Supreme Court New South Wales Medium Neutral Citation: Loureiro v Mac Aus Unit Pty Ltd [2021] NSWSC 925 Hearing dates: 28 July 2021 Date of orders: 30 July 2021 Decision date: 30 July 2021 Jurisdiction: Common Law Before: Harrison J Decision: (1) Dismiss the first defendant's motions filed 15 July 2021 and 16 July 2021. (2) Direct the plaintiffs, by no later than 27 August 2021, to file and serve all evidence, both lay and expert, upon which they intend to rely. (3) Direct the defendants, by no later than 8 October 2021, to file and serve all evidence, both lay and expert, upon which they intend to rely. (4) Order that the proceedings be expedited. (5) Grant liberty to the parties forthwith to approach the List Manager with a view to obtaining an expedited date for the hearing of the proceedings. (6) Order that the costs of the first defendant's motions be the costs in the proceedings. (7) Confirm that the proceedings are listed before the Registrar for pre-trial directions on 15 October 2021. Catchwords: EXPEDITION – funds in court – application for expedition of motion seeking payment out – no present entitlement to funds, paid into court as security for plaintiffs' claims – where delays caused by plaintiffs' failure to file evidence – where first defendant liable to suffer hardship if funds not released – expedite proceedings so as to bring forward competing claims Category: Procedural rulings Parties: Carlos Jose Luis Loureiro (First Plaintiff) Claudio Jose Leal Meireles (Second Plaintiff) Jose Carlos Reis Meireles (Third Plaintiff) Mac Aus Unit Pty Ltd ACN 141 715 700 (First Defendant) Antonio Manuel de Carvalho Conceicao (Second Defendant) Patricia Conceicao (Third Defendant) David Conceicao (Fourth Defendant) Representation: Counsel: E Bartley (Plaintiffs) M Stevens (First Defendant) Solicitors: Jeresyn Legal (Plaintiffs) Somerset Ryckmans (First Defendant) File Number(s): 2020/135763 Publication restriction: Nil Judgment 1. HIS HONOUR: Mac Aus Unit Pty Ltd was formerly the registered proprietor of a property situated at 6 Livingstone Road, Petersham. On 6 March 2020, Mac Aus entered into a contract for the sale of that property to a third party for the sum of $4,050,000. Prior to the completion of that contract, the plaintiffs lodged a caveat against the title to the property claiming an interest in it by way of an equitable charge or lien, alleged to have been created as the result of funds advanced by them to the defendants as a loan. By agreement between Mac Aus and the plaintiffs, and in order that the sale could be completed, the plaintiffs agreed to withdraw the caveat on condition that the sum of $1,000,000 be retained in a solicitor's trust account pending the adjudication of the plaintiffs' claims. On 6 May 2020, the plaintiffs commenced these proceedings seeking repayment of the loans that they say were made to the defendants. 2. Somewhat belatedly, on 7 December 2020, Mac Aus filed a notice of motion seeking an order that the money held on trust be released to it, or alternatively that it be paid into court upon the plaintiffs giving the usual undertaking as to damages. That money was later paid into court, on 8 February 2021. The plaintiffs gave the required undertaking. 3. The terms and conditions upon which the money was paid into court are otherwise not particularised. They were not to be found in a written agreement, nor have they been specifically reduced to writing, except to the extent that they are contained in or can be gleaned from the correspondence that was generated between the parties' lawyers on the issue of whether the plaintiffs in fact had an equitable charge over the property or any other interest that would have supported the caveat that they lodged. 4. For example, by letter dated 14 September 2020, Mr Gooden, the solicitor for Mac Aus, wrote to the solicitor for the plaintiffs as follows: "I confirm that I act for the First and Third Defendant in the above proceedings. I am instructed that Mac Aus Unit Pty Limited ACN 141 715 700 ('Mac Aus') had been the registered owner of the property situate and known as 6 Livingstone Street, Petersham (the 'Petersham property'). On 3 March 2020, Mac Aus entered into a contract for the sale of the Petersham property to Brimwood Investment Pty Limited. I am instructed that the settlement of the sale was fixed for 21 April 2020. I am further instructed that the day before settlement was due, Carlos Loureiro and the other Plaintiffs in the above proceedings caused a Caveat to be lodged on the title of the Petersham property. The Caveat had registration number AQ41882. The Caveat described the caveatable interest they held in the Petersham property to be: 'Equitable interest in the land created by an equitable charge to secure moneys advanced by the Caveators to or on behalf of the registered proprietor as well as any interest payable by the registered proprietor to the Caveators on the amounts advanced from May 2010 to date.' Given the fact that the settlement was due the next day, my clients' former solicitor, Roger Harkin of Owen Hodge Lawyers agreed to hold the balance of the proceeds of sale of the Petersham property in his trust account. The amount held was $1 Million. I subsequently gave notice that I required your clients to file their Statement of Claim in the Supreme Court of NSW by Wednesday 6 May 2020, otherwise I would seek to commence action that your clients had no right, title or interest in the Petersham property. The Statement of Claim was filed on 6 May 2020. Mac Aus and Patricia Conceicao have now filed their Defence. I observe that the grounds set out in the Caveat asserting a caveatable interest, are significantly different from the allegations contained in the Statement of Claim. In any event, my clients deny that any moneys were advanced to them by the Plaintiffs that would support the Caveat that had been lodged and which was replaced by the $1 Million being held by my clients' former solicitor. The moneys being held by my clients' former solicitor are clearly the property of Mac Aus. As you are no doubt aware, the Court treats a Caveat similar to an injunction. My clients are not prepared to continue with the arrangement whereby their former solicitor leaves in his trust account the $1 Million in circumstances in which the Plaintiffs have not given an undertaking for damages. I raise this matter because Mac Aus is a trading company and its inability to access its funds gives raise [sic] to a significant and substantial claim in damages should it be determined by the Court, that the Plaintiffs had no right to make any claim in the Petersham property. I therefore give notice, that I require the Plaintiffs to move the Court for an injunctive order with the standard undertaking for damages to be given, within the next 7 days, otherwise I shall instruct my clients' former solicitor to release the funds he is holding to Mac Aus. If you propose to move the Court, I will consider any orders that you propose the Court should make and it may well be that we can agree upon the terms of those Orders and the terms of the undertaking for damages. This may mean that we can avoid further costs being incurred regarding the retention of the $1 Million. Please treat this correspondence as a letter of demand." 1. The precise terms and conditions upon which the money was paid into court potentially arise as in issue for determination by me in two applications now brought by the first defendant. By its first notice of motion filed on 15 July 2021, Mac Aus seeks an order that the sum of $1,000,000 held in court be paid out to it, or alternatively that part of that sum, being $716,344.28, be paid out to Mac Aus for the sole purpose of enabling it to meet a capital gains tax liability incurred on its sale of the property. By a second notice of motion filed on 16 July 2021, the first defendant seeks expedition of the first motion. 2. Mac Aus maintains that it is entitled to the money paid into court, without reference to the merits or otherwise of the plaintiffs' principal claim for repayment of its loans, because the plaintiffs never had an interest in the property that would have supported a caveat and because demonstration of that fact must result in Mac Aus being entitled to payment of the money unconditionally. It is implicit from the terms of the relief sought by Mac Aus in its 15 July 2021 motion that it considers that it can establish that the plaintiffs never had a caveatable interest, whether by way of charge or equitable lien or howsoever otherwise. 3. By way of contrast, the plaintiffs maintain that the question of whether or not they had, or could have established, an interest in the property capable of supporting a caveat, has now passed into history and is completely irrelevant. They maintain that the circumstances in which the $1,000,000 was paid into court reflect the establishment of a regime pursuant to which they agreed not to obstruct completion of the sale of the property to the third party in return for Mac Aus agreeing to provide security in that sum for the amount that the plaintiffs claim they are owed for unpaid loans. If that contention is correct, the present application for expedition, and the determination of the anterior claim for payment of the money, are misconceived and cannot be dealt with until the plaintiffs' principal claims have been adjudicated. 4. It is reasonably clear in my opinion, from the terms of Mr Gooden's 14 September letter and in the events that have occurred, that the sum of $1,000,000 was withheld from the sale proceeds, and eventually paid into court, as security for the plaintiffs' claim for repayment of its alleged loan advance, but not upon the basis that the security was subject to the plaintiffs' proof of the existence of an enforceable caveatable interest in the property and so liable to be discharged if such an interest could not be established. As the letter makes clear, Mr Gooden was not content for the money to remain in a solicitor's trust account. He insisted upon the protection of an undertaking to the court from the plaintiffs that they would be liable for any damages that Mac Aus might incur by reason of its inability to use the money in question. The money was thereafter paid into court and the plaintiffs gave the required undertaking. Counsel for the plaintiffs submitted in terms that the money was paid into court "pending the outcome of these proceedings" and in consideration of their undertaking. 5. It seems to me in these circumstances that the money was paid into court as security for the plaintiffs' claims and to abide the outcome in these proceedings. I do not consider that Mac Aus can maintain its claim to have the money released to it until that occurs. Accordingly, a claim for expedition of the motion seeking such an order is misconceived. That, however, is not the end of the matter. 6. These proceedings were commenced as long ago as 6 May 2020. With the exception of the interlocutory skirmishes to which I have referred, almost nothing significant has happened. The plaintiffs were eventually ordered or consented on 29 April 2021 to file and serve the evidence upon which they proposed to rely by 28 May 2021. They did not do so. They were then ordered on 15 July 2021 to file and serve their evidence by 27 August 2021. The plaintiffs also became subject to an order that any evidence not served by that date could not be relied on without leave. When the matter came before me in the present application, counsel for the plaintiffs indicated that all of the plaintiffs' evidence, including expert evidence, would now be completed by that date. 7. Mac Aus relies on evidence in the present application to establish that it will be required to pay its anticipated capital gains tax liability next month. The plaintiffs do not accept that there is evidence to establish more than that Mac Aus will be required to lodge its return by that date. Moreover, the plaintiffs do not accept that there is any material to demonstrate that Mac Aus does not have other assets or funds which it could utilise, apart from the funds in court, in order to meet its anticipated capital gains tax liability. It has not been possible to resolve these issues in the limited time available in the duty list. 8. Doing the best I can, it appears reasonably clear on the available material that the plaintiffs never had an interest in the property capable of supporting a caveat. Despite that, under pressure to ensure that the completion of the sale was not imperilled, Mac Aus consented to a regime that quarantined $1,000,000 of its expected sale proceeds until the plaintiffs' claims were heard. Mac Aus ought probably to have sought expedition of the whole proceedings as soon as it became aware, probably no later than completion of the sale, that it would have a large capital gains tax liability due for payment this year. Mac Aus has no present right to require that the funds in court be paid to it that is not subject to, or co-extensive with, the outcome in the plaintiffs' principal claim. I accept that Mac Aus has not acted in a way that was intended to delay these proceedings, even though what I consider to be its misconceived application for expedition has not assisted to advance them. I do accept that the anticipated tax liability is a significant sum. 9. In all of the circumstances, I consider that the following orders should be made: 1. Dismiss the first defendant's motions filed 15 July 2021 and 16 July 2021. 2. Direct the plaintiffs, by no later than 27 August 2021, to file and serve all evidence, both lay and expert, upon which they intend to rely. 3. Direct the defendants, by no later than 8 October 2021, to file and serve all evidence, both lay and expert, upon which they intend to rely. 4. Order that the proceedings be expedited. 5. Grant liberty to the parties forthwith to approach the List Manager with a view to obtaining an expedited date for the hearing of the proceedings. 6. Order that the costs of the first defendant's motions be the costs in the proceedings. 7. Confirm that the proceedings are listed before the Registrar for pre-trial directions on 15 October 2021. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 30 July 2021