Re O C Developments Pty Ltd

[1998] QSC 105

IN THE SUPREME COURT

OF QUEENSLAND  No. 4098 of 1998

[Re O C Developments Pty Ltd]

IN THE MATTER of the Corporations Law

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IN THE MATTER of O.C. DEVELOPMENTS PTY LTD (ACN 071 905 621)

IN THE MATTER of the Land Title Act 1994
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IN THE MATTER of Caveats lodged by CLAUDIA DE MARIA

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IN THE MATTER of an application for O.C. DEVELOPMENTS PTY LTD (ACN 071 905 621)

CATCHWORDS: Corporations Law - application for removal of statutory demand - removal of caveat - whether residual equitable interest

Counsel:Mr G.D. O’Sullivan for the  applicant

Mr P.E. Hack for the respondent

Solicitors:Greg Kelly & Co town agent for Virgin Power & Co for the applicant

T.F. Wardrobe town agent for Griffiths, McColm & Parry for the respondent

Hearing date:               22 May 1998

JUDGMENT  -  DERRINGTON J.

Delivered 2 June 1998

These are applications by the above company to strike out a statutory demand by the respondent and to remove her caveat over its lands. 

The directors of the company are Mr Phipps and Mr Kolifrath.  The respondent was formerly a director but has been removed.  All three are holders of one share each in the company, though Mr Kolifrath owns his interest jointly with his wife, but for convenience in the following discussion, it will be assumed that he is the shareholder.

The company owns lands which it hopes to develop but they are security for substantial loans to the company from Westpac, which is currently threatening to call in its debt.  Negotiations are proceeding for a forced sale which would be devastating to the company’s fortune.

The history of the matter is as follows.  Mr Phipps and the respondent lived in a de facto relationship.  He was a builder and owned some land which he had bought partly by providing the consideration himself and partly by borrowing from Westpac.  The respondent contributed to the costs of purchasing it.  Further land was purchased, partly with funds provided by the respondent.

The company was then formed.  Those two parties were allotted one share in it each and appointed as its directors.  All of the land was transferred to it and as a result of their respective contributions the shareholders were each credited with almost $100,000 in their respective loan accounts.  Mr Phipps has drawn his account and is now in debit.  He also receives wages from the company.  Subsequently Mr Kolifrath bought into the company by subscribing $150,000.  That amount was credited to his loan account and he was allotted one share and appointed a director.

Subsequently and with the respondent’s approval, he was given a mortgage over some of the land to secure his loan.  Since 30 April, he has been entitled to terminate the arrangement and presumably demand repayment of his loan, but he has the power to extend the arrangement.  There is no evidence that he has done so, but since there is no evidence that he has made any demand, it might be inferred that he supports the continuation of the project.

There is a reasonably arguable case that the respondent’s loan is not repayable on demand and that under its terms repayment is postponed, possibly to the termination of the venture.  However since Mr  Kolifrath’s loan is repayable now on demand and Mr Phipps has had his loan paid out, there may well be an arguable case that the respondent’s loan is repayable at some earlier date than that suggested above.

Since the case against immediate repayment is arguable, the statutory notice should be struck out but on the conditions referred to in the order below so that her interest is protected until the matter is determined by suitable action.

The caveat however is insupportable because there is no caveatable interest behind it.  When the respondent transferred her interest in the land, although she had contributed to its purchase, she had arranged with the accountant who prepared the company’s original financial papers the amount of the loan which was to be credited to her.  Consequently, she probably would have received full consideration for her contribution.  Her subsequent conduct, particularly in dealings with Mr Kolifrath, indicates no claim of a residual equitable interest.

The strong inference is that she received full consideration for any interests she may have had in the land and has retained no equitable interest in it of the kind to which she now refers in support of her caveat.  Its presence is very detrimental to the company and it should be lifted.

There will be orders as per draft.