Paul Weston and Anor (in their capacities as Liquidators of Karl Suleman Enterprises Pty Limited (In Liq) and Receivers of the interests of Karl Suleman in specified property) v Metro Apartments Pty Limited and Anor

[2002] NSWSC 876

CITATION:	PAUL WESTON & ANOR (in their capacities as Liquidators of Karl Suleman Enterprises Pty Limited (In Liq) and Receivers of the interests of Karl Suleman in specified property) v METRO APARTMENTS PTY LIMITED & ANOR [2002] NSWSC 876
FILE NUMBER(S):	SC 2329/02
HEARING DATE(S):	23/09/02
JUDGMENT DATE:	23 September 2002
PARTIES :	Paul Weston (First Plaintiff) Neit R Cussen (Second Plaintiff) Metro Apartments Pty Limited (First Defendant) James Jariv (Second Defendant)
JUDGMENT OF:	Einstein J

COUNSEL :	Ms Kim Bourke (Plaintiffs Mr B Coles QC, F Lever (Defendants)
SOLICITORS:	Coudert Brothers (Plaintiffs) Landerer & Company (Defendants)
CATCHWORDS:	Caveatable Interests - Corporations - Causes of action not conferred upon liquidators
LEGISLATION CITED:	Real Property Act 1900 Supreme Court Rules 1970
CASES CITED:	Air Services Australia v Zarb [unreported NSWCA, 26 August 1998, BC 9804215) Dey v Victorian Railway Commissioners (1948) 78 CLR 62 Esanda Finance Corporation Limited v Peat Marwick Hungerfords (1997) 188 CLR 241 General Steel Industries Inc v Commissioner for Railways NSW (1964) 112 CLR 125 Kirby v Sanderson Motors Pty Limited (2002) 54 NSWCA 135 Martyn v Glennan [1979] 2 NSWLR 234 Morton v Black (1986) 4 BPR 9164 Nominal Defendant v Manning (2000) 50 NSWLR 139 Penny Nominees Pty Limited v Fountain (unreported, NSWSC, 2 May 1989 Young J) Rajski v Bainton (1990) 22 NSWLR 125 Ralph Symonds Australia Pty Limited v Pacific Property Investments Pty Limited (unreported, NSWSC, 19 October 1988 Bryson J) Re Hitchcock (1900) 17 WN (NSW) 62 Spellson v George (1992) 26 NSWLR 666 Wickstead & Ors v Browne (1992) 30 NSWLR 1 Williams v Spautz (1992) 174 CLR 509
DECISION:	Plaintiffs to propound further pleadings.

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

Einstein J

Monday 23 September 2002 ex tempore
Revised 26 September 2002

2329/02 PAUL WESTON & ANOR (in their capacities as Liquidators of Karl Suleman Enterprises Pty Limited (In Liq) and Receivers of the interests of Karl Suleman in specified property) v METRO APARTMENTS PTY LIMITED & ANOR

JUDGMENT

The Judgment of Campbell J

1 On 26 July 2002 Campbell J delivered a judgment on an application to extend a caveat of the plaintiffs in these proceedings. For obvious reasons it is not necessary to do otherwise than to detail, to a certain extent, sections of what his Honour’s reasons included. The judgment is self-explanatory and is regarded as relevantly presently before the court. And for the reason that there is presently before the court an application by the defendants which the plaintiffs contend to be an attempt to re-litigate an issue albeit determined on an interlocutory application.

2 There are currently across applications before the court. The plaintiffs by notice of motion seek leave to join additional parties to the proceedings and leave to file and serve a statement of claim in the form annexed to the judgment. The defendants oppose any such leave being granted and pursue an application for an order that the plaintiffs withdraw caveat number 8813600P and that the plaintiffs be restrained from lodging any caveat in respect of the subject land upon the same grounds as those set out in that caveat or claiming an interest to the same effect as the interest claimed therein. The defendants further seek an order dismissing the proceedings pursuant to Supreme Court Rules Part 13 Rule 5.

The general background

3 In about December 1999, Karl Suleman Enterprises Pty Limited (In Liq) (‘KSE’), commenced operating what the plaintiffs allege to be an unregistered managed investment scheme (‘the Scheme’). The Scheme was operated as a shopping trolley collection service business and Karl Suleman and others apparently promoted the Scheme to potential and actual investors representing that investment in KSE would result in significant monetary gains for an investor, such gains being paid on a regular basis for a pre-determined period. The Scheme was apparently known as a ponzi on pyramid scheme.

4 The bulk of the funds received from new investors to the Scheme were not used to service payments to existing investors, but on the plaintiffs’ case, were misappropriated by Mr Suleman and others.

5 Initially, under the investment contracts issued to investors, the investment contracts purported to be sales of shopping trolley businesses. In fact, the shopping trolley businesses purported to be sold did not pass to the purported purchaser. These initial contracts apparently provided that the “purchaser” would receive from KSE a fixed sum of money on a regular basis for a pre-determined period.

6 By November 2000, the investment contracts had varied and the contract is said then to have represented that KSE was a manager carrying on business including but not limited to trolley collection services in Australia. The contracts are said to have represented that the investor agreed to “loan” to KSE a certain sum of money and in consideration the investor would receive a fixed sum of money on a regular basis for a pre-determined period.

Contracts for Sale Agreements

The purchase of Unit 43

7 Between April 2001 and June 2001 Mr Suleman is said to have paid to Mr Stoliar the sum of $100,00 on two separate occasions for the purchase of Unit 43, 16 - 30 Bunn Street, Pyrmont. [Affidavit of Michael Rowe sworn 13 August 2002, annexure “B and “C” see paragraphs 25-29 of draft Statement of Claim]

8 The liquidators have made plain that they have identified during the course of investigations, including but not limited to Section 596A and 596B examinations, that the monies paid by Mr Suleman to Mr Stoliar for the purchase of Unit 43 were monies belonging to KSE. On or about 26 June 2001, a contract for the sale of Unit 43 was executed. The purchaser was named as Mr Suleman. The purchase price was $1,000,000.

Investment/Agreement to Purchase - Units 41 and 42

9 At some time in June 2001, on or about 26 June 2001, Mr Suleman and Mr Jariv the second defendant, entered into an agreement, which terms the plaintiffs assert had been agreed to orally, whereby the second defendant would invest $1million dollars into a KSE Investment Scheme and Mr Suleman would purchase Units 41 and 42 of the same property for $950,000 each. The second defendant paid $600,000 for the investment contract and Mr Suleman paid $100,000 deposit for each of units 41 and 42. [Affidavit of James Jariv sworn 6 May 2002, paragraphs 22 and 25; affidavit of Michelle Harpur sworn 17 June 2002, annexure “A”, in particular, Tx pages 1327; 1334-1338; 1340-1344; 1347; paragraphs 30-34 of the draft Statement of Claim]

10 The plaintiffs assert that on 27 July 2001, the Investment Contract was executed by the second defendant [Paragraph 31 of draft Statement of Claim] and that between August 2001 and October 2001, contracts for the sale of Units 41 and 42 were executed. [Paragraph 34 of draft Statement of Claim]

11 The plaintiffs’ case is that the remaining $400,000 due under the investment contract was treated as part payment of the purchase price of the units. That contribution was made, so the plaintiffs contend, by KSE, as it provided the second defendant a benefit of receiving an investment return under a $1million dollar contract, whereas the second defendant had only paid $600,000. [Paragraphs 31, 38 of the draft Statement of Claim; affidavit of Michelle Harpur sworn 17 June 2002, annexure “A” at Tx 1342]

12 During the course of investigations into the affairs of KSE, the liquidators assert that they have identified the $100,000 deposit paid by Mr Suleman for the purchase of Unit 41 and the $100,000 deposit paid by him for the purchase of Unit 42 as monies belonging to KSE.

The judgment of Campbell J

13 Campbell J held that on the evidence before him there was a serious question to be tried about the type of connection that had existed between the second defendant having entered into the investment contract with KSE and Mr Suleman to enter the contracts to purchase Units 41 and 42. The serious question concerned the nature of the connection and whether it was such as to give KSE an estate or interest in the land comprised in Units 41 and 42. His Honour dealt with the evidence in that regard holding that such a serious question had been shown concerning whether the relationship between the entry for the contracts of purchase of those units and the entry of the investment scheme was such as to give rise to an equitable charge over the land. The holding was that his Honour was able to conceive the possibility of an argument that, at the least, there was such an equitable charge for that portion of the $350,000 which was an excess payment - excess in the sense that the second defendant was entitled to receive those payments only if he had paid $1 million to the scheme, whereas in fact he had paid only $600,000. In reaching this finding his Honour expressly made clear that his Honour was not seeking to limit the basis on which an equitable charge might exist but was merely seeking to identify a bare minimum which seemed to his Honour to justify the continuance of the caveat on the property.

The principles

Abuse of process

14 An attempt to re-litigate an issue which has been determined or lost is an abuse of process, Nominal Defendant v Manning (2000) 50 NSWLR 139 at 142 per Mason P.

15 Further, an interlocutory application seeking an order of a substantive nature, such as the withdrawal of a caveat, after a contested hearing where an order was made in contemplation that such an order would operate until the determination of the proceedings, will constitute an abuse of process in circumstances where no material change of circumstance has occurred since the interlocutory order was made, Nominal Defendant v Manning at 142 - 144.

16 Where a party has previously threatened that proceedings will be commenced unless the other party consents to or acquiesces to that party’s request, the commencement of the proceedings may constitute an abuse of process, Williams v Spautz (1992) 174 CLR per majority at 528.

17 The categories of abuse of process are of course never closed, Rajski v Bainton (1990) 22 NSWLR 125 at 128 per Handley JA.

Nature of equitable charge

18 A charge involves the notion of a monetary obligation due from one party to another, where the chargee may have recourse to some asset of the chargor to obtain satisfaction in the event of non-payment of an obligation.

19 A charge typically involves some item of property or fund being available to answer an obligation, such that, at least to the extent that the court’s assistance can be obtained, the chargee will have an “interest” in the charged property, and so become entitled to the protection of a court of equity to prevent dissipation of that property, and to compel its realisation for the agreed or identified purpose.

Withdrawal of Caveat

20 The effect of a caveat is analogous to a statutory injunction, which prevents registration of dealings until such time as the court can determine the rights of parties, Re Hitchcock (1900) 17 WN (NSW) 62.

21 The Courts approaches an application to extend a caveat in the same manner as it does for interlocutory injunctions, in so far as it considers whether the evidence satisfies the court that there is an arguable case that at the final hearing of the proceedings, the caveator may persuade the Court that the claim made in the caveat is established. [Penny Nominees Pty Limited v Fountain NSWSC, Young J 2 May 1989; Ralph Symonds Australia Pty Limited v Pacific Property Investments Pty Limited NSWSC, Bryson J, 19 October 1988; P W Young, Annotated Conveyancing and Real Property Legislation, 2nd Ed in footnotes contained on pages 559 and 566]

22 Where an application is made seeking unconditional summary removal of a caveat lodged, the principles to be considered when determining such an application are whether the caveat is irregular and whether the claim sought in the caveat is bad.

23 Where a caveat does has substance and proceedings have been commenced, an order summarily withdrawing the caveat is not made unless the court will not preserve the status quo by way of interim injunction, Morton v Black 91986 4 BPR 9164; Martyn v Glennan [1979] 2 NSWLR 234.

Summary Judgment - Order 3 of Metro Apartments’ application

24 The principles upon which a court is to exercise its discretionary power under Part 13 Rule 5 of the Supreme Court Rules are well established. The onus of satisfying the court that there is no real issue to be tried rests with the applicant. [Dey v Victorian Railway Commissioners (1948) 78 CLR 62; General Steel Industries Inc v Commissioner for Railways (1964) 112 CLR 125; Webster & Anor v Lampard (1993) 177 CLR 598; Air Services Australia v Zarb (unreported) NSWCA, 26 August 1998. See also Spellson v George (1992) 26 NSWLR 666 at 678 per Young AJA, with whom Handley JA and Hope AJA agreed]

25 In General Steel Barwick CJ put the matter as follows:

“Although I can agree with Latham CJ in the same case when he said that the defendant should be saved from the vexation of the continuance of useless and futile proceedings, in my opinion great care must be exercised to ensure that under the guise of achieving expeditious finality a plaintiff is not improperly deprived of his opportunity for the trial of his case by the appointed tribunal. On the other hand I do not think that the exercise of the jurisdiction should be reserved for those cases where argument is unnecessary to evoke the futility of the plaintiff’s claim. Argument, perhaps even of an extensive kind, may be necessary to demonstrate that the case of the plaintiff is so clearly untenable that it cannot possibly succeed……”

“It is sufficient for me to say that these cases uniformly adhere to the view that the plaintiff ought not be denied access to the customary tribunal which deals with actions of the kind he brings, unless his cause of action-if that be the ground on which the Court is invited, as in this case, to exercise its powers of summary dismissal –is clearly demonstrated. The test to be applied has been variously expressed: “so obviously untenable that it cannot possibly succeed”; “manifestly groundless”; “so manifestly faulty that it does not admit of argument”; “discloses a case which the Court is satisfied cannot succeed”; “under no possibility can there be a good cause of action”; ”be manifest that to allow them (the pleadings) to stand would involve useless expense”.

26 In Webster & Anor v Lampard, Mason CJ, Deane and Dawson JJ said at page 602:

“The power to order summary judgment must be exercised with “exceptional caution” and “should never be exercised unless it is clear that there is no real question to be tried”.

27 In Air Services Australia v Zarb, Rolfe AJA said:

“The demanding nature of the test is in no way lessened in circumstances where there are potential for difficult factual and legal issues to arise. Rather, as the decision in Webster made clear, it is heightened; see also Wickstead & Ors v Browne (1992) 30 NSWLR 1 and Esanda Finance Corporation Limited v Peat Marwick Hungerfords (1997) 188 CLR 241.”

Dealing with the issue

28 Clearly enough the applications presently before the court have some differences to the applications dealt with by Campbell J close to two months ago. But the present applications arise out of the leave granted by and reasons given by Campbell J in that judgment.

29 The new events which have led to the instant applications comprise the filing of the later caveat and the attempts by the plaintiffs to propound the new pleading including the attempts to join the new defendants.

30 A clear difficulty faced by Campbell J which I share in endeavouring to determine this second tranche of closely similar issues to those dealt with by his Honour, concerns the particularly difficult set of facts, matters and circumstances which apparently gave rise to transactions which the plaintiffs have to endeavour to dissemble albeit from an exceptionally awkward forensic position. The scheme is said to have been a ponzi on pyramid scheme. It is said to have been an unregistered management investment scheme. The information coming forward to the liquidators during their investigations has included section 596A and 596B investigations. Campbell J also took into account the note referred to in paragraph 9 of the judgment. As his Honour said in relation to this note:

"it includes the entries 'James - what to say'. I infer that 'James' is Mr Jariv. There are remaining entries on the page which include the figures of $950,000 and $1 million. There is also an entry that says 'we set up contract for $1 million' and 'units cost each $950,000 made out of $650,000 cash and contract for $300,000'.

31 As his Honour then held, these particular entries suggested that there was some sort of connection between the investment contract, and the purchase of the two units, but the nature of the connection cannot be ascertained from that document alone, unassisted by oral evidence. [Judgment at paragraph 9]

32 His Honour also took into account the fact that before the second defendant had actually paid the full $1 million amount, he was claiming to be a creditor of KSE for that sum. That was a matter which his Honour saw as appropriate to be taken into account in deciding whether there was a serious question to be tried.

33 The defendants in their detailed written submissions have taken a number of points of principle.

34 Their submissions include the following:

“In the present proceedings, it appears to be alleged that various parties (apparently acting as principals) entered into the following transactions:

(a) Suleman agreed to purchase Unit 41 and Unit 42 from Metro Apartments Pty Limited; and

(b) James Jariv agreed to advance $1m to KSE as an investment in that company.”

35 The submission does not it seems to me to do justice to the terms of paragraph 30 of the pleading sought to be propounded. Nor does it, it seems to me, take into account the allegation sought to be pleaded in paragraph 38 of the pleading. Those two paragraphs were in the following terms:

“30. Between June 2001 and July 2001, Jariv and Karl Suleman entered into an agreement whereby it was agreed that Jariv would sell to Karl Suleman and Karl Suleman agreed to purchase two units, for the sum of $950,00 each, and the manner and method of purchase was or was to the effect that:

(i) Jariv would invest in KSE under an Investment Agreement to the value of $1M (one million dollars);
(ii) Jariv would pay to KSW $600,000 for the Investment Agreement valued at $1M and receive payments for a fixed period of time on a regular basis for a pre-determined period, such return reflecting an actual investment of $1M;
(iii) The remaining $400,000 due to KSE under the Investment Agreement by Jariv would be treated as part payment towards the balance of the purchase price of the two units;
(iv) Karl Suleman would purchase two units from Metro Apartments, subsequently Units 41 and 42, for $950,000 each, totally an amount of $1,900,000.00 ($1.9M);
(v) Karl Suleman would on execution of contracts of sale of the two units pay 10% (percent) of the purchase price of each unit;
(vi) Karl Suleman would on settlement pay toward the balance of the purchase price cash of $650,000 for each unit, totally an amount of $1.3M.”
38. “Further, under the agreement between Jariv and Karl Suleman as set forth in paragraphs 25 to 29 inclusively, Jariv obtained a benefit of a contribution valued at $400,000 from KSE. The Investment Agreement formed part of the Contracts for Sale of Units 41 and 42 and in the circumstances, it is unconscionable and inequitable that Jariv retain the benefit of the contribution valued at $400,000 from KSE free of any obligation to treat that contribution as part payment by Karl Suleman towards the balance of the purchase price.”

36 The gravamen of the defendants submissions are put as follows:

"Accepting the plaintiffs’ case at its highest on its proposed pleadings:

(a) Jariv is not alleged to have paid either KSE or anyone else the remaining $400,000 of his anticipated investment;

(b) it is nowhere alleged that Jariv has any present or continuing liability to pay to KSE the remaining $400,000 of his anticipated investment (even if KSE were a plaintiff, it could not sue to recover unpaid subscription monies to any illegal investment scheme);

(c) KSE does not and cannot claim an order that Jariv pay the $400,000 to Metro Apartments in partial satisfaction of Suleman’s obligation under the contracts for sale - those contracts are acknowledged as being at an end, and Suleman is neither obliged (nor presently reading, willing or able) to pay Metro Apartments $1.3m on completion on the assumption (as the plaintiff appears to contend) that Jariv paid the remaining $400,000 at that time;

(d) if Jariv had (contrary to facts) actually paid to Metro Apartments the amount of $400,000 on account of Suleman’s obligation as purchaser under the contracts for sale of units 41 and 42 (but not otherwise), Metro Apartments would be liable to repay that sum on termination of the contracts. Whether it would be liable to repay to Mr Jariv or to Suleman need not be examined, since in the events that have happened, nothing is repayable;

(e) only if Metro Apartments had some such obligation to repay $400,000 could any suggestion arise as to the extent to which its property might be charged with the obligation to repay that sum;

(f) Mr Jariv is not and could not be alleged to have any proprietary interest in units 41 and 42 which he was capable of charging to secure any earlier obligation of his own to pay $400,000 to or at the direction of KSE;

(g) Metro Apartments is not (and could not be) alleged to have any monetary obligation of any kind to Suleman which it could be contended that his receivers are entitled to enforce. In this respect, it is important to note that there is no contention that any claim to a charge is based on:-

(i) the respective amounts of $5,000 paid for each of Units 41 and 42 in excess of the contractually stipulated deposits;

(ii) the amount of $100,000 paid for unit 43 in excess of the contractually stipulated deposit; or

(iii) the difference between the 7 payments of $50,000 made to Mr Jariv and the 7 payments which might have been made to him on the assumption that his original investment was $1m and not $600,000;


(h) Metro Apartments is not alleged to have any monetary obligation in an amount of $400,000 to KSE which (assuming KSE became a party) could be enforced by KSE against Metro Apartments, and become of the subject of a charge; and

(i) Metro Apartments is not alleged to have any cause of action against Jariv to compel him to pay $400,000 towards the former obligation of Suleman under the terminated contracts for sale."

37 The defendants then submit that the inability of the plaintiffs to identify the origin and nature and amount of the charge which is alleged has the result that the plaintiffs cannot support their current caveat. They rely upon Section 74F(5) of the Real Property Act which requires that a caveat must specify, amongst other things “(5) the prescribed particulars of the legal or equitable estate or interest to which the caveator claims to be entitled”. They then make the point that the present caveat asserts that the entitlement to the equitable charge arises by virtue of "consideration paid under the relevant contract or agreement for the acquisition of property". The defendants’ submission is that the only consideration that has ever been paid is the amount of the respective deposits.

38 The defendants’ submission is that a careful reading of the statement of claim sought to be propounded exposes the lack of transparency of reasoning processes involved in the manner in which the matter is sought to be pleaded. The defendants submission is as follows:

" 6 Paragraph 56 of the proposed Statement of Claim alleges that “the equity arising in favour of KSE ought to be satisfied by an equitable charge over units 41 and 42 to the value of $200,000 for each unit”.

7. It is wholly unclear what “the equity arising in favour of KSE” is. The pleading fails to comply with the basic rules that “a pleading of a party shall contain, and contain only, a statement in summary form of the material facts on which he relies” [SCR Part 15 Rule 7(1)]. Moreover, Part 15 Rule 13 provides that “a party must plead specifically any matter which, if not pleaded specifically may take the defendant by surprise”.

8. The proposed pleading in this, and many other respects, falls far short of the requirements of the rules. The threshold significance of observing the rules of court in these basic ways has recently been emphasized by the Court of Appeal in Kirby v Sanderson Motors Pty Limited [2002] NSWCA 44.

9. Moreover, paragraph 56 of the proposed Statement of Claim alleges that the conclusions contended for follow “by reason of the matters pleaded in paragraphs 25-29 and paragraphs 33 & 34”. Those paragraphs shortly provide:

(a) there was a contract for sale on 26th June 2001 of Unit 43 (wrongly said to be between Mr Stoliar and Suleman) for which a deposit of $200,000 was paid for and accounted to Metro Apartments, being $100,000 in excess of the contractually required deposit (see paragraphs 25-29); and
(b) Mr Jariv was paid 7 payments totalling $350,000 (paragraph 33); and
(c) Suleman executed contracts to purchase lots 41 & 42, the vendor being wrongly described as Mr Jariv (paragraph 34).


10. None of the pleaded allegations noted above rationally produces any “equity arising in favour of KSE”.

11. Even if there was some equity arising in favour of KSE, there is not the slightest indication as to why an equity in KSE’s favour should be satisfied by an equitable charge over units the property of Metro Apartments."

39 The defendants’ submission do not it seems to me, do justice to paragraph 30 (iii) of the pleading sought to be propounded which in terms alleges that the subject agreement between the second defendant and Mr Suleman "was or was to the effect that the remaining $400,000 due to KSE under the Investment Agreement [ie following the payment by the second defendant to KSE of $600,000 for the Investment Agreement valued at $1 million] by Jariv would be treated as part payment towards the balance of the purchase price of the two units."

40 This is an allegation which, although I accept that the matter may be pleaded and should have been pleaded with the necessary precision, seems to squarely seek to involve the first defendant Metro Apartments, as part of the transaction. The allegation is simply not explicable in the absence of some form of transaction, be it contract or otherwise, to which both Metro Apartments as well as the second defendant were parties. The allegation seems to me to be implicit in the plaintiffs written submissions that "An equitable charge arises in favour of KSE consequent upon KSE contributing $400,000 to the investment/purchase agreement entered into by James Jariv and Karl Suleman. That charge attaches to Units 41 and 42.”

41 The central problem with the present pleading concerns the failure to make explicit what that transaction is said to have been. In the absence of such an allegation there is, it seems to me, clear substance in the defendants’ central submission.

42 Unless what I have said seems to be implicit in the plaintiffs’ allegations is made explicit in the pleading by an appropriate allegation, it seems to me that the defendants central submission cannot be gainsaid and that the defendants’ central submission would simply lead to the court making an order that the subject caveat be withdrawn and striking from the pleading now sought to be propounded, those allegations alleging the charge to which I have referred.

43 One possibility which may or may not for example be open to be pleaded by the plaintiffs depending upon their instructions, depending upon the facts, and depending upon the proper approach to due discharge of the ethical obligations of solicitors and counsel who plead matters, to plead those matters only upon appropriate instructions and only upon being appropriately satisfied that the matters are appropriate to be pleaded, may be that Metro Apartments for whatever consideration and by whatever transaction had agreed to waive or forgo any obligation upon the second defendant to pay to it the amount of $400,000.

44 The defendants have in their written submissions effectively accepted that only if Metro Apartments had a relevant obligation to repay $400,000, could there be a suggestion [and I infer a claim], to its property being charged with the obligation to repay that sum. The defendants accept that if the second defendant had, contrary to the facts, in fact paid this amount to Metro Apartments on account of Mr Suleman’s obligation as purchaser under the contracts for sale, Metro Apartments would be liable to repay that sum on termination of the contracts.

45 I accept that had the pleading which is now sought to be propounded included contentions to the effect that the claim to a charge is based upon:

(i) the respective amounts of $5,000 paid for each of Units 41 and 42 in excess of the contractually stipulated deposits;

(ii) the difference between the seven payments of $50,000 paid to the second defendant and the seven payments which might have been made to him on the assumption that his original investment was $1million and not $600,000;

then the pleading would not suffer from the defects now exposed by the defendants.

46 In the result the position which seems to me to obtain is that in the absence of the pleading sought to be propounded, comprehending some arrangement or contract or transaction presumably involving Metro Apartments Pty Limited, the second defendant, Mr Suleman and probably KSE, part and parcel of which involved Metro Apartments regarding itself as having received, whether or not in cash, consideration qua the sale of units 41 and 42 in the sum of $400,000.00:

· the defendants’ claim so far as the orders which are sought that the latest caveat be removed are claims of substance;

· leave is likely be refused concerning the pleadings sought to be propounded in so far as claiming an alleged charge.

47 Earlier in the judgment I referred to some qualifications. The defendants have squarely and in terms now enunciated the locus issues and have done so in the following terms:

“1. Karl Suleman Enterprizes Pty Limited (“ KSE ”) is not a party to these proceedings. No rights of KSE are able to be asserted without KSE joining in the proceedings as plaintiff.

2. Although the plaintiffs purport to sue as liquidators, it is clear that:-


(a) no property of KSE is vested in them (unlike a bankruptcy trustee by virtue of S.58 of the Bankruptcy Act, 1966) and it is not claimed that any order under S.474(2) of the Corporations Act 2001 has been made in the present case;

(b) no cause of action is asserted by the plaintiffs, in their capacity as liquidators, of the kind which, by the terms of the Corporations Act, is a cause of action conferred upon liquidators AOEO Nominee (see for example S.588FF(1) of Corporations Act).


3. The plaintiffs in their capacity as Receivers of the assets of Mr K Suleman (“ Suleman ”) were receivers and managers, inter alia, of the property and assets of Suleman being “the interest in the contracts for sale by Metro Apartments Pty Limited of units 41, 42 and 43 Metro Apartments, Bunn Street, Pyrmont.

4. Those contracts for sale are, according to the plaintiffs, at an end. No claim to enforce them is asserted. No claim for relief from forfeiture of the interests thereunder is advanced. The plaintiffs assert (correctly) that the contracts for sale have been terminated by the vendor.

5. Suleman has not himself brought any proceedings to assert any entitlements based upon his former position as purchaser under those contracts for sale.”

48 The plaintiffs by Ms Burke of counsel have accepted these special locus problems as pervasive. For those reasons it is not necessary for the court to presently do otherwise than to have the judgment note that the plaintiffs from the bar table have sought leave to join Karl Suleman Enterprises Pty Limited as a plaintiff to the proceedings.

49 In the circumstances where the plaintiffs have now sought a further opportunity in which to be in a position to comprehend the defendants’ written submissions and the terms of this judgment and in which to bring forward yet a further form of the statement of claim to be propounded, the parties have accepted that the convenient course is for the court to stand the matter over to 4.00pm on Monday next, the 30th September. I direct that the proceedings stand over to that day and time. I further direct that the plaintiffs on or before on 4.00pm on Thursday of this week, 26th September, serve upon the defendants and furnish to my associate, a copy of the fresh pleading which is sought to be propounded which will include the joinder, as plaintiff, of Karl Suleman Enterprises Pty Limited.

50 All other questions relating to either of the motions currently before the court are stood over for further examination and directions on Monday next at 4.00pm. Written submissions should again be furnished to the court by each party by 6.00pm on Saturday next by email to my associate, in relation to those matter which may sought to be agitated on Monday at 4.00pm.

I certify that paragraphs 1 -50
are a true copy of the reasons
for judgment herein of
the Hon. Justice Einstein
given on Monday 23 September 2002
ex tempore and revised 26 September 2002

___________________
Susan Piggott
Associate

26 September 2002

Last Modified: 10/01/2002