and Loss Statement” for the year ended 30th June 2005 includes the following figures:
a.$124,228, as the “Capital gain (loss) on sale of non-current assets” for the year to 30 June 2004;
b.$150,623, as the “Profit from ordinary activities for the year to 30 June 2004”;
c.$472,015.96, as the “Sales” for the year to 30 June 2005;
d.$159,247, as the “profit from ordinary activities” for the year to 30 June 2005.
62I do not consider, however, that in the absence of any further evidence I should accept that the Roadhouse was held beneficially for the Family Trust by Mr Callipari. I rely upon the following matters in reaching that conclusion:
a.Helimount was the trustee of the Family Trust named in the deed of settlement dated 6 April 1988;
b.Mr Callipari was never appointed the trustee of the Family Trust;
c.Mr Callipari in February 2007, according to his solicitors letter dated 7 June 2013, “believed he was the owner” of the Roadhouse and did not find out until “some time after” that the Roadhouse “belonged to the ... Family Trust”;
d.no evidence was given, or explanation offered as to how the beneficial interest Mr Callipari held for the Family Trust was created or otherwise arose, or when this happened and when Mr Callipari became aware of the fact. The only basis discussed during Mr Mitchell’s final submissions was the possibility of a trust created by the use by Mr Callipari of trust monies to purchase the Roadhouse. Those facts were not sought to be established. If those facts had been pleaded in the defence, and some evidence in support adduced, it is likely, as Mr Phillips submitted, that the Roadhouse would have been paid for by Helimount and any rights in respect of the property would be its to exercise as trustee rather than Mr Callipari’s, particularly in view of his subsequent bankruptcies;
e.the most credible financial statements are those included in the Court Book. They are reasonably complete and are dated and signed on behalf of the accountants. However, the earlier Balance Sheets appear to cast doubt upon the veracity of the 2005 Balance Sheet, and it remains unclear as to why the Roadhouse does not appear in the 2003 and 2004 Balance Sheets produced;
f.Mr Mitchell was alerted to the criticisms which might be made of the provenance of these documents at the conclusion of the evidence in Mildura on 23 February 2016. It was suggested by me that he should consider whether, when the case resumed in Melbourne on 29 February 2016, he should call further evidence, for example from the accountants who prepared the accounts. No further evidence was led by the defendants and no real explanation was provided.
Admissibility of the Certificate pursuant to the Memorandum of Common Provisions
63Clause 9.9 of the Memorandum of Common Provisions entitled the Bank to “give a certificate about any matter relating to this mortgage, the property or the secured money”. The clause set out examples of “the things about which” the Certificate could be given, and provided that the Certificate would be “conclusive evidence of the accuracy of its contents”.
64Mr Mitchell objected to the admission of the Certificate into evidence. The reasons he advanced in final submissions were that:
a.a certificate should only have been given by a person from within the organisation (such as the Bank) in which the matter certified had arisen in the normal course of business;
b.certain things included in the Certificate were outside its contemplated scope and should be ignored. These matters included service of a notice to pay on Mr Callipari;
c.the admission of the parts of the Certificate relating to service of the notice to pay (being a document prepared by Darzins Legal) was contrary to the agreement reached by counsel.
65Mr Phillips submitted that these were not valid objections to the admission in evidence of the Certificate, for the following reasons:
a.all the things included in the Certificate related “to this mortgage, the property or the secured money”, and were either given as examples in clause 9.9, or were similar matters;
b.the inclusion in Schedule A to the Certificate of a copy of the notice prepared by Darzins Legal did not infringe the agreement reached by counsel.
66Paragraphs 7 and 8 of the Certificate read as follows:
“7. By no later than 9 September 2009 a Notice to Mortgagor pursuant to s.76 of the Transfer of Land Act 1958 (Notice) had been served upon:
a. The Mortgagor in accordance with clause 11.2 of the MCP;
b.Each of the two caveators 180 Capital Finance Pty Ltd and Peter Goodin in his capacity as the Mortgagor’s trustee in bankruptcy.
8. A true copy of the Notice is at Schedule A to this Certificate”.
67Schedule A to the Certificate contained a notice by Helimount to Mr Callipari “under section 76 of the Transfer of Land Act 1958”. The notice was dated 7 September 2009 and signed by “Darzins Legal as solicitors and agents for and on behalf of Helimount...”.
68I reject Mr Mitchell’s arguments that a certificate should only be given by a person, such as an employee of a bank, who has direct access to the records of the bank or to persons with direct knowledge of the matters referred to, or that the service of a statutory notice is not the sort of matter which might be included in a certificate. Commonly, courts receive certificates given by solicitors or other persons who have no direct knowledge of the matters certified, and often certificates relate to the service of notices.
69Mr Mitchell also submitted that paragraph 7 and 8 of the Certificate should be excluded because its admission breached the agreement reached by the parties following the disclosure of my acquaintance with Mr Darzins, the principal of Darzins Legal. Mr Mitchell said that the parties’ agreement reached at that time was that the plaintiff’s evidence would exclude “all reference to letters and documents tendered on behalf of the plaintiff in respect to matters involving Mr Darzins”. Mr Mitchell submitted that the admission of paragraphs 7 and 8 the Certificate involved the receipt by the Court in evidence of a document signed by Darzins Legal.
70Mr Phillips submitted that the agreement of counsel was of more limited effect. The Certificate had been referred to by him in opening and it was not the Certificate, but rather the proposed tender of the affidavit of service of Mr Darzins which had provoked the discussion leading to the agreement. During discussion with counsel at that time, I expressed my concern that I may be asked to determine a matter involving Mr Darzins’ credit, if there were a dispute about whether the notice the subject of the affidavit, had in fact been served on Mr Callipari.
71I am conscious that the parties’ agreement on this matter was reached on the basis that, if the plaintiff did not introduce certain evidence, the defendants would not make an application to have me disqualify myself. Such an application would be made on the basis of perceived bias, in circumstances where I may be required to decide a contested issue which was likely to depend on the credibility of a person known to me. The arrangement between the parties was again referred to late in the hearing at Mildura and, as a consequence, Mr Phillips sought to withdraw his reliance upon a number of emails and letters from Darzins Legal which had earlier been received in evidence.
72I do not consider that it is necessary for me to further determine the extent of the “agreement” reached by the parties. There is, in my view, little relevant difference between the views expressed in final submissions by each counsel. I note, further, the following matters:
a.paragraphs 7 and 8 of the Certificate can have separate effect;
b.paragraph 7 does not refer to Darzins Legal, and might be regarded as a “matter relating to this mortgage”, as provided for in clause 9.9 of the Memorandum of Common Provisions;
c.paragraph 8 does no more than identify a document;
d.there was no challenge to the form of the document, simply as to whether Helimount had established that the notice had been served on Mr Callipari;
e.the suggestion in Mr Mitchell’s further written submissions that “the notice pursuant to section 76 exhibited to the affidavit of Mr Darzins is a different notice to the notice referred to in the schedule of Mr Martin’s certificate” has no merit. The document in both cases is a “copy” of the document served. It is in precisely the same form although the signature on the copies varies slightly.
73Mr Callipari said that, as far as he knew at the time Helimount was wound up, the loan with the Bank was “up to date and I hadn’t received a letter from the Bank to say anything different”. He did not specifically say that he did not receive the notice dated 7 September 2009.
74In the amended statement of claim, paragraph 13 reads as follows:
“By notice dated 7 September 2009 Helimount advised that it intended to enter into possession as mortgagee of the property on 11 September 2009 and demanded rent from the then tenant”.
75The paragraph appeared to include two allegations; the demand of rent from the then tenant, and an allegation of service of the notice dated 7 September 2009. However, in supplementary written submissions, Mr Phillips referred to a document at page 101 of the Court Book which is addressed to “The Tennant” (sic) and is dated 7 September 2009. It is likely that this is the notice referred to in paragraph 13 of the amended statement of claim and that the paragraph does not refer to the service of a notice on Mr Callipari.
76The pleadings in response to paragraph 13 by each defendant were as follows:
a.by Mr Cappola: “The first defendant does not plead to paragraph 13 as no allegation is made against him”;
b.by Mr Callipari: “The second defendant does not plead to paragraph 13 as no allegations are made against him”.
77By operation of Rule 13.12, failure by each of the defendants specifically or by necessary implication to deny or not admit paragraph 13 of the amended statement of claim, operates as an admission of every allegation of fact in the paragraph. This would suggest that there was no need by Helimount to prove these matters. However, in view of Mr Phillips’ written submissions, paragraph 13 of the amended statement of claim and the defendants' pleadings to that paragraph would appear to be not relevant to the service of a notice on Mr Callipari.
78Rule 13.07(2)(b) of the County Court Rules of Civil Procedure 2008 provides that , “In a proceeding for the recovery of land… the defendant shall plead specifically every ground of defence on which the defendant relies”. Sub-rule 2 enlarges on Rule 13.07(1) which requires a defendant to “plead specifically any fact or matter which – (a) the party alleges makes any claim … of the opposite party not maintainable; or (b) if not pleaded specifically, might take the opposite party by surprise; or (c) raises questions of fact not arising out of the [statement of claim]”.
79If paragraph 13 of the amended statement of claim did not raise the issue of the service of a relevant notice on Mr Callipari, either under the Mortgage or pursuant to section 76 of the Transfer of Land Act 1958, a defendant wishing to rely upon Helimount’s failure to serve a necessary notice should have specifically pleaded the relevant facts namely, the failure to serve the notice and the specific matter which required the service of the notice. The defendants cannot in final submissions, and without the matter having been addressed in Mr Callipari’s evidence, raise the issue in that way.
80Mr Phillips submitted further that:
a.it was unnecessary for Helimount to prove that a notice had been served pursuant to section 76 of the Transfer of Land Act 1958 as Helimount was not seeking to exercise a power of sale pursuant to section 77 of the Act. In any event, sections 78 and 81 entitled Helimount, independently of sections 76 and 77 to claim possession of the Roadhouse in the event of a default by Mr Callipari;
b.Helimount had, following the default by Mr Callipari under the mortgage, exercised its rights pursuant to Part 7 of the Memorandum of Common Provisions. Clause 7.7 makes it clear that the power of sale under the Transfer of Land Act 1958 is “in addition to its right to sell the property under this clause”. Clause 7.3 excludes or limits any requirement or obligation at law to give notice before exercising the rights on default, “to the extent that [they] can be excluded or limited”;
c.by entering into the deed dated 28 February 2007, Mr Callipari acknowledged his debt to the Bank of $749,992.30 and he covenanted with Helimount to pay his debt to Helimount in full and that Helimount would subrogate the Bank as owner of the Mortgage if the debt of Mr Callipari was not paid in full. Mr Callipari was estopped by his entry into the deed dated 28 February 2008 from contesting the accuracy of the matters included as recitals in the deed;
d.Helimount had by the issue of the writ in the proceeding relied, inter alia, upon the indebtedness of Mr Callipari to the Bank in the sum of $1,523,939.87, the payment of that sum to the Bank and the assignment of the Mortgage to it by the Bank and that, as a result, “Helimount as mortgagee became entitled to all rights of entry pursuant to the mortgage and all rights of entry pursuant to law”.
81In these circumstances, I am satisfied that Helimount may rely upon clause 7 of the Certificate as proof of service of a notice pursuant to a section 76 of the Transfer of Land Act 1958, and so far as is necessary, clause 8 and Schedule A as identification of the notice referred to in clause 7. I consider, in any event, that Helimount has a right to possession under the mortgage without recourse to the Transfer of Land Act 1958, and that there is sufficient evidence of a default by Mr Callipari of his obligations under the Mortgage.
Whether the assignment of the Mortgage entitles Helimount to possession of the Roadhouse
82Mr Mitchell submitted that Helimount was not entitled to rely upon the deed of assignment of the Mortgage to enforce its claim for possession of the Roadhouse against Mr Callipari.
83Mr Mitchell referred to the following matters:
a.the deed of assignment is dated 31 January 2008;
b.Helimount was seeking to rely upon its rights pursuant to the deed dated 28 February 2007;
c.Helimount was not able to rely upon the Mortgage as it did not secure any indebtedness by Mr Callipari to Helimount which had been outstanding before the assignment;
d.Mr Martin had calculated Mr Callipari’s indebtedness to the Bank at $749,992.30 and there was no evidence that this sum had not been paid in full.
84Mr Mitchell relied upon the decision of Olympic Holdings Pty Ltd v. Windslow Corporation Pty Ltd (in liq.) [2008] WASCA 80 (“Olympic”). The Western Australian Court of Appeal endorsed the decision of the trial judge who had declared that, “On their true construction each of [the Securities] do not secure the repayment of any debt incurred by [Windslow] to [Olympic] prior to or after the assignment of the securities by [the Bank] to [Olympic], and secure only the repayment of the debt of $304,220.28 the subject of [the Deed of Assignment]” (paragraph 9).
85The Court of Appeal in Olympic analysed a number of earlier decisions where the approach taken by the court was to construe the terms of the mortgage, or other security assigned, to determine whether what was intended was “that pre-assignment debts owed by the mortgagor to the unnamed assignee are to be secured by the mortgage” (paragraphs 33, 38 and 39).
86Mr Mitchell submitted that the present case was an “all-fours” with Olympic. Mr Phillips sought to distinguish that case on the basis that, in the present action:
a.paragraph G of the Introduction to the deed of assignment stated that the assignment was “without prejudice to [Helimount’s] rights under the law of subrogation arising out of the payment” by Helimount on 9 March 2007 of “the secured debt to the [Bank] in the amount of $1,551,461.62”;
b.the deed dated 28 February 2007 contemplated that:
i.Helimount would pay the total indebtedness to the Bank of $1,523,939.57 (plus interest and costs accruing daily) which was calculated at Mr Callipari’s debt of $749,992.30 and Helimount’s debt of $773,947.27;
ii.upon payment by Helimount of Mr Callipari’s indebtedness to the Bank, Helimount would subrogate the Bank as the owner of the securities (including the mortgage registered over the Roadhouse);
c.although the indebtedness to the Bank was that of Mr Callipari in the first instance, Helimount had, pursuant to the Corporate Guarantee dated 3 November 2005, given to the Bank an unlimited guarantee and indemnity in respect of Mr Callipari’s indebtedness. Accordingly, Helimount had a right of indemnity from Mr Callipari.
87In my view, the Mortgage dated 12 February 2006 contemplated the exercise of the rights of the Bank as mortgagee by a guarantor who had paid out the mortgagor’s indebtedness to the Bank. Those rights were exercised either as the assignee from the Bank or pursuant to its rights of subrogation. Clause 9.12 of the Memorandum of Common Provisions contemplated that, the Bank “may transfer this mortgage, its rights in connection with this mortgage and my obligations under it without telling me and without getting my consent”.
88Further, whatever rights Mr Callipari had to challenge the entitlement of Helimount as the registered mortgagee, upon his subsequent bankruptcies in 2009 and 2010, those rights passed to his trustee in bankruptcy and were no longer available to Mr Callipari.
89In these circumstances, I consider that Helimount was entitled to exercise the powers of a mortgagee pursuant to the Mortgage, in the event of default by Mr Callipari.
Whether injunctive relief should be granted against the defendants
90Helimount seeks permanent injunctive relief to prevent Mr Cappola and Mr Callipari taking steps which might frustrate the orderly sale of the Roadhouse, including the maintenance of vacant possession until that is achieved.
91Mr Callipari is currently in possession of the Roadhouse. He said he was allowed into possession by Mr Cappola who had also spent some time at the property. I consider it likely that before that time, the “tenants” who had gone into possession did so with the knowledge of Mr Callipari. I consider it is also probable that Mr Callipari had knowledge that the attempts by Mr Martin to keep the property vacant were being frustrated, requiring the locks at the Roadhouse to be changed.
92It is likely that the injunctive relief will only be necessary for the relatively short period until a purchaser can take possession of the Roadhouse upon settlement of any sale. In the circumstances, I consider that the orders sought by Helimount in this regard are appropriate.
Proposed orders
93The orders of the Court will be as follows:
1.Judgment for the plaintiff against the defendants for possession of the property known as the Roadhouse at 813 Deakin Avenue, Mildura being the land described in Certificate of Title Volume 8201 Folio 676 (“the property”).
2.The defendants and each of them, whether by themselves, their servants or agents or howsoever otherwise are restrained from:
a.occupying or going onto the property without the prior written permission of the plaintiff;
b.damaging the property or removing fixtures from the property;
c.allowing their personal property, other than any fixtures to the property, to remain on the property;
d. permitting, authorising, allowing or encouraging any other person to occupy or go onto the property without the prior written permission of the plaintiff.
94I will hear further from the parties before making final orders as to the costs of the proceeding.
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Certificate
I certify that these 22 pages are a true copy of the reasons for decision of His Honour Judge Anderson delivered on 10 March 2016.
Dated: 10 March 2016
Mi-Lin Chen Yi Mei
Associate to His Honour Judge Anderson
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