Carmelo Dimarti v Danielle Dimarti as Administratrix of the Estate of the Late Antonio Dimarti;; In the matter of Naro Investments Pty Ltd

1. [1]

   HIS HONOUR: This is an application to enforce the terms of an agreement made on or about 12 November 2013 by which proceedings between two brothers were settled.

2. [2]

   The applicant and cross-claimant is Danielle Dimarti. She is the daughter of the late Antonio Dimarti and administratrix of his estate.

3. [3]

   Antonio and Carmelo (sometimes called Charlie) Dimarti were brothers. On 11 September 2012 Carmelo Dimarti commenced proceedings against Antonio claiming relief in respect of certain property transactions in which the two of them had engaged. Two properties involved in the 2012 proceedings were located at 18 and at 20 Rocky Point Road, Kogarah. The property at 20 Rocky Point Road was then registered in the name of Antonio. Carmelo alleged that Antonio had become registered as the sole registered proprietor of the property as the result of his having forged a transfer of Carmelo’s interest in the property to himself.

4. [4]

   The property at 18 Rocky Point Road was owned by Danaro Pty Ltd (“Danaro”). It later changed its name to Naro Investments Pty Ltd. In these reasons I will refer to that company either as Danaro or Naro Investments according to the context.

5. [5]

   The dispute between Carmelo and Antonio was settled on 12 November 2013. Consent orders were made on that day pursuant to which Antonio agreed to transfer to Carmelo a 50 per cent interest in 20 Rocky Point Road and Carmelo agreed to do all that was necessary on his part to cause Antonio to be registered as the holder of 50 per cent of the shares in Danaro that owned 18 Rocky Point Road.

6. [6]

   Antonio then sought to have the consent orders set aside but was unsuccessful. In due course, on Carmelo’s application, trustees for sale were appointed to 20 Rocky Point Road and that property was sold at auction. Carmelo and his wife Margherita were the purchasers.

7. [7]

   At the time of the settlement the shares in Danaro were held by Carmelo’s children, Natalie and Rocco.

8. [8]

   In the consent orders of 12 November 2013 Carmelo acknowledged that the shares in Danaro were held on trust for him and Antonio in equal shares.

9. [9]

   Antonio committed suicide on 13 April 2015. Danielle seeks to enforce Carmelo’s promise to do all things necessary to ensure that 12 of the 24 shares in Naro Investments were transferred to Antonio. Naro Investments, Natalie and Rocco have been joined as parties to her application.

10. [10]

    Carmelo now says that he entered into the agreement noted in the orders of 12 November 2013 under duress and says that it is not binding on him. He says this even though he opposed Antonio’s application to set those orders aside and notwithstanding that he has enforced those orders by obtaining the appointment of trustees for sale of 20 Rocky Point Road.

11. [11]

    Carmelo also says that Antonio did not have a 50 per cent beneficial interest in the shares in Danaro. He says this notwithstanding his agreement with Antonio on the basis of which the 2012 proceedings were settled under which he acknowledged that Antonio was a beneficial owner of 50 per cent of the shares in Danaro.

12. [12]

    Natalie and Rocco were not parties to the 2012 proceeding. They are not bound by Carmelo’s admission in the consent orders of 12 November 2013. They also denied that Antonio had a beneficial interest in the shares.

13. [13]

    Natalie claims to have acquired all of the shares in Danaro in 2008 from Carmelo. She claims to be a bona fide purchaser for value of the shares without notice of any interest of Antonio.

14. [14]

    Rocco acquired half of the shares in Danaro on 26 April 2012, shortly after he turned 18. He claims to have been a purchaser for value without notice of any subsisting interest of Antonio in the shares.

15. [15]

    On 28 November 2013 Carmelo’s then solicitors, Uther Webster & Evans, prepared share transfers to give effect to the agreement between Antonio and Carmelo. On 10 December 2013 they noted that the transfers of shares had been executed by Rocco and Natalie and enclosed copies of the transfers.

16. [16]

    Carmelo now says that the documents were forgeries that he procured. Carmelo and Rocco deny having signed the transfers. Their signatures were purportedly witnessed by their mother, Margherita. She denies that the writing and signatures on the documents that appear to be hers are genuine.

17. [17]

    For the reasons which follow I have concluded that:

18. [18]

    My reasons for these conclusions follow.

Settlement of the 2012 Proceedings

1. [19]

   The statement of claim in the 2012 proceedings was amended on 3 September 2013 to include a claim that as part of what was called a “Joint Endeavour” between Carmelo and Antonio, Carmelo made financial contributions that included contributions relating to both the purchase of the 18 Rocky Point Road property and contributions following its acquisition. Danaro was joined as a second defendant to the proceeding. Carmelo alleged that Antonio held his interest in the property at 20 Rocky Point Road and any interest that he had in the shares of Danaro or in 18 Rocky Point Road, and in any other property or moneys traceable to the Joint Endeavour, on trust for Carmelo to an extent that reflected Carmelo’s contributions.

2. [20]

   Although this was disputed, I am satisfied that the further amended statement of claim was served on Danaro. Danaro did not enter an appearance.

3. [21]

   The proceeding was listed for hearing before Kunc J on 12 November 2013. On that day the proceedings were settled and orders were made by consent. The consent orders included a declaration that the transfer in relation to the property at 20 Rocky Point Road, Kogarah to Antonio was void and of no effect as between Carmelo and Antonio, and an order that Antonio execute a transfer to Carmelo in registrable form of a 50 per cent interest in the 20 Rocky Point Road, Kogarah property. The parties had liberty to apply for further orders as to the implementation of those orders and the agreement which the court noted. The court noted an agreement between Carmelo and Antonio that included the following terms:

4. [22]

   Antonio provided a signed transfer of his 50 per cent interest in the 20 Rocky Point Road property on the same day as the settlement. He also provided a withdrawal of a caveat he had lodged over 18 Rocky Point Road that is referred to later in these reasons. Carmelo provided a withdrawal of a caveat he had lodged over 20 Rocky Point Road.

5. [23]

   As at 12 November 2013, Antonio was acting for himself. He had previously been represented by Mr Alistair Stewart of SK Legal. On 14 November 2013 Uther Webster & Evans, who acted for Carmelo, wrote to Antonio. They noted that the settlement required the transfer to each of Antonio and Carmelo of 12 shares in Danaro and for Carmelo and Antonio to be appointed as directors and Carmelo to be appointed as secretary. They said:

6. [24]

   On 28 November 2013 Uther Webster & Evans sent to Mr Stewart of SK Legal, three documents that Uther Webster & Evans had prepared in relation to Danaro. It appeared at that stage that Antonio had or was proposing to again retain Mr Stewart to act for him. It can be inferred that Antonio was having second thoughts about the settlement. The documents sent by Uther Webster & Evans to Mr Stewart comprised a form of consent by Antonio for him to act as a director of Danaro, an instrument for the transfer of 12 shares in Danaro by Natalie to Antonio, and a draft minute of a meeting of the members of Danaro (namely, Antonio and Carmelo) for Antonio and Carmelo to be appointed as directors of Danaro, noting the resignations of Natalie and Rocco as directors.

7. [25]

   On 10 December 2013 Uther Webster & Evans wrote to SK Legal referring to their email of 28 November and noting that they had not received a response. Uther Webster & Evans stated:

8. [26]

   The enclosed documents included two instruments described as Transfer of Shares. A reproduction of the signed transfers is attached as appendix A to these reasons.

9. [27]

   The minute of meeting of members of the company that was enclosed was signed by Carmelo and was initialled in the place for signature by Antonio.

10. [28]

    On 11 December 2013 Mr Stewart advised Uther Webster & Evans that he was awaiting instructions from Antonio as to whether he wished SK Legal to continue acting for him. Mr Stewart said that at that time it appeared that he did not.

11. [29]

    On 25 February 2014 Uther Webster & Evans again wrote to Antonio noting that they had sought his confirmation that he wished to proceed with the arrangements regarding 20 Rocky Point Road and Danaro, but had heard nothing from him as to his compliance with the Court’s orders and the Agreement dated 12 November 2014. Uther Webster & Evans advised that they were instructed to apply for the appointment of a trustee for the sale of 20 Rocky Point Road. They also said that they understood arrangements were to be made for the sale of 18 Rocky Point Road.

Antonio’s Application to Set Aside Consent Orders

1. [30]

   Antonio was dissatisfied with the 12 November 2013 settlement. As early as 2 December 2013 Mr Stewart had told Mr Garvin, a solicitor with Uther Webster & Evans who was acting for Carmelo, that:

2. [31]

   Mr Garvin took that to mean that Antonio was seeking to resile from the agreement reached in November 2013.

3. [32]

   On 23 May 2014 Carmelo Dimarti instituted these proceedings in which he sought an order for the appointment of trustees for sale of the property at 20 Rocky Point Road.

4. [33]

   On 15 July 2014 Antonio filed a notice of motion seeking orders for the setting aside of the consent orders made on 12 November 2013 and the agreement noted in those orders. It was not clear from materials on the present hearing when that contention was first raised. It must have been raised before 15 July 2014 because Carmelo Dimarti swore an affidavit dated 21 May 2014 responding to that contention.

5. [34]

   Antonio’s application to set aside the 12 November 2013 orders and agreement was heard on 9 and 10 February 2015 and determined on 20 February 2015 by Lindsay J (Dimarti v Dimarti [2015] NSWSC 97). The application was opposed by Carmelo and was unsuccessful. On 17 March 2015, on the application of Carmelo, Lindsay J appointed trustees for sale of the property at 20 Rocky Point Road. Antonio was ordered to pay the costs of his application to set aside the orders of 12 November 2013 and the application for the appointment of trustees for sale.

6. [35]

   On 13 April 2015 Antonio committed suicide. On 17 June 2015 Danaro changed its name to Naro Investments. The company had originally been named after the names of the three children of Antonio and Carmelo, namely, Danielle (Da), Natalie (Na), and Rocco (Ro).

Enforcement of Antonio’s Obligations Under the Settlement

1. [36]

   On 7 May 2015 the trustees appointed for the sale of the property at 20 Rocky Point Road advised Uther Webster & Evans that they had obtained vacant possession of the property and had secured the premises.

2. [37]

   Antonio’s daughter, Danielle, appointed Makinson d’Apice to act for her. On 3 August 2015 Uther Webster & Evans wrote to Makinson d’Apice as follows:

3. [38]

   In these proceedings Carmelo Dimarti denied that Antonio had any interest in the shares in Danaro. He said he did not give the instructions referred to in that letter. I do not accept those denials.

4. [39]

   The property at 20 Rocky Point Road was eventually sold by the trustees for sale and was purchased by Carmelo Dimarti and his wife Margherita.

5. [40]

   On 3 May 2016 Carmelo filed a notice of motion in these proceedings seeking orders in relation to the distribution of the proceeds of sale of 20 Rocky Point Road. There was a dispute with the trustees in relation to their fees.

6. [41]

   On 25 May 2016 Danielle filed a notice of motion seeking orders in relation to the distribution of the proceeds of sale of 20 Rocky Point Road. She sought an order for payment to her out of those proceeds of moneys representing her assessment of the value of half of the shares in Naro Investments.

7. [42]

   On 24 August 2016 I made orders by consent that disposed of the issues concerning the distribution of the proceeds of sale of 20 Rocky Point Road. The orders provided for Carmelo to receive 50 per cent of the proceeds plus $90,000, being full satisfaction of the costs order made by Lindsay J on 17 March 2015 against Antonio. The orders made on that day preserved the right of Danielle to claim relief in respect of Naro Investments and the property at 18 Rocky Point Road.

Danielle’s Application

1. [43]

   On 22 September 2016 Danielle filed an amended notice of motion in which, amongst other relief, she sought orders that Rocco and Natalie Dimarti and Naro Investments be joined as defendants to the proceedings. She sought orders that Carmelo, Natalie and Rocco deliver an executed transfer of 12 shares in Danaro and deliver executed minutes of a meeting of directors of Danaro resolving to register the transfer and to appoint Danielle as a director. She sought orders that Natalie resign as a director. She also sought an order in the notice of motion that Naro Investments be wound up pursuant to s 461(k) of the Corporations Act 2001 (Cth) (the just and equitable ground) and that a liquidator be appointed. She sought damages against Carmelo.

2. [44]

   Eventually, after I made an order for substituted service on Rocco and Natalie, Rocco and Natalie, as well as Danaro, appeared. The matter proceeded on pleadings and a separate originating process was filed by which Danielle sought an order for the winding-up of Danaro on the just and equitable ground. No submissions were made as to Danielle’s standing to make that application. I will return to that question later in these reasons.

3. [45]

   Carmelo Dimarti represented himself in these proceedings after 16 June 2016. He did not file a defence to Danielle’s cross-claim. Danielle did not seek judgment in default of a defence and the matter was contested on its merits. She did not oppose Carmelo’s being entitled to raise issues that appeared from the affidavits filed by him and the position he had taken orally in the course of directions hearings.

Carmelo is Bound by Settlement Agreement

1. [46]

   Notwithstanding that Carmelo had successfully opposed Antonio’s application to set aside the consent orders and the agreement noted in the orders of 12 November 2013 and had successfully enforced those orders by obtaining the appointment of trustees for sale and buying the 20 Rocky Point Road property at auction from the trustees for sale, Carmelo resisted Danielle’s attempt to enforce the term of the agreement that Carmelo should do all things necessary to ensure that 12 shares in Danaro were retransferred to Antonio or to Danielle as administratrix of his estate. He contended that the agreement noted in the orders of 12 November 2013 was entered into by him under duress and said that accordingly it was not binding on him.

2. [47]

   The better view is that an agreement entered into under duress is voidable, not void (J W Carter, Contract Law in Australia, 6th ed, LexisNexis Butterworths at [22-02] ff).

3. [48]

   I do not accept that the agreement noted in the orders of 12 November 2013 was entered into under duress. In any event Carmelo Dimarti clearly elected to affirm the agreement by taking positive steps to enforce it. Having elected to affirm it, he could not now avoid the agreement. If the agreement were void and not voidable, he would be estopped from asserting its voidness.

4. [49]

   Carmelo deposed that on 29 October 2013 he met Antonio with a mutual friend, a Mr Andy Ciccone, at the RSL Club at Ramsgate Beach. He deposed that at that meeting Antonio threatened to kill him. Mr Ciccone corroborated that evidence. I accept Mr Ciccone’s evidence that after the meeting in the club as the three participants were walking out Antonio’s demeanour changed for no apparent reason and he started to scream and yell at Carmelo saying “I’m going to kill you and your family” and that he held his hands up to Carmelo’s head to resemble holding a gun and said words to the effect “go and prepare yourself a coffin”. It does appear that Antonio suffered mental illness. Mr Ciccone to all appearances was an honest and straightforward witness.

5. [50]

   I do not accept that Carmelo felt intimidated by the threat. According to Mr Ciccone he calmly reacted to it. Carmelo said that he had often been threatened by his brother, including with knives and guns. That did not stop his bringing proceedings against his brother.

6. [51]

   If Carmelo thought that he had been forced to enter into the orders of 12 November 2013 against his will, he could be expected to have consented to Antonio’s application to have the orders set aside. He did not. Instead he resisted Antonio’s application. His various steps to enforce the agreement not only amount to an election to affirm the contract, they are inconsistent with his ever having felt under duress to enter into it.

Carmelo Did Not Acquire Antonio’s Shares in Danaro in 2005

1. [52]

   The next factual issue is whether, as Carmelo asserted at this hearing, he acquired Antonio’s shares in 2005. Carmelo’s assertion that he acquired the shares in 2005 was inconsistent both with the ASIC search of Danaro and Carmelo’s affidavit of 10 October 2013.

2. [53]

   Danaro was incorporated on 24 August 2004 at which time it also entered into the contract to buy the property at 18 Rocky Point Road. Carmelo and Antonio were equal shareholders and they were both directors. According to a document signed by Carmelo and lodged with ASIC by his accountant, Bechini & Associates, on 12 May 2005 Antonio resigned as a director and secretary of the company and Carmelo was appointed as secretary in his place. Carmelo now says that at the same time Antonio transferred his shares in Danaro to Carmelo. No record of such a change was included in the documents lodged with ASIC.

3. [54]

   In an affidavit of 10 October 2013 Carmelo deposed that in May 2005 he had a conversation with Antonio to the following effect:

4. [55]

   He deposed that following that conversation he executed the ASIC change to company details for Danaro. He did not say that he then acquired Antonio’s shares. Rather, he deposed that in 2008, just prior to Natalie turning 18, he had a conversation with Antonio to the following effect:

5. [56]

   He then deposed:

6. [57]

   That is to say, Carmelo’s position prior to the present hearing was that Antonio had remained a shareholder of Danaro up to 2008 at which time his shares were transferred to Antonio. He did not give any evidence that Antonio signed a share transfer form. No executed transfer of shares was produced. Danaro did not produce its share register. The accountant who was said to have implemented the transfer, Mr Bechini, was not called. I infer that any evidence he could have given would not have assisted the cross-defendants.

7. [58]

   Carmelo was a witness devoid of credit. I would not accept his evidence unless it was against interest or was corroborated by other reliable evidence.

8. [59]

   Carmelo denied that the shares in Danaro were held by Natalie and Rocco on trust for Antonio and him. This was so notwithstanding that :

9. [60]

   In the present proceeding Carmelo said that Antonio had had no interest at all in the shares in Danaro after 2005.

10. [61]

    The only arguable corroboration of Carmelo’s evidence was a record of interview that was taken by the police when they interviewed Antonio in relation to Carmelo’s allegation that Antonio had forged a transfer of Carmelo’s interest in the 20 Rocky Point Road property. On 12 November 2013, as part of the settlement, Antonio consented to a declaration that that transfer was void. On 2 May 2012 Antonio was interviewed by the police about Antonio’s allegation that the transfer of the 20 Rocky Point Road property that resulted in the property being registered in Antonio’s sole name was forged. In the interview Antonio said that in early 2007 he decided to rescind his verbal agreement with Carmelo that they would build a real estate portfolio. He said that Carmelo had not been depositing moneys that were collected from tenants towards the loans secured over various properties. He said that:

11. [62]

    Earlier in the interview he had said that Carmelo told him that on his accountant’s advice 18 Rocky Point Road should be bought in a company name. He said that:

12. [63]

    He said:

13. [64]

    Antonio made no reference to transferring his shares in Danaro. He seems to have been of the view that by resigning as a director of Danaro and thus giving Carmelo control of the company, he surrendered his interest in the company and 18 Rocky Point Road when he took steps to take control of other properties that he regarded as his.

14. [65]

    In his amended statement of claim in the 2012 proceeding Carmelo alleged that:

15. [66]

    Carmelo alleged that Antonio:

16. [67]

    In the amended statement of claim Carmelo alleged that Antonio held a disproportionately large share of the assets acquired in the course of the Joint Endeavour which it would be unconscionable for him to retain. As a particular of that allegation Carmelo said that:

17. [68]

    Carmelo did not allege that Antonio had disposed of his shares in Danaro.

18. [69]

    I do not accept Carmelo’s evidence that Antonio had disposed of his shares in favour of Carmelo in 2005. That evidence was given for the first time in these proceedings. Carmelo acknowledged in the agreement noted on 12 November 2013 that 12 of the shares were held on trust for Antonio.

19. [70]

    Mr McDonald, who appeared for Natalie, Rocco and Danaro submitted that Antonio had lost title to the shares by abandonment. He submitted that Antonio’s shares were a contract made between him and Danaro and between him and Carmelo and could be abandoned in the same way that any contract can be abandoned. Counsel submitted that the inference of abandonment could be drawn where an inordinate length of time has been allowed to elapse during which neither party has attempted to perform or called upon the other to perform the contract. It can then be inferred that the contract has been discharged by agreement (Summers v Commonwealth (1918) 25 CLR 144 at 151-152; [1918] HCA 33; Fitzgerald v Masters (1956) 95 CLR 420 at 432; [1956] HCA 53; DTR Nominees Pty Ltd v Mona Homes Pty Ltd (1978) 138 CLR 423 at 434; [1978] HCA 12).

20. [71]

    On the assumption that shares can be abandoned in this way, the grounds for such abandonment are not made out in this case. The lapse of time between 2005 when Antonio resigned as a director, and 2013 when he asserted that his shares had been illegally transferred to Natalie does not give rise to an inference that the contracts constituted by the shares had been discharged by agreement of Danaro (acting through Carmelo as its director) and Carmelo (in his own right as a member). A passive shareholder does not lose his or her rights to a share by not asserting any interest in the share and not participating in the company’s affairs or management.

21. [72]

    In any event, I do not think that a member of a company can cease to be entitled to shares by “abandonment”. In Ford, Austin & Ramsay’s Principles of Corporation Law (Online edition) the learned authors say (at [6.440]) that a person ceases to be a member of a company limited by shares when:

22. [73]

    The closest category to abandonment referred to in Ford, Austin & Ramsay is the surrender of shares. In relation to that the learned authors say (at [17.273]):

23. [74]

    If Danaro has a constitution, it was not in evidence. There is no question of the director having accepted a surrender.

24. [75]

    In Lunn v Cardiff Coal Company (No. 2) [2003] NSWSC 25; (2003) 173 FLR 63 and Lunn v Cardiff Coal Company (No. 3) [2003] NSWSC 789; (2003) 47 ACSR 79 the company had been dormant and without directors for decades. The court’s jurisdiction to order a winding-up depended upon its still having five members. According to the share register its members included the estates of various deceased members and certain named individuals who would have been long since dead. The relevant entries on the register dated from 1863 to 1938. Barrett J held that there must have existed at the time of the application for winding up some person or entity with a claim as would warrant the person’s being regarded as a member (Lunn v Cardiff Coal Company (No. 3) at [31]).

25. [76]

    Clearly, it did not appear to Barrett J, nor to the experienced counsel who appeared for Mr Lunn, that a member could have lost his rights as a member by “abandonment”. The point was not discussed, but Barrett J would have raised the issue if it were plausible.

26. [77]

    I do not accept the submission made by counsel for Natalie, Rocco and Danaro that Antonio had ceased to be a shareholder because he had abandoned his shares.

27. [78]

    It follows that Antonio was a member of Danaro immediately before 27 August 2008.

2008 Acquisition of Shares by Natalie

1. [79]

   On 27 August 2008 Natalie signed an ASIC form headed “Change to company details” that recorded the transfer of 24 shares to her on 27 August 2008, 12 shares being transferred to her by Carmelo and 12 by Antonio. That form was lodged with ASIC. It is prima facie evidence that Antonio’s shares were transferred to Natalie on that date (Corporations Act, s 1274B).

2. [80]

   Danielle says that she purchased the shares in Danaro from Carmelo. In an affidavit made on 5 December 2016 she deposed as follows:

3. [81]

   Mrs Margherita Dimarti, mother of Natalie and Rocco and wife of Carmelo, also made an affidavit on 5 December 2016 in which she deposed to a conversation in or about August 2008 in identical terms to the conversation deposed to by Natalie in para 13(a), (c) and (d). Mrs Margherita Dimarti also said that Natalie said almost identical words to which Natalie deposed in para 14, the only difference being the word “Nonna” in Natalie’s affidavit, whereas Margherita said the word used was “Grandma”. They were asked to explain how they came to recall a conversation said to have taken eight years earlier in identical terms. The initial reaction of both was that the explanation was that both were present at the time of the conversation, and presumably, heard the same thing spoken. But it emerged that Natalie, Rocco and Margherita discussed with each other what evidence they would give and were seen together by their solicitor when instructions for the contents of their affidavits were given in order for the solicitors to prepare their affidavits.

4. [82]

   I do not know if the latter statement is true. The solicitor or solicitors who prepared the affidavits have not had the opportunity to be heard. It would be improper for affidavits to be taken in that way. But the fact that Natalie and Mrs Margherita Dimarti say that they recall the same conversation that took place more than eight years ago in identical terms clearly casts doubt on their credibility. I deal with Carmelo’s lack of credibility in more detail below. But I should say at this point that I found none of Natalie, Rocco, nor Margherita Dimarti to be a reliable or credible witness.

5. [83]

   Margherita Dimarti said that after the conversation referred to above she assisted Natalina (Carmelo’s mother and Natalie’s grandmother) to go to a biscuit tin that she kept in her glory box to pull out cash that amounted to just over $70,000. She said that Natalina said “Please get something in writing off Carmelo, as I have four sons, but it is Natalie who looks after me.” She said that she then prepared a receipt and handed the cash and the document to Carmelo at their home. She said that she saw Carmelo sign the receipt and then gave it to Natalina. She produced the receipt said to have been given on this occasion in 2008. The document is dated 16 August 2008 and states:

6. [84]

   The document bears a signature of Carmelo above his typed name. The paper on which the document is written is crumpled and has various stains on it that suggest age. To a lay eye, the same is not true of the signature. The document was first produced as a photocopy to an affidavit served one week before the hearing. The original was produced at the hearing. There was no opportunity for it to be subjected to examination by a document examiner. For the reasons below, I will be referring the papers in this matter to the Attorney General for consideration of whether any prosecution should be brought against Carmelo Dimarti either for forgery that he admits, or procuring another to commit forgery, as he asserts, or for perjury for falsely asserting such forgeries. Any investigation that might follow that referral should consider the authenticity of the receipt dated 16 August 2008. If it is not genuine there should be further consequences.

7. [85]

   Carmelo Dimarti was said to have been present when the alleged conversation between Natalina, Margherita and Natalie occurred. He did not refer to any such conversation in his affidavit. Counsel for Danaro, Natalie and Rocco elicited evidence as examination-in-chief from Carmelo about the conversation said to have occurred in 2008 at which he was present. He said that his mother paid him $75,000 or $72,000 or $71,000 or whatever and Natalie gave him another $5,000 in cash. He said that he did the right thing by his brother by giving him $35,000 of the moneys he received. Never in the earlier proceedings had he made any such claim. I do not accept it. In the course of giving that evidence he said that shortly before receiving the money from his mother he told her “Mum, you know I really need the money, you’ve got to give me the money because I already done the paperwork for Natalie.” This is inconsistent with the terms of the document.

8. [86]

   Carmelo said that his mother asked him for a receipt so that she could have it available to show the government what she did with her money in case her pension was otherwise cut. As the cross-defendants’ case was that the $70,000 was kept in cash by Natalina, under her bed as it were, the idea that Natalina would want a receipt for the cash she paid in order to produce it to the government is fantastical. In providing this elaborate detail Carmelo overlooked the fact that while the document produced as a receipt states that the shares were yet to be transferred to Natalie, according to Carmelo, the paperwork had already been done. If Carmelo’s evidence were otherwise reliable, it would cast doubt on the authenticity of the receipt. Because I do not consider his evidence to be reliable, I treat it as a neutral consideration.

9. [87]

   I am not satisfied that there was any such discussion between Natalie, Margherita, Carmelo and Natalina as was deposed to and I am not satisfied as to the authenticity of the alleged receipt. For reasons which follow, it would make no difference to the outcome of this proceeding if I had been so satisfied.

Natalie Held 12 Shares on Trust for Antonio

1. [88]

   There is prima facie evidence in the form of the ASIC return that Natalie was entered on the members’ register of Danaro as the holder of all of the shares in the company on that day. It is not known whether that was done without the execution of a transfer of shares by Antonio, or whether a forged transfer was provided to the company’s accountant, a Mr Burrell of O’Brien, Burrell & Co Pty Ltd. Mr Burrell did not give evidence. I infer that any evidence he could have given would not have assisted the cross-defendants.

2. [89]

   Natalie claims to have been a bona fide purchaser of the shares in Danaro for value and without notice of Antonio’s interest. That claim fails on various grounds.

3. [90]

   First, the principle on which Natalie relies concerns questions of priority between a person who acquires a legal estate in property and a person who has a prior equitable interest in the property. Antonio was not merely the holder of a prior equitable interest. He had the legal interest in 12 shares in Danaro. If Natalie was registered as the holder of his shares pursuant to a forged transfer, the transfer was void. There may have been no transfer at all. In either case, Antonio is entitled to rectification of the register and Danielle as his administratrix is entitled to that relief.

4. [91]

   This is a short answer to the whole of the case.

5. [92]

   In any event, Natalie had not only constructive notice, but actual notice of Antonio’s interest. She signed the relevant ASIC form 484 notifying a change to company details. She said that she would have read the form before she signed it. The form disclosed that she acquired the shares from both Antonio and Carmelo. She thus knew that Antonio was a member. She did not deal with him at all. She could have looked at the company’s share register. It has not been produced, but it is to be assumed that it showed Antonio as the holder of 12 shares. She could have searched the ASIC register that would have disclosed the same information. Thus, she did not acquire a legal estate without notice of Antonio’s interest.

6. [93]

   Further, I am not satisfied that Natalie acquired Antonio’s shares for value. There is no objective corroboration of the evidence of Natalie, Margherita and Carmelo that any money changed hands, apart from the document produced as a receipt referred to above. I do not consider any of Carmelo, Natalie, Margherita or Rocco to be a truthful witness. I am not satisfied of the authenticity of the receipt.

7. [94]

   It follows that at all times Natalie held the 12 shares of which Antonio had been the holder on constructive trust for him.

Rocco’s Acquisition of 12 Shares in Danaro

1. [95]

   Rocco contended that he was a bona fide purchaser for value of the 12 shares that he acquired from Natalie. Natalie gave no evidence that the shares were transferred for value. In his affidavit Rocco said only that “there was an agreement of random, incremental payments as funds became available.” That sentence was rejected with leave given to counsel for the second-fourth cross-defendants to adduce oral evidence in relation to that subject matter. The leave was not taken up by counsel for the second-fourth cross-defendants but was the subject of cross-examination. Rocco was asked:

2. [96]

   In cross-examination Natalie gave evidence to the same effect.

3. [97]

   I do not accept this evidence. I do not accept that Rocco was told that Natalie had paid her father $70,000 in 2008.

4. [98]

   Rocco said that he did not have the money available at the time to pay for the shares and said that the full amount agreed on had not yet been paid. He said that he had been paying Natalie a few thousand dollars by way of cash transfers from time to time, but he was not able to say how much had been paid and was not able to say how he could determine how much had been paid. There was no evidence that any stamp duty had been paid on the transfer.

5. [99]

   It does not matter to Danielle’s right to be registered as the holder of 12 shares in Naro Investments whether Rocco acquired title to 12 shares as a bona fide purchaser of the legal estate for value from Natalie without notice of Antonio’s equitable interest or not. If Rocco acquired a good title to 12 shares in Naro Investments as a bona fide purchaser for value without notice from Natalie, Natalie would hold her remaining 12 shares on trust for Antonio. There was no evidence that particular numbered shares in Danaro were transferred by Natalie to Rocco, nor as to whether they might have been the same numbered shares that Natalie had acquired from either Carmelo or Antonio. The cross-defendants have failed to produce the records that are or should be in their custody that would enable identification of the particular shares that Antonio held that were transferred to Natalie and the particular shares transferred by Natalie to Rocco. Their failure to produce the documents that would enable the identification of those particular shares does not preclude a finding that Natalie has at all relevant times held 12 of the 24 shares she acquired on trust for Antonio (White v Shortall (2006) 68 NSWLR 650; [2006] NSWSC 1379 at [210]-[213]). If, contrary to my view, Rocco could claim title to 12 shares as a bona fide purchaser for value without notice, the result would be that Natalie held her 12 shares on trust for Danielle as administratrix of Antonio’s estate.

6. [100]

   As Rocco has not established such a title Natalie and Rocco must each transfer 6 of the 24 issued shares in Naro Investments to Danielle.

Were the 2013 Share Transfer Forms Forged?

1. [101]

   The authenticity of the 2013 share transfer forms was a significant factual issue. It is not determinative. Even if the forms were forged, Natalie held 12 shares on trust for Antonio. If they were not, Natalie’s and Rocco’s signing of the share transfer forms was, in the circumstances, an admission that the shares were held on trust for Antonio and Carmelo.

2. [102]

   On 21 July 2016, Uther Webster & Evans, who then still acted for Carmelo, wrote to Makinson d’Apice, solicitors for Danielle, stating that:

3. [103]

   Clearly up to this point, Carmelo had not told his solicitor that he had forged the share transfers. Carmelo said that at some unspecified time he told Ms Evans of Uther Webster & Evans that he had forged the share transfers. Uther Webster & Evans filed a notice of ceasing to act for Carmelo on 16 June 2016.

4. [104]

   Carmelo made a great play that by his settlement with Antonio he had acted contrary to the interests of his children. He asserted that he was estranged from them. I do not accept he was estranged from them. I consider this to be a charade. It got to the point that when Natalie, Rocco and Margherita gave evidence Carmelo absented himself from the court. In his submissions he said:

5. [105]

   The insincerity and hypocrisy of Carmelo’s position was transparent. He said that he had done his best for his brother because, according to his version of events, he forged the share transfers that he had agreed he would do everything necessary on his part to obtain. This was ludicrous. In fact for the reasons below, I am not satisfied that the share transfers were forged, but if they were, that was to the potential advantage of his children and not his brother.

6. [106]

   It is to be recalled that on 8 November 2013 Carmelo, through his counsel, said that he did not dispute and had never disputed that Antonio retained a beneficial interest in the shares in Danaro which was not affected by the transfers in favour of Carmelo’s children. He gave the following evidence:

7. [107]

   This is not true. Carmelo’s position in this proceeding is that Antonio did not retain a beneficial interest in the shares in Danaro. I asked the following questions:

8. [108]

   Carmelo sued his brother. Having reached a settlement with him he is now actively seeking to prevent Antonio’s legal representative from obtaining the benefit of the promise he made to obtain that settlement. His assertions of wanting to make peace and acting for love of his brother ring hollow.

9. [109]

   In similar vein, Carmelo said that he got a man in Leichhardt to forge the documents because “I would do anything to be friends with my brother”. When I asked how he thought he would be a friend to his brother by forging his children’s signatures on the share transfers, Carmelo initially gave a long non-responsive answer. When asked to get to the point directly he said:

10. [110]

    In his affidavit of 10 October 2016 Carmelo deposed that:

11. [111]

    After deposing to the events of 29 October 2013 involving the threat made to him by Antonio referred to above, Carmelo then deposed:

12. [112]

    The children’s signatures were not the only handwriting on the share transfer forms. Their signatures were apparently witnessed by Carmelo’s wife Margherita and there was handwriting that appeared to be in Margherita’s hand stating her name and address. That writing bears a striking similarity to Margherita’s writing on a caveat she has lodged over the property at 18 Rocky Point Road claiming an equitable interest in that property on the basis that she lent money to Danaro in order for Danaro to pay the deposit to acquire 18 Rocky Point Road in 2004. That caveat is dated 23 September 2016. It prompts an enquiry whether Carmelo was a skilled enough forger also to copy his wife’s handwriting.

13. [113]

    In his oral evidence Carmelo said that he did not sign his children’s signatures. This was contrary to his affidavit. Instead, Carmelo said that he procured the documents to be forged by a man called Ben who, in 2013, lived in a room of a house in Leichhardt owned by Carmelo, to whom he paid $300 for both transfers. When asked for Ben’s last name, Carmelo said:

14. [114]

    He ultimately landed on the surname “Burnt” as the name of the alleged forger. This evidence lacked all credibility.

15. [115]

    A forensic document examiner, a Mr Cliff Hobden, was provided with some documents to test the hypothesis that the images of signatures purporting to be those of Natalie and Rocco on the two share transfers were genuine, or whether they were forgeries prepared by Carmelo. He was provided with some specimen signatures of Rocco and Natalie. He observed that there was a higher than average amount of natural variation in the specimen signatures provided for Rocco which increased the risk of outliers that were not evident in the specimen provided to him. He said that there was only a very small number of specimen signatures for Natalie provided to him, some of which were of low quality. The document examiner observed that the questioned signatures (that is, those of Natalie and Rocco) on the original share transfer forms were similar to the specimen signatures as would be expected if they were either genuine or forged by a skilled forger. He said that it was beyond his expertise to compare the specimen signatures or handwriting known to be made by Carmelo so as then to opine with any degree of confidence that the signatures on the forms were made by Carmelo. He knew of no reliable methodology for that type of examination.

16. [116]

    Mr Hobden was not provided with handwriting of Margherita in order to compare the handwriting and signature that purport to be hers on the document with handwriting that may be taken to be genuine.

17. [117]

    Thus the expert handwriting evidence is inconclusive. It does not support Carmelo’s initial position that he forged his children’s signatures. It does not support his later contention that he arranged for someone called Ben to forge the documents.

18. [118]

    Each of Natalie, Rocco and Margherita denied that the signatures or handwriting on the share transfer forms were theirs.

19. [119]

    The fact that Carmelo is a witness of no credibility does not mean that Margherita, Natalie and Rocco should be regarded as witnesses not worthy of credit. I am generally sceptical of the extent to which demeanour can play a legitimate part in assessing a witness’ credit. But in this case I do have regard to the demeanour of Natalie, Rocco and Margherita. I have rarely been less impressed by witnesses in their own cause. Natalie and Margherita ultimately, but not initially, confirmed that the testimony in their affidavits had been prepared when they were in conclave. There was no objective corroboration of Carmelo’s assertion that he was estranged from his children. Rocco continues to assist his parents in their real estate business from time to time. I am satisfied that at least Rocco attempted to evade service, which was consistent with what I consider to be Carmelo’s strategy.

20. [120]

    In the result I do not accept the evidence of any of these witnesses that the share transfer forms provided to Uther Webster & Evans were forged. I also do not accept their evidence that Natalie paid Carmelo $70,000 to acquire the shares.

21. [121]

    As noted above, Carmelo stated that he paid Antonio $35,000, apparently as Antonio’s share of the purchase moneys. There was no corroboration of that evidence. If there had been any such transaction it could be expected to have been referred to in Carmelo’s affidavits in the 2012 proceedings.

Carmelo’s Breach of the Agreement of 12 November 2013

1. [122]

   Carmelo said that after 12 November 2013 he did not ask Natalie and Rocco to transfer their shares to him and Antonio. If that were the position, then Carmelo would have been in breach of his agreement with Antonio. He would have been liable for substantial damages for the breach because Natalie said that if her father had asked her in November 2013 to re-transfer her shares she would probably have done so if the $70,000 she alleged she was given by her grandmother was repaid.

2. [123]

   However, I do not accept Carmelo’s evidence that he did not ask his children to re-transfer the shares. In giving that evidence Carmelo was trying to protect the position of his children so as to defraud Antonio’s estate. I think on the balance of probabilities that in late November 2013 he did what was required on his part to obtain executed transfers and minutes of meeting and these were signed by his children.

3. [124]

   But in the course of these proceedings Carmelo has breached his agreement with Antonio to do all things necessary to ensure that 12 of the shares in Danaro were retransferred to Antonio. He has done his best to thwart Danielle’s attempts to enforce the agreement he made with Antonio by giving false evidence. I infer that he has encouraged his children to resist Danielle’s claim. He is liable to pay as damages the costs that have been incurred by Danielle to date and which may be incurred in the future of her attempt to obtain a transfer of those shares. Prima facie, Danielle would be entitled to her costs under s 98 of the Civil Procedure Act 2005 (NSW) on the indemnity basis against Carmelo, having regard to my findings as to his conduct of this litigation (Degmam Pty Ltd (In Liq) v Wright (No. 2) [1983] 2 NSWLR 354). But irrespective of that, Danielle would be entitled to recover such costs on the indemnity basis as damages for Carmelo’s breach of contract.

4. [125]

   If Carmelo had accepted that the 2013 transfers were genuine, as I have found that they were, instead of asserting them to have been forged, and if Carmelo had encouraged his children to do what was necessary to have Danielle registered as the holder of 12 shares in Danaro, I do not think that the cross-claim would have been defended. The assets of Naro Investments will have been, and will be, diminished by the legal costs and expenses Naro Investments has incurred in defending these proceedings, and any costs it pays to Danielle. Danielle will be entitled to recover half of those costs as damages against Carmelo for his breach of the agreement noted in the orders of 12 November 2013.

Other Matters

1. [126]

   The purpose of Antonio’s being entitled under the settlement agreement to 50 per cent of the shares in Danaro was that he could participate equally in the benefits to be derived from Danaro’s ownership of 18 Rocky Point Road. Danaro carried on no other business other than its ownership of 18 Rocky Point Road. Natalie and Rocco have given evidence that they have serviced a mortgage over that property. They have also been in occupation of it. The fact that they have made payments towards the mortgage is not a reason for denying Danielle her entitlement to a declaration that half of the shares in Danaro are held on trust for her as administratrix of Antonio’s estate. Whether Danaro is liable to indemnify them for the mortgage payments they have made on its behalf, and whether they are liable to pay Danaro an occupation rent, are not questions that arise on the present application.

Conclusions and Orders

1. [127]

   For the above reasons I have concluded that Natalie and Rocco hold half of their shares in Danaro (now Naro Investments) on trust for Danielle as administratrix of Antonio’s estate. There should be a declaration accordingly. I will order that the share register of Naro Investments be rectified so as to record Danielle as a holder of 12 (out of 24) shares in Naro Investments.

2. [128]

   Mr McDonald, who appeared for Danaro, Natalie and Rocco, accepted that if this conclusion were reached it would be appropriate that Naro Investments be wound up on the just and equitable ground. That would clearly be appropriate. However, there is a serious question, upon which I have not received submissions, as to whether Danielle has standing to apply for a winding-up order on the just and equitable ground. Danielle filed a separate originating process on 14 October 2016 seeking the winding-up of Naro Investments on the just and equitable ground under s 461(k) of the Corporations Act and an order that a liquidator be appointed to the company. She does not claim to have been a creditor of Naro Investments when the originating process was filed. Nor does she claim that Antonio was a creditor of Naro Investments. She claims to be entitled to an order for rectification of the register so as to be registered as a member of Naro Investments. I have upheld that claim. But at the time the originating process was filed that claim was undetermined. Without the benefit of argument, I am not presently satisfied that Danielle had standing when the originating process was filed to seek the order for winding-up, nor that I could make an order for winding up on the just and equitable ground if she did not have standing to seek that order when the application was filed (In re A Company [1894] 2 Ch 349; Re Gattopardo Ltd [1969] 2 All ER 344; Re Exclusive Master Book-binding and Manufacturing Pty Ltd (1977) 2 ACLR 549; Maertin v Klaus Maertin Pty Ltd [2006] NSWSC 588; (2006) 57 ACSR 714; Treadtel International Pty Ltd v Cocco [2016] NSWCA 360 at [85] ff).

3. [129]

   Mr McDonald submitted that if I concluded that 50 per cent of the shares in Danaro were held on trust for Danielle as administratrix of Antonio’s estate, that I should defer making a winding-up order to give the parties the opportunity of negotiating arrangements to give effect to that conclusion without incurring the expense of a liquidation. Mr Karam, who appeared for Danielle, submitted that a winding-up order should be made, but the question of Danielle’s standing was not addressed.

4. [130]

   Mr McDonald said that he had instructions that if an undertaking were needed that the company would not deal with its property other than in the ordinary course of business and payment of legal fees, that sort of undertaking could be given (as a condition of a stay of a winding-up).

5. [131]

   For the above reasons I am not satisfied that there is presently jurisdiction to order a winding-up of Naro Investments. However, on the making of the declaration and the order for rectification of the share register, Danielle will be entitled to apply for a winding-up of Naro Investments on the just and equitable ground. Pending the determination of a winding-up application, the second, third and fourth cross-defendants should be restrained from dealing with the assets of Naro Investments otherwise than in the ordinary course of business and in payment of legal costs and expenses.

6. [132]

   There will also be liberty to apply or restore in case there have been changes to the share register not revealed in the evidence that might thwart the intent of these orders.

7. [133]

   For these reasons I make the following declarations and orders:

8. [134]

   I will stand over the proceedings to a convenient date to hear the parties on questions of costs and in relation to the winding-up application. If a fresh originating process for the winding-up of Naro Investments is filed it can be made returnable on the return date.