Reschke v Trevor Reschke Nominees Pty Ltd
[2019] SASCFC 27
•21 March 2019
SUPREME COURT OF SOUTH AUSTRALIA
(Full Court)
RESCHKE v TREVOR RESCHKE NOMINEES PTY LTD
[2019] SASCFC 27
Judgment of The Full Court
(The Honourable Chief Justice Kourakis, The Honourable Justice Bampton and The Honourable Justice Parker)
21 March 2019
REAL PROPERTY - TORRENS TITLE - CAVEATS AGAINST DEALINGS - EXTENSION
REAL PROPERTY - TORRENS TITLE - CAVEATS AGAINST DEALINGS - REMOVAL
REAL PROPERTY - TORRENS TITLE - GENERAL PRINCIPLES - CONSTRUCTION AND INTERPRETATION OF LEGISLATION
Appeal against two decisions of single Judges of this Court to refuse to extend the time for removal of a caveat over real property. The first decision was a dismissal of an appeal against a Master’s decision to set aside an extension of time of the caveat (the setting aside decision). The second decision was a decision to refuse to grant the appellant an extension of the caveat (the caveat refusal decision), which was brought as a fresh application after the setting aside decision.
The appellant contends that he has an equitable interest in the caveat land on the basis that he relied upon assertions by members of his family from time to time throughout his childhood that he would inherit, and be responsible for, the management of the family farming properties. The appellant contends that the property the subject of the caveat ought to belong to him and that it retained more value if maintained in common ownership with other parcels of property presently owned by the appellant or through entities the appellant controlled.
Held, per Kourakis CJ (Bampton and Parker JJ agreeing), dismissing the appeal:
1. The disclosure related to the sale of the parcel of real property by the appellant warranted a review of the order extending time to remove the caveat. The appeal against the setting aside order should be dismissed because it lacks utility.
2. The appellant’s principal contention as to the relevant question of law in assessing whether to grant an extension of the caveat should be rejected.
3. In exercising the statutory discretion to allow a caveat to remain for an extended period, the Court must balance the competing claims and interests of the registered proprietor and the caveator. The balance of convenience overwhelmingly favours refusing an extension of the caveat sought by the appellant.
Real Property Act 1886 (SA) s 191(1)(g); Statutes Amendment (New Rules of Civil Procedure) Act 2006 (SA) Pt 64, referred to.
Reschke v Trevor Reschke Nominees Pty Ltd [2018] SASC 22; Reschke v Trevor Reschke Nominees Pty Ltd [2018] SASC 120, applied.
Whallin v Bailbart Investments Pty Ltd (1987) 47 SASR 198, discussed.
Galvasteel Pty Ltd v Monterey Building Pty Ltd (1974) 10 SASR 176; Ovenden v Palyaris Construction Pty Ltd (1975) 11 SASR 65; Taddeo v Catalano (1975) 11 SASR 492; Van Reesema v Giameos (No 2) (1978) 17 SASR 390; Nexus Mortgage Securities v Mawson KLM Holdings & Starmaker (No 51) Pty Ltd (1997) 193 LSJS 474; Cini & Ors v Pets Paradise Franchising (SA) Pty Ltd & Ors (2008) 102 SASR 177; Haris v Yigiter & Anor [2011] SASC 184; Stone & Anor v Leonardis & Anor (2011) 110 SASR 503; Perpetual Trustee Company Ltd v Saunders [2013] SASC 89; Permanent Mortgages Pty Ltd v Pastro [2018] SASC 5, considered.
RESCHKE v TREVOR RESCHKE NOMINEES PTY LTD
[2019] SASCFC 27Full Court: Kourakis CJ, Bampton and Parker JJ
KOURAKIS CJ: The appellant, Burke Reschke (Burke), is a fourth‑generation farmer and viticulturalist in the Coonawarra region of this State. Burke’s great‑grandfather, Henry Albert Reschke (Henry), first started farming land in the Coonawarra in the early 1900s. Burke’s grandfather, Reginald Reschke (Reg) continued the farming tradition and acquired more land. Trevor Reschke (Trevor), Burke’s father, maintained their farming tradition and acquired yet further land. The land was held variously by Reg and Trevor personally and by corporate trustees. I will refer to the whole of the land holdings amassed by Henry, Reg and Trevor, howsoever held, as the ‘Reschke farming land’.
Reg died in 1986. Trevor and his wife, Vivian, had three children: Burke, his brother Dru and his sister Joanne. Trevor passed away in 2008. By his will, Trevor divided the Reschke farming land between Vivian, Burke and Dru, largely by gifting them the shares in, and therefore control of, the corporate trustees which held the land. Burke has since sold one of the blocks of the Reschke farming land left to him to reduce his debt, and the receivers and managers of his corporate vehicle have contracted to sell the remainder. Dru’s corporate vehicle, the respondent Trevor Reschke Nominees Pty Ltd (TRN Pty Ltd), has contracted to sell another substantial part of the Reschke farming land. Burke and Dru have now fallen into dispute as to their respective equitable and inherited interests in the Reschke farming land.
Before the Court are two appeals brought by Burke against two decisions of Judges of this Court with respect to a caveat lodged by him over the parcel of land in sections 233, 234 and 235 in the Hundred of Comaum (the caveat land), which TRN Pty Ltd, as the trustee of the Reg Reschke Family Trust, has contracted to sell.
By his will, Trevor left the shares in TRN Pty Ltd to Altruism Holdings Pty Ltd (Altruism Holdings), the trustee of the Altruism Trust. Altruism Holdings is Dru’s corporate vehicle. Trevor also bequeathed to Altruism Holdings his power of appointment under the Reg Reschke Family Trust. Burke believes that he is a beneficiary of the Reg Reschke Family Trust but has not been able to procure a copy of the trust deed.
On 10 January 2017, after hearing that TRN Pty Ltd had entered into a contract for the sale of the caveat land, Burke lodged a caveat against that land, claiming an equitable interest in fee simple in it.
On 11 May 2017, a Master of this Court, Judge Bochner, granted an extension of time for the removal of the caveat until further order. On 20 November 2017 that order was set aside by another Master of this Court, Auxiliary Master Roder, on the ground that Burke had deliberately failed to disclose the sale of a parcel of the Reschke farming land which had been left to him in Trevor’s will. It was said that that sale was inconsistent with the case put by Burke for the caveat extension, which was that he felt a moral obligation to keep the Reschke farming land together as a whole, and that it could be farmed much more effectively if all of it was retained. Burke appealed against the Auxiliary Master’s decision to set aside the extension of time. Justice Doyle dismissed his appeal on 7 March 2018.[1] The first of the appeals before this Court is an appeal against that decision (the setting aside decision).
[1] Reschke v Trevor Reschke Nominees Pty Ltd [2018] SASC 22.
After the setting aside decision, Burke made a further application for an extension of the caveat. Judge Bochner refused that application on 26 March 2018. Justice Nicholson dismissed Burke’s appeal from Judge Bochner’s decision on 30 August 2018 (the caveat refusal decision).
I would dismiss the appeal against the setting aside decision for lack of utility. Whether or not the Auxiliary Master was correct to set aside the indefinite extension of time for removal of the caveat granted by the Judge, the changed circumstance brought about by the fact of the sale of the land by Burke’s corporate vehicle warranted a reconsideration of whether or not the order extending time should be continued.
Burke’s application for a caveat was reconsidered by Judge Bochner and her Honour’s refusal of the application was then confirmed in the caveat refusal decision of Nicholson J.[2] Moreover, on the hearing of the appeal, TRN Pty Ltd adduced further evidence which showed that Burke’s corporate vehicle, Reschke Vineyards Pty Ltd (Reschke Vineyards) had been placed under the control of receivers and managers who have entered into contracts for the sale of almost all of the parcels of Reschke farming land in Burke’s control. As will be seen, that evidentiary material was not disputed. It substantially affects the balance of convenience. The evidence could not have been placed before Judge Bochner or Nicholson J because the land has only recently been sold. It is material that Burke is bound to disclose. I would receive it on this appeal.
[2] Reschke v Trevor Reschke Nominees Pty Ltd [2018] SASC 120.
That sale by the receivers also warrants a reconsideration of the extension of time for removal of the caveat. Indeed, Burke’s loss of control of the parcels of land left to him nullifies the primary ground on which he had claimed the balance of convenience, which was the importance as a matter of practical farming operations, of maintaining the contiguity and integrity of the Reschke farming land. For the reasons given by Nicholson J, and by reason of the additional circumstance disclosed by the further evidence, Burke’s appeal against the caveat refusal decision must also be dismissed. I elaborate on my reasons below.
The Reschke farming land
It is necessary to describe the properties comprising the Reschke farming land interests. They are generally oriented from north to south.
At the northern end of the Reschke farming land are three properties, the registered proprietor of which is Reschke Vineyards as trustee of the Koonara Property Trust. Burke is the principal of Reschke Vineyards. The three properties are: the Henry Albert vineyard comprising sections 229-231, the Reg Reschke vineyard comprising section 226, and another parcel comprising land described as Allotment 2 in the area named Glenelg in the Hundred of Comaum and land in section 228 (the Allotment 2/section 228 parcel).[3] As will be seen, all of those properties have been sold or are subject to contracts of sale entered into at the direction of either Burke or receivers appointed to Reschke Vineyards. The properties referred to were bequeathed by Trevor to the trustee of the Koonara Property Trust. I will refer to these properties as the northernmost properties. Vineyards have been planted on parts of the northernmost properties and the remainder is cropped and grazed with cattle. Burke has also purchased independently of the family farming interests a property known as V and A Lane which he also controls through Reschke Vineyards.
[3] All of the sections in which the Reschke farming land is located are in the Hundred of Comaum.
To the south of Burke’s northern properties, and contiguous with them, is the caveat land which is commonly known as Glenroy. It comprises sections 233, 234 and 235. It is primarily used for cropping and grazing. The caveat land was held by Reg Reschke Nominees Pty Ltd in its capacity as trustee of the Reg Reschke Family Trust. The trustee was controlled by Reg. Trevor inherited the shares in Reg Reschke Nominees Pty Ltd and thereby the power of appointment over the Reg Reschke Family Trust. Trevor caused that power to be exercised by appointing TRN Pty Ltd as the trustee. The caveat land has, for the last 10 years, been leased to a neighbour, Peter Phillips, for grazing and cropping. Burke was appointed a director of TRN Pty Ltd when he was about 17 years of age and maintained the directorship until 30 January 2002 when he retired in accordance with a family decision to keep the vineyard and farming operations separate. Dru was appointed a director of TRN Pty Ltd on 13 November 2000. Even though Dru also deposed that Burke ceased to be a director of TRN because of a decision to keep the vineyard and farming operations separate, it is not clear whether they are referring to vineyards on the northernmost property or to vineyards on the ‘Home Block’ to which I refer below. TRN Pty Ltd, which is now controlled by Dru, remains the registered proprietor of the caveat land.
To the south of the caveat land, and contiguous with it, is the property referred to as Rocky Castle. This is because the registered proprietor is the trustee of the Rocky Castle Trust, Fabriano Pty Ltd. The Rocky Castle property comprises sections 377, 379 and 239. Vivian holds a life interest in the Rocky Castle property. The Rocky Castle property is primarily used for cropping and grazing. By his will, Trevor gave his power of appointment in the Rocky Castle Trust and his shares in Fabriano Pty Ltd, which he acknowledged to be the trustee of the Rocky Castle Trust, to his wife Vivian, his accountant Brentan Scott and his solicitor Peter Westley:
… to hold and to act as trustees of the said Rocky Castle Trust and in that capacity to vest the farming land owned by that Trust in favour of my sons Dru and Burke in such shares as will create equality in the land holdings of my said sons or of their entities taken pursuant to this, my Will and after taking into account the inheritance of land either son (or his related entity) may have received from the estate of their grandmother Emiline May Reschke.’
In his third affidavit, sworn on 26 May 2017, Burke reveals that he and his brother are in dispute over whether the equality of land holding referred to is to be calculated by area or value.
The most southern end of the Reschke farming land is the parcel referred to as either the Home Block or Koonara. It is comprised of land in sections 438, 440, 441, 442 and 444. It is used for cropping, grazing and vineyards. The Home Block is not contiguous with any of the Reschke farming land to its north. The Home Block parcels are subject to certain trusts effectively controlled by either Dru Reschke or his mother Vivian. Trevor’s share and interest in the parcel in section 438 was left to the trustee of the Altruism Trust. Trevor gave his entitlements in any superannuation fund of which he may be a member to his wife Vivian, and they now form part of her superannuation fund. Trevor had provided that if Vivian should predecease him, the land in sections 440, 441, 442 and 444 would be left to the trustees of the Altruism Trust. Those blocks are leased by the superannuation fund to Dru for an annual rent of $48,000.
To the west of the Home Block is a small, 30 acre parcel of land (section 443) of which Burke is the registered proprietor, it having been gifted to him when he was a child.
The following table taken from paragraphs [18] and [20] of Dru’s first affidavit summarises the division of the Reschke farming land effected by Trevor’s will:
Trevor Reschke Nominees Pty Ltd
Section Numbers in the Hundred of Comaum:Size (Ha)
Total hectares
233
87.82
234
66.37
235
70.42
439
12.15
Altruism Pty Ltd
Section in the Hundred of Comaum:
4 of 438
71.625
308.38
Burke Reschke Holdings –
Section Numbers
Ha
TOTAL
230, 231, 229
110.5
226, 227, 228
216.9
443
12.15
339.55
In a spreadsheet exhibited to Burke’s third affidavit sworn on 26 May 2017, prepared for the purposes of comparing the value of the family farm holdings distributed by Trevor’s Will, Burke showed that the value of the properties left to him and V and A Lane was $1,283,242.00 or 29.2 percent of the family holdings. On the other hand, the land left to Dru comprising Glenroy, the Home Block (including the land in Vivian’s superannuation fund) and his grandmother’s block in section 439 was valued at $2,965,774.20 or 67.5 percent of the family holdings. The land held by Fabriano and the Rocky Castle Trust was valued at $143,460.45 or 3.3 percent of the land value. The total was $4,392,476.25.
By his affidavit, sworn on 3 February 2017, Burke deposed to the following facts and circumstances on which he propounded his claim to an equitable interest in the caveat land which he described as being ‘separate from and prior to’ any interest he had under the Reg Reschke Family Trust:
(a)From the age of four (Burke was born in 1968), his grandfather and grandmother, father and mother impressed upon him that he had a duty to continue the family farming legacy and that he would one day ‘inherit the farm’, but that if he did not wish to inherit he should say so and the opportunity would fall to his brother Dru.
(b)When Burke was four, his grandfather purchased the parcel of land in section 443 and gifted it to Burke, telling him ‘[we] might as well start putting it in your name because you’ll end up owning it’.
(c)In response to the promises of future ownership, Burke demonstrated his unconditional enthusiasm for taking over the farm whereas Dru did not.
(d)When Burke was six, he had a conversation with his grandfather as to whether a gum tree sapling which had self-sown next to a silo should be removed or not.
(e)Over the years as a child or young man, Burke was taught how to put up fencing. He helped his grandfather to put up kilometres of fencing, during the course of which his grandfather spoke about the advantages of dropping in larger gate posts so that Burke would ‘only need to replace each [post] once in [his] life time [sic]’.
(f)Burke was encouraged to leave St Peter’s College because of its ‘very expensive’ fees in year 11 and instead enrolled in Australia’s leading agricultural college, Marcus Oldham Agricultural College.
(g)Burke’s grandmother then paid for him to attend the Royal Agricultural College in England because she believed that greater ‘business skills [were required] to run a farm than in days gone past’ and so that he could ‘take over the farm’.
(h)On the strength of those representations Burke did the following:
· worked on the farm after school and during the holidays;
· undertook three years’ work experience, including on a farm in Queensland;
· attended Marcus Oldham Agricultural College and the Royal Agricultural College in England, instead of studying for an alternative career at university;
· spent several years living and working interstate and overseas developing business and financial skills;
· established a household on the family farm, bringing his wife from England to live in Australia;
· undertook landscaping, and developed fencing, water, electrical, and building infrastructure on the Rocky Castle land;
· made very substantial personal physical and financial commitments to establishing new enterprises on the farm including the planting of a vineyard;
· erected stock yards and fencing on Glenroy; and
· spent time managing the farm.
On its face, Burke’s claim is certainly not a strong one. Childhood conversations of the kind he describes are commonplace for young children on farming properties and are designed to engage their interest in farming, but are rarely treated, on either side, as binding. Furthermore, Burke’s subsequent education and vocational experiences are more naturally characterised as substantial life advantages and opportunities, than burdens. Being taught how to fence, and helping with fencing family properties, as a child or young man is a natural part of the mutual obligations which sustain Australian family farms. Burke’s affidavits are largely silent about the underlying trust structures by which much of the farming property was held. Burke does not depose to any discussions about the nature of those corporate and trust structures, the changes to them, including the arrangements which led to his resignation as a director of TRN Pty Ltd, and how they affected his expectations.
It appears from Burke’s affidavit of 8 February 2017, that despite the expectation that he would take over the family farms, he spent much of the 1990s overseas until a conversation with his mother in 1997, in which he was told that if he still wanted to take over the farm he would have to ‘come back and earn it’. The conversation undermines that part of Burke’s case that relies on earlier conversations and his claimed reliance on them.
Importantly, Burke’s affidavits are silent about any discussions with Trevor concerning an investment scheme in which Trevor allowed Burke to operate, at no real cost to Burke, on the northernmost properties. That investment scheme is referred to in Burke’s third affidavit of 29 May 2017 as the Henry Albert Vineyard project. Burke embarked on the investment scheme in about 1998 after his return from overseas.
The first vineyard to be planted was the 50 acres Henry Albert Vineyard. Even after that planting Burke had intended to return to Chicago, and leave his father to manage the vineyard. His father refused and Burke remained in Australia and expanded the investment scheme. The project was called the Coonawarra Wine Grape Project and operated under the supervision of Australian Hardwood Management Pty Ltd (AHM Pty Ltd) as the responsible entity of a registered management investment scheme. On Burke’s own admission, the majority of his working hours from 1998 until 2002 were spent on that project.
Burke described the arrangements with his father as a purchase by him of the land at a ‘transaction value’ of $550,000. However, the arrangement described in the heads of agreement (the HOA) exhibited to his third affidavit is that Trevor granted to Burke an option to purchase the land, but at the same time leased it to Burke at a nominal value for a term of 10 years with a right to extensions of four further periods each of 10 years. The formal lease ultimately drawn up for the purpose of the scheme was from Trevor to Reschke Vineyards at an annual rent of $273. The HOA also showed that Burke agreed to grant Trevor a 10 percent interest in the vineyard business he proposed to establish over the land for no consideration but otherwise on the same terms and conditions that would be offered to other investors and participants. The value of the land, if the call option were exercised, was agreed to be the average of market values determined by two valuers appointed by each of Burke and Trevor.
All that can be drawn from the arrangement set out in the HOA is that in exchange for a long-term lease at a nominal value, Burke offered his father a 10 percent interest in a speculative business venture. According to another document exhibited to Burke’s affidavit, the business was valued by Colliers at in excess of $6,000,000.00. However, the venture failed and degenerated into protracted litigation. From 2004 until 2011, TRN Pty Ltd and other Reschke family corporate entities prosecuted a professional negligence action against their former legal advisors over an ATO tax ruling. From 2011 until 2016, investors in the Coonawarra Wine Grape Project prosecuted an action against Burke, his corporate vehicles and AHM Pty Ltd. Far from evidencing a sale of the land, the arrangement simply shows that Trevor, on terms very favourable to Burke, gave him the use of the land for a speculative and ultimately unsuccessful investment project.
In any event, Dru exhibited to his second affidavit, sworn on 16 March 2018, documents which show that Burke’s claims were disputed by Trevor and, in 2007, Trevor transferred his interest in the project to Burke in exchange for a release and indemnity. Burke accepts that he and Dru are in dispute over the nature and effect of the transactions connected with the Coonawarra Wine Grape Project.
Dru also disputed Burke’s claims that infrastructure, which was critical to the farming operation of the Reschke farming land as a whole and expensive to replace, was situated on the caveat land.
Burke deposed that in contrast to his interest in the farm, Dru expressed little ‘early interest’ in farming, completed his schooling and attended university, later building a career in information technology and innovation. Burke maintained that his brother’s interest in agriculture was relatively recent and that in the past his interest was only in wine production and retailing.
Burke deposed the following in his affidavit, sworn on 3 February 2017:
My brother has been supported by his family in his efforts to establish a career outside the farm over many years. I, myself, have contributed financially to Dru’s businesses in the hope that he would make the most of the opportunities which freedom from the obligation to carry on the family farming legacy afforded him. I say freedom because responsibility for a farm is neither an easy nor a profitable burden. That those efforts of Dru’s failed is no fault of mine. I have always wished to accommodate such interest in farming as he has demonstrated, as long as that interest was understood to be secondary to the requirements of the farm, and to my proprietary rights which I accrued by long years of attentiveness, education, training and very hard work.
The lack of meaningful detail in that self-serving and condescending paragraph, and Burke’s affidavits more generally, and the failure to acknowledge his own financial difficulties, to which I refer in greater detail below, suggest a lack of candour on his part.
Dru completed his secondary education at St Peter’s College in 1992 and took a gap year before undertaking a Bachelor of Business at the University of South Australia, graduating in 1996. He spent one year overseas before returning to Australia in 1998. He deposed that the first vineyards were planted on sections 440, 441 and 442 (the Home Block) between 1990 and 1998. Dru has lived in the Coonawarra region since 2004. Dru deposed that TRN Pty Ltd had made substantial contribution to the irrigation infrastructure on the Home Block. From 2006, the vineyards have been managed on sustainable, ecological viticulture principles. As I observed in his first affidavit, sworn on 8 February 2017, Dru accepted, and agreed, with Burke’s explanation that Burke ceased to be a director of TRN Pty Ltd in order to keep the vineyard and farming operations separate. However, Dru also deposed in his first affidavit that the change was part of his father’s succession planning for the eventual division of the properties. A draft Will drawn in 2002 shows that Trevor had left the Home Block land on which the vineyards were planted to the Altruism Trust should his wife Vivian predecease him, whereas the Henry Albert vineyard was left to the Koonara Property Trust and therefore Burke. Dru deposed that leading up to his father’s death in June 2008 his father had argued with Burke but that his father maintained his intention to divide the farming property equally between Burke and Dru.
In his first affidavit Dru deposed that, on 21 December 2016, he had contracted to sell the caveat land to Mr Greg Gartner in order to reduce his substantial indebtedness by repaying a substantial loan secured over the caveat land. Settlement was fixed for 27 January 2017. Dru deposed that the interest payable on the loan was $383 per day. Dru deposed that most of his and his wife’s income was taken up by that interest cost, and that as a result, he and his wife supported themselves on the limited annual income of $14,498.00. Dru deposed that he had used his best endeavours to keep the contract on foot after the passing of the settlement date.
In the hearing before Nicholson J both Burke and Dru tended further affidavits which were received subject to a ruling on their admissibility but were not ultimately admitted into evidence. The affidavits so received were as follows:
·Sixth affidavit of Burke Reschke sworn 12 April 2018 responding to Dru’s allegation that it would not be expensive to replicate the infrastructure on the caveat land and in particular the cattle yards, and challenging Dru’s claim that he contributed to capital improvements on the Home Block.
·The affidavit of Digby Luckhurst-Smith sworn on 19 April 2018 annexing the affidavit of Guy Stratford, who was a General Manager of Koonara Management Pty Ltd, which gives largely hearsay evidence of Burke’s expectation of inheriting the Rocky Castle Land, speaks of Burke’s capital contributions to the caveat land, and diminishes Dru’s agricultural experience.
·Affidavit of Phil Wood who was employed by Trevor Reschke and deposes that cattle were generally moved along the road, when being moved from one paddock to another, rather than through the caveat land, and supporting the contention that cattle yards could be built for a relatively modest sum on other parts of the Reschke farming land if the caveat land were to be sold.
·Affidavit of Brad Batt sworn 16 March 2018 speaking to Dru’s involvement in the operation of the Reschke farming land.
·Third affidavit of Dru Reschke sworn 11 April 2018 describing the land use of the northernmost properties and explaining that the land other than vineyards was too small to use for cattle grazing, and speaking of his endeavours to ensure that the contract with Mr Gartner remained on foot, despite Mr Gartner becoming weary.
·Ninth affidavit of Mark Gowans sworn 11 April 2018 relating to Burke’s financial circumstances.
·Tenth affidavit of Mark James Gowans sworn 27 April 2018 exhibiting an affidavit of James Black making disparaging comments about Guy Stratford arising from their commercial dealings.
·Eleventh affidavit of Mark James Gowans sworn 27 April 2018 exhibiting an email from an agribusiness agent as to steps taken by Burke to sell other portions of his land, going to whether Burke was willing to sell land when commercially convenient.
·Fourth affidavit of Dru Reschke sworn 26 April 2018 responding to the allegations of Guy Stratford and claiming that Burke had the use of the Rocky Castle land for the previous 20 years through his corporate entity, Koonara Management Pty Ltd, but had failed to make any rental payments since 2012.
·Twelfth affidavit of Mark James Gowans sworn 1 May 2018 exhibiting an email from Peter Westley dated 27 April 2018 seeking an explanation from Dru Reschke of the extended delay in the sale.
The proceedings to set aside
On 16 May 2017, TRN Pty Ltd applied for the extension of time granted to Burke for removal of the caveat to be set aside. TRN Pty Ltd relied on Burke’s failure to disclose that he had entered into a contract of sale for a parcel of the northernmost land between 14 March 2017, when Judge Bochner reserved her judgment, and 11 May 2017, when judgment was delivered.
TRN Pty Ltd relied on a letter sent to its solicitor Mr Mark Gowans, from another solicitor, Mr Peter Westley, which disclosed that Reschke Vineyards had contracted on 10 April 2017 with Mr Gartner, the purchaser of the caveat land, to sell the Allotment 2/Section 228 parcel. Mr Westley attached the contract and informed Mr Gowans that Mr Gartner had approved disclosure of the contract to the Supreme Court. It can be inferred that Mr Westley was acting for Mr Gartner on the purchase of that land. There was no evidence explaining how or why Mr Westley came to send his letter to the solicitors acting for TRN Pty Ltd.
Burke opposed the application to set aside the extension of time on two grounds, namely that Dru knew of the sale and that the sale was not inconsistent with his claims that preservation of the integrity of the Reschke farming land was both personally important to him and necessary as a matter of practical farm management.
In the proceedings before Auxiliary Master Roder, Burke explained the reasons for selling the land in his third affidavit sworn on 26 May 2017 as follows:
·If the caveat land were to be conveyed to him he would have to take it subject to the mortgage which secured a substantial loan made to Dru. He could not sustain and carry that level of debt together with other debt over other parcels of the Reschke family holdings without selling some of the land.
·In anticipation of his proprietary estoppel claim being successful he decided to improve his financial liquidity by selling a parcel of land.
·The land which he sold was less strategic to the future viability of the whole of the land because it is off to the eastern side of the main part of the northern holdings and because it is the least valuable on a per acre valuation and does not have infrastructure, and will not affect the north-south contiguity. He asserted that he was ‘deeply saddened’ by the necessity of the sale.
The evidence on which Burke relied to prove that Dru knew of the sale was as follows. On 1 March 2017, a real estate agent sent an email to both Burke and Dru informing them that he had a client interested in purchasing a portion of the northernmost properties. That email, in itself, does not show that Dru came to know that Burke later sold the Allotment 2 land.
In his third affidavit sworn on 26 May 2017, Burke deposed that he received the letter of offer dated 1 March 2017 from Greg Gartner but only read it on 3 March 2017. However, in his fourth affidavit sworn on 4 July 2017, Burke accepted that he read the emailed offer on the same day on which he received it. Burke claimed that little progress was made in negotiating a sale until after the argument before Judge Bochner on 14 March 2017.
On 16 March 2017, Dru sent the following email to Burke:
From: Dru Reschke – Koonara Wines ‹[email protected]›
Date: Thursday, 16 March 2017 at 11:00 AM
To: Burke Reschke ‹[email protected]›
Subject: Gartners salePeter Wesley refuses to do the paperwork for the sale to Gartners for you – You might need Tim to Camscanner it (an app that picks out text from documents), take out the text and copy it, and give it to Phil Shell direct.
Dr Reschke
Director of Great People
Koonara Coonawarra Wines Pty Ltd
44 Church St Penola South Australia 5277
Ph: +61 8 8737 3222 Fx: +61 8 8737 3220
W: E: [email protected]Burke deposed that on the basis of the email he assumed that Dru knew that he had contracted to sell the land and required conveyancing services to effect the sale. In my view, his assumption was well founded. Indeed, it is an inference I would draw.
Doyle J rejected Burke’s contention that Dru knew of the sale for the following reasons:[4]
[38]Finally, the appellant challenged the Judge’s inability to make any finding that the respondent had notice of the sale that was not disclosed. Judge Roder had said in his reasons that the argument that Mr Dru Reschke (the appellant’s brother and a director of the respondent) was aware of at least the offer by Mr Gartner required him to accept that a solicitor acting for a party to a transaction “had advised his client in another matter of the other matter”. The Judge said that there was no evidence that that occurred, and that he was not prepared to draw that inference.
[39]In this respect, the appellant referred to paragraph 19 of his fourth affidavit. He there gave evidence to the effect that Mr Dru Reschke was copied in on the 1 March 2017 email enclosing Mr Gartner’s offer. The appellant’s affidavit also stated that his brother and Mr Gartner shared a common solicitor, and that the appellant assumed from this that his brother was being kept up to date about the sale by that solicitor.
[40]I accept that the Judge may again have slightly overstated or misstated the effect of the evidence, as there was some evidence that Mr Dru Reschke was aware of the offer. However, as counsel for the respondent pointed out, it was not a matter of contention or significance that there was an offer from a third party. It was the fact that this offer was at least at some point being seriously entertained by the appellant, and that a contract of sale was then entered into. There was no error in the Judge’s reasoning that Mr Dru Reschke’s knowledge of these matters was not the subject of direct evidence, and the Judge’s conclusion that there was ultimately not a sufficient evidential basis for him to draw an inference of knowledge.
[4] Reschke v Trevor Reschke Nominees Pty Ltd [2018] SASC 22 at [38]-[40].
As can be seen, Doyle J did not address the email concerning Mr Westley’s refusal to undertake the conveyancing for Burke. That email shows either that Mr Westley had made that disclosure, or that Dru knew of the sale from another source and wished to obstruct Burke using Mr Westley’s services. I also observe that there is no reason to assume any impropriety in such a disclosure; it may have been made on instructions.
Accordingly I accept that a finding that Dru knew of the sale is supported by the evidence. However, the fact of the sale of the land, in itself, warranted a review of the order extending time to remove the caveat. That review was conducted by Judge Bochner when the appellant brought a fresh application for an extension of time within which to withdraw the caveat. Judge Bochner refused to extend the time and her decision was confirmed on appeal by Nicholson J. The appeal to this Court against the caveat refusal decision, which I consider below, will determine whether on all of the material before this Court, the caveat should be extended. I would, therefore, dismiss the appeal against the setting aside decision because it lacks utility.
Section 191 of the Real Property Act 1886 (SA) (the RPA)
The foundation stone of Burke’s submissions on his appeal against the caveat refusal decision is that the long line of authorities in this State which have applied, by analogy, principles relating to an application for an interlocutory injunction in determining applications for an extension of a caveat are wrong. Burke accepts, of course, that as a caveator it is necessary for him to establish a reasonably arguable case of a proprietary interest in the land. However, he contends that the assessment of the balance of convenience must commence with a presumption in his favour because of the proprietary interest protected by the caveat. Burke contends that only in special or exceptional circumstances should an application for an extension be refused when a reasonably arguable case has been established. Burke did not put this argument to the courts below but has adopted the burden of a herculean task only on appeal.
Section 191(1)(g) of the RPA provides:
… the Court may, on the caveator’s application, extend the period of 21 days until an action under paragraph (fa) is determined or for any other period;
Section 191(1)(fa) provides:
… a caveator may bring an action in the Court to establish the validity of the claim on which the caveat is based;
Section 191(1)(g) in its present form was enacted by Part 64 of the Statutes Amendment (New Rules of Civil Procedure) Act 2006 (SA) (‘the Amendment Act’). Prior to the Amendment Act, the predecessor to s 191(1)(g) provided:
… the caveator may apply … for an order to extend the time … and the Court may … make such order in the premises, either ex parte or otherwise, as shall seem just.
The Second Reading Speech to the Amendment Act explained that its purpose was to harmonise the Act with the current Supreme Court Civil Rules 2006 and to ensure that the ‘statute book does not refer to discontinued practises or archaic terms’. [5] The Second Reading Speech also expressly referred to s 191 of the Act, asserting that it had been redrafted ‘without changing the effect of the provision, so that, in addition to removing redundant language, they can be more easily understood’.[6]
[5] Second Reading Speech on the Statutes Amendment (New Rules of Civil Procedure) Bill, Hansard, House of Assembly, 22 June 2006 at p 634.
[6] Second Reading Speech on the Statutes Amendment (New Rules of Civil Procedure) Bill, Hansard, House of Assembly, 22 June 2006 at 636.
It is axiomatic that Parliament’s construction of, or opinion as to, the legal effect of a Bill is neither binding nor persuasive on its construction once enacted. It is fundamental to the rule of law and the separate governmental functions of the legislative and judicial branches that the construction of the provisions enacted by Parliament is exclusively the responsibility of the courts. However, parliamentary proceedings may disclose the purpose of the enactment and that in turn may inform its proper construction. From the Second Reading Speech, it is plain that its purpose was merely to modernise statutory language and to harmonise it textually with Supreme Court rules.
The starting point for identifying the proper test to be applied in considering an application for an extension of time must be the statute itself. The salient, and at the time of its enactment, radical, feature of the RPA is the indefeasibility of title it grants to a registered proprietor. Secondly, it is to be remembered that the RPA does not allow the registration of equitable interests. It follows that a person claiming an equitable proprietary interest might have that interest defeated by a legal transfer of the land. One of the statutory purposes of allowing a caveat to be lodged is the protection of, as yet, unregistered interests, including equitable interests.
Interests in land have been strongly protected by the common law from feudal times. The importance of protecting proprietary interest in feudal landholding systems are obvious enough. As Nicholson J observed, equity developed specific remedies in aid of proprietary interest.[7] That approach has persisted even after industrialisation, and its associated social changes, broke down the feudal rigidity of landed estates. There is also often an emotional attachment to land. Indeed, for many indigenous communities, land has an important spiritual and cultural significance. However, and more relevantly to these proceedings, in the modern commercial, including agribusiness, context, the importance of land is in the opportunity it provides for financial exploitation, or in its use as collateral security because of its stable value.
[7] Reschke v Trevor Reschke Nominees Pty Ltd [2018] SASC 120 at [86].
In this case I would not have placed much weight on Burke’s claims to have an emotional attachment to the land as a reason for extending the time to remove the caveat. Farming is a commercial enterprise and the Coonawarra Wine Grape Project showed Burke’s preparedness to commoditise the Reschke farming land. For the same reason I would not have placed much significance on the inconsistency between the sale of the Allotment 2/Section 228 parcel and Burke’s claimed attachment to the Reschke farming land. The significance of the sale was that it undermined Burke’s claim as to the importance of maintaining the Reschke farming land as a whole to ensure efficient farm management.
Both the registered proprietor and a person who seeks to impeach that title by asserting a competing equitable interest, claim a right to enjoy the benefits of a proprietary interest in kind until their dispute is determined. An extension of time will often be granted to the caveator if the registered proprietor does not have any pressing need to dispose of the land, or to use it as security to obtain finance. Equally, an extension of time may be granted when the registered proprietor wishes to sell the land because, his or her interest being reduced to a realisation of its value in money terms, a delay in that sale may be compensated by an undertaking as to damages, if the caveator has a capacity to honour that undertaking.
The fundamental point to be made is that, in exercising the statutory discretion to allow a caveat to remain for an extended period, the Court must balance the competing claims and interests of the registered proprietor and the caveator.
In this case, having regard to the further evidence which has been received, it is plain that both Burke and Dru have competing financial, not personal, interests in the land. Dru’s financial interest exists as he wishes to repay business loans that he obtained on the security of the caveat land. Burke too has a financial interest as he is under financial pressure because of loans secured over the northernmost properties. On the appeal, the Court was told that Burke proposes to bring in a financial partner to help him salvage the Reschke farming land.
However, as shall be seen, there is every reason to conclude that Burke is not in a position to honour any undertaking as to damage, should he be granted an extension of time for the removal of the caveat.
It is apparent that the relevant considerations mandated by the purpose served by the statutory discretion are no different to the considerations which inform the grant of an injunction. Both involve a balancing of competing proprietary interests.
As Cox J observed in Whallin v Bailbart Investments Pty Ltd (Whallin), the discretion conferred by s 191 is a matter of adjectival law.[8] The consequences of extending or not extending a caveat might be serious, but they do not determine final rights.
[8] (1987) 47 SASR 198 at 201.
In Whallin, Cox J rejected a submission that it is sufficient to secure an extension of the caveat that there be a serious question to be tried because ‘common sense and authority combined to oppose it’.[9] Cox J observed that the proposed test ignored altogether the interests of the registered proprietor.
[9] Whallin v Bailbart Investments Pty Ltd (1987) 47 SASR 198 at 201.
Cox J reframed the procedural questions as to whether a caveator need obtain an equitable injunction at all, and whether or not the caveat would be allowed to remain after the granting of an interim injunction or interlocutory injunction.[10] His Honour reaffirmed the long line of authority which proceeded by analogy with an interlocutory equitable injunction. Those cases included Galvasteel Pty Ltd v Monterey Building Pty Ltd,[11] Ovenden v Palyaris Construction Pty Ltd,[12] Taddeo v Catalano,[13] and Van Reesema v Giameos (No 2).[14]
[10] Cox J correctly observed that a separate application for an equitable injunction was largely otiose and that in any event there was good reason to maintain a caveat until the conclusion of proceedings determining the dispute as to the existence of the caveated interest because the equitable injunction would only bind the parties to it and not a subsequent purchaser who might obtain indefeasible title.
[11] (1974) 10 SASR 176.
[12] (1975) 11 SASR 65.
[13] (1975) 11 SASR 492.
[14] (1978) 17 SASR 390.
Those authorities were largely confirmed by this Court in Nexus Mortgage Securities v Mawson KLM Holdings & Starmaker (No 51) Pty Ltd[15] in which the approach of Cox J was adopted. More recent authorities, too, have followed that approach.[16]
[15] (1997) 193 LSJS 474.
[16] See Cini & Ors v Pets Paradise Franchising (SA) Pty Ltd & Ors (2008) 102 SASR 177; Haris v Yigiter & Anor [2011] SASC 184; Stone & Anor v Leonardis & Anor (2011) 110 SASR 503; Perpetual Trustee Company Ltd v Saunders [2013] SASC 89; Permanent Mortgages Pty Ltd v Pastro [2018] SASC 5.
Burke’s principal contention as to the relevant question of law in assessing whether to grant an extension of the caveat should be rejected.
Balance of convenience
Burke’s objections to the sale of the caveat land and the grounds on which he sought as extension of the caveat were as follows:
·The land ought to belong to him.
·It has particular value to the family because it is located in the centre of the family’s northern holdings and its sale would eliminate advantages of contiguity with other northern holdings.
·It will reduce the scale of the northern holdings.
·The land includes important farming and infrastructure, including cattle and sheep yards, sheds for hay and shearing, and large scale flood irrigation.
·The sale will not realise the full value because the land is more valuable in common ownership.
Nicholson J dismissed Burke’s appeal from Judge Bochner’s decision for reasons which appear in paras [72]-[93] of his Honour’s reasons. Having rejected Burke’s contention as to the principles which should govern the exercise of the discretion conferred by s 191(1)(g) of the RPA, those reasons have not been shown to be affected by any error.
On the hearing of the appeal to this Court, TRN Pty Ltd sought to adduce the following further evidence. First, it conducted a search on various corporate entities of which the appellant is a director, secretary or shareholder. That search revealed the following:
1. The results of the historical personal name extract search is summarised below:
Company
Plaintiff’s Involvement
Status
Koonara Management Pty Ltd (‘Koonara Management’)
Director and Secretary
Sole Shareholder
Ferrier Hodgson as receivers and Managers Appointed by NAB on or about 3 August 2018.
Reschke Vineyards Pty Ltd (‘Reschke Vineyards’)
Director and Secretary
Sole Shareholder
Ferrier Hodgson as receivers and Managers Appointed by NAB on or about 3 August 2018.
Reschke Pty Ltd (‘Reschke’)
Director and Secretary
Sole Shareholder
In Liquidation.
Simon Miller appointed as Liquidator by order of the Supreme Court of South Australia on or about 22 June 2018.
Ferrier Hodgson as receivers and Managers Appointed by NAB on or about 3 August 2018.
Coonawarra Vintners Pty Ltd
Director and Secretary
Sole Shareholder
Registered
Mate Holdings Pty Ltd
Director and Secretary
Sole Shareholder
Registered
Rocky Castle Finance Pty Ltd
Director and Secretary
Sole Shareholder
Registered
TRN Pty Ltd also sought to produce a historical property search performed in relation to Burke himself. That search showed that the only real property he owned was the land at Lot 443, Gaffney Road, Coonawarra, which was mortgaged to the National Australia Bank, and his matrimonial home in North Adelaide, which was registered in both his and his wife’s name. That home, however, is advertised on for sale at a price of $3,100,000.00. Receivers and managers have been appointed to manage the affairs of Reschke Vineyards Pty Ltd, Koonara Management and Reschke Pty Ltd. They have advertised the Reschke Vineyard land, including V and A Lane, the Henry Albert Vineyard, Reginald Reschke and block 443.
In a later affidavit of Mr Gowans it appears that contracts of sale have been entered into with respect to all of those properties.
On the hearing of the appeal, counsel for TRN Pty Ltd informed the Court that information had been received that morning from the solicitors for the receivers that the whole of the Henry Albert and the whole of the Reg Reschke Vineyard had been or was subject to an unconditional contract of sale.
Burke’s counsel accepted that the Allotment 2/Section 228 parcel was sold to Mr Gartner. Counsel also confirmed that receivers had been appointed to the corporate entities which controlled the remainder of the Reschke Vineyard land and that receivers had entered into contracts for the sale of those lands.
The Court was also told that the land held in Burke’s name personally, lot 443, was being advertised but was not yet the subject of a sale.
I would receive the further evidence. It affects substantially the weight of the competing consideration in the exercise of the discretion conferred by s 191(1)(g) of the RPA. That evidence would in itself have warranted a reconsideration of the original order granting Burke an extension of time to remove the caveat. It is also evidence which Burke would have been bound to bring to the Court’s attention.
In the course of the appeal, Burke’s counsel informed the Court that despite the sale of the Reschke Vineyard land he had arranged to finance his proposed purchase of Dru’s interests and development of the farm by entering into an equity arrangement with a publicly listed company to sell 51 percent of what was described as the Reschke Group. The Court was informed that Burke hoped to put that arrangement in place in February 2019. He expected or hoped that that arrangement would provide him with finance to take his companies out of receivership and to, if necessary, repurchase the land. No documentary evidence or independent confirmation was provided in support of Burke’s claims.
The evidence is that all of the proceeds of the sale of the caveat land would be needed to repay the loan it secures. Burke complains that the loan monies may not have been used to develop or exploit the caveat land. That complaint is beside the point. Persons with an interest in land are entitled to use it as security to obtain finance for whatever purpose they see fit. The point of present relevance is that the land will be sold by the mortgagee and the caveat land will not be available to farm with the remainder of the Reschke farming land.
The balancing of the respective interests of Burke and Dru can be summarised as follows. The delay in settlement on the contract for the sale of the caveat land entered into on the strength of Dru’s legal interest, is causing him substantial loss. Burke has not demonstrated any capacity to compensate him. Burke’s prospects of regaining the northernmost land at this late stage are necessarily poor. His claim over the caveat land is not strong. Moreover, Burke could only take that land subject to a mortgage which must exceed its value. There may also be a dispute over priority between Burke’s interest and Mr Gartner’s. Burke’s claims to an equitable property interest over any other part of the Reschke farming land are even weaker having regard to the corporate registered proprietors and the competing equitable claims of Dru and Vivian.
These considerations overwhelmingly favour refusing an extension of the caveat sought by Burke.
I would dismiss the appeal.
BAMPTON J: I agree with the reasons of the Chief Justice and would dismiss the appeal.
PARKER J: I would dismiss the appeal. I agree with the reasons of the Chief Justice.
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