New South Wales Supreme Court CITATION : Nick Kardiasmenos v Pioneer Management Pty Limited & 3 Ors [2005] NSWSC 770 HEARING DATE(S) : 9, 23 June 2005 JUDGMENT DATE : 20 July 2005 JUDGMENT OF : Smart AJ at 1 DECISION : See para 73 CATCHWORDS : Plaintiff providing all the money for purchase of land for developmnent project of townhouses and villas with title vested in 1st Defendant - project fails - development not approved by Council and requisite finance unable to be raised - resulting trust and 1st defendant a bare trustee - venture held to be a partnership - Plaintiff held to have prior equitable interest - Priority not lost - 1st defendant executes mortgage of land but money received applied by 2nd defendant with knowledge of 4th defendant to advance interests of 2nd defendant and overseas venture - bankruptcy of 3rd defendant and all choses of action vested in trustee. Bankruptcy Act Companies Act 1961 LEGISLATION CITED : Corporations Act Real Property Act s 74MA Re Crest Realty Pty Ltd (In Liq) [1977] 1 NSWLR 664 Grossman v E Katz Manufacturing Lewellers (ACT) Pty Ltd [2004 NSWSC 1224 Octavo Investments Pty Ltd v Knight (1979) 144 CLR 360 CASES CITED : Re Suco Gold Pty Ltd (In Liq) 1983 33 SASR 99 Re Sutherland and French Caledonia Travel Service Pty Ltd (2003) 59 NSWLR Wells v Wily & Anor 50 ASCR 105 PARTIES : Nick Kardiasmenos v Pioneer Management Pty Limited & 3 Ors FILE NUMBER(S) : SC 5469/02 Pltf unrepresented by counsel M B Duncan for 2nd & 4th defts Mr Vescio in person (3rd deft) COUNSEL : R J Tassell of Verekers for pltf SOLICITORS : Mr Venegas for Liquidator of 1st deft LOWER COURT JURISDICTION : IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION SMART AJ Wednesday, 20 July 2005 5469/02: Nick KARDIASMENOS v PIONEER MANAGEMENT PTY LIMITED & ORS JUDGMENT 1. This judgment should be read with the principal judgment of 13 May 2005 and the findings there made. Mr Vescio's Application 2. Michael Vescio, by his motion of 9 June 2005 seeks the following: 1. A declaration that rights to the partnership did not arise during the period that the Third Defendant was in bankruptcy but were vested in a fiduciary trust to Correy Isabella …. 2. That rights to the distribution of the partnership proceeds be made available to the Third Defendant. 3. In the alternative, a declaration in seeking that the amount of the partnership proceeds that are awarded to the third defendant be placed in an account until such time as the application to the Federal Court is finalised. 3. The fourth order sought cites a passage from Lindley on Partnership, 11th ed, p 87. Mr Vescio alleges that he was the other party to the fiduciary trust. He stated that there were no documents evidencing the trust other than a document lodged by him on 21 October 2002 with ASIC entitled "Change to Officeholders," relating to Pioneer Management Pty Limited. It showed the appointment of Correy Isabella as a director of the company and bore the date "7/10/2002" and that PR Lee had ceased to hold office as a director and secretary and SM Lee had ceased to hold office as a director as from "7 October 2002." The document mentioned does not provide satisfactory evidence of the trust alleged and its terms. No other satisfactory evidence of the trust and its terms was adduced. This claim was neither advanced nor evidence adduced pointing to the trust and its terms at the principal hearing in November/December 2004. It is not accepted. 4. Mr Vescio's affidavit of 7 June 2005 mainly contains argument and that is how I read it. However, Mr Vescio annexed to his affidavit a copy of an application dated 4 July 2000 he had made to the Federal Court seeking an order for the annulment of his bankruptcy, an order restraining Westpac (a mortgagee) from taking possession of a property at North Manly, and two orders restraining properties at Guildford and Woonona respectively being sold (by mortgagees), an order that the Liquidator of Leunam account for certain proceeds of sale of two properties at Woonona, an order that Lea Nominees Pty Ltd (Mr Paul Triscott) be made accountable for the construction loan for the Woonona properties and an order that the Land Titles Office be restrained from registering any new dealing or removing "any claim asserting caveatable interest made by the Applicant", and if removed, reinstated. 5. Accompanying that application was a statutory declaration by Mr Vescio in which he described himself as a building designer and supervisor and briefly detailed the history of various properties, his financial history and that of his company Leunam Pty Ltd ("Leunam"). 6. Mr Vescio stated that in March 1999 a creditors meeting of Leunam was called by the administrator, Mr A Wily and that in the Notice to Creditors, Mr Wily indicated that he would be supporting a Deed of Arrangement. Mr Vescio complained that at the creditors' meeting Mr Wily did not do so and used the proxy votes vested in him by the creditors to liquidate the company. Mr Vescio, who was the secretary/director when the company was liquidated in 1999 unsuccessfully appealed to this Court. Apparently, he was not a shareholder. Mr Wily disputed the allegations of misconduct. 7. As to his personal affairs, Mr Vescio stated that at a meeting of his creditors about 12 May 1999, he fell just short of obtaining the mandatory 75 per cent of votes needed to enter into a Deed of Arrangement. Mr Vescio contended that this was due to the administrator …"who indiscriminately allowed only some creditor petition amounts in order to disqualify me from obtaining the 75 per cent required. …" Mr Vescio complained that his adviser "failed to submit the Pt 73 Form to the Court." In para 24 of his statutory declaration, Mr Vescio wrote: "The situation was further frustrated when the ANZ Bank, a minor unsecured creditor took the matter to the Federal Court and bankrupted me to prevent me from pursuing the appeal in the NSW State Court as I was then a bankrupt." It is not clear from whose judgment the appeal was brought. Both Windeyer J and Santow J had heard matters involving Mr Vescio. PRL and SML relied on para 24 as demonstrating that Mr Vescio was aware of the consequences of being made bankrupt. This was said to be relevant on the question of costs. 8. In para 27 of his statutory declaration he sought the investigation of the various matters referred to in his declaration by the Police, ICAC, ACCC and Ombudsman and any other relevant Government authorities and the rectification of the "ongoing harassment and travesty of justice that has been inflicted on me and my family." He listed ten people and entities who should be investigated. 9. On 22 August 2000 Mr Vescio's application came on for hearing before Conti J in the Federal Court. On Mr Vescio's report as to his affairs there was a deficiency of assets of $1.2 million. Mr Vescio contended that Leunam had sufficient assets to cover his debts and that its properties had been sold by mortgagees at an undervalue. The Liquidator had not challenged the sales. It was pointed out that the property at North Manly was not in the name of Carmelo Michael Vescio, but in that of a relative, Paul Michael Vescio. 10. Conti J heard from Mr Vescio, the ANZ Bank, Sims Lockwood, Westpac, Mr Brickwood, Mr Wily (the Liquidator) and Mr Geoff MacDonald (an adviser to Mr Vescio as to administration). 11. It appeared that Leunam had been struck off the register. 12. After considering a body of material Conti J held that the essential statutory base under s 153(b) of the Bankruptcy Act or annulling a sequestration order had not been established by any of the material before him. Accordingly Conti J dismissed Mr Vescio's application for an annulment and ordered him to pay the costs of the respondents. The transcript next records "Adjourned Indefinitely". As foreshadowed at the hearing on 23 June 2005, Mr Vescio forwarded to the Court a copy of the transcript of proceedings before Conti J on 22 August 2000. 13. On 10 June 2005 Mr Vescio filed an application for an extension of time to file and serve a Notice of Appeal from the judgment of Conti J. The draft Notice of Appeal names many respondents, namely Australian and New Zealand Bank Limited, (1st respondent), Westpac Banking Corporation, (2nd respondent), Worrells Trustee (for the Bankrupt Estate), Paul Triscott – Fund Manager (3rd respondent), John Brickwood – Alternative Business Solutions Pty Ltd (4th respondent), Andrew Wily – Armstrong Wily (Administrator/liquidator) (5th respondent), Geoffrey McDonald – Hall & Chadwick (Trustee) (6th respondent) and Scott Pascoe (Sims Partners) (Trustee of Mr Vescio's bankrupt estate 7th respondent). The stated grounds of appeal are: "2. The judgment caused a miscarriage of justice due to the fact that the case was adjourned indefinitely without having due regard to matters being brought before the court and its failure to initiate a proper case management procedure to inquire into the fraudulent liquidation of the Company Leunam Pty Ltd ACN 002 570 041 and this resulting to the bankruptcy of the Applicant. 3. Further the deliberate collaboration between the 3rd, 4th, 5th, 6th and 7th respondents and or Certain officers from the 1st and 2nd respondents resulted in the failure of fiduciary duty leading to misleading and deceptive conduct and the failure of the respondents to act in the Utmost good faith and fair dealings. 4. The 1st and 2nd respondent having departed from the Code of Banking Practice part of contract between banker and customer." The Orders sought are: "1. An order for the annulment of the bankruptcy NSW 2943 / 99 / 5 2. An order that the 5th Respondent be removed as liquidator of the company Leunam Pty Ltd ACN 002 570 041 (deregistered) 3. An order that the Company Leunam be reinstated under Co-operations Section 601 4. Claims under section 43 of the Crimes Act 5. An order that the Court inquires into the failure of fiduciary duty 6. An order that the Court inquire into negligence and misleading conduct 7. An order that the court inquire the conduct of the Respondent pursuant to the Trade Practices Act 1974 Part 1VA, s51AA and s51AB 8. An order for remedy under part VI of the Trade Practices Act 9. An order for damages as per attached schedule under section 82 and any order under section 87 the court thinks appropriate." 14. Annexed to the Draft Notice of Appeal is a note headed Amended Proof of Debt Leunam Pty Ltd asserting total losses including interest to 25 May 2005 of $14,140,880. This comprises real property losses of $1,850,420, development losses of $11,365,250 and interest. 15. Most of the orders sought could not be granted by the Full Court of the Federal Court. On what I know of the facts I would not describe the prospects of Mr Vescio obtaining any of the relief sought as good. Some of the orders sought do not reflect an appreciation of the role of the Court. 16. Mr Vescio provided the Court with a copy of his affidavit of 10 June 2005 filed in support of his application or an extension of time within which to appeal to the Full Court of the Federal Court. That affidavit seeks to explain the financial difficulties in which Leunam found itself and how it could have overcome those difficulties if others had not acted wrongly. 17. Mr Vescio relied on a Media Release from ASIC stating that Mr A Wily had been disciplined for failing to carry out, or perform adequately and properly, the duties of a liquidator in relation to the external administration of a number of companies including Leunam. The particular failure stated as to Leunam was not lodging the minutes of meetings, reports and forms within the required statutory period in 1999. While various penalties were imposed Mr Wily was neither suspended nor removed from the roll of liquidators. Mr Wily undertook to pay $125,000 to the creditors of one company (not Leunam) and was ordered to pay ASIC's costs of $80,000. It is hard to see how the failure to lodge minutes of meetings, reports and forms within the required statutory period bore upon Mr Vescio being made bankrupt. 18. Mr Vescio placed before the Court copy letter of 21 March 2002 from the Solicitors Complaints Tribunal of Queensland, advising that Paul Anthony Triscott had been found guilty of professional misconduct on seven charges and ordered that his name be removed from the Roll of Solicitors of the Supreme Court of Queensland. 19. Having received from Mr Vescio letters dated 30 December 2003 and 9 January 2004, Mr S D Pascoe, the trustee of Mr Vescio's bankrupt estate replied by FAX of 13 January 2004 "I am unable to identify any assets of the estate that I could assign to you. Please specify the assets you wish to claim and provide substantial evidence of the same". 20. Mr Vescio relied on all these materials to persuade the Court that Leunam was entitled to large sums of money and that if these were paid he would receive sufficient moneys to enable him to pay his debts. This was in aid of the relief sought in para 3 of his motion of 9 June 2005. Mr Vescio was not a shareholder of Leunam, but a director. Apparently, members of his family held shares in Leunam. 21. On the materials before the Court it does not appear that the sequestration order was made incorrectly. An inference is available that the publication of the Court's reasons on 13 May 2005 and the disappointing result for Mr Vescio led to his application to the Federal Court for an extension of time to appeal. It is over four years and six months since the decision of Conti J and Mr Vescio was discharged from his bankruptcy as from 17 July 2002. 22. Mr Vescio placed much weight upon the finding in the principal judgment that initially there was a partnership to carry out a development project at Ambervale. He contended that the project failed through no fault of his. That does not conclude the matter. 23. Mr Vescio submitted that as a result of the findings of fact in the principal judgment the current position was as follows: (a) Pioneer from the outset held and continues to hold the larger block on behalf of the partnership. (b) The plaintiff and PRL caused the small block to be transferred to a party and there has been no accounting for the proceeds of sale. (c) In view of the obstruction caused by PRL to the partnership and PRL not carrying out his part he is disqualified from receiving any profits. (d) Since the small block has been fully devoted to PRL's benefit with the plaintiff's consent, the value of the small block should be "vested" back to the partnership. (e) An order should be made that all profits be divided between the plaintiff and Mr Vescio after all expenses relating to the original partnership have been brought to account. 24. Mr Vescio has misunderstood some of the evidence and some of the findings. PRL, by deliberately untrue statements prevailed upon and pressured the plaintiff to sign a withdrawal of caveat in respect of the smaller block. Without such pressure the plaintiff would never have signed the withdrawal. The plaintiff understood the smaller block was to be returned. It was subsequently sold by Pioneer to Ngoc Ly for $80,000, the plaintiff having ceased to be a director of Pioneer. Completion of that sale has taken place. The nett proceeds of sale were paid to SML. The course proposed by Mr Vescio is not permissible. 25. Mr Vescio submitted that due to the plaintiff's continued collaboration with PRL the development of the two properties did not proceed and that substantial capital gains have been made, the beneficial ownership of which belongs to the partnership. Mr Vescio claimed orders as to his equitable share of the partnership being equal to half of the nett proceeds. I do not agree that the plaintiff continued to collaborate with PRL. PRL misled the plaintiff. I do not know the present value of the larger block and what development will be permitted. 26. Mr Vescio felt that he and the part he had played and the absence of any fault on his part for the project not proceeding had not received sufficient consideration and been given the correct weight. I disagree. 27. Mr Vescio found the properties but contributed no cash to the project. Negotiating a reduction in the sale price of the Ambervale properties cannot be equated with providing the purchase moneys for the properties Neither such negotiations nor preparing a development application and attending upon the Council give rise to the rebuttal of the equitable presumption of a resulting trust when the object or purpose of the partnership has failed. 28. The project failed and never materialised due to the failure of PRL to raise the required finance and the refusal of development approval. The Council rejected both the plans lodged by Mr Vescio and those lodged at the behest of PRL. Further plans, with greater architectural merit, a less dense development and containing other amendments may have been able to be lodged and approved. That remains an open question as does the related question whether the reduced scale of development would have been economically viable. 29. Turning specifically to the relief sought in Mr Vescio's Notice of Motion, I do not propose to make the declaration sought. No trust document was produced and the oral evidence did not support such a declaration. Such a suggestion was not made until after my judgment of 13 May 2005 was delivered. 30. I adhere to the views expressed in the judgment of 13 May 2005 and consequently do not propose to grant any relief in terms of paragraphs 2 and 3 of Mr Vescio's Motion. 31. PRL never had any realistic chance of raising the finance required to purchase the Ambervale properties and construct the townhouses and villas envisaged. PRL probably realised this at an early date. There needed to be a substantial cash contribution. To keep the proposed development moving PRL persuaded the plaintiff to advance the moneys to purchase the land and meet the associated expenses. Obtaining development approval was highly important when it came to raising finance. PRL's attempts to raise finance were meagre and it did not help that he found that he could not work with Mr Vescio. 32. While PRL had his own agenda the plaintiff wanted to proceed with the project, but he was manipulated by PRL 33. I dismiss Mr Vescio's Motion of 9 June 2005. Orders: 34. There was debate as to the orders which should be made consequent upon the judgment. The Liquidator of Pioneer Management Pty Limited (In Liquidation) advised the Court that in his view the winding up cannot progress without a determination of the beneficial ownership of land currently held in the company's name. That view is correct. The Liquidator stated that he had no objection to the matter proceeding to judgment. 35. The Liquidator submitted, correctly, that the findings of fact at para 245 of the principal judgment put Pioneer in the position of trustee in respect of its holding of the larger block. The Liquidator also submitted, and again correctly, that Pioneer's only activity was to hold the property and that it did not otherwise trade in its own right. It was proposed that it develop the property. Apart from consenting to development applications being lodged it did nothing else. 36. The Liquidator submitted, correctly, that the finding of a trust does not automatically result in a transfer of the trust asset to the plaintiff, especially where there is a corporate trustee which has been the subject of a Court ordered winding up. The interests of creditors, the Trustee's right of indemnity and all the circumstances needed to be considered. 37. In Re Crest Realty Pty Ltd (In Liq) [1977] 1 NSWLR 664 Needham J, when considering the provisions of the Companies Act 1961 said at 672: "In the absence of any statutory provision regulating the administration of trusts of which a company in liquidation is the trustee, it seems to me that s 261(1) of the Companies Act placed upon the liquidator the duty to act in a responsible way in administration of the trust in the name of the company." Needham J acknowledged that in some cases it would be unsuitable for the company to continue to act as trustee. 38. In Wells v Wily & Anor 50 ACSR 103, Austin J, relying on the Crest Realty said at 109: "A Liquidator taking office in respect of a corporate trustee is invested with the trustee's power to administer the trust." and: "Where the winding up is ordered by the court, it appears that the power derives from what is now s 477(2)(m) namely the power to 'do all such other things as are necessary for winding up the affairs of the company and distributing its property'." 39. The Liquidator submitted that the debts incurred by Pioneer in respect of its holding of the property such as land tax, insurance etc should be the subject of a right of indemnity from the assets of the trust. That follows from the decision in Octavo Investments Pty Ltd v Knight (1979) 144 CLR 360 at 368. 40. The Liquidator further submitted that the priority of the right of indemnity as against the rights of the plaintiff was explained by Austin J in Wells v Wily & Anor at 110: "It cannot be contended that the interests of the trust creditors and the beneficiaries are interests at the same level. If the trustee has acted properly and within its authority in incurring debts on behalf of the trust, the trustee has a right of indemnity or recoupment and an equitable lien giving it priority to the interests of the beneficiaries, and the creditors are entitled to be subrogated to those rights." 41. In the present case the position is even stronger as the liabilities have arisen out of the holding of the land and the need to safeguard that asset, for example, land tax, rates and insurance. 42. The Liquidator further submitted that it was part of the duty of a trustee company to incur debts for the purposes of the trust business and to pay those debts and that upon winding up those debts can only be paid in accordance with the provisions of the Corporations Act. It was submitted that this would necessarily involve the liquidator incurring costs and expenses of doing so and being paid remuneration. It was also submitted that the Liquidator should be entitled to sell the larger block as the trustee of the trust and discharge the costs and expenses of Pioneer, including the remuneration of the Liquidator for work done in the course of winding up the company and the costs of the petitioning creditor. 43. In Grossman v E Katz Manufacturing Jewellers 9ACT) Pty Ltd [2004] NSWSC 1224, Barrett J reviewed a number of the authorities. It was accepted that when a company, which carries on no activities other than being the trustee of a trading trust goes into liquidation the proper costs and expenses of the Liquidator can be met from the trust property. The Liquidator's entitlement must be even stronger where the company is a land holding company and statutory charges and other expenses arising out of the holding of the land have been incurred. 44. It was accepted that "trust property" is available to meet the remuneration of a Liquidator only in respect of work done in and about the administration of the trust. It was also accepted that the Court had inherent jurisdiction with respect to trusts as a source of power to sanction resort to trust property by way of remunerating a Liquidator of a corporate trustee. 45. I follow Re Suco Gold Pty Ltd (In Liq) 1983 33 SASR 99, Re Sutherland and French Caledonia Travel Service Pty Ltd (2003) 59 NSWLR 361 and Grossman. 46. The Liquidator's entitlement to remuneration is not in doubt. 47. Ultimately, after considering the authorities, the plaintiff accepted that (i) the Liquidator was duty bound to ensure that all debts incurred by Pioneer as trustee of the larger block were paid out of the trust property; and (ii) that the costs of the petitioning creditor in the winding up of Pioneer and the Liquidator's fees and expenses should be paid out of the trust property. 48. The Liquidator further submitted that as Pioneer was utilised as a vehicle by the other defendants and was subject to their direction and control and it had been wound up, the court should direct that payment of the costs of the action be made by the other defendants and not by Pioneer. 49. Pioneer did not appear at the hearing and from an early stage played no active part in the proceedings. The main contest was between the plaintiff on the one hand and PRL and SML on the other. PRL and SML used Pioneer to achieve their purposes. Pioneer should not be ordered to pay the plaintiff's costs or any of them. I do not overlook the contest between the plaintiff and Mr Vescio. 50. While the plaintiff informed the Court that he wished to sell the larger block to recover the money he had lost and discharge the mortgages over his other properties, he was anxious to avoid the situation of the Liquidator selling the larger block and incurring fees and being entitled to remuneration in connection with the sale. Sale by auction may not be the best way to proceed. 51. The Liquidator was conscious of the plaintiff's view and submitted that as to the first defendant the following declaration and orders would be appropriate: "1. A declaration that the equitable interest of the Plaintiff in respect of the Larger Block, subject to the First Defendant's right of indemnity against the assets of the trust including the right of the First Defendant to be indemnified for:- (a) Debts incurred by the First Defendant as trustee; (b) Payment of the costs of the petitioning creditor in the winding up of the First Defendant, as agreed or assessed; (c) Payment of the Liquidator's costs, fees and expenses as agreed or assessed. 2. Order that the First Defendant take all necessary steps to execute a real property transfer of the Larger Block in favour of the Plaintiff, subject to:- (a) Payment of all creditors of the First Defendant in respect of debt incurred by the First Defendant as trustee. (b) Payment of the costs of the petitioning creditor in the winding up of the First Defendant, as agreed or assessed. (c) Payment of the Liquidator's costs, fees and expenses as agreed or assessed. 3. In the event that the payments in Order 2(a) – (c) above are not paid within 28 days, order that the Liquidator of the First Defendant be authorised to sell the Larger Block and account to the Plaintiff for the balance of proceeds of sale after payment of all proper expenses incurred in the sale and the payments of the amounts referred to in Order 2(a) – (c) above. 4. Order that the Second and Fourth Defendants pay the Plaintiff's costs of the hearing." Order 2 would cover, amongst other matters, the Liquidator's legal fees. 52. The plaintiff pointed out that orders in this form would pose practical difficulties. They involved him in providing substantial funds prior to the sale of the larger block. Various options were canvassed. These included ordering the Liquidator to take all necessary steps to execute a real property transfer in favour of the plaintiff, subject to a charge in favour of the Liquidator and the plaintiff using his best endeavours to sell the larger block as expeditiously as possible consistent with the exercise of prudence and to ensure that $50,000 was placed in a joint account in the names of the solicitors for the plaintiff and the solicitors for the Liquidator to be applied in payment of those amounts specified in the draft Order 2. It was thought $50,000 would cover the totality of those amounts. Liberty to apply would be reserved. 53. Counsel for PRL and SML submitted that the Court's findings resulted in SML being at all times a secured creditor and the Liquidator ranking third in priority, that is, after the plaintiff and SML. There were also the statutory charges. SML, by his counsel, accepted that he was not entitled to a registered mortgage. 54. In the present case the Liquidator is entitled to an indemnity out of the trust property and the Liquidator is invested with the trustee's power to administer the trust property. 55. It is necessary to refer to the findings made in para 186 of the principal judgment namely that PRL caused the money deposited to the bank account of Ocean Park to be remitted to Count Albert for the purposes of Count Albert and PRL and that it had nothing to do with the Ambervale development. There were also the findings in para 226 that the moneys were remitted for the purpose of advancing the financial interests of PRL and Count Albert and that SML was present while arrangements were made to remit the moneys from Ocean Park to the nominated accounts of Count Albert. It was found that PRL intended that Pioneer should grant an equitable mortgage over the Ambervale properties to SML by deposit of title deeds, that the plaintiff did not hand over the title deeds to SML, that PRL procured the title deeds in an underhand way and that SML was aware of what was happening (paras 300 and 309). It was also found that SML went along with the $600,000 being credited to the account of Ocean Park, much of it being sent overseas to Count Albert. 56. The plaintiff submitted that no moneys having been advanced to Pioneer or the plaintiff, there was nothing to be secured by any mortgage in favour of SML and it would be futile to make any order in his favour. Despite the form of the documents the moneys were not advanced to Pioneer. They went to Ocean Park for transmission of the majority of those moneys to Count Albert to advance his interests and those of PRL. 57. Any equitable interest of SML is postponed to the plaintiff's interest. The result of the findings in the principal judgment and this judgment is that Pioneer holds the larger block in its entirety on trust for the plaintiff. Any interest of SML is no more than theoretical. 58. SML requested the Court make these declarations: "1. Lot 10 in Deposited Plan 700704 of which the First Defendant, Pioneer Management, is the registered proprietor, is held by the First Defendant upon a resulting trust for the Plaintiff subject to an equitable mortgage in favour of the Fourth Defendant to secure monies lent by the Fourth defendant to the First Defendant pursuant to a loan agreement dated 8 August 2001. 2. The interest of the Fourth Defendant in the said land ranks second in priority to the interest of the Plaintiff. 3. In consequence of the said equitable mortgage, the Fourth Defendant has a caveatable interest in the said land. 4. The Third Defendant has no caveatable interest in the said land." 59. I decline to make declarations 1 to 3. Declaration 1 does not reflect the true position as I am not satisfied that any moneys were in truth lent to Pioneer. Declarations 2 and 3 would serve no useful practical purpose. I will consider Declaration 4 subsequently along with the suggested orders for the removal of the caveats lodged by Mr Vescio. Costs 60. The plaintiff sought an order that Pioneer, PRL and SML pay his costs of the hearing. The plaintiff did not seek an order for costs against Mr Vescio. 61. Mr Vescio submitted that as these proceedings were the result of the plaintiff and PRL "deviating from the original agreement and venturing into other avenues all costs to be assed (sic) or agreed between them." I take Mr Vescio to be submitting that the plaintiff and PRL should pay all his costs and that no order for costs be made against Mr Vescio. 62. PRL and SML submitted that Mr Vescio should pay their costs "on their cross-claim together with the costs for time taken in drafting, preparation, argument and evidence in the proceedings otherwise as a result of [Mr Vescio's] participation in the proceedings assessed in the sum of $25,000 inclusive of GST." While PRL and SML each filed a cross-claim against the plaintiff, neither appears to have filed a cross-claim against Mr Vescio. 63. Mr Vescio filed a document entitled "Statement In Reply To Amended Statement of Claim". In part, that document contains cross-claims. In that document Mr Vescio alleged that PRL "has not fulfilled his part of the agreement and actually hindered the partnership by diverting into other ventures and introducing other parties and causing the plaintiff to withdraw as director so that PRL could have full control." Mr Vescio sought relief against the plaintiff which I have declined to grant. Mr Vescio sought an order that PRL be disqualified from the partnership for not carrying out his duties and for causing delays in fulfilling the partnership agreement, damages including loss to delays caused mainly by PRL diverting into directions other than those initially agreed to, a declaration that SML has no interest in either the large block or the small block, a declaration that Pioneer is not indebted to SML or anyone else for any sum, an order that the caveat lodged by SML on the large block be removed and an injunction restricting SML from selling, transferring, encumbering or otherwise dealing with the larger block. 64. I have held that the object and purpose of the partnership failed. Development approval was not obtained. The Council rejected both applications on substantial grounds. The application lodged by Mr Vescio was found to be seriously defective by the Council. The other major cause of the failure was the inability of PRL to obtain finance. 65. Mr Vescio also sought equitable damages in respect of the sale of the smaller block and an account of profits of any sale of the smaller block. 66. In the principal judgment I held that Mr Vescio, because of his bankruptcy, lacked the standing to make his claims. 67. In their "Answer to Third Defendant's Statement In Reply To Amended Statement of Claim" PRL and SML raised the issue of Mr Vescio's bankruptcy. That document was not filed in Court until 2 December 2004 but the issue was raised at the start of the hearing. 68. The hearing before the Court continued over four days, 30 November 2004, 1, 2 and 3 December 2004. On my assessment Mr Vescio's participation in the proceedings, including the issues he raised and the issue of his bankruptcy, would not have extended the hearing by more than three hours. By participation I include the cross-examination of Mr Vescio, the reading of his affidavit, the evidence he gave, Mr Vescio's cross-examination of witnesses and his addresses. Some of that time was taken up in his putting his case against the plaintiff. I accept that counsel for PRL and SML would have been involved in drafting and preparation, considering and marshalling evidence. The main contest was between the plaintiff on the one hand and PRL and SML on the other and that occupied most of the hearing. 69. The correct order is that Mr Vescio pay the costs of PRL and SML, limited to 3 hours hearing time and the taking of instructions as to Mr Vescio's claims, preparation to rebut them and advance PRL's and SML's case in opposition to them, drafting and considering and marshalling evidence. In default of agreement those costs are to be assessed. I do not propose to make a lump sum order or an indemnity costs order. 70. As to the costs of the plaintiff, I do not propose to make an order that Pioneer pay the costs of the plaintiff. Although joined as a necessary party it took no part in the hearing. It was a bare trustee. Again, the real contest was between the plaintiff and PRL and SML. The plaintiff lost control of Pioneer to PRL. Later SML became entitled to control Pioneer. I propose to order PRL and SML to pay the costs of the plaintiff of the proceedings, not including those relating to Michael Vescio and the extension of the hearing time by three hours due to his participation. Caveats 71. I propose to order the removal of the caveats lodged by Mr Vescio and SML. Mr Vescio had no caveatable interest. To the extent that SML has a caveatable interest, it is a theoretical one and will cause considerable difficulty and delay with no recognisable benefit. 72. I propose to make an order for the transfer of the larger block to the plaintiff but to make provision for the various debts and expenses which must be met. Such an order is not made in every case but it is appropriate in the present case of a resulting trust where the whole of the purchase money was provided by the plaintiff and the order was not opposed by the Liquidator, subject to the protection of his interests. The solicitor for the plaintiff accepted that the Liquidator would lodge a caveat. Declarations and Orders 73. I make the following declarations and orders: 1. Declare that the larger block (being Lot 10 DP 700704) known as Lot 10 Whitechapel Road Ambervale) is held on trust by Pioneer Management Pty Ltd (In Liq) for the plaintiff, Nick Kardiasmenos. 2. A declaration that the equitable interest of the plaintiff in the larger block is subject to Pioneer's right of indemnity against the assets of the trust including the right of Pioneer to be indemnified for (a) Debts incurred by Pioneer as trustee of the larger block for the plaintiff (b) Payment of the costs of the petitioning creditor in the winding up of Pioneer, as agreed or assessed (c) Payment of the Liquidator's costs, fees and expenses, as agreed or assessed 3. Upon the plaintiff undertaking to the Court that: (a) he acknowledges the Liquidator's caveatable interest in the larger block and consents to the Liquidator lodging a caveat to protect his interests and those of Pioneer in the larger block; and (b) he will as soon as reasonably possible cause the larger block to be sold and use his best endeavours to obtain a prudent sale price; and (c) he will pay, on settlement of the sale, $50,000 into a joint account in the names of the solicitors for the plaintiff and those for Pioneer for payment out of the items mentioned in Declaration 2 order that Pioneer take all necessary steps to execute a real property transfer of the larger block in favour of the plaintiff. 4. Note that on settlement of the sale and payment of the sum of $50,000 into the joint account in the names of the solicitors for the plaintiff and the solicitor for the Liquidator, the Liquidator will execute in registrable form and deliver a withdrawal of his caveat to the solicitor for the plaintiff or his nominee. 5. Declare that the equitable interest of the plaintiff in the larger block takes priority over any interest held by the fourth defendant, Sai Meng Lee. 6 (a) Order that pursuant to s 74MA of the Real Property Act 1974 , Sai Meng Lee, within 14 days of this Order take all necessary steps to withdraw the caveat lodged by him over the larger block. (b) Order that service of this Order upon Sai Meng Lee be dispensed with. (c) Order that if Sai Meng Lee does not execute a withdrawal of his caveat over the larger block and provide it to the plaintiff's solicitors within 14 days of this Order the Registrar of the Equity Division of this Court be appointed in place of Sai Meng Lee to execute a withdrawal of such caveat. 7 (a) Order that pursuant to s 74MA of the Real Property Act 1974 Michael Vescio, within 14 days of this Order, take all necessary steps to withdraw the caveats lodged by him over the larger block. (b) Order that service of this Order upon Michael Vescio be dispensed with. (c) Order that if Michael Vescio does not execute a withdrawal of his caveats and provide such withdrawal or withdrawals to the plaintiff's solicitors within 14 days of this Order the Registrar of the Equity Division of this Court be appointed in place of Michael Vescio to execute a withdrawal or withdrawals of his caveats. 8. Dismiss the cross-claim of Peter Robert Lee against the plaintiff with the costs of the plaintiff thereof to be paid by Peter Robert Lee. 9. Dismiss the cross-claim of Sai Meng Lee against the plaintiff with the costs of the plaintiff thereof to be paid by Sai Meng Lee. 10. So far as the Statement of Reply to Amended Statement of Claim of Michael Vescio contains a cross-claim dismiss such cross-claim. 11 (a) Order that within 14 days of this Order Sai Meng Lee deliver up to the Liquidator the Certificate of Title to the larger block. (b) Order that service of this Order be dispensed with. 12. Order that Mr Vescio's mpotion of 9 June 2005 be dismissed and that he pay the costs of the defendants of such motion. 13. Order that PRL and SML pay the costs of the plaintiff of the action except those referrable to the action against Mr Vescio and the three hours by which the hearing was extended by virtue of his participation in the hearing of the action. 14. Order that Mr Vescio pay the costs of PRL and SML limited to 3 hours hearing time and the taking of instructions as to Mr Vescio's claims, preparation to rebut them and advance PRL's and SML's case in opposition to them, drafting, considering and marshalling evidence in relation thereto. 15. Liberty to apply to the plaintiff, Pioneer and the Liquidator of Pioneer. 16. Leave to enter these orders forthwith 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.