Superior Diamond Products Pty Limited v Simon Peter Camilleri - [2006] NSWSC 1169

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CITATION: Superior Diamond Products Pty Limited & Anor v Simon Peter Camilleri & Ors [2006] NSWSC 1169

HEARING DATE(S): 1/11/06

JUDGMENT DATE :
9 November 2006

JURISDICTION: Equity Division
Commercial List

JUDGMENT OF: Einstein J

DECISION: Third defendant liable to second plaintiff for damages for deceit. Assessment of damages to be referred to an Associate Justice for determination.

CATCHWORDS: Proceeding for damages for deceit

LEGISLATION CITED: Evidence Act 1995 (NSW)

CASES CITED: ASX Operations Pty Limited v Pont Data Australia Pty Limited (No 1) (1990) 27 FCR 460
Briginshaw v Briginshaw (1938) 60 CLR 336
Coventry v Charter Pacific Corporation Ltd (2005) 56 ACSR 1
Neat Holdings Pty Ltd v Karajan Holdings Pty Ltd (1992) 67 ALJR 170
Pascoe v Federal Commissioner of Taxation (Cth) (1956) 30 ALJR 402
Pedler v Richardson (unreported, Supreme Court of New South Wales, Young J, 16 October 1997, BC9705263)
Watson v Foxman (2000) 49 NSWLR 315

PARTIES: Superior Diamond Products Pty Limited (First Plaintiff)
Tresaire Pty Limited (Second Plaintiff)
Simon Peter Camilleri (First Defendant)
Neal Lionel Alexander (Second Defendant)
Adrian Camilleri (Third Defendant)

FILE NUMBER(S): SC 50154/05

COUNSEL: Mr M Bransgrove (Plaintiffs)
No appearance (Defendants)

SOLICITORS: Bransgroves Mortgage Solicitors (Plaintiffs)

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
COMMERCIAL LIST

Einstein J

Thurday 9 November 2006

50154/05 Superior Diamond Products Pty Limited and Anor v Simon Peter Camilleri and Ors

JUDGMENT

The proceedings

1 Superior Diamond Products Pty Ltd and Tresaire Pty Ltd are the plaintiffs in the summons filed in these proceedings on 12 October 2005. The defendants joined to the proceedings are Mr Simon Peter Camilleri, Mr Neal Lionel Alexander and Mr Adrian Camilleri: respectively the first, second and third defendants.

2 Tresaire is presently proceeding only against the third defendant, the first and second defendants having had sequestration orders made against them. In circumstances where Tresaire’s claims against the third defendant are for deceit following the making of allegedly fraudulent representations, it is entitled to proceed against the third defendant, notwithstanding any sequestration order which may have been made against him: cf the decision of the High Court of Australia in Coventry v Charter Pacific Corporation Ltd (2005) 56 ACSR 1.

The procedural situation

3 The proceedings were commenced by summons filed on 12 October 2005, on which date a commercial list statement was also filed. A notice of appearance for the third defendant was filed by Purcell Lawyers on 8 November 2005. The third defendant, by his solicitors, appeared [or arranged for his appearance to be mentioned] during case management directions hearings on 25 November 2005, 3 February 2006 and 5 May 2006.

4 On 23 December 2005 the third defendant filed a commercial List response.

5 The solicitors on the record for the third defendant filed a notice of intention to cease acting on 11 May 2006 and on 19 May 2006 filed a notice of ceasing to act.

6 On 9 June 2006 the proceedings were listed for hearing on 1 November 2006.

7 There is evidence before the Court of sundry attempts by the plaintiffs' solicitors to communicate the position with respect to the proceedings to the third defendant [the plaintiffs' even going to the lengths of issuing a subpoena seeking the current address of the third defendant to other solicitors apparently acting for him in other proceedings].

8 The Court is satisfied that Tresaire is entitled to presently proceed with the hearing [on the basis that if successful on liability, the orders sought in the summons for the assessment of damages as against the third defendant are to be referred to an Associate Justice for determination].

9 The Commercial List Statement pleads the cases;

i. against the first two defendants in the Contentions (at 10-29);

10 Although Tresaire is not presently proceeding against the first two defendants, the claims made against both groups of defendants have some commonality and the broad background to the claims made against the third defendant requires some understanding of the entirety of the history earlier pleaded.

11 Notwithstanding the fact that Superior Diamond Products does not claim relief against the third defendant, the pleaded case against the third defendant makes allegations extending to conduct intended to cause the first plaintiff to incur loss.

The proper approach to an allegation of fraud

12 There is a plethora of authority in support of the proposition that the Court is bound to see that a case of fraud is clearly proved. An allegation of fraudulent intent is one of the most serious allegations capable of being made. Actual dishonesty is said to be "the hallmark of fraud". The gravity of the allegation has been said to be such that whereas section 140(1) of the Evidence Act 1995 (NSW) stipulates a single standard of proof for all civil cases, namely the balance of probabilities, Section 140(2) preserves the doctrine in Briginshaw v Briginshaw (1938) 60 CLR 336 at 361-362; Pedler v Richardson (unreported, Supreme Court of NSW, 16 October 1997, Young J) at 10-11. See also McLelland CJ in Eq in Watson v Foxman (2000) 49 NSWLR 315, 319. More recently in Neat Holdings Pty Ltd v Karajan Holdings Pty Ltd (1992) 67 ALJR 170 the High Court has put the matter in the following terms:

13 The High Court has pointed out that the evidence given by a man of his intention and state of mind, must be tested:

Pascoe v Federal Commissioner of Taxation (Cth)

14 Courts have emphasized that the best evidence of a man's purpose is to look at what was actually done: ASX Operations Pty Limited v Pont Data Australia Pty Limited (No 1) (1990) 27 FCR 460 at 482 - 483.

15 The Court proceeds accordingly.

The findings of fact

16 The very detailed evidence given by Mr Kevin Smith [who is the sole director and secretary of the plaintiffs] in the primary affidavit made on 5 April 2006 and in the four volumes of exhibits to that affidavit and the detail also given in the affidavit of Mr Laurence John Treanor [made on 10 May 2006 and served on 13 May 2006 on the third defendant's lawyers] provide the essential evidence [shortly to an extent clarified by the oral evidence given in chief by Mr Smith during the hearing] which permits the making of the material factual findings which follow.

The relevant lending entities

17 Superior Diamond Products Pty Ltd, originally set up by Mr Smith as a shelf company, was later used as a trustee for investment funds beneficially owned by Mr Smith.

18 Lemnos Ltd was at material times the trustee of Peak (NZ) Superannuation Fund, a fund which acted as trustee for superannuation funds beneficially owned by Mr Smith.

19 Tresaire Pty Ltd was set up by Mr Smith as a shelf company and was a trustee for investment funds beneficially owned by Mr Smith.

The three loans

20 There were three loans, each made to both the first and second defendants. Each loan was secured by either a mortgage or an equitable mortgage. Essentially the making of each of these loans and the entry into each of the mortgages is not put in issue by the third defendant's commercial list response. In any event the making of the loans and the entry into of the mortgages is clearly proved by the evidence before the Court.

21 The first loan was in late 2003 by the first plaintiff in the sum of $1 million, it being a term of the loan that the principal be repayable on 18 January 2004, the repayment date having been extended to 17th February 2004 [by a deed of variation of loan agreement entered into on or about 4 December 2003]. A deal of the material facts are admitted in the commercial list response and are in any event proven by the evidence before the Court. The loan agreement and mortgage were dated 19 November 2003. {Exhibit KES Vol2 at pages 233 et seq]

22 The second loan was by Lemnos Pty Ltd [in its capacity as trustee of superannuation funds beneficially owned by Mr Smith] and was in the sum of $700,000, it being a term of the loan that the principal was repayable on 26 February 2004: Tresaire having replaced Lemnos as such trustee [affidavit of Mr Smith paragraph 21]. The material facts are admitted in the commercial list response.

23 Lemnos had also presumably for more abundant precaution, assigned its rights ‘under the mortgage transaction’ to the new trustee. This step does not seem to have been necessary. In any event the issue is foreclosed by the admission in the commercial list response.

24 The third loan and equitable mortgage transaction was entered into by Tresaire Pty Ltd in its own right and was in the sum of $480,000, it being a term of the loan that the principal was repayable on 7 March 2004. These matters are either admitted by the commercial List response or proven by the evidence before the Court.

25 Each of the loans provided for payment of interest and costs. The provisions with respect to the requirements to pay interest and with respect to interest payable upon default are as pleaded in the commercial list statement.

The genesis of the contracts

26 The evidence establishes that Mr Smith was induced to enter into the first loan inter alia by representations by Mr Adrian Camilleri, then a director of a mortgage broker called 'Express Loans and Finance', to the effect that his company arranged short term loans for developers and only lent to borrowers which the company had thoroughly checked out. The evidence as to the representations with respect to the initial proposition being put to Mr Smith, included evidence of a conversation part of which was in the following terms:

This development is in fact already complete but the developer did not have the funds to market the property and the original lender was going to liquidate him. To get the occupation certificate and sell the units the boys need to jump through a few minor hoops with council and pay council some fees.

They bought this property for a knock down price. They needed to settle quickly before a liquidator was called in. So instead of borrowing most of the purchase price they were forced to plough a significant amount of their own money in because they could only get a low LVR loan from the NAB at such short notice.

They are going to replace that loan with a facility from AustMortgage for $19 million. The AustMortgage facility will enable them to take back out the cash they put in when they bought, but until then they are drained of funds and cash strapped.

The property is worth $27.5 million, which is a lot more than they paid. I have sworn valuations here from United Valuers (who are one of the most respected and professional valuers in Sydney) confirming the value.

The AustMortgage loan will take 2 months to go through. The money it will enable them to take out ($6 million) will allow them to service this property as well as to pay settlement costs and loan interest on several properties in Kings Cross, Bellevue Hill and Vaucluse they have just bought from the same developer.

Their problem is that they need cash immediately to settle those other properties and to service interest. They cannot wait the two months for the AustMortgage loan to come through. That’s why they need to borrow $760,000 clear ($1,000,000 including pre-paid interest) for 2 months from you. It’s a great deal for you because the exit strategy is the loan from AustMortgage which has already been approved. The loan is irrevocable but it just takes a long time to get all the security documents signed and for it all to go through.

To tell you the truth this loan is as good as they come because these guys are both exceptionally wealthy. They both own a lot of property I will send you their Assets & Liabilities. Between them their net position is around $15,000,000.

Mr Smith: Can I see the offer of finance from AustMortgage.

[he faxed the offer on from AustMortgage on 18 November 2003 (a true copy of that documents forms page 043 of KES-1).]

You will need the valuation [he handed me a copy of several valuations by United Valuers dated 21 August 2003. (a true copy of that documents forms page 010 – 015 & 017 - 022 of KES-1).]

Mr Smith: When do they need the money?

Mr Camilleri: In about a week. We know solicitors who will act for you and they do it all the time. They are called Trinity Lawyers, they are very professional.

27 The subsequent communications between the parties which led to the first loan and mortgage transactions are dealt with in detail in the affidavit of Mr Smith from paragraphs 27 to 57. For present purposes it is unnecessary to repeat those facts except to observe that Mr Smith's evidence was that:

i. at the inception of his introduction to the transaction, he had been informed that the proprietors of the relevant block of units were in some difficulty because they needed to have some funds quickly, were intending to refinance very quickly and hence were seeking only a very short term loan for a specific purpose;

ii. he was informed that the proprietors needed to manage their funds short term;

Moving on to the precise representations now pressed against Mr Adrian Camilleri

28 The Court can now pass from the initial loan/mortgage transaction to the allegations dealing with the second and third loan/equitable mortgage transactions for the reason that the claims being currently pressed against Mr Adrian Camilleri only concern representations said to have induced the entry into of the Lemnos loan and equitable mortgage and the Tresaire loan and equitable mortgage.

29 The short position with respect to the second loan/equitable mortgage claim is that in about late November 2003, prior to the Lemnos loan/equitable mortgage being entered into, Mr Adrian Camilleri represented to the first and second plaintiffs and to Lemnos that a buyer had been found who was prepared to pay the sum of $25,500,000 for the land [for present purposes this representation may be referred to in the same terms as used in the pleading against Mr Adrian Camilleri, as "the first representation"].

30 The Court is satisfied that the plaintiffs have proven the making of this representation. Mr Smith has deposed to the making of the representation in his affidavit [at paragraph 58]. There is no contradictor to this evidence. The proposition is confirmed by the later documentary evidence before the Court and in particular:

i. by the facsimile from Mr Adrian Camilleri to Mr Smith’s assistant sent on 22 December 2003 and advising that Mr Camilleri would be forwarding a copy of the contract of sale to Mr Smith's offices as soon as he would receive it;

31 The first representation is said to have been fraudulent in that Mr Adrian Camilleri knew at the time that he made the representation that the representation was false and yet made the representation with the intention that the first or the second plaintiff or the Trust (through its trustee) would act to its detriment.

32 The evidence before the Court permits the inference that the first representation was fraudulent for the reason that Mr Adrian Camilleri knew at the time that he made the representation that it was false and made the representation nonetheless with the intention that the first or the second plaintiff or the Trust would rely upon it to their detriment. The sale contract referred to below and which Mr Camilleri caused to be sent to Mr Smith was not authentic. None of the correspondence in Exhibit KES 1 exhibited anything otherwise than a series of statements that the sale was to complete now on this date and then on another date and similar, with absolutely no adjectival information in answer to Mr Smith's concerns most succinctly expressed in the sentence in an e-mail sent on 15 March 2004 by Mr Smith's solicitor, Mr Lee Collett to Mr Adrian Camilleri:

33 The evidence satisfies the Court that in reliance upon the first representation, Lemnos (as trustee of the Trust) at the instigation of Mr Smith made the second loan out of the money of the Trust, and entered into the Lemnos equitable mortgage.

34 Plainly enough, and as Mr Smith has sworn, he would not have caused the second loan to have been made had he not been told that the property had been sold. He clearly believed that the environment had altered in that, as he also swore, there was no longer proposed to be a refinancing, as the property had been sold for $25.5 million. His evidence included the following:

Q. You were told apparently - I think you've said this--
A. It was sold.

Q. That something had changed?
A. Oh definitely, on the second loan that it had been sold for $25.5 million. That was the reasoning why they needed more funds because they weren't refinancing now, the property has been sold, it was going to be a longer period of time.

Q. Why would they need the money, to repay the other mortgagees or what?
A. Because they were doing - they'd bought other developments as well in Kings Cross, off the same developer, at a bargain, at a good price because they were in liquidation, and they had to settle on those properties as well and it was to help pay stamp duty and all the rest because they'd used their own money, all their cash money, on the first Bundarra properties type of thing, so they were cash-strapped shortly while they - because they had to refinance them all, so they needed money short-term until they got their new loan going through, but then when the second loan came in they had a sale, they had a contract with the price, the property had been sold and then everything was going to be fine because they were having all the cash coming back then.

35 The evidence establishes also that the inducement to make the Lemnos loan and to enter into the Lemnos mortgage was to the detriment of the Trust in the circumstances.

36 The evidence establishes that by reason of the aforesaid deceit of Mr Adrian Camilleri, Tresaire as present trustee of the trust, has suffered loss and damage.

37 The short position with respect to the third loan/equitable mortgage claim is that by the very same facsimiles earlier referred to and sent, as to the first of them, by Mr Adrian Camilleri and as to the second of them, by Takchi & Associates [at the request of Mr Camilleri], Mr Camilleri caused to be forwarded to the first and second plaintiffs and to Lemnos the purported contract for the sale of the land representing, to the plaintiffs and to Lemnos, that a contract had been made in the form of that sale contract [“the second representation”].

38 The evidence establishes that the second representation was fraudulent for the reason that Mr Adrian Camilleri knew at the time that he made the representation that it was false and that the Sale Contract was not a genuine contract and made the representation with the intention that the first or second plaintiff or the Trust (through its trustee) would act to its detriment.

39 The Court is able to infer from all of the evidence, including that given by Mr Treanor, that the contract was not authentic and this to the knowledge of Mr Adrian Camilleri.

40 The evidence satisfies the court that in reliance upon the second representation, Tresaire made the third loan and entered into the Tresaire mortgage.

41 The evidence establishes also that the inducement to make the third loan and to enter into the Tresaire mortgage was to the detriment of Tresaire in the circumstances.

Orders to be made

42 The second plaintiff has succeeded in establishing that the third defendant is liable to it for damages for deceit.

43 The appropriate further order is for the assessment of damages as against the third defendant to be referred to an Associate Justice for determination.

44 The third defendant is to pay the costs of the second plaintiff to date. The Court will invite submissions if the first plaintiff seeks from the third defendant any of the costs which it has incurred in the proceedings up to this point in time.

Corrigendum

In paragraph 44 first line replace

the words “second defendant”

with the words “second plaintiff

9 November 2006

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Citations

Superior Diamond Products Pty Limited v Simon Peter Camilleri [2006] NSWSC 1169

Cases Citing This Decision

0

Cases Cited

8

Statutory Material Cited

1

Briginshaw v Briginshaw [1938] HCA 34

Digi-Tech (Australia) Ltd v Brand [2004] NSWCA 58

Brown v The The Queen [2022] NSWCCA 116

CITATION:	Superior Diamond Products Pty Limited & Anor v Simon Peter Camilleri & Ors [2006] NSWSC 1169
HEARING DATE(S):	1/11/06
JUDGMENT DATE :	9 November 2006
JURISDICTION:	Equity Division Commercial List
JUDGMENT OF:	Einstein J
DECISION:	Third defendant liable to second plaintiff for damages for deceit. Assessment of damages to be referred to an Associate Justice for determination.
CATCHWORDS:	Proceeding for damages for deceit
LEGISLATION CITED:	Evidence Act 1995 (NSW)
CASES CITED:	ASX Operations Pty Limited v Pont Data Australia Pty Limited (No 1) (1990) 27 FCR 460 Briginshaw v Briginshaw (1938) 60 CLR 336 Coventry v Charter Pacific Corporation Ltd (2005) 56 ACSR 1 Neat Holdings Pty Ltd v Karajan Holdings Pty Ltd (1992) 67 ALJR 170 Pascoe v Federal Commissioner of Taxation (Cth) (1956) 30 ALJR 402 Pedler v Richardson (unreported, Supreme Court of New South Wales, Young J, 16 October 1997, BC9705263) Watson v Foxman (2000) 49 NSWLR 315
PARTIES:	Superior Diamond Products Pty Limited (First Plaintiff) Tresaire Pty Limited (Second Plaintiff) Simon Peter Camilleri (First Defendant) Neal Lionel Alexander (Second Defendant) Adrian Camilleri (Third Defendant)
FILE NUMBER(S):	SC 50154/05
COUNSEL:	Mr M Bransgrove (Plaintiffs) No appearance (Defendants)
SOLICITORS:	Bransgroves Mortgage Solicitors (Plaintiffs)