New South Wales Supreme Court CITATION : 21 Million Pty Limited v Clarence Street Pty Limited [2003] NSWSC 1178 HEARING DATE(S) : 9/12/03 JUDGMENT DATE : 10 December 2003 JURISDICTION: Equity Division JUDGMENT OF : Einstein J DECISION : The orders of the Court are: 1. I grant leave to FRN to amend its notice of motion by adding the word 'forthwith' at the end of paragraph 3. 2. Orders in terms of paragraphs 1, 2 and 3 of the Clarence Street Notice of Motion filed on 8 December 2003. 3. Orders in terms of paragraphs 1, 2 and 3 of the FBN's Notice of Motion filed on 8 December 2003. CATCHWORDS : Real Property - Caveats - Section 74O Real Property Act - Application for leave for lodgment of further caveat - Costs - Proceedings commenced without authority Conveyancing Act 1919 (NSW) LEGISLATION CITED : Real Property Act 1900 (NSW) Supreme Court Act 1970 (NSW) Supreme Court Rules (NSW) Diamond v Baulkham Hills Shire Council [1999] NSWCA 277 CASES CITED : Knight v FP Special Assets Limited (1992) 174 CLR 178 Leighton Contractors Pty Limited v Smith [No.3] Costs [2000] NSWCA 250 21 Million Pty Limited (Plaintiff) PARTIES : FBN Investments Pty Limited (Receivers & Managers) (Cross-Defendant) Clarence Street Pty Limited (Defendant and Cross-Claimant) FILE NUMBER(S) : SC 5885/03 Mr RD Wilson (Plaintiff) COUNSEL : Mr J Stoljar (Cross-Defendant) Mr GKJ Rich (Defendant and Cross-Claimant) Tress Cocks & Maddox (Plaintiff) SOLICITORS : Argyle Partnership (Cross-Defendant) Watson Mangioni (Defendant and Cross-Claimant) IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION Einstein J Wednesday 10 December 2003 5885/03 21 Million Pty Limited v Clarence Street Pty Limited JUDGMENT The state of the proceedings 1 A revised judgment was delivered in these proceedings on 8 December 2003. It is unnecessary to repeat the terms of that judgment. The remaining matters for decision which were the subject of argument on 9 December 2003 concern: · an application by 21 Million for leave pursuant to section 74O of the Real Property Act to file a reformulated caveat in respect of level 7; · notices of motion under cover of which Clarence Street and FBN seek costs orders; The application for leave to file a reformulated caveat 2 The application has been pursued without the need for a separate notice of motion. The reformulated caveat in respect of which the leave is sought by 21 Million relevantly: · identifies the nature of the claimed estate or interest in the land as a "15 percent equitable interest"; · claims that estate or interest by virtue of the following alleged facts: "FBN Investments Pty Ltd (Receivers and Managers Appointed) holds one half of its 30 percent equitable interest in the land on trust for Headland Properties Pty Ltd through the caveator as nominee". 3 No additional evidence has been sought to be tendered in support of the reformulated caveat. 4 In my view the submissions of Clarence Street opposing the grant of the leave sought are of substance. They are generally adopted in the reasons which follow. It should also be noted that Mr Stoljar of counsel, appearing for FBN on the instructions of the solicitors for the receiver and manager, supported each of the submissions of Clarence Street in relation to the leave issue. 5 The first matter to be noted is that there is currently no claim for relief consistent with the terms proposed caveat. 6 The second matter to be noted concerns the difficulties raised by the terms of the proposed caveat and in particular the problems which inhere in the very nature of the interest which is claimed. 7 The contention appears to be that FBN which has a 30 percent equitable interest in the land, holds part of that equitable interest on trust for Headland Properties "through 21 Million as nominee [apparently of Headland Properties]". The proposition contended for appears to be that the ultimate beneficial owner of the relevant interest is Headland Properties. It appears to be contended that somehow 21 Million has been interposed between Headland Properties and FBN. 8 At its highest the contention of 21 Million is arguably that it is the trustee of an equitable interest. Even at this level there are the problems where 21 million would at the most be a trustee and would not itself have an interest in its own right. Mr Rich referred to the following passage in Jacobs on Trust [6th ed] [318]: "If A holds property on trust for B, and B declares a trust of B's interest in favour of C, then, if the intermediate trust is a 'bare trust' but not otherwise, it is arguable (but not certain) that the effect of B's declaration of trust is to bring A and C into a direct relationship, so that A becomes a trustee for C." 9 The leave to attempt to reformulate the caveatable interest claimed, if anything, resulted in even more ambiguity than before. 10 The other difficulties with the 21 Million contention concerned absence of evidence of any writing signed by Headland Properties pursuant to which an equitable interest in the property could have been conferred upon 21 Million: Section 23 C (1) (b) of the Conveyancing Act 1919. In that regard the following may be noted: · Schedule 1 of the reformulated caveat does not identify any instrument or document said to evidence writing signed by Headland Properties in favour of 21 Million; · the conversation alleged to have taken place in about August 2001 (referred to in the extract from the Clarence Street submissions [10] [to be found in the judgment at page 13]) would have taken place well prior to the incorporation of 21 Million and in any event, even if documented, could only have created an interest in Headland Properties; · the letter of 31 July 2002 (referred to in the extract from the Clarence Street submissions [21] [to be found in the judgment at page 16]) also predated the incorporation of 21 Million and likewise did not refer to 21 Million; · the January 2003 conversation (referred to in the extract from the Clarence Street submissions [23] [to be found in the judgment at page 16]) was not documented and has no effect by reason of section 23C (1) (b); · the net effect of the evidence concerning the drafts of a document entitled "Heads of Agreement" (referred to in the extract from the Clarence Street submissions [24]-[38] [to be found in the judgment at page 17-19]) is that no agreement was ever concluded pursuant to that document giving rise to binding obligations or rights. Here again and importantly Headland Properties was never a party to the document and on 21 Million's own evidence, the Heads of Agreement document never constituted a binding contract but remained a proposal. 11 It is appropriate to note the contention put forward by Mr Wilson of counsel to the effect that the concept of nomination is dimensionally different from the concept of a declaration of trust. The proposition is flawed for the reason that in order for particular conduct to ground a caveatable interest, it must ground an equitable interest in property. The so-called nomination relied upon in this case simply does not ground or support the grant to 21 million of an equitable interest in property. Nor does the claim in that regard warrant the statutory injunction pending final hearing. 12 For all of these reasons and now having given 21 Million the opportunity to seek to reformulate the caveatable interest for which it contends, in my view and applying the principles set out in the revised judgment, the proper exercise of the Court's relevant discretion is not to grant the leave sought to lodge the reformulated caveat. The combination of (1) the problems with the reformulated claim and (2) the absence, on the evidence presently before the court, of a viable case, dictates that conclusion The Costs issues 13 An undertaking given to the Court by Mr Taylor through his counsel on 3 December 2003 [recorded on the transcript (p32, lines 26 – 34)] was in the following terms: "The transcript will record that Mr Wilson of counsel, on the instructions of Mr Taylor, has given an undertaking to the court that Mr Taylor will indemnify FBN Investments Pty Limited (receivers and managers appointed) in respect of any adverse costs order which may be made against FBN Investments Pty Limited in the proceedings 5885 of 2003 presently before the Court . . . " The application pursued by Clarence Street 14 Clarence Street seeks the following orders: " 1 That the First Respondent [21 Million} pay the Applicant's costs of the Summons to date; 2. Pursuant to Section 76 of the Supreme Court Act 1970 (NSW) and Part 52A rule 4(5)(f) of the Supreme Court Rules, that Mr Gregory Joseph Taylor of Level 4, 44 Caroline Street, South Yarra, Victoria, pay the Applicant's costs of the Cross-Claim; 3. That the costs referred to in Orders 1 and 2 be assessed: (a) on a party and party basis up to an including 2 December 2003; and (b) on an indemnity basis from and including 3 December 2003; 4. That the costs referred to in Orders 1 and 2 be payable forthwith." 15 As the transcript records, early during the commencement of the contested application for interlocutory relief Mr Wilson sought leave on behalf of FBN to discontinue the proceedings. In the events which the court has now held occurred, Mr Taylor had no authority to give instructions to commence proceedings on behalf of FBN. Nor did he have any authority to give instructions to any legal representative to appear on behalf of FBN as second plaintiff or to appear on behalf of FBN in its capacity as cross defendant. Nor did he have any authority on behalf of FBN to lodge the so-called 'second caveat'. 16 Part 52A Rule 4 (5) (f) of the Supreme Court Rules empowers the court to make orders for costs against a person, not being a party, who purports without authority to conduct proceedings in the name of another person. 17 Bearing in mind: · the terms of the without prejudice letter of 2 December 2003 [Annexure A to the affidavit of Mr Ciappara of 8 December 2003]; · the resultant failure of 21 Million in terms of its application for interlocutory relief; · the circumstances in which Mr Taylor acted without authority as earlier described; the proper exercise of the Court's discretion is to make orders in terms of paragraphs 1,2,3 and 4 of the notice of motion filed for Clarence Street on 8 December 2003. The application pursued by FBN 18 FBN seeks the following orders: "1. That Gregory Joseph Taylor pay the costs incurred by FBN Investments Pty Limited in these proceedings; 2. That Gregory Joseph Taylor indemnify FBN Investments Pty Limited for any costs ordered to be paid by it in favour of Clarence Street Pty Limited; 3. That Gregory Joseph Taylor pay the costs of this application forthwith." 19 Written submissions were received from Mr Stoljar in support of the claim to these orders. The submissions are of substance and are adopted in what follows. Order 1 in the Motion Jurisdiction · As already observed, the Court has jurisdiction to make an order for costs against Mr Taylor under section 76 of the Supreme Court Act, and in particular under Part 52A rule 4(5)(f) of the Supreme Court Rules. · Mr Taylor's counsel appeared at the outset of the hearing of the matter on 3 December 2003 and announced his appearance on behalf of the cross claimant, giving rise to a situation in which the proper representative of the cross claimant was not clarified and resolved until the court delivered judgment on 4 December 2003. · Mr Taylor purported to begin these proceedings in the name of the cross claimant, as a second plaintiff, although the Court gave leave on 3 December 2003 to discontinue such proceedings, subject to any order for costs. Why the court should exercise its discretion to make a costs order against Mr Taylor · In Knight v FP Special Assets Limited (1992) 174 CLR 178 it was held (at 193): "That category of case [namely, the case in which a costs order may be made against a non-party] consists of circumstances where the party to the litigation is an insolvent person or man of straw, where the non party has played an active part in the conduct of the litigation and where the non party, or some person on whose behalf he or she is acting or by whom he or she has been appointed, has an interest in the subject of the litigation." · The High Court added that an order for costs should only be made against a non-party if the interests of justice require that it be made (at 193). · In Diamond v Baulkham Hills Shire Council [1999] NSWCA 277 an order for costs against a non-party was made in circumstances in which the non-party was a driving force in the litigation and also an environmental activist. · In Leighton Contractors Pty Limited v Smith [No.3] Costs [2000] NSWCA 250 an order for costs was made against an insurer who had carried on proceedings in the name of an insured despite the fact that the insurer apparently had no obligation to indemnify the insured pursuant to the relevant policy, and sought to rely on that fact subsequent to the hearing. · In the present case Mr Taylor caused on 15 October 2003 to be lodged the caveat the subject of the cross claim, namely caveat AA7267Y. As was accepted by all those appearing at the hearing, Mr Taylor did so without the authority or consent of the receiver of FBN. The lodgement of the caveat was the direct cause of the cross claim, and hence the costs incurred by FBN. · In lodging the caveat, and in purporting to carry on the proceedings, including the cross-claim, in the name of FBN, Mr Taylor seems to have proceeded on a misapprehension of the law: namely, that despite the appointment of a receiver he was entitled, pursuant to his position as director of FBN, to lodge a caveat and to conduct legal proceedings [affidavit of Steven Golledge sworn 8.12.03, annexure C]. · FBN was served with the cross claim. The receiver wished at all times to see the caveat withdrawn, believing that the contemplated sales of the subject properties were the best way of realising the debt owed to his appointor. The receiver in these circumstances had no practical option other than to appear in the name of FBN in order to make appropriate submissions. As noted in the judgment the receiver's evidence through Mr Hassan was of some assistance to the Court. The assets of FBN available for distribution to the appointor of the receiver should not be denuded by reason of costs occasioned by Mr Taylor's conduct. Order 2 in the Motion · The order for indemnity sought in order 2 of the Motion reflects the undertaking given to the Court by Mr Taylor through his counsel on 3 December 2003. Conclusion 20 In my view and for those reasons the proper exercise of the Court's discretion is to make orders in terms of paragraphs 1,2 and 3 FBN's Notice of Motion [noting that the application in terms of paragraph 3 added the word "forthwith" after the word "application"]. Orders 21 The orders of the Court are: 1. I grant leave to FRN to amend its Notice of Motion by adding the word 'forthwith' at the end of paragraph 3. [The Notice of Motion has been amended in handwriting. The Court dispenses with any formal requirement to lodge an amended Notice of Motion] 2. Orders in terms of paragraphs 1, 2 and 3 of the Clarence Street Notice of Motion filed on 8 December 2003. 3. Orders in terms of paragraphs 1, 2 and 3 of the FBN's Notice of Motion filed on 8 December 2003. I certify that paragraphs 1- 21 are a true copy of the reasons for judgment herein of the Hon. Justice Einstein given on 10 December 2003 ___________________ Susan Piggott Associate 10 December 2003 Last Modified: 12/19/2003 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.