Marchesi v Vasiliou
[2009] VSC 213
•5 June 2009
| IN THE SUPREME COURT OF VICTORIA | Not Restricted | |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
No. 5856 of 2009
| BRENDAN JOHN MARCHESI as trustee of the property of Andrew Vasiliou, a bankrupt | Plaintiff |
| v | |
| ANDREW VASILIOU in his own right and as trustee of the Vasiliou Family Trust & Ors | Defendants |
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JUDGE: | HANSEN J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 22 April 2009 | |
DATE OF JUDGMENT: | 5 June 2009 | |
CASE MAY BE CITED AS: | Marchesi v Vasiliou | |
MEDIUM NEUTRAL CITATION: | [2009] VSC 213 | |
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REAL PROPERTY – Caveat – Removal.
INJUNCTION – To restrain lodging of further caveats – To restrain Registrar of Titles from accepting further caveats.
COSTS – High-handed conduct in lodging caveat – Misuse of caveat procedure – Indemnity costs.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr M J Galvin | Piper Alderman |
| The First Defendant in person and, by leave, for the Third Defendant | ||
| No appearance by or on behalf of the Second or Fourth Defendants |
HIS HONOUR:
In this proceeding the plaintiff seeks orders for the removal of a caveat and other related relief.
The plaintiff is Brendan John Marchesi who is, and sues as, the trustee in bankruptcy of the first defendant. The first defendant is Andrew Vasiliou who is sued in his own right and as trustee of the Vasiliou Family Trust, the second defendant is his wife Vasiliki Apostolou, the third defendant is Optquest Pty Ltd (“Optquest”) which is sued in its own capacity and as trustee of the Vasiliou Family Trust, and the fourth defendant is the Registrar of Titles.
At the hearing the plaintiff appeared by counsel, the first defendant appeared in person and by leave for the third defendant, the second defendant did not appear and the Registrar of Titles, in accordance with a letter to the Prothonotary, did not appear.
The caveat
The subject caveat, no. AG265788X, was dated 24 December 2008 and lodged on that day on behalf of the third defendant. It claimed an estate in fee simple in the land described in:
(a)certificate of title volume 9012 folios 077, 083 and 092. These titles comprise unit 5, 3 Alfriston Street, Elwood being a residential unit and an associated car park and accessory unit (“Alfriston”),
(b)certificates of title volume 4509 folio 646 and volume 10088 folio 011. This is a commercial property at 18 St Kilda Road, Melbourne (“St Kilda”),
(c)certificate of title volume 1173 folio 541. Residential apartments are erected on this property at 10 Claremont Street, South Yarra (“Claremont”)
on the following ground, namely:
“Pursuant to a Sale Contract dated the 25th March 1989 between Andrew Vasiliou also known as Andreas Vasiliou and Optquest Pty Ltd ACN 006 828 664” but “Subject to Mortgage AB712284 to HSBC Bank of Australia Limited”. The caveat was “executed by Optquest Pty Ltd … by Ms Panagiota Vasiliou … Sole Director/Secretary of 34 Sandra Street, Bulleen, Vic, 3105 A Person Authorised to SIGN for the Company”.
Optquest
A current and historical company extract of Optquest provided by the Australian Securities and Investments Commission on 20 March 2009 discloses that Optquest was registered on 11 August 1987. On 7 July 1995 the company was deregistered[1] and remained deregistered at the time when the first defendant became bankrupt. The registration of the company was reinstated on 3 December 2008 on the application of the first defendant. The effect of reinstatement was that the registration of the company continues as if deregistration had not occurred. As to directors, the extract records that:
(a)from 1 September 1987 the first and second defendants were the directors; the first defendant until 23 December 2008 and the second defendant (who was also the secretary) until 1 December 2008;
(b)from 23 December 2008 until 8 January 2009 Panagiota Vasiliou of 34 Sandra Street, Bulleen was the sole director and secretary;
(c)from then until the present the first defendant has been sole director and secretary.
[1]Marchesi v Apostolou [2007] FCA 986 at [41].
The company has two issued shares and a paid up share capital of $2.
Relief sought
In addition to an order for the removal of the caveat, the plaintiff seeks orders that:
(a)the first, second and third defendants be restrained from lodging or causing to be lodged on their own behalf or on behalf of any third party, any caveat on the above titles;
(b)until further order the fourth defendant reject any caveat or other dealing lodged for registration on the above titles unless such caveat or other dealing is lodged by leave of the Court, on behalf of the plaintiff or by a third party with the written consent of the plaintiff; and
(c)the first, second and third defendants pay the plaintiff’s costs on an indemnity basis.
Evidence
The application was supported by two affidavits sworn by the plaintiff. The first defendant swore an affidavit in opposition. Neither deponent was cross-examined.
The hearing
At the hearing I heard counsel and the first defendant at some length. Then, following the hearing, between 22 and 27 April the first defendant sent to my Associate 10 emails containing further submissions and comments. The plaintiff’s solicitors received the emails but did not respond to them. They did not need to, particularly in view of the thorough submissions I had received at the hearing. I have read the emails and I make further reference to them below.
First defendant’s bankruptcy
On 14 September 2004 the first defendant became bankrupt by virtue of a sequestration order made that day by a Registrar in the Federal Magistrates Court on the petition of Tasiopoulos Lambros & Co (“Tasiopoulos”), and the plaintiff was appointed trustee of the bankrupt estate.
The first defendant did not take this lying down, as the following history reveals. On 17 September he sought a review of the Registrar’s decision, which application was dismissed by a Federal Magistrate on 13 October[2]. Not content, on 3 November he appealed therefrom to the Federal Court of Australia (proceeding VID 1348/2004) (“the appeal proceeding”). On 4 November he filed a Notice of Motion in the appeal proceeding seeking a stay of his bankruptcy, an order that the plaintiff remove caveats lodged by him on the titles to the three properties, and that the plaintiff’s actions as trustee be set aside; Sundberg J dismissed the application on 11 November. Undaunted, on 14 December 2004 the first and second defendants filed a Notice of Motion in the appeal proceeding, again seeking a stay of the bankruptcy and an order that the plaintiff remove his caveats. On 21 December Gray J added the plaintiff as a respondent to the appeal and referred the matter to mediation; subsequently, on 11 March 2005 Gray J adjourned the motion to the hearing of the appeal.
[2][2004] FMCA 690.
Not content to await determination of the appeal, on 11 May 2005 the first and second defendants commenced a proceeding in the Federal Court (VID 437/2005) against Tasiopoulos, the plaintiff and the mortgagee (HSBC Bank Australia Ltd) for orders that the plaintiff be removed as trustee in bankruptcy, his caveats be removed, the properties be returned to them, the mortgagee be restrained from realising Claremont pursuant to its security, and Tasipoulos pay all costs (“the removal proceeding”). On 10 June 2005 the plaintiff filed a Notice of Motion for the dismissal of the removal proceeding on the grounds of the lack of a cause of action and that the proceeding was otherwise frivolous and vexatious. The mortgagee filed a like motion.
On 29 September Gray J dismissed the appeal proceeding with costs[3].
[3][2005] FCA 577.
On 14 October Marshall J dismissed the removal proceeding save as to two aspects upon which he gave judgment on 20 October and dismissed the balance of the claim with costs[4].
[4][2005] FCA 1471.
Still undaunted, on 28 November the first defendant applied (in a fresh proceeding VID 1545/2005) for an extension of time in which to apply for leave to appeal from the decision of Marshall J; Merkel J dismissed this application on 3 February 2006[5].
[5][2006] FCA 37.
Then, having rolled into 2006, in January the first defendant commenced another application in the Federal Court (proceeding VID 74/2006) against Tasiopoulos and the plaintiff seeking a stay or discontinuance of his bankruptcy, removal of the plaintiff as trustee, and compensation. On 6 February Ryan J dismissed the application with costs[6].
[6][2006] FCA 69.
All else having failed, on 30 June 2006 the first defendant turned to the High Court with an application for special leave to appeal from the 29 September 2005 order of Gray J. Before this application was determined the first defendant sought a stay of his bankruptcy; Hayne J refused this application on 24 August 2006. Then, on 14 June 2007 the High Court refused special leave to appeal.
Following all this futile activity of the first and second defendants, with all the vexation and costs thereby occasioned, on 15 October 2007 the first defendant was discharged from bankruptcy by operation of law pursuant to s 149 of the Bankruptcy Act 1966 (“the Act”).
The plaintiff continues to be trustee of the first defendant’s bankrupt estate.
The subject properties and beneficial ownership
When the first defendant became bankrupt he was the sole registered proprietor of the Alfriston, St Kilda and Claremont properties.
From the outset of the bankruptcy the first defendant maintained that he was not the beneficial owner of the properties, and that he held them on trust for the Vasiliou Family Trust of which Optquest was formerly the trustee.
On 24 March 2005 the plaintiff commenced an application in the Federal Court (proceeding VID 235/2005) for declarations and orders that the properties were beneficially owned by the first defendant at the date of his bankruptcy, and that they had vested in the plaintiff pursuant to ss 58 and 116 of the Act. The respondents to the application were the second defendant (as first respondent) in her capacity as trustee of the Vasiliou Family Trust and the first defendant (as second respondent).
On 23 August 2006 Weinberg J gave judgment in favour of the plaintiff[7]. This judgment was successfully appealed against, as I refer below.
[7][2006] FCA 1122.
On 4 September 2006 the second defendant lodged a caveat no. AE584209F over the title to each of the properties claiming an estate in fee simple. She did so as trustee of the Vasiliou Family Trust.
On 20 September 2006 the plaintiff filed a Notice of Motion in the proceeding seeking the removal of the caveat and an order that the first defendant deliver up the duplicate certificates of title to the St Kilda property or provide an affidavit as to their whereabouts. The first and second defendants having then lodged an appeal against the judgment and orders given and made on 23 August 2006, on 28 September 2006 Jessup J adjourned the Notice of Motion to a date to be fixed with an order that if it were not brought back on for hearing within 28 days of the determination of the appeal it stand dismissed. As it ultimately transpired, in view of the fact (as I refer below) that the Full Court remitted the proceeding for retrial, the plaintiff did not cause the Notice of Motion to be fixed for hearing and accordingly it stood dismissed.
On 21 December 2006 the Full Court of the Federal Court allowed the appeal from, and set aside, the judgment and orders of 23 August 2006 and remitted the proceeding for retrial. The retrial was had before Jessup J who gave judgment in favour of the plaintiff on 4 July 2007[8].
[8]Marchesi v Apostolou [2007] FCA 986.
Jessup J found that the properties were beneficially owned by the first defendant at the date when he became bankrupt. Accordingly, he declared that the beneficial title to the Alfriston, St Kilda and Claremont properties had vested in the plaintiff pursuant to s 58 of the Act. He also ordered that within 28 days the first defendant deliver to the plaintiff an instrument of transfer, duly executed by him as vendor under the Transfer of Land Act 1958, in relation to each of the properties, and otherwise stood the matter over in relation to costs and an application by the second defendant for leave to make a cross-claim against the plaintiff. At a further hearing on 20 July 2007 Jessup J set aside the order requiring the first defendant to deliver an instrument of transfer, gave the plaintiff leave to apply for an order in substitution, and otherwise adjourned the matter to 13 August 2007.
On or about 24 July 2007, in proceeding VID 656/2007 the first and second defendants appealed against the orders made on 4 July 2007.
On 13 August 2007, on the first and second defendants’ undertaking to prosecute their appeal with all expedition, and on the plaintiff undertaking not to deal with or dispose of the properties pending the hearing and determination of the appeal, Jessup J ordered that:
(a)within seven days the second defendant deliver up to the plaintiff the duplicate certificates of title in respect of the St Kilda property;
(b)within seven days the second defendant do all things necessary to effect the removal of caveat no AE584209F lodged in respect of the properties;
(c)the plaintiff have liberty to apply pursuant to O 37 r 3 of the Federal Court Rules in the event the second defendant not comply with the orders,
(d)the first and second defendants pay the plaintiff’s costs of the proceeding except for certain of those costs,
(e)the second defendant’s application for leave to cross-claim be dismissed, and
(f)the first and second defendants pay the costs of a Notice of Motion dated 27 July 2007.
On or about 20 August 2007, in proceeding VID 755/2007 the first and second defendants appealed against the orders made on 13 August 2007.
On 14 July 2008 the Full Court of the Federal Court dismissed the appeals from the orders of Jessup J of 4 July 2007 and 13 August 2007. On 17 October 2008 the High Court refused special leave to appeal from the judgment and order of the Full Court.
Registration as proprietor of Claremont
It is convenient now to refer to the course of events as the plaintiff sought to procure the registration of himself as proprietor of Claremont. I refer only to Claremont in this regard as it is that property which the plaintiff desires to sell, and for the purpose of facilitating such sale seeks the removal of the subject caveat.
Following the orders of 4 July 2007 the plaintiff sought to become registered as proprietor of Claremont. This registration required a transmission application accompanied by the duplicate certificate of title which was held by the registered mortgagee HSBC Bank Australia Ltd. The plaintiff instructed solicitors to take the necessary steps but the mortgagee refused to produce the duplicate certificate of title and the Registrar of Titles suggested that the appropriate relief should be sought from a Court. The plaintiff took that course by way of a Notice of Motion filed in the Federal Court proceeding (VID 235/2005) on 9 December 2008 which also sought orders for the removal of a caveat and related orders.
On 17 December 2008 Heerey J ordered, among other things, that within seven days the mortgagee endorse the plaintiff’s transmission application with an order to register and make the duplicate certificate of title to Claremont available to the plaintiff to enable him to become registered as the proprietor thereof. Heerey J also made orders on the caveat aspect, to which I refer below.
The first defendant sought a stay of the orders of Heerey J (by motion in proceeding VID 1062/2008) but that was refused by Marshall J on 23 December 2008.
The first defendant then sought leave to appeal from the orders of Heerey J and Marshall J but that leave was refused by Tracey J on 2 February 2009[9].
[9][2009] FCA 66.
The final step in this aspect of the saga is that on 24 December 2008 the plaintiff’s transmission application was lodged with the Registrar of Titles and the plaintiff was duly registered on title as the proprietor of Claremont.
State of the administration
As at the date of swearing his affidavit on 7 April 2009 the plaintiff had received claims from creditors of $397,932.87 of which he had admitted claims totalling $244,293.47. Some claims have either not been admitted, or admitted in part, or remain for consideration.
There is Tasiopoulos whose claim for costs as petitioning creditor is $3,094.90 but which have not been taxed and cannot be admitted; further, the costs may actually be greater by reason of various applications.
There is the City of Stonnington with claims for $53,892.81 (in relation to Claremont) which have not been admitted, and the City of Port Phillip for $54,200.91 (in relation to Alfriston and St Kilda) and admitted to $27,551.91, who may be secured creditors as chargees pursuant to ss 156(6) and 175 of the Local Government Act 1989, and the former of which has lodged a caveat over Claremont. At this stage the plaintiff has determined not to require either to elect between withdrawing their claim in the estate or delivering their security to him until such time as funds become available in the estate. Notwithstanding his position, the City of Stonnington elected to withdraw its claim in the estate.
There is also the State Revenue Office whose claim of $34,745.79 for unpaid land tax is secured by a charge on each property under s 66 of the Land Tax Act 2005. In view of the security of the charge the plaintiff has not admitted nor adjudicated on the claim and not determined to require the creditor to elect as to its security.
On 31 October 2008 creditors approved the plaintiff’s claim for remuneration both for past work and work to completion of the administration of the estate, as follows:
(a) remuneration to 5 September 2008
$269,286
(b) remuneration to completion $55,000 (c) disbursements to 5 September 2008 $151,864 (d) solicitor’s costs and disbursements $879,771 (e) counsel’s fees $139,010
As at 7 April 2009 the plaintiff has not received any remuneration nor been reimbursed for the majority of disbursements paid by him in the estate as there have not been sufficient funds from which to make payment. He has received rental of $5,500 from Claremont and recovered limited funds under an indemnity held from two creditors of the bankrupt estate which he has applied towards meeting some of the disbursements. He has also obtained a series of costs orders against the first and second defendants which thus far have not been enforced.
The plaintiff’s solicitors have acted since October 2004 without rendering an invoice for their professional fees. The plaintiff deposed to his belief that as at 23 March 2009 his solicitor’s claim for remuneration was not less than $783,167 including GST. The plaintiff has contracted to pay an uplift fee on this amount in accordance with the Legal Profession Act 2004.
The plaintiff deposed that Alfriston, St Kilda and Claremont are the only substantive assets of the estate of the first defendant. Claremont is the most valuable. The plaintiff anticipates that a sale of Claremont will produce a surplus after payment of all encumbrances, the costs of sale, meeting his claims for remuneration and expenses, and paying a first and final dividend to creditors so as to satisfy their claims in full. For this reason, the plaintiff determined that when he is in a position to realise the assets of the estate he would realise Claremont first, as after the realisation of that property it may not be necessary to realise Alfriston or St Kilda. The plaintiff’s expectation of a surplus is, of course, based on his costs and expenses being of the order indicated above. Doubtless it is hoped that actions of the first, second and third defendants do not alter that expectation. The plaintiff deposed further that he had refrained from realising the properties until determination of the appeal to the Full Court of the Federal Court and the application for special leave to appeal to the High Court. Even then the delay in becoming registered on the title to Claremont and the need to obtain the removal of several caveats lodged over it so as to ensure he can deliver a clear title at settlement, has delayed a marketing campaign.
Caveats
I referred at [4] above to caveat no. AG265788X which is the subject of the present application for removal. This caveat was preceded by two caveats – no. AE584209F and no. AG228993G – also lodged in respect of the three properties. Caveat no. AE584209F was lodged by the second defendant as trustee of the Vasiliou Family Trust, while the other caveats were lodged by or on behalf of Optquest as trustee of the Vasiliou Family Trust. Each caveat was based on the premise that the beneficial interest in each property was owned by the Vasiliou Family Trust.
It will be necessary to analyse the reasons for judgment of Jessup J as they bear upon the efficacy of the ground claimed in the subject caveat no. AG265788X. Before doing so, however, I refer to the history of events which commences with the order made by Jessup J on 13 August 2007 that within seven days the second defendant effect the removal of caveat no. AE5842095F lodged on title over each property. The second defendant did not comply with that order.
On 4 December 2008 the plaintiff received correspondence from the first defendant which stated that Optquest had been reinstated, the second defendant had withdrawn caveat no. AE584209F, and that Optquest, the “true Trustee of the Vasiliou Family Trust” had lodged a caveat over each property claiming an interest by virtue of:
(a)the Deed of Trust dated 12 August 1987 by which Optquest was appointed as trustee of the Vasiliou Family Trust;
(b)the Deed of Gift dated 8 October 1987 which Andrew Vasiliou also known as Andreass Vasiliou made in favour of Optquest; and
(c)the Sale Contract Heads of Agreement dated 25 March 1989 between Andrew Vasiliou and Optquest.
The letter stated that the Land Titles Office could only accept one claim per caveat so the last two grounds were deleted.
The plaintiff then caused to be conducted a search of the titles to the properties which disclosed that caveat no. AE584209F had been removed from each property on 3 December 2008. The search further disclosed that on 3 December 2008 a further caveat no. AG228993G was lodged by Optquest over the titles to the three properties. Having discovered this, the plaintiff brought the matter of this caveat forward in the application dealt with by Heerey J on 17 December 2008. In addition to the order concerning the plaintiff’s transmission application referred to at [33] above, Heerey J also ordered that:
(a)within seven days the first defendant cause Optquest to effect the removal of caveat no. AG228993G,
(b)in the event of non-compliance with that order, a Registrar of the Court be directed and appointed to execute and provide to the plaintiff a withdrawal of the caveat in registrable form,
(c)the first and second defendants be restrained from lodging or causing to be lodged on their own behalf or on behalf of any third party any caveat in respect of the properties, and
(d)the first and second defendants pay the plaintiff’s costs on an indemnity basis.
It is to be noted that as at 3 December 2008 the first defendant was the sole director of Optquest.
In breach of the order of Heerey J the first defendant did not cause the caveat to be removed.
Then, upon the plaintiff’s application on 27 February 2009 (in proceeding VID 235/2005), Tracey J ordered that a Deputy District Registrar of the Court be directed and appointed to execute for and on behalf of Optquest and provide to the applicant a withdrawal of caveat no. AG228993G, and that the first defendant pay the plaintiff’s costs of the hearing that day on an indemnity basis. Pursuant to that order, on 2 March 2009 the Deputy District Registrar delivered an executed withdrawal of caveat to the plaintiff and the caveat was duly removed on 10 March 2009.
Not to be defeated, the first and second defendants filed an application for special leave to appeal from the orders of Tracey J (in proceeding VID 161/2009) which was listed for hearing on 19 March 2009 but which was adjourned at the request of the first defendant. I do not know what has occurred with that application.
In the meantime, however, on 24 December 2008 Optquest lodged caveat no. AG265788X, which is the subject of the present application. This caveat has not been the subject of application in the Federal Court. The caveat was signed by Panagiota Vasiliou who at the time of lodging was the sole director and secretary of Optquest. She is a daughter of the first and second defendants. The plaintiff contends that Jessup J’s judgment of 4 July 2007 precludes the caveat. Thus I must consider the judgment.
Jessup J judgment of 4 July 2007
Jessup J commenced his judgment by identifying that the first defendant (the second respondent in the case before him), being the registered proprietor of the three properties in question, claimed “that the beneficial interest is owned by the Vasiliou Family Trust, of which his wife … is the trustee”[10]. He stated that:
“2 The respondents base their claim that the beneficial interest is held by the family trust upon two circumstances: first, they claim that Mr Vasiliou made a gift, which was perfect in equity, of the properties to the trust in October 1987; and secondly, and probably in the alternative, they claim that the trust obtained the beneficial interest pursuant to an agreement between Mr Vasiliou and the trust in March 1989.”
The plaintiff, who claimed a declaration that the beneficial title to each property had vested in him pursuant to s 58 of the Act, disputed the efficacy in equity of the gift of October 1987 and the March agreement. Alternatively, the plaintiff submitted that the gift and agreement were undertaken to defraud the first defendant’s creditors at the time and were thus void as against the plaintiff pursuant to s 121 of the Act[11]. A further alternative argument of the plaintiff was that if the first defendant held the legal but not the beneficial interest in the properties as a result of either of these transactions, the first defendant was entitled to an indemnity out of the trust property for certain debts he had incurred in relation to them, which right vested in the plaintiff, and in consequence the properties were charged with the payment of certain remuneration, liabilities and expenses. I mention this alternative part of the case but do not otherwise refer to it as it is not relevant to the present issue concerning the caveat.
[10]Judgment para [1].
[11]Judgment para [3].
The course of the judgment was then to refer to the facts (paras [7] to [48]), discuss credibility issues (paras [49] to [55]), determine the efficacy of the 1987 gift (paras [56] to [77]) and – assuming the gift was effective in equity – whether it was void under s 121 (paras [78] to [97]), then determine the efficacy of the March agreement (paras [98] to [119]) and – assuming it gave rise to an equitable interest in the properties – whether it was void under s 121 (paras [120] to [134]), and finally the matter of the first defendant’s right of indemnity.
I interpolate that the caveat the subject of the proceeding before me is based upon the March agreement. I refer to this as the Sale Contract, as it is referred to in the subject caveat. This was the agreement referred to in the first defendant’s letter to the plaintiff referred to at [47] above. I also interpolate that the Deed of Gift referred to in that letter is the gift referred to in the above quote from Jessup J’s judgment.
In his judgment Jessup J set out a history of the first defendant’s ownership of the properties, and their use, and problems the first defendant experienced with income tax which led, in 1987, to an investigation by the tax authorities. In September 1987 the first defendant found out that he had been assessed to tax of $557,386.23 in respect of the years 1981-1986, when he had feared he might be assessed for about $60,000. The first and second defendants decided to establish a family trust, and to place the three subject properties in the trust. Solicitors and accountants acted for the first and second defendants, the accountant apparently recommending a restructure of affairs. In August or September 1987 the solicitor as settlor executed a Deed of Settlement (dated 11 August 1987 being the date of incorporation of Optquest), by which the Vasiliou Family Trust was constituted with Optquest as trustee, and the first defendant as appointor with power to remove the trustee and appoint any additional or replacement trustee. The specified beneficiaries were the first and second defendants’ children and the general beneficiaries were the special beneficiaries and other persons including the first and second defendants.
On 8 October 1987 the first defendant executed a document in which he stated that he made a gift of the three properties to the Vasiliou Family Trust, executed instruments of transfer of each property from himself as transferor to Optquest as transferee, and for stamp duty purposes made a statutory declaration as to the value of the properties. As it transpired, the transfers were not stamped or lodged for registration at the Land Titles Office, which Jessup J found was on instructions of the first defendant to the solicitor given in March 1988 because (as the solicitor said in evidence) the stamp duty was too expensive.
On 11 March 1988 the Deputy Commissioner of Taxation filed a Supreme Court writ claiming $522,996.82 on account of tax for the years 1981-1986. On 13 July 1988 the Deputy Commissioner of Taxation commenced a further proceeding against the first defendant also in this Court claiming unpaid sales tax of $160,849.43.
In March 1989 the first defendant settled the income tax claim for $113,000 payable as to $73,250 on 15 March 1989, and the balance by equal instalments in April, May and June 1989. The first defendant duly paid the full amount using funds provided by Optquest by way of a draw down on a mortgage account of Optquest with Citibank, that mortgage relating to a property at 50 Great Valley Road owned by the first defendant.
On 25 March 1989 the first defendant and Optquest executed a document described as “Heads of Agreement – Sale Contract” (“Sale Contract”). I interpolate that this is the Sale Contract upon which the subject caveat AG265788X is based. The sale contract contained the following operative terms:
“1.OPTQUEST PTY LTD is the Trustee Company of the VASILIOU FAMILY TRUST appointed on the 12th August 1987 at Melbourne in the State of Victoria.
2.ANDREW VASILIOU he is the donor of three properties named bellow vested in the Family Trust since the 8th of October 1987 originated by a DEED OF GIFT executed and declared on that day by the donor.
3.The properties that the equity & purchase and payment is made for in this agreement are:
a)5/3 Alfriston, Elwood Vic 3184
b)10 Claremont, St South Yarra Vic 3141
c)18 St Kilda Road, St Kilda Vic 3182
4.The equity in those properties at the time of the gift being the 8th October 1987 is calculated and agreed to be of the sum of $182,000.00 (one hundred and eighty two thousand dollars).
5.The parties agree that this is a special payment and is made under special circumstance and is one off such payment and is irrevocable and final and full settlement of the equity amount on all above mentioned properties.
6.The purchaser being OPTQUEST PTY LTD acting on behalf of the Family Trust will not be responsible for any further demands lodged by any other parties against Andrew Vasiliou from this day onwards.
7.Andrew Vasiliou agrees that he will signed and execute any further documents that deem necessary to pass Title to the Trust on all properties names in this agreement in favour of the Trustee Company or to its any subsequent appointed Trustees of the Vasiliou Family Trust.
8.Further Andrew Vasiliou agrees not to deal with the above mentioned properties without a written consent and permission from the Trustee of the Trust.
9.Existing mortgagers or payments of rates and outgoings are as always has being is the responsibility of Family Trust and all income from those properties or profits it is the full entitlement to the Family Trust.
10.This agreement is enforceable upon the executors of each party in the even of the death of Andrew Vasiliou.
11.The payment of the above mentioned amount by the Trustee Company on behalf of the Family Trust is at no way an interpretation that the gift made by the donor Andrew Vasiliou on the 8th October 1987 is somewhat effected by this payment or made void or withdrawn by the donor in any way.
12.The payment of the equity to Andrew Vasiliou it allows the first name on this contract to enforce its rights and that of the Family Trust if deem necessary to be applied.
13.This agreement allows the bearer to deal with all that is necessary to transfer and to call in mortgagers and pay same surrender all deeds and duplicates of Titles from the relevant Bank or building Society or financier.”
Relevantly to the present case, the chronology picks up at 1 July 1995 when the first defendant, as appointor under the trust, removed Optquest as trustee of the Vasiliou Family Trust and appointed himself in lieu. As mentioned earlier, on 7 July 1995 Optquest was deregistered. Subsequently, on 1 July 2003 the first defendant as appointor removed himself as trustee and appointed the second defendant in lieu. Subsequently the first defendant reappointed Optquest as trustee; if he had not done so Optquest could not have been a competent caveator.
In concluding the discussion of the facts Jessup J noted that in his statement of affairs dated 13 October 2004 the first defendant stated that the Vasiliou Family Trust owned the three properties. It was the first defendant’s claim that he did not beneficially own those properties that led to the proceeding. Then, after dealing with some issues concerning the credibility of the first defendant, in which conclusions adverse to the first defendant were expressed, Jessup J proceeded to consider the efficacy of the 1987 gift.
As to that, the question was whether by the Deed of Gift the first defendant had divested himself of the equitable interest in the properties. Jessup J concluded that he had not so divested himself. That was because (for reasons discussed) the gift was imperfect in equity, and thus would not be enforced under the principle in Milroy v Lord[12] as stated in Corin v Patton[13]. And, as under the Torrens System a donee cannot secure registration in his name without a transfer executed by the donor, it is necessary that the donor execute and deliver the transfer to the donee; Brunker v Perpetual Trustee Co Ltd[14]. The instruments of transfer executed by the first defendant “were never delivered to Optquest”. They remained in the custody of the first defendant or his agent throughout, and the first defendant “as donor did not, therefore, do everything necessary on his part to vest the legal title to the subject properties in Optquest as donee. It follows that equity will not recognise the gift as complete and that, subject only to the transaction of March 1989 to which I shall refer presently, Mr Vasiliou held the full beneficial title to the subject properties at all times”[15].
[12](1862) 4 De G F & J 264.
[13](1990) 169 CLR 540 at 559 per Mason CJ and McHugh J, 582 per Deane J.
[14](1937) 57 CLR 555 at 602-603 per Dixon J, 609 per McTiernan J; and as to which see Corin v Patton (1990) 169 CLR at 558 and 560 per Mason CJ and McHugh J, 582 per Deane J.
[15]Judgment para [77].
Jessup J then considered the alternative case of the plaintiff that the transfers were void as against him pursuant to s 121 of the Act. Assuming, for this purpose, that the gift was effective in equity and that absent the transfers the subject properties would probably have become part of the first defendant’s bankrupt estate and/or available to his creditors, Jessup J concluded that the requirements of s 121(1)(a) and (b)(i) and (ii) were satisfied and, hence, the gift was void as against the plaintiff. Jessup J also concluded that s 121(2) was not satisfied.
Jessup J then turned to consider the first and second defendants’ alternative case that the Sale Contract operated to pass the beneficial title in the three properties to Optquest; or, more accurately, to impose upon the first defendant an equitable obligation to hold the properties for the benefit of Optquest[16]. He found that of the amount of $182,000 Optquest was liable to pay under clause 4 of the Sale Contract Optquest had paid $175,320.24, and that Optquest had not paid rates and outgoings pursuant to clause 9. The total sum owing was $75,331 not including the $34,745.79 for which the State Revenue Office did not seek to prove. These were substantial sums when measured by reference to the valuations of the properties stated in the Sale Contract.
[16]Judgment para [104].
In the light of these findings Jessup J considered the effect of the Sale Contract from two points of view. First, whether the Sale Contract was to be regarded as a contract for the sale of land under which the equitable title passed to the purchaser. Secondly, whether the true situation was that the Sale Contract conferred an option to purchase.
On the first hypothesis of a contract for the sale of land, Jessup J observed that if Optquest could not obtain specific performance of the Sale Contract, “the better view would seem to be that no equitable interest would have arisen”: Chang v Registrar of Titles[17]. Here the fact was that Optquest had not paid the purchase price and was (as was the second defendant as successor trustee) in continuing default. The question was whether specific performance would be granted. Jessup J said[18] that:
“In the case of a contract of sale which remains unperformed by the purchaser, whether or not an equitable interest passes depends on whether the purchaser would obtain specific performance. That is to say, to assert that the purchaser has acquired an equitable interest is to go no further than to state the consequences of the circumstance that equity would, in the facts as they exist, grant specific performance: see Brown v Heffer (1967) 116 CLR 344 at 349; Stern at 522-523; Tanwar Enterprises Pty Ltd v Cauchi (2003) 217 CLR 315 at 332-333. Generally, specific performance will not be ordered where the party seeking that relief remains in breach of his or her essential obligations under the contract: Australian Hardwoods Pty Ltd v Commissioner for Railways [1961] 1 WLR 425 at 432-433; Bahr v Nicolay [No 2] (1988) 164 CLR 604 at 619. The way it was put by Mason and Deane JJ in Legione v Hateley (1983) 152 CLR 406 at 449 was that it was ‘only in exceptional circumstances that specific performance will be granted at the instance of a purchaser who is in breach of an essential condition’.”
[17](1976) 137 CLR 177 at 181 and 190.
[18]Judgment para [110].
Jessup J held that the defaults constituted breaches of essential conditions of the Sale Contract. Further, neither Optquest nor the second defendant had sought specific performance. Jessup J concluded that had the second defendant done so immediately before the first defendant’s bankruptcy:
“… she would have been met with the circumstance that she remained in breach of the March 1989 agreement in respects which were, I consider, essential. She would not have obtained that remedy, and did not therefore, have an equitable interest in the subject properties.”[19]
[19]Judgment, para [111].
On the second hypothesis of an option to purchase, which Jessup J considered to more closely accord with the terms of the Sale Contract, the option was exercisable by paying $182,000 and calling for the transfer of the legal title. Jessup J held on the basis of the authorities referred to in the passage quoted above, and further authorities, that the holding of an equitable interest under an option is commensurate with the entitlement to specific performance[20]. As Optquest could not obtain specific performance in the capacity of purchaser it could not do so in the capacity of grantee under an option.
[20]Judgment paras [113]-[115].
An alternative path to these conclusions was that the grantee’s unremedied default in performing ongoing obligations under the Sale Contract “produced the result that, at the time when the grantee sought to exercise the option, as a matter of contract there was no option at all”[21]. Considering that the trustee of the family trust (then the second defendant) was in the position of such a grantee, the trustee did not:
“… as at the date of Mr Vasiliou’s bankruptcy, have an option to purchase the subject properties. I so conclude because of the unpaid rates and outgoings, and regardless of whether there was a readiness and willingness to make good the shortfall in the payment of the $182,000 to Mr Vasiliou.”
[21]Judgment para [117].
Having so concluded, Jessup J stated that it was not easy to identify any further basis on which to conclude that Optquest derived an equitable interest in the subject properties as a result of the Sale Contract. He did not accept that payment of most of the $182,000 necessarily converted the transaction of October 1987 into “an exchange for consideration – or made Optquest anything more than a volunteer in relation to that transaction”. Nor did he accept that the “equity” in the subject properties was “tradeable as a commodity, as it were”. As by reason of incomplete performance of Optquest, equity would not intervene to give effect to the first defendant’s obligation (if there were one) under the Sale Contract to transfer title, it “would not give effect to the agreement as some kind of commercial transfer of the equitable title”[22].
[22]Judgment para [118].
For these reasons Jessup J held that the Sale Contract “did not give rise to a situation in which Optquest held the beneficial title to the subject properties”[23].
[23]Judgement para [119].
Jessup J then considered the plaintiff’s alternative case that the Sale Contract was void pursuant to s 121 of the Act. Again, this was on the assumption that the Sale Contract gave rise to an equitable interest in Optquest in the subject properties, and that that would constitute a transfer of property for the purpose of s 121. A further assumption was that the properties would otherwise probably have been part of the first defendant’s bankrupt estate and/or available to his creditors. On a consideration of the facts, Jessup J found that the main purpose in entering into the Sale Contract was to prevent the subject properties from becoming divisible among the first defendant’s creditors. He therefore held that such transfer as may have been effected by the agreement was void as against the plaintiff[24].
[24]Judgment para [134].
Having so concluded, Jessup J made the declaration and orders referred to at [26] above.
It is, of course, apparent that Jessup J had wider issues to consider than the single issue of the existence of the ground of claim in caveat no. AE584209F which, for the reasons mentioned earlier, was not before him for removal. Nevertheless, Jessup J’s conclusions clearly rendered the caveat unsustainable, and unsurprisingly he ordered it be removed on 13 August 2007. Likewise, Jessup J’s conclusions concerning the Sale Contract bear upon, indeed deny, the existence of the ground claimed in the caveat before me, no. AG265788X.
Then, as noted above, appeals from the judgment and orders of Jessup J made on 4 July 2007 and 13 August 2007 were dismissed by the Full Court of the Federal Court, as was the subsequent application for special leave to appeal to the High Court.
Further matters
In his affidavit sworn on 7 April 2009 the plaintiff deposed that he had consulted an estate agent regarding the sale of Claremont who had advised of the risk of a downturn in the property market given the current economic climate and that the property should be put up for sale as soon as practicable. The plaintiff deposed that he had settled upon a marketing campaign which had not been commenced pending the outcome of the present application. That is to ensure that a caveat lodged by or on behalf of or at the direction of the first defendant over the title to Claremont does not adversely affect the prospect of achieving a satisfactory sale.
The plaintiff further deposed to the first defendant having sought to intimidate him and his lawyers with threats which had been reported to the Police, to allegations by the first defendant of conspiracy by the plaintiff, his lawyers and members of the judiciary “in a history of defamatory, scandalous and contemptuous communications taking the form of correspondence and submissions to me and the Courts”, to threats of the first defendant to sue him for damage allegedly done or caused to be done to the first defendant and his family trust, which matters, the plaintiff deposed, were relevant to the present application “as evidence of steps the first defendant had gone to [sic] try to circumvent and hamper the due administration of the bankrupt estate”.
As to the relief sought, the plaintiff deposed to his belief, based on the history of the matter and the conduct of the first defendant, that the first defendant will continue to attempt to obstruct the realisation of Claremont including by attempting to lodge caveats over the title.
The plaintiff concluded his affidavit by deposing to the first defendant having informed him from time to time that the trustee of the Vasiliou Family Trust had changed. Accordingly he (the plaintiff) was unable to say with certainty whether the trustee is the first defendant, Optquest or some other party.
First defendant’s evidence
I now refer to the matters deposed to by the first defendant in his affidavit. Although I do so in a summary way, and without mentioning all that he said, I have read the affidavit and bear the entire contents in mind.
The affidavit commences (in para 2) with an assertion of “severe corruptions involving in a criminal way the Plaintiff his Lawyers and several Federal Court Judges Magistrates and Registrars” and his former solicitor who (the first defendant says) gave false evidence at both trials. I do not further refer to statements of that nature which occur at other points in the affidavit.
In para 2 the first defendant states that the plaintiff implemented a plan against him, thinking that the three properties were the first defendant’s, and had caused him major losses of more than $600,000 in one property by evicting tenants. The first defendant further stated that he had suffered other losses running to about $2M on top of what the plaintiff is seeking to recover by selling Optquest property, plus his fees and charges.
In para 9 the first defendant deposed that Optquest’s caveats protected its legal entitlement “as purchaser and payer in full of all monies regarding the properties the subject of the ‘3 caveats’ and the current proceeding should not loose directions from this reality”. Optquest had nothing to do with his bankruptcy and associated debts incurred by the plaintiff; the beneficial owner was Optquest regardless.
The first defendant deposed that the court cases and appeals were issued and run against the wrong party (namely, the second defendant), the true owner and correct party being Optquest. Despite that, the decisions made at those hearings were “totally incorrect”. A “fresh approach and Court case must be implemented to deliver justice to Optquest Pty Ltd after all” (para 11). Further, orders made against a wrong party cannot be enforced as the plaintiff seeks to do (para 12).
The first defendant deposed that the plaintiff knew that Optquest was the true owner of the three properties (para 14) and what “he is doing right now is FRAUD because he knows the answers to his problem” (para 15 and see also para 16). Further on the first defendant deposed that none of the debts mentioned in the plaintiff’s affidavit were personally his debts “as such neither belongs to Optquest”. So the rush to sell the properties is “illegal and improper” (para 51).
In para 52 the first defendant stated that this Court, if it wanted to get involved, should know everything, and treat this proceeding “as the first time ever come before the Court”. It was the first time because it was the first proceeding against Optquest. He then (in para 53) stated that Optquest’s caveats were “genuine” because despite the earlier gift and the Vasiliou Family Trust issue, Optquest subsequently purchased the three properties.
The defendant then referred to the tax issue and the assessments, to being “blackmailed” to pay $113,000, and to he and his accountant having “decided to sell the equity that I had earlier gifted to the Trust through Optquest Pty Ltd calculated at that time to be a total amount gifted of $182,000”, so the Sale Contract was executed (para 55). For that purpose Optquest borrowed from Citibank, from which borrowing the first defendant paid the $113,000 (para 56). Further, Optquest had paid all mortgages, outgoings and all the agreed amounts (para 58).
In para 60 the first defendant referred to a number of documents including the Deed of Trust which appointed Optquest as trustee of the Vasiliou Family Trust, three transfers of land executed 8 October 1987 in favour of Optquest as trustee of the Vasiliou Family Trust, and stamp duty assessments issued by the State Revenue Office in regard to the three transfers.
Caveat removal – the Court’s approach
On an application for removal of a caveat the Court approaches the matter in a manner analogous to an application for an interlocutory injunction[25]. The caveator bears the onus of establishing that there is a serious question, or prima facie case, to be tried as to the existence of the interest claimed to support the caveat and, if so, that having regard to all relevant matters, the balance of convenience favours the maintenance of the caveat until trial.
[25]Goldstraw v Goldstraw (2006) V ConvR 54-712 at [30]; see also Lewenberg v Direct Acceptance Corporation Limited [1981] VR 344 at 347 where O’Bryan J stated that the respondent carries the onus of proof to justify maintenance of the caveat.
Submissions
Plaintiff
Counsel for the plaintiff submitted that the judgment and orders of Jessup J precluded any question arising as to the existence in Optquest of the claimed caveatable interest, or indeed of any beneficial interest being held by Optquest as trustee of the Vasiliou Family Trust. The caveat relied on the Sale Contract, but Jessup J had ruled, in a decision upheld on appeal, that the Sale Contract did not have the effect that Optquest held the beneficial interest in the properties. This conclusion removed any basis for the claim in the subject caveats. The judgment and orders constituted an estoppel upon the issue. While it was true that Optquest was not a named party to the proceeding the fact is that the then trustee of the Vasiliou Family Trust was the first respondent to the application and was sued in that capacity. Optquest was not sued as it did not then occupy the office of trustee. But Optquest’s absence as a named party did not matter: there was only one trust, the Vasiliou Family Trust, which trust continued throughout, it was either entitled to the benefit of the equitable interest or it was not, and the changing identity of the trustee for the time being was irrelevant to that issue.
For these reasons, and no new basis to support the caveat being brought forward (assuming it were possible to re-open the issue), there could be no question as to the existence of the caveatable interest, and the caveat should be removed.
If, however, it were considered that there was a serious question, or prima facie case, to be tried as to a caveatable interest, counsel submitted that the balance of convenience favoured removal of the caveat. The sale of Claremont would produce a fund sufficient to cover the claims of creditors and the plaintiff’s costs and expenses. Generally, too, it was preferable to leave the first, second and third defendants to a claim for damages against the plaintiff, which they could pursue if they wished.
Finally, counsel submitted that in the circumstances the orders restraining the lodging or receiving of further caveats should be made.
First and third defendants
The first defendant addressed submissions at some length. He gave me a history of the matter, going over the ground referred to in Jessup J’s judgment and in his affidavit, and in the course of which he provided me with much detail. It is unnecessary to set out all that he said, although I do not overlook it. Ultimately, and in summary, he made submissions to the following effect:
(a)The plaintiff had sued the wrong parties in the Federal Court proceedings. The correct party had been Optquest. The first and second defendants should be removed from the present proceeding.
(b)It cannot be assumed against Optquest that Jessup J’s judgment was correct.
(c)If Optquest had been sued in the Federal Court the plaintiff would have lost. The evidence established that Optquest had paid for the properties. Further, s 121 could not have been applicable when the first defendant did what he did in order to pay his liability to the Deputy Commissioner of Taxation, and the properties were transferred at above market value.
(d)If the ground of claim in the subject caveat was wrong or not open, the Court should (the first defendant so applying) validate the caveat by referring to the equitable interest.
(e)Optquest wished to claim against the plaintiff for loss and damage suffered as a result of his negligent or improper conduct of the bankruptcy. Knowing that Optquest was the true beneficial owner of the three properties, he should never have brought the proceeding to establish the contrary. Nor, having obtained possession of Claremont, should he have left it untenanted and vacant. Claremont had lain empty for years, and been vandalised.
(f)Recognising all matters advanced, the Court should exercise its discretion to apply justice. This meant, as I understood it, that the plaintiff’s application should be refused, the issue as to Optquest holding the equitable (and a caveatable) interest in the properties or at least Claremont should be re-litigated, and Optquest and/or the first defendant should be able to claim for their alleged loss and damage.
I referred earlier to the series of emails the first defendant sent to my Associate subsequent to the hearing. I have regard to the various matters stated therein, particularly as they bear upon the above submissions, and especially as they relate to the issues for determination in the present proceeding. In particular, it should be noted that the email of 26 April included the statement that Optquest also sought leave to file a claim against the fourth defendant (Registrar of Titles) for loss and damage suffered by reason of the Registrar having accepted the withdrawal of caveat executed by the Registrar of the Federal Court. As Optquest was not a party in the Federal Court proceeding the Court did not have jurisdiction to direct such execution by a Registrar. The first defendant submitted that before the Court determined the present application for removal, “the legality of the removal of the first lot” should be determined.
Decision
It is plain beyond argument that there is no serious question to be tried, or to put it another way there is no prima facie case to be tried, as to the existence in Optquest as trustee of the Vasiliou Family Trust of the equitable interest claimed. That is because the question whether the trust holds that equitable interest pursuant to the Sale Contract was squarely raised and litigated before, and decided by, Jessup J. The consequence is that his judgment determining the issue, together with his orders based thereon, constitute an issue estoppel precluding relitigation of the issue. It matters not that Optquest was not a party to that proceeding, because the trust acts through its trustee and the then trustee/caveator was a party. Optquest was a deregistered entity at all times relevant to the proceeding. Hence, there would have been no different result if Optquest had been a defendant in the proceeding determined by Jessup J.
This result would be the same whatever Jessup J’s decision had been as to the application of s 121 in relation to the Sale Contract.
I mentioned above that the first defendant applied, in effect, to amend the ground of claim in the caveat if I considered that the stated ground was wrong or not open. He submitted that the caveat be amended to refer to the equitable interest. But that was the issue dealt with by Jessup J and, relevantly, whether the equitable interest was held pursuant to the Sale Contract. And the caveator must be and remain Optquest in the capacity of trustee of the Vasiliou Family Trust. It is clear on the evidence that these are the factual premises. In the circumstances no amendment could alter the situation. The application is thus refused.
In conclusion then, no serious question or prima facie case is established as to the existence of a caveatable interest. The first defendant submitted, nevertheless, that I should allow the caveat to stand while he and/or the third defendant prosecuted claims for loss and damage against the plaintiff. It is not clear that the claim against the Registrar of Titles was also relied on as a reason to refuse the plaintiff relief; whether it was would not alter my decision.
Of course, the first defendant also wishes to relitigate the whole issue of the existence of an equitable interest. But, as I have said, such relitigation of the issue of the caveatable interest is precluded. As for claims for loss and damage, they can be prosecuted but any such proceeding must be brought separately. The present proceeding is spent on its determination by this judgment and the orders I will make. This is a proceeding for the removal of the subject caveat and the related relief, and that is all.
In my view it would be an erroneous exercise of discretion to refuse to order removal of the caveat or to order removal but require that the net proceeds of the sale of Claremont be set aside in an account pending determination of such claim for loss and damage as the first or third defendant may cause to commence against the plaintiff. Either course would discount the lack of a basis for the caveat and, further, would delay completing the administration of the first defendant’s bankrupt estate, merely to enable the commencement and prosecution of a claim for loss and damage. Regarding the matter overall, the balance of convenience clearly precludes the first defendant’s suggested approach.
For these reasons I will order that the caveat be removed.
That leaves for consideration the matter of the injunctive relief sought by the plaintiff, the terms of which are set out at [6] above. There is no need for this purpose to repeat any of the history of disputation that has beset the first defendant’s bankruptcy. In my view the history bespeaks the appropriateness, indeed necessity of the orders sought. Without such orders the probability, which I found reinforced by the first defendant’s address before me, is that on the removal of the present caveat the first defendant or someone at his behest, if not Optquest, will lodge another caveat based on the same matter as the subject caveat and those before it. The history, and the presentation before me, establishes sufficiently to my mind that the orders sought should be made.
That brings me to the question of costs. The plaintiff seeks indemnity costs. The circumstances of this case overwhelmingly warrant such an order. There are two aspects. First, there is the improper use of the caveat procedure, which is becoming all too common and which more and more is being met with special orders for costs. Secondly, the present case has aggravating features in its misuse of the caveat procedure. Here we have a caveat lodged in defiance of a judicial finding upheld on appeal, and preceded by the history of caveat removals and orders for indemnity costs. To put it mildly, the conduct in lodging the caveat was “a high-handed presumption” to borrow Tadgell J’s description of the conduct in AGC v De Jager[26].
[26][1984] VR 483 at 502.
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