Westpac Banking Corporation v Victor Warren Ollis

[2008] NSWSC 824

CITATION:	Westpac Banking Corporation v Victor Warren Ollis & Ors [2008] NSWSC 824
HEARING DATE(S):	1/08/08
JUDGMENT DATE :	15 August 2008
JURISDICTION:	Equity Division Commercial List
JUDGMENT OF:	Einstein J
DECISION:	Declaration and orders concerning parties having no interests in particular properties and concerning enforcement of charges and other consequential orders.
CATCHWORDS:	Interests in land - Judicial sale - Purchasers liens - Caveatable interests - s.43A(1) Real Property Act - Unstamped transfers - Purchaser for value without notice - Volunteers - Competing equities - Charges - Line between proprietary interests being mere equities and full equitable estates
LEGISLATION CITED:	Civil Procedure Act 2005 (NSW) Conveyancing Act 1919 (NSW) Criminal Assets Recovery Act 1990 (NSW) Duties Act 1997 (NSW) Real Property Act 1900 (NSW)
CATEGORY:	Consequential orders
CASES CITED:	Black v Garnock (2007) 230 CLR 438 Brown v Heffer (1967) 116 CLR 344 Cashflow Finance Pty Ltd (in liq) v Westpac Banking Corporation [1999] NSWSC 671 Chief Commissioner of Stamp Duties (NSW) v Paliflex Pty Ltd (1999) 47 NSWLR 382 Combe v Lord Swaythling [1947] Ch 625 Commonwealth of Australia v Official Trustee in Bankruptcy [2004] NSWSC 1155 Diemasters Pty Ltd v Meadowcorp Pty Ltd (2001) 52 NSWLR 572 Double Bay Newspapers Pty Ltd v AW Holdings Pty Ltd (1996) 42 NSWLR 409 El Ajou v Dollar Land Holdings plc & Anor [1993] 3 All ER 717 Evans v European Bank Ltd (2004) 61 NSWLR 75 Fysh v Page (1956) 96 CLR 233 Fitzgerald v Masters (1956) 95 CLR 420 Forder v Cemcorp Pty Ltd (2001) 51 NSWLR 486 Giumelli v Giumelli (1999) 196 CLR 101 Harrison v Lidoform Pty Ltd [unreported, Federal Court of Australia 24 November 1998, Hely J, BC 9806231] Hewett v Court (1983) 149 CLR 639 IAC (Finance) Pty Ltd v Courtenay (1963) 110 CLR 550 Lamshed v Lamshed (1963) 109 CLR 440 Latec Investments Ltd v Hotel Terrigal Pty Ltd (in liq) (1965) 113 CLR 265 Macquarie Bank Ltd v Sixty-Fourth Throne Pty Ltd [1998] 3 VR 133 Malouf v MBF Australia Ltd [2007] NSWSC 1020 Mehmet v Benson (1965) 113 CLR 295 Meriton Apartments Pty Ltd v McLaurin & Tait (Developments) Pty Ltd (1976) 133 CLR 671 Mills v Ruthol Pty Ltd [2002] NSWSC 294 Orix Australia Corporation Ltd v Moody Kiddell & Partners Pty Ltd [2005] NSWSC 1209 Phillips v Ellinson Brothers Pty Ltd (1941) 65 CLR 221 Rose v Watson (1864) 10 HL Cas 672 Ruthol Pty Ltd v Mills [2003] NSWCA 56 Sama Zaraah Pty Ltd v 888 Projects Pty Ltd [2007] NSWSC 1041 Tallerman & Co Pty Ltd v Nathan’s Merchandise (Victoria) Pty Ltd (1957) 98 CLR 93 Tanwar Enterprises Pty Ltd v Cauchi (2003) 217 CLR 315
TEXTS CITED:	Meagher, Gummow & Lehane’s Equity, Doctrines & Remedies 4th edition, 2002 P J Millett, “Tracing the Proceeds of Fraud” (1991) 107 Law Quarterly Review 71
PARTIES:	Westpac Banking Corporation (Plaintiff) Victor Warren Ollis (First Defendant) Gail Anne Shields (Second Defendant) Koala Development Pty Limited (Third Defendant) Aaron Lye (Fourth Respondent) Christopher Lye (Fifth Respondent) New South Wales Crime Commission (Sixth Respondent) Peter William Flynn (Seventh Respondent) Richard Maurice Hawkins (Eighth Respondent) Kathryn Joan Hawkins (Ninth Respondent) Green Parkes Estate Pty Limited (Tenth Respondent) Docos Estate Parkes Pty Limited (Eleventh Respondent) Roger Wylie Developments Pty Limited (Twelfth Respondent) Holmes Conveyancing Pty Limited (Thirteenth Respondent) Lee-Lin Weissel (Fourteenth Respondent) Michael Joseph Ross (Fifteenth Respondent) Jennifer Anne Ross (Sixteenth Respondent) Secure Funding Pty Ltd (Seventeenth Respondent)
FILE NUMBER(S):	SC 50045/06
COUNSEL:	Mr J Stevenson SC, Mr N Kabilafkas (Plaintiff) Mr CJ Dibb (Second Defendant) Mr Rundle appeared for the seventh, eighth, ninth and eleventh respondents. Mr Josh Abdurahman and Mr Ian Brown, secretary and director of the respondent Green Parks Estate Pty Limited, appeared unrepresented
SOLICITORS:	Henry Davis York (Plaintiff)

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

Einstein J

Friday 15 August 2008

50045/06 Westpac Banking Corporation v Victor Warren Ollis & Ors

JUDGMENT

The notice of motion

1 Westpac Banking Corporation pursues an amended notice of motion filed on 15 February 2008.

Background

2 On 28 March 2008, this Court made the following orders in these proceedings:

“13 The seventh, eighth, ninth, tenth, eleventh, fifteenth, sixteenth and seventeenth respondents to serve all evidence and submissions upon which they intend to rely by 24 April 2008.

14 The plaintiff to serve all evidence and submissions in reply by 23 May 2008.

15 The plaintiff’s application for a judicial sale of the properties situated at:

(a) lot 300 – 302 Docos Street, Parkes having title reference Auto Consol 6027-167;
(b) 2 Condoblin Road, Parkes having title reference 2/811666;
(c) 10 Cathedral Close, Parkes having title reference 6/1085775; and
(d) 77 Woodward Street, Parkes, having title reference 3/547904,

be fixed for hearing by application to the List Judge on 11 April 2008”.

3 After the hearing, the Bank’s solicitors were contacted by the solicitors for the fourteenth respondent (Lee-Lin Weissel) and the parties agreed that order 13 would be treated as embracing the fourteenth respondent, and that there would be a 15(e) being “the property situated at 1-7 Koala Street, Parkes having title reference 7/1078492”.

4 The dispute regarding the property at 2 Condoblin Road, Parkes has been resolved with the consent of the parties asserting an interest in that property: the fifteenth respondent (Michael John Ross), sixteenth respondent (Jennifer Anne Ross) and the seventeenth respondent (Secure Funding Pty Ltd).

5 The dispute regarding the property at 1-7 Koala Street, Parkes has also been resolved by agreement and hence the annexed orders also have the consent of the fourteenth respondent (Lee-Lin Weissel).

6 The following properties remain disputed:

a) lot 300 – 302 Docos Street, Parkes having title reference Auto Consol 6027-167 (“Docos Street”);

b) 10 Cathedral Close, Parkes having title reference 6/1085775 (“Cathedral Close”); and

c) 77 Woodward Street, Parkes, having title reference 3/547904 (“Woodward Street”).

7 The tenth respondent, Green Parkes Estate Pty Ltd (“Green Parkes”) asserts an interest in all three properties.

8 Submissions and evidence have been served by solicitors for the seventh respondent (Peter William Flynn), eighth respondent (Richard Maurice Hawkins), ninth respondent (Kathryn Hawkins) and eleventh respondent (Docos Estate Parkes Pty Ltd (“Docos Estate”)). These respondents assert an interest in the Docos Street property by Docos Estate.

9 The Bank relies upon the findings made in the reasons for judgment given on 31 August 2007 and a number of affidavits.

10 In summary, the Bank submits that neither Docos Estate nor Green Parkes have any interest in land with respect to the properties in which they assert an interest, and in the alternative, even if they do establish such an interest, then the interest of the Bank is entitled to priority.

11 Affidavits were also read by the seventh, eighth, ninth and eleventh respondents and also by Green Parks.

Dealing with the respective properties seriatim

The Woodward Street Property

12 The title reference for this property is 3/547904 and the registered proprietor is Ms Shields.

13 The evidence indicates that the property is a vacant block with an estimated value of approximately $200,000.

14 On 6 September 2007, the Court ordered that this property was subject to a charge in favour of the Bank in the sum of $5,585,245.57.

27 Oct 03	Transferred to Ollis
2 Feb 04	Alleged parol agreement between Ollis and Green Parkes to reduce purchase price of property
20 Feb 04	Contract for sale of “Hillview Estate” forming part of property between Shields and Green Parkes Estate with Green Parkes paying a deposit of $7,500
21 May 04	Ollis gives unregistered mortgage to Green Parkes & IGRX3
15 Apr 05	Green Parkes registers caveat AB415457
25 May 05	Green Parkes and IGRX3 register mortgage AB466465
27 Oct 05	Green Parkes and IGRX3 register discharge of mortgage & Ollis transfers property to Shields. Shields transfers $290,000 stolen money to Green Parkes Estate and IGRX3
19 Apr 06	Subdivision application refused
9 May 06	Green Parkes registers caveat AC289663

Asserted interest

15 The caveat asserts that Green Parkes has an interest in the entire estate which it “purchased” under contract dated 20 February 2004. Mr Brown appears to assert that Green Parkes is entitled to a decree of specific performance if it tenders the remaining purchase price of $46,840.

Decision

16 Green Parkes has not satisfied its onus of proving that it has an interest in land.

17 Putting for the moment the question of a purchaser’s lien to one side, Green Parkes only has an interest in land to the extent that it is entitled to specific performance: Tanwar Enterprises Pty Ltd v Cauchi (2003) 217 CLR 315 at [53] per Gleeson CJ, McHugh, Gummow, Hayne & Heydon JJ; Black v Garnock (2007) 230 CLR 438 at [32] per Gummow & Hayne JJ.

18 In this case, the alleged contract presented as evidence has not been stamped and is therefore both inadmissible and a nullity in law: section 304(1) of the Duties Act 1997 (NSW). Furthermore, the document alleged to be the contract has not had the vendor’s signature witnessed.

19 Even if the alleged contract was admissible and effective, completion was conditional upon the subdivision application being registered substantially in accordance with the sketch plan annexed to the document: Special Condition 3. The subdivision application with respect to this property was refused on or about 16 April 2006. That being so, the contract would in any event no longer be specifically performable: Fitzgerald v Masters (1956) 95 CLR 420 at 433 per Dixon CJ & Fullagar J; Brown v Heffer (1967) 116 CLR 344 at 351 per Windeyer J.

20 There is a further reason why Green Parkes has failed to establish that it would be entitled to specific performance. To do so it must show that it is ready, willing and able to substantially perform its obligations under the contract, most critically being ready, willing and able to pay the outstanding purchase moneys in full: see Mehmet v Benson (1965) 113 CLR 295 at 307 – 308 per Barwick CJ (McTiernan J agreeing) and 314 per Windeyer J; Tanwar Enterprises Pty Ltd v Cauchi (2003) 217 CLR 315 at [4] per Gleeson CJ, McHugh, Gummow, Hayne & Heydon JJ.

21 Green Parkes has not adduced such evidence. It has sought to place reliance upon vague evidence of an alleged parol agreement with Mr Ollis such that it is entitled to pay less than the stipulated purchase price. Such an agreement, however, even if established by admissible evidence on the balance of probabilities, is not enforceable unless it is in writing and signed by Mr Ollis: section 54A(1) Conveyancing Act 1919 (NSW). The prohibition in that section applies equally to parol variations of existing contracts as it does to the creation of an entirely new agreement: Phillips v Ellinson Brothers Pty Ltd (1941) 65 CLR 221 at 234 per Starke J and 243 – 244 per Williams J; Tallerman & Co Pty Ltd v Nathan’s Merchandise (Victoria) Pty Ltd (1957) 98 CLR 93 at 112 – 113 per Dixon CJ & Fullagar J and 122 per Williams J.

22 It is in any event unclear how a written contract made on 20 February 2004 can be varied by a parol agreement made more than two weeks earlier on 2 February 2004.

23 That leaves the question of whether Green Parkes is entitled to a purchaser’s lien. To prove such an interest, however, Green Parkes must adduce evidence that the moneys paid over were paid to Mr Ollis directly (and not to an agent or to his stakeholder), that they were paid pursuant to a contract of sale and that it is entitled to the return of the deposit under the contract: see Rose v Watson (1864) 10 HL Cas 672; Combe v Lord Swaythling [1947] Ch 625; Hewett v Court (1983) 149 CLR 639. Green Parkes has simply failed to discharge its onus on all three of these matters.

24 There being no interest in land, the issue of priorities does not arise.

The Cathedral Close Property

25 The title reference for this property is 6/1085775 and the registered proprietor is Ms Shields.

26 The evidence indicates that the property is a vacant block with an estimated value of approximately $50,000.

27 On 6 September 2007, his Honour ordered that this property was subject to a charge in favour of the Bank in the sum of $12,718,362.64.

8 Dec 03	Property at corner of Koala St & Best St, Parkes (DP 1/518440) transferred to Ollis. Ollis executes mortgage in favour of Holmes Conveyancing securing $409,000
30 Apr 04	Ollis executes further mortgage in favour of Holmes Conveyancing securing $630,000
2 Feb 04	Alleged parol agreement between Ollis and Green Parkes to reduce purchase price of lot 6
29 Jun 04	Alleged contract of sale between Shields and Green Parkes concerning “Lot 6 Koala Estate, Parkes” being Lot 6 in an unregistered plan annexed to the contract of DP 1/518440
20 Dec 04	Ollis executes variation of mortgage in favour of Holmes Conveyancing increasing principal to $872,570.93
3 Mar 05	Unregistered mortgage to Guardian Loans
7 Mar 05	Guardian Loans registers caveat
19 Jul 05	Roger Wylie Developments registers caveat over property, the interest claimed an unregistered mortgage securing $28,000
9 Aug 05	Property subdivided into lots 1-14/1078492
31 Aug 05	Ollis pays $22,500 stolen money to Peter Flynn
12 Sep 05	Ollis pays $28,880 of stolen money to Roger Wylie Developments
16 Sep 05	Roger Wylie Developments registers withdrawal of caveat over DP 1-14/1078492
22 Sep 05	Guardian Loans registers discharges of the caveat, and Holmes Conveyancing registers discharges of the mortgages, over lots 3 – 6 & 8 – 12 of DP 1078492. The lots are transferred to Shields
7 Oct 05	Ollis pays $203,316 stolen money to Guardian Loans
13 Oct 05	Guardian Loans registers discharge of caveat over DP 14/1078492
21 Oct 05	Ollis pays $635,000 stolen money to Holmes Conveyancing
27 Oct 05	Holmes Conveyancing registers discharge of mortgage (over lot 14)
4 Nov 05	DP 14/1078492 subdivided into DP 1-14/1085775
14 Nov 05	Ollis transfers lots 2, 3, 5 & 10 – 13 of DP 1085775 to Shields
16 Nov 05	Guardian Loans registers discharges of the caveat, and Holmes Conveyancing registers discharges of the mortgages, over lots 1, 7 & 13 of DP 1078492. Ollis transfers the lots to Shields
23 Nov 05	Ollis pays $157,000 stolen money to Peter Flynn
7 Dec 05	Ollis transfers lots 1, 4, 6, 7, 9 & 14 of DP 1085775 to Shields

Asserted interest

28 Green Parkes has not lodged a caveat in respect of this alleged interest.

29 Mr Brown appears to assert that Green Parkes is entitled to a decree of specific performance if it tenders the remaining purchase price of $32,800.

Decision

30 Green Parkes has not satisfied its onus of proving that it has an interest in land.

31 As with the Woodward Street property, the alleged contract presented as evidence has not been stamped and has not had the vendor’s signature witnessed.

32 As with the Woodward Street property, Green Parkes has also not adduced evidence that it is ready, willing and able to pay the stipulated purchase price by relying upon an alleged parol variation which:

i. even if established is unenforceable by reason of section 54A(1) of the Conveyancing Act; and

ii. in any event, was made on 2 February 2004, almost five months before the contract of sale was allegedly exchanged.

33 Additionally, in relation to the Cathedral Close property, Green Parkes has not adduced sufficient evidence to prove that that property was the property the subject of its alleged contract: that contract concerns the sale of Lot 6 in the unregistered plan for the subdivision of Lot 1 of DP 518440. It is simply impossible to determine from the evidence whether that lot is what subsequently became Lot 6 in deposited plan 1085775, itself a subdivision of Lot 14 in deposited plan 1078492. An equity regarding the purchase of a prospective lot in a subdivision only becomes a proprietary interest when it attaches to an identifiable lot, and Green Parkes has failed to prove that this has occurred: see Harrison v Lidoform Pty Ltd [unreported, Federal Court of Australia, 24 November 1998, Hely J]; Forder and Others v Cemcorp Pty Ltd (2001) 51 NSWLR 486 at [15] per Barrett J; Sama Zaraah Pty Ltd v 888 Projects Pty Ltd [2007] NSWSC 1041 at [4] – [5] per Gzell J.

34 That therefore leaves the question of whether Green Parkes is entitled to a purchaser’s lien. As with the Woodward Street property, however, Green Park has failed to discharge its onus on the question of who has the deposit, whether it was paid under a valid contract and whether it would be legally entitled under that contract to a return of the deposit.

35 Furthermore, having failed to caveat its alleged interest, if the question of priorities arises, Green Parkes’ claim would be defeated by laches as the interests of third parties have intervened: see Fitzgerald v Masters (1956) 95 CLR 420 at 433 per Dixon CJ & Fullagar J and Lamshed v Lamshed (1963) 109 CLR 440 at 453 & 455 per Kitto J (Windeyer J agreeing).

36 That being so, here again the issue of priorities does not arise.

The Docos Street Property

37 The registered proprietor is the first defendant, Victor Warren Ollis.

38 The Bank’s evidence indicates that it is a vacant development site with an estimated value of approximately $350,000.

39 On 6 September 2007, the Court ordered that this property was subject to a charge in favour of the Bank in the sum of $12,718,362.64.

2 Feb 04	Ollis and Green Parkes Estate execute “agreement of sale” of lot 28 of subdivision. Alleged parol variation the same day.
30 Apr 04	Holmes Conveyancing advances $717,000 to Ollis
20 Aug 04	Transfer of property to Ollis executed Mortgage to Holmes Conveyancing executed
5 Oct 04	Transfer of property to Ollis registered Mortgage to Holmes Conveyancing registered
22 Nov 04	Alleged agreement between Dr Peter Flynn & Dr Susan Flynn and Ollis for the purchase of unregistered lots 19, 28, 29, 30, 31, 32, 38, 39 & 40
20 Dec 04	Mortgage to Holmes Conveyancing: principal $872,570.93
3 Mar 05	Unregistered mortgage to Guardian Loans
7 Mar 05	Guardian Loans registers caveat
14 Mar 05	Peter Flynn registers caveat AB346794Y Richard & Kathryn Hawkins register caveat AB346806U
5 May 05	Alleged agreement between Peter & Mary Lawrence and Ollis for the purchase of unregistered lots 3, 4, 5, 6, 33, 34, 41, 42, 43 & 44
13 May 05	Alleged agreement between Richard Hawkins and Ollis for the purchase of unregistered lots 16, 17, 18, 25, 26 & 27
26 Jun 05	Alleged agreement between Jennifer & John Vallance and Ollis for the purchase of unregistered lots 1, 2, 20, 21, 22, 23, 24, 35, 36 & 37
7 Oct 05	Ollis pays $203,316 stolen money to Guardian Loans
13 Oct 05	Guardian registers withdrawal of caveat
21 Oct 05	Ollis pays $635,000 stolen money to Holmes Conveyancing Holmes Conveyancing provides discharge of mortgage to Pilgrim
16 Dec 05	Ollis and Docos Estate allegedly exchange contract for sale of entire property (price $400,000). Peter Flynn and Richard & Kathryn Hawkins provide executed withdrawals of caveat.
20 Dec 05	Settlement alleged to occur
19 Jan 06	Sully J makes restraining order against entire property pursuant to section 10 of the Criminal Assets Recovery Act 1990 (NSW) (“the Restraining Order”)
20 Jan 06	NSW Crime Commission (“the Commission”) lodges caveat AC62711 pursuant to section 15(3) of the Criminal Assets Recovery Act
27 Jan 06	Transfer stamped. Presumably lodged for registration immediately thereafter
30 Jan 06	Registrar-General writes to Pilgrim: NSWCC caveat means that transfer, discharge of mortgage and withdrawal of caveats rejected
8 May 06	Green Parkes Estate Pty Ltd registers caveat AC289640T
25 Sep 07	Docos Estate registers caveat AD424720W
10 Mar 08	Jennifer & John Vallance register caveat AD763396K

Docos Estate Parkes Pty Ltd

40 A caveat lodged on behalf of Docos Estate states the interest as the “Whole of the estate” pursuant to a contract for sale dated 16 December 2005 “as bona fide purchaser for value without notice”.

41 Docos Estate appears to be a development vehicle for investors, including a number of the caveators.

42 Docos Estate’s submission is that the contract for sale and settlement mean that it had a dealing registrable, obtained from the registered proprietor for value and “on a bona fide basis”, and hence could rely upon section 43A(1) of the Real Property Act 1900 (NSW) such that it had “protection against notice by elevating [its] interest to one deemed to be a legal estate”. It relies upon IAC (Finance) Pty Ltd v Courtenay (1963) 110 CLR 550 at 571 - 574, Meriton Apartments Pty Ltd v McLaurin & Tait (Developments) Pty Ltd (1976) 133 CLR 671, Diemasters Pty Ltd v Meadowcorp Pty Ltd (2001) 52 NSWLR 572 and Black v Garnock (2007) 230 CLR 438.

43 This submission is considered below. In essence, section 43A does not assist Docos Estate and hence the matter is to be resolved in the Bank’s favour by the application of the rules relating to equitable priorities, the Bank’s interest being first in time and there being no disentitling conduct.

Priority

44 Docos Estate asserts that its interest under the contract has priority over the Bank’s charge by reason of section 43A(1) of the Real Property Act.

45 That section provides:

“For the purpose only of protection against notice, the estate or interest in land under the provisions of this Act, taken by a person under a dealing registrable, or which when appropriately signed by or on behalf of that person would be registrable under this Act shall, before registration of that dealing, be deemed to be a legal estate”.

46 In Black v Garnock [(2007) 230 CLR 438 at [33]; citing Meriton Apartments Pty Ltd v McLaurin & Tait (Developments) Pty Ltd (1976) 133 CLR 671 at 676 per Barwick CJ, Mason & Jacobs JJ], Gummow & Hayne JJ held that upon the settled construction given this section by the authorities, it “confers upon a purchaser who has received a registrable instrument and paid the purchase money the same protection against notice of an earlier unregistered interest as that achieved by a purchaser who acquires the legal estate at common law”.

47 This section does not assist Docos Estate, because:

i. it was not, at the time of settlement, a purchaser for value without notice of the Bank’s interest;

ii. the transfer was not a “dealing registrable” because it was not stamped until 27 January 2006 and at that time the property was bound by the Restraining Order; and

iii. even if the transfer was a “dealing registrable” at the time it was provided to Docos Estate, it ceased to be so at the time it was lodged for registration.

48 If section 43A does not apply, then the issue of priority is determined by the rules of equity, and the Bank submits there is nothing in the present case which would displace the rule qui prior est tempore potior est iure.

Purchaser for value without notice

49 Section 43A only applies where the registrable dealing is taken by the purchaser for value and without notice: Meriton Apartments Pty Ltd v McLaurin & Tait (Developments) Pty Ltd (1976) 133 CLR 671 per Barwick CJ, Mason & Jacobs JJ. The protection it extends prior to registration is therefore not the equivalent of the immediate indefeasibility provided upon registration by section 42, but it permits the purchaser to rely upon the common law doctrine of purchaser for value without notice which doctrine otherwise has little role to play with respect to Torrens land: see Macquarie Bank Ltd v Sixty-Fourth Throne Pty Ltd [1998] 3 VR 133 at 151 per Tadgell JA, Winneke P agreeing; and Meagher, Heydon & Leeming, Meagher, Gummow & Lehane’s Equity, Doctrines & Remedies 4th edition, 2002, at [8-295].

50 Docos Estate has failed to adduce sufficient admissible evidence that it has paid anything to the vendor Mr Ollis such that it could be said to be a purchaser for value. The evidence indicates that the Investors paid Ms Shields (under her trading name “Cashflow Positive Investments”) $1.15 million in return for 1.15 million shares in Docos Estate.

51 Although there is evidence showing payments by certain of the investors to Ms Shields, there is no evidence of payments being made:

i. by the purchaser, Docos Estate;

ii. to the vendor and registered proprietor, Mr Ollis; or

iii. in respect of the contract of sale.

52 Indeed the evidence of Mr Pilgrim is that the payments were made by the investors to Ms Shields and in consideration for shareholdings in Docos Estate Parkes Pty Ltd.

53 That being the case the only finding available in the evidence is that Docos Estate was a volunteer

54 There is no evidence to indicate what subsequently happened to those funds, and in particular no evidence that:

i. the $1.15 million was being treated by Ms Shields as held on trust for Docos Estate; and

ii. of this sum $400,000 was transferred to Mr Ollis as the purchase price for the sale.

55 On the current evidence the Court is simply left to speculate as to the treatment of the $1.15 million.

56 Docos Estate having failed to establish it was a purchaser for value, section 43A has no application.

“Delay”

57 Docos Estate submits that its delay in lodging the transfer for registration did not prejudice the Bank.

58 As Docos Estate submissions appears to acknowledge, however, the Bank does not rely upon any defence of laches. The equitable principles to which the High Court refers to in Fysh v Page (1956) 96 CLR 233 could have no bearing on what is the proper construction of section 43A.

59 The Bank’s propositions regarding section 43A are threefold:

i. the section has no operation because Docos Estate was not a purchaser for value;

ii. in the alternative, the transfer was never a “dealing registrable” because by the time it was stamped (27 January 2006), it could not be registered because:


a) the Commission’s restraining order (19 January 2006) was an absolute bar to registration, and

b) the Commission’s caveat (20 January 2006) meant that at the time Docos Estate would otherwise have had a dealing registrable, it had notice of the prior dealing; and

iii. in the further alternative, if the Court holds that Docos Estate had a “dealing registrable” on 20 December 2005 despite the failure to stamp, then the intervention of the restraining order on 19 January 2006 and the caveat the day after deprived Docos Estate of the protection it would otherwise have had pursuant to section 43A.

60 The first proposition is accepted as of substance.

61 Had it been necessary to deal with the alternative proposition 2 and/or 3, each would itself be of substance.

62 The question of “delay” is only germane to the third argument. In that respect, I accept that it is the intervention of the restraining order and caveat between the taking of the transfer and lodgement and not mere delay or prejudice which causes Docos Estate to lose the section’s protection against notice. That being so, laches is simply irrelevant.

Competing Equities

63 Docos Estate submits that even if section 43A is inapplicable it is entitled to succeed on the question of priorities.

64 The finding is that as first in time, it follows that the Bank prevails.

65 Docos Estate has not pointed to any disentitling conduct which would reverse the prima facie position. The Court having accepted that there is insufficient evidence to show that it was a purchaser for value, clearly Docos Estate does not have a true equitable interest, because its interest in the land is commensurate only with payment of the purchase price: see Chief Commissioner of Stamp Duties v Paliflex Pty Ltd (1999) 47 NSWLR 382 at [30] – [31] per Austin J.

66 Docos Estate submits that the Court did not find how much stolen money was paid to discharge the mortgages attached to the property. Although that is true, it is beside the point. The Court needed only to find the total amount of stolen money into the relevant properties.

67 The amount of the Bank’s interest is sufficiently established for present purposes by the evidence of John Williams, which evidence was accepted by the Court in the findings against the defendants. Docos Estate has not adduced any evidence to the contrary.

68 Lastly, Docos Estate submits that it is entitled to priority because the interest asserted by the Bank is a “mere equity”: Latec Investments Ltd v Hotel Terrigal Pty Ltd(in liq) (1965) 113 CLR 265.

69 It is apparent that Docos Estate misapprehends the nature of the interests created by the Court’s orders on 6 September 2007. The trusts and charges created by the wrongful taking and conversion by the defendants arose as soon as the money was taken or converted without the necessity for an order of the Court.

70 Thus, in Evans v European Bank Ltd (2004) 61 NSWLR 75 at [112], the Spigelman CJ (with whom Handley and Santow JJA agreed) stated that at [113] – [115]:

“A case of simple theft involves a transfer of property about which the transferor was entirely unaware. The transferee holds any property into which the stolen property has been converted on trust in a manner which should be seen as automatic … The Australian authorities indicate that a trust arises immediately upon the acquisition of the property, not when recognised by a court …

As Millett J (as his Lordship was) said in a case involving fraudulent misappropriation: ‘the trust which is operating in these cases is not some new model remedial constructive trust, but an old-fashioned institutional resulting trust [ El Ajou v Dollar Land Holdings plc [1993] 3 All ER 717 at 734; see also P J Millett, “Tracing the Proceeds of Fraud” (1991) 107 Law Quarterly Review 71 at 81].

If appropriately characterised as ‘constructive’, the trust that arises upon receipt of stolen funds by an active participant in the theft is of an institutional rather than remedial character”.

71 That the trust, howsoever described, arises immediately upon the wrongful taking has been repeatedly reaffirmed by single judges of this Court: Cashflow Finance Pty Ltd (in liq) v Westpac Banking Corporation [1999] NSWSC 671; Commonwealth of Australia v Official Trustee in Bankruptcy [2004] NSWSC 1155 at [18] per Young CJ in Eq; Orix Australia Corporation Ltd v Moody Kiddell & Partners Pty Ltd [2005] NSWSC 1209 at [155] per White J; Malouf v MBF Australia Ltd [2007] NSWSC 1020 at [29] per Einstein J.

72 The charge over the Docos Estate property is therefore to be distinguished from the sort of “remedial” charge that was created and declared by the High Court in Giumelli v Giumelli (1999) 196 CLR 101.

73 The exact dividing line between a proprietary interest that is a “mere equity” and a full equitable estate in land has not been settled in the authorities: see Mills v Ruthol Pty Ltd [2002] NSWSC 294 at [121] & [125] per Palmer J. None of the justices in Latec Investments Ltd v Hotel Terrigal Pty Ltd (in liq) (1965) 113 CLR 265 attempted to give an authoritative definition of either category of interest: see Double Bay Newspapers Pty Ltd v AW Holdings Pty Ltd (1996) 42 NSWLR 409 at 425 per Bryson J. In that case, Bryson J drew the following conclusion from Latec Investments:

“… a mere equity, meaning a claim to have an equitable interest which can only be enforced by succeeding in some claim to a court for equitable relief (such as a claim for rectification, a claim to set aside a conveyance obtained by fraud or (as I think) a claim the enforcement of which depends on the doctrine of part performance) does not participate in competitions of priorities with equitable interests which have been acquired in good faith, for valuable consideration and in a manner which can be clearly shown without obtaining any decision of the court upholding them.

74 Latec Investments] shows clearly that an equity which requires the assistance of a court if it is to be established at all does not enter into a competition of priorities with an equitable interest which was obtained for value and without notice of it.

75 In Mills v Ruthol Pty Ltd [2002] NSWSC 294 at [131], Palmer J stated that the basic principle in the following way:

“…where the holder of a prior equitable interest needs the assistance of the equity court to perfect his or her title to it, that equitable interest will be defeated if, before the title is perfected, a third party takes an equitable interest for value without notice”.

76 Although his Honour was reversed on appeal, the Court of Appeal assumed (without deciding) the correctness of this statement or principle: Ruthol Pty Ltd v Mills [2003] NSWCA 56 at [87] per Sheller JA (Meagher JA & Cripps AJA agreeing).

77 The critical difference, then, is between an “equity” – an in personam right in equity – which requires the intervention of the court to flower into a full equitable estate, and an equitable interest which does not because it already consists of such estate. As the Court of Appeal has unanimously held in Evans v European Bank Ltd at [113] – [115] (extracted above), it is clear that the charge in the present case falls into the latter category: the charge arose as soon as the stolen funds were wrongfully converted.

78 The orders made by this Court on 6 September 2007 merely declared the existence of that charge, in the same manner as the court might declare a purported termination of a contract to be valid or invalid. The Bank therefore had a complete equitable estate – not just “interest” – with respect to the Docos Street property from 7 October 2005.

Conclusion

79 For those reasons it is appropriate to make orders in terms of the Short minutes of Order pursued by the Bank.