Macks v Emanuele No. Scgrg-97-1550 Judgment No. S6523

[1998] SASC 6523

MACKS v EMANUELE

Debelle J

Application to Remove Caveat

In this action the plaintiff applies to remove a caveat registered by the Registrar-General of Queensland in respect of land at Mission Beach in Queensland. 

Jurisdiction

I deal first with the question of the jurisdiction of this Court. The application is made pursuant to s127 of the Land Title Act, 1994 (Q), which provides:

“(1)  A caveatee may at any time apply to the Supreme Court for an order that a caveat be removed.

(2)  The Supreme Court may make the order whether or not the caveator has been served with the application, and may make the order on the terms it considers appropriate.”

The caveatee may apply at any time to remove the caveat and there is no requirement to give a period of notice to the caveator. The procedure under s127 is to be contrasted with that under s126 of the Act, which provides that, if the caveatee gives notice to the caveator requiring the caveator to issue proceedings to establish the interest claimed under the caveat and the caveator does not within 14 days commence such proceedings, the caveat will lapse.

A caveatee is defined by s4 of the Land Title Act to mean the registered proprietor of the land or “someone (other than the caveator) who has an interest” in the land.   The plaintiff is, by reason of the order of Lander J made on 6 June 1997 in action No 1880 of 1995, a person who has an interest in the land at Mission Beach.  It is common ground that the plaintiff is entitled to apply for removal of the caveat.  I will refer later to the terms of the order of Lander J.

The jurisdiction of this Court to make an order in respect of land in Queensland stems from the terms of the uniform scheme related to the cross-vesting of jurisdiction. Section 9 of the Jurisdiction of Courts (Cross-Vesting) Act, 1987 (SA) (“the South Australian Act”) invests this Court with jurisdiction conferred by a law of the Commonwealth or a State relating to cross-vesting of jurisdiction.  Section 9 provides:

“The Supreme Court -
(a)     may exercise jurisdiction (whether original or appellate) conferred on that court by a provision of this Act or of a law of the Commonwealth or a State relating to cross-vesting of jurisdiction;
and
(b)     may hear and determine a proceeding transferred to that court under such a provision.”

For the reasons which follow, jurisdiction is conferred on this Court by the Jurisdiction of Courts (Cross-Vesting) Act, 1987 (Q) (“the Queensland Act”). Section 4(3) of the Queensland Act invests the Supreme Court of another State with original and appellate jurisdiction in respect of State matters. Among the matters defined by s3 of the Queensland Act to be a State matter is a matter in which the Supreme Court of Queensland has jurisdiction otherwise than by reason of a law of the Commonwealth or of another State. Section 127 of the Land Title Act, 1994 confers on the Supreme Court of Queensland jurisdiction to hear applications to remove caveats. The application to remove the caveat is, therefore, a State matter and so, by virtue of the combined operation of s9 of the South Australian Act and s4(3) of the Queensland Act, this Court has jurisdiction. Any order made by this Court may be enforced pursuant to s14(3) of the Queensland Act.

Section 9 of the South Australian Act invests the Court with a discretion whether it should exercise the power conferred by s4(3) of the Queensland Act. The word “may” often imports a discretion and I think it does here. Mr Blue submitted that the Court was bound to exercise the jurisdiction if invited to do so. He relied on the decision of McLelland J in Re Tolltreck Systems Ltd (1991) 4 ACSR 701. As I understand the reasons of McLelland J, His Honour did not intend to rule out any exercise of discretion. His Honour was considering the provisions of the Corporations (NSW) Act, 1990 which relate to cross-vesting of jurisdiction and in particular s47 of that Act, which is in similar terms to the Jurisdiction of Courts (Cross-Vesting) Act, 1987 (SA).  His Honour said at 701:

“It seems to me that the court is bound to exercise that jurisdiction, when properly invoked, unless the court decides that the proceeding or application should be transferred to some other court, under s44 of the Corporations (NSW) Act 1990.”

The condition identified by His Honour imports a discretion.  In addition, there are sound policy reasons why the Court should have a discretion to decide whether to exercise the jurisdiction.  A plaintiff may be forum shopping or there might be some other reason why the Court should decline to exercise the jurisdiction.  See also the reasons of Ipp J in Bond Brewing Holdings Ltd v Crawford (1990) 1 WAR 517.

It is appropriate in the particular circumstances of this case that the Court should exercise the jurisdiction invoked by the plaintiff.  These proceedings arise out of the liquidation of a series of companies, most, if not all, of which were registered in South Australia.  The liquidator carries on business in South Australia.  The liquidation is being administered in South Australia.  The liquidator had instituted the action No 1880 of 1995 in this Court.  In this application the liquidator is seeking to enforce some of the orders made by Lander J in that action.  In addition, Mr Emanuele resides here.  The only aspect of the matter which is not South Australian is the fact that the land is in Queensland so that any order made by the Court will bind the Registrar-General in Queensland.  Although there is a slight difference between the procedure in this State and the procedure in Queensland for the removal of caveats, it is not a difference of substance.  As will be seen, the task for the caveator is the same in each jurisdiction, namely, to demonstrate that there is a serious question to be tried as to whether he has a caveatable interest.  The law in this State governing the determination of that issue is, therefore, the same as in Queensland.  Thus, there is no hint of forum shopping.  Nor is there any other basis on which this Court should decline to hear the matter.  For these reasons, it is appropriate to exercise the jurisdiction invoked by the plaintiff. 

Procedure

In order to be able to maintain the caveat, the caveator must show that there is a serious question to be tried which would justify leaving the caveat undisturbed: Re Jorss’ Caveat [1982] Qd.R 458 at 465; Re Burman’s Caveat [1994] 1 Qd.R 123. That is the approach which is now “entrenched” in Queensland: Re Burman’s Caveat, (supra) at 127.  If the caveator establishes that there is a serious question to be tried, the court will examine the balance of convenience.  That is also the position in this State: Whallin v Bailbart Investments Pty Ltd (1987) 47 SASR 198; Nexus Mortgage Securities Pty Ltd v Starmaker (No 58) Pty Ltd (unreported, Full Court, 5 September 1997 Judgment No S6347).  For the reasons which follow, Mr Emanuele, the caveator, has not demonstrated that there is a serious question to be tried. 

The plaintiff had also applied for immediate relief pursuant to Rule 25.02 of the Supreme Court Rules. That procedure is available where, in circumstances of urgency, a judge can decide issues which are capable of speedy resolution without a lengthy hearing and give judgment without trial, or where the plaintiff considers there is no serious question to be tried:  Settlement Wine Co Pty Ltd v National & General Insurance Co Ltd (1988) 146 LSJS 150 at 152 per King CJ and the cases there cited. As will be seen, there is a degree of urgency in this matter and the issues can be determined speedily without a lengthy hearing. More significantly, there is no serious question to be tried.

The Orders of Lander J

This application arises out of orders made on 6 June 1997 by Lander J in action No 1880 of 1995.  The plaintiffs in that action were a group of companies, which were all members of the Emanuel Group of Companies.  The defendants were a group of companies largely under the control of Mr Robert Simionato.  The defendant companies included two companies, Simionato Holdings Pty Ltd and Liddan Pty Ltd.  Mr Emanuele, the defendant in this action, was not a party to action No. 1880 of 1995.  However, for the purpose of this application, Mr Emanuele accepts the orders made by Lander J in that action.

The orders of Lander J were stayed pending an appeal to the Full Court.  On 7 October 1997 the Full Court dismissed the appeal.  An application for leave to appeal to the High Court was instituted on 3 November 1997.  The application has yet to be heard.  On 9 December 1997 the appellants applied to this Court for a stay of execution pending the hearing of the application for leave to appeal.  The application was refused on certain terms.  None of the terms affect the determination of this application.

The action heard by Lander J concerned, among other things, a substantial payment of money to the defendant companies as part of a transaction which  (as Lander J found) was entered into for the purpose of defeating the claims of the creditors of the Emanuel Group of Companies.  Mr Emanuele was the chairman of directors of the Group and directed the affairs of the Group.  The facts are recited in detail in the reasons of Lander J.  There is little to be gained by repeating them.  It is sufficient to summarise them. 

The Emanuel Group had acquired a substantial holding of 64,000 acres of land in Queensland situated between Brisbane and the Sunshine Coast.  To purchase the land, the Group had borrowed monies from companies in the Elders Finance Group of Companies.  For convenience I will refer to the lenders as “EFG”.   The Emanuel Group ran into financial difficulties.  By August 1994 it was insolvent.  EFG sought to enforce its securities.  Litigation ensued between EFG and the relevant companies in the Emanuel Group.  Negotiations between the parties resulted in a compromise by which $3.3 million would be paid by EFG to Simionato Holdings and other persons and real estate would be transferred to Liddan and other companies. The compromise included terms which indirectly benefitted Mr Emanuele.  Settlement was proposed for March 1995.  On 27 February 1995 the solicitors who were then acting for both Mr Emanuele and the Emanuel Group of Companies advised Mr Emanuele that he should resign his directorship in 27 companies in the Emanuel Group to avoid a conflict of interest between himself and the relevant companies when negotiating the settlement with EFG. On 28 February 1995 Mr Emanuele resigned his directorship in those 27 companies. Lander J held, among other things,

1that on 27 February 1995 the Emanuel Group of Companies were insolvent;

2that on 27 February Mr Emanuele was insolvent;

3that on 17 March 1995 EFG had paid $3.3 million to Simionato Holdings;

4that the transaction was entered into for the purpose of defeating the claims of the creditors of Mr Emanuele and of the Emanuel Group of Companies;

5that the payment of $3.3 million was to the personal advantage of Mr Emanuele and to the disadvantage of the creditors of the Emanuele family and the Emanuel Group of Companies;

6that on 17 March 1995 Simionato Holdings had purported to lend to Liddan, in its capacity as the trustee of the Liddan Trust, the sum of $1.3 million;

7that on 4 April 1995 Liddan resolved to purchase the land at Mission Beach in Queensland;

8that on 8 May 1995 Liddan borrowed the sum of $941,952.97 from Simionato Holdings to complete the purchase of the land at Mission Beach; and

9that Mr Emanuele, as well as other directors, had made improper use of his position as a director of the 27 plaintiff companies to secure an indirect advantage for himself and a direct advantage for Simionato Holdings and Liddan and had been guilty of a breach of his fiduciary duty to those companies.

Lander J also held that Mr Emanuele’s position was not affected by his purported resignation from the 27 plaintiff companies on 27 February 1995.  The plaintiff in this action proved the documents which embodied the compromise and other facts relevant to the issue of Mr Emanuele’s knowledge of the negotiations and the completion of the agreed compromise.  I am satisfied that the findings of Lander J and, in particular, the findings as against Mr Emanuele, are correct for the reasons he gave.

To give effect to his reasons for judgment, Lander J made a series of orders.  For present purposes it is sufficient to note paragraph 2, parts of paragraph 3, and paragraphs 4, 5 and 14 of the order.  The relevant parts of those orders read:

“2..... That it is declared that the defendants received as constructive trustees and hold on trust for the plaintiffs listed below (“the 27 plaintiffs”) the payment of $4,600,000 by Elfic Limited, Lensworth Properties Pty Ltd and EFG Finance Limited (collectively “EFG”) to the defendants on 17 March 1995 (“the Money”) and all assets acquired with the Money.

[The order lists the 27 plaintiffs]

3.That it is declared and ordered that:

3.1... The defendant Liddan Pty Ltd (ACN 067 412 462) (“Liddan”) holds pursuant to a constructive trust (“the Liddan Property trust”) for the 27 plaintiffs...

3.1.4 the estate of fee simple in the land situated at Mission Beach in the State of Queensland being the whole of the land comprised and described as Lot 67 on Registered Plan RP903192 County of Cardwell Parish of Rockingham, Certificate of Title reference 50130255;...

4.That, pursuant to Section 36(1) of the Trustee Act 1936 (SA), Peter Ivan Macks in his capacity as liquidator of the 27 plaintiffs be appointed:

4.1the new trustee in substitution for Liddan of the Liddan

......... Property trust...

5...... That, pursuant to Section 37 of the Trustee Act 1936 (SA), the interests in land set out in paragraphs 3.1.1 to 3.1.4 inclusive shall be vested in Peter Ivan Macks as trustee of the Liddan Property trust in his capacity as liquidator of the 27 plaintiffs...

14.... That, pursuant to Section 114(4) of the Land Title Act 1994 (Qld), Section 9 of the Jurisdiction of Courts (Cross-Vesting) Act 1997 (sic) (SA) and Section 14(3) of the Jurisdiction of Courts (Cross-Vesting) Act 1987 (Qld), the Registrar of Titles (Queensland) make the necessary notations upon the following Certificate of Title Register Books to give effect to the orders vesting in Peter Ivan Macks as trustee of the Liddan Property trust in his capacity as liquidator of the 27 plaintiffs the land comprised and described therein including cancelling the certificates of title and issuing new certificates and taking such other steps as are necessary to give effect to the vesting orders herein:

14.1. the estate of fee simple in the land situated at Mission Beach in the State of Queensland being the whole of the land comprised and described as Lot 67 on Registered Plan RP903192 County of Cardwell Parish of Rockingham, Certificate of Title reference 50130255.”

Later, Liddan borrowed monies from Equitiloan Securities Pty Ltd and repaid the monies it had borrowed from Simionato Holdings.

A Caveat is Lodged

After the Full Court delivered its judgment, Mr Macks, as liquidator of the 27 plaintiff companies, applied to register the order.  He was unable to do so because a caveat had already been lodged on behalf of Mr Emanuele.  It is caveat No. 702293068.  The caveat prohibits registration of any interest until it is withdrawn by the caveator. On 5 November 1997 Fisher Jeffries, the solicitors acting for Mr Macks, sent a letter to the solicitors named on the caveat as solicitors for Mr Emanuele.  In that letter, Fisher Jeffries asked for particulars of the interest asserted in the caveat and asked that the caveat be removed.  The caveat was not removed.  It is still registered on the Certificate of Title. 

Urgency

Before dealing with the question whether the caveat should be removed, it is convenient to deal with the question of urgency.  This issue needs only to be considered if the plaintiff relies on Rule 25.02.

Liddan is in default in paying interest pursuant to the mortgage. The arrears of interest were $28,093.45 as at 26 November 1997.  Liddan has no funds to pay the arrears of interest and no income to pay future interest.  Mr Emanuele has mentioned a refinancing proposal but it is quite unrealistic.  The mortgagee has issued and served a notice of default dated 26 November 1997 and has given notice that it intends to sell the property if the default is not paid within 30 days of service of the notice.  By letter dated 15 January 1998 the solicitors for the mortgagee have advised the solicitors for the liquidator that the mortgagee intends to proceed to sell the property.  The liquidator is anxious to sell the land himself.  He believes that he will be able to sell it in an orderly way which will not have the notorious disadvantages of a mortgagee’s sale.  I am satisfied that there is sufficient urgency to justify proceeding pursuant to Rule 25.02.

The Alleged Equitable Interest

The caveat asserts that Mr Emanuele is entitled to an interest as equitable owner of an estate in fee simple in the land at Mission Beach.  The grounds of the claim for the equitable interest are specified in paragraph 4 of the caveat in these terms:

“Pursuant to a Constructive Trust arising by virtue of an agreement made on 17 March 1995 and by operation of law from certain non-monetary contributions made by the said caveator pursuant to the development of the said land within the agreement and intent of the said caveator and the said caveatee that by so doing the caveator would acquire an interest in the said land.”

It is difficult to determine precisely what is meant by that claim. 

Mr Emanuele has sworn an affidavit in this application in which he seeks to establish the grounds for the alleged equitable interest.  He says that he was promised an interest in exchange for his services as an expert in real estate development.  He claims that a constructive trust exists in his favour by reason of an agreement made on or about 15 March 1995 in Adelaide between himself and Robert Simionato and Alessandro Caruso, who were both, at the relevant times, directors of Simionato Holdings and Liddan.  He says that it was agreed that he would be given the sole consultancy as an expert in the development of real estate over all properties then held or to be held by Simionato and Liddan to help those companies make profits by development of the land and subsequent sale.  In his affidavit he says:

“We agreed that I would be given sold consultancy over all the Simionato and Liddan and future properties to help the companies make profits in real estate sales and developments.  I insisted I be given a share in all the future properties that are bought by the Simionato Group of companies.  At that time not all the Simionato companies (Liddan, Simionato Holdings, Melbourne Projects, Sardona etc) were formed but these things were discussed in detail.  I would not have offered my services unless I was given a reward - I was not prepared to do it for nothing and I wanted a share in the investments.  Briefly put, unless I got a share of the land and the profits I was not prepared to provide my services.

(4)    We agreed verbally that I would get a joint venture share in all real estate properties that were going to be bought and that I would also get a share of the profits also when the properties were sold.  My share was going to be calculated as a percentage depending on the amount of time I spent, the increase in the value of the land after development and after sale.  It was also agreed that I would get a maximum of no more than 50% of the net increase in value of any land (or profit) bought by Simionato Holdings or its new companies in the future.  It was agreed that I would not receive wages or any other regular payment - my reward would be calculated at the end of any joint venture.”

The land at Mission Beach was one of the parcels of land which, according to Mr Emanuele, was subject to the agreement.  In his affidavit Mr Emanuele deposes to the work which he asserts he has done in relation to the development of the land at Mission Beach. Thus, Mr Emanuele claims that a joint venture exists between himself and Liddan which gives rise to the constructive trust. The claim that a constructive trust exists is grounded on the decisions in Muschinski v Dodds (1985) 160 CLR 583 and Baumgartner v Baumgartner (1987) 164 CLR 137.

There are a number of grounds on which one might question the existence of the alleged agreement.  There is no document which records the agreement.  There is no record of this agreement in the minutes of either Simionato Holdings or Liddan.  That is in stark contrast to the fact that the minutes evidence all dealings in real estate by Liddan between 17 March 1995 and 17 August 1995.  In addition, on those occasions when he has been required to declare his assets, Mr Emanuele has not listed his interest as constructive trustee.  I do not accept his explanations for the omission.

It might also be questioned whether the arrangement alleged to have been made on 15 March 1995 constituted anything more than an agreement that in future the parties might acquire and develop land and that Mr Emanuele would contribute his expertise in return for a share of the profits to be agreed.  Plainly, the share which Mr Emanuele would receive would depend on the extent to which he assisted in the development and his assistance increased the value of the land. But it is unnecessary to pursue these issues since there are two grounds which plainly demonstrate that Mr Emanuele has no equitable interest in the land. 

No Equitable Interest

It will have been noticed that the meetings between Mr Emanuele and his nephews, Messrs Simionato and Caruso, occurred on 15 March 1995, two days before the sum of $3.3 million had been paid by EFG to Simionato Holdings and the other defendants.  At that stage Liddan had not contracted to buy the land at Mission Beach.  Therefore, it was not then possible for Simionato and Caruso, as directors of either Simionato Holdings or Liddan, to create any interest in the land.  Put at its highest, the meeting on 15 March 1995 was a meeting at which future intentions were discussed and the proposals for development of real estate were considered in quite general terms.  The declaration in paragraph 2 of the orders made by Lander J that the monies received by Simionato Holdings and other defendants were received by them as constructive trustees and were held on trust for the 27 named plaintiffs is retrospective in operation: c.f. the remarks of Deane J in Muschinski v Dodds (supra) at 614. Two consequences flow from that fact. The first is that the constructive trust in favour of the 27 plaintiffs named in the order is prior in time to any equitable interest which Mr Emanuele asserts. The second is that neither Simionato Holdings nor Liddan had any interest in the land and could not, therefore, grant that which they did not have. In addition, neither Simionato Holdings nor Liddan had any authority to purchase land with those monies and did not have any authority to grant any interest in the land purchased with those monies. Furthermore, neither Mr Simionato nor Mr Caruso, as directors of Simionato Holdings or Liddan, had any authority to grant an interest in the land to Mr Emanuele.

The other reason why Mr Emanuele has no equitable interest lies in the fact that Mr Emanuele was actively involved in the negotiations which led to the payment of $3.3 million to Simionato Holdings and others.  He had resigned as a director of the 27 plaintiff companies in an ill-advised attempt to avoid a conflict between his personal interests and the interests of those companies.  Mr Emanuele knew, or ought to have known, that the payment to Simionato Holdings would defeat the interests of the creditors of the plaintiff companies and that any subsequent dealing in the money was similarly tainted.  I am satisfied by the evidence in this case that Mr Emanuele used his position as a director of the 27 companies for his own advantage.  His resignation as a director does not prevent him from being liable to account for the breach by him of his fiduciary duty to those companies: Canadian Aero Service Ltd v O’Malley (1973) 40 DLR (3d) 371. If it had been possible for either Simionato Holdings or Liddan to grant any interest in the land at Mission Beach to Mr Emanuele, Mr Emanuele was always liable to account to the plaintiff companies for that interest as an asset acquired in breach of his duties to those companies: Regal (Hastings) Limited v Gulliver [1967] 2 AC 134; Furs Ltd v Tomkies (1936) 54 CLR 583; Canadian Aero Service Ltd v O’Malley (supra).  In this respect, I adopt the reasons of Lander J.

Thus, however the issues are approached, Mr Emanuele did not have an interest in the land at Mission Beach.  Mr Emanuele has failed to show that there is a serious question to be tried which would justify leaving the caveat undisturbed. 

For these reasons, I order that the Registrar-General in Queensland remove the caveat lodged by Mr Emanuele. This order is made pursuant to s9 of the Jurisdiction of Courts (Cross-Vesting) Act, 1987 (SA) and ss4(3) and 14 of the Jurisdiction of Courts (Cross-Vesting) Act, 1987 (Q).