Supreme Court New South Wales Medium Neutral Citation: CB Cuckoo Pty Ltd v Kyriacou [2021] NSWSC 991 Hearing dates: 2 August 2021 Decision date: 02 August 2021 Jurisdiction: Equity Before: Ward CJ in Eq Decision: 1. Order pursuant to s 74MA of the Real Property Act 1900 (NSW) that the defendant withdraw Caveat AR140801 forthwith. 2. Order pursuant to s 74MA of the Real Property Act 1900 (NSW) that the defendant withdraw Caveat AR140802 forthwith. 3. Order that these orders be entered forthwith. 4. Order that the Defendant pay the plaintiff's costs of the amended summons. 5. Amended Summons otherwise be dismissed. 6. Note: Undertaking to the Court by the plaintiffs not to deal with either of the properties referred to in Orders 1 and 2 for a period of 7 days (the terms of which undertaking are to be reduced to writing and forwarded to the Court and the defendants as soon as practicable). Catchwords: LAND LAW — Caveats — Removal of caveat — Removal by order of court — Whether serious question to be tried Legislation Cited: Real Property Act 1900 (NSW), ss 74MA, 74F Real Property Regulation 2019 (NSW), Sch 2 Cases Cited: El-Sayed v El Hawach (2015) 88 NSWLR 214; [2015] NSWCA 26 Lew v Bluescope Distribution Pty Ltd [2010] NSWSC 794 Mayrin DM Pty Ltd v Deng (2019) 19 BPR 39,841; [2019] NSWSC 1552 Mercanti v Mercanti (2016) 340 ALR 290; [2016] WASCA 495 Ramage v Waclaw (1988) 12 NSWLR 84 Ruhe v Patel [2015] ACTSC 169 Szoda v NSW Trustee and Guardian (2012) 17 BPR 32,223; [2012] NSWSC 194 TAL Life Ltd v Shuetrim (2016) 91 NSWLR 439; [2016] NSWCA 68 Category: Principal judgment Parties: CB Cuckoo Pty Ltd (First Plaintiff) Somersby Aust Pty Ltd (Second Plaintiff) George Kyriacou (Defendant) Representation: Counsel: M Ashhurst SC with M Dolenec (First and Second Plaintiffs) M Condon SC with J Simpkins (Defendant) Solicitors: MDA Law (First and Second Plaintiffs) KDA Legal (Defendant) File Number(s): 2021/00175705 Publication restriction: Nil Judgment 1. HER HONOUR: This is an application, by amended summons filed on 22 June 2021, by the plaintiffs (CB Cuckoo Pty Ltd, and Somersby Aust Pty Ltd (Somersby Aust)) against the defendant, George Kyriacou. The relief that is being pressed in the amended summons is for orders pursuant to s 74MA of the Real Property Act 1900 (NSW) (Real Property Act) that the defendant withdraw two caveats – one over a property in Pitt Street, that I will refer to as the Pitt Street Property, and the other over a property in Somersby, that I will refer to as the Somersby Property. There is other relief sought in the amended summons, but that is not pressed today. 2. The defendant accepts that the defendant does not have a caveatable interest in the Somersby Property and, accordingly, an order in the form of prayer 2 of the amended summons should be made; namely, an order pursuant to s 74MA of the Real Property Act that the defendant withdraw caveat AR140802 forthwith. 3. The dispute this morning has been as to the caveat lodged in respect of the Pitt Street Property. The caveatable interest claimed under that caveat is described as an estate in fee simple by virtue of a beneficial interest in a trust. The date ascribed to that interest is 10 May 2021 and the details supporting the claim to have a caveatable interest read as follows: The caveator is the beneficiary of a trust. The trustee company has sold the property to a related party without consideration of the interests of the beneficiary. 1. The plaintiffs are the registered proprietors of the land in question. The position of the plaintiffs is that, first, the form of the caveat does not comply with the requirements of the Real Property Act, see s 74F(5) and the particulars set out in Sch 2 to the Real Property Regulation 2019 (NSW); and, second (more substantively) that neither the affidavit evidence relied upon by the defendant, nor the statement of claim filed in other proceedings in this Court by the defendant, George Kyriacou, and his mother, Filomina Kyriacou (the Kyriacou Proceedings), establishes that George Kyriacou has a caveatable interest in the land. 2. The basis for the defendant's claimed caveatable interest in the Pitt Street Property is said to be set out in the statement of claim filed in the Kyriacou Proceedings. I note that the allegations contained therein include the following: 36. In order to fund the acquisition of the Pitt Street Property: a. the second plaintiff contributed approximately $600,000 towards the purchase price; and b. (inter alia) Westpac advanced fund secured over the said property. 37. The second plaintiff [Filomina Kyriacou] made the said contribution on the basis that half of the Pitt Street Property or alternatively half of the shares in VHM would be held on trust for her husband and her children, including the first plaintiff [George Kyriacou]. Particulars i. The Pitt Street Property was acquired pursuant to an arrangement between the second plaintiff and Mr Russo whereby they acquired assets for the benefit of, inter alios, members of their families. ii. Prior to the acquisition of the Pitt Street Property, the second plaintiff and Mr Russo agreed that they would own it equally and that the second plaintiff's interest was held on the basis that her share was owned on behalf of her husband and three children. 38. VHM was imputed with knowledge of the matters pleaded in paragraph 37 hereof, because the second plaintiff was its sole director. 39. To give effect to the second plaintiff's understanding: a. from 30 December 2016 to about 21 November 2018, all of the issued shares in VHM were held by Verona Group Pty Ltd (Verona) on trust for the Australian Global Investment Unit Trust; b. at all material times the unit holders of the Australian Global Investments Unit Trust were: i. as to one half, A&R Group Pty Ltd as trustee for A&R Group Family Trust; and ii. as to the remaining half, F&K Group Pty Ltd as trustee for the F&K Group Family Trust c. F&K Group Pty Ltd was incorporated on 16 February 2016 and deregistered on 7 July 2019; d. At all relevant times, John Kyriacou (the father of the first plaintiff and ex-husband of the second plaintiff) was the sole director and shareholder of F&K Group Pty Ltd e. The F&K Group Family Trust was a discretionary trust established on 2 March 2016 and had as a beneficiary thereof the first plaintiff f. A&R Group Pty Ltd as trustee for A&R Group Family Trust represented the interests of Mr Russo. … 41. In about June 2020 the second plaintiff and Mr Russo entered into a further understanding with Mr Cassaniti pursuant to which Mr Cassaniti offered to undertake, inter alia, the following tasks: a. he would cause new trusts to be created and new trustees to be appointed; b. the trustee would be Mr Russo. … 43. At about April 2019 the second plaintiff and Mr Russo entered into the understanding with Mr Cassaniti, the second plaintiff informed Mr Cassaniti that: a. Mr Russo and she equally owned the Pitt Street Property through a trust; and b. amongst the beneficiaries were her husband and children (including the first plaintiff) … 51. Shortly after Verona's winding up, Mr Russo informed the second plaintiff that her family still owned 50% of the Pitt Street Property. 1. As I understand it, what is being asserted is that the company that acquired the Pitt Street Property on 3 February 2017, VHM Asset Holdings Pty Ltd (VHM), of which at the time of purchase Filomina Kyriacou was the sole director, acquired the property in circumstances where VHM was imputed with knowledge of an agreement that had been reached between Filomina Kyriacou and her then business partner Angelo Russo, that half of the Pitt Street Property, or alternatively half of the shares in VHM (this seemingly being the import of [39] of the pleading), would be held on trust for her husband and her children, including George Kyriacou. 2. As noted, it is alleged in the statement of claim (at [36]) that Filomina Kyriacou contributed approximately $600,000 towards the purchase price. 3. The particulars to [37] refer to an agreement reached between Filomina Kyriacou and Mr Russo prior to the acquisition of the property that "they would own it equally" and that Filomina Kyriacou's interest was held on the basis that her share was owned on behalf of her husband and three children. 4. What is then asserted (at [39]), which is said to be the critical part of the pleading, is as to certain matters relating to the company VHM, and the shareholding in the company of VHM. This paragraph is prefaced by the words "to give effect to the second plaintiff's (i.e., Filomina Kyriacou) understanding", that understanding being the understanding referred to in or arising out of the matters pleaded in [36] and [37]. 5. The contention here made by George Kyriacou is that VHM held the Pitt Street Property on trust, inter alios, for him from the moment of its acquisition (not, I interpose to note, as might be suggested from the pleading, that the issued shares in VHM or any units in the unit trusts referred to at [39] were held on trust for him). 6. It is then alleged at [41] of the statement of claim that, in about June 2020, Filomina Kyriacou and Mr Russo entered into a further understanding with Mr Cassiniti, pursuant to which Mr Cassiniti offered to undertake certain tasks, and that in about April 2019, Filomina Kyriacou and Mr Russo entered into the understanding with Mr Cassiniti, at which time Filomina Kyriacou informed Mr Cassiniti that she and Mr Russo equally owned the Pitt Street Property through a trust and amongst the beneficiaries were her husband and children, including George Kyriacou. 7. The pleading then sets out the allegations against Mr Cassiniti and the alleged breach by Mr Cassiniti of fiduciary duties to Filomina Kyriacou (see [46] of the statement of claim). 8. The defendant, Mr George Kyriacou, maintains that he is the beneficiary of an express trust (in respect of the Pitt Street Property) and, as such, has a caveatable interest in the trust property, reference being made to Ruhe v Patel [2015] ACTSC 169 at [16] per Refshauge J and Mayrin DM Pty Ltd v Deng (2019) 19 BPR 39,841; [2019] NSWSC 1552 at [41]-[43] per Rein J. 9. As to the Somersby Property, what had been said on behalf of George Kyriacou was that he is the beneficiary of a discretionary trust referred to in the submissions as the Somersby Investment Holding Trust and, in that capacity, had a caveatable interest in the property. The defendant accepts that a beneficiary of a discretionary trust has no equitable interest in the assets of the trust fund, unless the provisions of the trust instrument create that result (referring to Mercanti v Mercanti (2016) 340 ALR 290; [2016] WASCA 495 at [248]); and both parties have referred to the decision of Nicholas J in Szoda v NSW Trustee and Guardian (2012) 17 BPR 32,223; [2012] NSWSC 194). However, George Kyriacou contends that, as a beneficiary of the Somersby Investment Holding Trust, he is entitled to exercise the rights of the trustee (Shoebill Pty Ltd) to set aside the transfer of the property to Somersby Aust from Raphis Securities Pty Ltd (Raphis), a company owned and controlled by Sam Cassaniti. 10. In the Kyriacou Proceedings, George Kyriacou challenges the sale by Raphis as mortgagee and submits that he has standing to bring such a claim consistent with the authorities considered in Ramage v Waclaw (1988) 12 NSWLR 84; El-Sayed v El Hawach (2015) 88 NSWLR 214; [2015] NSWCA 26 at [55]-[57] per Beazley P, as Her Excellency then was, Gleeson and Leeming JJA; and TAL Life Ltd v Shuetrim (2016) 91 NSWLR 439; [2016] NSWCA 68 at [54] per Leeming JA (with whom Beazley P and Emmett AJA agreed). 11. This matter was listed for hearing by me in the applications list on 27 July 2021. On that occasion, there was debate as to the timetable for the filing of affidavit evidence in relation to this application. The position that was taken by the plaintiffs was that there was nothing, either on the evidence that had been filed to that date, or if the matters in the statement of claim were to be accepted, to establish that George Kyriacou had a caveatable interest. The matter was listed for hearing this morning, effectively on the basis that it would not be necessary for there to be further affidavit evidence if what was being put was that, even accepting that the factual allegations in the statement of claim were correct, this did not give George Kyriacou a caveatable interest. 12. That is, in effect, the position that the plaintiffs still maintain. The plaintiffs submit that the statement of claim as pleaded does not assert facts which give rise to a caveatable interest by George Kyriacou; rather, that the only interest pleaded in the statement of claim relevant to George Kyriacou is that he is the beneficiary of discretionary trusts in respect of the land and that, as the discretionary object of a family trust (in relation to the allegations at [39] of the statement of claim), his standing or status in respect of shares in the company which owns the property in question would not be sufficient to give rise to a caveatable interest. 13. Although the statement of claim in the Kyriacou Proceedings seeks, as part of the relief claimed, interim relief effectively restraining the plaintiffs in the present proceeding from alienating, encumbering, disposing of or otherwise dealing with the Somersby Property, the suggestion that an application for interlocutory relief be dealt with today was resisted by the plaintiffs (and I note that the matter had not been listed for the purpose of such a hearing) and, in circumstances where the plaintiffs have now proffered an undertaking to the Court not to deal with either of the said properties for a period of seven days, in order to permit the defendant or Filomina Kyriacou to make whatever application is then sought to be made for interlocutory relief in relation to the properties, the plaintiffs say that there is no reason not to make orders in relation to the withdrawal of the caveats at this stage. Determination 1. It is not disputed that the relevant issue for determination on the present application is whether there is a serious question to be tried that there is a caveatable interest. Reference is made by the plaintiffs to the authorities cited in Lew v Bluescope Distribution Pty Ltd [2010] NSWSC 794 at [5]-[6] per Pembroke J. 2. I am of the view that the statement of claim does not give rise to a serious question to be tried as to George Kyriacou holding an equitable caveatable interest in the Pitt Street Property (as opposed to there potentially being a claim by Filomina Kyriacou in relation to the property as against the registered proprietor based on, say, a resulting trust; and George Kyriacou having some form of claim based derivatively from the claim that Filomina Kyriacou might have). 3. For the avoidance of doubt, on publishing these reasons I interpose to note that, in the course of oral submissions and having been taken through the claims pleaded in the Kyriacou Proceedings, it seemed to me that the claim there made was in effect a claim by Filomina Kyriacou that there was a resulting trust in relation to the Pitt Street Property (by reason of the contribution made by her to the purchase price for the property) and that Filomina Kyriacou's beneficial interest under that resulting trust was to be held for the benefit of her husband and children (this being the express trust for which I understand George Kyriacou contends in the disputed caveat). I was of the view that it would be Filomina Kyriacou that would be the appropriate party to seek to claim or enforce some sort of beneficial interest in relation to the property (albeit that such a beneficial interest, on her evidence, was the subject of a declaration of trust in favour of her husband and the three children); and that any claim by George Kyriacou would then be to enforce the trust declared by Filomina Kyriacou. That is what I meant by referring above to some sort of derivative claim on the part of George Kyriacou. Hence, I accepted the submission for the plaintiffs that the proper caveator on this scenario would be Filomina Kyriacou not her son, George Kyriacou. On that basis, I was not satisfied that there was a serious question to be tried that George Kyriacou held the claimed caveatable interest; and it was not necessary to dwell on the perceived deficiency in the manner in which the claimed caveatable interest had been claimed in the caveat. I add this by way of explanation of the oral reasons that might perhaps be said to have been too cryptically expressed. Returning then to the oral reasons, I concluded as follows. 4. Accordingly, I will also order that the caveat over the Pitt Street Property be withdrawn forthwith. I also note the undertaking to the Court that had been given by the plaintiffs and which is to be reduced to writing and forwarded as soon as practicable. On the basis of that undertaking, I will not proceed to hear or determine any interlocutory application at this stage. Orders 1. For the above reasons, I make the following orders: 1. Order pursuant to s 74MA of the Real Property Act 1900 (NSW) that the defendant withdraw Caveat AR140801 forthwith. 2. Order pursuant to s 74MA of the Real Property Act 1900 (NSW) that the defendant withdraw Caveat AR140802 forthwith. 3. Order that these orders be entered forthwith. 4. Order that the Defendant pay the plaintiff's costs of the amended summons. 5. Amended Summons otherwise be dismissed. 6. Note: Undertaking to the Court by the plaintiffs not to deal with either of the properties referred to in Orders 1 and 2 for a period of 7 days (the terms of which undertaking are to be reduced to writing and forwarded to the Court and the defendants as soon as practicable). ********** 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: 09 August 2021