Supreme Court New South Wales Medium Neutral Citation: Glenella One Pty Limited v Duncan (No 2) [2015] NSWSC 441 Hearing dates: 15 April 2015 Date of orders: 17 April 2015 Decision date: 17 April 2015 Jurisdiction: Common Law Before: Schmidt J Decision: Application to lift stay refused. Orders made on 6 March 2015 varied. Catchwords: PROCEDURE – notice of motion – application for an order to lift stay – the application refused – orders earlier imposed varied Legislation Cited: Civil Procedure Act 2005 (NSW) Family Law Act 1975 (Cth) Real Property Act 1900 (NSW) Cases Cited: Glenella One Pty Limited v Duncan [2015] NSWSC 165 Category: Procedural and other rulings Parties: Glenella One Pty Ltd ACN 158 632 976 (Plaintiff/Second Cross-Defendant) Andrew David Duncan (First Defendant/First Cross-Claimant) White Turtle Pty Ltd ACN 108 030 137 (Second Defendant/First Cross-Defendant) Morten Weaver (Third Defendant/Fourth Cross-Defendant) Jane Duncan (Fourth Cross-Defendant) Representation: Counsel: Mr C Birch SC (Plaintiff/Second Cross-Defendant) Mr G W McGrath (First Defendant/First Cross-Claimant) File Number(s): 2014/00163175 Publication restriction: None Judgment 1. On 6 March 2015, I refused an application brought by the defendant, Mr Andrew Duncan, for an order transferring these proceedings to the Family Court. An order staying the proceedings until further order, pending the Family Court's determination of an application which the plaintiff, Glenella, had brought in that Court, to be removed as a party to those proceedings was, however, then made (see Glenella One Pty Limited v Duncan [2015] NSWSC 165). 2. These proceedings concern a claim for possession brought by Glenella, the registered proprietor of a leasehold interest in a property at Manly, where Mr Duncan, a paraplegic, has long lived and in which he claims an equitable interest. Mr Duncan resists Glenella's claim and, by a cross-claim, seeks an order that its interest in the property be transferred to him, given the circumstances in which it became the proprietor of the property, he claims, as the result of fraud. 3. Mr Duncan's sister, Ms Jane Duncan, and her former de facto husband, Mr Morton Weaver and their family company, White Turtle Pty Ltd, the former registered proprietor of the lease, are all parties to these proceedings. Mr Weaver, who is now a bankrupt, has not been active in the proceedings, nor has his Trustee taken an interest. Nor have White Turtle, now in liquidation as the result of steps taken by Mr Weaver, or Ms Duncan or her estate been active. 4. The Family Court proceedings concern claims made by Ms Duncan against Mr Weaver in relation to, amongst other things, her interest in White Turtle and through it, the Manly property, which it transferred to Glenella, Ms Duncan claimed, as the result of fraudulent steps taken by Mr Weaver, when he dealt with Glenella's corporate adviser, Mr Ted Manny and which resulted in Glenella acquiring the property in return for certain non-voting shares. Both Mr Duncan and Glenella are also parties to those proceedings. 5. The details of all of these matters and how the parties advance their claims are discussed in the March judgment and I do not repeat them here. 6. Glenella now seeks an order lifting the stay. 7. At the time that the stay was granted, an application made by Glenella in the Family Court, that it be removed as a party to those proceedings, was due to be heard on 30 March 2015. On 10 March, Mr Duncan issued subpoenas for production of documents which relate to the disputed transaction in those proceedings, directed to Glenella, its corporate adviser Mr Manny, solicitors and accountants. 8. Ms Duncan died on 16 March. It is common ground between the parties that Ms Duncan's death does not automatically bring the Family Court proceedings to an end. 9. On 24 March Mr Weaver, who had also not been active in the Family Court proceedings, served an affidavit he had sworn, in which he deposed to Ms Duncan's death, asserted that he was her executor and requested that the Family Law proceedings be withdrawn. His interest in Ms Duncan's estate is, however, contested by Mr Duncan. 10. On 25 March, the Family Court matter was listed for return of subpoenas. There was an objection to Mr Duncan having access to the documents produced. Mr Weaver was then represented, contending that no steps should be taken in the proceedings, pending determination of his application. The subpoenas were stood over to 27 April. 11. On 27 March, Mr Duncan served a handwritten will executed by Ms Duncan in November 2014. On 30 March, in the Family Court, Mr Duncan sought that Glenella's application to be removed from those proceedings be heard. The matter was adjourned, there being no appointed representative for Ms Duncan's estate, given the contest over her will. The matter is next listed for directions on 9 June. 12. On 7 April, Glenella sought the relisting of these proceedings. That day Ms Duncan's mother applied to this Court for administration ad litem of Ms Duncan's estate. The Court issued requisitions, which were answered on 9 April. Mr Weaver has served a caveat requiring strict proof of the execution of Ms Duncan's handwritten will, which is being responded to. Any dispute over the two wills will have to be resolved in the Probate Division of this Court. Whether there will be any dispute requiring the Court's resolution, is not yet known. 13. On 10 April 2015, Glenella applied for removal of the stay. Garling J directed it to file a motion and gave directions as to the filing of evidence. The parties' cases 1. Glenella's case was that in the face of Ms Duncan's death, the balance of convenience now favoured the stay being lifted. This was because it must refinance borrowings which are secured by the Manly property in July. While there is a question as to its title, which prevents it obtaining possession of the property, it cannot refinance. Nor could it repay those borrowings. It was thus imperative that the challenge to its claim for possession be resolved. This was in issue. 2. The application was resisted by Mr Duncan, whose case was that his sister's death had not altered the balance of convenience and that the application should be refused. The evidence 1. On the removal of the stay application, various affidavits were relied on by the parties, with none of the witnesses, including Mr Manny, being required for cross-examination. There was little dispute about the evidence, which has to be resolved at this point. 2. Mr Manny gave unchallenged affidavit evidence that Ms Duncan's estate was likely to be insolvent, given her 50% interest in the family home at Palm Beach, valued at some $4.8 million, which secured borrowings of some $5.8 million, interest on which was accruing at some $36,000 per month and a credit card debt of some $48,000. Even if the entirety of the Manly property was returned to White Turtle, Mr Manny said in his affidavit, it would be sold by the liquidator for the benefit of its creditors. It was now valued at some $1.5 million and even if the property became a part of Ms Duncan's estate, the estate would be insolvent. 3. On Mr Manny's evidence, Glenella cannot refinance the borrowings secured over the property, while its title is under challenge. Nor will it be able to repay the loan, when it falls due in July, with the result that it will then go into default, the lender will seek possession and it will not be in a position to give a required notice in September in relation to the lease. I have reservations about this evidence, given Mr Manny's evidence as to all of Glenella's financial circumstances. If correct, it would tend to support the view that there is strength in the case advanced against it by Ms Duncan's estate. 4. It is not necessary to come to a concluded view about this. The difficulty Glenella faces in refinancing borrowings it took on, after it became a party to the Family Court proceedings, was not put in issue by Mr Duncan. That was a loan of some $1,050,000 secured over a property then valued at that amount, for which it had paid nothing and which is now estimated to have a value of some $1.5 million. That Glenella now confronts a difficulty in refinancing the loan, given the challenges to its title, was a risk which must have been apparent to Glenella, when it took out that loan, then knowing, as it did, that its title was challenged. 5. That Glenella faces real difficulty in repaying the loan, given its financial circumstances need not be resolved, but if it does, that is seemingly something else which must have been apparent to it, when it took out the loan. The application to lift the stay must be refused 1. Given what has transpired in the Family Court, following Ms Duncan's death, the position is that Glenella's application to be removed as a party to those proceedings will not be resolved before July, when Glenella's borrowings must be refinanced. 2. The only practical reason for the Family Court proceedings being continued, Glenella argued, given Ms Duncan's death, was for orders in respect of the Manly property to be obtained against it. In that regard it was relevant that there was reason to believe that Ms Duncan's estate was insolvent, with the result that even if orders were made in favour of the estate in the Family Court, in relation to the Manly property, Mr Duncan would not benefit, even if he was Ms Duncan's beneficiary. 3. In that event, orders made in favour of Ms Duncan in the Family Law proceedings would only benefit the creditors of her estate, in this case, principally the Commonwealth Bank. Of itself, that is a reason for thinking that the Family Court proceedings might be pursued even if Mr Weaver is revealed to be the executor and beneficiary. At least the estate's creditors would have to be notified and then granted the opportunity to consider their position. 4. Glenella's defence of claims made against it in both proceedings was submitted to be akin to the defence that it was a bona fide purchaser for value without notice of the interest in the property which Mr Duncan and his sister claimed they had, or of Mr Weaver's alleged fraud. In the result, it says it was, as the registered proprietor of the leasehold, with indefeasibility of title entitled to use the property to secure its borrowings and to obtain possession for Mr Duncan. 5. Glenella submitted that Mr Duncan's claims in both the Family Court and these proceedings depended entirely on principles of the general law of property, not upon provisions of the Family Law Act 1975 (Cth). Orders which reflected his interest thus depended on him establishing an interest in the property which amounted to an exception to the indefeasibility of its title under the Real Property Act 1900 (NSW). Namely, either the fraud in which he alleged Mr Weaver, Mr Manny, White Turtle and Glenella had been involved, or an in personal right. The latter depended on his establishing conduct by Glenella involving some form of acknowledgment of his unregistered interest, or an agreement or undertaking to act in accordance with that interest from which it had later resiled (see Sze Tu v Lowe [2014] NSWCA 462 at [224] to [229]). There was, as yet, no evidence that he could establish such a case. 6. Glenella argued that, in the result, the Family Court would only confirm any interest which Mr Duncan held in the Manly property, if he established that he had in fact some proprietary right, which ought to be recognised in the orders made in relation to the dispute between Ms Duncan's estate and Mr Weaver, if ultimately pursued. 7. It followed that, given the disruption which Ms Duncan's untimely death had caused, the future course of the Family Court was now uncertain, contrary to the position when these proceedings were stayed in March. Despite this, determination of the beneficial ownership of the property was imperative, given that by 25 July, the borrowings which Glenella had secured over the property would have to be refinanced and that by 30 September, Glenella was obliged under the lease to indicate whether it intended to renew the lease for the period from October 2031 to September 2048. That fee, calculated at 20% of the value of the property, would have to be paid by 30 September 2016. 8. Despite all of that was urged for Glenella, I am not satisfied that it may justly be concluded that the stay should be lifted in the circumstances now prevailing. In resolving what lies in issue between the parties, regard must again be had to the requirements imposed by s 56 of the Civil Procedure Act 2005 (NSW) in relation to the overriding purpose there specified, namely, the just, quick and cheap resolution of the real issues in the proceedings. 9. Account must also be taken of the requirements of s 58, which obliges the Court to act in accordance with what the dictates of justice require in the circumstances which have arisen. In determining what the dictates of justice require, the Court must act in accordance with the requirements of s 57, which specifies the objects of case management, to which attention must be paid: the just determination of the proceedings; the efficient disposal of the business of the Court; the efficient use of available judicial and administrative resources; and the timely disposal of the proceedings, and all other proceedings in the court, at a cost affordable by the respective parties. 10. The need to eliminate delay (s 59) and proportionality of costs (s 60) must also be considered. 11. In the present circumstances, whether it is Mr Weaver or Mr Duncan who is the beneficiary of Ms Duncan's estate, its interests are not identical to those of Mr Duncan. Even if, as Glenella contends, the estate is insolvent, it has an interest in pursuing the claim against Glenella in relation to the Manly property, given what is owed to creditors, who also have rights which they might exercise. While White Turtle is in liquidation, if the estate succeeds in having the transaction between it and Glenella set aside, the estate will have an interest in whatever remains, which may be significant after that company's creditors have been paid out. 12. Mr Duncan, by way of contrast, claims against Mr Weaver, Ms Duncan's estate, White Turtle and Glenella, that he has an equitable interest in the Manly property which he was deprived of, as the result of the fraud in which Mr Weaver, Mr Manny, White Turtle and Glenella were involved. His claim, if accepted, would prevail over that of the estate. It was in those circumstances that I concluded in March that these proceedings should be stayed, pending determination of Glenella's application in the Family Court, to be removed as a party to those proceedings. 13. The present position, following Ms Duncan's death, is that Glenella's application in the Family Court cannot be determined, until someone is appointed to represent Ms Duncan's estate. Until that occurs and Glenella's claim to be removed as a party to those proceedings is determined in its favour and if it is not, it successfully resists the estate's claim, Glenella will not be in a position to refinance its borrowings. That is so irrespective of how its claim in these proceedings are resolved. 14. Even if these proceedings were heard and determined before the borrowings have to be repaid in full, on Mr Manny's evidence Glenella would still not be able to refinance, given the estate's challenge to its title. On the evidence, that will not be resolved before July. Accordingly, Glenella will have to deal with its problems with refinancing and the further difficulty of having to give a notice in relation to the renewal of the lease, which has to be given in September 2015, not knowing whether it will in fact be the registered proprietor when the payment has to be made in September 2016, unless its application to be removed as a party to the Family Law proceedings and these proceedings are resolved in its favour before then. On the evidence which the parties led, that Glenella's application in the Family Court will be resolved before September, is not certain. That depends on what happens with the representation of the estate. 15. In those circumstances, Mr Duncan's submission that the delays which will result from his sister's death, do not provide a basis for concluding that the balance of convenience now favours the stay being lifted, must be accepted. All of the claims which each of the parties advance still arise for determination in those proceedings. 16. Given all of the circumstances, the parties' respective positions and the claims they each advance in the Family Court, it is just, efficient and cost effective to continue the stay of these proceedings, at least until Glenella's application in the Family Court is resolved, or those proceedings are brought to an end without that application being determined, if that occurs first, even though that will take longer than was envisaged after the March judgment was given 17. That does not mean, however, that the terms on which the stay was granted ought not to be reviewed in light of all that has happened since March. 18. If the Family Court proceedings are brought to an end or Glenella's application to be removed from those proceeding succeeds, then these proceedings should be heard and determined. 19. There is plainly an urgent need to resolve the question of the representation of the estate. That is being pursued, it appears. There was no appearance for the estate in these proceedings, but from what was revealed, it is evident that an application for expedition of any matters which have to be resolved by the Court in relation to the representation of the estate or Ms Duncan's will, ought to be made and is likely to be granted by the Court. 20. It is unquestionably in the interests of Glenella, Mr Duncan and the estate, given their respective claims, that the notice in relation to the lease be given in September. Both the value of the property and the right to occupy it rests entirely on the continuation of the lease. Only the lessee can give that notice. There was some discussion between the parties as to how that practical difficulty might be addressed, given the inevitable delays with which they are confronted. 21. Complete agreement did not emerge, but a regime which appropriately balances the parties' respective positions did. For its part, Glenella did not accept that indemnities and undertakings proffered by Mr Duncan adequately addressed the prejudice which would flow from the refusal of its application to lift the stay. 22. I am satisfied, however, that Glenella has not met the onus falling upon it to establish that an order lifting the stay should be made. I do consider that what has transpired since the stay was granted, may not be overlooked and that accordingly, the terms on which the stay was granted, should be varied. I am also satisfied that the terms which I will impose, accord with what justice requires in the current circumstances. 23. There is also an obvious need, which the parties acknowledged, for the evidence on which Glenella and Mr Duncan would rely either in this Court or the Family Court, to be prepared. Such evidence is relevant to both proceedings, including in relation to Glenella's application to be removed as a party to the Family Law proceedings. 24. The parties also discussed the need for access to be given to Mr Duncan, to the documents produced on subpoena in the Family Court and a regime which would involve Glenella being given first access to those documents and then Mr Duncan, who it was accepted would require them, in order to prepare his evidence. 25. Accordingly, I propose to vary the terms on which the stay was granted, imposing terms which have regard to the undertakings proffered by Mr Duncan and imposing the timetable which the parties proposed, which envisaged that Mr Duncan would be given access to the subpoenaed documents as soon as possible, but hopefully no later than 28 April 2015 and that the parties would then finalise the evidence. Orders 1. For these reasons, I vary the orders made on 6 March 2015 by ordering that: UPON the First Defendant's undertakings to the Court in the terms of Undertakings A and B below 1) The Plaintiff's Notice of Motion filed on 13 April 2015 be listed for further directions at 9.30 am on 12 June 2015. 2) The Plaintiff's and First Defendant's costs of the Motion be it and his costs in the cause. 3) The Plaintiff and First Defendant be released from the implied undertaking to this Court not to use for any purpose other than the conduct of these proceedings the documents or copy documents received by them pursuant to service of documents, discovery or subpoenas or other coercive powers of the Court in these proceedings, so as to entitle the Plaintiff and First Defendant to use such documents or copy documents for the purposes of the related Family Court of Australia proceedings. FIRST DEFENDANT'S UNDERTAKINGS A. A.1 The First Defendant, Mr Andrew Duncan (Mr Duncan), undertakes to the Court that if: a) Glenella One Pty Ltd (Glenella One): i) gives to the Lessor the Option Notice under clause 2.2 (a) of Registered Lease number 8875515E (Lease) in respect of the property at 1/3 College St, Manly (Manly Property) and the Premium Notice under clause 3.1 of the Lease; or ii) pays the Premium under clause 2.2(b) of the Lease; and b) Glenella One is found and declared in these proceedings or the related Family Court proceedings to hold the Manly Property on trust for Mr Andrew Duncan (Mr Duncan) or if Mr Duncan is found to be entitled to have the Manly Property registered in his name; Mr Duncan will indemnify Glenella One from any then existing obligation to pay the Premium under clause 2.2(b) of the Lease or, if the Premium has been paid by Glenella One, he will reimburse Glenella One for payment of the Premium. A.2 Mr Duncan agrees to charge his interest in the Manly Property to secure his obligations under this undertaking or to set off the amount of any, if any, Premium paid by Glenella One against Mr Duncan's claim for damages or equitable compensation against Glenella One arising from Glenella One having mortgaged or encumbered Mr Duncan's Manly Property. B. Note that Mr Duncan has provided to Glenella One a draft Minute of Family Court Orders in terms the attachment hereto marked 'A' concerning documents produced on subpoena in that Court. Subject to him having access to the documents produced on subpoena in the related Family Court proceedings within 7 days of the date of these orders, Mr Duncan will serve the affidavit evidence on which he intends to rely in support of his claim in the related Family Court proceedings and in these proceedings by 28 May 2015. "A" FAMILY COURT OF AUSTRALIA DRAFT MINUTE OF CONSENT ORDERS THIRD RESPONDENT'S DOCUMENT CASE NUMBER: SYC4098 OF 2014 BY CONSENT, ORDERS as follows: 1. That, subject to Order 2 below, the legal representatives for Glenella One Pty Limited and Mr Andrew Duncan have access to and permission to copy the documents produced to the Family Court in answer to subpoenas in these proceedings addressed to: A. Glenella One Pty Ltd A.C.N 158 632 976 B. Charltons CJC Pty Limited A.C.N 002 599 420 C. Bull, Son and Schmidt Lawyers D. Mr Ted Manny (the "Addressees"). 2. That: a) the legal representatives of Glenella One Pty Limited have first access to the documents produced to the Court by the Addressees in answer to subpoenas, until 4pm on Monday 20 April 2014, in order to ascertain whether Glenella One Pty Limited is entitled to apply to claim privilege and restrict access to some or all of the documents; and b) in the absence of any further application, the legal representatives for Mr Andrew Duncan shall forthwith thereafter have access to and permission to copy the documents access to the documents produced to the Court by the Addressees. 3. That Glenella One Pty Limited and Mr Andrew Duncan be released from the implied undertaking to this Court not to use for any purpose other than the conduct of these proceedings the documents or copy documents received by them pursuant to the subpoenas to the Addressees, so as to entitle Glenella One Pty Limited and Mr Duncan to use such documents for the purposes of Supreme Court proceedings numbered 2014/163175. ********** 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: 17 April 2015