New South Wales Supreme Court CITATION : Phoenix Management Corporation Pty Ltd and Curl 2D Pty Ltd v Barrenjoey Road Bungan Beach Pty Ltd [2001] NSWSC 1099 CURRENT JURISDICTION: Equity FILE NUMBER(S) : SC 4382/01; 4553/01 HEARING DATE(S) : 16 & 19 November 2001 JUDGMENT DATE : 19 November 2001 4382/01 Phoenix Management Corporation Pty Limited (P1) Phoenix Fidelity Corporation Pty Limited (P2) Barrenjoey Road, Bungan Beach Pty Limited (D1) Beach Road, Bungan Beach Pty Limited (D2) Timothy Mark Brachmanis (D3) Haydn Harvey Prior & Jill Rodney Prior (D4) Sydney Project Management Pty Limited (D5) Worldwide Prestige Vehicles Pty Limited (D6) 4553/01 Curl 2D Pty Limited (P1) PARTIES : Lilant Pty Limited (P2) Acelan Pty Limited (P3) Emsco Pty Limited (P4) Hi Tech Property Services Pty Limited (P5) Lisa Noone (P6) Phillip Owen & Alison Brady (P7) Flash Electrical Contractors Pty Ltd (P8) Barrenjoey Road, Bungan Beach Pty Limited (D1) Beach Road, Bungan Beach Pty Limited (D2) Timothy Mark Brachmanis (D3) Haydn Harvey Prior & Jill Rodney Prior (D4) Sydney Project Management Pty Limited (D5) Worldwide Prestige Vehicles Pty Limited (D6) JUDGMENT OF : Hamilton J 4382/01 P Larkin (P1 & 2) L Harris, Solicitor (D1-3, 5 & 6 to file notice of ceasing to act & by leave as amicus curiae) COUNSEL : No appearance (D4) 4553/01 R J Webb (P1-8) L Harris, Solicitor (D1-3, 5 & 6 to file notice of ceasing to act & by leave as amicus curiae) No appearance (D4) 4382/01 Michell Sillar (P1 & 2) M D Nikolaidis & Co (D1-3, 5 & 6 until notice of ceasing to act filed) SOLICITORS : Champion Legal (D4) 4553/01 Riley Lawyers (P1-8) M D Nikolaidis & Co (D1-3, 5 & 6 until notice of ceasing to act filed) Champion Legal (D4) CATCHWORDS : EQUITY [109] - Trusts and trustees - Express trusts constituted inter vivos - "Special purpose" or Quistclose trust - Intention of parties. LEGISLATION CITED : Supreme Court Rules 1970 Part 13 r 2 Ausintel Investments Australia Pty Ltd v Lam (1990) 19 NSWLR 637 Australasian Conference Association Limited v Mainline Constructions Proprietary Limited (in Liquidation) (1978) 141 CLR 335 Barclays Bank Ltd v Quistclose Investments Ltd [1970] AC 567 CASES CITED : Peter Cox Investments Pty Ltd (In Liq) v International Air Transport Association (1999) 161 ALR 105 Walsh Bay Developments Pty Ltd v Federal Commissioner of Taxation (1995) 130 ALR 415 Jacobs' Law of Trusts in Australia (6th Ed, 1997) [214] L J Priestley "The Romalpa Clause and the Quistclose Trust" in P D Finn, ed, Equity and Commercial Relationships (1987) DECISION : Summary judgment given. Trusts declared and orders made for repayment of moneys with interest. IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION HAMILTON J MONDAY, 19 NOVEMBER 2001 4382/01 PHOENIX MANAGEMENT CORPORATION PTY LIMITED & ORS v BARRENJOEY ROAD, BUNGAN BEACH PTY LIMITED & ORS 4553/01 CURL 2D PTY LTD & ORS v BARRENJOEY ROAD, BUNGAN BEACH PTY LIMITED & ORS JUDGMENT - On application for summary judgment 1 HIS HONOUR: Last Friday, 16 November 2001 I heard applications for summary judgment under Part 13 r 2 of the Supreme Court Rules 1970 ("the SCR") against the first, second and third defendants in each of these proceedings. Some supplementary material was also tendered this morning. Each of the first and second defendants is a company which was to engage in property investment, and the third defendant, Timothy Brachmanis, is the controller of those companies. In the first set of proceedings there are two plaintiffs, but it is only the second plaintiff which paid moneys towards a property development, in circumstances which will appear hereafter. In the second set of proceedings, when I grant leave as sought for the addition of a further plaintiff, there will be nine plaintiffs who contributed money to property developments. In each case, the moneys were contributed under a joint venture agreement. Some of the joint venture agreements differed slightly in terms but, in essence, they were all agreements under which the plaintiffs agreed with either the first defendant or the second defendant to enter into a joint venture under which the plaintiffs were to make contributions to a common fund for the purpose of acquiring and holding (and, in some instances, developing) a stipulated property. The funds that were paid totalled more than $1 million dollars, but neither of the properties involved was ever acquired. 2 The defendants, though served, have not appeared before me on the hearing of these applications. A representative of their former solicitors appeared on Friday and filed a notice of ceasing to act. His last office was to appear as amicus curiae, which I allowed him to do, to procure the grant of a certificate under s 128 of the Evidence Act 1995 in respect of an affidavit of the third defendant which he had in Court and which I ordered him to produce to the Court. That affidavit, which was made by him pursuant to an order made against him by way of Mareva relief on 21 September 2001, details payments that were made out of the funds contributed by the plaintiffs, and which appear to have been wholly paid away by the defendants who received them. The affidavit was in evidence on the hearing of these applications. Mr Brachmanis has left Australia and is presently overseas, probably in the United States of America. There is some information which suggests he may return in about a fortnight. There is in evidence another affidavit of Mr Brachmanis which explicitly admits the receipt by the first two defendants of all or most of the sums said to have been contributed. In any event, there is evidence on behalf of the plaintiffs of the fact the moneys were paid. As I have already said, neither of the properties was ever acquired. 3 The plaintiffs have terminated the agreements. The only defence which may be divined from any material provided by Mr Brachmanis or on behalf of the first two defendants (or at all) is that some of the moneys were paid by the first or second defendant to Mr Brachmanis or to entities associated with him under an agreement he had with those defendants for the payment of commission or other moneys to him. However, that is hardly to the point, especially since each of the joint venture agreements contained a clause to the effect that, unless it was agreed by a majority interest of the joint venturers, Mr Brachmanis should not receive any compensation for services rendered by him under the joint venture agreement. 4 There are no pleadings. The matters have proceeded by way of summons. The plaintiffs claim relief on various bases. First, they claim that the moneys were received by the first and second defendants upon a trust which required the moneys to be expended only for the purpose of the specified joint venture, and they say that the moneys were otherwise to be held in trust for the contributors upon what is commonly known as a Quistclose trust. That is a reference to the decision of the House of Lords in Barclays Bank Ltd v Quistclose Investments Ltd [1970] AC 567. As was stated by Gibbs ACJ in Australasian Conference Association Limited v Mainline Constructions Proprietary Limited (in Liquidation) (1978) 141 CLR 335 at 353: "That case is authority for the proposition that where money is advanced by A to B with the mutual intention that it should not become part of the assets of B but should be used exclusively for a specific purpose, there will be implied (at least in the absence of an indication of a contrary intention) a stipulation that if the purpose fails, the money will be repaid and the arrangement will give rise to a relationship of a fiduciary character, or trust." See also Ausintel Investments Australia Pty Ltd v Lam (1990) 19 NSWLR 637; Walsh Bay Developments Pty Ltd v Federal Commissioner of Taxation (1995) 130 ALR 415; Peter Cox Investments Pty Ltd (In Liq) v International Air Transport Association (1999) 161 ALR 105; Jacobs' Law of Trusts in Australia (6th Ed, 1997) [214]; L J Priestley "The Romalpa Clause and the Quistclose Trust" in P D Finn, ed, Equity and Commercial Relationships (1987). 5 In my view, the inference to be drawn from the material before me is that the requirements enunciated by Gibbs ACJ in the passage quoted above were fulfilled and a trust interest accordingly arose. I am prepared by way of summary relief to grant appropriate declarations. 6 None of the money has been paid back except an amount to Ms Noone, which repayment is allowed for in the figures that have been presented. As I have said, neither of the properties was acquired. The only evidence of moneys having gone towards the purchase of those properties was in respect of a sum of $36,000 and that was paid before any of these plaintiffs contributed funds, so it cannot have been from their moneys. Schedules have been prepared of the evidence which proves the payment of all the relevant moneys, as well, as I have said, as there being evidence that in effect admits that in most cases. Those schedules will remain with the papers. Affidavits to satisfy Part 13 r 2(1)(b) have been filed and read. It appears to me that the plaintiffs have a right to recover, from whichever of the first and second defendants the moneys were paid to, the sums paid to them. Although Mr Brachmanis has deposed as to where the moneys went, it is submitted to me - and it is, in my view, correct - that there is nothing in the evidence before me that establishes that any sum was paid for a valid purpose of any of the joint venture agreements. Those agreements have been terminated. It seems to me that the plaintiffs have good causes of action to recover the sums paid at law as money paid upon a consideration which has totally failed and a good cause of action in equity to recover the moneys held on trust. They should also have judgment to recover interest calculated on each of those sums, from the time of its payment to the first defendant or the second defendant, calculated at the rates specified by the SCR. Judgment is sought against Mr Brachmanis, as the third defendant, for the sum of the amounts recovered from the first defendant and the second defendant, he clearly being involved in the breaches of trust which, in my view, are clearly established on the material before me. It seems to me that all three defendants ought be ordered to pay the plaintiffs' costs of both sets of proceedings. Short minutes may be brought in to give effect to the decision which I have enunciated. **************************** Last Modified: 02/28/2002 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.