Sobey v Nicol and Davies, in the Matter of Guiseppe Antonio Mercorella [2007] FCAFC 136
PROCEDURE – application to adduce additional evidence on appeal – s 27 Federal Court of Australia Act 1976 (Cth) – discretion to receive further evidence on appeal – considerations – cogency of evidence – conduct of party – finality of litigation – discretion to be exercised judicially and consistently with judicial process – application refused Held:‑ appeal dismissed
ANTHONY JOHN SOBEY v COLIN MCINTOSH NICOL & SAMUEL CHARLES DAVIES AS JOINT AND SEVERAL RECEIVERS AND MANAGERS OF THE PROPERTY OF GUISEPPE ANTONIO MERCORELLA AND THE SCHEME AND AS JOINT AND SEVERAL LIQUIDATORS OF THE SCHEME
SAD 276 OF 2006
BRANSON, LINDGREN AND BESANKO JJ 22 AUGUST 2007 ADELAIDE
IN THE FEDERAL COURT OF AUSTRALIA
SOUTH AUSTRALIA DISTRICT REGISTRY
SAD 276 OF 2006
ON APPEAL FROM A JUDGE OF THE FEDERAL COURT OF AUSTRALIA
BETWEEN:
ANTHONY JOHN SOBEY Appellant
AND:
COLIN MCINTOSH NICOL & SAMUEL CHARLES DAVIES AS JOINT AND SEVERAL RECEIVERS AND MANAGERS OF THE PROPERTY OF GUISEPPE ANTONIO MERCORELLA AND THE SCHEME AND AS JOINT AND SEVERAL LIQUIDATORS OF THE SCHEME Respondent
JUDGES:
BRANSON, LINDGREN AND BESANKO JJ
DATE OF ORDER:
22 AUGUST 2007
WHERE MADE:
ADELAIDE
THE COURT ORDERS THAT:
1.The application by the appellant to adduce additional evidence be refused.
2.The application for leave to appeal from the interlocutory judgment pronounced on 24 November 2006 refusing to adjourn the hearing listed for that day be dismissed.
3.The appeal be dismissed.
4.The appellant pay the respondent’s costs of the application to adduce additional evidence, the application for leave to appeal and the appeal including all reserved costs.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA
SOUTH AUSTRALIA DISTRICT REGISTRY
SAD 276 OF 2006
ON APPEAL FROM A JUDGE OF THE FEDERAL COURT OF AUSTRALIA
BETWEEN:
ANTHONY JOHN SOBEY Appellant
AND:
COLIN MCINTOSH NICOL & SAMUEL CHARLES DAVIES AS JOINT AND SEVERAL RECEIVERS AND MANAGERS OF THE PROPERTY OF GUISEPPE ANTONIO MERCORELLA AND THE SCHEME AND AS JOINT AND SEVERAL LIQUIDATORS OF THE SCHEME Respondent
JUDGES:
BRANSON, LINDGREN AND BESANKO…
Grounds of appeal
[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.
[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.
[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.
Consideration
[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.
[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.
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Sobey v Nicol [2007] FCAFC 136
Case
[2007] FCAFC 136
Decision Date
CaseChat Overview and Summary
The case of Sobey v Nicol involves a dispute over the distribution of surplus funds held in a trust account by Nicol and Davies, who were receivers and managers of property owned by Mercorella and the Scheme. Sobey claimed to have a beneficial interest in the property based on a loan agreement dated 19 July 2005, but no such agreement was produced in court. The primary judge dismissed Sobey's application for a stay of the order made by Mansfield J on 4 December 2006, leading to the surplus funds being paid to Nicol and Davies.
The legal issues before the court were whether Sobey had a valid claim to the surplus funds and if the primary judge had erred in refusing to adjourn the hearing. The court had to determine if Sobey had provided sufficient evidence to substantiate his claim of a beneficial interest in the property and if the refusal to adjourn the hearing deprived him of natural justice.
The court found that although Sobey claimed to have loaned $750,000 to Mercorella in 2004, no documentary evidence of the loan agreements or the mortgage was provided. The cheques presented as evidence of the loan were not shown to have been presented. The memorandum of mortgage provided was unsigned by Sobey, who also stated he had not seen the document before. The court concluded that even if Sobey's claims about the loan were true, there was no evidence to support his claim of an interest in the property. The appeal was dismissed, and Sobey was ordered to pay the costs of the appeal and related applications.
This case highlights the importance of providing documentary evidence to substantiate claims in legal disputes, especially in matters involving significant financial interests. The court's decision underscores the necessity for claimants to present clear and admissible evidence to support their claims to avoid the risk of their applications being dismissed.
Orders
Orders of the court
1. The application by the appellant to adduce additional evidence be refused.
2. The application for leave to appeal from the interlocutory judgment pronounced on 24 November 2006 refusing to adjourn the hearing listed for that day be dismissed.
3. The appeal be dismissed.
4. The appellant pay the respondent’s costs of the application to adduce additional evidence, the application for leave to appeal and the appeal including all reserved costs.
Background
Background to the litigation
By order dated 15 December 2006, Lander J dismissed an application made by Mr Sobey for a stay of the order made by Mansfield J on 4 December 2006. The surplus funds previously held in the solicitors’ trust account were thereafter paid to Messrs Nicol and Davies.BACKGROUND FACTS On 8 August 2005 Mr Nicol was appointed receiver and manager of all of the property (with one exception) of Mr Mercorella and the property of the Scheme as well as liquidator of the Scheme. Subsequently the companies associated with Mr Mercorella were ordered to be wound up and Mr Nicol was appointed liquidator of the companies. On 3 August 2006 Mr Davies assumed the above appointments jointly with Mr Nicol. As at 8 August 2005 Mr Mercorella was the registered proprietor of the Jerningham Street property. His title was subject to a first registered mortgage in favour of Banksia Mortages Ltd (“Banksia”) produced on 30 June 2004 and registered on 15 July 2004. On 19 July 2005 Mr Sobey produced, and subsequently had registered on 22 July 2005, a caveat on the title of the Jerningham Street property. The caveat asserted that Mr Sobey had a beneficial interest:… as mortgagee of [the property] pursuant to loan agreement dated the 19th day of July 2005 between the caveator and caveatee wherein pursuant to clause 5 of the loan agreement the caveatee expressly mortgaged to the caveator the estate and interest in the land. On 10 August 2005 the Court made orders on the application of Mr Nicol directing the Registrar General not to register any further dealings concerning the Jerningham Street property until further order. On 9 September 2005 Banksia served on Mr Mercorella, who was in default of the first registered mortgage, a notice of demand for payment and observance of the terms of its mortgage. Banksia and Mr Nicol agreed to a variation of the order of 10 August 2005 to permit Banksia to realise its security on the basis that any funds available after payment of the debt secured by the mortgage, and after payment of the expense of preserving and realising the asset, were to be paid into the Minter Ellison Trust Account until further order, and in particular, pending Mr Nicol’s investigation of any competing claim in respect of those surplus funds. On 14 October 2005 the Court gave a direction to the Registrar General that enabled this agreement to be put into effect. The Jerningham Street property was sold by public auction on 16 December 2005. Settlement of the sale was effected on 16 February 2006 and surplus funds totalling $1,352,810 paid into the Minter Ellison Trust Account. Those funds were thereafter invested in an interest bearing account. On 23 August 2006 Messrs Nicol and Davies filed an Interlocutory Process pursuant to r 2.2(1)(b) of the Federal Court (Corporations) Rules 2000 seeking a final order that the full amount of the surplus funds be paid to them. The only competing claim to be entitled to those funds was that made by Mr Sobey.EVIDENCE BEFORE THE PRIMARY JUDGE
Evidence
Evidence Before The Court
The evidence before the primary judge disclosed the following matters.Request for Evidence in Support of Mr Sobey’s Claim Mr Sobey was advised by a letter dated 12 August 2005 from Mr Nicol’s solicitors of Mr Nicol's appointment as receiver and manager of the property of Mr Mercorella and of the Scheme. The letter referred to Mr Sobey’s claim to be beneficially entitled to an estate and interest as mortgagee of the Jerningham Street property pursuant to loan agreement dated 19 July 2005. The solicitors asked for a copy of the loan agreement together with details of any advances made pursuant to the agreement and the balance currently payable thereunder. Having received no reply, the solicitors wrote to Mr Sobey again on 22 August 2005 inviting him to contact them. By letter dated 8 September 2005, Caldicott & Co, solicitors, wrote to Mr Nicol’s solicitors providing copies of two cheques, apparently signed by Mr Sobey on 16 March 2004 and 20 April 2004 respectively, drawn in favour of Mr Mercorella. The cheques were in the amounts of $350,000 and $400,000. No copy of the loan agreement was provided nor was any advice given of the balance then payable under the agreement. By letter dated 20 September 2005 addressed to Caldicott & Co, Mr Nicol’s solicitors repeated their request for a copy of the loan agreement referred to in the caveat and advice as to the balance currently payable under that agreement.Documents Provided and Advice re Mr Sobey’s Instructions By letter dated 13 December 2005, Robert Chrzaszcz & Associates, solicitors, wrote to Mr Nicol’s solicitors advising that they acted for Mr Sobey in respect of the sale of the Jerningham Street property. The letter asserted:Our client has an interest in this property by way of equitable mortgage. This mortgage secures the sum of $750,000 lent by our client to Mr Giuseppe Mercorella. The amount secured by the mortgage is pursuant to two separate loan agreements, dated 16 March 2004 in the sum of $350,000 and $400,000 dated 20 April 2004. Interest on these loans is 32% per annum pursuant to clause 4 of the loan agreements. Our client registered a caveat over the various titles of this property, giving notice of his interest.We enclose copies of the mortgage and loan agreements referred to above.… our client has instructed us to make an application for the balance of the funds obtained by the auction of the property, which are to be held in your trust account, to be distributed to our client pursuant to his equitable interest. To this extent we enclose a copy of our clients’ (sic) proposed Application and our client’s supporting affidavit. The copy memorandum of mortgage enclosed with the above letter was not stamped. It included certain alterations by hand that were not initialled. It was not signed by the mortgagee. It was comprised of a first page and a page numbered 3 but did not include a page numbered 2. It referred to “… the terms and conditions expressed herein in memorandum No 7678598 ….” but did not include any such memorandum. The consideration and terms of agreement were expressed as follows:ConsiderationSEVEN HUNDRED AND FIFTY THOUSAND DOLLARS ($750,000.00) (“the principal sum”) advanced to the mortgagor by the mortgagee in the following manner:(a): $350,000.00 on 16th March 2004(b): $400,000.00 on 20 April 2004Terms of repayment:(a): Interest only repayments of $20,000.00 paid monthly in arrears.(b):The Mortgagor shall repay the principal sum upon receiving one (1) month’s written notice.(c):The Mortgagor shall give the Mortgagee one (1) month’s written notice for the repayment of the principal sum.Commencement Day 16th March, 2004Interest Days Day of each and every calendar month (sic)Rate of Interest Thirty two (32) per centumManner of calculating interest monthlyInsurance Full insurable value
Decision
Reasons for decision
BRANSON, LINDGREN AND BESANKO JJ
After refusing the adjournment application, his Honour moved immediately to hear the application made by Messrs Nicol and Davies. Mr Lazarevich remained in Court and participated in the hearing. The transcript of the hearing suggests that Mr Lazarevich himself was initially unaware that the matter was listed for final hearing but that his instructing solicitor was well aware that the matter was listed for final hearing.REASONS FOR JUDGMENT OF THE PRIMARY JUDGE The primary judge noted that the claim of Messrs Nicol and Davies was quite straightforward given their status as receivers and managers of the property of Mr Mercorella. He further noted that the only competing claim was that advanced by Mr Sobey. His Honour observed that, although the copy cheques drawn in the amounts of $350,000 and $400,000 were in evidence, it was unclear that the cheques had ever been presented. He further observed that, although the caveat lodged by Mr Sobey claimed an interest as mortgagee pursuant to a loan agreement dated 19 July 2005, no loan agreement bearing that date was in evidence. Although a memorandum of mortgage dated 19 July 2005 was in evidence, it was not signed by Mr Sobey and he had given evidence while under examination that he had not previously seen the document. Although Mr Sobey’s evidence during his examination was that the loan of $750,000 was documented at the time of the loans (that is, in 2004) no such documents had been adduced in evidence. His Honour was satisfied that, even if it be assumed in Mr Sobey’s favour that he advanced the money to Mr Mercorella in March and April 2004 as he claimed, the evidence did not establish that Mr Sobey had any interest in the Jerningham Street property at any material time. The order sought by Messrs Nicol and Davies was made.INTERLOCUTORY APPELLATE HEARINGS The appeal from the judgment pronounced by Mansfield J on 4 December 2006 was originally listed for hearing on Monday, 14 May 2007. On the Court’s own initiative the appeal was listed for directions before Besanko J on Thursday, 10 May 2007. Mr Hayes QC with Mr Lazarevich appeared for Mr Sobey and Mr Hoffmann appeared for Messrs Nicol and Davies. Among the issues raised with the parties on the directions hearing were:(a)that, although Mr Sobey’s written submissions challenged his Honour’s refusal to adjourn the hearing below, it did not appear that leave to appeal from the order refusing an adjournment had been granted and, if leave were to be sought, an extension of time would be required (O 52 r 10); and(b)Mr Sobey appeared to place reliance on evidence additional to the evidence before the primary judge but he had neither complied with the requirements of O 52 r 36 nor filed an affidavit explaining his failure to do so.We interpolate that although the discussion on 10 May 2007 was at a general level, questions raised by the first of these procedural issues are: (a) whether there is a material distinction between a party who wishes to challenge directly an order refusing an adjournment and a party who wishes only to challenge the final judgment - but on the ground that the party was denied natural justice at trial by reason of the refusal to allow the adjournment, and (b) whether the former is required by s 24(1A) of the Federal Court of Australia Act 1976 (Cth) (“the Federal Court Act”) to obtain leave to appeal.