Kadoo Pty Ltd v Tricontinental Corporation Ltd

C A T C H W O R D S

MORTGAGES -

sale by encumbrancee

claim for reconveyance

beneficiary of trust - trustee the encumbrancer

- allegations

of fraudulently misleading Registrar as to existence

of power

of sale - no specific allegations impllcating purchasers from

encumbrancee - claim against purchasers dismissed

- claim for

relief against encumbrancee allowed to proceed.

Kadoo Pty. Ltd. & Anor.

v. Trlcontlnental Corporatlon Limited & Ors.

Qld G124 of 1987

PINCUS J. BRISBANE 18 SEPTEMBER 1987

IN THE FEDERAL COURT OF AUSTRALIA

)

QUEENSLAND DISTRICT REGISTRY

)	QLD G124 of 1987

GENERAL DIVISION

)

BETWEEN: KADOO PTY. LTD.

First Applicant

AND: BARRANBALI PTY. LTD.

Second Applicant

AND:	TRICONTINENTAL CORPORATION LIMITED

First Respondent

AND:	HARFERN PTY. LTD.

Second Respondent

AND :

KALEGO PTY. LTD.

Thlrd Respondent

A N D :

ROBERT GOLDSTEIN

Fourth Respondent

AND: FRANK GOLDSTEIN

Fifth Respondent

AND: IAN KENNETH

D'ARCY

S i x t h Respondent

AND:	ROBERT HARDROSS RUDKIN

Seventh Respondent

MINUTES OF ORDER

JUDGE MAKING

PINCUS

ORDER:

DATE OF ORDER:	18 SEPTEMBER 1	907
WHERE MADE:	BRISBANE
THE COURT ORDERS THAT:

1.	The application be dismissed as against	the 2nd.
3rd, 4th and 5th respondents.

2 .

The applicants have leave to deliver

an amended

statement of claim against the 1st respondent to

filed and served

on or before 2 October 1987.

3. The applicants pay the costs of the application of the 2nd, 3rd, 4th and 5th respondents, to be taxed.

4. The costs of the application to strike out incurred

by the 1st respondent

be taxed and paid

the

applicants.

5. The applicatlon for security for costs made by the

1st respondent be dismissed, the director

the

applicant, Mr.

J . W .

Quinn, a

solicitor,

having

given an undertaking to the Court.

Costs of the appllcation for securlty

be the 1st

respondent's costs In the proceedings.

NOTE:

Settlement and entry of orders is dealt with in

Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA

)

QUEENSLAND DISTRICT REGISTRY

)	QLD G124 of 1987

GENERAL DIVISION

)

BETWEEN:

W O O PTY. LTD.

First Applicant

AND:	BARRANBALI PTY. LTD.

Second Applicant

AND: TRICONTINENTAL CORPORATION LIMITED

First Respondent

AND: HARFERN

PTY. LTD.

Second Respondent

AND: KALEGO

PTY. LTD.

Third Respondent

AND: ROBERT GOLDSTEIN

Fourth Respondent

AND:

F R A N K

GOLDSTEIN

Flfth Respondent

AND:	IAN KENNETH D'ARCY

Sixth Respondent

AND:	ROBERT HARDROSS RUDKIN

Seventh Respondent

PINCUS J.

18 September 1987

M TEMPORE REASONS FOR JUDGMENT

This is an application

made by the

second,

third,

fourth, and fifth respondents to have an application struck out or stayed on the grounds that the statement of claim is embarrassing

or insufficiently

particularized,

and

on another

ground

unnecessary to mention.

2 .

The case has also been argued by counsel for the first respondent, who supports the submission made

by counsel

for the

second to

fifth

respondents, which

1 s . in

essence,

that

the

statement of claim is defective

and,

as against the second

fifth respondents, the claim

1 s vexatious.

"he appllcation was one to

which, until recently, there

were seven respondents, the sixth

and

seventh being solicitors

involved in the transactions	I shall mention. As agalnst them, it
has been discontinued.

The case concerns

encumbrancee's sale

of property

owned by a company called Visigoth Pty. Ltd.

("Vlslgoth"), whlch

was not joined.

The

flrst applicant, Kadoo Pty. Ltd., says that

it 1 s a beneflclary under a trust of which Vlslqoth

1 s

trustee,

and it clalms to

sue In defence or vlndlcatlon of the rlqhts

the

trust.

1s plam and, Indeed, not contested,

that

the

proceedlngs are, In that respect, defectlve because

of the absence

of Visigoth from them. I refer to Vo1.48

of the 4th edltlon

Halsbury, paragraph 933.

The submlsslon whlch 1 s made on behalf

of the appllcants, however, is that the absence of Vlslgoth 1 s not

fatal to

the

proceedings,

and

I agree with that.

15,

nevertheless, plainly a

matter whlch has to be attended

to and

not, in this case

at least, merely a formal matter.

The pleadlng is a complex document and it is desirable to summarize its effect rather than set the relevant parts

of it

out at length. It says that the

first respondent, Tricontinental

Corporation Limited

("Tricontinental"), purporting to

do so as

3 .

encumbrancee, sold property for $416,000 which was the subject of

a bill of encumbrance.

The statement of

claim sets up that the

property was sold by a transfer lodged in the office

of the

Registrar of Titles

on 18 June 1987 and registered on 19 June

1987. In their application, which was filed on 5 August 1987, the

appllcants claim, among other things, an order whlch is expressed to be one "terminating the effect of the transfer". Counsel for

the appllcants explalned, however,

that what was really intended

was to ask for

an order for reconveyance.

The second and third

respondents presently

have

the legal title to the land.

The

fourth and

fifth respondents

are persons associated with them.

The presence of the second and third respondents

1s requlred,

seems to me, If

the clalm for reconveyance

1 s to proceed, but

serlous question arises as

to whether the case should be allowed

to go ahead as agalnst any of the second, thlrd, fourth	or flfth
respondents.

The statement

of clalm alleges

that documents lodged

with the

Reglstrar

Tltles to

procure

reglstration

were

factually Incorrect and mlsled the Reglstrar fraudulently, In

that

they asserted that there was a default

of Vlslgoth at a

certam

date when there was not. It seems to be common ground that the

rights of the encumbrancee, Tricontlnental, were governed

not only

by the bill of encumbrance but by

a deed of settlement of certam

Supreme

Court

proceedings

which affected

the

rights

the

encumbrancee to sell.

The case

the

applicants appears at

first sight to be that under the bill of encumbrance as so varied there was no right to sell, although that is not clearly set out

pleading.

the

4 .

Paragraph 15 of the statement of claim alleges that

the

misleading documents caused the Registrar

to register the transfer

and that the

first applicant, Kadoo Pty. Ltd., thereby lost its

beneflcial

interest

the

property,

being

one-thud of

the

difference between the market value

of the property and its prlce.

It also,

so the pleading

says, lost Its interest as optionee

pursuant

to a lease.

Complaint

was

made

the

lack

specificatlon of the interest as lessee, and that complaint seems

to me well founded, but It is	not a	ma~or	deflciency In the
pleadmg.

My lnltial

readlng of

the pleading

was

that

the

appllcants intended to allege that there was no power of sale

all and that the lack

of speclflcatlon of that matter was merely a

sllp.

However,

two clrcumstances have comblned to cause me to

abandon that vlew.

The first is that Mr.

Robb, for the

appllcants, has

drawn my attentlon to an affldavlt made by Mr.

Cocker111 whlch

says that Mr. Cockerill does not

wlsh to assert that a sale by

Tricontinental

of the land

market value was other than in

accordance with the encumbrancee's rlghts pursuant to the blll

encumbrance and

the deed.

As I understand the submisslon

counsel for the applicants, it seems to be this: that two of the

three beneflclaries under the deed in fact agreed to

a sale of a

certaln sort, and

the third

one would have

agreed, and counsel

says It is going to be set up that these facts were so; it	seems
to me if they were so, they should be pleaded.

The second circumstance which

caused me to abandon the

vlew I initially took as to the nature

of the applicant's case is

that the pleading goes on to complaln of

failure to sell to the

second applicant Barranbali Pty.

Ltd., which, of course, implies

that there was

a power of

sale. It turns

out, from dlscusslon

between myself and Mr.

Robb, that, on the second leg,

It 1s Indeed

the case for the applicants

that there was a power of sale.

The allegation on

the first leg of the

case, then, is

that there was a transfer whlch could not have been registered

there being no power of sale - but for mlsrepresentatlons made to the Registrar. The mlsrepresentatlons were as to the relationshlp between the encumbrancee and the encumbrancer, Vlslgoth.

Of course, lt may

occur

that

purchaser

from

mortgagee or encumbrancee 1 s aware of the whole of the

clrcumstances surroundlng the

sale, but there

1 s no presumptlon

that he 1s so aware, and

it would seem to me absolutely contrary

to the scheme of the Real Propertv Act 1861-1986 (Qld.) to

allow

speculatlve proceedlngs

for reconveyance to

be brought agalnst

purchasers from holders of securltles, based

upon

the

mere

posslbility that they were involved In the alleged mlsdeeds of the

vendor.

There are allegations of fraud

here. And indeed, so far

as concerns the first respondent, the argument which

has

been

delivered by Mr. Robb makes it plain that the allegations

of fraud

are seriously pressed.

They are so pressed, also, as against the

second, third,

fourth and fifth

respondents, but

it seems that

Mr. Sofronoff for those respondents

is right in saying that the

case against the purchasers and those associated	with	them is
speculatlve.

I suggested to counsel for the applicants, in the course

of his address, that that seemed to be

so and, in effect, Invited

him to

tell me If there

were substantial

facts

(although not

pleaded) upon which

it was going to be sought

to support the case

of fraud agalnst the second to

fifth respondents. Counsel

' s

responses have reinforced	my impression that what	Mr. Sofronoff
says 1 s right.

An example of the sort of thlng of

which complamt

was

made on behalf of the second to flfth respondents 1 s that I t 1 s

sald in paragraph 13 of the statement of clalm that the conduct of

the second and thlrd respondents was caused to be carrled out by

the fourth and flfth respondents, or alternatlvely

the fourth and

fifth respondents authorlsed some other person or persons to carry

out the sald conduct, further

particulars of whlch cannot be given

untll after dlscovery in this actlon.

As another example, ~t

1 s

said i r l paragraph

11 that neither the

fourth respondent nor the

fifth respondent belleved that the default mentloned In the papers

was contlnumg, or that there was any other default and this is

all, of course, sald to be fraudulent.

There is in the fairly lengthy and elaborate pleading

hint that there is

any concrete evidence

fraud agalnst the

purchasers, or

those associated

with them. Mr. Robb spoke of

inferences that might

be dram

from the circumstances, and the

only particular circumstance

he seemed to rely

was that the

contract of sale between the encumbrancee and the purchasers was

settled and a date other than that prescribed by the contract, and

indeed settled earlier.

It is said in the pleading, against the second to fifth

respondents that their solicitor,

who was

once a party to the

proceedings, knew the facts constitutlng the fraud and told

them.

There is, of course, again

no lndlcation In the pleading of

when

or by what means the informatlon was passed to them,	so as	to
impllcate them m the alleged fraud.

I cannot, I

thlnk, lgnore the practlcal conslderatlon

that the prlnclpal purpose of lolnder

the

second

to third

respondents 1 s to undo the sale to them.

If that sale was at

under-value then, sublect

the

questlon

of ~olnder of the

encumbrancer, monetary relief	may perhaps be obtamed agalnst the
encumbrancee.

When I raised

that

question

wlth

counsel

for

the

applicants, he Informed me that, for reasons he did not specify, the land was of some speclal value to the appllcants, and I must

accept that for present purposes. Nevertheless

am confronted

with the fact that he has pleaded

a shadowy case of fraud agalnst

the purchasers from the encumbrancee,

who have become reglstered.

He wants to bolster it, or

hopes

to do

so, by discovery and

perhaps interrogatories and

I have, of

course, been referred by

the respondents' counsel to the authoritles bearing upon the

propriety of that course.

I do not act upon the view that

it can never be right

for one having

a rather skeletal case

of unlawful conduct, and in

particular fraudulent conduct, to plead

what is

known and then

rely upon dlscovery. There must come a point, however, at

whlch

the court would not allow such a case to go further, and despite the able argument advanced on behalf of the appllcants, It seems to me clear enough that the point has been reached here. I do not thlnk the matter should be allowed to proceed agalnst the second to fifth respondents, and the appllcatlon as against them wlll be

struck out.

I do

not think the pleading demonstrates anything

other than that

it 1 s hoped to make a case of fraud agalnst them,

if the facts fall that way, and the discusslon on the facts whlch

I have engaged

In wlth

counsel for the applicants,

so far from

dlspelllng that impresslon, has reinforced It. In one

sense,

suppose the argument

1 s baslcally one about dlscovery

should

applicants be allowed to

go to dlscovery, and further pursue the

case, on thls sort of pleadlng;

I do not thlnk they should.

There are

other aspects

of the

pleadlng whlch could

be mentloned, but It 1 s perhaps superfluous to do so, because I propose to let the matter proceed agamst the flrst respondent on

a fresh pleading. There will obviously have to be a new pleadlnq

because most of the

respondents are

now out

of the matter, the

case havlng been abandoned against the two solicitors

and struck

out as against

the

second

to fifth respondents. I will,

therefore, be brief.

The second leg of the case, as presently

pleaded, is a

claim that

the encumbrancee promised to sell the

land in question

to the

second applicant, Barranbali Pty. Ltd.

This aspect of the matter 1 s put on two alternative bases. It is

said, firstly, that Tricontinental misrepresented its Intention:

while saying it intended to

sell to Barranbali Pty. Ltd.,

It was

going ahead with the sale to the second to

fifth respondents.

Alternatively, a

contract

sale between the applicants and

Tricontinental

alleged,

a contract

whlch

Tricontinental

breached by selling to the second and third respondents.

the latter point, the argument was put that, since the contract

sale set up

was merely moral, there was

no cause of

action by

reason of 5.59 of the Propertv

Law Act 1974 (Q.) which corresponds

to 5 . 4 of the Statute of

Frauds, 1677.

It appears to me clear

enough that this point

does not

avall the respondents. Such a

contract is, of course, merely unenforceable

and

not

vold

Madison v. Alderson

(1883) A.C. 467 at 488. As Colllns M.R.

pointed out In Fraser

(1904) 2 0 T.L.R. 798 at 799,

5.4 of

the Statute of Frauds of 1677 does not go to the merits but merely

deals wlth evldence and the defendant

has an optlon wnether or not

to set the section up.

The claim cannot be struck out

the

ground of lack of plea of a wrltlnq.

Criticism 1 s also made

of the contractuai clalm on

the

basls that It

is not clear from the pleadlngs what

It 1 s

that

constitutes the offer by the applicants which

1 s

relled on.

agree that that is so, but agaln that is not a striking-out point,

nor does it seem to me likely to cause any serlous embarrassment

to the respondents.

A more substantial point, to which some reference

has

already been made, is that it

is unclear what is the applicants'

case as to the power of sale.'

During the course of

discussion,

10.

counsel

for

the applicants handed to

proposed

additional

paragraphs 14(al, 14(b) and 16(a), which wlll be marked exhibit

But, having heard what

he has to say, it is still not clear to me

how the second leg	of	the case is made out, or how he matches it
with the first leg.	I find it difficult to see how a complaint

can be made against the first respondent

of the fallure to sell to

the second applicant for

$416,000, which in the first branch

case is said to

be an illegal price.

It may be that the answer

is, as counsel

for

the

applicants

has

told

me,

that

those

involved, which he says

were the other two beneflciarles under the

trust, simply did not know enough about the value

of the property.

But If the second leg

of the case depends upon there belng a power

of sale created by assent of beneflciarles, then that has to be

plainly pleaded; otherwlse the pleading

is lncomprehenslble.

I do not, however, propose to deal wlth other aspects the matter raised In the course of argument in critlclsm

the

present pleadlng; it has to be repleaded In any event, because	of
the absence of nearly all the lnltial respondents.

The orders I propose to make are that the appllcation be

dismissed as agalnst

the

second,

third,

fourth

and

flfth

respondents, and that the applicants have leave to dellver

amended statement of claim against the first respondent by fillng

and serving the same

on or before the second day

of October 1987.

As to costs, it will be ordered that the applicants pay

the costs of the second, third, fourth and fifth respondents, to be taxed. The costs of the hearing of the application to strike

1 11.

[1987] FCA 562

18 Sep 1987