IN THE SUPREME COURT OF VICTORIA	Not Restricted	
AT MELBOURNE
Common Law Division
PROPERTY List
S ECI 2020 01362

AAGG DEVELOPMENTS PTY LTD (ACN 627 341 128) AS TRUSTEE OF THE AAGG DEVELOPMENTS TRUST 	Plaintiff	
		
v  		
		
SAAFIN CONSTRUCTIONS PTY LTD (RECEIVERS AND MANAGERS APPOINTED) (IN LIQUIDATION) (ACN 097 500 751) & ORS
(according to the attached Schedule)	Defendants	

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JUDGE:	Derham AsJ	
WHERE HELD:	Melbourne	
DATE OF HEARING:	17 November 2020	
DATE OF JUDGMENT:	17 November 2020	
CASE MAY BE CITED AS:	AAGG Developments Pty Ltd v Saafin Constructions Pty Ltd & Ors 	
MEDIUM NEUTRAL CITATION:	[2020] VSC 768	

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PROPERTY LAW —CAVEATS – Application for removal of a caveat lodged on title to land – Whether caveators have established a prima facie case for an interest in the land arising under an implied, resulting of constructive trust – Whether the balance of convenience favours retention or removal of the caveat – Other proceedings in the court in which the individual defendants have been given leave to bring a derivative claim in the name of and on behalf of the corporate defendant for a declaration that the plaintiff holds the land as constructive trustee for the corporate defendant – Relevant individual defendants have a prima facie case to sustain the interest in the land claimed in unusual circumstances, being a derivative claim made by the individual defendants on behalf of and in the name of the corporate defendant for a declaration of an interest arising under a constructive trust and the re-transfer of the land by the plaintiff to the corporate defendant – Appeal pending against the grant of leave to the individual defendants to bring derivative claim – Whether appropriate to make final orders or interim orders – Interim orders appropriate pending determination of the Appeal – Piroshenko v Gosjman, (2010) 27 VR 489; Goldstraw v Goldstraw [2002] VSC 491; Australian Broadcasting Corporation v O’Neill (2006) 227 CLR 57, 82; Carbon Black Pty Ltd v Launer [2015] VSCA 126; El-Saafin & Anor v Franek & Ors (No 4) [2020] VSC 389, referred to.

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APPEARANCES:
	Counsel	Solicitors	
For the Plaintiff	Mr M Clarke QC	Mark J Halse	
			
For the First Defendant	No Appearance		
			
For the Second to Fourth Defendants	Mr I Upjohn QC	Hicks Oakley Chessell Williams	
			
For the Fifth Defendant	No Appearance (the usual letter was received)		

TABLE OF CONTENTS

Introduction	1
Background	1
Applicable Law	2
Submissions	3
Consideration	5
Conclusion	7

HIS HONOUR:
Introduction
1	The plaintiff (AAGG) is registered proprietor of the land situate at and known as 65-67 Arden Street, North Melbourne, being the land described in Certificate of Title Volume 08614 Folio 340 (the Land).  
2	AAGG applies pursuant to section 90(3) of the Transfer of Land Act 1958 (TLA) to have removed caveat numbered AR286477C lodged on the title to the Land (the Caveat) by the first to the fourth defendants on 26 July 2018, and to restrain the second to the fourth defendants (Saafin Parties) from lodging any further caveat on the Land. 
Background
3	The grounds of claim in the Caveat are that the first to fourth defendants are entitled to and interest in the Land arising from an Implied, Resulting or Constructive Trust.  
4	There are proceedings in the Technology, Engineering and Construction List of this Court in which the first defendant (Company) and the Saafin Parties are plaintiffs and AAGG, amongst others, is a defendant (proceeding S CI 2018 01685) (Derivative Proceeding).  
5	In the Derivative Proceeding the Saafin Parties have been given leave to make a derivative claim on behalf of and in the name of the Company for relief that includes a declaration that AAGG holds the Land on a constructive trust for the Company, an order that AAGG be restrained from taking steps to realise, sell or otherwise dispose of the Land and an order that AAGG reconvey the Land to the Company.
6	The detailed history of the disputes between the Saafin Parties and AAGG, and other related companies and persons, is set out in four Rulings or Reasons for judgment of Lyons J, namely El-Saafin v Franek [2018] VSC 450, El-Saafin & Anor v Franek & Ors (No 2) [2018] VSC 683,  El-Saafin & Anor v Franek & Ors (No 3) [2019] VSC 155 and El-Saafin & Anor v Franek & Ors (No 4) [2020] VSC 389.
7	It is unnecessary to set out the facts and lengthy history of the disputes between the parties.  It is sufficient to note that Lyons J found there to be a solid foundation for the claims by the Saafin Parties for the relief they claim in the Derivative Proceeding, and thus for the relief that involves a declaration that AAGG holds the Land on a constructive trust for the Company and an order that AAGG transfer the Land to the Company.  There is an interim injunction restraining AAGG from taking steps to develop, realise, sell or otherwise dispose of the Land extant in the Derivative Proceeding.  An application by AAGG to discharge that injunction has been adjourned and has not been pursued pending the trial of the Derivative Proceeding, which is fixed to commence on 3 February 2021.
Applicable Law
8	The applicable principles are not in dispute.  In short summary they are:
(a)	The application is in the nature of a summary procedure analogous to the determination of interlocutory injunctions.  The procedure is consequently interlocutory in substance, even though it may give rise to a final order.  
(b)	The Court’s power under s 90(3) of the TLA is discretionary.
(c)	The caveator bears the onus of establishing that there is a prima facie that it does have the estate or interest in land as claimed.  
(d)	The prima facie case test is often used interchangeably with whether a serious question to be tried is established.  The prima facie case test is to be preferred.  That does not mean that the Caveator must show that it is more probable than not that at trial the plaintiff will succeed.  The Caveator must show that they have a prima facie case with sufficient likelihood of success to justify the maintenance of the caveat, and the preservation of the status quo pending trial.  
(e)	If the caveator establishes a prima facie case to be tried in relation to the estate or interest claimed, the caveator must further establish that the balance of convenience favours the maintenance of the caveat until trial.
(f)	There is a relationship between the strength of the case in establishing a prima facie case to be tried and the extent to which the caveator must establish the balance of convenience favours the caveator; the stronger the prima facie case, the more readily the balance of convenience might be satisfied.  It is sufficient that the caveator show a sufficient likelihood of success that, in the circumstances, justifies the practical effect which the caveat will have on the ability of the registered proprietor to deal with the property in question in accordance with its normal proprietary rights.
9	An application to remove a caveat involves two steps.  First, the Caveator must establish that there is a prima facie case - there is a probability on the evidence before the Court that the Caveator will be found to have the asserted legal or equitable rights or interest in the land.  Second, having done so, the Caveator must establish that the balance of convenience favours the maintenance of the Caveat on the title until trial and that probability is sufficient to justify the practical effect which the caveat has on the ability of the registered proprietor to deal with the property in question in accordance with their normal proprietary rights.
Submissions
10	AAGG maintains in this application, in brief summary, that:
(a)	The caveat was lodged without the authority of the Company, to which Receivers and Managers were appointed at the relevant time.
(b)	The Saafin Parties have advanced no basis for their claimed interest in the Land by way of an implied, resulting or constructive trust.
(c)	The Company neither consents nor opposes the removal of the Caveat and has also not advanced any basis to maintain an interest arising under an implied, resulting or constructive trust.  It is therefore unnecessary to consider the balance of convenience.  
(d)	If the balance of convenience is relevant, here the partially constructed building on the Land is in a dangerous condition and to put it in a safe condition AAGG needs to raise moneys on mortgage, which it cannot do whilst the Caveat remains on title.
11	The Saafin Parties maintain, in brief summary, that: 
(a)	The residual powers of the directors of the Company enabled the Saafin Parties, two of whom are directors of the Company, to lodge the Caveat on its behalf;
(b)	Their claims in the derivative Proceeding justify the interest claimed in the Caveat, because they are claims to a constructive trust in favour of the Company by them on its behalf.  It is a discrete and unusual basis to maintain the Caveat and does not represent a claim that they individually have such an interest in the Land; 
(c)	The formulation of the interest claimed in the Caveat needs to be viewed having regard to the claims they make on behalf of and in the name of the Company in the Derivative Proceeding.  Only in that way do they claim such an interest.  In short, it is a derivative claim in the Caveat;
(d)	The presence of the injunction in the Derivative Proceeding may preclude mortgaging it.  If the injunction does not preclude AAGG registering a mortgage of the Land, the Caveat does practically do so;
(e)	Maintaining the Caveat until the hearing and determination of the Derivative Proceeding is the course that carries the lower risk of injustice if the Court should turn out to be wrong.  
(f)	The extra-curial activities of Mr Mekkya and others through MAG Financial and Investment Ventures Pty Ltd (MAG) (which sold the Land to AAGG) point to a history that should give the Court pause before accepting the evidence of AAGG at face value.  In this regard, references were made to the judgment of Lyons J where his Honour notes that in 2018, during the proceedings which became the Derivative Proceedings, whilst applications were underway before the Court by the Saafin Parties for injunctions against the Receivers and Managers of the Company restraining them from selling the Land, MAG, as mortgagee in possession of the Land, sold it to AAGG and did not inform the Court of that fact. 
(g)	AAGG has not established that there are no other moneys available to those who stand behind it to render the Land safe.  
Consideration
12	The parties’ Counsel informed the Court that the orders of Lyons J made on 28 July 2020, in consequence of his reasons in El-Saafin & Anor v Franek & Ors (No 4) [2020] VSC 389, have been appealed to the Court of Appeal and that appeal was heard last week.  If the Court of Appeal reverses or varies the orders made by Lyons J the underlying basis for the maintenance of the Caveat may be destroyed.  In that event, it may be appropriate that the application before me is revisited and that it is not now appropriate to finally determine the application for removal of the Caveat.
13	There are, generally speaking, residual powers in the directors of a company to which Receivers and Managers have been appointed which enable them to authorise the lodging of a caveat in the name of the company to protect its proprietary interest in land pending the hearing and determination of litigation to establish that interest.  The Saafin Parties who are directors of the Company were in that position when the Caveat was lodged on the title to the Land.  
14	Without a thorough examination of the terms of appointment of the Receivers and Managers appointed to the property of Company, it is not possible to arrive at a contrary position, and neither side of this application has put the material in evidence that would enable that examination to take place.
15	 In my view, the existence of the Derivative Proceeding and the claims for relief made in it, which includes a declaration that AAGG holds the Land on a constructive trust for the Company, an order that AAGG be restrained from taking steps to realise, sell or otherwise dispose of the Land and an order that AAGG reconvey the Land to the Company, means that there is a prima facie basis for the claimed interest in the Land set out in the Caveat by the Company, through the Saafin Parties, derivatively.  
16	Lyons J found that there was a solid foundation for the claims made in the Derivative Proceeding, including the claims that would result in the declaration of a constructive trust in favour of the Company and the transfer of the Land by AAGG to the Company.  The analysis of the facts and law that he undertakes in El-Saafin & Anor v Franek & Ors (No 4) [2020] VSC 389 are the prima facie case that is advanced by the first to fourth defendants.
17	I agree with the submission of the Saafin Parties, that the formulation of the interest claimed in the Caveat needs to be viewed having regard to the claims they make ‘on behalf of and in the name of the Company’ in the Derivative Proceeding.  Only in that way do they claim such an interest.  In short, it is a derivative claim in the Caveat and not a claim by the Saafin Parties to an interest in the Land in their own right.  In my view that provides a proper basis for the Saafin Parties to be named as claimants to the interest in the Land in the Caveat.
18	The evidence given on behalf of AAGG by Mr Mekkya does not establish, in my view, that there are no other moneys available to those who stand behind AAGG and the trust of which it is trustee, to render the Land safe, as distinct from recommencing the construction works on the Land.  The evidence of Mr Mekkya is that AAGG has access to the necessary funds from the CBA (Commonwealth Bank of Australia) to recommence construction of the works on the Land and to complete the proposed development but that a condition of the grant of the funds is the removal of the Caveat.   The evidence in the Derivative Proceeding tends to support the inference that moneys are available to Mr Mekkya, a director of AAGG, should he wish to advance them to the trust or AAGG.
19	It is also my view that the impending trial of the Derivative Proceeding, but subject to the result of the Appeal, means that the balance of convenience favours the maintenance of the Caveat to await the outcome of the Appeal, or the outcome of the Derivative Proceeding if the Appeal is unsuccessful.
20	The Company is in liquidation and leave to proceed is necessary for any order to be made against it.  The evidence given on behalf of the plaintiff shows that there is no opposition from the representative of the Liquidator of the Company in the Derivative Proceeding, Mr Thomas Egan, to the grant of such leave and there is good reason for the grant of that leave to the extent necessary to make the orders I refer to below, which are made on an interim basis.  There will be no adverse impact on the assets of the Company by the orders I propose to make.  To the contrary, such assets as it is entitled to through the Derivative Proceeding are preserved.
Conclusion
21	For the reasons set out above, I will make the following orders:
(a)	The requirements of r 5.03(1) and r 8.02 of the Rules are dispensed with and the plaintiff is authorised to commence this proceeding by originating motion in Form 5C
(b)	To the extent necessary, pursuant to s 471B of the Corporations Act 2001 (Cth), the plaintiff has leave to proceed with the applications made against the Company by the originating motion. 
(c)	The application for an order pursuant to s 90(3) of the TLA that the fifth defendant remove the Caveat is refused, with liberty to re-apply on not less than 7 days’ notice.
(d)	The plaintiff’s summons filed on 8 April 2020 is adjourned to a date to be fixed.
(e)	Costs reserved.
(f)	Reserve liberty to the parties to apply generally.

SCHEDULE OF PARTIES

		
	S CI 2020 01362	

BETWEEN:		

AAGG DEVELOPMENTS PTY LTD (ACN 627 341 128) AS TRUSTEE OF THE AAGG DEVELOPMENTS TRUST	Plaintiff 	
		
- v -		
		
SAAFIN CONSTRUCTIONS PTY LTD (RECEIVERS AND MANAGERS APPOINTED) (IN LIQUIDATION) (ACN 097 500 751)	First Defendant	
		
HASSAN H M EL-SAAFIN	Second Defendant	
		
MOHAMED EL-SAAFIN	Third Defendant	
		
WAEL EL-SAAFIN	Fourth Defendant	
		
REGISTRAR OF TITLES FOR THE STATE OF VICTORIA	Fifth Defendant